#1For personal use only SOUTHERN CROSS AUSTEREO FY18 INVESTOR PRESENTATION 23 August 2018 SOUTHERN CROSS AUSTEREO absolutely engaging#2For personal use only Disclaimer Summary information The material in this presentation has been prepared by Southern Cross Media Group Limited ABN 91 116 024 536 ("Southern Cross Austereo") and contains summary information about Southern Cross Austereo's activities current as at 23 August 2018. The information in this presentation is of a general background nature and does not purport to be complete. It should be read in conjunction with Southern Cross Austereo's other periodic and continuous disclosure announcements which are available at www.southerncrossaustereo.com.au Past performance Past performance information in this presentation is for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance. Future performance This presentation contains certain "forward-looking statements". Forward-looking statements, opinions and estimates provided in this presentation are based on assumptions and estimates which are subject to change without notice, as are statements about market and industry trends, which are based on interpretation of market conditions. Although due care has been used in the preparation of forward- looking statements, actual results and performance may vary materially because events and actual circumstances frequently do not occur as forecast. Investors should form their own views as to these matters and any assumptions on which any of the forward-looking statements are based. Not financial product advice Information in this presentation, including forecast financial information, should not be considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling securities. Before acting on any information, you should consider the appropriateness of the information having regard to your particular objectives, financial situation and needs, any relevant offer document and in particular, you should seek independent financial advice. SOUTHERN CROSS AUSTEREO 2 absolutely engaging#3For personal use only FY18 Results Grant Blackley SOUTHERN CROSS AUSTEREO absolutely engaging#4only For personal use EXECUTIVE SUMMARY 2018 has been a year of transition and investment ✓ Prior year asset disposals have impacted short term earnings - resulting in stronger financial stability Investment in core operations delivered higher revenue growth in H2 Invested for the future in creating new revenue streams: Podcasting Live Experiences Nine Network extended partnership ✓ Forecast return to growth in FY19 - after cycling over earnings impact of divestments - stronger revenue momentum with greater visibility and lead times SOUTHERN CROSS AUSTEREO 4 absolutely engaging#5only For personal use GROUP RESULTS SUMMARY EBITDA $154.7m FY18 EBITDA impacted by non-recurring items NNSW TV ($10m), FY17 profit on asset disposal ($3m), Spectrum tax ($3m), FY17 H1 credits - ACMA and copyright dispute ($5m) Revenue contracted 5.3%, impacted by the divestment of NNSW TV, while like for like revenues up 0.6%. Balance Sheet strengthened with reduction in debt, lower financing costs and strong cash conversion Full year dividend maintained at 7.75 cps, fully franked $ millions FY18 FY17 Var. - Revenue 654.1 690.8 (5.3%) EBITDA 154.7 177.4 (12.8%) Underlying NPAT 75.3 93.8 (19.7%) Net Debt 304.0 321.0 (5.3%) Full Year dividend (cps) 7.75 7.75 SOUTHERN CROSS AUSTEREO 5 absolutely engaging#6For personal use only HEADLINE ACHIEVEMENTS Sales Performance Investment Group revenues up 0.6% (on a like for like basis) Regional revenues up 3.2% (on a like for like basis) Regional Radio revenues up 4.5% - led by National revenue up 15.3% Metro performance improving with stronger ratings and revenue conversion - evidenced with H1 revenue back 3.7% and H2 up 1.9% (Q4 growth of 8%) Digital Radio investment complete - "sustainable competitive advantage" PodcastOne investment - now Australia's #1 commercial on demand podcast company with 45m downloads and clear monetisation path Live Experiences - RnB Live format renewed with extended branded events - "Vine Days" Nine Network representation broadened to include NNSW local. Seven Network affiliation extended on favourable terms Financial Stability Balance Sheet remains healthy with further reduction in debt; interest cover 11.8x and leverage 1.79x Refinancing of bank facilities complete with improved commercial terms Operating cash conversion of 94.2% up 8.2 points • Full Year fully franked dividend maintained at 7.75 cents SOUTHERN CROSS AUSTEREO 6 absolutely engaging#7For personal use only FY18 FINANCIAL RESULTS Nick McKechnie SOUTHERN CROSS AUSTEREO absolutely engaging#8For personal use only GROUP REPORTED STATUTORY RESULTS $ millions FY18 FY18 Var. FY17 (excl. Impairment) Revenue Expenses EBITDA EBITDA Margin 654.1 654.1 690.8 (5.3%) (499.4) 154.7 154.7 23.6% 23.6% (499.4) (513.4) 2.7% 177.4 (12.8%) 25.7% Depreciation & Amortisation (30.7) (30.7) (30.9) 0.5% Impairment EBIT (104.7) 19.3 124.0 146.5 (15.4%) Net Finance Costs (14.8) (14.8) (18.8) 21.2% PBT 4.5 109.2 127.7 (14.5%) Tax Underlying NPAT (3.0) (33.9) (33.9) 1.5 75.3 Deferred Tax Credit 93.8 (19.7%) (14.8) NPAT 1.5 75.3 108.6 (30.6%) Impairment of Regional TV assets - $105m charge less $31m deferred tax credit Statutory result impacted by NNSW sale - divested May 2017 Revenues up 0.6% (exc. NNSW TV) Expenses driven by higher transmission and electricity costs. Non-recurring items from H1 FY17 ($5m) Finance costs reduced 21% or $4m year on year Effective tax rate has normalised at ~31% SOUTHERN CROSS AUSTEREO 8 absolutely engaging#9CASHFLOW $ millions Opening Cash Cash from Operations Tax payment Net Payments for Non-Current Assets Net Financing payments Cashflow pre dividend and non-recurring items Payments for Intangibles (acquisition of Authentic) ✓ For personal use only FY18 FY17 49.0 94.8 145.8 152.7 (34.8) (36.4) (25.5) (29.0) (18.1) (21.1) 67.4 66.2 (8.2) Proceeds from sale of operations and assets Dividends to security holders. 11.1 53.8 (59.6) (55.8) Debt repayment (11.8) (101.8) Closing Cash Balance 56.1 49.0 Reported EBITDA 154.7 177.4 Operating Cash Conversion 94.2% 86.1% EBITDA to cash conversion at 94.2% - up from 86.1% in previous period Modest capital investment of $25.5m Cashflow pre-dividend and non-recurring items increased in FY18 despite lower EBITDA, aided by lower capex and reduced debt financing $10m deferred consideration from sale of NNSW TV received May 2018 SOUTHERN CROSS AUSTEREO 9 absolutely engaging#10For personal use only DEBT REDUCTION PROGRAM $m's 506.9 Net Debt 340.2 321.0 304.0 Jun 2015 Jun 2016 Jun 2017 Jun 2018 Debt Reduction Program has been a priority for the company in last three years, debt levels. reduced by ~$200m since 2015 Net debt reduced further in FY18 to $304m Cycling out of low to negative growth and "back of house" assets - e.g. NNSW TV, transmission assets & excess land & buildings Successfully refinanced $500m facility for a further three years to 2021 - currently $360 million drawn facility $300m (83%) fixed at 2.4% base interest rate for the term SOUTHERN CROSS AUSTEREO 10 absolutely engaging#11For personal use only FINANCIAL COVENANTS 10.00 Interest Cover Ratio 10.60 11.75 3.00 3.00 3.00 Jun 2017 Interest Cover Covenant 3.5 Dec 2017 Jun 2018 Interest Cover Leverage Ratio 3.5 3.5 1.81 1.92 1.79 Jun 2018 Jun 2017 Dec 2017 Leverage Ratio -Leverage Ratio Covenant Material improvement in financial covenants over past two years following debt reduction - and resulting reduction in financing costs Significant headroom exists under covenants with interest cover of just over 11.8x and leverage in a more desirable range at 1.79x SOUTHERN CROSS AUSTEREO absolutely engaging 11#12For personal use only DIVIDEND POLICY Dividend Paid (cps) 4.00 3.50 3.00 4.00 Full Year fully franked dividend maintained at 7.75 cents Dividend payout policy 65% - 85% range of NPAT Strong cash generation supports payout ratio to shareholders Maintained dividend in conjunction with organic investment in new organic growth drivers (e.g. PodcastOne, Digital Radio) 3.75 3.75 3.00 3.25 FY15 FY16 FY17 FY18 Interim Final SOUTHERN CROSS AUSTEREO 12 absolutely engaging#13For personal use only OPERATIONAL REVIEW SOUTHERN CROSS AUSTEREO absolutely engaging#14For personal use only OPERATIONAL REVIEW ● FY17 (excl Var. $ millions Metro Revenue FY18 FY17 Var. NNSW) 242.7 247.2 (1.8%) 247.2 (1.8%) Regional Revenue 393.0 421.4 (6.7%) 381.0 Corporate Revenue 18.4 22.2 (17.1%) 22.2 Total Revenue Metro Expenses Regional Expenses Corporate Expenses Total Expenses Metro EBITDA 654.1 690.8 (5.3%) 650.3 (185.0) (187.1) (1.1%) (278.3) (295.6) (5.9%) (36.1) (30.7) 17.5% (30.7) (187.1) (264.3) 5.3% 17.5% 3.2% (17.1%) 0.6% (1.1%) (499.4) (513.4) (2.7%) (482.1) 3.6% 57.7 60.1 (4.0%) 60.1 Regional EBITDA 114.7 125.8 (8.8%) 116.7 (4.0%) (1.7%) Corporate EBITDA (17.7) (8.5) (107.2%) (8.5) Total EBITDA 154.7 177.4 (12.8%) 168.3 107.2% (8.1%) Underlying EBITDA back 8.1% (adjusting for sale of NNSW TV) Metro revenues - "tale of two halves" with improving momentum in H2 supported by stronger ratings and rollout of Digital Radio. commercial strategy Metro expenses back 1.1% including investment in new growth platform - PodcastOne ~$2m Regional expenses higher due to revenue related costs, TX site rental and increased electricity costs Corporate expenses benefited from ~$5m favourable non-recurring items in prior year SOUTHERN CROSS AUSTEREO 14 absolutely engaging#15For personal use only ADVERTISING REVENUE ANALYSIS BY HALF H1 H2 1.9% (3.7%) Metro Radio 3.7% 5.4% 5.3% 2.8% 1.7% 1.4% Regional Radio Regional TV Total Advertising Revenue (exc. NNSW) H2 FY18 advertising revenue growth 2.8% Metro Radio - advertising revenue rebounds in H2. Q4 Metro radio revenues +8%, positively influenced by stronger audiences & "digital stack" strategy Regional Radio continues to benefit from stronger national investment Growth skewed towards higher margin radio revenues, resulting in favourable cost outcome Regional TV continued growth in revenue and market share - SOUTHERN CROSS AUSTEREO absolutely engaging 15#16For personal use only METRO RADIO • $ millions Total Revenue FY18 FY17 Var. 242.7 247.2 (1.8%) Broadcast & Production (13.9) (13.2) (5.3%) Metro Radio revenues down 1.8%, impacted by H1 performance (-3.7%) Metro full year market grew by 4.0% in FY18 aided by strong growth in H2 at 5.8% Staff & Talent (74.2) (75.0) 1.1% Metro revenues rebound in Q4 following Selling, General & Admin (96.9) (98.9) 2.0% Total Expenses (185.0) (187.1) 1.1% EBITDA 57.7 60.1 (4.0%) stronger ratings and implementation of "digital stack" strategy Expenses were back 1.1% and this includes ~ $2m investment in PodcastOne EBITDA Margin 23.8% 24.3% SOUTHERN CROSS AUSTEREO 16 absolutely engaging#17For personal use only METRO RADIO "DIGITAL STACK' STRATEGY hit TRIPLE WM buddha Easy ok skl URBAN TRIPLE hits hits hits hits 4,567,000 Listen to SCA's FM Network only Source: GFK audience survey 4, 2018 302,000 Listen to both SCA's FM and Digital Radio AMM GREATEST HITS DIGITAL TRIPLE CLASSIC ROCK TRIPLE MODERN TRIPLE MM COUNTRY DIGITAL DIGITAL DIGITAL 329,000 Listen exclusively to SCA's Digital Radio Network only SOUTHERN CROSS AUSTEREO 17 absolutely engaging#18For personal use only METRO RATINGS – IMPROVING AUDIENCES UP ~12% - Simultaneous release of DAB+ survey data from S1 2018 5.1m 4.9m 4.8m 5.2m 5.3m 5.2m 5.0m 4.9m 4.9m 4.8m Survey 7 2017 Survey 8 2017 Survey 1 2018 Survey 2 2018 Survey 3 2018 Survey 4 2018 FM Audience DAB+ Audience Investment in FM assets delivering audience growth - 10+ cumulative audience up 5% (since the start of FY18) Effective Survey #1 2018 - combined FM + DAB stations delivering ~12% higher audience. Strategy delivering a meaningful strategic advantage - with improved monetisation occurring 2DayFM has improved ratings share - and will remain our #1 content priority for the group SOUTHERN CROSS AUSTEREO 18 absolutely engaging#1950,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 For personal use 20,000,000 15,000,000 10,000,000 5,000,000 Week 1 Week 3 Week 5 Week 7 Week 9 Week 11 PODCASTONE PodcastOne Downloads: Weekly & Cumulative 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 The pre-eminent commercial podcast company in Australia - achieving 45 million downloads since launch Aug 17 Premium original content driving increasing consumer engagement and monetisation pathway Download volumes up to yearly high of ~1.5m downloads per week Net investment of $2m in FY18 - expected to reduce in FY19 as revenues increase Week 13 Week 15 Week 17 Week 19 Week 21 Week 23 Week 25 Week 27 Week 29 Cumulative Downloads (RHS) Week 31 Week 33 Week 35 Week 37 Week 39 Week 41 Week 43 Week 45 Week 47 -Weekly Downloads (LHS) Week 49 Week 51 Week 53 Week 55 Week 57 SOUTHERN CROSS AUSTEREO 19 absolutely engaging#20For personal use only REGIONAL - TV & RADIO Regional revenue growth of 3.1% (on a like for like basis) $ millions FY17 FY18 FY17 Var. (excl NNSW) Var. . Regional Radio a consistent performer - 393.0 421.4 6.7% 381.0 3.1% Total Revenue Broadcast & Production Staff & Talent (110.6) (121.3) (8.8%) (71.2) (70.3) 1.2% Selling, General & Admin (96.5) (104.0) (7.2%) Total Expenses 5.3% (278.3) (295.6) (5.9%) (264.3) 125.8 8.8% 116.7 (1.7%) EBITDA 114.7 EBITDA Margin 29.2% 29.9% 30.6% revenue up 4.5% - driven by national revenues up 15% Regional TV continues to "buck the market trend" growing 3.5% Expenses up 5.3% (excl NNSW TV) due to higher revenue related costs, TX site rental and increased electricity costs EBITDA of $114.7m impacted by closure of Mall Media investment ($1.2m), FY17 profit on sale of assets ($3.0m) and benefit from transfer of sundry revenue ($2m) SOUTHERN CROSS AUSTEREO 20 absolutely engaging#21For personal use only REGIONAL RADIO ADVERTISING REVENUES 152.8 147.6 165.4 162.1 172.9 Regional radio revenues grew 4.5%, consolidating 4.4% growth in the prior year and marking 7 th consecutive year of growth National revenues up 15.3% or $7.9m after concerted effort to educate and attract increased investment from national advertisers. Strong result and still "early days" Local revenues stable - aided by stronger yield management - respecting national advertisers naturally occupied a higher ratio of inventory FY14 FY15 FY16 FY17 FY18 SOUTHERN CROSS AUSTEREO 21 absolutely engaging#22For personal use only REGIONAL TV ADVERTISING REVENUES $m's 201.9 195.0 93.8 90.6 104.4 FY17 (exc. NNSW) ■ National Local 108.0 FY18 TV revenues up 3.6% or $6.9m (excl. NNSW TV) after gains in market share supported by improved programming and premium selling Revenue across Tasmanian and Spencer Gulf markets remained flat SOUTHERN CROSS AUSTEREO 22 absolutely engaging#23For personal use only REGIONAL TV POWER RATIO FOR NINE AFFILIATION NINE - QLD, SNSW & VIC Commercial Share, Audience Share & Power Ratio 1.03 1.06 1.09 35.8% 34.9% 32.8% 33.4% 31.8% 38.1% 1.06 34.0% 35.9% Full year power ratio (ratings to revenue conversion) strengthened to 1.07 H1 power ratio grew from a 1.03 to a 1.09 H2 power ratio steady - respecting non- recurring impact of Winter Olympics (Feb 18) & Commonwealth Games (Mar 18) H1 FY17 Audience Share H2 FY17 H1 FY18 H2 FY18 Commercial Share Power Ratio 4 KPMG Market Share Report - Regional Queensland, SNSW and Regional Victoria SOUTHERN CROSS AUSTEREO absolutely engaging 23#24For personal use only CORPORATE $ millions FY18 FY17 Var. Total Revenue 18.4 22.2 17.1% • Total Expenses (36.1) (30.7) 16.6% EBITDA nm = not meaningful (17.7) (8.5) nm ~$2m of FY17 sundry revenue has been reallocated to Regional Expenses impacted by ~$5m favourable prior year movements, including resolution of copyright dispute SOUTHERN CROSS AUSTEREO 24 absolutely engaging#25For personal use only CREATING A SMARTER WORKPLACE – POSITIVE COST CONTROL - Talent & labour costs . Substantial technological investment. Creating a more efficient workplace Systems investment in sales management and content distribution systems coupled with review of workflows, is placing downward pressure on cost base 56% 44% Revenue related & contracted costs Variable nature of revenue related costs Local revenues leverage off national presence across Australia and create ability to deliver localised content SOUTHERN CROSS AUSTEREO absolutely engaging 25#26For personal use only OUTLOOK Grant Blackley SOUTHERN CROSS AUSTEREO absolutely engaging#27For personal use only 8,740 8,795 8,941 National Cume - All Commercial Stations, People 10+, Monday to Sunday 5.30-12.00 midnight Source: GfK Metropolitan Radio Surveys (Average of SMBAP) Source: GfK Metropolitan Radio Surveys (Average of SMBAP) 1 Source: Audioscape 2018 Survey 9,148 9,306 9,345 Radio Audiences 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Average Average Average Average Average Average Average Average Average Average Average 9,559 9,771 9,923 10,069 10,234 RADIO IS A STRONG & GROWING PLATFORM Radio market continues to grow underpinned by continuous audience growth ✓ Metro 4.0% revenue growth FY18 ✓ Regional 4.5% revenue growth FY18 Radio consumption is expanding ✓ Radio portability on the rise (home, car, work, mobile) Smart Speakers - opportunity to grow audiences and engagement - in-home penetration in Australia is ~8% (20% in US) 1 SOUTHERN CROSS AUSTEREO 27 absolutely engaging#28only For personal use REGIONAL GROWTH STRATEGY SCA attracted 15% higher national revenue into regional radio in FY18 Local, 26% Metro Radio Local, 65% National, 74% Regional Radio National, 35% 9.1m Australians live & work in Regional Australia Regional markets hold 36% of the national buying power National advertisers award only 9% of spend to this substantial community - The opportunity is to secure sustainable improvements in national spends – and the "tide is turning" SOUTHERN CROSS AUSTEREO absolutely engaging 28#29For personal use only KEY PRIORITIES - THE YEAR AHEAD Metro Optimise key audio assets - maximise the value and monetisation of all audio brands Improve accessibility of our audio products to a wider range of devices Create personalised audio experiences for our audiences Regional . Accelerate the education and resulting rate of investment from national advertisers Extend our vast reach and influence further in regional Australia Optimise the efficiency of all operations - after considerable technological investment Investment in Growth Disciplined investment criteria - evidenced by Digital Radio & PodcastOne • Mall Media investment closed - unable to validate path to profitability Identify new growth segments - considerate of our core strengths and competencies SOUTHERN CROSS AUSTEREO 29 absolutely engaging#30only For personal use Trading update TRADING UPDATE Strong radio market conditions - across both Metro & Regional, with improved visibility and lead times Group revenue for July & August up 5% (with growth in all asset classes) National investment in regional markets continuing to grow Expense growth less than revenue growth SOUTHERN CROSS AUSTEREO 30 absolutely engaging#31For personal use only Q & A SOUTHERN CROSS AUSTEREO absolutely engaging#32For personal use only SOUTHERN CROSS AUSTEREO absolutely engaging