Nine Entertainment Co Holdings Ltd
Annual Report 2022

Plain-text annual report

ANNUAL REPORT 2022 We shape culture by sparking conversations, challenging perspectives and entertaining our communities. We bring people together by celebrating the big occasions and connecting the everyday moments. AUSTRALIA BELONGS HERE Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory CONTENTS OVERVIEW OPERATIONAL HIGHLIGHTS CHAIRMAN’S ADDRESS CEO’S ADDRESS BROADCAST STAN PUBLISHING DOMAIN SUSTAINABILITY PEOPLE AND CULTURE COMMUNITY BOARD OF DIRECTORS CORPORATE GOVERNANCE STATEMENT 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 11 19 22 26 28 31 35 38 40 54 60 61 84 92 166 167 172 175 NINE Annual Report 2022 1 Overview The value of Nine’s content brands, and the resulting audience delivery across the Group’s Television, Publishing and Radio platforms, as well as the Domain marketplaces business underpinned Nine’s 15% revenue growth in FY22, and subsequent strong profit result. EBITDA growth to more than $700 million marked a record for Nine – at a Group level, as well as for Total TV and Publishing. Across all of Nine’s businesses, strategic milestones were achieved, further enhancing the Group’s competitive position and reinforcing Nine as Australia’s Media Company. Nine continues to grow its digital footprint. Notwithstanding a particularly strong advertising market, the combination of Nine’s digital businesses across 9Now, Stan, Digital Publishing and Domain (60%) contributed 43% of Group revenue and more than 50% of EBITDA, up 29% and 43% respectively on FY21. GROUP REVENUE1 $2.7B+15% GROUP EBITDA1 $701M+24% DIVIDEND PER SHARE1 14c+33% 1. Year to June 2022, % chg on pcp 2. Before Specific Items 2 Nine Entertainment Co. Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory RESULTS IN BRIEF GROUP EBITDA GROWTH OF 24% $m 400 300 200 100 0 -100 +19% +53% +21% +81% (28%) (24%) FY21 FY22  Total Television  Radio  Stan  Publishing  Domain  Corporate For the year to June 2022, Nine reported Group EBITDA before Specific Items of $701 million, growth of 24% on FY21. Revenue across the Group grew by 15% to $2.7 billion. Net Profit after Tax, and before Specific Items, was $349 million, which was up 34% on FY21. After Specific Items (non- recurring and net of tax) of $58 million, a Statutory Net Profit, before Minority Interests, of $315 million was reported, up 71% on FY21. Earnings per share of 20.5 cents was up 34% on FY21 and dividends of 14 cents per share were paid from the year’s profits. 50% 4% 11% EBITDA 57% 26% Yr to June, $m Revenue1 Group EBITDA1 EBIT1 NPAT, after Minorities1 Statutory Net Profit, including Specific Items2 Earnings per Share – cents Dividend per Share – cents 1. Before Specific Items 2. Before Minorities Reported, as at Net Debt, wholly owned, $m3 Net Leverage, wholly owned 3. Excludes Domain FY22 FY21 Variance 2% 2,688.8 2,331.5 700.7 551.6 348.5 315.3 20.5 14.0 564.7 415.6 261.0 184.0 15.3 10.5 +15% +24% +33% +34% +71% +34% +33% 30 June 2022 30 June 2021 Variance 172.9 0.3x 171.1 0.4x +$1.8 -0.1x  Total Digital  Total Television  Radio  Domain  Stan  Publishing Economic interest adjusted basis, excludes Nine’s corporate costs Operating Cash before Specific Items, Interest and Tax for the 12 months was $570 million, on a wholly owned basis. On the same basis, Net Debt was $173 million, broadly unchanged on 12 months earlier. During the year, Nine distributed $213 million of dividends to shareholders, capital expenditure was $49 million and tax paid was $115 million. Nine also invested $131 million in Domain to support its acquisition of Realbase. Annual Report 2022 3 Operational Highlights TOTAL TELEVISION NINE NETWORK TOTAL MARKET $3.2B1, +12% NINE’S REVENUE $1.3B2, +10% FOR A 39% SHARE1 #1 RATINGS SHARE ACROSS ALL KEY DEMOGRAPHICS3 #1 FREE TO AIR REVENUE SHARE4 9NOW REVENUE +41% TO $151M2 STAN ACTIVE SUBSCRIBERS REVENUE >2.5M +22% DAILY ACTIVE USERS LIVE STREAMS STAN SPORTS SUBS +33%5 +75%6 >150% GROWTH7 AVERAGE REVENUE PER USER +9%8 CONTENT PIPELINE STRENGTHENED INCREASED COMMITMENT TO STAN ORIGINALS ENTERTAINMENT CONTENT DEALS – extension of Starz/Lionsgate and MGM. Expanded deal with Warner. New output deal with Sony 9 LAUNCH OF STAN EVENTS NEW SPORTS CONTENT including Rugby World Cup, all tennis Grand Slams, Motorsports, Boxing 1. Think TV data, includes Metro Free To Air + BVOD 12 Months to June 2022 2. Yr to June 2022 3. OzTAM. Metro TV ratings, 6pm-midnight, 12 months to June 30 2022, excl summer Olympics 4. Think TV data, 12 Months to June 2022, Metro markets 5. Internal SSO data 6. OzTAM July-June vs pcp 7. Average Q4 2022 on Q4 2021 8. On FY21 9. From August 2022 4 Nine Entertainment Co.  NINE PUBLISHING EBITDA +53% DIGITAL REVENUES ACCOUNT FOR MORE THAN 60% OF TOTAL REVENUES GROWTH IN SUBSCRIPTIONS AND ADVERTISING NINE RADIO EBITDA AD REVENUE +81% +14% AHEAD OF MARKET +10%10 CONTINUED GROWTH IN RADIO AUDIENCES DOMAIN EBITDA (ONGOING) +38%11 23%GROWTH IN CORE RESIDENTIAL BUSINESS WITH 14% CONTROLLABLE YIELD INCREASE DELIVERING ON MARKETPLACE STRATEGY WITH ACQUISITION OF REALBASE 10. Commercial Radio Australia, 12 months to June 2022, Sydney-Melbourne- Brisbane-Perth 11. As per Domain’s results Annual Report 2022 5 OverviewCorporate GovernanceDirectors’ ReportOperating and Financial ReviewFinancial StatementsShareholder information Corporate DirectoryChairman’s address NINE WILL BE INSTRUMENTAL IN MOULDING AND DETERMINING THE FUTURE OF AUSTRALIA’S MEDIA. FY22 was a very successful year for Nine. The quality of our content delivered through the unique combination of our platform assets led to strong audiences, revenue and profitability. Across the year, and across all of our businesses, Nine built on its previous positive momentum and reported noticeable progress against the Company’s objectives. In particular, we continue to build a digital future. Nine reported strong profit growth for FY22 with Group EBITDA before Specific Items up 24% and Net Profit After Tax and Minorities up 34% on FY21. There was a recovery in our traditional advertising markets, and digital earnings grew very strongly – growing by 43% and now accounting for more than 50% of Group EBITDA. 6 Nine Entertainment Co. Subscription now contributes 32% of revenues. Across the financial year, Nine announced dividends of 14 cents per share, up 33% on last year and consistent with our stated policy of a 60-80% payout. resilient against the backdrop of global conflict and local economic challenges. Underpinned by our content performance, Nine held or gained underlying revenue share in these buoyant market conditions. Content is the key to Nine’s business. Across the year, Nine’s total television business, (both FTA and BVOD), talk- radio stations and metro mastheads, attracted leading audiences in their respective markets. This success reflects our deep understanding of our audiences and what they want, as well as our recognition of the changes in the way this content is being consumed. The advertising market was consistently strong across the year and remained remarkably Across the year, Nine also remained focused on its long-term objectives of growing the Nine business, and reweighting it towards its digital future. The growth in 9Now, and the initiation of significant revenue from the global digital platforms, are testament to the success of this focus. In addition, we have extended Stan’s investment in live streaming, successfully differentiating our Subscription-Video On-Demand platform from the plethora of other international services. Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory We have the benefit of a very strong balance sheet which, during the year, enabled us to continue this investment in the future of our business. In addition, we decided to support Domain’s acquisition of Realbase, which we believe adds a crucial element to Domain’s marketplaces strategy. These past years have given us the opportunity to challenge previous paradigms, and ensure we are the employer of choice in the media sector. One of the ways we did this, was to recognise our employees with a one-off Retention Bonus of $1,750 at the close of the financial year. As a Group, we are committed to ensuring trusted journalism remains available for all Australians, through our investment in news and current affairs across all of our platforms. During 2022, this commitment was tested. In May, the NSW Supreme Court issued an extraordinary order requiring Nine to hand over copies of an upcoming television program and newspaper investigation to an interested party before the content had been published or even completed. Fortunately, the decision was overturned on appeal, but developments like this would severely hamper investigative journalism, allowing an aggrieved person the opportunity to edit upcoming stories or at least delay publication of significant stories. Nine’s team of journalists, across all our key platforms, have successfully brought many stories of public interest to the fore over the past few years, and we are committed to continuing to do so in the future. We believe that society benefits from free speech which should be subject to few, clear and circumscribed exceptions. We are hopeful that the most significant disruptions due to COVID are now behind us. Our employees have proven committed and resilient through this period and we are pleased that the operating environment is now finding its new normal. This year, we completed our initial Materiality Assessment, and Environmental, Social and Governance (ESG) Policy. Sustainability is an overarching concept, the focus of which will vary in different companies, but it is designed to make sure that short-term business practices are consistent with long-term Company aspirations. We are committed to continuing improvement in this area. Ensuring the safety of our employees is a challenging but vital part of our business. Our journalists and staff come under enormous pressure as they gather and bring to publication stories on tight deadlines and sometimes on hostile subjects. We are extremely aware that this is a demanding task – which has a large impact on them and also on our ability to maintain important news-gathering services. We are constantly assessing and mitigating these risks and the Board has an active participation in these discussions. In addition, our people often work in complex political environments that add to the pressure. This year a number of our staff and some of our Directors were banned by the Russian Ministry of Foreign Affairs for a “Russophobic agenda.” I can assure you there is no such agenda – just a commitment to report facts as accurately as possible. During the year, we renewed key agreements with the NRL, as well as content providers Sony, and Starz-Lionsgate. Nine’s success is built around strong partnerships with local production houses, international content suppliers, sporting bodies, as well as our audiences and advertisers; and of course, with our shareholders. FY22 marked the first full year for Mike Sneesby in the role of CEO. Mike has brought an increased focus on the growth engines of the Company and developing its digital future, with the insights gained in his previous role as CEO of Stan. I’d like to thank Mike, and his leadership team, on behalf of our Board and all our shareholders, for ensuring the ease of his transition and the continued momentum of the business. The Board itself has worked cooperatively and has given me great support. The Directors’ broad range of skills and experience has proven invaluable to Nine. We are excited about our business, as we believe we have the pre-eminent suite of media assets in the Australian market. All of our businesses have strong market positions, as well as opportunities to grow. Through these past two years, we have expedited the expansion of our business via digital delivery and further enhanced our competitive position. Nine will be instrumental in moulding and determining the future of Australian media. Thank you. PETER COSTELLO, AC Chairman Annual Report 2022 7 CEO’s address HAVING A CLEAR AND WELL-KNOWN PURPOSE AND VISION ... WILL HELP TO CREATE THE FRAMEWORK FOR A HIGH PERFORMANCE CULTURE AT NINE. Across 2022, Nine’s position as Australia’s Media Company, with our diverse range of inter- related assets across Broadcast, Publishing, Streaming and Marketplaces, has strengthened further – strengthened due both to our operational performance, as well as the results of our targeted strategy and investments. In an increasingly global landscape, Nine stands out. Our commitment to producing the content our audiences most need or want, delivered across all available platforms, will continue to ensure that our own local voices will be heard and remain relevant. Nine reported 24% EBITDA growth in 2022 to more than $700 million. Behind that record result were some stand-out highlights. Record profit for Total Television, notwithstanding key events on other networks; a massive 53% growth in Publishing as the business rebases to a higher level; continued recovery in Radio with clear share gains in a stronger market; strong underlying profit performance at Stan while making significant investments in growth through Sport and Originals; and 38% growth in ongoing EBITDA at Domain. I would like to thank and congratulate the team at Nine on this exceptional result. They have focused on the priorities that drive revenue and growth opportunities across the business, while remaining disciplined in cost management. Content is at the heart of our business, and in 2022, the team here at Nine has delivered outstanding results across programming and audience. We have gained underlying audience share across all of our key platforms, as Nine’s content continues to attract the most lucrative audiences. Across all forms of Television, Radio and Publishing, Nine’s content has resonated with audiences. Nine Network, 9Now and Stan represent Australia’s broadest set of television assets. Through Nine’s leading content brands and platforms, we are best- placed to meet the needs of audiences, advertisers and content providers alike. This is clearly evidenced in Sport, with sporting bodies recognising the value of partnering with Nine, as we offer unrivalled exposure to the largest audiences (across free and subscription television) with the media assets to support that coverage and build fan engagement. The value of Total Television is becoming clear to both audiences, across a number of our key properties, and advertisers. We believe 9Now’s revenue growth (over 40% this year), and absolute contribution, means we can reasonably expect long-term, top line growth in our Total Television revenue through the cycle. This also demonstrates that we are making solid in-roads into the $3 billion-plus digital video market. It’s been a big year for Stan, and the subscription streaming market overall. Over the year, we have seen sentiment towards global streaming businesses turning rapidly, with the spotlight now firmly on profitability. As a result, we are seeing more diversified strategies for global content distribution, a more rational direct-to-consumer streaming market and a greater volume of premium content available for licensing. Stan continues to grow its subscribers while maintaining positive cash flow 8 Nine Entertainment Co. Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory and profitability. At the same time, Stan has continued to carve out a clear and differentiated market position through Stan Sport and Stan Original programming. The launch of Stan Sport has outperformed our expectations and added significantly to the value and sustainability of Stan in the Australian market. Stan’s expansion of its Originals slate has also proven successful as Stan takes greater control of its own premium content production and supply. Stan is also well-placed to partner with international studios and content producers. In FY22, Nine’s Publishing business reported EBITDA growth of 53%, rebasing to a higher level of profit contribution. A broad focus on reader revenue, or more specifically digital subscription revenues, has proven timely, with the benefit of a heavy news cycle and COVID- related disruptions helping to expedite the migration to digital. We see further opportunities for Nine Publishing to grow its footprint and engage more deeply with more consumers. We will continue to invest both in the content that drives subscribers and the technology that ensures the optimal consumer experience. During the year, we committed a further $131 million to Domain, fully participating in the Group’s capital raising to buy the Realbase business. We continue to support Domain’s Marketplace strategy, of which Realbase is a key component. Nine’s data opportunity in Australia is second to none. Whilst we now boast a pool of more than 20 million unique signed-in users, it is the 16 million people who engage with our network every month, across our mastheads and broader publishing platform, streaming on 9Now or Nine Radio, who drive the revenue opportunity. The scale of our registered user base gives us the first party data relationship with our audience which enables us to understand more about them. However, what enables us to generate advertising revenue and increase yield is the volume of content our audiences consume and the frequency with which they engage across our network. Whilst much progress has been made, we are still at the early stage of our data journey. I have been pleased to see so many of our people returning to the workplace over the past few months. As a Company, we acknowledge the benefit of flexible working arrangements, but we also understand the strength of outcomes that are achieved when people are together – particularly in a business that is so strongly built around creative, strategic and commercial pillars. Our People and Culture teams have worked tirelessly to support our people while working remotely during COVID and also to ensure a smooth transition back to our workplaces across the country. Over the second half of the year, the Executive team has been focused on the development of our long-term plan, and the setting of our strategic priorities. This includes opportunities within our business, as well as adjacencies where we see the potential for creating shareholder value. Nine is a leading player in each of our businesses – Streaming, whether it is subscription or advertising based; Digital Publishing and Marketplaces – and all have opportunities to grow. The Board has been engaged in the process, and I thank them for their support and insights along the way. During the year, we invited all of our people to join a conversation about Nine’s Purpose and Values. It was inspiring to witness first-hand the engagement and clear passion demonstrated across all parts of our business, right across the country as our team brought Nine’s Purpose and Values to life. The expression of our Purpose is a powerful statement, and contains some aspirational goals.`We shape culture by sparking conversations, challenging perspectives, and entertaining our communities. We bring people together by celebrating the big occasions and connecting the everyday moments. Australia belongs here.’ Being clear and aligned on the purpose and the values that unite us provides the framework for a high performance culture at Nine, crucial to our long- term success There will always be challenges in our business, but it is these challenges that enable our people to prove themselves as the best in the market. Our assets are all performing well in their own right; however, it is the strength of our assets together that underpins the strength of our business and the long-term opportunities ahead of us. Thank you. MIKE SNEESBY CEO Annual Report 2022 9 10 Nine Entertainment Co. Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory Broadcast NINE’S BROADCAST DIVISION, WHICH COMPRISES TOTAL TELEVISION AND NINE RADIO, REPORTED EBITDA OF $401M (+21%) ON REVENUES OF $1.4B (+10%) FOR THE YEAR. TOTAL TELEVISION Total Television comprises Nine’s businesses of traditional linear television, Nine Network, and Broadcast Video On Demand (BVOD), 9Now. In FY22, the Total Television market (metro linear plus BVOD) grew by 12% to $3.2 billion, with Nine attracting a market-leading share of 39%. Nine’s Total TV revenues grew by 10% which resulted in 19% EBITDA growth across the Nine Network and 9Now. Around 12% of Nine’s Total Television revenues were digital, up from 9% in FY21. Consumer behaviour has undeniably changed. Nine’s slate of premium television content is now effectively being distributed across three different platforms – linear television, live streaming and catch up. And while linear television continues to account for the majority of the audience, Nine is experiencing strong growth in the other platforms. The challenge for all forms of Television is the finite amount of available viewer time in every day. And whilst total video consumption continues to grow, there are increasing numbers of players competing for that time. What is clear however, is that the right content will continue to attract audiences. Annual Report 2022 11 Broadcast Sport, News and Entertainment are the three key content genres of Nine’s Total Television business. commitment to Television news and current affairs with the expansion of Under Investigation with Liz Hayes. News is the backbone to the regular television schedule with more than 60 hours of broadcast news and current affairs each and every week. This core of News has the added benefit of substantial and stable audiences, with Nine’s nightly 6pm bulletin attracting 1.2 million Australians each and every night, and is the crucial lead- in to each evening’s entertainment schedule. In FY22, Nine furthered this Nine’s commitment to news spans the entire business – across Television, Radio and Publishing which creates opportunities for cross-platform content creation, commitment to a story and promotion. A great example of this was the pre-election Leaders debate which featured a three-person panel consisting of the Nine News’ political editor, Chris Uhlmann, 2GB Radio host, Deb Knight, and The Age’s chief political correspondent, David Crowe. During 2022, Nine also undertook a number of major joint investigations, delivered cross platform, including exposés on Star Casino and the cosmetic surgery industry. The Melissa Caddick story was a further example of the power and impact of Nine’s assets working together – beginning with extensive coverage across The Age and The Sydney Morning Herald, BROADCAST RESULTS, $M 1,600 1,400 1,200 1,000 800 600 400 200 450 400 350 300 250 200 150 100 50 0 0 FY20 FY21 ● TV Revenue (LHS) ● 9Now Revenue (LHS) ● Radio Revenue (LHS) ― EBITDA (RHS) FY22 EBITDA1 CONTRIBUTION – FY22 11% 26% $401M 57% Total Television Radio Stan Publishing Domain 4% 2% 1. Economic interest-adjusted basis, excludes Nine’s corporate costs 12 Nine Entertainment Co. Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory and 60 Minutes. Following on, Underbelly: Vanishing Act was the highest rating new Australian drama launch on television in three years with a national average audience of more than 1.6 million; and the podcast series Liar Liar, featuring The Sydney Morning Herald’s Kate McClymont and 60 Minutes’ Tom Steinfort has attracted downloads of almost 4 million1 since the series launched in April, 2022. national Total Television average audience of 3.9 million – making it the highest rating women’s final of all time, as well as attracting the highest BVOD audience for the Australian Open on record. During the year, Nine also augmented its Australian Open coverage with the other Grand Slams – Roland-Garros and Wimbledon being shown across both Nine and Stan, and the US Open being added from FY23. Note: All ratings and audience data sourced from OzTAM. In FY22, Nine broadcast more than 1,250 hours of premium sports content, as well as a further 500 hours of sport- related content. Once again, Nine’s suite of cross platform assets offers an attractive proposition to the sporting bodies – broad coverage through free linear and streaming, complemented by the deeper offering of Stan, coupled with the promotional power of Nine’s suite of media assets. Following a further agreement with the NRL during the year, Nine has retained broadcast and live, free streaming rights for the NRL through to the end of season 2027. Nine’s partnership with the NRL has now extended over 30 years, and the return to a full season in 2022 was welcomed by the 2.7 million people who tuned in to Nine’s coverage each week. The 2022 State of Origin attracted an average Total Television audience of almost 3 million people, growth on both 2020 (+11%) and 2021 (+3%) with around 15% of 2022 audiences watching live via 9Now. Nine’s 2022 Summer of Tennis, back in its usual calendar slot, was incredible. Ash Barty in the Women’s Singles, the Special Ks Nick Kyrgios and Thanasi Kokkinakis in the Men’s Doubles, and Dylan Alcott, in his final Grand Slam appearance, captured the attention of Australian audiences. Across the fortnight, Tennis on Nine reached a national audience of 12.5 million people, while 657 million live minutes were streamed through 9Now (+171% on 2021). Ash Barty’s final boasted an incredible 1. Triton Podcast Metrics, April-August 2022 Annual Report 2022 13 Broadcast Over 2022, there have been a number of clear examples of key content on Nine where Total Television audiences have grown. Season 17 of The Block, NRL Finals, The Australian Open and Married At First Sight are all evidence that good content will continue to find an audience. The Block in FY22, aired in late 2021, continued to be a proven time slot winner across its 14 week season. The average audience of more than 1.5 million viewers across Australia for each episode, equated to growth of 9% over season 16 in both All People and the coveted 25- 54s. 9Now accounted for a growing share of total audience – 14% of Total People and 18% of the 25-54s. For the 2022 season of Married At First Sight, Total Television audiences also grew, a result of 67% growth in live streaming coupled with 16% growth in catch up audiences – the final episode being watched by almost 2.5 million people across Australia. Other key returning shows – Australian Ninja Warrior, Lego Masters and Celebrity Apprentice, all performed well, while Travel Guides has continued to grow, recording an average Total Television audience of almost 1.2 million across the year. During the year, Nine continued to invest in new content and concepts. Under Investigation with Liz Hayes, Parental Guidance, The Hundred with Andy Lee, Snackmasters and Beauty and the Geek were all new to Nine in calendar 2021 and will all be returning (or have already returned) in 2022. This consistent updating of the content slate is crucial to the ongoing success of Nine’s Total Television business. 14 Nine Entertainment Co. The Television industry is also changing the way it reports and analyses audience data, due in part to the broader roll-out during the year of VirtualOz – a ratings product that brings together broadcast viewing on TV sets and connected devices to provide all- screen, cross-platform reporting for Australia’s Total Television industry. The days of the 9am reporting of overnight linear audiences are being replaced by Total Overnight audiences. More relevant still are the 7-day and 28-day cumulative audiences which also reflect the now significant numbers who choose when they want to watch their favourite shows. For Married At First Sight, this catch-up element was around 20% of total audience. Nine now has three unique ways to monetise Total Television content – through Free To Air television (Nine Network), as well as both live streaming and catch-up through BVOD (9Now). TOTAL TV RESULTS – NINE NETWORK + 9NOW 1,400 1,200 1,000 800 600 400 200 0 450 400 350 300 250 200 150 100 50 0 FY21 ● Free To Air Revenue (LHS) ● 9Now Revenue (LHS) ― Total TV EBITDA (RHS) FY20 FY22 Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory FREE TO AIR TELEVISION (FTA) Nine continued to lead the Metro Free To Air market in both key ratings and revenue share in FY22. The Metro FTA market grew by 9% across the year as segments like Retail, Insurance and Government/ Political continued to drive the advertising market. Nine recorded a market leading share of Metro FTA revenues for the year of 38.2%, notwithstanding the impact of two Olympics on another Network. FY22 was another strong ratings year for Nine. For the year to June, and excluding the Summer Olympics, Nine was the #1 Free To Air Network in all of the key demographics. In Nine’s targeted 25-54s, Nine was the clear leader on both a Network and main channel basis, 4.3 points and 5.4 points respectively ahead of its nearest rival. Reflecting Nine’s strong metro market performance, as well as growth in the regional markets and higher affiliate revenues from WIN, Nine recorded FTA revenue of $1.1 billion for the year, up 7%. Nine’s costs in FY22 increased by 5%, with the return of full tennis rights and spectrum charges, after one-off reductions in FY21, being the primary impacts. EBITDA from Nine’s FTA business grew by 14% to $285 million in FY22. The operating margin was a record high of 26%. NINE NETWORK LEADS IN ALL KEY RATINGS #1 #1 #1 25-54s 16-39s 38.4% commercial share (4.3 pts ahead of nearest rival) 36.8% commercial share (2.2 pts ahead of nearest rival) GS + CH 39.4% commercial share (4.8 pts ahead of nearest rival) OzTAM data, linear Metro TV, 12 months to end of June 2022, 6pm-midnight, excl. Olympics Annual Report 2022 15 Broadcast 9NOW – BROADCAST VIDEO ON DEMAND In FY22, the Broadcast Video On Demand (BVOD) market grew by 47% and now accounts for around 10% of Total Television revenues. Nine recorded a market-leading share of BVOD revenues for the year of 45%, equating to revenue growth of 41% to $151 million. In FY22, 9Now reported EBITDA growth of 37% to $101 million. 9Now continues to record strong growth in audiences. Growth in live streams of 75% out-paced growth in total streams of 25%. From initially being established as a catch-up service for past Nine content, 9Now continues to evolve and is expected to further capture viewers as audiences migrate from linear delivery to free streaming of their Total Television content. 9Now’s success primarily reflects the strength of Nine’s core network content. However, targeted content continues to be added to 9Now to augment Nine’s core network content – content like Love Island, both Australia and the UK, which brings incremental viewing and minutes to 9Now. Nine expects this migration of Total Television viewers to 9Now will continue to gather momentum with the penetration of connected televisions. Nine’s key opportunity is to gain an increasing share of the overall digital video market, estimated currently to be more than $3 billion and dominated by YouTube (Google) and FaceBook (Meta). Beyond Nine’s premium content, 9Now has clear advantages over these global platforms – a brand safe environment, unskippable ads and a third-party, auditable measuring system. The rollout of Virtual Oz, which brings broadcast viewing on TV sets and connected devices together in a single database, will also enable Nine to sell the de-duplicated reach of Total Television, a key opportunity looking forward. 16 Nine Entertainment Co. Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory NINE RADIO Nine Radio operates Australia’s leading Talk Radio Network through 3AW (Melbourne), 2GB (Sydney), 4BC (Brisbane) and 6PR (Perth). In FY22, the Total Radio market (through Nine’s four markets) grew by 10% to $624 million. Reflecting further growth in share, Nine Radio’s advertising revenues grew by 14%. Total revenue of $102 million, up 13%, underpinned EBITDA growth of 81% to $15 million for the year. Costs increased by 6% as Nine lifted its investment in digital audio. Survey results were strong across the year as audiences continued to embrace Nine’s Live and Local content. In each of the eight surveys, 2GB and 3AW retained their number one status in Sydney and Melbourne respectively, on both an All Day basis as well as the key breakfast and morning slots. More specifically, Ben Fordham has recorded 2GB’s best ever cumulative audience. Ray Hadley celebrated 20 years hosting mornings on 2GB, and delivered his best ever survey result. 3AW’s breakfast team, Ross and Russ, celebrated 17 consecutive surveys at number one, while breakfast in Melbourne has recorded 162 consecutive surveys at the top. During the year, Nine Radio introduced single sign on (SSO) for its digital audiences. Around 27% of Nine’s audience are now streaming Nine Radio, and the introduction of Nine’s SSO will enable data and analysis of audience composition and preferences, underpinning subsequent growth in digital revenues. Like Total Television, Nine’s Radio focus is on extending current linear audiences and advertisers onto the digital platforms, using the Group-wide single sign on and digital ad insertion technologies to provide differentiated and targeted advertising opportunities. And like 9Now, the extension of Radio’s traditional content into other digital content, in this case podcasts, is expected to provide incremental opportunities for audiences and advertisers. RADIO RESULTS, $M 120 100 80 60 40 20 0 FY20 FY21 ● Revenue (LHS) ― EBITDA (RHS) FY22 16 14 12 10 8 6 4 2 0 THE IMPORTANCE OF DATA Across the Group’s portfolio of assets, Nine reaches more than 20 million signed-in users. More important however, is the 16 million who engage with Nine’s network every month – across the mastheads and broader publishing platforms, streaming on 9Now or audio streaming on Nine Radio. As consumers enter Nine’s ecosystem, and engage with Nine’s content, the Group has an opportunity to gather data and intelligence on user habits and preferences. The benefit of this is two-fold. Firstly, it enables the analysis of content consumption – what works and what doesn’t and with whom – helping to support future content and product investment; and secondly, it enables the delivery of more relevant advertising – a benefit to the consumer, advertisers and Nine, as advertisers will pay a premium for effective targeting. With an increasing focus on privacy, the recent changes to Apple’s iOS settings and the expected phasing out of third-party cookies by Google, Nine’s access to this pool of first- party data (information a company collects directly from its customers and owns) is expected to become increasingly important and valuable. With a broad range of platforms to both contribute to this data pool, and a similarly broad range of platforms to distribute content and advertise through, Nine is well placed to continue to grow its data revenue. In FY22, Nine’s revenue from advertising augmented with data increased by almost 50% on FY21. Annual Report 2022 17 18 Nine Entertainment Co. Stan STAN IS NINE’S SUBSCRIPTION VIDEO ON DEMAND STREAMING BUSINESS, WHICH LAUNCHED IN 2015. IN FY22, STAN REPORTED EBITDA OF $29M ON REVENUE OF $381M (+22%). Revenue growth was underpinned by growth in active subscribers, as well as close to double-digit growth in ARPU (average revenue per user). Reported EBITDA reflected the investments made in both Originals and Sport across the year. Stan has a unique position in the subscription streaming market in Australia. As a profitable player, with more than 2.5 million active subscribers and a unique subscriber base of 7.8 million since inception, Stan stands out. Its diverse range of world class programming across the key content pillars of Stan Originals, licensed entertainment content and Sport, is unmatched by any other player in the Australian market. In FY22, Stan continued to position itself as a key aggregator of premium exclusive and library content from around the world, sourcing 85 first-run exclusive shows from 17 different distributors. In the past year, Stan signed a new multi-year major content partnership with Sony Picture Television, securing a significant slate of first-run exclusive premium TV shows, and extended major content partnerships with MGM and WarnerMedia. Annual Report 2022 19 OverviewCorporate GovernanceDirectors’ ReportOperating and Financial ReviewFinancial StatementsShareholder information Corporate Directory Stan Across the year, Stan also launched an expanded slate of nine Originals, with outstanding results. Original projects are developed and commissioned with a broad range of partners, both local and international, with Stan retaining exclusive rights in the Australian market. Stan Originals now account for six of the ten most viewed features on the platform (with Gold, a movie starring Zac Efron, the most viewed feature on the Stan platform) and four of the top ten most viewed series, and have also featured across many of the world’s leading networks and platforms including Hulu, Peacock, Paramount+, BBC and HBO Max. During the year, Stan also formed a television development partnership with Hollywood studio Lionsgate, for the production of a further slate of Stan Originals. The investment in Originals is strategic. Not only does it differentiate Stan’s offering from the global players, but it also gives Stan more control of its content supply and creates the building blocks of a long-term content library asset. Stan remains on track to deliver 30% of its premium first-run slate from original productions within three years. STAN RESULTS, $M Stan has also worked closely with Nine’s programming team on a four- part drama series, Bali 2002 and the upcoming brand new reality series, Love Triangle, as well as the Original documentaries brand, Revealed, which includes expansions of investigations previously shown on Nine’s 60 Minutes, or through The Age and The Sydney Morning Herald. This cross-platform approach to content is unique to Nine and Stan and is a real competitive advantage in the Australian market. 450 400 350 300 250 200 150 100 50 0 20 Nine Entertainment Co. 45 40 35 30 25 20 15 10 5 0 FY20 FY21 ● Revenue (LHS) ― EBITDA (RHS) FY22 Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory EBITDA1 CONTRIBUTION – FY22 $29M 4% Total Television Radio Stan Publishing Domain 1. Economic interest adjusted basis, excludes Nine’s corporate costs Over the past 12-18 months, Stan has extended its business into live streaming, with the launches of Stan Sport (February 2021) and Stan Event (March 2022). For an incremental $10 per month, Stan Sport subscribers have access to Rugby Union, including the men’s and women’s Rugby World Cups, all Wallabies and Wallaroos test Total Television Radio Stan Publishing Domain matches, and the premier domestic and trans-Tasman competitions, UEFA Club Competitions (including the UEFA Champions League), Grand Slam Tennis (Australian Open, Wimbledon, Roland-Garros and US Open), Laver Cup and ATP Cup, as well as motorsport including the SpeedSeries, INDYCAR, Formula E, World Rally Championship, World Endurance Championship, Australian Superbike Championship, Australian Pro MX and FIM Motocross, and the Professional Fighters League. Stan Sport’s strategy focuses on selected sports, with committed supporter bases, that positively contribute to profitability. Stan continues to assemble a portfolio of rights that meet these criteria. Stan Sport enables Nine to offer a whole-of-television approach to sport. Sporting codes benefit from access to both committed subscribers and the broader Free To Air audiences which has proven benefits. Audiences for Rugby Union for example, since Stan and Nine commenced coverage, have more than doubled compared with the previous broadcaster. Stan Event offers Stan subscribers access to premium Pay Per View events – to date, boxing events including Turf War (Sonny Bill Williams vs Barry Hall) and Tyson Fury vs Dylan Whyte. Stan has also recently announced two new boxing events including Joe Joyce vs Joseph Parker on 25 September and Sonny Bill Williams vs Mark Hunt on 5 November. Whilst certain global Subscription Video On Demand (SVOD) providers have experienced recent headwinds, the Australian SVOD market continues to offer growth. Stan’s subscriber numbers have continued to increase post COVID and the business remains well positioned, with a profitable subscriber base of more than 2.5 million, and a unique subscriber base of 7.8 million. Stan’s offering combines the best of international and domestic content through licensed entertainment, originals and sport and, as the international market for streaming evolves, Stan will remain a leading player in that process in Australia. Annual Report 2022 21 Publishing IN FY22, NINE PUBLISHING REPORTED EBITDA OF $180M, UP 53% ON REVENUE OF $594M. Nine’s Publishing division includes the key mastheads, The Sydney Morning Herald, The Age and The Australian Financial Review, as well as Nine’s other Digital Publishing titles including Pedestrian, Drive and nine.com.au. Nine recorded growth across both key sources of revenue – subscription and licensing, and advertising. The key drivers of the business have changed substantially over the past two years with reader revenues (subscription, licensing and retail sales) now accounting for more than 60% of total masthead revenues. This reweighting is the result of a commitment to producing differentiated journalism that subscribers will pay for, without diminishing value for advertisers. CONTRIBUTION TO REVENUE Subscription and Licensing DIGITAL 61% Digital Advertising Other Print subscription Print retail Print advertising COMBINED REACH1 ~16M Across mastheads and other digital publishing platforms, de-duplicated MONTHLY AUDIENCE1 ~12M Across print and digital mastheads, de-duplicated REGISTERED USERS2 970,000 As at 30 June, 2022 ACTIVE SUBSCRIBERS OVER2 450,000 +25% over the past two years 1. Roy Morgan Research, People 14+, June 2022 2. Nine internal data 22 Nine Entertainment Co. Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory EBITDA1 CONTRIBUTION – FY22 26% $180M Total Television Radio Stan Publishing Domain 1. Economic interest-adjusted basis, excludes Nine’s corporate costs PUBLISHING RESULTS, $M 700 600 500 400 300 200 100 0 FY20 FY21 ● Revenue (LHS) ― EBITDA (RHS) FY22 200 180 160 140 120 100 80 60 40 20 0 For all of its businesses, Nine is focused on extending audiences across existing and emerging digital platforms. For Nine Publishing, more than 60% of revenues are now digitally-sourced, up from less than 50% in FY19. COVID, coupled with an active news market, has expedited this migration and Nine is determined to further capitalise on this opportunity. Over the past two years, Nine has seen 25% growth in subscribers to the core mastheads – The Sydney Morning Herald, The Age and The Australian Financial Review - with that growth coming entirely from digital. In June 2021, a registration wall was introduced, resulting in more than 950,000 incremental registered users across the mastheads. This pool of users has enabled Nine to better understand what motivates readers to subscribe. Since its introduction, around 25% of new subscribers have been acquired from this cohort. With a monthly reach of 12 million readers, the potential opportunity to further grow subscribers is significant. Nine is committed to further invest in the content that drives subscription, to achieve the goal of doubling total subscribers over the next five years. Annual Report 2022 23 Publishing In FY22, Nine started to receive licensing revenues from the key digital platforms, an overdue endorsement of the quality of the Group’s journalism and a recognition of the key role that public interest journalism plays in digital platform business models. Growth in our audiences, and utilisation of our Group-wide data will provide further opportunities to continue to grow our share of the $1.5 billion addressable digital advertising market. In FY22, digital advertising revenues across mastheads and digital titles grew by 10%. Nine’s print publications retain a loyal base of advertisers, reflecting their highly valuable and engaged audiences. This was reflected in 13% growth in print advertising revenues in FY22. Nine’s journalism is industry- leading and regularly recognised at prestigious media awards. Over the past 12 months, journalists from Nine’s publishing division were honoured with eight Walkley awards, ten Quills and six Kennedy awards, including Nick McKenzie as Journalist of the Year. THE AUSTRALIAN FINANCIAL REVIEW – 70 YEARS The Australian Financial Review celebrated its 70th anniversary in 2022. Australia’s first national newspaper is the country’s leading business, finance and political news publication. It remains unrivalled in its market position. The Financial Review chronicles the economic and corporate history of Australia, with a particular focus on how enterprise has contributed to the prosperity of the nation. Countless iconic components have been added to the Financial Review over time, including the Canberra Observed column (1957), the Pierpont character (1972), 24 Nine Entertainment Co. Chanticleer (1974), the Financial Review Rich List (1984), Rear Window (1994) the AFR Magazine (1995) and AFR Weekend (1997). AFRnet, Australia’s first digital newspaper masthead, was launched in 1995. The masthead has evolved and grown with the business community and policy makers in Australia. In March, the Financial Review launched its Carbon Challenge franchise, based around a weekly email newsletter, to provide the deepest coverage of Australia’s challenges and opportunities in transitioning to a Net Zero carbon emissions economy. In May, the Financial Review launched a new quarterly lifestyle title, Fin! Magazine, inspiring readers with the very best in fashion, design, jewellery, motoring, art and travel. Fin! complements the AFR Magazine which recorded its second year of double-digit growth in readership. In March, the Financial Review capped its annual two-day Business Summit with a black-tie Platinum 70 Year dinner to celebrate the masthead’s seven decades of recording the nation’s growing prosperity. The dinner speakers were headed by the then Treasurer, Josh Frydenberg and Tesla chair, Robyn Denholm. The special guests included John Howard and Paul Keating. The Financial Review has more readers and subscribers than ever and a newsroom that is expanding. As Australia’s leading business masthead, the equation has remained unwavering – break exclusive stories, set the news agenda, hold those in power to account and focus on the core audience of executive decision makers, entrepreneurs and those who service them or aspire to be them. . Journalists from Nine’s Publishing division were recognised with six awards at the 2022 Kennedy Awards. Pictured: Bevan Shields (editor, The Sydney Morning Herald) and Adele Ferguson (Outstanding Investigative Reporting and Outstanding Consumer Affairs Reporting award winner). Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory Gladys: A composite photo of former NSW Premier Gladys Berejiklian made with photos taken from her daily press conferences from January 2021 – September 2021, during the COVID-19 pandemic. Photo Editor: Mags King; Main photo: Louis Douvis; Composite created by Georgia Willis with photos by SMH photographers. Annual Report 2022 25 Domain IN FY22, DOMAIN REPORTED EBITDA OF $122M (+21%) ON REVENUES OF $357M (+23%) FOR THE YEAR. Domain’s Agent Solutions business is focused on providing agents with enhanced tools and solutions to enable them to strengthen and grow their businesses. In FY22, revenue grew by a reported 67%, boosted by an initial two month contribution from Realbase. EBITDA1 CONTRIBUTION – FY22 11% $122M Total Television Radio Stan Publishing Domain 1. % calculated on an economic interest adjusted basis, excluding Nine’s corporate costs On an ongoing basis, which better reflects underlying performance, Domain recorded EBITDA growth of 38% to $130 million.1 Nine holds a 60% stake in the separately ASX-listed Domain Group, one of Australia’s leading property technology and services businesses. Domain’s strategy is to create a property marketplace which offers both consumers and agents a cohesive and integrated suite of property related services including core listings, Agent Solutions, Consumer Solutions and Property Data Solutions. During FY22, Domain augmented this strategy with the acquisitions of Insight Data Solutions (October 2021) and Realbase (April 2022). While both of these acquisitions added to Domain’s strategy in their own right, they also strengthened the value of the Group’s core listings business. Nine supported these acquisitions, most specifically the Realbase acquisition, with the investment of a further $131 million in Domain, supporting its capital raising and resulting in a slight increase in Nine’s shareholding to just over 60%. Domain’s focus on both scale and quality audiences is reflected not only in its unique digital audience of 8.4 million2 and monthly app launches of 16.7 million, but also key metrics around recent purchases and propensity to purchase which lifts both the efficiency of Group marketing spend and the perceived value to agents. In FY22, Domain’s operating performance reflected the strong property listings market, benefitting also from the broader focus of the Group’s strategy. Domain’s core residential business, which accounts for 67% of Domain’s revenues, recorded revenue growth of 23%, driven by a 9% increase in listing volumes coupled with a 14% increase in controllable yield, a function of both higher prices and depth penetration. This yield performance reflects the benefits of Domain’s micro-market strategy – a unique structure which customises price and depth metrics across individual zones. 400 Media, Developers and Commercial recorded 7% growth in revenues, to 14% of Domain’s revenues. Commercial Real Estate was the best performing business, benefitting from its flexible pricing model but also recording record levels of depth penetration across every State, which offset a weaker listing environment. 200 240 360 120 280 160 320 80 DOMAIN RESULTS, $M 1. Ongoing results exclude JobKeeper and Zipline (Domain’s voluntary employee program, implemented during the initial stages of the COVID pandemic to deliver a 20% reduction in employee cash salary) 2. Digital Media Ratings. Monthly tagged. Average July 2021-May 2022, P2+ 26 Nine Entertainment Co. 40 0 FY20 FY21 ● Core Digital Revenue (LHS) ● Consumer Solutions Revenue (LHS) ● Print Revenue (LHS) ― EBITDA (RHS) FY22 140 120 100 80 60 40 20 0 Realbase is a leading campaign management technology platform, enabling agents to create and track all elements of the products required to list and market a property. Agent Solutions also includes Real Time Agent, which provides enhanced digital tools for the property transaction process Pricefinder (Agent) and Homepass. Property Data Solutions recorded revenue growth of 35%, which includes the performance of Pricefinder (non-Agent), Australian Property Monitors and Insight Data Solutions (IDS), from October 2021. IDS is a property data business, focused on both Government and Corporate customers. Domain’s Property Data Solutions business is focused on building Australia’s best quality data asset, available to all customers, by combining all of Domain’s data sources. Domain‘s Consumer Solutions business recorded revenues of $9 million, up 70%, driven by strong growth from Domain Home Loans, a business which Domain regards as having significant longer-term potential. Total costs increased by 24%, or 13% on an ongoing basis and excluding the Realbase acquisition, which was in line with guidance and primarily reflected the increased market activity, increased staff costs as well as ongoing investment in the future of the business. Domain’s print revenues grew by 22% to $22 million, reflecting the resumption of a normal publishing schedule post the interruptions of COVID. Print continues to deliver strategic value to Domain, from both an agent and consumer perspective. As the housing market cools, Domain continues to focus on the elements of its business that it can control. Domain’s marketplaces model, and the strategic ground it has made in FY22, positions it well to maximise the growth opportunities of the future. Annual Report 2022 27 OverviewCorporate GovernanceDirectors’ ReportOperating and Financial ReviewFinancial StatementsShareholder information Corporate DirectorySustainability Nine is committed to delivering long-term sustainable value for all of our stakeholders, by addressing the Environmental, Social and Governance (ESG) factors that impact most deeply on the success of the business. Nine has recently completed its Environmental, Social and Governance (ESG) Policy – 2022, a full version of which is available on the Nine website https://www. nineforbrands.com.au/wp-content/ uploads/2022/07/Environmental- Social-and-Governance-Policy.pdf. This ESG Policy is intended to provide a framework for how the business applies ESG considerations to its activities. This ESG policy reflects the maturity of Nine’s ESG journey. As Nine’s ESG focus grows, this policy will be updated to mirror these changes and developments. ENVIRONMENTAL SOCIAL GOVERNANCE Understanding and managing how Nine’s operations impact, and are impacted by, the environment we operate in. Identifying how Nine affects and is impacted by our people, our audiences, the community and other stakeholder groups. Managing responsible decision making, ensuring the rights and responsibilities of different stakeholders including the Board, shareholders and others. TOPICS OF FOCUS FIGURE 1. NINE ESG MATERIALITY TOPICS MAP During the year, Nine commissioned Cushman and Wakefield to complete an Environmental, Social and Governance Materiality Assessment of the business. The process identified a number of topics of focus for Nine, as shown in this chart. From these topics, the six most material and of greatest importance to our stakeholders and impact on our business, were identified and will form the focus for our ESG strategy and program over the period of 2022 to 2024. Of particular note, the Materiality Assessment focused on facilitating trusted journalism, community engagement, carbon footprint accounting, diversity and inclusion, disclosure and transparency and data security and privacy. Nine is focused on monitoring and, where possible, reducing the impact that these identified ESG risks could have on the business. This 28 Nine Entertainment Co. Facilitating trusted journalism Carbon footprint – Operations and operations Community engagement and contribution Fair and balanced journalism Diversity and inclusion Data security Net Zero commitment Green buildings ESG disclosure and transparency Operational waste Board diversity Talent development Employee health, safety and wellbeing Culture Purchasing green energy Carbon neutral advertising Consumer privacy Anti-bribery, Anti-corruption l s r e d o h e k a t s o t e c n a t r o p m I Impact on Business  Social  Governance  Environment consideration occurs at all stages from Board level, through business strategy, risk management and culturally across the Group. As a public-facing media outlet, it is important that Nine promotes trusted journalism. There are, in place, governance frameworks that ensure truthfulness, accuracy, objectivity and independence of editorial decision making, from commercial decision making. These are underpinned by the external frameworks which apply to journalism activities, specifically: • For online and print journalism, Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory Nine is committed to complying with the various standards developed by the Australian Press Council in conjunction with its constituent members (https://www. presscouncil.org.au/statements- of-principles). This includes 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. 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. • Television broadcast journalism, including the handling of personal information, is governed by the Commercial Television Code of Practice (https://www. freetv.com/resources/code-of- practice) and the ACMA Privacy Guidelines (https://acma.gov. au/publications/2016-09/guide/ privacy-guidelines-broadcasters). The Commercial Television Code of Practice 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 also requires Nine to ensure advertisers comply with the AANA Advertiser Code of Ethics and the AANA Code of Advertising and Marketing Communications to Children. • 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. • For Radio journalism, Nine complies with the standards developed by Commercial Radio Australia (https:///www. commercialradio.com.au/legal/ regulation-codes). 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. As in television, Nine’s commercial radio 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. CONSUMER DATA AND PRIVACY Nine collects consumer data and information through the Group’s base of more than 20 million unique, registered users. Nine recognises that it is critically important to have controls and frameworks in place to protect consumers’ data and privacy. Without appropriate controls, the business risks losing public faith, social licence to operate and shareholder value. Details on Nine’s security and privacy policy can be found at https://login.nine. au/privacy. DIVERSITY AND INCLUSION For Nine, diversity and inclusion covers gender, family status, sexual orientation, gender identity, age, disabilities, ethnicity, religious beliefs, cultural background, socio- economic background, perspective and experience. As an Australian media company, Nine recognises that its audience includes a diverse range of people. Nine is focused on putting in place structures and frameworks that allow the business to reflect the diversity of the community, in terms of the Group’s employees, suppliers and the content that is created and distributed. Nine has a well-developed Diversity and Inclusion Policy that recognises diversity within the workforce (https://www.nineforbrands.com. au/wp-content/uploads/2022/05/ Diversity-and-Inclusion-Policy.pdf). The Board sets and monitors progress against measurable objectives including engaging, retaining and fostering a diverse and inclusive culture. For further details, refer to People and Culture, page 31 of this Annual Report. COMMUNITY ENGAGEMENT AND CONTRIBUTION Nine acknowledges that it has a responsibility to the community to report news that is reliable and accurate, to provide content that reflects the diversity of the audience and to broadly make a positive contribution to the Community. Nine Cares delivers support to charities and communities in need across Australia. For further details, refer to page 35 of this Annual Report. Annual Report 2022 29 Sustainability CARBON FOOTPRINT ACCOUNTING A key impact of doing business is the carbon footprint on the environment. Nine defines its carbon footprint as encompassing emissions generated directly through energy and water consumption and waste generation, and indirectly through the goods and services required to operate the business. Quantifying and accounting for the carbon footprint is a key component of Nine’s ESG program. Nine is committed to expanding the tracking and reporting of its carbon footprint over the next 24 months to support the identification of carbon ENERGY AND EMISSION PROFILE efficiency opportunities and promote practices that drive reductions or avoidance of carbon emissions. Notwithstanding the broad return to the office across 2022, Nine’s energy consumption and CO₂ gas emissions continue to be at a level which remains below the threshold required for reporting, under the National Greenhouse and Energy Reporting Act (NGER, 2007), meaning Nine is not required to file annual returns with the Clean Energy Regulator (CER). Notwithstanding, Nine is committed to an iterative journey to improve its sustainable performance and reduce the Group’s long-term carbon footprint. Over the next 12 months, Nine intends to focus on both the accuracy and breadth of available data. Following this data uplift project, Nine will look to identify future carbon reduction goals and define ambitions under a scientific and responsible framework. Nine will also continue to look for new ways to integrate environmentally friendly practices into everyday activities, with a range of employee-driven sustainability initiatives. 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 NGERs corporate Group threshold FY19 FY20 FY21 FY22 ● Electricity MWh (LHS) ― Scope 1 + 2 CO2 emissions (RHS) 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 ESG DISCLOSURE AND TRANSPARENCY To ensure the success of an ESG program, Nine believes that appropriate governance to promote disclosure and transparency is imperative. Nine understands the importance of transparent reporting, both internally and externally, and is committed to consistently improving sustainability reporting as the Group’s ESG program and strategy matures. Support through journalism During the year, The Australian Financial Review hosted the Energy and Climate Summit, focused on providing a leading platform to shape Australia’s energy and climate future, providing a forum for political leaders, regulators, energy producers, disruptors and industry experts to debate key policy issues. The Financial Review also hosted the ESG Summit, bringing Australia’s leading companies together with those who finance and invest in them to navigate the current economic, social and governance challenges. 30 Nine Entertainment Co. Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory People and Culture The last year has seen our people rise to the challenge and deliver their best, driving outstanding results in trying circumstances. With large parts of our workforce in lockdown for much of the year, the need for us to connect, re-engage and drive purpose was emphasised. Our people have demonstrated incredible resilience, and their passion for Nine by always delivering great content, whether that’s on television, through our publishing assets or on radio that helped keep Australia informed, entertained and most importantly, connected. LEADING CONNECTION Supporting our people in the first half required a deliberate effort to keep them connected, whether they were working from home or continuing to deliver content from our offices. With the experience gained in FY21, we were quickly able to virtually bring our teams together through a refreshed series of Masterclasses. The topics for the Masterclasses were varied, from leadership and wellbeing focused such as Leading through Lockdown, Resilience and Avoiding Burnout; Family-focused such as Parenting through the Pandemic, or supporting the elderly; building new skills such as baking and gardening; or supporting the kids with after school activities delivered by our incredible talent such as our Ninja Warriors and Andy Lee. Despite the challenges in the first half, in our most recent employee survey our overall engagement increased, demonstrating that the actions we undertook in 2020 and 2021 had a positive impact on the overall employee experience at Nine. As in previous years, our people’s pride in Nine and confidence in our future remained our strongest areas, and we were pleased to see that our investment in keeping our people safe was recognised as one of our highest- rating drivers. LEADING PURPOSE AND VALUES Over the last year we embarked on an initiative like never before. We set out to understand our purpose at Nine – our ‘why we exist’ – and to bring it to life in a simple way that makes sense for all of us. We also took the opportunity to identify the values and behaviours – ‘our how we show up’ – that reflect who we are at Nine, and who we want to be. We started the conversation across all parts of our business, with over 3,000 team members participating in surveys, digital focus groups and workshops. During that conversation, it became clear very quickly that our sense of purpose is strongly aligned across Annual Report 2022 31 People and Culture the organisation and established over many years in Publishing since 1831, in Radio since 1925 and in TV since 1956. For an organisation as large as ours, and made up of such a diversity of people, we were surprised with how consistent the thoughts and conversations were. Themes like: ‘we play a crucial role in informing the nation, finding and telling the stories that matter, holding those in power to account, and entertaining diverse audiences’. Our purpose is already our DNA; part of who we are at Nine, and why we can consistently deliver success for our audiences, the wider community and our shareholders. ‘Australia Belongs Here’ unites us and has meaning in every part of our business. It reflects the work of our people across teams; from our corporate functions enabling our business and bringing people together, our journalists sparking conversations and challenging perspectives, and our storytellers entertaining our communities. It’s fundamental to how we treat our audiences, our readers and listeners, our partners, our wider community and each other. And our Values: Walk the Talk, Turn Over Every Stone and Keep it Human reflect the importance of demonstrating courage and credibility, curiosity and innovation, empathy and humility. Our Purpose and Values provide the anchor for our People and Culture strategy and will become embedded at every stage of our employee lifecycle. We look forward to bringing our purpose and values to life in FY23. LEADING DEVELOPMENT Our focus on Leadership continued over FY22, with Masterclasses supporting leaders dealing with the challenges presented by the lockdown. We also continued our Take the Lead program, with more than 700 leaders enrolling in our modules to continue their leadership development. In January 2022 we launched our Radio internship program, providing opportunities for candidates to gain invaluable experience while learning from the best in the industry. Targeted at those with no experience or links to the media industry, the six week paid program will run three times a year at each Nine radio station. The Nine Sales Academy continued to grow, including the launch of a mentoring program for future sales leaders, 360 leadership coaching as well as strategic planning and writing. LEADING DIVERSITY AND INCLUSION Throughout FY22, we continued to build on our diversity and inclusion strategy, renewing our commitment to provide an inclusive workplace where our people are able to be their authentic selves. This included greater recognition of significant events internally and externally, such as NAIDOC week, and Wear It Purple Day, as well as building tools to ensure greater inclusion across Nine. During NAIDOC week, we shared stories from some of our Indigenous people, whilst also celebrating our partnership with the Indigenous Culinary Institute by providing meal boxes with ingredients and recipes created by brothers Luke and Sam Bourke. On Wear It Purple Day, our own talent including Darren Palmer provided messages to our people on the importance of recognising Wear It Purple Day for our LGBTIQA+ youth. We again asked non-compulsory diversity and inclusion questions in our employee survey, providing further insight into the employee experience for our people from diverse backgrounds. We were pleased to see no difference in the engagement of our LGBTQIA+ in comparison to the whole workforce, whilst our people with caring responsibilities had higher levels of engagement. BOARD MANAGEMENT TOTAL EMPLOYEES 43% 7 57% 45% 795 55% 45% 5,254 55% Female Male Female Male Female Male 32 Nine Entertainment Co. Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory Women @ Nine continues to be a foundational component of the People and Culture Strategy, providing a range of initiatives for our people centred around development, networking and mentoring. In FY22, 10 women participated in the Future Women Platinum + program, and 12 attended the annual Future Women Conference. In addition, the Future Women Conference was made available through the live digital option in all offices, allowing all of our employees the opportunity to participate virtually in the program. Our partnership with Future Women has also extended this year to the ‘Changemakers Program’, a program designed for male senior leaders. Two senior leaders participated in a pilot of the program, and we intend to include Changemakers as an element of Women @ Nine in FY23. We have strengthened our Women Leading @ Nine alumni, providing connection for all current and previous participants in our Women Leading programs. The alumni connect regularly via communication channels such as Slack, as well as increasingly through informal face to face gatherings. At a grassroots level, the Women in Tech group continues to build its presence internally and externally. Founded and run by women in the technology department, and sponsored by Senior Management, the group meets regularly to advance women in technology internally and externally. Internally, Women in Tech have launched their own site available through the intranet to all employees, sharing career stories of women in technology at Nine. Externally, the group participates in mentoring, and speaking at events specifically to attract young women (particularly at high school ages) to consider careers in technology. This extends to internships and work experience for high school and university students. This year, we embarked on a partnership with Macquarie University to provide experiences across the Nine Group for four media students from culturally and linguistically diverse (CALD) backgrounds. The conclusion of the program resulted in two appointments into the business. We are committed to supporting the program in partnership with Macquarie University which will continue throughout 2022 and into 2023. Supporting our audience, and our partners in diversity and inclusion, is a priority. In 2022 we announced our partnership with Talanoa Consultancy to provide higher cultural competency for Pacifika athletes in sports broadcasting. Wide World of Sports rugby league and rugby union commentary teams will participate in cultural competency sessions, and have access to advisory services and research to optimise skills and knowledge for broadcast teams. LEADING THE WAY WE WORK AT NINE Over the last two years, we have reflected on the Way we Work at Nine, and how we best manage the needs of our people, our teams and our business. We adapted our work environments and approach to workplace quickly recognising that, in a business as diverse as ours, there would never been one approach to working that would fit across our entire business. With that in mind, we created the Way we Work at Nine toolkit to empower managers to develop principles and an approach to working that best suits the function and our people, encouraging collaboration and connection whilst delivering our business outcomes. Many roles within our business are not able to be done remotely, and so in developing this approach we also considered the broadest approach to flexibility, including flexibility in days worked, hours and shifts, time in lieu, as well as working remotely. The Way we Work will always look different in different businesses and teams, but by co-creating the principles and accountability to deliver results we are confident our hybrid approach will continue to deliver strong results. The majority of our workforce now works with some flexibility, however we encourage all of our people to spend part of the working week in our office workspaces to ensure ongoing connection with their colleagues and with the culture of Nine. LEADING SAFETY In response to COVID-19 continuing to impact our communities throughout the last two years we focused on measures we could take to keep our people safe during the pandemic and keep our business operational. In major broadcast and radio locations we had on- site PCR testing to ensure we had regular screening for those who were required to be present in a Nine workplace to conduct their roles. This enabled early detection and subsequent isolation of any positive case and contact tracing as needed. As RAT kits came to market, strategic sourcing arrangements were formed and supplies of kits given to operational departments for greater screening of COVID in the home and outside of the workplace. The investment in testing and associated PPE was approximately $2.5 million for the last 12 months. In addition to this, Nine prepared, consulted on and deployed a National Condition of Entry policy to ensure that those on Nine working sites are COVID vaccinated. This will be reviewed over the coming period to align with pandemic risk and business needs. Annual Report 2022 33 People and Culture SAFETY METRICS Total injury numbers Lost time injury Lost time injury frequency rate Total recordable injury frequency rate Hazards Identified EAP (Employee Assistance Program) Usage FY22 FY21 24 16 2.00 3.00 15 5.1% 30 15 2.09 4.19 55 5.9% As travel commenced again for our employees, risk assessments and support of our people on overseas assignments has been strengthened. An example of this is our people deployed to Ukraine for war coverage have been offered wellbeing checks post deployment to ensure that our people have the opportunity to debrief with professionals and process the scenes and images that are present in their roles. Our wellbeing agenda has continued to develop with the initial rollout of our four-hour Mental Health for Leaders session. This has been received well by our people with further deployment to continue. Nine has undertaken initial review of the WHS Framework and a key project of 2022-23 will be to define and build the framework and commence prioritisation of education of the elements across the organisation. THE FAIRFAX FOUNDATION The Fairfax Foundation, established in 1959 with an independent charter, provides assistance to current and former employees and their dependents through a range of grants and other benefits. Grants can assist individuals who are in financial hardship, facing significant out-of-pocket medical expenses, or seeking support for education costs 34 Nine Entertainment Co. or personal development activities. The Foundation provided almost $950,000 in financial grants and other benefits to eligible beneficiaries during the 2022 financial year. This included a special grant to improve the wellbeing of staff during the extended lockdowns, and grants for people affected by floods across eastern Australia. FUTURE WOMEN (50%) Launched in July 2018, Future Women was born out of the desire to help women connect, learn and lead. Together with Nine, former magazine editor Helen McCabe created the company when the MeToo movement gained momentum in late 2017. Today, it offers content on core topics covering leadership, equality, business and culture to its members through podcasts, books, essays, training and development programs, live interviews and in-person events. Future Women membership offers a range of activities, from mentoring and job connections to intermediate and advanced leadership and training. The Future Women Leadership Summit was held in March 2022 and is Australia’s premier International Women’s Day event, this year attracting world-class speakers and changemakers including Kate Jenkins, the Sex Discrimination Commissioner at the Australian Human Rights Commission; Teela Reid, a proud Wiradjuri and Wailwan woman, lawyer, essayist, storyteller and co- founder of @blackfulla_bookclub; Chief Executive Officer of the Commonwealth Bank, Matt Comyn and Federal Treasurer Dr Jim Chalmers. The Jobs Academy is a Future Women initiative supporting women to return to work, increase their working hours and secure long-term employment after a career break. As part of the Government’s 2022-23 Budget announcement, $8.7 million has been granted to Future Women for an expansion of the Jobs Academy, which will see 2,000 women undertake the online learning and professional development program over the next three years. Future Women works with dozens of public and private sector organisations, and supports men to be better, and more gender inclusive leaders, through the Change Makers program. That program assists participants to understand how a gender-equal workplace can benefit them, the organisation they work in and the teams they work with. GOVERNANCE Nine’s Corporate Governance Statement, which starts on page 40, 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/). Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory Community As Australia’s largest locally-owned media company, the business has a focus on continuing 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 charities to the forefront. In the last 12 months Nine has provided more than $77 million in value for our partner charities, which include vital causes such as Mental Health, Child Bereavement, Disability and Special Needs, Stillbirth, People Experiencing Homelessness and Domestic Violence. FY22 Total $77.5m1 ● Television CSAs ● Radio CSAs ● Publishing ● Telethons/appeals ● Publicity/editorial 1. Includes 100% of donations to Australia Unites MATESHIP MILES After a tumultuous year of floods, fires and COVID-19, there were more Australians than ever before seeking help and support of mental health services. In partnership with the Today Show and Gotcha4Life we set up the Gotcha4Life Mateship Miles roadshow, covering Nine’s Karl Stefanovic and Gotcha4Life’s Gus Worland trek from Melbourne to Wollongong, raising awareness for mental fitness along the way. Throughout the week, we broadcast segments of the roadshow into the Today Show with viewers donating over $100,000 to support the cause. The week ended with a brunch in Wollongong for 300 raising additional funds for Healthier Illawarra Men, another charity that supports Men’s Mental Fitness and Health. CHILDREN’S HOSPITAL TELETHONS Each year, Nine supports a variety of Telethons to raise funds for the Children’s Hospitals across the country. We combined our talent, broadcast airtime, editorial support, production and volunteers to support this worthwhile cause. In FY22, Nine raised a further $22 million, with telethons broadcast across Melbourne, Sydney and Brisbane. Annual Report 2022 35 Community MARK HUGHES FOUNDATION – BEANIES FOR BRAIN CANCER FUNDRAISING JUNE 2022 AUSTRALIA UNITES – AUSTRALIAN RED CROSS FLOOD APPEAL In April 2022, Nine, Network 10, and the Seven Network united for a telethon, broadcast from the Nine Studios, which raised more than $25 million for the Australian Red Cross Flood Appeal. With 100% of the funds raised during Australia Unites: Red Cross Flood Appeal going to help people and communities affected by the devastating floods across Queensland and New South Wales, the star-studded broadcast saw Australian music royalty, celebrities and popular news and entertainment personalities from across all three networks band together. Over the five-hour live broadcast, an average of more than 810,000 Australians tuned in nationally to Australia Unites: Red Cross Flood Appeal, which was simulcast on Channel 9, 9Now, 10, 10 Play, Channel 7 and 7plus. On television, Australia Unites: Red Cross Flood Appeal reached over 3 million Australians including 2.16 million people in the capital cities and 1.03 million in regional areas. 36 Nine Entertainment Co. Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory UNLTD For the past five years, Nine has been a supporter of UnLtd, a media industry, not-for-profit focused on reducing the rate of Youth Suicide in Australia through the support of 25 youth-focused organisations. Three years ago, Nine aligned its focus and energy to supporting two of these organisations via strategic, creative, business and financial support. LeaderLife was formed to fill a gap in Dubbo’s social fabric by providing real, holistic support for young people falling through the cracks of society. Since 2011, LeaderLife has been working with kids in Dubbo, who have been exposed to complex issues like domestic violence, neglect, abuse and trauma. In 2020, Leaderlife launched a social Enterprise business, Soil2Soul. Soil2Soul is a lime farm in Narromine which was established to employ young people having difficulty finding work, focusing on building their skills and independence. With Nine’s support, Soil2Soul limes are now bought by Coles while the business has diversified its revenue streams through a range of lime- based products. Down The Track is an innovative program for young people based in the remote communities of Lake Cargelligo and Murrin Bridge in Central West NSW. They also work with disengaged and marginalised young people between the ages of 10 and 20, focusing on engagement and improving self-esteem by providing training, education, employment pathways and community connection. With the support of Nine, these two programs have not only impacted the lives of countless young people, they have also helped to support the people and communities in which they live. In May 2022, Nine announced its intention to continue to fund both of these organisations until 2025. TWO GOOD WORK PROGRAM Two Good is a social enterprise fiercely focused on the creation of high quality food and products that support, empower and employ women who have experienced homelessness, domestic violence and complex trauma. Everything Two Good does is designed to rebuild self worth and independence, in order to break the cycle of disadvantage. Last year, a group of Nine women from across the business volunteered to participate in the Two Good Work program, mentoring women and supporting them back into the workforce. Throughout the program the Nine volunteers were put to work in the Two Good Kitchen, attended workshops on Trauma training and mentored and guided their mentees ending with a graduation held at Nine’s Sydney office, 1 Denison Street. Annual Report 2022 37 NATIONAL VOLUNTEERS WEEK In May 2022, to support National Volunteers Week, Nine delivered a program throughout the week providing all staff nationally details about the Nine Cares charities we support, and how each permanent staff member has 2x days available to them for volunteering. There was a morning tea set up in Nine’s Sydney office, with nine charities who came in to showcase their offerings and how staff or teams can volunteer. Throughout the week, the Nine Cares Intranet was launched with lifts across Nine accessed to promote the work Nine Cares was doing. Off the back of the morning tea, the WWOS sports team volunteered to help at Bear Cottage, a children’s hospice and provider of end-of-life care for children with life-limiting conditions, also catering for parents and siblings who are facing difficult times of a sick child or brother or sister. Board 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 and 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 April 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 Entertainment 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 its 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. 38 Nine Entertainment Co. Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory 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 28 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. Sam Lewis joined the Board in March 2017 as an independent, Non-Executive Director and is Chair of the Audit and Risk Management Committee and a member of the People and 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 and Risk 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 advises companies and serves on boards, including Bank of Queensland, FaZe Clan, Ascendant Digital Acquisition Corporation and Fabletics. She served on the board of Pandora Media, and was the President of Tribune Interactive and concurrently the President of the Los Angeles Times. Ms Rosen also served as a Senior Advisor to the Boston Consulting Group. Prior, Ms Rosen served as Senior Vice President of Global Media and 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. 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 was appointed to the Board in May 2016 as an independent, Non-Executive Director and is the Chair of the People and Remuneration Committee and a member of the Audit and 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 and Peter Warren Automotive. She is also a Director and Vice-President of the Sydney Breast Cancer Foundation, 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. Annual Report 2022 39 Corporate Governance Statement 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 2022 (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. This includes approving Nine’s environmental, social and governance (ESG) policy and strategy; 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 our 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; 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//corporate-governance-2/. 40 Nine Entertainment Co. Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory v. reviewing, monitoring and approving Nine’s risk management framework, policies, procedures and systems for managing financial and non-financial risks; vi. overseeing Nine’s environmental management initiatives; and vii. managing internal and external audit arrangements and auditor independence. 1.2 Delegation to Management The responsibility for the operation and administration of Nine and our 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. During the year, the delegation of authority across the Group was reviewed and updated. The Chief Executive Officer’s role includes: i. ii. iii. the day-to-day management of Nine’s operations. responsibility for the effective leadership of the management team; the development of strategic objectives for the business; and 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 Nicholas Falloon From 7 December 2018 Andrew Lancaster From 1 April 2021 Samantha Lewis From 20 March 2017 Mickie Rosen From 7 December 2018 Catherine West From 9 May 2016 Yes No Yes No Yes Yes Yes Member of the Audit & Risk Management Committee None Member of the People & Remuneration Committee None Chair of the Audit & Risk Management Committee Member of the People & Remuneration Committee None 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 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 Chairman, on all corporate governance matters. Annual Report 2022 41 Corporate Governance Statement 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. There were no changes to the Board composition during the financial year. 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. 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 our 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. 42 Nine Entertainment Co. Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory 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. During the Reporting Period, the Board reviewed the skills matrix and updated it. The skills identified are: Media Industry Working in or with the media industry in a significant capacity Content Working in or with businesses that acquire, create or exploit content. Digital/New Media Working in or with digital/online businesses and emerging forms of media and technology Direct to consumer 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 Developing, implementing and overseeing risk management policies and procedures for a substantial organisation Managing People and Change Expertise in human resource management, particularly through periods of change in a business or industry Political/regulatory 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 Tax/Financial Expertise in overseeing or managing the tax and financial affairs of a substantial Australian business. The 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 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% y g e t a r t S i a d e M y r t s u d n I t n e t n o C l a t i g D i s s e n s u B i s s e n s u B i o t t c e r i D r e m u s n o C l / a c i t i l o P y r o t a u g e r l A & M l i a c n a n F i s t e k r a m l a r e n e G s s e n s u B i e s i t r e p x e k s i r i g n g a n a M / x a T e g n a h c i g n g a n a M d n a l e p o e p l i a c n a n F i l a g e L X S A e c n a n r e v o G Annual Report 2022 43 Corporate Governance Statement 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. 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; v. Work health and safety, and Nine’s Code of Conduct. 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. ii. to prepare and present Nine’s financial statements and reports; 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; vi. to manage audit arrangements and auditor independence; and vii. overseeing Nine’s environmental management initiatives. 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. 44 Nine Entertainment Co. Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory 4. REPORTING AND RISK 4.1 Risk management Nine recognises that risk is an accepted part of doing business, enabling the creation of 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. j. evaluating the structure and adequacy of the Group’s insurance coverage. reviewing any material incident involving a fraud or a breakdown of Nine’s risk controls; and 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. Material business risks are discussed below and are further outlined in the Operating and Financial Review section of our Annual report. 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. During the Reporting Period, Nine continued to review our risk management framework, including improving reporting to the board on risk management, and re-assessing the major risk areas for the business. The Audit & Risk Management Committee revised the Company’s risk management framework and satisfied itself that the framework continues to be sound. Annual Report 2022 45 Corporate Governance Statement 4.2 Internal Audit Responsibility for internal audit is part of the broader Risk and Assurance function, managed by the Director of Risk, who reports on internal audit activities at each meeting of the Audit & Risk Management Committee. 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; 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 ii. 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 2021 and the full year accounts to 30 June 2022 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 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). 46 Nine Entertainment Co. Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory 4.5 Material exposure to risks Nine has exposure to specific risks that could impact on our ability to create value for our shareholders, including (in no particular order): • Ransomware and other destructive cyber activity; • Managing the transition to digital and new markets; • Changes in industry structure and the competitive environment; • Breach of data/privacy laws; • Execution of Nine’s digital strategy, including delivery of platform development; • Impact of regulatory changes; • Mental health and wellbeing of staff; and • Attraction and retention of talent. 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. Nine has progressed the development of an Environmental, Social and Governance Policy. Nine’s initial priorities in this regard are in the areas of: • Facilitating independent journalism • Consumer data security and privacy • Community engagement and contribution • Carbon footprint accounting – print and operations • Diversity and inclusion • ESG disclosure and transparency Nine does not have material environmental risks and is not required to report under the National Greenhouse Energy Reporting Framework. However, Nine understands that our impact on the environment is an important matter requiring increased attention and reporting. As part of our ESG program in coming years, Nine will expand the tracking and reporting of our carbon footprint, to support the identification of opportunities for Nine to do more to reduce our environmental impact and our carbon emissions. Nine has reduced energy consumption by 50% since FY19, and will continue to work on energy efficiency and energy reduction for our operations. Nine has prepared our Modern Slavery Statement for the Reporting Period. In doing so, Nine has reviewed elements of our supply chain to be assured that we and our key suppliers are not engaging in modern slavery practices. We have also adopted a supplier Code of Conduct to manage such social risks. Nine’s Modern Slavery Statement provides further details of our focus in this area. Nine understands that, as a media company, we have a role to play in supporting the community and upholding high standards in relation to our content. These activities engender trust and confidence in Nine, which is necessary for our continued social licence to operate and mitigating social risks relating to Nine’s operations. Nine takes our role as a community participant seriously, and undertakes a number of initiatives to support the communities we operate in, including: • providing free airtime and advertising space to community service organisations and charities for community service announcements; • actively supporting fundraising for a number of charities including the Sydney Children’s Hospital Gold Telethon and the Mark Hughes Foundation Beanies for Brain Cancer fundraising drive; Annual Report 2022 47 Corporate Governance Statement • leading the organisation and broadcast by all three commercial networks of a telethon for the benefit of people who were impacted by the floods in Queensland and New South Wales in early 2022. This raised over $25 million; and • providing opportunities for staff to volunteer (through paid volunteer leave) both with the charities supported by Nine Cares, including Adopt Change, St Vincent de Paul, Rural Aid and Red Kite, and charities of the individual’s choosing. Nine’s activities as a broadcaster and publisher are managed in 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 Nine conducts operations. These set minimum standards for Nine’s content and provide our stakeholders with assurance about Nine as a trusted source of news and entertainment. 5. DIVERSITY 5.1 Diversity & Inclusion Policy Nine has adopted a Diversity & Inclusion Policy, to recognise the value of creating a workplace that is inclusive and respectful of diversity. Nine acknowledges the positive outcomes that can be achieved from a diverse workforce, and recognises the contribution of diverse skills and talent from our 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 & Inclusion 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 and male representation As at 30 June 2022, the proportion of men and women employed by Nine was as follows: Board of Directors Non-Executive Directors Senior Executives Total Nine workforce Women 43% 50% 38% 45% Men 57% 50% 62% 55% For this purpose, “Senior Executives” are the Chief Executive Officer and his direct reports. 48 Nine Entertainment Co. Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory 5.3 Objectives for FY22 Nine’s performance against the objectives for achieving gender diversity which were adopted for the Reporting Period was 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. Of Non-Executive Directors, 50% are men and 50% are women. At least 40% of senior executive positions (CEO and direct reports) to be held by women This was not satisfied. Following some changes in senior executives, five out of 13 (38%) of these positions are now held by women. However, there are a number of women identified as potential successors for senior executive roles within Nine. At least 40% of management positions to be held by women This was satisfied. Representation of women in management has increased over the Reporting Period to 45% (an increase from 41.5% in the previous year), demonstrating the impact of Nine’s work in providing development and opportunities for women at Nine. Gender balance in leadership and talent development This was satisfied. 51% of promotions in the Reporting Period were awarded to women. Participation in Nine’s Take the Lead training program was 56% female. Nine also provided opportunities for development for 10 women through participation in the Future Women Platinum+ program. Monitor and review initiatives that drive equity across the business such as pay equity review and flexible working The continued uptake in use of flexible or hybrid working arrangements has resulted in productive arrangements for many of our work force. Nine has conducted a pay equity review for a number of levels of management, which found no significant gaps in a like for like comparison of roles. Objectives for FY23 The Board has adopted the following measurable objectives for FY23 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. During the Reporting Period, Nine has been working with employees from across the group to develop a new statement of Nine’s purpose and values. The outcome of this work will be shared with stakeholders early in FY23. Annual Report 2022 49 Corporate Governance Statement 6.2 Code of Conduct Nine has a Code of Conduct which applies to all Directors and employees of Nine and our 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. 6.4 Disclosure Policy Nine has a Disclosure Policy which sets out the processes which are followed to ensure compliance 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. 50 Nine Entertainment Co. Overview Corporate Governance Directors’ Report Operating and Financial Review Financial Statements Shareholder Information Corporate Directory 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 and our share registry, Link Market Services, encourage shareholders to receive communications from Nine and our share registry electronically. The websites of Nine and the registry both provide contact points for shareholders to communicate with Nine and the registry electronically. Nine provides a webcast/teleconference facility for our results announcements, so that all shareholders can attend the presentation of the results, and our annual general meeting. Nine’s last two annual general meetings have been held virtually, allowing all shareholders to participate regardless of their location. While a return to in person meetings is now possible, Nine will consider holding hybrid meetings, to facilitate shareholder participation. In addition, Nine’s constitution allows direct voting, giving shareholders a greater ability to participate directly in voting at the Annual General Meeting, if they are unable to attend the meeting. 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 our 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 our 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. Annual Report 2022 51 Nine Entertainment Co. Holdings Limited ABN 60 122 203 892 FY22 CONTENTS DIRECTORS’ REPORT AUDITOR’S INDEPENDENCE DECLARATION REMUNERATION REPORT – AUDITED OPERATING AND FINANCIAL REVIEW FINANCIAL HIGHLIGHTS 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 SHAREHOLDER INFORMATION CORPORATE DIRECTORY 54 60 61 84 84 92 93 94 95 96 97 166 167 172 175 The financial report is provided to the Australian Securities Exchange (ASX) under ASX Listing Rule 4.2A.3. 52 Nine Entertainment Co. Annual Report 2022 53 Directors’ Report The Directors present the financial report for the year ended 30 June 2022. 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 Independent Non-Executive Deputy Chairman 7 December 2018 Mike Sneesby Chief Executive Officer Andrew Lancaster Non-Executive Director 1 April 2021 1 April 2021 Samantha Lewis Independent Non-Executive Director 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. 54 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory Mike Sneesby (Chief Executive Officer) Mr Sneesby was appointed Chief Executive Officer, and Director of Nine with effect from 1 April 2021. Prior to this, Mike was the CEO of Nine’s subscription streaming business, Stan, since its inception in 2013. He is also a Director of Domain Holdings Australia Ltd (since 21 April 2021). Mr Sneesby’s executive experience spans Media, Telecommunications and Technology having held senior roles in Australia and overseas. He was previously Vice President of IPTV for the digital media venture lntigral, where he was responsible for establishing the Invision IPTV service in Dubai. Before joining lntigral, he headed Corporate Strategy and Business Development at ninemsn, where he led the company’s corporate strategy function and established a portfolio of high growth digital media businesses. 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 a Bachelor of Engineering (Electrical) from the University of Wollongong and an MBA from the Macquarie Graduate School of Management. Andrew 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 28 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. Annual Report 2022 55 Directors’ Report Directors’ Report Directors’ Report Mickie Rosen (Independent Non-Executive Director) Ms 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, 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 Fabletics, 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) and Peter Warren Automotive (since April 2021). She was a director of the Endeavour Group (from June 2021 to April 2022). Ms West is also a Director and Vice President of the Sydney Breast Cancer Foundation, 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. 56 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory OPERATING AND FINANCIAL REVIEW 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 Peter Costello Nick Falloon Mike Sneesby Andrew Lancaster Samantha Lewis Mickie Rosen Catherine West COMPANY SECRETARY 10 10 10 10 10 10 10 10 10 10 10 10 10 10 4 — — — 4 — 4 4 — — — 4 — 4 — 5 — — 5 — 5 — 5 — — 5 — 5 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. Annual Report 2022 57 Directors’ Report Directors’ Report Directors’ Report DIVIDENDS Nine Entertainment Co. Holdings Limited paid an interim dividend of 7.0 cents per share, fully franked, in respect of the year ended 30 June 2022 amounting to $119,377,528 on 21 April 2022. Since the year end, the Company has proposed a dividend in respect of the year ended 30 June 2022 of 7.0 cents per share, fully franked, amounting to $119,377,528. The Company paid a dividend of 5.5 cents per share, fully franked, in respect of the year ended 30 June 2021 amounting to $93,796,629 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 2022, the Group reported a consolidated net profit after income tax of $315,288,000 (2021: $183,961,000). The Group’s revenues from continuing operations for the year to 30 June 2022 increased by $349,228,000 (15%) to $2,691,406,000 (2021: $2,342,178,000). The Group’s earnings before interest, tax, depreciation and amortisation (EBITDA) and before specific items (Note 2.4) for the year ended 30 June 2022 was a profit of $700,733,000 (2021: $564,696,000). The Group’s cash flows generated in operations for the year to 30 June 2022 were $487,228,000 (2021: $398,161,000). Further information is provided in the Operating and Financial Review on pages 84 to 91. 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, resulting in a benefit of $0.7 million to current year profit (2021: $3.1 million). In addition, spectrum fees which would have been payable by broadcasters were waived by the Australian Government, resulting in a benefit of $1.0 million to current year profit (2021: $9.4 million). The Group results also include an expense of $6.5 million (2021: income of $8.2 million) which relates to the repayment of JobKeeper allowance received by Domain in the relation to the financial year ended 30 June 2021. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS On 15 October 2021, Domain Group, a subsidiary of the Company, acquired 100% of the share capital in the IDS Group. The IDS Group consists of Insight Data Solutions Holdings Pty Ltd, IDS Gov Services Pty Ltd and Insight Data Solutions Pty Ltd. The total estimated consideration for this acquisition is $79.2 million. The on-target and maximum consideration of the acquisition is $135 million and $154 million, all of which is expected to be settled in cash. On 29 April 2022, Domain Group also acquired 100% of the share capital in Realbase Group. The Realbase Group consists of Realbase Pty Ltd and its subsidiaries and equity accounted investments. The total estimated consideration for this acquisition is $173.9 million. The on-target and maximum consideration of the acquisition is $205 million and $230 million, all of which is expected to be settled in cash. Please refer to Note 6.1 for details. 58 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE Subsequent to the year end, the Group has announced an on-market buyback of up to 10 percent of the Group’s current issued share capital, to commence from September 2022. Other than described above, there has not arisen in the interval between the end of the financial period and the date of this report any 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. 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 60. 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. NON-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, AC Chairman Sydney, 25 August 2022 MIKE SNEESBY Chief Executive Officer and Director Annual Report 2022 59 Auditor’s Independence Declaration 60 Nine Entertainment Co. Ernst & Young200 George StreetSydney NSW 2000 AustraliaGPO Box 2646 Sydney NSW 2001Tel: +61 2 9248 5555Fax: +61 2 9248 5959ey.com/auAuditor’s independence declaration to the directors of Nine EntertainmentCo. Holdings LimitedAs lead auditor for the audit of the financial report of Nine Entertainment Co. Holdings Limited for thefinancial year ended 30 June 2022, I declare to the best of my knowledge and belief, there have been:a.No contraventions of the auditor independence requirements of theCorporations Act 2001 inrelation to the audit;b.No contraventions of any applicable code of professional conduct in relation to the audit; andc.No non-audit services provided that contravene any applicable code of professional conduct inrelation to the audit.This declaration is in respect of Nine Entertainment Co. Holdings Limited and the entities it controlledduring the financial year.Ernst & YoungChristopher GeorgePartner25 August 2022A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards LegislationRemuneration Report – Audited CONTENTS 1. Key Management Personnel 2. Executive Summary 2.1 Summary of remuneration outcomes for current Executive KMP 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 Plan (STI) 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 64 65 66 67 67 67 68 68 69 71 74 74 75 76 77 77 77 77 77 78 78 78 78 79 80 82 83 83 Annual Report 2022 61 Remuneration Report – Audited Remuneration Report – Audited Remuneration Report – Audited LETTER FROM COMMITTEE CHAIR On behalf of the Board, I am pleased to present the Company’s Remuneration Report for the financial year ended 30 June 2022 (FY22). Financial year FY22 has been a very successful year for Nine. We continued the positive momentum in delivering our business strategy and for FY22 on a pre-specific item basis, Nine delivered growth of 24% on Group EBITDA to $700.7 million and Net Profit After Tax up by 34% to $348.5 million on FY21. Nine’s traditional markets performed well in an environment impacted by the various challenges, with the advertising market remaining strong during the year. Nine continued to make strides in its digital transformation objectives including achieving significant growth in 9Now and executing on the continued evolution of Stan including expanding live streaming of sport. Digital earnings grew 47% in FY22 and now accounts for 51% of Group EBITDA. These results are attributable to the whole team at Nine who have successfully executed on Nine's strategy. Nine’s remuneration structure awards short and long term incentives to Nine’s Key Executive Management Personnel (Executive KMP) based on metrics which are aligned with the creation of shareholder value. FY22 Short-Term Incentives outcomes The Short Term Incentive plan for FY22 was structured with 50% allocated to achievement of the Group EBITDA target and 50% allocated to individual objectives which were made up of financial and strategic objectives aligned to our strategy. The target for FY22 was $596.9 million (pre specific items) and the Executive team delivered an excellent Group EBITDA result of $700.7 million (pre specific items), and therefore the Group financial target was achieved at maximum performance. The individual objectives 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 in FY22. FY20 Long-Term Incentives outcome in FY22 The FY20 Long Term Incentive Plan (LTI) grant was tested at the conclusion of FY22. For current Executive KMP the required targets for the FY20 LTI grant were equally weighted to Total Shareholder Return (TSR) and Earnings Per Share Growth (EPSG) measured over a three-year performance period. The EPSG target was achieved which resulted in 100% vesting of this portion of the grant. The TSR performance was not achieved which resulted in no vesting for the rights attributable to that hurdle. This resulted in 50% of the maximum possible benefits under the FY20 LTI. The unvested FY20 LTI Rights lapsed. 62 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory Changes in remuneration during FY22 As highlighted in the FY21 Remuneration Report, in the FY22 LTI plan, the Strategic hurdle (digital transformation) introduced for the CEO’s LTI plan in FY20 and FY21 was expanded to include all Executive KMP and participants of the FY22 LTI plan. The target and maximum opportunity for Executive KMP did not change. The hurdles and their weighting are 40% Relative TSR performance hurdle, 40% for Earnings Per Share Growth (EPSG) performance hurdle and 20% for the Strategic hurdle. The Strategic hurdle is focussed on Nine’s continued transformation as a digitally focused business. During the year the Board reviewed the Executive remuneration arrangements. The review considered the Executive’s performance and appropriate external benchmarking. Following the review, the Board increased the fixed remuneration of Michael Stephenson by 10% and Maria Phillips by 2.85% effective from 1 July 2021. There was no change to the CEO Mike Sneesby’s remuneration. The Board also reviewed the Director fees during the year. The fees structure was benchmarked against peer groups consisting of other media and entertainment organisations, and companies of a similar market capitalisation, complexity and prominence. Following the review, effective from 1 January 2022 there was a 10% increase in Director fees and Committee Chair fees. There was no increase to Committee Member fees. The Director’s fees did not change following the merger with Fairfax Media in December 2018 and have not changed since February 2017. FY23 STI and LTI The People and Remuneration Committee and the Board review the Executive Remuneration Framework on an annual basis and have determined that there will be no changes to the structures of the STI and LTI Plans for FY23. In closing, FY22 has been an excellent year for Nine and on behalf of the Board I would like to thank the Executives and the whole Nine team on executing the strategic priorities of the business and driving long term performance and value 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 Annual Report 2022 63 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 2022. 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. There were no movements during the 2022 financial year in Executive KMP and Directors. KEY MANAGEMENT PERSONNEL Name Position Term 2022 Non-Executive Directors (NEDs) Peter Costello Nick Falloon Chairman (independent, Non-Executive) Deputy Chairman (independent Non-Executive) Andrew Lancaster Director (Non-Executive) Catherine West Mickie Rosen Samantha Lewis Executive Director Mike Sneesby Other Executive KMP Director (independent Non-Executive) Director (independent Non-Executive) Director (independent Non-Executive) Chief Executive Officer Maria Phillips Chief Financial Officer Michael Stephenson Chief Sales Officer Full year Full year Full Year Full year Full year Full year Full year Full year Full year 64 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 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. Annual short term incentive (STI) Cash payments and deferred shares. Further detail in section 3.5. 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. Performance Measure Performance and delivery of key responsibilities as set out in the position description. At risk portion Not applicable Chief Executive Officer: Target 100% of fixed remuneration, Maximum 125% 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. Group Financial measure: 50% — Group Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) before specific items. Individual measures: 50% — Individual objectives related to the Executive KMP’s role and responsibilities. 40% — Total Shareholder Return (TSR) — relative to S&P/ASX 200 Index companies. 40% — Earnings Per Share Growth (EPSG). 20% — Strategic and Transformation Objectives. Hurdles measured over a three-year performance period. No retesting. 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. The group financial measure rewards Group performance. Individual measures reflect individuals’ performance and contribution to the achievement of both Group and business unit short and long term objectives. This year’s focus was on meeting targets across various strategic initiatives including growth in digital businesses, growth in Stan and Stan Sport, securing key content, data commercialisation, revenue and audience growth across all our platforms, and cost base management. 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. For the FY22 grant, performance will be based on measures supporting Nine’s continued transformation as a digitally focused organisation, including but not limited to growth in digital EBITDA, digital revenue growth, and growth in non-advertising 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. Annual Report 2022 65 Remuneration Report – Audited 2.1 Summary of remuneration outcomes for current Executive KMP The table below is a summary of remuneration outcomes for financial year 2022. Fixed remuneration • Following a review of the Executive teams’ remuneration arrangements by the Board, which considered appropriate external benchmarking, the following increases to Ms Phillips and Mr Stephenson were effective 1 July 2021. Short-term incentive (STI) Long-term Incentive (LTI) Award vesting • Ms Phillips received an increase in fixed remuneration from $700,000 to $720,000. • Mr Stephenson received an increase in fixed remuneration from $840,000 to $924,000. • During FY22 there was no increase to the fixed remuneration of Mr Sneesby who commenced in the CEO role on 1 April 2021. • • • • The Group financial target for FY22 was set at Group EBITDA of $596.9 million (before specific items). The reported FY22 Group EBITDA (before specific items) was $700.7 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. FY22 short-term incentive payments to Executive KMP were consequently above target levels at payouts of between 120% and 138% of target opportunity. • LTI grants were made in line with plan rules for Executive KMP in financial year 2022. • • • LTI grants made in financial year 2020 were tested at 30 June 2022 in line with the plan rules. The TSR hurdle did not achieve the required level of performance, resulting in no vesting of this portion of the grant. The EPS growth target was achieved at maximum performance, resulting in maximum vesting of this portion of the grant. • Executive KMP received a total of 50% of the possible benefits under the FY20 LTI plan. The remainder of the FY20 Rights lapsed. Non-executive director fees • The Board reviewed the Director fees during the year. The fees structure was benchmarked against peer groups consisting of other media and entertainment organisations, and companies of a similar market capitalisation, complexity and prominence. Following that review, effective from 1 January 2022 there was a 10% increase in Director fees and Committee Chair fees. There was no increase to the Committee Member fees. The Director’s fees did not change following the merger with Fairfax Media in December 2018 and have not changed since February 2017. • The total amount paid by Nine to Non-Executive Directors in financial year 2022 was $1,031,750. This is well below the aggregate fee pool of $3 million approved by shareholders at the AGM on 21 October 2013. 66 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 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 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. 3.2 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 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. Annual Report 2022 67 Remuneration Report – Audited 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 3.4 Fixed Remuneration Year 2 Year 3 STI — deferred shares (16.5%) STI — deferred shares (16.5%) 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. 68 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 3.5 Short Term Incentive Plan (STI) Purpose & 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 STI Opportunity (at target) Group Financial Measures (50% of the STI) • The STI is weighted 50% to a Group financial measure and 50% to individual objectives. CEO Other Executive KMP % of fixed remuneration 100 50 • Group EBITDA — chosen as it aligns executive performance with the key drivers of shareholder value and reflects 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 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% Individual Objectives (50% of the STI) • 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. • This year’s individual objectives were focused on meeting targets across various strategic initiatives including growth in digital businesses, growth in Stan and Stan Sport, securing key content, data commercialisation, revenue and audience growth across all our platforms, and cost base management. Payouts based on individual measures are detailed below. Performance Assessment based on delivery of Individual KPIs Unsatisfactory Performance Requires Development Valued Contribution Superior Contribution Exceptional Contribution % Payout (of Individual Component) CEO Nil 25 – 75% 75 – 100% 100 – 110% 110 – 125% Other Executive KMP Nil 25 – 75% 75 – 110% 110 – 130% 130 – 150% Annual Report 2022 69 Remuneration Report – Audited 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 2022: Date Payable/ of Vesting Percentage Cash Deferred Shares Following results release 1 year following end of performance period 2 years following end of performance period 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 recommend that the Board 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 Board and will 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. 70 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 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 FY22 grant was issued on 1 December 2021 and remains on foot (subject to testing against vesting conditions at the end of the performance period). Consideration Nil Award 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) Performance Period Vesting Dates CEO Other Executive KMP % of fixed remuneration 125 50 For the FY22 grant, the performance period is the three year period from 1 July 2021 to 30 June 2024 (Vesting Date). 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 As highlighted in the FY21 Remuneration Report, in the FY22 LTI plan, the Strategic hurdle (digital transformation) introduced for the CEO’s LTI plan in FY20 and FY21 was expanded to include all Executive KMP and participants of the FY22 LTI plan. Performance Rights granted for the FY22 allocation will vest on performance of the following hurdles: • Total Shareholder Return (TSR) Hurdle: 40% of the FY22 grant 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 Ranked at the 75th percentile or higher (Maximum) Ranked at the 50th percentile (Threshold) Ranked below the 50th percentile Vesting 100% 50% 0% Vesting is pro-rated if the outcome is between the Threshold and Maximum band. • Earnings Per Share Growth (ESPG) Hurdle: 40% of the FY22 grant 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. Annual Report 2022 71 Remuneration Report – Audited Vesting Conditions continued EPSG VESTING SCHEDULE: Outcome The EPSG hurdle assesses cumulative growth in EPS as the sum of the annual EPS growth relative to actual EPS for the year preceding commencement of the plan. This is calculated at the end of each financial year over the performance period. Vesting occurs when: Cumulative annual growth over the period exceeds the Maximum Vesting Target Cumulative annual growth over the period exceeds the Threshold Cumulative annual growth over the period of less than the Threshold Vesting 100% 33% 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 • Market practice and competitor benchmarking Due to the competitively sensitive nature of these hurdles and the implied outlook for Nine earnings, the Nine Board has determined to disclose these EPSG targets upon vesting of any performance rights. • Strategic Hurdle — Digital strategy: 20% of the FY22 grant is subject to a strategic or transformation hurdle. For the FY22 grant, performance will be based on measures supporting Nine’s continued transformation as a digitally focused organisation, including but not limited to growth in digital EBITDA, digital revenue growth, and growth in non-advertising revenue. 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 the 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. 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. Cessation of employment (Employment Conditions) 72 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory Disposal restrictions 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. 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. 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. Change of control 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. Amendments 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. Capital Initiatives 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 in this regard will be at their sole discretion. Annual Report 2022 73 Remuneration Report – Audited 4. 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 the 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 EBITDA for FY22) 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, relative TSR, and a strategic hurdle based on digital transformation required to be achieved for any vesting to occur for all LTI participants. The following table provides 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 221 $m 30 June 211 $m 30 June 201 Restated2 $m 30 June 193 Pro-Forma $m 30 June 183 Pro-Forma $m 30 June 194 $m 30 June 18 $m 2,688.8 2,331.5 2,155.3 700.7 26% 51% 564.7 24% 44% 394.8 18% 48% 2,341.7 423.8 18% 27% 2,364.0 385.1 16% — 1,965.1 349.9 18% — 1,403.9 257.2 18% 13% 348.5 261.1 142.4 224.8 170.6 187.1 156.7 Revenue Group EBITDA Group EBITDA % Digital EBITDA % of Group EBITDA Net Profit after Tax and Minorities (pre specific items) Earnings per share — cents 20.5 cents 15.3 cents 8.3 cents 11.6 cents 10.0 cents 13.0 cents 18.0 cents Opening share price Closing share price Dividend Executive KMP STI Payments Awarded Forfeited (at target) 30 June 22 Cents/Share 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 291 183 14.0 138 291 10.5 188 138 7 248 188 10 138 248 10 248 188 10 138 248 10 30 June 22 30 June 21 30 June 20 30 June 19 30 June 18 30 June 19 30 June 18 124% — 131% — 0% 100% 69% 31% 129% — 69% 31% 129% — 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 of the FY21 Annual Report. 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. 74 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 4.2 Short Term Incentives (STI) Outcomes The Short Term Incentive Plan for Executive KMP in FY22 was allocated 50% towards the achievement of the Group EBITDA target and the remaining 50% for individual measures that reflect the individuals’ performance and contribution to the achievement of both Group and business unit objectives. The target for FY22 was $596.9 million (pre specific items) and the Executive team delivered an excellent Group EBITDA result of $700.7 million (pre specific 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 FY22, these measures focussed on meeting targets across various strategic initiatives including growth in digital businesses, Stan and Stan Sport growth, securing key content, data commercialisation, revenue and audience growth across all our platforms, and cost base management The Individual measures were assessed by the PRC who made recommendations to the Board and were mainly achieved at above target performance. The Board believe that the performance in FY22 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 FY22 FY21 FY22 FY21 FY22 FY21 FY21 Proportion of Target STI (%) Proportion of Maximum STI (%) Awarded % Forfeited % Awarded % Forfeited % 120% 112.5% 125% 123% 138% 140% 135% 0% 0% 0% 0% 0% 0% 0% 96% 90% 83% 82% 92% 93% 90% 4% 10% 17% 18% 8% 7% 10% 1. Mr Sneesby became an Executive KMP following his appointment as Chief Executive Officer on 1 April 2021. His FY21 STI was awarded on a pro-rata basis. 2. Ms Phillips commenced as Chief Financial Officer on 31 August 2020. Her FY21 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. Annual Report 2022 75 Remuneration Report – Audited 4.3 Long Term Incentives (LTI) Outcomes Plan Grant Date Test Date Performance Hurdles FY17 LTI 1 December 2016 30 June 2019 • 50% – Total Shareholder Return • 50% – Earnings Per Share Growth FY18 LTI 1 December 2017 30 June 2020 • 50% – Total Shareholder Return • 50% – Earnings Per Share Growth FY19 LTI 26 November 2018 30 June 2021 • 50% – Total Shareholder Return • 50% – Earnings Per Share Growth FY20 LTI 1 December 2019 30 June 2022 • 40% CEO & 50% other KMP – Total Shareholder Return • 40% CEO & 50% other KMP – Earnings Per Share Growth 1 December 2020 30 June 2022 • 20% – Digital Transformation (former CEO only) FY21 LTI 1 December 2020 30 June 2023 • 40% CEO & 50% other KMP – Total Shareholder Return Vesting outcome (%) 100% 37% 25% 50% 100% • 40% CEO & 50% other KMP – Earnings Per Share Growth N/A • 20% – Digital Transformation (CEO only) FY22 LTI 1 December 2021 30 June 2024 • 40% – Total Shareholder Return • 40% – Earnings Per Share Growth • 20% – Digital Transformation N/A The performance period of the FY20 Long Term Incentive Plan (FY20 LTI) commenced on 1 July 2019 and expired on 30 June 2022. Performance was assessed at the conclusion of the FY22 year, and as a result of performance over the three year period, 50% vesting was achieved. The Total Shareholder Return (TSR) hurdle did not achieve the required level of performance, resulting in no vesting of this portion of the grant. The cumulative EPS growth targets for the FY20 LTI plan were set at 2% per annum for threshold performance and 5% per annum for maximum performance. The Company’s EPS growth performance over the three-year period was achieved at maximum performance and therefore achieved maximum vesting for this portion of the grant. For the FY20 LTI plan, a Strategic hurdle focused on Digital Transformation was introduced for the CEO at the time (Hugh Marks) and weighted to 20% of his overall FY20 LTI grant. Mr Marks left the business on 31 August 2021 and retained a time based pro-rata proportion of his LTI rights under the FY20 LTI plan. The Board assessed the overall performance of this hurdle on an aggregate basis, taking into account the success of key indicators in the digital transformation strategy including, but were not limited to, digital revenue growth measures and subscription revenue growth expectations that exceeded their targets, successful performance in Stan, 9Now and the Metro digital platforms and Digital EBITDA growth to 51% of overall Group EBITDA over the three years. The Board therefore determined that the Digital Transformation objectives had been achieved on an aggregate basis and 100% of this portion of Mr Marks grant would vest. The portion of FY20 rights that did not meet the required performance hurdles were forfeited and lapsed. There is no retesting of the hurdles. 76 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 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 2022 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 $720,000 $360,000 $360,000 12 months 12 months 12 months Michael Stephenson $924,000 $462,000 $462,000 12 months 12 months 12 months 1. Fixed remuneration comprises of base cash remuneration, superannuation and other non-monetary benefits. 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 57 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. Annual Report 2022 77 Remuneration Report – Audited 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 engages the services of PwC as the Company’s remuneration advisor. There were no remuneration recommendations provided to the Committee by PwC or any other consultants in the 2022 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). 7. 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 2022 (FY22) 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 regard to FY22. 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 fees and cash bonus $ Other Remuneration1 $ Deferred STI2 $ Long-term incentives3 $ Remuneration for 2022 $ Executive Director Mike Sneesby4 Other Executive KMP Maria Phillips5 Michael Stephenson Total Current Executive KMP FY22 1,376,432 1,120,910 2,497,342 128,414 552,090 FY21 344,576 263,813 608,389 131,449 129,937 FY22 695,924 301,500 997,424 76,758 148,500 FY21 567,946 240,042 807,988 37,496 118,229 — — — — 3,177,846 869,775 1,222,682 963,713 FY22 900,276 425,618 1,325,894 97,594 209,633 236,249 1,869,370 FY21 818,306 393,960 1,212,266 16,748 194,040 121,489 1,544,543 FY22 2,972,632 1,848,028 4,820,660 302,767 910,223 236,249 6,269,899 FY21 1,730,828 897,815 2,628,643 185,693 442,206 121,489 3,378,031 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 2022 but which were measured based on performance up to 30 June 2022. The value attributed to these Rights has been calculated based on the share price as at 1 August 2022 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 (CFO) on 31 August 2020. 78 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory e r u s o c s d l i 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 2 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 . d $ e t a e R l e c n a m r o f r e P l $ a t o T s $ t i f e n e B n o i t a n m r e T i m r e t - g n o L 3 $ s e v i t n e c n i 2 $ I T S e $ v a e L d e r r e f e D i e c v r e S g n o L l a u n n A 1 $ e v a e L - r e p u S n $ o i t a u n n a 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 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 t s o P t n e m y o p m E l 2 6 5 4 7 4 5 4 0 5 1 5 8 4 — , 8 4 0 4 2 9 3 , 5 7 7 9 6 8 , 2 0 1 , 3 5 4 , 1 , 9 0 4 8 9 0 , 1 , 0 9 0 6 0 0 2 , 0 2 9 , 1 9 6 , 1 4 5 3 0 1 1 , , 6 1 6 3 3 9 7, , 0 4 2 3 8 3 7, , 4 7 0 4 0 7 , 1 1 — — — — — — , 6 5 6 6 5 8 2 , — — , 6 5 6 6 5 8 2 , , 1 0 2 6 4 7 0 9 0 2 5 5 , 9 1 3 , 1 4 8 2 5 3 6 , 8 6 5 3 2 , , 0 1 9 0 2 1 , 1 , 2 3 4 6 7 3 , 1 2 2 Y F — 7 3 9 9 2 1 , 7 2 3 7, 8 8 9 6 8 3 , 4 2 4 5 , , 3 1 8 3 6 2 , 6 7 5 4 4 3 1 2 Y F 0 2 4 0 3 2 , 0 0 5 8 4 1 , 6 9 6 4 3 1 , 9 2 2 8 1 1 , 8 7 1 , 3 2 4 0 , 1 9 6 9 2 7 3 , 3 3 6 9 0 2 , 8 0 9 4 4 , 2 1 0 0 5 , 0 6 7 4 1 , 8 1 1 , 9 2 8 6 5 3 2 , 4 9 6 , 1 2 8 6 5 3 2 , 0 0 5 , 1 0 3 4 2 9 5 9 6 , 2 4 0 0 4 2 , 6 4 9 7, 6 5 , 8 1 6 5 2 4 , 6 7 2 0 0 9 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 0 6 9 3 9 3 , 6 0 3 8 1 8 , — — — 0 5 7 7, 5 2 2 , 4 9 8 7, 1 5 2 3 4 4 3 , 3 0 9 2 5 , 5 6 8 5 3 , 0 7 2 6 1 , 4 2 4 5 , — 5 6 0 9 6 , 1 8 4 , 1 5 0 , 1 , 0 3 2 6 4 1 , 1 , 0 9 5 9 4 3 , 1 3 2 2 0 1 9 , 5 0 4 9 8 , 8 5 6 2 4 1 , 4 0 7 0 7 , , 8 2 0 8 4 8 , 1 , 2 3 6 2 7 9 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 , , 6 9 2 9 4 9 , 1 3 2 1 , 6 4 9 2 , 2 2 Y F 1 2 Y F 2 2 Y F 1 2 Y F 1 2 Y F 1 2 Y F 2 2 Y F 1 2 Y F n o i t a r e n u m e r P M K 2 2 0 2 s e m o c t u o . s t n e m e r i u q e r r o t c e r i D e v i t u c e x E 4 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 5 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 h t O l 7 n a m e p p o K l u a P 6 s k r a M h g u H P M K e v i t u c e x E l a t o T d n a s t i f e n e b l t n e m y o p m e - t s o P , s t i f e n e b m r e t t r o h S s a n w o h s s t n u o m a , l i y g n d r o c c A . 1 2 0 2 t s u g u A 1 3 n o e n N i f o e e y o p m e l n a e b o t d e s a e c d n a , 1 2 0 2 h c r a M 1 3 n o P M K a d n a O E C e b o t d e s a e c s k r a M r M d n a i d a p s a d e s o c s d i l s t n u o m A . 1 2 0 2 h c r a M 1 3 o t s h t n o m e n n i e h t n i p u o r G e h t f o O E C s a y t i c a p a c i s h n i n o i t a r e n u m e r ’ s k r a M r M t n e s e r p e r ) s t i f e n e b n o i t i a n m r e t f o n o i t p e c x e e h t h t i w ( s t i f e n e b m r e t g n o L . s r a e y o w t t x e n e h t r e v o s e h c n a r t l a u q e o w t n i d e l t t e s e b l l i w i s h T . s e r a h s e n N i n i d e r r e f e d t u b r a e y l i a c n a n i f e h t o t n o i t l a e r n i d e d r a w a I T S o t s e t a e r l I T S d e r r e f e D . d e u r c c a t a h t s d e e c x e r a e y e h t n i n e k a t e v a e l l a u n n a ' s P M K e h t e r e h w e v i t a g e n e b y a m s t n u o m A . 1 2 0 2 l i r p A 1 n o ) O E C ( r e c i f f O e v i t u c e x E i f e h C s a t n e m t n o p p a i i s h i g n w o l l o f P M K e v i t u c e x E n a e m a c e b y b s e e n S r M . 6 3 . s n o i t c e s n i d e n i l t u o e r a s n a P l e v i t n e c n I m r e T g n o L e h t f o s l i a t e D . 0 2 0 2 t s u g u A 1 3 n o ) O F C ( r e c i f f O l i a c n a n F i i f e h C s a d e c n e m m o c s p i l l i h P s M . 1 . 2 . 3 . 4 . 5 . 6 ’ s p u o r G e h t n i d e l i a t e d s a , 1 2 0 2 h c r a M 1 3 n o p u o r G e h t f o O E C s a l e o r i s h f o n o i t a s s e c i g n w o l l o f d e l t i t n e s a w s k r a M r M i h c h w o t s t n u o m a l l a t n e s e r p e r s t i f e n e B n o i t i a n m r e T s a n w o h s s k r a M r M o t l e b a y a p . 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 t r o p e r n o i t a r e n u m e r . 0 2 0 2 l y u J 0 1 e h t n o y n a p m o C e h t f o e e y o p m e l n a i g n e b d e s a e c d n a n o i t a n g s e r i i s h l i t n u 9 1 0 2 r e b m e t p e S 2 m o r f r e c i f f O l i a c n a n F i i f e h C e h t s a w l n a m e p p o K r M . 7 Annual Report 2022 79 Remuneration Report – Audited 7.3 Performance Rights and Share Interests of Key Management Personnel 2022 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 Sneesby Other Executive KMP 261,038 1 Dec 21 1.940 1 Jul 23 628,817 1 Dec 21 2.220 1 Jul 24 Maria Phillips 208,830 1 Dec 20 1.940 1 Jul 23 129,356 1 Dec 21 2.220 1 Jul 24 261,038 628,817 208,830 129,356 Michael Stephenson 228,260 250,596 1 Dec 19 1 Dec 20 1.940 1 Jul 23 1.163 1 Jul 22 114,130 114,130 — 166,007 1 Dec 21 2.220 1 Jul 24 Former Executive KMP Hugh Marks2 550,327 211,285 450,797 1 Dec 19 1 Dec 20 1 Dec 20 1.163 1.163 1 Jul 22 275,164 275,163 1 Jul 22 181,803 29,482 1.940 1 Jul 23 250,596 166,007 — — 450,797 1. Rights which vested subsequent to 30 June 2022 but which were measured based on performance up to 30 June 2022. 2. In accordance with the terms of issue of the performance rights and the terms of his employment contract, on cessation of employment Mr Marks retained a pro-rata proportion of his LTI rights under the FY20 and FY21 LTI plans, detailed in the Group’s remuneration report for the year ended 30 June 2021. 80 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 2022 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 2021 Ord Granted on conversion of Share Rights Ord Granted as STI Ord Other Net Changes Ord Held directly as at 30 June 2022 Ord Held nominally as at 30 June 2022 Ord Non-Executive Directors Peter Costello Nick Falloon Andrew Lancaster Catherine West Mickie Rosen Samantha Lewis Executive Director 301,786 396,222 — 100,000 80,000 60,000 — — — — — — — — — — — — — — 20,000 — — — — 301,786 51,142 345,080 — — 20,000 100,000 80,000 — — 60,000 Mike Sneesby 81,083 — 46,689 — 46,689 81,083 Other Executive KMP Maria Phillips — Michael Stephenson 84,517 Total 1,103,608 — 43,859 43,859 42,482 69,723 — (24,000) 42,482 109,897 158,894 (4,000) 330,210 — 64,202 972,151 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 Falloon Domain Holdings Australia Limited 101,239 ordinary shares 692,123 ordinary shares 31,105 share rights 31,105 share rights Further information on the securities in Domain Holdings Australia Limited is available in its annual report and on other ASX disclosures. Annual Report 2022 81 Remuneration Report – Audited 8. NON-EXECUTIVE DIRECTOR (NED) REMUNERATION ARRANGEMENTS AND DETAILED DIS- CLOSURES 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 2022 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. During the year, the Board reviewed the fee structure for Directors’ remuneration. Nine’s NED fee structure was benchmarked to comparable peer groups consisting of other media and entertainment organisations, and companies of a similar market capitalisation, complexity and prominence. Following that review, effective from 1 January 2022 there was a 10% increase in Director fees and Committee Chair fees. There was no increase to the Committee Member fees. The Director’s fees did not change following the merger with Fairfax Media in December 2018 and have not changed since February 2017. The NED fees pre and post the increase are set out below: Role Chairman Directors Audit & Risk Committee chair Audit & Risk Committee member People & Remuneration Committee chair People & Remuneration Committee member Fees to 31 December 2021 Fees from 1 January 2022 $340,000 $374,000 $135,000 $148,500 $30,000 $20,000 $25,000 $15,000 $33,000 $20,000 $27,500 $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 2022 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 2021 and 2022, Mr Falloon is a Board member of Domain Holdings Australia Limited (Domain). Mr Falloon is the Chairman of the Domain Board and a member of the Domain People, Culture and Sustainability Committee, and the Audit and Risk Committee. In FY22, 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. The fees paid to Mr Falloon in these years are included as controlled entity transactions. The fees are paid by Domain. 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. 82 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory NED REMUNERATION FOR YEARS ENDED 30 JUNE 2022 AND 2021 Nine Domain (Controlled Entity) Nine Non-Executive Director Fees $ Super- annuation paid by Nine $ Domain Non-Executive Director Fees $ Financial year Super- annuation paid by Domain $ 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 FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 Former Non-Executive Directors Patrick Allaway3 Total NED FY21 FY22 FY21 357,000 340,000 156,750 — — — — — 228,146 146,747 3,253 189,234 — — 22,815 17,977 — — 357,000 340,000 17,769 425,480 49,889 407,100 — — 170,909 164,384 — — 17,091 15,616 128,864 12,886 123,288 171,136 176,096 11,712 17,114 3,904 106,164 10,086 — — — — — — — — — 984,659 47,091 228,146 1,056,679 44,571 189,234 — — — — — — — — — — — — — — — — — — 188,000 180,000 141,750 135,000 188,250 180,000 — 22,815 17,977 — 116,250 17,769 1,300,480 49,889 1,358,350 1. Mr Falloon received Director fees from a controlled entity, Domain Holdings Australia Limited (Domain), in respect of his services as Chairman of Domain. The amount is disclosed separately as it 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 vested on 7 November 2021. For the purpose of FY22 this equated to a fair value amount of $17,769 (FY21: $49,889). 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. 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. Annual Report 2022 83 Operating and Financial Review Financial Highlights $2,689m Revenue increase of 15%  $701m $552m $315m EBITDA increase of 24%  EBIT increase of 33%  NPAT increase of 71%  20.5cents EPS increase of 34%  Before specific items (Note 2.4). 84 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory REVIEW OF OPERATIONS Revenue (before specific items) Group EBITDA (before specific items)1 Depreciation and Amortisation Group EBIT (before specific items) Net Finance Costs Profit after tax before specific items Specific items after income tax Profit after Income Tax Net Cash Flows generated from operating activities Net Debt2 Leverage3 1. EBITDA plus share of associates 2. Bank facilities unsecured, less cash at bank 3. Net Debt/Group EBITDA (before Specific Items) 2022 $m 2,688.8 700.7 (149.1) 551.6 (25.2) 373.5 (58.2) 315.3 487.2 324.4 0.5x 2021 $m 2,331.5 564.7 (149.1) 415.6 (27.5) 277.5 (93.6) 184.0 398.2 249.9 0.4x Variance $m Variance % 357.3 136.0 — 136.0 2.3 96.0 35.4 131.3 89.0 74.5 15% 24% 0% 33% (8%) 35% (38%) 71% 22% 30% Revenue before Specific items increased by 15% to $2,688.8 million as a result of continued audience strength across all key platforms, driven by Nine's premium content with strong growth across all operating segments offset by revenue related cost increases and investment in growth businesses. Group EBITDA before Specific Items increased by $136.0 million (24%) to $700.7 million with the revenue increase flowing to EBITDA. Depreciation and Amortisation remained stable at $149.1 million and Net Finance Costs reduced from $27.5 million in the prior year to $25.2 million in the current year. Specific Items of $76.8 million pre-tax (refer to Note 2.4) relate principally to group restructuring costs and the impairment of assets in relation to surplus property lease space. These include: $30.9 million in restructuring costs; $28.9 million in impairment costs; $9.0 million expense on revaluation of contingent consideration payable; as well as $8.0 million of acquisition related costs. Operating Cash Flow increased $89.0 million to $487.2 million year-on-year due to the cash conversion of the EBITDA increase. In addition, capital expenditure during the period decreased from $93.8 million to $74.8 million, primarily reflecting the completion of Nine’s new Sydney headquarters at 1 Denison Street, North Sydney. The Group made dividend payments of $213.2 million, or 12.5 cents per share, to shareholders during the year. Net Debt at 30 June 2022 was $324.4 million (excluding lease liabilities) which resulted in net leverage of 0.5x, well within bank covenants. Annual Report 2022 85 Operating and Financial Review Operating and Financial Review SEGMENTAL RESULTS The results of operations are set out below: 2022 $m 2021 $m Variance $m Variance % Revenue1, 2 Broadcasting Digital and Publishing Domain Group Stan Corporate Total Revenue1 EBITDA2 Broadcasting Digital and Publishing Domain Group Stan Corporate Share of Associates Group EBITDA 1,371.9 1,242.6 593.5 356.7 381.2 4.8 504.5 286.6 311.8 2.3 129.3 89.0 70.1 69.4 2.5 2,708.1 2,347.8 360.3 401.1 179.5 122.1 28.5 (32.3) 1.8 700.7 332.5 117.2 100.6 39.5 (26.1) 1.0 68.6 62.3 21.5 (11.0) (6.2) 0.8 564.7 136.0 1. Before elimination of inter-segment revenue and excluding interest income. 2. Pre specific items A summary of each division’s performance is set out below. Broadcasting Revenue EBITDA Margin 2022 $m 1,371.9 401.1 29% 2021 $m 1,242.6 332.5 27% Variance 2022 to 2021 $m 129.3 68.6 10% 18% 24% 22% 109% 15% 21% 53% 21% (28%) 24% 80% 24% % 10% 21% 2 pts Nine’s Broadcasting division, which comprises Nine Network, 9Now and Nine Radio, reported EBITDA of $401.1 million on revenues of $1,371.9 million for the year. Nine Network reported a revenue increase from $1,044.7 million to $1,118.5 million, growth of 7% for the year, primarily as a result of the Metro Free To Air advertising market being up 9%1 for the year, and 4%1 in the second half. Nine recorded a full year FTA revenue share of 38.2%1, including a second half share of 40.6%1. Nine Network costs increased by 5% or $39.1 million for the year, principally-related to the normalisation of COVID-related cost relief in FY21 (specifically Australian Open rights, the return of spectrum charges and travel/ entertainment costs). 1. Source: Think TV, Metro Free To Air revenue and share, 12 months to June 2022. 86 Nine Entertainment Co. 86 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory In a BVOD market which grew by 47% for the year to $369 million2, 9Now attracted 44% of this subset of the digital video market, resulting in revenue of $151.0 million. Across the year, Daily Active Users grew by a further 33%, while live streaming (minutes) were up by 72%. The cost increase of approximately $17 million related to investment in content, volume related technology costs and increased marketing. Overall, 9Now increased its EBITDA contribution from $73.4 million to $100.5 million, an increase of 37% on the prior year. 12% of Total Television (Nine Network and 9Now) revenue came from digital, up from 9% in the prior year. Nine Radio reported EBITDA of $15.2 million (2021: $8.4 million) on revenue of $102.4 million (2021: $90.8 million) with the benefits of previous cost reductions and sale team restructures combining with modest growth in the advertising market. The 13% growth in revenue was driven by the Metro radio advertising market gaining momentum, and finished the year up 10%3 on FY21. Nine also gained share momentum, both on an audience and revenue basis. Radio costs increased by 6% or $4.8 million as a result of investment in content and sales related costs. Digital and Publishing Revenue EBITDA Margin 2022 $m 593.5 179.5 30% 2021 $m 504.5 117.2 23% Variance 2022 to 2021 $m 89.0 62.3 % 18% 53% 7 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 $593.5 million and a combined EBITDA of $179.5 million. In total, the digital medium now accounts for more than 60% of Publishing and Digital revenue. Metro Media contributed revenue of $474.9 million (2021: $402.0 million) and EBITDA of $154.9 million (2021: $98.9 million) for the year to 30 June 2022. Continued strong readership across each of The Sydney Morning Herald, The Age and The Australian Financial Review translated into paying audiences, with total subscriber growth across each masthead. Print subscription and retail sales declined by around 6%. However, this was more than offset by digital subscription and licensing revenue which grew by 66% across the year, driven by double-digit growth in subscription revenue, as well as revenue from the digital platforms. Advertising revenue from Nine’s Publishing assets recorded strong growth, both digital and print. Digital advertising revenue grew by 10%, notwithstanding the end of the legacy Google sales agreement in February 2021. Print advertising grew by 13%, with Travel and Commercial Real Estate bouncing back strongly, the former however, remaining well below pre-COVID levels. Costs at Metro Media increased by $17.0 million with around half related to increases in staff and production costs, the remainder reflecting Nine’s ongoing investment in Publishing content, as well as some remaining post-COVID rebalances. For the full year to June 2022, EBITDA grew by $56.0 million or 57% to $154.9 million. Other key components of Digital & Publishing together contributed revenue of $118.6 million, and EBITDA of $24.6 million, representing a $6.3 million increase for the full year to June 2022. 2. Source: Think TV, BVOD revenue( (9Now, 7Plus, 10Play), 12 months to June 2022. 3. Source: Commercial Radio Australia, 12 months to June 2022, 4 city basis. Annual Report 2022 87 Operating and Financial Review Operating and Financial Review Domain Group Revenue EBITDA Margin 2022 $m 356.7 122.1 34% 2021 $m 286.6 100.6 35% Variance 2022 to 2021 $m 70.1 21.5 % 24% 21% (1 pts) Domain’s performance was underpinned by the ongoing strength in the property market and Domain’s success in driving its Marketplace strategy. 24% growth in digital revenues was underpinned by Residential, with 9% growth in national listing volumes coupled with a strong 14% increase in controllable yield. Double-digit revenue growth was also recorded across Agent Solutions and Property Data Solutions as Domain continues to deliver on building its Marketplace strategy through the acquisitions of Realbase and IDS. Together, this resulted in revenue growth of 24% or $70.1 million. Operating costs increased by 16% or $31.1 million across the year with the increase associated with improved revenue performance, unwinding of COVID cost control measures in a strengthening market, repayment of JobKeeper allowance and investment in existing and new staff to support Domain's Marketplace strategy, as well as expenses from newly-acquired buinesses, IDS and Realbase. In the year to 30 June 2022, full-year EBITDA was up by 21% from $100.6 million in 2021 to $122.1 million in 2022. Stan Revenue EBITDA Margin 2022 $m 381.2 28.5 7% 2021 $m 311.8 39.5 13% Variance 2022 to 2021 $m 69.4 (11.0) % 22% (28%) (6pts) Momentum remains positive at Stan with current active subscribers of more than 2.5 million, driven both by Sport and Entertainment. Sports subscribers have continued to grow; in Q4, average active subscribers to Stan Sport were more than 150%4 higher than the same quarter last year. The combination of the strong subscriber numbers and close to double-digit growth in ARPU5 increased Stan’s revenue by 22% across the full year to 30 June 2022. The cost increase of $80.4 million reflects the investment in Sport, the ramping up of output deals and the increased rollout of Stan Originals, in line with management's strategy for growth. EBITDA of $28.5 million for the year, a decrease of $11.0 million on the previous year, reflects a period of strategic investment in Originals to build a long-term library asset, and in live content, primarily Sport, as a key differentiator to other streaming platforms in Australia. Corporate Net corporate costs increased by $6.2 million or 24% across the year, mainly as a result of investment in cyber capabilities, COVID related testing expenses following the return of employees to office based work and higher cost of insurance. 88 Nine Entertainment Co. 88 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory BUSINESS STRATEGIES AND FUTURE PROSPECTS The Group has identified and is focused on delivering against the following strategic priorities: • Australia’s leading distributor of video content The Group will continue to strengthen its position as the leading supplier of premium video content in Australia, through its FTA, Broadcast Video On Demand (9Now) (together “Total TV”) and Subscription (Stan) businesses. Ongoing investment in content that appeals to Australian audiences, and in platform functionality and prominence, will support the expansion of the Group’s audiences. By delivering premium content across Entertainment, News and Current Affairs and Sport, the Group’s goal is to increase its revenues via advertising across our Total TV businesses and subscriptions on Stan. Stan remains on a strong growth trajectory, underpinned by its focus on investment in Stan Originals, growth in the Stan Sport proposition and extensions to key strategic licensing deals, supported by increasing efficiency of customer acquisition, a world class platform and cross-promotion across the wider Nine business. • Accelerating the shift to Digital The Group continues to successfully grow audiences and advertisers on digital platforms across Total TV, Radio and Publishing. This evolution ensures long term sustainability in the business model and increased opportunities to diversify content and better monetise audiences. Our Metro Publishing business is targeting a doubling of subscribers through the next five years, 9Now set live streaming BVOD records during the 2022 State of Origin series and Nine’s radio audiences continue to grow listening online and via smart speakers and apps. The Group has also formalised commercial arrangements with global tech platforms, Google and Meta, for the supply and use of Nine content. • Continued optimisation of traditional media assets While the transition to digital platforms is a key driver of long-term success, the Group’s traditional media assets remain important and optimisation of performance is an ongoing priority. The restructure of the Radio business since acquisition has realised strong growth in market share as the business builds talkback radio for the new generation. The Group’s Publishing business continues to outperform the market through its print advertising proposition and achieve cost efficiencies despite structural headwinds. Content investment also continues to balance targeted investment by platform and the production of content that works across both linear and digital platforms. • Growth of Marketplaces The Group’s marketplace strategy continues to be led by strong growth in Domain. Domain is focused on continually increasing the value that they bring to their customers and consumers, supporting them at more points of their property journeys. The business remains structured across Core Listings, Agent Solutions, Consumer Solutions and Property Data Solutions, each forecast to deliver continued growth. Notably, the acquisitions of Realbase and Insight Data Solutions during the year are expected to strengthen and accelerate the scale and impact of the Domain’s Agent Solutions and Property Data Solutions business units. Delivery of this strategy is underpinned by the relationship with and access to Nine’s other assets, most notably FTA television and digital, building increased brand recognition and enhanced traffic to Domain.com.au. • Optimising connections across platforms Across its portfolio, Nine provides and supports the establishment of valuable connections between content, audiences and advertisers. Product, technology and user experience are at the core of everything the business does, supporting the production and distribution of the Group’s content and driving premium revenue opportunities. The transition to digital will also strengthen the Group’s data assets, supporting product initiatives across all business units, improving yields and supporting increased effectiveness in planning and execution. The Group continues to explore potential opportunities for targeted investment in aligned growth opportunities, focused on driving long term returns for the business. Annual Report 2022 89 Operating and Financial Review Operating and Financial Review 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 via our Audit & Risk Committee. Revenue — the major risks which could affect the revenue of the Group are: • Impact of competitor strategies or new market entrants; • A change in the way content is viewed or consumed by audiences; • Transition of advertising towards digital whilst maintaining traditional sources of revenue; • 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; • Creation of successful content and securing quality licensed content; • Nine’s share of the FTA market itself; • Longer term impact of COVID-19, including the timing and extent of recovery and potential for future outbreaks; and • Declines in property market conditions. A key contributor to these risks is a change in audience behaviours and preferences, which in turn impacts advertiser behaviour and subscription revenue. 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. Operational — from an operational perspective, the business is subject to operational risks of various kinds, including transmission failure, systems failure, data loss, reliance on key third party partners, inaccurate reporting, industrial action (such as at film and television production studios, in sporting competitions broadcast by Nine and in Publishing), defamation and other execution risks, including those that significantly impact production. 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. We continue to invest in uplifting our cyber capabilities to keep pace with the ever-evolving cyber security threats. 90 Nine Entertainment Co. 90 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 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 FTA television 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 proactively identify 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. The ongoing impact of COVID-19 continues to place pressure on securing and retaining talent. We recognise the increasing challenges to mental wellbeing, not only to our own people but in the community due to broader societal factors which we manage both through our internal programs and making responsible content choices. Nine continues to be an employer of choice by investing in our people through training and development opportunities, by promoting diversity and workplace flexibility, providing support programs 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 Domain 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. Annual Report 2022 91 Nine Entertainment Co. Holdings Limited ABN 60 122 203 892 Financial Statements for the Year ended 30 June 2022 CONTENTS CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DIRECTORS’ DECLARATION INDEPENDENT AUDITOR’S REPORT 93 94 95 96 97 166 167 FINANCIAL STATEMENT NOTE INDEX 1. About this 2. Group report Performance 3. Operating Assets and Liabilities 4. Capital Structure and Management 5. Taxation Structure 7. Other 6. Group 1.1 Significant 2.1 Segment events during the period information 3.1 Cash 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 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 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 4.3 Dividends paid and proposed 4.4 Share-based payments 4.5 Financial instruments 1.3 Notes to 2.3 Expenses 3.3 Program the financial statements rights and inventories 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 3.9 Leases 92 Nine Entertainment Co. Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2022 Revenues Expenses Finance costs Share of profits of associate entities Net profit before income tax expense Income tax expense Net profit after income tax expense Net profit for the period attributable to: Owners of the parent Non-controlling interest Net profit for the period Other comprehensive income Items that may be reclassified subsequently to profit or loss: Foreign currency translation Fair value movement in derivative financial instruments (net of tax) Items that will not be reclassified subsequently to profit or loss: Fair value movement in investment in listed equities (net of tax) Actuarial (loss)/gain on defined benefit plan (net of tax) Other comprehensive income for the period Note 2.1 2.3 2.3 30 June 2022 $’000 30 June 2021 $’000 2,691,406 2,342,178 (2,217,262) (2,039,575) (26,302) (29,002) 6.2(c) 1,793 5,991 449,635 279,592 5.1 (134,347) 315,288 (95,631) 183,961 297,143 169,364 18,145 315,288 14,597 183,961 873 1,693 (179) (730) 1,657 (525) — 1,230 3,674 4,379 4.5 7.1 7.2 Total comprehensive income attributable to equity holders 316,945 188,340 Total comprehensive income attributable to: Owners of the parent Non-controlling interest Total comprehensive income for the period Earnings per share 298,800 173,743 18,145 14,597 316,945 188,340 Basic and diluted earnings per share attributable to ordinary equity holders of the parent 2.5 $0.17 $0.10 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. Annual Report 2022 93 Consolidated Statement of Financial Position as at 30 June 2022 Current assets Cash and cash equivalents Trade and other receivables Program rights and inventories Prepayments Other assets Derivative financial instruments 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 Derivative financial instruments 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 2022 $’000 30 June 2021 $’000 3.1 3.2 3.3 4.5 3.2 3.3 6.2 7.1 3.5 3.6 4.5 7.2 3.4 4.1 3.7 4.5 3.4 4.1 5.2 3.7 4.5 4.2 153,464 408,380 291,259 33,792 2,691 3,214 — 892,800 10,113 168,236 33,606 6,511 491,490 2,512,285 1,333 — 23,925 3,247,499 4,140,299 530,105 115,132 44,622 215,924 1,721 907,504 126,211 745,515 267,864 21,249 406 1,161,245 2,068,749 2,071,550 2,111,752 (54,922) (178,820) 1,878,010 193,540 2,071,550 171,927 380,997 256,617 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 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 94 Nine Entertainment Co. Consolidated Statement of Changes in Equity for the year ended 30 June 2022 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 , 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 ( , 7 5 6 , 1 — 7 5 6 , 1 — 8 8 2 5 1 3 , 5 4 1 , 8 1 3 4 1 7, 9 2 3 4 1 7, 9 2 5 4 9 6 1 3 , 5 4 1 , 8 1 0 0 8 8 9 2 , 3 4 1 7, 9 2 — — ) 4 8 1 , 9 1 ( — — — — — ) 4 8 1 , 9 1 ( 9 6 9 8 4 , 9 6 9 8 4 , — ) 4 1 1 , 2 1 ( 1 3 1 , 9 — — ) 4 1 1 , 2 1 ( 1 3 1 , 9 — — — — — 6 3 1 , 2 ) 8 9 7 , 1 3 2 ( ) 4 2 6 8 1 ( , ) 4 7 1 , 3 1 2 ( ) 4 7 1 , 3 1 2 ( — — — — — — — — — ) 3 8 8 , 1 1 ( 0 0 0 $ ’ e g d e h e v r e s e r w o l f h s a C - e r a h S d e s a b 0 0 0 $ ’ e v r e s e r s t n e m y a p 0 0 0 $ ’ I C O V F l e u a V r i a F f o e v r e s e r l i a c n a n i f t a s t e s s a 0 0 0 $ ’ e v r e s e r i n g e r o F y c n e r r u c s t h g R i n o i t a l s n a r t n a p l d e t u b i r t n o C — — 3 9 6 , 1 3 9 6 , 1 — — — — — — — — — — ) 6 3 1 , 2 ( ) 0 2 7 , 1 ( ) 1 0 3 7, ( — — — 1 3 1 , 9 — ) 9 0 9 ( ) 9 0 9 ( — — — — — — — — 3 7 8 3 7 8 — — — — — — — 1 7 5 , 1 2 ) 6 0 8 5 ( , ) 1 0 9 , 1 ( — — — — — — 0 2 7 , 1 ) 4 1 1 , 2 1 ( — — — — — — — — — — — — 0 0 0 $ ’ s e r a h s ) 7 5 6 2 1 ( , y t i u q e 0 0 0 $ ’ , 3 0 8 4 3 1 , 2 ) 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 n e m y a p d e s a b - e r a h S 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 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 ) 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 o i r e p e h t r o f 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 d o i r e p e h t r o f t i f o r P 1 2 0 2 l y u J 1 t A l s r e d o h e r a h s o t s d n e d v D i i 0 5 5 , 1 7 0 2 , 0 4 5 3 9 1 , , 0 1 0 8 7 8 , 1 ) 0 2 8 8 7 1 ( , ) 7 1 4 8 6 ( , 3 9 6 , 1 5 4 5 9 1 , ) 5 1 7 6 ( , ) 8 2 0 , 1 ( ) 1 5 0 3 2 ( , , 3 0 8 4 3 1 , 2 2 2 0 2 e n u J 0 3 t A 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 ( 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 ( , , 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 ( , — — — — — — — — — — — — — — — — ) 4 5 ( ) 3 9 2 , 1 ( — — — — — 9 5 9 7, 1 — — 4 0 9 4 , ) 5 2 5 ( 4 0 9 4 , ) 5 2 5 ( — — — — — — — — — — — — — — — — — — — — — — — 3 9 2 , 1 — — ) 3 9 2 2 ( , — — — — — — — — — — — 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 ) 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 o i r e p e h t r o f 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 ) 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 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 I C N f o i n o i t i s u q c A d o i r e p e h t r o f t i f o r P 0 2 0 2 l y u J 1 t A i y r a d s b u s i n i 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 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 1 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 Annual Report 2022 95 Consolidated Statement of Cash Flows for the year ended 30 June 2022 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Dividends received — associates Government grants (repaid)/received 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 (Acquisition)/disposal of subsidiaries, net of cash acquired Proceeds from disposal of investments and assets held for sale Net receipt of contingent consideration Funding to associates Net cash flows used in investing activities Cash flows from financing activities Proceeds from borrowings Repayments of borrowings Payment for debt refinancing fees Proceeds from issue of shares by subsidiary with non-controlling shareholder Purchase of rights plan shares Purchase of non wholly-owned subsidiary treasury shares Payment of the principal portion of leases Proceeds from exercise of non wholly-owned subsidiary share options Net repayment of loan to non-controlling shareholder Note 30 June 2022 $’000 30 June 2021 $’000 2,945,170 2,482,841 (2,290,122) (1,978,030) 168 (6,322) 1,048 (24,643) (138,071) 487,228 (18,780) (55,987) 3,333 (226,104) 658 49 (500) 50 11,809 1,520 (28,713) (91,316) 398,161 (42,633) (51,130) — 4,470 6,000 — (939) (297,331) (84,232) 817,000 229,960 (760,000) (395,000) (1,565) 56,514 (12,114) (32,709) (45,768) 5,978 (3,897) — — (2,293) — (40,010) — — Dividends paid to non-controlling interest (18,625) (2,675) Dividends paid to shareholders of the Group 4.3 (213,174) (119,378) 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 (208,360) (329,396) (18,463) (15,467) 171,927 153,464 187,394 171,927 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 96 Nine Entertainment Co. Notes to the Consolidated Financial Statements for the year ended 30 June 2022 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 2022. 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 2022 was authorised for issue in accordance with a resolution of the directors on 25th August 2022. The Directors have the power to amend and reissue the financial report. 1.1 Significant events during the period On 15 October 2021, Domain Group, a subsidiary of the Company, acquired 100% of the share capital in the IDS Group. The IDS Group consists of Insight Data Solutions Holdings Pty Ltd, IDS Gov Services Pty Ltd and Insight Data Solutions Pty Ltd. The total estimated consideration for this acquisition is $79.2 million. The on-target and maximum consideration of the acquisition is $135 million and $154 million, all of which is expected to be settled in cash. On 29 April 2022, Domain Group also acquired 100% of the share capital in Realbase Group. The Realbase Group consists of Realbase Pty Ltd and its subsidiaries and equity accounted investments. The total estimated consideration for this acquisition is $173.9 million. The on-target and maximum consideration of the acquisition is $205 million and $230 million, all of which is expected to be settled in cash. Please refer to Note 6.1 for details. 1.2 Basis of preparation This financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has been prepared using the going concern basis of accounting and the historical cost convention, except for derivative financial instruments and investments in listed equities which have been measured at fair value, and investments in joint ventures and associates which have been accounted for using the equity method. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’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 2021 annual report. 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. Annual Report 2022 97 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 1. ABOUT THIS REPORT continued 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 3.4 Trade and other payables Note 3.6 Intangible assets Note 3.7 Provisions Note 6.1 Business combinations 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. 98 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 2. GROUP PERFORMANCE 2.1 Segment Information Segment revenue1 EBITDA before specific items Depreciation and amortisation EBIT before specific items 30 June 2022 $’000 30 June 2021 $’000 30 June 2022 $’000 30 June 2021 $’000 30 June 2022 $’000 30 June 2021 $’000 30 June 2022 $’000 30 June 2021 $’000 Broadcasting 1,371,926 1,242,643 401,109 332,519 (57,331) (56,644) 343,778 275,875 Digital and Publishing 593,535 504,522 179,534 117,189 (43,033) (39,795) 136,501 77,394 Domain Group 356,729 286,587 122,098 100,580 (32,801) (38,636) 89,297 61,944 Stan 381,203 311,761 28,544 39,471 (15,944) (14,009) 12,600 25,462 Segment total 2,703,393 2,345,513 731,285 589,759 (149,109) (149,084) 582,176 440,675 Corporate Associates Total Group 4,751 2,274 (32,345) (26,075) — — 1,793 1,012 — — — — (32,345) (26,075) 1,793 1,012 2,708,144 2,347,787 700,733 564,696 (149,109) (149,084) 551,624 415,612 1. Includes inter-segment revenue of $19,377,000 (2021: $16,309,000). Reconciliation of total Group revenue on the Consolidated Statement of Profit or Loss and Other Comprehensive Income 30 June 2022 $’000 30 June 2021 $’000 Total Group revenue (per above) Inter-segment eliminations Total Group revenue Interest income Specific item income Revenue per the Consolidated Statement of Profit or Loss and Other Comprehensive Income Reconciliation of EBIT before specific items to profit after tax EBIT before specific items Interest income Finance costs Income tax expense Profit before specific items Specific items Income tax benefit on specific items Net profit after income tax expense 2,708,144 2,347,787 (19,377) (16,309) 2,688,767 2,331,478 1,148 1,491 1,506 9,194 2,691,406 2,342,178 Note 30 June 2022 $’000 30 June 2021 $’000 551,624 415,612 1,148 1,506 2.3 (26,302) (29,002) (152,983) (110,586) 373,487 277,530 (76,835) (108,524) 18,636 315,288 14,955 183,961 2.4 2.4 Annual Report 2022 99 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 2. GROUP PERFORMANCE continued 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 (2021: none). Accounting Policy For the financial report for the year ended 30 June 2022, management has 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 2022 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 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. 100 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 2.2 Revenue and other income 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 $’000 Digital and Publishing $’000 Domain Group $’000 Stan $’000 Corporate $’000 Total $’000 Period ended 30 June 2022 Advertising revenue 1,258,154 263,950 287,808 — Subscription revenue Affiliate revenue Circulation revenue Program Sales Other revenue — 214,212 53,047 381,203 76,778 — — 67,642 14,431 — — — — 22,563 47,731 15,874 — — — — — — — — — 1,809,912 648,462 76,778 67,642 14,431 4,751 90,919 Total segment revenue (Note 2.1)1 1,371,926 593,535 356,729 381,203 4,751 2,708,144 1. Includes inter-segment revenue of $19,377,000. Broadcasting $’000 Digital and Publishing $’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 — — 72,215 20,409 — — — — 21,114 37,101 16,302 — — 509 — — — — — — 2,274 1,658,275 460,295 59,293 72,215 20,918 76,791 Total segment revenue (Note 2.1)1 1,242,643 504,522 286,587 311,761 2,274 2,347,787 1. Includes inter-segment revenue of $16,309,000. Accounting 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. Where performance obligations have not been satisfied, the related revenue is deferred until such time that the performance obligations are met (refer to Note 3.4). Amounts disclosed as revenue are net of commissions, rebates, discounts and returns which are recognised when they can be reliably measured. The Group determined that the estimates of variable consideration are not constrained based on its historical experience, business forecasts and the current economic conditions. In addition, the uncertainty on the variable consideration is generally resolved within a short time frame. Annual Report 2022 101 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 2. GROUP PERFORMANCE continued Accounting Policy continued Revenue continued The following specific recognition criteria must also be met before revenue is recognised: Type of sales revenue Recognition Criteria Advertising revenue 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 on the publication date. Affiliate revenue • 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 when it is broadcast or as the program content is distributed. Other revenue includes transactional and non-trading revenue, which is recognised when the services are performed. Type of other income Recognition Criteria Dividends 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). Sublease income Recognised on a straight-line basis over the term of the lease. 102 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 2.3 Expenses Expenses Broadcasting Digital and Publishing Domain Group Stan Other1 Total expenses from continuing operations Included in the expenses above are the following: Depreciation and amortisation (excluding program rights) Salary and employee benefit expenses2 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 2022 $’000 30 June 2021 $’000 1,028,148 1,049,073 458,372 437,399 294,156 236,168 368,603 286,299 67,983 30,636 2,217,262 2,039,575 149,109 755,516 157,425 686,961 580,669 507,608 1,485,294 1,351,994 11,289 14,448 565 12,970 15,321 711 26,302 29,002 1. Includes corporate costs and specific items not allocated to segments, offset by inter-segment revenue of $19.4 million (2021: $16.3 million). 2. During the period, the Group repaid government grants of $6.5 million that were received under the JobKeeper scheme in relation to the financial year ended 30 June 2021. In the year ended 30 June 2021, net government grant income of $8.2 million was received by the Group and disclosed as a reduction of total expenses 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. Annual Report 2022 103 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 2. GROUP PERFORMANCE continued 2.4 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: Net (loss)/gain on contingent consideration payable (Note 3.4) Impairment of other assets Restructuring costs Acquisition related costs Other specific provisions Impairment of goodwill and other intangibles Net profit on sale of investments and assets held for sale Net specific items expense before tax Income tax benefit on specific items Net specific items expense after tax 30 June 2022 $’000 30 June 2021 $’000 (9,018) (28,933) (30,904) (7,980) — — — 1,576 (8,233) (30,518) — (18,694) (61,500) 8,846 (76,835) (108,523) 18,636 14,955 (58,199) (93,568) Net (loss)/gain on contingent consideration payable $7.8 million loss related to an increase in contingent consideration payable recognised in respect of the acquisition of Insight Data Solutions Pty Ltd, a net loss of $1.0 million related to the buy-out of the Drive (formerly ‘CarAdvice’) minority shareholders put option liability, and a $0.2 million loss for the final settlement of the contingent consideration for the acquisition of Bidtracker Holdings Pty Ltd and Real Time Agent Pty Ltd. In the year ended 30 June 2021, the net gain related to an increase in 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), which was offset by the revaluation of contingent consideration payable for Commercialview.com.au Pty Limited Tranches 3A and 3B (expense of $3.0 million). Impairment of other assets The impairment of other assets includes: • $29.4 million of right of use assets relating to surplus property leases and other assets no longer considered recoverable; offset by • $0.5 million reversal of previous debtor write offs. In the year ended 30 June 2021, an impairment of $7.7 million was recognised for program inventory, principally related to the change in FTA license requirements, as well as a $1.7 million impairment related to right of use assets and other assets resulting from the relocation of the Group’s headquarters, offset by a $1.1 million reversal of previous debtor write offs. 104 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory Restructuring costs Restructuring costs include: • $20.8 million related to the implementation of new financial systems, including $8.1 million relating to Domain Group. This expense, in large part, would have been capitalised before the 30 June 2021 required accounting policy change related to configuration or customisation costs in a cloud computing arrangement; • $5.6 million of onerous short-term property leases excess to requirements; • $2.3 million of Domain Group loss on early exit of leased office space; • $2.9 million of other one-off expenses; offset by; • $0.7 million gain resulting from a modification of the Domain Group syndicated loan facility agreement. In the year ended 30 June 2021, $30.5 million of restructuring costs were incurred, $15.2 million of which related to the implementation of new financial systems, including $5.5 million in Domain Group, $11.5 million of redundancy and restructuring costs, $2.3 million of onerous short-term property leases and $1.5 million of other expenses incurred for one-off projects. Acquisition related costs On 15 October 2021, the Domain Group acquired 100% of the shares of Insight Data Solutions Group, and on 29 April 2022, the Domain Group acquired 100% of the shares of RealBase Group. The Group has incurred legal and advisory fees and other costs related to acquisition activity amounting to $8.0 million during the period. Refer to Note 6.1 for further details. Other specific provisions In the year ended 30 June 2021, other specific provisions include onerous production contracts related to future commitments and other provisions related to prior financial periods. Impairment of goodwill and other intangibles In the year ended 30 June 2021, an impairment charge of $61.5 million was recognised in respect of the Nine Radio cash generating unit. Net profit on sale of investments and assets held for sale In the year ended 30 June 2021, the net profit related to the sale of the RateCity ($3.5 million) and RSVP ($1.0 million) investments and the Group’s share of a profit on sale of assets by an associate ($5.0 million), offset by final expenses in respect of the sale of ACM. Annual Report 2022 105 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 2. GROUP PERFORMANCE continued 2.5 Earnings per share From continuing operations (in cents) Basic and diluted earnings per share before specific items1 Basic earnings per share after specific items Diluted earnings per share after specific items1 Profit attributable to the ordinary equity holders of the parent used in calculating the basic and diluted earnings per share ($’000) from continuing operations Weighted average number of ordinary shares used as denominator for basic earnings per share (‘000) Effect of dilution: 30 June 2022 30 June 2021 $0.20 $0.17 $0.17 $0.15 $0.10 $0.10 297,143 169,364 1,703,627 1,704,355 Rights Plan shares under the performance rights plan (Note 4.4) (‘000) 1,797 3,930 Weighted average number of ordinary shares adjusted for the effect of dilution (‘000) 1,705,424 1,708,285 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. 106 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 3. OPERATING ASSETS AND LIABILITIES 3.1 Cash and cash equivalents 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 30 June 2022 $’000 30 June 2021 $’000 153,464 153,464 171,927 171,927 b. Reconciliation of profit after tax to net cash flows from operations: Profit after tax Loss 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 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 315,288 (302) 149,109 29,451 — 9,131 (1,793) (5,283) (28,698) (61,939) 5,228 66,690 (12,094) (4,761) 15,295 10,824 1,082 183,961 (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) Net cash flows from operating activities 487,228 398,161 Annual Report 2022 107 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 3. OPERATING ASSETS AND LIABILITIES continued 3.1.1 Changes in liabilities from financing activities — Bank Facilities At 1 July 2021 Net cash flows Other changes (liability related) At 30 June 2022 At 1 July 2020 Net cash flows Other changes (liability related) At 30 June 2021 Accounting Policy Bank Facilities $’000 421,850 57,000 (943) 477,907 584,316 (165,040) 2,574 421,850 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. 108 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 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 receivables Total non-current trade and other receivables 30 June 2022 $’000 30 June 2021 $’000 387,731 356,853 (7,741) (7,219) 379,990 349,634 4,199 (2,910) 27,101 4,074 (2,910) 30,199 408,380 380,997 4,396 5,717 10,113 4,146 8,327 12,473 The ageing analysis of trade receivables not considered impaired is as follows: Total Not past due <30 days 31-60 days >61 days 379,990 337,495 349,634 323,508 38,138 23,481 3,439 2,135 918 510 PAST DUE BUT NOT IMPAIRED 2022 2021 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. 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 counterparties. The amount of the impairment loss is the receivable carrying amount compared to the present value of estimated future cash flows. Annual Report 2022 109 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 3. OPERATING ASSETS AND LIABILITIES continued 3.3 Program rights and inventories Current Program rights — cost less accumulated amortisation and impairment Inventories Total current program rights and inventories Non-current Program rights — cost less accumulated amortisation and impairment Total non-current program rights and inventories 30 June 2022 $’000 30 June 2021 $’000 278,514 243,732 12,745 12,885 291,259 256,617 168,236 168,236 140,939 140,939 In the year ended 30 June 2021, $7.7 million of program inventory and sports rights were impaired, principally related to the change in FTA license requirements. No impairment was required as at 30 June 2022. 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. Due to the uncertainties in estimating forecast future cash flows, changes in economic and market conditions could result in changes in the carrying value in future periods. 110 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 3.4 Trade and other payables Current — unsecured Trade and other payables Program contract payables Deferred income Contingent consideration (Note 6.1) Total current trade and other payables Non-current — unsecured Program contract payables Other creditors Deferred income Contingent consideration (Note 6.1) Total non-current trade and other payables Accounting Policy 30 June 2022 $’000 30 June 2021 $’000 266,359 248,038 163,693 158,733 76,952 23,101 65,605 2,650 530,105 475,026 111,034 92,489 — 4,476 10,701 2,033 4,013 1,500 126,211 100,035 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. Contingent consideration to be transferred by the acquirer on business combinations is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration are recognised in accordance with AASB 9 Financial Instruments in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. Contingent consideration resulting from business combinations are measured at the fair value of the Group’s best estimate of the expenditure required to settle the present obligation at the reporting date. The determination of these fair values involves judgement around the forecast results of those businesses. Annual Report 2022 111 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 3. OPERATING ASSETS AND LIABILITIES continued Accounting Policy continued Key judgements, estimates and assumptions Contingent consideration from business combinations is valued at fair value on the acquisition date. When the contingent consideration meets the definition of a financial liability, it is remeasured to fair value at each reporting date with revaluations recognised within the Consolidated Statement of Profit or Loss and Other Comprehensive Income. The determination of the fair value is based on discounted cashflows. The key assumptions include the probability and timing of meeting commercial and financial performance targets and the discount factor. Management uses their best estimates of future cash flows and other key assumptions to determine the appropriate fair value of contingent consideration on acquisition and at each subsequent reporting period. Where appropriate, management obtained external expert advice for these key assumptions and continues to seek further advice (where applicable) throughout the measurement period. Given the fair value measurement was performed using significant non-observable inputs, the fair value was classified as a Level 3 measurement, refer to Note 4.5(b)(i). IDS Group Management remeasured the contingent consideration at reporting date based on its best estimates of key assumptions and future developments in business performance of the IDS Group. As a result, the contingent consideration was remeasured to $32.3 million discounted ($36.7 million undiscounted), with the resulting loss being recorded in the Consolidated Statement of Profit or Loss and disclosed as a specific item (refer to Note 2.4). At each reporting period, Management will continue to remeasure the contingent consideration based on the IDS Group securing and delivering specified government contracts over the earn out period ending in June 2027. Realbase Group For the contingent consideration associated with the Realbase Group, at both acquisition and reporting date, Management determined the fair value of the contingent consideration to be nil based on forecast projections of the business. At each reporting period, Management will remeasure the contingent consideration based on the latest forecast financial performance of the business. Due to the uncertainties in estimating fair value of contingent consideration, changes in commercial and financial performance of the businesses could result in changes in the carrying value in future periods. Refer to Note 6.1 for further details. 112 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 3.5 Property, plant and equipment Transfers (19) 3,122 6,885 (10,122) Transfer from assets held for sale 2,039 — — Year ended 30 June 2022 At 1 July 2021, net of accumulated amortisation and impairment Additions Acquisition through business combination (Note 6.1) Disposals Impairment (Note 2.4) Depreciation expense At 30 June 2022, net of accumulated depreciation and impairment Year ended 30 June 2021 At 1 July 2020, net of accumulated amortisation and impairment Additions Transfers Disposals Impairment Freehold land and buildings $’000 Leasehold improve- ments $’000 Plant and equipment $’000 Work in progress $’000 ROU property2 $’000 ROU plant and equipment $’000 Total property, plant and equipment $’000 22,969 87,553 112,458 4,234 341,295 5,427 573,936 967 9,989 7,859 5,050 5,114 28,979 109 269 — 1,588 (244) (2,201) (605) — — — (946) (9,559) (23,896) — — — — — 1,966 — 2,039 (10,707) (29,451) 134 — (7,657) (29,451) — — — — (37,174) (3,697) (75,272) 23,799 79,991 105,100 1,971 273,785 6,844 491,490 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) — — — — — — Depreciation expense (961) (10,544) (26,032) (39,832) (4,047) (81,416) At 30 June 2021, net of accumulated depreciation and impairment 22,969 87,553 112,458 4,234 341,295 5,427 573,936 At 30 June 2022, net of accumulated depreciation and impairment Cost (gross carrying amount) 33,774 138,737 555,008 1,970 428,944 19,922 1,178,355 Accumulated amortisation and impairment (9,975) (58,746) (449,907) — (155,159) (13,078) (686,865) Net carrying amount 23,799 79,991 105,100 1,970 273,785 6,844 491,490 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 1. In the year ended 30 June 2021, work in progress additions and transfers primarily relate to the Group’s new headquarters of 1 Denison Street, North Sydney. 2. Right of use assets include $21.9 million relating to commercial subleases on leased office premises. Fair value of these assets approximates cost. Annual Report 2022 113 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 3. OPERATING ASSETS AND LIABILITIES 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 of the asset. Any gain or loss arising on derecognition 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 finance costs and income tax expense. 114 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory Accounting Policy continued Assets held for sale continued 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. 3.6 Intangible assets Year ended 30 June 2022 At 1 July 2021, net of accumulated amortisation and impairment Purchases Acquisition through business combination (Note 6.1) Disposals Amortisation expense At 30 June 2022, net of accumulated amortisation and impairment Year ended 30 June 2021 At 1 July 2020, net of accumulated amortisation and impairment Goodwill $’000 Licences $’000 Mastheads and Brand Names $’000 Customer relationships $’000 Software1 $’000 Total $’000 888,949 598,471 562,739 134,371 81,911 2,266,441 — 260,078 — — — — — — — 185 — — — — 55,987 55,987 3,504 263,767 (73) (73) (464) (22,149) (51,224) (73,837) 1,149,027 598,471 562,460 112,222 90,105 2,512,285 933,738 615,182 563,118 156,625 84,233 2,352,896 Purchases Impairment2 — — (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 888,949 598,471 562,739 134,371 81,911 2,266,441 1. Capitalised development costs of software being, in part, an internally generated intangible asset. 2. In the year ended 30 June 2021, impairment charges of $44.8 million for goodwill and $16.7 million for licences were recognised in relation to the Radio CGU and were classified as Specific Items — refer to Note 2.4 for details. Annual Report 2022 115 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 3. OPERATING ASSETS AND LIABILITIES continued Goodwill $’000 Licences $’000 Mastheads and Brand Names $’000 Customer relationships $’000 Software1 $’000 Total $’000 At 30 June 2022, net of accumulated amortisation and impairment Cost (gross carrying amount) 2,899,734 1,596,651 564,091 191,760 316,134 5,568,370 Accumulated amortisation and impairment (1,750,707) (998,180) (1,631) (79,538) (226,029) (3,056,085) Net carrying amount 1,149,027 598,471 562,460 112,222 90,105 2,512,285 At 30 June 2021, net of accumulated amortisation and impairment 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 3.6(a) Allocation of non-amortising intangibles and goodwill The Group has allocated intangibles and goodwill to the following cash generating units (“CGUs”): Year ended 30 June 2022 Total TV NBN Stan Domain Metropolitan Media Nine Radio Other1 Goodwill $’000 Licences $’000 Mastheads and Brand Names $’000 — 457,884 3,300 11,000 315,302 704,397 105,052 — — — — 129,587 20,976 — — — 71,452 406,595 84,413 — — Total licences and goodwill as at 30 June 2022 1,149,027 598,471 562,460 Year ended 30 June 2021 Total TV NBN Stan Domain Metropolitan Media Nine Radio Other1 — 457,884 3,300 11,000 315,302 444,319 105,052 — — — — 129,587 20,976 — — — 71,452 406,874 84,413 — — Total licences and goodwill as at 30 June 2021 888,949 598,471 562,739 1. Other goodwill is made up of Nine.com.au $6.7 million (June 2021: $6.7 million) and PedestrianTV $14.3 million (June 2021: $14.3 million). 116 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 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 2022, the Group determined Total TV, 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. The Group performed its annual impairment test in June 2022 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 cashflows 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 2022, there has been continued improvement in the Australian economy, including the majority of the markets in which Nine operates, following the recovery from the impact of the COVID-19 pandemic. As the economy recovers from COVID-19, the ongoing demand for goods and services, as well as supply constraints created by both the pandemic and current world events, has led to inflation in major economies globally. Consequently, managements expectation of the impact of current economic conditions have been incorporated when determining the recoverable amount of CGUs. 3.6(c) Impairment losses recognised As a result of impairment analysis performed at 30 June 2022, there is headroom in the Group’s CGUs and therefore an impairment charge is not required for any of the Group’s CGUs. In the year ended 30 June 2021, an impairment of $61.5 million was recognised in respect to the Nine Radio CGU. 3.6(d) Key assumptions Operating cashflow 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 2022 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. Total TV • 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. Annual Report 2022 117 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 3. OPERATING ASSETS AND LIABILITIES continued • Expenditure is assumed to show low single-digital growth 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 14.91% (30 June 2021: 13.03%) 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 2021: 1.00%). Metropolitan Media: • Revenue is forecast to show slight growth 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 show low single-digital growth 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 14.99% (30 June 2021: 14.30%) 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 2021: 0.0%) consistent with industry forecasts specific to the CGU. Nine Radio: • Revenue is based on assumptions around linear and digital 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 term. • 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 15.40% (30 June 2021: 14.59%) which reflects current market assessment 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% (30 June 2021: 1.5%) 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 14.71% (30 June 2021: 14.04%) 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% (30 June 2021: 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 13.55% (30 June 2021: 13.14%) 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% (30 June 2021: 2.5%) consistent with industry forecasts specific to the CGU. 118 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory NBN: • The advertising market for regional 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. • 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 15.50% (30 June 2021: 14.07%) which reflects current market assessment 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 2021: 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 16.18% (30 June 2021: 15.84%) which reflects current market assessment of the time value of money and the risks specific to the digital display market. • Terminal growth rate of 0.0% (30 June 2021: 0.0%). Pedestrian TV: • The digital advertising market reflects managements expectation of 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 15.65% (30 June 2021: 14.90%) which reflects current market assessment of the time value of money and the risks specific to the digital display market. • Terminal growth rate of 2.0% (30 June 2021: 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. 3.6(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 Total TV 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. Annual Report 2022 119 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 3. OPERATING ASSETS AND LIABILITIES continued • The estimated recoverable amount of the Nine Radio CGU is consistent with carrying value and therefore future events that result in adverse changes to forward assumptions would result in impairment. The following changes to the impairment assessment of this CGU would lead to an impairment charge, assuming all other assumptions are held constant and management does not take any steps to mitigate the impact of the changes, by the following amounts: Assumption ($ million) 2.50% reduction in forecasted revenue growth per annum 1.50% increase in the pre-tax discount rate 1.50% reduction in the terminal growth rates Nine Radio (17.9) (8.5) (6.3) Together any adverse changes in the key assumptions would cumulatively result in an impairment impact. Accounting Policy Goodwill 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. 120 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory Accounting Policy 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. Software-as-a-Service (SaaS) arrangements are arrangements in which the Group does not currently control the underlying software used in the arrangement. Where expenditure relates to SaaS arrangements, an assessment is undertaken to determine if this can be capitalised. 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. 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. Annual Report 2022 121 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 3. OPERATING ASSETS AND LIABILITIES continued 3.7 Provisions At 1 July 2021 Amounts provided/(utilised) during the period At 30 June 2022 Represented by: Current Non-current At 30 June 2022 Employee entitlements $’000 133,897 15,908 149,805 135,567 14,238 149,805 Onerous contracts $’000 16,909 663 17,572 13,067 4,505 17,572 Other1 $’000 59,460 10,336 69,796 67,290 2,506 69,796 Total $’000 210,266 26,907 237,173 215,924 21,249 237,173 1. Included in other provisions are defamation provisions $32.5 million, content and royalties provisions $28.6 million, provisions for property $4.6 million, disposal related provisions $2.7 million and provisions for restructuring $1.4m. (2021: 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). Employee entitlements $’000 106,624 27,273 133,897 Onerous contracts $’000 15,026 1,883 16,909 Other1 $’000 Total $’000 51,849 173,499 7,611 36,767 59,460 210,266 121,442 12,455 5,025 11,884 53,561 5,899 180,028 30,238 133,897 16,909 59,460 210,266 At 1 July 2020 Amounts provided/(utilised) during the period At 30 June 2021 Represented by: Current Non-current At 30 June 2021 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. 122 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory Accounting Policy continued Employee entitlements 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. 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 corporate 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 royalty 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. Annual Report 2022 123 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 3. OPERATING ASSETS AND LIABILITIES continued Accounting Policy continued Key judgements, estimates and assumptions Onerous contract provisions The Group has recognised onerous contract provisions in relation to various content and property lease contracts where the cost exceeds the economic benefit expected to be derived from the contract. Due to the uncertainties in estimating expected future economic benefits, future actual performance may differ from the amounts provided. 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. Due to the uncertainties inherent in estimating such claims and proceedings, the actual costs may differ from the amounts provided. 3.8 Commitments Year ended 30 June 2022 Capital expenditure Lease commitments — Group as lessee Lease commitments — Group as lessor1 <1 year $’000 1-5 years $’000 >5years $’000 Total $’000 3,632 16,748 (8,445) — 47,089 (5,354) — 34,161 3,632 97,998 — (13,799) Television and Subscription Video on Demand program and sporting broadcast rights 343,597 789,151 53,872 1,186,620 Total Commitments 355,532 830,886 88,033 1,274,451 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 >5years $’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. The Group has commercial subleases on office premises and amounts disclosed above represent the future minimum rentals receivable under non- cancellable operating leases. 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. 124 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 3.9 Leases The Group leases various properties, equipment and motor vehicles in Australia. Refer to Note 3.5 for details of right-of-use assets and Note 4.1 for details of lease liabilities held by the Group. Short-term leases and leases of low-value assets The Group applies the short-term and low-value lease exemptions and therefore does not recognise ROU assets or lease liabilities on such leases. Instead, lease payments associated with these leases are recognised as an expense on a straight-line basis over the lease term. The following are the amounts recognised in the Consolidated Statement of Profit or Loss: Depreciation expenses of right-of-use assets Interest expense on lease liabilities Expense relating to short-term leases Expense relating to leases of low-value assets Total amount recognised in profit or loss Future rental payments 30 June 2022 $’000 30 June 2021 $’000 40,871 14,448 16 493 43,879 15,321 16 558 55,828 59,774 Set out below are the undiscounted future rental payments relating to periods following the exercise date of extension and termination options. These amounts are not included in the lease term and would be payable should those options be exercised: Within five years $’000 More than five years $’000 Total $’000 Extension options expected not to be exercised 6,537 475,000 481,537 Termination options expected to be exercised — — — At 30 June 2022 6,537 475,000 481,537 Extension options expected not to be exercised 4,654 476,883 481,537 Termination options expected to be exercised — — — At 30 June 2021 4,654 476,883 481,537 Annual Report 2022 125 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 3. OPERATING ASSETS AND LIABILITIES continued Set out below is the carrying amounts of ROU assets and lease liabilities and the related movements in these balances during the year: Balance at the beginning of the year Additions Disposals/Modifications Transfers Depreciation Impairment Interest expense Lease payments At 30 June 2022 Right-of-Use Assets $’000 Lease Liabilities $’000 346,722 (428,580) 11,752 (7,657) 134 (40,871) (29,451) — — (11,752) 11,824 — — — (14,448) 60,216 280,629 (382,740) 126 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 4. CAPITAL STRUCTURE AND MANAGEMENT 4.1 Financial Liabilities Current Lease liabilities Bank facilities unsecured Total current financial liabilities Non-current Lease liabilities Bank facilities unsecured Total non-current financial liabilities 100% Owned Facilities 30 June 2022 $’000 30 June 2021 $’000 35,360 79,772 115,132 43,897 79,595 123,492 347,380 384,683 398,135 342,255 745,515 726,938 The Group’s wholly-owned subsidiaries are 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 2023, following an extension executed in January 2022. At 30 June 2022, the $80.0 million (30 June 2021: $80.0 million) working capital facility, and $180.0 million (30 June 2021: $170.0 million) of the revolving cash advance facility, relating to the facility expiring in February 2024, was drawn. A $33.3 million bank guarantee facility is also available to the Group’s 100% owned subsidiaries on a rolling annual basis. As of 30 June 2022, $28.6 million was drawn (30 June 2021: $26.6 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 2022. Domain Domain Group is party to a $350.0 million syndicated bank facility which is available to a controlled entity, Domain Holdings Australia Limited (Domain). In December 2021, Domain refinanced this facility (previously: $220.0 million), which now consists of tranches maturing in December 2025 ($210.0 million) and December 2026 ($140.0 million). This refinance was treated as a non-substantial modification under AASB 9 Financial Instruments, with a gain of $0.7 million recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income and disclosed as a specific item (Note 2.4). Annual Report 2022 127 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 4. CAPITAL STRUCTURE AND MANAGEMENT continued The interest rate for drawings under this facility is the applicable bank bill rate plus a credit margin. At 30 June 2022, $215.0 million (30 June 2021: $170.0 million) was drawn on this facility. A $5.0 million bank guarantee facility is also available to Domain on a rolling annual basis. As of 30 June 2022, $3.0 million was drawn (30 June 2021: $1.0 million). Domain is subject to certain customary financial covenants measured on a six monthly basis. Domain has been in compliance with its financial covenant requirements during the year ended 30 June 2022. 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. 4.2 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 30 June 2022 $’000 30 June 2021 $’000 2,111,752 2,122,146 2,111,752 2,122,146 2,122,146 2,123,146 (12,114) 1,720 (2,293) 1,293 2,111,752 2,122,146 30 June 2022 No. of shares 30 June 2021 No. of shares 1,705,393,253 1,705,393,253 — — 1,705,393,253 1,705,393,253 At 30 June 2022, a trust controlled by the Company held 5,209,131 (30 June 2021: 1,605,869) ordinary fully paid shares in the Company. During the period, 4,561,562 shares (2021: 800,000 shares) were acquired by the Trust at an average price of $2.66. The shares were purchased for the purpose of allowing the Group to satisfy performance rights obligations to certain senior management of the Group. 128 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 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. 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 7.0 cents per share, fully franked (amounting to $119,377,528) in respect of the year ended 30 June 2022 and a dividend of 5.5 cents per share, fully franked (amounting to $93,796,629) in respect of the year ended 30 June 2021. 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 7.0 cents per share amounting to $119,377,528 to be paid in October 2022 (2021: fully franked dividend of 5.5 cents per share amounting to $93,796,629). 4.3(c) Franking credits available for subsequent years The franking credits available for subsequent years as at 30 June 2022 was $74,315,049 (2021: $42,999,675). This balance represents the franking account balance as at 30 June 2022. 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 $114,450,012. Nine had an exempting account balance of $41,069,000 for the year ended 30 June 2022 (2021: $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. Annual Report 2022 129 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 4. CAPITAL STRUCTURE AND MANAGEMENT continued 4.4 Share-based payments Under the executive long-term incentive plan for Nine Entertainment Co. Holdings Limited (“parent entity” or “NEC”), performance rights (“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 61 to 83. 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 2022. The total expense (pre tax) recognised for share based payments during the financial period for the Group was $12,044,764 (2021: $10,236,643), of which $7,998,247 (2021: $8,016,217) relates to Domain Group. The share based payments reserve includes amounts relating to on-foot schemes of Domain Group totalling $13.6 million (2021: $17.5 million). 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 year1 Vested Lapsed during the year Outstanding at 30 June2 30 June 2022 Number 30 June 2021 Number 6,614,132 7,699,571 2,328,964 3,290,321 (824,789) (1,929,311) (490,475) (1,133,069) (1,471,460) (1,313,380) 6,156,372 6,614,132 1. These NEC Rights were forfeited by executives that left during the period. 2. This includes 1,291,006 (2021: 1,500,634) 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. 2,102,264 (2021: 1,841,226) of the performance rights have been issued with approval under ASX Listing Rule 10.14. 1,153,871 rights vested subsequent to the period end which were measured based on performance up to 30 June 2022. This includes 496,266 (2021: 159,926) NEC Rights in relation to executives that left in prior years which were cash settled. 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 are modified to settle in cash, the cumulative expense is transferred from the share-based payment reserve to Payables in the Statement of Financial Position. 130 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 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 Annual Report 2022 131 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 4. CAPITAL STRUCTURE AND MANAGEMENT continued The 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 counterparties 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 and 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 values hierarchy has been determined as follows for financial assets and financial liabilities of the Group at 30 June 2022: Level 1: Investment in listed equities (Note 7.1). Level 2: Forward foreign exchange contracts and financial liabilities (Note 4.1). Level 3: Unlisted shares, CGU recoverable amount for Domain (Note 3.6(a)) and contingent consideration (Note 3.4). 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: Derivative financial assets Foreign exchange contracts — current Foreign exchange contracts — non-current Total derivative financial instruments — assets Derivative financial liabilities Foreign exchange contracts — current Option over controlled entity — current Foreign exchange contracts — non-current Total derivative financial instruments — liabilities Bank facilities — current 2022 Carrying Amount $’000 Fair Value $’000 2021 Carrying Amount $’000 Fair Value $’000 Note 3,214 1,333 4,547 1,721 — 406 2,127 3,214 1,333 4,547 1,721 — 406 2,127 — — — — — — — — 2,772 2,772 — — 2,772 2,772 Syndicated facility unsecured — at amortised cost 4.1 79,772 79,772 79,595 79,595 Bank facilities — non-current Syndicated facility unsecured — at amortised cost 4.1 398,135 398,135 342,255 342,255 Total bank facilities 477,907 477,907 421,850 421,850 132 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 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) 2022 2021 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 — inflows Foreign exchange contracts — current 3,214 — Foreign exchange contracts — non-current — 1,333 Derivative — outflows Foreign exchange contracts — current 1,721 Option over controlled entity — current Foreign exchange contracts — non-current — — Other financial assets1 — — — — — — 351 55 — — — — — — — — 2,772 — — — — — — — — — — — — — — — — Cash assets 153,464 — — — 171,927 — — — Trade and other receivables 408,380 3,646 5,406 1,068 380,997 1,366 10,001 1,106 Other financial liabilities1 Trade and other payables 530,105 74,521 44,410 930 470,857 71,255 27,089 191 Lease liabilities 54,113 49,142 134,025 245,665 56,954 55,517 141,077 278,636 Contingent consideration 24,701 — 15,079 — 4,169 1,500 — Bank facilities (including interest)2 94,777 191,017 234,285 — 85,681 291,095 55,375 — — 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 2022 remains drawn until the facilities mature. Annual Report 2022 133 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 4. CAPITAL STRUCTURE AND MANAGEMENT continued Interest 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: 2022 2021 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 0.43 153,464 — 153,464 0.59 171,927 — 171,927 Trade and other receivables N/A N/A 418,493 418,493 N/A N/A 393,470 393,470 Financial liabilities Trade and other payables N/A N/A 656,316 656,316 N/A N/A 588,955 588,955 Lease liabilities 3.88 382,740 — 382,740 3.66 428,580 — 428,580 Syndicated facilities — at amortised cost 3.27 477,907 — 477,907 1.42 421,850 — 421,850 Interest rate sensitivity analysis The following table demonstrates the sensitivity to a reasonable possible change in interest rates on that portion of loans and borrowings affected, after the impact of hedge accounting. Assuming the closing debt outstanding, with all other variables held constant, the Group’s profit before tax is affected through the impact on floating rate borrowings as follows: Effect on profit before tax Increase/decrease in basis points 2022 $’000 2021 $’000 +/-100 +/-200 (4,800)/4,800 (3,910)/3,910 (9,600)/9,600 (7,820)/7,820 AUD AUD 134 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 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. 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 contractual payments for program rights in USD and EUR, and contractual receipts in USD. These transactions are highly probable. The Group manages this foreign currency risk by entering into forward foreign exchange contracts. The foreign exchange forward contracts are designated as cash flow hedges and are entered into for periods consistent with the foreign currency exposure of the underlying transactions. The foreign exchange forward contract balances vary with the level of expected foreign currency receipts and payments, and changes in foreign exchange forward rates. Effects of hedge accounting The table below summarises the hedging instruments used to manage market risk: Current assets Foreign exchange contracts Non-current assets Foreign exchange contracts Total derivative financial instrument assets Current liabilities Foreign exchange contracts Non-current liabilities Foreign exchange contracts Total derivative financial instrument liabilities 30 June 2022 $’000 30 June 2021 $’000 3,214 1,333 4,547 1,721 406 2,127 — — — — — — Annual Report 2022 135 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 4. CAPITAL STRUCTURE AND MANAGEMENT continued The following table summarises the impact of hedging instruments designated in hedging relationships on the consolidated Statement of Financial Position: $'000 Cash flow hedges Foreign exchange risk Forward contracts (buy USD) Forward contracts (sell USD) Forward contracts (buy EUR) Notional amount Carrying amount assets/ (liabilities) Changes in fair value used for measuring ineffectiveness for the year 2022 2021 2022 2021 2022 2021 US$39,814 US$36,458 €742 — — — 4,547 (2,112) (16) — — — — — — — — — The following table summarises the impact of hedged items designated in cash flow hedging relationships on the consolidated Statement of Financial Position and the effect of the hedge relationships on other comprehensive income: Cash flow hedge reserve Changes in fair value used for measuring ineffectiveness for the year Hedged gain/(loss) recognised in comprehensive income 2022 2021 2022 2021 2022 2021 1,693 — — — 1,693 — $'000 Cash flow hedges Foreign exchange risk Forward contracts 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. 136 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 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. Derivative financial instruments are recognised initially at fair value on the date the instrument is entered into and are subsequently remeasured at fair value or ‘mark to market’ at each reporting date. The gain or loss on remeasurement is recognised immediately in profit or loss unless the derivative is designated as a hedging instrument, in which case the remeasurement is recognised in equity. 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. At inception of the hedge relationship, the Group formally designates the relationship between hedging instruments and hedged items, as well as its risk management objective for undertaking various hedge transactions. The Group also documents its assessment at hedge inception date, and on an ongoing basis, as to whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items. The Group enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item and a qualitative assessment is performed to assess effectiveness. If changes in circumstances affect the terms of the hedged item, such as the terms no longer match exactly with the critical terms of the hedged instrument, a hypothetical derivative method is used to assess effectiveness. Cash flow hedge A derivative or financial instrument hedging the exposure to variability in cash flow attributable to a particular risk associated with an asset, liability or forecasted transaction. A cash flow hedge is used to swap variable interest rate payments to fixed interest rate payments, or to lock in foreign currency rates in order to manage the Group’s exposure to interest rate risk and foreign exchange risk. The effective part of any gain or loss on the derivative financial instrument is recognised in other comprehensive income and accumulated in equity in the cash flow hedge reserve. The change in the fair value that is identified as ineffective is recognised immediately in profit or loss within other income or other expense. Amounts accumulated in equity are transferred to profit or loss when the hedged item affects profit or loss. When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to profit or loss. For derivatives that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are taken. Annual Report 2022 137 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 5. TAXATION 5.1 Income tax expense Current tax expense 30 June 2022 $’000 30 June 2021 $’000 126,641 137,384 Deferred tax expense/(benefit) relating to the origination and reversal of temporary differences 7,706 Income tax expense 134,347 (41,753) 95,631 Reconciliation of tax expense to prima facie tax payable Profit from operations Prima facie income tax 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 Impairments, write down of investments and revaluation of derivative financial instruments 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: 449,635 279,592 134,891 83,878 (538) 2,961 — (1,752) (1,500) 285 (304) (353) 18,453 (1,795) (3,961) (287) 134,347 95,631 Consolidated statement of financial position Consolidated statement of profit or loss and other comprehensive income 30 June 2022 $’000 30 June 2021 $’000 30 June 2022 $’000 30 June 2021 $’000 Employee benefits provision Other provisions and accruals Property, plant and equipment Intangible assets Tax losses Business related costs deductible over five years 37,178 43,510 10,184 33,311 45,188 11,916 (381,946) (389,604) 24,792 15,507 44,179 16,119 Accelerated depreciation — program stock (47,000) (48,108) Leases AASB 16 Other 32,246 (2,335) 23,931 6,066 Net deferred income tax liabilities (267,864) (257,002) 3,867 (1,678) (1,732) 7,658 2,938 13,812 7,860 14,249 (19,388) (20,322) (611) 1,109 8,315 (8,402) (10,862)1 6,551 2,675 12,471 1,505 41,7391 1. Consists of $7,706,000 of deferred tax expense to the Consolidated Statement of Profit or Loss and $3,156,000 of deferred tax expense through equity reserves, mainly consisting of a share based payment reserve deferred tax expense of $2,913,000 and cash flow hedge reserve expense of $726,000, offset by a defined benefit plan deferred tax benefit of $483,000. 30 June 2021: 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. 138 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 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. Annual Report 2022 139 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 5. TAXATION continued Tax consolidation Nine Entertainment Co. Holdings Limited (the “Company” or “Parent Entity”) and its 100% owned Australian subsidiaries (collectively, the “Group”) 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 Entertainment Co. Holdings Limited. The Company 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. 140 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 6. GROUP STRUCTURE 6.1 Business combinations Acquisitions for the year ended 30 June 2022 The Domain Group has gained control of the following entities and businesses during the year: Entity or business acquired Principal activity Date of acquisition Ownership interest as at 30 June 2022 Insight Data Solutions and its subsidiaries (IDS Group) Provision of land and property valuation and insights and analytics services to governments and financial institutions. 15 October 2021 100% Realbase Pty Ltd, its subsidiaries and equity accounted investments (Realbase Group) Campaign management technology platform in Australia and New Zealand, providing services to real estate agents in relation to property transactions 29 April 2022 100% Assets acquired and liabilities assumed The provisionally determined fair values of the identifiable assets and liabilities acquired are detailed below, with their measurement to be finalised within one year from the date of acquisition. Provisional Fair Value on Acquisition Current Assets Cash Trade and other receivables Total current assets Non-current Assets Right-of-use asset Investments accounted for using the equity method Intangible assets Property, plant and equipment Leasehold improvements Deferred tax assets Total non-current assets Total assets IDS Group $’000 Realbase Group $’000 622 37 659 — — 3,379 21 — 358 3,758 4,417 1,937 5,113 7,050 1,588 300 310 244 109 1,174 3,725 10,775 Annual Report 2022 141 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 6. GROUP STRUCTURE continued Provisional Fair Value on Acquisition Current liabilities Trade and other payables Current tax liabilities Provisions Lease liabilities Total current liabilities Non-current liabilities Provisions Lease liabilities Deferred tax liabilities Total non-current liabilities Total liabilities Total identifiable net liabilities at fair value Goodwill arising on acquisition IDS Group $’000 Realbase Group $’000 5,980 10,700 — 496 — 966 1,016 281 6,476 12,963 — — 1,048 1,048 7,524 (3,107) 225 1,370 — 1,595 14,558 (3,783) 82,352 177,726 Total identifiable net liabilities and goodwill attributable to the Domain Group 79,245 173,943 IDS Group $’000 Realbase Group $’000 54,720 173,943 24,525 79,245 — 173,943 IDS Group $’000 Realbase Group $’000 (54,720) (173,943) 622 1,937 (54,098) (172,006) Purchase consideration Cash paid Contingent consideration at acquisition Total purchase consideration Net cash outflow on acquisition Cash paid Cash acquired Net cash outflow 142 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory Acquisition of Insight Data Solutions Group On 15 October 2021, Property Data Solutions (2) Pty Ltd, a wholly-owned subsidiary of the Domain Group, acquired 100% of the share capital in Insight Data Solutions Holdings Pty Ltd and its subsidiaries (IDS Group). The acquisition marks another step forward in executing on Domain’s marketplace strategy to expand its addressable market beyond Agents and Consumers to financial institutions and Government. The acquisition of IDS Group establishes Domain as a market leading provider of land and property valuation, insights and analytics services into the Government sector, and significantly expands the size of the Property Data Solutions pillar of Domain’s marketplace strategy. Goodwill of $82.4 million was recognised at the time of acquisition. This goodwill comprises expected synergies arising from the acquisition. None of the goodwill recognised is expected to be deductible for income tax purposes. The consideration of the acquisition comprises an upfront cash payment and multiple tranches that are contingent on the future financial and commercial performance of the IDS Group, relating to securing and delivering services under new customer contracts over the performance period ending in June 2027. The first tranche cash payment of $54.7 million was settled on 15 October 2021. Other tranches are due to be settled during the performance period between completion and June 2027. The on-target and maximum consideration for the transaction, including the undiscounted contingent consideration, is $134.7 million and $153.7 million respectively. The range of potential outcomes, undiscounted, is $54.7 million to $153.7 million. The expectation at acquisition is that it will be cash settled, however, the purchase agreement allows for this consideration to be settled in cash and/or equity at Domain’s discretion. As at the acquisition date, the discounted fair value of the contingent consideration was estimated to be $24.5 million. The fair value of the contingent consideration determined at the date of acquisition reflects the probabilities of securing certain new government contracts and achieving budgeted financial targets. Subsequent to the acquisition date, these assumptions have been revised as a result of change in facts and circumstances post acquisition, resulting in the remeasurement of the contingent consideration to $32.3 million, constituting a loss of $7.8 million recognised through the Consolidated Statement of Profit or Loss and Comprehensive Income as disclosed in Note 2.4. The contingent consideration is recognised as a financial liability on the Statement of Financial Position and is measured at fair value through the Consolidated Statement of Profit or Loss and Comprehensive Income. The contingent consideration is accounted for in accordance with AASB 9 Financial Instruments and disclosed as a financial liability as the amount to be paid is variable, based upon the post-acquisition financial and commercial performance of the IDS Group. 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. Costs incurred in relation to the acquisition amounted to $1.6 million as disclosed in Note 2.4. Annual Report 2022 143 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 6. GROUP STRUCTURE continued Acquisition of Realbase Group On 29 April 2022, Australian Property Monitors Pty Ltd, a wholly-owned subsidiary of the Domain Group, acquired 100% of the share capital in Realbase Pty Ltd and its subsidiaries (Realbase Group). The acquisition marks another step forward in the evolution of Domain’s Marketplace strategy. The acquisition of the Realbase Group is highly strategic, meaningfully accelerating the scale and impact of Domain’s Agent Solutions business unit, with complementary offerings that create a holistic end-to-end solution for real estate agents. Goodwill of $177.7 million was recognised at the time of acquisition. This goodwill comprises expected synergies arising from the acquisition. None of the goodwill recognised is expected to be deductible for income tax purposes. The consideration for the acquisition comprises an upfront cash payment and multiple tranches that are contingent upon the future financial performance of the Realbase Group, specifically the achievement of stretch financial performance targets based on a mix or revenue and EBITDA metrics over a three-year period of financial years ending 30 June 2024 to 30 June 2026. As at the acquisition date and 30 June 2022, Management determined the fair value of the contingent consideration to be nil based on forecast projections of the business. The first tranche cash payment of $173.9 million was settled on 29 April 2022. The on-target and maximum consideration for the transaction is $205.0 million and $230.0 million respectively. The range of potential outcomes, undiscounted, is $173.9 million to $230.0 million. The expectation at acquisition is that any contingent consideration payable will be cash settled, however, the purchase agreement allows for this to be settled in cash and/or equity at Domain’s discretion. The contingent consideration is recognised as a financial liability on the Statement of Financial Position and is measured at fair value through the Consolidated Statement of Profit or Loss and Comprehensive Income. The contingent consideration is accounted for in accordance with AASB 9 Financial Instruments and disclosed as a financial liability as the amount to be paid is variable, based upon the post-acquisition financial and commercial performance of the Realbase Group. 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. Total transaction and share issuance costs incurred in relation to the acquisition of the Realbase Group amounted to $4.9 million. This includes share issuance costs amounting to $2.4 million which was recognised by Domain Group as a reduction to Domain’s share capital, however was expensed in the Group financial statements as disclosed in Note 2.4. Acquisitions for the year ended 30 June 2021 There were no acquisitions for the year ended 30 June 2021. Disposals There were no disposals for the year ended 30 June 2022 (30 June 2021: none). 144 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 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 by the parent 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. Key judgements, estimates and assumptions The Group has recognised the provisional fair values of identifiable assets and liabilities acquired, including goodwill, at values based on information available to management as at balance date. These provisional values have been applied as the initial accounting for the business combinations are incomplete as at the end of the reporting period. The provisional values may be adjusted during the measurement period (up to one year following acquisition) to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date. Therefore, the finalisation of the purchase price allocation exercise may result in a change to the value of identified assets and liabilities recorded as at balance date. Contingent consideration to be transferred by the acquirer on business combinations is recognised at fair value of the Group’s best estimate of the expenditure required to settle the present obligation at the acquisition date. Subsequent changes to the fair value of the contingent consideration are recognised in accordance with AASB 9 Financial Instruments in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. The determination of these fair values involves judgement around the forecast results of those businesses. Refer to Note 3.4 for further details. Annual Report 2022 145 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 6. GROUP STRUCTURE continued 6.2 Investments accounted for using the equity method 6.2(a) Investments at equity accounted amount: Associated entities — unlisted shares 6.2(b) Investments in Associates and Joint Ventures 30 June 2022 $’000 30 June 2021 $’000 33,606 31,181 Interests in associates and joint ventures are accounted for using the equity method of accounting. Information relating to associates and joint ventures is set out below: Principal Activity Country of Incorporation % Interest1 30 June 2022 30 June 2021 Adventure TV Channel Pty Ltd 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 Combined Translator Facilities Pty Ltd Television transmission Intrepica Pty Ltd Ibenta Pty Ltd3 Online learning service Real estate marketing and management solutions NPC Media Pty Ltd Television playout services Australia Australia Australia Australia Australia Australia Australia Australia Australia Oztam Pty Ltd Television audience measurement Australia The Premium Content Alliance Media research and promotion TX Australia Pty Ltd Television transmission Digital Radio Broadcasting Sydney Pty Ltd Digital Radio Broadcasting Melbourne Pty Ltd Digital Radio Broadcasting Brisbane Pty Ltd Digital Radio Broadcasting Perth Pty Ltd Mediality Pty Ltd Oneflare Pty Ltd2 Skoolbo Pte Ltd Digital audio broadcasting Digital audio broadcasting Digital audio broadcasting Digital audio broadcasting Australia Australia Australia Australia Australia Australia Newsagency & information service Australia Home services marketplace Online learning service Australia Singapore 1. The proportion of ownership is equal to the proportion of voting power held, except where stated. 2. This entity was disposed on 29 March 2022. 3. Acquired on 29 April 2022 as part of the acquisition of Realbase Group. Refer to Note 6.1 146 Nine Entertainment Co. 50 20 50 50 50 25 15 24 50 33 25 50 12 18 25 17 47 — 19 50 20 50 50 50 25 15 — 50 33 25 50 12 18 25 17 47 21 19 Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 6.2(c) Carrying amount of investments in associates and joint ventures Balance at the beginning of the financial year Funding to associates and joint ventures Acquired during the year Disposals Share of associates’ net profit for the year1 Dividends received or receivable Carrying amount of investments in associates and joint ventures at the end of the financial year 30 June 2022 $’000 30 June 2021 $’000 31,181 25,766 500 300 — 1,793 (168) 939 — (1,465) 5,991 (50) 33,606 31,181 1. In the year ended 30 June 2021, the share of associates net profit for the year 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 The following table illustrates the Group’s aggregate share of net profit after income tax from associates and joint ventures. Net profit after income tax 30 June 2022 $’000 30 June 2021 $’000 1,793 5,991 The Group’s current year share of losses of associates and joint ventures not recognised is nil (2021: $nil). The Group’s cumulative share of losses of associates and joint ventures not recognised is nil (2021: $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 (2021: $nil). 30 June 2022 $’000 30 June 2021 $’000 20,563 26,838 47,401 11,431 7,270 18,701 15,839 28,635 44,474 12,104 10,503 22,607 Annual Report 2022 147 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 6. GROUP STRUCTURE continued Accounting 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. 148 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 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 June 2022 % June 2021 % Ownership interest Nine Entertainment Co. Holdings Ltd 112 Pty Ltd2 Channel 9 Australia Inc Channel 9 South Australia Pty Ltd CarAdvice.com Pty Ltd2 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 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 Television & Radio Broadcasters Pty Ltd TCN Channel Nine Pty Ltd A, B A A, B A 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 A, B A, B Australia Australia USA Australia Australia Australia Australia New Zealand Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Parent Entity Parent Entity 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 88 100 100 88 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Annual Report 2022 149 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 6. GROUP STRUCTURE continued 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 Campaigntrack Limited4 Campaigntrack Pty Ltd4 Campaigntrack Print Pty Ltd 1, 4 Commercial Real Estate Holdings Pty Ltd Commercial Real Estate Media Pty Limited1 Commercialview.com.au Ltd1 CT Content House Pty Ltd 1, 4 CT Signs Pty Ltd 1, 4 David Syme & Co Pty Limited A, B Digital Home Loans Pty Limited 1 Domain Group Finance Pty Limited Domain Holdings Australia Limited Domain Insure Pty Ltd 1 Domain Operations Pty Limited Fairfax Corporation Pty Limited Fairfax Digital Australia & New Zealand Pty Limited Fairfax Digital Pty Limited Fairfax Entertainment Pty Limited Fairfax Event Sub Pty Ltd Fairfax Media Limited Fairfax Media Events Pty Ltd 150 Nine Entertainment Co. A, B A, B A, B A, B B A, B A, B Footnote Place of incorporation June 2022 % June 2021 % Ownership interest 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 New Zealand Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100 100 100 100 60 60 60 100 100 100 60 60 100 100 60 60 30 60 40 40 30 30 100 36 60 60 42 60 100 100 100 100 100 100 100 100 100 100 100 59 59 59 100 100 100 59 59 100 100 — — — 59 40 40 — — 100 36 59 59 41 59 100 100 100 100 100 100 100 Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory Footnote Place of incorporation June 2022 % June 2021 % Ownership interest A, B A, B A, B A, B A, B A, B A, B A, B A, B B A, B A, B 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 Homepass Pty Ltd Insight Data Solutions Holdings Pty Ltd3 Insight Data Solutions Pty Ltd 3 IDS Gov Services Pty Ltd 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 1 MMP Community Network Pty Ltd MMP (DVH) Pty Ltd 1 MMP (Melbourne Times) Pty Ltd 1 MMP Bayside Pty Ltd 1 MMP Eastern Pty Ltd 1 MMP Greater Geelong Pty Ltd 1 MMP Holdings Pty Ltd MMP Moonee Valley Pty Ltd 1 National Real Estate Media Pty Limited National Real Estate Nominees Pty Ltd New South Wales Real Estate Media Pty Limited 1 Northern Territory Real Estate Media Pty Ltd 1 Property Data Solutions Pty Ltd Property Data Solutions (2) Pty Ltd 3 Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100 100 100 100 100 100 60 60 60 60 60 100 100 100 100 100 100 100 56 60 36 60 38 42 47 42 29 60 42 60 60 30 30 60 60 100 100 100 100 100 100 59 59 — — — 100 100 100 100 100 100 100 55 59 35 59 37 41 46 41 28 59 41 59 59 30 30 59 — Annual Report 2022 151 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 6. GROUP STRUCTURE continued Queensland Real Estate Media Pty Ltd 1 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 Realbase Pty Ltd 4 Realhub Systems Pty Ltd 4 Realhub Services Pty Ltd 4 Realhub Studios Pty Ltd 4 Realbase Inc 4 Real Growth Solutions Limited 1, 4 Review Property Pty Ltd South Australia Real Estate Media Pty Ltd 1 Tasmania Real Estate Media Pty Ltd 1 Footnote Place of incorporation June 2022 % June 2021 % Ownership interest A, B A, B A, B A, B A, B A, B Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Philippines New Zealand Australia Australia Australia Australia Australia 30 100 100 100 100 100 100 60 60 60 60 60 30 60 30 30 100 30 30 100 100 100 100 100 100 — — — — — — 59 30 30 100 30 The Age Company Pty Limited A, B Western Australia Real Estate Media Pty Ltd 1 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. This represents the Group’s effective interest in the entity which is partially owned (yet controlled) by a non-wholly owned subsidiary. 2. On 16 August 2021, the Group acquired the remaining 12% of shares in CarAdvice.com Pty Ltd and its wholly-owned subsidiary 112 Pty Ltd. On 6 October 2021, both Caradvice.com Pty Ltd and 112 Pty Ltd became parties to the Deed of Cross Guarantee. 3. On 15 October 2021, Domain Group acquired all shares in Insight Data Solutions business. Refer to Note 6.1 for details. 4. On 29 April 2022, Domain Group acquired all shares in Realbase Pty Ltd. Refer to Note 6.1 for details. 152 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory Accounting Policy Basis of consolidation The consolidated financial statements comprise the financial statements of the parent entity and its subsidiaries as at 30 June 2022. 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 Statement of 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 2022 is as follows: Closed Group1 Extended Closed Group2 2022 $’000 2021 $’000 2022 $’000 2021 $’000 Consolidated Statement of Profit or Loss and Other Comprehensive Income Profit before income tax Income tax expense 386,470 224,956 385,322 224,956 (106,983) (80,402) (106,404) (80,402) Net profit after income tax from operations 279,487 144,554 278,918 144,554 Dividends paid during the period (213,174) (119,378) (213,174) (119,378) Adjustment for Entities which joined the closed Group during the year (21,069) (25,570) Adjustments to reserves 281 54 — 281 — 54 Accumulated profits at the beginning of the financial year (205,871) (205,531) (205,871) (231,101) Accumulated profits at the end of the financial year (160,346) (205,871) (139,846) (205,871) 1. Closed Group are those entities party to the Deed of Cross Guarantee. Refer to Note 6.3 for details. 2. 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”. Refer to Note 6.3 for details. Annual Report 2022 153 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 6. GROUP STRUCTURE continued On 6 October 2021, both Caradvice.com Pty Ltd and 112 Pty Ltd became parties to the Deed of Cross Guarantee. 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 2022 is as follows: Closed Group1 Extended Closed Group2 2022 $’000 2021 $’000 2022 $’000 2021 $’000 81,184 338,087 291,259 — 3,214 34,510 748,254 70,949 322,192 256,617 3,622 — 34,679 688,059 79,816 334,605 291,259 — 3,214 34,390 743,284 70,949 322,192 256,617 3,622 — 34,679 688,059 9,856 168,236 8,021 140,939 9,856 168,236 8,021 140,939 33,307 31,181 33,307 31,181 780,375 6,511 462,049 1,263,170 1,333 23,925 832,528 6,690 529,492 1,274,733 — 29,683 835,424 6,511 461,662 1,259,031 1,333 23,925 835,424 6,690 529,492 1,274,733 — 29,683 2,748,762 2,853,267 2,799,285 2,856,163 3,497,016 3,541,326 3,542,569 3,544,222 441,033 108,767 38,350 204,873 1,721 794,744 111,364 507,413 200,074 406 16,887 836,144 1,630,888 1,866,128 428,158 112,412 47,499 158,824 2,772 749,665 88,503 520,172 195,921 — 26,496 831,092 1,580,757 1,960,569 439,125 108,614 38,339 204,314 1,721 792,113 104,889 507,413 200,312 406 16,838 829,858 1,621,971 1,920,598 428,158 112,412 47,499 158,824 2,772 749,665 89,923 520,172 195,921 — 26,496 832,512 1,582,177 1,962,045 Current assets Cash and cash equivalents Trade and other receivables Program rights and inventories Property, plant and equipment held for sale Derivative financial instruments 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 Derivative financial instruments Other assets Total non-current assets Total assets Current liabilities Trade and other payables Financial liabilities Income tax liabilities Provisions Derivative financial instruments Total current liabilities Non-current liabilities Payables Financial liabilities Deferred tax liabilities Derivative financial instruments Provisions Total non-current liabilities Total liabilities Net assets 1. Closed Group are those entities party to the Deed of Cross Guarantee. 2. Refer to Note 6.3 for details. 154 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 6.5 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 Net profit for the year Total comprehensive income for the year Parent entity 2022 $’000 2021 $’000 89,523 77,168 2,367,588 2,389,395 2,457,111 2,466,563 948 1,078 653,036 684,507 653,984 685,585 1,803,127 1,780,978 2,134,803 2,134,803 8,631 6,703 (340,307) (360,528) 1,803,127 1,780,978 233,114 233,114 13,560 13,560 Annual Report 2022 155 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 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. 2022 $’000 2021 $’000 Rendering of services to and other revenue from: Associates of Nine Entertainment Co: Future Women Pty Ltd Adventure TV Channel Pty Ltd 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 Broadcasting Sydney Pty Ltd Combined Translator Facilities Pty Ltd Amounts owed by related parties: Adventure TV Channel Pty Ltd NPC Media Pty Ltd 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:1 Darwin Digital Television Pty Ltd NPC Media Pty Ltd Other 1. The loans granted to these related parties are non-interest bearing. 156 Nine Entertainment Co. 9 7,816 — 77 1 218 90 78 839 43 268 132 7 7,716 — 345 3,285 4,000 21 9 6,034 6 74 7 671 — 50 820 95 112 118 18 6,521 402 241 3,035 4,000 21 Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory Terms 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 2022, the Group has not made any additional allowance for expected credit losses. There is an allowance relating to amounts owed by related parties of $2.9 million (2021: $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 2022 $’000 2021 $’000 6,176,123 6,258,379 — 2,856,656 140,610 999,628 133,054 1,103,135 1,367,359 2,711,201 8,683,720 13,062,425 The table includes current and former key management personnel. Detailed remuneration disclosures are provided in the Remuneration Report on pages 61 to 83. Annual Report 2022 157 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 7. OTHER 7.1 Other financial assets Non-current Investments in listed entities Closing balance at 30 June 2022 $’000 6,511 6,511 2021 $’000 6,690 6,690 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 Statement of Profit and Loss. Non-current As at 1 July Movement in fair value Closing balance at 30 June 2022 $’000 6,690 (179) 6,511 2021 $’000 5,460 1,230 6,690 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 loss of $179,000 adjusted against the investment for the year ended 30 June 2022 (2021: $1,230,000 gain). Accounting Policy Certain of the Group’s investments are categorised as investments in listed equities and designated at fair value through other comprehensive income, 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. 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. 158 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory Accounting Policy continued 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. 7.2 Defined benefit plan Non-current Defined benefits plan1 Closing balance at 30 June 2022 $’000 2021 $’000 23,925 23,925 25,533 25,533 1. 30 June 2022 balance consists of Nine Network Superannuation Plan (2022: $21,521,000; 2021: $22,915,000), Fairfax Media Super defined benefit plan (2022: $2,058,000; 2021: $2,258,000) and Nine Radio Pty Ltd Super defined benefit plan (2022: $346,000; 2021: $360,000). Plan information Defined benefit members receive lump sum benefits on retirement, death, disablement and withdrawal. The defined benefit sections of the Plans are 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 Plans’ 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. Annual Report 2022 159 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 7. OTHER continued 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 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 2022 were performed by Mercer Investment Nominees Limited for the purpose of satisfying accounting requirements. The details of the plan disclosed throughout Note 7.2 relate 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. 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 losses/(gains) arising from changes in financial assumptions Actuarial (gains)/losses arising from liability experience Employer contributions 30 June 2022 $’000 30 June 2021 $’000 22,915 12,594 (671) 276 (3,338) 3,851 (1,533) 21 (782) 176 9,445 (398) 1,861 19 Net defined benefit asset at end of year 21,521 22,915 160 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 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 30 June 2022 $’000 30 June 2021 $’000 60,520 780 (3,338) 21 623 (3,441) (141) 52,498 791 9,445 19 703 (2,865) (71) Fair value of planned assets at end of year 55,024 60,520 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 (gains)/losses arising from changes in financial assumptions Actuarial losses/(gain) arising from liability experience Benefits paid Taxes, premiums and expenses paid 30 June 2022 $’000 30 June 2021 $’000 37,605 39,904 671 504 623 (3,851) 1,533 (3,441) (141) 782 615 703 398 (1,861) (2,865) (71) Present value of defined benefit obligations at end of year 33,503 37,605 The defined benefit obligation consists entirely of amounts from Plans that are wholly or partly funded. Fair value of Plan assets As at 30 June 2022, total Plan assets of $55,024,000 (2021: $60,520,000) are held in AMP Future Directions Balanced investment option. These assets are fair valued using Level 2 inputs. The percentage invested in each asset class at the reporting date is: As at Australian Equity International Equity Fixed Income Property Alternatives/Other Cash 1. Asset allocation as at 31 May 2022. 30 June 20221 % 30 June 2021 % 24% 31% 21% 12% 9% 3% 24% 31% 21% 11% 9% 4% Annual Report 2022 161 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 7. OTHER continued The fair value of Plan assets includes no amounts relating to: • any of the Company’s own financial instruments; or • any property occupied by, or other assets used by, the Company. Significant Actuarial Assumptions As at Assumptions to Determine Benefit Cost Discount rate Expected salary increase rate Assumptions to Determine Benefit Obligation Discount rate Expected salary increase rate Sensitivity Analysis 30 June 2022 30 June 2021 1.4% pa 2.0% pa 1.6% pa 2.0% pa 4.9% pa 1.4% pa 3.5% pa in the first year and then 2.5% pa 2.0% pa The defined benefit obligation as at 30 June 2022 under several scenarios is presented below: Scenarios A and B relate to discount rate sensitivity. Scenarios C and D relate to salary increase rate sensitivity. • Scenario A: 0.5% pa lower discount rate assumption. • Scenario B: 0.5% pa higher discount rate assumption. • Scenario C: 0.5% pa lower salary increase rate assumption. • Scenario D: 0.5% pa higher salary increase rate assumption. % pa Discount rate Salary increase rate 1 Defined benefit obligation ($’000s) 2 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 4.4% pa 5.4% pa 4.9% pa 2.5% pa 2.5% pa 2.0% pa 4.9% pa 3.0% pa 34,066 32,970 33,142 33,877 Base case 4.9% pa 2.5% pa 33,503 1. First year salary increase is 3.5% and moves in line with the long term assumption in Scenarios C and D. 2. 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. Asset-liability matching strategies No asset and liability matching strategies have been adopted by the Plan. 162 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory Funding arrangements The financing objective adopted at the 1 July 2021 actuarial investigation of the Plan, in a report dated 21 December 2021, 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) may be financed from Defined Benefit Assets from 1 April 2022 to 31 March 2023 (or starting at a date as agreed between the Trustee and the Employer). During the year to 30 June 2022, contributions of $nil (2021: $nil (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 2023 — Maturity profile of defined benefit obligation The weighted average duration of the defined benefit obligation as at 30 June 2022 is five years (30 June 2021: five years). Expected benefit payments for the financial year ending on: 30 June 23 30 June 24 30 June 25 30 June 26 30 June 27 Following five years $’000 5,171 4,217 4,926 8,600 5,349 4,065 Annual Report 2022 163 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2022 7. OTHER continued Accounting 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): 2022 $ 2021 $ Fees for auditing the statutory financial report of the parent covering the group and auditing the statutory financial reports of any controlled entities1 2,592,901 2,494,022 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 104,375 63,460 136,335 303,145 2,833,611 2,860,627 1. Comprised of the audit and review of the wholly-owned group ($1,603,100) and the audit and review of Domain Group ($989,801). (2021: wholly-owned group ($1,527,500) and the audit and review of Domain Group ($966,522)). 164 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory 7.4 Contingent liabilities and related matters The consolidated entity has made certain guarantees regarding contractual leases, performance and other commitments of $31,598,202 (2021: $27,577,141). 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, including defamation claims, 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. 7.5 Events after the balance sheet date Subsequent to the year end, as disclosed in Note 4.3(b), the Company has proposed a dividend in respect of the year ended 30 June 2022 of 7.0 cents per share, fully franked, amounting to $119,377,528. The Group has also announced an on-market buyback of up to 10 percent of the Group’s current issued share capital, to commence from September 2022. Other than described above, there has not arisen in the interval between the end of the financial period and the date of this report any 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 2022 New accounting standards, interpretations and amendments adopted by the Group There were no new accounting standards, interpretations and amendments significantly impacting the Group in the financial year ended 30 June 2022. Standards issued but not yet effective Certain new accounting standards, amendments and interpretations have been issued that are not yet effective for the financial year ended 30 June 2022. 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: • Amendments to AASB 101 Classification of Liabilities as Current or Non-current • Amendments to AASs Disclosure of Accounting Policies and Definition of Accounting Estimates – Amendments to AASB 7, AASB 101, AASB 134 and AASB Practice Statement 2 – Amendments to AASB 108 • Amendments to AASs Deferred Tax related to Assets and Liabilities arising from a Single Transaction • Amendments to AASs — Initial Application of AASB 17 and AASB 9 Comparative Information • Amendments to AASs Sale or Contribution of Assets between an Investor and its Associate or Joint Venture • Amendments to AASB 137 Onerous Contracts — Cost of Fulfilling a Contract • Amendments to AASB 3 Reference to the Conceptual Framework • Amendment to AASB 9 Fees in the ‘10 per cent’ Test for Derecognition of Financial Liabilities Annual Report 2022 165 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 2022. 2. in the opinion of the Directors, the consolidated financial statements and notes that are set out on pages 92 to 165 and the Remuneration Report in pages 61 to 83 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 2022 and of its performance for the financial year ended on that date; and ii) complying with Australian Accounting Standards and the Corporations Regulations 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 97 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 6.4 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, AC Chairman Sydney, 25 August 2022 MIKE SNEESBY Chief Executive Officer and Director 166 Nine Entertainment Co. 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 2022, 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 2022 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 Annual Report 2022 167 Independent Auditor’s Report Impairment Test ing of Goodwill and Ot her Int angible Asset s Why significant How our audit addr essed t he key audit mat t er At 30 June 2022, the Group’s consolidated statement of financial position included goodwill and other intangible assets amounting to $2,512.3 million, representing 60.6% of total assets. As disclosed in Note 3.6 to the financial statements, the Directors have assessed goodwill and other intangible assets for impairment at 30 June 2022. This assessment involved critical accounting estimates and assumptions, based upon conditions existing as at 30 June 2022, 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 considered the impairment testing of goodwill and other 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 applied in deriving 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. • 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 impairment of goodwill and other intangible assets in the financial report, 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 168 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory Carrying Value of Program Right s Why significant At 30 June 2022, program rights to the value of $451.1 million have been recognised as assets. This balance comprises $278.5 million in current program rights and $172.6 million non- current program rights. These program rights constit ute free-to-air and digital broadcast rights in the Broadcasting business and subscription video on demand rights in the Stan business. As disclosed in Note 3.3 to the financial statements, the Directors’ assessment of the carrying value of program rights involves judgement, relating to forecasting the amount of future revenue to be derived from the usage of those program rights and subsequent derivation of net present value in accordance with AASB 102 Inventories. We considered this a key audit matter due to the value of the program rights relative to total assets and the inherent subjectivity involved in forecasting future revenue and profitabilit y. How our audit addr essed t he key audit mat t er Our audit procedures included the following: • • • Assessment as to whether the recognition, measurement and amortisation methodology applied by the Group to program rights met the requirements of Australian Accounting Standards. Assessment of recoverability through comparison of forecast revenue for program rights to the carrying value of the respective program rights. Assessment of the forecast revenue to be derived from the usage of program rights by assessing the assumptions applied in the Group’s forecasts with reference to recent historical performance of program rights and actual advertising and subscription revenue earned subsequent to year end. • Consideration of the adequacy of the disclosures in the financial report relating to the valuation of program rights, including those made with respect to judgements and estimates. 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 2022 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. 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. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislat ion Annual Report 2022 169 Independent Auditor’s Report 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 firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislat ion 170 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory ► 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 61 to 83 of the directors’ report for the year ended 30 June 2022. In our opinion, the Remuneration Report of Nine Entertainment Co. Holdings Limited for the year ended 30 June 2022 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 responsibilit y 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 2022 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislat ion Annual Report 2022 171 Shareholder Information TWENTY LARGEST SHAREHOLDERS AS AT 7 SEPTEMBER 2022 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 NOMS PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED UBS NOMINEES PTY LTD NETWEALTH INVESTMENTS LIMITED PACIFIC CUSTODIANS PTY LIMITED NAVIGATOR AUSTRALIA LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2 PACIFIC CUSTODIANS PTY LIMITED BNP PARIBAS NOMS(NZ) LTD BNP PARIBAS NOMINEES PTY LTD MORGAN STANLEY AUSTRALIA SECURITIES (NOMINEE) PTY LIMITED BOND STREET CUSTODIANS LIMITED POWERWRAP LIMITED 20 UBS NOMINEES PTY 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. 07 Sep 2022 550,549,955 275,564,125 254,760,442 219,549,770 104,090,963 39,038,454 13,287,510 12,426,836 6,120,066 4,792,955 4,417,142 4,306,517 4,240,405 4,180,165 4,051,417 3,889,165 3,769,711 3,435,278 2,637,101 2,166,711 %IC 32.28 16.16 14.94 12.87 6.10 2.29 0.78 0.73 0.36 0.28 0.26 0.25 0.25 0.25 0.24 0.23 0.22 0.20 0.15 0.13 172 Nine Entertainment Co. SUBSTANTIAL SHAREHOLDERS Substantial shareholders as shown in substantial shareholding notices received by the Company as at 7 September 2022 are: Name Bruce Gordon/Birketu/WIN1 Pendal Group Yarra Capital Management Macquarie Group Limited 1. In addition, Birketu has economic interests in 37,000,000 shares pursuant to swaps. RANGE (7 SEPTEMBER) Range (7 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 VOTING RIGHTS Total shares 254,760,442 151,262,076 86,180,082 85,424,292 No. of holders 8,516 9,590 3,115 3,383 198 24,802 772 % 14.94% 8.87% 5.05% 5.01% % 34.34 38.67 12.56 13.64 0.80 100.00 3.11 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 On 25 August 2022, Nine announced its intention to conduct an on-market share buy-back of up to 10% of its issued capital, commencing from 12 September 2022 over a 12 month period. Annual Report 2022 173 This page has been left blank intentionally. 174 Nine Entertainment Co. Directors’ Report Remuneration Report – Audited Operating and Financial Review Financial Statements Independent Auditor’s Report Corporate Directory Corporate 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, 10 November 2022. The meeting will be held at 1 Denison Street, North Sydney and accessible online at https://meetings.linkgroup.com/NEC22 FINANCIAL CALENDAR 2023 (PRELIMINARY) Interim Result Preliminary Final Result Annual General Meeting 23 February 2023 24 August 2023 9 November 2023 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 Ph: 1300 888 062 (toll free within Australia) Ph: +61 2 8280 7670 Fax: +61 2 9287 0303 Email: Website: www.linkmarketservices.com.au registrars@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 Annual Report 2022 175 

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