HT&E Limited Annual Report 2022

Plain-text annual report

ANNUAL REPORT 2022 ALL AUDIO More Connections that Count HT&E owns Australia’s leading audio company, ARN, connecting with over 8 million people1 each week through broadcast and digital audio, across every state and territory in Australia. ARN delivers creative solutions for advertisers that take advantage of the full Audiosphere – from radio to music streaming, podcasting and beyond. The Group also maintains a number of other investments across the media and advertising sector. HT&E Annual Report 20221 In this report 2 About 36 Board of Directors 6 Delivering our strategy 38 Senior management team 8 Chairman’s letter 2022 10 CEO’s letter 2022 12 Operating and Financial Review 16 Review of operations 22 2022 Awards 24 Environmental, Social and Governance: InTune @ARN 26 InTune with Our Communities 30 InTune with Our Team 32 InTune with Our Planet 34 InTune with Best Practice 40 Directors’ Report and Financial Report 46 Remuneration Report 62 Auditor’s Independence Declaration 63 Consolidated Financial Statements 120 Directors’ Declaration 121 Independent Auditor’s Report 127 Shareholder Information 130 Corporate Directory 2023 was ARN’s best year ever. #1 Metro Radio Network1 (12.7% YoY increase) and highest annual cume average) 5.9m #1 Podcast Publisher2 download growth YoY3 +45% 1. GfK CY2022 Metro Radio, People 10+, Mon–Sun 0530–12mn #1 based on share, increase based on cumulative reach unless otherwise stated ratings, Xtra Insights regional ratings, most recent surveys. 2. Triton Digital Podcast Ranker, December 2022 (excludes New York Times). 3. Triton Australian Podcast Ranker, CY2022 vs CY2021. Kian, Avneesha, Yaz – CADA 2 About Creating quality connections for audiences and advertisers. ARN’s ambition is to build the best radio and digital audio business in Australia, offering our audiences and clients a gateway to develop deeper connections in the booming world of audio. Content Connecting Australian communities through Australia’s greatest depth and breadth of audio content across live, local and on-demand formats. Broadcast Networks On-air talent Podcasting We are committed to maintaining the 46 local brands that act as a pillar of the community they broadcast in. Just some of those are represented here. HT&E Annual Report 20223 A leading enabler for enterprise communications within the CPaaS industry, Soprano delivers secure business mobile messaging software solutions for large organisations worldwide.1 A creative agency creating ideas that change the way people feel about brands. Pioneer of the highest quality innovation and premium connected on-the-go advertising solutions in Hong Kong. Commercialisation & Partnerships Enabling access to our audience through effective all-of-audio solutions and partnerships. Distribution Everywhere our listeners are connecting: Broadcast Radio, DAB+ and Digital Streaming. ARN is focused on creating the content that our audience seek, delivering it in the format they want to hear it and enabling access to those audiences for advertisers. 1. ARN announced the signing of a binding share sale agreement on 3 January 2023, with the sale conditional on the Foreign Investment Review Board (FIRB) approval and expected to complete in the first half of 2023. Jase & Lauren – KIIS 101.1 Melbourne 44 HT&E Annual Report 2022 Creating over 8 million connections every day We are everywhere our listeners are, providing the greatest breadth and depth of audio content across every state and territory in Australia. At ARN we deliver unparalled live and local content to over 8 million people1 each week, connecting them to their communities. We enrich 4.7 million podcast listeners2 lives, who access our podcasts on-demand via every available major digital audio platform. And through offering a curated listening experience, more than 2.4 million people3 have registered on iHeartRadio to date. Radio audience nationally (weekly)1 Over 8m YoY growth (Up 63%) Digital websites reach (monthly)4 Streaming listening hours (+5% YoY)5 1.5m 124m Galey & Emily Jade – Hot Tomato Gold Coast HT&E Annual Report 2022HT&E Annual Report 20225 A strategic focus on delivering a variety of content and listening options enabled by digital audio has contributed to increasing our total audience footprint across the last 12 months. 6 #1 Network 5.9m 12.7% Best ever cume YoY growth #1FM Melbourne Breakfast1 for GOLD 104.3’s Christian O’Connell (21 in a row) #1FM Sydney Breakfast1 for KIIS 1065’s Kyle & Jackie O (32 in a row) 1. Broadcast Radio, People 10+, Mon–Sun 0530–12mn unless otherwise stated – Gfk Metro radio ratings, Survey 8, 2022, Xtra Insights regional ratings, most recent surveys. 2. Triton Digital Podcast metrics, December 2022 (excludes New York Times). 3. Adobe Analytics, iHeartRadio Australia Registration Data, Lifetime Users, Unique Visitors, 2022. 4. Google Analytics – ARN Metro Web Assets – Dec 2022. 5. AdsWizz/StreamGuys, Total Radio Streaming, Total Listening Hours 2022 vs 2021. 6. GfK CY2022 Metro Radio, People 10+, Mon–Sun 0530–12mn #1 based on share, increase based on cumulative reach unless otherwise stated ratings, Xtra Insights regional ratings, most recent surveys. #1 ARN Regional Stations1 Hot Tomato in the Gold Coast Hitz 93.9 in Bundaberg Hot 100 in Darwin Star 102.7 in Cairns Zinc 96.1 in Gympie Power FM in Ballarat River 94.9 in Ipswich Chilli FM in Launceston Star 101.9 in Mackay 666 Delivering our strategy ARN’s goal is to build the best broadcast radio and digital audio business in Australia, offering our audiences and advertisers a gateway to develop deeper connections in the booming world of audio. Following the acquisition of a portfolio of 46 regional radio stations (ARN Regional) from Grant Broadcasters on 4th January 2022, we were focused on integrating ARN Regional while continuing to grow our leading metro and podcast network positions. We did this in a considered and deliberate way that ensured a strengthening of core operations under the strategic focus areas maintained from 2021, with additional focus on improving our culture through building an engaged and thriving workforce. Our strategic focus areas Our critical priorities ARN Key Performance Indicators (KPIs) Christian O’Connell – GOLD 104.3 Melbourne Scale of audiences We continued to grow our audience across broadcast radio, digital audio streaming and podcasting though a considered content strategy that deliver Australia’s most popular content from world class talent. Multi-platform content delivery Continued evolution of the ‘podcast to broadcast’ strategy, launch of youth based brand CADA and continued investment in the iHeart streaming platform have leveraged digital channels to expand our total audience footprint and meet our audiences’ audio needs, wherever they may be. Increasing digital data and targeting capabilities Improved technical and operational capabilities has allowed for better performance monitoring and to deliver more robust total audio targeting solutions for clients. Ease of transaction Optimisation of the Commercial team structure and national commercial products along with the digital platforms that enables them, has improved our overall service delivery for clients. Engaged and thriving workforce Continued embedding of our Culture In Action and development programs across leadership and other critical capabilities has improved operational efficiencies and team engagement. HT&E Annual Report 2022HT&E Annual Report 202277 Three pillars for growth Content Connecting Australian communities through Australia’s greatest depth and breadth of audio content across live, local and on-demand formats. Distribution Everywhere our listeners are connecting: Broadcast Radio, DAB+ and Digital Streaming. Innovation Enabling access to our audience through effective all-of-audio solutions and partnerships. Events & Experiences Audio Branding Radio Audio Innovation Dynamic Audio DAB+ Streaming Digital Podcasts ARN’s Audiosphere delivers the most complete audio solutions in Australia Our strategic focus areas Our critical priorities ARN Key Performance Indicators (KPIs) Scale of audiences We continued to grow our audience across broadcast radio, digital audio streaming and podcasting though a considered content strategy that deliver Australia’s most popular content from world class talent. Multi-platform content delivery Continued evolution of the ‘podcast to broadcast’ strategy, launch of youth based brand CADA and continued investment in the iHeart streaming platform have leveraged digital channels to expand our total audience footprint and meet our audiences’ audio needs, wherever they may be. Increasing digital data and targeting capabilities Improved technical and operational capabilities has allowed for better performance monitoring and to deliver more robust total audio targeting solutions for clients. ARN listenership (surveyed stations)1 Registered users (lifetime)2 6.8m Metro Network (Up 24% YoY) 2.1m Regional Network 2.4m (Up 13% YoY) 2.44m 2.17m 1.88m 2022 2021 2020 CADA brand growth (total audience connections)1 Podcast downloads (Dec 2021 to Dec 2022)3 +35% P18–39 59k 43k 57k 2021 2022 2020 ARN revenue $314.8m (Up 61% YoY) ARN Revenue $314.8m $195.6m 2021 $171.5m4 2020 2022 +40% 290m Podcast downloads 290m 207m 126m 2020 2022 2021 Ease of transaction Optimisation of the Commercial team structure and national commercial products along with the digital platforms that enables them, has improved our overall service delivery for clients. ARN EBITDA ARN digital revenue $86.5m (Up 61% YoY) $86.5m $53.8m 2021 $46.0m4 2020 2022 $14.6m (Up 56% YoY) $14.6m $9.4m $6.3m4 2021 2020 2022 Engaged and thriving workforce Continued embedding of our Culture In Action and development programs across leadership and other critical capabilities has improved operational efficiencies and team engagement. 1. Broadcast Radio, People 10+, Mon–Sun 0530–12mn unless otherwise stated – Gfk Metro radio ratings, Survey 8, 2022, GfK Regional Ratings Survey 3, 2022, Xtra Insights regional ratings, most recent surveys. 2. Adobe Analytics, iHeartRadio Australia Registration Data, Lifetime Users, Unique Visitors, 2022 vs 2021 vs 2020. 3. Triton, ARN Network Total, Jan–Dec 2022 vs Jan–Dec 2021 vs Jan–Dec 2020. 4. Excluding disposed businesses. 8 Chairman’s letter 2022 2022 has been a transformational year for HT&E as we continued to deliver on our goal to be the best audio business in Australia. I am pleased to report another strong performance for your business in a year of considerable change. The Company successfully completed the acquisition of the largest regional radio network in the country creating a truly national broadcasting offering and the integration programme is already delivering ahead of expectations. We enhanced our position as the leading radio broadcaster in the country, we continued to expand our digital audio content and monetisation programme, and at the end of the year, considerable value was unlocked for shareholders through the sale of our minority stake in Soprano for $66.3m cash subject to FIRB approval. ARN Regional acquisition Unique position What sets our new regional network apart is our strong belief in the power of local voices and the need to maintain local programming and the connections with regional communities across the country. Our unique and critical role in regional communities was again highlighted early in the year during the floods in Queensland. It was our stations that kept vital information flowing and saved lives as communities rallied together in times of need. This vital contribution we make to Australian life is a responsibility we take very seriously and are committed to enhancing. Our belief in local content also extends into our news service. At a time when regional newsrooms are disappearing, we are elevating our offering across the network by taking a ‘Local News First’ approach for regional markets, with local news leading every bulletin between 6am – 9am workdays. This ensures we create capacity amongst our journalists to highlight key issues impacting local audiences and make intimate connections with listeners. The Company has always focused on identifying the right opportunities to drive shareholder value and the acquisition of 46 regional stations from Grant Broadcasters, which became part of ARN on 4th January 2022, has proven to be an outstanding acquisition. Our combined network is made up of 58 stations, 46 DAB+ stations across 33 markets. We represent an additional 77 stations which combined, delivers more than 8 million listeners1 across every state and territory in the country. Exceptional progress was made with the integration program as we secured our target of approximately $7 million revenue synergies in the year, whilst also growing already strong regional revenues by +7%. The new commercial structure is now established and sales training programs in place and together with the first phase of the IT integration complete, we are very pleased with the progress made and are confident of concluding other major integration components by the end of 2023. The Board has also benefited from the contributions of new director, Alison Cameron, who was previously Chief Executive of Grant Broadcasters and provided strategic guidance and insight on the business as we have progressed through this last 12 months. ARN is delivering a superior audio offering for audiences and advertisers across its portfolio of brands – KIIS, Pure Gold, CADA, iHeartRadio and local brands, which now entertain and influence more than a third of Australians each week. HT&E Annual Report 202299 Platform for growth in 2023 The best content attracts the greatest audiences which creates the most fruitful commercial opportunities for advertisers and in 2022, ARN delivered the best outright ratings performance across the category. This has laid the foundation for the business to capitalise on commercial opportunities from growth in total audio consumption across 2023 and beyond. We are focusing on creating even better content across our networks. Part of our strategy will mirror what has been developed in our regional news offering which lays the foundation for our Future of News strategy to elevate news content and position ARN as the industry leader in short and longform audio news across broadcast and digital platforms. HT&E has an enviable owned and represented podcast portfolio which is incredibly important to us, and we will consider further investment where the content and audience align with our radio brands, or where we perceive there to be a commercially attractive under serviced audience. This forms part of our strategy to continue to invest in reaching new audiences along with our new multi-platform youth brand CADA. Strong capital management focus Considerable value was realised for shareholders through the sale of our long-held investment in Soprano for $66.3 million in cash to Potentia Capital, a leading Australian private equity group focused on technology. This was a great result given global CPaaS and technology markets have been challenged over the past 12 months and HT&E views this transaction to be a positive outcome in today’s market, with Potentia better placed to support Soprano in its next phase of growth. The all-cash deal is expected to receive FIRB approval in March 2023 and enables the company to focus on its position as a leading provider of audio services in Australia, effectively eliminates existing debt under the current financing facilities and puts the Group in an enviable position to take advantage of future audio entertainment opportunities. The Board is committed to maintaining strong dividends for shareholders thanks to the high cash generating nature of our business and announced a fully franked dividend of 5.2 cents per share to be paid in March 2023. This dividend is paid from parent entity profits since 1 January 2023. In addition, HT&E’s accretive share buy-back was maintained through the second half delivering improved returns for shareholders. The year ahead As we navigate an uncertain macroeconomic environment, HT&E is incredibly well placed to withstand any potential short-term impacts to advertising revenues. We finished the year in a very strong position with the best outright ratings performance ever which reflects our continued commitment to deliver quality connections through a considered content strategy, executed by world class talent. ARN is delivering a superior audio offering for audiences and advertisers across its portfolio of brands – KIIS, Pure Gold, CADA, iHeartRadio and local brands, which now entertain and influence more than a third of Australians each week. There is genuine excitement and belief in what we are creating amongst our team and our customers. Investment in content and platforms is what we do well, and we will continue to explore growth initiatives where appropriate and given the strength of our balance sheet. We remain particularly focused on the expanding digital audio streaming and podcasting sectors where we have already established a very strong offering. Our Board has the right mix of skills and experience to navigate the opportunities and challenges which may emerge in 2023 and I would like to thank the directors for their contribution and dedication. I would also like to sincerely thank our people, clients, and shareholders for their continued support and look forward to working with you all in the year ahead. Hamish McLennan Chairman 1. Broadcast Radio, People 10+, Mon–Sun 0530–12mn unless otherwise stated – Gfk Metro radio ratings, Survey 8, 2022, Xtra Insights regional ratings, most recent surveys. 10 CEO’s letter 2022 We have extended our lead as Australia’s best performing audio business across a range of key metrics. Despite global and inflationary concerns impacting H2 consumer and advertising sentiment, HT&E’s full year results were in-line with market expectations and considerable progress was made delivering on our strategic intent to build the best broadcast radio and digital audio business in Australia. 2022 revenue significantly improved on last year, up 5% to $344.9 million, on a pro forma basis had HT&E owned ARN Regional for the 12 months to 31 December 2021. Costs before interest, tax, depreciation and amortisation, and significant items were up 9% to $266.2 million on a pro forma basis, impacted by cost of sales on improved revenues, the launch of new youth platform, CADA in March, further investment in digital audio capability and macroeconomic inflationary pressures driving a level of cost inflation. Earnings before interest, tax, depreciation and amortisation (EBITDA) before significant items were down 4% to $91.8 million on a pro forma basis. Operating cash flows before income taxes of $54.7 million grew 60% on the prior period. In ARN, an impairment charge of $249.9 million was taken in the second half, reflecting uncertainty associated with the current macro-economic environment. ARN performance In a highly competitive market, ARN finished 2022 as the #1 metropolitan network for people 10+, the #1 network for people 25–54, and our highest ever 25–54 audience share and largest cumulative audience. Across our metropolitan network, overall listeners increased by close to 12.7% year on year. Consistency remains a key part of our ratings success as ARN continues to be the #1 metropolitan radio network, reaching over 6 million people a week and culminating with our strongest ever ratings performance in a survey during 2022. ARN dominates in the key metropolitan markets with #1FM stations in Sydney and Melbourne. In Melbourne, GOLD104.3 is #1FM in all dayparts, holding the overall leadership for FM stations for the 24th consecutive survey, led by The Christian O’Connell Show. In Sydney, ARN has maintained its Breakfast duopoly leadership with KIIS 1065’s Kyle & Jackie O and WSFM’s Jonesy & Amanda finishing in the #1FM and #2FM spots respectively.1 Regionally, we delivered equally impressive audience results. In the largest non-metropolitan market, Gold Coast, ARN’s Hot Tomato increased cume year-on-year and remained a strong #1. Of the other regional markets surveyed featuring ARN stations, ARN increased cume in five and holds the #1 position in Bundaberg, Darwin, Cairns, Mackay, Gympie, Ballarat, Ipswich and Launceston.2 Australian’s insatiable appetite to consume more audio showed no signs of slowing during the year, with the percentage of the population now regularly listening to podcasts overtaking that of the US during the year. Launched under three years ago, the iHeart Podcast Network Australia has grown at scale and maintained its position as the #1 Publisher on the Australian Podcast Ranker for 32 consecutive months. Every month, we now reach 4.7 million listeners via the podcast network.3 In 2022, we launched several new radio programs with established podcast creators, including ‘Life Uncut’ and ‘She’s on the money’, as part of our ‘Podcast to Broadcast strategy’, with the aims being to bring new younger audiences into radio and create a path for the uncovering the next generation of radio talent. In 2023 we will continue to invest in both our owned and represented podcast portfolio, ad tech & simplify our product offering for advertisers. Bigger, Better Together We were really pleased to complete the acquisition of what we now call ‘ARN Regional’ on 4th January 2022, and in doing so, grew our network to deliver over 8 million listeners across 135 stations in every state and territory in the country. We purchased ARN Regional from Grant Broadcasters, Australia’s most successful, oldest and family owned regional radio business. It was critical that through the integration we maintained the elements that made it such a success. We have fiercely protected the localised nature of the individual regional station brands and the connections to the communities they serve, while providing them with additional tools, opening up access to centralised resources such as people and culture, research and marketing to improve on the ground operations. HT&E Annual Report 20221111 Australian’s insatiable appetite to consume more audio showed no signs of slowing during the year, with the percentage of the population now regularly listening to podcasts overtaking that of the US during the year. We are unique in Australia as we strongly believe in the power of local voices and have maintained local programming, with a particular focus on key day parts; breakfast and drive. We broadcast 226 live and local shows across the network and where syndicated programming makes sense, we adapt it to introduce local voices, ensuring the connection to the community is never broken. The acquisition has also allowed us to expand the distribution of some of our most successful radio shows. In January, we replaced all previously licensed content across the regional network with ARN original content. This saw us grow distribution and audiences for key properties and in turn deliver greater value for our national commercial partners. Our commitment to delivering localised, quality connections has proven the investment case for ARN Regional. We secured approximately $7 million of revenue synergies in the year, whilst growing already strong regional revenues by +7%. Whilst the integration program of work is substantial, we made significant progress during the year and remain on-track to conclude the major components by the end of 2023. Building the next generation of content creators and audiences With a vision to create a national multi-platform youth media brand we launched CADA on 31st March 2022, delivered by talent representative of the diversity of young Australia today. Targeting Australia’s underserviced youth audience, CADA is consumed in Sydney on the 96.1FM frequency and around Australia on iHeartRadio, DAB+ and across podcast, social and digital. Our focus for CADA this year has been on building brand awareness, refining the content offering and growing the cross-platform audience. We have been pleased with the support from our key commercial partners, with CADA delivering major integrated campaigns for marquee clients including Bonds, Netflix and Collarts. Return on Investments Materially improved local market conditions and strong management of our network of tunnel advertising contracts, Cody Outdoor revenue and earnings increased 9% and 31% respectively, and the business returned to cashflow profitability.4 The reopening of international borders and removal of quarantine requirements expected in the first half of 2023 will further assist the business. Emotive, an independent creative agency in which HT&E holds a 51% stake, had its most successful year to date, further expanding its client base, improving revenues and earnings. Looking to 2023 HT&E is in a strong position to drive continued shareholder value in 2023 and beyond and we have a powerful platform for future commercial growth following our best outright ratings performance in 2022. We believe we have the right formula to continue to grow our audiences across both our metropolitan and regional networks and in digital audio and are encouraged by Australian’s continued appetite to consume more audio, and the increasing willingness of advertisers to connect with these new audiences. Building a great place to work Finally, investment in our people is part of our DNA and during the year we further embedded our “Culture in Action” employee behaviours framework. Just 18 months into a multi-year program focused on creating a constructive workplace culture and are very pleased with the progress made. We prioritised investment in a structured Environmental, Social and Governance (ESG) program, named ‘Intune @ARN’, focusing on our Team, Communities, Planet and Governance. We aim to advance the right behaviours to support equity, inclusion, diversity and belonging, and create a workplace environment that enables our people to do their best work and make a difference. I am very proud to work with such a passionate, creative and motivated group of people and thank them all for their efforts in another tough year. I would also like to acknowledge and thank the great management team that we have, our Board for their guidance our shareholders for their continued support. See you all in 2023. Ciaran Davis CEO & Managing Director 1. GfK Radio Ratings, SMBAP, AM/FM/DAB+, p10+, Mon–Sun, 0530–2359, S8 2022, CY22 vs CY21 YoY comparison. 2. Gfk Radio Ratings Regional, Xtra Insights regional ratings, most recent surveys. 3. Triton Australian Podcast Ranker, December 2023. 4. Adjusted for the loss of HK Tramways contract from May 2022. 12 Operating and Financial Review This Operating and Financial Review should be read in conjunction with the Chairman’s letter and the Chief Executive Officer’s letter. Overview Summary of financial performance HT&E Limited (HT&E) results for the year ending 31 December 2022 were impacted by the acquisition of ARN Regional in January 2022. Statutory results for the year benefited from the consolidation of ARN Regional results. To enable comparability, this overview discusses both statutory and pro forma results which have been adjusted as if HT&E owned ARN Regional for the year ending 31 December 2021. The operating results of ARN Metro and ARN Regional are now presented as a single operating segment reflective of the interdependent nature of the underlying assets and cashflows of the integrated business. Cody Outdoor and Investments, containing Emotive and Soprano, remain separate operating segments in the financial report. On a statutory basis, Group revenues from ordinary activities of $344.9 million increased $119.9 million on the prior period. $111.5 million is directly attributable to ARN Regional, with the balance predominately due to strengthening digital audio & Emotive revenues, offset by lower revenues for Cody Outdoor following the loss of the HK Tramways contract in May 2022. Total group costs were up 52% to $266.2 million from $175.0 million; the majority of the increase was attributable to ARN Regional, further investment in digital audio, including the launch of new youth brand, CADA in March 2022, and expansion of ARN’s podcast and streaming capability and commercial offering. Underlying group earnings before significant items, interest, tax, depreciation and amortisation (EBITDA) of $91.8 million increased by 53% in the period. The statutory loss attributable to HT&E shareholders of $176.3 million was impacted by an impairment charge on goodwill and other intangible asset balances in ARN of $249.9 million taken in the second half. 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 Significant items net of tax4 NPAT attributable to HT&E shareholders EBITDA margin Underlying basic EPS (cents) Dividend per share (cents) Dividend per share from 2023 profits (cps)5 Change 53% >100% 7% 52% 53% 36% >100% 56% 60% 55% 78% 49% (12%) 57% >100% (>100%) 2022 344.9 3.4 9.7 2021 225.0 0.7 9.1 (266.2) (175.0) 91.8 (17.8) (2.4) 71.6 (5.6) 66.0 (17.5) 48.5 (3.4) 45.1 (221.5) (176.3) 26.6% 14.6 5.0 5.2 59.8 (13.1) (0.8) 46.0 (3.5) 42.5 (9.9) 32.6 (3.8) 28.8 (13.9) 14.9 26.6% 10.4 7.4 – 1. Totals may not add due to rounding. 2. EBITDA from continuing operations and before significant items, represents the Group’s total segment result. 3. EBIT from continuing operations and before significant items. 4. Commentary on significant items is included in note 1.3 to the consolidated financial statements. 5. Subsequent event: Dividend declared in February 2023 of 5.2cps to be paid from parent entity profits since 1 January 2023. HT&E Annual Report 202213 HT&E revenue6 $344.9m (Up 5% YoY) 2021 2022 $329.5m $344.9m HT&E EBITDA6 $91.8m (Down 4% YoY) 2021 2022 $96.0m $91.8m Financial Position The Group had net assets at 31 December 2022 of $359.4 million, $133.7 million lower than December 2021 net assets of $493.1 million, driven largely by the acquisition of ARN Regional, offset by the impairment of goodwill and other intangible assets in the current year. The acquisition was finalised on 4 January 2022, funded through a combination of existing cash reserves and undrawn debt totalling $249.0 million and the issuance of 35.9 million new HT&E shares with a fair value of $74.4 million. The acquisition accounting for ARN Regional was finalised in the period, with intangible balances comprising radio licences ($125.6 million), brands ($31.3 million), customer relationships ($16.6 million) and residual goodwill ($156.8 million) recognised, along with first year amortisation of customer relationships. These intangible asset balances were subsequently impacted by an impairment charge recorded in the year. During the year, the Group also paid the remaining $20.0 million owing under the binding heads of agreement reached with the Australian Tax Office as part of the New Zealand Branch matter, completed the sale of its 4KQ Brisbane radio station and licence for $12.0 million, disposed its remaining interest in Lux Group Limited for $8.8 million and announced the signing of a binding share sale agreement to sell its 25% interest in Soprano Design Limited (Soprano) for $66.3 million cash. The Soprano sale is conditional upon receiving FIRB approval and is expected to be completed in the first half of 2023. Underlying Drivers of Performance HT&E completed the acquisition of ARN Regional on 4 January 2022. If HT&E had owned ARN Regional for the year ending 31 December 2021, pro forma revenues in 2022 would have been up 5%, from $329.5 million. On the same pro forma basis, earnings before interest, tax, depreciation and amortisation (EBITDA) before significant items would have been down 4% from $96.0 million. Metropolitan broadcast advertising revenues grew 3.4% to $192.5 million, with increasing audiences further strengthening ratings positions and driving revenue onto key eastern seaboard stations. Increased revenue contribution from digital audio on a pro forma basis, up 8% to $14.6 million also assisted overall growth. Regional advertising revenues grew 7% on a pro forma basis, assisted by federal government election related spend and buoyant economic conditions in our key regional markets of operation. On a pro forma basis, Group operating costs increased 9%, with people and operating expenditure growth reflecting our continued investment in digital audio, including the launch of CADA in the period, and the impacts of macroeconomic factors driving cost inflation, labour shortages and salary pressures. Depreciation and amortisation expense of $20.2 million increased by 1% in the year on a pro forma basis. This resulted in EBIT before significant items of $71.6 million compared with $76.0 million in the prior year on a pro forma basis, and net profit after tax attributable to shareholders, before significant items (NPAT) of $45.1 million. Details on the significant items totalling $221.5 million (net of tax), including an impairment charge on goodwill and other intangible asset balances in the current year of $251.8 million are included in note 1.3 to the Financial Report. 5. Podcast – Triton Digital Podcast Ranker, December 2022 (excludes New York Times). 6. On a pro forma basis, as if HT&E had owned ARN Regional for the year ending 31 December 2021. 14 Operating and Financial Review (cont) Cash flow generation AUD million1 Operating cash flows and lease payments2 Tax payments and receipts ATO settlement (including interest and penalties) Cash flow from operating activities and lease payments Investing cash flows3 Borrowings Short-term deposits Dividends paid to shareholders Share buy back Other financing cash flows Cash at the beginning of the year Effect of foreign exchange of the year Cash at end of year4 Bank loans Net (debt)/cash 2022 54.7 (25.4) (22.3) 7.0 (221.4) 17.0 – (27.6) (2.3) (6.0) 257.1 0.1 23.9 (85.0) (61.1) 2021 Change $ 34.2 (9.8) – 24.4 70.6 65.0 50.0 (9.7) (5.0) (3.3) 65.1 0.0 20.6 (15.6) (22.3) (17.3) (292.0) (48.0) (50.0) (18.0) 2.7 (2.7) 192.0 0.1 257.1 (233.2) (68.0) 189.1 (17.0) (250.2) 1. Totals may not add due to rounding. 2. Operating cash flows, plus principal repayments on finance leases accounted for under AASB 16 Leases from 1 January 2019. 3. 2021 includes proceeds from the disposal of OML and Luxury Escapes investments. Excluding amounts transferred (to)/from short-term deposits. 4. Excludes amounts held in short-term deposit with banking institutions. HT&E Annual Report 202215 Investing cashflows include $239.1 million for the acquisition of ARN Regional, offset by proceeds received on disposal of 4KQ and the Group’s remaining investment in Lux Group totalling $20.8 million. The accretive share buy-back was maintained through the second half delivering improved returns for shareholders. In consideration of the trading result for the period and current economic environment, the Company declared a dividend of 5.2 cents per share. This dividend is paid from parent entity profits since 1 January 2023. Cash and capital management The balance sheet of the Group is in a very strong position, with net debt of $61.1m and leverage on a pro forma pre AASB-16 basis 0.8 times EBITDA. Cash proceeds from the disposal of HT&E’s investment in Soprano5 expected to be received in the first half of 2023 will be used to pay down debt, effectively eliminating existing debt under the current financing facilities, providing significant flexibility for HT&E to pursue future growth opportunities as they arise. The Group retains debt facilities with undrawn limits of $141.6 million, most of which expire in 2026. Impacting operating cashflows in the period include payments to the ATO of $22.3 million and transaction and integration costs associated with the acquisition of ARN Regional of $8.7 million. The tax payments made were part of finalising settlements of two long running taxation disputes with the Australian Tax Office, announced in 2021. Will & Woody – KIIS Network Drive 5. The sale is conditional upon receiving FIRB approval. 16 Review of operations 2022 has been a year characterised by growth at ARN and we extended our lead as Australia’s best performing audio business across a range of key metrics. In a highly competitive market, ARN finished 2022 as the #1 metropolitan network for people 10+, the #1 network for people 25–54, and with our highest ever 25–54 audience share and largest cumulative audience, while the iHeart Podcast Network Australia maintained its position as the #1 Publisher. Even MORE Connections that count In 2022, we expanded our content slate and touchpoints across all audio formats, integrating 46 regional radio stations acquired from Grant Broadcasters (ARN Regional) and rolling out the iHeart digital audio platform to regional areas. We invested in the creation of original podcast content, digital music formats and a new multi-platform youth brand, CADA, which has helped deliver valuable new audiences to the network. Our strategic intent remains to build the best broadcast radio and digital audio business in Australia and offer audiences and advertisers a gateway to develop deeper connections in the booming world of audio. We do this by delivering on our three pillars for growth. 1. The Infinite Dial, Edison Research, 2022, p12+. 2. Triton digital/Digital – Adobe, Google Analytics, December 2022. 3. Gfk Radio Ratings, S8, SMBAP, Comm Radio Gps (AM/FM/DAB+), Mon–Sun 5:30am–12:00mn, Share % P10+ and P 25–54. Three pillars for growth Real People Creating meaningful relationships and environments for shared and trusted brand experiences. Real Influence ARN’s unique deep connections drive an unmatched halo of influence. Real Results Boosting ROI within an audiosphere of real human connections at every touchpoint. #1 radio stations across key markets: FM Syd, FM Melb, FM Adl, national DAB+ station #1 Radio streaming app1 #1 Podcast publisher2 #1 Radio network share3 p10+ and p25–54 H222 digital audio revenue (vs H122) +28% Content Live and local content delivered by Australia’s best talent, and supported by brands that people know and trust. Distribution Distributed across our comprehensive network of broadcast radio stations and on iHeartRadio, Australia’s most established digital audio platform. Double digit audience growth across radio, podcast, streaming1 Innovation Commercialised through a suite of innovative, data and technology led products and partnerships. Continued momentum in digital audio revenue growth HT&E Annual Report 20221717 Leaders in local: We have fiercely protected the localised nature of the individual regional station brands and the connections to the communities they serve, while providing our teams with additional tools, opening up access to centralised resources such as people and culture, research and marketing to improve on the ground operations. We are unique in Australia as we strongly believe in the power of local voices and have maintained local programming, with a particular focus on key dayparts; breakfast and drive. We broadcast 2261 live and local shows across the network and where syndicated programming makes sense, we adapt it to introduce local voices, ensuring the connection to the community is never broken. Delivering on the acquisition business case: Through providing our clients with the ability to access more than a third of Australian consumers, we identified the potential for material revenue synergies for ARN of up to $20 million per annum within three years of completing the acquisition of ARN Regional. We set an ambitious revenue synergy target of between $6–8 million in 2022 and despite the significant focus required on the integration program were able to secure approximately $7 million of new revenues into the business. With the Commercial structure now set, training programs in place and first phase IT integration complete, we are confident we can deliver further synergies in 2023 to meet the acquisition business case. Bigger, Better Together On 4th January 2022, ARN completed the acquisition of ARN Regional from Grant Broadcasters, growing the network to over 8 million listeners across 135 stations in every state and territory in the country. Grant Broadcasters is Australia’s oldest, family owned and successful regional radio business and it was critical that the integration of ARN Regional into the core business maintained the elements that made it such a success. People first: Crucial to the ongoing success of the business has been a ‘people first’ integration effort. To ensure the success of combining the two businesses in February, we brought together over 120 leaders from across the business, for the purpose of creating a shared vision and generating strong working relationships. This exercise was replicated with a core group of leaders in September, as a way of health checking our progress and establishing the foundations for continued integration efforts. The program of work was substantial and we remain on-track to conclude the major components by the end of 2023. The integration consisted of numerous individual workstreams encompassing organisational structures, processes and systems. The timeline below illustrates the key milestones achieved in 2022 and remaining for 2023. Our Integration Timeline Acquisition completed Agency upfront presentations Disposal of 4KQ for $12m Hot Tomato (Gold Coast) integration into metro structure Merger of metro and regional revenue & inventory systems Single accounting system go-live Sep 2022 May 2023 Oct 2023 Aug 2022 Apr 2023 Jul 2023 Enabling teams and systems integrated Integration of TRSN into ARN Agency Sales team Selling@ARN Capability@ARN iHR regional digital expansion ARN syndicated shows launched 1. Total show count is based on live and local shows across all ARN owned stations across Metro & Regional. Mar 2022Jul 2022Feb 2022Jan 2022Jun 202218 HT&E Annual Report 2022 Review of operations (cont) ARN continues to have the #1 metropolitan radio network share in Australia, with reach of over 6 million people a week. Consistency remains a key part of our ratings success, culminating with our strongest ever metropolitan ratings performance in the final survey of 2022. In Sydney, ARN has maintained its Breakfast duopoly leadership with KIIS 1065’s Kyle & Jackie O and WSFM’s Jonesy & Amanda finishing in the #1FM and #2FM spots respectively, and in Adelaide, Mix102.3 remains the #1FM Station and Cruise1323 the #1 Commercial AM Station.1 In the less regularly surveyed but equally important regional markets, ARN drove impressive results. In the largest non- capital market of the Gold Coast, ARN’s Hot Tomato increased cume YoY and remained a strong overall #1. Of the eight of ARN’s other major regional markets surveyed in 2022, ARN increased cume in five and held #1 rankings in Cairns, Mackay & Gympie. Cume also increased strongly in Wollongong and Hobart from prior surveys.2 Growing our connections through content Growth from the core ARN continues to be #1 metropolitan radio network in Australia reaching over 6 million people a week. Consistency remains a key part of our ratings success, culminating with our strongest ever metropolitan ratings performance in the final survey of 2022. In a highly competitive market, ARN finished 2022 as the #1 metropolitan network for people 10+, the #1 network for people 25–54, and with our highest ever 25–54 audience share and largest cumulative audience. Across our metropolitan network, overall listeners increased by close to 12.7% year on year. ARN continues to lead key metropolitan markets with #1FM stations in Sydney, Melbourne and Adelaide. In Melbourne, GOLD104.3 is #1FM in all dayparts for the 24th consecutive survey, led by The Christian O’Connell Show. 1919 Expanding our most powerful shows The acquisition of ARN Regional has allowed us to expand the distribution of some of our most successful radio shows. In February, we replaced all previously licensed content across the regional network with ARN original content. This saw us grow distribution and audiences for key properties and in turn deliver greater value for our national commercial partners. Elevating our news offering News is a key element in radio programming and in September, recognising the importance of local news stories to the communities we serve, changes were made to how we create and deliver news across the network. These changes better reflect who we are, strengthen our news service delivery, and enhance the quality of the content we produce. The benefits of the changes made have been extensive, and include: • A Local News First approach for regional markets, with local news leading every bulletin between 6am – 9am workdays. This ensures we free-up our journalists to highlight key issues impacting local audiences and make intimate connections with listeners. • Creating a consistent approach to news gathering across the network and maximising the productivity of ARN’s news force to generate bespoke content for digital first distribution, as audience behaviours shift to on-demand listening. The News Review lays the foundation for our Future of News strategy to elevate news content and position ARN as the industry leader in short and longform audio news across broadcast and digital platforms. Will & Woody – more than quadrupling their audience footprint across Australia 2021 # of stations 2022 # of stations 5 24 Total Audience Reach Number3 1,623,700 +40% Growth (465,700) Kyle & Jackie O – record breaking cume, reaching more listeners than any other show in the country 2021 # of stations 2022 # of stations 5 41 Total Audience Reach Number3 1,362,500 +34% Growth (348,500) Jonesy & Amanda – substantial audience growth off a very strong base 2021 # of stations 2022 # of stations 4 27 Total Audience Reach Number3 805,100 +15% Growth (103,100) Christian O’Connell – extending the lead in Australia’s biggest radio market 2021 # of stations 2022 # of stations 5 35 Total Audience Reach Number3 925,100 +29% Growth (208,100) 1. GfK CY2022 Metro Radio, People 10+, Mon–Sun 0530–12mn #1 based on share, increase based on cumulative reach unless otherwise stated ratings, Xtra Insights regional most recent surveys | GfK, S8 2022, SMBAP, p10+, p25–54, 0530–2359, Share/Cume | Xtra Insights, most recent Surveys 10+. 2. GFK Gold Coast surveys 1–3 2021 vs surveys 1–3 2022, 10+ Share/Cume, Mon–Sun 530am–12mn | Xtra Insights most recent surveys, 10+ Station Listened to Most, Cume, Mon–Sun 12mn–12mn. 3. GFK Metro Survey 8 2021 vs Survey 8 2022, 10+ All People Cume, Kyle & Jackie O Syd Mon–Fri 5.30am–9am & 6pm–7pm, SMBAP Mon–Fri 6pm–7pm, Will & Woody SMBAP Mon–Fri 4pm–6pm, Jonesy & Amanda SMA Mon–Fri 5:30am-9am & 6pm–7pm, Christian O’Connell SMBAP Mon–Fri 5:30am-9am & 7pm–8pm | Xtra Insights All People 10+ Cume (markets selected specific to show, most recent surveys), Kyle & Jackie O Nights Mon–Fri 7pm–12mn, Will & Woody Drive Mon–Fri 4pm–7pm, Jonesy & Amanda Nights Mon–Fri 7pm–12mn, Christian O’Connell, Nights Mon–Fri 7pm–12mn. 20 HT&E Annual Report 2022 Review of operations (cont) Building the next generation of content creators and audiences Launch of CADA We launched CADA on 31st March 2022, with the vision to create a national multi-platform youth media brand, delivered by talent representative of the diversity of young Australia today. Targeting Australia’s underserviced youth audience (aged 18–29), CADA is consumed in Sydney on the 96.1FM frequency and around Australia on iHeartRadio, DAB and across podcast, social and digital. Our focus this year has been on building brand awareness, refining the content offering and growing the cross-platform audience. We have been pleased with the support from our key commercial partners, with CADA delivering major integrated campaigns for marquee clients including Bonds, Netflix and Collarts. Bonds “Big Icon Energy” campaign saw Flex & Froomes record their show in front of a live studio audience with 170 attendees, prize winners and influencers. We have seen more success with the Flex & Froomes podcast reaching 1 million downloads in six months and becoming ARN’s 4th biggest catch-up podcast within three months of launch. CADA also presented some of the biggest tours in Australia across the year – including Kendrick Lamar, The Grass Is Greener Festival, Central Cee and Tyga, and launched CADA:Live as part of BIGSOUND in Brisbane in September, allowing hundreds of audience members to experience CADA in real life. Podcast listening continues to grow Australians’ insatiable appetite to consume more audio showed no signs of slowing in 2022, with the percentage of the population now regularly listening to podcasts overtaking that of the US across the year. Consumers have an infinite number of podcasts at their disposal, and therefore the way we think about investing in a particular genre or creator of content across both our owned and represented podcast portfolio is incredibly important. We will consider investment where the content and audience align with our radio brands, or where we perceive there to be a commercially attractive under serviced audience. At this point in time, we do not believe the commercial opportunity attached to long-form, investigative style podcast content, justifies the investment for our business. The Media-i survey provides an important perspective on key attributes of our commercial offering relative to our audio peers through sampling over 2000 media agency professionals. On the most important measure, the Net Promoter Score (NPS), ARN ranked #1, a noteworthy achievement for our entire team and testament to the investment we continue to make in people, product, and process. Our people also achieved significant industry recognition at the ACRA’s securing our best ever results with 24 winners across 21 categories, and Kyle and Jackie O being inducted into the Commercial Radio Hall of Fame. Looking to the future Our focus for 2023 continues to be delivering improved returns for HT&E shareholders and we have a strong platform for future commercial growth this year following our best outright ratings performance in 2022. We are strongly placed to deliver on our strategic intent to build the best broadcast radio and digital audio business in Australia and offer audiences and advertisers a gateway to develop deeper connections in the booming world of audio through; 1. Creating live and local content delivered by Australia’s best talent and supported by brands that people know and trust. 2. Distributed across our comprehensive network of broadcast radio stations and on iHeartRadio, Australia’s most established digital audio platform. 3. Commercialised through a suite of innovative, data and technology led products and partnerships. HT&E is confident that it will deliver on its integration objectives, including second year revenue synergy targets. Launched under three years ago, the iHeart Podcast Network Australia has grown at scale and maintained its position as the #1 Publisher on the Australian Podcast Ranker for 32 consecutive months. Every month, we now reach a further 4.7 million listeners via the podcast network. In 2022, we launched several new radio programs with established podcast creators, including ‘Life Uncut’, ‘She’s On The Money’ and ‘Collective Noun’, as part of our ‘Podcast to Broadcast strategy’, aiming to bring new younger audiences into radio and create a path for uncovering the next generation of radio talent. In 2023 we will continue to invest in both our owned and represented podcast portfolio, ad tech and simplify our product offering for advertisers. Roadmap to building a constructive workplace culture Investment in our people is part of our DNA and during the year we further embedded our “Culture in Action” employee behaviours framework. Just 18 months into a multi-year program focused on creating a constructive workplace culture, we remeasured our culture using the Human Synergistics Organisational Culture Index, with pleasing progress made. We prioritised investment in a structured Environment Social and Governance (ESG) program, named ‘InTune @ARN’, focusing on our Team, Communities, Planet and Governance. We aim to advance the right behaviours to support equity, inclusion, diversity and belonging, and create a workplace environment that enables our people to do their best work and make a difference. Our focus on recruiting and retaining the best people continued to deliver results, with ARN achieving strong performance in two key industry measures, being the bi-annual Media-i Industry Survey (Media-i) and the annual Australian Commercial Radio Awards (ACRAs). 2121 Emotive Emotive, an independent creative agency in which HT&E holds a 51% stake, had its most successful year to date, further expanding its client base, improving revenues and earnings. As a full-service creative agency, Emotive is uniquely structured to respond to its clients’ business needs, offering strategy, creative and design, production, creative amplification and brand experience services. Emotive entered the next exciting phase of its growth in 2022, further expanding the team and securing new premises by the beach in Coogee. Emotive works with an enviable roster of local and international clients, including; Optus, Audible, Google, Breville, Danone, Pernod Ricard, ARN, Revlon, Unilever and The NRL. 1. Adjusted for the loss of HK Tramways contract from May 2022. This transaction delivers HT&E shareholders a meaningful return on investment and provides further balance sheet strength and financial flexibility for HT&E to continue to invest in its core media assets. The sale is conditional upon receiving FIRB approval and is expected to be completed in the first half of 2023. Cody Outdoor With materially improved local market conditions and strong management of our network of tunnel advertising contracts, Cody Outdoor revenue and earnings before interest, tax,depreciation and amortisation (EBITDA) before significant items increased 9% and 31% respectively, and the business returned to cashflow profitability.1 The reopening of international borders and removal of quarantine requirements expected in the first half of 2023 will further assist the business. Cody continues to operate a network of profitable tunnel advertising contracts, including the Eastern and Western Harbour Tunnels, Tai Lam Tunnel, Tate Cairns Tunnel and a number of smaller assets. Recruiting and retaining the best people will continue to be our focus and we are confident that our investment in a structured ESG program, ‘InTune @ARN’ will have a positive impact. We aim to advance the right behaviours to support equity, inclusion, diversity and belonging, and create a workplace environment that enables our people to do their best work and make a difference. Having concentrated on growth from the core, as we head into an uncertain economic period we believe we have the right formula to capitalise on the strengths of radio, while meeting the demand created by Australians’ insatiable appetite to consume more audio via digital formats. Investments Soprano In early January 2023, we announced the signing of a binding share sale agreement to dispose of our long held 25% interest in Soprano Design Limited (Soprano) to Potentia Capital (Potentia), a leading Australian based technology focused private equity firm for $66.3 million in cash consideration. After an extensive outreach process with various interested parties, the Potentia proposal was considered to be the most attractive for HT&E shareholders. Global CPaaS and technology markets have been challenged over the past 12 months and HT&E views this transaction to be a positive outcome in today’s market, with an all-cash deal enabling the company to focus on its position as a leading provider of audio services in Australia. Robin, Terry & Kip – KIIS 97.3 Brisbane 22 2022 Awards In 2022 our people lived our values of “aim high” and “own it” with a number of sought-after achievements recognised across Radio, Podcasting and beyond. We celebrated the following award wins across the business. Australian Commercial Radio Awards (ACRAs) In its 33rd year, the ACRAs are a celebration of the wealth of talent that drives the Australian commercial radio industry. Winners are awarded across 39 categories and cover all areas of radio broadcasting. In 2022, we reinforced our position as Australia’s leading audio company, taking home an astounding 25 awards, the best year for ARN on record. The standout achievement of the night was the induction of KIIS 1065’s Kyle & Jackie O into the Commercial Radio Hall of Fame, a true reflection of the calibre and excellence ARN maintains. Categories won by ARN • Hall of Fame Inductees – Kyle & Jackie O, KIIS Network • Best On-Air Team (Metro) – Kyle & Jackie O, KIIS 106.5 Sydney • Best On-Air Team (Country & Provincial) – Brooke & Bob, Magic 93.1 Berri • Best Talk Presenter (Provincial) – Katie Woolf, Mix 104.9/Hot 100 Darwin • Best Networked Program (Metro) – Kyle & Jackie O Hour of Power, KIIS Network • Best Networked Program (Provincial) – Tasmania Talks with Mike O’Loughlin, ARN • Best Current Affairs Presenter (Non-Metropolitan) – Katie Woolf, Mix 104.9/Hot 100 Darwin • Best Entertainment Presenter (Country) – Dana Hamilton, Power 98.1 Muswellbrook • Best Entertainment Presenter (Metro) – Kyle Sandilands, KIIS 106.5 Sydney • Best Music Presenter (Metro) – Mitch Churi, KIIS Network Ciaran Davis, Jackie O, Kyle Sandilands, Duncan Campbell – 2022 ACRAs • Best Station Produced Comedy Segment (Country) – Tracksuit Boys ‘Everybody’, Power FM Bega Bay • Best Station Produced Comedy Segment (Metro) – Barb Scams the Summer, KIIS Network • Brian White Award for Journalism (Non-Metro) – Katie Woolf, Mix 104.9 Darwin • Best Radio Show Podcast (Metro) – Jonesy & Amanda’s Time Travellers Podcast, WSFM Sydney • Best Sport Event Coverage (Non-Metro) – Raiders On Mix – Raiders v Titans Comeback Match, Mix 106.3, Canberra, ARN/Southern Cross Austereo • Best Music Special (Provincial) – 30th Anniversary of Nevermind, Power 100 Townsville • Best Multimedia Execution – Station (Metro) – Kyle & Jackie O’s Get Vaxxed Baby! KIIS 106.5 Sydney • Best Station Promotion (Metro) – Kyle and Jackie O’s Set You Up For Life, The Kyle & Jackie O Breakfast Show, KIIS 1065 Sydney • Best Show Producer – Talk/Current Affairs (Non-Metro) – Rhea Gillie, LAFM Launceston • Best Program Director (Metro) – Mike Byrne, WSFM Sydney • Best Music Director (Metro) – Brad McNicol, KIIS 106.5 Sydney • Engineering Excellence – ARN’s VPlayer, Bryan Amos, ARN • Best Direct Salesperson (Non-Metro) – Caroline Lowe, Magic 899 & 5CC, Port Lincoln SA • Best Station Sales Achievement (Non-Metro) – Gold FM98.3 & AM1071 Sales Team, Bendigo VIC • Best Newcomer Off-Air (Provincial) – Scott Gilchrist; Hot 104.7 & Mix 106.3, Canberra ARN/Southern Cross Austereo HT&E Annual Report 2022Media i Awards The Media i Awards provide recognition in sales excellence for teams and individuals across all media channels. The awards are the culmination of over 2,000 media agency peers voting for the individuals and teams they believe achieved excellence in the discipline and are the only awards program of its kind in Australia. Australian Podcast Awards Recognising the Australian podcast industry’s 2022 achievements, These Awards celebrate amazing content, campaigns and talent – both on the mic and behind the scenes. Chosen by a panel of over 60 independent international and Australian judges working in the sector, ARN were recognised across 7 categories in 2022. Categories won by ARN • QLD Sales Team of the Year – ARN Agency Team • QLD Radio Sales Representative of the Year – Liam Armstrong • VIC Radio Sales Representative of the Year – Tess McLeod • NSW Radio Sales Representative of the Year – Tom Bonnell Radio Today Podcast Awards Radio Today’s Annual Podcast Awards, recognise the most innovative podcasts in Australia and the people driving success behind the scenes. ARN was extremely pleased that Kyle & Jackie O took out the Radio Show Podcast of the Year for the second year running, with a total of 3 out of 16 category wins. Categories won by ARN • Radio Show Podcast of The Year – Kyle & Jackie O • Podcast Executive Leader of The Year – Corey Layton • Podcast Publisher of The Year (Indie) – Victoria Devine, She’s On The Money LearnX Summit and Awards The LearnX Awards are an international and professional awards program that recognises multiple fields of learning and talent development. In 2022, ARN was recognised for two of their learning programs that were developed entirely in house by our People & Capability team. Categories won by ARN • Leadership Training – Gold Winner, ARN People & Culture • Sales Training – Gold Winner, ARN People & Culture Categories won by ARN Gold Winners • Listeners Choice – Life Uncut • Best Creative Campaign – She’s On The Money & Budget Direct, Victoria Devine Silver Winners • Spotlight Award – Life Uncut • Best Sex & Relationship Podcast – Hooked, Hitched & Hung Up • Best Creative Campaign – Queens of the Drone Age Bronze Winners • Best New Podcast – Flex & Froomes • Rising Star – Indianna Symons • Best Podcast Sales House – ARN B&T Women in Media Awards B&T’s Women in Media Awards recognises those exceptional women who have achieved success in their professional arenas and celebrates their invaluable contribution through their leadership, innovation and courage to their industry. In 2022, our Chief Strategy & Connections Officer, Lauren Joyce was awarded Marketer of the Year. Radio Today 30 under 30 Awards Radio Today’s 30 under 30 Awards unearth Australia’s youngest and brightest minds in radio, audio and podcasting. In 2022, year ARN secured one third of the awards with 10 rising stars recognised for their excellence in the industry. Awards won by ARN • Jake Powell – CADA • Brooke Humble – Magic 93.1 • Brooke Taylor – CADA • Juan Estapa – ARN • Michael Gallo – ARN • Liam Armstrong – ARN • Kate Valance – KIIS • Lachlan Perry – 2ST/949 Power • Tom Bonnell – ARN • Ben McDowell – KIIS 23 Agency Sales Team Individual Awards Across the Advertising Industry in Australia, some of the major Ad Agencies acknowledge their media partners with awards to recognise excellence in innovation or partnership throughout the year. Awards won by ARN • Carat Sales Rep, Q1 – Adelaide • Mindshare Rep of the Month – March – Melbourne • Initiative Sales Person of the Month – July – Melbourne • Initiative Sales Person of the Month – Sept – Melbourne • Initiative Sales Person of the Year 2022 – Melbourne • Initiative Media of the Year 2022 – Melbourne • Starcom Rep of the Quarter, Q3 – Sydney • Media Partners Rep of the Year – Metro • Media Partners Rep of the Year – Regional Ipswich Chamber of Commerce Business Excellence Awards Celebrating the bold work that propels their business community forward, inspiring a competitive marketplace and fostering meaningful connections within and across business and industry sectors. • The President’s Award – River 949 Mediaweek Power List In its second year, Mediaweek released its annual Power 100 list. The list recognises the media executives who control the content across the Media industry in Australia. Mediaweek 100 Power List • Ciaran Davis • Peter Whitehead • Duncan Campbell • Corey Layton Mediaweek Star Power 25 List • Kyle & Jackie O • Christian O’Connell • Laura Byrne and Brittany Hockley • Amanda Keller and Brendan Jones • Will and Woody 24 Environmental, Social & Governance: InTune @ARN Positively Impacting Our People and Planet We are contributing to the achievement of local and global Environmental, Social and Governance (ESG) goals by making sustainable, measurable, continuous improvements across our businesses with a focus on ARN. To do this, we have developed an ESG strategy, translated into practical actions to make a positive and tangible impact to people and the planet. We call this program of work “InTune @ARN”. Our InTune efforts are focused in four areas: Our Communities By supporting our audiences and communities. Our Team By building the most constructive workplace culture possible. Our Planet By measuring and mitigating our environmental footprint. Best Practice By ensuring robust and transparent governance structures, reporting and controls. We call ESG “InTune @ARN”. Flex & Froomes – CADA HT&E Annual Report 202225 InTune with Our Communities Building quality connections with our communities (audiences, clients, partners), by understanding what’s important to them and giving back in big and small ways. InTune with Our Team Our people are the reason for our success. We believe diverse teams who collaborate constructively find even more ways to grow, innovate, achieve and do their life’s best work. The InTune @ARN Framework Key programs of work undertaken in 2022 IPG Mediabrands’ Media Responsibility Index OMG’s Sustainability and DE&I Partner Survey Read more on page 26 InTune with Our Planet We are heard in suburbs, cities and regions near and far, so we strive to protect and regenerate those communities today to sustain tomorrow. Key programs of work undertaken in 2022 Decarbonisation strategy, plus scope 1&2 carbon auditing Founding membership of ‘Green Ears’ audio industry sustainability program Read more on page 32 Key programs of work undertaken in 2022 Award-winning capability programs, including: Leadership@ARN and Selling@ARN Establishing an evidence-based Diversity and Inclusion Strategy Group-wide culture survey re-test with statistically significant improvements Read more on page 30 InTune with Best Practice Ethical, transparent and accountable governance structures and controls are the foundation of our success. Key programs of work undertaken in 2022 ISS ESG’s Corporate Ratings Consolidated and redrafted the HT&E Code of Conduct Read more on page 34 26 Environmental, Social & Governance: InTune @ARN InTune with Our Communities As a media broadcaster, ARN is in a unique position to support social issues important to vast and diverse groups of people from our audiences, to customers, communities, shareholders, partners and team members. Community Service Announcements In 2022, we supported 254 different community service organisations by supplying airtime and digital inventory to promote causes including Movember, Starlight Children’s Foundation, Clean Up Australia, Bravehearts, The Salvation Army, Polished Man and R U OK? Day. In this arena, we delivered over 1.4m impressions and 211,395 radio spots which equates to over $18.7m in value. We also supported some of these charities with airtime vouchers to the value of $396k to auction off at fundraising events throughout the year. Impressions 1.4m Radio spots 211k +441% YoY Value $18.7m +153% YoY Airtime auction vouchers $396k Mel & Chris Dzelde with Ali Clarke, Mix 102.3 Adelaide HT&E Annual Report 202227 Damien Leith, WAVE FM Illawarra On Air Activities With loyal and engaged listeners, our talent consistently use their platforms for good, bringing awareness to those whose stories need to be heard. From Christian O’Connell raising the money to give a car to a loyal listener with a disability so she could take her kids to school, to Paul ‘Galey’ Gale raising money for Gold Coast families with “Galey to the rescue”, the end goal is always the same – giving people a voice, raising money for charities or groups in need whilst, bringing our audience something heartfelt and meaningful – with community at the forefront. Kyle & Jackie O’s Givebacks “Givebacks” are one of our most popular content segments as Kyle & Jackie O get to use their radio powers for good, in 2022 they helped raise and giveaway over $250,000 to those in need. Kyle & Jackie O ran several giveback segments in 2022, one of the most heart-warming being for the family of Jaclyn Michelle who tragically died after being struck by a train, leaving behind six children. Our listeners and clients overwhelmingly dug deep, raising close to $100,000 for Jaclyn’s family. Christian O’Connell’s Hamper Claus Throughout November, Christian ran an on-air fundraiser, the goal was to raise $32,500 to provide 500 hampers for the Charity Mum’s Supporting Families in need and ended up raising close to $80,000! Bravehearts Day In its 26th year, Bravehearts Day is Australia’s largest and longest-running campaign, dedicated to preventing child sexual abuse. We supported this initiative with social posts/stories and on air messaging across 43 regional stations, delivering over $460,000 in value. Camp Quality For over 10 years, the teams at Mix 104.9 and Hot 100 in Darwin have been running this charity day in partnership with Camp Quality. This year we ran an all-day radio auction, clothing collections, an outside broadcast and of course putting our listeners on the air and playing requests for donations all day long. In 2022 a massive $35,000 was raised for NT families. R U OK? Day The KIIS Network once again went silent for 10 seconds every hour and encouraged listeners to use that silence to ask each other ‘R U OK?’ Our team at Townsville’s Power 100 received a call from a listener to thank announcers Archie, Bretz, Karina and Wildy who in his words said, “you guys saved my life”. After having had a major setback in his life, it was Power 100 that got him through. Reinforcing the meaningful way that our teams connect with our listeners. Mix 102.3’s Spirit of Christmas Mix 102.3 along with Power FM in South Australia told the story of Mel Dzelde who has been diagnosed with stage 4 rectal cancer and late last year was diagnosed with MND. As the sole carer for Mel, her husband Chris could no longer work. In an Adelaide first, the two stations combined forces simulcasting their breakfast shows, with the aim to raise $50,000 to help clear Mel & Chris’s debts, and any additional money going to Mary Potter Hospice. Joined by icons such as Kate Ceberano, Hans the German and Erin Phillips – as well as special guest Oprah Winfrey (who also contributed $15,000) they raised a total of $75,000 for Mel and her family. Koinz 4 Kids Throughout the month of July, SeaFM Devonport, Burnie, 7AD and 7BU raised money via Koinz for Kids for The Cancer Council Tasmania, helping children who are impacted by Cancer on the Northwest Coast. With the help of businesses, schools, and the community, they were able to raise over $36,000. Hoodies for the Homeless Over the course of four weeks, WAVE FM in the Illawarra collected and donated an overwhelming 12,000 items to St Vincent De Paul through their “Hoodies for the Homeless” campaign. The donations were distributed out to anyone experiencing homelessness within the Illawarra and South Coast area so that they could stay warm during the winter months. All in for Aspen Sunshine Coast’s Hot91 urged listeners to roll up their sleeves (or get their speedos on) in support of two-year-old Aspen, who had been diagnosed with leukemia. Sam & Ash in Breakfast asked listeners to pledge blood instead of money with the goal of 1000 litres of blood pledges. In turn they would swim 100km in a day at Cotton Tree Pool. On the event day 850km in total were swum across 12 hours and 100 blood donations registered. Will & Woody’s “Most Distant Shave” for Movember In support of Movember, KIIS Drive hosts Will & Woody attempted the World Record for the most ‘distant’ shave. They used their platform to start the conversation about men’s mental health, attempting to shave Will’s mo from a 20 metre drop off a building. 28 Environmental, Social & Governance: InTune @ARN InTune with Our Communities (cont) Disaster Reporting The power of radio is undisputed during times of crisis. When people want to feel a sense of community, connection and hope, audio plays a vital role regardless of whether audiences access content via broadcast, on-demand audio or social media. The resilience of broadcast radio is unparalleled particularly during times of natural disaster. As phone and wifi networks faulter, radio waves become the most reliable format for communication and are crucial for disseminating life saving information to the affected communities. Our networks came together in a major way with the flood coverage during February and March 2022 where so many communities were affected. Robin Bailey from KIIS 97.3 in Brisbane broadcast live from her balcony while the Brisbane River lapped at her front door, the local stations in affected areas such as Ipswich, Gympie, Sunshine Coast, Brisbane and Wollongong worked double-time as they increased their news, weather and live bulletins, as well as social updates. One example of this was in Ipswich where River 94.9 covered the emergency in their area like no other station could. They provided the community with updates as they happened and with how to access assistance. They had a direct line to evacuation centres as a way of updating listeners as soon as their doors opened with information direct from SEQ water, councillors and mayors across the region, as it became available. On the first day of the floods they put between 150–200 callers to air, the priority was getting information to their listeners that could help the community. Some of the stories the station heard that day were remarkable, from people stuck on the roofs of their house to narrowly escaping cars on the major highway. The live updates were critical for helping the community to navigate the changing weather conditions in real time. Radio is incredibly agile and all relevant shows across our network pivoted their normal programming to provide our listeners with the most accurate updates from government agencies and emergency services, as well as satisfying our audience’s desire for light-hearted escapism and sharing stories of hope. Volunteering and Donating At ARN every staff member has been allocated one day a year of paid leave to use to support their charity of choice by volunteering. A number of staff took up this offer in 2022, in addition to organised activities, supporting charities and allowing staff to ‘be their best selves’. With COVID restrictions easing in 2022, we saw a 500% increase in the amount of Charity Days that staff took. Supporting Charities ARN supports various charities through donations and organised events across the year, coordinated by our local “ARNSocial” teams. This serves to raise money but also awareness of the causes. Some examples of this activity in 2022 include: • Biggest Morning Tea for Cancer Council • AusMusic T-Shirt Day • Remembrance Day • Movember • Mater Chicks in Pink • Lifeline • Perrin Institute for Research Ipswich Floods, February 2022 HT&E Annual Report 202229 Partnerships In 2022 ARN invested in programmes to support select charities aligned to our key values. A long-time partner is UnLtd; a social purpose organisation connecting the media, marketing and creative industries with charities helping children and young people at risk. Through this partnership our people can immerse themselves in a range of charities and contribute their time and expertise through a series of events across the year. In 2022 we • Engaged over 100 participants in 38 events across all metro markets • Sponsored five activations across 4 x golf days and 2 x soccer tournaments helping to raise $305,000 • Raised $7,000 for Support Act at the Ricochet Ball • Partnered with UnLtd as a Gold Sponsor to the value of $250,000 value in media airtime • Played a critical role in raising $284,000 across their cricket, Three Peaks (hiking) and golf events • Contributed to over $565,000 being raised for BackTrack at the Unltd Big Dream Ball As part of the UnLtd Partnership ARN specifically supports Musicians Making A Difference (MMAD), an Australian charity that transforms young lives through music. In 2022, we supported MMAD day nationally to help deliver the organisation their most successful to date. Our support included a campaign valued at $200,000 that spanned consumer and trade audiences. As a result of the campaign MMAD experienced 18,000 interactions on the ‘Get Help’ website page on MMAD Day alone and a total campaign reach of almost 20 million people worldwide. Salvation Army Street Level Mission – Surry Hills “My husband & I are both lucky enough to work at places where they see value allowing staff to utilise a “volunteer day” and we always spend the day working at The Salvation Army Street Level Mission in Surry Hills with our two eldest daughters. Our day consists of many things including, cooking lunch for the homeless, cleaning up, serving the homeless their lunch or just chatting with them. Volunteering has opened up our eyes to a world we never understood or even knew existed and it’s given us the opportunity to meet a wide range of different people from different backgrounds and to see that everybody has a story. It’s a great eyeopener for our kids and a fantastic way to do our little bit to give back and realise just how lucky we are. We wouldn’t be able to do this without the support of ARN.” Karen Harris, Strategy Manager Samaritan’s Purse – Operation Christmas Child “We are so lucky at ARN to get access to one day a year to give back in any way we like. I chose to use my day this year helping Samaritan’s Purse in Western Sydney – they check and pack thousands of boxes of donated presents for kids in Cambodia, who would otherwise not get anything for Christmas at all. The thought of putting a smile on some little one’s faces from all the way over here is heart‑warming and I feel so blessed to be able to help!“ Tegan Kirkby, Client Strategy Director “We are so lucky at ARN to get access to one day a year to give back in any way we like.” Tegan Kirkby Client Strategy Director 30 Environmental, Social & Governance: InTune @ARN (continued) InTune with Our Team Our sustained focus and investment in our people reaped many rewards for our business and teams in 2022. With the acquisition of Grant Broadcasters early in the year, ARN’s workforce and operational complexity increased. In response our people stepped up and delivered on their business-as-usual work whilst executing the full integration of our metro and regional stations. 18 months later, and at the end of a year of significant change and integration work, we retested our culture, with pleasing progress made. The interventions to shift the culture had the desired impact with all constructive (blue) styles increasing and defensive (red and green) styles decreasing. We continued to build on the foundations set in 2021 and made progress against our plan of building the most constructive culture possible. This is brought to life through our ‘Culture in Action’ framework – a set of behaviours hardwired into every day which articulate what constructive culture looks like. At the beginning of 2021, we benchmarked our culture using Human Synergistics’ Organisational Culture Index (OCI) which measures the current culture of an organisation through shared behavioural norms (behaviours people believe are required to “fit in”). Using the same model, we set an ambition for our ideal future culture. Investment in People Capability An essential part of our constructive culture is investment in people. In 2022 this included succession planning for existing team members, as well as recruiting new team members to close current and future capability gaps. This was delivered across most functions of the business but with a primary focus on Digital & Technology, Finance & Legal and People & Culture. Key appointments in 2022 include • Chief Digital & Technology Officer • Chief Legal Officer & Company Secretary • Head of Organisational Effectiveness • Director – Commercial Strategy & Growth Further Developing and Embedding Capability Continuously developing our people’s knowledge and capability remained a core focus – and while it is our view the best learning happens across a multitude of touchpoints (formal and informal), two significant and structured programs were delivered in 2022. Mix 102.3 & Cruise1323 staff enjoyed a staff gathering, including a smoking ceremony HT&E Annual Report 202231 Establishing an Evidence-Based Diversity and Inclusion Strategy We also continued to build on our culture work by developing a diversity and inclusion (D&I) strategy which draws on an evidence-base we access as members of the Diversity Council of Australia (DCA). Health, Safety and Wellbeing In 2021 we renewed our Workplace Health and Safety Management System (WHSMS). Now in place for over 12 months, and we have maintained our industry-low incident record, with zero serious incidents. In addition, we participated in the DCA Member Survey, accessed open programs and attended the Annual Diversity Debate. Further, we have registered to participate in the 2023 DCA national ‘Inclusion at Work Index’ tracking the state of inclusion in Australian workplaces. ARN’s ELT has also made a commitment to developing their D&I capability by participating in DCA knowledge programs and cascading learnings across the business. Workplace flexibility is brought to life through the behaviours of our constructive culture and we encourage each team member to work with their leader to agree the best processes and places for them to deliver their agreed outcomes. ARN is also proud to have formalised our commitment to embedding the principles and purpose of reconciliation by registering with Reconciliation Australia to commence developing a Stage One “Reflect” Reconciliation Action Plan for implementation in 2023. Since the onset of COVID-19, we have focused on keeping our people, safe, well and informed by complying with government requirements including encouraging vaccination and enabling people to work flexibly and from home as/when necessary – and will continue to do so if/when required. Our Social Committees coordinate a range of opportunities for our teams to connect and celebrate. The ‘feel good philosophy’ these volunteers creates many moments of joy for our people online and face-to-face. With the need for interpersonal and social connection at an all-time high, the significance of our Social Committees’ work has increased and we continue to support them with budget and resource allocations to bring this important and unique part of our culture to life. Another support structure in place for our people’s health, safety and wellbeing is an Employee Assistance Program (EAP) providing confidential and free counselling support for team members and their immediate family. Britt, Laura & Mitch – THE PICK UP, KIIS Network 1. Leadership@ARN Because leaders have the greatest impact on culture and results, we continued to develop our leaders’ capabilities to achieve measurable outcomes including but not limited to: 1. Cascading and delivering strategic goals 2. Driving success and achieving ambitious commercial outcomes 3. Increasing engagement, performance and effectiveness 4. Reducing attrition and attracting high caliber talent Our program received a participant Net Promoter Score of 70, a reported 20% increase in leadership confidence and an uplift on all ROI metrics. Leadership@ARN is also the winner of a 2022 Gold LearnEx Award for Leadership Training. 2. Selling@ARN To capitalise on the opportunities of 2022, we also turned our focus to our sales teams, developing a new learning solution giving every salesperson increased capability to connect with customers. In addition to increased sales revenue, Selling@ARN achieved in all key impact areas identified as measures of success and the highest rating on the Kirkpatrick Training Evaluation model. Selling@ARN is also the winner of the Gold LearnEx Award for Sales Training. We continued to build on the strength of the foundations set in 2021 and made progress against our plan of building the most constructive culture possible. 32 Environmental, Social & Governance: InTune @ARN InTune with Our Planet In 2022 we have taken significant steps to understand our carbon profile and identify steps to reduction. To understand our emissions and potential in this area, we partnered with a specialist sustainability advisory, Edge Environment, to calculate our Greenhouse Gas (GHG) emissions and identify our impacts and opportunities. Immediate Objectives 2022 Project Scope 1. Quantify and understand ARN and Emotive’s carbon footprint in line with the Greenhouse Gas Protocol. 2. Improve internal understanding of carbon outputs and impact, plus pathways to decarbonisation. 3. Understand our emissions profile including areas for priority attention. 4. Increase stakeholder understanding of sustainability. 5. Consider longer-term opportunities for carbon reductions and communicating progress. We measured our carbon emissions across the reporting period 1 October 2021 – 30 September 2022: 1. Emissions from the use of fuels and refrigerants (Scope 1) 2. Emissions from the use of electricity (Scope 2) * Note: Assets where we have no operational control over utilities are with Scope 3 and not included within this assessment. Results and Emissions Breakdowns On completion of analysis, data was split into several specific areas of impact and opportunity. This chart sets our base benchmark for improvement. As more corporations monitor their environmental impact and industry comparisons become available, we will establish targets commensurate to our size and ambitions. Emissions by Scope Scope 1 Scope 2 Emissions by Asset Type Offices Transmission Sites Emissions by Office Control Leased Offices Owned Offices Emissions by Vehicles Owned Vehicles Carbon Output 569 tCO2 -e 4,354 tCO2 -e Carbon Output 3,008 tCO2 -e 1,915 tCO2 -e Carbon Output 2,388 tCO2 -e 663 tCO2 -e Carbon Output 240 tCO2 -e % Total Operational Emissions 12% 88% % Total Asset Emissions 61% 39% % Total Office Emissions 78% 22% % Total Operational Emissions 5% HT&E Annual Report 202233 Summary This carbon footprint highlights opportunities to be addressed in our next phase of work which may include: more robust data collection; mitigation and reduction planning; target trajectories; opportunities for stakeholder influencing; internal knowledge-building; investor communication packs; and leveraging opportunities within existing operations to reduce our carbon footprint. One such example of reducing our carbon footprint is the development of our new Port Lincoln studio. Within this facility almost all major components of the broadcast technology were sourced from other decommissioned studios and then successfully “upcycled” to create a new broadcast facility. This included studio on-air consoles, Broadcast and IT servers, phone system and computer hardware – thus providing the blueprint for a more sustainable, replicable solution for a wide range of future studio builds and re-builds. In addition to these initiatives, in 2022 ARN became founding members of the audio industry’s inaugural sustainability committee ‘Green Ears’ which will work toward the continued improvement of each member’s and our industry’s environmental performance and impact as a whole with the goal of establishing a ‘green audio checklist’. Almost all major components of the broadcast technology were sourced from other decommissioned studios and then successfully “upcycled” to create a new broadcast facility. 34 Environmental, Social & Governance: InTune @ARN InTune with Best Practice HT&E’s long-term success requires strong governance, across both corporate and media areas of operation. Corporate Governance HT&E is an ASX listed company with an objective of increasing shareholder value within an appropriate framework of corporate governance. The Company has considered the best practice recommendations established by the ASX Corporate Governance Council and complied with those ASX recommendations. The documents detailing the Company’s corporate governance framework are available at htande.com.au/corporate-governance/. Most relevant are the Corporate Governance Statement and Code of Conduct. Charters also exist to guide the Board, the Audit and Risk Committee and the Remuneration, Nomination and Governance Committee. The Company also has detailed policies regarding Market Disclosure, Risk Management, Securities Trading, Fraud, Diversity, Conflict of Interest, Modern Slavery and Whistleblowers. The Whistleblower program ensures people can raise concerns regarding actual or suspected contravention of the Company’s ethical and legal standards without fear of reprisal or feeling threatened by doing so. It includes an externally managed hotline to give whistleblowers confidence and the ability to make complaints on an anonymous basis. These policies were reviewed during 2022 and updated accordingly. Media Governance ARN takes its obligations as a provider of news content to its audiences and the Australian community seriously. We operate under strict editorial controls to ensure fair representation and accuracy. The company has expertise in regulatory and pre-publication review including defamation, content regulation, privacy and anti-surveillance, advertising restrictions and consumer protection legislation. ARN is committed to ethical journalism – news content produced by our journalists is subject to both the MEAA Code of Ethics and the Commercial Radio Code of Practice requiring high standards of integrity, honesty, independence and impartiality. Digital content is carefully moderated by online content producers and vetted to ensure published material meets ARN’s policies and legislative requirements governing news content. HT&E Annual Report 202235 ARN understands the significance of the news, current affairs and emergency information that it broadcasts to its audiences. This has become even more important following the acquisition of ARN Regional, which services many regional communities that rely on radio, particularly after the floods that occurred during 2022. ARN is a participant in the ACMA’s co-regulatory complaints handling framework which ensures accountability to prevailing community standards. The company expects its journalists and digital content producers to act with integrity and professionalism in news gathering and production activities. ARN understands the significance of the news, current affairs and emergency information that it broadcasts to its audiences. This has become even more important following the acquisition of ARN Regional, which services many regional communities that rely on radio, particularly after the floods that occurred during 2022. ARN also understands the critical role of news information in contributing to civic life, political engagement and an effective democracy and are committed to delivering news across all settings without political agenda or commercial influence. The company delivers a trusted news service that can be relied upon as a timely and credible source of information. At peak times, bulletins are compiled and broadcast half hourly by its radio stations in order to bring the most up to date news to its audiences. Approach to Intellectual Property Protection HT&E has a well-developed intellectual property protection program designed to ensure compliance with laws and following industry best practice. Each day, ARN delivers content to its audiences across multiple platforms. Radio’s inimitable ability to connect with its audiences, to generate emotion and to create lasting impact requires a unique mix of music, personalities, talk and information to produce a sense of connection beyond geographical boundaries. ARN relies on intellectual property to continually create best-in-class content requires a constant focus on intellectual property governance that safeguards its copyright and other intellectual property interests, as well as that of its partners, suppliers and consumers in order to keep pace with a rapidly changing intellectual property economy. A framework of intellectual property rights management is required to produce ARN’s radio shows, podcasts and website content. All licences, consents, clearances and permissions that may be required in separate copyrights in underlying musical, literary or dramatic works or subsisting in audio/visual recordings is obtained prior to publication by ARN. The company ensures its obligations in relation to moral rights, performers’ consents and crediting sources are carefully observed at all times and that content does not violate any applicable laws, impersonate any person or infringe the intellectual property rights of any third party. ARN is committed to providing clear processes, performance protocols and policy transparency for all of its clients and partners and operates at all times subject to its published terms of trade. These terms of trade include its Standard Advertising Terms and Conditions, Terms of Use and Privacy Statement, which are designed to provide transparency regarding intellectual property ownership, avoid unfair trade practices, protect the interests of its clients, and to enable informed choices about the services being provided by ARN. These terms of trade promote the proper and accountable treatment of intellectual property and functioning of ARN’s media services to its clients. All of ARN’s terms of trade are published on its websites and readily accessible. Its Standard Advertising Terms and Conditions are communicated to its clients at the time of booking or can be made available on request. ARN takes its brand protection very seriously and is committed to the protection and integrity of its intellectual property to ensure its brands remain strong and resonate with audio consumers. Its portfolio of influential brands resonate with the Australian public through its highly recognisable talent and identifiers in the form of registered trade marks, logos, business and domain names that appear on its platforms and properties and identify the KIIS, Gold and iHeartRadio networks as leading audio brands in their respective markets. Listeners of all ages and demographics associate the ARN brands with best in class content, unforgettable moments with the familiar voices of ARN’s unrivalled stable of talent, and a sense of connection to community that can overcome distance and geography. Piracy, copyright and trade mark infringements are continually monitored by ARN as part of its brand protection program. The company believes that strong intellectual property protection is essential for it to be able to deliver on its strategic objectives and to continue to resonate with its audiences. Radio’s unique mix of music, personalities, talk and information create an unrivalled connection with audiences which we unequivocally protect. 36 Board of Directors Hamish McLennan Ciaran Davis Roger Amos FCA, FAICD Chairman of the Board and Non-executive Director (since 30 Oct 2018) Hamish McLennan is an experienced media and marketing executive who brings unparalleled 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), Rugby Australia Limited (Chairman), Magellan Financial Group Limited (Chairman), Claim Central Pty Limited, Scientific Games Corporation (US company) 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). CEO & Managing Director (since 24 Aug 2016) Non-executive Director (since 30 Nov 2018) 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. 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 over 20 years media experience working in over 15 countries throughout Europe and the Middle East. In 2022, Ciaran became Chair of Commercial Radio and Audio in Australia – the industry body representing the interests of commercial radio broadcasters throughout Australia. 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. Roger Amos is an experienced non-executive Director with extensive finance and management experience. He was formerly Chairman of Contango Asset Management Limited and a non-executive Director of 3P Learning Limited. He was formerly a non-executive Director at REA Group Ltd, where he was the Chairman of the Audit, Risk and Compliance Committee and a member of its Human Resources Committee. At 3P Learning Limited, he was the Chairman of the Audit and Risk Committee and a member of its Nominations and Remuneration Committee. Roger was also previously a Director of Austar United Communications Limited and Enero Group Limited as well as Governor on the Cerebral Palsy Alliance Research Foundation. 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 Nil. Previous directorships of other Australian listed companies (last three years) Enero Group Limited (from 23 November 2010 to 18 October 2018), REA Group Ltd (from 4 July 2006 to 17 December 2020), Contango Asset Management Limited (from 7 June 2007 to 31 January 2022) and 3P Learning Limited (from 2 June 2014 to 28 May 2021). HT&E Annual Report 202237 Alison Cameron B Ec Paul Connolly BComm, FCA Belinda Rowe BA Non-executive Director (since 5 Jan 2022) Non-executive Director (since 18 Oct 2012) Non-executive Director (since 5 Feb 2019) Alison is an experienced media executive with a 34 year career spanning finance, sales and management in commercial radio. From 1993–2021, Alison worked for her family’s business, privately owned Grant Broadcasters Pty Ltd and was part of multiple acquisitions over the last 15 years, culminating in the ownership of 48 commercial radio stations in regional Australia. She has a deep understanding of media and regional communities. Alison’s most recent role was CEO of Grant Broadcasters and was responsible for the negotiation of the sale of 46 regional stations to ARN. Alison is also a Director of the government’s National Film and Sound Archive, and Chair of their Finance Committee and a member of the Audit and Risk Committee. Alison was also Director of Grant Broadcasters Pty Ltd from 18 February 2004 to 4 January 2022. Committees Audit & Risk Committee. Other Directorships and offices Director of National Film and Sound Archive since May 2020. Director of private companies Craigieburn Resort Pty Ltd, Golden Labrador Pty Ltd, G-Agri Pty Ltd and Gordie Pty Ltd. Previous directorships of other Australian listed companies (last three years) Nil. Paul Connolly has over 30 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 and Pacific based telecommunications Company – he continues to serve as a Senior Advisor to Digicel. 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 Chairman of private Irish companies Connolly Capital Ltd., Tetrarch Capital Ltd., FrameSpace Ltd., Business & Finance Ltd. (Irish business media group), Polaris Principal Navigator Ltd. and UNICEF Ireland. Belinda Rowe has extensive experience across the marketing, communications, digital and media sectors. She held leadership roles in global companies such as Telefonica O2 UK, a significant UK telecommunications company as head of their Brand and Marketing Communications. She was one of the top global executives at Publicis Media, one of the largest media communications groups in the world. She led a business and digital transformation capability along with a successful client practice in her global role at Zenith. She also created a unique content marketing business across 32 markets with Publicis Media, advising on digital capabilities such as digital content marketing including social and the application of data and technology for dynamic creative solutions. Prior to moving to the UK in 2009 she was CEO of ZenithOptimedia (now Zenith) and Executive Director at Mojo, for 10 years in Australia. Committees Audit & Risk, Remuneration, Nomination and Governance. Other Directorships and offices Nominated Director of Soprano Design Limited, Non-Executive Director of Sydney Swans Limited, Temple & Webster Group Ltd and 3P Learning, SecondBite NSW Chair Advisory Committee. Previous directorships of other Australian listed companies (last three years) Nil. Previous directorships of other Australian listed companies (last three years) Nil. 38 Senior management team Ciaran Davis Andrew Nye BBus, CA Jeremy Child BBus LLB MSc CEO & Managing Director (since 24 Aug 2016) Chief Financial Officer (since 14 Aug 2019) Refer to biography above. 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. Chief Legal Officer & Company Secretary (since 14 Aug 2019) 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. HT&E Annual Report 2022Directors’ Report and Financial Report 39 40 Corporate Governance Statement 3. Capital management 40 Directors’ Report 46 Remuneration Report 62 Auditor’s Independence Declaration 63 About The Financial Statements 64 Consolidated Financial Statements 64 Consolidated Statement of Comprehensive Income 65 Consolidated Balance Sheet 66 67 Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity Notes To The Consolidated Financial Statements 1. Group performance 68 1.1 Revenues 70 1.2 Expenses 70 1.3 Segment information 73 1.4 Earnings per share 87 3.1 Bank loans 88 3.2 Cash flow information 89 3.3 Financial risk management 91 3.4 Fair value measurements 93 3.5 Contributed equity 94 3.6 Share-based payments 95 3.7 Reserves and accumulated losses 97 3.8 Dividends 4. Taxation 98 4.1 Income tax and deferred tax 5. Group structure 103 5.1 Controlled entities 106 5.2 Interests in other entities 107 5.3 Shares in other corporations 108 5.4 Investments accounted for using the equity method 111 5.5 Parent entity financial information 112 5.6 Deed of cross guarantee 2. Operating assets and liabilities 6. Other 74 2.1 Intangible assets 80 2.2 Property, plant and equipment 82 2.3 Leases 85 2.4 Provisions 114 6.1 Business combination 115 6.2 Disposals 116 6.3 Contingent liabilities 116 6.4 Remuneration of auditors 117 6.5 Related parties 118 6.6 Other significant accounting policies 119 6.7 Subsequent events 120 Directors’ Declaration 121 Independent Auditor’s Report 127 Shareholder Information 130 Corporate Directory 40 HT&E Annual Report 2022 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 2022. 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) Alison Cameron (appointed 5 January 2022) Details of the current Directors’ qualifications, experience and responsibilities are set out on pages 36 and 37. 2. Company Secretary The Company Secretary of HT&E Limited is Jeremy Child (appointed 14 August 2019) Details of the current Company Secretary’s qualifications, experience and responsibilities are set out on page 38. 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 Australian Radio Network (ARN), Australia’s leading metropolitan and regional radio broadcaster and home to the national KIIS and Pure Gold networks and youth radio network The Edge. On 4 January 2022, ARN acquired regional radio and digital operations (ARN Regional) from Grant Broadcasters (refer note 6.1 for more details). ARN also operates under a long term licence agreement, music, streaming and podcasting distribution platform 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 370 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 secure mobile messaging technology Soprano Design. On 31 December 2022, the Group signed a binding share sale agreement to sell its 25% interest in Soprano Design Limited (Soprano) to Potentia Capital (Potentia), a leading Australian technology focused private equity firm. Under the agreement the Group will receive approximately $66.3 million in cash as consideration for the sale of its entire interest. The sale is conditional upon receiving FIRB approval and is expected to be completed in the first half of 2023. 41 Directors’ Report (Continued) Dividends Dividends paid to owners of HT&E Limited during the financial year were as follows: Dividends Type Final 2021 Interim 2022 Cents per share AUD million Date of Payment 3.9 5.0 12.1 23 March 2022 15.6 15 Sept 2022 Since the end of the financial year, the Directors have declared the payment of a fully franked dividend of 5.2 cents per ordinary share. This dividend is paid from parent entity profits since 1 January 2023. This dividend is payable on 23 March 2023. 4. 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 letter, Chief Executive Officer’s letter and Operating & Financial Review on pages 8 to 21. 5. 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. 6. Matters Subsequent to the End of The Financial Year Events occurring after balance date are outlined in note 6.7 to the consolidated financial statements. 7. Likely Developments and Expected Results of Operations Overall strategic direction and prospects are discussed in the Chairman’s and Chief Executive Officer’s letters on pages 8 to 11 and the Operating & Financial Review on pages 12 to 21. 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. 8. 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. 42 HT&E Annual Report 2022 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 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 total audio offering, which span across radio, music streaming 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 is 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 Remaining relevant to advertisers and audiences is critical to meeting the Group’s strategic audience preferences objectives. Changes in audience preferences leading to audience fragmentation could over time, result in revenue declines. The Group remains focused on improving commercial revenue share through its “Defining Audio through Connections that Count” commercial proposition. The Group’s relevance to agencies and advertisers has been further enhanced with the acquisition of ARN Regional. The Group continues to invest in digital audio innovation, podcasting, music streaming and data capabilities. Further, investment in capabilities include retaining experienced media executives, hiring proven on-air talent, participation in industry bodies, advertising and market research. Macroeconomic factors 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. Advertising spend has improved in 2022 and the Group maintains a sound capital structure with sufficient undrawn financing facilities in place and will continue to monitor performance and market developments to reassess plans and strategies as required. Tax matters A number of tax matters as previously disclosed, have been settled through binding agreements with the Australian Taxation Office in 2021. Further details are provided in note 4.1 to the consolidated financial statements. Loss of broadcasting While considered unlikely, the loss of an Australian radio broadcasting licence would have licence a material impact on Group revenues and earnings. The Group has long-standing controls in place to minimise the risk of legislation compliance breaches. Disruption of technology There are a number of technology systems that are critical to the operations of the Group and systems, security breaches protection of privacy of data. and data privacy 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. During the year, training on cyber security awareness was completed for all staff. 43 Directors’ Report (Continued) 9. Corporate Social Responsibility The Directors recognise the corporate social responsibilities of the Group, including the importance of environmental matters, occupational health and safety issues and diversity initiatives. 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. 10. Remuneration Report The Remuneration Report is set out on pages 46 to 61 and forms part of this Directors’ Report. 11. 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: Hamish McLennan Roger Amos Paul Connolly Ciaran Davis Alison Cameron Belinda Rowe Board of Directors Audit & Risk Committee Remuneration, Nomination and Governance Committee Held Attended Held Attended Held Attended 6 6 6 6 6 6 6 6 6 6 6 6 4 4 4 4 4 4 N/A1 N/A1 3 4 3 4 3 3 3 N/A N/A 3 3 3 3 N/A N/A 3 1 Ciaran Davis attended all Audit & Risk Committee meetings Committees were formed for purposes of approving the half-year financial statements, annual financial statements, 2021 Annual Report and 2022 Notice of Annual General Meeting. These meetings were attended as follows (Held/Attended): Hamish McLennan (2/2), Ciaran Davis (2/2). 12. Directors’ Interests The Remuneration Report on pages 46 to 61 contains details of shareholdings of the Directors and Executive Key Management Personnel for the year ended 31 December 2022. 13. Shares Under Option There were no unissued shares of HT&E Limited under option at 31 December 2022 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. 14. 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). 44 HT&E Annual Report 2022 Directors’ Report (Continued) 15. 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. 16. 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. 17. 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 $632,436 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 6.4 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 62. 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. 18. 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 62. 45 Directors’ Report (Continued) 19. 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 21 February 2023 46 HT&E Annual Report 2022 Remuneration Report Dear Shareholders On behalf of the Remuneration, Nomination and Governance Committee and the Board of Directors, I am pleased to present HT&E’s Remuneration Report for 2022. The Chairman’s and CEO & Managing Director’s reports outline the performance of the Group in 2022. In a year of significant transformation, the Group maintained its market leading metropolitan radio audience share, successfully delivered on key milestones in the integration of ARN Regional and advanced several long-term strategic projects. Key projects furthered included the expansion of the Group’s digital audio capability, launch of multi-platform youth media brand, CADA, continued investment in the ‘Culture in Action’ employee behaviours framework and the launch of InTune@ARN, our ESG program. The sale of HT&E’s long-held investment in Soprano for $66.3 million (subject to FIRB approval) following a lengthy process, represents a significant return on investment and places the Group in a strong position to reduce existing debt and take advantage of future audio opportunities. HT&E’s financial performance for 2022 finished behind ambitious revenue targets, and the remuneration outcomes set out below reflect this performance. Remuneration Approach and Changes For 2022 Following the acquisition of ARN Regional which significantly increased the revenues, EBITDA, cost base and complexity of the Group, and the critical role of KMP in managing the integration, the below changes were enacted in 2022; • the CEO & Managing Director’s Total Financial Remuneration (‘TFR’) reinstated to $1.2 million (equal to 2017 TFR), and the target TIP opportunity reduced from 137.5% to 115%; the CFO’s TFR increased to $575,000, with the TIP threshold remaining unchanged at 100%; • • Non-executive Director Board Member fees increased to $135,000 per annum; and • the Chairman’s fees increased to $320,000 per annum The structure and financial metrics of the Group’s Total Incentive Plan (TIP) in 2022 remained consistent with the 2021 plan. Performance and Remuneration Outcomes For 2022 As previously outlined, HT&E’s financial performance in 2022 fell short of ambitious revenue targets and accordingly the financial performance thresholds below were not met; • Reported EBITDA before significant items and discontinued operations, of $91.8 million was up 53% verses 2021 and 12.1% below target; • • EPS on a post-tax basis, before significant items, of 14.6 cents was 18.5% below target; and ROIC, calculated based on earnings before interest and tax (EBIT) and before significant items, of 10.7%, compared to target of 12.5%. Executive KMP also met some of their key performance indicator (KPIs) targets. A review of KMP remuneration was undertaken in late 2021, with the support of Mercer Consulting Australia. This review involved benchmarking the Executive KMP Remuneration framework and outcomes against a peer group of similar companies. The review confirmed that the Executive KMP Remuneration framework is market competitive, acts as a reward and retention tool, and strongly aligns executives with the interests of shareholders. The Board believes the Group’s total remuneration and incentive plan continues to strongly align our management team with the interests of shareholders. Paul Connolly Chair of the Remuneration, Nomination and Governance Committee 47 Remuneration Report (Continued) Our Detailed Remuneration Report This Remuneration Report for the year ended 31 December 2022 outlines key aspects of our remuneration 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. Remuneration governance and framework C. How 2022 reward was linked to performance D. Total remuneration for Executive KMP E. Actual remuneration for 2022 F. Contractual arrangements with Executive KMP G. Non-executive Director arrangements H. Share-based remuneration I. Non-executive Director and Executive KMP shareholdings J. 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. Name Executive KMP Ciaran Davis Andrew Nye Non-executive Directors Role Chief Executive Officer (CEO & Managing Director) Chief Financial Officer (CFO) Hamish McLennan Non-executive Chairman Roger Amos Paul Connolly Belinda Rowe Non-executive Director Non-executive Director Non-executive Director Alison Cameron Non-executive Director (from 5 January 2022) No other changes have occurred to the composition of KMP since 31 December 2022 up to the date of this report. 48 HT&E Annual Report 2022 Remuneration Report (Continued) B. Remuneration Governance and Framework Remuneration Governance 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 KMP. The Committee reviews KMP remuneration on a periodic basis, often with the assistance of external remuneration specialists. A review was last undertaken in 2021, with the support of Mercer Consulting Australia. The review involved determining an appropriate peer group of companies to benchmark our remuneration framework against, reviewing our TIP against key competitor STI and LTI plans, reviewing both Non-Executive Director fee structures and Executive KMP remuneration (TFR and TIP) against the peer group of companies, and developing recommendations for adjustments based on market competitiveness and business performance. Remuneration Framework We believe that building and maintaining a primarily constructive culture enables business success, drives internal engagement, and allows us to attract and retain the best people. Our remuneration framework has a key role to play and is structured in alignment with the following principles: Market competitive through Rewards the creation of A holistic “total reward” A focus on stretch goal alignment against a peer shareholder value through the offering across financial and achievement, leveraging group of companies of a sustainable delivery of short non-financial elements that financial and non-financial similar size and complexity and long-term business balances reward with KPIs to balance the “what” outcomes retention with the “how” HT&E aims to reward Executive KMPs with a level and mix of remuneration appropriate to their position, responsibilities and performance within the Group and aligned with market practice. Executive KMP remuneration is comprised of two main elements, Total Fixed Remuneration (TFR) and Total Incentive Plan (TIP). The TIP is a simple and effective plan that encompasses both long and short-term reward. HT&E aims to position total remuneration for KMP Executives principally within a competitive range of a peer group. This includes Australian listed companies with characteristics most like HT&E when compared against a set of financial and qualitative metrics. Total reward opportunity is intended to provide the opportunity to earn median to top quartile reward for outstanding performance against set stretch targets. 49 Remuneration Report (Continued) The Executive KMP remuneration framework is summarised below. Element Delivery Structure Fixed Total Fixed Cash and – Base pay aligned to market, role scope and complexity, and Remuneration (TFR) Superannuation skills, knowledge, and experience of the individual Contributions – Superannuation aligned to SGC Variable Total Incentive Plan Cash 50% – KPIs set at the start of the financial year ‘At risk’ and linked to performance (TIP) Financial performance of the company and individual performance over the year Delivered at the end of – 75% financial KPIs (weighted equally between ROIC, the financial year EBITDA, and EPS) Equity 50% Delivered in rights to acquire ordinary shares in the company at nil consideration, subject to a further 1-year service period and 2-year holding lock – 25% non-financial KPIs (delivery of strategic business initiatives/priorities) – Retention element through long-term focus of KPIs, target setting process and structure of delivery of equity – The higher weighting of financial to non-financial metrics emphasises the importance the Board places on HT&E’s financial performance The TIP provides Executive KMPs with the opportunity to receive cash and equity following an assessment against specified financial and non-financial performance KPIs based on a one-year performance period. The following diagram illustrates the operation of the TIP. - 25% non-financial performance KPI measures - 75% financial performance KPI measures Year 1 Year 2 Year 3 Year 4 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. 50 HT&E Annual Report 2022 Remuneration Report (Continued) Performance Measures Financial Key Performance Indicators (KPIs) make up 75% of the target TIP with performance 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 significant items, per the table below. EBITDA and EPS ROIC EBITDA and EPS Percentage of target performance opportunity awarded ROIC performance Percentage of target opportunity awarded <95% of budget 95% of budget 0% 25% Below threshold1 At threshold >95% to <100% Pro-rata between Between threshold of budget 25% and 100% 100% of budget 100% and budget At budget >100% to <110% Pro-rata between Between budget of budget 100% and 150% and stretch 0% 25% Pro-rata between 25% and 100% 100% Pro-rata between 100% and 150% At or above 110% 150% At or above stretch 150% of budget 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%. EPS in 2022 was derived from Net Profit After Tax (NPAT) attributable to owners of the parent as a percentage of weighted average number of shares on issue. ROIC in 2022 was derived from EBIT as a percentage of adjusted total equity. Both measures were on a pre-significant items basis. (1) Threshold will be determined with reference to prior year ROIC, next 12-months expected earnings and forecast changes to capitalisation in the annual Group budget. 51 Remuneration Report (Continued) Non-financial KPIs make up 25% of the target TIP and are aligned to key strategic priorities for the Group. For 2022, the Executive KMPs were accountable for delivering the following outcomes to achieve their non-financial KPIs: Strategic Priority Outcomes Delivered Leadership of ARN people and culture transformation • • Strong shifts in culture as measured through the Human Synergistics OCI and OEI tools. All styles improved and key areas targeted (leadership, collaboration, communication) improved significantly Improvement in leadership capability through ongoing investment in development programmes • Development and implementation of a sales capability programme ARN Regional integration • Successful integration of TRSN into national sales and all enabling functions (Finance, IT, P&C, etc), with core technology and payroll / people systems integrated by 1st May • ARN Regional Business Area established and business performance maintained under new leadership Digital business development • Development of a 2-year business transformation programme • Digital transformation team established focused on 4 areas – Product Development; Listener Experience; Sales & Fulfillment; People Experience • Ongoing investment in cyber security capability and data management Balance sheet, cost and • Successful disposals of 4KQ and non-core investments in Lux Group Limited and Soprano capital management Design (subject to FIRB approval) • Creation of appropriate capital structure for the Group on completion of ARN Regional acquisition • Continued in-sourcing of key processes and investment in systems to gain efficiencies 52 HT&E Annual Report 2022 Remuneration Report (Continued) KMP Remuneration Mix The remuneration mix between fixed and variable pay incentivises executives to focus on the Group’s short and long-term performance, with a portion of remuneration at risk. There has been no change to the target remuneration mix for Executive KMP in 2022. CEO & MD CFO Variable - TIP 53% Fixed - TFR 47% Variable - TIP 50% Fixed - TFR 50% Fixe d - TFR Variab le - TIP Fixe d - TFR Variab le - TIP To further reinforce the alignment of Executive KMPs to shareholder interests, 50% of the TIP is delivered as rights to acquire ordinary shares, with a 1-year service period and further 2-year holding lock. This serves as a strong retention driver, as well as providing further incentive for effective long-term decision-making. The following diagram shows the mix of cash (short-term reward) and equity (long-term reward) delivered at target across total remuneration for Executive KMPs. CEO CFO 0% 20% 40% 60% 80% 100% 120% TFR (cash) TIP (cash) TIP (e q uity) 53 Remuneration Report (Continued) Other plan features Feature Dividends Description At the discretion of the Board participants will receive an additional allocation of fully paid ordinary shares or a cash payment at vesting equal to the dividends paid on vested rights over the performance and service periods. Equity allocation Equity is granted based on the face value of the rights calculated at the commencement of the methodology performance period. Clawback 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 Awards are forfeited for ‘bad’ leavers (e.g. resignation or termination for cause), while ‘good’ leavers cessation of employment (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 Participants receive pro-rated awards based on the extent to which performance and service conditions change of control are met. 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. 54 HT&E Annual Report 2022 Remuneration Report (Continued) C. How 2022 Reward was Linked to Performance Performance Measures The overall Company performance for 2022 is reflected in the performance measures below. Results for 2019 onwards reflect the adoption of AASB 16 Leases in 2019. 2022 2021 2020 2019 2018 Group EBITDA1 Net profit after tax before amortisation (NPAT)1 $91.8m $45.1m $59.8m $28.8m $49.3m $15.4m $75.6m $105.5m $34.2m $51.2m Weighted average number of shares outstanding 309,873,237 276,605,346 279,530,868 283,605,019 307,528,973 Basic (NPAT) EPS (cents) ROIC Dividend paid to shareholders (cents per share) 2 Increase/(decrease) in share price (%)3 14.6 10.7% 8.9 (54%) 10.4 13.9% 3.5 14% 5.5 8.0% 4.6 9% 12.1 14.0% 8.0 7% 16.6 23.9% 79.0 22% (1) Continuing operations before significant items. 2018 includes Adshel’s results for the period it was owned by HT&E. 2019 onwards includes impact of adoption of AASB 16 Leases. (2) 2018 closing share price increased to reflect payment of special dividend. Performance and Impact on Remuneration 2022 TIP Award HT&E’s continuing operations EBITDA, EPS and ROIC performance in 2022 fell short of targets set at the beginning of the year, and consequently the financial component (75%) was not achieved and no awards were made under this component of the 2022 TIP. Performance for the 2022 financial year is outlined in the table below: 2022 TIP financial metrics EBITDA performance EPS performance ROIC performance Group: continuing operations Between target and maximum; Between target and maximum; Between target and maximum; 87.9% of target achieved 81.5% of target achieved 85.2% of target achieved 55 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: HT&E’s financial performance conditions in 2022 were not met and no awards were made for the financial components of the TIP. The financial performance in 2021 surpassed the stretch target on all financial performance conditions resulting in the maximum award for financial metrics. The table below summarises the 2022 TIP outcomes: Executive KMP Ciaran Davis Andrew Nye TIP awarded (cash incentive) $ TIP awarded 1 (equity award) $ Total TIP awarded $ % of target achieved % of maximum achieved % of maximum forfeited 155,250 66,844 155,250 310,500 66,844 133,688 22.5% 23.3% 16.4% 16.9% 83.6% 83.1% (1) This differs from the accounting fair value of the equity award (included in section D), which is calculated in accordance with accounting standards and expensed over two financial years, covering both the performance and service periods. 56 HT&E Annual Report 2022 Remuneration Report (Continued) D. Total Remuneration for Executive KMP Details of the Executive KMP remuneration for 2022 and comparatives for 2021 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 E. Short-term benefits Post- employment benefits Cash salary and fees1 $ Non- monetary benefits2 $ Cash incentives3 $ Super- annuation4 $ 1,139,930 37,440 155,250 979,934 19,159 905,625 551,432 498,306 938 787 66,844 357,500 1,691,362 38,378 222,094 1,478,240 19,946 1,263,125 24,430 22,631 24,430 22,631 48,860 45,262 Other long-term benefits Long service leave5 $ Fair value equity awards6 $ Total $ 60,444 24,212 586,851 2,004,345 513,867 2,465,428 3,869 234,276 881,789 939 202,851 1,083,014 64,313 25,151 821,127 2,886,134 716,718 3,548,442 Executive KMP Ciaran Davis 2022 2021 Andrew Nye 2022 2021 Total 2022 2021 (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. (4) 2022 superannuation benefit incorporates the change to the super guarantee from 1 July 2022. (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. 57 Remuneration Report (Continued) E. Actual Remuneration for 2022 The following section sets out the value of remuneration which has been received by Executive KMP for the 2022 performance year. The figures in the following table are different to those shown in the accounting table in Section D 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 2022 is the value of the TIP that was granted in 2021 and vested at the end of 2022 based on the share price at 31 December 2022, consistent with prior Remuneration Reports. Executive KMP Ciaran Davis 2022 2021 Andrew Nye 2022 2021 Total 2022 2021 TFR1 $ TIP $ Vested TIP2 $ Total $ 1,200,589 155,250 551,480 1,907,319 1,020,937 905,625 – 1,926,562 575,862 66,844 217,700 860,406 520,937 357,500 – 878,437 1,776,451 222,094 769,180 2,767,725 1,541,874 1,263,125 – 2,804,999 (1) TFR comprises base salary, retirement benefits and other remuneration related costs. (2) Vested TIP in 2022 includes the shares in relation to 2021 TIP that have now vested valued at the share price at vesting date. 58 HT&E Annual Report 2022 Remuneration Report (Continued) F. 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 Continuing Notice by individual/Company Employment may be terminated by either party. Notice periods vary according to contractual terms: CEO & Managing Director – 12 months and CFO – six months. Termination of employment (for cause) All contracts provide that employment may be terminated at any time without notice for serious misconduct. Termination of employment (without cause) Where employment is terminated by the Company, payment may Redundancy 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. Non-compete/restraint Executive KMP are subject to non-compete provisions for the term of their notice period. G. Non-Executive Director Arrangements 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, Nomination and Governance Committee 2022 $ Chair fee1 302,5002 20,000 2023 $ Member fee Chair fee1 Member fee 135,000 10,000 320,000 20,000 135,000 10,000 20,000 10,000 20,000 10,000 (1) The Board Chair does not receive Committee fees. (2) The Board Chair fee increased from an annual fee of $284,700 to $320,000 effective 1 July 2022. 59 Remuneration Report (Continued) 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 2022 and none is expected for 2023. Details of the Non-executive Directors’ fees for 2022 and 2021 are set out in the table below: Non-executive Directors Hamish McLennan 2022 2021 Roger Amos 2022 2021 Paul Connolly 2022 2021 Belinda Rowe 2022 2021 Alison Cameron (from 5 January 2022) 2022 2021 Total 2022 2021 Fees $ Superannuation $ Total(1) $ 278,857 263,006 150,000 105,023 150,000 105,023 140,909 95,890 24,430 22,631 15,375 10,240 15,375 10,240 14,098 9,349 303,287 285,637 165,375 115,263 165,375 115,263 155,007 105,239 127,435 13,073 140,508 – – – 847,201 568,942 82,351 52,460 929,552 621,402 (1) Total fees may differ from Annual fees set out in previous table due the application of the new superannuation guarantee rate from 1 July 2022. 60 HT&E Annual Report 2022 Remuneration Report (Continued) H. Share-Based Remuneration Terms and Conditions of Share-Based Remuneration 2022 TIP Awards Executive KMP received a grant of rights under the 2022 TIP during 2022. Based on HT&E’s performance, rights have been awarded at the end of 2022 to satisfy TIP outcomes. Rights will vest at the end of the one-year service period. The table below shows the number and value of 2022 rights that were awarded and remain unvested at the end of 2022. Executive KMP Grant date1 Vesting Date Number of rights granted Number of rights awarded Number of rights forfeited Ciaran Davis 16 February 2022 31 December 2023 332,691 74,856 257,835 Andrew Nye 16 February 2022 31 December 2023 138,622 32,230 106,392 Value per right at grant date $ 1.95 1.95 Maximum value to be recognised in future years $ 72,985 31,424 (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. 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 2022 financial year. At the Board's discretion, the participants may receive an additional allocation of fully paid ordinary shares equal to the value of dividends that were payable on the underlying shares, whilst holding unvested and/or vested rights. Where dividends have been declared, these additional fully paid ordinary shares are included in the rights table below as ‘Dividend uplift’, to reflect the full number of shares the participants may be entitled to at the conclusion of the vesting period. Executive KMP Ciaran Davis Vested and exercisable Unvested Total Andrew Nye Vested and exercisable Unvested Total Total Vested and exercisable Unvested Total Balance at start of the year 2020 TIP Exercised/ vested 2021 TIP Exercised/ vested1 Awarded Dividend uplift Balance at end of the year – 524,121 524,121 – 206,900 206,900 – 731,021 731,021 – – – – – – – – – 524,121 (524,121) – 206,900 (206,900) – – 44,415 568,536 74,856 74,856 6,344 81,200 50,759 649,736 – 17,533 224,433 32,230 32,230 2,733 34,963 20,266 259,396 731,021 – (731,021) 107,086 61,948 9,077 792,969 116,163 – 107,086 71,025 909,132 (1) Held in trust until the end of the 2-year holding lock which is 31 Dec 2024 for the 2021 TIP. 61 Remuneration Report (Continued) I. 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 Rowe Alison Cameron (from 5 Jan 2022) Executive KMP Ciaran Davis Andrew Nye Balance at start of the year TIP shares released1 Other changes during the year Balance at end of the year 73,000 16,250 65,935 – – – – – – – – – – – 73,000 16,250 65,935 – 35,934,8912 35,934,891 1,220,157 50,476 109,246 6,709 – – 1,329,403 57,185 (1) 115,955 of shares for the 2019 TIP released from the two-year holding lock. (2) Shares held by Grant Broadcasters Pty Ltd. Alison Cameron holds, directly and indirectly, less than 0.005% of the issued capital in Grant Broadcasters. Janet Cameron, Alison’s mother, holds 99.9% of the issued capital in Grant Broadcasters. J. Other Statutory Disclosures Loans Given to Non-Executive Directors and Executive KMP There are no loans from the Company to the Non-executive Directors or Executive KMP. Transactions with Related Parties $37,671 director fees received directly from Soprano Design Pty Limited by Belinda Rowe for services performed in the first half of 2022. An additional $36,906 director fees were paid to Belinda Rowe by the Company in relation for services performed on the Board of Soprano Design Pty Limited in the second half of 2022. The Group paid $782,289 property rental to entities associated with Alison Cameron on commercial arm’s length terms. 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 Executive KMP, are not permitted to hedge any options, rights or similar instruments prior to them becoming vested or otherwise tradable under the applicable plan. Voting and Comments Made at the Company’s 2021 AGM The Company received more than 85% of ‘yes’ votes on its Remuneration Report for the 2021 financial year. No major remuneration related concerns were raised which required the Company’s attention during the 2022 financial year. External Remuneration Consultants During 2022, HT&E did not receive advice from any external remuneration consultants. (cid:16) aB(cid:16)<@:A(cid:16):IA9=GF(cid:16)LGF(cid:16)=D@(cid:16):IA9=(cid:16)GL(cid:16)bcde(cid:16)89?9=@A(cid:16)LGF(cid:16)=D@(cid:16)>@:F(cid:16)@JA@A(cid:16)fg(cid:16)h@C@?;@F(cid:16)ijiik(cid:16)l(cid:16)A@C<:F@(cid:16)=D:=(cid:16)=G(cid:16) =D@(cid:16);@B=(cid:16)GL(cid:16)?>(cid:16)mJGn<@AN@(cid:16):JA(cid:16);@<9@Lk(cid:16)=D@F@(cid:16)D:H@(cid:16);@@Jo(cid:16)(cid:16) PQRSTUVWX(cid:16)YZR[\[ZR[Z][(cid:16)^[]_‘V‘TSUZ(cid:16) p:q(cid:16) JG(cid:16)CGJ=F:H@J=9GJB(cid:16)GL(cid:16)=D@(cid:16):IA9=GF(cid:16)9JA@E@JA@JC@(cid:16)F@rI9F@?@J=B(cid:16)GL(cid:16)=D@(cid:16)stuvtuwxytz{(cid:16)|}x(cid:16)~(cid:127)(cid:127)(cid:128)(cid:16)9J(cid:16) F@<:=9GJ(cid:16)=G(cid:16)=D@(cid:16):IA9=(cid:129)(cid:16):JA(cid:16) p;q(cid:16) JG(cid:16)CGJ=F:H@J=9GJB(cid:16)GL(cid:16):J>(cid:16):EE<9C:;<@(cid:16)CGA@(cid:16)GL(cid:16)EFGL@BB9GJ:<(cid:16)CGJAIC=(cid:16)9J(cid:16)F@<:=9GJ(cid:16)=G(cid:16)=D@(cid:16):IA9=O(cid:16) cD9B(cid:16)A@C<:F:=9GJ(cid:16)9B(cid:16)9J(cid:16)F@BE@C=(cid:16)GL(cid:16)bcde(cid:16)89?9=@A(cid:16):JA(cid:16)=D@(cid:16)@J=9=9@B(cid:16)9=(cid:16)CGJ=FG<<@A(cid:16)AIF9JN(cid:16)=D@(cid:16)E@F9GAO(cid:16) (cid:16)(cid:16) 8GI9B@(cid:16)(cid:130)9JN(cid:16) K:F=J@F(cid:16) KF9C@n:=@FDGIB@(cid:131)GGE@FB(cid:16) (cid:16)(cid:16) M>AJ@>(cid:16) ig(cid:16)(cid:132)@;FI:F>(cid:16)ijif(cid:16) (cid:0)(cid:2)(cid:3)(cid:4)(cid:5)(cid:6)(cid:7)(cid:8)(cid:5)(cid:2)(cid:9)(cid:10)(cid:11)(cid:12)(cid:5)(cid:13)(cid:10)(cid:10)(cid:14)(cid:5)(cid:2)(cid:12)(cid:15)(cid:16)(cid:17)(cid:18)(cid:19)(cid:16)(cid:20)(cid:21)(cid:16)(cid:22)(cid:23)(cid:24)(cid:16)(cid:25)(cid:26)(cid:26)(cid:16)(cid:22)(cid:20)(cid:22)(cid:16) (cid:27)(cid:28)(cid:5)(cid:16)(cid:29)(cid:28)(cid:8)(cid:5)(cid:2)(cid:28)(cid:7)(cid:8)(cid:3)(cid:10)(cid:28)(cid:7)(cid:30)(cid:16)(cid:31)(cid:10)(cid:6)(cid:5)(cid:2)(cid:12)(cid:16) !"(cid:28)(cid:5)!(cid:15)(cid:16)#(cid:7)(cid:8)(cid:5)(cid:2)$(cid:7)(cid:28)(cid:12)(cid:16)%(cid:11)(cid:7)!(cid:15)(cid:16)(cid:18)(cid:7)(cid:2)(cid:7)(cid:28)&(cid:7)(cid:2)(cid:10)(cid:10)(cid:15)(cid:16)’(cid:0)(cid:27)(cid:16)(cid:18)(cid:27)((cid:16)(cid:21))(cid:20)(cid:24)(cid:15)(cid:16) *+(cid:19),*(cid:16)(cid:16)(cid:19) #(cid:16)(cid:16)(cid:21)(cid:24)(cid:24)-(cid:16) (cid:31).(cid:16)/)-(cid:16)(cid:21)(cid:16)(cid:23)(cid:21)))(cid:16)(cid:24)(cid:24)(cid:24)(cid:24)(cid:15)(cid:16)0.(cid:16)/)-(cid:16)(cid:21)(cid:16)(cid:23)(cid:21)))(cid:16)1111(cid:15)(cid:16)(cid:6)(cid:6)(cid:6)2(cid:14)(cid:6)(cid:4)2(cid:4)(cid:10)$2(cid:7)(cid:11)(cid:16) 3(cid:5)4(cid:5)(cid:30)(cid:16)--(cid:15)(cid:16)-(cid:0) %(cid:15)(cid:16)-)1(cid:16)5(cid:7)(cid:4)6(cid:11)(cid:7)(cid:2)(cid:3)(cid:5)(cid:16) (cid:8)(cid:2)(cid:5)(cid:5)(cid:8)(cid:15)(cid:16)(cid:0)(cid:7)(cid:2)(cid:2)(cid:7)$(cid:7)(cid:8)(cid:8)(cid:7)(cid:16)(cid:19) #(cid:16)(cid:21)-(cid:20)(cid:24)(cid:15)(cid:16)(cid:0)(cid:27)(cid:16)(cid:18)(cid:10)7(cid:16)--(cid:20)(cid:20)(cid:16)(cid:0)(cid:7)(cid:2)(cid:2)(cid:7)$(cid:7)(cid:8)(cid:8)(cid:7)(cid:16)(cid:19) #(cid:16)(cid:21)-(cid:21)(cid:25)(cid:16) (cid:31).(cid:16)/)-(cid:16)(cid:21)(cid:16)1)(cid:20)1(cid:16)(cid:21)(cid:25)(cid:22))(cid:15)(cid:16)0.(cid:16)/)-(cid:16)(cid:21)(cid:16)(cid:23)(cid:21)))(cid:16)1111(cid:15)(cid:16)(cid:6)(cid:6)(cid:6)2(cid:14)(cid:6)(cid:4)2(cid:4)(cid:10)$2(cid:7)(cid:11)(cid:16) 89:;9<9=>(cid:16)<9?9=@A(cid:16);>(cid:16):(cid:16)BCD@?@(cid:16):EEFGH@A(cid:16)IJA@F(cid:16)KFGL@BB9GJ:<(cid:16)M=:JA:FAB(cid:16)8@N9B<:=9GJO(cid:16) Consolidated Financial Statements 63 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 21 February 2023. The Directors have the power to amend and reissue the financial statements. Basis of Preparation These general purpose financial statements have 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). The Group changed its accounting policy in relation to land and buildings, refer to note 6.6 for more information. All remaining 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 6.6 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. 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. Management also needs to exercise judgement in applying accounting policies. 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 2.1 Intangible assets; • Note 2.3 Leases; • Note 4.1 Income tax and deferred tax; • Note 5.3 Shares in other corporations; and • Note 5.4 Investments accounted for using the equity method. • Note 6.1 Business combinations Significant Events in the Current Reporting Period Acquisition of ARN Regional from Grant Broadcasters On 4 January 2022, HT&E completed its acquisition from Grant Broadcasters of 46 regional radio stations and digital operations. Refer to note 6.1 for more details. Sale of 4KQ On 1 July 2022, HT&E completed the sale of its 4KQ Brisbane radio station and license to a subsidiary of Sports Entertainment Group Limited (ASX: SEG) for consideration of $12.0 million. Refer to note 6.2 for more information. Sale of investments in Lux Group Limited (Luxury Escapes) The Group disposed of its remaining investment in Lux Group Limited in the period for consideration of $8.8 million. Sale of Soprano Design Pty Limited On 31 December 2022, the Group signed a binding share sale agreement to sell its 25% interest in Soprano Design Limited (Soprano) to Potentia Capital (Potentia), a leading Australian technology focused private equity firm. Under the agreement the Group will receive approximately $66.3 million in cash as consideration for the sale of its entire interest. The sale is conditional upon receiving FIRB approval and is expected to be completed in the first half of 2023. Please refer to note 6.2 for more information. 64 HT&E Annual Report 2022 Consolidated Statement of Comprehensive Income For the year ended 31 December 2022 Revenue Other revenue and income Total revenue and other income Note 1.1 1.1 2022 $’000 344,890 9,022 353,912 2021 $’000 *Restated 225,036 18,965 244,001 Expenses before impairment, finance costs, depreciation and amortisation 1.2 (275,914) (184,313) Impairment of intangible assets Associate impairment reversals Finance costs Depreciation and amortisation Share of profits of associates and joint ventures accounted for using the equity method (Loss)/Profit before income tax Income tax credit/(expense) (Loss)/Profit for the year Other comprehensive (loss)/income Items that may be reclassified to profit or loss: Net exchange difference on translation of foreign operations Share of associate’s other comprehensive loss Item that will not be reclassified to profit or loss: Changes in the fair value of equity investments recorded at fair value through other comprehensive income Other comprehensive (loss)/income, net of tax Total comprehensive (loss)/income (Loss)/Profit for the year is attributable to: Owners of the parent entity Non-controlling interests (Loss)/Profit for the year Total comprehensive (loss)/income is attributable to: Owners of the parent entity Non-controlling interests Earnings per share Basic/diluted earnings per share 1.3, 2.1 (251,798) 1.3, 5.4 1.2 1.2 5.4 – (5,911) (20,200) 9,691 (190,220) 4.1 17,230 (172,990) – 2,019 (12,743) (13,839) 9,786 44,911 (26,232) 18,679 3.7 3.7 5.3 (44) (163) (438) (298) – 2,322 (207) (173,197) 1,586 20,265 (176,345) 3,355 (172,990) (176,552) 3,355 (173,197) 14,862 3,817 18,679 16,448 3,817 20,265 Cents Cents 1.4 (56.9) 5.4 The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. *Comparative information has been restated to reflect the change in accounting policy detailed in note 6.6. Consolidated Balance Sheet As at 31 December 2022 65 Current assets Cash and cash equivalents Receivables Other current assets Asset held for sale 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 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 Bank loans 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 The above consolidated balance sheet should be read in conjunction with the accompanying notes. *Comparative information has been restated to reflect the change in accounting policy detailed in note 6.6. Note 3.2 3.3(B) 6.2 5.3 5.4 2.2 2.1 2.3 2.3 4.1 2.4 3.1 2.3 2.4 4.1 2022 $’000 23,852 65,654 4,069 23,788 2021 $’000 *Restated 257,068 51,351 1,896 – 117,363 310,315 677 33,327 49,138 4,196 52,561 16,179 437,309 372,613 35,807 851 23,424 1,683 557,109 470,656 674,472 780,971 31,323 41,461 5,021 8,823 4,083 14,527 63,777 84,394 29,555 8,269 4,966 9,956 20,511 6,720 83,614 67,250 21,664 4,097 129,072 111,250 251,290 204,261 315,067 287,875 359,405 493,096 3.5 3.7 3.7 1,547,690 1,475,706 (46,025) (45,078) (1,178,034) (974,183) 323,631 456,445 35,774 36,651 359,405 493,096 66 HT&E Annual Report 2022 Consolidated Statement of Cash Flows For the year ended 31 December 2022 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 Settlement of tax in dispute Net cash inflows from operating activities Cash flows from investing activities Payments for property, plant and equipment Payments for software Proceeds from sale of property, plant and equipment Proceeds from sale of investments Proceeds from sale of controlled entities Acquisition of controlled entities, net of cash acquired Receipts from short-term deposits Net loans from/(to) associate Dividends received from associate Net cash (outflows)/inflows from investing activities Cash flows from financing activities Proceeds from borrowings Payments for borrowing costs Principal elements of lease payments Payments for treasury shares Dividends paid to company’s shareholders Payments for share buyback Net payments to non-controlling interests Net cash (outflows)/inflows from financing activities Change in cash and cash equivalents Cash and cash equivalents at beginning of the year Effect of exchange rate changes Note 2022 $’000 2021 $’000 383,907 238,387 (311,284) (187,162) 51 313 (5,390) (25,389) (22,305) 19,903 – 422 (3,205) (9,794) – 38,648 (7,923) (3,297) (345) 195 8,806 12,045 (239,106) – (45) 5,019 (14) 32 63,628 – – 50,000 3,667 6,599 (221,354) 120,615 17,000 (266) (12,854) (1,470) (27,648) (2,339) (4,294) (31,871) (233,322) 257,068 106 65,003 (80) (14,278) (10) (9,675) (5,046) (3,216) 32,698 191,961 65,080 27 4.1 3.2 2.2 2.1 5.3 6.2 6.1 5.4 3.1 2.3 3.7 3.8 3.5 Cash and cash equivalents at end of the year 3.2 23,852 257,068 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. Consolidated Statement of Changes in Equity For the year ended 31 December 2022 67 Contributed equity $’000 Reserves $’000 Accumulated losses $’000 Note Non- controlling interests $’000 Total $’000 Total equity $’000 1,480,752 (25,605) (1,001,233) 453,914 36,051 489,965 – 14,862 14,862 3,817 18,679 Balance at 31 December 2021 Restated* 1,475,706 (45,078) (974,183) 456,445 36,651 493,096 – (3,217) (3,217) 1,475,706 (45,078) (974,183) 456,445 36,651 493,096 – (176,345) (176,345) 3,355 (172,990) Balance at 1 January 2021 Restated* Profit for the period Other comprehensive income Share-based payments Share buy-back Dividends paid to company’s shareholders Transfers within equity Treasury shares vested to employees Acquisition of treasury shares Transactions with non-controlling interests Balance at 1 January 2022 Profit/(loss) for the year Other comprehensive loss Share-based payments Contributions to equity, net of transaction costs Share buy-back Dividends paid to shareholders Transfers within equity Treasury shares vested to employees Acquisition of treasury shares Acquisition of non-controlling interest Transactions with non-controlling interests – – – (5,046) – – – – – 3.7 3.5 3.8 3.7 3.7 3.7 – – – 74,323 (2,339) – – – – – – 3.7 3.5 3.5 3.8 3.7 3.7 3.7 6.1 1,586 633 – – – – – 1,586 633 (5,046) (9,675) (9,675) (21,863) 21,863 181 (10) – – – – – 181 (10) (207) (560) – – – (142) 1,432 (1,470) – – – – – – (207) (560) 74,323 (2,339) (27,648) (27,648) 142 – 1,432 (1,470) – – – – – – – – – – – 1,586 633 (5,046) (9,675) – 181 (10) – – – – – – – – (207) (560) 74,323 (2,339) (27,648) – 1,432 (1,470) Balance at 31 December 2022 1,547,690 (46,025) (1,178,034) 323,631 35,774 359,405 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. *Comparative information has been restated to reflect the change in accounting policy detailed in note 6.6. – – 37 37 (4,269) (4,269) 68 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements 1. Group Performance 1.1 Revenue Revenue and other income Revenue Revenue from contracts with customers Gain on financial assets held at fair value through profit or loss 5.3 Dividend income Other Other income Interest income Total other revenue and income Total revenue and other income Revenue recognised in the year ended 31 December 2022 that was included in the contract liabilities balance as at 1 January 2022 is $4.8 million (2021: $4.2 million). Note 2022 $’000 2021 $’000 344,890 344,890 5,292 51 3,361 8,704 318 9,022 225,036 225,036 17,931 – 699 18,630 335 18,965 353,912 244,001 69 Notes to the Consolidated Financial Statements (Continued) 1.1 Revenue (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 Segment ARN & HK Outdoor Segment Advertising revenue (Regional, Metro, Digital and Other) Nature and timing of satisfaction of performance obligations Advertising revenue includes broadcast revenue, display revenue, sponsorship revenue, web advertising revenue, revenue from online radio platforms, and advertising from podcasts. • Broadcast revenue is recognised when each advertisement is aired per the contract terms. • Web revenue is recognised over the time period which the advertisements are • displayed. Revenue from online radio platforms is recognised at a point in time when each advertisement is aired. • Revenue from podcast advertising is recognised when advertisements are served. • Revenue from sponsorships is recognised when advertisements are aired. • Display revenue (HK Outdoor) is recognised over the time period which the advertisements are displayed. Services revenue (Other) HK Outdoor & Investments 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. Also includes cleaning and maintenance revenue, which is recognised when the service occurs. Historically the Group has acted as principal when recognising revenue on broadcast radio contracts. With the introduction of podcast and streaming contracts, the Group has had to assess whether it acts as a principal or agent. The Group makes this assessment based on the requirements of AASB 15 Revenue from Contracts with Customers, including whether it has inventory and credit risk, and the extent to which the Group can determine the price. Where the Group assesses that its acts as principal in the contract it recognises revenue on a gross basis, with a corresponding expense for any fees. Alternatively, where the Group assesses that it acts as agent in the contract, it recognises revenue net of any corresponding fees. 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. Government subsidies and grants Subsidies from relevant governments compensates the Group for employee benefits expense incurred and is recognised in profit or loss on a systematic basis in the period in which the expense is recognised. For the years ending 31 December 2021, Canberra FM received the Public Interest News Gathering Fund grant. This has been recorded in other income. For the year ending 31 December 2021 and 31 December 2022, Hong Kong domiciled entities within the Group were eligible for the Hong Kong Government Employment Support Scheme. This has been recorded within Other Income. 70 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 1.2 Expenses 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 Penalties – tax settlement Acquisition costs Costs associated with sale of business Other expenses Total expenses before impairment, finance costs, depreciation and amortisation Interest – lease liabilities Interest and finance charges Interest – tax settlements Borrowing costs amortisation Total finance costs Depreciation – right-of-use assets Depreciation – other assets Amortisation Total depreciation and amortisation Note 1.3 1.3 1.3 2.3 4.1 2.3 2.2 2.1 2022 $’000 166,930 18,668 47,744 11,920 5,379 4,958 3,819 – 5,334 888 10,274 275,914 1,899 3,600 – 412 5,911 11,623 6,178 2,399 20,200 2021 $’000 Restated* 106,014 13,060 34,011 7,396 3,443 3,524 1,624 5,734 1,958 428 7,121 184,313 1,540 1,756 8,912 535 12,743 9,945 3,139 755 13,839 *Comparative information has been restated to reflect the change in accounting policy detailed in note 6.6. 1.3 Segment information Description of segments The Group has identified its operating segments based on the internal reports reviewed by the Chief Operating Decision Maker (“CODM”) in assessing performance and determining the allocation of resources. At 30 June 2022, the Group determined there were four operating segments being ARN Metro, ARN Regional, HK Outdoor and Investments. With the integration of the ARN Metro and ARN Regional segments now largely complete, Australian Radio Network (ARN) is now reporting as one segment to the CODM. The revised segment reporting will now include three segments as follows: Reportable segment Principal activities ARN Metropolitan and Regional radio networks, on-demand radio, streaming and podcasting (Australia) HK Outdoor Billboard, transit and other outdoor advertising (Hong Kong) Investments Includes controlling interests in Emotive Pty Limited (creative agency) and equity accounted investments in Soprano Design Pty Limited (software vendor for secure messaging services) The CODM assesses 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 significant items such as gains or losses on disposals of businesses and restructuring related costs. 71 Notes to the Consolidated Financial Statements (Continued) 1.3 Segment information (Continued) Results by operating segment The segment information provided to the CODM for the year ended 31 December 2022 is as follows: ARN HK Outdoor Investments Corporate Group elimination Total 192,524 107,687 14,600 – – – – 19,487 19,487 – 8,750 19,243 14,253 – – – 10,997 10,997 4,400 5,949 33,759 – – – – – – (9,452) 11,774 7,648 221,205 – – – (405) (405) – – – – 2022 $’000 Revenue Metro Regional Digital Other Revenue from contracts with customers 314,811 Share of profits of associates Segment result Segment assets Segment liabilities 5,291 86,549 609,696 71,961 Reconciliation of segment result to loss before income tax Segment result Depreciation and amortisation A Net finance costs ARN Regional acquisition costs B Integration costs C Loss on disposal of 4KQ D Implementation of software as a service (SaaS) products E Impairment of intangible assets Gain on financial asset held at fair value through profit and loss F Loss before income tax Explanation of statutory adjustments (A) Consists of depreciation of $17.8 million and amortisation of $2.4 million (refer to note 1.2). (B) Transaction costs associated with the acquisition of ARN Regional (refer to note 6.1). (C) Costs relating to the integration of ARN Regional and ARN Metro. (D) (E) Relates to one off expenditure for new systems implemented. (F) Gain recognised on fair value uplift of HT&E’s investment in Lux Group Limited (refer to note 3.4). Impairment of $1.9 million, PP&E disposal of $0.4 and sale costs of $0.5 million recognised on the sale of 4KQ. 192,524 107,687 14,600 30,079 344,890 9,691 91,796 674,472 315,067 91,796 (20,200) (5,593) (5,334) (3,043) (2,795) (452) (249,891) 5,292 (190,220) 72 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 1.3 Segment Information (Continued) 2021 $’000 *Restated Revenue Metro Digital Other 186,226 9,358 – Revenue from contracts with customers 195,584 Share of profits of associates Segment result Segment assets Segment liabilities 4,760 53,821 483,847 46,747 Reconciliation of segment result to loss before income tax Segment result Depreciation and amortisation A Net finance costs B Cost associated with sale of business C Acquisition costs D Penalties – tax settlements E Associate share of impairment gain/(loss) and other adjustments F Gain on financial asset held at fair value through profit and loss G Implementation of software as a service (SaaS) products H Profit before income tax Explanation of statutory adjustments ARN HK Outdoor Investments Corporate Group elimination Total – – 21,851 21,851 – 10,506 20,362 17,368 – – 8,322 8,322 4,329 5,582 – – – – – (10,094) 25,740 251,022 3,371 220,389 – – (721) (721) – – – – 186,226 9,358 29,452 225,036 9,089 59,815 780,971 287,875 59,815 (13,839) (12,408) (428) (1,958) (5,734) 2,716 17,931 (1,184) 44,911 (A) Consists of depreciation of $13.1 million and amortisation of $0.8 million (refer to note 1.2). (B) Includes $8.9 million interest expense on tax settlement (refer to note 4.1). (C) (D) Transaction costs associated with the disposal of investment in OML and unsuccessful disposal of investment in Soprano. Initial costs related to the acquisition of ARN Regional incurred in the period. Penalties on ATO settlement (refer to note 4.1). (E) (F) Consists of part reversal of previous impairment in Nova Perth investment ($2.0 million) (refer to note 5.4) and adjustment to associate revenues ($1.3 million), offset by $0.6 million impairment of goodwill held by Soprano. (G) Gain recognised on fair value uplift of HT&E’s investment in Luxury Escapes, prior to its partial disposal (refer to note 5.3). (H) Relates to one off expenditure on new systems implemented. Other segment information The Group is domiciled in Australia and operates predominantly in Australia and Hong Kong. Revenue from contracts with customers in Australia is $325.4 million (2021: $203.2 million) and in Asia is $19.5 million (2021: $21.9 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 $548.8 million (2021: $461.1 million) and in Hong Kong is $8.3 million (2021: $9.5 million). Segment assets are allocated to countries based on where the assets are located. 73 Notes to the Consolidated Financial Statements (Continued) 1.3 Segment Information (Continued) 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. 1.4 Earnings per share (a) Reconciliation of earnings used in calculating earnings per share (EPS) (Loss)/Profit attributable to owners of the parent entity (Loss)/Profit attributable to owners of the parent entity used in calculating basic/diluted EPS 2022 $’000 2021 $’000 *Restated (176,345) (176,345) 14,862 14,862 Number Number (b) Weighted average number of shares Weighted average number of shares used as the denominator in calculating basic EPS 309,873,237 276,605,346 Adjusted for calculation of diluted EPS: Unvested/unexercised rights 45,499 348,259 Weighted average number of shares used as the denominator in calculating diluted EPS 309,918,736 276,953,605 *Comparative information has been restated to reflect the change in accounting policy detailed in note 6.6. 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. 74 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 2. Operating Assets and Liabilities 2.1 Intangible Assets 2021 $’000 Cost Goodwill Software 490 3,754 Accumulated amortisation and impairment – (2,438) Net book amount Movements 490 1,316 Opening net book amount 490 2,382 Additions Disposals Transfers and other adjustments Amortisation Impairment charge Foreign exchange differences – – – – – – 14 – (558) (522) – – Closing net book amount 490 1,316 Customer relationships – – – – – – – – – – – Radio licences 375,284 (4,477) 370,807 371,040 – – – (233) – – 370,807 Brands Total – – – – – – – – – – – 379,528 (6,915) 372,613 373,912 14 – (558) (755) – – 372,613 2022 $’000 Cost Accumulated amortisation and impairment Net book amount Movements Opening net book amount Additions Goodwill Software Customer relationships Radio licences Brands Total 490 – 490 490 – 4,096 12,310 402,313 25,751 444,960 (2,940) - (4,711) – (7,651) 1,156 12,310 397,602 25,751 437,309 1,316 345 – – 370,807 – – – 372,613 345 Acquisition of subsidiary 156,770 16,622 125,555 31,295 330,242 Disposals Transfers and other adjustments Amortisation Impairment charge * Foreign exchange differences Closing net book amount – – – – (1) – – (11,694) – (504) (1,662) (233) – – – (11,694) (1) (2,399) (156,770) – 490 – – (2,650) (86,833) (5,544) (251,797) – – – – 1,156 12,310 397,602 25,751 437,309 *Impairment charge relates to $249.9 million for the ARN CGU and $1.9 million for radio licenses recognised on the sale of 4KQ. 75 Notes to the Consolidated Financial Statements (Continued) 2.1 Intangible Assets (Continued) ACCOUNTING POLICY Summary of goodwill and other intangible assets Asset Goodwill Customer relationships Brand Software Radio licences Digital radio licence Goodwill Useful life Indefinite 10 years Indefinite 3-5 years Indefinite 20 years Amortisation method Acquired or Internally generated No amortisation Straight-line basis No amortisation Acquired Acquired Acquired Straight-line basis Internally generated No amortisation Straight-line basis and acquired Acquired Acquired 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 impairment testing as described below. 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. Customer relationships Customer relationships represent future income streams attributable to customer relationships. They are accounted for as identifiable assets and carried at cost less accumulated depreciation and any accumulated impairment loss. Amortisation is calculated on a straight-line basis over the useful life of the asset. 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. Where expenditure relates to Software-as-a-Service (SaaS) arrangements, an assessment is undertaken to determine if this can be capitalised. 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. 76 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 2.1 Intangible Assets (Continued) Year-End Impairment Review A comprehensive impairment review was conducted at 31 December 2022. The recoverable amount of each cash generating unit (CGU) that includes goodwill or indefinite life intangible assets was reviewed. Below is the allocation of goodwill and other non amortising intangible assets to cash generating units (CGUs) as at period-end, subsequent to the impairment test: ‑ Name of CGU ARN Emotive Total goodwill and other non-amortising intangible assets 2022 Goodwill $’000 2022 Other non-amortising intangible assets $’000 – 490 490 420,224 – 420,224 2021 Goodwill $’000 – 490 490 Other non 2021 amortising intangible assets $’000 ‑ 367,451 – 367,451 For the six months period ended 30 June 2022, ARN Metro and ARN Regional operated as separate CGU’s. During the six months to December 2022, significant progress was made on the integration of ARN Metro and ARN Regional. At 31 December 2022 the Group determined there to be only one CGU and operating segment for ARN. The Australian Radio Network (ARN) CGU incorporates metropolitan and regional radio networks, on-demand radio, streaming and podcasting in Australia which includes indefinite life intangible assets. At 31 December 2022 an impairment of $249.9 million was recorded in the ARN CGU and apportioned across intangible assets as follows: goodwill was fully impaired $156.8 million, radio licenses were impaired by $84.9 million, brands were impaired by $5.5 million and customer relationships were impaired by $2.7 million at 31 December 2022. The impairment reflects an increase in the ARN CGU discount rate and the estimated impacts of the current macro-economic environment on future advertising revenues. At 30 June 2022, a $1.9 million impairment charge was recognised on the sale of the 4KQ radio license. Refer to note 6.2 for more information. The recoverable amount of the ARN CGU was estimated based on value in use calculations, using management budgets and forecasts for a 5-year period, after adjusting for central overheads. The key assumptions for the impairment review as at 31 December 2022, used to calculate the recoverable amount are presented overleaf. 77 Notes to the Consolidated Financial Statements (Continued) 2.1 Intangible Assets (Continued) (A) Cash flows Year 1 cash flows Based on Board approved annual budget derived with reference to a range of internal and relevant external industry data and analysis. Revenue forecasts are discounted by a factor of approximately 6% reflecting recent historical accuracy of budget achievement. Years 2, 3, 4 and 5 Revenue forecasts are prepared based on management’s current assessment for each CGU, with cash flows consideration given to internal information and relevant external industry data and analysis. In general: • market growth in the ARN CGU is forecast across the cash flow period. The revenue forecast assumes the Australian radio market will return to historical pre-COVID-19 pandemic levels within the forecast period, and the ARN CGU will gain some additional market share or reclaim lost market share through continued investment in content, marketing and operations. Revenue forecasts for radio, streaming and podcasting take into account a range of internal and relevant external industry data and analysis; • • • • the ARN CGU is forecast to benefit from revenue synergies over the forecast period through optimizing a national network of metropolitan and regional radio stations; and Revenue forecasts are adjusted for the discount to year 1 cash flows, reflecting recent historical accuracy of budget achievement. 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. the above assumptions result in EBITDA CAGR of 2.8% for ARN CGU across the cash flow period. Terminal value cash flows Cash flows are extrapolated at growth rates not exceeding the long-term average growth rate for the industry in which the CGU operates. (B) Discount rate and long-term growth rate The discount rates (per annum) used reflect specific risks relating to the relevant segments. Name of CGU ARN Dec 2022 Post-tax discount rate Dec 2022 Pre-tax discount rate Dec 2022 Long-term growth rate Dec 2021 Post-tax discount rate Dec 2021 Pre-tax discount rate Dec 2021 Long-term growth rate 10.25% 14.0% 1.5% 9.0% 12.2% 1.5% 78 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 2.1 Intangible Assets (Continued) (C) Estimation uncertainty and key assumptions KEY JUDGEMENTS AND ESTIMATES The Group tests whether goodwill and other non-amortising intangible assets have suffered any impairment, in accordance with the accounting policy stated below. 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. Value in use calculations are prepared based on the Board approved annual budget, reforecast for current conditions and extended over the forecast period using growth rates derived with reference to a range of internal and relevant external industry data analysis, including but not limited to publicly available broker reports and media industry experts. The discount rate used is based on an internally prepared weighted average cost of capital (WACC) calculation and reflects risks associated with underlying assets. Terminal value cashflows have been extrapolated at growth rates not exceeding the long-term average growth rate for the industry in which the CGU operates. At 31 December 2022, an impairment loss of $249.9 million was recorded against the goodwill, radio licences, customer relationship, and brands in the ARN CGU, reflecting a recoverable amount of $436.8 million. $1.9 million of the impairment loss related to the impairment of 4KQ radio license. The carrying values of the other assets in the ARN CGU were considered equal to their value in use. After the impairment loss, the estimated recoverable amount of the ARN CGU, based on a value in use calculation, equals its carrying amount. The impairment reflects an increase in the ARN CGU discount rate and the estimated impacts of the current macro-economic environment on future advertising revenues. At 31 December 2022 the market capitalisation of the Group was $301.3 million based on the closing share price at 31 December 2022, representing a $169.8 million deficiency to the adjusted enterprise value (adjusted for debt, minority interest and other relevant items) of $461.9 million, after the current year impairment of $249.9m. The Group considered the likely reasons for the deficiency and concluded the value in use calculations are appropriate in supporting the carrying values of the ARN CGU at 31 December 2022. Any variation in the key assumptions used to determine the value in use would result in a change in the recoverable amount of the ARN CGU. The directors and management have considered and assessed reasonably possible changes in key assumptions and the approximate impact on the recoverable amount; • • • 1.0 % increase in the post-tax discount rate 1.0% reduction in the long-term growth rate Impact of 10.0% EBITDA shortfall per annum on EBITDA CAGR Discount rate change Long-term growth rate change EBITDA CAGR (EBITDA shortfall of 10% per annum) From To 10.25% 11.25% 1.5% 2.8% 0.5% 0.7% Change to carrying value (53,093) (37,961) (63,059) 79 Notes to the Consolidated Financial Statements (Continued) 2.1 Intangible Assets (Continued) 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. 80 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 2.2 Property, Plant and Equipment 2021 $’000 *Restated 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 Foreign exchange differences Closing net book amount 2022 $’000 Cost or fair value Accumulated depreciation and impairment Capital works in progress Net book amount Movements Opening net book amount Acquisition of subsidiary Additions Depreciation Transfers and other adjustments Disposal Foreign exchange differences Closing net book amount Freehold land Buildings 423 – – 423 423 – – – – – 603 (325) – 278 290 3 (15) – – – Plant and equipment 76,989 (64,557) 3,046 15,478 15,736 3,294 (3,124) (367) (66) 5 Total 78,015 (64,882) 3,046 16,179 16,449 3,297 (3,139) (367) (66) 5 423 278 15,478 16,179 Freehold land Buildings 11,464 – – 11,464 423 11,341 – – – (300) – 8,422 (611) – 7,811 278 7,992 37 (411) 22 (108) – Plant and equipment 90,329 (65,616) 5,150 29,863 15,478 13,680 7,886 (5,767) (871) (553) 11 Total 110,215 (66,227) 5,150 49,138 16,179 33,013 7,923 (6,178) (849) (961) 11 11,464 7,810 29,864 49,138 The Group had capital commitments of $nil as at 31 December 2022 (2021: $147,240). *Comparative information has been restated to reflect the change in accounting policy detailed in note 6.6. 81 Notes to the Consolidated Financial Statements (Continued) 2.2 Property, Plant and Equipment (Continued) ACCOUNTING POLICY Property, 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: 20–50 years; • plant and equipment: 3-30 years; and 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. Refer to the change in accounting policy note in note 6.6. 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. 82 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 2.3 Leases As a lessee, the Group leases several assets including property, advertising spaces, motor vehicles and other equipment. The weighted average lease term is 9.2 years (2021: 9.3 years). (A) 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 2022 $’000 29,318 5,621 868 35,807 8,823 29,555 38,378 2021 $’000 16,138 7,147 139 23,424 9,956 21,664 31,620 Additions to the right-of-use assets during the 2022 financial year were $22.7 million (2021: $2.6 million). $13.6 million additions related to the acquisition of ARN Regional. 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. (B) Amounts recognised in the consolidated statement of comprehensive income The consolidated statement of comprehensive income 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 2022 $’000 6,106 5,233 284 11,623 1,899 1,625 2021 $’000 3,439 6,201 305 9,945 1,540 2,332 measurement of the lease liability 968 465 The total cash outflow for leases, inclusive of principal and interest was $14.8 million (2021: $15.8 million). As at 31 December 2022, there were indications that the carrying amount of HK Outdoor Advertising Concession Agreements may exceed their recoverable amount, so an impairment test was performed which determined no impairment to be recognised. The recoverable amount of the right-of-use assets were based on the discounted cash flow analysis over the contractual period for right of-use assets, which takes into account the financial performance of specific advertising concession agreements as 31 December 2022. Notes to the Consolidated Financial Statements (Continued) 83 2.3 Leases (Continued) ACCOUNTING POLICY 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, however may be more than 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. 84 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 2.3 Leases (Continued) ACCOUNTING POLICY (Continued) 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. 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. 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. ‑ Notes to the Consolidated Financial Statements (Continued) 2.4 Provisions Current Employee benefits Make good Other Total current provisions Non-current Employee benefits Make good Total non-current provisions 2022 $’000 11,862 2,615 50 14,527 2,216 6,053 8,269 Movements in each class of provision during the financial year, other than employee benefits, are set out below: 2022 Carrying amount at beginning of the year Additional amounts recognised Acquired Amounts used Reversal Foreign exchange differences Carrying amount at end of the year Make good $’000 2,885 1,240 4,760 (233) – 16 8,668 Other $’000 450 50 – (37) (413) – 50 85 2021 $’000 6,270 – 450 6,720 1,212 2,885 4,097 Total $’000 3,335 1,290 4,760 (270) (413) 16 8,718 86 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 2.4 Provisions (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. Make good The Group will recognise a make good provision when they are included in lease agreements for which the Group has a legal or constructive obligation. The present value of the estimated costs of dismantling and removing the assets and restoring the site is recognised as a provision. At each reporting date, the liability is remeasured in line with changes in discount rates, estimated cash flows and the timing of those cash flows. These costs have been capitalised to right of use assets and property, plant and equipment and are amortised over the shorter of the term of the lease and the useful life of the assets. Notes to the Consolidated Financial Statements (Continued) 87 3. Capital Management 3.1 Bank loans Non-current bank loans Bank loans – unsecured Total non-current bank loans (i) Deduct: Borrowing costs Accumulated amortisation Net borrowing costs Total non-current interest-bearing liabilities (i) Net debt (i) Non-current bank loans Net borrowing costs Cash and cash equivalents Net cash Note 2022 $’000 85,000 85,000 2,470 (1,864) 606 84,394 84,394 606 2021 $’000 68,000 68,000 2,511 (1,761) 750 67,250 67,250 750 3.2 (23,852) (257,068) 61,148 (189,068) (i) The majority of the Group’s debt facilities do not expire until after December 2025. The Group’s debt facilities has a maximum leverage covenant of 3.25 times and a minimum interest cover covenant of 3.0 times. As at 31 December 2022 the leverage ratio was 0.79 times and the interest cover ratio was 23.6 times. (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 Pertaining to the revolving cash advance facility. (i) (ii) Relating to bank loan and guarantees drawn (refer to note 6.3). 2022 $’000 2021 $’000 229,397 (87,853) 141,544 1,550 – 1,550 258,826 (71,648) 187,178 1,500 – 1,500 88 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 3.1 Bank Loans (Continued) 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. 3.2 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 23,852 257,068 The below reconciliation relates to both continued and discontinued operations. Reconciliation of (loss)/profit for the year to net cash inflows/(outflows) from 2022 $’000 2021 $’000 operating activities: (Loss)/Profit for the year Depreciation and amortisation Borrowing costs amortisation Share of profits of associate and joint ventures Other non-cash items Impairment of intangible assets Impairment reversal on associate and joint venture Share-based payments expense (172,990) 20,200 412 (9,691) 263 251,798 – 873 18,679 13,839 535 (9,786) 641 – (2,019) 814 Gains on financial assets held at fair value through profit or loss (5,292) (17,931) Net gain on sale of non-current assets Fair value gains on financial assets Changes in assets and liabilities net of effect of acquisitions and changes in accounting policy: (Increase)/decrease in receivables (Increase)/decrease in prepayments Increase/(decrease) in current tax /deferred tax liabilities Increase/(decrease) in payables and provision for employee benefits Net cash inflows from operating activities (29) (63) (1) – 3,644 (1,487) (50,278) (17,457) 19,903 (5,635) 1,953 16,437 21,122 38,648 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, with maturities 90 days or less. 89 Notes to the Consolidated Financial Statements (Continued) 3.3 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 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 The Group is exposed to interest rate risk through its long-term borrowings issued at variable rates as well as through its cash and cash equivalents balance. Based on the outstanding net debt as at 31 December 2022, a change in interest rates of +/- 1% per annum with all other variables being constant would impact equity and post-tax profit by $0.4 million higher/lower. (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 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. (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. Group credit risk principally arises from customer receivables, cash and cash equivalents, short-term deposits with banks and financial institutions and financial guarantees (refer to note 6.3 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 – trade receivables The Group applies the AASB 9 Financial Instruments simplified approach to measuring expected credit losses (ECL) which uses a lifetime expected loss allowance for all trade receivables and contract assets. To measure the ECL, trade receivables and contract assets have been grouped based on shared credit risk characteristics. 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. 90 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 3.3 Financial risk management (Continued) (B) Credit risk (Continued) The carrying amount of receivables as at reporting date was as follows: Note Trade receivables Loss allowance Other receivables Total receivables The loss allowance determined for trade receivables as at 31 December 2022 and 2021 is as follows: Opening loss allowance as at 1 January Expected credit losses recognised/(reversed) in profit or loss Acquisition of ARN regional Receivables written off as uncollectible Closing loss allowance The aging of trade receivables that were not impaired at the end of the reporting date was as follows: Current Past due less than 1 month Past due 1 to 3 months Past due 3 to 6 months Past due over 6 months Trade receivables ACCOUNTING POLICY 2022 $’000 60,895 (519) 60,376 5,278 65,654 2022 $’000 269 (18) 373 (105) 519 2022 $’000 55,984 2,858 1,435 274 344 2021 $’000 48,835 (269) 48,566 2,785 51,351 2021 $’000 585 (236) – (80) 269 2021 $’000 44,942 3,193 451 95 154 60,895 48,835 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. 91 Notes to the Consolidated Financial Statements (Continued) 3.3 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 has $141.5 million in undrawn facilities at 31 December 2022, please refer to note 3.1 for more information. The tables below analyse the Group’s financial liabilities, including interest to maturity into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the tables are the contractual undiscounted cash flows. 2021 Non-derivative Financial Liabilities Payables Bank Loans Lease Liabilities Total non-derivatives Less: interest Total financial liabilities 2022 Non-derivative Financial Liabilities Payables Bank Loans Lease Liabilities Total non-derivatives Less: interest Total financial liabilities 3.4 Fair Value Measurements Note 3.1 2.3 Note 3.1 2.3 Less than one year $’000 Between one and two years $’000 Between two and five years $’000 Over five years $’000 41,461 1,139 11,157 53,757 (1,139) 52,618 – 1,139 5,774 6,913 (1,139) 5,774 – 68,584 8,617 77,201 (584) – – 14,785 14,785 – 76,617 14,785 Less than one year $’000 Between one and two years $’000 Between two and five years $’000 Over five years $’000 31,323 4,059 9,984 45,366 (4,059) 41,307 – 21,324 6,930 28,254 (3,324) 24,930 – 70,532 11,446 81,978 (3,532) 78,446 – – 21,218 21,218 – 21,218 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 • financial assets at fair value through other comprehensive income. 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). 92 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 3.4 Fair Value Measurements (Continued) (A) 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 2021 and 2022: 2021 Recurring fair value measurements Financial assets Note Level 1 $’000 Level 2 $’000 Level 3 $’000 Total $’000 Financial assets at fair value through profit or loss Shares in other corporations 5.3 Total financial assets – – – – 4,196 4,196 4,196 4,196 2022 Recurring fair value measurements Financial assets Financial assets at fair value through profit or loss Shares in other corporations Total financial assets Note Level 1 $’000 Level 2 $’000 Level 3 $’000 Total $’000 5.3 – – – – 677 677 677 677 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 fair value of bank loans approximates the carrying amount. The level 3 inputs used by the Group are derived and evaluated as follows. ‑ The fair value of lease liabilities disclosed in note 2.3 is estimated by discounting the minimum lease payments at the Group’s incremental borrowing rate. For the period ended 31 December 2022, the borrowing rates were determined to be between 2.3% and 6.9% 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 that are measured through profit and loss. During the year a fair value gain of $5.3 million (2021: $17.9 million) was recorded in other income for shares in other corporations relating to the disposal of the Groups remaining investment in Lux Group Holdings for $8.8 million (refer to note 5.3 for more information). The fair value gain relating to the Group’s remaining investment in Lux Group Limited as at 31 December 2021 was valued with reference to the sale price attained on the partial disposal in the period ending 31 December 2021, incorporating adjustments for minority interest and marketability. 93 Notes to the Consolidated Financial Statements (Continued) 3.5 Contributed Equity Issued and paid up share capital 2022 $’000 2021 $’000 1,547,690 1,475,706 (A) Movements in contributed equity during the financial year 2022 Number shares 2021 Number shares 2022 $’000 2021 $’000 Balance at beginning of the year 275,154,900 278,196,267 1,475,706 1,480,752 Share issue (i) Share buy-back (ii) 35,934,891 – (2,009,189) (3,041,367) 74,323 (2,339) – (5,046) Balance at end of the year 309,080,602 275,154,900 1,547,690 1,475,706 (i) Issue of ordinary shares (net of costs directly attributable) in January 2022 as consideration for the purchase of ARN Regional. Refer to note 6.1. (ii) During 2022, the Company purchased and cancelled on-market 2.0 million shares (2021: 3.0 million). The shares were acquired at an average price of $1.16 per share (2021: $1.66). (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. 94 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 3.6 Share-Based Payments As at 1 January Awarded Exercised Other changes Balance at end of the year 2022 Number of rights 788,896 107,086 2021 Number of rights 115,955 765,802 – (115,955) 75,930 971,912 23,094 788,896 Share rights outstanding at the end of the year have the following vesting date and weighted average fair value: Incentive plan 2021 TIP and incentive award (1) 2022 TIP and incentive award (2) Balance at end of the year Vesting date 31-Dec-22 31-Dec-23 Weighted average fair value $2.01 $1.95 Rights 2022 855,749 116,163 971,912 2021 788,896 – 788,896 2022 2021 Weighted average remaining contractual life of rights outstanding at end of period 0.1 year 1.0 year (1) The date on which the fair value of the 2021 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 16 February 2022. At the Board’s discretion, the participants may receive an additional allocation of fully paid ordinary shares equal to the value of dividends that were payable on the underlying shares, whilst holding unvested and/or vested rights. 66,853 additional rights were issued to satisfy this requirement. (2) The date on which the fair value of the 2022 TIP rights were calculated, is the deemed grant date of the rights for accounting purposes. The performance conditions were met on 31 December 2022 and approved on 15 February 2023. At the Board’s discretion, the participants may receive an additional allocation of fully paid ordinary shares equal to the value of dividends that were payable on the underlying shares, whilst holding unvested and/or vested rights. 9,077 additional rights were issued to satisfy this requirement. This is disclosed in other changes above. Share-based payments expense related to the above tables for the year was $872,000 (2021: $814,000). Further information of the rights granted to Executive KMP is contained in the Remuneration Report found on pages 46 to 61 of the Annual Report. ACCOUNTING POLICY Share-based compensation benefits are provided to employees via share-based payments as part of a Total Incentive Plan (TIP) and other management incentive plans. The fair value of rights granted 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. Notes to the Consolidated Financial Statements (Continued) 95 3.7 Reserves and Accumulated Losses Reserves Foreign currency translation reserve Share-based payments reserve Investment revaluation reserve Transactions with non-controlling interests reserve Treasury shares reserve Total reserves Foreign currency translation reserve Balance at beginning of the year Net exchange difference on translation of foreign operations Share of associates foreign exchange reserve Balance at end of the year Share-based payments reserve Balance at beginning of the year Share-based payments expense Transfer to retained earnings Treasury shares vested to employees Balance at end of the year Investment revaluation reserve Balance at beginning of the year Fair value adjustment on financial assets Transfer to retained earnings 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 Acquisition of treasury shares Treasury shares vested to employees Balance at end of the year 2022 $’000 868 7,994 – (53,283) (1,604) (46,025) 1,075 (44) (163) 868 8,696 872 (142) (1,432) 7,994 – – – – (53,283) (53,283) (1,566) (1,470) 1,432 (1,604) 2021 $’000 *Restated 1,075 8,696 – (53,283) (1,566) (45,078) 1,811 (438) (298) 1,075 8,131 814 (68) (181) 8,696 19,473 2,322 (21,795) – (53,283) (53,283) (1,737) (10) 181 (1,566) *Comparative information has been restated to reflect the change in accounting policy detailed in note 6.6. 96 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 3.7 Reserves and Accumulated Losses (Continued) Nature and purpose of reserves 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 6.6. 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 3.6. Investment revaluation reserve The investment revaluation reserve is used to recognise the fair value of shares in other entities that are measured at fair value through other comprehensive income. Refer to note 5.3 for more information. Transactions with non-controlling interests reserve The transactions with non-controlling interest reserve is used to record the differences described in note 5.2 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 788,896 (2021: 6,099) additional shares in the Company during the year. 850,772 shares were issued to employees during the year (2021: 103,919). The total shareholding in the Company as at 31 December 2022 was 904,851 shares at an average price of $1.77 (2021: 966,727 shares at $1.62). This shareholding is disclosed as treasury shares and deducted from equity. Performance rights that relate to the 2018 and 2019 TIP have vested and converted into shares. Unissued shares remain in the Trust. The treasury shares reserve is used to recognise the value of shares purchased by the Trust. Accumulated losses Movement in accumulated losses are as follows: Balance at beginning of the year (Loss)/Profit attributable to owners of the parent entity Transfer from reserves Dividends paid to shareholders Balance at end of the year 2022 $’000 2021 $’000 *Restated (974,183) (1,001,233) (176,345) 142 (27,648) 14,862 21,863 (9,675) (1,178,034) (974,183) *Comparative information has been restated to reflect the change in accounting policy detailed in note 6.6. 97 Notes to the Consolidated Financial Statements (Continued) 3.8 Dividends Final dividend for the year ended 31 December 2021 of 3.9 cents per share fully franked (2020: nil cents) Paid in cash Interim dividend for the year ended 31 December 2022 of 5.0 cents per share fully franked (2021: 3.5) Paid in cash Total dividends Franking credit balance available as at 31 December (at 30% corporate tax rate) Dividends not recognised at year end 2022 $’000 12,133 12,133 15,515 15,515 27,648 87,690 2021 $’000 – – 9,675 9,675 9,675 14,729 Subsequent to year end, the Directors have declared a fully franked dividend of 5.2 cents 16,072 12,133 per share. The aggregate amount of the dividend expected to be paid on 23 March 2023 (paid from parent entity profits since 1 January 2023) but not recognised as a liability at year end is: 98 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 4. Taxation 4.1 Income Tax and Deferred Tax (A) Income tax Current tax expense Tax settlement Deferred tax benefit Adjustment for current tax of prior periods Income tax (benefit)/expense Income tax expense differs from the prima facie tax as follows: Profit/(Loss) before income tax (benefit)/ expense Prima facie income tax at 30% Difference in international tax treatments and rates Non-deductible acquisition costs Non-deductible penalties on tax settlement Non-deductible impairment charge Capital losses utilised against the gain on disposal of investment in Luxury Escapes Unrecognised tax losses/(tax losses realised) Share of profits of associates Adjustment for current tax of prior periods Tax settlement Capital losses utilised against the gain on disposal of investment in oOh!Media Capital losses utilised against the sale of 4KQ Other Income tax (benefit)/expense 2022 $’000 11,967 – (27,211) (1,986) (17,230) (190,220) (57,066) (103) 84 – 47,031 (2,641) (126) (2,907) (1,986) – – (569) 1,053 2021 $’000 6,962 29,455 (8,103) (2,082) 26,232 44,911 13,473 (243) 371 1,720 – (4,326) (297) (2,936) (2,082) 29,455 (9,341) – 438 (17,230) 26,232 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. Tax expense for 31 December 2022 is impacted by the reassessment of the deferred tax liability in relation to the sale of the 4KQ radio license, which has resulted in a decrease to the tax expense of $2.9 million. Previously unrecognised capital losses of $3.2 million have been recognised in the period to offset deferred tax liabilities of $3.2 million, due to the sale of 4KQ assets and Lux Group Limited shares. 99 Notes to the Consolidated Financial Statements (Continued) 4.1 Income Tax and Deferred Tax (Continued) (A) Income Tax (Continued) New Zealand Branch Matter As previously disclosed, the Company reached a binding heads of agreement on 29 October 2021 to settle the taxation dispute regarding the New Zealand branch matter with the Australian Taxation Office (ATO) for the total sum of $70.7 million. A deed of settlement to formalise the binding heads of agreement was also executed on 1 February 2022. The settlement amount of $70.7 million was made up of $56.6 million tax, $5.4 million penalties and $8.7 million interest. The Company had already deposited $50.7 million with the ATO, and the remaining $20.0 million was paid on 1 March 2022. The $8.7 million interest amount is deductible for income tax. Given the dispute is now completed, remitted interest previously taken as deductions has been treated as assessable income in the tax return for the year ended 31 December 2021, the final net interest assessable was $47.2 million (before tax). Capital Losses As previously noted, the New Zealand branch matter settlement agreement also recognised that 62.5% of the capital losses arising from the disposal of the New Zealand mastheads in 2016 which may be carried forward, subject to the usual loss carry forward rules regarding change of ownership and same business test. These capital losses totalled $345.9 million pre-tax, with 62.5% equating to $216.2 million pre-tax. These are subject to the usual loss carry forward rules regarding change of ownership and same business test. Assuming various rules are met, these capital losses should be available to shelter future capital gains. No deferred tax asset is recorded for these capital losses as they may only be utilised in the event of capital gains and it is not currently probable there will be capital gains against which the losses will be utilised. Other Matters: Loan Forgiveness As previously disclosed, the Company and the ATO also settled the Loan Forgiveness matter. The ATO had indicated it would apply the market value substitution rules to the loan forgiveness, with the tax adjustment being $5.8 million plus potential penalties and interest. On 22 December 2021, the Company and the ATO executed a deed of settlement to settle the Loan Forgiveness matter for a total of $3.4 million, made up of $2.9 million tax, $0.3 million penalties and $0.2 million interest. The amount owing of $2.3 million as at 31 December 2021 was paid on 18 January 2022. There are no other matters currently under review by the ATO. 100 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 4.1 Income Tax and Deferred Tax (Continued) (A) Income Tax (Continued) ACCOUNTING POLICY 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, i.e. that detection risk should be ignored; that the entity should reflect the effect of the uncertainty in its income tax accounting when it is not probable that the tax authorities will accept the treatment; that the impact of the uncertainty should be measured using either the most likely amount or the expected value method, depending on which method 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. Notes to the Consolidated Financial Statements (Continued) 101 4.1 Income Tax and Deferred Tax (Continued) (B) Deferred tax assets and liabilities 2021 *Restated Employee benefits Doubtful debts Accruals/restructuring Capital losses Intangible assets Depreciation Right-of-use assets Lease liabilities Investments accounted for using the equity method Balance 1 Jan 21 $’000 1,588 150 2,258 – (110,234) (50) (5,465) 7,213 (7,054) Recognised in profit or loss $’000 Recognised in equity $’000 Other movements $’000 Offset $’000 Balance 31 Dec 21 $’000 573 (71) 38 – – 18 862 (916) (742) – – – – – – – – – – – – – – – 9,341 (9,341) 2,161 79 2,296 – (110,234) 1,421 (4,603) 6,297 (7,796) – – – – – 9,341 (1,052) – – 181 (111,250) – 1,453 – – – – – Shares in other corporations (8,344) (1,054) Other 333 53 (995) (206) *Comparative information has been restated to reflect the change in accounting policy detailed in note 6.6. (119,605) (1,239) (1,201) 10,794 2022 Employee benefits Doubtful debts Accruals/restructuring Capital losses Balance 1 Jan 22 $’000 2,161 79 2,296 – Recognised in profit or loss $’000 Acquisition of ARN Regional $’000 59 (36) 137 – 1,916 112 2,191 – Intangible assets (110,234) 29,007 (52,042) Depreciation Right-of-use assets Lease liabilities Investments accounted for using the equity method 1,421 (4,603) 6,297 (7,796) (26) 156 (426) (274) Shares in other corporations (1,052) (1,586) (1,908) (4,081) 3,338 – – Other 181 200 (149) (111,250) 27,211 (50,623) Recognised in equity $’000 Other movements $’000 Offset $’000 Balance 31 Dec 22 $’000 – – – – – – – – – – (275) (275) – – 72 3,210 2,939 (316) – – – (3) (37) 5,865 – – – (3,210) 4,136 155 4,696 – 569 (129,761) – – – – (829) (8,528) 9,209 (8,070) 2,641 – – – (80) (129,072) The Group has not recognised deferred tax assets of $5.8 million (2021: $5.5 million) in respect of HK Outdoor tax losses carried forward. 102 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 4.1 Income Tax and Deferred Tax (Continued) (B) Deferred tax assets and liabilities (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. The wholly owned Australian subsidiaries acquired as part of the acquisition of ARN Regional entered the tax consolidated group in 2022, of which the HT&E is the head entity, in accordance with Australian taxation law. 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. 103 Notes to the Consolidated Financial Statements (Continued) 5. Group Structure 5.1 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 6.6. Name of entity 5AD Broadcasting Company Pty Ltd 1 Ambersky Pty. Limited 1, 2, 4 AMI Radio Pty Limited 1, 2, 4 APN News & Media Employee Share Trust ARN Adelaide Pty Ltd 1 ARN Brisbane Pty Ltd 1, 2 ARN Broadcasting Pty Ltd 1 ARN Communications Pty Ltd 1, 2 ARN Limited Partnership ARN New Zealand Pty. Limited 1, 2 ARN Overseas Pty. Limited 1,2 ARN Perth Pty Limited 1 ARN Regional Pty Ltd 1, 2, 4 ARN South Australia Pty Limited 1 Australian Radio Network Pty Limited 1,2 Bass Radio Pty Limited 1, 2, 4 Biffin Pty. Limited 1, 2 Black Mountain Broadcasters Pty. Limited Blue Mountains Broadcasters Pty Limited 1 Bluwin Pty Ltd Brisbane FM Radio Pty Ltd Bundaberg Broadcasters Pty. Ltd 1, 4 Bundaberg Narrowcasters Pty. Ltd. 1, 2, 4 Burnie Broadcasting Service Proprietary Limited.1, 2, 4 Buspak Advertising (Hong Kong) Limited Cairns Broadcasters Pty Ltd 1, 2, 4 Canberra FM Radio Pty Ltd3 Capital City Broadcasters Pty. Limited 1 Catalogue Central Pty Limited 1 Cody Outdoor International (HK) Limited Commercial Broadcasters Proprietary Limited 1, 2, 4 Commonwealth Broadcasting Corporation Pty Ltd 1, 2 Conversant Media Pty Ltd 1 Covette Investments Pty Limited 1, 2 Digi-Lution Pty Ltd 1, 2, 4 Country of incorporation/ establishment Equity holding 2022 % Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Hong Kong Australia Australia Australia Australia Hong Kong Australia Australia Australia Australia Australia 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 50 100 50 50 100 100 100 100 100 50 100 100 100 100 100 100 100 100 2021 % 100 – – 100 100 100 100 100 100 100 100 100 – 100 100 – 100 50 100 – 50 – – – 100 – 50 100 100 100 – 100 100 100 – 104 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) Name of entity Digital Radio Broadcasting Darwin Pty Ltd 1, 2, 4 Double T Radio Pty Ltd 1 East Coast Radio Pty. Limited 1, 2, 4 Emotive Pty Limited Evitome Pty Limited 1 Eyre Peninsula Broadcasters Pty Ltd 1, 4 Gergdaam Capital Pty Limited 1, 2 Gulgong Pty. Limited 1, 2 Haswell Pty. Limited 1, 2 Hot 91 Pty Ltd 1, 2, 4 Hot Tomato Australia Pty Limited 1, 4 Hot Tomato Narrowcasting Pty Limited 1, 2, 4 HT&E Broadcasting (Regionals) Pty. 1, 2 HT&E Digital Pty Ltd 1 HT&E Finance Pty Limited 1, 2 HT&E International Pty Ltd 1, 2 HT&E Online (Australia) Pty Ltd 1 HT&E Operations Ltd 1, 2 Level 3 Investments Pty Limited 1 Mackay Broadcasters Pty Ltd 1, 2, 4 Melbourne F.M. Facilities Pty. Limited North East Tasmanian Radio Broadcasters Proprietary Limited 1, 2, 4 Northern Tasmania Broadcasters Proprietary Limited 1, 2, 4 Northern Territory Broadcasters Pty Ltd 1, 4 Queensland Regional Broadcasters Pty Ltd 1, 4 Radio 96FM Perth Pty Limited 1 Radio Ballarat Pty. Ltd. 1, 2, 4 Radio Barrier Reef Pty Ltd 1, 2, 4 Radio Cairns Pty Ltd 1, 2, 4 Radio Central Victoria Pty Ltd 1, 2, 4 Radio Gladstone Pty Ltd 1, 2, 4 Radio Hunter Valley Pty. Limited 1, 2, 4 Radio Mackay Pty Ltd 1, 2, 4 Radio Murray Bridge Pty Limited 1, 2, 4 Radio Rockhampton Pty Ltd 1, 2, 4 Radio Townsville Pty Ltd 1, 2, 4 Radio West Coast Pty Ltd 1, 4 Riverland Broadcasters Pty Ltd 1, 2, 4 Country of incorporation/ establishment Equity holding 2022 % 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 51 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 50 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 2021 % – 100 – 51 100 – 100 100 100 – – – 100 100 100 100 100 100 100 – 50 – – – – 100 – – – – – – – – – – – – Notes to the Consolidated Financial Statements (Continued) Name of entity South Coast & Tablelands Broadcasting Pty Ltd 1, 4 Southern State Broadcasters Pty. Limited 1 Speedlink Services Pty Ltd 1 Spencer Gulf Broadcasters Pty Ltd 1, 2, 4 Star Broadcasting Network Pty Ltd 1, 2, 4 Sydney FM Facilities Pty Ltd Tasmanian Broadcasters Pty Ltd 1, 2, 4 The Hot Tomato Broadcasting Company Pty Limited 1, 2, 4 The Internet Amusements Group Pty Limited 1 The Level 3 Partnership The Radio Sales Network Pty Ltd 1, 2, 4 The Roar Sports Media Pty Ltd 1 Tibbar Broadcasting Pty Limited 1 Wesgo 1, 2 Wilson & Horton Australia Pty Ltd 1 Wilson & Horton Finance Pty Ltd 1,2 Wollongong Broadcasters Pty. Limited 1, 2, 4 Country of incorporation/ establishment Equity holding 2022 % Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100 100 100 100 100 50 100 100 100 100 100 100 100 100 100 100 100 105 2021 % – 100 100 – – 50 – – 100 100 – 100 100 100 100 100 – (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 is proportionately consolidated and its principal activities are commercial radio. Refer to note 5.4. (4) These companies acquired during the year entered the Assumption Deed which provides for the joining of each company to the Deed of Cross Guarantee dated 28 April 2017. 106 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 5.2 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 Brisbane FM Radio Pty Ltd Place of business and country of incorporation Ownership interest held by the Group Ownership interest held by non-controlling interests 2022 2021 2022 2021 Principal activities 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. Brisbane FM Radio Pty Ltd 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 inflows/(outflows) from investing activities Net outflows from financing activities Net increase in cash and cash equivalents 2022 $’000 10,841 773 10,068 67,363 44 67,319 77,387 38,694 22,366 5,845 – 5,845 2,923 2,790 6,619 – (6,861) (241) 2021 $’000 10,864 1,031 9,833 67,318 47 67,271 77,104 38,552 22,742 6,855 – 6,855 3,428 2,684 5,835 – (5,667) 168 107 Notes to the Consolidated Financial Statements (Continued) 5.2 Interests in Other Entities (Continued) (B) Non-controlling interests (Continued) 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. 5.3 Shares in Other Corporations Shares in other corporations Note 3.4 2022 $’000 677 2021 $’000 4,196 The group disposed of its remaining investment in Lux Group Limited in the period for $8.8 million (2021: $14.4 million). The Group recognised a gain on financial asset through profit and loss of $5.3 million (2021: $17.9 million). The Group disposed of its investment in oOh!media Limited (OML) on 2 November 2021, which was designated as fair value through other comprehensive income. Prior to the sale, the investment in OML was revalued to $49.2 million as at 2 November 2021, with a $2.3 million fair value gain net of tax, recognised in other comprehensive income. The sale resulted in a $21.8 million gain net of tax previously recognised in other comprehensive income being transferred from the investment revaluation reserve to retained earnings. 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 3.3(B)) 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 3.3(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 3.4. 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. KEY JUDGEMENTS AND ESTIMATES The Group’s investments in equity instruments are measured at fair value, determined in the manner described in note 3.4. These calculations require the use of assumptions. Refer to note 3.4 for details of these assumptions. 108 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 5.4 Investments Accounted for Using the Equity Method Interests in associates Shares in associates Total investments accounted for using the equity method Share of profits of associates (i) Note 2022 $’000 33,327 33,327 9,691 2021 $’000 52,561 52,561 9,786 Set out below are the associate and joint ventures of the Group as at 31 December 2022. 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 Nova Entertainment (Perth) Pty Ltd Australia Ownership interest Consolidated carrying values 2022 25% 50% 2021 25% 50% Nature of relationship Measurement method 2022 $’000 2021 $’000 Associate1 Equity method – 19,551 Associate2 Equity method 33,327 33,010 (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. The Group has determined that its investment in Soprano Design Pty Limited should be held as an asset held for sale. Refer to note 6.2 for more information. (2) On 1 March 2020, Nova Entertainment (Perth) Pty Ltd, an FM radio station in Perth, became an associate of the Group. The Group’s interest in the entity was previously classified as an equity investment within Shares in Other Corporations Below is a reconciliation of investments accounted for using the equity method: Carrying amount at the beginning of the financial year Note Share of profit (i) Share of reserves Dividend paid Reclassification of associate from financial asset 6.2 Impairment reversal/(loss) Other Total investments accounted for using the equity method 2022 $’000 52,561 9,691 (163) (5,019) (23,788) – 45 33,327 2021 $’000 51,320 9,786 (298) (6,599) – 2,019 (3,667) 52,561 (i) Included in prior year share of profits is adjustment to associate revenues by $1.3 million, offset by ($0.6) million impairment of goodwill held by Soprano. 109 Notes to the Consolidated Financial Statements (Continued) 5.4 Investments Accounted for Using the Equity Method (Continued) (A) Impairment test of investment in Nova 93.7FM A comprehensive impairment review of the Group's investment in Nova 93.7FM was conducted at 31 December 2022 with no change to the recoverable amount. The recoverable amount of Nova 93.7FM was estimated based on a value in use calculation, using management forecasts for a 5 year period. ‑ The cash flow assumptions are based on: • • • revenue forecasts, which consider internal information and relevant external industry data and analysis which include market growth across the cash flow period. The revenue forecast assumes the Australian Radio market will return to historical 2019 within the forecast period and recent Nova 93.7FM market share will moderate to historical averages over the forecast period. expense forecasts, which are prepared on a detailed basis based on their nature. Variable costs are forecasted to move in line with revenue movements. Personnel costs are forecasted to move in line with headcount based on investment required to maintain market share and adjusted for expected inflation. Other costs are forecasted based on management expectations, considering existing contractual arrangements. terminal value cash flows are extrapolated at rates not exceeding the long-term average growth rate for the industry in which Nova 93.7FM operates. (B) Discount rate and long-term growth rate The discount rate (per annum) used reflect specific risks relating to the investment and the country in which it operates. Nova 93.7FM Dec 2022 Post-tax discount rate 10.25% Dec 2022 Pre-tax discount rate 14.5% Dec 2022 Long-term growth rate Dec 2021 Post-tax discount rate Dec 2021 Pre-tax discount rate Dec 2021 Long-term growth rate 1.5% 9.0% 12.4% 1.5% (C) Estimation uncertainty and key assumptions At 31 December 2022, the carrying value of the Group’s investment in Nova 93.7FM equalled its value in use calculation. The impairment calculation is therefore sensitive to changes in certain key assumptions, with any negative change giving rise to an impairment charge. The below illustrates how a reasonable possible change in estimate and assumptions can impact headroom. The headroom for the Group’s investment in Nova 93.7FM would change by the following based on changes made in isolation to the key assumptions below: • 1.0% increase in the post-tax discount rate • • 1.0% reduction in the long-term growth rate Impact of 10.0% terminal EBITDA shortfall The carrying value of the Group’s investment in Nova 93.7FM equalled its value in use calculation. The following reasonably possible changes in a key assumption would result in a recoverable amount lower than the carrying value to the extent shown below: Discount rate change Long-term growth rate change Terminal EBITDA shortfall From 10.25% 1.5% – To 11.25% 0.5% (10.0%) Change to carrying value $'000 (3,048) (2,167) (2,100) 110 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 5.4 Investments Accounted for Using the Equity Method (Continued) (C) Estimation uncertainty and key assumptions (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. 111 Notes to the Consolidated Financial Statements (Continued) 5.5 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 2022 $’000 2021 $’000 384 290 649,203 1,044,108 4,130 522,376 126,827 41,792 830,002 214,106 1,547,690 1,475,706 Share-based payments reserve 7,994 8,697 Retained earnings Closing profit reserve Closing loss reserve Total equity Loss for the year Total comprehensive loss 736 12,868 (1,429,593) (1,283,165) 126,827 214,106 (130,912) (214,579) (130,912) (214,579) (B) Guarantees entered into by the parent entity Refer to note 6.3 for details. (C) Contingent liabilities and contractual commitments of the parent entity The parent entity did not have any as at 31 December 2022 (2021 $4.0 million) and did not have any contractual commitments as at 31 December 2022 (2021: nil). 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. 112 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 5.6 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 5.1. Set out below is the consolidated income statement and summary of movements in consolidated retained earnings for the year ended 31 December 2022 for the Closed Group: Revenue Other revenue and income 2022 $’000 284,730 14,023 2021 $’000 165,072 26,563 Expenses from operations before impairment, finance costs, depreciation and amortisation (236,447) (138,286) Impairment of Group company investments (1,919) (5,157) Impairment of intangibles Finance costs Depreciation and amortisation Share of profits of associate and joint ventures (Loss)/Profit before income tax Income tax benefit/(expense) (Loss)/Profit attributable to owners of the parent entity Accumulated losses Balance at beginning of the year (Loss)/Profit attributable to owners of the parent entity Dividends paid to shareholders Transfers between reserves Balance at end of the year (251,798) (4,918) (12,820) 9,691 (199,458) 19,776 (179,682) – (11,743) (5,742) 9,786 40,493 (23,138) 17,355 (1,088,951) (1,118,494) (179,682) (27,648) 142 17,355 (9,675) 21,863 (1,296,139) (1,088,951) 113 Notes to the Consolidated Financial Statements (Continued) 5.6 Deed of Cross Guarantee (Continued) Set out below is the consolidated balance sheet as at 31 December 2022 for the Closed Group: Current assets Cash and cash equivalents Receivables Other current assets Asset held for sale 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 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 Bank Loans 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 2022 $’000 2021 $’000 16,941 172,585 3,337 23,788 252,704 157,883 650 – 216,651 411,237 157,889 185,202 57,115 46,649 25,952 52,561 15,026 15,375 360,747 296,019 209 648,561 865,212 321 564,504 975,741 165,615 177,568 909 4,487 4,125 13,730 188,866 84,394 23,660 7,829 129,238 245,121 433,987 431,225 773 2,463 20,463 6,178 207,445 67,294 18,526 3,747 111,401 200,968 408,413 567,328 1,547,690 1,475,706 179,674 180,573 (1,296,139) (1,088,951) 431,225 431,225 567,328 567,328 114 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 6. Other 6.1 Business Combinations On 4 January 2022, the Company completed the acquisition from Grant Broadcasters of ARN Regional, comprising 46 regional radio stations and digital operations. The purchase consideration was made up of cash of $239.1 million (net of cash acquired) and equity of $74.4 million (fair value using closing share price on completion date). As part of the acquisition, the Company also acquired Bluwin Pty Limited, which is a joint venture between Australian Radio Network Pty Limited and WIN Corporation. The company has consolidated its interest in Bluwin Pty Limited and has recorded a non-controlling interest, which has been measured based on proportionate share of net assets. The remaining entities acquired are wholly owned subsidiaries. Goodwill recognised through the acquisition incorporates potential synergies to the Group through increased audience reach and scale for national advertisers. This goodwill will not be tax deductible. Acquisition costs of $5.3 million are included in the income statement (31 December 2021: $2.0 million). The acquired business contributed revenue of $111.5 million and net profit after tax attributable to the parent of $25.2 million to the Group for the period to 31 December 2022. The determined fair values of the identifiable assets and liabilities acquired are detailed overleaf. Purchase consideration: Cash paid Ordinary shares issued Total purchase consideration The assets and liabilities recognised as a result of the acquisition: Cash and cash equivalents Receivables Other assets Right-of-use assets Property, plant and equipment Goodwill Radio licences Brands Customer relationships Lease liabilities Payables Contract liabilities Provisions Deferred tax liability Current tax liabilities Value of net identifiable assets Non-controlling interest Value of net identifiable asset and non-controlling interest Net outflow of cash ‒ investing activities 2022 $’000 249,044 74,385 323,429 9,937 16,467 519 13,605 33,013 156,770 125,555 31,295 16,622 (11,126) (6,512) (210) (11,146) (50,623) (774) 323,392 37 323,429 (239,106) 115 Notes to the Consolidated Financial Statements (Continued) 6.1 Business Combinations (Continued) ACCOUNTING POLICY The acquisition method of accounting is used to account for all business combinations. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred, and the equity interests issued by the Group. Acquisition costs are expensed as incurred. The identifiable assets acquired and liabilities assumed are measured initially at their fair values at the acquisition date. Non controlling interests in an acquiree are recognised either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. This decision is made on an acquisition-by-acquisition basis. ‑ The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the Group’s share of the net identifiable assets acquired is recorded as an indefinite life intangible asset. KEY JUDGEMENTS AND ESTIMATES Management judgement is required to determine the fair value of identifiable assets and liabilities acquired in business combinations. A number of judgements have been made in relation to the identification of fair values attributable to separately identifiable assets and liabilities acquired, including radio licences, customer relationships and brands. The determination of fair values require the use of valuation techniques based on assumptions including future cash flows, revenue growth, margins, customer attrition rates and weighted-average cost of capital. 6.2 Disposals 4KQ Sale On 1 July 2022, HT&E completed the sale of its 4KQ Brisbane radio station and license to a subsidiary of Sports Entertainment Group Limited (ASX: SEG) for consideration of $12.0 million. A $1.9 million impairment was recognised on the radio license on the sale of the asset, as well as $0.4 million loss on disposal of property, plant and equipment and $0.5 million costs associated with the sale. Soprano Sale On 31 December 2022, the Group signed a binding share sale agreement to sell its 25% interest in Soprano Design Limited (Soprano) to Potentia Capital (Potentia), a leading Australian technology focused private equity firm. Under the agreement the Group will receive approximately $66.3 million in cash as consideration for the sale of its entire interest. The sale is conditional upon receiving FIRB approval and is expected to be completed in the first half of 2023. The Group have determined that its interest in Soprano should be held as an asset held for sale at its carrying value of $23.8 million. ACCOUNTING POLICY Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell. An impairment loss is recognised for any initial or subsequent write-down of the asset to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset, but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset is recognised at the date of derecognition. Non-current assets classified as held for sale are presented separately from other assets in the balance sheet. 116 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 6.3 Contingent Liabilities The parent entity and all wholly-owned controlled entities have provided guarantees in respect of banking facilities. As at 31 December 2022, the facilities had been drawn to the extent of $87.9 million (2021: $71.6 million), of which $2.9 million (2021: $3.6 million) of the balance pertains to bank guarantees. As at 31 December 2021 the Group had a contingent liability relating to the acquisition of ARN Regional from Grant Broadcasters for $4.0 million. The Group did not have any other contingent liabilities and unrecognised capital contractual commitments as at 31 December 2022 (2021: $ nil). 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. 6.4 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 services PricewaterhouseCoopers – overseas firm Tax services Compliance Total non-audit services 2022 $ 2021 $ 1,587,120 908,192 84,798 79,671 44,880 16,187 42,448 9,505 1,732,985 1,039,816 440,269 168,780 – 392,802 41,200 – 23,387 21,305 632,436 455,307 117 Notes to the Consolidated Financial Statements (Continued) 6.5 Related Parties (A) Key management personnel compensation Short-term employee benefits Post-employment benefits Other long-term benefits Share-based payments Total 2022 $ 2021 $ 2,799,035 3,330,253 131,211 64,313 821,127 97,722 25,151 716,718 3,815,686 4,169,844 Detailed remuneration disclosures are provided in the Remuneration Report. (B) Transactions with other related parties The aggregate amounts recognised in respect to the following types of transactions and each class of related party involved were as follows: Type of transaction Class of other related party Director fee with associate Key management personnel (i) Director fee with associate Key management personnel (ii) Property rental Key management personnel (iii) 2022 $ – 74,577 782,289 2021 $ 75,000 75,172 – (i) Directors fees received from Soprano Design Pty Limited by HT&E for services performed by Ciaran Davis. (ii) Directors fee received from by Belinda Rowe for services performed in relation to Soprano Design Pty Limited. For the year ending 31 December 2022 Soprano Design Pty Limited directly paid $37,671 (2021: $75,172), whilst the Group paid $36,906. (iii) The Group paid property rental to entities associated with Alison Cameron on commercial arm’s length terms. (C) Payables with other related parties There was $nil payable to related parties as at 31 December 2022 (2021: $nil). (D) Loans to related parties There was $11.0 million in loans owing to related parties as at 31 December 2022 (2021: $11.1 million). This relates to Nova Entertainment (Perth) Pty Ltd. (E) Commitments with other related parties There was $nil commitment to related parties as at 31 December 2022 (2021: $nil). 118 HT&E Annual Report 2022 Notes to the Consolidated Financial Statements (Continued) 6.6 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. 119 Notes to the Consolidated Financial Statements (Continued) 6.6 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. New and amended standards adopted by the group The Group adopted certain accounting standards, amendments, and interpretations, which did not result in changes in accounting policies, amounts recognised or disclosures in the financial statements for the year ending 31 December 2022. Standards and interpretations issued but not yet effective. There are no 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 period and on foreseeable future transactions. Change in accounting policy The Group has previously recognised land and building at fair value, with changes in the fair value being recognised in the asset revaluation reserve. Following the acquisition of ARN Regional on 4 January 2022, the Group reassessed its accounting policy and determined that the historical cost basis of accounting would provide more relevant and reliable information. Consequently, the Group changed its accounting policy to historical cost in the period. Land and buildings will be measured 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 assets 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. The change in policy has been applied retrospectively and comparative information has been restated. This has the following impact on the amounts recognised in the financial statements; Property Plant and Equipment Asset Revaluation Reserve Depreciation and amortisation Opening retained earnings Deferred tax liability 6.7 Subsequent Events Dec 2021 $’000 (2,599) (2,402) (32) 124 (353) Jan 2021 $’000 (2,631) (2,402) – 124 (353) Subsequent to the end of the financial year, the Directors have declared the payment of a fully franked dividend of 5.2 cents per ordinary share. This dividend is paid from parent entity profits since 1 January 2023. This dividend is payable on 23 March 2023. 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. 120 HT&E Annual Report 2022 Directors’ Declaration In the Directors’ opinion: (a) the financial statements and notes set out on pages 63 to 119 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2022 and of its performance for the financial year ended on that date; and (b) 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 (c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identified in note 5.1 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 5.6. Page 63 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 21 February 2023 Independent auditor’s report 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) giving a true and fair view of the Group's financial position as at 31 December 2022 and of its financial performance for the year then ended (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. What we have audited The Group financial report comprises: ● ● ● ● ● ● the consolidated balance sheet as at 31 December 2022 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 significant accounting policies and other explanatory information 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 & 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. 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 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 Liability limited by a scheme approved under Professional Standards Legislation. 122 Our audit approach An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and the industry in which it operates. Materiality ● For the purpose of our audit we used overall Group materiality of $2,800,000, which represents approximately 5% of the Group's statutory profit before tax adjusted to exclude the impairment of intangible assets. ● 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 because, in our view, it is the benchmark against which the performance of the Group is most commonly measured. We adjusted to exclude the impairment of the intangible asset to reflect the underlying performance of the group. ● We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds. Audit Scope ● Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events. ● 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 as to 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. 123 - 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 auditor”) of Nova Entertainment (Perth) Pty Limited operating under our instructions, we determined the level of involvement we needed to have in the audit work at this location to be satisfied that sufficient audit evidence had been obtained. We communicated regularly with the component audit team during the year through face-to-face meetings, phone calls, and written instructions where appropriate Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context. We communicated the key audit matters to the Audit and Risk Committee. Key audit matter How our audit addressed the key audit matter Impairment of intangible assets (Refer to note 2.1) We performed the following procedures, amongst others: The Group continues to hold significant indefinite lived intangible assets in the Australia Radio Network (ARN) cash generating unit (CGU) totalling $420.2 million. As required by Australian Accounting Standards, at 31 December 2022 the Group performed an impairment assessment over the indefinite lived intangible asset balances by calculating the recoverable amount for the ARN CGU, using a discounted cash flow model (the model) prepared on a value in use basis. As a result the Group recognised an impairment charge of $249.9 million to goodwill and intangible assets. The carrying value of goodwill and other indefinite lived intangible assets relating to the ARN CGU and related impairment charge was determined to be a key audit matter due to: ● ● the magnitude of the goodwill and indefinite lived intangible asset balance and the impairment charge recorded during the year the degree of judgement required by the Group in estimating the key assumptions in the valuation models, including forecast performance, growth rates and discount rates. ● ● ● ● ● assessed whether the division of the Group’s assets into cash generating units (CGUs), which are the smallest identifiable groups of assets that can generate largely independent cash inflows, was consistent with our knowledge of the Group’s operations and internal Group reporting considered the market capitalisation of the Group in comparison to the carrying value of its net assets and adjusted equity value with the assistance of our valuation specialists considered whether the model used to estimate the recoverable amount of the assets was consistent with the requirements of the Australian Accounting Standards tested the mathematical accuracy, on a sample basis, of the model’s calculations assessed the appropriateness of the key assumptions within the model compared to observable market information where available, historical results, industry forecasts, and considered management’s ability to carry out courses of action 124 Key audit matter How our audit addressed the key audit matter ● ● ● ● ● compared the forecast cash flows used in the model to the Board of directors’ approved budget evaluated the Group’s historical ability to forecast future cash flows by comparing budgets with reported actual results assessed if the discount rate assumption was appropriate by comparing it to market data, comparable companies and industry research, with the assistance of our valuation specialists assessed the sensitivity of changes in key assumptions incorporated in the model evaluated the reasonableness of the disclosures made in note 2.1, including those regarding the key assumptions and sensitivities to changes in such assumptions, in light of the requirements of Australian Accounting Standards. Business combinations - ARN Regional (Refer to note 6.1) The Group acquired ARN regional comprising 46 regional radio stations and digital operations from Grant Broadcasters for total consideration of $323.4 million, as described in note 6.1. The purchase consideration was in the form of the Group’s shares of $74.4 million and cash of $249 million. The acquired radio licences were valued at $125.6 million and goodwill of $156.8 million was recognised on acquisition. The accounting for the acquisition was a key audit matter due to: ● ● it being a significant transaction for the year given the financial and operational impacts on the Group. the complexity and judgments required by the Group in determining the fair value of assets and liabilities recognised on the opening balance sheet, in particular the Radio licences, Customer relationships and Brand. Assisted by PwC valuation experts, our procedures included the following, amongst others: ● evaluating the Group’s accounting against the requirements of Australian Accounting Standards, through reviewing key transaction agreements, using our understanding of the business acquired and its industry, and inspecting minutes of the Board of directors’ meetings, agreeing the cash consideration paid and shares issued to supporting documentation including bank statements, share issuance documents and the key transaction agreements, assessing the fair values of the acquired assets and liabilities recognised, including: ● ● o o o considering the valuation methodology in the models in light of the requirements of Australian Accounting Standards considering key assumptions used in the models that estimated fair value in light of historical performance and available market data assessing the competence and capability of management’s expert 125 Key audit matter How our audit addressed the key audit matter ● considering the adequacy of the business combination disclosures 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 2022, 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. 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: 126 https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.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 46 to 61 of the directors’ report for the year ended 31 December 2022. In our opinion, the remuneration report of HT&E Limited for the year ended 31 December 2022 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 21 February 2023 127 Shareholder Information (Continued) 1. Shares (A) Substantial shareholders The following information is extracted from substantial shareholder notices received by the Company as at 23 January 2023: Name Allan Gray (Orbis) News Limited (claims News + Citigroup position) Spheria Asset Management Pty Ltd Perpetual Limited Carol Australia Holdings Pty Ltd Grant Broadcasters Pty Ltd (B) Top 20 holders of fully paid ordinary shares The following information is extracted from the share register as at 16 February 2023: Name CITICORP NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED NEWS PTY LIMITED GRANT BROADCASTERS PTY LTD J P MORGAN NOMINEES AUSTRALIA PTY LIMITED NATIONAL NOMINEES LIMITED BNP PARIBAS NOMS PTY LTD FIRST SAMUEL LTD ACN 086243567 BNP PARIBAS NOMINEES PTY LTD CITICORP NOMINEES PTY LIMITED PACIFIC CUSTODIANS PTY LIMITED BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD UBS NOMINEES PTY LTD PACIFIC CUSTODIANS PTY LIMITED BISHOP FAMILY COMPANY PTY LTD SLING SUPER PTY LTD BNP PARIBAS NOMINEES PTY LTD GPDCM SUPERANNUATION PTY LTD AUSTRALIAN EXECUTOR TRUSTEES LIMITED MR HENRY YOMAN & MRS VIRLINA YOMAN Total Number of shares 62,165,031 40,803,132 27,432,356 41,182,418 15,741,965 35,934,891 % of total shares 24.68 24.03 13.20 11.63 7.92 4.58 2.87 1.18 0.91 0.87 0.66 0.42 0.35 0.26 0.23 0.14 0.12 0.10 0.09 0.08 Number of shares 76,285,488 74,279,330 40,803,132 35,934,891 24,468,012 14,160,883 8,863,211 3,654,641 2,814,561 2,687,300 2,049,494 1,312,356 1,095,231 788,896 710,000 420,000 375,262 303,785 268,348 248,062 291,522,883 94.32 1 Pacific Custodians Pty Limited is the registered legal holder for shares held in trust belonging to Directors as part of the treasury incentive plan. As noted in the Directors’ interests, Ciaran Davis holds 1,329,403, of which 1,257,530 is held in Pacific Custodians Pty Limited HT1 Plans ctrl a/c. 128 HT&E Annual Report 2022 Shareholder Information (Continued) (C) Analysis of individual ordinary shareholdings as at 16 February 2023: 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 3,862 979 278 328 36 % of total shareholders 70.44 17.86 5.07 5.98 0.66 5,483 100.00 Number of shares 976,925 2,356,420 2,104,461 9,718,882 293,923,914 309,080,602 % of total shares 0.32 0.76 0.68 3.14 95.10 100 There were 2,936 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. Unquoted Securities There were 904,851 performance rights on issue at 31 December 2022 (2021: 966,727) 3. Directors’ Interests The relevant interest of each Director in the securities of the parent entity as at 13 February 2023 was: Director H McLennan R Amos P Connolly C Davis (ii) B Rowe A Cameron (i) Number of shares 73,000 16,250 65,935 1,329,403 – 35,934,891 Number of options – – – – – – (i) 35,934,891 Ordinary Shares held by Grant Broadcasters Pty Ltd. Alison Cameron holds, directly and indirectly, less than 0.005% of the issued capital in Grant Broadcasters. Janet Cameron, Alison’s mother, holds 99.9% of the issued capital in Grant Broadcasters. (ii) Pacific Custodians Pty Limited is the registered legal holder for shares held in trust belonging to Directors as part of the treasury incentive plan. As noted in the Directors’ interests, Ciaran Davis holds 1,329,403, of which 1,257,530 is held in Pacific Custodians Pty Limited HT1 Plans ctrl a/c. 129 Shareholder Information (Continued) 4. Other Information Stock exchange listing HT&E shares are listed on the ASX (code HT1). Enquiries 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 2022. 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. 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 2021 Annual Report 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. Corporate Directory HT&E LIMITED ABN 95 008 637 643 Directors Hamish McLennan (Chairman) Ciaran Davis (CEO & Managing Director) Roger Amos Alison Cameron 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: +61 1300 553 550 Fax: +61 2 9287 0303 Email: registrars@linkmarketservices.com.au Website: www.linkmarketservices.com.au Auditors PricewaterhouseCoopers One International Towers Sydney Watermans Quay BARANGAROO NSW 2000 Principal bankers Commonwealth Bank of Australia HSBC National Australia Bank Westpac Banking Corporation Annual General Meeting Notice is given that the Annual General Meeting (AGM) of HT&E Limited will be held on Wednesday 17 May 2023 commencing at 9:00am. Prior to the AGM, the Company will publish a virtual meeting guide on the ASX and the Company’s website at https://investorcentre.htande.com.au outlining how Shareholders will be able to participate via the internet.

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