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Special Broadcasting Service Corporation Annual Report 2018–19

7. Budgetary Reports and Explanations of Major Variances

7.1 Budgetary Reports

The following tables provide a comparison between the 2018–19 Portfolio Budget Statements (PBS) budget and the final financial outcome in the 2018–19 financial statements. The Budget is not audited.

Variances are considered to be ‘major’ based on the following criteria:

the variance between budget and actual is greater than 10%; and
the variance between budget and actual is greater than 2% of the relevant category (Income, Expenses and Equity totals); or
an item below this threshold but is considered important for the reader’s understanding or is relevant to an assessment of the discharge of accountability and to an analysis of performance of the Corporation.

7.1A Statement of Comprehensive Income for the year ended 30 June 2019

		Actual	Budget estimate
			Original¹	Variance²
NET COST OF SERVICES		2019	2019	2019
Expenses	Notes	$'000	$'000	$'000
Employee benefits	7.2(v)	141,941	132,543	9,398
Suppliers	7.2(ii)	192,107	182,053	10,054
Depreciation and amortisation		11,959	11,918	41
Program inventory amortisation		59,972	59,514	458
Finance costs		26	-	26
Impairment loss allowance on financial instruments		94	-	94
Write-down and impairment of other assets		133	-	133
Foreign exchange losses		61	-	61
Total expenses		406,293	386,028	20,265

Less:
Own-source income
Own-source revenue
Sale of goods and rendering of services	7.2(i)	118,923	99,504	19,419
Deposit interest income		3,277	2,300	977
Rental income		1,354	1,161	193
Royalties from program rights		1,461	1,400	61
Other revenue		225	412	(187)
Total own-source revenue		125,240	104,777	20,463

Gains
Gains from sale of assets		-	-	-
Foreign exchange gains		-	-	-
Reversal of impairment losses		-	-	-
Total gains		-	-	-
Total own-source income		125,240	104,777	20,463
Net cost of services		281,053	281,251	(198)
Revenue from Government		281,726	281,726	-
Surplus on continuing operations		673	475	198
OTHER COMPREHENSIVE INCOME
Items not subject to subsequent reclassification to net cost of services
Changes in asset revaluation reserve		6,180	-	6,180
Items subject to subsequent reclassification to net cost of services
Profit on cash flow hedging instruments		229	-	229
Total other comprehensive income		6,409	-	6,409
Total comprehensive income		7,082	475	6,607

The Corporation's original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the Corporation's 2018-19 PBS).
Between the actual and original budgeted amounts for 2019. Explanations of major variances are provided further below.

7.1B Statement of Financial Position as at 30 June 2019

		Actual	Budget estimate
			Original¹	Variance²
		2019	2019	2019
	Notes	$’000	$’000	$’000
ASSETS
Financial assets
Cash and cash equivalents		5,623	5,195	428
Trade and other receivables		23,951	24,680	(729)
Term investments	7.2(i), 7.2(iv)	20,035	9,513	10,522
Total financial assets		49,609	39,388	10,221

Non-financial assets
Land	7.2(iii)	45,550	39,860	5,690
Buildings	7.2(iii)	46,184	34,854	11,330
Plant and equipment		21,061	25,620	(4,559)
Computer software		12,537	17,096	(4,559)
Other intangibles		9,319	9,319	-
Inventories		84,225	90,312	(6,087)
Other non-financial assets		13,511	15,286	(1,775)
Total non-financial assets		232,387	232,347	40
TOTAL ASSETS		281,996	271,735	10,261
LIABILITIES
Payables
Trade creditors and accruals	7.2(iv)	14,095	29,996	(15,901)
Other payables	7.2(iv)	14,530	6,534	7,996
Total payables		28,625	36,530	(7,905)
Provisions
Employee provisions	7.2(v)	30,000	25,769	4,231
Other provisions		745	1,193	(448)
Total provisions		30,745	26,962	3,783
TOTAL LIABILITIES		59,370	63,492	(4,122)
NET ASSETS		222,626	208,243	14,383
EQUITY
Contributed equity		110,403	110,403	-
Reserves	7.2(iii)	82,026	68,555	13,471
Retained surplus		30,197	29,285	912
TOTAL EQUITY		222,626	208,243	14,383

The Corporation's original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the Corporation's 2018-19 PBS).
Between the actual and original budgeted amounts for 2019. Explanations of major variances are provided further below.

7.1C Statement of Changes in Equity for the year ended 30 June 2019

		Contributed equity			Asset revaluation reserve			Hedge reserve			Retained surplus			Total equity
		Actual	Budget estimate		Actual	Budget estimate		Actual Budget estimate			Actual	Budget estimate		Actual	Budget estimate
			Original¹	Variance²		Original¹	Variance²		Original¹	Variance²		Original¹	Variance²		Original¹	Variance²
		2019	2019	2019	2019	2019	2019	2019	2019	2019	2019	2019	2019	2019	2019	2019
	Notes	$’000	$'000	$'000	$’000	$'000	$'000	$’000	$’000	$’000	$'000	$'000	$'000	$’000	$'000	$'000
Opening balance
Balance carried forward from previous year		110,403	110,403	-	75,215	68,555	6,660	424	-	424	29,502	28,810	692	215,544	207,768	7,776
Comprehensive income
Surplus for the year		-	-	-	-	-	-	-	-	-	673	475	198	673	475	198
Other comprehensive income
Asset revaluation	7.2(iii)	-	-	-	6,180	-	6,180	-	-	-	-	-	-	6,180	-	6,180
Gain on cash flow hedging instrument		-	-	-	-	-	-	229	-	229	-	-	-	229	-	229
Total comprehensive income		-	-	-	6,180	-	6,180	229	-	229	673	475	198	7,082	475	6,607
Transfers between equity components
Transfer of revaluation gain/(loss) in relation to assets written off during the year		-	-	-	(22)	-	(22)	-	-	-	22	-	22	-	-	-
Total transfers between equity components		-	-	-	(22)	-	(22)	-	-	-	22	-	22	-	-	-
Closing balance as at 30 June 2019		110,403	110,403	-	81,373	68,555	12,818	653	-	653	30,197	29,285	912	222,626	208,243	14,383

The Corporation's original budgeted financial statement that was first presented to parliament in respect of the reporting period (i.e. from the Corporation's 2018-19 PBS).
Between the actual and original budgeted amounts for 2019. Explanations of major variances are provided further below.

7.1D Cash Flow Statement for not-for-profit Reporting Entities for the year ending 30 June 2019

		Actual	Budget estimate
			Original¹	Variance²
		2019	2019	2019
	Notes	$’000	$’000	$’000
OPERATING ACTIVITIES
Cash received
Receipts from Government		281,726	281,726	-
Sale of goods and rendering of services	7.2(i)	143,635	108,377	35,258
Interest		3,120	2,300	820
Net GST received		6,734	11,500	(4,766)
Total cash received		435,215	403,903	31,312
Cash used
Employees		(138,211)	(131,843)	(6,368)
Suppliers	7.2(ii)	(276,023)	(254,164)	(21,859)
Total cash used		(414,234)	(386,007)	(28,227)
Net cash from operating activities		20,981	17,896	3,085

INVESTING ACTIVITIES
Cash received
Investments		187,546	195,000	(7,454)
Total cash received		187,546	195,000	(7,454)
Cash used
Purchase of property and equipment		(12,698)	(12,000)	(698)
Investments		(197,546)	(202,000)	4,454
Total cash used		(210,244)	(214,000)	3,756
Net cash used from investing activities		(22,698)	(19,000)	(3,698)

FINANCING ACTIVITIES
Cash used
Finance lease payments		-	-	-
Total cash used		-	-	-
Net cash from financing activities		-	-	-
Net decrease in cash held		(1,717)	(1,104)	(613)

Cash and cash equivalents at the beginning of the reporting period		7,340	6,299	1,041
Cash and cash equivalents at the end of the reporting period		5,623	5,195	428

The Corporation's original budgeted financial statement that was first presented to parliament in respect of the reporting period (i.e. from the Corporation's 2018-19 PBS).
Between the actual and original budgeted amounts for 2019. Explanations of major variances are provided further below.

7.2 Major Budget Variances for 2019

Explanations of major variances	Affected line items (and statement)
(i) Sale of goods and rendering of services
Advertising sales were higher than budget largely due to increased activity and better than budgeted advertising sales revenue. Revenue generated from key sporting events has also contributed to a better than budgeted revenue position. Within uncertain market conditions, linear channels across the board including the SBS Food channel performed more strongly than anticipated.	Sale of goods and rendering of services (Statement of Comprehensive Income); Sale of goods and rendering of services (Cash Flow Statement); Term investments (Statement of Financial Position)
(ii) Suppliers
Suppliers were higher than budgeted due to the increase in advertising revenue, which impacted the cost of sales including higher sales commissions associated with additional revenue. In addition SBS increased investment in content and related activities.	Suppliers (Statement of Comprehensive Income); Suppliers (Cash Flow Statement)
(iii) Land and Buildings
Increased value of Land and Buildings due to revaluations conducted in June 2018 and 2019 (The revaluation of Land and Buildings in June 2018 was not included in the original budget, as the budget was prepared prior to the finalisation of the revaluation). The building work carried out on the SBS Melbourne Office at Federation Square has also contributed to an increase in Buildings. This is partly offset by lower than budgeted Plant and equipment expenditure with components of the work originally anticipated as Plant and equipment.	Land and Buildings (Statement of Financial Position); Reserves in Equity (Statement of Financial Position); Asset revaluation reserve (Statement of Changes in Equity)
(iv) Payables
Lower Trade creditors and accruals balance primarily due to the timing of payments and a change to a content acquisition arrangement which had been budgeted as an accrual in June 2019. Other payables were higher than budgeted largely due to receipts in advance.	Trade creditors and accruals (Statement of Financial Position); Other payables (Statement of Financial Position); Term investments (Statement of Financial Position)
(v) Employee provisions
Employee provisions were higher than budget mainly due to adjustments to the discounting of employee provisions associated with reductions in the government bond rate. The ten year government bond rate was reduced from 2.6% at June 2018 to 1.3% at June 2019.	Provisions (Statement of Financial Position); Employee benefits (Statement of Comprehensive Income)

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