PROSPECTUS Macquarie Radio Network Lim ited

Transcription

PROSPECTUS
Macquarie Radio Network Limited
ABN 32 063 906 927
(1,1) -1- RMRN0003_Cover 8mm spine 14/3/05, 3:19:26 PM
Contents
Important Information
2
Key Information
4
Key Offer Statistics
4
Chairman’s Letter
5
Section 1…
Offer Summary
7
Section 2…
Details of the Offer
11
Section 3…
The Business
18
Section 4…
Overview of the Australian
Commerical Radio Industry
26
Section 5…
Board, Senior Management
and Corporate Governance
33
Section 6…
Financial Information
40
Section 7…
Risk Factors
49
Section 8…
Investigating Accountant’s Report
55
Section 9…
Independent Review of
Directors’ Forecasts
79
Section 10…
Additional Information
83
Section 11…
Glossary
97
Section 12…
Corporate Directory
100
…1…
Important Notice
The Offer contained in this Prospectus is an invitation to apply for Shares in Macquarie
Radio Network.
This Prospectus is dated 14 March 2005 and was lodged with ASIC on that date. Neither
ASIC nor ASX takes any responsibility for the contents of this Prospectus or the merits of the
investment to which this Prospectus relates. This Prospectus expires on the Expiry Date and no
securities will be allotted or issued on the basis of this Prospectus after the Expiry Date.
No person is authorised to give any information or to make any representation in connection
with the Offer described in this Prospectus other than as contained in this Prospectus. Any
information or representation not so contained may not be relied on as having been authorised
by Macquarie Radio Network in connection with the Offer. Macquarie Radio Network has no
liability for this Prospectus or in respect of the Offer except to the extent required by law.
This Offer is available to Australian residents located in Australia. The distribution of this
Prospectus in jurisdictions outside Australia may be restricted by law. Persons who obtain this
Prospectus in jurisdictions outside Australia should seek advice on and observe such restrictions.
Any failure to comply with these restrictions may constitute a violation of applicable securities
laws. This Prospectus does not constitute an offer or an invitation in any place outside Australia
where, or to any person to whom, it would be unlawful to make such an offer or invitation.
It is important that you read this Prospectus in its entirety before deciding to invest in Macquarie
Radio Network and, in particular, in considering the prospects of the Company, that you consider
the assumptions underlying the prospective financial information and the risk factors that could
affect the financial performance of Macquarie Radio Network. You should carefully consider
these factors in light of your personal circumstances (including financial and taxation issues)
and seek professional advice from your stockbroker, accountant or other professional or financial
adviser before deciding whether to invest. Some of the risk factors that should be considered by
potential investors are outlined in Section 7.
Exposure Period
This Prospectus (excluding the Application Form) will be made generally available during the
Exposure Period on Macquarie Radio Network’s website at www.mrn.com.au. A paper copy
of this Prospectus will be available to Australian residents on request to the Share Registry.
The purpose of the Exposure Period is to enable examination of this Prospectus by market
participants prior to the raising of funds. Under the Corporations Act, applications received
during the Exposure Period will not be accepted or processed until after the expiry of that period.
No preference or priority will be conferred on applications received during the Exposure Period.
…2…
On completing an Application Form, Applicants will be required to provide certain personal
Privacy
information to Macquarie Radio Network and the Share Registry. Macquarie Radio Network and
the Share Registry will collect, hold and use that personal information in order to process the
Application Form and to provide administration in relation to the Applicant’s status as a member
of Macquarie Radio Network. Macquarie Radio Network and the Share Registry may disclose
personal information provided for in an Application Form to their agents and service providers,
and as authorised under the applicable provisions of the Privacy Act 1988 (Cth).
If an Applicant becomes a member of Macquarie Radio Network, personal information of the
Applicant may be disclosed from time to time to provide information to the Applicant about
the business of Macquarie Radio Network and its related bodies corporate. If an Applicant
does not want personal information used for these purposes, the Applicant should contact
the Share Registry. Under the Privacy Act, an Applicant may also request access to any
personal information held by or on behalf of Macquarie Radio Network or the Share Registry
by telephoning or writing to the Share Registry.
Defined terms and abbreviations used in this Prospectus are explained in the Glossary.
Definitions and Abbreviations
The financial amounts shown in this Prospectus are expressed in Australian dollars
Financial Amounts
unless otherwise stated.
This Prospectus, excluding the Application Form, may be viewed in electronic form on Macquarie
Electronic Prospectus
Radio Network’s website at www.mrn.com.au.
Persons who receive the electronic version of this Prospectus should ensure that they download
and read the entire Prospectus. A paper copy of this Prospectus will be provided free of charge to
any person who requests a copy by contacting the Share Registry during the Offer Period.
Applications may only be made on a printed copy of the Application Form accompanying this
Prospectus. The Corporations Act prohibits any person from passing the Application Form on to
another person unless it is attached to or accompanying a hard copy of this Prospectus or the
complete and unaltered electronic version of this Prospectus. Macquarie Radio Network retains
the discretion to issue Shares under the Offer.
This document is important and should be read in its entirety. If you have any queries
about any part of this document you should obtain the advice of your stockbroker,
accountant or other professional or financial adviser.
…3…
Key Information
Opening Date
22 March 2005
Closing Date
31 March 2005
Shareholding statements expected to be dispatched
11 April 2005
Trading of Shares on ASX expected to commence
15 April 2005
These dates are indicative only. Macquarie Radio Network has the right to vary these dates
without notice and to close the Offer early or extend it. Investors are encouraged to submit their
applications as soon as possible after the Offer opens as the Offer may close at any time without
notice. Macquarie Radio Network reserves the right to accept late Applications either generally
or in particular cases.
Key Offer Statistics
(1) This excludes the 1 C Class Share held by
Hadiac (a company associated with Alan
Jones) which carries an entitlement to
receive a payment equal to Hadiac’s
proportion of any dividends declared,
returns of capital and other payments paid
by Macquarie Radio Network to Shareholders.
It is also entitled to participate in issues of
shares to the extent of Hadiac’s proportion.
Hadiac’s proportion is, broadly, the proportion
of the Company’s share capital which the
Options held by Hadiac would comprise
if converted to Shares. At the date of this
Prospectus, that proportion is 14.03%. Please
refer to Section 10 for further information.
(2) Based on the Directors’ Forecasts.
The Directors’ Forecasts include best estimate
assumptions that are subject to business,
economic and competitive uncertainties, and
best estimate assumptions with respect to
future business decisions which are subject
to change. Full details of the Directors’
Forecasts and the best estimate assumptions
on which they are based are set out in
Section 6. Investors should also pay close
attention to the risk factors in Section 7, the
Investigating Accountant’s Report in Section 8
and the Independent Review of the Directors’
Forecasts in Section 9.
(3) Earnings per ordinary Share based on the
total number of Shares on issue following
completion of the Offer including the Options
on issue, and after allowing for earnings
attributable to the C Class Share.
…4…
Offer Price per Share
$1.00
Shares to be offered for subscription under the Offer
3,160,000
Total Shares on issue on completion of the Offer (1)
72,111,940
Market capitalisation at the Offer Price
$72,111,940
Forecast NPAT for year ending 30 June 2005 (2)
$3,703,000
Fully diluted EPS (cents)
(2)(3)
4.44
CHAIRMAN’S LETTER
Dear Investor,
On behalf of the Board, it is my pleasure to invite you to become a shareholder in one
of Sydney’s leading commercial radio networks, Macquarie Radio Network Limited.
Macquarie Radio Network operates two Sydney metropolitan commercial AM radio
stations: Sydney’s No.1 talk radio station – 2GB 873 and Sydney’s home of easy
listening – 2CH 1170.
The existing Shareholders of Macquarie Radio Network have made a committment
to each other to list Macquarie Radio Network on the ASX. This initial public offering
represents a natural progression for Macquarie Radio Network’s business, providing
it with access to public capital markets, financial flexibility and a corporate structure
that will allow Macquarie Radio Network to pursue growth opportunities.
A total of 3,160,000 Shares are being offered under this Prospectus at an offer price
of $1.00 per Share to raise $3 million.
This Prospectus contains detailed information about the Offer, Macquarie Radio
Network and its business. Please read this information carefully before making your
investment decision.
Together with my fellow Board members, I look forward to welcoming you as a
shareholder of Macquarie Radio Network.
Yours sincerely,
Max Donnelly
Chairman
…5…
Section 1
OFFER SUMMARY
1
This section provides an overview of the Offer and should be read in conjunction with
the remainder of this Prospectus.
1.1 Macquarie Radio Network Overview
Both 2GB and 2CH broadcast to the greater Sydney metropolitan area. The total
radio advertising revenue for Sydney (Australia’s largest metropolitan centre
containing approximately four million people) was $220 million for the year ending
31 December 2004.
According to the most recent Nielsen Media Research Survey for Sydney1,
2GB is the number one rating commercial radio station in Sydney, and has been the
number one rating commercial radio station in Sydney for the last six Nielsen Media
Research Surveys.2
A total of 3,160,000 Shares are being offered under this Prospectus. On completion
1.2 The Offer
of the Offer, the Shares offered under this Prospectus will represent 4.38% of the
issued capital of Macquarie Radio Network.
All of the Shares offered under this Prospectus, other than the C Class Share, will rank
equally with all Shares currently on issue in Macquarie Radio Network in accordance
with the rights attaching to the Shares set out in Section 10.
The Offer is not underwritten.
The following table sets out a summary of the Macquarie Radio Network
1.3 Capital Structure
capital structure.
Important Notes
Shares on issue at the date of this Prospectus
67,537,980
(1)
Shares to be offered for subscription under the Offer
3,160,000
Total Shares on issue on completion of the Offer
72,111,940
(2)
Market Capitalisation (3)
$72,111,940
Options
11,251,395
(4)
(1) This excludes 1,143,960 Shares to be issued to
the Company’s Chief Executive Officer, Ms
Angela Clark, prior to the Company being
admitted to the Official List. Refer to Section
10 for further information.
(2) This excludes the 1 C Class Share held by
Hadiac (a company associated with Alan
Jones) which carries an entitlement to receive
a payment equal to Hadiac’s proportion of any
dividends declared, returns of capital and
other payments paid by Macquarie Radio
Network to Shareholders. It is also entitled
to participate in issues of shares to the extent
of Hadiac’s proportion. Hadiac’s proportion is,
broadly, the proportion of the Company’s
share capital which the Options held by
Hadiac would comprise if converted to Shares.
At the date of this Prospectus, that proportion
is 14.03%. Please refer to Section 10 for
further information.
(3) Based on the total number of Shares on issue
on completion of the Offer at the Offer Price.
(4) Represents the number of Options held by
Hadiac (a company associated with Alan Jones).
…7…
1
1.4 Financial Data
OFFER SUMMARY
The table below sets out certain historical and financial information for Macquarie
Radio Network. This table should be read in conjunction with the more detailed
discussion of financial information in Section 6, the Investigating Accountant’s
Report on historical financial information in Section 8, the Independent Review of
the Directors’ Forecasts in Section 9, the risk factors set out in Section 7 and other
information set out in this Prospectus.
(1) Forecast financial information for FY2005 is
derived from the Directors’ Forecasts.
Actual
FY2002
Actual
FY2003
Actual
FY2004
Forecast
FY2005 (1)
Revenue ($000) (2)
20,153
37,182
43,034
39,506
EBITDA ($000) (2)
(5,196)
5,784
8,737
7,767
EBIT ($000)
6,982
(2) Interest expense is net of interest income.
(3) In FY2004 a tax credit of $9.399 million was
brought to account in respect of the future
income tax benefits pertaining to Macquarie
Radio Network’s past tax losses. Refer to
Section 6.7 for further details.
(5,908)
5,027
8,011
NPBT ($000)
(6,999)
2,916
6,087
NPAT ($000)
(6,999)
2,916
12,991
85
16
(8)
EBITDA Margin (%)
16
20
20
EBIT Margin (%)
14
19
18
(2)
Revenue Growth (%)
1.5 Control of the Company
5,581
(3)
3,703
Founding Shareholders
The Founding Shareholders of Macquarie Radio Network are companies controlled by
John Singleton and Mark Carnegie. John Singleton is the founder, major shareholder
and a director of STW. He is also a director of each of the Macquarie Radio Network’s
wholly-owned controlled entities, Harbour Radio and Radio 2CH. Mark Carnegie is
currently a Director and also a director of each of Macquarie Radio Network’s whollyowned controlled entities, Harbour Radio and Radio 2CH. A brief profile of Mark
Carnegie is set out in Section 5.
If the Offer is fully subscribed, following completion of the Offer, the Founding
Shareholders will together hold approximately 94% of the issued Shares and as
such will be in a position to control the Company, elect members of the Board and
generally direct the management and affairs of the Company and prevent a change
in control of the Company.3
The Founding Shareholders have agreed not to dispose of any of the Shares they
will hold after completion of the Offer for a defined period. Details of these escrow
restrictions are set out in Section 10.
Current Controllers
Under the Broadcasting Services Act, persons in a position to exercise control of a
commercial radio broadcasting licence (as defined in that legislation) must be notified
to the ABA. Notifications must occur on an annual basis, and following a change in
control of the Company.
…8…
OFFER SUMMARY
1
John Singleton (and certain companies he controls) and Mark Carnegie (and certain
companies he controls with Tanya Carnegie) have been notified to the ABA as being
in a position to exercise control of the 2GB and 2CH licensees.
Alan Jones (and certain companies he controls) has also been notified to the ABA as
being in a position to exercise control of the 2GB and 2CH licensees. This notification
was made following the execution of an Option Deed dated 25 October 2002 between
the Company, Hadiac (a company controlled by Alan Jones) and companies controlled
by John Singleton and Mark Carnegie. A Revised Option Deed was executed on
11 March 2005 between the same parties, a summary of which is set out in Section 10.
Under the Revised Option Deed, Macquarie Radio Network is prohibited from
materially changing the nature of its business, being the owner and operator of any
media business (including commercial radio and television broadcasting) and related
services and activities without the consent of Hadiac.
Subject to Macquarie Radio Network achieving sufficient profits and not requiring
1.6 Dividend Policy
profits to fund any expansion, the Company intends to distribute at least 60% of net
earnings in dividends and to frank dividends to the extent that it is able to do so.
Macquarie Radio Network does not currently have a franking account because of its
past and current tax losses. Consequently, the Company expects that dividends will
be unfranked for the next three to four years. The Directors may review this dividend
policy from time to time and, subject to prevailing circumstances, may change its
terms. No guarantee can be given about the payment of the dividends, the level of
franking or imputation of such dividends or the extent of payout ratios for any future
periods, as these matters will depend on the future profits of the Company, and its
financial and taxation position at that time.
As with any investment in the stock market, an investment in Macquarie Radio
1.7 Business and Investment Risks
Network has a number of risks. The price of the Shares may fall as well as rise.
A number of key risk factors, which prospective Applicants should be aware of, are
described in Section 7. Before deciding to apply for Shares, prospective Applicants
should read the entire Prospectus and, in particular, should consider the assumptions
underlying the prospective financial information, the financial forecasts and the risk
factors that could affect the future financial performance of the Company.
This Prospectus provides information for potential investors in Macquarie Radio
1.8 Enquiries
Network and should be read in its entirety. If after reading this Prospectus, you have
any questions about any aspect of an investment in Macquarie Radio Network, please
contact your stockbroker, accountant or other professional or financial adviser.
1 Source: Nielsen Media Research Survey 1 2005, Sydney (16 January 2005 to 12 February 2005) – all people 10 years +
2 Source: Nielsen Media Research Survey 1 2005, Sydney – all people 10 years + and Nielsen Media Research Surveys 4, 5, 6, 7 and 8 2004,
Sydney – all people 10 years +.
3 As discussed below, Alan Jones (and a company he controls) also has certain rights in relation to Macquarie Radio Network. Please refer to
Section 10 for further information.
…9…
Section 2
DETAILS OF THE OFFER
A total of 3,160,000 Shares are being offered under this Prospectus. On completion
2
2.1 Description of the Offer
of the Offer, the Shares offered under this Prospectus will represent 4.38% of the
issued capital of Macquarie Radio Network.
Based on the Offer Price, Macquarie Radio Network will raise approximately
2.2 Use of Proceeds of the Offer
$3.0 million pursuant to the issue of 3,160,000 Shares. The issue of 3,160,000 Shares
includes the issue of approximately 160,000 Shares to Eligible Employees for no cost
under the Employee Share Plan. The intended use of the total funds raised by the
Offer is set out in the table below.
Intended Use
Partial repayment of debts owed by Macquarie Radio
Network to the Founding Shareholders
– Expenses of the Offer
Total proceeds raised under the Offer
$(000)
2,500
500
3,000
This table is intended to be indicative only. The Directors expect that Macquarie
Radio Network will have sufficient working capital from its operations and existing
funding sources to fund its stated business objectives.
The purpose of the Offer is to:
2.3 Purpose of the Offer
– provide Macquarie Radio Network with an appropriate capital structure and the
financial flexibility to pursue growth opportunities;
– obtain additional capital to partially repay the debts owed by Macquarie Radio
Network to the Founding Shareholders;
– improve on-going access to capital markets; and
– provide a liquid market for Shares.
…11…
2
2.4 Capital Structure
The table below sets out the ownership of Shares before the closing of the Offer and
immediately following the Offer.
(1) Excludes the 1 C Class Share held by Hadiac
(a company associated with Alan Jones).
Includes the 1,413,960 Shares to be issued to
the Company’s Chief Executive Officer, Angela
Clark, prior to the Company being admitted to
the Official List. Please refer to Section 10 for
further information.
Before the closing of the Offer
After the Offer
Shares and Options held by
Number of Shares
and Options
Number of Shares
and Options
Founding Shareholders
67,508,190
97.91
67,508,190
93.62
1,443,750
2.09
1,443,750
2.00
Other Shareholders
(1)
Shares offered
under the Prospectus
2.5 Structure of the Offer
%
%
–
–
3,160,000
4.38
Total Shares
68,951,940
100
72,111,940
100
Total Options
11,251,395
100
11,251,395
100
The Offer comprises:
– the Foundation Offer open to Foundation Investors; and
– approximately $1,000 of Shares issued to each Eligible Employee under the
Employee Share Plan (refer Section 10).
There will be no general public Offer. Macquarie Radio Network will not accept any
applications received from the general public, and Application Monies received by the
general public will be returned. Interest will not be paid on any monies refunded and
any interest earned on Application Monies prior to return will be and will remain the
property of Macquarie Radio Network.
All of the Shares offered under this Prospectus, other than the C Class Share,
will rank equally with all Shares currently on issue in Macquarie Radio Network in
accordance with the rights set out in Section 10.
The Offer is not underwritten.
…12…
Foundation Offer
2
2.6 Who Can Apply
The Foundation Offer is open to Foundation Investors. Foundation Investors are
parties whom Macquarie Radio Network has invited to apply for Shares. All Shares
under the Foundation Offer will be issued at the Offer Price.
Employee Share Plan
All Eligible Employees are eligible to participate in the Employee Share Plan. Under
the Employee Share Plan, Eligible Employees will be issued 1,000 Shares to the value
of $1,000 of Shares at the Offer Price and at no cost to the Eligible Employee. The
Employee Share Plan is only available under the Offer and is solely at the discretion
of the Board. Similar allocations may be made in subsequent years, subject to the
performance of Macquarie Radio Network. A separate employee offer document will
be sent together with this Prospectus to Eligible Employees detailing the terms of the
Employee Share Plan. For further details of the Employee Share Plan, see Section 10.
How to Complete the Application Form
2.7 How to Apply
Applications for Shares under the Offer can only be made and will only be accepted on
the Application Form accompanying this Prospectus. Applications must be completed
in accordance with the instructions set out on the back of the Application Form.
All Applications must be for a minimum of 2,000 Shares and thereafter in multiples of
100 Shares. There is no maximum amount which may be applied for under the Offer.
Application Monies
A cheque must accompany Application Forms for the relevant Application Monies.
Cheques must be in Australian dollars drawn on an Australian branch of an Australian
bank, crossed “not negotiable”, and made payable to “Macquarie Radio Network
Share Offer”.
Applicants must apply at the Offer Price of $1.00 per Share.
…13…
2
2.8 Where and When to Lodge Completed
Application Forms and Application Monies
Completed Application Forms and accompanying cheque(s) must be lodged:
– For the Foundation Offer Applications, with the Share Registry as set out below:
Mailing address
Computershare Investor Services Pty Limited
GPO Box 7115
Sydney NSW 2001
Delivery address
Level 3
60 Carrington Street
Sydney NSW 2000
Regardless of the method of lodgement, the Share Registry must receive all
Applications by no later than 5.00pm AEST on the Closing Date, unless Macquarie
Radio Network varies the dates and times.
Applicants are advised to lodge their Applications as early as possible after the Offer
opens. Macquarie Radio Network reserves the right to close the Offer at any time
before the Closing Date or to extend the Offer without prior notice.
2.9 Allocation Policy
The allocation of Shares will be made as soon as possible after the Closing Date.
Macquarie Radio Network reserves the right to allocate the Shares offered under this
Prospectus in full on any Application or to allocate any lesser number or to decline
any Application.
Where no allocation is made or where the value of Shares allocated is less than the
value applied for, subject to the paragraph immediately below, surplus Application
Monies will be returned. Interest will not be paid on any monies refunded and any
interest earned on Application Monies prior to allotment or return will be and will
remain the property of Macquarie Radio Network.
Following the issue of Shares, successful Applicants will receive a holding statement
setting out the number of Shares allocated to them. It is expected that holding
statements will be dispatched by standard post on 11 April 2005.
If admission to the Official List of ASX is denied, or for any reason the Offer does not
proceed, all Application Monies will be refunded in full without interest.
…14…
Macquarie Radio Network will apply for the Shares offered by this Prospectus and for
2
2.10 ASX Listing
other Shares on issue to be listed for quotation by ASX within seven days of the date
of this Prospectus. Macquarie Radio Network’s ASX code will be MRN.
If the application is not made within seven days or Macquarie Radio Network is
not admitted to the Official List within three months of the date of this Prospectus
(subject to extension as permitted by law), the Offer will be cancelled and all
Application Monies will be refunded in full without interest.
It is expected that trading of the Shares on ASX will commence on or about 15 April
2005. The despatch of holding statements will occur on or about 11 April 2005.
ASX takes no responsibility for this Prospectus or the investment to which it relates.
Admission to the Official List of ASX is not to be taken as an endorsement by ASX of
Macquarie Radio Network.
Macquarie Radio Network will apply to participate in Clearing House Electronic
2.11 CHESS and Issuer Sponsored Register
Subregister System (CHESS), in accordance with the ASX Listing Rules and the
Securities Clearing House (SCH) Business Rules. Macquarie Radio Network will
operate an issuer sponsored subregister through the Share Registry. CHESS and the
Share Registry will together make up Macquarie Radio Network’s register of securities.
Macquarie Radio Network will not issue share certificates to investors but as soon as
practicable after allocation, investors will receive holding statements (similar to bank
account statements) which set out the number of Shares allocated to them pursuant
to this Prospectus. The statements will also set out each investor’s unique Holder
Identification Number (HIN) (in the case of a holding on the CHESS subregister),
or Security Holder Reference Number (SRN) (in the case of a holding on an issuer
sponsored register).
Investors will be provided with periodic statements from the Share Registry showing
any changes in their holdings of securities. Investors may request a statement at any
time (although an administration fee may be charged for these additional statements).
The Founding Shareholders and Hadiac (a company associated with Alan Jones)
2.12 Voluntary Escrow Arrangements
have agreed to a voluntary escrow arrangement under which they will be restricted
from dealing in a specified number of Shares or Options (in the case of Hadiac) for
a defined period. Similar escrow arrangements will apply in relation to the 1,413,960
Shares to be issued to the Company’s Chief Executive Officer, Angela Clark, prior to
the Company being admitted to the Official List. Details of these escrow restrictions
are set out in Section 10.
No brokerage, commission or stamp duty is payable by investors for Shares under
2.13 Brokerage, Commission and Stamp Duty
the Offer.
…15…
2
2.14 Foreign Investors
No action has been taken to register or qualify the Shares or the Offer, or otherwise to
permit a public offering of the Shares in any jurisdiction outside Australia.
The Prospectus does not constitute an offer or invitation in any place in which, or to
any person to whom, it would not be lawful to make such an offer or invitation. The
distribution of this Prospectus in jurisdictions outside Australia may be restricted
by law and persons who come into possession of this Prospectus should seek advice
on and observe any such restrictions. Any failure to comply with such restrictions
may constitute a violation of applicable securities laws. It is the responsibility of any
Applicants who are citizens or residents of jurisdictions outside of Australia to ensure
compliance with all laws of any jurisdiction which is relevant to their Applications.
2.15 Taxation
The Australian taxation consequences of any investment in Shares will depend on
an investor’s particular circumstances. Investors should make their own enquiries
concerning the taxation consequences of an investment in Macquarie Radio Network.
If you are in doubt as to the course of action you should follow, you should consult
your stockbroker, accountant or other professional or financial adviser.
2.16 Enquiries
This Prospectus provides information for potential investors in Macquarie Radio
Network and should be read in its entirety. If after reading this Prospectus, you have
any questions about any aspect of an investment in Macquarie Radio Network, please
contact your stockbroker, accountant or other professional or financial adviser.
Prospective investors requiring further information regarding the completion of the
Application Forms or requiring additional copies of the Prospectus should contact the
Share Registry on 1300 850 505.
…16…
Section 3
3
3.1 Macquarie Radio Network Overview
THE BUSINESS
Both 2GB and 2CH broadcast in the greater Sydney metropolitan area. The total radio
advertising revenue for Sydney (Australia’s largest metropolitan centre containing
approximately four million people) was approximately $220 million for the year
ending 31 December 2004.
According to the Nielsen Media Research Surveys carried out in 20041:
– Macquarie Radio Network’s two stations (combined) achieved an average 25.1%
share of listening to commercial radio; and
– Macquarie Radio Network has a higher exclusive audience than any other
commercial radio station in Sydney – between 37.4% and 42.7% of Macquarie
Radio Network’s listeners do not listen to any other commercial radio network.
3.2 Corporate Structure
The following diagram details the corporate structure of Macquarie Radio Network.
Macquarie
Radio Network
100%
91%
9%
Radio 2CH
Harbour Radio
Currently, Radio 2CH holds the commercial radio licence in respect of 2CH, and
Harbour Radio holds the commercial radio licence in respect of 2GB.
3.3 2GB Profile
2GB is a Sydney talk station and provides its listeners with a program of news,
informed and opinionated comment, “talk back”, entertainment, sport and
promotions through a strong line-up of talented radio personalities and a dedicated
newsroom, Macquarie News.
Talk radio (such as 2GB) focuses on social, economic and political issues of current
relevance to the community and offers listeners the ability to interact with the on-air
personalities and to have their opinions broadcast.
2GB listeners are provided with a comprehensive up-to-date coverage of sport
through a combination of dedicated sports reporters and experienced sports
broadcasters, as well as expert contributors. 2GB listeners are also able to benefit
from the sporting expertise of other 2GB personalities such as Alan Jones and
Ray Hadley. 2GB has held the exclusive commercial radio rights to broadcast the NRL
since 2000, and was the official radio broadcaster of the Rugby World Cup 2003 and
the 2004 Olympic Games.
…18…
THE BUSINESS
3
2GB also provides its listeners with a range of special interest programs such as health,
gardening, cooking, motoring and real estate shows hosted by industry experts.
According to the most recent Nielsen Media Research Survey for Sydney2, 2GB
is the number one rating commercial radio station in Sydney, and has been the
number one rating commercial radio station in Sydney for the last six Nielsen
Media Research Surveys3. Macquarie Radio Network believes 2GB’s ratings success
is attributable to its focus on a diverse mix of programming that includes highly
successful breakfast, morning and weekend shows with some of Australia’s bestknown radio personalities such as Alan Jones and Ray Hadley.
Monday – Friday
Time
Presenter
The Best of Alan Jones
5am-5.30am
Alan Jones
Breakfast
5.30am-10am
Alan Jones
Morning Show
10am-1pm
Ray Hadley
2GB Afternoons
1pm-4pm
Chris Smith
Sydney Drivetime
4pm-7pm
Philip Clark
The Good Life
7pm-9pm
Murray Wilton
Night-time in Sydney
9pm-12am
Brian Wilshire
Overnight in Sydney
12am-5am
Jim Ball
The Garden Clinic
6am-9am
Graham and Sandra Ross
Real Estate
9am-10am
Mark Moraza
Your Health
10am-12pm
Dr Graham
Weekend Detention
12pm-8pm
The Continuous Call Team
Numerology
8pm-12am
Steve Murphy
Weekend Overnight
12am-6am
The current program schedule of 2GB
is set out alongside.
Saturday
Sunday
The Garden Clinic
6am-9am
Graham and Sandra Ross
Weekend Wireless
9am-12pm
Luke Bona
Weekend Detention
12pm-6pm
The Continuous Call Team
SportsZone
6pm-8pm
Andrew Moore
Bill Crews on Sundays
8pm-12am
Reverend Bill Crews
Weekend Overnight
12am-6am
…19…
3
THE BUSINESS
Alan Jones, AO joined 2GB in 2002. Alan has been a speechwriter and senior
adviser to the then Prime Minister, The Right Honourable Malcolm Fraser and was
one of Australia’s most successful Australian rugby union coaches. Over 14 years,
the Alan Jones program has achieved a record 101 number one rated breakfast
survey wins in 102 surveys. In 2004, Alan received a Queen’s Birthday Honour – an
Officer of the Order of Australia (AO) partly for his service to the media and sports
administration, but also for helping many charities, including Youth Off the Streets, the
Children’s Hospital, Starlight Foundations, the Sir Edward Dunlop Medical Research
Foundation and the Heart Reach Institute. At the annual Australian Commercial Radio
Awards, Alan was awarded the Best Current Affairs Commentator Award in 1991,
1995 to 1998 and 2001 to 2004, the Best Current Affairs Segment in 1992, and the
Best Talk Personality Award in 1990 to 1993, 1995, 1999, and 2001 to 2004.
Ray Hadley, OAM joined 2GB in 2002 hosting both the weekday mornings and
weekend NRL programs. Ray has been the voice of rugby league since 1987, winning
every rugby league survey since 1990. He has been named Australia’s best radio
sports broadcaster for five of the past 10 years at the Australian Commercial Radio
Awards. In 2002, Ray received a Queen’s Birthday Honour – a Medal of the Order
of Australia (OAM) for service to rugby league football as a broadcaster and to the
community, particularly through his fundraising efforts for charitable organisations.
Ray’s morning program has been the number one rating morning program for the last
six Nielsen Media Research Surveys.
Chris Smith joined 2GB in 2000 initially as Program Director. Chris has built a career
both in Australia and abroad covering news and current affairs in radio and television.
He has won a number of journalistic awards including a MBF National Health award
and a State Government award for excellence in environmental reporting. After just
three years of broadcasting on 2GB, Chris’s afternoon show was the number one
rating afternoon program according to the Nielsen Media Research Survey 5 2004,
Sydney. In addition to broadcasting his afternoon show, Chris recently joined the
Channel 9 news team to co-host the weekday early morning bulletin.
…20…
THE BUSINESS
3
Philip Clark joined 2GB in 2001. Philip’s career began as a parliamentary researcher
and speechwriter in Canberra before moving to Sydney in 1986 where he took up
private legal practice with a major city firm. In 1988 Philip joined the Sydney Morning
Herald writing state politics and editing the original Stay in Touch column. Philip
then joined broadcaster John Doyle’s highly successful afternoon show on ABC 702
Sydney (formerly ABC Radio 2BL Sydney). Philip presented the Evening Show
which featured the Radio Quiz before he became the presenter for the ABC 702
Breakfast Show, a position he held for approximately 10 years before commencing
with 2GB. Philip has been involved in many major broadcasting events including
calling the opening and closing ceremonies of the 2000 Sydney Olympic Games.
Murray Wilton initially joined 2GB in 1986 as an Engineer and Producer. After 2
years with 2GB he moved to Radio 2GN Goulburn where he commenced his extensive
broadcasting career, moving to Radio 2CC in Canberra 2 years later. After nearly a
decade with Radio 2UE Sydney, where he worked as the Promotions and Marketing
Manager (including hosting a variety of programs), Murray rejoined 2GB in 2001.
Brian Wilshire joined 2GB in 1979. Brian began his highly successful career at
Radio 2NZ Inverell and later at Radio 2TM Tamworth, Radio 2CA Canberra and
Radio 2UE Sydney. Brian was the founder of the Sydney radio institution “Midnight
Matchmaker”. Brian celebrated 25 years at 2GB in 2004 with the highest rating show
on the station at that time.
Jim Ball joined 2GB in 1999. Jim has 28 years experience in the radio industry
including the areas of broadcasting, management, promotions and marketing. Jim has
worked for many radio stations including radio stations located in Muswellbrook,
Mt Isa, Longreach, Bundaberg, Brisbane, Newcastle and Sydney.
The Ross Family joined 2GB in 1980. The Ross family have produced and presented
gardening programs on television since 1978 including “Better Homes & Gardens”,
reporting on “Seven National News” and “Today Tonight”, and more recently, the
popular “Ground Force”. The Ross family also have their own gardening magazine
and travel company, Ross Garden Tours, which specialises in international and
Australian group garden tours. They have received numerous awards for their media,
horticultural, environmental and charity work and contribution to Australian society.
Malcolm T Elliott first joined 2GB in 1977, and returned to 2GB in 1991 where he
hosted the Afternoon program until 1993. Malcolm has over 38 years experience as
a professional radio and television broadcaster. Malcolm has worked for a number of
television and radio stations including Radio 2UE Sydney and Radio 2UW Sydney. At
Radio 2UW, Malcolm achieved the highest radio ratings the station has ever achieved
in its history. In 1994 Malcolm returned to 2GB where he now hosts the Summer
Afternoon program.
…21…
3
THE BUSINESS
Steve Murphy celebrates his 25th year in radio this year. Steve has worked for a
number of commercial radio stations including Radio 2SM Sydney, Sky Radio and
Melbourne’s Radio 3MP where he hosted the Breakfast show. In addition to hosting
Numerology on Saturday nights, Steve hosts the weekly Afternoon program on 2CH.
Luke Bona initially joined 2GB in 1978 at the age of 16. Luke left 2GB in 1980 to
pursue a broadcasting career at Radio 2LF Young and Radio 2BS Bathurst where he
became Program Director and launched their FM station B-Rock. Luke returned to
2GB in 1999 as the Assistant Program Director, Production Manager and presenter
for the Weekend Wireless show.
Andrew Moore initially joined 2GB in 1994, and has over 19 years experience in the
Sydney radio broadcasting industry. Andrew left 2GB in 1999 to join Radio 2SM
Sydney and later Radio 2UE Sydney during which time he hosted a number of sports
programs including his own five hour nightly show “Moore at Night” on Radio 2SM.
Andrew returned to 2GB in 2002, and is an integral part of the 2GB Continuous Call
Team’s NRL coverage.
Reverend Bill Crews, AM joined 2GB in 2002. Reverend Crews has tirelessly
assisted the homeless, sick, elderly and others in need throughout his entire life.
In 1986 he was ordained the Minister of the Ashfield Uniting Church. In 1992, he was
voted Father of the Year and Humanitarian of the Year. In February 1998, Reverend
Crews was included in the National Trust’s 100 “National Living Treasures”. He was
awarded an Order of Australia (AM) in 1999 for his services to the disadvantaged and
his work with the homeless youth.
3.4 2CH Profile
2CH broadcasts an easy listening format on the AM band. 2CH is a music station
providing its adult audience with an entertaining mix of songs from the 1950s through
to today’s latest releases. The station also broadcasts a range of segments featuring
celebrity interviews, regular news updates from Macquarie News, finance reports and
major station promotions and giveaways.
The current weekday program schedule of 2CH is set out below:
Monday – Friday
Time
Presenter
Breakfast
5am-9am
John Poole
Morning
9am-12pm
Bob Rogers
Afternoon
12pm-4pm
Steve Murphy
Drive
4pm-8pm
George Ilich
Evening
8pm-12am
Ian Holland
2CH’s weekends feature “Bob Rogers’ Reminiscing” each Saturday night
from 6pm to midnight.
…22…
THE BUSINESS
3
A brief profile on each of the 2CH presenters is set out below:
John Poole has been a member of the 2CH Easy 1170 on-air team for almost
30 years, firstly as top-rating weekday breakfast show host, and later spending
five years as 2CH program director and presenter of the morning program.
John left radio in 1994 to establish his own business and lived in England and New
Zealand where he worked for the Fifeshire FM network. John returned to Sydney
in 1997 to host 2CH’s weekend breakfast programs. He returned to presenting
weekday breakfast in July 2004.
Bob Rogers joined 2CH in 1997. Bob began his career as a disc jockey in Brisbane,
building a huge following before coming to Sydney to host the “Australian Top 40”
show on Radio 2UE Sydney where he became Australia’s top radio DJ. In 1964 Bob
was chosen to tour with The Beatles around Australia and abroad. Bob later starred
in Network Seven’s “The Bob Rogers Show”, and in 1976 wrote the rock bible “Rock
and Roll Australia”.
Steve Murphy celebrates his 25th year in radio. Steve has worked for a number of
commercial radio stations including Radio 2SM Sydney, Sky Radio and Melbourne’s
Radio 3MP where he hosted the breakfast show. In addition to hosting the Afternoon
program, Steve hosts Numerology on 2GB on Saturday nights.
George Ilich joined 2CH in 1988, which makes him the longest consecutive serving
radio announcer on 2CH. George began his career as an announcer at Radio 2GN
Goulburn and later as Drive host and Production Manager for Radio 2GN. Before
joining 2CH, George worked at Capital 7 TV in Canberra and WIN Television
in Wollongong.
Ian Holland began his career in 1970 as an announcer and copywriter with Radio
2VM Moree before moving to Radio 2DU Dubbo, Radio 7LA Launceston and later
Radio 3UZ Melbourne. Before becoming the Program Director of 2CH in 1976,
Ian hosted the “Australian Top 40” for three years on more than 50 radio stations
throughout Australia. During his time as 2CH Program Director, 2CH became
Sydney’s number one rating station in 1979 for the first time in its history. Ian left
2CH for a short period of time and returned in 1992. In 2005, Ian was reappointed
Program Director.
…23…
3
3.5 Sales
THE BUSINESS
Macquarie Radio Network has two distinct sales team – one team is focussed
on clients who are not represented by media agencies (direct sales) and the other
on clients who are represented by media buying agencies (agency sales). According
to PricewaterhouseCoopers, the Sydney commercial radio industry’s independent
advertising statistician, 2GB achieved the greatest amount of advertising revenue
from direct sales of any commercial radio station in the Sydney metropolitan area for
a total of 23 consecutive months to 31 December 20044.
Advertising revenue from direct sales for the year ending 31 December 2004
accounted for approximately 55% of Macquarie Radio Network’s total advertising
revenue, with agency sales accounting for the remainder.
3.6 Macquarie Radio Network’s
Strategic Direction
Expand Australian Radio Revenue
– Macquarie Radio Network will seek to expand its exposure to the Australian
market through the acquisition of additional licences or existing businesses.
– In the longer term, Macquarie Radio Network believes that growth opportunities
exist in Australia through digital radio broadcasting which has the potential to
enhance the current radio format with the addition of text and image transmission
and provide additional benefits to advertisers (subject to the regulatory regime
that is ultimately introduced for digital radio broadcasting).
Grow Complementary Media Businesses
– Building on its strength in radio broadcasting, Macquarie Radio Network
intends to broaden its revenue and profit base by selectively entering into new,
complementary media businesses in Australia and internationally.
…24…
1 Source: Nielsen Media Research Surveys 1, 2, 3, 4, 5, 6, 7 and 8 2004, Sydney – all people 10 years +.
2 Source: Nielsen Media Research Survey 1 2005, Sydney (16 January 2005 to 12 February 2005) – all people 10 years +.
3 Source: Nielsen Media Research Survey 1 2005, Sydney – all people 10 years + and Nielsen Media Research Surveys 4, 5, 6, 7 and 8 2004,
Sydney – all people 10 years +.
4 Source: PricewaterhouseCoopers Sydney Radio Commercial Advertising Revenue Statistics February 2003 to December 2004.
Section 4
4
4.1 Background
OVERVIEW OF THE AUSTRALIAN COMMERCIAL RADIO INDUSTRY
The commercial radio industry in Australia consists of metropolitan and regional
commercial radio stations. Macquarie Radio Network operates two metropolitan
commercial radio stations. Unlike other media, people listen to radio everywhere
– at work, in the home or on the road – radio is there alongside them. In an average
week, approximately 80% of Australians listen to commercial radio. Australians aged
10 years and older have been estimated to listen to a weekly average of 19 hours of
commercial radio. There are an estimated 37 million radios in Australia, an average
of 5.1 sets per household (source: All Australian Listening Report, 2000).
Macquarie Radio Network believes that Australian radio listening times will continue
to remain strong given the impact of longer commuter driving times, increased radio
listening times at work and to some extent the complementary nature of radio to
Internet and interactive games activity.
There are currently approximately 257 commercial radio stations operating in
Australia. The majority of these stations are operating in regional markets (217)
with only 40 commercial radio stations operating in capital cities, including the
metropolitan areas of Sydney, Melbourne, Brisbane, Adelaide and Perth.
The following table illustrates the number of commercial radio stations on issue in the
broadcasting services bands in the five largest metropolitan centres in Australia.
Table 1.1: Metropolitan Commercial
Radio Stations.
(1) Source: Australian Broadcasting Authority,
Section 30 Schedule, 21 October 2004,
available at: www.aba.gov.au/broadcasters/
planning/bsa_s30/index.html
(2) Source: Australian Broadcasting Authority,
Commercial Radio Broadcasting Licences,
7 October 2004, available at:
www.aba.gov.au/broadcasters/pdfrtf/
LIC022_Commercial_Radio_Broadcasting_
Licences.pdf.
See also List of Current Controllers of a
Broadcasting Licence (available from ABA).
Market
% Australian Population (1)
AM
Commercial (2)
FM
Sydney
18.97%
5
6
Melbourne
17.91%
5
6
Brisbane
8.64%
4
4
Adelaide
5.91%
2
4
Perth
7.07%
2
4
Total
58.50%
18
24
Following changes to the media ownership rules in 1992, which now allow owners to
operate two commercial radio stations in each licence area (the “two to a market rule”),
there has been considerable consolidation of the radio industry over the past five years.
Currently 12 radio networks own 80% of the commercial radio stations in Australia.
4.2 Commercial Radio and the
Australian Advertising Industry
4.2.1 Australian Advertising Market
Advertising is the principal source of revenue for commercial radio broadcasters.
Advertising revenue is sourced from local direct sales and from advertising agencies
and media buyers. Advertising revenue is a function of the number of available
“spots” and the pricing for those spots. Except in limited circumstances, the number
of advertising spots is not regulated, but commercial (and ratings) pressures limit the
…26…
4
number of spots which radio operators make available. Commercial radio competes
for advertising revenue with other forms of main media including newspapers,
magazines, print media, television, outdoor, cinema, direct mail and the Internet.
Australia’s metropolitan commercial radio broadcasters captured approximately
4.2.2 Commercial Radio Advertising Market
9% of the total Australian main media advertising revenues for the year ended
31 December 2004, representing advertising revenues of $556.6 million for the
year ended 31 December 2004 – a 14.8 per cent increase over the year ended
31 December 2003. The Sydney metropolitan market alone captured nearly 40% of
the $556.6 million advertising revenues. The Company believes that radio advertising
will continue to be attractive to advertisers due to its cost effectiveness, flexibility,
strength as a direct response medium, and ability to target specific audiences.
Macquarie Radio Network’s existing primary competitors for advertising revenue in
4.3 Existing Competitors and Ratings
the Sydney metropolitan market are Austereo Group Limited, DMG Radio Australia
Pty Limited, Southern Cross Broadcasting (Australia) Limited and Australian Radio
Network Pty Limited.
Market revenue share against competitors is significantly driven by ratings. Ratings
are primarily categorised according to different age groups of commercial radio
listeners. Nielsen Media Research currently holds the radio rating contract for
audience measurement in Australia. Eight surveys are done each year in each of
the five major capital cities. These cities are surveyed for 39 weeks of the year.
4.4 Regulation
The Australian Government regulates the ownership of radio broadcasting media in
4.4.1 Overview
Australia (including cross media and foreign ownership restrictions) through the
Broadcasting Services Act, the FATA and the TPA.
The ABA1 administers the Broadcasting Services Act, which is the principal legislation
regulating the provision of broadcasting services in Australia. The Broadcasting
Services Act contains the regulatory scheme for the planning and allocation of
commercial radio broadcasting licences, and the rules that apply to the ownership
and control of such licences. The content of commercial radio broadcasting services
is also regulated under the Broadcasting Services Act through licence conditions
and standards determined by the ABA and codes of practice (developed by the
commercial radio industry and registered by the ABA).
Commercial radio licences are renewed by the ABA every five years. The scheme in
the Broadcasting Services Act requires the ABA to renew licences unless it is aware
of special circumstances that would give rise to issues of “suitability”. However, unlike
the scheme that existed prior to the commencement of the Broadcasting Services Act
(which involved a public hearing process), the ABA is not required to conduct formal
suitability investigations prior to the renewal of a licence, and a company is a suitable
licensee unless the ABA decides otherwise.
…27…
4
The ABA has recently renewed the radio licences held by Radio 2CH and Harbour
Radio for a further 5 years. The Radio 2CH licence in respect of 2CH expires on 1 May
2010, and the Harbour Radio licence in respect of 2GB expires on 16 May 2010.
The Broadcasting Services Act places no restrictions on transferring a commercial
radio broadcasting licence provided that the transfer complies with the ownership
and control rules of the Broadcasting Services Act as referred to below.
The Broadcasting Services Act places no restriction on foreign ownership or foreign
directorships of companies controlling commercial radio broadcasting licences.
However, certain foreign investments may require the Federal Treasurer’s approval
under the FATA.
As noted, the Broadcasting Services Act does impose ownership and control limits in
relation to commercial radio licences including restrictions on cross-media ownership.
In summary, the “two to a market” rules provide that a person must not:
– be in a position to exercise control of more than two commercial radio
broadcasting licences within the same licence area;
– be a director of a company that is, or of two or more companies that are, between
them, in a position to exercise control of more than two commercial radio
broadcasting licences in the same licence area;
– be a director of a company that is, or of two or more companies that are, between
them, in a position to exercise control of two commercial radio broadcasting
licences in a licence area and in a position to exercise control of another
commercial radio broadcasting licence in the same licence area; or
– be in a position to exercise control of two commercial radio broadcasting licences
in a licence area and also be a director of a company that is in a position to exercise
control of another commercial radio broadcasting licence in the same licence area.
In summary, the “cross media” rules provide that a person must not:
– be in a position to exercise control of a commercial television broadcasting licence
and a commercial radio broadcasting licence that have the same licence area;
– be in a position to exercise control of a commercial radio broadcasting licence and
a newspaper that is “associated” with the licence of that radio licence;
– be a director of a company that is in a position to exercise control of a commercial
radio broadcasting licence and either a company that is in a position to exercise
control of a commercial television broadcasting licence that has the same licence
area, or a company that is in a position to exercise control of a newspaper that is
associated with the licence area of that radio licence; or
– be in a position to exercise control of a commercial radio broadcasting licence
and be a director of either a commercial television broadcasting licence in the
same licence area or a newspaper that is associated with the licence area of the
commercial radio broadcasting licence.
…28…
4
The above restrictions are based on the concept of “control”. The definition of
“control” in the Broadcasting Services Act includes control as a result of, or by
means of, trusts, agreements, arrangements, understandings and practices, whether
or not they have legal or equitable force and whether or not they are based on legal
or equitable rights.
Under the Broadcasting Services Act, a person is deemed to be in control of a
licensee or company if that person has “company interests” which exceed 15%.
The term “company interests” is given a wide meaning and includes shareholding,
voting, dividend and winding up interests.
In addition, the Broadcasting Services Act deems persons to be in a position to
exercise control of a licence, company or newspaper if other “non-company interest
factors” are made out. For example, in the case of a commercial radio licensee,
a person will be in a position to exercise control of the licensee if they control
a significant proportion of the operations of a licensee in providing broadcasting
services, or the selection or provision of a significant proportion of the programs
broadcast by the licensee.
In addition to the above media specific legislation, the TPA regulates acquisitions that
would result in a substantial lessening of competition in the relevant market. The TPA
may apply to the transfer of commercial radio broadcasting licences and the conduct
of licensees.
The ABA has responsibility for planning and allocating all parts of the radio frequency
4.4.2 New Radio Licences
spectrum utilised for free-to-air broadcasting services in Australia (known as the
“broadcasting services bands”). Under the Broadcasting Services Act, the ABA was
required to determine licence area plans (“LAPs”) for all the radio licence areas in
Australia. The LAP process involved reviewing the radio services available in each
licence area, and determining the number and characteristics of broadcasting services
to be made available within each licence area. In preparing a LAP, the ABA is required
to promote the objects of the Broadcasting Services Act, including the economic and
efficient use of the spectrum, and to consider such factors as:
– demographic characteristics;
– social and economic characteristics within the licence area, within neighbouring
licence areas and within Australia generally;
– the number of existing broadcasting services and the demand for new
broadcasting services within the licence area, within neighbouring licence areas
and within Australia generally;
– developments in technology; and
– technical restraints relating to the delivery or reception of broadcasting services.
…29…
4
The ABA determined the LAP for Sydney in December 1999, deciding that two new
commercial radio licences would be made available in the Sydney licence area (one in
2000, and the second in 2004). As a result, the following has recently occurred in relation
to the Sydney metropolitan market in which Macquarie Radio Network operates:
– on 24 July 2000, the ABA allocated a new commercial FM radio licence to a joint
venture that included DMG Radio Investments Pty Limited, following the auction
of the licence on 24 May 2000. The service is currently on air as NOVA 969;
– On April 15 2004, the ABA auctioned a new commercial FM radio licence and
Daily Mail (UK Radio 1) Pty Limited was the highest bidder. The new service is
expected to commence transmission by June 2005; and
– in September 2003, the ABA announced that it had completed the analog planning
of all of the radio licence areas in Australia. In this context, it announced that the
ABA does not propose to allocate any further analog commercial radio licences
within five years of the last allocation in each relevant licence area (although the
ABA clarified that this was not intended to be taken to mean that after five years
the ABA will begin a further round of allocations). Applying this policy in the Sydney
licence area, no additional analog commercial radio licences will be allocated within
five years after 15 April 2004, being the date of the ABA’s last allocation of an analog
commercial radio licence in Sydney (as noted above).
4.5 Industry Developments
4.5.1 Digital Radio Broadcasting
With the rapid rate of technology development and convergence, one of the
biggest challenges facing the commercial radio industry in Australia is the advent
of digital radio. Digital technology is a new way of transmitting and receiving radio
signals. It turns sound and data into digital signals at the transmission end, and
decodes these in the digital radio receiver to produce compact disc quality sound
with data enhancements. With the advent of more sophisticated radio receivers,
digital technology would allow listeners to be sent such things as graphics, logos,
personalised messages, weather and traffic conditions or the results of a football
match – all which would be delivered free-to-air. Digital radio also adds a new
dimension for advertisers as it significantly increases marketing options such as the
use of logos, graphic visuals and electronic coupon downloads.
Over the past year, the commercial radio industry has actively united in its approach
to digital radio to ensure that the commercial radio industry has a central role in the
successful introduction and implementation of the new digital technology.
A consortium of commercial and public radio broadcasters are currently conducting
digital radio trials in Sydney to test listener and advertiser response to the new digital
technology and a range of digital receivers. Macquarie Radio Network is part of this
consortium called Digital Radio Broadcasting Australia Pty Limited.
The Federal Government is currently in consultation with the radio industry in
relation to the development of a policy and regulatory framework for the introduction
…30…
and rollout of digital radio in Australia. At the end of last year, the Federal
4
Government announced that it expects to be in a position to elaborate on a policy
framework for digital radio within 12 months. It also announced that it would not
issue any commercial digital radio licences for an initial period of five years. In a news
release dated 20 December 2004, the Minister for Communications, Information
Technology and the Arts stated that the moratorium on the issue of commercial
digital radio licences “recognises the important contribution incumbent commercial
broadcasters will make in the digital future and provides them some stability in the
early stages of the introduction of digital radio”.
Until a policy and regulatory framework on digital radio has been fully developed,
the impact of digital radio broadcasting on existing commercial operators is difficult
to predict. However, given that Australia has not yet chosen a system for digital
radio, Macquarie Radio Network does not expect digital radio to have an impact on
AM and FM broadcasting in the short to medium term. The Company believes that
the existing AM and FM services will still remain the most important media for radio
services for a number of years.
It is understood that the Australian Government continues to be committed to
reforming media ownership laws.
4.5.2 Proposed Reforms to the Media
Ownership Laws
In March 2002, the Broadcasting Services Amendment (Media Ownership) Bill 2002
(the Bill) was introduced into the House of Representatives. Among other things,
the Bill proposed to amend the Broadcasting Services Act by creating an exemption
scheme that would apply to the existing cross-media ownership restrictions contained
in the Broadcasting Services Act (as outlined in Section 4.4.1 above). However, the
Bill did not propose to change the existing prohibition against a person (including
a company) having control of more than two commercial radio licences in the same
licence area.
After a number of significant amendments to the Bill following Senate Committee
recommendations, the Bill was re-introduced into the House of Representatives in
November 2003, and passed by the House in December 2003. However, the Senate
introduced further amendments to the Bill which were not passed by the House of
Representatives.
As the Government will have a majority in the Senate from July 2005, it is expected
that amendments to the relevant provisions of the Broadcasting Services Act may be
introduced after that time. If this occurs, and if the new bill contains similar provisions
to those in the previous Bill and is enacted, changes in the current ownership and
control of commercial radio licences in the Sydney licence area could change
(eg following mergers and acquisitions in the media sector). Please refer to Section 7
which considers the risk of further competition for Macquarie Radio Network.
1 The Australian Government has decided to merge the Australian Broadcasting Authority with the Australian Communications Authority, to
form the Australian Communications and Media Authority (ACMA). It is understood that the ACMA will commence operation on 1 July 2005.
…31…
Section 5
BOARD, SENIOR MANAGEMENT AND CORPORATE GOVERNANCE
The current Board comprises four non-executive Directors and one executive Director.
5
5.1 Board and Company Secretary
The Chairman of the Board, Max Donnelly, is a non-executive Director.
It is the current intention of the Board to appoint an independent director to the
Board within the next three months from the date of this Prospectus.
Max Donnelly – Non-Executive Chairman
Max Donnelly has been non-executive Chairman of Macquarie Radio Network since
November 2004. Max is currently a partner of Ferrier Hodgson, one of Australia’s
leading turnaround, insolvency and reconstruction management groups. Max has been
involved in insolvency, turnaround consulting and litigation support for over 27 years.
Max is a chartered accountant and holds a Bachelor of Commerce from the University
of New South Wales.
Angela Clark – CEO/Director
Angela Clark has been Chief Executive Officer of Macquarie Radio Network since
May 2004. Prior to joining Macquarie Radio Network, Angela was Managing Director
of JCDecaux Australia Pty Limited for over six years. She is also a director of
Commercial Radio Australia Limited, Digital Radio Australia Pty Limited, JCDecaux
Australia Pty Limited, Bangarra Dance Theatre Australia Limited, Biennale of
Sydney Limited and Performing Lines Limited.
Angela holds an honours degree in Politics, Philosophy and Economics from
Oxford University.
…33…
5
Mark Carnegie – Non-Executive Director
Mark Carnegie joined Macquarie Radio Network as a Director in November 1994, and
is Chairman of the Nomination and Remuneration Committee. Mark is a principal
of Carnegie, Wylie & Company, a boutique advisory house. He has had a near 20-year
career as an investor and corporate adviser in New York, London, and Sydney.
Mark is Chairman of STW, Chairman of EasyCall International Limited, President
Commissioner of PT London Sumatra and a director of EasyCall Asia Limited, DSL
Group Pty Limited, Lonely Planet Publications Pty Limited and Buka Minerals Limited.
Mark holds a Masters degree in Jurisprudence from Oxford University and a Bachelor
of Science (Hons) from Melbourne University.
Russell Tate – Non-Executive Director
Russell Tate joined Macquarie Radio Network as a Director in November 2004.
Russell is Chief Executive Officer of STW, Australia’s second largest advertising and
marketing group, and has over 25 years experience in the advertising industry.
Russell holds a Bachelor of Commerce (Econ.) from the University of New South Wales.
…34…
5
Stephen Chapman – Non-Executive Director
Stephen Chapman joined Macquarie Radio Network as a Director in November 2002,
and is Chairman of the Audit Committee. Stephen is a founder and Chairman of
Baron Partners Limited, an Australian merchant bank. He is also a director of
Blackmores Limited and Hostworks Group Limited. Stephen’s career has given him
wide experience of the strategic and financial issues affecting public companies and
investment markets.
Stephen holds an MBA from the University of Adelaide and a Bachelor of Commerce
from the University of New South Wales.
Kate Thompson – Company Secretary
Kate Thompson joined Macquarie Radio Network as Company Secretary in November
2004, and is Chair of the Compliance Committee. Kate is currently a professional at
Carnegie, Wylie & Company where she works closely with STW Communications
Group Limited. Kate is a director of a number of Carnegie, Wylie investee companies.
Prior to joining Carnegie, Wylie & Company in 2002, Kate practised for over four years
in a number of leading national law firms.
Kate holds an LLB (Hons) from Bond University, Queensland.
…35…
5
5.2 Senior Management
5.3 Corporate Governance
Senior management who are not Directors include:
Name
Year Commenced
Position Held
Merryn Vincent
1999
Chief Operating Officer
Bo Medved
1997
Chief Financial Officer
Chris Parker
2004
Sales Director
John Brennan
2001
2GB Program Director
Ian Holland
1992
2CH Program Director
The Board has the responsibility of ensuring Macquarie Radio Network is properly
managed so as to provide and enhance shareholders’ interests in a manner that is
consistent with Macquarie Radio Network’s responsibility to meet its obligations to all
parties with which it interacts. To assist the Board in the execution of its duties, the
Board has established three committees – the Audit Committee, the Nomination and
Remuneration Committee and the Compliance Committee. The Board is responsible
for appointing and removing committee members. Each committee is empowered to
investigate any matter brought to its attention with full access to all books, records,
facilities and personnel of the Company.
Macquarie Radio Network recognises the importance of corporate governance in
creating value and establishing accountability. The corporate governance framework
for Macquarie Radio Network is underpinned by the ASX Principles of Good
Corporate Governance and Best Practice Recommendations (ASX Guidelines).
Macquarie Radio Network has, however, departed from the ASX Guidelines, as
none of the existing Directors are independent Directors. However, it is the current
intention of the Board to appoint an independent director to the Board within the
next three months from the date of this Prospectus.
Audit Committee
The Audit Committee monitors and reviews the effectiveness of the Company’s
controls in the areas of operational and balance sheet risk, legal and regulatory
compliance and financial reporting. The committee discharges these responsibilities by:
– overseeing Macquarie Radio Network’s relationships with the external auditor and
the external audit function generally; and
– evaluating the processes to ensure that accounting records are properly
maintained in accordance with statutory requirements and financial information
provided to investors and the Board is accurate and reliable.
Members of management and the external auditors attend meetings of the committee
by invitation. The committee may also have access to financial and legal advisers, in
accordance with the Board’s general policy.
…36…
5
The members of the Audit Committee are Max Donnelly, Stephen Chapman and
Russell Tate. Stephen Chapman is Chairman of this committee. The committee
intends to meet with external auditors at least twice a year.
Nomination and Remuneration Committee
The Nomination and Remuneration Committee is responsible for matters relating
to succession planning, recruitment and the appointment and remuneration of the
Directors and the Chief Executive Officer, and overseeing succession planning,
selection and appointment practices and remuneration packages for management and
employees of Macquarie Radio Network. The objectives of the committee include:
– reviewing, assessing and making recommendations to the Board on the desirable
competencies of the Board;
– assessing the performance of the members of the Board;
– overseeing the selection and appointment practices for non-executive Directors
and senior management of Macquarie Radio Network;
– developing succession plans for the Board and overseeing the development of
succession planning in relation to senior management; and
– assisting the Board in determining appropriate remuneration policies.
In making recommendations to the Board regarding the appointment of Directors,
the committee periodically assesses the appropriate mix of skills, experience and
expertise required of the Board and assesses the extent to which the required skills
and experience are represented on the Board.
The committee may obtain information from, and consult with, management and
external advisers, as it considers appropriate.
The members of the Nomination and Remuneration Committee are Max Donnelly,
Mark Carnegie and Angela Clark. Mark Carnegie is Chairman of this committee.
Compliance Committee
The Compliance Committee is responsible for matters relating to the Company’s
compliance under broadcasting legislation and related legislation and codes, including:
– Broadcasting Services Act;
– Broadcasting Services Act – Codes of Practice;
– Broadcasting Services Act Standards;
– Radio Licence Fees Act 1964 (Cth); and
– Privacy Act.
The Compliance Committee is also responsible for ensuring Macquarie Radio
Network complies with the terms and conditions of its two broadcasting licences.
The members of the Compliance Committee include Kate Thompson, Angela Clark,
Merryn Vincent and external legal and accounting advisers. Kate Thompson is Chair
of this committee.
…37…
5
Corporate Governance Policies
The Board will adopt the following corporate governance policies:
Continuous disclosure policy
Macquarie Radio Network places a priority on communication with shareholders and
is aware of the obligations it will have once listed under the Corporations Act and
the ASX Listing Rules to keep the market fully informed of information which is not
generally available and which may have a material effect on the price or value of
the Shares.
The Company will adopt a policy which establishes procedures to ensure that
Directors and management are aware of, and fulfil their obligations in relation to,
the timely disclosure of material price-sensitive information.
Share trading guidelines
Macquarie Radio Network will adopt guidelines that prohibit trading in the Shares
by Directors and staff who possess material price-sensitive information about the
Company. Subject to the overriding restriction that persons may not deal in Shares
while they are in possession of material price-sensitive information, Directors and key
staff will only be permitted to deal in Shares during certain “window periods”. Outside
of these periods, Directors and key staff will not be permitted to deal in Shares.
Remuneration of non-executive Directors
The Constitution provides that the non-executive Directors are each entitled to be
paid such remuneration from the Company as the Directors decide for their services
as a non-executive Director, but the total amount provided to all non-executive
Directors for their services must not exceed in aggregate in any financial year the
amount fixed by the Company in general meeting. This amount has been fixed by
the Company not to exceed $200,000 for the financial year ending 30 June 2005.
The remuneration of non-executive Directors must not include a commission on,
or a percentage of, profits or operating revenue. Directors may also be reimbursed
for travelling and other expenses incurred in attending to the Company’s affairs.
Directors may be paid such additional or special remuneration as the Directors decide
is appropriate where a Director performs extra services or makes special exertions for
the benefit of the Company.
Deed of access, insurance and indemnity
Macquarie Radio Network has or will execute a deed of access, indemnity and insurance
in favour of each Director and executive officer of the Company. The indemnity is
subject to the restrictions prescribed in the Corporations Act. The deed also gives
each Director and executive officer of the Company a right of access to Board
papers and requires the Company to maintain insurance cover for the Directors and
executive officers of the Company. The Company has arranged for this insurance.
…38…
Section 6
6
6.1 Introduction
FINANCIAL INFORMATION
This section contains a summary of the historical and forecast financial information
for Macquarie Radio Network (Financial Information).
The Financial Information comprises:
– a summary of the historical financial performance of Macquarie Radio Network for
each of the three years to 30 June 2004 and the six months to 31 December 2004,
together with the Directors’ Forecasts; and
– a summary of the historical cash flow of Macquarie Radio Network for the
12 months ending 30 June 2004 and the Directors’ cash flow forecast for the
12 months ending 30 June 2005 (the cash flow forecast for the 12 months ending
30 June 2005 includes the Company’s actual cash flow for the six months ending
31 December 2004).
The statement of financial position for Macquarie Radio Network for each of the three
years to 30 June 2004, as at 31 December 2004 and, on a pro-forma basis as at
31 December 2004, is set out in The Investigating Accountant’s Report in Section 8.
The Financial Information contained in this Prospectus complies with Australian
Accounting Standards, other authoritative pronouncements of the Australian
Accounting Standards Board, Urgent Issues Group Consensus Views and the
Corporations Act.
The Company’s accounting policies are set out in the notes to the financial statements
contained in Section 8 and have been consistently applied throughout the period.
In preparing this special purpose information, consideration has been given to the
requirements of International Financial Reporting Standards (IFRS). The new
standards are to be adopted for all entities reporting under the Corporations Act for
financial years commencing on or after 1 January 2005. Accordingly, Macquarie Radio
Network will be required to report under IFRS for the year ending 30 June 2006.
The table following sets out the historical financial information of Macquarie Radio
Network and the Directors’ Forecast information.
…40…
Historical
Forecast
Audited
Reviewed
Years ended 30 June
2002
(1)
Six months ended
31 December
Year ended
30 June
2003
2004
2004
2005
Revenues
20,153
37,182
43,034
22,146
39,506
Expenses
25,349
31,398
34,297
16,912
31,739
EBITDA
(5,196)
5,784
8,737
5,234
7,767
757
726
404
785
(5,908)
5,027
8,011
4,830
6,982
1,091
2,111
1,924
863
1,401
(6,999)
2,916
6,087
3,967
5,581
(6,905)
1,361
1,878
12,991
2,606
3,703
Dep. and amort
EBIT
Interest (net)
Net profit/(loss) before tax
Income tax expense
Net profit/(loss) after tax
712
–
(6,999)
–
2,916
(i) Basis of Preparation and Presentation
6
6.2 Historical and Forecast
Financial Results ($000)
(1) Forecast financial information for the year
ended 30 June 2005 is derived from the
Directors’ Forecasts.
6.3 Historical Financial Information
The historical financial information in this section has been extracted from
the historical financial information and the financial statements set out in the
Investigating Accountant’s Report in Section 8.
The historical financial performance information has been presented to specifically
show the details of net interest as the debt structure of Macquarie Radio Network
after the Offer will be different to historical levels. Please refer to paragraph (iii) of
Section 6.7 for further details.
The summary of the historical financial performance for each of the three years to
30 June 2004 and the six months to 31 December 2004 does not include any costs
associated with operating as a publicly listed company. Additional costs associated
with a listed public company structure have been assumed for the purposes of the
Directors’ Forecasts (from the assumed date of listing).
(ii) Analysis of Historical Financial Information
FY 2003 compared to FY 2002
Revenue
Revenue increased by 84.5%, an increase of $17.03 million to $37.18 million for the
twelve months ended 30 June 2003. The increase in revenue related primarily to
growth in advertising revenues and improved market share compared to the prior year.
…41…
6
Expenses
Expenses increased by 23.9%, an increase of $6.05 million to $31.40 million for the year
ended 30 June 2003. The increase in expenses related primarily to the renegotiation
of key personnel contracts during the year.
FY 2004 compared to FY 2003
Revenue
Revenue increased by 15.7%, an increase of $5.85 million to $43.03 million for the
twelve months ending 30 June 2004. The increase in revenue related primarily to
strong growth in metropolitan advertising revenue for the year and an increase in
Macquarie Radio Network’s market share compared to the prior year.
Expenses
Expenses increased by 9.2%, an increase of $2.89 million to $34.30 million for the
year ended 30 June 2004. The increase in expenses related primarily to increased
variable sales costs, increased content costs and the renegotiation of key personnel
contracts during the year.
6.4 Forecast Financial Information
(i) Basis of Preparation and Presentation
The Directors’ Forecasts have been prepared in accordance with Australian generally
accepted accounting principles for use in the Prospectus. Subject to the continuous
disclosure requirements imposed on a publicly listed company, Macquarie Radio
Network does not intend to update this information.
The Directors’ Forecasts comprise prospective financial information, which is based
on a number of assumptions and is subject to significant economic, industry and
competitive uncertainties, many of which will be outside the control of the Directors
and are not predictable on a reliable basis. The Directors’ Forecasts represent the
Directors’ assessment, based on present circumstances, of the expected operating,
financial and economic conditions facing the Company and its most likely future
performance. The Directors have used due care and attention in the preparation of
the Directors’ Forecasts and consider the assumptions to be reasonable when viewed
as a whole. However, this information is not fact and you are cautioned not to place
undue reliance on the Directors’ Forecasts.
Events and circumstances often do not occur as anticipated and therefore actual
results are likely to differ from the Directors’ Forecasts and these differences may be
material. Accordingly, neither the Directors nor any other person can give assurance
that the forecast financial information will be achieved.
At the date of this Prospectus, there have not been any events of a material nature
or any material change in the business operations or financial position of Macquarie
Radio Network that are likely to impact materially on the Directors’ Forecasts.
…42…
6
The Directors’ Forecasts should be read in conjunction with this Prospectus in its
entirety, the risk factors set in Section 7, the key assumptions set out below and the
sensitivity analysis also set out below.
Horwath Investment Services Pty Limited’s review of the Directors’ Forecasts is
provided in Section 9.
The material best estimate assumptions made by the Directors in preparing the
Directors’ Forecasts are set out below. In the course of formulating the Directors’
Forecasts, the Directors have relied on each of the assumptions being and remaining
accurate and applicable throughout the Forecast Period.
(ii) Analysis of Forecast Financial Information
FY2005 compared to FY2004
Revenue
Revenue is forecast to decrease by 8.2%, a decrease of $3.53 million to $39.51 million
for the year ending 30 June 2005. The decrease in forecasted revenue to FY2005
compared to FY2004 relates to atypical incremental revenue in FY2004, in part
due to Rugby World Cup and a weaker than anticipated sales performance. Senior
management and other staff changes have been made to the agency sales team and
the Directors believe that performance will improve in the mid to longer term.
Expenses
Expenses are forecast to decrease by 7.5%, a decrease of $2.56 million to $31.74
million for the year ending 30 June 2005. The decrease in forecasted expenses relates
primarily to a reduction in variable sales commissions, cost control measures in
general expenditure and a reduction in external consultants and staff restructuring.
(iii) General Assumptions
Continuity of Operations
There will be no significant disruption to the broadcasting operations of Macquarie
Radio Network or loss of key personnel.
Accounting Policies
There will be no material change in the accounting policies that Macquarie Radio
Network expects to adopt and no material change in Australian Accounting
Standards, Statements of Accounting Concepts or other mandatory professional
reporting requirements, being Urgent Issues Group Consensus Views and the
Corporations Act, which will have a material effect on the Company’s financial results.
Taxation Legislation
There will be no change in the taxation legislation that will have a material impact
during the Forecast Period.
…43…
6
Regulatory Environment
There will be no substantial changes in the existing regulatory environment in which
Macquarie Radio Network operates. The Directors’ Forecasts assume that current
regulatory restrictions on radio licences remain consistent over the Forecast Period
and the Company continues to comply with the regulatory requirements administered
by the ABA.
Economic Environment
The Directors acknowledge the link between advertising expenditure and the overall
state of the Australian economy. It has been assumed that economic growth will
continue during the Forecast Period.
Acquisitions and Investments
The Forecast Information assumes no acquisitions or investments are made during
the Forecast Period.
(iv) Specific Assumptions
Radio Revenues
Radio revenues are forecast to decrease by 8.2% in the year ending 30 June 2005;
notwithstanding, the Board believes that radio revenues should increase in the year
ending 30 June 2006.
Forecast radio revenues refect the following assumptions:
– Macquarie Radio Network’s percentage share of advertising revenue from direct
sales declines by 4.5% because of increased competition from commercial radio
stations in the NSW direct sales market;
– improvements in revenue share due to senior management and staff changes in
the agency sales team not expected to have a positive impact in the short term;
– 2GB continues to rate within the top three commercial radio stations in the
Sydney metropolitan market; and
– emerging broadcast technologies, including Internet and digital do not have a
material impact on revenues.
Radio Expenses
Forecast radio expenses reflect the following assumptions:
– costs for key personnel are based on existing staff levels and on existing contracts;
– ABA licence fees are based on forecast advertising revenue. APRA fees are based
on advertising revenue and the expected programming mix;
– local commissions are based on the attainment of 100% of sales targets;
– agency commissions are based on existing agency rates; and
– costs associated with being a listed company, including share registry, production
of interim and annual reports, audit fees and Directors’ fees, have been
incorporated into the cost structure.
Interest Expense
– no change to the ANZ reference rate or the ANZ margin.
…44…
6
(v) Sensitivity Analysis
The Forecast Information is based on certain economic and business assumptions
about future events, detailed above in paragraphs(iii) and (iv) of Section 6.4.
Set out below is a summary of the sensitivity of the Forecast Information to variations
in a number of these key variables. The changes in the key variables set out in
the sensitivity analysis are not intended to be indicative of the complete range of
variations that may be experienced in the year ending 30 June 2005.
Care should be taken in interpreting these sensitivities. The impact of changes in
each of the variables has been calculated in isolation from changes in other variables
over the full year. In practice, changes in variables may offset each other or may
be cumulative, and it is likely that Macquarie Radio Network’s management would
respond to any adverse change in one variable by taking action to minimise the net
effect on the Company’s earnings.
The sensitivities below reflect the impact on the Directors’ Forecasts.
Radio Revenues
A one percentage point increase or decrease in Macquarie Radio Network’s radio
revenues could be expected to impact the Company’s NPAT by $101,000.
Radio Expenses (other than those directly attributable to radio revenues)
A one percentage point increase or decrease in Macquarie Radio Network’s radio
expenses could be expected to impact the Company’s NPAT by $59,000.
Interest Rates
A one percentage point increase or decrease in interest rates on variable rate debt
facilities could be expected to impact the Company’s NPAT by $75,000.
The table below sets out the historical cash flow summary for the year ending 30 June
6.5 Forecast Cashflow Summary
2004, and the Directors’ forecast cash flow summary for the year ending 30 June 2005.
Years to 30 June
EBITDA
Movement in working capital
Net interest
Net operating cashflow
Net capital expenditure
Loan repayments
– Bank
– Shareholders (2)
NET CASHFLOW
2004
(Actual)
$000
2005
(Forecast)(1)
$000
8,737
7,767
555
(1,924)
7,575
5,457
(611)
(626)
(5,999)
(1,125)
965
(2) Excludes repayment of debts owed by
Macquarie Radio Network to the Founding
Shareholders from the proceeds of the Offer.
(386)
(1,717)
–
(1) Comprises the actual cash flow summary
to 31 December 2004 and the Directors’ cash
flow summary to 30 June 2005.
(1,800)
1,906
…45…
6
6.6 Pro-Forma Balance Sheet
The pro-forma statement of financial position of Macquarie Radio Network as at
31 December 2004, together with the assumptions used in its compilation, is set out
in Annexure B of the Investigating Accountant’s Report in Section 8.
The pro-forma statement of financial position of Macquarie Radio Network as at
31 December 2004 assumes the completion of the pro-forma transactions and
adjustments referred to in the Investigating Accountant’s Report in Section 8.
6.7 Other
(i) Taxation Losses
In FY 2004, Macquarie Radio Network and its wholly-owned entities:
– were consolidated for taxation purposes under the Tax Consolidation System; and
– brought to account the future income tax benefits not previously recognised in
respect of tax losses, net of timing differences.
The statement of financial position as at 31 December 2004 (refer to Annexure A
of the Investigating Accountant’s Report in Section 8) notes:
– a future income tax benefit of $6.259 million pertaining to tax losses; and
– the provision for deferred income tax liability of $0.716 million pertaining to
timing differences.
The net tax benefit as at 31 December 2004 of $5.543 million, grossed up at the 30%
corporate tax rate, equates to taxable income of $18.47 million. If Macquarie Radio
Network’s future pre-tax accounting profit and its taxable income were equal and
based on the 30 June 2005 net profit before tax forecast of $5.58 million, Macquarie
Radio Network would not be liable to pay tax until the 30 June 2008 financial year.
(ii) Dividend Policy
The dividend policy of Macquarie Radio Network is detailed in Section 1.6 and states
that “subject to Macquarie Radio Network achieving sufficient profits and not requiring
profits to fund further expansion, the Company intends to distribute at least 60% of
net earnings in dividends and to frank dividends to the extent that it is able to do.”
As a consequence of the taxation losses discussed above in paragraph (i) of Section
6.7, Macquarie Radio Network may not be in a position to pay franked dividends until
at least October 2008.
(iii) Financing Facilities
Macquarie Radio Network and each of its subsidiaries (from when they became
subsidiaries) have always banked with ANZ.
…46…
6
As at 31 December 2004, Macquarie Radio Network’s banking facilities with the
ANZ included:
Facility
$000
Term facilities
Overdraft
Guarantees
Cash
Net
21,289
Drawdown
$000
(1) As per Note 11 of Annexure A of the
Investigating Accountant’s Report in
Section 8.
21,289 (1)
250
–
1,324
1,004
22,863
22,293
–
4,197
22,863
18,096
Macquarie Radio Network is under no obligation to make any repayments of the term
facilities until March 2008. Up until 30 September 2004, Macquarie Radio Network
was repaying the term facilities at the rate of $1.125 million each quarter.
(iv) International Financial Reporting Standards
The Australian equivalent of IFRS will apply to Macquarie Radio Network from
1 July 2005. Further considerations, and the consequences of the adoption of the
Australian equivalents, are specifically discussed under note 1 of Annexure A of the
Investigating Accountant’s Report in Section 8.
…47…
Section 7
RISK FACTORS
7
This section identifies the areas that the Directors regard as the major risks associated
with an investment in Macquarie Radio Network.
Macquarie Radio Network’s business activities are subject to risk factors, both specific
to its business activities and of a general nature. Individually, or in combination,
these might affect the future operation and financial performance of Macquarie Radio
Network and the value of an investment in the Company.
If any of the risks associated with an investment in Macquarie Radio Network are
realised, Macquarie Radio Network’s business, results of operations, financial
condition and prospects could be materially and adversely affected, which could
result in the loss of all or part of your investment.
Some of these factors can be mitigated by the use of safeguards and appropriate
systems and controls but many are outside the control of the Company and cannot
be mitigated. In addition, potential investors should be aware that the value of the
Shares might rise and fall depending on a range of factors that affect the market
price of securities. These include local, regional and global economic conditions and
sentiment towards equity markets in general.
The Shares issued under this Prospectus carry no guarantee with respect to the
profitability, the payment of dividends, return of capital or the price at which the
Shares may trade on the ASX.
Before making a decision to apply for Shares, prospective investors should carefully
consider the following risk factors, as well as the other information contained in
this Prospectus.
7.1 General Risks
Stock market fluctuations in Australia and other stock markets around the world may
7.1.1 Stock Market Fluctuations
negatively affect the value of the Shares. Factors that may influence the investment
climate in stocks, which may not relate to actual performance of Macquarie Radio
Network, include the general economic outlook, movements in commodity prices,
exchange rate movements, interest rates, inflation and political developments.
Both Australian and world economic conditions may negatively affect Macquarie
7.1.2 General Economic Conditions
Radio Network’s performance. Any protracted slow down in economic conditions or
factors such as the level of production in the relevant economy, inflation, currency
fluctuation, interest rates, supply and demand and industrial disruption may have a
negative impact on Macquarie Radio Network’s costs and revenue. These changes
could adversely affect Macquarie Radio Network’s operations and earnings.
…49…
7
7.2 Risks Specific to Macquarie Radio Network
RISK FACTORS
The following matters, as well as others described elsewhere in this Prospectus, should
be carefully considered in evaluating Macquarie Radio Network and its prospects.
7.2.1 Advertising Market Conditions
Macquarie Radio Network’s radio revenues are dependent on the ongoing strength
of the general advertising market in Australia which in turn is linked to the level of
economic growth.
If there is a general weakening in the Australian economy, Macquarie Radio Network’s
revenues and operating results might be adversely impacted.
7.2.2 Loss of Key Personnel
The success of Macquarie Radio Network depends on the continued services of
Macquarie Radio Network’s radio presenters. The loss of services of one or more of
these people may have a material adverse effect on the Company’s business.
In addition, the senior managers of Macquarie Radio Network have the responsibility
of overseeing the day-to-day operations and strategic management of Macquarie
Radio Network. There can be no assurance that there will be no detrimental impact
on the Company if one or more of these key employees were to cease employment
with Macquarie Radio Network.
7.2.3 Regulation
The commercial radio industry is highly regulated in the areas of licensing, planning,
ownership and control. It is also subject to content regulation. Any changes to
commercial radio broadcasting legislation or policy in relation to the industry
could impact Macquarie Radio Network and its financial position and profitability.
Examples of regulatory or policy changes which could affect Macquarie Radio
Network include additional restrictions on advertising time and additional content
and programming restrictions.
7.2.4 Competition from Other Forms of Media
Macquarie Radio Network competes for audience share and advertising revenues
with other media such as newspapers, television, magazines, cinema and the Internet.
Alternative forms of media could become more attractive for advertisers as a result,
for example, of cost reductions or improvement in the ability to target audiences.
Any of these circumstances could adversely impact on the radio advertising market
as a whole, and in turn on Macquarie Radio Network’s revenue and profitability.
7.2.5 Competition from Other Radio
Stations or Radio Groups
Macquarie Radio Network is and will be subject to competition from other radio
groups or individual stations in Australia. Macquarie Radio Network’s radio stations
compete for audience share and advertising revenue with other commercial and
government-owned radio broadcasters. Macquarie Radio Network’s operations are
subject to the possibility of one of its competitors changing its programming formats
to compete directly for listeners and advertisers or launching an aggressive
promotional campaign in support of an already existing competitive format.
…50…
RISK FACTORS
7
If a competitor, particularly one with substantial financial resources, instituted
either of these methods to compete with Macquarie Radio Network, the cash flow
of the affected Macquarie Radio Network station might decrease due to increased
promotion and other expenses and/or lower audience share resulting in lower
advertising revenue. There are no assurances that any one of Macquarie Radio
Network’s radio stations will be able to maintain or increase its current audience
share and revenue market share. Furthermore, Macquarie Radio Network’s radio
operations are subject to the risk of competition from non-Australian companies
because the ABA does not prohibit foreign ownership of Australian radio licences.
The proposed changes to the existing cross-media control restrictions outlined in
Section 4.4.1 could also result in changes in the identity of holders of commercial radio
broadcasting licences, thereby increasing Macquarie Radio Network’s competition.
Ratings are the key driver of advertising pricing and revenue. A material drop in
7.2.6 Ratings
ratings could materially adversely impact Macquarie Radio Network’s revenues,
cash flows and operating results.
As outlined in Section 4.4, the ABA is the regulatory authority which oversees the
7.2.7 New Commercial Radio Licences
allocation of commercial radio broadcasting licences in accordance with the
regulatory scheme under the Broadcasting Services Act.
As noted, in September 2003, the ABA announced its intention not to allocate any
new analog AM or FM commercial radio broadcasting licences within five years of the
last allocation in each licence area. Applying this policy in the Sydney licence area, no
additional analog commercial radio licences are expected to be allocated in Sydney
for at least five years from 15 April 2004, being the date of the ABA’s last allocation
of an analog commercial radio licence in Sydney (on 15 April 2004, the ABA issued a
new FM licence to DMG Radio Australia).
Any issue of new radio licences in the same market in which Macquarie Radio
Network operates (including the recent issue of the new FM licence to DMG Radio
Australia) is likely to increase the level of competition faced by Macquarie Radio
Network, and may impact adversely on Macquarie Radio Network’s ratings and
advertising revenue.
…51…
7
7.2.8 Loss of Radio Licences
RISK FACTORS
Macquarie Radio Network and its licensees are required to comply with all the
regulatory obligations under the Broadcasting Services Act. This includes compliance
with the licence conditions, the Commercial Radio Standards and the Commercial
Radio Codes of Practice.
Under the Broadcasting Services Act, a company is a suitable licensee unless the ABA
decides otherwise. The ABA may consider a licensee to be unsuitable if it is satisfied
that allowing a particular company to provide or to continue to provide commercial
broadcasting services under a licence would lead to a significant risk of an offence
against the Broadcasting Services Act or the Broadcasting Services Regulations being
committed, or a breach of the conditions of licence occurring.
The issue of suitability is relevant to the renewal of licences. As noted in Section
4.4.1, the Broadcasting Services Act requires Macquarie Radio Network to seek
renewal of its commercial radio broadcasting licences every five years.
As noted in Section 4.4.1, the ABA has recently renewed the radio licences held by
Radio 2CH and Harbour Radio for a further five years.
If either of the Macquarie Radio Network licensees were to be in breach of a condition
of its licence, it would be guilty of an offence under the Broadcasting Services Act.
In such circumstances, there are a number of enforcement remedies available to the
ABA. For example, the ABA may issue a notice that requires action to be taken to
ensure that the service is provided in a way that conforms to the conditions of the
licence, or in an extreme case, suspend or cancel the broadcasting licence (this is also
a remedy available where an enforcement notice is not complied with).
Again, Macquarie Radio Network is not aware of any matter that would be likely to
result in such enforcement action being taken by the ABA. However, these provisions
are noted here to illustrate circumstances in which radio licences could be lost.
7.2.9 New Technology
The radio broadcasting industry is subject to rapid technological change, evolving
industry standards and the emergence of new media technologies. One example of a
new technology currently under development in the industry is digital radio, which
enables multi-channelling, superior sound and a more efficient delivery of content
(refer to Section 4.5.1 for further information on digital radio).
Macquarie Radio Network’s ability to compete effectively in the future may be
impacted by its ability to maintain or develop appropriate technologies, and by
Government decisions about the use of such technologies. No assurance can be given
that Macquarie Radio Network will have the resources to acquire new competitive
technologies, or to introduce new services using its existing technological capabilities
that could compete with these new technologies. In addition, maintaining or
developing appropriate technologies may require significant capital investment by
Macquarie Radio Network, which may impact on Macquarie Radio Network’s ability to
pay dividends in the future.
…52…
RISK FACTORS
The risk of litigation (particularly risks associated with defamation litigation) is
7
7.2.10 Litigation Risk
a general risk of any radio broadcaster such as Macquarie Radio Network. So far as
Macquarie Radio Network is aware, however, there is no current, pending or
threatened litigation, arbitration proceedings, administrative appeals or criminal or
governmental prosecution in which Macquarie Radio Network is directly or indirectly
concerned which is likely to have a material adverse effect on the business or financial
position of Macquarie Radio Network. There are, however, existing defamation actions
and claims which are yet to be resolved. Refer to Section 10 for further information in
relation to the existing defamation actions and claims.
There are 6 Sydney AM Broadcasters (including 2GB and 2CH) whose transmitter
7.2.11 Transmitter Sites
sites are located at Homebush Bay. Leases on these sites are subject to expiration
from 2008. Financial consequences of gaining access to suitable transmission facilities
are yet to be determined.
The Shares offered pursuant to this Prospectus carry no guarantee with respect to
7.2.12 Investment Returns
return of capital or the price at which the Shares will trade on the ASX. If you are in
any doubt whether you should invest in Macquarie Radio Network you should seek
advice from your stockbroker, accountant or other professional or financial adviser.
Macquarie Radio Network’s actual results may be different from those contained in
7.2.13 Additional Risks
the Directors’ Forecasts included in this Prospectus.
…53…
Section 8
INVESTIGATING ACCOUNTANT’S REPORT
8
14 March 2005
The Directors
Level 1, Building C
33-35 Saunders Street
PYRMONT NSW 2009
Dear Directors,
1. Introduction
We have prepared this Investigating Accountant’s Report (“the Report”) at the
request of the Directors of Macquarie Radio Network Limited (the “Company”),
for inclusion in the Prospectus to be dated on or about 14 March 2005 relating to
the offer by the Company of 3,160,000 Shares and its listing on the ASX.
Expressions and other terminology defined in the Prospectus have the same meaning
in this Report.
2. Scope
We have been requested to prepare the Report covering the following financial
historical information of the Company as set out in Annexures A and B of this Report:
–
Annexure A - historical financial information comprising the historical
statements of financial position as at 30 June 2002, 30 June 2003, 30 June 2004
and 31 December 2004 and the historical statements of financial performance
and statements of cash flows for the years ended 30 June 2002, 30 June 2003,
30 June 2004 and the six months ended 31 December 2004; and
–
Annexure B - pro-forma financial information comprising the pro-forma
statement of financial position as at 31 December 2004 which assumes
completion of the pro-forma transactions and adjustments as noted therein
(the “Pro-Forma Financial Information”).
The historical financial information for the years ended 30 June 2002, 30 June 2003
and 30 June 2004 has been extracted from the statutory financial statements of
the Company which were audited by Horwath Sydney Partnership and on which
unqualified audit opinions were issued.
The historical financial information for the six months ended 31 December 2004
has not been audited. The Horwath Sydney Partnership conducted a review of the
financial statements of the Company for the six months ended 31 December 2004.
The Directors have prepared and are responsible for the historical financial
information and Pro-Forma Financial Information. We disclaim any responsibility
for any reliance on this Report or on the financial information to which it relates for
…55…
8
any purposes other than that for which it was prepared. This Report should be read
in conjunction with the full Prospectus.
Audit of Historical Financial Information
We have conducted an independent audit of the historical financial information for
the years ended 30 June 2002, 30 June 2003 and 30 June 2004, in order to express
an audit opinion. Our audit has been conducted in accordance with Australian
Auditing and Assurance Standards applicable to audit engagements to provide
reasonable assurance whether the historical financial information is free of material
misstatement. Our procedures included examination, on a test basis, of evidence
supporting the amounts and other disclosures in the historical financial information,
and the evaluation of accounting policies and significant accounting estimates. These
procedures have been undertaken to form an opinion as to whether, in all material
respects, the historical financial information is presented fairly in accordance with
the measurement and recognition requirements of applicable Accounting Standards
and other mandatory professional reporting requirements in Australia, so as to
present a view which is consistent with our understanding of the Company’s financial
position and performance as represented by the results of its operations, and its cash
flows for the years ended 30 June 2002, 30 June 2003 and 30 June 2004.
Review of Historical Financial Information
We have conducted an independent review of the historical financial information
for the period ended 31 December 2004, in order to state whether on the basis of
the procedures described below, anything has come to our attention that would
cause us to believe that the historical financial information is not presented fairly
in accordance with the measurement and recognition requirements of the
applicable Accounting Standards and other mandatory professional reporting
requirements in Australia.
Our review has been conducted in accordance with Australian Auditing and
Assurance Standards applicable to review engagements and has been limited to
a reading of relevant Directors’ minutes, inquiries of management personnel,
analytical procedures applied to the financial data and certain limited verification
procedures. These procedures do not provide all the evidence that would be
required in an audit, thus the level of assurance is less than that given in an audit.
We have not performed an audit for the six month period ended 31 December 2004
and accordingly, we do not express an audit opinion on the historical financial
information relating to that period.
Review of Pro-Forma Financial Information
We have conducted an independent review of the Pro-Forma Financial Information
in order to state whether, on the basis of the procedures described below, anything
has come to our attention that would cause us to believe that the Pro-Forma
Financial Information is not presented fairly in accordance with the measurement
…56…
and recognition requirements (but not all of the disclosure requirements) of the
8
applicable Accounting Standards and other mandatory reporting requirements in
Australia as if the pro-forma transactions and adjustments set out in Annexure B
of this Report had occurred during the applicable periods.
Our review has been conducted in accordance with Australian Auditing
Standards applicable to review engagements and has been limited to a reading
of relevant Directors’ minutes, reading of appropriate legal documents, inquiries
of management’s personnel and analytical review procedures applied to the
financial data. We have also assessed whether the pro-forma transactions and the
adjustments form a reasonable basis for the preparation of the Pro-Forma Financial
Information. These procedures do not provide all the evidence that would be
required in an audit, thus the level of assurance provided is less than given in an
audit. We have not performed an audit of the Pro-Forma Financial Information and,
accordingly, we do not express an audit opinion.
3. Opinion and Statement
Audit Opinion on Historical Financial Information
In our opinion, the historical financial information of the Company, comprising the:
–
historical statement of financial position as at 30 June 2002, 30 June 2003 and
30 June 2004;
–
historical statement of financial performance for the years ended 30 June 2002,
30 June 2003 and 30 June 2004;
–
historical statement of cash flows for the years ended 30 June 2002,
30 June 2003 and 30 June 2004; and
–
notes to the financial information,
as set out in Annexure A of this Report and in Section 6, presents fairly, in
accordance with the measurement and recognition requirements of applicable
Australian Accounting Standards and other mandatory professional reporting
requirements in Australia, the financial performance of the Company as
represented by the results of its operations and its cash flows for the years ended 30
June 2002, 30 June 2003 and 30 June 2004.
Review Statement on Historical Financial Information
Based on our review, which was not an audit, nothing has come to our attention
which would cause us to believe the:
–
historical statement of financial performance for the six month period ended
31 December 2004;
–
–
historical statement of financial position as at 31 December 2004;
historical statement of cash flows for the six month period ended 31 December
2004; and
–
notes to the financial information,
as set out in Annexure A of this Report and in Section 6, does not present fairly, in
accordance with the measurement and recognition requirements of applicable
…57…
8
Accounting Standards and other mandatory professional reporting requirements
in Australia, the financial position of the Company as at 31 December 2004 and its
performance as represented by the results of its operations and its cash flows for the
six month period ended 31 December 2004.
Review Statement on Pro-Forma Financial Information
Based on our review, which was not an audit, nothing has come to our attention,
which would cause us to believe the Pro-Forma Financial Information as set
out in Annexure B of this Report and in Section 6, does not present fairly the
financial position of the Company as at 31 December 2004, in accordance with
the measurement and recognition requirements (but not all the disclosure
requirements) of applicable Accounting Standards and other mandatory
professional reporting requirements in Australia, as if the pro-forma transactions
as set out in Annexure B of this Report had occurred at that date.
4. Subsequent Events
Apart from the matters dealt with in this Report and having regard to the scope of
our Report, to the best of our knowledge and belief, there have been no material
items, transactions or events outside the ordinary business of the Company
subsequent to 31 December 2004 that have come to our attention which require
comment on, or adjustment to, the information referred to in our Report or that
would cause such information to be misleading or deceptive.
5. Disclosure
The Horwath Sydney Partnership does not have any pecuniary interests that could
reasonably be regarded as being capable of affecting its ability to give an unbiased
opinion in relation to this matter. Horwath Sydney Partnership is the auditor of
the Company and together with Horwath (NSW) Pty Limited provides professional
services including both audit and tax services. Horwath Sydney Partnership will
receive a professional fee for the preparation of the Report. The partners of Horwath
Sydney Partnership do not hold or have any interest in shares in the Company.
Consent to the inclusion of the Investigating Accountant’s Report in this Prospectus
in the form and context in which it appears has been given. At the date of this
Report, consent has not been withdrawn.
Yours faithfully,
HORWATH SYDNEY PARTNERSHIP
David Green
…58…
Partner
Annexure A
STATEMENT OF FINANCIAL PERFORMANCE – CONSOLIDATED
MACQUARIE RADIO NETWORK LIMITED
Notes
Year ended
30 Jun 2002
$000
Year ended
30 Jun 2003
$000
20,153
Audited
Reviewed
37,188
43,098
22,197
(15,365)
(19,490)
(20,132)
(10,216)
(712)
(757)
(726)
(404)
Legal and professional
(1,759)
(1,055)
(1,556)
(735)
Advertising and promotion
(2,516)
(2,537)
(1,993)
(1,090)
Lease expense
(776)
(675)
(749)
(456)
Royalties and licences
(939)
(1,430)
(1,609)
(1,440)
Commissions
(741)
(1,358)
(1,403)
(1,023)
News and broadcasting
(757)
(1,731)
(2,142)
(549)
Utilities and telephone
(765)
(708)
(801)
(361)
Total revenues from
operating activities
2
Employee benefits
Depreciation and amortisation
3
Insurances
Other
Borrowing costs
3
Profit (loss) from ordinary
activities before income tax
Income tax attributable to
operating profit (loss)/benefit
4
Audited
Audited
Year ended 6 months ended
30 Jun 2004
31 Dec 2004
$000
$000
(198)
(421)
(470)
(285)
(1,533)
(1,993)
(3,442)
(757)
(1,091)
(2,117)
(1,988)
(914)
(6,999)
2,916
6,087
3,967
–
6,904
(1,361)
–
Profit (loss) from ordinary
activities after income tax
15
(6,999)
2,916
12,991
2,606
Total changes in equity other
than those resulting from
transactions with owners
as owners
16
(6,999)
2,916
12,991
2,606
The accompanying notes form part of these financial statements.
…59…
8
STATEMENT OF FINANCIAL POSITION – CONSOLIDATED
Notes
Year ended
30 Jun 2002
$000
Audited
Year ended
30 Jun 2003
$000
Audited
Year ended
30 Jun 2004
$000
Audited
6 months ended
31 Dec 2004
$000
Reviewed
Current Assets
Cash
19
753
355
1,140
4,197
Receivables
5
6,060
6,770
6,639
5,813
Other
6
178
771
1,261
697
6,991
7,896
9,040
10,707
Total Current Assets
Non-current Assets
Property, plant and equipment
7
1,263
6,058
5,943
5,787
Deferred tax asset
8
–
–
7,706
6,259
Intangibles
9
15,203
15,203
15,203
15,203
Other
6
3,809
3,238
2,095
2,001
Total Non-current Assets
20,275
24,499
30,947
29,250
Total Assets
27,266
32,395
39,987
39,957
10
6,790
5,101
5,068
11,325
Interest-bearing liabilities
11
16,669
5,212
4,511
11
Provisions
12
70
55
155
92
23,529
10,368
9,734
11,428
Current Liabilities
Payables
Total Current Liabilities
Non-current Liabilities
Payables
10
8,416
8,416
7,575
–
11
7,300
22,581
17,946
21,315
Deferred tax liability
13
–
–
801
716
Provisions
12
188
281
190
151
Total Non-current Liabilities
15,904
31,278
26,512
22,182
Total Liabilities
39,433
41,646
36,246
33,610
(12,167)
(9,251)
3,741
6,347
1,400
1,400
1,400
1,400
NET ASSETS/(DEFICIENCY)
Equity
…60…
Contributed equity
14
Retained profits/
(Accumulated losses)
15
(13,567)
(10,651)
2,341
4,947
TOTAL EQUITY (DEFICIENCY)
16
(12,167)
(9,251)
3,741
6,347
STATEMENT OF CASH FLOWS – CONSOLIDATED
8
Notes
Year ended
30 Jun 2002
$000
Audited
Year ended
30 Jun 2003
$000
Audited
Year ended
30 Jun 2004
$000
Audited
6 months ended
31 Dec 2004
$000
Reviewed
Cash flow from
Receipts from customers
Payments to suppliers
and customers
Interest received
36,472
43,165
22,795
(21,745)
(32,999)
(33,667)
(17,471)
–
Borrowing costs
Net cash (used in) provided
by operating activities
17,656
19(b)
6
65
(1,197)
(2,117)
(1,988)
(5,286)
1,362
7,575
–
–
228
(914)
4,638
Cash flow from
investing activities
Payment for investments
–
(90)
Payment for property, plant
and equipment
(732)
(5,345)
(611)
(360)
Net cash used in investing
activities
(732)
(5,345)
(611)
(450)
Cash flow from
financing activities
Proceeds from borrowings
7,139
Repayment of borrowings
(226)
Net cash (used in) provided by
financing activities
6,913
Net increase (decrease)
in cash held
Cash at beginning of year/period
Cash at the end of
the year/period
19(a)
3,436
(31)
3,405
–
–
(5,999)
(1,131)
(5,999)
(1,131)
895
(578)
965
3,057
(142)
753
175
1,140
753
175
1,140
4,197
…61…
8
NOTES TO THE FINANCIAL STATEMENTS – CONSOLIDATED
1.STATEMENT OF ACCOUNTING POLICIES
Macquarie Radio Network Limited is a company incorporated and domiciled
in Australia.
The historical and Pro-Forma Financial Information (Annexure B) has been
consistently prepared throughout the reporting period in accordance with the
measurement and recognition requirements of applicable Australian Accounting
Standards and other mandatory professional reporting requirements in Australia.
Principles of Consolidation
The consolidated financial statements incorporate the assets and liabilities of all
entities controlled by Macquarie Radio Network Limited (parent entity) at each of the
period ends and the results of all controlled entities on each of these dates. Macquarie
Radio Network Limited and its controlled entities together are referred to in this
financial report as the consolidated entity. The effects of all transactions between
entities in the consolidated entity are eliminated in full.
Income Tax
The consolidated entity adopts the liability method of tax-effect accounting whereby
the income tax expense shown in the Statement of Financial Performance is based on
the pre-tax accounting profit adjusted for any permanent differences.
Timing differences which arise due to the different accounting periods in which items
of revenue and expense are included in the determination of pre-tax accounting
profit and taxable income, are brought to account as either provision for deferred
income tax or an asset described as future income tax benefit at the rate of income
tax applicable to the period in which the benefit will be received or the liability will
become payable.
Future income tax benefits relating to timing differences are not brought to account
unless realisation of the asset is assured beyond any reasonable doubt. Future income
tax benefits relating to tax losses are not brought to account unless there is virtual
certainty of realisation of the benefit.
The amount of benefits brought to account or which may be realised in the future
is based on the assumption that no adverse change will occur in income taxation
legislation, and the anticipation that the consolidated entity will derive sufficient
future assessable income to enable the benefit to be realised and comply with the
conditions of deductibility imposed by the law.
Macquarie Radio Network Limited and its wholly-owned controlled entities have,
from 1 July 2003, been consolidated for tax purposes under the Tax Consolidation
System. Macquarie Radio Network Limited, as the head entity in the tax consolidated
group, is responsible for recognising the current and deferred tax assets and tax
liabilities of the consolidated group. The group notified the ATO on 10 November 2004
that it had formed an income tax consolidated group to apply from 1 July 2003.
…62…
8
The tax consolidated group has entered into an agreement whereby each company in
the group contributes to the income tax payable in proportion to its contribution to
the taxable profit of the tax consolidated group.
Investments
The carrying amount of investments is reviewed annually by Directors to ensure it is
not in excess of the recoverable amount of these investments.
Revenue
Revenue from the rendering of a service is recognised in the month that the
advertisement is broadcast.
All revenue is stated net of the amount of goods and services tax (GST).
Property, Plant and Equipment
Plant and equipment are included at cost. All assets are depreciated over their useful
lives to the consolidated entity.
The depreciation rates used for each class of assets are:
Fixed Asset Class
Rates
Basis
Plant and Equipment
10 - 33%
Straight Line
Leased Plant and Equipment
25%
Straight Line
Leasehold Improvements
7%
Straight Line
The cost of improvements to or on leasehold properties is amortised over the
unexpired period of the lease or the estimated useful life of the improvement to the
consolidated entity, whichever is the shorter. Leasehold improvements held at the
reporting date are being amortised over 15 years.
Radio Licence
The cost of the radio licences arises upon consolidation of the two controlled entities
which own the licences. The licences have been valued at cost. Radio licences are
not amortised because they have an indefinite useful life and in the opinion of the
Directors would realise more than their cost if sold.
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except
where the amount of GST is not recoverable from the Australian Taxation Office.
In these circumstances the GST is recognised as part of the cost of acquisition of the
asset or as part of an item of expense. Receivables and payables in the Statement of
Financial Position are shown inclusive of GST.
Leases
Leases of fixed assets, where substantially all the risks and benefits incidental to
the ownership of the asset, but not the legal ownership, are transferred to the
consolidated entity are classified as finance leases. Finance leases are capitalised,
…63…
8
recording an asset and a liability equal to the present value of the minimum lease
payments, including any guaranteed residual values.
Leased assets are amortised on a straight line basis over their estimated useful lives
where it is likely that the consolidated entity will obtain ownership of the asset, or
over the term of the lease. Lease payments are allocated between the reduction of the
lease liability and the lease interest expense for the period.
Lease payments for operating leases, where substantially all the risks and benefits
remain with the lessor, are charged as expenses in the periods in which they are
incurred. This basis is representative of the pattern of benefits derived from the
lease assets.
Employee Benefits
(i) Wages and salaries, annual leave
Liabilities for wages and salaries, including non-monetary benefits and annual
leave expected to be settled within 12 months of the reporting date are
recognised in other creditors in respect of employees’ services up to the reporting
date and are measured at the amounts expected to be paid when the liabilities
are settled. Liabilities for sick leave are recognised when the leave is taken and
measured at the rates paid or payable.
(ii) Long service leave
The liability for long service leave expected to be settled within 12 months of
the reporting date is recognised in the provision for employee benefits and
is measured in accordance with (i) above. The liability for long service leave
expected to be settled more than 12 months from the reporting date is recognised
in the provision for employee benefits and measured as the present value
of expected future payments to be made in respect of services provided by
employees up to the reporting date. Consideration is given to expected future
wage and salary levels, experience of employee departures and periods of service.
(iii) Employee benefit on-costs
Employee benefit on-costs, including payroll tax, are recognised and included in
employee benefit liabilities and costs when the employee benefits to which they
relate are recognised as liabilities.
Cash
For the purposes of the statement of cash flows, cash includes cash on hand and
at call deposits with banks or financial institutions, investments in money market
instruments maturing within less than three months from the date of acquisition and
net of bank overdrafts.
…64…
8
Contra Income and Expenditure
Contra income and expenditure are respectively recognised in the Statement of
Financial Performance in the month that the advertisement is broadcast and the
benefit of the contra agreement is received or utilised.
The net difference between the Company’s liability to provide airtime and the
benefits to be received under the contra agreement is reflected in the Statement
of Financial Position to the extent that such airtime or benefit will ultimately be
provided or received.
Adoption of Australian Equivalents to International Financial
Reporting Standards
Australia is currently preparing for the introduction of the Australian Equivalents
International Financial Reporting Standards (AEIFRS) effective for financial years
commencing on or after 1 January 2005. This requires the production of accounting
data for future comparative purposes from 1 July 2004 to be included in restated
comparatives in the financial report for the year ending 30 June 2006.
The Company’s management, along with its auditors, are assessing the significance
of these changes and are preparing for their implementation. We will seek to keep
shareholders informed as to the impact of these new standards as they are evaluated.
The Directors are of the opinion that the key differences in the consolidated entity’s
accounting policies which will arise from the adoption of AEIFRS relate to the
following:
(i) Impairment of Assets
Currently the consolidated entity determines the recoverable amount of an
asset on the basis of undiscounted net cash flows that will be received from the
assets use and subsequent disposal. In terms of the new AASB 136: Impairment
of Assets, the recoverable amount of an asset will need to be determined as the
higher of fair value less costs to sell and value in use. The directors are of the
view that the recoverable amounts of all assets, in terms of the new AASB 136,
are not less than cost.
(ii) Employee Share Plan
The consolidated entity currently recognises no expense for shares or options
issued by way of equity based compensation. Under the new AASB2 : Sharebased Payment, equity based compensation to employees will be recognised as
an expense in respect of services received.
…65…
8
Rounding of Amounts
The consolidated entity is of a kind referred to in
Class Order 90/0100, issued by the Australian
Securities and Investments Commission, relating to
“rounding off” of amounts in the financial report.
Amounts in the financial report have been rounded
off in accordance with that Class Order to the
nearest thousand dollars, or in certain cases, to the
nearest dollar.
Year ended
30 Jun 2002
$000
Audited
Year ended
30 Jun 2003
$000
Audited
Year ended
30 Jun 2004
$000
Audited
6 months ended
31 Dec 2004
$000
Reviewed
2. REVENUE
Revenue from
– revenue from ordinary activities
– recoveries
19,733
36,875
42,555
21,865
420
307
479
281
20,153
37,182
43,034
22,146
– Directors’ loans
–
6
–
–
– Other third parties
–
–
64
51
Revenue from outside the
Interest
Revenue from ordinary activities
–
6
64
51
20,153
37,188
43,098
22,197
709
2,111
1,980
912
33
6
8
2
250
–
–
–
99
–
–
–
1,091
2,117
1,988
914
243
415
514
300
400
198
16
3
3. EXPENSES
Borrowing costs paid or
payable to:
– other persons
– finance lease charges
– related party
– director related entities
Total borrowing costs
Depreciation of property,
plant and equipment
Amortisation of
non-current assets:
– capitalised leased assets
– leasehold improvements
69
144
196
101
712
757
726
404
400
–
–
–
107
234
113
19
Other Provisions
– net rent and make good costs
Bad and doubtful debts
– bad debts written off
– bad debts recovered
– doubtful debts
Rental expense on
operating leases
Loss on disposal of fixed assets
…66…
–
–
239
(8)
(35)
67
179
146
338
266
292
165
601
524
849
449
–
33
–
10
8
Year ended
30 Jun 2002
$000
Audited
Year ended
30 Jun 2003
$000
Audited
Year ended
30 Jun 2004
$000
Audited
6 months ended
31 Dec 2004
$000
Reviewed
4. INCOME TAX EXPENSE
(a) The prima facie tax payable on
operating profit (loss) is reconciled
to the income tax expense as
follows:
Prima facie tax payable on operating
profit (loss) from ordinary activities
before income tax of 30%
(2,100)
875
1,826
1,190
51
82
105
60
– tax losses
–
–
– timing differences
–
–
564
1,641
772
–
Add
Tax effect of:
– non-allowable items
– future income tax benefit not
previously recognised in respect of:
(9,399)
– current year future income tax benefit
not recognised in respect of:
– tax losses
Adjustment to prior year income
tax expense
460
–
(1,067)
–
–
–
111
Less
Tax losses recouped
Income tax (benefit) expense
attributable to profit from
ordinary activities
52
–
(662)
–
–
(6,904)
1,361
(b) Future income tax benefit not
brought to account, the benefit of
which will only be realised if the
conditions for deductibility set out
in Note 1 occur:
– tax losses
–
–
10,367
303
9,399
(564)
–
–
10,670
8,835
–
–
…67…
8
Year ended
30 Jun 2002
$000
Audited
Year ended
30 Jun 2003
$000
Audited
Year ended
30 Jun 2004
$000
Audited
6 months ended
31 Dec 2004
$000
Reviewed
5. RECEIVABLES
Current
Trade debtors
Less: Provision for doubtful debts
Other debtors
Amounts receivable from Directors
5,771
(296)
7,031
(371)
6,816
(440)
6,002
(567)
5,475
6,660
6,376
5,435
485
110
263
378
100
–
–
–
6,060
6,770
6,639
5,813
178
771
1,261
697
3,809
3,238
2,095
1,810
–
–
–
191
3,809
3,238
2,095
2,001
910
3,092
3,173
3,176
6. OTHER ASSETS
Current
Deferred expenditure/Prepayments
Non-current
Deferred expenditure
Investments – unrelated companies
7. PROPERTY, PLANT & EQUIPMENT
At cost
Less: accumulated amortisation
(823)
(275)
(471)
(572)
87
2,817
2,702
2,604
1,756
3,947
4,538
4,685
Plant and Equipment
a) Plant and Equipment
At cost
Less: accumulated depreciation
(1,343)
(1,545)
1,005
(751)
3,041
(906)
3,195
3,140
1,315
227
57
57
(11)
(14)
43
(b) Leased plant and equipment
At cost
Less: accumulated amortisation
Total property, plant and equipment1,263
…68…
(1,144)
(27)
171
200
46
6,058
5,943
5,787
8
Year ended
30 Jun 2002
$000
Audited
Year ended
30 Jun 2003
$000
Audited
Year ended
30 Jun 2004
$000
Audited
6 months ended
31 Dec 2004
$000
Reviewed
8. DEFERRED TAX ASSET
Future income tax benefit
–
–
7,706
6,259
15,203
15,203
15,203
15,203
Trade creditors
1,458
1,648
1,702
589
Other creditors and accruals
4,922
2,917
2,768
2,608
410
536
598
553
9. INTANGIBLES
Non-current
Radio licences – at cost
10. PAYABLES
Current
Unsecured liabilities
Employee entitlements
Amounts payable to:
– Shareholders (a)
–
–
–
7,575
6,790
5,101
5,068
11,325
8,416
8,416
7,575
–
169
33
11
11
4,000
–
–
–
4,169
33
11
11
Non-current
Amounts payable to:
– Shareholders (a)
(a) Amounts payable to Shareholders
These loans are interest free and to
30 June 2004 were non-current.
On or before 30 June 2005 these
loans will be partly repaid from current
cash flow and the proceeds arising
from the issue of Shares pursuant to
the Prospectus.
11. INTEREST-BEARING LIABILITIES
Current
Lease liability (Note 18 (a))
Amounts payable to Shareholders
Secured liabilities
Bank overdraft (secured) (b)
Bank loans (secured) (b)
Amounts payable to Shareholders
–
179
–
–
7,000
5,000
4,500
–
5,500
–
–
–
12,500
5,179
4,500
–
16,669
5,212
4,511
11
…69…
8
Year ended
30 Jun 2002
$000
Audited
Year ended
30 Jun 2003
$000
Audited
Year ended
30 Jun 2004
$000
Audited
6 months ended
31 Dec 2004
$000
Reviewed
Non-current
Secured liabilities
Bank loans (b)
7,300
22,414
17,914
21,289
7,300
22,414
17,914
21,289
–
167
32
26
Lease liability (Note 18 (a))
–
167
32
26
7,300
22,581
17,946
21,315
– total non-current assets
20,275
24,499
30,947
30,983
– total assets
27,266
32,395
39,987
41,404
70
55
155
92
Employee benefits
188
281
190
151
(a) Total employee benefits
668
871
944
797
(b) Number of employees at year end
134
142
139
129
–
–
801
716
1,400
1,400
1,400
1,400
Balance at the beginning of the
year/period
(6,568)
(13,567)
(10,651)
2,341
Net profit (loss)
(6,999)
2,916
12,992
2,606
(13,567)
(10,651)
2,341
4,947
(b) Bank Facility Security
(i) The bank facility is secured by a
Cross Deed of Covenant between the
Company and its controlled entities,
Radio 2CH Pty Ltd and Harbour
Radio Pty Ltd. The Covenant is
supported by a first registered fixed
and floating charge over all the
assets and undertaking of each entity.
(ii) The carrying amount of assets
pledged as security is as follows:
(iii) A Shareholder related entity had
provided a charge over certain
assets as further security in respect
of the bank facilities. This security
was released after balance date.
12. PROVISIONS
Current
Employee benefits
Non- Current
13. DEFERRED TAX LIABILITY
Provision for deferred income tax
14. CONTRIBUTED EQUITY
1,400,170 Shares fully paid
15. RETAINED PROFITS/
(ACCUMULATED LOSSES)
Balance at the end of the financial
year/period
…70…
8
Year ended
30 Jun 2002
$000
Audited
Year ended
30 Jun 2003
$000
Audited
Year ended
30 Jun 2004
$000
Audited
6 months ended
31 Dec 2004
$000
Reviewed
16. EQUITY
Total equity of the beginning of the
financial year/period
(5,168)
(12,167)
Total changes in equity represented in
the statement of financial performance
(6,999)
2,916
(12,167)
(9,251)
Total equity at the end of the
financial year/period
(9,251)
3,741
12,992
2,606
3,741
6,347
17. CONTINGENT LIABILITIES
At 31 December 2004 further defamation threats and/or claims, not provided for, have been made
against a controlled entity. The controlled entity has disclaimed the liabilities and is defending the
actions. At this time, the Directors are unable to determine the costs, if any, of resolving these
matters. Should amounts be payable pursuant to the claims they will be brought to account when
any costs to be incurred can be accurately determined.
Year ended
30 Jun 2002
$000
Audited
Year ended
30 Jun 2003
$000
Audited
Year ended
30 Jun 2004
$000
Audited
6 months ended
31 Dec 2004
$000
Reviewed
18. CAPITAL & LEASING COMMITMENTS
(a) Finance leasing commitments
Payable
– not longer than one year
– longer than one year but not longer
than five years
Minimum lease payments
Less future finance charges
176
46
14
14
–
184
34
26
176
230
48
40
(30)
(5)
(3)
169
200
43
37
169
33
11
11
(7)
Total lease liability
Represented by
Current liability (Note 11)
Non-current liability (Note 11)
–
167
32
26
169
200
43
37
1,047
825
847
855
– longer than one year but not longer
than five years
3,475
3,449
3,225
3,081
– longer than five years
6,469
5,671
5,085
4,799
10,991
9,945
9,157
8,735
The interest rate implicit in the leases is 9.56%.
(b) Operating lease commitments
Non-cancellable operating leases
contracted for but not capitalised
in the financial statements:
Payable
– not longer than one year
Operating leases relate to rental commitments for two radio transmitter towers and the head office
premises for the group operations. Transmitter lease payments are referrable to a periodic valuation
of the land on which the transmitters reside. With respect to the premises lease rental commitments
are referrable to a five yearly market value review of rents.
…71…
8
Year ended
30 Jun 2002
$000
Audited
Year ended
30 Jun 2003
$000
Audited
Year ended
30 Jun 2004
$000
Audited
6 months ended
31 Dec 2004
$000
Reviewed
19. CASH FLOW INFORMATION
(a) Reconciliation of cash
Cash at the end of the financial year as
shown in the Statement of Cash Flows
is reconciled to the related items in
the Statement of Financial Position
as follows:
Cash on hand and at bank
Bank overdrafts
753
–
753
355
(179)
1,140
4,197
–
–
176
1,140
4,197
2,916
12,991
2,606
726
404
78
203
(b) Reconciliation of Cash flow from
operations
Profit (loss) from ordinary activities
after income tax
(6,999)
Non-cash flows in ordinary activities:
Depreciation and amortisation
717
757
Charges to provisions
252
(257)
Loss on disposal of fixed assets
Deferred expenditure financed
by borrowings
–
33
–
10
4,000
–
–
–
Changes in assets and liabilities:
(Increase)/Decrease in trade and
other debtors
(2,994)
(786)
64
523
(Increase)/Decrease in prepayments
(3,519)
(22)
653
850
Increase/(Decrease) in trade
creditors and accruals
(1,279)
(32)
–
–
Increase/(Decrease) in deferred
tax liabilities
–
–
801
1,362
7,575
Cash flow from operations
…72…
3,257
(Increase)/Decrease in deferred
tax assets
(5,286)
(7,706)
(1,319)
1,446
(85)
4,638
8
20. OTHER DISCLOSURES
(as required and as they pertain to the 2004 financial year end and the six month period
to 31 December 2004)
(a) Interest rate risk
The Company’s exposure to interest rate risk and the effective weighted average interest rate by
maturity periods is set out in the following table.
Floating
Interest
rate
$000
Fixed
1 year
or less
$000
Over 1
to 5 years
$000
More than Non-interest
5 years
bearing
$000
$000
Total
$000
31 DECEMBER 2004
Financial assets
Cash and deposits
4,197
–
–
–
–
4,197
Receivables
–
–
–
–
5,813
5,813
Other financial assets
– deferred acquisition costs
–
–
–
–
2,507
2,507
4,197
–
–
–
8,320
12,517
Trade and other creditors
–
–
–
–
3,197
3,197
Shareholder loans
–
–
–
–
7,575
7,575
Weighted average interest rate 4.6%
Financial liabilities
Secured loans
21,289
–
–
–
–
21,289
–
11
26
–
–
37
Weighted average interest rate 7.96%
21,289
11
26
–
10,772
32,098
Net financial assets (liabilities)
(17,092)
(11)
(26)
–
(2,452)
(19,581)
Lease liabilities
30 JUNE 2004
Financial assets
Cash and deposits
1,140
–
–
–
–
1,140
–
–
–
–
6,639
6,639
Receivables
Other financial assets
– deferred acquisition costs
–
–
–
–
3,356
3,356
1,140
–
–
–
9,995
11,135
Trade and other creditors
–
–
–
–
4,470
4,470
Shareholder loans
–
–
–
–
7,575
7,575
Financial liabilities
Secured loans
22,414
–
–
–
–
22,414
–
11
32
–
–
43
Lease liabilities
Net financial assets (liabilities)
22,414
11
32
–
12,045
34,502
(21,274)
(11)
(32)
–
(2,050)
(23,367)
Fair value of financial assets and liabilities
(i) On balance sheet
The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets
and financial liabilities approximates their carrying values.
(ii) Off balance sheet
The Company and certain controlled entities have potential financial liabilities that may arise from
certain contingencies disclosed in note 17. As explained in that note, certain amounts have been
provided which are reflected in the statements of financial performance and position where losses
are anticipated and are able to be approximated by the Directors.
…73…
8
Year ended
30 Jun 2004
$000
Audited
6 months ended
31 Dec 2004
$000
Reviewed
Financing Facilities
Unrestricted access was available at balance date to the following
lines of credit:
Credit standby arrangements
Total Facilities
– Bank overdraft
250
250
250
250
–
–
–
–
Used at balance date
– Bank overdraft
Unused at balance date
– Bank overdraft
250
250
250
250
22,414
21,289
–
–
22,414
21,289
1,534
436
$0 – $9,999
3
5
$10,000 – $19,999
1
–
$30,000 – $39,999
–
1
$120,000 – $129,999
–
2
$150,000 – $159,999
–
1
$310,000 – $319,999
1
–
$510,000 – $519,999
1
–
$700,000 – $709,999
1
–
7
9
Bank loan facilities
Total Facilities
– Used at balance date
– Unused at balance
The current interest rates are 7.9% on the term facility and 9.1% on
the bank overdraft.
(b) Remuneration of Directors
Income paid or payable, or otherwise made available to Directors by
the Company and related parties in connection with the management
of affairs of the Company.
The numbers of Directors whose total income from the Company or
related parties was within specified bands as follows.
…74…
8
Year ended
30 Jun 2004
$000
Audited
6 months ended
31 Dec 2004
$000
Reviewed
(c) Related Parties
Directors and specified executives
Loans made by Director and Director-related parties
Loans made to the consolidated entity by Director-related entities
that are also Shareholders are disclosed in Note 10 and comprise:
Non-interest bearing loans advanced by:
– Ognis Pty Ltd
– PEC Nominees Pty Limited
6,399
6,399
1,176
1,176
7,575
7,575
Advances are non-interest bearing and all expected to be repaid by
31 December 2005.
Other transactions with Directors and Director-related entities
A previous Director, Gary Charny, is a director in the firm Wolsely
Corporate & Media Pty Limited which provided corporate advisory
services to Macquarie Radio Network Limited for several years on
normal commercial terms and conditions.
A Director, Max Donnelly, is a partner at the firm Ferrier Hodgson.
Ferrier Hodgson have provided the services of Max Donnelly on
normal commercial terms and conditions. These services were
paid by a Director-related company, Macquarie Media Investments
Pty Limited.
Directors John Singleton and Mark Carnegie are directors and
shareholders of Macquarie Media Investments Pty Limited. This
company has been providing consulting services, inclusive of the
services of a Director, Angela Clark, to the Company on normal
commercial terms and conditions.
(d) Expenditure commitments
Commitments for the payment of salaries and other remuneration
under long term employment contracts and other expenditure
commitments in existence at the reporting date but not recognised
as liabilities payable.
Within one year
6,896
Later than one year but not later than five years
23,859
Later than five years
3,071
33,826
(e) Auditor remuneration
During the period, the auditors earned the following remuneration
Audit of the financial report
Other services
69
67
37
45
106
112
…75…
8
PRO-FORMA STATEMENT OF FINANCIAL POSITION
– CONSOLIDATED AT 31 DECEMBER 2004
Annexure B
$000
Current Assets
Cash
4,197
Receivables
5,813
Other
Total Current Assets
697
10,707
Non-current Assets
Property, plant and equipment
Deferred tax asset
Intangibles – radio licences
5,787
6,259
15,203
Receivable
1,414
Other
2,002
Total Non-current Assets
30,665
Total Assets
41,372
Current Liabilities
Payables
7,816
11
Provisions
92
Total Current Liabilities
7,919
Non-current Liabilities
21,315
Deferred tax liability
716
Provisions
151
Total Non-current Liabilities
22,182
Total Liabilities
30,101
NET ASSETS
11,271
Equity
Contributed equity
…76…
6,324
Retained profits
4,947
TOTAL EQUITY
11,271
The pro-forma balance sheet should be read in conjunction with the accompanying notes.
PRO-FORMA STATEMENT OF FINANCIAL POSITION
– CONSOLIDATED AT 31 DECEMBER 2004
8
1. Basis of Preparation
The pro-forma consolidated statement of financial position has been prepared consistent with the
applicable accounting policies described in Note 1 to the financial statements in Annexure A.
2. Assumptions Used in Compiling the Pro-Forma Consolidated Statement of Financial Position
– Prior to the IPO, all options over shares in the Company held by the Founding Shareholders are
exercised. The total option exercise price is represented by a reduction in the debt owing to the
Founding Shareholders of $1.009 million.
– The Shares on issue, pre IPO, are split in the ratio of 45 Shares for every one Share.
– Share issue to Chief Executive Officer by way of loan, pre IPO.
– The net proceeds of the IPO, totalling $2.5 million is all applied to partially discharge the
Shareholder loans.
3. Reconciliation of Cash Balance
$000
Balance per historical statement of financial position.
4,197
Proceeds of IPO
3,000
IPO costs
Repayment of part of Shareholder loans
(500)
(2,500)
$ 4,197
4. Reconciliation of Contributed Equity
Balance per historical statement of financial position
1,400
Options exercised
1,010
Executive Share issue, pre IPO
1,414
Net proceeds of Share issue, for consideration, per IPO
2,500
$ 6,324
…77…
Section 9
INDEPENDENT REVIEW OF DIRECTORS’ FORECASTS
9
14 March 2005
The Directors
Pyrmont Building
Level 1, 33-35 Saunders Street
PYRMONT NSW 2009
Dear Sirs
REPORT ON DIRECTORS’ FORECASTS
We have prepared this report on the forecast financial information of Macquarie
Radio Network Limited (“the Company”) for the financial year ending 30 June 2005
for inclusion in the Prospectus dated on or about 14 March 2005 relating to the
offer by the Company of 3,160,000 Shares and its listing on the ASX. This report is
prepared in accordance with AUS 902 “Review of Financial Reports” and PS 170
“Prospective Financial Information”.
Expressions defined in the Prospectus have the same meaning in this report.
Scope
You have requested Horwath Investment Services Pty Limited to prepare a report
covering the forecast financial performance of the Company for the year ending
30 June 2005 as set out in Section 6 of the Prospectus (“the Forecast”). The Forecast
period includes the actual financial results of the Company to 31 December 2004.
The Directors are responsible for the preparation and presentation of the Forecast,
including the best-estimate assumptions, which include the pro-forma transactions,
on which they are based. The Forecast has been prepared for inclusion in the
Prospectus. We disclaim any assumption of responsibility for any reliance on this
report or on the Forecast to which it relates for any purposes other than those for
which it was prepared.
Review of Directors’ Best-Estimate Assumptions
Our review of the Forecast and the best-estimate assumptions underlying the
Forecast was conducted in accordance with the Australian Auditing and Assurance
Standard AUS 902 “Review of Financial Reports”. Our procedures consisted
primarily of enquiry and comparison and other such analytical review procedures
we considered necessary. These procedures included discussions with the Directors
and senior management of the Company and have been undertaken to form the
opinion set out below under “Review Statement on the Forecast”.
…79…
9
The Forecast has been prepared by the Directors to provide investors with a
guide to Macquarie Radio Network’s potential future financial performance based
on the achievement of certain economic, operating, developmental and trading
assumptions about future events and actions that have not yet occurred and
may not necessarily occur. There is a considerable degree of subjective judgment
involved in the preparation of forecasts. Actual results may vary materially
from those forecasts and the variation may be materially positive or negative.
Accordingly, investors should have regard to the investment risks set out in Section
7 of the Prospectus and the sensitivities set out in Section 6 of the Prospectus.
Our review of the Forecast and the Directors’ best-estimate assumptions, is
substantially less in scope than an audit examination conducted in accordance with
Australian Auditing and Assurance Standards. A review of this nature provides less
assurance than an audit. We have not performed an audit and we do not express an
audit opinion on the Forecast included in the Prospectus.
Conclusion
Review Statement on the Forecast
Based on our review, which is not an audit, nothing has come to our attention which
causes us to believe that:
(a) the Directors’ best-estimate assumptions set out in Section 6 of the Prospectus
do not provide reasonable grounds for the preparation of the Forecast;
(b) the Forecast is not properly compiled on the basis of the Directors’ bestestimate assumptions or presented fairly in accordance with the recognition
and measurement principles prescribed in Accounting Standards and other
mandatory professional reporting requirements in Australia, and the accounting
policies adopted by the Company disclosed in Section 8 of the Prospectus; and
(c) that the Forecast itself is unreasonable.
The underlying assumptions are subject to significant uncertainties and
contingencies often outside the control of the Company. If events do not occur as
assumed, actual results may vary significantly from the Forecast. Accordingly, we
do not confirm or guarantee the achievement of the Forecast, as future events, by
their very nature, are not capable of independent substantiation.
…80…
9
Subsequent Events
Apart from the matters dealt with in this report, and having regard to the scope of
our report, to the best of our knowledge and belief no material transactions or events
outside of the ordinary business of Macquarie Radio Network have come to our
attention that would require comment on, or adjustment to, the information referred
to in our report or that would cause such information to be misleading or deceptive.
Disclosure of Interest
Except as disclosed in this Prospectus, Horwath Investment Services Pty Limited
does not have any interest in the outcome of this issue other than in the preparation
of this report for which normal professional fees will be received.
Yours faithfully,
Horwath Investment Services Pty Limited
Alfred Nehama
Representative
…81…
Section 10
ADDITIONAL INFORMATION
The Company has 68,951,940 Shares on issue at the date of the Prospectus
10
10.1 Issued Shares
and 3,160,000 Shares offered under this Prospectus.
The Company has 1 C Class Share on issue with the following rights:
10.2 C Class Share
Fully paid
The C Class share is fully paid and cannot be quoted on any securities exchange.
Dividend
The holder is entitled to be paid a proportion of any dividends declared, returns
of share capital or any other payment made by the Company to the ordinary
shareholders. The proportion it is entitled to is the proportion that the number of
Shares which would be held by the C Class Shareholder if it exercised the options
over Shares held by it would comprise of the total issued ordinary Shares in the
capital of the Company (Hadiac’s proportion). This dividend is to be paid in priority
to any payment of a dividend on any other classes of shares and is cumulative.
Bonus Issues and Pro Rata Rights Offers
The holder has the right to participate to the extent of Hadiac’s proportion in any
bonus issue or pro rata rights offer that the Company makes to ordinary shareholders.
Voting
The C Class Share does not confer on the holder a right to vote at general meetings
except on certain proposals including to reduce the Company’s share capital, to affect
rights attached to the C Class Share, to wind up the Company, to dispose of the whole
Company’s property, business and undertaking, or on a resolution to approve the
terms of a buy-back agreement, during a period where a dividend is in arrears and
during the winding up of the Company, and the number of votes that shall be cast by
the holder shall be equivalent to Hadiac’s proportion.
Transfer of C Class Share
The C Class Share cannot be transferred except where:
(a) the transfer occurs due to the transfer from the trustee of a trust to a new trustee
which does not lead to a change in beneficial ownership; or
(b) the transfer arises from a change in corporate control or a change in beneficial
ownership of the C Class share but only due to the consequence of the
transmission of property or rights on death, bankruptcy or mental incapacity of a
natural person to the trustee, executors, administrators, heirs or guardians of that
person as provided under section 1072A of the Corporations Act.
Redemption or Winding Up
On the earlier of redemption or in a winding up or other repayment of capital or
participation in assets, the C Class holder is entitled to receive, in priority, a cash
payment consisting of $1 per share and the amount (if any) equal to the aggregate of
any preferential dividend accrued (whether declared or not) but unpaid and of any
arrears of that dividend.
…83…
10
The C Class Share will be redeemed by the Company for a price of $1 on the date that
the C Class Share holder no longer holds any Options, or the Options expire.
10.3 Constitution
The rights attaching to ownership of the Shares are detailed in the Constitution of
the Company which may be inspected during normal business hours at the registered
office of the Company. The following is a summary of their major provisions.
Voting
At a general meeting, every member present in person or by proxy, attorney or
representative has one vote on a show of hands and on a poll, one vote for each fully
paid Share held. On a poll partly paid Shares confer a fraction of a vote pro-rata to the
amount paid up on the Share.
General Meetings
Each member is entitled to receive notice of and, except in certain circumstances,
to attend and vote at general meetings of the Company and receive all financial
statements, notices and other documents required to be sent to members under the
Constitution or the Corporations Act.
Dividends
Subject to any special terms and conditions of issue, the profits of the Company
which the Directors from time to time determine to distribute by way of dividend are
divisible amongst the members in proportion to the amounts paid up on the Shares
held by them.
Issue of Further Shares
The Directors may (subject to the restrictions on the allotment of shares imposed by
the Constitution, the ASX Listing Rules and the Corporations Act) allot, grant options
in respect of, or otherwise dispose of further Shares on the terms and conditions as
they see fit.
Transfer of Shares
Holders of Shares may transfer them by a proper transfer effected in accordance with
the ASTC Settlement Rules and as otherwise permitted by the Corporations Act.
The Directors may decline to register a transfer of Shares where the transfer is not in
registrable form or where the refusal to register the transfer is permitted under the
ASX Listing Rules. If the Directors decline to register a transfer the Company must give
the party lodging the transfer written notice of the refusal and the reason for refusal.
…84…
10
Winding up
Subject to any special or preferential rights attaching to any class or classes of
Shares, members will be entitled in a winding up to share in any surplus assets of the
Company in proportion to the Shares held by them, less any amounts which remain
unpaid on these Shares at the time of distribution.
Proportional Takeover Provisions
The Constitution contains provisions for shareholder approval in relation to any
proportional takeover bid. The provision will lapse unless it is renewed by special
resolution of shareholders in general meeting within three years from the date of its
adoption.
Directors
The minimum number of Directors is three and the maximum is to be fixed by the
Directors but may not be more than 12 unless the Company passes a resolution
varying that number. Questions arising at a meeting of Directors will be decided by a
majority vote.
Dividend Plans
The Constitution contains a provision allowing Directors to implement a dividend
reinvestment plan and a dividend selection plan. Participants in a dividend selection
plan may elect to receive a dividend from the Company paid wholly or partly out of
any particular fund or reserve or out of profits derived from any particular source, or
forego a dividend from the Company in place of some other form of distribution from
the Company or another body corporate or a trust.
Directors’ Indemnity
The Company, to the extent permitted by law, indemnifies each Director, alternate
Director or executive officer (and any person who has previously served in that
capacity) against any liability or cost incurred by the person as an officer of the
Company or a related body corporate of the Company. This includes but is not limited
to liability for negligence or costs incurred in defending proceedings in which judgment
is given in favour of the person or in which the person is acquitted. The indemnity may
be extended to other officers or the auditor at the discretion of the Directors.
Broadcasting Services Act
The Constitution contains various provisions which reflect the requirements of the
Broadcasting Services Act. The purpose of these provisions is to provide a mechanism
to ensure that persons restricted from holding Shares as a result of the provisions of
the Broadcasting Services Act do not hold Shares.
…85…
10
Failure to comply with the requirements of the Broadcasting Services Act may lead to
severe penalties, and in extreme cases, can include the suspension or cancellation of
a commercial radio licence held by a licensee under the Broadcasting Services Act.
As subsidiaries of the Company hold such licences, the provisions summarised in the
following paragraphs are a requirement for its constitution.
The Directors may, in certain circumstances, disenfranchise a member’s rights and
powers in relation to Shares and order the divestiture of such Shares to avoid a
breach of the requirements of the Broadcasting Services Act.
The Directors are entitled in their discretion not to allot or transfer Shares to certain
persons if the holding of Shares by such persons would infringe any of the provisions
of the Broadcasting Services Act. Directors also have the power under these
provisions to require the disposal of Shares. Proceeds from the sale of such Shares
are to be paid to the previous shareholder. Shareholders acknowledge that they have
no right of action against Directors or the Company for any loss suffered by them,
whether direct or otherwise, as a result of the Directors exercising this power.
It is also a requirement that all new members of the Company provide a statutory
declaration setting out information required under the Broadcasting Services Act.
The Company also has a general right to acquire information about members from
time to time.
The appointment of a Director is invalid if the Company is in a position to exercise
control of a commercial radio broadcasting licence and the Director is also a director
of a company that is in a position to control the exercise of:
– a commercial television broadcasting licence that has the same licence area as the
relevant commercial radio broadcasting licence; or
– a newspaper associated with the licence area of the commercial radio broadcasting
service for the purposes of the Broadcasting Services Act.
In addition, where at any time the Company is in a position to exercise control of a
commercial radio broadcasting licence an appointment of a Director is invalid if:
– the Company; and
– the Director; and
– any other company to which the Director has been appointed as a director
(if any),
are, between them, in a position to exercise control of more than two commercial
radio broadcasting licences in the same licence area as the relevant commercial radio
broadcasting licence.
…86…
10
Alterations of Constitution
The Constitution can only be amended by a special resolution passed by at least
three quarters of members present and voting at a general meeting of the Company.
The Company must give at least 28 days’ written notice of its intention to propose a
resolution as a special resolution.
Share Buy Backs
The Company may buy back shares in itself in accordance with the provisions of the
Corporations Act 2001.
The Company has adopted (but not implemented) a Dividend Reinvestment Plan.
10.4 Dividend Reinvestment Plan
The Directors will advise Shareholders prior to payment of the proposed dividend
if the Dividend Reinvestment Plan will be operative in respect of that dividend.
Participation in the Dividend Reinvestment Plan is optional. A Shareholder who
wishes to participate in the Dividend Reinvestment Plan must complete the
prescribed form and apply to the Company for participation. A Shareholder may
nominate the percentage of his or her Shares which are to participate in the Dividend
Reinvestment Plan. A Shareholder may terminate his or her participation in the
Dividend Reinvestment Plan or increase or decrease the percentage of his or her
Shares which are to participate in the Dividend Reinvestment Plan at any time by
giving written notice to the Company.
Each cash dividend that would otherwise be payable on a Shareholders’ participating
Shares will be applied to a subscription for additional Shares in the Company.
The Directors may terminate, suspend or modify the Dividend Reinvestment Plan at
any time by giving Shareholders notice in writing.
The Company has established an Employee Share Plan (ESP).
10.5 Employee Share Plan
Under the ESP, the Board intends to issues Shares having a value of $1,000 (based on
the Offer price) under the ESP to eligible employees and contractors (Participants)
within three months of completion of the Offer. These shares will be issued to
Participants for free.
The Board may, in its absolute discretion, make further issues of Shares to
Participants under the ESP provided that Shares issued to a Participant in any one
year must not exceed $1,000 in value.
Each share issued under the ESP ranks equally with all other Shares.
…87…
10
Shares issued to eligible employees under the ESP cannot be disposed of, dealt with
or have a security interest granted over them until the earlier of:
– three years after the date they are issued under the ESP; and
– the time the eligible employee ceases to be employed by Macquarie Radio Network.
The ESP contains provisions to adjust the number of Shares held by eligible
employees under the ESP (before the expiry of the three year restriction period
referred to above) to take into account the effect of any capital reconstruction, rights
issue or bonus issue by the Board.
The Board may terminate or suspend the operation of the ESP at any time in its
absolute discretion.
10.6 Material Contracts
Alan Jones
Revised Service Agreement
Harbour Radio entered into a services agreement with Belford Productions (a company
controlled by Alan Jones) and Alan Jones on 24 October 2002 under which Belford
Productions agreed to provide exclusively Alan Jones’ media services to Harbour
Radio. The provisions of the services agreement were amended under the Revised
Service Agreement.
The Revised Service Agreement extends the terms of the service arrangement to
2 March 2010.
The Revised Service Agreement restricts Belford Productions and Alan Jones during
the term from providing media services (unless the service is for certain activities
such as public speaking and existing television commitments) to a third party where
to do so would compete with the business of the Company and its related entities.
Other non competitive media services cannot be provided to third parties without
first offering those services to the Company and if the Company declines then the
services may be provided but through the Company.
The agreement may be terminated by Harbour Radio in various circumstances
including the prolonged illness of Alan Jones. The agreement is not terminable for
convenience and may only terminate for cause.
Restrictive Covenant Deed
In consideration for a payment made to Belford Productions and Alan Jones, Belford
Productions and Alan Jones have entered into a restrictive covenant deed with the
Company which operates from the termination of the Revised Services Agreement.
The covenant restricts Belford Productions and Alan Jones from providing certain
media services (including Alan Jones as presenter or his name) to third parties
without first offering those services to the Company. If the Company rejects the offer,
Belford Productions and Alan Jones are entitled to extend the offer to third parties
…88…
10
provided that the terms are no more favourable than those offered to the
Company. There are certain exceptions including product or service endorsements
or advertisements, public speaking at an engagement and any guest or single
appearance by Jones in any media program.
The Restrictive Covenant Deed applies world wide and continues to bind the parties
until the death of Alan Jones unless the Revised Services Agreement or Revised
Option Deed are terminated by Belford Productions or Hadiac (as the case may be)
and Alan Jones by reason of an unremedied breach by Harbour Radio or the Company.
Revised Option Deed
The Company has entered into a Revised Option Deed in relation to options to
subscribe for Shares in the Company held by Hadiac Pty Limited as trustee for the
Jones Family Trust (Hadiac) (Options). Alan Jones controls Hadiac. The Deed
provides that on exercise of the Options Hadiac will hold a 14.03% interest in
the issued capital of the Company (to be diluted by the capital raised under this
Prospectus and subsequent issues except where Hadiac participates in pro rata or
other issues to existing Shareholders of the Company) (Hadiac Capital).
The Revised Option Deed sets out the terms attaching to the Options. As at the date
of the Prospectus 1,687,725 Options are exercisable and the remaining Options will
become exercisable in quarterly tranches of Shares beginning on 3 June 2005 up
until 3 March 2009 although if certain events occur all Options may be exercised. The
exercise price for each Option held by Hadiac is $0.2243. Any Option not exercised
on 3 March 2012 will lapse.
Under the Revised Option Deed, Hadiac is entitled to receive a payment equal to its
proportion of any dividends declared, returns of capital and other payments paid by
Macquarie to its shareholders. These are set out in the C Class Share and the relevant
rule is summarised above.
Hadiac is able to nominate a representative to the board of Macquarie while it holds
5% or more of the diluted capital in Macquarie. Hadiac will be subject to the same
transfer restrictions as agreed by the Founding Shareholders.
Until the Options expire, or Hadiac no longer holds any Options, the Company is
prohibited under the Revised Option Deed from materially changing the nature of its
business, being the owner and operator of any media business (including commercial
radio and television broadcasting) and related services and activities.
The Revised Option Deed provides that the Options will lapse on the earlier of the
termination of the Revised Service Agreement due to the breach of that agreement by
the Company or Harbour Radio or a change in control of Hadiac.
…89…
10
Ray Hadley
Harbour Radio has entered into an agreement with Raytrack Sporting Services Pty
Limited and Ray Hadley under which Raytrack Sporting Services Pty Limited agrees,
on an exclusive basis, to provide Ray Hadley’s services to Harbour Radio. Ray Hadley
is required to host 2GB’s Monday to Friday morning program and other elements of
2GB’s sports programming.
The agreement commenced on 1 January 2004 and will expire on 31 December
2011, unless terminated prior to that date in accordance with the agreement. The
agreement provides that Harbour Radio may terminate in various circumstances,
including, without limitation, for serious misconduct or prolonged illness on the part
of Hadley. Hadley and Raytrack Sporting Services Pty Limited may also terminate in
certain circumstances, including, without limitation, in the event that Harbour Radio
no longer holds all licences that are necessary to conduct its business or commits a
material breach of the agreement. The agreement is not terminable for convenience
and may only terminate for cause. The agreement does not impose competition
restraints on Ray Hadley for the period after termination or expiry of the agreement.
NRL
National Rugby League Limited (NRL) has entered into an agreement with Harbour
Radio under which it grants to 2GB exclusive rights to broadcast coverage of NRL
matches throughout Australia, New Zealand and Papua New Guinea, on AM and
FM band radio. The exclusive rights are provided for three Rugby League seasons
commencing 1 January 2003 and ending on 31 October 2005. The NRL may terminate
the agreement on breach by Harbour Radio of a material term. The agreement is
not terminable for convenience and may only terminate for cause. The rights are
provided in return for payment of a licence fee and the provision by Harbour Radio of
advertising contra to NRL. Under the agreement, 2GB is prevented from broadcasting
coverage of matches conducted by any other Australian winter football code, other
than a number of listed sporting events.
Olympics
The Company has entered into an agreement with Seven Network (Operations)
Limited (Seven) and the International Olympic Committee pursuant to which Seven
sub-licences to the Company, on an exclusive basis, the radio rights for the Olympic
Games in Athens, Turin (2006) and Beijing (2008). The agreement commenced
on 1 January 2003 and expires on 31 December 2008, unless terminated sooner in
accordance with the deed. The agreement is not terminable for convenience and may
only terminate for cause.
Both Seven and the Company provide indemnities to the other for losses arising
from any act or omission related to the performance or non-performance of the deed
and any material breach of the deed. The Company must also comply with various
restrictions relating to the use of Olympic insignia and marks.
…90…
10
Bob Rogers
Radio 2CH has entered into an agreement with Worldwide Media Pty Limited under
which Worldwide Media Pty Limited agrees to provide the services of Bob Rogers
as a presenter to Radio 2CH. The agreement commenced on 3 November 1999 and
will expire on 2 November 2009, unless extended by Radio 2CH or terminated in
accordance with the agreement. The agreement may be extended for an additional
period of 10 years by Radio 2CH, by providing notice at any time prior to the end of the
initial term. Radio 2CH may terminate the agreement in various circumstances which
include, without limitation, Bob Rogers or Worldwide Media Pty Limited committing
an act of serious misconduct or failing to observe the terms of the agreement. The
agreement is not terminable for convenience and may only terminate for cause.
Philip Clark
Harbour Radio has an agreement with Philip Clark for his employment, on an exclusive
basis, as a presenter on 2GB. The agreement commenced on 1 February 2004 and
continues for a period of three years, unless terminated in accordance with the
agreement. Harbour Radio may terminate in various circumstances, including, without
limitation, on the commission by Philip Clark of an act of serious misconduct, breach
of the agreement of breach of the various codes and policies issued by Harbour Radio.
The agreement is not terminable for convenience and may only terminate for cause.
Advertising Contracts
Advertising clients of Radio 2CH and Harbour Radio consist of those who are not
represented by media agencies (direct sales) and clients who are represented by
media buying agencies (agency sales). In both cases, advertising arrangements
generally comprise of a booking agreement which contains details of the advertising
slots acquired and the corresponding fee payable by the advertiser. The arrangements
are generally cancellable by the advertiser, and a full refund is payable, on provision
by the advertiser of notice in writing no later than 28 days prior to the scheduled
advertising.
Several defamation proceedings have been threatened or filed against the Macquarie
10.7 Litigation and Administrative Action
Radio Network in the registries of the NSW Supreme Court and the NSW District
Court, in relation to statements made by its presenters in various broadcasts,
extending over a number of years.
The Directors consider that defamation litigation is an ongoing risk associated with
the business of the Company. The Directors do not consider that any actual or
threatened proceedings, of which they are aware, are likely to have a material adverse
effect on the business or financial position of Macquarie Radio Network.
Macquarie Radio Network currently has limited defamation insurance cover in relation
to each of its radio broadcasters other than in relation to Alan Jones and Ray Hadley.
…91…
10
10.8 Chess
The Company will apply to participate in the Clearing House Electronic Subregister
System, known as CHESS, pursuant to the ASX Listing Rules. Following the issue
of Shares, the Company will provide shareholders with a Share notice (which is
similar to a bank account statement) that sets out the number of Shares allotted to
each shareholder under this Prospectus. If applicable, this notice will also advise
shareholders of their Holder Identification Number and Sponsoring Issue Number.
Shareholders will receive an explanation of sale and purchase procedures under the
CHESS system with the notice.
If a shareholding changes during a month, shareholders will receive a statement at
the end of that month. Shareholders may also request statements at any other time
(although the Company may charge an administrative fee).
10.9 Interests and Fees
of Certain People Involved in the Offer
Generally
This section sets out the nature and extent of the interests and fees of persons
involved in the Offer.
Other than set out below or elsewhere in this Prospectus none of the persons
involved in the Offer and referred to below has, or has had in the last 2 years, any
interest in:
– the formation or promotion of the Company;
– property acquired or proposed to be acquired by the Company in connection with
its formation or promotion, or in connection with the Offer; or
– the Offer.
Other than set out below or elsewhere in this Prospectus, no amount has been paid or
agreed to be paid and no benefit has been given or agreed to be given:
– to any Director or proposed Director of the Company to induce them to become,
or to qualify as, a Director; or
– to any of the persons involved in the Offer for services provided by them in
connection with the promotion or formation of the Company, or the Offer.
Directors’ Interests
Directors are not required under the Constitution of the Company to hold any Shares
in the Company or options over Shares. At the date of this Prospectus, Mark Carnegie
(through PEC Nominees) holds 12,151,485 Shares.
Angela Clark has an executive service agreement with the Company for a four year
term ending 30 June 2009. After the first year, either the Company or Ms Clark may
terminate this agreement without cause with 6 months notice. The Company may
terminate the agreement at any time without notice and without payment in lieu of
notice if Ms Clark engages in misconduct warranting the summary termination of
her employment. The Company will also lend Ms Clark $1,413,960 to subscribe for
1,413,960 Shares on interest free, unsecured and limited recourse terms. These
…92…
10
Shares are to be issued to Ms Clark prior to the Company’s admission to the Official
List of ASX which is scheduled for 15 April 2005.
The Shares to be issued to Ms Clark will be subject to escrow arrangements prohibiting
her from disposing of any Shares until at least 30 June 2006. After that time, Ms Clark
will be permitted to dispose of up to 50% of her Shares in four equal tranches (176,745
Shares per tranche) at the end of each year of the four year term. Proceeds from any
sale of Ms Clark’s Shares must be applied to repay the loan made by the Company.
For so long as Ms Clark is employed by the Company, she must retain at least 50% of
her Shares. The executive service agreement provides for the Company to buy-back
and cancel some or all of Ms Clark’s Shares in circumstances where the agreement is
terminated or expires without the principal amount having been repaid in full.
The provision of a loan of $1,413,960 by the Company to Ms Clark will constitute
the Company providing a financial benefit to a related party, as well as the Company
financially assisting Ms Clark to acquire Shares. In addition, the Share buy-back
arrangements in Ms Clark’s executive services agreement will, if triggered, require
the Company to undertake a selective share-buy back in compliance with the
Corporations Act. Accordingly, prior to the issue of any Shares to Ms Clark:
(a) the Founding Shareholders will provide all approvals required under the
Corporations Act to authorise the financial benefit and financial assistance to
Ms Clark arising from the lending arrangements outlined above, as well as the
Company buying back and cancelling Ms Clark’s Shares in the circumstances
provided for in her executive services agreement; and
(b) the Company will provide ASIC with all notifications and documentation required
under the Corporations Act in respect of the Founding Shareholders’ approval of
the financial benefit and financial assistance to Ms Clark arising from the lending
arrangements outlined above and of any buy-back of her Shares.
Finally, Ms Clark is required under her executive services agreement to accept any
buy-back offer that is made to her by the Company in circumstances where her
services agreement is validly terminated and to otherwise do all things necessary or
expedient to effect any buy-back and cancellation of her Shares.
Directors’ Fees
The Constitution of the Company provides that the Directors are entitled to the
remuneration the Directors determine, but the remuneration of non-executive
Directors must not exceed in aggregate a maximum amount fixed by the Company in
general meeting for that purpose.
As at the date of this Prospectus, the aggregate maximum amount for non-executive
Directors is $200,000. The maximum amount for non-executive Directors has been
approved by the Shareholders of the Company. Directors are on rolling, short term
contracts with the Company and are not subject to competition restraints.
…93…
10
Interests and Fees of Professionals
This Section applies to persons named in the Prospectus as performing a function
in a professional, advisory or other capacity in connection with the preparation or
distribution of the prospectus.
Horwath Sydney Partnership is the Company’s auditor and has prepared the
Investigating Accountant’s Report included in this Prospectus and has performed
work in relation to due diligence enquiries, for which it will be paid in accordance
with its usual time based charge-out rates.
Horwath Investment Services Pty Limited has prepared the Independent Review of the
Directors’ Forecasts included in this Prospectus, for which it will be paid in accordance
with its usual time based charge-out rates.
Horwath Sydney Partnership and Horwath Investment Services Pty Limited will be
paid a total amount equal to $135,000 plus disbursements.
Gilbert + Tobin has acted as lawyers to the Offer and has performed work in relation
to due diligence enquiries for which it will be paid $185,000 plus disbursements.
10.10 ASX Waivers and Confirmations
The ASX has given in-principle advice that it would be likely to grant waivers or
confirmations of the ASX Listing Rules as follows:
– confirmation for the purposes of ASX Listing Rule 1 Condition 1.1 that the
Company’s structure and operations are appropriate for a listed entity;
– confirmation for the purposes of ASX Listing Rule 6.1 that the terms that apply to
each class of securities in the Company are appropriate and equitable; and
– a waiver of ASX Listing Rules 6.3 and 6.5 to the extent necessary to allow the
Company to have a ‘C’ Class share, having the rights set out in the Company’s
constitution, on issue.
10.11 Escrow
The Company has entered into escrow arrangements with the Founding Shareholders
and Hadiac (a company associated with Alan Jones) under which those parties are
prevented, following completion of the Offer, from disposing or otherwise dealing
with their Shares without the prior written consent of the Company for twelve
months from completion of the Offer.
10.12 Consents
Written consents to the issue of this Prospectus have been given and at the time of
this Prospectus have not been withdrawn by the following parties:
Gilbert + Tobin has given and has not withdrawn its consent to be named as lawyers
to the Offer in the form and context in which it is named.
Horwath Sydney Partnership has given and has not withdrawn its consent to be
named as Auditors and to the inclusion of the Investigating Accountant’s Report in
the form and context in which it is included.
…94…
10
Horwath Investment Services Pty Limited has given and has not withdrawn its
consent to the inclusion of the Independent Review of the Directors’ Forecasts in the
form and context in which it is included.
Horwath (NSW) Pty Limited has given and has not withdrawn its consent to
be named as a provider of professional services to the Company in the form and
context in which it is named.
Computershare Investor Services Pty Limited has given and has not withdrawn its
consent to be named as the share registry of the Company in the form and context
in which it is named. It has had no involvement in the preparation of any part of this
Prospectus other than assisting in the design of the Application Form and recording
its name as share registrar to the Company.
PricewaterhouseCoopers has given and has not withdrawn its consent to be named as
independent advertising statistician to the commercial radio industry, in the form and
context in which it is named.
Each of the Directors has given and has not withdrawn his or her consent to be
named in the Prospectus in the form and context in which he or she is named.
10.13 Expenses of the Offer
All expenses connected with the Offer are being borne by the Company.
10.14 Directors’ Statement
The Directors report that, in their opinion, since the date of the financial statements
used in the preparation of the Investigating Accountant’s Report (as set out in
Appendix A), no circumstances have arisen that materially affect or will materially
affect the profitability of the Company or the value of the Company’s assets and
liabilities, except as disclosed in this Prospectus.
10.15 Authorisation
This Prospectus has been duly signed on behalf of the Directors on 14 March 2005
and each Director consents to lodgement of the Prospectus with ASIC.
Max Donnelly
Chairman
14 March 2005
…95…
Section 11
GLOSSARY OF TERMS
11
$ Australian dollars
ABA Australian Broadcasting Authority
AEST Australian Eastern Standard Time
ANZ Australia and New Zealand Banking
Group Limited
Applicant A person who applies for Shares in
accordance with this Prospectus
Application Amount The amount of money that
accompanies an Application Form
Application Form An application form accompanying
this Prospectus
Application Money or Monies Money received from an
Applicant in respect of an Application
APRA Australasian Performing Right Association
ASIC Australian Securities and Investments
Commission
Associates Has the meaning given to it in the
Corporations Act
ASX Australian Stock Exchange Limited and includes
the market conducted by ASX
ASX Listing Rules The official listing rules of ASX
Belford Productions Belford Productions Pty Limited
(ABN 21 002 890 744)
Board The board of Directors of Macquarie
Radio Network
Broadcasting Services Act Broadcasting Services Act
1992 (Cth)
CHESS Clearing House Electronic Subregister System
Closing Date Closing date of the Offer being
31 March 2005
Company Macquarie Radio Network Limited
(ABN 32 063 906 927)
Corporations Act Corporations Act 2001(Cth) and
includes any regulations made under that Act
Directors Directors of Macquarie Radio Network
Directors’ Forecasts The financial forecasts of the
Directors for the twelve month period ending 30 June
2005, incorporating the actual reviewed financial
results for the six months ending 31 December 2004
EBIT Earnings before interest and taxation
EBITDA Earnings before interest, taxation,
depreciation and amortisation
Eligible Employees Means employees and
contractors of Macquarie Radio Network as at
the date of this Prospectus as determined in the
discretion of the Board
Employee Share Plan Means the employee share
plan of Macquarie Radio Network, as described in
Section 10
EPS Earnings per Share
Expiry Date 13 months from the date of this
Prospectus being 14 April 2006
Exposure Period The period during which the
Company cannot accept applications as described in
section 727(3) of the Corporations Act
FATA Foreign Acquisitions and Takeovers Act 1975
(Cth)
Forecast Period The 12 months ending 30 June 2005
Foundation Investor (s) Parties selected by
Macquarie Radio Network
…97…
11
GLOSSARY OF TERMS
Foundation Offer Means the invitation under this
Prospectus to the Foundation Investors, as described
in Section 2
Founding Shareholders Means John Singleton
Promotions (a company associated with John
Singleton) and PEC Nominees (a company associated
with Mark Carnegie)
FY The financial year to 30 June in any year. eg. FY04
means the financial year ended 30 June 2004
Hadiac Hadiac Pty Limited (ABN 42 097 208 001)
(a company associated with Alan Jones)
Harbour Radio Harbour Radio Pty Limited
(ABN 89 010 853 317)
Holding Statements Holding statements for Shares
under CHESS
John Singleton Promotions John Singleton Promotions
Pty Limited (ABN 33 001 608 546)
Listing The quotation of the Shares on the
Official List
Macquarie Radio Network Macquarie Radio
Network Limited (ABN 32 063 906 927) and,
where applicable, includes its wholly-owned controlled
entities, Harbour Radio and Radio
2CH, as the case requires
NPAT Net profit after tax
NPBT Net profit before tax
NRL National Rugby League
Offer The offer to subscribe for 3,160,000 Shares
pursuant to this Prospectus
Offer Period The period between the Opening Date and
the Closing Date
Offer Price $1.00 per Share
Official List The official list of the ASX
Opening Date The commencement date of the Offer
being 22 March 2005
Optionholder The registered holder of an option
Options Means the options that Macquarie Radio
Network has issued or may issue over Shares as more
fully described in Section 10
PEC Nominees PEC Nominees Pty Limited
(ABN 85 090 856 670)
Privacy Act Privacy Act 1988 (Cth)
Prospectus This prospectus and any supplementary or
replacement prospectus in relation to this prospectus
Radio 2CH Radio 2CH Pty Limited
(ABN 73 000 749 753)
Section A section of this Prospectus
Share Registry Computershare Investor Services Pty
Limited (ABN 48 078 279 277)
Shareholder A holder of a Share
Shares Fully paid ordinary shares in the capital of
Macquarie Radio Network
STW STW Communications Group Limited
(ABN 84 001 657 370)
TPA Trade Practices Act 1974 (Cth)
…98…
Section 12
12
CORPORATE DIRECTORY
Directors
Max Donnelly
Chairman
Angela Clark
Chief Executive Officer
Mark Carnegie
Non-executive Director
Russell Tate
Stephen Chapman
Company Secretary
Kate Thompson
Registered Office and Head Office
Pyrmont Building
Level 1, 33-35 Saunders Street
Pyrmont NSW 2009
Auditors
Horwath Sydney Partnership
1 Market Street
Sydney NSW 2000
Investigating Accountant
Horwath Sydney Partnership
1 Market Street
Sydney NSW 2000
Lawyers to the Offer
Gilbert + Tobin
2 Park Street
Sydney NSW 2000
Share Registry
Level 3
60 Carrington Street
Sydney NSW 2000
…100…
Designed and produced by Red Temple
(1,1) -1- RMRN0003_Cover 8mm spine 14/3/05, 3:18:20 PM

PROSPECTUS Macquarie Radio Network Lim ited

Transcription

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Waterview Apartments

Fine Print - the Hastings Fine Art Association website.

Expressions of interest - information document

broadcasting - radio