YEAR IN REVIEW
SCA’s results in FY2019 highlight the quality of its core Audio assets in the eyes
of consumers and advertisers and the benefits of SCA’s disciplined approach to
management of costs and cash flow.
Revenue
EBITDA
Underlying EBITDA
Reported NPAT
Underlying NPAT
Net Debt
Full year dividends
FY2019
Comparison to FY2018
$660.1m
$147.4m
$159.9m
($91.3m)
$76.2m
$292.6m
7.75 cents
$656.8m
$158.4m
$158.4m
$0.1m
$73.9m
$303.9m
7.75 cents
0.5%
(6.9%)
0.9%
nm
3.1%
(3.7%)
No change
In metro markets, SCA’s Hit and Triple M brands performed consistently in
SCA’s Television business outperformed the market, delivering a power
FM and digital radio audience surveys. The metro sales teams delivered an
ratio – which measures the conversion of ratings to revenue – of 1.05 in
increase of 4.1% in Audio revenue, while the broader radio market declined
the four east coast aggregated markets.
by 0.5%. Regional radio revenue grew by 1.5%, boosted by the Boomtown
initiative. In both cases, these results were driven by strong growth in
national revenues, which were up by 9.2% on the prior year.
In the year ahead, SCA will continue to invest sensibly in ‘front-of-house’
activities: creating compelling content and using its audio assets to help
its advertising partners succeed. This will include optimising the value
Aggregating SCA’s FM and digital radio reach in metro markets offers
of its current radio and podcasting brands, as well as developing new
advertisers a unique, simple and scaled value proposition and has reaped
audio products that meet the increasing consumer demand for mobile,
rewards. When brands choose to advertise on a Hit or Triple M station, their
personalised, on-demand audio content. This will be complemented
advertisements are broadcast in the same day-part on five radio stations in
by a focus on operational excellence in the ‘back of house’ functions,
the same location, significantly extending their commercial impact.
including implementing the recently announced outsourcing of SCA’s
PodcastOne Australia consolidated its position as the leading premium
commercial podcast business in Australia, attracting a blue chip group of
corporate sponsors. This division is expected to reach cash flow breakeven
in the second half of the new financial year.
television playout and broadcast transmission functions.
Contents
Year In Review
Chairman’s Statement
CEO’s Report
Operational Review
Television
Boomtown
YEAR IN REVIEW
IFC
Governance
02
04
06
10
11
SCA Engage
The Board And Leadership Team
Financial Report
ASX Report
Corporate Directory
12
13
14
18
94
95
SOUTHERN CROSS AUSTEREO YEAR IN REVIEW
10mil
86
4.8mil
3.9mil
Reaching over 10m Australians
86 FM & Digital Radio Stations
4.8 Million Hit network
3.9 Million Triple M network
every week across its Television,
7.5 Million National Reach
listeners nationally each week
listeners nationally each week
Radio and Digital networks
46 FM & Digital Stations
40 AM & FM & Digital Stations
4.4mil
92
No. 1
Regional Television networks
92 free-to-air television signals
Australia’s leading commercial
4.4m viewers per week
podcast network
YEAR IN REVIEW | 1
ANNUAL REPORT 2019 CHAIRMAN’S
STATEMENT
On behalf of the Board of Directors,
I am pleased to present Southern
Cross Austereo’s Annual Report
for the 2019 financial year.
Group revenue of $660.1 million was 0.5% up on the prior year. Group
EBITDA of $147.4 million was down 6.9% on the prior year, reduced by
$12.5 million of significant items and restructuring costs. Underlying net profit
after tax was $76.2 million, which was 3.1% higher than the prior year.
Net debt reduced during the year from $303.9 million to $292.6 million.
SCA is comfortably within its debt covenants and has a robust balance sheet
allowing flexibility and opportunities for future growth.
The Board was pleased to maintain fully franked dividends of 7.75 cents per
share, in line with the prior year.
Following the accounting separation of SCA’s regional radio and television
assets, an impairment charge of $226.9 million was recognised against the
Group’s regional television licences. This was offset by an adjustment of
$68.1 million to the Group’s deferred tax liability. Apart from this impairment
charge, the other significant item at the year-end was the fair value loss of
$9.2 million recorded on the assets held at the end of the financial year for
resale to Broadcast Australia. This sale, and outsourcing of SCA’s broadcast
transmission functions, was announced in early August.
In challenging advertising markets, SCA delivered a credible result with
healthy revenue shares in all markets along with strong cost controls.
SCA’s audio assets performed well during the year. Up to the most recent
Metro radio survey in July 2019, SCA’s national brand reach was over
7.5 million across 76 analogue stations and eight digital radio stations in 38
markets. On FM radio, the national Drive shows launched in 2018 – Kennedy
Molloy on the Triple M Network and the combination of Carrie & Tommy
with Hughesy & Kate on the Hit Network – consolidated their audiences
and reached number 1 in several market surveys. Moonman in the Mornings
has made a solid start as Triple M’s new Sydney Breakfast show, while Fifi,
Fev & Byron continued their reign in Breakfast for The Fox in Melbourne.
SCA’s unique strategy for aggregating its FM and digital radio station
audiences in metro markets is providing additional value for advertisers and
a sustainable competitive advantage over commercial radio peers.
The most recent Metro radio survey in July 2019 showed that SCA’s digital
radio stations had 316,000 digital only listeners, providing advertisers with
a greater aggregate reach of 6.3% across the Triple M and Hit Networks.
SOUTHERN CROSS AUSTEREO CHAIRMAN’S
STATEMENT
As audiences increasingly seek out personalised on-demand audio
platforms. The ACCC’s final report on the Digital Platforms Inquiry has
experiences, SCA has strengthened its investment in smart audio
recommended that the Government should address these regulatory
consumed through Internet-enabled devices, such as smartphones and
disparities. SCA looks forward to the Government acting promptly to
smart speakers. Each week, SCA delivers 106 live digital radio streams,
implement the ACCC’s recommendations.
200 organic and 140 catch-up show podcasts and 900 minutes of
bespoke news services for smart speakers.
I would like to thank my Board colleagues for their commitment and
guidance during the year. On a personal note, I was also appreciative
PodcastOne Australia has expanded beyond its market-leading library
of their support during my medical leave of absence this year. The Board
of Australian original podcast series to offer branded podcasts, helping
continued to function effectively during that time under the leadership
companies to better interact and engage with key stakeholders including their
of our Deputy Chair, Leon Pasternak, working closely with our senior
employees and customers. Through the industry owned RadioApp, all of SCA’s
executive team. While there were no changes in the Board’s composition
FM and digital radio stations are available on Amazon Alexa-enabled devices
this year, Leon will leave the Board in the next two years and the Board
(including Sonos speakers) and will soon be available on Google Home.
is focused on the task of succession to ensure we maintain a suitable
In contrast to audio, the regional television model remains challenged;
mix of skills to guide and support SCA’s future.
however SCA outpaced the market. Advertising revenue in the total
On behalf of the Board, I thank SCA’s passionate and committed people
regional television market declined by 5.3% compared to the prior year.
who continue to drive the Group’s success. I look forward to working with
This total market decline was partly offset by strong sales performance
the Board and management team in the year ahead to deliver positive
in all markets by SCA. Our national television revenue was slightly up,
returns for SCA’s audiences, advertisers, communities and shareholders.
PETER BUSH
Chairman
to $108.1 million, and our sales teams delivered a power ratio of 1.05
in the four aggregated east coast markets.
Regional television broadcasters face competition for audience and
advertisers from subscription video-on-demand (SVOD) platforms, such
as Netflix and Stan, as well as other online platforms like YouTube and
Facebook. Increasingly, competition is also coming from the metropolitan
television networks that provide their live programming on-demand and
for catch-up in regional markets. The networks have also increased product
placement and other in-program integrations, reducing the incentive
for program sponsors to buy advertising from regional broadcasters.
Against this backdrop, SCA continues to operate its television assets
effectively. Through the Boomtown campaign and other initiatives, the sales
and marketing teams have successfully promoted the benefits for national
advertisers to invest in regional media. SCA has also continued its strategy
of divesting non-core assets and activities. In the most recent 12 months, this
has included the outsourcing to NPC Media of television playout services
and the outsourcing of broadcast transmission services to Broadcast
Australia, creating a more streamlined and efficient service and minimising
cost in the delivery of broadcast television to SCA’s television licence areas.
The media law reforms introduced in 2017, while welcome, were long
overdue and there is more work to be done. Broadcasting legislation
constrains the operating model for regional broadcasters to compete
in the Internet era, and there are significant disparities in regulation of
content and advertising on broadcast platforms compared to online
CHAIRMAN’S STATEMENT | 3
ANNUAL REPORT 2019
CEO’S
REPORT
SCA takes great pride in our strategic
vision and agility. We recently refreshed
our winning aspiration to be ‘Proudly
National, Fiercely Local’. This clearly
states what differentiates SCA from
other Australian media businesses.
SCA has Australia’s largest radio network, with 76 analogue radio stations
and eight capital city digital radio brands operating under the Hit and
Triple M families. PodcastOne Australia is the leading, premium,
commercial podcast network in Australia, now boasting 65 contracted
premium podcast creators producing unique, original content. SCA also
broadcasts 105 television signals into regional and rural Australia. These
national assets are supported by sales and content teams around Australia,
all highly engaged and inextricably linked with their local communities.
Under the national operating model introduced from 1 July 2018, our core
business functions of Operations, Content, Sales, Finance and Corporate
Affairs, and Technology, are aligned nationwide. This has streamlined
processes, communication flow and decision making so that our offices
around the country are supported to deliver consistent, high quality
services to our people, audiences, advertisers and communities.
A significant change has been the restructuring of our Content team to
align with our strategy to create a national focus on entertainment, music,
news and marketing for the Hit and Triple M networks. This has formed
a more disciplined, effective and forward-looking group of executives,
targeting even stronger content outcomes. While the position of Chief
Content Officer remains vacant, the Content team has reported directly
to me as we define the skills and experience required to lead our creation
of compelling content into the future.
Turning to the future, SCA is positioning itself to take advantage of key
consumer trends in media and audio entertainment. The trends towards
mobile, personalised and on-demand audio content are continuing
apace, and smart speakers and connected cars are adding new layers
of complexity and opportunity. The global technology platforms –
including Amazon, Google, and Apple – have emerged as key players
and partners in this new ecosystem and, in some cases, as competitors.
With the Board’s support, our senior leadership team undertook a
detailed review of these trends and has confirmed and refreshed the
four pillars of SCA’s corporate strategy:
SOUTHERN CROSS AUSTEREO CEO’S
REPORT
CREATE COMPELLING CONTENT:
There is an ever-growing range of content available to our audiences,
TRANSFORM OUR BUSINESS TO BUILD
SUSTAINABLE REVENUE STREAMS:
through broadcast and online platforms, both locally and internationally.
This pillar is firmly focused on building a strong future for SCA. The launch
For SCA to prosper, our own content needs to be the most compelling.
of our Hubble talent development portal in 2017 was an early action to
For radio audiences, that means we need to provide music, entertainment,
ensure SCA has a sustainable pipeline of creative talent for our range
information and news that our audiences want to hear and seek out, all with
of audio platforms. Earlier this year, we launched an internal innovation
an emphasis on what’s going on in their local communities. For our podcast
program designed to make SCA a place where employees actively think
audiences, we need to deliver unique and original content that entertains,
about and work on innovation. The program includes training for our
engages and informs them.
DELIVER IMPROVED AUDIO EXPERIENCES:
The ‘live and local’ strengths of radio continue to make it the most popular
way for audiences to consume audio content, and the car remains one of
the most popular places for people to listen to radio. The devices on which
people listen, however, are changing. Smartphones, connected cars and
smart speakers are growing in importance, both for live radio and for on-
demand listening. SCA continues to improve the functionality of our apps,
with signed-in users increasing by 56% to 416,000 during the year. In a global
first, Radio App, the commercial radio industry app which hosts over 300
leaders to run workshops across our network of locations and a portal
for submission of ideas that could create value for SCA.
The growth in total audio listening and the shift to digital on-demand
platforms is providing opportunities for companies with creative and
technical audio expertise. For SCA, this will include creating branded
podcasts for companies who want to engage their customers or staff,
helping advertisers with audio branding to improve their prominence on
smart speakers and other voice-controlled devices, and exploring new and
user-friendly ways for audiences to find and enjoy our compelling content in
a brand-safe environment for our advertisers’ products and services.
Australian radio stations, has been (or will shortly be) integrated into Amazon
A key principle underlying SCA’s corporate strategy is to invest sensibly
Alexa, Sonos and Google-enabled devices. Our bespoke news updates
in our ‘front-of-house’ activities: creating compelling content and using our
are also available on-demand on a range of voice-activated platforms
audio assets to help our advertising partners succeed. Our decisions during
(Google Home, Amazon Alexa, and Sonos). We have recently refreshed
the year to outsource our television playout and broadcast transmission
our PodcastOne Australia website and app, making it easier for our growing
services are consistent with that strategy. These ‘back-of-house’ functions are
audiences to find and enjoy our library of unique and original podcasts.
asset-intensive and can be performed more efficiently by specialist service
USE OUR ASSETS TO HELP OUR
CLIENTS SUCCEED:
Effectively monetising our content is fundamental to our success.
The description of this pillar emphasises to our sales teams that we will
only succeed if we focus on delivering success for our clients. First and
foremost, this requires our sales and creative teams to spend more time to
understand our clients’ businesses. We are investing resources to ensure
providers. Outsourcing will deliver reliable and standardised performance
of these functions, while mitigating future capital expenditure risks.
I am conscious that our outsourcing of these back-of-house functions will
mean that some current roles in our business will no longer be required.
We are grateful to all impacted employees for their service and assure them
of our support during the transition period and in helping them to identify
new opportunities after completion.
that our wealth of research and insights are relevant to our clients’ needs
In closing, I would like to thank all of our people and the Board for their
and to demonstrate the return on investment from advertising on SCA’s
commitment and support as we build an exciting and successful future for SCA.
assets. Our investment in technology to enable aggregation of our FM
and digital radio audiences through our ‘digital stack’ strategy is providing
increased reach and demonstrable value for advertisers in a scaled and
simple way. Our new and exclusive sales partnership with SoundCloud
has expanded our portfolio of digital audio assets, providing advertisers
with access to new audiences, while our new sales representation of
2CH Sydney has broadened our suite of advertising opportunities.
GRANT BLACKLEY
Managing Director and Chief Executive Officer
CEO’S REPORT | 5
ANNUAL REPORT 2019 OPERATIONAL
REVIEW
HIGHLIGHTS:
• Hit and Triple M metro audiences expand, and SCA’s digital stack extends commercial impact
• PodcastOne Australia grows listeners and sponsors, extending into branded podcasts
• Digital audio extension to smart speakers and streaming
• Boomtown helps drive national revenue and commercial share growth for Regional radio and television.
AUDIO
SCA’s Audio business grew successfully in FY2019. Revenue increased by 2.3% to $453.4 million and underlying EBITDA grew by 3.4% to $152.7 million.
This result was spurred by national audio revenue growth of 9.3% to $254.4 million, offset by weaker local revenue.
$M’S
NATIONAL
LOCAL
OTHER
EBITDA
442.7
31.0
178.9
232.8
147.7
FY18
Metro markets led this growth, while Regional radio performance was static.
$M’S
NATIONAL
LOCAL
Metro
236.4
55.7
180.7
227.0
60.8
166.2
FY181
FY19
$M’S
NATIONAL
LOCAL
453.4
29.6
169.4
254.4
184.7
118.1
66.6
FY182
152.7
FY19
Regional
187.4
113.7
73.7
FY19
1 Restatement for AASB 15 – Revenue from Contracts with Customers. 2 Restatement to include revenue from Canberra JV previously included in Corporate segment
6 | OPERATIONAL REVIEW
SOUTHERN CROSS AUSTEREO OPERATIONAL
REVIEW
SCA’s metro audio revenue increased by 4.1% to $236.4 million in a market that
declined by 0.5%. In large part this is a reward for SCA’s innovative and unique
strategy for aggregating its FM and digital radio station audiences to provide
additional value for advertisers in metro radio markets.
In 38 locations around the country, SCA’s 76 Hit and Triple M network
analogue radio stations and eight digital stations continued to entertain
and inform more than 7.5 million listeners every day.
The Triple M and Hit FM networks are complemented in the five metro
capital cities by four additional stations that are available on digital
radio. Digital radio was also launched during the year in Hobart and in
Canberra. SCA is a firm believer in the future of digital radio, owning
and operating more digital radio spectrum than any other Australian
commercial radio network.
In the August 2019 GfK Metro survey, SCA’s national metro digital radio
stations attracted 316,000 unique listeners, providing advertisers with
greater audience reach of 6.3% in those metro markets.
SCA uses this aggregated FM and digital radio reach to offer advertisers a
simple and scaled value proposition. When advertisers choose to advertise
on a Hit or Triple M station, their advertisements are broadcast in the same
day-part on five radio stations in the same location, significantly extending
their commercial impact. Other Australian commercial radio networks
cannot (or have so far chosen not to) do this for advertisers.
4,426,000
Listen to SCA’s
FM Network only
326,000
Listen to both
SCA’s FM and
Digital Radio
316,000
Listen to SCA’s Digital
Radio Network only
Beyond the traditional broadcast signals, the Hit and Triple M networks are
The compelling and engaging digital content stems from SCA’s broadcast
reaching and growing audiences on a range of digital and social channels.
brands and leads back to its owned and operated platforms, the Hit and
From Facebook and Instagram to YouTube, SCA’s networks use these
Triple M apps and websites. This engagement contributed to 80% growth
platforms to market their quality audio entertainment, news and information
over the year in audio on demand consumption on SCA’s own platforms.
to Australian listeners through visualisation and storytelling.
SCA continues to improve the functionality of its apps, with active signed-in
SCA’s social communities have increased by 4.6% to 13 million, as it
listeners increasing by 56% to 416,000 during the year
continues to be the industry leader in social engagement – generating
more than 29 million interactions on social platforms in FY2019.
MUSIC
Music is a key reason why people listen to radio. For many, it is the number
This will include updating playlists for each radio station around Australia
one reason. During the year, SCA appointed a Head of Music and created
according to demographic, research and survey information, evolving
a music hub for each network. SCA’s music strategy, relying on a mix of
successful formats, and replacing less successful ones. There will be a core
science and art, is to curate music moments to retain, attract and grow
focus on digital formats, each of which is curated in a specific music genre.
a loyal audience every day on all of SCA’s stations around the country.
OPERATIONAL REVIEW | 7
ANNUAL REPORT 2019 OPERATIONAL
REVIEW
HIT NETWORK
TRIPLE M NETWORK
The Hit network achieved growth in both share and listeners in metro
The Triple M network’s metro audience remained stable with an 8.2% share
markets over the past year. Listeners were up 1.1%, from 3.077 million to
(All People 10+) and a 32,000 or 1% increase in listeners to 2.35 million.
3.111 million, and the network share rose from 8.2% to 8.4%.
The network share increased from 8.2% to 8.4%.million, and the network
The Hit network strengthened in its core demographic of Women 25-54 over
FY2019 in metro markets, with a 7.4% increase in listeners to 1.103 million.
share rose from 8.2% to 8.4%.
Highlights:
Highlights:
• 2DayFM continued to rebuild its audience, helped by a broader
• Kennedy Molloy national Drive show: share up 12% in the core
music profile during the Workday. This delivered substantial
Men 25-54 demographic; listeners up by 5% or 47,000 people.
increases in the target demographic of Women 25-54, from
242,000 to 279,000 listeners, a 15% increase. From 16 August
2019, we launched a new Breakfast show on 2DayFM, offering
an upbeat new music alternative to Sydneysiders on their
morning commute.
• The Fox in Melbourne continued its reign with the #1 Breakfast
show this year with Fifi, Fev & Byron. This show has the highest
audience of all commercial stations in Australia at 1.154 million.
• Sydney Breakfast was relaunched in January 2019 as Moonman
in the Morning. The new show, led by Lawrence Mooney,
recorded an improvement in audience share from 4.7% to 5.9%
across the first four surveys of 2019.
• In Melbourne, The Hot Breakfast with Eddie McGuire, Luke Darcy
& Will Anderson increased its audience share to 6.8% over the
year. Listening and share also increased across the Workday.
It is also #1 in the core Women 25-54 demographic, achieving a
• The Big Breakfast in Brisbane with Marto, Robin & Nick
1% increase to 391,000 listeners over the year.
• Stav, Abby & Matt on Hit105 Brisbane grew its All People 10+
from 491,000 to 505,000 listeners and in the core Women 25-54
increased to a 12% share of listening (All People 10+). Workday
grew listening to a 13.3% share. In the core Men 25-54
demographic, Breakfast dominated with a share of 20.8%.
demographic, the show was up 6.9% to 169,000 listeners.
• In a tight breakfast battle in Perth, Mix94.5’s All People 10+
• The Hit network’s dual national Drive show strategy delivered
positive ratings and revenue for SCA. Carrie & Tommy increased
their share for All People 10+ from 10.6% to 10.7%, ranking #1 for
Women 25-54 with a 17.4% share. Hughesy & Kate’s share in the
Breakfast share increased to 13.5% and listeners were up by
2,000. Mix94.5 achieved big gains across FY2019 in the key
demographic target of Women 25-54, up by 0.9% to 17.4%; and
listeners rose by 13,000.
same demographic was up from 14.9% to 15.2%.
• Triple M’s AFL coverage audiences grew by 7% from 487,000
• Hit92.9 in Perth achieved strong growth in key demographics for
the Workday music sessions, with share up 2.2 points to 13.9% in All
People 25-54 and gains of 15,000 listeners. Workday jumped by 2.7
points to 18.8% for Women 25-54, growing by 9,000 listeners.
to 519,000 listeners.
8 | OPERATIONAL REVIEW
SOUTHERN CROSS AUSTEREO OPERATIONAL
REVIEW
PODCASTONE AUSTRALIA
Podcasting is an exponential growth sector. Increasing consumer
PodcastOne Australia is home to over 65 original podcast titles from a
awareness and trial is building dedicated audiences that are becoming
compelling group of Australians, as well as the best podcasts from our
more attractive to advertisers, albeit off a low but growing base. Against
partner, PodcastOne USA. PodcastOne Australia’s homegrown podcasts
this backdrop, PodcastOne Australia has consolidated its position as
include Hamish & Andy, Adam Shand at Large, The Howie Games (Mark
the leading, premium, commercial podcast business in Australia. In July
Howard), Mum says my Memoir is a Lie (Rosie Waterland), and Superwomen
2019, PodcastOne Australia launched a new website and app to improve
We Ain’t (Janine Allis and Margie Hartley).
audience experience searching for and listening to PodcastOne Australia
podcasts. Audiences and revenues were up 260% over the year, and SCA
expects PodcastOne Australia to become cash flow positive during 2020 –
supported by increasingly higher downloads and stronger revenues.
Other businesses have also noticed the growing influence of podcasting,
and this is providing new commercial opportunities for PodcastOne Australia
to use its specialist expertise to help companies create branded podcasts to
engage key stakeholders, employees and customers.
DIGITAL AUDIO
Audiences still love SCA’s linear broadcast radio stations, but there is also
We’ve created skills and bespoke content so that the latest news updates
increasing demand for mobile, personalised on-demand audio content. SCA
are available on demand on smart speakers.
is at the forefront of these consumer developments.
On 1 April 2019, SCA kicked off an exclusive advertising partnership in Australia
SCA’s radio stations can be streamed on the go on smartphones or at home
with SoundCloud, a global, open audio platform fostering what’s new, now and
on smart speakers. The flagship radio shows around the country are available
next in music and culture. With an aggregated commercial reach of over three
on catch-up podcasts, so that their audiences can listen to them – or to original
million monthly users, SCA is now a one-stop shop for digital audio advertising
podcasts on PodcastOne Australia – wherever and whenever it suits them.
solutions on SoundCloud, coupled with SCA’s own substantial live radio
streaming and catch-up podcasts.
Cumulative Signups (Web and App)
HIT
TRIPLE M
SCA TOTAL APPS
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
*Google’s Firebase Product as of July 31st 2019
OPERATIONAL REVIEW | 9
ANNUAL REPORT 2019 TELEVISION
With regional television advertising
markets continuing to be challenged,
SCA performed relatively well through an
effective sales approach and disciplined
controls over back office costs.
SCA’s television operations contributed revenue of $206.6 million in
FY2019, down 3.2% compared to FY2018. Excluding significant items
and restructuring charges, underlying EBITDA increased by 1.2% to $33.7
million and the underlying EBITDA margin increased from 15.6% to 16.3%.
This improved EBITDA margin was driven by the efficiencies that SCA
has extracted from its television operations over time.
$M’S
NATIONAL
LOCAL
Advertising Revenue
201.9
93.8
191.0
82.9
108.0
108.1
FY18
FY19
SCA’s principal affiliation – in the regional markets of Queensland, Southern New South Wales and Victoria – continues to be with the Nine Network.
From 1 July 2018, SCA has also provided Nine with exclusive sales representation services in Northern New South Wales, making it simpler for advertisers
to invest in these aggregated markets. Married at First Sight, The Block, Australian Ninja Warrior and Nine’s NRL coverage were the best performing shows.
SCA has consistently achieved a commercial share in excess of audience share in these markets.
1.06
1.09
38.1%
35.8%
34.9%
33.4%
Commercial Share & Power Ratio
1.06
1.08
1.06
1.05
38.1%
35.9%
36.7%
36.4%
36.1%
34.0%
34.0%
34.2%
H2 FY17
H1 FY18
H2 FY18
H1 FY19
H2 FY19
H2 FY19
AUDIENCE SHARE
COMMERCIAL SHARE
POWER RADIO
SNSW, VIC & QLD1
INC. NNSW1,2
SCA is expecting strong ratings and commercial performance from Nine’s
SCA has also announced that it will outsource its television playout services
second year of broadcasting the Australian Open tennis in 2020. With
– comprising 105 broadcast signals – to NPC Media (a joint venture between
Nine only securing the 2019 tennis rights late in 2018, there was limited
the Nine and Seven Networks), and its television and radio broadcast
opportunity for our sales teams to optimise this new event in its first year.
transmission services to Broadcast Australia. The transition of these
SCA is affiliated with the Seven Network in Tasmania. While this is a smaller
market, SCA has built a strong position for Seven’s programming over many
years. Seven’s AFL coverage is its premier product in Tasmania, with My
Kitchen Rules, House Rules, Home & Away and Andrew Denton’s Interview
also strong ratings performers. Tasmania is the only market in which SCA
produces its own local news bulletins, and that contributes to our leading
position. SCA’s sales teams continued in FY2019 to achieve a commercial
share in excess of audience share in Tasmania.
services will be completed during FY2020, creating a streamlined and
efficient service for delivery of broadcast television to SCA’s licence areas.
Outsourcing these services will create a more predictable cost base for our
television operations, while mitigating future capital expenditure and other
risks associated with SCA’s previous ownership of broadcast assets.
1 KPMG Market Share Report – Regional Queensland, SNSW, NNSW & Regional Victoria
2 Effective 1 July 2018 SCA and Nine entered into a local sales representation agreement
for the NNSW Television licence area
10 | TELEVISION
SOUTHERN CROSS AUSTEREO BOOMTOWN
SCA has grown its national advertising revenue in regional markets over the past
several years. In the last two years, SCA has grown national regional revenues
by 23.2% and 3.5% for radio and television respectively. In FY2019, SCA’s national
regional radio revenue grew by 10.7%, while national regional television revenue
was flat. Overall, SCA grew national regional revenue by 4.1% to $181.8 million.
This growth has been driven by targeted initiatives taken by SCA to change
of Australia’s population – have disposable incomes and travel, shopping
the perception among metropolitan media buyers of regional Australia and
and spending patterns that are comparable to those of Australia’s capital city
to increase advertising investment in regional media. In 2019, SCA partnered
residents. And yet only 10% of national media budgets are spent regionally.
with other regional media businesses in a joint marketing campaign to
Boomtown seeks to close that gap.
accelerate these initiatives. The campaign is called Boomtown.
SCA and our Boomtown partners believe there are significant opportunities
Representing 8.8 million people living in regional Australia, Boomtown
for advertisers to grow their businesses in a more effective and efficient
includes major business and population centres like the Gold Coast,
manner by tapping into Boomtown. More information is available on the
Newcastle, the New South Wales Central Coast, Townsville, Hobart,
Boomtown website: https://boomtown.media/.
Bunbury and Canberra. The residents of Boomtown – who comprise 36%
BOOMTOWN | 11
ANNUAL REPORT 2019 GOVERNANCE
VALUES
CONNECTING AND SUPPORTING COMMUNITIES
SCA prides itself on creating a culture where people feel valued and can
As a local media organisation, SCA is an integral part of the fabric of regional
perform at their very best. We don’t just focus on what we do; we care about
and rural communities. SCA’s local news and information services on radio
how we do it. SCA’s five values guide day-to-day decisions and shape
and television keep communities up to date on the issues that matter to them;
individual and collective behaviour.
as well as providing local skilled jobs, promoting local events, supporting local
DIVERSITY AND INCLUSION
businesses, providing local advertising opportunities and supporting local
charities and community initiatives. SCA produces and broadcasts local news
SCA believes that business performance is enhanced by a diverse
bulletins in Tasmania on the Seven Network and, in conjunction with the Nine
workforce where employees are treated with respect and fairness and
Network, SCA broadcasts local television news bulletins in regional Victoria,
have equal access to opportunities. SCA aims to provide a living, creative
Southern New South Wales and regional Queensland.
organisation that understands the diversity of its audiences and advertisers.
The representation of women in the national executive team has risen from
25% to 30% over the past year. There are a range of initiatives under way
to continue that trajectory, including mentoring and executive development
programs for women, policies to encourage flexible working arrangements
and return from parental leave, recruitment and succession planning
processes that support high potential women, and training for all managers
on diversity and inclusion.
Gender pay analysis indicates that remuneration across SCA’s business
is generally determined by reference to the requirements of each role
and the skills and experience of individual employees, with no systemic
gender bias in remuneration practices. Where isolated pay gaps have
been identified (whether in favour of men or women), action has been
taken to address them – or will be over time.
DEVELOPING AND LOOKING AFTER OUR PEOPLE
SCA is investing in leadership with a focus on the skills that SCA requires of its
leaders now and in the future. This has included partnering with the Australian
School of Applied Management to provide leaders with executive level
training on leading in times of change, executing strategy, inspiring trust and
coaching for high performance. SCA was also proud to receive an award for
Cultural Transformation and Sustainability from Human Synergistics Australia,
based on the people, culture and engagement results in 2016 and 2018.
SCA manages a range of workplace health and safety risks, including
travelling and working in remote areas, working at heights on high voltage
transmission equipment and other electrical equipment, managing
asbestos in old office buildings and equipment shelters in regional areas,
managing security arrangements for high profile performers and on-air
announcers, and conducting ‘stunts’ for on-air radio content. Proactive
steps are taken to promote the mental health and wellbeing of SCA’s
people including a wellbeing portal on the Company intranet, training on
managing mental health in the workplace and an employee assistance
program and counselling service.
In addition to the SCA Engage national charity program, SCA is
an active contributor to local communities. Here are just a few
examples from the past year:
• Facing disaster from the devastating floods this year,
SCA’s Townsville radio personalities and the people in Far
North Queensland locations assisted local authorities and
communities with emergency briefings, up-to-date advice and
recommendations and support services over several weeks.
• The extreme bush fires in Esperance saw SCA’s radio stations
broadcast bushfire information 24 hours a day for five days.
Triple M in Warragul did the same for 48 hours during the
Bunyip State Park fires in March 2019.
• Triple M’s GoldFM on the Gold Coast supported an event where
hundreds of people paddled on Currumbin Creek and took an
oath to Stand Up against Domestic Violence. Hit90.9’s announcer,
Ben Hannant, peddled a spin bike for 24 hours to raise $152,000
for a local family in need.
• Hit106.9 Newcastle Breakfast announcer, Simon Baggs, walked
50 kilometres – raising $60,000 for the family of an 11-year-old
girl suffering permanent disability following surgery to remove
a brain tumour.
• Through a partnership with Habitat for Humanity, SCA offers
four employees each year the opportunity to participate in
Rock the House, in which they help to construct housing for
disadvantaged people in impoverished overseas communities.
In 2019, Rock the House travelled to Siem Reap, Cambodia.
CORPORATE GOVERNANCE
SCA’s Corporate Governance Statement demonstrates the extent
to which SCA has complied with the ASX Corporate Governance
Council’s Principles and Recommendations and corporate governance
best practice. The Corporate Governance Statement and related
corporate governance policies are available on SCA’s website
(http://www.southerncrossaustereo.com.au/investors).
12 | GOVERNANCE
SOUTHERN CROSS AUSTEREO SCA ENGAGE
SCA Engage is SCA’s national charity program. Over two-year cycles, SCA works with selected charities
to help their work, while engaging its own people to build stronger communities. SCA provides support
through radio and television advertising; digital, social and research support; event and meeting spaces;
brainstorming sessions; concert and sporting tickets; on-air interviews; and staff volunteering.
SCA supported CanTeen, OzHarvest and Black Dog Institute in the first of our two-year programs.
SCA ENGAGE 2016-2018
CanTeen
OzHarvest
Black Dog Institute
Increase of 1,700 young people receiving
25% uplift in CEO Cookoff fundraising
Individual giving rose by 477%
intensive support
53% increase in financial year tax
in regional Australia
SCA research insights changed ways
appeal fundraising
Brand awareness up 11% (metro) and
to communicate with young people
Training at SCA increased professionalism
of 50 youth ambassadors
19% increase in Christmas appeal fundraising
8% (regional)
11% increase in men 30-52 seeking mental
health information from Black Dog Institute
SCA also supported Rural Aid, helping rural communities dealing with
TESTIMONIALS:
drought. A four-month campaign of community service announcements
on radio and television encouraged people to donate to the ‘Buy a Bale’
appeal or volunteer to help farmers in need.
From 1 January 2019, SCA is working with The Smith Family and Beyond
Blue, as well as our in-house charity, Give Me 5 for Kids. In the first six
months of 2019, SCA provided The Smith Family and Beyond Blue with
commercial advertising to the value of $19,543,602.
Both external charity partners have provided education sessions in 11 of
our biggest offices, reaching over 1,400 staff. On 1 July 2019, our metro
Triple M network was proud to work with Beyond Blue on ‘No Talk Day’.
From 6:00am until 6:00pm, there were no shows, news, weather or paid
advertisements. The promotion aimed to encourage men to talk to someone
about their mental health. Beyond Blue has reported a 30% increase in
people using their services since SCA’s support began in January 2019.
SCA has run the annual Give Me 5 for Kids campaign for more than 20
years. Beginning as a simple coin drive on the New South Wales Central
Coast, the campaign has raised over $25 million nationally, and benefited
over 40 pediatric wards of local hospitals and children’s health-related
charities. Local health services use these funds to improve outcomes for
Beyond Blue Quote: Patrice O’Brien (General Manager Workplace,
Partnerships & Engagement)
Our partnership with SCA is only five months old but already you have blown
us away with the enthusiasm, professionalism and sheer speed at which you
have amplified our messages across Australia. We’ve been inspired by the
culture which we’ve encountered in your organisation which makes this an
even more meaningful partnership for us. ‘Thank you’ hardly seems enough.
The Smith Family Quote: Melanie Lowe (Strategic Partnership Manager)
The experience with SCA thus far in our partnership has been truly wonderful.
Over the past five months, constant team member passion and enthusiasm
shines through and cements what an invaluable journey we are both on
together. On a personal note, I am beyond excited for what is yet to come.
Alison Kennedy, CEO Toowoomba Hospital Foundation
The Give Me 5 for Kids appeal is a wonderful fundraiser which has helped
us bring much joy and support to children visiting the Toowoomba Hospital.
We’re proud to have been a part of this great cause over the past 11 years and
the generosity of our community has raised over half a million dollars to date
which has gone towards purchasing vital equipment for the paediatric unit.
Lucas Coleman, Manager of Communication, Fundraising
young patients, from acquiring vital medical equipment through to providing
and Volunteering, Newcastle Health
clown doctor services to cheer up sick children.
In June each year, SCA’s local radio and television stations get behind
the cause by holding local fundraising events. Many local businesses,
clubs and individuals stage their own fundraising activities under the
Give Me 5 for Kids banner, adding to the funds raised and helping to build
stronger communities. SCA covers all administrative costs so that all funds
raised go direct to local charities.
As the recipient organisation it is almost difficult to articulate the difference we
have seen over the past five years. Thank you to all the team who put in so
much effort each year to ensure Give Me 5 for Kids is bigger and better each
year; the staff at John Hunter Children’s Hospital are very appreciative of the
work you do, as are the 50,000 families that require our services each year.
SCA ENGAGE | 13
ANNUAL REPORT 2019 DIRECTORS
PETER BUSH
CHAIRMAN, INDEPENDENT DIRECTOR
Appointed: 25 February 2015, Most recently elected by shareholders: 23 October 2018,
Board Committees: Nomination Committee (Chair)
Peter Bush had a distinguished executive career spanning the media, FMCG, advertising and consumer products sectors.
He held senior marketing roles with SC Johnson, Reckitt & Coleman, Ampol/Caltex and Arnott’s and was CEO of AGB
McNair, Schwarzkopf and McDonald’s Australia. He brings broad commercial and strategic leadership skills to the Board.
Peter also brings a wealth of public company governance experience, including considerable experience in
mergers and acquisitions and equity capital markets transactions. He is Chairman of Inghams Group. He has previously
served on the boards of Mantra Group, Pacific Brands, Nine Entertainment Holdings, Insurance Australia Group, Miranda
Wines, McDonald’s Australia and Lion Nathan Ltd. Peter is a member of the 30% Club, supporting at least 30% female
representation on ASX 200 boards. Both directors appointed during Peter’s time as Chair are women.
LEON PASTERNAK
DEPUTY CHAIRMAN, INDEPENDENT DIRECTOR
Appointed: 26 September 2005, Most recently elected by shareholders: 23 October 2018
Until July 2010, Leon was a senior corporate partner at Freehills (now Herbert Smith Freehills) specialising in mergers
and acquisitions, public finance and corporate reorganisations. Until February 2014, Leon held the positions of Vice
Chairman and Managing Director with Merrill Lynch Markets (Australia) Pty Limited (a subsidiary of Bank of America)
with responsibility for the financial institutions group and mergers and acquisitions. As a principal of BCC Partners,
Leon now offers strategic and financial advice to a portfolio of private, public and family businesses.
Leon brings broad corporate and strategic expertise to the Board’s deliberations. As the Company’s longest-serving
director, his corporate knowledge has been invaluable in bedding down the significant renewal since 2014 of both
the Board and the senior leadership team.
HELEN NASH
INDEPENDENT DIRECTOR
Appointed: 23 April 2015, Most recently elected by shareholders: 24 October 2017
Board Committees: Audit & Risk Committee, People & Culture Committee (Chair), Nomination Committee
Helen Nash has more than 20 years’ executive experience in consumer packaged goods, media and quick service
restaurants. As Chief Operating Officer at McDonald’s Australia, she oversaw restaurant operations, marketing,
menu, insights and research, and information technology. This mix of strategic and operational experience allows
Helen to bring broad commercial skills and acumen, as well as a consumer focus, to the Board. Helen also brings
robust financial skills to her role having initially trained in the UK as a Certified Management Accountant.
Since transitioning to her non-executive career in 2013, Helen has served as a director of companies in a range
of industries. She is a director of Metcash Ltd and Inghams Group Limited, and was formerly a director of Pacific
Brands Ltd and Blackmores Ltd. Our Board benefits from Helen’s governance experience and skills, including her
membership of audit and remuneration committees at these other companies.
14 | DIRECTORS
SOUTHERN CROSS AUSTEREO DIRECTORS
GLEN BOREHAM AM
INDEPENDENT DIRECTOR
Appointed: 1 September 2014, Most recently elected by shareholders: 20 October 2016
Board Committees: Audit & Risk Committee, People & Culture Committee
Glen’s executive career culminated in the role of CEO and Managing Director of IBM Australia and New Zealand in a
period of rapid change and innovation from 2006 to 2010. He was the inaugural Chair of Screen Australia from 2008
to 2014, and chaired the Australian Government’s Convergence Review of the media industry. The Board benefits
from Glen’s extensive knowledge, insights and networks in the technology and data industries. Having lived in Asia,
Europe and Australia, Glen brings a global perspective.
Glen is also a director of Cochlear and Link Group and is Chair of the Advisory Board at IXUP. He was previously
Chair of the Industry Advisory Board at the University of Technology Sydney, Chair of Advance (representing the one
million Australians living overseas), as well as Deputy Chair of the Australian Information Industry Association and a
Director of the Australian Chamber Orchestra. In 2010, he became a founding member of Australia’s Male Champions
of Change group. Glen is a Member of the Order of Australia for services to business and the arts.
ROBERT MURRAY
INDEPENDENT DIRECTOR
Appointed: 1 September 2014, Most recently elected by shareholders: 24 October 2017
Board Committees: People & Culture Committee, Nomination Committee
Rob had a successful career in sales, marketing and general management having served most recently as the
CEO of Lion (formerly Lion Nathan), one of Australasia’s leading food and beverage companies, including during its
acquisition by Kirin Holdings in 2009. Before joining Lion Nathan in 2004, Rob worked for Procter & Gamble for 12
years; and then for eight years with Nestlé, first as MD of the UK Food business, and then as CEO of Nestlé Oceania.
Rob brings valuable strategic and commercial insight to the Board, along with his in-depth understanding of
consumer behaviour and global experience in mergers and acquisitions and other corporate transactions.
He is Chair of Metcash, a director of the Bestest Foundation, and Advisory Chair of the Hawkes Brewing Company.
He was previously a director of Dick Smith Holdings, Super Retail Group and Linfox Logistics.
MELANIE WILLIS
INDEPENDENT DIRECTOR
Appointed: 26 May 2016, Most recently elected by shareholders: 20 October 2016
Board Committees: Audit & Risk Committee (Chair), People & Culture Committee
Melanie has extensive experience in corporate finance, strategy and innovation and investments both in executive
and non-executive roles. She has worked in sectors including accounting and finance, infrastructure, property
investment management, and retail services (including tourism and start-up ventures). She held executive roles as
CEO of NRMA Investments (and head of strategy and innovation), CEO of a financial services start-up and director of
Deutsche Bank, having previously been in corporate finance at Bankers Trust and Westpac.
In her role as Chair of the Audit & Risk Committee, Melanie applies her extensive skills and experience in financial
reporting and risk management matters. In addition to her broad finance, strategic and commercial skills, Melanie
brings valuable governance experience from her roles as a director of Challenger, Paypal Australia and Chief
Executive Women and from her former positions as a director of Pepper Group and Ardent Leisure where she also
served on audit committees.
DIRECTORS | 15
ANNUAL REPORT 2019 LEADERSHIP
TEAM
GRANT BLACKLEY
MANAGING DIRECTOR
Appointed: 29 June 2015, Most recently elected by shareholders: 29 October 2015
Grant Blackley has enjoyed a distinguished career with more than 30 years’ experience in the media and
entertainment sectors. Grant joined the Board in June 2015 as Chief Executive Officer and Managing Director and
is responsible for leading the strategic and operational performance of the company. Grant is the Chairman of
Commercial Radio Australia and a director of the Australian Association of National Advertisers. He has in the past
served as a director of Free TV Australia. He has served in numerous senior leadership roles including at the TEN
Network, as CEO from 2005 to 2010. Prior to becoming CEO, Grant held key roles in network sales, digital media
and multi-channel program development as well as being responsible for Group strategy, acquisitions and executive
leadership and development.
NICK MCKECHNIE
CHIEF FINANCIAL OFFICER
Appointed: 8 September 2014
Nick McKechnie is a Chartered Accountant with over 20 years’ experience. Nick was the CFO of ConnectEast from
2009 to 2014 and Group Financial Controller from 2007 to 2009. Prior to this role Nick held a variety of senior
finance roles at Virgin Media in the UK and commenced his career with Arthur Andersen.
As CFO of SCA, Nick is responsible for the financial stewardship of the Company, including the allocation of capital
and resources and the management of returns to shareholders. Financial objectives include optimising the cost of
capital through use of an appropriate balance of equity and debt capital and through seeking to invest capital in
projects that result in returns above the Company’s existing Return on Invested Capital (ROIC). Nick is responsible
for managing relationships and communication with providers of equity and debt capital and for ensuring a strong
and effective governance framework exists.
JOHN KELLY
CHIEF OPERATING OFFICER
Appointed: February 2016
John Kelly is an experienced executive who has previously held senior executive roles in large Australian sporting
and media organisations. John was COO at Football Federation Australia from 2013 to 2015 where his role
encompassed strategy and media rights. Prior to that role John spent over 16 years in various executive and director
roles at Ten Network Holdings Limited including over eight years as Group CFO. John has a background as a
Chartered Accountant and commenced his career at KPMG where he progressed to the role of Manager.
As Chief Operating Officer, John is responsible for leading the Operations function of the business to ensure
alignment and delivery of the corporate strategy. This includes overseeing SCA’s General Management Teams,
People & Culture, Strategy and Podcasting as well as facilitating the Company’s external key broadcasting
agreements and key partnerships.
16 | LEADERSHIP TEAM
SOUTHERN CROSS AUSTEREO LEADERSHIP
TEAM
BRIAN GALLAGHER
CHIEF SALES OFFICER
Appointed: July 2015
Brian Gallagher is a media executive with strong commercial and broadcast experience across the metro and
regional media markets gathered over 30 years. Brian has worked in radio, free to air TV, pay TV, content marketing
and program production. Brian has worked with the Nine Network, Ten Network and was CEO of Ignite Media Brands
prior to joining SCA as Chief Sales Officer.
Brian is responsible for the development and implementation of an overall sales strategy for the Company, including
driving the entire sales operation across SCA’s full suite of media channels and brands.
STEPHEN HADDAD
CHIEF TECHNOLOGY OFFICER
Appointed: June 2018
Stephen Haddad is an experienced CIO/CTO and Business Transformation Executive who has demonstrated his
ability to drive strategic business growth over 20 years in Australia’s media, finance and consulting organisations. Prior
to this role, Stephen held CIO roles at Bauer Media, FujiFilm and senior roles within banking and telecommunications.
Stephen is responsible for all technology domains across SCA, including business systems, corporate networks
and infrastructure, digital design and development, audio engineering technology and operations and television
broadcast engineering and operations. Stephen also has management responsibility for the project management
office and procurement functions.
LEADERSHIP TEAM | 17
ANNUAL REPORT 2019 FINANCIAL
REPORT
CONTENTS
Corporate Governance Statement
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 Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Additional Stock Exchange Information
Corporate Directory
21
21
21
24
24
24
24
24
24
24
25
26
27
28
47
48
49
50
51
52
53
66
75
77
85
86
94
95
The financial statements were authorised for issue by the Directors on
22 August 2019. The Directors have the power to amend and re-issue
the financial statements.
20 | FINANCIAL REPORT
SOUTHERN CROSS AUSTEREO DIRECTORS’ REPORT
FOR YEAR ENDED 30 JUNE 2019
Corporate Governance Statement
The 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,
will be available on the Southern Cross Austereo website,
www.southerncrossaustereo.com.au, under the investor relations
tab in accordance with listing rule 4.10.3 when the 2019 Annual
Report is lodged.
Directors’ Report
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 2019. 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)
– Leon Pasternak (Deputy Chairman)
– Grant Blackley
– Glen Boreham
– Rob Murray
– Helen Nash
– Melanie Willis
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 (AM, 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
The Group reported revenues of $660.1 million, up 0.5% on the prior
year revenues of $656.8 million, and Earnings before Interest, Taxes,
Depreciation and Amortisation (“EBITDA”) before loss on assets
held for sale of $156.6 million, down 1.1% on prior year EBITDA
of $158.4 million. Net loss after tax was $91.4 million for the year
ended 30 June 2019, from a net profit after tax of $0.1 million.
Current year results included impairment charges against the
television intangible assets of $226.9 million and fair value loss on
assets held for sale of $9.2 million. Excluding these significant items,
net profit after tax of $73.9 million is flat on the prior year.
A change has been made to the presentation of the results of
operations to reflect organisational structure changes, with reporting
of the results now analysed between Audio and Television reporting
segments. Further description of this change is set out in note 2
“Segment Information” to the financial statements.
Net debt has reduced by a further 3.8% to $292.6 million and net
cash finance costs of $12.8 million are down 9.2% on the prior year.
Significant Items
At 31 December 2018, the Group recognised impairment charges
against intangible assets of $226.9 million, which related to an
impairment in the carrying value of television licences in the
Television Cash Generating Unit (“CGU”). There was also a related
derecognition of a deferred tax liability in respect of certain brands
and licences for $68.1 million. At 31 December 2018 the estimated
recoverable amount of the Television CGU, based on value-in-use,
equalled its carrying amount. On the reassessment of the CGUs, the
assets of the Regional CGU were allocated between the Audio and the
Television CGUs. The carrying value attributable to the Television CGU
was in excess of the CGU’s value-in-use, which was the main cause of
the impairment. Refer to notes 6, 9 and 10 for further information.
During 2019, the Group performed an evaluation of its broadcast
transmission assets. The Group decided to sell its existing
transmission assets and to outsource the provision of transmission
services. At 30 June 2019 the sale negotiations were at an advanced
stage and on 6 August 2019 the Group announced the sale of
assets and outsourcing of transmission services. On reclassification
to Assets held for sale, fair value losses totalling $9.2 million were
recorded. Refer to note 7 for further information.
Segment Profit and Loss
Audio
Television
Corporate
Total Revenue
EBITDA
Audio
Television
Corporate
Total EBITDA
Group NPAT
2019
$’m
452.4
206.6
1.1
660.1
148.7
25.2
(26.5)
147.4
(91.4)
2018
$’m
442.1
213.4
1.3
656.8
147.7
33.3
(22.6)
158.4
Variance
2.3%
(3.2%)
(15.4%)
0.5%
0.7%
(24.3%)
17.3%
(6.9%)
0.1
N/A
21
ANNUAL REPORT 2019 Strategic Update
During the 2019 financial year the Group has executed on a
number of elements that support the achievement of the Group’s
medium-term strategic objectives to:
1. Create compelling content;
2. Deliver improved audio experiences;
3. Use our assets to help our clients succeed; and
4. Transform our business to build sustainable revenue streams.
The Group focused on the continued development of local content
across its radio network to increase its appeal to audiences. In
addition, the expansion of digital radio stations aligned to the
principal Hit and Triple M brands has further extended its audiences
and enabled greater monetisation of its assets.
SCA has further increased the personalisation of its products and
the development of on-demand audio assets. PodcastOne Australia
has become established as the leading commercial premium
podcast platform across Australia, with high quality local content
appealing to Australian audiences. The platform now hosts over 65
creators and monetisation is growing as audiences and advertisers
embrace the medium. In addition, the Group has expanded its digital
audio assets with the introduction of instream advertising and a
partnership with the global music streaming platform Soundcloud,
under which SCA is its sales representation agent for all digital audio
consumed in Australia.
The Group has continued to focus on increasing the proportion of
national advertising invested in regional markets. These efforts were
focused through an industry trade marketing “Boomtown” campaign
that SCA has delivered along with its regional media peers in
television, radio, print and digital assets. The success of these efforts
has seen national regional radio advertising increase by 10.6% and
national television revenues held flat despite a declining market.
SCA continues to focus on the development of new assets in digital
audio that will result in the development of sustainable new revenue
streams and has implemented an innovation program and culture
within the business to assist with the transformation of the business.
2020 Outlook
The majority of the Group’s earnings come from its Audio division
and SCA plans to further grow these earnings through its focus on
further improving the content offering, on expanding the breadth of
its offering through use of its digital radio spectrum and through the
development of personalised and on-demand content. In Television,
SCA will achieve improved efficiency following the decision to
outsource both playout and transmission services.
Review and Results of Operations (continued)
Audio
The Audio business consists of two complementary radio brands
operating in the Australian capital cities and regional Australia along
with the digital assets associated with these two brands. The brands
target different audience demographics with the Triple M network
skewed towards males in the 25 to 54 age bracket and the Hit
Network targeted towards females in the 18 to 49 age bracket.
The Audio business saw revenue growth of 2.3%, which led to
EBITDA growth of 0.7%, with growth in both the Australian capital
cities and regional Australia.
Overall, the metropolitan free-to-air radio advertising market has
performed relatively well throughout 2019, decreasing 0.5% year
on year in what was a challenged media environment. An improving
ratings position and the monetisation of our digital radio stations
resulted in market share increases that led to a 4.1% growth in the
Group’s metro radio advertising revenues.
Regional radio continues to be a strong performer for the Group
with advertising revenues up 1.5% on 2018. Revenue from national
agency clients was up 10.6%. This growth has been driven by the
Group’s stated objective of increasing the profile of regional radio by
conducting audience surveys in many regional markets and working
with key agency clients to help them better understand the benefits
of regional radio advertising. Local revenues have fallen by 3.7%,
impacted by the credit squeeze following the Royal Commission,
coupled with lower spend in the election period.
Television
The Television business consists of a number of regional television
licences. Each regional television licence receives programming from
a metropolitan television network affiliate, with the Group receiving
the majority of its programming from the Nine Network, while the
Tasmania and Central Australian licence areas receive Seven Network
programming. The combination of two premium programming
agreements gives SCA a strong audience share across its TV licence
areas. However, the Group faced a market decline of 5.1% in its
main markets, which led to a 3.2% decline in Television revenues
and 24.3% decline in Television EBITDA, before fair value losses on
assets held for sale. Refer to the “Significant Items” section above
for a description of the $226.9 million impairment charge against the
television licence intangible assets.
Corporate
The Corporate function comprises the Group-wide centralised
functions of the Group. Corporate expenses increased due to software
licencing, as a result of investment in new software tools designed to
improve the efficiency of our operations, with insurance costs also up.
Financial position
The financial position of the Group continues to improve with net
debt reducing 3.8% on 2018 to finish the year at $292.6 million.
The Group’s key debt measures continue to improve with a leverage
ratio of 1.76 times, down from 1.79 times in June 2018, and interest
cover improving to 13.03 times, up from 12.03 times in June 2018.
22
DIRECTORS’ REPORTFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO Material Risks
Business and operational risks that could affect the achievement of the Group’s financial prospects include the following risks:
Risk
Decrease in the size of
the free-to-air (“FTA”)
television market at a
faster rate than forecast
Mitigation Strategies
The Group has seen a decline in the television market of 5.1% year on year. Although FTA television continues
to deliver mass audiences and hence has a key place in media buying strategies, television markets remain
challenging due to ongoing audience declines. At 31 December 2018, the Group recognised impairment charges
against the Television CGU of $226.9 million. On the reassessment of the CGUs, the assets of the Regional CGU
were allocated between the Audio and the Television CGUs. The carrying value attributable to the Television CGU
was in excess of the CGU’s value-in-use, which was the main cause of the impairment; but is consistent with the
continuing declines and independent estimates of forecast negative television growth rates. For further information,
refer note 10.
Key mitigation strategies are focused on improving the share of media spending directed towards regional markets
and by focusing on the efficiency of television operations.
The Group’s sales teams’ Regional Development Program continues to drive incremental marketing in regional
markets where there is an underinvestment in media spend on a per capita basis and is supported in this regard by
the industry trade marketing Boomtown campaign.
SCA continues to focus on improving the efficiency of television operations and during the year entered into
outsourcing arrangements with specialist operators for both television playout and transmission services.
The Group is a diversified business covering television, radio and online, which provides a degree of protection
against individual market weaknesses, with the television CGU only representing 15% of the Group’s EBITDA. As
a television affiliate the Group pays a percentage of revenue to the broadcast partners meaning television has a
higher variable cost structure than our radio or online businesses, which reduces the profit impact of any potential
decline in revenue.
Finding and retaining
good on-air talent
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 stations.
The Group maintains a risk-based (opportunity) approach to unearthing and developing new talent and has
implemented “Hubble”, a formal tool that assists to Discover, Document, Develop and Deploy talent at each stage
of their career. The nature of the Group’s regional and metro radio assets provides an opportunity for developing
talent to be moved from smaller to larger markets over time.
Contracts are used to lock talent in for certain periods of time. The development of successful off-air teams that
help create high quality programming is also important in developing the loyalty of on-air talent to the Group.
New products emerge
that are more compelling
than Linear Radio
The Group has increased its focus on content that is desirable, accessible and prominent.
SCA is looking to evolve existing products and develop new products to take advantage of the opportunity provided
by the expanding scope of digital distribution.
Examples include:
SCA’s website and apps, which provide personalisation for signed-in users
PodcastOne Australia which is SCA’s podcast network which was launched in 2017 and which SCA aims to
make the pre-eminent podcasting network in Australia. PodcastOne Australia produces unique original content
that is available on demand to listeners and this content is monetised through advertising. The platform now hosts
65 creators and monetisation is growing as audiences and advertisers embrace the medium.
SCA is also working with global technology platforms to extend the content that these carry, either directly
or through industry bodies. For example, ensuring that SCA’s audio products are readily accessible on smart
speakers.
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 suffers financial loss due to a transfer of advertising
spend to digital media.
The Group has employed a team of digital experts, which are now integrated into the Group’s day-to-day
operations, in order to leverage existing content and sales capabilities.
The Group invests in engaging digital audiences through the simulcast of its FM radio stations online and the
creation of additional stations on DAB that extends its Hit and Triple M radio brands across broadcast and online
platforms.
The Group’s digital strategy is to utilise its broadcast, social and website reach to continuously engage audiences
around our digital audio offering, driving people to our branded apps on which they can listen either live or
on-demand. SCA currently has an installed base of 2.6 million1 across its branded radio apps.
Digital audio is increasing and SCA has implemented an Instream product that enables targeted advertising to be
delivered across SCA’s own digital inventory as well as that of its partners such as SoundCloud.
Global technology
platforms alter the
distribution landscape
that leads to a loss
of revenue
1 AppAnnie.
23
ANNUAL REPORT 2019 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 23.
The Board has considered the position and, in accordance with
advice received from the Audit & 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 & 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.
Distributions and Dividends
Type
Final 2018 Ordinary
Interim 2019 Ordinary
Cents
per share
4.00
3.75
Total Amount
$’m
30.8
28.8
Date of Payment
9 October 2018
11 April 2019
Since the end of the financial year the Directors have declared
the payment of a final 2019 ordinary dividend of $30.761 million
(4.00 cents per fully paid share) out of “Retained profits – 2015 H1
interim reserve” to fully utilise that reserve and the remainder to be
paid out of “Retained Profits – 2016 reserve”. This dividend will be
paid on 8 October 2019 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
Events occurring after balance date are outlined in note 26
“Events Occurring after Balance Date” to the Financial Statements.
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 has 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 $562,086 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.
24
DIRECTORS’ REPORTFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO Information on Directors
Chairman
Peter Bush
Appointed 25 February 2015
Most recently elected by shareholders: 23 October 2018
Board Committees: Chairman, Nomination Committee
Peter Bush had a distinguished executive career spanning the media, FMCG, advertising and consumer products
sectors. He held senior marketing roles with SC Johnson, Reckitt & Coleman, Ampol/Caltex and Arnott’s and was
CEO of AGB McNair, Schwarkopf and McDonald’s Australia. He brings broad commercial and strategic leadership
skills to the Board.
Peter also brings a wealth of public company goverance experience, including considerable experience in
mergers and acquisitions and equity capital market transactions. He is Chairman of Inghams Group. He has
previously served on the boards of Mantra Group, Pacific Brands, Nine Entertainment Holdings, Insurance
Australia Group, Miranda Wines, McDonald’s Australia and Lion Nathan Ltd. Peter is a member of the 30% Club,
supporting at least 30% female representation on ASX 200 boards. Both directors appointed during Peter’s time
as Chair are women.
Deputy Chairman
Leon Pasternak
Appointed 26 September 2005
Most recently elected by shareholders: 23 October 2018
Board Committees: Deputy Chairman
CEO and
Managing Director
Grant Blackley
Until July 2010, Leon was a senior corporate partner at Freehills (now Herbert Smith Freehills) specialising in
mergers and acquisitions, public finance and corporate reorganisations. Until February 2014, Leon held the
positions of Vice Chairman and Managing Director with Merrill Lynch Markets (Australia) Pty Limited (a subsidiary
of Bank of America) with responsibility for the financial institutions group and mergers and acquisitions. As a
principal of BCC Partners, Leon now offers strategic and financial advice to a portfolio of private, public and
family businesses.
Leon brings broad corporate and strategic expertise to the Board’s deliberations. As the Company’s longest-serving
Director, his corporate knowledge has been invaluable in bedding down the significant renewal since 2014 of both
the Board and the senior leadership team.
Appointed 29 June 2015
Most recently elected by shareholders: 29 October 2015
Grant Blackley has enjoyed a distinguished career with more than 30 years’ experience in the media and
entertainment sectors. Grant joined the Board in June 2015 as Chief Executive Officer and Managing Director
and is responsible for leading the strategic and operational performance of the Company. Grant is the Chairman
of Commercial Radio Australia and a director of the Australian Association of National Advertisers. He has in the
past served as a director of Free TV Australia. He has served in numerous senior leadership roles including at the
TEN Network, as CEO from 2005 to 2010. Prior to becoming CEO, Grant held key roles in network sales, digital
media and multi-channel program development as well as being responsible for Group strategy, acquisitions and
executive leadership and development.
Director
Appointed 1 September 2014
Glen Boreham AM
Most recently elected by shareholders: 20 October 2016
Board Committees: Audit & Risk Committee, People & Culture Committee
Glen’s executive career culminated in the role of CEO and Managing Director of IBM Australia and New Zealand in
a period of rapid change and innovation from 2006 to 2010. He was the inaugural Chair of Screen Australia from
2008 to 2014, and chaired the Australian Government’s Convergence Review of the media industry. The Board
benefits from Glen’s extensive knowledge, insights and networks in the technology and data industries. Having
lived in Asia, Europe and Australia, Glen brings a global perspective.
Glen is also a director of Cochlear Limited and Link Group and is Chair of the Advisory Board at IXUP. He
was previously Chair of the Industry Advisory Board at the University of Technology Sydney, Chair of Advance,
representing the one million Australians living overseas, as well as Deputy Chair of the Australian Information
Industry Association and a Director of the Australian Chamber Orchestra. In 2010, he became a founding member
of Australia’s Male Champion of Change group. Glen is a Member of the Order of Australia for services to business
and the arts.
25
ANNUAL REPORT 2019 Information on Directors (continued)
Director
Appointed 1 September 2014
Robert Murray
Most recently elected by shareholders: 24 October 2017
Board Committees: People & Culture Committee, Nomination Committee
Rob had a successful career in sales, marketing and general management having served most recently as the
CEO of Lion (formerly Lion Nathan), one of Australasia’s leading food and beverage companies, including during its
acquisition by Kirin Holdings in 2009. Before joining Lion in 2004, Rob worked for Procter & Gamble for 12 years,
and then for eight years with Nestlé – first as MD of the UK Food business, and then as CEO of Nestlé Oceania.
Rob brings valuable strategic and commercial insight to the Board, along with his in-depth understanding of
consumer behaviour and global experience in mergers and acquisitions and other corporate transactions. He is
Chair of Metcash, a director of the Bestest Foundation, and Advisory Chair of the Hawkes Brewing Company. He
was previously a director of Dick Smith Holdings, Super Retail Group and Linfox Logistics.
Director
Helen Nash
Appointed 23 April 2015
Most recently elected by shareholders: 24 October 2017
Board Committees: Audit & Risk Committee, People & Culture Committee (Chair), Nomination Committee
Helen Nash has more than 20 years’ experience in consumer packaged goods, media and quick service
restaurants. As Chief Operating Officer at McDonald’s Australia, she oversaw restaurant operations, marketing,
menu, insights and research and information technology. This mix of strategic and operational experience allows
Helen to bring broad commercial skills and acumen, as well as a consumer focus, to the Board. Helen also brings
robust financial skills to her role having initally trained in the UK as a Certified Management Accountant.
Since transitioning to her non-executive career in 2013, Helen has served as a director of companies in a range
of industries. She is a director of Metcash Ltd and Inghams Group Limited, and was formally a director of Pacific
Brands Ltd and Blackmores Ltd. Our Board benefits from Helen’s governance experience and skills, including her
membership of audit and remuneration committees at these other companies.
Director
Melanie Willis
Appointed 26 May 2016
Most recently elected by shareholders: 20 October 2016
Board Committees: Audit & Risk Committee (Chair), People & Culture Committee
Melanie has extensive experience in corporate finance, strategy and innovation and investments both in executive
and non-executive roles. She has worked in sectors including accounting and finance, infrastructure, property
investment management, and retail services (including tourism and start-up ventures). She has held executive
roles as CEO of NRMA Investments (and head of strategy and innovation), CEO of a financial services start-up and
director of Deutsche Bank, having previously been in corporate finance at Bankers Trust and Westpac.
In her role as Chair of the Audit & Risk Committee, Melanie applies her extensive skills and experience in financial
reporting and risk mangement matters. In addition to her broad finance, strategic and commercial skills, Melanie
brings valuable governance experience from her roles as a director of Challenger, Paypal Australia and Chief
Executive Women and from her former positions as a director of Pepper Group and Ardent Leisure where she
also served on audit committees.
Information on Company Secretary
General Counsel and
Company Secretary
Tony Hudson
Appointed 7 September 2015
Tony Hudson has over 25 years’ experience in senior legal and governance roles. Tony was General Counsel and
Company Secretary at ConnectEast from 2005 until 2015. Before that, Tony was a partner of Blake Dawson
Waldron (now Ashurst Australia), working in the firm’s Melbourne office and from 1993 until 2000 in its Jakarta
associated office. Tony manages the Group’s national legal and corporate affairs teams, including responsibility for
regulatory affairs and board governance.
26
DIRECTORS’ REPORTFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO Meetings of Directors
The number of meetings of the Board of Directors and its committees that were held during the year and the number of meetings attended
by each director are summarised in the table below.
The Nomination Committee did not meet formally during the year. Members of the Nomination Committee met informally to discuss Board
succession issues during the year.
Director
Peter Bush2
Leon Pasternak
Grant Blackley
Glen Boreham
Rob Murray
Helen Nash
Melanie Willis
Board
Audit & Risk
People & Culture
Meetings of Committees
Attended
6
7
9
9
8
9
9
Held1
6
9
9
9
9
9
9
Attended
2
2
4
5
1
5
5
Held1
*
*
*
5
*
5
5
Attended
3
3
5
5
5
5
5
Held1
*
*
*
5
5
5
5
1 Held refers to the number of meetings held during the time the director held office or was a member of the relevant committee during the year.
2 Peter Bush was granted leave of absence for medical reasons during the year. He was not eligible to attend meetings during his leave of absence.
* Not a member of the relevant committee during the year.
27
ANNUAL REPORT 2019 REMUNERATION REPORT
FOR YEAR ENDED 30 JUNE 2019
Letter from People & Culture Committee
On behalf of the Board, I am pleased to present the Company’s
2019 Remuneration Report. The People & Culture Committee
(PCC) assists the Board in its oversight of management activities in
developing and implementing strategies to improve the Company’s
culture and diversity, consistent with our values. An important part
of the committee’s role is to ensure that the Company’s remuneration
policies are aligned with the creation of value for shareholders, having
regard to applicable governance, legal and regulatory requirements
and industry standards.
Executive remuneration includes fixed and variable components,
comprising short-term incentives (STI) and long-term incentives
(LTI). Having not adjusted the fixed remuneration of the senior
leadership team in FY2019, the Board has approved an increase for
FY2020 of 2.5% for the CEO and increases of between 2.7% and
3.6% for other executive KMP. The fixed remuneration of the Chief
Technology Officer will increase by 6.7% as he transitions over two
years to the senior leadership team remuneration structure. In making
these changes, the PCC and the Board considered an independent
benchmarking report prepared by KPMG and the Board’s policy of
providing executive reward between the median and 75th percentile
of relevant peers.
The Board has also approved changes to the variable components
of the remuneration of the Company’s senior leadership team, to
take effect in FY2020. For executives other than the CEO, the STI
component will be increased from 25% to 30% of total remuneration
and the LTI component will be decreased from 25% to 20%. For the
CEO, the STI and LTI components will each continue to be 30% of
total remuneration. Twenty-five percent of any STI award made to the
CEO, and 20% of any STI award made to any member of the senior
leadership team, will be paid in equity subject to the terms of the
Senior Executive Share Ownership Policy. Previously, the STI awards
of executives other than the CEO have been made wholly in cash,
and 25% of the post-tax amount of the CEO’s STI award has been
made in equity.
The increased STI portion of incentive remuneration in FY2020 will
facilitate payment in equity of a portion of each executive KMP’s
STI award. That equity will be subject to a disposal restriction until
cessation of employment, unless the executive has already met the
minimum shareholding required by the Board’s Senior Executive
Share Ownership Policy. The CEO will be required to accumulate
shares with a value at least equivalent to 100% of the CEO’s fixed
remuneration and other members of the senior leadership team will
be required to accumulate shares with a value at least equivalent
to 50% of their fixed remuneration. Introduction of a deferred
equity component into the STI awards for executive KMPs, coupled
with a minimum shareholding policy, will create greater alignment
with shareholders.
Unless an executive has achieved the required minimum shareholding
at the conclusion of the applicable performance period, any equity
received by the executive under the Company’s STI plan and 25% of
any equity received under the Company’s LTI plan will be subject to
a disposal restriction for as long as the executive remains employed
by the Company. The Board has not prescribed a period within which
executives must achieve their minimum shareholding; however, based
on existing shareholdings and historical awards made under the
LTI and STI plans, the Board anticipates that executives will do so
within five years.
The Company’s short-term incentive (STI) plan applies a balanced
scorecard to assessment of the performance of the senior leadership
team and other participants in the STI plan. Performance is
measured in three categories: profitability and financial performance
(40%), high level operational improvements (40%) and cultural and
behavioural influences (20%). This recognises the long-term benefits
to the organisation of the Company’s leaders committing to develop
and maintain a strong culture and operational discipline.
The first of these includes Group-wide and individual departmental
performance measures, with the Group-wide measures operating as
a gateway to any payment in this category. The gateway targets for
Group NPAT and EBITDA were achieved during the year. Underlying
NPAT grew by 3.1% to $76.2 million and underlying EBITDA grew
by 0.9% to $159.9 million. These results reflected a strong sales
performance by SCA in a challenging media environment, coupled
with disciplined cost controls.
Although Group revenue was up by 0.5% to $660.1 million,
the gateway target for Group sales was not achieved, potentially
excluding the Chief Sales Officer from receiving any payment for the
profitability and financial performance component of the STI plan.
On the committee’s recommendation, the Board exercised discretion
to award the Chief Sales Officer a portion of this STI category. The
Board noted that the failure to achieve the Group sales gateway
was affected by the general weakness in advertising markets and
particularly in regional television markets which represent 31% of the
Group’s revenue but only 14% of its earnings. Revenue in the Audio
segment (comprising metropolitan and regional radio and podcasting)
was 2.3% higher at $452.4 million. This achieved the gateway target
and reflected an increased commercial share of the radio advertising
market for the Group. Considering the influence of general market
conditions on the Group’s revenue performance and the differing
contribution to profitability of Audio and Television, the Board has also
accepted the PCC’s recommendation that the Group’s EBITDA target
should operate as the gateway to payment in the profitability and
financial performance category for the Chief Sales Officer in FY2020.
With some variations in individual performance, the Board was
satisfied that goals relating to operational improvements and
cultural and behavioural influences were substantially achieved
by all executives. This resulted in ongoing members of the senior
leadership team receiving approximately 90% of their total respective
STI opportunities. Details of individual outcomes are provided in the
Remuneration Report that follows this letter.
The Company’s FY2017 long-term incentive (LTI) plan partially
vested. The Company’s adjusted earnings per share (EPS) declined
from 10.04 cents1 to 9.61 cents over the three years ended on
30 June 2019, failing to achieve the threshold of 3.0% for vesting
of this performance condition. However, the Company’s relative total
shareholder return (TSR) over the same three years was ranked in
the 65th percentile, resulting in 78% vesting of this performance
condition and 39% vesting overall.
For all other grants now open under the LTI plan (and for grants to be
made in FY2020), relative TSR has been replaced as a performance
condition by return on invested capital (ROIC). EPS continues to be
the other equally-weighted performance condition.
28
REMUNERATION REPORTFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO The Non-Executive Directors Share Ownership Policy requires all
non-executive directors to accumulate a minimum shareholding with a
value equivalent to the base fee for a non-executive director. Subject
to the effect of periodic share price fluctuations, all of the Company’s
non-executive directors now hold the minimum shareholding required
by the Board’s policy.
The PCC is confident that the Company’s remuneration framework
is helping to drive behaviours that will deliver sustainable value for
shareholders. The changes to be implemented in the new financial
year will further align with that objective. We look forward to your
feedback and to welcoming you to our 2019 Annual General Meeting.
Yours faithfully,
Helen Nash
Chairman of the People & Culture Committee
In considering both vesting of this year’s EPS performance condition
and the progress of the other open grants under the LTI plan, the
Board exercised discretion about the extent to which particular
significant or non-recurring items will be excluded, having regard
to the reasons for any particular item. The Board was satisfied that
the Company’s reported EPS in FY2019 should be adjusted for the
purposes of the LTI plan to exclude the impact of the impairment
recorded this year against the Company’s regional television assets.
The impairment was consistent with the ongoing decline in the
regional free-to-air television market, while the Company maintained
a strong power ratio – which measures the conversion of ratings to
revenue – in its regional television markets. The Company’s reported
EPS in FY2019 was also adjusted to exclude the loss disclosed in
the financial report in relation to assets held for resale to Broadcast
Australia as part of the outsourcing of the Company’s broadcast
transmission assets. As noted above, these adjustments did not
affect vesting of the EPS performance condition in FY2019.
The vesting range of cumulative annual growth rates (CAGR) from
3% to 8% has been retained for the EPS performance condition in
the LTI grants for FY2020. Having regard to the Company’s media
and entertainment business, the Board continues to believe that this
vesting range remains appropriate.
The threshold for vesting of the ROIC performance condition in the
LTI grants for FY2020 is 8.9% (FY2019: 9.0%)1, which is the ROIC
achieved by the Company in FY2019. The Board applies a consistent
principle under which the vesting threshold for each grant should be
the ROIC achieved in the immediately preceding year, while ensuring
that the vesting threshold is above the Company’s weighted average
cost of capital. The upper band of the vesting range for LTI grants
in FY2020 is 11.3% (FY2019: 11.4%). As for the grants made in
FY2018 and FY2019, this is 2.4 percentage points above the vesting
threshold for the ROIC performance condition.
Shareholders will recall that impairments and other significant items
incurred during the life of an LTI grant will be added back to operating
EBIT and Invested Capital in determining ROIC performance. This
means that the impairments of $104.7 million and $226.9 million
recorded by the Company at 30 June 2018 and 31 December 2018
respectively will be reversed for the purposes of the ROIC calculation
for the LTI grants made in FY2019 and FY2020 (to be tested in
FY2021 and FY2022 respectively). The fair value loss of $9.2 million
on assets held for resale recorded at 30 June 2019 will also be
reversed in calculating ROIC for LTI grants to be made in FY2020.
Further details of how ROIC is calculated are provided in the
description of the LTI Plan in the Remuneration Report.
Assisted by an independent benchmarking review by KPMG, the
Board has resolved to adjust the fees paid to members of the PCC so
that they are the same as the fees paid to members of the Board’s
Audit & Risk Committee. All other aspects of the remuneration
of the Company’s non-executive directors will be the same in
FY2020 as in FY2019.
1 Due to the retrospective application of AASB 15, EPS in FY2016 has been restated from 10.12 to 10.04 cents. In addition, the vesting range for the ROIC performance
condition in the FY2019 LTI plan has been adjusted to be between 9.0% and 11.4%, instead of the vesting range at the time grants were made under the FY2019 LTI
plan of between 8.8% and 11.2%. An appropriate adjustment has also been made to the vesting range for the ROIC performance condition in the FY2018 LTI plan.
29
ANNUAL REPORT 2019 1. Overview of FY2019 remuneration
This section provides an overview of the remuneration received by executive KMP and non-executive directors in FY2019.
1.1. Executive KMP
The principles for remuneration of executive KMP are set out in section 2. Details of remuneration paid during the year are provided in
sections 3 (Remuneration), 4 (short-term incentives) and 5 (long-term incentives).
This table provides an overview of remuneration received by KMP executives in FY2018 and FY2019.
Total remuneration
Short-term
incentive opportunity
Long-term incentive
eligible for vesting1
Name
Grant Blackley
Chief Executive Officer
and Managing Director
Nick McKechnie
Chief Financial Officer
John Kelly
Chief Operating Officer
Brian Gallagher
Chief Sales Officer
Stephen Haddad2
Chief Technology Officer
Guy Dobson3
Chief Creative Officer
Total executive KMP
Year
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Amount
$
1,869,156
2,196,406
795,935
890,599
831,750
844,938
764,592
849,937
465,974
–
853,211
826,041
5,580,618
5,607,921
Performance-
related
proportion
%
36.5
46.0
29.8
36.6
30.8
33.3
26.8
35.6
19.6
–
(1.3)
17.9
26.2
36.9
Awarded
%
90.3
Forfeited
%
9.7
Vested
%
71.5
Forfeited
%
28.5
52.0
90.0
51.0
94.5
50.0
78.0
49.0
94.0
–
53.5
53.0
83.4
51.0
48.0
10.0
49.0
5.5
50.0
22.0
51.0
6.0
–
46.5
47.0
16.6
49.0
–
71.5
35.9
–
–
71.5
–
–
–
71.5
35.9
71.5
35.9
–
28.5
64.1
–
–
28.5
–
–
–
28.5
64.1
28.5
64.1
1 The vested and forfeited proportions of LTI entitlements relate only to those LTI entitlements that were eligible for vesting during the year. In 2018, these were from the
FY2014 and FY2015 LTI plans. In FY2019, these were from the FY2016 LTI plan.
2 Stephen Haddad was appointed as Chief Technology Officer and joined the Company’s senior leadership team on 1 July 2018. He was not a KMP during FY2018.
3 Guy Dobson ceased employment with the Company on 4 January 2019. The role of Chief Creative Officer remains vacant at the date of this report.
1.2. Non-executive directors
The aggregate remuneration of the Company’s non-executive directors during the year was $1,120,500 compared to $1,118,438 in 2018.
The principles for remuneration of non-executive directors are set out in section 2. Details of the remuneration of non-executive directors
during the year are provided in section 3.
30
REMUNERATION REPORTFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO 2. Remuneration principles
2.1 Overview of executive remuneration
The Company aims to ensure remuneration is competitive and appropriate for the results delivered. Executive reward is aligned with the
achievement of strategic objectives and the creation of value for shareholders, and is informed by market practice for delivery of reward.
Executive remuneration packages include a mix of fixed and variable remuneration. Variable remuneration includes short and long-term
incentives. More senior roles in the organisation have a greater weighting towards variable remuneration.
The table below shows the target remuneration mix for executive KMP in 2019 and 2020. The STI portion is shown at target levels and the
LTI portion is based on the value granted or to be granted in the relevant year. As explained below in section 2.3.1, the increased portion of
incentive remuneration to be applied to the STI plan in 2020 will support the requirement for a portion of an executive KMP’s STI awards to be
paid in equity that will be subject to a disposal restriction until cessation of employment, unless the executive has already met the minimum
shareholding required by the Board’s Senior Executive Share Ownership Policy.
Grant Blackley
John Kelly
Nick McKechnie
Brian Gallagher
Stephen Haddad
Guy Dobson
Fixed remuneration
2020
2019
40%
40%
50%
50%
50%
50%
50%
50%
60%
70%
–
76%
STI
LTI
2019
30%
25%
25%
25%
15%
12%
2020
30%
30%
30%
30%
20%
–
2019
30%
25%
25%
25%
15%
12%
2020
30%
20%
20%
20%
20%
–
2.2 Fixed remuneration for executive KMP
Fixed remuneration for executives is structured as a total employment package. Executives receive a combination of base pay, superannuation
and prescribed non-financial benefits at the executive’s discretion. The Company contributes superannuation on behalf of executives in
accordance with the superannuation guarantee legislation.
Fixed remuneration is reviewed annually to ensure the executive’s pay is competitive and appropriate for the results delivered. There are no
guaranteed fixed remuneration increases included in any executive KMP contracts.
31
ANNUAL REPORT 2019 2.3 Variable remuneration for executive KMP
2.3.1 Short-term incentives
The table below outlines details of the Company’s short-term incentive plan.
What is the incentive?
The STI is an annual “at risk” bonus designed to reward executives for meeting or exceeding financial
and non-financial objectives.
How is each executive’s
entitlement determined?
Each executive is allocated a dollar value (which may be a fixed percentage of the executive’s total remuneration)
representing the executive’s STI opportunity for the year.
How is the
incentive delivered?
STI awards for all executives other than the CEO (and, from FY2020, other executive KMP) are paid in cash
according to the extent of achievement of the applicable performance measures. No portion of an STI award is
subject to deferral.
The CEO’s STI award is payable partly in cash and partly in equity. The equity component is 25% of the after-tax
value of the total STI award.
In FY2020, 25% of the CEO’s STI award, and 20% of the STI awards of other executive KMP, will be paid in
equity, subject to the requirements of the Company’s Senior Executive Share Ownership Policy. The Board may
elect to pay the STI awards of an executive KMP (other than the CEO) wholly in cash once the executive KMP has
accumulated the minimum shareholding required under the Senior Executive Share Ownership Policy.
What are the performance
measures and hurdles?
The Board sets the annual KPIs for the CEO near the beginning of each financial year. The KPIs are allocated to
three categories having regard to the Company’s business strategy: profitability and financial performance (40%),
high level operational improvements (40%) and cultural and behavioural influences (20%).
The CEO determines the KPIs for the other members of the senior leadership team in the same three categories
and having regard to their areas of responsibility. KPIs for the Chief Creative Officer may allocate up to 40% to
creative and content performance instead of profitability and financial performance.
The metrics that applied under the STI plan in 2019 are summarised below.
Profitability and financial performance/Creative and content performance (40%)
– Group NPAT compared with budget: Focuses on financial results and collaboration for the overall benefit of the
Group. This financial metric applies for the CEO, CFO and COO.
– Group EBITDA compared with budget: Focuses on the operating performance of the operating business. This
metric applies for the Chief Sales Officer, Chief Creative Officer and Chief Technology Officer.
– Sales-related targets: Focuses on achieving sustainable financial performance from growing top line revenue.
This metric applies for the Chief Sales Officer.
– Radio survey ratings targets: Revenue and financial performance is heavily dependent on ratings on both radio
and television (although, as an affiliate broadcaster, the Company is not responsible for the content of its
television broadcasts and has minimal ability to influence television ratings). This metric applies for the Chief
Creative Officer (for radio).
Profitability and financial performance targets also include targets to ensure non-revenue related costs are closely
controlled and to achieve specific corporate strategy projects that improve the asset base.
The Board has discretion to adjust budget targets to take into account acquisitions or divestments or other
significant items where appropriate for linking remuneration reward to corporate performance.
Achievements against financial metrics are based on the Company’s audited annual financial statements. The
Board has discretion to make adjustments to take into account any significant non-cash items (for example
impairment losses), acquisitions and divestments and one-off events/abnormal/non-recurring items, where
appropriate for linking remuneration reward to corporate performance.
High level operational performance (40%)
– Strategy: Focuses on strategic initiatives (such as network strategy, material contracts and diversification of
revenue streams) that deliver growth, improved business performance and shareholder value.
– Operational improvements: Focuses on effective management of business support functions and infrastructure
to sustain and improve long-term earnings performance.
Cultural and behavioural influences (20%)
– People: Focuses on maintaining a strong and positive corporate culture, effective leadership and development
and retention of talent to sustain and improve long-term earnings performance.
– External relationships: Focuses on development and maintenance of constructive relationships with key
stakeholders to sustain and improve long-term earnings performance.
32
REMUNERATION REPORTFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO Is there a gateway?
At least 95% of an executive’s financial metrics relating to NPAT or EBITDA must be achieved before any STI
is payable under the profitability and financial performance (40%) component of the STI plan. In FY2019, at
least 97.5% of an executive’s financial metrics for sales had to be achieved before any STI is payable under the
profitability and financial performance (40%) component of the STI plan. Sales-related targets will not be used
as gateway targets in FY2020. This recognises the significant impact on sales performance of market factors
that are beyond the control of management as well as the differing contributions to profitability of Audio and
Television assets.
Where the budget for a financial year is less than the previous year’s actual result, the applicable financial metric
will be the previous year’s actual result (excluding any divested assets or non-recurring items).
There is no gateway for metrics in the high level operational improvements (40%) or cultural and behavioural
influences (20%) components of the STI plan.
Individual performance must be at a “meets expectations” level before any STI is payable.
What is the maximum
amount payable?
The maximum award for non-financial measures under the STI plan is 100% of an executive’s STI opportunity for
those measures.
The maximum award for financial measures under the STI plan is 100% of an executive’s STI opportunity for that
measure. In addition, an executive can earn up to 200% of the financial component (40%) of the executive’s STI if
the Group achieves up to 105% of the Group’s NPAT target. An executive’s maximum STI opportunity is therefore
140% of target.
Having regard to assumptions underlying the Company’s annual budget, the Board considers that achieving 105%
of the Group’s NPAT target would represent significant outperformance. Any STI award for such outperformance
must be self-funding. This means that the outperformance must be achieved after providing for the incremental
cost of any STI award.
NPAT/EBITDA
<95%
95% to 100%
100% to 105% NPAT
>105%
CEO: At the end of each financial year, with the assistance of the Committee, the Board assesses the actual
performance of the Company and the CEO against the applicable KPIs and determines the STI amount
payable to the CEO.
% of financial STI payable
0%
Straight-line between 50% and 100%
Progressive scale between 100% and 200%
200%
Sales
<97.5%
97.5% to 100%
n/a
n/a
How is
performance assessed?
Other executive KMP: At the end of the financial year the CEO assesses the actual performance of the Group and
the executive KMPs against the applicable KPIs and determines the STI amount payable to each executive. The
CEO provides these assessments to the Committee for review.
Cessation of employment
“Bad Leavers” (who resign or are terminated for cause) will forfeit their STI entitlement, unless otherwise
determined by the Board or the CEO as appropriate.
Change of control
Clawback
Other features
The STI payments of executives who cease employment for other reasons are pro-rated for time and performance,
unless otherwise determined by the Board.
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 the Board’s discretion.
The Board may reconsider the level of satisfaction of a performance measure and take steps to reduce the benefit
of an STI award to the extent its vesting was affected by fraud, dishonesty, breach of obligation or other action
likely to result in long-term detriment to the Company.
Discretionary elements: The Board (for KMP) and the CEO (for other executives) have discretion to grant additional
bonuses for special projects or achievements that are not contemplated in the normal course of business or that
have a particular strategic impact for the Company, such as acquisitions and divestments, refinancing, or major
capital expenditure projects.
Minimum employment period: Participants must be employed for at least three months in the performance period to
be entitled to receive an STI payment.
Equity awards and retention of shares: When a portion of an STI award is paid in equity, the Board has discretion to
purchase shares on-market or to issue new shares.
The equity component of the STI award of an executive KMP will be subject to a disposal restriction under
the Senior Executive Share Ownership Policy unless the executive has already met the minimum shareholding
requirement under that policy.
33
ANNUAL REPORT 2019 2.3.2 Long-term incentives
The table below outlines details of the Company’s long-term incentive plan.
What is the incentive?
The LTI plan provides executive KMP with grants of performance rights over ordinary shares, for nil consideration.
Performance rights granted under the LTI plan are subject to a three-year performance period. From 2017, the LTI
plan has also been made available to about 20 executives in the next tiers of management.
How is each executive’s
entitlement determined?
Each executive is allocated a dollar value (which may be a fixed percentage of the executive’s total remuneration)
representing the executive’s maximum LTI opportunity for the year. This dollar value is converted into a number of
performance rights in the LTI plan, based on the face value of performance rights at the applicable grant date. The
face value of performance rights is calculated as:
– the weighted average price of the Company’s shares for the five trading days commencing seven days after the
Company’s results for the prior financial year (ended 30 June 2018) are announced to ASX;
less
– the amount of any final dividend per share declared as payable in respect of the prior financial year
(ended 30 June 2018).
How is the
incentive delivered?
To the extent that the applicable vesting conditions are satisfied at the end of the three-year performance period,
LTI awards are delivered by allocation to participants of one fully paid ordinary share for each performance right
that vests. The Board has discretion to settle vested awards in cash.
Twenty-five percent of any shares allocated under the LTI plan to executive KMP will be subject to a disposal
restriction until cessation of employment under the Senior Executive Share Ownership Policy unless the executive
has accumulated the minimum shareholding required under that policy at the conclusion of the applicable
performance period.
From 1 July 2017, each grant under the LTI plan has two equally weighted performance hurdles over a three-year
period: Return on Invested Capital (ROIC) and Absolute Earnings per Share (EPS). ROIC has replaced Relative
Total Shareholder Return (TSR), which, together with Absolute EPS, was the performance hurdle used in LTI
grants made before 1 July 2017. This change was made following a review of the LTI plan by Juno Partners, an
independent consultant. The Company’s ROIC Performance is more within management’s sphere of influence than
is the Company’s Relative TSR Performance, is readily measurable at any time during the performance period of an
LTI grant, and therefore provides a more effective incentive for management performance.
Return on Invested Capital Performance hurdle
ROIC measures management’s efficiency at allocating the capital under its control to generate profitable returns.
To maintain and improve the Company’s ROIC, management is required to focus on the quality of earnings and the
capital required to deliver improved earnings.
ROIC is calculated as follows:
Operating Earnings Before Interest and Tax (EBIT)
Invested Capital (Net Debt plus Equity)
ROIC is defined by reference to factors substantially within management’s sphere of influence. Accordingly:
– Operating EBIT is adjusted to exclude the impact of significant or non-recurring items (both income and costs)
to provide a fair measure of underlying long-term performance.
– Impairments and other significant items are added back to operating EBIT and Invested Capital. To ensure
consistent measurement from year to year, any impairments and other significant items from 1 July 2017 (when
ROIC was introduced as a performance condition under the LTI plan) will be added back to the calculation of
Invested Capital in each year (impairments and significant items before the introduction of ROIC as a measure
on 1 July 2017 are not added back).
– Non-cancellable operating leases are included in Invested Capital.
– Returns are measured pre-tax.
– Invested Capital is measured at the end of each month over the final year of an LTI grant and is averaged for
the purposes of calculating ROIC.
– Where applicable, items used to calculate ROIC will be rebased to accommodate changes in accounting
standards and policies during the life of an LTI grant.
ROIC performance rights will vest if the Company’s ROIC performance in the final year of the performance period
is at or above a threshold set by the Board at the time of making the relevant LTI grant. ROIC performance rights
granted in FY2020 are eligible to vest according to the following schedule:
ROIC Performance in FY2021
Below 8.9%
8.9%
8.9% to 11.3%
At or above 11.3%
% of allocation that vests
Nil
50%
Straight-line vesting between 50% and 100%
100%
What are the performance
measures and hurdles?
34
REMUNERATION REPORTFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO What are the performance
measures and hurdles?
(continued)
Is there a gateway?
Absolute EPS Performance hurdle (50%)
Performance rights will vest if the Company’s adjusted EPS performance over the performance period is at
or above a 3% Compound Annual Growth Rate (CAGR). Adjusted EPS excludes the impact of significant or
non-recurring items (both income and costs) and so provides a fair measure of underlying long-term performance.
The Board exercises a discretion about the extent to which particular significant or non-recurring items will be
excluded, having regard to the reasons for any particular item.
Adjusted EPS is calculated by dividing the adjusted profit after tax attributable to shareholders for relevant
reporting period (reported profit after tax, adjusted for the after-tax effect of significant or non-recurring items)
by the weighted average number of ordinary shares on issue in the Company over the relevant reporting period.
Absolute 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%
Relative TSR Performance hurdle (for LTI grants made before 1 July 2017)
TSR provides a comparison of relative shareholder returns that is relevant to most of the Company’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 Company’s capital structure.
Performance rights will vest if the Company’s TSR over the performance period is at or above the 51st percentile
against the constituents of the ASX Consumer Discretionary Index at each grant date, excluding News Corporation.
The comparator group represents a range of alternative 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.
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%
The ROIC Performance hurdle will be achieved only if the Company’s adjusted ROIC performance in the final
year of the performance period is at or above a threshold set by the Board at the time of making the relevant LTI
grant. The ROIC Performance hurdle for grants made in FY2020 will be achieved if the Company’s adjusted ROIC
performance in FY2022 is at or above 8.9%.
The Absolute EPS Performance hurdle will be achieved only if the Company’s EPS performance over the
performance period is at or above 3% CAGR.
The Relative TSR Performance hurdle will be achieved only if the Company’s relative TSR over the performance
period is at or above the 51st percentile of the comparator group.
What is the maximum
amount payable?
How is performance
assessed?
The maximum award under the LTI plan is 100% of an executive’s grant if all vesting conditions are fully satisfied
over the performance period.
The Board will calculate the Company’s ROIC and EPS Performance at the end of the performance period for each
LTI grant by reference to the Company’s accounting records and the Company’s audited financial reports. The
Company may engage an independent consultant to review or carry out these calculations.
The Group engages Deloitte to report on the Company’s TSR ranking within the comparator group as defined in
each of the LTI plans at each relevant vesting date.
There is no re-testing of performance hurdles under the LTI plan.
Cessation of employment
“Bad Leavers” (who resign or are terminated for cause) will forfeit any unvested performance rights, unless
otherwise determined by the Board.
Change of control
For executives who cease employment for other reasons, 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 period.
In the event of a change of control before vesting of an LTI award, the Board has discretion as to how to treat the
unvested award, including to determine that the award will vest or lapse in whole or in part, or that it will continue
subject to the same or different conditions.
35
ANNUAL REPORT 2019 Clawback
Other features
The Board may reconsider the level of satisfaction of a performance hurdle and take steps to reduce the benefit of
an LTI award to the extent its vesting was affected by fraud, dishonesty, breach of obligation or other action likely
to result in long-term detriment to the Company.
Treatment of dividends: There are no dividends payable to participants on unvested performance rights. Once
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 discretion to purchase shares on-market or to issue new shares in respect of
vested performance rights.
Retention of shares: The rules of the LTI plan do not require participants to retain any shares allocated to them
upon vesting of performance rights. However, the Company’s Senior Executive Share Ownership Policy imposes
a disposal restriction until cessation of employment on 25% of the shares allocated to an executive KMP upon
vesting of performance rights unless the executive has already met the minimum shareholding requirement
under that policy.
2.4 Consequences of performance on shareholder value
In considering the Group’s performance and the benefits for shareholder value, the Board has regard to the following indicators in the current
financial year and the preceding four financial years.
Revenue
EBITDA
EBITDA%
Net profit before tax
Net profit after tax (“NPAT”)
NPAT%
Net profit after tax excluding significant items
NPAT % excluding significant items
EPS (cents)1
ROIC2
Opening share price
Closing share price
Dividend/Distribution
Restated3
Restated3
30 June 2018
$’000
656,784
158,439
24.1%
2,519
82
0.0%
73,932
11.3%
9.61
9.0%
Restated3
30 June 2017
$’000
691,021
181,170
26.2%
125,747
107,169
15.5%
107,169
15.5%
12.02
10.4%
30 June 2019
$’000
660,088
147,382
22.3%
(129,475)
(91,395)
(13.8%)
73,879
11.2%
9.61
8.9%
30 June 2016 30 June 2015
$’000
611,120
163,262
26.7%
(265,216)
(284,950)
(46.6%)
64,783
10.6%
8.93
n/a
30 June 2019 30 June 2018 30 June 2017 30 June 2016 30 June 2015
$1.07
$0.97
6.0c
$’000
641,129
169,296
26.4%
113,334
76,657
12.0%
76,653
12.0%
10.04
9.2%
$0.97
$1.25
6.25c
$1.25
$1.31
7.75c
$1.25
$1.25
7.25c
$1.31
$1.25
7.75c
1 EPS is shown after adjustments to exclude the impact of significant or non-recurring items (both income and costs) as approved by the Board for the purposes of the
Company’s LTI plan.
2 ROIC is calculated in accordance with the principles outlined in section 2.3.2. It has not been calculated for periods prior to the introduction of the scheme in 2016.
3 Comparative figures have been restated to conform to changes in presentation in the current year and for the impact of adoption of AASB 15 Revenue from contracts
with customers.
2.5 Executive service contracts
The Company has entered into service contracts setting out the terms of employment of each executive KMP. All service contracts are for an
indefinite term, subject to termination by either party on six months’ notice. Each executive service contract provides for the payment of base
salary and participation in the Company’s STI and LTI plans, along with other prescribed non-monetary benefits.
2.6 Services from remuneration consultants
Deloitte was engaged during the year to assess the performance of the Company’s LTI plans as at each vesting date and, for this purpose,
to determine the Group’s TSR ranking within the comparator group over the applicable performance periods. Deloitte was paid $3,000 for
these services.
KPMG was engaged by the People & Culture Committee during the year to advise on a range of matters. This included provision of data in
relation to the market positioning of the remuneration of the Company’s executive KMP and its non-executive directors, advice about market
practice for share ownership by executive KMP and associated tax advice. KPMG did not make any remuneration recommendations (as defined
in the Corporations Act.) KPMG was paid $41,000 for these services.
36
REMUNERATION REPORTFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO 2.7 Remuneration of non-executive directors
The Company enters into a letter of appointment with each non-executive director. The letter sets out the Board’s expectations for
non-executive directors and the remuneration payable to non-executive directors.
The maximum annual aggregate fee pool for non-executive directors is $1,500,000. This was approved by shareholders at the 2011 Annual
General Meeting.
The Chair and the Deputy Chair receive a fixed aggregate fee. Other non-executive directors receive a base fee for acting as a director and
additional fees for participation as Chair or as a member of the Board’s committees. Non-executive directors do not receive performance-based
fees and are not entitled to retirement benefits as part of their fees.
The table below sets out the fees for non-executive directors that applied in 2018 and 2019 and those that will apply in 2020.
Base fees – Annual
Chair1
Deputy Chair1
Other Non-Executive Directors
Committee fees – Annual
Audit & Risk Committee – Chair1
Audit & Risk Committee – member
People & Culture Committee – Chair1
People & Culture Committee – member
Nomination Committee – Chair1
Nomination Committee – member
2018
$
2019
$
2020
$
273,000
176,000
136,500
23,000
15,500
16,500
11,000
16,500
11,000
273,000
176,000
136,500
273,000
176,000
136,500
23,000
15,500
16,500
11,000
16,500
11,000
23,000
15,500
23,000
15,500
16,500
11,000
1 The Chair and Deputy Chair do not receive any additional fees for committee work. Accordingly, the fees set out above for Chair of the Nomination Committee were not
paid during 2018 or 2019 and will not be paid during 2020.
37
ANNUAL REPORT 2019 3. Remuneration of executive KMP and directors during the year
3.1 Total remuneration received by Executive KMP in FY2019 (non-statutory disclosures)
The remuneration in the table below is aligned to the current performance periods and provides an indication of alignment between the
remuneration received in the current year and its alignment with long-term performance. The amounts in this table will not reconcile with
those provided in the statutory disclosures in section 3.2. For example, the executive KMP table in section 3.2 discloses the value of LTI
grants which might or might not vest in future years, while the table below discloses the value of LTI grants from previous years which
vested in FY2019.
Executive KMP
Grant Blackley
Chief Executive Officer
and Managing Director
Nick McKechnie
Chief Financial Officer
John Kelly
Chief Operating Officer
Brian Gallagher
Chief Sales Officer
Stephen Haddad1
Chief Technology Officer
Guy Dobson
Chief Content Officer
Total Executive KMP
Year
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Cash salary
and fees
$
1,147,976
1,143,627
525,251
523,107
541,651
539,440
525,251
523,106
349,249
–
1,005,523
633,530
4,094,901
3,362,810
STI bonus
$
750,227
405,000
245,554
140,140
265,489
140,600
212,995
132,860
75,200
–
26,733
53,333
1,576,198
871,933
Non-monetary
benefits
$
5,025
4,428
3,498
2,799
5,025
4,428
5,025
4,428
5,025
–
2,532
4,428
26,130
20,511
Super-
annuation
benefits
$
20,531
20,049
20,531
20,049
20,531
20,049
20,531
20,049
20,531
–
15,399
20,049
118,054
100,245
LTI vested
in the year2
$
489,272
–
244,636
90,346
–
–
163,089
–
–
–
163,089
60,231
1,060,086
150,577
Total
$
2,413,031
1,573,104
1,039,470
776,441
832,696
704,517
926,891
680,443
450,005
–
1,213,276
771,571
6,875,369
4,506,076
1 Stephen Haddad was not an Executive KMP in 2018.
2 The LTI entitlements that vested during the year were from the FY2017 LTI plan.
38
REMUNERATION REPORTFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO 3.2 Total remuneration received by Executive KMP in FY2019 (statutory disclosure)
The table below sets out the nature and amount of each major element of the remuneration of each Executive KMP in 2019 and 2018.
Short-term employee benefits
Salary
and fees
$
1,147,976
STI
bonus2
$
Year
2019
750,227
2018 1,143,627 405,000
Non-
monetary
$
Total
$
5,025 1,903,228
4,428 1,553,055
Post-
employment
Super
con-
tribution
$
20,531
20,049
Long
Service
Leave1
Term-
ination
benefits
Perfor-
mance-
related
proportion
Total
Share-
based
payments
Perfor-
mance
rights3
$
$
12,530
18,429
$
$
–
(67,133) 1,869,156
– 604,873 2,196,406
Executive KMP
Grant Blackley
Chief Executive
Officer and
Managing Director
Nick McKechnie
Chief Financial
Officer
John Kelly
Chief Operating
Officer
Brian Gallagher
Chief Sales
Officer
Stephen Haddad4
Chief Technology
Officer
Guy Dobson5
Chief Creative
Officer
Total
Executive KMP
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
525,251
523,107
245,554
140,140
774,303
3,498
2,799 666,046
20,531
20,049
9,102
18,344
(8,001)
–
– 186,160
795,935
890,599
541,651
265,489
539,440 140,600
5,025
812,165
4,428 684,468
20,531
20,049
525,251
212,995
523,106 132,860
5,025
743,271
4,428 660,394
20,531
20,049
349,249
–
75,200
–
5,025
–
429,474
–
20,531
–
8,389
–
9,107
–
–
–
–
(9,335)
– 140,421
831,750
844,938
–
(8,317)
– 169,494
764,592
849,937
–
–
15,969
–
465,974
–
325,947
633,530
26,733
53,333
2,532
4,428
355,212
691,291
15,399
20,049
(159,212) 679,576
–
19,770
(37,764)
94,931
853,211
826,041
2019 3,415,325 1,576,198
2018 3,362,810 871,933
26,130 5,017,653
20,511 4,255,254 100,245
118,054 (120,084) 679,576
56,543
(114,581) 5,580,618
– 1,195,879 5,607,921
%
36.5
46.0
29.8
36.6
30.8
33.3
26.8
35.6
19.6
–
(1.3)
17.9
26.2
36.9
1 Long service leave relates to amounts accrued during the year.
2 The STI bonus is for performance during the year using the criteria set out in section 2.3.1. The amount was finally determined by the Board on 21 August 2019 after
considering recommendations of the People & Culture Committee.
3 The value of the performance rights granted during the year was determined as the face value of the performance rights at the grant date. The method of calculating
the face value of performance rights is explained in section 2.3.2. The value disclosed is the portion of the face value of the rights recognised as an expense in each
reporting period.
4 Stephen Haddad was appointed Chief Technology Officer with effect from 1 July 2018. He was not an Executive KMP in 2018.
5 Guy Dobson ceased employment with effect from 4 January 2019. Termination Benefits includes accrued Annual Leave and Long Service Leave. The position of Chief
Creative Officer remains vacant at the date of this report.
39
ANNUAL REPORT 2019 3.3 Non-executive directors
The table below sets out the nature and amount of each major element of the remuneration of each non-executive director in 2019 and 2018.
Non-executive director
Peter Bush
Chairman
Leon Pasternak
Deputy Chairman
Glen Boreham
Non-executive director
Rob Murray
Non-executive director
Helen Nash
Non-executive director
Melanie Willis
Non-executive director
Total
Short-term employee benefits
Salary
and fees
$
252,469
252,951
160,732
160,732
148,860
145,510
144,748
148,186
163,928
162,253
155,708
155,708
1,026,445
1,025,340
Non-monetary
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$
252,469
252,951
160,732
160,732
148,860
145,510
144,748
148,186
163,928
162,253
155,708
155,708
1,026,445
1,025,340
Post-
employment
Super
contribution
$
20,531
20,049
15,268
15,268
14,140
13,823
13,752
13,752
15,572
15,414
14,792
14,792
94,055
93,098
Total
$
273,000
273,000
176,000
176,000
163,000
159,333
158,500
161,938
179,500
177,667
170,500
170,500
1,120,500
1,118,438
Year
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
40
REMUNERATION REPORTFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO 4. Analysis of short-term incentives included in remuneration
4.1 STI performance outcomes
The table below summaries the KPIs applicable for each KMP for FY2019 and the performance achieved.
Profitability and
financial performance
40%
High level operational improvements
40%
Cultural and behavioural influences
20%
KMP
Grant Blackley
Measure
Group NPAT
Group costs
Performance Measure
34.5 %
achieved
Nick McKechnie Group NPAT
Group costs
34.5 %
achieved
John Kelly
Group NPAT
Non-revenue
related costs
34.5 %
achieved
Brian Gallagher Group EBITDA
Group revenue
Sales dept costs
22.0 %
achieved
Stephen Haddad Group EBITDA
Non-revenue
related
Technology costs
34.0 %
achieved
Guy Dobson1
Group EBITDA
Non-revenue
related Content
costs
26.8 %
achieved
Deliver corporate strategy;
maintain high cash
conversion; deliver workforce
planning efficiencies; drive
increased national advertising
in regional markets;
consolidate Hit and Triple M
Network ratings gains.
Deliver corporate strategy;
realise targeted workforce
planning efficiencies;
maintain high cash
conversion; deliver
material structural change
in finance team.
Deliver corporate strategy;
implement new national
management structure; lead
and management workforce
planning initiatives to realise
targeted efficiencies; lead
maturation of PodcastOne.
Drive growth in volume and
yield of national advertising
in regional markets; Metro
radio power ratio; effective
implmentation of Salesforce;
improve monetisation of
premium sporting rights;
improve yield on Brandworks
local advertising in regional
markets.
Lead new TV playout
solution; design and
implement a “right-sized”
technology plan for
the business; ensure
project management and
procurement functions
deliver target efficiencies;
effective implementation
of Salesforce.
2DayFM Breakfast
performance; grow Triple M
all people 25-54 audience;
growth in digital radio
audience; grow radio app
usage; ensure Content team
embraces Hubble talent
development portal.
Performance Measure
35.8 %
achieved
Maintain succession planning
for KMP executives; improve
on 2016 cultural audit
results; enhance reputaton
with investors, financiers and
other influencers.
Performance
20.0 %
achieved
38.8 %
achieved
40.0 %
achieved
36.0 %
achieved
40.0 %
achieved
14.0 %
achieved
16.7 %
achieved
20.0 %
achieved
20.0 %
achieved
Improve on 2016 cultural
audit results; enhance
reputation with investors,
financiers and other
influencers; develop CFO
network to influence
advertising investment
strategies.
Improve on 2016 cultural
audit results; maintain
succession planning for direct
reports; develop initiatives
and operational workflows to
align with corporate strategy.
Maintain succession planning
for direct reports including
to monitor diversity; ensure
commitment to corporate
goals for diversity, future
workplace and innovation;
improve on 2016 cultural
audit results.
20.0 %
achieved
Maintain succession planning
for direct reports including
to monitor diversity; ensure
commitment to corporate
goals for diversity, future
workplace and innovation;
improve on 2016 cultural
audit results.
12.7 %
achieved
Maintain succession planning
for direct reports including
to monitor diversity; ensure
commitment to corporate
goals for diversity, future
workplace and innovation;
improve on 2016 cultural
audit results.
1 Guy Dobson’s STI payment was pro-rated to reflect the date of his cessation of employment on 4 January 2019.
41
ANNUAL REPORT 2019 4.2 Vesting of STI awards
The table below sets out details of the short-term incentive bonus payments awarded as remuneration to Executive KMP for the year.
KMP
Grant Blackley
Nick McKechnie
John Kelly
Brian Gallagher
Stephen Haddad
Guy Dobson3
Short-term incentive bonus
% achieved in year
Included in
remuneration1
$
750,227
245,554
265,489
212,995
75,200
26,733
Profitability
and financial
performance4
34.5%
34.5%
34.5%
22.0%
34.0%
26.8%
High level
operational
improvements
35.8%
38.8%
40.0%
36.0%
40.0%
14.0%
Cultural and
behavioural
influences
20.0%
16.7%
20.0%
20.0%
20.0%
12.7%
%
forfeited
in year2
9.7%
10.0%
5.5%
22.0%
6.0%
46.5%
1 Amounts included in remuneration for the year represent the amounts related to the year based on achievement of corporate and personal goals for each executive.
These amounts were approved by the Board on 21 August 2019.
2 The amounts forfeited are due to corporate and personal goals not being achieved in the year.
3 The first performance measure was based on Creative and Content performance for Guy Dobson. He ceased employment with effect from 4 January 2019.
His STI award was pro-rated to reflect the portion of the year for which he was employed by the Company.
4 Because budget targets were not achieved, the Board did not award any of the stretch opportunity of up to 105% available for the profitability and financial
performance component of the STI plan.
5. Share-based incentive payments
All references to rights in this section are to performance rights over fully paid ordinary shares in the Company issued under the Company’s
LTI plan. Rights are convertible into fully paid ordinary shares in the Company on a one-for-one basis upon vesting in accordance with the
Company’s LTI plan. There are no options on issue under the Company’s LTI plan.
5.1 Rights granted as remuneration during the year
The tables below set out details of the rights over shares granted as remuneration to each KMP under the Company’s LTI plan during the year.
KMP
Grant Blackley
Nick McKechnie
John Kelly
Brian Gallagher
Stephen Haddad
Guy Dobson
Details for all rights granted in financial year
Grant Date
Face value at grant date
Vesting date
Number of rights granted
621,820
204,280
210,266
204,280
59,862
74,828
ROIC
14 September 2018
$1.3364
30 June 2021
Absolute EPS
14 September 2018
$1.3364
30 June 2021
All rights expire on the earlier of their vesting date or termination of the executive’s employment on a pro-rata basis. The rights vest at the
end of the third financial year after their grant. This is 30 June 2021 for all rights granted in the year. In addition to a continuing employment
condition, vesting is conditional on the Group achieving specified performance hurdles. Details of the performance hurdles are included in the
discussion of the LTI plan in section 2.3.2.
42
REMUNERATION REPORTFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO 5.2 Details of equity incentives affecting current and future remuneration
The table below sets out the vesting profiles of rights held by each KMP as at 30 June 2019 and details of rights that vested during the year.
At the end of the year, there were no rights that had vested and which had not been exercised by conversion to fully paid ordinary shares.
Name
Grant Blackley
Nick McKechnie
John Kelly
Brian Gallagher
Guy Dobson3
Stephen Haddad
Grant Date
Vesting Date
FY19 Plan 01/07/2021
FY18 Plan 01/07/2020
FY17 Plan 01/07/2019
FY16 Plan 01/07/2018
Total
FY19 Plan 01/07/2021
FY18 Plan 01/07/2020
FY17 Plan 01/07/2019
FY16 Plan 01/07/2018
Total
FY19 Plan 01/07/2021
FY18 Plan 01/07/2020
FY17 Plan 01/07/2019
Total
FY19 Plan 01/07/2021
FY18 Plan 01/07/2020
FY17 Plan 01/07/2019
FY16 Plan 01/07/2018
Total
FY19 Plan 01/07/2021
FY18 Plan 01/07/2020
FY17 Plan 01/07/2019
FY16 Plan 01/07/2018
Total
FY19 Plan 01/07/2021
FY18 Plan 01/07/2020
Total
No. of
Perf Rights
Granted
621,820
660,993
764,151
491,803
Value of
Perf Rights
at Grant
Date1
$
831,000
831,000
810,000
300,000
2,538,767 2,772,000
273,000
204,280
273,000
217,149
177,000
166,981
150,000
245,902
873,000
834,312
281,000
210,266
281,000
223,513
183,000
172,642
745,000
606,421
273,000
204,280
273,000
217,149
177,000
166,981
100,000
163,934
823,000
752,344
100,000
74,828
100,000
79,542
100,000
94,340
100,000
163,934
400,000
412,644
80,000
59,862
30,000
23,863
110,000
83,725
No. of
Perf Rights
Vested and
Exercised
During
the Year
–
–
–
351,640
351,640
–
–
–
175,820
175,820
–
–
–
–
–
–
–
117,212
117,212
–
–
–
117,212
117,212
–
–
–
Vested and
Exercised
%
–
–
–
No. of
Perf Rights
Forfeited
During
the Year2
–
–
–
71.50% 140,263
71,50% 140,263
–
–
–
70,082
70,082
–
–
–
–
–
–
–
46,722
46,722
–
–
–
46,722
46,722
–
–
–
–
–
–
71.50%
71.50%
–
–
–
–
–
–
–
71.50%
71.50%
–
–
–
71.50%
71.50%
–
–
–
No. of
Perf Rights
Remaining
at Year End
621,820
660,993
764,151
–
Value of
Perf Rights
yet to Vest
Forfeited
%2
$
831,000
–
831,000
–
810,000
–
28.50%
–
28.50% 2,046,964 2,472,000
273,000
204,280
–
273,000
217,149
–
177,000
166,981
–
28.50%
–
–
723,000
28.50% 588,410
281,000
210,266
–
281,000
223,513
–
183,000
172,642
–
745,000
606,421
–
273,000
204,280
–
273,000
217,149
–
177,000
166,981
–
–
–
28.50%
723,000
28.50% 588,410
100,000
74,828
–
100,000
79,542
–
100,000
94,340
–
28.50%
–
–
300,000
28.50% 248,710
80,000
59,862
30,000
23,863
110,000
83,725
–
–
–
1 The value of rights granted is the face value of rights (for grants made on or after 1 July 2017) or the fair value of rights (for grants made before 1 July 2017) calculated
at the grant date. The total value of rights granted in the table is allocated to remuneration over the vesting period.
2 The number and percentage of rights forfeited during the year is the reduction from the maximum number of rights available to vest due to the performance criteria not
being satisfied.
3 A portion of Guy Dobson’s performance rights were forfeited upon cessation of employment on 4 January 2019.
43
ANNUAL REPORT 2019 5.3 Vesting of rights during the year (as at 1 July 2018)
Performance rights granted under the FY2016 LTI plan were tested in August 2018, following approval of the Company’s financial report
for the year ended 30 June 2018. There were two equally-weighted performance conditions for these rights: the Company’s relative TSR
performance against companies in the comparator group over the performance period and the Company’s EPS performance over the
performance period. A report provided by Deloitte confirmed that the Company’s relative TSR performance exceeded the 50th percentile
vesting gateway, resulting in partial vesting. The EPS performance condition was also satisfied because the Company’s EPS grew at a CAGR of
3.10% over the performance period. This was above the vesting gateway of 3%, resulting in partial vesting. These outcomes are shown below.
FY2016 LTI plan
Relative TSR performance
Absolute EPS performance
Total
TSR percentile
ranking/EPS CAGR
71st percentile
3.10%
% vested 50% weighting
46.0%
25.5%
71.50%
92%
51%
5.4 Vesting of rights as at 1 July 2019
Performance rights granted under the FY2017 LTI plan were tested in August 2019, following approval of the Company’s financial report
for the year ended 30 June 2019. There were two equally-weighted performance conditions for these rights: the Company’s relative
TSR performance against companies in the comparator group over the performance period and the Company’s EPS performance over the
performance period. A report provided by Deloitte confirmed that the Company’s relative TSR performance exceeded the 50th percentile
vesting gateway, resulting in partial vesting. The EPS performance condition was not satisfied because the Company’s adjusted EPS
declined over the performance period from 10.04 cents in FY2016 to 9.61 cents in FY2019, failing to achieve the vesting gateway of 3%.
These outcomes are shown below.
The grants that have vested will be included in the remuneration of participating executives in 2019.
FY2017 LTI plan
Relative TSR performance
Absolute EPS performance
Total
TSR percentile
ranking/EPS CAGR
64th percentile
(1.4%)
% vested 50% weighting
39%
0%
39%
78%
0%
6. Payments to executives before taking office
There were no payments made during the year to any person as part of the consideration for the person taking office.
7. Transactions with KMP
7.1 Loans to KMP
There were no significant loans made to KMP or their related parties during the year.
7.2 Other transactions and balances with KMP
There were no other transactions with KMP or their related parties during the year.
44
REMUNERATION REPORTFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO 8. KMP shareholdings
The table below sets out the movements in shares held directly or indirectly by KMP during the year.
Non-executive directors
Peter Bush
Leon Pasternak
Glen Boreham
Rob Murray
Helen Nash
Melanie Willis
Executives
Grant Blackley
Nick McKechnie
John Kelly
Brian Gallagher
Stephen Haddad
Guy Dobson1
Received during the year
On exercise
of LTI
performance
rights
Under
STI Plan
Other changes
during the
year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
351,640
175,820
–
117,212
–
117,212
761,884
42,585
–
–
–
–
–
42,585
–
–
–
20,000
6,676
15,000
41,676
(243,426)
(100,000)
29,500
(47,000)
–
–
(360,926)
Balance at
start of year
130,000
1,185,215
123,500
87,248
98,324
94,670
1,718,957
71,700
110,609
–
–
7,500
46,154
235,963
Balance at
end of year
130,000
1,185,215
123,500
107,248
105,000
109,670
1,760,633
222,499
186,429
29,500
70,212
7,500
163,366
679,506
1 Guy Dobson’s holdings shown as at the date of cessation of employment on 4 January 2019.
45
ANNUAL REPORT 2019 AUDITOR’S INDEPENDENCE DECLARATION
A copy of the Auditor’s Independence Declaration, as required under s307C of the Corporations Act 2001, is set out on page 47.
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
22 August 2019
Leon Pasternak
Deputy Chairman
Southern Cross Media Group Limited
Sydney, Australia
22 August 2019
46
SOUTHERN CROSS AUSTEREO
Auditor’s Independence Declaration
As lead auditor for the audit of Southern Cross Media Group Limited for the year ended 30 June 2019,
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
22 August 2019
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, 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.
37
47
ANNUAL REPORT 2019 STATEMENT OF COMPREHENSIVE INCOME
FOR YEAR ENDED 30 JUNE 2019
Revenue from continuing operations
Broadcast and production costs
Employee expenses
Selling costs
Occupancy costs
Promotions and marketing
Administration costs
Fair value loss on assets held for sale
Other Income
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
Profit/(loss) before income tax expense for the year from continuing operations
Income tax credit/(expense) from continuing operations
Profit/(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 profit/(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)
Consolidated
2019
$’000
660,088
(123,600)
(205,536)
(78,838)
(30,631)
(16,766)
(49,877)
(9,223)
1,046
719
147,382
(30,643)
(226,883)
(20,179)
848
(129,475)
38,080
(91,395)
(4,275)
(95,670)
(11.88)
(11.88)
Restated
2018
$’000
656,784
(126,393)
(202,243)
(78,955)
(27,533)
(18,455)
(46,987)
–
1,069
1,152
158,439
(30,718)
(104,708)
(21,300)
806
2,519
(2,437)
82
826
908
0.01
0.01
Note
3
4
5
19
4
17
6
15
15
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
48
SOUTHERN CROSS AUSTEREO STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
Current assets
Cash and cash equivalents
Receivables
Current tax asset
Assets held for sale
Total current assets
Non-current assets
Receivables
Investments accounted for using the equity method
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
Current liabilities
Payables
Deferred Income
Provisions
Borrowings
Current tax liabilities
Total current liabilities
Non-current liabilities
Deferred Income
Provisions
Borrowings
Deferred tax liability
Derivative financial instruments
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
Note
12
7
12
19
8
9
12
12
12
17
12
12
17
6
18
16
16
Consolidated
2019
$’000
32,387
135,973
1,527
15,000
184,887
Restated
2018
$’000
56,052
136,714
–
–
192,766
1,419
9,015
104,472
917,960
1,032,866
1,217,753
1,617
7,740
130,607
1,144,744
1,284,708
1,477,474
68,137
4,729
17,073
–
–
89,939
93,689
9,119
323,524
259,537
7,529
693,398
783,337
434,416
66,640
6,718
18,138
19
2,476
93,991
95,192
7,966
357,601
330,068
1,419
792,246
886,237
591,237
1,379,736
496
(77,406)
(868,708)
434,118
298
434,416
1,379,736
5,601
(77,406)
(716,992)
590,939
298
591,237
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
49
ANNUAL REPORT 2019 STATEMENT OF CHANGES IN EQUITY
FOR YEAR ENDED 30 JUNE 2019
2019
Total equity at 1 July 2018
Loss for the year
Other comprehensive income
Total comprehensive income
Transactions with equity
holders in their capacity
as equity holders:
Employee share entitlements
Payments on maturity of
Long-Term Incentive Plan
Dividends paid
Contributed
equity
$’000
1,379,736
–
–
–
Share-based
payment
reserve
$’000
6,595
–
–
–
Hedge
reserve
$’000
(994)
–
(4,275)
(4,275)
Other equity
transactions
$’000
(77,406)
–
–
–
(Accumulated
losses)/
retained
profits
$’000
(716,992)
(91,395)
–
(91,395)
Non-
controlling
interest
$’000
298
–
–
–
Total
$’000
590,939
(91,395)
(4,275)
(95,670)
Total
equity
$’000
591,237
(91,395)
(4,275)
(95,670)
Total equity at 30 June 2019
–
1,379,736
–
(270)
(560)
(830)
5,765
–
–
–
–
–
(5,269)
–
(77,406)
–
(270)
(722)
(59,599)
(60,321)
(868,708)
(1,282)
(59,599)
(61,151)
434,118
–
–
–
–
298
(270)
(1,282)
(59,599)
(61,151)
434,416
Contributed
equity
$’000
1,379,736
Share-based
payment
reserve
$’000
5,671
Hedge
reserve
$’000
(1,820)
Other equity
transactions
$’000
(77,406)
(Accumulated
losses)/
retained
profits
$’000
(655,382)
Non-
controlling
interest
$’000
298
Total
equity
$’000
651,097
Total
$’000
650,799
–
–
–
–
(1,984)
(1,984)
–
(1,984)
1,379,736
5,671
(1,820)
(77,406)
(657,366)
648,815
298
649,113
–
–
–
–
–
–
–
1,379,736
–
–
–
1,102
(178)
–
924
6,595
–
826
826
–
–
–
–
(994)
–
–
–
–
82
–
82
82
826
908
–
1,102
–
–
–
(77,406)
(109)
(59,599)
(59,708)
(716,992)
(287)
(59,599)
(58,784)
590,939
–
–
–
–
–
–
–
298
82
826
908
1,102
(287)
(59,599)
(58,784)
591,237
2018
Total equity at 1 July 2017
Impact of adoption of
accounting standard AASB 15
Revenue from contracts with
customers
Revised total equity at
1 July 2017
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with equity
holders in their capacity as
equity holders:
Employee share entitlements
Payments on maturity of
Long-Term Incentive Plan
Dividends paid
Total equity at 30 June 2018
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
50
SOUTHERN CROSS AUSTEREO
STATEMENT OF CASH FLOWS
FOR YEAR ENDED 30 JUNE 2019
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
Proceeds from sale of operations and assets
Dividends received from equity accounted investments
Net cash flows used in investing activities
Cash flows from financing activities
Dividends paid to security holders
Payments for debt financing
Repayment of borrowings from external parties
Interest paid to external parties
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
11
Consolidated
2019
$’000
2018
$’000
714,967
(570,052)
848
(34,621)
111,142
(28,299)
(99)
615
932
540
(26,311)
(59,599)
–
(35,000)
(13,878)
(19)
(108,496)
(23,665)
56,052
32,387
718,923
(574,794)
806
(34,777)
110,158
(24,828)
(116)
1,144
11,069
–
(12,731)
(59,599)
(1,828)
(10,000)
(18,717)
(209)
(90,353)
7,074
48,978
56,052
51
ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2019
Key Numbers
Capital Management
Group Structure
Other
1. Summary of Significant
Accounting Policies
13. Capital Management
19. Non-Current Assets –
22. Share-Based Payments
Objectives
Investments Accounted
for Using the Equity
Method
2. Segment Information
14. Dividends Paid and
20. Subsidiaries
23. Remuneration of Auditors
Proposed
3. Revenue
15. Earnings per Share
21. Parent Entity Financial
24. Related Party Disclosures
Information
4. Significant Items
16. Contributed Equity and
Reserves
25. Leases and Other
Commitments
5. Other Income
17. Borrowings
6. Income Tax Expense
18. Financial Risk
Management
26. Events Occurring after
Balance Date
27. Other Accounting Policies
7. Assets held for sale
8. Non-Current Assets
– Property, Plant and
Equipment
9. Non-Current Assets –
Intangible Assets
10. Impairment
11. Cash Flow Information
12. Receivables, Payables,
Deferred Income and
Provisions
52
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO 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 and for the impact of
adoption of AASB 15 Revenue from contracts with customers.
a) Principles of consolidation
The consolidated financial statements incorporate the assets and
liabilities of all subsidiaries of the Company as at 30 June 2019 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 Company is of a kind referred to in ASIC Legislative Instrument
2016/191, relating to the “rounding off” of amounts in the Directors’
Report and Financial Report. Amounts have been rounded off in
accordance with the Instrument to the nearest thousand dollars,
unless otherwise indicated.
Critical accounting estimates and judgements
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 9 Non-Current Assets – Intangible Assets
Note 10 Impairment
Notes to the financial statements
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 27.
53
ANNUAL REPORT 2019 2. Segment Information
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.
The Group has determined operating segments based on the information reported to the Group CEO and the Company Board of Directors.
The Group has previously determined that it 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.
To align with organisational structure changes, the Group has made a change to its financial structure. The revised segment reporting will now
comprise two main segments:
– Audio, comprising metro and regional radio, podcasting and other related businesses; and
– Television, comprising the regional television business.
Audio
Television
Corporate
Consolidated
2019
$’000
452,424
254,451
169,399
28,574
452,424
Restated3
2018
$’000
442,079
232,798
178,946
30,335
442,079
2019
$’000
206,558
108,127
82,918
15,513
206,558
Restated3
2018
$’000
213,421
108,016
93,838
11,567
213,421
2019
$’000
1,106
–
–
1,106
1,106
Restated3
2018
$’000
1,284
–
–
1,284
1,284
2019
$’000
660,088
362,578
252,317
45,193
660,088
Restated3
2018
$’000
656,784
340,814
272,784
43,186
656,784
148,646
32.9%
147,712
33.4%
25,201
12.2%
33,325
15.6%
(26,465)
N/A
(22,598)
N/A
147,382
22.3%
158,439
24.1%
–
–
–
–
–
–
–
–
–
–
–
–
(226,883)
(104,708)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(226,883)
(30,643)
(110,144)
(19,331)
38,080
(104,708)
(30,718)
23,013
(20,494)
(2,437)
(91,395)
82
Segment Revenue
National Revenue1
Local Revenue2
Other (refer note 3)
Total Revenue
EBITDA/Segment Result
EBITDA % of Revenue
Impairment of intangibles
and investments
Depreciation and Amortisation
Statutory EBIT/Segment Result
Financing costs
Income tax expense
(Loss)/Profit for the year
attributable to shareholders
1 National revenue is sold by SCA’s national sales team who are able to sell all SCA products across all markets.
2 Local revenue is sold directly by SCA’s local sales team who are only able to sell local products specific to the particular market.
3 Comparative figures have been restated to conform to changes in presentation in the current year and for the impact of adoption of AASB 15 Revenue from Contracts
with Customers.
54
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO 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
2019
$’000
Restated
2018
$’000
656,332
3,756
660,088
652,922
3,862
656,784
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. For significant
payment terms refer to note 12. Within advertising revenue there is a significant contract in which SCA acts as an agent and recognises
revenue over time on a net fee and commissions received basis. 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.
4. Significant Items
The net profit 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 9, 10 and 12)
Derecognition of deferred tax liability on impairment (refer note 6)
Fair value loss on sale of assets held for sale net of tax (refer note 7)
Total significant items included in net loss after tax
5. Other Income
Net gain from disposal of operations and assets
Total other income
Net assets disposed
Gross cash consideration
Gross deferred consideration
Net gain from disposal of operations and assets before tax
Consolidated
2019
$’000
(226,883)
68,065
(6,456)
(165,274)
2018
$’000
(104,708)
30,859
–
(73,849)
Consolidated
2019
$’000
1,046
1,046
2019
$’000
(501)
1,547
–
1,046
2018
$’000
1,069
1,069
2018
$’000
(939)
2,008
–
1,069
55
ANNUAL REPORT 2019 Income Tax Expense
6.
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
Current tax
Current tax on profits for the year
Adjustments for current tax of prior periods
Total current tax expense
Deferred income tax
Decrease in net deferred tax assets
Adjustments for deferred tax of prior periods
Total deferred tax expense
Reconciliation of income tax expense to prima facie tax payable
Profit 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
Impairment of investments
Share of net profits of associates
Non-deductible entertainment expenses
Other (non-assessable income)/non-deductible expenses
Adjustments recognised in the current year in relation to prior years
Income tax (credit)/expense
Consolidated
2019
$’000
Restated
2018
$’000
29,762
861
30,623
(68,077)
(626)
(68,703)
(129,475)
(38,843)
–
(216)
1,200
(456)
235
(38,080)
31,282
2,029
33,311
(28,604)
(2,270)
(30,874)
2,519
756
553
(454)
1,259
564
(241)
2,437
56
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO Deferred Taxes
The balance comprises temporary differences attributable to:
Licences and brands
Employee benefits
Provisions
Interest rate swaps
Other
Net balance disclosed as deferred tax liability
Consolidated
2019
$’000
(273,206)
5,834
1,952
2,259
3,624
(259,537)
Restated
2018
$’000
(341,272)
5,974
1,794
426
3,010
(330,068)
For the year ended 30 June 2019, the Company had $1.8 million of income tax benefit (2018: $0.4 million expense) recognised directly in
equity in relation to cash flow hedges, with a corresponding deferred tax asset (2018: liability) being recognised. There are $58.400 million
available unused tax losses on the capital account for which no deferred tax asset has been recognised (2018: $58.800 million). There are no
other unused tax losses for which no deferred tax asset has been recognised.
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 assumed to be recovered through use.
Tax Consolidated Group
The Company is the head entity of the tax consolidated group. For further information, refer note 21.
57
ANNUAL REPORT 2019 7. Assets held for sale
During 2019, the Group performed an evaluation of its broadcast transmission assets. The Group decided to sell its existing transmission
assets and to outsource the provision of transmission services. At 30 June 2019 the sale negotiations were at an advanced stage and on
6 August 2019 the Group announced the sale of assets and outsourcing of transmission services to Broadcast Australia. The fair value loss
on assets held for sale including property, plant and equipment and other assets, totalling $9.2 million, was recorded. In determining the
value of assets held for sale, the Group considered the condition of the assets and quoted replacement values for similar assets. The fair value
measurements for assets held for sale are within level 2 of the fair value hierarchy.
Assets held for sale
Total assets held for sale
8. Non-Current Assets – Property, Plant and Equipment
Consolidated
2019
Cost
Accumulated depreciation expense
Net carrying amount
Movement
Net carrying amount at beginning of year
Additions
Disposals
Transfers to assets held for sale
Depreciation expense
Transfers
Net carrying amount at end of year
Consolidated
2018
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
2019
$’000
15,000
15,000
2018
$’000
–
–
Land and
Buildings
$’000
32,585
(11,333)
21,252
Leasehold
Improvements
$’000
50,106
(26,680)
23,426
Plant and
Equipment
$’000
289,651
(235,543)
54,108
Assets under
construction
$’000
5,686
–
5,686
22,580
140
(470)
–
(998)
–
21,252
17,165
9,051
(58)
–
(2,732)
–
23,426
80,095
13,591
(481)
(23,074)
(26,313)
10,290
54,108
10,767
5,209
–
–
–
(10,290)
5,686
Land and
Buildings
$’000
33,208
(10,628)
22,580
Leasehold
Improvements
$’000
41,390
(24,225)
17,165
Plant and
Equipment
$’000
357,897
(277,802)
80,095
Assets under
construction
$’000
10,767
–
10,767
23,847
723
(827)
(1,163)
–
22,580
16,956
2,643
(1)
(2,433)
–
17,165
86,755
10,637
(316)
(25,061)
8,080
80,095
8,620
10,227
–
–
(8,080)
10,767
Total
$’000
378,028
(273,556)
104,472
130,607
27,991
(1,009)
(23,074)
(30,043)
–
104,472
Total
$’000
443,262
(312,655)
130,607
136,178
24,230
(1,144)
(28,657)
–
130,607
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.
58
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO 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.
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
25 – 50 years
3 – 16 years
2 – 10 years
Communication equipment
Other plant and equipment
Leased plant and equipment
3 – 5 years
2 – 20 years
2 – 20 years
9. Non-Current Assets – Intangible Assets
Consolidated
2019
Cost
Accumulated impairment expense
Accumulated amortisation expense
Net carrying amount
Movement
Net carrying amount at beginning of year
Additions
Amortisation expense
Impairment expense
Net carrying amount at end of year
Consolidated
2018
Cost
Accumulated impairment expense
Accumulated amortisation expense
Net carrying amount
Movement
Net carrying amount at beginning of year
Additions
Amortisation expense
Impairment expense
Net carrying amount at end of year
Goodwill
$’000
352,129
(352,129)
–
–
Broadcasting
Licences
$’000
1,483,224
(630,331)
–
852,893
Brands and
Tradenames
$’000
89,915
(24,848)
–
65,067
Customer
Contracts
$’000
2,240
–
(2,240)
–
–
–
–
–
–
1,079,776
–
–
(226,883)
852,893
64,968
99
–
–
65,067
–
–
–
–
–
Goodwill
$’000
352,129
(352,129)
–
–
Broadcasting
Licences
$’000
1,483,224
(403,448)
–
1,079,776
Brands and
Tradenames
$’000
89,816
(24,848)
–
64,968
Customer
Contracts
$’000
2,240
–
(2,240)
–
Total
$’000
1,927,508
(1,007,308)
(2,240)
917,960
1,144,744
99
–
(226,883)
917,960
Total
$’000
1,927,409
(780,425)
(2,240)
1,144,744
–
–
–
–
–
1,182,641
–
–
(102,865)
1,079,776
64,852
116
–
–
64,968
1,462
–
(1,462)
–
–
1,248,955
116
(1,462)
(102,865)
1,144,744
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 (“CGUs”). Due to changes in the organisational and financial
structure, the Group has reassessed its CGUs. The impact of the reassessment is to recognise the regional and metro free-to-air commercial
radio broadcasting and related operations as one CGU, “Audio”, and to recognise the regional television broadcasting operations as a separate
CGU, “Television”. Previously regional free-to-air commercial radio and television broadcasting formed the “Regional” CGU and metro
free-to-air commercial radio broadcasting was the separate “Metro” CGU.
59
ANNUAL REPORT 2019 9. Non-Current Assets – Intangible Assets (continued)
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. Despite this, the carrying value of the Television CGU was in excess of its recoverable value resulting in the
Television licences being fully impaired at 31 December 2018. On this basis, the useful life judgement for these television licences will
not be key going forward.
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.
Impairment tests for licences, tradenames, brands and goodwill
10. Impairment
a)
The value of licences, tradenames, brands and goodwill is allocated to the Group’s cash generating units (“CGUs”), which have recently been
reassessed, as described in note 9, as Audio and Television.
The recoverable amount of the CGUs at 30 June 2019 and 30 June 2018 was determined based on a value in use discounted cash
flow (“DCF”) model. As the indefinite lived intangible assets relating to the Television CGU were fully impaired at 31 December 2018,
no impairment test was performed on the Television CGU at 30 June 2019.
Allocation of goodwill and other intangible assets
Consolidated
2019
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
Radio
Television
Discount rate (post-tax)
Audio CGU
$’000
–
917,960
917,960
Television CGU
$’000
–
–
–
Total
$’000
–
917,960
917,960
Audio CGU
30 June 2019
%
Television CGU
31 December 2018
%
3.2
2.3
2.0
N/A
9.2
(5.4)
(2.3)
N/A
(5.9)
9.2
60
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO Consolidated
2018
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
Radio
Television
Discount rate (pre-tax)
Total
$’000
–
1,144,744
1,144,744
Regional CGU
$’000
–
525,706
525,706
Regional CGU
%
(1.6)
(0.7)
2.0
(5.9)
13.5
Metro CGU
$’000
–
619,038
619,038
Metro CGU
%
4.6
2.2
2.0
N/A
12.3
b) Key assumptions used for value in use calculations
The value in use calculations use cash flow projections based on the 2020 Board approved 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 of 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.
Impact of a reasonably possible change in key assumptions
c)
Television CGU
Impairment
At 31 December 2018, an impairment loss of $226.9 million was recorded against television licences in the Television CGU. The estimated
recoverable amount of the Television CGU, based on value-in-use, equals its carrying amount. On the reassessment of the CGUs, the assets of
the Regional CGU were allocated between the Audio and Television CGUs. The carrying value attributable to the Television CGU was in excess
of the CGU’s value-in-use, which was the main cause of the impairment.
Sensitivity
The following sensitivities were disclosed in the interim financial report for the half year ended 31 December 2018. As the indefinite lived
intangible assets relating to the Television CGU were fully impaired at 31 December 2018, no impairment test was performed on the Television
CGU at 30 June 2019 and there are no similar disclosures as at 30 June 2019.
As at 31 December 2018 the following changes in key assumptions would have the following approximate impact on recoverable amount and
carrying value for the Television CGU:
Sensitivity
Revenue
Expenses
Post-tax discount rate
Terminal growth rate
Impact of
change on
Television CGU
carrying value
31 December
2018
$ million
10.5
(10.2)
(8.5)
8.3
(0.4)
0.4
0.1
(0.1)
Change in
variable in
perpetuity
%
+1%
(1)%
+1%
(1)%
+0.5%
(0.5)%
+0.5%
(0.5)%
61
ANNUAL REPORT 2019 10. Impairment (continued)
Audio CGU
Sensitivity
A variation in certain key assumptions used to determine the value in use would result in a change in the recoverable amount of the Audio
CGU. The following reasonably possible change in a key assumption would result in a recoverable amount lower than the carrying value to the
extent shown below:
Impact of
change on
Audio CGU
carrying value
$ million
(21.5)
Change in
variable
%
3.0%
Consolidated
2019
$’000
(91,395)
226,883
30,643
(1,046)
9,223
(719)
20,179
(830)
(4,412)
(70,122)
1,006
(4,352)
(4,003)
87
111,142
Restated
2018
$’000
82
104,708
30,718
(1,069)
–
(1,152)
21,300
924
9,070
(30,874)
(10,397)
(8,037)
(1,466)
(3,649)
110,158
Consolidated
2019
$’000
32,387
–
(325,000)
(292,613)
2018
$’000
56,052
(19)
(360,000)
(303,967)
32,387
(325,000)
(292,613)
56,052
(360,019)
(303,967)
Sensitivity
Increase in post-tax discount rate from 9.2% to 12.2%
11. Cash Flow Information
a) Reconciliation of Profit after Income Tax to Net Cash Inflow from Operating Activities
Profit/(loss) after income tax
Impairment of intangibles and investments
Depreciation and amortisation
Net gain from disposal of operations and assets
Fair value loss on disposal of assets held for sale
Share of associate profit
Interest expense and other borrowing costs included in financing activities
Share-based payments
Change in operating assets and liabilities:
(Increase)/decrease in receivables
Decrease in deferred taxes (net of tax movement in hedge reserve)
Increase/(decrease) in payables (excluding interest expense classified as financing activities)
Decrease in deferred income
Decrease in provision for income tax
Increase/(decrease) in provisions
Net cash inflows from operating activities
b) Net debt reconciliation
Cash and liquid investments
Borrowings – repayable within one year
Borrowings – repayable after one year
Net debt
Cash and liquid investments
Gross debt – fixed interest rates
Net debt
62
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO 12. Receivables, Payables, Deferred Income and Provisions
a) Receivables
Current
Trade receivables
Provision for doubtful debts
Prepayments
Other
Non-current
Refundable deposits
Related parties
Other
Consolidated
2019
$’000
2018
$’000
123,309
(526)
8,615
4,575
135,973
126,341
(807)
8,545
2,635
136,714
Consolidated
2019
$’000
146
577
696
1,419
2018
$’000
147
515
955
1,617
The carrying amounts of the non-current receivables approximate their fair value.
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.
Consolidated
As at 30 June 2019
Trade receivables
Expected credit losses
Consolidated
As at 30 June 2018
Trade receivables
Provision for doubtful debts
Current –
not past due
$’000
112,585
(331)
Past due –
up to 60 days
$’000
7,631
(11)
Past due –
60 – 90 days
$’000
2,154
(43)
Current –
not past due
$’000
112,598
–
Past due –
up to 60 days
$’000
8,531
–
Past due –
60 – 90 days
$’000
2,105
–
Past due –
>90 days
$’000
939
(141)
Past due –
>90 days
$’000
3,107
(807)
Total
$’000
123,309
(526)
Total
$’000
126,341
(807)
The Group has recognised expenses in respect of bad and doubtful trade receivables during the year ended 30 June 2019 of $765,125 (2018:
expense of $717,602). The loss allowance is based on a simplified model of recognising lifetime expected credit losses immediately upon
recognition. The amount of the loss allowance 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 loss
allowance. Generally credit terms are for 30 days from date of invoice or 45 days for an accredited agency.
b) Payables
Current
Trade creditors
GST payable
Accruals and other payables
Consolidated
2019
$’000
2018
$’000
10,980
3,189
53,968
68,137
12,732
3,565
50,343
66,640
63
ANNUAL REPORT 2019 12. Receivables, Payables, Deferred Income and Provisions (continued)
b) Payables (continued)
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.
c) Deferred Income
Current
Deferred income
Non-current
Deferred income
Consolidated
2019
$’000
4,729
4,729
Restated
2018
$’000
6,718
6,718
Consolidated
2019
$’000
93,689
93,689
Restated
2018
$’000
95,192
95,192
Recognition and Measurement
Deferred Income
In 2016, the Group entered into a long-term contract with Australian Traffic Network (ATN) for it to provide traffic reports for broadcast
on Southern Cross Austereo (SCA) radio stations. SCA received payment of $100 million from ATN in return for its stations broadcasting
advertising tags provided by ATN attached to news and traffic reports. The contract has a term of 20 years, with an option for ATN to extend
it by a further 10 years. The $100 million payment has been recorded on the balance sheet under “Deferred Income” and will be released to
the Income Statement over a 30-year period, unless the contract ends after 20 years at which point the remaining balance will be recognised
as revenue in year 20. This treatment will match the receipt of future broadcasting services, airtime and traffic management services that the
Group is required to provide over the life of the contract (refer note 27)
ATN revenue recognised that was included in the deferred income balance at the beginning of the period was $7.1 million.
In addition to the payment received from ATN, deferred income 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.
64
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO d) Provisions
Current
Employee benefits
Lease provisions
Non-current
Employee benefits
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
Additional provisions made in the period, including increases to existing provisions
Amounts used during the period
Unused amounts reversed during the period
Balance at the end of the financial year
Consolidated
2019
$’000
2018
$’000
17,293
(220)
17,073
17,800
338
18,138
Consolidated
2019
$’000
2018
$’000
2,370
6,749
9,119
2,295
5,671
7,966
Consolidated
2019
$’000
6,009
721
(168)
(33)
6,529
2018
$’000
9,956
778
(2,053)
(2,672)
6,009
65
ANNUAL REPORT 2019 12. Receivables, Payables, Deferred Income and Provisions (continued)
d) Provisions (continued)
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 high quality corporate
bond rates with terms that match as closely as possible to the expected future cash flows.
Onerous Contracts
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the
unavoidable costs of meeting the obligation under the contract. The provision is measured at the lower of the cost of fulfilling the contract and
any compensation or penalties arising from the failure to fulfil it.
Lease Provisions
The lease provision covers lease arrangements to enable the lease expenses to be recognised on a straight-line basis over the life of the lease.
The provision also comprises of makegood provisions included in lease agreements for which the Group has a legal or constructive obligation.
The present value of the estimated costs of dismantling and removing the asset and restoring the site is recognised as a provision. At each
reporting date, the liability is remeasured in line with changes in discount rates, estimated cash flows and the timing of those cash flows.
Capital Management
13. 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 has taken measures to reduce net debt and has achieved its 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 intends to distribute between 65-85% of underlying financial year Net Profit After Tax. There has been no change to this dividend
policy during the year.
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. The DRP has been suspended since the 2016 interim
dividend following the successful reduction in the Group’s leverage ratio.
Further details on the Group’s dividends are outlined in note 14.
Debt Facilities
Syndicated Debt Facility
At 30 June 2019 the Group had a $500 million (2018: $500 million) revolving three-year Syndicated Facility Agreement (“SFA”) expiring
on 8 January 2021. This facility is used as core debt for the Group, and may be paid down and redrawn in accordance with the SFA.
Covenants
For the duration of the SFA the Banking Group, being Southern Cross Austereo Pty Ltd and its subsidiaries, has a maximum leverage ratio
covenant of 3.5 times and a minimum interest cover ratio of 3.0 times. As at 30 June 2019, the leverage ratio was 1.76 times and the interest
cover ratio was 13.03 times.
Further details on the Group’s debt facilities are outlined in note 17.
Property, Plant and Equipment and Intangibles
The capital expenditure for 2019 was $27.991 million (2018: $24.230 million).
Further details on the Group’s fixed assets are outlined in note 8.
66
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO 14. Dividends Paid and Proposed
The dividends were paid as follows:
Interim dividend paid for the half year ended 31 December 2018/2017 – fully franked at the tax rate of 30%
Final dividend paid for the year ended 30 June 2018/2017 – 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 cash
Interim dividend paid for the half year ended 31 December
Final dividend paid for the year ended 30 June
Consolidated
2019
$’000
2018
$’000
28,838
30,761
59,599
59,599
59,599
Cents
per share
3.75
4.00
7.75
28,838
30,761
59,599
59,599
59,599
Cents
per share
3.75
4.00
7.75
The Group has $153.4 million of franking credits at 30 June 2019 (2018: $144.9 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.
Since the end of the financial year the Directors have declared the payment of a final 2019 ordinary dividend of $30.761 million (4.00 cents
per fully paid share) out of “Retained profits – 2015 H1 interim reserve” to fully utilise that reserve and the remainder to be paid out of
“Retained Profits – 2016 reserve”. This dividend will be paid on 8 October 2019 by the Company.
15. Earnings per Share
Continuing Operations
Profit/(loss) attributable to shareholders from continuing operations ($’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 (refer note 4)
Basic earnings per share excluding significant items (cents per share)
Diluted earnings per share excluding significant items (cents per share)
Dividends paid/proposed for the year as a % of NPAT
Consolidated
2019
Restated
2018
(91,395)
73,879
82
73,932
769,014
769,014
771,756
(11.88)
(11.88)
9.61
9.57
80.7%
772,763
0.01
0.01
9.61
9.57
80.6%
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.
67
ANNUAL REPORT 2019 16. Contributed Equity and Reserves
Ordinary shares
Contributed equity
On issue at the beginning of the financial year
On issue at the end of the financial year
Consolidated
2019
$’000
1,379,736
1,379,736
2018
$’000
1,379,736
1,379,736
Consolidated
2019
Number of
securities
’000
769,014
769,014
2018
Number of
securities
’000
769,014
769,014
Consolidated
2019
$’000
1,379,736
1,379,736
2018
$’000
1,379,736
1,379,736
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 784,396 performance rights have vested (2018:
918,166) and 1,957,873 (2018: 2,242,074) performance rights have been granted. In the current year $269,650 (2018: $1,102,410) has
been recognised as a benefit 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 $77.406 million (2018: $77.406 million) in connection with the
IPO of the Group.
68
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO 17. Borrowings
a) Total interest bearing liabilities
Current secured borrowings
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
2019
$’000
2018
$’000
–
–
19
19
Consolidated
2019
$’000
2018
$’000
325,000
(1,476)
–
323,524
323,524
360,000
(2,399)
–
357,601
357,620
For all non-current borrowings, the carrying amount approximates fair value in the balance sheet. Of the $1.476 million of borrowing costs,
$0.959 million (2018: $0.923 million) will unwind during the year ending 30 June 2020.
b)
Interest expense
Interest expense and other borrowing costs
External banks
AASB 15 – Revenue from customers with contracts interest expense
Amortisation of borrowing costs
Total interest expense and other borrowing costs
Consolidated
2019
$’000
13,648
5,608
923
20,179
Restated
2018
$’000
14,912
5,691
697
21,300
69
ANNUAL REPORT 2019 17. Borrowings (continued)
c) Bank facilities and assets pledged as security
The $500 million debt facilities (2018: $500 million) 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.
The facility matures on 8 January 2021 and has an average variable interest rate of 2.58% (2018: 3.51%). The facility is 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. At 30 June 2019, the Group complied with all the covenants.
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
Assets held for sale
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
2019
$’000
2018
$’000
31,448
134,873
15,000
181,321
56,046
136,027
–
192,073
1,272
4,559
104,472
917,960
1,028,263
1,209,584
1,617
4,932
130,607
1,144,744
1,281,900
1,473,973
Recognition and Measurement
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Transaction costs that have been paid or accrued for 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.
70
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO 18. 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 12). 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.
Exposure and sensitivity to interest rate risk
External borrowings of the Group currently bear an average variable interest rate of 2.58% (2018: 3.51%). In 2015 the Group entered into
$320 million of interest rate swap contracts under which it was obliged to receive interest at variable rates and to pay interest at fixed rates
at an average fixed rate of 2.5% (2018: 2.5%). These interest rate swap contracts expired in January 2018. In 2017 the Group entered into
$200 million of interest rate swap contracts under which it is obliged to receive interest at variable rates and pay interest at fixed rates starting
in January 2018 at an average fixed rate of 2.4%. These interest rate swap contracts will expire in January 2021. Later in 2017 the Group
entered into a further $100 million of interest rate swap contracts under which it is obliged to receive interest at variable rates and pay interest
at fixed rates starting in January 2018 at an average fixed rate of 2.25%. These interest rate swap contracts will expire in January 2022.
Details on how the Group accounts for the interest rate swap contracts as cashflow hedges are disclosed in note 27.
Derivative financial instruments
Interest rate swap contracts – current liability
Interest rate swap contracts – non-current liability
Total derivative financial instruments
Consolidated
2019
$’000
–
7,529
7,529
2018
$’000
–
1,419
1,419
Swaps currently in place cover approximately 92% (2018 – 83%) of the variable loan principal outstanding. The fixed interest rates of the
swaps range between 2.2% and 2.4% (2018 – 2.2% and 2.5%) and the variable rates on the loans are 1.4% above the three months bank bill
rate, which at the end of the reporting period was 1.2% (2018 – 2.1%).
The swap contracts require settlement of net interest receivable or payable every three months. The settlement dates coincide with the dates
on which interest is payable on the underlying debt.
71
ANNUAL REPORT 2019 Interest rate risk (continued)
18. Financial Risk Management (continued)
a)
Effects of hedge accounting on the financial position and performance
The effects of the interest rate swaps on the Group’s financial position and performance are as follows:
Carrying amount (liability)
Notional
Maturity date
2021
2022
Hedge ratio
Change in fair value of outstanding hedging instruments since 1 July
Change in value of hedged item used to determine hedge effectiveness
Weighted average hedged rate for the year
2019
$’000
7,529
300,000
200,000
100,000
1:1
(7,234)
7,234
2.37%
2018
$’000
1,419
300,000
200,000
100,000
1:1
(615)
615
2.44%
Hedging reserve
The Group’s hedging reserve disclosed in the Statement of Changes in Equity relates to the following hedging instruments:
Opening balance 1 July 2017
Add: Change in fair value of hedging instrument recognised in OCI for the year
Less: reclassified from OCI to profit or loss
Less: Deferred tax
Closing balance 30 June 2018
Add: Change in fair value of hedging instrument recognised in OCI for the year
Less: reclassified from OCI to profit or loss
Less: Deferred tax
Closing balance 30 June 2019
Hedge Reserve
for Interest
Rate Swaps
$’000
(1,820)
(615)
1,795
(354)
(994)
(7,234)
1,127
1,832
(5,269)
Interest rate swap contracts
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 (2018: +/– 25 basis points) in the relevant interest
rates at 30 June 2019 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.
Carrying
Value
$’000
32,387
(7,529)
(325,000)
56,052
(1,419)
(360,000)
Impact on post-tax profits
Increase/(decrease)
+/– 25 basis points
$’000
+25
57
525
(569)
+25
98
525
(630)
$’000
–25
(57)
(525)
569
–25
(98)
(525)
630
Impact on reserves
Increase/(decrease)
+/– 25 basis points
$’000
+25
–
1,383
–
+25
–
2,059
–
$’000
–25
–
(1,390)
–
–25
–
(2,074)
–
Consolidated
AUD exposures
2019
Cash at bank
Interest rate swaps
Borrowings
2018
Cash at bank
Interest rate swaps
Borrowings
72
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO
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.
Exposure and sensitivity
Financing arrangements
Unrestricted access was available at balance date to the following lines of credit:
Consolidated
As at 30 June 2019
Line of credit value
Used at balance date
Unused at balance date
Consolidated
As at 30 June 2018
Line of credit value
Used at balance date
Unused at balance date
Bank
facilities
$’000
500,000
(325,000)
175,000
Bank
facilities
$’000
500,000
(360,000)
140,000
Working
capital
facility
$’000
7,000
(5,920)
1,080
Working
capital
facility
$’000
5,000
(4,524)
476
Total
facilities
$’000
507,000
(330,920)
176,080
Total
facilities
$’000
505,000
(364,524)
140,476
The $500 million debt facility for the Group matures on 8 January 2021. The Group’s bank facilities are denominated in Australian dollars
as at 30 June 2019 and 30 June 2018.
73
ANNUAL REPORT 2019 18. Financial Risk Management (continued)
b) Liquidity risk (continued)
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.
Consolidated
As at 30 June 2019
Borrowings – Principal
Interest cashflows1
Derivative financial instruments2
Payables3
Total
Consolidated
As at 30 June 2018
Lease liabilities
Borrowings – Principal
Interest cashflows1
Derivative financial instruments2
Payables3
Total
Less than
1 year
$’000
–
12,941
–
60,343
73,284
Less than
1 year
$’000
19
–
14,299
–
59,878
74,196
1-2 years
$’000
325,000
7,307
4,444
–
336,751
1-2 years
$’000
–
–
14,338
–
–
14,338
2-3 years
$’000
–
566
3,085
–
3,651
2-3 years
$’000
–
360,000
7,593
1,409
–
369,002
3-5 years
$’000
–
–
–
–
–
3-5 years
$’000
–
–
79
10
–
89
Greater than
5 years
$’000
–
–
–
–
–
Greater than
5 years
$’000
–
–
–
–
–
–
1 Calculated using a weighted average variable interest rate. Interest cashflows includes interest on principal borrowings, swap interest and the commitment fee on the
Syndicated Facility Agreement.
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 $7.529 million
(2018: $1.419 million).
3 The payables balance excludes interest payable as the cashflows are included in “Interest cashflows” above and excludes GST payable as this is not a financial liability.
74
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO Group Structure
19. 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
Acquisition of associates and joint ventures
Dividends
Decrease in associates and joint ventures
Carrying amount at the end of the financial year
Consolidated
2019
$’000
7,740
719
1,620
(1,064)
–
9,015
2018
$’000
5,167
1,152
1,729
–
(308)
7,740
20. Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries:
Name of entity
SCM No 1 Limited (SCM1)
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
Australia
Class of
shares/units
Ordinary
Ordinary
Ordinary
Ordinary
Effective
ownership
interest
2019
100%
100%
100%
100%
Effective
ownership
interest
2018
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 Statements of Comprehensive
Income and Statements of Financial Position respectively.
75
ANNUAL REPORT 2019 21. 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
Total liabilities
Net assets
Issued capital
Reserves
Retained profits – 2013 reserve
Accumulated losses – 2014 reserve
Retained profits – 2015 H1 interim reserve
Accumulated losses – 2015 H2 reserve
Retained profits – 2016 reserve
Retained profits – 2017 reserve
Retained profits – 2018 reserve
Retained profits – 2019 reserve
Total equity
Profit for the year
Total comprehensive income
Southern Cross
Media Group Limited
2019
$’000
1,998
1,003,028
1,005,026
34,089
34,089
970,937
1,282,148
5,765
–
(96,805)
8,202
(323,833)
27,555
2,534
1,943
63,428
970,937
64,149
64,149
2018
$’000
693
972,784
973,477
5,539
5,539
967,938
1,282,148
6,595
45,040
(96,805)
22,761
(323,833)
27,555
2,534
1,943
–
967,938
61,651
61,651
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 2019
(2018: nil). The parent entity has not given any unsecured guarantees at 30 June 2019 (2018: nil).
c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2019 (30 June 2018: nil).
d) Contractual commitments for the acquisition of property, plant or equipment
As at 30 June 2019, the parent entity had no contractual commitments (30 June 2018: 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 below:
Investments in subsidiaries, associates and joint venture entities
i)
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.
76
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO Other Notes to the Financial Statements
22. Share-Based Payments
The company operates a long-term incentive plan for Executive KMP and certain senior executives. The share-based payment benefit for the
year ended 30 June 2019 was $269,650 (2018: $1,102,410 expense).
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 year
Vested and exercisable at end of the year
2019
5,319,736
1,957,873
–
(1,483,713)
5,793,896
784,396
2018
3,749,123
2,242,074
–
(671,461)
5,319,736
918,166
Recognition and Measurement
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.
The fair value of the performance rights issued during 2019 was determined using a Black-Scholes-Merton model for the ROIC and 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
Expected volatility
ROIC
14 September 2018
$1.33
$1.12
Nil
5.83%
2.05%
34.00%
Absolute EPS
14 September 2018
$1.33
$1.12
Nil
5.83%
2.05%
34.00%
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 the favour of the employee, the changes are reflected when determining the impact on
profit or loss.
77
ANNUAL REPORT 2019 23. 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
Legal services
Total remuneration for other services
Total
Consolidated
2019
$
2018
$
621,900
10,000
18,965
650,865
630,900
215,000
15,965
861,865
–
–
–
–
–
–
–
650,865
165,000
32,000
197,000
1,058,865
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.
The Board has considered the position and, in accordance with the advice received from the Audit & 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 & 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.
78
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO 24. 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
2019
$
6,044,098
212,109
(120,084)
679,576
(114,581)
6,701,118
2018
$
5,280,594
193,343
56,543
–
1,195,879
6,726,359
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 (2018: nil).
b) Subsidiaries and Associates
Ownership interests in subsidiaries are set out in note 20. Details of interests in associates and distributions received from associates are
disclosed in note 19. Details of loans due from associates are disclosed in note 12.
79
ANNUAL REPORT 2019 25. 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 five years
Later than five years
Finance lease payment commitments
Finance lease commitments are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
Less: Future lease finance charges
Lease liabilities provided for in the financial statements:
Current
Non-current
Total lease liability
Consolidated
2019
$’000
2018
$’000
2,841
2,841
4,302
4,302
23,114
42,155
38,903
104,172
21,708
45,923
21,748
89,379
–
–
–
–
–
–
–
–
–
19
–
–
19
–
19
19
–
19
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 $27.1 million (2018: $25.1 million).
26. Events Occurring after Balance Date
On 6 August 2019 the Group announced the sale of assets and outsourcing of transmission services to Broadcast Australia. Refer note 7 for
further details.
No other matters or circumstances have arisen since the end of the financial year that have significantly affected, or may significantly affect,
the operations, results of operations or state of affairs of the Group in subsequent accounting periods.
27. 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 $15.0 million (2018:
$14.9 million) and is included in employee expenses.
80
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO 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 hedges); or (2) hedges of highly probable forecast transactions
(cash flow hedges). 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 rates 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.
Derivatives
Hedge ineffectiveness
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to
ensure that an economic relationship exists between the hedged item and hedging instrument.
The Group enters into interest rate swaps that have similar critical terms as the hedged item, such as reference rate, reset dates, payment
dates, maturities and notional amount. The Group does not hedge 100% of its loans, therefore the hedged item is identified as a proportion
of the outstanding loans up to the notional amount of the swaps. As all critical terms matched during the year, the economic relationship was
100% effective.
The Group therefore performs a qualitative assessment of effectiveness. If changes in circumstances affect the terms of the hedged item such
that the critical terms no longer match exactly with the critical terms of the hedging instrument, the Group uses the hypothetical derivative
method to assess effectiveness.
Hedge ineffectiveness may occur due to:
– the credit value/debit value adjustment on the interest rate swaps which is not matched by the loan; and
– differences in critical terms between the interest rate swaps and loans.
There was no ineffectiveness during 2019 or 2018 in relation to the interest rate swaps.
Cash flow hedges
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.
81
ANNUAL REPORT 2019 27. Other Accounting Policies (continued)
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.
New accounting standards and interpretations
A number of new or amended standards became applicable for the current reporting period and the Group had to change its accounting
policies as a result of adopting the following standards:
– AASB 9 Financial Instruments, and
– AASB 15 Revenue from Contracts with Customers
In addition the Group made retrospective changes, as detailed below, as a result of adopting AASB 15.
AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement and makes a number of changes to
the previous guidance on the classification and measurement of financial assets and introduces an “expected credit loss” model for allowances
against financial assets.
Loss allowance
In adopting AASB 9, the Group revised its loss allowance methodology in relation to its trade receivables and has now applied a simplified
model of recognising lifetime expected credit losses immediately upon recognition. These items do not have a significant financing component
and have maturities of less than 12 months. Historical loss allowances in relation to trade receivables have not been material. The expected
loss rates are based on the payment profile of sales over a period of three years before the end of the current period. The historical loss rates
have been adjusted to reflect current and forward-looking information on factors affecting the ability of the customers to settle the receivables.
The impact of the adoption of AASB 9 Financial Instruments on the loss allowance is disclosed below.
$’000
113,220
7,631
2,153
938
June 2019
%
0.13%
0.15%
2.00%
15.00%
Expected credit losses
Current
Up to 60 Days
60 to 90 Days
Over 90+ Days
Other
Loss allowance under AASB 9 at 1 July 2018
Restatement of expected credit losses taken
to FY19 profit
Expected credit loss
$’000
147
12
43
141
183
–
526
$’000
112,598
8,531
2,105
2,987
June 2018
%
0.13%
0.15%
2.00%
15.00%
$’000
146
13
42
448
120
769
38
807
82
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO AASB 15 Revenue from Contracts with Customers
The Group has adopted AASB 15 Revenue from Contracts with Customers from 1 July 2018 which resulted in changes in accounting policies
and adjustments to the amounts recognised in the financial statements. In accordance with the transition provisions in AASB 15, the Group
has adopted the new rules retrospectively and has restated comparatives.
The Group has identified that a significant financing component exists within the ATN contract. Under AASB 15, the Group is required to
separate the underlying revenue from the implied financing component and associated interest expense. Following a review of a representative
sample of other contracts, no other material changes were required.
Statement of comprehensive income to 30 June 2018
Revenue from continuing operations
EBITDA
Interest expense and other borrowing costs
Income tax expense
Net profit after tax
Net profit after tax excluding significant items
Earnings per share
Earnings per share excluding significant items
As originally
presented
$’000
653,007
154,662
(15,609)
(3,011)
1,422
75,271
0.2
9.8
Remeasurement
$’000
3,777
3,777
(5,691)
574
(1,340)
(1,340)
(0.2)
(0.2)
Restated
$’000
656,784
158,439
(21,300)
(2,437)
82
73,931
0.0
9.6
The following adjustments were made to the amounts recognised in the balance sheet at 30 June 2018.
Statement of financial position
Current Deferred Income
Non-current Deferred Income
Deferred tax liability
Retained profits
AASB 118
carrying amount
30 June 2018
$’000
8,553
88,609
331,492
(713,668)
Remeasurement
$’000
(1,835)
6,583
(1,424)
(3,324)
AASB 15
carrying amount
1 July 2018
$’000
6,718
95,192
330,068
(716,992)
Accounting Standards issued but not yet effective
Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2019 reporting period.
AASB 16 Leases is mandatory for annual reporting periods beginning on or after 1 January 2019. Management has reviewed the new standard
and calculated there will be a material impact on the Group’s financial statements. The principal change will be to capitalise certain operating
leases on balance sheet and treat akin to a finance lease.
Impact of standards issued but not yet applied
AASB 16 Leases
Applying the new standard will result in the following changes to the Group’s financial statements:
– a gross up of the balance sheet which will increase operating cash flows, decrease financing cash flows; as repayment of lease liabilities
will be classified as cash flows from financing activities from FY2020 under AASB 16 to account for new lease assets and related lease
liabilities; and
– an increase in EBITDA due to a reduction in operating lease expense and an increase in depreciation and interest expense.
The main change relates to the classification of operating leases by lessees. Only leases where a significant portion of the risks and rewards
of ownership are retained by the lessor will continue to be classified as operating leases.
Currently operating leases are classified off balance sheet and disclosed as commitments. As at the reporting date, the Group had
non-cancellable leases of $104.2 million (2018: $89.4 million) (refer note 25).
The new standard will require operating leases with a term greater than 12 months to be capitalised and reported on the balance sheet.
Operating leases with a term of less than 12 months or which have a low value will continue to be accounted for in the Income Statement as
lease expenses are incurred.
SCA’s leases have been broken down into four main “portfolios” – Transmission sites, Premises, Equipment and Other. Each portfolio has been
evaluated to determine the incremental borrowing rate applicable to determine the present value of outstanding commitments. The main reason
for different rates relates to the duration of the lease, with shorter leases being at lower rates and longer leases at higher rates.
83
ANNUAL REPORT 2019 27. Other Accounting Policies (continued)
Impact of standards issued but not yet applied (continued)
AASB 16 Leases (continued)
The table below outlines the various incremental borrowing rates used:
1 – 5 years
3.90%
>5 – 10 years
4.50%
>10 – 15 years
5.20%
>15 years
5.80%
Lease Term
The table below outlines the impact of the adoption of the new standard on the Group’s financial statements
$ millions
Initial adoption – 1 July 2019
Balance Sheet
Right-of-Use Asset
Lease Liability
Net Assets
FY2020 year, including initial adoption
Balance Sheet – 30 June 2020
Right-of-Use Asset
Lease Liability
Net Assets
Income Statement – FY2020
Lease Expense
Depreciation Expense
Interest Expense
Net loss before tax
Impact1
$154.1
$(154.1)
–
$103.6
$(108.2)
$(4.6)
$14.9
$(13.2)
$(6.3)
$(4.6)
1 The amounts are based on no lease additions or disposals, with the exception of the leases relating to the outsourcing of transmission services, refer Note 26
“Events Occurring after Balance Date”. The Group has assessed the outsourcing contract to be a services agreement rather than a lease in accordance with AASB 16
Leases. On the initial adoption, $39.0 million Right-of-Use Asset and Lease Liability, relate to arrangements that have been outsourced. The forecast impact on the
30 June 2020 balance sheet and FY2020 income statement reflect this disposal.
Under the modified retrospective approach entities will recognise transitional adjustments in retained earnings on the date of initial
application (e.g. 1 July 2019), without restating the comparative period. The Group currently expects to use the modified retrospective
approach for adoption.
84
NOTES TO THE FINANCIAL STATEMENTSFOR YEAR ENDED 30 JUNE 2019SOUTHERN CROSS AUSTEREO DIRECTORS’ DECLARATION
FOR YEAR ENDED 30 JUNE 2019
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 48 to 84 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(i) 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
22 August 2019
Leon Pasternak
Deputy Chairman
Sydney, Australia
22 August 2019
85
ANNUAL REPORT 2019
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 audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Southern Cross Media Group Limited (the Company) and its
controlled entities (together the Group or Southern Cross Austereo) is in accordance with the
Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 30 June 2019 and of its
financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
the consolidated statement of financial position as at 30 June 2019
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, 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. 88
86
SOUTHERN CROSS AUSTEREO
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
• For the purpose of our audit we used overall Group materiality of $5.3 million, which represents
approximately 5% of the Group’s profit before tax adjusted for impairment and other significant
items.
• We applied this threshold, together with qualitative considerations, to determine the scope of our
audit and the nature, timing and extent of our audit procedures and to evaluate the effect of
misstatements on the financial report as a whole.
• We chose Group profit before tax because, in our view, it is the benchmark against which the
performance of the Group is most commonly measured. We adjusted for impairment and other
significant items as they are unusual or infrequently occurring items impacting the statement of
comprehensive income.
• We utilised a 5% threshold based on our professional judgement, noting it is within the range of
commonly acceptable thresholds.
Audit Scope
• Our audit focused on where the Group made subjective judgements; for example, significant
accounting estimates involving assumptions and inherently uncertain future events.
• The Group operates in Australia and the audit is conducted by one engagement team.
89
87
ANNUAL REPORT 2019
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF SOUTHERN CROSS MEDIA GROUP LIMITED (CONTINUED)
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit and Risk Committee.
Key audit matter
How our audit addressed the key audit matter
Impairment assessment for licences,
tradenames and brands
(refer to note 10)
As at 31 December 2018, the Directors’ determined a
change in the Group’s cash generating units (CGUs)
from Metro and Regional to Audio and Television (TV)
due to changes in the interdependence of cash flows.
The change in CGU triggered the requirement to
perform an impairment assessment at 31 December
2018.
The Directors’ performed an impairment assessment
for the Audio and TV CGUs as at 31 December 2018
which resulted in an impairment of $226.9m in the TV
CGU. The written-down value of indefinite lived
intangible assets in the TV CGU is nil at 30 June 2019.
The Group continues to have significant indefinite lived
intangible assets in the Audio CGU, totalling $917.9
million as at 30 June 2019.
The Directors’ performed an impairment assessment
for the Audio CGU as at 30 June 2019, and identified
no impairment.
This continues to be a key audit matter due to the size
of the indefinite lived intangible assets and on the basis
the impairment assessment involves estimates of future
earnings and cash flows.
Judgements made in determining whether an
impairment is required include assumptions about
internal and external factors such as industry growth
In designing our audit approach for the key audit
matter we considered:
• whether the Directors’ assessment of the
CGUs is consistent with evidence supporting a
change in the interdependence of cash flows.
This included considering key strategic and
operational factors such as the aggregation of
Audio assets, separation of TV assets, changes
in sales strategy and changes in commissions
structures
•
•
•
recent independent Radio and TV ratings,
market share data and the relative impact on
financial performance of the Group
the market capitalisation of the Group in
comparison to the carrying value of the assets
and the impact on the impairment assessment
regulatory, economic and market
developments during the year that could
impact the discount rate and the long term
growth rate calculations.
To evaluate the cash flow forecasts prepared for the
Directors’ impairment assessment we performed the
following procedures, amongst others:
•
obtained the value-in-use discounted cash
90
88
SOUTHERN CROSS AUSTEREO
Key audit matter
How our audit addressed the key audit matter
rates, future market share estimates and the forecast
financial performance of the Group.
flow models (the models) as at 31 December
2018 and 30 June 2019 used for impairment
testing and agreed the TV CGU impairment at
31 December 2018 to the amount calculated
by the model
performed mathematical accuracy checks,
evaluated the terminal value methodology and
assessed the appropriateness of the discount
rates incorporated in the models
compared the forecasted cash flows used in
the models with budgets formally approved by
the Board and evaluated the Directors’ ability
to forecast future cash flows by considering
the historical accuracy of budgeted cash flows
and actual performance for July 2019
considered whether the models’ allocation of
corporate costs between CGUs was reasonable
and reflective of actual costs incurred
assessed key growth assumptions within the
models with specific focus on forecast revenue
comparing to readily available market
information.
•
•
•
•
We performed sensitivity analysis over key
assumptions in the models to ascertain the extent of
change in those assumptions that, either individually or
collectively, would result in the assets being impaired
and we also assessed the likelihood of such a movement
in those key assumptions arising. We satisfied
ourselves that the disclosure in note 10 was consistent
with Australian Accounting Standards.
Indefinite lived classification of intangible
assets
(refer to note 9)
On at least an annual basis, the Directors review the
Group’s portfolio of intangible assets to determine
whether they should be classified as amortising
intangible assets with finite lives or non–amortising
intangibles with indefinite lives. As of 30 June 2019,
In assessing the indefinite useful life of intangible
assets we performed the following procedures, amongst
others:
•
considered regulatory developments in the
91
89
ANNUAL REPORT 2019
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF SOUTHERN CROSS MEDIA GROUP LIMITED (CONTINUED)
Key audit matter
How our audit addressed the key audit matter
Southern Cross Austereo has audio intangible assets
totalling $917.9 million, consisting of brands and
licences, classified as non-amortising indefinite lived.
This was a key audit matter because determination of
whether or not intangibles are indefinite lived involves
significant judgements over multiple sources of
externally and internally generated information. The
determination has an impact on the financial
statements as it affects whether amortisation is
recorded in the statement of comprehensive income.
year which may change the licence renewal
process or use of brands
assessed whether there had been any
revocation of radio licences by Australian
Communications and Media Authority
(ACMA) in the year
considered market share data related to new
industry participants not subject to the same
regulatory and licence framework
evaluated strategic plans for the Directors’
intended use of the assets.
•
•
•
We also benchmarked the assumptions and conclusion
made by the Directors against a selection of similar
assets held by other industry participants in the radio
advertising market. In addition, we considered the
significant accounting policy disclosed in note 9 for
consistency with Australian Accounting Standards.
Sale of transmission assets
(refer to note 4 and 7)
The Group announced an agreement to sell its
transmission towers and associated assets
(transmission assets) to a service provider.
In designing our approach for the proposed sale of
transmission assets we have performed the following
procedures, amongst others:
As at 30 June 2019 the agreement is subject to
regulatory approval. The Directors’ have determined
the transmission assets meet the definition of assets
held for sale under Australian Accounting Standards.
Consequently the assets have been revalued to fair
value at 30 June 2019 leading to a $9.2m fair value loss
recorded in the statement of comprehensive income.
The Directors have not recognised an associated
provision for restructuring as at 30 June 2019.
Judgement was involved in determining whether the
provision recognition criteria under Australian
Accounting Standards had been met.
We considered this to be a key audit matter because
there is judgement involved in determining whether the
•
•
•
•
read the proposed contract and obtained an
understanding of the key terms
assessed whether the transmission assets meet
the criteria to be classified as held for sale as
under Australian Accounting Standards
considered whether any associated costs met
the criteria to be recognised in the current
period under Australian Accounting Standards
obtained the Directors’ estimation of the
transmission assets valuation and the
associated fair value loss recorded at 30 June
2019 and assessed key assumptions and
methodology used in calculating the fair value
92
90
SOUTHERN CROSS AUSTEREO
Key audit matter
How our audit addressed the key audit matter
transmission assets meet the criteria as an asset held
for sale and determining the associated fair value
valuation of the assets. There was also judgement in
assessing whether any associated costs met the criteria
to be recognised in the current period under Australian
Accounting Standards.
Revenue recognition
(refer to note 3 and 27)
In the current period the Group adopted the new
accounting standard AASB 15 – Revenue from
contracts with customers. AASB 15 requires the Group
to assess their revenue transactions in accordance with
five distinct steps outlined in the standard.
We have considered revenue recognition a key audit
matter given the significance of revenue to the Group’s
statement of comprehensive income and because
revenue is an important metric by which the Group’s
performance is measured.
loss on transmission assets.
In designing our audit approach for revenue
recognition we have performed the following
procedures, amongst others:
•
•
•
•
•
•
•
obtained an understanding of the customer
contracts, invoicing and cash receipting
process
considered the Directors’ assessment of the
accounting treatment of material revenue
streams
performed risk-based targeted substantive
procedures over revenue transactions
performed controls testing over revenue
systems to identify the correct airing of
advertising spots
used data assurance software to analyse
revenue transactions
confirmed year end accounts receivable
balances directly with customers or via
subsequent receipts of cash
assessed the appropriateness of the Directors’
disclosure of the impact and accounting policy
change arising from the adoption of AASB 15
on 1 July 2018.
93
91
ANNUAL REPORT 2019
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF SOUTHERN CROSS MEDIA GROUP LIMITED (CONTINUED)
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2019, but does not include the
financial report and our auditor’s report thereon. Prior to the date of this auditor's report, the other
information we obtained included the Directors’ Report. We expect the remaining other information to
be made available to us after the date of this auditor's report.
Our opinion on the financial report does not cover the other information and we do not and will not
express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
When we read the other information not yet received, if we conclude that there is a material
misstatement therein, we are required to communicate the matter to the directors and use our
professional judgement to determine the appropriate action to take.
Responsibilities of the directors for the financial report
The Directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
94
92
SOUTHERN CROSS AUSTEREO
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 28 to 45 of the directors’ report for the
year ended 30 June 2019.
In our opinion, the remuneration report of Southern Cross Media Group Limited for the year ended 30
June 2019 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Sam Lobley
Partner
Melbourne
22 August 2019
95
93
ANNUAL REPORT 2019 ADDITIONAL STOCK EXCHANGE INFORMATION
The additional stock exchange information set out below was applicable as at 31 August 2019. The Company has only one class of shares, fully
paid ordinary shares. All holders listed below 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 the Company’s quoted equity securities are listed below.
Fully paid ordinary
shares
% of issued
capital
Name
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd (DRP)
Citicorp Nominees Pty Limited (Colonial First State Inv A/C)
BNP Paribas Nominees Pty Ltd (Agency Lending DRP A/C)
AMP Life Limited
HSBC Custody Nominees (Australia) Limited-GSCO ECA
BNP Paribas Nominees Pty Ltd (IOOF Invmt Mngt Ltd DRP)
Warbont Nominees Pty Ltd (Unpaid Entrepot A/C)
Sandhurst Trustees Ltd (SISF A/C)
BNP Paribas Nominees Pty Ltd (Agency Lending Collateral)
HSBC Custody Nominees (Australia) Limited
HSBC Custody Nominees (Australia) Limited (NT Comnwlth Super Corp A/c)
Akat Investments Pty Ltd (Tag Family Core A/c)
UBS Nominees Pty Ltd
National Nominees Limited (N A/C)
BNP Paribas Nominees Pty Ltd (Australi Unity Trst Ltd DRP)
Buttonwood Nominees Pty Ltd
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 (with holdings as notified to the Company
most recently before 31 August 2019) are set out below:
Name
Allan Gray Australia Pty Ltd and its related bodies corporate
Ubique Asset Management Pty Limited
Investors Mutual Ltd and its related bodies corporate
Commonwealth Bank of Australia and its related bodies corporate
Challenger Limited and its related bodies corporate
Vinva Investment Management
Retail Employees Superannuation Pty Limited
Dimension Fund Advisors LP and related entities
Securities subject to voluntary escrow are set out below:
Type
Voluntary escrow
94
256,414,059
153,710,727
147,069,972
100,558,461
14,444,839
12,499,190
12,290,711
3,144,847
2,150,262
1,950,000
1,583,724
1,400,000
1,385,000
1,357,933
1,264,108
1,250,000
1,062,985
947,459
827,104
825,561
716,136,942
Number of
shareholders
851
1,297
750
1,090
87
4,075
455
Fully paid ordinary
shares
104,290,468
88,159,266
50,472,655
47,073,414
41,749,281
38,862,611
38,568,350
38,458,228
447,634,273
33.34
19.99
19.12
13.08
1.88
1.63
1.60
0.41
0.28
0.25
0.21
0.18
0.18
0.18
0.16
0.16
0.14
0.12
0.11
0.11
93.12
Fully paid
ordinary shares
335,944
3,846,316
5,977,153
8,904,011
729,950,181
769,013,605
28,088
% of issued
capital
15.74
10.42
7.30
7.13
6.17
5.09
5.02
56.87
Date escrow period
ends
n/a
Fully paid ordinary
shares
–
SOUTHERN CROSS AUSTEREO 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
Tel: +61 3 9252 1019
Web: https://www.southerncrossaustereo.com.au
Share Registry
Computershare Investor Services Pty Limited
Yarra Falls
452 Johnston Street
Abbotsford VIC 3067
Tel: 1300 555 159 (within Australia)
+61 3 9415 4062 (from outside Australia)
Investor Centre:
https://www-au.computershare.com/investor/
The Southern Cross Austereo Annual Report
2019 is printed on EcoStar+ an environmentally
responsible paper. The fibre source is FSC®
Recycled certified. EcoStar+ is manufactured
from 100% post consumer recycled paper in
a process chlorine free environment under the
ISO 14001 environmental management system.
Source: GFK Radio Ratings. Survey 4 2019- Metro. Gold Coast, Canberra Survey, Newcastle
Survey 1 2019. Mon-Sun 5:30-12mn, Cume. Xtra Insights West Gippsland, Orange,
Rocky-Gladstone, Bunbury Survey 1 2016, Mon-Sun 05:30-12mn, Cume. Wheatbelt,
Esperance, Dubbo, Mt Isa, Kingaroy, Roma, Emerald, Port Macquarie, Albury, Albany,
Kalgoorlie, Maryborough Survey #1 2017, Mon-Sun 5:30-12mn Cume. Xtra Insights Mackay,
Shepparton, Cairns, Toowoomba, Bundaberg, Gosford, Hobart, Mildura, Townsville, Bendigo
Survey #1 2018 Mon-Sun 5:30-12mn, Xtra Insights Mt Gambier, Griffith, Wagga and Coffs
Harbour Survey #1 2019 Mon-Sun 05:30-12mn, Cume.
REGIONAL TAM DATA. 4AGGS & TAS. WEEKLY CUME REACH (1 MIN) AVERAGED.
0200-2600. SUN-SAT. NETWORK TTLS. WK 27 2018 - 26 2019 excl. Easter and Summer
Ratings Periods. DIARY MARKETS - LAST AVAILABLE SURVEY. 0600-2400. SGT - 2015
(MIDNIGHT - MIDNIGHT).
ANNUAL REPORT 2019
95