ANNUAL REPORT 2011 ANNUAL REPORT 2011 SOUTHERN CROSS AUSTEREO Southern Cross Austereo
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SOUTHERN CROSS AUSTEREO SOUTHERN AUSTEREO CROSS ANNUAL REPORT 2011 SOUTHERN ANNUAL REPORT 2011 REPORT ANNUAL CROSS AUSTEREO Southern Cross Austereo Contents One Company United 2 Chairman and CEO’s Report 4 Community 8 Financials 9 Southern Cross Media Group Limited ABN 91 116 024 536 Annual Report 2011 1 SoutHern Cross MEDIA Group LIMIted Welcomes You to THE 2011 Annual Report. THE LAST YEAR WAS ONE OF THE MOST EXCITING IN OUR HISTORY. A YEAR WHERE WE ADDED AUSTRALIA’S BIGGEST AND MOST SUCCESSFUL METROPOLITAN RADIO NETWORK, AUSTEREO, TO AUSTRALIA’S LARGEST REGIONAL RADIO AND TELEVISION NETWORK, SOUTHERN CROSS. IN LAUNCHING SOUTHERN CROSS AUSTEREO WE HAVE CREATED THE MOST UNIQUE AND EXCITING AUSTRALIA-WIDE MULTI-MEDIA COMPANY COVERING APPROXIMATELY 98% OF AUSTRALIA’S POPULATION. SOUTHERN CROSS AUSTEREO NOW INCLUDES 80 COMMERCIAL RADIO SERVICES, 21 COMMERCIAL TELEVISION LICENCES, THE LARGEST HOLDER OF DIGITAL RADIO SPECTRUM AND A SUBSTANTIAL ARRAY OF ON-LINE DIGITAL AND SOCIAL NETWORK OFFERINGS. Southern Cross Austereo 2 ONE COMPANY UNITED Television SoutHern Cross Austereo IS FIrst IN medIA entertaInment solutIons THrougH Brand OFFerIngs sucH as THE TodaY NetWorK, trIple M local WorKS netWorK, soutHern cross TV, soutHern cross ten, DIGItal TV Brands eleVen, one, 7 TWO and 7 mate, THE DIrt and radar radIO. COVERIng 98% MARKet leadIng OF AustralIans Brands Southern Cross Austereo is a leading Australian Southern Cross Austereo is proud to have an broadcasting group with potential audience reach impressive portfolio of market leading brands of over 98% of Australia via its commitment that showcase a diversity of outstanding shows to developing and broadcasting some of the and talent country’s most engaging and exciting content AustralIA-WIde complementarY sales proposITIon content Our newly combined business will deliver Combining complementary content a national advertising sales proposition across national radio, regional free-to-air to advertisers across both regional and television and online platforms metropolitan radio markets Annual Report 2011 3 Radio Digital UNIQue CLIent SYnergIes and OpportunITIes operatIonal ImproVements We are uniquely able to offer advertisers $12 million to $15 million in annual synergies access to national radio, regional free-to-air and operational improvements television and online platforms for integrated advertising campaigns EXpanded Integrated NEW reVenue medIA OFFerIng opportunITIes We have increased earnings through an Revenue opportunities have been identified, expanded integrated media offering. We have such as using a broader programming base increased our exposure to radio markets, to enhance content nationally and delivering and our free-to-air television offer continues enhanced digital and online services and a to benefit from digital multi-channelling broader radio offering to regional audiences Southern Cross Austereo 4 CHAIRMAN AND CEO’S REPORT Dear Shareholders, we have pleasure in providing EBIT margins expanded and finished at 26.6% for you with the Southern Cross Austereo Annual the full year compared with 25.8% for the prior year. Report for the year ended 30 June 2011. The year was one of fluctuating fortunes and The financial year 2011 was one of great market conditions. In the first quarter, the success opportunity, where we emerged from the of the 2010 Masterchef series on Channel Ten, and previous year’s completed initiatives with positive sentiment about economic conditions, more simplified financial structures which resulted in strong growth in both National and Local provided the strength and foundations upon TV markets. Local radio conditions also showed which we acquired Austereo, Australia’s positive signs. After a promising start a number of most successful metropolitan radio network. events subdued growth. The acquisition of Austereo has been Channel Ten ratings became challenging and a transformational for the Group. The combination series of natural disasters in Queensland and areas of Southern Cross Media and Austereo has created of regional NSW and Victoria had a dampening one of Australia’s leading media companies with effect on revenue growth trajectory. a national footprint across both metropolitan and regional radio markets, as well as an integrated Stronger comparative prior periods began to regional television offering. pull back growth rates in the second half of the year. Regional Australia, particularly Queensland, The offer for Austereo was initially announced suffered from poor economic conditions and on 31 January 2011 and went unconditional on sentiment. Channel Ten launched their third 29 March 2011, completing with 100% ownership digital channel, 11, which has been successful. on 17 May 2011. In order to achieve the acquisition Changes to the ONE digital channel have also we had the support of our shareholders via a 6 for 7 been moderately successful. accelerated renounceable entitlement offer raising $471.6 million, as well as the opportunity to welcome Overall radio once again showed resilience and new shareholders to the register during the process. stability in difficult circumstances and produced pleasing revenue growth of 5% year on year. Whilst the acquisition of Austereo provided the major In a challenging year for television ratings the highlight, the operating performance was also very business produced modest yet creditable growth pleasing, with solid revenue growth and improving in television revenue of 1.5% year on year. margins on all lines of the business. A hallmark of the regional business over the years has The regional business produced revenue from been cost management and costs were managed operations of $428.3 million on a proportionately tightly to produce increases in EBIT margins. consolidated basis, up 2.8% from the prior year. AUSTRALIA MEDIA OPERATIONS JUNE 2011 JUNE 2010 Revenue ($m) 502.1 416.7 Expenditure ($m) (343.8) (286.9) EBITDA ($m) 158.3 129.8 EBITDA Margin 31.5% 31.1% EBIT ($m) 136.1 107.7 EBIT Margin 27.1% 25.8% Dividend distribution (cents per share) 10.0 9.7 Annual Report 2011 5 Southern Cross Austereo 6 Annual Report 2011 7 CHAIRMAN AND CEO’S REPORT CONTINUED As commented on earlier, the acquisition of Austereo has added metropolitan commercial radio stations to the portfolio of regional radio stations 502M and a well developed and progressive digital and online multi-media offering adds much needed UNDERLYING breadth to the distribution networks of the business. OPERATING REVENUE UP 20.5% For the period 29 March 2011 to 30 June 2011 the acquired entity produced, on a proportionately consolidated basis, revenue from operations of $74.5 million, EBITDA of $24.6 million and EBIT 158M of $22.1 million. EBIT margins for the three months of ownership finished at 29.7%. UNDERLYING OPERATING EBITDA The metro radio business has performed strongly UP 22.0% since the change of ownership. The Today network has maintained its number one ranking as the leading commercial metropolitan radio network and MMM has improved ratings performance in the two leading markets of Sydney and Melbourne. 68.5M The integration of the two businesses has been UNDERLYING very successful to date, which is a credit to the OPERATING NPAT leadership teams of both entities who have worked UP 31.0% collaboratively during the early stages of the integration process. We look forward to building on the strengths of the two organisations to build one united Australian 11.55c multi-media entertainment network. EARNINGS PER SHARE As in past years we have proudly contributed to FROM CONTINUING the communities of which we are a part through OPERATIONS the provision of airtime and TV telecasts with UP 100% which they can share their voice. The community conversation takes many forms and we are passionately supportive of the many ways our communities interact, including the facilitation of conversation through integrated media. The cornerstone of our charitable contribution, Give Me 5 for Kids, raised in excess of $1.5 million for local regional hospitals. This work, among other charitable initiatives, will continue to be a key element of our connection with our communities. The past year has once again been full of challenges and exciting opportunities which have been embraced with vigour by your management and Board. The addition of the best Australian metropolitan radio assets to the best regional multi-media network has established a network of assets that will provide much opportunity for the development of the business in future years. MAX MOORE-Wilton CHAIRMAN On behalf of the Board of Directors we would like to thank our very talented and dedicated people who strive for excellence every day and continue to produce good results for all stakeholders. We also would like to particularly thank our shareholders who have shown strong support this RHYS HOLLERAN year, which has enabled the Group to emerge as the CEO only truly National radio network and multi-media entertainment company. Southern Cross Austereo 8 COMMUNITY Southern Cross Austereo is committed St Vinnie’s CEO Sleep Out to positively influencing and giving back St Vinnies CEO Sleep Out began as a local to the local communities in which it operates community venture in Sydney’s Parramatta in 2006. by developing community focused programs Since then, the event has raised important funds for and fundraising initiatives that the entire Vinnies Homeless Services across New South Wales. company works towards. Vinnies place an emphasis on breaking personal Many individuals within Southern Cross cycles of poverty by helping people to learn to Austereo perform voluntary roles for their charities make better decisions through a range of education of choice and on a whole the company dedicates programs, recreation activities, and extensive its time and resources to some major fundraising information and referral services in a safe and CEO SLEEP OUT initiatives each year. Below is an outline of the main supportive environment. community-focused activities that operate through the business nationally. In 2010, CEO Rhys Holleran, and 14 Southern Cross Austereo managers participated in the St Vinnies CEO Sleep Out and raised nearly $60,000.