There was controlled tension in the room at today’s Southern Cross Media (SXL) annual general meeting, held at SCA’s World Square headquarters in Sydney. Steve Ahern was there for radioinfo.

The company’s television operations are dragging down its profitability, with TV revenue down 8.7% to $97.5 million in the reporting period. Broadcast Radio revenue was down 1.6% to $367 million, while Digital Audio was up 42% to $35 million. CEO John Kelly said in his AGM remarks that the company “is all about audio.” SXL is in the process of exploring the sale of its TV operations.

Company Chair Heith Mackay-Cruise began the meeting by commenting on a report in the Financial Review that two major shareholders intended to vote against the remuneration report and against his re-election as Chair.

In the end, three of the four votes were carried, delivering Mackay-Cruise back to the Chairmanship, electing Marina Go to the board and allowing the Managing Director’s performance rights to be paid.

But, the fourth motion was defeated, with 215 million votes FOR the company’s Remuneration Report and 83 million AGAINST, triggering a ‘first strike’ for the company.

The Corporations Act 2001 was amended in 2011 to create a ‘two strikes’ rule in relation to company remuneration reports as a means of investors making clear to boards that they were unhappy with company performance. This is how it works, according to the Australian Institute of Company Directors:

“At the annual general meeting, the shareholders must vote approval or otherwise of the remuneration report. The first strike is when a company’s remuneration report receives a ‘no’ vote of 25 % or more. Where this occurs, the company’s subsequent remuneration report must explain whether shareholders’ concerns have been taken into account, and either how they have been taken into account or why they have not been taken into account.”

The no vote for the SXL Remuneration Report was about 28%.

One of the two major shareholders that voted against the report was unsuccessful takeover suitor ARN. The other was Spheria Asset Management.

How did a rival company come to be a major shareholder in SXL?

During its unsuccessful bid for SXL, ARN grew its shareholding to a point where it had a ‘relevant interest’ and could trigger a takeover in company law takeover provisions. That point can be up to 20% of the shareholding.

But ARN also had to stay under the ACMA’s Media Control rules, which limit share ownership to less than 15% of company shares.

ARN holds 14.9% of SXL shares, just under the threshold.

ARN voted its shareholding against SXL’s remuneration report, triggering a ‘first strike’ as far as the corporate regulator is concerned.

CEO/Managing Director John Kelly told me he felt “angry and disappointed” at the voting strategy and that it had also been leaked to the media.

Chair Mackay-Cruise advocated for more relaxed media rules in his comments, to allow more efficient consolidation of Australian media companies so that they can better compete against international media.

“Our discussions earlier this year with the ARN/Anchorage Consortium, the time we spent considering a potential transaction with Australian Community Media, and our more recent discussions in relation to sale of our television assets have demonstrated how the regulatory environment constrains innovation, efficiency and the sustainability of Australian broadcast media businesses. Our largest competitors for audiences and advertising dollars are global giant digital platforms, such as Meta, Google and Spotify, but Australia’s pre-internet regulation severely restricts our ability to compete with them on a level playing field.”

The meeting progressed professionally, but directors sitting at the top table faced some tough questioning from investors about company performance.

Shareholder David Kingston, a former board member of the company when it was Southern Cross Broadcasting, acknowledged that the CEO and most of the board were new to their roles, before delivering his detailed views of the company performance over the past 5 years.

“The share price 5 years ago was $10, now it is 55 cents, 95% of the company’s value has been lost… The company should have sold its TV assets when they were more profitable… the share buyback also turned out to have hurt shareholder value,” he said.

“There is still substantial broadcast radio revenue, but it’s time for digital to show us the money.”

Addressing the ‘show us the money’ comment. John Kelly explained that the ups and downs of broadcast radio and the development of new advertising opportunities in digital mean that Audio should be considered together within the business, not looked at as broadcast and digital separately. “The combination of broadcast and digital audio together the our future, not separately… we are aiming to raise our share of all audio,” he said. Click the chart to enlarge the company’s P&L segment summaries.

Kelly also addressed mistaken beliefs, saying that radio is not as “struggling” as some commentators think, given that profitability (EBITDA) across the whole radio industry is 24%.

Looking forward, the company expects improved revenue growth this year, with first quarter performance looking healthy according to a recent stock exchange update.

• Total Audio revenue for Q1 FY25 of $100.4 million was up 4.8% compared to Q1 FY24, driven by growth of 48.2% in Digital Audio and 1.1% in Broadcast Radio.
• Total revenue for Q1 FY25 of $122.3 million was up 1.5% compared to Q1 FY24.
• In the most recent metro radio survey published on 1 October 2024, SCA maintained its leading share of the core buying demographics for men and women aged 25-54 for the 26th survey in a row.
• LiSTNR continues to perform strongly, with over two million signed-in and addressable users and the LiSTNR AdTech Hub driving inquiry from advertisers willing to pay a premium to connect their messages to targeted and addressable audiences.
• The LiSTNR AdTech Hub is now included in over 33% of digital audio campaigns.

Note: Sometimes readers are confused by references to SXL and SCA. SXL is the Australian Stock Exchange listing code for the company known as Southern Cross Austereo (SCA). We usually refer to the company as SCA, but when reporting annual results we also use the stock exchange company listing code SXL and listing name Southern Cross Media Group Limited.

Related report: SCA AGM: group revenue down 1%, LiSTNR EBITDA positive

About the author:

Steve Ahern is the founding editor of radioinfo and the CEO of AMT Pty Ltd, which publishes a range of radio, podcasting and audio technology trade journals in Australia and internationally.