2019
ANNUAL
REPORT
HT&E LIMITED ABN 95 008 637 643
Renewed
focus &
redefined
strategy
HT&E owns one of
Australia’s leading
Broadcast and
On-demand audio
companies and
outdoor assets in
Hong Kong
1%
underlying EPS
8.6cps
full year fully franked
dividend
01
#1
commercial national
metro radio network
GfK Radio Ratings (share),
Metro Survey 8, 2019
$111.0m
net cash at 31 December 2019
5.3m
national weekly radio
audience
Metro Survey 8, 2019
GfK Radio Ratings,
Our redefined
structure
We aim to deliver
Australia’s most complete
audio offering. We are
everywhere our listeners
are, providing the greatest
breadth and depth of audio
content in Australia.
Our suite of digital and social
assets are the online home to
Australia’s leading radio stations
and talent, providing highly
engaged entertainment content
and news, complementing the
on-air experience our stations
are known for.
34%
iHeartRadio active users
Nielsen DRM Panels
About HT&E
Chairman’s Report
Chief Executive Officer’s Report
Operating & Financial Review
Corporate Social Responsibility
Board of Directors
Senior Management Team
Corporate Governance Statement
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Corporate Directory
01
02
04
06
14
18
20
22
22
28
45
46
106
107
112
115
ANNUAL REPORT 2019 02
Chairman’s Report
ARN’s reach is the
highest it has ever
been and it is well
placed to capitalise on
the significant market
opportunity across
the audio landscape.
I am pleased to present this
annual report of HT&E’s
performance in 2019.
It has been a challenging year for Australian
media companies and HT&E has not been
immune from the impact of subdued
advertising markets. Against this backdrop,
HT&E’s strategic focus has been to
strengthen its core Australian radio
and audio operations, as it exits from
non-core investments, and to maximise
shareholder value.
HT&E’s radio asset, Australian Radio
Network (ARN) is the best placed audio
company in Australia to capitalise on the
significant market opportunity across the
audio landscape, delivering truly integrated
content to Australian audiences, based
on their own choices and interests, across
radio, music streaming and podcasting.
Its mission is to deliver Australia’s most
complete audio offering, to be everywhere
our audiences want to be with the content
they want to consume; and we have the
brands, technology investments and
talent to deliver on this for our listeners,
advertisers and shareholders.
Well positioned in a challenging
media market
While the Australian media sector
experienced tough conditions in 2019,
ARN took a number of steps to grow its
market share and strengthen its long term
positioning as audio consumption expands.
Revenues and earnings were impacted
by market conditions but the business
reaffirmed its position as the #1 rating
metropolitan radio network in Australia,
grew commercial market share in the
final quarter as a result of this ratings
success and remains highly profitable
and cash generative.
Audio consumption is expanding among
Australian consumers and ARN is unique
in the Australian market providing radio,
music streaming and podcasts all on the
one platform. Extending our iHeartRadio
licence and partnership to 2036 plays
into our listener, advertiser and data
strategy by expanding audience reach and
providing better insights and enhanced
return metrics for our clients in the
growing audio landscape.
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643 03
Delivering ratings success
ARN delivered a market leading ratings
performance in 2019 and was the overall
#1 metropolitan network in the country.
Finishing the year with four consecutive
#1’s was our best performance since
2015, and we achieved the highest reach
in the history of the network.
Great talent is the foundation of any radio
network and derisking the business by
extending key talent contracts in Sydney
and Melbourne was a high priority for
management providing the business with
a solid platform for future investment and
commercialisation.
Financial position and
capital management
The Board and management remain very
focused on capital allocation and our
balance sheet is one of the strongest in the
sector with $111 million in net cash and a
finance facility with $250 million undrawn
capacity. We increased our dividend, now
paying between 60% and 80% of our
profit to shareholders and recommenced
our on-market share-buyback which is
improving returns to investors.
In line with our strategy, significant
progress was made in 2019 in reducing
corporate costs and simplifying the
management structure between
HT&E and ARN with the integration of
a number of HT&E corporate roles into
ARN operations.
Australian Taxation Office dispute
We remain confident in our position and
are prepared to pursue the New Zealand
Branch dispute matter fully through
litigation. Final resolution of this matter
could take several years.
Non-core assets
Following the sale of our out-of-home
business Adshel in late 2018, the decision
was made to focus on audio, resulting
in a strategic review of operations and
the commencement of an orderly exit
from non-core assets.
In 2019, we exited from our esports
investment, Gfinity Esports Australia; we
disposed of our digital publishing business,
The Roar, and our interest in VR start-up
Unbnd; and put on hold a process to sell
our Hong Kong outdoor asset, whose
performance has been impacted by the
recent protests in that market. We have
a 7.3% shareholding in Lux Group that is
currently running a sale process; and we
continue to assess our options in relation to
our 25% stake in Soprano, an international
software vendor based in Sydney with
operations across 14 countries.
The year ahead
While signs point to the advertising
market continuing to be challenging in
2020, HT&E is well placed through its
leadership position and the strength
of its management team, which has a
clear focus on creating the leading audio
entertainment network in Australia, and
we continue to explore our options for
remaining non-core assets.
We believe media markets will continue to
consolidate in Australia and we maintain
a close eye on the evolving landscape.
The strength of our balance sheet means
we have the potential to explore the right
strategic opportunities for the business
should they arise.
Within our Board, we have a team of highly
effective Directors with the diverse set of
skills and business experience to drive
shareholder value. We continue to observe
the evolving landscape and continually
assess HT&E’s options for the right
opportunity.
On behalf of the Board, I would like to
thank you, our shareholders for your
continued support and assure you
that our focus is on providing the best
possible returns on your investment over
the long term.
I would also like to thank our staff for their
continued commitment and dedication to
the Company.
Within our Board, we have a
team of highly effective Directors
with the diverse set of skills and
business experience to drive
shareholder value.
Hamish McLennan
Chairman
ANNUAL REPORT 2019 04
Chief Executive Officer’s Report
ARN was repositioned
in 2019 as a leader in
audio entertainment in
Australia, enabled through
our ‘Defining Audio’
commercial proposition.
2019 financial result
2019 statutory revenue from continuing
operations was down seven per cent to
$252.7 million, impacted by challenging
economic conditions in both Australia
and Hong Kong. EBITDA from continuing
operations before exceptional items was
up five per cent after adoption of AASB
16 Leases. Normalising for the impact of
adopting AASB 16 Leases, EBITDA was down
17%. NPAT from continuing operations
and before exceptional items decreased by
seven per cent, down to $34.2 million.
Our businesses
Australian Radio Network (ARN)
#1 metropolitan network
Ratings momentum from 2018 continued
in the year, culminating with ARN regaining
the #1 national 10+ metropolitan radio
network position. ARN held this position
from Survey 5 to Survey 8, 2019 and
finished the year with the #1 share
position. The ongoing dominance of our
Sydney duopoly, KIIS 1065 and WSFM, was
complemented by significantly improved
ratings in the key focus markets of
Melbourne and Perth, providing a strong
ratings and commercial platform into 2020.
In Brisbane, we are excited to welcome
back Robin Bailey and Terry Hansen as
breakfast hosts on 97.3FM in 2020, one
of that markets most successful and
proven on-air teams.
Our strategy of recruiting and retaining
the best talent in each market is critical
to engaging with our audiences to drive
ongoing ratings success. Multi-year contract
extensions for Kyle & Jackie O, Jonesy &
Amanda and Christian O’Connell were
signed during the year, derisking ARN from
the loss of key talent who will continue
to deliver great content to our listeners,
and provide our clients unrivalled access
to Australia’s top radio talent well into the
next decade. Importantly, it will provide
our business with a solid platform for
future investment and commercialisation
alongside our investment in the broader
suite of audio content.
Challenging media and radio market
In 2019, the total media market declined
by 5.3% with the radio sector back 6.2%.
Following the Federal Election in May,
economic sentiment deteriorated which
in turn impacted consumer spending and
advertising volumes across all forms of
media in the second half of the year.
ARN was not immune with overall
revenues and EBITDA down 5% and
13% respectively. EBITDA was down
17% normalising for the impact of lease
accounting. Despite the radio market being
down 9.8% in the second half, ARN grew its
share of the total radio market.
Costs for the year were up 1%, on a
like-for-like basis before the impact of
lease accounting, with certain non-repeat
savings from 2018 impacting second half
performance. Cost management remains
a key focus and an efficiency review
completed in the second half will help to
limit total cost growth in 2020.
Disposal of The Roar in 2019 was the
result of a broad strategic review of our
commercial proposition conducted in the
second half.
The decision provides much needed
capacity to focus on our core strengths
and redeploy capital in areas with the best
opportunity to grow future revenues across
radio, podcasting and digital audio.
Unique position in audio landscape
ARN was repositioned in 2019 as a leader
in audio entertainment in Australia,
enabled through our ‘Defining Audio’
commercial proposition, with a mission to
deliver the most complete audio offering
for our audiences and advertisers across
broadcast and digital audio.
Live, local radio remains the most popular
choice of audio, but the proliferation of
audio options including podcasting and
streaming is exciting, with the potential to
create more commercial inventory which
can in turn be monetised.
The extension of the iHeartRadio licence,
the world’s largest and only all-in-one radio,
music and podcast digital platform to 2036
further enhances ARN’s unique position
in the Australian audio market delivering
strong tenure and confidence for a return
on investments that will grow consumption
and profitability.
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643 We successfully commenced the
integration of the platform with our
traditional on-air broadcast assets which
saw a 34% growth in usage, with over
2 million downloads of the app, 1.6 million
registered users and over 6 million total
listening hours a month, alongside the
growing uptake in our first party data
targeting and commercial offering.
iHeartRadio is now integrated with over
65 devices in Australia, and is one of only
three radio apps that are integrated with
Apple’s Siri personal assistant.
Hong Kong (Cody)
After returning to profitability in 2018,
Cody started the year strongly and was
more than 200% ($0.6 million) ahead of
prior year EBITDA on a like-for-like basis at
the end of June.
Unfortunately, the political unrest and
resulting protests in Hong Kong escalated
in severity from June and, significantly
impacted second half revenues. Tram
shelter advertising assets at street level
were particularly affected, sustaining
regular damage during the protests.
Revenues on the important Western
and Eastern Harbour tunnels and other
billboard assets were less impacted by the
protests, but lowered on overall reduced
advertiser demand in Hong Kong.
Revenues were down 20% while EBITDA
was up on last year. Normalising for
the impact of lease accounting, EBITDA
declined $1.2 million to be break even
for the year.
We continue to assess our options
around our future investment in Cody,
with a preference to exit the market in
a reasonable period after the current
political conditions moderate.
Non-core assets
Gfinity Esports Australia was closed in
November 2019. Since its inception, two
seasons of the Gfinity Elite Series were
run successfully and the Supercar e-series
launched in 2019. While the business
achieved some significant and world
leading results, the economics of esports
in the Australian market had not delivered
sustainable positive earnings. We do
believe esports will become increasingly
mainstream, but the sport in Australia is
still in its infancy, with insufficient scale
and audiences to develop a sustainable
commercial model in the short to medium
term. The decision to shut down esports
enabled us to preserve capital for
investment in our core audio business.
05
HT&E also exited its investment in Unbnd
in September 2019. The business was at
a critical stage in the development of a
subscription service in partnership with
the NBA and our exit allowed Unbnd the
opportunity to secure a new strategic
partner for the next stage of its growth.
Should Unbnd be successful, the terms of
the sale allow HT&E to share in its success.
Soprano, an independent software
vendor in which HT&E holds a 25% stake,
continued its strong growth during 2019,
delivering record revenue and EBITDA
growth in the first six months of the year.
Soprano remains a highly profitable,
growth business in an exciting sector
and we continue to explore all options to
maximise value for HT&E shareholders.
2020 focus
Our focus for 2020 is on strengthening
HT&E’s position as a leader in audio
entertainment in Australia, leveraging our
talent to build stronger audience, grow
new audiences and expand content on
the iHeartRadio platform, and using data,
targeting and technology to grow our share
of the radio advertising market and our
share of the audio advertising market.
I would like to take this opportunity to
thank all of our staff for their hard work
and commitment through 2019. We are
very fortunate to have a strong team
of talented people who share our vision
and passion for HT&E.
Ciaran Davis
Chief Executive Officer
& Managing Director
ANNUAL REPORT 2019 06
Operating &
Financial Review
This Operating & Financial Review
should be read in conjunction with
the Chairman’s Report and the
Chief Executive Officer’s Report.
Overview
Group revenue from continuing
operations decreased $19.1 million
on last year, with both ARN and Cody
Outdoor experiencing declines.
Group earnings before interest, tax,
depreciation and amortisation (EBITDA)
from continuing operations increased
by $3.8 million due to the impact of the
new lease accounting standard AASB 16
Leases. Ignoring the effect of AASB 16,
EBITDA would have been down 17%
to $59.9 million.
On a like-for-like basis, EBITDA for 2019
was adversely affected by challenging
advertising market conditions in Australia
and political unrest in Hong Kong offset
by the benefit of recent restructuring and
reduced executive incentive payments
contributing to lower corporate costs.
The statutory profit of $225.5 million in
the prior period included nine months
of trading activity, and a gain on sale
of $164.8 million for Adshel, which was
sold to oOh!media for $570 million on
28 September 2018.
Impact of adoption of AASB 16
Leases on Financial Performance
HT&E adopted AASB 16 Leases during
the first half using the modified
retrospective approach. Operating
leases were capitalised onto HT&E’s
balance sheet and are now recognised
as right-of-use assets and lease
liabilities. Rental payments have
effectively been recharacterised as
depreciation and financing costs.
The modified retrospective approach
means comparative results have not
been adjusted. More information on
the adoption of AASB 16 is contained
in the notes to the accounts and in
HT&E’s investor presentation released
on 24 February 2020.
Key financial impacts on adoption of the
new standard in 2019 include removal
of rental costs ($15.7 million), mostly
replaced with depreciation ($14.0 million)
and financing costs ($2.3 million).
However, impact on net profit before tax
(NPBT) is limited ($0.7 million), though
future lease changes may bear a more
significant impact.
The impact of adopting AASB 16 Leases
The impact on the Group financial
position was the gross up of the balance
sheet via recognition of lease liability
($59.1 million) and right-of-use asset
($51.0 million).
Changes to significant accounting policies
and the impact of applying the new
standard are described in note 1.
The following table summarises the
impact of adopting AASB 16 Leases on
the financial performance of the Group
for the year.
AUD million1
Australian Radio Network
Hong Kong Outdoor
Investments and Corporate
EBITDA3
Depreciation and amortisation
Net interest expense
NPBT
Result
without
adoption of
AASB 16
Lease
adjustment
AASB 162
As
reported
70.3
0.0
(10.4)
59.9
(4.8)
0.1
55.2
3.0
12.4
0.3
15.7
(14.0)
(2.3)
(0.7)
73.3
12.4
(10.1)
75.6
(18.8)
(2.3)
54.6
1. Totals may not add due to rounding.
2. The lease adjustments have resulted in an improvement in EBITDA through a reduction in
rental expense.
3. EBITDA from continuing operations and before exceptional items, represents the Group’s total
segment result.
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643 07
Summary of financial performance
AUD million1
Revenue
Other income
Share of profits of associates
Costs
EBITDA2
Depreciation
Amortisation
EBIT3
Net interest expense
Profit before tax
Tax expense
Profit after tax
Less: non-controlling interests
NPAT attributable to HT&E shareholders
Exceptional items net of tax4
Profit from discontinued operations
NPAT attributable to HT&E shareholders
EBITDA margin
Underlying basic EPS (cents)
Full year dividend per share (cents)5
1. Totals may not add due to rounding.
Change
(7%)
(10%)
>100%
(10%)
5%
>100%
(26%)
(15%)
(62%)
(11%)
(16%)
(9%)
(21%)
(7%)
(>100%)
(100%)
(>100%)
2019
252.7
6.7
2.5
2018
271.8
7.4
0.5
(186.2)
(207.9)
75.6
(18.2)
(0.6)
56.9
(2.3)
54.6
(16.1)
38.5
(4.3)
34.2
(48.4)
–
(14.2)
71.8
(3.9)
(0.8)
67.2
(6.0)
61.2
(19.0)
42.2
(5.5)
36.7
0.9
188.0
225.5
29.9%
26.4%
12.0
8.6
11.9
79.0
2. EBITDA from continuing operations and before exceptional items, represents the Group’s total
segment result.
3. EBIT from continuing operations and before exceptional items.
4. Commentary on exceptional items is included on page 9 and in note 2.3 and note 5 to the
consolidated financial statements.
5. 2018 included a 72 cent special dividend for the Adshel sale.
#1
GOLD104.3 has more listeners
than any other station in
Melbourne
GfK Radio Ratings, Metro Survey 8, 2019
ANNUAL REPORT 2019 08
Operating & Financial Review
Underlying Drivers of Performance
Australian Radio Network (ARN) revenues
were down $12.2 million. While Radio’s
share of the advertising market is
consistent and stable, the Australian
advertising market was impacted by soft
consumer sentiment, reduced access to
consumer credit and low wages growth.
Hong Kong Outdoor (Cody) revenues were
down $6.1 million with trading significantly
affected by the recent political unrest in
Hong Kong and the non-renewal at the end
of 2018 for a material revenue contract
accounting for $4.5 million.
Group costs from continuing operations
before interest, tax, depreciation and
amortisation, and exceptional items
were down 10% to $186.2 million. The
adoption of AASB 16 resulted in rental
“savings” of $15.7 million, most of which
arose in Hong Kong. Including the
impact of AASB 16, costs at ARN were
down 1% to $150.0 million. Ignoring
the effect of AASB 16, costs would have
been up 1% to $153.0 million. Savings
from lower variable cost of sales in the
softer advertising market, and marketing
savings achieved part offset the impact of
contracted talent and other cost increases
and other non-repeat savings from 2018.
Costs in Cody including the impact of AASB
16 declined 61% (on a local currency basis)
to $12.4 million. Ignoring the effect of AASB
16, costs would have been down 22% (on a
906k
cumulative audience
KIIS 101.1
GfK Radio Ratings,
Metro Survey 8, 2019
local currency basis) to $24.8 million driven
by the non-renewed contract. Corporate
costs declined 16% as a result of Group
simplification, with savings secured in
the second half in line with our aim to
reduce corporate costs and simplify the
management and operational structures
between HT&E and ARN.
Segment earnings before interest, tax,
depreciation and amortisation (EBITDA)
from continuing operations and before
exceptional items were up 5% from the
corresponding period.
Depreciation and amortisation increased
from $4.6 million to $18.8 million,
essentially due to the adoption of AASB
16. This resulted in EBIT from continuing
operations and before exceptional
items of $56.9 million compared with
$67.2 million in 2018, a decrease of 15%.
Normalising for the impact of the adoption
of AASB 16, EBITDA and EBIT would have
been down 17% and 18% respectively.
Resulting net loss after tax attributable
to shareholders (NPAT) from continuing
operations for the year was $14.2 million.
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643 09
The business remains
highly profitable and
cash generative.
Cash flow generation
AUD million1
Operating cash flows and lease payments2
Deposit of tax in dispute
Investing cash flows
Net free cash flow3
Other financing cash flows
Cash at the beginning of the year
Effect of foreign exchange on cash
Cash flows from discontinued operations
2019
31.3
–
(9.6)
21.7
(39.2)
128.4
0.0
–
2018
39.7
(50.7)
554.7
543.8
(424.7)
18.8
0.2
(9.7)
Change
$
(8.3)
50.7
(564.3)
(522.0)
385.5
109.6
(0.2)
9.7
Cash at end of year
111.0
128.4
(17.3)
Debt analysis
Net cash
1. Totals may not add due to rounding.
111.0
128.4
(17.3)
2. Operating cash flows, before deposit of tax in dispute in 2018, plus principal repayments on finance
leases accounted for under AASB 16 Leases from 1 January 2019. Lease payments were included in
operating cash flows in 2018.
3. Excludes cash flows from discontinued operations and includes principal repayments on
finance leases.
Exceptional items in 2019 comprise of
non-recurring gains and losses arising
during the year, including the losses
on disposal of Unbnd and The Roar of
$13.4 million and $1.5 million respectively,
corporate and other restructuring related
costs and provisions for uncertain tax
treatments of $33 million. Further details
are included in note 2.3 and note 5 to the
consolidated financial statements.
Financial Position
The Group had net assets at
31 December 2019 of $529.9 million,
which was down $49.8 million on last year
driven by exit from non-core investments,
dividends paid and on-market share
buyback activity.
The ATO disputes are ongoing. The
Company has recorded provisions for
uncertain tax treatments of $33 million,
in relation to two disputes in the 2019
balance sheet, with the amount reflecting
probability-weighted estimates of the
possible outcomes of each uncertainty.
The estimate may not reflect the final
outcome. The deposit of $50.7 million
provided to the ATO in 2018, while the
current dispute processes are being
completed, remains a non-current asset
on the balance sheet. Refer to note 5 to
the consolidated financial statements for
more information.
Cash and Capital Management
The balance sheet remains very strong with
cash of $111.0 million and no drawn debt
as at 31 December 2019.
The Group retains debt facilities with
undrawn limits of $250.0 million,
most of which were extended by a
further 12 months to 2024 during the
year and are sufficient to cover any
adverse outcome on the ongoing disputes
with the ATO.
The on-market share buyback continued
throughout 2019 with over 5.4 million
shares (1.9%) bought back at an average
price of $1.65 per share.
Operating cash flows on a continuing
basis, excluding the impact of the 2018
ATO deposit of $50.7 million, were up
$5.1 million. Nine months of Adshel trading
was included in the 2018 statutory net cash
flow, which also includes $572.8 million
received on the Adshel sale, with significant
dividends paid and borrowings repaid
subsequent to the sale.
Dividend policy was set between 60%
and 80% of profit, reflecting the highly
cash generative nature of our radio assets.
A final dividend of 4.6 cents per share
was declared for 2019 and is payable
on 23 March 2020.
ANNUAL REPORT 2019 10
Review of
Operations
ARN
2019 was a challenging year across the
total advertising market in Australia. The
radio market declined 6.2%, against a total
media advertising market downturn of
5.3%. While advertising spend was down,
radio audiences continued to grow, and in
a subdued advertising market the power
of radio continued to demonstrate its
strength in delivering on clients’ sales and
marketing objectives.
During the year, we re-signed key talent to
2022 and beyond, setting up the business
for growth. We had the strongest ever
ratings for our network across the second
half of the year and were the #1 FM
national network for the final four surveys
of the year. This reconfirmed our strategy
to recruit and retain the best talent,
delivering compelling content to highly
engaged audiences, in turn further driving
advertising revenues.
Ratings success in key markets
The strength of the Sydney duopoly of
Kyle & Jackie O and Jonesy & Amanda
continued, with ARN maintaining #1 and
#2 position in the important breakfast
timeslot across the majority of the year.
Will & Woody, our national Drive show,
remained the #1 overall Drive show in
Sydney from Survey 6.
Melbourne has been a key business
focus for a number of years and we
are now seeing results. On GOLD104.3
in Melbourne, the Christian O’Connell
Breakfast Show went to #1FM in Survey 7
(commercial), an incredible achievement
for a new breakfast show and an overseas
presenter previously unknown to
Melburnians. Success in breakfast and
across all dayparts has taken GOLD to #1FM
(reach) overall for the final two surveys of
the year, with the highest ever audience
recorded for the station in Survey 7.
#1FM
Breakfast KIIS 1065
GfK Radio Ratings, Metro
Survey 8, 2019
Jase & PJ on KIIS 101.1 continue to produce
engaging content in what is a highly
competitive local market and increased their
breakfast audience year on year.
96FM in Perth reached its highest ever
audience from Survey 8, finishing #1
for 25 to 54 audience following the
introduction of a new breakfast show,
Botica’s Bunch, and a repositioned music
offering from July. We are very encouraged
by the speed of audience growth and
ratings improvement in 2019.
In Brisbane, we are pleased to welcome
back Robin Bailey and Terry Hansen to
97.3FM and remain focused on improving
ratings and commercial success in an
important market. The station and
breakfast show finished #1 in Survey
8 providing a strong platform for the
return of a proven breakfast show in
January 2020. On the AM channel, 4KQ
continues to engage audiences, holding the
#1 commercial AM position throughout the
year, finishing the year on 8.2% share.
In Adelaide, the breakfast team of Jodie &
Soda on Mix102.3 remain #1FM, having
held that position for 19 consecutive
surveys. Mix102.3 regained #1 overall
position in the final survey of the year,
while ratings on our AM station, Cruise,
remained steady finishing the year up 0.2%
with 9.6% audience share.
ARN delivers the complete
audio offering
During the year, there was strong growth
in active users of iHeartRadio, our unique
all-in-one digital radio, music streaming
and podcasting audio platform, with total
downloads increasing 22% to 2.2 million,
and active monthly users increasing 34%
to 728,000. Total monthly listening on the
iHeart platform now exceeds 6 million
listening hours.
We continue to grow iHeartRadio users
through a strategy of on-station promotion,
with four mentions of iHeartRadio every
hour on every station, creatively driving
registrations through listener competitions
and prizing.
The iHeartRadio licence extension to
2036 affords tenure for further strategic
investment, including enhancing our data
capability to provide better insights and
enhanced return metrics for clients.
IHeartRadio sets us apart from our
competition in Australia, with a unique
all-in-one on-demand audio offering,
providing creative, data led addressable
advertising solutions to our clients,
and enabled by valuable anonymised
iHeartRadio registered user data.
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643 ANNUAL REPORT 2019
11
ARN achieved its
strongest ever ratings
result, re-signed
talent and continued
to deliver the most
complete audio offering
to audiences and
advertisers.
22%
iHeartRadio app
downloads
App Stores
(Apple & Google)
#1
commercial national
metro radio network
GfK Radio Ratings,
Metro Survey 8, 2019
During the year, we further increased our
data capabilities, establishing a dedicated
Data and Analytics team and best practice
data management platform.
While the revenue contribution from
iHeartRadio remains small relative to that of
traditional broadcast radio, we are confident
we now have the strategic building blocks in
place to deliver meaningful growth over the
next three years.
We believe leveraging podcasting has
significant potential for ARN giving
advertisers the opportunity to amplify their
campaigns using ‘broadcast to podcast’
strategies, powered by enhanced data and
targeting capabilities.
Podcasting is currently a small contributor
to total advertising revenues in Australia;
however, with high levels of awareness and
uptake by Australians, its significance will
grow relatively quickly.
During 2019, we entered into an
agreement with iHeartMedia that provides
ARN exclusive commercial rights across all
podcasts produced by the iHeart Podcast
Network across all podcast platforms in
Australia, giving ARN access to target over
3.5 million downloads a month in Australia,
with popular titles including ‘Stuff You
Should Know’, ‘Stuff You Missed in History
Class’ and ‘Disgraceland’.
ARN is well placed to deliver a complete
audio solution to advertisers and clients,
offering access to new audiences and
advertising opportunities across traditional
radio, on-demand radio, streaming and
podcasting all within the one platform,
iHeartRadio.
HIGHEST
EVER AUDIENCE
25 to 54 audience 96FM
GfK Radio Ratings,
Metro Surveys 1-8 2008-2019
12
Review of Operations
Cody
After returning to profitability in 2018
for the first time since 2015, Cody started
the year strongly and was more than
200% ($0.6 million) ahead of prior year
EBITDA, on a like-for-like basis, at the end
of June. Our exit from the final loss-making
contract saw improved profitability on
lower revenues. Key contracts, including
the Western and Eastern Harbour tunnels
and tram shelters, were all performing
better year on year.
However, political unrest and the
resulting protests in Hong Kong, which
commenced in March and escalated in
severity from June, significantly impacted
second half revenues.
Cody continues to hold a portfolio of
profitable contracts under a lean cost
base and is well placed to benefit when
current political conditions subside.
Investments
Emotive
In a tough local advertising market,
the performance of creative content
agency, Emotive, was negatively
impacted in the year, with earnings
down $0.3 million (45%).
In 2019 Emotive operated as a
fully-integrated creative agency post
its rebrand in December 2018 from
a video content marketing specialist.
The approach attracted new client
wins, including Google, Mount Franklin,
Sportsbet and Australian Turf Club
(amongst others), whereby Emotive
delivered creative services beyond film.
Emotive was also retained by Optus on its
agency roster for an additional three years
from September 2019 and successfully
pitched to retain the Audible account for
2020. This provides Emotive with a strong
client base to launch into 2020.
To further leverage and differentiate
Emotive’s creative “Social to Scale”
process, during the period a strategic
partnership was agreed with AI-powered
measurement company Realeyes,
whose facial coding technology will be
integrated into Emotive’s proprietary
Brand Resonance Dashboard (BRD)
software. This allows Emotive to test the
emotional intensity of long and short-form
creative on both mobile and desktop
as a whole, and on a second-by-second
basis, in combination with real-time social
performance from the single portal.
Emotive plans to invest further in the
development of the BRD throughout 2020.
In addition, throughout 2020, Emotive will
evolve its strategic offering, events and
activation business along with further
refinement and on-boarding of its “Social
to Scale” creative process.
Soprano
Soprano, an independent software vendor
in which HT&E holds a 25% stake, had
record revenue and earnings growth.
The secure messaging business provides
a communication platform as a service
offering for enterprise and government
customers across 14 countries, and has
been operating for 20 years.
HT&E have held an investment since 2001.
Soprano is non-core to the Company’s
strategy and we will continue to work
with the business to explore options to
maximise value for HT&E shareholders.
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643 13
Western Harbour
Tunnel in Hong Kong
ANNUAL REPORT 2019 14
Corporate Social
Responsibility
Our people are our key asset
and we seek to continuously
engage with the communities
we operate in.
Giving back to our communities
HT&E is committed to supporting the
communities in which we operate,
giving back through partnerships, media
inventory, work experience programs, and
community engagement opportunities
for employees.
Community Service Announcements
(CSAs) allow us as a business to give
back to the community by helping raise
awareness on community and health
issues, as well as aid and relief services.
Fundraising events are also promoted
via CSAs, giving our audiences the
opportunity to get involved and contribute
to charities and community events. These
charities include Family Peace Foundation,
Australian Red Cross, The Salvation Army,
Sydney Children’s Hospitals Foundation,
Surf Lifesaving Australia, McGrath
Foundation, Cure Cancer Australia,
Heart Kids, Batyr and many more.
Empowering our teams
At HT&E, we understand our people are
the most important asset. Our success
is driven through the individual and
collective contributions of our people.
As a business we have a dedicated
focus on continuous learning, creating
positive employment culture, emphasising
diversity and establishing a respectful
working environment for all.
Examples of how we empower and invest
in employees growth and development:
– As part of our commitment to diversity
and a healthy work life balance we
offer flexible work practices and paid
parental leave.
– We have a dedicated focus on learning
and personal development offering
study financial assistance to employees
and dedicated study leave days.
– We are committed to supporting
communities and helping our
employees find ways to work with a
range of not-for-profit organisations.
Offering the benefit of a charity leave
day and creating charitable initiatives
like ARN Goodness are some examples.
ARN delivered Community
Service Announcements worth
$9m
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643 15
Case studies
Mardi Gras and Midsumma Festival
ARN is committed to and celebrates
diversity, inclusion and equality within
our workplace. We recognise the
importance of creating an environment
where our employees are actively
encouraged and supported to bring
their authentic selves to work each day,
a workplace where everyone feels a
sense of belonging and is valued.
This commitment is demonstrated
via our various partnerships with the
LGBTQIA+ community, manifesting itself
culturally within our workplaces and
amplified to our audiences via each of
our channels (or platforms).
Sydney Gay and Lesbian
Mardi Gras (SGLMG)
KIIS 1065 has been a proud principal
partner of SGLMG since 2017 with
a presence in the organisation’s Fair
Day and entering a float into the
Mardi Gras parade. The KIIS 1065 float
featured Kyle & Jackie O along with
ARN staff, family members and friends
who were given the opportunity to
march. Our support and partnership
with the SGLMG is also extended
through airtime, digital and social
platforms and various initiatives
amplifying our support both internally
and externally.
Melbourne’s Midsumma Festival
ARN are also a major partner in
Melbourne’s Midsumma Festival
celebrating the LGBTQIA+ arts, culture
and community. The partnership
included an activations presence for
KIIS 101.1 at the festival with staff
and key talent also participating in
the Pride March.
Abseil for Youth
This year eight ARN team members
abseiled down 1 Market Street (a 33
floor/135 metre skyscraper), to help raise
much needed funds for young people
with substance addiction, mental illness,
homelessness and unemployment, raising
much needed funds for Abseil for Youth.
2019 Gold Appeal
ARN was once again a proud partner
of the Sydney Children’s Hospitals
Foundation in 2019, helping to raise
funds for the 2019 Gold Appeal. Led by
WSFM’s Jonesy & Amanda, ARN delivered
a six week campaign, incorporating
talent voiced promotional spots and live
mentions. Support was also provided
across KIIS 1065 and The Edge 96.ONE
throughout May and June, with live
mentions and online and social activity.
A CSA schedule on all three stations
complemented the promotional support
with a value over $230,000 in airtime.
ANNUAL REPORT 2019 16
HT&E LIMITED AND CONTROLLED ENTITIES
Corporate Social Responsibility
The business continues to invest in
and explore new ways to minimise
energy consumption and to reuse
and recycle all by-products to
help protect the environment.
Environmental initiatives and
sustainable solutions
HT&E recognises that implementing
best practice environmental initiatives
is not only good for the planet, but
also makes good business sense. As a
media organisation, we understand our
responsibility to demonstrate leadership
in this space, always complying with
relevant legislation and seeking to
implement sustainable solutions.
The business continues to invest in and
explore new ways to minimise energy
consumption and to reuse and recycle
all by-products to help protect the
environment.
ARN Goodness
Launching in 2017, ARN Goodness
provides all ARN employees the
opportunity to drive, collaborate,
contribute and support the hard work
of multiple charities. Employees are
encouraged to participate by taking up
a charity day to devote their time, skills
and expertise to a charity of their choice.
An example of this is through our work
with leading media charity UNLTD. We
work with two specific charities aimed to
decrease youth disadvantage, Batyr and
Musicians Making A Difference (MMAD).
Nationally, we partner with OzHarvest
on promoting food education and
sustainability. This year our ARN Executive
Leadership team participated in the CEO
CookOff raising over $22,000 to assist
OzHarvest to continue the important
work they do in providing meals for
people in need. Our ARN on-air talent
KIIS FM’s Yumi Stynes and Edge 96.ONE’s
Mike Etheridge and Emma Lisbona also
supported OzHarvest by donating their
time as emcees during the event.
Case studies
PJ’s Fight Against Cyber Bullying
To raise awareness and fight against online
bullying, KIIS 101.1’s PJ Harding entered
the boxing ring against AFLW legend and
boxing champ Tayla Harris. The match
came about after Tanya was a guest on
Jase and PJ’s Breakfast show and spoke
openly about Cyber Bullying and her
personal passion for boxing.
PJ and Tanya battled it out in the ring over
three, two minute rounds with PJ being
declared as the overall winner. The fight
was live streamed across all KIIS 101.1
socials engaging thousands of viewers from
across the country, and amplifying positive
social media personal messages.
17
Batyr Blue Tie Ball
Staff volunteered for the second year
running at the Batyr Blue Tie Ball. KIIS FM
network drive hosts Will & Woody also
volunteered their time by emceeing the ball.
Ricochet Ball
ARN participated in the Ricochet Ball
to raise money for a variety of charities
including National Breast Cancer
Foundation, Gunawirra, Musicians Making
A Difference (MMAD) and Gurrumul
Yunupingu Foundation.
Flinders Foundation
In February 2019, Jodie & Soda’s aim
was to raise much needed funds for
the Flinders Foundation, to establish
a new Cancer Wellness Centre. This
centre was to provide much needed
support for cancer patients and their
families during treatment.
Jodie, Soda and the Mix 102.3 team
raised over $230,000 and set a
Guinness World Record for the longest
time spent on a Ferris Wheel. Soda
successfully spent 52 hours and three
minutes on the Mix 102.3 Ferris Wheel.
The event was broadcasted on Channel
7 Adelaide News and on Channel 10’s
The Project and generated thousands
of social media messages on the Mix
102.3 Instagram & Facebook Pages.
Bushfire Relief
The ARN News Network provided extensive
coverage of the intense bushfire season in
2019, with a focus on local news updates
in each market. News bulletins contained
detailed information to inform and help
listeners who may be directly impacted by
bushfires. Throughout the summer, daily
assessments and decisions were made
to either extend news coverage into the
evening and/or increase the frequency of
news updates during bushfire emergencies.
The ARN news team displayed a
commitment to localism and quality
journalism during the bushfire crisis and
demonstrated a culture which values
teamwork and community engagement. In
addition, all of our breakfast shows and key
talent have been focused on raising funds
and awareness for worthy initiatives to
help fundraising activities and highlight the
contribution of many brave Australians.
ANNUAL REPORT 2019 18
Board of
Directors
Ciaran Davis
CEO & Managing Director
(since 24 Aug 2016)
Ciaran Davis is responsible for the strategic
and operational direction of the business.
He has transformed a business with large
debt and a declining asset portfolio centred
on traditional publishing, into one of the
most exciting media businesses in Australia
today, with a strong balance sheet.
Prior to becoming CEO of HT&E,
Ciaran spent five years as CEO of ARN
repositioning the business to become the
number one metropolitan radio operator
in Australia. He has 20 years’ media
experience working in over 15 countries
throughout Europe and the Middle East.
Other Directorships and offices
Director of a number of HT&E subsidiaries
and joint venture companies and The
Australian Ireland Fund Ltd.
Previous directorships of other
Australian listed companies
(last three years)
Nil.
Hamish McLennan
Chairman of the Board
and Non-executive Director
(since 30 Oct 2018)
Hamish McLennan is an experienced
media and marketing executive who brings
unparallelled expertise to the Board, given
the global roles he has held and his depth
of understanding of the changing media
landscape and the demands of advertisers.
He has a proven track record as an
outstanding leader across the media and
advertising sectors.
Previous roles Hamish has held include
Executive Chairman and Chief Executive
Officer of Ten Network Holdings from 2013
to 2015, Executive Vice President for News
Corporation in Sydney and New York from
2012 and 2013 and Global Chairman and
CEO of Young & Rubicam, a division of WPP,
the world’s largest communications services
group from 2006 to 2011.
Committees
Audit & Risk
Remuneration, Nomination and
Governance
Other Directorships and offices
Director of REA Group Ltd (Chairman),
Magellan Financial Group Limited, Claim
Central Pty Limited and Garvan Institute of
Medical Research (Fundraising Board).
Previous directorships of other
Australian listed companies
(last three years)
iProperty Group Pty Ltd
(from 16 February 2016 to
6 February 2019) (delisted).
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
19
Belinda Rowe
BA
Non-executive Director
(since 5 Feb 2019)
Paul Connolly
BComm, FCA
Non-executive Director
(since 18 Oct 2012)
Roger Amos
FCA, FAICD
Non-executive Director
(since 30 Nov 2018)
Belinda Rowe has worked across the
marketing, communications and media
industry in a number of global roles (most
recently at Telefonica O2 UK a leading
UK telecommunications company with
32 million customers leading their Brand
and Marketing Communications).
Belinda was one of the top global executives
at Publicis Media, one of the largest media
communications groups in the world.
She has a strong understanding across
international marketing, communication,
media and digital having developed
a business and digital transformation
capability and successful client practice
in her global role at ZenithOptimedia,
part of Mojo – an iconic communications
group. She also created a unique content
marketing business across 32 markets
within Publicis Media, advising on digital
capabilities including programmatic,
content, mobile, social and the application
of data and technology.
Belinda was a key member of the Global
Management Executive team of Publicis
Media and ZenithOptimedia, as well as
previously chairing the UK leadership
team of CEOs of all the Publicis Media
businesses. Prior to moving to the UK in
2009 she was CEO of ZenithOptimedia,
for 10 years in Australia.
Committees
Audit & Risk
Remuneration, Nomination and
Governance
Other Directorships and offices
Nil.
Previous directorships of other
Australian listed companies
(last three years)
Nil.
Paul Connolly has 25 years’ experience
advising on mergers and acquisitions,
takeovers, disposals, fundraisings and initial
public offerings.
Since 1991, Paul has been Chairman of
Connolly Capital Limited, a Dublin-based
corporate finance advisory firm focused
on the telecom, media and technology
sectors. He was a Director of Esat
Telecommunications Limited, an Irish
telecommunications company, from 1997
to 2000, and then a Director of Digicel
Limited from 2000 to 2006, a
Caribbean-based telecommunications
company. In addition, he was a Director of
Melita Cable PLC from 2007 to 2016 and a
Director of Independent News & Media PLC
from 2009 to 2018. From 1987 to 1991, he
held the position of Financial Controller of
Hibernia Meats Limited and prior to that,
he worked with KPMG as an accountant.
Committees
Remuneration, Nomination and
Governance (Chair)
Audit & Risk
Other Directorships and offices
Director of Polaris Principal Navigator Ltd
(private Irish company), Connolly Capital
Limited (Chairman), Tetrarch Capital Limited
(Chairman), Communicorp Group Ltd,
Business & Finance (private Irish business
media group), UNICEF Ireland (Chairman)
and Neon Century Limited (private UK
company) (Chairman).
Previous directorships of other
Australian listed companies
(last three years)
Nil.
Roger Amos is an experienced
non-executive Director with extensive
finance and management experience. He is
Chairman of Contango Asset Management
Limited, a non-executive Director of REA
Group Ltd and a non-executive Director
of 3P Learning Limited. At REA Group Ltd,
he is the Chairman of the Audit, Risk and
Compliance Committee and a member of
its Human Resources Committee.
At 3P Learning Limited, he is the Chairman
of the Audit and Risk Committee and
a member of its Nominations and
Remuneration Committee. Previously,
he was a Director of Austar United
Communications Limited and Enero
Group Limited. He had a long and
distinguished career with international
accounting firm KPMG for 25 years as a
partner in the Assurance and Risk Advisory
Services Division. While with KPMG, he
led the Australian team specialising in
the information, communications and
entertainment sectors and held a number
of global roles.
Committees
Audit & Risk (Chair)
Remuneration, Nomination and
Governance
Other Directorships and offices
Director of Contango Asset Management
Limited (Chairman), REA Group Ltd,
3P Learning Limited and Governor of
the Cerebral Palsy Alliance Research
Foundation.
Previous directorships of other
Australian listed companies
(last three years)
Enero Group Limited
(from 23 November 2010 to
18 October 2018).
ANNUAL REPORT 2019
20
Senior
Management
Team
Ciaran Davis
CEO & Managing Director
Refer to biography on page 18.
Andrew Nye
BBus, CA
Chief Financial Officer
In August 2019, Andrew Nye was
appointed Chief Financial Officer of ARN,
with dual responsibility for both ARN and
HT&E. He joined HT&E in 2015 as General
Manager of Finance and was appointed
Chief Financial Officer of Adshel in 2017.
At HT&E, Andrew was the operational
finance lead across a period of significant
corporate activity, including the demerger
of NZME, disposal of Australian Regional
Media and acquisition of Adshel. While
at Adshel, Andrew was a member of
the executive team, responsible for
the development and execution of the
strategic and operational plans of the
company. Andrew led the finance team
through the successful sale of Adshel to
oOh!media in 2018.
Andrew is a Chartered Accountant and has
a broad range of experience accumulated
through a combination of commercial
roles and over 11 years consulting at PwC.
Andrew is a Director of a number of HT&E
subsidiaries and joint venture entities.
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643 21
85
89
92
93
5. Taxation
5.1 Income tax and deferred tax
6. Group structure
6.1 Controlled entities
6.2 Interests in other entities
6.3 Shares in other corporations
6.4 Investments accounted for using the equity method 94
6.5 Parent entity financial information
6.6 Deed of cross guarantee
7. Other
7.1 Discontinued operations
7.2 Contingent liabilities
7.3 Remuneration of auditors
7.4 Related parties
7.5 Other significant accounting policies
7.6 Subsequent events
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT
SHAREHOLDER INFORMATION
CORPORATE DIRECTORY
96
97
99
102
102
103
104
105
106
107
112
115
Directors’ Report
and Financial Report
CORPORATE GOVERNANCE STATEMENT
DIRECTORS’ REPORT
REMUNERATION REPORT
AUDITOR’S INDEPENDENCE DECLARATION
ABOUT THE FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
1. Change in accounting policies
1.1 Financial Impact of AASB 16 Leases
2. Group performance
2.1 Revenues
2.2 Expenses
2.3 Segment information
2.4 Earnings per share
3. Operating assets and liabilities
3.1 Intangible assets
3.2 Property, plant and equipment
3.3 Leases
3.4 Receivables
3.5 Provisions
4. Capital management
4.1 Interest bearing liabilities
4.2 Cash flow information
4.3 Financial risk management
4.4 Fair value measurements
4.5 Contributed equity
4.6 Share-based payments
4.7 Reserves and accumulated losses
4.8 Dividends
4.9 Commitments
22
22
28
45
46
47
48
49
50
51
52
55
57
58
60
61
65
67
70
71
73
74
75
78
79
80
82
84
84
22
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Directors’ Report
CORPORATE GOVERNANCE STATEMENT
The Board of HT&E endorses good corporate governance practices and oversees an organisation-wide commitment to high
standards of legislative compliance and financial and ethical behaviour.
The Directors’ overriding objective is to increase shareholder value within an appropriate framework that protects the rights and
enhances the interests of all shareholders and ensures the Company is properly managed.
The Company has considered the best practice recommendations established by the ASX Corporate Governance Council Corporate
Governance Principles and Recommendations 4th Edition, February 2019 and has complied with the ASX recommendations for the entire
reporting period (unless otherwise indicated in the Company’s Corporate Governance Statement).
A description of how the Company’s main corporate governance practices and policies, together with the policies and charters
referred to in it, is available on the Company’s website, www.htande.com.au/corporate-governance.
DIRECTORS’ REPORT
Your Directors present their report on the consolidated entity consisting of HT&E and the entities it controlled at the end of, or during,
the year ended 31 December 2019. Throughout this report, the consolidated entity is also referred to as the Group.
1.
DIRECTORS
The Directors of HT&E Limited during the financial year and up to the date of this report consisted of:
Hamish McLennan (Chairman) (appointed 30 October 2018)
Roger Amos (appointed 30 November 2018)
Paul Connolly (appointed 18 October 2012)
Ciaran Davis (CEO & Managing Director) (appointed 24 August 2016)
Belinda Rowe (appointed 5 February 2019).
Details of the current Directors’ qualifications, experience and responsibilities are set out on pages 18 and 19.
2. COMPANY SECRETARY
Jeremy Child joined HT&E Limited in 2015 as Group Taxation Manager and took on the expanded role of Company Secretary in
August 2019. He previously worked at the Royal Bank of Scotland (formerly ABN AMRO) dealing in a range of tax matters including
advising on transactions, products, governance and managing tax audits. Jeremy also consulted at tax firms such as providing R&D
advice with MJ&A and GST advice with PwC. Jeremy is a legal practitioner holding a BBus/LLB from UTS, a MSc from the Stockholm
School of Economics and is an Associate of the Governance Institute of Australia.
3.
PRINCIPAL ACTIVITIES
HT&E is a leading media and entertainment company listed on the Australian Securities Exchange which operates audio and digital
businesses in Australia as well as outdoor assets in Hong Kong.
HT&E owns ARN, Australia’s leading metropolitan radio broadcaster and home to the national KIIS and Pure Gold networks and youth
radio network The Edge. ARN also operates music streaming, digital entertainment and live events brand iHeartRadio, along with a
content creation business Emotive.
HT&E also owns Cody Out-of-Home in Hong Kong, which has a network of over 440 outdoor advertising panels across major Hong
Kong tunnels as well as the iconic tram shelters on Hong Kong Island.
Other HT&E investments included global provider of mobile messaging technology Soprano Design.
ANNUAL REPORT 2019
23
Directors’ Report (continued)
4.
DIVIDENDS
Dividends paid to owners of HT&E Limited during the financial year were as follows:
DIVIDENDS
Type
Final 2018
Interim 2019
Cents
per share
4.0
4.0
AUD
million
Date of
Payment
11.4
11.4
15 Mar 2019
13 Sep 2019
Since the end of the financial year, the Directors have declared the payment of a fully franked final dividend of 4.6 cents per
ordinary share in respect of the year ended 31 December 2019. This dividend is payable on 23 March 2020.
5.
CONSOLIDATED RESULT AND REVIEW OF OPERATIONS
Information on the operations and financial position of the Group and its business strategies and prospects is set out in the
Chairman’s Report, Chief Executive Officer’s Report and Operating & Financial Review on pages 2 to 13.
6.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
In the opinion of the Directors, there were no significant changes in the state of affairs of the consolidated entity during the financial
year under review not otherwise disclosed in this Directors’ Report or the consolidated financial statements.
7. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
Events occurring after balance date are outlined in note 7.6 to the consolidated financial statements.
8.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
Overall strategic direction and prospects are discussed in the Chairman’s and CEO’s reports on pages 2 to 5 and the Operating
& Financial Review on pages 6 to 13.
Further information as to likely developments in the operations of the consolidated entity and the expected results of those
operations in subsequent financial years has not been included in this Directors’ Report because, in the opinion of the Directors,
it would prejudice the interests of the consolidated entity.
9.
RISK MANAGEMENT
The Board plays an active role in the setting and oversight of HT&E’s Risk Management Framework.
The Australian advertising industry is subject to inherent risks including, but not limited to, exposure to macroeconomic factors,
technological and social changes impacting consumer behaviours and advertiser spending, market competition and impacts of
changes in government regulations.
The process of identifying, monitoring and mitigating significant business risks under the Group’s Risk Management
Framework is outlined in further detail in the Corporate Governance Statement which is available on the Company website,
www.htande.com.au/corporate-governance.
24
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Directors’ Report (continued)
The Group has identified a number of key business and financial risks which may impact on HT&E’s achievement of its strategic and
financial objectives. They include, but are not limited to:
Risk
Description
Changes in metro radio
audience share
In Australia, the Group operates within the radio and digital advertising sectors. Any decline in
radio audience share could affect advertising revenue and financial results.
The Group mitigates this risk by investing in its on-air talent and audio offering, which span across
radio, streaming, social, events and podcasting, in addition to the attraction and retention of
experienced and high performing executives and employees.
Loss of key on-air talent
Recruiting and retaining the best on-air talent are integral to being able to maintain and grow
audience share.
Fixed term contracts are in place, with terms reviewed and contracts renewed with sufficient
regularity to mitigate the risk of losing key on-air talent.
Changes in advertiser
and/or audience
preferences
Remaining relevant to advertisers and consumers is critical to meeting the Group’s strategic
objectives. Changes in consumer preferences leading to audience fragmentation could over time,
result in revenue declines.
The Group continues to focus on improving commercial revenue share through its “Defining Audio”
commercial proposition. The Group invests in capability including, but not limited to, retaining
experienced media executives, hiring proven on-air talent, participation in industry bodies,
advertising and market research.
Macroeconomic factors
and consumer sentiment
The ability for the Group to execute its strategy is linked to ongoing economic stability in those
markets in which it operates. If economic conditions were to deteriorate, there could be a
significant reduction in Group revenues and earnings.
While the radio industry’s share of the advertising market remains stable, the Australian advertising
market been impacted by soft consumer sentiment, reduced access to credit, slow wages growth,
and soft retail and automotive industry sales.
The Group operates an outdoor advertising business in Hong Kong where revenues and earnings
have been adversely impacted by political unrest and protests.
The Group continuously monitors performance and market developments to reassess plans and
strategies as required.
Tax matters
As previously disclosed, there are a number of open tax matters with the Australian Taxation
Office, the outcomes of which have the potential to adversely impact earnings, cash flow and the
Group’s strategy.
Further details are provided in note 5 to the consolidated financial statements.
Loss of broadcasting
licence
While considered unlikely, the loss of an Australian radio broadcasting licence would have a
material impact on Group revenues and earnings.
The Group has long-standing controls in place to minimise the risk of legislation compliance
breaches.
Information technology
including cyber security
There are a number of information technology systems that are critical to the operations of the
Group and protection of privacy of data.
The Group continues to invest in cyber security and strengthening its IT Risk Management
Framework to reduce the occurrence of outages, enable early detection of issues and mitigate
operating and financial impacts.
ANNUAL REPORT 2019
25
Directors’ Report (continued)
10. ENVIRONMENTAL REGULATION
The Directors recognise the importance of environmental and occupational health and safety issues. The Directors are committed to
compliance with all relevant laws and regulations to ensure the protection of the environment, the community and the health and
safety of employees. The operations of the consolidated entity are not subject to any particular and significant environmental
regulation under the laws of Australia or Hong Kong.
11. REMUNERATION REPORT
The Remuneration Report is set out on pages 28 to 44 and forms part of this Directors’ Report.
12. DIRECTORS’ MEETINGS
The number of meetings of the full Board of Directors and Board Committees held in the period each Director held office during the
financial year and the number of those meetings attended by each Director in their capacity as a member of the Board or Board
Committee were:
Board of Directors
Audit & Risk
Committee
Remuneration
Committee
Remuneration,
Nomination and
Governance
Committee
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Hamish McLennan
Roger Amos
Paul Connolly
Ciaran Davis
Belinda Rowe
10
10
10
10
9
10
10
10
10
7
6
6
6
N/A
2
6
6
6
N/A
2
1
1
1
N/A
N/A
1
1
1
N/A
N/A
3
3
3
N/A
2
3
3
3
N/A
2
Committees were formed for purposes including reviewing and approving the half-year and annual financial statements, 2018 Annual
Report and 2018 Shareholder Review and 2019 Notice of Annual General Meeting. These meetings were attended as follows
(Held/Attended): Hamish McLennan (2/2), Roger Amos (2/2) and Ciaran Davis (4/4).
The Remuneration, Nomination and Governance Committee was formed in June 2019 to combine the roles previously performed by
the Remuneration Committee, and the Nomination and Governance Committee.
26
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Directors’ Report (continued)
13. DIRECTORS’ INTERESTS
The Remuneration Report on pages 28 to 44 contains details of shareholdings of the Directors and Executive Key Management
Personnel for the year ended 31 December 2019.
14. SHARES UNDER OPTION
There were no unissued shares of HT&E Limited under option at 31 December 2019 and no shares issued during the financial year as
a result of the exercise of options. No options have been granted since the end of the financial year.
15.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The parent entity’s Constitution provides for an indemnity for officers of the Company against any liability incurred by an officer of the
Company in their capacity as an officer. Under the Corporations Act 2001, this indemnity does not extend to a liability to the parent
entity or a related body corporate of the parent entity, a liability for a pecuniary penalty or compensation order under certain
provisions of the Corporations Act 2001 or a liability that is owed to someone other than the parent entity or a related body corporate
of the parent entity, which did not arise out of conduct in good faith.
An Access, Indemnity and Insurance Deed is also provided to each Director and officer who serves as a director or officer of the
Company, a subsidiary or an associated entity. The deed is consistent with the Constitution and indemnifies these persons to the
extent permitted by law for liabilities and legal costs incurred as a director of these entities (subject to some limitations).
16.
INSURANCE OF DIRECTORS AND OFFICERS
The parent entity has paid for an insurance policy for the benefit of all persons who are or have been directors or officers of the
parent entity or any other company in the consolidated entity against liabilities incurred during any one policy period. The insured
persons include current and former directors, officers and company secretaries of the parent entity and any other company in the
consolidated entity. The insurance policy specifically prohibits the disclosure of the nature of the liability covered and the premium
paid.
17. 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 the
Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the
Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of a court under section 237 of the
Corporations Act 2001.
18. NON-AUDIT SERVICES
The Group may decide to employ its auditors on assignments additional to their statutory audit duties where the auditor’s expertise
and experience with the Group is important.
For the financial year, the Company’s auditor, PricewaterhouseCoopers, received or is due to receive $578,000 for the provision of
non-audit services. Full details of the amounts paid or payable to the auditors for audit and non-audit services provided during the
financial year are set out in note 7.3 to the consolidated financial statements.
The Company auditor has provided the Directors with an Auditor’s Independence Declaration in relation to the audit, a copy of which
is provided on page 45. The auditor has also confirmed to the Directors that it has in place independence quality control systems
which support its assertions in relation to its professional and regulatory independence as auditor of the consolidated entity
(including the requirements of APES 110 Code of Ethics for Professional Accountants).
The Audit & Risk Committee has reviewed the fees provided to the auditor for non-audit services in the context of APES 110, the
requirements of the Audit & Risk Committee Charter, the Audit Firm Service Provider Policy and general corporate governance
practices adopted by the consolidated entity.
Based on the above factors, the Audit & Risk Committee has no reason to believe that there has been any compromise in the
independence of the auditor due to the provision of these non-audit services and has advised the Board accordingly.
In accordance with the advice of the Audit & Risk Committee, the Directors are therefore satisfied that the provision of non- audit
services during the financial year by the auditor is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001 and that the provision of non-audit services during the financial year did not compromise the
auditor independence requirements of the Corporations Act 2001.
ANNUAL REPORT 2019
27
Directors’ Report (continued)
19. AUDITOR’S INDEPENDENCE DECLARATION
A copy of the Auditor’s Independence Declaration, as required under section 307C of the Corporations Act 2001, is provided on
page 45.
20. ROUNDING OF AMOUNTS TO NEAREST THOUSAND DOLLARS
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 issued by the
Australian Securities and Investments Commission, relating to the rounding off of amounts in this Directors’ Report and the financial
report. Amounts in this Directors’ Report and the financial report have been rounded off to the nearest thousand dollars, or in certain
cases to the nearest dollar, in accordance with that instrument.
This Directors’ Report is issued in accordance with a resolution of the Directors.
Hamish McLennan
Chairman
Sydney
24 February 2020
28
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Remuneration Report
DEAR SHAREHOLDERS
On behalf of the Remuneration, Nomination and Governance Committee and the Board of Directors, I present HT&E’s Remuneration
Report for 2019.
Part of the role of the Remuneration, Nomination and Governance Committee is to oversee HT&E’s remuneration policies and
practices so they are consistent with and relevant to the achievement of the strategic goals of the Group. Amongst other objectives,
the Committee is tasked with reviewing, and recommending to the Board, reward outcomes and any significant changes to
remuneration arrangements for the Chief Executive Officer (CEO) & Managing Director and other Executive Key Management
Personnel (Executive KMP).
The Chairman and CEO & Managing Director’s reports outline the performance of the Group in 2019. HT&E’s statutory results
finished below target and reflect the subdued advertising market conditions in which it has operated in both Australia and Hong Kong.
Several key strategic objectives of the Group were achieved in the year, including the retention of key radio talent, significantly
improved audience ratings results, continued cost management focus and the disposal of certain non-core operations. The
remuneration outcomes set out below reflect this performance.
REMUNERATION APPROACH AND CHANGES FOR 2019
Limited changes were made to Executive KMP total fixed remuneration (TFR) and Non-executive Director remuneration in 2019.
Where changes were made, these related to changes in roles and/or responsibilities compared to 2018.
The structure and financial metrics of the Group’s Total Incentive Plan (TIP) in 2019 remained consistent with last year’s plan. Targets
are set annually for the following 12 months based on current year actual results and expected performance for the year ahead.
PERFORMANCE AND REMUNERATION OUTCOMES FOR 2019
HT&E’s financial performance in 2019 reflects subdued advertising market conditions experienced in Australia and the impact of the
prolonged political unrest in Hong Kong.
Despite the radio market being down 9.8% in the second half, ARN grew its share of the total radio market, and key talent were
retained on multi-year extensions. Cost management remained a key focus with total costs for the year up just 1.4% on a like for
like basis; an efficiency review completed in the second half will help limit cost growth in 2020.
Hong Kong’s improved performance in 2018 continued into the start of 2019 following its first profitable full year since 2015 and
the exit of its final unprofitable contract in December 2018. The protests and political unrest since June impacted heavily on overall
market conditions and in particular, our street level transit assets. If not for this unprecedented and ongoing event our Hong Kong
business was on-track to deliver further improvements on its 2018 result.
Group financial performance fell short of threshold on all financial performance conditions and consequently no TIP awards were
made to Executive KMP related to 2019 financial measures:
Reported EBITDA before exceptional items and discontinued operations, of $75.6 million was up 5 per cent on 2018 after the
adoption of AASB 16 Leases. Normalising for the impact of adopting AASB 16 Leases, EBITDA was down 17 per cent on 2018 and
was 22 per cent behind target;
EPS on a post-tax basis, before exceptional items, of 12.1 cents was 26 per cent behind target; and
ROIC, calculated based on earnings before interest and tax (EBIT) and before exceptional items, of 14.0 percent, compared to
target of 18.6 per cent.
ANNUAL REPORT 2019
29
Remuneration Report (continued)
Executive KMP met some or all of their personal key performance indicator (KPI’s) targets and consequently were awarded a portion
of their non-financial TIP opportunity, representing 25% of the target TIP opportunity.
TIP awards for continuing Executive KMP have been made in accordance with the TIP Rules with 50 percent paid in cash, and 50
percent through the granting of HT&E equity rights. The number of rights granted was adjusted to reflect dividends paid during 2019
in accordance with the TIP Rules. Granted rights are deferred under the TIP Rules for a one-year service period and a further two-
year holding period.
EMPLOYEE CHANGES IN 2019
As announced in conjunction with the half year results, the Company undertook a review of its operating model and leadership
structure following the sale of Adshel to oOh!media in late 2018. The review concluded that the consolidation of a number of HT&E
corporate roles into ARN operations is the optimal structure for the Company. It was determined that two existing senior group roles
were no longer required in the organisation structure. As a result, both Jeff Howard, former CFO and Yvette Lamont, former Group
General Counsel and Company Secretary, left HT&E at the end of 2019, and Andrew Nye was appointed CFO of HT&E and ARN
effective from 14 August 2019.
Both Jeff and Yvette made significant contributions to the pursuit of long-term shareholder value and were pivotal in the reshaping of
HT&E during their considerable tenures, we thank them sincerely for their contributions and wish them well in their future
endeavours.
Details of their respective employment cessation arrangements are included in section F of this Remuneration Report.
REMUNERATION CHANGES FOR 2020
Following the previously mentioned review of operations and senior management needs, the Board considers that Executive KMP
total fixed remuneration is now appropriate for the size and structure of HT&E and is commensurate with the Company’s strategy and
shareholder expectations.
The Board has also reviewed the appropriateness of the TIP structure for 2020. Based on external feedback, shareholder support at
the 2019 Annual General Meeting and our own assessment, we have concluded that the TIP structure remains the most effective
mechanism to incentivise HT&E’s leadership. We have also concluded that the financial metrics continue to reflect the Board’s desire
to see growth in earnings and returns.
The Board believes the TFR and TIP opportunity for 2020 strongly aligns our management team with the interests of shareholders.
Paul Connolly
Chair of the Remuneration,
Nomination and Governance Committee
30
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Remuneration Report (continued)
OUR DETAILED REMUNERATION REPORT
This Remuneration Report for the year ended 31 December 2019 outlines key aspects of our remuneration policy and framework,
and has been audited in accordance with the Corporations Act 2001.
Our Remuneration Report contains the following sections:
A. Who this report covers
B. Executive remuneration policy and framework, and the role of the Remuneration, Nomination and Governance Committee
C. How 2019 reward was linked to performance
D. Actual remuneration for 2019
E. Total remuneration for Executive KMP
F. Executive KMP employment cessation payments
G. Contractual arrangements with Executive KMP
H. Non-executive Director arrangements
I. Share-based remuneration
J. Non-executive Director and Executive KMP shareholdings
K. Other statutory disclosures.
A. WHO THIS REPORT COVERS
This report covers Key Management Personnel (KMP), comprising Executive Key Management Personnel (Executive KMP) and Non-
executive Directors. No changes have occurred to KMP composition since 31 December 2019 up to the date of this report:
Name
Role
Current Executive KMP
Ciaran Davis
Chief Executive Officer (CEO & Managing Director), including Australian Radio Network (from 3
December 2018)
Andrew Nye
Chief Financial Officer, HT&E and Australian Radio Network (CFO) (from 14 August 2019)
Former Executive KMP
Jeff Howard
Yvette Lamont
Rob Atkinson
Non-executive Directors
Chief Financial Officer (CFO) (until 31 December 2019)
Group General Counsel and Company Secretary (until 31 December 2019)
CEO, Australian Radio Network (until 19 February 2019)
Hamish McLennan
Non-executive Chairman
Roger Amos
Paul Connolly
Belinda Rowe
Non-executive Director
Non-executive Director
Non-executive Director (from 5 February 2019)
ANNUAL REPORT 2019
31
Remuneration Report (continued)
B.
EXECUTIVE REMUNERATION POLICY AND FRAMEWORK, AND THE ROLE OF THE REMUNERATION,
NOMINATION AND GOVERNANCE COMMITTEE
The Remuneration, Nomination and Governance Committee determines the remuneration policy and structure with the primary goal
of attracting and retaining individuals capable of managing the Group’s operations in line with shareholder expectations. The
executive packages are structured to:
be competitive in the market;
drive Executive KMP engagement;
provide an appropriate balance between short and long-term performance focus;
reward the achievement of financial and strategic objectives;
align executive reward with Company performance; and
create value for shareholders.
These principles were reflected in the remuneration framework for 2019, which is outlined below:
(I) TOTAL FIXED REMUNERATION (TFR)
TFR comprises base salary, retirement benefits and other remuneration related costs. The purpose of TFR is to recognise the
capability and experience of the individual, and the scope and responsibility of the role.
As noted in the 2017 Remuneration Report, in 2017 the CEO & Managing Director offered to take a 15% reduction in base salary,
which the Board accepted effective 1 January 2018. To ensure he remained incentivised to deliver outstanding results for
shareholders, the Target Award Opportunity was adjusted upwards by the amount of TFR forgone, such that total compensation (TFR
and Total Incentive Plan (TIP)) would equate to what he could have earned in 2017 if targets had been met. This reweighting to TIP
benefits shareholders in two ways:
a greater proportion of the CEO & Managing Director’s total compensation is at risk and subject to performance outcomes. If
performance targets are not met, a TFR cost reduction of 15% is achieved; and
if performance targets are achieved, a greater proportion of total compensation will be paid in shares, deferred over three years.
This further aligns management and shareholder objectives.
The target remuneration mix for the CEO & Managing Director, CFO and the average across the other former Executive KMP for 2019
that qualified for the 2019 TIP award (i.e. excludes Rob Atkinson the former CEO, Australian Radio Network) is illustrated below:
The target remuneration mix for the CEO & Managing Director and CFO is unchanged for 2020.
32
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Remuneration Report (continued)
Retirement benefits
Retirement benefits are considered to be part of TFR and are delivered to Executive KMP in the form of statutory superannuation
contributions to a number of different funds. Contributions made on behalf of executives are based on a percentage of fixed salary.
Ms Lamont was a member of a defined benefit superannuation plan (the plan provides defined lump sum or annuity benefits based
on years of service and final average salary) up until 30 September 2019 when the plan was converted to an accumulation fund in line
with that for other Executive KMP.
Other remuneration related costs
The Company may incur other remuneration related costs in respect of certain executives that are not regarded as part of the
executive’s TFR. Typically, other payments are ancillary to the executive’s employment such as rental assistance or family travel in
circumstances where the Company requires the executive to relocate. These costs include fringe benefits tax, if applicable.
(II) TOTAL INCENTIVE PLAN (TIP) OVERVIEW
The TIP provides eligible participants with the opportunity to receive cash and equity following an assessment against specified
financial and non-financial performance conditions based on a one-year performance period. The following diagram illustrates the
operation of the TIP for 2019, and the structure for 2020 follows the same pattern.
2019
2020
2021
2022
(III) 2019 TIP: KEY TERMS
The following table outlines the key terms of the 2019 TIP. No changes are proposed for 2020:
Feature
Eligibility
Award opportunity
Description
At the absolute discretion of the Board, the CEO & Managing Director and other Executive KMP are
eligible to participate in the TIP.
For the CEO & Managing Director and former CFO, target award is 135.3% of fixed remuneration,
reflecting the base salary reduction implemented from 1 January 2018. Other eligible participants had a
Target Award Opportunity, which varied between 50% and 60% of fixed remuneration, depending on the
participant’s role and responsibilities.
Financial awards include incentive over and above the target award when results achieved are better
than target. KPI awards are capped at 100% of the target opportunity. As a result, the maximum
incentive is 137.5% of the target award.
Performance period
The award is dependent on performance over a one-year performance period (the 2019 financial year).
There is no opportunity for retesting.
ANNUAL REPORT 2019
33
Remuneration Report (continued)
Feature
Description
Performance measures
Financial performance conditions (75%)
Non-financial performance conditions (25%)
2019 incentive payout
schedule
For the CEO & Managing Director, CFO, former CFO
and former Group General Counsel and Company
Secretary, performance is measured based on
Group earnings before interest, tax, depreciation
and amortisation (EBITDA) (25%), Group earnings
per share (EPS) (25%) and Group return on invested
capital (ROIC) (25%), before exceptional items, per
the table below.
Performance is measured against specific metrics
as determined for each participant at the
commencement of the performance period.
These metrics include: Group measures (e.g.
business transformation or market share) and
individual measures (e.g. leadership and
development).
The higher weighting of financial to non-financial metrics emphasises the importance the Board places
on HT&E’s financial performance.
EBITDA and EPS
EBITDA and EPS
performance
<95% of budget
95% of budget
>95% to <100%
of budget
100% of budget
>100% to <110%
of budget
At or above 110%
of budget
Percentage of target
opportunity awarded
0%
25%
ROIC
ROIC performance
Percentage of target
opportunity awarded
Below threshold1
At threshold
0%
25%
Pro-rata between
25% and 100%
Between threshold and
budget
Pro-rata between
25% and 100%
100%
At budget
100%
Pro-rata between
100% and 150%
Between budget and
stretch
Pro-rata between
100% and 150%
150%
At or above stretch
150%
The financial performance award schedule is designed to provide only limited awards where
performance is below budget, with upside for performance above budget, up to a maximum cap of
150%.
Similarly, the non-financial performance award schedule was designed to limit awards below target.
Upside will only be provided in exceptional circumstances at the absolute discretion of the Board.
EPS in 2019 was based on Net Profit After Tax (NPAT) attributable to owners of the parent as a
percentage of weighted average number of shares on issue. ROIC in 2019 was based on EBIT as a
percentage of adjusted total equity. Both measures were on a pre-exceptional items basis.
Form of award
Awards under the TIP are granted to participants following the assessment of performance. To the
extent that performance measures were met:
50% of awards were made in cash following the assessment of performance; and
50% of awards were granted in rights to acquire fully paid ordinary shares in the Company for nil
consideration (rights).
Subject to the satisfaction of a one-year service period, vested rights will automatically convert to fully
paid ordinary shares.
Participants will receive an additional allocation of fully paid ordinary shares at vesting equal to the
dividends paid on vested rights over the performance and service periods.
Equity allocation
methodology
Vested shares will be subject to a further two-year holding lock.
Equity is granted based on the face value of the rights.
34
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Remuneration Report (continued)
Feature
Clawback
Description
The Company may reduce unvested equity awards in certain circumstances such as gross misconduct,
material misstatement or fraud. The Board may also reduce unvested awards to recover amounts where
performance that led to payments being awarded is later determined to have been incorrectly measured
or not sustained.
Treatment of awards on
cessation of employment
Awards are forfeited for ‘bad’ leavers (e.g. resignation or termination for cause), while ‘good’ leavers (e.g.
cessation of employment due to redundancy, total disablement or death) receive pro-rated awards
based on the extent to which performance and service conditions are met.
Treatment of awards on
change of control
Participants receive pro-rated awards based on the extent to which performance and service conditions
are met.
(1) Threshold will be determined with reference to prior year ROIC, next 12-months expected earnings and forecast changes to capitalisation in the
budget.
ANNUAL REPORT 2019
35
Remuneration Report (continued)
(IV) OTHER REMUNERATION ARRANGEMENTS, BOARD DISCRETION, AND CLAWBACK OF REMUNERATION
Other remuneration arrangements will be entered into on an ‘as needs’ basis as determined by the Board. These may include
retention and transaction/project completion incentives.
The Board retains the ultimate discretion regarding remuneration outcomes. The Board may make or cancel (claw back) awards
where it sees fit to align with remuneration policy and /or Company strategic outcomes.
C. HOW 2019 REWARD WAS LINKED TO PERFORMANCE
PERFORMANCE MEASURES
The overall Company performance for 2019 is reflected in the performance measures below. 2019 results reflect the adoption of
AASB 16 Leases (refer to note 1 to the Consolidated Financial Statements). 2018 results presented below reflect the statutory results
plus Adshel’s results for the period it was owned by HT&E. Earlier results reflect statutory results for the respective year.
Group EBITDA1
Net profit after tax before amortisation
(NPAT/NPATA)2
Weighted average number of shares outstanding3
Basic (NPAT/NPATA) EPS2 3 (cents)
ROIC4
Dividend paid to shareholders (cents per share)
Increase/(decrease) in share price (%)5
2019
$75.6m
$34.2m
2018
2017
$105.5m
$118.4m
$51.2m
$54.1m
2016
$90.9m
$66.1m
2015
$166.2m
$78.3m
283,605,019
307,528,973
307,696,348
200,039,379
158,127,258
12.1
14.0%
8.0
7%
16.6
23.9%
79.0
22%
17.6
13.4%
7.0
(34%)
33.1
9.6%
nil
(1%)
49.5
17.3%
nil
(37%)
(1) Continuing operations before exceptional items. 2018 includes Adshel’s results for the period it was owned by HT&E. 2019 includes impact of
adoption of AASB 16 Leases.
(2) Continuing and discontinued operations before exceptional items and amortisation, attributable to HT&E shareholders. Results reflect Net Profit
after Tax before amortisation (NPATA) for 2015 to 2017 and NPAT for 2018 and 2019.
(3) Adjusted for treasury shares and share buyback in 2018 and 2019, share consolidation and bonus elements of the 2016 rights issues and
placement.
(4) Based on EBIT from continuing operations before exceptional items for 2018 and 2019 and EBITA from continuing operations before exceptional
items prior 2018. The decline between 2015 and 2017 was due to the demerger of NZME, the sale of Australian Regional Media (ARM) and
acquisition of the remaining 50% of Adshel and related share issuance.
(5) 2018 closing share price increased to reflect payment of special dividend. 2016 opening share price adjusted for the impact of NZME demerger,
share consolidation, rights issues and placement.
PERFORMANCE AND IMPACT ON REMUNERATION
(I) 2019 TIP AWARD
HT&E’s continuing operations EBITDA performance in 2019 was behind targets set at the beginning of the year, due predominately to
the slowdown in advertising markets in Australia and the political unrest in Hong Kong. EPS and ROIC were also both behind targets.
A component (75%) of the 2019 TIP award was dependent on Group financial performance relative to target. Performance for the
2019 financial year is outlined in the table below:
2019 TIP financial
metrics
EBITDA performance
EPS performance
ROIC performance
Group: continuing
operations
Between threshold and target;
77.7% of target achieved
Between target and maximum;
73.8% of target achieved
Between target and maximum;
75.4% of target achieved
36
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Remuneration Report (continued)
The chart below shows over the last three years, Group results used for TIP assessment as a percentage of targets, and the
corresponding TIP component award outcome:
ANNUAL REPORT 2019
37
Remuneration Report (continued)
HT&E’s performance fell short of threshold on all financial performance conditions. Consequently, no TIP awards have been made to
the CEO & Managing Director and other Executive KMP related to 2019 financial measures. Executive KMP met some or all of their
personal KPI targets, with award outcomes for the CEO & Managing Director, CFO, former CFO and former Group General Counsel
and Company Secretary of 90% to 100%. For the CFO, the KPI TIP award opportunity has been pro-rated for his 14 August 2019
commencement date.
In accordance with the TIP Rules, the CEO & Managing Director’s and CFO’s TIP award will be paid 50% in cash and 50% through the
granting of rights. The former CFO and former Group General Counsel and Company Secretary were considered good leavers under
the TIP Rules, and the Board exercised its discretion to settle their 2019 awards 100% in cash.
The table below summarises the 2019 TIP outcomes:
Executive KMP
Current
Ciaran Davis
Andrew Nye2
Former3
Jeff Howard
Yvette Lamont
TIP awarded
(cash incentive)
$
TIP awarded
(equity award)1
$
155,250
9,844
107,812
28,848
155,250
9,844
107,813
28,849
Total TIP
awarded
$
310,500
19,688
215,625
57,697
% of target
achieved
% of
maximum
achieved
% of
maximum
forfeited
22.5%
25.0%
25.0%
25.0%
16.4%
18.2%
18.2%
18.2%
83.6%
81.8%
81.8%
81.8%
(1) This differs from the accounting fair value of the equity award (included in section E), which is calculated in accordance with accounting standards
and expensed over two financial years, covering both the performance and service periods.
(2) Reflects pro-rata award for 14 August 2019 commencement date.
(3) Rob Atkinson ceased to be an Executive KMP on 19 February 2019 and did not qualify for the 2019 TIP award.
As a result of the above, 189,099 TIP rights have been awarded at 31 December 2019. Other than for Jeff Howard and Yvette Lamont,
whose rights have vested and will be cash settled, all other Executive KMP TIP rights are subject to a one-year service period and a
further two-year holding period. The number of rights was increased to reflect dividends paid during 2019 in accordance with the TIP
Rules. For current Executive KMP 109,856 rights over HT&E shares will be issued to satisfy the 2019 TIP awards. Assuming all
remaining rights vest, at 1 January 2020 the equivalent number of shares associated with these rights was valued at $186,206.
D. ACTUAL REMUNERATION FOR 2019
The following section sets out the value of remuneration which has been received by Executive KMP for the 2019 performance year.
HT&E’s performance in 2019 was impacted by a subdued Australian advertising market and political unrest in Hong Kong, with Group
EBITDA, EPS and ROIC all behind targets set at the beginning of the year. As a result, there were no TIP awards made to Executive
KMP related to 2019 financial measures.
Executive KMP met some or all of their personal KPI targets and as a result TIP awards have been made in relation to the non-financial
component and in accordance with the TIP Rules with 50 per cent paid in cash, and 50 per cent through the granting of HT&E equity
rights. With the exception of the former CFO and former Group General Counsel and Company Secretary, who ceased to be
employed by HT&E as at 31 December 2019, granted rights are deferred under the TIP Rules for a one-year service period and a
further two-year holding period.
For Executive KMP, the number of awarded 2019 rights and vesting 2018 rights was increased in accordance with the TIP Rules for
dividends paid during 2019. Refer to the Reconciliation of Rights table included in Section I (II). The Board waited until 2019 results
were finalised prior to hedging the TIP obligations due to the anticipated management changes.
The figures in the following table are different to those shown in the accounting table in section E because that table includes the
apportioned accounting value for all vested TIP grants. It also includes accrued long service leave and non-monetary benefits provided
in addition to an individual’s TFR.
The TIP values represent the cash portion (50%) of the total TIP awarded for each year. Vested TIP in 2018 is the value of the 2017 TIP
grant which vested at the end of 2018. Vested TIP values reflect the value of shares as at 1 January 2019 consistent with the 2018
Remuneration Report.
38
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Remuneration Report (continued)
ACTUAL REMUNERATION
Executive KMP1
Current
Ciaran Davis
2019
2018
Andrew Nye (from 14 August 2019)
2019
2018
Total – Current
2019
2018
Former
Jeff Howard (until 31 December 2019)
2019
2018
Yvette Lamont5 (until 31 December 2019)
2019
2018
Rob Atkinson (until 19 February 2019)
2019
2018
Total – All
2019
2018
TFR2
$
TIP
$
Vested TIP3
$
Other4
$
Total
$
1,020,000
1,020,000
155,250
1,117,844
758,883
164,192
163,254
–
9,844
–
–
–
1,183,254
1,020,000
165,094
1,117,844
758,883
164,192
–
–
–
–
–
–
2,293,094
1,943,075
173,098
–
2,466,192
1,943,075
637,500
637,500
107,813
481,040
830,408
102,623
935,826
2,511,547
–
1,221,163
480,000
480,000
28,849
130,520
224,865
34,739
870,000
1,603,714
–
645,259
76,343
554,617
_
_
100,762
43,712
431,375
158,796
507,718
857,887
2,377,097
301,756
2,173,117
2,237,201
7,089,171
2,692,117
1,471,205
345,266
158,796
4,667,384
(1) Table includes 2018 and 2019 Executive KMP.
(2) TFR comprises base salary, retirement benefits and other remuneration related costs.
(3) Vested TIP in 2019 includes the shares in relation to 2018 TIP that have now vested and for Jeff Howard and Yvette Lamont also includes the cash
(4)
settlement of rights awarded under the 2019 TIP estimated using 31 December 2019 closing share price.
Includes the capped and non-capped redundancy benefits for Jeff Howard, Yvette Lamont and Rob Atkinson in 2019. A breakdown of these
amounts is included in the relevant table in section F.
(5) Yvette Lamont was a member of a defined benefit scheme and her TFR includes $50,000 (2018: $80,000) of contributions to that scheme. This
scheme converted to an accumulation fund on 30 September 2019.
ANNUAL REPORT 2019
39
Remuneration Report (continued)
E.
TOTAL REMUNERATION FOR EXECUTIVE KMP
Details of the Executive KMP remuneration for 2019 and 2018 are set out in the table below. The remuneration in this table has been
calculated in accordance with accounting standards and therefore differs from the information included in section D.
Short-term benefits
Post-
employment
benefits
Other
long-term
benefits
Share-based
payments
Termination
benefits
Cash salary
and fees1
$
Non-
monetary
benefits2
$
Cash
incentives3
$
Super-
annuation4
$
Long
service
leave5
$
Fair value
equity
awards6
$
Executive KMP
Current
Ciaran Davis
976,489
2019
976,965
2018
Andrew Nye (from 14 August 2019)
152,949
2019
2018
–
Total – Current
2019
2018
1,129,438
976,965
33,143
32,302
155,250
758,883
–
–
9,844
–
33,143
32,302
165,094
758,883
584,161
580,333
Former
Jeff Howard (until 31 December 2019)
2019
2018
Yvette Lamont (until 31 December 2019)
2019
2018
Rob Atkinson (until 19 February 2019)
2019
2018
Total - All
2019
2018
2,199,558
2,491,624
414,749
400,000
71,210
534,326
42,970
46,434
10,398
9,557
18,446
25,901
229,641
481,040
61,450
130,520
–
303,270
20,767
20,290
10,305
–
31,072
20,290
20,767
20,290
65,251
80,000
5,133
20,290
Total
$
1,717,443
2,754,226
178,637
–
1,896,080
2,754,226
$
–
–
–
–
–
–
34,683
(1,437)
497,111
967,223
87
–
5,452
–
34,770
(1,437)
502,563
967,223
29,924
16,339
261,111
611,657
935,826
–
2,104,340
1,756,093
(2,957)
8,000
70,849
172,822
870,000
–
1,489,740
800,899
1,550
–
–
–
431,375
–
527,714
883,787
104,957
114,194
456,185
1,673,713
122,223
140,870
63,287
22,902
834,523
1,751,702
2,237,201
–
6,017,934
6,195,005
(1) Cash salary and fees include accrued annual leave paid out as part of salary.
(2) Non-monetary benefits typically include novated lease costs, car parking and associated fringe benefits tax.
(3) Cash incentive payments relate to cash TIP awards accrued for the relevant year and paid in the year following. For Jeff Howard and Yvette
Lamont, cash incentives include the cash settlement of 2019 TIP awards estimated using 31 December 2019 closing share price.
(4) Yvette Lamont was a member of a defined benefit superannuation plan up to 30 September 2019 when it was converted to an accumulation fund.
The amount disclosed above has been determined in accordance with the relevant accounting standards.
(5) Long service leave relates to amounts accrued during the year.
(6) The fair value is derived using the closing share price on the grant date.
40
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Remuneration Report (continued)
F.
EXECUTIVE KMP EMPLOYMENT CESSATION PAYMENTS
Former Executive KMP employment cessation payments for 2019 and 2018 were made in line with contractual entitlements and the
terminations cap under the Corporations Regulations 2001 as it pertains to redundancy payments. Details of these payments are set
out in the table below:
Payments not
subject to cap1
Bona fide
redundancy
$
Former
Executive
KMP
Payments subject to cap1
Notice
period
$
Non-compete /
Restraint
$
Defined benefit
superannuation
contribution
$
Jeff Howard (until 31 December 2019)
2019
2018
260,826
–
637,500
–
–
–
–
–
Ex-gratia
$
37,500
–
Total
$
935,826
–
Yvette Lamont (until 31 December 2019)
2019
2018
400,000
–
Rob Atkinson (until 19 February 2019)
2019
2018
Total
2019
2018
164,333
–
825,159
–
100,000
100,000
137,434
132,566
870,000
–
267,042
–
–
–
–
–
–
–
–
–
–
–
431,375
–
1,004,542
100,000
137,434
170,066
2,237,201
–
–
–
–
–
(1) Benefits paid as defined by Corporations Regulations 2001 Reg 2D.2.02. Refer section G for further details.
G. CONTRACTUAL ARRANGEMENTS WITH EXECUTIVE KMP
Remuneration and other terms of employment for Executive KMP are formalised in employment contracts. All Executive KMP are
employed under contracts with substantially similar terms. The key elements of these employment contracts are summarised below:
Contract duration
Notice by individual/Company
Termination of employment (for cause)
Termination of employment (without cause)
Redundancy
Non-compete/restraint
Continuing
Employment may be terminated by either party. Notice periods vary according
to contractual terms: CEO & Managing Director and former CFO – 12 months;
former Group General Counsel and Company Secretary – three months; and
CFO – six months.
All contracts provide that employment may be terminated at any time without
notice for serious misconduct.
Where employment is terminated by the Company, payment may be made in
lieu of notice.
If the Company terminates the employment of an Executive KMP for reasons of
redundancy, a redundancy payment would be paid depending on the length of
their service. Benefits paid as defined by Corporations Regulations 2001 Reg
2D.2.02 cannot exceed 12 months base salary (average of past three years).
Payments for redundancy and accrued leave entitlements are not subject to this
cap.
Executive KMP are subject to non-compete provisions for the term of their
notice period.
ANNUAL REPORT 2019
41
Remuneration Report (continued)
H. NON-EXECUTIVE DIRECTOR ARRANGEMENTS
APPROACH
Non-executive Directors are provided with written agreements which outline the fees for their contribution as Directors. Fees reflect
the demands which are made on, and the responsibilities of, the Directors. The Remuneration, Nomination and Governance
Committee has the responsibility for reviewing and recommending the level of remuneration for Non-executive Directors in relation to
Board and Committee duties.
Non-executive Directors are not eligible to participate in incentive programs or termination payments.
The annual fees provided to Non-executive Directors inclusive of superannuation are shown below:
Role
Board
Audit & Risk Committee
Remuneration Committee (until 5 June 2019)2
Nomination and Governance Committee (until 5 June 2019)2
Remuneration, Nomination and Governance Committee
(from 5 June 2019)2
2019
$
Chair fee1
284,700
20,000
20,000
20,000
20,000
2020
$
Member fee
Chair fee1 Member fee
85,000
10,000
10,000
10,000
10,000
284,700
20,000
–
–
85,000
10,000
–
–
20,000
10,000
(1) The Board Chair does not receive Committee fees.
(2) The Board resolved on 5 June 2019 to form the Remuneration, Nomination and Governance Committee.
APPROVED FEE POOL
The Non-executive Director fee pool of $1,200,000 per annum was approved by shareholders at the 2015 Annual General Meeting.
There was no change to the Non-executive Director fee pool in 2019 and none is expected for 2020.
42
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Remuneration Report (continued)
Details of the Non-executive Directors’ fees for 2019 and 2018 are set out in the table below:
Non-executive Directors
Hamish McLennan (from 30 October 2018)
2019
2018
Roger Amos (from 30 November 2018)
2019
2018
Paul Connolly
2019
2018
Belinda Rowe (from 5 February 2019)
2019
2018
Total
2019
2018
Fees
$
Superannuation
$
263,933
46,060
123,325
10,612
108,808
110,813
75,543
–
571,609
167,485
20,767
3,615
11,716
1,008
10,337
10,527
7,613
–
50,433
15,150
Total
$
284,700
49,675
135,041
11,620
119,145
121,340
83,156
–
622,042
182,635
SHARE-BASED REMUNERATION
I.
(I) TERMS AND CONDITIONS OF SHARE-BASED REMUNERATION
2019 TIP Awards
Current Executive KMP received a grant of rights under the 2019 TIP during 2019. Based on HT&E’s performance, rights have been
awarded at the end of 2019 to satisfy TIP outcomes. Other than for Jeff Howard and Yvette Lamont, whose rights will be cash settled
as outlined in section D, current Executive KMP rights will vest at the end of the one-year service period. The table below shows the
number and value of 2019 rights that were awarded and remain unvested at the end of 2019.
Executive KMP
Current
Ciaran Davis
Andrew Nye
Former
Jeff Howard2
Yvette Lamont2
Grant
date1
Vesting
date
8 February 2019
1 January 2021
14 August 2019
1 January 2021
8 February 2019
31 December 2019
8 February 2019
31 December 2019
Number
of rights
granted
432,392
24,675
270,425
72,313
Number
of rights
awarded
97,289
6,169
67,562
18,079
Number
of rights
unvested
Value per
right at
grant date
$
335,103
18,506
202,683
54,234
1.635
1.71
1.635
1.635
(1) The date on which the fair value of the TIP rights was calculated, being the deemed grant date of the rights for accounting purposes. An actual
grant of rights will not be made to the CEO & Managing Director until shareholder approval has been received at the 2020 AGM, and for all other
current Executive KMP on a date to be determined after this Annual Report has been issued.
(2) As noted above, Jeff Howard’s and Yvette Lamont’s 2019 TIP rights will be cash settled in accordance with the TIP Rules and at the discretion of the
Board.
ANNUAL REPORT 2019
43
Remuneration Report (continued)
(II) RECONCILIATION OF RIGHTS
The table below shows a reconciliation of the number of rights held by each Executive KMP from the beginning to the end of the 2019
financial year:
Executive KMP
Current
Ciaran Davis2
Vested and exercisable
Unvested
Total
Andrew Nye
Vested and exercisable
Unvested
Total
Total – Current
Vested and exercisable
Unvested
Total
Former
Jeff Howard
Vested and exercisable
Unvested
Total
Yvette Lamont
Vested and exercisable
Unvested
Total
Total – All
Vested and exercisable
Unvested
Total
Balance at
start of the
year1
2017 TIP
Exercised /
vested
2018 TIP
Exercised /
vested
Awarded
Dividend
uplift
Balance at
end of the
year
103,919
619,929
723,848
–
–
–
103,919
619,929
723,848
64,951
392,961
457,912
21,987
106,624
128,611
(103,919)
619,929
–
(619,929)
(103,919)
–
–
–
–
–
–
–
–
97,289
97,289
–
6,169
6,169
(103,919)
619,929
–
(619,929)
(103,919)
–
–
103,458
103,458
(64,951)
392,961
–
(392,961)
(64,951)
–
(21,987)
106,624
–
(106,624)
(21,987)
–
–
67,562
67,562
–
18,079
18,079
190,857
1,119,514
1,310,371
(190,857)
1,119,514
–
(1,119,514)
(190,857)
–
–
189,099
189,099
39,566
6,211
45,777
–
187
187
39,566
6,398
45,964
25,080
4,313
29,393
6,806
1,155
7,961
71,452
11,866
83,318
659,495
103,500
762,995
–
6,356
6,356
659,495
109,856
769,351
418,041
71,875
489,916
113,430
19,234
132,664
1,190,966
200,965
1,391,931
(1) An actual grant of rights will not be made to the CEO & Managing Director until after shareholder approval has been received at the 2020 AGM.
44
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Remuneration Report (continued)
J. NON-EXECUTIVE DIRECTOR AND EXECUTIVE KMP SHAREHOLDINGS
The number of shares in the Company held by each Non-executive Director and Executive KMP during the year including their related
parties is summarised below:
Non-executive Directors
Hamish McLennan
Roger Amos
Paul Connolly
Belinda Rowe1
Current Executive KMP
Ciaran Davis
Andrew Nye1
Former Executive KMP
Jeff Howard2
Yvette Lamont2
Rob Atkinson3
Balance at
start of the
year
–
–
65,935
–
420,134
30,476
303,374
115,143
–
Balance at
end of
the year
73,000
16,250
65,935
–
420,134
50,476
303,374
115,143
–
Change
73,000
16,250
–
–
–
20,000
–
–
–
(1) Belinda Rowe became a Non-executive Director on 5 February 2019. Andrew Nye became an Executive KMP on 14 August 2019. The balance at
start of the year in the table above for these respective individuals is the number of shares held as at their appointment dates.
Jeff Howard and Yvette Lamont both ceased to be an Executive KMP on 31 December 2019.
(2)
(3) Rob Atkinson ceased to be an Executive KMP on 19 February 2019. The balance at end of the year in the table above is the number of shares he
held at that date.
K. OTHER STATUTORY DISCLOSURES
(I) LOANS GIVEN TO NON-EXECUTIVE DIRECTORS AND EXECUTIVE KMP
There are no loans from the Company to the Non-executive Directors or Executive KMP.
(II) SECURITIES TRADING POLICY AND GUIDELINES
The Company’s Securities Trading Policy and Guidelines is outlined in the Corporate Governance Statement, which can be found on
the Company website. Under the policy, restricted persons, which include KMP, are not permitted to hedge any options, rights or
similar instruments prior to them becoming vested or otherwise tradable under the applicable plan.
(III) VOTING AND COMMENTS MADE AT THE COMPANY’S 2019 AGM
The Company received more than 94% of ‘yes’ votes on its Remuneration Report for the 2018 financial year, and more than 94% of
‘yes’ votes to the granting of deferred rights to the CEO & Managing Director. No major remuneration related concerns were raised
which required the Company’s attention during the 2019 financial year.
(IV) EXTERNAL REMUNERATION CONSULTANTS
During 2019, HT&E made use of external remuneration consultants, including advice regarding Executive KMP termination
settlements.
All advice from remuneration consultants is carefully considered by the Remuneration, Nomination and Governance Committee. The
Committee is satisfied that all advice received from remuneration consultants has been given free of undue influence by KMP.
Auditor’s Independence Declaration
ANNUAL REPORT 2019
45
As lead auditor for the audit of HT&E Limited for the year ended 31 December 2019, I declare that to the best of my knowledge
and belief, there have been:
(a)
(b)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of HT&E Limited and the entities it controlled during the period.
Louise King
Partner
PricewaterhouseCoopers
Sydney
24 February 2020
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.
46
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Consolidated Financial Statements
ABOUT THE FINANCIAL STATEMENTS
The financial statements are for the consolidated entity consisting of HT&E Limited (Company) and its controlled entities (collectively
the Group). The Company is a for profit company limited by ordinary shares, incorporated and domiciled in Australia. The ordinary
shares are publicly traded on the Australian Securities Exchange.
The financial statements were authorised for issue, in accordance with a resolution of Directors, on 24 February 2020. The Directors
have the power to amend and reissue the financial statements.
BASIS OF PREPARATION
This general purpose financial report has been prepared in accordance with the Corporations Act 2001, Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and International Financial Reporting
Standards issued by the International Accounting Standards Board (IASB).
All new and amended Australian Accounting Standards and Interpretations issued by the AASB that are relevant to the Group and
effective for the current reporting period have been adopted. Refer to note 1 for further details.
The financial report is presented in Australian dollars which is the Company’s functional and presentation currency.
It has been prepared under the historical cost convention, as modified by the revaluation of certain financial assets and liabilities
(including derivative instruments) and certain classes of property, plant and equipment.
The Company presents reclassified comparative information, where required, for consistency with the current year’s presentation.
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, issued by the
Australian Securities and Investments Commission, relating to the rounding off of amounts in the financial report. Amounts in the
financial report have been rounded off in accordance with that Instrument to the nearest thousand dollars, or in certain cases, the
nearest dollar.
KEY JUDGEMENTS AND ESTIMATES
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of the assets and liabilities within the next and subsequent years can be found in the following notes:
Note 3.1 Intangible assets;
Note 3.3 Leases; and
Note 5.1 Income tax and deferred tax.
SIGNIFICANT EVENTS IN THE CURRENT REPORTING PERIOD
During the current financial year, the financial position and performance of the Group were particularly affected by the following
events and transactions:
New Accounting Standard AASB 16 Leases
The Group adopted the new leasing standard on 1 January 2019. Refer to note 1 for further details.
New AASB Interpretation 23 Uncertainty over Income Tax Treatments
The Group applied the new interpretation on 1 January 2019. Refer to note 5.1 for further details.
Sale of interest in Unbnd Group
The Group disposed of its 50% share in Unbnd Group Pty Ltd on 19 September 2019 resulting in a loss on disposal. Refer to note 6.4
for further details.
Closure of Gfinity Esports Australia
Gfinity Esports Australia Pty Limited was closed in November 2019 with the joint venture interest in HT&E Events Pty Limited written
down following this decision. Refer to note 6.4 for further details.
Consolidated Income Statement
For the year ended 31 December 2019
Revenue from continuing operations
Other revenue and income
Total revenue and other income
Expenses from continuing operations before impairment, finance costs,
depreciation and amortisation
Joint venture impairment and related closure costs
Finance costs
Depreciation and amortisation
Share of profits of associates and joint ventures accounted
for using the equity method
Profit before income tax
Income tax expense
(Loss)/profit from continuing operations
Profit from discontinued operations
(Loss)/profit for the year
(Loss)/profit for the year is attributable to:
Owners of the parent entity
Non-controlling interests
(Loss)/profit for the year
Earnings per share from continuing operations
Basic earnings per share
Diluted earnings per share
Earnings per share from continuing and discontinued operations
Basic earnings per share
Diluted earnings per share
ANNUAL REPORT 2019
47
2019
$’000
252,691
9,678
262,369
(205,906)
(5,423)
(4,760)
(18,778)
2,527
30,029
(39,879)
(9,850)
–
(9,850)
(14,195)
4,345
(9,850)
2018
$’000
271,777
8,433
280,210
(206,964)
–
(6,992)
(4,639)
468
62,083
(19,063)
43,020
188,009
231,029
225,544
5,485
231,029
Cents
Cents
(5.0)
(5.0)
(5.0)
(5.0)
12.2
12.2
73.3
73.1
Note
2.1
2.1
2.2
2.3
2.2
2.2
6.4
5.1
7.1
2.4
2.4
2.4
2.4
The Group has initially applied AASB 16 Leases at 1 January 2019. Under the modified retrospective transition method chosen,
comparative information has not been restated. Refer to note 1.
The above consolidated income statement should be read in conjunction with the accompanying notes.
48
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Consolidated Statement
of Comprehensive Income
For the year ended 31 December 2019
(Loss)/profit for the year
Items that may be reclassified to profit or loss
Net exchange difference on translation of foreign operations
Net gain on fair value hedges
Reclassification of foreign currency translation reserve to profit or loss on
sale of Adshel
Item that will not be reclassified to profit or loss
Revaluation of freehold land and buildings
Other comprehensive income, net of tax
Total comprehensive income
Total comprehensive income is attributable to:
Owners of the parent entity
Non-controlling interests
Total comprehensive income attributable to owners of the parent
entity arises from:
Continuing operations
Discontinued operations
Note
4.7
4.7
4.7
4.7
2019
$’000
(9,850)
(56)
–
–
1,575
1,519
(8,331)
(12,676)
4,345
(8,331)
(12,676)
–
(12,676)
2018
$’000
231,029
1,746
544
3,504
–
5,794
236,823
231,338
5,485
236,823
38,437
192,901
231,338
The Group has initially applied AASB 16 Leases at 1 January 2019. Under the modified retrospective transition method chosen,
comparative information has not been restated. Refer to note 1.
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Consolidated Balance Sheet
As at 31 December 2019
Current assets
Cash and cash equivalents
Receivables
Tax assets
Other current assets
Total current assets
Non-current assets
Shares in other corporations
Investments accounted for using the equity method
Property, plant and equipment
Intangible assets
Right-of-use assets
Deposit of tax in dispute, net of provision
Other loans
Other non-current assets
Total non-current assets
Total assets
Current liabilities
Payables
Contract liabilities
Lease liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Payables
Lease liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total parent entity interest
Non-controlling interests
Total equity
ANNUAL REPORT 2019
49
2019
$’000
110,972
45,700
3,339
3,990
164,001
37,346
17,314
22,132
427,397
51,003
20,670
–
5,456
581,318
745,319
24,092
5,552
14,315
–
12,817
56,776
–
44,816
5,184
108,638
158,638
215,414
529,905
2018
$’000
128,355
55,177
–
2,265
185,797
35,403
18,829
16,650
429,585
–
50,670
6,994
4,194
562,325
748,122
24,250
10,773
–
11,566
6,983
53,572
610
–
4,250
109,974
114,834
168,406
579,716
1,483,685
(43,743)
(946,536)
493,406
36,499
529,905
1,492,555
(43,809)
(905,894)
542,852
36,864
579,716
Note
4.2
3.4
5.1
6.3
6.4
3.2
3.1
1.1, 3.3
5.1
2.1
1.1, 3.3
5.1
3.5
1.1, 3.3
3.5
5.1
4.5
4.7
4.7
The Group has initially applied AASB 16 Leases at 1 January 2019. Under the modified retrospective transition method chosen,
comparative information has not been restated. Refer to note 1.
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
50
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Consolidated Statement
of Cash Flows
For the year ended 31 December 2019
Note
2019
$’000
2018
$’000
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Dividends received
Interest received
Interest paid
Income taxes paid
Prepayment of tax in dispute
Net cash inflows/(outflows) from operating activities
4.2
Cash flows from investing activities
Payments for property, plant and equipment
Payments for software
Payments for other intangible assets
Proceeds from sale of property, plant and equipment
Investment in joint venture
Net proceeds from sale of businesses
Loans to joint ventures
Net loans repaid by other entities
Dividends received from associate
285,908
(221,173)
3,836
2,069
(3,632)
(22,174)
–
44,834
(7,793)
(187)
–
–
(500)
–
(1,788)
667
–
465,017
(386,839)
4,878
1,002
(7,395)
(31,199)
(50,670)
(5,206)
(17,484)
(3,136)
(6)
59
–
564,553
(6,294)
312
1,250
Net cash (outflows)/inflows from investing activities
(9,601)
539,254
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Payments for borrowing costs
Principal elements of lease payments
Payments for treasury shares
Dividends paid to shareholders
Payments for share buyback
Net payments to non-controlling interests
Net cash outflows from financing activities
Change in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of exchange rate changes
1.1, 3.3
4.7
4.8
4.5
–
–
(262)
(13,495)
(2,537)
(22,776)
(8,870)
(4,710)
(52,650)
(17,417)
128,355
34
Cash and cash equivalents at end of the year
4.2
110,972
97,000
(230,792)
(2,078)
–
(197)
(244,039)
(39,012)
(5,540)
(424,658)
109,390
18,773
192
128,355
The Group has initially applied AASB 16 Leases at 1 January 2019. Under the modified retrospective transition method chosen,
comparative information has not been restated. Refer to note 1.
The above consolidated statement of cash flows includes cash flows from continuing and discontinued operations and should be read
in conjunction with the accompanying notes.
Consolidated Statement
of Changes in Equity
For the year ended 31 December 2019
Balance at 1 January 2018
1,531,567
(50,712)
(887,511)
Contributed
equity
$’000
Reserves
$’000
Accumulated
losses
$’000
Note
Profit for the period
Other comprehensive income
Share-based payments
Share buy-back
Dividends paid to shareholders
Transfers within equity
Treasury shares vested to
employees
Acquisition of treasury shares
Transactions with non-controlling
interests
4.7
4.5
4.8
4.7
4.7
4.7
–
–
–
(39,012)
–
–
–
–
–
–
225,544
Total
$’000
593,344
225,544
5,794
594
(39,012)
–
–
–
(244,039)
(244,039)
112
–
–
–
–
824
(197)
–
5,794
594
–
–
(112)
824
(197)
–
ANNUAL REPORT 2019
51
Non-
controlling
interests
$’000
36,919
5,485
–
–
–
–
–
–
–
Total
equity
$’000
630,263
231,029
5,794
594
(39,012)
(244,039)
–
824
(197)
(5,540)
36,864
(5,540)
579,716
Balance at 31 December 2018
1,492,555
(43,809)
(905,894)
542,852
Balance at 1 January 2019
Change in accounting policy
– lease accounting
Restated total equity at
beginning of the period
Loss for the period
Other comprehensive income
Share-based payments
Share buy-back
Dividends paid to shareholders
Transfers within equity
Treasury shares vested to
employees
Acquisition of treasury shares
Transactions with non-controlling
interests
1.1
4.7
4.5
4.8
4.7
4.7
4.7
1,492,555
(43,809)
(905,894)
542,852
36,864
579,716
–
–
(3,587)
(3,587)
–
(3,587)
1,492,555
(43,809)
(909,481)
539,265
36,864
576,129
–
(14,195)
(14,195)
4,345
(9,850)
–
–
–
(8,870)
–
–
–
–
–
1,519
523
–
–
84
477
(2,537)
–
–
–
–
1,519
523
(8,870)
(22,776)
(22,776)
(84)
–
–
–
–
477
(2,537)
–
–
–
–
–
–
–
1,519
523
(8,870)
(22,776)
–
477
(2,537)
(4,710)
–
(4,710)
Balance at 31 December 2019
1,483,685
(43,743)
(946,536)
493,406
36,499
529,905
The Group has initially applied AASB 16 Leases at 1 January 2019. Under the modified retrospective transition method chosen,
comparative information has not been restated. Refer to note 1.
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
52
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements
1
CHANGE IN ACCOUNTING POLICIES
The IASB has issued IFRS 16 Leases, replacing IAS 17 Leases. The AASB has issued an equivalent standard, AASB 16 Leases. The Group
has adopted AASB 16 Leases using the modified retrospective approach with practical expedients where the cumulative effect of
adopting the standard is recognised in opening retained earnings at 1 January 2019, with no restatement of prior year comparative
information. The Group has also applied the new AASB Interpretation 23 Uncertainty over Income Tax Treatments on its assessment of
the financial impact of the tax in dispute as detailed in note 5.1. A number of other new standards are effective from 1 January 2019
but they do not have a material effect on the Group financial statements. Changes to accounting policies and the financial impact on
adoption of AASB 16 Leases are detailed below.
1.1 FINANCIAL STATEMENTS IMPACT OF AASB 16 LEASES
Impact on transition
On adoption, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases'
under AASB 117 Leases. The lease liabilities are measured at the present value of minimum lease payments for the lease term,
discounted using a weighted average incremental borrowing rate of 3.9%.
Lease liability on transition
Non-cancellable operating lease and rental commitments disclosed as at 31 December 2018
Discounted using the lessee's incremental borrowing rate of at the date of initial application
Add: finance lease liabilities recognised as at 31 December 2018
(Less): short-term leases recognised on a straight-line basis as expense
(Less): low-value leases recognised on a straight-line basis as expense
(Less): contracts reassessed as service agreements
Add: adjustments as a result of a different treatment of extension and termination options
Add: adjustments relating to changes in the index or rate affecting variable interest payments
Lease liabilities recognised as at 1 January 2019
The change in accounting policy affected the following items on the balance sheet at 1 January 2019:
Increase in assets:
Deferred tax assets
Right-of-use assets
(Increase)/decrease in liabilities:
Payables
Lease liabilities
Net impact on retained earnings
1 January 2019
$’000
44,581
44,309
–
(1,286)
–
(617)
11,409
428
54,243
1 January 2019
$’000
947
48,452
1,257
(54,243)
(3,587)
Notes to the Consolidated
Financial Statements (continued)
1.1 FINANCIAL STATEMENTS IMPACT OF AASB 16 LEASES (CONTINUED)
The associated right-of-use assets on transition and as at 31 December 2019 by asset class:
Property
Advertising concession agreements
Motor vehicle and other
Total right-of-use assets
ANNUAL REPORT 2019
53
1 January
2019
$’000
31 December
2019
$’000
14,746
32,803
903
48,452
23,788
26,632
583
51,003
Net profit before tax (NPBT) from continuing operations, segment assets and liabilities for 31 December 2019 all impacted as a result
of the change in accounting policy:
Increase/(decrease) due to adoption of AASB 16 Leases
Australian Radio Network
HK Outdoor
Digital investments
Corporate
Total
NPBT
$’000
(385)
(273)
(2)
2
Segment
assets
$’000
20,920
30,818
96
104
Segment
liabilities
$’000
23,410
32,414
96
185
(658)
51,938
56,105
Earnings per share decreased by 0.2 cents for the twelve months to 31 December 2019 as a result of the adoption of AASB 16 Leases.
During the 12 months to 31 December 2019, the Group recognised $14,021,000 of depreciation charges and $2,343,000 of interest
costs in association with AASB 16 Leases.
54
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
1.1 FINANCIAL STATEMENTS IMPACT OF AASB 16 LEASES (CONTINUED)
ACCOUNTING POLICY
Prior to 1 January 2019, the Group classified leases as operating leases when all the risks and benefits of ownership are
effectively retained by the lessor. Operating lease payments, excluding contingent payments, were charged to the income
statement on a straight-line basis over the period of the lease.
On and after transition, the Group assesses whether a contract is or contains a lease based on the new definition of a lease: a
contract is or will contain a lease if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration.
Under AASB 16 Leases, the Group recognises on its balance sheet right-of-use assets representing its right to use the
underlying assets and corresponding lease liabilities representing its obligation to lease payments at the lease commencement
date. Details of the new lease accounting policy adopted by the Group is disclosed in note 3.3.
Practical expedients applied on transition
In applying AASB 16 Leases, the Group has used the following practical expedients on transition:
elected not to reassess whether a contract is or contains a lease at the date of the initial application. Instead contracts
entered into before the transition date, the Group relied on assessments made applying AASB 117 Leases and Interpretation
4 Determining whether an Arrangement contains a lease;
the accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term
leases;
reliance on previous assessments on whether leases are onerous;
the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease;
and
the use of a single discount rate to a portfolio of leases with similar characteristics.
Notes to the Consolidated
Financial Statements (continued)
2
GROUP PERFORMANCE
2.1 REVENUES
Revenue and other income
From continuing operations
Broadcast revenue
Advertising revenue
Services revenue
Other revenue
Revenue from continuing operations
Gain on financial assets held at fair value through profit or loss
Dividend income
Other
Other income
Interest income
Finance income
Total other revenue and income
Total revenue and other income
From discontinued operations
Total revenue and other income
Gain on sale of business
ANNUAL REPORT 2019
55
Note
2019
$’000
2018
$’000
202,034
43,738
6,861
58
217,358
46,053
8,132
234
252,691
271,777
2,037
4,360
787
7,184
2,494
2,494
9,678
1,912
4,878
639
7,429
1,004
1,004
8,433
262,369
280,210
7.1
7.1
–
–
153,342
164,845
Revenue recognised in the year ended 31 December 2019 that was included in the contract liabilities balance as at 1 January 2019 is
$10.8 million (2018: $6.0 million).
56
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
2.1 REVENUES (CONTINUED)
ACCOUNTING POLICY
Revenue
The key revenue streams and policies are detailed below:
Under AASB 15 Revenue from Contracts with Customers, revenue is recognised when a customer obtains control of the goods or
services. Determining the timing of the transfer of control requires judgement. The Group recognises revenue when control of
the services or goods passes to the customer.
Revenue is recognised gross of rebates and agency commissions. Payment terms vary between 30 and 45 days from the
invoice issue date.
Type of
product/service
Broadcast revenue
Segment Nature and timing of satisfaction of performance obligations
Revenue is recognised when each advertisement is aired per the contract terms.
Australian
Radio
Network
Advertising revenue
All
Revenue is recognised over time, on a prorated basis when the advertisement is
displayed or published.
Services revenue
HK
Outdoor
Includes production and installation revenue. Production and installation revenue,
where it is a distinct service, is recognised by reference to stage of completion of the
service.
Other revenue
All
Includes sponsorships, royalties and cleaning and maintenance revenue. Revenue is
recognised when the service occurs.
Contract costs
The Group applies the practical expedient under AASB 15 Revenue from Contracts with Customers to expense contract
acquisition costs as they are incurred, as the expected costs have an amortisation period of less than 12 months.
Contract assets and liabilities
Contract assets relate primarily to the Group’s rights to consideration for work completed but not billed at each reporting date.
Contract assets are transferred to receivables when the rights become unconditional. This usually occurs when the Group
issues an invoice to a customer.
Contract liabilities primarily relate to consideration received in advance from customers, for which the performance obligation
is yet to be satisfied.
Notes to the Consolidated
Financial Statements (continued)
2.2 EXPENSES
From continuing operations
Employee benefits expense
Production and distribution expense
Selling and marketing expense
Rental and occupancy expense
Professional fees
Repairs and maintenance costs
Travel and entertainment costs
Redundancies and associated costs
Loss on disposal of investment in joint venture
Loss on disposal of business
Other costs
Other expenses
Total expenses before impairment, finance costs, depreciation and
amortisation
Interest – lease liabilities
Interest and finance charges
Borrowing costs amortisation
Total finance costs
Depreciation – right-of-use assets
Depreciation – other assets
Amortisation
Total depreciation and amortisation
From discontinued operations
Total expenses
ANNUAL REPORT 2019
57
Note
2.3
6.4
2.3
2.3
1.1, 3.3
1.1, 3.3
3.2
3.1
7.1
2019
$’000
98,928
21,083
39,253
10,047
6,825
1,782
2,894
4,802
13,355
1,508
–
5,429
2018
$’000
100,683
19,238
41,913
29,970
5,625
1,849
3,205
–
–
–
(889)
5,370
205,906
206,964
2,343
1,741
676
4,760
14,021
4,190
567
18,778
–
6,445
547
6,992
–
3,872
767
4,639
–
121,463
The Group has initially applied AASB 16 Leases at 1 January 2019. Under the modified retrospective transition method chosen,
comparative information has not been restated. Refer to note 1.
58
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
2.3 SEGMENT INFORMATION
(I) DESCRIPTION OF SEGMENTS
The Group has identified its operating segments based on the internal reports reviewed by the Board of Directors and the senior
management team in assessing performance and determining the allocation of resources. There are three reportable segments as
follows:
Reportable segment
Principal activities
Australian Radio Network
Metropolitan radio networks (Australia) and digital advertising
HK Outdoor
Digital Investments
Billboard, transit and other outdoor advertising (Hong Kong)
Includes controlling interests in Emotive and equity accounted investments in Soprano Design
Pty Limited, HT&E Events Pty Limited and Unbnd Group Pty Ltd
The Directors and senior management team assess the performance of the operating segments based on a measure of earnings
before interest, tax, depreciation and amortisation (EBITDA) from continuing operations which excludes the effects of exceptional
items such as gains or losses on disposals of businesses and restructuring related costs.
The sale of the Adshel business was completed on 28 September 2018. The Adshel business segment is included as a discontinued
operations in note 7.1.
The Group’s investment in Unbnd Group Pty Ltd was disposed of on 19 September 2019 (refer note 6.4) while HT&E Events Pty
Limited was wound down following the decision to close of Gfinity Esports Australia earlier in the year.
(II) RESULTS BY OPERATING SEGMENT
The segment information provided to the Directors and senior management team for the year ended 31 December 2019 is as follows:
2019
$’000
Australian
Radio Network
HK
Outdoor
Digital
Investments Corporate
Group
elimination
Revenue from external customers
Share of profits of associate & joint ventures
223,297
24,817
–
–
4,577
2,527
–
–
–
–
Total
252,691
2,527
Segment result
Segment assets
Segment liabilities
73,338
12,407
2,704 (12,812)
547,143
45,972
21,001
131,203
42,018
38,898
6,564
127,934
–
75,637
–
–
745,319
215,414
Reconciliation of segment result to profit before income tax from continuing operations
Segment result
Depreciation and amortisationA
Net finance costs
Joint venture impairment and related
closure costsB
Loss on disposal of investment in joint ventureC
Loss on disposal of businessD
Redundancies and associated costsE
Dividend incomeF
Profit before income tax from continuing operations(i)
75,637
(18,778)
(2,266)
(5,423)
(13,355)
(1,508)
(4,802)
524
30,029
(i) The Group has initially applied AASB 16 Leases at 1 January 2019. Under the modified retrospective transition method chosen, comparative
information has not been restated and so the 2019 result includes the impact of AASB 16, whereas 2018 does not. Refer to note 1 for further
details.
Explanation of statutory adjustments
(A) Consists of depreciation of $18.2 million and amortisation of $0.6 million. Refer to note 2.2.
(B) Relates to impairment of the joint venture interest in HT&E Events Pty Limited ($685,000), write-down of loan to HT&E Events Pty Limited
($4,200,000) and costs relating to the funding of the business until the end of the year ($538,000), following the decision to close Gfinity Esports
Australia in June 2019.
(C) Loss on disposal of investment in Unbnd Group Pty Ltd. Refer to note 6.4.
(D) Loss on disposal of assets attributable to The Roar Sports Media Pty Ltd, effective 31 January 2020.
(E) Restructuring costs associated with the Australian Radio Network and Corporate segments resulting from a review of the Company’s operating
model and senior management needs following the sale of Adshel in 2018.
(F) Dividend income received from Digital Radio Broadcasting Sydney Pty Ltd, an entity the Group has an interest in.
ANNUAL REPORT 2019
59
Notes to the Consolidated
Financial Statements (continued)
2.3 SEGMENT INFORMATION (CONTINUED)
(II) RESULTS BY OPERATING SEGMENT (CONTINUED)
2018
$’000
Australian
Radio
Network
HK
Outdoor
Digital
Investments Corporate
Group
elimination
Total
Revenue from external customers
235,483
30,871
Share of profits of associate & joint ventures
Segment result
Segment assets
Segment liabilities
–
84,596
524,227
14,711
–
1,206
22,540
12,376
5,688
468
–
–
1,263
(15,244)
30,654
170,701
3,561
137,758
Reconciliation of segment result to profit before income tax from continuing operations
Segment result
Depreciation and amortisationA
Net finance costs
Other costsB
Profit before income tax from continuing operations
(265)
271,777
–
–
–
–
468
71,821
748,122
168,406
71,821
(4,639)
(5,988)
889
62,083
Explanation of statutory adjustments
(A) Consists of depreciation of $3.9 million and amortisation of $0.8 million. Refer to note 2.2.
(B) Reversal of earn-out provision related to the 2016 Conversant Media acquisition ($1,367,000), offset by decommissioning and onerous lease costs
relating to Hong Kong Outdoor ($478,000).
(III) OTHER SEGMENT INFORMATION
The Group is domiciled in Australia and operates predominantly in Australia and Hong Kong. Revenue from external customers in
Australia is $227.9 million (2018: $240.9 million) and in Asia is $24.8 million (2018: $30.9 million). Segment revenues are allocated
based on the country in which the customer is located.
The total of non-current assets located in Australia is $545.2 million (2018: $556.8 million) and in Hong Kong is $36.1 million
(2018: $5.5 million). Segment assets are allocated to countries based on where the assets are located.
ACCOUNTING POLICY
Segment revenues and expenses comprise amounts that are directly attributable to a segment and the relevant portion that
can be allocated on a reasonable basis. Corporate overheads, including centralised finance, legal and administrative costs, are
not allocated against operating segments but rather are included above as unallocated amounts.
Segment revenues and results exclude transfers between segments. Such transfers are priced on an arm’s length basis and
are eliminated on consolidation.
60
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
2.4 EARNINGS PER SHARE
(a) Reconciliation of earnings used in calculating earnings per share (EPS)
(Loss)/profit from continuing operations attributable to owners of the parent entity
Profit from discontinued operations attributable to owners of the parent entity
(Loss)/profit attributable to owners of the parent entity used in calculating basic/diluted EPS
2019
$’000
(14,195)
–
(14,195)
2018
$’000
37,535
188,009
225,544
Number
Number
(b) Weighted average number of shares
Weighted average number of shares used as the denominator in calculating basic EPS
284,497,535
307,611,412
Weighted average number of treasury shares
Adjusted for calculation of diluted EPS:
Unvested/unexercised rights
(892,515)
(82,439)
1,264,796
1,092,545
Weighted average number of shares used as the denominator in calculating diluted EPS
284,869,816
308,621,518
While rights have been issued to Executive Key Management Personnel (Executive KMP) under the 2019 Total Incentive Plan (TIP),
there is no certainty these rights will vest, and if they do, it is the Company’s current intention to satisfy any rights by acquiring shares
on-market, consistent with recent practice.
ACCOUNTING POLICY
Basic earnings per share
Basic earnings per share is determined by dividing:
the net profit or loss attributable to owners of the Company; by
the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in
ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share by taking into account:
the after-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.
Goodwill
Software
Notes to the Consolidated
Financial Statements (continued)
3
OPERATING ASSETS AND LIABILITIES
3.1
INTANGIBLE ASSETS
2018
$’000
Cost
Accumulated amortisation and impairment
Net book amount
Movements
Opening net book amount
Additions (i)
Sale of Adshel (ii)
Transfers and other adjustments
Amortisation (i)
Foreign exchange differences (i)
Closing net book amount
(i) Movements partially relate to Adshel prior to sale.
(ii) Refer to note 7.1 for further details.
55,081
–
55,081
273,796
–
(219,733)
–
–
1,018
55,081
ANNUAL REPORT 2019
61
Radio
licences
375,284
(3,670)
371,614
Brands
1,945
(416)
1,529
Licences and
relationships
–
–
–
Total
436,854
(7,269)
429,585
372,170
4,623
114,833
769,235
–
–
–
(556)
–
6
–
3,142
(2,149)
(110,029)
(338,387)
–
(956)
5
1,529
–
(5,329)
525
–
1,238
(7,191)
1,548
429,585
4,544
(3,183)
1,361
3,813
3,136
(6,476)
1,238
(350)
–
1,361
371,614
2019
$’000
Cost
Goodwill
Software
Radio
licences
55,100
3,564
375,284
Accumulated amortisation and impairment
–
(2,547)
(4,011)
Net book amount
Movements
55,100
1,017
371,273
Brands
1,945
(1,938)
7
Opening net book amount
55,081
1,361
371,614
1,529
Additions
Transfers and other adjustments
Amortisation
Sale of business (iii)
Foreign exchange differences
Closing net book amount
–
–
–
–
19
187
(390)
(34)
(108)
1
–
–
(341)
–
–
55,100
1,017
371,273
–
–
(192)
(1,330)
–
7
(iii) Relates to the disposal of intangible assets of The Roar Sports Media Pty Ltd.
Licences and
relationships
–
–
–
–
–
–
–
–
–
Total
435,893
(8,496)
427,397
429,585
187
(390)
(567)
(1,438)
20
–
427,397
62
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
3.1
INTANGIBLE ASSETS (CONTINUED)
ACCOUNTING POLICY
Summary of goodwill and other intangible assets
Asset
Goodwill
Software
Radio licences (commercial)
Radio licence (digital)
Brands – Conversant Media
Brands – other
Useful life
Amortisation
method
Indefinite
No amortisation
Acquired or
Internally generated
Acquired
3-5 years
Straight-line basis
Internally generated and acquired
Indefinite
No amortisation
20 years
Straight-line basis
3-10 years
Straight-line basis
Indefinite
No amortisation
Acquired
Acquired
Acquired
Acquired
Acquired
Licences and relationships
10-15 years
Straight-line basis
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable
assets of the acquired business at the date of acquisition. Goodwill is not amortised but rather is subject to periodic
impairment testing as described below.
Software
Costs incurred in developing systems and acquiring software and licences are capitalised to software. Costs capitalised include
materials, services, payroll and payroll related costs of employees involved in development. Amortisation is calculated on a
straight-line basis over the useful life of the asset.
Radio licences
Commercial radio licences are accounted for as identifiable assets and are brought to account at cost. The Directors believe
the licences have indefinite lives and accordingly, no amortisation has been provided against the carrying amount. The
commercial radio licences held by the Group are renewable every five years under the provisions of the Broadcasting Services
Act 1992. The Directors understand that the revocation of a radio licence has never occurred in Australia and have no reason
to believe the licences will not be renewed from time to time for the maximum period allowable under the Act and without
imposition of any conditions. As a result, the radio licences have been assessed to have indefinite useful lives.
The digital radio licence is accounted for as an identifiable asset and is brought to account at cost. The licence is amortised
over the term of the contract on a straight-line basis.
Brands
Brands are accounted for as identifiable assets and are brought to account at cost. The Directors have considered the
geographic location, legal, technical and other commercial factors likely to impact the assets’ useful lives and consider that they
have indefinite lives. Accordingly, no amortisation has been provided against the carrying amount for brands outside of
Conversant Media.
Licences and relationships
Licences and relationships represent future income streams attributable to site licences and associated relationships. They are
accounted for as identifiable assets and carried at cost less accumulated amortisation and any accumulated impairment loss.
They are amortised on a straight-line basis.
ANNUAL REPORT 2019
63
Notes to the Consolidated
Financial Statements (continued)
3.1
INTANGIBLE ASSETS (CONTINUED)
YEAR-END IMPAIRMENT REVIEW
KEY JUDGEMENTS AND ESTIMATES
The Group annually tests whether goodwill and other non-amortising intangible assets have suffered any impairment, in
accordance with the accounting policy stated above. The recoverable amounts of cash generating units have been determined
based on the higher of fair value less costs to sell, or value in use, calculations. These calculations require the use of
assumptions. Refer below for details of these assumptions and the potential impact of changes to these assumptions.
ALLOCATION OF GOODWILL AND OTHER NON-AMORTISING INTANGIBLE ASSETS TO CASH GENERATING UNITS
(CGUS)
Name of CGU
Australian Radio Network
HK Outdoor
Emotive
2019
Other non-
amortising
intangible
assets
$’000
2018
Other non-
amortising
intangible
assets
$’000
2018
Goodwill
$’000
367,451
51,494
367,451
–
–
3,097
490
–
–
2019
Goodwill
$’000
51,494
3,116
490
Total goodwill and other non-amortising intangible assets
55,100
367,451
55,081
367,451
YEAR-END IMPAIRMENT REVIEW OF CGUS INCLUDING INDEFINITE LIFE INTANGIBLE ASSETS
A comprehensive impairment review was conducted at 31 December 2019. The recoverable amount of each CGU that includes
goodwill or indefinite life intangible assets was reviewed.
The recoverable amounts of the Australian Radio Network and HK Outdoor CGUs were based on value in use calculations, using
management budgets and forecasts for a 3 year and 5 year period, respectively, after adjusting for central overheads. The forecast
used for the HK Outdoor CGU value in use calculation has been extended to a 5 year period (from 3 years) to accommodate a steady
recovery in the Hong Kong economy in the medium term following recent political unrest.
The key assumptions used to calculate the recoverable amount are presented overleaf:
64
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
3.1
INTANGIBLE ASSETS (CONTINUED)
(i) Cash flows
Year 1 cash flows
Years 2, 3, 4 and 5 cash
flows
Based on Board approved annual budget.
Revenue forecasts are prepared based on management’s current assessment for each CGU, with
consideration given to internal information and relevant external industry data and analysis. In general:
market growth in the Australian Radio Network CGU is forecast across the cash flow period. The
revenue forecast assumes the Australian Radio Network CGU will gain additional market share or
reclaim lost market share through continued investment in content, marketing and operations;
market growth in the HK Outdoor CGU is forecast across the cash flow period. The revenue forecast
assumes HK Outdoor CGU will gain additional market share through investment in sales and
marketing capabilities and key site contracts. Future yield growth in the existing asset base is also
assumed;
expenses are forecast on a detailed basis, based on their nature. Variable costs are forecast to move
in line with revenue movements. Personnel costs are forecast to move in line with headcount and
adjusted for expected inflation. Other costs are forecast based on management expectations,
considering existing contractual arrangements; and
management have considered the impact of the Hong Kong protests and civil unrest within the cash
flow forecast for the HK CGU. Management will continue to monitor the Hong Kong economic
climate for other factors which may have a financial impact on the HK CGU.
Beyond 3 or 5 year cash
flows
Cash flows beyond 3 (Australian Radio Network) or 5 (HK Outdoor) years are extrapolated at growth
rates not exceeding the long-term average growth rate for the industry in which the CGU operates.
(ii) Discount rate and long-term growth rate
The discount rates used reflect specific risks relating to the relevant segments and the countries in which they operate.
2019
Pre-tax
discount
rate
per annum
13.6%(i)
12.4%(i)
2019
Long-term
growth rate
per annum
2.0%
2.0%
2018
Pre-tax
discount
rate
per annum
13.6%(i)
12.4%(i)
2018
Long-term
growth rate
per annum
2.0%
2.0%
Name of CGU
Australian Radio Network
HK Outdoor
(i) Post tax-rate equivalents of the pre-tax rates noted above are 10%.
No impairment was recognised for these CGUs at 31 December 2019.
ACCOUNTING POLICY
Impairment
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment and whenever there is an indication that they may be impaired. Assets that are subject to amortisation are tested
for impairment whenever changes in circumstances indicate that the asset’s carrying amount may exceed its recoverable
amount. An impairment charge is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell, and value in use. For the purpose of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are
largely independent of the cash inflows from other assets or groups of assets (CGUs). Non-financial assets other than goodwill
that suffer an impairment are reviewed for possible reversal of the impairment at each reporting date.
Notes to the Consolidated
Financial Statements (continued)
3.2 PROPERTY, PLANT AND EQUIPMENT
2018
$’000
Cost or fair value
Accumulated depreciation and impairment
Capital works in progress
Net book amount
Movements
Opening net book amount
Additions(i)
Depreciation(i)
Transfers and other adjustments(i)
Sale of Adshel(ii)
Foreign exchange differences(i)
Closing net book amount
(i) Movements partially relate to Adshel prior to sale.
(ii) Refer to note 7.1 for further details.
2019
$’000
Cost or fair value
Accumulated depreciation and impairment
Capital works in progress
Net book amount
Movements
Opening net book amount
Additions
Depreciation
Transfers and other adjustments
Disposal
Revaluation of freehold land and buildings
Foreign exchange differences
Closing net book amount
ANNUAL REPORT 2019
65
Freehold
land
1,083
–
–
1,083
1,083
–
–
–
–
–
Buildings
Plant and
equipment
707
(119)
–
588
625
–
(37)
–
–
–
67,511
(56,090)
3,558
14,979
82,390
17,484
Total
69,301
(56,209)
3,558
16,650
84,098
17,484
(11,574)
(11,611)
(990)
(990)
(72,558)
(72,558)
227
14,979
227
16,650
1,083
588
Freehold
land
2,391
–
–
2,391
1,083
–
–
–
–
1,308
–
2,391
Buildings
986
(49)
–
937
588
–
(105)
73
–
381
–
937
Plant and
equipment
72,746
Total
76,123
(59,014)
(59,063)
5,072
18,804
5,072
22,132
14,979
7,793
(4,085)
319
(204)
–
2
16,650
7,793
(4,190)
392
(204)
1,689
2
18,804
22,132
66
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
3.2 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
ACCOUNTING POLICY
Land and buildings are shown at fair value, based on periodic valuations by external independent valuers, less subsequent
depreciation for buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying
amount of the asset and the net amount is restated to the revalued amount of the asset. Increases in the carrying amounts
arising on revaluation of land and buildings are credited to asset revaluation reserve in equity. To the extent that the increase
reverses a decrease previously recognised in the income statement, the increase is first recognised in the income statement.
Decreases that reverse previous increases of the same asset are first charged against asset revaluation reserve directly in
equity to the extent of the remaining reserve attributable to the asset; all other decreases are charged to the income
statement.
Plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a
separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the
Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income
statement during the financial period in which they are incurred.
Depreciation
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or
revalued amounts, net of their residual values, over their estimated useful lives, as follows:
buildings: 50 years;
plant and equipment: 3-25 years; and
motor vehicles: 4-7 years.
The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at each balance date. Gains and losses on
disposals are determined by comparing proceeds with carrying amount and are included in the income statement.
Impairment of assets
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. Assets that are subject to depreciation (amortisation) are tested for impairment whenever
changes in circumstances indicate that the asset’s carrying amount may exceed its recoverable amount. An impairment charge
is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Assets that suffer an
impairment are reviewed for possible reversal of the impairment at each reporting date.
ANNUAL REPORT 2019
67
Notes to the Consolidated
Financial Statements (continued)
3.3 LEASES
As a lessee, the Group leases several assets including property, advertising spaces, motor vehicles and other equipment. The average
lease term is 4 years.
(i) AMOUNTS RECOGNISED IN THE BALANCE SHEET
Property
Advertising concession agreements
Motor vehicle and other
Total right-of-use assets
Current
Non-current
Total lease liabilities
31 December
2019
$’000
1 January
2019
$’000*
23,788
26,632
583
51,003
14,315
44,816
59,131
14,746
32,803
903
48,452
13,495
40,748
54,243
* For the adjustments recognised on adoption of AASB 16 Leases on 1 January 2019, please refer to note 1.
Additions to the right-of-use assets during the 2019 financial year were $15.9 million.
KEY JUDGEMENTS AND ESTIMATES
Whenever changes in circumstances indicate that the right-of-use asset carrying amount may exceed its recoverable amount,
the Group applies judgement when testing whether right-of-use assets have suffered any impairment. An impairment charge is
recognised for the amount by which the right-of-use asset’s carrying amount exceeds its recoverable amount. Right-of-use
assets that suffer an impairment are reviewed for possible reversal of the impairment at each reporting date.
Lease liabilities by relevant maturity groupings(i):
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
31 December
2019
$’000
16,247
33,997
20,422
70,666
(i) Maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed are the
contractual undiscounted cash flows.
The Group does not face a significant liquidity risk with regard to its lease liabilities. Lease liabilities are monitored within the
Group’s treasury function.
(II) AMOUNTS RECOGNISED IN THE STATEMENT OF PROFIT OR LOSS
The statement of profit or loss shows the following amounts relating to leases:
Property
Advertising concession agreements
Motor vehicle and other
Depreciation charge of right-of-use assets
Interest expense on lease liabilities
Rental and occupancy expense relating to short-term leases
Rental and occupancy expense relating to variable lease payments not included in the
measurement of the lease liability
The total cash outflow for leases in 2019 was $15.8 million.
2019
’000
3,678
10,020
323
14,021
2,343
2,387
2,367
68
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
3.3 LEASES (CONTINUED)
ACCOUNTING POLICY
Until the end of the 2018 financial year, leases of property, plant and equipment were classified as operating leases; See note 1
for details. From 1 January 2019, 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.
The Group leases various properties, advertising spaces, motor vehicles and other equipment. Rental contracts are typically
made for fixed periods of 1 to 15 years, but may be in excess of 20 years and include extension options.
Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the
lease and non-lease components based on their relative stand-alone prices.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease
agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor.
Leased assets may not be used as security for borrowing purposes.
Lease liabilities
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:
fixed payments (including in-substance fixed payments), less any lease incentives receivable;
variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the
commencement date;
amounts expected to be payable by the Group under residual value guarantees;
the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
payments of penalties for terminating the lease, if the lease term reflects the group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease liability excludes non-lease components including variable lease amounts which are not linked to a rate or index.
These components are expensed as incurred.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not
included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect,
the lease liability is reassessed and adjusted against the right-of-use asset.
Lease payments are allocated between principal 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.
Incremental borrowing rate
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which
is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual
lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar
economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect
changes in financing conditions since third-party financing was received;
uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group, which
does not have recent third-party financing; and
makes adjustments specific to the lease, e.g. term, country, currency and security.
ANNUAL REPORT 2019
69
Notes to the Consolidated
Financial Statements (continued)
3.3 LEASES (CONTINUED)
ACCOUNTING POLICY (CONTINUED)
Right-of-use assets
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.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line
basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying
asset’s useful life. While the Group revalues its land and buildings that are presented within property, plant and equipment, it
has chosen not to do so for the right-of-use buildings held by the Group.
Extension and termination options
Extension and termination options are included in a number of property leases across the Group. These are used to maximise
operational flexibility in terms of managing the assets used in the Group’s operations. The majority of extension and
termination options held are exercisable only by the Group and not by the respective lessor.
In determining the lease term, management considers all facts and circumstances that create an economic incentive to
exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are
only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
Rental and occupancy expense
Payments associated with short-term leases of equipment and vehicles and all 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 IT equipment and small items of office furniture.
Rental outgoings are treated as non-lease components and are recognised as expense in profit or loss. Other property
expenses which do not transfer substantially all of the asset's economic benefits to the Group are recognised on a straight-line
basis as expense in profit or loss.
70
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
3.4 RECEIVABLES
Trade receivables
Loss allowance
Other receivables
Total receivables
Note
2019
$’000
2018
$’000
44,155
52,202
4.3
(550)
(529)
43,605
51,673
2,095
3,504
45,700
55,177
The maximum exposure to credit risk at the reporting date is the higher of the carrying value and fair value of each receivable. The
Group does not hold any collateral as security. Refer to note 4.3 for credit risk and note 4.4 for fair value information.
ACCOUNTING POLICY
Trade receivables are generally settled within 30 to 45 days and therefore classified as current. Trade receivables are
recognised initially at the amount of consideration that is unconditional unless they contain significant financing components,
when they are recognised at fair value. Due to their short-term nature, the carrying value represents fair value. The Group
holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them
subsequently at amortised cost using the effective interest method.
Details about the group’s impairment policies and the calculation of the loss allowance are provided in note 4.3(b).
Notes to the Consolidated
Financial Statements (continued)
3.5 PROVISIONS
Current
Employee benefits
Contingent consideration
Onerous contracts
Provision for uncertain tax treatment
Other
Total current provisions
Non-current
Employee benefits
Other
Total non-current provisions
ANNUAL REPORT 2019
71
2019
$’000
4,920
–
4,897
3,000
–
12,817
1,191
3,993
5,184
2018
$’000
5,083
1,500
–
–
400
6,983
1,045
3,205
4,250
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
2019
Carrying amount at beginning of the year
Additional amounts recognised
Amounts used
Amounts reversed
Foreign exchange differences
Onerous
contracts
$’000
–
4,897
–
–
–
Provision for
uncertain tax
treatment
$’000
Contingent
consideration
$’000
–
3,000
–
–
–
1,500
–
(1,016)
(484)
–
–
Other
$’000
3,605
842
Total
$’000
5,105
8,739
(453)
(1,469)
–
(1)
(484)
(1)
3,993
11,890
Carrying amount at end of the year
4,897
3,000
The onerous contracts provision refers to financial guarantee costs related to Unbnd Group Pty Ltd, a joint venture which was sold on
19 September 2019 (refer to note 6.4).
The provision for uncertain tax treatment is in relation to a legacy financing arrangement (refer to note 5.1).
72
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
ACCOUNTING POLICY
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present
obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that
reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the
provision due to the passage of time is recognised as interest expense.
Employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave, and long service leave, in respect of
employees’ services up to the reporting date expected to be settled wholly within 12 months from the reporting date are
measured at the amounts expected to be paid when settled.
Liabilities for annual leave and long service leave not expected to be settled wholly within 12 months after the end of the
reporting date are measured as the present value of expected future payments to be made. Consideration is given to expected
future wage and salary levels, experience of employee departures and periods of service. Expected future payments are
discounted using market yields at the reporting date on corporate bonds rates with terms to maturity and currency that match,
as closely as possible, the estimated future cash outflows. Remeasurements as a result of experience adjustments and
changes in actuarial assumptions are recognised in profit or loss.
The obligations are presented as current liabilities in the consolidated balance sheet if the entity does not have an
unconditional right to defer settlement for 12 months after the reporting period, regardless of when the actual settlement is
expected to occur.
Contingent consideration
The contingent consideration provision comprises the fair value of amounts payable on business combinations and
investments in associates should certain pre-determined thresholds be met by the acquired businesses.
Onerous contracts
The onerous contracts provision represents contract where the expected economic benefit is lower than the cost for which the
Group is currently committed under the terms of the contract. The minimal net obligation under the contract is provided for.
The provision is calculated as the net of the estimated committed cost discounted to present value.
Provision for uncertain tax treatment
Where there is uncertainty over income tax treatments, the Group applies AASB Interpretation 23 Uncertainty over Income Tax
Treatments to determine how to recognise and measure deferred and current income tax assets and liabilities (refer to
note 5.1).
ANNUAL REPORT 2019
73
Notes to the Consolidated
Financial Statements (continued)
4
CAPITAL MANAGEMENT
4.1
INTEREST BEARING LIABILITIES
(A) CAPITAL RISK MANAGEMENT
The Group is focused on safeguarding its ability to continue as a going concern, so that it can provide returns for shareholders and
benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain an optimal capital structure, the Group may:
adjust dividends paid to shareholders;
return capital to shareholders;
issue new shares; or
sell assets to reduce debt.
(B) STANDBY ARRANGEMENTS AND CREDIT FACILITIES
Entities in the Group have access to:
Loan facilities (i)
Unsecured bank loan facilities
Amount of facility utilised (ii)
Amount of available facility
Overdraft facilities
Unsecured bank overdraft facilities
Amount of credit utilised
Amount of available credit
(i) Pertaining to the revolving cash advance facility.
(ii) Relating to bank guarantees drawn.
2019
$’000
259,146
(9,150)
249,996
1,500
–
1,500
2018
$’000
259,053
(3,023)
256,030
1,500
–
1,500
During the year, the Group extended the majority of its debt facilities by one year to 1 January 2024. There were no bank loans drawn
as at 31 December 2019 and 2018.
Net borrowing costs of $1,644,000 (2018: $2,058,000) are disclosed in other non-current assets on the balance sheet.
ACCOUNTING POLICY
Interest bearing liabilities are initially recognised at fair value less attributable transaction costs and subsequently measured at
amortised cost. Any difference between cost and redemption value is recognised in the income statement over the period of
the borrowing on an effective interest basis.
Costs incurred in connection with the arrangement of borrowings are deferred and amortised over the period of the
borrowing. These are shown as an asset in the balance sheet.
74
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
4.2 CASH FLOW INFORMATION
RECONCILIATION OF CASH
Cash at end of the year, as shown in the statement of cash flows, comprises:
Cash at bank and on hand
The below reconciliation relates to both continued and discontinued operations.
Reconciliation of (loss)/profit for the year to net cash inflows/(outflows)
from operating activities:
(Loss)/profit for the year
Depreciation and amortisation
Borrowing costs amortisation
Share of profits of associate and joint ventures
Interest income from associate and joint venture
Dividend income
Other non-cash items
Joint venture impairment and related closure costs
Loss on disposal of investment in joint venture
Loss on disposal of business
Share-based payments expense
Gain on sale of Adshel
Gains on financial assets held at fair value through profit or loss
Net loss/(gain) on sale of non-current assets
Provisions for uncertain tax treatments
Changes in assets and liabilities net of effect of acquisitions and changes
in accounting policy:
Trade and other receivables
Inventories
Prepayments
Change in current tax /deferred tax liabilities
Trade and other payables and provision for employee benefits
Net cash inflows/(outflows) from operating activities
2019
$’000
2018
$’000
110,972
128,355
(9,850)
18,778
676
(2,527)
(71)
(524)
300
5,423
13,355
1,508
1,000
–
(2,037)
4
33,000
8,488
–
(2,693)
(15,295)
(4,701)
44,834
231,029
18,802
547
(468)
(79)
–
439
–
–
–
1,281
(179,073)
(1,912)
(59)
–
(2,170)
757
(6,802)
(54,089)
(13,409)
(5,206)
ACCOUNTING POLICY
For the purposes of presentation on the statement of cash flows, cash and cash equivalents include cash on hand and
deposits held at call with financial institutions, net of bank overdrafts.
ANNUAL REPORT 2019
75
Notes to the Consolidated
Financial Statements (continued)
4.3 FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks: market risk (including interest rate risk and foreign exchange risk), credit
risk and liquidity risk.
The Group’s overall financial risk management program focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the financial performance of the Group. The Group will use derivative financial instruments such as
interest rate swaps to hedge certain risk exposures. The Group uses different methods to measure different types of risk to which it is
exposed. These methods include sensitivity analysis in the case of interest rate and foreign exchange risk and ageing analysis for
credit risk.
Financial risk management is carried out by the Group Treasury function under policies approved by the Board of Directors. The
policies provide principles for overall risk management, as well as covering specific areas, such as interest rate risk, foreign exchange
risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
(A) MARKET RISK
(i) Cash flow and fair value interest rate risk
As at 31 December 2019, the Group had no long-term borrowings outstanding. The Group is exposed to interest rates risk through its
cash and cash equivalents balance. A change of +/- 1% per annum with all other variables being constant would impact equity and net
profit by $0.8 million. The parent entity has no significant exposure to a change in interest rates.
(ii) Foreign exchange risk
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities that are denominated in a
currency that is not the entity’s functional currency. Individual transactions are assessed, and forward exchange contracts are used to
hedge the risk where deemed appropriate.
While the Group as a whole has assets and liabilities in multiple currencies, individual entities in the Group do not have a significant
foreign exchange exposure to receivables or payables in currencies that are not their functional currency.
(iii) Price risk
The Group is not exposed to significant price risk.
(B) CREDIT RISK
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. Credit risk principally arises from customer receivables, cash and cash equivalents, derivative financial instruments,
deposits with banks and financial institutions and financial guarantees (refer to note 7.2 for details).
For banks and financial institutions, the creditworthiness is assessed prior to entering into arrangements and approved by the Board.
For customer receivables, the maximum exposure to credit risk at the reporting date is the higher of the carrying value and fair value
of each receivable. Risk control involves the assessment of the credit quality, taking into account financial position, past experience
and other factors. The utilisation of credit limits is regularly monitored.
Where appropriate, the Group undertakes all of its transactions in foreign exchange contracts with financial institutions.
Impairment of financial assets
The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The Group uses
judgement when determining whether the credit risk of a financial asset has increased significantly since initial recognition and when
estimating expected credit loss (ECL). The Group considers reasonable and supportable information that is relevant and available
without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Group’s historical
experience, current market conditions as well as forward-looking estimates at the end of each reporting period.
76
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
4.3 FINANCIAL RISK MANAGEMENT (CONTINUED)
Trade receivables and contract assets
The Group applies the AASB 9 Financial Instruments simplified approach to measuring ECL which uses a lifetime expected loss
allowance for all trade receivables and contract assets.
To measure the ECLs, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the
days past due. The contract assets relate to unbilled work in progress and have substantially the same risk characteristics as the trade
receivables for the same types of contracts. The Group has therefore concluded that the ECL rates for trade receivables are a
reasonable approximation of the loss rates for the contract assets.
The ECL rates are based on the payment profiles of sales over a period of 36 months before 31 December 2019 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.
On this basis, the loss allowance determined for trade receivables as at 31 December 2018 and 2019 is as follows:
2018
Expected credit loss %
Trade receivables – gross carrying amount
Loss allowance
2019
Expected credit loss %
Trade receivables – gross carrying amount
Loss allowance
Past due
Less than
one month
One to three
months
Three to six
months
$’000
$’000
$’000
1.4%
9,222
(126)
4.3%
2,248
(96)
33.7%
578
(195)
Over six
months
$’000
62.5%
Total
$’000
165
52,202
(103)
(529)
Past due
Less than
one month
One to three
months
Three to six
months
$’000
$’000
$’000
Over six
months
$’000
Total
$’000
4.8%
1,471
(71)
11.6%
18.6%
59.7%
814
(94)
456
(85)
233
44,155
(139)
(550)
Current
$’000
0.0%
39,989
(9)
Current
$’000
0.4%
41,181
(161)
The loss allowances for trade receivables as at 31 December reconcile to the opening loss allowances as follows:
Opening loss allowance as at 1 January
Expected credit losses recognised in profit or loss
Sale of Adshel (i)
Receivables written off as uncollectible
Closing loss allowance at 31 December
(i) Refer to note 7.1 for further details.
2019
$’000
529
96
–
(75)
550
2018
$’000
781
–
(155)
(97)
529
ANNUAL REPORT 2019
77
Notes to the Consolidated
Financial Statements (continued)
4.3 FINANCIAL RISK MANAGEMENT (CONTINUED)
(C) LIQUIDITY RISK
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an
adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the
underlying business, Group Treasury aims at maintaining flexibility in funding by keeping committed credit lines available.
Management monitors rolling forecasts of the Group’s liquidity reserve on the basis of expected cash flows.
The Group analyses financial liabilities, including interest to maturity, into relevant maturity groupings based on the remaining period
at the reporting date to the contractual maturity date. Financial liabilities include trade and other payables and lease liabilities.
The contractual undiscounted cash flows attributed to trade and other payables amounted to $24,092,000 (2018: $24,250,000) which
are all due within one year. This excludes any non-current amounts that do not meet the definition of a financial liability under
Australian Accounting Standards (2018: $610,000).
The relevant maturity groupings for lease liabilities are detailed in note 3.3. Details of credit standby arrangements and loan facilities
are included in note 4.1.
78
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
4.4 FAIR VALUE MEASUREMENTS
The Group measures and recognises the following assets and liabilities at fair value on a recurring basis:
financial assets at fair value through profit or loss; and
land and buildings.
(A) FAIR VALUE HIERARCHY
AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level of the following fair value measurement
hierarchy:
level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or
indirectly; and
level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
(i) Recognised fair value measurements
The following table presents the Group’s financial assets and financial liabilities measured and recognised at fair value at
31 December 2018 and 2019:
2018
Recurring fair value measurements
Financial assets
Financial assets at fair value through profit or loss
Shares in other corporations
Total financial assets
Non-financial assets
Freehold land and buildings
Freehold land
Buildings
Total non-financial assets
2019
Recurring fair value measurements
Financial assets
Financial assets at fair value through profit or loss
Shares in other corporations
Total financial assets
Non-financial assets
Freehold land and buildings
Freehold land
Buildings
Total non-financial assets
Note
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
6.3
3.2
3.2
–
–
–
–
–
–
–
–
–
–
35,403
35,403
35,403
35,403
1,083
588
1,671
1,083
588
1,671
Total
$’000
Note
Level 1
$’000
Level 2
$’000
Level 3
$’000
6.3
3.2
3.2
–
–
–
–
–
–
–
–
–
–
37,346
37,346
37,346
37,346
2,391
937
3,328
2,391
937
3,328
ANNUAL REPORT 2019
79
Notes to the Consolidated
Financial Statements (continued)
4.4 FAIR VALUE MEASUREMENTS (CONTINUED)
The Group also has a number of assets and liabilities which are not measured at fair value, but for which fair values are disclosed in
the notes.
The carrying amounts of trade receivables and payables are assumed to approximate their fair values due to their short-term nature.
The level 3 inputs used by the Group are derived and evaluated as follows.
The fair value of lease liabilities disclosed in note 3.3 is estimated by discounting the minimum lease payments at the Group’s
incremental borrowing rate. For the period ended 31 December 2019, the borrowing rates were determined to be between 3.4% and
5.2% per annum, depending on the type of lease.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case
for shares in other corporations disclosed in note 6.3, which are valued using discount rates, forecast cash flows, EBITDA multiples
estimated by management based on comparable transactions and industry data.
The Group obtains independent valuations at least every three to five years for its freehold land and buildings (classified as property,
plant and equipment in note 3.2), less subsequent depreciation for buildings. This is considered sufficient regularity to ensure that the
carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period. All
resulting fair value estimates for properties are included in level 3.
During the year, a fair value gain of $2.0 million (2018: $1.9 million) was recorded in other income for shares in other corporations.
Further, freehold land and buildings were adjusted to reflect independent valuations carried out in the year (refer to note 3.2). There
were no other material level 3 fair value movements during the year.
4.5 CONTRIBUTED EQUITY
Issued and paid up share capital
(A) MOVEMENTS IN CONTRIBUTED EQUITY DURING THE FINANCIAL YEAR
2019
$’000
2018
$’000
1,483,685
1,492,555
Balance at beginning of the year
Share buy-back(i)
Balance at end of the year
2019
Number
shares
2018
Number
shares
2019
$’000
2018
$’000
285,598,399
308,912,092
1,492,555 1,531,567
(5,369,239)
(23,313,693)
(8,870)
(39,012)
280,229,160
285,598,399
1,483,685 1,492,555
(i) During 2019, the Company purchased and cancelled on-market 5.4 million shares (2018: 23.3 million). The shares were acquired at an average price
of $1.65 per share (2018: $1.67).
(B) ORDINARY SHARES
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the
number of and amounts paid on the shares held.
On a show of hands, every holder of ordinary shares present at a meeting in person or by proxy, attorney or corporate representative
is entitled to one vote, and upon a poll each share is entitled to one vote.
ACCOUNTING POLICY
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown
in equity as a deduction, net of tax, from the proceeds.
80
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
4.6 SHARE-BASED PAYMENTS
As at 1 January
Granted
Exercised
Forfeited
Other changes
As at 31 December
2019
Number of rights
1,446,914
189,099
(327,400)
–
83,318
1,391,931
2018
Number of rights
1,049,753
936,245
(1,111,599)
(7,813)
580,328
1,446,914
Share rights outstanding at the end of the year have the following vesting date and weighted average fair value:
Incentive plan
2017 TIP¹
2018 TIP2, 3
2019 TIP⁴
As at 31 December
Vesting date
1–Jan–19
1–Jan–20
1-Jan-21
Weighted
average fair
value
$2.27
$1.84
$1.60
Weighted average remaining contractual life of rights outstanding at end of period
Rights
2019
–
1,190,966
200,965
1,391,931
2018
327,400
1,119,514
–
1,446,914
2019
2018
0.1 year
0.8 years
(1)
(2)
(3)
(4)
The date on which the fair value of the 2017 TIP rights were calculated, is the deemed grant date of the rights for accounting purposes. An actual
grant of rights was not made to the CEO & Managing Director until after shareholder approval had been received at the Annual General Meeting,
and for all other Executive KMP on 14 February 2018. The 2017 TIP required that participants receive an additional allocation of shares at vesting
equal to the dividends paid on vested rights over the performance and service period. 142,548 additional rights were issued to satisfy this
requirement in respect of 2018. This is disclosed in other changes in the 2018 reconciliation above.
The date on which the fair value of the 2018 TIP rights were calculated, is the deemed grant date of the rights for accounting purposes. An actual
grant of rights was not made to the CEO & Managing Director until after shareholder approval had been received at the Annual General Meeting,
and for all other Executive KMP on 13 February 2019. The 2018 TIP required that participants receive an additional allocation of shares at vesting
equal to the dividends paid on vested rights over the performance and service period. 437,780 additional rights were issued to satisfy this
requirement in respect of 2018. This is disclosed in other changes in the 2018 reconciliation above.
The 2018 TIP requires that participants receive an additional allocation of shares at vesting equal to the dividends paid on vested rights over the
performance and service period. 83,318 additional rights were issued to satisfy this requirement in respect of 2019. This is disclosed in other
changes in the 2019 reconciliation above.
The date on which the fair value of the 2019 TIP rights were calculated, is the deemed grant date of the rights for accounting purposes. An actual
grant of rights will not be made to the CEO & Managing Director until after shareholder approval has been received at the Annual General
Meeting, and for all other Executive KMP on a date to be determined after this annual report has been issued.
Share-based payments expense related to the above tables for the year was $1,000,000 (2018: $1,281,000).
Further information of the rights granted to Executive KMP is contained in the Remuneration Report found on pages 28 to 44 of the
Annual Report.
The TIP, encompassing the 2019 financial year, provides for the grant of rights which will convert to fully paid ordinary shares following
the achievement of performance measures in 2019, and satisfaction of a one-year service period.
ANNUAL REPORT 2019
81
Notes to the Consolidated
Financial Statements (continued)
4.6 SHARE-BASED PAYMENTS (CONTINUED)
ACCOUNTING POLICY
Share-based compensation benefits are provided to employees via share-based payments as part of a Total Incentive Plan (TIP).
The fair value of rights granted under the TIP is recognised as an employee benefits 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.
The fair value is derived using the closing share price on the grant date.
The fair value of the rights granted is adjusted to reflect any market vesting condition but excludes the impact of 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 Group revises its estimate of the number of rights that are expected to
become exercisable.
The employee benefits 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.
82
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
4.7 RESERVES AND ACCUMULATED LOSSES
Reserves
Asset revaluation reserve
Foreign currency translation reserve
Share-based payments reserve
Hedging reserve
Transactions with non-controlling interests reserve
Treasury shares reserve
Total reserves
Asset revaluation reserve
Balance at beginning of the year
Revaluation of freehold land and buildings
Balance at end of the year
Foreign currency translation reserve
Balance at beginning of the year
Reclassification of foreign currency translation reserve to profit or loss on sale of Adshel
Net exchange difference on translation of foreign operations
Balance at end of the year
Share-based payments reserve
Balance at beginning of the year
Share-based payments expense
Transfers within equity
Issue of shares to employees
Balance at end of the year
Hedging reserve
Balance at beginning of the year
Net gain on fair value hedges
Balance at end of the year
Transactions with non-controlling interests reserve
Balance at beginning of the year
Balance at end of the year
Treasury shares reserve
Balance at beginning of the year
Issue of treasury shares
Transfers within equity
Treasury shares vested to employees
Balance at end of the year
2019
$’000
2,361
(45)
10,422
–
(53,283)
(3,198)
(43,743)
786
1,575
2,361
11
–
(56)
(45)
9,829
1,000
70
(477)
10,422
–
–
–
(53,283)
(53,283)
(1,152)
(2,537)
14
477
(3,198)
2018
$’000
786
11
9,829
–
(53,283)
(1,152)
(43,809)
786
–
786
(5,239)
3,504
1,746
11
9,347
1,418
(112)
(824)
9,829
(544)
544
–
(53,283)
(53,283)
(1,779)
(197)
–
824
(1,152)
ANNUAL REPORT 2019
83
Notes to the Consolidated
Financial Statements (continued)
4.7 RESERVES AND ACCUMULATED LOSSES (CONTINUED)
NATURE AND PURPOSE OF RESERVES
ASSET REVALUATION RESERVE
The asset revaluation reserve is used to record increments and decrements on the revaluation of non-current assets, as described in
note 3.2. The balance standing to the credit of the reserve may be used to satisfy the distribution of bonus shares to shareholders
and is only available for the payment of cash dividends in limited circumstances as permitted by law. In the event of the sale of an
asset, the revaluation surplus is transferred to accumulated losses.
FOREIGN CURRENCY TRANSLATION RESERVE
Exchange differences arising on translation of any foreign controlled entities are recognised in other comprehensive income and the
foreign currency translation reserve as described in note 7.5.
SHARE-BASED PAYMENTS RESERVE
The share-based payments reserve is used to recognise the fair value of performance rights issued but not yet vested as described in
note 4.6.
HEDGING RESERVE
The hedging reserve is used to record unrealised gains or losses on cash flow hedging instruments that are recognised in other
comprehensive income.
TRANSACTIONS WITH NON-CONTROLLING INTERESTS RESERVE
The transactions with non-controlling interest reserve is used to record the differences described in note 6.2 which may arise as a
result of transactions with non-controlling interests that do not result in a loss of control.
TREASURY SHARES RESERVE
APN News & Media Employee Share Trust (Trust), a controlled entity, was established in 2017. The Trust purchased 1,432,933 (2018:
107,465) additional shares in the Company during the year. The number of shares which vested to employees during the year was
209,520 (2018: 343,592). The total shareholding in the Company as at 31 December 2019 was 1,728,704 shares at an average price of
$1.85 (2018: 505,291 shares at $2.28). This shareholding is disclosed as treasury shares and deducted from equity.
Performance rights that relate to the 2016 and 2017 TIP have vested and converted into shares; however, they have not been issued
and remain in the Trust. Treasury shares for the 2018 TIP have been purchased; however, they have not vested yet and therefore
remain in the Trust.
Treasury shares for the 2019 TIP are to be purchased after the date of this report.
The treasury shares reserve is used to recognise the value of shares purchased by the Trust.
ACCUMULATED LOSSES
Balance at beginning of the year (i)
Change in accounting policy – lease accounting (ii)
Restated total at beginning of the financial year
(Loss)/profit attributable to owners of the parent entity
Transfer from reserves
Dividends paid to shareholders
Balance at end of the year
2019
$’000
(905,894)
(3,587)
(909,481)
(14,195)
(84)
(22,776)
(946,536)
2018
$’000
(887,511)
–
(887,511)
225,544
112
(244,039)
(905,894)
(i) During the year the Group made an adjustment to prior period deferred tax liabilities. As a result, deferred tax liabilities decreased by $7,584,000
(refer to note 5.1) and accumulated losses decreased by $7,584,000. The income statement for the prior year was not adjusted as the amount
relating to the comparative period is insignificant.
(ii) The Group has initially applied AASB 16 Leases at 1 January 2019. Under the modified retrospective transition method chosen, comparative
information has not been restated. Refer to note 1.
84
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
4.8 DIVIDENDS
Final dividend for the year ended 31 December 2018 of 4.0 cents per share, fully franked, paid
on 15 March 2019 (2017: 4.0 cents)
Paid in cash
Interim dividend for the year ended 31 December 2019 of 4.0 cents per share fully franked
(2018: 3.0 cents)
Paid in cash
Special dividend for the year ended 31 December 2018 of 72.0 cents per share fully franked
Paid in cash
Total dividends
2019
$’000
11,424
11,424
11,352
11,352
–
–
22,776
2018
$’000
12,357
12,357
9,267
9,267
222,415
222,415
244,039
Franking credits available for subsequent financial years at the 30% corporate tax rate after
allowing for tax payable in respect of the current year’s profit and tax refunds due
21,449
11,393
Dividends not recognised at year end
Since year end, the Directors have declared a fully franked final dividend of 4.6 cents per share.
The aggregate amount of the dividend expected to be paid on 23 March 2020 out of retained
profits at 31 December 2019, but not recognised as a liability at year end, is:
12,891
11,424
4.9 COMMITMENTS
From 1 January 2019, the Group has recognised lease liabilities and right-of-use assets in respect of operating leases and rental
commitments, except for short-term and low-value leases. Refer to note 3.3(I) for the maturity profile of lease liabilities as at 31
December 2019.
The below summarises commitments for minimum lease payments in relation to operating leases and rental commitments
contracted for but not recognised as liabilities as at 31 December 2018, prior to adoption of AASB 16 Leases:
Minimum lease payments
Not later than one year
Later than one year but not later than five years
Later than five years
Total operating lease and rental commitments
Representing:
Cancellable operating leases and rental commitments
Non-cancellable operating leases and rental commitments
Total operating lease and rental commitments
Capital expenditure contracted for at balance date but not recognised as liabilities
2019
$’000
–
2018
$’000
14,269
30,339
4
44,612
31
44,581
44,612
2018
$’000
688
Notes to the Consolidated
Financial Statements (continued)
5
TAXATION
5.1
INCOME TAX AND DEFERRED TAX
(A)
INCOME TAX
Current tax expense
Provisions for uncertain tax treatments
Deferred tax benefit/(expense)
Adjustment for current tax of prior periods
Income tax expense
Income tax expense is attributable to:
Profit from continuing operations
Profit from discontinued operations
Total income tax expense
ANNUAL REPORT 2019
85
2019
$’000
9,482
33,000
502
(3,105)
39,879
39,879
–
39,879
2018
$’000
33,607
–
(5,666)
(162)
27,779
19,063
8,716
27,779
Income tax expense differs from the prima facie tax as follows:
Profit before income tax expense
30,029
258,808
Prima facie income tax at 30%
Difference in international tax treatments and rates
Provisions for uncertain tax treatments
Non-deductible amortisation
Foreign exchange losses
Adjustment for current tax of prior periods
Tax losses written off/not recognised
Utilisation of unrecognised capital losses and capital gain tax exemptions
Adshel sale transaction costs
Other
Income tax expense
9,009
109
33,000
205
(231)
(3,105)
133
–
–
759
39,879
77,642
339
–
–
–
(162)
19
(54,187)
3,437
691
27,779
KEY JUDGEMENTS AND ESTIMATES
The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is
required in determining the provision for income taxes. There are certain transactions and calculations undertaken during the
ordinary course of business for which the ultimate tax determination is uncertain. The Group estimates its tax liabilities based
on the Group’s understanding of the tax law. Where the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in
which such determination is made.
86
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
5.1
INCOME TAX AND DEFERRED TAX (CONTINUED)
New Zealand branch matter
On 22 January 2018 and 1 May 2018, the Australian Taxation Office (ATO) issued amended income tax assessments in relation to the
previously disclosed New Zealand branch matter (involving the licensing of New Zealand mastheads by a New Zealand branch of an
Australian HT&E Group entity). The New Zealand branch was closed as part of the demerger of NZME Limited on 29 June 2016.
The amended assessments are for the financial years ended 31 December 2009 to 31 December 2015 inclusive and HT&E has been
advised the ATO intends to expand its position to the year ended 31 December 2016.
On 2 August 2018, the ATO determined its position on the application of penalties and interest relating to the New Zealand branch
matter. The ATO is seeking to apply penalties at the rate of 50% to the years 2009 to 2015.
In summary, the ATO’s current position in relation to this matter involves $102.5 million of tax adjustments plus $49 million of
penalties plus $27.5 million of interest.
The issue of amended assessments represents a formalisation of the ATO’s position. HT&E has lodged objections with the ATO
regarding the assessments for the years ended 31 December 2009 to 31 December 2016 inclusive, and objections to the penalties
and interest assessments. While these dispute processes are being completed, the taxpayer is typically required to deposit with the
ATO 50% of the tax in dispute. The deposit, totalling $50.7 million, was paid in two instalments, with $35.7 million paid on 15 February
2018 and $15.0 million paid on 25 May 2018.
The Company continues to consult with its advisers. The Company remains satisfied that its treatment of the New Zealand branch
matter is consistent with relevant taxation legislation and will if necessary, contest the matter through litigation proceedings. The
potential outcomes include resolution through litigation or settlement, which may involve no payment, or payment of either a portion
or the entire amount at risk.
Other matters: New Zealand financing arrangement
The ATO is also auditing other matters within the Group covering the financial years ended 31 December 2010 to 31 December 2013
inclusive. One matter involved a financing arrangement involving the Company’s former New Zealand operations. This legacy financing
arrangement was effectively unwound in 2016 (with the demerger of NZME Limited) and is unrelated to the New Zealand branch
matter above. The ATO has disputed the tax treatment of this financing arrangement.
As at the date of this report, there is no certainty as to whether any other proposed adjustments or disputes will be raised by the ATO
as a result of any matters under review in this audit.
AASB Interpretation 23 Uncertainty over Income Tax Treatments
AASB Interpretation 23 Uncertainty over Income Tax Treatments applies for annual reporting periods beginning from 1 January 2019 and
clarifies the application of the recognition and measurement criteria where there is uncertainty over income tax treatments.
In respect of the New Zealand branch matter, given the range of possible outcomes and in light of recent correspondence and
discussions with the ATO and consultation with the Company’s advisers, AASB Interpretation 23 has been applied using the sum of
the probability-weighted amounts to predict the resolution of the uncertainty. A tax expense of $30 million has been recorded in
respect of the New Zealand branch matter in line with the requirements of AASB Interpretation 23. This figure is an estimate involving
judgement of the probability-weighted amounts and may not reflect the final outcome. This amount is offset against the deposit of tax
in dispute.
In respect of the New Zealand financing arrangement, similarly given the range of possible outcomes and in light of recent
correspondence and discussions with the ATO and consultation with the Company’s advisers, AASB Interpretation 23 has been
applied using the sum of the probability-weighted amounts to predict the resolution of the uncertainty. A tax expense of $3 million
has been recorded in respect of the New Zealand financing arrangement in line with the requirements of AASB Interpretation 23. This
figure is an estimate involving judgement of the probability-weighted amounts and may not reflect the final outcome. This amount is
included in provisions as disclosed in note 3.5.
ANNUAL REPORT 2019
87
Notes to the Consolidated
Financial Statements (continued)
5.1
INCOME TAX AND DEFERRED TAX (CONTINUED)
ACCOUNTING POLICY
The new AASB Interpretation 23 Uncertainty over Income Tax Treatments explains how to recognise and measure deferred and
current income tax assets and liabilities where there is uncertainty over a tax treatment. In particular, it discusses:
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 the 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, ie 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 best predicts the resolution of the uncertainty; and
that the judgements and estimates made must be reassessed whenever circumstances have changed or there is new
information that affects the judgements.
While there are no new disclosure requirements, the Group used the guidance of this Interpretation to provide information
about judgements and estimates made in relation to its existing tax in dispute matters.
(B) DEFERRED TAX ASSETS AND LIABILITIES
2018
Employee benefits
Doubtful debts
Accruals/restructuring
Intangible assets
Depreciation
Other (i)
2019
Employee benefits
Doubtful debts
Accruals/restructuring
Intangible assets
Depreciation
Right-of-use assets (iii)
Lease liabilities (iii)
Other (i)
Balance
1 Jan 18
$’000
Recognised in
profit or loss
$’000
Recognised
in equity
$’000
2,399
235
9,570
(146,376)
(8,861)
18
(143,015)
78
(30)
(4,987)
1,756
1,183
(3,666)
(5,666)
–
–
2
(153)
(23)
–
(174)
Other
movements
$’000 (ii)
(643)
(46)
(2,051)
34,087
7,775
(241)
Balance
31 Dec 18
$’000
1,834
159
2,534
(110,686)
74
(3,889)
38,881
(109,974)
Balance
1 Jan 19
$’000
Recognised in
profit or loss
$’000
Recognised
in equity
$’000
Other
movements
$’000
Balance
31 Dec 19
$’000
1,834
159
2,534
(110,686)
74
–
–
(3,889)
(109,974)
(29)
6
909
1,921
92
1,262
(567)
(3,092)
502
–
–
–
–
–
–
–
–
–
–
(4,582)
5,529
(113)
834
(3,025)
3,025
–
–
1,805
165
3,443
(108,765)
166
(6,345)
7,987
(7,094)
(108,638)
(i) During the year the Group made an adjustment to prior period deferred tax liabilities. As a result, deferred tax liabilities decreased by
$7,584,000 and accumulated losses decreased by $7,584,000 (refer to note 4.7). The income statement for the prior year was not adjusted as
the amount relating to the comparative period is insignificant.
(ii) Deferred tax balances relating to Adshel, included in carrying amount of net assets sold.
(iii) The Group has initially applied AASB 16 Leases at 1 January 2019. Under the modified retrospective transition method chosen, comparative
information has not been restated and the deferred tax effect at transition have been recognised in equity. Refer to note 1.
The Group has not recognised deferred tax assets of $4.1 million (2018: $4.2 million) in respect of HK Outdoor tax losses carried
forward.
88
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
5.1
INCOME TAX AND DEFERRED TAX (CONTINUED)
ACCOUNTING POLICY
The income tax expense for the year is the tax payable on the current year’s taxable income based on the applicable income
tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences
between the tax bases of assets and liabilities and their carrying amounts in the financial statements and also adjusted for
unused tax losses utilised in the year.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the Group’s subsidiaries and associates operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is
subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax
authorities.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets
are recovered or liabilities are settled, based on those enacted tax rates applicable to each jurisdiction. The relevant tax rates
are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or
liability.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are not recognised for temporary differences between the carrying amount and tax bases of
investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary
differences and it is probable that the differences will not reverse in the foreseeable future. Temporary differences in relation
to indefinite life intangible assets are determined with reference to their respective capital gains tax bases in respect of assets
for which capital gains tax will apply.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where
the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle
the liability simultaneously.
Current and deferred tax balances attributable to amounts recognised in other comprehensive income are also recognised in
other comprehensive income.
The Company and its wholly-owned Australian controlled entities are part of a tax-consolidated group under Australian
taxation law. HT&E Limited is the head entity in the tax-consolidated group. Entities within the tax-consolidated group have
entered into a tax funding arrangement and a tax sharing agreement with the head entity. Under the terms of the tax funding
arrangement, HT&E Limited and each of the other entities in the tax-consolidated group have agreed to pay (or receive) a tax
equivalent payment to (or from) the head entity, based on the current tax liability or current tax asset of the entity. Each entity
in the tax-consolidated group measures its current and deferred taxes as if it continued to be a separate taxable entity in its
own right.
Judgement is required in relation to the recognition of carried forward tax losses as deferred tax assets. The Group assesses
whether there will be sufficient future taxable profits to utilise the losses based on a range of factors, including forecast
earnings and whether the unused tax losses resulted from identified causes which are unlikely to recur.
ANNUAL REPORT 2019
89
Notes to the Consolidated
Financial Statements (continued)
6
GROUP STRUCTURE
6.1 CONTROLLED ENTITIES
The consolidated financial statements incorporate the assets, liabilities and results of the following controlled entities in accordance
with the accounting policy described in note 7.5.
Name of entity
5AD Broadcasting Company Pty Ltd1
Actraint No. 116 Pty. Limited1
Airplay Media Services Pty. Limited1
APN News & Media Employee Share Trust
ARN Adelaide Pty Ltd1
ARN Brisbane Pty Ltd1,2
ARN Broadcasting Pty Ltd1
ARN Communications Pty Ltd1,2
ARN Limited Partnership
ARN New Zealand Pty. Limited1,2
ARN Overseas Pty. Limited1,2
ARN Perth Pty Limited1
ARN South Australia Pty Limited1
ARN Superannuation Pty Ltd1
ARNSAT Pty Limited1
Asia Posters Sdn Bhd3
Australian Outdoor Pty Limited1,2
Australian Radio Network Pty Limited1,2
Australian Radio Network Sales Pty Ltd1
Biffin Pty. Limited1,2
Black Mountain Broadcasters Pty. Limited
Blue Mountains Broadcasters Pty Limited1
Brisbane FM Radio Pty Ltd
Buspak Advertising (China) Limited
Buspak Advertising (Hong Kong) Limited
C.R. Phillips Investments Pty Ltd1
Capital City Broadcasters Pty. Limited1
Cardcorp (Manufacturing) Pty. Limited
Catalogue Central Pty Limited1
Central Coast Broadcasting Pty.1
Citysites Outdoor Advertising (Albert) Pty. Ltd.1
Citysites Outdoor Advertising (S. Aust.) Pty. Ltd.1
Citysites Outdoor Advertising (W Aust) Pty Ltd1
Citysites Outdoor Advertising Pty. Ltd.1
Cody Outdoor International (HK) Limited
Commonwealth Broadcasting Corporation Pty Ltd1,2
Conversant Media Pty Ltd1
Covette Investments Pty Limited1,2
Double T Radio Pty Ltd1
Emotive Pty Limited
Evitome Pty Limited1
Farm Fantastic Pty Limited
Gergdaam Capital Pty Limited1,2
Country of incorporation/
establishment
Equity holding
2019
%
2018
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Malaysia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Hong Kong
Hong Kong
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Hong Kong
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
50
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
100
50
100
90
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
6.1 CONTROLLED ENTITIES (CONTINUED)
Name of entity
Gulgong Pty. Limited1,2
Haswell Pty. Limited1,2
HT&E Braeside Pty Ltd
HT&E Broadcasting (Regionals) Pty. 1,2
HT&E Broadcasting Investments Pty Ltd1
HT&E Business Magazines Pty Ltd1
HT&E Digital Pty Ltd 1
HT&E Finance Pty Limited1,2
HT&E International Pty Ltd1,2
HT&E Milperra Pty Ltd
HT&E Online (Australia) Pty Ltd1
HT&E Operations Ltd1,2
iNC Network Australia Pty Ltd1
KAFM Broadcasters Proprietary Limited1
Level 3 Investments Pty Limited1
Level 4 Investments Pty Limited1
Lunchbox Investments Pty Ltd
Media Tek Pty. Limited1,2
Melbourne F.M. Facilities Pty. Limited
Nathco Holdings Pty. Ltd.1,2
Perth Sign Company Pty Ltd1
Phillips Finance Pty Ltd1
Phillips Neon Pty Ltd1
Provincial Investments Pty. Ltd.1
Radio 96FM Perth Pty Limited1
RadioWise Pty Ltd1
Regmax Pty Limited1
Shelter Advertising Pty Ltd1
Southern State Broadcasters Pty. Limited1
Speedlink Services Pty Ltd1
Street Furniture (NSW) Pty Ltd1
SunCoastal F.M. Radio Pty. Ltd.1
Sydney FM Facilities Pty Ltd
The Internet Amusements Group Pty Limited1
The Level 3 Partnership
The Roar Sports Media Pty Ltd1
Tibbar Broadcasting Pty Limited1
Universal Radio Pty. Ltd.1
Urban Design Furniture Pty. Ltd.1
Wesgo1,2
West Sydney Radio Pty Ltd1
Westat Research Pty Ltd1
Wilson & Horton Australia Pty Ltd1
Wilson & Horton Finance Pty Ltd1,2
Country of incorporation/
establishment
Equity holding
2019
%
2018
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
50
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
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
ANNUAL REPORT 2019
91
Notes to the Consolidated
Financial Statements (continued)
6.1 CONTROLLED ENTITIES (CONTINUED)
(1) These companies are parties to a deed of cross guarantee dated 28 April 2017 under which each company guarantees the debts of the others
(Deed of Cross Guarantee). These companies represent a Closed Group for the purposes of ASIC Corporations (Wholly-owned Companies) Instrument
2016/785 and there are no other members of the Extended Closed Group.
(2) These 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.
(3) This company was deregistered during the year.
92
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
6.2
INTERESTS IN OTHER ENTITIES
(A) MATERIAL SUBSIDIARIES WITH NON-CONTROLLING INTERESTS
Set out below are the Group’s principal subsidiaries with material non-controlling interests. Unless otherwise stated, the subsidiaries
as listed below have share capital consisting solely of ordinary shares, which are held directly by the Group, and the proportion of
ownership interests held equals to the voting rights held by the Group.
Name of entity
Place of
business and country of
incorporation
Ownership interest
held by the Group
Ownership interest
held by non-
controlling interests
2019
2018
2019
2018
Principal activities
Brisbane FM Radio Pty Ltd
Australia
50%
50%
50%
50% Commercial radio
(B) NON-CONTROLLING INTERESTS
Set out below is summarised financial information for each subsidiary that has non-controlling interests that are material to the
Group. The amounts disclosed for each subsidiary are before inter-company eliminations.
Summarised balance sheet
Current assets
Current liabilities
Current net assets
Non-current assets
Non-current liabilities
Non-current net assets
Net assets
Accumulated non-controlling interests
Summarised statement of comprehensive income
Revenue
Profit for the period
Other comprehensive income
Total comprehensive income
Total comprehensive income allocated to non-controlling interests
Dividends paid to non-controlling interests
Summarised statement of cash flows
Net inflows from operating activities
Net outflows from investing activities
Net outflows from financing activities
Net (decrease)/increase in cash and cash equivalents
Brisbane FM Radio Pty Ltd
2018
$’000
2019
$’000
4,687
2,706
1,981
2,757
1,102
1,655
67,464
67,585
44
67,420
69,401
34,700
25,316
8,390
–
8,390
4,195
4,100
8,434
(27)
29
67,556
69,211
36,136
28,617
10,377
–
10,377
5,188
5,200
10,329
(11)
(8,930)
(10,120)
(523)
198
ACCOUNTING POLICY
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statement,
statement of comprehensive income, balance sheet and statement of changes in equity respectively.
The effects of all transactions with non-controlling interests are recorded in equity if there is no change in control. Where there
is a loss of control, any remaining interest in the entity is remeasured to fair value and a gain or loss is recognised in the
income statement. Any losses are allocated to the non-controlling interests in subsidiaries even if the accumulated losses
should exceed the non-controlling interests in the individual subsidiary’s equity.
Notes to the Consolidated
Financial Statements (continued)
6.3
SHARES IN OTHER CORPORATIONS
Shares in other corporations
ANNUAL REPORT 2019
93
Note
4.4
2019
$’000
37,346
2018
$’000
35,403
The following table summarises the quantitative information about the significant unobservable inputs used in level 3 fair value
measurement of shares in other corporations, which is mainly comprised of the Group’s investment in Nova 93.7, an FM radio station
in Perth, Western Australia:
Fair value
as at
31 Dec 2019
$’000
37,346
Valuation
technique
Discounted
cash flows
Unobservable
inputs
Cash flow
growth factor
Range
of inputs
(probability
weighted
average)
Between -
6.7% to +3.5%
(+2.2%)
Description
Shares in
other
corporations
Relationship of unobservable
inputs to fair value
Increasing terminal cash growth factor by
50 basis points and lowering discount rate by
100 basis points would increase the fair value by
$4.4 million. Lowering terminal cash growth factor
by 50 basis points and increasing discount rate by
100 basis points would decrease the fair value by
$3.3 million.
14%
Pre-tax risk-
adjusted
discount rate
ACCOUNTING POLICY
Classification and initial measurement of financial assets
Financial assets are initially measured at fair value, plus transaction costs. This excludes those financial assets classified as at
fair value through profit or loss which are initially measured at fair value. Subsequent measurement of financial assets is at fair
value or amortised cost where certain criteria are met.
Financial assets at amortised cost and impairment
The Group’s loans and receivables (refer to note 3.4) meet the requirements for measurement at amortised cost based on the
purpose for which the assets and liabilities are held and the contractual terms.
Details about the group’s impairment policies and the calculation of the loss allowance are provided in note 4.3(b).
Financial assets at fair value
The Group’s investments in equity instruments are measured at fair value, determined in the manner described in note 4.4. At
initial recognition, the Group can make an irrevocable election (on an instrument-by-instrument basis) to recognise gains and
losses on equity instruments not held for trading, in other comprehensive income. Otherwise, all gains and losses are
recognised in profit or loss.
94
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
6.4
INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Shares in associate and joint ventures
Total investments accounted for using the equity method
Share of profits of associate and joint ventures
Note
2.3
2019
$’000
17,314
17,314
2,527
2018
$’000
18,829
18,829
468
Set out below are the associate and joint ventures of the Group as at 31 December 2019. The entities listed below have share capital
consisting solely of ordinary shares, which are held directly by the Group. The country of incorporation is also their principal place of
business, and the proportion of ownership interest is the same as the proportion of voting rights held.
Name of entity
Place of
business/
country of
incorporation
Soprano Design Pty Limited
Australia
HT&E Events Pty Limited
Unbnd Group Pty Ltd
Australia
Australia
Ownership
interest
2019
25%
50%
–
Nature of
relationship
2018
25% Associate1
50% Joint venture2
50% Joint venture3
Measurement
method
Equity method
Equity method
Equity method
Consolidated
carrying values
2019
$’000
17,314
–
–
2018
$’000
14,051
884
3,894
(1) Soprano Design Pty Limited specialises in the development and provision of world leading mobile messaging and wireless application infrastructure.
The interest in this business was acquired in 2001.
(2) The joint venture interest in HT&E Events Pty Limited was written down in June 2019 following the decision to close Gfinity Esports Australia.
(3) The interest in Unbnd Group Pty Ltd, a digital and communications business specialising in emerging media technologies was disposed on 19
September 2019. Refer overleaf for further details on sale.
SALE OF UNBND
HT&E disposed of its 50% share in Unbnd Group Pty Ltd (Unbnd) on 19 September 2019 resulting in a loss on disposal of
$13,355,000 inclusive of: $4,500,000 loss allowance on non-current loans; $4,897,000 financial guarantee costs and $322,000 other
costs. A contingent receivable of $4,000,000 related to the sale was not recognised, given its nature.
Refer to note 7.2 for details around the financial guarantee provided by the Group in relation to Unbnd.
ANNUAL REPORT 2019
95
Notes to the Consolidated
Financial Statements (continued)
6.4
INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED)
ACCOUNTING POLICY
Associates
Associates are all entities over which the Group has significant influence but not control or joint control. This is generally the
case where the Group holds between 20% and 50% of the voting rights.
Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting,
after initially being recognised at cost. The Group’s investment in associates includes goodwill (net of any accumulated
impairment loss) identified on acquisition.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of
post-acquisition movements in other comprehensive income of the associate, is recognised in other comprehensive income.
The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends received
from associates are recognised in the consolidated financial statements as a reduction in the carrying amount of the
investment.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured
receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the
associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in
the associates.
Joint arrangements
Under AASB 11 Joint Arrangements, investments in joint arrangements are classified as either joint operations or joint ventures
depending on the contractual rights and obligations each investor has, rather than the legal structure of the joint arrangement.
(i) Joint operations
The Group recognises its direct right to, and its share of, jointly held assets, liabilities, revenues and expenses of joint
operations.
(ii) Joint ventures
The interest in a joint venture is accounted for using the equity method after initially being recognised at cost. Under the equity
method, the Group’s share of the profits or losses of the joint venture is recognised in the income statement, and the share of
post-acquisition other comprehensive income is recognised in other comprehensive income.
When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint venture (which includes any
long-term interests that, in substance, form part of the Group’s net investment in the joint venture), the Group does not
recognise further losses, unless it has incurred obligations or made payments on behalf of the joint venture.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest
in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the
asset transferred.
96
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
6.5 PARENT ENTITY FINANCIAL INFORMATION
(A) SUMMARY OF FINANCIAL INFORMATION FOR THE PARENT ENTITY
The individual financial statements for the parent entity show the following aggregate amounts:
Balance sheet
Current assets
Total assets
Current liabilities
Total liabilities
Total equity
Contributed equity
Reserves
Share-based payments reserve
Retained earnings
Opening profit reserve
Dividends paid to shareholders
Profit for the year
Closing profit reserve
Brought forward loss reserve
Loss for the year
Closing loss reserve
Total equity
(Loss)/profit for the year
Total comprehensive income
2019
$’000
3,614
2018
$’000
360
1,414,651
1,568,344
3,006
795,907
618,744
11,649
728,205
840,139
1,483,685
1,492,555
10,423
9,831
58,252
(22,818)
–
35,434
(720,499)
(190,299)
(910,798)
618,744
(190,299)
(190,299)
60,181
(244,039)
242,110
58,252
(720,499)
–
(720,499)
840,139
242,110
242,110
(B) GUARANTEES ENTERED INTO BY THE PARENT ENTITY
Refer to note 7.2 for details.
(C) CONTINGENT LIABILITIES AND CONTRACTUAL COMMITMENTS OF THE PARENT ENTITY
The parent entity did not have any other contingent liabilities or any contractual commitments as at 31 December 2019 or
31 December 2018.
ACCOUNTING POLICY
The financial information for the parent entity, HT&E Limited, has been prepared on the same basis as the consolidated
financial statements, except for:
Investments in subsidiaries
Investments in subsidiaries are accounted for at cost less impairment losses in the financial statements of the parent entity.
Dividends received from subsidiaries are recognised in the parent entity’s income statement when its right to receive the
dividend is established.
ANNUAL REPORT 2019
97
Notes to the Consolidated
Financial Statements (continued)
6.6 DEED OF CROSS GUARANTEE
Companies in the Closed Group are party to a deed of cross guarantee dated 28 April 2017 under which each guarantees the debts
of the others. These companies represent a Closed Group for the purposes of ASIC Corporations (Wholly-owned Companies) Instrument
2016/785. The companies party to Deed of Cross Guarantee are detailed at note 6.1.
Set out below is the consolidated income statement and summary of movements in consolidated retained earnings for the year
ended 31 December 2019 for the Closed Group:
Revenue from continuing operations
Other revenue and income
2019
$’000
188,274
36,562
2018
$’000
197,151
36,838
Expenses from operations before impairment, finance costs, depreciation and amortisation
(172,388)
(153,624)
Impairment of Group company investments
Finance costs
Depreciation and amortisation
Share of profits of associate and joint ventures
Profit/(loss) before income tax
Income tax expense
Loss from continuing operations
Profit from discontinued operations
(Loss)/profit attributable to owners of the parent entity
Accumulated losses
Balance at beginning of the year
Change in accounting policy – lease accounting
Restated total at beginning of the financial year
(Loss)/profit attributable to owners of the parent entity
Dividends paid to shareholders
Transfers between reserves
Balance at end of the year
(5,423)
(10,464)
(6,824)
2,527
32,264
(38,755)
(6,491)
–
(6,491)
(81,185)
(16,070)
(4,153)
468
(20,575)
(17,025)
(37,600)
192,765
155,165
(1,030,485)
(941,722)
(2,222)
(1,032,707)
(6,491)
(22,776)
(84)
–
(941,722)
155,165
(244,039)
111
(1,062,058)
(1,030,485)
98
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
6.6 DEED OF CROSS GUARANTEE (CONTINUED)
Set out below is the consolidated balance sheet as at 31 December 2019 for the Closed Group:
Current assets
Cash and cash equivalents
Receivables
Tax assets
Other current assets
Total current assets
Non-current assets
Other financial assets
Investments accounted for using the equity method
Property, plant and equipment
Right-of-use assets
Intangible assets
Deposit of tax in dispute, net of provision
Other loans
Other non-current assets
Total non-current assets
Total assets
Current liabilities
Payables
Lease liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Lease liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total parent entity interest
Total equity
2019
$’000
107,218
139,056
3,300
2,389
251,963
237,681
17,314
20,125
20,901
347,640
20,670
–
2,616
666,947
918,910
162,937
2,648
–
12,315
177,900
23,579
4,850
108,752
137,181
315,081
603,829
2018
$’000
122,489
133,654
–
1,521
257,664
235,738
18,829
16,066
–
348,630
50,670
6,993
2,058
678,984
936,648
160,061
–
11,342
6,458
177,861
–
4,179
110,174
114,353
292,214
644,434
1,483,685
182,202
1,492,555
182,364
(1,062,058)
(1,030,485)
603,829
603,829
644,434
644,434
ANNUAL REPORT 2019
99
Notes to the Consolidated
Financial Statements (continued)
7
OTHER
7.1 DISCONTINUED OPERATIONS
2018
SALE OF ADSHEL
On 25 June 2018, the Group announced it had executed documentation to sell Adshel to oOh!media, subject to regulatory clearance.
Australian Competition and Consumer Commission clearance was obtained on 23 August 2018. Adshel was sold on 28 September
2018 and reported as a discontinued operation. Financial information relating to the discontinued operations for the period to the
date of sale is set out below.
Balances in the foreign currency translation reserve in respect of the Group’s net investment in Adshel New Zealand were recycled
through the income statement.
(a) Financial performance and cash flow information
Revenue and other income
Expenses before depreciation and amortisation
Depreciation and amortisation
Profit before income tax
Income tax expense
Profit from operations
Gain on sale of business
Onerous contract costsa
Write-back of provisionb
Income tax expense
Profit after income tax from discontinued operations
Explanation of items related to discontinued operations
(a) Onerous contract costs relate to one Adshel contract provided for based on expected contract performance.
(b) Release of provision that was not going to be utilised.
Net cash inflows from operating activities
Net cash inflows from investing activities
Net cash outflows from financing activities
Net increase in cash generated by the division
28 September 2018
$’000
153,342
(119,755)
(14,163)
19,424
(5,585)
13,839
164,845
(3,670)
16,125
(3,130)
188,009
28 September 2018
$’000
18,639
549,076
–
567,715
100
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
7.1 DISCONTINUED OPERATIONS (CONTINUED)
(b) Details of sale
Consideration received:
Enterprise value
Completion adjustments
Total sale consideration
Less: assets and liabilities at date of sale
Less: transaction costs and other items
Gain on sale of business before income tax
Income tax expense on gain1
Gain on sale of business after income tax
1 Refer to note 5.1(A) for more information on the tax expense.
(c) Assets and liabilities at date of sale
The carrying amounts of assets and liabilities as at the date of sale (28 September 2018) were:
Cash and cash equivalents
Receivables
Inventories
Property, plant and equipment
Intangible assets
Other assets
Total assets of disposal group
Payables
Contract liabilities
Provisions
Deferred tax liabilities
Other liabilities
Total liabilities of disposal group
Net assets of disposal group
Reclassification of foreign currency translation reserve
Assets and liabilities at date of sale
2018
$’000
570,000
2,754
572,754
(393,741)
(14,168)
164,845
–
164,845
28 September 2018
$’000
8,202
35,556
1,590
72,558
338,387
14,072
470,365
28,820
2,006
10,294
38,881
127
80,128
390,237
3,504
393,741
ANNUAL REPORT 2019
101
Notes to the Consolidated
Financial Statements (continued)
7.1 DISCONTINUED OPERATIONS (CONTINUED)
ACCOUNTING POLICY
Non-current assets (or disposal group) are classified as held for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use. They are measured at the lower of their carrying amount, and
their fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial
assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are
specifically exempt from this requirement.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are
classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for
sale continue to be recognised.
Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented
separately from the other assets in the consolidated balance sheet. The liabilities of a disposal group classified as held for sale
are presented separately from other liabilities in the consolidated balance sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that
represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose
of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of
discontinued operations are presented separately on the face of the consolidated income statement.
102
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
7.2 CONTINGENT LIABILITIES
The parent entity and all wholly-owned controlled entities have provided guarantees in respect of banking facilities. As at 31
December 2019, the facilities had been drawn to the extent of $9.1 million (2018: $3.0 million), of which the entire balance pertains to
bank guarantees.
During the year, the Company provided a financial guarantee in relation to Unbnd Group Pty Ltd (Unbnd), a joint venture which was
disposed on 19 September 2019. The maximum exposure to the Group in relation to this guarantee as at 31 December 2019 was
$4,897,000 and the amount has been presented in the balance sheet as a provision (refer to note 3.5) based on the likelihood of
settlement.
The Group did not have any other contingent liabilities and contractual commitments as at 31 December 2019 or 31 December 2018.
CLAIMS
Claims for damages are made against the Group from time to time in the ordinary course of business. The Directors are not aware of
any claim that is expected to result in material costs or damages.
7.3 REMUNERATION OF AUDITORS
During the year, the following fees were paid or payable for services provided by the auditor of the Group, its related practices,
non-related audit firms and other professional advisory and consulting firms:
Remuneration for audit or review of the financial reports
PricewaterhouseCoopers – Australian firm
PricewaterhouseCoopers – overseas firm
Remuneration for other assurance services
PricewaterhouseCoopers – Australian firm
PricewaterhouseCoopers – overseas firm
Total audit and other assurance services
Remuneration for other services
PricewaterhouseCoopers – Australian firm
Tax services
Consulting and advice
Compliance
Other advisory services
Other services
PricewaterhouseCoopers – overseas firm
Tax services
Compliance
Total non-audit services
2019
$’000
998
83
42
8
1,131
382
165
–
2
29
578
2018
$’000
991
78
129
7
1,205
568
143
47
–
24
782
Notes to the Consolidated
Financial Statements (continued)
7.4 RELATED PARTIES
(A) KEY MANAGEMENT PERSONNEL COMPENSATION
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
ANNUAL REPORT 2019
103
2019
$
2018
$
3,332,309
6,031,545
172,655
63,287
2,237,201
834,522
6,639,974
203,311
22,902
–
1,751,702
8,009,460
Detailed remuneration disclosures are provided in the Remuneration Report.
(B) TRANSACTIONS WITH OTHER RELATED PARTIES
There was $nil transactions with other related parties in the 12 months ending 31 December 2019 (2018: $nil).
(C) PAYABLES WITH OTHER RELATED PARTIES
There was $nil payable to related parties as at 31 December 2019 (2018: $nil).
(D) LOANS TO RELATED PARTIES
There was $nil in loans to related parties as at 31 December 2019 (2018: $7.0 million). In 2018, there were loans to HT&E Events Pty
Limited and Unbnd Group Pty Ltd.
(E) COMMITMENTS WITH OTHER RELATED PARTIES
There was $nil commitment to related parties as at 31 December 2019 (2018: $nil).
104
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Notes to the Consolidated
Financial Statements (continued)
7.5 OTHER SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION – SUBSIDIARIES
The consolidated financial statements incorporate the assets and liabilities of HT&E Limited and its subsidiaries. Subsidiaries are all
entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has the rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the
entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from
the date that control ceases.
Inter-entity transactions, balances and unrealised gains on transactions between Group entities are eliminated. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statement,
statement of comprehensive income, balance sheet and statement of changes in equity respectively.
FOREIGN CURRENCY TRANSLATION
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (functional currency). The consolidated financial statements are presented in Australian
dollars, which is HT&E Limited’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss,
except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to
part of the net investment in a foreign operation.
(iii) Group entities
The results and financial position of all the Group entities that have a functional currency different from the presentation currency are
translated into the presentation currency as follows:
assets and liabilities are translated at the closing rate at the date of the balance sheet;
income and expenses are translated at average exchange rates for the year; and
all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and
other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a
foreign operation is sold or a partial disposal occurs, a proportionate share of such exchange differences is recognised in the income
statement as part of the gain or loss on disposal.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign
entity and translated at the closing rate.
TRADE PAYABLES
Trade payables, including accruals not yet billed, are recognised when the Group becomes obliged to make future payments as a
result of a purchase of assets or services. Trade payables are carried at amortised cost which is the fair value of the consideration to
be paid in the future for goods and services received. Trade payables are unsecured and are generally settled within 30 to 45 days.
DIVIDENDS
A payable is raised for the amount of any dividend declared, determined or publicly recommended by the Directors before or at the
end of the financial year but not distributed at balance date.
ANNUAL REPORT 2019
105
Notes to the Consolidated
Financial Statements (continued)
7.5 OTHER SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SHORT-TERM INCENTIVE PLANS
A liability for short-term incentives is recognised in provisions when there is an expectation of settlement and at least one of the
following conditions is met:
there are contracted terms in the relevant plan for determining the amount of the benefit;
the amounts to be paid are determined before the time of completion of the financial report; or
past practice gives clear evidence of the amount of the obligation.
Liabilities for short-term incentives are expected to be settled within 12 months and are measured at the amounts expected to be
paid when they are settled.
STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
New conceptual framework
In March 2018, the IASB issued a new Conceptual Framework for Financial Reporting and Amendments to References to the Conceptual
Framework in IFRS Standards. The new conceptual framework contains new definition and recognition criteria for assets, liabilities,
income and expenses where the criteria are not inconsistent with a specific requirement of an accounting standard.
Following this, the AASB has issued an equivalent conceptual framework as well as AASB 2019-1 Amendments to Australian Accounting
Standards – References to the Conceptual Framework which sets out to amend Australian Accounting Standards, Interpretations and
other pronouncements to reflect the issuance of the conceptual framework. This amendment applies to annual reporting periods
commencing on or after 1 January 2020. The Group has assessed the future impact of the new criteria in the new conceptual
framework and expects that there will not be a material impact on the Group.
There are no other standards and interpretations that are not yet effective and that are expected to have a material impact on the
Group in the current or future reporting periods and on foreseeable future transactions.
7.6 SUBSEQUENT EVENTS
Since the end of the financial year, the Directors have declared the payment of a fully franked final dividend of 4.6 cents, to be paid 23
March 2020 (refer to note 4.8).
Other than the matters described above, the Directors are not aware of any matter or circumstance that has arisen since the end of
the financial year that has significantly affected or may significantly affect the Group’s operations, the results of those operations or
the Group’s state of affairs in future financial years.
106
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Directors’ Declaration
In the Directors’ opinion:
(a)
the financial statements and notes set out on pages 46 to 105 are in accordance with the Corporations Act 2001, including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
giving a true and fair view of the consolidated entity’s financial position as at 31 December 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 extended closed group
identified in note 6.1 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the
deed of cross guarantee described in note 6.6.
Page 46 of the Annual Report confirms that the financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
This declaration is made in accordance with a resolution of the Directors, after receiving the declarations required to be made by the
Chief Executive and Chief Financial Officer in accordance with section 295A of the Corporations Act 2001.
Hamish McLennan
Chairman
Sydney
24 February 2020
Independent Auditor’s Report
ANNUAL REPORT 2019
107
To the members of HT&E Limited
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
OUR OPINION
In our opinion:
The accompanying financial report of HT&E Limited (the Company) and its controlled entities (together the Group) is in accordance
with the Corporations Act 2001, including:
(a)
(b)
giving a true and fair view of the Group's financial position as at 31 December 2019 and of its financial performance for the year
then ended
complying with Australian Accounting Standards and the Corporations Regulations 2001.
WHAT WE HAVE AUDITED
The Group financial report comprises:
the consolidated balance sheet as at 31 December 2019
the consolidated income statement for the year then ended
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows 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
(including Independence Standards) (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.
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.
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.
108
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Independent Auditor’s Report continued
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 $2,730,000, which represents approximately 5% of the Group’s
profit before tax from continuing operations excluding one- off/infrequently occurring transactions.
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 chose Group profit before tax from continuing operations because in our view, it is an important financial statement metric
used in assessing the performance of the Group. We adjusted this benchmark for one-off/infrequently occurring transactions to
reflect the normal underlying performance of the Group.
We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly acceptable profit
related thresholds for listed companies.
Audit Scope
Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving
assumptions and inherently uncertain future events.
The Group audit was aligned with the structure of the Group.
The nature, timing and extent of audit work required on each component of the Group was determined by the component's risk
characteristics and financial significance to the Group and consideration whether sufficient evidence had been obtained for our
opinion on the financial report as a whole. The audit work involved:
- an audit of the Australian Radio Network financial information
- specific risk focused audit procedures over Cody Outdoor International (HK) Limited financial information
- specific risk focused analytical procedures at the Group level.
further audit procedures at a Group level, including over the consolidation of the Group's reporting units and the preparation
-
of the financial report.
For the work performed by other auditors (“component auditors”) operating under our instructions, we determined the level of
involvement we needed to have in the audit work at those locations to be satisfied that sufficient audit evidence had been
obtained. We communicated regularly with these component audit teams during the year through face-to-face meetings, phone
calls, and written instructions where appropriate. We also met with local management of each financially significant operation and
the Group Financial Services shared service centre.
Independent Auditor’s Report continued
ANNUAL REPORT 2019
109
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.
Key audit matter
How our audit addressed the key audit matter
Taxation of New Zealand branch royalty income
Our audit procedures included:
examining correspondence between the Group and the
ATO
examining correspondence between the Group and its
external advisors and considering their independence and
technical competence
together with PwC tax experts, considering the conclusions
reached by the Group’s external advisors. This included
interviewing the advisors and comparing their conclusions
to supporting evidence
agreeing the Group’s potential tax exposure for the 31
December 2009 to 31 December 2016 tax years to the
amounts in the amended assessments issued by the ATO
for the respective tax years
recomputing the Group’s potential tax exposure for the 31
December 2016 tax year to the Agreement for Licence of
Trademarks between Wilson & Horton Finance Pty Limited
– New Zealand Branch and APN New Zealand Limited
assessing the sum of the probability-weighted amounts for
the range of possible outcomes determined by the Group
to estimate the resolution of the uncertain tax matter
assessing the adequacy of the Group’s disclosure of the
matter in the financial statements in light of the
requirements of Australian Accounting Standards.
(Refer to note 5)
In the prior year, the Australian Tax Office (ATO) issued
amended assessments with adjustments and determined a
position on the application of penalties and interest relating to
the licensing of New Zealand mastheads by a New Zealand
branch of one of the Group’s Australian entities. The ATO has
challenged the Group’s treatment of the royalty income
received by the New Zealand branch in respect of the
mastheads as being non-assessable, non-exempt income for
Australian tax purposes. In summary, the ATO’s position in
relation to this matter involves $102.5m of tax adjustments plus
$49.0m of penalties plus $27.5m of interest. In that regard a
deposit of $50.7m was paid to the ATO in the prior the year.
The Group continues to consult with its advisers and is satisfied
that its treatment is consistent with relevant tax legislation, that
penalties should not apply and disagrees with the rate of
penalties imposed.
The Group has lodged objections with the ATO regarding the
amended tax assessments and regarding the assessments of
penalties and interest. The Group will if necessary, contest the
matter through litigation proceedings.
Given the range of possible outcomes and in light of recent
correspondence and discussions with the ATO and consultation
with the Company’s advisers, AASB Interpretation 23 has been
applied using the sum of the probability-weighted amounts to
predict the resolution of the uncertainty. A tax expense of $30m
has been recorded in respect of the New Zealand branch
matter.
We considered this a key audit matter because of the significant
judgement required by the Group in estimating the future
outcome of the taxation authority’s assessment (which may
include a court), the associated legal processes, and in
estimating the provision and appropriate disclosure of the
matter in the financial report.
110
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Independent Auditor’s Report continued
Impairment of intangible assets
(Refer to note 3.1)
At 31 December 2019 the Group had $55.1m of goodwill and
$367.5m of non-amortising intangible assets, which is
significantly greater than materiality. This relates to the
Australian Radio licences within the Australian Radio Network
(ARN) cash generating unit (CGU).
At 31 December 2019, the Group performed an impairment
assessment over the ARN CGU by:
calculating the ‘Value in Use’ for the CGU, using a
discounted cash flow model (the model)
comparing the resulting ‘Value in Use’ to the CGU’s carrying
value to determine the need for any impairment.
We considered this a key audit matter, because:
the intangible asset is the largest non-current asset in the
consolidated balance sheet
significant judgement is required by the Group in
performing the impairment assessment, particularly in
estimating:
o
o
o
o
forecasted future results of the business
terminal growth rates
revenue forecasts
discount rates applied to future cash flow forecasts in
determining whether there are any impairment
charges.
We performed the following procedures amongst others:
evaluated key factors used in the Group’s approach to
assess impairment including the methodology applied
and the Group’s identification of CGUs.
agreed forecast cash flows used in the impairment
assessment to Board approved budgets
evaluated the Group’s historical ability to forecast future
cash flows by comparing budgeted amounts to
reported actual results for the past year
tested whether the discount rate reflected the risks of
the CGU by comparing the discount rate to other
comparable companies
compared the growth rates used in the CGU’s cash flow
forecasts to independent industry forecasts and
historical growth rates
tested the mathematical accuracy of the impairment
assessment
evaluated the adequacy of the disclosures made in note
3.1, including those regarding the method of
measurement, the estimation uncertainty and range of
potential outcomes, in light of the requirements of
Australian Accounting Standards.
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 31 December 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.
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.
Independent Auditor’s Report continued
ANNUAL REPORT 2019
111
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 28 to 44 of the directors’ report for the year ended 31 December 2019.
In our opinion, the remuneration report of HT&E Limited for the year ended 31 December 2019 complies with section 300A of the
Corporations Act 2001.
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
Louise King
Partner
Sydney
24 February 2020
112
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Shareholder Information
1
SHARES
(A) SUBSTANTIAL SHAREHOLDERS
The following information is extracted from substantial shareholder notices received by the Company as at 14 February 2020:
Name
Allan Gray Australia Pty Ltd and its related bodies corporate
News Pty Limited and its related bodies corporate
Spheria Asset Management Pty Ltd
Commonwealth Bank of Australia and its related bodies corporate
Perpetual Limited and its related bodies corporate
Mitsubishi UFJ Financial Group, Inc.
Carol Australia Holdings Pty Limited and its related bodies corporate
(B) TOP 20 HOLDERS OF FULLY PAID ORDINARY SHARES
The following information is extracted from the share register as at 14 February 2020:
Name
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Pty Limited
News Pty Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
Citicorp Nominees Pty Limited
Pacific Custodians Pty Limited - APN Emp Share Tst a/c
Pacific Custodians Pty Limited - HT1 Plans Ctrl a/c
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd DRP
National Nominees Limited
S M & R W Brown Pty Ltd
Mr Vincent Crowley
Montorio Superannuation Nominees Pty Ltd
Warrill Nominees Pty Ltd
W H List & Son Pty Ltd
Mr Aaron Benjamin
HSBC Custody Nominees (Australia) Limited-GSCO ECA
Glowvane Pty Limited
Total
Number
of shares
60,488,597
41,823,884
28,235,310
20,402,039
20,241,659
19,009,003
15,741,965
% of
total shares
29.3%
21.4%
18.8%
14.7%
5.1%
2.5%
1.7%
0.6%
0.5%
0.3%
0.2%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.0%
Number
of shares
81,994,851
59,987,313
52,764,978
41,303,132
14,217,562
7,105,454
4,786,303
1,672,000
1,296,390
842,839
496,793
267,481
200,000
185,305
174,203
167,104
133,334
131,763
128,445
116,789
267,972,039
95.9%
Shareholder Information continued
ANNUAL REPORT 2019
113
(C) ANALYSIS OF INDIVIDUAL ORDINARY SHAREHOLDINGS AS AT 14 FEBRUARY 2020:
Holding
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
Number of
shareholders
% of total
shareholders
Number
of shares
1,041,324
2,327,191
1,715,097
6,955,157
268,190,391
72.97
18.12
4.27
4.25
0.39
100.00
280,229,160
% of
total shares
0.38
0.83
0.61
2.48
95.70
100.00
4,067
1,010
238
237
22
5,574
There were 2,779 holders of less than a marketable parcel.
(D) VOTING RIGHTS OF SHAREHOLDERS
The voting rights are governed by rule 16 of the Constitution. In summary, shareholders are entitled to vote in person or by proxy,
attorney or corporate representative at any meeting of shareholders of the Company on:
a show of hands – one vote per shareholder; and
a poll – one vote per share.
2
OPTIONS
There are no issued options.
3
DIRECTORS’ INTERESTS
The relevant interest of each Director in the securities of the parent entity as at 14 February 2020 was:
Director
H McLennan
R Amos
P Connolly
C Davis
B Rowe
4 OTHER INFORMATION
STOCK EXCHANGE LISTING
HT&E shares are listed on the ASX (code HT1).
ENQUIRIES
Number
of shares
Number
of options
73,000
16,250
65,935
524,053
–
–
–
–
–
–
Shareholders or investors with any enquiries concerning their shareholding, shareholder details, dividend information, or
administrative matters, should direct their enquiries to the Share Registry. Contact details for the Share Registry appear on the
Corporate Directory page in this Annual Report 2019.
DIVIDEND PAYMENTS
Dividends to shareholders may be paid direct to any bank, building society or credit union account in Australia. Shareholders who
wish to receive dividends by electronic transfer should advise the Share Registry.
TAX FILE NUMBER (TFN)
The Company is obliged to deduct tax from unfranked or partially franked dividend payments to shareholders resident in Australia
who have not supplied their TFN to the Share Registry. To avoid this deduction, you should advise the Share Registry of your TFN.
114
HT&E LIMITED AND CONTROLLED ENTITIES | ABN 95 008 637 643
Shareholder Information continued
REGISTER YOUR EMAIL ADDRESS
Shareholders are encouraged to register their email address to receive dividend advices, notification of availability of annual reports,
notices of meeting, access to online voting and other shareholder communications. To register, shareholders should go to
www.linkmarketservices.com.au, log in to their shareholding through the Investor Centre and select the “All communication by email”
option.
Other services available to shareholders at this website include: viewing details of their shareholdings, updating address details,
updating bank details and obtaining a variety of registry forms.
CONSOLIDATION OF HOLDINGS
Shareholders who have multiple issuer-sponsored holdings and wish to consolidate their separate shareholdings into one account
should advise the Share Registry in writing.
CHANGE OF NAME OR ADDRESS
Shareholders who are issuer sponsored should notify the Share Registry in writing of any change in either their name or registered
address. If a change of name has occurred, it will be necessary to supply a certified copy of the relevant deed poll or marriage
certificate. Shareholders sponsored by a broker (CHESS) should advise their broker of the amended details.
DIVIDEND REINVESTMENT PLAN (DRP)
The Directors determined to suspend the DRP effective from 15 February 2018.
Shareholders may elect to participate in any future DRP for all or part of their shareholding. Shareholders wishing to participate in any
future DRP should contact the Share Registry. Terms and conditions of the DRP, the DRP Guide and forms to apply for, vary or cancel
participation in the DRP are also available on the Company’s website, www.htande.com.au.
INVESTOR INFORMATION
The Annual Report is the most comprehensive publication with information for investors. Copies of the 2019 Annual Report and 2019
Shareholder Review may be obtained by contacting the Share Registry or on the Company’s website, www.htande.com.au. Other
financial and relevant information, including press releases on financial results and Chairman’s addresses, are available from the
corporate office in Sydney, or at the Company’s website, www.htande.com.au.
Corporate
Directory
HT&E LIMITED
ABN 95 008 637 643
Directors
Auditors
Hamish McLennan (Chairman)
PricewaterhouseCoopers
One International Towers Sydney
Watermans Quay
BARANGAROO NSW 2000
Principal Bankers
Bank of Queensland
Commonwealth Bank of Australia
HSBC
National Australia Bank
Westpac Banking Corporation
Ciaran Davis (CEO & Managing Director)
Roger Amos
Paul Connolly
Belinda Rowe
Company Secretary
Jeremy Child
Registered Office
3 Byfield St, Macquarie Park
SYDNEY NSW 2113
Telephone: +61 2 8899 9900
Share Registry
Link Market Services Limited
Level 12, 680 George Street
SYDNEY NSW 2000
Locked Bag A14
SYDNEY SOUTH NSW 1235
Telephone
(Australia) 1300 553 550
(International) +61 1300 553 550
Fax
(Australia) 02 9287 0303
(International) +61 2 9287 0303
Email
registrars@linkmarketservices.com.au
Website
www.linkmarketservices.com.au
ANNUAL REPORT 2019 115
Notice is given that the
Annual General Meeting
of HT&E Limited will be
held at
KPMG
Level 38, Tower 3
300 Barangaroo Avenue
Sydney NSW 2000
on 7 May 2020
at 9:00am