GTN : Appendix 4D and half year financial statements

For personal use only

GTN Limited

ABN 38 606 841 801

ASX Half-year information

31 December 2021

For personal use only

2

GTN Limited

Half-year ended 31 December 2021

(Previous corresponding period: Half-year ended 31 December 2020)

Results for Announcement to the Market

							$ (,000's)
Revenue from ordinary activities		up		14.5%		to	81,021
Net profit for the period attributable to		up
members			629.7%		To	2,678
Dividends/distributions		Amount per security		Franked amount per
							security
Final dividend - Year ended 30 June 2021			N/A			N/A
Interim FY2022 dividend			N/A			N/A

Net tangible assets / (liabilities) per security

	31 December	31 December
	2021	2020
Net tangible assets/ (liabilities) per security (cents
per share)	$0.42	$0.37

For personal use only

3

Directors' Report

The Directors of GTN Limited (the "Company") submit the following report for GTN Limited and its subsidiaries (the "Group") for the half-year ended 31 December 2021. In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows:

Directors

The following people were Directors of the Company for the entire half year ended 31 December 2021 and up to the date of this report:

• Peter Tonagh (Chairman)
• William Yde III (Managing Director)
• David Ryan
• Corinna Keller
• Robert Loewenthal

Principal Activities

The principal activity of the Group during the course of the financial half year was that of provider of an advertising platform to advertisers in Australia, United Kingdom, Canada and Brazil.

Review and Results of Operations

The Group reported revenue of $81.0 million for the six-month period ended 31 December 2021, an increase of 14.5% from $70.8 million for the same period in the prior year. Revenue increased in all markets except Canada, which decreased slightly (less than 1%). While revenue continues to be negatively impacted by the COVID-19 pandemic, revenue has increased significantly since its low point at the onset of the pandemic in all of the Group's markets.

Revenue		31 December	31 December
		2021	2020
		$'000	$'000
Australia		37,948	30,592	24.0%
United Kingdom		24,080	22,463	7.2%
Canada		14,095	14,161	(0.5)%
Brazil		4,898	3,565	37.4%
Total		81,021	70,781	14.5%

Changes in foreign exchange rates had a positive impact on reported revenue from the United Kingdom and Canada and a negative impact on Brazil reported revenue.

Revenue:		31 December	31 December
Local Currency
		2021	2020
		$'000	$'000
Australia	AUD	37,948	30,592	24.0%

For personal use only

4

United Kingdom	GBP	12,926	12,432	4.0%
Canada	CAD	12,996	13,495	(3.7)%
Brazil	BRL	19,364	13,884	39.5%

EBITDA for the six months ended 31 December 2021 increased 96.1% to $6.1 million compared to $3.1 million for the six months ended 31 December 2020. Adjusted EBITDA, (as defined below) increased 42.8% to $10.2 million for the current period compared to $7.1 million for the prior half-year period. EBITDA and Adjusted EBITDA were positively impacted by the revenue increase for the period. Combined network operations and station compensation expenses, non-cash compensation and selling and general and administrative expenses ("operating expenses") increased 10.5% ($7.1 million). The increase in operating expenses included $2.3 million (4.9%) in station compensation, $2.1 million in sales costs (28.0%) and a $1.2 million (64.9%) reduction in Jobkeeper/Canada Emergency Wage Subsidy ("CEWS") benefits. Some of the factors impacting the increase in station compensation were an increase in expense to a key affiliate in Australia, additional variable expense in the United Kingdom related to the revenue increase as well as changes in foreign exchange rates in Canada and the UK. Sales costs increased both due to higher commissions and bonuses related to the revenue increase for the period as well as additional investments in staff and other sales costs designed to continue the positive revenue momentum the Group has experienced.

The Group recognised Jobkeeper and CEWS benefit of $0.7 million for the half-year period ending 31 December 2021 compared to a benefit of $1.9 million for the half-year period ending 31 December 2020. Jobkeeper and CEWS are reflected as a reduction in general and administrative expenses in the Group's consolidated statement of profit and loss and other comprehensive income. The Group received no similar benefits in its other jurisdictions (Brazil, United Kingdom and United States). Both programs have been discontinued and the Group does not expect to receive Jobkeeper or CEWS subsidies in 2H FY22.

EBITDA is earnings before interest, tax, depreciation, amortisation and intangible impairment charges. Management uses EBITDA to evaluate the operating performance of the business without the non-cash impact of depreciation and amortisation and before interest and tax charges, which are significantly affected by the capital structure and historical tax position of the Group. EBITDA can be useful to help understand the cash generation potential of the business because it does not include the non-cash charges for depreciation and amortisation. However, management believes that it should not be considered as an alternative to net free cash flow from operations and investors should not consider EBITDA in isolation from, or as a substitute for, an analysis of the Group's results of operations. Adjusted EBITDA is EBITDA adjusted to include the non-cash interest income arising from the long-term prepaid Southern Cross Austereo Affiliate Contract and excluding transaction costs, foreign exchange gains and losses, gains on lease forgiveness and loss on refinancing. The Directors consider that Adjusted EBITDA is an appropriate measure of the Group's underlying EBITDA performance. Otherwise, the EBITDA would reflect significant non-cash station compensation charges without offsetting non-cash interest income arising from the treatment of the Southern Cross Austereo contract as a financing arrangement, one-off costs related to purchasing businesses and raising capital and the non-operating impact of the fluctuation in foreign exchange rates. See Note 8 for a reconciliation of EBITDA and Adjusted EBITDA to profit before taxes.

Cash Resources and Liquidity

The Group continues to maintain significant cash resources with $32.5 million of cash and cash equivalents at 31 December 2021 and net debt (debt less cash) of $7.3 million. Debt

For personal use only

5

consists of a $37 million bank debt facility (fully drawn) and $2.8 million of leases that are considered debt under AASB 16. The Group's total gearing ratio ("TGR") was 0.43x net debt to trailing 12-month Adjusted EBITDA at 31 December 2021.

The Group repaid $13 million of its bank facility during the period and has repaid $23 million of the facility during the past 12 months. The Company anticipates that it will continue to reduce the amount of debt outstanding under the bank facility in the future but has not set a target level of debt repayment or debt outstanding. The repayment date of the bank facility is 30 September 2023 and there are no scheduled mandatory principal payments prior to that date.

Net cash used in operating activities for the period was $2.3 million. This was primarily due to a $6.9 million increase in accounts receivable from 30 June 2021 to 31 December 2021. The increase in accounts receivable relates to the higher revenue in 1H FY22 which increased $10.2 million compared to 1H FY21. We expect, should revenue continue to grow compared to previous periods in the future, that accounts receivable will continue to grow and act as a drag on net cash provided from operating activities.

COVID-19 impact

The ongoing COVID-19 pandemic continues to have a negative impact on the Group's revenue, which due to the fixed cost nature of the Company's business model has a large negative impact on all measurements of profitability, including NPAT, NPATA, EBITDA and Adjusted EBITDA. However, the Group's results have rebounded from the low point of the initial onset of the pandemic. For example, revenue for the half-year ended 31 December

2020 (the initial comparable period impacted by the pandemic), dropped $24.9 million (26%) compared to the previous year period, whereas revenue for the half-year period ended 31 December 2021 increased $10.2 million (14%), recapturing 41% of the initial decrease. Trailing 12-month revenue "bottomed out" in March 2021 at $125.7 million and has subsequently increased $27.8 million (30.4%) over the past nine months (April 2021 - December 2021).

While the Group's revenue and profitability performance has improved, we anticipate that the Group's results will continue to be highly dependent on the impact of the COVID-19 pandemic in the markets in which we operate, and any lockdown or other tightening of restrictions will have further negative impact on the Group's financial results.

Bank debt facility

In December 2020, the Group and its lender agreed to modify certain covenants and other terms of its debt facility. The purpose of these modifications was to allow the Group to remain in compliance with the terms of the debt facility given the ongoing impact of the COVID-19 pandemic on its financial results. As a condition of this relief, the Company agreed to restricted distributions (including the elimination of dividends and share buy-backs) and other "tightening" of the terms of the debt facility agreement for the period of the modification. The Group also agreed to an interest rate margin of 3.25% for the period of the modification. Previously the margin was based on the total gearing ratio with the margin set at 2.50% at a total gearing ratio of less than 2.00x increasing to a maximum of 3.25% at a total gearing ratio in excess of 2.25x. The lender's definition of EBITDA for purposes of the debt facility covenants differs from the EBITDA and Adjusted EBITDA definitions used herein. The lender lowered the margin to 2.50% effective 22 October 2021, the date the Group delivered its compliance certificate for first quarter fiscal 2022.

The Group was in compliance with the revised covenants throughout the period of the modification. The additional restrictions expired effective with the delivery of the Group's compliance certificate for the period ending 31 December 2021, which was delivered in February 2022. The Group expects to continue to be in compliance with its debt facility covenants in the future should the impact of the COVID-19 pandemic remain roughly comparable to what it has been for 1H FY22.