Southern Cross Media Group Ltd Annual Report 2022

Plain-text annual report

2 0 2 2 A N N U A L R E P O R T 2 0 2 2 A N N U A L R E P O R T Year In Review SCA’s audio audiences and revenues grew strongly, while television delivered improved margins following SCA’s affi liation switch to Network 10. Revenue Expenses Underlying expenses EBITDA Underlying EBITDA Underlying NPAT Net debt Free cash conversion Dividends (full year) FY2022 $519.7M ($434.1M) ($431.8M) $85.6M $87.9M $27.4M $78.5M 67.2% 9.25 cps COMPARISON TO FY21 $529.2M ($403.2M) ($443.7M) $125.9M $85.5M $19.8M $52.6M 125.7% 5.0 cps (1.8%) 7.7% (2.7%) (32.0%) 2.8% 38.4% 49.4% - 85.0% Audiences are returning in droves to commercial radio. SCA’s Hit and Triple M metro radio stations recorded their highest ever cumulative audiences of 5.93 million in August 2022. Including SCA’s 78 regional radio stations, we have a total radio audience of more than 8.52 million Australians*. Since its launch just 18 months ago in February 2021, LiSTNR has acquired more than 889,000 signed-in users. Developing LiSTNR as our own digital audio platform allows us to control our own destiny in the rapidly expanding world of digital audio. Our core competency and commitment to localism – in the content we create and distribute on LiSTNR together with the trusted way we engage with our physical and online communities – diff erentiates us from global technology platforms and services. LiSTNR provides a growing and diverse library of live and on-demand audio content. With the recent addition of three Kinderling children’s stations, LiSTNR houses more than 100 live radio stations; 25 music genre stations; 124 original podcasts; live AFL, NRL and international cricket; local news and information around Australia; and domestic and international licensed content from the BBC, Schwartz Media, the Royal Institution of Australia, SoundCloud and other partners. On-platform listening in the six months to 30 June 2022 multiplied 3.7 times to 2.7 million average monthly streams compared to the same period in 2021. There truly is something for everyone! The Board has completed a strategic review of the Group’s television assets and concluded that value for shareholders will be maximised by continuing to operate the television business. The business is streamlined, effi cient and capital light, generating EBITDA of $30 million and an EBITDA margin of 23.7% during the year. In the year ahead, SCA will balance ongoing initiatives to grow audiences and advertising interest for our live and on-demand content with a focus on operational effi ciency and capital management initiatives to improve returns to shareholders. The Board was therefore pleased to declare dividends of 9.25 cents per share in FY22, up 85% on the prior year. In addition, with the long-term strategy for the Group’s television assets now settled, the Board has resumed the on-market share buy-back. Contents Year In Review IFC Our People Chairman’s Statement CEO’s Report Operational Review Television Boomtown Year In Review 02 03 06 14 15 SCA Embrace and Community The Board and Leadership Team Financial Report Additional Information Corporate Directory 16 17 20 25 95 97 Southern Cross Austereo Year In Review 8.5M 5.8M Total FM, AM and DAB+ audience* Total Hit FM and DAB+ audience* 4.2M Total Triple M FM and DAB+ audience* 3.6M Total TV reach^ 3M+ 1.7M+ 9.9M+ Average monthly unique radio streamers** Average monthly streaming total listening hours** 889K+ 8M Average monthly unique podcast listeners*** Total signed in digital audio users^^^ Total digital audio network audience^^ Source: *GfK Metro Survey #5 2022, Provincial Survey #2 2022. P10+, Cume Reach (000’s), Mon-Sun ROS, SCA FM&DAB+ Brands (inc Soundcloud), Hit Network FM&DAB+ Brands, MMM Network FM&DAB+ Brands. Xtra Insights SCA Regional Markets Surveyed to Date, P10+, Cume Reach (00’s), Mon-Sun ROS. **Triton Streaming Metrics. ***Triton Podcast Metrics. ^Regional TAM Data. 4AGGS (Network 10 + Sky News Regional), WA (Network 10) & TAS (Seven Network & Network 10). Average Weekly Reach (1 Min Cume). 0200-2600. Consolidated 7. SUN-SAT. 27/06/21 - 02/07/22 (Excl Summer & Easter Wks). Diary Markets - Last Available Survey. 0600-2400. CEN – 2007. DAR – 2011. SGT – 2015. ^^ LiSTNR Digital Audio Network: 8m Australians per month, including LiSTNR streaming, podcasts, Soundcloud and Sonos. ^^^Firebase Authenticated User Counts. 2022 Annual Report Year In Review | 1 Chairman’s Statement The recovery in media markets continued in the past year, but not in a straight line. Natural disasters, geo-political events and various ongoing pandemic impacts dampened business and consumer conﬁ dence during the year. But, with positive trends in audio consumption and engagement with our LiSTNR platform, we are cautiously optimistic about earnings recovery in the year ahead. SCA’s metro radio audiences reached record levels in the most recent offi cial radio survey 5 published in August 2022. The cumulative audience of SCA’s Hit and Triple M stations in the ﬁ ve metro capitals of 5.93 million was its highest ever and 22.8% higher than in the ﬁ nal survey of 2021. Including our network of 78 radio stations in regional Australia, we have a total radio audience of over 8.52 million Australians*. In our top seven annually surveyed locations, SCA most recently ranked #1 in 60% of available dayparts for our target demographics of men aged 25-54 for Triple M Network and women aged 25-54 for the Hit Network*. In addition more than 889,000 signed-in LiSTNR users who are increasingly turning to LiSTNR to meet their daily audio needs. Advertisers rewarded the compelling reach of SCA’s audio platforms during FY22 with 9.6% growth in audio revenue to $392.8 million, sparked by expansion of 35% in digital audio revenue. Despite the positive trends in consumption of our content, and impressive year-on-year growth in audio revenues, the year’s results were below our expectations as broadcast radio markets recover more slowly than expected and remain below pre-COVID 2019 levels. The recovery in local revenues lagged the recovery in national revenues in both metro and regional markets. It is clear that small and medium business clients in regional markets have been particularly aff ected by ﬂ oods, labour shortages and supply chain delays. In the face of current economic uncertainty and an increase in the cost of capital globally, the Group recognised impairment charges of $178.6 million (net of tax) relating to impairment in the carrying value of radio licences, goodwill and brands. Our investment in a fully owned and operated digital audio ecosystem, LiSTNR, positions SCA to take a leading share of the rapidly expanding Australian digital audio market. We will continue to invest in evolving LiSTNR to provide audiences with an easy-to-use, intuitive and personalised experience, while building and enhancing the suite of premium content available on LiSTNR. This will include ongoing curation of our original podcasts, such as Hamish & Andy and The Howie Games, as well as expansion of our domestic and international partnerships with the BBC, Schwartz Media, the Royal Institution of Australia, SoundCloud, and others. Importantly, however, it will also include targeted investment in our live and local radio shows and news and information services around Australia. With record radio audiences migrating to listen to our shows on mobile phones, desktop computers, smart speakers, connected cars and other digital devices, the industry and SCA are carefully migrating listeners to new ways of listening and engaging with our brands. At the same time, we have urged the new Federal Government to legislate to ensure local AM, FM and DAB+ radio is prominently available on car dashboards and other digital devices. This has become an increasingly signiﬁ cant issue as car manufacturing has moved off shore and manufacturers develop cars for global markets. During the year, the Board completed a strategic review of the Group’s television assets, including engagement with several interested parties. Bids from these parties did not align with the Board’s valuation, and the Board has concluded that value for shareholders will be maximised by continuing to operate the television business. The business is streamlined, effi cient and capital light, generating EBITDA of $30 million and an EBITDA margin of 23.7% during the year. The television business also provides a valuable marketing platform to grow awareness and enjoyment of LiSTNR in regional Australia. Free-to-air television remains an important and trusted source of information and entertainment in regional Australia, especially in the still large areas with no or limited Internet coverage. We are therefore also asking the Federal Government to legislate to ensure free-to-air television is readily and prominently available on connected televisions and to update anti-siphoning rules to protect the community’s access to major Australian and international sporting events on free-to-air television. After six years on our Board, Melanie Willis retired as a director during the year. On behalf of my fellow directors, I thank Melanie for her signiﬁ cant contribution to SCA, including for ﬁ ve years as Chair of the Board’s Audit & Risk Committee. Considering changes in SCA’s business over the past year, the Board has decided not to seek a replacement for Melanie. The Board considers its reduced size and its mix of skills and experience are appropriate for SCA’s needs. The Board will, however, review the structure and composition of its committees in coming months. I would also like to acknowledge Nick McKechnie’s contribution as SCA’s Chief Financial Offi cer since 2014. Under Nick’s stewardship, the Group has signiﬁ cantly improved its balance sheet and cash ﬂ ow position which has enabled us to invest in our digital transformation strategy. We wish him well in his new role. In the year ahead, SCA will balance ongoing initiatives to grow audiences and advertising interest for our live and on-demand content with a focus on operational effi ciency and capital management initiatives to improve returns to shareholders. The Board acknowledges shareholders have experienced a diffi cult journey since COVID ﬁ rst began to aff ect SCA and media markets generally in early 2020. The Board was therefore pleased to declare dividends of 9.25 cents per share in FY22, up 85% on the prior year. In addition, with the long-term strategy for the Group’s television assets now settled, the Board has resumed the on-market share buy-back. On behalf of the Board, I thank SCA’s people all around Australia for their dedication and commitment during the year just ended. I trust you will enjoy reading our annual report. Rob Murray Chair *GfK Metro Survey #5 2022, Provincial Survey #2 2022. P10+, Cume Reach (000’s), Mon-Sun ROS, SCA FM&DAB+ Brands (inc Soundcloud), Hit Network FM&DAB+ Brands, MMM Network FM&DAB+ Brands. Xtra Insights SCA Regional Markets Surveyed to Date, P10+, Cume Reach (00’s), Mon-Sun ROS. 2 | Chairman’s Statement Southern Cross Austereo CEO’s Report In the past year, SCA completed a ﬁ ve-year program to install a digital operating infrastructure across all offi ces and every studio. This investment enables us to create, ingest and distribute our premium content from any location to audiences at a time and on a device of their choice and positions us to capture the commercial value of the ever-increasing appetite of Australians for our live and on-demand audio content. Completion of this program was a core driver of our purpose to entertain, inform and inspire Australians, anytime, anywhere. And we’ve reﬁ ned the pillars of our corporate strategy for the next two years, which are to entertain, inform and inspire our audiences; to evolve LiSTNR into a unique, world-class audio platform; to optimise and simplify our sales off ering to grow revenue; and to re-imagine and restructure SCA’s operating model. Entertaining, informing and inspiring our audiences This pillar remains the ﬁ rst and most important requirement for our success. A successful media company must consistently deliver large and engaged audiences to attract interest and investment from our advertising clients. The ending of COVID-19 related lockdowns in the second half of the past year saw workers in Australia’s major population centres return to their offi ces. Home to offi ce commuting, particularly in cars but also by public transport or on foot, is one of the prime drivers of audio consumption. The total weekly metro commercial radio audience of 12 million recorded in survey 5 was the highest ever and a 7.6% jump over the prior year^. SCA’s Hit and Triple M stations led this rise as audiences naturally returned to entertainment and music formats. In the ﬁ ve metro radio markets, SCA has the largest audience in our core target of people aged 25-54 with over 3.2 million listeners*. Seventy percent of advertising briefs target this demographic. The aggregate metro audience (cume) of both the Hit Network and the Triple M Network in survey 5 was the highest ever. With cume of 1.325 million, Melbourne’s Fox FM also recorded its highest ever cume and was the most listened to radio station in Australia*. Our Sydney Hit Network station, 2DayFM, remains the biggest opportunity for growth in our portfolio. In September 2021, we relaunched the station as the ‘new’ 2DayFM with a refreshed music strategy and a female-skewed format. Hughesy, Ed and Erin took their Breakfast show to key communities to build engagement and encourage more listening. While much work remains to be done, the number of weekly listeners to 2DayFM has grown 45% since relaunch of the station. The strategy for 2DayFM in the year ahead is directed at attracting and retaining new listeners while extending the time they spend listening. Sustained growth in the audience of the Breakfast show will ﬂ ow through to listening in other dayparts, including the national Carrie and Tommy Drive show which has grown its weekly national metro audience to more than 1.77 million*. The Triple M Network has doubled down on its local roots this year. All Triple M stations around the country have locally produced Breakfast shows (unlike the regional ‘super shows’ on the Hit Network) as well as new State-based Rush Hour Drive shows. This diff erentiates Triple M from our own Hit Network and other competitors which, for the most part, off er national Drive shows. These State-based Rush Hour shows have quickly resonated with audiences as survey results have improved over the year. Triple M also recorded the largest commercial AFL and NRL metro footy audience, delivering 47% more audience than any other commercial competitor. Triple M’s AFL coverage achieved a cumulative audience of 626,000 in Melbourne, Adelaide and Perth, while Triple M’s NRL coverage has a cumulative audience of 471,000 in Sydney and Brisbane*. Triple M also returned to cover international cricket last summer. For the ﬁ rst time this year, our audiences were able to listen to Triple M’s AFL, NRL and cricket commentary on LiSTNR. Sporting bodies had previously reserved streaming rights for themselves or other parties and extending these rights to LiSTNR has expanded the reach and inﬂ uence of these sports. This was especially exciting for our cricket fans in regional markets and led to a spike in the number of signed-up users of LiSTNR during last summer. We have also continued to expand the volume and diversity of other live and on-demand audio content hosted on LiSTNR. With the recent addition of three Kinderling children’s stations, we have over 100 live radio stations; 25 music genre stations; 124 original podcasts; live AFL, NRL and international cricket; local news and information around Australia; and domestic and international licensed content from the BBC, Schwartz Media, the Royal Institution of Australia, SoundCloud, and other partners. The Australian Podcast Ranker for July 2022 had Hamish & Andy as Australia’s most popular podcast, with seven other LiSTNR podcasts in the top 20, and ﬁ ve LiSTNR podcasts were the most popular Australian-made in their genre (Comedy: Hamish & Andy; News: 7am, in partnership with Schwartz Media; Sport: Triple M Footy AFL; Society and culture: It’s a Lot with Abbie Chatﬁ eld; and Fiction: The Younger Man). The Younger Man, an adaptation of Zoë Foster Blake’s romantic comedy novel of the same name, is the ﬁ rst of LiSTNR’s serialised audio dramas. Evolve LiSTNR into a unique, world-class audio platform We released LiSTNR in February 2021 as a minimum viable product and have progressively added to its functionality and user experience in the 18 months since. That we have acquired over 889,000 signed- in users during that time with app store user ratings consistently over 4.5/5 is testament to our work to date, but also an indicator of the opportunities ahead. Signing in to LiSTNR enables users to express their audio interests and preferences. Using built-in artiﬁ cial intelligence and machine learning, LiSTNR interprets this information and users’ actual listening habits to help users ﬁ nd other content likely to be of interest to them. In turn, this will build trust and loyalty to LiSTNR. We also use this information to commission new content for LiSTNR and to organise the content available on LiSTNR so it is intuitive for users. We make most LiSTNR content available on other audio-on-demand platforms in Australia. This remains essential to maximise the reach of LiSTNR content for our creators and advertisers. However, over time it will be important to grow the on-platform audience for LiSTNR content, deepening the ﬁ rst party data and insights available to help advertisers connect to addressable and targeted audiences at scale. We are conﬁ dent that developing LiSTNR as our own digital audio platform puts SCA ahead of local and international audio peers. As consumers increasingly choose to listen to live and on-demand audio on digital devices, SCA will control its own destiny through LiSTNR. Our core competency and commitment to localism – in the content we create and distribute on LiSTNR together with the trusted way we engage with our physical and online communities – diff erentiates us from global technology platforms and services. 2022 Annual Report CEO’s Report | 3 CEO’s Report Optimise and simplify our sales off ering to grow revenue The ways in which our audiences consume our content continue to diversify and our range of products is expanding in tandem. For example, in August, we launched a world ﬁ rst dynamic sport campaign delivering live AFL and NRL Friday night game scores inside audio ads on broadcast and digital audio platforms. Live score updates are delivered during Triple M Footy ad breaks, so fans know who’s winning even while the ads are on. Enhanced audio transcription of our content now enables us to report accurately and quickly to clients on credits delivered during live sport and other shows. During the year, SCA’s insights division, SCA iQ, worked with Ampliﬁ ed Intelligence and Professor Karen Nelson-Field to conduct a feasibility study into broadcast audio attention to understand how live radio inﬂ uences listeners’ brand choice. The feasibility study found broadcast audio commands high attention, on par with other broadcast media, while SCA’s suite of audio content performed better than some visual attention counterparts. Commercial Radio and Audio (CRA), our peak industry body, and its members have committed to continue this testing to develop audio attention metrics for broadcast audio and podcasting. We were delighted recently to host more than 400 media buyers and other guests for an immersive experience showcasing a day in the life of a LiSTNR user from waking up listening to Steve Price on Australia Today, heading to the gym listening to It’s A Lot with Abbie Chatﬁ eld, catching the train to work enjoying Triple M’s The Marty Sheargold Show, and cooking dinner with the Hit Network’s national Drive show, Carrie and Tommy. It’s more important than ever for our sales and creative teams to understand our products and to be able to explain them simply and match them to our clients’ objectives. Taking a client-centric approach, we have therefore created an integrated radio and digital audio sales structure and will this year commission a single sales and traffi c system for audio inventory. Our sales training provides detailed knowledge about SCA’s products (including our growing suite of digital audio content and audience attribution tools), fundamental skills for eff ective selling, critical thinking, and tools for motivating, coaching, and performing as part of a team. SCA is also at the forefront of industry initiatives to educate buyers about digital audio and improve the tools available to buyers. CRA has made good progress with offi cial survey provider, GfK, to evolve the commercial radio industry’s audience measurement currency. Radio audience survey data is now collected predominantly by electronic diary and live streaming data will be incorporated in coming months. The Australian Podcast Ranker, of which SCA was a founding member, now provides monthly data on both listeners (reach) and downloads (frequency), helping media buyers to plan and value their investment in digital audio inventory. Re-imagine and restructure SCA’s operating model Increasingly, content created for broadcast is consumed by our audiences on connected devices, whether live or later as a radio show podcast, or in snippets posted to LiSTNR. Our radio shows build engagement and loyalty with our audiences through audio and video clips posted to social media. Visualisation is becoming increasingly important in the world of digital audio. At the same time, our advertisers want to know more about the audience to ﬁ ne-tune their messages and improve their return on investment. To meet these imperatives, SCA is committed to a digital ﬁ rst operating model for audio. We have made strides in this direction, but work remains to optimise our workforce and systems. Actions underway to close gaps in our current business model include designing new workﬂ ows, performance measures and measurement and reporting tools; educating and upskilling our people to ensure we have the required capabilities; educating our clients about the beneﬁ ts of digital audio advertising products; and partnering with leading content creators and technology innovators from around the world. SCA has made small investments in key technology partners to accelerate and inﬂ uence their product development while working collaboratively with our sales, content and technology teams. The dynamic sport scores advertising innovation and improved reporting on client credits mentioned above resulted from our collaboration with Frequency and Sonnant, two of our recent investment partners. Television We are very comfortable retaining our television assets. Through sale of capital assets and outsourcing of asset intensive activities to specialist service providers since 2017, SCA has created a streamlined, effi cient and capital light service. SCA’s television assets delivered EBITDA of $30 million, an improved EBITDA margin of 23.7%, and a market leading revenue-to-audience power ratio of 1.09 in the three aggregated markets of regional Queensland, Southern New South Wales, and regional Victoria. These outcomes followed a seamless transition to affi liation with Network 10 in the three aggregated markets from 1 July 2021. SCA’s provision of national sales representation services for Network 10 programming in Northern New South Wales, Western Australia, Tasmania, Darwin and Mildura/Riverland delivers a simple and scaled sales proposition for national buyers of advertising on Network 10 programming in regional Australia. Television is also a strong marketing platform for the growth of LiSTNR in regional markets, delivering around $10 million of in-kind marketing support in FY22. Executive leadership changes During the year, I was pleased to promote and welcome Rebecca Ackland to our executive leadership team as Chief People and Culture Offi cer. Bec joined our People and Culture team four years ago and has progressed rapidly from operational human resources responsibilities to designing and implementing initiatives to ensure SCA will have the digital and other skills and capabilities to achieve our strategic ambitions. Bec’s leadership and counsel through the complex challenges of the COVID-19 pandemic cemented her credentials. Bec also brings a fresh perspective to the leadership team and is a role model for other aspiring women at (or considering joining) SCA. After eight years, we will shortly farewell Nick McKechnie as Chief Financial Offi cer. Nick has made a signiﬁ cant contribution to SCA. I have valued Nick’s support and advice in my seven years as CEO, which have included the ongoing challenges presented by the COVID-19 pandemic. On behalf of the senior leadership team and everyone else at SCA, I wish Nick success in his new role. *GfK Metro Survey #5 2022, Provincial Survey #2 2022. P10+, Cume Reach (000’s), Mon-Sun ROS, SCA FM&DAB+ Brands (inc Soundcloud), Hit Network FM&DAB+ Brands, MMM Network FM&DAB+ Brands. Xtra Insights SCA Regional Markets Surveyed to Date, P10+, Cume Reach (00’s), Mon-Sun ROS. ^CRA survey 5 release. 4 | CEO’s Report Southern Cross Austereo CEO’s Report The year ahead In the ﬁ rst quarter, broadcast radio revenues are forecast to grow between ﬁ ve and seven percent. With growth in local advertising still subdued, there is stronger momentum in metro markets compared to regional markets. First quarter digital audio revenues are forecast to increase by about 30 percent. After the Commonwealth Games in 2022 and the Tokyo Olympics in 2021, television markets are tracking below the ﬁ rst quarter last year. Our FY23 non-revenue-related costs will increase by between two and four percent and total ﬁ nancing costs will be about $17 million. With the Melbourne offi ce relocation completed, capital expenditure in FY23 will concentrate on core systems and innovation and will reduce from $30 million to about $20 million. We are targeting to reach 1.75 million signed-in users on LiSTNR by the end of FY23, driven by stronger awareness of the LiSTNR brand, an increase in the diversity of premium content from both SCA and our partners, and further improvements in user personalisation and discovery. In conclusion, we are proud of the culture we have built at SCA that encourages inclusion, diversity, agility and collaboration. Our people are highly skilled, passionate, and curious by nature. May I also thank our shareholders for their support of our business. We are working hard to improve the pace of recovery and adapt to the changing and increasing consumption of our content across existing and new platforms. We are genuinely excited about our future and look forward to updating you on our progress. Grant Blackley Managing Director and Chief Executive Offi cer 2022 Annual Report CEO’s Report | 5 Operational Review Highlights: • SCA has 8.52 million listeners across its national FM, AM and DAB+ networks* • LiSTNR now has 1.5 million app installs, 889,000 signed-in users, plus 8 million Australians consuming LiSTNR’s digital audio content and growing** • LiSTNR won Australian Podcast Company of the Year and Podcast of the Year in the 2022 Podcast Awards for the second consecutive year • There has been a strong recovery in radio listening following the pandemic, with the industry weekly listeners up 8% year on year to 12 million^ • In survey 5, SCA recorded record cumulative audiences of 5.93 million for its metro stations, up 199,000 new listeners on survey 4, 2022* • The Hit Network recorded its largest metro audience ever in the latest metro radio ratings survey 5 in August 2022 with 4.21 million listeners and 5.8 million listeners in total across its 50 stations around the country* • The Fox in Melbourne is Australia’s most listened to radio station with 1.325 million weekly listeners the highest cumulative audience in Australian radio history* • Triple M reported its largest audience in 17 years, with 2.89 million listeners, in metro survey 5 in August 2022; and 4.28 million listeners across its 49 stations country-wide* • Triple M and LiSTNR won the audio streaming rights to AFL, NRL and Cricket Australia, bringing NRL game broadcasts to regional markets for the ﬁ rst time • SCA will retain its television assets for scale in regional markets • SCA’s affi liation with Network 10 resulted in a market-leading power ratio of revenue to audience of 1.09 • SCA extended its long-standing affi liation with the Seven Network in Tasmania, Darwin, Broken Hill and Spencer Gulf, and remote Central Eastern Australia. • 7 Tasmania is the number one television network in the State, delivering 58.8% commercial share of viewing *GfK Metro Survey #5 2022, Provincial Survey #2 2022. P10+, Cume Reach (000’s), Mon-Sun ROS, SCA FM&DAB+ Brands (inc Soundcloud), Hit Network FM&DAB+ Brands, MMM Network FM&DAB+ Brands. Xtra Insights SCA Regional Markets Surveyed to Date, P10+, Cume Reach (00’s), Mon-Sun ROS. **LiSTNR Digital Audio Network: 8m Australians per month, including LiSTNR streaming, podcasts, Soundcloud and Sonos. ^CRA Survey 5 release. 6 | Operational Review Southern Cross Austereo Operational Review LiSTNR LiSTNR hit its ﬁ rst birthday milestone in February this year and is now Australia’s fastest growing audio entertainment platform, with 889,000 signed-in users and growing. LiSTNR Sign-Ups 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 To celebrate, LiSTNR hosted ‘Audio Ampliﬁ ed’ a unique immersive experience to show a day in the life of a listener, from waking up in the morning listening to Steve Price on Australia Today, heading to the gym listening to Abbie Chatﬁ eld’s It’s A Lot podcast, catching the train into work while being entertained by Triple M’s The Marty Sheargold Show and Triple M Footy, to cooking dinner in the evening with the Hit Network’s national drive show, Carrie and Tommy, just to name a few. It was attended by more than 400 people and was covered extensively in the media. LiSTNR, an Australian ﬁ rst premium, curated and personalised free app, is central to SCA’s digital transformation and houses SCA’s 99 Hit and Triple M radio stations, 124 original Australian podcasts and 25 music stations. LiSTNR has ﬁ ve key curated content verticals: Entertainment and Culture, Sport, News and Information, Factual and Drama, and Parenting and Kids Entertainment, along with branded podcasts funded by advertisers. The suite of podcasts on LiSTNR includes Australia’s most popular podcast, Hamish & Andy. LiSTNR has the most podcasts in the Top 20 Australian podcasts, including number one sports podcast Triple M Footy AFL, number one news podcast in partnership with Schwartz Media 7am, and number one entertainment/culture podcast It’s a Lot with Abbie Chatﬁ eld. Others in the Top 20 include The Howie Games, The Brieﬁ ng, Triple M’s Rush Hour with JB & Billy, and Just the Gist. 2022 Annual Report Operational Review | 7 Operational Review LiSTNR LiSTNR’s key focus is on premium, curated podcast and streaming content from trusted Aussie household names including Hamish Blake, Andy Lee, Mark Howard, Tom Tilley, Steve Price, Natarsha Belling, Adam Shand, Jess Rowe, Luke Darcy, Turia Pitt and Abbie Chatﬁ eld, as well as the country’s highest proﬁ le and most loved talent including Carrie Bickmore, Tommy Little, Dave ‘Hughesy’ Hughes, Ed Kavalee, Erin Molan, Marty Sheargold, Fiﬁ Box, Brendan Fevola, Nick Cody, Jess Eva, Anthony ‘Lehmo’ Lehmann, Bianca Dye, Andrew ‘Cosi’ Costello, Stav Davidson, Abby Coleman, and more. This year, LiSTNR has launched more than 30 podcasts, including The Younger Man, the ﬁ rst audio rom com podcast series in its new Audio Fiction pillar based on Zöe Foster Blake’s book. Other key launches include The Sport, LiSTNR and Schwartz Media’s ﬁ rst co-created podcast, Shockwaves: The Bali Bombings, the ﬁ rst co-produced podcast with Network 10 and LiSTNR; The Science Brieﬁ ng and Huh? Science Explained both co-created with the Royal Institution of Australia (RiAus), the ﬁ rst of four branded podcasts with carsales called Watts Under the Bonnet: The Electric Vehicle Podcast; while Steph Claire Smith and Laura Henshaw’s popular KICPOD podcast and That’s Enough Already with Urzila Carlson moved to LiSTNR, and two of Andy Lee’s best-selling children’s books Do Not Open This Book and Do Not Open This Book for Eternity also became available as audio books. In addition, Sydney’s popular radio duo, Mike E and Emma, launched a new, live national weekday Breakfast show station on LiSTNR and DAB+ called RnB FRIDAYS. The channel also features the hottest Hip-Hop and RnB music. Today, LiSTNR publishes more co-created original podcast titles and episodes than any other Australian commercial digital audio company. Throughout the year, LiSTNR has collected a number of accolades, including being awarded Podcast Company of the Year at the 2022 Podcast Awards by Radio Today for the second consecutive year. LiSTNR also won Podcast of the Year for Come Out Wherever You Are, Podcast Thought Leader of the Year and Podcast Executive Producer of the Year. SCA’s Innovation Program, The Lab, received more than 400 entries into its company-wide Lab Contest in 2021 to develop innovative ideas for LiSTNR. Two of the three winners’ ideas came to fruition this year – The Stories of Us podcast that tells inspiring true stories about locals from around Australia, and Sound States, a series of ‘sensory non-music audio’ that inﬂ uences mood states of listeners, a concept that has found cult popularity among young audiences. 8 | Operational Review Southern Cross Austereo Operational Review LiSTNR As well as its content line-up, LiSTNR has developed successful business partnerships across content, audience intelligence and machine learning with the NRL, AFL, Cricket Australia, Network 10, Kinderling, BBC, Schwartz Media, Apple Music, Salesforce, Frequency, NumberEight, SourseAI and Sonnant – with more premium partnerships to come. Consumers are migrating at pace to digitally enabled IP listening across multiple devices and platforms. In time this will become the dominant mode of audio consumption. • Strategic imperative to own and operate our digital audio eco-system (not licence) • Localism is our key diff erentiator to global tech platforms • On-demand content growing the audio market on top of an already resilient radio platform • Digital Audio First Strategy – re-thinking the way we program and commission content This year LiSTNR delivered a new record high of 3.4 million podcast listeners. Excluding Spotify, LiSTNR has the highest share of voice in the media at 31%. Active streams during FY22 were 62.33 million, while total listening hours were 60.3 million for the same period. Sources: Triton Australian Podcast Ranker March 2022, Streem data, Triton. Average monthly streams on LiSTNR have increased by over 3.7x since launch, as listening on the platform grows rapidly across podcasting, live streaming of radio shows and music streams. Average Monthly Streams on LiSTNR by HY 3.7x Growth in Listening On-platform listening is scaling rapidly - growth in signed-in users, increasing depth of content and more inventory for monetisation. Source: SCA Internal data 2.7m 1.7m 0.7m H1 CY21 H2 CY21 H1 CY22 LiSTNR is also gaining ground among consumers. User satisfaction of the LiSTNR app grew from 49% overall satisfaction to 59% and is the second-highest ﬁ rst to mind recalled audio brand. There has been 61% growth, from 6.4% to 10.3%, in unprompted awareness among consumers, and 26.9% growth, from 22.1% to 28.5%, in prompted awareness. Source: SCA iQ \LiSTNR Brand Tracking, July 2022. External sample (Fonto & Ovation Insights), National P18-64 n=1,210. In ﬁ eld 14th to 31st July 2022. LiSTNR’s Instagram has achieved more than 55% audience growth in 2022, to almost 10,000 followers. Two stand-outs were Hamish & Andy’s Remembering Project with 2.2 million organic video views, and Abbie Chatﬁ eld’s It’s A Lot podcast with more than 12 million organic video views. 10.0k 9.0k 8.0k 7.0k 6.0k Instagram Growth Chart Week of Jan 01 Week of Apr 01 Week of Jul 01 Audio listening is also booming. The latest Edison Inﬁ nite Dial report in June 2022 found that 80% of Australians had listened to live radio or radio catch-up podcasts in the past week and that average time spent listening to podcasts had surged to seven hours and six minutes of podcasts per week (up from ﬁ ve hours in 2021). LiSTNR is accelerating SCA’s transition from a one to many unknown consumers model to a one to one known signed-in consumers model, which is appealing to digital audio advertisers. Supported by the growth in consumption of LiSTNR’s live and on-demand audio content and an expanding digital audio market, SCA’s digital audio revenue jumped by 35% in FY22. 2022 Annual Report Operational Review | 9 Operational Review Radio SCA owns 99 stations across FM, AM and DAB+ radio and provides national sales representation for 23 other regional radio stations. SCA is the #1 commercial radio network for the key buying demographic of people 25 to 54 years of age. The Hit and Triple M networks continued to entertain, inform and inspire more than 8.52 million Australians each week*. The Hit and Triple M networks are home to some of the best radio talent in the country including Carrie Bickmore, Fiﬁ Box, Tommy Little, Abbie Chatﬁ eld, Brendan Fevola, Nick Cody, Ed Kavalee, Dave Hughes and Erin Molan on Hit, and Marty Sheargold, Mark Geyer, Gus Worland, Jess Eva, Margaux Parker, Dave Gleeson, Wendell Sailor, Ryan Girdler, Leisel Jones, Peter Sterling, James Brayshaw, Billy Brownless, Gorden Tallis, Greg Martin, Jude Bolton, Mark Ricciuto, Chris Dittmar, Peter ‘Spida’ Everitt and Andrew Jarman on Triple M. There has been a strong recovery in radio listening following the pandemic. Commercial Radio and Audio reports that weekly listeners have risen 8% year on year to 12 million people in metro capital cities in the survey 5 radio ratings. There has been a 900,000 year on year increase in weekly listeners for the industry, a 27% increase in listeners streaming radio content, and a 35-minute weekly increase in in-car listening as city workers return to commuting between home and offi ce. Smart speaker listening also continues its explosive growth. On the Hit Network, smart speaker listening has grown by 169% in two years and on Triple M, smart speaker growth is 230% in the same period (July 2020 to July 2022). In the survey 5 radio ratings, the Hit and Triple M networks continue to show a remarkable audience return to radio, with a record national cumulative audience of 5.93 million for our metro stations – a rise of 26.4% since the last survey of 2021. SCA’s cumulative audience has grown at a faster rate that its peers over the past ﬁ ve radio ratings surveys and has added 1.2 million listeners over the past ﬁ ve years*. Metro Commercial Radio Audiences Source: Commercial Radio Australia 11.7 11.1 11.2 10.9 10.7 10.5 2017 2018 2019 2020 2021 2022 Average Metro Radio Audience – All People 10+ Cume Source: GFK – 5 Cap Cities, share of audience People 10+ (incl DAB). Commercial Radio Australia 300 260 220 180 140 #5 2019 #6 2019 #7 2019 #8 2019 #1 2020 #2 2020 #6 2020 #7 2020 #8 2020 #1 2021 #2 2021 #3 2021 #4 2021 #5 2021 #6 2021 #7 2021 #8 2021 #1 2022 #2 2022 #3 2022 #4 2022 SCA NOVA ARN NINE This year, SCA launched eight new DAB+ radio stations from the Hit and Triple M networks on the Gold Coast, bringing local listeners the best of digital radio music and entertainment off erings for the ﬁ rst time. The Gold Coast is the 10th city in Australia to have DAB+. In addition to its two FM stations, 90.9 Sea FM and 92.5 Triple M, SCA launched six digital-only radio stations: Triple M Classic Rock, Triple M 80s and Triple M 90s, plus Easy 80s Hits, Oldskool 90 Hits, and RnB FRIDAYS Radio. Metro radio advertising revenue grew 9.4% in the ﬁ nancial year and regional ad revenue grew by 6.4% as the advertising market recovers from the pandemic but is still impacted by labour shortages and supply chain issues. SCA has completed its ﬁ ve-year 60 offi ce digitisation program across Australia, creating a digital infrastructure ﬁ t for the future. 10 | Operational Review Southern Cross Austereo Operational Review Hit Network Listeners have ﬂ ocked back to the Hit Network, which recorded its largest metro audience ever in the latest radio ratings survey 5 in August 2022 with 4.21 million listeners*. Across its national network of 50 stations, Hit has 5.8 million listeners in total*. In particular, The Fox in Melbourne continued its record-breaking streak as Australia’s most listened to radio station with 1.325 million weekly listeners*. This is the highest cume ever in Australian radio history. Survey 5 also saw 2DayFM celebrate its ﬁ fth consecutive cume increase and the Breakfast show with Hughsey, Ed and Erin again grew its audience, achieving the highest audience growth in Sydney, and a 38% increase in audience this year*. A lucky listener from Sydney won the prize after playing live with 48 other ﬁ nalists on Million Dollar Day with Drive hosts Carrie and Tommy. The prize enabled Stacey from Casula to give up 16 years of renting to ﬁ nally buy her own family home. In addition, Brisbane’s B105, home of the Stav, Abby and Matt Breakfast show, recorded its highest cume ever, rising by 10% to 642,000*. Perth’s Mix 94.5, home of the Pete, Matt and Kymba Breakfast show, matched this record with its highest cume ever, up 5% to 595,000*. SAFM has the number one Breakfast show, with Bec, Cosi and Lehmo, among women aged 25 to 54; and is also the number one station for this demographic*. The Hit Network is the number one network for the key buying demographic of people aged 25 to 54 and has the number one share of women aged 25 to 54*. Hit’s regional stations also had a stellar year, with many recording the biggest radio audience in their respective markets. On the Gold Coast, 90.9 Sea FM is the number one station overall and in Breakfast among women aged 25 to 54. Hit 100.9 in Hobart is the number one most listened to station in the city*. A number of other Hit stations were crowned number one with Hit 106.9 in Newcastle, Hit 93.1 Wagga Wagga, Hit 100.3 and 94.7 in Mackay and the Whitsundays, the number one stations overall and in Breakfast among women aged 25 to 54*. Hit 104.7 Canberra was the number one station overall among people aged 18 to 39, Hit 105.5 Coff s Harbour and Hit Port Hedland and Broome were both the number one stations overall in people aged 10+*. Hit 106.5 Karratha was number one in Breakfast, Drive and in people aged 25 to 54*. The Hit Network made Australian radio history in November 2021 as the network crowned its very ﬁ rst millionaire. Hit’s biggest ever promotion, the $1,000,000 Alphabucks competition, ran on air nationally from July to November 2021. To win, players were asked to answer 10 questions using one letter from the alphabet with 30 seconds to answer. More than 75,000 registered to play. Hit ‘hit’ the ground running in 2022 with a new national Nights show, Hot Nights with Abbie Chatﬁ eld, that has been a ratings success story. Abbie’s podcast, It’s A Lot, also features on LiSTNR and featured in the top 10 podcasts for the ﬁ rst time in the July Australian Podcast Ranker. Hobart’s favourite sons and ACRA-award winning duo, Jimmy and Nath from the 100.9 Hit Breakfast show, launched a new national weekend breakfast show, Jimmy and Nath, plus a new national late night show, of the same name. As a result, a brand-new Breakfast show launched on Hit 100.9 in Hobart with Dan and Christie taking the reins from Jimmy and Nath. On the Gold Coast, Danny Lakey joined the Breakfast show to become Bianca, Ben and Lakey on 90.9 Sea FM in July, marking his return to the Gold Coast after 10 years. Hit’s popular national Drive show, Carrie and Tommy, ﬂ ew some lucky listeners to London to see Ed Sheeran live at Wembley Stadium, Hit’s ﬁ rst overseas competition since the pandemic. The Fox Breakfast Show team of Fiﬁ , Fev and Nick also hit the road, travelling throughout Melbourne’s suburbs to connect with listeners, to the Gold Coast for ‘Fiﬁ ’s Big Night Out’ and to Victoria’s Mount Buller to broadcast from the ski resort as part of its long-term partnership. The Hit Network welcomed the return of live events this year with the launch of RNB Fridays ‘Fridayz Live’ in partnership with the Mushroom Group. The national live concert series features across Sydney, Melbourne, Brisbane, Adelaide, and Perth in November 2022. Hosted by Abbie Chatﬁ eld, the Hit Network’s Hot Nights host, and Fatman Scoop, the concerts are headlined by Macklemore with other great artists. 2022 Annual Report Operational Review | 11 Operational Review Triple M Triple M reported its largest audience in 17 years, with 2.89 million listeners, in the latest radio ratings survey 5 in August 2022*. Triple M is also the number one radio network for men aged 25 to 54. Across its 49 stations nationally, Triple M has 4.28 million listeners*. The Marty Sheargold Show is the number one Breakfast show in Melbourne for men aged 40 to 54, while The Rush Hour in Sydney, Melbourne, Brisbane and Adelaide is number one for men aged 25 to 54*. All Triple M stations around the country have locally produced Breakfast shows and the year kicked off with a new Drive show strategy, bringing new, State-based Rush Hour Drive shows across the country. The Rush Hour team in Sydney is hosted by Wendell Sailor, Jude Bolton and Gus Worland, while in Melbourne The Rush Hour with JB and Billy, now in its 11th year on air, moved from its early evening timeslot to take over Drive, as did Adelaide’s The Rush Hour with Bernie, Blewey and Jars. In Perth West Coast Eagle and 2006 Norm Smith Medallist, Andrew Embley hosts The Rush Hour with Andrew Embley. In Brisbane and the Gold Coast, nine-time Olympic medal winner Leisel Jones joined The Rush Hour team of Triple M NRL commentator, Ben ‘Dobbo’ Dobbin, and host of The Scorecard on LiSTNR, Liam Flanagan. Across Queensland, Elliott Lovejoy and Annabelle ‘AB’ Brett host The Rush Hour with AB and Elliott. Triple M and LiSTNR also negotiated streaming rights with the AFL, NRL and Cricket Australia, to bring all the sports action to listeners. Triple M Cricket was the smash hit during the Ashes series, One Day Internationals and T20 matches, and the network’s expert commentary team pioneered a new soundtrack to summer across Australia, introducing cricket on the LiSTNR app for the ﬁ rst time ever to great success. The Australian Rugby League Commission also agreed to extend its long-standing partnership with Triple M and LiSTNR for Audio Broadcast Rights until 2027, including exclusive commercial broadcasts of four NRL Home and Away Matches each week, the State of Origin, Representative Matches and NRL Finals Series, and the NRL Women’s Premiership, Nines and All Stars. The NRL was broadcast to regional markets on Triple M for the ﬁ rst time. Triple M has the largest AFL and NRL metro audience, delivering 47% more audience than its closest commercial competitor. In the latest radio ratings survey 5 in August, 626,000 people tuned into Triple M’s AFL broadcast in Melbourne, Adelaide and Perth, and 471,000 listened to Triple M’s NRL broadcast, with comprehensive coverage of all games and the best expert commentary team in the country*. Triple M’s annual ‘No Talk Day’ returned for the fourth consecutive year in July to raise awareness around men’s mental health and suicide and encourage courageous conversations on Triple M’s 45 stations across the country with support from mental health charity partner Beyond Blue. From 6:00am to 6:00pm on July 4, Triple M removed all regular programming replacing it with music and candid conversations from Triple M on-air talent and some of the biggest names in rock, sport and comedy about their challenges with mental health and the resources they have used to recognise the signs and work on overcoming feeling helpless. For the ﬁ rst time this year, Triple M hosted a long-form mental health discussion, ‘Triple M’s Courageous Talk’, moderated by Triple M No Talk Day co-founder Shaun Gough with special guests Wayne Schwass, former North Melbourne AFL footballer, commentator and mental health activist; Dr Grant Blashki, Lead Clinical Advisor for Beyond Blue; Matt O’Gorman, drummer for Aussie rock band British India and host of Triple M Aussie; and Christian McBride, Tour/Production Manager and CrewCare board member. This year, SCA created a world ﬁ rst dynamic sport advertising campaign on Triple M that delivered live AFL and NRL Friday night game scores inside audio ads on broadcast and digital audio platforms, in partnership with McDonald’s. Several Triple M Breakfast shows added some serious talent this year, starting in Sydney as rugby league legend Mark ‘MG’ Geyer joined the line-up to form Breakfast with MG, Jess, and Pagey. 92.5 Triple M Gold Coast saw Ali Plath join the Breakfast show alongside Peter ‘Spida’ Everitt and Sean ‘Flan’ Flanagan. In Adelaide, Laura ‘Loz’ O’Callaghan joined 104.7 Triple M Breakfast alongside popular duo Roo and Ditts to become Roo, Ditts and Loz. In Perth, 92.9 Triple M breakfast welcomed Michelle Anderson, from The Rush Hour Perth team to the Breakfast show with Xav, Michelle and Baz. And Hobart’s 107.3 Triple welcomed Esther ‘Woody’ Nichols and Andy ‘Tubes’ Taylor a new Breakfast show for the city. Aussie Rock superstar Dave Gleeson returned to Nights on Triple M as host of Triple M Nights with Dave Gleeson in Sydney, Melbourne, Brisbane, Adelaide, Perth, Newcastle, Gold Coast and Hobart. In Sydney, 104.9 Triple M’s Dead Set Legends Saturday morning show added Candice Warner joining Triple M legend Dan Ginnane and horse racing royalty Richard Freedman to talk all things sport. In Adelaide, Tom Rockliff , Callum Ferguson, and Mark ‘Thomo’ Thomas formed Triple M Dead Set Legends with Tom Rockliff , Callum Ferguson and Thomo on Saturday mornings. In regional markets, Brisbane and Adelaide, the ‘Good Times, Greatest Hits’ music proposition was implemented for a broader audience appeal. 1152 Triple M Riverina celebrated a big milestone this year – 90 years on air serving the Wagga Wagga and Riverina region. Over the past 90 years, 1152 Triple M has been a part of so many signiﬁ cant moments of the region, keeping the community informed during ﬂ oods and bushﬁ res and celebrating events such as the establishment of the RAAF base in 1940. 1152 Triple M was part of the proclamation of Wagga Wagga becoming a city in April 1946, selling the ﬁ rst Chiko Roll at the Wagga Wagga Show in 1951 and waving to Her Majesty Queen Elizabeth II and His Royal Highness the Duke of Edinburgh in February 1954 during their visit Down Under. On the New South Wales Central Coast, 107.7 Triple M celebrated its Golden anniversary as the coast’s oldest radio station with 50 years of broadcasting. The station has been home to some of Australia’s most well-known radio personalities including Doug Mulray, John Kerr, comedian Akmal Saleh, Mike Duncan, Rick Julien, Dwayne Jeff ries, Bob Peters, Cam Humphreys, Sarah King, Paddy Gerrard, Rob Palmer and many more. *Source: GFK Radio Ratings. Survey #5 2022 – Metro (FM & DAB+). Gold Coast, Newcastle, Canberra Survey 2 2022 (FM/AM). Mon-Sun 5:30-12mn Cume. Xtra Insights Mt Gambier, Griffi th, Coff s Harbour, Rocky-Gladstone, Orange, Dubbo, Bunbury, Warragul, Albury. Xtra Insights Survey #1 2019. Mt Isa Xtra Insights Survey #1 2020 Geraldton Survey, Port Macquarie, Kingaroy, Roma, Albany, Maryborough, Hobart, Wheatbelt, Bundaberg, Esperance, Emerald, Gosford, Toowoomba, Townsville, Shepparton, Kalgoorlie, Cairns, Mildura, Bendigo #1 2021. Karratha, Mt Gambier, Coff s Harbour, Griffi th, Hobart, Port Hedland Broome Survey, Mackay, Wagga Wagga #1 12022 (FM/AM) Mon-Sun ROS Cume. 12 | Operational Review Southern Cross Austereo Operational Review SCA iQ SCA iQ is SCA’s internal centralised hub for media research and insights capability which houses data from more than 300,000 SCA listeners from around Australia, who provide ﬁ rst-party data and behavioural insights. SCA iQ’s Mood Monitor, now in its ninth year, is a major study to survey metro and regional Australians particularly around mood, concerns and ﬁ nances. In SCA iQ’s latest instalment of Mood Monitor in May 2022, Australians are returning to their pre-pandemic levels of positivity and concerns but with some slight nuances. Our concern for the environment, healthcare and the Australian economy all exceeded results seen pre and during the pandemic. Whilst the increasing cost of living has our ‘concerned’ levels rising, it is notable that 48% of Aussies are using audio to help support their mental health and mood at the moment. This year, SCA iQ launched a Boomtown version of Mood Monitor for regional Australians. SCA is paving the way to measure broadcast audio attention with a world-ﬁ rst feasibility study to test broadcast audio attention globally in partnership with Professor Karen Nelson-Field’s Ampliﬁ ed Intelligence. SCA is the ﬁ rst audio company internationally to pioneer measurement of broadcast audio attention to understand how live radio inﬂ uences brand choice to exposed listeners. Among the initial ﬁ ndings, the study revealed that broadcast audio commands high attention, on par with other broadcast media, while SCA’s suite of audio content performed better than some visual attention counterparts in the digital media space. Commercial Radio and Audio (CRA) and its members have committed to continue this testing to develop audio attention metrics for broadcast audio and podcasting. A new report this year from SCA iQ, called Audio Reach Ampliﬁ er, explored ad-supported audio’s ability to increase a campaign’s scale and better impact the total marketing funnel, and analysed the value of audio in companion reports for Total Audio and Digital Audio. The report found that 16.8 million Australians are listening to ad-supported broadcast and digital audio every week – with 49% listening via the Internet, 40% listening on mobile devices, and 24% via smart speakers. Ad-supported audio reaches 84% of the critical 25 to 54-year-old demographic, who are the largest group of listeners. The report found that digital audio formats extend radio’s reach in this demographic by 24% more than using commercial radio alone. Audio Reach Ampliﬁ er is the ﬁ rst in a series of reports, to be released by SCA iQ, demonstrating the value of audio at every stage of the marketing funnel. SCA iQ also undertook Australia’s largest audio ‘Establishment Study’ in Australia for many years. The national study had a 14,000-strong sample size and was designed to provide robust benchmarks for audio reach and consumption across all audio platforms. This data is used in many of SCA’s new audio products and dashboards. Its primary purpose is to provide deep, granular data to enhance current audio currency measurement. An audio incremental reach tool developed by SCA iQ allows advertising clients to understand why planning more than one audio channel is advantageous. In addition, SCA iQ also developed a LiSTNR insights and planning dashboard for advertising clients and our sales teams. The dynamic, informative dashboard features LiSTNR app user and content proﬁ les and is designed to inﬂ uence increased usage of the LiSTNR network. Currently in trial, it will launch in FY23. 2022 Annual Report Operational Review | 13 Television SCA changed its principal regional television affi liation in the three aggregated markets of Queensland, southern New South Wales, and Victoria to Network 10 in July 2021. SCA had already been broadcasting Network 10 programming in Broken Hill and Spencer Gulf. Network 10 has a popular range of programming including The Masked Singer, MasterChef, Survivor, I’m a Celebrity Get Me Out of Here, The Bachelor, Have You Been Paying Attention?, The Project, The Living Room, plus sports Australian A League football, MotoGP, Bellator MMA, F1 and the Melbourne Cup Carnival. During the year, SCA also took over national sales representation of Network 10 programming in northern New South Wales (including Gold Coast), Tasmania, Western Australia and Mildura. This allows SCA to off er a simple and scaled ‘Total 10’ sales proposition to national buyers of advertising on Network 10 programming. Despite Network 10 programming generally rating lower than SCA’s former Nine Network affi liation, SCA’s superior sales performance delivered a market-leading power ratio of revenue to audience of 1.09 in the three aggregated markets. As a result, SCA maintained its earnings from television with EBITDA of $30 million and an increased EBITDA margin of 23.7%. 1.09 Commercial Share and Power Ratio 19.0% 20.8% 19.6% 1.08 21.1% H1 FY22 H2 FY22 Audience Share Commercial Share Power Ratio SCA was also pleased during the year to extend until 30 June 2024 its longstanding affi liation with the Seven Network in Tasmania, Darwin, Broken Hill and Spencer Gulf, and Remote Central Eastern Australia. 7 Tasmania is the number one television network in Tasmania, delivering 58.8% commercial share of viewing in zone 1. The network reaches more than 380,000 unique viewers, or 71.4% of people in Tasmania, on average each month*. It was the only commercial network to deliver audience share growth, up +3.1 points year on year, and delivered the highest year on year share growth of all commercial primary channels, up +2.1 points. In addition, 7TWO is the number one commercial multi-channel, followed by 7mate and both delivered year on year share growth of 0.8% and 0.2% respectively. 7mate was the only commercial multi-channel to grow its audience year on year, up 10.2%*. SCA Tasmania produces 7 Nightly News, a one-hour, live news bulletin every day from its Launceston offi ce. 7 Nightly News is the number one program in Tasmania with a 73.9% commercial share of viewing, which is up 3.5 points year on year. The News program has 10.5 times more viewers than its closest commercial competitor*. SCA’s 7 Tasmania service also delivered 19 of the top 20 regular programs in Tasmania including 7 Nightly News, Home and Away, The Voice, Farmer Wants a Wife and RFDS*. Premium sporting events were big winners for SCA’s 7 Tasmania service. The AFL Grand Final was the highest rating broadcast in 2021, delivering more than 80% commercial share of viewing, and the highest AFL Grand Final audience since 2017, growing 20% year on year*. The Tokyo Olympics last year had 50% more viewers than the Rio de Janeiro Olympic Games and reached more than 385,000 unique viewers, or 72.2% of Tasmanians. Over the summer ratings period, 7 Cricket dominated, reaching 395,000 unique viewers, or 74% of people in Tasmania*. SCA is committed to providing local news services for regional television viewers. In Southern New South Wales, there are nine news updates each weekday in the Canberra, Wollongong, Wagga Wagga and Orange markets, and in Victoria nine weekday news updates are broadcast to Bendigo, Ballarat, Gippsland and Albury. In Queensland, SCA provides nine news updates each weekday in the markets of Cairns, Townsville, the Sunshine Coast, Rockhampton and Bundaberg. SCA also produces nine news updates each weekday in the Hobart and Launceston markets for its joint venture, TDT, which carries Network 10 programming. In Darwin, SCA broadcasts six news updates and city speciﬁ c content to meet the requirements of our broadcast licences, while in regional South Australia, SCA airs a 30-minute news bulletin on weekdays, with video journalists based in Port Lincoln, Port Pirie, Port Augusta, Whyalla and Broken Hill. SCA’s total local news output on weekdays is four hours and 34 minutes. Overall, SCA’s television assets cover the following parts of regional Australia: • Network 10 programming in regional Queensland, Southern New South Wales, Victoria, Broken Hill and Spencer Gulf, along with additional national sales representation in Northern New South Wales, Tasmania, Darwin, Western Australia and Mildura • Channel Seven programming in Tasmania, Broken Hill and Spencer Gulf, Darwin and Remote Central and Eastern Australia • Nine programming in Broken Hill and Spencer Gulf. SCA also has a multi-year free-to-air program supply agreement with Sky News Australia. Sky News content is broadcast across SCA’s largest regional markets on a dedicated 24-hour news channel. Sky News Regional broadcasts on Channel 56 in 17 of SCA’s regional markets across Victoria, Southern New South Wales, and Queensland. SCA also performs sales representation for Sky News Regional on behalf of WIN in Northern New South Wales, Griffi th, and Mount Gambier/Riverland. Following a strategic review, SCA has decided to retain its television assets. The outsourcing of back of house capital-intensive functions has simpliﬁ ed television operations. Television also provides SCA with scale in a growing regional market as well as a marketing platform for SCA to further mature LiSTNR in regional Australia. Source: Regional TAM Data, TAS, Total People, Consolidated 7, 1 July 2021- 30 June 2022, 1800-2230 unless speciﬁ ed, Sun-Sat, Commercial share, AUD, Commercial Channels (using content affi liates NOT broadcaster), Regular programs (0200-2600, grouped, min 3 eps, sports ungrouped, excl. encores, repeats and specials), Top telecasts (0200-2600, ungrouped), Avg monthly reach = 1 min cume (0200-2600), Tokyo Olympics reach (entire telecast incl rpts 21/7-9/8, excl. Paralympics), Cricket based on typology, Summer: weeks 49-6. 14 | Television Southern Cross Austereo Boomtown This year the Boomtown collective has capitalised on the transformation that has occurred in regional Australia seeing population growth in regional areas outpacing metro for the ﬁ rst time in four decades. Representing the 9.1 million people living in regional Australia, including major business and population centres like the Gold Coast, Newcastle, Geelong, Toowoomba, Hobart, Darwin and Canberra; Boomtown has experienced unprecedented population growth in the past year due to the ‘work from anywhere’ phenomenon driven by the COVID-19 pandemic. As a result, metro migration has occurred on a scale never seen before, with young urban professional families and digital nomads accounting for a signiﬁ cant proportion of those relocating to Boomtown. This has created a ‘spiral of success’ for Boomtown, with record job vacancies on off er, 75% of which are for highly skilled and professional roles, and a property boom in regional Australia the likes of which hasn’t been seen for 15 years. In addition, Boomtown residents are happier, with 79% of people who moved to regional Australia ‘extremely satisﬁ ed’ with their move. The Boomtown collective comprises eight major media stakeholders: SCA, WIN, Seven West Media, ARN, ACM, Imparja, News Corp and oOh!. The collective continues to successfully demonstrate the value of advertising to regional Australians among national advertisers and their media agencies. After four years in market, Boomtown has helped move regional media to a position of strength, with trade tracking studies showing that awareness, consideration, usage and eff ectiveness are at close-to-saturation levels amongst its media audience. There has been a 15-point uplift in the Boomtown Net Promoter Score (NPS), demonstrating a strong propensity to recommend Boomtown and regional media amongst its target audience. Boomtown will continue to deliver its mission statement: ‘Connecting ambitious brands with the power of regional media’. Key initiatives The winner of Boomtown’s ‘Win a million dollars in regional media’ competition, a multi-platform regional campaign that has delivered exceptional results for leading Australian pasta brand San Remo, demonstrated the power of regional media to boost brand awareness and sales. In one of the most comprehensive cross-media case studies released by Boomtown, San Remo turned a $1 million regional media advertising investment into impressive results. The campaign recorded 47% category growth across the campaign regions, a 9.4% sales increase in spaghetti, 0.9% increase in dollar value and 0.6% increase in volume share in the highly competitive specialty foods category. There have been continued improvements to the Boomtown Hub, aimed at simplifying the process of planning regional media through interactive media coverage maps and search tools, to update and reﬁ ne its eff ectiveness. Since its launch in 2021 the Hub has attracted more than 4,000 users. Throughout the year, Boomtown delivered another series of its successful educational Masterclasses, facilitated by marketer and academic Gaye Steel. These classes continue to receive excellent feedback with an average rating score of 9.1 by participants. An online self-paced Masterclass is also in currently in development, empowering anyone to learn about Boomtown at any time. Boomtown continued its partnerships in trade, including AdNews LIVE, the Independent Media Agencies of Australia, presenting at the IMAA Operation Bounceback event in April, and the Media Federation of Australia’s NGEN program, industry leaders in training new starters in the industry. Also in development is the ‘Boomtown Agency Advocate Program’, ensuring we have Boomtown champions in all major media agencies across Australia. The ‘Boomtown City Spotlight’ campaign also launched and is designed to showcase Australia’s 14 major regional cities, bust some myths about regional areas, and promote regional Australia and its residents as contemporary, vibrant and proﬁ table markets. This year, Boomtown will continue to improve its suite of tools, including the Boomtown Hub, education, case studies and insights. The monthly newsletter will also continue, which reports an average open rate of 41.6%, an extremely high engagement with its audience. More information is available on the Boomtown website: https://boomtown.media/. 2022 Annual Report Boomtown | 15 Our People Values SCA prides itself on creating a culture where people feel valued and can perform at their very best. We don’t just focus on what we do; we care about how we do it. SCA’s ﬁ ve values guide day-to-day decisions and shape individual and collective behaviour. • We COLLABORATE: We work as a team. Together, we deliver our best. • 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. • Act with INTEGRITY: We do what’s right and act with transparency and honesty. We deliver on our promises. Our values are at the heart of all that we do and are indicative of our company culture, for which we were awarded a Cultural Sustainability Award from Human Synergistics following our most recent culture audit in 2021. Diversity and Inclusion SCA believes that business performance is enhanced by a diverse workforce where employees are treated with respect and fairness and have equal access to opportunities. SCA aims to provide a living, creative organisation that understands the diversity of its audiences and advertisers. At present, women occupy 40% of senior management positions and 53% of middle management positions at SCA. We have been focused on programs introduced in recent years to encourage ﬂ exible work practices to help our people – both men and women – to successfully manage their career and family life through a practical work-life balance, as well as providing learning opportunities for ‘future executive’ women to ensure we are succession planning for equitable hiring decisions. SCA has rolled out an enhanced workplace ﬂ exibility framework to ensure the Company continues to prioritise employee wellbeing while delivering exceptional outcomes for our audiences, advertisers and shareholders. Developing and looking after our people SCA continues to invest in leadership with a focus on the skills that SCA requires of its leaders now and in the future. SCA takes a values- based approach to leadership. We train and develop our leaders to exhibit values-based behaviours that align to our Code of Conduct and leadership behaviours framework and recruit talent that show capability in these areas. SCA has high expectations of its leaders. We review leadership styles through a 360-degree feedback tool called the Leadership Styles Inventory (LSI) with our partner Human Synergistics. SCA puts at least 40 leaders through the LSI process annually and, once this process is completed a supporting coaching program is put in place to support development in highlighted areas. SCA’s People and Culture Team is an accredited practitioner of the LSI tool. The LSI tool indicates SCA’s Senior Management Team has a highly constructive culture. At SCA, Learning and Development is a key focus for all our people, to equip them with the skills they require to deliver our strategic goals. Accordingly, we off er a robust suite of learning including: • Women in Content Program • Executive Ready Women in Leadership Program • Leaders of the Future Program • SCA Leads Leadership Development Program • ‘Leading Teams’ for National Executive Functional Groups • LSI and Coaching for Leadership Development • Mentoring Program • Specialised high performance sales training • Managing Mental Health training • Managing Underperformance training. SCA manages workplace health and safety risks in an active way. Local managers monitor and manage risks at their workplaces, ensuring that risks are identiﬁ ed, assessed and managed proactively and not only in response to an incident. Key risks managed on a day-to-day basis include security arrangements for high proﬁ le performers and on-air announcers and conducting ‘stunts’ for on-air radio content. Measures have been implemented in all 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 voltage equipment and managing asbestos in old buildings in regional areas are now managed directly by specialist service providers. Proactive steps are taken to promote the mental health and wellbeing of SCA’s people, including a wellbeing portal on SCA’s intranet, training on managing mental health in the workplace, and an employee assistance program and counselling service. Governance and sustainability 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. SCA also publishes a Sustainability Report reporting on how we manage our impacts on people, the environment and the economy. Our Corporate Governance Statement, Sustainability Report and related corporate governance policies are available on SCA’s website (http://www.southerncrossaustereo.com.au/investors). 16 | Our People Southern Cross Austereo SCA Embrace and Community SCA Embrace is SCA’s charity initiative launched in September 2016. Under our national framework of supporting selected charities for a two-year period, SCA engages with these charities to ensure there is growth in awareness (and ﬁ nancially) during this period. Through our diverse employee group, SCA provides the charities with support through radio, digital and television advertising; digital, social and research support; event and meeting spaces; brainstorming sessions; concert and sporting tickets; on-air interviews; and staff volunteering. SCA’s current national charity partners are Foodbank Australia and Make-A-Wish Australia. In the initial six months of these partnerships, we have provided more than $18 million of in-kind radio, digital and television advertising, along with digital, social, creative and research support. Due to the nature of this charity program SCA was able to support Foodbank in the 2022 Queensland and New South Wales ﬂ oods without delay by providing emergency support on-air messaging, social posts for awareness and donation requests; as well employees volunteering in the warehouse environment. We continue to be very proud of SCA Embrace, a program that has provided more than $160 million of in-kind advertising over the past six years. In July 2021 SCA extended its charity program to support local charities in regional markets. More than 20 local offi ces partnered with an organisation in the community and provided similar opportunities as our national partners have access to. During the ﬁ rst year of the local model SCA provided close to $1 million of in-kind radio advertising as well as local team support. Testimonials Make-A-Wish Australia CEO, Sally Bateman: Foodbank Australia CEO, Brianna Casey: “We are incredibly grateful for the amazing in-kind support we have received from SCA since the commencement of our partnership. The exposure across metro and regional Australia has helped broaden our reach. It has driven our biggest uplift in applications into the wish program since the pandemic began, which we’re so pleased about. “The guidance and insights shared by the radio and television teams have also helped us connect with a new audience of givers, with our most recent fundraising eff orts up over 20% in what we know continues to be such a challenging time for everyone. We’re genuinely amazed by what together we’ve achieved in such a short time. In the year ahead, we look forward to ensuring everyone at SCA has the opportunity to become a fully-ﬂ edged member of our ‘Wishforce’, so that we can make the impossible, possible for more wish kids.” “In only a few short months, SCA has become a treasured member of the Foodbank family, wrapping their arms around us every time we swing into action responding to ﬂ oods, the cost of living crisis, the ongoing challenges of COVID and more. “The SCA team knows how time-sensitive disaster response eff orts are, and when the devastating March 2022 ﬂ oods hit communities across both New South Wales and Queensland, they had CSAs and News Alerts ready within a matter of hours. SCA’s active promotion of Foodbank campaigns and appeals has helped generate much-needed funds to help us secure essential food and grocery items for natural disaster response and recovery, as well as everyday food relief. “Between skyrocketing electricity bills, increased food and grocery prices, the housing crisis, ﬂ oods, supply chain disruption and the global pandemic, it’s no wonder we are seeing increased demand for food relief, and a whole new cohort of people in need of assistance. We’re working hard to ensure every person who needs food relief receives it, and we couldn’t be more delighted to have SCA right there with us as we help change the lives of so many.” SCA YourWellbeing After a successful 2.5-year relationship with Beyond Blue under SCA Embrace, SCA has continued this very strong partnership under our mental health and wellbeing pillar, SCA YourWellbeing. Similar to previous beneﬁ ts, Beyond Blue continues to receive in-kind advertising as well as support from all aspects of the business. Beyond Blue continues to support SCA with its expertise and knowledge to ensure we are providing a safe and well workplace and has assisted with our mental health and wellbeing strategy. Since January 2022 SCA has provided Beyond Blue with more than $6 million of in-kind advertising and in July 2022 achieved its fourth national Triple M ‘No Talk Day’ on-air event to raise awareness around men’s mental health and suicide. 2022 Annual Report SCA Embrace and Community | 17 SCA Embrace and Community Connecting and supporting communities SCA’s local news and information services on radio and television keep communities up to date on the issues that matter most to them, as well as providing local skilled jobs, supporting local businesses, providing local advertising opportunities, and supporting local events, charities and community initiatives. SCA produces nightly news bulletins for its Channel Seven television service in Tasmania and local television news updates in regional Victoria, southern New South Wales, regional Queensland, and other regional television markets. SCA prides itself on its ‘ﬁ ercely local’ engagement with communities and this support has ramped up now COVID lockdowns have eased and in the wake of the devastating Queensland and New South Wales ﬂ oods. In addition to the SCA Embrace national charity program, SCA is an active contributor to communities. Here are just a few examples of SCA engaging with local communities, resulting in meaningful connections and contributions, from the past year: Triple M Bundaberg’s Christmas Crusade Triple M Bundaberg’s annual Christmas Crusade was its most successful campaign to date. In partnership with local charity Angels Community Group, the Triple M team rallies the community to ensure big smiles and relief as no child will miss out on having a very special Christmas. The campaign saw thousands of toys donated, ﬁ lling the entire offi ce, helping more than 700 families who qualiﬁ ed. Sue Tasker from Angel Community Group said: “I cannot express the impact this Crusade has on children who otherwise may have missed celebrating Christmas. The ability for JB and Jules to get the word out and rally the community was amazing.” Triple M Central Queensland’s ‘Good Luck Truck’ The Good Luck Truck is a successful hallmark of the Triple M brand, however 2022 saw it run for the ﬁ rst time in Central Queensland, and with great success. Local ﬁ nancial organisation The Capricornian Bank joined up in funding the program to bring much needed relief to the region. After just three days of promotion, we received 53 genuine entries of people out there looking for support or a bit of a leg up and ended up with hundreds of entries. This was a clear indication that things were getting tough out there with the housing and rental markets, cost of lettuce and everything else putting the pinch on listeners. The challenge became how to have the most meaningful impact for the most people, so over a four-week campaign Triple M did everything from paying bills and buying groceries to buying washing machines and sending someone for a spa day. Hit Central Queensland’s Sleepout: Sarge, Hit Central Queensland’s Workday announcer, took to the streets, literally, for Rockhampton’s ﬁ rst ever sleepout event. Designed to help break the cycle of homelessness and generate funding and support for the many people suff ering in the community, Sarge partnered with Harvey Norman, Live Free Support Services, and other members of the community to facilitate a massive fundraising event culminating in the sleepout. The fundraiser was a big night with everything from helicopter tours to a $14,000 bedding package going under the hammer for the cause. Triple M Townsville ‘Pricey’s Good Luck Truck’ Each year Triple M calls on listeners to nominate someone that needs a bit of a helping hand, with Pricey’s Good Luck Truck. In early 2021, Mel Landon was diagnosed with stage 4 breast cancer. Her husband Richard quit his job to help care for Mel and their two young kids. Given Mel’s young age and her sheer determination, they decided to treat her with a very aggressive form of chemo, which in turn damaged her heart leaving it with 20% capacity. The family lives on Magnetic Island and their car had been playing up but given their signiﬁ cant ﬁ nancial strain, they were not in a position to maintain it. Not only was Triple M able to coordinate getting the car to the mainland, ﬁ ve local businesses pitched in and repaired it. A $250 groceries voucher was also donated, and Triple M pitched in with a gift basket and toys for the kids for Christmas. We managed to turn this around within 36 hours. Sadly, Mel lost her battle in August. We are honoured to have had the opportunity to help their family during this diffi cult time and thank the local community for their support. Hit 103.1 Townsville’s ‘Hit the Hill’ Hit Townsville has again ‘hit the hill’ to raise awareness for mental health and suicide prevention. The whole Hit team was involved, broadcasting live at the top of Townsville’s iconic Castle Hill to culminate a whole week of activity. Close to $10,000 was raised for a local charity through this new, virtual style event in 2021. 18 | SCA Embrace and Community Southern Cross Austereo SCA Embrace and Community Hit Central Coast Maz and Lakey at Wagga Mardi Gras In what was the biggest LGBTQI+ celebration in regional Australia, Hit NSW’s Breakfast show Maz and Lakey hit the town to help host the Wagga Mardi Gras 2022. Thousands of locals lined the streets as the parade, including featuring the Hit 93.1 team, made its way to a big celebration at local parklands. Maz and Lakey engaged with the community through stage presence and one to one mingling. Triple M Central Coast Coast Shelter Sleep Out Teaming up with local charity partner Coast Shelter, local Afternoons announcer Justin Coombes- Pearce spent a night under the stars at Central Coast Stadium, alongside several other Coastie personalities and business owners. Proceeds raised for the event went directly to the homeless community of the Coast, as well as victims of domestic violence utilising Coast Shelter facilities to escape their home environment. Hit and Triple M ‘Wagga Wagga Takes 2’ The SCA Wagga Wagga team once again were heavily involved in Wagga’s biggest annual fundraising event ‘Wagga Wagga Takes 2’. Hit and Triple M have been involved in this event since it started in 2007. Hit and Triple M’s support isn’t just limited to promotion of the event, but every year the stations have representation in the show. The event pairs up a local celebrity with a local entertainer, and together they sing for their chosen local charity. This year, SCA Wagga Sales Manager Trent Cohalan got up on stage to perform Car Wash to raise money for charity. SCA Regional Content Director, Duncan Potts is the MC of the show, with support from Triple M Breakfast host Leigh Ryan and Hit Workday announcer Dane McGuirk. In 2022, 10 acts were part of the show, and collectively raised $200,000 for 10 local Wagga charities. Since the show began back in 2007, Wagga Wagga Takes 2 has returned nearly $4 million to local Wagga charities. Hit Albury ‘City2City’ City2City is a run/walk between our two major border towns, raising money for local hospitals in Albury Wodonga Health. Every year, since it began in 2015, Hit Albury gets involved in some way, with our announcers hosting the start line, ﬁ nish line and even multiple staff members running themselves. This year, Hit’s Tyson Witham helped launch the event as MC at the starting line, where $70,000 was raised for Albury Wodonga’s Community Care Services. Triple M Albury ‘Carevan’ Triple M Albury’s fundraising for Carevan got turned on its head this year with two incredible displays of generosity. Starting off with a week of auctions, Rob from Zypex Australia heard about our eff orts to raise money for a new van and bid an incredible $5,000 for a copy of Border Monopoly. However, when discussing with the charity exactly what they did and how much a new van would assist in their eff orts he decided to buy them one so Carevan could continue helping out so many across the region. Hit and Triple M Albury ‘Border Dance for Cancer’ The Stars of the Border Dance for Cancer is a yearly event on the Border that raises money for the Cancer Council of NSW with funds also going to the Albury Wodonga Cancer Centre. Over its eight years, someone from Hit or Triple M has participated in the event as a ‘dancer’. In May 2022, Triple M’s Guy Mylecharane had a dance performance and Hit’s Tyson Witham hosted the event, where along with some Border locals they raised $300,000 to help ﬁ ght cancer. Triple M Bendigo Guide Dogs Victoria Cogho and Kylie recruited Triple M listeners to assist in naming a new puppy at Guide Dogs Victoria. After 30+ suggestions from our audience they settled on Banjo. Guide Dogs Victoria brings Banjo into the show often to update us on his progress as he gets ready to serve his ﬁ rst family with Guide Dogs Victoria. Triple M Shepparton During COVID lockdowns Shepparton copped it a little harder that most Victorian towns and the region relied heavily on front line workers. Leisha Brodyk, the then Triple M Shepparton Breakfast announcer, dipped into her own pocket to provide these workers with pizza on a Saturday afternoon. BANJO 2022 Annual Report SCA Embrace and Community | 19 The Board and Leadership Team Robert Murray Chairman and Independent Director Appointed: 1 September 2014 Most recently elected by shareholders: 30 October 2020 Board Committees: Nomination Committee (Chair) Rob Murray became Chairman 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, ﬁ rst 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 a director of the Bestest Foundation, and Advisory Chair of the Hawkes Brewing Company. He was previously a director of Metcash, Dick Smith Holdings, Super Retail Group and Linfox Logistics. Glen Boreham AM Independent Director Appointed: 1 September 2014 Most recently elected by shareholders: 13 October 2021 Board Committees: Digital Transformation Committee (Chair), 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 beneﬁ ts 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 was formerly Chair of the Advisory Board at IXUP where he remains a Strategic Adviser. 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. Carole Campbell Independent Director Appointed: 1 September 2020 Most recently elected by shareholders: 30 October 2020 Board Committees: Audit & Risk Committee (Chair) Carole Campbell has over 30 years’ ﬁ nancial executive experience in a diverse range of industries including professional services, ﬁ nancial 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 GUD Holdings Limited where she chairs the audit committee at both companies. She was previously a non-executive director of IVE Group Ltd and Humm Group. Carole is also Deputy Chair of Council of the Australian Film Television and Radio School. Carole is a Fellow of Chartered Accountants Australia and New Zealand and brings extensive experience in accounting, treasury, ﬁ nance and risk management to her role on the Board and as Chair of the Audit & Risk Committee. 20 | The Board and Leadership Team Southern Cross Austereo The Board and Leadership Team Ido Leffl er Independent Director Appointed: 30 October 2020 Most recently elected by shareholders: 30 October 2020 Board Committees: Digital Transformation Committee, People & Culture Committee Ido Leffl er has long and successful experience in developing digital brands and extensive networks in the start-up communities of Silicon Valley and Australasia. Ido is the co-founder and Chief Executive Offi cer at Yoobi, a school supplies company that engages kids through bright colours, cool designs and, most importantly, cause. He is also a co-founder of Yes To Inc. – a leading global natural beauty brand; and of Beach House Group – a global consumer product house. Ido is a non-executive director of Vestergaard and The Lux Group. He was a non-executive director of Spark New Zealand Limited for six years until November 2020. Ido also sits on other corporate and advisory boards, including as an emeritus member of the United Nations Foundation Global Entrepreneur Council. Heith Mackay-Cruise Independent Director Appointed: 30 October 2020 Most recently elected by shareholders: 30 October 2020 Board Committees: Audit & Risk Committee, Digital Transformation Committee Heith Mackay-Cruise’s executive career included senior roles in Marketing for Pepsi-Cola in Australia and Australian Consolidated Press and as CEO and Managing Director of PBL Media in New Zealand, Study Group and Sterling Early Education. Since 2014, Heith has focused on non-executive roles including four years on the board of the ASX-listed Bailador Technology Investments Limited, and privately owned groups including Literacy Planet, hipages Group, LifeHealthcare, and his ongoing roles as Chair of Straker Translations Ltd and UP Education Limited and on the boards of Orro Group Holdings Pty Ltd and the Australian Institute of Company Directors. Heith brings to the Board his executive leadership experience, as well as global platforms exposure and marketing and digital knowledge. Helen Nash Independent Director Appointed: 23 April 2015 Most recently elected by shareholders: 30 October 2020 Board Committees: Audit & Risk Committee, People & Culture Committee (Chair), Nomination Committee Helen Nash has more than 20 years’ executive experience in consumer packaged goods, media and quick service restaurants. As Chief Operating Offi cer 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 ﬁ nancial skills to her role having initially trained in the UK as a Certiﬁ ed 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 Chair of Inghams Group Limited, a director of Metcash Ltd, and was formerly a director of Paciﬁ c Brands Ltd and Blackmores Ltd. Our Board beneﬁ ts from Helen’s governance experience and skills, including her membership of audit and remuneration committees at these other companies. 2022 Annual Report The Board and Leadership Team | 21 The Board and Leadership Team Grant Blackley Managing Director and CEO 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 Offi cer 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 Network 10, as CEO from 2005 to 2010. Before becoming CEO at Network 10, 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. Rebecca Ackland Chief People and Culture Offi cer Appointed: May 2022 Rebecca Ackland is an experienced people and culture leader and has had a successful career at SCA including key roles within talent acquisition, people operations and as People and Culture Manager. Rebecca passionately champions SCA’s award-winning culture, ensuring we place our people and our values at the core of what we do every day. As Chief People and Culture Offi cer, Rebecca is responsible for development and execution of SCA’s people and culture strategy and leads a team of experienced executives across specialties of talent, human resources operations, capability and learning, as well as people service Dave Cameron Chief Content Offi cer Appointed: January 2020 Dave Cameron has been with SCA for over 25 years and brings to the role of Chief Content Offi cer 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 Offi cer held the position of General Manager of the Melbourne offi ce. As Chief Content Offi cer, Dave is responsible for overseeing and delivering strategic leadership and creative excellence for SCA’s key content initiatives across all of its stations including FM, DAB+ and extended digital and associated on-demand content. 22 | The Board and Leadership Team Southern Cross Austereo The Board and Leadership Team Nikki Clarkson Chief Marketing Offi cer 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 Offi cer, 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. Brian Gallagher Chief Sales Offi cer 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 and Network 10, and was CEO of Ignite Media Brands prior to joining SCA as Chief Sales Offi cer. Brian is responsible for the development and implementation of an overall sales strategy for the Group, including driving the entire sales operation across SCA’s full suite of media channels and brands. Stephen Haddad Chief Technology Offi cer 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 Australian media, ﬁ nance and consulting organisations. Prior to this role, Stephen held CIO roles at Bauer Media and Fuji Film and senior roles within banking and telecommunications. Stephen is responsible for all technology domains across SCA, including Business Systems, Corporate Networks and Infrastructure, Digital Design and Development, Audio Engineering Technology and Operations and Television Broadcast Engineering and Operations. Stephen also has management responsibility for the Project Management Offi ce and Procurement functions. 2022 Annual Report The Board and Leadership Team | 23 The Board and Leadership Team John Kelly Chief Operating Offi cer Appointed: February 2016 John Kelly is an experienced executive who has previously held senior executive roles in large Australian sporting and media organisations. John was COO at Football Federation Australia from 2013 to 2015 where his role encompassed strategy and media rights. Prior to that role, John spent over 16 years in various Executive and Director roles at Network 10, including over eight years as Group CFO. John is a Chartered Accountant and commenced his career at KPMG where he progressed to the role of Manager. As Chief Operating Offi cer, 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, strategy, research and insights and digital audio as well as facilitating SCA’s external key sporting rights agreements and key digital audio partnerships. Nick McKechnie Chief Financial Offi cer Appointed: 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 ﬁ nance roles at Virgin Media in the UK and commenced his career with Arthur Andersen. As CFO of SCA, Nick is responsible for the ﬁ nancial 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. Nick is responsible for managing relationships and communication with providers of equity and debt capital and for ensuring a strong and eff ective governance framework exists. Nick has tendered his resignation. The search for a replacement is underway and Nick will remain with the business until a replacement has been appointed. 24 | The Board and Leadership Team Southern Cross Austereo Financial Report 2022 Annual Report Financial Report | 25 Contents Corporate Governance Statement Directors’ Report Review and Results of Operations Distributions and Dividends Signiﬁ cant Changes in State of Aff airs Events Occurring After Balance Date Likely Developments and Expected Results of Operations Indemniﬁ cation and Insurance of Offi cers 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 Notes to the Consolidated Financial Statements Key Numbers Capital Management Group Structure Other Notes to the Financial Statements Directors’ Declaration Independent auditor’s report to the members of Southern Cross Media Group Limited Additional Information Corporate Directory The ﬁ nancial statements were authorised for issue by the Directors on 22 August 2022. The Directors have the power to amend and re-issue the ﬁ nancial statements. 27 27 27 30 30 30 30 30 30 30 31 33 33 34 53 54 55 56 57 58 59 74 81 83 88 89 95 97 26 | Financial Statements Southern Cross Austereo Directors’ Report For the year ended 30 June 2022 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 ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations, 4th 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 2022 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 2022. In order to comply with the provisions of the Corporations Act 2001, the Directors’ Report is 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: – Rob Murray (Chairman) – Grant Blackley (Managing Director) – Glen Boreham – Carole Campbell – Ido Leffl er – Heith Mackay-Cruise – Helen Nash – Melanie Willis Principal Activities The principal activities of the Group during the course of the ﬁ nancial year were the creation of audio content for distribution on broadcast (AM, FM and DAB radio) and digital networks. The Group also broadcasts free-to-air television content in regional markets. 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 full year. Review and Results of Operations Operational Review Group Results The Group reported revenues of $519.7 million, a decrease of 1.7% on the prior year revenues of $528.6 million. Earnings before Interest, Taxes, Depreciation and Amortisation (‘EBITDA’) of $85.6 million, a decrease of 32.0% on prior year EBITDA of $125.9 million. Excluding government grants year on year, EBITDA was comparable at $83.9 million for FY22 and $85.5 million for FY21. Government grants include JobKeeper and Public Interest News Gathering as described in Note 6 ‘Government Grants’ to the Financial Statements. Net loss after tax was $153.7 million for the year ended 30 June 2022, down from a proﬁ t after tax of $48.1 million for the same period in the prior year. Current year results include impairment charges against the audio intangible assets of $250.9 million ($178.6 million net of tax) and impairment of investments of $0.8 million. Excluding these impairment charges, net proﬁ t after tax was $25.7 million. EBITDA is a measure that, in the opinion of the Directors, is a useful supplement to net proﬁ t in understanding the cash ﬂ ow 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 ‘Proﬁ t before depreciation, amortisation, interest, fair value movements on ﬁ nancial derivatives and income tax expense for the full year’ included within the Consolidated Statement of Comprehensive Income. Signiﬁ cant Items At 30 June 2022, the Group recognised impairment charges against intangible assets of $250.9 million, which related to an impairment in the carrying value of radio licences, goodwill and brands in the Audio Cash Generating Unit (‘CGU’). There was also a related derecognition of a deferred tax liability in respect of certain brands and licences for $72.3 million. The impairment reﬂ ects an increase in the discount rate; slower than expected recovery from the economic impacts of the COVID pandemic; independent estimates of radio broadcast growth rates showing declines over the forecast period; and a more pessimistic weighting towards the Lower Case due to increased potential for worsening economic conditions. There were also $0.8 million of impairment charges against investments and $4.0 million of other signiﬁ cant items relating to restructuring costs and expenses associated with terminated ﬁ nance systems refresh. Government Grants As part of its response to COVID-19, in March 2020 the Australian Government announced various stimulus measures resulting from the economic fallout due to the coronavirus lockdown. JobKeeper The Group determined it was eligible to receive the initial JobKeeper Payment Scheme (‘JobKeeper’) for the period April to September 2020 and the ﬁ rst period of the extension from October to December 2020. During the prior year SCA recognised $31.9 million in JobKeeper funding and nil for the year ended 30 June 2022. PING The Group applied and was found eligible for funding under the Commonwealth Government’s Public Interest News Gathering (PING) program. During the prior year SCA received $10.3 million for the period September 2020 to August 2021 of which $1.7 million was recognised as income during this ﬁ nancial year and $8.6 million in the prior year. Segment Proﬁ t and Loss Revenue Audio Television Corporate Total Revenue EBITDA Audio Television Corporate Total EBITDA Group NPAT 2022 $’m 392.8 126.2 0.7 519.7 85.8 30.0 (30.2) 85.6 (153.7) 2021 $’m 358.4 169.6 0.6 528.6 115.0 38.1 (27.2) 125.9 48.1 Variance 9.6% (25.6%) 16.7% (1.7%) (25.4%) (21.3%) (11.0%) (32.0%) (419.5%) 2022 Annual Report Directors’ Report | 27 Directors’ Report For the year ended 30 June 2022 Audio The Audio business consists of two complementary radio brands operating across Australian capital cities and regional Australia along with the digital assets associated with these two brands. These brands target diff erent 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 25 to 54 age bracket. Digital audio revenues continue to grow with an increase of 35.2% year on year. SCA anticipates digital audio growth will continue into FY23. The Group’s digital platform, LiSTNR, grew signiﬁ cantly in FY22, with strong adoption by users attracted to the compelling product and increasing choice of content on the product. Total listenership of SCA and partner digital audio content measured across all digital platforms has now exceeded 5 million listeners on a monthly basis, and the number of listeners who have registered with LiSTNR has now exceeded 800,000 users. The Group’s metro radio revenue increased by 9.4%, driven primarily from the Sydney and Melbourne markets with growth of 13.3% and 9.7% respectively. The recovery in metro advertising markets continued, particularly in the second half of FY22 once COVID-19 lockdowns in the key markets of Sydney and Melbourne were ended. The recovery in audio markets was driven by increased listening which saw commercial radio audiences achieve record highs in the surveys reported in 2022 to date. Regional radio achieved total growth of 6.4%. The Boomtown initiative continues to inﬂ uence National advertisers on the beneﬁ ts of regional reach with 8.9% growth across the Group’s regional markets. Whilst total audio revenues increased by 9.6%, EBITDA fell 25.4% on prior year. This fall is a product of reduced government stimulus and increased investment in growing SCA’s digital audio business. Television The Television business consists of a number of regional television licences. Each regional television licence receives programming from a metropolitan television network affi liate. During the ﬁ nancial year the Group received the majority of its programming from the Ten Network, whilst Tasmania, Darwin and Central licence areas received Seven Network programming. Total television revenues decreased by 25.6%, largely due to the change in affi liation partners from the Nine Network to Network Ten which occurred on 1 July 2021. EBITDA fell 21.3% on prior year predominantly due to lower government stimulus. Excluding government stimulus, EBITDA decreased by 2.2%. Corporate The Corporate function comprises the group-wide centralised functions that cannot be clearly attributable to the audio or television CGUs. Corporate expenses increased by $3.2 million, mainly due to increased consulting fees and the termination of a cloud-based software implementation. Financial position Cash ﬂ ow generation was consistent throughout the year with a return to the payment of dividends and increased investing activities back to pre-pandemic levels. The reduction of debt in the prior year resulted in lower interest payments of $9.5 million. The Group’s key leverage ratio increased to 0.95 times, up from 0.43 times in June 2021. This remains well within the maximum covenant of 3.5x. Lower debt levels saw the Interest cover increase to 23.45 times, up from 15.62 in June 2021. The minimum interest cover covenant is 3.0 times. The Group’s debt facilities were reﬁ nanced in January 2022 with a four-year extension in the $250 million facilities through to January 2026, providing security of ﬁ nancing into the medium term. Strategic update The Group’s mission is ‘To entertain, inform and inspire Australians. Anytime. Anywhere.’ With a renewed focus on being Australia’s leading Audio company, and a particular focus on the growing Digital Audio sector, the Group will leverage its localism and audio ecosystem to maximise total shareholder returns for investors. In FY21 the Group developed a new and refreshed Corporate Strategy. This strategy provides an overall strategic pathway for the Company over the next ﬁ ve years which stipulates speciﬁ c objectives and targets whilst enabling the Group to remain agile. In FY22 the Group reﬁ ned its four speciﬁ c objectives to: 1. Entertain, inform and inspire our audiences 2. Evolve LiSTNR into a Unique World Class Audio Platform 3. Optimise and simplify our sales off ering to grow revenue 4. Re-imagine and restructure SCA’s operating model 2023 Outlook The Group’s focus will be on Audio, speciﬁ cally on growing Digital Audio. Digital Audio earnings will attract a premium valuation multiple thereby positioning the Group as an emerging growth option for shareholders. The Group also maintains a highly competitive position in traditional radio (licences), which will provide the base from which to drive Digital Audio. Continued evolution of the Group’s Digital First operating model will be key, with a multifaceted innovative workforce who are platform agnostic (Radio and Digital) and underpinned by an effi cient and secure technology infrastructure. SCA has completed a strategic review of SCA’s television assets and concluded that value will be maximised by continuing to hold the television assets. SCA received multiple bids for the asset but concluded that greater value would be realised for shareholders by retaining the asset and the earnings that it derives. The review was supported by SCA’s ﬁ nancial adviser, Grant Samuel. Through sale of transmission towers and outsourcing of asset intensive activities to specialist service providers since 2017, SCA has created a streamlined and effi cient service that minimises the cost of delivery of broadcast and television to SCA’s licence areas. SCA operates a best-in-class television sales team that consistently delivers market leading revenue-to-audience power ratios in regional markets. During FY22 the Group extended its program supply agreement with Seven West Media covering the Tasmania, Darwin, Central and Spencer Gulf markets to 30 June 2024. The Group also broadcasts Nine and Network 10 programming in Spencer Gulf. The Group’s current television affi liation agreement with Network 10 runs to 30 June 2023. While the regional television industry is in structural decline, SCA will continue to seek effi ciencies to maximise cash ﬂ ow from the asset into the future. The contribution from television will continue to support returns to SCA’s shareholders. On 24 March 2022, the Group announced its intention to conduct an on-market share buy-back of up to $40 million. For the period to 30 June 2022, the Group purchased $5.5 million in shares. This was funded from existing cash reserves. The on-market share buy- back will continue into FY23 and will be funded by existing cash reserves and debt facilities. 28 | Directors’ Report Southern Cross Austereo Material Risks Business and operational risks that could aff ect the achievement of the Group’s ﬁ nancial prospects include the following risks: Risk Mitigation Strategies Economic shape of recovery reduces shareholder returns into the long term In March 2020, COVID-19 severely impacted economic activity, with declines in certain sectors and with signiﬁ cant impacts on the Australian economy, increasing unemployment and economic contraction due to the pandemic. Although the advertising market has not fully recovered to pre-pandemic levels, building on the strong recovery in FY2021, this year has seen further growth in audio and television, despite the impact of signiﬁ cant lockdowns due to COVID variants. Subsequent to the end of the lockdowns, radio audiences have grown signiﬁ cantly as listening patterns have been re-established. Some advertising categories remain aff ected by the outcomes of the pandemic and will take longer to recover, especially as economic conditions may deteriorate, with inﬂ ation and interest rates rising. However, as described below, SCA is transitioning into a digital audio ﬁ rst business, a high growth market, and investing in systems and capability to create a higher level of operating eff ectiveness into the future, to mitigate this risk. New products emerge that are more compelling than Linear Radio 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. Consumption of digital audio continues to grow strongly, with 71% of Australians 12+ listening to online audio each week, up from 66% in 2021, with average time spent listening increasing from 12 hours 11 minutes per week up to 13 hours 31 minutes1. This is expanding the range of audio content and diversifying the ways in which audio can be consumed. On 18 February 2021 SCA launched LiSTNR, a curated and personalised free app off ering radio, podcasts, music and news, creating a new audio destination for all Australians. LiSTNR is an important part of SCA’s digital transformation, building on the success of PodcastOne Australia, which was launched in 2017. LiSTNR features all of SCA’s existing digital content plus a huge range of new and compelling premium content, all located in one free and easy to use app. Since launch, over 800,000 users have signed up to LiSTNR, resulting in signiﬁ cant audio consumption through the product and generating ﬁ rst-party data from our signed-in audience that gives SCA enhanced ability to off er our clients targeted, engaged audiences at scale. This targeted advertising is enabled by an Instream advertising product, which also delivers it across the digital inventory of SCA’s partners such as SoundCloud. SCA believes that with continued investment it will be able to off er its listeners compelling content across the medium of their choice – being broadcast radio or digital audio. Further resources will be deployed towards the ongoing development of LiSTNR to ensure that SCA’s digital audio off ering is a market leader in terms of content depth and quality, product capability and digital sales expertise. 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 that it suff ers ﬁ nancial loss due to a transfer of advertising spend to digital media. As described above, SCA has launched LiSTNR and continues to develop the product so that it directly attracts listeners and establishes itself as a destination for audio listening, providing a signiﬁ cant signed-in user base that enables SCA to compete eff ectively in providing digital advertising solutions. The Group’s team of digital experts are 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 brands across broadcast and online platforms. This is coupled with a large range of digital only content that ensures the LiSTNR product has a deep content off ering for users. SCA utilises its own media assets as well as paid media to drive awareness and adoption of LiSTNR to build a strong market position. SCA has launched LiSTNR and continues to develop the product so that it directly attracts listeners and establishes itself as a destination for audio listening. SCA aims to grow market share quickly with LiSTNR, so that it builds a strong and loyal audience that can compete with both domestic and international competitors. LiSTNR’s podcasting and streaming monthly audience each grew by more than 200% in the year to March 20222. SCA has a core expertise in content creation and is focused on providing localised content as a key diff erentiator to international operators to ensure it receives strong engagement and listening from its customer base. Global technology companies enter the Audio space as content aggregators and service providers to consumers 1 The Inﬁ nite Dial Australia 2022 study. 2 Triton Podcasting and Streaming Metrics (February 2021 – March 2022). 2022 Annual Report Directors’ Report | 29 Non-Audit Services The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Group are important. Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers Australia) for audit and non-audit services provided during the year are set out in note 23. The Board has considered the position and, in accordance with advice received from the Audit & Risk Committee, is satisﬁ ed 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 satisﬁ ed 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 signiﬁ cant environmental regulations under Australian Commonwealth, State or Territory law. The Directors are not aware of any breaches of any environmental regulations. Directors’ Report For the year ended 30 June 2022 Distributions and Dividends Type Cents per share Total Amount $’m Date of Payment Final 2021 Ordinary 5.0 cents Interim 2022 Ordinary 4.5 cents $13.2 million 1 October 2021 7 April 2022 $11.9 million Since the end of the ﬁ nancial year the Directors have declared the payment of a ﬁ nal 2022 ordinary dividend of $12.35 million (4.75 cents per fully paid share) out of ‘Retained Proﬁ ts – 2019 reserve’. This dividend will be paid on 4 October 2022. Signiﬁ cant Changes in State of Aff airs In the opinion of the Directors, there were no signiﬁ cant changes in the state of aff airs of the Group that occurred during the year under review. Events Occurring After Balance Date Events occurring after balance date are outlined in note 26 ‘Events Occurring after Balance Date’ to the Financial Statements. Likely Developments and Expected Results of Operations Further information on likely developments relating to the operations of the Group in future years and the expected results of those operations have not been included in this report because the Directors of the Company believe it would be likely to result in unreasonable prejudice to the commercial interests of the Group. Indemniﬁ cation and Insurance of Offi cers and Auditors During the year the Company paid a premium of $3,030,094 to insure its offi cers. So long as the offi cers of the Company act in accordance with the Constitution and the law, the offi cers remain indemniﬁ ed 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 indemniﬁ ed out of the assets of the Group. 30 | Directors’ Report Southern Cross Austereo Information on Directors Chairman Appointed: 1 September 2014 Robert Murray Most recently elected by shareholders: 30 October 2020 Board Committees: Nomination Committee (Chair) 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, ﬁ rst 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. Rob is a director of Metcash and 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 Appointed: 1 September 2014 Glen Boreham Most recently elected by shareholders: 13 October 2021 Board Committees: Digital Transformation 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 beneﬁ ts 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 was formerly Chair of the Advisory Board at IXUP where he remains a Strategic Adviser. 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 Appointed: 1 September 2020 Carole Campbell Most recently elected by shareholders: 30 October 2020 Board Committees: Audit & Risk Committee (Chair) Carole Campbell has over 30 years’ ﬁ nancial executive experience in a diverse range of industries including professional services, ﬁ nancial 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 GUD Holdings Limited where she chairs the audit committee. She was previously a non-executive director of IVE Group Ltd and Humm Group Ltd. Carole is also Deputy Chair of Council of the Australian Film Television and Radio School. Carole is a Fellow of Chartered Accountants Australia and New Zealand and brings extensive experience in accounting, treasury, ﬁ nance and risk management to her role on the Board and as Chair of the Audit & Risk Committee. Director Ido Leffl er Appointed: 30 October 2020 Most recently elected by shareholders: 30 October 2020 Board Committees: Digital Transformation Committee, People & Culture Committee Ido Leffl er has long and successful experience in developing digital brands and extensive networks in the start- up communities of Silicon Valley and Australasia. Ido is the co-founder and Chief Executive Offi cer at Yoobi, a school supplies company that engages kids through bright colours, cool designs and, most importantly, cause. He is also a co-founder of Yes To Inc. – a leading global natural beauty brand; and of Beach House Group – a global consumer product house. Ido is a non-executive director of Vestergaard and The Lux Group. He was a non-executive director of Spark New Zealand Limited for six years until November 2020. Ido also sits on other corporate and advisory boards, including as an emeritus member of the United Nations Foundation Global Entrepreneur Council. 2022 Annual Report Directors’ Report | 31 Directors’ Report For the year ended 30 June 2022 Director Appointed: 30 October 2020 Heith Mackay-Cruise Most recently elected by shareholders: 30 October 2020 Board Committees: Audit & Risk Committee, Digital Transformation Committee Heith Mackay-Cruise’s executive career included senior roles in Marketing for Pepsi-Cola in Australia and Australian Consolidated Press and as CEO and Managing Director of PBL Media in New Zealand, Study Group and Sterling Early Education. Since 2014, Heith has focused on non-executive roles including four years on the board of the ASX-listed Bailador Technology Investments Limited, and privately owned groups including Literacy Planet, hipages Group, LifeHealthcare, and his ongoing role as Chair of UP Education Limited. Heith brings to the Board his executive leadership experience, as well as global platforms exposure, and marketing and digital knowledge. Director Helen Nash Appointed: 23 April 2015 Most recently elected by shareholders: 30 October 2020 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 Offi cer 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 ﬁ nancial skills to her role having initially trained in the UK as a Certiﬁ ed 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 Paciﬁ c Brands Ltd and Blackmores Ltd. Our Board beneﬁ ts from Helen’s governance experience and skills, including her membership of audit and remuneration committees at these other companies. Director Appointed: 26 May 2016 Melanie Willis Most recently elected by shareholders: 13 October 2020 Board Committees: Audit & Risk Committee, People & Culture Committee Melanie has extensive experience in corporate ﬁ nance, strategy and innovation and investments both in executive and non-executive roles. She has worked in sectors including accounting and ﬁ nance, 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 ﬁ nancial services start-up and director of Deutsche Bank, having previously been in corporate ﬁ nance at Bankers Trust and Westpac. Melanie chaired the Audit & Risk Committee until 30 September 2021 and continues as a member of that Committee which beneﬁ ts from her extensive skills and experience in ﬁ nancial reporting and risk management matters. In addition to her broad ﬁ nance, strategic and commercial skills, Melanie brings valuable governance experience from her roles as a director of Challenger, PEXA Group, Paypal Australia and QBE Insurance (AusPac), and from her former positions as a director of Mantra, Pepper Group, Ardent Leisure and Chief Executive Women. 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, chairs the audit and risk committee and is a member of the remuneration, nomination and people committee at PEXA Group, and chairs the audit committee and people and culture committee at Paypal Australia. Director Appointed: 29 June 2015 Grant Blackley 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 Offi cer 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 Network 10, as CEO from 2005 to 2010. Before becoming CEO at Network 10, 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. 32 | Directors’ Report Southern Cross Austereo 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 ﬁ rm’s Melbourne offi ce and from 1993 until 2000 in its Jakarta associated offi ce. Tony manages the Group’s national legal and corporate aff airs teams, including responsibility for regulatory aff airs and board governance. Meetings of Directors The number of meetings of the Board of Directors and its committees held during the year and the number of meetings attended by each director are summarised in the table below. The Nomination Committee did not meet during the year. As a result, the members of the Nomination Committee (Rob Murray, Glen Boreham, and Helen Nash did not receive any fees in respect of their membership of the Nomination Committee during the year. Director Rob Murray Grant Blackley Glen Boreham Carole Campbell Ido Leffl er Heith Mackay-Cruise Helen Nash Melanie Willis Board Audit & Risk People & Culture Digital Transformation Attended Held 1 Attended Held 1 Attended Held 1 Attended Held 1 Meetings of Committees 13 14 13 14 14 14 14 14 14 14 14 14 14 14 14 14 4 4 1 4 – 4 4 4 * * * 4 * 4 4 4 5 5 6 3 5 5 6 6 * * 6 * 6 * 6 6 5 5 5 2 5 5 – – * * 5 * 5 5 * * 1 Held refers to the number of meetings held during the time the director held offi ce or was a member of the relevant committee during the year. * Not a member of the relevant committee during the year. 2022 Annual Report Directors’ Report | 33 Directors’ Report For the year ended 30 June 2022 Remuneration Report Letter from People & Culture Committee Overview On behalf of the Board, I am pleased to present SCA’s remuneration report for the year ended 30 June 2022 (FY22). The People & Culture Committee (PCC) assists the Board in its oversight of management activities in developing and implementing strategies to improve SCA’s ﬁ nancial performance, culture and diversity, consistent with our values. An important part of the committee’s role is to ensure SCA’s remuneration policies align executive reward with creation of value for shareholders, having regard to applicable governance, legal and regulatory requirements and industry standards. Executive remuneration includes ﬁ xed and variable components. As foreshadowed in last year’s remuneration report, the Board replaced the previous short-term incentive (STI) and long-term incentive (LTI) plans with a combined Executive Incentive Plan (EIP) for FY22 and future years. The Board made these changes after consulting with SCA’s major shareholders and considering independent advice from KPMG on market practices and investor expectations. The new EIP provides a simpler and more direct way to link executive performance and reward to generation of sustainable positive returns for shareholders. Classiﬁ cation of executive KMP For some years, the Board has classiﬁ ed the senior leadership team, comprising the CEO and the CEO’s direct executive reports, as key management personnel (KMP) for ﬁ nancial reporting purposes. This was because the senior leadership team jointly planned, directed and controlled the activities of the Group, despite their operational roles only covering discrete areas of the Group’s operations. Following changes in the responsibilities of the CEO’s direct executive reports during FY22, the Board has classiﬁ ed only four executives as KMP: the Chief Executive Offi cer (CEO), the Chief Financial Offi cer (CFO), the Chief Operating Offi cer (COO) and the Chief Sales Offi cer (CSO). From 1 July 2021, the Board has assessed that these four executives have overarching responsibility for formation of corporate strategy, budgets and other decisions regarding allocation of resources. The Board’s assessment was informed by, among other factors, the CEO’s and CFO’s participation in all meetings of the Board and its committees, the COO’s central role in developing corporate strategy and facilitating the Board’s consideration and approval of corporate strategy, and the CSO’s responsibility for revenue strategy across SCA’s audio and television operations around Australia. From July 2021 the responsibilities and inﬂ uence of other members of the leadership team are limited to their respective functional departments. Senior Leadership Team The PCC oversees the composition, performance and remuneration not just of SCA’s executive KMP but of all members of the Senior Leadership Team. During the year, the PCC was delighted to support the elevation of Rebecca Ackland to this team as Chief People and Culture Offi cer. With Rebecca’s elevation, SCA achieved its previous 2024 target for 25% women in executive leadership. Rebecca also brings a younger perspective to the leadership team and is a role model for other aspiring women at or considering joining SCA. Executive Incentive Plan Under the new EIP, the performance of the executive KMP is assessed annually against a mix of ﬁ nancial and non-ﬁ nancial performance measures. The EIP uses a balanced scorecard to assess the performance of executive KMP. Sixty percent of the annual award is based on performance against annual ﬁ nancial performance hurdles. Non-ﬁ nancial measures – accounting for 40% of the annual award – include execution of strategic projects designed to drive future ﬁ nancial performance, and cultural and behavioural inﬂ uences. This balanced scorecard recognises the long-term beneﬁ ts to the organisation of SCA’s leaders committing to develop and maintain a strong culture and operational discipline. In all cases, executives’ maximum EIP opportunity is capped at target. The Board also maintains a corporate balanced scorecard to assess overall performance against agreed targets for radio audience survey performance, advertising market commercial share, growth in digital audio reach and monthly active users of LiSTNR, as well as ﬁ nancial performance measures. Several of the measures from the corporate scorecard are reﬂ ected in the scorecards of individual executives and the Board also uses the scorecard to inform its exercise of discretion when considering the performance and incentive opportunities of individual executives. The annual EIP award to each executive KMP is settled partly in cash and the remainder in equity performance rights. The cash component is 40% for the CEO and 50% for other executive KMP. These performance rights are eligible for vesting and conversion to ordinary shares at the end of year 3, subject to ongoing employment. Vesting of one-half of the performance rights will potentially be scaled back according to SCA achieving satisfactory growth in earnings per share over the three years of the EIP. A further restriction on disposal of vested shares will apply until the end of year 5, two years after allocation of any vested shares. While the former LTI plan has been suspended, entitlements granted to executives in FY21 remain on foot. Shareholders will recall this bespoke LTI plan is focused on increasing SCA’s market capitalisation and resuming a reliable ﬂ ow of dividends over the three-year performance period to 30 June 2023. Vested awards under the FY21 LTI plan will be settled in equity. Details of this bespoke LTI plan, under which total shareholder return is the sole performance measure, are outlined in section 2.3.2 of the remuneration report. Target shareholdings for executive KMP and non-executive directors Incentive awards under the EIP or the former LTI plan that are settled in equity are subject to restrictions on disposal until the applicable executive KMP has accumulated the target shareholding required by the Senior Executive Share Ownership Policy. The Board adjusted this policy during the year. The policy had previously required the CEO to accumulate a shareholding with a value equivalent to 100% of the CEO’s ﬁ xed remuneration and other executive KMP to accumulate a shareholding with a value equivalent to 50% of their ﬁ xed remuneration. The revised policy requires executive KMP to invest an amount not less than 50% of the executive’s base salary in acquiring SCA shares. The CEO must invest an amount not less than 100% of the CEO’s base salary in acquiring SCA shares. The market price at the time of allocation to an executive of shares under one of SCA’s executive incentive plans is included in the executive’s invested amount. The proceeds of any sales of shares will be deducted from an executive’s invested amount. There is no due date by which an executive must acquire the target shareholding. 34 | Directors’ Report Southern Cross Austereo Executive remuneration planning for FY23 In accordance with the Board’s three-year schedule, the Board engaged KPMG to benchmark SCA’s remuneration of the senior leadership team during April 2022. At the time of the benchmarking, SCA’s market capitalisation ranked 282 in the ASX 300. A comparator group comprising 38 companies from the ASX 150-300 Consumer Staples, Consumer Discretionary and Communication Services sector and certain other media peers was selected for the benchmarking. KPMG found that the ﬁ xed remuneration of SCA’s executive KMP in FY22 ranked between the 69th and 78th percentile of the comparator group and their total remuneration ranked between the 55th and 74th percentile. Board remuneration There were no changes to the remuneration of non-executive directors in FY22. The same remuneration framework for non- executive directors will continue in FY23. In accordance with the Board’s three-year schedule, the Board engaged KPMG to benchmark SCA’s remuneration of non- executive directors during April 2022. Using the comparator group described above, KPMG found that the remuneration of SCA’s non-executive directors in FY22 is in the top quartile of the comparator group. Melanie Willis will retire as a director on 31 August 2022. Considering changes in SCA’s business over the past year, the Board has decided not to seek a replacement for Melanie. The Board considers its reduced size and its mix of skills and experience will be appropriate for SCA’s needs. However, as a result of Melanie’s retirement, the Board will review its Committees to ensure they are structured optimally for SCA’s business requirements. Further details of current Board remuneration arrangements are provided in the remuneration report. The PCC continues to strive to ensure SCA’s remuneration framework will drive behaviours to generate sustainable value for shareholders. Introduction in FY22 of the new EIP has that explicit objective. I look forward to your feedback and to welcoming you to our 2022 Annual General Meeting. Yours faithfully, Helen Nash Chair of the People & Culture Committee The Board considers the revised policy operates more fairly to executive KMP who have invested substantially in acquiring SCA shares and who have, along with other shareholders, experienced a signiﬁ cant loss in the value of their shareholdings since the COVID-19 pandemic began to aff ect SCA in March 2020. Details of executive KMP shareholdings are set out in section 8.1 of the remuneration report. The Board adopted corresponding changes to the non-executive directors Shareholding Policy during the year. Details of non- executive directors’ shareholdings are set out in section 8.1 of the remuneration report. Executive remuneration in FY22 The Board approved increases of between 2.6% and 4.5% in the base remuneration of the CEO and other executive KMP for FY22. The remuneration of these executive KMP had not been adjusted since FY19. The Board considered these adjustments were reasonable to ensure SCA’s executive remuneration remained competitive in a tightening labour market. Under the FY22 EIP, the performance of each executive KMP was assessed against a mix of ﬁ nancial and non-ﬁ nancial performance measures. The proﬁ tability and ﬁ nancial performance measures under the EIP for FY22 were Group EBITDA, earnings per share, digital revenue growth, and non-revenue-related costs compared to budget. The ﬁ rst three revenue-related targets were not achieved. The PCC and Board accepted this underperformance against budget was in large part due to COVID-related lockdowns across New South Wales and Victoria in 1H FY22 as well as broader macroeconomic and geopolitical factors that were not foreseeable at the time the budget was set and which were beyond the control of the executive team. In contrast, the non-revenue- related costs target was fully achieved, reﬂ ecting the proactivity of the executive team in controlling costs during the year. Despite this, on the recommendation of the CEO, the Board exercised its discretion downward to award only 25% of the available reward for achievement of this target. This resulted in a small award (3% out of a possible 60%) for all executive KMP under the proﬁ tability and ﬁ nancial performance component of the EIP. The Board considered that good progress was made during the year on strategic initiatives designed to embed a digital audio operating model and grow the user base and commercial potential of LiSTNR. These outcomes were driven by targeted investments in original and partner content, technology, marketing, as well as recruitment, training and development of our people. Cultural and behavioural goals were also substantially achieved during the year, although the Board made some adjustments to recognise that steps were not taken quickly enough in a small number of cases to address poor behaviour and its impacts on others. As a result of these assessments, executive KMP received between 38% and 41% of their respective EIP opportunities. Half of their awards (and 60% of the CEO’s award) will be settled by grant of performance rights that will be eligible for vesting after 30 June 2024, strongly aligning executives’ interests with those of other shareholders. Details of the EIP outcome for each executive KMP are provided in the remuneration report. As noted above, no LTI entitlements were eligible for vesting in FY22. 2022 Annual Report Directors’ Report | 35 Directors’ Report For the year ended 30 June 2022 1. Overview of FY22 remuneration This section provides an overview of the remuneration received by executive KMP and non-executive directors in FY22. 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 of executive KMP and directors), 4 (Analysis of incentives) and 5 (Share-based incentives). This table provides an overview of statutory remuneration received by executive KMP in FY21 and FY22. Name Grant Blackley Chief Executive Offi cer and Managing Director Nick McKechnie Chief Financial Offi cer John Kelly Chief Operating Offi cer Brian Gallagher Chief Sales Offi cer Stephen Haddad Chief Technology Offi cer Dave Cameron Chief Content Offi cer Nikki Clarkson Chief Marketing Offi cer Total executive KMP Total remuneration Performance- related proportion % Amount $ 1,692,408 26.5% 1,692,269 768,705 794,301 787,462 800,090 766,238 771,929 – 529,294 – 555,572 – 414,089 4,014,813 5,557,544 29.1% 20.6% 27.3% 22.0% 27.6% 21.7% 27.1% – 23.6% – 19.2% – 23.0% 23.6% 26.4% Year 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Short-term incentive opportunity1 Long-term incentive eligible for vesting2,3 Awarded % Forfeited % Vested % Forfeited % 39.0 50.0 38.0 59.0 41.0 59.0 40.0 57.0 – 60.0 – 55.0 – 55.0 39.0 55.0 61.0 50.0 62.0 41.0 59.0 41.0 60.0 43.0 – 40.0 – 45.0 – 45.0 61.0 45.0 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 1 The short-term incentive opportunity awarded or vested during FY22 is the cash component of awards made under the Executive Incentive Plan. 2 No LTI entitlements were eligible for vesting in FY22. Entitlements granted under the FY20 LTI plan that would have been eligible for vesting in FY22 were cancelled during 2020 because of the impact on SCA’s business of the COVID-19 pandemic. 3 A portion of the awards made under the Executive Incentive Plan in FY22 will be satisﬁ ed by the grant of performance rights that will be eligible for vesting after expiry of the three-year performance period on 30 June 2024. 4 The roles of the Chief Technology Offi cer (Stephen Haddad), Chief Content Offi cer (Dave Cameron) and Chief Marketing Offi cer (Nikki Clarkson) were assessed as KMP in FY21. For reasons explained in the letter of the Chair of the Boards’s People & Culture Committee, the Board has assessed these roles were not KMP roles during FY22. 1.2 Non-executive directors The aggregate remuneration of the Company’s non-executive directors during FY22 was $1,280,600, compared to $1,235,072 in FY21. Aggregate remuneration was lower in FY21 because non-executive directors took a voluntary 10% fee reduction between 1 May 2020 and 30 September 2020 due to the impact of COVID-19. 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. 36 | Directors’ Report Southern Cross Austereo 2. Remuneration principles 2.1 Overview of executive remuneration The Company aims to ensure remuneration is competitive and appropriate for the results delivered. Executive reward is aligned with the achievement of strategic objectives and the creation of value for shareholders and is informed by market practice for executive reward. Executive remuneration packages include a mix of ﬁ xed and variable remuneration. In FY21, variable remuneration included short- and long-term incentives. In FY22, the former short-term incentive (STI) and long-term incentive (LTI) plans were replaced by a combined Executive Incentive Plan (EIP). Entitlements granted to executive KMP (and other participants) under the FY21 LTI plan remain on foot and will be eligible for vesting after the end of the three-year performance period on 30 June 2023. 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 FY21 and FY22. 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. Executive KMP3 Grant Blackley John Kelly Nick McKechnie Brian Gallagher Stephen Haddad Dave Cameron Nikki Clarkson Fixed remuneration EIP/STI EIP/LTI Target remuneration mix FY22 40% 50% 50% 50% – – – FY21 40% 50% 50% 50% 50% 50% 50% EIP1 FY22 30% 25% 25% 25% – – – STI FY21 30% 30% 30% 30% 30% 30% 30% EIP2 FY22 30% 25% 25% 25% – – – LTI FY21 30% 20% 20% 20% 20% 20% 20% 1 The EIP is a combined incentive plan under which awards are paid partly in cash and partly in equity performance rights that are eligible for vesting at the end of year 3. The percentages in this column are the cash component of the EIP awards in FY22. 2 The EIP is a combined incentive plan under which awards are paid partly in cash and partly in equity performance rights that are eligible for vesting at the end of year 3. The percentages in this column are the equity performance rights component of the EIP awards in FY22. 3 The roles of the Chief Technology Offi cer (Stephen Haddad), Chief Content Offi cer (Dave Cameron) and Chief Marketing Offi cer (Nikki Clarkson) were assessed as KMP in FY21. For the reasons explained in the letter of the Chair of the Board’s People & Culture Committee, the Board has assessed these roles were not KMP roles during FY22. 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-ﬁ nancial beneﬁ ts at the executive’s discretion. SCA 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 ﬁ xed remuneration increases included in any executive KMP contracts. The Board approved increases of between 2.6% and 4.5% in the base remuneration of the CEO and other executive KMP for FY22. The remuneration of these executive KMP had not been adjusted since FY19. The Board considered these adjustments were reasonable to ensure SCA’s executive remuneration remained competitive in a tightening labour market. 2022 Annual Report Directors’ Report | 37 Directors’ Report For the year ended 30 June 2022 2.3 Variable remuneration for executive KMP 2.3.1 Executive incentive plan The table below outlines details of the Company’s executive incentive plan (EIP). The EIP operated for the ﬁ rst time in FY22. What is the incentive? The EIP is an annual at-risk bonus designed to reward executives for meeting or exceeding ﬁ nancial and non-ﬁ nancial objectives. How is each executive’s entitlement determined? Each executive is allocated a dollar value target (which may be a ﬁ xed percentage of the executive’s total remuneration) representing the executive’s maximum EIP opportunity for the one-year performance period. How is the incentive delivered? The EIP operates over ﬁ ve years as follows: – a one-year performance period commencing on 1 July in the ﬁ rst year of the EIP, after which individual and corporate performance is assessed and an EIP award may be made partly in cash and partly in grant of performance rights; – a two-year service period commencing on 1 July in the second year of the EIP, after which performance rights will be eligible for vesting and conversion to fully paid ordinary shares; and – a two-year retention period commencing on 1 July in the fourth year of the EIP, during which any shares allocated at the end of the service period are subject to a disposal restriction. To the extent the EIP performance conditions for an executive are satisﬁ ed during the performance period, SCA will make an EIP award to the executive. SCA will satisfy the dollar value of the EIP award by: – paying the executive the cash component of the EIP award; and – granting the executive performance rights with a face value equal to the equity component of the EIP award in two equal tranches. The number of performance rights granted to the executive is calculated by dividing the dollar value of the equity component of the EIP award by the face value of a performance right at the end of the applicable performance period. The face value of a performance right is: – the volume weighted average price of SCA’s shares for the ﬁ ve trading days commencing seven days after SCA’s results for the performance period are announced to the ASX; less – the amount of any ﬁ nal dividend per share declared as payable in respect of the performance period. These performance rights will be eligible for vesting at the end of year 3, two years after their grant to the executive. This two-year period is referred to as the service period. What are the performance measures and hurdles? The Board sets the annual goals for the CEO near the beginning of each ﬁ nancial year. The goals are allocated to three categories having regard to SCA’s business strategy: ﬁ nancial performance (60%), strategic execution (30%) and culture and behaviour (10%). The CEO determines the annual goals for other Leadership Executives in the same three categories and having regard to their areas of responsibility. Financial performance (60%) The ﬁ nancial performance metrics that apply under the EIP in FY22 are summarised below. – Group EBITDA compared to budget: This is a core measure of operational proﬁ tability. This metric is relevant for all Leadership Executives. – Earnings per share (EPS) compared to budget: This uses net proﬁ t after tax (NPAT) as the core proﬁ tability driver while also taking account of any capital management initiatives that increase or reduce the number of shares on issue. This metric is relevant for all Leadership Executives. – Revenue compared to budget: Targets may be set for total revenue or for speciﬁ c categories of revenue, such as digital audio revenue. This metric is relevant for several Leadership Executives including the Chief Sales Offi cer. – Non-revenue-related costs compared to budget: These controllable costs exclude costs such as agency commissions and television affi liation fees that are variable with revenue. This metric is relevant for all Leadership Executives. Achievements against ﬁ nancial metrics are based on SCA’s audited annual ﬁ nancial report. The Board has discretion to adjust targets and outcomes to ensure executive reward is appropriately linked to corporate performance. For this purpose, the Board may consider matters including SCA’s overall corporate performance and progress against strategic objectives; signiﬁ cant non-cash items (for example impairment losses); acquisitions, divestments and one-off events; and abnormal or non-recurring items. Strategic execution (30%) Goals for strategic execution are tailored to the individual responsibilities of each executive. These goals focus on implementation of strategic initiatives, major projects, and material operational improvements designed to deliver growth, improved and sustainable business performance, and shareholder value. Culture and behaviour (10%) Goals for culture and behaviour are tailored to the individual responsibilities of each executive. These goals focus on maintaining a positive corporate culture, eff ective leadership and development, retaining talent, and building eff ective external relationships to improve and sustain long-term business performance and shareholder value. 38 | Directors’ Report Southern Cross Austereo Is there a gateway? The following gateways and vesting schedules apply for EIP awards based on ﬁ nancial metrics: EBITDA – percentage of budget Vesting percentage Below 95% 95% Above 95% to 102.5% Above 102.5% Nil 50% Straight-line vesting between 50% and 100% 100% EPS – percentage of budget Vesting percentage Below 90% 90% Above 90% to 105% Above 105% Nil 50% Straight-line vesting between 50% and 100% 100% Revenue – percentage of budget Vesting percentage Below 97% 97% Above 97% to 100% Above 100% Nil 50% Straight-line vesting between 50% and 100% 100% Digital revenue – percentage of budget Vesting percentage Below 85% 85% Above 85% to 107.5% Above 107.5% Nil 50% Straight-line vesting between 50% and 100% 100% Non-revenue-related costs – percentage of budget Vesting percentage Above budget On budget or below Nil 100% There is no gateway for non-ﬁ nancial measures. Individual performance must be at a ‘meets expectations’ level before any EIP award will be made. What is the maximum amount payable? The maximum award under the FY22 EIP is 100% of an executive’s EIP target opportunity if all vesting conditions are fully satisﬁ ed over the one-year performance period. How is performance assessed? The Board will calculate the ﬁ nancial measures under the EIP at the end of the performance period. SCA may engage an independent consultant to review or carry out these calculations. The Board has discretion to adjust targets and outcomes to ensure executive reward is appropriately linked to corporate performance. CEO: At the end of each ﬁ nancial year, with the assistance of the Board’s People & Culture Committee, the Board assesses the performance of the CEO against the applicable non-ﬁ nancial measures and determines the extent to which the CEO has achieved applicable targets. In doing so, the Board may consider the CEO’s achievements in the context of SCA’s overall performance. Other Leadership Executives: At the end of the ﬁ nancial year the CEO assesses the performance of the other Leadership Executives against the applicable non-ﬁ nancial measures and determines the extent to which each Leadership Executive has achieved applicable targets. In doing so, the CEO may consider each Leadership Executive’s achievements in the context of SCA’s overall performance. The CEO provides these assessments to the People & Culture Committee for review. 2022 Annual Report Directors’ Report | 39 Directors’ Report For the year ended 30 June 2022 Vesting of performance rights after service period If the executive remains employed by SCA at the end of the service period: – Tranche 1 of the executive’s EIP award will vest at that time; and. – Tranche 2 of the executive’s EIP award will be eligible for vesting according to the following scale. 3-year EPS CAGR % of Tranche 2 that vests 1.5% or below Nil Above 1.5% to 8.0% Straight-line vesting between 0% and 100% Above 8.0% 100% SCA will allocate one fully paid ordinary share for each of the executive’s performance rights that vests at the end of the service period. An executive will receive an additional allocation of fully paid ordinary shares with a value equal to the dividends paid on vested rights over the service period. The Board has discretion to settle vested awards in cash. Any performance rights that do not vest at the end of the service period will lapse. The Board has discretion to fulﬁ l SCA’s obligation to allocate shares on vesting by issuing new shares or acquiring shares on-market. The Board has decided that any shares to be allocated on vesting of performance rights under the FY22 EIP grant will be acquired on-market. Shares allocated under the EIP to Leadership Executives will be subject to disposal restrictions for two years (until the end of year 5) or cessation of the Leadership Executive’s employment, whichever is earlier. These shares will be subject to further disposal restrictions under the Senior Executive Share Ownership Policy unless the Leadership Executive has accumulated the target shareholding required under that policy. Cessation of employment If an executive ceases employment with the Company during the ﬁ ve-year term of the FY22 EIP grant, the treatment of executive’s rights under the EIP will be determined by time and the circumstances of the cessation of employment as explained below. During performance period Bad Leavers (who resign or are terminated for cause) during the year 1 performance period will not be eligible for an award under the FY22 EIP. For an executive who ceases employment for other reasons during the performance period, the Board has discretion to make an award to the executive under the EIP on a pro-rata basis considering time and the performance to date against the applicable performance measures, to hold the EIP award to be tested against the applicable performance measures at the end of the original performance period , or to treat the EIP award in any other manner it considers appropriate. During service period Bad Leavers (who resign or are terminated for cause) during the two-year service period will forfeit any unvested performance rights, unless otherwise determined by the Board. For executives who cease employment during the service period for other reasons, the Board has discretion to vest any unvested performance rights on a pro-rata basis considering time and the performance to date against the EPS performance hurdle, to hold all or a part of any unvested performance rights to be tested against the EPS performance hurdle at the end of the original service period, or to treat the award in any other manner it deems appropriate. After service period If an executive ceases employment with SCA after the service period, SCA will release the executive’s shares from any remaining restrictions on disposal. If a change of control event in relation to SCA occurs before assessment of performance under an EIP award or before vesting of performance rights granted under an EIP award, the Board has discretion as to how to treat the unassessed award or unvested performance rights, including to forfeit or make an award in whole or in part and to determine performance rights will vest or lapse in whole or in part, or that performance rights will continue subject to the same or diff erent conditions. In exercising its discretion, the Board may consider the proportion of the performance period and the service period that has passed at the time of the change of control, the performance to date of SCA and the executive against applicable performance conditions , and any other matters the Board considers to be relevant. The Board may reconsider the level of satisfaction of a performance hurdle and take steps to reduce the beneﬁ t of an EIP award to the extent its vesting was aff ected by fraud, dishonesty, breach of obligation or other action likely to result in long-term detriment to SCA. Change of control Clawback 40 | Directors’ Report Southern Cross Austereo Other features Treatment of dividends: There are no dividends payable to executives on unvested performance rights. Once performance rights have vested to fully paid ordinary shares, the executive will be entitled to dividends on these shares. In addition, upon vesting of an executive’s performance rights, the executive will receive an additional allocation of fully paid ordinary shares with a value equal to the dividends paid on vested rights over the service period. Sourcing of shares: The Board has discretion to purchase shares on-market or to issue new shares in respect of vested performance rights. The Board typically chooses to purchase shares on-market for this purpose and will do so for any performance rights that vest under the FY22 EIP. Retention of shares: Participants must retain any shares allocated to them upon vesting of performance rights for two years or cessation of employment, whichever is earlier. SCA’s Senior Executive Share Ownership Policy also applies to shares allocated to Leadership Executives on vesting of performance rights under the EIP. 2.3.2 Long-term incentive plan The table below outlines details of the Company’s LTI plan in FY21. The LTI plan has been suspended for subsequent ﬁ nancial years. Entitlements granted under the FY21 LTI plan will be eligible for vesting after expiry of the three-year performance period on 30 June 2023. 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 ﬁ xed 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 ﬁ ve trading days commencing seven days after the Company’s results for the prior ﬁ nancial year are announced to ASX; less – the amount of any ﬁ nal dividend per share declared as payable in respect of the prior ﬁ nancial year. The face value of each performance right for the FY21 grant was determined to be $0.1623. Following implementation on 2 November 2020 of a one for 10 consolidation of the Company’s share capital, the face value of each performance right for the FY21 grant has been adjusted to $1.6230. Because of the severe impacts of the COVID-19 pandemic on the Australian economy and the ﬁ nancial performance and market capitalisation of SCA, the dollar value of each executive’s entitlement under the LTI plan in FY21 was discounted by 76%, subject to each participant receiving a minimum grant of 6,161 performance rights (which, after implementation on 2 November 2020 of the one for 10 consolidation of the Company’s share capital, is the number of performance rights that has a total face value of $10,000). How is the incentive delivered? To the extent the applicable vesting conditions are satisﬁ ed 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. 2022 Annual Report Directors’ Report | 41 Directors’ Report For the year ended 30 June 2022 What are the performance measures and hurdles? In FY21, each grant under the LTI plan had a single performance hurdle over a three-year performance period: Absolute Total Shareholder Return (TSR). The absolute TSR performance hurdle considers share price appreciation plus reinvested dividends, expressed as a percentage of investment and adjusted for changes in the Company’s capital structure. The share price at the beginning and end of the performance period is the volume-weighted average price of the Company’s shares on the ASX for the 10 trading days before and after the relevant date (and on the relevant date if the relevant date is a trading day). The starting share price, based on the volume-weighted average price on 30 June 2020, was $0.1819 per share. Following implementation on 2 November 2020 of the one for 10 consolidation of the Company’s share capital, the starting share price has been adjusted to $1.819 per share. Dividends paid during the performance period will be assumed to have been re-invested on the ex-dividend date. Tax and any franking credits (or equivalent) will be ignored. The LTI plan for FY21 is designed to incentivise executives to increase the Company’s market capitalisation following the substantial decline that occurred since a trading update released in October 2019 and onset of the COVID-19 pandemic in early 2020. In broad terms, an absolute TSR of 100% over the three-year performance period would restore the Company’s market capitalisation to the average level experienced during the 2019 calendar year. The LTI plan for FY21 considers the severe impact of COVID-19 on the Company’s operations and market capitalisation and the ongoing uncertain economic environment. The Board wishes to provide a targeted incentive to executives focused on increasing the market capitalisation of the Company over the three-year performance period. The number of performance rights to be granted to executives was 24% of their standard entitlement (Base Amount). (This is subject to each participant receiving a minimum grant of 6,161 performance rights with a total face value of $10,000). Dependent on the TSR of the Company’s securities over the three- year performance period, the maximum number of performance rights that could vest will be 2.5 times the Base Amount or 60% of the executive’s standard entitlement under the LTI plan. TSR performance rights granted in FY21 are eligible to vest according to the following schedule: TSR performance to 30 June 2023 % of standard entitlement that vests 0% or below Nil Above 0% to 150% Above 150% Straight-line vesting between Base Amount (24% of standard entitlement) and 2.5 x Base Amount (60% of standard entitlement) 2.5 x Base Amount (60% of standard entitlement) The above schedule illustrates that each executive’s vesting opportunity commences at 24% of an executive’s standard entitlement. The number of performance rights that vests will be subject to a multiplier according to the TSR performance of the Company over the three-year performance period. For TSR performance of 100%, a multiplier of 2x applies so that the number of performance rights that vests will be double the Base Amount granted to the executive. The maximum multiplier is 2.5x for TSR performance of 150% over the three-year performance period. In that case, the number of performance rights that vests will be 60% of an executive’s standard entitlement. Is there a gateway? The Absolute TSR performance hurdle will be achieved only if the Company’s TSR performance over the performance period is above zero. What is the maximum amount payable? The maximum award under the FY21 LTI plan is 150% of an executive’s grant if all vesting conditions are fully satisﬁ ed over the performance period. Because the grant under the FY21 LTI plan to each executive in FY21 will be at a discount of 76% to the executive’s standard entitlement, the maximum number of performance rights to be awarded under the FY21 LTI plan is 60% of the executive’s standard entitlement. How is performance assessed? The Board will calculate the Company’s TSR performance at the end of the performance period for each LTI grant. The Company will engage an independent party to report on the Company’s TSR at the vesting date. There is no subsequent testing of performance hurdles under the LTI plan. Cessation of employment Bad Leavers (who resign or are terminated for cause) will forfeit any unvested performance rights, unless otherwise determined by the Board. Change of control Clawback For executives who cease employment for other reasons, the Board has discretion to vest any unvested performance rights on a pro-rata basis considering 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 diff erent conditions. The Board may reconsider the level of satisfaction of a performance hurdle and take steps to reduce the beneﬁ t of an LTI award to the extent its vesting was aff ected by fraud, dishonesty, breach of obligation or other action likely to result in long-term detriment to the Company. 42 | Directors’ Report Southern Cross Austereo Other features 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. The Board typically purchases shares on-market for this purpose and will do so for any performance rights that vest under the FY21 LTI plan. Retention of shares: The rules of the LTI plan do not require participants to retain any shares allocated to them upon vesting of performance rights. However, the Company’s Senior Executive Share Ownership Policy requires executive KMP to retain 25% of the shares allocated to them upon vesting of performance rights until they achieve the required minimum shareholding under that policy or cease to be employed by the Company. 2.4 Consequences of performance on shareholder value In considering the Group’s performance and the beneﬁ ts for shareholder value, the Board has regard to the following indicators in the current ﬁ nancial year and the preceding four ﬁ nancial years. Revenue EBITDA EBITDA % Net (loss)/proﬁ t before tax Net (loss)/proﬁ t after tax (NPAT) NPAT % Net proﬁ t after tax excluding signiﬁ cant items NPAT % excluding signiﬁ cant items EPS (cents)1 TSR Opening share price2,4 Closing share price2,4 Dividend/Distribution5 30 June 2022 $’000 30 June 2021 $’000 30 June 2020 $’000 30 June 2019 $’000 30 June 2018 $’000 519,682 85,580 16.5% (214,068) (153,722) (29.6%) 28,554 5.5% 10.77 (48.1%) $2.09 $0.99 9.50c 528,649 125,936 23.8% 71,282 48,096 9.1% 48,096 9.1% 18.2 19.4% $1.75 $2.093 0.00c 540,152 108,232 20.0% 38,294 25,100 4.6% 34,193 6.3% 17.69 (79.7%) $8.60 $1.75 4.00c 660,088 147,382 22.3% (129,475) (91,395) (13.8%) 73,879 11.2% 65.11 1.4% $8.48 $8.60 7.75c 656,784 158,439 24.1% 2,519 82 0.0% 73,932 11.3% 65.16 12.4% $7.54 $8.48 7.75c 1 EPS is shown after adjustments to exclude the impact of signiﬁ cant or non-recurring items (both income and costs) as approved by the Board for the purposes of the Company’s LTI plan and EIP. 2 On 4 May 2020, the Company completed a $169.6 million equity raising. The equity raising consisted of a pro-rata accelerated non-renounceable rights issue and placement, resulting in the issue of 1,873,092,080 shares. 3 On 30 October 2020, the Company’s shareholders approved a one for 10 consolidation of the Company’s share capital. The consolidation was implemented on 2 November 2020. As a result, the number of shares on issue reduced from 2,642,105,685 to 264,214,027. 4 Opening and closing share prices and dividends per share have been adjusted for the rights issue component of the equity raising referred to in note 2 and the consolidation of share capital referred to in note 3 (Source: Capital IQ). 5 Dividends paid during FY18, FY19, and FY20 represent amounts paid per share prior to the equity raising and prior to the share consolidation. 2.5 Executive service contracts The Company has entered service contracts setting out the terms of employment of each executive KMP. All service contracts are for an indeﬁ nite term, subject to termination by either party on up to six months’ notice. Each executive service contract provides for the payment of base salary and participation in the Company’s incentive plans, along with other prescribed non-monetary beneﬁ ts. 2.6 Services from remuneration consultants KPMG was engaged during the year to advise on benchmarking of the remuneration of SCA’s non-executive directors and SCA’s executive KMP and other leadership executives. KPMG did not make any remuneration recommendations (as deﬁ ned in the Corporations Act). KPMG was paid $23,750 for these services. Deloitte was engaged during the year to advise on valuation of outstanding entitlements granted under SCA’s EIP and LTI plan. Deloitte did not make any remuneration recommendations (as deﬁ ned in the Corporations Act). Deloitte was paid $1,500 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 conﬁ rmed in amendments to the Constitution approved by shareholders at the 2020 AGM. The Chair receives a ﬁ xed 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 beneﬁ ts as part of their fees. 2022 Annual Report Directors’ Report | 43 Directors’ Report For the year ended 30 June 2022 The table below sets out the scale of fees for non-executive directors that applied in FY21 and FY22 and those that will apply in FY23. The amounts shown for FY21 and FY22 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 Digital Transformation Committee – Chair Digital Transformation Committee – member Nomination Committee – Chair1 Nomination Committee – member2 FY213 $ FY223 $ FY23 $ 273,000 176,000 136,500 273,000 N/a 136,500 273,000 N/a 136,500 23,000 15,500 23,000 15,500 23,000 15,500 16,500 11,000 23,000 15,500 23,000 15,500 23,000 15,500 16,500 11,000 23,000 15,500 23,000 15,500 23,000 15,500 16,500 11,000 1. The Chair (and formerly the Deputy Chair) do not receive additional fees for committee work. Accordingly, the fees set out above for Chair of the Nomination Committee have not been paid in any of the above years and will not be paid in FY23. The Board has not appointed a Deputy Chair since FY21. 2. Members of the Nomination Committee waived their fees in FY21 and FY22 because the Nomination Committee did not meet during that year. The same waiver will apply if the Nomination Committee does not meet in FY23. 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 fees paid to non-executive directors for the period from 1 April 2020 to 30 September 2020 were reduced by 10%. The above fees relate to the Board approved amounts prior to the 10% reduction. 3. Remuneration of executive KMP and directors during the year 3.1 Total remuneration received by executive KMP in FY22 (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 performance rights granted under the LTI plan and the EIP 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. Non- monetary beneﬁ ts $ Super- annuation beneﬁ ts $ 2,789 23,568 KMP executive2 Grant Blackley Chief Executive Offi cer and Managing Director Nick McKechnie Chief Financial Offi cer John Kelly Chief Operating Offi cer Brian Gallagher Chief Sales Offi cer Stephen Haddad Chief Technology Offi cer Dave Cameron Chief Content Offi cer Nikki Clarkson Chief Marketing Offi cer Total executive KMP Year 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Cash salary and fees $ 1,203,709 1,148,563 561,207 531,016 576,512 542,730 561,632 527,202 – 371,226 – 423,453 – 277,702 EIP cash bonus1 $ 272,974 426,000 111,077 199,332 122,916 202,860 117,648 191,278 – 112,130 – 91,632 – 84,186 4,509 1,020 1,486 3,698 4,509 3,718 4,509 – 4,509 – 2,780 – 2,992 2,903,060 3,821,892 624,615 1,307,418 11,225 25,294 LTI vested in the year $ – – – – – – – – – – – – – – – – Total $ 1,503,040 1,600,766 696,872 753,528 726,694 771,793 706,566 744,683 – 509,559 – 539,559 – 386,574 3,633,172 5,306,462 21,694 23,568 21,694 23,568 21,694 23,568 21,694 – 21,694 – 21,694 – 21,694 94,272 151,858 1 The EIP cash bonus is for performance during the year using the criteria set out in section 2.3.1. The amount was ﬁ nally determined by the Board on 19 August 2022 after considering recommendations of the People & Culture Committee. 2 The roles of the Chief Technology Offi cer (Stephen Haddad), Chief Content Offi cer (Dave Cameron), and Chief Marketing Offi cer (Nikki Clarkson) were assessed as KMP in FY21. For the reasons explained in the letter of the Chair of the Board’s People & Culture Committee, the Board has assessed these roles were not KMP roles during FY22. 44 | Directors’ Report Southern Cross Austereo 3.2 Total remuneration received by Executive KMP in FY22 (statutory disclosure) The table below sets out the nature and amount of each major element of the remuneration of each executive KMP in FY22 and FY21. Short-term employee beneﬁ ts Year Salary and fees $ EIP cash bonus2 $ Non- monetary $ Post- e’ment Super contrib- ution $ Total $ Long Service Leave1 Termin- ation beneﬁ ts $ $ Share- based pay- ments Perform- ance rights3 $ Perform- ance- related proportion Total $ % 2022 1,203,709 272,974 2,789 1,479,472 23,568 14,690 – 174,678 1,692,408 26.5% 2021 1,148,563 426,000 4,509 1,579,072 21,694 24,309 2022 561,207 111,077 1,020 673,304 23,568 24,852 531,016 199,332 1,486 731,834 21,694 22,949 576,512 122,916 3,698 703,126 23,568 10,206 2021 2022 2021 2022 2021 2022 542,730 202,860 561,632 117,648 191,278 527,202 – – 4,509 3,718 4,509 – 4,509 – 2,780 – 750,099 21,694 10,000 682,998 722,989 23,568 21,694 11,123 9,580 – – – 487,865 – 517,865 – 21,694 – 21,694 – 7,116 – 1,186 – 2021 371,226 112,130 2022 Dave Cameron Chief Content Offi cer 2021 – 423,453 – 91,632 2022 – – Executive KMP4 Grant Blackley CEO and Managing Director Nick McKechnie Chief Financial Offi cer John Kelly Chief Operating Offi cer Brian Gallagher Chief Sales Offi cer Stephen Haddad Chief Technology Offi cer Nikki Clarkson Chief Marketing Offi cer Total executive KMP – – – – – – – – – – – – – 67,194 1,692,269 46,981 768,705 17,824 794,301 50,562 787,462 18,297 800,090 48,549 17,666 766,238 771,929 – – 12,619 529,294 – 14,827 – – 555,572 – 11,041 414,089 29.1% 20.6% 27.3% 22.0% 27.6% 21.7% 27.1% – 23.6% – 19.2% – 23.0% 23.6% 26.4% 2021 277,702 84,186 2,992 364,880 21,694 16,474 2022 2,903,060 624,615 3,821,892 1,307,418 2021 11,225 3,538,900 25,294 5,154,604 94,272 60,872 91,614 151,858 – 320,770 4,014,813 159,468 5,557,544 – 1 Long service leave relates to amounts accrued during the year. 2 The EIP cash bonus is for performance during the year using the criteria set out in section 2.3.1. The amount was ﬁ nally determined by the Board on 19 August 2022 after considering recommendations of the People & Culture Committee. 3 The value disclosed is the portion of the fair value of the rights recognised as an expense in each reporting period. 4 The roles of the Chief Technology Offi cer (Stephen Haddad), Chief Content Offi cer (Dave Cameron), and Chief Marketing Offi cer (Nikki Clarkson) were assessed as KMP in FY21. For the reasons explained in the letter of the Chair of the Board’s People & Culture Committee, the Board has assessed these roles were not KMP roles during FY22. 2022 Annual Report Directors’ Report | 45 Directors’ Report For the year ended 30 June 2022 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 FY22 and FY21. A non-executive director’s salary and fees are based on the scale set out in section 2.7 and membership of the Board’s committees as set out in the Directors’ Report. Non-executive Director Rob Murray1 Chair Glen Boreham5 Non-executive director Peter Bush2 Non-executive director Carole Campbell3 Non-executive director Ido Leffl er3 Non-executive director Heith Mackay-Cruise3 Non-executive director Helen Nash Non-executive director Leon Pasternak4 Non-executive director Melanie Willis Non-executive director Total Short-term employee beneﬁ ts Salary and fees $ 273,000 248,648 175,000 170,940 – 53,573 143,295 115,677 150,273 101,979 150,273 101,979 167,045 166,511 – 49,559 153,977 170,625 1,212,863 1,179,491 Year 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Non- monetary $ – – – – – – – – – – – – – – – – – – – – Total $ 273,000 248,648 175,000 170,940 – 53,573 143,295 115,677 150,273 101,979 150,273 101,979 167,045 166,511 – 49,559 153,977 170,625 1,212,863 1,179,491 Post- employment Super contribution $ – 4,170 – 3,743 – 5,089 14,330 10,989 15,027 9,688 15,027 9,688 7,955 7,506 – 4,708 15,398 – 67,737 55,581 Total 273,000 252,818 175,000 174,683 – 58,662 157,625 126,666 165,300 111,667 165,300 111,667 175,000 174,017 – 54,267 169,375 170,625 1,280,600 1,235,072 1 Rob Murray was elected by the Board as Chair on 19 August 2020. 2 Peter Bush stood down as Chair on 19 August and retired as a director on 30 October 2020. 3 Carole Campbell was appointed as a director on 1 September 2020 and appointed Chair of the Audit & Risk Committee from 1 October 2021. Ido Leffl er and Heith Mackay-Cruise were elected as directors on 30 October 2020. 4 Leon Pasternak retired as Deputy Chair and as a director on 30 October 2020. The Board has not appointed a Deputy Chair in his place. 5 Glen Boreham was appointed as Chair of the newly formed Digital Transformation Committee on 1 November 2020. 46 | Directors’ Report Southern Cross Austereo 4. Analysis of incentives included in remuneration 4.1 EIP performance outcomes 4.1.1 EIP ﬁ nancial and proﬁ tability measures The table below summarises SCA’s performance against the ﬁ nancial and proﬁ tability measures included in the KPIs for executive KMP under the EIP in FY22. Group EBITDA Budget $’000 $116,172 Actual $’000 $85,580 EPS (excluding signiﬁ cant items) Actual Budget Cps Cps % Budget 74% % Budget 10.77 62% 17.4 Revenue Budget $’000 $564,980 Digital revenue Budget $’000 $27,866 Actual $’000 $519,682 Actual $’000 $20,746 % Budget 92% % Budget 74% % Budget Non-revenue related costs Budget $’000 Actual $’000 $317,627 $307,582 100% Vesting % – Vesting % – Vesting % – Vesting % – Vesting % 25%1 Executive KMP CEO, CFO, COO, CSO Executive KMP CEO, CFO, COO, CSO Executive KMP CEO, CFO, COO, CSO Executive KMP CEO, CFO, COO, CSO Executive KMP CEO, CFO, COO, CSO 1 Although the non-revenue related costs target within the proﬁ tability and ﬁ nancial performance component of the FY22 EIP was fully achieved, on the recommendation of the CEO, the Board exercised its discretion downward to award only 25% of the available reward for achievement of this target. This recognised the cost control exercised and led by executive KMP in diffi cult economic conditions, while also acknowledging SCA’s overall ﬁ nancial performance was below target. This resulted in a small award (3% out of a possible 12%) for achievement of this target. 2022 Annual Report Directors’ Report | 47 Directors’ Report For the year ended 30 June 2022 4.1.2 EIP outcomes for executive KMP The table below summarises the key performance indicators (KPIs) applicable for each executive KMP under SCA’s EIP for FY22. Assessment of the goals set for executive KMP in FY22 resulted in executive KMP being eligible to receive between 38% and 41% of their respective EIP target opportunities. While ﬁ nancial performance and proﬁ tability targets were not achieved, the Board considered these awards to recognise appropriately the achievements of the executive team in diffi cult macroeconomic conditions. The executive team did a creditable job in controlling costs and made good progress on strategic initiatives designed to embed a digital audio operating model and grow the user base and commercial potential of LiSTNR. Half of each executive’s award (and 60% of the CEO’s award) will be settled by grant of performance rights that will be eligible for vesting after 30 June 2024, strongly aligning executives’ interests with those of other shareholders. The table below shows the outcome for each executive KMP in each EIP component. Executive KMP Goals Grant Blackley, CEO and Managing Director Outcomes Group EBITDA, EPS, digital revenue, non-revenue-related Group operating expenses compared to budget Refer to tables in section 4.1.1. Proﬁ tability and ﬁ nancial performance (60%) Strategy execution (30%) Proﬁ tability and ﬁ nancial performance (60%) Strategy execution (30%) Implement Horizon 1 of corporate strategy Partially achieved Implement digital audio ﬁ rst operating model and culture Achieved Implement strategy to create leading commercial radio shows in core markets and target demographics Partially achieved Cultural and behavioural inﬂ uences (10%) Identify skills and capabilities required to deliver SCA’s strategic objectives. Improve diversity through your succession plans Achieved Improve employee perceptions of job security and job signiﬁ cance Achieved Nick McKechnie, Chief Financial Offi cer Group EBITDA, EPS, digital revenue, non-revenue-related Group operating expenses compared to budget Refer to tables in section 4.1.1. Implement digital audio ﬁ rst operating model and culture Partially achieved Reﬁ nance SCA’s debt facilities to create a ﬂ exible structure Achieved Provide functional leadership and risk management for implementation of a refreshed ERP ﬁ nance system Partially achieved Cultural and behavioural inﬂ uences (10%) Identify skills and capabilities required to deliver SCA’s strategic objectives. Improve diversity through your succession plans Achieved Improve communication and collaboration in ﬁ nance team to remove business barriers and improve stakeholder relationships Achieved John Kelly, Chief Operating Offi cer Proﬁ tability and ﬁ nancial performance (60%) Strategy execution (30%) Group EBITDA, EPS, digital revenue, non-revenue-related Group operating expenses compared to budget Refer to tables in section 4.1.1. Implement digital audio ﬁ rst operating model Develop new premium podcasts for targeted audience and inventory growth Achieved Partially achieved Establish LiSTNR Sport as a content pillar Cultural and behavioural inﬂ uences (10%) Identify skills and capabilities required to deliver SCA’s strategic objectives. Improve diversity through your succession plans Lead the general management team to ensure it is collaborative and courageous in implementing the digital audio strategy Achieved Achieved Achieved 3% 26% 10% Total 39% 3% 25% 10% Total 38% 3% 28% 10% 41% Total 48 | Directors’ Report Southern Cross Austereo Executive KMP Goals Brian Gallagher, Chief Sales Offi cer Outcomes Proﬁ tability and ﬁ nancial performance (60%) Group EBITDA, EPS, digital revenue, non-revenue-related Group operating expenses compared to budget Refer to tables in section 4.1.1. Strategy execution (30%) Deliver superior sales performance in metro radio through eff ective yield management and premium ideation Partially achieved Deliver strong sales outcomes for the new affi liation with Network 10 Achieved Drive regional radio revenue performance through developing local sales teams and leading the Boomtown national sales initiative Achieved 3% 28% Cultural and behavioural inﬂ uences (10%) Identify skills and capabilities required to deliver SCA’s strategic objectives. Improve diversity through your succession plans Achieved Promote remuneration structures for sales teams that drive collaboration, reduce internal competitiveness, and maximise revenue opportunities Partially achieved 9% Total 40% 4.2 EIP awards The table below sets out details of the incentive awards granted as remuneration to executive KMP for the year. Although the non- revenue-related costs target within the proﬁ tability and ﬁ nancial performance component of the FY22 EIP was fully achieved, on the recommendation of the CEO, the Board exercised its discretion downward to award only 25% of the available reward for achievement of this target. This resulted in a small award (3% out of a possible 60%) for all executive KMP under the proﬁ tability and ﬁ nancial performance component of the EIP. Executive incentive plan % achieved in year Cash award included in remuneration1 $ 272,974 111,077 122,916 117,648 Performance rights to be granted2 $ 409,461 111,077 122,916 117,648 Proﬁ tability and ﬁ nancial performance4 Strategy execution Cultural and behavioural inﬂ uences % forfeited in year3 3% 3% 3% 3% 26% 25% 28% 28% 10% 10% 10% 9% 61% 62% 59% 60% KMP Grant Blackley Nick McKechnie John Kelly Brian Gallagher 1 Amounts included in remuneration for the year represent the cash component of EIP awards related to the year based on achievement of corporate and personal goals for each executive. These amounts were approved by the Board on 19 August 2022. 2 Performance rights will be granted during September 2022 based on the face value of performance rights to be determined as set out in section 2.3.1. 3 The amounts forfeited are due to corporate and personal goals not being achieved in the year. 4 Although the non-revenue related costs target within the proﬁ tability and ﬁ nancial performance component of the FY22 EIP was fully achieved, on the recommendation of the CEO, the Board exercised its discretion downward to award only 25% of the available reward for achievement of this target. This recognised the cost control exercised and led by executive KMP in diffi cult economic conditions, while also acknowledging SCA’s overall ﬁ nancial performance was below target. This resulted in a small award (3% out of a possible 12%) for achievement of this target. 5. Share-based incentive payments All references to rights in this section are to performance rights over fully paid ordinary shares in SCA issued under SCA’s EIP or LTI plan. Rights are convertible into fully paid ordinary shares in SCA on a one-for-one basis upon vesting in accordance with SCA’s EIP or LTI plan. There are no options on issue under SCA’s EIP or LTI plan. 5.1 Rights granted as remuneration during the year There were no rights over shares granted as remuneration to executive KMP during the year under SCA’s LTI plan or under SCA’s new EIP. As noted in section 4.2, performance rights will be granted under the EIP during September 2022 based on the face value of performance rights to be determined as set out in section 2.3.1. 2022 Annual Report Directors’ Report | 49 Directors’ Report For the year ended 30 June 2022 The tables below set out details of the rights over shares granted as remuneration to each executive KMP under SCA’s LTI plan during FY21 and which remain on foot on 30 June 2022. KMP Grant Blackley Nick McKechnie John Kelly Brian Gallagher Total Details for performance rights granted in FY21 under the LTI plan Grant Date Metric (100%) Face value at grant date1 Starting share price on 30 June 20201 Vesting date 25 September 2020 Absolute TSR $1.6230 $1.8190 30 June 2023 Number of rights granted (Base Amount)1 125,989 33,420 34,307 33,124 226,840 Maximum number of rights to vest2 314,973 83,550 85,767 82,810 567,100 1 The number of rights granted, the face value of those rights and the starting share price for the purposes of calculating TSR are stated after adjustment for the one for 10 consolidation of the Company’s share capital implemented on 2 November 2020. 2 As explained in section 2.3.2, the number of performance rights that vests under the FY21 LTI plan will be subject to a multiplier according to the TSR performance of the Company over the three-year performance period. For TSR performance of 100%, a multiplier of 2x applies so that the number of performance rights that vests will be double the Base Amount granted to the executive. The maximum multiplier is 2.5x for TSR performance of 150% over the three-year performance period. All performance 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 be forfeited on a pro-rata basis according to the executive’s period of service. The rights vest at the end of the performance period speciﬁ ed at the time of their grant. This is 30 June 2023 for performance rights granted under the FY21 LTI plan. In addition to a continuing employment condition, vesting is conditional on SCA achieving speciﬁ ed performance hurdles. Details of the performance hurdles are included in the discussion of the LTI plan in section 2.3.2. 5.2 Details of equity incentives aff ecting current and future remuneration The table below sets out the vesting proﬁ les of rights held by each executive KMP on 30 June 2022 and details of rights that vested during the year. At the end of the year, there were no rights that had vested and had not been exercised by conversion to fully paid ordinary shares. At grant date During FY22 At year end Executive KMP Grant date Vesting date Perf rights granted1 Perf rights vested and exercised Perf rights vested and exercised % Perf rights value2 $ Perf rights forfeited Perf rights forfeited % Perf 3 rights cancelled3 Perf rights cancelled3 % Perf rights not vested Perf rights not vested value2 $ Grant Blackley Nick McKechnie John Kelly Brian Gallagher FY21 01/7/23 125,989 201,582 Total 125,989 201,582 FY21 01/7/23 33,420 53,471 Total 33,420 53,471 FY21 01/7/23 34,307 54,891 Total 34,307 54,891 FY21 01/7/23 33,124 52,998 Total Total 33,124 52,998 226,840 362,942 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 125,989 201,582 – 125,989 201,582 – – – – – – 33,420 53,471 33,420 53,471 34,307 54,891 34,307 54,891 33,124 52,998 33,124 52,998 – 226,840 362,942 1 The number of performance rights granted (Base Amount) is stated after adjustment for the one for 10 consolidation of the Company’s share capital implemented on 2 November 2020. As explained in section 2.3.2, the number of performance rights that vests will be subject to a multiplier according to the TSR performance of the Company over the three-year performance period. For TSR performance of 100%, a multiplier of 2x applies so that the number of performance rights that vests will be double the Base Amount granted to the executive. The maximum multiplier is 2.5x for TSR performance of 150% over the three-year performance period. 2 The value of rights granted is the fair value of rights calculated at the grant date, adjusted in the case of performance rights granted under the FY21 LTI plan, for the one for 10 consolidation of the Company’s share capital implemented on 2 November 2020. The total value of rights granted in the table is allocated to remuneration over the vesting period. 3 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 satisﬁ ed or to rights being cancelled by the Board. 50 | Directors’ Report Southern Cross Austereo 5.3 Vesting of rights during the year Performance rights granted under the FY19 LTI plan were due to be tested in August 2021, following approval of SCA’s ﬁ nancial report for the year ended 30 June 2021. Performance rights granted under the FY20 LTI plans were due to be tested in August 2022. 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 cancelled all outstanding performance rights under the FY19 and FT20 LTI plans. As a result, no rights granted under the LTI plan in FY19 or FY20 will vest. 5.4 Grants and vesting of rights since 30 June 2022 Awards made under SCA’s EIP for FY22 will be satisﬁ ed partly in cash and partly by grant of performance rights. The number of performance rights to be granted will be based on the face value of the rights, which will be determined under the formula set out in section 2.3.1. These rights will be eligible for vesting at the end of the three-year performance period on 30 June 2024, subject to satisfaction of the conditions described in section 2.3.1. No rights, whether granted under the former LTI plan or the EIP, have vested since 30 June 2022. 6. Payments to executives before taking offi ce There were no payments made during the year to any person as part of the consideration for the person taking offi ce. 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 8.1 Balances and movements in KMP shareholdings The table below sets out the movements in shares held directly or indirectly by KMP during the year. Non-executive Directors Rob Murray Glen Boreham Carole Campbell Ido Leffl er Heith Mackay-Cruise Helen Nash Melanie Willis Executives Grant Blackley Nick McKechnie John Kelly Brian Gallagher Share balance at start of year 65,167 48,462 57,250 65,800 56,380 28,875 40,796 362,730 168,545 63,679 26,630 57,597 316,451 Received during the year STI Plan Vesting of EIP rights Vesting of LTI rights – – – – – – – 50,974 19,081 19,419 18,310 107,784 – – – – – – – – – – – – – – – – – – – – – – – – – – Other changes during the year Share balance at end of year – – 21,000 – 18,190 – – 39,190 – – – – – 65,167 48,462 78,250 65,800 74,570 28,875 40,796 401,920 219,519 82,760 46,049 75,907 424,235 2022 Annual Report Directors’ Report | 51 Directors’ Report For the year ended 30 June 2022 8.2 Board’s target share ownership policies The Board’s non-executive director Share Ownership Policy requires non-executive directors to invest an amount not less than the base fee of a non-executive director in acquiring SCA shares. A non-executive director is required to do so within three years after appointment as a director. The proceeds of any sales of shares will be deducted from a non-executive director’s invested amount. The current base fee for non-executive directors is $136,500. The table below shows the status under this policy of non-executive directors’ shareholdings. Non-executive Director Rob Murray Glen Boreham Carole Campbell Ido Leffl er Heith Mackay-Cruise Helen Nash Melanie Willis Share balance at end of year FY22 Base fee $ Invested amount $ Achieved target? Due date to achieve target 65,167 48,462 78,250 65,800 74,570 28,875 40,796 401,920 136,500 136,500 136,500 136,500 136,500 136,500 136,500 245,286 199,884 137,011 114,608 139,910 144,033 207,909 1,188,641 Yes Yes Yes No Yes Yes Yes – – – Oct 2023 – – – The Board’s Senior Executive Share Ownership Policy requires executive KMP (and the CEO’s other direct executive reports) to invest an amount not less than 50% of the executive’s base salary in acquiring SCA shares. The CEO must invest an amount not less than 100% of the CEO’s base salary in acquiring SCA shares. The market price at the time of allocation to an executive of shares under one of SCA’s executive incentive plans is included in the executive’s invested amount. The proceeds of any sales of shares will be deducted from an executive’s invested amount. There is no due date by which an executive must acquire the target shareholding. The table below shows the status under this policy of the shareholding of each executive KMP. Executive KMP Grant Blackley Nick McKechnie John Kelly Brian Gallagher Balance at end of year FY22 Base salary $ Invested amount $ Achieved target? 219,519 82,760 46,049 75,907 424,235 1,227,277 584,775 600,080 585,200 2,997,332 1,044,293 307,583 167,888 302,534 1,822,298 No Yes No Yes 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 53. This report is signed in accordance with resolutions of the directors of Southern Cross Media Group Limited. Rob Murray Chair Southern Cross Media Group Limited Sydney, Australia 22 August 2022 Grant Blackley Managing Director Southern Cross Media Group Limited Sydney, Australia 22 August 2022 52 | Directors’ Report Southern Cross Austereo Auditor’s Independence Declaration Auditor’s Independence Declaration As lead auditor for the audit of Southern Cross Media Group Limited for the year ended 30 June 2022, 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 22 August 2022 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. 2022 Annual Report Auditor’s Independence Declaration | 53 Consolidated Statement of Comprehensive Income For the year ended 30 June 2022 Revenue from continuing operations Revenue related expenses Employee expenses Program and production Technical expenses Promotions and marketing Administration costs Other income Share of net proﬁ t of investments accounted for using the equity method Proﬁ t before depreciation, amortisation, interest, impairment, fair value movements on ﬁ nancial derivatives and income tax expenses for the year from continuing operations Depreciation and amortisation expense Impairment of intangibles and investments Interest expense and other borrowing costs Interest revenue (Loss)/Proﬁ t before income tax expense for the year from continuing operations Income tax credit/(expense) from continuing operations (Loss)/Proﬁ t from continuing operations after income tax expense for the year Other comprehensive income that may be reclassiﬁ ed to proﬁ t or loss: Changes to fair value of cash ﬂ ow hedges, net of tax Total comprehensive (loss)/proﬁ t 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 5 19 4 17 7 15 15 2022 $’000 519,682 (127,297) (197,797) (24,130) (41,801) (20,064) (23,790) 16 761 85,580 (31,851) (251,718) (16,219) 140 (214,068) 60,346 (153,722) 1,658 (152,064) 2021 $’000 528,649 (158,396) (147,559) (20,582) (40,845) (16,367) (20,180) 510 706 125,936 (32,770) – (23,201) 1,317 71,282 (23,186) 48,096 3,781 51,877 (58.30) (58.30) 18.2 18.2 The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes. 54 | Consolidated Statement of Comprehensive Income Southern Cross Austereo Consolidated Statement of Financial Position For the year ended 30 June 2022 Current assets Cash and cash equivalents Receivables Derivative ﬁ nancial instruments Current tax asset 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 Lease liability Current tax liability Derivative ﬁ nancial instruments Total current liabilities Non-current liabilities Deferred income Provisions Borrowings Lease liability Deferred tax liability Derivative ﬁ nancial instruments Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Other equity transaction Accumulated losses Equity attributable to equity holders Total equity Note 11 12 18 12 25 19 8 9 12 12 12 25 7 18 12 12 17 25 7 18 16 16 2022 $’000 49,462 100,947 787 2,622 153,818 11,932 110,759 6,465 84,554 703,796 917,506 2021 $’000 75,420 98,687 – – 174,107 12,974 98,689 5,969 87,199 947,903 1,152,734 1,071,324 1,326,841 48,930 6,742 20,620 6,497 – – 82,789 88,260 4,854 126,943 120,322 187,749 – 528,128 610,917 460,407 56,884 7,306 17,125 9,868 5,843 319 97,345 90,142 5,546 127,225 103,101 259,701 1,262 586,977 684,322 642,519 1,537,404 5,749 – (1,082,746) 460,407 460,407 1,542,884 3,559 (77,406) (826,518) 642,519 642,519 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. 2022 Annual Report Consolidated Statement of Financial Position | 55 2022 Total equity at 1 July 2021 Loss for the year Other comprehensive income Total comprehensive income Transactions with equity holders in their capacity as equity holders: Buy-back of ordinary shares Transfer of reserves1 Employee share entitlements Dividends Paid Consolidated Statement of Changes in Equity For the year ended 30 June 2022 Contributed equity $’000 1,542,884 – – – Share-based payment reserve $’000 4,664 – – – Other equity transactions $’000 (Accumulated losses)/ retained proﬁ ts $’000 (77,406) – – (826,518) (153,722) – Non- controlling interest $’000 Total equity $’000 – – – 642,519 (153,722) 1,658 Total $’000 642,519 (153,722) 1,658 – (153,722) (152,064) – (152,064) Hedge reserve $’000 (1,105) – 1,658 1,658 (5,480) – – – (5,480) – – 532 – 532 – – – – – – 77,406 – – – (77,406) – (25,100) (5,480) – 532 (25,100) 77,406 (102,506) (30,048) – – – – – – (5,480) – 532 (25,100) (30,048) 460,407 Total equity at 30 June 2022 1,537,404 5,196 553 – (1,082,746) 460,407 1 The Group transferred the reverse acquisition reserve of $77.406 million in connection with the IPO of the Group, into Accumulated losses eff ective 30 June 2022. Other equity transactions $’000 (Accumulated losses)/ retained proﬁ ts $’000 Total $’000 588,099 48,096 3,781 51,877 (874,614) 48,096 – 48,096 2021 Total equity at 1 July 2020 Proﬁ t for the year Other comprehensive income Total comprehensive income Transactions with equity holders in their capacity as equity holders: Contributions of equity, net of transaction costs Employee share entitlements Acquisition of remaining interest Contributed equity $’000 1,540,569 – – – Share-based payment reserve $’000 4,436 – – – Hedge reserve $’000 (4,886) – 3,781 3,781 2,315 – – 2,315 – 228 – 228 – – – – (77,406) – – – – – – – – – – – 2,315 228 – 2,543 Non- controlling interest $’000 298 – – – – – (298) (298) Total equity $’000 588,397 48,096 3,781 51,877 2,315 228 (298) 2,245 Total equity at 30 June 2021 1,542,884 4,664 (1,105) (77,406) (826,518) 642,519 – 642,519 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 56 | Consolidated Statement of Changes in Equity Southern Cross Austereo Consolidated Statement of Cash Flows For the year ended 30 June 2022 Cash ﬂ ows from operating activities Receipts from customers Payments to suppliers and employees Government grants received Interest received from external parties Tax paid Net cash inﬂ ows from operating activities Cash ﬂ ows from investing activities Payments for purchase of property, plant and equipment Payments for purchase of intangibles Proceeds from sale of property, plant and equipment Payments for acquisitions of unlisted equity securities Dividends received from equity accounted investments Net cash ﬂ ows used in investing activities Cash ﬂ ows from ﬁ nancing activities Dividends paid to security holders Repayment of borrowings from external parties Reﬁ nancing costs paid to external parties Buy-back of ordinary shares Interest paid to external parties Principal elements of lease payments Net cash ﬂ ows used in ﬁ nancing activities Net decrease in cash and cash equivalents Cash assets at the beginning of the year Cash assets at the end of the year Note 2022 $’000 2021 $’000 11 563,782 (488,932) – 140 (20,780) 54,210 (24,574) (5,321) 80 (1,173) 640 (30,348) (25,100) – (1,235) (5,480) (10,018) (7,987) (49,820) (25,958) 75,420 49,462 548,547 (465,172) 47,418 1,317 (15,950) 116,160 (13,821) (123) 2,481 (500) 560 (11,403) – (275,000) – – (19,564) (6,204) (300,768) (196,011) 271,431 75,420 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 2022 Annual Report Consolidated Statement of Cash Flows | 57 Notes to the Consolidated Financial Statements For the year ended 30 June 2022 Key Numbers Capital Management Group Structure Other 1. Summary of Signiﬁ cant Accounting Policies 13. Capital Management 19. Non-Current Assets – Objectives Investments 22. Share-Based Payments 2. Segment Information 14. Dividends Paid and Proposed 20. Subsidiaries 23. Remuneration of Auditors 3. Revenue 15. Earnings per Share 21. Parent Entity Financial Information 24. Related Party Disclosures 4. Signiﬁ cant Items 16. Contributed Equity and Reserves 5. Other Income 17. Borrowings 6. Government Grants 18. Financial Risk Management 25. Leases and Other Commitments 26. Events Occurring after Balance Date 27. Other Accounting Policies 7. Income Tax Expense 8. Non-Current Assets – Property, Plant and Equipment 9. Non-Current Assets – Intangible Assets 10. Impairment 11. Cash ﬂ ow Information 12. Receivables, Payables, Deferred Income and Provisions 58 | Notes to the Consolidated Financial Statements Southern Cross Austereo 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 Off ering (‘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 reﬂ ects 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 resulted in a debit of $77.4 million to other equity transactions. The Group transferred this reserve to Accumulated losses eff ective 30 June 2022. This does not aff ect the Group’s distributable proﬁ ts or ability to pay dividends. 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 ﬁ nancial 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 ﬁ nancial impact on the entity and that are believed to be reasonable under the circumstances. Management believes the estimates used in the preparation of the ﬁ nancial report are reasonable. Actual results in the future may diff er from those reported. Judgements and estimates which are material to the ﬁ nancial report are found in the following notes: Note 9 Non-Current Assets – Intangible Assets Note 10 Note 12 Receivables, Payables, Deferred Income and Provisions Note 25 Leases and Other Commitments Impairment Key Numbers 1. Summary of Signiﬁ cant Accounting Policies The principal accounting policies adopted in the preparation of these consolidated ﬁ nancial statements are set out below. In addition, signiﬁ cant and other accounting policies that summarise the measurement basis used and that are relevant to an understanding of the ﬁ nancial statements are provided throughout the notes to the ﬁ nancial statements. These policies have been consistently applied to all the years presented, unless otherwise stated. The ﬁ nancial 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 ﬁ nancial report has been prepared in accordance with Australian Accounting Standards and the Corporations Act 2001 (where applicable). The Group is a for-proﬁ t entity for the purpose of preparing the ﬁ nancial statements. These ﬁ nancial 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 $49.5 million of cash and cash equivalents at 30 June 2022; forecast performance; and the expectations that the Group will comply with its debt facility covenants. Based on the assessment, the Group concluded that these ﬁ nancial statements should be prepared on a going concern basis. Information in respect of the parent entity in this ﬁ nancial report relates to Southern Cross Media Group Limited. i) Compliance with IFRS Compliance with Australian Accounting Standards ensures that the ﬁ nancial statements and notes of the Group comply with International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board (‘IASB’). Consequently, this ﬁ nancial report has also been prepared in accordance with and complies with IFRS as issued by the IASB. ii) Historical cost convention These ﬁ nancial statements have been prepared under the historical cost convention, as modiﬁ ed by the revaluation of certain ﬁ nancial assets and liabilities (including derivative instruments) at fair value through proﬁ t or loss. All amounts are presented in Australian dollars, unless otherwise noted. iii) Comparative ﬁ gures Where necessary, comparative ﬁ gures have been adjusted to conform to changes in presentation in the current year. Principles of consolidation The consolidated ﬁ nancial statements incorporate the assets and liabilities of all subsidiaries of the Company as at 30 June 2022 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 aff ect 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 eff ects of all transactions between entities in the Group are eliminated in full. 2022 Annual Report Notes to the Consolidated Financial Statements | 59 Notes to the Consolidated Financial Statements For the year ended 30 June 2022 1. Summary of Signiﬁ cant Accounting Policies (continued) Coronavirus (COVID-19) and other environmental factors The Group’s results were signiﬁ cantly impacted by continuous COVID-19 lockdowns throughout the current year and prior year. In addition to the pandemic, external factors including natural disasters, the war in Ukraine and the possibility of recession have all contributed to the pace of recovery. As a consequence, management has: – Continued to evaluate 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 ﬁ nancial and non-ﬁ nancial assets classes and disclosures such as fair value disclosures of ﬁ nancial assets and liabilities; 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 these external factors and are detailed further in the notes to the ﬁ nancial statements, in particular: Impairment Note 10 Note 12 Receivables, Payables, Deferred Income and Provisions Note 13 Capital Management Objectives Note 18 Financial Risk Management Note 19 Non-Current Assets – Investments Notes to the ﬁ nancial statements Notes relating to individual line items in the ﬁ nancial 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 ﬁ nancial report in note 27. 2. Segment Information AASB 8 requires operating segments to be identiﬁ ed 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, digital and other related businesses; and – Television, comprising the regional television business. Segment revenue National revenue 1 Local revenue2 Other Total revenue Reported EBITDA EBITDA % of Revenue Impairment of intangibles and investments Depreciation and amortisation Statutory EBIT/ Segment Result Financing costs Income tax credit (expense) Proﬁ t/(Loss) for the year attributable to shareholders Audio Television Corporate Consolidated 2022 $’000 392,811 213,377 137,849 41,585 2021 $’000 2022 $’000 358,465 126,216 194,959 130,466 33,040 77,572 41,382 7,262 2021 $’000 169,627 103,023 53,937 12,667 392,811 358,465 126,216 169,627 2022 $’000 2021 $’000 2022 $’000 2021 $’000 655 – – 655 655 557 – – 557 557 519,682 528,649 290,949 179,231 49,502 297,982 184,403 46,264 519,682 528,649 85,824 21.8% 115,021 32.1% 30,010 23.8% 38,092 (30,254) (27,177) 85,580 125,936 22.5% N/A N/A 16.5% 23.8% (251,718) – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – (251,718) – (31,851) (32,770) (197,989) (16,079) 60,346 93,166 (21,884) (23,186) (153,722) 48,096 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 speciﬁ c to the particular market. 60 | Notes to the Consolidated Financial Statements Southern Cross Austereo 3. Revenue The proﬁ t before income tax from continuing operations included the following speciﬁ c items of revenue: Revenue from continuing operations Sales revenue Rental revenue Total revenue from continuing operations Consolidated 2022 $’000 2021 $’000 519,398 284 519,682 528,298 351 528,649 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 radio, digital and television advertising airtime and related activities, including sponsorship and promotions. Based on the Group being considered the principal entity in the sale of radio, digital and advertising, revenue is recognised gross of rebates and agency commissions. For signiﬁ cant payment terms refer to note 12. Advertising revenue is recognised at a point in time when the underlying performance obligation has been satisﬁ ed, 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 Traffi c Network (ATN) contract where revenue is recognised over time. The ATN contract has been deemed to contain a signiﬁ cant ﬁ nancing 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 to note 12). Digital revenue is recognised at the point the underlying performance obligations of the contract have been delivered to the customer. Historically SCA has acted as the principal for Radio and Television Advertising, however with the introduction and growth in the digital market this is not always the case. New digital revenue streams have resulted in SCA having to determine whether it is the principal or agent under AASB 15. SCA is the principal in a transaction when it has primary responsibility for fulﬁ lling the promise, the inventory risk and discretion in establishing price. Revenue will be recognised as Gross when SCA is principal, with a corresponding expense for any fees which could include agency commission in the traditional sense. SCA is the agent in a transaction when it receives a commission/revenue share, has no inventory risk and little or no discretion in establishing price. Revenue will be recognised as net when SCA is an agent, with no corresponding expense for any fees. The Group derives other regular sources of operating revenue including commercial production for advertisers, facility sharing revenue and third-party agency commissions. 4. Signiﬁ cant Items The net proﬁ t after tax includes the following items whose disclosure is relevant in explaining the ﬁ nancial performance of the Group. Signiﬁ cant items are those items of such a nature or size that separate disclosure will assist users to understand the ﬁ nancial statements. Impairment of intangibles and investments (refer notes 9, 10 and 19) Other (after tax) Total signiﬁ cant items included in net proﬁ t after tax 2022 $’000 (179,430) (2,846) (182,276) 2021 $’000 – – – 2022 Annual Report Notes to the Consolidated Financial Statements | 61 Notes to the Consolidated Financial Statements For the year ended 30 June 2022 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 Consolidated 2022 $’000 16 16 2022 $’000 (65) 81 16 2021 $’000 510 510 2021 $’000 (1,971) 2,481 510 6. Government Grants As part of its response to COVID-19, in March 2020 the Australian Government announced various stimulus measures as a result of the economic fallout from the coronavirus lockdown. JobKeeper The Group determined it was eligible to receive the initial JobKeeper Payment Scheme (‘JobKeeper’) for the period April to September 2020. The initial JobKeeper payments were a wage subsidy whereby employers who qualify for the stimulus received $1,500 per fortnight for each eligible employee who was employed by the company during the period April 2020 to September 2020. Further to the initial JobKeeper wage subsidy, the scheme was extended for two further quarters, albeit at lower rates. The Group has determined that it was eligible to receive the ﬁ rst period of the extension from 28 September 2020 to 3 January 2021. The JobKeeper extension was a two-tier wage subsidy. In the ﬁ rst extension quarter, employers who qualify for the stimulus received $1,200 per fortnight for each eligible employee, who worked for 80 hours or more in the reference period; and $750 per fortnight for eligible employees who worked less than 80 hours in the reference period. The Group determined it was not eligible for the second extension period from January 2021 to March 2021. During the prior year SCA received $37.1 million in JobKeeper funding, of which $31.9 million was recognised as income. PING The Group applied and was found eligible for funding under the Commonwealth Government’s Public Interest News Gathering (PING) program. During the prior year SCA received $10.3 million for the period September 2020 to August 2021 of which $1.7 million was recognised as income during this ﬁ nancial year and $8.6 million in the prior year. The PING program is a government incentive to support commercial television, radio and newspaper businesses in regional Australia during COVID-19. JobKeeper and PING payments are government grants and are accounted for under AASB 120 Accounting for Government Grants and Disclosure of Government Assistance. Government grants are recognised over the period of the grant at their fair value when there is reasonable assurance that the grant will be received, and the Group will comply with all attached conditions. The impact on the Consolidated Statement of Comprehensive Income is shown below. JobKeeper PING Program Employee Costs Total employee costs after Government Assistance Consolidated 2022 $’000 – 1,711 (199,508) (197,797) 2021 $’000 31,878 8,577 (188,014) (147,559) 62 | Notes to the Consolidated Financial Statements Southern Cross Austereo Income Tax Expense 7. The income tax expense for the ﬁ nancial year diff ers from the amount calculated on the net result from continuing operations. The diff erences are reconciled as follows: Income tax expense Current tax Current tax on proﬁ ts for the year Adjustments for current tax of prior periods Total current tax expense Deferred income tax Decrease in net deferred tax liabilities Adjustments for deferred tax of prior periods Total deferred tax expense Income tax (credit)/expense Reconciliation of income tax expense to prima facie tax payable (Loss)/proﬁ t before income tax expense Tax at the Australian tax rate of 30% Tax eff ect of amounts which are not deductible/(taxable) in calculating taxable income Impairment of intangibles and investments Share of net proﬁ ts of associates Non-deductible entertainment expenses Other non-deductible expenses Adjustments recognised in the current year in relation to prior years Income tax (credit)/expense Deferred Taxes The balance comprises temporary diff erences attributable to: Licences and brands Employee beneﬁ ts Provisions Interest rate swaps Right-of-use assets Lease liabilities Deferred revenue Other Net balance disclosed as deferred tax liability Consolidated 2022 $’000 2021 $’000 10,806 1,510 12,316 (71,065) (1,597) (72,662) (60,346) (214,068) (64,220) 3,227 (228) 797 165 (87) (60,346) 26,311 594 26,905 (3,904) 185 (3,719) 23,186 71,282 21,385 – (212) 621 613 779 23,186 Consolidated 2022 $’000 2021 $’000 (206,641) 6,882 865 (236) (33,327) 38,145 3,459 3,104 (187,749) (279,009) 5,887 1,027 474 (29,610) 33,896 2,986 4,648 (259,701) For the year ended 30 June 2022, the Company had $0.7 million deferred income tax expense (2021: $1.6 million of deferred income tax expense) recognised directly in equity in relation to cash ﬂ ow hedges, with a corresponding reduction in deferred tax assets being recognised. There are $60.644 million available of unused tax losses on the capital account for which no deferred tax asset has been recognised (2021: $60.030 million). There are no other unused tax losses for which no deferred tax asset has been recognised. 2022 Annual Report Notes to the Consolidated Financial Statements | 63 Notes to the Consolidated Financial Statements For the year ended 30 June 2022 Income Tax Expense (continued) 7. Recognition and Measurement Income Tax Income tax amounts recognised in the Group’s ﬁ nancial statements relate to tax paying entities within the Group and have been recognised in accordance with Group policy. The income tax expense 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 diff erences between the tax bases of assets and liabilities and their carrying amounts in the ﬁ nancial statements and adjusted by changes to unused tax losses. Deferred Taxes Deferred tax assets and liabilities are recognised for temporary diff erences 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 diff erences to measure the deferred tax asset or liability. Deferred tax assets are recognised for deductible temporary diff erences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary diff erences and losses. In determining the extent of temporary diff erences of assets, the carrying amount of assets is assumed to be recovered through use. Tax Consolidated Group The Company is the head entity of the tax consolidated group. For further information, refer note 21. 8. Non-Current Assets – Property, Plant and Equipment Consolidated 2022 Cost Accumulated depreciation expense Net carrying amount Movement Net carrying amount at beginning of year Additions Disposals Depreciation expense Transfers1 Net carrying amount at end of year Land and Buildings $’000 Leasehold Improvements $’000 Plant and Equipment $’000 Assets under construction $’000 25,433 (9,273) 16,160 16,790 101 (67) (664) – 16,160 54,331 (36,165) 18,166 256,267 (220,903) 35,364 18,053 2,877 (20) (4,470) 1,726 18,166 46,881 2,998 (60) (13,893) (562) 35,364 14,864 – 14,864 5,475 14,584 – – (5,195) 14,864 Total $’000 350,895 (266,341) 84,554 87,199 20,560 (147) (19,027) (4,031) 84,554 1 The transfer of $4,031 million of net intangibles relate to the LiSTNR app, which was transferred from Property, plant and equipment following a review of the accounting treatment. Consolidated 2021 Cost Accumulated depreciation expense Net carrying amount Movement Net carrying amount at beginning of year Additions Disposals Depreciation expense Transfers Net carrying amount at end of year Land and Buildings $’000 Leasehold Improvements $’000 Plant and Equipment $’000 Assets under construction $’000 25,410 (8,620) 16,790 19,520 147 (2,288) (589) – 16,790 50,605 (32,552) 18,053 23,142 159 (10) (5,238) – 18,053 255,800 (208,919) 46,881 49,053 8,338 (887) (14,463) 4,840 46,881 5,475 – 5,475 5,138 5,177 – – (4,840) 5,475 Total $’000 337,290 (250,091) 87,199 96,853 13,821 (3,185) (20,290) – 87,199 64 | Notes to the Consolidated Financial Statements Southern Cross Austereo 8. Non-Current Assets – Property, Plant and Equipment (continued) 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 amortise the cost of the asset over its estimated useful life. Estimates of remaining useful life are made on a regular basis for all assets, with annual reassessments for major items. The expected useful life of property, plant and equipment is as follows: Buildings Leasehold improvements Network equipment Communication equipment 3 – 16 years Other plant and equipment 2 – 10 years 3 – 5 years 2 – 20 years 2 – 20 years Leased plant and equipment 25 – 50 years 9. Non-Current Assets – Intangible Assets Consolidated 2022 Cost Accumulated impairment expense Accumulated amortisation expense Net carrying amount Movement Net carrying amount at beginning of year Additions Transfers1 Impairment expense (note 10) Amortisation expense Net carrying amount at end of year Goodwill $’000 362,088 (362,088) – – 9,959 – – (9,959) – – Broadcasting Licences $’000 Brands and Tradenames $’000 1,502,031 (854,478) – 647,553 871,700 – – (224,147) – 647,553 90,238 (41,662) – 48,576 65,308 82 – (16,814) – 48,576 Other $’000 12,844 – (5,177) 7,667 936 5,073 4,031 – (2,373) 7,667 Total $’000 1,967,201 (1,258,228) (5,177) 703,796 947,903 5,155 4,031 (250,920) (2,373) 703,796 1 The transfer of $4.031 million of net intangibles relate to the LiSTNR app, which was transferred from Property, plant and equipment following a review of the accounting treatment. Consolidated 2021 Cost Accumulated impairment expense Accumulated amortisation expense Net carrying amount Movement Net carrying amount at beginning of year Additions Amortisation expense Net carrying amount at end of year Goodwill $’000 362,088 (352,129) – 9,959 9,959 – – 9,959 Broadcasting Licences $’000 Brands and Tradenames $’000 1,502,031 (630,331) – 871,700 871,700 – – 871,700 90,156 (24,848) – 65,308 65,185 123 – 65,308 Other $’000 3,577 – (2,641) 936 1,203 – (267) 936 Total $’000 1,957,852 (1,007,308) (2,641) 947,903 948,047 123 (267) 947,903 2022 Annual Report Notes to the Consolidated Financial Statements | 65 Notes to the Consolidated Financial Statements For the year ended 30 June 2022 9. Non-Current Assets – Intangible Assets (continued) Goodwill and intangible assets with indeﬁ nite useful lives The Group tests at least annually whether goodwill and intangible assets with indeﬁ nite useful lives have suff ered 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 Indeﬁ nite Indeﬁ nite Licences Television and radio licences are initially recognised at cost. Analogue licences are renewable for a minimal cost every ﬁ ve 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 ﬁ nite life. During the year, the free-to-air commercial television and radio broadcasting licences have been assessed to have indeﬁ nite useful lives. Brands Brands are initially recognised at cost. The brands have been assessed to have indeﬁ nite 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 indeﬁ nite lives as there is no foreseeable limit to the period over which the assets are expected to generate net cash inﬂ ows. Other intangible assets IT development and software Costs associated with maintaining software programs are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identiﬁ able and unique software products controlled by the Group are recognised as intangible assets where the following criteria are met: – it is technically feasible to complete the software so that it will be available for use – management intends to complete the software and use or sell it – there is an ability to use or sell the software – it can be demonstrated how the software will generate probable future economic beneﬁ ts – adequate technical, ﬁ nancial and other resources to complete the development and to use or sell the software are available; and – the expenditure attributable to the software during its development can be reliably measured. Directly attributable costs that are capitalised as part of the software include employee and contractor costs. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use. The Group amortises other intangible assets with a limited useful life using the straight-line method over the following periods: IT development and software Customer contracts 3 – 5 years 5 years 66 | Notes to the Consolidated Financial Statements Southern Cross Austereo 10. Impairment a) Impairment tests for licences, tradenames, brands and goodwill The value of licences, tradenames, brands and goodwill is allocated to the Group’s cash-generating units (‘CGUs’), identiﬁ ed as being Audio and Television. As the indeﬁ nite 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 identiﬁ ed for the remaining assets based on the Television CGU’s performance for FY2022 relative to its remaining carrying value, no impairment test was performed on the Television CGU at 30 June 2022. The recoverable amount of the Audio CGU at 30 June 2022 and 30 June 2021 was determined based on the fair value less costs of disposal (‘FVLCD’) discounted cash ﬂ ow model utilising probability weighted scenarios. Allocation of goodwill and other intangible assets Consolidated 2022 Goodwill allocated to CGU Indeﬁ nite lived intangible assets allocated to CGU Finite lived intangible assets allocated to CGU Total goodwill, ﬁ nite and indeﬁ nite lived intangible assets Consolidated 2021 Goodwill allocated to CGU Indeﬁ nite lived intangible assets allocated to CGU Finite lived intangible assets allocated to CGU Total goodwill, ﬁ nite and indeﬁ nite lived intangible assets Audio CGU Audio CGU $’000 – 696,129 7,667 703,796 Audio CGU $’000 9,959 937,008 936 947,903 Television CGU $’000 – – – – Television CGU $’000 – – – – Total $’000 – 696,129 7,667 703,796 Total $’000 9,959 937,008 936 947,903 Impairment At 30 June 2022, an impairment loss of $250.9 million was recorded against the Goodwill, Broadcasting Licences and Brands and Tradenames in the Audio CGU, reﬂ ecting a recoverable amount of $511.9 million. The carrying values of the other assets in the Audio CGU were considered equal to their fair value. After the impairment loss, the estimated recoverable amount of the Audio CGU, based on FVLCD, equals its carrying amount. The impairment reﬂ ects an increase in the discount rate; slower than expected recovery from the economic impacts of the COVID pandemic; independent estimates of radio broadcast growth rates showing declines over the forecast period; and a more pessimistic weighting towards the Lower Case due to increased potential for worsening economic conditions. b) Key assumptions used 30 June 2022 The FVLCD calculations used cash ﬂ ow projections based on the 2023 Board approved ﬁ nancial 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 and publicly available broker reports as well as internal Company data and assumptions. In respect of the Audio CGU the long-term growth rates did not exceed the independent forecast reports. The discount rate used is based on a range provided by an independent expert and reﬂ ects speciﬁ c 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 weighting 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 Long-term growth rate Discount rate (post-tax) Growth in digital audio revenues – 5-year CAGR Metro market share – Year 5 Probability weighting Lower case Base case Upper case To 82% of CPI adjusted FY19 revenue base in FY24 declining to 76% by FY27 To 83% of CPI adjusted FY19 revenue base in FY24 declining to 80% by FY27 To 90% of CPI adjusted FY19 revenue base by FY24 and ﬂ at thereafter 0.5% 9.75% 17% 26% 1.5% 9.75% 29% 29% 2.5% 9.75% 41% 30% 40% – lower case considered more likely than upper case due to potential for worsening economic conditions 50% – base case considered most likely outcome 10% – upper case considered less likely than lower case due to potential for worsening economic conditions 2022 Annual Report Notes to the Consolidated Financial Statements | 67 Notes to the Consolidated Financial Statements For the year ended 30 June 2022 10. Impairment (continued) The market capitalisation of the Group at 30 June 2022 was $258 million, which represented a $202 million deﬁ ciency against the net assets of $460 million. The Group considered reasons for this diff erence and concluded the recoverable amount resulting from the FVLCD methodology is appropriate in supporting the carrying value of the Audio CGU. 30 June 2021 The FVLCD calculations used cash ﬂ ow projections based on the 2022 Board approved ﬁ nancial 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 and publicly available broker reports 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 is based on a range provided by an independent expert and reﬂ ects speciﬁ c 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 Long-term growth rate Discount rate (post-tax) Growth in digital audio revenues – 5-year CAGR Metro market share – Year 5 Probability weighting Lower case Base case Upper case To 80% of CPI adjusted FY19 revenue base by FY25 To 85% of CPI adjusted FY19 revenue base by FY24 To 90% of CPI adjusted FY19 revenue base by FY23 (0.5)% 8.5% 23% 27% 1.0% 8.5% 41% 29% 2.0% 8.5% 58% 30% 10% – lower case considered equally as likely as upper case 80% – base case considered most likely outcome 10% – upper case considered equally as likely as lower case c) Impact of a reasonably possible change in key assumptions Audio CGU Sensitivity Any variation in the 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 for 30 June 2022 described above represent a reasonably possible change in assumptions, which together would lead to a further pre-tax impairment of $357 million. The following reasonably possible changes in a key assumption would result in the following approximate impact on recoverable amount (as derived on a probability weighted basis) and carrying value for the Audio CGU: Sensitivity Increase in post-tax discount rate from 9.75% to 10.5% Reduction in long-term growth rate by 1.0% in each scenario Reasonable Change in variable % 0.75% (1.0)% Impact of change on Audio CGU carrying value $ million (42) (42) 68 | Notes to the Consolidated Financial Statements Southern Cross Austereo 11. Cash ﬂ ow information a) Reconciliation of Proﬁ t after Income Tax to Net Cash Inﬂ ow from Operating Activities (Loss)/proﬁ t after income tax Impairment of intangibles and investments Depreciation and amortisation Net gain from disposal of assets Share of associate proﬁ t Interest expense and other borrowing costs included in ﬁ nancing activities Share-based payments Change in operating assets and liabilities: (Increase) in receivables (Decrease) in deferred taxes (net of tax movement in hedge reserve) Increase/(decrease) in payables (excluding interest expense classiﬁ ed as ﬁ nancing activities) (Decrease) in deferred income Increase/(decrease) in provision for income tax Increase in provisions Net cash inﬂ ows from operating activities b) Net debt reconciliation Cash and liquid investments Borrowings – repayable within one year Borrowings – repayable after one year Lease liabilities Net debt Consolidated 2022 $’000 (153,722) 251,718 31,851 (16) (761) 16,219 532 (1,687) (72,662) (3,824) (7,777) (8,465) 2,804 54,210 2021 $’000 48,096 – 32,770 (510) (706) 23,201 228 (14,876) (3,718) 25,380 (8,732) 10,956 4,071 116,160 Consolidated 2022 $’000 49,462 – (126,943) (126,819) (204,300) 2021 $’000 75,420 – (127,225) (112,969) (164,774) 2022 Annual Report Notes to the Consolidated Financial Statements | 69 Notes to the Consolidated Financial Statements For the year ended 30 June 2022 11. Cash ﬂ ow information (continued) b) Net debt reconciliation (continued) Balance as at 1 July 2020 Repayment of borrowings Other cash ﬂ ows Payment for leases Changes from ﬁ nancing activities Other Changes Finance costs Amortisation of borrowing costs Addition of leases Options not exercised Other remeasurements Subtotal of other changes Balance as at 30 June 2021 Payment for leases Other cash ﬂ ows Changes from ﬁ nancing activities Other Changes Finance costs Amortisation of borrowing costs Addition of leases Other remeasurements Subtotal of other changes Balance as at 30 June 2022 c) Cash and cash equivalents Current Cash at bank and at hand Consolidated Cash $’000 271,431 (275,000) 78,989 – 75,420 – – – – – – Bank Loans $’000 (401,703) 275,000 – – (126,703) – (522) – – – (522) 75,420 – (25,958) 49,462 (127,225) – – (127,225) – – – – 1,235 (953) – – – 49,462 282 (126,943) Lease Liabilities $’000 (132,951) – – 13,353 (119,598) (6,874) – (2,130) 16,034 (401) 6,629 (112,969) 14,256 – (98,713) (6,271) – (21,646) (189) (28,106) (126,819) Total $’000 (263,223) – 78,989 13,353 (170,881) (6,874) (522) (2,130) 16,034 (401) 6,107 (164,774) 14,256 (25,958) (176,476) (5,036) (953) (21,646) (189) (27,824) (204,300) Consolidated 2022 $’000 49,462 49,462 2021 $’000 75,420 75,420 Recognition and measurement For the purpose of presentation in the statement of cash ﬂ ows, cash and cash equivalents includes cash on hand, deposits held at call with ﬁ nancial 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 insigniﬁ cant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet. 70 | Notes to the Consolidated Financial Statements Southern Cross Austereo Consolidated 2022 $’000 88,458 10,974 1,515 100,947 2021 $’000 85,744 9,813 3,130 98,687 Consolidated 2022 $’000 334 11,468 130 11,932 2021 $’000 292 12,495 187 12,974 Total $’000 89,896 (1,438) 88,458 Total $’000 87,310 (1,566) 85,744 12. Receivables, Payables, Deferred Income and Provisions a) Receivables Current Trade receivables Prepayments Other Non-current Refundable deposits Prepayments Other The carrying amounts of the non-current receivables approximate their fair value. Ageing analysis of trade receivables The tables below summarise the ageing analysis of trade receivables as at 30 June. Consolidated As at 30 June 2022 Expected loss rate Trade receivables Expected credit losses (‘ECL’) Trade receivables net of ECL Consolidated As at 30 June 2021 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 to 90 days $’000 Past due – >90 days $’000 1.1% 83,626 (921) 82,705 2.2% 4,691 (103) 4,588 21.0% 991 (208) 783 35.0% 588 (206) 382 Current – not past due $’000 Past due – up to 60 days $’000 Past due – 60 to 90 days $’000 Past due – >90 days $’000 0.9% 79,898 (731) 79,167 3.0% 5,704 (171) 5,533 30.0% 950 (285) 665 50.0% 758 (379) 379 The Group has recognised bad debts during the year ended 30 June 2022 of $140,536 (2021: $153,095). The Group applies a simpliﬁ ed model of recognising lifetime expected credit losses immediately upon recognition. The expected loss rates are historically based on the payment proﬁ le of sales over a period of three years before the end of the current period. Historical loss rates have been adjusted to reﬂ ect current and forward-looking information on macroeconomic factors aff ecting the ability of customers to settle the receivables. The amount of the loss allowance is recognised in proﬁ t or loss. Where a debt is known to be uncollectible, it is considered a bad debt and written off . Collections have held up throughout FY22, with very few delinquent debts, therefore SCA has decreased the weightings of expected losses on debts over 30 days. However, due to recent economic uncertainly SCA has increased the current – not past due weighting from 0.9% to 1.1.%. Overall, SCA has reduced the ECL provision to $1.438 million (2021: $1.566 million). 2022 Annual Report Notes to the Consolidated Financial Statements | 71 Notes to the Consolidated Financial Statements For the year ended 30 June 2022 12. 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 ECL provision. Generally, credit terms are for 30 days from date of invoice or 45 days for an accredited agency. b) Prepayments On 2 September 2019, the Group paid $15 million to Broadcast Australia for the outsourcing of the Group’s transmission services which is being recognised as an expense over a 15-year period. Current Broadcast Australia transmitter services Other Non-current Broadcast Australia transmitter services c) Payables Current Trade creditors GST payable Accruals and other payables Recognition and Measurement 2022 $’000 1,027 9,947 10,974 11,468 11,468 2021 $’000 1,027 8,786 9,813 12,495 12,495 Consolidated 2022 $’000 9,938 2,658 36,334 48,930 2021 $’000 10,780 2,107 43,997 56,884 Trade Creditors, Accruals and Other Payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the ﬁ nancial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. d) Deferred income Current Deferred income Non-current Deferred income Consolidated 2022 $’000 6,742 6,742 2021 $’000 7,306 7,306 Consolidated 2022 $’000 88,260 88,260 2021 $’000 90,142 90,142 72 | Notes to the Consolidated Financial Statements Southern Cross Austereo 12. Receivables, Payables, Deferred Income and Provisions (continued) Recognition and Measurement Deferred Income In 2016, the Group entered into a long-term contract with Australian Traffi c Network (ATN) for it to provide traffi c 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 traffi c 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 traffi c 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 (2021: $7.1 million) has been off set by the recognition of $5.4 million (2021: $5.4 million) in interest expense as the unwind of discounting. In addition to the payment received from ATN, deferred income represents government grants received and income invoiced in advance. Government grants relating to costs are deferred and recognised in proﬁ t or loss over the period necessary to match them with the costs that they are intended to compensate. Government grants relating to the purchase of property, plant and equipment are deferred and recognised in proﬁ t or loss on a straight-line basis over the expected useful lives of the related assets. e) Provisions Current Employee beneﬁ ts Lease provisions Non-current Employee beneﬁ ts Lease provisions Movements in current and non-current provisions, other than provisions for employee beneﬁ ts, are set out below: Balance at the beginning of the ﬁ nancial year Additional provisions made in the period, including increases to existing provisions Unused amounts reversed during the period Balance at the end of the ﬁ nancial year Consolidated 2022 $’000 19,930 690 20,620 2021 $’000 17,125 – 17,125 Consolidated 2022 $’000 3,010 1,844 4,854 2021 $’000 2,715 2,831 5,546 Consolidated 2022 $’000 2,831 – (297) 2,534 2021 $’000 2,047 805 (21) 2,831 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 sacriﬁ ce of economic beneﬁ ts 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 outﬂ ow 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 outﬂ ow with respect to any one item included in the same class of obligations may be small. 2022 Annual Report Notes to the Consolidated Financial Statements | 73 Notes to the Consolidated Financial Statements For the year ended 30 June 2022 12. Receivables, Payables, Deferred Income and Provisions (continued) 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 reﬂ ects current market estimates of the time value of money and the risks speciﬁ c 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 Consolidated 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 beneﬁ ts 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 ﬂ ows. Onerous Contracts A provision for onerous contracts is recognised when the expected beneﬁ ts 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 fulﬁ lling the contract and any compensation or penalties arising from the failure to fulﬁ l it. Lease Provisions The provision comprises of the 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 ﬂ ows and the timing of those cash ﬂ ows. Capital Management 13. Capital Management Objectives The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide appropriate returns for shareholders and beneﬁ ts 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 leverage is now below 1.0 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 ﬁ nancial year Net Proﬁ t After Tax. 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. Further details on the Group’s dividends are outlined in note 14. Share buy-back On 24 March 2022 the Group announced its intention to conduct an on-market share buy-back of up to $40 million over the 12-month period from 8 April 2022 to 7 April 2023. As of 30 June 2022, the Group had bought back 3,366,234 shares for $5.5 million. Debt Facilities Syndicated Debt Facility During the year, the Group successfully renegotiated its Syndicated Facility Agreement (‘SFA’), which was used to repay the existing drawn debt of $128 million on 10 January 2022. At 30 June 2022 the Group had a $250 million (2021: $250 million) revolving four year (2021: three year) facility expiring on 9 January 2026. 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. 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, however the covenant subsequently reverted to 3.5 times. As at 30 June 2022, the leverage ratio was 0.95 times, and the interest cover ratio was 23.45 times. Further details on the Group’s debt facilities are outlined in note 17. Property, Plant and Equipment and Intangibles The capital expenditure for 2022 was $20.6 million (2021: $13.8 million). Further details on the Group’s ﬁ xed assets are outlined in note 8. 74 | Notes to the Consolidated Financial Statements Southern Cross Austereo 14. Dividends Paid and Proposed The dividends were paid as follows: Interim dividend paid for the half year ended 31 December 2021/2020 – fully franked at the tax rate of 30% Final dividend paid for the year ended 30 June 2021/2020 – fully franked at the tax rate of 30% Dividends paid in cash or satisﬁ ed by the issue of shares under the dividend reinvestment plan were as follows: Paid in cash Interim dividend paid for the half year ended 31 December 2021/2020 Final dividend paid for the year ended 30 June 2021/2020 Consolidated 2022 $’000 2021 $’000 11,890 13,210 25,100 25,100 25,100 – – – – – Cents per share Cents per share 4.50 5.00 9.50 – – – The Group has $180.1 million of franking credits at 30 June 2022 (2021: $170.5 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 ﬁ nancial year but not distributed at the end of the reporting period. Since the end of the ﬁ nancial year the Directors have declared the payment of a ﬁ nal 2022 ordinary dividend of $12.35 million (4.75 cents per fully paid share) out of ‘Retained Proﬁ ts – 2019 reserve’. This dividend will be paid on 4 October 2022. 15. Earnings per Share Continuing Operations Proﬁ t attributable to shareholders from continuing operations ($’000) Proﬁ t attributable to shareholders from continuing operations excluding signiﬁ cant 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 signiﬁ cant items (refer note 4) Basic earnings per share excluding signiﬁ cant items (cents per share) Diluted earnings per share excluding signiﬁ cant items (cents per share) Dividends paid/proposed for the year as a % of NPAT Consolidated 2022 $’000 (153,722) 28,554 2021 $’000 48,096 48,096 263,681 264,214 265,200 (58.3) (58.3) 10.82 10.77 85.0% 264,922 18.20 18.15 18.20 18.15 27.5% During the prior year the Group announced completion of the one for 10 share consolidation which was approved by shareholders at the AGM on 30 October 2020. On 24 March 2022 the Group announced its intention to conduct an on-market share buy-back of up to $40 million over the 12-month period from 8 April 2022 to 7 April 2023. As of 30 June 2022, the Group had bought back 3,366,234 shares for $5.5 million. Recognition and Measurement Basic earnings per share Basic earnings per share is calculated by dividing the proﬁ t 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 ﬁ nancial year. Diluted earnings per share Diluted earnings per share adjusts the ﬁ gures used in the determination of basic earnings per share to take into account the after income tax eff ect of interest and other ﬁ nancing 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. 2022 Annual Report Notes to the Consolidated Financial Statements | 75 Notes to the Consolidated Financial Statements For the year ended 30 June 2022 16. Contributed Equity and Reserves Ordinary shares Contributed equity On issue at the beginning of the ﬁ nancial year Share Issue – Institutional Share Issue – Retail Buy-back of ordinary shares One for 10 share consolidation Contributions of equity, net of transaction costs On issue at the end of the ﬁ nancial year Consolidated 2022 $’000 2021 $’000 1,537,404 1,537,404 1,542,884 1,542,884 Consolidated Consolidated 2022 $’000 1,542,884 – – (5,480) – – 1,537,404 2021 $’000 1,540,569 – – – – 2,315 1,542,884 2022 Number of securities ’000 264,214 – – (3,366) – – 260,848 2021 Number of securities ’000 2,642,106 – – – (2,377,892) – 264,214 During the prior year the Group announced completion of the one for 10 share consolidation which was approved by shareholders at the AGM on 30 October 2020. On 24 March 2022, the Group announced its intention to conduct an on-market share buy-back of up to $40 million. For the period to 30 June, the Group purchased $5.5 million in shares. This was funded from existing cash reserves. The on-market share buy-back will continue into FY23 and will be funded by existing cash reserves and debt facilities. Ordinary shares in Southern Cross Media Group Limited Ordinary shares entitle the holder to participate in distributions and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands, each shareholder present in person and each other person present as a proxy has one vote and upon a poll, each share is entitled to one vote. Ordinary shares have no par value, and the Company does not have a limited amount of authorised capital. Employee share entitlements The Group operates an LTI plan for its senior executives. Information relating to the employee share entitlements, including details of shares issued under the scheme, is set out in the Remuneration Report. Nature and purpose of reserves a) Share-based payments reserve The share-based payments reserve is used to recognise the fair value of future potential shares to be issued to employees for no consideration in respect of performance rights off ered under the Long-term Incentive Plan. During the year no performance rights vested (2021: nil). In the current year $532,887 has been recognised as an expense (2021: $228,186 expense) in the Consolidated Statement of Comprehensive Income as the fair value of potential shares to be issued. b) Hedge reserve The hedge reserve is used to record gains or losses on a hedging instrument in a cash ﬂ ow hedge that are recognised in Other comprehensive income. Amounts are reclassiﬁ ed to the Statement of Comprehensive Income when the associated hedged transaction aff ects proﬁ t or loss. c) Reverse Acquisition Reserve As described in note 1, the Group transferred the reverse acquisition reserve of $77.406 million in connection with the IPO of the Group, into Accumulated losses eff ective 30 June 2022. 76 | Notes to the Consolidated Financial Statements Southern Cross Austereo 17. Borrowings a) Total 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 2022 $’000 2021 $’000 128,000 (1,057) 126,943 126,943 128,000 (775) 127,225 127,225 For all non-current borrowings, the carrying amount approximates fair value in the Consolidated Statement of Financial Position. Of the $1.057 million of borrowing costs, $0.300 million (2021: $0.508 million) will unwind during the year ending 30 June 2023. There are no current liabilities as at 30 June 2022. b) Interest expense Interest expense and other borrowing costs External banks Termination of swaps 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 2022 $’000 3,664 – 5,331 6,271 953 16,219 2021 $’000 9,199 1,177 5,429 6,874 522 23,201 c) Bank facilities and assets pledged as security The $250 million debt facilities (2021: $250 million) of the Banking Group are secured by a ﬁ xed and ﬂ oating 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 9 January 2026 and has an average variable interest rate of 3.31% (2021: 1.28%). The facility is denominated in Australian dollars. There are certain ﬁ nancial and non-ﬁ nancial 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 beneﬁ t of the ultimate parent entity, Southern Cross Media Group Limited. Covenant testing dates fall at 30 June and 31 December each year until the facility maturity date. At 30 June 2022, the Group complied with all the covenants. The carrying amounts of assets pledged as security by Southern Cross Austereo Pty Ltd for current and non-current borrowings are: Current assets Floating charge Cash and cash equivalents Receivables 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 2022 $’000 2021 $’000 49,352 99,175 148,527 75,311 95,577 170,888 11,932 5,107 84,554 708,984 810,577 959,104 12,974 4,271 87,199 947,903 1,052,347 1,223,235 2022 Annual Report Notes to the Consolidated Financial Statements | 77 Notes to the Consolidated Financial Statements For the year ended 30 June 2022 17. Borrowings (continued) c) Bank facilities and assets pledged as security (continued) 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 classiﬁ ed as prepayments. Borrowings are subsequently measured at amortised cost. Any diff erence between the proceeds (net of transaction costs) and the redemption amount is recognised in proﬁ t or loss over the period of the borrowings using the eff ective interest method. Borrowings are classiﬁ ed 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. 18. Financial Risk Management The Group’s activities expose it to a variety of ﬁ nancial risks: market risk (the Group’s main exposure to market risk is interest rate risk), liquidity risk and cash ﬂ ow interest rate risk). The Group’s overall risk management program focuses on the unpredictability of ﬁ nancial markets and seeks to minimise potential adverse eff ects on the ﬁ nancial performance of the Group. The Group uses derivative ﬁ nancial 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 ﬁ nancial 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 ﬁ nancial risk management process to be adopted by management. Speciﬁ c ﬁ nancial risks that have been identiﬁ ed by the Group are interest rate risk and liquidity risk. a) Interest rate risk Nature of interest rate risk Interest rate risk is the Group’s exposure to the risk that interest rates move in a way that adversely aff ects 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 ﬂ ow risk. Interest rate risk management Whilst there is no formal policy in place mandating hedging levels, it is considered by the Board regularly and SCA has historically hedged the interest rate risk by taking out ﬂ oating to ﬁ xed rate swaps on the majority of its drawn debt. Such interest rate swaps have the economic eff ect of converting borrowings from variable rates to ﬁ xed rates. Generally, the Group raises long-term borrowings at variable rates and swaps them into ﬁ xed rates that are lower than those available if the Group borrowed at ﬁ xed rates directly. Under the interest rate swaps, the Group agrees with other parties to exchange, at speciﬁ ed intervals (quarterly), the diff erence between ﬁ xed 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 3.31% (2021: 1.29%). 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 ﬁ xed rates starting in January 2018 at an average ﬁ xed rate of 2.43%. These interest rate swap contracts expired 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 ﬁ xed rates starting in January 2018 at an average ﬁ xed rate of 2.25%. On 8 April 2021, the Group terminated $72 million of these swaps at a cost of $1.178 million. The remaining $28 million interest rate swap contracts expired 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 ﬁ xed rates starting in January 2021 at an average ﬁ xed 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 ﬂ ow hedges is disclosed in note 27. Derivative ﬁ nancial instruments Interest rate swap contracts – current asset Interest rate swap contracts – current liability Interest rate swap contracts – non-current liability Total derivative ﬁ nancial instruments Consolidated 2022 $’000 787 – – 787 2021 $’000 – (319) (1,262) (1,581) Swaps currently in place cover 78% (2021 – 100%) of the variable loan principal outstanding. The ﬁ xed interest rates of the swaps is 1.0% (2021 – range between 1.0% and 2.3%) and the variable rates on the loans are 1.30% (2021 – 1.20%) above the three months bank bill rate, which at the end of the reporting period was 2.0% (2021 – 0.1%). The swap contracts require settlement of net interest receivable or payable every three months. The settlement dates coincide with the dates on which interest is payable on the underlying debt. 78 | Notes to the Consolidated Financial Statements Southern Cross Austereo 18. Financial Risk Management (continued) a) Interest rate risk (continued) Eff ects of hedge accounting on the ﬁ nancial position and performance The eff ects of the interest rate swaps on the Group’s ﬁ nancial position and performance are as follows: Carrying amount asset/(liability) Notional Maturity date 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 eff ectiveness Weighted average hedged rate for the year Consolidated 2022 $’000 787 100,000 – 100,000 1:1 1,168 (1,168) 1.20% 2021 $’000 (1,581) 128,000 28,000 100,000 1:1 (311) 311 2.09% Hedging reserve The Group’s hedging reserve disclosed in the Statement of Changes in Equity relates to the following hedging instruments: Opening balance 1 July 2020 Add: Change in fair value of hedging instrument recognised in OCI for the year Less: reclassiﬁ ed from OCI to proﬁ t or loss Less: Deferred tax Closing balance 30 June 2021 Add: Change in fair value of hedging instrument recognised in OCI for the year Less: reclassiﬁ ed from OCI to proﬁ t or loss Less: Deferred tax Closing balance 30 June 2022 Hedge Reserve for Interest rate swaps $’000 (4,886) (311) 5,713 (1,621) (1,105) 1,168 1,200 (710) 553 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 ﬂ ow 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 (2021: +/- 25 basis points) in the relevant interest rates at 30 June 2022 for ﬁ nancial assets and liabilities denominated in Australian Dollars (‘AUD’). The following table illustrates the impact on proﬁ t or loss with no impact directly on equity for the Group. Consolidated AUD exposures 2022 Cash at bank Interest rate swaps Borrowings 2021 Cash at bank Interest rate swaps Borrowings Carrying Value $’000 49,462 787 (128,000) 75,420 (1,581) (128,000) Impact on post–tax proﬁ ts Increase/(decrease) +/– 25 basis points Impact on reserves Increase/(decrease) +/– 25 basis points $’000 $’000 $’000 $’000 +25 87 92 (224) +25 132 201 (224) –25 (87) (92) 224 –25 (132) (201) 224 +25 – 125 – +25 – 414 – –25 – (125) – –25 – (416) – 2022 Annual Report Notes to the Consolidated Financial Statements | 79 Notes to the Consolidated Financial Statements For the year ended 30 June 2022 18. Financial Risk Management (continued) b) Liquidity risk Nature of liquidity risk Liquidity risk is the risk of an entity encountering diffi culty in meeting obligations associated with ﬁ nancial liabilities. Liquidity risk management Prudent liquidity risk management implies maintaining suffi cient 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 outﬂ ows and exposure to connected parties. Exposure and sensitivity Financing arrangements Unrestricted access was available at balance date to the following lines of credit: Consolidated As at 30 June 2022 Line of credit value Used at balance date Unused at balance date Consolidated As at 30 June 2021 Line of credit value Used at balance date Unused at balance date Bank facilities $’000 Working capital facility $’000 250,000 (128,000) 122,000 7,000 (6,109) 891 Bank facilities $’000 Working capital facility $’000 250,000 (128,000) 122,000 7,000 (6,088) 912 Total facilities $’000 257,000 (134,109) 122,891 Total facilities $’000 257,000 (134,088) 122,912 The $250 million debt facility for the Group matures on 9 January 2026. The Group’s bank facilities are denominated in Australian dollars as at 30 June 2022 and 30 June 2021. Undiscounted future cash ﬂ ows The tables below summarise the maturity proﬁ le of the ﬁ nancial 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 2022 Borrowings – Principal Interest cash ﬂ ows1 Payables3 Lease liabilities Total Consolidated As at 30 June 2021 Borrowings – Principal Interest cash ﬂ ows1 Derivative ﬁ nancial instruments2 Payables3 Lease liabilities Total Less than 1 year $’000 – 3,312 45,473 12,143 60,928 Less than 1 year $’000 – 3,689 456 53,897 13,873 71,915 – 4,519 – 11,933 16,452 1-2 years $’000 128,000 1,686 1,478 – 11,297 142,461 Greater than 5 years $’000 Total contractual cash ﬂ ows $’000 1-2 years $’000 2-3 years $’000 3-5 years $’000 128,000 2,371 – 23,136 153,507 – 4,507 – 11,042 15,549 – – – 125,004 125,004 2-3 years $’000 3-5 years $’000 Greater than 5 years $’000 – – – – 10,718 10,718 – – – – 20,717 20,717 – – – – 110,981 110,981 Carrying amount liabilities $’000 128,000 N/A 48,930 126,819 303,749 Carrying amount liabilities $’000 128,000 N/A 1,581 56,884 112,969 299,434 128,000 14,709 45,473 183,258 371,440 Total contractual cash ﬂ ow $’000 128,000 5,375 1,934 53,897 167,586 356,792 1 Calculated using a weighted average variable interest rate. Interest cash ﬂ ows includes interest on principal borrowings, swap interest and the commitment fee on the Syndicated Facility Agreement. 2 The fair value of ﬁ nancial 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 ﬂ ows and are included in level 2 under derivative ﬁ nancial instruments. The total fair value of derivatives used for hedging is an asset of $0.787 million (2021: $1.581 million liability). 3 The payables balance excludes interest payable as the cash ﬂ ows are included in ‘Interest cash ﬂ ows’ above and excludes GST payable as this is not a ﬁ nancial liability. 80 | Notes to the Consolidated Financial Statements Southern Cross Austereo Group Structure 19. Non-Current Assets – Investments a) Investments accounted for using the Equity Method Carrying amount at the beginning of the ﬁ nancial year Share of proﬁ t after income tax Dividends Total Investments accounted for using the Equity Method b) Financial assets at fair value through proﬁ t or loss Carrying amount at the beginning of the ﬁ nancial year Acquisition of unlisted equity securities Impairment of unlisted equity securities Total Financial assets at fair value through proﬁ t or loss Total Investments Consolidated 2022 $’000 5,091 761 (640) 5,212 2021 $’000 4,945 706 (560) 5,091 Consolidated 2022 $’000 878 1,173 (798) 1,253 6,465 2021 $’000 378 500 – 878 5,969 20. Subsidiaries The consolidated ﬁ nancial statements incorporate the assets, liabilities and results of the following subsidiaries: Name of entity SCM No 1 Pty 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 Eff ective ownership interest 2022 Eff ective ownership interest 2021 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 ﬁ nancial 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 eff ect 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 ﬁ nancial year, its results are included in the Consolidated Statement of Comprehensive Income from the date on which control commences. Where control of an entity ceases during a ﬁ nancial year, its results are included for that part of the year during which control existed. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Non-controlling interests in the results and equity of subsidiaries are shown separately in the Consolidated Statement of Comprehensive Income and Statement of Financial Position respectively. 2022 Annual Report Notes to the Consolidated Financial Statements | 81 Notes to the Consolidated Financial Statements For the year ended 30 June 2022 21. Parent Entity Financial Information a) Summary ﬁ nancial 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 Accumulated losses – 2015 H2 reserve Retained proﬁ ts – 2016 reserve Retained proﬁ ts – 2017 reserve Retained proﬁ ts – 2018 reserve Retained proﬁ ts – 2019 reserve Retained proﬁ ts – 2020 reserve Accumulated losses – 2021 reserve Accumulated losses – 2022 reserve Total equity Loss for the year Total comprehensive income Southern Cross Media Group Limited 2022 $’000 1,882 460,258 462,140 1,733 1,733 460,407 1,439,815 5,198 (96,805) (323,833) – – – 59,690 55,054 (355,442) (323,270) 460,407 (311,379) (311,379) 2021 $’000 3,218 806,137 809,355 7,520 7,520 801,835 1,445,295 4,665 (96,805) (323,833) 4,996 2,534 1,943 63,428 55,054 (355,442) – 801,835 (355,442) (355,442) In FY2022, the parent entity recorded an impairment of $355.8 million (FY2021: $345.0 million) due to a reduction in the recoverable amount of the investment in a subsidiary determined using fair value less costs of disposal. b) Guarantees entered into by the parent entity The parent entity has not provided any ﬁ nancial guarantees in respect of bank overdrafts and loans of subsidiaries as at 30 June 2022 (2021: nil). The parent entity has not given any unsecured guarantees at 30 June 2022 (2021: nil). c) Contingent liabilities of the parent entity The parent entity did not have any contingent liabilities as at 30 June 2022 (30 June 2021: nil). d) Contractual commitments for the acquisition of property, plant or equipment As at 30 June 2022, the parent entity had no contractual commitments (30 June 2021: nil). Recognition and Measurement Parent entity ﬁ nancial information The ﬁ nancial information for the parent entity has been prepared on the same basis as the consolidated ﬁ nancial statements, except as set out on the following page. i) Investments in subsidiaries, associates and joint venture entities Investments in subsidiaries are accounted for at cost in the ﬁ nancial 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 reﬂ ected 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 | Notes to the Consolidated Financial Statements Southern Cross Austereo Other Notes to the Financial Statements 22. Share-Based Payments The Company operates a long-term incentive plan for Executive KMP and certain senior executives. The share-based payment expense for the year ended 30 June 2022 was $532,887 (2021: $228,186). 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 One for 10 share consolidation Exercised during the year Forfeited during the year Balance at end of year 2022 427,861 – – – (24,809) 403,052 2021 – 4,278,492 (3,850,631) – – 427,861 Recognition and Measurement Share-based compensation beneﬁ ts 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 provided is recognised as an employee beneﬁ t 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. To the extent the FY2022 Executive Incentive Plan (‘EIP’) performance conditions are satisﬁ ed during FY2022, the Company will award performance rights in FY2023, however the one-year performance period started on 1 July 2022 and the fair value of the related share-based compensation will be recognised as an expense over the three- year period from that date to the end of the service period on 30 June 2025 when the performance rights will be eligible for vesting and conversion to fully paid ordinary shares. The fair value and number of the performance rights relating to the FY2022 EIP will be remeasured on the grant date of the performance rights. The fair value of the share-based compensation provided during FY2022 was determined using a Black-Scholes-Merton model for the Absolute Total Shareholder Return performance rights, with the following inputs: Valuation date Valuation date share price Fair value at grant date Exercise price Dividend yield Risk free interest rate Expected volatility 30 June 2022 $0.99 $0.99 Nil 0.00% 3.365% 51.001% The fair value at grant date of the securities granted is adjusted to reﬂ ect any market vesting conditions but excludes the impact of any non- market vesting conditions (for example, proﬁ tability 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 beneﬁ t expense recognised each period takes into account the most recent estimate. The impact of the revision to original estimates, if any, is recognised in proﬁ t or loss with a corresponding adjustment to equity. Where the terms of the share-based payment entitlement are modiﬁ ed in the favour of the employee, the changes are reﬂ ected when determining the impact on proﬁ t or loss. 2022 Annual Report Notes to the Consolidated Financial Statements | 83 Notes to the Consolidated Financial Statements For the year ended 30 June 2022 23. Remuneration of Auditors a) Audit and other assurance services PricewaterhouseCoopers Australian ﬁ rm: Statutory audit and review of ﬁ nancial reports Other assurance services Regulatory returns Total remuneration for audit and other assurance services b) Taxation services PricewaterhouseCoopers Australian ﬁ rm: Tax services Total remuneration for taxation services c) Other services PricewaterhouseCoopers Australian ﬁ rm: Debt advisory Other Total remuneration for other services Total Consolidated 2022 $ 2021 $ 758,462 – 18,200 776,662 734,155 10,000 27,455 771,610 – – – – 150,000 – 150,000 926,662 15,000 58,100 73,100 844,710 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 satisﬁ ed 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 satisﬁ ed 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. 24. Related Party Disclosures Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below. a) KMP During the year, no KMP of the Company or the Group has received or become entitled to receive any beneﬁ t because of a contract made by the Group with a KMP or with a ﬁ rm 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 ﬁ nancial report. The aggregate compensation of KMP of the Group is set out below: Short-term employee beneﬁ ts Post-employment beneﬁ ts Other long-term beneﬁ ts Share-based payments Consolidated 2022 $ 4,751,763 162,009 67,550 320,770 5,302,092 2021 $ 6,348,915 207,441 91,614 159,468 6,807,438 Note: Changes to KMP during the year can be found in the Remuneration Report. The number of ordinary shares in the Company held during the ﬁ nancial 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 (2021: nil). b) Subsidiaries and Associates Ownership interests in subsidiaries are set out in note 20. Details of interests in associates and distributions received from associates are disclosed in note 19. 84 | Notes to the Consolidated Financial Statements Southern Cross Austereo 25. Leases and Other Commitments Capital commitments Commitments for the acquisition of plant and equipment contracted for at the reporting date but not recognised as liabilities are payable as follows: Within one year Consolidated 2022 $’000 2021 $’000 2,400 2,400 467 467 Leases From 1 July 2019, the Group recognised right-of-use assets for these leases, except for short-term and low value leases. The Group leases various premises, IT equipment and vehicles. Premises typically have initial rental periods of ﬁ ve 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. Lease terms are negotiated on an individual basis and contain a wide range of diff erent terms and conditions. Extension options are included in a number of property leases across the Group, which provide ﬂ exibility 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 and termination options have been included in all property leases across the Group except those that are surplus to the Group’s operational requirements. The Group sub-leases buildings under an operating lease and rent revenue is recorded as income in the proﬁ t or loss on a straight-line basis. As with all property leases in its portfolio, the Group assumes that extension options in leases will be exercised and therefore included in the calculations for the lease liability and ROU asset. On 5 May 2021 the Group signed a lease for its Melbourne operations. A further 11 property leases were renegotiated during the year resulting in a total net lease liability and ROU remeasurements of $0.2 million and gain on lease disposal of $0.1 million. a) Amounts Recognised in the Consolidated Statement of Comprehensive Income The Consolidated Statement of Comprehensive income shows the following amounts relating to leases: Depreciation charge of right-of-use assets Premises IT equipment Vehicles Interest expense on lease liabilities b) Amounts Recognised in the Consolidated Statement of Financial Position The Consolidated Statement of Financial Position includes the following amounts relating to leases: Lease liabilities as at 30 June 2022: Lease Liabilities Current Non-Current Total lease liabilities The associated right-of-use assets as at 30 June 2022 by asset class: Premises IT Equipment Vehicles Total right-of-use assets 2022 $’000 7,978 1,509 363 9,850 6,271 2022 $’000 6,497 120,322 126,819 2022 $’000 107,034 3,275 450 110,759 2021 $’000 9,924 1,471 217 11,612 6,874 2021 $’000 9,868 103,101 112,969 2021 $’000 94,673 3,428 588 98,689 2022 Annual Report Notes to the Consolidated Financial Statements | 85 Notes to the Consolidated Financial Statements For the year ended 30 June 2022 Hedge accounting The Group designated interest rates swaps as cash ﬂ ow 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 eff ective in off setting changes in cash ﬂ ows of hedged items. The fair values of derivative ﬁ nancial 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 classiﬁ ed as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classiﬁ ed as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Derivatives Hedge ineff ectiveness Hedge eff ectiveness is determined at the inception of the hedge relationship, and through periodic prospective eff ectiveness 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 hedges up to 100% of its loans, and the hedged item is identiﬁ ed 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% eff ective. The Group therefore performs a qualitative assessment of eff ectiveness. If changes in circumstances aff ect 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 eff ectiveness. Hedge ineff ectiveness may occur due to: – the credit value/debit value adjustment on the interest rate swaps which is not matched by the loan; and – diff erences in critical terms between the interest rate swaps and loans. There was no ineff ectiveness during 2022 or 2021 in relation to the interest rate swaps. 25. Leases and Other Commitments (continued) At 30 June 2022, the total cash outﬂ ow for leases was $14.3 million (2021: $13.4 million) and additions to the right-of-use asset was $21.6 million (2021: $2.1 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. 26. Events Occurring after Balance Date SCA has completed a strategic review of SCA’s television assets and concluded that value will be maximised by continuing to hold the television assets. SCA received multiple bids for the asset but concluded that greater value would be realised for shareholders by retaining the asset and the earnings that it derives. The review was supported by SCA’s ﬁ nancial adviser, Grant Samuel. There are no other matters or circumstances that have arisen since the end of the ﬁ nancial year that have signiﬁ cantly aff ected, or may signiﬁ cantly aff ect, the operations, results of operations or state of aff airs of the Group in subsequent accounting periods. 27. Other Accounting Policies Deﬁ ned contribution scheme The Group operates a deﬁ ned contribution scheme. The deﬁ ned contribution scheme comprises ﬁ xed contributions made by the Group with the Group’s legal or constructive obligation being limited to these contributions. Contributions to the deﬁ ned 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 deﬁ ned contribution plan expense for the year was $15.6 million (2021: $13.5 million) and is included in employee expenses. Derivative ﬁ nancial instruments The Group enters into interest rate swap agreements to manage its ﬁ nancial 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 ﬁ nancial 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 proﬁ t or loss. If the derivative ﬁ nancial 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 ﬁ rm commitment (fair value hedge); or (2) hedges of highly probable forecast transactions (cash ﬂ ow hedge). The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessments, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly eff ective in off setting changes in fair values or cash ﬂ ows 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 ﬂ ows. 86 | Notes to the Consolidated Financial Statements Southern Cross Austereo 27. Other Accounting Policies (continued) Cash ﬂ ow hedge The eff ective portion of changes in the fair value of derivatives that are designated and qualify as cash ﬂ ow hedges is recognised in other comprehensive income and accumulated in reserves in equity. The gain or loss relating to the ineff ective portion is recognised immediately in the Statement of Comprehensive Income. Amounts accumulated in equity are reclassiﬁ ed to proﬁ t or loss in the periods when the hedged item aff ects proﬁ t or loss (for instance when the forecast sale that is hedged takes place). The gain or loss relating to the eff ective portion of interest rate swaps hedging variable rate borrowings is recognised in proﬁ t 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 proﬁ t or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately reclassiﬁ ed to proﬁ t or loss. Fair value estimation The fair value of ﬁ nancial assets and ﬁ nancial 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 ﬁ nancial 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 ﬂ ows, are used to determine fair value for the remaining ﬁ nancial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash ﬂ ows. The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of ﬁ nancial liabilities for disclosure purposes is estimated by discounting the future contractual cash ﬂ ows at the current market interest rate that is available to the Group for similar ﬁ nancial instruments. New accounting standards and interpretations The year-end ﬁ nancial statements have been prepared on a basis of accounting policies consistent with those applied in the 30 June 2021 ﬁ nancial statements. The Group adopted certain accounting standards, amendments, and interpretations during the ﬁ nancial year, which did not result in changes in accounting policies nor an adjustment to the amounts recognised in the ﬁ nancial statements. They also do not signiﬁ cantly aff ect the disclosures in the Notes to the ﬁ nancial statements. 2022 Annual Report Notes to the Consolidated Financial Statements | 87 Directors’ Declaration The Directors of the Company declare that: 1. in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2. in the Directors’ opinion, the ﬁ nancial statements and notes as set out on pages 54 to 87 are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the ﬁ nancial 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) conﬁ rms that the ﬁ nancial 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 22 August 2022 Grant Blackley Managing Director Sydney, Australia 22 August 2022 88 | Directors’ Declaration Southern Cross Austereo Independent Auditor’s Report to the members of Southern Cross Media Group Limited Independent auditor’s report To the members of Southern Cross Media Group Limited Report on the audit of the financial report Our opinion In our opinion: The accompanying financial report of Southern Cross Media Group Limited (the Company) and its controlled entities (together the Group) 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 2022 and of its financial performance for the year then ended (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. What we have audited The Group financial report comprises: (cid:3511) (cid:3511) (cid:3511) (cid:3511) (cid:3511) (cid:3511) the consolidated statement of financial position as at 30 June 2022 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 significant accounting policies and other explanatory information the directors’ declaration. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. PricewaterhouseCoopers, ABN 52 780 433 757 2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999 Liability limited by a scheme approved under Professional Standards Legislation. 2022 Annual Report Independent Auditor’s Report | 89 Independent Auditor’s Report to the members of Southern Cross Media Group Limited Our audit approach An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and the industry in which it operates. Materiality (cid:3511) For the purpose of our audit we used overall Group materiality of $1.8 million, which represents approximately 5% of the Group’s profit before tax adjusted to exclude the impairment of intangible assets. (cid:3511) 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. (cid:3511) We chose Group profit before tax adjusted because, in our view, it is the benchmark against which the performance of the Group is most commonly measured. We adjusted to exclude the impairment of intangible assets as it is an unusual and infrequently occurring item impacting profit or loss. (cid:3511) We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds. Audit Scope (cid:3511) Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context. We communicated the key audit matters to the Audit and Risk Committee. 90 | Independent Auditor’s Report Southern Cross Austereo Key audit matter How our audit addressed the key audit matter Impairment assessment for licences, tradenames, brands and goodwill (refer to note 10) In performing our audit work we considered, amongst other things: The Group continues to have significant indefinite lived intangible assets in the Audio cash generating unit (CGU), totalling $696.1 million as at 30 June 2022. These are subject to an annual impairment assessment by the Group. During the year, the Group recognised an impairment charge of $250.9 million in relation to goodwill and indefinite lived intangible assets. This was a key 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. As described in note 10, there is an inherent level of uncertainty around the key assumptions that are used in the impairment assessment, which includes making assumptions about internal and external factors such as industry growth rates, future market share and the forecast financial performance of the Group. (cid:3511) whether the Group’s identification of CGUs remains appropriate (cid:3511) (cid:3511) the market capitalisation of the Group in comparison to the carrying value of its net assets the appropriateness of adopting a fair value less costs of disposal methodology for estimating the Audio CGU’s recoverable amount. 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: (cid:3511) (cid:3511) (cid:3511) (cid:3511) (cid:3511) performed mathematical accuracy checks assessed the appropriateness of the discount rate incorporated in the model in consideration of the forecasted cash flows assessed the appropriateness of the key assumptions within the model compared to observable market information where available, and considered management’s ability to carry out courses of action evaluated the Group’s historical ability to forecast future cash flows by comparing forecast cash flows with reported actual performance considered whether the model’s allocation of corporate costs between CGUs was appropriate and reflective of actual costs incurred 2022 Annual Report Independent Auditor’s Report | 91 Independent Auditor’s Report to the members of Southern Cross Media Group Limited Key audit matter How our audit addressed the key audit matter (cid:3511) (cid:3511) assessed the sensitivity of changes in key assumptions incorporated in the model compared the Group’s valuations to external data sources including broker reports. We evaluated the adequacy of the disclosures in note 10 in light of the requirements of Australian Accounting Standards. Indefinite lived classification of intangible assets (refer to note 9) In assessing the indefinite useful life of intangible assets, we performed the following procedures, amongst others: As at 30 June 2022, the Group has Audio intangible assets totalling $696.1 million, including Radio Broadcasting Licences, Brands and Tradenames classified as indefinite lived intangible assets. This was a key audit matter because determination of whether or not intangible assets are indefinite lived involves judgement. The determination has an impact on the financial report as it affects whether amortisation is recorded in the consolidated statement of comprehensive income. (cid:3511) (cid:3511) (cid:3511) (cid:3511) (cid:3511) considered regulatory developments in the year which could change the licence renewal process or use of the brands assessed whether there had been any revocation of radio licences by Australian Communications and Media Authority (ACMA) in the year considered the forecasted growth of the associated cash flows of the assets evaluated the directors’ strategic plans for the intended use of the assets benchmarked the conclusion made by the directors against a selection of similar assets held by other industry participants in the radio broadcasting market. We considered the adequacy of the significant accounting policy disclosed in note 9 with regard to Australian Accounting Standards. 92 | Independent Auditor’s Report Southern Cross Austereo 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 2022, 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. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: 2022 Annual Report Independent Auditor’s Report | 93 Independent Auditor’s Report to the members of Southern Cross Media Group Limited https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our auditor's report. Report on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in pages 3(cid:23) to (cid:24)(cid:21) of the directors’ report for the year ended 30 June 2022. In our opinion, the remuneration report of Southern Cross Media Group Limited for the year ended 30 June 2022 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. PricewaterhouseCoopers Trevor Johnston Partner Melbourne 22 August 2022 94 | Independent Auditor’s Report Southern Cross Austereo Additional Information The information below is provided pursuant to ASX Listing Rule 4.10 and was current on 18 August 2022. The Company has only one class of shares, which are 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. The Company is conducting an on-market buy-back which commenced on 7 April 2022. Twenty largest holders The names of the 20 largest holders of the Company’s quoted equity securities are listed below. Name Citicorp Nominees Pty Limited HSBC Custody Nominees (Australia) Limited J P Morgan Nominees Australia Limited National Nominees Limited BNP Paribas Noms Pty Ltd (DRP) Citicorp Nominees Pty Limited (Colonial First State Inv A/C) HSBC Custody Nominees (Australia) Limited (NT Cwlth Super Corp A/c) John William Harbot BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd (DRP A/c) Bradley Barry Krause BNP Paribas Noms (NZ) Ltd (DRP) Wearne Webber Capital Pty Limited Birbal Investments Pty Ltd Talmal Pty Ltd (Talmal A/c) Netyard Pty Ltd Sling Super Pty Ltd (Sling Super Fund A/c) Sandhurst Trustees Ltd (SISF A/C) Netwealth Investments Limited (Wrap Services A/c) Rahmon Coupe and Julia Coupe (Coupe Family A/c) Offi cial Intelligence Pty Ltd Distribution of shareholdings Analysis of numbers of equity security holders by size of holding: Range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Holding less than a marketable parcel Fully paid ordinary shares % Issued capital 63,432,931 61,190,475 46,260,950 14,894,813 4,692,089 2,899,387 2,702,012 1,600,000 1,315,103 1,188,408 1,143,202 1,000,000 750,000 550,000 540,000 465,000 409,000 367,919 351,125 328,354 206,080.768 24.32 23.46 17.73 5.71 1.80 1.11 1.04 0.61 0.50 0.46 0.44 0.38 0.29 0.21 0.21 0.18 0.16 0.14 0.13 0.13 79.00 Number of shareholders Fully paid ordinary shares % Issued capital 5,512 3,625 1,029 1,039 73 11,278 3,100 2,432,339 8,996,678 7,731,816 27,283,952 214,403,008 260,847,793 710,020 0.93 3.45 2.96 10.46 82.19 100.00 0.27 2022 Annual Report Additional Information | 95 Additional Information Substantial holders Substantial holders in the Company (with holdings as notiﬁ ed to the Company most recently before 18 August 2022) are set out below: Name Allan Gray Australia Pty Ltd and its related bodies corporate* Ubique Asset Management Pty Limited Investors Mutual Ltd and its related bodies corporate Retail Employees Superannuation Pty Limited Dimension Fund Advisors LP and related entities* Fully paid ordinary shares % Issued capital 35,829,504 14,203,190 23,706,976 19.36 13.56 5.38 8.97 5.00 52.29 * The most recent notices given by these holders pre-dated one or both of the Company’s equity raising (comprising a placement and entitlements off er) in April 2020 and the one for 10 consolidation of share capital in November 2020. Percentage interests held by these holders shown in the above table are based on the most recent notices given by these holders. It is not meaningful to state the number of shares held by these holders on the date of their most recent notices because of the changes in the Company’s capital structure since the date of those notices. Voluntary escrow Securities subject to voluntary escrow are set out below: Type Voluntary escrow Date escrow period ends Fully paid ordinary shares N/a – – On-market purchases for employee incentive plans During the year ended 30 June 2022, the Company purchased the following shares on-market for allocation to employees under the Company’s executive incentive plans: Type Short-term incentive plan Long-term incentive plan Executive incentive plan Fully paid ordinary shares Average price 135,356 – – 135,356 2.0849 – – 2.0849 96 | Additional Information Southern Cross Austereo Corporate Directory Southern Cross Media Group Limited ABN 91 116 024 536 Company Secretary Mr Tony Hudson Registered offi ce Level 2, 101 Moray Street South Melbourne VIC 3205 Tel: +61 3 9252 1019 Web: https://www.southerncrossaustereo.com.au Share registry Computershare Investor Services Pty Limited Yarra Falls 452 Johnston Street Abbotsford VIC 3067 Tel: 1300 555 159 (within Australia) +61 3 9415 4062 (from outside Australia) Investor Centre: https://www-au.computershare.com/investor/ ecoStar+ is an environmentally responsible paper. The ﬁ bre source is FSC® Recycled certiﬁ ed. ecoStar+ is manufactured from 100% post consumer recycled paper in a process chlorine free environment under the ISO 14001 environmental management system. 2022 Annual Report Corporate Directory | 97

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