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2023 ReportPeers and competitors of Southern Cross Media Group Ltd:
Reading International Inc. 10m
99
4.8m
3.8m
Reaching over 10 million
99 AM & FM & DAB+
4.8 million Hit network listeners
3.8 million Triple M
Australians every week
radio stations, 7.4 million
nationally each week – 50 FM &
network listeners nationally
across its Television, Radio
national reach
DAB+ radio stations
each week – 48 AM & FM &
and Digital networks
DAB+ radio stations
4.2m
92
No. 1
Regional Television networks
92 free-to-air television signals
Australia’s leading commercial
4.2 million viewers per week
podcast network
Year In Review
SCA’s results in FY2020 highlight its significantly improved balance sheet and strong cash flow, along with continuing or growing demand for
SCA’s core audio products. Despite the severe impact of the COVID-19 pandemic on SCA and broadcast media more broadly, there has been
progressive improvement in revenues since May 2020.
Revenue
Expenses
EBITDA
NPAT
Underlying NPAT
Net Debt
FY2020
$540.2M
($432.6M)
$108.2M
$25.1M
-
$131.6M
Excluding AASB 16 (Leases)
Comparison to FY20191
$661.0M
($513.6)
$147.4M
($91.4M)
$73.9M
$292.6M
(18.2%)
(12.8%)
(36.9%)
N.m.
(51.6%)
(55.0%)
FY2020
$540.2M
($447.8M)
$93.0M
$29.7M
$35.8M
$131.6M
1 Underlying amounts in FY2019 exclude the impact of one-off restructuring charges of $3.3 million and non-cash significant items, comprising the impairment of $158.9 million
N.m. Not meaningful
(net of tax) in relation to the Group’s regional television licences and the loss of $9.2 million on broadcast transmission assets held for sale on 30 June 2019.
Despite the challenges presented by weak advertising markets and the COVID-19 pandemic, SCA traded profitably in all four quarters of the year. This was
the result of disciplined cost control, as well as a prompt and effective response to maintain operations with the majority of our people working safely from
home. The Company also appreciated support received during the year from shareholders, lenders, and Government and regulatory agencies.
Consumption of SCA products, particularly digital audio, has grown during the pandemic. Audio is more accessible than ever through mobile phones,
tablets, desktop computers and smart speakers and SCA’s suite of radio stations, radio and original podcasts and smart news updates are available on
all these devices. Data from August 2020 showed that SCA’s audiences listened to 10 million hours of digital audio, 46% more than a year earlier. Live
streaming of Hit and Triple M radio shows reached record highs in August, increasing by 88% year-on-year; and radio podcast listening grew by 75%.
PodcastOne Australia has experienced a 167% growth across the March to August 2020 period with 26 million downloads.
SCA’s focus, as the economy recovers, is to convert consumption of our products into strong commercial outcomes. This will include continuing to invest
in key markets and timeslots in our radio networks and growing our digital audio ecosystem with premium content, platforms and products attractive to
listeners and advertisers.
Contents
Year In Review
Chairman’s Statement
CEO’s Report
Operational Review
Television
Boomtown
IFC
Governance
02
04
06
12
13
SCA Engage
The Board and Leadership Team
Financial Report
ASX Report
Corporate Directory
14
17
18
23
97
98
Southern Cross Austereo
Annual Report
2020
3
Chairman’s Statement
On behalf of the Board of Directors, I am pleased to present SCA’s
The Company has continued during this period to focus on the
During the year, the Board engaged Egon Zehnder to advise on
Annual Report for the 2020 financial year – my first as Chair.
long-term strategic imperative to expand the business beyond linear
Board succession to help ensure that the Board will maintain the
The first nine months of the year were challenging for the broadcast
media industry generally, and for SCA. Lack of business and
consumer confidence led to advertising markets being weak and
volatile. While SCA maintained its commercial share in audio and
television segments, first half revenues were 8.5% below the prior
year. The challenges became greater in the second half of the
year, first with the social and operational dislocation caused by the
bushfires that affected communities and small businesses in many
of the regional areas in which the Company operates; and then the
COVID-19 pandemic. This health crisis and the measures implemented
by Federal, State and Territory Governments in response have had a
severe impact on SCA’s business and operations. Full year revenues
of $540.2 million were 18.2% lower than the prior year and EBITDA of
$93.0 million (excluding AASB 16) was 36.9% below the comparable
amount in the prior year.
These challenges required a number of short-term responses,
including a tight focus on cost control and the roll-out of business
continuity plans to ensure our 1,700 people (including on-air
announcers) in 62 locations around Australia could work safely and
effectively from home.
broadcasting to digital and on-demand audio platforms and products.
skills and experience required to guide the Company in the years
Independent surveys indicate that consumption of audio in Australia,
ahead. After a comprehensive search process, the Board has recently
particularly on digital devices, has grown during the pandemic. With
appointed Carole Campbell as a director and will ask shareholders
Australia’s largest portfolio of home-grown audio assets, including
at this year’s AGM to elect Ido Leffler and Heith Mackay-Cruise as
99 AM, FM and DAB+ radio stations available on broadcast and by
directors. Together Carole, Ido and Heith will bring relevant expertise
Internet livestream as well as Australia’s leading commercial podcast
to complement the mix of skills and experience already on the Board.
network in PodcastOne Australia, SCA is well positioned to lead
Australia’s growing digital audio industry.
In closing, I would like to thank SCA’s management and employees
for their commitment, care and tenacity in a difficult year. Innovation,
While the focus of future investment will be on SCA’s audio assets,
creativity, courage and collaboration – four of our core values –
shareholders should be assured we will continue to operate our
have never been more evident as we have kept our audiences and
television assets effectively. The television business has been
communities informed and entertained and delivered value to our
transformed over the past three years through outsourcing of
clients, many of whom have also been severely affected by the
transmission and television playout services to specialist providers.
pandemic. Those values will stand us in good stead as we evolve our
Under this streamlined operating structure, SCA’s core expertise
business towards a more digital future and provide reliable returns for
in local and national sales continues to drive positive commercial
our shareholders.
outcomes. This is reflected in our market-leading power ratio –
measuring conversion of ratings to revenue – of 1.09 in the four east
coast aggregated television markets.
Our Board and executive team are well aware that many of our
shareholders have suffered as a result of the difficult trading
Rob Murray
Chair
Investments made over the past three years to increase the flexibility
conditions faced by the Company this year and are focused on
and security of our technology have been amply repaid during the
restoring the value that has been lost. That is the explicit aim of the
COVID-19 lockdowns. The Company appreciated the support of
executive long-term incentive plan implemented by the Board for the
shareholders who took up their entitlements in the $169.6 million
next three years. By specifying total shareholder return as the sole
equity raising conducted in April 2020 and the Company’s lenders
performance measure, the plan will provide a direct and clear link
who agreed to provide additional covenant headroom until June 2021
between shareholder returns and executive remuneration.
under our syndicated debt facility. We have also been grateful for
temporary regulatory relief and short-term financial support provided
by the Federal Government in the form of the JobKeeper wage
subsidy and grants under the Public Interest News Gathering program
to help ensure regional media businesses can continue to provide
news services to their communities.
The combination of these actions has enabled SCA to trade profitably
through the pandemic and position the business to rebound as the
economy recovers. Despite the adverse economic conditions, SCA
achieved a positive EBITDA contribution in all four quarters and has a
significantly strengthened balance sheet, with healthy liquidity. On 30
June 2020, the Company’s net debt of $131.6 million and leverage of
1.24x EBITDA were at historic lows.
Thank you to my fellow directors who have supported the
management team and each other throughout the year. I wish in
particular to acknowledge the contribution of Peter Bush who stood
down as Chair on 19 August 2020 and will retire as a director at this
year’s AGM. In his five years as Chair, Peter oversaw a comprehensive
renewal of the Board and leadership team and a streamlining of the
business to focus on our core competencies of creating compelling
audio content and sales. Leon Pasternak will also retire as a director
at the AGM. Leon is the Company’s longest-standing director and his
wisdom and corporate knowledge have been invaluable in bedding
down the significant renewal of the Board’s composition since 2014.
4
Southern Cross Austereo
Annual Report
2020
5
CEO’s Report
In difficult times, I’m proud that SCA’s people live our aspiration
around the country. This will deliver high quality, fun and entertaining
Games are consistently ranked among the top Australian original
As a commercial audio business, we are buoyed by these positive
every day to be Proudly National, Fiercely Local. This was amply
Breakfast shows to our regional Hit network stations, complemented
podcasts in the official Australian Podcast Ranker launched during
trends in consumption of our products and focused on converting
demonstrated during the summer as communities in many of
by locally hosted morning or afternoon shows and local news and
the year. Increasingly, our premium talent-led approach to original
them to improving commercial outcomes as the recovery from
our locations battled bushfires, floods and cyclones. Our radio
weather services.
podcasting is delivering valuable returns for our clients, whether as
COVID-19 progresses. In the year ahead, this will include growing our
and television stations worked closely with local authorities and
emergency services organisations to keep communities informed
about emergency warnings; as well as being directly involved in
helping communities to recover from these events.
SoundCloud Radio launched in August on DAB+ radio in the five
metro markets and live streaming around Australia. SoundCloud Radio
advertisers or as sponsors of branded podcasts to promote their
digital audio ecosystem with premium content, platforms and products
products or issues of importance to them.
attractive to our listeners and advertisers.
is the first and only SCA station dedicated to new music discovery,
Audio remains a popular companion for people – whether commuting
The growing popularity of digital audio brings with it the opportunity
offering listeners the chance to hear undiscovered tracks from
to and from work, or working from home. Consumption of audio,
and imperative to expand and improve the data and insights about
As the impact on our business of the COVID-19 pandemic deepened
emerging artists launching their careers on SoundCloud. Extending
including linear radio and on-demand podcasts, remains strong and
our audiences that we create for our sales and content teams, and for
in the final quarter of the year, we asked nearly all our employees to
our successful exclusive advertising partnership with SoundCloud, the
accept reduced pay and many to accept reduced hours of work. We
new station gives brands another way to connect with SoundCloud’s
asked them to work in new and agile ways, remotely from our highly
young and highly engaged audience.
Our radio stations are also available anywhere in Australia by live
stream so listeners can enjoy them on any Internet-enabled device,
has grown during the pandemic. This growth has continued, even
as COVID-19 restrictions have eased in many locations. With official
metro radio surveys paused since survey 2 in April 2020, GfK, the
official survey provider, conducted an online radio pulse study from
17 May to 13 June 2020. The survey found nearly 12 million listeners
our clients. Digital technology allows us to place targeted advertising
in our radio livestreams – meaning that advertisements on our
livestreams, which can be sold at premium rates, will not always be
the same as on the radio broadcast. Our instream advertising revenue
grew by 112% in FY2020.
collaborative office and studio environments. We’ve made changes to
our business to create a lean and efficient operating model focused
on recovering the earnings lost in the year just ended. Through this
disruption, our people’s passion and commitment to engage our
audiences, contribute to our communities, and deliver value to our
clients has never wavered.
The impact of COVID-19 is moderating as economic activity in much
of Australia is progressively recovering. We expect the recovery will
be more gradual than the sharp declines experienced in April and
May this year, and that outbreaks in one or more locations could
interrupt the recovery. We’re confident that SCA will continue to trade
wherever they are. Featured highlights of popular shows on our 88
tuned into commercial radio on any platform across the five metro
We now have over 630,000 signed-in users for our radio station
AM and FM radio stations are also available as on-demand podcasts
markets, with audience growth in all markets compared to survey 2.
apps, and our in-house SCA iQ team houses the Asia Pacific’s largest
enabling our audiences to listen where and when it suits them.
Despite many Australians not commuting to and from work, audiences
entertainment insight community with more than 300,000 members
Our strategy for aggregating our FM and DAB+ radio station
audiences in metro markets continues to provide additional value for
grew in the key Breakfast and Drive dayparts, with home listening
in metro and regional areas. These communities provide first party
more than making up for reduced in-car listening.
data to inform our decisions and those of our clients and will support
advertisers and a sustainable competitive advantage over commercial
Audio is also more accessible than ever through Internet-enabled
ongoing growth in our instream advertising revenue.
radio peers. The most recent metro radio survey 2 in April 2020
devices such as mobile phones, tablets, desktop computers and smart
I was delighted to welcome Nikki Clarkson and Dave Cameron
showed that SCA’s DAB+ radio stations had 333,000 DAB+ radio only
speakers. SCA’s suite of radio stations, radio and original podcasts
to the leadership team during this year. As Chief Marketing and
listeners, providing advertisers with a greater aggregate reach of 7.1%
and smart news updates is available on all these devices.
Communications Officer, Nikki oversees our trade and consumer
profitably through this period and will rebound as the worst impacts of
across the Triple M and Hit networks.
the pandemic abate.
SCA and our commercial radio peers have also been working
Last year, I wrote about the need for SCA to take advantage of key
collaboratively to make it easier for advertisers to invest in radio
consumer trends towards mobile, personalised and on-demand audio
through the RadioMATRIX industry-wide advertising buying
content. Those trends remain at the core of our corporate strategy
platform. Since launch in 2017, over 200 media agencies have used
to create compelling content and to distribute and monetise it in the
RadioMATRIX to process more than 1.5 billion items of radio inventory
The growth in consumption across SCA’s digital audio products
is illustrated by the following statistics from August 2020,
during which:
marketing as well as Group corporate communications. Dave’s
appointment as Chief Content Officer followed an extensive local
and global search. He is responsible for the content of our linear and
on-demand audio assets. Both Nikki and Dave have already had long
• SCA’s audiences listened to 10 million hours of digital audio, a year-
careers at SCA and have brought valuable strategic and creative
on-year increase of 46%;
insights to our leadership team.
most efficient and effective ways for our audiences and clients.
on 370 Australian commercial radio stations. A new pilot module
• live streaming of Hit and Triple M radio shows increased by 88% to
In closing, I would like to thank all of our people and the Board for their
We expanded our broadcast footprint during the year by acquiring
10 new radio stations in Western Australia from Redwave Media and
Carnarvon Communications. The recent launch of SoundCloud radio
provides agencies with a virtual and paperless workspace to send out
1.5 million listeners;
commitment and support as we build an exciting and successful future
briefs, receive proposals and undertake modelling of audience reach,
frequency and cost against real-time availability.
• listening to Hit and Triple M radio podcasts jumped by 75% to 4.2
for SCA.
million downloads;
on DAB+ radio increased our AM, FM and DAB+ radio portfolio to 99
The highest content priority in our radio network is to establish a
stations. In fact, we temporarily have 100 stations … including Little
new and successful Breakfast show on 2DayFM in Sydney. We have
Fox, a pop-up children’s DAB+ radio station on-air during the strict
performed poorly in this key timeslot for several years. In 2019, we
• there were 395,000 downloads of SCA Smart News, up 25% month-
on-month; and
COVID-19 lockdowns in Melbourne.
took a strategic decision to revert temporarily to a music format. This
• downloads of PodcastOne Australia’s original podcasts rose by 167%
In July, we unveiled a new look Hit network, bringing back the much
has created clear air for launch of a new Breakfast show early in 2021.
from March to August 2020.
loved heritage brands SAFM in Adelaide and B105 in Brisbane, and
PodcastOne Australia has consolidated its position as Australia’s
Even in the temporary absence of official radio surveys, these statistics
introducing a new ‘Get that feeling’ tagline and playlist to target a
leading premium commercial podcast network. Now with 90 original
show there is healthy and growing consumer demand for compelling
female-skewed audience aged 30-54. In August, we introduced
Australian titles, PodcastOne Australia grew revenue by 96% to $4.6
audio content, and for SCA’s audio products in particular. They also
statewide Breakfast shows to our 40 Hit stations in regional markets
million in FY2020. Titles such as Hamish & Andy and The Howie
show the increasing importance of digital delivery of audio content.
Grant Blackley
Managing Director and
Chief Executive Officer
6
Southern Cross Austereo
Annual Report
2020
7
Operational Review
Highlights:
• Broadcast footprint expanded to 99 AM, FM and DAB+ radio stations
• PodcastOne Australia grows listeners and sponsors
• SoundCloud Radio launched on DAB+ radio in five metro cities and by livestream around Australia
Mobile, desktop and smart speaker usage are all growing strongly given their usage and accessibility – and this in turn is providing an increased
volume of addressable inventory for sale to advertisers seeking scaled targeted audiences.
SCA’s audio revenue reflected the broad market contraction due to COVID-19. Revenue declined by 18.2% to $371.1 million and underlying
EBITDA declined by 35.3% to $97.8 million. Audio expenses fell by 9.6% to $273.3 million, influenced by a reduction in employee expenses.
• Digital audio listening on mobile devices and smart speakers grows exponentially, for both live streaming and on-demand radio and original podcast
Regional radio revenues were less impacted than metro radio, with stronger relative demand from national advertisers in regional markets.
• Boomtown helps drive national revenue and commercial share growth for regional radio and television.
Regional markets are expected to benefit in the future, led by regional tourism and related economic investment and helped by the Boomtown
Audio
Overall radio listening increased across FY2020, most notably across the day with more people based at home or working remotely. Increased audio
consumption is being supported by significant growth in listening via multiple digital devices.
Nationally, SCA reaches 7.48 million people aged 10+.
In the latest available GfK metro survey in April 2020, Triple M is the # 1 station of men aged 25-54 and people aged 18-39, while Hit is the # 1
commercial station for people aged 25-54. SCA’s national metro DAB+ radio stations attracted 333,000 unique listeners, providing advertisers
education initiative.
SCA’s radio footprint expanded in the year, following the acquisition of Redwave Media’s Western Australian regional stations, along with two
stations from Carnarvon Communications. These stations were rebranded in March 2020 to the Hit and Triple M brand family. These acquisitions
complete SCA’s radio coverage of Western Australia – extending to the Carnarvon, Karratha, Broome, Geraldton, Port Hedland and remote mine
site areas.
SCA now owns 99 stations across AM, FM and DAB+ radio and provides national sales representation for 23 other regional radio stations. The
Hit and Triple M network analogue radio stations and 10 DAB+ radio stations continued to entertain and inform more than 5 million people
each week. SCA temporarily has 100 stations, including Little Fox … a pop-up children’s DAB+ radio station on-air during the strict COVID-19
with greater audience reach.
lockdowns in Melbourne.
Radio listening has increased during COVID-19 – with notable increases across the day
Industry Audience
SCA is a firm believer in the future of DAB+ radio and is the largest commercial DAB+ radio group, owning and operating more DAB+
radio spectrum than any other Australian commercial radio network. Six new DAB+ radio stations launched this year: Hit Dance, Hit Urban,
Triple M 90s, Triple M Soft Rock, Triple M Hard n Heavy and a unique radio first with SoundCloud Radio.
8.0m
7.8m
7.5m
6.2m
8.0m
6.8m
7.3m
6.9m
Breakfast:
Mon-Fri 05:30 - 09:00
Morning:
Mon-Fri 09:00 - 12:00
Afternoon:
Mon-Fri 12:00 - 16:00
Drive:
Mon-Fri 16:00 - 19:00
Radio Pulse Jun 20
S2 2020
Increased Listening
GfK Radio Pulse survey, June 2020. Cume audience 5.30am – 12.00midnight, all people 10+. Mobility trends source: Google
4.36M 344K
LISTEN TO SCA’S
FM NETWORK ONLY
LISTEN TO SCA’S
FM AND DAB+
RADIO STATIONS
333K
LISTEN TO SCA’S DAB+
RADIO NETWORK ONLY
SCA uses this aggregated FM and DAB+ 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 daypart on five DAB+ 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.
8
Southern Cross Austereo
Annual Report
2020
9
Operational Review
SoundCloud Radio
Last year, SCA launched InStream, an addressable live radio offering
enabling the dynamic insertion of personalised and targeted audio
Building on a successful exclusive advertising partnership in Australia,
ads into live radio commercial breaks across all connected devices
in August SCA and SoundCloud launched SoundCloud Radio on DAB+
including SCA websites, apps and smart speakers. InStream revenues
radio in Brisbane, Sydney, Melbourne, Adelaide and Perth and by
rose by 112% in FY2020 as SCA increasingly serves digital audiences
livestream around Australia.
with more addressable advertising. SCA’s investment in developing new
SoundCloud is the world’s largest community of audio and music
creators, with a music streaming audience of 2.5 million monthly
digital assets is helping accelerate listening consumption and is driving
increasing revenue momentum.
listeners in Australia … which is increasing month-on-month.
Beyond the traditional broadcast signals, the Hit and Triple M networks
are reaching and growing audiences on a range of digital and social
SoundCloud Radio is the first and only station at SCA dedicated
purely to new music discovery, offering listeners the chance to hear
undiscovered tracks from some of the most exciting emerging artists
launching their careers on SoundCloud today.
This new offering enhances SCA’s ability to provide advertisers with
extraordinary reach on DAB+ radio and in the digital audio space. The
SoundCloud audience is young, highly engaged and influential, and
SCA’s social communities have increased by 3% to 15.16 million, as it
continues to be the industry leader in social engagement generating
more than 35.42 million interactions on social platforms in FY2020.
brands can reach this audience through SCA’s access to SoundCloud
SCA launched a refreshed design for its suite of Hit and Triple M apps
and now SoundCloud Radio.
as in-app listening surged by 48% year-on-year, to 3.88 million mobile
With an aggregated commercial reach of over 3.5 million monthly
users, SCA is now a one-stop shop for digital audio advertising
listening hours. The listening experience on the new apps has been
redesigned to support how audience behaviour is evolving.
solutions on SoundCloud and SCA’s own substantial live radio
News on demand is a new feature of these updates with a dedicated
streaming and radio and original podcasts.
section providing users with even greater access to local headlines.
Users can also set their preferences to receive regular notifications of
breaking news.
The Hit network app has recorded a 40% increase of unique users while
Triple M has seen an 18% rise year-on-year from June 2019 to June 2020.
This year’s bushfires, floods and COVID-19 pandemic saw in-app news
consumption in the past six months surge – increasing by 203%.
channels. From Facebook and Instagram to YouTube, SCA’s networks use
Highlights:
these platforms to market their quality audio entertainment, news and
• Triple M’s annual ‘No Talk Day’ on 1 July, to raise awareness of men’s
information to Australian listeners through visualisation and storytelling.
mental health, was extended to include all Triple M stations nationally
Triple M Network
Hit Network
Australia’s first commercial FM station, Triple M Melbourne, celebrates
The Hit network launched a significant rebranding, including reintroducing
40 years on air this year. The Triple M network welcomed eight new
heritage local brands, launching new Breakfast shows and unveiling a
stations, with six new stations in regional Western Australia and
new content strategy and branding. Hit also welcomed six new stations in
rebranding of Hit in Dubbo and Gippsland, taking it to 43 AM and FM
regional Western Australia following SCA’s acquisition of Redwave Media
stations, along with another five DAB+ radio stations.
and Carnarvon Communications. Two Hit stations in Dubbo and Gippsland
The Triple M network reaches 3.88 million listeners across metro,
were rebranded to Triple M, leaving Hit with 50 FM and DAB+ radio
regional and DAB+ radio stations. Triple M is the # 1 radio network for
stations nationally.
males aged 25-54 with 1.88 million listeners.
The local, heritage FM brands of SAFM in Adelaide and B105 Brisbane
this year. No Talk Day saw live streams increase by 53% year-on-year
and a 42% jump in listeners;
• Triple M is the # 2 radio network overall with national reach of 3.88
million people aged 10+;
• Breakfast on Triple M nationally reaches 2.246 million people;
• Drive on Triple M nationally reaches 1.912 million people;
• Triple M’s DAB+ radio stations reach 325,000 people;
made a return on 27 July to join other metro heritage brands (2DayFM in
Sydney and The Fox in Melbourne) that are already part of the Hit network.
Extending SAFM even further, Hit96.1 Limestone Coast was rebranded to
SAFM96.1 – delivering a strong, unified South Australian radio brand across
the State’s two biggest cities. SAFM welcomed back famous Adelaide-born
comedian, Anthony ‘Lehmo’ Lehmann who joined Rebecca Morse and Cosi
in the ‘Bec, Cosi & Lehmo’ Breakfast show.
On the Gold Coast, local radio and TV personality Bianca Dye returned to
her hometown to join the Hit90.9 Breakfast team with Dan Anstey and Ben
Hannant, creating the ‘Bianca, Dan & Ben’ Breakfast show.
The rest of the Hit-branded network stations nationally remain as Hit and
• Triple M’s live radio streaming grew 56% in the year to June 2020;
take on the network’s new-look branding. Hit also delivered a new, mood-
• Radio podcast downloads rose 121% in the year to June 2020, with
focused, ‘feel great’ pop music format nationally to appeal to a broader
Rush Hour Melbourne growing by 97%, Triple M Footy (AFL) up 84%
audience aged 30-54; and a new, emotive positioning line ‘Get that feeling’.
and Kennedy Molloy up 30%; and
The network also introduced State-wide Breakfast shows for its regional
• On Triple M’s Breakfast shows, Sydney’s Moonman in the Morning
stations in New South Wales, Queensland, Victoria and South Australia,
radio podcast downloads rose by 38%, Melbourne’s The Hot Breakfast
reflecting the existing Western Australia model.
increased 33% and Roo & Ditts for Breakfast in Adelaide was up 54%.
The Hit network reaches 4.83 million listeners across metro, regional and
DAB+ radio stations. Hit is the # 1 radio brand for people aged 25-54 and
the # 1 brand for women aged 18-39.
Highlights:
• The Hit network Breakfast nationally reaches 2.77 million people;
• Drive on Hit nationally reaches 2.604 million people;
• Hit’s DAB+ radio stations reach 416,000 people;
• Hit’s live radio streaming grew 47% in the year to June 2020;
• Live streaming of Stav, Abby & Matt on B105 Brisbane Breakfast grew 56%;
• On SAFM Adelaide, live streaming of Bec, Cosi & Lehmo Breakfast was
up 43%;
• In Perth on Hit92.9, Xavier, Juelz & Pete catch up rose by 36%; and
• Radio podcast downloads rose 99% in the year to June 2020, with Fifi,
Fev & Byron up 114%, Carrie & Tommy up 62% and Hughesy & Ed up 82%.
10
Southern Cross Austereo
Annual Report
2020
11
Operational Review
PodcastOne Australia
Digital audio
Podcasting in Australia continues to be a growth sector. Increasing
Hamish & Andy and The Howie Games both recording their biggest ever
Audiences still love SCA’s linear broadcast radio stations, but there is also a
the country are available on podcasts, so their audiences can listen to
consumer awareness and trial is building dedicated audiences that are
month of downloads in May.
growing demand for personalised on-demand audio content. SCA is at the
them – or to original podcasts on PodcastOne Australia – wherever and
becoming more attractive to advertisers. The Infinite Dial Australia 2020
study showed a quarter of those surveyed in Australia aged 12+ have
listened to a podcast in the last month, up from 22% in 2019; and people
listen to an average of six podcasts per week.
Hamish & Andy celebrated their 100th episode in July 2020 and have
forefront of these consumer developments.
whenever it suits them. SCA created skills and bespoke content so that the
grown audience downloads by 125% in the past 12 months. The Howie
SCA’s radio stations can be streamed on the go on smart phones, tablets
Games also celebrated its 100th episode, as it has become one of
or at home online and on smart speakers. The flagship radio shows around
Australia’s most successful sports interview based podcast series. The
latest news updates are available on demand on smart speakers.
PodcastOne Australia has consolidated its position as the leading,
Briefing also celebrated its 100th episode in August, while Matt & Alex –
premium, commercial podcast business in Australia. Now cash flow
All Day Breakfast achieved one million downloads and Rusty’s Garage
positive, PodcastOne Australia grew revenue by 96% to $4.6 million.
had its 50th episode featuring Eric Bana.
With the growth in digital audio accelerating during COVID-19 lockdowns,
SCA is well placed to benefit from increasing advertiser awareness of
consumers’ deep engagement with digital audio products.
$4.6m
$2.3m
FY2019 Revenue
FY2020 Revenue
PodcastOne Australia is home to over 90 original podcast titles from a
compelling group of Australians; as well as the best podcasts from our
partner, PodcastOne USA. PodcastOne Australia’s co-created domestic
podcasts include Hamish & Andy, Adam Shand at Large, The Howie
Games with Mark Howard, Rusty’s Garage with Greg Rust, My Mum says
My Memoir is a Lie and Just the Gist with Rosie Waterland, The Mentor
with Mark Bouris, A Plate to Call Home with Gary Mehigan, The Beanies
and ListenABLE with Dylan Alcott and Angus O’Loughlin.
This year also saw the launch of Australia’s first on-demand breakfast
show, Matt & Alex – All Day Breakfast, with the popular former hosts of
Triple J Breakfast Matt Okine and Alex Dyson.
News on demand is increasingly popular among audiences and SCA
has met this demand by launching a daily news podcast called The
Briefing in April 2020. Led by Tom Tilley and rolling co-hosts Annika
Smethurst, Jan Fran and Jamila Rizvi, the podcast covers three to four
of the biggest news stories over the past 24 hours, including in-depth
interviews to ‘brief’ the audience on one of these stories. And it’s all done
in under 20 minutes.
PodcastOne Australia achieved 167% growth in downloads from March to
August. Comedy and Sport were the two biggest growth categories with
PodcastOne Australia also commissioned a not-for-profit podcast series,
Rebuilding Australia, to provide helpful information to people on the key
areas of rebuilding their life after Australia experienced one of the worst
bushfire seasons in history and had to then deal with floods. The series
focused on rebuilding our animal population and land, and rebuilding our
homes, businesses and mindsets.
The growing influence of podcasting has not gone unnoticed by
businesses, 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.
136%
INCREASE
YOY
88% 95% 30%
INCREASE
YOY
INCREASE
YOY
INCREASE
YOY
In original podcast
listening from August 2019
to August 2020
Over 1.5M live radio streaming
listeners during August
2.2M listening hours,
accounting for 22% of
total listening
Recording more than 3.2M
total listening hours
PODCASTONE
AUSTRALIA
LIVE STREAMS
SMART SPEAKER
LISTENING
MOBILE & TABLET
LISTENING
SCA’s audiences are also listening longer, more often and on more
Smart speakers too are an increasingly popular choice for listeners,
devices. Total listening hours reached 10 million in August, an increase of
reporting 2.2 million listening hours in August, up 95% year-on-year;
46% year on year.
and an average session duration of 2 hours and 16 minutes.
As much of the population worked from home this year, audio became
Listening on demand, including live radio streaming across mobile, tablet
the companion of choice for many Australians, with digital audio
and smart speakers, as well as radio podcasts, soared in August:
listening increasing during this period and continuing to rise even as
restrictions eased.
More people are tuning into Hit and Triple M via digital devices than ever
before, with live radio streaming reaching a new record of 1.5 million
• 8.6 million active live radio streams, up 49% year-on-year
• Total listening hours on mobiles and tablets is up 30% year-on-year
• There were 395,000 downloads of SCA Smart News in July, up 25%
listeners, up by 88% year on year and radio podcasts jumping 75% year on
month-on-month.
year to 4.2 million downloads.
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Television
Boomtown
Television remains an important part of the business, delivering EBITDA of $23.9 million in FY2020.
The Boomtown industry initiative continues to encourage national advertisers to consider higher investment in regional areas.
During the year, SCA completed outsourcing television playout services – comprising 105 broadcast signals – to NPC Media (a joint venture
Representing the 8.8 million people living in regional Australia, Boomtown includes major business and population centres like the Gold Coast,
between the Nine and Seven networks), and broadcast transmission services to BAI Communications. This has created a streamlined and efficient
Newcastle, New South Wales’ Central Coast, Townsville, Hobart, Bunbury and Canberra. The residents of ‘Boomtown’ – who comprise 36% of
structure for delivery of broadcast television to SCA’s licence areas and a more predictable cost base, while mitigating future capital expenditure
Australia’s population – have disposable incomes and travel, shopping and spending patterns that are comparable to those of Australia’s capital
and other risks associated with SCA’s previous ownership of broadcast assets. This streamlined operating structure also allows SCA to leverage
city residents. And yet only 10% of national media budgets are spent regionally. Boomtown is closing that gap, reminding advertisers of the
its core expertise in local and national sales.
benefits of advertising in regional Australia.
This year, Boomtown is launching two major initiatives: a new education masterclass series in conjunction with the Media Federation of Australia’s
NGEN program to arm the industry with the knowledge and tools to understand and book regional media; plus the launch of an industry first
online portal to offer agencies a one-stop briefing platform to locate regional media coverage areas of the Boomtown media owners along with
industry updates and consumer insights.
SCA and our Boomtown partners believe there are significant opportunities for advertisers to grow their businesses in a more effective and
efficient manner by tapping into Boomtown. More information is available on the Boomtown website: https://boomtown.media/.
SCA’s principal affiliation – in the regional markets of Queensland, Southern New South Wales and Victoria – continues to be with the Nine
network. Since 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. The best performing shows included Lego Masters, Married at First Sight, The Voice, Australian
Ninja Warrior and Nine News. SCA continued to deliver a market leading power ratio of 1.09, despite the delayed start to the NRL season this year.
Commercial Share & Power Ratio
1.05
1.07
1.11
1.09
37.7%
35.9%
35.9%
38.5%
38.3%
37.6%
34.4%
34.5%
H1 FY19
H2 FY19
H1 FY20
H2 FY20
Audience Share
Commercial Share
Power Ratio
In response to the severe impacts of COVID-19, Nine cut back its local news services to SCA’s licence areas in local New South Wales, Victoria and
Queensland. SCA was pleased in early August that Nine was able to reinstate its 9News Local bulletins in a new format from 5.30pm to 6.00pm
leading into its State-based metro news bulletins.
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 Nightly News, Home and Away, Farmer Wants a Wife, Big Brother and
House Rules 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 FY2020 to achieve a commercial share in excess of audience share in Tasmania.
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15
Governance
Values
also provided to middle managers and other emerging talent within SCA.
• Summer 2019/2020 bushfires – With so many communities devastated by bushfires, SCA radio stations played an essential role in keeping
Programs for the new financial year will be designed to equip our people
locals, and holidaymakers, well informed. Local radio stations quickly pivoted from scheduled programming, working around the clock to provide
SCA prides itself on creating a culture where people feel valued and can
with the skills and resilience to rebound from the challenges of this year.
the most up-to-date news and emergency services information and, in collaboration with local authorities, to provide a sense of calm through
perform at their very best. We don’t just focus on what we do; we care
about how we do it. SCA’s five values guide day-to-day decisions and
shape individual and collective behaviour.
SCA manages workplace health and safety risks in an active way. Local
managers monitor and manage risks at their workplaces, ensuring that
risks are identified, assessed and managed proactively and not only in
factual and timely information. Once the immediate threats of the fires subsided, radio stations turned to communicating ways for individuals and
businesses to support the community.
Hit and Triple M teams visited impacted towns – from Batlow, New South Wales to Kangaroo Island, South Australia – showing their support
• We COLLABORATE: We work as a team. Together, we deliver our
response to an incident. Key risks managed on a day-to-day basis include
through donations of supplies and broadcasting Breakfast shows to encourage tourism to support these devastated towns. Hit91.9 Bendigo’s
best.
security arrangements for high profile performers and on-air announcers
Keeshia & Tim rallied 63 local schools and businesses to participate in ‘Central Victoria’s Biggest Casual Clothes Day’, raising over $19,000 for
• Take INITIATIVE: Each of us is responsible for exceeding
expectations. We go the extra mile.
• Maximise CREATIVITY: We lead with fresh thinking. We create
winning ideas.
• Have COURAGE: We always show strength and spirit. We stand up
for our beliefs and each other.
and conducting ‘stunts’ for on-air radio content. Measures have been
bushfire affected areas in their region.
implemented in all of our locations to educate our people about
workplace risks associated with COVID-19 and to manage those risks.
An important outcome of SCA’s outsourcing of television playout and
broadcast transmission services has been to reduce the range of
workplace risks for which SCA is directly responsible. Risks relating to
engineers travelling and working in remote areas and at heights on high
• Act with INTEGRITY: We do what’s right and act with transparency
voltage equipment and managing asbestos in old buildings in regional
and honesty. We deliver on our promises.
areas, are now managed directly by specialist service providers.
Diversity and Inclusion
Proactive steps are taken to promote the mental health and wellbeing
of SCA’s people, including a wellbeing portal on the Company intranet,
SCA believes that business performance is enhanced by a diverse
training on managing mental health in the workplace and an employee
workforce where employees are treated with respect and fairness and
assistance program and counselling service.
have equal access to opportunities. SCA aims to provide a living, creative
organisation that understands the diversity of its audiences
Connecting and supporting communities
and advertisers.
SCA’s local news and information services on radio and television keep
SCA achieved the gender diversity targets set by the Board for 30 June
communities up to date on the issues that matter to them, as well as
2020. Women now occupy 40% of senior management positions and
providing local skilled jobs, supporting local businesses, providing
60% of middle management positions at SCA; and 42% of non-executive
local advertising opportunities and supporting local events, charities
directors are female. The results achieved reflect programs introduced
and community initiatives. SCA produces and broadcasts local news
in recent years to encourage flexible work practices to help our people
bulletins in Tasmania on the Seven network; and in conjunction with the
– both men and women – to successfully manage their career and family
Nine network, SCA broadcasts local television news bulletins in regional
life through a practical work-life balance.
Victoria, Southern New South Wales and regional Queensland.
SCA has rolled out an enhanced workplace flexibility framework to ensure
SCA prides itself on its ‘fiercely local’ engagement with communities and
the Company continues to prioritise employee wellbeing while delivering
the support has never been more important than over the last 12 months.
exceptional outcomes for our audiences, clients and shareholders.
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
SCA made it a goal this year through its ‘My Community’ major research
study to truly understand the values of local communities. The study
revealed that 89% of regional SCA audiences agree that local radio stations
are strong supporters of the community and 81% agree that radio keeps
them informed about products and services that are relevant to them.
the Australian School of Applied Management to provide leaders with
In addition to the SCA Engage national charity program, SCA is an
• The bushfires in Port Macquarie were more
devastating than anyone anticipated and
local stations Hit102.3 and Triple M 100.7
moved away from network programming
to deliver local news, information and
emergency broadcasts, with real-time calls
and updates from the local community. As
the community epicentre for emergency
information, the two stations single-cast
as conditions worsened and some people
worked 28 days straight to keep the
community informed.
• SCA launched a national campaign to
encourage communities to support local
businesses impacted by COVID-19 by
‘shopping local’. Shop Local is the largest
national and locally voiced campaign SCA has
ever rolled out, with over $1 million of SCA’s
owned media invested in the campaign. It
featured ads voiced by over 70 Triple M and
Hit network talent around Australia, from local
Breakfast show hosts such Pricey on Triple
M Townsville, to Carrie Bickmore and Tommy
Little on Hit national Drive. In addition, each
local station gave local small businesses the
opportunity to receive a ‘shout out’ on-air and
across social media.
executive level training on leading in times of change, executing strategy,
active contributor to communities. Here are just a few examples of SCA
• The Fox Melbourne – Fifi, Fev & Byron saw first-hand the impact of COVID-19 on the elderly in their community. For five weeks at the height of
inspiring trust and coaching for high performance. Structured learning and
engaging with local communities, resulting in meaningful connections and
the crisis, the team engaged the support of clients of the show to put together and deliver care packs for the elderly and vulnerable as well as
development programs, and access to an internal mentoring program, are
contributions, from the past year:
frontline workers in the Melbourne area unable to access basic essential supermarket items.
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Governance
SCA Engage
• Hit103.1 Townsville – In its fifth year, ‘Hit
SCA Engage is SCA’s national charity program. Over two-year cycles, SCA
Despite this suspension, several long-term partners in Tasmania continued
the Hill’ raised over $60,000 for the local
works with selected charities to help their work, while engaging its own
with fundraising activities. Woolworths generously donated $25,000 direct
Headspace branch to shift the stigma
people to build stronger communities. SCA provides support through
to GM5fK due to the inability to fundraise within stores. The Aurora Australis,
around suicide and mental health.
radio and television advertising; digital, social and research support; event
Australian icebreaker and research ship, donated $10,000 – presenting the
and meeting spaces; brainstorming sessions; concert and sporting tickets;
cheque in the front of the boat at Salamanca Wharf in Hobart.
on-air interviews; and staff volunteering.
The Tasmanian Government teamed up with Lyden Builders, Clennett’s
SCA’s charity partners until 30 June 2021 are Beyond Blue and The
Mitre 10 and more than 60 local tradespeople and suppliers to construct
Smith Family.
To date, SCA has provided more than $64 million in community service
announcement (CSA) airtime to these charities.
SCA team members from around the country have shared their skills and
time to implement activations by creating CSAs, and participating in work
• Triple M 104.5 Brisbane – In support of
experience programs and fundraising activities.
Rural Aid The Big Breakfast team headed
out west to broadcast their show on the
road for four days. Their aim was to raise
money, create awareness and connect with
the communities experiencing extreme
FY2020 Highlights
Beyond Blue
• ‘No Talk Day’ on Triple M on 1 July 2020
‘Madison House’. The house was a unique purpose-built project
supporting one special needs Hobart family and dedicated to the memory
of Madison Lyden – daughter of Andy Lyden – who tragically lost her life
in a traffic accident in New York in 2018. Triple M followed construction
with regular on-air updates and a dedicated website page. The house
was completed and handed over by Tasmanian Housing Minister, Roger
Jaensch, in July 2020 with $372,000 donated to Give Me 5 for Kids.
Beyond Blue Chief Community Officer, Patrice O’Brien
“Our partnership with SCA has exceeded all expectations over the past
18 months. Not only has it been critical in amplifying Beyond Blue’s key
behavioural change campaign and support services; in this time SCA
drought. Nick Cody and Mel Buttle hosted
• Triple M ‘Rush Hour’ show – NRL Beyond Blue Cup
has created its own mental health and wellbeing initiatives, such as the
nightly comedy shows and helped to
raise $90,000 for Rural Aid to assist rural
Queenslanders doing it tough.
• Assistance with developing SCA’s first mental health strategy
Wellness Connection and Triple M’s ‘No Talk Day’, which demonstrate the
• SCA radio stations supporting World Mental Health Day (10 October)
• SCA and Beyond Blue working closely during the COVID-19
genuine passion and commitment SCA has to supporting its staff, listeners
and the broader community.”
pandemic to ensure mental health support messaging is a priority.
The Smith Family CEO, Dr Lisa O’Brien
• The Studio at SCA – Our creative team
• Hit network support of Toy and Book Appeal (53 staff utilised their
enhanced the experience for visitors to the
volunteer leave day for the Toy and Book appeal experience in
‘Last Seen’ exhibition – a fundraising initiative
Sydney, Melbourne, Hobart, Perth, Brisbane and Adelaide)
The Smith Family
“Since we joined forces with SCA in January 2019, they have generously
provided us with more than $30 million worth of in-kind media support
across their radio, TV and digital networks. This has enabled us to deepen
the public’s knowledge and awareness of poverty in Australia and its
direct impact on a child’s schooling.
for Queensland Eye Institute Foundation.
Last Seen paired blind or vision-impaired
Australians with artists to create paintings of
their last significant visual memory. The Studio
team created unique soundscapes to bring
the paintings to life for a more immersive
experience. The Studio at SCA’s collaboration
with Alkira and Publicis Worldwide won a
Webby award from the International Academy
of Digital Arts and Sciences.
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).
• Triple M network national support of Christmas Appeal
• Hit network national support of Back to School campaign
“Together, we are helping thousands of Australian children improve their
educational outcomes, so they can create a better future for themselves.”
• SCA hosted Work Inspiration (work experience) events for high school
Tasmanian Health Service Chief Executive Hospitals –
students in Hobart, Adelaide, Perth, Cairns, Melbourne and Sydney.
South, Susan Gannon
SCA has run the annual Give Me 5 for Kids (GM5fK) 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
“On behalf of the staff and patients at the Royal Hobart Hospital (RHH)
we wish to say a huge thank you to the 107.3 Triple M Give Me 5 for
Kids team, local businesses such as Lyden Builders and the Tasmanian
community for their fantastic support to the health and wellbeing of
babies, children and teenagers in Tasmania.
outcomes for young patients, from acquiring vital medical equipment
“The team has continued to exceed expectations every year and this
through to providing clown doctor services to cheer up sick children.
amazing donation is a direct result of the energy and commitment to raise
In March 2020, the decision was made to suspend GM5fK fundraising
activities because of the impact of COVID-19.
funds to allow us to continue in our work to provide world-class care to
sick children and support to their families.”
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The Board and Leadership Team
ROBERT MURRAY – CHAIRMAN & INDEPENDENT DIRECTOR
PETER BUSH – INDEPENDENT DIRECTOR
Appointed: 1 September 2014, most recently elected by shareholders: 24 October 2017
Board Committees: Nomination Committee (Chair), People & Culture Committee
Rob Murray became Chair of the Company on 19 August 2020.
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.
Appointed: 25 February 2015, most recently elected by shareholders: 23 October 2018
Peter Bush stood down as Chair of the Company on 19 August 2020.
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
HELEN NASH – INDEPENDENT DIRECTOR
Appointed: 26 September 2005, most recently elected by shareholders: 23 October 2018
Appointed: 23 April 2015, most recently elected by shareholders: 24 October 2017
Until July 2010, Leon was a senior corporate partner at Freehills (now Herbert Smith Freehills) specialising in
Board Committees: Audit & Risk Committee, People & Culture Committee (Chair), Nomination Committee
mergers and acquisitions, public finance and corporate reorganisations. Until February 2014, Leon held the
Helen Nash has more than 20 years’ executive experience in consumer packaged goods, media and quick
positions of Vice Chairman and Managing Director with Merrill Lynch Markets (Australia) Pty Limited (a subsidiary
service restaurants. As Chief Operating Officer at McDonald’s Australia, she oversaw restaurant operations,
of Bank of America) with responsibility for the financial institutions group and mergers and acquisitions. As a
marketing, menu, insights and research and information technology. This mix of strategic and operational
principal of BCC Partners, Leon now offers strategic and financial advice to a portfolio of private, public and
experience allows Helen to bring broad commercial skills and acumen, as well as a consumer focus, to the
family businesses.
Board. Helen also brings robust financial skills to her role having initially trained in the UK as a Certified
Leon brings broad corporate and strategic expertise to the Board’s deliberations. As the Company’s longest-
Management Accountant.
serving director, his corporate knowledge has been invaluable in bedding down the significant renewal since
Since transitioning to her non-executive career in 2013, Helen has served as a director of companies in a range
2014 of both the Board and the senior leadership team.
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.
GLEN BOREHAM AM – INDEPENDENT DIRECTOR
MELANIE WILLIS – INDEPENDENT DIRECTOR
Appointed: 1 September 2014, most recently elected by shareholders: 20 October 2019
Board Committees: Audit & Risk Committee, People & Culture Committee, Nomination 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.
Appointed: 26 May 2016, most recently elected by shareholders: 20 October 2019
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, QBE Insurance
(AusPac), and Chief Executive Women and from her former positions as a director of Mantra, Pepper Group and
Ardent Leisure. Melanie previously chaired the audit and risk Committee at Mantra and was a member of the audit
committee at Pepper Group. She currently chairs the risk committee and is a member of the audit committee at
Challenger, and chairs the audit committee and people and culture committee at Paypal Australia.
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The Board and Leadership Team
CAROLE CAMPBELL – INDEPENDENT DIRECTOR
Appointed 1 September 2020
Board Committees: Audit & Risk Committee
Carole Campbell has over 30 years’ financial executive experience in a diverse range of industries including
professional services, financial services, media, mining and industrial services. Carole started her career with
KPMG and has held executive roles with Macquarie Group, Westpac Institutional Bank, Seven West Media, Bis
Industries and Merivale.
Carole transitioned to a non-executive career in 2018 and is a non-executive director of FlexiGroup Limited
where she chairs the audit committee and of IVE Group Ltd where she chairs the audit, risk and compliance
committee. She is also Deputy Chair of Council of the Australian Film Television and Radio School.
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
Carole is a Fellow of Chartered Accountants Australia and New Zealand and brings extensive experience in
for ensuring a strong and effective governance framework exists.
accounting, treasury, finance and risk management to her role on the Board and the Audit & Risk Committee.
GRANT BLACKLEY – MANAGING DIRECTOR
Appointed: 29 June 2015
Most recently elected by shareholders: 29 October 2015
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
Grant Blackley has enjoyed a distinguished career with more than 30 years’ experience in the media and
and media organisations. John was COO at Football Federation Australia from 2013 to 2015 where his role
entertainment sectors. Grant joined the Board in June 2015 as Chief Executive Officer and Managing Director
encompassed strategy and media rights. Prior to that role John spent over 16 years in various Executive and
and is responsible for leading the strategic and operational performance of the company. Grant is the Chairman
Director roles at Ten Network Holdings Limited including over eight years as Group CFO. John has a background
of Commercial Radio Australia and a director of the Australian Association of National Advertisers. He has in the
as a Chartered Accountant and commenced his career at KPMG where he progressed to the role of Manager.
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
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.
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.
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Financial
Report
The Board and Leadership Team
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 & Operations and
Television Broadcast Engineering & Operations. Stephen also has management responsibility for the Project
Management Office and Procurement functions.
NIKKI CLARKSON – CHIEF MARKETING AND COMMUNICATIONS OFFICER
Appointed: January 2020
Nikki Clarkson is an experienced marketing and communications executive with over 20 years of proven, award
winning experience across multiple industries. Prior to joining the Leadership Team, Nikki held the position
of Head of Marketing and Communication at SCA for 10 years and has also held senior executive positions in
creative advertising agencies including Clemenger Harvie Edge.
As Chief Marketing Officer, Nikki is responsible for all marketing and communication strategy and execution
for SCA’s radio and TV brands, all on-demand brands, trade and corporate marketing and group corporate
communications and publicity.
DAVE CAMERON – CHIEF CONTENT OFFICER
Appointed: January 2020
Dave Cameron has been with SCA for over 25 years and brings to the role of Chief Content Officer a wealth of
experience and expertise in content strategy, programming and premium talent management. Dave has spent
several years in Content and Music Director roles and prior to his appointment to Chief Content Officer held the
position of General Manager of the Melbourne office.
As Chief Content Officer, Dave is responsible for overseeing and delivering strategic leadership and creative
excellence across all of SCA’s content initiatives including its 99 AM, FM, DAB+ radio stations and all its digital
and on-demand audio content.
24
Southern Cross Austereo
Annual Report
2020
25
Contents
Directors’ Report
25
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
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Key Numbers
Capital Management
Group Structure
Other Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Additional Stock Exchange Information
Corporate Directory
25
25
25
28
28
28
28
28
28
28
29
30
31
32
50
52
53
54
55
57
72
80
83
90
91
97
98
Directors’ Report
For the year ended 30 June 2020
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 2020 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 2020. 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 until 19 August 2020)
– Rob Murray (Chairman from 19 August 2020)
– Leon Pasternak (Deputy Chairman)
– Grant Blackley
– Glen Boreham
– Helen Nash
– Melanie Willis
At the Board meeting on 19 August 2020 Peter Bush stepped down as
Chairman and Rob Murray was elected by the Board as Chairman.
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 $540.2 million, a decrease of
18.2% on the prior year revenues of $660.1 million, and Earnings
before Interest, Taxes, Depreciation and Amortisation (‘EBITDA’) of
$108.2 million, a decrease of 30.9% on prior year EBITDA, (before loss
on assets held for sale), of $156.6 million, due to weak conditions in
advertising markets in the earlier part of the year, and in the fourth
quarter due to the COVID-19 health crisis. Net profit after tax was
$25.1 million for the year ended 30 June 2020, from a net loss after tax
of $91.4 million for the same period in the prior year. The current period
results were impacted by a change in the accounting policy following
the adoption of AASB 16 Leases, as disclosed in note 29.
EBITDA is a measure that, in the opinion of the Directors, is a useful
supplement to net profit in understanding the cash flow generated from
operations and available for payment of income taxes, debt service
and capital expenditure. EBITDA is useful to investors because analysts
and other members of the investment community largely view EBITDA
as a widely recognised measure of operating performance. EBITDA
disclosed within the Directors’ Report is equivalent to ‘Profit before
depreciation, amortisation, interest, fair value movements on financial
derivatives and income tax expense for the half year’ included within
the Statement of Comprehensive Income.
Significant Items
During 2020, the Group recognised restructuring charges of
$2.9 million, which related to the outsourcing of transmission services
and cost out programs. The Group also recognised the impairment
against investments of $6.1 million, following assessments that their
estimated recoverable amounts were less than their carrying values,
as a result of the economic impacts of the COVID-19 pandemic.
JobKeeper Payment
As part of its response to COVID-19, in March 2020 the Australian
Government announced various stimulus measures resulting from the
economic fallout from the coronavirus lockdown. One such stimulus
measure was the payment of subsidies to qualifying employers under
the JobKeeper Payment scheme (‘JobKeeper’). The initial JobKeeper
payments are a wage subsidy whereby employers who qualify for
the stimulus receive $1,500 per fortnight for each eligible employee
who was employed by the company during the period April 2020 to
September 2020.
The Group has determined that it is eligible to receive the initial
JobKeeper payments, which totalled $16.1 million in the period
to 30 June 2020.
On 21 July 2020 the Australian Government announced an extension
of the JobKeeper Payment scheme to 28 March 2021 at lower rates.
Qualification for the extension scheme is dependent on future events,
therefore the Group is unable to determine whether it will qualify for
any or all of the payments beyond 27 September 2020.
26
27
Annual Report2020Southern Cross Austereo Public Interest News Gathering program
On 29 June 2020, the Group announced it had been found eligible
for funding of approximately $10 million under the Commonwealth
Government’s Public Interest News Gathering (PING) program.
The grant to eligible regional media businesses will be deployed
across the 12-month period from 1 July 2020.
Segment Profit and Loss
Audio
Television
Corporate
Total Revenue
EBITDA
Audio
Television
Corporate
Total EBITDA
2020
$’m
370.5
169.5
0.2
540.2
108.5
23.9
(24.2)
108.2
2019
$’m
452.4
207.3
0.4
660.1
148.7
25.2
(26.5)
147.4
Variance
(18.1%)
(18.2%)
(60.9%)
(18.2%)
(27.0%)
(5.2%)
8.7%
(26.6%)
Group NPAT
25.1
(91.4)
N/A
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. Following a
rebranding of the Hit Network in July 2020, the network remains
female skewed but the core demographic has been increased towards
people aged 30 to 54.
The Audio business saw revenue fall by 18.1%, which led to EBITDA
decline of 27.0%, with declines in both the Australian capital cities and
regional Australia.
The metropolitan free-to-air radio advertising market decreased
20.2% year on year, which combined with a fall in market share
led to a 25.3% decline in the Group’s metro radio advertising
revenues. Revenues from digital audio streaming and podcasting
doubled to $7.1 million and are expected to contribute to earnings
growth in FY2021.
Regional radio performed somewhat better, although advertising
revenues were down by 13.1% on 2019. The decline in revenues
was shared evenly, with both national agency and local revenues down
13.1% as a result of the reduction in the advertising market as a result of
the economic impact of COVID-19.
Audio expenses fell by 14.0%, or 9.8% excluding the impact of AASB 16
and significant items, as a result of JobKeeper payments and other
reductions in payroll costs due to pay reductions and workforce
planning in the last quarter of FY2020.
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
exacerbated by the impact of COVID-19, which led to an 18.2% decline
in Television revenues. As a result, despite the JobKeeper payments
and other reductions in payroll costs due to pay reductions and
workforce planning in the last quarter of FY2020, Television EBITDA
declined by 40.5%.
Corporate
The Corporate function comprises the Group-wide centralised
functions of the Group, including the Group-wide technology function.
Corporate expenses decreased due to JobKeeper payments and
other reductions in payroll costs due to pay reductions and workforce
planning in the last quarter of FY2020, partly offset by increasing
insurance costs.
Financial position
The Group raised $168.6 million in an equity raising completed in
May 2020 as part of a range of actions to help strengthen its financial
position following the economic impact of the COVID-19 pandemic
on its operations. As a result the Group’s net debt reduced by 55.0%
on 2019 to finish the year at $131.6 million. The Group’s key leverage
ratio improved to 1.24 times, down from 1.76 times in June 2019, while
interest cover reduced to 8.38 times, down from 13.03 times in June
2019, still significantly above the covenant of 3.0 times, despite the
reduction in performance due to COVID-19.
Strategic update
In FY2019 the Group refined its corporate strategy to have the
following key objectives:
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 COVID-19 health crisis has led the Board and management to
review the corporate strategy to ascertain what changes should be
made in light of the evolving landscape. The COVID-19 pandemic
is altering the behaviours of consumers and is accelerating the
digitalisation of many facets of people’s lives. SCA’s updated strategy
is still in the process of being developed but SCA continues to focus
on the development of its audio business and the development of its
digital product set. This involves enabling the distribution of its existing
broadcast assets across all platforms coupled with the ongoing
development of new digital audio products. SCA’s podcasting network,
PodcastOne Australia, continues to grow with revenues increasing by
96% in the financial year.
As well as developing content for distribution across digital networks,
SCA has also implemented technology to enable digital audio to be sold
on an addressable basis using Instream technology. SCA’s partnership
with the global music streaming platform, Soundcloud, has expanded
the available pool of digital audio inventory that SCA is able to sell.
In addition to SCA’s focus on being the leading audio company in
Australia, the Group continues to work on growing the proportion of
national advertising that gets invested in regional markets. This is being
achieved through a collaborative industry initiative, ‘Boomtown’, which
SCA is delivering in conjunction with its regional industry peers in
television, radio, print and digital assets.
2021 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 increased
production and monetisation of digital audio. In Television, SCA will seek to achieve further improvements in power ratio through its sales
performance whilst optimising earnings following the completion of the outsourcing of both playout and transmission services. Financial
performance for the Group in FY2021 will be impacted by the ongoing COVID-19 crisis and the pace of recovery will be influenced by the duration
and extent of the health related restrictions in each market in which the Group operates.
Material Risks
Business and operational risks that could affect the achievement of the Group’s financial prospects include the following risks:
Risk
Economic shape of recovery
reduces shareholder
returns during the economic
recovery phase of the
COVID-19 pandemic
SCA radio networks are
not positioned to maximise
market share and SCA is
unable to find and retain
market leading talent
New products emerge that
are more compelling than
Linear Radio
Mitigation Strategies
COVID-19 has severely impacted economic activity, with declines in certain sectors and with significant impacts on
the Australian economy, increasing unemployment and economic contraction due to the pandemic.
SCA has strengthened its capital structure, with the $169 million equity raise in April 2020, and implemented many
measures to improve its cash flow.
The Group has taken a series of measures to improve its operating structure and will be taking further steps that
will reduce its cost base in FY2021 and which will create a leaner operating model for the future.
Listener behaviours and tastes change over time, which requires networks to adapt and position themselves to
ensure they continue to have strong appeal to broad audience segments.
SCA has been reviewing its Hit and Triple M brands and is developing strategies for each network for
implementation in FY2021.
In July 2020 the Group announced a rebranding of the Hit Network to ensure that it continues to appeal to broad
demographic segments and with a consistent approach across the network.
Finding and retaining market leading 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.
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.
SCA has core expertise in the development of market leading content and constantly reviews the evolving
distribution landscape to understand how it can continue to serve market leading content through new and
innovative products.
Examples of new product innovation include:
– SCA’s website and apps, which provide personalisation for signed-in users;
– PodcastOne Australia 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 over 85 creators and
monetisation is growing as audiences and advertisers embrace the medium; and
– SCA is also working on new digital audio products to continue to expand its offering to consumers and SCA
also works with global technology platforms to broaden the distribution of its content.
Global technology platforms
alter the distribution
landscape that leads
to a loss of revenue
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.
1 AppAnnie.
28
29
Annual Report2020Southern Cross AustereoDirectors’ ReportFor the year ended 30 June 2020 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 25.
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 2019 Ordinary
Interim 2020 Ordinary
Cents
per share
4.00
–
Total Amount
$’m Date of Payment
8 October 2019
30.8
–
–
On 6 April 2020, the Group announced the cancellation of the 2020
interim dividend to maximise liquidity in response to the business
impacts of the COVID-19 pandemic. Further the Group confirmed there
will be no final dividend paid for the year ended 30 June 2020.
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 28
‘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 $1,425,241 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.
Information on Directors
Chairman
Robert Murray
Appointed 1 September 2014
Most recently elected by shareholders: 24 October 2017
Board Committees: People & Culture Committee, Nomination Committee
Rob became Chair of the Company on 19 August 2020.
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
Peter Bush
Appointed 25 February 2015
Most recently elected by shareholders: 23 October 2018
Board Committees: Chairman, Nomination Committee
Peter stood down as Chair of the Company on 19 August 2020.
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 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
Appointed 26 September 2005
Leon Pasternak
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.
30
31
Annual Report2020Southern Cross AustereoDirectors’ ReportFor the year ended 30 June 2020 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.
During the year, members of the Nomination Committee met informally to discuss Board succession and the Board engaged Egon Zehnder
to help with succession matters. The Nomination Committee has worked with Egon Zehnder to develop a shortlist of candidates for future
appointment as Non-executive Directors.
Director
Peter Bush2
Leon Pasternak
Grant Blackley
Glen Boreham
Rob Murray
Helen Nash
Melanie Willis
Board2
Audit & Risk
People & Culture
Meetings of Committees
Attended
16
15
16
16
16
16
16
Held1
16
16
16
16
16
16
16
Attended
4
3
4
4
2
4
4
Held1
*
*
*
4
*
4
4
Attended
3
3
3
3
3
3
3
Held1
*
*
*
3
3
3
3
1 This refers to the number of meetings held during the year while the Director held office or was a member of the relevant committee.
2 Eight Board meetings were originally scheduled during the year. Additional meetings were held for the purposes of the equity raising conducted in April and May 2020
and to monitor the Company’s financial and operational performance under the impact of the COVID-19 health crisis and the associated government restrictions.
* Not a member of the relevant committee during the year.
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 Champions of Change group. Glen is a Member of the Order of Australia for services to business and the arts.
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 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.
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 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, QBE Insurance
(AusPac) and Chief Executive Women and from her former positions as a director of Mantra, Pepper Group and Ardent
Leisure. Melanie previously chaired the audit and risk committee at Mantra and was a member of the audit committee
at Pepper Group. She currently chairs the risk committee and is a member of the audit committee at Challenger, and
chairs the audit committee and people and culture committee at PayPal Australia.
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.
32
33
Annual Report2020Southern Cross AustereoDirectors’ ReportFor the year ended 30 June 2020 Remuneration Report
For the year ended 30 June 2020
Remuneration Report
For the year ended 30 June 2020
Letter from the People & Culture Committee
Overview
On behalf of the Board, I am pleased to present the Company’s 2020
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).
Shareholders will recall that the Company’s STI plan applies a balanced
scorecard to assessment of the performance of the CEO and other
leadership executives (Executive KMP) 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. STI awards for the CEO and other members of the senior
leadership team are settled partly in cash and partly in equity.
The Board sets performance conditions each year under the
Company’s LTI plan. Since FY2018, those performance conditions have
been based on the Company’s earnings per share (EPS) and return
on invested capital (ROIC) over a performance period of three years.
Vested awards under the LTI plan are settled in equity.
The CEO is required to accumulate a minimum shareholding
with a value equivalent to 100% of the CEO’s fixed remuneration
and other leadership executives are required to accumulate a
minimum shareholding with a value equivalent to 50% of their
fixed remuneration. All leadership executives subscribed for their
full entitlements in the equity raising conducted during the year.
Details of shares held by leadership executives are provided in the
Remuneration Report.
Remuneration impacts of COVID-19
The COVID-19 health crisis and the measures implemented by Federal,
State and Territory Governments in response had a severe impact
on the Company’s business and operations during the year and will
continue to do so in the year ahead. The Board and the Company’s
senior leadership team took decisive actions to enable the Company to
trade through the crisis and rebound when the recovery phase begins.
These actions included implementing a temporary across-the-board
reduction of 10% in the fixed remuneration of all Directors, executives,
and employees earning over $68,000, cancelling executive STI awards
and other commissions and bonuses, and cancelling all unvested LTI
awards. These actions did not reflect on the effort or quality of work
by executives during the year; rather they acknowledged the impact
of COVID-19 on the Company’s financial performance and on returns
to the Company’s shareholders. Taking advantage of the Federal
Government’s JobKeeper scheme, management also reduced the
working hours of employees in all functions and locations to match the
available work.
Along with proactive steps taken to strengthen the Company’s balance
sheet and liquidity – including renegotiation of the Company’s banking
facilities and the $169 million equity raising completed in May –
these remuneration initiatives have helped to stabilise the business,
enabling the Board and the senior leadership team to shift to planning
for the future.
Executive remuneration planning for FY2021
In the current uncertain economic environment, it is challenging
to set an annual budget, let alone long term financial targets. For
these reasons, although it has retained the same framework for
executive remuneration, the Board intends to adjust the variable
components to ensure they provide appropriate incentives to drive
performance by management.
It is intended that the current 10% reduction in the fixed remuneration
of executives and Non-executive Directors will be unwound from
1 October 2020. Unless there is significant improvement in business
performance and general economic conditions, it is expected there
will be no other changes in FY2021 to executive fixed remuneration
or the fees of Non-executive Directors. The STI and LTI components
will each continue to be 30% of the CEO’s total remuneration and
generally 30% and 20% respectively of the total remuneration of
other leadership executives. Adjustments may be made to the
remuneration packages of the Chief Content Officer and the Chief
Marketing and Communications Officer to transition the mix of their
remuneration to these percentages. The STI plan will continue to be
assessed in three categories: profitability and financial performance
(40%), high level operational improvements (40%) and cultural and
behavioural influences (20%). The Board has decided to remove the
previous outperformance opportunity for the profitability and financial
performance category in FY2021. This will avoid this opportunity
potentially being triggered by an unexpected improvement in
economic conditions during the year. Removal of the outperformance
opportunity will result in executives’ maximum STI opportunity being
capped at target, representing a reduction of about 30%. STI awards
will continue to be settled partly in cash and partly in equity (25% for
the CEO and 20% for other leadership executives).
The PCC and the Board are in the process of finalising specific goals
within the above categories for Executive KMP in FY2021. Setting
meaningful financial targets is challenged by the ongoing health and
economic impacts of COVID-19 and the uncertain timing and rate of
recovery from those impacts. The Board will consider the STI scorecard
outcome for each executive at the end of FY2021 and will exercise
judgement and discretion where necessary to ensure FY2021 STI
outcomes are appropriate in the context of SCA’s financial performance
and delivery of agreed strategic priorities and outcomes. The Board
will focus on factors that management can influence to deliver superior
results. These will include safety and security of the Company’s people
and workplaces, maintenance and growth of the Company’s market
share in metro and regional radio, revenue to ratings power ratios in
regional television, the development of existing and new digital audio
products, and implementation of a lean and effective operating model
to ensure SCA emerges stronger from the COVID-19 crisis.
The Board believes it is important to foster actions and behaviours by
executives that will deliver long-term success for the Company and
our shareholders. The Board intends that the LTI plan will continue to
operate over a three-year performance period with vesting conditions
that will align with the interests of shareholders in rebuilding value and
resuming a reliable flow of dividends. Because of the challenges of
setting long-term financial targets in the current economic environment,
the Board has not yet finalised the performance conditions that will
apply under the LTI plan for FY2021. The Board expects to do so
shortly and to provide details to shareholders at this year’s AGM
to be held in October.
Board remuneration
As noted above, apart from unwinding the current temporary 10%
reduction in the fees of Non-executive Directors, it is expected there
will be no other changes to the remuneration of Non-executive
Directors in FY2021. Further details of current Board remuneration
arrangements are provided in the Remuneration Report.
The significant fall in the price of the Company’s shares during the
year resulted in the value of the shareholdings of all Non-executive
Directors (other than Leon Pasternak) reducing below the minimum
requirement under the Non-executive Director Share Ownership
Policy. This is despite all Non-executive Directors previously having
acquired sufficient shares and all Non-executive Directors also taking
up their full entitlements in the equity raising conducted during the
year. The Board has resolved that current Non-executive Directors will
be required to re-establish their required minimum shareholding by
30 June 2023. Details of shares held by Non-executive Directors are
provided in the Remuneration Report.
New Non-executive Directors will be required to establish their
minimum shareholding within three years after appointment in
accordance with 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 be designed to achieve that objective. We look forward to your
feedback and to welcoming you to our 2020 Annual General Meeting.
Yours faithfully,
Helen Nash
Chair of the People & Culture Committee
34
35
Annual Report2020Southern Cross Austereo 1. Overview of FY2020 remuneration
This section provides an overview of the remuneration received by Executive KMP and Non-executive Directors in FY2020.
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 statutory remuneration received by Executive KMP in FY2019 and FY2020.
Total remuneration
Short-term
incentive opportunity
Long-term incentive
eligible for vesting1
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 FY2019 and FY2020. 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.
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 Haddad
Chief Technology Officer
Dave Cameron2
Chief Content Officer
Nikki Clarkson3
Chief Marketing and
Communications Officer
Annaliese van Riet4
Chief People and Culture Officer
Guy Dobson5
Chief Content Officer
Total Executive KMP
Year
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Amount
$
788,641
1,869,156
436,772
795,935
438,645
831,750
426,051
764,592
370,645
465,974
180,445
–
135,602
–
102,502
–
–
853,211
2,879,303
5,580,618
Performance-
related
proportion
%
Awarded
%
Forfeited
%
Vested
%
Forfeited
%
0.0
36.5
0.0
29.8
0.0
30.8
0.0
26.8
0.0
19.6
0.0
–
0.0
–
0.0
–
–
(1.3)
0.0
26.2
0.0
90.3
0.0
90.0
0.0
94.5
0.0
78.0
0.0
94.0
0.0
–
0.0
–
0.0
–
–
53.5
0.0
83.4
100.0
9.7
100.0
10.0
100.0
5.5
100.0
22.0
100.0
6.0
100.0
–
100.0
–
100.0
–
–
46.5
100.0
16.6
39.0
71.5
39.0
71.5
39.0
–
39.0
71.5
–
–
–
–
–
–
–
–
–
71.5
17.3
71.5
61.0
28.5
61.0
28.5
61.0
–
61.0
28.5
–
–
–
–
–
–
100.0
–
–
28.5
82.7
28.5
1 The vested and forfeited proportion of LTI entitlements relates only to those LTI entitlements in the FY2017 LTI scheme that were eligible for vesting during the year.
The vesting and forfeited proportions do not relate to the cancelled FY2018, FY2019 and FY2020 LTI schemes.
2 Dave Cameron was appointed as Chief Content Officer and joined the Company’s senior leadership team on 1 January 2020. He was not a KMP during FY2019.
3 Nikki Clarkson was appointed as Chief Marketing and Communications Officer and joined the Company’s senior leadership team on 1 January 2020. She was not a
KMP during FY2019.
4 Annaliese van Riet joined the Company and the Company’s senior leadership team as Chief People and Culture Officer on 20 January 2020. She ceased employment
with the Company on 27 March 2020.
5 Guy Dobson ceased employment with the Company on 4 January 2019.
1.2. Non-executive Directors
The aggregate remuneration of the Company’s Non-executive Directors during the year was $1,111,988, compared to $1,120,500 in FY2019. 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.
Executive KMP
Grant Blackley
John Kelly
Nick McKechnie
Brian Gallagher
Stephen Haddad
Dave Cameron1
Nikki Clarkson1
Annaliese van Riet1
Guy Dobson2
Target remuneration mix
Fixed remuneration
STI
LTI
2020
2019
2020
2019
2020
2019
40%
50%
50%
50%
60%
77%
60%
60%
–
40%
50%
50%
50%
70%
–
–
–
76%
30%
30%
30%
30%
20%
9%
20%
20%
–
30%
25%
25%
25%
15%
–
–
–
12%
30%
20%
20%
20%
20%
14%
20%
20%
–
30%
25%
25%
25%
15%
–
–
–
12%
1 Dave Cameron, Nikki Clarkson and Annaliese van Riet were not Executive KMP during FY2019.
2 Guy Dobson ceased employment with the Company on 4 January 2019.
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.
As disclosed in last year’s financial report, the Board approved increases of between 2.5% and 6.7% in the fixed remuneration of Executive KMP in
FY2020. These adjustments were made before the impact of COVID-19 and were consistent with the Board’s policy of providing executive reward
between the median and 75th percentile of relevant peers according to independent benchmarking.
36
37
Annual Report2020Southern Cross AustereoRemuneration ReportFor the year ended 30 June 2020 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 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.
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. Sales-related targets are
not used as gateway targets. This recognises the significant impact on sales performance of market factors that are
beyond the control of management.
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.
The STI awards of Executive KMP are payable partly in cash and partly in equity. The equity component for the CEO
is 25% of the STI award. The equity component for other Executive KMP is 20% of the STI award.
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 Board may elect to pay the STI award 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 Content 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 FY2020 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 applied for the CEO, CFO and COO.
– Group EBITDA compared with budget: Focuses on the performance of the operating business. This metric
applied 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 applied 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 typically applies for the
Chief Content 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.
The target 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%
Sales
<97.5%
97.5% to 100%
N/a
N/a
% of financial STI payable
0%
Straight-line between 50% and 100%
Progressive scale between 100% and 200%
200%
How is performance
assessed?
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.
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 may be subject to retention under the Senior Executive
Share Ownership Policy until the executive has accumulated the minimum shareholding required under that policy.
38
39
Annual Report2020Southern Cross AustereoRemuneration ReportFor the year ended 30 June 2020 2.3.2 Long-term incentives
The table below outlines details of the Company’s long-term incentive plan.
What is the incentive?
How is each executive’s
entitlement determined?
The LTI plan provides Executive KMP and about 20 other executives 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.
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 are announced to ASX; less
– the amount of any final dividend per share declared as payable in respect of the prior financial year.
How is the
incentive delivered?
To the extent the applicable vesting conditions are satisfied at the end of the applicable 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.
Shares allocated under the LTI plan to Executive KMP may be subject to restrictions on disposal under the Senior
Executive Share Ownership Policy until the executive has accumulated the minimum shareholding required under
that policy.
Is there a gateway?
What are the performance
measures and hurdles?
Each grant under the LTI plan has two equally weighted performance hurdles over the applicable performance
period: Return on Invested Capital (ROIC) and Absolute Earnings per Share (EPS).
What are the performance
measures and hurdles?
(continued)
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 the 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%
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 would have been achieved if the Company’s adjusted
ROIC performance in FY2022 is at or above 8.8%.
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.
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 were eligible to vest according to the following schedule:
ROIC performance in FY2022
Below 8.8%
8.8%
8.8% to 11.2%
At or above 11.2%
% of allocation that vests
Nil
50%
Straight-line vesting between 50% and 100%
100%
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.
Cessation of employment
‘Bad Leavers’ (who resign or are terminated for cause) will forfeit any unvested performance rights, unless
otherwise determined by the Board.
There is no re-testing of performance hurdles under the LTI plan.
Change of control
Clawback
Other features
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.
If a change of control occurs 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.
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 Plan requires
Executive KMP to retain 25% of the shares allocated to them upon vesting of performance rights until they achieve
the required minimum shareholding or cease to be employed by the Company.
40
41
Annual Report2020Southern Cross AustereoRemuneration ReportFor the year ended 30 June 2020 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.
The table below sets out the fees for Non-executive Directors that applied in 2019 and 2020 and those that will apply in 2021. The amounts
shown for 2020 and 2021 do not take account of the temporary 10% reduction in fees between April 2020 and September 2020 in response to
the impact of COVID-19.
Base fees – Annual
Chair1
Deputy Chair1
Other Non-executive Directors
Committee fees – Annual
Audit & Risk Committee – Chair
Audit & Risk Committee – member
People & Culture Committee – Chair1
People & Culture Committee – member
Nomination Committee – Chair1
Nomination Committee – member
2019
$
273,000
176,000
136,500
23,000
15,500
16,500
11,000
16,500
11,000
20202
$
20212
$
273,000
176,000
136,500
23,000
15,500
23,000
15,500
16,500
11,000
273,000
176,000
136,500
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 2019 or 2020 and will not be paid during 2021.
2 Because of the impact on the Company’s business of the COVID-19 health crisis and the lockdown measures implemented by Federal, State and Territory
Governments in response to the crisis, the fees paid to Non-executive Directors for the period from 1 April 2020 to 30 June 2020 were reduced by 10%. This reduction
will continue until 30 September 2020. The above fees relate to the Board approved amounts prior to the 10% reduction.
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
30 June 2020
$’000
540,152
108,232
20.0%
38,294
25,100
4.6%
34,193
6.3%
1.77
4.7%
30 June 2019
$’000
660,088
147,382
22.3%
(129,475)
(91,395)
(13.8%)
73,879
11.2%
6.5
8.9%
30 June 2018
$’000
656,784
158,439
24.1%
2,519
82
0.0%
73,932
11.3%
6.5
9.0%
30 June 2017
$’000
691,021
181,170
26.2%
125,747
107,169
15.5%
107,169
15.5%
9.57
10.4%
30 June 2016
$’000
641,129
169,296
26.4%
113,334
76,657
12.0%
76,653
12.0%
6.84
9.2%
30 June 2020 30 June 2019 30 June 2018 30 June 2017 30 June 2016
$0.97
$1.25
6.25c
$1.25
$0.173
4.00c4
$1.25
$1.25
7.25c
$1.31
$1.25
7.75c
$1.25
$1.31
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 ROIC as a measure
under the LTI Plan in FY2016.
3 On 4 May 2020, the Company completed a $169.6 million equity raising. The equity raising consisted of a pro-rata accelerated non-renouncable rights issue and
placement, resulting in the issue of 1,873,092,080 shares.
4 On 6 April 2020, the Group announced the cancellation of the interim dividend to maximise liquidity in response to the business impacts of the COVID-19 pandemic.
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 performance of the Company’s FY2017 LTI plan over the applicable performance period and,
for this purpose, to determine the Group’s TSR ranking within the comparator group and EPS growth over the applicable performance period.
Deloitte was paid $3,000 for these services.
KPMG was engaged during the year to provide an independent report benchmarking the remuneration of the Company’s Executive KMP and
its Non-executive Directors. This included advice about market practice for share ownership by Executive KMP and the taxation implications for
the Company and executives. KPMG did not make any remuneration recommendations (as defined in the Corporations Act). The remuneration of
the Company’s Executive KMP and Non-executive Directors was adjusted following consideration of that benchmarking report. KPMG was paid
$19,500 for these services.
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.
42
43
Annual Report2020Southern Cross AustereoRemuneration ReportFor the year ended 30 June 2020 3. Remuneration of Executive KMP and Directors during the year
3.1 Total remuneration received by Executive KMP in FY2020 (non-statutory disclosures)
The remuneration in the table below is aligned to the current performance period 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 the current year.
KMP executive
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
Dave Cameron2
Chief Content Officer
Nikki Clarkson3
Chief Marketing and
Communications Officer
Annaliese van Riet4
Chief People and Culture Officer
Guy Dobson5
Chief Content Officer
Total Executive KMP
Cash salary
and fees
$
1,142,762
STI bonus
$
–
1,147,976
527,274
525,251
539,707
541,651
523,857
525,251
366,496
349,249
195,034
–
133,475
–
48,782
–
–
1,005,523
3,477,387
4,094,901
750,227
–
245,554
–
265,489
–
212,995
–
75,200
–
–
–
–
–
–
–
26,733
–
1,576,198
Year
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Non-monetary
benefits
$
Super-
annuation
benefits
$
LTI vested
in the year1
$
Total
$
4,974
5,025
2,705
3,498
4,974
5,025
4,974
5,025
4,974
5,025
1,345
–
1,345
–
924
–
–
2,532
26,215
26,130
21,003
366,057
1,534,796
20,531
21,003
20,531
21,003
20,531
21,003
20,531
21,003
20,531
10,501
–
10,501
–
8,495
–
–
15,399
134,512
118,054
489,272
79,991
244,636
82,701
–
79,991
163,089
–
–
–
–
–
–
–
–
–
163,089
608,740
1,060,086
2,413,031
630,973
1,039,470
648,385
832,696
629,825
926,891
392,473
450,005
206,880
–
145,321
–
58,501
–
–
1,213,276
4,247,154
6,875,369
1 The LTI entitlements that vested during the year were from the FY2017 LTI plan. All share-based payments in the year were equity settled.
2 Dave Cameron was appointed as Chief Content Officer and joined the Company’s senior leadership team on 1 January 2020. He was not a KMP during FY2019.
3 Nikki Clarkson was appointed as Chief Marketing and Communications Officer and joined the Company’s senior leadership team on 1 January 2020. She was not a
KMP during FY2019.
4 Annaliese van Riet joined the Company and the Company’s senior leadership team as Chief People and Culture Officer on 20 January 2020. She ceased employment
with the Company on 27 March 2020.
5 Guy Dobson ceased employment with the Company on 4 January 2019.
3.2 Total remuneration received by Executive KMP in FY2020 (statutory disclosure)
The table below sets out the nature and amount of each major element of the remuneration of each Executive KMP in FY2020 and FY2019.
Short-term employee benefits
Executive
Year
Salary
and fees
$
STI
bonus2
$
Non-
monetary
$
Total
$
2020 1,142,762
1,147,976
2019
–
750,227
4,974 1,147,736
5,025 1,903,228
2020
2019
527,274
525,251
–
245,554
2,705
3,498
529,979
774,303
2020
2019
539,707
541,651
–
265,489
4,974
5,025
544,681
812,165
2020
2019
523,857
525,251
–
212,995
4,974
5,025
528,831
743,271
2020
2019
366,496
349,249
–
75,200
4,974
5,025
371,470
429,474
1,345
–
196,379
–
1,345
–
134,820
–
2020
2019
195,034
–
2020
2019
133,475
–
2020
2019
48,782
–
–
–
–
–
–
–
Grant Blackley
Chief Executive
Officer and
Managing
Director
Nick McKechnie
Chief Financial
Officer
John Kelly
Chief Operating
Officer
Brian Gallagher
Chief Sales
Officer
Stephen Haddad
Chief Technology
Officer
Dave Cameron4
Chief Content
Officer
Nikki Clarkson5
Chief
Marketing and
Communications
Officer
Annaliese
van Riet6
Chief People and
Culture Officer
Guy Dobson7
Chief Content
Officer
Post-
employ-
ment
Super
contrib-
ution
$
21,003
20,531
Long
Service
Leave1
Termin-
ation
benefits
Share-
based
payments
Perfor-
mance
rights3
$
$
$
Total
$
34,970
12,530
– (415,068)
(67,133)
–
788,641
1,869,156
21,003
20,531
21,003
20,531
21,003
20,531
21,003
20,531
10,501
–
10,501
–
20,181
9,102
11,308
8,389
10,611
9,107
6,466
–
(18,817)
–
(578)
–
– (134,391)
(8,001)
–
436,772
795,935
– (138,347)
(9,335)
–
438,645
831,750
– (134,394)
(8,317)
–
426,051
764,592
–
–
–
–
–
–
(28,294)
15,969
370,645
465,974
(7,618)
–
180,445
–
(9,141)
–
135,602
–
Perfor-
mance
related
proportion
%
0.0
36.5
0.0
29.8
0.0
30.8
0.0
26.8
0.0
19.6
0.0
–
0.0
–
0.0
–
–
(1.3)
0.0
26.2
924
–
49,706
–
8,495
–
–
–
44,301
–
–
–
102,502
–
2020
2019
–
325,947
–
26,733
–
2,532
–
355,212
–
15,399
–
–
(159,212) 679,576
–
(37,764)
–
853,211
Total
Executive KMP
2020 3,477,387
2019 3,415,325
–
1,576,198
26,215 3,503,602
26,130 5,017,653
134,512
118,054
64,141
(120,084) 679,576
44,301 (867,253) 2,879,303
5,580,618
(114,581)
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 19 August 2020 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 fair value of the rights recognised as an expense in each
reporting period.
4 Dave Cameron was appointed Chief Content Officer with effect from 1 January 2020. He was not an Executive KMP in FY2019.
5 Nikki Clarkson was appointed Chief Marketing and Communications Officer with effect from 1 January 2020. She was not an Executive KMP in FY2019.
6 Annaliese van Riet joined the Company and the Company’s senior leadership team as Chief People and Culture Officer on 20 January 2020. She ceased employment
with the Company on 27 March 2020.
7 Guy Dobson ceased employment with effect from 4 January 2019.
8 Because of the impact on the Company’s business of the COVID-19 health crisis and the lockdown measures implemented by Federal, State and Territory
Governments in response to the crisis, the Board has cancelled all outstanding performance rights under the LTI plan.
44
45
Annual Report2020Southern Cross AustereoRemuneration ReportFor the year ended 30 June 2020 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
FY2020 and FY2019.
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
$
Non-
monetary
$
245,172
252,469
156,713
160,732
156,047
148,860
145,138
144,748
165,617
163,928
155,821
155,708
1,024,508
1,026,445
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$
245,172
252,469
156,713
160,732
156,047
148,860
145,138
144,748
165,617
163,928
155,821
155,708
1,024,508
1,026,445
Post-
employment
Super
contribution
$
21,003
20,531
14,887
15,268
7,266
14,140
13,787
13,752
15,733
15,572
14,804
14,792
87,480
94,055
Total
$
266,175
273,000
171,600
176,000
163,313
163,000
158,925
158,500
181,350
179,500
170,625
170,500
1,111,988
1,120,500
Year
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
4. Analysis of short-term incentives included in remuneration
4.1 STI performance outcomes
The table below summarises the key performance indicators (KPIs) applicable for each KMP for FY2020. The Board accepted the
recommendation of the CEO that no STI awards be paid for FY2020 because of the effect on the business of the COVID-19 health crisis and the
lockdown measures implemented by Federal, State and Territory Governments in response to the crisis. For this reason, a detailed assessment of
executives’ performance against their respective KPIs was not carried out in FY2020.
Profitability and
financial performance
40%
High level operational improvements
Cultural and behavioural influences
40%
20%
Executive KMP1
Grant Blackley
Measure
Group NPAT
Non-revenue related Group
operating expenses
Nick McKechnie
Group NPAT
Non-revenue related Group
operating expenses
John Kelly
Group NPAT
Non-revenue related costs
Brian Gallagher
Group EBITDA
Radio, regional television and
digital revenues
Sales dept operating expenses
Stephen Haddad
Group EBITDA
Non-revenue related technology
operating expenses
Measure
Deliver corporate strategy; lead
change to focus on capital-minded
investment to create new sustainable
revenue streams; lead development
and optimisation of linear and on-
demand audio content products;
enhance reputation with investors,
financiers and other influencers.
Deliver corporate strategy;
successfully refinance Group debt;
lead change in business focus to
create new sustainable revenue
streams; enhance reputation with
investors, financiers and other
influencers.
Communicate and deliver corporate
strategy; lead development and
optimisation of linear and on-demand
audio content products; continue
development of PodcastOne
Australia; support development of a
knowledge management strategy.
Metro radio power ratio; develop
and drive new strategies to deliver
revenue outperformance in regional
markets; improve monetisation
of PodcastOne Australia and
premium sporting rights; improve
effectiveness of Salesforce to drive
customer acquisition and retention.
Successful migration of TV playout
from Canberra to NPC Media;
successful transition of transmission
services to BAI Communications;
support new smart audio capability
with market-leading infrastructure;
design and lead strategy to improve
sales automation.
Measure
Maintain succession planning for KMP executives;
develop and implement plans to increase diversity
in teams and raise awareness and participation in
innovation program; develop and implement plans
to build constructive behaviours and enhance
culture in own team and across business.
Maintain succession planning for role and direct
reports; develop and implement plans to increase
diversity in teams and raise awareness and
participation in innovation program; develop
and implement plans to build constructive
behaviours and enhance culture in own team
and across business.
Maintain succession planning for role and direct
reports; develop and implement plans to increase
diversity in teams and raise awareness and
participation in innovation program; develop
and implement plans to build constructive
behaviours and enhance culture in own team
and across business.
Maintain succession planning for role and direct
reports; develop and implement plans to increase
diversity in teams and raise awareness and
participation in innovation program; develop
and implement plans to build constructive
behaviours and enhance culture in own team
and across business.
Maintain succession planning for role and direct
reports; develop and implement plans to increase
diversity in teams and raise awareness and
participation in innovation program; develop
and implement plans to build constructive
behaviours and enhance culture in own team
and across business.
1 KPIs were not finalised with Annaliese van Riet during her time as Chief People and Culture Officer. KPIs were also not finalised with Dave Cameron and Nikki Clarkson
between their joining the Company’s senior leadership team on 1 January 2020 and commencement of the effect on the business of the COVID-19 health crisis and the
lockdown measures implemented by Federal, State and Territory Governments in response to the crisis.
4.2 Vesting of STI awards
Having regard to the impact of the COVID-19 crisis on the operations of the Company and returns to shareholders, the Board accepted
management’s recommendation that the executive STI awards for FY2020 be forfeited. These actions did not reflect on the effort or quality of
work by executives during the year; rather they acknowledged the impact of COVID-19 on the Company’s financial performance and on returns to
the Company’s shareholders.
46
47
Annual Report2020Southern Cross AustereoRemuneration ReportFor the year ended 30 June 2020 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
Dave Cameron
Nikki Clarkson
Annaliese van Riet
Total
Number of
rights granted
712,613
189,026
194,045
187,354
111,659
41,820
50,184
52,275
1,538,976
Details for all rights granted in financial year
Grant Date
Face value at grant date
Vesting date
Return on
invested capital
13 September 2019
$1.1956
30 June 2022
Absolute EPS
13 September 2019
$1.1956
30 June 2022
All rights expire on the earlier of their vesting date or termination of the executive’s employment. When an executive ceases employment as
a ‘good leaver’, the executive’s rights will typically terminate on a pro-rata basis according to the executive’s period of service. The rights vest
at the end of the performance period specified at the time of their grant. This was 30 June 2022 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.
Because of the impact on the Company’s business of the COVID-19 health crisis and the lockdown measures implemented by Federal, State
and Territory Governments in response to the crisis, the Board has cancelled all outstanding performance rights under the LTI plan, including the
above rights granted during the year.
5.2 Details of equity incentives affecting current and future remuneration
The table below sets out the vesting profiles of rights held by each Executive KMP as at 30 June 2020 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 Date
Vesting
Date
No. of
Perf Rights
Granted
Value of
Perf Rights
at Grant
Date1
$
No. of
Perf Rights
Vested and
Exercised
During the
Year
Vested
and
Exercised
%
No. of
Perf
Rights
Cancelled
During the
Year3
Forfeited
%2
Cancelled
%
No. of
Perf
Rights
Remaining
at Year End
Value
of Perf
Rights
yet to
Vest
$
Grant
Blackley
Nick
McKechnie
FY20 Plan 01/07/2022
FY19 Plan 01/07/2021
FY18 Plan 01/07/2020
01/07/2019
FY17 Plan
712,613
621,820
660,993
764,151
852,000
831,000
831,000
810,000
Total
FY20 Plan 01/07/2022
FY19 Plan 01/07/2021
FY18 Plan 01/07/2020
01/07/2019
FY17 Plan
2,759,577 3,324,000
189,026 226,000
273,000
204,280
273,000
217,149
177,000
166,981
–
–
–
298,019
298,019
–
–
–
65,123
John
Kelly
Brian
Gallagher
Stephen
Haddad
Dave
Cameron
Nikki
Clarkson
Total
FY20 Plan 01/07/2022
FY19 Plan 01/07/2021
FY18 Plan 01/07/2020
01/07/2019
FY17 Plan
Total
FY20 Plan 01/07/2022
FY19 Plan 01/07/2021
FY18 Plan 01/07/2020
01/07/2019
FY17 Plan
Total
FY20 Plan 01/07/2022
FY19 Plan 01/07/2021
FY18 Plan 01/07/2020
Total
FY20 Plan 01/07/2022
FY19 Plan 01/07/2021
FY18 Plan 01/07/2020
01/07/2019
FY17 Plan
Total
FY20 Plan 01/07/2022
FY19 Plan 01/07/2021
FY18 Plan 01/07/2020
01/07/2019
FY17 Plan
777,436 949,000
232,000
194,045
281,000
210,266
281,000
223,513
183,000
172,642
800,466 977,000
224,000
273,000
273,000
177,000
187,354
204,280
217,149
166,981
775,764 947,000
133,500
80,000
30,000
111,659
59,862
23,863
195,384 243,500
50,000
50,000
50,000
50,000
41,820
37,414
39,771
47,170
166,175 200,000
60,000
60,000
60,000
60,000
50,184
44,897
47,725
56,604
Annaliese
van Riet
Total
FY20 Plan 01/07/2022
199,410 240,000
62,500
52,275
Total
52,275
62,500
65,123
–
–
–
67,330
67,330
–
–
–
65,123
65,123
–
–
–
–
–
–
–
18,396
18,396
–
–
–
22,076
22,076
–
–
No. of
Perf
Rights
Forfeited
During
the Year
–
–
–
466,132
39.0 466,132
–
–
–
101,858
–
–
–
39.0
–
–
–
39.0
39.0
–
–
–
39.0
39.0
–
–
–
39.0
39.0
–
–
–
–
–
–
–
39.0
39.0
–
–
–
39.0
39.0
–
–
101,858
–
–
–
105,312
105,312
–
–
–
101,858
101,858
–
–
–
–
–
–
–
28,774
28,774
–
–
–
34,528
34,528
–
712,613
–
621,820
–
– 660,993
–
61.0
61.0 1,995,426
189,026
–
– 204,280
217,149
–
–
61.0
61.0 610,455
194,045
210,266
223,513
–
–
–
–
61.0
61.0 627,824
–
187,354
– 204,280
217,149
–
–
61.0
61.0 608,783
111,659
59,862
23,863
–
–
–
– 195,384
41,820
–
37,414
–
39,771
–
–
61.0
61.0
–
–
–
61.0
119,005
50,184
44,897
47,725
–
61.0 142,806
62,500
–
100.0
100.0
100.0
–
100.0
100.0
100.0
100.0
–
100.0
100.0
100.0
100.0
–
100.0
100.0
100.0
100.0
–
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
–
100.0
100.0
100.0
100.0
–
100.0
100.0
100.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
62,500
1 The value of rights granted is the fair value of rights 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 or to rights being cancelled by the Board.
3 Because of the impact on the Company’s business of the COVID-19 health crisis and the lockdown measures implemented by Federal, State and Territory
Governments in response to the crisis, the Board has cancelled all outstanding performance rights under the LTI plan.
48
49
Annual Report2020Southern Cross AustereoRemuneration ReportFor the year ended 30 June 2020 5.3 Vesting of rights during the year (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), which was below the vesting gateway of 3%. These outcomes are shown below.
FY2017 LTI plan
Relative TSR performance
Absolute EPS performance
Total
TSR percentile
ranking/EPS CAGR
64th percentile
(1.4%)
% vested
78%
0%
50%
weighting
39.0%
00.0%
39.0%
5.4 Vesting of rights as at 1 July 2020
Performance rights granted under the FY2018 LTI plan were due to be tested in August 2020, following approval of the Company’s financial report
for the year ended 30 June 2020. Performance rights granted under the FY2019 and FY2020 LTI plans were due to be tested in subsequent
years. There were two equally-weighted performance conditions for rights granted under each of these plans: the Company’s ROIC performance
over the performance period and the Company’s EPS performance over the performance period.
Because of the impact on the Company’s business of the COVID-19 health crisis and the lockdown measures implemented by Federal, State and
Territory Governments in response to the crisis, the Board has cancelled all outstanding performance rights under the LTI plan.
As a result, no rights granted under the LTI plan in FY2018, FY2019 or FY2020 will vest. At the end of the year, there were no outstanding rights
eligible for vesting under the LTI plan.
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 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.
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
Dave Cameron1
Nikki Clarkson1
Annaliese van Riet2
Received during the year
On exercise
of LTI
performance
rights
Balance at
start of year
Under
STI Plan
Other changes
during the
year
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
–
–
–
516,140
–
–
–
–
–
–
298,019
65,123
67,331
65,123
–
18,396
22,706
–
536,698
–
–
–
–
–
–
81,393
–
–
–
–
–
–
–
81,393
227,500
2,074,127
361,119
297,684
183,750
298,280
3,442,460
1,083,510
385,216
169,455
440,612
50,250
(18,396)
38,633
–
2,149,280
357,500
3,259,342
484,619
404,932
288,750
407,950
5,203,093
1,685,421
636,768
266,286
575,947
57,750
–
60,709
–
3,282,881
1 Dave Cameron and Nikki Clarkson became Executive KMP during the financial year, on 1 January 2020.
2 Annaliese van Riet’s holdings shown as at the date of cessation of employment on 27 March 2020.
50
51
Annual Report2020Southern Cross AustereoRemuneration ReportFor the year ended 30 June 2020 Auditor’s Independence Declaration
Directors’ report
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 51.
This report is signed in accordance with resolutions of the Directors of Southern Cross Media Group Limited.
Rob Murray
Chairman
Sydney, Australia
20 August 2020
Grant Blackley
Managing Director
Sydney, Australia
20 August 2020
Auditor’s Independence Declaration
As lead auditor for the audit of Southern Cross Media Group Limited for the year ended 30 June 2020,
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.
Trevor Johnston
Partner
PricewaterhouseCoopers
Melbourne
20 August 2020
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.
52
53
Annual Report2020Southern Cross Austereo
Consolidated Statement
of Comprehensive Income
For the year ended 30 June 2020
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)
Note
3
6
4
5
20
4
18
7
16
16
2020
$’000
540,152
(118,269)
(176,410)
(68,718)
(10,758)
(10,349)
(48,691)
–
638
637
108,232
(36,589)
(6,135)
(27,888)
674
38,294
(13,194)
25,100
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)
383
25,483
(4,275)
(95,670)
1.77
1.77
(8.05)
(8.05)
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
54
Consolidated Statement
of Financial Position
As at 30 June 2020
Current assets
Cash and cash equivalents
Receivables
Current tax asset
Assets held for sale
Total current assets
Non-current assets
Receivables
Right-of-use assets
Investments
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
Current liabilities
Payables
Deferred income
Provisions
Borrowings
Lease liability
Derivative financial instruments
Total current liabilities
Non-current liabilities
Deferred income
Provisions
Borrowings
Lease liability
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
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
Note
2020
$’000
2019
$’000
12
13
8
13
29
20
9
10
13
13
13
18
29
19
13
13
18
29
7
19
17
17
271,431
84,384
5,112
–
360,927
13,725
122,868
5,323
96,853
948,047
1,186,816
1,547,743
34,263
8,738
13,913
25,000
6,370
2,353
90,637
92,013
4,687
376,703
126,581
264,096
4,629
868,709
959,346
588,397
1,540,569
(450)
(77,406)
(874,614)
588,099
298
588,397
32,387
127,797
1,527
15,000
176,711
1,419
–
9,015
104,472
917,960
1,032,866
1,209,577
59,961
4,729
17,073
–
–
–
81,763
93,689
9,119
323,524
–
259,537
7,529
693,398
775,161
434,416
1,379,736
496
(77,406)
(868,708)
434,118
298
434,416
55
Annual Report2020Southern Cross Austereo Consolidated Statement of Changes in Equity
For the year ended 30 June 2020
Consolidated Statement of Cash Flows
For the year ended 30 June 2020
Contributed
equity
$’000
Share-based
payment
reserve
$’000
Hedge
reserve
$’000
Other equity
transactions
$’000
(Accumulated
losses)/
retained
profits
$’000
2020
Total equity at 1 July 2019
Profit for the year
Other comprehensive income
Total comprehensive income
1,379,736
–
–
–
5,765
–
–
–
(5,269)
–
383
383
(77,406)
–
–
–
(868,708)
25,100
–
25,100
Total
$’000
434,118
25,100
383
25,483
Transactions with equity
holders in their capacity as
equity holders:
Contributions of equity,
net of transaction costs
Employee share entitlements
Payments on maturity of Long-
Term Incentive Plan
Dividends paid
160,833
–
–
(717)
(612)
–
–
–
–
–
–
Total equity at 30 June 2020
160,833
1,540,569
(1,329)
4,436
–
(4,886)
–
(77,406)
–
–
160,833
(717)
(245)
(30,761)
(31,006)
(874,614)
(857)
(30,761)
128,498
588,099
2019
Contributed
equity
$’000
Share-based
payment
reserve
$’000
Total equity at 1 July 2018
Loss for the year
Other comprehensive income
Total comprehensive income
1,379,736
–
–
–
6,595
–
–
–
Hedge
reserve
$’000
Other equity
transactions
$’000
(994)
–
(4,275)
(4,275)
(77,406)
–
–
–
(Accumulated
losses)/
retained
profits
$’000
(716,992)
(91,395)
–
(91,395)
Total
$’000
590,939
(91,395)
(4,275)
(95,670)
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 2019
–
(270)
–
–
–
(270)
–
–
–
1,379,736
(560)
–
(830)
5,765
–
–
–
(5,269)
–
–
–
(77,406)
(722)
(59,599)
(60,321)
(868,708)
(1,282)
(59,599)
(61,151)
434,118
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Non-
controlling
interest
$’000
298
–
–
–
–
–
–
–
–
298
Non-
controlling
interest
$’000
298
–
–
–
–
–
–
–
298
Total
equity
$’000
434,416
25,100
383
25,483
160,833
(717)
(857)
(30,761)
128,498
588,397
Total
equity
$’000
591,237
(91,395)
(4,275)
(95,670)
(270)
(1,282)
(59,599)
(61,151)
434,416
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
JobKeeper received
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
Payment for acquisition of subsidiary, net of cash acquired
Payments for purchase of intangibles
Disposal of investments and intangibles
Proceeds from sale of property, plant and equipment
Proceeds from sale of operations and assets
Payments for purchase of investment
Dividends received from equity accounted investments
Net cash flows used in investing activities
Cash flows from financing activities
Dividends paid to security holders
Proceeds from borrowings
Repayment of borrowings from external parties
Refinancing costs paid to external parties
Proceeds from issue of shares
Share issue transaction costs
Interest paid to external parties
Principal elements of lease payments
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
2020
$’000
2019
$’000
12
644,850
(534,429)
10,599
674
(18,308)
103,386
(16,686)
(28,700)
(519)
134
1,944
3,220
(2,886)
580
(42,913)
(30,761)
78,000
–
(1,885)
168,578
(7,745)
(20,094)
(7,522)
178,571
239,044
32,387
271,431
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
56
57
Annual Report2020Southern Cross Austereo Key Numbers
Capital Management
Group Structure
Other
1. Summary of Significant
Accounting Policies
14. Capital Management
Objectives
20. Non-Current Assets –
Investments
24. Share-Based Payments
2. Segment Information
15. Dividends Paid and
Proposed
21. Subsidiaries
25. Remuneration of Auditors
3. Revenue
16. Earnings per Share
22. Parent Entity Financial
Information
26. Related Party Disclosures
4. Significant Items
17. Contributed Equity
and Reserves
23. Business Combinations
27. Leases and Other
Commitments
5. Other Income
18. Borrowings
6. JobKeeper Payments
19. Financial Risk
Management
28. Events Occurring after
Balance Date
29. Other Accounting Policies
7.
Income Tax Expense
8. Assets held for Sale
9. Non-Current Assets
– Property, Plant and
Equipment
10. Non-Current Assets –
Intangible Assets
11.
Impairment
12. Cash Flow Information
13. Receivables, Payables,
Deferred Income and
Provisions
58
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.
These financial statements have been prepared on a going concern
basis. The Group has performed an assessment of its ability to continue
as a going concern. The assessment has considered the balance sheet
position, including $271.4 million of cash and cash equivalents at 30
June 2020; forecast performance; and the expectations that the Group
will comply with its debt facility covenants. Based on the assessment,
the Group concluded that these financial statements should be
prepared on a going concern basis.
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 period. Certain balances in
the comparative period have been reclassified to align to the current
period classification. This has resulted in a $8 million reduction in
payables and receivables. This has also resulted in corporate revenue
of $715,000 being reallocated to television revenue.
Principles of consolidation
The consolidated financial statements incorporate the assets and
liabilities of all subsidiaries of the Company as at 30 June 2020 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 10 Non-Current Assets – Intangible Assets
Note 11
Note 13
Impairment
Receivables, Payables, Deferred Income and Provisions,
for Expected Credit Losses
Note 29 Leases
Coronavirus (COVID-19) Impact
COVID-19, which is a respiratory illness caused by a new virus, was
declared a world-wide pandemic by the World Health Organisation
in March 2020. COVID-19, as well as measures to slow the spread of
the virus, have since had a significant impact on global economies
and equity, debt and commodity markets. The Group has considered
the impact of COVID-19 and other market volatility in preparing its
financial statements.
59
Annual Report2020Southern Cross AustereoNotes to the Consolidated Financial StatementsFor the year ended 30 June 2020 1. Summary of Significant Accounting Policies (continued)
As a consequence of COVID-19, management:
– Re-evaluated whether there were any additional areas of judgement or estimation uncertainty;
– Updated its economic outlook, principally for the purposes of input into its expected credit losses through the application of forward-looking
information, but also for the input into the impairment analysis of financial and non-financial assets classes and disclosures such as fair value
disclosures of financial assets and liabilities;
– Reviewed external market communications to identify other COVID-19 related impacts; and
– Reviewed public forecasts and experience from previous downturns for input into the impairment assessment of the Audio CGU.
Further judgements and estimates were required due to COVID-19 and are detailed further in the notes to the financial statements, in particular:
JobKeeper Payments
Impairment
Note 6
Note 11
Note 13
Note 14
Note 19
Note 20 Non-Current Assets – Investments
Receivables, Payables, Deferred Income and Provisions, for Expected credit losses
Capital Management Objectives
Financial Risk Management
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 29.
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 are based on the information reported to the Group CEO and the Company Board of Directors.
The Group has determined that it has two main operating segments being:
– Audio, comprising metro and regional radio, podcasting and other related businesses; and
– Television, comprising the regional television business.
Segment Revenue
National Revenue1
Local Revenue2
Other
Total Revenue
EBITDA/Segment Result on
a pre AASB 16 basis3
AASB 16 Leases impact
Reported EBITDA (including
AASB 16 Leases impact)
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
Audio
Television
Corporate
Consolidated
2020
$’000
370,546
197,766
141,756
31,024
370,546
97,819
10,690
108,509
29.3%
–
–
–
–
–
–
2019
$’000
452,424
254,451
169,399
28,574
452,424
148,646
–
148,646
32.9%
–
–
–
–
–
–
2020
$’000
169,453
95,536
60,749
13,168
169,453
19,566
4,382
23,948
14.1%
–
–
–
–
–
–
2019
$’000
207,273
108,127
82,918
16,228
207,273
25,201
–
25,201
12.2%
(226,883)
–
–
–
–
–
2020
$’000
2019
$’000
153
–
–
153
153
391
–
–
391
391
2020
$’000
540,152
293,302
202,505
44,345
540,152
(24,434)
209
(26,465)
–
92,951
15,281
(24,225)
N/A
(26,465)
N/A
108,232
20.0%
2019
$’000
660,088
362,578
252,317
45,193
660,088
147,382
–
147,382
22.3%
(6,135)
–
–
–
–
–
–
–
–
–
–
–
(6,135)
(36,589)
(226,883)
(30,643)
65,508
(27,214)
(13,194)
(110,144)
(19,331)
38,080
25,100
(91,395)
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 The chief operating decision maker monitors EBITDA on the same basis as before AASB 16 Leases was applied or transitioned to by the Group.
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
2020
$’000
2019
$’000
539,169
983
540,152
656,332
3,756
660,088
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
Under AASB 15 Revenue from Contracts with Customers revenue is recognised when a customer obtains control of the goods or services.
Determining the timing of the transfer of control requires judgement. The Group recognises revenue at the point the underlying performance
obligation has been completed and control of the services or goods passes to the customer.
Revenue represents revenue earned primarily from the sale of television, radio and digital advertising airtime and related activities, including
sponsorship and promotions.
Based on the Group being considered the principal entity in the sale of television, radio and digital advertising, revenue is recognised gross of
rebates and agency commissions. For significant payment terms refer to note 13.
Advertising revenue is recognised at a point in time when the underlying performance obligation has been satisfied, being primarily when the
advertisement is aired.
Sponsorship revenue is included within advertising revenue and the length of the sponsorship can vary in length of time. Revenue is recognised
over the period to which the sponsorship relates.
Production services used to create advertising suitable for broadcast is treated as a separate performance obligation. Production
revenue is recognised at a point in time when the Group has completed the production service, which is likely to be before the relevant
advertising is broadcast.
Included within advertising revenue is the Australian Traffic Network (ATN) contract where revenue is recognised over time. The ATN contract has
been deemed to contain a significant financing component. Revenue from this contract has been recalculated over the 30-year contract period
and has been grossed up to account for interest expense (for further detail refer note 13).
Within advertising revenue there is a significant contract in which the Group acts as an agent selling advertising on behalf of NBN on a net fee
and commissions received basis. The advertising revenue from NBN is made up of fixed and variable consideration. The variable consideration is
based on selling performance relative to audience and market share. Revenue from this contract is recognised over time.
The commission received is accrued over time based on the amount of variable consideration that is considered highly probable, with any
variance recognised at the time of payment.
The Group derives other regular sources of operating revenue from commercial production for advertisers, including facility sharing revenue and
program sharing revenue based on an agreement to share revenue based on a fixed percentage
60
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Annual Report2020Southern Cross AustereoNotes to the Consolidated Financial StatementsFor the year ended 30 June 2020
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.
Income Tax Expense
7.
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:
Impairment of intangibles (refer notes 10, 11)
Derecognition of deferred tax liability on impairment (refer note 7)
Fair value loss on sale of assets held for sale net of tax (refer note 8)
Restructuring charges (after tax)
Impairment of investments (refer note 20)
Modification loss on refinancing (after tax)
Total significant items included in net loss after tax
5. Other Income
Net gain from disposal of assets
Total other income
Net assets disposed
Gross cash consideration
Net gain from disposal of assets before tax
2020
$’000
–
–
–
(2,031)
(6,135)
(927)
(9,093)
2019
$’000
(226,883)
68,065
(6,456)
–
–
–
(165,274)
Consolidated
2020
$’000
638
638
2020
$’000
(1,306)
1,944
638
2019
$’000
1,046
1,046
2019
$’000
(501)
1,547
1,046
6. JobKeeper Payments
As part of its response to COVID-19, in March 2020 the Australian Government announced various stimulus measures resulting from the economic
fallout from the coronavirus lockdown. One such stimulus measure was the payment of subsidies to qualifying employers under the JobKeeper
Payment scheme (‘JobKeeper’) The initial JobKeeper payments are a wage subsidy whereby employers who qualify for the stimulus receive
$1,500 per fortnight for each eligible employee who was employed by the company during the period April 2020 to September 2020.
The Group has determined that it is eligible to receive the initial JobKeeper payments, which totalled $16.1 million in the period to 30 June 2020.
JobKeeper payments are government grants and are accounted for under AASB 120 Accounting for Government Grants and Disclosure of
Government Assistance.
Government grants are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will
comply with all attached conditions.
Government grants shall be recognised as income over the periods necessary to match them with the related costs which they are intended to
compensate. Government grants related to income are deducted in reporting from the related expense.
JobKeeper payments
Employee costs
Total employee costs after JobKeeper payments
Consolidated
2020
$’000
16,059
(192,469)
(176,410)
2019
$’000
–
(205,536)
(205,536)
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
Increase/(decrease) in net deferred tax liabilities
Adjustments for deferred tax of prior periods
Total deferred tax expense
Income tax expense/(credit)
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 expense/(credit)
Deferred Taxes
The balance comprises temporary differences attributable to:
Licences and brands
Employee benefits
Provisions
Interest rate swaps
Right-of-use assets
Lease liabilities
Deferred revenue
Other
Net balance disclosed as deferred tax liability
Consolidated
2020
$’000
2019
$’000
11,817
2,978
14,795
2,032
(3,633)
(1,601)
13,194
38,294
11,488
1,841
(191)
900
(189)
(655)
13,194
29,762
861
30,623
(68,077)
(626)
(68,703)
(38,080)
(129,475)
(38,843)
–
(216)
1,200
(456)
235
(38,080)
Consolidated
2020
$’000
2019
$’000
(279,130)
4,900
608
2,095
(37,859)
39,885
2,497
2,908
(264,096)
(273,206)
5,834
1,952
2,259
–
–
1,974
1,650
(259,537)
For the year ended 30 June 2020, the Company had $0.2 million income tax expense (2019: $1.8 million of income tax benefit) recognised directly
in equity in relation to cash flow hedges, with a corresponding deferred tax liability (2019: asset) being recognised. There are $59.319 million
available unused tax losses on the capital account for which no deferred tax asset has been recognised (2019: $58.400 million). There are no
other unused tax losses for which no deferred tax asset has been recognised.
62
63
Annual Report2020Southern Cross AustereoNotes to the Consolidated Financial StatementsFor the year ended 30 June 2020 Income Tax Expense (continued)
7.
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.
From 1 July 2019, the Group adopted AASB 16 Leases using the modified retrospective approach with no restatement of prior year comparative
information. Deferred tax assets and liabilities are recognised for temporary differences arising from right-of-use assets and lease liabilities
separately, as management do not consider the initial recognition exemption in AASB 112 Income Taxes applies to transactions that give rise to
both an asset and liability. The net deferred tax amount will not be nil, as the carrying value of the lease liability is different to the right-of-use asset.
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 22.
8. Assets Held for Sale
On 6 August 2019, the Group announced the sale of its existing transmission assets and outsourced the provision of transmission services to
Broadcast Australia. The sale was completed on 2 September 2019, with no gain or loss on the disposal of assets held for sale. On 2 September
2019, the Group paid $15 million to Broadcast Australia for the outsourcing of its transmission services.
Assets held for sale
Total assets held for sale
2020
$’000
–
–
2019
$’000
15,000
15,000
9. Non-Current Assets – Property, Plant and Equipment
Consolidated
2020
Cost
Accumulated depreciation expense
Net carrying amount
Movement
Net carrying amount at beginning of year
Additions
Acquisition of subsidiaries
Disposals
Depreciation expense
Transfers
Net carrying amount at end of year
Consolidated
2019
Cost
Accumulated depreciation expense
Net carrying amount
Movement
Net carrying amount at beginning of year
Additions
Disposals
Transfer to assets held for sale
Depreciation expense
Transfers
Net carrying amount at end of year
Land and
Buildings
$’000
31,598
(12,078)
19,520
21,252
1,661
99
(1,822)
(1,670)
–
19,520
Land and
Buildings
$’000
32,585
(11,333)
21,252
22,580
140
(470)
–
(998)
–
21,252
Leasehold
Improvements
$’000
50,871
(27,729)
23,142
23,426
2,859
–
–
(3,143)
–
23,142
Leasehold
Improvements
$’000
50,106
(26,680)
23,426
17,165
9,051
(58)
–
(2,732)
–
23,426
Plant and
Equipment
$’000
Assets under
construction
$’000
262,683
(213,630)
49,053
54,108
8,858
618
(368)
(18,174)
4,011
49,053
5,138
–
5,138
5,686
3,463
–
–
–
(4,011)
5,138
Plant and
Equipment
$’000
Assets under
construction
$’000
289,651
(235,543)
54,108
80,095
13,591
(481)
(23,074)
(26,313)
10,290
54,108
5,686
–
5,686
10,767
5,209
–
–
–
(10,290)
5,686
Total
$’000
350,290
(253,437)
96,853
104,472
16,841
717
(2,190)
(22,987)
–
96,853
Total
$’000
378,028
(273,556)
104,472
130,607
27,991
(1,009)
(23,074)
(30,043)
–
104,472
Recognition and Measurement
Property, Plant and Equipment at Cost
Property, plant and equipment is recorded at cost less accumulated depreciation and cumulative impairment charges. Cost includes those costs
directly attributable to bringing the assets into the location and working condition necessary for the asset to be capable of operating in the
manner intended by management. The estimated cost of dismantling and removing infrastructure items and restoring the site on which the assets
are located is only included in the cost of the asset to the extent that the Group has an obligation to restore the site and the cost of restoration is
not recoverable from third parties. Additions, renewals and improvements are capitalised, while maintenance and repairs are expensed.
The carrying values of property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amounts may not be recoverable. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated recoverable amount.
Depreciation
Land is not depreciated. Depreciation on other assets is calculated on a straight-line basis to write off the cost of the asset over its
estimated useful life.
Estimates of remaining useful life are made on a regular basis for all assets, with annual reassessments for major items. The expected useful life of
property, plant and equipment is as follows:
Buildings
Leasehold improvements
Network equipment
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
64
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Annual Report2020Southern Cross AustereoNotes to the Consolidated Financial StatementsFor the year ended 30 June 2020 10. Non-Current Assets – Intangible Assets
Consolidated
2020
Cost
Accumulated impairment expense
Accumulated amortisation expense
Net carrying amount
Movement
Net carrying amount at beginning of year
Additions
Acquisition of subsidiaries
Amortisation expense
Consolidated
2019
Cost
Accumulated impairment expense
Accumulated amortisation expense
Net carrying amount
Movement
Net carrying amount at beginning of year
Additions
Impairment expense
Net carrying amount at end of year
Goodwill
$’000
Broadcasting
Licences
$’000
Brands and
Tradenames
$’000
Customer
Contracts
$’000
Total
$’000
362,088
1,502,031
90,033
3,577
1,957,729
(352,129)
(630,331)
(24,848)
–
(1,007,308)
–
–
–
9,959
871,700
65,185
(2,374)
1,203
(2,374)
948,047
Impairment tests for licences, tradenames, brands and goodwill
11. Impairment
a)
The value of licences, tradenames, brands and goodwill is allocated to the Group’s cash-generating units (‘CGUs’), identified as being Audio
and Television. As the indefinite lived intangible assets relating to the Television CGU were fully impaired in the year ended 30 June 2019, and
no indicator of impairment has been identified for the remaining assets based on the Television CGU’s performance for FY2020 relative to its
remaining carrying value, no impairment test was performed on the Television CGU at 30 June 2020.
The recoverable amount of the Audio CGU at 30 June 2020 was determined based on the fair value less costs of disposal (‘FVLCD’) discounted
cash flow model utilising probability weighted scenarios and at 30 June 2019 was determined based on a value in use (‘VIU’) discounted cash flow
model. Given the uncertainty arising from the economic impacts of the COVID-19 pandemic, the Group have considered various scenarios and
applied probability weightings to arrive at the recoverable amount.
917,960
518
29,703
(134)
948,047
Total
$’000
1,927,508
(1,007,308)
(2,240)
917,960
Allocation of goodwill and other intangible assets
Consolidated
2020
Goodwill allocated to CGU
Indefinite lived intangible assets allocated to CGU
Finite lived intangible assets allocated to CGU
Total goodwill, finite and indefinite lived intangible assets
Consolidated
2019
Goodwill allocated to CGU
Indefinite lived intangible assets allocated to CGU
Total goodwill and indefinite lived intangible assets
Audio CGU
$’000
9,959
936,885
1,203
948,047
Audio CGU
$’000
–
917,960
917,960
Television
CGU
$’000
–
–
–
–
Television
CGU
$’000
–
–
–
Total
$’000
9,959
936,885
1,203
948,047
Total
$’000
–
917,960
917,960
–
–
1,337
(134)
1,203
2,240
–
(2,240)
–
–
–
9,959
–
852,893
65,067
400
18,407
–
118
–
Broadcasting
Licences
$’000
Brands and
Tradenames
$’000
Customer
Contracts
$’000
Goodwill
$’000
352,129
(352,129)
–
–
1,483,224
(630,331)
–
852,893
–
–
–
–
1,079,776
–
(226,883)
852,893
89,915
(24,848)
–
65,067
64,968
99
–
65,067
–
–
–
–
1,144,744
99
(226,883)
917,960
Net carrying amount at end of year
9,959
871,700
65,185
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’).
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. During the year, the free-to-air commercial television and radio broadcasting licences have been assessed to have
indefinite useful lives.
Brands
Brands are initially recognised at cost. The brands have been assessed to have indefinite useful lives. The Group’s brands operate in
established markets with limited restrictions and are expected to continue to complement the Group’s media initiatives. On this basis, the
Directors have determined that brands have indefinite lives as there is no foreseeable limit to the period over which the assets are expected to
generate net cash inflows.
b) Key assumptions used
30 June 2020
The FVLCD calculations used cash flow projections based on internal forecasts for the FY2021 and FY2022 years, extended over the subsequent
three-year period (‘Forecast Period’) and applied a terminal value calculation using estimated growth rates approved by the Board for the
business relevant to the Audio CGU. In the current environment the Group has used a large range of data, including publicly available broker
reports and economic forecasts, and internal company data in determining appropriate growth rates to apply to the Forecast Period and to the
terminal calculation. The discount rate used is based on a range provided by an independent expert and reflects specific risks relating to the
Audio CGU in Australia.
The Group considered three scenarios: the Base case; Lower case; and Upper case and applied a probability weighing to each scenario as
outlined below to determine a recoverable amount. The key assumptions under each scenario are as follows:
Extent and duration of audio market recovery
Lower case
Base case
Upper case
To 85% of CPI adjusted
FY2019 revenue base by
FY2025
To 90% of CPI adjusted
FY2019 revenue base by
FY2024
To 90% of CPI adjusted
FY2019 revenue base by
FY2023
Long-term growth rate
Discount rate (post-tax)
1.00%
9.15%
Growth in digital audio revenues – 5-year CAGR
15.1%
Metro market share – Year 5
28%
2.00%
9.15%
31.5%
30%
2.00%
9.15%
47.5%
31%
Probability weighting
20% – lower case
considered equally as likely
as upper case
60% – base case
considered most likely
outcome
20% – upper case
considered equally as likely
as lower case
Headroom/(Deficit)
$(245.3) million
$105.8 million
Probability weighted headroom
$274.7 million
$69.4 million
66
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Annual Report2020Southern Cross AustereoNotes to the Consolidated Financial StatementsFor the year ended 30 June 2020
11. Impairment (continued)
b) Key assumptions used (continued)
The market capitalisation of the Group at 30 June 2020 was $462 million, which represented a $127 million deficiency against the net assets of
$589 million. The Group considered reasons for this difference, and concluded the recoverable amount resulting from the FVLCD methodology is
appropriate in supporting the carrying value of the Audio CGU.
12. Cash Flow Information
a) Reconciliation of Profit after Income Tax to Net Cash Inflow from Operating Activities
30 June 2019
Key Judgement
Value in use assumptions
Revenue growth – Forecast Period
Cost growth – Forecast Period
Long-term growth rate – terminal value
Radio
Television
Discount rate (post-tax)
Audio CGU
%
Television
CGU
%
3.2
2.3
2.0
N/A
9.15
(5.4)
(2.3)
N/A
(5.9)
9.15
The VIU calculations used cash flow projections based on the 2020 Board approved financial budgets extended over the subsequent four-year
period (‘Forecast Period’) and applied a terminal value calculation using estimated growth rates approved by the Board for the business relevant
to the Audio 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 the Audio 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)
Audio CGU
Sensitivity
A variation in certain key assumptions used to determine the FVLCD would result in a change in the recoverable amount of the Audio CGU.
The assumptions in the lower case scenario described above is a reasonably possible change in assumptions, which together would lead to an
impairment of $245.3 million. The following reasonably possible changes in individual key assumptions would result in a recoverable amount (as
derived on a probability weighted basis) lower than the carrying value to the extent shown below:
Sensitivity
Increase in post-tax discount rate
Decrease in extent of recovery to FY2019 in Base and
Upper cases
Decrease in long-term growth rate in Base and Upper cases
Change in weightings: Lower Case 35%; Base Case 55%;
Upper Case 10%
Reasonable
change in variable
%
Impact of change
on Audio CGU
carrying value
$ million
Change in variable
required to reduce
headroom to zero
%
0.85%
(5.0)%
(1.0)%
N/A
(44.2)
(60.6)
(22.1)
(0.2)
0.50%
(2.7)%
(0.7)%
N/A
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:
Decrease/(increase) in receivables
Decrease in deferred taxes (net of tax movement in hedge reserve)
(Decrease)/increase in payables (excluding interest expense classified as financing activities)
Increase/(decrease) in deferred income
Decrease in provision for income tax
(Decrease)/increase 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 – variable interest rates
Net debt
Consolidated
2020
$’000
25,100
6,135
36,589
(638)
–
(637)
27,888
(1,329)
36,137
(818)
(22,125)
7,699
(3,586)
(7,029)
103,386
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
Consolidated
2020
$’000
271,431
(25,000)
(378,000)
(131,569)
271,431
(403,000)
(131,569)
2019
$’000
32,387
–
(325,000)
(292,613)
32,387
(325,000)
(292,613)
68
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Annual Report2020Southern Cross AustereoNotes to the Consolidated Financial StatementsFor the year ended 30 June 2020 12. Cash Flow Information (continued)
c) Reconciliation of movements of liabilities to cash flows arising from financing activities
13. Receivables, Payables, Deferred Income and Provisions
a) Receivables
Current
Trade receivables
Prepayments
Other
Non-current
Refundable deposits
Related parties
Prepayments
Other
Balance as at 1 July 2018
Repayment of borrowings
Payment for leases
Changes from financing activities
Other changes
Amortisation of borrowing costs
Subtotal of other changes
Balance as at 30 June 2019
Adoption of AASB 16 Leases
Proceeds from borrowings
Refinancing costs
Payment for leases
Changes from financing activities
Other changes
Finance costs
Amortisation of borrowing costs
Addition of leases
Remeasurement of leases
Disposal of transmission site leases
Acquisition of leases
Subtotal of other changes
Balance as at 30 June 2020
d) Cash and cash equivalents
Current
Cash at bank and at hand
Term deposits
Consolidated
Bank Loans
$’000
Lease
Liabilities
$’000
(357,601)
35,000
–
35,000
(923)
(923)
(323,524)
–
(78,000)
1,885
–
(76,115)
–
(2,064)
–
–
–
(2,064)
(401,703)
(19)
–
19
19
–
–
–
(154,080)
–
–
14,475
(139,605)
(6,953)
–
(14,197)
(7,983)
37,568
(1,781)
6,654
(132,951)
Consolidated
2020
$’000
121,432
149,999
271,431
2019
$’000
32,387
–
32,387
Recognition and measurement
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with
financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities in the balance sheet.
Management has assessed the Group’s term deposits to be cash and cash equivalents.
Consolidated
2020
$’000
65,772
8,902
9,710
84,384
2019
$’000
114,607
8,615
4,575
127,797
Consolidated
2020
$’000
150
–
13,166
409
13,725
2019
$’000
146
577
–
696
1,419
Total
$’000
70,713
(4,941)
65,772
Total
$’000
115,133
(526)
114,607
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 as at 30 June.
Consolidated
As at 30 June 2020
Expected loss rate
Trade receivables
Expected credit losses (‘ECL’)
Trade receivables net of ECL
Consolidated
As at 30 June 2019
Expected loss rate
Trade receivables
Expected credit losses (‘ECL’)
Trade receivables net of ECL
Current –
not past due
$’000
Past due –
up to 60 days
$’000
Past due –
60 – 90 days
$’000
Past due –
>90 days
$’000
5.0%
63,353
(3,221)
60,132
5.0%
3,830
(192)
3,638
30.0%
1,182
(354)
828
50.0%
2,348
(1,174)
1,174
Current –
not past due
$’000
Past due –
up to 60 days
$’000
Past due –
60 – 90 days
$’000
Past due –
>90 days
$’000
0.32%
104,409
(331)
104,078
0.15%
7,631
(11)
7,620
2.0%
2,154
(43)
2,111
15.0%
939
(141)
798
The Group has recognised write-offs of bad debts during the year ended 30 June 2020 of $470,720 (2019: $765,125). The Group applies a
simplified model of recognising lifetime expected credit losses immediately upon recognition. The expected loss rates are historically based on
the payment profile of sales over a period of three years before the end of the current period. Historical loss rates have been adjusted to reflect
current and forward-looking information on macroeconomic factors affecting the ability of customers to settle the receivables. 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.
Given the impact of the COVID-19 pandemic on customers, the assumptions underlying the way the Group calculated expected credit losses
(‘ECL’) in the past no longer holds in the current environment. The Group considered the ECL provision looking at various characteristics
and factors including receivables based on their age, industry type and customer size and applying a different ECL rate based on these
characteristics. Higher weightings to expected losses were applied to overdue debt, industries subject to the greatest government restrictions
and smaller sized customers.
70
71
Annual Report2020Southern Cross AustereoNotes to the Consolidated Financial StatementsFor the year ended 30 June 2020 13. Receivables, Payables, Deferred Income and Provisions (continued)
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.
Prepayments
On 2 September 2019, the Group paid $15 million to Broadcast Australia for the outsourcing of the Group’s transmission services which will be
recognised as an expense over a 15-year period.
b) Payables
Current
Trade creditors
GST payable
Accruals and other payables
Consolidated
2020
$’000
5,245
2,107
26,911
34,263
2019
$’000
9,343
3,189
47,429
59,961
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
2020
$’000
8,738
8,738
2019
$’000
4,729
4,729
Consolidated
2020
$’000
92,013
92,013
2019
$’000
93,689
93,689
Recognition and Measurement
Deferred Income
Deferred income in the current year includes amounts which have been billed to customers for advertising but the advertising has been
postponed due to the COVID-19 health crisis, totalling $2.2 million; and government grants received.
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.
ATN revenue recognised that was included in the deferred income balance at the beginning of the period was $7.1 million. The ATN revenue
recognised of $7.1 million has been offset by the recognition of $5.5 million in interest expense.
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.
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
Amount transferred to Right-of-use assets (refer note 29)
Unused amounts reversed during the period
Balance at the end of the financial year
Consolidated
2020
$’000
13,892
21
13,913
2019
$’000
17,293
(220)
17,073
Consolidated
2020
$’000
2,661
2,026
4,687
2019
$’000
2,370
6,749
9,119
Consolidated
2020
$’000
6,529
1,316
(1,648)
(3,617)
(533)
2,047
2019
$’000
6,009
721
(168)
(33)
6,529
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 provision 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. Following
the adoption of AASB 16 Leases on 1 July 2019, leases are recognised as a right-of-use asset with a corresponding liability at the date at which the
leased asset is available for use by the Group. Prior to the adoption of AASB 16 the lease provision also covered lease arrangements to enable
the lease expenses to be recognised on a straight-line basis over the life of the lease.
72
73
Annual Report2020Southern Cross AustereoNotes to the Consolidated Financial StatementsFor the year ended 30 June 2020 Capital Management
15. Dividends Paid and Proposed
The dividends were paid as follows:
14. 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 has a policy to distribute between 65-85% of underlying financial year Net Profit After Tax. However, on 6 April 2020, the Group
announced the cancellation of the interim dividend to maximise liquidity in response to the business impacts of the COVID-19 pandemic. Further
the Group confirmed there will be no final dividend paid for the year ended 30 June 2020 and it expects there will be no dividends paid relating
to the year ending 30 June 2021.
The dividends were paid as follows:
Interim dividend paid for the half year ended 31 December 2019/2018 – fully franked at the tax rate of 30%
Final dividend paid for the year ended 30 June 2019/2018 – 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
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.
Interim dividend paid for the half year ended 31 December
Final dividend paid for the year ended 30 June
Consolidated
2020
$’000
–
30,761
30,761
30,761
30,761
2019
$’000
28,838
30,761
59,599
59,599
59,599
Cents per
share
Cents per
share
–
4.00
4.00
3.75
4.00
7.75
Further details on the Group’s dividends are outlined in note 15.
Debt Facilities
Syndicated Debt Facility
During the year, the Group successfully renegotiated its Syndicated Facility Agreement (‘SFA’). At 30 June 2020 the Group had a $460 million
(2019: $500 million) SFA comprising a $435 million (2019: $500 million) revolving three-year facility expiring on 8 January 2023 and a $25 million
(2019: $nil) one-year facility 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. However, in response to the adverse business impacts of COVID-19, an
amendment was agreed with the syndicate to increase the maximum leverage ratio covenant to 4.5 times for the periods from 30 June 2020
through to 30 June 2021. In addition, the leverage ratio and interest cover ratio at 31 December 2020 will be calculated on a quarter two FY2021
annualised basis, instead of the customary trailing 12-month basis. As at 30 June 2020, the leverage ratio was 1.24 times and the interest cover
ratio was 8.38 times.
Further details on the Group’s debt facilities are outlined in note 18.
Property, Plant and Equipment and Intangibles
The capital expenditure for 2020 was $17.558 million (2019: $27.991 million).
Further details on the Group’s fixed assets are outlined in note 9.
The Group has $169.0 million of franking credits at 30 June 2020 (2019: $153.4 million).
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the Company, on or
before the end of the financial year but not distributed at the end of the reporting period.
On 6 April 2020, the Group announced the cancellation of the interim dividend to maximise liquidity in response to the business impacts of the
COVID-19 pandemic. Further, the Group confirmed there will be no final dividend paid for the year ended 30 June 2020.
16. Earnings per Share
Continuing Operations
Profit/(loss) attributable to shareholders from continuing operations ($’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
2020
$’000
25,100
34,193
2019
$’000
(Restated)
(91,395)
73,879
1,418,721
1,134,648
1,418,721
1.77
1.77
2.41
2.41
90.0%
1,137,390
(8.05)
(8.05)
6.5
6.5
80.7%
On 6 April 2020, the Group announced it launched a fully underwritten $169 million equity raising. The equity raising was undertaken through
the issue of new fully paid ordinary shares. The equity raising consisted of a pro-rata accelerated non-renouncable rights issue which led to the
restatement of Earnings Per Share in the prior period (refer note 17 for further details).
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.
74
75
Annual Report2020Southern Cross AustereoNotes to the Consolidated Financial StatementsFor the year ended 30 June 2020 17. Contributed Equity and Reserves
Ordinary shares
Contributed equity
On issue at the beginning of the financial year
Share Issue – Institutional
Share Issue – Retail
Less transaction costs arising on share issue
On issue at the end of the financial year
Consolidated
2020
$’000
1,540,569
1,540,569
2019
$’000
1,379,736
1,379,736
Consolidated
Consolidated
2020
$’000
1,379,736
148,914
19,664
(7,745)
1,540,569
2019
$’000
1,379,736
–
–
–
1,379,736
2020
Number of
securities
’000
769,014
1,601,598
271,494
–
2,642,106
2019
Number of
securities
’000
769,014
–
–
–
769,014
18. Borrowings
a) Total interest bearing liabilities
Current secured borrowings
Bank facilities
Total secured current interest bearing liabilities
Non-current secured borrowings
Bank facilities
Borrowing costs
Total secured non-current interest bearing liabilities
Total current and non-current borrowings
Consolidated
2020
$’000
25,000
25,000
2019
$’000
–
–
Consolidated
2020
$’000
2019
$’000
378,000
(1,297)
376,703
401,703
325,000
(1,476)
323,524
323,524
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.
On 6 April 2020 the Group launched a fully underwritten $169 million equity raising. The equity raising was undertaken through the issue of new
fully paid ordinary shares via a fully underwritten:
– Placement to institutional and sophisticated investors to raise approximately $47 million; and
– Entitlement offer of approximately $121 million at a ratio of 1.75 new shares for every 1 existing fully paid ordinary share held by eligible
shareholders on the record date.
The entitlement offer consisted of an accelerated institutional component of approximately $102 million and a retail component of
approximately $19 million.
The offer price for the placement and the entitlement offer was $0.09 per share.
New shares issued under the equity raising rank equally with existing shares as at their date of issue.
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 694,939 performance rights have vested (2019:
784,396) and 2,142,305 (2019: 1,957,873) performance rights have been granted. In the current year $716,748 (2019: $269,650) has been
recognised as a benefit in the Statement of Comprehensive Income as the fair value of potential shares to be issued.
Because of the impact on the Company’s business from the COVID-19 health crisis and the lockdown measures implemented by Federal, State
and Territory Governments in response to the crisis, the Board has cancelled all outstanding performance rights under the LTI plan, including the
above rights granted during the year.
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, there is a reverse acquisition reserve of $77.406 million (2019: $77.406 million) in connection with the IPO of the Group.
For all non-current borrowings, the carrying amount approximates fair value in the balance sheet. Of the $1.297 million of borrowing costs,
$0.521 million (2019: $0.959 million) will unwind during the year ending 30 June 2021.
b)
Interest expense
Interest expense and other borrowing costs
External banks
AASB 15 – Revenue from customers with contracts interest expense
AASB 16 – Lease interest expense
Amortisation of borrowing costs
Total interest expense and other borrowing costs
Consolidated
2020
$’000
13,350
5,521
6,953
2,064
27,888
2019
$’000
13,648
5,608
–
923
20,179
c) Bank facilities and assets pledged as security
The $460 million debt facilities (2019: $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 2023 and has an average variable interest rate of 1.69% (2019: 2.58%). 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. There is a prohibition on paying dividends whilst the enhanced covenant
headroom provided by the lending group remains in place. Covenant testing dates fall at 30 June and 31 December each year until the facility
maturity date. The final covenant testing date with a leverage covenant at 4.5 times is 30 June 2021. At 30 June 2020, the Group complied with
all the covenants.
76
77
Annual Report2020Southern Cross AustereoNotes to the Consolidated Financial StatementsFor the year ended 30 June 2020 18. Borrowings (continued)
c) Bank facilities and assets pledged as security (continued)
The carrying amounts of assets pledged as security by Southern Cross Austereo Pty Ltd for current and non-current borrowings are:
Current assets
Floating charge
Cash and cash equivalents
Receivables
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
2020
$’000
2019
$’000
271,378
94,528
–
365,906
31,448
134,873
15,000
181,321
410
4,125
96,853
948,047
1,049,435
1,415,341
1,272
4,559
104,472
917,960
1,028,263
1,209,584
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.
19. 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. Under normal circumstances there is a relatively low level of credit risk on receivables that is managed by
careful business practices, however following the adverse economic impact of the COVID-19 pandemic on the Group’s customers this represents
a heightened risk (refer note 13). 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.
Interest rate risk
a)
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 1.69% (2019: 2.58%). 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 2.43%. These interest rate swap contracts will expire in January 2021. In 2018 the Group entered into
$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. In 2020 the Group entered into
$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 2021 at an average fixed rate of 1.04%. These interest rate swap contracts will expire in January 2023.
Details on how the Group accounts for the interest rate swap contracts as cash flow hedges are disclosed in note 29.
Derivative financial instruments
Interest rate swap contracts – current liability
Interest rate swap contracts – non-current liability
Total derivative financial instruments
Consolidated
2020
$’000
2,353
4,629
6,982
2019
$’000
–
7,529
7,529
Swaps currently in place cover approximately 74% (2019: 92%) of the variable loan principal outstanding. The fixed interest rates of the swaps
range between 1.0% and 2.4% (2019: 2.2% and 2.4%) and the variable rates on the loans are 1.55% (2019: 1.4%) above the 3 months bank bill rate,
which at the end of the reporting period was 0.2% (2019: 1.2%).
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.
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
2023
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
Consolidated
2020
$’000
6,982
400,000
200,000
100,000
100,000
1:1
(4,103)
4,103
2.37%
2019
$’000
7,529
300,000
200,000
100,000
–
1:1
(7,234)
7,234
2.37%
78
79
Annual Report2020Southern Cross AustereoNotes to the Consolidated Financial StatementsFor the year ended 30 June 2020 Interest rate risk (continued)
19. Financial Risk Management (continued)
a)
Hedging reserve
The Group’s hedging reserve disclosed in the Statement of Changes in Equity relates to the following hedging instruments:
Exposure and sensitivity
Financing arrangements
Unrestricted access was available at balance date to the following lines of credit:
Opening balance 1 July 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
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 2020
Hedge Reserve for
interest rate swaps
$’000
(994)
(7,234)
1,127
1,832
(5,269)
(4,102)
4,649
(164)
(4,886)
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 (2019: +/– 25 basis points) in the relevant interest rates
at 30 June 2020 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.
Consolidated
AUD exposures
2020
Cash at bank
Interest rate swaps
Borrowings
2019
Cash at bank
Interest rate swaps
Borrowings
Carrying
Value
$’000
271,431
(6,982)
(403,000)
32,387
(7,529)
(325,000)
Impact on post-tax profits
Increase/(decrease)
+/– 25 basis points
$’000
$’000
+25
475
525
(705)
+25
57
525
(569)
–25
(475)
(525)
705
–25
(57)
(525)
569
Impact on reserves
Increase/(decrease)
+/– 25 basis points
$’000
+25
–
1,022
–
+25
–
1,383
–
$’000
–25
–
(1,036)
–
–25
–
(1,390)
–
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 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.
Following the adverse economic impact of the COVID-19 pandemic on its operations, the Group raised $168.6 million in an equity raising in April
2020 as part of a range of actions to help strengthen its financial position. As a result the Group’s net debt reduced by 55.0% on 2019 to finish the
year at $131.6 million. The Group’s key leverage ratio improved to 1.24 times, down from 1.76 times in June 2019. At the same time, an amendment
to the Group’s debt facility was agreed to with the banking syndicate to increase the maximum leverage ratio covenant to ensure compliance with
the banking covenants and maintain liquidity requirements (refer Note 14).
Consolidated
As at 30 June 2020
Line of credit value
Used at balance date
Unused at balance date
Consolidated
As at 30 June 2019
Line of credit value
Used at balance date
Unused at balance date
Bank
facilities
$’000
460,000
(403,000)
57,000
Bank
facilities
$’000
500,000
(325,000)
175,000
Working
capital
facility
$’000
7,000
(6,031)
969
Working
capital
facility
$’000
7,000
(5,920)
1,080
Total
facilities
$’000
467,000
(409,031)
57,969
Total
facilities
$’000
507,000
(330,920)
176,080
Of the $460 million debt facility for the Group, $25 million matures on 8 January 2021 and $435 million matures on 8 January 2023. The Group’s
bank facilities are denominated in Australian dollars as at 30 June 2020 and 30 June 2019.
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 2020
Borrowings – Principal
Interest cashflows1
Derivative financial
instruments2
Payables3
Lease liabilities
Total
Consolidated
As at 30 June 2019
Borrowings – Principal
Interest cashflows1
Derivative financial
instruments2
Payables3
Total
Less than
1 year
$’000
25,000
11,858
3,336
39,011
13,351
92,556
Less than
1 year
$’000
–
12,941
–
60,343
73,284
1-2 years
$’000
–
8,730
3,552
–
14,464
26,746
1-2 years
$’000
325,000
7,307
4,444
–
336,751
2-3 years
$’000
378,000
4,006
1,526
–
14,826
398,358
3-5 years
$’000
Greater than
5 years
$’000
–
–
–
–
28,097
28,097
–
–
–
–
121,804
121,804
2-3 years
$’000
3-5 years
$’000
Greater than
5 years
$’000
–
566
3,085
–
3,651
–
–
–
–
–
–
–
–
–
–
Total
contractual
cash flows
$’000
403,000
24,594
8,414
39,011
192,542
667,561
Total
contractual
cash flows
$’000
325,000
20,814
7,529
60,343
413,686
Carrying
amount
liabilities
$’000
401,703
N/A
6,982
34,263
132,951
575,899
Carrying
amount
liabilities
$’000
323,524
N/A
7,529
59,961
391,014
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
$6.982 million (2019: $7.529 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.
80
81
Annual Report2020Southern Cross AustereoNotes to the Consolidated Financial StatementsFor the year ended 30 June 2020 Group Structure
20. Non-Current Assets – Investments
a)
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
Impairment of associates and joint ventures
Total Investments accounted for using the Equity Method
b) Financial assets at fair value through profit or loss
Carrying amount at the beginning of the financial year
Acquisition of unlisted equity securities
Impairment of unlisted equity securities
Total Financial assets at fair value through profit or loss
Total Investments
Consolidated
2020
$’000
9,015
637
600
(1,080)
(4,227)
4,945
2019
$’000
7,740
719
1,620
(1,064)
–
9,015
Consolidated
2020
$’000
–
2,286
(1,908)
378
5,323
2019
$’000
–
–
–
–
9,015
The Group invests in a small number of entities that operate in adjacent sectors and which have products or technologies that the Group views
as complementary to its own strategy. These entities are small businesses usually with high growth but in the early stages of their life-cycle.
The economic impact of the COVID-19 pandemic has the potential to adversely impact the ability of these businesses to continue to grow and
to access further capital as required. This has led to the Group’s assessment that their recoverable amounts were less than their carrying values,
which resulted in impairments.
21. 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
Class of
shares/units
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Effective
ownership
interest
2020
Effective
ownership
interest
2019
100%
100%
100%
100%
100%
100%
100%
100%
The proportion of ownership interest is equal to the proportion of voting power held unless otherwise indicated.
Recognition and Measurement
Subsidiaries
Subsidiaries are those entities over which the Group has the power to govern the financial and operating policies, generally accompanying a
shareholding of more than one-half of voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group
controls another entity.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. Where control of an entity is obtained
during a financial year, its results are included in the Statement of Comprehensive Income from the date on which control commences. Where
control of an entity ceases during a financial year, its results are included for that part of the year during which control existed.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated Statements of Comprehensive Income
and Statements of Financial Position respectively.
22. 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
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
Retained Profits – 2020 reserve
Total equity
Profit for the year
Total comprehensive income
Southern Cross Media
Group Limited
2020
$’000
53
1,202,412
1,202,465
47,731
47,731
1,154,734
1,442,981
4,436
(96,805)
–
(323,833)
4,996
2,534
1,943
63,428
55,054
1,154,734
55,297
55,297
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
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 2020 (2019: nil).
The parent entity has not given any unsecured guarantees at 30 June 2020 (2019: nil).
c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2020 (30 June 2019: nil).
d) Contractual commitments for the acquisition of property, plant or equipment
As at 30 June 2020, the parent entity had no contractual commitments (30 June 2019: nil).
Recognition and Measurement
Parent entity financial information
The financial information for the parent entity has been prepared on the same basis as the consolidated financial statements, except as set out on
the following page.
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.
82
83
Annual Report2020Southern Cross AustereoNotes to the Consolidated Financial StatementsFor the year ended 30 June 2020 23. Business Combinations
Acquisition of Redwave Media
On 18 October 2019, the Group announced it would acquire 100% of the Western Australian regional radio business of Seven West Media Group
Limited (Redwave Media) to expand its Audio business, for a total cost of $28.3 million payable in cash. Control on the Redwave Media acquisition
passed on 31 December 2019.
The assets and liabilities recognised as a result of the acquisition are as follows, which includes an additional $0.4 million relating to the working
capital adjustment:
Cash and cash equivalents
Receivables
Assets held for sale
Total current assets
Right-of-use assets
Property, plant and equipment
Deferred tax asset
Goodwill
Radio licences
Customer relationships
Total non-current assets
Total assets
Current liabilities
Payables
Provisions
Total current liabilities
Non-current liabilities
Lease liability
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
Balance
Sheet
Acquired
$’000
Fair Value
Adjustment
$’000
Opening
Balance
Sheet
$’000
16
1,637
–
1,653
1,149
717
411
–
17,316
–
–
(56)
3,243
3,187
632
–
(411)
9,959
1,091
1,337
19,593
21,246
12,608
15,795
415
188
603
1,143
–
1,143
1,746
19,500
(2)
19
17
638
5,923
6,561
6,578
9,217
16
1,581
3,243
4,840
1,781
717
–
9,959
18,407
1,337
32,201
37,041
413
207
620
1,781
5,923
7,704
8,324
28,717
The Group estimates that if the acquisition had arisen on 1 July 2019, the Group’s revenues and profit after tax would have been $4.8 million and
$1.1 million greater respectively.
On 1 May 2020, the Group sold the Bunbury Broadcasting licence it acquired through the acquisition of Redwave Media for its fair value of
$3.2 million. The licence was required to be divested under an undertaking to the Australian Communication and Media Authority.
Other Notes to the Financial Statements
24. 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 2020 was $716,748 (2019: $269,650 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
Cancelled during the year
Balance at end of year
Vested and exercisable at end of the year
2020
2019
5,793,896
2,142,305
–
(1,349,550)
(6,586,651)
–
694,939
5,319,736
1,957,873
–
(1,483,713)
–
5,793,896
784,396
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.
Because of the impact on the Company’s business from the COVID-19 health crisis and the lockdown measures implemented by Federal, State
and Territory Governments in response to the crisis, the Board has cancelled all outstanding performance rights under the LTI plan, including
those issued during the year described below.
In cancelling the FY2018, FY2019 and FY2020 LTI plans, potential future forfeitures have been included in determining the amount that should be
recognised immediately.
The fair value of the performance rights issued during FY2020 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
13 September 2019
$1.30
$1.09
Nil
5.96%
0.86%
30.34%
Absolute EPS
13 September 2019
$1.30
$1.09
Nil
5.96%
0.86%
30.34%
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.
84
85
Annual Report2020Southern Cross AustereoNotes to the Consolidated Financial StatementsFor the year ended 30 June 2020 25. 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
Total remuneration for other services
Total
Consolidated
2020
$
2019
$
738,780
47,422
26,925
813,127
621,900
10,000
18,965
650,865
–
–
–
–
137,700
137,700
950,827
–
–
650,865
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.
26. 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
Note: Changes to KMP during the year can be found in the Remuneration Report.
Consolidated
2020
$
4,528,110
221,992
64,141
44,301
(867,253)
3,991,291
2019
$
6,044,098
212,109
(120,084)
679,576
(114,581)
6,701,118
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 (2019: nil).
b) Subsidiaries and Associates
Ownership interests in subsidiaries are set out in note 21. Details of interests in associates and distributions received from associates are
disclosed in note 20. Details of loans due from associates are disclosed in note 13.
27. 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
Consolidated
2020
$’000
2019
$’000
272
272
2,841
2,841
Leases
From 1 July 2019, the Group recognised right-of-use assets for these leases, except for short-term and low value leases (refer note 29 for
further information).
The Group leases various premises, IT equipment and vehicles. Premises typically have initial rental periods of five to 10 years, with options,
exercisable by the Group, for periods extending the total lease period up to 30 years. Other leases are typically for less than four years.
Transmission site leases at 30 June 2020 relate to the Redwave acquisition, which are expected to be transferred to the Broadcast Australia
services agreement in FY2021 (refer note 29 for details).
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
Extension options are included in a number of property leases across the Group, which provide flexibility in terms of managing the assets used
in the Group’s operations. The extension options are exercisable by the Group, which applies judgement to determine whether these options
are reasonably certain or not. Extension options have been included in all property leases across the Group, except those that are surplus to the
Group’s operational requirements. The value of extension options not included in property leases is $1.8 million.
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.
a) Amounts Recognised in the Statement of Comprehensive Income
The Statement of Comprehensive income shows the following amounts relating to leases:
Depreciation charge of right-of-use assets
Premises
Transmission site
IT Equipment
Vehicles
Interest expense on lease liabilities
2020
$’000
10,443
1,237
1,700
289
13,669
6,953
28. Events Occurring after Balance Date
No 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.
86
87
Annual Report2020Southern Cross AustereoNotes to the Consolidated Financial StatementsFor the year ended 30 June 2020 29. 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 $14.3 million (2019:
$15.0 million) and is included in employee expenses.
Derivative financial instruments
The Group enters into interest rate swap agreements to manage its financial risks. Derivatives are initially recognised at fair value at the date
a derivative contract is entered into and are subsequently remeasured to their fair value. The method of recognising the resulting gain or loss
depends on whether the derivative is designated as a hedging instrument and if so, the nature of the item being hedged. The Group may have
derivative financial instruments which are economic hedges, but do not satisfy the requirements of hedge accounting. Gains or losses from
changes in fair value of these economic hedges are taken through profit or loss.
If the derivative financial instrument meets the hedge accounting requirements, the Group designates the derivatives as either (1) hedges of the
fair value of recognised assets or liabilities or a firm commitment (fair value 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 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 loans; and
– Differences in critical terms between the interest rate swaps and loans.
There was no ineffectiveness during 2020 or 2019 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.
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
AASB 16 Leases became applicable for the current reporting period and the Group had to change its accounting policies as a result of
adopting this standard.
AASB 16 Leases
The Group has adopted AASB 16 Leases using the modified retrospective approach with no restatement of prior year comparative information.
Changes to accounting policies and financial impact on adoption are detailed below.
i) Accounting Policies
Prior to 1 July 2019, the Group classified leases as operating leases when all the risks and benefits of ownership are effectively retained by the
lessor. Operating lease payments, excluding contingent payments, were charged to the income statement on a straight-line basis over the
period of the lease.
On and after transition, the Group assesses whether a contract is or contains a lease based on the new definition of a lease: a contract is or will
contain a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Under AASB 16, the Group recognises on its balance sheet right-of-use assets representing its right to use the underlying assets and
corresponding lease liabilities representing its obligation to make lease payments at the lease commencement date.
Right-of-use assets are initially measured at cost and comprise the following:
– The amount of the initial measurement of lease liability;
– Any lease payments made at or before the commencement date less any lease incentives received;
– Any initial direct costs; and
– Restoration costs.
88
89
Annual Report2020Southern Cross AustereoNotes to the Consolidated Financial StatementsFor the year ended 30 June 2020 The change in accounting policy affected the following items on the balance sheet at 1 July 2019:
Increase in assets
Right-of-use assets
Movement in liabilities
Lease provisions
Lease liabilities
Net Impact on retained earnings
The associated right-of-use assets on transition and as at 30 June 2020 by asset class:
Premises
Transmission sites
IT Equipment
Vehicles
Total right-of-use assets
1 July 2019
$’000
150,464
3,617
(154,081)
–
30 June 2020
$’000
1 July 2019
$’000
114,456
1,721
5,786
905
122,868
107,410
38,974
3,050
1,030
150,464
At 30 June 2020, the total cash outflow for leases was $14.5 million and additions to the right-of-use assets was $14.2 million, excluding
acquisition leases.
Rental contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and non-
lease components based on their relative stand-alone prices.
On 6 August 2019, the Group announced the sale of its existing transmission assets and outsourcing of transmission services to Broadcast
Australia. Following the sale, all transmission site leases were derecognised as leases and the agreement with Broadcast Australia was
recognised as a service agreement. Transmission site leases at 30 June 2020 relate to the Redwave acquisition, which are expected to be
transferred to the Broadcast Australia services agreement in FY2021.
The Group recognised $13,668,706 of depreciation charges and $6,953,157 of interest costs in association with AASB 16 Leases.
29. Other Accounting Policies (continued)
AASB 16 Leases (continued)
The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Lease liabilities are initially measured at the present value of the lease payments that are not paid at commencement date. These are discounted
using the rate implicit in the lease, or, if that rate cannot be readily determined, the Group’s incremental borrowing rate, which is the rate the Group
would have paid to borrow the funds necessary to obtain an asset of similar value in a similar economic environment and on similar terms and
conditions. Generally, the Group uses its incremental borrowing rate.
Lease liabilities are subsequently increased by the interest cost on the lease liability and decreased by lease payments made. They are
remeasured when there are changes in future lease payments arising from a change in index or rate (e.g. CPI), changes in estimate of amount
expected to be paid under residual value guarantees or as appropriate, changes in the assessment of whether a purchase or extension is
reasonably certain to be exercised or whether a termination option is reasonably certain not to be exercised.
Lease payments are allocated between the lease liability and finance cost. The finance cost is charged to profit or loss over the lease period so as
to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Payments associated with short-term leases (with a lease term of 12 months or less) and leases of low value assets are recognised on a straight-
line basis as an expense in profit or loss.
ii) Practical expedients applied on transition
In applying AASB 16 Leases, the Group has used the following practical expedients on transition:
– Elected not to reassess whether a contract is, or contains, a lease at the date of the initial application. Instead for contracts entered into before
the transition date, the Group relied on assessments made applying AASB 117 and Interpretation 4 in determining whether an Arrangement
contains a lease;
– The accounting for operating leases with a remaining lease term of less than 12 months as at 1 July 2019 as short-term leases;
– Reliance on previous assessments on whether leases are onerous;
– The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease; and
– The use of a single discount rate to a portfolio of leases with similar characteristics.
iii) Financial statements impact of AASB 16 Leases
Impact on transition
On adoption, the Group recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under AASB 16
Leases. The lease liabilities are measured at the present value of minimum lease payments for the lease term, discounted using a weighted
average incremental borrowing rate of 5.46%.
Critical judgements in determining the lease term
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension
option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease
is reasonably certain to be extended (or not terminated).
Extension and termination options have been included in all property leases across the Group except those that are surplus to the Group’s
operational requirements.
Lease liability on transition
Non-cancellable operating lease commitments disclosed at 30 June 2019
Different treatment of extension options
Discounted using the Group’s incremental borrowing rate at the date of initial application
Lease liability recognised as at 1 July 2019
Lease liabilities
Current
Non-current
Total lease liabilities
1 July 2019
$’000
104,172
67,760
(17,851)
154,081
30 June 2020
$’000
6,370
126,581
132,951
90
91
Annual Report2020Southern Cross AustereoNotes to the Consolidated Financial StatementsFor the year ended 30 June 2020 Directors’ Declaration
For the year ended 30 June 2020
Independent Auditor’s Report to the members
of Southern Cross Media Group Limited
Independent Auditor’s Report
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 52 to 89 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
Rob Murray
Chairman
Sydney, Australia
20 August 2020
Grant Blackley
Managing Director
Sydney, Australia
20 August 2020
Other information
Our opinion
In our opinion:
Independent auditor’s report
To the members of Southern Cross Media Group Limited
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.
Report on the audit of the financial 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
The accompanying financial report of Southern Cross Media Group Limited (the Company) and its
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
controlled entities (together the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 30 June 2020 and of its financial
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
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
are required to report that fact. We have nothing to report in this regard.
performance for the year then ended
What we have audited
The Group financial report comprises:
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 consolidated statement of financial position as at 30 June 2020
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.
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.
●
●
●
●
●
●
Basis for opinion
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.
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.
Auditor’s responsibilities for the audit of the financial report
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
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
Independence
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
We are independent of the Group in accordance with the auditor independence requirements of the
audit conducted in accordance with the Australian Auditing Standards will always detect a material
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
if, individually or in the aggregate, they could reasonably be expected to influence the economic
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
decisions of users taken on the basis of the financial report.
fulfilled our other ethical responsibilities in accordance with the Code.
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Annual Report2020Southern Cross Austereo
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.
Other information
procedure is made in that context. We communicated the key audit matters to the Audit and Risk
The directors are responsible for the other information. The other information comprises the
Committee.
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.
How our audit addressed the key audit matter
Key audit matter
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.
Assisted by PwC financial advisory experts in aspects of our
work , we performed the following procedures, amongst
others:
Basis of preparation
(refer to note 1)
As described in n ote 1 to the financial report, the
financial statements have been prepared by the
Group on a going concern basis.
●
●
evaluated the appropriateness of the Group's going
concern assessment and ensured all relevant
In connection with our audit of the financial report, our responsibility is to read the other information
information had been considered
and, in doing so, consider whether the other information is materially inconsistent with the financial
read amendments to the SFA during the year and
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
obtained an understanding of the k ey terms,
including available drawdown amounts and
covenants
read the terms of the short term deposits to assess
appropriateness of classification as cash and cash
equivalents
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.
COVID-19 has resulted in a significant decrease in
advertising revenues and profits of the Group and
has led to a reduction in forecast cash flows. The
Group responded to this by raising equity and
renegotiating its Syndicated Facility Agreement
(“SFA”) as outlined in n ote 17 and note 14
respectively.
When we read the other information not yet received, if we conclude that there is a material
obtained written representations from
misstatement therein, we are required to communicate the matter to the directors and use our
management and the directors regarding their
professional judgement to determine the appropriate action to take.
plans and the feasibility of these plans
evaluated k ey assumptions in the forecast cash flow
models prepared by the Group
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
We evaluated the adequacy of the disclosures in note 1 in
and for such internal control as the directors determine is necessary to enable the preparation of the
light of the requirements of Australian Accounting
Standards.
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
●
check ed the mathematical accuracy of the forecast
cash flow models prepared by the Group.
Assessing the appropriateness of the Group’s basis
of preparation for the financial report was a k ey
audit matter due to its importance to the overall
financial statements and the level of judgement
involved in forecasting future cash flows of the
business.
Impairment assessment for licences,
tradenames, brands and goodwill
(refer to note 11)
In performing our audit work we considered, amongst
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
other things:
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
● whether the Group’s identification of CGUs
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
The Group continues to have significant indefinite
operations, or have no realistic alternative but to do so.
lived intangible assets and goodwill in the Audio
cash generating unit (CGU), totalling $946.8 million
as at 30 June 2020.
Auditor’s responsibilities for the audit of the financial report
the mark et capitalisation of the Group in
comparison to the carrying value of its net assets
remains appropriate
●
●
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.
This was a k ey audit matter due to the size of the
indefinite lived intangible assets and on the basis
that the impairment assessment involves
judgemental estimates of future profits and cash
flows. In addition, as a result of COVID-19 the
degree of estimation uncertainty is heightened.
To evaluate the fair value less costs of disposal discounted
cash flow model (“the model”) prepared for the Group’s
Audio CGU impairment assessment, with assistance from
PwC valuation experts in aspects of our work , we
performed the following procedures, amongst others:
the appropriateness of adopting a fair value less
costs of disposal methodology for estimating the
Audio CGU’s recoverable amount.
As described in n ote 11, there is an inherent level of
uncertainty around the business recovery period
● performed mathematical accuracy checks
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Annual Report2020Southern Cross AustereoOur audit approach An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and the industry in which it operates. Materiality ● For the purpose of our audit we used overall Group materiality of $2.2 million, which represents approximately 5% of the Group’s profit before tax adjusted for impairment of investments. ● 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 also adjusted for impairment of investments as they are unusual or infrequently occurring items impacting profit or loss. ● 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. 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
Independent Auditor’s Report to the members
of Southern Cross Media Group Limited
(continued)
Other information
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.
which has increased the level of judgement involved
in the impairment assessment, which includes
mak ing assumptions about internal and external
factors such as industry growth rates, future mark et
share and the forecast financial performance of the
Group.
assessed the appropriateness of the discount rate
incorporated in the model and terminal value
methodology applied
●
●
assessed the reasonableness of the assumptions
within the model compared to observable market
information where available
evaluated the Group’s historical ability to forecast
future cash flows by comparing budgeted cash
flows with reported actual performance
●
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.
considered whether the model’s allocation of
In connection with our audit of the financial report, our responsibility is to read the other information
corporate costs between CGUs was reasonable
and, in doing so, consider whether the other information is materially inconsistent with the financial
and reflective of actual costs incurred
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
assessed the sensitivity of changes in k ey
assumptions incorporated in the model
●
●
If, based on the work we have performed on the other information that we obtained prior to the date of
compared the forecast cash flows used in the
this auditor’s report, we conclude that there is a material misstatement of this other information, we
model to the most up-to-date forecasts and
results.
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.
We evaluated the adequacy of the disclosures in n ote 11 in
light of the requirements of Australian Accounting
Standards.
Indefinite lived classification of intangible
assets
(refer to note 10)
Responsibilities of the directors for the financial report
In assessing the indefinite useful life of intangible
assets, we performed the following procedures,
amongst others:
●
As at 30 June 2020, the Group has Audio intangible
assets totalling $936.9 million, consisting of Brands,
Tradenames and Radio Broadcasting Licences
classified as indefinite lived intangible assets.
The Directors of the Company are responsible for the preparation of the financial report that gives a
considered regulatory developments in the
year which could change the licence renewal
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
process or use of the brands
and for such internal control as the directors determine is necessary to enable the preparation of the
assessed whether there had been any
financial report that gives a true and fair view and is free from material misstatement, whether due to
revocation of radio licences by Australian
fraud or error.
Communications and Media Authority
(ACMA) in the year
This was a k ey audit matter because determination of
whether or not intangibles are indefinite lived involves
significant judgement. The determination has an
impact on the financial report as it affects whether
amortisation is recorded in the consolidated statement
of comprehensive income.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
evaluated strategic plans for the directors’
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
intended use of the assets.
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
● benchmarked the conclusion made by the
operations, or have no realistic alternative but to do so.
●
●
directors against a selection of similar assets
held by other industry participants in the
radio broadcasting market.
Auditor’s responsibilities for the audit of the financial report
We considered the significant accounting policy
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
disclosed in n ote 10 for consistency with Australian
Accounting Standards.
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
Assisted by PwC valuation experts in aspects of our work ,
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
we have performed the following procedures, amongst
if, individually or in the aggregate, they could reasonably be expected to influence the economic
others:
decisions of users taken on the basis of the financial report.
●
Acquisition of Redwave Media
(refer to note 23)
On 30 December 2019, the Group acquired
Redwave Media Pty Ltd (and related entities
Geraldton FM Pty Ltd and Great Northern
Broadcasters Pty Ltd) for $28.7 million with control
transferring to the Group on 31 December 2019.
evaluated the identification of the assets and
liabilities acquired against the requirements of
Australian Accounting Standards, the final
transaction agreement, our understanding of the
●
business acquired and relevant legal
correspondence
Given the complexity of the acquisition accounting,
the Group engaged a valuation expert who
determined the valuation for the k ey assets
purchased, being radio licences and customer
relationships.
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
obtained the valuation expert’s report and
information we obtained included the Directors’ Report. We expect the remaining other information to
considered the k ey assumptions used in
determining the fair values of the acquired assets
be made available to us after the date of this auditor's report.
recognised including media licences and
customer relationships
This was a k ey audit matter due to the judgements
and subjectivity in the valuation methodology
applied by the Group and its expert.
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.
considered the valuation methodologies applied
against the requirements of Australian
Accounting Standards
In connection with our audit of the financial report, our responsibility is to read the other information
assessed the competence and capability of the
and, in doing so, consider whether the other information is materially inconsistent with the financial
valuation expert
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
agreed the initial purchase consideration paid to
bank records and the purchase agreement.
●
●
●
If, based on the work we have performed on the other information that we obtained prior to the date of
We considered the adequacy of the disclosures in note 23
this auditor’s report, we conclude that there is a material misstatement of this other information, we
in light of the requirements of Australian Accounting
Standards.
are required to report that fact. We have nothing to report in this regard.
Other information
Responsibilities of the directors for the financial report
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.
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 2020, 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 Director's Report. We expect the remaining other information to be made available
to us after the date of this auditor's 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
Our opinion on the financial report does not cover the other information and we do not and will not
and for such internal control as the directors determine is necessary to enable the preparation of the
express an opinion or any form of assurance conclusion thereon.
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
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
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
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.
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.
Auditor’s responsibilities for the audit of the financial report
Responsibilities of the directors for the financial report
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.
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.
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.
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Annual Report2020Southern Cross Austereo
Independent Auditor’s Report to the members
of Southern Cross Media Group Limited
(continued)
Additional Stock
Exchange Information
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.
The additional stock exchange information set out below was current on 31 August 2020. 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.
Name
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
National Nominees Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited (Colonial First State Inv A/C)
BNP Paribas Noms Pty Ltd (DRP)
BNP Paribas Nominees Pty Ltd (Agency Lending DRP A/C)
Wearne Webber Capital Pty Limited
C S Fourth Nominees Pty Limited
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