Good morning. I'm Ryan Stokes, Chair of Southern Cross Media Group. Welcome to this Annual General Meeting of the company. I've been advised there's a quorum present, therefore, I declare this meeting open. Voting is now open on all items of business. Firstly, please let me introduce members of our board. I'm joined by Teresa Dyson, Marina Go AM, Cathy O'Connor, Sylvia Wiggins, the Honorable Mark McGowan AC, Karen Stocks, and Rohan Lund, our Managing Director and Chief Executive Officer. Also joining us is Warren Coatsworth, our Company Secretary. Members of our senior leadership team are present at today's meeting, as are representatives from our auditor, PricewaterhouseCoopers. This is the first Annual General Meeting of the combined Southern Cross Media Group, and my first as Chair. It is an honor to be here today representing the board and shareholders of this company. Now to my address.
We brought these businesses together because the future of Australian media belong to companies with the scale and breadth to engage audiences wherever they are, and provides a more compelling platform for customers to connect with them. Audiences have fragmented across platforms. Global streaming services and digital platforms compete aggressively for the attention of Australians and for advertising dollars, with a global footprint no single Australian media company can match on its own. The effective answer is scale. The scale to reach audiences across television, audio, digital, and publishing, and to offer customers a genuinely integrated national platform to connect with these audiences. The combination creates the only Australian media company with leading positions across all four. Together, our brands engage, inform, and entertain more than 20 million Australians every month with the content that matters most to them: live sport, trusted news, and local entertainment.
The combined group starts from four clear strengths. The first is audio. Our audio businesses had an outstanding year, growing its share of audience and advertising, and expanding its margin to 23.4%. Radio remains one of the most trusted and resilient media in this country, and our networks lead it. The second is television audiences. 7NEWS and sport are what Australians trust and choose to watch together, live and in larger numbers than before. The third is Western Australia, where the state's leading mastheads, television, and radio sit with one company. No other market in Australia offers that combination. The fourth is our relationship with our audiences, and that relationship is built on trust and deep engagement. Almost 16 million Australians are registered users of 7plus, and 2.7 million of LiSTNR. The value of the merger comes from bringing these strengths together.
We can now offer customers a single proposition across every screen and every speaker, backed by first-party data and measured from end to end. Few companies can do that. The opportunity is to make it simple for our customers to connect with our audience and to deliver integrated solutions that can multiply the impact. That is where the growth from this combination will come from. We're also making it easier for our customers to do business with us. The strategy is defined. The task now is disciplined execution, and that work is well underway. What we do matters to this country. We are proudly Australian-owned, and Australian-run. We make a contribution to our communities, and we pay tax. Every day, our talented people across newsrooms, broadcasters, and radio networks engage, inform, and entertain millions of Australians.
We tell the stories of local communities, we inform without fear or favor, and we bring the nation together around the sport and events we care about. We are there when it counts, through elections, emergencies, and moments of national significance. That role rests on trust. Australians trust what they see on Seven, hear on our radio networks, and read in our mastheads because it is made by people who are accountable for it. That trust has been earned over decades and is a foundation of everything we do. It requires investment. Trusted journalism, local content, and live sport are expensive to produce. Regulation and reform are important. Global digital platforms have built their business on algorithms designed to capture attention and engagement from their own commercial ends, with little accountability to the communities where they operate.
That has included profiting from scam advertising that uses AI-generated likeness of well-known Australians to defraud the community. We compete with these platforms for audiences and advertisers, but on very different terms. They use algorithms to capture Australian audiences and Australian content without comparable contribution through tax, employment, investment, or investment in local journalism. They are not bound by the regulatory and community obligations that apply to us. That is not a level playing field, and that gap widens as audiences move online. We need a regulatory framework built for the way Australians now consume media. That means ensuring Australians have free and universal access to sport, news, and entertainment that they love and rely on. It means protecting Australian content from being used by AI platforms without permission or payment.
It means addressing competition failure in advertising technology markets. It means reforming the regulation of our own sector, much of which was designed for a very different era, so that locally owned media companies can invest and compete on fair terms. We will continue to work constructively with the government and parliament on these reforms. The outcome matters not only to our shareholders, but to the quality of Australian public conversation. This has been a significant year of change for the company. The financial results for the year did not meet our expectations, nor did it deliver on the potential we believe exists for this business. Your board and management are focused on improving performance, and Rohan will take you through the details of that shortly.
Our priorities are clear: completing the integration of the two businesses, building a more efficient cost base, and growing revenue from the integrated offering. Your board is confident these are the right priorities and that the company has the assets and the people to deliver. Completing the integration also means one identity. Today, we are asking shareholders to approve a change in the company's name to Seven Media Group. Over the past year, the business has been known as Southern Cross Media Group, Southern Cross Austereo, and Seven West Media. The new name reflects what the company now is, one company with one strategy and one identity. Our brands remain exactly what they are known by our audience as, what they know them and trust them as: Triple M, Hit, LiSTNR, Seven, 7plus, 7NEWS, The West Australian, The Nightly, and PerthNow.
Each one keeps its name, its masthead, and its connection with its audience. The new corporate name sits above them and brings them together. Rohan Lund joined the board in March and became Managing Director and Chief Executive Officer on the 1st of May this year. Rohan was Group Chief Executive Officer of the NRMA from 2016 to 2025, and before that, held senior executive roles at Foxtel, Seven West Media, Yahoo!Seven, and Singtel Optus. In his first six months, Rohan has established the operating model for the combined group, appointed his leadership team, and set a clear agenda for the business. He has the full confidence and support of the board, and I look forward to working with him to achieve our strategic objectives. I would like to take this opportunity to thank our people across the company.
Bringing two companies together is demanding work, and our teams have done it while continuing to serve our audiences and customers every single day. On behalf of the board, thank you. I would like to thank my predecessor Chair, Teresa Dyson, for her leadership. Teresa has successfully guided the company through a critical transition period and where the operating model of the combined group was set. Teresa continues as Non-Executive Director and Chair of the new Risk, Regulatory, and Compliance Committee. My thanks also to Heith Mackay-Cruise, who chaired the company through the complexity of the integration post the merger, and to Ido Leffler, Michael Malone, Michael Ziegelaar, and Colin Garnsey OAM for their service. I would also like to acknowledge Kerry Stokes AC, who was interim Chair of the company through the completion of the merger.
Kerry chaired Seven West Media for more than 14 years, and from 1995, was Chairman of the Seven Network and Seven West. Over three decades, he built Seven into one of the nation's most successful media companies and has been a steadfast champion of Australian content, news, and sport throughout. The media industry as a whole is stronger for his contribution. On behalf of the board, I extend our sincere thanks to Kerry. I welcome Cathy O'Connor, Sylvia Wiggins, and the Honorable Mark McGowan, and Karen Stocks to this board. In September, the independent directors elected Cathy as Lead Independent Director. Given my role at SGH, a substantial shareholder, that role is an important part of how this board is governed. With the appointment of Mark and Karen, the board composes eight directors, six of whom are independent Non-Executive Directors.
Cathy, Sylvia, Teresa, Mark, and Karen each stand for election today, and the board recommends that you support them. Two items before you today concern Marina Go. Marina stands for re-election, and a shareholder has given notice of a resolution to remove her as a director. The directors other than Marina unanimously recommend that you vote for her re-election and against her removal. Australian media is being reshaped by technology, by changing audience behavior, and by global competition. Those forces will not slow down. They will reward companies with trusted brands, national scale, and direct relationships with their audiences, and the discipline to invest where it counts. That is exactly the company we are building. Our ambition is to be Australia's leading integrated media company, the first choice for Australians seeking news, sport, and entertainment, and the first call for customers who want to reach them.
The combination has given us the platform to get there, and I'm excited about the company that we can become. The board's focus is clear. We will support Rohan and the management team in executing the strategy with discipline and hold them to account for the results. The board is united in its commitment to building a stronger, higher-performing group that delivers growing returns for all shareholders. I'd now like to welcome Rohan Lund to speak to you.
Thank you, Ryan, and good morning, everyone. There's six months into the role, and I'm more confident today about the opportunity in front of us. But I'm also clear about the work we have to do to turn that opportunity into better returns for you. At our recent upfronts, I spoke about a simple belief. In a fragmented media landscape, Australians still come together. Media may have changed dramatically, but people haven't. There are more screens, more platforms, more choices competing than at any other point in history. Australians still want to belong. They want to be entertained, to connect, and they want to know who and what they can trust. Our job is to bring them together. That's the starting point for the business we're building. We want to earn more of Australians' time and trust.
We want to give advertisers audiences at scale and more valuable ways they can connect with them. For shareholders, we plan to turn that into a connection and into sustainable revenue, stronger earnings, and better returns. That's the job we're here to do. Ryan has outlined the strengths of the group, and I want to focus on what we're doing with them. No one reaches audiences at scale the way we do. We reach more than 20 million Australians every month. The opportunity comes from giving those Australians more reasons to spend time with us across the day and across our brands. Someone might watch the footy on TV, listen to the discussion on Triple M, discover a podcast on LiSTNR, maybe read the story behind the game in one of our mastheads. Each experience has value in its own right.
Connecting them creates more opportunities to build a lasting audience relationship and more ways for advertisers to participate. That's how we intend to grow, by making each part of the business stronger than the others, through the others. That requires us to think differently about the business. A TV team, a radio team, and a publishing team can each have a strong relationship with the same community. We need to make it easier for them to share ideas and bring those relationships to customers in a coordinated way. The audience should get more relevant content, and the customer should get a better solution. We describe that strategy as connecting Australians with what matters to them. We're pursuing that in three practical ways: meeting audiences where they are, meeting advertisers where they are, and reimagining how we work so we can transform the cost base.
For au diences, that starts with trusted, live, and local content, news people can rely on, entertainment they can enjoy together, and sport they want to experience as it happens. It also means making that content available in the formats people choose. A live broadcast, a stream, a podcast, or a short video can serve different needs at different moments. We need to be good at all of them, with a clear purpose for each. For advertisers, we need to make the business easier to understand, easier to buy, and easier to measure. A customer should be able to start with the audience they want to reach and the outcome they need, and then work with us on the best way to get there. Inside the company, we need clear accountability and a cost base that supports investment in the content and capabilities that will drive future earnings.
Trust runs through all of this. Audiences need to trust our content. Customers need to trust that we deliver. Our people need to trust the direction we're taking. You need to see us execute with discipline and trust that we create the value these incredible assets deserve. Audiences are not our challenge. At the upfront, we reported a total TV audience growth of 9.5% year on year, with growth in both broadcast and streaming. TV delivered its biggest first-quarter share since OzTAM Ratings began, and 7plus is growing around 50% year on year. In audio, our metropolitan networks have led the 25 to 54 audience for 42 consecutive surveys. Triple M and Hit have strong connections with listeners, and LiSTNR gives us an increasingly valuable direct digital relationship with them.
In publishing, The West Australian remains central to life in Western Australia, while The Nightly is building a national audience and a daily news habit. Audiences are growing right across the group. The strategy is working. Our work now is to deepen engagement and convert that audience performance into commercial results. In FY 2026, revenue was AUD 1.87 billion, and EBITDA, including onerous contracts, was AUD 200 million. As Ryan has said, the result did not meet our expectations or reflect the potential we see in this business. We are tracking well, delivering a AUD 150 million cost program, with the full benefit expected in FY 2028. In fact, we expect to exceed that cost target. You should judge our progress by delivery, the savings we achieve, the revenue share we generate from our audience strengths, and the improvement in earnings and cash generation over time.
The upfronts gave customers a clear view of what we're building next. Our ambition is to be the easiest and most effective way for brands to connect with Australia. Delivering that requires changes to how we develop ideas, how we use audience insight, and how we help customers buy our content. We've built Seven iD to connect and enrich our understanding of audiences across all of our brands. Someone watching television, streaming a program, listening to audio is still the same person. Understanding those relationships better can help us make advertising more relevant and more valuable. Then there's the buying process itself. Phoenix Exchange is our vision for a more connected trading system, building on capabilities already operating in TV and audio.
It matters because reducing the time and effort required to do business with us should make our content more accessible to advertisers and help our team spend more time solving customer problems. That includes reaching people off our platforms. Our expanding YouTube presence gives audiences another way to find our content and gives advertisers another way to work with us to solve around it. The advertising market remains short and volatile, with consumer and advertising sentiment, it is variable. We are managing the business with that uncertainty in mind, and we have been more aggressive in setting the cost base on the assumption that the broader economy might even deteriorate in the second half.
In the first quarter of FY 2027, television revenue did track down year-on-year, but share gains from the Commonwealth Games and AFL finals have partly offset a market that was down mid-single digits, and we have had the lower payments by Google for news reflected in this quarter. Audio revenue was broadly flat, with regional and digital performance offset by metro and other movements. Publishing revenue was down year-on-year, mainly reflecting weaker advertising markets, schedule changes impacting events income, and lower Google payments. But again, higher circulation subscription income has partly offset those effects. That shows the value of audience and revenue share gains in a difficult market. It also reinforces why we need to keep improving our offer to customers and the efficiency of our operations.
We cannot control the advertising market, but we can control the quality of our content and how well we serve our customers and where we invest and how efficiently we operate. Those are the areas where this team is concentrating its effort. The NBI legislation has now been passed, and we will seek to recover our full share from that pool. I know that as shareholders, you want to see all of this translate into better returns. The priorities I have outlined are directed at improving the earnings and cash generation that underpin long-term shareholder value. Six months in, what gives me confidence is seeing the strategy become practical. Teams working across brands, content finding new audiences, and capabilities developed in one business being put to work in another. There is also a responsibility that comes with a place that our brands hold in Australian life.
Telethon's record AUD 101 million fundraising result in October was extraordinary, and it is a powerful example of what our people, our partners, and communities can achieve together. That connection has been earned over many years, and we need to keep earning it. I want to thank Ryan and the board for their support, for our team, my team that is here today, for the work that they do going through considerable change in this organization. I particularly want to thank our customers and partners and you, our shareholders, for your ongoing support.
There is a calm confidence in the business right now as we build around the content that Australians value. We want to make it easier for customers to work with us. We want to reshape how we operate so we can deliver better financial results. We will deliver on that plan, and the new shape we want for the group will be very apparent by FY 2028.
Well, thank you, Rohan. We will now attend to the business of today's meeting. The notice convening the meeting has been in your hands for some time. I will take the notices read unless there are any objections. Before we begin, I would like to provide an overview of the conduct of today's meeting. Shareholders and proxy holders holding a green or yellow card may ask questions. If, as a holder of ordinary shares or a proxy or authorized representative, you would like to ask any questions, I will take questions during the course of the meeting which relate to the resolution being put.
The questions relating to general business will be taken at the end of the meeting. Please move to a microphone. Before speaking, show your green or yellow card you received when registering and state your name, and if you are not speaking for yourself, who you are representing.
Please keep to one question at a time and ensure the question is less than two minutes in duration and is relevant to the item before the meeting. If a question has already been asked, I will refer to the earlier answer rather than repeat it. I ask that all questions are directed to me as chair. I ask for everyone's courtesy so that every shareholder who wishes to be heard has the chance. Before each resolution is put to the meeting, we will display on the screen the proxy votes that have been cast in each resolution. The proxy votes reflect valid proxies lodged by the deadline stipulated in the notice of meeting. As chair, I intend to cast all available proxies against items 12 and 13 and in favor of all other resolutions. As set out in the notice of meeting, all resolutions will be decided by poll.
The first item of business is to receive and consider the financial report and the director's report, the sustainability report, and the auditor's reports of the company and its controlled entities for the year ended 30 June 2026. There is no requirement for a formal resolution on this item, so this item is excluded from the proxy forms and will not be voted on. Prior to the meeting, we received a pre-submitted question from a shareholder about the company's approach to capital management, in particular, when we will resume paying dividends. The answer to that, the board keeps dividends under regular review and understands that shareholders would like to see them resume as soon as prudent to do so. Market conditions remain challenging, so our priorities are to strengthen cash flow and reduce debt. As both improve, the company will be in a better position to reinstate dividends.
Are there any other questions in relation to the annual accounts and reports for the year end under review from holders of ordinary shares in the room. Please move. Yes. Show your right of green card and just state your name, please. Thank you.
Very formal, Ryan.
That's all right.
My name is David Kingston from K Capital. Look, Ryan, obviously your lawyers have given you a brief about trying to constrain comments to two minutes. I think that's a little bit inappropriate of your lawyers. As you probably know, under the Corporations Act, the roles are a little bit reversed at AGMs. Shareholders do have a right under the Corps Act to not just ask questions, but to also make comments. So if you could please give me a little bit longer than two minutes for my first question. I note you're also asking for one question at a time. That's fine. I'll come back and ask a second question later on this matter. But the average of my two questions, Ryan, will be around about two minutes, but the first one will be longer. I think the lawyers should be a little bit
You are fine to go ahead, David.
Okay. Thank you, Ryan. I am just rebuking your lawyers. Look, I appreciate, Ryan, that the traditional media has serious headwinds, no doubt about that. I think the issue I am raising today is when is this company finally going to step up and deliver? As you know, or may remember, Ryan, I made a speech at the 2024 Seven West meeting. I did not attend last year. I also made a speech, as Marina Go will know, at the 2024 SXL meeting, and I did not attend last year. I am not a yearly participant, but I thought I would come along this year, because I am disappointed with the lack of progress. Look, I made detailed critiques of the very poor shareholder performance of each company for many, many years. Share prices of both SWM and Southern Cross are down over 95% from peaks.
After the 2024 AGM of Southern Cross, the radio business and its share price stepped up. Hooray! It improved significantly. Then we have the merger at the end of 2025 with SWM, and since then, Southern Cross shares have declined substantially. Let us look at the metrics. We hear the euphemisms about, "We are well-placed. We are number 1 in national TV. We are number 1 in national audio network." But let us look at shareholder value metrics. The market cap of the once mighty Seven and mighty radio is a paltry AUD 240 million, loose change for the Stokes family. Let us add net debt, AUD 363 million.
We have an enterprise value of AUD 600 million for both. The sales annualized are AUD 1.9 billion approximately. So the sales are three times the enterprise value. Concerningly, EBITDA, whether it is AUD 192 million or AUD 200 million, depends on onerous contracts. The EBITDA multiple is a derisory three times.
I have a couple of comments on the Kroll report, Chair, and then I have a question, my first question. The Kroll report, less than a year ago, it stated the guidance for 2026 EBITDA was AUD 80.5 million for Austereo, Southern Cross, sorry, and AUD 161 million for Seven. There was also an indication, AUD 30 million of synergies. Add them together, and the actual EBITDA in 2026 is massively down on the Kroll report indications at a mere AUD 192 million. I am excluding onerous contracts. Secondly, let us look at equity value. Kroll assessed the equity value of the merged group, including synergies, at, quote, "AUD 467 million-AUD 567 million." Hallelujah. In contrast, the current equity value is AUD 240 million, less than half the midpoint of the supposed expert one year ago. Very disappointing.
The third issue I would point out is operating cash flow, which is critical to any company, free cash flow, operating cash flow. The statutory accounts, and it's a bit confusing, Chair, because the statutory accounts only have half a year of Seven West, whereas mainly we're talking about pro formas, including a full year. The statutory accounts show a very derisory operating cash flow of AUD 15 million. AUD 15 million out of AUD 1.9 billion of revenue. Surely this company can retain more in operating cash flow. My first question, Chair, what has gone so badly wrong that the current metrics are so inferior to what Kroll indicated a year ago? Secondly, at what stage, Chair, will the inexorable decline of earnings, free cash flow, and shareholder value from these once great companies, at what stage will it actually reverse?
I've had the pleasure of working with Cathy O'Connor back in the peak days of Austereo. Sydney licenses individually were worth over AUD 100 million each. I appreciate a lot of it's outside your control, but at what point is the actual company going to deliver some free cash flow? That's my first question. Thank you.
David, appreciate your comment, and as outlined, we're very comfortable to take the comments in the AGM. You're right, the shareholders have, this is the opportunity to raise comments and ask questions. I appreciate you listened through Rohan's presentation, but at time you probably had a chance to reflect on that. In looking through what we have as far as plans, we are very focused on how we drive shareholder value, which we see being best achieved through driving profit growth and ultimately driving free cash flow and ultimately paying a dividend. That is the clear aspirational focus of the board. I think that the closing remark was, we know we've got work to do through FY 2027. That's not going to be the year where that's delivered, but we have very clear line of sight to how we can do that in FY 2028.
Yes, that is a clear focus for us. I think in your comments, and I appreciate it's going beyond the primary question, market hasn't gone exactly to plan. That isn't an excuse, but that's meant that we've needed to take action to try to address that. It's been a more uncertain and a stronger, I'd say, cyclical pressure point in the market than assumed, and so action needs to be taken. Those actions are underway, and I think the team are pretty regularly driving that action and driving those outcomes. We have AUD 1.8 million in revenue.
Yes, there might be elements where that's under decline, but we have a great opportunity, we feel, to reposition this business to actually drive sustainable results, where we have a strong financial position, and ultimately it can drive that free cash flow to reward shareholders, both in share price appreciation and in dividend. That is absolutely the focus. That is absolutely kept with the team. They are financially motivated to drive that, and I can say, from Rohan and the team down, they want to deliver on that incentive potential.
There is a strong alignment across the organization in order to deliver on that potential, and they're working hard each day to deliver that. I think if you look at the actions that we have in the strategy, we feel confident it will get there. I said that's more going to be a reflection in 2028 than 2027, but that is a clear focus. Another question?
Just one follow-up to that, Ryan. I wouldn't quibble if the company was 10%-20% down on what it represented via Kroll a year ago. That's fine. We understand that forecasts are hard to guarantee. Can you or Rohan please advise shareholders, why are you trading at less than half of what Kroll indicated was the equity value of the merged company with synergies? Less than half. That's a dramatic shortfall, which does hurt shareholders, Chair.
Absolutely. Look, it's very difficult to postulate on what the drivers of the market are. I mean, that's going to be, you have as much insight as we do into that. I think that the earnings outlook is going to be a key factor, confidence in the business's ability to drive stable and growing earnings and cash flow, and through that, dividends, I think will fundamentally change it. We think that you call it three times multiple is not a fair multiple for this business, and over a period of time, successfully executing that strategy, we'll see, in our view, a change in that multiple and therefore better reflect where that value exists. I don't think that there's a viewpoint that it is a fair or appropriate value, but the business needs to execute in order to demonstrate that. So that is a focus.
If we are successful in being able to execute and realize the potential of the business, the market will recognize that, shareholders will get the benefit of that. That is what we are working hard to do. Again, that is exactly what Rohan and the team work day in, day out to deliver. Thank you. Are there any other questions in relation to that item or any questions for the company's auditor of the company's financial statements and reports for the year ended 30 June 2026? David?
If there are no other questions, I will come to my second question. I just appreciate some guidance, please. Rohan has indicated that AUD 145 million-AUD 150 million cost-out program is underway. Terrific. I think most people would agree costs need to come down. Also, you have indicated that AUD 30 million of synergies have already been achieved. So that is fantastic. But the market does not seem to be believing that that is going to provide a net improvement to free cash flow, because if that just added to free cash flow, hallelujah. That is tremendous.
Could you please clarify, is that terrific cost out, is that going to lead to free cash flow gains of that magnitude? Or are other costs, like sport, going to offset the cost out? Or is revenue decline in other areas going to take away part of the benefit from the other cost out?
Because superficially it looks great, but the market is not believing it, Rohan. The follow-up from that also, Chair, which actually might be for the auditors, is that with minimal free cash flow in this company, operating cash flow as per the stat accounts at AUD 15 million, virtually nothing, and then you have also spent money on intangibles and PPE, so arguably it is negative. But with minimal free cash flow, yet, Chair, in the accounts, the directors are signing off on AUD 746 million of intangibles. It may be for you, it may be for the auditors, but unless Rohan can deliver real profit, real free cash flow, in my view, the value of the intangibles is well overpriced at AUD 746 million.
Your net tangible assets are materially negative. Your shareholders' funds are positive only because of the AUD 746 million of intangibles, but it all comes down to free cash flow. Unless you can deliver that free cash flow, those look grossly overpriced. Thank you. Appreciate your guidance.
Thank you, David. I might let Rohan answer that question in relation to the cost and cost plan and that outlook. I appreciate that second aspect is more comment, to be frank, but I appreciate that. Rohan, do you want to?
Yeah, certainly. I actually agree with you that I don't think the market has full confidence yet that we'll even deliver that cost out. I think there's a history there, and I've been quite open with shareholders that we're committed to proving that we'll take the cost out. In 2027, you've got a couple of things happening. One, the cost program, as you go through the year taking it out, you only get part of that benefit within FY 2027. You get the full benefit by FY 2028 as we go through the year. We also had in this year some one-off costs, which had been pre-committed previously, Commonwealth Games, Rugby League World Cup, that don't recur. There were quite a few one-off costs to the cost base that actually we were unable to address within the year.
No, in terms of I made the comment earlier that from a cost out, our ambition, and we're tracking to more than the AUD 150 million, you will see the benefit of that through FY 2028. You will see strong benefits in FY 2027. You're also in a market where you're looking at significant decline across advertising, digital and linear, across all categories that's happening right at the moment across the year, which is why that's been priced in across all media companies. You can see a consistent decline in valuations right across the sectors, because people are just watching. We're the canary in the coal mine. It's media that's going to get affected first when the economy's shaping the way it is. No, I absolutely agree cost transformation is the path forward to generate free cash. We need to go significantly into the cost base.
We have good plans for that and are tracking ahead already as to where we thought we would be. I don't think that ever ends for us. I think that's just the path we're now on, which is working backwards, what's the cash we should be delivering? The entire team are focused, incented. That's the attention here is now on generating free cash flow. That's what we talk about.
Just a brief follow-up to that. Still uncertain, Rohan, as to my question really is, black and white, you are forecasting AUD 145 million cost out, but what percentage of that is going to be lost by revenue declining? Really, the value of any company is what the board can deliver as free cash flow over time. People really want to see this company actually deliver some free cash flow. Can you give people a bit of a feel, a bit of color as to what part of that AUD 145 million you are going to gain by eliminating costs? What part of that are you going to lose because revenue is going to decline? What part of it are you going to retain so that there will be free cash flow from currently almost nil free cash flow? Thank you.
I think, David, I think to probably address a lot of the question, but if you are really going to get that to the heart of the issue, looking at the guidance statement that the company has put out today, where we are retaining that guidance position we put out at the full year results, gives some indication that we still expect to be on track for that consistent position. We will continue to revise the cost structure in order to make sure we can continue to drive results in the business. I encourage you to look through 2027 into 2028, where we definitely see a number of those costs not reoccurring, and that was kind of the emphasis of the remarks in the CEO comments. Thank you.
Chair, the other part that I did raise of the massive intangibles value. If the company continues to deliver minimal free cash flow, presumably there will be a significant write-down at some stage. Obviously not this year, but maybe next year. Maybe the auditors, if they can clarify, they have listed it as a key risk item.
Just want to be specific, David. Your question to the auditor, can you just be more precise, please?
There's a very large intangibles figure there. I did mention to the auditor before the meeting that I had a question for her.
Yeah. That's fine.
AUD 745 million, I think, from memory. You've listed it as a key risk item in your auditor's statement. Could you please clarify to shareholders on what basis have you been prepared to sign off with an intangibles figure that is three times the market capitalization, which is one and a quarter times the enterprise value, and which is based on a company that at the moment, the merged company at the moment, is delivering pretty close to zero free cash flow? So, I'd just be grateful if the auditor could explain how she signed off on that figure. Thank you.
Right. Yes, please. Address the question.
Thank you for the question. You are right. The carrying value of the intangible assets was a key audit matter as part of our audit. In our opinion, we clearly state out the work that we did around that, which included, amongst other things, looking at the discounted cash flows, looking at the key assumptions that underpin those model, and the discount rates, and other assumptions in that. Based on the work that we did, we concluded on that matter. That is set out in that key audit matter in our audit opinion.
Thank you. Any other questions in relation to that matter? The next seven items of business relate to the re-election of Directors, and election of Directors. I would like to explain how these items will proceed. Each candidate's profile and the board's recommendation is set out in the notice of meeting so that every shareholder has had that information before today. To be fair to all candidates, no candidates will be addressing the meeting, whether they are standing for election or re-election. Shareholders may ask questions on each election when the resolution is put. I ask for questions, not statements. I ask that any questions are directed to me. Item two relates to the re-election of Marina Go, who retires, and being eligible, offers herself for re-election.
Ms. Go has more than 30 years of leadership experience in the media industry, including Chief Executive and senior leadership roles in magazine and digital publishing. She brings extensive Non-Executive Director experience, as well as a detailed understanding of the company's audio business to the board. Ms. Go is Chair of the People, Remuneration and Nominations Committee. The board recommends that shareholders vote in favor of this item. Are there any questions on this matter? If not, the proxies lodged for this resolution appear on the screen. Thank you. As the next item relates to shareholder consideration of my election to the board, I will now hand over to Cathy O'Connor.
Thank you, Ryan. Item three relates to the election of Ryan Stokes, who retires, and being eligible, offers himself for election. Mr. Stokes is the Managing Director and Chief Executive Officer of SGH Limited, a leading Australian diversified operating and investment group, with businesses and investments in industrial services, media, and energy. He brings a deep understanding of the media industry and extensive experience in investment, risk, people management, and executive leadership to the board. Mr. Stokes brings a strong focus on strategic execution and business performance to his role as Chair, and the board recommends that shareholders vote in favor of this item. Are there any questions on this matter? Please move to the nearest microphone, David, and show your green or yellow card and give your name. I think we know who he is. It is okay. The proxies lodged for this resolution appear on the screen.
I actually borrowed it from someone else. It's not mine.
Okay.
Look, a serious question for Ryan. Obviously, he's done an outstanding job in a lot of areas. SGH has been brilliant, and totally accept there are massive headwinds for traditional media. It seems to me at the moment that in the old glory days, you had news, you had movies, and you had sport as the big drivers. News you can get anywhere these days. Movies you can get anywhere. Free-to-air seems to be driven by sport. Ten has got a poor portfolio of sport. My understanding, it's losing a lot of money. Well done. This company is actually not losing cash, but Ten is. But a very serious question. Are the free-to-airs, in conjunction with Foxtel and others, are they paying too much for sport?
Foxtel seems to be up for sale at the moment, certainly Seven, and it's not just Seven, Nine as well is in a difficult space in its value of cash flow from free-to-air. It just seems to me crazy that NRL and AFL are banking ever-increasing amounts of money for their sporting rights. They're negotiating very well. They're playing off the different buyers. It just seems to be surprising that the free-to-air side is not performing well, and yet it's paying massive amounts for sport. It's not just AFL and NRL, it's all the other sport, whether it's Premier League or- Gee, watching TV on Tuesday, and Seven had the Sydney races and Nine had the Melbourne Cup.
Duplication, extra costs, and why have two of the free-to-airs both run the races on Tuesday? But I appreciate your guidance, because to me, it's part of the conundrum of why free-to-air companies in Australia, TV, are not doing well. It's the cost of sport. Thank you.
I think that stretches a bit beyond my re-election. I will give you the luxury of that.
I was just going to say, I think part of re-election is to understand the philosophy of the directors who are up for re-election.
I am not sure. I mean, it is relevant in that perspective, David, but to be frank, that is more a relevant question for the management team, because they are and I will let Rohan kind of give a bit of context to your question, because they are having to justify why any investment in sport is going to deliver a return. To the core point, it is not done other than to believe that through that audience, we can generate revenue, and thro ugh that, we can generate profit. That is a focus. I mean, that is more a question for management, to be frank. So, yeah, bit of cover.
Yeah, I think deals were done historically with a market assumption that is very different from what we see today. There would be a view that we would hold, which I am just echoing the same points, that we look at it through a profitability lens, and that would take a different view from the market category that we see today. We have long-term deals that were constructed. We need to make sure we extract everything we can out of those deals. Really, what you are referring to is kind of the next round of negotiations, which is, we were very disciplined and have been with any sports rights that have emerged in my time. I cannot speak for what has happened before, because there were different market dynamics. Going forward, you should expect us to have a very, very disciplined approach.
Thank you. I will now hand back to Ryan.
Thank you, Cathy. Item four relates to the election of Teresa Dyson, who retires and, being eligible, offers herself for election. Ms. Dyson is an experienced company director with a broad range of experience across public and private sectors. She brings skills and experience in financial regulatory legal matters, as well as in governance and risk management to the board. Ms. Dyson is chair of the Risk, Regulatory, & Compliance Committee. The board recommends that shareholders vote in favor of this item. Are there any questions on this matter? No? If not, the proxies lodged for this resolution appear on the screen. Thank you. Item five relates to the election of Mark McGowan, who retires and, being eligible, offers himself for election. Mr. McGowan served as Premier of Western Australia from 2017 to 2023.
As Premier, he led the Western Australian government through a period of significant infrastructure, investment, and sustained economic growth. He brings executive leadership, financial management, and government and regulatory experience to the board. The board recommends that shareholders vote in favor of this item. Are there any questions on this matter? If not, the proxies lodged for this resolution appear on the screen. Thank you. Item six relates to the election of Cathy O'Connor, who retires and, being eligible, offers herself for election. Ms. O'Connor has more than 30 years experience as a highly credentialed media executive. She brings broad sector management experience and strong skills in business, integration, digital transformation, and investor engagement to the board. Ms. O'Connor has been elected by the independent directors as lead independent director. The board recommends that shareholders vote in favor of this item. Are there any questions on this matter?
Yes, please, David.
Look, I have had the pleasure of working with Cathy before, a number of years ago. She is an outstanding executive, and I think it is a fantastic appointment to put Cathy on the board. I am sure that you did some due diligence before you joined the board. Every sensible person does. In my view, in business, there are always things that can go wrong. You need a bit of paranoia in business. What can go wrong? What can go right? I would just be very interested, I am sure others would, in your due diligence before coming on this board, which has been an underperforming. Both companies have underperformed significantly. What keeps you awake at night, Cathy? We respect your judgment because of your outstanding experience. A lot of things can go right, a number of things can go wrong.
What keeps you awake at night in terms of your relatively new directorship of this company? What worries you about the future, and what counterbalances that and makes you extremely optimistic about the future that the company can turn around? Thank you.
Thank you, David. That is a great question. I am an optimist at heart, and actually, when I first started to talk to what was then Southern Cross Austereo about the opportunity, I became more interested once the prospect of a merger of the two became apparent. The reason for that is because I think any media company that was standing still had inherent risks. You talk about the Austereo of the old days, I believe were it a standalone business, it would have inherent risks. That is because of the changing media landscape. We have massive proliferation of digital platforms, many of them global, many of them playing to different rule books, and that inherently challenges the established media order. This company, I believe, over any other media company in this country, has the best opportunity to not only withstand that trend, but actually to prevail and endure.
I see nothing but opportunity, appreciating that the merger of any business is complex and hard, and many decisions and lots of hard work need to take place pretty quickly, and often, not as quickly enough for many shareholders, as evidenced by some of your comments today. I do passionately believe in local stories and the role that we play in Australian culture, the quality of good journalism, and believe that governments and corporations will continue to support the very real role that we play in society. That is a big-picture view of why I am optimistic. The economic headwinds that we are all facing do not help. They are very real, and as a consumer-driven, advertising-driven business, we feel it, as Rohan rightly said, we feel it in the front seat.
We just have to withstand that and look through the cycle and understand that as a large-scaled, essentially digital business that we are, we have more than enough in our kit bag to grow and deliver for shareholders. Long answer to a long question, but they would be the things I would share with you today.
Thank you.
Thank you. Any other questions? Proxies lodged for this resolution appear on the screen. Thank you. Item seven relates to the election of Karen Stocks, who retires and, being eligible, offers herself for election. Ms. Stocks has more than 30 years leadership experience across technology, media, and telecommunications in Australia and globally. She brings technology, data, and audience measurement, digital media, and audit and risk experience to the board. The board recommends that shareholders vote in favor of this item. Are there any questions on this matter? If not, the proxies lodged for this resolution appear on the screen. Thank you. Item eight relates to the election of Sylvia Wiggins, who retires and, being eligible, offers herself for election. Ms. Wiggins is a former investment banker, chief executive officer, and executive director with almost 30 years experience across infrastructure, energy and utilities, resources, defense, financial services, and transport and government.
She brings strong financial, commercial, and capital markets experience to the board, together with extensive experience as an audit committee chair. Ms. Wig gins is the chair of the audit committee. The board recommends that shareholders vote in favor of this item. Are there any questions on this matter? If not, the proxies lodged for this resolution appear on the screen. Thank you. The next item of business, item nine, is the adoption of the remuneration report for the year ended 30 June 2026. During FY 2026, remuneration outcomes continued to operate separately across the two businesses.
Audio delivered a solid performance against its objectives and financial targets, resulting in an outcome of 84.2% of target. For Seven West, the business in FY 2026, STI 90% EBIT gateway was not achieved. Therefore, no awards were made under the Seven West FY 2026 STI plan. No LTI awards were due for performance testing during FY 2026.
For FY 2027, the board has reset the executive remuneration framework to support the next phase of the group's strategy. Under the revised framework, the STI plan balances financial and strategic measures with clear group business unit and role-specific accountabilities. A 90% EBIT STI gateway will apply for all STI plan participants. The board believes that the remuneration of the company's executive KMP is appropriate given their responsibilities and qualifications and experience that are required to lead this large, diversified national media organization, which is highly focused on digital and strategic transformation. Members of the company's key management personnel and the closely related parties are not entitled to vote on this item, except as proxy in limited circumstances set out in the notice of meeting. The vote on this resolution is advisory only and does not bind the directors or company.
The board will take the outcome of the vote and your comments into account when reviewing the company's remuneration policies. The board recommends that shareholders vote in favor of this item. I welcome questions or comments in relation to the remuneration report. Yes, please.
Good morning, Ryan. How are you?
Good. You want to just state your name?
Yeah, sure, Ryan. No problem. Peter Starr. So we hold the group, and I haven't caught up with you since the tour at Andy Penn's. Farewell, mate. Just some questions, Ryan, in relation to the company's performance over the last couple of years. It's been not bad, but seem to be trending down share-wise. I'm just wondering your thoughts on where we go. I know last week we were down at 46. I know we bounced back a little bit this morning to 50. And I know we're going to vote on a name change, so I'll have some questions on that. I'm just wondering where you see us going, if you compare to what's going on in the market generally with media and things, as far as the share price and about dividends and things like that. Thank you.
Thank you. I think it probably stretches into general business, but I'll entertain the question in relation to what you're trying to understand. Our focus is on driving the performance of the company. I think if we look at the specific item here in relation to the remuneration report, we want to ensure we have a remuneration framework that is going to incentivize and drive that outcome and alignment with shareholders in that performance. To drive shareholder returns, in our view, that share price appreciation and dividend will come through the work of the leadership team to continue to transform and restructure the business to make sure we are managing our costs and chasing every bit of revenue that we can pursue, that's ultimately going to drive profit and cash flow. That is the focus.
We have a lot of work to undertake, and say, through FY 2027, there is a clear plan. We believe, as we start to set the business up, that that will be better reflected in FY 2028. We restated the prior guidance in the meeting today, so we're confident that despite what might be variable conditions, we'll still continue to deliver that FY 2027 result, and the team are very steadfast in their commitment to deliver on that.
Thanks, Ryan.
Thank you. The proxies lodged for this resolution appear on the screen. Thank you. The next item of business, item 10, relates to the grant of performance rights to the Managing Director and Chief Executive Officer, Mr. Rohan Lund, under the company's FY 2027 long-term incentive plan. As summarized in explanatory notes, the performance rights are subject to two equally weighted performance hurdles, relative total shareholder returns and EPS growth, each measured over the three-year period from 1 July 2026 to 30 June 2029. Together, these measures ensure the LTI assesses and rewards both market performance and underlying financial performance. Under the ASX rules, shareholder approval is required in order for a director to be issued new securities under an employment incentive scheme. It is currently intended that shares will be acquired on market to satisfy any performance rights that vest.
However, approval is being sought for the FY 2027 LTI grant to Mr. Lund to provide flexibility for the company to satisfy rights under the LTI plan with new shares required. The board, excluding Mr. Lund, recommends that shareholders vote in favor of this item. Are there any questions on this matter? If not, the proxies lodged for this resolution appear on the screen. Thank you. Next item of business is item 11. It seeks the approval of shareholders for the company to change its name to Seven Media Group Limited and modify its constitution to reflect this change of name. This is a special resolution and must be passed by at least 75% of the votes cast by shareholders entitled to vote. The merger of Southern Cross Media Group and Seven West Media created a larger, more diverse business with market-leading brands, television, audio, publishing, and digital.
The board considers that the name Seven Media Group Limited will more effectively represent the combined group to investors, advertisers, consumers, and employees. The proposed name maintains a strong connection with the group's heritage while orientating it towards a future media platform diversified media group. The name change is proposed to occur concurrently with an ASX listing code change from SXL to SMG, providing a stronger linkage between the business and the market than the existing combination does. The board recommends that shareholders vote in favor of this item. Are there any questions on this matter? Yes, Peter.
Thanks, Ryan. If this is approved, the change of code will be, as you've outlined, SMG?
Correct.
So that means that the ASX will just reissue everybody the new code and the stock, or will we stay under the old code?
It would just be a change of name. So effectively, it will just be, you will see that reference point change from SXL to SMG. So it will be seamless. There won't be any requirement for shareholders to do anything.
How long will that take to implement?
I think post-successful AGM, I think we have that underway. I might turn to company secretary just to confirm the timeframe.
Yes, we are looking at implementing that early next week through the ASX. They take a couple of days to turn that around.
Yeah, that is why I asked that question, because I would have thought that the ASX then would not have to reissue.
There is not much from an administrative point of view that will involve shareholders, but we will put out an announcement which will actually indicate the time when we have actually been able to conclude that with the ASX, but it will not be too far ahead.
Right. Thank you.
Thank you.
Thank you. Proxies lodged for this resolution appear on the screen. The final two items of business are resolutions that are not endorsed or supported by the board. Item 12 is a resolution to remove Marina Go as a director of the company under Section 203D of the Corporations Act. The resolution has been proposed by shareholders holding shares for the benefit of funds managed by Sandon Capital Pty Limited, which together hold approximately 5.5% of the company's shares. Sandon Capital's statement in the support of the resolution is set out in Annexure one of the notice. The board does not endorse it or its accuracy, and is not responsible for its contents. If the resolution is passed, Ms. Go will cease to be a director, even if she is elected under item two. Sandon Capital has not nominated anyone to replace her.
Ms. Go's background is set out in the notice. She has more than 30 years leadership experience in the media industry and extensive experience as non-executive director of Australian boards. She has been closely involved with the integration of the two businesses, in setting the company's strategy, and in delivering integration benefits. Ms. Go chairs the People, Remuneration and Nominations Committee and is a member of the Audit Committee. Her removal would create a skills gap that would be difficult to adequately replace in the short term. For those reasons, the board believes that the resolution is not in the best interest of the company. The board, with Ms. Go absenting, recommends the shareholders vote against this item. As chair, I intend to vote all available proxies against item 12. Marina, under the Corporations Act, you are entitled to speak to this resolution. Would you like to do so?
Thank you, Chair. I think it's outlined, and the only point that I will make is that, last year's AGM, the same resolution was put to the Southern Cross Austereo shareholders, and it was rejected by the shareholders then, so it was exactly the same. Thank you.
Thank you. Are there any questions on this matter? If not, the proxies lodged for this resolution appear on the screen. Thank you. Item 13 relates to the proposed election of Stephen Mayne, an external candidate who has nominated himself for election as a non-executive director and is not endorsed by the board. His biographical information, which was provided by Mr. Mayne, and is available and has not been independently verified by the company, it is set out in the notice. The board has considered Mr. Mayne's nomination against the skills matrix and current composition. The board does not consider Mr. Mayne's skills and experience would strengthen the board or meet the needs of the company at this stage of its integration. The board recommends that shareholders vote against this item. As chair, I intend to vote all available proxies against item 13. Are there any questions on this matter?
If not, the proxies lodged for this resolution appear on the screen. Thank you. Before we come to the end of this meeting and to take a poll on items two to 13, I would like to open the meeting to general questions from holders of ordinary shares. Have any pre-submitted questions been received?
Chair, we have received a question from a shareholder. Is 2Day FM ever going to be the powerhouse it once was?
Thank you. We are confident that 2Day FM can improve its standing in Sydney radio again. We are already seeing encouraging momentum. Over the past eight surveys, a combined Sydney audience share amongst people 25%,54% has grown almost 60%, with 2Day FM delivering the strongest results since 2024. Sydney remains our biggest growth opportunity, and our investment in talent, content, and a clear long-term strategy puts 2Day FM in a stronger position to rebuild its audience and commercial performance. Were there any other pre-submitted questions?
No further questions were received.
Thank you. If there are any questions from holders of ordinary shares in the room, again, please move to the nearest microphone, show your green or yellow card, and state your name. If not, thank you. The poll will now be taken on items 2- 13. To vote, please use your green card, which you received on registration. Chris Dedrick from our share registry, Computershare, has been appointed returning officer and will conduct the poll after voting has closed. The results of the poll will be announced to the ASX later today. Following today's approval of the name change, the formal steps to change the company's name to Seven Media Group Limited will be taken over the coming days.
We expect the ASX will update the company's name and ticker code early next week. That concludes the business of the meeting. I will now declare the meeting closed for all purposes submitted to the conduct and conclusion of the poll. Thank you for attending this annual general meeting. Thank you.