Part A

Southern Cross Media Group Limited:

Q.1

 The Auditors for Southern Cross Media Group Limited is the PricewaterhouseCoopers audit company that provide audit and non-audit services.

Q.2

The principal activities that  SCMG engaged in during the financial year comprised; the broadcasting of regional free to air commercial television and radio stations across Australia, advertising sales on television and radio and management of online radio content. They also published community newspapers within the United States of America as a principal activity of the business until the sale of American Consolidated Media LLC in June 2010.

Q.3

Five directors served on the Board of Directors during the year. They included; Max Moore-Wilton who served as Chairman, Leon Pasternak, Chris de Boer, Tony Bell and Michael Carapiet who served as an alternate to Max Moore-Wilton until March 10, 2010  when was appointed as director.

Q.4

Only one director Mr. Michael Carapiet who was also an alternative to Max Moore served as Non-Executive Director.

Q.5

Board Independence principle requires that the majority of directors must be independent. This policy determines whether a director has vested interest that affects their ability to perform and exercise unfettered and independent decisions. Currently, the Chairman of SCMG is not independent as stipulated by the Principles given that in the last three years he has been a consultant and senior employee of Macquarie, which is SCMG major investor. The Board Charter requires that all future chairs must be independent.

Q. 6

In the 2009/2010 financial year, SCMG reported a consolidated loss of $82.7 million after tax, a slight improvement from the year 2009 which was a loss of $84.6 million. This loss included a profit after tax from the continuing SCM businesses of $19.9 million which has been offset by a loss from the discontinued American Consolidated of Media operations of $102.6 million.

Q. 7

The main contributing factor to this performance is the loss from the discontinued ACM operations of $102.6 million and the impairment charge of $170.6 million (2009: $138.9 million) which was documented to lower the non-current assets of the ACM business to their projected recoverable amounts at 31 December 2009. The impairment charge as a result of persistent unfavorable economic environment influencing the transaction performance of the business as well as a decline in earnings multiple received in sale transactions for equivalent businesses.

Q. 8

The company used Recapitalization, where by December 2009 SCMG had raised $294 million capital, this finalized with an overall acceptance rate of 83% and a clearing price of$1.65 for every new available security, representing a premium of 10% per new security on the offer price of $1.55 per stapled security. Internalization was also used to change management of the Macquarie. By 10th march 2010 SCMG had completed internalization and paid Macquarie $40.5 million in consideration for the cessation of the management planning with Macquarie Media Management Limited along with the provision of transitional service area to SCMG. Corporatization was also used by SCMG where the company introduced corporatization and various other changes to remove reverences to Macquarie as had been voted by security holders on 17 December 2010. It also simplified its corporate structure by converting from a triple stapled structure to single holding company, SCMGL. All security holders of the former company held the same number of shares in SCMGL as the number of stapled securities they held prior to corporatization.

Q. 9

Recapitalization raised $294 million with an overall acceptance rate of 83% and at a clearing price of $1.65 per new stapled security. This represented premium of 10 cents for every new security on the offer price of $1.55 per stapled security.

Q. 10

The funds realized from the capital raising, together with the majority of corporate level cash, were used to reduce debt owing under SCM Australia Pty Ltd.’s business level bank facility from $872.5 million to $337.5 million on 3 December 2009.

Q. 11

SCMG performance is expected to take a positive trend during to the 2010-2011 financial year owing to the fact that ACM operation that was making losses had been discontinued, the management of Macquarie changed, the recapitalization and payment of the debts owing under   SCM Australia reduced substantially and increase of revenue of basic media operations revenue by 3.5% for the period to $416.7 million. The Television division has also given an indication of strongly performance for the year with revenues increasing by 6.5%.

Q. 12

The Directors declared a final fully franked dividend of 6.2 cents per share, totaling the full year payout to 9.7 cents per share, which is an increase of 26% from what was paid in the previous year.

Village Roadshow Limited

Q. 1

The auditor of Village Roadshow Limited is Ernest and Young (Australia)

Q. 2

The main activities of VRL include; theme park and water park operations,  aquariums and other attraction operations, cinema exhibition operations, FM radio operations and Film, DVD and video distribution operations.

Q.3

The VRL Board of Directors has decided that no final dividend will be declared and paid for the year ended 30 June 2010 as a result of the current work being undertaken to streamline the capital structure of the VRL group.

Q.4

VRL sold the Greece and Czech Republic operations, leading to a profit after tax from the discontinued operation of $25.6 million.

Q.5

Village Roadshow Limited operates is Australia, New Zealand, wales, US

Q.6

The company plans to build and operate VRL’s fourth Wet’n’Wild water park at Prospect in Western Sydney. This was after VRL entered into conditional agreement with the New South Wales Government in September 2010. The park will cost $80 million and have Australia’s the biggest man-made beach and wave pool, , a range of teen and family oriented water slides, dueling water coasters and toddler pool and interactive water play zone. The company will also establish an integrated Water Management Plan to ensure sustainable water.

Q. 8

Wet’n’Wild Sydney is expected to start functioning during the summer of 2013/14 financial year.

Q.9

There are eight directors who served in the Board of Directors.  They included; John R. Kirby Executive Chair, Robert G. Kirby Executive Deputy Chair, Graham W. Burke Managing Director, Peter M. Harvie, D. Barry Reardon, Peter D. Jonson, David J. Evans and Robert Le Tet

Q. 10

Only four of the directors are independent

Q.11

Executive Director must be one full time employees of the Company or a branch within the VRL Group, either directly or through a consultancy. The Chairman of the Board also needs to be a shareholder of the company.

Q.12

There are for committee namely Audit and risk committee, nomination committee, remuneration committee and executive committee.

Q.13

The corporate Code of Conduct stresses on the actions of the employees as stipulated  in the Employee Guide and obligation of the all Directors and managers to act with integrity and

objectivity, at all times to promote the image and performance of the Company.

Part B

Q.1

Southern Cross Media Group Limited

Return on Equity  = 0 (0 profits)

Return on Assets  = 0 (0 profits)

   = 0

Current Ratio  = 1.8

Quick Ratio =  =    = 1.8

Cash flow ratio   =  =   = 1.49

Debt to Equity Ratio =   =    = 0.35

Debt Ratio =    =    = 0.26

Interest Coverage ratio =    = 0 (does not apply, has 0 profits)

Village Roadshow Limited

Return on Equity =    = 0.17

   =   = 0.092

Current Ratio  = 0.89

Quick Ratio =  =    = 0.84

Cash flow ratio   =  =   = 0.57

Debt to Equity Ratio =   =    = 1.95

Debt Ratio =    =    = 0.66

Interest Coverage ratio =    =   = 1.7

Summary

RATIOS

SCMG

VRL

Return on Equity

0

0.17

Profit Margin

0

0.092

Current Ratio

1.8

0.89

Quick ratio

1.8

0.84

Cash Flow Ratio

1.49

0.57

Debt to Equity Ratio

0.35

1.95

Debt ratio

0.26

0.66

Interest coverage ratio

0

1.7

Q.2

Profitability is the ability of a company to have net return earnings from their business activities. Return on Equity and profit margin explains this category. Efficiency in this case is to the utilization of resources to maximize production of goods and service and bring positive returns. Liquidity is the ability of a company’s asset to be sold or bought in the market without affecting the value to offset the liabilities. Current ration and quick ration explains this category where by the higher the quick ratio the better. Capital structure means how companies finance their investments and activities. It is explained by the debt ratio, debt to equity ratio and interest coverage ratio

SCMG in this case made losses at 0% profit while VRL 9.2% of each dollar of sale contributed to its net income. VRL is equally more efficient since they get profits in their operation unlike SCMG that any earning offset the debts. SCMG in this category has higher rations of 1.8 making it more liquid than VRL at 0.8. VRL is in a better position of offsetting its liabilities using its assets than SCMG having that it has higher ratios.

In the short run, VRL is the best company to invest in, owing to the fact that it is a profit making company with 9.2% profit margin. This gives assurance of return to the shareholders’ equity. However, SCMG can be provide a better long term investment if the upward trend in performance is sustained due to the reason that it is more liquid with 1.8 ratios.

Part C

Q.1

VRL'S Shareholding in Austereo segment was sold to Austereo.

Q.2

There is improvement in performance in profit by 169% to 204272 from. 117204 but 46% decline in profit after tax from continuing operation.

Q.3

Repayment of corporate debt, sale of non-core business, successful share buyback, and better performance of theme park and review of overhead costs were the reason for improvement.

Q.4

SBMH recorded general increase in growth of revenue by 20.5% from$ 416.7M in operation.

Q.5

Yes. This is because SCMG will be stronger in the long run after clearing all the debts combined with its high liquidity ratio.

Conclusion

SCMG and VRL registered different performance for the 2009/2010 financial year. VRL posted 9.2% profit proving its strength in the market. SCMG on the other hand registered losses due to the debts carried forward and the poor performance of the discontinued operations. It is however back to the positive trend and will be a good company to invest in in future.

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