Nine Entertainment Co Holdings Ltd Annual Report 2021

Plain-text annual report

Annual Report 2021 i Nine Annual Report 2021AUSTRALIA’S WEALTHIEST PEOPLE FOOD & DRINKS ISSUE JUNE 5, 2021 TREVOR LEE AND KERI CR AIG-LEE No. 102 | $1.17 billion At home in Ascot, Brisbane Inside 52 TOP WINERIES BY HUON HOOKE Chris Lucas, Vicki Wild and Martin Benn at Collins Street’s Society “We went to the cliﬀ face many times and looked over the edge” From an audacious plan for a restaurant that would rewrite the rules of contemporary dining to the pandemic that nearly derailed it – one trio’s travails towards opening night BY Paul Best THE BOOZE-FREE BEVERAGE BOOM plus FARMING’S TECH-LED CHANGE Nine Annual Report 2021FOOD & DRINKS ISSUE JUNE 5, 2021 Inside 52 TOP WINERIES BY HUON HOOKE Chris Lucas, Vicki Wild and Martin Benn at Collins Street’s Society “We went to the cliﬀ face many times and looked over the edge” From an audacious plan for a restaurant that would rewrite the rules of contemporary dining to the pandemic that nearly derailed it – one trio’s travails towards opening night BY Paul Best THE BOOZE-FREE BEVERAGE BOOM plus FARMING’S TECH-LED CHANGE Australia’s Media Company As the home of some of Australia’s most trusted and loved brands, spanning news, business and finance, lifestyle, entertainment and sports, Nine prides itself on creating and curating quality content, accessed by consumers, when and how they want. Overview Operational Highlights 2021 Chairman’s address CEO’s address Broadcast Stan Publishing Domain Corporate Responsibility Nine Cares Board of Directors Corporate Governance Statement Financial Report Directors’ Report Auditor’s Independence Declaration Remuneration Report – Audited Operating and Financial Review Financial Statements Directors’ Declaration Independent Auditor’s Report Shareholder Information Corporate Directory 2 4 6 8 10 16 18 22 24 27 30 32 42 44 50 51 75 81 144 145 150 153 1 Nine Annual Report 2021Overview In FY21, notwithstanding a difficult first quarter, Nine recorded a 43% increase in EBITDA, with growth across all key television and publishing businesses. Content is the key to Nine, and across the Group’s television platforms, publishing and radio, Nine recorded strong audience performance, underpinning growth in both advertising and subscription revenues. Nine remains focused on accelerating the move to a more digital base. In FY21, Stan, 9Now, digital Publishing and Domain (59%), contributed 39% of Group Revenue and 44% of EBITDA, with growth of 19% and 41% respectively. The year marked two significant inflexion points for Nine – the scale and growth in 9Now expected to result in a Television Combined business which is in long term, top-line growth. Secondly, digital accounted for 56% of Publishing revenue, and with digital subscription revenue growing by 20% to more than $100 million, this growth outpaced the circulation declines associated with print. Result in brief For the year to June 2021, on revenue of $2.3 billion (+8%), Nine reported Group EBITDA of $565 million, with growth in each core business underpinning this 43% improvement on FY20. EBIT of $416 million, equated to 67% growth. Net Profit after Tax and Minorities was $261 million, which was up 83% on FY20. After Specific Items of $94 million, the majority of which were non-cash, a Statutory Profit of $184 million was reported. Earnings per share of 15.3c, was 83% up on FY20, and fully franked dividends of 10.5c per share were declared across the year, and have subsequently been paid. $2,332m Revenue 10.5c Dividend per Share $565m Group EBITDA Strong growth in EBITDA across all businesses, $m +76% +48% +27% +28% +19% +27% Broadcast (ex 9Now) 9Now Stan Publishing Domain Corporate FY20 FY21 300 250 200 150 100 50 0 -50 2 Nine Annual Report 2021Lego Masters was the #1 light entertainment series of 2021, with an average cross-platform audience of almost 1.7m viewers per episode Operating cash flow for the year, before Specific Items, Interest and Tax was $443 million, calculated on a wholly owned basis, which equated to cash conversion of 96%. During the year, $119 million was paid in dividends to shareholders and capital expenditure totalled $76 million, of which $25 million related to the new premises in North Sydney. Net Debt on a wholly owned basis at 30 June 2021 was $171 million, compared with $291 million, 12 months earlier. On the same basis, Nine’s leverage at the end of June 2021 was 0.4x EBITDA, down from 0.9x 12 months earlier. 30 June 2021 30 June 2020 variance 171.1 0.4x 291.1 0.9x -120.0 -0.5x Revenue split1 – FY21 8% 22% $2,332m 51% Broadcast 9Now Stan Publishing Domain 14% 5% 1. Reflects split based on economic share of revenue, excluding corporate. FY21 FY20 Variance 2,331.5 2,155.3 564.7 394.8 415.6 261.0 184.0 15.3 10.5 249.1 142.4 (507.8) 8.3 7.0 +8% +43% +67% +83% NM +83% +50% 3 Reported, as at Net Debt, wholly owned, $m Net Leverage Yr to June, $m Revenue Group EBITDA EBIT NPAT, after Minorities, before Specific Items Statutory Net Profit, including Specific Items Earnings per Share – cents Dividend per Share – cents NM Not meaningful. Nine Annual Report 2021Operational Highlights 2021 TELEVISION COMBINED TOTAL MARKET NINE’S REVENUE $2.9b, +14% $1.2b, +12% THINK TV, 12 MONTHS TO JUNE 40.1% SHARE Leading audience share Highest FTA margin FOR >10 YEARS BOTH NINE AND 9NOW FTA – Free To Air STAN 9NOW 46% REVENUE GROWTH 9% ~2.4m OF TOTAL TV COMBINED REVENUE ACTIVE SUBSCRIBERS (AS AT AUGUST 2021) 7% growth IN AVERAGE REVENUE PER USER (JUNE QTR 2021/JUNE QTR 2020) 13% GROWTH IN DAILY ACTIVE USERS 39% GROWTH IN LIVE STREAMS 29% GROWTH IN STAN REVENUES • Successful launch of Stan Sport • Major output deal completed with Comcast NBC Universal (incl. Peacock and Sky Originals) • Increased commitment to Stan Originals 4 Nine Annual Report 2021PUBLISHING RADIO 20% GROWTH IN DIGITAL SUBSCRIPTION REVENUE TO >$100M 56% 11% +3pt OF TOTAL REVENUE NOW DIGITAL AUDIENCE GROWTH ACROSS FY21 GROWTH IN AGENCY SHARE $18m COSTS DOWN OVER 2 YEARS • Growth in digital subscription revenues outpacing decline in print THE SECRET I CAN NEVER TELL / GO GLAM AT HOME / THE NEW WINTER SKIRT Alexa Chung HOW A GEEK WITH CHIC BECAME FASHION’S IT GIRL June 6, 2021 S P E C I A L I N S I D E 18 19 JUNE 2021 • Completion of content licensing deals with Google and Facebook DOMAIN 11% 31% INCREASE IN CONTROLLABLE YIELD GROWTH IN DIGITAL EBITDA • 9M-plus Record unique digital audience • Continued rollout of Marketplaces strategy The Big Read THE UPGRADING BOOM Neighbourhoods VAUCLUSE Coast & Country TREE-CHANGE DELIGHTS Strong Group cash flows & low leverage Memories of home Annandale’s Italian-style villa 5 Nine Annual Report 2021Chairman’s address Last year, I warned about the market power of the global digital platforms and the way they were using our creative content without fair recompense for the cost involved in producing it. I am very pleased to now report that, during the year, we were able to negotiate landmark content deals with Facebook and Google that will secure payment to the Company for use of our original content. This would not have been possible without the Government’s News Media and Digital Platforms Mandatory Bargaining Code. This was enacted with bi-partisan political support for which we are grateful. The reaction by Facebook at first, to close its usual services to Australia, was disproportionate and counter- productive. However, when negotiations resumed, although they were tough, they did, we believe, lead to an outcome of mutual interest and in the national interest. We are pleased with the outcome. These agreements are essential to properly recompense the cost of employing creators to produce the work which will ensure the long-term vibrancy of our Publishing business as we continue to produce quality and challenging journalism. In March, Nine was subject of a significant cyber-attack which, as a result, took down our corporate and broadcast systems. Sadly, these attacks are becoming very common and are a key risk for all businesses these days. The Nine team did a remarkable job at identifying the threat early, limiting the damage, and assessing and remediating it. At the Board and Company level, we had identified the threat of a cyber-attack as a major risk and proactively planned our response well before this event. This helped and enabled us to keep the cost to our business to a minimum. To most of our audiences, it was business as usual throughout, with our content effectively airing uninterrupted, while the disruption to our advertisers was remarkably minimal. We have significantly upgraded our defensive systems as a result. Of course, we know hostile actors are continually upgrading their offensive systems as well. Nine has made cyber security a key priority. After more than 5 years in the role, in November, Hugh Marks announced his intention to stand down as Company CEO. Under Hugh’s leadership the Company was transformed. I would like to thank Hugh for his dedication to Nine, and acknowledge the significant success it enjoyed under his management. The Board established an exhaustive selection process, interviewing candidates both here and overseas, internal and external, which in March, concluded in the appointment of Mike Sneesby as Nine’s Chief Executive Officer. Mike had established and overseen the growth of our premium streaming service, Stan, and he commenced as CEO in April 2021. It is a testament to all of our team, that the Company didn’t miss a beat through this process, and the transition to Mike has been seamless. Mike’s digital background and experience in new forms of media will be extremely valuable as we take the Company through its next phase of development. In FY21, Nine staged a remarkable recovery. The outcome, which is a tribute to the efforts of our employees, customers, and management, produced a good result for our shareholders. The year began in the turbulence of COVID, which heavily reduced revenue in our advertising businesses across television, radio, and publishing. In the wake of a sudden and significant downturn across these businesses, Nine kept its head and kept its focus. We continued to work to our long-term objectives, to move the Company further into its digital future. As the recovery took hold, our traditional advertising revenues came back and complemented our digital initiatives, giving us strong profitability overall and growth in new businesses. We are now in a better position than we were at the start of the pandemic. The advertising market, which had turned down so sharply in March 2020, rebounded through October, November and December and we now believe it will settle at, if not above, the trajectory it had pre-COVID. Our core advertising business generates the strong revenue that supports new investment. The revenues are not merely a reflection of the underlying economy, they also reflect the relative strength of the Nine assets. Across the year, Nine’s television business, through both the Network and 9Now, talk-radio stations and metro mastheads, attracted the leading audiences in their respective markets. As a result, Nine reported strong profit growth for FY21 with Group EBITDA up 43% and Net Profit After Tax up 83% on FY20. All television and publishing businesses reported growth and we are immensely proud of their results. We further tilted our business towards the future, with digital earnings growing by 41% and now accounting for 44% of Group EBITDA, and subscription contributing 19% of revenues. In respect of the financial year, Nine announced dividends of 10.5 cents per share, up 50% on last year and consistent with our stated policy of a 60-80% payout. We are excited about our business. We have growing assets in streaming, which will be a big part of media’s future, and key investments in marketplaces, another area of growth opportunity for us, especially when coupled with our unique, wholly-owned suite of media assets. Our competitive position continues to improve, driven by our premium content, and underpinned by our proprietary platforms. 6 Nine Annual Report 2021Our competitive position continues to improve, driven by our premium content, and underpinned by our proprietary platforms The demands on the Board were heavy this year and I thank my fellow Directors for their commitment and focus. In April, Patrick Allaway resigned from the Board to devote more time to his other commitments, and I thank him for his service to Nine and previously to Fairfax. In April, we appointed Andrew Lancaster to the Board. Andrew’s experience in television, including regional television, and his understanding of sales is a valuable addition to your Board. We have a broad diversity of skills and experience across the Directors on the Board, which has been a great support to the management team throughout this testing period. We are in an exciting stage for the business. Sometimes, all of our businesses swing up at the same time, and the last year was a good one in that respect. But outside each operating business, we believe we can still harness improvement from the overall Group – through maximisation of advertising yields, utilisation of our vast data pool and optimisation of our operating structure. Our longer-term digital targets remain, and we are well on our way to achieving them. Our business is at the forefront of digital disruption and we are determined to adapt to, and benefit from, it. Thank you PETER COSTELLO, AC Chairman 7 Nine Annual Report 2021CEO’s address Through Nine’s leading content brands and unrivalled platforms, we are best-placed to reach audiences, deliver for advertisers and commercialise our content. Australians are watching more television than ever before. Through Nine’s leading content brands and unrivalled platforms, we are best-placed to reach audiences, deliver for advertisers and commercialise our content. Our combination of established and profitable assets gives Nine Australia’s only scale platform across Free to Air and Subscription television. In Nine and 9Now, the acceleration of live streaming and our focus on content gives us an opportunity to expand our core audiences, as well as our Television Combined revenues, now expected to be in longer term growth. Through the continued expansion of 9Now to an increasing footprint of internet- enabled devices and further development of our product, supported by the consumer tech cycle, we are well placed to take an increasing share of the overall digital video market, which we estimate is currently more than $2.3 billion. For Stan, we will ensure our long-term success through content. Whilst international studio content has been instrumental in Stan’s success to date, we will continue to focus on expanding our ownership and control of content – doubling the volume of Stan Originals in FY22, combined with continued growth in live streaming and Stan Sport. I am equally excited about the opportunities for our Publishing business. The further growth in reader revenue, and more particularly digital subscription and licensing revenue, is key. And this will be achieved by focusing on the content that resonates most strongly with our current and potential subscriber base – as well as ensuring an optimal consumer experience through continued enhancement and features available in our apps. Coupled with the licensing revenues from the digital platforms, Nine Publishing has significant critical mass, with broad opportunities to grow and reach an even greater audience. As someone who has spent the majority of their media career in and around Nine, it’s an honour to be given the opportunity to lead this fantastic company. Over the past few years, Nine has successfully evolved from a Free To Air broadcaster, to a diversified Media Company, with a unique suite of well-positioned and complementary assets across Broadcast, Publishing, Streaming and Marketplaces. In a local media landscape that is increasingly occupied by global platforms, Nine’s role has never been more important – we are the source of truth, information, entertainment, comfort, excitement, hope – from the hearts and minds of Australia’s best journalists and content creators – we are Australia’s Media Company. Across our mastheads at The Sydney Morning Herald, The Age and The Australian Financial Review to Nine News and our current affairs programs, to local reality, scripted comedy, drama and sport – content is what Nine does best. And in 2021, the strength of Nine’s business continues to reflect our understanding of our audiences and their requirements. Strong growth in audience share across our linear platforms of FTA television and radio and similarly strong growth in audience metrics across our streaming and publishing businesses underpins our positive revenue trajectory. Since the merger with Fairfax, we have focused on re-aligning our cost base particularly across our traditional businesses which is reflected in our increased profitability, with almost 6 pts of growth in Group EBITDA margins in FY21 to c24%. Cost efficiencies will always be in the DNA of our business, but we are also focused on longer term growth. We have the key foundations for this – Streaming, whether it is subscription or advertising based, Digital Publishing and Market-places are all growth sectors where Nine is well positioned to build further on our strong market positions. The pandemic has had a material impact on consumer behaviour, shifting more and more activity on-line, and within the home. We expect that these trends will have a lasting impact beyond the current period, having effectively accelerated the change in the way people consume content. These changes enable Nine to expedite the transition of our businesses into digital businesses, while managing costs to establish strong margin profiles and investing in opportunities to accelerate the digital shift. 8 Nine Annual Report 2021We are committed to our investments in Domain and Drive, and will continue to find new ways to support and grow value through their Marketplace expansions. We have recently bought out the minorities in Drive to give us the ability to realise that potential, while we also continue to support Domain’s growth strategy. 2021 has again shown us how resilient our people are, and how they rise to the challenges that are thrown at them. In late March, Nine was impacted by a cyber-attack that resulted in the virtual shut-down of our company-wide IT systems for a period of time. I remain in awe of our people, and how they responded. Without exception, all of our employees stepped up, to contribute where they could, supporting others around them. Our technology team worked around the clock to identify and isolate the issue, and subsequently, in time, return our operating systems to their full strength. To the outside world, the business barely missed a beat, with our television content available as expected, and our major mastheads delivered every day throughout. I am immensely proud of the team at Nine – their commitment, their attitude and their resolve is without compare. In closing, I want to acknowledge my predecessor Hugh Marks, for tirelessly leading Nine over the past five years, for constantly encouraging the team to push boundaries and for supporting and challenging me personally. Nine evolved enormously under Hugh’s watch but there remains much to do. From here, the business has a real opportunity to further grow its position and importance as Australia’s Media Company. Thank you MIKE SNEESBY CEO 9 Nine Annual Report 2021Broadcast Nine’s Broadcast division, which comprises Television Combined (Nine Network + 9Now) as well as Nine Radio, reported EBITDA of $333 million (+69%) on revenues of $1.2 billion (+10%) for the year. TV Combined – Nine Network + 9Now Nine Network and 9Now are the primary distribution platforms for Nine’s free television content, with Nine Network the traditional broadcast delivery platform, and 9Now Nine’s internet-delivered television and catch-up service. Nine continues to produce the premium content consumers want to watch, in News, Sports and Entertainment across both platforms, offering convenience and choice for both consumers and advertisers. In FY21, the Combined television market grew by 14% to $2.9 billion, with Nine attracting a market leading share, resulting in revenue growth of 12%. The cyclical recovery of the advertising market, the underlying growth in streaming and further overall cost reductions resulted in EBITDA growth of 73% for Nine’s Television Combined business. Nine’s TV Combined business has also reached a key inflexion point in FY21, with 9Now at a scale and on a trajectory such that Nine now expects to maintain positive growth across the TV Combined revenue stream through the cycle. EBITDA1 contribution – FY21 Broadcast results, $m 1,400 1,200 1,000 800 600 400 200 0 $333m 46% Broadcast 9Now Stan Publishing Domain 13% 1. Reflects split based on economic share of revenue, excluding corporate. 10 Married at First Sight – Australia’s #1 reality show of the year with an average cross-platform audience of more than 2.1m viewers 350 300 250 200 150 100 50 0 FY20 FY21 ● TV Revenue (LHS) ● 9Now Revenue (LHS) ● Radio Revenue (LHS) ― EBITDA (RHS) Nine Annual Report 2021Free To Air Television Nine continued to lead the Free To Air market in both ratings and revenue share across FY21. The power of Free To Air television (FTA) as an advertising medium, was in evidence in late 2020 as FTA clearly led the post- COVID advertising recovery. From September, brand advertisers particularly turned to television, as the primary medium to communicate with mass audiences. The Metro FTA market grew by 12% across the year, notwithstanding a 14% decline in the September quarter. Segments such as retail, household goods and motor vehicles led the recovery, which proved quicker and steeper than earlier expectations. Nine recorded Television revenue growth of 10% across the year, with a market-leading share of Metro revenues for the year of 39.4%. In FY21, Nine recorded a 2% decline in its FTA cost base, or $20 million, notwithstanding the impact of the strong market on revenue-related costs. Nine benefitted from a one-off reduction to both spectrum charges and tennis rights costs, both of which will return in FY22. The result was also impacted by the costs associated with the return of the normal NRL schedule in the second half offset by some broad savings across local and international content. This reflected Nine’s long-term focus on the efficiency of its cost base, with programming decisions made on a Group profitability, rather than short-term ratings, basis. EBITDA from Nine’s FTA business grew to $251 million in FY21, up by 82% against the COVID-lows of FY20 and was also comfortably above FY19 levels. The finale of The Block was the No. 1 entertainment program of 2020 with an average national audience of almost 2.4m viewers 11 Nine Annual Report 2021 Broadcast Ash Barty in action at The Australian Open 2021. Photo: Eddie Jim, The Age FY21 was a strong ratings year for Nine. For the year to June, Nine was the #1 Free To Air Network in all of the key demographics. #1 Free To Air Ratings #1 #1 #1 Total People 37.9% commercial share 25-54s 16-39s 37.3% commercial share 35.3% commercial share #1 GB + CH 38.5% commercial share OzTAM data, 12 months to end of June 2021, 6am – midnight. Nine’s free television business is built around News, Sports and Entertainment – premium content that is primarily viewed live and is the core of the television business. News is central to Nine, across both Broadcast and Publishing. Only the Australian media commits the energy and resources to cover the breaking news in Australia, for all Australians. During 2021, COVID and the impact on Australians’ lives was front of mind to all, and Nine’s news teams were there to report, analyse and educate. Nine’s team also includes correspondents around the world offering relevant coverage of global news stories. Across the year, Nine broadcast more than 60 hours of television news and current affairs each and every week. Nine’s 6pm news service attracted a National Free To Air audience of almost 1.2 million people each night, with the weeknightly A Current Affair (ACA) averaging audiences of close to a million people, each night. After 42 years, Nine’s 60 Minutes continues to dominate its Sunday night slot with average audiences of almost 900,000 nationally. The re-vamped Today Show recorded growth across all key demographics and now leads in the coveted 25-54s, 16-39s and Grocery Buyers with Children. 12 During the year, Nine News also participated in seven major joint investigations between 60 Minutes, The Age and The Sydney Morning Herald which highlighted the strength of Nine’s journalism, and the power of the cross-platform approach. The continuation of Nine’s Crown Unmasked series, and the ongoing investigation into war crimes were two that gripped the Australian public and led to further investigations by the relevant authorities. Sport remains a core part of Nine’s programming strategy. In the COVID-interrupted FY21 year, Nine broadcast 1,100 hours of premium sport across the year, in addition to around 500 hours of other sports-related content. Nine Annual Report 2021David Campbell and Belinda Russell from Today Extra – 9am each weekday – offering a fresh, light-hearted look at social issues, fashion and entertainment Once again, Nine’s teams demonstrated high agility and flexibility as the sporting calendar was amended and re-amended across the year. Season 2020 for the NRL, was interrupted, shortened and delayed but Nine’s broadcasts continued to attract an average audience of around 1.6 million of league supporters each week, a fertile audience for advertisers chasing a tight demographic. Nine’s 2021 Summer of Tennis encountered similar disruptions, with the Australian Open (AO) pushed back by two weeks, and played both with and without live spectators. Notwithstanding, tennis on Nine reached a national audience of 12.4 million people. Tennis also attracted a significant digital audience. The majority of the 242 million AO live minutes were streamed via simulcast (Nine, GEM, Go!), with around a quarter viewed via one of the 16 additional, exclusive 9Now channels. Simulcast broadcast was up around 10% year-on-year, with growth across all key demographics. Together with Stan, Nine added coverage of two other Grand Slams during the year, Roland-Garros and Wimbledon. In 2021, Rugby Union was added to the schedule, in co-operation with Stan, exploiting Nine’s unique combination of Free To Air and subscription television. Nine Network broadcast one Super Rugby game each week, as well as the domestic Wallabies games, with the remaining games available on Stan. The delayed start to the tennis in 2021 pushed back the start of Nine’s entertainment schedule. Nonetheless, Nine once again dominated the March quarter in terms of ratings and revenue share, as Nine’s dating juggernaut, Married At First Sight, delivered an average national audience of almost 2 million viewers per episode, across linear and streaming platforms. The season finale was the most watched show of the year with more than 1.8 million tuning in on linear TV and another 91,000 live streaming. Notwithstanding the COVID interruption that resulted in ‘Tools Down’ for five weeks mid-filming, Season 16 of The Block, in late 2020, attracted average cross-platform audiences of 1.4 million per episode. The Block’s unique format, coupled with Australians’ obsession with their homes, continued to resonate with audiences and advertisers alike, with the integration of around 30 advertising partners within the show, more than half of whom have been with the show for more than 3 seasons. Lego Masters also had an excellent return season 2021. The smash-hit program dominated its timeslot in all the key demographics, including Total People across every broadcast of the 11 episode series, recording an average cross-platform audience of 1.5 million per episode. Nine took the decision in 2021 to refresh some elements of its schedule with Celebrity Apprentice premiering in May with an audience of more than 800,000 and Beauty and the Geek following later in 2021. Content decisions will continue to be focused on Nine’s targeted 25-54 demographics, as well as content that works on both linear (Nine) and streaming (9Now) distribution. Nine will continue to invest in the three key pillars of News, Sports and Entertainment with a focus on Australian content that is viewed live. Nine’s strong and consistent schedule of premium entertainment content across the full calendar year creates an unrivalled proposition for advertisers with consistent and proven product and clear demographic strengths. The all-new, reimagined Celebrity Apprentice Australia was a hit for Nine, launching in May and achieving a national average cross-platform audience of around 1.1m viewers per episode 13 Nine Annual Report 2021Broadcast Broadcast Video On Demand – 9Now 9Now, Nine’s advertiser supported live streaming and catch-up service, continued to grow and evolve in 2021. Notwithstanding Nine’s interrupted programming schedule throughout the year, 9Now recorded strong growth in all metrics – audiences, engagement, revenue and profitability. In FY21, 9Now reported revenue growth of 46%, and a 48% increase in EBITDA to $73 million. The opportunity for 9Now in Australia is broader than the Broadcast Video On Demand (BVOD) market, which in FY21 totalled $252 million. BVOD is a narrow sub-set of the digital video market, which is currently estimated at c$2.3 billion, and is dominated by YouTube. 9Now’s natural competitive advantages over the global video platforms are clear – the brand-safe environment, unskippable ads and a third-party auditable measuring system will be keys to the future growth of 9Now. 9Now’s success has been primarily driven by the broad performance of Nine’s schedule. In particular, the popularity of Married At First Sight, Lego Masters, Travel Guides and The Block helped to underpin a 22% increase in total minutes streamed for the year. And that was without 9Now’s favourite Love Island, which was paused during COVID but has returned in the second half of calendar 2021. 9Now recorded particularly strong growth in live streaming across the year. Interestingly, growth in live streams of more than 39% has out-paced catch-up, and now accounts for around 30% of total streams. Game 1 of the State of Origin was a key example of the growth and opportunity of live streaming with 56% growth in live streams over 2020, and more than 300% over 2019, resulting in live streaming now accounting for almost 10% of the national audience. Through the expansion of 9Now to the full suite of internet- enabled devices and further development of product, Nine is well placed to take an increasing share of the overall digital video market. 14 11 million registered users Digital Video advertising market estimated at $2.3b, of which BVOD accounts for c10% 9Now results, $m 120 100 80 60 40 20 0 FY20 FY21 ● Revenue (LHS) ― EBITDA (RHS) 80 70 60 50 40 30 20 10 0 Nine Annual Report 2021Nine Radio Nine Radio operates Australia’s leading Talk Radio Network through 3AW (Melbourne), 2GB (Sydney), 4BC (Brisbane) and 6PR (Perth) – with 3AW and 2GB being the clear #1 rating stations in their respective markets. Nine also operates music stations in the same markets, through the heritage brands of Magic 1278, 2UE, 4BH and 6GT. In FY21, Nine’s audience performance was strong with overall Talk Network audience growth of 11%, and particularly strong growth in the 25-54s (+14%)1. Nine’s share of agency revenues performed well across the year with growth of 3 percentage points, however, this was offset by a reduction in direct share. Reflecting the COVID-related absence of ratings data, and advertising demand that lagged the broader market, Metro radio market revenues declined by 3%2 across the year, albeit with the market beginning to improve through the June quarter. Nine Radio recorded a 4% decline in advertising revenue, broadly in line with the market. Costs for the year were down by 11%, or more than $10 million, reflecting benefits of a full year of consolidation, including the impact of on-air talent changes. For the year, Radio EBITDA dropped marginally to $8 million, with momentum clearly returning in the second half. Survey results were strong across the year, with 2GB and 3AW retaining number one status in Sydney and Melbourne for the key Breakfast and Morning slots. Programming changes to live and local in Brisbane and Perth are also yielding positive results. Reflecting on these changes, the continued strength of the Nine Group agency sales relationship and augmented by some incremental investment in our local sales team, Nine is confident of improved radio returns as ad market conditions continue to improve. From an industry perspective, the move to digital has been more gradual for Radio than other medias, however, with around 15% of audience already streaming Nine Radio, Nine is well-placed to build and execute their digital audio strategy from FY22 onwards. Nine’s audience grew by 11% in FY21 across its core Talk Network (All People, 10+, 2GB, 3AW, 4BC, 6PR) 1. All People, 10+ , All Talk stations (2GB, 3AW, 4BC, 6PR). 2. Commercial Radio Australia data, 12 months to June 2021, 4-city. 15 Nine Annual Report 2021Stan In FY21, Stan reported EBITDA of $40 million (+27%) on revenues of $312 million (+29%) for the year. Stan is Nine’s Subscription Video On Demand (SVOD) platform. With more than 6 million unique subscribers added in the 6 years since launch, and a current active subscriber base of 2.4 million, Stan is the lead local player in what continues to be a rapidly expanding market. In FY21, Stan’s growth was underpinned by growth in both active subscribers and ARPU (average revenue per user), ending the year with a revenue run-rate in excess of $340 million. This resulted in profit of around $40 million. Australians continue to consume more video content across more platforms than ever before. Through Nine’s Total Television approach, the traditional Nine Network is complemented by streaming services, 9Now (advertiser-supported) and Stan (subscription). Stan has positioned itself as a key aggregator of premium exclusive and library content from studios and production houses from around the world, as well as a growing creator of key local franchises. In FY21, Stan sourced more than 80 first-run exclusive shows, the key ones that drive subscriber uptake, from 19 different distributors from around the world, as well as an increasing number of Stan Originals – six in FY21, all of which have been sold or distributed into overseas markets. During the year, Stan announced a major output deal with Comcast NBCUniversal, including Peacock and Sky Originals, and also renewed the Starz/Lionsgate output deal. EBITDA1 contribution – FY21 Stan results, $m $40m 7% Broadcast 9Now Stan Publishing Domain 350 300 250 200 150 100 50 0 1. Reflects split based on economic share of revenue, excluding corporate. FY20 FY21 ● Revenue (LHS) ― EBITDA (RHS) 16 45 40 35 30 25 20 15 10 5 0 Nine Annual Report 2021Stan Original, Bump, was released in January and remains the most successful launch of any title to premier on Stan The early signs are promising. Within four months, Stan Sport passed the milestone of 250,000 subscribers, many of whom had never subscribed to Stan before, subscribers who are proving stickier and more engaged than Entertainment- only subscribers. Just as Stan Sport is expected to drive incremental revenue, Nine’s increased commitment to Stan Originals will also help to differentiate Australia’s leading streaming service from its international competitors. During the year, Stan announced its intention to lift its commitment to Stan Originals from the current run-rate of 5-6 each year, to around 30% of premium first run titles within four years. These originals are often co-productions with major international studios – for example, The Tourist which has been filmed in South Australia during the year, A Stan Original co-production with BBC ONE and HBO Max. Broadly, Stan Originals have been well-received by audiences, with the January release of Bump, proving to be Stan’s most successful first-run exclusive launch in its history. Video On Demand, and specifically Subscription Video On Demand, continues to be a key growth sector for media, globally. Many of the major US production houses have announced plans to extend internationally, and some of these are likely to launch in Australia. Stan, however, has a clear advantage – it has an established brand and profitable subscriber base, an extensive database of subscribers and viewing preferences and patterns, as well as a focus on local content, both entertainment and sports. The overall market is expected to evolve markedly over the next few years, and Stan will be a strong participant in that evolution and longer- term growth. 17 In February, Stan lead the SVOD market into live streaming, with the launch of Stan Sport – making Stan Australia’s largest subscription streaming platform to deliver live content. For an incremental $10 per month, Stan subscribers can also subscribe to Stan Sport – the launch of Stan Sport effectively enabled by the positioning and scale of Stan’s Entertainment business. It puts Nine in a unique position in the Australian television market, as the only business that can deliver the full depth of coverage through subscription on Stan Sport, combined with broad exposure across Free To Air, maximising both reach and revenue. During FY21, Stan secured long-term rights for Rugby Union (including rights to all Wallabies and Wallaroos test matches, the premier domestic and trans-Tasman competitions, international matches featuring New Zealand, South Africa and Argentina, and the New Zealand and South African domestic competitions); Grand Slam tennis and the UEFA (Union of European Football Associations) club competitions, including the Champions League. Nine Annual Report 2021Publishing Nine’s Publishing division includes Metro Media (The Sydney Morning Herald, The Age and The Australian Financial Review) and Nine’s other Digital Publishing titles including Pedestrian, Drive and nine.com.au. Together, Publishing reported revenue of $505 million and 28% growth in EBITDA to $117 million. Publishing is driven by a combination of circulation, subscription and licensing revenues, and advertising. The dynamics of the business have changed markedly over the past 5 years, from a business which was almost entirely reliant on advertising, to one where subscription and licensing revenues contribute a growing share of the total. Moreover, in FY21, Nine’s Publishing business generated around 56% of its revenues from Digital sources, comfortably exceeding the contribution from Print. Nine Publishing reported a revenue decline of 3% which, coupled with a 9% decrease in costs, resulted in EBITDA growth of 28% to $117 million. There was growth at every key digital line, most particularly subscription which grew by 20% to more than $100 million, while print continues to be affected by the fall-out from the COVID-19 pandemic, and the resulting impact on work and travel patterns. Schoolies from Ballina Coast High School celebrate finishing their school year in Byron Bay, NSW on November, 2020 Photo: Elise Derwin, The Sydney Morning Herald Good Food is the most trusted food brand in Australia. Now in its 42nd year, The Good Food Guide is Australia’s home to the coveted chef’s hat awards. Despite the interruption of lockdowns, the Good Food team has covered and supported the food and restaurant industry through its print and digital content including a new magazine called 101 Good Things 18 Nine Annual Report 2021The Good Food Guide returns this year. PAGE 4MAY 25, 2021THE HAT IS BACK!W I N T E R R E A D I N G S P E C I A L W I N T E R R E A D I N G S P E C I A L June 27, 2021 June 27, 2021 Alice Pung Alice Pung “WRITING WAS MY WAY OF VENTING” “WRITING WAS MY WAY OF VENTING” ART QUANDAMOOKA STAR RISING TRAVEL TORRES STRAIT AND ARNHEM LAND WINE CUSTODIANS OF COUNTRY ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● HILARY MANTEL ON FAME AND HILARY MANTEL THE FUTURE ON FAME AND LISA TADDEO THE FUTURE ON STYLE LISA TADDEO WHY READING ON STYLE IS GOOD FOR WHY READING YOUR HEALTH IS GOOD FOR OUR MUST-READ YOUR HEALTH BOOKS LIST OUR MUST-READ BOOKS LIST Life & LeısureAFR 2-4 July 2021 The Australian Financial Review | www.afr.com Publishing has reached a similar inflexion point to Television Combined, with digital subscription growth in FY21 outpacing the print decline. The very different cost structure of digital also means that the profitability of each incremental digital subscriber dollar is markedly higher than a print dollar. In the year to June, Nine’s portfolio of metro mastheads reached a total de-duplicated audience of 12.4 million1 people across print and digital platforms, with The Sydney Morning Herald the nation’s leading masthead and The Age a clear leader in the Victorian market. As the broader advertising market began to recover through the year, Publishing generally lagged. Notwithstanding the conclusion of Nine’s sales agreement with Google in February, digital advertising revenues grew by 9% while the print advertising decline of 10% was impacted by Nine’s reliance on travel as a key category. 1. Source: Asteroid Roy Morgan, People 14+, 12 months ending June 2021. CELEBRATING NAIDOC WEEK IT’S ONLY NATURAL THE NEXT WAVE OF AUSTRALIAN SWIMWEAR DESIGNERS Liandra Swim two-piece, modelled by Shakira Cooper. PHOTO: LEICOLHN MCKELLAR Nurse takes a swab test at the Summer Hill COVID-19 clinic on Saturday, June 27 Photo: Cole Bennetts, The Sydney Morning Herald EBITDA1 contribution – FY21 Publishing results, $m 21% $117m Broadcast 9Now Stan Publishing Domain 600 AFRGA1 L001 500 400 300 200 100 0 1. Reflects split based on economic share of revenue, excluding corporate. FY20 FY21 ● Revenue (LHS) ― EBITDA (RHS) 140 120 100 80 60 40 20 0 19 Nine Annual Report 2021Publishing Locals cleaning up floating debris in their backyard, Thompson square, Windsor. Hawkesbury River flooding, March 2021 Photo: Louise Kennerley, The Sydney Morning Herald The Australian Ballet returns after a COVID-affected year Photo: Jason South, The Age Publishing’s strong history on costs continued in FY21, with total costs declining by a further 9%. Printing and distribution accounted for the major component of cost reductions, the bulk of which related to renegotiated arrangements. 190 years of The Sydney Morning Herald The Sydney Morning Herald celebrated its 190th anniversary in April, making it one of the oldest continuously printed metropolitan newspapers in the world. The first edition rolled off the presses on April 18, 1831 when King William IV was ruling the British Empire and 70 years before Federation. Re-named The Sydney Morning Herald shortly after John Fairfax bought the publication in 1841, the Herald has become an indelible part of Sydney’s DNA over the course of nearly two centuries. Whilst the business model may have changed, with more than 60% of revenues now sourced directly from its readers, the one thing that has stayed consistent over 190 years of delivering news has been the Herald’s unwavering dedication to journalism – in pursuit of the truth and what is right. With countless investigations that have resulted in Royal Commissions, inquiries, ICAC cases 20 1HERSA1 K001 Black Lives Matter protesters pause near Sydney Town Hall, watched by the media Photo: James Brickwood, The Sydney Morning Herald Nine Annual Report 2021A swimmer jumps into the shallow waters at Clovelly Beach as temperatures push 30 degrees in Sydney, September, 2020 Photo: Brook Mitchell, The Sydney Morning Herald Tech savvy | Solving skills gap with data mindset | Christelle Young, L’Oreal Accounting p34 www.afr.com | Wednesday 7 July 2021 $4 INCLUDES GST FINANCIAL REVIEW RBA tapers off slowly (cid:31) Cash rate likely to remain at 0.1pc until 2024 (cid:31) QE bond buying cut from $5b to $4b a week Lockdown extended in Sydney ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Ronald Mizen Economics correspondent The Reserve Bank of Australia has taken a ﬁrst baby step towards unwind- ing its extraordinary $237 billion mon- etary stimulus, but signalled it will lag other central banks in lifting interest rates and that a move remains unlikely before 2024. Governor Philip Lowe said the RBA was largely unconcerned by the eco- nomic effects of recent COVID-19 lockdowns across the country because once restrictions eased the rebound was expected to be quick. The RBA kept the cash rate at a record low 0.1 per cent at its board meeting yesterday, but announced a move to a ‘‘ﬂexible’’, scaled-back bond- buying program to reﬂect the growing strength of the economic recovery. At the end of the current six-month, $100 billion bond buy-up, the RBA will transition to more ﬂexible quantitative easing of $4 billion a week, down from $5 billion, which will be reviewed in November. Dr Lowe said the bank was respond- ing to the stronger-than-expected eco- nomic recovery and improved outlook but emphasised the lower rate did not ‘‘represent a withdrawal of support’’ and the bank would keep buying bonds until there was material progress towards its inﬂation target. ‘‘Because the inﬂation and wage out- comes have been lower than other places, we’re going to keep stimulus going longer than other countries,’’ he said. The market expectation was for a shift to ﬂexible bond purchases, which the bank had previously ﬂagged, but the smaller size came as a surprise. ‘‘The ﬁrst review is somewhat earlier than we expected. If the data remain robust, as we expect, then the market Behind the curve Despite the economy roaring back, the RBA feels it is at a much weaker starting point on wages and inﬂation. John Kehoe p4 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● The RBA will follow the US Federal Reserve and other central banks in winding back bond purchases before thinking about hiking interest rates. Karen Maley p26 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● (cid:31) Jennifer Hewett An uncertain balance p2 (cid:31) News More reports on RBA p4-p5 (cid:31) Markets plus David Bassanese p24, p25 (cid:31) AFR View Exit extreme settings p38 (cid:31) Stephen Grenville Blame the Fed p39 (cid:31) Chanticleer Money printing quest p40 will factor in another tapering at that point,’’ ANZ head of Australian eco- nomics David Plank said. ‘‘All up a little more hawkish than we expected, but there is still a lot of bond purchases to come (most likely around $100 billion give or take) and a rate hike is still a long way off.’’ Markets took a hawkish interpreta- tion of the announcement, pricing the cash rate at 0.53 per cent by June 2023, up from 0.44 per cent, and 0.78 per cent in December 2023, up from 0.72 per cent. Those moves followed a shift after May’s strong jobless rate when the market brought forward expectations for the ﬁrst rate hike to late next year. In a rare press conference after the Continued p4 ‘We will continue buying bonds, until there is further material progress towards our goals for employment and inﬂation. Philip Lowe, RBA Governor Philip Lowe after the Sydney board meeting yesterday. PHOTO: JAMES BRICKWOOD Lew increases stake, rips into ‘disastrous’ Myer ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Sue Mitchell Billionaire retailer Solomon Lew has launched a new attack on Myer, calling on the entire board to resign after con- ﬁrming he spent $16.4 million this week increasing his stake in the embattled department store group to at least 15.8 per cent. Mr Lew, the chairman of Premier Investments, said he would work with other shareholders to reconstitute the Myer board, appointing directors who had expertise in retail, property, logist- ics and e-commerce to help Myer reverse its decline. ‘‘We remain bitterly by disappointed Myer’s performance which continues to be disastrous for Myer’s many shareholders, employees, suppliers and customers,’’ Mr Lew said yesterday. Solomon Lew He conﬁrmed that Premier Invest- ments, his listed investment company, had bought 41.1 million shares on Mon- day for $16.4 million, or 40¢ a share, increasing its stake to 15.77 per cent. Premier is also believed to have bought another 19 million shares yes- terday for $7.6 million, which would increase its stake to 18 per cent, close to the 19.9 per cent takeover threshold. Myer shares soared 15 per cent to 42.5¢, the highest level since February 2020, amid speculation the Financial Review Rich Lister would make another tilt for board representation or launch a takeover offer. Mr Lew has been seeking as many as three seats on the board since buying an initial 10.8 per cent stake in Myer in 2017 at $1.15 a share. His previous ‘‘dream team’’ consisted of former Myer Grace Bros managing director Terry McCartney and former UBS banker Tim Antonie – both of whom are Premier Investments non- executive directors – as well as Stephen Sewell, the former CEO of shopping centre owner Federation Centres. Last year, Mr Lew forced Myer chair- man Garry Hounsell to fall on his Continued p16 Finbar O’Mallon Sydney’s lockdown will be extended for another week beyond Friday as NSW Premier Gladys Berejiklian signals a tougher approach to restrictions, warning life will not return to the way it was pre-lockdown due to the infectious nature of the delta variant. NSW has been a stand-alone in its approach to controlling the virus, res- isting snap lockdowns and other restrictions. But Ms Berejiklian warned: ‘‘When we do come out of the lockdown it won’t be what life looked like necessar- ily before we went into lockdown.’’ She blamed the highly infectious nature of the delta variant for a change in government thinking. ‘‘[It] is likely to be the dominant strain of the virus until we have further information, and we also appreciate that we need to vaccinate more of our population before we can live as freely as we would like,’’ she said. Ms Berejiklian promised Sydney- siders they would get ‘‘certainty’’ on the future of the lockdown in an announce- ment this morning, remarking that she wanted to make the current lockdown the last before the population was sufﬁ- ciently vaccinated. It’s understood the government’s cri- sis cabinet decided to extend the lockdown until midnight on Friday, July 16, as the outbreak hit 330 cases yesterday. Restrictions will remain the same in greater Sydney and regional NSW. Students will return to classrooms across regional NSW. Remote learning will be in place for greater Sydney but parents can still take their kids to school if they are essential workers. The state government is also likely to detail Sydney’s exit plan out of Continued p6 High gas prices prompt calls for cut in exports Manufacturers are sounding the alarm as east coast gas prices surge to levels not seen since 2016, thanks to cold win- ter weather and gas having to be diver- ted to generate electricity after the breakdown of coal-ﬁred generators. The spike in domestic gas to as much as $10 a gigajoule above export prices has triggered renewed calls from industrial gas users for the federal government to step in and redirect exported gas from Queensland to force prices lower. (cid:31) News p3, Price gap a deals trigger p12 (cid:31) Fortescue vindicated on hydrogen p14 (cid:31) Carnarvon: it’s green diesel not oil p14 and police/AFP charges, the Herald has ensured its thorough and exclusive journalism is key to growing subscribers and keeping Sydney informed. The Herald is committed to continuing to drive and inform the future of Sydney, the direction of Australia and its place on the world’s stage. AFRGA1 A001 Digital Platforms During 2021, Parliament passed the News Media Bargaining Code, enabling local Australian news publishers to negotiate with the digital platforms, to ensure they receive fair remuneration for their content. Nine prides itself on the quality of its journalism and depth of its coverage but in a world where distribution is proliferating, Nine needs to be able to monetise its content across all available platforms. Subsequently, Nine reached long-term agreements with both Google and Facebook, resulting in material annual payments to Nine from the platforms for access to Nine’s content, beginning in FY22. These agreements are crucial in enabling the long term vibrancy of our publishing business, as Nine continues to produce quality and challenging journalism. Digital contributes more than 55% of Publishing revenue Print Digital Digital ● Subscription and licensing ● Advertising ● Other Print ● Subscription ● Retail ● Advertising 21 Nine Annual Report 2021Domain One of Australia’s leading property technology and services businesses 22 Nine Annual Report 2021EBITDA1 contribution – FY21 Domain results, $m 11% $101m Broadcast 9Now Stan Publishing Domain 350 300 250 200 150 100 50 0 120 100 80 60 40 20 0 1. Reflects split based on economic share of revenue, excluding corporate. FY20 FY21 ● Core Digital Revenue (LHS) ● Consumer Solutions Revenue (LHS) ● Print Revenue (LHS) ● Corporate Revenue (LHS) ― EBITDA (RHS) In FY21, Domain reported EBITDA of $101 million (+21%) on revenues of $290 million (+11%) for the year. Nine holds a 59% stake in separately ASX-listed Domain Group, one of Australia’s leading property technology and services businesses. Through the year, Domain continued the evolution of its business, through its unique Marketplaces model, as with Nine, this evolution being expedited by changing consumer requirements and preferences. This in turn acts to maximise Domain’s leverage to the property market recovery, whilst continuing to build out long term growth opportunities. Domain continues to focus on delivering a superior value proposition for vendors and agents, utilising its evolving data and analytics as well as a market-specific approach. The success of this strategy is reflected in growth of 23% in unique digital audience to 9.6 million1, across print and digital, as well as 25% growth in listing views2 and 55% growth in enquiries2. In FY21, Domain’s operating performance benefitted from the strong recovery in property listing volumes through the second half of the year. In Domain’s core residential business, which accounts for 68% of revenues, Domain reported revenue growth of 21%, a function of national listings market growth of 11%, coupled with an 11% increase in controllable yield. This strong yield performance was driven primarily by growth in depth listings, as consumers and agents recognise the increasing value of the Domain product - offering agents and consumers support across every stage of their property journey, as well as the benefits of Domain’s innovative, variable pricing model. The stronger second half property market also benefitted Domain’s Media, Developers and Commercial operations, which recorded 7% growth in revenues, to 16% of Domain’s revenues. Media, which delivers digital display solutions for advertisers, was the strongest performer with the strength of Domain’s audiences and content, coupled with a strengthening advertising market, driving growth in ad revenues. 1. emmaCMV conducted by IPSOS Australia, People 14+, P14+ Digital Panel, 12 mths to March 2021 on pcp. 2. Domain (plus Allhomes) internal FY21 on pcp. During the year, Domain continued to focus on providing agents with enhanced tools and solutions for their businesses. Revenue from Agent and Property Data Solutions increased by 8% in FY21 as Domain continues to invest in products to differentiate and enrich both the agent and consumer experience. Pricefinder and Australian Property Monitors deliver data, insights and reporting tools, while Real Time Agent provides enhanced digital tools for the property transaction process, increasingly important through this period of lockdowns and social distancing. Homepass provides a registration tool for Open For Inspections, while MarketNow provides flexible payment options for vendor marketing campaigns. Domain‘s fledgling Consumer Solutions business recorded revenues of $6 million with products like Domain Home Loans and Domain Insure, furthering the Domain’s ambition to offer all solutions in the property journey through the Marketplaces model. Domain’s print revenues declined by 33% to $18 million, through a period which reflected just 68% of Domain’s usual publication schedule. As the market recovered through the second half, so too did Domain’s print revenues. Print continues to deliver strategic value to Domain, from both an agent and consumer perspective. Total costs increased by 6%, reflecting a continuation of Domain’s multi-year strategy to drive cost discipline, partially offset by investment in growth initiatives. During the year, Domain maintained its momentum delivering innovative solutions, as COVID continued to accelerate the digital take-up and evolution of both agents and consumers. As a result, Domain is well-positioned to continue to maximise its leverage to the recovery in the property market, whilst building on longer-term growth opportunities. 23 Nine Annual Report 2021Corporate Responsibility CORPORATE RESPONSIBILITY People Community Governance Environment Nine’s Corporate Responsibility strategy is based on the four key pillars illustrated above – People, Community, Governance and Environment. Corporate Responsibility is an ongoing focus and Nine will continue to evolve and improve its practices over time. People People and Culture FY21 was a year where we saw the passion, creativity and ambition of our people shine through and drive our outstanding results. Despite the challenges presented through COVID, we came out of the pandemic strong and capitalised on the changes we made to create an environment for our people to thrive, drive high performance and be recognised and rewarded for success. Our People and Culture strategy remained anchored in our organisational strategy to Create, Distribute and Engage, whilst evolving to meet the dynamic nature of the industry and business requirements: • Create competitive advantage through attracting, retaining and developing the best talent in the industry; • Distribute efficiencies across our business through strong, enabling infrastructure to drive high performance, building strong collaboration and leveraging our scale; • Engage our people through evolving our workspaces, creating an environment that allows for efficiency, productivity and flexibility, while allowing our employees to bring their whole self to work. Investing in our People At Nine, we recognise that our people are our source of competitive advantage. It is their energy, passion, creativity and ambition that drives our content, our reach and our results. We track and measure the engagement of our people through our annual NineConnect survey, with a goal of meeting benchmarks in Australia, but also globally in the media industry. Proactively seeking feedback from our people allows us to be fully informed and not make assumptions on what people are thinking and feeling about Nine. This information informs the People and Culture strategy and initiatives. For example, feedback from previous surveys have led to company-wide initiatives such as: • ‘Take the Lead‘ leadership program • Increased internal communications (Inside Nine, Nine @ Nine, Employee Business Updates) • Ability to work flexibly, anywhere, anytime on any device (including rolling out new devices) Over 70% of our employees participated in our survey in October – an outstanding result considering many of our employees were working remotely at that time. This survey also provided our first opportunity to get a whole of business baseline, with the inclusion of Nine Radio. Our overall engagement increased from the last survey and is now hitting global media industry benchmarks. Pleasingly, our strongest results came in company confidence, teamwork and ownership and pride in working for Nine. Over the year, as COVID restrictions began to lift, we conducted a ‘Return to Workplace’ survey to gauge people’s level of comfort to return to the workplace. Additionally, this gave us insights about our people’s views on working remotely and flexibly as a more permanent arrangement. This insight provided the foundation for updates to ‘The Way we Work at Nine’, a toolkit for employees and managers to support the changes we have embraced, such as remote working, whilst balancing the needs of the individual, team and the overall business. We have encouraged our people to discuss with their leaders how they will work ongoing, whilst recognising the importance of shared workplaces to create, collaborate and connect. Investing in our Leaders Following the successful pilot of our face-to-face Leadership Program, Take the Lead, we recognised the need to continue investment in our leaders, albeit in a virtual way. Adjusting the content to be modularised, and particularly relevant to the needs of our leaders managing through uncertain times, we created Take the Lead Bite Size, two-hour programs that delivered our leaders quality content in a virtual, yet interactive and collaborative way. 50 sessions were held, with over 500 leaders participating in modules covering topics such as Leading in Uncertainty, Providing Quality Feedback and How to Lead @ Nine. Feedback from participants on the approach, including the short modules, was so strong that the modularised approach will continue to be the foundation for development over FY22. 24 Nine Annual Report 2021NEC Board NEC Management NEC Total Employees 43% 7 57% 42% 728 58% 45% 5,100 55% Female Male Female Male Female Male 25 Nine Annual Report 2021Corporate Responsibility Investing in Diversity and Inclusion As Australia’s Media Company, we know the importance of informing and entertaining our diverse audience. Our diverse audiences turn to our different platforms to engage with us in different ways, and our reporting, tone of voice, and stories must speak to all of them in a way that connects. To do this, we acknowledge the need to continuously challenge ourselves on creating an environment where the diversity of our audience is reflected, and our people feel supported to bring their whole selves to work. Recognising the importance of this to our people, our October NineConnect survey asked diversity and inclusion questions for the first time. These optional questions were introduced to provide a baseline set of data to support the creation of a sustainable diversity and inclusion strategy. The Survey asked employees to provide further demographic detail relating to gender, sexual orientation, ancestry, disability and caregiving responsibilities. These questions were completely voluntary and non-identifiable and were positioned to help us to get a more holistic view of the people who make up Nine. Of those who responded to these questions we found 51% of our people with ancestry other than Australian, although 73% were born in Australia. In addition to the demographic questions above, we asked our people a number of questions regarding inclusion, including their sense of belonging to Nine. We were pleased that 73% of our people felt comfortable expressing their true selves. In order to accelerate progress on our strategy, in March we engaged Diversity Partners, one of Australia’s leading diversity and inclusion consulting firms. In partnership with them, we conducted workshops, interviews and review of policies and processes with the outcome a three year diversity and inclusion strategy, to commence in FY22. Nine was also included in the 2021 Bloomberg Gender-Equality Index (‘BGEI’), a voluntary disclosure of gender-related metrics providing a comprehensive review of investment in workplace gender equality. Nine was one of 380 companies globally, and one of ten in Australia, to be included in the index. The reference index measures gender equality against five areas: female leadership and talent pipeline, equal pay and gender pay parity, inclusive culture, sexual harassment policies and pro-women brand. Against these new activities, we also continued to build on our existing initiatives, including iterating our Women Leading @ Nine program to partner with Future Women. Seven outstanding leaders commenced the Platinum + program in March 2021, and we anticipate growing our partnership with Future Women further in 2022. Our partnership with KidsCo to provide onsite vacation care grew stronger, particularly following the relocation of our Sydney based employees into 1 Denison St. We also built on our paid parental leave, harmonising our policy across the business and providing 16 weeks paid primary parental leave. Investing in Health, Safety and Wellbeing Moving from the peak of the COVID pandemic, the ongoing management of health protocols, mental health and wellbeing, and balancing COVID outbreaks with returning people to the 26 workplace was a focus of FY21. The Nine Work Health and Safety (‘WHS’) strategy was endorsed by the People and Remuneration Committee in July 2020 with three main areas of focus over the coming few years. Firstly, in the strategic pillar of Governance our WHS Framework will be reviewed and re- written to be reflective of the needs and demands for WHS thinking and practices in a multi-faceted media organisation. Building on this foundation, the second strategic focus is on WHS leadership and culture and an opportunity to educate our people leaders on the core elements of WHS and how it forms part of decision making and risk management. Within our third pillar, Health and Wellbeing, there have been significant achievements made, namely the creation of our wellbeing strategy ‘Thrive at Nine’. We have streamlined our Employee Assistance Program offerings across Nine and appointed Converge International as our preferred Group-wide provider. To enable our leaders, a four-hour education session was piloted to give our leaders the understanding of mental health in our community, our people and how to support them in the workplace. This program will continue rolling out across the next few years. In addition, we continued our support of Mental Health First Aid and trained an additional 25 people this year based in NSW. Safety Stats Total injury numbers Lost time injury Lost time injury frequency rate Total recordable injury frequency rate Hazards Identified FY21 FY20 30 15 2.09 4.19 55 29 15 1.84 3.56 74 EAP (Employee Assistance program) usage 5.9% 4.7% The Fairfax Foundation The Fairfax Foundation, established in 1959 with an independent charter, provides assistance to current and former employees and their dependants through a range of grants and other benefits. Grants can assist individuals who are in financial hardship, facing significant out-of-pocket medical costs, or seeking support for education costs or personal development activities. The Foundation provided almost $800,000 in financial grants and other benefits to eligible beneficiaries during the 2021 financial year. This included a special program of small grants for staff in Melbourne who were impacted by the extended lockdown, and emergency grants for staff in NSW affected by floods and in WA affected by bushfires. Nine Annual Report 2021Nine is committed to delivering support to charities and communities in need. Community As Australia’s largest locally-owned media company, Nine is committed to its Nine Cares program, delivering support to charities and communities in need. Nine has leveraged its unique suite of assets including media, marketing, telethons, talent, publicity and employees to deliver coverage and scale across the country and bring some of Australia’s largest issues and most deserving charities to the forefront. Over the last 12 months, Nine Cares has provided more than $75 million in value for our partner charities, which include vital causes such as mental health, child bereavement, disability and special needs and domestic violence. Nine talent support local telethons, with Tim Davies (Today Show) and Belinda Russell (Today Extra) Initiatives across the year included: Children’s Hospital Telethons Over the year, Nine ran telethons for the Children’s Hospital Foundation, with one broadcast in Brisbane and two in Sydney. Together, these telethons raised over $17.5 million and brought the awareness of sick children and their families to the forefront. Nine used talent, broadcast airtime, editorial support and production to support this worthwhile cause. Partnership Of Purpose In March 2021, The Australian Financial Review and Smith Family announced a partnership with a focus on providing financial assistance from sponsors to help fund education, and support from dedicated co-ordinators within the community of Smith Family themselves. The goal is to use the scale of the AFR to promote opportunity and prosperity to disadvantaged children, with 1 in 6 living in poverty in Australia. The AFR will work with the Smith Family to provide corporate giving, volunteering and work experience for students. Australian Red Cross – Connecting On Saturday 24 April, Nine broadcast Australian Red Cross Connecting on the 9Network hosted by Today’s Brooke Boney and Alex Cullen. Throughout the special broadcast, remarkable stories of inspiration and hope were told including: • The four siblings who fled a country riddled by conflict and found refuge in Albury, NSW – welcomed on arrival by Red Cross workers helping them settle into their new home. • A 63-year-old woman who lost everything in the bushfires that ravaged Kangaroo Island, South Australia in 2020 and received a life-changing sum of money via Red Cross bushfire grants to start rebuilding. • An Indigenous elder who lives alone and has a rare autoimmune condition that keeps her wheelchair-bound. Each morning she receives a call from a Red Cross volunteer who makes sure she feels connected to her community. The entire project was supported across Nine’s Radio, Print, TV and Digital assets. Mark Hughes Foundation Nine continues to support the Mark Hughes Foundation, through its Beanies for Brain Cancer initiative. With donations (and beanie purchases) from staff and on-air support of the campaign, most notably in the Today Show and NRL broadcasts through Beanies Round, more than $4 million was raised for brain cancer research. 27 Nine Annual Report 2021FY21 Total $75.2m ● Television CSAs ● Radio CSAs ● Publishing ● Digital – nine.com.au ● Telethons/appeals ● Publicity/editorial CSA: community service announcement Corporate Responsibility 3AW Alfred Appeal For the past two decades, 3AW has broadcast live from The Alfred Hospital in the week of the Father’s Day Appeal. The objective was to raise awareness and encourage donations to The Alfred’s Critical Care Appeal. 3AW supported The Alfred Hospital Critical Care Appeal via: • CSA airtime in lead up to the event • Promotional pointers in the week of event • Live/recorded credits hour from 5:30am – 6:00pm (BMAD) • Article page on 3AW.com.au with links to donate • Interview opportunities throughout the day More than $300k worth of support was delivered by 3AW, whilst the appeal raised more than $500k for the Alfred Hospital. Look Good, Feel Better Workshop In September 2020, Nine opened its doors to the brand-new make-up studio at Nine Sydney for the first time to facilitate a Look Good, Feel Better workshop. The aim was to deliver a make-up and styling session for women recovering from cancer treatment. Nine provided the space for the day, and organised limousine transfers for each participant, morning tea and a welcome pack. Willoughby Relocation To Nine Sydney (1 Denison) The relocation to Nine’s new HQ at 1 Denison Street, North Sydney provided an opportunity to gather resources from the Willoughby office, which were no longer required, and distribute them to charities in need. As a result, Nine was able to donate furniture, commercial kitchen equipment and kitchenware, clothes, and technology. Two Good: Nine provided an entire commercial kitchen from the Willoughby bistro. This will be used to provide work for women currently seeking accommodation and support from a women’s refuge. Two Good provides a program for these women to learn how to cook, cater and eventually find long-term employment. Kids Cancer Project: To support their move to their new HQ in Rosebery, Nine donated tables and chairs to help offset substantial set up costs. This will be utilised for staff and guests visiting the centre. Bill Crews Exodus Foundation: Nine provided desks, chairs, monitors and furniture to build an entire training facility for 20 participants. This facility will be used to provide training and professional development in hospitality for disadvantaged people. COVID Campaign In June, Nine, together with key on-air talent, launched its own ad campaign, encouraging Australians to line up for the COVID jab. This campaign has continued to evolve including messages from Public Health and authorities from around the country, encouraging our community to get vaccinated, to protect themselves, their families, community and their work-places. 28 Nine Annual Report 2021Corporate Governance Nine’s Corporate Governance Statement, which starts on page 32, demonstrates the extent to which Nine has complied with the ASX’s Corporate Governance Council Principles and Recommendations and corporate governance best practice. The Charters which Nine has adopted and related corporate governance policies are available on Nine’s website (https://www.nineforbrands.com.au/investors/). Nine’s Metro Publishing business is a member of the Press Council of Australia. The Press Council has issued a Statement of General Principles, a Statement of Privacy Principles, Specific Principles covering matters such as the reporting of suicides, and Advisory Guidelines on matters such as reporting elections, which guide the publication of content by Nine. As a member of the Press Council, Nine must cooperate with the Press Council’s consideration of complaints against it and publish any decisions by the Press Council following a complaint to Nine. Media Ethics and Content Regulation Nine aims to be a good corporate citizen, by maintaining the trust of the communities which we are a part of, through responsible journalism and providing high quality content. As a commercial television licence holder, Nine is bound by the Commercial Television Code of Practice, which prohibits certain types of programs and advertisements, requires classification of program material and broadcasts in suitable time slots, and puts limits on the amount of advertising and other non- programming matter which can be broadcast. It also promotes editorial accuracy, fairness and protection of privacy for individuals in relation to news and current affairs. The Commercial Television Code of Practice requires Nine to ensure advertisers comply with the AANA Advertiser Code of Ethics and the AANA Code of Advertising and Marketing Communications to Children. In respect of its radio business, Nine is bound by the Commercial Radio Code of Practice and the Commercial Radio Guidelines which also promote editorial accuracy and guide reporting on sensitive topics such as mental illness. Further, Nine’s commercial television licences issued under the Broadcasting Services Act are subject to conditions around specific matters such as advertising of tobacco and interactive gambling, obligations to broadcast matters of national interest, and prohibitions on the broadcast of material with certain classifications. There are similar restrictions on Nine’s commercial radio licences. Nine provides regular training for employees on our obligations as a broadcaster and publisher and compliance with other applicable laws, relating to matter such as defamation and contempt of court. Environment With the move to 1 Denison Street, Nine has effectively consolidated 7 active sites to 4 in Sydney (1D, Pyrmont (Radio), Wharf 10 and Stan) which has had a marked impact on the Group’s overall energy efficiency. Pre this move, Nine qualified as a reporting entity under the National Greenhouse and Energy Reporting Act (NGER, 2007) meaning the Group was required to file annual returns with the Clean Energy Regulator (CER). In order to be required to report, businesses have to exceed a number of emission thresholds, relating primarily to greenhouse gas emissions and energy consumption. Since FY19, with site consolidation around the 5 Star Green Star rated 1 Denison Street, Nine’s energy consumption and CO2 gas emissions have both dropped to levels below the thresholds required for reporting, as shown in the chart below. Notwithstanding, Nine remains committed to ensuring this improved performance is maintained across all of its sites. The slight increase in metrics in FY21 reflects a full 12 months of the Macquarie Media acquisition as well as the impact of a general return to the office, post the initial impact of COVID. Nine’s Energy & Emissions Profile – FY19-21 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 NGERs corporate group threshold FY19 FY20 FY21 est ● Electricity (MWh, LHS) ― Total tCO2 emissions (RHS) 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 29 Nine Annual Report 2021Board of Directors Peter Costello, AC Independent Non-Executive Chairman Nick Falloon Independent Non-Executive Deputy Chairman Mike Sneesby Chief Executive Officer and Director Peter Costello was appointed to the Board in February 2013 as an independent, Non-Executive Director and in March 2016 became Chairman of the Board. He is also a member of the Audit & Risk Management Committee. Mr Costello is currently Chairman of the Board of Guardians of Australia’s Future Fund and serves on a number of domestic and international advisory boards. He commenced his career as a solicitor, and then a barrister. Mr Costello was a member of the Australian House of Representatives from 1990 to 2009 and Treasurer of the Commonwealth of Australia from March 1996 to December 2007. From 2009, Mr Costello has worked as a corporate advisor in the field of mergers, acquisitions and foreign investment. He has a Bachelor of Arts and a Bachelor of Laws LLB (Hons) and a Doctorate of Laws (Honoris Causa) from Monash University. In 2011, Mr Costello was appointed a Companion of the Order of Australia. Prior to the merger of Nine and Fairfax, Mr Falloon was Chairman of the Fairfax Board before taking up the role of Deputy Chairman of Nine in December 2018. He is also Chairman of Domain Holdings Australia. Mr Falloon has had 30 years’ experience in the media industry, 19 years working for the Packer-owned media interests from 1982 until 2001. Mr Falloon served as CEO of Publishing and Broadcasting Limited (PBL) from 1998 to 2001 and before that as Chief Executive Officer of PBL Enterprises and Group Financial Director of PBL. The PBL experiences provided a strong background in the television, pay TV, magazine, radio and digital industries. From 2002, Mr Falloon spent nine years as Executive Chairman and CEO of Ten Network Holdings. He holds a Bachelor of Management Studies (BMS) from Waikato University in New Zealand. Mr Sneesby was appointed Chief Executive, and Director of Nine in March 2021. Prior to this, Mike was the CEO of Nine’s Subscription Video On Demand business, Stan, since its inception in 2013. Mike is an experienced media executive with a depth of local and international experience. He was formerly the CEO of the Microsoft/Nine e-commerce joint venture, Cudo, up until its sale in 2013. Prior to that, Mike set up the Invision IPTV service in Dubai as Vice President of IPTV for the Saudi Telecom/Astra Malaysia joint venture lntigral. Before joining lntigral, he headed Corporate Strategy and Business Development at ninemsn ( joint venture between Nine and Microsoft) where he led the Company’s corporate strategy function and established a portfolio of high growth digital media businesses including the start-up of MSN New Zealand and management of the EPG and listings business HWW. Prior to ninemsn, Mike led a company-wide program for Optus rolling out and launching their national ADSL broadband network. Mike spent his earlier career in leadership and consulting positions gaining broad experience in digital media, technology and telecommunications in Australia, Asia and the USA. He holds an Honours Degree in Electrical Engineering from the University of Wollongong and a Masters of Business Administration from the Macquarie Graduate School of Management. 30 Nine Annual Report 2021 Andrew Lancaster Non-Executive Director Sam Lewis Independent Non-Executive Director Mickie Rosen Independent Non-Executive Director Catherine West Independent Non-Executive Director Andrew Lancaster is CEO of the WIN Corporation and Birketu Pty Ltd, Nine Entertainment Co’s largest individual shareholder. After more than 27 years working in the media sector, Andrew has extensive experience in both metropolitan, and regional television and radio. He has a broad knowledge of strategic, structural, operational, financial and resource management as well as a proven history of driving strong revenue growth across all areas of these businesses. He is currently a Director of Free TV Australia, Broadcast Transmission Services and NRL team St. George Illawarra Dragons. Andrew holds a Master of Commerce Human Resource Management and a Bachelor of Economics and Management, both from the University of Wollongong. Samantha Lewis joined the Board in March 2017 as an independent, Non-Executive Director and is Chair of the Audit & Risk Management Committee and a member of the People & Remuneration Committee. Ms Lewis is a Chartered Accountant, with extensive experience in accounting, finance, auditing, risk management, corporate governance, capital markets and due diligence. Ms Lewis has been a Non-Executive Director since 2014, and in addition to Nine Entertainment, serves on the Boards of ASX-listed Orora Ltd and Aurizon Holdings Ltd and is also the Chair of the Audit Committee of the Australian Prudential Regulatory Authority. Prior to becoming a Non- Executive Director, Ms Lewis spent 20 years at Deloitte Touche Tohmatsu including 14 years as a Partner. In that role, she led the audit of a number of major Australian listed companies, in the retail/fast moving consumer goods (FMCG) and industrial sectors. During her time at Deloitte, Ms Lewis also provided accounting advice and transactional advisory services, including due diligence, IPOs and debt/ equity raisings. Mickie Rosen served on the Fairfax Board from March 2017, before moving on to the Nine Board when Nine and Fairfax merged in December 2018. Ms Rosen has three decades of strategy, operating, and advisory experience at the intersection of media, technology, and e-commerce. She has built and led businesses for iconic global brands such as Yahoo, Fox, and Disney, as well as early stage companies such as Hulu and Fandango. Ms Rosen currently serves on public, private, and non- profit boards, including Bank of Queensland, Ascendant Digital Acquisition Company and TechStyle Fashion Group, and she advises early to growth stage companies. Until recently, she served on the board of Pandora Media, and was the President of Tribune Interactive, the digital arm of Tribune Publishing, and concurrently the President of the Los Angeles Times. Ms Rosen also served as a Senior Advisor to the Boston Consulting Group, and was a co-founder and partner of a boutique strategic advisory firm, Whisper Advisors. Prior, Ms Rosen served as Senior Vice President of Global Media & Commerce for Yahoo, where she led Yahoo’s media division worldwide. The foundation of Ms Rosen’s career was built with McKinsey & Company, and she holds an MBA from Harvard Business School. Cath West was appointed to the Board in May 2016 as an independent, Non-Executive Director and is the Chair of the People & Remuneration Committee and a member of the Audit & Risk Management Committee. Ms West has more than 25 years of business and legal affairs experience in the media industry, both in Australia and the UK. Her most recent executive role was Director of Legal – Content Commercial and Joint Ventures for Sky Plc in the UK. In this role, she was responsible for all of Sky’s content relationships, distribution, commercial activities and joint ventures. Ms West has been a Non- Executive Director since 2016 and in addition to Nine, serves on the Boards of ASX listed Monash IVF Group, Peter Warren Automotive and the Endeavour Group. She is also Vice-President of the Sydney Breast Cancer Foundation at Chris O’Brien Lifehouse, a Director of NIDA and the NIDA Foundation Trust, and a Governor of Wenona School. She is a consultant to media companies internationally and to the healthcare sector. Ms West is a Graduate Member of the Australian Institute of Company Directors and holds a Bachelor of Laws (Hons) and Bachelor of Economics degree from the University of Sydney. 31 Nine Annual Report 2021 Corporate Governance Statement 2021 This Corporate Governance Statement provides an outline of the corporate governance framework for Nine Entertainment Co. Holdings Limited (Nine or the Company) for the year to 30 June 2021 (Reporting Period), demonstrating the extent to which Nine has complied with the ASX’s Corporate Governance Council’s Corporate Governance Principles and Recommendations (4th edition). This statement was approved by the Board. 1. Board and Management 1.1 Role of the Board The role and responsibilities of Nine’s Board, as set out in the Board Charter1 include: i) defining Nine’s purpose and strategic objectives; ii) approving Nine’s budgets and business plans; iii) approving Nine’s annual report including the financial statements, directors’ report, remuneration report and this Corporate Governance Statement; iv) approving major borrowing and debt arrangements, the acquisition, establishment, disposal or cessation of any significant business of the company, any significant capital expenditure and the issue of any shares, options, equity instruments or other securities in Nine; v) assessing performance against strategies to monitor both the performance of the Chief Executive Officer and other executives as determined from time to time by the People & Remuneration Committee; vi) ensuring that Nine acts legally and responsibly on all matters and that the highest ethical standards are maintained; vii) maintaining a constructive and ongoing relationship with the Australian Securities Exchange and other regulators, and overseeing implementation of policies regarding disclosure and communications with the market and Nine’s shareholders; and viii) monitoring and approving changes to internal governance including delegated authorities, and monitoring resources available to senior management. Further, with the guidance of the Board’s People & Remuneration Committee, the Board is responsible for: i) ensuring Nine’s remuneration framework and policies are aligned with its purpose, values, strategic objectives and risk appetite; ii) evaluating and approving the remuneration packages of the Chief Executive Officer and other members of senior management; iii) monitoring compliance with the Non-Executive Director remuneration pool and recommending any changes to the pool; iv) administering short- and long-term incentive plans and engaging external remuneration consultants, as appropriate; and v) appointing, evaluating or removing the Chief Executive Officer, and approving appointments or removal of all other members of senior management. With the guidance of the Audit & Risk Management Committee, the Board is ultimately responsible for: i) preparing and presenting Nine’s financial statements and reports; ii) overseeing Nine’s financial reporting, including reviewing the integrity and suitability of Nine’s accounting policies and principles and how they are applied, and ensuring they are used in accordance with the statutory financial reporting framework; iii) assessing information from external auditors to ensure the quality of financial reports; iv) overseeing the adequacy of Nine’s financial controls and systems; v) reviewing, monitoring and approving Nine’s risk management framework, policies, procedures and systems for managing financial and non-financial risks; and vi) managing internal and external audit arrangements and auditor independence. 1. Copies of the Board Charter, Committee Charters and governance policies referred to in this Corporate Governance Statement are all available on Nine’s website – https://www.nineforbrands.com.au/investors/ 32 Nine Annual Report 20211.2 Delegation to Management The responsibility for the operation and administration of Nine and its wholly owned subsidiaries (the Group) is delegated, by the Board, to the Chief Executive Officer and senior management within levels of authority specified by the Board from time to time. The Board ensures that this team is appropriately qualified and experienced to discharge its responsibilities and has in place procedures to assess the performance of the senior management team. The Chief Executive Officer’s role includes: i) responsibility for the effective leadership of the management team; ii) the development of strategic objectives for the business; and iii) the day-to-day management of Nine’s operations. The Chief Executive Officer may delegate aspects of his authority and power but remains accountable to the Board for Nine’s performance and is required to report regularly to the Board on the conduct and performance of Nine’s business units. 1.3 Board composition The Board consisted of a majority of independent directors during the Reporting Period. At all times during the Reporting Period, the Chairman was an independent director and not the same person as the Chief Executive Officer. During the Reporting Period, the Board and its committees consisted of the following individuals: Name Tenure Independent Committee membership Peter Costello From 6 February 2013 Michael Sneesby From 1 April 2021 Hugh Marks Patrick Allaway From 6 February 2013 to 31 March 2021 From 7 December 2018 to 1 April 2021 Nicholas Falloon From 7 December 2018 Andrew Lancaster From 1 April 2021 Samantha Lewis From 20 March 2017 Yes No No Yes Yes No Yes Member of the Audit & Risk Management Committee None None Member of the Audit & Risk Management Committee from 24 January 2019 to 31 March 2021 Member of the People & Remuneration Committee l l R R e e v v e e w w i i None Chair of the Audit & Risk Management Committee Member of the People & Remuneration Committee Mickie Rosen From 7 December 2018 Yes None Catherine West From 9 May 2016 Yes Member of the Audit & Risk Management Committee Chair of the People & Remuneration Committee Details of directors’ skills, experience and expertise and their attendances at Board and Committee meetings are contained elsewhere in the Annual Report. 1.4 Company Secretary The Board appoints and removes the Company Secretary. All Directors have direct access to the Company Secretary who supports the effectiveness of the Board by monitoring that Board policy and procedures are followed, and co-ordinates the completion and despatch of Board agendas and papers. The Company Secretary is accountable to the Board through the Chair, on all corporate governance matters. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 33 Nine Annual Report 2021 Corporate Governance Statement 2021 2. Board appointment and reviews 2.1 Board appointment and induction The processes to address succession of directors and ensuring that the Board is comprised of an appropriate mix of skills, knowledge, diversity, independence and experience are managed by the Board, rather than by a separate Nominations Committee. Those processes are described in this section and section 2.3. The process for nomination of new directors is managed by the Board, under the leadership of the Chairman. During the financial year, Mr Allaway and Mr Marks left the Board, and Mr Lancaster and Mr Sneesby were appointed to the Board. Where a casual vacancy is to be filled, the Board typically considers the skills and expertise which it would be beneficial to add to the Board, then identifies suitable candidates (using an external search adviser if necessary). A review process is carried out by the Chairman, before a candidate is proposed to the whole Board for approval. Such a review, and external checks, were conducted when Mr Lancaster and Mr Sneesby were appointed to the Board during the year. When directors are proposed to shareholders for election or re-election, detailed information about the director, their professional background and areas of expertise are provided to shareholders, so that the shareholders have all material information relevant to a decision whether or not to elect or re-elect that director. All Directors are issued with a letter of appointment that sets out the key terms of their appointment and the Company’s expectations regarding involvement with Nine. Nine provides briefings to new Directors on its business and strategy and the Directors’ roles and responsibilities and access to previous board papers, as part of the induction. Directors may meet with the Company’s auditors to receive a detailed briefing on Nine’s financial reporting and audit issues. All directors are expected and encouraged to engage in professional development activities to develop and maintain the skills and knowledge needed to perform their roles as directors. In addition, ongoing engagement with senior management across the business provides the Directors with development of their knowledge of industry issues. Directors may obtain independent professional advice at Nine’s expense on matters arising in the course of their Board and committee duties, after obtaining the Chairman’s approval. The other Directors must be advised if the Chairman’s approval is withheld. 2.2 Remuneration The Remuneration Report sets out Nine’s policies and practices regarding the remuneration of non-executive directors, executive directors and other senior management of the group. It also provides details of the remuneration paid to directors and certain other senior management of Nine in the Reporting Period. Nine has a written employment agreement with each senior executive, setting out the terms on which she or he is engaged by the company, including the components of fixed and variable or at risk remuneration payable to the senior executive. 2.3 Board skills matrix The Board has adopted a skills matrix which is used, together with a consideration of the diversity present among the Board, in assessing the composition of the Board from time to time. The skills identified are: Media Industry Working in or with the media industry in a significant capacity Content Digital/New Media Direct to consumer Working in or with businesses that acquire, create or exploit content. Working in or with digital/online businesses and emerging forms of media and technology Working in or with businesses that are consumer facing General business expertise Gained in a substantial business, as a senior executive or director Strategy Developing and implementing the strategic direction of an organisation Managing Risk Managing People & Change Political/regulatory Developing, implementing and overseeing risk management policies and procedures for a substantial organisation Expertise in human resource management, particularly through periods of change in a business or industry Managing and influencing the political and regulatory environment Mergers & Acquisitions Expertise in undertaking corporate mergers or acquisitions activities Financial Markets Expertise in debt and capital markets ASX Governance Legal Knowledge of the corporate governance and regulatory framework that applies to an ASX listed company Experience practising as a lawyer in a relevant field or exposure to legal issues relevant to Nine’s business 34 Nine Annual Report 2021The Board considers that the current members, taken as a whole, satisfy the mix of skills identified in the skills matrix, as a majority of directors have a high level of expertise across each of the skills identified in the skills matrix. The Board also demonstrates diversity in terms of gender and international work experience. The chart below shows the degree to which Board members, considered as a group, demonstrate a high level of the skills which form part of Nine’s skills matrix (with a score of 100% indicating that all directors have the skill to a high degree). Skills Matrix Strategy Media industry Content Digital business Direct to consumer business Political/regulatory M&A Financial markets General business expertise Managing risk Managing people and change ASX Governance Legal 71.4% 76.2% 76.2% 66.7% 90.5% 90.5% 90.5% 76.2% 76.2% 100.0% 81.0% 90.5% 0 10 20 30 40 50 60 70 80 90 100 57.1% 2.4 Review processes The Board carries out a review of the performance of the Board and directors and each committee reviews its performance. The Chairman discussed performance of the board with each director in respect of the Reporting Period. Each Committee Chair also reviewed the performance of that committee. Nine has an employee performance review process which operates throughout the company. In addition, the People & Remuneration Committee reviews performance of the Chief Executive Officer and other senior management, in the context of determining incentives and remuneration. This took place in respect of the Reporting Period. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 35 Nine Annual Report 2021 Corporate Governance Statement 2021 3. Committees 3.1 People & Remuneration Committee The People & Remuneration Committee Charter sets out the terms of reference for the People & Remuneration Committee. The Committee’s key responsibilities and functions are to assist the Board in discharging its responsibilities in connection with: i) Remuneration framework and policies (including approving remuneration arrangements for the Chief Executive Officer, directors and senior management); ii) Short- and long-term incentive plans; iii) Succession and development plans for the Chief Executive Officer and senior management; iv) Setting objectives for achieving diversity and monitoring progress in meeting those objectives; and v) Overseeing Nine’s strategy and framework for complying with workplace health and safety obligations. At all times during the Reporting Period, the People & Remuneration Committee comprised a majority of independent directors and was chaired by an independent director. At all times during the year, the Committee was comprised of three members. 3.2 Audit & Risk Management Committee The Audit & Risk Management Committee Charter sets out the terms of reference for the Audit & Risk Management Committee. The Committee’s key responsibilities and functions are to assist the Board in discharging its responsibilities: i) to prepare and present Nine’s financial statements and reports; ii) in relation to Nine’s financial reporting, including reviewing the integrity and suitability of accounting policies and principles, assessing significant estimates and judgements in financial reports and assessing information from internal and external auditors to ensure the quality of financial reports; iii) in relation to the entry into, approval, or disclosure, of related party transactions (if any); iv) in overseeing the adequacy of Nine’s financial controls and systems; v) to review, monitor and approve Nine’s risk management framework, policies, procedures and systems for financial and non- financial risks; and vi) to manage audit arrangements and auditor independence. At all times during the Reporting Period, the Audit & Risk Management Committee comprised a majority of independent directors and was chaired by an independent director. It has had at least three members throughout the Reporting Period. 36 Nine Annual Report 20214. Reporting and Risk 4.1 Risk management Nine recognises that risk is an accepted part of doing business, enabling it to create long-term shareholder value. Nine is committed to the identification, monitoring and management of material risks, to protect and enhance shareholder interests. Responsibility for risk management is shared across the organisation: i) The Board is responsible for approving Nine’s Risk Management Policy and for determining Nine’s approach to risk, taking into account Nine’s strategic objectives and other factors including stakeholder expectations. ii) The Board has delegated to the Audit & Risk Management Committee responsibility for: a) identifying major risk areas; b) reviewing, monitoring and approving Nine’s risk management framework, policies, procedures and systems (at least annually) to provide assurance that major business risks are identified, consistently assessed and appropriately addressed; c) ensuring that risk considerations are incorporated into strategic and business planning; d) providing risk management updates to the Board and any supplementary information required to provide the Board with confidence that key risks are being appropriately managed and making recommendations on changes to Nine’s risk management framework; e) reviewing reports from management concerning compliance with key laws, regulations, licences and standards which Nine is required to satisfy in order to operate; f) overseeing the effectiveness of Nine’s financial controls and systems g) overseeing tax compliance and tax risk management; h) reviewing any significant findings of any examinations by regulatory agencies; i) reviewing any material incident involving a fraud or a breakdown of Nine’s risk controls; and j) evaluating the structure and adequacy of the Group’s insurance coverage. iii) Nine management is responsible for establishing operational processes and policies to support Nine’s risk management framework, including identifying major risk areas and effectively identifying, monitoring, reporting on and managing key business risks. iv) Each employee and contractor is expected to understand and manage the risks within their responsibility and boundaries of authority, as set out in Nine’s internal policies, when making decisions and undertaking day-to-day activities. Nine has processes in place to identify and assess major risks, whether at an enterprise level or a project level, and to manage those risks. Nine’s Risk and Assurance function, with oversight from the Audit & Risk Management Committee, implements a continuous process of communication with internal stakeholders to understand and influence the risk environment affecting Nine. It also conducts annual examinations of Nine’s external and internal environments, to establish the parameters within which risks must be managed. During the Reporting Period, Nine continued to review its risk management framework, including enhancing the internal resourcing and reporting structure on risk management, improving reporting to the board on risk management, and reviewing the internal audit plan to better align with key risk areas. Nine’s internal processes for risk management include establishing operating plans and budgets, periodic reforecasting and monitoring of progress against the approved plans and budgets. There are controls in place in relation to matters such as approval of payments and approval of contracts, which are designed to ensure that levels of delegated authority are adhered to. Staff and business units have both financial and non-financial KPIs, which are monitored. Nine has a thorough system for managing workplace safety, including regular reviews of policies and standard operating procedures, training for staff, consultation with staff through WHS committees at each site and regular site inspections to identify any changes in risks. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 37 Nine Annual Report 2021 Corporate Governance Statement 2021 4.2 Internal Audit During the Reporting Period, Nine appointed a new Director of Risk, with a direct reporting line to the Chair of the Audit & Risk Management Committee. Responsibility for internal audit is part of the broader Risk and Assurance function, managed by the Director of Risk. The internal audit function’s goal is to bring a systematic, disciplined approach to evaluating and improving the effectiveness of risk management, control and governance over business processes, through independent, objective assurance. The internal audit plan is agreed with the Audit & Risk Management Committee annually however is able to be adapted as the need arises following consultation with the Committee.. During the year, Nine moved towards a co-sourced internal audit model to improve the overall effectiveness of the function, using independent internal resources supported by an external service provider to provide specialist skills and capacity. 4.3 Reporting by CEO and CFO The Chief Executive Officer and Chief Financial Officer are each responsible for reporting to the Audit & Risk Management Committee any proposed changes to the risk management framework. Any exposures or breaches of key policies or incidence of risks, where significant, must be reported to the Audit & Risk Management Committee and the Board. The Chief Executive Officer and Chief Financial Officer are required to provide to the Board declarations in accordance with section 295A of the Corporations Act which confirm: i) that the financial records of Nine have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of Nine’s financial position and performance; ii) their view that the Company’s financial reporting is founded on the basis of a sound system of risk management and internal compliance and control which implements the financial policies adopted by the Board; and iii) that the Company’s risk management and internal compliance and control system is operating effectively in all material respects. These declarations were provided before the half year accounts to 31 December 2020 and the full year accounts to 30 June 2021 were approved by the Board. 4.4 Verification of the integrity of unaudited corporate reports Nine periodically releases reports which have not been audited or reviewed by the auditors, such as the directors’ report and operating review which accompanies the financial statements, this Corporate Governance Statement and other elements of the Annual Report. Nine has a process to ensure that those reports are complete and accurate before they are released, which includes: • Preparation of drafts by experienced staff of Nine, who consult with relevant colleagues to ensure information is collected from necessary departments within Nine and consult with advisers as required; • Review of the drafts by relevant stakeholders who will have knowledge of the matters covered in the report, which may include the General Counsel, Head of Investor Relations, Chief Financial Officer, Deputy Chief Financial Officer, Group Financial Controller and Director of Risk; and • Where necessary or appropriate, approval by the Board or by the Company’s Disclosure Committee (which consists of the Chief Executive Officer, General Counsel & Company Secretary and Chief Financial Officer). 4.5 Material exposure to risks Nine has exposure to specific risks that could impact on its ability to create value for its shareholders, including: • Changes in the competitive landscape for media businesses, including changes in the advertising market; • Cyber security and systems security more generally. • Loss of key programming rights; • Nine’s products ceasing to be competitive in their markets; • The timeline for recovery of the economy from the Covid 19 pandemic; • Changes in the way in which consumers find and access content; and • Changes in the regulatory environment. The above mentioned risks are not set out in any particular order and exclude general risks that could have a material effect on most businesses in Australia under normal operating conditions. Further discussion regarding the key risks affecting Nine’s business and the way in which Nine manages those risks are outlined in the Operating and Financial Review in Nine’s Annual Report. 38 Nine Annual Report 2021Nine does not have any material exposure to environmental risks, given the nature of its business and operations. While Nine does not have any material exposure to social risks above those of a similar organisation, Nine takes its role as a community participant seriously, and undertakes a number of initiatives to support the communities it operates in, including: • providing free airtime and advertising space to community service organisations and charities for community service announcements; • actively supporting a number of charities including the Sydney Children’s Hospital Gold Telethon and the Mark Hughes Foundation; and • compliance with the Broadcasting Services Act 1992 (Cth), Commercial Television Code of Practice, Commercial Radio Code of Practice, the Press Council’s Statement of General Principles and other regulatory obligations which affect the material which Nine can broadcast and publish, and the manner in which it conducts its operations. 5. Diversity 5.1 Diversity Policy Nine has adopted a Diversity & Inclusion Policy, to recognise the value of creating a workplace that is inclusive and respectful of diversity. This was revised in the Reporting Period following wide consultation with staff across the Group. Nine acknowledges the positive outcomes that can be achieved from a diverse workforce, and recognises the contribution of diverse skills and talent from its Directors and employees. In the context of the policy, diversity includes gender, age, ethnicity, cultural background, religion, sexual orientation, disability and mental impairment. The Diversity Policy requires the Board to set and monitor on an annual basis Nine’s performance against measurable objectives in relation to gender diversity, and other aspects of diversity. 5.2 Female representation As at 30 June 2021, the proportion of men and women employed by Nine was as follows: Board of directors Senior Executives Total Nine workforce Women 43% 46% 44% Men 57% 54% 56% For this purpose, “Senior Executives” are the Chief Executive Officer and his direct reports. 5.3 Objectives for FY21 Nine’s performance against the objectives for achieving gender diversity which were adopted for the Reporting Period is as follows: Objective Performance At least 30% of board positions to be held by women and at least 30% of such positions to be held by men This was satisfied. Four out of seven (57%) board members are men and three out of seven (43%) are women. At least 40% of senior executive positions (CEO and direct reports) to be held by women At least 40% of management positions to be held by women Gender balance in leadership and talent development This was satisfied. Five out of 11 of these positions are held by women. This is an increase on the previous year, as a result of the appointment of Maria Phillips as Chief Financial Officer. This was satisfied. Representation of women in management has remained stable at 41.5% This was satisfied. Representation in our leadership program was 63% female and talent development was balanced. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 39 Nine Annual Report 2021 Corporate Governance Statement 2021 5.4 Objectives for FY22 The Board has adopted the following measurable objectives for FY22 for achieving gender diversity: • At least 30% of board positions to be held by women and at least 30% of such positions to be held by men; • At least 40% of senior executive positions (CEO and direct reports) to be held by women; • At least 40% of management positions to be held by women; • Gender balance in leadership and talent development. • Monitor and review initiatives that drive equity across the business such as pay equity review and flexible working. 6. Corporate Governance Policies 6.1 Values Nine’s identity serves as a guide that informs how we do business and sets an expectation for the way we behave with each other. At the heart of our identity are passion, creativity and ambition. These three values are the DNA of Nine: • We are passionate – We believe in Nine and celebrate our history and our future equally. We show it through our commitment, dedication and enthusiasm in everything we do. • We are creative – We challenge the status quo seeking the new, the different, the innovative, the ground-breaking. We make the impossible possible. • We are ambitious – We are the best at what we do. We push boundaries, are bold and unwavering. We are fearless, always with integrity. 6.2 Code of Conduct Nine has a Code of Conduct which applies to all directors and employees of Nine and its subsidiaries. The Code of Conduct: • sets the ethical standards required in relation to conduct of Nine’s business; • provides clear guidance on Nine’s values and expectations of staff, in relation to matters such as protecting confidential information, receipt of gifts, compliance with laws, protecting Company assets and outside interests of employees; • prohibits giving or taking any bribes or improper payments in connection with doing business with Nine; and • offers guidance to shareholders and other stakeholders on our values, standards and expectations and what it means to work for or with Nine. Any material breaches of the Code of Conduct would be reported to the People & Remuneration Committee or, if any such breaches involved fraud or other financial misconduct, would be reported to the Audit & Risk Management Committee. Nine is not aware of any material breaches of the Code of Conduct during the Reporting Period. 6.3 Securities Trading Policy Nine’s Securities Trading Policy has been developed to educate the Board and employees of the Group about their obligations under the Corporations Act in relation to trading in securities. The policy sets black out periods in which shares cannot be traded by directors and employees to whom the policy applies. It requires those individuals to obtain consent before any trading outside a black out period is undertaken. The Securities Trading Policy prohibits employees from entering derivative or other transactions which limit economic risk in respect of any Nine securities which are unvested or subject to a holding lock. Nine is not aware of any breaches of the Securities Trading Policy during the Reporting Period. 40 Nine Annual Report 20216.4 Disclosure Policy Nine has a Disclosure Policy which sets out the processes which are followed to ensure that it complies with the ASX Listing Rules in relation to continuous disclosure. Nine has a Disclosure Committee which is tasked with determining whether announcements on potentially price sensitive matters are required, the content of announcements and ensuring that announcements are made within the time frame required by the ASX Listing Rules. Nine’s Disclosure Policy requires that any briefing and presentation materials containing previously undisclosed information will be disclosed to the market through the ASX and Nine’s corporate website. Nine is not aware of any breaches of the Disclosure Policy during the Reporting Period. Directors are on an email distribution list which ensures they receive copies of all material market announcements promptly after they are released to the ASX. Nine ensures that any new and substantive investor or analyst presentation, such as the Annual General Meeting presentation and results presentations, is provided to the ASX Markets Announcement Platform before the presentation is provided to any third parties. 6.5 Shareholder Communications and participation Nine has a Shareholder Communications Policy which promotes effective two way communications with shareholders and other stakeholders and encourages effective participation at Nine’s general meetings. Nine’s website (www.nineforbrands.com.au) provides ready access for shareholders to key corporate governance documents, ASX releases, financial reports and other information of relevance to shareholders. The website is updated as soon as possible after documents are released to the ASX under Nine’s continuous disclosure obligations. The policy was complied with during the Reporting Period. Nine provides a webcast/teleconference facility for its results announcements, so that all shareholders can attend the presentation of the results, and its annual general meeting. In 2020, Nine amended its constitution to allow direct voting. This allows shareholders a greater ability to participate directly in voting at the Annual General Meeting, if they are unable to attend the meeting. Nine and its share registry encourage shareholders to receive communications from Nine and its share registry electronically. The websites of Nine and its share registry both provide contact points for shareholders to communicate with Nine and the registry electronically. Shareholders are invited to submit questions ahead of the Annual General Meeting, so that any issues raised by shareholders in advance can be responded to. There is also an opportunity for shareholders to ask questions or comment on matters relevant to Nine at the Annual General Meeting. The Company’s auditor is always present at Annual General Meetings to answer questions about the conduct of the audit and the audit report. For some years, Nine has put all resolutions at its Annual General Meeting to shareholders by a poll, rather than by a show of hands. This is to support the principle of “one share, one vote” which is captured by the ASX Listing Rules, and ensures that the outcome of resolutions reflects the will of the shareholders. 6.6 Whistleblower Policy Nine has a Whistleblower Policy which applies to all directors and employees of Nine and its subsidiaries and has appointed a third party service provider to provide a confidential, anonymous means for notifications to be provided under the Whistleblower Policy. Any material incidents reported under that policy will be reported to the People & Remuneration Committee or, if the incident relates to fraud or other financial misconduct, to the Audit & Risk Management Committee. A copy of the policy is available on Nine’s website. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 41 Nine Annual Report 2021 Nine Entertainment Co. Holdings Limited ABN 60 122 203 892 Financial Report for the year ended 30 June 2021 Contents Directors’ Report Auditor’s Independence Declaration Remuneration Report — Audited Operating and Financial Review Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report Shareholder information Corporate Directory 44 50 51 75 82 83 84 85 86 144 145 150 153 The financial report is provided to the Australian Securities Exchange (ASX) under ASX Listing Rule 4.2A.3. 42 Nine Annual Report 2021 Financial Highlights $2,332m Revenue increase of 8% $416m EBIT increase of 67% $565m EBITDA increase of 43% $278m NPAT increase of 76% 15.3 cents EPS increase of 83% 0.4x Net Leverage1 improvement of 60% Before specific items (Note 2.4). 1. Net debt, excluding lease liabilities. 43 Nine Annual Report 2021 Directors’ Report The Directors present the financial report for the year ended 30 June 2021. The financial report includes the results of Nine Entertainment Co. Holdings Limited (the “Company”) and the entities that it controlled during the period (the “Group”). Directors The Directors of the Company at any time during the year or up to the date of this report were as follows: Name Title Date Appointed Date Resigned Peter Costello Independent Non-Executive Chairman 6 February 2013 Nick Falloon Hugh Marks Independent Non-Executive Deputy Chairman 7 December 2018 Chief Executive Officer 6 February 2013 31 March 2021 Mike Sneesby Chief Executive Officer 1 April 2021 Patrick Allaway Independent Non-Executive Director 7 December 2018 1 April 2021 Andrew Lancaster Non-Executive Director Samantha Lewis Independent Non-Executive Director 1 April 2021 20 March 2017 Mickie Rosen Independent Non-Executive Director 7 December 2018 Catherine West Independent Non-Executive Director 9 May 2016 Peter Costello (Independent Non-Executive Chairman) Mr Costello was appointed to the Board in February 2013 as an independent, Non-Executive Director and in March 2016 became Chairman of the Board. He is also a member of the Audit & Risk Management Committee. Mr Costello is currently Chairman of the Board of Guardians of Australia’s Future Fund and serves on a number of domestic and international advisory boards. He commenced his career as a solicitor and then a barrister. Mr Costello was a member of the Australian House of Representatives from 1990 to 2009 and was Treasurer of the Commonwealth of Australia from March 1996 to December 2007. From 2009, Mr Costello has worked as a corporate adviser in the fields of mergers, acquisitions and foreign investment. He has a Bachelor of Arts and a Bachelor of Laws (Hons) and a Doctorate of Laws (Honoris Causa) from Monash University. In 2011, Mr Costello was appointed a Companion of the Order of Australia. Nick Falloon (Independent Non-Executive Deputy Chairman) Mr Falloon was appointed to the Board in 7 December 2018 as an independent, Non-Executive Director. Prior to the merger of Nine and Fairfax, Mr Falloon was chairman of the Fairfax Board before taking up the role of deputy chairman of Nine in December 2018. He is also chairman of Domain Holdings Australia (since November 2017). Mr Falloon has had 30 years’ experience in the media industry, 19 years working for the Packer-owned media interests from 1982 until 2001. Mr Falloon served as CEO of Publishing and Broadcasting Limited (PBL) from 1998 to 2001 and before that as Chief Executive Officer of PBL Enterprises and Group Financial Director of PBL. PBL provided a strong background in the television, pay TV, magazine, radio and digital industries. From 2002, Mr Falloon spent nine years as Executive Chairman and CEO of Ten Network Holdings. He holds a Bachelor of Management Studies (BMS) from Waikato University in New Zealand. Mike Sneesby (Director and Chief Executive Officer) Mr Sneesby was appointed as a Director and Chief Executive Officer of Nine with effect from 1 April 2021. He was the CEO of Stan Entertainment since its inception in 2013, until his appointment as CEO of Nine. He is also a director of Domain Holdings Australia Ltd (since 21 April 2021). Mr Sneesby is an experienced media executive with a depth of local and international experience. He was formerly the CEO of the Microsoft/Nine e-commerce joint venture, Cudo, up until its sale in 2013. Prior to that, Mr Sneesby set up the invision IPTV service in Dubai as Vice President of IPTV for the Saudi Telecom/Astra Malaysia joint venture, lntigral. Before joining lntigral, he headed Corporate Strategy and Business Development at ninemsn where he established a portfolio of high growth digital media businesses including the start-up of MSN New Zealand and management of the EPG and listings business HWW. Prior to ninemsn, Mr Sneesby led a company-wide program for Optus rolling out and launching their national ADSL broadband network. Mr Sneesby spent his earlier career in leadership and consulting positions gaining broad experience in digital media, technology and telecommunications in Australia, Asia and the USA. He holds an Honours Degree in Electrical Engineering from the University of Wollongong and a Masters of Business Administration from the Macquarie Graduate School of Management. 44 Nine Annual Report 2021Andrew Lancaster (Non-Executive Director) Mr Lancaster joined the Board on 1 April 2021 as a Non-Executive Director. Mr Lancaster is CEO of the WIN Corporation and Birketu Pty Ltd, Nine Entertainment Co’s largest individual shareholder (so is not an independent director). After more than 27 years working in the media sector, Mr Lancaster has extensive experience in both metropolitan, and regional television and radio. He has a broad knowledge of strategic, structural, operational, financial and resource management as well as a proven history of driving strong revenue growth across all areas of these businesses. Mr Lancaster is currently a Director of Free TV Australia, Broadcast Transmission Services and NRL team St George Illawarra Dragons. Mr Lancaster holds a Master of Commerce Human Resource Management and a Bachelor of Economics and Management, both from the University of Wollongong. Samantha Lewis (Independent Non-Executive Director) Ms Lewis joined the Board in March 2017 as an independent, Non-Executive Director and is Chair of the Audit & Risk Management Committee and a member of the People & Remuneration Committee. Ms Lewis is a chartered accountant with extensive experience in accounting, finance, auditing, risk management, corporate governance, capital markets and due diligence. Ms Lewis has been a non-executive director since 2014, and in addition to Nine Entertainment, serves on the Boards of ASX-listed Orora Ltd (since March 2014) and Aurizon Holdings Ltd (since February 2015) and is also the Chair of the Audit and Risk Committee of the Australian Prudential Regulatory Authority. Prior to becoming a non-executive director, Ms Lewis spent 20 years at Deloitte including 14 years as a Partner. In that role, she led the audit of a number of major Australian listed companies, in the retail/FMCG and industrial sectors. During her time at Deloitte, Ms Lewis also provided accounting advice and transactional advisory services, including due diligence, IPOs and debt/equity raising. Ms Lewis holds a Bachelor of Arts, Economics from the University of Liverpool. Mickie Rosen (Independent Non-Executive Director) Ms Rosen served on the Fairfax Board from March 2017, before moving on to the new board when Nine and Fairfax merged in December 2018. Ms Rosen has nearly three decades of strategy, operating, advisory, and investment experience at the intersection of media, technology and e-commerce. She has built and led businesses for iconic global brands such as Yahoo, Fox, and Disney, and early stage start-ups such as Hulu and Fandango. Ms Rosen currently serves on public, private, and non-profit boards including Bank of Queensland (since March 2021), Ascendant Digital Acquisition Company and TechStyle Fashion Group, and she advises early to growth stage companies. Until recently, she served on the board of Pandora Media, and was the President of Tribune Interactive, the digital arm of Tribune Publishing, and concurrently the President of the Los Angeles Times. Ms Rosen has also served as a Senior Advisor to the Boston Consulting Group and was a co-founder and partner of a boutique strategic advisory firm, Whisper Advisors. Prior, Ms Rosen served as Senior Vice President of Global Media & Commerce for Yahoo, where she led Yahoo’s media division worldwide. Prior to Yahoo, she was a partner with Fuse Capital, a consumer Internet focused venture capital firm, investing in early stage video, publishing, advertising technology, and e-commerce companies. She was also an executive with Fox Interactive Media, Fandango, and The Walt Disney Company. The foundation of Ms Rosen’s career was built with McKinsey & Company, and she holds an MBA from Harvard Business School. Catherine West (Independent Non-Executive Director) Ms West was appointed to the Board in May 2016 as an Independent, Non-Executive Director and is the Chair of the People & Remuneration Committee and a member of the Audit & Risk Management Committee. Ms West has more than 25 years of business and legal affairs experience in the media industry, both in Australia and the UK. Her most recent executive role was Director of Legal – Content Commercial and Joint Ventures for Sky Plc in the UK. In this role, Ms West was responsible for all of Sky’s content relationships, distribution, commercial activities and joint ventures. Ms West has been a non-executive director since 2016 and in addition to Nine serves on the Boards of ASX listed Monash IVF group (since September 2020), Peter Warren Automotive (since April 2021) and the Endeavour Group (since June 2021). Ms West is Vice President of the Sydney Breast Cancer Foundation at Chris O’Brien Lifehouse, a director of NIDA and the NIDA Foundation Trust and a Governor of Wenona School. She is a consultant to media companies internationally and to the healthcare sector. Ms West is a Graduate Member of the Australian Institute of Company Directors and holds both a Bachelor of Laws (Hons) and Bachelor of Economics degree from the University of Sydney. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 45 Nine Annual Report 2021 Directors’ Report Patrick Allaway (Former Independent Non-Executive Director) Mr Allaway served on the Fairfax Board from April 2016, before moving on to the new board when Nine and Fairfax merged in December 2018. He has had 30 years’ experience in the global financial industry across capital markets and corporate advisory; and 17 years Non- Executive Director experience across property, retail, media, and finance. Mr Allaway commenced his executive career with Citibank in Sydney, London and New York and with Swiss Bank Corporation in Zurich and London. He was previously a Director of Macquarie Goodman, Metcash, Fairfax, Domain Holdings Australia, Woolworths South Africa, and Chairman of Saltbush Capital Markets. In May 2019, he was appointed Non-Executive Director of the Bank of Queensland, and as Chairman of the Bank in October 2019. He is also a Non-Executive Director of Dexus Funds Management (since February 2020) and Allianz Australia (since July 2020). Mr Allaway has a Bachelor of Arts/Law degree from the University of Sydney. Hugh Marks (Former Director and Chief Executive Officer) Mr Marks was appointed Chief Executive Officer of Nine Entertainment Co. in November 2015 and ceased to hold that role and be a director on 31 March 2021. Prior to his appointment as CEO, Mr Marks had been an independent, Non-Executive Director since February 2013. Mr Marks has over 20 years’ experience as a senior executive in content production and broadcasting in Australia and overseas. Prior to his appointment as CEO, he had ownership and management interests in a number of independent companies producing content for broadcast and pay TV, talent management and digital production. Before joining the Board, Mr Marks was an authority member for the Australian Communications and Media Authority for over two years. Previously, Mr Marks was Chief Executive Officer of the Southern Star Group. Mr Marks has also worked with the Nine Network as legal counsel and then as Director of Nine Films & Television for seven years. Mr Marks was a director of Domain Holdings Australia (from February 2020 to 31 March 2021). Mr Marks received a Bachelor of Commerce and Bachelor of Laws from the University of New South Wales. Remuneration Report The Remuneration Report is set out on the pages that follow and forms part of this Directors’ Report. Directors’ Interests The relevant interests of each Director in the equity of the Company and related bodies corporate as at the date of this report are disclosed in the Remuneration Report. Directors’ Meetings The number of meetings of Directors (including meetings of committees of Directors) held during the year, and the number of meetings attended by each Director, were as follows: Board Audit & Risk Management Committee People & Remuneration Committee Meetings held Meetings attended Meetings held Meetings attended Meetings held Meetings attended 16 16 12 4 12 4 16 16 16 16 15 8 4 11 4 16 16 16 5 — — — 4 — 5 — 5 5 — — — 4 — 5 — 5 — 5 — — — — 5 — 5 — 5 — — — — 5 — 5 Peter Costello Nick Falloon Hugh Marks Mike Sneesby Patrick Allaway Andrew Lancaster Samantha Lewis Mickie Rosen Catherine West 46 Nine Annual Report 2021Company Secretary Rachel Launders (General Counsel and Company Secretary) Ms Launders was appointed joint Company Secretary on 4 February 2015 and became sole Company Secretary on 29 February 2016. Ms Launders holds the role of General Counsel and Company Secretary at the Group. Prior to joining the Group in January 2015, Ms Launders was a partner at Gilbert + Tobin for over 13 years where she specialised in mergers and acquisitions, corporate governance and compliance. Ms Launders holds a Bachelor of Arts and Bachelor of Laws (Hons) from the University of Sydney. She also completed the Graduate Diploma of Applied Finance and Investment at the Financial Services Institute of Australasia and is a Fellow of the Financial Services Institute of Australasia and a graduate of the Australian Institute of Company Directors. Principal Activities The principal activities of the entities within the Group during the year were: • Broadcasting and program production across Free to Air television, Broadcast video on demand and metropolitan radio networks in Australia; • Publishing across digital platforms and newspapers; • Real estate media and technology services; and • Subscription video on demand. There have been no significant changes in the nature of activities during the financial year. Dividends Nine Entertainment Co. Holdings Limited paid an interim dividend of 5.0 cents per share, fully franked, in respect of the half year ended 31 December 2020 amounting to $85,269,663 on 20 April 2021. Since the year end, the Company has proposed a dividend in respect of the year ended 30 June 2021 of 5.5 cents per share, fully franked, amounting to $93,796,629. The Company paid a dividend of 2.0 cents per share, fully franked, in respect of the year ended 30 June 2020 amounting to $34,107,865 during the current year. Corporate Information Nine Entertainment Co. Holdings Limited is a company limited by shares that is incorporated and domiciled in Australia. It is the parent entity of the Group. The registered office of Nine Entertainment Co. Holdings Limited is Level 9, 1 Denison Street, North Sydney NSW 2060. Review of Operations For the year to 30 June 2021, the Group reported a consolidated net profit after income tax of $183,961,000 (2020: loss $573,940,000). There was no profit or loss from discontinued operations (2020: loss $66,189,000). The Group’s revenues from continuing operations for the year to 30 June 2021 increased by $170,118,000 (8%) to $2,342,178,000 (2020: $2,172,060,000). The Group’s earnings before interest, tax, depreciation and amortisation (EBITDA) and before specific items (Note 2.4) for continuing operations for the year ended 30 June 2021 was a profit of $564,696,000 (2020: restated profit of $394,826,000). The Group’s cash flows generated in operations for the year to 30 June 2021 were $398,161,000 (2020 restated: $374,501,000). Further information is provided in the Operating and Financial Review on pages 75 to 80. COVID-19 Following continued disruption to certain businesses within the Group as a result of the COVID-19 pandemic, the Group has benefited from Government funding available to the regional publishing industry in the form of a Public Interest News Gathering (PING) grant (P&L benefit of $3.1 million in the period). In addition, spectrum fees which would have been payable by broadcasters were waived by the Australian Government, resulting in a P&L benefit of $9.4 million (2020: $1.3 million) in the period. The Group results also include a net P&L benefit of $8.2 million (2020: $6.1 million) relating to JobKeeper allowance received by significantly impacted businesses which met the relevant criteria, the most significant of which relates to Domain ($8.3 million). This benefit is net of $2.3 million of repayments made for amounts received by wholly owned subsidiaries since the inception of the scheme in March 2020. Following the year end, Domain Group announced its intention to repay JobKeeper allowance received during the year ended 30 June 2021, totalling $6.5 million. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 47 Nine Annual Report 2021 Directors’ Report Significant Changes in the State of Affairs Cyber-Attack During the year, the Group was subject to a cyber-attack which caused disruption to operations for a short period of time. No sensitive data was compromised in relation to this attempted breach and the financial impact on the business was not material. Relocation of the Group headquarters to 1 Denison Street, North Sydney During the year, the Group relocated its headquarters to 1 Denison Street, North Sydney and commenced a long-term lease with a non-cancellable period of 12 years and two additional 5 year option periods, with market reviews at the time of each option commencement. As a result, a Right of Use asset totalling $156.5 million was recognised within Property, Plant and Equipment, with a related lease liability totalling $189.8 million recognised within financial liabilities. Significant Events after the Balance Sheet Date On 16 August 2021, the Domain Board made the decision to repay benefits of $6.5 million received during the year ended 30 June 2021 from the Federal Government’s JobKeeper scheme. This will impact the Domain Group’s result in the year ended 30 June 2022. In the time between 30 June 2021 and the date of this report there has not arisen any other item, transaction or event of a material and unusual nature, in the opinion of the Directors of the Company, to affect significantly the operations, results or the state of affairs of the Group, currently or in future financial years. Likely Developments and Expected Results Other than the developments described in this report, the Directors are of the opinion that no other matters or circumstance will significantly affect the operations and expected results of the Group. Unissued Shares and Options As at the date of this report, there were no unissued ordinary shares or options. There have not been any share options issued during the year or subsequent to the year end. Indemnification and Insurance of Directors and Officers During or since the financial year, Nine Entertainment Co. Holdings Limited has paid premiums in respect of a contract insuring all the Directors and officers of the parent entity and its controlled entities against costs incurred by them in defending any legal proceedings arising out of their conduct while acting in their capacity as Director or officer of Nine Entertainment Co. Holdings Limited or its controlled entities. The insurance contract specifically prohibits disclosure of the nature of the insurance cover, the limit of the aggregate liability and the premiums paid. Auditor’s Independence Declaration The Directors have received the Auditor’s Independence Declaration, a copy of which is included on page 50. Indemnification of Auditors To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year. 48 Nine Annual Report 2021Non-audit Services Details of amounts paid or payable to the auditor for non-audit services provided by the auditor during the year are set out in Note 7.3 of the financial statements. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. Rounding The amounts contained in the financial statements have been rounded off to the nearest thousand dollars (where rounding is applicable) under the option available to the Group under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. Nine Entertainment Co. Holdings Limited is an entity to which the Instrument applies. Signed on behalf of the Directors in accordance with a resolution of the Directors. Peter Costello Chairman Sydney, 25 August 2021 Mike Sneesby Chief Executive Officer and Director C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 49 Nine Annual Report 2021 Auditor’s Independence Declaration Ernst & Young 200 George Street Sydney NSW 2000 Aust ralia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Audit or’s independence declarat ion t o t he direct ors of Nine Ent er t ainment Co. Holdings Limit ed As lead auditor for the audit of the financial report of Nine Entertainment Co. Holdings Limited for the financial year ended 30 June 2021, I declare to the best of my knowledge and belief, there have been: Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Ernst & Young 200 George Street Sydney NSW 2000 Aust ralia GPO Box 2646 Sydney NSW 2001 a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Nine Entertainment Co. Holdings Limited and the entities it controlled Audit or’s independence declarat ion t o t he direct ors of Nine Ent er t ainment during the financial year. Co. Holdings Limit ed As lead auditor for the audit of the financial report of Nine Entertainment Co. Holdings Limited for the financial year ended 30 June 2021, I declare to the best of my knowledge and belief, there have been: a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in Ernst & Young relation to the audit; and b. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Nine Entertainment Co. Holdings Limited and the entities it controlled during the financial year. Christopher George Partner 25 August 2021 Ernst & Young Christopher George Partner 25 August 2021 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislat ion 50 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislat ion Nine Annual Report 2021Remuneration Report — Audited Contents 1. Key Management Personnel 2. Executive Summary 2.1 Summary of Executive Remuneration outcomes 3. Executive Remuneration 3.1 Remuneration Principles 3.2 Approach to Setting Remuneration 3.3 Remuneration Mix (at target) 3.4 Fixed Remuneration 3.5 Short Term Incentive (STI) Plan 3.6 Long Term Incentive (LTI) Plan 4. Linking Pay to Performance 4.1 Link Between Remuneration and Company Performance 4.2 Short Term Incentives (STI) Outcomes 4.3 Long Term Incentives (LTI) Outcomes 5. Executive Agreements 6. Remuneration Governance 6.1 The Board 6.2 The People and Remuneration Committee (PRC) 6.3 Management 6.4 Use of Remuneration Consultants 6.5 Associated Policies 7. Detailed disclosure of executive remuneration 7.1 Non-statutory remuneration disclosures 7.2 Statutory remuneration disclosures 7.3 Performance Rights and Share Interests of Key Management Personnel 8. Non-Executive Director (NED) Remuneration Arrangements and detailed disclosures of NED remuneration 9. Loans to Key Management Personnel and their related parties 10. Other transactions and balances with Key Management personnel and their related parties 54 54 56 56 56 57 57 57 58 60 63 63 64 65 65 66 66 66 66 66 66 67 67 68 70 72 74 74 C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 51 Nine Annual Report 2021 Remuneration Report — Audited Letter from Committee Chair On behalf of the Board, I am pleased to present the Company’s Remuneration Report for financial year ended 30 June 2021 (FY21). FY21 was a challenging year and Nine’s Executive team responded to the challenges and continued to adapt and transform the business and achieved a strong financial result. For FY21, on a pre-specific item basis, Nine delivered 43% EBITDA growth to $564.7 million and a Group EBIT of $415.6 million, up 67% on FY20. Net Profit After Tax and Minorities before Specific Items was $261.0 million for the year, up 83%. Nine’s digital transformation continued with digital EBITDA growing and now accounting for 44% of Group EBITDA. Nine successfully completed transformational deals with Google and Facebook and its audiences strengthened across Free to air, BVOD, Publishing, Radio and Stan. 9Now has continued to thrive and consolidate its leadership position in BVOD. Stan has continued to grow and successfully launched Stan Sport. The Executive team has maintained tight cost control and a strong balance sheet with low leverage. In November 2020, Hugh Marks announced his intention to stand down as CEO. Hugh expertly led the successful transformation of Nine for over 5 years and he leaves Nine in a strong and enviable position to continue its success. I would like to thank Hugh for his huge contribution to Nine and welcome our new CEO Mike Sneesby. Mike’s broad media experience ideally equips him to lead Nine in its next phase of growth and development. Mike’s background and experience was invaluable in facing his first challenge in successfully leading Nine through the cyber-attack during the second half of this year. Nine’s remuneration structure awards short and long term incentives to Nine’s Key Executive Management Personnel based on metrics which are aligned with the creation of shareholder value. Short-Term Incentives outcomes The Short Term Incentive plan for FY21 (FY21 STI) was structured with 50% allocated to achievement of the Group EBIT target and 50% allocated to individual objectives which were made up of financial and strategic objectives aligned to our strategy. Setting a Group financial target in the midst of the pandemic in 2020 was difficult. As positive signs emerged during the first half of the year, the Board re-visited the original Group EBIT target which had been set, and determined that 5% growth on the FY20 Group EBIT outcome of $249.1 million (before restatement $246.8 million) for continuing operations and pre significant items, would be an appropriate target. The Executive team delivered a Group EBIT of $415.6 million (continuing operations and pre significant items), and therefore the Group financial target was achieved at maximum performance. The individual measures were assessed by the Board and were mainly achieved at above target performance resulting in overall STI outcomes for Executive KMP above target opportunity reflecting the strong company performance during the year. Long-Term Incentives outcome The FY19 Long Term Incentive Plan grant (FY19 LTI) was tested at the conclusion of FY21. The required targets for the FY19 LTI grant were Total Shareholder Return (TSR) and Earnings Per Share Growth (EPSG) measured over a three-year performance period. The EPSG target was not achieved, resulting in no vesting of this portion of the grant (50% of the total grant). The TSR performance was achieved at the 50th percentile, resulting in vesting of 50% of the rights attributable to that hurdle (50% of the total grant). This resulted in LTI participants receiving a total of 25% of the maximum possible benefits under the FY19 LTI. The remainder of the FY19 LTI Rights lapsed. Changes for FY22 STI and LTI arrangements The People and Remuneration Committee and the Board review the Executive Remuneration Framework on an annual basis and made some changes to the STI and LTI Plans for FY22. For the FY22 STI plan, the Group financial target will revert to Group EBITDA. The Board considers that EBITDA provides a more direct measurement of business and our Executives’ performance for the year than EBIT and aligns with the company’s in year strategy and targets. In the FY21 LTI plan, to remove the volatility and uncertainty around the recovery of COVID, the Earnings Per Share Growth (EPSG) performance hurdle was changed to a point-to-point measure. Given the stabilisation of our markets, for the FY22 LTI plan the EPSG performance hurdle will revert back to measuring EPSG on a cumulative annual growth rate. 52 Nine Annual Report 2021In addition, for the FY22 LTI plan, the Strategic hurdle (digital transformation) introduced for the CEO’s LTI plan in FY20 and FY21 will be expanded to include all Executive KMP and participants of the FY22 LTI plan. The target and maximum opportunity for Executive KMP will not change, and the hurdles and their weighting will be 40% for the existing Relative Total Shareholder Return (TSR) performance hurdle, 40% for the existing the Earnings Per Share Growth (EPSG) performance hurdle and 20% for the Strategic hurdle, which will continue to focus on transformation of Nine into a digital focused business. Otherwise the STI and LTI structures for FY22 remain the same as FY21. It has been another extraordinary year for Nine and the whole of Australia. On behalf of the Board I would like to extend my thanks to every member of the Nine team for their exceptional work, in informing, engaging and entertaining the nation whilst it continues to experience unprecedented times. The whole of the Nine team has risen to the challenges presented and excelled, executing on the strategic priorities of the business and driving long term performance for shareholders. I trust you will find this report informative. I encourage you to vote in favour of the report and welcome any questions at the Annual General Meeting. Yours faithfully, Catherine West Chair of the People and Remuneration Committee C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 53 Nine Annual Report 2021 Remuneration Report — Audited 1. Key Management Personnel The Remuneration Report details the remuneration framework and arrangements for Key Management Personnel (KMP), as set out below for the year ended 30 June 2021. KMP are those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any Director (whether Executive or otherwise) of the Company. The table details movements during the 2021 financial year and current KMP and Directors. Key Management Personnel Name Position Term 2021 Non-Executive Directors (NEDs) Peter Costello Nick Falloon Patrick Allaway1 Chairman (independent, Non-Executive) Full year Deputy Chairman (independent Non-Executive) Full year Director (independent Non-Executive) Up to 1 April 2021 Andrew Lancaster2 Director (Non-Executive) From 1 April 2021 Samantha Lewis Mickie Rosen Catherine West Executive Director Mike Sneesby3 Other Executive KMP Director (independent Non-Executive) Director (independent Non-Executive) Director (independent Non-Executive) Full year Full year Full year Chief Executive Officer From 1 April 2021 Maria Phillips4 Chief Financial Officer From 31 August 2020 Michael Stephenson Chief Sales Officer Full year Former Executive KMP Hugh Marks5 Paul Koppelman6 Chief Executive Officer Chief Financial Officer Up to 31 March 2021 Up to 10 July 2020 1. Mr Allaway retired from the Board on 1 April 2021. 2. Mr Lancaster joined the Board on 1 April 2021. 3. Mr Sneesby was appointed Chief Executive Officer effective 1 April 2021. 4. Ms Phillips commenced as Chief Financial Officer on 31 August 2020. 5. Mr Marks ceased to be Chief Executive Officer and therefore ceased to be a KMP of the Company effective 31 March 2021. 6. Mr Koppelman was the Chief Financial Officer from 2 September 2019 until his resignation and ceased being an employee of the Company on 10 July 2020. 2. Executive Summary The table below outlines each component of the remuneration framework, metrics and the link to Group strategic objectives. Component Fixed remuneration Salary, non-monetary benefits and statutory superannuation. Further detail in Section 3.4. Performance Measure Performance and delivery of key responsibilities as set out in the position description. At risk portion Not applicable Link to Strategic Objective Fixed remuneration is set at competitive levels to attract and retain high performance individuals. Other considerations include: • Scope of role and responsibility; • Capability, experience and competency; and • Internal and external benchmarks. 54 Nine Annual Report 2021Component Annual short-term incentive (STI) Cash payments and deferred shares. Further detail in Section 3.5. Performance Measure Group Financial measure: 50% – Group Earnings Before Interest and Tax (EBIT) before specific items. Individual measures: 50% – Individual objectives related to the Executive KMP’s role and responsibilities. Long-term incentive (LTI) Performance rights used to align the reward of executives to the returns generated for Nine shareholders. Further detail in Section 3.6. 50% – Total Shareholder Return (TSR) – relative to S&P/ASX 200 Index companies. 50% – Earnings Per Share Growth (EPSG). Additional 25% CEO only – Strategic and Transformation Objectives. Hurdles measured over a three-year performance period. No retesting. At risk portion Link to Strategic Objective Chief Executive Officer: Target 100% of fixed remuneration, Maximum 125% of fixed remuneration (previous CEO, Mr Marks, had a maximum of 150% of fixed remuneration). Other Executive KMP: Target 50% of fixed remuneration, Maximum 75% of fixed remuneration. Chief Executive Officer: 125% of fixed remuneration. Other Executive KMP: 50% of fixed remuneration. The group financial measure rewards Group performance. Individual measures reflect individuals’ performance and contribution to the achievement of both business unit and Group short and long term objectives. This year’s focus was on a successful transition through the impacts of COVID-19, driving performance on revenues and audience targets, meeting targets for Stan, data commercialisation and meeting targets across various strategic initiatives including finance and enterprise transformation. For the new CEO, Mr Sneesby, measures were focused on a successful first 100 days in the role. A portion is paid in cash (67%) and a portion (33%) delivered as Nine shares deferred for up to two years to ensure continued alignment to shareholder outcomes. Creates a strong link with the creation of shareholder value. Relative TSR was chosen as it provides an external market performance measure having regard to S&P/ASX 200 Index companies representing Consumer Discretionary, Consumer Staples, Information Technology and Communication Services. EPSG was chosen as it aligns with shareholder dividends over time. Strategic and transformation objectives are chosen to focus on key initiatives to position Nine for medium to long term growth and sustainability. The CEO’s objectives for the FY21 grant focus on transformation of Nine into a digital focused business, demonstrated by increasing digital audience and engagement and growth in digital revenue and subscription revenue. Total Remuneration The remuneration mix is designed to align Executive remuneration and rewards to the creation of long term shareholder value. The remuneration of Executive KMP is set on appointment and then reviewed annually. We set both fixed remuneration and the total remuneration opportunity by considering factors such as experience, competence and performance in the role, competitive market pressures and internal equity with peers. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 55 Nine Annual Report 2021 Remuneration Report — Audited 2.1 Summary of Executive Remuneration outcomes The table below is a summary of remuneration outcomes for financial year 2021. Fixed remuneration • Mr Sneesby commenced as Nine CEO on 1 April 2021 at a fixed remuneration of $1,400,000 per Short-term incentive (STI) Long-term Incentive (LTI) Award vesting annum which is less than his predecessor. • Ms Phillips commenced in the role of CFO on 31 August 2020 at a fixed remuneration of $700,000 per annum which is less than her predecessor. • During FY21 there was no increase to Mr Stephenson’s fixed remuneration. • Setting a Group financial target in the midst of the pandemic was difficult. As positive signs emerged during the first half of the year, the Board re-visited the original target which had been set, and determined that 5% growth on the FY20 Group EBIT outcome of $249.1 million (before restatement $246.8 million) for continuing operations and pre significant items, would be an appropriate target. • The reported FY21 Group EBIT for continuing operations (before specific items) was $415.6 million, resulting in the Group Financial target being achieved at maximum performance. This represents 50% of the STI opportunity. • The individual measures were assessed against specific targets and awarded where achieved. This represents 50% of the STI opportunity. • FY21 short-term incentive payments to Executive KMP were consequently above target levels at payouts of between 112.5% and 140% of target opportunity. • LTI grants were made in line with plan rules for Executive KMP in financial year 2021. • LTI grants made in financial year 2019 were tested at 30 June 2021 in line with the plan rules. • TSR requirements were achieved at the threshold level of performance, resulting in 50% vesting of this portion of the grant (50% of total grant). • The EPSG target was not achieved, resulting in no vesting of this portion of the grant (50% of total grant). • Overall participants received a total of 25% of the possible benefits under the FY19 LTI plan. The remainder of the FY19 Rights lapsed. Non-executive director fees • The total amount paid by Nine to Non-Executive Directors in financial year 2021 was $1,101,250. This is well below the aggregate fee pool of $3 million approved by shareholders at the AGM on 21 October 2013. 3. Executive Remuneration 3.1 Remuneration Principles The remuneration framework is designed to attract and retain high performing individuals, align executive reward to Nine’s business objectives and to create shareholder value. The remuneration framework reflects the Company’s remuneration approach and considers industry and market practices and advice from independent external advisers. The Company’s Executive reward structure is designed to: • Align rewards to the creation of shareholder value, implementation of business strategy and delivery of results; • Implement targeted goals that encourage high performance and establish a clear link between executive remuneration and performance, both at Company and individual business unit levels; • Attract, retain and motivate high calibre executives for key business roles; • Provide a balance between fixed remuneration and at-risk elements and short-term and long-term outcomes that encourages appropriate behaviour to provide reward for short-term delivery and long-term sustainability; and • Implement an industry competitive remuneration structure. 56 Nine Annual Report 20213.2 Approach to Setting Remuneration Our Executive KMP reward is designed to support and reinforce the Nine strategy, reward delivery against our objectives and align to returns to shareholders. The Group aims to reward the Chief Executive Officer and other Executive KMP (Executive KMP) with competitive remuneration and benefits based on consideration of all the relevant inputs and provides a mix of remuneration (comprising fixed remuneration, short and long-term incentives) appropriate to their position, responsibilities and performance within the Group and aligned with industry and market practice. The key components of the remuneration framework for Executive KMP detailed in this remuneration report include fixed remuneration and at-risk remuneration: • Fixed remuneration is made up of base salary, non-monetary benefits and superannuation; and • At-Risk remuneration is made up of short-term and long-term incentives which form the at-risk component of Executive KMP remuneration. The Company reviews remuneration on a periodic and case-by-case basis taking into consideration market data, performance of the Company and individual and market conditions. The policy is to position remuneration for Executive KMP principally within a competitive range of direct industry peers in light of the small pool of executive talent with appropriate media and entertainment industry experience and skills. There is also consideration of other Australian listed companies of a similar size, complexity and prominence. The tables in section 3.3 summarises the Executive KMP remuneration structure and mix under the Company’s Remuneration Framework. 3.3 Remuneration Mix (at target) Chief Executive Officer Fixed Remuneration Short-Term Incentive Long-Term Incentive 30.8% 30.8% 38.4% Cash – 67% Deferred Shares – 33% Other Executive KMP Fixed Remuneration Short-Term Incentive Long-Term Incentive 50% 25% 25% Cash – 67% Deferred Shares – 33% Total at Risk 69.2% Total at Risk 50% Longer term focus through incentive deferral The remuneration mix is structured so that a substantial portion of remuneration is delivered through Deferred STI or LTI. The table below shows that remuneration awards to Executive KMPs are earned over a period of up to three years. This ensures that the interests of executives are aligned with shareholders and the delivery of the long-term business strategy. Year 1 Fixed remuneration STI – cash (67%) LTI – 3 year performance period Year 2 Year 3 STI – deferred shares (16.5%) STI – deferred shares (16.5%) 3.4 Fixed Remuneration Fixed remuneration represents the amount comprising base salary, non-monetary benefits and superannuation appropriate to the Executive KMP’s role. Fixed remuneration is set at a competitive level to attract and retain talent and considers the scope of the role, knowledge and experience of the individual and the internal and external market. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 57 Nine Annual Report 2021 Remuneration Report — Audited 3.5 Short Term Incentive (STI) Plan Purpose and overview • The STI plan is the annual incentive plan that is used for the Executive KMPs and other Executives. The STI plan is designed to align individual performance to the achievement of the business strategy and increased shareholder value. • Awards are made annually and are aligned to the attainment of clearly defined Group, business unit and individual targets. • The STI plan is subject to annual review by the People and Remuneration Committee (PRC). The structure, performance measures and weightings may therefore vary from year to year. STI funding • The pool to fund STI rewards is determined by the Group’s financial performance before significant items. Weighting of STI Measures • The STI is weighted 50% to a Group financial measure and 50% to individual objectives. STI Opportunity (at target) CEO Other Executive KMP % of fixed remuneration 100* 50 * Mr Sneesby’s STI opportunity as an Executive KMP for the FY21 STI plan is pro-rata from 1 April 2021. Group Financial Measures (50% of the STI) • Following changes to the accounting standards for leases, the financial measure changed to Group EBIT for continuing operations, before specific items, for the FY21 STI plan. • Group EBIT was chosen to align executive performance with the key drivers of shareholder value and reflect the short-term performance of the business. • Group financial performance measures for future years will be determined annually. • Payouts based on financial measures are detailed below (pro-rata between bands). Performance against target Current CEO Other Executive KMP % Payout (of Group Financial Component) <95% 95% 100% 105% 110% >115% Subject to Board consideration Subject to Board consideration 50% 100% 105% 112.5% 125% 50% 100% 110% 125% 150% • Executive KMPs are assigned individual objectives based on their specific area of responsibility. These objectives are set annually and are directly aligned to the Board approved financial, operational and strategic objectives and include quantitative measures where appropriate. At least one objective will be a non-financial measure. Weightings are assigned to each objective to reflect their relative importance to delivery of the strategy and required focus. • Individual objectives in FY21 were focused on a successful transition through the impacts of COVID-19, driving performance on revenues and audience targets, meeting targets for Stan, data commercialisation and meeting targets across various strategic initiatives including finance and enterprise transformation. For the new CEO, Mr Sneesby, measures were focused on a successful first 100 days in the role. Individual Objectives (50% of the STI) 58 Nine Annual Report 2021Individual Objectives (50% of the STI) continued Performance Assessment based on delivery of Individual KPIs Unsatisfactory Performance Requires Development Valued Contribution Superior Contribution Exceptional Contribution % Payout (of Individual Component) Current CEO Other Executive KMP Nil 25 – 75% 75 – 100% 100 – 110% 110 – 125% Nil 25 – 75% 75 – 110% 110 – 130% 130 – 150% Deferred STI Payment • 33% of any STI outcome is deferred into Nine shares (Shares) that vest in two tranches and cannot be traded until after they have vested. • Any unvested Shares may be forfeited if the executive ceases to be an employee before a vesting date. The following allocation of any STI payment between cash and Shares applies for financial year 2021: Cash Deferred Shares Date Payable/of Vesting Following results release 1 year following end of performance period 2 years following end of performance period Percentage 67% 16.5% 16.5% • The number of Shares subject to deferral is determined by dividing the deferred STI amount (being 33% of the STI payable) by the volume weighted average price (VWAP). VWAP is calculated over the period commencing 5 trading days before and ending 4 trading days after the performance period results release (i.e. over a total period of 10 trading days). • The Executive KMP will receive all benefits of holding the Shares in the period before vesting, including dividends, capital returns and voting rights. • Shares which have vested can only be traded, within specified trading windows, consistent with Nine’s Securities Trading Policy or any applicable laws (such as the insider trading provisions). • The Board has determined that Shares will be acquired on-market to satisfy any awards under this component of the STI Plan. Assessment and Board discretion • Actual performance against Group financial and individual measures is assessed at the end of the financial year. • In assessing the achievement of Group financial and individual measures, the People and Remuneration Committee (PRC) may exercise its discretion to adjust outcomes for significant factors that are considered outside the control of management that contribute positively or negatively to results. Adjustments are by exception and are not intended to be regular. Any adjustment will require the judgement of the PRC and should balance fair outcomes that reflect management’s delivery of financial performance, with the outcomes experienced by Nine’s shareholders. • The Board determines the amount, if any, of the short-term incentive to be paid to each Executive KMP, seeking recommendations from the PRC and CEO as appropriate, as well as the Chair of the Audit and Risk Committee. • For significant outperformance of financial measures and individual objectives, executives may be awarded an STI payment of up to 125% for the CEO, and 150% for other executives, of the target STI. • The Board has the discretion to clawback awards made under the Short Term Incentive Plan to ensure that participants do not unfairly benefit, including in the event of fraud, dishonesty or a breach of obligation to the Company. In addition, the Board may also clawback awards in the case of material risk issues arising or where any information becomes available after awards are granted, which suggests that the outcome was not justified. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 59 Nine Annual Report 2021 Remuneration Report — Audited 3.6 Long Term Incentive (LTI) Plan The LTI plan involves the annual granting of conditional rights to participants. Overview Grant Date The Long Term Incentive Plan is an equity incentive plan used to align the Executive KMPs’ remuneration to the returns generated for Nine shareholders. The FY21 grant was issued on the 1 December 2020 and remains on foot (or subject to testing against vesting conditions at the end of the performance period). Consideration Nil Performance Rights Performance rights are awarded based on the fixed amount to which the individual is entitled divided by the VWAP. The VWAP is calculated over the period commencing 5 trading days before and ending 4 trading days after the results release immediately following the start of the performance period (i.e. over a total period of 10 trading days). Upon satisfaction of Vesting Conditions, each Performance Right will, at the Company’s election, convert to a Share on a one-for-one basis or, at the Board’s discretion, entitle the Participant to receive cash to the value of a Share. No amount is payable on conversion. LTI Opportunity (at target) CEO Other Executive KMP % of fixed remuneration 125* 50 * Mr Sneesby’s LTI opportunity, as an Executive KMP, for the FY21 LTI grant is pro-rata based on his commencement date of 1 April 2021 to the value of $437,500 (representing 25% of an annual allocation). Allocation of any performance rights is subject to shareholder approval at the 2021 Nine Annual General Meeting in November 2021. Performance Period For the FY21 grant, the performance period is the three year period from 1 July 2020 to 30 June 2023 (Vesting Date). Vesting Dates Subject to the Vesting Conditions and Employment Conditions described below, Performance Rights held by each Participant will vest on the Vesting Date (with no opportunity to retest). Vesting Conditions Performance Rights granted for the FY21 allocation will vest on performance of the following hurdles: • Total Shareholder Return (TSR) Hurdle: 40% for the CEO, and 50% for other Executive KMP, is subject to the Company’s TSR performance against S&P/ASX 200 Index companies representing Consumer Discretionary, Consumer Staples, Information Technology and Communication Services. TSR was chosen as it provides a relative, external market performance measure. TSR Vesting Schedule Outcome Ranked at the 75th percentile or higher Ranked at the 50th percentile (Threshold) Ranked below the 50th percentile Vesting 50% 25% 0% Vesting is pro-rated if the outcome is between the Threshold and Maximum band. • Earnings Per Share Growth (ESPG) Hurdle: 40% for the CEO, and 50% for other Executive KMP, is subject to the achievement of fully diluted Earnings Per Share Growth (EPSG) targets as set by the Board over the Performance Period. EPSG was chosen as it aligns with shareholder dividends over time and provides a clear focus on meeting the earnings expectations delivered to the market. For the FY21 grant, the EPSG hurdle requires growth in earnings per share on a point to point basis, over the 3 year performance period, from a pre COVID-19 starting point, for any vesting to occur. This change for the FY21 grant removes the volatility and uncertainty around the recovery of COVID-19. If the Executive team achieves the EPS point-to-point target at the end of FY23, Nine will have come out of the COVID-impacted period in a strong financial position. 60 Nine Annual Report 2021Vesting Conditions EPSG vesting schedule: continued Outcome The EPSG hurdle requires growth in earnings per share on a point to point basis, over the performance period from a pre COVID-19 starting point, for any vesting to occur. Vesting occurs when: Growth over the period that exceeds the Maximum Vesting Target Growth over the period that meets or exceeds the Threshold Growth over the period of less than the Threshold Vesting 50% 16.5% 0% Vesting is pro-rated if the outcome is between the Threshold and Maximum band. EPSG hurdles are determined at the issue of each grant having regard to factors including: • Internal forecasting estimates taking into account the outlook for the industry; • Market expectations, including reference to sell-side equity analyst forecasts; • Recent actual performance; and • Market practice and competitor benchmarking. Due to the competitively sensitive nature of these hurdles and the implied outlook for Nine earnings, the PRC and Nine Board has determined to disclose these EPSG targets upon vesting of any performance rights. • Strategic Hurdle – Digital strategy (CEO only): 20% (for only the CEO) is subject to a strategic or transformation hurdle. For the FY21 grant, performance will be based on targets supporting our digital strategy, including targets relating to: • Digital audience growth in reach and engagement; • Digital revenue growth; and • Subscription revenue growth. The number of rights that vest will be based on the Board’s assessment of performance, on an aggregated level, across a group of quantitative measures. Due to the competitively sensitive nature of these digital measures and the implied outlook for Nine earnings, the PRC and Nine Board has determined to disclose their assessment upon vesting of any performance rights. The Board may vary the Vesting Conditions for each Plan issue. The PRC undertakes reviews of the targets on LTI grants on-foot to ensure they remain relevant in light of any Company transactions and external or legislative impacts. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 61 Nine Annual Report 2021 Remuneration Report — Audited Cessation of employment (Employment Conditions) If the Participant is not employed by Nine or any Nine Group member on a particular Vesting Date due to the Participant: • having been summarily dismissed; • resigning (subject to the Board exercising discretion to allow rights to be retained); or • having terminated his/her employment agreement otherwise than in accordance with the terms of that agreement, any unvested Performance Rights held on or after the date of termination will lapse. If the Participant has ceased to be employed by Nine in any other circumstances (e.g. redundancy, retirement, ill health), the Participant will retain a time based, pro-rated number of unvested Performance Rights determined on a tranche-by-tranche basis (where the time based proportion of each tranche is determined as the length of time from the start of the performance period to the date on which employment ceases divided by the total performance period of a particular tranche). Any unvested Performance Rights that do not lapse in accordance with the above, remain on-foot until the relevant Vesting Date. Any vesting at that time will be determined based on Vesting Conditions for those Performance Rights being met. Where vesting occurs during a trading blackout period under the Company’s Securities Trading Policy, any Shares issued or transferred to the Participant upon vesting of any Performance Rights will be subject to restrictions on disposal from the date of issue (or transfer) of the Shares until the commencement of the business day following the end of that blackout period, or such later date that the Board may determine under the Company’s Securities Trading Policy. A Participant may not enter into any arrangement for the purpose of hedging, or otherwise affecting their economic exposure to their Performance Rights. Disposal restrictions Clawback provision The Board has the discretion to clawback awards made under the Long Term Incentive plans to ensure that participants do not unfairly benefit, including in the event of fraud, dishonesty or a breach of obligation to the Company. Change of control Amendments Capital Initiatives In addition, the Board may also clawback awards in the case of material risk issues arising or where any information becomes available after awards are granted (whether vested or unvested), which suggests that the initial grant or result was not justified. The Board has the discretion to accelerate vesting of some or all of a Participant’s Performance Rights in the event of certain transactions which may result in a change of control of Nine Entertainment Co. Holdings Ltd. The discretion will be exercised having regard to all relevant circumstances at the time. Unvested Performance Rights will remain in place unless the Board determines to exercise that discretion. To the extent permitted by the ASX Listing Rules, the Board retains the discretion to vary the terms and conditions of the Performance Rights Plan. This includes varying the number of Performance Rights or the number of Shares to which a Participant is entitled upon a reorganisation of capital of Nine. The Board will endeavour to amend the terms of any Performance Rights on issue to equitably deal with any capital return, share consolidation or share split, such that the value of those rights is not prejudiced. The Board’s actions here will be at their sole discretion. 62 Nine Annual Report 20214. Linking Pay to Performance 4.1 Link Between Remuneration and Company Performance A key principle of the Nine remuneration framework is to align Executive remuneration outcomes with Company Performance. The People & Remuneration Committee makes recommendations to the Board on performance objectives, both financial and non-financial, for Executive KMP which are intended to be strongly linked between remuneration outcomes and shareholder value. The Company performance and remuneration outcomes link is demonstrated in the STI plan with 50% linked to the Group’s Financial target (Group EBIT for FY21) and the remaining 50% related to Individual Objectives made up of both a financial and non-financial nature. In the LTI plan, Company performance and remuneration outcomes are linked with key shareholder value measures of Earnings Per Share and relative TSR hurdles required to be achieved for any vesting to occur for all LTI participants. There is a separate strategic hurdle for the CEO which is based on digital transformation. Set out in the following table is a summary of the Group financial performance over the last five years and the link to Executive KMP remuneration outcomes over this period. 30 June 211 $m 30 June 20 1 Restated 2 $m 30 June 19 3 Pro-Forma $m 30 June 18 3 Pro-Forma $m 30 June 19 4 $m 30 June 18 1 $m 30 June 17 1 $m Revenue 2,331.5 2,155.3 2,341.7 2,364.0 564.7 24% 394.8 18% 423.8 18% 385.1 16% 1,965.1 349.9 18% 1,403.9 1,244.9 257.2 18% 205.6 17% Group EBITDA Group EBITDA % Net Profit after Tax and Minorities (pre specific items) Earnings per share – cents Opening share price Closing share price Dividend Executive KMP STI Payments Awarded Forfeited (at target) 261.0 142.4 224.8 170.6 187.1 156.7 123.6 15.3 cents 8.3 cents 11.6 cents 10.0 cents 13.0 cents 18.0 cents 14.0 cents 30 June 21 Cents/Share 30 June 20 Cents/Share 30 June 19 Cents/Share 30 June 18 Cents/Share 30 June 19 Cents/Share 30 June 18 Cents/Share 30 June 17 Cents/Share 138 291 10.5 188 138 7 248 188 10 138 248 10 248 188 10 138 248 10 105 138 9.5 30 June 21 30 June 20 30 June 19 30 June 18 30 June 19 30 June 18 30 June 17 131% — 0% 100% 69% 31% 129% — 69% 31% 129% — 94% 6% 1. Results are presented pre specific items on a continuing operations basis. 2. Details of the restatements in relation to the year ended 30 June 2020 are provided in the financial statements. 3. FY19 Pro-forma results aggregate the results for the former Nine and Fairfax businesses for the full 12 months to 30 June 2019, including 100% of Stan. They are presented pre specific items and purchase price accounting adjustments and on a continuing operations basis. These figures are unaudited. 4. FY19 includes the contribution from the former Fairfax businesses since the merger implementation date of 7 December 2018 and are from continuing operations only. They are presented pre specific items but inclusive of purchase price accounting adjustments. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 63 Nine Annual Report 2021 Remuneration Report — Audited 4.2 Short Term Incentives (STI) Outcomes The Short Term Incentive Plan for Executive KMP in FY21 was allocated 50% towards the achievement of the Group EBIT target and the remaining 50% for individual measures that reflect the individuals’ performance and contribution to the achievement of both business unit and Group objectives. Setting a Group financial target in the midst of the pandemic was difficult. As positive signs emerged during the first half of the year, the Board re-visited the original target which had been set, and determined that 5% growth on the FY20 Group EBIT outcome of $249.1 million (before restatement $246.8 million) for continuing operations and pre significant items, would be an appropriate target. The Executive team delivered a Group EBIT of $415.6 million (continuing operations and pre significant items), and therefore the Group financial target was achieved at maximum performance. For each Executive KMP, clear targets for the Individual Objectives that were important to the delivery of the company’s strategic goals were agreed. For FY21, these measures were targeted on a successful transition through the impacts of COVID, driving performance on revenues and audience targets, meeting targets for Stan, data commercialisation, and meeting targets across various strategic initiatives including finance and enterprise transformation. For the new CEO, Mr Sneesby, measures were focused on a successful first 100 days in the role. The Individual measures were assessed by the PRC and the Board and were mainly achieved at above target performance. The PRC and Board believe that the performance in FY21 has been appropriately reflected in the STI outcomes. The proportions of target and maximum STI that were awarded and forfeited by each Executive KMP in relation to the current financial year and last year are set out below. Executive KMP Mike Sneesby1 Maria Phillips2 Michael Stephenson Former Executive KMP Hugh Marks3 Paul Koppelman4 Proportion of Target STI (%) Proportion of Maximum STI (%) Awarded % Forfeited % Awarded % Forfeited % 112.5% — 123% — 140% 0% 135% 0% 0% 0% 0% — 0% — 0% 100% 0% 100% 100% 100% 90% — 82% — 93% 0% 90% 0% 0% 0% 10% — 18% — 7% 100% 10% 100% 100% 100% FY21 FY20 FY21 FY20 FY21 FY20 FY21 FY20 FY21 FY20 1. Mr Sneesby became an Executive KMP following his appointment as Chief Executive Officer on 1 April 2021. His STI was awarded on a pro-rata basis. 2. Ms Phillips commenced as Chief Financial Officer on 31 August 2020. Her STI was awarded on a pro-rata basis. 3. Mr Marks ceased to be CEO and therefore ceased to be an Executive KMP of the Company effective 31 March 2021. 4. Mr Koppelman was the Chief Financial Officer from 2 September 2019 until his resignation and ceased being an employee of the Company on 10 July 2020. 64 Nine Annual Report 2021 4.3 Long Term Incentives (LTI) Outcomes Plan Grant Date Test Date FY17 LTI 1 December 2016 30 June 2019 FY18 LTI 1 December 2017 30 June 2020 FY19 LTI 26 November 2018 30 June 2021 1 December 2019 30 June 2022 FY20 LTI 1 December 2020 30 June 2022 FY21 LTI 1 December 2020 30 June 2023 Performance Hurdles • 50% – Total Shareholder Return • 50% – Earnings Per Share Growth • 50% – Total Shareholder Return • 50% – Earnings Per Share Growth • 50% – Total Shareholder Return • 50% – Earnings Per Share Growth • 50% – Total Shareholder Return • 50% – Earnings Per Share Growth • 25% – Digital Transformation Measures (CEO only) • 50% – Total Shareholder Return • 50% – Earnings Per Share Growth • 25% – Digital Transformation Measures (CEO only) Vesting outcome (%) 100% 37% 25% N/A N/A N/A The performance period of the FY19 Long Term Incentive Plan (granted 26 November 2018) commenced on 1 July 2018 and concluded on 30 June 2021. Performance was assessed at the conclusion of the FY21 year, and as a result of performance over the three year period, 25% vesting was achieved. The Total Shareholder Return (TSR) hurdle was achieved at the threshold level of performance. The TSR result was at the 50th percentile compared to the comparator group, resulting in 50% vesting of this portion of the grant (50% of total grant). The cumulative EPSG performance was tested using statutory results, pre-specific items and prior to the purchase price accounting amortisation as a consequence of the Nine and Fairfax merger. That is, EPSG was calculated by applying legacy Nine up to the merger date (7 December 2018) and the merged entity thereafter. The EPSG targets for the FY19 LTI plan were 2% per annum for threshold performance and 5% per annum for stretch performance. The EPSG targets were not achieved, resulting in no vesting of this portion of the grant (50% of total grant). The portion of rights (75% of total FY19 grant) that did not meet the required performance hurdles were forfeited and lapsed. There is no retesting of the hurdles. 5. Executive Agreements Each Executive KMP has a formal employment agreement. Each of these employment agreements, which are of a continuing nature and have no fixed term, provide for the payment of fixed and performance-based remuneration, superannuation and other benefits such as statutory leave entitlements. The key terms of current Executive KMP contracts at 30 June 2021 were as follows: Mike Sneesby Maria Phillips Fixed Remuneration1 Target STI Target LTI Notice Period by Executive Notice Period by Company Restraint $1,400,000 $1,400,000 $1,750,000 12 months 12 months 12 months $700,000 $350,000 $350,000 12 months 12 months 12 months Michael Stephenson $840,000 $420,000 $420,000 12 months 12 months 12 months 1. Fixed remuneration comprises of base cash remuneration, superannuation and other non-monetary benefits. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 65 Nine Annual Report 2021 Remuneration Report — Audited 6. Remuneration Governance 6.1 The Board The Board approves the remuneration arrangements of the Chief Executive Officer (CEO) and other key executives and awards made under short-term incentive (STI) and long-term incentive (LTI) plans, following recommendations from the PRC. The Board also sets the remuneration levels of Non-Executive Directors (NEDs), subject to the aggregate pool limit approved by shareholders. 6.2 The People and Remuneration Committee (PRC) The PRC assists the Board in fulfilling its responsibilities for corporate governance and oversight of Nine’s human resources policies and practices and workplace health and safety (WHS) management. The PRC’s goal is to ensure that Nine attracts the industry’s best talent, appropriately aligns their interests with those of key stakeholders, complies with WHS obligations and effectively manages WHS risks. The PRC makes recommendations to the Board on CEO and Non-Executive Director remuneration. The PRC approves the executive reward strategy, and incentive plans and provides oversight of management’s implementation of approved arrangements. Details of the membership, number and attendance at meetings held by the PRC are set out on page 46 of the Directors’ Report. Further information on the PRC’s role, responsibilities and membership is included in the committee charter which is available at www.nineforbrands.com.au 6.3 Management Management prepares recommendations and information for the PRC’s consideration and approval. Management also implements the approved remuneration arrangements. 6.4 Use of Remuneration Consultants From time to time, the PRC seeks external independent remuneration advice. Remuneration consultants are engaged by, and report directly to, the Committee. In selecting a remuneration consultant, the Committee considers potential conflicts of interest and requires the consultant’s independence from management as part of their terms of engagement. Where the consultant’s engagement requires a remuneration recommendation, the recommendation is provided to the Chair of the PRC to ensure management cannot unduly influence the outcome. The Company has engaged the services of PwC as the Company’s remuneration advisor during the 2021 financial year. There were no remuneration recommendations provided to the Committee by PwC or any other consultants in the 2021 financial year. 6.5 Associated Policies The Company has established a number of policies to support reward and governance, including the Code of Conduct, Disclosure Policy and Securities Trading Policy. These policies have been implemented to promote ethical behaviour and responsible decision making. These policies are available on Nine’s website (www.nineforbrands.com.au). 66 Nine Annual Report 20217. Detailed disclosure of executive remuneration 7.1 Non-statutory remuneration disclosures The actual remuneration awarded to current Executive KMPs in the year ended 30 June 2021 (FY21) is set out in the table below. This information is considered to be relevant as it provides details of the remuneration actually receivable by the Company’s Executive KMPs in regards to FY21. STI amounts include both the cash and deferred shares elements awarded for the respective financial year. Only LTIs which were tested and have vested during the year are included. The table differs from the statutory disclosure in section 7.2 principally because the table in section 7.2 includes a value for LTI which may or may not vest in future years. Salary and fees $ Cash Bonus $ Fixed salary and allowance and cash bonus Other Remuneration1 Deferred STI2 Long-term incentives3 Remuneration for FY21 344,576 263,813 608,389 131,449 129,937 — — — — — 567,946 240,042 807,988 37,496 118,229 — — — — — — — — — 869,775 — 963,713 — 818,306 393,960 1,212,266 16,748 194,040 121,489 1,544,543 818,998 — 818,998 37,414 — 125,800 982,212 Executive Director Mike Sneesby4 FY21 FY20 Other Executive KMP Maria Phillips5 Michael Stephenson FY21 FY20 FY21 FY20 Former Executive KMP Hugh Marks6 Total Executive KMP FY21 1,528,305 1,401,975 2,930,280 109,029 690,525 404,968 4,134,802 FY20 1,528,997 — 1,528,997 149,745 — 482,521 2,161,263 FY21 3,259,133 2,299,790 5,558,923 294,722 1,132,731 526,457 7,512,833 FY20 2,347,995 — 2,347,995 187,159 — 608,321 3,143,475 1. Other remuneration relates to superannuation and movement in annual leave and long service leave balances. 2. Deferred STI relates to STI awarded in relation to the financial year but deferred in Nine shares. This is settled in two equal tranches over the following two years. 3. Rights which vested subsequent to 30 June 2021 but which were measured based on performance up to 30 June 2021. The value attributed to these Rights has been calculated based on the share price as at 2 August 2021 as an approximation of the cash value on vesting. 4. Mr Sneesby became an Executive KMP following his appointment as Chief Executive Officer (CEO) on 1 April 2021. 5. Ms Phillips commenced as Chief Financial Officer on 31 August 2020. 6. Mr Marks ceased to be CEO and therefore ceased to be a KMP of the Company on 31 March 2021, however his full year earnings in accordance with his contract of employment are shown in the table. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 67 Nine Annual Report 2021 Remuneration Report — Audited - r o f r e P e c n a m d % e t a e R l l $ a t o T s t i f e n e B 5 s e v i t n e c n i 4 I T S n o i t a n m r e T i m r e t - g n o L d e r r e f e D g n o L i e c v r e S 3 $ e v a e L l a u n n A 2 $ e v a e L - r e p u S n o i t a u n n a 1 $ r e h t O h s a C s $ u n o B s $ e e f d n a y r a a S l s t i f e n e B m r e T g n o L t s o P t n e m y o p m E l s t i f e n e B s t i f e n e B m r e T t r o h S . s t n e m e r i u q e r e r u s o c s d i l y r o t u t a t s h t i w e c n a d r o c c a n i l e b a t i g n w o l l o f e h t n i t u o t e s e r a 1 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f s e v i t u c e x e e h t f o n o i t a r e n u m e r e h t f o s l i a t e D s e r u s o c s i d l n o i t a r e n u m e r y r o t u t a t S 2 7 . 68 5 4 — 5 4 — 1 5 5 1 8 4 8 2 — 0 1 — 4 — , 5 7 7 9 6 8 , 9 0 4 8 9 0 , 1 — 0 2 9 , 1 9 6 , 1 , 5 8 6 2 0 0 , 1 , 6 1 6 3 3 9 7, — — — — — — , 6 5 6 6 5 8 2 , — — — — — — 7 3 9 9 2 1 , 7 2 3 7, 8 8 9 6 8 3 , 4 2 4 5 , 6 9 6 4 3 1 , 9 2 2 8 1 1 , 2 4 0 , 1 0 6 7 4 1 , 4 9 6 , 1 2 — — — — — 6 6 8 8 6 2 , 0 4 0 4 9 1 , 3 3 2 0 2 , ) 9 7 1 , 5 2 ( 4 9 6 , 1 2 3 7 2 6 4 1 , — 1 6 8 5 2 , ) 0 5 4 9 ( , 3 0 0 , 1 2 0 5 7 7, 5 2 2 , 4 9 8 7, 1 5 2 3 4 4 3 , 3 0 9 2 5 , 0 7 2 6 1 , , 4 7 0 4 0 7 , 1 1 , 6 5 6 6 5 8 2 , 2 1 3 , 1 6 6 2 , 0 0 1 , 0 6 9 4 3 0 3 4 1 , 7 4 0 7, 1 1 6 0 5 0 7 , , 9 9 7 4 2 3 2 , — 4 5 3 0 1 1 , , 4 2 2 4 8 8 — — — — , 6 5 0 6 4 6 — — 2 4 5 9 8 , , 3 7 8 3 9 0 , 1 , 1 5 2 0 8 8 1 5 6 0 4 , — — — — — — 5 6 2 , 1 — — 5 3 9 9 6 , 8 0 8 8 5 , 3 0 0 , 1 2 5 6 8 5 3 , 4 2 4 5 , — 1 7 4 , 1 — 0 0 0 5 2 , 1 9 4 0 3 , 2 0 5 7, 1 0 0 2 4 5 , — — — — — — — — — — — — — — , 3 1 8 3 6 2 , 6 7 5 4 4 3 — — , 2 4 0 0 4 2 6 4 9 7, 6 5 0 6 9 3 9 3 , 6 0 3 8 1 8 , — 8 9 9 8 1 8 , 1 2 Y F 0 2 Y F 1 2 Y F 0 2 Y F 1 2 Y F 0 2 Y F r o t c e r i D e v i t u c e x E 6 y b s e e n S e k M i P M K e v i t u c e x E r e h t O 7 s p i l l i h P a i r a M n o s n e h p e t S l e a h c M i P M K e v i t u c e x E r e m r o F 1 8 4 , 1 5 0 , 1 , 0 3 2 6 4 1 , 1 1 2 Y F — — — — — , 7 9 9 8 2 5 , 1 0 2 Y F — 5 6 0 9 6 , 4 2 2 , 1 9 6 0 0 5 6 4 1 , 1 2 Y F 0 2 Y F 1 2 Y F 0 2 Y F , 6 9 2 9 4 9 , 1 3 2 1 , 6 4 9 2 , 1 2 Y F l 9 n a m e p p o K l u a P 8 s k r a M h g u H 0 1 s e n r a B g e r G P M K e v i t u c e x E l a t o T , 1 8 5 5 0 3 5 , , 1 5 2 0 8 8 , 2 2 5 2 2 9 — 1 6 0 7, 9 0 2 3 , 1 8 8 0 5 4 8 , 0 0 2 4 5 , — , 9 1 7 5 8 1 , 3 0 2 Y F Nine Annual Report 2021 1. Represents a relocation and rent allowance for Mr Koppelman. 2. Amounts may be negative where the KMP’s annual leave taken in the year exceeds that accrued. 3. As a result of the Fairfax merger, Management adjusted the LSL provision methodology during the 2020 financial year to ensure consistency across the Group. 4. Deferred STI relates to STI awarded in relation to the financial year but deferred in Nine shares. This will be settled in two equal tranches over the next two years. 5. Details of the Long Term Incentive Plans are outlined in sections 3.6. 6. Mr Sneesby became an Executive KMP following his appointment as Chief Executive Officer (CEO) on 1 April 2021. No LTI has been recorded as the FY21 grant of rights is subject to approval by shareholders at the FY21 AGM in November 2021. Mr Sneesby’s LTI opportunity for the FY21 LTI grant, pro-rata based on his commencement date of 1 April 2021, is $437,500 (representing 25% of an annual allocation). 7. Ms Phillips commenced as Chief Financial Officer on 31 August 2020. 8. Mr Marks ceased to be CEO and a KMP on 31 March 2021, and will cease to be an employee of Nine on 31 August 2021. Mr Marks will receive his contractual entitlements according to his contract of employment on the ending of his employment. The statutory remuneration expense is comprised of the following: • Salary and Fees and Superannuation: These amounts shown are for the 9 months to 31 March 2021, during which time Mr Marks was a KMP. Mr Marks’ annual fixed remuneration is $1,550,000. • Cash Bonus and Deferred STI: Mr Marks was eligible to receive a Short Term Incentive (STI) payment for FY21. The Cash Bonus and Deferred STI amounts shown are for the 9 months to 31 March 2021, during which time he was a KMP. • Mr Marks was eligible to receive an annual allocation of performance rights as part of the Long Term Incentive plan. In accordance with the terms of issue of the performance rights and the terms of his employment contract, on cessation of employment Mr Marks will only retain a pro-rata proportion of his LTI rights under the FY20 and FY21 LTI plans; see note 3 to the table in Section 7.3 for further details. Those rights have been accounted for in this table under Long Term Incentives and Termination Benefits as set out below: • Long Term Incentives: The amounts shown under the Long Term Incentives column is the cost for the 9 months to 31 March 2021 of the FY19, FY20 and FY21 performance rights which Mr Marks will retain under the terms of his contract. This amount is made up of: • $46,857 which is the cost to 31 March 2021 of LTI rights to be tested against TSR (TSR rights) awarded under the FY19 LTI plan (vested and unvested), calculated at the fair value on award of TSR rights of $0.641; • $2,210,893 which is the cost to 31 March 2021 of the FY20 LTI Rights and the FY21 LTI Rights (as defined in note 3 to the table in Section 7.3), calculated at the share price at 30 June 2021 ($2.91), to recognise that any rights granted in FY20 and FY21 which vest in future years, following testing of the performance hurdles, will be cash settled in accordance with the terms of issue. These rights will be tested against existing performance criteria under those plans in July 2022 and July 2023 respectively to determine whether any rights vest. Whilst the Group has recognised an expense based on the assumption these rights vest in full, as these rights will be tested against their performance hurdles, there is no certainty that these amounts will actually become payable. • Termination Benefits amounts shown comprises: • salary and STI payments for the period of the FY21 financial year between 1 April 2021 and 30 June 2021 totalling $910,625 (salary and superannuation of $387,500 and STI payment of $523,125, of which $350,494 is a cash bonus and $172,631 is Deferred STI); • a payment of $1,047,842 representing the balance of the 12 months’ notice period payable to Mr Marks under his existing employment agreement; • $15,619 which is the cost from 1 April 2021 to 30 June 2021 of TSR rights awarded under the FY19 LTI plan (vested and unvested), calculated at the fair value on award of TSR Rights of $0.641; and • an amount of $882,569 which is the cost from 1 April 2021 until 31 August 2021 of the FY20 LTI Rights and the FY21 LTI Rights (as defined in note 3 to the table in Section 7.3) calculated at the share price at 30 June 2021 ($2.91), to recognise that any rights granted in FY20 and FY21 which vest in future years, following testing of the performance hurdles, will be cash settled in accordance with the terms of issue. These rights will be tested against existing performance criteria under those plans in July 2022 and July 2023 respectively to determine whether any rights vest. Whilst the Group has recognised an expense based on the assumption these rights vest in full, as these rights will be tested against their performance hurdles, there is no certainty that these amounts will actually become payable. 9. Mr Koppelman was the Chief Financial Officer from 2 September 2019 until his resignation and ceased being an employee of the Company on the 10 July 2020. 10. Mr Barnes ceased to be an employee of the Company on 31 August 2019. Mr Barnes was paid notice of one year’s salary, which was his contractual entitlement to notice. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 69 Nine Annual Report 2021 Remuneration Report — Audited 7.3 Performance Rights and Share Interests of Key Management Personnel 2021 Rights over shares held by Executive KMP The number of Performance Rights granted to Executive KMP as remuneration, the number vested and lapsed during the year and the number outstanding at the end of the year are shown below. Performance Rights do not carry any voting or dividend rights and can be exercised once the vesting conditions have been met. Share Rights Outstanding at Start of Year No. Share Rights granted in year No. Fair Value per Share Right at award date $ Award date Vesting Date Vested 1 No. Lapsed during the year No. Share Rights Outstanding at End of Year No. Executive Director Mike Sneesby2 Other Executive KMP Maria Phillips Michael Stephenson Former Executive KMP Hugh Marks3 175,439 228,260 584,795 760,869 — 208,830 1 Dec 20 1.940 1 Jul 23 208,830 26 Nov 18 1.065 1 Jul 21 43,859 131,580 — 1 Dec 19 1.163 1 Jul 22 250,596 1 Dec 20 1.940 1 Jul 23 228,260 250,596 26 Nov 18 1.065 1 Jul 21 146,198 438,597 — 1 Dec 19 292,118 1 Dec 20 1.163 1.163 1 Jul 22 1 Jul 22 210,542 550,327 80,833 211,285 1,156,026 1 Dec 20 1.940 1 Jul 23 705,229 450,797 Paul Koppelman4 230,978 1 Dec 19 1.163 1 Jul 22 230,978 — 1. Rights which vested subsequent to 30 June 2021 but which were measured based on performance up to 30 June 2021. 2. Mr Sneesby was appointed as Chief Executive Officer effective 1 April 2021. As part of his remuneration arrangement Mr Sneesby will be offered a right to participate in the NEC Long Term Incentive Plan for the 2021 financial year, on a pro-rata basis from his appointment to the CEO role, to the value of $437,500 (25% of his annual LTI opportunity) subject to shareholder approval which will be sought at the FY21 AGM held in November 2021. 3. In accordance with the terms of issue of the performance rights and the terms of his employment contract, on cessation of employment Mr Marks will only retain a pro-rata proportion of his LTI rights under the FY20 and FY21 LTI plans, as follows: • For the FY20 LTI plan 291,375 rights will lapse. Mr Marks will retain 761,612 performance rights in respect of the FY20 LTI plan (FY20 LTI Rights) which will be tested against existing performance criteria under that plan in July 2022 to determine whether any rights vest. As these LTI rights will be tested against their performance hurdles in July 2022 there is no certainty that these amounts will actually become payable. Any performance rights which vest will be satisfied by payment of cash, in accordance with the terms of issue. • For the FY21 plan, 705,229 rights will lapse. Mr Marks will retain 450,797 performance rights in respect of the FY21 LTI plan (FY21 LTI Rights) which will be tested against existing performance criteria in July 2023 to determine whether any rights vest. As these LTI rights will be tested against their performance hurdles in July 2023 there is no certainty that these amounts will actually become payable. Any performance rights which vest will be satisfied by payment of cash, in accordance with the terms of issue. 4. Mr Koppelman resigned and ceased to be an employee of the Company on 10 July 2020. The rights granted to Mr Koppelman on 1 December 2019 were forfeited and lapsed on resignation. 70 Nine Annual Report 2021 2021 Shareholding of Key Management Personnel The Board has a policy of encouraging directors to acquire shares to the value of one year’s base fees, to be acquired within five years of appointment. Nine Entertainment Co. Holdings Limited shares held by KMP and their related parties are as follows: As at 1 July 2020 Ord Granted on conversion of Share Rights Ord Granted as STI Ord Other Net Changes Ord Held directly as at 30 June 2021 Ord Held nominally as at 30 June 2021 Ord Non-Executive Directors Peter Costello Nick Falloon Andrew Lancaster1 Catherine West Mickie Rosen Patrick Allaway2 Samantha Lewis Executive Director 301,786 396,222 — 40,000 80,000 73,542 60,000 Mike Sneesby 81,083 Other Executive KMP Maria Phillips — — — — — — — — — — Michael Stephenson 519,087 92,500 Former Executive KMP Hugh Marks3 2,316,644 354,794 Paul Koppelman4 105,000 — Total 3,973,364 447,294 — — — — — — — — — — — — — — — — 60,000 — — — — — — 301,786 51,142 345,080 — — — — — — — — 100,000 80,000 73,542 60,000 81,083 — (527,070) 64,174 20,343 — — 2,389,158 282,280 — 105,000 (467,070) 2,504,474 1,449,114 1. Mr Lancaster joined the Board on 1 April 2021. The number of shares provided in the table was held at the commencement of his term as a Director and KMP and at the end of the financial year. 2. Mr Allaway retired from the Board on 1 April 2021. The number of shares provided in the table is as at the start of the financial year and as at the end of his term as KMP. 3. Mr Marks ceased to be Chief Executive Officer on 31 March 2021 and therefore ceased to be a KMP of the company. The number of shares provided in the table is as at the start of the financial year and at the end of his term as KMP. 4. Mr Koppelman ceased to be employed by Nine and a KMP of the company on 10 July 2020 and held 105,000 shares at the end of his term as KMP. Related Body Corporate – Domain Holdings Australia Limited (Domain) equity holdings of Directors The following table represent the number of Domain ordinary shares and Domain rights over shares held by Directors of Nine and their related parties. Director Related Body Corporate Relevant Interest as at 1 July 2020 Relevant Interest as at 30 June 2021 Nick Falloon1 Domain Holdings Australia Limited 101,239 ordinary shares 101,239 ordinary shares 31,105 share rights 31,105 share rights 1. Domain ran a program (Project Zipline) where employees and Directors could voluntarily sacrifice a portion of their cash salary for a 6 month period, and in return would be granted an allocation of share rights to this value. The period of the arrangement is from 4 May to 1 November 2020. Mr Falloon took up the offer and sacrificed 50% in cash fees and received 31,105 share rights which are anticipated to vest on 7 November 2021. Further details of the Domain program can be found in the Domain Annual Report. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 71 Nine Annual Report 2021 Remuneration Report — Audited 8. Non-Executive Director (NED) Remuneration Arrangements and detailed disclosures of NED remuneration Remuneration Policy The Board seeks to set aggregate Non-Executive remuneration at a level that provides the Company with the ability to attract and retain Directors of the highest calibre, at a cost that is acceptable to shareholders. The shareholders of Nine approved an aggregate fee pool of $3 million at the AGM on 21 October 2013. The Board will not seek any increase to the NED fee pool at the 2021 AGM. Structure The remuneration of NEDs consists of Directors’ fees and committee fees. The payment of additional fees for serving on a committee recognises the additional time commitment required by NEDs who serve on committees. The Chairman of the Board does not receive any additional fees in addition to Board fees for being a member of any committee. All Board fees include any superannuation entitlements, as applicable. These arrangements are set out in the written engagement letters with each Director. The NED fees are set out below: Role Chairman Directors Audit & Risk Committee chair Audit & Risk Committee member People & Remuneration Committee chair People & Remuneration Committee member Fees $340,000 $135,000 $30,000 $20,000 $25,000 $15,000 NEDs do not receive retirement benefits, nor do they participate in any incentive programs. No Share Rights or other share-based payments were issued to NEDs during the 2021 financial year. The statutory table below includes fees for the period, when they held the position of NEDs. Directors Fees Paid By Domain Holdings Australia Limited In the following statutory table representing fees paid to Nine NEDs for financial years 2020 and 2021, Mr Falloon and Mr Allaway (until 1 February 2020) are Board members of Domain Holdings Australia Limited (Domain). The fees paid to Mr Falloon and Mr Allaway in these years are included as controlled entity transactions. The fees are paid by Domain. Mr Falloon is the Chairman of the Domain Board and a member of the Domain People and Culture Committee, and the Audit and Risk Committee from 1 February 2020 (replacing Mr Allaway). In FY21, the Chairman’s fee on the Domain Board was $250,000 per annum. The Chairman does not receive any additional fees for being a member of Committees at Domain. Mr Allaway retired from the Domain board on 1 February 2020 and was a member of the Domain Audit and Risk Committee. Mr Marks, who was Nine’s CEO until 31 March 2021, joined the Domain Board on 1 February 2020 as a Non-Executive Director until his resignation from the Domain Board effective 31 March 2021. Mr Marks received no fees for his services on the Domain Board. Mr Sneesby, Nine’s CEO, joined the Domain Board on 21 April 2021 as a Non-Executive Director. Mr Sneesby receives no fees for his services on the Domain Board. 72 Nine Annual Report 2021NED Remuneration for years ended 30 June 2021 and 2020 Nine Domain (Controlled Entity) Nine Non-Executive Director Fees $ Superannua- tion paid by Nine $ Domain Non-Executive Director Fees $ Superannua- tion paid by Domain $ Financial year Fair Value of Domain’s Project Zipline Share Rights $ Total $ Non-Executive Directors Peter Costello Nick Falloon1 Andrew Lancaster2 Catherine West Mickie Rosen Samantha Lewis 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Former Non-Executive Directors Patrick Allaway3 Total NED 2021 2020 2021 2020 340,000 329,499 146,747 143,493 — — 164,384 164,384 123,288 123,288 176,096 164,384 — 10,501 3,253 6,507 — — 15,616 15,616 11,712 11,712 3,904 15,616 106,164 141,552 10,086 13,448 — — 189,234 211,626 — — 17,977 20,104 — — 340,000 340,000 49,889 407,100 6,342 388,072 — — — — — — — — — 69,687 — — — — — — — — — 6,620 17,977 — — — — — — — — — — — — 180,000 180,000 135,000 135,000 180,000 180,000 116,250 231,307 49,889 1,358,350 1,056,679 44,571 189,234 1,066,600 73,400 281,313 26,724 6,342 1,454,379 1. Mr Falloon received Director fees from a controlled entity, Domain Holdings Australia Limited (Domain), in respect of his services as Chairman of Domain. This amount is disclosed separately and was paid by Domain. In response to the impact of COVID-19, Domain ran a program (Project Zipline) where employees and Directors could voluntarily sacrifice a portion of their cash salary for a 6 month period, and in return would be granted an allocation of share rights to this value. The period of the arrangement was from 4 May to 7 November 2020. Mr Falloon took up the offer and sacrificed in total 50% in cash fees and received 31,105 share rights which are anticipated to vest on 7 November 2021. For the purpose of FY21 this equated to a fair value amount of $49,889 (FY20: $6,342). Further details of the Domain program can be found in the Domain Annual Report. 2. Mr Lancaster joined the Board on 1 April 2021 and has agreed that he will not be paid any Director’s fees for serving on the Board or any Committees to which he may be appointed. 3. Mr Allaway retired from the Nine Board on 1 April 2021. Mr Allaway received Director and Committee fees in FY20 from Domain, in respect of his services as a non-executive director of Domain and as a member of the Audit & Risk Committee. This amount is disclosed separately and was paid by Domain. Mr Allaway retired from the Domain Board on 1 February 2020. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 73 Nine Annual Report 2021 Remuneration Report — Audited 9. Loans to Key Management Personnel and their related parties No loans have been made to KMP or their related parties. 10. Other transactions and balances with Key Management personnel and their related parties The following related party arrangement has been entered into by a Nine Group member: • Sebastian Costello, the son of Peter Costello, is employed on a full time basis as a journalist and presenter on commercial, arm’s length terms. • Nick Falloon’s son had access to a corporate golf membership for part of the year up until 14 April 2021, which was paid for by the Group. The estimated value of this in the year to 30 June 2021 was $3,676 (30 June 2020; $4,521). 74 Nine Annual Report 2021Operating and Financial Review Review of Operations Revenue from Continuing Operations (before specific items) 2021 $m 2,331.5 Group EBITDA from Continuing Operations (before specific items) 1 564.7 Depreciation and Amortisation from Continuing operations Group EBIT from Continuing Operations (before specific items) Net Finance Costs from Continuing Operations Profit after tax before specific items from Continuing Operations Specific items from Continuing Operations (after income tax) Profit/(loss) from Continuing Operations after Income Tax Net Cash Flows generated from operating activities Net Debt 2 Leverage 3 (149.1) 415.6 (27.5) 277.5 (93.6) 184.0 398.2 249.9 0.4X 2020 Restated4 $m Variance $m Variance % 2,155.3 394.8 (145.7) 249.1 (26.3) 157.7 (665.4) (507.8) 374.5 396.9 1.0X 176.2 169.9 (3.4) 166.5 (1.2) 119.8 571.8 691.8 23.7 (147.0) 8% 43% 2% 67% 5% 76% (86%) (136%) 6% (37%) 1. EBITDA plus share of associates. 2. Bank facilities unsecured, less cash at bank. 3. Net Debt (excluding lease liabilities)/EBITDA (before Specific Items). 4. Refer to Note 1.2 for details of restatement to 30 June 2020 comparative financial information. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i Revenue from Continuing Operations before Specific items increased by 8% to $2,331.5 million driven by continued audience strength across all key platforms and a marked recovery in ad markets with particularly strong growth for Television Combined (FTA + BVOD). l l R R e e v v e e w w i i Group EBITDA before Specific Items (from Continuing Operations) increased by $169.9 million (43%) to $564.7 million with the revenue increase flowing to EBITDA. Depreciation and Amortisation increased from $145.7 million to $149.1 million and Net Finance Costs increased from $26.3 million in the prior year to $27.5 million in the current year. Specific Items of $108.5 million pre-tax (refer to note 2.4) relate principally to the impact of COVID-19 on the Radio advertising market and an associated review of carrying value, as well as group restructuring costs. These include: $61.5 million in intangible impairments for Radio; $30.5 million in restructuring costs; $18.7 million in provisions relating to onerous production contracts and other provisions; as well as net $2.2 million of other Specific Items reported. Operating Cash Flow increased $23.7 million to $398.2 million year on year due to the cash conversion of the EBITDA increase offset by the market recovery impact on working capital. In addition, capital expenditure during the period decreased from $136.0 million to $93.8 million, primarily reflecting the completion of Nine’s new Sydney headquarters at 1 Denison Street, North Sydney. The Group made dividend payments of $119.4 million or 7.0 cents per share, to shareholders during the year. Net Debt of the wholly owned Group at 30 June 2020 was $171.0 million (excluding lease liabilities) which, based on wholly- owned EBITDA, resulted in net leverage of 0.4x, well within bank covenants. i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 75 Nine Annual Report 2021 Operating and Financial Review Segmental Results The results of the continuing operations are set out below: 2021 $m 2020 Restated $m Variance $m Revenue 1 2 Broadcasting Digital and Publishing Domain Group Stan Corporate 1,242.6 1,127.5 504.5 286.6 311.8 2.3 518.5 267.8 242.1 14.2 Total Revenue from Continuing Operations 1 2,347.8 2,170.2 EBITDA 2 Broadcasting Digital and Publishing Domain Group Stan Corporate Share of Associates 332.5 117.2 100.6 39.5 (26.1) 1.0 197.3 91.5 84.7 31.0 (10.6) 0.9 Group EBITDA from Continuing Operations 564.7 394.8 1. Before the elimination of inter-segment revenue and excluding interest income. 2. Pre specific items. A summary of each division’s performance is set out below. 115.1 (14.0) 18.8 69.7 (11.9) 177.6 135.2 25.7 15.9 8.5 (15.5) 0.1 169.9 % 10% (3%) 7% 29% (84%) 8% 69% 28% 19% 27% 146% 11% 43% Broadcasting Revenue EBITDA Margin 2021 $m 1,242.6 332.5 27% 2020 $m 1,127.5 197.3 17% Variance 2021 to 2020 $m 115.1 135.2 % 10% 69% 10 pts Nine’s Broadcasting division, which comprises Nine Network, 9Now and Nine Radio, reported EBITDA of $332.5 million on revenues of $1,242.6 million for the year. Nine Network reported a revenue increase from $951.8 million to $1,044.7 million, growth of 10% for the year, primarily as a result of 24% growth in the second half against COVID affected comparatives. The FTA advertising market was up 11.5%1 across the year, and 25.8% in the second half with Nine’s FTA revenue share broadly flat on FY20. Costs improved by 2% or $19.9 million for the year. Second half costs reflected the prior period COVID affected comparatives with $36 million of the H2 increase NRL-related. 76 Nine Annual Report 2021In a BVOD market which grew by 55%2 for the year to $252 million, 9Now consolidated its leadership position with revenue growth of 46% to $107.1 million. Users and engagement continued to grow, with Daily Active Users recording double digit growth and live streaming minutes up 39%, notwithstanding COVID disrupted content plans. Overall, 9Now increased its EBITDA contribution from $49.7 million to $73.4 million. Nine Radio reported EBITDA of $8.4 million (2020: $9.8 million) on revenue of $90.8 million (2020: $102.6 million). The 11% decline in revenue was driven by discontinued businesses such as Map and Page and a Metro radio market which declined by 3%3, coupled with a lower market share. Radio costs declined by 11% or $10.4 million. Digital and Publishing Revenue EBITDA Margin 2021 $m 504.5 117.2 23% 2020 $m 518.5 91.5 18% Variance 2021 to 2020 $m (14.0) 25.7 % (3%) 28% 5 pts Nine’s Digital and Publishing division includes Metro Media, as well as Nine’s other Digital Publishing titles, including Pedestrian Group, Drive (formerly “CarAdvice”) and nine.com.au. Digital and Publishing reported revenue of $504.5 million and a combined EBITDA of $117.2 million. Metro Media contributed revenue of $402.0 million (2020: $426.3 million) and EBITDA of $98.9 million (2020: $88.2 million) for the year to 30 June 2021. The 6% decline in revenue was primarily attributable to print with a decline in both retail sales and advertising. Retail sales declined 18% or $15.8 million, as the tail of COVID continued to impact on the hotel, airport and CBD segments. Audiences grew strongly across each of The Sydney Morning Herald, The Age and the Financial Review, albeit with accelerating growth in digital subscriptions and flat print subscription revenue (total subscription revenue up 12% or $16.5 million). Advertising revenue was down 8% or $13.9 million, with print advertising declining but stabilising across the year, partially offset by growth in digital advertising of 11% across the year. There was a sharp decline in other revenue of $11.1 million reflecting the sale of Weatherzone and the reduced Events activity in the period. Costs at Metro Media declined by $35.1 million with more than half related to production and distribution, driven both by reduced print volumes and Nine’s revised printing arrangements. For the full year to June 2021, EBITDA grew by $10.7 million or 12% to $98.9 million. Other key components of Digital and Publishing together contributed revenue of $102.5 million, and EBITDA of $18.3 million representing a $15.0 million increase for the full year to June 2021. Domain Group Revenue EBITDA Margin 2021 $m 286.6 100.6 35% 2020 $m 267.8 84.7 32% Variance 2021 to 2020 $m 18.8 15.9 % 7% 19% 3 pts The property market, particularly in Sydney and Melbourne, rebounded strongly through the first half of FY21 which broadly benefited Domain. Across the year, Domain’s new listings recovered from FY20 lows, recording growth of 11%. Notwithstanding the absence of an across-the-board price increase, Domain recorded an 11% growth in controllable yield. Together, this resulted in revenue growth of 7% or $18.8 million. Operating costs increased by 2% or $2.9 million across the year with higher staff and insurance costs offset by efficiencies in promotions, production and software. In the year to 30 June 2021, full-year EBITDA was up by 19% from $84.7 million in 2020 to $100.6 million in 2021. During the year, Domain continued to grow its audiences, broaden its geographical exposure and focused on providing innovative solutions for both agents and consumers. 2. Source: Think TV, BVOD revenue, 12 months to June 2021. 3. Source: Commercial Radio Australia, 12 months to June 2021, 4 city basis. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 77 Nine Annual Report 2021 Operating and Financial Review Stan Revenue EBITDA Margin 2021 $m 311.8 39.5 13% 2020 $m 242.1 31.0 13% Variance 2021 to 2020 $m 69.7 8.5 % 29% 27% — During FY21, Stan consolidated the strong FY20 subscriber growth with current active subscribers now at 2.4 million, and focused on its long term strategic plan. The launch of Stan Sport, confirmation of a major output deal with NBCUniversal and increased programming commitments for Stan Originals, were the key initiatives, all enabled by Stan’s established scale and market position. The combination of the strong subscriber growth and 7% growth in ARPU increased Stan’s revenue by 29% across the full year to 30 June 2021 and resulted in EBITDA of $39.5 million for the year, an improvement of $8.5 million on the previous year. Share of Associates profit Share of Associates profit increased from a profit after tax of $928,000 to a profit after tax of $5,991,000, largely reflecting a one- off gain of $4,979,000 on an associates’ asset sale. Review of Financial Position At 30 June 2021, the Net Assets of the Group were $1,959.6 million which is $78.0 million higher than as at 30 June 2020 reflecting current year profitability after dividends paid to shareholders. Underlying Drivers of Performance The Group operates across four key businesses and industries, each of which has their own underlying drivers of performance. These are summarised below: • Broadcasting — size of the advertising market and the share attributed to FTA, Broadcast Video on Demand (BVOD) and Radio, Nine’s share of those advertising sectors, the regulatory environment and the ability to secure key programming contracts. Nine’s ability to control costs, particularly associated with content. • Digital and Publishing — size of the advertising market and the share attributed to Online, Nine’s share of those advertising sectors, the ability of Nine to engage with audiences across print media and digital platforms with their content. Nine’s ability to control costs, particularly associated with printing and distribution. • Real Estate Media and Technology Services — size of the real estate classifieds market largely driven by new property listings and Domain’s share of that market, as well as Domain’s ability to sell premium services to agents and users (often referred to as “depth penetration”). • Subscription Video on Demand (SVOD) — size of the SVOD market, Nine’s share of the SVOD market and the ability to secure key programming contracts. The impacts of changes in underlying drivers of performance on the current year result are set out in the Review of Operations, as applicable. Business Strategies and Future Prospects The Group is focusing on the following business growth strategies: • Consolidation of position as leading distributor of video content The Group intends to build on Nine’s position as a leading supplier of premium video content, through its FTA, Broadcast Video On Demand (9Now) and Subscription (Stan) businesses. The Group plans to expand its audience by investing in content that appeals to them, and by increasing the ways customers find and access this content, including via mobile devices. Through growth in audiences, the Group’s goal is to increase its revenue via both subscriptions and advertising. The Group is committed to supporting the continued growth of Stan and 9Now, particularly through cross-promotion across Nine’s multi-platform ecosystem. In addition, the Group intends to make use of its data assets to improve yields and the effectiveness of advertising. 78 Nine Annual Report 2021• Growth of digital businesses The Group intends to continue to migrate its audiences across both Broadcasting and Publishing onto its digital platforms. This will drive the Group’s ability to offer a broader range of advertising and subscription options. Continued migration to digital platforms also builds the Group’s data asset which enables it to enhance the effectiveness of its advertising and support the growth of its own businesses. • Growth of Domain businesses The Group is focused on growing Domain, with a clear operational focus on the roll-out of the Group’s marketplace strategy. Domain’s core residential listings business remains the largest contributor, with residential revenue growth expected to come via both yield and depth, as well as geographical expansion (growth in the business outside of Sydney and central Melbourne), expedited by the relationship with, and access to, other Nine assets, most notably FTA television and digital. Group wide initiatives are underway to augment the growth of Domain primarily via increased brand recognition and enhanced traffic to Domain.com.au. Domain remains focussed on broadening its business base through the creation of a property marketplace, offering consumer, agent and data solutions. • Optimisation of performance of the Group’s traditional media assets As Nine focuses on growing its digital assets, the Group will continue to focus on optimising the performance of its traditional media assets. Nine has restructured much of its Radio business since acquisition and continues to achieve cost efficiencies across its print publishing assets. Content investment will also be more targeted towards content that works across multiple platforms, and exclusivity of content. • Optimise the returns and opportunities associated with the Group’s content and audience reach Across its assets, Nine’s strengths lie in the production and broad distribution of its premium content. The Group will continue to identify and pursue opportunities where it can increase its rights to use content and drive premium revenue, and broaden the utilisation of this content across its well-established distribution platforms, as well as the monetisation of the Group’s content across other platforms. The Group remains committed to optimising its cost base and will also assess targeted investment in aligned growth opportunities, focused on driving long term returns for the business. The Group believes that the successful execution of these business strategies will enable the Group to grow in the future. Material business risks The following section outlines the material business risks that may impact on the Group achieving its strategic objectives and business operations, including the mitigating factors put in place to address those risks. The material risks are not set out in any particular order and exclude general risks that could have a material effect on most businesses in Australia under normal operating conditions. These risks are managed on an ongoing basis as part of our risk management framework. Mitigations and strategies to address them are maintained and regularly reviewed, including via regular reporting to the Board. Revenue — the major risks which could affect the revenue of the Group are: • Longer term impact of COVID-19, including the timing and extent of recovery and potential for future outbreaks; • A significant change to advertising market conditions that leads to a prolonged decline in the advertising market or an adverse shift in FTA television, Print or Digital publishing relative shares of the broader advertising market; • Nine’s share of the FTA market itself; • A change in the way content is viewed or consumed by audiences; • Declines in property market conditions; • Difficulty securing access to premium content; and • Impact of competitor strategies or new market entrants. A key contributor to these risks is a change in audience behaviours and preferences. Peak-time programming performance or loss of key programming rights may also contribute to these risks materialising. The continued development of alternative forms of media may lead to increased competition for advertising revenue. Nine’s strategies are focused on ensuring we effectively anticipate and respond to the potential risks through having the best platforms, creating and securing the content audiences want to consume and delivering it to them when and where they want it. Our digital strategy enables us to maximise our revenue opportunities across all of our platforms. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 79 Nine Annual Report 2021 Operating and Financial Review Operational — from an operational perspective, the business is subject to operational risks of various kinds, including transmission failure, systems failure, data loss, inaccurate reporting, industrial action (such as at film and television production studios, and in sporting competitions broadcast by Nine), defamation and other execution risks, including those that significantly impact production (such as COVID-19 in FY21). These risks could have a negative effect on Nine’s reputation and its ability to conduct its business without disruption or at the budgeted level of cost in various ways. Technology, cyber security and data privacy — Nine’s strategy to leverage all our digital assets requires us to ensure our technology and infrastructure is able to deliver our content when, and where, our audiences choose to consume it. We invest in the latest technologies to ensure we remain at the forefront of industry developments, deliver the best experience for our audiences and maximise operating efficiencies. Whilst the threat of cyber attacks exists in all businesses, Nine’s reliance on technology and key partners to deliver our products and services increases the potential impact of cyber risks. During the year we demonstrated our preparedness to address these risks following a cyber attack in March 2021. Whilst the attack did cause some disruption, we were able to respond to limit the impacts. Despite the success of our response, we continue to invest in ensuring our cyber security practices and infrastructure respond to the ever-evolving cyber threats we face. Regulation and Legislation — Nine’s businesses are subject to changes in regulation at Federal, State and local level as well as changes in government policy and decisions by the courts. These risks include changes to: the regulatory environment under which the FTA industry operates; anti-siphoning legislation; the licence conditions under which Nine operates (including the granting of a fourth licence in the major markets in which Nine operates); regulation of content; advertising restrictions in relation to certain types of products; and interpretation of privacy and defamation laws. These risks could adversely impact Nine’s reputation and/or Nine’s revenues, costs or financial performance. The Group’s internal processes are regularly assessed and tested as part of robust risk and assurance programs. Further to this, Nine manages the costs of compliance to ensure our costs of doing business are not significantly impacted. We do this by ensuring we pro-actively manage changes to regulatory requirements and respond with effective programs to ensure compliance. People and culture — The increasingly competitive landscape and the ongoing need for media organisations to remain agile in order to anticipate and respond to changing audience preferences, continues to place pressure on the competition for talent. The ability to attract and retain talent with the necessary skills and capabilities to operate in a challenging market whilst being able to continue to adapt is critical to Nine’s success. We continue to be an employer of choice by being Australia’s best Media Company, investing in our people through training and development opportunities, by promoting diversity and workplace flexibility and maintaining succession planning. Domain — Domain is a separate company which has minority investors and is listed on the ASX. As such, decisions by the board and the actions of the company must be made having regard to their best interests. This may mean that if their interests diverge from those of Nine, Domain may adopt an approach contrary to the preferences of Nine. 80 Nine Annual Report 2021 Nine Entertainment Co. Holdings Limited ABN 60 122 203 892 Financial Statements 30 June 2021 Contents Financial Statements Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report 81 82 83 84 85 86 144 145 Financial Statement Note Index 1. About this 2. Group report Performance 3. Operating Assets and Liabilities 4. Capital Structure and Management 5. Taxation 6. Group Structure 7. Other 1.1 Significant 2.1 Segment 3.1 Cash events during the period information and cash equivalents 4.1 Financial liabilities 5.1 Income tax expense 6.1 Business 7.1 Other financial combinations assets 1.2 Basis of preparation 2.2 Revenue and other income from continuing operations 3.2 Trade 4.2 Share capital and other receivables 5.2 Deferred tax assets and liabilities 6.2 Investments accounted for using the equity method 7.2 Defined benefit plan 1.3 Notes to the Financial Statements 2.3 Expenses from continuing operations 3.3 Program rights and inventories 4.3 Dividends paid and proposed 4.4 Share-based payments 4.5 Financial instruments 2.4 Specific items 3.4 Trade 2.5 Earnings per share and other payables 3.5 Property, plant and equipment 3.6 Intangible assets 3.7 Provisions 3.8 Commitments 6.3 Investment 7.3 Auditors’ in controlled entities remuneration 6.4 Deed of cross guarantee 7.4 Contingent liabilities and related matters 6.5 Parent entity disclosures 7.5 Events after the balance sheet date 6.6 Transactions with related parties 7.6 Other significant accounting policies 6.7 Discontinued operations 81 Nine Annual Report 2021 Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2021 Continuing operations Revenues Expenses Finance costs 2021 $’000 2020 Restated1 $’000 2,342,178 2,172,060 (2,039,575) (2,625,378) (29,002) (27,793) Note 2.1 2.3 2.3 Share of profits of associate entities 6.2(c) 5,991 928 Net profit/(loss) from continuing operations before income tax expense 279,592 (480,183) Income tax expense 5.1 (95,631) (27,568) Net profit from continuing operations after income tax expense 183,961 (507,751) Discontinued operations Profit/(Loss) after tax from discontinued operations 6.7 — (66,189) Net profit/(loss) for the period Net profit/(loss) for the period attributable to: Owners of the parent Non-controlling interest Net profit/(loss) for the period Other comprehensive income Items that may be reclassified subsequently to profit or loss: Foreign currency translation Other Items that will not be reclassified subsequently to profit or loss: Fair value movement in investment in listed equities Actuarial gain/(loss) on defined benefit plan (net of tax) Other comprehensive income/(loss) for the period 183,961 (573,940) 169,364 (589,198) 14,597 15,258 183,961 (573,940) (525) — 1,230 3,674 4,379 (168) 145 (489) (4,176) (4,688) 7.1 7.2 Total comprehensive income/(loss) attributable to equity holders 188,340 (578,628) Total comprehensive income/(loss) attributable to: Owners of the parent Non-controlling interest Total comprehensive income/(loss) for the period Earnings per share Basic earnings attributable to ordinary equity holders of the parent Diluted earnings attributable to ordinary equity holders of the parent Earnings per share for continuing operations Basic and diluted earnings attributable to ordinary equity holders of the parent 1. Refer to Note 1.2 for details of restatement to 30 June 2020 comparative financial information. 173,743 (593,886) 14,597 15,258 188,340 (578,628) 2.5 2.5 2.5 $0.10 $0.10 ($0.35) ($0.34) $0.10 ($0.31) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 82 Nine Annual Report 2021Consolidated Statement of Financial Position as at 30 June 2021 Current assets Cash and cash equivalents Trade and other receivables Program rights and inventories Prepayments Other assets Assets held for sale Total current assets Non-current assets Receivables Program rights and inventories Investments accounted for using the equity method Other financial assets Property, plant and equipment Intangible assets Prepayments Defined benefit plan Total non-current assets Total assets Current liabilities Trade and other payables Financial Liabilities Current income tax liabilities Provisions Derivative financial instruments Total current liabilities Non-current liabilities Payables Financial liabilities Deferred tax liabilities Provisions Derivative financial instruments Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Total equity attributable to equity holders of the parent Non-controlling interest Total equity Note 30 June 2021 $’000 30 June 2020 Restated1 $’000 3.1 3.2 3.3 3.2 3.3 6.2 7.1 3.5 3.6 7.2 3.4 4.1 3.7 4.5 3.4 4.1 5.2 3.7 4.5 4.2 171,927 380,997 256,617 32,744 3,934 3,622 849,841 12,473 140,939 31,181 6,690 573,936 2,266,441 4,150 25,533 3,061,343 3,911,184 475,026 123,492 56,052 180,028 2,772 837,370 100,035 726,938 257,002 30,238 — 1,114,213 1,951,583 1,959,601 2,122,146 (42,670) (264,925) 1,814,551 145,050 1,959,601 187,394 258,061 225,744 25,377 10,978 3,622 711,176 13,511 122,585 25,766 5,460 415,172 2,352,896 12,449 14,805 2,962,644 3,673,820 380,587 103,429 9,983 153,739 — 647,738 74,096 749,192 298,741 19,761 2,700 1,144,490 1,792,228 1,881,592 2,123,146 (61,531) (314,965) 1,746,650 134,942 1,881,592 1. Refer to Note 1.2 for details of restatement to 30 June 2020 comparative financial information. The above consolidated statement of financial position should be read in conjunction with the accompanying notes. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 83 Nine Annual Report 2021 Consolidated Statement of Changes in Equity for the year ended 30 June 2021 9 7 3 4 , — 9 7 3 4 , — , 1 6 9 3 8 1 7 9 5 4 1 , 4 6 3 9 6 1 , 4 6 3 9 6 1 , 0 4 3 8 8 1 , 7 9 5 4 1 , 3 4 7 3 7 1 , 4 6 3 9 6 1 , — — — — — — ) 0 0 3 2 ( , ) 0 7 1 ( ) 0 3 1 , 2 ( 0 4 1 0 7 5 ) 3 9 2 2 ( , 9 5 9 7, 1 0 4 1 0 7 5 — — — — ) 3 9 2 2 ( , 9 5 9 7, 1 4 5 — — — — — — ) 7 0 4 4 2 1 ( , ) 9 2 0 5 ( , ) 8 7 3 9 1 1 ( , ) 8 7 3 9 1 1 ( , — — — — — — — — — — ) 0 3 1 , 2 ( — — — ) 4 5 ( ) 3 9 2 , 1 ( — — — — — 9 5 9 7, 1 — 4 0 9 4 , 4 0 9 4 , — ) 5 2 5 ( ) 5 2 5 ( — — — — — — — — — — — — — — — — — — — — — — — 3 9 2 , 1 ) 3 9 2 2 ( , — — — — — — — — — — — — — 2 9 5 , 1 8 8 , 1 2 4 9 4 3 1 , , 0 5 6 6 4 7 , 1 ) 5 6 9 4 1 3 ( , ) 4 0 4 4 5 ( , 9 5 9 4 , ) 0 1 7 0 1 ( , ) 6 7 3 , 1 ( ) 7 5 6 , 1 1 ( , 3 0 8 4 3 1 , 2 , 1 0 6 9 5 9 , 1 0 5 0 5 4 1 , , 1 5 5 4 1 8 , 1 , ) 5 2 9 4 6 2 ( ) 4 3 5 6 5 ( , 1 7 5 , 1 2 ) 6 0 8 5 ( , ) 1 0 9 , 1 ( ) 7 5 6 2 1 ( , , 3 0 8 4 3 1 , 2 d o i r e p e h t r o f ) s s o l ( / e m o c n i i e v s n e h e r p m o c r e h t O d o i r e p e h t r o f ) s s o l ( / e m o c n i e v i s n e h e r p m o c l a t o T ) d e t a t s e r ( 0 2 0 2 l y u J 1 t A d o i r e p e h t r o f t i f o r P i y r a d s b u s i ) 4 4 . e t o N ( s e r a h s n a P l s t h g R i f o g n i t s e V y t i u q e o t e v r e s e r m o r f s r e f s n a r T I C N f o i n o i t i s u q c A n i t s e r e t n i g n i l l o r t n o c - n o n f o n o i t i n g o c e R s t s e r e t n i g n i l l o r t n o c - n o n h t i w s n o i t c a s n a r T s e r a h s f o e s a h c r u P x a t f o t e n , e s n e p x e t n e m y a p d e s a b - e r a h S l s r e d o h e r a h s o t s d n e d v D i i , 3 2 3 3 7 7 2 , 4 4 6 2 9 1 , , 9 7 6 0 8 5 2 , , 1 1 8 8 4 4 6 9 2 6 , 4 0 6 6 , ) 0 9 1 , 6 ( ) 8 5 0 , 1 ( ) 7 8 5 8 ( , , 3 0 8 4 3 1 , 2 ) d e t r o p e r l y s u o v e r p i ) 3 0 3 5 ( , ) 4 1 1 , 1 ( ) 9 8 1 , 4 ( ) 9 8 1 , 4 ( — — — — — — ) 2 . 1 e t o N ( y c i l o p g n i t n u o c c a n i e g n a h c f o t c e f f e t e N ) 8 8 6 4 ( , — ) 8 8 6 4 ( , — ) 0 4 9 3 7 5 ( , 8 5 2 5 1 , ) 8 9 1 , 9 8 5 ( ) 8 9 1 , 9 8 5 ( ) 8 2 6 8 7 5 ( , 8 5 2 5 1 , ) 6 8 8 3 9 5 ( , ) 8 9 1 , 9 8 5 ( — — — — — — ) 9 5 7 7, 1 1 ( ) 6 7 3 5 5 ( , ) 3 8 3 2 6 ( , 3 1 9 3 , 3 1 9 3 , — ) 0 0 8 5 ( , 8 6 7 2 , — — ) 0 0 8 5 ( , 8 6 7 2 , — — — — — 0 5 1 ) 2 2 9 0 9 1 ( , ) 3 8 3 0 2 ( , ) 9 3 5 0 7 1 ( , ) 9 3 5 0 7 1 ( , — — — — — — — — — ) 0 3 7 2 ( , ) 0 0 7 0 6 ( , ) 3 8 6 , 1 ( — — — — — — — 8 6 7 2 , — ) 0 2 5 4 ( , ) 0 2 5 4 ( , — — — — — — — — ) 8 6 1 ( ) 8 6 1 ( ) 0 5 1 ( — — — — — — — — — — — — 0 3 7 2 , ) 0 0 8 5 ( , — — — — — — — — — — — — , 0 2 0 8 6 7 2 , 0 3 5 , 1 9 1 , 0 9 4 6 7 5 2 , , 2 2 6 4 4 4 6 9 2 6 , 4 0 6 6 , ) 0 9 1 , 6 ( ) 8 5 0 , 1 ( ) 7 8 5 8 ( , , 3 0 8 4 3 1 , 2 d o i r e p e h t r o f ) s s o l ( / e m o c n i i e v s n e h e r p m o c r e h t O d o i r e p e h t r o f ) s s o l ( / e m o c n i e v i s n e h e r p m o c l a t o T ) d e t a t s e r ( 9 1 0 2 l y u J 1 t A d o i r e p e h t r o f t i f o r P ) 4 4 . e t o N ( s e r a h s n a P l s t h g R i f o g n i t s e V s t s e r e t n i g n i l l o r t n o c - n o n f o i n o i t i s u q c A s t s e r e t n i g n i l l o r t n o c - n o n h t i w s n o i t c a s n a r T y t i u q e o t e v r e s e r m o r f s r e f s n a r T e s n e p x e t n e m y a p d e s a b - e r a h S s e r a h s f o e s a h c r u P l s r e d o h e r a h s o t s d n e d v D i i 2 9 5 , 1 8 8 , 1 2 4 9 4 3 1 , , 0 5 6 6 4 7 , 1 ) 5 6 9 4 1 3 ( , ) 4 0 4 4 5 ( , 9 5 9 4 , ) 0 1 7 0 1 ( , ) 6 7 3 , 1 ( ) 7 5 6 , 1 1 ( , 3 0 8 4 3 1 , 2 ) d e t a t s e r ( 0 2 0 2 e n u J 0 3 t A . s e t o n i g n y n a p m o c c a e h t h t i w n o i t c n u n o c j n i d a e r e b l d u o h s y t i u q e n i s e g n a h c f o t n e m e t a t s d e t a d i l o s n o c e v o b a e h T 1 2 0 2 e n u J 0 3 t A s a ( 9 1 0 2 l y u J 1 t A l a t o T y t i u q E 0 0 0 $ ’ - n o N 0 0 0 $ ’ s t s e r e t n i g n i l l o r t n o c l a t o T 0 0 0 $ ’ 0 0 0 $ ’ i d e n a t e R i s g n n r a e 0 0 0 $ ’ r e h t O e v r e s e r 0 0 0 $ ’ e v r e s e r 0 0 0 $ ’ I C O V F d e s a b - e r a h S l i a c n a n i f s t n e m y a p t a s t e s s a l e u a V r i a F f o e v r e s e r i n g e r o F y c n e r r u c 0 0 0 $ ’ e v r e s e r 0 0 0 $ ’ s e r a h s y t i u q e 0 0 0 $ ’ n o i t a l s n a r t n a p l s t h g R i d e t u b i r t n o C 84 Nine Annual Report 2021 Consolidated Statement of Cash Flows for the year ended 30 June 2021 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Dividends received — associates Government grants Interest received Interest and other costs of finance paid Income tax paid Net cash flows generated from operating activities Cash flows from investing activities Purchase of property, plant and equipment Purchase of intangible assets Proceeds on disposal of property, plant and equipment Disposal/(acquisition) of subsidiaries, net of cash acquired Proceeds from disposal of investments and assets held for sale Funding to associates Net cash flows used in investing activities Cash flows from financing activities Proceeds from borrowings Repayments of borrowings Purchase of rights plan shares Payment of the principal portion of leases Dividends paid to and other transactions with non-controlling interest Note 30 June 2021 $’000 30 June 2020 Restated 1 $’000 2,482,841 2,764,062 (1,978,030) (2,285,341) 50 11,809 1,520 (28,713) (91,316) 398,161 (42,633) (51,130) — 4,470 6,000 (939) 5,467 4,552 1,619 (27,330) (88,528) 374,501 (85,310) (50,647) 807 (132,864) (6,454) 382 (84,232) (274,086) 229,960 (395,000) (2,293) (40,010) (2,675) 761,442 (691,473) (5,800) (42,389) (20,383) Dividends paid to shareholders of the Group 4.3 (119,378) (170,539) Net cash flows used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the financial period Cash and cash equivalents at the end of the period (329,396) (15,467) 187,394 171,927 (169,142) (68,727) 256,121 187,394 1. Refer to Note 1.2 for details of restatement to 30 June 2020 comparative financial information. The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 85 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 1. About this Report The financial report includes the consolidated entity consisting of Nine Entertainment Co. Holdings Limited (the “Company” or “Parent Entity”) and its controlled entities (collectively, the “Group”) for the year ended 30 June 2021. Nine Entertainment Co. Holdings Limited is a for-profit company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities of the Group are described in the Directors’ Report. Information on the Group’s structure is provided in Note 6. Information on other related party relationships is provided in Note 6.6. The consolidated general purpose financial report of the Group for the year ended 30 June 2021 was authorised for issue in accordance with a resolution of the Directors on 25th August 2021. The Directors have the power to amend and reissue the financial report. 1.1 Significant events during the period Cyber-Attack During the year, the Group was subject to a cyber-attack which caused disruption to operations for a short period of time. No sensitive data was compromised in relation to this attempted breach and the financial impact on the business was not material. Relocation of the Group headquarters to 1 Denison Street, North Sydney During the period, the Group relocated its headquarters to 1 Denison Street, North Sydney and commenced a long-term lease with an initial term of 12 years. As a result, a Right of Use asset totalling $156.5 million was recognised within Property, Plant and Equipment, with a related finance lease liability totalling $189.8 million recognised within financial liabilities. This lease represents a cash commitment of the Group in FY22 of $17.4 million, FY23 — FY27 a total of $97.2 million and FY28 onwards a total of $95.3 million. 1.2 Basis of preparation This financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has been prepared using the going concern basis of accounting and the historical cost convention, except for derivative financial instruments and investments in listed equities which have been measured at fair value and investments in joint ventures and associates which have been accounted for using the equity method. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated under the option available to the Company under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. The Company is an entity to which the instrument applies. The accounting policies adopted in the preparation of the financial report are consistent with those applied and disclosed in the 2020 annual report except as set out below and in Note 7.6. The consolidated financial statements provide comparative information in respect of the previous period, which is reclassified where necessary in order to provide consistency with the current financial year. Statement of compliance The financial report complies with Australian Accounting Standards. The financial report also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. Key Judgements and Estimates In the process of applying the Group’s accounting policies, management has made a number of judgements and applied estimates of future events. Judgements and estimates which are material to the financial report are found in the following notes: Note 3.3 Program rights and inventories Note 3.6 Intangible assets Note 3.7 Provisions Note 6.1 Business combinations 86 Nine Annual Report 2021Restatements to comparative financial information for the year-ended 30 June 2020 The comparative financial information for the year ended 30 June 2020 has been restated as a result of an accounting policy change and a restatement to the deferred tax liability. Details of these restatements, including the related impact on the comparative financial information, is set out below: 1.2(a) Accounting Policy Change — Configuration or Customisation Costs in a Cloud Computing Arrangement In April 2021, the IFRS Interpretations Committee (IFRIC) published an agenda decision for configuration and customisation costs incurred related to a Software as a Service (SaaS) arrangement. Following this clarification, the Group has changed its accounting policy in relation to configuration and customisation costs incurred in implementing SaaS arrangements. The nature and effect of the adjustment as a result of changing this policy is described below. The Group’s accounting policy has historically been to capitalise costs related to the configuration of SaaS arrangements as intangible assets in the Statement of Financial Position, where they meet the relevant definition. The adoption of the above agenda decision resulted in a de-recognition of these intangible assets and the recognition of an expense in the Consolidated Statement of Profit or Loss and Other Comprehensive Income, impacting both the current and prior periods presented. This change in policy has resulted in an increased expense in the current financial year related to the implementation of financial systems across the Group that would have previously been capitalised. Refer to Note 2.4 for details. The change in policy has been retrospectively applied and comparative financial information has been restated, as detailed below. 1.2(b) Deferred Tax Liability Restatement In the current year, the Group identified that the tax base applied to certain assets for the calculation of deferred tax assets and liabilities was overstated. This arose from the finalisation of purchase price accounting in respect of the 2018 merger with Fairfax Group and resulted in a $33.6 million understatement of the Group’s deferred tax liability. Accordingly, the Group has increased its deferred tax liability by $33.6 million and recognised a commensurate increase in goodwill as of 30 June 2020. There was no earnings impact to the 2021 or 2020 financial years as a result of this adjustment or any adjustments to income tax paid or payable. The impact of this adjustment on comparative financial information is detailed below. 1.2(c) Summary of Comparative Period Restatements Consolidated Statement of Financial Position 30 June 2020 $’000 Intangible assets Total non-current assets Total assets Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Retained earnings Total equity attributable to equity holders of the parent Non-controlling interest Total equity As Previously Reported 1 SaaS Adjustment (Note 1.2(a)) DTL Restatement (Note 1.2(b)) As Restated 2,325,244 2,934,992 3,646,168 266,814 1,112,563 1,760,301 1,885,868 (311,613) 1,750,004 135,864 1,885,868 (5,920) (5,920) (5,920) (1,645) (1,645) (1,645) (4,275) (3,352) (3,352) (922) (4,275) 33,572 2,352,896 33,572 2,962,644 33,572 3,673,820 33,572 298,741 33,572 1,144,490 33,572 1,792,228 — — — — — 1,881,592 (314,965) 1,746,650 134,942 1,881,592 1. Comparative information in respect of the year ended 30 June 2020, reclassified where necessary in order to provide consistency with the current financial year. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 87 87 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 1. About this Report continued 1.2 Basis of preparation continued 1 July 2019 $’000 Intangible assets Total non-current assets Total assets Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Retained earnings As Previously Reported SaaS Adjustment (Note 1.2(a)) DTL Restatement (Note 1.2(b)) As Restated 2,958,405 3,329,341 4,409,058 314,380 770,374 1,635,735 2,773,323 448,811 192,644 (7,233) (7,233) (7,233) (1,930) (1,930) (1,930) (5,303) (4,189) (4,189) (1,114) — — — — — — — — — — — Total equity attributable to equity holders of the parent 2,580,679 Non-controlling interest Total equity 2,773,323 (5,303) Consolidated Statement of Profit or Loss and Other Comprehensive Income 30 June 2020 $’000 Expenses from operations excluding impairment, depreciation, amortisation and finance costs Depreciation and amortisation Net profit/(loss) from continuing operations before income tax expense Income tax expense Net profit from continuing operations after income tax expense Net profit/(loss) for the period attributable to: Owners of the parent Non-controlling interest Earnings per share Basic earnings attributable to ordinary equity holders of the parent Diluted earnings attributable to ordinary equity holders of the parent As Previously Reported SaaS Adjustment (Note 1.2(a)) DTL Restatement (Note 1.2(b)) (1,772,443) (2,910) (149,932) (481,495) (27,283) (508,778) (590,033) 15,066 ($0.35) ($0.34) 4,222 1,312 (285) 1,027 835 192 $0.00 $0.00 — — — — — — — — — 88 88 2,951,172 3,322,108 4,401,825 312,450 768,444 1,633,805 2,768,020 444,622 2,576,490 191,530 2,768,020 As Restated (1,775,353) (145,710) (480,183) (27,568) (507,751) (589,198) 15,258 ($0.35) ($0.34) Nine Annual Report 2021Consolidated Statement of Cash Flows 30 June 2020 $’000 As Previously Reported SaaS Adjustment (Note 1.2(a)) DTL Restatement (Note 1.2(b)) Payments to suppliers and employees Net cash flows generated from operating activities Purchase of intangible assets Net cash flows (used in)/from investing activities (2,282,431) 377,411 (53,557) (276,996) (2,910) (2,910) 2,910 2,910 — — — — As Restated (2,285,341) 374,501 (50,647) (274,086) 1.3 Notes to the Financial Statements The notes include information which is required to understand the financial statements and is material and relevant to the operations, financial position and performance of the Group. Information is considered material and relevant if, for example: • the amount in question is significant because of its size or nature; • it is important for understanding the results of the Group; • it helps to explain the impact of significant changes in the Group’s business or it relates to an aspect of the Group’s operations that is important to its future performance. The notes are organised into the following sections: 1. About this report: provides an introduction to the structure and preparation of the report; 2. Group performance: provides a breakdown of individual line items in the statement of profit or loss and other comprehensive income that the directors consider most relevant and the accounting policies, judgements and estimates relevant to understanding these line items; 3. Operating assets and liabilities: provides a breakdown of the key assets and liabilities and the accounting policies, judgements and estimates relevant to understanding these line items; 4. Capital structure and management: provides information about the capital management practices of the Group, shareholders’ return and the Group’s exposure to various financial risks, how they affect the Group’s performance and are managed; 5. Taxation: discusses the tax position of the Group; 6. Group structure: explains aspects of the Group structure and how changes have affected the financial position and performance of the Group; and 7. Other: provides information on items which require disclosure to comply with Australian Accounting Standards and other regulatory pronouncements. However, these are not considered critical in understanding the historical financial performance or position of the Group. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 89 89 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 2. Group Performance 2.1 Segment information Segment revenue 1 EBITDA before specific items Depreciation and amortisation EBIT before specific items 30 June 2021 $’000 30 June 2020 $’000 30 June 2021 $’000 30 June 2020 Restated $’000 30 June 2021 $’000 30 June 2020 Restated $’000 30 June 2021 $’000 30 June 2020 Restated $’000 Broadcasting 1,242,643 1,127,478 332,519 197,263 (56,644) (48,733) 275,875 148,530 Digital and Publishing 504,522 518,530 117,189 91,503 (39,795) (41,863) 77,394 49,640 Domain Group 286,587 267,844 100,580 84,686 (38,636) (41,428) 61,944 43,258 Stan 311,761 242,113 39,471 31,028 (14,009) (13,152) 25,462 17,876 Segment total 2,345,513 2,155,965 589,759 404,480 (149,084) (145,176) 440,675 259,304 Corporate Associates 2,274 14,214 (26,075) (10,582) — — 1,012 928 — — (534) (26,075) (11,116) — 1,012 928 Total Group 2,347,787 2,170,179 564,696 394,826 (149,084) (145,710) 415,612 249,116 1. Includes inter-segment revenue of $16,309,000 (2020: $14,855,000). Following a change in internal reporting, the results of 9Now, which was previously reported under the Digital and Publishing segment, are reported under the Broadcasting segment. Comparative financial information has been restated accordingly to reflect this change. Reconciliation of total Group revenue from continuing operations on the Consolidated Statement of Profit or Loss and Other Comprehensive Income Total Group revenue (per above) Inter-segment eliminations Total Group revenue Interest income Specific item – Net gain on contingent consideration payable and sale of financial assets 30 June 2021 $’000 30 June 2020 Restated $’000 2,347,787 2,170,179 (16,309) (14,855) 2,331,478 2,155,324 1,506 9,194 1,461 15,275 Revenue per the Consolidated Statement of Profit or Loss and Other Comprehensive Income 2,342,178 2,172,060 90 90 Nine Annual Report 2021Reconciliation of EBIT before specific items to profit after tax from continuing operations Notes 30 June 2021 $’000 30 June 2020 Restated $’000 EBIT before specific items Interest income Finance costs Income tax expense Profit before specific items Specific items Income tax benefit/(expense) on specific items Net profit/(loss) from continuing operations after income tax expense 2.3 5.1 2.4 5.1 415,612 1,506 (29,002) (110,586) 277,530 249,116 1,461 (27,793) (65,089) 157,695 (108,524) (702,967) 14,955 183,961 37,521 (507,751) Geographic Information A majority of the Group’s external revenues arise out of sales to customers within Australia. Major customers The Group did not have any customers which accounted for more than 10% of operating revenue for the year (2020: none). Accounting Policy For the financial report for the year ended 30 June 2021, management have reviewed the segments to reflect how the Chief Operating Decision Makers (determined to be the Board of Directors) review and manage the business. The reportable segments for continuing operations for the period ended 30 June 2021 are: • Broadcasting — includes free to air television activities, 9Now and metropolitan radio networks in Australia. • Digital and Publishing — includes Nine Digital (Nine.com.au and other digital activities) and Metropolitan Media (metropolitan news, sport, lifestyle and business media across various platforms). • Domain Group — real estate media and services businesses. • Stan — subscription video on demand service. Segment performance is evaluated based on continuing operations segment earnings before interest, tax, depreciation and amortisation (EBITDA), before specific items. Specific items are items that by size and nature or incidence are relevant in explaining the financial performance of the Group and are excluded when assessing the underlying performance of the business. These are detailed in Note 2.4. Group finance costs on bank facilities, interest income and income taxes are managed on a Group basis and are not allocated to operating segments. Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties and are eliminated on consolidation. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 91 91 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 2. Group Performance continued 2.2 Revenue and other income from continuing operations In the following table, revenue is disaggregated by major products/service lines. The table also includes a reconciliation of the disaggregated revenue with the Group’s reportable segments (see Note 2.1). Broadcasting 2 $’000 Digital and Publishing 2 $’000 Domain Group $’000 Stan $’000 Corporate $’000 Total $’000 Period ended 30 June 2021 Advertising revenue 1,141,827 246,668 269,780 — Subscription revenue Affiliate revenue Circulation revenue Program Sales Other revenue — 148,538 505 311,252 59,293 — 20,409 21,114 — 72,215 — 37,101 — — — 16,302 — — 509 — Total segment revenue (Note 2.1) 1 1,242,643 504,522 286,587 311,761 — — — — — 2,274 2,274 1,658,275 460,295 59,293 72,215 20,918 76,791 2,347,787 1. Includes inter-segment revenue of $16,309,000. 2. During the year, the classification of certain rebates has been aligned across the Group, resulting in a decrease in revenue and expenses in the Digital and Publishing segment by $6.7 million and the Broadcasting segment by $8.5 million. The 2020 comparative financial information has been adjusted in line with this change, resulting in a reclassification of $15.2 million from expenses to revenue. This change has no impact on EBITDA or EBIT of the segment. Broadcasting $’000 Digital and Publishing $’000 Domain Group $’000 Stan $’000 Corporate $’000 Total $’000 — — — — — 14,214 14,214 1,532,522 374,175 54,833 87,990 16,098 104,561 2,170,179 Period ended 30 June 2020 Advertising revenue Subscription revenue Affiliate revenue Circulation revenue Program Sales Other revenue 1,030,791 — 54,833 259,406 132,062 — — 87,990 16,098 25,756 — 39,072 25,519 242,325 — — — — — 242,113 — — — — Total segment revenue (Note 2.1) 1 1,127,478 518,530 267,844 242,113 1. Includes inter-segment revenue of $14,855,000. 92 92 Nine Annual Report 2021Accounting Policy Revenue The Group recognises revenue only when the performance obligation is satisfied and the control of goods or services is transferred, typically at the point of being published, broadcast or streamed. Amounts disclosed as revenue are net of commissions, rebates, discounts and returns which are recognised when they can be reliably measured. All performance obligations are expected to be recognised within one year. The Group determined that the estimates of variable consideration are not constrained based on its historical experience, business forecast and the current economic conditions. In addition, the uncertainty on the variable consideration is generally resolved within a short time frame. The following specific recognition criteria must also be met before revenue is recognised: Type of sales revenue Advertising revenue Recognition Criteria • Broadcasting — Recognised by reference to when an advertisement has been broadcast and specific viewer metrics contained in the agreement with the customer have been met. Publishing and Domain: • Revenue from advertising for newspapers, magazines and other publications is recognised on the publication date. • Revenue from the provision of advertising on websites is recognised over the period the advertisements are placed. • Revenue from the provision of property listings is accounted for as a single performance obligation, the provision of a listing being a distinct service. Revenue is recognised over the listing period. Subscription revenue • Revenue from subscriptions for newspapers, magazines, other publications is recognised Affiliate revenue on the publication date. • Revenue for digital subscriptions and Stan subscriptions is recognised over time. • Revenue from affiliates is recognised on a monthly basis based on a percentage of revenue generated by the affiliate. Affiliate revenue relates to the Group’s entitlement to a percentage of advertising revenue derived by broadcast partners, payable to the Group as consideration for use of the Group’s program inventory. Circulation revenue • Revenue from circulation for newspapers, magazines and other publications is recognised on the publication date. Program sales revenue • Revenue from program sales and recoveries, including syndicated programming content, is recognised in the month that it is broadcast or as the program content is distributed. Other revenue includes: a) Transactional revenue Recognised when the services are performed. b) Non-trading revenue Recognised when the services are performed. Type of other income Recognition Criteria Other income includes: a) Dividends b) Interest Recognised when the right to receive payment has been established. Recognised as the interest accrues using the effective interest method (which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset). c) Sublease income Recognised on a straight-line basis over the term of the lease. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 93 93 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 2. Group Performance continued 2.3 Expenses from continuing operations Expenses Broadcasting 1 4 Digital and Publishing 1 Domain Group Stan Other2 Total expenses from continuing operations Included in the expenses above are the following: Depreciation and amortisation (excluding program rights) Salary and employee benefit expenses 3 Program rights Total depreciation, salary and program rights Finance Costs Interest on debt facilities Interest on lease liabilities Amortisation of debt facility establishment costs Total finance costs 30 June 2021 $’000 30 June 2020 Restated $’000 1,049,073 1,357,278 437,399 236,168 286,299 30,636 577,736 420,276 224,238 45,850 2,039,575 2,625,378 157,425 686,961 507,608 146,293 645,600 486,632 1,351,994 1,278,525 12,970 15,321 711 29,002 15,279 11,561 953 27,793 1. During the year, the classification of certain rebates has been aligned across the Group, resulting in a decrease in revenue and expenses in the Digital and Publishing segment by $6.7 million and the Broadcasting segment by $8.5 million. The 2020 comparative financial information has been adjusted in line with this change, resulting in a reclassification of $15.2 million from expenses to revenue. This change has no impact on EBITDA or EBIT of the segment. 2. Includes corporate costs and specific items not allocated to segments, offset by inter-segment revenue of $16.3 million (2020: $14.9 million). 3. Government grants of $10.5 million (2020: $4.5 million) have been received by the Group during the current year, $8.3 million of which are attributable to Domain (2020: $3.6 million). During the year, the Group has repaid $2.3 million of grants received since inception of the JobKeeper scheme. Total expenses from continuing operations therefore include $8.2 million (2020: $4.5 million) of net grants received. 4. Expenses include Specific Items, including impairment, for Broadcasting ($61.5 million). Refer to Note 2.4 for details. (2020: Broadcasting ($310.8 million); Digital and Publishing ($92.7 million); Domain Group ($188.2 million). Accounting Policy Borrowing costs Interest is recognised as an expense when it is incurred. Debt establishment costs are recognised as a reduction of the financial liability on initial recognition, and amortised using the effective interest method. 94 94 Nine Annual Report 20212.4 Specific items The net profit after tax includes the following specific items, which by size and nature or incidence are relevant in explaining the financial performance of the Group: Impairment of goodwill and other intangibles Impairment of other assets Restructuring costs Net profit on sale of investments and assets held for sale Net gain on contingent consideration payable Other specific provisions Acquisition related costs Net specific items loss before tax from continuing operations Income tax benefit on specific items from continuing operations Net specific items loss after tax from continuing operations Impairment of goodwill and other intangibles 30 June 2021 $’000 30 June 2020 Restated $’000 (61,500) (8,233) (30,519) 8,846 1,576 (18,694) — (591,776) (61,412) (49,420) 1,930 15,455 (8,574) (9,170) (108,524) (702,967) 14,955 37,521 (93,569) (665,446) An impairment charge of $61.5 million has been recognised in respect of the Nine Radio cash generating unit. The decrease in the estimated recoverable amount of this business compared to prior year is a result of the continued impact of the COVID-19 pandemic on this market. Refer to Note 3.6 for details. In the year ended 30 June 2020, the charge relates to impairment of the Nine Network ($310.8 million), Other Digital ($40.9 million), CarAdvice ($46.8 million, inclusive of $3.0 million of specific software impairments), Pedestrian TV ($5.0 million) and Domain ($188.2 million) cash generating units. Impairment of other assets The impairment of other assets includes: • $7.7 million (2020: $36.4 million) of program inventory, principally related to the change in FTA license requirements; and • $1.7 million (2020: $17.2 million) of right of use assets relating to surplus property leases and other asset impairments no longer considered recoverable due to the relocation of the Group’s headquarters to 1 Denison Street, North Sydney. • Offset by a $1.1 million reversal of previous debtor write-offs. Restructuring costs Restructuring costs include: • $15.2 million related to the implementation of new financial systems across the Group, of which $5.5 million relates to Domain Group. This expense, in large part, would have been capitalised before the current year accounting policy change related to configuration or customisation costs in a cloud computing arrangement; • $11.5 million of redundancy and restructuring costs incurred during the period; • $2.3 million of onerous short-term property leases excess to requirements as a result of the relocation of the Group’s headquarters to 1 Denison Street, North Sydney; and • $1.5 million of other expenses incurred for one-off projects in the current year. The prior year includes redundancy costs in relation to the Fairfax merger, Macquarie Radio acquisition and other restructuring and termination costs for the Group, including $11.5 million relating to onerous short-term property leases excess to requirements as a result of the Fairfax merger and relocation of the Group’s headquarters to 1 Denison Street, North Sydney. Net profit on sale of investments and assets held for sale Gain on sale of RateCity ($3.5 million) and RSVP ($1.0 million) investments and the Group’s share of the gain on sale of assets by an associate ($5.0 million), offset by final expenses in respect of the sale of ACM. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 95 95 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 2. Group Performance continued 2.4 Specific items continued Net gain on contingent consideration payable Revaluation on contingent and deferred consideration relates to an increase in the deferred consideration receivable for Commerce Australia Pty Ltd and a reduction in the deferred consideration payable for Bidtracker Holdings Pty Ltd Tranche 3 (combined gain of $4.6 million) and the revaluation of contingent consideration payable for Commercialview.com.au Pty Limited Tranches 3A and 3B (expense of $3.0 million). Other specific provisions Includes onerous production contracts related to future commitments and other provisions related to prior financial periods. In the year ended 30 June 2020, includes provision for defamation and other provisions related to prior financial periods. Acquisition related costs In the year ended 30 June 2020, costs related to the acquisition of Macquarie Media Limited (excluding redundancies) and the merger of Fairfax (excluding redundancies). 2.5 Earnings per share From continuing and discontinued operations (in cents) Basic and diluted earnings per share before specific items 1 Basic earnings/(loss) per share after specific items Diluted earnings/(loss) per share after specific items1 Profit/(loss) attributable to the ordinary equity holders of the parent used in calculating the basic and diluted earnings per share ($’000) from continuing and discontinued operations From continuing operations (in cents) Basic and diluted earnings per share before specific items 1 Basic and diluted earnings/(loss) per share after specific items 1 Profit/(loss) attributable to the ordinary equity holders of the parent used in calculating the basic and diluted earnings per share ($’000) from continuing operations 30 June 2021 30 June 2020 Restated $0.15 $0.10 $0.10 $0.08 ($0.35) ($0.34) 169,364 (589,198) $0.15 $0.10 $0.08 ($0.31) 169,364 (523,009) Weighted average number of ordinary shares used as denominator for basic earnings per share (‘000) 1,704,355 1,703,446 Effect of dilution: Rights Plan shares under the performance rights plan (Note 4.4) (‘000) 3,930 4,827 Weighted average number of ordinary shares adjusted for the effect of dilution (‘000) 1,708,285 1,708,273 1. Diluted earnings per share assumes that the executive long term incentive plan (Refer Note 4.4) is satisfied by issuing new shares. The Group’s practice to date has been to purchase the shares on the open market and if this practice continues there will be no difference between basic and diluted earnings per share. Accounting Policy Basic Earnings Per Share Basic earnings per share amounts are calculated by dividing the net profit/(loss) for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year, as adjusted for shares held in Trust (refer Note 4.4). Diluted Earnings Per Share Diluted earnings per share amounts are calculated by dividing the net profit/(loss) attributable to ordinary equity holders of the parent by the sum of the weighted average number of ordinary shares outstanding during the year plus the number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares (such as performance rights) into ordinary shares. 96 96 Nine Annual Report 20213. Operating Assets and Liabilities 3.1 Cash and cash equivalents Cash balances representing continuing operations: (a) For the purpose of the statement of cash flows, cash and cash equivalents comprise the following at 30 June: — Cash on hand and at bank Total cash and cash equivalents (b) Reconciliation of profit/(loss) after tax to net cash flows from operations: Profit/(Loss) after tax from continuing operations Loss after tax from discontinuing operations (Loss)/profit on sale of properties and other assets Depreciation and amortisation Impairment of assets Impairment of Intangibles Share-based payment expense Share of associates net profit Derivative interest unwinding Other non-cash items Changes in assets and liabilities Trade and other receivables Program rights and inventories Prepayments and other assets Trade and other payables Provision for income tax Provision for employee entitlements Other provisions Deferred income tax liability Foreign currency movements in assets and liabilities of overseas controlled entities Net cash flows from operating activities 30 June 2021 $’000 30 June 2020 Restated $’000 171,927 171,927 187,394 187,394 183,961 — (3,483) 157,425 9,454 61,500 10,785 (5,991) — 1,322 (121,676) (56,900) 4,112 117,585 46,070 27,273 9,494 (42,225) (545) 398,161 (507,751) (66,189) 71,989 146,293 42,358 591,776 2,768 (928) 365 23,106 146,851 14,097 38,186 (54,927) (37,456) (6,567) 19,601 (48,912) (159) 374,501 C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 97 97 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 3. Operating Assets and Liabilities continued 3.1 Cash and cash equivalents continued 3.1.1 Changes in liabilities from financing activities — bank facilities At 1 July 2020 Net cash flows Other changes (liability related) At 30 June 2021 At 1 July 2019 Net cash flows Other changes (liability related) At 30 June 2020 Accounting Policy Bank Facilities $’000 584,316 (165,040) 2,574 421,850 511,953 69,969 2,394 584,316 Cash and cash equivalents in the Statement of Financial Position comprise cash at bank and in hand, deposits held at call with financial institutions and other short-term investments with original maturities of three months or less that are readily convertible to cash and subject to insignificant risk of changes in value. Bank overdrafts are shown within interest bearing liabilities in current liabilities on the Consolidated Statement of Financial Position. 3.2 Trade and other receivables Current Trade receivables Allowance for expected credit loss Related party receivables (Note 6.6) Allowance for expected credit loss Other receivables Total current trade and other receivables Non-Current Loans to related parties (Note 6.6) Other Total non-current trade and other receivables 98 98 30 June 2021 $’000 30 June 2020 $’000 356,853 251,328 (7,219) (7,390) 349,634 243,938 4,074 (2,910) 30,199 6,302 (2,910) 10,731 380,997 258,061 4,146 8,327 12,473 4,021 9,490 13,511 Nine Annual Report 2021The ageing analysis of trade receivables not considered impaired is as follows: 2021 2020 Total Not past due <30 days 31-60 days >61 days 349,634 323,508 243,938 222,430 23,481 17,058 2,135 1,134 510 3,316 Past due but not impaired Accounting Policy Trade receivables are recognised and carried at original invoice amount less an allowance for expected credit loss. They are non-interest bearing and are generally on 30 to 60 day terms. Key judgements, estimates and assumptions Expected credit losses for trade receivables are initially recognised based on the Group’s historical observed default rates. If appropriate, the Group will adjust the historical credit loss with forward-looking information. For instance, if forecast economic conditions are expected to materially deteriorate over the next year, which could lead to an increased number of defaults in debtors, the historical default rates are adjusted. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed. Expected credit losses for individual trade receivables are recognised when there is an expectation that the Group will not be able to collect all amounts due according to the original trade terms. Collectability of trade receivables is reviewed on an ongoing basis. Individual debts that are known to be uncollectible are written off when identified. Factors considered as objective evidence of impairment include ageing and timing of expected receipts and the creditworthiness of counter- parties. The amount of the impairment loss is the receivable carrying amount compared to the present value of estimated future cash flows. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i 3.3 Program rights and inventories Current l R e v e w i 30 June 2021 $’000 30 June 2020 $’000 Program rights — cost less accumulated amortisation and impairment 244,354 210,080 Inventories Total current program rights and inventories Non-Current 12,263 15,664 256,617 225,744 Program rights — cost less accumulated amortisation and impairment Total non-current program rights and inventories 140,939 140,939 122,585 122,585 During the year, $7.7 million of program inventory and sports rights were impaired, principally related to the change in FTA license requirements. In the prior year $36.4 million of program inventory and sports rights were impaired as a result of the COVID-19 pandemic. These have been classified as Specific items — refer to Note 2.4 for details. i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 99 99 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 3. Operating Assets and Liabilities continued 3.3 Program rights and inventories continued Accounting Policy Program Rights The Group recognises program rights which are available for use. Programs which are available for use, including those acquired overseas, are recorded at cost less amounts charged to the Statement of Profit or Loss and Other Comprehensive Income based on the useful life of the content and management’s assessment of the future years of benefit, which is regularly reviewed with additional write-downs made as considered necessary. Program rights are classified as current or non-current based on the expected realisation of economic benefits flowing from their use. Inventories Inventories are carried at lower of cost or net realisable value (“NRV”). The NRV is the estimated future net cash inflows in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Key judgements, estimates and assumptions The assessment of the appropriate carrying value of program rights and inventories requires estimation by management of the forecast future cash flows which will be derived from that content. This estimate is based on a combination of market conditions and the value generated from the broadcast of comparable programs. 3.4 Trade and other payables Current — unsecured Trade and other payables Program contract payables Deferred income Total current trade and other payable Non-current — unsecured Program contract payables Other creditor Deferred income Total non-current trade and other payables 30 June 2021 $’000 30 June 2020 $’000 250,688 158,733 65,605 475,026 193,770 128,709 58,108 380,587 92,489 67,806 3,533 4,013 1,095 5,195 100,035 74,096 Accounting Policy Trade and other payables are carried at amortised cost. Liabilities are brought to account for amounts payable in relation to goods received and services rendered, whether or not billed to the Group at reporting date. The Group operates in a number of diverse markets, and accordingly the terms of trade vary by business. Terms of trade in relation to trade payables are, on average, 30 to 60 days from the date of invoice. Program contract payables are settled according to the contract negotiated with the program supplier. Deferred income represents the fair value of cash received for revenue relating to future periods. 100 100 Nine Annual Report 2021Depreciation expense (961) (10,544) (26,032) (39,832) (4,047) (81,416) Freehold land and buildings $’000 Leasehold improve -ments $’000 Plant and equipment $’000 Work in progress1 $’000 ROU property $’000 ROU plant and equipment $’000 Total property, plant and equipment $’000 23,930 21,638 65,958 77,797 216,540 9,309 415,172 — — — — 3,691 9,597 62,668 171,557 165 247,678 72,917 63,314 (136,231) — (149) (379) — — (5,265) (1,705) — — — — — — — (5,793) (1,705) 22,969 87,553 112,458 4,234 341,295 5,427 573,936 16,484 33,375 95,107 20,356 — — 165,322 — (13,794) — — (13,794) — 194 — — 270,324 13,660 283,984 16,865 67,940 2,465 983 97,306 l R e v e w i 3.5 Property, Plant and Equipment Year ended 30 June 2021 At 1 July 2020, net of accumulated amortisation and impairment Additions Transfers Disposals Impairment At 30 June 2021, net of accumulated depreciation and impairment Year ended 30 June 2020 At 1 July 2019, net of accumulated depreciation and impairment Opening reclassification to intangibles2 AASB16 initial recognition Additions Finalisation of purchase price accounting (Note 6.1) Transfers Disposals Impairment — — 8,859 365 (44) — — — (8,877) — (169) 9,571 (9,767) (3,383) (3,423) (732) (8,913) (2,931) (6,195) (10,236) — — — — — — — — (8,877) — (16,495) (19,362) Depreciation expense (1,734) (5,448) (23,296) (37,100) (5,334) (72,912) At 30 June 2020, net of accumulated depreciation and impairment 23,930 21,638 65,958 77,797 216,540 9,309 415,172 At 30 June 2021, net of accumulated depreciation and impairment Cost (gross carrying amount) 31,998 136,740 538,469 4,234 430,168 14,808 1,156,417 Accumulated amortisation and impairment (9,029) (49,187) (426,011) — (88,873) (9,381) (582,481) Net carrying amount 22,969 87,553 112,458 4,234 341,295 5,427 573,936 At 30 June 2020, net of accumulated depreciation and impairment Cost (gross carrying amount) 31,998 60,281 465,937 77,797 263,876 14,643 914,532 Accumulated amortisation and impairment (8,068) (38,643) (399,979) — (47,336) (5,334) (499,360) Net carrying amount 23,930 21,638 65,958 77,797 216,540 9,309 415,172 1. Work in progress additions and transfers primarily relate to the Group’s new headquarters of 1 Denison Street, North Sydney. 2. An opening balance reclassification of $13.8 million from property, plant and equipment to other intangible assets has been undertaken in relation to software to ensure consistency of classification across the Group. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 101 101 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 3. Operating Assets and Liabilities continued 3.5 Property, Plant and Equipment continued Accounting Policy Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation and amortisation is calculated on a straight-line basis over the estimated useful life of the asset as follows: • freehold buildings — 20 to 60 years; • other production equipment — up to 15 years; • leasehold improvements — lease term; • right-of-use property — lease term; • right-of-use plant and equipment — up to 6 years; • plant and equipment — 2 to 15 years; and • computer equipment — up to 6 years. The assets’ residual values, useful lives and amortisation methods are reviewed and adjusted as appropriate each year end. Impairment The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. The recoverable amount is the greater of fair value less costs to sell and value in use. The recoverable amounts are based on the present value of expected future cash flows. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. Refer to Note 3.6 for details of CGU recoverable amount assessment. Disposal An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected to arise from the continued use or disposal of the asset. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the Statement of Profit or Loss and Other Comprehensive Income in the year the item is derecognised. Assets held for sale The Group classifies non-current assets and disposal groups as held for sale or for distribution to equity holders of the parent if their carrying amounts will be recovered principally through sale or a distribution rather than through continuing use. Such non-current assets and disposals are measured at the lower of their carrying amount and fair value less costs to sell or to distribute. Costs to sell or distribute are the incremental costs directly attributable to the sale or distribution, excluding the finance costs and income tax expense. The criteria for held for sale or for distribution classification is regarded as met only when the sale or distribution is highly probable and the asset or disposal group is available for immediate sale or distribution in its present condition. Management must be committed to the sale or distribution expected within one year from the date of the classification. Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale or distribution. Key judgements, estimates and assumptions The Group has applied certain judgements including which contractual arrangements represent a lease, the period over which the lease exists, the variability of future cash flows and the applicable incremental borrowing rates used to calculate the lease liability. 102 102 Nine Annual Report 20213.6 Intangible assets Year ended 30 June 2021 At 1 July 2020, net of accumulated amortisation and impairment (restated) Goodwill $’000 Licences $’000 Mastheads and Brand Names $’000 Customer relationships $’000 Software 1 $’000 Total $’000 933,738 615,182 563,118 156,625 84,233 2,352,896 Purchases Impairment — — (44,789) (16,711) — — — — 51,130 51,130 (76) (61,576) Amortisation expense — — (379) (22,254) (53,376) (76,009) At 30 June 2021, net of accumulated amortisation and impairment Year ended 30 June 2020 (restated) At 1 July 2019, net of accumulated amortisation and impairment 888,949 598,471 562,739 134,371 81,911 2,266,441 1,516,748 624,082 562,893 176,316 78,366 2,958,405 Opening reclassification from Property, plant and equipment — Finalisation of purchase price accounting 2 15,904 Net effect of change in accounting policy (Note 1) Acquisition of subsidiaries Purchases Disposals Impairment Amortisation expense At 30 June 2020, net of accumulated amortisation and impairment (restated) — — — — — — — 20,782 — (39,849) (579,847) (8,900) — — — — — 225 — — — — — — — — 13,794 13,794 2,186 18,090 (5,920) (5,920) 5,190 26,197 2,805 50,752 53,557 — — (1,999) (41,848) (3,029) (591,776) (22,496) (55,107) (77,603) 933,738 615,182 563,118 156,625 84,233 2,352,896 1. Capitalised development costs of software being, in part, an internally generated intangible asset. 2. In the current year, the Group identified a $33.6 million understatement in goodwill which has been adjusted as of 30 June 2020. Refer to Note 1.2 for further details. At 30 June 2021, net of accumulated amortisation and impairment Goodwill $’000 Licences $’000 Mastheads and Brand Names $’000 Customer relationships $’000 Software1 $’000 Total $’000 Cost (gross carrying amount) 2,639,656 1,596,651 563,906 191,760 256,506 5,248,479 Accumulated amortisation and impairment (1,750,707) (998,180) (1,167) (57,389) (174,595) (2,982,038) Net carrying amount 888,949 598,471 562,739 134,371 81,911 2,266,441 At 30 June 2020, net of accumulated amortisation and impairment (restated) Cost (gross carrying amount) 2,639,656 1,596,651 563,906 191,760 205,376 5,197,349 Accumulated amortisation and impairment (1,705,918) (981,469) (788) (35,135) (121,143) (2,844,453) Net carrying amount 933,738 615,182 563,118 156,625 84,233 2,352,896 C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 103 103 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 3. Operating Assets and Liabilities continued 3.6 Intangible assets continued During the year an impairment charge was recognised against goodwill in respect of Nine Radio of $44.8 million (2020: Nine Network ($301.9 million), Nine.com.au ($40.9 million), Drive ($43.8 million), Pedestrian TV ($5.0 million) and Domain ($188.2 million)). Radio licenses were also impaired by $16.7 million (2020: TV licenses $8.9 million and $3.0 million of obsolete software intangible assets). These impairments have been classified as Specific Items — refer to Note 2.4 for details. 3.6(a) Allocation of non-amortising intangibles and goodwill The Group has allocated non-amortising intangibles and goodwill to the following cash generating units (“CGUs”): Year ended 30 June 2021 TV Broadcast NBN Stan Domain Metropolitan Media Nine Radio Other1 Total licences and goodwill as at 30 June 2021 Year ended 30 June 2020 TV Broadcast NBN Stan Domain Metropolitan Media Nine Radio Other 1 Total licences and goodwill as at 30 June 2020 — 129,587 Goodwill $’000 — 3,300 315,302 444,319 105,052 20,976 888,949 — 3,300 315,302 444,319 105,052 44,789 20,976 933,738 Licences $’000 Mastheads and Brand Names $’000 457,884 11,000 — — — — — — 71,452 406,874 84,413 — — 598,471 562,739 457,884 11,000 — — — 146,298 — 615,182 — — 71,452 407,253 84,413 — — 563,118 1. Other goodwill is made up of Nine.com.au $6.7 million (June 2020: $6.7 million) and PedestrianTV $14.3 million (June 2020: $14.3 million). 3.6(b) Determination of recoverable amount The recoverable amount of the CGUs is determined based on Value-in-use calculations using discounted cash flow projections based on financial forecasts covering a five-year period with a terminal growth rate applied thereafter, with the exception of the Domain CGU which is based on fair value less cost of disposal calculations (and which is classified within Level 3 of the fair value hierarchy) using cash flow projections for up to ten years and a terminal growth rate applied thereafter. As at 30 June 2020, the Group adjusted the composition of Group CGUs by moving the 9Now business from the Nine.com.au CGU to the Nine Network CGU. This adjustment was undertaken following an assessment of cash inflows and other relevant factors in accordance with accounting standards. Following this change, the CGU formerly known as “Nine Network” and the 9Now business have been tested as the TV Broadcast CGU. The Group determined TV Broadcast, NBN, Domain, Nine Radio, Metropolitan Media, Stan and each of the components of Other (Nine.com.au and Pedestrian TV) to be CGUs subject to an annual impairment test. 104 104 Nine Annual Report 2021The Group performed its annual impairment test in June 2021 for each CGU. The cash flow projections which are used in determining any impairment require management to make significant estimates and judgements. Each of the assumptions is subject to significant judgement about future economic conditions and the ongoing structure of markets in which the CGUs operate. Forecasted cash flows are risk-adjusted allowing for estimated changes in the business, the competitive trading environment and potential changes in customer behaviour. During the year to 30 June 2021, there has been a marked improvement in the Australian economy, including the majority of the markets in which NEC operates, following the recovery from the impact of the COVID-19 pandemic. This recovery has been significantly quicker than previously forecasted, with the majority of the markets in which the Group operate returning to, or above, pre-COVID levels. 3.6(c) Impairment losses recognised As a result of impairment analysis performed at 30 June 2021, management identified an impairment in the Nine Radio CGU ($61.5 million). There is headroom in the Group’s remaining CGUs. The COVID-19 pandemic has significantly impacted the radio advertising market in the year to 30 June 2021, with a slower recovery evident in this market compared to other markets in which the Group operates. Given the uncertain timing and extent of recovery in this market, as well as the ongoing disruption from digital mediums, management has adjusted longer-term growth assumptions of this CGU. As a result, goodwill and other intangible assets totalling $61.5 million have been impaired and this impairment is included within Expenses in the Statement of Profit and Loss and Other Comprehensive Income. This impairment has been disclosed as a specific item in Note 2.4. 3.6(d) Key assumptions Operating cash flow projections have been determined based on expectations of future performance, considering recent trading. Significant assumptions used in the impairment testing are inherently subjective and in times of economic uncertainty the degree of subjectivity is higher than it might otherwise be. Changes in certain assumptions can lead to significant changes in the recoverable amount of these assets. In the context of this uncertain environment, the Group has based its impairment testing upon conditions existing at 30 June 2021 and what the Directors believe can reasonably be expected at that date. Key assumptions in the cash flows include revenue growth, cost of sales and operating expenses. These assumptions take into account management’s expectations of market demand and operational performance. The key assumptions on which management has based its cash flow projections when determining the value in use calculations for each CGU are set out below. Management has applied its best estimates to each of these variables but cannot warrant their outcome. TV Broadcast • The advertising market for metro FTA television reflects management’s expectation of single-digit decline in the short term to medium term in line with market maturity and management’s expectations of market development. The advertising market for broadcast video-on-demand is expected to exhibit double-digit growth over the short to medium term consistent with industry market participant expectations. • Nine Network’s share of the Metro Free-To-Air, and 9Now’s share of the broadcast video-on-demand, advertising markets in future years is estimated after consideration of recent audience performance in key demographics, revenue share performance and the impact of investment in content. • Expenditure is assumed to increase over the life of the model, to support the forecast growth in revenue. • The pre-tax discount rate applied to the cash flow projections was 13.03% (30 June 2020: 15.97%) which reflects current market assessment of the time value of money and the risks specific to the relevant segments in which the CGU operates. • Terminal growth rate of 1.00% (30 June 2020: 1.20%). Metropolitan Media: • Revenue is forecast to show strong growth in the short term following the commencement News Media Bargaining Code agreements. A flat market is then assumed in the medium term based on market maturity and is in line with industry trends and management’s expectation of market development. • Expenditure is assumed to increase in FY22 to support the forecast growth in revenue, after which it remains relatively flat over the life of the model. • The pre-tax discount rate applied to the cash flow projections was 14.30% (30 June 2020: 14.25%) which reflects current market assessment of the time value of money and the risks specific to the relevant segments in which the CGU operates. • Terminal growth rate of 0.0% (30 June 2020: 0.0%) consistent with industry forecasts specific to the CGU. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 105 105 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 3. Operating Assets and Liabilities continued 3.6 Intangible assets continued Nine Radio: • Revenue is based on assumptions around market growth and market share by station, considering past performance and trends, and reflects management’s expectation of single-digit growth in the short to medium. • Expenditure is assumed to remain relatively flat over the life of the model. • The pre-tax discount rate applied to the cash flow projections was 14.59% (30 June 2020: 16.61%) which reflects management’s best estimate of the time value of money and the specific risk within the cash flow projections applicable to the relevant licence. • Terminal growth rate of 1.5% (2020: 2.0%) consistent with industry forecasts specific to the CGU. Stan: • Revenue growth is in line with subscription video-on-demand business industry trends, taking account of recent investment in the diversification of content. • Expenditure is assumed to increase over the life of the model, to support the forecast growth in revenue. • The pre-tax discount rate applied to the cash flow projections was 14.04% (30 June 2020: 15.41%) which reflects current market assessment of the time value of money and the risks specific risk to the Australian subscription video-on-demand market. • Terminal growth rate of 3.5% (2020: 3.5%) consistent with industry forecasts specific to the CGU. Domain: The key assumptions on which management has based its cash flow projections when determining the fair value less cost of disposal calculations for Domain are as follows: • Revenue growth is in line with digital business industry trends, market maturity and management’s expectations of market development. • Expenditure is assumed to increase over the life of the model, to support the forecast growth in revenue. • The pre-tax discount rate applied to the cash flow projections was 13.14% (30 June 2020: 13.30%) which reflects current market assessment of the time value of money and the risks specific to the relevant market in which the CGU operates. • Terminal growth rate of 2.5% (2020: 2.5%) consistent with industry forecasts specific to the CGU. NBN: • The advertising market for Regional FTA television shows single-digit decline over the short to medium term. • Expenditure is assumed to remain relatively flat over the life of the model. • The pre-tax discount rate applied to the cash flow projections was 14.07% (30 June 2020: 14.70%) which reflects management’s best estimate of the time value of money and the risks specific to the regional free-to-air television market. • Terminal growth rate of 0.0% (30 June 2020: 0.0%). Nine.com.au: • The digital platforms within this CGU are forecasted to be challenged in line with market maturity and management’s expectations of market development. • Expenditure is assumed to decline in line with revenue over the life of the model. • The pre-tax discount rate applied to the cash flow projections was 15.84% (30 June 2020: 20.60%) which reflects management’s best estimate of the time value of money and the risks specific to the digital display market. • Terminal growth rate of 0.0% (30 June 2020: 0.0%). Pedestrian TV: • The digital advertising market shows single-digit growth over the short to medium term in line with digital business industry trends, market maturity and management’s expectations of market development. • Expenditure is assumed to increase over the life of the model, to support the forecast growth in revenue. • The pre-tax discount rate applied to the cash flow projections was 14.90% (30 June 2020: 16.67%) which reflects management’s best estimate of the time value of money and the risks specific to the digital display market. • Terminal growth rate of 2.0% (30 June 2020: 2.0%). For the purpose of impairment testing, intangible assets with indefinite lives, including goodwill, are allocated to the Group’s operating divisions which represent the lowest level within the Group at which the assets are monitored for internal management purposes. 106 106 Nine Annual Report 20213.6(e) Sensitivity The estimated recoverable amounts of the CGUs represent Management’s assessment of future performance based on historical performance and expected future economic and industry conditions. • The recoverable amount of the TV Broadcast and NBN CGUs are in excess of the carrying amounts of intangible and tangible assets of the respective CGUs. The excess is deemed to relate to previously impaired goodwill, which cannot be reversed according to Australian Accounting Standards. Any reasonable adverse change in key assumptions would not lead to impairment. • The recoverable amount of the Metropolitan Media, Nine.com.au, PedestrianTV, Stan and Domain CGUs are in excess of the carrying amounts of intangible and tangible assets of the respective CGUs. Any reasonable adverse change in key assumptions would not lead to impairment. • The estimated recoverable amount of the Nine Radio CGU is equal to the carrying value, following the impairment charge previously discussed. Any future event that results in adverse changes to forward assumptions would accordingly result in further impairment. The following changes to the impairment assessment of this CGU are considered to be reasonably possible and would increase the impairment charge, assuming all other assumptions are held constant, by the following amounts: Assumption ($ million) 1.0% reduction in forecasted revenue growth per annum 0.50% increase in the pre-tax discount rate 0.25% reduction in the terminal growth rates Nine Radio (8.0) (5.4) (1.8) Together any adverse changes in the key assumptions would cumulatively result in a more significant additional impairment impact. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i Accounting Policy Goodwill l R e v e w i Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets and liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised. As at the acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to benefit from the combination’s synergies. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. Licences Licences are carried at cost less any accumulated impairment losses. The Directors regularly assess the carrying value of licences to ensure they are not carried at a value greater than their recoverable amount. No amortisation is provided against these assets as the Directors consider that the licences are indefinite life intangible assets. Mastheads and Brand Names The Group’s mastheads and brand names operate in established markets with limited licence conditions and are expected to continue to complement the Group’s new media initiatives. On this basis, the Directors have determined that the majority of mastheads and brand names have indefinite useful lives as there is no foreseeable limit to the period over which the assets are expected to generate net cash inflows for the Group. These assets are not amortised but are tested for impairment annually. Customer Relationships Customer relationships purchased in a business combination are amortised on a straight-line basis over their useful lives, which are between two and twelve years. i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 107 107 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 3. Operating Assets and Liabilities continued 3.6 Intangible assets continued Other intangible assets Intangible assets acquired separately are capitalised at cost, and from a business combination are capitalised at fair value as at the date of acquisition. Following initial recognition, the cost model is applied to the class of intangible assets. Costs incurred to develop software for internal use, and websites are capitalised and amortised over the estimated useful life of the software or website. Costs related to design or maintenance of software for internal use and websites are expensed as incurred. Where expenditure relates to Software-as-a-Service (SaaS) arrangements, an assessment is undertaken to determine if this can be capitalised. Refer to Note 7.6 for details of the Group’s accounting policy. Intangible assets, excluding development costs, created within the business are expensed in the year in which the expenditure is incurred. Only intangible assets with a finite life are amortised. Intangible assets are tested for impairment where an indicator of impairment exists, and annually in the case of indefinite life intangibles, either individually or at the cash generating unit level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis. Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit or Loss and Other Comprehensive Income when the asset is derecognised. Key judgements, estimates and assumptions The Group determines whether goodwill, and other identifiable intangible assets with indefinite useful lives are impaired at least on an annual basis. Other intangible assets are reviewed at least annually to determine whether any indicators of impairment exist, and if necessary an impairment analysis is performed. Impairment testing requires an estimation of the recoverable amount of the cash generating units to which the goodwill and other intangible assets with indefinite useful lives are allocated. Refer above for key assumptions used. 108 108 Nine Annual Report 20213.7 Provisions At 1 July 2020 Amounts provided/(utilised) during the period At 30 June 2021 Represented by: Current Non-current At 30 June 2021 Employee entitlements $’000 106,624 27,273 133,897 121,442 12,455 133,897 Onerous contracts $’000 15,026 1,883 16,909 5,025 11,884 16,909 Other 1 $’000 51,849 7,611 59,460 53,561 5,899 59,460 Total $’000 173,499 36,767 210,266 180,028 30,238 210,266 1. Included in other provisions are defamation provisions $28.0 million, content and royalties provisions $20.6 million, disposal related provisions $5.0 million and provisions for property $5.9 million. (2020: defamation provisions $23.5 million, content and royalties provisions $12.0 million, disposal related provisions $10.5 million and provisions for property $5.8 million). Employee entitlements $’000 113,191 (6,567) 106,624 95,824 10,800 106,624 Onerous contracts $’000 22,788 (7,762) 15,026 12,762 2,264 15,026 Other 1 $’000 Total $’000 49,454 185,433 2,395 51,849 45,152 6,697 (11,934) 173,499 153,739 19,761 51,849 173,499 At 1 July 2019 Amounts provided/(utilised) during the period At 30 June 2020 Represented by: Current Non-current At 30 June 2020 Accounting Policy Provisions Provisions are recognised when the Group has a legal or constructive obligation to make a future sacrifice of economic benefits to other entities as a result of past transactions or other events, it is probable that a future sacrifice of economic benefit will be required and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. Employee benefits Provision is made for employee benefits accumulated as a result of employees rendering services up to balance date including related on-costs. The benefits include wages and salaries, incentives, compensated absences and other benefits, which are charged against profits in their respective expense categories when services are provided or benefits vest with the employee. The provision for employee benefits is measured at the remuneration rates expected to be paid when the liability is settled. Benefits expected to be settled after 12 months from the reporting date are measured at the present value of the estimated future cash outflows to be made in respect of services provided by employees up to the reporting date. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 109 109 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 3. Operating Assets and Liabilities continued 3.7 Provisions continued The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and years of service. Expected future payments are discounted using market yields at the reporting date on government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows. Onerous contracts The Group is carrying provision for onerous contracts (other than property contracts) where, due to changes in market conditions, the expected benefit derived from the contract is lower than the committed contractual terms. Other Other provisions include: • Defamation, content and royalties’ provisions, estimated based on the expected costs to be incurred. • Disposal related provisions, including Events contra advertising, based on related disposal agreements. • Property leases, other than those accounted for in accordance with AASB 16, are considered to be an onerous contract if the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. Where a decision has been made to vacate the premises or there is excess capacity and the lease is considered to be onerous, a provision is recorded. • Amounts payable in connection with restructuring, including termination benefits, on-costs, outplacement and consultancy services. Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Key judgements, estimates and assumptions Onerous contract provisions The Group has recognised onerous contract provisions in relation to various content contracts where the cost exceeds the economic benefit derived from the contract. Defamation Provision The Group has recognised a defamation provision related to a number of ongoing claims and proceedings against the Group. This provision is calculated based on Management’s best estimate of the costs expected to be incurred. 110 110 Nine Annual Report 20213.8 Commitments Year ended 30 June 2021 Capital expenditure Lease commitments — Group as lessee Lease commitments — Group as lessor1 Television and Subscription Video on Demand program and sporting broadcast rights <1 year $’000 1-5 years $’000 >5 years $’000 Total $’000 6,796 13,271 (10,651) 747 34,974 (13,773) 316,994 383,932 — 40,918 — — 7,543 89,163 (24,424) 700,926 Total Commitments 326,410 405,880 40,918 773,208 <1 year $’000 1-5 years $’000 >5 years $’000 Total $’000 Year ended 30 June 2020 Capital expenditure Lease commitments — Group as lessee2 Lease commitments — Group as lessor1 39,769 16,476 (10,159) 4,386 93,777 (24,263) Television program and sporting broadcast rights 276,677 426,133 — 44,155 176,785 287,038 — — (34,422) 702,810 Total Commitments 322,763 500,033 176,785 999,581 1. The Group has commercial subleases on office premises and amounts disclosed above represent the future minimum rentals receivable under non-cancellable operating leases at 30 June 2021. 2. 30 June 2020: Includes leasing commitments of the group’s new headquarters of 1 Denison Street North Sydney, within one year $12.7 million, within 5 years $76.9 million, and after 5 years of $159.9 million which were not accounted for under AASB 16 Leases in the year ended 30 June 2020. This lease has been accounted for under AASB 16 Leases in the year ended 30 June 2021. Lease commitments include lease of land and buildings where the lease term has not yet commenced and outgoings where the application of AASB 16 is not applicable. Renewal terms are included in certain contracts, whereby renewal is at the option of the specific entity that holds the lease. On renewal, the terms of the leases are usually renegotiated. There are no restrictions placed upon the lessee by entering into these leases. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 111 111 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 4. Capital Structure and Management 4.1 Financial Liabilities Current Lease liabilities 1 Bank facilities unsecured Total current financial liabilities Non-current Lease liabilities1 Bank facilities unsecured Total non-current financial liabilities 30 June 2021 $’000 30 June 2020 $’000 43,897 79,595 123,492 384,683 342,255 726,938 23,803 79,626 103,429 244,502 504,690 749,192 1. During the period, the Group relocated its headquarters to 1 Denison Street, North Sydney and commenced a long-term lease with a non- cancellable period of 12 years and two additional 5 year option periods, with market reviews at the time of each option commencement, recognising a lease liability totalling $189.8 million on commencement. 100% Owned Facilities The Group is party to syndicated bank facilities with limits totalling $625.0 million which comprise two revolving cash advance facilities ($272.5 million in each facility), maturing in February 2023 and February 2024, and a one year $80.0 million working capital facility expiring in February 2022, following an extension executed in January 2021. At 30 June 2021, $250.0 million (30 June 2020: $415.0 million) of the syndicated facilities was drawn. In light of the economic uncertainty caused by the COVID-19 pandemic, the Group entered a 1 year debt facility of $47.5 million at 30 June 2020 which was not utilised during the period and expired on 30 June 2021. A $33.2 million bank guarantee facility is also available to the Group’s 100% owned subsidiaries on a rolling annual basis. As of 30 June 2021, $26.6 million was drawn (30 June 2020: $24.0 million). The corporate facilities available to the Group for its 100% owned subsidiaries are provided by a syndicate of banks and financial institutions. The interest rate for drawings under these facilities is the applicable bank bill rate plus a credit margin. These facilities are supported by guarantees from most of the Company’s wholly-owned subsidiaries (refer to note 6.3) but are otherwise provided on an unsecured basis. These facilities impose various affirmative and negative covenants on the Company and the Group, including restrictions on encumbrances, and customary events of default, including a payment default, breach of covenants, cross-default and insolvency events. As part of the corporate facilities, the Group is subject to certain customary financial covenants measured on a six monthly basis. The Group has been in compliance with its financial covenant requirements to date including the period ended 30 June 2021. Domain The Group has exposure to a $225.0 million syndicated bank facility which is available to a controlled entity, Domain Holdings Australia Limited (Domain), with tranches maturing in November 2022 ($125.0 million) and November 2023 ($100.0 million). At 30 June 2021, $173.0 million (30 June 2020: $173.0 million) was drawn. The interest rate for drawings under this facility is the applicable bank bill rate plus a credit margin. In March 2021, Domain cancelled the additional debt facility of $80.0 million obtained as part of its response to COVID-19. Domain has not utilised this additional facility during the period and are not forecasting the need for this additional facility given the ongoing improvement in property market conditions. A $5.0 million bank guarantee facility is also available to Domain Holdings Group on a rolling annual basis. As of 30 June 2021, $975,296 was drawn (30 June 2020: $975,296). Accounting Policy All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the borrowing. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised costs using the effective interest method. 112 112 Nine Annual Report 20214.2 Share capital Issued share capital Ordinary shares authorised and fully paid Movements in issued share capital — ordinary shares Carrying amount at the beginning of the financial period Purchase of rights plan shares Vesting of Rights Plan shares (Note 4.4) Carrying amount at the end of the financial period Balance at beginning of the financial period Issue of ordinary shares fully paid Balance at the end of the financial period C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d 30 June 2021 $’000 30 June 2020 $’000 2,122,146 2,122,146 2,123,146 2,123,146 2,123,146 2,126,216 (2,293) 1,293 (5,800) 2,730 2,122,146 2,123,146 30 June 2021 No. of shares 30 June 2020 No. of shares 1,705,393,253 1,705,393,253 — — 1,705,393,253 1,705,393,253 At 30 June 2021, a trust controlled by the Company held 1,605,869 (30 June 2020: 2,011,252) ordinary fully paid shares in the Company. During the period, 800,000 shares (2020: 3,140,000 shares) were acquired by the Trust. The shares were purchased for the purpose of allowing the Group to satisfy performance rights obligations to certain senior management of the Group. Terms and Conditions of Contributed Equity Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up or sale of the Company in proportion to the number of shares held. Accounting Policy Ordinary shares are classified as equity. Issued capital is recognised at the fair value of the consideration received by the Group, less transaction costs. The Group provides remuneration to senior management in the form of share-based payments, whereby employees render services as consideration for equity instruments. In the Group’s financial statements the transactions of these share-based payments are settled through a plan trust and are treated as being executed by the Group (an external third party acts as the Group’s agent). Where shares to satisfy the Rights Plan are purchased by the plan trust, the consideration paid is deducted from total shareholders’ equity and the shares are treated as treasury shares until they are subsequently vested, sold, reissued or cancelled. Where such shares are vested, sold or reissued, any consideration received is included in shareholders’ equity. i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 113 113 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 4. Capital Structure and Management continued 4.3 Dividends paid and proposed 4.3(a) Dividends appropriated during the financial year During the year Nine Entertainment Co. Holdings Limited (“Nine”) paid an interim dividend of 5.0 cents per share, fully franked (amounting to $85,269,663) in respect of the half year ended 31 December 2020 and a dividend of 2.0 cents per share, fully franked (amounting to $34,107,865) in respect of the year ended 30 June 2020. 4.3(b) Proposed Dividends on Ordinary Shares not recognised as a liability Since the year end, the Directors have proposed a dividend, fully franked of 5.5 cents per share amounting to $93,796,629 to be paid in October 2021 (2020: fully franked dividend of 2.0 cents per share amounting to $34,107,865). 4.3(c) Franking credits available for subsequent years The franking credits available for subsequent years as at 30 June 2021 was $42,999,675 (2020: $35,980,358). This balance represents the franking account balance as at 30 June 2021. After adjusting for franking credits which arise from the payment of income tax payable balances as at the end of the financial year, the franking account balance is $89,872,324. Nine had an exempting account balance of $41,069,000 for the year ended 30 June 2021 (2020: $41,069,000). Nine became a former exempting entity as a consequence of the IPO in December 2013. As a result, Nine’s franking account balance at that time was transferred to an exempting account. Exempting credits will generally only be of benefit to certain foreign resident shareholders by providing an exemption from Australian dividend withholding tax. The exempting credits will generally not give rise to a tax offset for Australian resident shareholders. Accounting Policy A provision for dividends is not recognised as a liability unless the dividends are declared, determined or publicly recommended on or before the reporting date. 114 114 Nine Annual Report 20214.4 Share-based payments Under the executive long-term incentive plan for Nine Entertainment Co. Holdings Limited (“parent entity” or “NEC”), performance rights (“Rights” or “NEC Rights”) have been granted to executives and other senior management who have an impact on the Group’s performance. On satisfaction of vesting conditions, each NEC Right will convert to a share in the parent entity on a one-for-one basis or entitle the Participant to receive cash to the value of a share. Details of the plan are included in the Remuneration Report on pages 51 to 74. In addition, there are long-term incentive plans in Domain Group; further details of Domain Group’s employee share plans are detailed in the Domain Group annual report for the year ended 30 June 2021. The total expense (pre tax) recognised for share based payments during the financial period for the Group was $10,236,643 (2020: $2,767,844), of which $8,016,217 (2020: $2,659,816) relates to Domain Group. Movement during the period The following table sets out the number of NEC Rights outstanding as at 30 June: Outstanding at 1 July Granted during the year Forfeited during the year 1 Vested 2 Lapsed during the year Outstanding at 30 June 3 30 June 2021 Number 30 June 2020 Number 7,699,571 9,267,322 3,290,321 5,014,005 (1,929,311) (326,444) (1,133,069) (3,950,809) (1,313,380) (2,304,503) 6,614,132 7,699,571 1. These Rights were forfeited by executives that left during the period. 2. 1,358,069 rights vested during the period which had been accounted as at and were measured based on performance up to 30 June 2021. This includes 159,926 (2020: 341,095) NEC Rights in relation to executives that left in prior years which were cash settled. 3. This includes 1,500,634 (2020: 565,978) NEC Rights in relation to executives that left in prior years which may be cash settled if they vest at the end of the testing period. 2,209,013 of the Rights have been issued with approval under ASX Listing Rule 10.14. During the year ended 30 June 2021, the Group awarded 225,000 shares to a number of employees in recognition of additional performance in response to COVID-19 related matters. Accounting Policy The Group provides remuneration to senior management in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions). The cost for equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model. That cost is recognised in employee benefit expense, together with a corresponding increase in share-based payment reserves, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised at each reporting date, until vesting date, reflects the extent to which the vesting period has expired. The share-based payments can be settled with either cash or equity at the election of the Group. Where terms of an individual’s share-based payment is modified to settle in cash, the cumulative expense is transferred from the share-based payment reserve to Payables in the Statement of Financial Position. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 115 115 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 4. Capital Structure and Management continued 4.5 Financial instruments 4.5(a) Financial risk management The Group’s principal financial instruments, other than derivatives, comprise cash and short-term deposits and credit facilities (refer to Notes 3.1 and 4.1). The main purpose of these financial instruments is to manage liquidity and to raise finance for the Group’s operations. The Group has various other financial instruments, such as trade and other receivables and trade and other payables, which arise directly from its operations. The Group uses derivatives in accordance with Board approved policies to reduce the Group’s exposure to adverse fluctuations in interest rates and foreign exchange rates. Derivative instruments that the Group uses to hedge risks such as interest rate, foreign currency, and commodity price movements include: • interest rate swaps; and • forward foreign currency contracts. The Group’s risk management activities are carried out centrally, under policies approved by the Board, in cooperation with the Group’s operating units so as to maximise the benefits associated with centralised management of Group risk factors. 4.5(b) Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to shareholders through the optimisation of net debt and total equity balances. Capital risk management focuses on the maturity profile and stability of debt facilities. The Group’s capital structure is reviewed to maintain: • sufficient finance for the business at a reasonable cost; • sufficient funds available to the business to implement its capital expenditure and business acquisition strategies; and • compliance with all financial covenants. Where excess funds arise with respect to the funds required to enact the Group’s business strategies, consideration is given to repayment of debt, increased dividends or buy back of shareholder equity. 4.5(b)(i) Carrying value and Fair Values of Financial Assets and Financial Liabilities The carrying value of a financial asset or liability will approximate its fair value where the balances are predominantly short-term in nature, can be traded in highly liquid markets, and incur little or no transaction costs. The carrying values of the following accounts approximate their fair value: Account Cash and cash equivalents Trade and other receivables Trade and other payables Note 3.1 3.2 3.4 116 116 Nine Annual Report 2021The Group uses various methods in estimating the fair value of a financial asset or liability. The different methods have been defined as follows: Level 1: The fair value is calculated using quoted prices in active markets. Level 2: The fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability, through valuation techniques including forward pricing and swap models and using present value calculations. The models incorporate various inputs including credit quality of counter-parties and foreign exchange spot rates, forward rates and listed share prices. Fair values of the Group’s financial liabilities are determined by using a DCF method using a discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period. Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. The fair value of the option over the controlled entity is determined based on a multiple of the controlled entity’s EBITDA. As such, the fair value of the financial liability moves based on the EBITDA of the controlled entity and a significant increase/(decrease) in the EBITDA of the controlled entity would result in higher/(lower) fair value of the financial liability. Fair values hierarchy has been determined as follows for financial assets and financial liabilities of the Group at 30 June 2021: Level 1: Investment in listed equities (refer to Note 7.1). Level 2: Forward foreign exchange contracts, interest rate swaps and financial liabilities and options over listed equities. Level 3: Unlisted shares, options over controlled entities and CGU recoverable amount for Domain. There were no transfers between the Level 1, Level 2 and Level 3 fair value measurements during the year. The following table lists the carrying values and fair values of the Group’s financial assets and financial liabilities at balance date: 2021 Carrying Amount $’000 Fair Value $’000 2020 Carrying Amount $’000 Fair Value $’000 Note 2,772 — 2,772 2,772 — 2,772 — 2,700 2,700 — 2,700 2,700 Derivative financial liabilities Option over controlled entity — current Option over controlled entity — non-current Total derivative financial instruments — liabilities Bank facilities — current Syndicated facility unsecured — at amortised cost 4.1 79,595 79,595 79,626 79,626 Bank facilities — non-current Syndicated facility unsecured — at amortised cost 4.1 342,255 342,255 504,690 504,690 Total bank facilities 421,850 421,850 584,316 584,316 C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 117 117 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 4. Capital Structure and Management continued 4.5 Financial instruments continued 4.5(b)(ii) Market risk factors The key risk factors that arise from the Group’s activities, including the Group’s policies for managing these risks, are outlined below. Market risk is the risk that the fair value of future cash flows of the Group’s financial instruments will fluctuate because of changes in market prices. The market risk factors to which the Group is exposed are discussed in further detail below. Liquidity risk Liquidity risk is the risk that the Group cannot meet its financial commitments as and when they fall due. To help reduce this risk, the Group ensures it has readily accessible funding arrangements available. The contractual maturity of the Group’s financial assets and other financial liabilities are shown in the following tables. The amounts presented represent the future undiscounted principal and interest cash flows and therefore do not equate to the values shown in the Statement of Financial Position. Contractual maturity (nominal cash flows) 2021 2020 Less than 1 year $’000 1 to 2 years $’000 2 to 5 years $’000 Over 5 years $’000 Less than 1 year $’000 1 to 2 years $’000 2 to 5 years $’000 Over 5 years $’000 Derivative — outflows Option over controlled entity (Note 6.3) — current Option over controlled entity (Note 6.3) — non-current Other financial assets1 2,772 — — — — — — — — — — 2,700 — — Cash assets 171,927 — — — 187,394 — — Trade and other receivables 380,997 1,366 10,001 1,106 258,061 5,101 8,410 Other financial liabilities 1 — — — — Trade and other payables 470,857 71,255 27,089 191 379,007 52,204 19,248 — Lease liabilities 56,954 55,517 141,077 278,636 24,803 34,587 89,427 175,935 Contingent consideration 4,169 1,500 — Bank facilities (including interest) 2 85,681 291,095 55,375 — — 1,580 2,644 — 88,682 8,082 512,210 — — 1. For floating rate instruments, the amount disclosed is determined by reference to the interest rate at the last repricing date. 2. This assumes the amount drawn down at 30 June 2021 remains drawn until the facilities mature. 118 118 Nine Annual Report 2021Interest rate risk Interest rate risk refers to the risks that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. Interest rate risk arises from interest-bearing financial assets and liabilities that the Group utilises. Non-derivative interest bearing assets are predominantly cash. The Group’s debt facilities are all floating rate liabilities, which gives rise to cash flow interest rate risks. The Group’s risk management policy for interest rate risk seeks to minimise the effects of interest rate movements on its asset and liability portfolio through active management of the exposures. The Group maintains a mix of long-term and short-term debt to manage these risks as deemed appropriate. The Group designates which of its financial assets and financial liabilities are exposed to a fair value or cash flow interest rate risk, such as financial assets and liabilities with a fixed rate or financial assets and liabilities with a floating rate that is reset as market rates change. At balance date, the Group had the following mix of financial assets and financial liabilities exposed to Australian floating interest rate risk that were not designated as cash flow hedges. 2021 2020 Average interest rate p.a. % Floating rate $’000 Non- interest bearing $’000 Average interest rate p.a. % Floating rate $’000 Non- interest bearing $’000 Total $’000 Total $’000 Financial assets Cash and cash equivalents 0.59 171,927 — 171,927 1.15 187,394 — 187,394 Trade and other receivables N/A N/A 393,470 393,470 N/A N/A 271,572 271,572 Financial liabilities Trade and other payables N/A N/A 588,955 588,955 N/A N/A 454,683 454,683 Lease liabilities 3.66 428,580 — 428,580 3.86 268,305 — 268,305 Syndicated facilities — at amortised cost 1.42 421,850 — 421,850 1.54 584,316 — 584,316 Interest rate sensitivity analysis There will be no material impact on net profit after tax if interest rates were higher or lower by 1% with all other variables held constant. A sensitivity of 1% was selected as it is considered reasonable given the current level of both the short-term and long- term Australian financial market. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 119 119 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 4. Capital Structure and Management continued 4.5 Financial instruments continued 4.5(c) Credit risk exposures Credit risk is the risk that a contracting entity will not complete its obligations under a financial instrument and cause the Group to make a financial loss. The Group has exposure to credit risk on all financial assets included in the Group’s Statement of Financial Position. To help manage this risk, the Group: • has a policy for establishing credit limits; and • manages exposures to individual entities it either transacts with or with which it enters into derivative contracts (through a system of credit limits). The Group’s credit risk is mainly concentrated across a number of customers and financial institutions. The Group does not have any significant credit risk exposure to a single customer or group of customers, or individual institutions. Refer to Note 3.2 for details on the Group’s policy on impairment, its ageing analysis of trade receivables and the allowance for expected credit losses. 4.5(c)(i) Credit risk The maximum exposure to credit risk is the carrying amount of current receivables. For those non-current receivables, the maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables. Collateral is not held as security. 4.5(c)(ii) Foreign currency risk Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to trade payables and receivables from contractual payments. The Group manages this foreign currency risk by entering into cross-currency hedges. As at 30 June 2021, the Group does not have any material cross-currency hedges. Accounting Policy The Group uses derivative financial instruments, such as interest rate swaps and foreign currency contracts, to economically hedge its risks associated with interest rate and foreign currency fluctuations. Such derivative financial instruments are stated at fair value. The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. For the purposes of hedge accounting, hedges are classified as fair value hedges when they hedge the exposure to changes in the fair value of a recognised asset or liability, or cash flow hedges where they hedge exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a forecasted transaction. In relation to fair value hedges, any gain or loss from remeasuring the hedging instrument at fair value is recognised immediately in profit or loss as a finance cost. Any gain or loss attributable to the hedged risk on re-measurement of the hedged item is adjusted against the carrying amount of the hedged item and recognised in profit and loss. Any adjustment to the carrying amount of a hedged interest-bearing financial instrument is recognised over the remaining term of the hedging relationship using the Effective Interest Rate method. For derivatives that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are taken directly to profit or loss for the year. 120 120 Nine Annual Report 20215. Taxation 5.1 Income tax expense Current tax expense Deferred tax (benefit)/expense relating to the origination and reversal of temporary differences Income tax expense Reconciliation of tax expense to prima facie tax payable Profit/(loss) from continuing operations Prima facie income tax/(benefit)expense at the Australian rate of 30% Tax effect of: Share of associates’ net (profit)/loss Difference between tax and accounting profit from disposal of properties 30 June 2021 $’000 30 June 2020 Restated $’000 137,384 (41,753) 95,631 49,947 (22,379) 27,568 279,592 (480,183) 83,878 (144,055) (304) (353) (214) (442) Impairments, write down of investments and revaluation of derivative financial instruments 18,453 175,026 Adjustments in respect of current income tax of previous years Research and development tax offset Other items — net Income tax expense 5.2 Deferred tax assets and liabilities Deferred tax relates to the following: (1,795) (3,961) (287) (676) (1,855) (216) 95,631 27,568 Consolidated statement of financial position Consolidated statement of profit or loss and other comprehensive income 30 June 2021 $’000 30 June 2020 Restated $’000 30 June 2021 $’000 30 June 2020 Restated $’000 Employee benefits provision Other provisions and accruals Property, plant and equipment1 Intangible assets Tax losses Business related costs deductible over five years 33,311 45,188 11,916 30,373 31,376 4,056 2,938 13,812 7,860 (389,604) (403,853) 14,249 44,179 16,119 64,501 9,568 Accelerated depreciation — program stock (48,108) (50,783) AASB16 Leases Other 23,931 6,066 11,460 4,561 Net deferred income tax liabilities (257,002) (298,741) (20,322) 6,551 2,675 12,471 1,505 41,7392 (3,411) 3,653 13,408 (17,037) (9,945) (5,694) 27,930 11,460 2,015 22,379 1. In the current year, the Group identified a $33.6 million understatement in the Group’s deferred tax liability which has been adjusted as of 30 June 2020. Refer to Note 1.2 for further details. There was no earnings impact to the 2021 or 2020 financial years as a result of this adjustment, or any adjustments to income tax paid or payable. 2. Consists of $41,753,000 of deferred tax benefit to the Consolidated Statement of Profit or Loss and deferred tax expense through equity reserves, mainly consisting of a defined benefit plan deferred tax expense of $7,659,000 offset by a share based payment reserve deferred tax benefit of $7,174,000 and other movements of $471,000. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 121 121 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 5. Taxation continued Accounting Policy Current tax liabilities are measured at the amount expected to be paid to the taxation authorities based on the current year’s taxable income. The tax rules and tax laws used to compute the amount are those that are enacted at the balance date. Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences: • except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or • in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses, can be utilised except: • where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit not taxable profit or loss; or • in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Income taxes relating to items recognised directly in equity are recognised in other comprehensive income and not in the profit or loss for the year. Tax consolidation Nine Entertainment Co. Holdings Limited (“Nine”) and its 100% owned Australian subsidiaries are part of a tax consolidated group. As a result, members of the group have entered into a tax sharing arrangement in order to allocate income tax expense to the wholly-owned subsidiaries on a pro-rata basis. In addition, the agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax obligations. At the balance date, the possibility of default is remote. The head entity of the tax consolidated group is Nine. Nine has recognised the current tax liability of the tax consolidated group. Members of the tax consolidated group are part of a tax funding agreement. The tax funding agreement provides for the allocation of current and deferred taxes to members of the tax consolidated group in accordance with their taxable income for the year. The allocation of taxes under the tax funding agreement is recognised as an increase/decrease in the subsidiaries’ intercompany accounts with the head entity. The Group has applied the group allocation approach to determine the appropriate amount of current and deferred tax to allocate to each member of the tax consolidated group. Other taxes Revenues, expenses and assets are recognised net of the amount of GST except: • where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the Statement of Cash Flows on a gross basis and the GST components of cash flows arising from investing and financing activities, which are recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. 122 122 Nine Annual Report 20216. Group Structure 6.1 Business combinations Acquisitions for the year ended 30 June 2021 There were no acquisitions for the year ended 30 June 2021. Acquisitions for the year ended 30 June 2020 Acquisition of remaining 45.6% interest in Macquarie Media Limited During the period, the Group acquired the remaining 45.6% stake in Macquarie Media Limited which it did not already own, for a total consideration of $113.9 million, with the acquisition completed on 21 November 2019. The Group acquired the remainder of Macquarie Media Limited to consolidate its position as a supplier of news and current affairs across all of the Group’s key platforms. Macquarie Media Limited was previously consolidated into the Group’s results as a result of the Fairfax merger on 7 December 2018 and therefore there was no change to the net assets recorded in relation to this entity as a result of the acquisition of the remaining 45.6% stake. Bidtracker Group On 27 November 2019, the Group (through Domain) acquired 100% of the share capital in the Bidtracker Group which operates the business Real Time Agent. The consideration of the acquisition is to be paid in three tranches, with two of the three being contingent on defined targets over FY20 and FY21. The first tranche included payment of $19.4 million which was settled in cash on 27 November 2019 and $0.5 million cash effective settlement of the intercompany loan. The second tranche of 1.5 million was settled in cash on 21 October 2020. Tranche three is anticipated to be settled in October 2021 based on the performance against defined revenue targets in FY21. An additional amount between nil and $9.1 million in cash is payable; the maximum consideration for the transaction across the three tranches is $30.0 million, the expected total consideration for the transaction as at 30 June 2021 is $22.4 million. The contingent consideration for tranche three is recognised as a financial liability on the Consolidated Balance Sheet and is measured at fair value through the profit and loss. Goodwill of $20.6 million was recognised at the time of acquisition. The goodwill comprises expected synergies arising from the acquisition. AASB 3 Business Combinations allows a measurement period after a business combination to provide the acquirer a reasonable time to obtain the information necessary to identify and measure all of the various components of the business combination as of the acquisition date. The period cannot exceed one year from the acquisition date. Disposals for the year ended 30 June 2021 There were no disposals for the year ended 30 June 2021. Disposals for the year ended 30 June 2020 Stuff NZ On 31 May 2020, the Group disposed of its 100% interest in Stuff Limited (“Stuff NZ”) for consideration of $1 resulting in a loss on disposal of $44.0 million. Since the Fairfax merger in December 2018, Stuff New Zealand was held for sale and recognised as a discontinued operation in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations. Following the disposal, a loss on disposal was recognised within the Discontinued Operations line of the Group’s Consolidated Statement of Profit or Loss and Other Comprehensive Income. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 123 123 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 6. Group Structure continued 6.1 Business combinations continued Disposal of The Weather Company Pty Ltd On 30 September 2019, the Group disposed of its 75% stake in The Weather Company Pty Ltd (“Weatherzone”) for $30 million. The transaction did not create any profit or loss on disposal as it was sold at fair value recognised under purchase price accounting on the Fairfax merger. Commerce Australia Pty Limited On 13 March 2020, the Group (through Domain) completed the disposal of its 100% share in Commerce Australia Pty Limited (MyDesktop) for a total maximum cash consideration of $14.4 million, of which $7.0 million is contingent on achieving a number of conditions in. The expected consideration for this transaction is $14.3 million. The sale was part of Domain’s strategy to simplify and optimise and work in alignment with all agents. A net gain on disposal of $0.6 million being $1.3 million revenue and $0.7 million disposal costs was recognised through Other Revenue and Income in the Group’s Consolidated Statement of Profit or Loss and Other Comprehensive Income. Accounting Policy The acquisition method of accounting is used to account for all business combinations regardless of whether equity instruments or other assets are acquired. Consideration is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the acquisition date. Where equity instruments are issued in a business combination, the fair value of the instruments is their published price at the acquisition date unless, in rare circumstances, it can be demonstrated that the published price at the acquisition date is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity. Except for non-current assets or disposal groups classified as held for sale (which are measured at fair value less costs to sell), all identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any Non-Controlling interest. The excess of the cost of the business combination over the net fair value of the Group’s share of the identifiable net assets acquired is recognised as goodwill. If the cost of acquisition is less than the Group’s share of the net fair value of the identifiable net assets of the subsidiary, the difference is recognised as a gain in the Statement of Comprehensive Income, but only after a reassessment of the identification and measurement of the net assets acquired. Where settlement of any part of the consideration is deferred, the amounts payable in the future are discounted to their present value as at the acquisition date at the original effective interest rate. 124 124 Nine Annual Report 20216.2 Investments accounted for using the equity method 6.2(a) Investments at equity accounted amount Associated entities — unlisted shares 30 June 2021 $’000 30 June 2020 $’000 31,181 25,766 6.2(b) Investments in Associates and Joint Ventures Interests in associates and joint ventures are accounted for using the equity method of accounting. Information relating to associates is set out below: Principal Activity Country of Incorporation 30 June 2021 30 June 2020 % Interest 1 Australia Australia Australia Australia Australia Australia Australia Australia Adventure TV Channel Pty Ltd Television channel providers Australian Money Channel Pty Ltd 2 Television channel providers CopyCo Pty Ltd Content licensing Darwin Digital Television Pty Ltd Television broadcast Future Women Pty Ltd Online content provider Homebush Transmitters Pty Ltd Transmission services Intrepica Pty Ltd NPC Media Pty Ltd Oztam Pty Ltd RateCity Pty Ltd 3 Online learning service Television playout services Television audience measurement Australia Operator of a financial product comparison service Australia The Premium Content Alliance Media research and promotion Australia TX Australia Pty Ltd Television transmission Digital Radio Broadcasting Sydney Pty Ltd Digital audio broadcasting Australia Australia Digital Radio Broadcasting Melbourne Pty Ltd Digital audio broadcasting Australia Digital Radio Broadcasting Brisbane Pty Ltd Digital audio broadcasting Digital Radio Broadcasting Perth Pty Ltd Digital audio broadcasting Mediality Pty Ltd Newsagency and information service Oneflare Pty Ltd Home services marketplace RSVP.com.au Pty Limited 4 Online dating services Australia Australia Australia Australia Australia Skoolbo Pte Ltd Online learning service Singapore 1. The proportion of ownership is equal to the proportion of voting power held, except where stated. 2. This entity was deregistered on 12 August 2020. 3. This entity was disposed on 29 April 2021. 4. This entity was disposed on 22 January 2021. 50 — 20 50 50 50 15 50 33 — 25 50 12 18 25 17 47 21 — 19 50 50 20 50 50 50 15 50 33 50 25 50 12 18 25 17 47 21 58 19 C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 125 125 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 6. Group Structure continued 6.2 Investments accounted for using the equity method continued 6.2(c) Carrying amount of investments in associates Balance at the beginning of the financial year Funding to associates Acquired during the year Impairments Disposals Share of associates’ net profit/(loss) for the year 1 Dividends received or receivable Carrying amount of investments in associates at the end of the financial year 30 June 2021 $’000 30 June 2020 $’000 25,766 26,145 939 — — (1,465) 5,991 (50) 31,181 — 6,743 (778) (1,805) 928 (5,467) 25,766 1. Includes a one-off gain of $5.0 million relating to the Group’s share of an associates’ asset sale. This has been disclosed as a specific item — refer to Note 2.4. 6.2(d) Share of associates and joint ventures net profit/(loss) The following table illustrates the Group’s aggregate share of net profit/(loss) after income tax from associates and joint ventures. Net profit after income tax from continuing operations 30 June 2021 $’000 30 June 2020 $’000 5,991 928 The Group’s current year share of losses of associates and joint ventures not recognised is nil (2020: $nil). The Group’s cumulative share of losses of associates and joint ventures not recognised is nil (2020: $nil) 6.2(e) Share of associates and joint ventures assets and liabilities Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities 6.2(f) Impairment There was no impairment recorded during the current financial year (2020: $778,000). 30 June 2021 $’000 30 June 2020 $’000 15,839 28,635 44,474 12,104 10,503 22,607 17,148 60,576 77,724 15,078 15,626 30,704 126 126 Nine Annual Report 2021Accounting Policy Associates are entities over which the Group has significant influence and which are not subsidiaries. Significant influence is the power to participate in the financial and operating policy decisions of the entity but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The investments in the associate or joint venture are accounted for using the equity method. They are carried in the Consolidated Statement of Financial Position at cost plus post-acquisition changes in the Group’s share of net assets of the associates, less any impairment. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. The consolidated Statement of Consolidated Profit or Loss and Other Comprehensive Income reflects the Group’s share of the results of operations of the associates or joint ventures. Dividends received from associates and joint ventures are recognised in the Consolidated Statement of Financial Position as a reduction in the carrying amount of the investment. When the Group’s share of losses in the associate or joint venture equals or exceeds its investment in the associate or joint venture, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture. The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. Impairment After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate or joint venture. At each reporting date, the Group performs an impairment test to determine whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, then recognises the loss as “Share of profit of an associate” in the Statement of Consolidated Profit or Loss and Other Comprehensive Income. 6.3 Investment in controlled entities The consolidated financial statements include the financial statements of Nine Entertainment Co. Holdings Limited and its controlled entities. Significant controlled entities and those included in an ASIC instrument with the parent entity are: Footnote Place of incorporation Nine Entertainment Co. Holdings Ltd Channel 9 South Australia Pty Ltd CarAdvice.com Pty Ltd 1 Ecorp Pty Ltd General Television Corporation Pty Limited Mi9 New Zealand Limited Micjoy Pty Ltd NBN Enterprises Pty Limited NBN Pty Ltd Nine Films & Television Pty Ltd Nine Films & Television Distribution Pty Ltd Nine Network Australia Pty Ltd A, B A, B A, B A, B A, B A, B A, B A, B A, B A, B A, B Australia Australia Australia Australia Australia New Zealand Australia Australia Australia Australia Australia Australia Ownership interest June 2021 % Ownership interest June 2020 % Parent Entity Parent Entity 100 88 100 100 100 100 100 100 100 100 100 100 88 100 100 100 100 100 100 100 100 100 C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 127 127 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 6. Group Structure continued 6.3 Investment in controlled entities continued Footnote Place of incorporation Ownership interest June 2021 % Ownership interest June 2020 % Nine Network Australia Holdings Pty Ltd Nine Network Marketing Pty Ltd Nine Network Productions Pty Limited Nine Entertainment Group Pty Limited NEC Mastheads Pty Ltd Nine Entertainment Co. Pty Limited Nine Digital Pty Ltd Pay TV Holdings Pty Limited Petelex Pty Limited Pedestrian Corporation Holdings Pty Limited Pedestrian Group Pty Limited Pink Platypus Pty Ltd Queensland Television Holdings Pty Ltd Queensland Television Pty Ltd Shertip Pty Ltd Stan Entertainment Pty Ltd Swan Broadcasters Pty Ltd TCN Channel Nine Pty Ltd Television Holdings Darwin Pty Limited Territory Television Pty Ltd White Whale Pty Ltd 2GTHR Pty Ltd All Homes Pty Limited ACT Real Estate Media Pty Ltd Alldata Australia Pty Ltd Allure Media Pty Ltd Associated Newspapers Pty Ltd Australian Openair Cinema Pty Limited Australian Property Monitors Pty Limited Bidtracker Holdings Pty Ltd Bodypass Trading Pty Ltd Buyradio Pty Ltd Commercial Real Estate Holdings Pty Ltd 128 128 A, B A, B A, B A, B A, B A, B A, B A, B A, B A, B A, B A, B A, B A, B A, B A, B A, B A, B A, B A, B A, B A, B A, B A, B B Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 59 59 59 100 100 100 59 59 100 100 59 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 59 59 59 100 100 100 59 59 100 100 59 Nine Annual Report 2021Footnote Place of incorporation Ownership interest June 2021 % Ownership interest June 2020 % Commercial Real Estate Media Pty Limited 2 Commercialview.com.au Ltd 2 David Syme & Co Pty Limited A, B Digital Home Loans Pty Limited 2 Domain Group Finance Pty Limited Domain Holdings Australia Limited Domain Insure Pty Ltd 2 Domain Operations Pty Limited Fairfax Corporation Pty Limited A, B Fairfax Digital Australia & New Zealand Pty Limited A, B A, B A, B B A, B A, B A, B A, B A, B A, B A, B A, B A, B A, B A, B B A, B A, B Fairfax Digital Pty Limited Fairfax Entertainment Pty Limited Fairfax Event Sub Pty Ltd Fairfax Media Limited Fairfax Media Events Pty Ltd Fairfax Media Group Finance Pty Ltd Fairfax Media Management Pty Limited Fairfax Media Publications Pty Limited Fairfax News Network Pty Ltd Find a Babysitter Pty Ltd Radio 2GB Sydney Pty Ltd Homepass Australia Pty Ltd 2, 3 Homepass Pty Ltd 2, 3 John Fairfax & Sons Pty Limited John Fairfax Pty Limited Nine Radio Pty Limited Macquarie Media Network Pty Limited Nine Radio Operations Pty Limited Nine Radio Syndication Pty Limited Map and Page Pty Ltd Metro Media Publishing Pty Ltd Metro Media Services Pty Ltd MarketNow Payments Pty Ltd 2, 4 MMP Community Network Pty Ltd 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 40 40 100 36 59 59 41 59 100 100 100 100 100 100 100 100 100 100 100 100 100 59 59 100 100 100 100 100 100 100 55 59 35 59 40 40 100 36 59 59 41 59 100 100 100 100 100 100 100 100 100 100 100 100 100 40 40 100 100 100 100 100 100 100 55 59 — 59 C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 129 129 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 6. Group Structure continued 6.3 Investment in controlled entities continued Footnote Place of incorporation Ownership interest June 2021 % Ownership interest June 2020 % MMP (DVH) Pty Ltd 2 MMP (Melbourne Times) Pty Ltd 2 MMP Bayside Pty Ltd 2 MMP Eastern Pty Ltd 2 MMP Greater Geelong Pty Ltd 2 MMP Holdings Pty Ltd 2 MMP Moonee Valley Pty Ltd 2 National Real Estate Media Pty Limited National Real Estate Nominees Pty Ltd New South Wales Real Estate Media Pty Limited 2 Northern Territory Real Estate Media Pty Ltd 2 Property Data Solutions Pty Ltd Queensland Real Estate Media Pty Ltd 2 Radio 1278 Melbourne Pty Limited Radio 2UE Sydney Pty Ltd Radio 3AW Melbourne Pty Limited Radio 4BC Brisbane Pty Limited Radio 6PR Perth Pty Limited Radio Magic 882 Brisbane Pty Limited Review Property Pty Ltd South Australia Real Estate Media Pty Ltd 2 Tasmania Real Estate Media Pty Ltd 2 A, B A, B A, B A, B A, B A, B The Age Company Pty Limited A, B Western Australia Real Estate Media Pty Ltd 2 Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 37 41 46 41 28 59 41 59 59 30 30 59 30 100 100 100 100 100 100 59 30 30 100 30 37 41 46 41 28 59 41 59 59 30 30 59 30 100 100 100 100 100 100 59 30 30 100 30 A. These controlled entities have entered into a deed of cross guarantee with the parent entity under ASIC Corporations (Wholly-owned Companies) instrument 2016/785 - the “Closed Group” (refer to Note 6.4). B. Members of the “Extended Closed Group” (refer to Notes 4.1 and 6.4 for further detail). 1. The Group currently owns 88% of the shares in CarAdvice.com Pty Ltd, however it is 100% consolidated in accordance with accounting standards. 2. This represents the Group’s effective interest in the entity which is partially owned (yet controlled) by a non-wholly owned subsidiary. 3. On 1 March 2021, Domain Group acquired the remaining share capital in Homepass Pty Ltd. Total consideration was $2.3 million for the remaining 31.5% with $1.15 million contingent on future performance. 4. On 9 November 2020, MarketNow Payments Pty Ltd was incorporated with 10 shares issued to Domain Holdings Australia Limited at $1 each. On 13 November 2020, a further 209,990 shares were issued to Domain Holdings Australia Ltd and 140,000 shares were issued to non- controlling interest Limepay Pty Ltd for $1 each; ownership interest for Domain after the issue is 60% equating to 35% for Nine. 130 130 Nine Annual Report 2021Accounting Policy Basis of consolidation The consolidated financial statements comprise the financial statements of the parent entity and its subsidiaries as at 30 June 2021. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Controlled entities are de-consolidated from the date control ceases. Subsidiary acquisitions are accounted for using the acquisition method of accounting. The financial statements of subsidiaries are prepared for the same reporting year as the parent entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist. All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered. Non-controlling interests in the results and equity of subsidiaries are shown separately in the Consolidated Profit or Loss and Other Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Statement of Financial Position respectively. 6.4 Deed of cross guarantee Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 and various deeds of cross guarantee entered into with the parent entity, certain controlled entities of Nine Entertainment Co. Holdings Limited have been granted relief from the Corporations Act 2001 requirements for preparation, audit and publication of accounts. The Statement of Consolidated Profit or Loss and Other Comprehensive Income of the entities which are members of the “Closed Group” and the “Extended Closed Group” for the year ended 30 June 2021 is as follows: Closed Group 1 Extended Closed Group 2 C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i 2021 $’000 2020 Restated $’000 2021 $’000 2020 Restated $’000 l R e v e w i Consolidated Statement of Profit or Loss and Other Comprehensive Income Profit/(loss) from continuing operations before income tax 224,956 (446,190) 224,956 (469,974) Income tax expense (80,402) (19,251) (80,402) (27,890) Net profit/(loss) after income tax from operations 144,554 (465,441) 144,554 (497,864) Dividends paid during the period (119,378) (170,539) (119,378) (170,539) Adjustment for Entities which joined the closed Group during the year Adjustments to reserves (25,570) 54 — — — 54 — — Accumulated profits at the beginning of the financial year (205,531) 431,567 (231,101) 438,420 Accumulated profits at the end of the financial year (205,871) (204,413) (205,871) (229,983) 1. Closed Group are those entities party to the Deed of Cross Guarantee. 2. Refer to Note 6.3 for details. The debt facilities for the 100% owned group (refer to Note 4.1) are supported by guarantees from most of the Company’s wholly owned subsidiaries, these guarantors are referred to as the “Extended Closed Group”. On 22 January 2021, Mi9 New Zealand Limited, 2GTHR Pty Ltd, 2GTHR Pty Ltd, Associated Newspapers Pty Ltd, Australian Openair Cinemas Pty Limited, Fairfax Media Group Finance Pty Ltd, Fairfax News Network Pty Ltd, Find a Babysitter Pty Ltd, Nine Network Marketing Pty Ltd, Nine Radio Syndication Pty Limited, Pedestrian Group Pty Limited, Pink Platypus Pty Ltd, Radio 1278 Melbourne Pty Limited, Radio 2UE Sydney Pty Ltd, Radio 4BC Brisbane Pty Limited, Radio 6PR Perth Pty Limited, Radio Magic 882 Brisbane Pty Limited were added as parties to the Deed of Cross-Guarantee. i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 131 131 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 6. Group Structure continued 6.4 Deed of cross guarantee continued The Consolidated Statement of Financial Position of the entities which are members of the “Closed Group” and the “Extended Closed Group” for the year ended 30 June 2021 is as follows: Current assets Cash and cash equivalents Trade and other receivables Program rights and inventories Property, plant and equipment held for sale Other assets Total current assets Non-current assets Receivables Program rights Investment in associates accounted for using the equity method Investment in Group entities Other financial assets Property, plant and equipment Intangible assets Other assets Total non-current assets Total assets Current liabilities Trade and other payables Financial liabilities Income tax liabilities Provisions Derivatives Total current liabilities Non-current liabilities Payables Financial liabilities Deferred tax liabilities Provisions Total non-current liabilities Total liabilities Net assets Closed Group 1 Extended Closed Group 2 2021 $’000 70,949 322,192 256,617 3,622 34,679 2020 Restated $’000 112,831 229,150 229,758 3,622 28,342 2021 $’000 70,949 322,192 256,617 3,622 34,679 688,059 603,703 688,059 8,021 140,939 4,443 118,571 8,021 140,939 2020 Restated $’000 114,978 235,279 229,758 3,622 28,676 612,313 4,443 118,571 31,181 25,517 31,181 25,766 832,528 832,528 6,690 529,492 1,274,733 29,683 2,853,267 3,541,326 428,158 112,412 47,499 158,824 2,772 749,665 88,503 520,172 195,921 26,496 831,092 1,580,757 1,960,569 2,269 335,819 1,353,590 27,255 2,699,992 3,303,695 255,721 94,965 5,566 149,393 — 505,645 252,438 526,827 299,349 14,439 1,093,053 1,598,698 1,704,997 835,424 6,690 529,492 1,274,733 29,683 2,856,163 3,544,222 428,158 112,412 47,499 158,824 2,772 749,665 89,923 520,172 195,921 26,496 832,512 1,582,177 1,962,045 835,424 5,460 366,245 1,353,590 27,255 2,736,754 3,349,067 335,364 96,067 6,014 149,666 — 587,111 265,436 538,872 287,726 19,220 1,111,254 1,698,365 1,650,702 1. Closed Group are those entities party to the Deed of Cross Guarantee. 2. Refer to Note 6.3 for details. 132 132 Nine Annual Report 20216.5 Parent entity disclosures (a) Financial Position Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Contributed equity Reserves Retained earnings Total Equity (b) Comprehensive income/(loss) Net profit/(loss) for the year Total comprehensive income/(loss) for the year Parent entity 2021 $’000 2020 $’000 77,168 58,610 2,389,395 2,375,065 2,466,563 2,433,675 1,078 684,507 685,585 869 580,510 581,379 1,780,978 1,852,296 2,134,803 2,134,803 6,703 5,829 (360,528) (288,336) 1,780,978 1,852,296 13,560 13,560 (714,290) (714,290) C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 133 133 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 6. Group Structure continued 6.6(a) Transactions with related parties The following table provides the total value of transactions that were entered into with related parties for the relevant financial year. 2021 $’000 2020 $’000 Rendering of services to and other revenue from: Associates of Nine Entertainment Co: Future Women Pty Ltd Adventure TV Channel Pty Ltd Ratecity Pty Ltd1 Darwin Digital Television Pty Ltd NPC Media Pty Ltd Receiving of services from related parties: Associates of Nine Entertainment Co: Mediality Pty Ltd Digital Radio Broadcasting Sydney Pty Ltd Dividends received from: Associates of Nine Entertainment Co: Digital Radio Broadcast Sydney Pty Ltd Combined Translator Facilities Pty Ltd TX Australia Pty Ltd Oztam Pty Ltd Amounts owed by related parties: Adventure TV Channel Pty Ltd NPC Media Pty Ltd Ratecity Pty Ltd1 Future Women Pty Ltd Homebush Transmitters Pty Ltd Darwin Digital Television Pty Ltd Amounts owed to related parties: Adventure TV Channel Pty Ltd Oztam Pty Ltd NPC Media Pty Ltd Loans to related parties:2 Darwin Digital Television Pty Ltd NPC Media Pty Ltd Darwin Digital Television Pty Ltd Other 1. Investment disposed during the period — refer to Note 6.2(b) for details. 2. The loans granted to these related parties are non-interest bearing. 134 134 9 6,034 — 6 74 7 671 — 50 — — 820 95 — 112 118 18 6,521 402 241 2,910 4,000 125 21 11 421 26 77 57 300 574 267 100 4,500 600 2,750 433 148 — 54 7 2,747 — 2,055 2,910 4,000 — 21 Nine Annual Report 2021Terms and conditions of transactions with related parties All of the above transactions, other than non-interest bearing loans, were conducted under normal commercial terms and conditions. Outstanding balances at the year end in relation to these transactions, disclosed under “amounts owed by related parties”, are made on terms equivalent to those that prevail on arm’s length transactions, are interest free and settlement occurs in cash. For the year ended 30 June 2021, the Group has made an allowance for expected credit losses relating to amounts owed by related parties of $2.9 million (2020: $2.9 million). An impairment assessment is undertaken each financial year by examining the financial position of the related party and the market in which the related party operates to determine whether there is objective evidence that a related party receivable is impaired. When such objective evidence exists, the Group recognises an allowance for the impairment loss. 6.6(b) Parent entity Nine Entertainment Co. Holdings Limited is the ultimate parent entity of the Group incorporated within Australia and is the most senior parent in the Group which produces financial statements available for public use. 6.6(c) Controlled entities, associates and joint arrangements Investments in associates and joint arrangements are set out in Note 6.2. Interests in significant controlled entities are set out in Note 6.3. 6.6(d) Key management personnel 6.6(d)(i) Transactions with key management personnel All transactions between the Group and its key management personnel and their personally related entities are conducted under normal commercial terms and conditions unless otherwise noted. 6.6(d)(ii) Compensation of key management personnel Remuneration by category Short-term employee benefits Termination payments Post-employment benefits Long-term benefits Share-based payments Total remuneration of key management personnel The table includes current and former key management personnel. Detailed remuneration disclosures are provided in the Remuneration Report on pages 51 to 74. 6.7 Discontinued operations Year ended 30 June 2021 There are no discontinued operations in the current year. Year ended 30 June 2020 2021 $’000 2020 $’000 6,141,332 4,587,831 2,856,656 880,251 133,054 184,633 1,220,182 178,381 2,711,201 928,864 13,062,425 6,759,960 Following the acquisition of Fairfax on 7 December 2018, the Board agreed to sell Stuff NZ, a wholly owned businesses of Fairfax. Consequently, the Group classified that business as a discontinued operation. Stuff NZ was sold on 31 May 2020. Refer to Note 6.1 for details. During the year to disposal, Stuff generated a profit before tax of $12.3 million, including $4.5 million of net income classified as a Specific Item. Furthermore, during this period NZ$4.2 million in government subsidies was received from the New Zealand government related to the NZ Government’s Wage Subsidy program in response to COVID-19. Profit after tax from discontinued operations includes the loss on disposal of Stuff NZ ($44.0 million) and finalisation of the ACM disposal including working capital adjustments ($6.7 million), and the termination of a related printing operations agreement ($14.0 million). C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 135 135 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 7. Other 7.1 Other financial assets Non-current Investments in listed entities Closing balance at 30 June 2021 $’000 6,690 6,690 2020 $’000 5,460 5,460 Investments in Yellow Brick Road (ASX: YBR) and Sports Entertainment Group Limited (ASX: SEG). These investments are carried at fair value through other comprehensive income in order to avoid volatility in the profit and loss. Non-current As at 1 July Movement in fair value Closing balance at 30 June 2021 $’000 5,460 1,230 6,690 2020 $’000 5,949 (489) 5,460 Accounting Policy Certain of the Group’s investments are categorised as investments in listed equities under AASB 9 — Financial Instruments. When financial assets are recognised initially, they are measured at fair value plus, in the case of assets not recorded at fair value through profit or loss, directly attributable transaction costs. The investment in listed equities is classified as a Level 1 instrument as described in Note 4.5(b). Fair value was determined with reference to a quoted market price with a mark to market gain of $1,230,000 adjusted against the investment for the year ended 30 June 2021 (2020: $489,000 loss). Recognition and derecognition All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the market place. Financial assets are derecognised when the right to receive cash flows from the financial assets has expired or when the entity transfers substantially all the risks and rewards of the financial assets. If the entity neither retains nor transfers substantially all of the risks and rewards, it derecognises the asset if it has transferred control of the assets. Subsequent measurement Investments in listed equities are non-derivative financial assets, principally equity securities, which meet the definition of equity instruments. Upon initial recognition under AASB 9, the Group made an irrevocable election, on an instrument by instrument basis, to present subsequent changes in the fair value of its investments in listed equities in a separate component of equity. Dividends from investments in listed equities are recognised in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. The fair values of investments that are actively traded in organised financial markets are determined by reference to quoted market bid prices at the close of business on the reporting date. For investments with no active market, fair values are determined using valuation techniques. Such techniques include: using recent arm’s length market transactions; reference to the current market value of another instrument that is substantially the same and discounted cash flow analysis, making as much use of available and supportable market data as possible and keeping judgemental inputs to a minimum. 136 136 Nine Annual Report 20217.2 Defined benefit plan Non-current Defined benefits plan 1 Closing balance at 30 June 2021 $’000 2020 $’000 25,533 25,533 14,805 14,805 1. 30 June 2021 balance consists of Fairfax Media Super defined benefit plan (2021: $2,258,000; 2020: $1,934,000), Macquarie Media Ltd (MML) Super defined benefit plan (2021: $360,000; 2020: $277,000) and Nine Network Superannuation Plan (2021: $22,915,000; 2020: $12,594,000). Plan information Defined benefit members receive lump sum benefits on retirement, death, disablement and withdrawal. The defined benefit section of the Plan is closed to new members. All new members receive accumulation only benefits. Regulatory framework The Superannuation Industry (Supervision) (SIS) legislation governs the superannuation industry and provides the framework within which superannuation plans operate. The SIS Regulations require an actuarial valuation to be performed for each defined benefit superannuation plan every three years, or every year if the plan pays defined benefit pensions unless an exemption has been obtained. Responsibilities for the governance of the Plans The Plan’s Trustees are responsible for the governance of the Plans. The Trustees have a legal obligation to act solely in the best interests of Plan beneficiaries. The Trustee has the following roles: • administration of the Plan and payment to the beneficiaries from Plan assets when required in accordance with Plan rules; • management and investment of the Plan assets; and • compliance with superannuation law and other applicable regulations. The prudential regulator, the Australian Prudential Regulation Authority (APRA), licenses and supervises regulated superannuation plans. Risks There are a number of risks to which the Plans expose the Company. The more significant risks relating to the defined benefits are: • Investment risk — the risk that investment returns will be lower than assumed and the Company will need to increase contributions to offset this shortfall; • Salary growth risk — the risk that wages or salaries (on which future benefit amounts will be based) will rise more rapidly than assumed, increasing defined benefit amounts and thereby requiring additional employer contributions; and • Legislative risk — the risk that legislative changes could be made which could increase the cost of providing the defined benefits. The defined benefit assets of the Nine Network superannuation plan are invested in the AMP Future Directions Balanced investment option. The assets have a 55% weighting to equities and therefore the Plan has a significant concentration of equity market risk. However, within the equity investments, the allocation both globally and across the sectors is diversified. The assets held to support accumulated benefits, including the accumulation accounts in respect of defined benefit members, are held in the investment options selected by the member. Significant events There were no plan amendments affecting the defined benefits payable, curtailments or settlements during the year. Valuation The actuarial valuations of the defined benefits funds for the year ended 30 June 2021 were performed by Mercer Investment Nominees Limited for the purpose of satisfying accounting requirements. The details of the plan disclosed throughout relates to the Nine Network Superannuation Plan and excludes the Fairfax Media and MML Plans, on the basis that they are not considered material to the Group. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 137 137 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 7. Other continued 7.2 Defined benefit plan continued Reconciliation of the Net Defined Benefit Asset Financial year ended Net defined benefit asset at start of year Current service cost Net interest Actual return on Plan assets less interest income Actuarial gains arising from changes in financial assumptions Actuarial gains arising from liability experience Employer contributions Contributions to accumulation section Net defined benefit asset at end of year Reconciliation of the Fair Value of Plan Assets Financial year ended Fair value of Plan assets at beginning of the year Interest income Actual return on Plan assets less interest income Employer contributions Contributions by Plan participants Benefits paid Taxes, premiums and expenses (paid)/received Contributions to accumulation section Fair value of planned assets at 30 June Reconciliation of the Present Value of the Defined Benefit Obligation Financial year ended Present value of defined benefit obligations at beginning of year Current service cost Interest cost Contributions by Plan participants Actuarial losses arising from changes in financial assumptions Actuarial (gain)/losses arising from liability experience Benefits paid Taxes, premiums and expenses (paid)/received Present value of defined benefit obligations at 30 June 30 June 2021 $’000 30 June 2020 $’000 12,594 (782) 176 9,445 (398) 1,861 19 — 22,915 21,161 (1,401) 402 (1,921) (1,393) (544) 25 (3,735) 12,594 30 June 2021 $’000 30 June 2020 $’000 52,498 58,519 791 9,445 19 703 (2,865) (71) — 60,520 1,215 (1,921) 25 731 (2,925) 589 (3,735) 52,498 30 June 2021 $’000 30 June 2020 $’000 39,904 37,358 782 615 703 398 (1,861) (2,865) (71) 37,605 1,401 813 731 1,393 544 (2,925) 589 39,904 The defined benefit obligation consists entirely of amounts from Plans that are wholly or partly funded. 138 138 Nine Annual Report 2021Fair value of Plan assets As at 30 June 2021 total Plan assets of $60,520,000 are held in AMP Future Directions Balanced investment option. These assets are fair valued using Level 2 inputs. The percentage invested in each asset class at the reporting date is: As at Australian Equity International Equity Fixed Income Property Alternatives/Other Cash 1. Asset allocation as at 31 May 2021. The fair value of Plan assets includes no amounts relating to: • any of the Company’s own financial instruments; or • any property occupied by, or other assets used by, the Company. Significant Actuarial Assumptions As at Assumptions to Determine Benefit Cost Discount rate Expected salary increase rate Assumptions to Determine Benefit Obligation Discount rate Expected salary increase rate Sensitivity Analysis 30 June 2021 1 % 30 June 2020 % 24% 31% 21% 11% 9% 4% 23% 33% 20% 6% 15% 3% 30 June 2021 30 June 2020 1.6% pa 2.0% pa 2.2% pa 2.0% pa l R e v e w i 1.4% pa 2.0% pa 1.6% pa 2.0% pa The defined benefit obligation as at 30 June 2021 under several scenarios is presented below: Scenarios A and B relate to discount rate sensitivity. Scenarios C and D relate to salary increase rate sensitivity. • Scenario A: 0.5% pa lower discount rate assumption. • Scenario B: 0.5% pa higher discount rate assumption. • Scenario C: 0.5% pa lower salary increase rate assumption. • Scenario D: 0.5% pa higher salary increase rate assumption. % pa Discount rate Salary increase rate Defined benefit obligation ($’000s) 1 Scenario A -0.5% pa discount rate Scenario B +0.5% pa discount rate Scenario C -0.5% pa salary increase rate Scenario D +0.5% pa salary increase rate 0.9% pa 1.9% pa 1.4% pa 2.0% pa 2.0% pa 1.5% pa 1.4% pa 2.5% pa 38,671 36,653 36,822 38,456 Base case 1.4% pa 2.0% pa 37,605 1. Includes defined benefit contributions tax provision. The defined benefit obligation has been recalculated by changing the assumptions as outlined above, whilst retaining all other assumptions. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 139 139 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 7. Other continued 7.2 Defined benefit plan continued Asset-liability matching strategies No asset and liability matching strategies have been adopted by the Plan. Funding arrangements The financing objective adopted at the 1 July 2018 actuarial investigation of the Plan, in a report dated 21 December 2018, is to maintain the value of the Plan’s assets at least equal to: • 100% of accumulation account balances (including additional accumulation accounts of defined benefit members); plus • 110% of defined benefit Vested Benefits. In that valuation, it was recommended that the Company contributes to the Plan as follows: • Defined Benefit members: Category A A1 Employer Contributions Rate (% of Salaries) nil nil Plus any compulsory or voluntary member pre-tax (salary sacrifice) contributions. • For A1 members, the employer should also make the relevant Superannuation Guarantee contributions to members’ chosen funds. • Accumulations members: • the Superannuation Guarantee rate of ordinary Time Earnings (or such lesser amount as required to meet the Employer’s obligations under Superannuation Guarantee legislation or employment agreements); • except that one year of required Employer SG Contributions (not exceeding $1 million per month or $12 million in aggregate, gross of tax) will be financed from Defined Benefit Assets from 1 April 2019 to 31 March 2020 (or starting at a date as agreed between the Trustee and the Employer but no later than 1 July 2019). During the year to 30 June 2021, contributions of $nil (2020: $3.7 million (net of tax)) were financed from defined benefit assets; and • any additional employer contributions agreed between the Employer and a member (e.g. additional salary sacrifice contributions). Expected Contributions Financial year, ending Expected employer contributions 30 June 2022 — Maturity profile of defined benefit obligation The weighted average duration of the defined benefit obligation as at 30 June 2021 is five years (30 June 2020: six years). Expected benefit payments for the financial year ending on: 30 June 22 30 June 23 30 June 24 30 June 25 30 June 26 Following five years 140 140 $’000 5,034 4,948 4,391 4,466 7,740 16,514 Nine Annual Report 2021Accounting Policy The Group contributes to defined benefit superannuation funds which require contributions to be made to separately administered funds. The cost of providing benefits under the defined benefit plans is determined separately for each plan using the projected unit credit actuarial valuation method. Re-measurements, comprising actuarial gains and losses, the effect of the asset ceiling (excluding net interest) and the return on plan assets (excluding net interest), are recognised immediately in the statement of financial position with a corresponding debit or credit to a separate component of equity in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods. Past service costs are recognised in the Statement of Comprehensive Income on the earlier of the date of the plan amendment or curtailment, and the date that the Group recognises restructuring-related costs. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Group recognises the following changes in the net defined benefit obligation under “expenses” in the Statement of Comprehensive Income (by function): • service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and • net interest expense or income. 7.3 Auditors’ remuneration Amounts to Ernst & Young (Australia): 2021 $ 2020 $ Fees for auditing the statutory financial report of the parent covering the Group and auditing the statutory financial reports of any controlled entities 1 2,693,518 2,980,455 Fees for other assurance and agreed-upon-procedures services under other legislation or contractual arrangements where there is discretion as to whether the service is provided by the auditor or another firm Fees for other services — Tax compliance and advisory Total auditors’ remuneration 63,460 99,550 303,145 370,383 3,060,123 3,450,388 1. Comprised of the audit and review of the consolidated group ($1,527,500) and the audit and review of other related entities ($1,166,018). (2020: consolidated group ($2,144,987) and the audit and review of other related entities ($835,468)). 7.4 Contingent liabilities and related matters The consolidated entity has made certain guarantees regarding contractual leases, performance and other commitments of $27,577,141 (2020: $24,975,789). All contingent liabilities are unsecured. The probability of having to meet these commitments is remote and there are uncertainties relating to the amount and the timing of any outflows. Certain entities in the Group are party to various legal actions and exposures that have arisen in the ordinary course of business. Appropriate provisions have been recorded, however the outcomes cannot be predicted with certainty. The parent entity is a party to the Deed of Cross Guarantee entered into with various Group companies. Refer to Note 6.4 for further details. Refer to Note 3.8 for disclosure of the Group’s commitments. The operation of the Deed of Cross Guarantee has the effect of joining the parent entity as a guarantor to the Group’s commitments and contingencies. C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 141 141 Nine Annual Report 2021 Notes to the Consolidated Financial Statements for the year ended 30 June 2021 7. Other continued 7.5 Events after the balance sheet date Following the year end, Domain Group announced its intention to repay JobKeeper allowance received during the year ended 30 June 2021, totalling $6.5 million. There has not arisen in the interval between the end of the financial period and the date of this report any other item, transaction or event of a material and unusual nature, to affect significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity, in future years. 7.6 Other significant accounting policies Accounting Policy 7.6(a) Changes in accounting policies and disclosures Year ended 30 June 2021 Changes in accounting policies — IFRIC agenda decision — Configuration or Customisation Costs in a Cloud Computing Arrangement In April 2021, the IFRS Interpretations Committee (IFRIC) published an agenda decision for configuration and customisation costs incurred related to a Software-as-a-Service (SaaS) arrangement. As a result, the Group has changed its accounting policy in relation to configuration and customisation costs incurred in implementing SaaS arrangements. The nature and effect of the changes as a result of changing this policy is described in Note 1.2 and the Group’s new accounting policy is detailed below: Accounting policy — Software-as-a-Service (SaaS) arrangements SaaS arrangements are arrangements in which the Group does not currently control the underlying software used in the arrangement. Where costs incurred to configure or customise SaaS arrangements result in the creation of a resource which is identifiable, and where the company has the power to obtain the future economic benefits flowing from the underlying resource and to restrict the access of others to those benefits, such costs are recognised as a separate intangible software asset and amortised over the useful life of the software on a straight-line basis. The amortisation is reviewed at least at the end of each reporting period and any changes are treated as changes in accounting estimates. Where costs incurred to configure or customise do not result in the recognition of an intangible software asset, then those costs that provide the Group with a distinct service (in addition to the SaaS access) are now recognised as expenses when the supplier provides the services. When such costs incurred do not provide a distinct service, the costs are now recognised as expenses over the duration of the SaaS contract. Previously some costs had been capitalised and amortised over its useful life. The Group has early adopted the following standards, interpretations or amendments that have been issued but are not yet effective. Significant accounting judgements, estimates and assumptions In the process of applying the Group’s accounting policy, Management has made following judgements which have the most significant effect on the amounts recognised in the consolidated financial statements. • Determining whether cloud computing arrangements contain a software licence intangible asset The Group evaluates cloud computing arrangements to determine if it provides a resource that the Group can control. The Group determines that a software licence intangible asset exists in a cloud computing arrangement when both of the following are met at the inception of the arrangement: • It is feasible for the Group to run the software on its own hardware or contract with another party unrelated to the supplier to host the software. 142 142 Nine Annual Report 2021• Capitalisation of configuration and customisation costs in SaaS arrangements Where the Group incurs costs to configure or customise SaaS arrangements and such costs are considered to enhance current on-premise software or provide code that can be used by the Group in other arrangements, the Group applies judgement to assess whether such costs result in the creation of an intangible asset that meets the definition and recognition criteria in AASB 138 Intangible Assets. • Determination whether configuration and customisation costs provide a distinct service to access to the SaaS The Group applies judgement in determining whether costs incurred provide a distinct service, aside from access to the SaaS. Where it is determined that no distinct service is identifiable, the related costs are recognised as expenses over the duration of the service contract. • IFRS Interpretations Committee (IFRIC) Agenda Decision - Costs Necessary to Sell Inventories (IAS 2 Inventories) In June 2021, IFRIC published an agenda decision in relation to the accounting treatment when determining net realisable value (NRV) of inventories, in particular what costs are necessary to sell inventories under AASB 102 Inventories. The Group is currently assessing the impact the agenda decision will have on its current accounting policy and whether an adjustment to inventory may be necessary. Accordingly, a reliable estimate of the impact of the IFRIC agenda decision on the Group cannot be made at the date of this report. The Group expects to complete the implementation of the above IFRIC agenda decision as part of its interim report for the period ending 31 December 2021. • AASB 2020-3 Amendments to AASB 137 Onerous Contracts — Cost of Fulfilling a Contract (effective date 1 January 2022) AASB 137 defines an onerous contract as a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. Unavoidable cost is the lower of the cost of fulfilling the contract and any compensation or penalties arising from failure to fulfil it. AASB 137 does not specify which costs to include in determining the cost of fulfilling a contract. Consequently, AASB 137 was amended to clarify that when assessing whether a contract is onerous, the cost of fulfilling the contract comprises all costs that relate directly to the contract, which includes both the: • incremental costs of fulfilling that contract (e.g., materials and labour); and • an allocation of other costs that relate directly to fulfilling contracts (e.g., depreciation of property, plant and equipment). An entity shall apply these amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments (the date of initial application). Comparative information is not restated. Instead, the cumulative effect of initially applying the amendments is recognised as an adjustment to the opening balance of retained earnings or other component of equity, as appropriate, at the date of initial application. This has not had a material impact on the Group. • Other Certain new accounting standards, amendments and interpretations have been issued that are not yet effective for the financial year ended 30 June 2021. However, the Group intends to adopt the following new or amended standards and interpretations, if applicable, when they become effective with no significant impact being expected on the Consolidated Financial Statements of the Group: • AASB 2020-3 Amendments to AASB 3 — Reference to the Conceptual Framework C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 143 143 Nine Annual Report 2021 Directors’ Declaration The Directors of Nine Entertainment Co. Holdings Limited have declared that: 1. the Directors have received the declarations required by section 295A of the Corporations Act 2001 from the Chief Executive Officer and the Chief Financial Officer for the year ended 30 June 2021. 2. in the opinion of the Directors, the consolidated financial statements and notes that are set out on pages 81 to 143 and the Remuneration Report in pages 51 to 74 in the Directors’ Report, are in accordance with the Corporations Act 2001, including. i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2021 and of its performance for the financial year ended on that date; and ii) complying with Australian Accounting Standards and the Corporations Act 2001 3. in the opinion of the Directors, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 4. a statement of compliance with International Financial Reporting Standards has been included on page 86 of the financial statements; and 5. in the opinion of the Directors, at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identified in Note 6.3 will be able to meet any obligations or liabilities which they are or may become subject to, by virtue of the Deed of Cross Guarantee. The Directors’ Declaration is made in accordance with a resolution of the Board of Nine Entertainment Co. Holdings Limited. Peter Costello Chairman Sydney, 25 August 2021 Mike Sneesby Chief Executive Officer and Director 144 Nine Annual Report 2021 Independent Auditor’s Report Ernst & Young 200 George Street Sydney NSW 2000 Aust ralia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Independent audit or’s report t o t he members of Nine Ent ert ainment Co. Holdings Limit ed Report on t he audit of t he financial report Opinion We have audited the financial report of Nine Entertainment Co. Holdings Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of profit or loss and comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a. Giving a true and fair view of the consolidated financial position of the Group as at 30 June 2021 and of its consolidated financial performance for the year ended on that date; and b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis f or 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 are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (t he Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other et hical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit mat t ers Key audit matters are those matters that , in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislat ion C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 145 Nine Annual Report 2021 Independent Auditor’s Report Impairment t est ing of int angible asset s Why significant How our audit addr essed t he key audit mat t er At 30 June 2021, the Group’s consolidated statement of financial position included goodwill and other intangible assets amounting to $2,266m, representing 57.9% of total assets. As disclosed in Note 3.6 to the financial statements, the Directors have assessed goodwill and other intangible assets for impairment and recorded an impairment charge of $61.5 million for the year. This assessment involved critical accounting estimates and assumptions, based upon conditions existing as at 30 June 2021, specifically concerning factors such as forecast cashflows, discount rates and terminal growth rates. The estimates and assumptions relate to future performance, market and economic conditions which are inherently subjective and in times of economic uncertaint y the degree of subjectivit y is higher than it might otherwise be. Changes in certain assumptions can lead to significant changes in the recoverable amount of these assets. As a result, we consider the impairment testing of goodwill and ot her intangible assets to be a key audit matter. Our audit procedures included the following: • Assessment as to whether the models used by the Directors in their impairment testing of the carrying values of intangible assets met the requirements of Australian Accounting Standards. • • Evaluation of the determination of each Cash Generating Unit (“ CGU” ) based on whether independent cash inflows are generated by the CGU and other factors. Testing of the mathematical accuracy of the models. • Consideration of the underlying assumptions regarding future cash flows used in the models by comparing these to the Board approved five-year business plans and long- term capital and content investment plans. • Consideration of the historical accuracy of the Group’s cash flow forecasting. • Assessment of the discount rates and growth rates (including terminal growth rates) applied in the models, with involvement from our valuation specialists and with reference to external data such as broker forecasts and valuations. • Consideration of the sensitivity analysis performed by the Group, focusing on the areas in the models where a reasonably possible change in assumptions could cause the carrying amount to differ from its recoverable amount and therefore indicate impairment or a reversal of prior year impairment. • Consideration of the adequacy of the disclosures relating to intangible assets in the financial statements, including those made with respect to judgements and estimates. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislat ion 146 Nine Annual Report 2021Cyber Incident Why significant During the period the Group was affected by a significant cyber incident, affecting systems, processes and causing disruption to the Group. The cyber incident required significant auditor attention in considering its impact and the response by management on financial reporting processes and on our planned audit approach. This necessitated the involvement of our cyber security experts. Accordingly, this was considered to be a key audit matter. How our audit addr essed t he key audit mat t er Our audit procedures included the following: Inquiries wit h senior management to • understand the Group’s assessment of the cyber incident and the steps taken to respond to the incident, including alternate transaction processing procedures implemented during the affected period. This focused on the key financial systems used in the preparation of the Group financial statements. • Reviewed management’s assessment of the impact of the cyber incident on the key financial systems used across the Group and in the preparation of the Group financial statements. • Reviewed, with the assistance of our cyber security specialists, the investigative report prepared by the Group’s third party experts to assess whether the key financial systems had been compromised. • Considered where our audit plan needed to be modified as a result of incident and management’s response to it. • Evaluated the design and tested the operating effectiveness of the Group’s alternate processes during the effected period. Informat ion ot her t han t he financial report and audit or’s report t hereon The directors are responsible for the other information. The other information comprises the information included in the Company’s 2021 annual report other than the financial report and our auditor’s report thereon. We obtained the directors’ report that is to be included in the annual report prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the annual report after the date of this auditor’s report. Our opinion on the financial report does not cover the other information and we do not and will not express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection wit h 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. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislat ion C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 147 Nine Annual Report 2021 Independent Auditor’s Report If, based on the work we have performed on the other information 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. Responsibilit ies of t he direct ors for t he 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 cont rol 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 Group’s ability to continue as a going concern, disclosing, as applicable, matters relating 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. Audit or’s responsibilit ies for t he audit of t he 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 this financial report. As part of an audit in accordance wit h the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: ► Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. ► Obtain an understanding of internal control relevant to t he audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. ► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. ► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. ► Evaluate the overall presentation, st ructure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. A member fir m of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislat ion 148 Nine Annual Report 2021► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit . We remain solely responsible for our audit opinion. We communicate wit h the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on t he audit of t he Remunerat ion Report Opinion on t he Remunerat ion Report We have audited the Remuneration Report included in pages 51 to 74 of the directors’ report for the year ended 30 June 2021. In our opinion, the Remuneration Report of Nine Entertainment Co. Holdings Limited for the year ended 30 June 2021 complies with section 300A of the Corporations Act 2001. Responsibilit ies The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance wit h 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. Ernst & Young Christopher George Partner Sydney 25 August 2021 A member fir m of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislat ion C o r p o r a t e G o v e r n a n c e D i r e c t o r s ’ R e p o r t R e m u n e r a t i o n R e p o r t O p e r a t i n g a n d i F n a n c a i l R e v e w i i F n a n c a i l S t a t e m e n t s S h a r e h o d e r l i n f o r m a t i o n C o r p o r a t e D i r e c t o r y 149 Nine Annual Report 2021 Shareholder information Twenty largest shareholders as at 3 September 2021 Rank Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED BIRKETU PTY LTD CITICORP NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED BNP PARIBAS NOMINEES PTY LTD BNP PARIBAS NOMS PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED UBS NOMINEES PTY LTD MUTUAL TRUST PTY LTD BOND STREET CUSTODIANS LIMITED BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD NETWEALTH INVESTMENTS LIMITED PACIFIC CUSTODIANS PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 POWERWRAP LIMITED UBS NOMINEES PTY LTD BNP PARIBAS NOMS(NZ) LTD 20 NAVIGATOR AUSTRALIA LTD Options There were no options exercisable at the end of the financial year. Escrowed shares There were no shares in escrow at the end of the financial year. 03 Sep 2021 564,841,499 279,657,218 254,760,442 209,089,741 113,658,536 23,892,055 20,551,773 14,668,230 13,202,625 5,320,147 5,138,872 4,987,850 4,008,809 3,941,138 3,543,930 3,457,769 2,433,756 2,166,711 2,027,197 2,000,893 %IC 33.12 16.40 14.94 12.26 6.66 1.40 1.21 0.86 0.77 0.31 0.30 0.29 0.24 0.23 0.21 0.20 0.14 0.13 0.12 0.12 150 Nine Annual Report 2021Substantial shareholders Substantial shareholders as shown in substantial shareholding notices received by the Company as at 3 September 2021 are: Name Bruce Gordon/Birketu/WIN1 Pendal Group Fidelity Worldwide Investment (FIL) 1. In addition, Birketu has economic interests in 37,000,000 shares pursuant to swaps. Range (3 September) 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and Over Total Unmarketable Parcels Total shares 254,760,442 151,262,076 85,522,155 No. of holders 8,501 8,817 2,658 3,026 187 23,189 495 % 14.94% 8.87% 5.01% % 36.66 38.02 11.46 13.05 0.81 100.00 2.13 Voting rights On a show of hands, every member present, in person or by proxy shall have one vote and upon a poll, each share shall have one vote. Buy-back There is no current on market buy-back. C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 151 Nine Annual Report 2021 This page has been left blank intentionally. 152 Nine Annual Report 2021Corporate Directory Nine Entertainment Co. Holdings Limited ABN 60 122 203 892 Annual General Meeting The Annual General Meeting will be held at 10:00am AEST on Thursday, 11 November 2021, and will be a virtual meeting. Information on how to join will be available with the Notice of Meeting. Financial Calendar 2022 Interim Result 24 February 2022 Preliminary Final Result 25 August 2022 Annual General Meeting 17 November 2022 Company Secretary Rachel Launders Registered Office Nine Entertainment Co. Holdings Limited Level 9, 1 Denison Street, North Sydney NSW 2060 Ph: +61 2 9906 9999 Share Registry Link Market Services Limited Level 12, 680 George Street Sydney NSW 2000 1300 888 062 (toll free within Australia) Ph: Ph: +61 2 8280 7670 Fax: +61 2 9287 0303 Email: registrars@linkmarketservices.com.au Website: www.linkmarketservices.com.au Securities Exchange Listing The Company’s ordinary shares are listed on the Australian Securities Exchange as NEC. Auditors Ernst & Young 200 George Street Sydney NSW 2000 C C o o r r p p o o r r a a t t e e G G o o v v e e r r n n a a n n c c e e D D i i r r e e c c t t o o r r s s ’ ’ R R e e p p o o r r t t R R e e m m u u n n e e r r a a t t i i o o n n R R e e p p o o r r t t O O p p e e r r a a t t i i n n g g a a n n d d i i F F n n a a n n c c a a i i l l R R e e v v e e w w i i i i F F n n a a n n c c a a i i l l S S t t a a t t e e m m e e n n t t s s S S h h a a r r e e h h o o d d e e r r l l i i n n f f o o r r m m a a t t i i o o n n C C o o r r p p o o r r a a t t e e D D i i r r e e c c t t o o r r y y 153 Nine Annual Report 2021

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