10 questions lodged at 2024 Southern Cross Austereo hybrid AGM
November 26, 2024
Below is the text of the 10 written questions submitted at the 105 minute Southern Cross Austereo hybrid AGM held on November 25, 2024. Proxies should have been disclosed to ASX early with these formals but the chair provided this useful summary of what the proxy advisers and major shareholders were doing leading into the Q&A. It was a high quality AGM debate with David Kingston, Charlie Kingston, Fred Woollard and Roger Colman all asking questions from the floor.
Q1. Our name is Southern Cross Austereo and after Macquarie Group floated us with a $1 billion equity valuation in November 2005, we've now wracked up $1.32 billion in accumulated losses with potentially more to come given the latest $224.8m annual loss slashed our net assets to $202.8m, but the market still thinks that is overdone because with the stock at 54c, our market cap is only $139m and the outstanding debt of more than $100m looks pretty ominous. Given the CEO has been with the company since 2016, could he have the first crack at explaining who got the circa $1.4 billion which shareholders have lost so far. With the benefit of hindsight, was Southern Cross in 2007 or Austereo in 2011 our worst over-priced acquisition in terms of burning hundreds of millions of dollars for shareholders?
Answer: Amazed that new chair Heith Mackay-Fraser claimed "we are a particularly successful business today" then declined to reflect on history. He just had to say "we clearly overpaid for acquisitions in the past, then got disrupted by big tech". David Kingston had earlier spelt out all this unfortunate history and much more from the floor. Watch video of exchange via Twitter.
Q2. PwC have been paid more than $1 billion to audit Macquarie Group since it floated in 1996 and the job has still not ever gone to tender. Macquarie arranged for PwC to be our auditor when they floated our business as Macquarie Media in November 2005. 19 years and endless financial disasters later, we are still audited by PwC. How many times have we run full competitive tenders for the audit during PwC's unbroken run auditing our company and when are we next planning to run a full tender for the audit job? Also, could the audit signing partner please comment on why our claimed net assets are 46% higher than the current market capitalisation?
Answer: Complete failure to answer the question, which raises suspicions as to whether it has ever been tendered. Watch video of exchange via Twitter.
Q3. Our largest shareholder and biggest competitor ARN Media have crashed and burned trying to bring Kyle and Jacqui O into the Melbourne market to justify the ridiculous new long term contract they secured from the company. Did we help drive up the cost of this contract by competing vigorously to poach Kyle and Jackie O and how have our stations fared fending off their push into the Melbourne market?
Answer: The chair and CEO both sounded very pleased they've seen off the Kyle and Jackie O Melbourne incursion, so far, particularly with their "family friend" content on Fox FM. Watch video of exchange via Twitter.
Q4. Could new director Marina Go and the chair comment on the recruitment process that led to her appointment to the board. Was a head hunter involved, did the full board interview Marina and did they interview any other candidates? Did Marina know any of our directors before engaging with the recruitment process? Also, could Marina please explain why she banned online participation at Friday's Adore Beauty AGM, where she is chair? Hybrid AGMs maximise shareholder participation and accountability so thanks to Southern Cross for sticking with the practice in recent years.
Answer: The chair said that he serves on the AICD board with Marino Go and dismissed the Adore Beauty question as irrelevant, when he could have said "I'm sure Marina will note your comment but at this company we'll stick with the hybrid format". Watch video of exchange via Twitter.
Q5. Could Heith please explain the process through which he become our chair. Which of our major shareholders supported his appointment to this role. Also, corporate voting is not a secret ballot and given the takeover battle with our largest shareholder ARN Media over the past year, could Heith please comment on whether he knows if ARN Media is supporting his re-election today. Have ARN voted in favour by proxy, not voted at all or are they waiting to vote in the meeting today? Finally, are any of the major proxy advisers still covering us and, if so, have they all recommended in favour of Heith's re-election today?
Answer: The chair had earlier explained that ISS and Glass Lewis recommended in favour of all resolution and it was 2 un-named large shareholders which delivered the 28% vote against his re-election. Watch video of exchange via Twitter.
Q6. As chair of our company, could Heith outline his approach to the tricky social issue of gambling advertising in a country like Australia which suffers the world's biggest per capita gambling losses running at $25b a year. The Federal Government continues to dither in terms of responding to the unanimous cross party parliamentary committee recommendation 17 months ago to implement a full tobacco-style gambling advertising ban by 2026. What proportion of our advertising revenue comes from gambling companies, how much has this risen over the years and how active have we been in terms of lobbying the Federal Government not to introduce the proposed full ad ban? What guard rails do we voluntarily put in place in terms of gambling advertising, such as not broadcasting them during school drop off times or children viewing hours or limiting the volume of gambling ads during certain programs, such as live sport.
Answer: The answer didn't create the impression that the chair was engaged or active on the gambling debate, which is the way most commercial media play the issue with a "we follow the law and do nothing more" approach. Watch video of exchange via Twitter, plus these additional comments saying how they are "very active" lobbying in Canberra through their peak radio and TV associations.
Q7. The 5 most valuable US big tech stocks - Microsoft, Apple, Amazon, Alphabet and Nvidia - are together worth more than $20 trillion, largely because they have enormous pricing power and are over-charging customers the world over. Putting aside the damage some of them have done to our business as competitors, could the CEO comment on which of the big global technology companies we are most reliant on from an operational point of view and what would we do if they suddenly put their prices up by 30%?
Answer: The correct answer might have been "we're a heavy user of Microsoft internally" or "Alphabet is pivotal for delivering eye-balls via search and Youtube" but the CEO didn't understand the question and instead only offered that they "get a bit of money off Google". Watch video of exchange via Twitter.
Q8. We broadcast News Corp's Sky News across much of our regional television network. Given that we are trying to sell our regional television assets and News Corp is simultaneously trying to sell Foxtel, are we talking to some of the same potential buyers? What is the current status of our Sky News contract, when does it expire and has it been profitable for our business?
Answer: The chair said it was profitable but did offer much more. Watch video of exchange via Twitter.
Q9. At 8.16pm last night, The AFR published a story by media writer Sam Buckingham-Jones which included the following line:
"ARN Media is among the three biggest Southern Cross shareholders, all of whom intend to vote against the remuneration report, according to multiple people briefed on the matter who spoke on condition of anonymity."
What is going on with our major shareholders leaking their voting intentions to the press ahead of the AGM? They are clearly trying to undermine us with public pressure and a remuneration strike. It would have been better to publish the proxy position to the ASX along with the formal addresses as many companies now do so we could have a more fully informed debate on the voting situation at today's AGM, but you've declined to do this. What is the voting position and please outline our pre-AGM engagement with these 3 largest shareholders who clearly have turned hostile.
Answer: The chair clarified that it was 2 not 3 major shareholders who declined the 28% vote against his re-election but declined an opportunity to spray ARN Media and its fellow travellers for running a destabilisation campaign. Watch video of exchange via Twitter.
Q10. Thanks for offering a hybrid AGM today but I wasn't able to find a copy of the AGM webcast from past AGMs on your website. The annual report says we have 9,423 shareholders but less than 200 will be online or in the room today watching this AGM live. It is not comfortable listening for the board to hear a savvy analyst like David Kingston lay out the uncomfortable facts but this should not be buried with access denied to all shareholders and the broader public. Will the chair undertake to publish a full archive of the AGM webcast on our website? Also, please disclose how many shareholders voted for and against in the poll outcome announcement to the ASX today so we can see what retail shareholders think, rather than just the big shareholders dominating the voting outcome.
Answer: Not asked but no problems given the previous 9 questions were all asked in full without editing. Let's hope they publish the full webcast and embrace scheme-like voting disclosure.
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