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ANNUAL REPORT For personal use only Consolidated Media Holdings Limited ABN 52 009 071 167 A This Annual Report, incorporating the financial report of the company, covers both Consolidated Media Holdings Limited (CMH) as an individual entity and as a consolidated entity consisting of CMH and its controlled entities. This financial report is presented in the Australian currency. CMH is a company limited by shares, incorporated and domiciled in Australia. CMH’s registered office and place of business are located at: Level 2 54 Park Street Sydney NSW 2000 Australia Financial timeline Shares quoted ‘ex’ dividend Monday 3 October 2011 Record date for final dividend Friday 7 October 2011 Payment of final dividend Friday 21 October 2011 This Annual Report was authorised for issue by the directors on 22 August 2011. CMH has the power to amend and reissue the Annual Report. All ASX releases, financial reports and other material information are available on the CMH website at www.cmh.com.au. Payment of dividends With effect from the 2011 final dividend, all Australian shareholders will receive their dividends via direct credit only. For information on our Share Registry and how to update your details, please see the final page of this Annual Report. CONTENTS For personal use only Consolidated Media Holdings Limited Annual Report 2011 CONTENTS 02 Financial Highlights 04 Executive Chairman’s Review 06 Investment Review 06 FOXTEL 10 Premier Media Group 14 Corporate Governance Statement 20 Directors’ Report 27 Auditor’s Independence Declaration 28 Remuneration Report 33 Financial Report 66 Shareholder Information For personal use only 68 Additional Information 1 FINANCIAL HIGHLIGHTS NPAT Result Associates FOXTEL has agreed binding terms to acquire 100 per cent of AUSTAR (ASX:AUN) at Operating NPAT for FY2011 Total combined equity $1.52 per share, subject to improved by $5.3 million or accounted contribution from various conditions including 5.8 per cent to $94.8 million investments: $89.0 million. regulatory, AUSTAR minority (FY2010: $89.5 million). shareholders and Court approval. FOXTEL contributed CMH’s Reported NPAT result $37.6 million to the NPAT FOXTEL via FOX SPORTS will of $101.7 million for 2011 result this year, and paid CMH broadcast the AFL from the includes a non‑recurring gain $65 million in distributions. 2012 season live, uninterrupted on property‑related matters. and in High Definition. PMG contributed $51.5 million o the NPAT result this year, PMG continues to be the and paid CMH $60 million destination of Australians who in distributions. love their sport – with 98 of the top 100 highest rating shows FOXTEL reported an EBITDA (based on average audience) result of $550.6 million, up on subscription television 15.5 per cent on FY2010; and broadcast on one of the a PBT result of $200.0 million, FOX SPORTS channels. up 25.8 per cent on FY2010. The Reds v Crusaders PMG reported an EBITDA Super 15 final live broadcast on result of $145.9 million, down FOX SPORTS 3 on July 9, 4.9 per cent on FY2010; and 2011 was the highest a PBT result of $136.9 million, rating Australian subscription down 4.7 per cent on FY2010. television program ever. Operating NPAT FY2011 NPAT Equity accounted profit from FOXTEL and PMG 100 ($m) 100 ($m) 7.0 101.7 95 90 6.0 94.8 89 87 51.5 (6.3) 6.1 84 80 80 78 70 63 62 60 60 40 For personal use only 40 40 37.6 20 20 0 0 FY07 FY08 FY09 FY10 FY11 FOXTEL PMG EBITInterestTax FY11 Property FY11 FY07 FY08 FY09 FY10 FY11 Operating Result Statutory NPAT NPAT 2 Consolidated Media Holdings Limited Annual Report 2011 FINANCIAL HIGHLIGHTS Earnings Per Share Capital Management and Share Price and dividend investment activity The FY2011 operating The CMH share price (ASX:CMJ) earnings per share result of CMH ended the year with at 30 June 2011 was $2.61, 16.61 cents per share reflects cash of $82.5 million. down 17.9 per cent on the share an improvement of 2.66 cents price at 30 June 2010, tracking per share on the FY2010 result CMH generated $6.1 million the negative trend in retail and (13.95 cents per share). of interest on its cash reserves media stocks notwithstanding this year. CMH’s limited exposure to the If the conditions are satisfied, advertising market. CMH will contribute up to CMH has maintained its annual $225 million to FOXTEL’s total dividend of 16.5 cents per acquisition of AUSTAR share, with a final dividend of (our share of the FOXTEL 6.0 cents per share to be paid Partner contribution). to shareholders in October 2011. CMH acquired a 12.1 per cent stake in SEEKAsia Limited alongside SEEK Limited, Macquarie Capital and Tiger Global. SEEKAsia now has an 80 per cent investment in JobsDB Inc, one of South East Asia’s leading online employment companies. Under the shareholder‑approved 2010 Buy‑Back Program, CMH acquired 58,874,237 shares at a cost to CMH of $194.1 million. FOXTEL and PMG EBITDA Operating EPS Share Price Performance 600 ($m) FOXTEL PMG 20.00 (cps) 4.00 $ Source: IRESS CMH 551 S&P/ASX 200 S&P/ASX 200 Media 500 16.61 16.00 477 13.95 400 406 3.50 351 12.00 300 10.21 9.05 For personal use only 237 8.00 200 3.00 5.84 152 153 146 133 4.00 100 106 0 0.00 2.50 FY07 FY08 FY09 FY10 FY11 FY07 FY08 FY09 FY10 FY11 Aug 10 Oct 10 Dec 10 Feb 11 Apr 11 Jun 11 3 EXECUTIVE CHAIRMAN’S REVIEW Each of FOXTEL and PMG increased Introduction and results overview CMH’s Operating NPAT their cash distributions to CMH this year, result of $94.8 million was I am pleased to report to shareholders with CMH receiving a total of $125 million: up 5.8 per cent on FY2010 that, in spite of the challenging retail $65 million from FOXTEL ($25 million ($89.5 million), with directors environment, we have seen another in 2010) and $60 million from PMG declaring a unfranked final year of solid returns at your company, ($40 million in 2010). with CMH’s Operating NPAT – our CMH ended the 2011 financial year with dividend of 6.0 cents per share. continuing net profit after tax result $82.5 million in cash and will pay an excluding any non-recurring gains – unfranked final dividend of 6 cents per reflecting an improvement of 5.8 per cent FOXTEL’s indicative proposal share to its shareholders in October 2011. to acquire AUSTAR at $1.52 per on our 2010 result to $94.8 million this year, driven by the strong ARPU Operating earnings per share increased AUSTAR share was announced, performance at FOXTEL and a this year from 13.95 cents per share with binding terms agreed in satisfactory performance from PMG. (in FY2010) to 16.61 cents per share. July but with the deal subject Including the non-recurring gains arising The CMH share price unfortunately has to approval of various this year from property-related matters, not been immune from the volatility regulators, AUSTAR minority CMH reported a statutory NPAT result affecting both local and global markets. shareholders and the Court. of $101.7 million for FY2011. With the exception of AUSTAR (which remains subject to the FOXTEL offer), CMH has committed to FOXTEL contributed $37.6 million to our CMH’s share price has generally tracked contribute up to $225 million NPAT result this year, up 25.6 per cent on the negative trend in media and retail the 2010 contribution of $29.9 million. This to the transaction. stocks during the financial year. improvement largely reflects the continued trend of increasing average revenue However, CMH has maintained its dividend PMG continued this year per user – ending the year at above year-on-year, with total dividends of to show the best offering $97 a month, attributable to FOXTEL’s 16.5 cents to be paid to shareholders for of live sport, with FOX SPORTS existing subscribers taking on additional the 2011 financial year. having 98 of the top 100 products and services during the year. Subscriber growth has remained subdued, The 2011 final dividend will be unfranked. most watched programs on with the tough retail market, declining As our franking credit balance improves, subscription television in the consumer confidence and the free-to-air we expect to pass these franking credits 2010 calendar year based multi channels and IPTV continuing to on to our shareholders. on average audience. have an effect on consumer willingness to subscribe. From the 2012 season, FOXTEL PMG contributed $51.5 million to CMH’s will showcase all AFL season NPAT result this year, down 4.8 per cent on its contribution in 2010 ($54.0 million), games live and uninterrupted For personal use only but nevertheless a solid contribution for in High Definition with a a business reliant on subscriber numbers dedicated Footy Channel and operating in a market in which on FOX SPORTS. acquiring and broadcasting sports rights is becoming increasingly more expensive. 4 Consolidated Media Holdings Limited Annual Report 2011 PMG reported an EBITDA result of Also this year, CMH agreed with the The performance of our underlying investments was solid this year $145.9 million for the 2011 financial year, property owner at 54 Park Street Sydney down 4.9 per cent on the result for the to cease providing property services in FOXTEL prior year ($153.5 million). consideration for the payment of a 2011 has marked another year of solid non-recurring fee of $7.5 million, with the Total revenues, and each revenue line, were results from FOXTEL.