Results for Announcement to the Market
GTN Limited
ABN 38 606 841 801
Year ended 30 June 2019
(Previous corresponding period:
Year ended 30 June 2018)
$’000
Revenue from ordinary activities
down
‐% to
184,969
Profit from ordinary activities after tax
attributable to members (continuing
operations)
down
36.6%
to
15,732
Loss from discontinued operation
up
N/A*
to
‐
Net profit for the period attributable to
members
up
N/A**
to
15,732
*Previous period included a loss from discontinued operations
**Net profit after discontinued operations was a loss in FY 2018
Dividends/distributions
Amount per security
Franked amount per
security
Final dividend
Interim dividend
$0.032
$0.024
70%
100%
Record date for determining entitlements to the dividend
6 September 2019
Additional dividend/distribution information
● Declaration Date – 29 August 2019
Ex-Dividend Date - 5 September 2019
Date of Record – 6 September 2019
Payment Date - 30 September 2019
Dividend/distribution reinvestment plans
N/A
NTA Backing
2019
2018
Net tangible asset backing per ordinary share
Net tangible assets consist of net assets less goodwill and intangible assets without any adjustment
for deferred tax liabilities related to purchased intangible assets.
$0.39
$0.42
GTN Limited
ABN 38 606 841 801
Annual Report 2019
CONTENTS
Item
Chairman and CEO’s Letter
About GTN
Corporate Governance
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Consolidated Financial Report
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder information
Corporate Directory
Page
1
2
6
7
20
29
30
36
80
81
86
89
CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S LETTER
Dear Shareholders,
On behalf of the Board of Directors, we are pleased to present GTN Limited’s (“GTN” or the “Company”)
annual report for fiscal year ending 30 June 2019.
GTN reported net revenues for the year from continuing operations of $185.0 million which was flat when
compared with last year. Whilst revenue at all of our operating segments outside of Australia exceeded the
previous year in both AUD and local currency, revenue dropped 7% compared to the previous year in
Australia, our largest operating segment. This decline in Australian revenue combined with an increase in
expenses (due mainly to an increase in compensation to our radio and television affiliates) led to a decrease
in consolidated Adjusted EBITDA. Adjusted EBITDA was $37.5 million for FY 2019 compared to $48.1 million
for FY 2018. While disappointed in the drop in Adjusted EBITDA, there were a number of positive
developments that occurred in FY 2019:
● CTN entered into a multiple year agreement with Rogers adding three new radio station affiliates in the
Toronto market, which is the largest and most important market in Canada. While not initially accretive to
EBITDA due to the increased costs, we believe this agreement led to the acceleration of revenue growth in
Canada during 2H FY2019.
● BTN opened the Brasilia and Campinas markets during FY 2019. Although the added costs contributed to
the drop in EBITDA for the year, we believe that increasing our national footprint in Brazil will increase
revenue in the future.
● Although ATN showed an increase in station compensation due to a multi-year renewal of one of our key
affiliate groups, the positive corollary is that station compensation for our three most important affiliate groups
is now locked in for multiple years into the future. Therefore a large proportion of any revenue growth across
the period should be converted into EBITDA.
The Company’s operations continue to generate significant cash flow. During the past year, we returned
$30.1 million to our shareholders in the form of dividends (FY 2018 final and FY 2019 interim dividends) and
declared an additional $7.2 million via the FY 2019 final dividend which will be paid on 30 September 2019.
In addition to the attractive dividend yield, the Company also launched an on-market share buyback in March
2019. The approved scope of the buyback is the lower of $20 million or ten percent of the shares outstanding.
During FY 2019 the Company was able to repurchase almost 721 thousand shares, representing 23% of
shares traded during the time the Company was actively purchasing shares. The share buyback was
hampered by the low volume of shares available. The Company intends to reinstitute the buyback once the
black-out period is lifted post-release of FY 2019 results.
At 30 June 2019, our cash balance was $50.7 million and our net debt (including lease liabilities recognized
under AASB 16) was only $12.8 million. Our total gearing ratio of net debt to Adjusted EBITDA was 0.34x as
of 30 June 2019. Our low leverage should allow us to continue to return capital to shareholders while being
able to take advantage of new opportunities that may arise in the future.
The Company continues to grow revenue in its markets outside Australia (which now constitute almost half
of our revenue), has low leverage, produces strong cash flow, and possesses exciting growth opportunities.
We look forward to exciting progress in the coming fiscal year.
William L. Yde III
Managing Director and Chief Executive Officer
Robert Loewenthal
Chairman
1
About GTN
Overview of GTN
GTN provides a broad reach advertising platform that enables advertisers to reach large
audiences frequently and effectively. GTN is one of the largest broadcast media advertising
platforms by audience reach in Australia, Canada and the United Kingdom and is progressing
towards its goal of achieving this status in Brazil.
GTN is the largest supplier of traffic information reports to radio stations in its operating
geographies. In exchange for providing these and other reports and in certain cases cash
compensation, GTN receives commercial advertising spots adjacent to traffic, news and
information reports from its large network of radio and television stations (“Affiliates”). The
spots are bundled together by GTN and sold to advertisers on a national, regional or specific
market basis.
GTN’s advertising platform provides advertisers with high impact campaigns because
advertisements are ideally placed during peak audience times and are aired frequently across
large audiences. GTN’s advertisements are short in duration, adjacent to engaging information
reports and are often read live on the air by well-known radio and television personalities. This
product is designed to create high audience engagement and high recall among listeners,
leading to a high return on investment for advertisers.
This has enabled GTN to establish longstanding relationships with large, national advertisers,
resulting in strong growth in revenue since GTN’s inception.
GTN has successfully established itself within its Affiliates’ operations by providing them with
quality, timely and important information. In some cases, GTN also provides cash compensation
to Affiliates in exchange for advertising spots, which, in many cases, allows Affiliates to convert
an important programming segment from a cost centre to a profit centre. This stable income
stream can constitute a material portion of the Affiliates’ overall profits, further solidifying GTN’s
position within their operations.
GTN currently operates in Australia, Canada, the United Kingdom and Brazil, four of the 10
largest advertising markets in the world. GTN began operations in Australia in 1997 and has
selectively and successfully expanded into other attractive markets.
In FY2019, 97% of GTN’s Revenues were generated through the sale of radio advertising spots
and 3% were generated through the sale of television advertising spots.
Overview of GTN’s divisions
Country
Australia
Canada
Kingdom
Brazil
United
Population
(millions)
(years)
25.4
22
37.5
14
66.9
212.6
10
8
GTN years of
operation
FY 2019
revenue (1)
% of FY 2019
revenue (1)
GTN
audience
(millions)
93.9
33.2
45.2
12.6
(%)
51%
18%
24%
7%
(#)
11.4m
radio (2)
14.7m
radio
28.4m
radio
21.7m
radio
2
4.7m TV
9.4m TV
(#)
148 radio
115 radio
237 radio 81 radio
13 TV
(%)
100%
6 TV
88%
100%
76%
(%)
87%
81%
80%
48%
(‘000’s)
1,032
655
19,435(3)
315
Number of
affiliates
Proportion of
metropolitan
commercial
radio
listeners in
GTN’s
existing
markets
GTN
penetration
within
existing
metropolitan
commercial
radio markets
FY 2019
spots
inventory
(1) Amounts may not add due to rounding
(2) Includes 823 thousand listeners in regional markets rated by GfK.
Excludes listeners in markets not rated by GfK. The population of the
markets not rated by GfK but serviced by ATN is approximately 8
million persons.
(3) The UK market measures inventory and units sold based on impacts
instead of spots. An impact is a thousand listener impressions.
Operating model
GTN provides an advertising platform designed to enable advertisers, generally large national
advertisers, to reach high-value demographics cost effectively. The advertising spots GTN offers
are adjacent to information reports that listeners are typically highly engaged with, as this
content is “of use” to the consumer, such as traffic and news. The advertising spots are generally
10 seconds long and read live by well-known on-air personalities. GTN is able to obtain radio
spots that are primarily aired during peak listenership hours (i.e. during morning and afternoon
commutes). The placement and format of GTN’s advertising spots are designed to maximise
efficacy, enhance recall and minimise switching during advertisements.
Advertisers purchase a schedule of radio spots on a national, regional or specific market basis.
The schedule includes spots on all radio Affiliates in the relevant market. Spots sold in
advertising packages are allocated on a percentage-based rotation such that each advertiser
receives a pro rata share of advertising spots on each Affiliate throughout the relevant markets.
GTN does not sell spots on individual radio Affiliates.
3
In order to provide this advertising platform, GTN must appeal to the radio and television stations
that provide the advertising spots GTN sells to advertisers. GTN accomplishes this by providing
Affiliates with information reports at no charge, and in some cases, provides cash compensation
to the Affiliates in exchange for advertising spots, allowing Affiliates, in many cases, to turn an
important programming segment from a cost centre into a profit centre. Affiliate contracts are
typically multi-year, generally cover all of an Affiliate’s stations across the relevant market and
provide a fixed number of spots over the life of the agreement.
By focusing on traffic reports, GTN believes it provides a better product to its Affiliates than the
stations could create on their own. GTN collates information for its traffic reports from a range of
sources including aircraft, access to government traffic centres, third party providers, radio
scanners and station listener lines, to provide up-to-the-minute information to Affiliates.
GTN value proposition
Revenue model
GTN primarily generates revenue by selling schedules of advertising spots to large advertisers.
The majority of GTN’s advertising revenue is generated through advertising agencies who have
been engaged by advertisers. In these situations, GTN attempts to maintain a relationship with
the advertisers directly to assist with the sale process. GTN also sells some spots directly to
advertisers.
Each of GTN’s operating geographies has generally been able to grow its spots inventory each
year. Inventory is grown either through expanding the Affiliate network (in existing or new
markets) or growing the number of spots under contract with existing Affiliates.
GTN can accommodate orders from advertisers with short lead times, providing advertisers the
flexibility to conduct timely and relevant campaigns. Advertisers book a significant portion of
orders not more than four weeks in advance. This short forward sales pipeline is typical for the
radio business.
Value proposition to advertisers
GTN provides a different value proposition to advertisers in comparison with traditional
advertising models as summarised below. This has enabled GTN to build a loyal customer base,
comprised primarily of large advertisers.
Audience reach: GTN operates one of the largest broadcast media advertising platforms by
audience reach in Australia, Canada and the United Kingdom, and GTN’s goal is to achieve
the same status in each market GTN enters, such as Brazil. This enables advertisers to
communicate with a large number and broad demographic of potential consumers.
High frequency: GTN’s advertisements are heard frequently throughout the day on every
Affiliate in the purchased market or region, enabling advertisers to communicate their
4
message repeatedly. This format is designed to maximise efficacy, enhance recall and
minimise switching during advertisements.
High engagement: GTN’s advertising spots are adjacent to information reports that have
been found to be useful and engaging for listeners. In 2015, GTN commissioned a research
study conducted by Neuro Insight which measured brain activity and demonstrated that traffic
update content was the most engaging content for listeners.
Ideal placement: A large proportion of GTN advertising spots are aired during morning and
afternoon commute periods, which generally have the largest audience.
High recall: GTN’s advertisements are designed to provide high recall rates by being short in
duration (10 seconds), adjacent to information reports and standalone to other
advertisements.
Audience consistency: Advertisers using GTN’s platform are less exposed to ratings
swings of individual radio affiliate stations since GTN’s customers receive spots on multiple
radio affiliate stations.
Audience coverage: GTN sells spots on a national, regional or specific market basis. This
allows the product to be relevant for both nationally and regionally-focused advertisers.
Value proposition to broadcasters
GTN provides a strong value proposition to broadcasters as summarised below. This has
allowed GTN to develop longstanding relationships with Affiliates and consistently grow its
network of Affiliates. GTN seeks to provide Affiliates with:
Tailored content: GTN customises the information reports that it provides to Affiliates by
providing pertinent and geographically-relevant information that meets the content and style
requirements of each Affiliate. This helps to ensure that the reports appeal to each Affiliate’s
target audience;
Quality product: GTN commits substantial resources to its information gathering and
dissemination capabilities, including considerable training of its reporters and producers.
Consequently, Affiliates receive more substantive and higher quality reports than they would
likely be able to cost effectively produce themselves;
Cost efficiencies: Affiliates utilise GTN’s reports instead of having to procure this
information on their own, which could require significant capital outlay in order to acquire
aircraft and other information gathering infrastructure. This allows Affiliates to eliminate the
non-core operating costs associated with real time content development, which is
particularly helpful to Affiliates that are not large enough to cost effectively produce traffic
reports on their own;
Contractual earnings: GTN provides station compensation to certain Affiliates in the form
of cash payments. These station compensation payments represent stable recurring cash
flows for these Affiliates and, in some instances, form a material part of that Affiliate’s overall
profits; and
Revenue opportunity: Affiliates are permitted to sell sponsorships at the opening of an
information report (i.e. “this report is brought to you by”), providing them with a revenue
source without a cost base.
By addressing multiple needs of our radio and television station Affiliates and providing our
advertising customers with a highly effective advertising vehicle, we are able to meet the needs
of both constituencies and continue to grow our business.
5
Corporate Governance
The Corporate Governance Statement outlining GTN Limited’s corporate governance framework
and practices in the form of a report against the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations, 3rd Edition, is available on the GTN Limited
website at http://www.gtnetwork.com.au/home/?page=corporate-governance in accordance with
ASX listing rule 4.10.3. The Directors approved the 2019 Corporate Governance Statement on
29 August 2019.
6
Directors’ Report
The Directors present their report together with the consolidated financial statements of GTN
Limited and its Controlled Entities (“Group”), for the year ended 30 June 2019 and the auditor’s
report thereon.
Directors and Company Secretaries
Robert Loewenthal
Independent Non-
Executive Chairman
Chairman of the Nomination
and Remuneration Committee
Member of the Audit and Risk
Committee
William Yde III (“Bill”)
Managing Director and
Chief Executive Officer
Robert Loewenthal has over 10 years of experience in the radio industry.
He currently operates a private corporate advisory and consulting business, Free
Trade Hall, and is the founder of the Whooshkaa Podcasting Platform.
Robert formerly held the role of Managing Director of Macquarie Radio Network,
where he had previously acted as Chief Operating Officer and company
secretary.
Robert is a Chartered Accountant and holds a Bachelor of Commerce degree
from The University of Sydney.
Bill Yde has 35 years of experience in the radio and media industry.
Bill co-founded The Australia Traffic Network (“ATN”) in 1997, later co-founding
Global Traffic Network, Inc. and has served as Chief Executive Officer and
President since its inception in 2005.
Prior to forming ATN, Bill founded Wisconsin Information Systems, Inc. (trading
as the Milwaukee Traffic Network) in 1994, and expanded its operations to
create traffic networks in Milwaukee, Oklahoma City, Omaha and Albuquerque
before the business was sold to Metro Networks, Inc. (now part of iHeartMedia,
Inc.).
Bill holds a Bachelor of Arts degree in Accounting from Indiana University and is
a Certified Public Accountant.
7
David Ryan AO
Independent Non-
Executive Director
Chairman of the Audit and
Risk Committee
Member of the Nomination and
Remuneration Committee
Corinna Keller
Independent Non-
Executive Director
Member of the Audit and
Risk Committee and Nomination
and Remuneration Committee
Anna Sandham
Joint Company Secretary
Patrick Quinlan
Joint Company Secretary
David Ryan AO has over 40 years of experience in commercial banking,
investment banking and operational business management.
David is also currently Chairman of Visit Sunshine Coast Limited (formerly
Sunshine Coast Destination Limited), a director of First American Title Insurance
Company of Australia Pty Ltd, a director of First Mortgage Services Pty Ltd, a
director of Sunshine Coast Airport Pty Limited and Board member of the
Sunshine Coast Events Board.
David has previously held positions as a non-executive director of GetSwift
Limited from April 2018 to April 2019, a non-executive director of Lendlease
Corporation Limited from December 2004 until his retirement in November 2017,
non-executive director of Aston Resources from 2011 until its merger with
Whitehaven Coal and as non-executive chairman of Transurban Holdings
(appointed director in 2003, chairman in 2007, and retired in 2010).
David holds a Bachelor of Business from the University of Technology, Sydney
and is a Fellow of the Australian Institute of Company Directors and of CPA
Australia.
Corinna Keller is Vice President of Advertising Sales for the Americas for CNN
International Commercial (a WarnerMedia company), which she joined in
2016. Corinna oversees the pan-regional ad sales business for CNN
International, CNN en Español, CNN.com/international and CNNEspañol.com for
Latin America and clients based in the U.S. and Canada who want to target
international viewers.
From 1999 to 2015, Corinna was with Viacom in various roles, her last as Vice
President, International Marketing Partnerships and Pan-regional Ad Sales,
running the pan-regional advertising business for Nickelodeon, MTV, Comedy
Central, Paramount Channel and VH1, and a diverse digital portfolio. She held a
number of senior positions with Viacom in both the U.S. and Mexico and
managed client relationships with Fortune 500 companies across the U.S., Latin
America, Europe and Asia.
Prior to Viacom, Corinna was in the pay television industry at Turner
Broadcasting, where she assisted in distribution for the newly launched CNN en
Español.
Corinna holds a BAS from Kalamazoo College and speaks English, Spanish,
German and Portuguese.
Anna Sandham is a Chartered Company Secretary employed by Company
Matters Pty Limited. Anna is an experienced company secretary and
governance professional with over 20 years’ experience in various large and
small, public and private, listed and unlisted companies.
Anna has previously worked for companies including AMP Financial Services,
Westpac Banking Corporation, BT Financial Group and NRMA Limited.
Anna is a fellow of the Governance Institute of Australia, in addition to being a
member of their Legislative Review Committee.
Patrick Quinlan is the finance manager for the Australian and Canadian entities,
as well as being the joint company secretary for GTN Limited.
Patrick holds a Bachelor of Business degree from University of Western Sydney
and is a member of CPA Australia. Patrick is currently studying to be a chartered
secretary at Governance Institute of Australia.
8
Senior Executives
The Senior Executives of the Company currently are:
Scott Cody
Chief Operating Officer and
Chief Financial Officer
Gary Worobow
Executive Vice President,
Business and Legal
Affairs
Kelly McIlwraith
Commercial Sales, Marketing &
Strategy Director
The Australia Traffic Network
(“ATN”)
Victor Lorusso (“Vic”)
Chief Operations Manager
ATN
Scott Cody has over 30 years of experience in the radio media industry.
Prior to joining Global Traffic Network, Scott held various positions with Metro
Networks, Inc./ Westwood One, serving as Vice President of Finance from 1997
to 2002 and Senior Vice President of Business Development from 2002 to 2005.
Prior to joining Metro Networks, Inc./ Westwood One, Scott was Vice President
of Finance for Tele-Media Broadcasting Company.
Scott graduated with a Bachelor of Arts in Accounting and Finance from Juniata
College.
Gary Worobow has over 20 years of experience in the radio and media industry.
He was previously a member of the Global Traffic Network Board from 2006 to
2009. Prior to joining Global Traffic Network, Gary held the position of Executive
Vice President and General Counsel of Five S Capital Management, Inc. from
2006 to 2009, Executive Vice President, Business Affairs and Business
Development for Metro Networks Inc./ Westwood One, Inc. from 2003 to 2006
and as Senior Vice President and General Counsel from 1999 to 2002.
Gary was a founder and the General Counsel of Columbus Capital Partners and
held the positions of Senior Vice President, General Counsel and board member
for Metro Networks, Inc./ Westwood One from 1995 to 1999.
Gary holds a Bachelor of Arts from the University of Rochester, a Masters of
Business Administration from the Simon School, University of Rochester and a
Juris Doctor from the Fordham Law School.
Kelly McIlwraith has over 20 years’ experience in the advertising industry in both
the UK and Australia working in media agencies and sales organisations in
sales, strategy, research and marketing roles.
Kelly joined ATN in 2015 as Marketing Strategy Director.
Prior to joining ATN, Kelly was General Manager of Strategy for oOh! Media and
was a member of their senior executive team and held senior positions at media
agencies Mediacom and Mediaedge.
Kelly was previously a judge for the POPAI Marketing at Retail Awards and a
member of the MOVE Committee (outdoor audience measurement).
Vic Lorusso has over 20 years of experience in the media industry, all of those
with ATN in various operational and management positions.
Vic is currently the Chief Operations Manager for ATN after joining in 1999.
Vic is also an airborne traffic reporter for the Ten Network and various radio
stations. In addition to his role with ATN, Vic is associated with a number of
charities throughout the country including the Variety Children’s Charity, Redkite,
Miracle Babies Foundation, Diabetes Association NSW, Cure Cancer Foundation
and the Special Olympics Foundation.
Vic has a Business Licence for Real Estate.
9
John Quinn
Chief Operating Officer
United Kingdom Traffic Network
(”UKTN”)
John Quinn has over 30 years of experience in the radio and media industry.
John is currently the Chief Operating Officer of Global Traffic Network’s United
Kingdom operations after joining Global Traffic Network in 2009 following its
acquisition of UBC Media’s commercial division.
Prior to the acquisition, John was the Chief Operating Officer and a director of
UBC Media (a company listed on AIM, a sub-market of the London Stock
Exchange) and has held numerous other sales and management positions within
the United Kingdom commercial radio industry.
Meetings of Directors
The number of meetings of the Board of Directors and its committees that were held during the
year and the number of meetings attended by each director are summarised in the table below.
Board
Audit and Risk
Management
Committee
Nomination and
Remuneration
Committee
Held
Attended
Held
Attended
Held
Attended
William Yde III
David Ryan
Robert
Loewenthal
Corinna Keller
(1)(2)
8
8
8
3
8
8
8
3
-
5
5
-
-
5
5
-
-
4
4
-
-
4
4
-
(1) Appointed to Board of Directors effective 1 March 2019.
(2) Appointed to Audit and Risk Management Committee and Nomination and
Remuneration Committee on 12 June 2019.
Principal activities
The principal activity of GTN during the course of the financial year was that of provider of an
advertising platform to advertisers in Australia, United Kingdom, Canada and Brazil.
Operating Strategy
The Company’s operating strategy is to grow its business through the obtaining of more
advertising inventory and selling a higher proportion of and obtaining a higher price per unit of
advertising inventory. The Company strategy to obtain more advertising inventory consists of
the following:
10
Obtain more advertising inventory from existing radio and television stations for existing
products. This is primarily accomplished by the payment of higher station
compensation.
Have existing radio stations provide advertising inventory outside traditional traffic
reporting, such as the number of stations in Australia where we currently receive
advertising inventory adjacent to news reports.
Expansion into additional operating regions within our current countries, such as the
expansion into additional regional markets in Australia and Campinas and Brasilia in
Brazil.
This growth strategy is subject to a number of risks, some of which are out of our control. Some
of these risks and our strategy for mitigating them are as follows:
Loss of key radio station Affiliates
In FY 2019, 97% of our revenue came from the sale of advertising inventory obtained from our
radio station Affiliates. Loss of significant radio station Affiliates would have a material impact on
our revenue. We attempt to defend against this risk in the following ways:
Provide a high-quality product that resonates with stations’ listeners and would be
difficult for the stations to replicate in a cost-effective manner, if at all.
For the most important radio stations, pay a significant amount to the stations in the form
of station compensation. For our most important Affiliates, this amount has become a
significant portion of their EBITDA based on our review of their public filings.
Decline in demand for traffic reports on radio
Individuals have other means of getting traffic information, including the internet, smart phone
aps, navigation systems, etc. and we expect that such options will continue to proliferate in the
future. It is possible that in the future that such other options will decrease the demand for our
traffic reports from radio stations. We attempt to defend against this possibility in two ways:
First, by paying significant station compensation, we attempt to make it a very difficult
decision to reduce or eliminate the number of traffic reports broadcast.
Second, since we sell our reports as a network of information reports, we are educating
clients that the key element is that their spot be adjacent to high demand information
content, rather than just traffic. In Australia, approximately 22% of our advertising
inventory in the five metro markets is adjacent to news reports.
We believe that combining high levels of compensation to stations to encourage their continued
provision of advertising inventory with an advertiser base that understands that while traffic is a
very effective area to place spots today, but is not the only attractive placement option, is the
best way to protect against a decline in interest in traffic reports broadcast on traditional radio.
Decline in popularity of radio and television in general
Virtually all of our revenue is derived from the sale of advertising spots on radio and television
stations. A decline in the popularity of these mediums as either an entertainment option or
advertising medium would likely have a material negative impact on our revenues and
profitability. While to a certain extent this risk is out of our control, we have employed several
strategies to attempt to mitigate this risk:
Our product is different than traditional radio despite being broadcast on radio stations.
We sell a broad reach across all demographics with the spots having the further
advantage of sole placement, adjacent to popular information programming elements
and generally read live by the announcer. In our opinion, all of these things make our
advertising product more effective than traditional radio advertising. We believe this
contention is supported by the fact that our revenue growth has consistently surpassed
that of the overall radio market in the markets in which we operate, with FY 2019 in
Australia being a notable exception.
11
We continue to explore other platforms where our content and sales ability would
translate to. To date, these explorations have not been successful but we plan to
continue to research and pursue additional opportunities outside of radio and television.
Decline in advertising market in general
Our business model is currently almost entirely based on the sale of advertising, which is cyclical
in nature. While we cannot control the fluctuations in the advertising market, we attempt to
mitigate this risk by providing a compelling advertising product that is both effective for
advertisers and not easily replicated by “buying around” our networks. A certain level of
advertising is still sold even in down business cycles so we attempt to position ourselves as a
key portion of an advertiser’s strategy, even if they are reducing their overall expenditures.
Expansion into new markets
Expansion into new markets entails risk as there is an upfront investment of monetary resources
to purchase equipment (often helicopters) and to fund the initial operating losses and working
capital requirements. There is also the opportunity cost of a diversion of management’s time
and focus away from the current operations. The Company attempts to mitigate this risk by a
thorough due diligence process prior to committing significant resources to a new market. In
addition, the Company hires virtually all of its employees in the local market, which gives market
insights that would not otherwise be readily available. The Company believes by training local
personnel in the Company’s business model, the likelihood of success is increased.
Foreign exchange fluctuations can have a negative impact on financial performance
A significant portion of our revenues (49% in FY 2019) are generated outside of Australia and
subject to currency exchange fluctuations between AUD and the local currency of those entities.
We expect the portion of revenue subject to foreign exchange fluctuations will increase in the
future as we anticipate that our Canada and Brazil operations will grow faster than the overall
group revenues. We do not hedge for foreign currency fluctuations at this time and currently do
not have an intention to do so although we may enter into such hedging arrangements in the
future. This risk is mitigated by each country incurring virtually all their expenses in local
currency as well. The impact of this is should revenue be reduced by an unfavourable currency
movement, expenses will also be reduced, which would be considered a favourable movement.
The negative impact to the financial statements is only on the net difference between the
revenue and expenses. However, this net amount can still be material based on the magnitude
of the currency shifts.
Review and Results of Operations
Operating and Financial Review
Revenue for FY 2019 was flat at $185.0 million. EBITDA and Adjusted EBITDA decreased 26%
and 22% respectively due to increased operating expenses across all geographies. Station
compensation was the largest component of the expense increase. The non-IFRS
measurements used are defined in the table below and further discussed later in this report.
(m)(4)
Revenue (5)
EBITDA (2)(5)
Adjusted EBITDA (3)(5)
NPAT (5)
NPATA (1)(5)
FY19
FY18
% Difference
185.0
185.0
29.2
37.5
15.7
20.3
39.7
48.1
24.8
29.2
12
-%
(26)%
(22)%
(37)%
(31)%
NPATA per share (cents) (5)
$0.09
$0.13
(31)%
(1)
NPATA is defined as net profit after tax (NPAT) from continuing operations adjusted for the tax effected
amortization arising from acquisition related intangible assets.
(2) EBITDA is defined as net profit after tax (earnings) before the deduction of interest expense/income, income
taxes, depreciation, amortization and non-cash impairment charges.
(3) Adjusted EBITDA is defined as EBITDA adding back the non-cash interest income related to the long-term
prepaid affiliation agreement with Southern Cross Austereo which is treated as a financing transaction, foreign
exchange gains and losses and transaction costs.
(4) Amounts in tables may not add due to rounding. Percentage changes based on actual amounts prior to
rounding.
(5) Results exclude FY18 discontinued operation.
Revenue
Group revenue was flat compared to FY 2018 due to a decline in Australian revenue. All three
of the operating segments operating outside of Australia exceeded the previous year’s revenue.
The Australia market constituted 51% of the Company’s revenue for FY 2019. Revenue for the
Company’s markets outside of Australia grew 8% in FY 2019.
FY19 Revenue by Geographic Segment
(m)(4)
Australia (ATN)
Canada (CTN)
United Kingdom (UKTN)
Brazil (BTN)
Total
FY19
FY18
% Difference
93.9
33.2
45.2
12.6
185.0
100.8
29.8
42.2
12.2
185.0
(6.8)%
11.2%
7.2%
3.7%
-%
Revenue in local currency increased in all the operating segments outside of Australia as well.
Fluctuations in exchange rates benefitted the Canada and United Kingdom segments while
acting as a headwind in Brazil.
FY19 Revenue by Geographic Segment – Local Currency
(m)(4)
Australia (ATN) (AUD)
Canada (CTN) (CAD)
United Kingdom (UKTN) (GBP)
Brazil (BTN) (BRL)
FY19
FY18
% Difference
93.9
31.4
25.0
34.9
100.8
29.4
24.3
31.2
(6.8)%
6.9%
3.0%
11.9%
EBITDA and Adjusted EBITDA
Adjusted EBITDA for FY 2019 was $37.5 million, a decrease of 22% from FY 2018 due to higher
operating expenses. The largest component of the increase was additional station
compensation associated with the renewal of a key affiliate group in Australia, the Rogers
Toronto affiliation in Canada, an increase in variable compensation in the United Kingdom due to
the higher revenue as well as market consolidation and additional compensation in Brazil related
to both opening new markets and expanding existing markets. The increase in sales, general
and administrative expenses related primarily to increased employee costs outside of Australia,
including commissions and bonuses related to increased revenue in those markets, contractual
increases to executive management and severance payments. Operating expenses outside of
13
Australia also increased due to the weakening of the Australia dollar compared to the Canadian
dollar and British pound.
(m)(4)
Revenue
Network operations and station
compensation expenses
Selling, general and
administrative expenses
Equity based compensation
expense
Net F/X losses
Operating expenses
EBITDA
Interest income on Southern
Cross Austereo Affiliate Contract
Net F/X losses
Adjusted EBITDA
NPATA
FY19
185.0
185.0
FY18
% Difference
(117.1)
(109.8)
(38.1)
(34.8)
(0.6)
-
(0.7)
(0.1)
(155.8)
(145.4)
29.2
39.7
8.3
-
37.5
8.4
0.1
48.1
-%
7%
9%
(13)%
(48)%
7%
(26)%
(1)%
(48)%
(22)%
The Group reported NPATA from continuing operations of $20.3 million which is a decrease of
31% from FY 2018. The decrease in NPATA was primarily due to the reduced Adjusted EBITDA
for the period which is discussed above. In addition, NPATA was negatively impacted by
approximately $1.3 million of additional depreciation expense due to the Company adoption of
AASB 16 (Leases).
FY19 Cash Flow
The Group reported strong cash flow from continuing operations.
(m)(4)
Adjusted EBITDA
Non-cash items in Adjusted EBITDA
Change in working capital
Impact of Southern Cross Austereo
Affiliate Contract
Operating free cash flow before capital
expenditure
Capital expenditure (excludes assets
acquired under leases)
Net free cash flow before financing, tax
and dividends
FY19
37.5
0.6
4.8
2.0
44.9
(3.9)
FY18
48.1
0.7
(2.8)
2.0
48.0
(3.3)
41.0
44.6
Due to the favourable change in working capital (which is expected to be a temporary timing
difference), positive cash impact of the Southern Cross Austereo prepayment and low cash
capital expenditures, more than 100% of Adjusted EBITDA was converted into net free cash flow
14
before financing, tax and dividends. As a result of GTN’s strong cash generation and large cash
balance, the Group was able to pay $30.1 million in dividends during the year ended 30 June
2019, consisting of a final dividend for FY 2018 and an interim dividend for FY 2019. In addition,
the directors have declared a final dividend for FY 2019 of $7.2 million. The Group’s cash
balance was $50.7 million at 30 June 2019 compared to $52.2 million at 30 June 2018. The
Group also has a $15 million bank facility which is undrawn as of 30 June 2019.
The Group has outstanding bank debt principal at 30 June 2019 of $60 million, $3.6 million of
finance leases (related to the adoption of AASB 16) and net debt (debt principal less cash
balances) of $12.8 million. The ratio of net debt to Adjusted EBITDA is 0.34x at 30 June 2019.
The Group’s debt is only secured by the Groups’ Australia and United Kingdom operations.
Based on the applicable covenants for the Group’s debt facility, the leverage was 0.80x at 30
June 2019. The EBITDA used for the calculation of the leverage under the debt facility differs
from that of Adjusted EBITDA used in this report.
Segment Adjusted EBITDA
Adjusted EBITDA by segment decreased in Australia, Brazil and Canada while increasing in the
United Kingdom. Australia, the Group’s largest segment, decreased as a result of a decrease in
revenue and a slight (1%) increase in operating expenses, primarily station compensation.
Adjusted EBITDA decreased in both Brazil and Canada despite revenue increases due to higher
costs. The primary driver of the expense increase in Canada was the Rogers affiliation
agreement for the Toronto market, while Brazil expenses were impacted by opening several new
markets as well as additional costs to build and maintain the affiliation base. United Kingdom
Adjusted EBITDA increased due primarily to a 7% increase in revenue for the period.
(m)(4)
Australia (ATN)
Canada (CTN)
United Kingdom (UKTN)
Brazil (BTN)
Other(6)
Total
FY19(7)
FY18(7) % Difference
32.7
6.2
4.4
1.1
(6.8)
37.5
40.6
7.7
3.7
1.8
(5.6)
48.1
(19)%
(20)%
+19%
(38)%
(21)%
(22)%
(6) Primarily corporate overhead
(7) Excludes intercompany management fees charged to certain subsidiaries
Key operating metrics
Key operating metrics by jurisdiction (local currency)
Australia
Radio spots inventory ('000s)
Radio sell-out rate (%)
Average radio spot rate (AUD)
Canada
Radio spots inventory ('000s)
Radio sell-out rate (%)
Average radio spot rate (CAD)
United Kingdom
Total radio impacts available ('000)
Notes
1
2
3
1
2
3
4
FY19
1,032
64%
137
655
66%
69
FY18
958
73%
138
630
63%
69
19,435
19,307
15
Radio sell-out rate (%)
Average radio net impact rate (GBP)
5
6
Brazil
Radio spots inventory ('000s)
Radio sell-out rate (%)
Average radio spot rate (BRL)
1
2
3, 7
99%
1.3
315
50%
258
97%
1.3
216
60%
275
1. Available radio advertising spots (primarily adjacent to traffic, news and information reports).
2. The number of radio spots sold as a percentage of the number of radio spots available.
3. Average price per radio spot sold net of agency commission.
4. The UK market measures inventory and units sold based on impacts instead of spots. An impact is a
thousand listener impressions.
5. The number of impressions sold as a percentage of the number of impressions available.
6. Average price per radio impact sold net of agency commission.
7. Not adjusted for taxes or advertising agency incentives that are deducted from net revenue.
Foreign exchange rates
A significant portion of the Company’s revenue and expenses are in a currency other than
Australia dollars (“AUD”). The actual annual exchange rates utilized in preparing the annual
consolidated statement of profit or loss and other comprehensive income are as follows:
FY2019
Actual
FY2018
Actual
0.72
0.95
0.55
2.76
0.78
0.98
0.58
2.56
AUD:USD
AUD:CAD
AUD:GBP
AUD:BRL
Discontinued Operation
On 13 March 2018, the Company sold its United States Traffic Network, LLC (“USTN”)
subsidiary for $1 USD. The Company exited the U.S. market because it believed that it would
not be able to sufficiently increase revenue in the short or intermediate term sufficiently to justify
the costs (primarily station compensation) of operating in the United States. The Company
recognized a gain of $24,865 thousand on the disposal of USTN. The net loss associated with
the USTN segment was $39,932 thousand for the period from 1 July 2017 to 13 March 2018
(“FY 2018”) and $21,967 thousand for the period 1 December 2016 to 30 June 2017 (“FY 2017”)
and is reflected as loss from discontinued operation in the consolidated statement of profit or
loss and other comprehensive income.
Dividends
An interim dividend $0.024 per share (100% franked) was paid 29 March 2019.
A final dividend of $0.0320 per share (70% franked) was declared 29 August 2019 and will be
paid to holders of record as of 6 September 2019.
16
Non-IFRS measurements
● EBITDA is earnings before interest, tax, depreciation, amortisation and non-cash
impairment charges which exclude the results of discontinued operations.
Management uses EBITDA to evaluate the operating performance of the business
without the non-cash impact of depreciation and amortisation and before interest and tax
charges, which are significantly affected by the capital structure and historical tax
position of the Company.
EBITDA can be useful to help understand the cash generation potential of the business
because it does not include the non-cash charges for depreciation and amortisation.
However, management believes that it should not be considered as an alternative to net
free cash flow from operations and investors should not consider EBITDA in isolation
from, or as a substitute for, an analysis of the Company’s results of operations;
● Adjusted EBITDA is EBITDA adjusted to include the non-cash interest income arising
from the long-term prepaid Southern Cross Austereo Affiliate Contract and excludes
foreign exchange gains or losses and transaction costs.
Management considers that Adjusted EBITDA is an appropriate measure of GTN's
underlying EBITDA performance. Otherwise, the EBITDA would reflect significant non-
cash station compensation charges without offsetting non-cash interest income arising
from the treatment of the contract as a financing arrangement.
● NPATA is net profit (loss) after tax from continuing operations adjusted to add-back the
tax effected impact of amortization of intangible assets related to the purchase
accounting arising from GTCR’s acquisition of Global Traffic Network, Inc. in September
2011.
Management considers it appropriate to disclose NPATA because the amortization of
the intangibles related to purchase accounting is both a non-cash charge and there will
be no future cash outlays to “replace” these assets once fully amortized.
Non-IFRS information has not been audited.
Likely developments and expected results
The Company’s prospects and strategic direction are discussed in the Operating Strategy
section of the Directors’ Report.
Further information about likely developments in the operations of the Company and the
expected results of those operations in future financial years has not been included in the report
because disclosure of the information would be likely to result in prejudice to the Company.
Significant changes in the state of affairs
Except as outlined elsewhere in this Directors’ Report, there were no significant changes in the
affairs of the Group during the fiscal year.
Events since the end of financial year
Except as outlined in the Financial Statements and elsewhere in this Directors’ Report, no matter
or circumstance has arisen since 30 June 2019 that has significantly affected the Group’s
operations, results or state of affairs or may do so in future years.
Environmental regulation
The operations of the Group are not subject to any particular or significant environmental
regulation or law.
17
Insurance of officers and Directors
Pursuant to its constitution, GTN may indemnify Directors and officers, past and present, against
liabilities that arise from their position as a Director or officer as allowed under law. Under the
deeds of access, indemnity and insurance, GTN indemnifies each Director against liabilities to
another person that may arise from their position as a director of GTN to the maximum extent
permitted by law. The deeds of access, indemnity and insurance stipulate that GTN will
reimburse and compensate each Director for any such liabilities, including reasonable legal
costs and expenses, except where a Director’s act is fraudulent, criminal, dishonest or wilfully
deceitful.
Pursuant to its constitution, GTN may arrange and maintain directors’ and officers’ insurance for
its Directors to the maximum extent permitted by law. Under the deeds of access, indemnity and
insurance, GTN must use reasonable endeavours to obtain such insurance during each
Director’s period of office and for a period of seven years after a Director ceases to hold office.
This seven-year period can be extended where certain proceedings or investigations commence
before the seven-year period expires.
GTN has obtained insurance in respect to directors’ and officers’ liability for the year ended 30
June 2019 and thereafter. These insurance policies insure against certain liabilities (subject to
exclusions) of persons that have been directors or officers of GTN or its direct or indirect
subsidiaries to the extent allowed by the Corporations Act 2001. The expense related to this
insurance was $234 thousand for FY 2019.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to
bring proceedings on behalf of GTN, or to intervene in any proceedings to which GTN is a party,
for the purposes of taking responsibility on behalf of GTN for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of GTN with leave of the Court
under section 237 of the Corporations Act 2001.
Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory
audit duties where the auditor’s expertise and experience with the Group is important.
Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers Australia and its
related companies) for audit and non-audit services provided during the year are included in
Note 10 of the Consolidated Financial Report.
The Board has considered the position and, in accordance with advice received from the Audit
and Risk Committee, is satisfied the provision of the non-audit services is compatible with the
general standard of independence for auditors imposed by the Corporations Act 2001. The
Directors are satisfied that the provision of non-audit services by the auditor, as set forth below,
did not compromise the auditor independence requirements of the Corporations Act 2001 for the
following reasons:
● all non-audit services have been reviewed by the Audit and Risk Committee to ensure
they do not impact the impartiality and objectivity of the auditor
● none of the services undermine the general principles relating to auditor independence
as set out in APES 110 Code of Ethics for Professional Accountants.
During the year the following fees were paid or payable for non-audit services provided by the
auditor of GTN and its related practices:
18
Taxation services*
Tax compliance
Remuneration for taxation services
2019
$
370,000
370,000
2018
$
524,000
524,000
Total remuneration for non-audit services
370,000
524,000
*Included in the above fees are amounts paid to network firms of PricewaterhouseCoopers Australia.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the
Corporations Act 2001 is set forth on page 29.
Rounding of amounts
GTN is of a kind referred to in ASIC Corporations Instrument 2016/191, issued by the Australian
Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the
Directors’ Report. Amounts in the Directors’ Report have been rounded off in accordance with
that ASIC Corporations Instrument to the nearest thousand dollars, or in certain cases, the
nearest dollar.
Directors’ interests in shares and options of GTN
The relevant interests of each Director in the equity of GTN as of the date of this Directors’
Report are disclosed in the Remuneration Report.
This report was made in accordance with a resolution of the Directors.
Robert Loewenthal
Chairman
29 August 2019
19
Remuneration Report (audited)
The directors present the GTN 2019 remuneration report, outlining key aspects of our
remuneration policy and framework, and remuneration awarded this year.
The report is structured as follows:
a) Key management personnel (KMP) covered in this report
b) Remuneration policy and link to performance
c) Elements of remuneration
d) Link between remuneration and performance
e) Remuneration expenses for executive KMP
f) Contractual arrangements with executive KMP
g) Non-executive director arrangements
h) Additional statutory information
(a) Key management personnel covered in this report
Non-executive and executive directors (see pages 7 to 8 - for details about each
director)
William Yde III
David Ryan AO
Robert Loewenthal
Corinna Keller
Other key management personnel
Name
Scott Cody
Gary Worobow
Position
Chief Operating Officer and Chief Financial Officer
Executive Vice President, Business and Legal Affairs
Key management personnel are those executive management members that have
responsibility and authority for planning, controlling and directing resources for the entire
group. Other senior executives, such as jurisdictional management, are not considered
to be key management personnel for the purposes of the remuneration report as their
duties are related to their geographic area of operation only and do not extend to
strategic direction and control of resources of the Group.
Changes since the end of the reporting period
None
(b) Remuneration policy and link to performance
Our Nomination and Remuneration committee is made up of non-executive directors (all of
whom are independent). The committee reviews and makes recommendations to the Board
about our remuneration policy and structure annually to align it to business needs and meet
our business principles. From time to time, the committee may also engage external
remuneration consultants to assist with this review (see section (h)(v) Reliance on external
remuneration consultants). In particular, the policies and practices are designed to:
● enable the Company to attract, retain and motivate directors, executives and
employees who will create value for shareholders within an appropriate risk
management framework by providing remuneration packages that are equitable and
externally competitive;
● be fair and appropriate having regard to the performance of the Company and the
relevant director, executive or employee;
●foster exceptional human talent and motivate and support employees to pursue the
growth and success of the Company in alignment with the Company’s values; and
20
● equitably and responsibly reward employees, having regard to the performance of the
Company, individual performance and statutory and regulatory requirements.
Remuneration Framework
Element
Purpose
Fixed
Remuneration
(FR)
Provide
competitive
market salary
Short-term
incentive (STI)
Long-term
incentive (LTI)
Reward for in
year
performance
Alignment to
long-term
shareholder
value
Performance
metrics
N/A
Potential
Value
Varies
Adjusted EBITDA
Varies
Vesting based on
continued service
only
Varies
Changes for FY20
Contractual
increases of 5%
effective 1 October
2019
Targets adjusted on
an annual basis.
Contractually
obligated options
expected to be
granted in FY20.
Balancing short-term and long-term performance
Annual incentives are set at levels designed to maximize performance. Long-term
incentives consist of share options that vest one third after two years and two thirds after
three years and are designed to align management’s interests with those of the
shareholders and encourage retention.
Assessing performance
The Board has overall responsibility for executive remuneration and receives
recommendations from the Nomination and Remuneration Committee. To assist with its
assessment of executive compensation the committee receives reports on performance from
management which are based on independently verifiable data such as financial measures
and independent market data. There are no “claw-back” provisions in any of the
performance-based remuneration plans.
(c) Elements of remuneration
(i)
Fixed annual remuneration (FR)
Executives may receive their fixed remuneration as cash or cash with non-monetary benefits
such as health insurance and similar benefits. FR is reviewed annually or upon promotion or
change in circumstance. Superannuation is included for Australia based employees and
directors only.
(ii)
Short-term incentives (STI)
Feature
Maximum
bonus
Description
CEO – $443,722, other executive management $147,604 to
$228,358
100% of the maximum bonus is paid for achieving 100% of the
performance metrics. Board may award discretionary bonus
for performance that is less than 100% of the performance
metrics.
Performance
Metrics
Aligns executive compensation with market expectations.
Metric
Adjusted
EBITDA
Target
FY20 Board
approved
Weighting Reason
Adjusted
100%
EBITDA is
21
Adjusted
EBITDA target
primary criteria
by which
investors judge
performance
Delivery of STI 100% paid upon conclusion of fiscal year after completion of
Board
discretion
audit of financial statements
The Board has discretion to adjust remuneration outcomes up
or down in certain situations to prevent any inappropriate
reward outcomes.
Note: Amounts are paid in USD and amounts to be paid are based on estimated
USD/AUD exchange rate of 1.4243:1.
(iii)
Long-term incentives (“LTIP”)
Executive key management personnel participate in the LTIP comprising of annual
grants of options which vest one third after two years and two thirds after three
years and are subject to performance conditions summarized below.
Feature
Allocation
Description
CEO 70% FR, Other executive management 50% of FR.
Target allocation is based on fair value of the grant, which
vests over three years.
Current
Performance
Metrics
Vesting is subject to continued employment only.
Exercise Price Exercise price equal to share price on date of grant.
Forfeiture and
termination
Options will lapse if performance conditions are not met. Any
unvested options granted will be forfeited where the participant
resigns or is dismissed during the performance period.
However, if the participant is considered a good leaver their
unvested options will vest or remain on foot.
(d)
Link between remuneration and performance
The Company’s Adjusted EBITDA performance for fiscal 2019 reached 82% of the
target set by the board (5% decrease over fiscal 2018 (excluding the discontinued
United States segment)). As a result, the board awarded executive management
0% of their bonus potential for the period.
The Company reached its Prospectus Forecast Adjusted EBITDA target for both
FY2016 and FY2017 and executive management received 100% of their short-term
incentive potential. The Company reached 95% its target Adjusted EBITDA from
continuing operations for FY2018 and executive management received 50% of their
short-term incentive potential for the year. The Company reached 82% its target
Adjusted EBITDA from continuing operations for FY2019 and executive
management received 0% of their short-term incentive potential for the year.
Performance against key measures and impact on variable remuneration
(m)
FY 2016(1) FY2017(2) FY2018(2)
FY 2019
Adjusted EBITDA
Increase/(decrease)
34,646
+21%
48,856
+41%
48,140
(1)%
37,549
(22)%
22
STI paid (% of potential)
100%
100%
50%
0%
(1) Pro forma. See previous filings for detail of pro forma adjustments.
(2) Adjusted to reflect disposal of United States Traffic Network LLC
Statutory key performance indicators of the Company over the past five years
FY 2019
FY 2018(1) FY2017(1) FY2016 FY 2015(2)
Profit (loss) from continuing
operations attributable to owners
($’000’s)
Basic earnings (loss) per share
Dividends paid ($‘000’s)
Dividend pay-out ratio (%)
Increase/(decrease) in share
price (%)
15,732
24,831
28,172
(17,234)
N/A
$0.07
12,561
80%
$0.11
24,719
100%
$0.13
23,216
82%
$(0.11)
-
N/A
(58)%
(9)%
+19%
N/A
N/A
N/A
N/A
N/A
(1) Adjusted to reflect disposal of United States Traffic Network LLC
(2) Not applicable as Company went public during FY2016
(e) Remuneration expenses for executive KMP
Fixed remuneration
Variable
Remuneration
Name
Year
Cash
Salary
Non-
monetary
benefits
Post-
employment
benefits
Other
Cash
bonus
Equity
based
comp
Total
(1)(2)(6)
(2)
(4)(6)
(6)
(3)(7)
(5)
Executive
Management
William Yde
III
(6)(4)
2019
1,038,547
2018
880,311
Scott Cody
(6)(4)
2019
2018
669,524
566,691
Gary
Worobow
(6)(4)
2019
554,932
2018
467,891
-
-
-
-
-
-
-
-
-
-
-
-
33,557
- 322,388
1,394,492
30,948
183,733 390,458
1,485,450
33,557
30,948
- 147,288
93,896 176,636
850,369
868,171
33,557
-
98,963
687,452
30,948
61,185
83,669
643,693
(1) Includes superannuation where applicable.
(2) Payments for annual leave are considered a component of cash salaries.
(3) Amounts based on expense recognized in the Consolidated Statement of Profit or Loss and Other
Comprehensive Income.
(4) United States based executive management receives cash stipend in lieu of the provision of health
insurance and similar employee benefits. The amount of the stipend is USD 2,000 per month.
(5) All amounts translated into AUD at the average exchange rate for the year.
23
(6) Paid in United States dollars (USD) except for equity based compensation.
(7) Includes amounts expensed for financial statement purposes related to forfeited stock options.
(f) Contractual arrangements with executive KMP
CEO Description
Component
Fixed remuneration (1)
Contractual term
Notice by the
individual/Company
Termination of employment
(without cause)
Termination of employment
(with cause) or by the
individual
$1,019,687 from 1 October
2018 to 1 October 2019,
minimum 5% increase per
annum thereafter.
Ongoing contract
By the Employee voluntarily
upon at least twelve (12)
months written notice to the
Company. Should the
executive terminate their
employment, they will be
entitled to up to one-year
severance. Severance is
calculated based on a
formula that subtracts the
required transition time (as
determined by the
Company) from the
maximum one-year period.
Entitled to pro-rata STI for the year
By the Company without
Cause upon twelve (12)
months written notice to
Employee.
Entitled to pro-rata STI for the year
Immediately
Other executive
management description
Range between $544,854
and $657,365 from 1
October 2018 to 1 October
2019, minimum 5% increase
per annum thereafter.
Ongoing contract
By the Employee voluntarily
upon at least twelve (12)
months written notice to the
Company. Should the
executive terminate their
employment, they will be
entitled to up to one-year
severance. Severance is
calculated based on a
formula that subtracts the
required transition time (as
determined by the Company)
from the maximum one-year
period.
By the Company without
Cause upon twelve (12)
months written notice to
Employee.
Immediately
No STI entitlement.
(1) Based on USD/AUD exchange rate of 1.4243:1.
(g) Non-executive director arrangements
Non-executive directors receive a fixed monthly fee for participating on the board. They do not
receive performance-based fees or retirement allowances. The directors’ fees are inclusive of
superannuation where applicable.
The current base fees were reviewed in November 2018. At that time the chair fee was
increased to $200,000 per annum (from $128,000) and the independent non-executive director
base fee was increased to $100,000 per annum (from $90,000). Fees will be reviewed annually
by the board taking into account comparable roles at comparable sized companies and other
available market data. The board may engage an independent remuneration advisor at its
discretion.
Directors are contractually required to purchase Company shares equal to one year’s salary
within three years of joining the board. In June 2019, the directors modified this requirement to
allow for up to five years to purchase the requisite shares. Prior to the modification, Robert
Loewenthal was not in compliance with this provision of his contract.
24
The maximum annual aggregate directors’ fee pool limit is $1,000,000 and was approved by the
shareholders on 8 November 2017.
Base fees
Chair (2)
Other independent non-executive directors (1)
Additional fees
Audit and risk committee – Chair
Audit and risk committee – member
Nomination and remuneration committee –
Chair
Nomination and remuneration committee –
member
$200,000
$100,000
$40,000
-
-
-
(1) Corinna Keller is paid $72,000 USD per annum which approximated $100,000 AUD
at the time of her appointment.
(2) The chairperson does not receive additional fees for participating in or chairing
committees, rather this is taken into account as part of their overall director fee.
All non-executive directors enter into a service agreement with the Company in the form of a
letter of appointment. The letter summarises the board policies and terms, including
remuneration, relevant to the office of director.
Non-executive director remuneration
Name
Year
Base fee
M Anderson (2)
R Loewenthal (4)
D Ryan
C Keller (1)(3)
2019
2018
2019
2018
2019
2018
2019
2018
-
-
176,000
128,000
96,667
90,000
34,183
-
Audit and Risk
Committee
Remuneration
and
Nomination
Committee
Total
-
-
-
-
40,000
40,000
-
-
-
-
-
-
-
-
-
-
-
-
176,000
128,000
136,667
130,000
34,183
-
Total non-
executive director
remuneration
2019
306,850
40,000
-
346,850
2018
218,000
40,000
-
258,000
(1) Paid in United States dollars (USD). Amount translated into AUD based on same
exchange rates as annual financial statements.
(2) Resigned effective 26 March 2018.
(3) Appointed effective 1 March 2019
(4) Named Acting Chairman effective 1 March 2017. Named Chairman effective 8
November 2017.
25
Whooska Podcasting Platform, a company controlled by Robert Loewenthal, provides
podcasting hosting services to the Company at no charge. The fair-market value of the service
provided is de minimus.
(h) Additional statutory information
(i)
Relative proportions of fixed vs variable remuneration expense
The following table shows the relative proportions of remuneration that are linked to
performance and those that are fixed, based on the amounts disclosed as statutory
remuneration expense above:
Relative proportions of fixed vs variable remuneration expense
Name
Executive directors
W Yde
Fixed
remuneration
2019
77%
Other key management personnel of the group
S Cody
G Worobow
83%
86%
At Risk – STI
At Risk – LTI*
2019
2019
-%
-%
-%
23%
17%
14%
* Where applicable, the expenses include negative amounts for expenses reversed during
the year
(ii)
Performance based remuneration granted and forfeited during the year
The following table shows for each KMP how much of their STI cash bonus was awarded
and how much was forfeited. It also shows the value of options that were granted, exercised
and forfeited during FY 2019.
Total
Opportunity
$
2019
435,594
224,175
144,901
Name
W Yde (1)
S Cody (2)
G Worobow
(3)
Total STI bonus (cash)
Value
granted
$
LTI Options
Value
exercised
%
Forfeited
%
2019
2019
2019 (4)
Awarded
%
2019
0%
0%
0%
688,547
317,063
262,796
-
-
-
65
64
64
(1) USD 311,537. Amounts in the table have been translated into AUD based on
the exchange rate used to prepare the financial statements.
(2) USD 160,330. Amounts in the table have been translated into AUD based on
the exchange rate used to prepare the financial statements.
(3) USD 103,633. Amounts in the table have been translated into AUD based on
the exchange rate used to prepare the financial statements.
(4) Represents percentage of unvested LTI Options outstanding at 1 July 2018 that
were forfeited.
26
(iii)
Terms and conditions of equity-based payment arrangements.
FY2019
Name
W Yde
S Cody
G
Worobow
Balance
at the
start of
the year
Unvested
Granted:
9
November
2018
Vested
Exercised
Forfeited
Balance at the end of
the year
#
%
#
%
Vested
Unvested
645,938
1,064,594 229,307 35
-
416,631 65
390,791
1,064,594
292,209
490,225 103,735 36
-
188,474 64
176,788
490,225
138,415
406,321
49,138 36
-
89,277 64
83,742
406,321
Ordinary Shares
FY2019
Name
Balance at
the start of
year
Received
during the
year on
exercise of
stock
options
Shares
Purchased
Shares
Sold
Balance at the
end of the
year
W Yde
3,603,408
D Ryan (2)
R Loewenthal (2)
C Keller
S Cody
G Worobow (1)
75,475
17,417
-
-
10
-
-
-
-
-
-
-
-
-
10,500
-
-
-
-
-
-
-
-
3,603,408
75,475
17,417
10,500
-
10
(1) Initial shares upon forming GTN Limited.
(2) Shares held indirectly through superannuation fund.
(iv)
Other transactions with key management
Mr. Yde’s daughter is employed by the Company as an accountant. Her cash salary
(translated from USD to AUD at the same exchange rates as the Company’s financial
statements) was:
●FY2019
●FY2018
$178,340
$162,422
The Board considers the compensation received by Mr. Yde’s daughter to be consistent with
the compensation that would be paid to unrelated third parties for a similar position and thus
has not included any of these payments in Mr. Yde’s remuneration disclosures.
27
(v)
Reliance on external remuneration consultants
No external remuneration consultants were engaged during FY 2019.
(vi)
Voting of shareholders at last year’s annual general meeting
During the last annual general meeting, the shareholders voted 100.00% in favour of
adoption of the remuneration report for the year ended 30 June 2018.
28
Auditor’s Independence Declaration
As lead auditor for the audit of GTN Limited for the year ended 30 June 2019, I declare that to the best
of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of GTN Limited and the entities it controlled during the period.
MW Chiang
Partner
PricewaterhouseCoopers
Sydney
29 August 2019
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
29
GTN Limited
ACN 606 841 801
Consolidated Financial Report
For the year ended 30 June 2019
30
Contents
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Page
32
33
34
35
36
80
31
GTN Limited
For the year ended 30 June 2019
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
For the year ended 30 June 2019
Revenue
Other income
Interest income on long-term prepaid affiliate contract
Network operations and station compensation expenses
Selling, general and administrative expenses
Equity based compensation expenses
Depreciation and amortisation
Finance costs
Foreign currency transaction loss
Profit before income tax
Income tax expense
Profit for the year from continuing operations
Loss from discontinued operation
Profit (loss) for the year
Notes
7
7
7
25
8
8
8
2019
$’000
2018
$’000
184,969
185,013
259
8,325
403
8,401
(117,083)
(109,816)
(38,093)
(34,807)
(569)
(11,208)
(3,642)
(41)
22,917
(651)
(9,476)
(4,784)
(79)
34,204
9
(7,185)
(9,373)
32
15,732
-
15,732
24,831
(39,932)
(15,101)
Other comprehensive income (loss) for the year, net of income tax:
Items that may be reclassified to profit or loss
Foreign currency translation reserve
Unrealised gain (loss) on interest rate swaps
2,309
-
1,591
3
Total other comprehensive income (loss) for the year
2,309
1,594
Total comprehensive income (loss) for the year
18,041
(13,507)
Earnings per share attributable to the ordinary equity holders:
Basic and diluted earnings per share from continuing operations
Basic and diluted loss per share from discontinued operation
Basic and diluted earnings/(loss) per share
23
23
$0.07
$ -
$0.07
$0.11
$(0.18)
$(0.07)
Total profit/ (loss) for the year and other comprehensive income are fully attributable to members of the Company
This statement should be read in conjunction with the notes to the financial statements.
32
GTN Limited
For the year ended 30 June 2019
Consolidated Statement of Financial Position
As at 30 June 2019
Assets
Current
Cash and cash equivalents
Trade and other receivables
Current tax asset
Other current assets
Current assets
Non-current
Property, plant and equipment
Intangible assets
Goodwill
Deferred tax assets
Other assets
Non-current assets
Total assets
Liabilities
Current
Trade and other payables
Deferred revenue
Current tax liabilities
Financial liabilities
Provisions
Current liabilities
Non-current
Trade and other payables
Financial liabilities
Deferred tax liabilities
Other liabilities
Provisions
Non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Accumulated losses
Total equity
Notes
11
12
17
13
16
15
14
17
13
18
20
17
21
19
18
21
17
22
19
24
2019
$’000
50,728
38,091
2,479
3,481
94,779
10,459
52,172
96,179
2,975
96,139
257,924
352,703
32,596
534
306
1,155
939
35,530
73
61,393
18,997
-
454
80,917
116,447
236,256
2018
$’000
52,232
38,681
957
1,827
93,697
6,335
58,009
96,193
3,916
97,215
261,668
355,365
28,346
450
338
-
1,341
30,475
69
58,294
17,443
37
349
76,192
106,667
248,698
444,041
9,418
(217,203)
236,256
444,981
6,540
(202,823)
248,698
This statement should be read in conjunction with the notes to the financial statements.
33
GTN Limited
For the year ended 30 June 2019
Consolidated Statement of Changes in Equity
For the year ended 30 June 2019
Balance at 30 June 2017
Total comprehensive income:
Net loss
Other comprehensive income
Transactions with owners in their capacity as owners:
Dividends
Equity based compensation
Balance at 30 June 2018
Total comprehensive income:
Net income
Other comprehensive income (loss)
Transactions with owners in their capacity as owners
Dividends
Shares repurchase and retired
Equity based compensation
Notes
Issued
Capital
$’000
444,981
Common
Control
Reserve
$’000
(24,655)
Foreign Currency
Translation Reserve
$’000
26,690
Hedging Reserve
$’000
Equity Based
Payments
Reserve
$’000
(3)
2,263
Accumulated
Losses
$’000
(176,935)
Total
Equity
$’000
272,341
-
-
-
-
-
-
-
-
-
-
-
444,981
(24,655)
-
-
-
(940)
-
(940)
-
-
-
-
-
-
-
-
1,591
1,591
-
-
1,591
28,281
-
2,309
2,309
-
-
-
2,309
30,590
-
3
3
-
-
3
-
-
-
-
-
-
-
-
-
-
-
-
-
651
651
(15,101)
(15,101)
-
1,594
(15,101)
(13,507)
(10,787)
-
(10,787)
651
(25,888)
(23,643)
2,914
(202,823)
248,698
-
-
-
-
-
569
569
15,732
-
15,732
15,732
2,309
18,041
(30,112)
(30,112)
-
-
(940)
569
(14,380)
(12,442)
3,483
(217,203)
236,256
Balance at 30 June 2019
24
444,041
(24,655)
This statement should be read in conjunction with the notes to the financial statements.
34
GTN Limited
For the year ended 30 June 2019
Consolidated Statement of Cash Flows
For the year ended 30 June 2019
Operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Finance costs
Income tax paid
Net cash from operating activities
Investing activities
Purchase of property, plant and equipment
Cash outflow from sale of subsidiary
Net cash used in investing activities
Financing activities
Shares repurchased
Dividends paid
Repayment of borrowings
Principal elements of lease payments
Net cash from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Exchange differences on cash and cash equivalents
Notes
2019
$’000
2018
$’000
209,285
253,445
(167,151)
(230,508)
27
259
(2,959)
(5,993)
33,441
(3,929)
-
(3,929)
(940)
(30,112)
-
(1,291)
(32,343)
(2,831)
52,232
1,327
403
(4,064)
(9,289)
9,987
(3,470)
(5,730)
(9,200)
-
(10,787)
(40,000)
-
(50,787)
(50,000)
100,727
1,505
Cash and cash equivalents, end of year
11
50,728
52,232
Property acquired under leases
4,737
-
Cash flows of discontinued operation
32
This statement should be read in conjunction with the notes to the financial statements.
35
GTN Limited
For the year ended 30 June 2019
Notes to the Consolidated Financial Statements
1
Corporate information
Nature of operations
GTN Limited and its subsidiaries (the “Company”’) derives a substantial majority of its revenues from the
sale of commercial advertising commercials adjacent to traffic and news information reports that are
broadcast on radio and/or television stations in Australia and international markets, including Canada, the
United Kingdom and Brazil. The Company obtains these advertising commercials from radio and television
stations.
General information
GTN Limited is a company limited by shares, incorporated and domiciled in Australia. The address of GTN
Limited’s registered office and its principal place of business is Level 42, Northpoint, 100 Miller Street North
Sydney, NSW Australia 2060.
The consolidated financial statements for the year ended 30 June 2019 (including comparatives) were
approved and authorised for issuance on 29 August 2019. The directors have the power to amend and reissue
the financial statements.
36
GTN Limited
For the year ended 30 June 2019
Summary of significant accounting policies
2
The significant accounting policies that have been used in the preparation of these consolidated financial
statements are summarised below. These policies have been consistently applied to all the periods presented
unless otherwise stated. The financial statements are for the group consisting of GTN Limited and its
subsidiaries.
2.1 Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act
2001. GTN Limited is a for-profit entity for the purpose of preparing the financial statements.
(i) Compliance with IFRS
The consolidated financial statements of GTN Limited also comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB), unless otherwise stated.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
● financial assets and liabilities (including derivative instruments) – measured at fair value in profit or loss or
fair value in other comprehensive income, and
● assets held for sale – measured at fair value less cost of disposal.
Certain amounts reported in prior years have been reclassified to conform to the current year presentation.
.
2.2 Basis of consolidation
The Company’s financial statements consolidate those of GTN Limited and all of its subsidiaries (the
“Company” or “Group”) as of 30 June 2019. The Company controls a subsidiary if it is exposed, or has
rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns
through its power over the subsidiary. All subsidiaries have a reporting date of 30 June.
All transactions and balances between the Group are eliminated on consolidation, including unrealised gains
and losses on transactions between the Company and its subsidiaries. Where unrealised losses on “intra-
group” asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a
Group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where
necessary to ensure consistency with the accounting policies adopted by the Company.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are
recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable.
2.3 Business combinations
The Company applies the acquisition method in accounting for business combinations.
The consideration transferred by the Company to obtain control of a subsidiary is calculated as the sum of
the acquisition date fair values of assets transferred, liabilities incurred and the equity interests issued by the
Company, which includes the fair value of any asset or liability arising from a contingent consideration
arrangement. Acquisition costs are expensed as incurred.
37
GTN Limited
For the year ended 30 June 2019
The Company recognises identifiable assets acquired and liabilities assumed in a business combination
regardless of whether they have been previously recognised in the acquiree’s financial statements prior to the
acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values.
Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of
the sum of (a) fair value of consideration transferred; (b) the recognised amount of any non-controlling
interest in the acquiree; and (c) acquisition-date fair value of any existing equity interest in the acquiree, over
the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the
sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss
immediately.
2.4 Foreign currency translation
Functional and presentation currency
The consolidated financial statements are presented in Australian dollars (AUD). ATN, Aus Hold Co and
GTN Limited’s functional currency is Australian dollars (AUD); CTN’s functional currency is Canadian
dollars (CAD); UK Hold Co, UKTN and UK Commercial’s functional currency is British pounds (GBP); and
BTN’s functional currency is Brazilian real (BRL). The remaining subsidiaries functional currency is United
States dollars (USD).
The presentation currency for these financial statements is AUD which is the functional currency of the
largest portion of the Company’s operations.
Foreign currency transactions and balances
Foreign currency transactions are translated using the exchange rates prevailing at the dates of the
transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such
transactions and from the re-measurement of monetary items at year end exchange rates are recognised in
profit or loss.
Loans between Group entities are eliminated upon consolidation. Where the loan is between Group entities
that have different functional currencies, the foreign exchange gain or loss is not eliminated and is recognized
in the consolidated statement of profit and loss unless the loan is not expected to be settled in the foreseeable
future and thus forms part of the net investment in the foreign operation. In such a case, the foreign
exchange gain or loss is recognized in other comprehensive income.
Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the
exchange rates at the date of the transaction), except for non-monetary items measured at fair value which are
translated using the exchange rates at the date when fair value was determined.
Foreign operations
In the Company’s financial statements, all assets, liabilities and transactions of entities with a functional
currency other than AUD are translated into AUD upon consolidation. Goodwill and fair value adjustments
arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation
and translated at the closing rate. The functional currency of the entities in the Company has remained
unchanged during the reporting period.
38
GTN Limited
For the year ended 30 June 2019
On consolidation, assets and liabilities have been translated into AUD at the closing rate at the reporting date.
Income and expenses have been translated into AUD at the average rate over the reporting period. Exchange
differences are charged/credited to other comprehensive income and recognised in the currency translation
reserve in equity. On disposal of a foreign operation the cumulative translation differences recognised in
equity are reclassified to profit or loss and recognised as part of the gain or loss on disposal.
2.5 Revenue recognition
The Company derives a substantial majority of its revenues from the sale of advertising commercials adjacent
to traffic and news information reports that are broadcast on radio and/or television stations. The stations
are suppliers of the advertising spots to the Company.
The Company provides advertising commercials to advertisers and their agencies. In situations where the
advertisers engage advertising agencies in executing transactions with the Company, the Company records
revenue based on the amount it expects to receive from the agency and follows the agency’s directions in
placing the advertisements. Cash considerations are received net of agency commissions provided and are
typically due after the commercials are broadcast.
Advertising revenue is earned and recognised when the performance obligation is satisfied, which is when the
commercial advertisements are broadcast.
Payments received in advance are deferred until the advertisements are broadcast and as such the amounts are
included as a component of deferred revenue in the accompanying consolidated statement of financial
position. Sales taxes, goods and service taxes, value added taxes and similar charges collected by the
Company on behalf of government authorities are not included as a component of revenue. There is no
variable consideration or financing components associated with revenue. The Company’s revenue is
disaggregated by the geography based on where the advertisements are broadcast in (see Note 31).
Interest and dividend revenue recognition
2.6
Interest income and expenses are reported on an accrual basis using the effective interest method. Dividend
income, other than those from investments in associates, is recognised at the time the right to receive
payment is established.
2.7 Network operations and station compensation expenses
The cost of producing and distributing the radio and television traffic and news reports and services and the
obtaining of advertising inventory are considered network operations and station compensation expenses.
These consist mainly of personnel, aviation costs, facility costs, third party content providers and station
compensation. Network operations and station compensation expenses are recognised when incurred.
The Company generally enters into multiyear contracts with radio and television stations. Station
compensation is a component of network operations and station compensation expenses on the
accompanying consolidated statement of profit or loss and other comprehensive income and is recognised
over the terms of the contracts, which is not materially different than when the services are performed.
2.8 Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less loss allowance. Trade receivables are generally due for settlement within 30
days. They are presented as current assets unless collection is not expected for more than 12 months after
the reporting date.
39
GTN Limited
For the year ended 30 June 2019
The Group applies the simplified approach to measuring expected credit losses, which uses a lifetime
expected loss allowance for all trade receivables. Debts which are known to be uncollectible are written off by
reducing the carrying amount directly. The loss allowance is based on expected lifetime credit losses. To
measure the expected credit losses, trade receivables have been grouped based on the shared credit risk
characteristics and the days past due. The expected loss rates are based on the payment profiles of sales over a
period of five years before 30 June 2019 or 1 July 2018 respectively and the corresponding historical credit
losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-
looking information on macroeconomic factors affecting the ability of the customers to settle the receivables.
The amount of the loss allowance is the difference between the asset's carrying amount and the present value
of estimated future cash flows (excluding future credit losses that have not been incurred), discounted at the
original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of
discounting is immaterial.
The amount of any impairment loss is recognised in profit or loss within selling, general and administrative
expenses. When a trade receivable for which a loss allowance had been recognised becomes uncollectible in a
subsequent period, it is written off against the loss allowance account. Subsequent recoveries of amounts
previously written off are credited against selling, general and administrative expenses in profit or loss.
2.9 Goodwill
Goodwill represents the future economic benefits arising from a business combination that are not
individually identified and separately recognised. Goodwill is carried at cost less accumulated impairment
losses. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or
changes in circumstances indicate that it might be impaired and is carried at cost less accumulated impairment
losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the
entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made
to those cash-generating units or groups of cash-generating units that are expected to benefit from the
business combination in which the goodwill arose. The units or groups of units are identified at the lowest
level at which goodwill is monitored for internal management purposes, being the operating segments.
2.10 Intangible assets
Intangible assets are stated at cost (or fair value if acquired in a business combination) and subsequently
carried at cost less accumulated amortisation and impairment losses. Intangible assets with definite lives are
amortised over their expected useful lives on a straight-line basis, as follows:
station contracts: 14 years
advertising contracts: 4.5 years
Amortisation expense is not reflected for intangible assets with indefinite lives such as trade names and the
Company annually tests these assets for impairment. There is no residual value recognised with regard to
intangible assets subject to amortisation.
40
GTN Limited
For the year ended 30 June 2019
2.11 Property, plant and equipment
IT equipment, motor vehicles, aircraft and other equipment
IT equipment, motor vehicles, aircraft and other equipment (comprising furniture and fittings) are initially
recognised at acquisition cost or manufacturing cost, including any costs directly attributable to bringing the
assets to the location and condition necessary for it to be capable of operating in the manner intended by the
Company’s management.
IT equipment, motor vehicles, aircraft and other equipment are subsequently measured using the cost model,
cost less subsequent depreciation and impairment losses. An asset’s carrying amount is written down
immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable
amount.
Depreciation is recognised on a straight-line basis to write down the cost less estimated residual value of
computer equipment, motor vehicles, aircraft and other equipment. The following useful lives are applied:
computer equipment: 3-5 years
motor vehicles: 7 years
helicopters and fixed wing aircraft: 6-8 years
helicopters engine rebuilds: 2-3 years
furniture, equipment and other: 5 years
recording, broadcasting and studio equipment: 5 years.
right of use assets: shorter of useful life or lease
Material residual value estimates and estimates of useful life are updated as required, but at least annually.
Gains or losses arising on the disposal of property, plant and equipment are determined as the difference
between the disposal proceeds and the carrying amount of the assets and are recognised in profit or loss
within other income or other expenses.
2.12 Leased assets
The Group leases various properties and equipment. Rental contracts are typically made for fixed periods of
one to five years but may have extension options as described below. Lease terms are negotiated on an
individual basis and contain a wide range of different terms and conditions.
Prior to the current financial year, leases of property and equipment were classified as either finance leases or
operating leases. Where the Company was a lessee under an operating lease, payments on operating lease
agreements were recognised as an expense on a straight-line basis over the lease term. Associated costs, such
as maintenance and insurance, were expensed as incurred.
From 1 July 2018 leases are recognised as a right of use asset and a corresponding liability at the date at which
the leased asset is available for use by the Group. Each lease payment is allocated between the liability and
finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability for each period. The right of use asset is
depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include
the net present value of the following lease payments:
41
GTN Limited
For the year ended 30 June 2019
fixed payments (including in-substance fixed payments), less any lease incentives receivable
variable lease payment that are based on an index or a rate
amounts expected to be payable by the lessee under residual value guarantees
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
Extension and termination options are included in a number of property and equipment leases across the
Group. These terms are used to maximise operational flexibility in terms of managing contracts. The majority
of extension and termination options held are exercisable only by the Group and not by the respective lessor.
The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined,
or the Group’s incremental borrowing rate.
Right of use assets are measured at cost comprising the following:
the amount of the initial measurement of lease liability
any lease payments made at or before the commencement date, less any lease incentives received
any initial direct costs, and
restoration costs.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line
basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-
value assets comprise of IT equipment and small items of office furniture and equipment.
2.13 Impairment testing of goodwill, other intangible assets and property, plant and
equipment
For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely
independent cash inflows (cash-generating units). As a result, some assets are tested individually for
impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating
units that are expected to benefit from synergies of the related business combination and represent the lowest
level within the Company at which management monitors goodwill.
Cash-generating units to which goodwill has been allocated (determined by the Company’s management as
equivalent to its operating segments) and trade names are tested for impairment at least annually. All other
individual assets or cash-generating units are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying
amount exceeds its recoverable amount, which is the higher of fair value less costs to sell and value-in-use.
To determine the value-in-use, management estimates expected future cash flows from each cash-generating
unit and determines a suitable discount rate in order to calculate the present value of those cash flows. The
data used for impairment testing procedures are directly linked to the Company’s latest approved budget,
adjusted as necessary to exclude the effects of future reorganisations and asset enhancements. Discount
factors are determined individually for each cash-generating unit and reflect management’s assessment of
respective risk profiles, such as market and asset-specific risks factors.
Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that
cash-generating unit. Any remaining impairment loss is charged pro rata to the other assets in the cash-
42
GTN Limited
For the year ended 30 June 2019
generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an
impairment loss previously recognised may no longer exist. An impairment charge is reversed if the cash-
generating unit’s recoverable amount exceeds its carrying amount.
2.14 Financial instruments
Recognition, initial measurement and derecognition
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual
provisions of the financial instrument and are measured initially at fair value adjusted by transactions costs,
except for those carried at fair value through profit or loss, which are measured initially at fair value.
Subsequent measurement of financial assets and financial liabilities are described below.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire,
or when the financial asset and all substantial risks and rewards are transferred. A financial liability is
derecognised when it is extinguished, discharged, cancelled or expires.
General and specific borrowing costs that are directly attributable to the acquisition of a qualifying asset are
capitalised during the period of time that is required to complete and prepare the asset for its intended use or
sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their
intended use or sale.
Other borrowing costs are expensed in the period in which they are incurred.
Classification and subsequent measurement of financial assets
Financial assets are classified in the following measurement categories:
those to be measured subsequently at fair value (either through other comprehensive income or
loss or through profit and loss), and
those to be measured at amortised cost. Currently the Company only has one category of financial
instruments which is financial assets measured at amortised cost which includes cash and cash
equivalents, trade and other receivables (which was classified as loans and receivables until 30 June
2018). The measurement (other than impairment) did not change on adoption of AASB 9. See
Note 2.8.
The classification depends on the business model for managing the financial assets and the contractual terms
of the cash flows.
All income and expenses relating to financial assets that are recognised in profit or loss are presented within
finance costs, finance income or other financial items, except for impairment of trade receivables which is
presented within selling, general and administrative expenses.
Loans and receivables – until 30 June 2018
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. After initial recognition, these are measured at amortised cost using the effective
interest method, less any loss allowance. Discounting is omitted where the effect of discounting is
immaterial. The Company’s cash and cash equivalents, trade and most other receivables fall into this category
of financial instruments.
43
GTN Limited
For the year ended 30 June 2019
The Company’s policies for determining loss allowances with regards to receivables is set forth in Note 2.8.
Classification and subsequent measurement of financial liabilities
The Company’s financial liabilities include borrowings and trade and other payables.
Financial liabilities are measured subsequently at amortised cost using the effective interest method.
All interest-related charges that are reported in profit or loss are included within finance costs.
Deferred loan costs relate to the costs related to the debt financing and are amortised using the effective
interest method over the five-year life of the loan. Expense recognised related to the effective interest
method is recognised as a component of finance costs in the Company’s consolidated statement of profit or
loss and other comprehensive income. Any deferred loan costs outstanding upon repayment or refinancing
of debt balances are immediately expensed as a component of finance costs.
Derivatives and hedging activities
Derivatives are initially recognised at fair value on the date the derivative contract is entered into and are
subsequently remeasured at fair value at the end of each reporting period. The accounting for subsequent
changes in fair value depends on whether the derivative is designated as a hedging instrument and, if so, the
nature of the item being hedged. The Company designates certain derivatives as hedges of a particular risk
associated with the cash flows of recognized assets and liabilities and highly probable forecast transactions
(cash flow hedges). There were no derivatives outstanding at 30 June 2019 and 2018.
At the inception of the hedge relationship, the Company documents the economic relationship between the
hedging instrument and the hedged items, including whether changes in the cash flows of the hedging
instruments are expected to offset changes in the cash flows of the hedged items. The Company documents
its risk management objective and strategy for undertaking its hedge transactions.
The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining
maturity of the hedged item is more than 12 months and is classified as a current asset or liability when the
remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current
asset or liability.
Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognized in the hedging reserve within equity. The gain or loss relating to the ineffective portion
is recognized immediately in profit or loss, within other gains (losses).
Amounts accumulated in equity are reclassified in the periods when the hedged item affects profit or loss as
follows:
● Where the hedged item subsequently results in the recognition of a non-financial asset (such as
property, plant and equipment), both the deferred hedging gains and losses and the deferred time value of the
option contracts of deferred forward points, if any, are included within the initial cost of the asset. The
44
GTN Limited
For the year ended 30 June 2019
deferred amounts are ultimately recognized in profit or loss as the hedged item affects profit or loss (for
example through depreciation expense).
●The gain or loss relating to the effective portion of the interest rate swaps hedging variable rate
borrowings is recognised in profit or loss within finance cost at the same time as the interest expense on the
hedged borrowings.
When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria for
hedge accounting, any cumulative deferred gain or loss and deferred costs of hedging in the hedging reserve
at that time remains in equity until the forecast transaction occurs, resulting in the recognition of a non-
financial asset. When the forecast transaction is no longer expected to occur, the cumulative gain or loss and
deferred costs of hedging that were reported in equity are immediately reclassified to profit or loss.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in fair value of any derivative
instrument that does not qualify for hedge accounting are recognized immediately in profit or loss and
included in other gains (losses).
2.15 Income taxes
Income tax expense for the period is the tax payable on the current period’s taxable income based on the
applicable tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences between the tax base of the asset and liabilities and their carrying amount in the
financial statements.
Deferred income taxes are calculated using the liability method on temporary differences between the
carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the
initial recognition of goodwill or on the initial recognition of an asset or liability unless the related transaction
is a business combination or affects tax or accounting profit. Deferred tax on temporary differences
associated with investments in subsidiaries is not provided if reversal of these temporary differences can be
controlled by the Company and it is probable that reversal will not occur in the foreseeable future.
Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to
their respective period of realisation, provided they are enacted or substantively enacted by the end of the
reporting period.
Deferred tax assets are recognised to the extent that it is probable that they will be able to be utilised against
future taxable income, based on the Company’s forecast of future operating results which is adjusted for
significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit.
Deferred tax liabilities are always provided for in full.
Deferred tax assets and liabilities are offset only when the Company has a right and intention to set off tax
assets and liabilities from the same taxation authority.
Changes in deferred tax assets or liabilities are recognised as a component of income tax benefit or expense in
profit or loss, except where they relate to items that are recognised in other comprehensive income (such as
45
GTN Limited
For the year ended 30 June 2019
the revaluation of land) or directly in equity, in which case the related deferred tax is also recognised in other
comprehensive income or equity, respectively.
Tax consolidation legislation
GTN Limited and its wholly-owned Australian controlled subsidiaries have implemented the tax
consolidation legislation.
The head entity, GTN Limited, and the controlled subsidiaries in the tax consolidated group account for their
own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax
consolidated group continues to be a stand-alone taxpayer in its own right.
In addition to its own current and deferred tax amounts, GTN Limited also recognizes the current tax
liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed
from controlled subsidiaries in the tax consolidated group.
The subsidiaries also entered into a tax funding arrangement under which the wholly-owned entities fully
compensate GTN Limited for any current tax payable assumed and are compensated by GTN Limited for
any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are
transferred to GTN Limited under the tax consolidation legislation. The funding amounts are determined by
reference to the amounts recognized in the wholly-owned subsidiaries’ financial statements.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice
from the head entity, which is issued as soon as practicable after the end of each financial year. The head
entity may also require payment of interim funding amounts to assist with its obligations to pay tax
instalments.
Assets or liabilities arising under tax funding agreements with tax consolidated subsidiaries are recognized as
current amounts receivable or payable to other entities in the group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding
agreement are recognized as a contribution to (or distribution from) wholly-owned tax consolidated
subsidiaries.
2.16 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term,
highly liquid investments that are readily convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value.
2.17 Employee Benefits
Short-term employee benefits
Short-term employee benefits are benefits, other than termination benefits, that are expected to be settled
wholly within twelve months after the end of the period in which the employees render the related service.
Examples of such benefits include wages and salaries, non-monetary benefits, annual leave and accumulating
sick leave. Short-term employee benefits are measured at the undiscounted amounts expected to be paid
when the liabilities are settled.
46
GTN Limited
For the year ended 30 June 2019
Other long-term employee benefits
The Company’s liabilities for long service leave is included in other long-term benefits when they are not
expected to be settled wholly within twelve months after the end of the period in which the employees render
the related service. They are measured at the present value of the expected future payments to be made to
employees. The expected future payments incorporate anticipated future wage and salary levels, experience of
employee departures and periods of service, and are discounted at rates determined by reference to market
yields at the end of the reporting period on high quality corporate bonds or government bonds for currencies
for which there is no deep market in such high quality corporate bonds, that have maturity dates that
approximate the timing of the estimated future cash outflows. Any re-measurements arising from experience
adjustments and changes in assumptions are recognised in profit or loss in the periods in which the changes
occur. The obligations are presented as current liabilities on the statement of financial position if the entity
does not have an unconditional right to defer settlement for at least 12 months after the reporting period
regardless of when the actual settlement is expected to occur.
2.18 Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of
financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of
recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12
months from the reporting date.
2.19 Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company, excluding
any costs of servicing equity other than ordinary shares by the weighted average number of ordinary shares
outstanding during the financial year adjusted for bonus elements in ordinary shares issued during the year
and excluding treasury shares.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the amounts used in the determination of basic earnings per share to take
into account the after income tax effect of interest and other financing costs associated with dilutive potential
ordinary shares and the weighted average number of additional ordinary shares that would have been
outstanding assuming the conversion of all dilutive potential ordinary shares.
2.20 Equity and reserves
Issued capital represents the fair value of shares that have been issued. Any transaction costs associated with
the issuing of shares are deducted from issued capital.
Other components of equity include the following:
Foreign currency translation reserve – comprises foreign currency translation differences arising on
the translation of financial statements of the Company’s foreign entities into AUD.
Hedging reserve – comprises changes in the fair value of interest rate hedges that are deemed
effective.
Equity based payments reserve – comprises the cumulative charge to the statement of profit or
loss and other comprehensive income for employee equity-settled equity-based remuneration.
47
GTN Limited
For the year ended 30 June 2019
Common control reserve – represents difference between the fair value of the shares issued under
the initial public offering net of transaction costs, plus carried forward reserves and accumulated
losses and the book value of the total equity of the predecessor company.
Retained earnings include all current and prior period retained profits including those related to GTCR
Gridlock Holdings (Cayman), L.P, the predecessor company to GTN Limited.
2.21 Equity based remuneration
The Company operates equity-settled equity-based remuneration plans for certain of its employees.
All goods and services received in exchange for the grant of any equity-based payment are measured at their
fair values. Where employees are rewarded using equity-based payments, the fair values of employees’
services are determined indirectly by reference to the fair value of the equity instruments granted. This fair
value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example
profitability and sales growth targets and performance conditions).
All equity-settled equity-based remuneration is ultimately recognised as an expense in profit or loss with a
corresponding credit to equity-based payments reserve. If vesting periods or other vesting conditions apply,
the expense is allocated over the vesting period, based on the best available estimate of the number of equity
instruments expected to vest.
Non-market vesting conditions are included in assumptions about the number of equity instruments that are
expected to become exercisable. Estimates are subsequently revised if there is any indication that the number
of equity instruments expected to vest differs from previous estimates. Any cumulative adjustment prior to
vesting is recognised in the current period. No adjustment is made to any expense recognised in prior
periods if equity instruments ultimately exercised are different to that estimated on vesting.
Upon exercise of equity instruments, the proceeds received net of any directly attributable transaction costs
are allocated to issued capital.
2.22 Provisions, contingent liabilities and contingent assets
Provisions for legal disputes, onerous contracts or other claims are recognised when the Company has a
present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic
resources will be required from the Company and amounts can be estimated reliably. Timing or amount of
the outflow may still be uncertain.
Restructuring provisions are recognised only if a detailed formal plan for the restructuring has been
developed and implemented, and management has at least announced the plan’s main features to those
affected by it. Provisions are not recognised for future operating losses.
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the
most reliable evidence available at the reporting date, including the risks and uncertainties associated with the
present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be
required in settlement is determined by considering the class of obligations as a whole. Provisions are
discounted to their present values, where the time value of money is material.
48
GTN Limited
For the year ended 30 June 2019
Any reimbursement that the Company can be virtually certain to collect from a third party with respect to the
obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related
provision.
No liability is recognised if an outflow of economic resources as a result of present obligation is not probable.
Such situations are disclosed as contingent liabilities, unless the outflow of resources is remote in which case
no liability is recognised.
2.23 Goods and services taxes (GST)
Revenues, expenses and assets are recognized net of any amount of associated GST, value added taxes
(VAT), Quebec sales tax (QST), harmonized sales tax (HST) and similar taxes.
Receivables and payables are stated inclusive of the amount of GST and related taxes receivable or payable.
The net amount of these taxes recoverable from, or payable to, the taxation authority is included in trade and
other payables in the balance sheet.
Cash flows are presented on a gross basis. The components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the taxation authority, are presented as operating cash
flows.
2.24 Long-term prepaid affiliate contract
Long term prepayments of station compensation are accounted for as a financing arrangement whereby non-
cash interest income over the term of the contractual agreement is recognized based on an estimate of the
radio stations’ incremental borrowing rate with similar terms which will reduce over time as the prepayment is
amortised. Station compensation expense is also recognized over the contract period equal to the
prepayment amount plus the total non-cash interest income on a straight-line basis over the expected term of
the contract including renewal periods, if it is more likely than not the contract will be extended. Additional
station compensation expense over the contract period is recognized equal to any cash payments, including
an estimate of inflationary adjustments expected to be paid on a straight-line basis over the contract term.
2.25 Rounding of amounts
The Company is of a kind referred to in ASIC Legislative Instrument 2016/191, issued by the Australian
Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the financial statements.
Amounts in the financial statements have been rounded off in accordance with that instrument to the nearest
thousand dollars, or in certain cases, the nearest dollar.
2.26 Significant management judgement in applying accounting policies and estimation
uncertainty
When preparing the financial statements, management undertakes a number of judgements, estimates and
assumptions about the recognition and measurement of assets, liabilities, income and expenses.
Significant management estimates and judgements
The following are significant management judgements in applying the accounting policies of the Company
that have the most significant effect on the financial statements.
49
GTN Limited
For the year ended 30 June 2019
Recognition of deferred tax balances
The extent to which deferred tax balances are recognised is based on an assessment of the probability of the
Company’s future taxable income against which the deferred tax assets can be utilised or liabilities assessed.
In addition, significant judgement is required in assessing the impact of any legal or economic limits or
uncertainties in various tax jurisdictions. See Note 17.
Impairment
In assessing impairment, management estimates the recoverable amount of each asset or cash-generating unit
based on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty
relates to assumptions about future operating results and the determination of a suitable discount rate. See
Note 14.
Useful lives of depreciable assets
Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the
expected utility of the assets. Uncertainties in these estimates relate to technical obsolescence that may
change the utility of certain property, plant and equipment. See Note 16.
Recoverability of long-term prepaid station compensation
Management reviews the recoverable amount of long-term prepaid station compensation at each reporting
period, analysing such factors as number of advertising spots received, market conditions for the advertising
spots, ratings of the stations, counter party risk (i.e. the financial viability of the provider of the advertising
spots and its ability to continue to meet its obligations) and other relevant factors to determine the
recoverability of long-term prepaid station compensation over its anticipated contractual term including
renewal periods, if it is more likely than not the contract will be extended. See Note 13.
2.27 Parent Entity financial information
The financial information for the Parent Entity, GTN Limited disclosed in Note 29 has been prepared on the
same basis as the consolidated financial statements except as set out below.
Investment in subsidiaries
Investments in subsidiaries are accounted for at cost in the financial statements of GTN Limited. Dividends
received are recognized when the right to receive the dividend is established.
2.28 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision maker.
2.29 Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at
the discretion of the Company, on or before the end of the reporting period but not distributed at the end of
the reporting period.
3
Changes in accounting policies
3.1 New and revised standards that are effective for these financial statements
A number of new and revised standards and an interpretation became effective for the first time for annual
periods beginning on or after 1 July 2018. Information on these new standards is presented below.
50
GTN Limited
For the year ended 30 June 2019
Standards adopted early during the period
AASB 16 Leases
AASB 16 removes the balance sheet distinction between operating and finance leases for lessees. Changes
under AASB 16 affect lessees with almost all leases going on the balance sheet. The asset (the right to use the
leased item) and a financial liability to pay rentals is recognized under the new standard with the only
exemption being short-term and low-value leases. The new standard is effective from 1 January 2019 but is
available for early adoption. The Group has elected to apply AASB 16 retrospectively from 1 July 2018, but
has not restated comparatives for the 2018 reporting period, as permitted under specific transition provisions
of the standard. The new accounting policy is described in Note 2.12.
On adoption of AASB 16, the Group recognized right of use assets and lease obligations equal to the
discounted payments. The lease obligation was adjusted to reflect any deferred rent or prepayments at the
time of the adoption. The Group has applied the practical expedient to account for short-term (less than one
year) and low value leases as an expense on a straight-line basis over the lease term.
Reconciliation of operating lease commitments to leases
Operating lease commitments as of 30 June 2018
4,073
Current portion of lease liability from adoption of AASB 16 on 1
July 2018
Non-current portion of lease liability from adoption of AASB 16 on
1 July 2018
Lease liability from adoption of AASB 16 on 1 July 2018
Difference between operating lease commitments as of 30 June
2018 and lease liability from adoption of AASB 16 on 1 July 2018
Differences consist of:
Future interest payments under leases
Short term and low value leases at 1 July 2018
824
2,453
3,277
796
319
477
The impact on the consolidated financials for the period are as follows:
Lease liabilities from adoption of AASB 16 on 1 July 2018
Additional lease liabilities during period
Repayments during period
Foreign exchange differences
Lease balance at 30 June 2019
Current portion of lease liability
Non-current portion of lease liability
Depreciation expense on right of use assets
Interest expense on leases (included in finance costs)
30 June
2019
$’000
3,277
1,460
(1,291)
125
3,571
1,155
2,416
1,321
162
51
GTN Limited
For the year ended 30 June 2019
Expense relating to short-term and low-value leases (included in
network operations and sales, general and administrative
expenses)
Total cash outlay – leases
963
2,416
The discount rate utilized on the initial adoption of AASB 16 is 4.445% which was the interest rate on the
Group’s outstanding bank facility at 1 July 2018. This discount rate is appropriate because the Group had an
available $15 million unused credit line at this interest rate. Given the credit line is significantly larger than
the lease liability, theoretically the Group could have borrowed under the credit line and extinguished the
lease obligations. Leases entered into during the period were discounted at the then prevailing interest rate of
the Group’s outstanding debt which was not materially different than the initial discount rate.
None of the leases have a variable payment component. Renewal periods are included in the initial
recognition of the lease if it is reasonably certain that the lease will be renewed.
Other standards adopted during the period
The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The
adoption of these Accounting Standards and Interpretations did not have any significant impact on the
financial performance or position of the Group.
The following Accounting Standards and Interpretations are most relevant to the Group:
AASB 9 Financial Instruments
‘AASB 9 Financial Instruments’ has been adopted in the current period. AASB 9 replaces the provisions of
AASB 139 that relate to the recognition, classification and measurement of financial assets and financial
liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting.
The adoption of AASB 9 from 1 July 2018 resulted in changes to accounting policies but no adjustments to
the amounts recognised in the financial statements. Refer to Note 2.14. The Group now applies the simplified
approach to providing for expected credit losses, which requires the use of the lifetime expected loss
provision for all trade receivables. The Group’s primary non-cash financial asset is trade receivables and
impairment losses related to trade receivables have historically been immaterial. The Group has assessed the
financial impact of adopting the new impairment model on transition to be immaterial. In addition, the
Group currently has no hedging arrangements in place on its debt.
AASB 15 Revenue from Contracts with Customers
The adoption of AASB 15 from 1 July 2018 resulted in changes to accounting policies but no adjustments to
the amounts recognised in the financial statements. Refer to Note 2.5 and Note 2.8. AASB 15 applies to all
revenue arising from contracts with customers unless the contracts are within the scope of other standards.
The standard outlines the principles entities must apply to measure and recognise revenue with the core
principle being that entities should recognise revenue at an amount that reflects the consideration to which the
entity expects to be entitled in exchange for fulfilling its performance obligation to a customer.
The principles in AASB 15 must be applied using the following 5 step model:
(a) Identify the contract(s) with a customer
(b) Identity the performance obligation in the contract
(c) Determine the transaction price
(d) Allocate the transaction price to the performance obligation in the contract
(e) Recognise revenue when or as the entity satisfied its performance obligation.
52
GTN Limited
For the year ended 30 June 2019
The standard requires entities to exercise considerable judgement taking into account all the relevant facts and
circumstances when applying each step of this model to their contracts with customers. On adoption of the
new revenue standard the Group has reviewed potential performance obligations which may arise under its
revenue contracts. Based on management assessment there are no areas of revenue recognition that are
materially affected.
Adoption of AASB 15 has no material impact on the financial statements in the period or at the date of initial
application.
3.2 Accounting Standards issued but not yet effective and not adopted early by the
Company
At the date of authorisation of these financial statements, certain new standards, amendments and
interpretations to existing standards have been published but are not yet effective, and have not been adopted
early by the Company. Management anticipates that all of the relevant pronouncements will be adopted in the
Company’s accounting policies for the first period beginning after the effective date of the pronouncement.
Information on new standards, amendments and interpretations that are expected to be relevant to the
Company’s financial statements is provided below. Certain other new standards and interpretations have been
issued but are not expected to have a material impact on the Company’s financial statements.
Interpretation 23 Uncertainty over Income Tax Treatments (“IFRIC 23”)
IFRIC 23 explains how to recognize and measure deferred tax assets and liabilities where there is uncertainty
over a tax treatment. In particular, it covers:
● how to determine the appropriate unit of account, and that each uncertain tax treatment should be
considered separately or together as a group, depending on which approach better predicts resolution of the
uncertainty
● that the entity should assume a tax authority will examine the uncertain tax treatments and have full
knowledge of all related information, i.e. that detection risk should be ignored
● that the entity should reflect the effect of the uncertainty in its income tax accounting when it is not
probable that the tax authorities will accept the treatment
● that the impact of the uncertainty should be measured using either the most likely amount or the
expected value method, depending on which method better predicts the resolution of the uncertainty, and
● the judgments and estimates made must be reassessed whenever circumstances have changed or
there is new information that affects the judgments.
The interpretation is effective for annual periods beginning on or after 1 January 2019. Management has
largely completed its assessment of the impact of IFRIC 23 and the interpretation is not expected to have a
material impact on income tax expenses, tax assets and liabilities and deferred tax balances when it is first
adopted for the year ending 30 June 2020. The Company’s preliminary assessment is that there would be no
adjustment to reported results for the years ended 30 June 2019 and 2018 had the Company adopted IFRIC
23 for those periods as the clarifications are consistent with the Company’s current policies.
There are no other standards that are not yet effective and that would be expected to have a material impact
on the entity in the current or future reporting periods and on foreseeable future transactions.
Financial risk management
4
The Company's activities expose it to a variety of financial risks: market risk (including currency risk and
interest rate risk), credit risk and liquidity risk. The Company's overall risk management program seeks to
53
GTN Limited
For the year ended 30 June 2019
minimise potential adverse effects on the financial performance of the Company. The Company has used
derivative financial instruments to manage interest rate risk exposures on borrowings.
Risk management is carried out by the senior management team with oversight from the Audit and Risk
Committee and the Board. The senior management team identifies, evaluates, reports and manages financial
risks in close co-operation with the Company's operating units in accordance with the Board policy.
The Company holds the following financial instruments:
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Interest bearing liabilities
Other liabilities
(a) Market risk
2019
$’000
50,728
38,091
88,819
32,669
62,548
-
95,217
2018
$’000
52,232
38,681
90,913
28,415
58,294
37
86,746
Market risk is the risk that the fair value or future cash flows of a financial asset or financial liability will
fluctuate because of changes in market prices. Market risk comprises interest rate risk and foreign exchange
risk.
(i) Cash flow and fair value interest rate risk
The Company's main interest rate risk arises from long term borrowings, cash, receivables and derivatives
(until 9 February 2018). Borrowings issued at variable rates expose the Company to cash flow interest rate
risk. The Company has previously utilized fixed rate interest rate swaps and interest rate collars to manage
interest rate risk. Currently all the Company’s outstanding debt is floating based on one-month BBSY and
none of the debt is subject to derivatives.
As at the end of the reporting period, the Company had the following variable rate cash and borrowings
outstanding:
2019
2018
Weighted
average
interest rate
%
Weighted
average
interest rate
%
Balance
$’000
Balance
$’000
Cash and cash equivalents
Borrowings – unhedged portion (1)
Net exposure to cash flow interest rate risk
52,232
(60,000)
(7,768)
(1) A portion of the hedged debt of $50 million was subject to cash flow risk because the hedging mechanism
50,728
(60,000)
(9,272)
0.53%
5.27%
0.57%
5.75%
is an interest collar which allows the interest rate to float between the interest rate floor and ceiling. The
collar expired 9 February 2018 at which time all outstanding debt became floating debt.
54
GTN Limited
For the year ended 30 June 2019
An official increase/decrease in interest rates of 100 (2018: 100) basis points would have favourable/adverse
effect on profit before tax of $93 thousand (2018: favourable/adverse $78 thousand) per annum.
(ii) Foreign currency risk
Exposures to currency exchange rates arise from the sales and purchases by its subsidiaries that are
denominated in currencies other than the subsidiaries’ functional currency.
The Company does not enter into forward exchange contracts to mitigate the exposure to foreign currency
risk.
Foreign currency denominated financial assets and liabilities which expose the Company to currency risk are
disclosed below. The amounts shown are those reported to key management translated into AUD at the
closing rate:
Short Term Exposure
Long Term Exposure
USD
$’000
GBP
$’000
CAD
$’000
BRL
$’000
Other
$’000
USD
$’000
GBP
$’000
30 June 2019
Financial assets
3,797
23,559
21,958
2,205
Financial liabilities
(514)
(7,100)
(5,303)
(2,622)
Total exposure
3,283
16,459
16,655
(417)
30 June 2018
Financial assets
Financial liabilities
Total exposure
4,808
(550)
4,258
20,176
(6,520)
15,203
(2,648)
13,656
12,555
2,883
(1,507)
1,376
18
(75)
(57)
51
(69)
(18)
-
-
-
-
-
-
-
(1)
(1)
-
(3)
(3)
CAD
$’000
-
(828)
(828)
-
(11)
(11)
BRL
$’000
-
(372)
(372)
-
(15)
(15)
There are no material transactions of subsidiary entities made in currencies other than the functional currency
of the subsidiary. Therefore, no sensitivity analysis on foreign currencies affecting profit or loss has been
prepared.
(b) Credit risk
Credit risk is the risk that a contracting entity will not complete its obligations under a financial instrument
and cause a financial loss. The Company has exposures to credit risk on cash and cash equivalents and
receivables. Our maximum exposure to credit risk is based on the total value of our financial assets net of any
loss allowance.
Ongoing credit evaluation is performed on the financial condition of customers and, where appropriate, a
loss allowance is raised. The Group applies the simplified approach to measuring expected credit losses,
which uses a lifetime expected loss allowance for all trade receivables (see Note 2.8). Debtor write-offs have
historically been immaterial.
The Company's policy is to engage major financial institutions to provide financial facilities to the Company,
thereby minimising credit risk on cash deposits. The Company does not have any cash balances or derivative
financial instruments with any financial institution rated below “A”.
55
GTN Limited
For the year ended 30 June 2019
(c) Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial
liabilities.
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an
adequate amount of committed credit facilities, and the ability to refinance borrowings.
(i) Financing arrangement
The Company had access to the following undrawn borrowing facilities at the end of the reporting period:
Total facilities
Bank loan facility
Used at balance date
Bank loan facility
Unused at balance date
Bank loan facility
(ii) Maturities of financial liabilities
Contractual maturities of financial liabilities
2019
$’000
2018
$’000
75,000
75,000
60,000
60,000
15,000
15,000
Within
1 year
$’000
Between
1 and 2
years
$’000
Between
2 and 5
years
$’000
Over
5 years
$’000
Total
contractual
cash flows
$’000
Carrying
Amount
(assets)/
liabilities
$’000
At 30 June 2019
Non-derivatives
Non-interest bearing
Trade and other payables
32,596
-
73
Interest bearing
Bank loans (1)(2)
Leases (1)
Total
2,351
1,333
36,280
61,417
923
62,340
-
1,665
1,738
-
-
-
-
32,669
32,669
63,768
3,921
100,358
58,977
3,571
95,217
(1) Cash flows include an estimate of future contractual payments of interest
(2) Carrying amounts are net of capitalized transaction costs
At 30 June 2018
Non-derivatives
Non-interest bearing
Trade and other payables
Other liabilities
Interest bearing
Within
1 year
Between
1 and 2
years
Between
2 and 5
years
Over
5 years
Total
contractual
cash flows
Carrying
Amount
(assets)/
Liabilities
$’000
$’000
$’000
$’000
$’000
$’000
69
37
-
-
28,415
28,415
37
37
28,346
-
-
-
56
GTN Limited
For the year ended 30 June 2019
Bank loans (1)(2)
Total
2,667
31,013
2,667
2,667
61,608
61,714
-
-
66,942
95,394
58,294
86,746
(1) Cash flows include an estimate of future contractual payments of interest
(2) Carrying amounts are net of capitalized transaction costs
(d) Fair value measurements
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement
or for disclosure purposes.
(i) Valuation techniques used to determine fair values
Specific valuation techniques used to value financial instruments include:
● use of quoted market prices or dealer quotes for similar instruments
● for interest rate swaps the present value of the estimated future cash flows based on observable
yield curves
●for foreign currency forwards the present value of future cash flows based on the forward exchange
rates at the balance sheet date
●for foreign currency options option pricing models such as Black-Scholes, and
●for other financial instruments a discounted cash flow analysis
All of the resulting fair value estimates are included in level 2.
5
Capital Management
Risk management
The Company’s objectives when managing capital are to
(i) safeguard its ability to continue as a going concern so it can continue to provide returns to the
shareholders and
(ii) maintain an optimal capital structure to reduce the cost of capital.
In order to accomplish these goals, the Company has entered into a secured bank loan with regard to its
Australian and United Kingdom operations. Under the terms of the loan, the borrowers are required to
comply with the following financial covenants:
(a) Total gearing ratio (TGR) (not greater than 2.50x at 30 June 2019) (actual 0.80x)
(b) Interest coverage ratio (at least 3.50x at 30 June 2019) (actual 13.49x)
(c) Debt service ratio (at least 1.10x at 30 June 2019) (actual 9.41x)
The borrowers were in compliance with these and all other requirements of the loan for all periods presented.
The Group’s consolidated TGR at 30 June 2019 was 0.34x. The Company targets to have a maximum total
gearing ratio of less than 2.0x but does not target a minimum TGR.
6
Interests in subsidiaries
Set out below details of the subsidiaries held directly and indirectly by the Company:
57
GTN Limited
For the year ended 30 June 2019
Name of the
Subsidiary
Country of Incorporation &
Principal Place of Business
Proportion of Ownership
Interests Held by the
Company
30-June-2019 30-June-2018
GTN Holdings Pty Limited (“LuxCo 1”)
GTN US Holdco, Inc. (‘US Hold Co”)
Global Traffic Network, Inc. (“GTN”)
Gridlock Holdings (Australia) Pty Limited (“Aus Hold
Co”)
The Australia Traffic Network Pty Limited (“ATN”)
GTN Management, Inc. (“US Management Co”)
GTCR Gridlock International (Luxembourg) S.a r.l.
(“LuxCo 2”)
Canadian Traffic Network ULC (“CTN”)
GTN Holdings (UK) Limited (“UK Hold Co”)
Global Traffic Network (UK) Commercial Limited
(“UK Commercial”)
Global Traffic Network (UK) Limited (“UKTN”)
Australia (NSW)
United States (Delaware) (1)
United States (Nevada) (1)
Australia (NSW)
Australia (NSW)
United States (Delaware)
Luxembourg
Canada (Alberta)
United Kingdom (England &
Wales)
United Kingdom (England &
Wales)
United Kingdom (England &
Wales)
GTCR Gridlock Holdings (Brazil) S.a r.l. (“LuxCo 3”) Luxembourg
BTN Informacao do Transito E Servicos Aereos
Especializados Ltda (“BTN”) (2)
Brazil
Global Story Network LLC (3)
United States (Delaware)
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
N/A
(1) Resident of Australia for tax purposes but still subject to U.S. taxes. Principal place of business
Australia.
(2) Name changed from BTN Servicos de Informacao do Transito Ltda effective 27 March 2019.
(3) Formed 4 January 2019
7
Revenue and other income
From continuing operations
Revenue from contracts with customers
Sale of advertising commercials – net of agency commissions and taxes
Other income
Interest on bank deposits
2019
$’000
2018
$’000
184,969
184,969
185,013
185,013
259
259
403
403
Interest income on long-term prepaid affiliate contract
8,325
8,401
8
Expenses
Profit/(Loss) before income tax includes the following specific
expenses:
Employee benefits expense
2019
$’000
2018
$’000
42,097
38,804
58
GTN Limited
For the year ended 30 June 2019
Defined contribution superannuation expenses
Amortisation and depreciation
Finance costs of bank loan, line of credit and leases
Rental expenses relating to short-term and low value leases
Foreign exchange (gain) loss on intercompany loans within the group
1,026
11,208
3,642
963
41
942
9,476
4,784
1,933
79
Income tax expense
9
The major components of tax expense and the reconciliation of the expected tax expense based on the
statutory tax rate at 30% (2018: 30%) and the reported tax expense in profit or loss are as follows:
Profit before income tax
Tax rate: 30% (2018: 30%)
Taxes on foreign earnings
Tax effect of permanent differences
(Recognition of previously unrecognised tax losses)/ unrecognized tax
losses
State taxes
Over-provision for income tax in prior year
Effect of tax rate changes
Other
Income tax expense
Expense
Current
Deferred
Income tax expense
Other comprehensive income
Current
Deferred
2019
$’000
22,917
6,875
(341)
417
617
29
(188)
-
(224)
7,185
2019
$’000
4,690
2,495
7,185
-
-
-
2018
$’000
34,204
10,261
266
564
(4,219)
1,154
(495)
1,250
592
9,373
2018
$’000
7,965
1,408
9,373
-
2
2
The recognition of deferred tax assets is limited to the extent that the Company anticipates making sufficient
taxable profits in the future to absorb the reversal of the underlying timing differences. The Company has an
unrecognised deferred tax asset of $22,994 thousand (2018: $21,525 thousand) in relation to the tax losses
and deductible temporary differences as management does not anticipate the Company will make sufficient
taxable profits in the foreseeable future to utilise this asset. The net operating losses that have not been
recognized do not expire.
59
GTN Limited
For the year ended 30 June 2019
10 Auditor’s remuneration
Auditor remuneration details are as follows:
PricewaterhouseCoopers Australia
Audit and other assurance services
Auditors of the Company:
Audit and review of financial statements
Remuneration from audit and other assurance services
Taxation services
Auditors of the Company:
Tax compliance
Remuneration for taxation services
2019
$
2018
$
663,000
663,000
692,000
692,000
104,000
104,000
149,000
149,000
Total remuneration of PricewaterhouseCoopers Australia
767,000
841,000
Network firms of PricewaterhouseCoopers Australia
Audit and other assurance services
Auditors of the Company:
Audit and review of financial statements
Remuneration from audit and other assurance services
Taxation services
Auditors of the Company:
Tax compliance
Remuneration for taxation services
125,000
125,000
266,000
266,000
118,000
118,000
375,000
375,000
Total remuneration of network firms of PricewaterhouseCoopers
391,000
493,000
Total auditor’s remuneration
1,158,000
1,334,000
11 Cash and cash equivalents
Cash and cash equivalents consist the following:
Cash at bank and in hand:
Cash at bank and in hand
Short term deposits
Cash and cash equivalents
12 Trade and other receivables
Trade and other receivables consist of the following:
Trade receivables
Loss allowance
Trade receivables
60
2019
$’000
41,679
9,049
50,728
2019
$’000
38,809
(718)
38,091
2018
$’000
48,649
3,583
52,232
2018
$’000
39,347
(666)
38,681
GTN Limited
For the year ended 30 June 2019
All amounts are short-term. The net carrying value of trade receivables is considered a reasonable
approximation of fair value.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less loss allowance. A loss allowance of $124 thousand (2018: $79 thousand) has
been recorded within selling, general and administrative expenses.
The movement in the loss allowance can be reconciled as follows:
Balance 1 July
Amounts written off (uncollectable)
Impairment reversal (loss)
Discontinued operations
Balance 30 June
2019
$’000
(666)
72
(124)
-
(718)
2018
$’000
(685)
34
(79)
64
(666)
At 30 June 2019
Expected loss rate
Gross carrying amount – trade
receivables
Loss allowance
*Less than 1%
At 1 July 2018
Expected loss rate
Gross carrying amount – trade
receivables
Loss allowance
*Less than 1%
Current
Not more
than 3
months
past due
More than
3 months
past due
Total
$’000
$’000
$’000
$’000
-%*
-%*
17%
2%
31,172
3,386
4,251
38,809
-
-
718
718
Current
Not more
than 3
months
past due
More than
3 months
past due
Total
$’000
$’000
$’000
$’000
-%*
-%*
26%
2%
34,386
2,378
2,583
39,347
-
-
666
666
61
GTN Limited
For the year ended 30 June 2019
13 Other assets
Other assets reflected on the consolidated statement of financial position consist of the following:
Current
Prepaid station affiliate contracts(i)
Prepaids and other current assets
Non-Current
Prepaid station affiliate contract(i)
Other assets
2019
$’000
1,860
1,621
3,481
95,881
258
96,139
2018
$’000
1,216
611
1,827
96,945
270
97,215
(i) ATN made a $100 million prepayment of station compensation to a radio station group in February 2016.
This is being accounted for as a financing arrangement whereby ATN will record non-cash interest income
over the term of the contractual agreement, based on an estimate of radio station group’s incremental
borrowing rate with similar terms (estimated to be 8.5% per annum), which will reduce over time as the
prepayment is amortised. ATN will also record station compensation expense over the contract period equal
to the $100 million prepayment plus the total non-cash interest income, which will be recognised on a
straight-line basis over the 30-year contract term. ATN will make annual recurring cash payments
commencing on 1 February 2017 of $2.75 million payable on a monthly basis that will be indexed by the
lower of CPI and 2.5%. ATN will record an additional station compensation expense over the contract
period equal to the total recurring indexed cash payments, which will be recognised straight line over the 30-
year contract term.
14 Goodwill
The movements in the net carrying amount of goodwill and trade names (Note 15) are as follows:
Gross carrying amount
Balance 1 July
Discontinued operation
Net exchange difference
Trade names
2019
$’000
2018
$’000
12,445
12,341
-
108
-
104
Carrying amount at 30 June
12,553
12,445
Goodwill
2019
$’000
96,193
-
(14)
96,179
2018
$’000
97,997
(2,030)
226
96,193
Due to the long term and indefinite nature of goodwill and trade names, amortisation expense is not reflected
and the Company annually reviews goodwill and trade names for impairment.
Impairment testing
For the purpose of annual impairment testing, goodwill and trade names are allocated to the following cash-
generating units, which are the units expected to benefit from the synergies of the business combinations in
which the goodwill and trade names pertain.
Australia
Canada
2019
$’000
95,801
4,094
2018
$’000
96,051
3,869
62
GTN Limited
For the year ended 30 June 2019
United Kingdom
Goodwill and trade names allocation at 30 June
8,837
108,732
8,718
108,638
The recoverable amounts of the cash-generating units were determined based on value-in-use calculations,
covering a detailed five-year forecast, followed by an extrapolation of expected cash flows for the units’
remaining useful lives using the growth rates determined by management. The present value of the expected
cash flows of each segment is determined by applying a suitable discount rate.
Growth rates and discount rates used in calculations:
Australia
Canada
United Kingdom
Australia
Canada
United Kingdom
Discount Rates
2019
Pre-Tax
2018
Pre-Tax
12.1%
15.8%
15.8%
12.2%
15.8%
15.8%
Average Growth Rates
Revenue
EBITDA
2019
2018
2019
2018
3%
6%
1%
3%
6%
(1)%
8%
16%
(7)%
3%
12%
(7)%
Growth rates
The growth rates reflect lower than the historic revenue growth rate of respective cash-generating units in the
local currency of the respective units. Expenses are then estimated based on a projected growth rate if fixed
in nature or in relation to revenue if variable. The base year for each calculation is the Company’s approved
internal budget for the coming fiscal year. The long-term growth rate utilized was 1%.
Discount rates
The discount rates reflect appropriate adjustments relating to market risk and specific risk factors of each
unit.
Cash flow assumptions
The calculations use cash flow projections based on financial budgets approved by management covering a
five-year period. Cash flows beyond the five-year period assume a 1% long term growth rate which does not
exceed the long-term average growth rates for the industry in which each CGU operates.
Significant estimate: Impact of possible changes in key assumptions
Management is not currently aware of any other reasonably possible changes in key assumptions that would
result in impairment.
Intangible assets
15
Detail of the Company’s intangible assets and their carrying amounts are as follows:
63
GTN Limited
For the year ended 30 June 2019
Station
contracts
$’000
Advertising
contracts
$’000
Software
$’000
Trade names
$’000
Total
$’000
Gross carrying amount
Balance at 1 July 2018
Net exchange differences
Balance at 30 June 2019
Amortisation
Balance at 1 July 2018
Amortisation
Net exchange differences
Balance at 30 June 2019
87,984
760
88,744
65,249
559
65,808
(42,420)
(65,249)
(6,314)
(391)
-
(559)
(49,125)
(65,808)
Carrying amount 30 June 2019
39,619
-
-
-
-
-
-
-
-
-
12,445
108
12,553
165,678
1,427
167,105
-
-
-
-
(107,669)
(6,314)
(950)
(114,933)
12,553
52,172
Gross carrying amount
Balance at 1 July 2017
Discontinued operation
Net exchange differences
Balance at 30 June 2018
Amortisation
Balance at 1 July 2017
Amortisation
Discontinued operation
Net exchange differences
Balance at 30 June 2018
Carrying amount 30 June 2018
100,600
(13,160)
544
87,984
(36,349)
(6,254)
73
110
(42,420)
45,564
73,543
(8,708)
414
65,249
(65,730)
-
1,445
(964)
(65,249)
-
1,014
12,341
187,498
(999)
(15)
-
(198)
-
193
5
-
-
-
104
(22,867)
1,047
12,445
165,678
-
-
-
-
-
(102,277)
(6,254)
1,711
(849)
(107,669)
12,445
58,009
The Company expects to either renew or replace its advertiser contracts and renew its station contracts
beyond their expected life. Amortisation expense for the years ended 30 June 2019 and 30 June 2018 was
$6,314 thousand and $6,254 thousand respectively. Indefinite life intangible assets (trade names) are also
subject to impairment testing as disclosed in Note 14.
16 Property, plant and equipment
Details of the Company’s property, plant and equipment and their carrying amount are as follows:
Helicopters
and fixed wing
aircraft
Recording,
broadcasting
and studio
equipment
Furniture,
equipment and
other
Right of use
assets – real
property
leases
$’000
$’000
$’000
$’000
Total
$’000
Gross carrying amount
Balance 1 July 2018
Opening adjustments for adoption of
AASB 16
Additions during period
Disposals
Net exchange differences
Balance 30 June 2019
Depreciation and impairment
Balance 1 July 2018
Disposals
21,203
-
3,122
-
954
25,279
(15,291)
-
1,827
-
657
(112)
62
2,434
(1,584)
112
-
23,873
3,277
1,460
-
69
3,277
5,389
(112)
1,108
4,806
33,535
-
-
(17,538)
112
843
-
150
-
23
1,016
(663)
-
64
GTN Limited
For the year ended 30 June 2019
Net exchange differences
Depreciation
Balance 30 June 2019
Carrying amount 30 June 2019
(769)
(3,184)
(19,244)
6,035
(15)
(88)
(766)
250
44
(301)
(1,729)
705
(16)
(1,321)
(1,337)
3,469
(756)
(4,894)
(23,076)
10,459
Helicopters
and fixed wing
aircraft
$’000
Recording,
broadcasting
and studio
equipment
$’000
Furniture,
equipment and
other
$’000
Right of use
assets – real
property
leases
$’000
Gross carrying amount
Balance 1 July 2017
Additions
Discontinued operation
Disposals
Net exchange differences
Balance 30 June 2018
Depreciation and impairment
Balance 1 July 2017
Disposals
Net exchange differences
Depreciation
Discontinued operation
Balance 30 June 2018
Carrying amount 30 June 2018
18,618
2,975
-
(6)
(384)
21,203
(12,530)
6
176
(2,943)
-
(15,291)
5,912
741
112
-
-
(10)
843
(599)
-
-
(64)
-
(663)
180
1,960
383
(508)
-
(8)
1,827
(1,422)
-
169
(215)
(116)
(1,584)
243
17 Current and deferred tax assets and liabilities
Current taxes can be summarised as follows:
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$’000
21,319
3,470
(508)
(6)
(402)
23,873
(14,551)
6
345
(3,222)
(116)
(17,538)
6,335
Current tax assets
Current tax liabilities
Net current tax assets/(liabilities)
2019
$’000
2,479
(306)
2,173
2018
$’000
957
(338)
619
Deferred taxes arising from temporary differences can be summarised as follows:
Deferred Tax Assets
1 July 2018
Recognised in
Profit
and Loss
30 June 2019
$’000
$’000
$’000
Annual leave accrual
Long service leave provision
Audit accrual
Superannuation accrued
Deferred rent
Allowance for doubtful debts
Leases
Deferred transaction costs
258
465
122
27
16
148
-
1,171
257
376
85
29
-
127
5
586
(1)
(89)
(37)
2
(16)
(21)
5
(585)
65
GTN Limited
For the year ended 30 June 2019
Fixed asset depreciation
Net tax losses
Set-off of deferred tax liabilities
pursuant to set-off provisions
Net deferred tax assets
720
5,024
7,951
(4,035)
3,916
569
(1,581)
(1,754)
1,289
3,443
6,197
(3,222)
2,975
Deferred Tax Liabilities
1 July 2018
Recognised
in Profit
and Loss
30 June 2019
$’000
$’000
$’000
Intangibles
Prepaid expenses
Other
Set-off of deferred tax assets
pursuant to set-off provisions
Net deferred tax liabilities
16,451
5,026
1
21,478
(4,035)
17,443
(1,672)
2,408
5
741
14,779
7,434
6
22,219
(3,222)
18,997
Deferred tax assets consist of:
Current
Non-current
Deferred tax liabilities consist of:
Current
Non-current
2019
$’000
792
5,405
6,197
-
22,219
22,219
2018
$’000
667
7,284
7,951
-
21,478
21,478
At 30 June 2019, the Company had a franking balance of $67 thousand.
18 Trade and other payables
Trade and other payables recognised consist of the following:
Current
Trade payables
Accrued payroll expenses
Accrued expenses and other liabilities
Non-current
Other
2019
$’000
24,775
5,641
2,180
32,596
2018
$’000
21,554
4,735
2,057
28,346
73
73
69
69
66
GTN Limited
For the year ended 30 June 2019
All current amounts are short-term. The carrying values of trade payables and other payables are considered
to be a reasonable approximation of fair value.
Goods and services, sales and value added taxes, which are charged by vendors to operating subsidiaries in
Australia, Canada and United Kingdom are included in trade payables until paid. The net amount of goods
and services, sales and value added tax payable (after deduction of amounts paid to vendors of the Company)
is included as a component of trade and other payables on the consolidated statement of financial position.
19 Provisions
Current
Long service leave provision
Non-Current
Long service leave provision
Lease restoration
2019
$’000
939
939
314
140
454
1,393
2018
$’000
1,341
1,341
211
138
349
1,690
The current portion of the long service leave provision includes all amounts that are either unconditional or
scheduled to become unconditional within 12 months. The entire amount of the unconditional and scheduled
to become unconditional long service leave are presented as current since the Company does not have the
unconditional right to defer settlement. However, based on past experience the Company does not expect all
employees to take the full amount of their long service leave or require payment within the next 12 months.
The Company has an obligation to restore certain of its leased premises back to their original condition at the
end of their respective leases. As of 30 June 2019 and 30 June 2018, the Company had a liability of $140
thousand and $138 thousand, respectively, accrued which it anticipates to be the amount required to restore
the premises at the end of the leases.
20 Deferred revenue
Deferred revenue
2019
$’000
534
534
2018
$’000
450
450
Payments received or amounts invoiced in advance are deferred until earned and such amounts are included
as a component of deferred revenue.
21
Financial liabilities
Current
Current portion of long-term debt
Current portion of leases
Non-current
Long-term debt, less current portion
2019
$’000
-
1,155
1,155
2018
$’000
-
-
-
58,977
58,294
67
GTN Limited
For the year ended 30 June 2019
Leases, less current portion
2,416
61,393
-
58,294
In February 2016, the Company amended its existing bank loan facilities to increase the total borrowing
capacity to $155 million primarily to finance the $100 million long term prepayment of a radio station
affiliation agreement. Facility A consisted of a $15 million revolving line of credit, Facility B a $40 million
term loan and Facility C a $100 million bullet loan. Deferred financing costs of $3,735 thousand were
incurred and are being recognized in finance costs via the effective interest method over the term of the
facilities. Part of the proceeds from the IPO were used to repay Facility A and Facility B. Facility B was
automatically terminated as part of the repayment. During the year ended 30 June 2018, $40 million of
Facility C was repaid and the commitment reduced to $60 million. At 30 June 2019, Facility C is outstanding
and Facility A is available but undrawn. A commitment fee of 45% of the applicable margin (currently
2.50%) is incurred on unutilized portion of Facility A. The outstanding loans bear interest at BBSY plus the
applicable margin.
Assets pledged as security
Bank loan facilities are secured by a first ranking charge over all ATN, Aus Hold Co, UK Hold Co, UKTN
and UK Commercial assets.
22 Other liabilities
Other
23 Earnings per share
2019
$’000
-
-
2019
$’000
2018
$’000
37
37
2018
$’000
Profit attributable to shareholders from continuing operations
15,732
24,831
Weighted average number of ordinary shares used in calculating basic
earnings per share
Weighted average number of ordinary shares and potential ordinary
share used in calculating diluted earnings per share
224,591
224,591
224,721
224,721
Basic earnings per share from continuing operations (cents per share)
Diluted earnings per share from continuing operations (cents per share)
Basic earnings/(loss) per share (cents per share)
Diluted earnings/(loss) per share (cents per share)
$0.07
$0.07
$0.07
$0.07
$0.11
$0.11
$(0.07)
$(0.07)
At 30 June 2019, the Company had common stock equivalents of 2,612,461 outstanding in the form of
outstanding stock options. However, these common stock equivalents are excluded from the calculation of
diluted earnings per share since they are anti-dilutive due to the exercise price of the options exceeding the
Company’s share price on 30 June 2019.
68
GTN Limited
For the year ended 30 June 2019
24 Shareholders’ equity
2019
‘000’s
2019
$’000
2018
‘000’s
2018
$’000
Ordinary shares
Issued capital
Ordinary shares
Issued capital
At beginning of reporting period
Shares repurchased and retired
At the end of the reporting period
224,721
(721)
224,000
444,981
(940)
444,041
224,721
444,981
-
-
224,721
444,981
On 25 February 2019, the Company filed an Appendix 3C announcing that it has initiated an on-market share
buyback of up to 10% of its outstanding shares (up to $20 million) for a period of up to twelve months. No
target share price or minimum repurchase amount has been set.
During the year ended 30 June 2019, the Company repurchased 720,631 shares at an average price per share
of $1.30 for total consideration of $940 thousand.
25 Equity based compensation
As of 30 June 2019 and 2018 there were 2,612,461 and 1,345,703 stock option grants to purchase shares of
GTN Limited outstanding, respectively under the Company’s Long-term Incentive Plan (“the Plan”).
Options granted under the Plan vest (subject to performance conditions) on an annual basis over three years
(one third after two years and the remaining grant after three years) and expire after five years from the date
of the grant. The Plan allows for cashless exercise under which employees surrender shares in lieu of paying
the cash exercise price and remitting the required amounts to satisfy tax withholding obligations. The
Company does not anticipate incurring cash costs under the Plan (other than de minimus payroll tax
withholdings) since it does not currently repurchase shares issued with regards to the Plan.
Stock Options
Under AASB 2, share-based compensation benefits are provided to employees via the Plan. The maximum
term of the options granted under the Plan is five years. The fair value of rights granted under the Plan is
recognised as equity based compensation expense with a corresponding increase in equity. The fair value is
measured at grant date and recognised over the period during which the employee becomes unconditionally
entitled to the rights.
7 April 2017 Grant
The fair value at grant date was independently determined using a number of methods including the Monte-
Carlo option pricing model and the Binomial option pricing model which take into account the exercise price,
the term of the right, the vesting and performance criteria, the volume weighted average share price at grant
date, the expected price volatility of the underlying shares, the expected dividend yield and the risk-free
interest rate for the term of the right.
The fair value of the rights granted is adjusted to reflect the market vesting condition but excludes the impact
of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the
number of rights that are expected to become exercisable. At each reporting date, the Company revises its
estimate of the number of rights that are expected to become exercisable.
The equity based compensation expense recognised each period takes into account the most recent estimate.
The impact of the revision to the original estimates is recognised in profit or loss with a corresponding
adjustment to equity. Shares related to the exercise of vested options under the Plan are issuable upon
payment of the strike price to the Company.
69
GTN Limited
For the year ended 30 June 2019
The performance criteria for vesting criteria are as follows:
Performance
Metrics
50% subject to performance condition based on the Company’s relative
total shareholder return (TSR) compared to members of the ASX 300
(excluding financials and resources) over the performance period
TSR ranking
Up to and including the 50th percentile
Between the 51st and 75th percentile (inclusive)
Percentage to vest
0%
Pro rata straight line
between 50% and
100%
At and above 75th percentile
100%
50% subject to performance condition based on Company’s earnings per
share (EPS) growth (adjusted for one-off items associated with the IPO
and amortisation of intangibles and excluding United States Traffic
Network, LLC operations, as determined by the Board) over the
performance period
EPS Compound annual growth rate
Less than threshold
Between threshold and stretch target (inclusive) Pro rata straight line
Percentage to vest
0%
Above stretch target
between 50% and
100%
100%
The inputs used in the measurement of the fair values at grant date were as follows:
Grant date
Expiration date
Share price at grant date
5-day VWAP at grant date
Fair value at grant date
Exercise price
Expected volatility (based on historic and
expected volatility of Company’s shares)
Expected life
Expected dividends
Risk-free interest rate (based on government
bonds)
30 June 2019
5 April 2017
31 December 2021
$2.74
$2.72
$0.695
$2.74
45.00 %
4.75 years
4.00 %
2.14 %
9 November 2018 Grant
The Company has moved to a service time-based vesting criterion. Under this plan, options vest if the
grantee is employed by the Company at the vesting date without further performance hurdles. The fair value
of these options was estimated at the date of the grant using the Black-Scholes option pricing model with the
following assumptions:
Grant date
Expiration date
Share price at grant date
Fair value at grant date
Exercise price
30 June 2019
9 November 2018
9 November 2023
$2.15
$0.647
$2.15
70
GTN Limited
For the year ended 30 June 2019
Expected volatility (based on historic and
expected volatility of Company’s shares)
Expected life
Expected dividends
Risk-free interest rate (based on government
bonds)
49.69 %
3.83 years
4.09 %
2.30 %
The Company’s outstanding stock options as of 30 June 2019 were as follows:
Balance, 30 June 2018
Exercisable, 30 June 2018
Grants
Exercised
Forfeitures/expirations
Balance, 30 June 2019
Exercisable, 30 June 2019
Weighted
Average
Exercise
Price
$
$
$
$
$
$
$
2.74
2.74
2.15
-
2.74
2.30
2.74
Shares
1,345,703
269,141
1,961,140
-
694,382
2,612,461
651,321
Aggregate
Fair
Value
,000’s
Weighted
Average
Remaining
Contractual
Term
3.50 years $
935
3.50 years $
187
4.64 years $ 1,268
— $
-
— $
(483)
4.11 years $ 1,720
2.50 years $
452
Based on the following assumptions, the fair value with regards to all options issued and outstanding as of 30
June 2019 is $1,720 thousand. As of 30 June 2019, there was $940 thousand of unrecognized compensation
cost related to non-vested share-based compensation under the Plan. The cost of the unrecognized
compensation is expected to be recognized over a weighted average period of 2.3 years on a pro rata basis
over the vesting period. This expense is based on an assumption that there will be no non-market forfeitures;
this assumption is based on the positions of the grantees of the stock options and the low number of
forfeitures under previous long-term incentive plans of members of the Company’s group. The expense with
regards to stock options for the years ended 30 June 2019 and 2018 is $569 thousand and $651 thousand,
respectively and is included in equity-based compensation expenses. The Company recognized $0 of income
tax benefit related to share-based compensation for the years ended 30 June 2019 and 2018.
26 Operating agreements
The Company’s UK Commercial subsidiary outsources the majority of its radio traffic and entertainment
news operations pursuant to contracts with unrelated third parties. These expenses are a component of
network operations and station compensation expense on the accompanying consolidated statement of profit
or loss and other comprehensive income and are recognised over the term of the applicable contracts, which
is not materially different than when the services are provided. The minimum future payments under these
contracts are as follows:
30 June 2019
30 June 2018
Within 1 year
1 to 5 years
After 5 years
Minimum Payments Due
$’000
3,434
3,761
$’000
4,158
1,736
$’000
-
-
Total
$’000
7,592
5,497
The Company generally enters into multiyear contracts with radio and television stations. These contracts call
for the provision of various levels of service (including, but not limited to providing professional
71
GTN Limited
For the year ended 30 June 2019
broadcasters, gathering of information, communications costs and aviation services) and, in some cases, cash
compensation or reimbursement of expenses. Station compensation is a component of network operations
and station compensation expenses on the accompanying consolidated statement of profit or loss and other
comprehensive income and is recognised over the terms of the contracts, which is not materially different
than when the services are performed. Contractual station commitments consist of the following:
30 June 2019
30 June 2018
Minimum Payments Due
Within 1 year
$’000
1 to 5 years
$’000
After 5 years
$’000
58,167
39,833
74,350
88,879
31,854
34,604
Total
$’000
164,371
163,316
The Company had no contingent liabilities at 30 June 2019.
27 Cash flow information
(a) Details of the reconciliation of cash flows from operating activities are listed in the
following table:
Cash flows from operating activities
Profit (loss) for the period
Adjustments for:
Allowance for doubtful accounts
Equity based compensation expenses
Amortisation of deferred borrowing costs
Fair value movement on derivatives
Depreciation and amortisation
Foreign currency loss
Non-cash impairment charges
Non-cash gain from sale of subsidiary
Non-cash station compensation from long-term prepaid affiliate contract
Interest income on long-term prepaid affiliate contract
Interest expense from amortisation of original issue discount
Net changes in working capital:
Change in trade and other receivables
Change in other assets
Change in deferred tax assets
Change in trade and other payables
Change in deferred revenue
Change in current tax liabilities
Change in provisions
Change in deferred tax liabilities
Change in other liabilities
Net cash from operating activities
(b) Net debt reconciliation
2019
$’000
2018
$’000
15,732
(15,101)
53
569
46
-
11,208
41
-
-
13,142
(8,325)
637
537
(578)
(1,538)
(312)
84
925
(297)
1,554
(37)
33,441
2019
$’000
(19)
651
49
(5)
11,078
79
21,744
(24,865)
13,142
(8,401)
676
(2,492)
2,228
763
12,836
(1,795)
(1,302)
114
647
(40)
9,987
2018
$’000
Cash and cash equivalents
50,728
52,232
72
GTN Limited
For the year ended 30 June 2019
Borrowings
Net (debt)/cash
Borrowings consist of:
Financial liabilities
Deferred loan costs and original issue discount
Leases
(63,571)
(12,843)
(58,977)
(1,023)
(3,571)
(63,571)
(60,000)
(7,768)
(58,294)
(1,706)
-
(60,000)
Cash and cash
equivalent
Borrowings
Leases
Net (debt)/cash
$’000
$’000
$’000
$’000
Net (debt)/cash as at 1 July 2017
Cash flows
100,727
(50,000)
Prepayment of debt
Net exchange differences
Net (debt)/cash as at 30 June 2018
Adoption of AASB 16 1 July 2018
Cash flows
Borrowings
Repayments
Net exchange differences
Net (debt)/cash as at 30 June 2019
-
1,505
52,232
-
(2,831)
-
-
1,327
50,728
(100,000)
-
40,000
-
(60,000)
-
-
-
-
-
(60,000)
-
-
-
-
-
(3,277)
-
(1,460)
1,291
(125)
(3,571)
727
(50,000)
40,000
1,505
(7,768)
(3,277)
(2,831)
(1,460)
1,291
1,202
(12,843)
28 Transactions with Key Management Personnel
Key Management Personnel remuneration includes the following expenses:
Total short-term employee benefits
Total equity-based compensation
Total remuneration
2019
$
2,363,674
568,639
2,932,313
2018
$
2,346,551
650,763
2,997,314
The Key Management Personnel are all paid in USD so a portion of the change in compensation from the
year ended 30 June 2018 to the year ended 30 June 2019 was due to changes in foreign exchange rates
between AUD and USD.
Whooska Podcasting Platform, a company controlled by Robert Loewenthal (a Company director), provides
podcasting hosting services to the Company at no charge. The fair-market value of the service provided is de
minimus.
William Yde’s (chief executive officer and director) daughter is employed by the Company as an accountant.
Her cash salary (translated from USD to AUD at the same exchange rates as the Company’s financial
statements) was:
●FY2019
●FY2018
$178 thousand
$162 thousand
73
GTN Limited
For the year ended 30 June 2019
29 Parent Entity information
The below information relates to GTN Limited (the “Parent Entity”) which was incorporated on 2 July 2015.
Statement of financial position
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Share capital
Accumulated losses
Accumulated profit – Dividend Profit Reserve
Total equity
Statement of profit or loss and other comprehensive income
Profit (loss) for the year
Other comprehensive income (loss)
Total comprehensive income (loss)
2019
$’000
6,244
363,421
327
635
362,786
444,041
(82,071)
816
362,786
30,929
-
30,929
2018
$’000
2,495
363,665
458
755
362,910
444,981
(82,071)
-
362,910
(61,335)
-
(61,335)
Loss for the year ended 30 June 2018 includes a $72,346 thousand charge for impairment of GTN Limited’s
investment in its subsidiary related to the Company’s exit from the United States market.
GTN Limited’s US Hold Co subsidiary paid a dividend of $7,000 thousand to GTN Limited in August 2019.
This dividend will be recorded in GTN Limited’s Dividend Profit Reserve.
Dividends
As set out in Note 33, subsequent to the end of the financial year and receipt of the dividend income from its
subsidiaries in August 2019 that was recorded in the Dividend Profit Reserve as described above, the
Directors have declared the payment of a final 2019 dividend of $0.032 per share (70% franked), totalling
$7,168 thousand from the Dividend Profit Reserve. This dividend will be paid to holders on record as of 6
September 2019.
Guarantees entered into by the parent entity
In addition, there are cross guarantees given by GTN Limited (as holding entity), GTN Holdings Pty Limited
(“LuxCo 1”), GTCR Gridlock Holdings (Australia) Pty Limited (“Aus Hold Co”), The Australia Traffic
Network Pty Limited (“ATN”), GTCR Gridlock Holdings, Inc. (‘US Hold Co”) and Global Traffic Network,
Inc. (“GTN”) as described in Note 30.
No liability was recognised by the parent entity or the group in relation to the above guarantees, as the fair
value of the guarantees is immaterial.
Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2019 or 30 June 2018. For information
about guarantees given by the parent entity, please see above.
30 Deed of cross guarantee
GTN Limited (as holding entity), GTN Holdings Pty Limited (“LuxCo 1”), Gridlock Holdings (Australia)
Pty Limited (“Aus Hold Co”), The Australia Traffic Network Pty Limited (“ATN”), GTN US Holdco, Inc.
74
GTN Limited
For the year ended 30 June 2019
(‘US Hold Co”) and Global Traffic Network, Inc. (“GTN”) are parties to a deed of cross guarantee under
which each company guarantees the debts of the others. By entering into the deed, the wholly-owned
entities have been relieved from the requirement to prepare a financial report and directors’ report under
ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 issued by the Australian Securities
and Investments Commission.
The above companies represent a ‘closed group’ for the purposes of the Class Order, and as there are no
other parties to the deed of cross guarantee that are controlled by GTN Limited, they also represent the
‘extended closed group’.
Consolidated statement of profit or loss and other comprehensive income, summary of movements in consolidated
retained earnings and consolidated statement of financial position
Set out below is a consolidated statement of profit or loss and other comprehensive income for the years
ended 30 June 2019 and 2018 of the closed group consisting of the above companies.
Consolidated statement of profit or loss and other
comprehensive income
Revenue
Other income
Interest income on long-term prepaid affiliate contract
Network operations and station compensation expenses
Selling, general and administrative expenses
Finance costs
Depreciation and amortisation
Foreign currency transaction loss
Impairment charge
Profit (loss) before income tax
Income tax expense
Profit (loss)for the year
Other comprehensive income for the year, net of income tax
Unrealised gain (loss) on interest rate swaps
Total other comprehensive income for the year
2019
$’000
93,896
139
8,325
(54,086)
(19,674)
(3,563)
(6,044)
(27)
-
18,966
(6,039)
12,927
-
-
2018
$’000
100,769
375
8,401
(52,672)
(20,202)
(4,784)
(5,460)
(50)
(72,346)
(45,969)
(7,631)
(53,600)
3
3
Total comprehensive profit (loss) for the year
12,927
(53,597)
Summary of movement in consolidated retained earnings
Accumulated losses at the beginning of the financial year
Profit (loss) for the period
Dividends
Accumulated losses at the end of the financial year
(104,361)
12,927
(30,112)
(121,546)
(39,974)
(53,600)
(10,787)
(104,361)
Set out below is a consolidated balance sheet as at 30 June 2019 and 2018 of the closed group consisting of
the above companies.
Consolidated statement of financial position
Assets
Current
Cash and cash equivalents
Trade and other receivables
Current tax assets
75
2019
$’000
20,704
18,406
1,940
2018
$’000
27,057
21,556
957
GTN Limited
For the year ended 30 June 2019
Other current assets
Current assets
Non-current
Property, plant and equipment
Intangible assets
Goodwill
Investment in subsidiaries
Other assets
Non-current assets
Total assets
Liabilities
Current
Trade and other payables
Deferred revenue
Current tax liabilities
Financial liabilities
Provisions
Current liabilities
Non-current
Financial liabilities
Deferred tax liabilities
Other liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Accumulated losses
Total equity
1,612
42,662
2,937
38,915
86,240
73,753
103,828
305,673
348,335
17,855
58
-
423
939
19,275
59,417
17,903
-
409
77,729
97,004
251,331
1,280
50,850
1,472
44,512
86,490
69,928
105,403
307,805
358,655
17,122
58
142
-
1,341
18,663
58,294
16,226
8
306
74,834
93,497
265,158
444,041
(71,164)
(121,546)
251,331
444,981
(75,462)
(104,361)
265,158
31 Segment information
The Company’s chief operating decision maker, its chief executive officer analyses the Company’s
performance by geographic area and has identified four reportable segments: Australia, Brazil, Canada and
United Kingdom.
The segments’ revenues are as follows:
Australia
United Kingdom
Canada
Brazil
2019
$’000
93,896
45,234
33,195
12,644
2018
$’000
100,769
42,203
29,845
12,196
184,969
185,013
The chief operating decision maker tracks performance primarily by Adjusted EBITDA which is defined as
EBITDA adjusted for any foreign exchange profit or loss, interest income on the long-term prepaid affiliate
agreement, transaction costs and other unusual non-recurring items.
2019
$’000
2018
$’000
Adjusted EBITDA by Segments
76
GTN Limited
For the year ended 30 June 2019
Australia
United Kingdom
Canada
Brazil
Other
Adjusted EBITDA
Foreign exchange loss
Less: Interest income on long-term prepaid
affiliate contract
EBITDA
30,911
3,883
5,409
1,128
(3,782)
37,549
(41)
(8,325)
29,183
38,757
3,223
6,986
1,827
(2,653)
48,140
(79)
(8,401)
39,660
Depreciation and amortization
(11,208)
(9,476)
Interest income on long-term prepaid affiliate
contract
Financing costs net of interest income
Profit before taxes and discontinued
operations
8,325
(3,383)
8,401
(4,381)
22,917
34,204
Segment assets and liabilities are classified by their physical location.
Segment assets
Total Assets:
Australia
United Kingdom
Canada
Brazil
Total segment assets
Unallocated:
Deferred tax assets
Others
Total assets
Segment liabilities
Total liabilities
Australia
United Kingdom
Canada
Brazil
Total segment liabilities
Unallocated:
Deferred tax liabilities
Borrowings
Intercompany eliminations
Others
Total liabilities
2019
$’000
2018
$’000
258,376
37,878
35,079
7,203
338,536
2,975
11,192
352,703
80,476
7,443
5,014
2,736
95,669
18,997
62,548
(68,309)
7,542
116,447
276,119
34,247
27,345
5,422
343,133
3,916
8,316
355,365
83,302
6,825
2,675
1,953
94,755
17,443
58,294
(70,852)
7,027
106,667
.
77
GTN Limited
For the year ended 30 June 2019
32 Discontinued operation
On March 13, 2018 the Company sold its United States Traffic LLC (“USTN”) subsidiary for $1 USD to an
entity owned by the president of USTN and is reported in the previous period as discontinued operation.
Financial information related to the discontinued operation for the period to the date of disposal is set forth
below.
The financial performance and cash flow information presented is for the period 1 July 2017 to 13 March
2018 (“2018”).
Revenue
Network operations and station compensation expenses
Selling, general and administrative expenses
Transaction costs
Depreciation and amortisation
Loss before impairment charge and gain on disposal
Impairment charge
Gain on disposal
Loss before income tax
Income tax expense
Loss from discontinued operation
Net cash used in operating activities
Net cash used in investing activities
Net cash from financing activities*
Exchange differences on cash and cash equivalents
Net increase (decrease) in cash generated by discontinued operation
2018
$’000
49,210
(75,555)
(15,087)
-
(1,602)
(43,034)
(21,744)
24,865
(39,913)
(19)
(39,932)
2018
$’000
(23,777)
(5,917)
28,400
-
(1,294)
*Net cash from financing activities consisted on advances from the Company to United States Traffic
Network, LLC and eliminate in consolidation
The carrying amounts of the assets and liabilities as at the date of sale (13 March 2018) were:
Cash and cash equivalents
Trade and other receivables
Other current assets
Property, plant and equipment
Other assets
Total assets
Trade and other payables
Deferred revenue
Intercompany payable*
78
13 March 2018
$’000
5,730
17,508
1,816
333
28
25,415
46,846
3,185
60,426
GTN Limited
For the year ended 30 June 2019
Total liabilities
Net assets
*Intercompany payable eliminated in consolidated statement of financial position.
Consideration received
Net assets disposed
Less: intercompany payable written off
Translation differences
Gain on disposal
110,457
(85,042)
-
(85,042)
60,426
(24,616)
(249)
24,865
33 Events subsequent to the reporting period
Subsequent to the end of the financial year, on 29 August 2019, the Directors have declared the payment of a
final 2019 dividend of $0.032 per share (70% franked). This dividend will be paid to holders on record as of 6
September 2019.
Other than the matter referred to above, no matters or circumstances have arisen since the end of the
financial year which significantly affected or may significantly affect the operations of the group, the results of
those operations, or the state of affairs of the group in future financial years.
79
GTN Limited
For the year ended 30 June 2019
Directors’ declaration
In the directors’ opinion:
(a)
The financial statements, set out on pages 30 to 79 are in accordance with the Corporations Act 2001,
including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
(ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2019 and of
its performance for the financial year ended on that date, and
(b)
(c)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable, and
at the date of this declaration, there are reasonable grounds to believe that the members of the closed
group identified in Note 30 will be able to meet any obligations or liabilities to which they are, or may
become, subject to virtue of the deed of cross guarantee described in Note 30.
Note 2.1 confirms that the financial statements also comply with International Financial Reporting Standards
as issued by the International Accounting Standards Board.
The directors have been given the declarations by the chief executive officer and chief financial officer
required by section 295A of the Corporations Act 2001.
Robert Loewenthal
Chairman
Dated, this 29th day of August 2019
80
Independent auditor’s report
To the members of GTN Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of GTN Limited (the Company) and its controlled entities (together
the Group) is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 30 June 2019 and of its
financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
the consolidated statement of financial position as at 30 June 2019
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the consolidated statement of profit or loss and other comprehensive income for the year then
ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
81
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
•
For the purpose of our audit we used overall Group materiality of $1,145,000 which represents approximately
5% of the Group’s profit before tax.
• We applied this threshold, together with qualitative considerations, to determine the scope of our audit and
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the
financial report as a whole.
• We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly
acceptable thresholds.
Audit Scope
• Our audit focused on where the Group made subjective judgements; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
• We conducted full scope audit work over Australia, Canada and the United Kingdom operating segments. We
performed limited scope audit work over the Brazil operating segment. We engaged auditors from another
PwC network firm to conduct a full scope audit over the United Kingdom. Audit instructions were issued by
our Group audit team from the PwC Australia firm to the component audit team. On-going dialogue was held
throughout the year between the Group audit team and the component audit team including consideration of
how component audits are planned and executed.
• Where the directors made subjective judgements; for example, significant accounting estimates involving
assumptions and inherently uncertain future events, we focused our audit work on these areas.
82
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matter to the Audit
and Risk Committee.
Key audit matter
How our audit addressed the key audit matter
Impairment of goodwill and indefinite life
intangible assets
We performed the following procedures:
Refer to:
• Note 2.9 and Note 14 Goodwill
• Note 2.13 Impairment testing of
goodwill, other intangible assets and
property, plant and equipment
• Note 2.26 Significant management
judgement in applying accounting
policies and estimation uncertainty
The goodwill and trade names balance is $108.7
million. This is a key audit matter because of the
magnitude of the balance and the judgement
involved in the assessment of potential
impairment as at 30 June 2019.
The Group’s impairment assessment includes
assumptions in the forecasted future results of
each cash generating unit (CGU) including
terminal growth rate, revenue and EBITDA
forecasts and the discount rates applied to future
cash flow forecasts.
• understood and evaluated the process by which
the cash flow forecasts were developed and
challenged management’s cash flow forecasts.
• tested that the forecast cash flows used in the
impairment model were consistent with the most
up-to-date budgets and business plans formally
approved by the directors.
• compared previous forecasts to actual results, to
assess the accuracy of management’s forecasting.
• performed sensitivity calculations by varying the
key assumptions.
• compared the recoverable amount of the CGUs
in the Group’s value in use models to the carrying
value of the respective CGUs to the accounting
records.
• assessed the Group’s accounting policy and the
adequacy of the Group’s disclosures.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2019, but does not include the
financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
83
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 20 to 28 of the directors’ report for the
year ended 30 June 2019.
In our opinion, the remuneration report of GTN Limited for the year ended 30 June 2019 complies
with section 300A of the Corporations Act 2001.
84
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
MW Chiang
Partner
Sydney
29 August 2019
85
SHAREHOLDER INFORMATION AS AT 23 JULY 2019
Number of security holders and securities on issue
Quoted equity securities
GTN has 224,000,012 fully paid ordinary shares on issue which are held by 511 shareholders.
Unquoted equity securities
GTN has 2,612,461 unquoted options on issue held by 3 option holders as follows:
651,321 options exercisable at $2.74 on or before 31 December 2021;
653,713 options exercisable at $2.15 after 9 November 2020; and
1,307,427 options exercisable at $2.15 after 9 November 2021.
Voting rights
Quoted equity securities
The voting rights attached to fully paid ordinary shares are that on a show of hands, every member
present, in person or proxy, has one vote and upon a poll, each share shall have one vote.
Unquoted equity securities
There are no voting rights attached to Options. Options will rank equally with the company’s fully
paid ordinary shares if and when the options vest and are thereafter exercised (prior to the
applicable expiry date).
Distribution of security holders
Quoted equity securities
Fully paid ordinary shares
Holding
No. of shares % of shares
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
46,796
448,540
528,441
3,103,644
219,872,591
224,000,012
0.02
0.20
0.24
1.39
98.16
100
No. of
shareholders
117
193
66
107
28
511
% of shareholders
22.90
37.77
12.92
20.94
5.48
100
86
Unquoted equity securities
Options
Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
No. of options % of Options No. of holders
0
0
0
0
3
3
0
0
0
0
2,612,461
2,612,461
0
0
0
0
100
100
% of holders
0
0
0
0
100
100
Unmarketable parcel of shares
The number of shareholders holding less than a marketable parcel of fully paid ordinary shares
is 80.
579 fully paid ordinary shares comprise a marketable parcel at GTN’s closing share price of
$0.865 as at 23 July 2019.
Substantial shareholders (as notified to ASX)
The number of securities held by substantial shareholders and their associates (as notified to
ASX) are set out below:
Fully paid ordinary shares
Name
of
Number
Shares
42,593,576
Viburnum Funds Pty Limited and subsidiaries and
funds
CBA and related bodies corporate
Ellerston Capital
Harbour Asset Management Limited
Renaissance Smaller Companies Pty Ltd
ICE Investors Pty Ltd
Devon Funds Management Limited
Smallco Investment Manager Limited
Quest Asset Partners
QVG Capital
H.E.S.T Australia Limited as Trustee for Health
Employees Superannuation Trust Australia
*As reported by the substantial shareholder at the time of lodgement
17,035,313
16,500,109
16,263,187
16,042,555
15,185,735
14,238,765
13,702,318
11,877,406
11,595,511
11,362,554
Current
Interest*
19.01%
Notice Date
27/06/2019
7.58%
7.4%
7.237%
7.14%
6.78%
6.34%
6.10%
5.29%
5.18%
5.06%
16/04/2019
28/02/2019
24/09/2018
18/05/2018
03/07/2019
18/05/2018
29/06/2018
04/02/2019
13/06/2019
27/12/2018
87
Twenty largest shareholders
Fully paid ordinary shares
Details of the 20 largest shareholders of quoted securities by registered shareholding are:
Rank Name
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
ANACACIA PTY LIMITED
MR WILLIAM L YDE III
BNP PARIBAS NOMS (NZ) LTD
VIBURNUM FUNDS PTY LTD
MIRRABOOKA INVESTMENTS LIMITED
BNP PARIBAS NOMINEES PTY LTD
ANACACIA PTY LTD
INVIA CUSTODIAN PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
CERTUS CAPITAL PTY LTD
CS THIRD NOMINEES PTY LIMITED
ANACACIA PTY LTD
PT VENTURES PTY LTD
COFLINK PTY LIMITED
MRS EVA XIRADIS
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
15
16
17
18
19
20
Total
Balance of register
Grand total
23 Jul 2019
%IC
101,243,774
38,364,841
21,981,506
21,222,449
7,734,045
6,278,679
4,923,556
3,603,408
3,154,715
2,500,000
2,449,524
1,275,000
850,000
511,233
450,000
450,000
412,350
391,314
345,034
315,000
300,000
218,756,428
5,243,584
45.20
17.13
9.81
9.47
3.45
2.80
2.20
1.61
1.41
1.12
1.09
0.57
0.38
0.23
0.20
0.20
0.18
0.17
0.15
0.14
0.13
97.66
2.34
224,000,012 100.00
On-market buy-back
On 25 February 2019, the Company announced the commencement of an on-market buyback of
the Company’s shares up to the lessor of A$20,000,000 in value and 22,472,064 shares.
On 20 May 2019, the Company announced that the buyback would be suspended during its
trading blackout period consistent with its Share Trading Policy. The Company intends to
recommence the buyback following the release of its full year results for FY 2019.
88
Corporate Directory
Directors
Robert Loewenthal - Independent Non-Executive Chairman
William Yde III - Chief Executive Officer and Managing Director
David Ryan AO – Independent Non-Executive Director
Corinna Keller – Independent Non-Executive Director
Company secretaries
Anna Sandham
Patrick Quinlan
Registered office
Share register
Auditor
Level 42, Northpoint
100 Miller Street
North Sydney NSW 2060
Telephone: +61 2 9955 3500
Link Market Services Limited
Level 12
680 George Street
Sydney, NSW 2000
Share registry telephone: +61 1300 554 474
PricewaterhouseCoopers
One International Towers Sydney
Watermans Quay, Barangaroo
GPO Box 2650
Sydney, NSW 2001
Stock exchange listing
GTN Limited shares are listed on the Australian Securities
Exchange (ASX code: GTN)
Website
www.gtnetwork.com.au
ABN
38 606 841 801
89