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Reaching over 10m Australians
every week across its Television, Radio
and Digital networks
Hit Network:
3.3m listeners
each week1
Triple M Network:
2.7m listeners
each week2
Regional Television
Networks – 4.8m
viewers each week3
#1 Radio Group
Online – 288k UB’s daily4
#1 Radio Business
on Social – 10m fans5
Source: 1+2: GfK Radio Ratings. Survey 5 2015- Metro. Survey 2 2015- Gold Coast, Newcastle and Canberra Cume. XTRA Research Albury and Hobart Survey 1 2014. 3. Regional TAM
4 AGGS & TAS. Reach: Sun-Sat 0200-2559; 1 min Cume reach; average weekly reach. NMR TV Advisor. Sun-Sat, 0530-2400. SGT (Survey 1 2007), Central (Survey 1 2008), Darwin
(Survey 1 2011). 4. Nielsen Online Ratings – Market Intelligence (Domestic) based on monthly average for period 1 July 2014 – 30 June 2015 – SCA Network National. 5. Facebook
insights, Twitter, Instagram and SCA Social Analytics as at July 2015. Fans: Facebook total page likes + Twitter Followers + Instagram Followers as at July 2015.
3
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 INNOVATION PEOPLE
AND CULTURE AT SCA
,
SCA strives to be the best entertainment business in the nation, attracting and retaining
the right people through continuous improvement in company culture and business critical
innovation to maintain our position at the forefront of the Australian media industry.
INNOVATION FOR THE FUTURE
Southern Cross Austereo (SCA) is investing in
innovative digital solutions, proving it understands
digital media consumption and data insights.
OUR VALUES
SCA’s new values represent the expectations
of the business, guiding day-to-day decisions
and behaviours.
Triple M Classic Rock is the most dominant digital
radio channel in Australia and SCA’s entire digital
radio portfolio offers a diversity of genres for
listeners and advertisers alike.
ANNUAL STAFF ENGAGEMENT SURVEY
In 2015, the fourth annual staff survey was
undertaken, delivering an increase in results year
on year. The highlights include:
Radio App launched in 2015 and became the
first Australian only audio aggregator app, making
listening on mobile easier than ever before.
Leading the way in programmatic audio
advertising, SCA has partnered with Triton Digital,
delivering Australia’s first programmatic online
and mobile audio advertising exchange, a2x®.
• 88% say that SCA is a friendly place to work
• 82% say that people care about each other
• 80% say they enjoy the people they work with
• Being treated with a high level of fairness
regardless of age, race, ethnicity, gender and
sexual orientation has results ranging between
88% and 96%.
4
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 DIVERSITY
SCA attracts and retains employees with varied
backgrounds, experience, knowledge and
abilities, who can share diverse perspectives and
ideas, results, and deliver the very best content
and client solutions.
Whilst all areas of diversity are critical to
business success, a recent focus has been on
gender diversity. Currently, 52% of our workforce
are female. Females are also well represented
within management, making up 25% of all Senior
Managers and 42% of middle management.
Additionally, 78% of all women who
commenced Parental Leave within the past
12 months have returned to SCA on a Flexible
Working Arrangement.
REWARD AND RECOGNITION
SCA’s annual Company Awards program
recognises exceptional talent and performance
across Australia. Many of the categories in
the peer-nominated awards scheme are based
around our Company Values, and also recognise
outstanding achievement in Sales and Leadership.
DEVELOPMENT PIPELINE
The business strives to attract the best and kick-
start careers in media. A number of traineeship
programs have been developed to ensure the
continuous development, succession planning and
retention of our best staff across Engineering and
Technology, Producing and Digital streams.
5
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 COMMUNITY SUPPORT
Using our media channels to give back to those who need it most.
Southern Cross Austereo is committed to using its vast media footprint and ability to positively influence the
local communities of Australia to help those in need. Southern Cross Austereo proudly invests both time
and resources into charity efforts all year round.
GIVE ME 5 FOR KIDS
With an established 20 year history, Southern
Cross Austereo is proud of its Give Me 5 for Kids
initiative that raises millions of dollars annually to
benefit local children’s hospitals and wards.
Over 34 radio and 21 TV stations across
regional Australia are dedicated to raising these
much-needed funds for local community hospitals
and charities.
Hundreds of events, activities and campaigns
are implemented across the nation to ensure
local communities can provide even better care
all year round to Aussie kids.
I BELIEVE IN CHRISTMAS
Southern Cross Austereo believes every child
should enjoy the festivities of Christmas. Each
year its media networks focus on ‘I Believe
in Christmas’, with the aim to deliver gifts to
underprivileged children across regional Australia.
Toys are collected and sent to The Salvation
Army and other charities who distribute them
to children and families in need during the
festive season.
6
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 B105 CHRISTMAS APPEAL
The B105 Christmas Appeal has raised funds
for the Children’s Hospital Foundation to help
purchase lifesaving medical equipment and fund
ground-breaking research into childhood illness
and disease. Since its inception in 1995, the
appeal has raised over $12 million.
MIX94.5 KIDS APPEAL WITH TELETHON
Perth’s mix94.5 Kids Appeal in association with
Telethon appeals to the community for donations
for Princess Margaret Hospital for two weeks
each year. From tin shaking through to a 24-hour
phone room, this year’s appeal successfully raised
over $446,000.
BRAND AFFILIATIONS
The business is passionate about using our
channels and people to support community causes
through brand affiliations.
Triple M has joined forces with White Ribbon
Australia, a national prevention campaign to
end men’s violence against women. Its radio
personalities call on men from all walks of life
to be leaders in the community to stop violence
against women.
In addition, the Triple M Network closely supports
Beyond Blue, whose work is aimed at achieving an
Australian community that understands depression
and anxiety, empowering all Australians, at any
life-stage, to seek help.
7
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 BOARD OF DIRECTORS
PETER BUSH
NON-EXECUTIVE CHAIRMAN
Peter Bush joined the Board in February 2015 as Director and Chairman, and is Chairman
of the Nomination Committee. Peter has proven leadership, strategic and management
achievements in executive roles spanning the media, FMCG and consumer products sectors.
This included senior roles with SC Johnson, Reckitt & Colman, Ampol/Caltex and Arnotts, and
as CEO of AGB McNair and Schwarzkopf. Peter ran his own strategic consultancy business
for six years with clients including Qantas, Telstra, George Patterson Bates, John Singleton
Advertising and McDonald’s Australia. In 2003, Peter became the CEO of McDonald’s
Australia, leaving in April 2010 as its divisional President for Pacific, Middle East and Africa.
LEON PASTERNAK
NON-EXECUTIVE DEPUTY CHAIRMAN
Leon Pasternak joined the Board in September 2005 and is Deputy Chairman of the Board
and Chairman of the Remuneration Committee. Leon was the Vice Chairman and Managing
Director of Merrill Lynch Markets (Australia) Pty Ltd (a subsidiary of Bank of America) with
cross sector and product responsibility, including responsibility for financial institutions,
and mergers and acquisitions. He was a partner at Freehills for 25 years (now Herbert Smith
Freehills), a leading global firm of lawyers, where he served on the Board and practised in the
law of mergers and acquisitions, public finance and corporate re-organisations.
GRANT BLACKLEY
CEO AND MANAGING DIRECTOR
Grant Blackley joined the Board in June 2015 as Chief Executive Officer and Managing
Director. Grant’s media industry career spans over 30 years, during which time he served in
numerous senior leadership roles at the TEN Network, including as CEO from 2005 to 2010.
Throughout this period he also held Directorships at Free TV and Freeview Australia. Prior to
becoming CEO, Grant served in key roles in network sales, digital media and multi-channel
program development as well as being responsible for group strategy, acquisitions and
executive development programs. Prior to joining Southern Cross Austereo, Grant was CEO of
the Keystone Group, former Partner in RGM Artists and Founder of Four Seasons Media.
GLEN BOREHAM
NON-EXECUTIVE DIRECTOR
Glen Boreham joined the Board in September 2014 and is a member of the Remuneration
Committee. Glen has had a long and distinguished career at IBM, culminating in the role of
Chief Executive Officer and Managing Director, IBM Australia and New Zealand from 2006
to 2010. Glen has extensive experience in technology but also in traditional and new media
through his roles Chairing the Australian Government’s Convergence Review of the media
industry, and being the inaugural Chair of Screen Australia from 2008 to 2014.
8
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 CHRIS DE BOER
NON-EXECUTIVE DIRECTOR
Chris de Boer joined the Board in September 2005 and is Chairman of the Audit and
Risk Committee and a member of the Remuneration Committee. Qualified as a Chartered
Accountant in London, he has since had various careers in stockbroking, investment banking,
business consulting and direct investment. Through them he gained experience in initial
public offerings, mergers and acquisitions, corporate re-organisations, joint ventures, bond
issues and financial advice across London, Hong Kong, Australia and New Zealand, in both
domestic and cross-border deals. Chris also has extensive experience in takeover regulation.
KATHY GRAMP
NON-EXECUTIVE DIRECTOR
Kathy Gramp joined the Board in September 2014 and is a member of the Audit and Risk
and Remuneration Committees. Until 30 June 2011, Kathy was Chief Financial Officer,
Company Secretary and a member of the Executive Committee of Austereo Group Ltd.
Kathy’s career in the radio industry has spanned over 22 years, with her initially joining
Austereo in 1989.
PETER HARVIE
NON-EXECUTIVE DIRECTOR
Peter Harvie joined the Board in August 2011 after the acquisition of Austereo Group Ltd
and is a member of the Nomination Committee. Peter has over 45 years’ experience in the
advertising, marketing and media industries. Prior to his appointment Peter was the Executive
Chairman of Austereo Group Ltd from 1997 until May 2011, Managing Director of the Triple
M Network, and Founder and Managing Director of the Clemenger Harvie advertising agency
from 1974 to 1993.
ROB MURRAY
NON-EXECUTIVE DIRECTOR
Rob Murray joined the Board in September 2014 and is a member of the Audit and Risk and
Nomination Committees. Rob has had a distinguished career in sales, marketing and general
management having served most recently as the CEO of Lion (formerly Lion Nathan) from
2004 to early 2013, including during its acquisition by Kirin Holdings in 2009. Prior to this
he worked for Nestlé for eight years, firstly as MD of the UK food business, and from 2000 to
2004 as CEO of Nestlé Oceania. Before Nestlé, Rob spent 12 years with Procter & Gamble.
HELEN NASH
NON-EXECUTIVE DIRECTOR
Helen Nash joined the Board in April 2015 and is a member of the Audit and Risk
Committee. Helen has more than 20 years’ experience in brands and marketing, including
seven years in FMCG at Procter & Gamble, followed by three years in publishing at IPC Media.
Helen held a variety of senior executive roles at McDonald’s Australia Ltd over a period of
nearly 10 years, including the position of Chief Operating Officer, overseeing restaurant
operations, marketing, menu, insights and research and information technology.
9
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 CHAIRMAN AND
CEO’S REPORT
We are pleased to present the Southern Cross Austereo (“the Group”) Annual Report
for the 2015 financial year.
Dear Shareholders,
The Group reported revenues of $611.1
million, a fall of 4.6% on prior year revenues of
$640.8 million with reported Earnings before
Interest, Taxes, Depreciation and Amortisation
(“EBITDA”) of $163.3 million, down 9.2% on
prior year EBITDA of $179.7 million. Net Profit
After Tax (“NPAT”) of the Group was up 3.7%
to a loss of $284.9 million, compared to the
prior year loss of $296.0 million. The Group was
impacted by significant items in 2015 and 2014,
primarily impairment losses recorded in both
years. Excluding significant items, EBITDA was
down from $187.8 million to $163.2 million,
a fall of 13.1%. NPAT was down 18.6% from
$79.6 million to $64.8 million.
It has been a difficult year for the Group, with
our Metro Radio business reporting a decline in
advertising revenues of 11.1%, and a reduction
in market share from 32.9% in 2014 to 27.8%
in 2015. Total Metro EBITDA was down 21%.
Triple M continues its rise, and the Group is
focused on improving yield to keep improving
market share on the network. The Hit Network
remains the primary focus of the Group, and we
are pleased that we have seen improvements
in ratings in the first four surveys of calendar
year 2015.
Regional Radio continues to be a solid and
consistent performer, with advertising revenue
up 3.5%. Television markets were down in 2015
and our advertising revenues were down 2.7%
against a market decline of 4.5%. However we are
pleased to see that television audience share and
market share are improving across the Channel 10
offering. Total regional EBITDA was up 1.9%.
The Board and Leadership team have gone
through significant change during the year. We
have had five new independent Non-Executive
Directors join the Board during the year, being
Glen Boreham, Peter Bush as Chairman, Kathy
Gramp, Rob Murray and Helen Nash. We would
like to thank the outgoing Chairman Max Moore-
Wilton and Director Michael Carapiet for their
contribution to the Board over a number of years.
After 18 years with the Group, Rhys Holleran
stepped down from the role of CEO. Rhys played
a strategic role in bringing together the Group as
it is today, and the Board and staff thank him for
his significant contribution. The appointment of
Grant Blackley as CEO and Managing Director,
who has come with a wealth of media experience,
will lead the Group into the next phase of its
development. The Board is confident that the
executive group is well placed to develop and
implement the strategic agenda for the Group
over the coming years.
The Board of Directors would like to thank the
Group’s absolutely engaging staff, who continue
to live our values every day, and would also like
to thank the shareholders for their continuing
support for the Group.
PETER BUSH
GRANT BLACKLEY
10
SOUTHERN CROSS AUSTEREO
ANNUAL REPORT 2015
SOUTHERN CROSS AUSTEREO
ANNUAL REPORT 2015
11
FINANCIAL REPORT
2015
CONTENTS
Directors’ Report
Review and Results of Operations
Distributions and Dividends
Significant Changes in State of Affairs
Events Occurring After Balance Date
Likely Developments and Expected Results of Operations
Indemnification and Insurance of Officers and Auditors
Non-Audit Services
Environmental Regulation
Information on Directors
Information on Company Secretary
Meetings of Directors
Remuneration Report
Auditor’s Independence Declaration
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Key Numbers
Capital Management
Group Structure
Other
Directors’ Declaration
PwC Independent Auditor’s Report
Additional Stock Exchange Information
Corporate Directory
14
14
17
17
17
17
17
17
17
18
20
20
21
38
39
40
41
42
43
44
55
62
64
69
70
72
IBC
The financial statements of Southern Cross Media Group Limited
(ABN 91 116 024 536) were authorised for issue by the Directors on
26 August 2015. The Directors have the power to amend and re-issue
the financial statements.
13
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015
The Corporate Governance Statement outlining Southern Cross Media
Group Limited’s corporate governance framework and practices in
the form of a report against the Australian Stock Exchange Corporate
Governance Principles and Recommendations, 3rd Edition, is available
on the Southern Cross Austereo website, www.southerncrossaustereo.
com.au, under the investor relations tab in accordance with listing
rule 4.10.3. The Directors approved the 2015 Corporate Governance
Statement on 24 September 2015.
The Directors of Southern Cross Media Group Limited (“the
Company”) submit the following report for Southern Cross Austereo,
being Southern Cross Media Group Limited and its subsidiaries
(“the Group”) for the year ended 30 June 2015. In order to comply
with the provisions of the Corporations Act 2001, the Directors
report as follows:
Directors
The following persons were Directors of the Company during the whole
of the year, unless otherwise stated, and up to the date of this report:
– Peter Bush (Chairman, appointed 25 February 2015)
– Leon Pasternak (Deputy Chairman)
– Chris de Boer
– Peter Harvie
– Rob Murray (appointed 1 September 2014)
– Kathy Gramp (appointed 1 September 2014)
– Glen Boreham (appointed 1 September 2014)
– Helen Nash (appointed 23 April 2015)
– Grant Blackley (appointed 29 June 2015)
– Max Moore-Wilton (Chairman, resigned 25 February 2015)
– Michael Carapiet (resigned 21 October 2014)
Principal Activities
The principal activities of the Group during the course of the
financial year were the creation and broadcasting of content on
free to air commercial radio (FM and digital), TV and online media
platforms across Australia. These media assets are monetised via
revenue generated from the development and sale of advertising
solutions for clients.
There were no changes in the nature of the Group during the year.
Review and Results of Operations
Operational Review
Group Results
Headline achievements for the Group include:
– Regional Radio advertising revenue growth for the 4th consecutive
year, up by 3.5%
– Regional TV revenues outperform the market
– Regional EBITDA up 1.9%, margins up 0.7%
– Strong EBITDA to cash conversion – 100%
– Net debt reduced by $81.0 million to $506.9 million and net
finance costs down 13.7%
– Leverage ratio reduced to 2.84 times, increasing covenant
headroom (covenant 3.75 times)
The Group reported revenues of $611.1 million, a fall of 4.6% on
prior year revenues of $640.8 million with reported Earnings before
Interest, Taxes, Depreciation and Amortisation (“EBITDA”)1 of
$163.3 million, down 9.2% on prior year EBITDA of $179.7 million.
The operational performance of the segments is outlined
in detail below.
Depreciation and amortisation was up 3.7% as the business continues
to invest in systems integration projects to achieve operational
efficiencies. Further reductions in interest expense and other
borrowing costs of 13.7% (excluding prior year significant items) are
the result of the new swaps taken out in April 2015, and the ongoing
benefit of the Group having successfully refinanced its syndicated debt
facility in January 2014 (refer Notes 11, 15 and 16 for further details).
Net Profit After Tax (“NPAT”) of the Group was up 3.7% to a loss of
$284.9 million, compared to the prior year loss of $296.0 million. The
Group was impacted by significant items in 2015 and 2014, primarily
impairment losses recorded in both years. Excluding significant items,
adjusted NPAT was $64.8 million, down 18.6% from the prior year
adjusted NPAT of $79.6 million.
Significant Items
In 2015, the Group recognised impairment charges against intangible
assets of $361.4 million, $276.5 million of which relates to the
Metropolitan Free to Air Broadcasting (“Metro”) Cash Generating
Unit (“CGU”) and $84.9 million relates to the Regional Free to Air
Broadcasting (“Regional”) CGU. There was also a derecognition of
a deferred tax liability in respect of certain brands and licences for
$11.7 million. Refer to Notes 5, 7 and 8 for further information. In
respect of the Metro CGU, the Group has reassessed its forecast
period revenue growth assumptions and long-term growth assumptions
on the basis that metro advertising markets may be more subdued,
and the long-term market share assumption has been reduced to
reflect the intense, competitive radio environment in which it operates.
In respect of the Regional CGU, television markets have declined 4.5%
in 2015, and independent estimates of television industry growth
rates over the forecast period have reduced significantly from the
prior year. Despite an improved outlook on the Channel Ten audience
share and market share, the effect of the lower industry growth rates
over the forecast period and in the terminal growth rate has resulted
in an additional impairment being recorded in 2015 in respect of the
Regional CGU.
In 2014, the Group recognised a number of significant items, being:
– the settlement of an income tax matter with the Australian Taxation
Office (“ATO”) which resulted in a write-back of interest expense of
$10.9 million and income tax expense of $15.5 million;
– the write-off of unamortised borrowing costs from the previous debt
facility of $5.6 million or $3.9 million after tax;
– impairment charges against intangible assets and investments of
$392.5 million, including $375.7 million relating to the Regional
CGU, $4.7 million relating to excess digital spectrum, and
$12.1 million relating to investments in associates; and
– the recognition of an onerous contract provision in respect of digital
radio (DAB+) contracts of $8.1 million, or $5.7 million after tax.
Regional
The Regional business consists of a number of regional radio and
regional television licences. Each regional television licence has a
metropolitan television network affiliate that supplies the majority of
programming for the licence.
1 EBITDA is a measure that, in the opinion of the Directors, is a useful supplement to net profit in understanding the cash flow generated from operations and available
for payment of income taxes, debt servicing and capital expenditure. EBITDA is useful to investors because analysts and other members of the investment community
largely view EBITDA as a widely recognised measure of operating performance. EBITDA disclosed within the Directors’ Report is equivalent to “profit before depreciation,
amortisation, interest, impairment, fair value movements on financial derivatives and income tax expense for the year from continuing operations” included within the
Statement of Comprehensive Income (which has been subject to audit).
14
DIRECTORS’ REPORTFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 Total Regional revenue finished the year at $361.6 million, 0.4% down
on prior year revenue, principally due to the weak regional television
advertising market. Regional advertising revenue of $337.3 million was
in line with the prior year, with gains on radio offsetting declines on
television. Television revenues performed well in what is a challenging
market for free to air television. Overall, advertising revenues were
back 2.7% in a market that declined 4.5% with declines from national
clients being partially offset by growth in local clients.
The Group continues to invest in television content through the Big
Bash League and the Glasgow Commonwealth Games, with both
events driving growth in local client revenues. Investment in these
events, along with other improvements in Channel Ten programming,
has led to an improved average audience share of 21.1%, compared
to 20.0% in 2014. This improved ratings position will provide
opportunities for growth in national client revenues in the future.
Regional radio continues to be a consistently performing asset
within the Group with its broad and diversified client base delivering
advertising revenue growth of 3.5% for the year. Local client revenues
have continued to perform, up 1.3% for the year, however the real
success story has been the strong growth in national revenues, which
are up 8.9% on 2014, partly due to state election activity.
Regional EBITDA finished the year at $114.7 million, up 1.9% on
the prior year. The EBITDA growth is due to a change in the mix of
advertising revenues, with improving radio revenues delivering higher
margins than reducing television revenues.
Metro
The Metro business consists of two complementary radio brands
operating in the Australian capital cities that target different audience
demographics: the Triple M network targets males in the 25 to 54 age
bracket and Today’s Hit Network is skewed towards females in the
18 to 39 age bracket.
The Metro radio division reported revenues of $224.1 million in 2015,
down 9.9% on the prior year, and EBITDA of $57.8 million, down
21.0% on prior year EBITDA of $73.2 million.
Radio advertising revenues, representing $204.0 million out of the
total reported revenue, were down 11.1% on the prior year. The
Triple M network represented $120.7 million, up 8.4%, and Today’s
Hit network represented $83.3 million, down 29.6%. Digital revenue
was up 13.1% on 2014, however it continues to represent a small
proportion of total advertising revenue.
Overall, the metropolitan free to air radio market grew by 5%,
with the Group’s market share declining from 32.9% in 2014 to
27.8% in 2015.
Competition within the female 18 to 39 demographic has intensified
over the past few years with the establishment of competing radio
services in Melbourne and Sydney which have taken audience share
from Today’s Hit Network and led to a significant loss of market share.
The breakfast show in Sydney changed in January 2015 and is still
in its infancy, and early signs are that the return of Hamish & Andy to
the national drive show will assist in regaining some audience share
across the network.
The Triple M network has continued to strengthen its audience
position and is now the most listened to network in Australia for
men. This growth in audience has led to $9.4 million in incremental
revenue, with 65% of this growth coming from agency clients.
Whilst revenue declined by $24.6 million, EBITDA has declined
by $15.4 million, reflecting the relatively high fixed cost nature
of the business.
Financial Position
The Group maintains its capital management strategy to reduce the
leverage ratio to 2.5 times EBITDA. Net borrowing Group debt has
reduced by $87.4 million during 2015 to $506.9 million (Group
net debt reduced by $81.0 million). The initiatives in place to
achieve this included:
– stabilisation of operating results;
– increased cash flow through improved debt management;
– cash conservation through underwritten DRP; and
– review of non-core assets.
During the year, a non-core property was disposed of which resulted
in proceeds of $9.0 million being used to reduce net debt. The Group
wide review of assets has identified further opportunities to divest non-
core assets that the Group is assessing.
The Group entered into a 2 year non-recourse receivables financing
facility in June 2015. This facility will further improve working capital
and reduce net debt, and it will provide a lower cost of funding than
the senior debt facility.
In February 2015, the Group negotiated a temporary increase in the
leverage ratio to 3.75 times to December 2015, thereafter reverting
back to 3.5 times. It is pleasing to report that as at 30 June 2015 the
leverage ratio was 2.84 times.
Net assets for the Group have reduced from $1.2 billion to
$936.8 million as a result of the impairment losses recorded in 2015.
Business Strategies and Prospects for Future Financial Years
Strategic Update
The Group has continued to implement its operational strategy
which comprises:
Re-establish
Metro Share
Operational
Efficiency
TV Affiliation
Leverage Digital
– Content reinvestment strategy gaining traction
– positive survey results in both networks1 –
yet more work to be done
– Return of Hamish & Andy adding to audience
increases across Today’s Hit network
– Triple M remains #1 network for men
around the country
– Continual evaluation and renewal across all
stations and all key timeslots
– Strengthening executive and management
team skills and experience
– Improved focus on strategic initiatives and
operations priorities – most importantly ratings
growth and revenue maximisation
– Debt reduction through improved working
capital management and lower financing costs
– New investment and realisation in
technological efficiencies
– Channel Ten affiliation expires June 2016,
planning is underway
– Improved recent ratings performances –
strengthening sales enquiry
– 13.1% year-on-year growth in digital revenues
– Engaging quality content – well procured
– is our future
– Partnered with Triton Digital to launch
a2x, Australia’s first digital audio
advertising exchange
1 GFK Radio Ratings, 2015.
15
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 Review and Results of Operations (continued)
The Group is pleased with the way the strategy has progressed and believes it is well positioned to capitalise on the work that was completed
throughout 2015.
2016 Outlook
Both Regional and Metro radio have started the year positively with results so far showing year-on-year growth. Television markets remain
challenged, although increased consistency and growth in Channel Ten has been beneficial.
Material Risks
Business and operational risks that could affect the achievement of the Group’s financial prospects include the following risks:
Risk
Breach of banking covenants The Syndicated Facility Agreement (“SFA”) of $650 million is subject to a leverage ratio covenant and an interest
Mitigation Strategies
Significant breach of an
Australian Communication
and Media Authority
(“ACMA”) code or licence
conditions
Decline in or loss of metro
audience share leading to a
loss of revenue
Threat of digital media
(including television, radio,
social) – emergence and
convergence
cover covenant. Whilst the Group maintains sufficient headroom in respect of the interest cover covenant, falling
Group EBITDA has resulted in pressure on the leverage ratio covenant.
The Group has mitigated this risk by obtaining an increase in covenant headroom to 3.75 times until December
2015, implementing an underwritten DRP to conserve cash for the final 2014 and interim 2015 dividends,
using proceeds from the sale of non-core assets to reduce net debt, and the establishment of a non-recourse
receivables financing facility. The risk of a breach of the leverage ratio banking covenant has now been mitigated,
with the June 2015 leverage ratio calculated at 2.84 times.
The Group holds a significant number of radio and television licences and is at risk of breaching an ACMA code or
licence obligation which exposes the Group to regulatory intervention and potentially onerous licence conditions,
fines or potentially a suspension of an operating licence.
The Group has instigated the use of delays in broadcasting for certain programs, use of pre-publication advice
from the legal department for at-risk content, and undertakes training and education for staff and on-air talent
around the ACMA codes.
Subsequent to year end, the Group has agreed with the ACMA to implement a range of actions agreed in
response to the ACMA’s findings in 2014 on the “royal prank call”, including an additional licence condition,
an enforceable undertaking, and a special broadcast.
The Group has seen a loss of metro audience share on Today’s Hit Network lead to a loss of revenue in the
second half of the 2014 financial year, and in the 2015 financial year. The Group believes that the market share
has stabilised at around 28%.
Today’s Hit Network is into its second year of regeneration, and Survey 4 of 2015 showed Today’s Hit Network
delivered share increases among people 10+ across its five metro stations. Triple M also delivered growth across
its four Triple M stations and Mix94.5 in Perth. The green shoots of improvement across both networks indicate
the Metro business is in the process of regeneration.
Finding and retaining good on-air talent is a key to retaining and growing audience share, and the Group is
committed to developing talent across its national network of radio and television stations to mitigate this risk.
With new alternative digital platforms and technologies emerging, there is a risk that the Group loses market
share to alternative digital platforms and technologies, or fails to fully exploit the opportunity digital media
represents for the business to lock in and grow new audience loyalty, or suffer financial loss due to a transfer of
advertising spend to digital media.
The Group has employed a team of digital experts, has a significant digital footprint and is focused on leveraging
its digital assets to drive revenue growth, achieving 13.1% year-on-year growth in digital revenues in 2015.
The Group continues to lead the radio industry in social media engagement, having the 3 most engaging
Facebook pages in Australia and 6 pages in the top 101.
The Group is also actively seeking complementary digital offerings, and during 2015 the Group partnered with
Triton Digital to launch a2x, the world’s first digital audio advertising exchange, in Australia.
1 The Online Circle Facebook Report Q1 2015.
CEO Transition
On 11 May 2015, the Group announced that Rhys Holleran would be stepping down from the role of CEO after 18 years working with the Group.
Rhys has played a strategic role in bringing together the Group as it is today, and the Board and staff thank him for his significant contribution.
The appointment of Grant Blackley as CEO, who has come with a wealth of media experience, will lead the Group into the next phase of
its development.
16
DIRECTORS’ REPORTFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 Community Involvement
The Group supports a range of initiatives aimed at giving back to
local communities.
The Group runs Give Me 5 For Kids, a charity that raises money to
support local children’s hospitals and charities in regional Australia.
The charity runs an annual fundraiser in June of each year, raising over
$2 million in each of the 2015 and 2014 appeals.
Through My Community Connect, regional Australians are provided
with an online event registry that is further supported via amplification
through the Group’s broad array of media assets.
Every December, the Group’s “I Believe in Christmas” appeal delivers
the festivities of Christmas to kids throughout regional Australia.
This year, the annual toy drive collected over 20,000 toys that were
distributed by The Salvation Army to families and children in need.
The Board of Directors would like to thank the Group’s absolutely
engaging staff who continue to live our values every day, and
would also like to thank the shareholders for their continuing
support for the Group.
Distributions and Dividends
Type
Cents per share
Total Amount
$’000
Date of Payment
Final 2014
Ordinary
Interim 2015
Ordinary
3.0
3.0
21,157
3 November 2014
21,970
12 May 2015
Since the end of the financial year the Directors have declared the
payment of a final 2015 ordinary dividend of $22.6 million (3.0 cents
per fully paid share) out of retained earnings – 2013 profit reserve.
This dividend will be paid on 4 November 2015 by the Company.
Significant Changes in State of Affairs
In the opinion of the Directors, there were no significant changes
in the state of affairs of the Group that occurred during the
year under review.
Events Occurring After Balance Date
On 13 July 2015, the Group paid down $80 million of borrowings from
cash reserves on the revolving 5 year SFA to reduce the drawn balance
to $570 million ($650 million at 30 June 2015). As both cash and
the SFA are included in net debt, there was no change to net debt.
Brian Gallagher was appointed to the role of Chief Sales Officer on
15 July 2015. Andrea Ingham resigned from her role as National Sales
Director on 17 July 2015.
Likely Developments and Expected Results
of Operations
Further information on likely developments relating to the operations of
the Group in future years and the expected results of those operations
have not been included in this report because the Directors of the
Company believe it would be likely to result in unreasonable prejudice
to the commercial interests of the Group.
Indemnification and Insurance of Officers
and Auditors
During the year the Company paid a premium of $192,882 to insure
its officers. So long as the officers of the Company act in accordance
with the Constitution and the law, the officers remain indemnified
out of the assets of the Company and the Group against any losses
incurred while acting on behalf of the Company and the Group.
The auditors of the Group are in no way indemnified out of the
assets of the Group.
Non-Audit Services
The Company may decide to employ the auditor on assignments
additional to their statutory audit duties where the auditor’s expertise
and experience with the Group are important.
Details of the amounts paid or payable to the auditor
(PricewaterhouseCoopers Australia) for audit and non-audit services
provided during the year are set out in Note 21.
The Board has considered the position and, in accordance with advice
received from the Audit and Risk Committee, is satisfied that the
provision of the non-audit services is compatible with the general
standard of independence for auditors imposed by the Corporations
Act 2001. The Directors are satisfied that the provision of non-audit
services by the auditor did not compromise the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
– all non-audit services have been reviewed by the Audit and Risk
Committee to ensure they do not impact the impartiality and
objectivity of the auditor; and
– none of the services undermine the general principles relating to
auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants.
Environmental Regulation
The operations of the Group are not subject to any significant
environmental regulations under Australian Commonwealth, State
or Territory law. The Directors are not aware of any breaches of any
environmental regulations.
17
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 Information on Directors
Non-Executive Chairman
Peter Bush
Age 63, Appointed 25 February 2015
Peter Bush joined the Board in February 2015 as Director and Chairman, and is Chairman of the Nomination
Committee. Peter has proven leadership, strategic and management achievements in executive roles spanning
the media, FMCG and consumer products sectors. This included senior roles with SC Johnson, Reckitt & Colman,
Ampol/Caltex and Arnotts and was CEO of AGB McNair and Schwarzkopf. Peter ran his own strategic consultancy
business for six years with clients including Qantas, Telstra, George Patterson Bates, John Singleton Advertising and
McDonald’s Australia. In 2003, Peter became the CEO of McDonald’s Australia, leaving in April 2010 as its divisional
President for Pacific, Middle East and Africa.
Non-Executive Director
Leon Pasternak
Non-Executive Director
Chris de Boer
Other Current Directorships
Peter has been chairman of Mantra Group Holdings Limited since 2014
Peter has been chairman of Pacific Brands Limited since 2012 (director since 2010)
Former Directorships in the last 3 years
Peter ceased being a director of Insurance Australia Group Limited in 2015
Age 60, Appointed 26 September 2005
Leon Pasternak joined the Board in September 2005 and is Deputy Chairman of the Board and Chairman of the
Remuneration Committee.
Leon was the Vice Chairman and Managing Director of Merrill Lynch Markets (Australia) Pty Limited (a subsidiary of
Bank of America) with cross sector and product responsibility, including responsibility for financial institutions, and
mergers and acquisitions. He was a partner at Freehills for 25 years (now Herbert Smith Freehills), a leading global
firm of lawyers. Leon served on the Freehills’ board and practised in the law of mergers and acquisitions, public
finance and corporate reorganisations. He was a part time lecturer at Sydney and NSW Universities teaching in their
respective masters of law programmes. Leon served on the Campbell Committee (inquiry into Australia’s Financial
System). He has an LLB and BEc (Hons) majoring in accounting from Sydney University. He is a fellow of the
Australian Institute of Company Directors. Leon has served on major boards including OPSM and Coca-Cola Amatil.
Other Current Directorships
Leon has no other current directorships in listed companies
Former Directorships in the last 3 years
Leon has not ceased any listed company directorships in the last 3 years
Age 70, Appointed 20 September 2005
Chris de Boer joined the Board in September 2005 and is Chairman of the Audit and Risk Committee and a member
of the Remuneration Committee. Chris qualified as a chartered accountant in London and since then has had various
careers in stockbroking, investment banking, business consulting, and direct investment. Through them he gained
experience in initial public offerings, mergers and acquisitions, corporate reorganisations, joint ventures, bond issues
and financial advice across London, Hong Kong, Australia and New Zealand, in both domestic and cross-border
deals. He was on the board of Optus prior to its listing on the ASX and was chairman of the New Zealand Venture
Investment Fund.
Chris also has extensive experience in takeover regulation. Chris spent more than two years as an executive at the
Takeover Panel in London, three years on the Takeovers Committee in Hong Kong and four years as Chairman of the
Takeovers Panel in Hong Kong.
Chris has an MA from Cambridge University and is a member of the Institute of Directors in New Zealand.
Other Current Directorships
Chris has no other current directorships in listed companies
Non-Executive Director
Peter Harvie
Former Directorships in the last 3 years
Chris has not ceased any listed company directorships in the last 3 years
Age 76, Appointed 1 August 2011
Peter Harvie joined the Board in August 2011 after the acquisition of Austereo Group Limited and is a member of the
Nomination Committee. Peter has more than 45 years’ experience in the advertising, marketing and media industries.
Prior to his appointment Peter was the Executive Chairman of Austereo Group Limited from 1997 until May 2011,
Managing Director of the Triple M Network and founder and managing director of the Clemenger Harvie advertising
agency from 1974 to 1993.
Other Current Directorships
Peter has been a director of Village Roadshow Limited since 20 June 2000
Former Directorships in the last 3 years
Peter has not ceased any listed company directorships in the last 3 years
18
DIRECTORS’ REPORTFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 Non-Executive Director
Kathy Gramp
Non-Executive Director
Rob Murray
Non-Executive Director
Glen Boreham
Age 56, Appointed 1 September 2014
Kathy Gramp joined the Board in September 2014 and is a member of the Audit and Risk, and Remuneration
Committees. Until 30 June 2011, Kathy Gramp was Chief Financial Officer, Company Secretary and member of the
Executive Committee of Austereo Group Limited. Kathy’s career in the radio industry spanned over 22 years with her
joining Austereo in 1989.
Kathy has board experience across a diverse range of Australian organisations and industry sectors including health,
retirement living and aged care, disability services, the finance sector, education, government and emergency
services. This includes Director roles with the Royal Automobile Association of South Australia, Masonic Homes and
Silver Chain Group.
Other Current Directorships
Kathy has no other current directorships in listed companies
Former Directorships in the last 3 years
Kathy has not ceased any listed company directorships in the last 3 years
Age 52, Appointed 1 September 2014
Rob Murray joined the Board in September 2014 and is a member of the Audit and Risk and Nomination
Committees. Rob has had a distinguished career in sales, marketing and general management having served most
recently as the CEO of Lion (formerly Lion Nathan) from 2004 to early 2013, including during its acquisition by Kirin
Holdings in 2009. Prior to this he worked for Nestlé for eight years, firstly as MD of the UK Food business, and from
2000 to 2004 as CEO of Nestlé Oceania. Before Nestlé Rob spent 12 years with Procter & Gamble.
Other Current Directorships
Rob has been chairman of Dick Smith Holdings since 2015 (director since 2014)
Rob has been a director of Metcash Limited since 2015
Former Directorships in the last 3 years
Rob ceased being a director of Super Retail Group Limited in 2015
Rob ceased being a member of the Kirin Brewery Company Ltd International Advisory Board in 2015
Age 51, Appointed 1 September 2014
Glen Boreham joined the Board in September 2014 and is a member of the Remuneration Committee. Glen has
had a long and distinguished career at IBM culminating in the role of Chief Executive Officer and Managing Director,
IBM Australia and New Zealand from 2006 to 2010. Glen has extensive experience in technology but also in
traditional and new media through his roles chairing the Australian Government’s Convergence Review of the media
industry, and being the inaugural Chair of Screen Australia from 2008 to 2014. In addition, Glen has held a number
of other roles including serving as a member of the Business Council of Australia and a member of the Australian
Government’s Information Technology Innovation Council. He completed three years as the Deputy Chairman of the
Australian Information Industry Association in 2010.
Other Current Directorships
Glen has been a director of Data#3 Limited since 2011
Glen has been a director of Cochlear Limited since 2015
Non-Executive Director
Helen Nash
Former Directorships in the last 3 years
Glen has not ceased any listed company directorships in the last 3 years
Age 43, Appointed 23 April 2015
Helen Nash joined the Board in April 2015 and is a member of the Audit and Risk Committee. Helen has more
than 20 years’ experience in brands and marketing, including seven years in FMCG at Procter & Gamble, followed
by three years in publishing at IPC Media. Helen held a variety of senior executive roles at McDonald’s Australia Ltd
over a period of nearly 10 years, including the position of Chief Operating Officer, overseeing restaurant operations,
marketing, menu, insights and research and information technology.
Other Current Directorships
Helen has been a director of Blackmores Limited since October 2013
Helen has been a director of Pacific Brands Limited since August 2013
Former Directorships in the last 3 years
Helen has not ceased any listed company directorships in the last 3 years
19
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 Information on Directors (continued)
Executive Director
Grant Blackley
Age 49, Appointed 29 June 2015
Grant Blackley joined the Board in June 2015 as Chief Executive Officer (“CEO”) and Managing Director. Grant’s
media industry career spans over 30 years during which time he served in numerous senior leadership roles at
the TEN Network, including CEO from 2005 to 2010. Throughout this period he also held Directorships at Free
TV and Freeview Australia. Prior to becoming CEO, Grant served in key roles in network sales, digital media and
multi-channel program development as well as being responsible for Group strategy, acquisitions and executive
development programs. Prior to joining Southern Cross Austereo, Grant was CEO of the Keystone Group, partner in
RGM Artists and founder of Four Seasons Media.
Other Current Directorships
Grant has no other current directorships in listed companies
Former Directorships in the last 3 years
Grant has not ceased any listed company directorships in the last 3 years
Information on Company Secretary
Jennifer Martin
Appointed 28 May 2015
Jennifer Martin has been the Group Financial Controller for over 4 years and is a qualified Chartered Accountant and
holds a Bachelor of Accounting degree. Prior to this, Jennifer was Group Financial Controller at SMS Management &
Technology Limited, and has over 18 years experience as a finance professional.
Meetings of Directors
The number of meetings of the Board of Directors and of other Committees held during the year ended 30 June 2015, and the numbers of
meetings attended by each Director were:
Full meetings
of directors
Audit and Risk
Nomination
Remuneration
Nomination and
Remuneration1
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Meetings of Committees
Director
Peter Bush
Leon Pasternak2
Grant Blackley
Chris de Boer
Peter Harvie2
Rob Murray
Kathy Gramp
Glen Boreham
Helen Nash
Max Moore-Wilton
Michael Carapiet
4
9
0
9
9
7
7
8
3
5
3
4
9
0
9
9
8
8
8
3
5
3
*
2
*
6
2
4
4
*
1
*
*
*
2
*
6
2
4
4
*
1
*
*
1
*
*
*
1
1
*
*
*
*
*
1
*
*
*
1
1
*
*
*
*
*
*
1
*
1
*
*
1
1
*
*
*
*
1
*
1
*
*
1
1
*
*
*
*
3
*
3
3
*
*
1
*
3
*
*
3
*
3
3
*
*
1
*
3
*
Held refers to the number of meetings held during the time the Director held office or was a member of the committee during the year.
* Not a member of the relevant committee during the year.
1 Effective February 2015, the Nomination and Remuneration Committee was separated into two separate committees – a Nomination Committee and a Remuneration
Committee. There were no separate meetings of the Nomination Committee during the year.
2 Leon Pasternak ceased being a member of the Audit and Risk Committee on 1 September 2014. Peter Harvie was appointed to the Audit and Risk Committee on
11 July 2014 and ceased being a member of the Committee on 1 September 2014.
20
DIRECTORS’ REPORTFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 REMUNERATION REPORT
FOR YEAR ENDED 30 JUNE 2015
Letter from Remuneration Committee
On behalf of the Board, I am pleased to present Southern Cross
Media Group Limited’s (“the Group’s”) 2015 Remuneration Report.
The Remuneration Committee is tasked by the Board to establish
appropriate policies and practices which represent the Board’s
philosophy on remuneration and are aligned with creation of
shareholder value; that of a balance between fair remuneration for
skills and expertise with a risk and reward framework that supports
long-term sustainability of our business.
After conducting a full review of the Executive Remuneration practices
in 2014, and embarking on a process of Board renewal over 2015, the
Group is very pleased to report on the principal changes implemented
over the course of the year:
– Restructured executive team: Effective 1 October 2014, the
executive team was restructured to appoint a lead executive to be
responsible for each of the Regional and Metro businesses. Rick
Lenarcic was appointed to the role of Executive Director – Regional
Operations and Guy Dobson was appointed to the role of Executive
Director – Metro Operations.
– New appointments: There were a number of new executive
appointments and changes to KMP during the year. Grant Blackley
commenced as CEO and Managing Director on 29 June 2015,
replacing Rhys Holleran as CEO. Nick McKechnie was appointed
Chief Financial Officer (“CFO”) on 8 September 2014, a role
that had been vacant following the departure of Peter Lewis in
July 2014. Vijay Solanki was appointed to the role of Director of
Digital and Innovation on 11 May 2015 following the departure of
Clive Dickens. Following the conclusion of the financial year, Brian
Gallagher was appointed to the newly created role of Chief Sales
Officer on 15 July 2015. The Board is confident that the executive
group is well placed to develop and implement the strategic agenda
for the Group over the coming years.
– New Short Term-Incentive (“STI”) plan commenced 1 July 2014:
– The new plan better aligns all Executive Key Management
Personnel (“KMP”) with the Group’s short-term objectives and
strategy by having a consistent framework for financial and non-
financial metrics, and re-weighting financial and non-financial
metrics from 70%/30% to 80%/20%.
– The Group-wide financial measure for Executive KMP has been
changed to net profit after tax (“NPAT”) rather than earnings
before interest, tax, depreciation and amortisation (“EBITDA”)
to better align executive performance with bottom line return
to shareholders.
– Long-Term Incentive (“LTI”) plan commenced 1 July 2014:
– The new plan comprises one consistent plan limited to KMP
only, with a three-year performance period with no vesting
possible before the end of the performance period.
– The new plan introduces an additional performance measure,
with a TSR (50%) and Earnings Per Share (“EPS”) (50%)
performance hurdle applying to awards.
Salary increases
There were no salary increases for Executive Key Management
Personnel (“KMP”) during the year, apart from Rick Lenarcic who was
promoted to Executive Director – Regional Operations and received a
new remuneration package on promotion. With the commencement of
a new CEO and a review of KMP remuneration, a further increase was
given to Rick Lenarcic for 2016 in recognition of his performance and
to align his salary with other KMP and market rates.
CEO compensation
The new CEO was engaged with a similar remuneration package to the
former CEO with a 5% increase in base remuneration to $1,050,000.
The former CEO was paid out his contractual entitlements as set
out on page 26.
STI achievement
For 2015, overall achievement of financial STIs for the Executive KMP
was 7%, and non-financial KPIs was 80%.
The Group did not achieve the financial STI gateway of 90% of
budgeted NPAT, therefore no Executive KMP were awarded any
Group wide financial STI payments. We are pleased to report that the
Regional operating segment achieved 100% of budgeted EBITDA and
Rick Lenarcic was awarded 100% of his financial STI for this measure.
Executive KMP received between 50% and 100% of their non-
financial STI’s depending on achievement of their KPIs.
LTI achievement
No LTI tranches vested during the year or at 1 July 2015.
Further detail on the STI and LTI outcomes for 2015 are set out in
section 5 of the Remuneration Report.
Retention bonus
The Board agreed that Nick McKechnie and Guy Dobson would be
provided with a retention bonus opportunity upon the transition of the
former CEO Rhys Holleran. The retention bonus for Nick McKechnie
is $120,000 (subject to continuing employment to 30 June 2016)
and Guy Dobson is $100,000 (subject to continuing employment and
certain other performance targets). Further details on the potential
retention bonuses can be found on page 30.
The Board would like to thank Rhys Holleran for his significant
contribution to the Group over 18 years, and wishes him all the best
for the future. He was instrumental in bringing the Group together
in 2011 and has left a strong legacy to pass on to the new CEO
Grant Blackley.
The Group remains focused on delivering sustainable value for our
shareholders. Ensuring we maintain an executive remuneration
framework which aligns with this objective and supports our business
strategy continues to be a key priority for the Board. The Board
recognises it is our responsibility to maintain shareholder confidence
in our leadership of the Group and our remuneration practices, and to
this end we value your feedback and look forward to welcoming you to
our 2015 Annual General Meeting.
Yours faithfully,
Yours faithfully,
Leon Pasternak
Chairman of the Remuneration Committee
21
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 REMUNERATION REPORT
FOR YEAR ENDED 30 JUNE 2015
Introduction
Contents
1.
2. KMP disclosed in this report
3. Remuneration governance
4. Executive remuneration policy and framework
5. KMP remuneration
6. Details of share-based payments
7. Non-Executive Director fee policy
8. Directors’ and Executives’ holdings of shares
9. Other remuneration information
10. Auditor’s independence declaration
Introduction
1.
The information provided in this Remuneration Report has been
audited as required by section 308(3C) of the Corporations Act 2001.
2. Key management personnel disclosed in this report
The Key Management Personnel (“KMP”) covered in this
Remuneration Report are those people having authority and
responsibility for planning, directing and controlling the activities of
the Group, directly or indirectly. The table below outlines the KMP
at any time during the financial year, and unless otherwise indicated,
they were KMP for the entire year.
Name
Role
Non-Executive Directors (“NED”)
(see pages 18-20 for details about each NED)
Peter Bush
Non-Executive Director (Chairman)
(appointed 25 February 2015), Independent
Non-Executive Director (Deputy Chairman),
Independent
Non-Executive Director, Independent
Non-Executive Director, Independent
Non-Executive Director
(appointed 1 September 2014), Independent
Non-Executive Director
(appointed 1 September 2014), Independent
Non-Executive Director
(appointed 1 September 2014), Independent
Non-Executive Director
(appointed 23 April 2015), Independent
Non-Executive Director (Chairman)
(resigned 25 February 2015),
Non-Independent
Non-Executive Director
(resigned 21 October 2014),
Non-Independent
CEO and Managing Director
(appointed 29 June 2015)
Executive Chairman
(from 11 May 2015 to 29 June 2015)
Leon Pasternak
Chris de Boer
Peter Harvie
Rob Murray
Kathy Gramp
Glen Boreham
Helen Nash
Max Moore-Wilton
Michael Carapiet
Executive Directors
Grant Blackley
Peter Bush1
22
Name
Executives
Rhys Holleran1
Nick McKechnie
Guy Dobson
Rick Lenarcic2
Andrea Ingham3
Vijay Solanki
Craig Bruce2
Clive Dickens
Peter Lewis
Role
CEO (resigned 31 July 2015)
CFO (appointed 8 September 2014)
Executive Director – Metro Operations
Executive Director – Regional Operations
(effective 1 October 2014)
National Sales Director
Director of Digital and Innovation
(appointed 11 May 2015)
Head of Content
(ceased 30 September 2014)
Director of Digital and Innovation
(resigned 20 January 2015)
CFO (resigned 16 July 2014)
1 Peter Bush assumed the role of Executive Chairman for the period following the
announcement of the resignation of Rhys Holleran as CEO and appointment of
Grant Blackley as CEO and Managing Director. As such, the remuneration he
received during his time as Executive Chairman has been separated from the
director fees he received as a non-executive director. Rhys Holleran’s employment
ceased on 31 July 2015 and as such, he remained employed for the entire 2015
financial year. Rhys Holleran ceased being KMP on 30 June 2015.
2 Following the implementation of a new management structure on 1 October
2014, Rick Lenarcic became Executive Director – Regional and was elevated to
KMP. With the appointment of Guy Dobson as Executive Director – Metro, Craig
Bruce ceased being KMP on 30 September 2014. Remuneration is disclosed for
the period the Executive was considered KMP.
3 Andrea Ingham ceased being KMP on 30 June 2015.
Changes since the end of the reporting period
Rhys Holleran’s employment ceased with the Company on 31 July
2015. Brian Gallagher was appointed to the role of Chief Sales Officer
on 15 July 2015. Andrea Ingham resigned from her role as National
Sales Director on 17 July 2015.
3. Remuneration governance
The Board has established a Remuneration Committee (“the
Committee”). It is responsible for making recommendations on
remuneration matters to the Board on:
– The over-arching executive remuneration framework
– Operation of the incentive plans which apply to the CEO and
CFO, including the quantum of STI paid to the CEO and CFO for
achievement against KPIs and performance hurdles
– Remuneration levels of CEO and CFO
– NED fees
The CEO is responsible for the management of remuneration levels
and incentive plans for senior executives.
The Committee’s objective is to ensure remuneration policies and
structures are fair, competitive and aligned with the long-term interests
of the Group. In 2014 Ernst & Young (“EY”) was engaged by the
Committee as an independent remuneration advisor to assist with
remuneration benchmarking and an incentive plan review.
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 EY’s terms of engagement included specific measures designed to
ensure the independence of the advice provided. EY was required to
maintain independence from management, and any advice regarding
KMP remuneration was provided directly to the Committee. The
Committee recognises that to effectively perform its role, it was
necessary for EY to interact with management to obtain relevant
information and work on approved matters from time to time. To
ensure EY remained independent, members of management were
precluded from requesting services which would be considered
a remuneration recommendation as defined by the Corporations
Amendment (Improving Accountability on Director and Executive
Remuneration) Act 2011.
a) Remuneration mix
To ensure that executive remuneration is aligned to Group
performance, a portion of the executives’ target remuneration is
“at risk”. The approximate target remuneration mix for the 2015
financial year was:
Target remuneration mix
CEO
57%
27%
16%
0%
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Fixed remuneration
STI
LTI
No remuneration recommendation was provided by EY or any other
external advisors during the 2015 financial year.
CFO
In order to assess the performance of the Group’s Long-Term Incentive
plans, the Committee has engaged Deloitte Touche Tohmatsu
(“Deloitte”) to prepare a report at each vesting date to determine
the Group’s Total Shareholder Return (“TSR”) Ranking within the
comparator group and Earnings Per Share (“EPS”) growth as defined
in each of the Long-Term Incentive Plans.
The 2014 Corporate Governance Statement provides further
information on the role of the Committee. The 2015 Corporate
Governance Statement will be issued with the 2015 Annual Report.
4. Executive remuneration policy and framework
The objective of the Group’s executive reward framework is to ensure
remuneration is reasonable for skills and expertise, and reward for
performance is competitive and appropriate for the results. The
framework aligns executive reward with the achievement of strategic
objectives and the creation of value for shareholders, and is informed
by market practice for delivery of reward. The Board aims for the
executive reward framework to satisfy the following key criteria:
– Market competitive and reasonable
– Acceptable to shareholders and aligned to shareholders’ interests
– Linked to Group performance
– Transparency regarding reward outcomes
The framework provides a mix of fixed and variable remuneration
consisting of a blend of short- and long-term incentives. More senior
roles in the organisation have a greater weighting towards variable
remuneration, compared to more junior roles.
The executive remuneration framework currently has the
following components:
– Fixed remuneration – comprising base pay, benefits and
superannuation
– STI
– LTI
64%
18%
18%
0%
10% 20% 30% 40% 50% 60% 70%
80% 90% 100%
Fixed remuneration
STI
LTI
Other KMP
69%
15%
16%
0%
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Fixed remuneration
STI
LTI
Subsequent to the review of executive remuneration conducted by
the Committee during 2014, the Group’s policy remuneration mix
for executives is:
Fixed remuneration
STI
LTI
(% of target total
remuneration)
50-60%
60-70%
(% of target total
remuneration)
20-25%
15-20%
(% of target total
remuneration)
20-25%
15-20%
60-70%
15-20%
15-20%
CEO
CFO
Other
Executive
KMP
In making this determination, the Committee had regard to fixed
remuneration and target total remuneration compared to two
comparator groups selected based on company size considerations;
one comparator group comprised companies with a similar market
capitalisation to the Group and the other comparator group comprised
companies with both a similar market capitalisation and revenue
to the Group.
Based on the findings of the benchmarking exercise, the Committee
believes the Group’s remuneration mix policy is broadly aligned with
companies of similar size in the market, albeit with a slightly heavier
weighting toward fixed remuneration.
Over time when new contractual agreements are entered into, the
Group will look to move to a remuneration mix that is more closely
aligned with its peers.
23
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 b) Remuneration positioning
The Group’s policy is to position fixed remuneration at the median and total target remuneration between the 25th percentile and the median
of the relevant comparator group. The Board believes this current positioning is appropriate given the need to provide a remuneration reward
framework which is market competitive and reasonable whilst being acceptable to shareholders.
5. KMP remuneration
a) Executive service agreements
Remuneration and other terms of employment for the CEO and the other executives are formalised in service agreements. Each of these
agreements provide for the provision of base salary, performance-related cash bonuses and other non-monetary benefits with the key terms
outlined below:
Name1
Grant Blackley
Nick McKechnie
Guy Dobson
Rick Lenarcic
Vijay Solanki
Brian Gallagher2
Type of agreement
Permanent
Permanent
Permanent
Permanent
Permanent
Permanent
Base salary including
superannuation
1,050
519
652
399
377
519
STI
(on target)
$’000
500
150
100
100
80
150
LTI
value
$’000
300
150
100
100
100
100
Termination notice
period
6 mths either party
6 mths either party
6 mths either party
12 weeks either party
6 mths either party
6 mths either party
1 Service contracts for only those KMP who have remained KMP to the date of this report have been detailed in this table.
2 Brian Gallagher commenced employment with the Group on 15 July 2015 as Chief Sales Officer and will be KMP for the 2016 financial year.
b) Details of executive remuneration
The tables below outline statutory remuneration of executives who were KMP (excluding NEDs which are disclosed at 7d) in 2015 and 2014 in
accordance with statutory rules and applicable Accounting Standards.
2015
Name
Executives
Grant Blackley
Peter Bush
Rhys Holleran
Nick McKechnie
Guy Dobson
Rick Lenarcic
Andrea Ingham
Vijay Solanki
Craig Bruce
Clive Dickens
Peter Lewis
Total Executive KMP
Short-term employee benefits
Cash salary
and fees1
$
8,750
51,136
975,000
407,197
633,530
210,000
401,500
50,214
130,882
202,192
94,573
3,164,974
Cash
STI
$
–
–
70,000
17,500
14,000
68,003
10,000
–
–
–
–
179,503
Non-
monetary
benefits
$
–
–
33,536
2,461
5,872
12,829
5,872
–
–
3,652
–
64,222
Post-
employment
benefits
Super
contribution
$
–
–
25,000
17,146
18,873
14,088
18,873
4,696
4,696
16,761
4,641
125,605
Long-term benefits
Share-based
payments
Other
long-term
benefits 2
Termination
Performance
rights
$
$
$
–
–
–
–
(1,088,498) 1,990,034
–
–
–
–
–
–
–
–
(1,046,426) 1,990,034
2,345
11,632
25,538
3,420
3,752
(11,728)
7,113
–
–
–
116,667
50,000
98,605
76,801
88,884
–
–
–
–
430,957
Total
$
9,581
51,136
2,121,739
496,649
782,512
407,259
528,549
58,662
123,850
229,718
99,214
4,908,869
1 A number of Executive KMP did not hold their roles for the full financial year. Remuneration is only disclosed for the time they were KMP as specified on page 22.
2 Amounts represent movements in employee leave entitlements with a negative balance representing an overall reduction in the employee leave provision balance
compared with prior year.
24
REMUNERATION REPORTFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 2014
Name
Executives
Rhys Holleran
Stephen Kelly1
Peter Lewis2
Guy Dobson
Craig Bruce
Andrea Ingham
Clive Dickens
Total Executive KMP
Short-term employee benefits
Post-
employment
benefits
Long-term benefits
Share-based
payments
Cash salary
and fees
$
975,000
437,500
21,825
633,530
523,530
340,482
357,500
3,289,367
Cash
STI
$
189,000
254,000
–
–
30,000
–
64,000
537,000
Non-
monetary
benefits
Super
contribution
Other
long-term
benefits 3
Termination
Performance
rights
$
$
$
$
$
Total
$
35,933
3,097
–
14,042
2,739
14,042
14,042
83,895
25,000
14,583
2,019
17,775
17,775
17,775
25,000
119,927
62,855
(91,667)
–
7,600
14,019
24,135
(49,560)
(32,618)
–
74,296
–
–
–
–
–
74,296
349,965
49,995
–
90,269
124,988
72,216
72,216
759,649
1,637,753
741,804
23,844
763,216
713,051
468,650
483,198
4,831,516
1 Remuneration disclosed is for the period 1 July 2013 until 19 January 2014.
2 Remuneration disclosed is for the period 16 June 2014 to 30 June 2014.
3 Amounts represent movements in employee leave entitlements with a negative balance representing an overall reduction in the employee leave provision balance
compared with prior year.
The following table shows for the remuneration received in each of the years, the relevant percentages for fixed remuneration, STI and LTI:
Executives2
Grant Blackley
Rhys Holleran1
Nick McKechnie
Guy Dobson
Rick Lenarcic
Andrea Ingham
Vijay Solanki
Fixed Remuneration
At risk – STI
At risk – LTI
2015
2014
2015
2014
2015
2014
100%
84%
86%
86%
69%
81%
100%
n/a
67%
n/a
88%
n/a
85%
n/a
0%
6%
4%
2%
15%
2%
0%
n/a
12%
n/a
0%
n/a
0%
n/a
0%
10%
10%
12%
16%
17%
0%
n/a
21%
n/a
12%
n/a
15%
n/a
1 The split of remuneration for Rhys Holleran excludes the termination payment he received.
2 Craig Bruce, Clive Dickens and Peter Lewis are no longer KMP and are not disclosed above – all had 100% fixed remuneration for 2015. Peter Bush was only entitled to
fixed remuneration during his time as Executive Director.
c) Fixed remuneration
Fixed remuneration is structured as a total employment package which may be delivered as a combination of base pay (i.e. cash),
superannuation and prescribed non-financial benefits at the executive’s discretion.
Superannuation is in line with Superannuation Guarantee Charge (“SGC”) legislation.
Fixed remuneration for executives is reviewed annually to ensure the executive’s pay is competitive with the market. As part of this review
process, external remuneration advisors are engaged from time to time to provide analysis and advice to ensure fixed remuneration is set to
reflect the market for a comparable role. An executive’s fixed remuneration is also reviewed on promotion.
There are no guaranteed fixed remuneration increases included in any executive contracts.
d) Changes during the year
In response to shareholder feedback and to better align STI metrics to the financial metrics in the Group’s business plan, the Group-wide
financial metric for the STI has been changed from EBITDA to NPAT. For the CEO and CFO, this is the only financial metric. Certain executives
are also assessed against other financial metrics as outlined on the following page.
The weighting between financial and non-financial metrics is consistently applied across all Executive KMP – 80% financial and
20% non-financial.
25
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 Upside against the financial metric will be available for all executives such that participants can receive up to 115% of their target STI
opportunity for stretch performance against the financial metric.
Following the implementation of a new management structure on 1 October 2014, Rick Lenarcic became KMP and Craig Bruce
ceased to be KMP.
Following the annual review for 2014, the Committee did not apply any fixed remuneration increases to existing Executive KMP. With the
commencement of the new CEO, all KMP remuneration was reviewed and a salary increase was approved for 2016 for Rick Lenarcic of
$100,000, taking his fixed remuneration to $399,308.
The fixed remuneration of Grant Blackley is $1,050,000, an increase from $1,000,000 (from former CEO), representing an increase of
approximately 5% to reflect competitive market remuneration for this role.
The fixed remuneration of Nick McKechnie is $518,783, reduced from $617,775 (from former CFO), representing a decrease of
approximately 16%.
The fixed remuneration of Vijay Solanki is $370,373, reduced from $400,373 (from former Director of Digital and Innovation), representing a
decrease of approximately 7%.
e) Terminations following the end of financial year
Rhys Holleran ceased employment with the Group on 31 July 2015 and received a termination payment of $1,990,034 that included payment of
all outstanding leave entitlements of $1,021,474 and 12 months payment in lieu of notice of $968,560 as both parties agreed it was beneficial
for the Group for a new CEO to be appointed as soon as possible.
Andrea Ingham ceased employment with the Group on 17 July 2015 and received a termination payment of $190,046 including all outstanding
leave entitlements and payment in lieu of notice.
f) Short-term incentives
The table below outlines details of the STI plan.
What is the STI?
How is the STI
delivered?
What are the
STI target
opportunities?
What are the
performance
measures?
The STI is an annual “at risk” bonus and is designed to reward executives for meeting or exceeding financial and
non-financial objectives.
STI is awarded in cash, and is not subject to deferral.
Given the executives’ relatively modest potential STI quantum, the Committee does not currently believe it is
appropriate to introduce STI deferral for Executive KMP. To provide a fair and competitive executive remuneration
package, introducing STI deferral would require an increase in STI opportunity (with a corresponding increase in
target total remuneration) which the Committee does not believe would be appropriate at this time.
The CEO has a target STI opportunity of 47% of fixed remuneration, CFO of 29% of fixed remuneration and other
executives have an STI opportunity of approximately 22% of fixed remuneration.
Each year, the Committee sets the KPIs for the CEO and CFO for the financial year, with a view to directly aligning the
individuals’ annual incentive opportunity to execution of the Group’s business strategy.
The CEO determines the KPIs for the other senior executives which are aligned to delivery of the strategy and
performance of the business. Payments under the STI are determined by performance against KPIs.
For 2015, STI performance measures and weightings vary by executive depending on individual accountabilities. The
metrics and their rationale for selection are as follows:
Financial metrics
Rationale for selection
Group NPAT compared with budget
(excluding significant items where
relevant)
Segment EBITDA compared with budget
Sales-related targets
Ratings targets
Key financial metric for the Group that drives financial results and
encourages senior executives to work together for the overall benefit of
the Group
Focuses senior executive attention on results and performance for
segments they have direct responsibility over
Focuses senior executives on achieving sustainable financial
performance from growing top line revenue
Revenue performance of the Group is largely dependent on ratings on
both radio and television and drives the ability for the Group to deliver
financial results
26
REMUNERATION REPORTFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 What are the
performance
measures?
(continued)
Non-financial metrics
Strategic
Operational
People
External relations
Rationale for selection
Focuses senior executives on strategic initiatives (such as network
strategy and diversification of revenue streams) that deliver growth,
improved business performance and shareholder value
Key operational deliverables align management to the strategic
initiatives of the Group with a focus on long-term sustainability of
earnings
Effective leadership and talent development and retention are critical
to the success of the business and underpin financial performance
Development of close and constructive relationships with key
stakeholders strengthens our brand and fosters long-term relationships
that assist in achieving financial and non-financial objectives and
enhancing shareholder value
Is there an STI gateway?
How is performance
assessed?
Other features
– Weighted 80% financial metric for all Executive KMP (actual NPAT against budget for CEO and CFO, with various
financial metrics for other executives) and 20% non-financial metrics
– The payout schedule against the financial metric is outlined in the table below:
% of budgeted
NPAT achieved
<90%
90% to 100%
100% to 120%
Percentage of financial component payable
(i.e. 80% of total STI)
0%
Straight-line between 50% and 100%
Straight-line between 100% and 115%
– No upside is available against the non-financial metrics.
Financial gateway of 90% of budgeted financial metric must be achieved before any financial STI is payable. There is
no gateway for the non-financial STI, as the quantum is relatively modest.
CEO and CFO
At the end of the financial year the Committee assesses the actual performance of the Group and the CEO and
CFO against the KPIs and recommends the STI quantum to be paid to the individuals for approval by the Board.
These assessment methods have been chosen as they provide the Committee with an objective assessment of each
individual’s performance.
Other Executives
At the end of the financial year the CEO assesses the actual performance of the Group and the executives against
the KPIs and determines the STI quantum to be paid to the individuals. The CEO provides these assessments to the
Committee annually.
The Committee and the CEO have the discretion to take into account any significant non-cash items (for example
impairment losses), acquisitions and divestments and one-off events/abnormal/non-recurring items in determining
whether the financial KPIs have been achieved, where it is considered appropriate for linking remuneration reward to
Company performance.
Clawback
There are currently no clawback clauses for STI payments.
Change of Control
In the event of a change of control before the STI payment date, the STI payment is pro-rated for time and
performance, subject to Board discretion.
Minimum Employment Period
Participants must be employed for at least three months in the performance period to be entitled to receive
an STI payment.
Termination
For “Bad Leavers” (defined by the Group as resignation or termination for cause), in the event of resignation the STI
payment is forfeited unless otherwise determined by the CEO or the Board as appropriate.
For cessation of employment for reasons other than those specified for “Bad Leavers”, the STI payment is pro-rated
for time and performance, unless otherwise determined by the Board.
27
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 g) Remuneration and Group performance
A key objective of the executive remuneration policy is to link a proportion of executive remuneration to the performance of the Group, with an
emphasis on the creation of sustainable value for shareholders.
Financial performance from continuing operations for the past five years is indicated by the following table:
Revenue
EBITDA
EBITDA %
Net profit before tax
Net profit after tax (“NPAT”)
NPAT %
Net profit after tax excluding significant items
NPAT % excluding significant items
Opening share price
Closing share price
Dividend/Distribution
Restated
30 June 2015
30 June 2014
30 June 2013
30 June 2012
30 June 20111
$’000
$’000
611,120
163,262
26.7%
(265,216)
(284,950)
(46.6%)
64,783
10.6%
640,834
179,705
28.0%
(279,577)
(296,008)
(46.2%)
79,629
12.4%
$’000
653,114
210,991
32.3%
133,269
96,111
14.7%
96,111
14.7%
$’000
687,313
225,780
32.8%
126,282
95,022
13.8%
95,022
13.8%
$’000
492,811
161,030
32.7%
87,232
64,060
13.0%
64,060
13.0%
30 June 2015 30 June 2014 30 June 2013 30 June 2012 30 June 2011
$1.07
$0.97
6.0c
$1.43
$1.07
7.5c
$1.20
$1.43
9.0c
$1.55
$1.20
10.0c
$1.64
$1.55
10.0c
1 Restatement for finalisation of allocation of purchase price for Austereo acquisition in accordance with Accounting Standards.
28
REMUNERATION REPORTFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 h) STI outcomes
The table below outlines the weighting of financial and non-financial KPIs in relation to each Executive KMP for 2015 and the
performance achieved.
Financial
80%
Executive
Measure
Rhys
Holleran
– NPAT against budget
Performance
Not achieved
Nick
McKechnie
– NPAT against budget
Not achieved
Guy
Dobson
– NPAT against budget
– Metro EBITDA against
Not achieved
Budget
Non-financial
20%
Measure(s)
Performance
Mixture of Strategic,
Operational, People and
External Relations relevant to
the executive
Mixture of Strategic,
Operational, People and
External Relations relevant to
the executive
Mixture of Strategic,
Operational, People and
External Relations relevant to
the executive
88% achievement of
measure. CEO’s management
in the last 12 months of
implementing a strategic
plan for the regeneration
of the metro business and
the further investment in
digital, as well as increasing
employee engagement and
the development of a values-
based culture.
70% achievement of measure.
CFO’s management of investor
relations, development of
strategic financial plans
and execution of the capital
management strategy during
the year.
70% achievement of measure.
The execution of a content
regeneration strategy across
metro operations and the
development of new content
opportunities, providing future
growth opportunities for the
Group.
100% achievement of
measure. Implementing a
sales and operational strategy
that has continued to deliver
growth and a motivated
employee base in the regional
markets despite a soft TV
advertising market.
50% achievement of
measure. Development of a
sales strategy to monetise
the regeneration of the
metro radio assets and the
management of external
relationships.
Rick
Lenarcic
– NPAT against budget
– Regional EBITDA against
Budget
NPAT not achieved however
Regional EBITDA achieved
to 100%
Mixture of Strategic,
Operational, People and
External Relations relevant to
the executive
Andrea
Ingham
– NPAT against budget
– Group national sales budget
– Radio market share and TV
power ratio targets
Not achieved
Mixture of Strategic,
Operational, People and
External Relations relevant to
the executive
Grant Blackley, Vijay Solanki and Peter Lewis were not eligible to receive any STI payment during the year as they were not employed for at least
three months. Clive Dickens ceased his employment during the year and did not receive any STI payment.
29
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 i) STI achieved
The following table outlines the percentage of target STI achieved (and forfeited) in relation to financial and non-financial KPIs, and the total STI
awarded, for each Executive KMP for 2015.
Financial
Non-financial
Total
STI On Target
Opportunity
$
400,000
125,000
100,000
100,000
100,000
Weighting
Achieved
Forfeited
Weighting
Achieved
Forfeited
STI awarded
%
80%
80%
80%
80%
80%
%
0%
0%
0%
60%
0%
%
100%
100%
100%
40%
100%
%
20%
20%
20%
20%
20%
%
88%
70%
70%
100%
50%
%
12%
30%
30%
0%
50%
$
70,000
17,500
14,000
68,003
10,000
Rhys Holleran
Nick McKechnie
Guy Dobson
Rick Lenarcic
Andrea Ingham
j) Retention bonus
The Board determined that Nick McKechnie and Guy Dobson would be provided with a retention bonus opportunity upon the transition of the
former CEO Rhys Holleran. The purpose of the retention bonus is to incentivise the selected KMP to remain with the Group during the transition
period of leadership by the Executive Chairman and following the appointment of a new CEO. The retention bonus for Nick McKechnie is
$120,000 (subject to continuing employment to 30 June 2016) and Guy Dobson is $100,000 (subject to continuing employment and certain
other performance targets). Instead of a retention bonus, Rick Lenarcic was given a $100,000 salary increase for 2016.
As this retention bonus is in addition to the usual STI scheme it is proposed that it be issued at the end of the period in equity. Levels of equity
holding by management are limited given the low vesting levels of historic LTI schemes and the turnover of KMP and this will add to a process
of increasing the level of equity holding by management and provide greater alignment with shareholders. For 2016 the Committee will review
whether a NED and KMP shareholding policy is appropriate.
k) Long-term incentives
What is the LTI?
What is the performance
and vesting period?
The Group operates an executive LTI plan, which provides Executive KMP with grants of performance rights over
ordinary shares, for nil consideration.
A new plan was introduced during the year that issued performance rights to KMP that are exercisable subject to a
three-year performance period and the satisfaction of set performance criteria during the period that includes both
EPS targets (50% weighting) and TSR targets (50% weighting). The residual plan that included both Executive
KMP and other senior executives has a number of performance rights that will reach their vesting dates over the next
3 years, as these plans were for either 3 or 4 years. These performance rights vest based on satisfaction of TSR
performance criteria only.
During the financial year, the Group introduced a revised LTI plan commencing on 1 July 2014, applying to Executive
KMP only. This plan has a three-year performance period with a single-point vesting schedule (i.e. 100% of
performance rights vest at the end of the performance period, subject to performance criteria being met).
30
REMUNERATION REPORTFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 What are the
performance measures
and hurdles?
In response to shareholder concerns regarding the use of a single LTI performance measure and to more accurately
capture the Group’s overall financial performance, the Group has introduced an additional performance measure
based on growth in EPS to supplement the relative TSR performance measure.
TSR
Performance against a relative TSR hurdle determines vesting for 50% of the performance rights issued in this
financial year. TSR was selected as it provides a comparison of relative shareholder returns that is relevant to most of
the Group’s investors.
The relative TSR performance hurdle takes into account share price appreciation plus reinvested dividends,
expressed as a percentage of investment and adjusted for changes in the Group’s capital structure.
In order for performance rights to vest and convert to shares, the Group’s TSR over the performance period must be
at or above the 51st percentile against the constituents of the ASX Consumer Discretionary Index, excluding News
Corporation at each grant date.
The comparator group was selected as it represents a range of alternate companies that shareholders could invest in
while maintaining portfolio sector balance. News Corporation has been excluded from each comparative group given
the extent of its international business operations and exposure to the declining print business.
TSR Performance
Below 51st percentile
51st percentile
51st to 75th percentile
At or above 75th percentile
% of Allocation that vests
Nil
50%
Straight-line vesting between 50% and 100%
100%
There is no re-testing of performance hurdles under the LTI plan.
EPS
EPS Performance determines vesting for 50% of the performance rights issued in this financial year. In order for
performance rights to vest, the Company’s adjusted EPS performance over the period must be at or above a 3%
Compound Annual Growth Rate (CAGR). Adjusted EPS is considered appropriate as it excludes the impact of
significant or non-recurring items (both income and costs) and so provides a better measure of underlying long-term
performance.
Adjusted EPS will be calculated by dividing the adjusted profit after tax attributable to members of SCMGL for the
relevant reporting period (reported profit after tax, adjusted for the after-tax effect of any significant or non-recurring
items) by the weighted average number of ordinary shares of the Company over the relevant reporting period.
EPS Performance
Below 3% CAGR
3% CAGR
3% to 8% CAGR
At or above 8% CAGR
% of Allocation that vests
Nil
50%
Straight-line vesting between 50% and 100%
100%
How is performance
assessed?
The Group engaged Deloitte to prepare a report to determine the Group’s EPS performance and TSR Ranking within
the comparator group (being the ASX Consumer Discretionary Index, excluding News Corporation at each grant date)
as defined in each of the Long-Term Incentive Plans at each vesting date.
31
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 Other features
Share Plan Trust
The Group has established the Southern Cross Media Group Employee Share Plan Trust (“Trust”). The Trust will
acquire and hold any shares (“Plan Shares”) that the employee becomes entitled to under the LTI plans, until
such time as the employee elects to remove the Plan Shares from the Trust or the employee departs the Company,
whichever is earlier.
Change of Control
If a Change of Control event occurs in relation to the Group, then:
– the performance rights which have not been exercised at the time of the announcement to the ASX of the Change
of Control event may vest pro-rata for time and performance, subject to Board discretion; and
– any Plan Shares held by the Trust on behalf of a Participant will immediately vest in the relevant participant upon
the announcement to ASX of the Change of Control event.
Termination
For “Bad Leavers” (defined by the Group as resignation or termination for cause), any unvested performance rights
are forfeited, unless otherwise determined by the Board.
For cessation of employment for reasons other than those specified for “Bad Leavers”, the Board has discretion
to vest any unvested performance rights on a pro-rata basis taking into account time and the current level of
performance against the performance hurdle, or to hold the LTI award to be tested against performance hurdles at
the end of the original vesting/performance period.
Treatment of dividends
There are no dividends payable to participants on unvested performance rights. Once the performance rights have
vested to fully paid ordinary shares, the participant will be entitled to dividends on these shares.
Sourcing of shares
The Board has the discretion to either purchase shares on-market or to issue new shares in respect of vesting
performance rights. To date, the Board has elected to issue new shares for vesting performance rights.
6. Details of share-based payments
The fair value of the performance rights issued during 2015 was determined using a Monte Carlo simulation model for the TSR performance
rights and a Black-Scholes-Merton model for the EPS performance rights, with the following inputs:
Grant date
Grant date share price
Fair value at grant date
Exercise price
Dividend yield
Risk free interest rate
Share price and TSR volatility
Relative TSR
12 January 2015
$1.12
$0.65
Nil
5.90%
2.50%
35.58%
Absolute EPS
12 January 2015
$1.12
$0.97
Nil
5.90%
2.50%
35.58%
The fair value at grant date of the securities granted is adjusted to reflect market vesting conditions, but excludes the impact of any non-market
vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the
number of shares that are expected to be issued. At each balance sheet date, the entity revises its estimate of the number of shares that are
expected to be issued. The employee benefit expense recognised each period takes into account the most recent estimate. The impact of the
revision to original estimates, if any, is recognised in profit or loss with a corresponding adjustment to equity. Where the terms of the share-
based payment entitlement are modified in favour of the employee, the changes are reflected when determining the impact on profit or loss.
32
REMUNERATION REPORTFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 a) Share-based payments
Eligibility and proportion of performance rights that reached vesting date during 2015 belong to the previous LTI plan and as such are solely
dependent on the Group’s TSR performance in comparison to its performance hurdles, as outlined below:
LTI vesting outcomes – 1 July 2015 Vesting date (recorded in 2016 financial year)
The table below details TSR performance against companies in the comparator group and the extent to which the LTI plan grants vested on
1 July 2015 for the performance period ending 30 June 2015.
Tranche
FY12 – Tranche 4
FY13 – Tranche 3
FY14 – Tranche 2
Percentile
ranking
% vested
38.0
30.0
17.0
0%
0%
0%
LTI vesting outcomes – 1 July 2014 Vesting date
The table below details TSR performance against companies in the comparator group and the extent to which the LTI plan grants vested on
1 July 2014 for the performance period ending 30 June 2014.
Tranche
FY11 – Tranche 4
FY12 – Tranche 3
FY13 – Tranche 2
FY14 – Tranche 1
At 30 June 2015 share-based payments granted to KMP are as follows:
Vesting
Date
No. of
Perf Rights
Granted
Value of
Perf Rights
at Grant
Date
$
No. of
Perf Rights
Vested and
Exercised
During
the Year
Vested
and
Exercised
%
No. of
Perf Rights
Forfeited
During
the Year
Value at
Date of
Forfeiture
$
01/07/2017
01/07/2015
01/07/2016
01/07/2017
01/07/2014
01/07/2015
01/07/2016
01/07/2014
01/07/2015
01/07/2014
449,643
114,368
113,257
113,257
238,071
220,104
216,028
174,112
171,551
129,617
350,000
116,655
116,655
116,655
116,655
116,655
116,655
116,655
116,655
116,655
1,940,008
1,399,895
01/07/2017
192,704
192,704
150,000
150,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.0%
–
–
0.0%
–
0.0%
0.0%
–
–
–
–
–
–
238,071
–
–
174,112
–
–
–
–
–
116,655
–
–
116,655
–
Name1
Rhys
Holleran2
Nick
McKechnie
Year
of
Grant
FY15
Plan
FY14
Plan
FY13
Plan
FY12
Plan
FY11
Plan
Total
FY15
Plan
Total
Percentile
ranking
% vested
47.3
39.1
28.0
13.8
0%
0%
0%
0%
No. of
Perf Rights
Remaining
at Year End
449,643
114,368
113,257
113,257
–
220,104
216,028
–
171,551
Forfeited
%
–
–
–
–
100.0%
–
–
100.0%
–
129,617
541,800
116,655
349,965
100.0%
–
100.0% 1,398,208
–
–
–
–
–
–
192,704
192,704
33
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 Vesting
Date
No. of
Perf Rights
Granted
Value of
Perf Rights
at Grant
Date
$
No. of
Perf Rights
Vested and
Exercised
During
the Year
01/07/2017
128,469
100,000
01/07/2015
01/07/2016
01/07/2017
01/07/2014
01/07/2015
01/07/2016
01/07/2017
01/07/2015
01/07/2016
01/07/2017
01/07/2014
01/07/2015
01/07/2016
01/07/2014
01/07/2015
01/07/2014
01/07/2017
01/07/2015
01/07/2016
01/07/2017
01/07/2014
01/07/2015
01/07/2016
01/07/2015
01/07/2016
01/07/2017
01/07/2014
01/07/2015
01/07/2016
32,676
32,359
32,359
102,031
94,330
92,583
514,807
128,469
22,874
22,651
22,651
47,614
44,021
43,206
27,360
26,958
33,330
33,330
33,330
49,995
49,995
49,995
349,975
100,000
23,333
23,333
23,333
23,333
23,333
23,333
18,333
18,333
24,072
409,876
21,667
298,331
128,469
32,676
32,359
32,359
68,020
62,887
61,722
418,492
32,676
32,359
32,359
68,020
62,887
61,722
290,023
100,000
33,330
33,330
33,330
33,330
33,330
33,330
299,980
33,330
33,330
33,330
33,330
33,330
33,330
199,980
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Name1
Guy
Dobson
Rick
Lenarcic
Andrea
Ingham3
Clive
Dickens
Year
of
Grant
FY15
Plan
FY14
Plan
FY13
Plan
Total
FY15
Plan
FY14
Plan
FY13
Plan
FY12
Plan
FY11
Plan
Total
FY15
Plan
FY14
Plan
FY13
Plan
Total
FY14
Plan
FY13
Plan
Total
Vested
and
Exercised
%
No. of
Perf Rights
Forfeited
During
the Year
Value at
Date of
Forfeiture
$
No. of
Perf Rights
Remaining
at Year End
Forfeited
%
–
–
–
–
128,469
–
–
–
0.0%
–
–
0.0%
–
–
–
–
0.0%
–
–
0.0%
–
0.0%
0.0%
–
–
–
–
0.0%
–
–
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
–
–
–
102,031
–
–
102,031
–
–
–
–
47,614
–
–
27,360
–
24,072
99,046
–
–
–
–
68,020
–
–
68,020
32,676
32,359
32,359
68,020
62,887
61,722
290,023
–
–
–
49,995
–
–
49,995
–
–
–
–
23,333
–
–
18,333
–
–
–
–
100.0%
–
–
100.0%
–
–
–
–
100.0%
–
–
100.0%
–
32,676
32,359
32,359
–
94,330
92,583
412,776
128,469
22,874
22,651
22,651
–
44,021
43,206
–
26,958
21,667
63,333
100.0%
100.0%
–
310,830
–
–
–
–
33,330
–
–
33,330
33,330
33,330
33,330
33,330
33,330
33,330
199,980
–
–
–
–
100.0%
–
–
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
128,469
32,676
32,359
32,359
–
62,887
61,722
350,472
–
–
–
–
–
–
–
1 No share-based payments were granted to Grant Blackley, Vijay Solanki or Peter Lewis during the year.
2 Performance rights granted to Rhys Holleran have been treated as follows on termination: all unvested performance rights relating to the FY12, FY13 and FY14 plans were
forfeited. The pro-rata performance rights in relation to the FY15 plan will remain on-foot (being 149,881 performance rights) with the balance of FY15 rights forfeited.
3 All performance rights on issue to Andrea Ingham were forfeited on termination.
34
REMUNERATION REPORTFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 b) Performance rights exercised
There were no performance rights that were exercised during the year.
c) Share trading policy
The Group securities trading policy applies to all NEDs and executives, which is available in the Southern Cross Austereo website,
www.southerncrossaustereo.com.au. The policy prohibits employees from dealing in the Company’s securities while in possession of material
non-public information relevant to the entity.
Executives must not enter into any hedging arrangements over unvested performance rights under the Group’s performance rights plan. The
Company would consider a breach of this policy as gross misconduct, which may lead to disciplinary action and potentially dismissal.
7. Non-Executive Director fee policy
a) NED fee policy
On appointment to the Board, all NEDs enter into a service agreement with the Group in the form of a letter of appointment. The letter
summarises the Board policies and terms, including compensation, relevant to the office of Director.
Fees and payments to NEDs reflect the demands which are made on and the responsibilities of the NEDs. NED fees are reviewed annually by
the Board. The Board has also considered the advice of independent remuneration advisors to ensure NED fees and payments are appropriate
and in line with the market. The Chairman and Deputy Chairman’s fees are determined independently to the fees of other NEDs based on
comparative roles in the market. Neither the Chairman nor Deputy Chairman is present at any discussions relating to determination of their own
fees. NEDs do not receive performance-based pay and are not entitled to the Company’s shares, performance rights or retirement benefits as
part of their fees.
The maximum annual aggregate NED fee pool is $1,500,000 and was approved by shareholders at the Annual General Meeting on
25 October 2011.
The NED fees were last changed with effect from 1 July 2011. Chairman and Deputy Chairman fees are inclusive of committee fees while other
NEDs who chair or are members of a committee receive additional committee fees.
The following NED fees (inclusive of superannuation) have applied in the 2015 and 2014 years:
Base fees – Annual
Chairman1
Deputy Chairman1
Other Non-Executive Directors
Committee fees – Annual
Audit Committee – Chairman
Audit Committee – member
Nomination and Remuneration Committee – Chairman2
Nomination and Remuneration Committee – member2
Nomination Committee – Chairman2
Nomination Committee – member2
Remuneration Committee – Chairman2
Remuneration Committee – member2
2015
$
2014
$
250,000
161,500
125,000
250,000
161,500
125,000
21,000
14,000
15,000
10,000
15,000
10,000
15,000
10,000
21,000
14,000
15,000
10,000
n/a
n/a
n/a
n/a
1 The Chairman and Deputy Chairman do not receive any additional fees for committee work.
2 During the year the Nomination and Remuneration Committee was separated into two separate committees, a Nomination Committee and a Remuneration Committee.
These committees are chaired by the Chairman and Deputy Chairman for no additional fee.
35
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 b) Details of NED fees
The tables below outline statutory remuneration of NEDs for 2015 and 2014 in accordance with statutory rules and applicable Accounting
Standards. NEDs did not receive long-term benefits or share-based payments in 2015 or 2014.
2015
Name
Non-Executive Directors
Peter Bush (Chairman)
Leon Pasternak
Chris de Boer
Peter Harvie
Rob Murray
Kathy Gramp
Glen Boreham
Helen Nash
Max Moore-Wilton
Michael Carapiet
Total
Short-term
employee
benefits
Post-
employment
benefits
Cash salary
and fees
$
Super
contributions
$
76,830
147,488
142,464
126,484
108,066
108,066
102,740
31,735
153,660
31,250
6,503
14,012
13,536
12,016
10,267
10,267
9,760
3,015
13,007
–
Total
$
83,333
161,500
156,000
138,500
118,333
118,333
112,500
34,750
166,667
31,250
1,028,783
92,383
1,121,166
Fees were higher in 2015 than 2014 as the Nomination and Remuneration Committee was split into separate Committees, and an extra Director
was added as a member of the Committees in 2015. In the prior year Marina Darling did not receive any payments.
2014
Name
Non-Executive Directors
Max Moore-Wilton (Chairman)
Leon Pasternak
Chris de Boer
Tony Bell
Michael Carapiet
Peter Harvie
Marina Darling1
Total
Short-term
employee
benefits
Post-
employment
benefits
Cash salary
and fees
$
Super
contributions
$
232,225
147,828
142,792
154,000
125,000
123,568
–
925,413
17,775
13,672
13,208
–
–
11,432
–
56,087
Total
$
250,000
161,500
156,000
154,000
125,000
135,000
–
981,500
1 Marina Darling was granted a leave of absence from the Board due to personal reasons from 1 July 2013 to 16 January 2014. Marina resigned on 16 January 2014.
36
REMUNERATION REPORTFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 8. Directors’ and Executives’ holdings of shares
The aggregate number of Company shares held directly, indirectly or beneficially by Directors of the Company or their related entities as at
30 June 2015 are:
Non-Executive Directors
Peter Bush
Leon Pasternak
Chris de Boer
Peter Harvie
Rob Murray
Kathy Gramp
Glen Boreham
Helen Nash
Executives
Grant Blackley
Rhys Holleran
Nick McKechnie
Guy Dobson
Rick Lenarcic
Andrea Ingham
Vijay Solanki
Received
during the
year on
exercise of
performance
rights
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at
start of year
–
1,064,216
148,571
–
–
–
–
–
1,212,787
–
460,680
–
–
18,343
–
–
479,023
Other
changes
during the
year
–
120,999
–
20,000
–
–
95,000
–
235,999
–
–
26,760
–
(18,343)
–
–
8,417
Balance at
end of year
–
1,185,215
148,571
20,000
–
–
95,000
–
1,448,786
–
460,680
26,760
–
–
–
–
487,440
9. Other remuneration information
Loans to Directors and executives
There were no loans to KMP and their related parties during the year ended 30 June 2015.
Other transactions and balances with KMP and their related parties
During the year there were no other transactions with KMP or their related parties.
10. Auditor’s independence declaration
A copy of the Auditor’s Independence Declaration, as required under section 307C of the Corporations Act 2001, is set out on page 38.
This report is signed in accordance with resolutions of the Directors of Southern Cross Media Group Limited.
Peter Bush
Chairman
Southern Cross Media Group Limited
Sydney, Australia
26 August 2015
Leon Pasternak
Deputy Chairman
Southern Cross Media Group Limited
Sydney, Australia
26 August 2015
37
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015
AUDITOR’S INDEPENDENCE DECLARATION
FOR YEAR ENDED 30 JUNE 2015
Auditor’s Independence Declaration
As lead auditor for the audit of Southern Cross Media Group Limited for the year ended 30 June 2015,
I declare that to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Southern Cross Media Group Limited and the entities it controlled
during the period.
Sam Lobley
Partner
PricewaterhouseCoopers
Melbourne
26 August 2015
PricewaterhouseCoopers, ABN 52 780 433 757
Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
38
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 STATEMENT OF COMPREHENSIVE INCOME
FOR YEAR ENDED 30 JUNE 2015
Revenue from continuing operations
Broadcast and production costs
Employee expenses
Selling costs
Occupancy costs
Promotions and marketing
Administration costs
Share of net profit/(losses) of investments accounted for using the equity method
Profit before depreciation, amortisation, interest, impairment, fair value movements on
financial derivatives and income tax expenses for the year from continuing operations
Depreciation and amortisation expense
Impairment of intangibles and investments
Interest expense and other borrowing costs
Interest revenue
Loss before income tax expense for the year from continuing operations
Income tax expense from continuing operations
Loss from continuing operations after income tax expense for the year
Other comprehensive income that may be reclassified to profit or loss:
Changes to fair value of cash flow hedges, net of tax
Total comprehensive loss for the year attributable to shareholders
Earnings per share attributable to the ordinary equity holders of the Company:
Basic earnings per share (cents)
Diluted earnings per share (cents)
2015
$’000
611,120
(107,756)
(169,313)
(69,313)
(30,684)
(19,009)
(51,962)
179
163,262
(28,534)
(361,414)
(40,216)
1,686
(265,216)
(19,734)
(284,950)
Consolidated
2014
$’000
640,834
(120,440)
(169,084)
(69,835)
(30,555)
(18,307)
(52,897)
(11)
179,705
(27,511)
(392,467)
(41,719)
2,415
(279,577)
(16,431)
(296,008)
4,284
(280,666)
5,769
(290,239)
(39.27)
(39.27)
(41.98)
(41.98)
Note
3
17
8
5
13
13
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
39
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2015
Current assets
Cash and cash equivalents
Receivables
Total current assets
Non-current assets
Receivables
Investments accounted for using the equity method
Property, plant and equipment
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Payables
Provisions
Borrowings
Current tax liabilities
Derivative financial instruments
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Other equity transaction
Accumulated losses
Equity attributable to equity holders
Non-controlling interest
Total equity
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
Note
10
10
17
6
7
5
10
10
15
16
15
16
10
14
14
Consolidated
2014
$’000
2015
$’000
143,051
122,038
265,089
62,090
115,498
177,588
4,550
3,059
163,841
1,289,440
12,336
1,473,226
1,738,315
88,692
20,976
21,261
7,128
–
138,057
647,964
1,732
13,790
663,486
801,543
936,772
1,365,110
3,014
(77,406)
(354,244)
936,474
298
936,772
5,843
2,880
171,343
1,650,612
5,396
1,836,074
2,013,662
85,087
20,643
84
22,956
8,946
137,716
646,472
–
15,864
662,336
800,052
1,213,610
1,686,878
(1,993)
(77,406)
(394,167)
1,213,312
298
1,213,610
40
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 STATEMENT OF CHANGES IN EQUITY
FOR YEAR ENDED 30 JUNE 2015
Contributed
equity
Share-based
payment
reserve
$’000
$’000
Other
equity
transactions
(Accumulated
losses)/
retained
profits
$’000
$’000
Hedge
reserve
$’000
Consolidated
Non-
controlling
interest
$’000
Total
$’000
Total
equity
$’000
1,686,878
–
3,503
–
(5,496)
–
(77,406)
–
(394,167)
(284,950)
1,213,312
(284,950)
298
–
1,213,610
(284,950)
–
–
–
46,232
(368,000)
–
(321,768)
–
–
723
–
–
–
723
4,284
4,284
–
–
–
–
–
–
–
–
–
–
–
–
–
4,284
(284,950)
(280,666)
–
–
723
46,232
368,000
(43,127)
324,873
–
(43,127)
3,828
–
–
–
–
–
–
–
4,284
(280,666)
723
46,232
–
(43,127)
3,828
1,365,110
4,226
(1,212)
(77,406)
(354,244)
936,474
298
936,772
Contributed
equity
Share-based
payment
reserve
$’000
$’000
Other
equity
transactions
(Accumulated
losses)/
retained
profits
$’000
$’000
Hedge
reserve
$’000
Consolidated
Non-
controlling
interest
$’000
Total
$’000
Total
equity
$’000
1,686,878
–
2,324
–
(11,265)
–
(77,406)
–
(34,693)
(296,008)
1,565,838
(296,008)
298
–
1,566,136
(296,008)
–
–
–
–
–
–
–
5,769
5,769
1,179
–
1,179
–
–
–
–
–
–
–
–
–
5,769
(296,008)
(290,239)
–
(63,466)
(63,466)
1,179
(63,466)
(62,287)
–
–
–
–
–
5,769
(290,239)
1,179
(63,466)
(62,287)
1,686,878
3,503
(5,496)
(77,406)
(394,167)
1,213,312
298
1,213,610
2015
Total equity at
1 July 2014
Profit for the year
Other comprehensive
income
Total comprehensive
income
Transactions with equity
holders in their capacity
as equity holders:
Employee share
entitlements
Shares issued, net of
transaction costs
Capital reduction per
Corporations Act
Section 258F
Dividends paid
Total equity at
30 June 2015
2014
Total equity at
1 July 2013
Profit for the year
Other comprehensive
income
Total comprehensive
income
Transactions with equity
holders in their capacity
as equity holders:
Employee share
entitlements
Dividends paid
Total equity at
30 June 2014
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
41
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015
STATEMENT OF CASH FLOWS
FOR YEAR ENDED 30 JUNE 2015
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received from external parties
Tax paid
Net cash inflows from operating activities
Cash flows from investing activities
Payments for purchase of property, plant and equipment
Payments for purchase of intangibles
Proceeds from sale of property, plant and equipment
Net cash flows used in investing activities
Cash flows from financing activities
Dividends paid to security holders
Proceeds from DRP underwrite
Net proceeds from receivables financing
Repayment of borrowings from external parties
Interest paid to external parties
Payments for debt refinancing
Payments for finance leases
Net cash flows used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash assets at the beginning of the year
Cash assets at the end of the year
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
Note
9
Consolidated
2014
$’000
2015
$’000
668,659
(507,267)
1,686
(44,338)
118,740
(28,232)
(242)
9,640
(18,834)
(15,774)
15,774
22,161
–
(40,567)
–
(539)
(18,945)
80,961
62,090
143,051
714,393
(519,538)
2,415
(38,312)
158,958
(27,309)
(53)
134
(27,228)
(63,466)
–
–
(53,000)
(51,319)
(4,140)
(621)
(172,546)
(40,816)
102,906
62,090
42
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2015
Key Numbers
Capital Management
Group Structure
Other
1. Summary of Significant
Accounting Policies
11. Capital Management
17. Non-Current Assets
20. Share-Based Payments
Objectives
– Investments Accounted
for Using the Equity
Method
2. Segment Information
12. Dividends Paid and
18. Subsidiaries
21. Remuneration of Auditors
Proposed
3. Revenue
13. Earnings per Share
19. Parent Entity Financial
22. Related Party Disclosures
Information
4. Significant Items
14. Contributed Equity
and Reserves
23. Leases and Other
Commitments
5. Income Tax Expense
15. Borrowings
24. Events Occurring after
Balance Sheet Date
16. Financial Risk Management
25. Other Accounting Policies
6.
Non-Current Assets
– Property, Plant and
Equipment
7.
Non-Current Assets
– Intangible Assets
8. Impairment
9.
Reconciliation of Profit/
(Loss) after Income Tax
to Net Cash Inflow from
Operating Activities
10. Receivables, Payables and
Provisions
43
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2015
Key Numbers
1. Summary of Significant Accounting Policies
The principal accounting policies adopted in the preparation of these
consolidated financial statements are set out below. In addition,
significant and other accounting policies that summarise the
measurement basis used and that are relevant to an understanding
of the financial statements are provided throughout the notes to
the financial statements. These policies have been consistently
applied to all the years presented, unless otherwise stated. The
financial statements are for the consolidated entity consisting of
Southern Cross Media Group Limited (“the Company”) and its
subsidiaries (“the Group”).
Basis of preparation
This general purpose financial report has been prepared in accordance
with Australian Accounting Standards and the Corporations Act 2001
(where applicable). The Group is a for-profit entity for the purpose of
preparing the financial statements.
Information in respect of the parent entity in this financial report
relates to Southern Cross Media Group Limited.
i) Compliance with IFRS
Compliance with Australian Accounting Standards ensures that the
financial statements and notes of the Group comply with International
Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board (“IASB”). Consequently this financial
report has also been prepared in accordance with and complies with
IFRS as issued by the IASB.
ii) Historical cost convention
These financial statements have been prepared under the historical
cost convention, as modified by the revaluation of certain financial
assets and liabilities (including derivative instruments) at fair value
through profit or loss. All amounts are presented in Australian dollars,
unless otherwise noted.
iii) Comparative figures
Where necessary, comparative figures have been adjusted to conform
to changes in presentation in the current year.
a) Principles of consolidation
The consolidated financial statements incorporate the assets and
liabilities of all subsidiaries of the Company as at 30 June 2015 and
the results of all subsidiaries for the year then ended. Subsidiaries are
all entities over which the Group has control. The Group controls an
entity when the Group is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control
is transferred to the Group. The effects of all transactions between
entities in the Group are eliminated in full.
The purchase method of accounting is used to account for the
acquisition of subsidiaries by the Group except as follows:
– At the time of Initial Public Offering (“IPO”) Southern Cross Media
Australia Holdings Pty Limited (“SCMAHL”) was deemed to be the
accounting acquirer of both Southern Cross Media Group Limited
(“SCMGL”) and Southern Cross Media Trust (“SCMT”), which was
neither the legal parent nor legal acquirer; and
– This reflects the requirements of AASB 3 that in situations where
an existing entity (SCMAHL) arranges to be acquired by a smaller
entity (SCMGL) for the purposes of a stock exchange listing, the
existing entity (SCMAHL) should be deemed to be the acquirer,
subject to consideration of other factors such as management of
the entities involved in the transaction and relative fair values of the
entities involved in the transaction. This is commonly referred to as
a reverse acquisition.
At the time of IPO, in November 2005, the reverse acquisition
guidance of AASB 3 was applied to the Group and the cost of the
Business Combination was deemed to be paid by SCMAHL to acquire
SCMGL and SCMT. The cost was determined by reference to the fair
value of the net assets of SCMGL and SCMT immediately prior to
the Business Combination. The investment made by the legal parent
SCMGL in SCMAHL to legally acquire the existing radio assets is
eliminated on consolidation. In applying the guidance of AASB 3,
this elimination results in a debit of $77.4 million to other equity
transactions. This does not affect the Group’s distributable profits.
Rounding of amounts
The Group and the Company are of a kind referred to in Class
Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the “rounding off” of amounts in the financial
report. Amounts in the financial report have been rounded off in
accordance with that Class Order to the nearest thousand dollars,
unless otherwise indicated.
Critical accounting estimates and judgement
The preparation of the financial report in accordance with Australian
Accounting Standards requires the use of certain critical accounting
estimates. It also requires management to exercise judgement in the
process of applying the accounting policies. Estimates and judgements
are continually evaluated and are based on historical experience and
other factors, including expectations of future events that may have a
financial impact on the entity and that are believed to be reasonable
under the circumstances. Management believes the estimates used
in the preparation of the financial report are reasonable. Actual
results in the future may differ from those reported. Judgements and
estimates which are material to the financial report are found in the
following notes:
Note 7
Note 8
Non-Current Assets – Intangible Assets
Impairment
Page 49
Page 50
Notes to the financial statements
The notes to the financial statements have been restructured
to make the financial report more relevant and readable, with a
focus on information that is material to the operations, financial
position and performance of the Group. Additional information has
also been included where it is important for understanding the
Group’s performance.
Notes relating to individual line items in the financial statements now
include accounting policy information where it is considered relevant
to an understanding of these items, as well as information about
critical accounting estimates and judgements. Details of the impact of
new accounting policies and all other accounting policy information are
disclosed at the end of the financial report in Note 25.
44
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 2. Segment Information
The Group has adopted AASB 8 Operating Segments with effect from 1 July 2009. AASB 8 requires operating segments to be identified on the
basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate
resources to the segments and to assess their performance.
Management has determined operating segments based on the information reported to the Group CEO and the Company Board of Directors.
Management has determined that the Group has two operating segments being the Regional free to air commercial radio and television
broadcasting segment and the Metro free to air radio broadcasting segment.
Metro
Regional
Corporate
Consolidated
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
2014
$’000
224,147
248,702
361,553
363,104
25,420
29,028
611,120
640,834
57,788
73,221
114,723
112,563
(9,249)
2,053
163,262
187,837
–
(8,132)
–
–
–
–
–
(8,132)
57,788
65,089
114,723
112,563
(9,249)
2,053
163,262
179,705
25.8%
26.2%
31.7%
31.0%
(36.4%)
7.1%
26.7%
28.0%
(276,468)
–
(84,946)
(392,467)
–
–
(361,414)
(392,467)
(4,995)
(4,879)
(14,384)
(14,754)
(9,155)
(7,878)
(28,534)
(27,511)
(223,675)
60,210
(15,393)
(294,658)
(18,404)
(5,825)
(226,686)
(240,273)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(19,734)
(38,530)
(16,431)
(39,304)
(284,950)
(296,008)
Segment Revenue
EBITDA/Segment
Result
Significant items
included in
EBITDA1
Statutory EBITDA/
Segment Result
EBITDA % of
Revenue
Impairment of
intangibles and
investments
Depreciation and
Amortisation
Statutory EBIT/
Segment Result
Income tax
expense
Financing costs
Loss for the year
attributable to
shareholders
1 In 2014 the Group recognised a provision for an onerous contract in respect of digital radio (DAB+) contracts of $8.1 million ($5.7 million after tax).
3. Revenue
The profit before income tax from continuing operations included the following specific items of revenue:
Revenue from continuing operations
Sales revenue
Rental revenue
Total revenue from continuing operations
Consolidated
2014
$’000
2015
$’000
604,859
6,261
611,120
635,433
5,401
640,834
Recognition and Measurement
Revenues are recognised at fair value of the consideration received or receivable net of the amount of GST payable to the relevant
taxation authority.
Sales revenue
Revenue represents revenue earned primarily from the sale of television, radio and digital advertising airtime and related activities, including
sponsorship and promotions. Revenue is recorded when the service is provided, being primarily when the advertisement is aired. Commissions
payable to media agencies are recognised as selling costs. Other regular sources of operating revenue are derived from commercial production
for advertisers, including facility sharing revenue and program sharing revenue. Revenue from commercial production is recognised on invoice, at
the time of completion of the commercial.
45
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 4. Significant Items
The net profit/(loss) after tax includes the following items whose disclosure is relevant in explaining the financial performance of the Group.
Significant items are those items of such a nature or size that separate disclosure will assist users to understand the financial statements.
Impairment of intangibles and investments (refer Notes 7 and 8)
Derecognition of Deferred Tax Liability on impairment (Note 5)
Onerous contracts (refer Note 10)
Write-off of unamortised borrowing costs on previous debt facility (refer Note 15)
Resolution of tax dispute (refer Note 5)
Total Significant Items included in net loss after tax
2015
$’000
(361,414)
11,681
–
–
–
(349,733)
Consolidated
2014
$’000
(392,467)
–
(5,670)
(3,900)
26,400
(375,637)
Income Tax Expense
5.
The income tax expense for the financial year differs from the amount calculated on the net result from continuing operations. The differences
are reconciled as follows:
Income tax expense/(benefit)
Current tax
Deferred tax
Deferred income tax (benefit)/expense included in income tax expense comprises:
(Increase)/decrease in net deferred tax assets
Adjustment for prior years
Reconciliation of income tax expense to prima facie tax payable
Loss before income tax expense
Tax at the Australian tax rate of 30%
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income
Deferred tax asset not recognised on impairment of non-current assets
Reversal of tax previously recognised on amended assessments
Share of net profits/(losses) of associates
Other (deductible expenses)/(non-assessable income)/non-deductible expenses
Adjustments recognised in the current year in relation to deferred tax of prior years
Income tax expense
2015
$’000
26,674
(6,940)
19,734
(10,662)
3,722
(6,940)
Consolidated
2014
$’000
12,824
3,607
16,431
6,571
(2,964)
3,607
(265,216)
(79,565)
(279,577)
(83,873)
96,744
–
53
(1,220)
3,722
19,734
117,750
(18,873)
(3)
4,394
(2,964)
16,431
46
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 5.
Income Tax Expense (continued)
The balance comprises temporary differences attributable to:
Licences and brands
Employee benefits
Provisions
Interest rate swaps
Other
Net balance disclosed as deferred tax assets
Consolidated
2014
$’000
(14,934)
5,963
4,866
2,684
6,817
5,396
2015
$’000
(3,253)
6,197
4,085
519
4,788
12,336
For the year ended 30 June 2015, the Company had $1.8 million of income tax expense (2014: $2.5 million expense) recognised directly in
equity in relation to cash flow hedges, with a corresponding deferred tax liability (2014: liability) being recognised. There are no unused tax
losses for which no deferred tax asset has been recognised.
On the acquisition of Austereo Group Ltd, a Deferred Tax Liability (“DTL”) was recognised in respect of the difference between the higher
accounting book value and lower tax cost base of the licences and brands. As a result of the 2015 impairment, the DTL has been reduced
by $11.7 million.
Recognition and Measurement
Income Tax
Income tax amounts recognised in the Group’s financial statements relate to tax paying entities within the Group and have been recognised in
accordance with Group policy.
The income tax expense (or revenue) for the year is the tax payable on the current year’s taxable income based on the applicable tax rate for
each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets
and liabilities and their carrying amounts in the financial statements, and adjusted by changes to unused tax losses.
Deferred Taxes
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or
liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied
to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts
will be available to utilise those temporary differences and losses.
In determining the extent of temporary differences of assets, the carrying amount of assets is generally assumed to be recovered through use
except for non-amortising identifiable intangible assets, such as free to air commercial television and radio broadcasting licences, brands and
tradenames where the carrying amounts are assumed to be recovered through sale, unless there is evidence of recovery through use.
Tax Dispute
The Company was subject to a specific issue tax audit by the ATO in relation to the income years ended 30 June 2006 to 30 June 2009. The
ATO disagreed with the tax deductibility of payments on certain redeemable preference shares issued by the Company. In 2014 the Company
reached a settlement with the ATO for a cash payment of $14.0 million with no Shortfall Interest Charges or penalties to be applied to the new
assessments. As such, $10.9 million in interest and $15.5 million in income tax expense was reversed in 2014.
Tax Consolidated Group
The Company is the head entity of the tax consolidated group. For further information, refer Note 19.
47
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 6. Non-Current Assets – Property, Plant and Equipment
2015
Cost
Accumulated depreciation expense
Net carrying amount
Movement
Net carrying amount at beginning of year
Additions
Disposals
Depreciation expense
Transfers
Net carrying amount at end of year
2014
Cost
Accumulated depreciation expense
Net carrying amount
Movement
Net carrying amount at beginning of year
Additions
Disposals
Depreciation expense
Transfers
Net carrying amount at end of year
Land and
Buildings
Leasehold
Improvements
Plant and
Equipment
Assets under
construction
$’000
46,184
(12,062)
34,122
39,074
3,762
(7,312)
(1,402)
–
34,122
$’000
35,038
(19,554)
15,484
17,537
–
–
(2,077)
24
15,484
$’000
393,809
(287,805)
106,004
104,526
16,187
(264)
(24,104)
9,659
106,004
$’000
8,231
–
8,231
10,206
7,708
–
–
(9,683)
8,231
Land and
Buildings
Leasehold
Improvements
Plant and
Equipment
Assets under
construction
$’000
52,377
(13,303)
39,074
37,444
2,644
–
(1,014)
–
39,074
$’000
35,029
(17,492)
17,537
18,612
980
–
(2,033)
(22)
17,537
$’000
386,676
(282,150)
104,526
107,402
17,392
(233)
(24,464)
4,429
104,526
$’000
10,206
–
10,206
7,137
7,476
–
–
(4,407)
10,206
Consolidated
Total
$’000
483,262
(319,421)
163,841
171,343
27,657
(7,576)
(27,583)
–
163,841
Consolidated
Total
$’000
484,288
(312,945)
171,343
170,595
28,492
(233)
(27,511)
–
171,343
Recognition and Measurement
Property, Plant and Equipment at Cost
Property, plant and equipment is recorded at cost less accumulated depreciation and cumulative impairment charges. Cost includes those
costs directly attributable to bringing the assets into the location and working condition necessary for the asset to be capable of operating
in the manner intended by management. The estimated cost of dismantling and removing infrastructure items and restoring the site on
which the assets are located is only included in the cost of the asset to the extent that the Group has an obligation to restore the site and
the cost of restoration is not recoverable from third parties. Additions, renewals and improvements are capitalised, while maintenance and
repairs are expensed.
The carrying values of property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amounts may not be recoverable. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated recoverable amount.
Depreciation
Land is not depreciated. Depreciation on other assets is calculated on a straight-line basis to write off the cost of the asset over its
estimated useful life.
Estimates of remaining useful life are made on a regular basis for all assets, with annual reassessments for major items. The expected useful
life of property, plant and equipment is as follows:
Buildings
Leasehold improvements
Network equipment
Communication equipment
5 – 50 years
3 – 16 years Other plant and equipment
2 – 10 years
Leased plant and equipment
3 – 5 years
2 – 20 years
2 – 20 years
48
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 7. Non-Current Assets – Intangible Assets
2015
Cost
Accumulated impairment expense
Net carrying amount
Movement
Net carrying amount at beginning of year
Additions
Impairment expense
Net carrying amount at end of year
2014
Cost
Accumulated impairment expense
Net carrying amount
Movement
Net carrying amount at beginning of year
Additions
Impairment expense
Net carrying amount at end of year
Goodwill
$’000
352,129
(352,129)
–
35,733
–
(35,733)
–
Goodwill
$’000
352,129
(316,396)
35,733
352,129
–
(316,396)
35,733
Broadcasting
Licences
Brands and
Tradenames
$’000
1,589,574
(364,801)
1,224,773
1,525,606
–
(300,833)
1,224,773
$’000
89,515
(24,848)
64,667
89,273
242
(24,848)
64,667
Broadcasting
Licences
Brands and
Tradenames
$’000
1,589,574
(63,968)
1,525,606
1,589,574
–
(63,968)
1,525,606
$’000
89,273
–
89,273
89,179
94
–
89,273
Consolidated
Total
$’000
2,031,218
(741,778)
1,289,440
1,650,612
242
(361,414)
1,289,440
Consolidated
Total
$’000
2,030,976
(380,364)
1,650,612
2,030,882
94
(380,364)
1,650,612
Goodwill and intangible assets with indefinite useful lives
The Group tests at least annually whether goodwill and intangible assets with indefinite useful lives have suffered any impairment, and when
there is an indication of impairment. The tests incorporate assumptions regarding future events which may or may not occur, resulting in the
need for future revisions of estimates. There are also judgements involved in determination of cash generating units.
Key Judgement
Useful Life
A summary of the useful lives of intangible assets is as follows:
Commercial Television/Radio Broadcasting Licences
Brands and Tradenames
Indefinite
Indefinite
Licences
Television and radio licences are initially recognised at cost. Analogue licences are renewable for a minimal cost every five years under
provisions within the Broadcasting Services Act. Digital licences attach to the analogue licences and renew automatically. The Directors
understand that the revocation of a commercial television or radio licence has never occurred in Australia and have no reason to believe
the licences have a finite life. As a result, the free to air commercial television and radio broadcasting licences have been assessed to have
indefinite useful lives.
Brands
Brands are initially recognised at cost. The brands have been assessed to have indefinite useful lives. The Group’s brands operate in
established markets with limited restrictions and are expected to continue to complement the Group’s media initiatives. On this basis, the
Directors have determined that brands have indefinite lives as there is no foreseeable limit to the period over which the assets are expected to
generate net cash inflows.
49
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015
Impairment
Impairment tests for licences, tradenames, brands and goodwill
8.
a)
The value of licences, tradenames, brands and goodwill is allocated to the Group’s cash generating units (“CGUs”), identified as Regional, being
Regional free to air commercial radio and television broadcasting and Metro, being Metro free to air commercial radio broadcasting.
The recoverable amount of Regional and Metro at 30 June 2015 and 30 June 2014 was determined based on a value in use discounted cash
flow (“DCF”) model.
Allocation of goodwill and other intangible assets
2015
Goodwill allocated to CGU
Indefinite lived intangible assets allocated to CGU
Total goodwill and indefinite lived intangible assets
Key Judgement
Value in use assumptions (see part (b))
Revenue growth – Forecast Period
Cost growth – Forecast Period
Long-term growth rate – terminal value
Discount rate (pre-tax)
2014
Goodwill allocated to CGU
Indefinite lived intangible assets allocated to CGU
Total goodwill and indefinite lived intangible assets
Key Judgement
Value in use assumptions (see part (b))
Revenue growth – Forecast Period
Cost growth – Forecast Period
Long-term growth rate – terminal value
Discount rate (pre-tax)
Regional CGU
Metro CGU
$’000
–
673,239
673,239
$’000
–
616,201
616,201
Consolidated
Total
$’000
–
1,289,440
1,289,440
%
2.4
2.3
1.4
12.8
%
4.1
4.3
2.5
12.3
Regional CGU
Metro CGU
$’000
–
758,185
758,185
$’000
35,733
856,694
892,427
Consolidated
Total
$’000
35,733
1,614,879
1,650,612
%
1.8
2.2
2.5
12.6
%
4.1
2.7
3.0
12.3
b) Key assumptions used for value in use calculations
The value in use calculations use cash flow projections based on the 2016 financial budgets extended over the subsequent four-year period
(“Forecast Period”) and apply a terminal value calculation using estimated growth rates approved by the Board for the business relevant to each
CGU. In determining appropriate growth rates to apply to the Forecast Period and to the terminal calculation, the Group considered forecast
reports from independent media experts as well as internal Company data and assumptions. In respect to each CGU the market growth rates did
not exceed the independent forecast reports. The discount rate used reflects specific risks relating to the relevant segments and the economies
in which they operate.
50
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 Impairment (continued)
Impact of a reasonably possible change in key assumptions
8.
c)
Regional CGU
Impairment
At 30 June 2015, an impairment loss of $84.9 million (2014: $375.7 million) was recorded against licences (2014: licences and goodwill) in
the Regional CGU. The estimated recoverable amount of the Regional CGU, based on value in use, equals its carrying amount. The impairment
reflects a decline in the television market during the 2015 year and independent estimates of television industry growth rates over the forecast
period have reduced significantly from the prior year. Despite an improved outlook on the Channel Ten audience share and market share, the
effect of the lower industry growth rates over the forecast period has resulted in the blended radio and television terminal growth rate reducing to
1.4% (from 2.5% prior year).
Metro CGU
Impairment
At 30 June 2015, an impairment loss of $276.5 million was recorded against goodwill, licences and brands in the Metro CGU. The estimated
recoverable amount of the Metro CGU, based on value-in-use, equals its carrying amount. The impairment reflects lower radio advertising market
growth rates over the forecast period and a reduction in the target long-term market share achievable for the network with higher talent costs
(the prior year value in use model assumed a higher long-term target market share in perpetuity). In addition, there has been a reduction of the
long-term terminal growth rate of the Metro CGU to 2.5% (from 3.0% in prior year) reflecting a lower expected long-term growth rate for metro
radio revenues.
Sensitivity
Any variation in the key assumptions used to determine the value-in-use would result in a change of the recoverable amount of the Metro and
Regional CGUs. Negative variances may cause impairment in future periods. The following reasonable shifts in key assumptions would have the
following approximate impact on recoverable amount for the Metro and Regional CGUs:
Sensitivity
Revenue
Expenses
Post tax discount rate
Terminal growth rate
Change in
variable in
perpetuity
%
+1%
–1%
+1%
–1%
+0.5%
–0.5%
+0.5%
–0.5%
Impact of
change on
Regional CGU
carrying value
Impact of
change on
Metro CGU
carrying value
$ million
$ million
52.0
(52.0)
(38.3)
38.3
(45.9)
52.1
40.1
(35.3)
40.2
(40.2)
(29.5)
29.5
(44.7)
51.8
41.2
(35.6)
51
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 9. Reconciliation of Profit/(Loss) after Income Tax to Net Cash Inflow from Operating Activities
Loss after income tax
Impairment of investments and non-current assets
Depreciation and amortisation
Profit on disposal of assets
Share of associate (profit)/loss
Non-cash revenue
Interest expense and other borrowing costs included in financing activities
Share-based payments
Change in operating assets and liabilities:
(Increase)/decrease in receivables
(Increase)/decrease in deferred taxes (net of tax movement in hedge reserve)
Increase/(decrease) in payables
Decrease in provision for income tax
(Decrease)/increase in provisions
Net cash inflows from operating activities
10. Receivables, Payables and Provisions
a) Receivables
Current
Trade receivables
Provision for doubtful debts
Prepayments
Other
Non-current
Refundable deposits
Related parties
Other
The carrying amounts of the non-current receivables approximate their fair value.
2015
$’000
(284,950)
361,414
28,534
(2,440)
(179)
–
40,216
3,828
(5,247)
(8,776)
3,382
(15,828)
(1,214)
118,740
Consolidated
2014
$’000
(296,008)
392,467
27,511
(1,189)
11
(1,247)
41,719
1,179
14,520
1,135
(4,343)
(23,266)
6,469
158,958
Consolidated
2014
$’000
2015
$’000
110,766
(663)
10,040
1,895
122,038
108,668
(527)
4,926
2,431
115,498
Consolidated
2015
$’000
605
1,255
2,690
4,550
2014
$’000
538
900
4,405
5,843
52
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 10. Receivables, Payables and Provisions (continued)
a) Receivables (continued)
Ageing analysis of assets
The tables below summarise the ageing analysis of assets past due but not impaired and impaired assets as at 30 June.
As at 30 June 2015
Trade receivables
Provision for doubtful debts
As at 30 June 2014
Trade receivables
Provision for doubtful debts
Current
– not past due
$’000
97,117
–
Current
– not past due
$’000
94,103
–
Past due
– up to
60 days
$’000
9,368
–
Past due
– up to
60 days
$’000
8,927
–
Past due
– 60-90 days
Past due
– >90 days
$’000
1,432
–
$’000
2,849
(663)
Consolidated
Total
$’000
110,766
(663)
Consolidated
Past due
– 60-90 days
Past due
– >90 days
$’000
1,880
–
$’000
3,758
(527)
Total
$’000
108,668
(527)
The Group has recognised expenses in respect of bad and doubtful trade receivables during the year ended 30 June 2015 of $719,842 (2014:
expense of $709,370). This provision is based on known bad debts and past experience for receipt of trade receivables. A provision for doubtful
debts is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of
the receivable. The amount of the provision is recognised in profit or loss. Where a debt is known to be uncollectible, it is considered a bad debt
and written off.
Recognition and Measurement
Trade Receivables
Trade receivables are recognised at fair value, being the original invoice amount and subsequently measured at amortised cost less provision for
doubtful debts. Generally credit terms are for 30 days from date of invoice or 45 days for an accredited agency.
Transferred Trade Receivables
The carrying amounts of the trade receivables include receivables which are subject to a non-recourse securitisation arrangement. Under this
arrangement, the Group has transferred the relevant receivables to the securitisation vehicle in exchange for cash, and is prevented from selling
or pledging the receivables. Whilst legal ownership has been transferred to the securitisation vehicle, the Group retains a portion of late payment
and credit risk for the amounts yet to be received from the securitisation vehicle in respect of the securitised receivables. The Group therefore
continues to recognise the transferred assets in their entirety in the balance sheet. The amount received under the securitisation arrangement is
presented as current secured borrowings in the balance sheet.
Current
Carrying amount of transferred receivables (included in trade receivables)
Carrying amount of associated secured borrowing (included in secured borrowings)
b) Current Liabilities – Payables
Trade creditors
GST payable
Accruals and other payables
Deferred income
Consolidated
2014
$’000
–
–
Consolidated
2014
$’000
10,154
4,118
62,373
8,442
85,087
2015
$’000
47,309
(22,161)
2015
$’000
8,761
3,809
68,354
7,768
88,692
53
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 Recognition and Measurement
Trade Creditors, Accruals and Other Payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. The
amounts are unsecured and are usually paid within 60 days of recognition.
Deferred Income
Deferred income generally represents government grants received. Grants from the government relating to costs are deferred and recognised in
profit or loss over the period necessary to match them with the costs that they are intended to compensate.
Government grants relating to the purchase of property, plant and equipment are deferred and recognised in profit or loss on a straight-line basis
over the expected useful lives of the related assets.
c) Provisions
Current
Employee benefits
Onerous contracts
Lease provisions
Non-current
Employee benefits
Onerous contracts
Lease provisions
Movements in current and non-current provisions, other than provisions for employee benefits, are set out below:
Balance at the beginning of the financial year
Movements in the year
Balance at the end of the financial year
Consolidated
2014
$’000
17,993
1,740
910
20,643
Consolidated
2014
$’000
2,062
6,392
7,410
15,864
2015
$’000
18,600
1,528
848
20,976
2015
$’000
2,057
4,815
6,918
13,790
Consolidated
2014
$’000
9,424
7,028
16,452
2015
$’000
16,452
(2,343)
14,109
Recognition and Measurement
Provisions
A provision is recognised when there is a legal, equitable or constructive obligation as a result of a past event and it is probable that a future
sacrifice of economic benefits will be required to settle the obligation, the timing or amount of which is uncertain.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the
class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same
class of obligations may be small.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the
balance sheet date. The discount rate used to determine the present value reflects current market estimates of the time value of money and the
risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
Wages and salaries, leave and other entitlements
Liabilities for unpaid salaries, salary related costs and provisions for annual leave are recorded in the Statement of Financial Position at the
salary rates which are expected to be paid when the liability is settled. Provisions for long service leave and other long-term benefits are
recognised at the present value of expected future payments to be made. In determining this amount, consideration is given to expected future
salary levels and employee service histories. Expected future payments are discounted to their net present value using rates on Commonwealth
Government securities with terms that match as closely as possible to the expected future cash flows.
54
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 Revolving Facility
The Group cancelled its $50 million 2 year revolving facility on 26
February 2015, prior to its expiry on 12 January 2016. The facility was
established to fund any potential working capital requirements that
may have resulted from the settlement of the tax dispute as outlined
in Note 5, however the settlement was funded from free cash flow and
the facility was no longer required.
Non-Recourse Receivables Financing Facility
In June 2015 the Banking Group entered into a $65 million non-
recourse Receivables Financing Agreement (“RFA”) that enables the
Group to convert receivables to cash quicker, providing an additional
source of funding for the Group’s working capital needs. As the Group
retains an interest in each of the receivables, as the advance rate for
each debtor is less than its face value and the Group only receives
further payment if the debtor pays the receivable, the full face value
of the receivable is retained on the Group’s balance sheet, and the
amount advanced under the RFA is recorded as a liability. As the
RFA is considered non-recourse, it is excluded from net debt for the
purposes of the leverage ratio calculation.
Further details on the Group’s debt facilities are outlined in Note 15.
Property, Plant and Equipment
During the year the Group deferred non-essential capital expenditure
until later years to assist with reducing debt levels, which resulted in
around $5.3 million of capital expenditure being deferred. The capital
expenditure for 2015 was $27.7 million (2014: $26.9 million).
During the year the Group divested a non-core property which resulted
in approximately $9.0 million cash being received which was used to
reduce net debt.
Further details on the Group’s fixed assets are outlined in Note 6.
Capital Management
11. Capital Management Objectives
The Group’s objectives when managing capital are to safeguard the
Group’s ability to continue as a going concern, so that it can continue
to provide appropriate returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
In order to maintain or adjust the capital structure, the Group may
adjust the amount of dividends paid to shareholders, maintain a
fully underwritten dividend reinvestment plan, return capital to
shareholders, issue new shares, buy back existing shares or sell assets
to reduce debt. The Group is undertaking measures to reduce net debt
and has a stated objective of reaching a leverage ratio of below 2.5
times. The following outlines the capital management policies that are
currently in place for the Group:
Dividend Policy
Dividend Payout Ratio
The Group’s dividend policy has been to payout between 60-70% of
underlying financial year Net Profit After Tax, as advised in a Capital
Management Initiatives media release on 24 November 2011. There
has been no change to this stated policy since this media release.
Dividend Reinvestment Plan (“DRP”)
The Group operates a DRP whereby shareholders can elect to receive
their dividends by way of receiving shares in the Company instead of
cash. The Company can elect to either issue new shares, or to buy
shares on-market.
For the final 2014 dividend and interim 2015 dividend, the DRP
operated with a 2.5% discount being offered to participants (2014:
nil discount for the final 2013 and interim 2014 dividends).
Underwritten DRP
The Company entered into a DRP Shortfall Placement Agreement with
CBA Equities Limited (“CBA Equities”) for the final 2014 and interim
2015 dividends that involved CBA Equities subscribing for shares
with a value of up to 100% of the shortfall in DRP Participation by
Company shareholders. The DRP achieved an average subscription
rate of 63%, and as such resulted in CBA Equities subscribing for
37% over the two subscriptions. For both dividends, the DRP was fully
underwritten and resulted in $15.8 million cash being retained in the
business that would otherwise have been paid out to shareholders.
Further details on the Group’s dividends are outlined in Note 12.
Debt Facilities
Syndicated Debt Facility
The Group has a $650 million revolving 5 year Syndicated Facility
Agreement (“SFA”) expiring on 12 January 2019. This facility is used
as core debt for the Group, and may be paid down and redrawn in
accordance with the SFA.
Covenants
During the year, the Banking Group, being Southern Cross Austereo
Pty Ltd and its subsidiaries, requested a temporary extension in its
leverage ratio covenant from 3.5 times to 3.75 times between June
2015 and December 2015, after which the covenant will revert back
to 3.5 times. The Group has a target leverage ratio of 2.5 times. The
Group also has an interest cover ratio covenant of 3.0 times.
55
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 12. Dividends Paid and Proposed
The dividends were paid as follows:
The dividends were paid/payable as follows:
Interim dividend paid for the half year ended 31 December – fully franked at the tax rate of 30%
Final dividend paid for the year ended 30 June – fully franked at the tax rate of 30%
Dividends paid in cash or satisfied by the issue of shares under the dividend reinvestment
plan were as follows:
Paid in cash1
Satisfied by issue of shares
Interim dividend paid for the half year 31 December
Final dividend paid for the year ended 30 June
Consolidated
2014
$’000
31,736
31,730
63,466
2015
$’000
21,970
21,157
43,127
15,774
27,353
43,127
Cents per
share
3.0
3.0
6.0
63,466
–
63,466
Cents per
share
4.5
4.5
9.0
1 The Company entered into a DRP Shortfall Placement Agreement with CBA Equities for the final 2014 and interim 2015 dividends that involved CBA Equities subscribing
for shares with a value of up to 100% of the shortfall in DRP Participation by Company shareholders.
The Group has $111.9 million of franking credits at 30 June 2015 (2014: $106.0 million).
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the Company, on or
before the end of the financial year but not distributed at the end of the reporting period.
13. Earnings per Share
Continuing Operations
Loss attributable to shareholders from continuing operations ($’000)
Profit attributable to shareholders from continuing operations excluding significant items ($’000)
Weighted average number of shares used as the denominator in calculating basic earnings per share
(shares, ’000)
Weighted average number of ordinary shares and potential ordinary shares used as the denominator in
calculating diluted earnings per share (shares, ’000)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Excluding Significant Items
Basic earnings per share excluding significant items (cents per share)
Diluted earnings per share excluding significant items (cents per share)
Dividends paid as a % of NPAT (excluding significant items)
Consolidated
2014
$’000
2015
$’000
(284,950)
64,783
(296,008)
79,629
725,688
705,135
725,688
705,135
(39.27)
(39.27)
(41.98)
(41.98)
8.93
8.93
68.8%
11.29
11.29
66.4%
Recognition and Measurement
Basic earnings per share
Basic earnings per share is calculated by dividing the profit or loss attributable to equity holders of the Company, excluding any costs of servicing
equity other than ordinary shares, by the weighted average number of shares outstanding during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax
effect of interest and other financing costs associated with dilutive potential shares and the weighted average number of shares assumed to have
been issued for no consideration in relation to dilutive potential shares.
56
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 14. Contributed Equity and Reserves
Ordinary shares
Contributed equity
Consolidated
2014
$’000
2015
$’000
1,365,110
1,365,110
1,686,878
1,686,878
On 22 December 2014, the share capital of the Company was reduced in accordance with Section 258F of the Corporations Act. The amount of
the reduction was $368 million and represented the value of paid-up share capital that was not represented by available assets.
On issue at the beginning of the financial year
Capital reduction
Shares issued for equity component in talent contracts
Shares issued in relation to the DRP and DRP underwrite
Shares issued as part of Long Term Incentive Plan
On issue at the end of the financial year
Consolidated
Consolidated
2015
$’000
1,686,878
(368,000)
3,105
43,127
–
1,365,110
2014
$’000
1,686,878
–
–
–
–
1,686,878
2015
2014
Number of
securities
Number of
securities
705,247
–
3,174
45,165
–
753,586
704,858
–
–
–
389
705,247
Ordinary shares in Southern Cross Media Group Limited
Ordinary shares entitle the holder to participate in distributions and the proceeds on winding up of the Company in proportion to the number of
and amounts paid on the shares held.
On a show of hands, each shareholder present in person and each other person present as a proxy has one vote and upon a poll, each share is
entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
Employee share entitlements
The Group operates an LTI plan for its senior executives. Information relating to the employee share entitlements, including details of shares
issued under the scheme, is set out in the Remuneration Report.
Nature and purpose of reserves
a) Share-based payments reserve
The share-based payments reserve is used to recognise the fair value of future potential shares to be issued to employees for no consideration in
respect of performance rights offered under the Long Term Incentive Plan. During the year no performance rights have vested (2014: 388,462)
and 1,027,757 (2014: 1,199,171) performance rights have been granted. In the current year, $723,407 (2014: $1,179,000) has been
recognised as an expense in the Statement of Comprehensive Income as the fair value of potential shares to be issued.
b) Hedge reserve
The hedge reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised in Other Comprehensive
Income. Amounts are reclassified to the Statement of Comprehensive Income when the associated hedged transaction affects profit or loss.
c) Reverse Acquisition Reserve
As described in Note 1(a), there is a reverse acquisition reserve of $77.4 million (2014: $77.4 million) in connection with the IPO of the Group.
57
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 15. Borrowings
a) Total interest bearing liabilities
Current secured borrowings
Borrowing costs
Securitised receivables
Lease liabilities
Total secured current interest bearing liabilities
Non-current secured borrowings
Bank facilities
Borrowing costs
Lease liabilities
Total secured non-current interest bearing liabilities
Total current and non-current borrowings
Consolidated
2014
$’000
–
–
84
84
2015
$’000
(984)
22,161
84
21,261
Consolidated
2014
$’000
2015
$’000
650,000
(2,249)
213
647,964
669,225
650,000
(3,753)
225
646,472
646,556
For all non-current borrowings, the carrying amount approximates fair value in the balance sheet.
On 19 June 2015, the Company entered into a $65 million non-recourse receivables financing facility. As at 30 June 2015 the amount of
funding received under the securitised facility was $22.2 million.
b)
Interest expense
Interest expense and other borrowing costs
External banks
Reversal of interest accrued on amended tax assessments
Amortisation of borrowing costs
Total interest expense and other borrowing costs
Consolidated
2014
$’000
44,103
(10,889)
8,505
41,719
2015
$’000
39,079
–
1,137
40,216
c) Bank facilities and assets pledged as security
The $650 million debt facilities of the Banking Group are secured by a fixed and floating charge over the assets and undertakings of the Banking
Group and its wholly-owned subsidiaries and also by a mortgage over shares in Southern Cross Austereo Pty Ltd. These facilities mature on 12
January 2019 and have an average variable interest rate of 4.83% (2014: 5.11%). These facilities are denominated in Australian dollars.
There are certain financial and non-financial covenants which are required to be met by subsidiaries in the Group. One of these covenants is an
undertaking that the subsidiary is in compliance with the requirements of the facility before any amount may be distributed to the benefit of the
ultimate parent entity, Southern Cross Media Group Limited. Covenant testing dates fall at 30 June and 31 December each year until the facility
maturity date.
58
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 15. Borrowings (continued)
c) Bank facilities and assets pledged as security (continued)
The carrying amounts of assets pledged as security by Southern Cross Austereo Pty Ltd for current and non-current borrowings are:
Current assets
Floating charge
Cash and cash equivalents
Receivables
Total current assets pledged as security
Non-current assets
Floating charge
Receivables
Investments accounted for using the equity method
Property, plant and equipment
Intangible assets
Total non-current assets pledged as security
Total assets pledged as security
Consolidated
2014
$’000
2015
$’000
143,046
121,543
264,589
55,623
114,977
170,600
3,633
2,980
163,841
1,289,440
1,459,894
1,724,483
5,304
7,944
171,343
1,650,612
1,835,203
2,005,803
Recognition and Measurement
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Transaction costs that have been paid for or accrued prior
to the drawdown of debt are classified as prepayments. Borrowings are subsequently measured at amortised cost. Any difference between
the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the
effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.
Borrowing costs
Borrowing costs are expensed over the life of the facility to which they relate.
16. Financial Risk Management
The Group’s activities expose it to a variety of financial risks: market risk (the Group’s main exposure to market risk is interest rate risk), liquidity
risk and cash flow interest rate risk. There is a relatively low level of credit risk on receivables that is managed by careful business practices
(refer Note 10). The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the financial performance of the Group. The Group uses derivative financial instruments such as interest rate swaps
to hedge certain risk exposures.
The Risk Management Policy is carried out by management under policies approved by the Board. Senior management of the Group identify,
quantify and qualify financial risks as part of developing and implementing the risk management process. The Risk Management Policy is a
written document approved by the Board that outlines the financial risk management process to be adopted by management. Specific financial
risks that have been identified by the Group are interest rate risk and liquidity risk.
a)
Interest rate risk
Nature of interest rate risk
Interest rate risk is the Group’s exposure to the risk that interest rates move in a way that adversely affects the ability of the Group to pay its
interest rate commitments. The Group’s interest rate risk arises from long-term borrowings which are taken out at variable interest rates and
therefore expose the Group to a cash flow risk.
Interest rate risk management
The Group does not have a formal policy to fix rates on its borrowings but manages its cash flow interest rate risk by using variable to fixed
interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from variable rates to fixed rates. Generally, the
Group raises long-term borrowings at variable rates and swaps them into fixed rates that are lower than those available if the Group borrowed
at fixed rates directly. Under the interest rate swaps, the Group agrees with other parties to exchange, at specified intervals (quarterly), the
difference between fixed contract rates and variable rate interest amounts calculated by reference to the agreed notional principal amounts.
59
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 Exposure and sensitivity to interest rate risk
External borrowings of the Group currently bear an average variable interest rate of 4.83% (2014: 5.11%). During the year the Group entered
into $320 million of interest rate swap contracts under which it is obliged to receive interest at variable rates and to pay interest at fixed rates at
an average fixed rate of 2.5%. These interest rate swap contracts will expire in January 2018. Details on how the Group accounts for the interest
rate swap contracts as cashflow hedges is disclosed in Note 25.
Derivative financial instruments
Interest rate swap contracts – current
Interest rate swap contracts – non-current
Total derivative financial instruments
Consolidated
2014
$’000
8,946
–
8,946
2015
$’000
–
1,732
1,732
Interest rate swap contracts
The Group has $320 million in interest rate swap contracts, all of which are due to expire on 8 January 2018. In 2014 the Group had
$350 million of interest rate swap contracts, the last of which expired on 26 March 2015.
The contracts require settlement of net interest receivable or payable and are timed to coincide with the approximate dates on which interest is
payable on the underlying debt.
These interest rate swaps are cash flow hedges as they satisfy the requirements for hedge accounting. Any change in fair value of the interest
rate swaps is taken to the hedge reserve in equity.
In assessing interest rate risk, management has assumed a +/– 25 basis points movement (2014: 25 basis points) in the relevant interest rates
at 30 June 2015 for financial assets and liabilities denominated in Australian Dollars (“AUD”). The following table illustrates the impact on profit
or loss with no impact directly on equity for the Group.
AUD exposures
2015
Cash at bank
Interest rate swaps
Borrowings
2014
Cash at bank
Interest rate swaps
Borrowings
Carrying
Value
Impact on post-tax profits
Increase/(decrease)
$’000
143,051
(1,732)
(650,000)
62,090
(8,946)
(650,000)
+/– 25 basis points
$’000
$’000
+25
358
–
(1,625)
+25
155
–
(1,625)
–25
(358)
–
1,625
–25
(155)
–
1,625
Consolidated
Impact on reserves
Increase/(decrease)
+/– 25 basis points
$’000
$’000
+25
–
2,156
–
+25
–
439
–
–25
–
(2,168)
–
–25
–
(440)
–
b) Liquidity risk
Nature of liquidity risk
Liquidity risk is the risk of an entity encountering difficulty in meeting obligations associated with financial liabilities.
Liquidity risk management
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed
credit facilities and the ability to close out market positions. The Group and Company have a prudent liquidity management policy which
manages liquidity risk by monitoring the stability of funding, surplus cash or near cash assets, anticipated cash in and outflows and exposure to
connected parties.
60
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 16. Financial Risk Management (continued)
b) Liquidity risk (continued)
Exposure and sensitivity
Financing arrangements
Unrestricted access was available at balance date to the following lines of credit:
As at 30 June 2015
Line of credit value
Used at balance date
Unused at balance date
As at 30 June 2014
Line of credit value
Used at balance date
Unused at balance date
Bank
facilities
$’000
650,000
(650,000)
–
Bank
facilities
$’000
650,000
(650,000)
–
Working capital
facility
Non-recourse
receivables
financing facility
$’000
5,000
(4,087)
913
$’000
65,000
(22,161)
42,839
Revolving
facility
$’000
–
–
–
Working capital
facility
Non-recourse
receivables
financing facility
Revolving facility
$’000
5,000
(3,460)
1,540
$’000
–
–
–
$’000
50,000
–
50,000
Consolidated
Total
facilities
$’000
720,000
(676,248)
43,752
Consolidated
Total
facilities
$’000
705,000
(653,460)
51,540
The $650 million debt facility for the Group matures on 12 January 2019. The Group’s bank facilities are denominated in Australian dollars as
at 30 June 2015 and 30 June 2014. The $50 million revolving facility was cancelled during the year. The non-recourse receivables financing
facility matures on 19 June 2017.
Undiscounted future cash flows
The tables below summarise the maturity profile of the financial liabilities as at 30 June based on contractual undiscounted repayment
obligations. Repayments which are subject to notice are treated as if notice were given immediately.
Less than 1 year
1-2 years
2-3 years
3-5 years
Greater than 5 years
Consolidated
As at 30 June 2015
Lease liabilities
Borrowings – Principal
Interest cashflows1
Derivative financial instruments2
Payables3
Total
As at 30 June 2014
Lease liabilities
Borrowings – Principal
Interest cashflows1
Derivative financial instruments2
Payables3
Total
$’000
103
–
28,560
–
84,883
113,546
$’000
102
–
28,207
–
–
28,309
$’000
73
–
27,477
1,732
–
29,282
$’000
15
650,000
13,672
–
–
663,687
$’000
4
–
–
–
–
4
Consolidated
Less than 1 year
1-2 years
2-3 years
3-5 years
Greater than 5 years
$’000
86
–
40,108
8,946
80,969
130,109
$’000
159
–
32,079
–
–
32,238
$’000
56
–
32,079
–
–
32,135
$’000
3
650,000
49,305
–
–
699,308
$’000
4
–
–
–
–
4
1 Calculated using a weighted average variable interest rate. Interest cashflows includes interest on principal borrowings, swap interest and the commitment fee on the
non-recourse receivables financing facility.
2 The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Group uses a variety of methods and makes
assumptions that are based on market conditions existing at the end of each reporting period. The fair value of interest rate swaps are calculated as the present value
of the estimated future cash flows and are included in Level 2 under derivative financial instruments. The total fair value of derivatives used for hedging is $1.7 million
(2014: $8.9 million).
3 The payables balance excludes GST Payable as this is not a financial liability.
61
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 Group Structure
17. Non-Current Assets – Investments Accounted for Using the Equity Method
Carrying amount at the beginning of the financial year
Share of profit/(losses) after income tax
Impairment of associates and joint ventures
Contributions to associates and joint ventures
Carrying amount at the end of the financial year
Consolidated
2014
$’000
13,677
(11)
(12,096)
1,310
2,880
2015
$’000
2,880
179
–
–
3,059
18. Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries:
Name of entity
Southern Cross Media Trust (SCMT)
SCM No 5 Limited (SCM5)
SCM No 1 Limited (SCM1)
Southern Cross Media International Limited (SCMIL) and controlled entities
Southern Cross Media Australia Holdings Pty Limited (SCMAHL)
Southern Cross Media Group Investments Pty Ltd (SCMGI)
Southern Cross Austereo Pty Limited (SCAPL) and controlled entities
Country of
incorporation
Australia
Australia
Australia
Bermuda
Australia
Australia
Australia
Class of
shares/units
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Effective
ownership
interest
2015
100%
100%
100%
100%
100%
100%
100%
Effective
ownership
interest
2014
100%
100%
100%
100%
100%
100%
100%
The proportion of ownership interest is equal to the proportion of voting power held unless otherwise indicated.
Recognition and Measurement
Subsidiaries
Subsidiaries are those entities over which the Group has the power to govern the financial and operating policies, generally accompanying a
shareholding of more than one-half of voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group
controls another entity.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. Where control of an entity is obtained
during a financial year, its results are included in the Statement of Comprehensive Income from the date on which control commences. Where
control of an entity ceases during a financial year, its results are included for that part of the year during which control existed.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated Statement of Comprehensive Income
and Statement of Financial Position respectively.
62
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 19. Parent Entity Financial Information
a) Summary financial information
The following aggregate amounts are disclosed in respect of the parent entity, Southern Cross Media Group Limited:
Statement of Financial Position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Issued capital
Reserves
Retained profits – 2013 reserve
Accumulated losses – 2014 reserve
Retained profits – 2015 H1 interim reserve
Retained losses – 2015 H2 reserve
Total equity
Profit/(loss) for the year
Total comprehensive income
Southern Cross Media
Group Limited
2015
2014
$’000
500
944,486
944,986
3,467
–
3,467
941,519
1,267,522
4,226
67,648
(96,805)
22,761
(323,833)
941,519
(279,102)
(279,102)
$’000
6,726
1,234,800
1,241,526
24,524
198
24,722
1,216,804
1,589,290
3,503
88,805
(464,794)
–
–
1,216,804
(401,328)
(401,328)
As a result of the impairment of the Metro and Regional CGUs, the carrying value of the parent entity’s investment in the relevant subsidiaries
has been reviewed for impairment. The carrying amount of the investment was compared with the recoverable amount of the subsidiaries and
resulted in an impairment of $325.6 million.
b) Guarantees entered into by the parent entity
The parent entity has not provided any financial guarantees in respect of bank overdrafts and loans of subsidiaries as at 30 June 2015 (30 June
2014 – nil). The parent entity has not given any unsecured guarantees at 30 June 2015 (30 June 2014 – nil).
c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2015 (30 June 2014: $nil).
d) Contractual commitments for the acquisition of property, plant or equipment
As at 30 June 2015, the parent entity had no contractual commitments (30 June 2014: $nil).
Recognition and Measurement
Parent entity financial information
The financial information for the parent entity has been prepared on the same basis as the consolidated financial statements, except as set out
on the following page.
i) Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries are accounted for at cost in the financial statements of the Company, less any impairment charges.
ii) Tax consolidation legislation
The Company and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 23 November 2005.
The Company is the head entity of the tax consolidated group. Members of the group have entered into a tax sharing agreement in order to
allocate income tax expense to the wholly-owned subsidiaries on a stand-alone basis. The tax sharing arrangement provides for the allocation
of income tax liabilities between the entities should the head entity default on its tax payment obligations. The possibility of such a default is
considered remote at the date of this report.
Members of the tax consolidated group have entered into a tax funding agreement. The Group has applied the group allocation approach in
determining the appropriate amount of current taxes to allocate to members of the tax consolidated group. The tax funding agreement provides
for each member of the tax consolidated group to pay a tax equivalent amount to or from the parent in accordance with their notional current tax
liability or current tax asset. Such amounts are reflected in amounts receivable from or payable to the parent company in their accounts and are
settled as soon as practicable after lodgement of the consolidated return and payment of the tax liability.
63
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 Other
20. Share-Based Payments
The Company operates a long-term incentive plan for Executive KMP, and previously to certain senior executives. The share-based payment
expense for the year ended 30 June 2015 was $723,407 (2014: $1,178,634).
The following table reconciles the performance rights outstanding at the beginning and end of the year:
Number of performance rights
Balance at beginning of the year
Granted during the year
Exercised during the year
Forfeited during the year
Balance at end of the year
Exercisable at end of the year
2015
2014
$’000
4,647,945
1,027,758
–
(4,035,721)
1,639,982
–
$’000
4,983,487
1,199,171
(388,462)
(1,146,251)
4,647,945
–
Details of the performance rights granted to KMP are set out in the Remuneration Report in the Directors’ Report.
Recognition and Measurement
Share-based payments
Share-based compensation benefits are provided to employees via certain Employee Agreements. Information relating to these Agreements is
set out in the Remuneration Report. The fair value of entitlements granted are recognised as an employee benefit expense with a corresponding
increase in equity. The fair value is measured at grant date and recognised as an expense over the period during which the employees become
unconditionally entitled to the shares.
21. Remuneration of Auditors
(a) Audit and other assurance services
PricewaterhouseCoopers Australian firm:
Statutory audit and review of financial reports
Other assurance services
Regulatory returns
Total remuneration for audit and other assurance services
(b) Taxation services
PricewaterhouseCoopers Australian firm:
Tax services
Total remuneration for taxation services
(c) Other services
PricewaterhouseCoopers Australian firm:
Debt advisory and cash management
Remuneration consulting services
Other consulting services
Total remuneration for other services
Total
Consolidated
2015
$’000
2014
$’000
724,400
62,500
25,000
811,900
580,000
–
8,000
588,000
78,108
78,108
101,482
101,482
126,812
–
5,200
132,012
475,000
12,000
102,000
589,000
1,022,020
1,278,482
The 2015 audit fee comprises the base audit fee of $597,000 (2014: $580,000), plus 2015 data migration work, and additional work required
in respect of impairment and Remuneration Report review for the 2014 audit of $73,000. Other assurance services include a fee for the review
of the new advertising booking system for $62,500.
The Group may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and
experience with the Company and/or the Group are important.
64
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 21. Remuneration of Auditors (continued)
The Board has considered the position and, in accordance with the advice received from the Audit and Risk Committee, is satisfied that the
provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
The Directors are satisfied that the provision of non-audit services by the auditor did not compromise the auditor independence requirements of
the Corporations Act 2001 for the following reasons:
– all non-audit services have been reviewed by the Audit and Risk Committee to ensure they do not impact the impartiality and objectivity of
the auditor; and
– none of the services undermine the general principles relating to auditor independence as set out in APES 110: Code of Ethics for
Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for
the Company, acting as advocate for the Company or jointly sharing economic risk and rewards.
22. Related Party Disclosures
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on
consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.
a) KMP
During the year, no KMP of the Company or the Group has received or become entitled to receive any benefit because of a contract made by the
Group with a KMP or with a firm of which a KMP is a member, or with an entity in which the KMP has a substantial interest except on terms set
out in the governing documents of the Group or as disclosed in this financial report.
The aggregate compensation of KMP of the Group is set out below:
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination payments
Share-based payments
Consolidated
2015
2014
$’000
4,437,482
217,988
(1,046,426)
1,990,034
430,957
6,030,035
$’000
4,835,675
176,014
(32,618)
74,296
759,649
5,813,016
Note: Changes to KMP during the year can be found in the Remuneration Report.
The number of ordinary shares in the Company held during the financial year by KMP of the Company and Group, including their personally
related parties, are set out in the Remuneration Report in the Directors’ Report. There were no loans made to or other transactions with KMP
during the year (2014: nil).
b) Subsidiaries and Associates
Ownership interests in subsidiaries are set out in Note 18. Details of interests in associates and distributions received from associates are
disclosed in Note 17. Details of loans due from associates are disclosed in Note 10.
c) Other related party transactions
During the year, Macquarie Group Limited and its controlled entities (“Macquarie”) received or was entitled to receive $10,954,532 (2014:
$16,156,252) as dividends on securities held.
At 30 June 2015, the Group had funds totalling $4,573 (2014: $6,466,996) on deposit with Macquarie. The Group earns interest on deposits
at commercial rates. Interest income from deposits with Macquarie included in the determination of the net result from ordinary activities for the
year for the Group was $22,383 (2014: $7,886).
65
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 23. Leases and Other Commitments
Capital commitments
Commitments for the acquisition of plant and equipment contracted for at the reporting date but not
recognised as liabilities are payable as follows:
Within one year
Operating leases
Commitments for minimum lease payments in relation to non-cancellable operating leases
are payable as follows:
Within one year
Later than one year but not later than 5 years
Later than 5 years
Finance lease payment commitments
Finance lease commitments are payable as follows:
Within one year
Later than one year but not later than 5 years
Greater than five years
Less: Future lease finance charges
Lease liabilities provided for in the financial statements:
Current
Non-current
Total lease liability
Consolidated
2015
$’000
2014
$’000
3,832
3,832
1,258
1,258
22,498
72,103
40,807
135,408
21,836
56,140
47,587
125,563
103
225
4
332
(35)
297
84
213
297
106
245
4
355
(46)
309
84
225
309
Leases
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are classified as
finance leases. Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property and the present value
of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other long-term payables.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.
Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over
the period of the lease.
The Group sub-leases buildings under an operating lease and rent revenue is recorded as income in the profit or loss on a straight-line basis.
Rental expense relating to operating leases – included in occupancy costs – is $25.3 million (2014: $25.1 million).
24. Events Occurring after Balance Sheet Date
On 13 July 2015, the Group paid down $80 million of borrowings from cash reserves on the revolving 5 year SFA to reduce the drawn balance to
$570 million ($650 million at 30 June 2015). As both cash and the SFA are included in net debt, there was no change to net debt.
Brian Gallagher was appointed to the role of Chief Sales Officer on 15 July 2015. Andrea Ingham resigned from her role as National Sales
Director on 17 July 2015.
66
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 25. Other Accounting Policies
Defined contribution scheme
The Group operates a defined contribution scheme. The defined
contribution scheme comprises fixed contributions made by the Group
with the Group’s legal or constructive obligation being limited to
these contributions. Contributions to the defined contribution scheme
are recognised as an expense as they become payable. Prepaid
contributions are recognised in the Statement of Financial Position as
an asset to the extent that a cash refund or a reduction in the future
payments is available. The defined contribution plan expense for
the year was $12.6 million (2014: $12.2 million) and is included in
employee expenses.
Derivative financial instruments
The Group enters into interest rate swap agreements to manage its
financial risks. Derivatives are initially recognised at fair value at
the date a derivative contract is entered into and are subsequently
remeasured to their fair value. The method of recognising the resulting
gain or loss depends on whether the derivative is designated as a
hedging instrument and if so, the nature of the item being hedged.
The Group may have derivative financial instruments which are
economic hedges, but do not satisfy the requirements of hedge
accounting. Gains or losses from changes in fair value of these
economic hedges are taken through profit or loss.
If the derivative financial instrument meets the hedge accounting
requirements, the Group designates the derivatives as either (1)
hedges of the fair value of recognised assets or liabilities or a firm
commitment (fair value hedge); or (2) hedges of highly probable
forecast transactions (cash flow hedge). The Group documents at
the inception of the transaction the relationship between hedging
instruments and hedged items, as well as its risk management
objective and strategy for undertaking various hedge transactions.
The Group also documents its assessments, both at hedge inception
and on an ongoing basis, of 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 fair values of over-the-counter derivatives are determined using
valuation techniques adopted by the Directors with assumptions that
are based on market conditions existing at each balance sheet date.
The fair values of interest rate swaps are calculated as the present
values of the estimated future cash flows.
Hedge accounting
The Group designated interest rate swaps held as at 1 July 2011 as
cash flow hedges and has applied hedge accounting from this date.
The Group documents the relationship between hedging instruments
and hedged items, as well as its risk management objective and
strategy for undertaking the hedge transactions. The Group also
documents its assessment, both at hedge inception and on an ongoing
basis, of whether the derivatives that are used in hedging transactions
have been and will continue to be highly effective in offsetting changes
in cash flows of hedged items.
The fair values of derivative financial instruments used for hedging
purposes are presented within the balance sheet. Movements in
the hedging reserve are shown within the Statement of Changes
in Equity. The full fair value of a hedging derivative is classified as
a non-current asset or liability when the remaining maturity of the
hedged item is more than 12 months; it is classified as a current asset
or liability when the remaining maturity of the hedged item is less
than 12 months.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that
are designated and qualify as cash flow hedges is recognised in
other comprehensive income and accumulated in reserves in equity.
The gain or loss relating to the ineffective portion is recognised
immediately in the Statement of Comprehensive Income.
Amounts accumulated in equity are reclassified to profit or loss in the
periods when the hedged item affects profit or loss (for instance when
the forecast sale that is hedged takes place). The gain or loss relating
to the effective portion of interest rate swaps hedging variable rate
borrowings is recognised in profit or loss within “interest expense and
other borrowing costs”. 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 reclassified to profit or loss.
Fair value estimation
The fair value of financial assets and financial liabilities must be
estimated for recognition and measurement or for disclosure purposes.
The Group has adopted AASB 7 Financial Instruments: Disclosures
which requires disclosure of fair value measurements by level of the
following fair value measurement hierarchy:
Level 1 – quoted prices (unadjusted) in active markets for identical
assets or liabilities;
Level 2 – inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (as prices) or
indirectly (derived from prices); and
Level 3 – inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
The fair value of financial instruments that are not traded in an active
market (for example, unlisted convertible notes) is determined using
valuation techniques. The Group uses a variety of methods and makes
assumptions that are based on market conditions existing at each
balance date. Other techniques, such as estimated discounted cash
flows, are used to determine fair value for the remaining financial
instruments. The fair value of interest rate swaps is calculated as the
present value of the estimated future cash flows.
The nominal value less estimated credit adjustments of trade
receivables and payables are assumed to approximate their fair
values. The fair value of financial liabilities for disclosure purposes
is estimated by discounting the future contractual cash flows at the
current market interest rate that is available to the Group for similar
financial instruments.
Impact of new accounting policies
The year end financial statements have been prepared on a basis
of accounting policies consistent with those applied in the 30
June 2014 Annual Report. The Group adopted certain accounting
standards, amendments, and interpretations during the financial
year which did not result in changes in accounting policies nor an
adjustment to the amounts recognised in the financial statements.
They also do not significantly affect the disclosures in the Notes to the
financial statements.
67
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 Impact of standards issued but not yet applied
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2015 reporting periods and have
not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out below:
Mandatory application date/
Date of adoption by Group
Must be applied for financial
years commencing on or after
1 January 2018.
The Group has not yet
decided whether to adopt any
parts of AASB 9 early.
In order to apply the new
hedging rules, the Group
would have to adopt the
December 2013 version
of AASB 9 and the
consequential amendments
to AASB 7 and AASB 139 in
their entirety.
Based on the transitional
provisions in the completed
AASB 9, early adoption in
phases will only be permitted
for annual reporting periods
beginning before 1 February
2015. After that date, the new
rules must be adopted in their
entirety.
Mandatory for financial years
commencing on or after
1 January 2018.
Expected date of adoption by
the Group: 1 July 2018.
Title of standard
Nature of change
Impact
AASB 9 Financial
Instruments
AASB 9 addresses the classification, measurement
and derecognition of financial assets and financial
liabilities and introduces new rules for hedge
accounting.
In December 2014, the AASB made further
changes to the classification and measurement
rules and also introduced a new impairment model.
These latest amendments now complete the new
financial instruments standard.
AASB 15 Revenue
from contracts with
customers
The AASB has issued a new standard for the
recognition of revenue. This will replace AASB 118
which covers contracts for goods and services and
AASB 111 which covers construction contracts.
The new standard is based on the principle that
revenue is recognised when control of a good or
service transfers to a customer – so the notion of
control replaces the existing notion of risks and
rewards.
The standard permits a modified retrospective
approach for the adoption. Under this approach
entities will recognise transitional adjustments in
retained earnings on the date of initial application
(e.g. 1 January 2018), without restating the
comparative period. They will only need to apply the
new rules to contracts that are not completed as of
the date of initial application.
The new hedging rules align
hedge accounting more
closely with the Group’s risk
management practices. As a
general rule it will be easier
to apply hedge accounting
going forward. The new
standard also introduces
expanded disclosure
requirements and changes
in presentation.
As it relates to the other
changes contemplated by the
new accounting standard, the
Group continues to assess
the impact on the financial
statements and at 30 June
2015 the changes are not
expected to materially impact
the Group.
Management is currently
assessing the impact of the
new rules. At this stage,
the Group is not able to
estimate the impact of the
new rules on the Group’s
financial statements. The
Group will make more detailed
assessments of the impact
over the next 12 months.
68
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 DIRECTORS’ DECLARATION
FOR YEAR ENDED 30 JUNE 2015
Directors’ Declaration
The Directors of the Company declare that:
1. in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable;
2. in the Directors’ opinion, the financial statements and notes as set out on pages 39 to 68 are in accordance with the Corporations Act 2001,
including compliance with accounting standards and giving a true and fair view of the financial position and performance of the Company and
the consolidated entity; and
3. the Directors have been given the declarations required by section 295A of the Corporations Act 2001.
4. Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
Signed in accordance with a resolution of the Directors made pursuant to section 295(5) of the Corporations Act.
On behalf of the Directors
Peter Bush
Chairman
Sydney, Australia
26 August 2015
Leon Pasternak
Deputy Chairman
Sydney, Australia
26 August 2015
69
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF SOUTHERN CROSS MEDIA GROUP LIMITED
Independent auditor’s report to the members of Southern
Cross Media Group Limited
Report on the financial report
We have audited the accompanying financial report of Southern Cross Media Group Limited (the
company), which comprises the statement of financial position as at 30 June 2015, the statement of
comprehensive income, statement of changes in equity and statement of cash flows for the year ended
on that date, a summary of significant accounting policies, other explanatory notes and the directors’
declaration for Southern Cross Austereo (the consolidated entity). The consolidated entity comprises
the company and the entities it controlled at year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the consolidated
entity’s preparation and fair presentation of the financial report 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 entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well
as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
PricewaterhouseCoopers, ABN 52 780 433 757
Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
70
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 Auditor’s opinion
In our opinion:
(a)
the financial report of Southern Cross Media Group Limited is in accordance with the
Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the consolidated entity's financial position as at
30 June 2015 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001.
(b)
the financial report and notes also comply with International Financial Reporting Standards as
disclosed in Note 1.
Report on the Remuneration Report
We have audited the remuneration report included in pages 21 to 37 of the directors’ report for the
year ended 30 June 2015. The directors of the company are responsible for the preparation and
presentation of the remuneration report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the remuneration report, based on our audit
conducted in accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the remuneration report of Southern Cross Media Group Limited for the year ended
30 June 2015 complies with section 300A of the Corporations Act 2001.
Matters relating to the electronic presentation of the audited
financial report
This auditor’s report relates to the financial report and remuneration report of Southern Cross Media
Group Limited (the company) for the year ended 30 June 2015 included on Southern Cross Media
Group Limited’s web site. The company’s directors are responsible for the integrity of Southern Cross
Media Group Limited’s web site. We have not been engaged to report on the integrity of this web site.
The auditor’s report refers only to the financial report and remuneration report named above. It does
not provide an opinion on any other information which may have been hyperlinked to/from the
financial report or the remuneration report. If users of this report are concerned with the inherent
risks arising from electronic data communications they are advised to refer to the hard copy of the
audited financial report and remuneration report to confirm the information included in the audited
financial report and remuneration report presented on this web site.
PricewaterhouseCoopers
Sam Lobley
Partner
Melbourne
26 August 2015
71
SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 ADDITIONAL STOCK EXCHANGE INFORMATION
The additional stock exchange information set out below was applicable as at 31 August 2015. The Company only has one class of shares, fully
paid ordinary shares, therefore all holders listed hold fully paid ordinary shares and each holder has the same voting rights. There are no unlisted
securities and there is currently no on-market buy-back.
The names of the 20 largest holders of quoted equity securities are listed below:
Name
Fully Paid Ordinary Shares
% of Issued Capital
Macquarie Diversified Asset Advisory Pty Limited
J P Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd (DRP)
Cladela Pty Limited (The Moore Family A/C)
Macquarie Corporate Holdings Pty Limited
Citicorp Nominees Pty Limited (Colonial First State Inv A/C)
Mr Nicholas Moore
Cladela Pty Limited (The Moore Superannuation A/C)
BNP Paribas Nominees Pty Ltd (Agency Lending Collateral)
HSBC Custody Nominees (Australia) Limited
Venamay Pty Limited
S & Giggles Pty Ltd
Cowies Corner Pty Ltd
RBC Investor Services Australia Nominees Pty Limited (Bkcust A/C)
Birketu Pty Ltd
McGuire Media Pty Limited
National Nominees Limited (DB A/C)
Analysis of numbers of equity security holders by size of holding:
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Holding less than a marketable parcel
Substantial holders in the Company are set out below:
Name
Macquarie Group Limited and its controlled bodies corporate
Allan Gray Australia Pty Ltd and its related bodies corporate
Commonwealth Bank of Australia and its related bodies corporate
Dimensional Entities
Securities subject to voluntary escrow are set out below:
Type
Voluntary escrow
Voluntary escrow
72
184,901,227
134,514,721
116,801,579
112,892,308
89,858,201
9,556,478
7,153,268
6,167,645
4,754,440
2,102,936
2,074,451
1,210,000
1,148,405
1,144,195
1,086,957
1,086,956
1,035,893
1,000,000
1,000,000
999,451
680,489,111
24.54
17.85
15.50
14.98
11.92
1.27
0.95
0.82
0.63
0.28
0.28
0.16
0.15
0.15
0.14
0.14
0.14
0.13
0.13
0.13
90.29
Number of Shareholders Fully Paid Ordinary Shares
334,348
4,848,574
7,242,737
36,192,139
704,968,611
753,586,409
67,795
843
1,637
922
1,390
113
4,905
539
Fully Paid Ordinary Shares
% of Issued Capital
196,094,086
131,103,243
44,017,500
35,293,487
406,508,316
26.02%
17.40%
5.84%
4.68%
53.94%
Date Escrow Period Finishes
Fully Paid Ordinary Shares
30 October 2015
2 January 2016
2,173,913
1,000,000
3,173,913
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SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 This page has been left blank intentionally.
74
HEADINGFOR YEAR ENDED 30 JUNE 2015SOUTHERN CROSS AUSTEREOANNUAL REPORT 2015 CORPORATE DIRECTORY
SOUTHERN CROSS MEDIA GROUP LIMITED
ABN 91 116 024 536
Company Secretary
Mr Tony Hudson
Registered Office
Level 2
257 Clarendon Street
South Melbourne VIC 3205
+61 3 9252 1019
Share Registry
Computershare Investor Services Pty Limited
Yarra Falls
452 Johnston Street
Abbotsford VIC 3067
The Southern Cross Austereo Annual Report 2015 is printed on ecoStar which is an environmentally responsible paper made Carbon Neutral.
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