ITV Annual Report 2018 | Quarterlytics

FY2018 Annual Report · ITV

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ITV plc Annual Report and Accounts
for the year ended 31 December 2018

Welcome to the 2018 Annual Report

We are an integrated producer
broadcaster, creating, owning
and distributing high-quality
content on multiple platforms.
This is so much More than TV
as we have known it.

4
ITV at a Glance

18
Market Review

28
Key Performance
Indicators

32
Operating and
Performance Review

6
Chairman’s
Statement

8
Chief Executive’s
Report

24
Our Strategy

Strengthen
Integrated broadcaster
producer

Grow
UK and global
production

Create
Direct to
consumer

26
Our Business Model

46
Finance
Review

54
Risks and
Uncertainties

Contents

2018 Highlights
2
ITV at a Glance
4
Chairman’s Statement
6
Chief Executive’s Report
8
14
Investor Proposition
Non-Financial Information Statement 15
16
Corporate Responsibility Strategy
18
Market Review
24
Our Strategy
26
Our Business Model
28
Key Performance Indicators
32
Operating and Performance Review
44
Alternative Performance Measures
46
Finance Review
54
Risks and Uncertainties

Governance

Chairman’s Governance Statement
Board of Directors
Management Board
Corporate Governance
Audit and Risk Committee Report
Remuneration Report
Directors’ Report

Financial
Statements

Financial Statements
Independent Auditor’s Report
Primary Statements
ITV plc Company Financial
Statements

Additional
Information

Glossary

Key

most popular channel
in 2018 was ITV

+32%

growth in online
viewing in 2018

In 2018, the ITV family of
channels achieved the highest
SOV in ten years, increasing
their SOV to 23.2% (2017: 21.7%),
with the main channel up 9%
to 16.9% (2017: 15.5%),
compared with BBC One,
down 2%, driven by consistently
strong performances across
the daytime schedule, growth
in key entertainment shows,
unmissable drama, and
outstanding audiences for
the 2018 Football World Cup.

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Market Review
continued

Broadcast television, online
and direct to consumer

Online viewing

Advertising revenue

Television’s share of the advertising market

Television

Press

Radio

Cinema

Outdoor

Internet

23.7%

11.5%

3.3%

1.2%

5.4%

54.9%

Source: Advertising Association January 2019

Online viewing includes catch
up viewing of broadcaster
content via the television set
or non-TV devices, and video on
demand (VOD) delivery of other
long-form content such as box
sets and movies via platforms
such as Sky, Netflix and Amazon.

While online viewing has grown
rapidly, and continues to do so,
it still accounts for only a small
proportion of total viewing time.
In the UK, we estimate 71% of
all viewing of legal long-form
content is live (excluding online
simulcast viewing) (2017: 75%),
with a further 13% timeshifted
via a Personal Video Recorder
(PVR) and watched within
28 days of the original
broadcast date (2017: 13%).

Of the estimated 16% of content
viewed on demand (2017: 13%),
4% is catch up viewing of
broadcaster content via the
television set or to non-TV
devices (2017: 4%). The
remaining 12% of content
is other VOD viewing, where
viewing of box sets via services
such as Sky, Netflix and Amazon
is replacing viewing of DVDs
(2017: 8%). In the UK, in viewing
share terms, Netflix would
represent the third biggest
channel behind BBC One
and ITV.

This is growing quickly, driven
by accessibility of these services
on smartphones, tablets and
connected televisions, providing
flexibility in viewing and
adaptability to changing
lifestyles, facilitating viewers
to watch content whenever
and wherever they want.

In 2018 viewing on the ITV Hub
has grown 32% year-on-year.

ITV generates advertising
revenue through linear
television, online VOD and
sponsorship, competing
with both other commercial
broadcasters and increasingly
alternative advertising media
for its advertising revenues.
ITV’s total advertising revenue
in 2018 is £1,795 million, up
1% year-on-year. As an integrated
producer broadcaster, cash from
these revenue streams funds the
broadcast of our content in the
UK and content creation globally.

In the UK, television advertising
(including spot, online VOD,
sponsorship and other television
revenues) continues to hold a
signiﬁcant share of the overall
advertising market with a 23.7%
share in 2018 (2017: 25.5%).
The decrease year-on-year
can be attributed to the
ongoing political and economic
uncertainty in the UK around
Brexit with advertisers reducing
spend on television as they try
to manage margins.

The make up of television
advertisers is changing as new
markets are being disrupted
by insurgent brands. Some
categories have grown rapidly,
the stand out being the online
brands. The well publicised issues
with the high street and FMCG
companies have put them under
pressure and as a result they are
spending less and have largely
reduced spend across all media.

While online advertising has
grown rapidly, concerns remain
as to what some online
advertising delivers, especially
when compared with television
in terms of both investment
return and potential reputational
risk. Some forms of online
advertising have no trusted
measurement system, the
adverts may not be seen by
a human, the adverts may be
off screen or viewed without
sound, and the content around
the advertising may not be
appropriate for that brand or
socially responsible. The ITV Hub
delivers the key demographics
and growing volumes in a
high-quality, trusted and
measured environment for
online advertisers.

ITV plc Annual Report and Accounts 2018

Market Review

Broadcast television, online

and direct to consumer

Advertising revenue

Subscription video-on-demand (SVOD)

Television’s share of the advertising market

Television

Press

Radio

Cinema

Outdoor

Internet

23.7%

11.5%

3.3%

1.2%

5.4%

54.9%

Source: Advertising Association January 2019

Source: 2018 BARB/Thinkbox data

41% of homes in the UK have an
SVOD service, up from 30% in 2017

Other Direct
to Consumer

8.5m

Paying Direct
to Consumer
relationships,
up 27% on 2017

With no uniformity in the
deﬁnitions used by broadcasters,
the UK television advertising
market is extremely difﬁcult to
measure, and therefore it is not
possible to give ITV’s share of
total advertising.

Online advertising can deliver
a more targeted advertising
proposition and ITV is making
good progress on developing
a scaled, programmatic
addressable advertising
proposition on the ITV Hub.

ITV also earns revenue from
various third parties, including
Sky and Virgin, through the
licensing of channels and
content, including our HD
digital channels (ITV2 HD,
ITV3 HD and ITV4 HD) and
catch up VOD.

Increasingly homes are
supplementing their free and
pay television with other forms
of paid content including
SVOD services such as Netflix
and Amazon, or by purchasing
additional channels through
‘no-contract’ providers such
as NowTV. Many households
have multiple subscriptions to
paid content, and we expect
this to increase. Around 41% of
homes in the UK have an SVOD
service, up from 30% in 2017,
and this is growing at a steady
rate (Source: BARB).

We are in the concluding phase
of talks with the BBC to
establish a strategic partnership
to bring BritBox, our exciting
new SVOD proposition, to UK
audeinces. This will provide an
unrivalled collection of British
boxsets and original series all
in one place. Research has
demonstrated there is high
demand and a willingness to pay
for an additional service. ITV is
well positioned to deliver this.

Our existing SVOD propositions
include ITV Hub+ in the UK,
BritBox US in the US and
Canada, and Cirkus in the
Nordics, Germany, Austria and
Switzerland, demonstrating our
ability and ambition to compete
in this market internationally.

Consumers are increasingly
willing to pay to engage with
great brands, content and
intellectual property (IP),
whether that is through
competitions, live events,
gaming, merchandise or
pay per view.

ITV Hub+ offers the content
available on the ITV Hub
ad-free, available for download
and with EU portability.
The number of subscribers,
including subscribers via
Amazon, has more than tripled
year-on-year.

BritBox US, our joint venture
with the BBC launched in 2017,
provides an ad-free SVOD
service offering the most
comprehensive collection
of British content available in
the US and Canada. Subscribers
have continued to grow steadily,
exceeding 500k in 2018.

Developing deeper and
broader insights about our
customers and viewers is
increasingly possible and more
valuable with the greater use
of data analytics.

Generating revenue directly
from consumers, while small,
is not new for ITV, however,
it presents an area of great
potential growth with our
fantastic brands and loyal
viewers. Vital to this growth
is making data analytics
a key competency across the
organisation. To support this
we are investing in technology
platforms to collect, process,
store, and analyse these data
sets, as well as investing in
people to turn that data
into insight.

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Market Review
continued

Global content

Scripted

UK
In the UK, we see higher demand and
stronger viewing ﬁgures for domestically
produced content over imported series.
Original, high-quality scripted content is
central to our strategy and essential for
the growth of broadcasters and OTT
players, with its the ability to drive
viewing and grow brands.

We are a major producer of scripted content
delivering some of the most unmissable
scripted content in 2018 both on and off
ITV including Bodyguard, Trauma, Poldark,
Unforgotten, and Vera.

The deﬁcit on high-cost productions is
covered through global and secondary
sales, with our strategy of making content
available in different territories, on different
broadcasters or OTT platforms and at
different times, either exclusively or
non-exclusively, in order to maximise
overall revenues. As a distributor as well
as a producer, ITV is in a strong position
to deﬁcit ﬁnance its own productions and
therefore produce high-quality content
and retain the rights to it as well as acquiring
rights for third-party productions.

Poldark is produced by Mammoth
Screen (part of ITV Studios UK) for the
BBC. 2018 saw the show return for a
fourth series, and it has been sold in over
150 countries.

US
The US dominates global production and
is the largest content market in the world.
This represents a signiﬁcant opportunity
for ITV, with a strong, and evolving,
presence in the region.

As with the UK, the market continues to see
a signiﬁcant increase in demand for drama,
particularly US drama. Original scripted
content is essential for broadcasters and
OTT platforms to drive viewing and attract
subscribers. Drama is brand deﬁning, and is
used as a tool for differentiation and
prominence in an increasingly competitive
global environment. The rise of Netflix
and Amazon, which are investing heavily
in signature high-quality original scripted
content, has signiﬁcantly increased
competition in the market.

Leveraging our network relationships and
international distribution network, we have
expanded our US scripted business and are
developing a portfolio of returning drama.
We are taking advantage of the increased
demand from OTT platforms and other
viewing windows around the world. Our
2019 scripted pipeline includes the delivery
of Snowpiercer to TNT and the remainder
of series ﬁve of Good Witch to Hallmark.

In recent years in the US, we have invested
in backing talent and intellectual property
(IP), rather than large scale acquisitions.
This allows us to attract and collaborate
with innovative and entrepreneurial
creatives, with minimal risks, and attractive
returns. For example, in 2017 we took
a 45% stake in Blumhouse Television, the
TV division of the company founded by
prodigious ﬁlm producer Jason Blum, which
in 2018, produced Into the Dark for Hulu,
and co-produced The Purge for USA
Network and Sharp Objects for HBO.

Rest of World
In Europe, we have seen the resurgence in
demand for local scripted content, with
acquired US content not performing as
well as it has done historically on broadcast
channels. The OTT platforms also drive
growth across Europe for local scripted
content, with the platforms tailoring their
proposition on a regional basis to
differentiate the offerings and attract
subscribers. There is now also global
demand for high-quality, foreign language
scripted content on both broadcast and
OTT platforms resulting in a broadening
market for European content.

Over the last few years we have invested
to strengthen our position in the European
market through our 2017 acquisitions of
Tetra Media Studio in France and Cattleya
in Italy. These acquisitions produce both
long-running and new, critically acclaimed
foreign-language dramas for free-to-air,
pay and OTT platforms locally and
internationally. Examples include Proﬁlage
and Balthazar from Tetra Media Studio, and
Suburra and Zero Zero Zero from Cattleya.
A review of the risk of a change to legislation
or regulation on our European operations
as a result of Brexit is included on page 57.

Proﬁlage is produced by Tetra Media
Studio for TF1 in France. The ninth series
delivered in January 2019.

ITV plc Annual Report and Accounts 2018

Global content

Market Review

Unscripted

UK
While not growing as quickly as scripted
content, demand for unscripted content
remains strong as networks continue to
require lower-cost, high-volume popular
series. The UK remains the dominant
producer and exporter of unique
unscripted formats.

ITV is the largest commercial production
company for unscripted content in the
UK. The large independent production
companies, such as Endemol Shine Group
and Fremantle, continue to be ITV Studios’
main competitors in non-scripted content.

2018 saw the successful return of Dancing
on Ice with the title having been rested
for a number of years. Dancing on Ice was
recommissioned and returned to ITV in
January 2019.

Returning series, including Love Island,
I’m a Celebrity... Get Me Out of Here! and
The Chase achieved record-breaking
audiences in 2018, and continue to go
from strength to strength, and provide
the very strong track record to then
sell the formats internationally.

US
The US remains a strong and vast market
for unscripted content, with continued
demand from broadcasters for proven
successful programming and new
entertainment formats. There is growing
pressure in the US cable market with
signiﬁcant external competition. OTT
platforms have also started to supplement
their catalogue with unscripted titles,
which provides a lower-cost alternative
to expensive scripted titles, and to appeal
to new audiences, or supplement the
viewing of existing subscribers.

ITV America is one of the largest producers
of unscripted content in the US with over
450 hours of original content produced in
2018. Having focused our US acquisitions
on the unscripted genre and grown
organically, the business has developed
a foundation of formats such as Real
Housewives, Marriage Bootcamp, Four
Weddings, The First 48, Alone, Mama June
and Forged in Fire. 2018 also saw the
delivery of three-time Emmy winning Queer
Eye and Girl Incarcerated to Netflix. Queer
Eye will return in 2019 to Netflix for a third
series. New in 2019 from ITV America is the
hit ITV format, Love Island, for CBS.

Rest of World
Demand remains strong across all major
territories for unscripted content as,
consistent with the UK and US, networks
require lower-cost alternatives to
scripted content. The market demands
a combination of proven global formats,
as well as the development and production
of local original ideas. Demand is not
growing as fast as for scripted content.

ITV has a presence in what we consider
to be the most attractive TV production
markets, leveraging our international
formats and local creative expertise to
grow our overall business.

International production of Love Island
tripled in 2018, with shows on air in
Germany, Australia, Norway, Sweden,
Finland and Denmark. I’m a Celebrity...
Get Me Out of Here!, further to the hugely
successful UK version, is produced in
Germany and Australia, and a new
version has been commissioned by TF1
in France. The show is the number one
entertainment show in Germany and is
on air for its 13th run, and a ﬁfth season
launched on Network Ten in Australia
in January 2019.

Love Island was the most watched show
on any digital channel in 2018 with the best
performing series yet with an average of
4.0 million viewers and a share of 17%.
In 2019 Love Island will be produced by ITV
for CBS in the US.

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Our Strategy

In 2018 we undertook a strategic refresh to help us highlight the opportunities for ITV and
also the challenges we need to address. It was very much a refresh as ITV is a strong business,
no longer solely reliant on advertising. However the market is changing and to reflect this
we have developed a clear vision and initiatives to drive growth.

ITV’s vision is to be…
More than TV

ITV strategy

The pre-eminent integrated producer
broadcaster for viewers and brands in
the UK

To deliver our strategy we
need to do three things
extremely well:

A world class creative force in global
content production

A scaled and leading Direct
to Consumer business with
strong consumer relationships

A lean and agile organisation capable
of perpetual change

A future facing, modern and digital
brand that is relevant and valuable
to all viewers and brands

A sustainable, cash generative and
growing business delivering value
for shareholders

Our vision is ‘More than TV’, building upon
ITV’s unique and winning combination of
creativity and commercial strength driven
by investment in data and technology.

ITV will be More than TV – it will be
a structurally sound integrated producer
broadcaster where our ambition is to
maximise total viewing and increase total
advertising revenue; it will be a growing
and proﬁtable global content business,
which drives returns; and it will create
value by developing and nurturing strong
direct consumer relationships, capturing
the increasing willingness of consumers
to pay for content and experiences with
a really trusted brand.

We will focus on three key areas:
• Strengthening the integrated

producer broadcaster

• Growing UK and global production, and
• Creating a scaled Direct to

Consumer business

• Communicate and market
ourselves effectively and
innovatively to engage
across our platforms and
gain more light viewers.

• Be a lean and agile

organisation with a culture
that can constantly adapt
to change.

• Ensure that we embed data,
analytics and technology
right across our business.

Data analytics
and technology

Strengthen
Integrated producer
broadcaster

Reposition ITV
as a modern and
digital brand

Grow
UK and global
production

Create
Direct to
consumer

Lean and agile
organisation

Key Performance Indicators – Targets and Strategic Ambitions

Description

KPI

ITV Group

Total non-advertising revenue

Grow by at least 5% CAGR

Target – over 3 years to 2021

Cost savings

Proﬁt to cash conversion

1 Strengthen
Integrated
producer
broadcaster

Online revenue growth

Online viewing

ITV Hub registered users

Brand consideration

Total advertising revenue

Total ITV viewing

ITV Family SOV

Deliver £35 to £40 million
run-rate of cost savings by 2021

Maintain at around 85%

Target – over 3 years to 2021

Double-digital growth per annum

Increase to 30 million

Increase to 60%

Strategic ambition – over 3 years to 2021

To grow total advertising in a flat
NAR market

To maintain total viewing

Above 21%

Target – over 3 years to 2021

2 Grow

UK and global
production

Total Studios revenue growth

Grow by at least 5% average CAGR

Studios adjusted EBITA margin

Maintain at 14% to 16%

Total production hours

Grow to 10,000 hours

These are not independent silos. They work
together – reinforcing each other, creating
synergies and delivering value.

3 Create

Direct to
Consumer

Direct to Consumer revenue
(excluding BritBox SVOD revenue)

Paying product relationships
(excluding BritBox SVOD subscribers)

ITV plc Annual Report and Accounts 2018

Target – over 3 years to 2021

Grow to at least £100 million

Grow to 10 million

ITV strategy

Our Strategy

Strengthen
Integrated producer
broadcaster

Grow
UK and global
production

Create
Direct to Consumer

We’ll strengthen our core UK Integrated
Producer Broadcaster (IPB) business to ensure
that we can address the opportunities and
challenges of structural change and provide
a strong, branded and data rich relationship
with our viewers and advertisers.

Our aim is to be a leading creative force in
global content production.

The core drivers of this business are creative
talent, creating and effectively monetising
hits, and being disciplined and efﬁcient.

There are ﬁve key components to our IPB
strategy; repositioning ITV and driving light
viewers; enhancing the development and
distribution of the Hub; investing in data,
analytics, insight and technology so we
understand and serve our viewers better;
supporting our advertisers better, building
our addressable advertising capabilities,
driving effectiveness and expanding our
portfolio of data driven marketing
solutions; and working more closely with
Studios, maximising the value of our
investment in content.

We are focused on developing more hits.
In order to do this we need to keep
attracting and retaining leading talent,
and nurturing the right creative and
commercial environment to do this.
We will also consider selective value
creating acquisitions and talent deals
in both scripted and unscripted to obtain
creative talent and IP.

We have eliminated the option of doing
any scaled US scripted acquisitions for
the foreseeable future.

The expanded reach, engagement and
insight into viewers, allied to new online
functionality and enhanced data analytics
will serve to grow the number of consumer
relationships we can monetise while
also enhancing the average revenue
per relationship.

We are in the concluding phase of talks
with the BBC to establish a strategic
partnership to bring BritBox, our exciting
new SVOD proposition to UK audiences.
This will provide an unrivalled collection
of British boxsets and original series
all in one place. Our research has
shown willingness to subscribe to
a new SVOD service, and a strong
appetite for quality British content
– and we are very well positioned to
deliver this.

2018 key performance indicators

£1,795m (2017: £1,781m)

Total advertising revenue

+36% (2017: +14%)

Online revenue growth

17.1bn hrs (2017: 16.6bn hrs)

Total ITV viewing

23.2% (2017: 21.7%)

ITV Family SOV

446m hrs (2017: 337m hrs)

Online viewing

£1,670m, up 6%

(2017: £1,579m)
Total Studios revenue growth

15% (2017: 15%)

Studios adjusted EBITA margin

8,900+ (2017: 8,468)

Total production hours

£1,971m (2017: £1,874m)

Total non-advertising revenues

£81m (2017: £65m)

Direct to Consumer revenue

8.5m (2017: 6.7m)

Paying product relationships

£1,971m (2017: £1,874m)

Total non-advertising revenues

28m (2017: 21m)

ITV Hub registered users

59% (2017: 58%)

Brand consideration

ITV Group

KPI deﬁnitions and historic performance
can be found on pages 21 to 31

15.4p

(2017: 16.0p)
Adjusted EPS

£1,971m

(2017: £1,874m)
Total non-advertising
revenues

On track
to deliver
£15 million cost savings
in 2019

88%

(2017: 91%)
Proﬁt to cash
conversion

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Our Business Model

Our vision is ‘More than TV’. We will use our creativity and commercial expertise to strengthen
the integrated producer broadcaster, grow the UK and global content business, and create
value in developing and enhancing direct consumer relationships. We are conﬁdent that
our vision and strategy is the right long-term plan for ITV in a dynamic market environment.

Our strategy is to
strengthen, diversify
and grow the
business, creating
a robust, future-
facing ITV.

Data analytics
and technology

Strengthen
Integrated producer
broadcaster

Reposition ITV
as a modern and
digital brand

Grow
UK and global
production

Create
Direct to
consumer

Lean and agile
organisation

Competitive advantage

Delivering
unrivalled
commercial
audiences
The scale of our
channels and
the signiﬁcant
investment we
make in quality
content give ITV
unique scale and
reach across the
key demographics
on our main
channel and more
targeted audiences
on our family of
channels and the
ITV Hub.

World-class
content
At the core of ITV
is our focus on
creativity and
content, whether
selling our unique
content around the
world or investing
in third-party
content to
broadcast across
multiple platforms.
Internationally
we have built
production and
distribution scale
in key global
creative markets
through organic
growth, selective
acquisitions and
talent deals.

Global
distribution
ITV has built
relationships
globally with major
networks, platform
owners and local
broadcasters, and
owns the rights to
a diverse portfolio
of shows,
particularly drama
and entertainment,
for international
distribution.

Intellectual
property
ITV has developed
and acquired
shows that are
hugely popular.
Owning this
intellectual
property allows
us to monetise
it internationally
through
programme and
format sales
and also
commercially in
the development
of interactive
experiences,
games, apps and
consumer products.

65%

Our channels reach
over 65% of the UK
population each week

£1bn

We invest over £1bn
annually in content
for our UK family
of channels

40,000+

hours of television
and ﬁlm content in the
Global Entertainment
catalogue

Our strategic assets

Our strategic assets underpin ITV’s competitive advantage

Creating and owning
the rights to quality
content and
intellectual property

Our strong, trusted
brand, products
and culture

Our talented
commercial and
creative people

ITV plc Annual Report and Accounts 2018

Our Business Model

Our diversiﬁed revenue streams

Creating value for…

By developing and managing the rights to content, ITV is able to
maximise the value of its programme brands across a range of
revenue streams, making ITV a more balanced business and
enabling it to drive value from different revenue models.

Advertising
Our family of channels and the ITV Hub drive signiﬁcant advertising
revenues from the ability to deliver both mass audiences and more
targeted demographics to advertisers. This funds our investment
in the programme budget.

Commercial partnerships
We work with advertisers and advertising agencies to provide
unique and innovative commercial partnerships and sponsorship
opportunities that extend beyond pure spot advertising.

Direct to Consumer
We monetise our consumer interactions through competitions, live
events, merchandising, pay per view, and SVOD. In the UK we currently
generate SVOD revenue through the ITV Hub+, and we have agreed
a joint vision for BritBox UK with the BBC and are now working
on a formal agreement. Internationally we deliver SVOD revenues
through our joint venture with the BBC, BritBox US, in the US and
Canada and Cirkus in the Nordics, Germany, Austria and Switzerland.

Pay
We earn pay revenue from platforms in the UK by licensing our HD
channels and our online VOD services.

Original production
We produce original content commissions for broadcasters and platform
owners internationally from our production bases in the UK, the US, the
Netherlands, Germany, France, Italy, Australia, the Nordics and the Middle East.

Distribution
We own the rights to a signiﬁcant catalogue of programmes and
formats that we sell and license to broadcasters and platform
owners internationally. The strong global demand for content
provides a signiﬁcant opportunity for us.

growth in non-advertising revenue

Advertisers
Through delivering
unique scale and breadth
of demographics as
well as more targeted
opportunities and new
innovative ways of engaging
with consumers around
quality programme brands

Audiences
Through a varied, high-
quality programming
schedule, which they
can watch and engage with
on a variety of platforms

Broadcasters
and platform owners
Through delivering
quality programming
that they can then
monetise through
their own business models

Customers
Through our Direct to
Consumer business
we drive engagement
and interaction with our
much loved brands

Shareholders
Through a track record of
creating shareholder value
and delivering signiﬁcant
shareholder returns

Our people
Through investing in and
developing our talent
and creating a culture
that nurtures them to
become both commercial
and creative

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Key Performance Indicators

In 2018 we redeﬁned our KPIs to align our performance and accountability to our strategic
priorities. As we implement our strategy our KPIs may evolve to ensure they remain
appropriate to our business and our priorities. We have set targets or strategic ambitions
for our KPIs for three years to 2021 where it is appropriate to do so.

ITV Group

Adjusted EPS1

Deﬁnition
Adjusted EPS represents
the adjusted proﬁt for the
year attributable to equity
shareholders. Adjusted
proﬁt is deﬁned as proﬁt
for the year attributable
to equity shareholders
after adding back
exceptional items and
including high-end
production tax credits.
Further adjustments
include amortisation and
impairment of assets, net
ﬁnancing costs and the
tax effects relating to
these items. It reflects the
business performance of
the Group in a consistent
manner and in line with
how the business is
managed and measured
on a day-to-day basis.

Performance
Adjusted EPS decreased by
4% from 16.0p to 15.4p. This
was predominantly due to
higher programme costs
as a result of the Football
World Cup which more than
offset the good adjusted
EBITA growth in ITV Studios.

Total non-advertising
revenues

Cost savings

Proﬁt to cash
conversion

Total advertising

Online revenue

Total ITV viewing2

ITV Family SOV

Deﬁnition
Total non-advertising
revenue is total ITV revenue
(including internal revenue)
excluding advertising
revenue from net
advertising revenue (NAR),
VOD and sponsorship. This
is an important measure
as we continue to rebalance
the business away from our
reliance on advertising.

Performance
Non-advertising revenue
increased by 5% in 2018
driven by growth in our
ITV Studios and Direct to
Consumer businesses.
We delivered 6% growth
in ITV Studios total revenue
to £1,670 million and 25%
growth in Direct to
Consumer revenues
to £81 million.

Deﬁnition
Cost savings are permanent
savings to the business.
Managing our cost base
is key as we aim to run our
business as efﬁciently as
possible and fund
investments in line with
our strategic priorities.

Performance
No cost saving target was set
for 2018 but we continued
to focus on running the
business efﬁciently.

We are on track to deliver
£15 million of cost savings
in 2019 as previously
announced as part of ITV’s
£35 million to £40 million
target by 2021.

Deﬁnition
This is our measure of
our effectiveness of cash
generation used for
working capital
management. It is
calculated as our adjusted
cash flow as a proportion
of adjusted EBITA. Adjusted
cash flow, which reflects
the cash generation of
our underlying business, is
calculated on our statutory
cash generated from
operations and adjusted
for exceptional items, net
of capex on property, plant
and equipment (excluding
capex relating to the
project to redevelop the
South Bank site) and
intangible assets, and
including the cash impact
of high end production
tax credits.

Performance
Proﬁt to cash remains high
at 88% (2017: 91%).

In the period we saw an
increase in working capital
which was primarily due to
an increase in stock.

Target
3 years to 2021

Strategic ambition

Grow by at least 5% CAGR

Deliver £35–£40 million
run-rate of savings by 2021

Maintain at around 85%

To grow total advertising

Double digit growth

in a flat NAR market

per annum

To maintain total viewing2

Above 21%

2018
15.4p

5
6
1

0
7
1

2018
£1,971m

0
6
1

4
5
1

decline in 2018

1
7
9
1

4
7
8
1

growth in 2018

7
8
6
1

2
2
5
1

*2016 and 2015
not fully restated
for IFRS15

2018

88%

7
9

1
9

8
8

2018

£1,795m

growth in 2018

2018

17.1bn hours

2018

23.2%

growth in 2018

1. A full reconciliation between our adjusted and statutory results is provided in the APMS.

ITV plc Annual Report and Accounts 2018

1 Strengthen

Integrated producer broadcaster

revenue

Deﬁnition

growth

Deﬁnition

Total advertising revenue

measures all our advertising

Online revenues are

advertising revenues

revenues and includes

ITV Family NAR (spot

revenue), VOD, sponsorship

and other advertising

revenues.

Performance

Total advertising revenue

grew 1% to £1,795 million

in a challenging market,

with online revenue

growth of 36% more than

offsetting the decline in

spot revenues.

from VOD via the ITV Hub.

With the investment in

the ITV Hub and the

signiﬁcant growth of

viewing on the ITV Hub

these are now a material

part of our advertising

measure of our success.

Performance

Online revenue continued

to grow strongly, up 36%

in 2018, as we delivered

Deﬁnition

Keeping our viewing

healthy is vital for our

advertising proposition.

Total ITV viewing is the

total number of hours

spent watching ITV

channels live and recorded

within 28 days and VOD

viewing via the ITV Hub

Performance

On-screen and online

viewing performed strongly

with total ITV viewing up

revenues and an important

and third-party platforms.

signiﬁcant growth in online

growth in both linear and

in 2018 to 23.2%. Our

3% to 17.1 billion hours with

ITV Family SOV grew 7%

viewing, up 32%.

online viewing.

Deﬁnition

Keeping our free-to-air

proposition strong and

our audiences healthy is

vital for the Broadcast &

Online business, and ITV

Family SOV helps measure

this. ITV Family SOV is the

total viewing audience

over the year achieved by

ITV’s family of channels

as a proportion of total

television viewing, including

the BBC Family.

Performance

ITV Family SOV is now the

highest it has been for ten

years. Within this, the ITV

main channel was up 9%

to 16.9% and the digital

channels were up 2% in

the year mainly across ITV2

and ITV3, up 5% and 10%

respectively. ITV2 was the

most watched digital

channel for 16-34s, growing

10% to a SOV of 6.0% for

the target demographic.

External source: BARB/AdvantEdge

External source: BARB, Crocus,

comScore Data Analystics and

third-party platforms

Target

3 years to 2021

2018

36%

Key Performance Indicators

Adjusted EPS1

Total non-advertising

Cost savings

Proﬁt to cash

conversion

Total advertising
revenue

Online revenue
growth

Total ITV viewing2

ITV Family SOV

1 Strengthen

Integrated producer broadcaster

Deﬁnition
Total advertising revenue
measures all our advertising
revenues and includes
ITV Family NAR (spot
revenue), VOD, sponsorship
and other advertising
revenues.

Performance
Total advertising revenue
grew 1% to £1,795 million
in a challenging market,
with online revenue
growth of 36% more than
offsetting the decline in
spot revenues.

Deﬁnition
Online revenues are
advertising revenues
from VOD via the ITV Hub.
With the investment in
the ITV Hub and the
signiﬁcant growth of
viewing on the ITV Hub
these are now a material
part of our advertising
revenues and an important
measure of our success.

Performance
Online revenue continued
to grow strongly, up 36%
in 2018, as we delivered
signiﬁcant growth in online
viewing, up 32%.

Deﬁnition
Keeping our viewing
healthy is vital for our
advertising proposition.
Total ITV viewing is the
total number of hours
spent watching ITV
channels live and recorded
within 28 days and VOD
viewing via the ITV Hub
and third-party platforms.

Performance
On-screen and online
viewing performed strongly
with total ITV viewing up
3% to 17.1 billion hours with
growth in both linear and
online viewing.

External source: BARB, Crocus,
comScore Data Analystics and
third-party platforms

Deﬁnition
Keeping our free-to-air
proposition strong and
our audiences healthy is
vital for the Broadcast &
Online business, and ITV
Family SOV helps measure
this. ITV Family SOV is the
total viewing audience
over the year achieved by
ITV’s family of channels
as a proportion of total
television viewing, including
the BBC Family.

Performance
ITV Family SOV grew 7%
in 2018 to 23.2%. Our
ITV Family SOV is now the
highest it has been for ten
years. Within this, the ITV
main channel was up 9%
to 16.9% and the digital
channels were up 2% in
the year mainly across ITV2
and ITV3, up 5% and 10%
respectively. ITV2 was the
most watched digital
channel for 16-34s, growing
10% to a SOV of 6.0% for
the target demographic.

External source: BARB/AdvantEdge

ITV Group

Deﬁnition

Adjusted EPS represents

the adjusted proﬁt for the

year attributable to equity

shareholders. Adjusted

proﬁt is deﬁned as proﬁt

for the year attributable

to equity shareholders

after adding back

exceptional items and

including high-end

production tax credits.

Further adjustments

include amortisation and

impairment of assets, net

ﬁnancing costs and the

tax effects relating to

these items. It reflects the

business performance of

the Group in a consistent

manner and in line with

how the business is

managed and measured

on a day-to-day basis.

Performance

Adjusted EPS decreased by

4% from 16.0p to 15.4p. This

was predominantly due to

higher programme costs

as a result of the Football

World Cup which more than

offset the good adjusted

EBITA growth in ITV Studios.

Deﬁnition

Cost savings are permanent

This is our measure of

revenues

Deﬁnition

Total non-advertising

revenue is total ITV revenue

(including internal revenue)

excluding advertising

revenue from net

advertising revenue (NAR),

VOD and sponsorship. This

is an important measure

as we continue to rebalance

the business away from our

Performance

Non-advertising revenue

increased by 5% in 2018

driven by growth in our

ITV Studios and Direct to

Consumer businesses.

We delivered 6% growth

growth in Direct to

Consumer revenues

to £81 million.

savings to the business.

Managing our cost base

is key as we aim to run our

business as efﬁciently as

possible and fund

investments in line with

our strategic priorities.

Performance

to focus on running the

business efﬁciently.

We are on track to deliver

£15 million of cost savings

in 2019 as previously

reliance on advertising.

No cost saving target was set

our underlying business, is

for 2018 but we continued

calculated on our statutory

in ITV Studios total revenue

£35 million to £40 million

to £1,670 million and 25%

target by 2021.

announced as part of ITV’s

project to redevelop the

our effectiveness of cash

generation used for

working capital

management. It is

calculated as our adjusted

cash flow as a proportion

of adjusted EBITA. Adjusted

cash flow, which reflects

the cash generation of

cash generated from

operations and adjusted

for exceptional items, net

of capex on property, plant

and equipment (excluding

capex relating to the

South Bank site) and

intangible assets, and

including the cash impact

of high end production

tax credits.

Performance

Proﬁt to cash remains high

at 88% (2017: 91%).

In the period we saw an

increase in working capital

which was primarily due to

an increase in stock.

Target

3 years to 2021

Target

3 years to 2021

Target

3 years to 2021

Grow by at least 5% CAGR

Deliver £35–£40 million

Maintain at around 85%

run-rate of savings by 2021

Strategic ambition

Target
3 years to 2021

To grow total advertising
in a flat NAR market

Double digit growth
per annum

Strategic ambition

To maintain total viewing2

Above 21%

2018

15.4p

decline in 2018

growth in 2018

2018

£1,971m

2018

88%

2018
£1,795m

3
5
8
1

3
3
8
1

1
8
7
1

5
9
7
1

growth in 2018

2018
36%

2
4

6
3

0
2

4
1

2018
17.1bn hours

2018
23.2%

7
6
1

9
6
1

6
6
1

1
7
1

growth in 2018

2
1
2

3
1
2

7
1
2

3
2

growth in 2018

2. Maintain total viewing compared to average for 2015 – 2018.

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Key Performance Indicators
continued

1 Strengthen

Integrated producer broadcaster

2 Grow

UK and global production

3 Create

Direct to Consumer

Online viewing

Deﬁnition
Long-form online viewing
is an important indicator
of our online success as it
measures how long viewers
are spending online. It is
calculated as the total
number of hours ITV VOD
content is viewed on
owned and operated
ad-funded platforms and
ITV Hub+ viewing.

Performance
The ITV Hub and ITV Hub+,
the online home for our
family of channels and
content, is growing rapidly,
driven by viewers’ appetite
for our content on catch up,
VOD and simulcast. Online
viewing was up 32% in 2018,
driven by viewing on mobile
devices, connected TVs and
streaming media players.

External source: Crocus and
comScore Data Analytics

Target
3 years to 2021

Double digit growth
per annum

2018
446m hours

6
4
4

32%

growth in 2018

7
3
3

0
4
2

0
7
1

ITV Hub registered
users

Deﬁnition
A registered user is an
individual viewer who has
signed up to the ITV Hub
who has been active in
the last three years.
The size of our viewer
online reach is key for our
advertising proposition.

Performance
The ITV Hub grew the
number of registered users
29% to 28 million in 2018.
This growth is driven by
the great content and good
user experience, supported
and enhanced by a process
of continued improvement
and investment.

The ITV Hub helps ITV
reach valuable younger
audiences, who are
increasingly using the
ITV Hub for simulcast as
well as catch up. 79% of
the UK’s 16-34 year olds are
registered on the ITV Hub.
Simulcast requests were
up 34% year-on-year.

Brand consideration

Total Studios
revenue growth

Deﬁnition
Total Studios revenue
measures the scale and
success of our global
studios business. It includes
revenues from programmes
sold to the ITV Network,
which as an integrated
producer broadcaster
are an important part
of our business.

Performance
ITV Studios total revenue
grew 6% to £1,670 million,
including an unfavourable
currency impact of
£11 million. Revenue
growth was driven by
Rest of World and Global
Entertainment, as we
continue to build our
capabilities in key
creative markets.

Total organic revenue,
which excludes our 2017
acquisitions and is adjusted
for currency, was up 4%.

Deﬁnition
UK public perception of
the ITV brand as measured
by YouGov. Our brand
perception is very
important as we look to
attract light viewers
to ITV and build a Direct
to Consumer business.

Performance
A new measure for ITV’s
spontaneous brand
consideration was
introduced in 2016 and in
2018 we achieved the best
ever at 58.9%, growing a
percentage point among all
adults and two percentage
points among light viewers.

External source: YouGov

Target
3 years to 2021

Increase to 30 million

Target
3 years to 2021

Increase to 60% for
all adults

Grow by at least 5%
average CAGR

Target

3 years to 2021

Target

3 years to 2021

Maintain at 14% to 16%

Grow to 10,000

Target

3 years to 2021

Grow to at least

£100 million

Target

3 years to 2021

Grow to 10 million

Total production

Direct to Consumer

hours

Deﬁnition

revenue

Deﬁnition

This is the key proﬁtability

Total hours of programming

Direct to Consumer revenue

We aim to grow ITV’s Direct

production and distribution

measures the number of

activities, and further varies

hours produced across all

produced is an important

measure of the scale and

success of our global

studios business. It

genres and geographies for

ITV and other broadcasters

and platform owners.

Performance

There was good growth

in the number of hours of

programming produced by

ITV Studios in 2018, up 5%

to over 8,900 hours.

Studios adjusted

EBITA margin1

Deﬁnition

measure used across

the Studios business.

The proﬁle of adjusted

EBITA margin differs for

with each production due

to genre and maturity.

Adjusted earnings before

interest, tax and

amortisation (EBITA) is

calculated by adding back

exceptional items and

including high-end

production tax credits.

It reflects the underlying

performance of the

business and provides

a more meaningful

comparison of how the

business is managed and

measured on a day-to-day

basis. Calculated based on

total Studios revenue.

Performance

ITV Studios adjusted EBITA

margin was 15%, consistent

with prior year and with

our target.

Paying product

relationships

Deﬁnition

to Consumer revenues

through increasing the

number of people who

pay for an ITV product as

well as increasing spend

per customer. This KPI

measures the total number

of paying relationships we

have with consumers.

Performance

Paying product

relationships grew 27%

to 8.5 million in 2018, on

track to deliver the target

ten million relations by

2021. The target excludes

relationships from any new

UK SVOD proposition.

The number of

relationships grew across

all revenue streams;

ITV Hub+ subscribers,

competition entrants,

live event attendees,

product sales, gaming

purchases, and pay per

view event customers.

is a key measure of the

success of our strategy.

It measures revenue

generated directly from

relationships with

a customer through

the purchase of goods

and services, and entry

into competitions.

Performance

Direct to Consumer revenue

grew 25% to £81 million

in 2018, on track to achieve

the £100 million revenue

by 2021 as set out in the

strategy. The target

excludes revenue from any

new UK SVOD proposition.

Growth was driven by

interactive with the

success of daytime

competitions, an increase

in subscriptions to ITV Hub+,

the subscription ad-free

version of the ITV Hub, and

pay per view boxing events.

2018

15%

2018

8,917 hours

2018

£81m

2018

8.5m

growth in 2018

25%

growth in 2018

27%

growth in 2018

2018
58.9%

3
6
5

1
8
5

9
8
5

6
7
2

29%

growth in 2018

2018
27.6m

3
1
2

9
6
1

7
2
1

2018
£1,670m

0
7
6
1

9
7
5
1

growth in 2018

5
9
3
1

7
3
2
1

*2016 and 2015
not restated for
IFRS15

a
/
n

ITV plc Annual Report and Accounts 2018

Online viewing

ITV Hub registered

Brand consideration

Studios adjusted
EBITA margin1

Total production
hours

Direct to Consumer
revenue

Paying product
relationships

Key Performance Indicators

3 Create

Direct to Consumer

Deﬁnition
This is the key proﬁtability
measure used across
the Studios business.
The proﬁle of adjusted
EBITA margin differs for
production and distribution
activities, and further varies
with each production due
to genre and maturity.
Adjusted earnings before
interest, tax and
amortisation (EBITA) is
calculated by adding back
exceptional items and
including high-end
production tax credits.
It reflects the underlying
performance of the
business and provides
a more meaningful
comparison of how the
business is managed and
measured on a day-to-day
basis. Calculated based on
total Studios revenue.

Performance
ITV Studios adjusted EBITA
margin was 15%, consistent
with prior year and with
our target.

Deﬁnition
Total hours of programming
produced is an important
measure of the scale and
success of our global
studios business. It
measures the number of
hours produced across all
genres and geographies for
ITV and other broadcasters
and platform owners.

Performance
There was good growth
in the number of hours of
programming produced by
ITV Studios in 2018, up 5%
to over 8,900 hours.

Deﬁnition
Direct to Consumer revenue
is a key measure of the
success of our strategy.
It measures revenue
generated directly from
relationships with
a customer through
the purchase of goods
and services, and entry
into competitions.

Performance
Direct to Consumer revenue
grew 25% to £81 million
in 2018, on track to achieve
the £100 million revenue
by 2021 as set out in the
strategy. The target
excludes revenue from any
new UK SVOD proposition.

Growth was driven by
interactive with the
success of daytime
competitions, an increase
in subscriptions to ITV Hub+,
the subscription ad-free
version of the ITV Hub, and
pay per view boxing events.

Deﬁnition
We aim to grow ITV’s Direct
to Consumer revenues
through increasing the
number of people who
pay for an ITV product as
well as increasing spend
per customer. This KPI
measures the total number
of paying relationships we
have with consumers.

Performance
Paying product
relationships grew 27%
to 8.5 million in 2018, on
track to deliver the target
ten million relations by
2021. The target excludes
relationships from any new
UK SVOD proposition.

The number of
relationships grew across
all revenue streams;
ITV Hub+ subscribers,
competition entrants,
live event attendees,
product sales, gaming
purchases, and pay per
view event customers.

Target
3 years to 2021

Maintain at 14% to 16%

Grow to 10,000

Target
3 years to 2021

Grow to at least
£100 million

Target
3 years to 2021

Grow to 10 million

2018
15%

7
1

5
1

2018
8,917 hours

2018
£81m

2018
8.5m

7
1
9
8

8
6
4
8

growth in 2018

2
0
8
7

7
9
0
7

1
8

25%

5
6

growth in 2018

8
5

5
8

27%

7
6

growth in 2018

1. A full reconciliation between our adjusted and statutory results is provided in the APMs.

a
/
n

1 Strengthen

Integrated producer broadcaster

users

Deﬁnition

Long-form online viewing

A registered user is an

is an important indicator

of our online success as it

individual viewer who has

signed up to the ITV Hub

measures how long viewers

who has been active in

ad-funded platforms and

Performance

ITV Hub+ viewing.

are spending online. It is

calculated as the total

number of hours ITV VOD

content is viewed on

owned and operated

Performance

The ITV Hub and ITV Hub+,

the online home for our

family of channels and

content, is growing rapidly,

driven by viewers’ appetite

the last three years.

The size of our viewer

online reach is key for our

advertising proposition.

The ITV Hub grew the

number of registered users

29% to 28 million in 2018.

This growth is driven by

user experience, supported

and enhanced by a process

of continued improvement

for our content on catch up,

and investment.

VOD and simulcast. Online

viewing was up 32% in 2018,

The ITV Hub helps ITV

driven by viewing on mobile

reach valuable younger

devices, connected TVs and

audiences, who are

streaming media players.

increasingly using the

ITV Hub for simulcast as

well as catch up. 79% of

the UK’s 16-34 year olds are

registered on the ITV Hub.

Simulcast requests were

up 34% year-on-year.

Deﬁnition

UK public perception of

the ITV brand as measured

by YouGov. Our brand

perception is very

important as we look to

attract light viewers

to ITV and build a Direct

to Consumer business.

Performance

A new measure for ITV’s

spontaneous brand

consideration was

introduced in 2016 and in

ever at 58.9%, growing a

percentage point among all

adults and two percentage

points among light viewers.

the great content and good

2018 we achieved the best

External source: Crocus and

comScore Data Analytics

Target

3 years to 2021

per annum

2018

446m hours

External source: YouGov

Target

3 years to 2021

Target

3 years to 2021

Double digit growth

Increase to 30 million

Increase to 60% for

32%

growth in 2018

29%

growth in 2018

2018

27.6m

all adults

2018

58.9%

2 Grow

UK and global production

Total Studios

revenue growth

Deﬁnition

Total Studios revenue

measures the scale and

success of our global

studios business. It includes

revenues from programmes

sold to the ITV Network,

which as an integrated

producer broadcaster

are an important part

of our business.

Performance

ITV Studios total revenue

grew 6% to £1,670 million,

including an unfavourable

currency impact of

£11 million. Revenue

growth was driven by

Rest of World and Global

Entertainment, as we

continue to build our

capabilities in key

creative markets.

Total organic revenue,

which excludes our 2017

acquisitions and is adjusted

for currency, was up 4%.

Target

3 years to 2021

Grow by at least 5%

average CAGR

2018

£1,670m

growth in 2018

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Operating and Performance Review

ITV has continued to deliver a strong operating performance in
2018 with fantastic viewing ﬁgures both on-screen and online.

Adjusted EPS

15.4p

(2017: 16.0p)

11.7p

(2017: 10.2p)

£927m

(2017: £912m)

8.0p

(2017: 7.8p)

Key highlights

Group external revenue

Total advertising revenue

Total non-advertising revenue

Adjusted EBITA

Statutory EPS

Net debt

Dividend per share (ordinary)

£3,211m

(2017: £3,130m)

£1,795m

(2017: £1,781m)

£1,971m

(2017: £1,874m)

£810m

(2017: £842m)

Overview
ITV has delivered a strong operating
performance in an uncertain economic
and political environment. In 2018
we launched our new strategy with
clear priorities and initiatives which
we believe, following investment, will
deliver growth in the medium term
and strengthen ITV, ensuring it is well
positioned to address the opportunities
and challenges of an increasingly
competitive media landscape.

On-screen, our ITV Family SOV has
again grown, increasing for the third
consecutive year up 7% to 23.2% with
strength across the schedule and
outstanding contributions from the
World Cup, I’m a Celebrity… Get Me
Out of Here! and drama. The ITV Hub
continues to deliver strong viewing,
up 32%. Total ITV viewing combining
ITV channels live, recorded and VOD,
increased by 3% year-on-year.

Total advertising revenue grew 1%,
outperforming expectations, with online
revenue growth of 36% more than
offsetting the decline in spot advertising.
Direct to Consumer revenues increased
25% to £81 million driven by competitions,
ITV Hub+ subscription growth and pay
per view events. ITV Studios total revenue
increased 6% driven by Rest of World
and Global Entertainment, including
the £11 million unfavourable impact
of currency. We have a strong creative
pipeline of high-quality programmes,
particularly drama and entertainment,
and we continue to perform well across
the key genres that return and travel.

We measure performance through a range
of metrics, particularly through our
alternative performance measures and
KPIs, as well as statutory results, all of
which are set out in this report.

Total ITV revenue increased 3% to
£3,766 million (2017: £3,655 million),
with external revenue up 3% at
£3,211 million (2017: £3,130 million).
Total non-advertising revenue grew 5%
to £1,971 million (2017: £1,874 million),
now accounting for 52% of total revenue.

Adjusted EBITA declined 4% to £810 million
(2017: £842 million) and adjusted EPS
declined 4% to 15.4p (2017: 16.0p) with the
5% growth in ITV Studios adjusted EBITA
offset by the 7% decline in Broadcast &
Online adjusted EBITA. Broadcast & Online
total revenue grew 1% year-on-year,
however, EBITA was impacted by investment
in the schedule for the World Cup and the
closure of Encore.

Adjusted ﬁnancing costs remain broadly flat
year-on-year at £36 million and our adjusted
tax rate remained unchanged at 19%.

ITV plc Annual Report and Accounts 2018

Operating and Performance Review

G
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F
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Key highlights

Group external revenue

Total advertising revenue

Total non-advertising revenue

Adjusted EBITA

£3,211m

(2017: £3,130m)

£1,795m

(2017: £1,781m)

£1,971m

(2017: £1,874m)

£810m

(2017: £842m)

Adjusted EPS

15.4p

(2017: 16.0p)

Statutory EPS

Net debt

Dividend per share (ordinary)

11.7p

(2017: 10.2p)

£927m

(2017: £912m)

8.0p

(2017: 7.8p)

Statutory proﬁt before tax grew by 13%
to £567 million (2017: £500 million) and
statutory EPS increased by 15% to 11.7p
(2017: 10.2p) primarily due to a reduction
in operating exceptional items and lower
amortisation and impairment on acquired
assets, which is explained in further detail
in the Finance Review.

Statutory ﬁnancing costs were £43 million
over the period which was down year-on-
year (2017: £50 million) and our reported
tax rate remains unchanged at 17%.

We have a solid balance sheet, healthy
liquidity, and the business continues to be
highly cash generative. Our proﬁt to cash
conversion remains high at 88% and we
ended the year with net debt of £927 million
(2017: £912 million) after the effect of
dividend payments of £315 million and
pension contributions of £82 million. 1.1x net
debt to adjusted EBITDA provides headroom
against our investment grade rating.

This allows us to continue to invest in
growing a more robust business with
the implementation of our strategy,
whilst continuing to deliver sustainable
returns to our shareholders.

Reflecting the Board’s conﬁdence in the
business and its strategy, as well as the
continued strong cash generation, it has
proposed a full year dividend of 8.0p,
up 3% year-on-year (2017: 7.8p). This is in
line with the Board’s intention to pay at
least an 8.0p dividend per year in 2018
and 2019. The Board expects that over
the medium term the dividend will grow
broadly in line with earnings.

ITV is More than TV. We are a business built
on hugely talented, creative and passionate
people. We are focused on strengthening
the integrated producer broadcaster,
growing our UK and global content and
distribution business, and developing
and nurturing strong direct consumer

relationships. We have a clear vision,
priorities and initiatives for how we can
compete in a changing environment.
Implementing the strategy and creating
value requires a relentless focus on
delivery. We are clear about what we
need to do and how we will measure
success, and ITV is strong on delivery.

The Company continues to keep the
potential implications of Brexit under
review. Workstreams are in place across
the business to identify, manage and
mitigate the impact across advertising,
broadcast licensing, tax, data, copyright
and IP. The most signiﬁcant risk is the
likely impact on the wider advertising
market. Further detail is included in
the Risks and Uncertainties section
on page 56.

S
t
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Strategic Report

Operating and Performance Review
continued

Broadcast
& Online

The media market environment in which
we operate is dynamic. It is changing and
evolving rapidly, becoming increasingly
competitive. Our Broadcast & Online
business is constantly adapting, and
therefore well positioned to address
the challenges and capitalise on the
signiﬁcant opportunities presented by
the changing environment.

ITV, through our family of free-to-air
channels and platforms, offers unique
audience scale and reach, as well as more
targeted demographics demanded by
advertisers. The ITV Hub and ITV Hub+,
the online home for our family of channels
and content, is growing rapidly, driven by
viewers’ appetite for our content on catch
up, VOD and simulcast. Through our Direct
to Consumer business we are increasingly
engaging with our audiences who have
a growing willingness to pay to engage
with our brands, content and IP, whether
that is through SVOD, competitions,
voting, live events, gaming, merchandise
or pay per view. Data and technology are
key to evolving operations and driving
revenue growth.

Twelve months to 31 December

Total advertising revenue
Direct to Consumer
SDN
Other revenue
Broadcast non-advertising

revenue

Total Broadcast & Online

revenue*

Network schedule costs
Variable costs
Broadcast infrastructure and

overheads

Total Broadcast & Online

adjusted EBITA

Adjusted EBITA margin

2018
£m

1,795
81
73
147

301

2,096
(1,055)
(123)

2017
£m

1,781
65
70
160

295

2,076
(1,025)
(104)

(363)

(348)

555
26%

599
29%

Change
£m

Change
%

14
16
3
(13)

20
(30)
(19)

(15)

(44)

1
25
4
(8)

1
(3)
(18)

(4)

(7)

IFRS 15 ‘Revenue from Contracts with Customers’ was effective from 1 January 2018. 2017 comparatives have been
restated. Please see Section 1 of the Notes to the accounts for further details.

Financial Performance
Broadcast & Online total revenue was up
1% in the year at £2,096 million (2017:
£2,076 million). We delivered a 1% growth
in total advertising revenue, with VOD
revenue up 36%, more than offsetting
the decline in NAR, which is impacted by
political and economic uncertainty with
the lack of conﬁdence meaning some
corporations are not investing in spot
advertising. Direct to Consumer revenue
grew 25% to £81 million (2017: £65 million),
on track to achieve the targeted £100
million revenue by 2021 as set out in the

strategy. Growth was driven by interactive
with the success of daytime competitions,
an increase in ITV Hub+ subscriptions, and
pay per view boxing events.

Spot and VOD advertising categories have
shown different trends in spend across
the year. On a combined basis advertising
categories such as Retail, FMCG, and
Airlines, Travel and Holidays continued
to see declines in advertising spend due
to the uncertain economic outlook, leading
advertisers to reduce spend in order to
maintain margins. Within Retail, we have seen

Emmerdale performed strongly in 2018,

with an average of 6.4 million viewers and
a 33% share, increasing half a share point
on 2017.

Girlfriends arrived on our screens in

January 2018 for a new six-part series.

ITV plc Annual Report and Accounts 2018

Operating and Performance Review

Good Morning Britain had a strong
performance throughout 2018 and the
show continues to see share gains and has
done so every year since launch back in 2014.

Who Wants to be a Millionaire?

returned after a four year break with new
host, Jeremy Clarkson. The 2018 series
averaged 4.9 million viewers and 22% share.

spending decline from both supermarkets
and the high street. Entertainment & Leisure
was up, particularly around the World Cup,
telecommunication grew with spend around
product launches and Government spending
increased with both national and regional
campaigns. Digital disrupter brands continue
to spend heavily on television, up 10% on
2017, to build brand awareness and having
witnessed the immediate response from
customers to spot advertising.

Total costs were up 4%, around half of
this driven by higher schedule costs, up
£30 million to £1,055 million, with coverage
of the Football World Cup. Variable costs
increased with the signiﬁcant growth in
online impacting bandwidth costs and
rights payments, and investment in the
ITV Hub, ITV Hub+ and ITV Box Ofﬁce
(our pay per view channel used in 2018
to show boxing matches). Broadcast
infrastructure and overhead costs
increased with foreign exchange movements
on our euro denominated transmission
contracts and higher property costs from
our new London ofﬁces.

Viewing
On-screen, we performed strongly with
total ITV viewing up 3% to 17.1 billion
hours with growth in both linear and
online viewing, and SOV up for the third
consecutive year.

ITV Family SOV grew 7% to 23.2% with
a strong performance across the schedule.
This level of growth is the biggest in ITV’s

recent history and never before has ITV
delivered three years of consecutive share
growth. Our ITV Family SOV is now the
highest it has been for ten years. Main
channel SOV grew 9% to 16.9%, showing
the most growth of all broadcast channels.
The main channel was the biggest channel
for 16-34s for the ﬁrst time since 2004
with SOV for the demographic up 18%
year-on-year to 15.7%.

Within digital channels, ITV2 was the most
watched digital channel for the 16-34s
for the second year in a row, growing 10%
to a SOV of 6.0% for the demographic.
For the second time ever at year end for
16-34s and 16-24s, ITV2 is ahead of E4.
It is also ahead of Channel 4, Channel 5
and BBC Two for 16-24s.

Daytime shows grew their audiences,
including The Chase, Good Morning
Britain – with its highest share ever, and
This Morning and Lorraine – both achieving
their highest share in ﬁve years. Our soaps,
Coronation Street and Emmerdale, have
enjoyed success in 2018 with both holding
a steady audience volume and managing
to increase share year-on-year, maintaining
their position as the UK’s two largest soaps.
We launched the sixth weekly episode of
Coronation Street in September 2017,
which has further strengthened its
performance. We successfully aired a range
of new dramas including Innocent,
Trauma, Girlfriends and Butterfly; new
entertainment shows, including Britain’s
Brightest Family; and successful factual,

including Gino, Gordon and Fred: Road Trip
and The Queen’s Green Planet. We continue
to drive signiﬁcant audiences with our
returning brands such as Vera – which
had its most successful series to date,
Unforgotten, Endeavour, The Durrells,
Ant & Dec’s Saturday Night Takeaway,
Britain’s Got Talent, The Voice UK,
The Real Full Monty and I’m a Celebrity…
Get Me Out of Here! – with its most
watched series ever averaging 11.8 million
viewers and 45% share, achieving the
accolade as the biggest show on TV in
2018 outside of some Football World Cup
matches. Our news programming continues
to perform well with positive share growth
across all programmes against a picture
of falling news audiences across our
competition. Our sporting schedule had
an outstanding year with the Football
World Cup, the Six Nations Rugby
Championship, the Tour de France, and
horse racing. ITV’s coverage of England’s
semi-ﬁnal against Croatia hit a peak of
26.6 million viewers. The match average
of 24.3 million was bigger than the
audiences for the Olympic Opening and
Closing ceremonies in 2012. While overall
our schedule is performing strongly, not
all of our programmes performed as well
as we had hoped, for example Change
Your Tune, Our Shirley Valentine Summer,
and The Big Audition, will not return.

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Operating and Performance Review
continued

ITV commercial audiences

8
3 9
9

9
5 9
9

9
9

6
9

8
9

6
9

2018
96%
98%

Over 3 million

Over 5 million

We continue to target the demographics
most highly demanded by advertisers –
particularly young and male audiences –
through our digital channels and online,
and have seen a strong performance in
our target demographics on ITV2, ITV4
and the ITV Hub.

On ITV2, Love Island was the most watched
programme on any digital channel in 2018
with the best performing series yet with an
average of 4.0 million viewers and a share
of 17.0%. It was up on series three by two
million viewers and +6.4 share points.
For 16-34s it averaged 2.0 million viewers
with a 46.2% share. Together with Ibiza
Weekender, Celebrity Juice, Family Guy,
American Dad and I’m a Celebrity… Extra
Camp, the performance of Love Island
helped ITV2 to achieve a SOV of 6.0% and
SOCI of 9.2% for the 16-34s demographic,
up 10% and 11% respectively. ITV3’s viewing
performance improved in the period due
to the strong slate of dramas such as
Midsomer Murders, Vera, Lewis, Poirot
and Endeavour. Following the closure
of ITV Encore at the end of April 2018 the
content has moved back to ITV3, adding
to the strength of the schedule. ABC1 adults
SOV and SOCI on ITV3 up 11% and 10%
respectively. Male SOCI on ITV4 was
marginally up year-on-year with the
continued strength of the sport schedule,
including horse racing, the French Open
tennis, and the Tour de France.

ITV plc Annual Report and Accounts 2018

ITV Hub
The ITV Hub, the online home for all of
our channels and content, continues to
grow rapidly. This is driven by our viewers’
appetite to watch our content whenever
and wherever they want, be it catch up or,
increasingly, simulcast. The ITV Hub is
available on 28 platforms and is pre-
installed on over 90% of all connected
televisions sold in the UK.

Long-form video requests are up 23%
and online viewing, which measures how
long viewers are spending online, was up
32% driven by viewing on mobile devices,
connected TV and streaming media players.
The ITV Hub now has 28 million registered
users (2017: 21 million). This growth is driven
by the great content and good user
experience, supported and enhanced by
a process of continued improvement
and investment, including a revamp of
the home pages on website and mobile
devices to present a wider variety of content
to viewers and the soft introduction of
personalised content suggestions to
connected TVs and iOS, which will be
ampliﬁed in 2019.

The ITV Hub helps ITV reach valuable
younger audiences – around 79% of the
UK’s 16-34 year olds are registered.
Younger viewers increasingly use the
ITV Hub for simulcast viewing, as well as
catch up, with programmes such as the
World Cup delivering record viewing with
0.9 million simulcast viewers for England’s
semi-ﬁnal against Croatia. Love Island
achieved an average of 0.3 million viewers
via simulcast per episode, which is greater
than linear audiences on most digital
channels. Simulcast requests were up
34% year-on-year driven by great content
and supported by the increasing robustness
of the platform.

Growth in ITV Hub allows us to collect
more data. We are consolidating and
unifying data from across the business
to drive our ambitions.

Innocent was ITV’s best performing

new drama of 2018 and the third best
performing new drama on TV, averaging
7.0 million viewers and a 29% share.

Operating and Performance Review

engaging in programme and podcast
sponsorship, brand licences, instore
branding, exclusive product lines and
merchandise, and product placement.

Responsive to a changing media
environment
Linear television viewing remains resilient
despite signiﬁcant changes in the
availability and delivery of content.
On average the number of minutes of
television viewers watched per day in
2018 was 192 minutes, down 5% from
203 minutes in 2017. ITV has countered
this trend showing growth in the hours
of linear television viewing. The majority
of viewing remains live at over 70% as
television continues to have the power
to bring audiences together.

VOD viewing continues to grow rapidly
while PVR (recorded) viewing has remained
relatively constant over the last few years at
around 13%. Younger viewers are watching
less linear television than they used to, but
through delivering great content such as
the World Cup, The Voice UK, Love Island,
I’m a Celebrity… Get Me Out of Here! and
Saturday Night Takeaway, ITV Family SOV
for 16-34s has increased by 13% to 23.9%
and accounted for 77 of the top 100 shows
for this demographic in 2018. Television still
reaches 85% of young people each week
and remains their dominant choice of media.

Increasingly homes are supplementing their
free, pay television and advertising video on
demand (AVOD) platforms with SVOD

Endeavour returned for another
successful series in 2018, averaging
6.0 million viewers and a 22% share.

Strong advertising proposition
While political and economic uncertainty
has led advertisers to reduce their current
spend in order to maintain margins,
television remains one of the most efﬁcient
and effective mediums for advertisers
to achieve mass simultaneous reach.
As viewing and advertising becomes
more fragmented, the scale and reach of
advertising that television, and particularly
ITV, delivers becomes increasingly valuable.
We provide a safe, trusted and transparent
environment in which to advertise, and
television generates the highest return
on investment of any media.

SOV provides an overall measure of viewing
performance, however, because advertisers
are buying scale and breadth of audiences,
SOV is not necessarily a direct indicator of
advertising performance. ITV offers scale,
delivering 98% of all commercial audiences
over ﬁve million and 96% of all commercial
audiences over three million in 2018.

Online advertising is growing rapidly and
we have seen double digital growth in our
VOD advertising on the ITV Hub, which
delivers more targeted demographics
in a high-quality, trusted and measured
environment for online advertisers. Online
advertising can deliver a more targeted
advertising proposition and ITV is making
good progress on developing a scaled,
programmatic addressable advertising
proposition on the ITV Hub. This will enable
our Commercial business to offer our
clients the best of both worlds with mass
audiences and addressable advertising.

ITV aims to maximise further the value of
its airtime and drive new revenue streams
through sponsorship, brand extension and
creative collaboration. ITV utilises the core
assets of its strong brand and reputation,
unique commercial relationships and quality
production capability to deliver a wide
variety of innovative marketing solutions.
To enhance our offering to advertisers and
fulﬁll the full potential we have scaled up
the creative solutions team to provide
original, engaging and brand-deﬁning
marketing propositions. John Lewis
engaged ITV to launch their 2018 Christmas
campaign with our creative solutions team
devising a piano-themed teaser campaign
to build anticipation for the full-length
advert featuring Elton John. In 2018 we
attracted an unprecedented number of
commercial partners for Love Island,

Our SVOD & pay offerings
ITV is well positioned to take advantage
of the opportunities that arise from the
changes we are seeing in digital media
and consumer behaviour.

ITV managed YouTube
channels – driving signiﬁcant
growth in viewer engagement

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Operating and Performance Review
continued

services. SVOD has seen strong growth
in the UK over the last few years with
approximately 41% of UK householders
subscribing to at least one of Netflix,
Amazon or NowTV. As a creator, owner
and distributor of sought after content,
ITV is well positioned to take advantage
of the opportunities from the changes
we are seeing in the media environment
and consumer behaviour.

Direct to Consumer
Direct to Consumer generates revenue
directly from the customer, and includes
SVOD, competitions, live events and pay
per view events. In 2018, total revenue has
grown 25% to £81 million (2017: £65 million).

We are in the concluding phase of talks with
the BBC to establish a strategic partnership
to bring BritBox, an exciting new SVOD service,
to UK audiences. This will provide an
unrivalled collection of British boxsets and
original series. Research has demonstrated
there is high demand for British content
and ITV is well positioned to deliver this.
Research has also shown the willingness
to pay for an additional service by those
who already subscribe to an SVOD platform.
See Chief Executive’s Report for more details.

Our existing SVOD propositions include
ITV Hub+ in the UK, BritBox US in the US
and Canada, and Cirkus in the Nordics,
Germany, Austria and Switzerland,
demonstrates our ability and ambition to
compete in this market internationally.

ITV Hub+ offers an ad-free subscription
version of the ITV Hub with content
download capability and EU portability.
While it remains relatively small, the
number of subscribers has more than tripled
in 2018 to 265,000. The subscriber growth
has been driven by increased marketing,
great content, and viewer recognition of
the beneﬁts offered. The number of
subscribers is seasonal, with a 2018 peak
of over 350,000 subscribers in July due to
Love Island and the Football World Cup,
and viewers’ demand for content when
overseas. In 2018 we introduced a free trial
to the ITV Hub+ allowing viewers to sample
the ad-free content service prior to a paid
commitment, and enabled EU portability.

Our joint venture with the BBC, BritBox US,
provides an ad-free SVOD service offering
the most comprehensive collection of
British content available in the US and
Canada. Subscribers have continued to
grow steadily, exceeding 500,000 in 2018.
We will continue to explore opportunities
for BritBox US on other platforms and in
other territories internationally.

Elsewhere in Direct to Consumer our
competitions have performed well across
the schedule with continued growth, and
development of the competition portal.
Programme related app downloads have
been strong, encouraging viewer
engagement. App downloads have both
beneﬁted from, and contributed to, the
growth in linear viewing. The Love Island

This Morning Live has another successful

year with over 30,000 attendees.

The Ninja Warrior UK Aqua Park launched

in May 2018.

ITV plc Annual Report and Accounts 2018

app saw over two million downloads, and
over ten million votes cast via the app.
The Love Island game was downloaded over
four million times. We hosted a number of
live events throughout 2018 based around
our key brands, including the Coronation
Street tour; Emmerdale village tour and
studio experience which showcases the
process of creating an episode; the Ninja
Warrior UK aqua park; Love Island Live,
offering passionate fans the opportunity
to meet the Islanders; and This Morning Live,
a shopping and lifestyle festival. These
events build relationships directly with our
viewers. In 2018 we ran a number of trial pay
per view boxing events on ITV Box Ofﬁce.
Although low margin, we see a further
opportunity for this, and in December 2018
we announced the agreement signed with
Haymon Sports Ltd, which grants us the
rights to a number of future bouts.

SDN
SDN generates revenue by licencing
multiplex capacity to broadcast channels,
radio stations and data providers on
digital terrestrial television or Freeview.
Currently, the SDN platform utilises the
radio spectrum licenced to it to provide
capacity for 16 broadcast channels and
a number of data and radio services.
SDN customers include ITV and third parties,
with external revenue (non-ITV) growing
4% in the period. SDN’s multiplex licence
expires in 2022. We are fully engaged with
both Government and Ofcom in relation
to the possible renewal or extension of
the licence.

Other revenue
Other revenue includes revenue from
platforms, such as Sky and Virgin, and
third-party commissions, e.g. for services
we provide to STV. This is down year-on-year
due to the closure of Encore at the end
of April 2018. ITV continues to license its
channels and content across multiple
platforms, including our HD digital channels
and catch up VOD on Sky and Virgin Media
set top boxes and all our live channels
and catch up VOD across their connected
platforms. In 2018 we signed a new deal
with Virgin Media providing Virgin TV
customers with an enhanced viewing
experience across all of ITV’s channels
and services.

Operating and Performance Review

ITV Studios

ITV Studios is a scaled business delivering
growth at a stable margin. Growing UK
and global production is central to
ITV’s strategy as an integrated producer
broadcaster and our aim is to be a leading
creative force in global content production.
As ITV creates and owns more content,
our channels in the UK provide a platform
to showcase our programmes before
distributing them across multiple
platforms in the UK and internationally.

Financial Performance
ITV Studios total revenue grew 6% to
£1,670 million (2017: £1,579 million), driven
by Studios Rest of World (RoW) and Global
Entertainment, which more than offset the
decline in ITV America. This performance
includes an unfavourable currency impact
of £11 million. Revenue grew across each
genre: scripted; unscripted; and core ITV
and other. Total organic revenue, which
excludes our 2017 acquisitions and adjusts
for currency, was up 4%. Revenue growth
was driven by a signiﬁcant increase in hours
delivered, up 5% to over 8,900 hours.

Twelve months to 31 December

Studios UK
ITV America
Studios RoW
Global Entertainment
Total ITV Studios revenue*
Total ITV Studios costs
Total ITV Studios adjusted

EBITA**

ITV Studios adjusted EBITA margin

2018
£m

695
245
516
214
1,670
(1,415)

255
15%

2017
£m

692
310
390
187
1,579
(1,336)

243
15%

Change
£m

Change
%

3
(65)
126
27
91
(79)

-
(21)
32
14
6
(6)

IFRS 15 ‘Revenue from Contracts with Customers’ was effective from 1 January 2018. 2017 comparatives have been
restated. Please see Section 1 of the Notes to the accounts for further details.

** Includes the beneﬁt of production tax credits.

Twelve months to 31 December

Sales from ITV Studios
to Broadcast & Online

External revenue
Total ITV Studios revenue

Twelve months to 31 December

Scripted
Unscripted
Core ITV* and Other
Total ITV Studios revenue

2018
£m

551
1,119
1,670

2018
£m

380
997
293
1,670

2017
£m

523
1,056
1,579

2017
£m

347
963
269
1,579

Change
£m

Change
%

28
63
91

5
6
6

Change
£m

Change
%

33
34
24
91

10
4
9
6

* Core ITV includes the soaps and daytime shows produced by ITV for the ITV main channel

Vera had its best performing series ever

in 2018, averaging 8.4 million viewers and
a 30% share. It was up by over 1.0 million
viewers on the previous series, including
0.7 million ABC1 Adults.

Balthazar produced by Beaubourg,
part of Tetra Media Studio, for TF1 was
one of the most watched programmes
in France in 2018.

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Operating and Performance Review
continued

Reflecting our growth in key global production
markets, 56% of Studios revenue was
generated outside of the UK (2017: 54%).
ITV is the number one commercial
producer in the UK and a leading producer
in Europe and the US. As our Studios
business grows internationally, foreign
currency movements could have a larger
impact on our results.

Adjusted EBITA was up 5% year-on-year
at £255 million. Adjusted EBITA margin
was stable at 15%. Foreign exchange had
an unfavourable £1 million impact on
Studios adjusted EBITA.

Growing demand for content
The strong global demand for content from
broadcasters and platform owners provides
signiﬁcant opportunity for ITV Studios.
We estimate that the global content market
is growing at around 4-5% per annum, with
some genres, such as drama, growing more
rapidly. A key driver of this change over
recent years has been the evolution in the
delivery and availability of content with
a substantial increase in the number of
ways to consume content. To capitalise on
this growth, we continue to develop, own
and manage rights in genres that return
and travel internationally, namely drama,
entertainment and factual entertainment,
and we have built a healthy pipeline of new
and returning programmes, which we will
continue to nurture and develop.

Building scale in key creative markets
ITV Studios has three production divisions –
Studios UK, ITV America and Studios
Rest of World (RoW), with RoW achieving
signiﬁcant growth year-on-year. Across
the divisions ITV Studios produced over
8,900 hours of programming compared
to around 8,400 in 2017, and secured
249 new commissions and 210 recommissions
in the year. Overall a strong performance,
however, performance in different
territories is impacted by phasing, with
the risk managed through the portfolio.

The US and UK are the dominant creative
markets, with the US the largest exporter
of scripted content globally and the UK
the world leader in exported formats.
Over the last few years we have built scale
in these key markets, both organically and
through acquisitions, and we now have
a signiﬁcant portfolio of successful series
and formats. In recent years in the US,
we have invested in backing talent and IP,
rather than large scale acquisitions. This
allows us to attract and collaborate with
innovative and entrepreneurial creatives,
with minimal risks and attractive returns.
In 2017 we took a 45% stake in Blumhouse
Television, the TV division of the company
founded by prodigious ﬁlm producer Jason
Blum, which in 2018, produced Into the Dark
for Hulu, and co-produced The Purge for
USA Network and Sharp Objects for HBO.
Previous investments include a 75% stake in

ITV plc Annual Report and Accounts 2018

Tomorrow Studios with Marty Adelstein,
with delivery across 2018 and 2019 of
original commission Cowboy Bebop to
Netflix, and co-production Snowpiercer
for TNT in the US and Netflix internationally.
We also acquired a 49% stake in Circle of
Confusion, which is building its development
slate, including the co-development of
Thirteen with Amazon Studios in 2019.
Europe is a growing creative market, with
particular demand for foreign language
drama internationally and local scripted
content from broadcasters and OTT platforms.
In recent years we have strengthened our
position in the European market through
the acquisitions of Tetra Media Studio in
France and Cattleya in Italy.

The UK’s revenue was broadly flat at
£695 million (2017: £692 million). Sales to
ITV Network grew 5% in 2018 driven by the
extra weekly episode of Coronation Street,
the successful return of Dancing on Ice and
an extended series of Love Island. Drama
deliveries to ITV Network declined in 2018
due to the schedule commitment to the
Football World Cup. ITV Studios’ UK share
of original content on ITV main channel
increased to 67% (2017: 66%).

Our off-ITV revenues in the UK declined 7%
with growth in drama offset by a decline
in entertainment and comedy deliveries.
New drama commissions Bodyguard,
Age Before Beauty and the part delivery of
War of the Worlds offset the adverse timing
of Shetland and non-return of The City and
The City. Comedy deliveries in 2018 were
impacted by Motherland, Back and Mum
not returning until 2019, and the non-return
of Bliss. Entertainment was impacted by
the loss of The Jump only partly offset by
new commission This Time Next Year US,
produced by Twofour Group.

ITV America total revenue declined 21% to
£245 million (2017: £310 million), and 18%
to £255 million (2017: £310 million) when
adjusted for the unfavourable foreign
exchange impact. We have delivered a lower
volume of programmes from our

The ABC Murders was produced by
Mammoth Screen (part of ITV Studios UK)
for the BBC.

Operating and Performance Review

Scripted

Unscripted

Core ITV

What Would Your Kid Do created and

distributed by Twofour, has been
commissioned in eight territories including
Belgium, Turkey, Hungary and Serbia.

entertainment portfolio with Duck Dynasty
and American Grit not returning, a reduction
in the volume of Pawn Stars episodes
delivered, and no Hell’s Kitchen delivered
following the delivery of two series in 2017.
There is growing pressure in the US cable
market with signiﬁcant external competition.
This volume decline was partly offset by
new series, The Four and Knife or Death,
and a higher volume of Emmy award
winning Queer Eye delivered, and a higher
number of Good Witch episodes. Snowpiercer
and the remainder of the ﬁfth series of
Good Witch will deliver in 2019.

Studios RoW has production bases in
Australia, Germany, France, the Netherlands,
the Nordics, Italy and the Middle East
where we produce original content as well
as local versions of ITV Studios UK and Talpa
formats. Revenue grew 32% to £516 million
(2017: £390 million), driven particularly by
good growth in France due to The Voice
of France and The Voice Kids. Across the
territories our entertainment and format

deliveries included I’m A Celebrity ...Get Me
Out of Here!, The Voice, Love Island and
The Chase in Australia, I’m A Celebrity ...Get Me
Out of Here!, Come Dine With Me, The Chase
and Quizduell in Germany, and Love Island,
The Chase and Four Weddings in Finland.

The business also beneﬁted from the 2017
acquisitions of Tetra Media Studio, Cattleya
and Elk. Demand for drama is growing
strongly and we have made real progress
in building a European scripted business
with the acquisition of Cattleya and Tetra
Media Studio. These, along with our existing
European businesses, enable us to beneﬁt
from the increasing demand for locally
produced content with global appeal.
Cattleya is very much at the vanguard of
the growth of Netflix’s push into non-
English language drama, with the delivery of
the second series of Suburra in 2018. In 2019,
Cattleya is set to deliver new drama Zero,
Zero, Zero to Sky, Canal+ and Amazon, and
Gomorrah returns for a fourth series to Sky.
In 2018, Beaubourg, part of Tetra Media

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Operating and Performance Review
continued

Studio, produced Balthazar, one of the year’s
top ten most watched dramas in France.
2019 is set to be another strong year for
Tetra Media Studio, with Vernon Subutex for
Canal+ and the delivery of Proﬁlage to TF1.

Talpa continues to develop its formats
including The Voice Senior, Dansing,
The Wishing Tree, Around the World with
80 Year Olds and House of Talent.
Our international scale now enables ITV
to make these other formats, and in
particular The Voice, in all our international
production territories and therefore earn
the production revenue as well as the
format fee.

Expanding our global distribution
business
Global Entertainment, the distribution
arm within ITV Studios, reported revenue
growth of 14% to £214 million (2017:
£187 million) as our content continues
to sell well internationally to both
broadcasters and OTT platforms.
Excluding the unfavourable impact of
currency movements, revenue grew 16%.

2018 growth is driven by a strong slate
of drama deliveries with multiple deals
with Netflix including global distribution
of Bodyguard, Good Witch, Somewhere
Between, and the delivery of Robozuna.
2018 also saw the delivery of period dramas
Vanity Fair and Harlots to OTT platforms,
Amazon and Hulu.

Over 15 of our scripted programmes have
been sold to more than 100 countries. Our
entertainment and factual entertainment
formats are highly demanded and include
programmes such as The Voice, Love Island,
The Graham Norton Show, Judge Rinder,
The Chase, This Time Next Year, Come Dine
With Me and Four Weddings.

In 2018 we sold 57 (2017: 62) different
formats internationally, ﬁve of which are
being produced by ourselves in three or
more countries. As well as funding and
creating new content from ITV Studios,
we also invest in third-party producers
and their content from all over the world.

Global Entertainment continues to be a
strong and expanding business driven by
our strong pipeline of high-end scripted
programmes and our valuable library, which
we sell to our vast network of long-standing
existing traditional linear broadcasters, the

global OTTs and new and emerging digital
platforms, such as FilmRise. The pipeline
for 2019 is healthy with the international
distribution of War of the Worlds (pre-sold
to over 80 territories), Wild Bill, The Bay,
World on Fire, and Snowpiercer.

Investing in content with
international appeal
Polarisation of content demand remains
a feature of the market. This is driven by
the growth of viewing platforms looking
for channel deﬁning content with demand
for both local adaptations of proven
entertainment formats and standout
original scripted content.

We are continuing to expand our portfolio
of successful formats and series that return
and can be distributed internationally.
Across the business we have grown a robust
portfolio of high volume and high margin
formats that travel internationally and that
we produce locally. For example, in 2018
we produced Love Island in seven of the
eight countries in which the format had
been sold, The Voice in seven countries,
The Chase in four countries, and I’m
a Celebrity… Get Me Out of Here! in four
countries. In 2019, ITV America will produce
Love Island for CBS.

Demand for drama is growing strongly
as prominent unique content becomes
brand-deﬁning for both broadcasters and
OTT players. To capitalise on this, we are
investing in our global scripted business.
We are strengthening our development
and creative capabilities, growing our
European business and investing in a number
of development relationships in the US.

We ﬁnance our large-scale scripted projects,
and to a limited degree some unscripted
projects, through our strong underlying

Suburra is produced by Cattleya for
Netflix. The second series was released
in February 2019.

cash flows or through co-productions and
partnerships with broadcasters and OTT
platforms. The production costs are
partly funded by the initial sale of the series
to a broadcaster, while the deﬁcit is
recovered through distribution revenue
from selling the ﬁnished product globally
to other broadcasters and platforms.
Doing more scripted deals and deals with
OTT platforms will impact our working
capital going forward.

We balance our ﬁnancial exposure through
building a portfolio of programmes across
genres and across their content life cycle,
with successful international dramas
offsetting the risk that we will not recover
the full deﬁcit on every show. This efﬁciently
uses the rights windows of our content to
maximise monetisation opportunities.
We are seeing increasing demand from
OTT platforms for original long-form
content and secondary rights. As well
as distributing library content to OTT
platforms through Global Entertainment,
in 2018 we produced and jointly commissioned
a number of scripted and unscripted
programmes with OTT platforms, including
Vanity Fair with Amazon, Queer Eye with
Netflix and Harlots for Hulu, and original
commission, Cowboy Bebop, for Netflix.
We are in development on a number of
shows for Quibi, the new platform set up
by Meg Whitman and Jeffrey Katzenberg,
and in which we are an investor, which is set
to launch in 2019 with bite-size original
programming designed for smartphones.
Original hours supplied to OTTs increased
over 35% in 2018.

ITV plc Annual Report and Accounts 2018

Operating and Performance Review

Broadcast and content technology
One of the key initiatives in our Broadcast
business is to improve our processes
around our content supply chain, which
includes how we store our content and
how our content is managed and ultimately
played out via our transmission centres.
This project has continued in 2018 and we
have sought to reduce the time taken from
live transmission to content being available
for catch up on the ITV Hub. This year the
productivity investments meant that
Love Island was available immediately
after the linear episode aired on ITV2.

We are in the process of upgrading our
advertising sales system and launched
a new audience forecasting system which
helped improve productivity by allowing
us to be more efﬁcient. We also continued
to investigate how robotic process
automation may beneﬁt ITV in the future.
Based on the proofs of concepts we did
last year, we are now launching three trials
across our Broadcast business to test if
our current robots can improve productivity
in these speciﬁc test cases.

During the year we started a number of
initiatives in our Direct to Consumer
business, with a focus on data. We intend
to unify our ﬁrst-party data by consolidating
our multiple datasets across ITV, instead
of relying on manual processes across
multiple teams thereby improving the
productivity of the teams.

Production facilities
Following last year’s investments in
Manchester for Coronation Street and
Belfast for UTV, during 2018 we relocated
our Daytime studios to White City where
we invested in a new state-of-the-art
facility as part of our London property
move. Further, we invested in a large
production facility for our key entertainment
brands such as Dancing on Ice.

We also seek to use established and
emerging technology to drive productivity,
where it makes commercial sense to do so.
In our Studios business, we installed a suite
of new high end cameras at Emmerdale
and continued to roll-out our bespoke
artist payment system, which has
signiﬁcantly reduced duplication of effort
across the business. Further, we reviewed
our end-to-end freelancer contracting
process and reduced complexity and
administration where it was possible
to do so.

ITV Feel Good offers colleagues support

and advice on having a balanced and
healthy working lifestyle.

Productivity

We consistently seek to drive
productivity across the Group by
investing in our people, new
broadcast and production technology
as well as up-to-date office facilities.

By investing in these areas, we aim
to transmit our content and
advertisements more efficiently,
increase our production output and IP
rights while improving the user
experience for viewers.

People
We continued to invest in our people and
have made signiﬁcant investments in new
properties and technology to provide staff
with upgraded workplace facilities enabling
better collaboration and communication
amongst our colleagues.

Our approach to performance management
engages managers and colleagues in
regular reviews of performance and
objective setting. We continue to invest
in our management development capability
to ensure all managers have the skills and
tools required to sustain high performance
in their teams.

Following the results from our last
engagement survey, we launched our
wellbeing programme, ITV Feel Good,
to offer colleagues support and advice
on having a balanced and healthy working
lifestyle. ITV Feel Good offers one-off
activities and experiences to inform and
inspire everyone to take control of their
own health and wellbeing, both inside
and outside of the workplace.

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Alternative Performance Measures

The Annual Report includes both statutory and adjusted
measures (Alternative Performance Measures or APMs),
the latter of which, in management’s view, reflect the
underlying performance of the business and provide
a more meaningful comparison of how the business is
managed and measured on a day-to-day basis.

Our APMs and KPIs are aligned with our strategy and
business segments and together are used to measure
the performance of our business and form the basis
of the performance measures for remuneration.

Adjusted results exclude certain items because, if
included, these items could distort the understanding
of our performance for the year and the comparability
between periods.

Key adjustments for adjusted EBITA, profit before tax and EPS
Adjusted EBITA is calculated by adding back exceptional items
and high-end production tax credits to EBITA. Further adjustments,
which include amortisation and impairment of assets and certain
net ﬁnancing costs, are made to remove their effect from adjusted
proﬁt before tax and EPS. The tax effects of all these adjustments
are reflected in the adjusted tax charge. These adjustments are
detailed below.

Production tax credits
The ability to access tax credits, which are rebates based on
production spend, is fundamental to our Studios business when
assessing the viability of investment in green-lighting decisions,
especially with regards to high-end drama. ITV reports tax credits
generated in the US and other countries (e.g. Norway, New Zealand,
Italy, Canada and Spain) within cost of sales, whereas in the UK tax
credits for high-end drama must be classiﬁed as a corporation tax
item. However, in our view all tax credits relate directly to the
production of programmes. Therefore, to align treatment,
regardless of production location, and to reflect the way the
business is managed and measured on a day-to-day basis, these
are recognised in adjusted EBITA. Our cash measures including
proﬁt to cash conversion and free cash flow are also adjusted
for the impact of production tax credits. Further detail on this
is included on the following page.

Exceptional items
These include acquisition-related costs, reorganisation and
restructuring costs, property costs, non-routine legal costs
and pension-related costs. These items are excluded to reflect
performance in a consistent manner and are in line with how
the business is managed and measured on a day-to-day basis.
They are typically gains or losses arising from events that are
not considered part of the core operations of the business or
are considered to be one-off in nature, though they may cross
several accounting periods. We also adjust for the tax effect
of these items. Note 2.2 to the ﬁnancial statements includes
further detail.

Acquisition-related costs
We structure our acquisitions with earnouts or put and call
options, to allow part of the consideration to be based on the
future performance of the business as well as to lock in and
incentivise creative talent. Where consideration paid or contingent

consideration payable in the future is employment-linked, it is
treated as an expense (under accounting rules) and therefore part
of our statutory results. However, we exclude all consideration of
this type from adjusted EBITA, adjusted proﬁt after tax and adjusted
EPS as, in our view, these items are part of the capital transaction
and do not form part of the Group’s core operations. The Finance
Review explains this further. Acquisition-related costs, including
legal and advisory fees on completed deals or signiﬁcant deals
that do not complete, are also treated as an expense (under
accounting rules) and therefore on a statutory basis form part
of our reported results. In our view, these items also form part
of the capital transaction or are one-off in nature and are
therefore excluded from our adjusted measures.

Restructuring and reorganisation costs
These arise from Group-wide initiatives to reduce the ongoing
cost base and improve efﬁciency in the business. We consider
each project individually to determine whether its size and nature
warrant separate disclosure. Where there has been a material
change in the organisational structure of a business area or
a material Group-wide initiative, these costs are highlighted
and are excluded from our adjusted measures.

Property costs
In the ﬁrst half of 2018, we relocated our London headquarters
from The London Television Centre to three central London
locations. The ﬁt-out costs of the three new locations were
capitalised. In October 2018, the Directors reversed their prior
decision, reported in 2017, and agreed not to redevelop the
Group’s headquarters at The London Television Centre and the
site is now for sale. The new London locations give ITV the flexibility
to continue to grow, while supporting our ambition to be an agile
and increasingly digital organisation. During the course of the
relocation project, dual rent, other property costs and move
related costs have been recognised as exceptional and are
therefore excluded from our adjusted measures. Rent and other
property costs for the new ofﬁces and studios are being treated
as operating costs. The costs associated with The London Television
Centre until disposal will be treated as exceptional.

Amortisation and impairment
Amortisation and impairment of assets acquired through business
combinations and investments are not included within adjusted
earnings. As these costs are acquisition-related, and in line with our
treatment of other acquisition-related costs, we consider them to
be capital in nature as they do not reflect the underlying trading
performance of the Group. Amortisation of software licences and
development is included within our adjusted results as management
consider these assets to be core to supporting the operations of the
business.

Net financing costs
Net ﬁnancing costs are adjusted to reflect the underlying cash
cost of interest for the business, providing a more meaningful
comparison of how the business is managed and funded on
a day-to-day basis. The adjustments made remove the impact
of mark-to-market on swaps and foreign exchange, imputed
pension interest and other ﬁnancial gains and losses, which
do not reflect the relevant interest cash cost to the business
and are not yet realised balances.

A full reconciliation between our adjusted and statutory results
is provided on the following page.

ITV plc Annual Report and Accounts 2018

Alternative Performance Measures

Reconciliation between statutory and adjusted results

Twelve months to 31 December
EBITA1
Exceptional items (operating)2
Amortisation and impairment3

Operating proﬁt
Net ﬁnancing costs4
Share of losses on JVs and Associates
Gain / (loss) on sale of non-current assets and subsidiaries

(non-operating exceptional items)2

Proﬁt before tax
Tax5
Proﬁt after tax
Non-controlling interests
Earnings
Shares (million), weighted average
EPS (p)
Diluted EPS (p)

2018
Statutory
£m
785
(93)
(92)

2018
Adjustments
£m
25
93
85

203
7
–

(10)
200
(49)
151
–
151
–

600
(43)
–

10
567
(97)
470
(4)
466
3,999
11.7p
11.6p

2018
Adjusted
£m
810
–
(7)

803
(36)
–

–
767
(146)
621
(4)
617
3,999
15.4p
15.4p

2017
Statutory
£m
810
(153)
(102)

2017
Adjustments
£m
32
153
97

282
17
–

1
300
(67)
233
–
233
–

555
(50)
(4)

(1)
500
(87)
413
(4)
409
4,006
10.2p
10.2p

2017
Adjusted
£m
842
–
(5)

837
(33)
(4)

–
800
(154)
646
(4)
642
4,006
16.0p
16.0p

1. £25 million adjustment relates to production tax credits which we consider to be a contribution to production costs and working capital in nature rather than a corporate tax item.
2. Exceptional items largely relate to acquisition costs, primarily employment linked consideration, as well as restructuring and property costs. £10 million non-operating exceptional

items mainly relates to the gain on sale of Manchester Quay Street. Further detail is included in the Finance Review.

3. £85 million adjustment relates to amortisation and impairment of assets acquired through business combinations and investments. We include only amortisation on purchased

intangibles such as software within adjusted proﬁt before tax.

4. £7 million adjustment is primarily for non-cash interest cost. This provides a more meaningful comparison of how the business is managed and funded on a day-to-day basis.
5. Tax adjustments are the tax effects of the adjustments made to reconcile proﬁt before tax and adjusted proﬁt before tax. A full reconciliation is included in the Finance Review.

Net pension deﬁcit
This is our deﬁned beneﬁt pension deﬁcit under IAS 19 adjusted for
other pension assets, mainly gilts, which are held by the Group as
security for future unfunded pension payments for four Granada
executives and over which that pension scheme holds a charge.
A full reconciliation is included within note 3.7.

Proﬁt to cash conversion
This is our measure of our effectiveness of cash generation used
for working capital management. It is calculated as our adjusted
cash flow as a proportion of adjusted EBITA. Adjusted cash flow,
which reflects the cash generation of our underlying business, is
calculated on our statutory cash generated from operations and
adjusted for exceptional items, net of capex on property, plant
and equipment and intangible assets, and including the cash impact
of high-end production tax credits.

Free cash flow
This is our measure of free cash flow after we have met our
ﬁnancial obligations. It takes our adjusted cash flow (see above)
and removes the impact of net interest, adjusted cash tax (which
is total tax paid adjusted to exclude the receipt of production tax
credits) and pension funding. A full reconciliation is included in
the Finance Review.

Other Alternative Performance Measures
Total revenue
As an integrated producer broadcaster, we look at the total
revenue generated in the business which includes internal revenue,
which is the sale of ITV Studios programmes to Broadcast & Online.
Our broadcast channels are a signiﬁcant customer for ITV Studios
and selling programmes to Broadcast & Online is an important part
of our strategy as an integrated producer broadcaster as it ensures
we own all the rights to the content.

A reconciliation between external revenue and total revenue is
provided below.

Twelve months to 31 December

External revenue (Reported)
Internal supply
Total revenue (Adjusted)

2018
£m

3,211
555
3,766

2017
£m

3,130
525
3,655

Adjusted net debt
Net debt (as deﬁned in note 4.1 to the ﬁnancial statements) is
adjusted for all our ﬁnancial commitments. This better reflects how
credit rating agencies look at our balance sheet. A reconciliation
between net debt and adjusted net debt is provided below.

Twelve months to 31 December
Net debt
Expected contingent payments on acquisitions
Net pension deﬁcit
Operating leases*
Adjusted net debt
Adjusted net debt to adjusted EBITDA
Reported net debt to adjusted EBITDA

2018
£m
(927)
(252)
(38)
(147)
(1,364)
1.6x
1.1x

2017
£m
(912)
(292)
(83)
(143)
(1,430)
1.6x
1.0x

Excludes transponder costs, which are now treated as service contracts.
See the Finance Review for further detail. The comparator has not been re-presented.

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Finance Review

ITV’s strong operating performance in a challenging year
reflects the underlying strength of the business.

ITV delivered a strong operational
performance in a challenging year with
ongoing political and economic uncertainty
in the UK, which has undoubtedly had an
impact on the demand for television
advertising, and therefore on ITV’s ﬁnancial
performance. We launched our new strategy
with clear priorities which we believe will
deliver growth and strengthen ITV.

Adjusted EBITA declined 4% to £810 million. ITV Studios adjusted
EBITA was up 5% at £255 million (2017: £243 million) with good
revenue growth, including the unfavourable impact of currency,
and the adjusted EBITA margin was flat at 15%. Broadcast & Online
adjusted EBITA declined 7% to £555 million (2017: £599 million)
with revenue growth more than offset by a £30 million increase
in schedule costs with the 2018 Football World Cup, higher variable
costs attributable to online revenue growth, investment in the
ITV Hub, ITV Hub+ and ITV Box Ofﬁce, and property costs associated
with the new London properties.

Adjusted EBITA tracker

842

(30)

(10)

(34)

810

£m

850

800

750

700

December
2017

Total
Advertising
Revenue

Network
Schedule

Direct to
Consumer
Revenue

Other
Broadcast
Revenue

Other
Broadcast
Costs

ITV
Studios

December
2018

Adjusted ﬁnancing costs were broadly flat year-on-year and our
adjusted tax rate was the same year-on-year, at 19%. The net of
these movements resulted in a 4% decline in adjusted EPS to
15.4p. Statutory EPS was up 15% to 11.7p due to the reduction
in operating exceptional items and lower amortisation and
impairment on acquired assets, which are explained on the
following pages, more than offsetting the decline in EBITA.

Our key strengths include our high margins and healthy cash flows,
which, together with our ongoing focus on costs, place us in a good
position to continue to invest in growing an even stronger and more
resilient business going forward, while delivering sustainable returns
to our shareholders.

Exceptional items

Twelve months to 31 December

Acquisition-related expenses
Restructuring and property-related costs
Insured trade receivables provision
Pension related costs
Other
Total operating exceptional items
Non-operating exceptional items
Total exceptional items

2018
£m

(60)
(26)
4
4
(15)
(93)
10
(83)

2017
£m

(90)
(30)
(27)
–
(6)
(153)
(1)
(154)

This Finance Review focuses on the more technical aspects of our
ﬁnancial results while the operating and ﬁnancial performance
has been discussed within the Operating and Performance Review.
Our Alternative Performance Measure explain the adjustments
we make to our statutory results and focus on the key measures
that we report on internally and use as KPIs across the business.

ITV delivered 3% external revenue growth to £3,211 million (2017:
£3,130 million). Total advertising revenue was up 1%. VOD revenue
was up 36% year-on-year, more than offsetting the decline in
NAR, which was impacted by political and economic uncertainty.
Total non-advertising revenue grew 5% to £1,971 million (2017:
£1,874 million), including the £11 million unfavourable impact
of currency. ITV Studios total revenue grew 6% to £1,670 million
(2017: £1,579 million), with growth driven by Studios RoW and
Global Entertainment, as we continue to build our capabilities
in key creative markets. Organic revenue grew 4% and our
portfolio acquisitions continue to deliver a return in excess
of our cost of capital. Direct to Consumer revenue grew 25%
to £81 million (2017: £65 million), driven by interactive with
the success of daytime competitions, an increase ITV Hub+
subscriptions, and pay per view boxing events.

Twelve months to 31 December –
revenue on a continuing basis

Total advertising revenue
Total non-advertising revenue
Total revenue
Internal supply
Group external revenue

Group adjusted EBITA
Group adjusted EBITA margin
Group statutory EBITA

Adjusted EPS
Statutory EPS
Dividend per share
Net debt as at 31 December

2018
£m

1,795
1,971
3,766
(555)
3,211

810
25%
785

15.4p
11.7p
8.0p
(927)

2017
£m

Change
£m

Change
%

1,781
1,874
3,655
(525)
3,130

842
27%
810

16.0p
10.2p
7.8p
(912)

14
97
111
(30)
81

(32)

(25)

(0.6)p
1.5p
0.2p
(15)

1
5
3
(6)
3

(4)

(3)

(4)
15
3
(2)

ITV plc Annual Report and Accounts 2018

Finance Review

Total exceptional items in the period were £83 million (2017:
£154 million). Operating exceptional items principally relate
to acquisition-related expenses. Acquisition-related expenses
largely relate to performance based, employment-linked
consideration to former owners. Restructuring and property-
related costs of £26 million includes £13 million of dual running
costs and relocation costs as a result of our London property
move and £13 million of costs from restructuring our business.
Exceptional items included a net £4 million credit in respect
of pension-related items. As a result of the purchase of a bulk
annuity insurance contract (‘Buy-in’), a net £10 million credit
was recognised for changes to options available to members
in those schemes. This has been offset by a £6 million past
service cost for Guaranteed Minimum Pensions (GMP), which
equalises the beneﬁts between men and women, following
a recent High Court ruling that set a precedent in this matter.
Full detail of these costs and a breakdown of the pension
schemes is included in the notes to the ﬁnancial statements.

The cash cost of exceptionals in the period was £90 million
(2017: £126 million).

Profit before tax
Adjusted proﬁt before tax, after amortisation and impairment
of assets and ﬁnancing costs, was down 4% at £767 million
(2017: £800 million).

Statutory proﬁt before tax increased by 13% to £567 million
(2017: £500 million), primarily as a result of a reduction in
exceptional items, and amortisation and impairments.

Proﬁt before tax (PBT)

Twelve months to 31 December
Proﬁt before tax
Production tax credits
Exceptional items
Amortisation and impairment*
Adjustments to net ﬁnancing costs
Adjusted proﬁt before tax

2018
£m
567
25
83
85
7
767

2017
£m
500
32
154
97
17
800

In respect of assets arising from business combinations and investments.

Net financing costs

Twelve months to 31 December
Financing costs directly attributable to loans

and bonds

Cash-related net ﬁnancing costs
Amortisation of bonds
Adjusted ﬁnancing costs
Imputed pension interest
Unrealised foreign exchange and other net

ﬁnancial losses
Net ﬁnancing costs

2018
£m

2017
£m

(30)
(5)
(1)
(36)
(2)

(5)
(43)

(30)
(2)
(1)
(33)
(9)

(8)
(50)

Tax
Adjusted tax charge
The total adjusted tax charge for the period was £146 million
(2017: £154 million), corresponding to an effective tax rate on
adjusted proﬁt before tax (PBT) of 19% (2017: 19%), which is in
line with the standard UK corporation tax rate of 19% (2017:
19.25%). We expect this effective tax rate to be sustainable
over the medium term. On a reported basis, the tax charge of
£97 million (2017: £87 million) corresponds to an effective tax
rate of 17% (2017: 17%). The adjustments made to reconcile
the tax charge with the adjusted tax charge are the tax effects
of the adjustments made to reconcile PBT and adjusted PBT,
as discussed earlier.

Adjusted ﬁnancing costs were broadly flat year-on-year at £36 million
(2017: £33 million). Net ﬁnancing costs were £43 million over the
period, which was down year-on-year (2017: £50 million), largely
due to a small reduction in net pension interest.

JVs and associates
The share of losses from JVs and associates has decreased to
£nil million (2017: £4 million). It is net of losses arising on some
of our investments, including our new venture BritBox US and
scripted talent investment, Circle of Confusion, offset with proﬁt
on a range of investments, including the 2017 ITV Studios
investment in Blumhouse Television.

Twelve months to 31 December

Tax charge
Production tax credits
Charge for exceptional items
Charge in respect of amortisation and

impairment*

Charge in respect of adjustments to net

ﬁnancing costs

Adjusted tax charge
Effective tax rate on adjusted proﬁts

2018
£m

(97)
(25)
(9)

2017
£m

(87)
(32)
(12)

(14)

(19)

(1)
(146)
19%

(4)
(154)
19%

In respect of intangible assets arising from business combinations and investments.
Also reflects the cash tax beneﬁt of tax deductions for US goodwill.

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Finance Review
continued

Cash tax
Cash tax paid in the period was £92 million (2017: £95 million),
and is net of £27 million of production tax credits received
(2017: £23 million). The majority of the cash tax payments
were made in the UK. The cash tax paid is lower than the full
year tax charge for 2018 of £97 million, largely due to the phasing
of tax payments in the UK and the treatment of allowable
pension contributions (cash tax beneﬁt of £14 million in 2018
and £15 million in 2017). A reconciliation between the tax charge
for the year and the cash tax paid in the year is shown below.

Twelve months to 31 December
Tax charge
Temporary differences recognised through

deferred tax

Prior year adjustments to current tax
Current tax, current year
Phasing of tax payments (including in

respect of pension contribution beneﬁts)

Production tax credits – timing of receipt
Cash tax paid

2018
£m
(97)

(37)
14
(120)

26
2
(92)

2017
£m
(87)

(17)
2
(102)

16
(9)
(95)

Tax strategy
ITV is a responsible business, and we take a responsible attitude
to tax, recognising that it affects all of our stakeholders. In order
to allow those stakeholders to understand our approach to tax,
we have published our Global Tax Strategy, which is available
on our corporate website.

www.itvplc.com/investors/governance/policies

We have four key strategic tax objectives :
1. Engage with tax authorities in an open and transparent way

in order to minimise uncertainty

2. Proactively partner with the business to provide clear, timely,
relevant and business focused advice across all aspects of tax
3. Take an appropriate and balanced approach when considering

how to structure tax sensitive transactions

4. Manage ITV’s tax risk by operating effective tax governance
and understanding our tax control framework with a view
to continuously adjusting our approach to be compliant with
our tax obligations

Our tax strategy is aligned with that of the business and its commercial
activities, and establishes a clear Group-wide approach based on
openness and transparency in all aspects of tax reporting and
compliance, wherever the Company and its subsidiaries operate.
The strategy conﬁrms that ITV does not engage in or condone tax
evasion or the facilitation of tax evasion in any form, and that

ITV plc Annual Report and Accounts 2018

we have in place reasonable procedures to prevent the facilitation
of tax evasion. Within our overall governance structure, the
governance of tax and tax risk is given a high priority by the
Board and Audit and Risk Committee, including through the
operation of the Tax and Treasury Committee. The ITV Global
Tax Strategy as published on the ITV plc website is compliant
with the UK tax strategy publication requirement set out in
Part 2 Schedule 19 of the Finance Act 2016.

EPS – adjusted and statutory
Overall, adjusted proﬁt after tax was down 4% at £621 million
(2017: £646 million). After non-controlling interests of £4 million
(2017: £4 million), adjusted basic earnings per share was 15.4p
(2017: 16.0p), down 4%, which is consistent with the decrease in
adjusted EBITA of 4%. The weighted average number of shares
declined to 3,999 million (2017: 4,006 million) because ITV bought
shares during 2018 on behalf of the Employee Beneﬁt Trust and,
in line with accounting standards, shares held by the Trust are not
included in the EPS share count. Diluted adjusted EPS in 2018 was
15.4p (2017: 16.0p) reflecting a weighted average diluted number
of shares of 4,013 million (2017: 4,017 million). The weighted
average diluted number of shares was down year-on-year
because of a decrease in the number of shares expected to vest
in ITV’s long-term incentive plans in the future.

Statutory EPS grew by 15% to 11.7p (2017: 10.2p) with the decline
in statutory EBITA more than offset by a reduction in exceptional
items, amortisation and impairments, and net ﬁnancing costs.

A full reconciliation between statutory and adjusted EPS is
included within the Alternative Performance Measures section.

Dividend per share
ITV continues to deliver a strong operational performance in
an uncertain economic and political environment. Reflecting
the Board’s conﬁdence in the business and its strategy, as well
as the continued strong cash generation, it has proposed a full
year dividend of 8.0p, up 3% (2017: 7.8p). This is in line with the
Board’s intention to pay at least an 8p dividend per year in 2018
and 2019. The Board expects that over the medium term the
dividend will grow broadly in line with earnings.

Finance Review

Acquisitions – between 2012 and 2017 (undiscounted)

Company

Geography

Genre

Total for 2012–2017
Total

Various Content & Broadcast TV

Initial
consideration
£m

Additional
consideration
paid
£m

Expected
future
payments*
£m

Total
expected

consideration**

£m

Expected
payment
period

941
941

138
138

252
252

1,331 2019–2024
1,331

Total
maximum

consideration**

£m

2,370
2,370

Undiscounted and adjusted for foreign exchange. All future payments are performance related.

*
** Undiscounted and adjusted for foreign exchange, including the initial cash consideration and excluding working capital adjustments.

Dividend per share p (ordinary)

8
2 7
7

p
0
8

0
6

7
4

5
3

6
2

6
1

+3%
YoY

2018
8.0p

Acquisitions
Since 2012, we have acquired a number of content businesses in
the UK, US and creative locations across Europe, developing a strong
portfolio of programmes that return and travel. As we have grown
in size and expanded our network relationships and distribution
capability, this has helped to renew and strengthen our creative
talent and build our reputation as a leading European producer
and distributor and a leading unscripted independent production
company in the US.

Our business is performing well and we will consider selective value
creating M&A and talent deals in both scripted and unscripted to
obtain further creative talent and IP. However, at this stage, we will
not be doing any scaled US scripted acquisitions.

We have strict criteria for evaluating potential acquisitions.
Financially, we assess ownership of intellectual property,
earnings growth and valuation based on return on capital
employed and discounted cash flow. Strategically, we ensure
an acquisition target has a strong creative track record and
pipeline in content genres that return and travel, namely drama,
entertainment and factual, as well as retention and succession
planning for key individuals in the business.

We generally structure our deals with earnouts or with put and
call options in place for the remainder of the equity, capping
the maximum consideration payable. By basing a signiﬁcant
part of the consideration on future performance. In this way,
not only can we lock in creative talent and ensure our incentives
are aligned, but we also reduce our risk by only paying for
the actual, not expected, performance delivered over time.
We believe this is the right way to structure our deals as we
should not pay upfront for future performance and should
incentivise and reward delivery by the business over time.

The majority of earnouts or put and call options are dependent
on the seller remaining within the business. Where future payments
are directly related to the seller remaining with the business, these
payments are treated as employment costs and therefore are part
of our statutory results. However, we exclude them from adjusted
proﬁts and adjusted EPS as an exceptional item, as in our view,
for the reasons set out above, these items are part of capital
consideration reflecting how we structure our transactions and
do not form part of the core operations.

The table above sets out the initial consideration payable on
our acquisitions, our expected future payments based on our
current view of performance and the total maximum consideration
payable, which is only payable if exceptional compound earnings
growth is delivered.

We closely monitor the forecast performance of each acquisition
and, where there has been a change in expectations, we adjust
our view of potential future commitments.

Expected future payments of £252 million have decreased by
£40 million since 31 December 2017, due to payments made
relating to our 2014 and 2015 acquisitions. At 31 December 2018,
£176 million of expected future payments had been recorded on
the balance sheet. We have not made any acquisitions in 2018.

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Finance Review
continued

Cash generation
Proﬁt to cash conversion

Twelve months to 31 December
Adjusted EBITA
Working capital movement
Adjustment for production tax credits
Depreciation
Share-based compensation and pension

service costs

Acquisition of property, plant and equipment

and intangible assets

Capex relating to redevelopment of

London headquarters

Adjusted cash flow
Proﬁt to cash ratio

2018
£m
810
(93)
2
28

Free cash flow

2017
£m
842
(58)
(9)
30

Twelve months to 31 December
Adjusted cash flow
Net interest paid
Adjusted cash tax*
Pension funding
Free cash flow

2018
£m
712
(42)
(119)
(82)
469

2017
£m
763
(38)
(118)
(80)
527

Adjusted cash tax of £119 million is total cash tax paid of £92 million plus receipt of
production tax credits of £27 million, which are included within adjusted cash flow
from operations, as these production tax credits relate directly to the production of
programmes.

(82)

(71)

37
712
88%

16
763
91%

Our free cash flow after payments for interest, cash tax and
pension funding remained healthy in the period at £469 million
(2017: £527 million).

Overall, after dividends, acquisitions and acquisition-related costs,
pension and tax payments, we ended the period with net debt of
£927 million, compared with net debt of £1,034 million at 30 June
2018 and £912 million at 31 December 2017.

Net debt tracker

£m

(200)

(400)

(600)

(800)

(1,000)

(912)

(927)

469

(22)

(315)

(5)

(6)

Dec 17
Net debt

Free
Cash
ﬂow

Acquisi-
tion of
invest-
ments
and NCI

Divi-
dends
paid

Purchase
of shares
for EBT

FX on
the
Euro-
bond

(90)

(37)

Excep-
tional
costs

London
Property
Capex

(9)

Other

Dec 18
Net Debt

Funding and liquidity
Debt structure and liquidity
Our balance sheet strength, together with our healthy free cash
flow, will enable us to continue to invest in opportunities to grow
the business in line with our strategic priorities and to make
sustainable returns to our shareholders. We have a number of
facilities in place to preserve our ﬁnancial flexibility. We have
a £630 million Revolving Credit Facility (RCF) in place until 2023.
We also have a bilateral ﬁnancing facility of £300 million, which
is free of ﬁnancial covenants and matures in 2021. This provides
us with sufﬁcient liquidity to meet the requirements of the business
in the short to medium term. The RCF has the usual ﬁnancial
covenants for this type of ﬁnancing. Of the total £930 million
of facilities in place, £50 million was drawn down at 31 December
2018. Our policy is to maintain at least £250 million of available
liquidity at any point.

Note: Except where disclosed, management views the acquisition of operating property,
plant and equipment and intangibles as business as usual capex, necessary to the ongoing
investment in the business.

One of ITV’s key strengths is its healthy cash flows reflecting
our ongoing tight management of working capital balances
and our disciplined approach to cash and costs. This is particularly
important when there is wider political and economic uncertainty.
Remaining focused on cash and costs means we are in a good
position to continue to invest across the business in line with
our strategic priorities and continue to deliver sustainable
returns to our shareholders.

In the year, we generated £712 million (2017: £763 million)
of operational cash from £810 million (2017: £842 million) of
adjusted EBITA, which equates to a strong proﬁt to cash ratio
of 88% after capex (2017: 91%). In the year, we saw an increase
in working capital which was due primarily to an increase in stock
relating to our programme delivery schedule.

To facilitate our working capital management, we have a
£100 million non-recourse receivables purchase agreement
(free of ﬁnancial covenants), which gives us the flexibility to
access additional liquidity when required. At 31 December,
£100 million of receivables were sold under the purchase
agreement (2017: £90 million).

ITV plc Annual Report and Accounts 2018

Finance Review

Net debt

At 31 December
Gross cash
Gross debt
Net debt

2018
£m
(95)
1,022
927

2017
£m
(126)
1,038
912

Financing – gross debt
We are ﬁnanced using debt instruments and facilities with a range
of maturities. Borrowings at 31 December 2018 were repayable
as follows:

Amount repayable as at 31 December 2018
£630 million Revolving Credit Facility
€600 million Eurobond
€500 million Eurobond
Other loans
Total debt repayable on maturity*

* Net of £25 million cross-currency swaps.

£m Maturity
50 Various
536 Sep 2022
449 Dec 2023
12 Various

1,047

At 31 December 2018, £580 million of the £630 million RCF
was undrawn.

Capital allocation and leverage
Our objective is to run an efﬁcient balance sheet and manage
our ﬁnancial metrics appropriately. At 31 December 2018 reported
net debt to adjusted EBITDA was 1.1x (31 December 2017: 1.0x).
Our priority remains to invest to drive organic growth and we have
made acquisitions where we have found the right opportunities.
We will continue to look at opportunities in line with our strategy.
We will balance this investment with attractive returns to
shareholders. Our investment decisions are based upon value
creation and returns analysis. Our returns analysis looks at
the 360 degree value creation and the long-term future value
of our investments in Broadcast & Online, Direct to Consumer
and Studios.

We also look at an adjusted measure of net debt, taking into
consideration all of our other debt-like commitments including
the expected, undiscounted contingent payments on acquisitions,
the net pension deﬁcit and the undiscounted operating lease
commitments, which mainly relate to property. This adjusted
leverage measure better reflects how the credit rating agencies
look at our balance sheet. This is important to monitor as
investment grade metrics are a key criteria when considering
our overall capital allocation. At 31 December 2018, adjusted
net debt was £1,364 million (adjusted net debt of £1,430 million
at 31 December 2017) and adjusted net debt to adjusted EBITDA
was 1.6x (adjusted net debt to adjusted EBITDA was 1.6x at
31 December 2017). A reconciliation of net debt to adjusted
net debt is provided in the Alternative Performance Measures.

During 2019 we will revisit the 1.5x reported net debt to adjusted
EBITDA guidance to ensure it remains appropriate. We will work
with the ratings agencies as part of this process, but wherever
we conclude on this our commitment to investment grade metrics
will underpin the outcome.

Credit ratings
We are rated investment grade by two ratings agencies: BBB-
(stable outlook) by Standard and Poor’s and Baa3 (stable outlook)
by Moody’s Investor Services. The factors that are taken into
account in assessing our credit rating include our degree of
operational gearing, exposure to the economic cycle, as well
as business and geographical diversity. Continuing to execute
our strategy to diversify will strengthen our position against all
these metrics.

Foreign exchange
As ITV continues to grow internationally, we are increasingly
exposed to foreign exchange on our overseas operations.
We do not hedge our exposure to revenues and proﬁts generated
overseas, as this is seen as an inherent risk. We may elect to hedge
our overseas net assets, where material. To date, we have hedged
a signiﬁcant portion of the euro net assets arising from the
Talpa Media acquisition.

ITV is also exposed to foreign exchange risk on transactions we
undertake in a foreign currency. Our policy is to hedge a portion
of any known or forecast transaction where there is an underlying
cash exposure for the full tenor of that exposure, to a maximum
of ﬁve years forward, where the portion hedged depends on the
level of certainty we have on the ﬁnal size of the transaction.

Finally, ITV is exposed to foreign exchange risk on the retranslation
of foreign currency loans and deposits. Our policy is to hedge such
exposures where there is an expectation that any changes in the
value of these items will result in a realised cash movement over
the short to medium term.

The foreign exchange and interest rate hedging strategy is
discussed and approved by the ITV plc Board and implemented
by our internal Tax and Treasury Committee which oversees
governance, recommends policies for approval by the Board and
exercises delegated authority to approve certain other tax and
treasury related policies and procedures within the business.

Foreign exchange sensitivity
The following table highlights ITV’s sensitivity, on a full year basis,
to translation resulting from a 10% appreciation/depreciation in
sterling against the US dollar and euro, assuming all other variables
are held constant. An appreciation in sterling has a negative effect
on revenue and adjusted EBITA; a depreciation has a positive effect.

Currency
US dollar
Euro

Revenue
£m
±40-50
±45-55

Adjusted
EBITA
£m
±7-9
±5-7

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Finance Review
continued

Pensions
The net pension deﬁcit for the deﬁned beneﬁt schemes at
31 December 2018 was £38 million (31 December 2017:
£83 million deﬁcit). The year-on-year reduction in the deﬁcit
reflects an increase in bond yields and our deﬁcit funding
contribution, partly offset by other losses in scheme assets
and the impact of the purchase of a bulk annuity insurance
contract (‘Buy-in’) in respect of two sections of our deﬁned
beneﬁt schemes.

The net pension assets include £49 million of gilts, which are
held by the Group as security for future unfunded pension
payments to four former Granada executives, the liabilities
of which are included in our pension obligations.

A full reconciliation is included within note 3.7 in the notes to
the ﬁnancial statements.

Net pension deﬁcit tracker

£m

200

150

100

(50)

(100)

192

(83)

(20)

(123)

(38)

(94)

Dec 17

Deﬁcit
funding

Increase in
inﬂation
assumption

Increase
in bond
yields

Other
losses in
scheme
assets

Adjustment
due to bulk
annuity
purchase

Other

Dec 18

Actuarial valuation
The 1 January 2017 actuarial valuation was agreed during the
year. On the basis agreed with the Trustees, the combined deﬁcits
of the ITV deﬁned beneﬁt Pension Scheme as at 1 January 2017
amounted to £470 million.

Deﬁcit funding contributions
The Group continues to make deﬁcit funding contributions in
line with the most recent actuarial valuation in order to eliminate
the deﬁcits in each section. The accounting deﬁcit does not drive
the deﬁcit funding contribution.

The Group’s deﬁcit funding contributions in 2018 were £82 million.
Further details are included within note 3.7 to the ﬁnancial
statements. In 2019, we expect deﬁcit funding contributions
of around £75 million.

New accounting standards
IFRS 15 ‘Revenue from Contracts with Customers’, was effective
from 1 January 2018. The new standard requires the Group to
reclassify various costs attributable to revenue in the income
statement as well as the change for certain contracts for the
production of programmes from point-in-time to over-time
recognition. The prior year comparatives have been restated,
resulting in a net £2 million decrease to the 2017 reported revenue.

IFRS 16 ‘Leases’, is effective from 1 January 2019. The detailed
assessment of the impact on the Group’s performance has been
completed. The Group plans on adopting the modiﬁed
retrospective approach with the right of use asset equal to
the lease liability at transition date. The likely impact to operating
costs is expected to be between £3 million to £5 million with
the likely impact to Proﬁt before tax being between £nil and
£1 million. Gross liabilities are expected to increase by £90 million
to £120 million with net assets remaining unchanged. Section 1
of the notes to the ﬁnancial statements provides further detail
on these new accounting standards.

London property
In the ﬁrst half of 2018, we relocated our London headquarters
from The London Television Centre to three central London
locations. The ﬁt-out costs of the three new locations were
capitalised. In October 2018, the Directors reversed their prior
decision, reported in 2017, and agreed not to redevelop the
Group’s headquarters at The London Television Centre and the
site is now for sale. The new London locations give ITV the flexibility
to continue to grow, while supporting our ambition to be an agile
and increasingly digital organisation. During the course of the
relocation project, dual rent, other property costs and move
related costs have been recognised as exceptional and are therefore
excluded from our adjusted measures. Rent and other property
costs for the new ofﬁces and studios are being treated as operating
costs. The costs associated with The London Television Centre until
disposal will be treated as exceptional.

In 2014, ITV established a Pension Funding Partnership with the
Trustees backed by The London Television Centre which resulted
in the assets of Section A of the DB pension scheme being increased
by £50 million. With the planned sale of the asset we have
commenced discussions with the Trustees around providing
a suitable equivalent asset. The proceeds of the sale of the
South Bank site could be used to replace the £50 million asset
security and the remaining sale proceeds used to reduce
ITV’s net debt.

ITV plc Annual Report and Accounts 2018

2019 full year planning assumptions
Proﬁt and Loss impact
• Total schedule costs are expected to be around £1.1 billion
• Total essential investment of around £40 million in 2019,
increasing to £60 million by 2021 as previously announced
ITV’s net investment in BritBox UK will be up to £25 million
in 2019, increasing to around £40 million in 2020 and
expected to decline thereafter

•

• £15 million cost savings in 2019 to fund strategic priorities,

increasing to £35-40 million in 2021 as previously announced
• Adjusted interest is expected to be around £35 million, which

is broadly unchanged from 2018

• The adjusted effective tax rate is 19%, which is unchanged
and expected to be sustainable over the medium term

• The translation impact of foreign exchange, assuming rates
remain at current levels, is not expected to have an impact
on revenue or EBITA

• Exceptional items are expected to be around £65 million,
mainly due to acquisition accounting and cost of change
to deliver cost savings. This excludes the sale of The London
Television Centre.

Cash impact
• Total capex is expected to be around £65 million of regular

capex, down on 2018

• The cash cost of exceptionals will be around £85 million,

largely relating to accrued earnouts and excludes the sale
of The London Television Centre

• Proﬁt to cash is expected to be around 80%, reflecting
our continued strong cash generation, investment in
Studios working capital and BritBox.

• Total pension deﬁcit funding contribution for 2019 is

expected to be around £75 million.

Finance Review

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Risks and Uncertainties

As an integrated producer broadcaster ITV’s business carries a number
of risks which we manage through our risk management framework.
Our continuing success is dependent on how well we understand and
manage our risks.

Risk management framework

Risk
assessment

Risk
identiﬁcation

Effectiveness
review

Risk appetite/
tolerance

Monitoring
and review of
the framework

Risk
management
framework

Sources of
assurance

Embedding risk
management

Monitoring
and reporting

Culture and
behaviours

We continue to focus on embedding the
ownership of risks within relevant
divisions and teams whilst ensuring that
the appropriate oversight and escalation
process is in place, delivered through
a three lines of defence model.

Group operational risks that have an impact
across the business are owned and considered
at a strategic level by the Management Board,
with tactical operational responsibility for
managing and monitoring the risks with
the divisional boards.

The central risk team provides a simple risk
management process aligned to business
activities and supporting the development
of a positive risk management culture. Our
approach to risk management is a cultural,
people driven process that encourages and
focuses on prevention rather than reaction
to failure.

ITV plc Annual Report and Accounts 2018

Risk management framework

Risks and Uncertainties

Board
• Sets strategic objectives.
• Identiﬁes and evaluates principal

risks and uncertainties.

• Sets our strategy on risk and establishes

• Continually monitors the risk management

tolerance levels and risk appetite.

and internal control systems.

• Ensures a robust and appropriate risk
management framework is in place.

Management Board
Has responsibility for:
• The development and operation of the risk management framework and the operation

of our systems of internal control, including:
– Risk identiﬁcation and assessment and establishing controls and procedures to monitor

and mitigate risks.

– Assessment and review of ﬁnancial controls, policies and procedures to ensure risks are

identiﬁed and the processes and procedures are in accordance with and aligned to the strategy.
– Reviewing and monitoring the effectiveness of internal controls and putting in place remedial
plans where controls are weak or there are opportunities for improvement. Serious control
weaknesses (if any) are reported to the Board and action taken as appropriate.

• Routinely reviewing and challenging risks and mitigations, including relevant reports or other

performance indicators.

• Reviewing policies and processes to ensure they remain ﬁt for purpose.
• Identifying and reporting emerging risks.

Divisional Boards
Have responsibility for ensuring appropriate risk management within their business area including:
• Routinely reviewing and challenging risks and mitigations, including relevant reports or other

performance indicators.

• Reviewing policies and processes to ensure they remain ﬁt for purpose.
• Monitoring the local implementation of key group policies and procedures.
• Identifying and reporting emerging risks through the risk management framework.

Audit and Risk Committee
Has responsibility for:
• Overseeing and advising the Board on risk
exposures and future mitigation strategy.

• Reviewing internal controls and

their effectiveness.

• Reviewing the effectiveness of

the risk management framework.

• Conducting in-depth reviews of

high-risk business areas or processes.
• Setting the internal audit plan to ensure

key risks are covered in respect of
providing assurance.

• Reviewing internal audit actions

and management responsiveness
to the ﬁndings.

Details of risk reviews undertaken during
the year are set out in the Audit and Risk
Committee Report on page 80.

Three lines of defence

1 Business divisions
• The business divisions own the

management of their risks
and are responsible for:
– Identifying and reporting local risks.
– Maintaining risk registers and business
continuity plans where appropriate.

– Reviewing and implementing

mitigating actions and controls.

2 Group functions
• Support the business divisions

in managing risks.

• Including Group Finance, Legal,

Human Resources, Group Secretariat,
Technology, Procurement, Health and
Safety, Tax , Treasury and Insurance.

3 Internal audit
• Internal Audit provides objective assurance

as to the effectiveness of the Group’s
systems of internal control and risk
management, reporting to the Management
Board, Divisional Boards and the Audit and
Risk Committee.

• The internal audit plan is driven from ITV’s

risk management framework. Internal Audit
reviews the auditable elements of the
principal and operational risks and this
review informs the areas and topics that
Internal Audit focuses on.

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Risks and Uncertainties
continued

Principal risks
Through our risk management framework the Divisional
and Management Boards have reviewed our principal risks
which have also been reviewed and approved by the Board.
In presenting these risks below we have provided context
of the risk, its link to our strategy along with detail on how we
currently manage the risk and any further plans that we have.
A number of the risks have been redeﬁned since 2017 although
the substance has not changed. One risk has been removed
relating to a potential ﬁnancial crisis in removing this,
consideration has been given to the state of the ﬁnancial
markets along with our current business position. This will
be kept under review given the potential impact of Brexit
on credit availability and therefore our credit status.

Brexit – the Board continues to keep the potential
implications of Brexit for ITV under review. Workstreams
are in place across the business to identify, manage and
mitigate risks across a range of the potential outcomes.
Particular focus has been given to a no deal scenario as
this could have an immediate impact across multiple
business areas and on credit availability. Many of the risks
pose operational challenges which could cumulatively
have an impact on our business. The most signiﬁcant
risk associated with a no deal is the likely impact on the
wider advertising market.

Risk heat map

Low

h
g
H

t
c
a
p
m

w
o
L

Likelihood

High

1
A signiﬁcant or unexpected
change in legislation or
regulation could lead to
reduced income or
operational impact.

2
A ﬁnancial crisis or
macroeconomic change
could impact the value of
pension scheme investments
and increase the deﬁcit.

3
A faster than expected shift
towards non-linear viewing
could lead to a sustained
loss of viewing and/or
a signiﬁcant reduced demand
for television advertising.

4
Advertisers could be impacted
by general or sector economic
uncertainty and/or voluntary
advertiser category
restrictions that could lead
to a signiﬁcant reduced
demand for advertising.

5
A rapidly changing
marketplace for content
rights could result in us failing
to identify or obtain optimal
rights packages.

6
A failure to create, own
and protect the rights to
a sufﬁcient number of hit
programmes/formats
across our portfolio of
content companies.

7
A failure to continue to evolve
our organisational structure
and culture could prevent us
attracting or retaining key
creative, commercial and
management talent to
deliver our strategy.

8
A major health and safety
incident on an ITV production
could result in a loss of human
life or major injury.

9
A failure to meet legal
or publicly expected
standards could result
in severe reputational
and brand impact.

Risks are evaluated taking into
account management activity
that is currently in place but
not planned activity. Many
of our principal risks have
increased since 2017. Our
strategy reflects the changing
nature of our risk landscape
and planned activity to deliver
the strategy will provide
signiﬁcant mitigation against
many of these risks.

10
A major failure in complex
broadcast system chains could
result in us being unable to
continue broadcasting for
a sustained period of time.

11
A sustained cyber incident
could result in system denial
or loss of data.

12
Legacy technology systems
could restrict our ability to
respond to business changes
and maintain system security.

ITV plc Annual Report and Accounts 2018

Risks and Uncertainties

More than TV

Risk direction (after current mitigations)

1 Strengthen

Integrated producer broadcaster

Increased risk

2 Grow

UK and global production

3 Create

Direct to Consumer

Risk stayed the same

Reduced risk

Regulation and legislation

Risk ownership: Management Board

Link to strategy

1 2 3

Description

Context

How we currently and further plan to manage the risk

Direction

1. A signiﬁcant or unexpected
change in legislation
or regulation could lead
to reduced income or
operational impact.

• We could be affected if there is a change
in UK media regulation or legislation; for
example, if there is a change in advertising
restrictions in key categories.

• We regularly communicate with appropriate

groups, our legal panel and Ofcom to monitor
potential policy, legal and regulatory
developments.

• We could be affected if there is a signiﬁcant
change in regulation or legislation in any of
our key territories that impacts the way in
which we are able to operate.

• We put forward alternative actions to regulation
where such regulation may have adverse impact
on ITV.

• We have regular dialogue with government

• The outcome of Brexit could lead to changes

ministers in relevant departments.

in regulation or legislation which would
impact how we interact with our businesses
based in other EU countries.

• We are monitoring closely the Brexit process and
have plans in place to mitigate the risks in the
event of a no deal Brexit.

Economic

Risk ownership: Management Board

Link to strategy

1 2 3

Description

Context

How we currently and further plan to manage the risk

Direction

2. A ﬁnancial crisis or
macroeconomic change
could impact the value
of pension scheme
investments and increase
the deﬁcit.

• Macroeconomic changes could result
in material movements in the Group’s
deﬁned beneﬁt pension scheme.

• A major change in investment values
or in the discount rate affecting the
value of liabilities could have a material
impact on the net pension liability.

• ITV may need to cover an increase in

the deﬁcit in such an event and update
the schedule of contributions .

• We have regular communication with the

pension trustees.

• The pension scheme’s assets are invested
in a diversiﬁed portfolio, with a signiﬁcant
amount of the fund held in bonds.

• We have worked with the pension trustees
to limit the potential deﬁcit by a series of
asset-backed arrangements. This includes
removing some mortality risk from the scheme
with a longevity swap and hedging a portion
of inflation and interest rate variability.

• We have reduced some of our exposure through

the ‘Buy In’ of two sections of the scheme.

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Risks and Uncertainties
continued

Advertising market

Risk ownership: Integrated Broadcast Board

Link to strategy

Description

Context

How we currently and further plan to manage the risk

Direction

3. A faster than expected
shift towards non-linear
viewing could lead to
a sustained loss of
viewing and/or signiﬁcant
reduced demand for
television advertising.

• Content is now available across many

different devices and platforms which
is impacting consumer habits with viewers
shifting from linear television and watching
more content online.

• Our strategy focuses on ITV being the pre-
eminent integrated producer broadcaster
for viewers and brands in the UK.

• We continue to develop both VOD and SVOD
propositions as a key part of our strategy.

• By developing and managing the rights to

content we will be able to maximise the value
of our programme brands across a range of
revenue streams.

• We continue to invest £1 billion annually in

our programming budget to attract viewers,
continuing to deliver share of viewing that
attracts advertisers.

• Owning and producing content enables us
to deliver unique advertising propositions
and create innovative solutions.

Risk ownership: Integrated Broadcast Board

Link to strategy

4. Advertisers could be
impacted by general or
sector economic uncertainty
and/or voluntary advertiser
category restrictions
that could lead to
a signiﬁcant reduced
demand for advertising.

Content rights

• The current overall economic environment
is uncertain which may impact demand
for advertising.

• The current position with Brexit is uncertain

and could have an impact on the overall
economic environment and impact demand
for advertising.

• There is signiﬁcant economic uncertainty
within some of our key advertiser sectors
which could have a disproportionate effect
on advertising.

• Key sectors have opted to voluntarily

restrict advertising.

• Our strategy focuses on creating value for

advertisers through delivering unique scale
and breadth of demographics as well as more
targeted opportunities and new innovative
ways of engaging with consumers around
quality brands.

• We are developing our data strategy to support

value creation for advertisers.

• We work closely with advertisers to articulate

the beneﬁts of advertising on our media.

• We regularly communicate with appropriate

groups, our legal panel and Ofcom to monitor
and influence potential policy, legal and
regulatory developments.

Risk ownership: Integrated Broadcast Board

Link to strategy

1 2

Description

Context

How we currently and further plan to manage the risk

Direction

5. A rapidly changing
marketplace for content
rights could result in us
failing to identify or obtain
optimal rights packages.

• The landscape for rights is increasingly

complex due to the multiple ways in which
content is broadcast.

• We are developing the rights packages and
content management processes to meet
strategic requirements.

• Our own rights requirements are

• By investing in creating and owning quality

diversifying and changing to support
the delivery of the strategy.

content we can ensure we have optimal rights
packages and efﬁciently manage exploitation.

• The increasing risk of global piracy of content

could lead us to lose programme rights.

• Our rights packages and content management
processes are focused on both protecting and
exploiting existing rights and ensuring that
future rights generated accrue to us.

ITV plc Annual Report and Accounts 2018

Risks and Uncertainties

Generating hit programmes and formats

Risk ownership: Studios Board

Link to strategy

Description

Context

How we currently and further plan to manage the risk

Direction

6. A failure to create, own
and protect the rights to
a sufﬁcient number of hit
programmes/formats
across our portfolio of
content companies.

For management of rights
see risk 5.

• ITV Studios has 50+ labels producing over

8,900 hours of original content.

• The competition for creative talent is

increasing due to the demand for content
across all platforms.

• ITV Studios creates for over 200 channels or
platforms globally that have varying rights
ownership requirements.

People and culture

Risk ownership: Management Board

• We maximise opportunities for ITV Studios
to create successful shows by investing in
the creative pipeline and focusing on
programmes and genres that can return
and travel internationally.

• Our management approach is creatively led

and commercially driven to promote an
environment where creative ideas can
be nurtured and developed.

• We are focused on hiring and retaining key

creative talent.

• We manage a proportion of the associated ﬁnancial
risk for high-end drama through deﬁcit ﬁnancing.

• ITV Studios has built signiﬁcant scale in key

creative markets around the world creating
and producing programmes and formats that
return and travel.

Link to strategy

1 2 3

Description

Context

How we currently and further plan to manage the risk

Direction

7. A failure to continue to
evolve our organisational
structure and culture could
prevent us attracting or
retaining key creative,
commercial and management
talent to deliver our strategy.

Risk ownership: Management Board

8. A major health and safety
incident on an ITV or ITV
Studios production could
result in a loss of human life
or major injury.

For more information on
health and safety
managements see page 115.

• Employing and retaining the best creative,
commercial and management talent is key
to our success.

• We are strengthening speciﬁc teams to deliver

our strategy through key talent, building
expertise and market knowledge.

• The market for talent is competitive
especially for those with experience
in key strategic areas.

• We need to ensure engagement across the
business with our More than TV strategy.

• We need to ensure a culture of creative

autonomy within ITV Studios.

• We foster both a commercial and

entrepreneurial culture that is creatively
led and commercially driven to attract
and retain key creative talent.

• We have a developed network of employee
Ambassadors to ensure communication
across the business.

• We have succession plans in place which include

nominated deputies.

• Employee engagement is critical and we will

undertake a survey in 2019.

Link to strategy

1 2 3

• As ITV Studios expands there is an increase

• We have a central health and safety risk

in the number of production hours and
increased potential to produce certain
types of programming that have higher
inherent risks.

• ITV is closely associated with all content
we broadcast including that produced by
independent production companies.

management team to support the business,
developing and implementing our health
and safety management system.

• The central health and safety risk management
team work with ITV Broadcast to ensure there is
a process for vetting content suppliers to ensure
they have appropriate health and safety
management in place.

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Risks and Uncertainties
continued

Brand

Risk ownership: Management Board

Link to strategy

1 2 3

Description

Context

How we currently and further plan to manage the risk

Direction

9. A failure to meet legal
or publicly expected
standards could result
in severe reputational
and brand impact.

• We operate in a public environment and are
exposed to a high degree of media interest.

• Our in house programme compliance

department advises all producers and
reviews all pre-recorded editorial content
before broadcast.

• We proactively manage our broadcast chain
partners and suppliers to minimise the risk
of incidents and regulatory breaches.

• Our risk management framework supports a

culture of encouraging everyone to raise concerns.

• We have a crisis management policy and process

in place and are continuing to increase the
emphasis on its development and application.

Broadcast infrastructure

Risk ownership: Management Board

Link to strategy

Description

Context

How we currently and further plan to manage the risk

Direction

10. A major failure in
complex broadcast system
chains could result in us
being unable to continue
broadcasting for a sustained
period of time.

• Our broadcast technology chain is complex
because it operates in multiple regions and
links to many platforms.

• We continually review and monitor the
broadcast operations risks through our
management and reporting processes.

• As we broadcast content across an increasing
number of platforms the infrastructure to
deliver and broadcast this content becomes
increasingly complex.

• We have detailed business continuity and
recovery plans in place to deliver a rapid
and flexible response to an incident.

• We conduct major incident scenario testing at
least annually and ahead of major live events.

• We proactively manage our broadcast chain
partners and suppliers to ensure the risk of
incidents is minimised.

ITV plc Annual Report and Accounts 2018

Risks and Uncertainties

Cyber security and data protection

Risk ownership: Management Board

Link to strategy

1 2 3

Description

Context

How we currently and further plan to manage the risk

Direction

11. A sustained cyber incident
could result in system denial
or loss of data.

• We consider cyber security an increasing risk

• We work with specialist security organisations

as our business develops new revenue
streams and direct to consumer propositions.

to implement 24/7 monitoring of our
network trafﬁc.

• With increasingly sophisticated technology
and proliferation of cyber hacking tools,
along with increased amounts of company
data, the risk of a cyber attack has increased
across the world.

• We are a higher risk organisation as a result
of being a media company and operating in
a public environment.

• There is a growing volume of software and
hardware vulnerabilities being identiﬁed by
technology providers in their own products.

• We conduct regular cyber simulation exercises
(including with the Management Board) and
phishing exercises. Key learnings are reflected
in our response plans.

• We have enhanced our risk assessment process
for third party security as our cyber risk extends
to our supply chain.

• We have disaster recovery and incident

management plans in place for high risk
areas of the business.

Technology resilience

Risk ownership: Management Board

Link to strategy

1 2 3

Description

Context

How we currently and further plan to manage the risk

Direction

12. Legacy technology
systems could restrict
our ability to respond to
business changes and
maintain system security.

• Our system requirements change as

we continue to rebalance the business,
grow new revenue streams and become
increasingly international.

• The pace of technological change outstrips
our capacity to respond and migrate off
legacy systems.

• Maintaining the security and performance

of legacy systems requires ongoing resources
and investment.

• Our system requirements are kept under review
with business growth and system modernisation
projects implemented as appropriate.

• We have a modernisation plan in place for legacy
systems, which remains under constant review
and development to ensure technology systems
meet the needs of the business.

GovernanceFinancial StatementsAdditional informationStrategic ReportStrategic Report

Risks and Uncertainties
continued

Viability Statement

What is the process ITV follows?
At the annual strategy meeting the Board assesses ITV’s prospects and risks. Amongst other topics,
the Board reviews the ﬁve year ﬁnancial plan, which is based on our strategic priorities. In 2018,
we undertook a strategy refresh to highlight the opportunities for ITV and also the challenges
we need to address. Pages 24 to 27 of the Annual Report provide detail of ITV’s prospects in the
Strategy and Business Model sections.

What is the assessment period for viability?
In its assessment of viability, the Board reviewed the planning horizon and is of the view that
a three year period to 31 December 2021 continues to be most appropriate. The factors the
Board considered in adopting this timeframe were as follows:

• Visibility over ITV’s broadcast advertising business is relatively short term, as advertising remains
cyclical and closely linked to the UK economic growth impacted by Brexit and the uncertain UK
macroeconomic climate

• The commissioning process and life cycle of programming gives the Studios division more

medium term outlook. However, while non-returning brands are replaced with new commissions,
over time there is less visibility as programmes can experience changes in viewer demand or come
to a natural expiration

• Technology in the media industry continues to change the demand for content and also how

it is consumed

• Pension funding, which is one of ITV’s key funding obligations, is also agreed triennially with

•

the Trustees of the pension scheme
ITV’s business model does not necessitate investment in large capital projects that would
require a longer-term horizon assessment or returns

Assessment of viability
When considering the longer term viability of ITV, the Board robustly reviewed each of ITV’s
Principal risks and, taking into account current operational and ﬁnancial performance, has in
particular analysed the impact of following hypothetical scenarios:

Scenario modelled

Link to Principal risks (pages 57 to 61)

Scenario 1:
The Broadcast division experiencing a signiﬁcant
downturn, based on the 2008/09 ﬁnancial crisis,
with advertising revenues declining sharply for
two years followed by a year of flat revenue.

Advertising Market: 4) Advertisers could
be impacted by general or sector economic
uncertainty and/or voluntary advertiser
category restrictions that could lead to
a signiﬁcant reduced demand for advertising.

Scenario 2:
A number of key programme brands within the
Studios division are not recommissioned. The
scheduling decisions of commissioners are made
in advance, so we have clear sight on 2019, however
key shows could come to an end at the same time
in 2020 impacting a quarter of the division’s proﬁts.

Scenario 3:
A signiﬁcant change in ITV’s pension funding
obligations, following the triennial valuation in
2020 resulting in doubling of the current deﬁcit
funding payments.

Regulation & Legislation: 1) A signiﬁcant
or unexpected change in legislation or
regulation could lead to reduced income
or operational impact.

Generating hit programmes and formats:
6) A failure to create, own and protect the rights
to a sufﬁcient number of hit programmes/formats
across our portfolio of content companies.

Economic: 2) A ﬁnancial crisis or macroeconomic
change could impact the value of pension
scheme investments and increase the deﬁcit.

Regulation & Legislation: 1) A signiﬁcant
or unexpected change in legislation or
regulation could lead to reduced income
or operational impact.

ITV plc Annual Report and Accounts 2018

Risks and Uncertainties

The sale of the London Television Centre has been included in the models. It is expected that a sale
takes place in 2019 and the Board will continue to monitor the impact of the project as it progresses.

The viability review involved flexing the underlying strategic forecast for the above impacts, both
individually and concurrently, and no speciﬁc mitigations were assumed. The underlying strategic
forecast assumed: business as usual capital spending; the ongoing availability of the ﬁnancing
facilities (as ITV remains within the covenants and there are no major bond repayments due in this
period); and the Group maintains the stated dividend policy. The current bank facilities are secured
until June 2021 and December 2023. Our model assumed both facilities will be available for the full
period under review.

The scenarios used are hypothetical and severe but plausible and are considered appropriate
to model risks that could impact the viability of the Group. In addition, there are options at
the disposal of the Board to maintain liquidity and continue operations in the event of any
of the scenarios arising, such as reducing M&A activity and non-essential capital expenditure
as well as reviewing the Group’s dividend policy.

Viability statement
Based on the results of this review, the Board has a reasonable expectation that ITV will be able
to continue in operation and meet its liabilities as they fall due over the three year period ending
31 December 2021. The assessment has been made with reference to ITV’s strategy and the
current position and prospects.

The Strategic Report was approved by the Board and signed on its behalf by:

Carolyn McCall
Chief Executive
27 February 2019

GovernanceFinancial StatementsAdditional informationStrategic ReportGovernance

Chairman’s Governance Statement

Sir Peter Bazalgette
Chairman

In the Governance section
This section of the Annual Report
contains a statement from our
Chairman and information about
the Directors and Management
Board. It explains our governance
structure, approach to corporate
governance and the work of the
Nomination Committee. It includes
reports from the Audit and Risk,
and Remuneration Committees,
and the Directors’ Report.

During 2019 we will
be focusing on how the
Board engages with and
assesses stakeholder
engagement and the
culture at all levels
across the Group.

Dear Shareholder

I am pleased to present our Corporate
Governance Report for 2018. The report
provides you with an insight into how
the Board operates and evaluates its
effectiveness. In addition, it summarises
our activities during the year and provides
information on how we comply with the
principles of the 2016 UK Corporate
Governance Code (the Code).

Board effectiveness
Following the publication of the 2018 UK
Corporate Governance Code (the 2018 Code)
we have reviewed compliance and will
ensure that appropriate reﬁnements to
our processes are made. The Board is fully
engaged with these matters and committed
to ensuring we remain an effective and
entrepreneurial group and continue to meet
our obligations under Section 172 of the
Companies Act 2006 to ensure we promote
the success of the Company for the beneﬁt
of shareholders but also with regard to the
interests of all our stakeholders.

We believe that a comprehensive induction
programme is important for all of our
new Board members as well as a process
for evaluation for the Board to assess its
effectiveness. Full details of our evaluation
and induction processes in the year and
a summary of the evaluation outcomes
and actions are set out on page 76.

Board succession
This year has seen a change in Board
membership, which builds on our already
diverse Board and brings additional
experience, ensuring there is an appropriate
balance of skills and knowledge as the
business evolves. The current Board
consists of a strong team with a wide
range of experience across various
industries and territories.

Following the departure of Adam Crozier,
Carolyn McCall joined us as Chief Executive
in January 2018. Following the decision by
Ian Grifﬁths to step down from the Board
at the end of 2018, Chris Kennedy joined
us as Group CFO in February this year.

ITV plc Annual Report and Accounts 2018

Our stakeholders,
particularly our
employees, are very
important to us and
we remain committed
to maintaining
regular open dialogue
and effective
communication
with them.

Chairman’s Governance Statement

John Ormerod and Andy Haste stepped
down from the Board in May 2018 at which
point Margaret Ewing became Chair of the
Audit and Risk Committee having served
as a member of the Committee from
October 2017. During the year we undertook
a process to replace John and Andy and
were pleased that Duncan Painter and
Edward Bonham Carter agreed to join
as Non-executive Directors in May and
October 2018 respectively. Edward is
also our Senior Independent Director.

• Provision B.7.1 – Independence –John
Ormerod had served on the Board for
more than nine years before he stepped
down in May 2018.

•

Provision A.2.1 – Separation of Chairman
and CEO – Following Adam Crozier’s
departure, I was Executive Chairman for
a six-month period until Carolyn McCall
joined the business in January 2018.

Further information on corporate
governance can be found on our website.

Directors’ other commitments are kept under
review to ensure that they have sufﬁcient
time to dedicate to our business. Details of
appointment dates and length of tenure for
each director can be found on page 71 and
details of other commitments can be found
on pages 66 and 67.

Stakeholder engagement
Our stakeholders, particularly our colleagues,
are very important to us and we remain
committed to maintaining regular open
dialogue and effective communication
with them. Continued engagement is highly
beneﬁcial to all parties as it helps to build
a greater understanding of their views,
opinions and concerns and enables ITV to
respond accordingly. We have a group of
Ambassadors in place across the business
to assist with colleague engagement and
our Senior Independent Director, Edward
Bonham Carter, will act as a conduit for
the Board by regularly attending meetings
and engaging with this group. Further
information on how we engage with all of
our stakeholders can be found on page 78.

During 2019, we will be focusing on how
the Board engages with and assesses
stakeholder engagement and responds
to stakeholder feedback and assesses
the culture at all levels across the Group.

Compliance with the Code
ITV is required to report on how it has
complied with the principles of governance
set out in the Code. The Board considers
that during 2018 the Company has
complied with the provisions of the
Code but notes the following:

www.itvplc.com/investors/governance

A copy of the Code and the 2018 Code are
available on the FRC website.

www.frc.org.uk/Our-Work/Codes-
Standards/Corporate-governance

Looking ahead
Throughout 2018, we have been developing
our strategy which we presented to the
market in July with further information at
our Capital Markets Day in September 2018.
2018 was a challenging year economically
and politically and this is expected to
continue into 2019 but we are in a strong
position, supported by an effective Board,
to face the challenges ahead particularly in
a competitive and rapidly changing industry.

I look forward to working with the Board
and the senior executive team in 2019
as we continue to develop and implement
our More than TV strategy. More
information on our Board programme
for 2019 is set out on page 73.

Sir Peter Bazalgette
Chairman
27 February 2019

Strategic ReportFinancial StatementsAdditional informationGovernanceGovernance

Board of Directors

Carolyn McCall
Chief Executive

Sir Peter Bazalgette
Chairman

N R
Appointed: June 2013
Key areas of prior experience: Media
consultant, digital media investor and
former television producer.
Current external appointments: Chairman,
Lovecraft Collective Ltd and Non-executive
Director of UK Research and Innovation;
Member of Advisory Board for YouGov plc
and Bartle Bogle Hegarty.
Previous experience: President, the Royal
Television Society; Chairman, the Arts Council
of England, ENo and Endemol UK Ltd; Non-
executive Director of Nutopia, Rightster, DCMS,
Critical Information Group plc and Channel Four
Television Corp; Senior Non-executive Director
and Chairman of the Remuneration Committee
and member of the Audit and Risk Committee of
YouGov plc; Non-executive Director and Chairman
of Mirriad Ltd; Trustee of DebateMate; Deputy
Chairman and Director of the National Film
and Television School; Adviser to Sony Music’s
television division; Chairman of the UK production
business of Sony Pictures Television Inc.; Chief
Creative Ofﬁcer at Endemol Group BV and
Endemol Entertainment UK Limited; Non-
executive Director and adviser, Base 79 Ltd.

G
Appointed: January 2018
Key areas of prior experience: Strategy
and change management, media, retail and
airline industries.
Current external appointments: Non-executive
Director and member of the Audit and
Nominations committees, Burberry Group plc;
Non-executive director, Department of Business,
Energy and Industrial Strategy; Trustee of the
Development Board of the Royal Academy of Arts.
Previous experience: Chief Executive easyJet plc,
Guardian Media Group plc and Guardian News
and Media; Non-executive Director of Lloyds TSB
Limited, Tesco plc, New Look plc; Director of
French Chamber of Commerce; Chair,
Opportunity Now.

Committee membership
G General Purpose

A Audit and Risk

N Nomination

R Remuneration

Full biographies can be found on our website:
www.itvplc.com/about/board-of-directors

Terms of engagement for the Non-executive
Directors and job descriptions for the Chairman,
Chief Executive and Senior Independent Director
are available on our website:
www.itvplc.com/investors/governance

Chris Kennedy
Group CFO

Appointed: February 2019
Key areas of prior experience: Corporate ﬁnance
and ﬁnancial restructuring, media.
Current external appointments: Non-executive
Director, Whitbread plc; Director of Great Ormond
Street Hospital for Children NHS Foundation Trust.
Previous experience: Chief Financial Ofﬁcer,
Micro Focus International plc, Arm Holdings
and easyJet plc. Various senior management roles
at EMI Music including UK Chief Financial Ofﬁcer,
Chief Operating Ofﬁcer International, Group
CFO and Chief Investment Ofﬁcer.

Margaret Ewing
Non-executive Director, Chair of the Audit and
Risk Committee
N A
Appointed: October 2017
Key areas of prior experience: Financial
accounting, corporate ﬁnance, strategic
and capital planning.
Current external appointments: Non-executive
Director and member of the Audit and Risk
Committee and Corporate Responsibility
Committee of ConvaTec Group plc; Trustee
of the Board, Great Ormond Street Hospital
Children’s Charity.
Previous experience: External member of the
Audit and Risk Committees, The Lawn Tennis
Association and John Lewis Partnership;
Non-executive Director and member of Audit
Committees of Standard Chartered plc,
Whitbread plc and CBI; Managing Partner and
Vice Chairman, Deloitte LLP; Chief Financial Ofﬁcer,
BAA plc and Trinity Mirror plc; Head of Corporate
Finance Transaction Services and Senior Manager
and Partner in corporate ﬁnance, Deloitte LLP.

Carolyn McCall

Sir Peter Bazalgette

Chris Kennedy

Margaret Ewing

Edward Bonham Carter

ITV plc Annual Report and Accounts 2018

Board of Directors

Edward Bonham Carter
Senior Independent Director
N A
Appointed: October 2018
Key areas of prior experience: Fund management,
stock markets and investor relations.
Current external appointments: Vice Chairman,
Jupiter Fund Management plc; Senior Independent
Director, Land Securities Group plc; Board member,
The Investor Forum; Trustee, The Orchestra of Age
Enlightenment Trust and The Esmee Fairbairn
Foundation; Member of the Strategic Advisory
Board, Livingbridge; Non-executive Director,
Netwealth Investments Ltd.
Previous experience: Group Chief Executive,
Jupiter Fund Management plc; Chief Investment
Ofﬁcer, Jupiter Fund Management plc; Fund
Manager, Jupiter Fund Management and Electra
Investment Trust; Investment Analyst, Schroders.

Salman Amin
Non-executive Director

N R
Appointed: January 2017
Key areas of prior experience: General
management, marketing, advertising and
media planning.
Current external appointments: Chief
Executive Ofﬁcer, Pladis Global.
Previous experience: Strategic Advisor,
4C Insights; Chief Operating Ofﬁcer, Global
Commercial Division and Chief Operating
Ofﬁcer, North America SC Johnson and Son Inc;
various positions at Pepsico including: Chief
Marketing Ofﬁcer, Purchase; President,
PepsiCo UK and Ireland; Senior VP Marketing,
Purchase and Snacks and GM, Quaker; VP
Marketing, International Snacks; VP Marketing,
International Beverages; other marketing and
various positions within brand management,
personal care, paper products and food in
the US, Saudi Arabia, Germany and Switzerland
at Procter & Gamble.

Duncan Painter
Non-executive Director

N R
Appointed: May 2018
Key areas of prior experience: Digital media,
consumer intelligence.
Current external appointments: Chief
Executive Ofﬁcer, Ascential plc; Non-executive
Director, Investis Limited.
Previous experience: Executive at BskyB plc,
Global Product Leader, Experian plc; Founder
and Chief Executive Ofﬁcer, Clarityblue,
European Systems Integration Director,
Hitachi Data Systems.

Mary Harris
Non-executive Director, Chair of the
Remuneration Committee
N A R
Appointed: July 2014
Key areas of prior experience: Business
management consulting, sales and marketing,
mergers and acquisitions, media, television
and interactive media investments and digital
rights management.
Current external appointments: Non-executive
Director and Chairman of the Remuneration
Committee, Reckitt Benckiser Group PLC; Member
of the supervisory board of Unibail Rodamco SE;
Member of Remuneration Committee, St Hilda’s
College, Oxford University.
Previous experience: Non-executive Director
and Chair of the Remuneration Committee of
J. Sainsbury plc; Member of the supervisory
board, TNT Express NV, TNT NV, Scotch and
Soda NV and Irdeto BV; Partner, McKinsey
& Company, Amsterdam; various positions
worldwide with McKinsey & Company, Maxwell
Entertainment Group, Pepsi Cola Beverages
and Goldman Sachs & Co.

Anna Manz
Non-executive Director
N A R
Appointed: February 2016
Key areas of prior experience: Strategy
and ﬁnance and ﬁnancial planning.
Current external appointments: Group
Finance Director, Johnson Matthey plc.
Previous experience: Various appointments
at Diageo plc including: Group Strategy Director,
Regional Finance Director Asia Paciﬁc, Group
Treasurer, Finance Director Global Marketing,
Sales and Innovation; other ﬁnance roles at
Quest International, Unilever and ICI.

Roger Faxon
Non-executive Director

N R
Appointed: October 2012
Key areas of prior experience: Broad commercial,
digital and media rights experience, development
of business strategy and ﬁnance.
Current external appointments: Chairman,
Mirriad Advertising Ltd; Director, The John
Hopkins University.
Previous experience: Non-executive Director,
Pandora Media Inc; Director, EMI Group Global
Limited and EMI Group plc; Chief Executive Ofﬁcer
of EMI Group Limited; Chairman and CEO of EMI
Music Publishing; Director, the Songwriters Hall
of Fame; other appointments at the American
Society of Composers and Authors and Lancit
Media Entertainment Ltd in the US; Chairman
of VIVA Television in Germany and Channel V
Networks in Asia.

Salman Amin

Duncan Painter

Mary Harris

Anna Manz

Roger Faxon

Strategic ReportFinancial StatementsAdditional informationGovernanceGovernance

Management Board

Julian Bellamy
Managing Director, ITV Studios
Appointed: February 2016
Experience: Julian joined ITV in 2014 as
Managing Director of ITV Studios in the UK
and was promoted to Managing Director of
ITV Studios in February 2016. Julian’s previous
roles included Creative Director and Head
of Commissioning at Discovery Networks
International, Head of Programming at
Channel 4 and prior to that he ran BBC3
and E4. He also spent time as Channel 4’s
Head of Factual Entertainment and was
a commissioning editor of Channel 4 News
and Current Affairs.

David Osborn
Group HR Director
Appointed: October 2014
Experience: David joined ITV as the HR Director
for ITV Studios in 2011 and was promoted
to Group HR Director and appointed to
the Management Board in 2014. David has
gained previous experience in both the UK
and internationally whilst working in a variety
of businesses including EMI Music, Vodafone,
Visa Europe and Marks and Spencer.

Carolyn McCall
Chief Executive
Appointed: January 2018
Experience: Biography on page 66.

Chris Kennedy
Group CFO
Appointed: February 2019
Experience: Biography on page 66.

Kelly Williams
Managing Director, Commercial
Appointed: December 2014
Experience: Kelly joined ITV in 2011 as Group
Commercial Director and joined the Management
Board in December 2014. He is also Chairman of
Thinkbox, sits on the BARB Strategy board and
is Vice Chairman of the Advertising Association.
Before joining ITV, Kelly was the Sales Director
at Channel 5 and prior to that held various
positions at UKTV, Sky and Thames Television.

Kevin Lygo
Director of Television
Appointed: August 2010
Experience: Kevin joined ITV as Managing
Director of ITV Studios in 2010 and became
Director of Television in February 2016. Kevin’s
previous roles included Director of Television
and Content at Channel 4, Director of
Programmes at Channel 5 and a number
of positions at the BBC, including Head of
Independent Commissioning for Entertainment.

Rufus Radcliffe
Group Marketing and Research Director
Appointed: April 2017
Experience: Rufus joined ITV in 2011 and was
promoted to the Management Board in 2017.
He also sits on the Freeview Board and is
a Fellow of the Marketing Society. Before
joining ITV, Rufus spent ten years at Channel 4,
and prior to that held various positions at
McCann Erickson and JWT.

Julian Bellamy

David Osborn

Carolyn McCall

Kevin Lygo

Rufus Radcliffe

Chris Kennedy

ITV plc Annual Report and Accounts 2018

Management Board

Julian Ashworth
Director of Strategy and Direct to Consumer
Appointed: February 2018
Experience: Julian joined ITV in 2018 to lead
the strategy review and development of the
Direct to Consumer business. Before joining ITV,
Julian was Global Director of Policy Strategy at
BT and prior to that held various strategy and
business development and commercial roles
at RELX plc, Centrica plc and Bain & Company.
He has also served as a member of the UK
Government’s Digital Economy Council, a board
member of TECHUK, the British Screen Advisory
Council, the Royal Taskforce against cyberbullying
and as a member of the UK Council for Child
Internet Safety.

Mark Smith
Group Chief Technology Ofﬁcer
Appointed: September 2018
Experience: Mark joined ITV in 2011 as a member
of the technology management team and was
promoted to Chief Technology Ofﬁcer in 2015,
before taking on the Group Chief Technology
Ofﬁcer role in 2018. Prior to joining ITV Mark
held senior technology positions at the BBC,
BBC Worldwide and Sky. Over the past 15 years
Mark has specialised in digital transformation
and has led the design, build and delivery of
industry leading VOD platforms. Mark started
his career as a software engineer at BT.

Kyla Mullins
General Counsel and Company Secretary
Appointed: January 2019
Experience: Kyla joined ITV in January 2019 as
General Counsel and Company Secretary. Before
joining ITV, Kyla held senior legal positions in the
media, entertainment and strategic outsourcing
sectors. Kyla was General Counsel and Company
Secretary at easyJet plc and Mitie Group plc;
Global General Counsel of EMI Music; and Group
Legal Director at ITV plc and Granada Media.

Paul Moore
Group Communications and Corporate
Affairs Director
Appointed: June 2018
Experience: Paul joined ITV in 2018 as Group
Communications and Corporate Affairs Director.
Before joining ITV, Paul was the Communications
and Public Affairs Director at easyJet plc from
2010 and prior to this worked for FirstGroup
and also Virgin Atlantic Airways for ten years
as Director of Corporate Affairs. Paul ﬁrst started
his career as a civil servant and worked for the
Department of Transport.

Kelly Williams

Julian Ashworth

Mark Smith

Kyla Mullins

Paul Moore

Strategic ReportFinancial StatementsAdditional informationGovernanceGovernance

Corporate Governance

Our Governance structure

Board

Audit and Risk Committee
See the Audit and Risk Committee Report
on page 80.

Remuneration Committee
See the Remuneration Report on page 92.

General Purpose Committee
Executive Directors
Meets as required to conduct business within
clearly deﬁned limits set by the Board.

Disclosure Committee
Group CFO and other senior managers
Meets to ensure compliance with the
continuing obligations under the Market
Abuse Regulation (MAR) and Disclosure
Guidance and Transparency Rules (DTRs).

Tax and Treasury Committee
Group CFO and other senior managers
Meets to consider and approve tax and
treasury related matters in respect of
corporate transactions or other activities.
Monitors compliance with tax and treasury
related policies and procedures.

Nomination Committee
Chairman and Non-executive Directors
Meets to review the structure, size, and
composition of the Board, including skills,
knowledge and experience. Identiﬁes and
nominates for Board approval candidates
to ﬁll Board vacancies, and considers
succession planning for Directors and other
Senior Executives. Considers and reviews
any conflicts of interest that may be
reported by the Directors.

Matters reserved for the Board and Committee
terms of reference are available on our website:

www.itvplc.com/investors/governance

Management Board
Meets to consider, approve and implement strategy, operational plans, policies, procedures and budgets; monitors operating and ﬁnancial
performance; assesses and manages risk; prioritises and allocates resources; monitors competitive forces and HR issues.

Studios Board
Meets to consider and
approve operational matters.
Assesses and manages risk
as well as aspects mentioned
above for the Management
Board but in relation to the
Studios business.

Integrated Broadcast
Board
Meets to consider and
approve operational matters.
Assesses and manages risk
as well as aspects mentioned
above for the Management
Board but in relation to the
Integrated Broadcast business.

Business Resilience
Response Team
The tactical response team
in the event of an incident,
supporting the Management
Board in dealing with
a crisis. Develops business
area response plans,
testing programmes and
incident reporting.

Corporate
Responsibility Board
Manages the direction
and delivery of ITV’s
Corporate Responsibility
Strategy including in relation
to diversity and inclusion,
environment, communities
and social causes (see
page 16).

Programme Compliance
Advisory Group
Manages and considers
issues and risks in relation
to programme compliance
and regulation.

Direct to Consumer
Operational Committee
Assists in assuring the
successful expansion of ITV’s
Direct to Consumer business.

ITV plc Annual Report and Accounts 2018

Corporate Governance

Board experience

Sector experience

International experience

Media

Retail

Investment

Finance

Digital

26%

33%

10%

19%

12%

United Kingdom

United States

Netherlands

Saudi Arabia

Germany

Ireland

Switzerland

Southeast Asia

China

Board tenure
(as at date of publication)

Board gender diversity
(as at date of publication)

0–2 years

2–5 years

5–9 years

40%

60%

Board and Committee membership and attendance
Board and Committee membership and attendance at scheduled meetings in 2018 is set out below.

Status

Notes

Date of appointment
to the Board

Date elected by
shareholders

Board

Nomination
Committee

Remuneration
Committee

Audit and Risk
Committee

Attendance at meetings

Current
Peter Bazalgette
Salman Amin
Edward Bonham Carter
Margaret Ewing
Roger Faxon
Mary Harris
Anna Manz
Carolyn McCall
Duncan Painter

Chairman
Independent
Independent SID
Independent
Independent
Independent
Independent
Executive
Independent

1
2

3
4

1 June 2013
9 January 2017
11 October 2018
31 October 2017
31 October 2012
28 July 2014
1 February 2016
8 January 2018
1 May 2018

14 May 2014
10 May 2017
–
10 May 2018
15 May 2013
14 May 2015
12 May 2016
10 May 2018
–

10/10
10/10
2/2
10/10
10/10
10/10
10/10
10/10
6/6

1/1
1/1
1/1
1/1
1/1
1/1
1/1
–
1/1

7/7
4/4
–
–
6/7
7/7
7/7
–
–

–
–
–
5/5
–
5/5
5/5
–
–

1. Peter Bazalgette acted as Executive Chairman from 1 July 2017 until 8 January 2018.
2. Salman Amin was appointed to the Remuneration Committee on 1 June 2018.
3. Roger Faxon was unable to attend the Remuneration Committee in July due to a prior commitment.
4. Mary Harris was appointed Interim Senior Independent Director on 10 May 2018 until Edward Bonham Carter’s appointment on 11 October 2018.

Past
Ian Grifﬁths
Andy Haste
John Ormerod

Status

Executive
Independent
Independent

Date of appointment
to the Board

Date left
the Board

Board

Nomination
Committee

Remuneration
Committee

Audit and Risk
Committee

Attendance at meetings

9 September 2008 31 December2018 10/10
4/4
4/4

11 August 2008
18 January 2008

10 May 2018
10 May 2018

–
–
–

–
–
3/3

–
2/2
2/2

Board and Committee meetings
The number of meetings held during the
year and attendance of Directors is set
out in the table above. The Board agrees
an annual schedule of matters it wishes
to consider at each of its meetings and
those of its Committees. The schedule
ensures that all relevant matters are
considered and receive appropriate
attention. Meetings are normally held
at one of the London sites or one of
the regional or international ofﬁces.

Board meetings are structured around the
following areas:

• Operational and functional updates
• Financial updates
• Strategy and strategy implementation
• Progress against strategy
• Business plan and performance

against plan

• Risk management framework, key risk

areas and risk appetite

• Other reporting and items for approval

Senior executives are regularly invited
to attend meetings for speciﬁc items. In
addition to formal Board and Committee
meetings, meetings take place between:

• Board members and Management

Board members

• Chairman and Non-executive Directors
Individual Non-executive Directors and
•
members of senior management
• Senior Independent Director and

Non-executive Directors (without
the Chairman present)

Strategic ReportFinancial StatementsAdditional informationGovernanceGovernance

Corporate Governance
continued

Key matters considered in 2018

2018 activity

Link to principal risks

Strategy refresh

Strategy day – considered and set refreshed strategy as announced to the market
in July 2018 and at the Capital Markets Day in September 2018.

Principal risks are set
out on pages 56 to 61

Succession planning and organisational design – reviewed proposals to reorganise
resource more efﬁciently and effectively to enable delivery of the strategy.

Strengthen
Integrated Producer
Broadcaster

360 recommissioning process – reviewed the process to provide visibility over the total
valuation of each production to ensure appropriate investment decisions.

Principal risks 5 and 6

Branding and Hub investment – reviewed and approved investment for enhanced
and improved branding and marketing.

Principal risk 3

Commercial – reviewed reorganisation of the Commercial team to ensure resource
was focused on creativity and building relationships.

Principal risk 7

Grow
UK and global
production

Create
Direct to Consumer

Reviewed priorities and future improvement plans including leveraging the producer/
broadcaster model to create joint initiatives.

Principal risks 5 and 6

Reviewed proposals to improve structure, direction and integration of acquired businesses.

Principal risk 6

Team – reviewed proposals for the creation of the Direct to Consumer team.

Principal risk 3

Business plan – reviewed and approved business plan.

SVOD proposition business plan – reviewed progress on developing SVOD strategy
and research and considered risks and challenges.

Principal risk 3

Data and analytics – reviewed plans for enhancing data analytics. A more in-depth data
strategy will be considered in 2019.

Principal risk 4

Other

Brexit and regulation – reviewed key policy and regulatory issues, including Brexit,
Digital Services Tax and advertising restrictions. This will be kept under review together
with other issues that could have potential long-term impact on the business.

Principal risk 1

Pensions – reviewed and approved ‘Buy In’ of sections B and C to mitigate future risk.

Principal risk 2

Property portfolio – reviewed the strategy for the London properties. The Board
concluded that it was not in the best interests of the Company to continue with
the proposed development plan and a decision to sell the Southbank site was made.

For further information on risks please see pages 56 to 61 of the Strategic Report and the Audit and Risk Committee Report pages 80 to 91.

ITV plc Annual Report and Accounts 2018

Corporate Governance

Focus for 2019

Strategy and operations

Governance

Strategy implementation progress

2018 UK Corporate Governance Code compliance

Deep dives on strategic initiatives

Data strategy

Brexit and Regulation

Total viewing and Direct to Consumer

Total advertising

Culture

Stakeholders

Succession planning
The Board recognises that effective succession planning is key to the Company’s ability to achieve its strategic objectives and is also
integral to maintaining an effective Board. The Board has in place a framework which the Nomination Committee keeps under review
to ensure that:

• The Board is refreshed appropriately in order to encourage new ideas;
• There is a diverse Board with a wide range of skills and experience; and
• Board tenure is appropriate and Board members remain independent.

During the year the Board has undergone some changes as set out below.

Group CFO: In June 2018 it was announced that Ian Grifﬁths would be leaving ITV. The Board commenced the recruitment process
for a successor. As part of its succession planning process, the Nomination Committee and the Board had already discussed the key skills,
experience and other requirements of the role. They established a sub-committee comprised of Peter Bazalgette, Margaret Ewing,
Anna Manz and Roger Faxon to ﬁnalise the process and Spencer Stuart were engaged to assist. Face-to-face interviews were held and
a strong shortlist was agreed. The Board agreed that Chris Kennedy should be asked to join ITV as Group CFO, which was announced
on 5 November 2018. Ian Grifﬁths stepped down from the Board on 31 December 2018, and Chris joined the business on 21 February 2019.

Non-executive Directors: During the year, we welcomed two new Non-executive Directors: Duncan Painter with effect from 1 May 2018
and Edward Bonham Carter with effect from 11 October 2018. The Nomination Committee engaged Founders Keepers and Spencer Stuart
respectively to assist with the recruitment following a similar process as that set out above for the Group CFO.

Duncan Painter has a broad range of experience in digital media, consumer intelligence and targeted advertising, all of which the Board
considered to complement the More than TV strategy.

When considering the recruitment of Edward Bonham Carter, the Nomination Committee was mindful of the need to secure a Senior
Independent Director. The Board considered Edward’s broad range of experience, particularly in the understanding of stock markets
and investor expectations, as well as his position as Senior Independent Director of Land Securities plc, would provide valuable insight
for the Board.

Both John Ormerod and Andy Haste stepped down from the Board following the AGM in May 2018.

Committees: The Board also reviewed Committee membership and during 2018 Margaret Ewing succeeded John Ormerod as Chair
of the Audit and Risk Committee. In addition, Salman Amin and Duncan Painter joined the Remuneration Committee and Edward Bonham
Carter joined the Audit and Risk Committee.

The Nomination Committee reviews succession planning for the senior executives annually. More information on succession planning
at ITV can be found in the Directors’ Report on page 110.

Strategic ReportFinancial StatementsAdditional informationGovernanceGovernance

Corporate Governance
continued

Diversity
The Board has a diversity policy to retain a talented and diverse Board with a mix of expertise, experience, skills and backgrounds reflecting
the business environment in which we operate. Amongst other things the policy aims to:

• Maintain at least 30% female Directors on the Board over the short to medium term;
• Ensure Non-executive Director shortlists include at least 50% female candidates;
• Ensure the Non-executive Director search pool is sufﬁciently wide and covers candidates from BAME backgrounds and candidates

with a wide range of expertise, skills and backgrounds; and

• Only use search ﬁrms who have signed up to the voluntary code of conduct on gender diversity.

A copy of the policy can be found on our website

www.itvplc.com/investors/governance

We believe that the ITV Board is a diverse group in terms of experience, age, gender and educational and professional background.
We consider diversity as part of our succession planning process but recognise it is important to ensure that the most appropriate
person is chosen for the relevant position.

More information on diversity at ITV can be found in the Directors’ Report on page 109.

Induction
All Directors who join ITV receive a comprehensive induction providing an overview of the industry and important key themes for the
Company. It is also used to familiarise each Director with the different areas and allow them to meet colleagues from across the business.

General board induction

All Directors
• Operational overview
• Financial review
• Strategic overview
• Budget and ﬁve year plan
• Director’s duties and responsibilities
• Risk management
• Governance structure
• Previous minutes and meeting papers
• Meetings with other Board members

Executive
• Build relationship with Chairman,

Management Board, Executive Leadership
Team and Senior Leadership Team
• Visits to main hub sites, studios and

regional news teams

Inductions in the year:
• Carolyn McCall
• Chris Kennedy

Non-executive
• Meetings with internal and external

advisers (as appropriate)

• Visits to main hub sites and studios
• Meetings with Management and

Divisional Board members

• Succession planning
• Banking and investment
• Investor relations
• Business development

Inductions in the year:
• Duncan Painter
• Edward Bonham Carter

ITV plc Annual Report and Accounts 2018

Corporate Governance

Training and development
During a director’s period of appointment, they are continually updated on the Group’s different business areas and the competitive
and regulatory environment in which they operate. This is done through:

• Updates and papers which cover changes affecting the Group and the market in which it operates and meetings with senior

executives across the Group and key advisers;

• Regular updates on changes to the legal and governance requirements of the Group and in relation to their own position as Directors;

and

• Presentations given at Board and Committee meetings on business matters and technical update sessions from external advisers

where appropriate.

Executive Directors may accept external appointments as Non-executive Directors of other companies and retain any fees paid to them.
Further details of external positions held by Executive Directors can be found on page 107.

Board evaluation
External
The Board undertakes an external evaluation every three years to review its effectiveness and consider development. As the last
external Board evaluation took place in 2016 the process will be undertaken again in 2019.

Internal
The work of the Board and its Committees is reviewed annually. The evaluation takes the form of a detailed questionnaire and interviews
with the Board and Committee members eliciting feedback on a wide range of topics. In addition, input is sought from the Executive
Directors, other relevant senior executives and external advisers. Results are then passed to the relevant Chairman and a report of
proposed actions is submitted and agreed as appropriate.

Our three year Board evaluation cycle

2017

Internal evaluation
Questionnaire circulated to the Board, senior executives and external advisers enabling an evaluation of performance in 2017.
Conclusions presented which were discussed and actions for the forthcoming year agreed (see below).

Internal evaluation
Questionnaire circulated to the Board, senior executives and external advisers enabling an evaluation of performance in 2018
and progress against actions agreed following the 2017 evaluation. Conclusions presented which were discussed and actions
for the forthcoming year agreed (see page 76).

External evaluation
To engage an independent party to facilitate a formal evaluation. Further details will be provided in next year’s report.

2018

2019

Strategic ReportFinancial StatementsAdditional informationGovernanceGovernance

Corporate Governance
continued

Actions in 2018

Composition

Action: Ensure there is a broad range
of experience and perspective on the
Board. In particular, media, technology
and digital experience.

Outcome: Duncan Painter was appointed
in May 2018 due to his experience in the
media and digital sectors. His biography
can be found on page 67.

Action: Consider the successor for the
Senior Independent Director.

Outcome: Edward Bonham Carter was
appointed in October 2018 due to his
investor experience and his position
as Senior Independent Director of Land
Securities Group plc. His biography can
be found on page 66.

Actions for 2019

Effectiveness

Stakeholder engagement

Action: Review meeting structure to
enhance productivity and efﬁciency and
allow for greater in-depth discussions.

Outcome: The meeting timetable was
altered to be more efﬁcient, particularly
for those Directors travelling from
overseas. More time was allocated
to deep dive on strategic matters and
risks. The annual programme and agenda
are kept under constant review to ensure
sufﬁcient time is available for robust
discussion and challenge.

Action: Engage more regularly on wider
stakeholder engagement. Spend more
time understanding and visiting UK and
international acquisitions.

Outcome: The Board is kept up-to- date
on the progress of acquisition integration.
Board members undertook visits to
Cattleya in Italy, Talpa in the Netherlands
as well to businesses in the US.

For more information on stakeholder
engagement see page 78.

Action: Nomination Committee structure
and process to be reviewed to enable more
time to consider succession planning and
skills gaps for the Board and succession
planning for the senior executives and
put appropriate action plans in place.

Action: Review terms of reference
of the Committees and review the job
descriptions of the Chairman, Senior
Independent Director and Chief Executive
to ensure alignment with the 2018 UK
Corporate Governance Code.

Action: Review and consider approach
and programme for continuing
professional development, as part
of the external evaluation exercise.

ITV plc Annual Report and Accounts 2018

Corporate Governance

Assessment
The Board considers and acts upon
feedback from colleague engagement
surveys to assess and monitor the
perception of our culture against our
values and beliefs. The last global survey
was undertaken in 2016 and indicated
that colleagues are broadly aligned with
ITV’s cultural vision. A full survey will
be undertaken in 2019 enabling us to
more formally assess and measure our
culture and the impact of our More than
TV strategy.

We believe that an inclusive, effective
and well embedded corporate culture
helps create a successful business.
We will continue to focus on building
a strong corporate culture and will keep
this under consideration as part of our
More than TV strategy.

Culture
ITV has an open, inclusive and collaborative
culture across all areas of the business.
At its core, ITV puts trust and an open and
honest working environment for all as its
most important values.

Board engagement
The Board places a high importance on
the value of corporate culture within ITV
and the role it provides in the development
and retention of fully engaged colleagues
as well as for ITV’s external reputation.
When we talk about culture we mean values,
behaviours and environments that shape
a colleague’s experience. We want ITV to
be a great place to work and a fundamental
part of this is fostering an inclusive culture
that attracts, develops and retains the best
talent possible, where everyone is valued
and empowered. As part of the More than
TV strategy we have undertaken a review
of the behaviours expected from our
leaders, managers and colleagues to
execute the strategy as well as working
with them to deﬁne and shape culture.

We also aim for our senior executives and
Board members to be as visible as possible
by using open-plan ofﬁce space across
the Group to encourage openness and
collaboration. Our London property
strategy is a big step to achieve a more
coherent and joined-up business.

Openness and communication are key
and as such it is imperative that the Board
is visible and approachable throughout
the organisation. The Board participates
in site visits to our different locations and
is in regular communication with senior
executives and other colleagues.

The Board recognises that this helps
ensure they have a greater insight and
understanding of the business to
enhance decision-making and debate,
and to enable consideration of the longer-
term impact of its decisions on our
colleagues and other stakeholders.

Embedding corporate culture
We seek to instill an inclusive ‘One ITV’
way of working through our global
network of eighty Ambassadors who
represent all parts of the business.
The role of an Ambassador is to represent
colleague interests, share information
and help shape our culture by giving
colleagues a voice. During 2018
Ambassadors were instrumental in
providing support to those affected
by the organisational redesign as part
of the strategy refresh process and
ofﬁce moves.

Our Senior Independent Director, Edward
Bonham Carter, has been appointed as
our workforce engagement director acting
as a conduit between our Ambassador
network and the Board, and will attend
Ambassador meetings on a regular basis
to discuss current issues and listen to
concerns. Carolyn McCall also regularly
attends Ambassador meetings as well
as delivering regular Vod and Podcasts
to update colleagues on developments
and encouraging direct contact through
her Ask Carolyn email address.

ITV has four colleague networks – ITV Pride
(for LGBT employees), The Women’s
Network, ITV Balance (to discuss work-life
balance) and ITV Embrace (for BAME
employees). These networks are open
to all colleagues and run a number of
inspirational talks, events, development
workshops and also support ITV programme
makers to ensure we reach the wider
community. Only by representing our
audiences within our workforce will we
be able to authentically reflect and appeal
to the breadth of viewers that characterise
modern society. Not only do we want to
attract the most talented people to work
for us, but we want to enable our colleagues
to achieve their best and to develop their
career at ITV. Making sure our culture and
working environment is inclusive and
accessible is key.

All colleagues are required to complete
mandatory training aligned with the Code
of Conduct. Systems are in place to enable
employees to identify and raise issues,
including suspected wrongdoing, fraud
or malpractice in the workplace. This
helps us ensure that the highest standards
of safety are maintained and good
ethics and judgement are applied
when making decisions.

Strategic ReportFinancial StatementsAdditional informationGovernanceGovernance

Corporate Governance
continued

Stakeholder engagement
The Board has a responsibility to create value for all its stakeholders and we believe it is vital to engage and listen to their views.
ITV has a wide range of stakeholders. More on how we engage with some of these different groups is detailed below.

Shareholders

Material issues

Engagement

Strategy refresh; long-term
ﬁnancial performance; capital
allocation; succession planning;
Board composition; policy
and regulation; Brexit;
Directors’ remuneration;
share price; challenges of
the digital media landscape.

The Board attaches a high priority to effective communication with investors
and has regular open dialogue with them. During the year meetings were routinely
held with institutional investors to keep them updated and the Board is kept
informed of any feedback from these meetings. In September the management
team held a Capital Markets Day to bring investors up-to-date on the More than
TV strategy process. Our investor calendar for 2018 can be found on page 79.
Our AGM provides a forum for private shareholders to raise questions with the
Board directly should they wish. They have ample opportunity to ask questions
during the meeting and before and after the event. The Chairman and Senior
Independent Director are always available to all shareholders.

Customers

Viewers: access to a varied,
high-quality programming
schedule that reflects a
modern society; ability
to view on a variety of
channels; on-screen diversity.

ITV reaches a vast audience across the UK and the Board recognises the
important role it plays for viewers. Viewers are able to tell us their thoughts
directly via email or telephone with contact details provided on our website.
They are also able to use our regulator Ofcom, to raise any concerns they may
have. The Integrated Broadcast Board receive a monthly compliance report
detailing viewer or regulator concerns. Our dedicated Viewer Services team
is on hand to resolve any technical issues or other questions our viewers may
have. We also provide bespoke support for all of our live daytime shows,
ITV Box Ofﬁce events, and the ITV Hub to enhance our viewer experience.

Advertisers, broadcasters
and platform owners:
deliver unrivalled commercial
audiences, scale and reach
across key demographics on
our main channel; targeted
audiences on the ITV Family
and ITV Hub.

We work closely with both media agencies and advertisers to develop and
nurture bespoke, integrated commercial and brand partnerships that extend
beyond pure spot advertising and programme sponsorship. Working with
them we create innovate ways to engage consumers around brand
marketing strategies.

Using the full breadth of our global production network we are able to work
directly with broadcasters and content platform providers to deliver quality
original programming. We develop key relationships with them to licence
Global Entertainment’s extensive programme catalogue.

Citizens

Legislators and
Regulators

Colleagues

Harness the power of our
programmes to have a positive
impact on communities
and causes; minimise the
environmental impact of
our operations.

Maintain the highest standards
of governance; ensure
regulatory requirements are
met at the highest level and
robust standards reached.

Engagement and culture;
investment in training and
development; diversity and
inclusion; remuneration.

See our Corporate Responsibility Strategy on page 16 and our
Corporate Responsibility website

www.itvplc.com/responsibility

We actively engage with politicians, policymakers and regulators on
a continual basis to ensure we deliver on our legal and regulatory obligations
and help inform new regulatory and legislative initiatives. This ensures our
regulatory framework remains ﬁt for purpose.

For information on Culture see page 77.

For more information on other issues see the Directors’ Report on page 109.

Further information on our stakeholders can be found in the Chairman’s Statement on page 6.

ITV plc Annual Report and Accounts 2018

Corporate Governance

Our 2018 investor calendar

February/March
• Full year results
published and
roadshow in London

• Citi Annual Media

conference in London

May
• Q1 Trading Update

published

• AGM

July
• Interim results
published and
roadshow in London

September
• Interim results

roadshow in London
• Capital Markets Day

in London

November
• Q3 Trading Update

published

• Morgan Stanley
TMT conference
in Barcelona
• US roadshow

April
• Full year results

June
• Barclays conference

August
• Interim results

roadshow in London

in US

roadshow in London

October
• Capital Markets Day
– follow up meetings

Investor profile
The types of holder by percentage is as follows:

Investor profile
The percentage of issued capital by type of holder
is as follows:

Institutional shareholders

0.16%

Private shareholders

92.64%

Other

7.20%

Institutional shareholders 97.27%

Private shareholders

Other

2.55%

0.18%

Strategic ReportFinancial StatementsAdditional informationGovernanceGovernance

Audit and Risk Committee Report

Margaret Ewing
Chair, Audit and
Risk Committee

In this report
The purpose of this report is to
highlight areas that the Committee
has reviewed during the year.
We report to shareholders on
the significant financial reporting
issues and judgements made in
connection with the preparation
of the Company’s financial
statements. Also highlighted is
how the Committee has assisted
the Board in reviewing the Company’s
internal control and risk environment.
We explain what the Committee
has done to review the effectiveness
of our internal and external auditors.

The Committee
continues to provide
independent and
robust challenge
to management and
our auditors to ensure
there are effective
and high-quality
controls in place
and appropriate
judgements taken.

Dear Shareholder

On the following pages we set out the
Audit and Risk Committee’s Report for
2018, which provides an overview of the
role of the Committee and the matters
considered during the year.

John Ormerod, your previous Audit and Risk
Committee Chairman, retired from the Board
in May 2018. I was delighted to take over the
Chairmanship from John, who was a valuable
member of the Board and an exceptional
Audit and Risk Committee Chairman.
He ensured my transition to the role was
seamless and I am hugely indebted to him.
Andy Haste also stepped down from the
Board and the Committee in May 2018.
At the end of December 2018 Ian Grifﬁths
stepped down from the Board. As CFO and
COO he worked tirelessly over the past ten
years for ITV and, with John, helped to
transform the Committee into the robust
and challenging committee that it is today.
On behalf of the Board and the Committee
I would like to thank them all for the
enormous contribution they have made to ITV.

In order to strengthen the Committee
membership we welcomed Edward
Bonham Carter as a member with effect
from 1 January 2019. Edward brings
signiﬁcant ﬁnancial acumen and the
important investor perspective to the
Committee’s deliberations. I look forward

to working with him and with Chris Kennedy,
our new Group CFO, during 2019.

This is my ﬁrst report and I would like to
assure shareholders that the Committee
is working really well, which I hope this report
will highlight. The Committee continues to
provide independent and robust challenge
to management and our auditors to ensure
there are effective and high-quality controls
in place and appropriate judgements taken.

We have the right mix of skills and experience
on the Committee to provide constructive
challenge and support to management.
The Committee continues to play a key role
in ensuring implementation of and compliance
with new accounting standards and associated
guidance. We consider relevant corporate
governance requirements and give
considerable focus to the Group’s evolving risk
management framework and processes.

During 2019, we will be considering the
requirements of the 2018 UK Corporate
Governance Code and the impact of various
regulatory reviews (Kingman, CMA and
Brydon) into the audit sector. We seek
to respond to shareholders expectations
in our reporting and, as always, welcome
any feedback from shareholders.

Margaret Ewing
Chair, Audit and Risk Committee
27 February 2019

ITV plc Annual Report and Accounts 2018

Audit and Risk Committee Report

Who is on the
Committee
The Committee is
composed entirely
of independent
Non-executive Directors.

Our role
Following each meeting,
the Committee
communicates its main
discussion points and
ﬁndings to the Board.

The Committee’s terms of
reference can be accessed
on our website.

www.itvplc.com/
investors/governance

The current members are:
• Margaret Ewing

(Chair from 10 May 2018)
• Edward Bonham Carter
(from 1 January 2019)

• Mary Harris
• Anna Manz

John Ormerod and Andy Haste
stepped down from the Board and
the Committee on 10 May 2018.

The Committee members have
between them a wide range of
business and ﬁnancial experience.
The Committee considers that
Margaret Ewing and Anna Manz
have recent and relevant ﬁnancial
experience for the purposes of
the Code.

Full details of attendance at
Committee meetings can be
found on the table on page 71.

Detailed biographies can be
found on pages 66 and 67.

The main role of the Committee
is to:
• Monitor the integrity of

published ﬁnancial information
and review signiﬁcant
ﬁnancial reporting issues
and judgements.

• Provide advice to the Board

on whether the Annual Report
and Accounts are fair, balanced
and understandable and the
appropriateness of the going
concern statement and the
longer-term viability statement.

• Assist the Board to establish
and articulate overall risk
appetite and oversee and advise
the Board on speciﬁc strategic
risk exposures and mitigations.

• Review the risk identiﬁcation
and assessment processes
and undertake deep dives
of high-risk business areas
or processes.

• Review the effectiveness of
the internal control and risk
management processes.

• Monitor and review the

effectiveness and independence
of the internal audit function.

• Provide advice to the

Remuneration Committee
on ﬁnancial reporting matters
and related judgements as they
affect executive remuneration
performance objectives.

• Review the quality and

effectiveness of the external
audit and the procedures and
controls designed to ensure
auditor independence.

Meetings in 2018
In addition to Committee
members, the Chairman of
the Board, Executive Directors,
Director of Group Finance,
Company Secretary, Head
of Internal Audit, Director of
Treasury, Director of Tax
and external audit partners
regularly attend meetings.
The Committee members
meet regularly with the
external audit partners and
Head of Internal Audit
without executives present.

At each meeting the
Committee receives a report
from the Head of Internal
Audit on the progress of the
internal audit work plan, issues
and recommendations arising
from the audit work and
management’s progress on
implementation of internal
audit ﬁndings. In addition to
the September ‘risk focused’
meeting, the Committee also
considers speciﬁc risk topics at
meetings throughout the year.

February
• Year end ﬁnancial

reporting issues, estimates
and judgements
• Fair, balanced and

understandable review of the
Annual Report and Accounts
• Viability Statement and going
concern statement veriﬁcation

• KPMG audit conclusions

and ﬁndings

July
• Half year report
• KPMG review conclusions

and ﬁndings

September
• Emerging and business speciﬁc

risk reviews

November
• Year end planning
• Known full year ﬁnancial

• APMs and exceptional items
• New regulation and guidelines

reporting issues
and judgements

compliance checklist
• Draft Annual Report

and Accounts
• Audit opinion
• Internal Audit independence
• Bonus and share plan outcomes

May
• Known half year ﬁnancial

reporting issues
and judgements

• External audit strategy

• Distributable reserves planning
• KPMG interim controls

review ﬁndings

• Effectiveness of internal

audit and the following year’s
internal audit plan

• Annual tax and treasury review

For other matters see page 82.

For external audit quality and
effectiveness see page 91.

Annual review
An annual review of
the performance of the
Committee is conducted
each year.

For 2018, in addition to feedback
from members of the Committee,
input was sought from the
Executive Directors, Director
of Group Finance, other senior
executives, members of the
external and internal audit teams
and the Chairman of the Board.
Overall, the review concluded
that the Committee is responding
appropriately to its terms of

reference and will continue to
develop its role. Priorities for
2019 include completing the
assessment of the appropriate
model for internal audit;
undertaking a tender process
for the appointment of external
and internal auditors effective
for the year commencing
1 January 2021, and supporting
the enhancement of the risk

framework, processes and
reporting. The Committee will also
amend, where necessary, its terms
of reference to reflect the 2018
UK Corporate Governance Code and
seek to improve its engagement
with relevant stakeholders.
The Committee will continue to
review its membership to ensure
the skills and experience align with
the business as it develops.

Strategic ReportFinancial StatementsAdditional informationGovernanceGovernance

Audit and Risk Committee Report
continued

Our focus in 2018
In planning its own agenda, and reviewing the audit plans of the internal and external auditors, the Committee takes account of signiﬁcant
issues and risks, both operational and ﬁnancial, that may have an impact on the Company’s ﬁnancial statements and/or the Company’s
execution and delivery of its strategy. The Committee also addresses speciﬁc queries referred to it by the Board or Remuneration Committee.

During 2018, after robust challenge and debate, there were no topics where there was signiﬁcant disagreement between management,
the external auditor and the Committee, or unresolved issues that needed to be referred to the Board. Set out in the tables below is
information on the key matters considered during the year.

Regular reviews and recurring transactions
The following table summarises the regular reviews and activities undertaken by the Committee. Some of these areas may require
the application of judgement by management or have underlying complexity.

Financial
disclosure
and judgements

• Financial results announcements
• Annual Report and Accounts
• Accounting judgements and estimates
• Developments in ﬁnancial reporting:

– revenue recognition (IFRS 15) (page 133)
– lease accounting (IFRS 16) (page 133)

• Fair, balanced and understandable

• Goodwill impairment (note 3.3, page 155)
• Tax (note 2.3, page 143)
• Deal debt (see page 83)
• Pension accounting (note 3.7, page 163)
• Deﬁcit ﬁnancing (see page 83)
• Acquisition earnout liabilities (see page 83)
• Appropriateness of Alternative

assessment

• Viability Statement – underlying

assumptions (page 62)
• Going concern (page 131)

Performance Measures

• Litigation provisions
• Property (page 84)

External
audit

• Auditor performance, quality

and effectiveness

• Plan for and scope of audit resource applied
• Auditor engagement and fees
• Auditor independence and objectivity
• Auditor Independence policy (including

non-audit fees)

• Auditor progress and review reports
• Key areas of judgement
• Auditor management reports
• Audit report

Internal control

•

Internal Audit independence
and effectiveness
Internal Audit plan
Internal Audit ﬁndings and outcomes

•
•
• Effectiveness of internal controls
• Monitoring acquisition earnouts

and related accounting
• Whistleblowing process

Insurance programme

• Material litigation
•
• Fraud controls
• Anti-bribery and corruption controls
• Technology controls
• Tax policy and controls
• Treasury policy and reports
• Tax and Treasury Committee review

Risk

• Principal risks and uncertainties

and risk mitigations

• Effectiveness of the risk
management process
• Cyber security (page 86)
• Business resilience
•
• Technology modernisation (page 86)
• Health and safety

Information security and GDPR (page 86)

• Regulatory and programme compliance
• Litigation
• Progress, risks and governance of the

airtime sales project (page 86)

• World Cup risk mitigation plans (page 88)

Further information on our risk
management framework can be found
on pages 54 and 55.

ITV plc Annual Report and Accounts 2018

Audit and Risk Committee Report

Most of the topics mentioned on page 82 are relevant to all businesses. However, matters speciﬁc to ITV include:

• Deal debt: management estimates the over and under delivery of advertising value to agencies. The Committee reviews
management’s approach and method of determining the provisions required for net under delivery of advertising value.

• Deﬁcit ﬁnancing: as part of our strategy to expand our content portfolio, signiﬁcant investment in high-end drama is made.

The Committee reviews the accounting implications, including revenue recognition and recoverability of the amounts invested.
The structure of content deals is becoming increasingly complex and the accounting implications increasingly material.

• Acquisition earnout liabilities: management estimates the future expected payout for acquisition related liabilities.

Judgement on complex discrete transactions
The Group completed certain signiﬁcant transactions during the period that were in line with the More than TV strategy, as set
out below. The Committee carefully reviewed these transactions to ensure that the judgements applied by management were
reasonable and any complex accounting guidance followed correctly.

Revenue and cost recognition

Financial reporting and judgement

Action taken by management

Action taken by the Committee and outcome

ITV signed a multi-year agreement for the
digital distribution of key scripted titles
including Snowpiercer and Bodyguard.

Management undertook an exercise to
consider the appropriate accounting for
revenue and cost recognition under IFRS.

The Committee assessed management’s
actions and agreed with the proposed
accounting treatment.

As the agreement covered multiple titles
and was across current and future years,
the ﬁnancial reporting and judgement
focused on revenue and cost recognition.

Also see note 2.1 on page 135.

Management focused on the fulﬁlment
of performance obligations under IFRS 15
and the allocation of costs under IAS 38R.
As delivery of the scripted series and the
performance obligations are to be fulﬁlled
over the term of the licence, it was
concluded that revenue should be
recognised over time.

With regards to cost recognition,
management proposed that costs
should be recognised in line with our
accounting policy for high-value drama.

KPMG also presented their view on
the matter to the Committee, noting
consistent conclusions on the appropriate
accounting treatment and disclosure.

Strategic ReportFinancial StatementsAdditional informationGovernanceGovernance

Audit and Risk Committee Report
continued

Revenue recognition

Financial reporting and judgement

Action taken by management

Action taken by the Committee and outcome

Talpa Media, a wholly owned subsidiary
of ITV, signed a multi-year licence deal for
The Voice of Spain and other current and
future unscripted Talpa Media formats in
June 2018.

At the time of approving the interim
ﬁnancial statements and trading
announcement, conﬁrmation of the
availability of the rights for exploitation
had not been received.

While this is a typical deal structure for
Talpa Media, the ﬁnancial reporting and
judgement involved:

• Ensuring the availability of the rights

for exploitation.

• Ensuring that separate components

of the licence contract were accounted
for correctly.

Also see note 2.1 on page 135.

Subsequently, management received the
in-house legal team’s review of the rights
position; this was also supported by
external counsel. No signiﬁcant issues were
identiﬁed and management concluded that
the rights were available for exploitation.

The intellectual property and production
know-how for The Voice already exists
with no further obligations. It was
concluded that, in line with IFRS 15,
because the performance considerations
were met, the multi-year The Voice of
Spain component of the contract be
fully recognised in 2018.

The future related components, such
as new formats or intellectual property
rights of the contract, will be recognised
over time.

The Committee accepted management’s
view that the revenue from this contract
should not be recognised at 30 June 2018.
Subsequent conﬁrmation of the rights
allowed revenue recognition during the
second half of 2018.

KPMG also presented their view on
the matter to the Committee, noting
consistent conclusions on the appropriate
accounting treatment and disclosure.

The Committee asked management
to ensure that going forward there
was better clarity on the availability
of rights where programmes moved
between broadcasters.

London properties

Financial reporting and judgement

Action taken by management

Action taken by the Committee and outcome

The Committee noted and agreed with the
revised accounting treatment and impact.

In 2017, the Group announced its intention
to redevelop its South Bank site and build
a new London ofﬁce. As a result,
management proposed that incremental
costs incurred across the project over
the medium term in respect of temporary
leases and related costs, both capital
and income statement related, should
be removed from the underlying results
in the future.

However, in 2018, the Board reversed its
prior decision and agreed not to redevelop
the Group’s HQ at the London Television
Centre, South Bank, and the site is now
for sale.

Consequently there were no longer any
temporary leases, and the accounting
treatment was reviewed.

Management reviewed the prior
treatment, as outlined in the 2017
Audit and Risk Committee Report,
and concluded that:

• All lease costs relating to our current
London ofﬁces should, following the
move date, be treated as business as
usual costs;

• The short-term temporary dual running
costs as a result of the vacant South
Bank property should be treated as
exceptional; and

• The costs associated with the physical

move, closure and disposal costs should
continue to be treated as exceptional.

ITV plc Annual Report and Accounts 2018

Audit and Risk Committee Report

Pensions

Financial reporting and judgement

Action taken by management

Action taken by the Committee and outcome

The Committee was provided with
a brieﬁng on the terms of the ‘Buy In’
transaction from the Director of Reward
and Pensions and considered the various
accounting complexities and considered
management’s approach to be correct.

In November 2018, the Trustee entered in to
a bulk annuity insurance contract (a ‘Buy In’)
in respect of the beneﬁts of two sections
of the ITV Pension Scheme.

A ‘Buy In’ is where the Trustee purchases
an insurance policy which is effectively
a scheme asset that pays the members
beneﬁts. The ultimate obligation to pay
the members beneﬁts still remains with
the scheme.

Management undertook an exercise to
consider the appropriate accounting
for this ‘Buy In’ under IAS 19.

As the acquisition of an insurance contract
is an investment decision this has been
accounted for through the Statement
of Other Comprehensive Income.

For IAS 19 purposes, the fair value of this
insurance contract is set equal to the
valuation of the insured member beneﬁts
using the IAS 19 assumptions. As these
two sections of the ITV Pension Scheme
were in a surplus position under IAS 19,
this has resulted in a loss within the
Group’s Statement of Other
Comprehensive Income.

There are elements of the ‘Buy In’
transaction which have been accounted
for through the Group’s Statement of Proﬁt
or Losses. Management’s view is that these
items are not in relation to the underlying
business and have been highlighted in our
alternative performance measures.

Strategic ReportFinancial StatementsAdditional informationGovernanceGovernance

Audit and Risk Committee Report
continued

Other matters
In addition the following topics were reviewed:

Cyber security, privacy and GDPR

Issue

Action taken by the Committee

Outcome

Cyber security is an increasing risk as
our business develops new revenue
streams and direct to consumer
propositions. Cyber security is a dynamic
area due to converging threats and
technology advancement.

Data privacy and GDPR are high proﬁle
areas of business risk for all companies.

The Committee reviewed progress against
agreed plans for cyber security and data
privacy. This included:

• Results from cyber incident

simulation exercises;

• Continued programmes to

educate employees;

• Actions taken to further embed

•

IT controls; and
Improving our detection and response
capability with assistance from third
party specialists.

The Committee requested and received
a frank view of the threats and mitigations
from BAE Systems (independent cyber
and wider technology security advisers
to the Company).

The Committee also reviewed the status
of the GDPR readiness programme, which
has also laid the foundations for ongoing
business process change.

The Committee acknowledged the
continued good progress that had
been achieved in implementation of
the cyber security strategy and the
positive comments of BAE Systems.
Risk ratings were approved and the
Committee requested an update on
the revised cyber security strategy and
risk appetite during 2019.

The GDPR readiness programme will
transition to business as usual during
2019 and this will be kept under review.

The Committee recommended
appropriate budget and focus across
the Group be given to further mitigations
for both cyber security and GDPR.

These topics continue to feature on
Internal Audit’s programme of work.

Technology modernisation

Issue

Action taken by the Committee

Outcome

The programme of work to modernise
our legacy business systems to reduce
a number of key business risks continues.

The work undertaken to date is delivering
signiﬁcant business beneﬁts and
reduced risks.

The Committee reviewed and challenged
the programme of work, including:

•

Migration of the majority of our
modernised applications to the cloud,
and a programme of work focusing
on the remaining legacy applications
to migrate to cloud technology by 2022;
Development of our end to end content
supply chain process, from the
management of the processing
of content from commissioning or
acquisition through to distribution;
Development and migration to
a bespoke artiste payment system
in the UK; and
Progress in the replacement of our
airtime sales system.

The Committee acknowledged the
signiﬁcant progress in modernising the
Group’s applications and supported the
plans for the legacy applications migration.

The Committee considered contingencies
and actions in the event of delay in
implementing the airtime sales project
to ensure adequate resource.

Signiﬁcant progress has been made and
completed and planned mitigations
were reviewed and assessed.

The Committee will continue to keep this
under review.

Internal Audit’s programme of work
seeks to incorporate key business
change programmes.

ITV plc Annual Report and Accounts 2018

Audit and Risk Committee Report

Broadcast transmission resilience

Issue

Action taken by the Committee

Outcome

Our broadcast transmission chain is growing
ever more complex as viewers access
content in many different ways.

It relies on the management of the key
partners who provide the components
of that chain.

The Committee reviewed the governance
processes in place, the risks and
mitigations and disaster recovery
arrangements around our broadcasting
transmission processes.

The Committee was impressed with the
mitigations and planning in place to avoid
major risks but recognised risks will
remain. The Committee recommended
that adequate budget be provided
to allow certain additional mitigations
to be implemented. The Committee will
continue to keep this under review.

Tax – employment status

Issue

Action taken by the Committee

Outcome

Employment status for tax purposes
continues to be a focus area for businesses
whose operating models rely on engaging
individuals on a freelance basis. This model
is particularly prevalent in television
production where freelancers are used
both behind and in front of camera.

Behind camera: the Committee continued
to receive regular updates to ensure
ITV continues to follow best practice.

Front of camera: ITV are engaged with
other producers and broadcasters to
develop best practice in this area, and
the Company continues to discuss these
issues with HMRC. The Committee
received updates from management
on developments within ITV and the
wider media sector.

Behind camera: the Committee noted
that improved processes were now
fully embedded in the business.
Management will update the Committee
on the status of proposed new HMRC
guidance during 2019.

Front of camera: the Committee will
keep the position under review.

Tax – IR35

Issue

From April 2020 the responsibility for
undertaking IR35 employment status
assessments, and where necessary
withholding PAYE and paying NICs, will
pass to the engager, rather than remain
with individuals and their personal
service companies.

Action taken by Committee

Outcome

The Committee considered updates from
management on the implications for ITV.

The Committee will continue to keep this
under review as the Company prepares
for the introduction of the new rules.

Internal Audit will attend the
programme board.

Speak up

At the heart of our approach
to risk management is
ensuring that everyone
has a voice.

Through strong leadership we successfully manage risk and aim to create a culture
where everyone can feel they are able to speak up. During 2018, we launched a new
reporting tool to employees and freelancers of ITV Studios, which will be rolled out
across the rest of the business around the world during 2019.

This can be used for reporting incidents as well as sharing observations, ideas and
examples of best practice across the business. We hope that this will help to break
down barriers and start conversations, leading to better risk management across
the business.

Strategic ReportFinancial StatementsAdditional informationGovernance
Governance

Audit and Risk Committee Report
continued

Anti-bribery and corruption

Issue

Action taken by the Committee

Outcome

Following an internal audit review on the
implementation of our anti-bribery and
corruption policies in 2017, actions to
strengthen implementation of the
Group programme were recommended
by Internal Audit.

The Committee continued to review
management’s progress against agreed
Internal Audit recommendations. They
noted that an external legal review had
conﬁrmed sufﬁcient processes were
in place.

The Committee will continue to keep
this under review in 2019 with further
work needed to fully embed the
processes in the business, particularly
our overseas businesses.

Internal Audit will look at the awareness
of the overseas businesses during any
overseas reviews.

Whistleblowing

Issue

Action taken by the Committee

Outcome

Work was undertaken with Protect to
benchmark our policy and processes.

The Committee considered the outcomes
and management’s proposed actions.

Protect (formerly Public Concern at Work)
provide ITV with independent advice on
our Whistleblowing process and
conﬁdential helplines for our colleagues
across the Group.

Football World Cup

Protect will undertake a further review
at the end of 2019 and Internal Audit
will include awareness of the Protect
helpline in the internal audit process
for international businesses and
smaller acquisitions.

Issue

Action taken by the Committee

Outcome

ITV broadcast the Football World Cup in
Russia in July 2018.

The Committee reviewed the consolidated
risk register for the World Cup, which
included risks and mitigations relating
to broadcast transmission, cyber risk,
anti-bribery and corruption, health and
safety and business resilience.

Internal Audit also undertook a review
of the risks identiﬁed and the mitigation
plans developed by management.

The Committee acknowledged that there
had been signiﬁcant effort in identifying
and mitigating the many risks associated
with the broadcast of this tournament.
The Committee was impressed with
the comprehensive assessment of all
potential key risks and the cooperation
across the Group and with other
broadcasters to mitigate the risks
as far as possible.

Brexit

Issue

Action taken by the Committee

Outcome

The implications for ITV on accounting,
tax and treasury matters of the UK
leaving the EU.

The Committee reviewed management’s
view of the impacts on accounting, tax
and treasury matters as part of regular
updates to the Committee.

The overall risks of the Group in respect
of the potential impact and risks of Brexit
have been reviewed in detail by the Board
and the Committee has focused on the
accounting, tax and treasury risks only.

The Committee will continue to keep this
under review.

ITV plc Annual Report and Accounts 2018

Audit and Risk Committee Report

Risk management and internal controls
Risk management
The Committee continued to consider the process for managing risk within the business and assisted the Board in relation to compliance
with the 2016 UK Corporate Governance Code. Further information on our risk management processes and details of our principal risks
are set out on pages 56 to 61.

We continue to develop our cultural people-driven approach to risk management, which we believe encourages a focus on prevention
rather than reaction to failure.

In 2018, the Committee reviewed a number of risk topics. The Group’s key risks reflect those inherent within the annual budget and
ﬁve year plan.

Internal controls
The Board has overall responsibility for the Group’s framework for internal control and for regularly reviewing the effectiveness
of the framework. The Committee assists the Board in reviewing the framework for internal control. The primary responsibility for
the operation of the framework is delegated to management. The framework can only provide reasonable and not absolute assurance
against material misstatement or loss. Key control procedures are designed to manage rather than eliminate risk.

The Committee reviews the internal controls framework and management’s approach to reviewing the effectiveness of the Group’s
internal controls. During 2018, the Committee reviewed the ﬁndings and conclusions and noted critical improvements in relation to risk
management and completion of risk actions. The Committee also reviewed the governance for key projects, simpliﬁcation of approval
levels, use of the core international controls framework and assessment of effectiveness through the Group Finance Assurance Plan.
The Committee noted the continuing improvement of the underlying processes, procedures and controls at the Business Service Centre,
including the forthcoming implementation of a new consolidation system in 2019. The Committee also reviewed the Fraud Prevention
Framework and interaction with external and internal audit.

The Committee satisﬁes itself that internal controls are operating throughout the year principally based on a programme of internal
audit reviews, reviews of the effectiveness of internal controls, including fraud and anti-bribery, reviews of balance sheet checklists
certiﬁed by local management, ‘deep dive’ sessions with relevant management on the management of certain key risks and controls
and through a suite of automated analytics that monitor ﬁnancial transactions in our systems. In addition to the internal audit
programme, there are a number of exception reports that cover transaction processing. For those subsidiaries not covered by exception
reporting software, a monthly self-assessment takes place, which is subject to independent internal review.

As part of our internal control process an annual strategy review and a rolling ﬁve year ﬁnancial planning exercise is undertaken,
which are reviewed and approved by the Board. The ﬁve year plan feeds into the annual budget cycle. The Executive Directors review
formal forecasts, detailed budgets, strategies and action plans and the Board approves the overall Group budget as part of its normal
responsibilities. The results of operating units are reported monthly to the Board, along with an update of the Group’s performance
against strategic KPIs and cash targets. Actual results are compared with budget and forecasts, and key trends and variances are
explained and analysed and actions taken to address performance variances or emerging issues agreed.

During the year, the Committee Chair met with internal and external litigation advisers on key litigation matters for the Group, such
as Boxclever, Gurney and the Voice of China.

The Tax and Treasury Committee is in place to consider and approve tax and treasury related matters in respect of corporate
transactions or other activities and monitors compliance with tax and treasury related policies. This committee is an important
part of the governance framework of ITV, minutes of meetings are shared with the Committee and its operation is reviewed annually
by the Committee. During the year the Committee Chair attended one of the committee meetings.

Strategic ReportFinancial StatementsAdditional informationGovernanceGovernance

Audit and Risk Committee Report
continued

Our auditors
Internal auditor
The Group’s internal audit activity is outsourced to Deloitte, who report directly to the Committee. The Committee continues to believe
that outsourcing offers access to the wide range of skills and resources in the various geographies required. However, during 2019 it will
again consider if this model for internal audit remains optimum for the Group’s strategy. The Committee keeps under review the internal
audit relationship with Deloitte and the procedures to ensure that appropriate independence of the internal audit function is maintained.
The effectiveness of internal audit is assessed over the year using a number of measures that include (but are not limited to):

• An evaluation of each audit assignment completed using feedback from the part of the business that has been audited; and
• A high level annual review that is completed by obtaining feedback from senior management in each division.

Prior to the start of the year, the Committee considered and approved the internal audit plan, which included audits across the Group
as well as assurance over live projects, including the airtime sales project, World Cup resilience and ﬁnance consolidation systems
implementation. During the year, the Committee reviewed ﬁndings from the internal audit reports, the actions taken to implement
the recommendations made in the reports and the status of progress against previously agreed actions. All internal audit reports are
available to the Committee. During the year, Internal Audit visited a number of our international subsidiaries as well as reviewing our
controls in a number of areas including ITV Hub+, Treasury and non-employee contracting.

External auditor
The Group’s external auditor is KPMG. The table below summarises the process followed to manage the relationship and audit process.

Engagement

Audit tendering
and rotation

Independence and
objectivity

Reappointment

KPMG were appointed as
auditor of ITV plc in December
2003 prior to the Company
becoming the parent company
of the ITV Group on 2 February
2004. In 2012 we undertook
a competitive tender applying
the BIS guidance on the EU
Audit rules. The Committee
intends to undertake a tender
process during 2019 for the
appointment of external
auditors effective from
1 January 2021.

The Committee continues to
monitor audit quality to ensure
a robust and effective audit.

We comply with the provisions
of the Statutory Audit Services
for Large Companies Market
Investigation (Mandatory
Use of Competitive Tender
and Audit Processes and Audit
and Risk Committee
Responsibilities) Order 2014.

The Committee seeks to
ensure the objectivity and
independence of our
auditor through:

• Focus on the assignment

and rotation of key personnel
• The adequacy of audit resource
• Policies in relation to

non-audit work

As a result of these strict
guidelines the Committee
believes that non-audit
services do not have a direct or
material effect on the audited
ﬁnancial statements. A copy
of our Auditor Independence
policy is available on our
website at www.itvplc.com.

We monitor relationships with
other audit ﬁrms to ensure we
have sufﬁcient choice for any
future appointment.

During the year, the Committee
considered the performance
and audit fees of our auditor,
and the level of non-audit
work undertaken, and
recommended to the Board
that a resolution for the
reappointment of KPMG for
a further year as the Company’s
auditor be proposed to
shareholders at the AGM in
May 2018. The resolution
was passed and KPMG was
reappointed.

The Committee has
recommended the
reappointment of KPMG
at the AGM on 8 May 2019.

The Committee considers
carefully the scope of planned
work and the assessment of
risk and materiality on which
it is based. The Committee’s
aim is to support a robust
and effective audit with
strong reporting lines to
the Committee.

The Committee discusses the
senior resource employed in
the audit and the background,
relevant sector and other
experience of new members
of the team and considers
implications for the audit of
new reporting, accounting
and governance guidelines
and standards.

The Committee agrees the
terms of engagement, audit
and non-audit fees and
reviews progress and results
throughout the year.

The Committee requested that
KPMG visit our US subsidiaries
prior to developing the audit
strategy to assess the audit
approach required in the US.

ITV plc Annual Report and Accounts 2018

Audit and Risk Committee Report

External audit effectiveness and quality
The Committee follows the review programme below to satisfy itself of external audit effectiveness and quality.

February
• Audit scope and materiality
• Conﬁrmation of work

performed and identiﬁcation
of other signiﬁcant risks

• Reappointment
• Independence and objectivity

May
• Audit plan and strategy
• Engagement
• Independence and objectivity

July
• Fees
• FRC Audit Quality Review

focus areas

• Independence and objectivity

November
• Auditor Independence policy
(reviewed every two years)
• Audit fees – ﬁnal approval
• Independence and objectivity

Audit quality is reviewed throughout the year and the Committee continues to use the Financial Reporting Council’s (FRC) Audit Quality
Practice Aid to structure its review of audit quality. When making its assessment of audit quality, the factors the Committee focused
on included:

External audit
quality reports

Auditor interaction
with management

Auditor’s own view
of effectiveness

The audit strategy for the year addressed thematic concerns that the FRC had highlighted.

Reviewing the auditor’s understanding of business progress against the strategy and emerging
industry themes, as well as the auditor’s discussion with and challenge of management on key
corporate transactions, key judgements and estimates and accounting treatments and disclosures
with clear indications of scepticism being applied when appropriate.

Enquired with regards to:

• Audit methodology and its effective application to ITV;
• Robustness of challenges and ﬁndings on areas that require management judgement;
• Whether there had been an internal peer review of the ITV audit and what the ﬁndings were; and
• The experience of the senior members of the audit team.

In its assessment of audit quality, the Committee also took into account:

• The detailed audit scope and strategy for the year, including the coverage of emerging risks and recent acquisitions and partnerships

in all geographies;

• Group materiality and component materiality;
• How the auditor communicated any key accounting judgements and conclusions, and
• Feedback from management of the performance of the auditor.

There were no signiﬁcant ﬁndings from the evaluation this year and the Committee considers the external audit to have been robust
and effective.

Strategic ReportFinancial StatementsAdditional informationGovernanceGovernance

Remuneration Report

Mary Harris
Chair, Remuneration Committee

In this report
The purpose of this report is to set
out for shareholders the principles
and policy we apply to remuneration
for our Executive Directors and to
update you on how we have applied
these for the financial year ended
31 December 2018. The report
also aims to demonstrate how
our Remuneration Policy aligns
with our strategy, supports the
retention of the Executive
Directors and rewards them
for strong performance.

Committee governance

page 95

Remuneration Policy
summary

Remuneration Policy
in action 2018

Remuneration Policy
application 2018

Remuneration Policy
application 2019

Other disclosures

page 96

page 97

page 98

page 102

page 103

Dear Shareholder

I am pleased to present the 2018 Annual
Report on Remuneration. This report
will be subject to an advisory vote by our
shareholders at the AGM on 8 May 2019.

During the year John Ormerod stepped
down from the Committee and I thank
John for his hard work. We also welcomed
Salman Amin and Duncan Painter to
the Committee. The composition and
activities of the Committee are
summarised on page 95.

More than TV – a clear vision for ITV
At the start of 2018 we were delighted to
see Carolyn McCall join the business as Chief
Executive. During the year, Carolyn and the
wider management team completed
a strategic refresh of the business. This
process resulted in the articulation of
a future vision for ITV, which seeks to build
upon our unique and winning combination
of creativity and commercial strength.

The management team is focused on
executing this strategy to create a stronger,
structurally sound business, building
on our strong operating performance.
The Committee has been mindful of the
strategic priorities when considering
remuneration for our Senior Executive

Group, and we have looked to highlight the
alignment between the strategy and future
pay arrangements.

During 2018, ITV made good initial progress
towards implementation of the More than
TV strategy, with investment and cost-
saving programmes on-track. In addition,
we have recently announced an exciting
vision for a new SVOD service.

While challenging market conditions and
political uncertainty persist, during 2018 ITV
largely performed in line with expectations
with outperformance in certain areas.
Viewing across ITV platforms increased
by 7% supported by a strong schedule
and ITV Studios delivered growth of 6%.

In 2018 ITV demonstrated its resilience in
what was a testing year for the UK economy.
During 2018, there was a further contraction
in the spot advertising market due to the
continued economic and political
uncertainty impacting business conﬁdence.
Given this backdrop, the EBITA result
represents a robust outcome. This outcome
was underpinned by another year of strong
cash conversion, a record outcome for share
of viewing of 23.2% (2017: 21.7%) and a 5%
growth in total non-advertising revenue.
Overall ITV has delivered another year of
strong operating performance as well as

ITV plc Annual Report and Accounts 2018

ITV demonstrated its
resilience in what was
a testing year for the
UK economy. Overall
ITV has delivered
another year of strong
operating performance
as well as making
a number of essential
investments and
strategic progress
towards future success.

Remuneration Report

making a number of essential investments
towards future success. This underlying
strength and conﬁdence is reflected in the
full year dividend for 2018 which is up 3%.

I would like to thank all investors who
engaged with us for their time and
I look forward to maintaining this dialogue
as we review our policy going forward.

For 2019 LTIP awards we intend to
maintain a similar balance of performance
measures. However, we will await
ﬁnalisation of our strategic investment
plans before publishing targets for 2019.

Incentive outcomes for 2018
The bonus outcomes for 2018 reflect
the strong performance delivered against
the targets set at the start of the year.

In 2018, ITV demonstrated its resilience in
what was a testing year for the UK economy.
Overall ITV has delivered another year of
strong operating performance as well as
making essential investments and strategic
progress towards future success.

Notwithstanding the above, the Committee
was mindful of how current macroeconomic
uncertainty has recently impacted many
UK exposed stocks, including ITV. In this
context, the Committee exercised discretion
and determined that while the Executive
Directors had performed well against
the targets set at the start of the year,
bonus awards should be scaled back by
a 10 percentage point reduction to the
overall payment.

The LTIP award made in 2016 lapsed
in full, largely reflecting the fact that the
performance targets were set in a more
positive economic environment. While
this outcome is clearly disappointing,
it does demonstrate our commitment
to pay-for-performance.

Shareholders will note that the 2018 single
ﬁgure (page 98) for Carolyn McCall includes
certain buyout awards agreed on her
appointment, and disclosed in full in last
year’s report. These awards directly
replace awards forfeited from her previous
employer, and largely relate to legacy
easyJet incentive plans. They do not form
part of ITV’s ongoing pay structure.

Aligning incentives with the strategy
In last year’s report, we noted that following
consultation with our largest shareholders
we had decided to defer the target setting
process for 2018 LTIP awards until the
completion of the strategy refresh. This was
to ensure that the performance conditions
for the 2018 LTIP awards were closely linked
to the future strategy.

Following a detailed review, the Committee
determined that the 2018 LTIP awards
should focus on three clear and simple
performance areas. The metrics selected
directly align with the More than TV
strategy and capture performance in
each of the following three areas:

(1) Strengthen – integrated producer
broadcaster;

(2) Grow – UK and global production; and

(3) Create – Direct to Consumer business.

We consulted with our largest shareholders
regarding the proposed targets for 2018
LTIP awards. During this consultation, it was
apparent that many of our shareholders
appreciated the alignment with the strategy
and were sympathetic to the challenges
faced by the industry given the uncertain
macroeconomic environment. Overall, there
was strong support for the proposals.

Despite this support, we note that there are
a diverse range of views from our investors
regarding the choice of performance
measures. In light of these differing
opinions, we have gone forward with an
approach which the Committee believes
will motivate management towards the
successful execution of the strategy over
the longer term and also has the support
of the majority of our largest shareholders.

We continue to value the views of all of
our shareholders, including those who
put forward alternative viewpoints during
consultation. All feedback was debated
at length by the Committee and we
believe that this resulted in a more robust
decision-making process. Further details
of measures and targets for LTIP awards
are set out on page 101.

Strategic ReportFinancial StatementsAdditional informationGovernanceGovernance

Remuneration Report
continued

Strategic alignment of remuneration
with KPIs for 2018 (pages 28 to 31)

LTIP

Cumulative adjusted EPS
Financial KPI

Total non-advertising revenues
Financial KPI

Viewing health – ITV Family SOV
Strategic KPI

Viewing health – Online viewing
Strategic KPI

Performance
weighting

40%

10%

Annual Bonus

ITV adjusted EBITA
Financial KPI

Proﬁt to cash conversion
Financial KPI

Individual targets

Performance
weighting

60%

15%

25%

In this year’s report we have provided
additional detail as to how we currently
comply with the remuneration provisions
within the 2018 Corporate Governance
Code (2018 Code) which takes effect for
2019. Whilst ITV is well placed against the
majority of provisions, we will use the policy
vote as a further opportunity to review
how our approach compares with evolving
market practice at that time.

In line with the 2018 Code, the Committee
already dedicates considerable time to
understanding pay in the wider organisation.
While the review of matters relating to,
for example, all-colleague pay or gender
and BAME pay provide important context
for the Board, these are also matters which
the Committee considers.

We hope that you ﬁnd this report to be
clear and transparent. We remain
committed to taking a measured approach
to pay and continue to value the support
of our shareholders in this approach.

Mary Harris
Chair, Remuneration Committee
27 February 2019

Board changes
On 31 December 2018 Ian Grifﬁths stepped
down from the Board after ten years.
During his tenure, ITV underwent a signiﬁcant
transformation and the Board would like
to thank Ian for his sustained contribution
to the business.

On departure, Ian’s remuneration
arrangements were determined in
accordance with his contractual terms
and the limits set out in the Remuneration
Policy approved by shareholders at the
2017 AGM. All variable incentives continue
to be performance based and will be
prorated for time served. Full details of the
departure terms are set out on page 103.

In November 2018, we announced that Chris
Kennedy would join the Board as Group CFO
during 2019. As announced on appointment,
the terms of his remuneration package will
be consistent with the Remuneration Policy.
One major change agreed was a reduced
cash allowance for income in retirement of
9% of salary (below the policy maximum
of 25%) which aligns with retirement
beneﬁts offered in the wider organisation.
Full details of his remuneration arrangements
are set out on pages 102 and 103.

Looking ahead
The current Remuneration Policy was
approved by shareholders at the 2017 AGM.
Under the normal three year renewal cycle,
a new Remuneration Policy will be
presented at the 2020 AGM. As part of this
renewal process, the Committee intends
to undertake a review of current pay
arrangements to ensure that they remain
ﬁt-for-purpose. We will once again consult
with our largest shareholders regarding
any signiﬁcant changes in approach.

ITV plc Annual Report and Accounts 2018

Remuneration Report

Who is on the
Committee
The Committee is
composed entirely of
Non-executive Directors.

The current members are:
• Mary Harris (Chair)
• Salman Amin (from 1 June 2018)
• Sir Peter Bazalgette
• Roger Faxon
• Anna Manz
• Duncan Painter (from

1 February 2019)

John Ormerod stepped down
from the Board and the
Committee on 10 May 2018.

Full details of attendance at
Committee meetings can be
found on the table on page 71.

Detailed biographies can be
found on page 66 and 67.

Our role
Following each meeting, the
Committee communicates
its main discussion points
and ﬁndings to the Board.

The Committee’s terms of
reference can be accessed
on our website.

www.itvplc.com/
investors/governance

Meetings in 2018
In addition to Committee
members, the Executive
Directors, Group HR
Director, Company
Secretary, Director of
Reward & Pensions and
independent adviser
Deloitte regularly
attended meetings.

The main role of the Committee
is to:
• Review the ongoing

appropriateness, relevance
and effectiveness of the
Remuneration Policy including
in relation to retention and
development.

• Propose to shareholders

changes to the Remuneration
Policy as appropriate.

• Approve the implementation

of remuneration arrangements
for the Executive Directors,
Management Board and other
senior executives (together the
Senior Executive Group) taking
into account arrangements for
the wider employee group.
Details on employee
remuneration can be found
on page 109.

• Approve the design of the
Company’s annual bonus
arrangements and long-term
incentive plans, including the
performance targets that apply
for the Senior Executive Group.

• Determine the award levels

for the Senior Executive Group
based on performance against
annual bonus targets and
long-term incentive conditions.

November
• Bonus framework and targets
• LTIP performance targets and

shareholder consultation
• Review of remuneration

consultants

• Gender and BAME pay

gap reporting

• Annual pay review
• CEO pay ratio reporting

January
• Financial performance update
• Indicative bonus outcomes and

payout levels

• Indicative LTIP performance

and vesting levels

• Pay review outcomes and

changes to Senior
Executive Group

• Remuneration Report
• Adviser independence

February
• Bonus targets considered

for current year

• LTIP awards and targets

considered for current year
in conjunction with
strategic review

• Remuneration Report
• Compliance with

Remuneration Policy

• Compliance with shareholding

guidelines

April
• Market update
• Financial performance update
• UK Corporate Governance Code

September
• Reward framework and

current trends

• LTIP performance targets

and strategic review.

• Consideration of remuneration
in the wider employee group

October
• Bonus payout forecasts
• Consider operation of

current incentives

• LTIP performance targets

and shareholder consultation

Annual review
An annual review of
the performance
of the Committee
is conducted each year.

For 2018, in addition to feedback
from members of the Committee,
input was also sought from
the Executive Directors and
Deloitte, the independent adviser
to the Committee.

Overall, the review concluded
that the Committee is responding
appropriately to its terms of
reference and will continue to
develop its role.

During 2019 the Committee will
review its role in considering
remuneration for the wider

workforce to ensure compliance
with the 2018 Code.

In addition they will review the
terms of reference of the
Committee and consider any
further actions required to
ensure full compliance.

Strategic ReportFinancial StatementsAdditional informationGovernanceGovernance

Remuneration Report
continued

Remuneration Policy Summary

The Company’s Remuneration Policy was approved by shareholders at the AGM on 10 May 2017. This Policy will continue to apply for 2019.
Under the normal three year renewal cycle, the Remuneration Policy will next be submitted for approval by shareholders at the 2020 AGM.

The Policy aims to balance the need to attract and retain high-quality talent essential to the Company’s success with the need to be
cost effective and to reward exceptional performance. The Policy seeks to balance these factors, while taking into account prevailing
best practice and fair outcomes for investors.

A signiﬁcant proportion of the package is tied to the achievement of stretching performance conditions that align remuneration with
our strategy to deliver strong business performance and create shareholder value.

A summary of the Policy is provided below. The full Policy can be found on our website.

www.itvplc.com/investors/governance

Element

Summary of Policy

2019 Approach

Fixed pay

Base salary

Purpose: To reflect the skills, responsibility and experience and support the
recruitment and retention of Executive Directors of the calibre required to deliver
the business strategy.

Operation: Reviewed annually with consideration given to personal and company
performance, pay levels in relevant market and the wider employee pay review.

Carolyn McCall:
£922,500 (+2.5%)

Chris Kennedy:
£660,000
(on appointment)

Provision for an
income in retirement

Purpose: To provide competitive post-retirement beneﬁts or cash allowance as a
framework to save for retirement.

Carolyn McCall:
15% of salary

Operation: The maximum contributions or cash allowances for the Executive Directors
are 25% of base salary.

Chris Kennedy:
9% of salary

Beneﬁts

Purpose: Ensures that the package is competitive.

In line with policy

Operation: Set at a level which the Committee considers to be appropriately positioned
taking into account typical market levels, individual circumstances and the overall cost
to the business.

Variable performance-related pay

Annual Bonus:
Cash and Deferred
Share Award (DSA)

Purpose: To incentivise achievement of key ﬁnancial measures and objectives to deliver
the business strategy. Compulsory deferral provides alignment with the shareholder
experience and supports retention of executives.

Operation: Maximum opportunity will not exceed 200% of salary. The majority of the
opportunity is based on corporate and ﬁnancial measures, the remainder on performance
against individual and/or strategic objectives. Targets and measures are set annually
based on business plans at the start of the year.

Not more than two-thirds delivered in cash with the balance deferred into shares under
the DSA, normally for a period of three years. Subject to malus and clawback.

Long-Term Incentive
Plan (LTIP)

Purpose: To incentivise delivery of performance aligned with the business strategy over
the longer term and the creation of shareholder value.

Operation: The maximum award that may be granted in any ﬁnancial year is 350%.

Performance measures are closely linked to ﬁnancial and strategic priorities.

Performance period is not less than three years, with awards to be held for
an additional two year holding period after the end of the performance period.
Subject to malus and clawback.

Maximum bonus opportunity

Carolyn McCall:
180% of salary

Chris Kennedy:
165% of salary

Performance measures
(see page 102)

2019 LTIP grant levels

Carolyn McCall:
265% of salary

Chris Kennedy:
225% of salary

Performance measures
(see page 102)

ITV plc Annual Report and Accounts 2018

Remuneration Report

Remuneration Policy in action 2018

Time horizons

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Fixed pay

Paid over
ﬁnancial year

Annual Bonus

Paid in March 2019

Deferral (one-third)

LTIP

Performance period – three years

Holding period – two years

Shareholding

Safeguards
– LTIP

Safeguards
– Annual Bonus

CEO: 400% of salary
CFO: 200% of salary

Malus and Clawback apply

How our incentive pay links to our strategy
Our incentive pay structure is designed to align with our strategy. Below we set out how each performance element under our
incentive pay links to our three strategic areas.

Strengthen
Integrated
producer
broadcaster

Grow
UK and global
production

Create
Direct to
Consumer

KPI’s are set out on pages 28 to 31

Annual bonus

ITV adjusted EBITA
Key measure of proﬁtability that reflects the underlying performance
of the business.

Proﬁt to cash conversion
Our measure of effective cash generation used for working capital management.

Cost savings
Permanent savings to the business. Managing our cost base is key as we aim to
run our business as efﬁciently as possible and fund investments in line with our
strategic priorities.

Individual strategic
Speciﬁc targets for each Executive Director to deliver on strategic priorities.
These are adjusted annually to reflect strategic need.

LTIP

Adjusted EPS
Key measure of overall Group performance, capturing performance across
all revenue streams.

Total non-advertising revenues
Strategic objective to deliver a growing and stable production business
and a new scaled and proﬁtable Direct to Consumer business.

Viewing health
ITV Family SOV – keeping our free-to-air proposition strong and our audience
ﬁgures healthy.

Online Viewing – growing ITV VOD viewing via catchup and other devices.

Strategic ReportFinancial StatementsAdditional informationGovernance
Governance

Remuneration Report
continued

Annual Report on Remuneration

The sections of the Annual Report on Remuneration that have been audited by KPMG are pages 98 to 100, page 103 to 104 (limited
to Non-executive Directors and payments to past Directors for loss of ofﬁce sections) and pages 105 to 106.

Remuneration Policy application in 2018
The following section provides details of how the current Remuneration Policy was implemented in 2018.

Executive Directors
The table below sets out in a single ﬁgure the total remuneration for both Executive Directors for the ﬁnancial year.

Salary
Taxable beneﬁts
Pension
Bonus (cash and shares)
Share awards
Transitional arrangements
Buy-out awards

Interim arrangements
Total
Total (excluding transitional arrangements)

Notes

2, 3

Carolyn McCall 1

Ian Grifﬁths

2018
£000

887
17
133
1,175
–

1,483

–
3,695
2,212

2017
£000

–
–
–
–
–

–
–
–

2018
£000

642
15
161
779
–

158
1,755
1,597

2017
£000

608
15
152
979
450

459
2,663
2,204

1. Carolyn McCall was appointed to the Board on 8 January 2018 and remuneration is prorated from that date.
2. The 2016 LTIP awards were subject to performance conditions measured to 31 December 2018. As the performance conditions were not achieved, this award will lapse.
3. In the 2017 Annual Remuneration Report, the amount shown for Ian Grifﬁths was the indicative vesting value of the 2015 LTIP award that was subject to performance conditions
measured to 31 December 2017. The ﬁgure shown in the table above represents the subsequent value received on the vesting date of 27 March 2018 using the share price on
that date (145.18 pence).

4. The ﬁgure shown represents awards made to Carolyn McCall in March 2018 to replace awards forfeited on joining ITV. Further details are shown on page 103.
5. As disclosed in May 2017, interim arrangements were implemented following Adam Crozier’s departure from the Board. The 2018 remuneration for Ian Grifﬁths includes a

temporary supplement that consisted of £54k salary, £13k pension and £90k bonus.

The aggregate emoluments for all Directors as required under Schedule 5 (SI 2008/410), is the total remuneration shown in the table above less share awards but including
gains on exercise of options and amounts receivable under LTIPs, plus the total emolument ﬁgures for Non-executive Directors shown on page 100.
Sir Peter Bazalgette was Executive Chairman for the period 30 June 2017 to 8 January 2018. Details of his remuneration arrangements are set out on page 100.

Further information in relation to each of the elements of remuneration for 2018 set out in the table above is detailed below.
An explanation for 2017 is set out in detail in our 2017 Annual Report and Accounts, which can be found on our website.

www.itvplc.com/investors

Salary
Carolyn McCall’s annual salary for the year was £900,000. She was appointed to the Board on 8 January 2018 and the prorated salary
received in the year was £887,308.

As disclosed in last year’s report, Ian Grifﬁths received a 2.75% salary increase from 1 January 2018 in line with the wider employee group.
For 2018, his salary was £642,213.

Taxable beneﬁts and pension
The beneﬁts provided to the Executive Directors include the cost of private medical insurance and car-related beneﬁts.

ITV plc Annual Report and Accounts 2018

Remuneration Report

The Executive Directors were not part of an ITV pension scheme but received a cash allowance in lieu of pension. Carolyn McCall received
15% and Ian Grifﬁths received 25% of base salary respectively. The cash allowance does not form part of the base salary for the purpose
of determining incentives.

Bonus (cash and shares)
Annual incentives are provided to Executive Directors through the bonus, with one-third of any award usually deferred into shares under
the Deferred Share Award Plan (DSA). The performance conditions that apply to the bonus are set on an individual basis and are linked
to the Company’s corporate, ﬁnancial and strategic priorities. This enables the Committee to reward both annual ﬁnancial performance
delivered for shareholders and performance against speciﬁc ﬁnancial, operational or strategic objectives set for each Executive Director.

The majority of the bonus (75%) was based upon the achievement of corporate and ﬁnancial targets, with payout determined in
accordance with pre-set target ranges subject only to the usual adjustments to exclude the impact of acquisitions and currency
movements. As indicated in the letter from the Chair, the ﬁnancial targets were set to reflect expected trends in the advertising market
and planned essential investments in core technologies and capabilities as well as the network programme budget agreed by the Board.
The targets were considered to be stretching in this context.

The corporate and ﬁnancial targets used for 2018, together with performance against those targets and the resulting level of payout
are set out below.

Performance measure

ITV adjusted EBITA
Proﬁt to cash conversion

Performance required

Weighting

20%

100%

Performance
achieved

Payout level
(% of maximum)

60% £754.3m
80%
15%

£834.3m
88%

£810m
88%

75.7%
100%

The remainder of the bonus (25%) was based upon the Committee’s assessment of the contribution each Executive Director made to the
overall strategy through the delivery of speciﬁc targets. The Committee applies suitable judgement when assessing performance in this
regard. The Executive Directors shared common objectives; completion of the strategy refresh, implementation of the organisational
re-design, and ensuring communication and engagement with the new strategic priorities. They delivered well against these objectives –
the More than TV strategy was announced in July 2018, a Direct to Consumer business was created, and the organisation redesign process
commenced and will be completed in 2019. The Committee therefore agreed that this element should deliver an outcome of 92.5% of
maximum for both Directors.

In 2018, ITV demonstrated its resilience in what was a testing year for the UK economy. During 2018, there was a further contraction
in the spot advertising market due to continued economic and political uncertainty impacting business conﬁdence. Given this backdrop,
the EBITA result for 2018 represents a robust outcome. This outcome was underpinned by another year of strong cash conversion,
a record outcome for share of viewing of 23.2% (2017: 21.7%) and a 5% growth in total non-advertising revenue. Overall ITV has
delivered another year of strong operating performance as well as making a number of essential investments towards future
success. This underlying strength and conﬁdence is reflected in the full year dividend for 2018 which is up 3%.

Notwithstanding the above, the Committee was mindful of how current macroeconomic uncertainty has recently impacted many UK
exposed stocks, including ITV. In this context, the Committee determined that while the executive team had performed well against the
targets set at the start of the year, the Committee would exercise its discretion and trust. The outcome from the corporate and ﬁnancial
elements of the bonus should therefore be scaled back by an amount equivalent to 10 percentage points of the overall award.

Payments and deferrals in respect of the ﬁnancial year are set out below.

Carolyn McCall
Ian Grifﬁths

% of maximum
bonus opportunity
earned

83.6%
83.6%

Total value

£1,334,423
£988,002

% of bonus
earned after
discretion applied

73.6%
73.6%

Total value

£1,174,707
£869,792

Value delivered
in shares under
the DSA

£391,569
£289,931

Value paid
in cash

£783,138
£579,861

Of the total bonus shown for Ian Grifﬁths, £779k relates to his ongoing bonus arrangements while £90k relates to the interim arrangements, see note 5 on page 98. The maximum
bonus opportunity for Ian Grifﬁths was increased from 165% to 180% for the period he was in receipt of a temporary salary supplement.

Strategic ReportFinancial StatementsAdditional informationGovernanceGovernance

Remuneration Report
continued

Share awards
We are required to show share awards in the single ﬁgure table on page 98 according to the year in which the performance period for each
performance measure ended.

The awards made in 2016 under the LTIP were subject to performance measured to 31 December 2018. The performance conditions were
not met and in accordance with the terms of the awards these will now lapse. Further details on the awards and performance measures
can be found on page 106 and in the 2016 Remuneration Report.

Transitional arrangements
As a result of joining ITV, Carolyn McCall forfeited various interests under legacy incentive arrangements operated by her previous
employer, easyJet plc. As explained in last year’s Remuneration Report, the Committee agreed to buyout these arrangements on
a comparable basis.

The single ﬁgure table for 2018 includes payments relating to: (i) 2015 easyJet deferred bonus (£209k), (ii) 2016 easyJet deferred bonus
(£92k), (iii) 2016/17 easyJet bonus (£910k); and (iv) 2014 easyJet long-term incentive awards (£271k). In all cases, the level of payout reflected
the value of awards forfeited. No buyout was made in respect of the 2015 easyJet long-term incentive awards, as the equivalent easyJet
award lapsed in full. Further details of the outstanding buyout arrangements are set out on page 103.

As noted in last year’s Remuneration Report, following Adam Crozier’s decision to step down from the Board, Ian Grifﬁths was asked to lead
the executive team on an interim basis and take on additional responsibilities until a new Chief Executive joined the business. To reflect
these additional responsibilities, it was agreed in May 2017 that he would receive a temporary salary supplement of £200,000 per annum
and an increased maximum bonus opportunity of 180% of salary. In order to facilitate a suitable transition, this supplement remained
payable until 7 April 2018.

Chairman and Non-executive Directors
The table below sets out in a single ﬁgure the total remuneration for Non-executive Directors for the ﬁnancial year.

Peter Bazalgette (Chairman)
Salman Amin
Edward Bonham Carter
Margaret Ewing
Roger Faxon
Mary Harris
Andy Haste
Anna Manz
John Ormerod
Duncan Painter

Notes

2
3
4

5
6, 7

6
8

Fees

2018
£000

450
68
20
80
70
101
35
76
33
43
976

2017
£000

450
64
–
12
69
86
103
74
90
–
948

Taxable beneﬁts1

Total

2018
£000

2017
£000

3
8
–
1
6
4
–
–
–
–
22

2
4
–
–
9
4
–
–
–
–
19

2018
£000

453
76
20
81
76
105
35
76
33
43
998

2017
£000

452
68
–
12
78
90
103
74
90
–
967

The amounts disclosed in the table above relate to the reimbursement of taxable relevant travel and accommodation expenses (and associated taxes) for attending Board
meetings and related business. In addition, Peter Bazalgette receives private healthcare.

2. Salman Amin joined the Remuneration Committee on 1 June 2018.
3. Edward Bonham Carter was appointed to the Board as Senior Independent Director on 11 October 2018.
4. Margaret Ewing became Chair of the Audit and Risk Committee on 10 May 2018.
5. Mary Harris was appointed interim Senior Independent Director from 10 May 2018 to 11 October 2018.
6. Andy Haste and John Ormerod both stepped down from the Board and Committees on 10 May 2018.
7.
8. Duncan Painter was appointed to the Board on 1 May 2018.

Andy Haste stepped down from the Remuneration Committee on 10 May 2017.

100

ITV plc Annual Report and Accounts 2018

Remuneration Report

LTIP awards made in 2018
On 28 March 2018, an award was made under the LTIP to Carolyn McCall and Ian Grifﬁths, subject to performance over the period
to 31 December 2020 as set out below.

% salary
awarded

Number of share
options (nil-cost)

Value at
award date

Performance
period ends

Holding period

Vesting date

Release date

Carolyn McCall
Ian Grifﬁths

265
225

1,641,997
995,134

£2,385,000
£1,445,432

31 December 2020
31 December 2020

2 years
2 years

28 March 2021
28 March 2021

28 March 2023
28 March 2023

As noted in the letter from the Chair, the performance measures and targets for the 2018 awards were determined following consultation
with our largest shareholders. For the 2018-2020 performance cycle the performance measures selected are intended to be directly
aligned to the three pillars of the More than TV strategy communicated to the market during 2018 and as set out on page 24.
The alignment between the strategy and the performance measures is summarised in the table on page 97.

When setting the performance measures and targets the Committee took into account the More than TV strategy, the planned essential
investments over the period and current internal and external forecasts for future performance. The targets are reflective of current
legislative and regulatory frameworks. The Committee views these targets as stretching given the uncertain economic environment.
Delivery of performance at the top of the range would represent signiﬁcant outperformance.

The performance measures and targets for 2018 are:

Adjusted EPS
Total non-advertising revenues
Viewing health:
- ITV Family SOV
- Online viewing

KPI

Weightings

see page 28

see page 29

see page 30

40%
40%

10%
10%

Threshold
(20% vesting)

13p
3% growth pa

Maximum
(100% vesting)

17p
6.5% growth pa

21.2%
+200m hours growth

23.1%
+400m hours growth

There will be scaled vesting between the threshold and maximum level. The interim vesting points are closely linked to the strategy and are therefore currently commercially
sensitive. However, full disclosure of the scale will be provided following the end of the performance period.

The Remuneration Committee will retain the ability to adjust the targets and deﬁnitions for exceptional, one-off events or new business
opportunities, which may arise over the course of the performance period, in order to ensure that the plan continues to operate in line
with the Committee’s original intentions.

As a further safeguard, and in line with the 2018 Corporate Governance Code, the Remuneration Committee will continue to have
discretion to amend the ﬁnal vesting level should any formulaic assessment of performance not reflect a balanced view of the business
performance during the performance period. When making this judgement the Committee may consider any such factors it deems
relevant. The Committee believes that this discretion is an important feature of the plan and mitigates the risk of unwarranted vesting
outcomes. This provision will apply to all LTIP awards granted from 2018 onwards.

101

Strategic ReportFinancial StatementsAdditional informationGovernanceGovernance

Remuneration Report
continued

Remuneration Policy in 2019
Executive Directors
The following section provides details of how the Remuneration Policy will be implemented in 2019. The details below include Chris
Kennedy who joined the Board in February 2019.

Salary
Salaries are paid in line with the Remuneration Policy. On 1 January 2019, Carolyn McCall received an increase of 2.5% in line with the wider
employee group.

Carolyn McCall
Chris Kennedy

2019 Salary

£922,500
£660,000

Taxable beneﬁts and pension
These are provided in line with the Remuneration Policy. Both Executive Directors receive private medical cover, car-related beneﬁts,
and a cash allowance in lieu of participation in any ITV pension scheme. Carolyn McCall’s pension beneﬁts for 2019 will remain unchanged
(15% of salary). In accordance with the 2018 UK Corporate Governance Code the Committee has determined that Directors who join from
1 January 2019 will receive pension contributions in line with the wider employee group, therefore Chris Kennedy will receive a cash
allowance in lieu of pension of 9% of salary.

Bonus (cash and shares)
The maximum bonus opportunity for 2019 remains unchanged: Carolyn McCall – 180% of salary; Chris Kennedy – 165% of salary. Awards
made to Executive Directors through the bonus will be paid two-thirds in cash and one-third deferred into shares under the DSA.

The performance measures and weightings for 2019 bonuses will be broadly similar to previous years. The target ranges for ﬁnancial
measures have been set to reflect planned essential investments and current expectations regarding advertising market performance for
2019. Overall the Committee is satisﬁed that the target ranges are realistic but highly stretching in this context. The Board considers the
actual targets for 2019 to be commercially sensitive at this time, however, we envisage providing retrospective disclosure of these targets
in next year’s report. Details of the ﬁnancial performance measures are set out in the table on page 97.

The Committee may adjust bonus targets or outcomes to reflect signiﬁcant one-off events (e.g. major transactions), foreign exchange
movements or material changes to assumed plan conditions to ensure that the plan continues to reward performance fairly.
The Committee may amend the bonus pay-out should any formulaic assessment of performance not reflect the overall business
performance of the year.

Share awards
The Committee’s intention is for 2019 LTIP awards to be subject to the same performance measures and weightings as those applicable to
2018 awards. As noted above, these metrics have been discussed at length with our largest shareholders.

For 2019 LTIP awards we intend to maintain the same balance of performance measures as for 2018. However, we will await ﬁnalisation of
our strategic investment plans before publishing targets for 2019. Once the targets are ﬁnalised, the Committee intends to publish them
on the Company’s website.

Malus and Clawback: malus and clawback provisions may be operated at the discretion of the Committee in respect of any cash and
deferred share elements of the bonus and awards made under the LTIP. Under malus, unvested share awards (including any LTIP shares
subject to a post-vesting holding period) can be reduced (down to zero if considered appropriate) or be made subject to additional
conditions. Clawback allows for repayment of bonuses previously paid and/or shares previously received following vesting. Malus/clawback
can be operated up to four years following the start of the relevant bonus year for bonuses, and up to six years from the relevant date of
grant for LTIP awards. The circumstances in which the operation of these provisions would be applied may be considered from time to time
but currently include material misstatement of results, gross misconduct or fraud. The plan rules have been reviewed and the Committee
is happy that they provide sufﬁcient scope to exercise discretion and judgement in line with the spirit of the 2018 Corporate Governance
Code. The Committee is also happy that there is no need to instigate either malus or clawback for any vested or outstanding awards at
this time.

102

ITV plc Annual Report and Accounts 2018

Remuneration Report

Buyout arrangements
Carolyn McCall: In addition to the awards set out in the table on page 100, Carolyn McCall is also entitled to a buyout in respect of an
easyJet long-term incentive granted in 2016 based on performance to 30 September 2019. The replacement award will be subject
to ITV performance to 31 December 2019 based on the same performance measures as the 2018 LTIP. The outcome for this award will
be disclosed in next year’s Remuneration Report. Following the assessment of performance any vested shares will be subject to
a two year holding period.

Chris Kennedy: In line with the Remuneration Policy, it was agreed that ITV would buyout certain bonus and share awards that
Chris forfeited by leaving his previous employer, Micro Focus International plc, and joining ITV. Details of forfeited arrangements
are set out in the Micro Focus International plc Annual Report and Accounts for 2017/18.

In determining the buyout, the Committee has taken into account relevant factors including performance conditions attaching to
the forfeited awards, the likelihood of the awards vesting and the form and timing of the awards. The awards will be bought out on
a comparable basis.

All elements of the buyout package are subject to continued employment. If Chris gives notice to leave the Company within 12 months
of commencing employment, all awards paid or that vested during this period will be repayable by him.

The buyout arrangements comprise the following:

• Annual bonus – bonus award forfeited in respect of 2018 will be replaced with an award of equivalent value. This will include a cash
payment of £372,000 payable in March 2019 and a deferred share award equivalent to £186,000 which will vest in September 2021.
• Long-term incentives – the forfeited 2018 long-term incentive award will be replaced with ITV share awards made in March 2019.
An award with an equivalent value of £210,000 will vest in March 2021 and an award with an equivalent value of £31,000 will vest in
September 2021. Given the value of the awards, the Committee determined that, for simplicity, the awards would be granted at an
equivalent value, discounted to reflect performance and vesting subject to continued employment. Full details regarding the buyouts
denominated in shares will be set out in the relevant stock exchange announcement at the time of grant, and shareholders will also
be provided with additional detail in next year’s Remuneration Report.

Non-executive Directors
There has not been an increase to Non-executive Director fees since 2016. Current fees are as set out below.

1 January 2019
£

1 January 2018
£

% Change

Chairman
Board fee
Additional fees for:
Senior Independent Director
Audit and Risk Committee Chairman
Audit and Risk Committee member
Remuneration Committee Chairman
Remuneration Committee member

450,000
65,064

25,000
20,000
5,371
20,000
5,371

Sir Peter Bazalgette acted as Executive Chairman from June 2017, with no additional fees paid, and resumed his non-executive role from 8 January 2018. In addition to his fee, he
received private medical insurance and this is disclosed on page 100.

Details of Committee memberships can be found on page 71.

Other disclosures
Payments to past directors
Ian Grifﬁths stepped down from the Board on 31 December 2018. As announced on the Company’s website on 2 January 2019, salary,
pension allowance and other contractual beneﬁts will continue to be paid until 31 March 2019 when his employment will cease. In line
with his contractual arrangements he will also receive a payment in lieu of the remainder of his 12-month notice period totalling
£408,014. Other beneﬁts will continue until the end of the notice period, 30 September 2019. In addition, Ian received an allowance
for legal advice and outplacement services totalling £55,000.

–
–

–
–
–
–
–

103

Strategic ReportFinancial StatementsAdditional informationGovernanceGovernance

Remuneration Report
continued

The Committee agreed to treat share awards as follows:

• DSA – for bonus already earned, all outstanding awards will be released on the usual vesting dates.
• LTIP – any unvested nil-cost options will be prorated to 31 March 2019 and vest as follows: the 2017 award will vest in March 2020 and
become exercisable in March 2022 and the 2018 award will vest in March 2021 and become exercisable in March 2023. The 2015 award
that vested in March 2018 is due to release in two tranches, the ﬁrst tranche in March 2019 and the second tranche in March 2020.
It has been agreed however that both tranches will release in March 2019.

In line with contractual arrangements, a bonus payment will be made in March 2019 for the 2018 bonus year. One-third of this will be
payable in shares in the normal way but the Committee has agreed that these will not be subject to a deferral period. The value of these
shares is included in the single ﬁgure table on page 98 with further details on page 99.

Chief Executive remuneration
The table below provides a summary of the total remuneration received by the Chief Executive over the last ten years, including details
of the annual bonus payout and long-term incentive award vesting level in each year.

2018
2017

2016
2015
2014
2013
2012
2011
2010

2009

Carolyn McCall
Peter Bazalgette (for the six month period served as Executive Chairman)
Adam Crozier (for the six month period served)
Adam Crozier
Adam Crozier
Adam Crozier
Adam Crozier
Adam Crozier
Adam Crozier
Adam Crozier (for the eight month period served)
John Cresswell (for the four month period served) – interim Chief Executive
Michael Grade – Executive Chairman

Total
remuneration
£000

Bonus %
of maximum

Long-term
incentive award
vesting %
of maximum

3,695
225
2,050
3,632
3,881
4,842
8,399
2,915
2,158
1,350
661
2,583

73.6
–
97.9
40
96
94
93
91
88
95
83
94

–
–
63
80
75
75
87
12
–
–
–
–

The long-term incentive award vesting percentage relates to the proportion of the award that met performance conditions in the relevant ﬁnancial year.

Comparison of Chief Executive to wider employees
The table below provides details of the percentage change in the base salary, beneﬁts and bonus of the Chief Executive between
31 December 2017 and 31 December 2018 compared with the average percentage change for other employees.

Chief Executive
All employees

Notes

1, 2
3, 4

% change in
base salary

% change in
beneﬁts

% change in
bonus payments

(4.35)
4.76

(0.74)
15.66

(29.2%)
(28.28%)

1. These ﬁgures are the annualised amounts received by Adam Crozier for 2017 and Carolyn McCall for 2018.
2. Beneﬁts include the cost of medical insurance and car-related beneﬁts.
3. As the majority of employees are based in the UK and share the same beneﬁts as the Chief Executive, overseas employees have not been included.
4. The percentage change in beneﬁts is the average change for all UK employees (excluding the Chief Executive) with any of the same beneﬁts as the Chief Executive.

The Committee is mindful of pay practices across the Group and during the course of the year regular updates are provided regarding
remuneration trends for the wider employee population. The Committee considers pay in the wider group from a number of perspectives.
The Remuneration Committee is also mindful of the new requirements to disclose the ratio between CEO’s remuneration and other
employees in the organisation. These new disclosure requirements will come into effect for the 2019 Directors’ Remuneration Report.
During the course of 2019, the Committee will be dedicating time to understanding how the ratio varies across the Group and in different
performance scenarios.

Overall, the Committee is keen to ensure pay practices across the Senior Executive Group are fair, reflect the nature of the role and
align with performance.

104

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Remuneration Report

Directors’ share interests
Shareholding guidelines
The Committee continues to recognise the importance of Directors being shareholders so as to align their interests with other shareholders.

Shareholding guidelines are in place, which encourage Executive Directors to build up a holding of ITV plc shares based on a percentage of base
salary. Normally, 50% of the requirement must be obtained within three years of appointment and the remainder within ﬁve years.

Where the value of shares required to be held increases as a result of a salary increase (or an increase in the relevant percentage),
the Executive Directors will have three years from such increase to achieve compliance. The Committee may change the guidelines
so long as they are not, overall, in the view of the Committee, less onerous.

Interests in share awards following departure enable departing Directors to remain aligned with the interest of shareholders for an
extended period after leaving the company. Deferred Share Awards and LTIP awards subject to a holding period will normally vest (and be
released from their holding periods) at the normal time. This means that Directors may retain a signiﬁcant interest in shares for up to ﬁve
years following departure from the Company. The Remuneration Committee intends to further review the Company’s arrangements for
alignment with shareholders post-cessation of employment as part of the review of the Remuneration Policy that will take place prior to
the 2020 AGM.

Non-executive Directors are required to build and then maintain a holding of 100% of their base fee over the six years from the date
of appointment to the Board (unless for some reason they are unable to retain their fees).

Interests in shares
The ﬁgures set out below represent shareholdings in the ordinary share capital of ITV plc beneﬁcially owned by Directors and their
family interests at 31 December 2018.

Executive Directors
Carolyn McCall
Ian Grifﬁths
Non-executive Directors
Salman Amin
Peter Bazalgette
Edward Bonham Carter
Margaret Ewing
Roger Faxon
Mary Harris
Anna Manz
Duncan Painter

Interests in shares

Notes

31 December
2018

2 January
2018

31 December
2017

181,598
1,456,982

–
1,254,554

14,795
313,497
–
22,700
40,935
31,078
33,268
–

–
249,095
–
6,700
28,910
19,883
32,993
–

–
236,070
–
6,700
28,910
17,870
32,993
–

% required
under
shareholding
guidelines

400
200

100
100
100
100
100
100
100
100

1. Carolyn McCall was appointed to the Board on 8 January 2018.
2. Edward Bonham Carter was appointed to the Board on 11 October 2018.
3. Duncan Painter was appointed to the Board on 1 May 2018.

The value of shares has been calculated using the share price on 31 December 2018 of 125.7 pence.
At 31 December 2018 Ian Grifﬁths had exceeded his shareholding requirement under the shareholding guidelines. Carolyn McCall purchased a signiﬁcant number of shares in the year,
and is required to hold 50% of her requirement by 8 January 2021.
Peter Bazalgette and Roger Faxon would have met their requirements under the NED guidelines based on the average share price in 2018.

105

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Remuneration Report
continued

Outstanding interests under share schemes
The following tables provide details of Directors’ interests in outstanding share awards.

At
1 January
2018

Notes

Awarded
in year

Vested
in year

Exercised
in year

Lapsed
in year

At
31 December
2018

Share price
used for
award
(pence)

Share price
at date of
vesting
(pence)

Date
of release/
exercise
in year

Carolyn McCall
Buy out Awards
28 March 2018
28 March 2018
28 March 2018

LTIP
28 March 2018

Ian Grifﬁths
DSA
28 March 2018
28 March 2017
29 March 2016
27 March 2015

LTIP

28 March 2018
11 May 2017
29 March 2016
27 March 2015

1, 2
1, 2
1, 2

–
–
–

160,406
54,294
209,049

160,406
–
–

–
–
–

–
54,294
209,049

145.25
145.25
145.25

130.00
–
–

17 Dec 2018
–
–

–

1,641,997

–

– 1,641,997

145.25

–

4, 2
4
4
4

–
60,472
121,628
112,186

291,882
–
–
–

–
–
–
112,186

–
–
–
–

291,882
60,472
121,628
–

6
7

–
705,730
536,850
491,722

995,134
–
–
–

–
–
–
–

–
–
–
181,392

995,134
705,730
536,850
309,784

145.25
209.2
241.0
256.7

145.25
199.3
241.0
256.7

–
–
–

–
–
–
145.18 27 March 2018

–
–
–
–

1. The buyout awards shown in the table relate to: (i) 2015 easyJet deferred bonus (160,406 ITV shares); (ii) 2016 easyJet deferred bonus (54,294 ITV shares), which will be eligible

for release in December 2019; and (iii) 2016/17 easyJet bonus – one-third deferred into shares for three years (209,049 shares). In all cases, the values reflect awards forfeited under
previous easyJet incentive arrangements and will vest and be released over the same time horizons as awards forfeited. The values are included in the single ﬁgure table on page 98.

2. DSA awards made in 2018 for 2017 performance and Buy out awards are included in the single ﬁgure table on page 98.
3. The face value of awards granted in the ﬁnancial year to Carolyn McCall under the LTIP was £2,920,389.
4. There are no performance conditions attaching to the DSA.
5. The face value of awards granted in the ﬁnancial year to Ian Grifﬁths under the LTIP was £1,869,390.
6. 2016 LTIP performance conditions were not met in December 2018 and accordingly these awards will lapse.
7. 2015 LTIP performance conditions were met in December 2017 (63%).

Performance conditions that apply to the unvested awards under the LTIP are summarised in the table below. Full details were provided
in previous Remuneration Reports. For awards made in 2018 see page 101.

Cumulative adjusted EPS
ITV Family SOV
Annual non-NAR growth
International production revenue growth
Online, Pay & Interactive revenue growth

2016

2017

Weighting

Threshold
vesting

Threshold

Maximum Threshold

Maximum

50%
20%
10%
10%
10%

20%
20%
20%
20%
20%

54.6p
20.2%
5%
5%
5%

62.4p
21.6%
10%
15%
18%

56.3p
20.2%
5%
5%
5%

64.2p
21.6%
10%
15%
18%

106

ITV plc Annual Report and Accounts 2018

Remuneration Report

External directorships
With speciﬁc approval of the Board, Executive Directors may accept external appointments as Non-executive Directors of other companies
and retain any related fees paid to them.

During the year, the Executive Directors retained fees for the directorships set out below.

Carolyn McCall
Ian Grifﬁths (stepped down from the board of DS Smith plc on 28 June 2018)

Company

Burberry Group plc
DS Smith plc

2018
£000

80
28

Service contracts
The Directors’ service contracts and letters of appointment are available for inspection at the Company’s registered ofﬁce.

Executive Directors: Executive Directors have rolling service contracts that provide for 12 months’ notice on either side.
There are no special provisions that apply in the event of a change of control.

Carolyn McCall
Chris Kennedy

Date of appointment

8 January 2018
21 February 2019

Nature of
contract

Rolling
Rolling

Notice period
from Company

Notice period
from Director

Compensation for
early termination

12 months
12 months

None
None

A payment in lieu of notice, including base salary, contractual beneﬁts and contractual provision for an income in retirement, may be made if:

• the Company terminates the employment of the Executive Director with immediate effect, or without notice; or
• termination is agreed by mutual consent.

With the exception of termination for cause or resignation, Executive Directors will be eligible for a bonus award prorated to reflect
the proportion of the ﬁnancial year for which they were employed and subject to performance achieved, provided they have a minimum
of three months’ service in the bonus year.

Non-executive Directors: Each Non-executive Director, including the Chairman, has a contract of service with the Company. Non-executive
Directors will serve for an initial term of three years, subject to election and then annual re-election by shareholders, unless otherwise
terminated earlier by and at the discretion of either party upon one month’s written notice (12 months for the current Chairman). After
the initial three year term, reappointment is on an annual basis.

All Non-executive Directors are subject to election or re-election at the AGM in 2019. Details of tenure are set out in the table on page 71.

Committee membership and advisers
The Directors who were members of the Committee when matters relating to the Executive Directors’ remuneration for the year were
considered are set out on page 95.

The Committee obtains advice from various sources in order to ensure it makes informed decisions. The Executive Directors are invited
to attend Committee meetings as appropriate. No individual is involved in decisions relating to their own remuneration.

The Group HR Director is the main internal adviser and provides updates on remuneration, employee relations and human resource issues.
Deloitte LLP acted as the independent adviser on remuneration policy and the external remuneration environment during 2018. Total fees
for advice provided to the Committee during the year amounted to £146,350 (exclusive of VAT and expenses).

The Committee has formally reviewed the work undertaken by Deloitte and is satisﬁed that the advice it has received has been objective
and independent. Deloitte are members of the Remuneration Consultants Group and abide by its Code of Conduct.

107

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Remuneration Report
continued

Spend on pay
The table below shows pay for all employees compared with other key ﬁnancial indicators.

Employee pay1
Ordinary dividend
Special dividend
Employee headcount2

2018
£m

473
315
–
6,281

2017
£m

449
294
200
6,055

%
Change

5.3
7.1
–
3.7

1. Employee pay is the total remuneration paid to all employees across ITV on a full-time equivalent basis. More detail is set out on page 139.
2. Employee headcount is the monthly average number of employees across ITV on a full-time equivalent basis. More detail is set out on page 139.
There were no share buybacks during either year.

Historic performance
The graph below shows the TSR performance of the Company against the FTSE 100 index over the ten year period to 31 December 2018.

900

800

700

600

500

400

300

200

100

)

9
0
0
2
y
r
a
u
n
a
J
1
t
a
0
0
1
o
t
d
e
s
a
b
e
r
(

R
S
T

31/12/2008

31/12/2009

31/12/2010

31/12/2011

31/12/2012

31/12/2013

31/12/2014

31/12/2015

31/12/2016

31/12/2017

31/12/2018

ITV

FTSE 100

Shareholder voting
Votes cast by proxy and at the meeting in respect of the Executive Directors’ remuneration were as follows:

Resolution

Number of
shares

Voting for
%

Number of
shares

Voting
against
%

Total votes
cast

Votes
withheld

Annual Report on Remuneration (2018 AGM)
Remuneration Policy (2017 AGM)

2,983,205,782
2,945,550,900

98.27
98.75

55,118,246
37,188,567

1.81
1.25

3,038,324,028 5,058,263
2,987,579,168 4,839,701

108

ITV plc Annual Report and Accounts 2018

Directors’ Report

The Directors present their Annual Report and the audited consolidated and parent company ﬁnancial statements for the year ended
31 December 2018, which they approved on 27 February 2019. The Directors’ Report comprises this report and the entire Governance
section including the Chairman’s Governance Statement.

Colleagues
ITV has a Code of Conduct which sets out the behaviours we expect from all our colleagues and forms part of their terms of employment
(a copy is available on our website at www.itvplc.com). Our employment and recruitment policies are based on equal opportunities and
non-discrimination. We have an Equal Opportunities Policy which covers all protected groups of the Equality Act 2010. We have a diversity
and inclusion strategy with a clear three year plan to amplify inclusion and diverse representation at all levels across the organisation.

Disability: ITV has been certiﬁed a Disability Conﬁdent Employer by the Department for Work and Pensions and as part of this
commitment guarantees an interview to any candidate with a disability who meets the minimum requirement for a role. The Company
gives full and fair consideration to the employment of people with a disability or long-term health condition. ITV works with a variety of
partners across its apprentice, early careers, permanent and ﬁxed-term contract recruitment process (including Mencap, MIND, Remploy,
Scope and Vercida). We provide all colleagues with appropriate measures to ensure they are fully supported and that reasonable
adjustments are made. We are committed to ensuring that all training, career development and promotion opportunities are accessible
and inclusive to all colleagues with a disability and that they have the same career opportunities for growth and progression. We continue
to run a focused programme of activity to raise awareness and dispel myths through a series of lunch and learns and management
development on mental health.

Diversity: Through our programmes, channels, workforce and services, and by working in partnership with the production community, we
aim to ensure we are relevant and accessible and reflect modern society. ITV has four network groups open to all colleagues (see page 16)
that run a number of inspirational talks and events and development workshops. We are a founding member of the Social Mobility
Business Partnership set up to promote social mobility in business, especially in the legal and accountancy professions.

We are also pleased to be singled out by the most recent Hampton Alexander report as the sixth best performer in the FTSE100 for gender
diversity in our combined Executive Committee and Direct Reports team and the fourteenth best performer at Board level.

Engagement: ITV has in place an Ambassador network who represent all parts of our business globally and are elected by their colleagues.
The role of the Ambassador is to represent colleagues’ interests, share information and shape our culture by giving a voice to all colleagues.
During 2018, the Ambassadors were instrumental in providing consultation support to colleagues affected by organisation design changes,
proposed ofﬁce moves and more generally providing feedback on the experience of working at ITV.

As a result of the More than TV strategy we have undertaken a review of the behaviours expected from our leaders, managers and
colleagues to execute the strategy. We have also redeﬁned the role of our Senior Leadership and Executive Leadership teams, giving them
a clear purpose and remit.

Carolyn McCall has introduced a regular podcast/vodcast enabling employees globally to hear directly from her providing business updates
and an insight in to what is happening both internally and externally in the wider media environment. Alongside this is an Ask Carolyn email
address which allows all colleagues to ask questions and to provide feedback directly to her.

Remuneration: When the Company reviews pay it takes a number of factors into consideration, including the need to stay competitive.
Our focus on cash and costs remains incredibly important for the future health of our business. We need to balance our business and
ﬁnancial commitments with our continuing investment in programming and people. The Company continues to be committed to ensuring
colleagues earn at least the Living Wage or greater. Where appropriate we have agreed additional increases. On 1 January 2019, all eligible
UK colleagues received a pay increase of 2.5% (2018: 2.75%).

In addition, a bonus arrangement extends to all our UK colleagues, providing a comprehensive incentive framework that rewards everybody
when the Company is successful. The all-colleague bonus award for 2018 was paid at £1,325 (75.7% of maximum) (2017: £1,750). The
Company also operates a successful and popular all-colleague Save As You Earn scheme that encourages voluntary investment in ITV
shares and a package of voluntary beneﬁts which provide valuable cost savings for both colleagues and the Company. Information about
remuneration for the Directors is included in the Remuneration Report on page 92.

Speaking up and Whistleblowing: ITV encourages a culture of open communication and recognises that by encouraging colleagues
to raise suspected wrongdoing, fraud or malpractice in the workplace we can ensure that the highest standards of safety are maintained
and good ethics and judgement are applied when making decisions. Systems are in place to enable colleagues to speak up and these are
reviewed annually by the Audit and Risk Committee. In 2019, we launched a new reporting tool that enables colleagues and freelancers to
report incidents and share observations and this will be rolled out across the Group during 2019. Our Whistleblowing Policy ensures that
concerns are investigated properly. Any form of reprisal or victimisation against anyone who raises a genuine concern will not be tolerated.

109

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Directors’ Report
continued

Further information can be found in the Audit and Risk Committee Report on page 87. A copy of the Whistleblowing Policy is available on
our website.

www.itvplc.com/investors/governance

Succession planning, training and development: When planning succession, consideration is given to emergency cover together with
medium and long-term succession and this is reviewed annually by the Nomination Committee. The aim of this programme is to build
breadth in our internal pipeline and accelerate the development of our new high potential leaders, preparing them to move into senior
positions and building a strong continuation of diverse talent for the future.

2018 saw continued investment in development for our colleagues. We introduced a refreshed New Manager Induction programme,
a series of Aspiring Manager masterclasses, and a new High Potential Leadership programme. We also continued with our series of
Leadership Labs to strengthen our leadership capability, Team Development workshops and also rolled out on-line globally accessible
training. The majority of our face-to-face leadership and all colleague development was UK focused. However, we have also run leadership
development sessions in Norway and with the Britbox US management team, focused on developing high performing teams.

99% of ﬁxed term and permanent colleagues completed our updated suite of mandatory training modules. This covered our Code of
Conduct, anti-bribery and corruption, cyber security and data protection in light of the updated GDPR regulations. Our freelancers also
completed the training modules as part of their onboarding experience.

We continue to fund the development of new talent through our apprenticeship programme with the majority of the classroom training
funded through the apprenticeship levy. Additionally, some colleagues have undertaken qualiﬁcations, utilising apprenticeship levy funding.

In 2018, 31% of vacancies were ﬁlled by internal candidates and 10% of our colleagues were promoted into larger/different roles
demonstrating our continued focus on career development.

Corporate
Articles of Association: Unless expressly speciﬁed to the contrary, the Articles of Association may only be amended by special resolution
of the shareholders. The Articles are available on our website.

www.itvplc.com/investors/governance

Auditor: The Audit and Risk Committee considered the performance and audit fees of the external auditor, and the level of
non-audit work undertaken. It recommended to the Board that a resolution for the reappointment of KPMG LLP for a further year
as the Company’s auditor be proposed to shareholders at the AGM on 8 May 2019.

Change of control: No person holds securities in the Company carrying special rights with regard to control of the Company.
All of the Company’s share schemes contain provisions relating to a change of control. Outstanding awards and options would normally
vest and become exercisable on a change of control, subject to the satisfaction of any performance conditions and proration for
time where appropriate.

Certain of the Group’s debt and derivative instruments have change of control clauses whereby the counterparty can require ITV to
repay or redeem the instruments in the event of a change of control although in some cases only if it is accompanied by a credit rating
downgrade. The Company is not aware of any other signiﬁcant agreements to which it is a party that take effect, alter or terminate upon
a change of control of the Company

Dividends: The Board has proposed a ﬁnal dividend for the year ended 31 December 2018. Details of this and other dividends paid for the
year are as follows:

Interim dividend
Final dividend
Total ordinary dividend payment

2018

2.6p
5.4p
8.0p

2017

2.52p
5.28p
7.80p

The ﬁnal dividend for 2018 will be paid on 23 May 2019 to shareholders on the register on 12 April 2019. The ex-dividend date is 11 April 2019.

110

ITV plc Annual Report and Accounts 2018

Directors’ Report

Political contributions: It is the Company’s policy not to make cash contributions to any political party. However, within the normal
activities of the Company’s national and regional news-gathering operations there may be occasions when an activity might fall within
the broader deﬁnition of ‘political expenditure’ contained within the Companies Act 2006. Shareholder authority for such expenditure
was given at the 2018 AGM. During 2018 the Group made no payments falling within this deﬁnition (2017: nil).

Directors
Appointments: A table showing Directors who served in the year can be found on page 71. Biographies for Directors currently in ofﬁce
can be found on pages 66 and 67 and on our website.

www.itvplc.com/about/board-of-directors

Directors are appointed for an initial three year period and annually thereafter. Each Director will retire and submit themselves for election
or re-election at the AGM on 8 May 2019.

Detail on compensation for loss of ofﬁce can be found in the Remuneration Report on page 103.

Conflicts of interest: The Board has delegated the authorisation of any conflicts to the Nomination Committee and has adopted
a Conflicts of Interest Policy. The Board has considered in detail the current external appointments of the Directors that may give
rise to a situational conflict and has authorised potential conflicts where appropriate. This authorisation can be reviewed at any time
but will always be subject to annual review.

Contracts of signiﬁcance: No Director had any interest in any contract with the Company or its subsidiary undertakings.

Powers: The powers of the Directors are set out in the Articles of Association. The Articles and a schedule of Matters Reserved for
the Board can be found on our website (below).

Insurance and indemnities: The Company maintains liability insurance for its Directors and ofﬁcers that is renewed on an annual basis.
The Company has also entered into deeds of indemnity with its Directors and other senior executives. A copy of the indemnity can be
found on our website.

www.itvplc.com/investors/governance

Disclosures
Listing rule 9.8.4 disclosures: There are no disclosures to be made other than that the trustee of the Employees’ Beneﬁt Trust (EBT)
waived its rights to receive dividends on shares it holds which do not relate to restricted shares held under the ITV Deferred Share
Award Plan.

Financial risk management: The Directors have carried out a robust assessment of the principal risks facing the Company, including in
relation to its business model, future performance, solvency and liquidity. Details of our risks and associated mitigations, together with
details of our approach to risk management, are set out on pages 54 to 61.

Note 4.3 to the accounts on page 176 gives details of the Group’s ﬁnancial risk management policies and related exposures. This note
is incorporated by reference and deemed to form part of this report.

Future developments: Our strategy is set out in the Strategic Report.

Going concern: The going concern statement is set out on page 131. This note is incorporated by reference and deemed to form
part of this report.

Subsequent events: There are no post balance sheet events to report.

Research and development: Relevant information is set out in the Strategic Report.

111

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Directors’ Report
continued

Pensions
The Company operates a number of pension arrangements which provide retirement and death beneﬁts for colleagues.

The Company pensions arrangements are overseen by a Pensions Steering Committee comprised of senior executives. The Committee
meets monthly and is supported by a range of specialist advisers.

ITV Pension Scheme (the ‘Scheme’): The Scheme is predominantly a deﬁned beneﬁt (DB) scheme which is closed to future accrual, but
also includes a deﬁned contribution (DC) section closed to future contributions. Until the end of November 2018, the Scheme comprised
three sections: A, B and C. On 30 November 2018, as part of effecting a ‘Buy-In’ transaction with an insurance company, Section B’s assets
and liabilities were merged into Section C.

ITV Pension Scheme Limited (a wholly owned subsidiary of ITV plc) is a corporate trustee and manages the Scheme under a trust which is
separate from the Company. Members of the trustee board are formally appointed as directors of ITV Pension Scheme Limited. There are
nine directors including the chairman — ﬁve appointed by the Company and four nominated by the members. The trustee has four
committees: Investment, Audit and Operations, DC, and Corporate Affairs. The Corporate Affairs Committee is convened as and when
appropriate for dealing with any corporate activities that may arise.

The trustee board and each committee hold regular meetings throughout the year at which key issues and more routine business matters
are dealt with and a budget is agreed each year. The trustee board has a risk register, a conflicts of interest policy and a register of interests
policy, which are reviewed regularly.

It is the responsibility of the trustee to have in place appropriate training for its directors and effective committee structures. The trustee
directors receive regular training throughout the year and also have the support of various professional advisers. The Group pensions
department helps identify training opportunities. Training is delivered both by attendance at external courses and with targeted training
to support speciﬁc agenda items at the start of each trustee board meeting. Where appropriate, longer training sessions are organised.
Comprehensive records are kept of all training completed by each trustee director. The trustee board completes regular assessments
of its advisers.

The chairman conﬁrms in an annual statement that the trustee meets its legal duties in relation to the DC section as required under the
Pensions Regulator’s Code of Practice 13.

Full valuations are carried out every three years. The latest completed actuarial valuation of all three sections of the main DB scheme was
carried out as at 1 January 2017.

ITV Deﬁned Contribution Plan (the ‘Plan’): This trust based Plan was established to accept contributions from 1 March 2017 for ex-DB
members and DC members who transferred from the Scheme. Eligible colleagues are invited to join the Plan after completing the required
time in the Company’s auto-enrolment (AE) arrangement – The People’s Pension. These individuals are given the opportunity
to transfer funds from the AE plan and make backdated contributions within permitted levels.

ITV DC Trustee Limited (a wholly owned subsidiary of ITV plc) is a corporate trustee and manages the DC assets, which are held under trust
separately from the Company. Members of the trustee board are formally appointed as directors of ITV DC Trustee Limited. There are ﬁve
directors including the chairman — three appointed by the Company and two nominated by the members. It is the responsibility of the
trustee to have in place appropriate training for its directors.

The governance framework for managing the Plan and developing the board is in line with that in place for the Scheme.

The chairman conﬁrms in an annual statement that the trustee meets its legal duties in relation to the DC Plan as required under the
Pensions Regulator’s Code of Practice 13.

112

ITV plc Annual Report and Accounts 2018

Directors’ Report

Ulster Television Pension and Assurance Scheme (the ‘Ulster Scheme’): The Ulster Scheme provides DB beneﬁts. It closed to new
members in 2002 but is still open to future accrual. However, a comprehensive 60-day consultation exercise was started on 28 January
2019 with active members on a proposal to close to future accrual with effect from 31 March 2019. The outcome of the consultation
will be conﬁrmed in next year’s report.

UTV Pension Scheme Limited (a wholly owned subsidiary of ITV plc) is a corporate trustee and manages the DB assets, which are held
under trust separately from the Company. Members of the trustee board are formally appointed as directors of UTV Pension Scheme
Limited. There are ﬁve directors including the chairman — three appointed by the Company (including a professional trustee as chairman)
and two nominated by the members. It is the responsibility of the trustee to have in place appropriate training for its directors.

The governance framework for managing the Ulster Scheme and developing the board is in line with that in place for the Scheme.

Full valuations are carried out every three years. The latest completed actuarial valuation was carried out as at 1 July 2017. The trustee
board has adopted the Pensions Regulator’s integrated risk management framework — taking a holistic approach and looking at how
risks around the employer covenant, funding and investment strategy are all linked and inter-dependent. A cashflow driven investment
strategy was introduced from March 2018.

The People’s Pension: Since 2013, employers within the Group have been required to enrol all eligible individuals into a pension scheme
automatically. This applies to all eligible individuals who are contracted to work for us, regardless of their contract type or tax status.
Following a provider review, the plan is now provided by a company called The People’s Pension under a master trust which is run by
an independent board of trustee directors and eligible individuals are enrolled into this arrangement.

Pension Scheme indemnities: Qualifying pension scheme indemnity provisions, as deﬁned in Section 235 of the Companies Act 2006,
were in force for the ﬁnancial year ended 31 December 2018 and remain in force for the beneﬁt of each of the directors of ITV Pension
Scheme Limited, ITV DC Trustee Limited and UTV Pension Scheme Limited. These indemnity provisions cover, to the extent permitted
by law, certain losses or liabilities that may be incurred as a result of being a director or ofﬁcer of these companies.

Shares
Issued share capital: At the date of this report, there were 4,025,409,194 ordinary shares of 10 pence each in issue, all of which are fully
paid up and quoted on the London Stock Exchange.

Purchase of own shares: The Directors have the authority to purchase up to 402.5 million of the Company’s ordinary shares.
The authority remains valid until the AGM in 2019 or 8 August 2019, if earlier.

Restrictions: There are no restrictions on the transfer of ordinary shares in the capital of the Company other than those which may
be imposed by law from time to time. In accordance with the Disclosure Guidance and Transparency Rules (DTRs), Persons Discharging
Managerial Responsibility are required to seek approval to deal in ITV shares. The Company is not aware of any agreements between
shareholders that may result in restrictions on the transfer of securities and/or voting rights.

Rights: The rights attaching to the Company’s ordinary shares are set out in the Articles of Association.

113

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Directors’ Report
continued

Share schemes: Details of employee share schemes are set out in note 4.7 on page 184. The Company has an EBT funded by loans to
acquire shares for the potential beneﬁt of colleagues. Details of shares held by the EBT at 31 December 2018 are set out on page 186.
During the year shares have been released from the EBT in respect of share schemes for colleagues. The trustee of the EBT has the
power to exercise all voting rights in relation to any investment (including ordinary shares) held within the EBT.

Substantial shareholders: Information regarding interests in voting rights provided to the Company pursuant to the DTRs is published
on a Regulatory Information Service and on the Company’s website.

As at 26 February 2019, the information in the table below had been received, in accordance with DTR5, from holders of notiﬁable interests
(voting rights) in the Company’s issued share capital. It should be noted that these holdings are likely to have changed since notiﬁed
to the Company. However, notiﬁcation of any change is not required until the next applicable threshold is crossed.

The Capital Group Companies Inc.
Liberty Global Incorporated Limited

BlackRock Inc.
Amerprise Financial, Inc and its group
The Goldman Sachs Group

% of interest
in shares

10.99%
–

5.11%
5.08%
0.03%

Nature of
interest
in shares

Indirect
Indirect

Indirect
Indirect
Indirect

% interest
in ﬁnancial
instruments

–
9.90%
0.39%
0.26%
0.045%
0.17%
20.41%

Nature of
interests
in ﬁnancial
instruments

–
Loaned shares
Securities lending
Contract for difference
Equities swap
Securities Lending
Swap (cash), Contract
for difference (cash),
over the counter option
(physical or cash)

Total number
of shares
or interests
in shares

442,468,836
398,515,510

232,006,146
206,179,898
829,368,692

The number of shares is based on announcements made by each relevant shareholder using the Company’s issued share capital at that date.

Regulations
Anti-bribery and corruption: ITV is committed to conducting business in an open and ethical way. We take a zero-tolerance approach to
bribery and corruption and are committed to acting professionally, fairly and with integrity in all our business dealings and relationships
wherever we operate, as well as implementing and enforcing effective systems to counter bribery and corruption. Our Anti-Bribery and
Corruption Policy sets out our responsibilities and how we expect those working for or with us to observe and uphold the policy and
provides information and guidance on how to deal with bribery and corruption issues. The effectiveness and implementation of the policy
is regularly reviewed and compliance by colleagues is closely monitored. ITV retains the right to ask associated parties to conﬁrm
compliance on an annual basis. Further information can be found in the Audit and Risk Committee Report on page 88.

We have in place a Sanctions Policy to ensure the business complies with all relevant international and ﬁnancial sanctions in force at the
time by the UN, EU or UK Government. Compliance with the policy is kept under review by the Tax and Treasury Committee.

Data: As a part of our business activity ITV processes large amounts of personal data. In doing this ITV respects the privacy of our viewers,
customers, contractors, talent and colleagues and seeks to protect personal data by complying with the applicable laws and regulations
and fully cooperating with the relevant regulatory authorities. ITV has a Privacy and Data Protection Policy and an Information Security
Policy that govern the processing of data. Compliance with these policies is mandatory and forms part of the Code of Conduct. All
colleagues undergo regular training to remind them of their responsibilities under these policies. Privacy and data protection is kept under
review by the Audit and Risk Committee (see page 86).

Environment: ITV recognises that it has a responsibility to understand and minimise our impact on the environment and an opportunity
to influence positively our industry and audiences. Further information can be found on our Corporate Responsibility website.

www.itvplc.com/responsibility

ITV is required to report annually on the quantity of carbon dioxide equivalent emissions in tonnes emitted as a result of activities for
which it is responsible. All data for the ﬁnancial year ended 31 December 2018 is disclosed overleaf for direct (gas, vehicle fuel, fuel oils and
refrigerants consumption) and indirect (electricity consumption) emissions.

114

ITV plc Annual Report and Accounts 2018

Directors’ Report

Indicator

Total gross CO2e emissions
Scope 1: Direct emissions

Scope 2: Indirect emissions
Total Revenue (1)
Emissions per unit/£m revenue

2018

20,066
6,770

13,293
£3,766m
5.3 (tCO2e)

2017

22,321 (tCO2e)
6,684 (tCO2e)

15,637 (tCO2e)
£3,665m
6.1 (tCO2e)

The total revenue for 2017 was restated as a result of IFRS 15 Revenue from contracts with customers. This did not result in a change to the emissions calculation.

Source: Mitie Energy analysis of ITV data. The emissions data covers our global operations for which we have operational control. We use the GHG Protocol Corporate Accounting and
Reporting Standard and the latest conversion factors from the Department for Business, Energy & Industrial Strategy to calculate emissions in tonnes of carbon dioxide equivalents.
37% of our data set is based on estimated data. Estimates are calculated from previous consumption trends and published benchmarks.

In 2018, the Company’s greenhouse gas emissions reduced by 10% compared to the previous year. As 85% of our greenhouse gas emissions
are generated within our UK operations, this is where we focus our efforts. We continued to replace ageing infrastructure with more
efﬁcient plant, optimise our building management software systems and replace lighting systems with more efﬁcient LED technology.

Health and safety: The health and safety of our employees, contractors and those participating in our productions is always a high priority.
The signiﬁcant loss of human life as the result of a major incident on production has been identiﬁed as a principal risk to the organisation.
ITV has in place a Group Health and Safety policy statement supported by a health and safety management system. In line with our overall
risk management approach we operate a three lines of defence model with the Company’s professional Health and Safety team occupying
the second line establishing a safety management system and providing expertise to support the business owner in the ﬁrst line of
defence.

The Health and Safety team continue to reﬁne the management system to ensure it meets the speciﬁc risk proﬁle of the business. In 2018
we developed our risk toolkit for productions:

• Processes were launched to review, manage and escalate risks within production from initial risk analysis to engagement of creatives

in risk evaluation;

• Our education programme was strengthened with the development and roll-out of two new courses that are accredited by the

International Institute of Risk and Safety Management; and

• A new reporting tool was developed to support ongoing risk management including health and safety (see page 87).

A key element of the risk toolkit is a set of core statements that act as our global risk language, these have been developed with the
London School of Economics and reflect what we expect to see from our people, our teams, and our leaders, in a positive risk climate.
They are focused on how we ensure everyone has a voice and how we listen to that voice.

Within all our health and safety activity we are using new methodology to engage with the business, building our understanding of the
effectiveness of safety management, enabling us to continually improve and reﬁne our approach. We continue to underpin our health
and safety management system with three key principles:

• People are the solution
• Safety is about positive outcomes
• Safety is a moral responsibility

The Audit and Risk Committee reviews health and safety annually.

Modern Slavery: ITV is fully committed to ensure that we do not participate in the violation of human rights and expect the same of our
suppliers. We are a founding member of the television industry Human Rights Working Group set up to proactively address human rights
issues in the television industry and raise awareness beyond it. ITV’s Modern Slavery Statement sets out the steps taken by ITV to identify,
address and prevent modern slavery and human trafﬁcking in our business and supply chain and is reviewed by the Board on an annual
basis. A copy can be found on our website.

www.itvplc.com

115

Strategic ReportFinancial StatementsAdditional informationGovernanceGovernance

Directors’ Report
continued

The Directors consider that the Annual
Report and Accounts, taken as a whole,
is fair, balanced and understandable and
provides the information necessary for
shareholders to assess the Company’s
and the Group’s position and performance,
business model and strategy. Each of the
Directors, whose names and functions are
listed on pages 66 and 67, conﬁrm that,
to the best of their knowledge:

• The Group accounts, which have been
prepared in accordance with IFRSs
as adopted by the EU, give a true and
fair view of the assets, liabilities, ﬁnancial
position and proﬁt of the Group; and
• The Directors’ Report includes a fair
review of the development and
performance of the business and the
position of the Group, together with
a description of the principal risks and
uncertainties that it faces.

In accordance with Section 418 of the
Companies Act 2006, the Directors conﬁrm
that, so far as they are each aware, there is
no relevant audit information of which the
Company’s auditor is unaware; and each
Director has taken all steps that they
ought to have taken as a Director in order
to make themselves aware of any relevant
audit information and to establish that
the Company’s auditor is aware of
that information.

The Board has conducted a review of
the effectiveness of the Group’s systems
of internal controls for the year ended
31 December 2018. In the opinion of the
Board, the Company has complied with
the internal control requirements of the
UK Corporate Governance Code throughout
the year, maintaining an ongoing process for
identifying, evaluating and minimising risk.

The Directors are responsible for preparing the Annual Report and the Group
and parent company ﬁnancial statements in accordance with applicable law and
regulations. Company law requires the Directors to prepare Group and parent
company ﬁnancial statements for each ﬁnancial year. Under that law they are
required to prepare the Group ﬁnancial statements in accordance with IFRSs as
adopted by the EU and applicable law and have elected to prepare the parent company
ﬁnancial statements in accordance with UK Accounting Standards, including FRS 101
(Reduced Disclosure Framework).

Under company law, the Directors must not approve the ﬁnancial statements unless
they are satisﬁed that they give a true and fair view of the state of affairs of the Group
and parent company and of their proﬁt or loss for that period. In preparing each of
the Group and parent company ﬁnancial statements, the Directors are required:

• To select suitable accounting policies and then apply them consistently
• To make judgements and estimates that are reasonable, relevant, reliable

and prudent

• For the Group ﬁnancial statements, to state whether they have been prepared

in accordance with IFRSs as adopted by the EU

• For the parent company ﬁnancial statements, state whether applicable

UK Accounting Standards have been followed, subject to any material departures
disclosed and explained in the parent company ﬁnancial statements

• To assess the Group and parent Company’s ability to continue as a going concern,

disclosing, as applicable, matters relating to the going concern; and

• To use the going concern basis of accounting unless they either intend to liquidate

the Group or the parent Company or to cease operations, or have no realistic
alternative but to do so.

The Directors are responsible for keeping adequate accounting records that are
sufﬁcient to show and explain the parent company’s transactions and disclose with
reasonable accuracy at any time the ﬁnancial position of the parent company and
enable them to ensure that its ﬁnancial statements comply with the Companies Act
2006. They are responsible for such internal control as they determine is necessary
to enable the preparation of the ﬁnancial statements that are free from material
misstatement, whether due to fraud or error, and have general responsibility for taking
such steps as are reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities. Under applicable law and regulations,
the Directors are also responsible for preparing a Strategic Report, Directors’ Report,
Annual Remuneration Report and Corporate Governance Statement that comply with
that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate
and ﬁnancial information included on the Company’s website. Legislation in the UK
governing the preparation and dissemination of ﬁnancial statements may differ
from legislation in other jurisdictions.

By order of the Board

Carolyn McCall
Chief Executive
27 February 2019
ITV plc
Registered Number: 4967001

116

ITV plc Annual Report and Accounts 2018

Financial Statements

> Financial Statements

In this
section

The financial statements have been presented in a style that attempts to make them less complex
and more relevant to shareholders. We have grouped the note disclosures into five sections: ‘Basis of
Preparation’, ‘Results for the Year’, ‘Operating Assets and Liabilities’, ‘Capital Structure and Financing Costs’
and ‘Other Notes’. Each section sets out the accounting policies applied in producing the relevant notes,
along with details of any key judgements and estimates used. The purpose of this format is to provide
readers with a clearer understanding of what drives financial performance of the Group. The aim of the
text in boxes is to provide commentary on each section, or note, in plain English.

Keeping
it simple

Notes to the financial statements provide information required by statute, accounting standards or
Listing Rules to explain a particular feature of the financial statements. The notes that follow are a part
of the financial statements and will also provide explanations and additional disclosure to assist readers’
understanding and interpretation of the Annual Report and the financial statements.

Contents
Independent Auditor’s Report to the members of ITV plc only

Primary Statements
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows

Section 1: Basis of Preparation

Section 2: Results for the Year
2.1 Profit before tax
2.2 Exceptional items
2.3 Taxation
2.4 Earnings per share

Section 3: Operating Assets and Liabilities
3.1 Working capital
3.2 Property, plant and equipment
3.3 Intangible assets
3.4 Acquisitions
3.5 Investments
3.6 Provisions
3.7 Pensions

Section 4: Capital Structure and Financing Costs
4.1 Net debt
4.2 Borrowings and finance leases
4.3 Managing market risks: derivative financial instruments
4.4 Net financing costs
4.5 Fair value hierarchy
4.6 Equity
4.7 Share-based compensation

Section 5: Other Notes
5.1 Related party transactions
5.2 Contingent assets and liabilities
5.3 Subsidiaries exempt from audit

ITV plc Company Financial Statements

Notes to the ITV plc Company Financial Statements

118

125
125
126
127
128
130

131

135
135
142
143
146

148
148
153
155
160
161
162
163

172
172
174
176
180
181
183
184

186
186
187
188

189

191

117
117

Strategic ReportAdditional informationFinancial StatementsGovernance

Financial Statements
Financial Statements

Independent Auditor’s Report to the
members of ITV plc

1. Our opinion is unmodified
We have audited the financial statements of ITV plc (“the Company”) for the year ended 31 December 2018 which comprise the consolidated
income statement, consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement
of changes in equity, consolidated statement of cash flows, company balance sheet, company statement of changes in equity, and the related
notes, including the accounting policies.

In our opinion:

• the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 31 December 2018

and of the Group’s profit for the year then ended

• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted

by the European Union

• the parent Company financial statements have been properly prepared in accordance with UK accounting standards, including FRS 101

Reduced Disclosure Framework and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group

financial statements, Article 4 of the IAS Regulation

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are
described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion
is consistent with our report to the audit committee.

We were first appointed as auditor by the directors in December 2003 prior to the company becoming the parent company of the now ITV
Group on 2 February 2004. The period of total uninterrupted engagement is for the 15 financial years ended 31 December 2018 for the listed
ITV Group. We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical
requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard
were provided.

2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and
include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had
the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.
We summarise below the key audit matters (unchanged from 2017), in decreasing order of audit significance, in arriving at our audit opinion
above, together with our key audit procedures to address those matters and, as required for public interest entities, our results from those
procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose
of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and
we do not provide a separate opinion on these matters.

118
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ITV plc Annual Report and Accounts 2018
ITV plc Annual Report and Accounts 2018

> Independent Auditor’s Report to the members of ITV plc

The risk

Our response

Total Advertising Revenue: £1,795 million (2017: £1,781 million) Risk vs 2017: ◄►,
Refer to page 83 (Audit and Risk Committee report), page 135 (accounting policy) and pages 136 to 138 (financial disclosures)

Our procedures included:

• Control operation: testing of controls, assisted by our own IT
specialists, including those over: segregation of duties, input of
annual deal terms with agencies, input of individual campaigns’
terms and pricing, comparison of those terms and pricing data
against the related contracts with advertising agencies; link to
transmission/viewer data; and the system generated calculation
of deal debt for each campaign.

• Test of detail: challenging the year-end deal debt positions based
on comparison with customers’ correspondence and agreed terms
of business.

• Test of detail: checking that the revenue is recognised post
transmission. Agreeing revenue recognised by matching the
transmissions to the corresponding spots and by agreeing invoices
to subsequent cash receipts on sample basis.

• Assessing disclosures: we also assessed the adequacy of the
Group's disclosures in respect of the accounting policies on
revenue recognition.

Our results:

• From the evidence we obtained we found the resulting amount
of recorded spot advertising to be acceptable (2017: acceptable).

Calculation complexity
The majority of ITV’s advertising revenue is subject to regulation
under Ofcom’s Contract Rights Renewal system (‘CRR’). CRR works
by ensuring that the annual share of TV advertising that will be
placed with ITV by each advertising agency can change in relation
to the viewing figures for commercial television that it delivers.
The CRR system, the pricing of the annual contractual arrangements
with advertising agencies and the details of each advertising
campaign, together with the related processes and controls, are
complex and involve estimation.

Our risk relates to the largest component of total advertising –
spot advertising.

In particular, the complexity of the pricing mechanism means it is
possible for a difference to arise between the price received by ITV
for an advertising campaign and the value it delivered, mainly as a
result of the actual viewing figures differing from the expected level
for the campaign. Where the Group has over-delivered viewers this is
referred to as a ‘deal credit’, or a ‘deal debt’ where delivery has fallen
short. Rather than the price paid for that campaign being adjusted at
the end of the campaign, these differences are noted for each agency
and then taken into account when agreeing either future campaigns
or the annual contract. A net deal debt position with an agency
is recorded in ITV’s accounts, as a liability. Net deal credit positions
are not recognised.

Spot advertising as the main component of total advertising
is therefore considered a significant risk due to:

• The number and complexity of contractual agreements with

advertising agencies

• The complexity of the systems and processes of control used

to record revenue and

• The complexity involved in determining any deal debt liability

at the period end

119
119

Strategic ReportAdditional informationFinancial StatementsGovernance

Financial Statements
Financial Statements

Independent Auditor’s Report to the
members of ITV plc continued

The risk

Our response

Non-advertising revenue £1,971 million (2017: £1,874 million) Risk vs 2017: ◄►
Refer to page 83 (Audit and Risk Committee report), pages 135 to 136 (accounting policy) and pages 135 to 138 (financial disclosures)

Complex contract accounting
Non-advertising revenue includes revenue from: programme
production and the sale of programme rights within the Studios
segment; transmission supply arrangements and the pay and
interactive revenue within the Broadcast segment.

Our risk relates to the non-advertising revenue within the Studios
segment due to contractual nature of revenue recognition.

Recognition of revenue is driven by the specific terms of the related
contracts and is considered to be a significant risk as the terms of
the contracts are varied and can be complex, with the result that
accounting for the revenue generated in any given period can require
judgement. Specifically judgement has been involved with regards to
determining separate performance obligations and the timing of the
revenue recognition of each. Due to the contractual nature of these
revenue streams, the focus of our work is on the risks associated with
significant one-off contracts.

Our procedures included:

• Accounting analysis: we considered the Group’s revenue

recognition policies against the relevant accounting standards.
• Test of detail: on a sample basis we assessed revenue contracts

entered into during the year, and considered whether revenue had
been recognised in accordance with the contractual terms in the
correct accounting period, given the requirements of the relevant
accounting policy.

• Assessing disclosures: we assessed the adequacy of the
Group’s disclosures in respect of the accounting policy on
revenue recognition.

Our findings:

• From the evidence we obtained we found the resulting amount

of recorded non advertising revenue to be acceptable
(2017: acceptable).

Gross defined benefit pension scheme obligations £3,719 million (2017: £3,987 million) Risk vs 2017: ◄►
Refer to page 85 (Audit and Risk Committee report), pages 163 to 164 (accounting policy) and pages 164 to 171 (financial disclosures)

Subjective valuation
Significant estimates are made in determining the key assumptions
used in valuing the Group's post-retirement defined benefit
obligations. When making these assumptions the directors take
independent actuarial advice relating to their appropriateness.

The valuation of the gross defined benefit obligations is considered
a significant risk given the quantum of the gross pension obligation
and that a small change in assumptions can have a material financial
impact on the Group.

Our procedures included:

• Benchmarking assumptions: challenging the key financial

assumptions applied in determining the Group's gross pension
obligations, being the discount rate, inflation rate and mortality/life
expectancy, with the support of our own actuarial specialists. This
included a comparison of these key assumptions against externally
derived data.

• Assessing disclosures: considering the adequacy of the Group’s

disclosures in respect of the sensitivity of the gross defined benefit
obligations to the assumptions.

Our findings:

• From the evidence we obtained we found the resulting valuation

of the gross pension obligations to be acceptable (2017: acceptable).

Recoverability of parent company’s investment in subsidiaries £2,286 million (2017: £2,191 million) Risk vs 2017: ◄►
Refer to page 191 (accounting policy) and page 193 (financial disclosures)

Low risk, high value
The carrying amount of the parent company’s investments in
subsidiaries represents 35% (2017: 34%) of the company’s total assets.
Their recoverability is not at a high risk of significant misstatement or
subject to significant judgement. However, due to their materiality in
the context of the parent company financial statements, this is
considered to be the area that had the greatest effect on our overall
parent company audit.

Our procedures included:

• Test of detail: comparing the carrying amount of 100% of the

investments balance (2017: 100%) with the relevant subsidiaries’
draft balance sheet to identify whether their net assets, being an
approximation of their minimum recoverable amount, were in
excess of their carrying amount and assessing whether those
subsidiaries have historically been profit-making.

Our results:

• We found the Group’s assessment of the recoverability of the
investment in subsidiaries to be acceptable (2017: acceptable).

120
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ITV plc Annual Report and Accounts 2018
ITV plc Annual Report and Accounts 2018

> Independent Auditor’s Report to the members of ITV plc

3. Our application of materiality and an overview of the scope of our audit
Materiality for the Group financial statements as a whole was set at £28 million (2017: £28.4 million), determined with reference to a
benchmark of Group profit before tax normalised to exclude pension exceptional items disclosed in note 2.2, of £563 million, of which
materiality represents 4.9% (2017: 5% of group profit before tax normalised to exclude certain exceptional items, of £568 million).
The group team performed procedures on the items excluded from normalised group profit before tax.

Materiality for the parent company financial statements as a whole was set as £27 million (2017: £27 million) determined with reference
to the benchmark of the company’s total assets, of which it represents 0.4% (2017: 0.4%).

We agreed to report to the Audit and Risk Committee any corrected or uncorrected identified misstatements exceeding £1.4 million
(2017: £1.4 million), in addition to other identified misstatements that warranted reporting on qualitative grounds.

Scoping and coverage
Revenue

Full scope audit

82%

Speciﬁed risk-based
audit procedures

Out of scope

12%

Proﬁt before tax
Full scope audit

Speciﬁed risk-based
audit procedures

Out of scope

94%

Total assets

Group audited

89%

Speciﬁed risk-based
audit procedures

Out of scope

The Group’s principal operations are in the United Kingdom. The Group audit team performed the audit of the core UK operations (comprising
Broadcast and Online, the UK Studios, Global Entertainment and the central functions) as if they were a single aggregated set of financial
information using materiality of £25 million (2017: £25 million). Talpa Media B.V. – a significant component of the Group in the Netherlands
was subject to an audit for Group reporting purposes. The Group audit team instructed the component auditor as to the significant areas to be
covered, including the relevant risks described above and the determination of the information to be reported back. Specified audit procedures
were performed by other component auditors, as instructed by the Group audit team, on three entities in the US included in our scope based
on the relative size of their operations. The Group audit team set the materiality of £5 million (2017: £5 million) for both the audit of the
component and the specified audit procedures. The Group audit team performed procedures on the items excluded from normalised Group
profit before tax.

The Group audit team held several telephone conference meetings with the component audit teams to assess the audit risk and strategy.
The Group audit team also visited the component in the Netherlands and in the US. At these visits and in these meetings, the findings reported
to the Group audit team were discussed in more detail, and any further work required by the Group audit team was then performed by the
component auditor.

Together the above audit and these specified audit procedures covered 88% (2017: 88%) of Group revenue; 95% (2017: 95%) of Group profit
before taxation; and 91% (2016: 92%) of total Group assets.

4. We have nothing to report on going concern
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or the Group
or to cease their operations, and as they have concluded that the Company’s and the Group’s financial position means that this is realistic. They
have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going
concern for at least a year from the date of approval of the financial statements (“the going concern period”).

Our responsibility is to conclude on the appropriateness of the Directors’ conclusions and, had there been a material uncertainty related to
going concern, to make reference to that in this audit report. However, as we cannot predict all future events or conditions and as subsequent
events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of
reference to a material uncertainty in this auditor's report is not a guarantee that the Group and the Company will continue in operation.

In our evaluation of the Directors’ conclusions, we considered the inherent risks to the Group’s and Company’s business model and analysed
how those risks might affect the Group’s and Company’s financial resources or ability to continue operations over the going concern period.
The risks that we considered most likely to adversely affect the Group’s and Company’s available financial resources over this period were:

• The Broadcast division experiencing a signiﬁcant and sharp decline in advertising revenues due to broader economic downturn

• A number of key program brands within the Studios division not being recommissioned

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Strategic ReportAdditional informationFinancial StatementsGovernance

Financial Statements
Financial Statements

Independent Auditor’s Report to the
members of ITV plc continued

As these were risks that could potentially cast significant doubt on the Group’s and the Company's ability to continue as a going concern, we
considered sensitivities over the level of available financial resources indicated by the Group’s financial forecasts taking account of reasonably
possible (but not unrealistic) adverse effects that could arise from these risks individually and collectively and evaluated the achievability of the
actions the Directors consider they would take to improve the position should the risks materialise. We also considered less predictable but
realistic second order impacts, such as the impact of Brexit and the erosion of customer or supplier confidence, which could result in a rapid
reduction of available financial resources.

Based on this work, we are required to report to you if:

• we have anything material to add or draw attention to in relation to the directors’ statement in Section 1 on page 131 of the financial

statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the
Group and Company’s use of that basis for a period of at least twelve months from the date of approval of the financial statements or

• the related statement under the Listing Rules set out on page 116 is materially inconsistent with our audit knowledge

We have nothing to report in these respects, and we did not identify going concern as a key audit matter.

5. We have nothing to report on the other information in the Annual Report
The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion
on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly
stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the
information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work
we have not identified material misstatements in the other information.

Strategic Report and Directors’ Report
Based solely on our work on the other information:

• we have not identified material misstatements in the Strategic Report and the Directors’ Report

• in our opinion the information given in those reports for the financial year is consistent with the financial statements and

• in our opinion those reports have been prepared in accordance with the Companies Act 2006

Directors’ Remuneration Report
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.

Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial statements audit, we have nothing material to add or draw attention to in relation to:

• the directors’ confirmation within the viability statement on page 62 that they have carried out a robust assessment of the principal risks

facing the Group, including those that would threaten its business model, future performance, solvency and liquidity

• the risks and uncertainties on pages 54 to 61 describing these risks and explaining how they are being managed and mitigated and

• the directors’ explanation in the viability statement of how they have assessed the prospects of the Group, over what period they have done
so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation that the
Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or assumptions

Under the Listing Rules we are required to review the viability statement. We have nothing to report in this respect.

Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements audit. As we
cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that
were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee as to the Group’s
and Company’s longer-term viability.

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ITV plc Annual Report and Accounts 2018

> Independent Auditor’s Report to the members of ITV plc

Corporate governance disclosures
We are required to report to you if:

• we have identified material inconsistencies between the knowledge we acquired during our financial statements audit and the directors’
statement that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable and
provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy or

• the section of the annual report describing the work of the Audit and Risk Committee does not appropriately address matters communicated

by us to the Audit and Risk Committee

We are required to report to you if the Corporate Governance Statement does not properly disclose a departure from the eleven provisions
of the UK Corporate Governance Code specified by the Listing Rules for our review.

We have nothing to report in these respects.

6. We have nothing to report on the other matters on which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from

branches not visited by us or

• the parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the

accounting records and returns or

• certain disclosures of directors’ remuneration specified by law are not made or

• we have not received all the information and explanations we require for our audit

We have nothing to report in these respects.

7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 116, the directors are responsible for: the preparation of the financial statements
including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and parent Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of
accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative
but to do so.

Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or other irregularities (see below), or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud, other irregularities or error and are considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.

Irregularities – ability to detect
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our
general commercial and sector experience, through discussion with the directors and other management (as required by auditing standards),
from inspection of the group’s regulatory and legal correspondence and discussed with the directors and other management the policies and
procedures regarding compliance with laws and regulations. We communicated identified laws and regulations throughout our team and
remained alert to any indications of non-compliance throughout the audit. This included communication from the group to component audit
teams of relevant laws and regulations identified at group level.

The potential effect of these laws and regulations on the financial statements varies considerably.

Firstly, the group is subject to laws and regulations that directly affect the financial statements including financial reporting legislation
(including related companies legislation), distributable profits legislation, taxation legislation and we assessed the extent of compliance with
these laws and regulations as part of our procedures on the related financial statement items.

Secondly, the group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect
on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or the loss of the group’s licence
to operate. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the
directors and other management and inspection of regulatory and legal correspondence, if any. These limited procedures did not identify
actual or suspected non-compliance.

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Strategic ReportAdditional informationFinancial StatementsGovernance
Financial Statements
Financial Statements

Independent Auditor’s Report to the
members of ITV plc continued

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements
in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards.
For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected
in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition,
as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and cannot be expected to
detect non-compliance with all laws and regulations.

8. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Paul Sawdon (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
27 February 2019

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ITV plc Annual Report and Accounts 2018

Consolidated Income Statement

For the year ended 31 December

Revenue
Operating costs
Operating profit

Presented as:
Earnings before interest, tax and amortisation (EBITA) before exceptional items
Operating exceptional items
Amortisation and impairment
Operating profit

Financing income
Financing costs
Net financing costs
Share of losses of joint ventures and associated undertakings
Gain/(loss) on sale of non-current assets (exceptional items)
Profit before tax
Taxation
Profit for the year

Profit attributable to:
Owners of the Company
Non-controlling interests
Profit for the year

Earnings per share
Basic earnings per share
Diluted earnings per share

> Primary Statements

Note

2.1

2.1
2.2
3.3, 3.5

4.4
4.4
4.4
3.5
2.2

2.3

4.6.6

2018
£m

3,211
(2,611)
600

Restated*

2017
£m

3,130
(2,575)
555

785
(93)
(92)
600

3
(46)
(43)
–
10
567
(97)
470

466
4
470

810
(153)
(102)
555

4
(54)
(50)
(4)
(1)
500
(87)
413

409
4
413

2.4
2.4

11.7p
11.6p

10.2p
10.2p

* The Group has applied IFRS 15 ‘Revenue from Contracts with Customers’ and IFRS 9 ‘Financial Instruments’ at 1 January 2018. Under the transition method chosen, the comparative information

has been restated. See section 1.

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Strategic ReportAdditional informationFinancial StatementsGovernance

Financial Statements
Financial Statements

Consolidated Statement of Comprehensive Income

For the year ended 31 December

Profit for the year

Other comprehensive (loss)/income:
Items that are or may be reclassified to profit or loss
Revaluation of financial assets
Net gain/(loss) on cash flow hedges and costs of hedging
Share of losses of joint ventures and associated undertakings
Exchange differences on translation of foreign operations (net of hedging)
Items that will never be reclassified to profit or loss
Remeasurement (losses)/gains on defined benefit pension schemes
Income tax credit/(charge) on items that will never be reclassified
Other comprehensive (loss)/income for the year, net of income tax
Total comprehensive income for the year

Total comprehensive income attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive income for the year

Note

4.6.4
4.6.3

4.6.3

3.7
2.3

4.6.6

2018
£m

470

Restated*

2017
£m

413

(1)
7
(15)
12

(52)
8
(41)
429

425
4
429

(1)
(3)
–
(32)

172
(39)
97
510

506
4
510

* The Group has applied IFRS 15 ‘Revenue from Contracts with Customers’ and IFRS 9 ‘Financial Instruments’ at 1 January 2018. Under the transition method chosen, the comparative information

has been restated. See section 1.

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Consolidated Statement of Financial Position

As at 31 December

Non-current assets
Property, plant and equipment
Intangible assets
Investments in joint ventures, associates and equity investments
Derivative financial instruments
Distribution rights
Defined benefit pension surplus
Other pension asset
Deferred tax asset

Current assets
Programme rights

Trade and other receivables due within one year
Trade and other receivables due after more than one year

Trade and other receivables
Contract assets
Current tax receivable
Derivative financial instruments
Cash and cash equivalents
Asset held for sale

Current liabilities
Borrowings
Derivative financial instruments

Trade and other payables due within one year
Trade payables due after more than one year

Trade and other payables
Contract liabilities
Current tax liabilities
Provisions

Net current assets/(liabilities)

Non-current liabilities
Borrowings
Derivative financial instruments
Defined benefit pension deficit
Deferred tax liabilities
Other payables
Provisions

Net assets

Attributable to equity shareholders of the parent company
Share capital

Share premium

Merger and other reserves

Translation reserve

Fair value reserve

Retained earnings

Total equity attributable to equity shareholders of the parent company

Non-controlling interests

Total equity

> Primary Statements

2018
£m

191
1,614
51
26
29
19
49
38
2,017

298
355
71
426
470
15
2
95
85
1,391

(54)
(4)
(768)
(49)
(817)
(255)
(115)
(16)
(1,261)
130

(993)
(1)
(106)
(64)
(130)
(4)
(1,298)
849

403

174

206

(33)

815

849

Restated*

2017
£m

256
1,645
74
10
19
16
38
31
2,089

321
413
27
440
352
19
6
126
–
1,264

(76)
(2)
(810)
(68)
(878)
(219)
(86)
(16)
(1,277)
(13)

(982)
(1)
(137)
(111)
(106)
(7)
(1,344)
732

403

174

199

(136)

687

732

Note

3.2
3.3
3.5
4.3
3.1.2
3.7
3.7
2.3

3.1.1
3.1.3
3.1.3

3.1.6

4.3
4.1
3.2

4.1, 4.2
4.3
3.1.4
3.1.5

3.1.6

3.6

4.1, 4.2
4.3
3.7
2.3
3.1.5
3.6

4.6.1

4.6.2

4.6.3

4.6.4

4.6.5

* The Group has applied IFRS 15 ‘Revenue from Contracts with Customers’ and IFRS 9 ‘Financial Instruments’ at 1 January 2018. Under the transition method chosen, the comparative information

has been restated. See section 1.

The accounts were approved by the Board of Directors on 27 February 2019 and were signed on its behalf by:

Chris Kennedy
Group CFO

Carolyn McCall
Chief Executive

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Financial Statements
Financial Statements

Consolidated Statement of Changes in Equity

Attributable to equity shareholders of the parent company

Note

Share
capital
£m

403

Share
premium
£m

Merger
and other
reserves
£m

Translation
reserve
£m

Fair value
reserve
£m

Retained
earnings
£m

174

199

(136)

Non-
controlling
interests
£m

Total
£m

687

Balance at 1 January 2018 (restated*)
Total comprehensive income/(loss)
for the year
Profit for the year
Other comprehensive income/(loss)
Revaluation of financial assets
Net gain on cash flow hedges and costs
of hedging
Exchange differences on translation of
foreign operations (net of hedging)
Remeasurement loss on defined benefit
pension schemes
Share of losses of joint ventures and
associated undertakings
Income tax credit on other
comprehensive income
Total other comprehensive
(loss)/income
Total comprehensive (loss)/income
for the year
Transactions with owners, recorded
directly in equity
Contributions by and distributions
to owners
Equity dividends
Movements due to share-based
compensation
Tax on items taken directly to equity
Purchase of own shares via employees’
benefit trust
Total transactions with owners
Changes in non-controlling interests (a)
Balance at 31 December 2018

–

–
–

–

–
–

–

–
–

–
–
–
403

–
–
–
174

–
–
7
206

3.7

2.3

4.7
2.3

4.7

3.4
4.6

–

–
–

–
–
–
60

Total
equity
£m

732

470

(1)

(52)

(15)

(41)

429

–

(1)

–

466

–

(1)

(52)

(15)

(1)

(59)

(41)

(1)

407

425

–

–
–

–

–
5

(315)

(8)

(323)

10
6

(5)
(304)
–
(33)

10
6

(5)
(304)
7
815

–
–

–
(8)
(7)
34

10
6

(5)
(312)
–
849

(a) Movements reported in merger and other reserves include a put option for the acquisition of non-controlling interests.

* The Group has applied IFRS 15 ‘Revenue from Contracts with Customers’ and IFRS 9 ‘Financial Instruments’ at 1 January 2018. Under the transition method chosen, the comparative

information has been restated. See section 1.

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ITV plc Annual Report and Accounts 2018

Consolidated Statement of Changes in Equity continued

> Primary Statements

Attributable to equity shareholders of the parent company

Share
premium
£m

Merger
and other
reserves
£m

Translation
reserve
£m

Available-
for-sale
reserve
£m

Note

Share
capital
£m

403
–
403

Balance at 1 January 2017
Adjustment on application of IFRS 15 *
Restated balance at 1 January 2017
Total comprehensive income / (loss)
for the year
Restated profit for the year *
Other comprehensive income / (loss)
Revaluation of available-for-sale
financial assets
Net loss on cash flow hedges and costs
of hedging
Exchange differences on translation of
foreign operations (net of hedging)
Remeasurement loss on defined benefit
pension schemes
Income tax charge on other
comprehensive income
Total other comprehensive
income/(loss)
Total comprehensive income/(loss)
for the year
Transactions with owners, recorded
directly in equity
Contributions by and distributions
to owners
Equity dividends
Movements due to share-based
compensation
Purchase of own shares via employees’
benefit trust
Total transactions with owners
Changes in non-controlling interests (a)
Balance at 31 December 2017

3.7

2.3

4.7

3.4
4.6

174
–
174

221
–
221

–

–
–
–
403

–
–
–
174

–
–
(22)
199

Retained
earnings
£m

(162)
2
(160)

Non-
controlling
interests
£m

33
–
–

Total
£m

722
2
724

Total
equity
£m

755
2
757

409

–

(1)

(3)

(32)

172

(39)

133

542

506

–

413

(1)

(3)

(32)

172

(39)

510

(494)

(4)

(498)

–

(36)
(518)
–
(136)

(36)
(518)
(25)
687

–
(4)
12
45

(36)
(522)
(13)
732

79
–
79

–

(3)

(32)

–

(35)

–

–
–
(3)
41

7
–
7

–

(1)

–

(1)

–

–
–
–
6

* The Group has applied IFRS 15 ‘Revenue from Contracts with Customers’ and IFRS 9 ‘Financial Instruments’ at 1 January 2018. Under the transition method chosen, the comparative information

has been restated. See section 1.

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Financial Statements
Financial Statements

Consolidated Statement of Cash Flows

For the year ended 31 December

Note

£m

Cash flows from operating activities
Cash generated from operations before exceptional items
Cash flow relating to operating exceptional items:

Operating exceptional items
Increase/(decrease) in exceptional payables
Decrease in exceptional prepayments and other receivables

Cash outflow from exceptional items
Cash generated from operations
Defined benefit pension deficit funding
Interest received
Interest paid on bank and other loans
Net taxation paid

Net cash inflow from operating activities

Cash flows from investing activities
Acquisition of subsidiary undertaking, net of cash acquired
Acquisition of property, plant and equipment
Acquisition of intangible assets
Acquisition of investments
Proceeds from sale of property, plant and equipment
Acquisition of non-controlling interests
Purchase of gilts (other pension assets)
Loans granted to associates and joint ventures
Net cash outflow from investing activities

Cash flows from financing activities
Bank and other loans – amounts repaid
Bank and other loans – amounts raised
Capital element of finance lease payments
Equity dividends paid
Dividends paid to minority interest
Purchase of own shares via employees’ benefit trust
Net cash outflow from financing activities

Net decrease in cash and cash equivalents

2.1

2.2

3.4

(93)
1
2

(82)
10
(52)
(92)

–
(56)
(26)
(13)
17
(10)
(11)
(4)

(422)
400
–
(315)
(8)
(5)

Cash and cash equivalents at 1 January
Effects of exchange rate changes and fair value movements
Cash and cash equivalents at 31 December

4.1

2018
£m

730

(90)
640

(216)
424

2017
£m

795

(126)
669

(213)
456

£m

(153)
(18)
45

(80)
21
(59)
(95)

(35)
(46)
(25)
(19)
–
–
–
(4)

(103)

(129)

(680)
465
(4)
(494)
(4)
(36)

(350)

(29)

126
(2)
95

(753)

(426)

561
(9)
126

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ITV plc Annual Report and Accounts 2018

Notes to the Financial Statements
Section 1: Basis of Preparation

> Section 1: Basis of Preparation

In this
section

This section sets out the Group’s accounting policies that relate to the financial
statements as a whole. Where an accounting policy is specific to one note, the policy
is described in the note to which it relates. This section also shows new EU endorsed
accounting standards, amendments and interpretations, and whether they are
effective in 2018 or later years. We explain how these changes are expected to
impact the financial position and performance of the Group.

The financial statements consolidate those of ITV plc (‘the Company’) and its subsidiaries (together referred to as
the ‘Group’) and the Group’s interests in associates and jointly controlled entities. The Company is domiciled in the
United Kingdom.

As required by European Union law (IAS Regulation EC 1606/2002), the Group’s financial statements have been
prepared in accordance with International Financial Reporting Standards as adopted by the EU (‘IFRS’), and approved
by the Directors.

The financial statements are principally prepared on the basis of historical cost. Where other bases are applied, these
are identified in the relevant accounting policy.

The parent company financial statements have been prepared in accordance with Financial Reporting Standard 101
‘Reduced Disclosure Framework’ (‘FRS 101’).

Going concern
At 31 December 2018, the Group was in a financial net debt position with a positive gross cash balance. The Group is in a
net current asset position with a solid balance sheet. The Group continues to generate significant cash from operations
which enables the Group to meet its obligations.

As a part of the going concern test, the Group reviews forecasts of the total advertising market to determine the
impact on ITV’s liquidity position. The Group’s forecasts and projections, taking account of reasonably possible changes
in trading performance, show that the Group will be able to operate within the level of its current available funding.

The Group also continues to focus on development of the non-advertising business, and evaluates the impact of
further investment against the cash headroom of the business.

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to
continue in operation for at least 12 months from the date of this report. Accordingly, the Group continues to adopt
the going concern basis in preparing its consolidated financial statements.

Subsidiaries, joint ventures, associates and investments
Subsidiaries are entities that are directly or indirectly controlled by the Group. Control exists where the Group has
the power to govern the financial and operating policies of the entity in order to obtain benefits from its activities.
In assessing control, potential voting rights that are currently exercisable or convertible are taken into account.

A joint venture is a joint arrangement in which the Group holds an interest under a contractual arrangement where
the Group and one or more other parties undertake an economic activity that is subject to joint control. The Group
accounts for its interests in joint ventures using the equity method. Under the equity method, the investment in
the entity is stated as one line item at cost plus the investor’s share of retained post-acquisition profits and other
changes in net assets.

An associate is an entity, other than a subsidiary or joint venture, over which the Group has significant influence.
Significant influence is the power to participate in, but not control or jointly control, the financial and operating
decisions of an entity. These investments are also accounted for using the equity method.

Investments where the Group concludes it does not have significant influence. These investments are held at fair
value unless the investment is a start-up business, in which case it is valued at cost and assessed for impairment.

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Financial Statements
Financial Statements

Notes to the Financial Statements
Section 1: Basis of Preparation continued

Current/non-current distinction
Current assets include assets held primarily for trading purposes, cash and cash equivalents, and assets expected to
be realised in, or intended for sale or use in, the course of the Group’s operating cycle. All other assets are classified
as non-current assets.

Current liabilities include liabilities held primarily for trading purposes, liabilities expected to be settled in the course
of the Group’s operating cycle and those liabilities due within one year from the reporting date. All other liabilities
are classified as non-current liabilities.

Classification of financial instruments
The financial assets and liabilities of the Group are classified into the following financial statement captions in the
statement of financial position in accordance with IFRS 9 ‘Financial Instruments’:

• Loans and receivables – separately disclosed as cash and cash equivalents and trade and other receivables
• Financial assets at fair value through OCI – measured at fair value through other comprehensive income
• Financial assets/liabilities at fair value through profit or loss – separately disclosed as derivative financial instruments

in assets/liabilities and included in other payables (contingent consideration) and

• Financial liabilities measured at amortised cost – separately disclosed as borrowings and trade and other payables

Judgement is required when determining the appropriate classification of the Group’s financial instruments.
Details on the accounting policies for measurement of the above instruments are set out in the relevant note.
Where unconditional rights to set off financial instruments exist, the Group presents the relevant instruments
net in the statement of financial position.

Recognition and derecognition of financial assets and liabilities
The Group recognises a financial asset or liability when it becomes a party to the contract. Financial instruments
are no longer recognised in the statement of financial position when the contractual cash flows expire or when
the Group no longer retains control of substantially all the risks and rewards under the instrument.

Cash and cash equivalents
Cash and cash equivalents comprise cash balances, call deposits with a maturity of less than or equal to three months
from the date of acquisition and cash held to meet certain finance lease commitments. The carrying value of cash
and cash equivalents is considered to approximate fair value.

Foreign currencies
The primary economic environment in which the Group operates is the UK and therefore the consolidated financial
statements are presented in pounds sterling (‘£’).

Where Group companies based in the UK transact in foreign currencies, these transactions are translated into pounds
sterling at the exchange rate on the transaction date. Foreign currency monetary assets and liabilities are translated
into pounds sterling at the year end exchange rate. Non-monetary assets and liabilities measured at historical cost are
translated into pounds sterling at the exchange rate on the date of the transaction. Where there is a movement in the
exchange rate between the date of the transaction and the year end, a foreign exchange gain or loss is recognised in
the income statement.

The assets and liabilities of Group companies outside of the UK are translated into pounds sterling at the year end
exchange rate. The revenue and expenses of these companies are translated into pounds sterling at the average
monthly exchange rate during the year. Where differences arise between these rates, they are recognised in the
translation reserve within other comprehensive income.

The Group’s net investments in companies outside the UK may be hedged where the currency exposure is considered
to be material. Hedge accounting is implemented on certain foreign currency firm commitments, for which the
effective portion of any foreign exchange gains or losses is recognised in other comprehensive income (note 4.3).

Where a forward currency contract is used to manage foreign exchange risk and hedge accounting is not applied,
any impact of movements in currency for both the forward currency contracts and the assets and liabilities is taken
to the income statement.

Exchange differences arising on the translation of the Group’s interests in joint ventures and associates are recognised
in the translation reserve within other comprehensive income.

On disposal of a foreign subsidiary, an interest in a joint venture or an associate, the related translation reserve
is released to the income statement as part of the gain or loss on disposal.

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> Section 1: Basis of Preparation

Accounting judgements and estimates
The preparation of financial statements requires management to exercise judgement in applying the Group’s
accounting policies. It also requires the use of estimates and assumptions that affect the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis, with revisions recognised in the period
in which the estimates are revised and in any future periods affected.

The area involving a high degree of estimation, judgement or complexity is set out below and in more detail in
the related note:

• Revenue recognition (note 2.1)

In addition to the above, the areas involving the most sensitive estimates and assumptions that are significant
to the financial statements are set out below and in more detail in the related notes:

• Defined benefit pension (note 3.7)
• Taxation (note 2.3)
• Business combinations including earnouts (note 3.3 and note 3.1.5)

New or amended EU endorsed accounting standards
The Group has adopted IFRS 9 ‘Financial Instruments’ and IFRS 15 ‘Revenue from Contracts with Customers’ from
1 January 2018. Neither standard has a material effect on the Group’s financial statements.

IFRS 9 ‘Financial Instruments’
IFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts
to buy or sell non-financial items. This standard replaces IAS 39 ‘Financial Instruments: Recognition and Measurement’.
IFRS 9 introduces new models for classification of financial assets and accounting for credit losses. Hedging rules have
been amended to allow hedge accounting to be applied to more risks.

The adoption of IFRS 9 did not result in a material adjustment to previously reported results. See 4.3 for further details.

IFRS 16 ‘Leases’
IFRS 16 is effective 1 January 2019 and will change lease accounting for lessees under operating leases. Such
agreements will require recognition of an asset, representing the right to use the leased item, and a liability,
representing future lease payments. Lease costs (such as property rent) will be recognised in the form of depreciation
and interest, rather than as an operating cost.

The Group plans on adopting the modified retrospective approach with the right of use asset equal to the lease liability
at transition date, less any lease incentives received. The likely impact to Operating costs is expected to be between
£3 million to £5 million with the likely impact to Profit before tax being £nil to £1 million. Non-current assets and gross
liabilities are both expected to increase by £90 million to £120 million with net assets remaining unchanged.

The Group has elected not to recognise right of use assets and lease liabilities for short-term leases or low-value assets.
The Group will continue to expense the lease payments associated with these leases on a straight-line basis over the
lease term.

IFRS 15 ‘Revenue from Contracts with Customers’
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised.
It replaced IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’ and related interpretations.

The Group has adopted IFRS 15 on a fully retrospective basis.

The following table summarises the impacts of adopting IFRS 15 on the Group’s Income Statement for the year end
31 December 2017.

Impact on the Income Statement

Revenue
Operating costs
Operating profit

As reported
2017
£m

Note

Adjustments

3,132
(2,577)
555

2
(2)
–

Restated
2017
£m

3,130
(2,575)
555

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Financial Statements
Financial Statements

Notes to the Financial Statements
Section 1: Basis of Preparation continued

The following table summarises the impacts of adopting IFRS 15 on the Group’s Statement of Financial Position as at
31 December 2017.

Impact on the Statement of Financial Position

Programme rights
Trade and other receivables due within one year
Contract assets
Trade and other payables due within one year
Contract liabilities
Others
Net assets

Retained earnings
Others
Equity

As reported
2017
£m

Note

Adjustments

Restated
2017
£m

570
514
–
(1,029)
–
675
730

(138)
868
730

(249)
(101)
352
219
(219)
–
2

2*
–
2*

321
413
352
(810)
(219)
675
732

(136)
868
732

* The change in retained earnings relates to the restatement of 2017 opening balances.

The changes to revenue recognition as a result of IFRS 15 relate to:

• Principal versus agent consideration in the Broadcast & Online division resulted in movements between revenue
and costs. This resulted in an increase to revenue of £1 million with a corresponding increase in operating costs
• Certain contracts for production of programmes in ITV Studios meet over-time revenue recognition criteria under

IFRS 15, compared to point-in-time recognition under the previous standard. This change has resulted in a reduction
in revenue by £3 million with a corresponding reduction in operating costs. The Statement of Financial Position has
been adjusted for the impact of this timing difference and the reclassification of contract assets and liabilities from
other balances

• The changes in the Statement of Financial Position relate to the reclass of programme rights and accrued revenue

to contract assets and deferred revenue to contract liabilities

There was no impact to the Group’s Statement of Cash Flows.

Other new or amended accounting standards
IFRIC 22 ‘Foreign Currency Transactions and Advance Consideration’ and the amendments to IFRS 2 ‘Share-based
Payment’ on the classification and measurement of share-based payment transactions did not have an impact
to our results.

Based on the Directors’ analysis, other than those specifically mentioned, the new or amended accounting standards
outlined above do not have a material impact on the Group’s financial position or performance for the year ended
31 December 2018.

EU endorsed accounting standards effective in future periods
The Directors considered the impact on the Group of other new and revised accounting standards, interpretations
or amendments that are currently endorsed but not yet effective. IFRS 16 has been discussed earlier. The Directors
do not expect any other standards to have a significant impact on the Group’s results.

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ITV plc Annual Report and Accounts 2018

Notes to the Financial Statements
Section 2: Results for the Year

> Section 2: Results for the Year

In this
section

This section focuses on the results and performance of the Group. On the following
pages, you will find disclosures explaining the Group’s results for the year, segmental
information, exceptional items, taxation and earnings per share.

2.1 Profit
before tax

Keeping
it simple

This section analyses the Group’s profit before tax by reference to the activities
performed by the Group and an analysis of key operating costs.

Adjusted earnings before interest, tax and amortisation (EBITA) is the Group’s
key profit indicator. This reflects the way the business is managed and how
the Directors assess the performance of the Group. This section therefore
also shows each division’s contribution to total revenue and adjusted EBITA.

Accounting policies
Revenue recognition
The Group derives revenue from the transfer of goods and services. Revenue recognition is based on the delivery of
performance obligations and an assessment of when control is transferred to the customer. Revenue is recognised
either when the performance obligation in the contract has been performed (‘point in time’ recognition) or ‘over time’
as control of the performance obligation is transferred to the customer.

Customer contracts can have a wide variety of performance obligations, from production contracts to format licences
and distribution activities. For these contracts, each performance obligation is identified and evaluated. Under IFRS 15
the Group needs to evaluate if a format or licence represents a right to access the content (revenue recognised over
time) or represents a right to use the content (revenue recognised at a point in time). The Group has determined that
most format and licence revenues are satisfied at a point in time due to their being limited ongoing involvement in the
use of the license following its transfer to the customer.

The transaction price, being the amount to which the Group expects to be entitled and has rights to under the contract
is allocated to the identified performance obligations. The transaction price will also include an estimate of any variable
consideration where the Group’s performance may result in additional revenues based on the achievement of agreed
targets such as audience targets. Variable consideration is not recognised until the performance obligations are met.

Revenue is stated exclusive of VAT and equivalent sales taxes.

Complexity in advertising revenue recognition is driven by automated and manual processes involved in measuring the
value delivered to the customer.

Revenue recognition criteria for the Group’s key classes of revenue are as follows:

Segment

Major classes of revenue

Payment terms

Broadcast & Online
Total advertising
revenue

• Advertising (NAR) is generated from selling spot airtime and is

recognised at the point of transmission

Direct to
Consumer

• Video on demand (VOD) is generated from selling advertising on the

ITV Hub and is recognised at the point of delivery

• Revenue from the sponsorship of programmes across ITV linear

channels and online is recognised over the period of transmission

• Revenue from ‘pay’ is generated from the provision of HD channels,
catch up content and licences to ready-made programmes in the
form of box sets and is recognised either over the term of the
contract or per subscriber or download

• Revenue from ‘interactive’ is from entries to competitions and is

recognised as the event occurs

• Received in the month
after transmission
• Received in the month

after campaign is
delivered

• Received prior to
transmission

Payment term for ‘pay’
and ‘interactive’ is over
the term of the contracts

SDN

• Revenue is generated from the carriage fee or capacity of the

digital multiplex and is recognised over the term of the contract

Payment term is over the
term of the contract

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Financial Statements
Financial Statements

Notes to the Financial Statements
Section 2: Results for the Year continued

Segment

Major classes of revenue

Payment terms

Studios
Programme
production

Programme
distribution rights

• Revenue generated from the programmes produced for broadcasters
in the UK and internationally and is recognised at the point of delivery
of an episode and acceptance by the customer. Producer for hire
contracts where cost plus a margin is received upon cancellation is
recognised over time

• A licence is granted for the transmission of a programme in a stated
territory, media and period and revenue is recognised at the point
when the contract is signed, the content is available for download
and the licence period has started

• Payment term is over

the term of the
contract

• Payment term is over

the term of the
contract

Format and
licences

• A licence is granted for the exploitation of a format in a stated

• Payment term is over

territory, media and period. These are recognised when the licence is
granted to the customer (point in time )

the term of the
contract

Digital: archive

• Content sold to broadcasters and is recognised on delivery of

• Payment term is over

content or over the contract period in a manner that reflects the flow
of content delivered

the term of the
contract

The results for the year aggregate these classes of revenue into the following categories:

Total advertising revenue
Direct to consumer
SDN
Other

Total Broadcast & Online

Studios UK
ITV America
Studios RoW
Global Entertainment

Total ITV Studios*
Total revenue

2018
£m

1,795
81
73
147
2,096
695
245
516
214
1,670
3,766

2018
% of total

48%

56%

44%

2017
£m

1,781
65
70
160
2,076
692
310
390
187
1,579
3,655

2017
% of total

49%

57%

43%

* Studios UK and ITV America revenues are mainly programme production. Studios RoW revenue is from programme production, programme distribution rights

and format and licences. Global Entertainment revenue includes programme distribution rights, format and licences and digital archive.

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> Section 2: Results for the Year

Segmental information
Operating segments, which have not been aggregated, are determined in a manner that is consistent with how the
business is managed and reported to the Board of Directors. The Board is regarded as the chief operating decision-maker.

The Board considers the business primarily from an operating activity perspective. The reportable segments for the
years ended 31 December 2018 and 31 December 2017 are therefore Broadcast & Online and ITV Studios, the results
of which are outlined in the following tables:

Total segment revenue
Intersegment revenue
Revenue from external customers

Adjusted EBITA(ii)

Total segment revenue
Intersegment revenue
Revenue from external customers

Adjusted EBITA(ii)

Broadcast
& Online
2018
£m

2,096
(4)
2,092

ITV Studios(i)
2018
£m

Consolidated
2018
£m

1,670
(551)
1,119

3,766
(555)
3,211

555

255

810

Broadcast
& Online (iii)
2017
£m

2,076
(2)
2,074

ITV Studios (i), (iii)
2017
£m

Consolidated
2017
£m

1,579
(523)
1,056

3,655
(525)
3,130

599

243

842

(i) Revenue of £354 million (Restated 2017: £393 million) was generated in the US during the year; the US represented £329 million (2017: £330 million)

of non-current assets at year end.

(ii) Adjusted EBITA is before exceptional items and includes the benefit of production tax credits. It is shown after the elimination of intersegment revenue

and costs.

(iii) The Group has applied IFRS 15 ‘Revenue from Contracts with Customers’ and IFRS 9 ‘Financial Instruments’ at 1 January 2018. Under the transition method

chosen, the comparative information has been restated. See section 1.

The Group’s principal operations are in the United Kingdom. Revenue from external customers in the United Kingdom
is £2,250 million (Restated 2017: £2,273 million), and revenue from external customers in other countries is £961 million
(Restated 2017: £856 million). The Operating and Performance Review provides further detail on ITV’s international
revenues.

Intersegment revenue, which is earned on arm’s length terms, is mainly generated from the supply of ITV Studios
programmes to Broadcast & Online for transmission primarily on the ITV network. This revenue stream is a measure
that forms part of the Group’s strategic priority of building a strong international content business, as producing and
retaining rights to the shows broadcast on the ITV network benefits the Group further from subsequent international
content and format sales.

In preparing the segmental information, centrally managed costs have been allocated between reportable segments
on a methodology driven principally by revenue, headcount and building occupancy of each segment. This is consistent
with the basis of reporting to the Board of Directors.

There is one media buying agency (2017: one) acting on behalf of a number of advertisers that represent the Group’s
major customers. This agency is the only customer that individually represents over 10% of the Group’s revenue.
Revenue of approximately £554 million (2017: £561 million) was derived from this customer. This revenue is attributable
to the Broadcast & Online segment.

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Strategic ReportAdditional informationFinancial StatementsGovernance

Financial Statements
Financial Statements

Notes to the Financial Statements
Section 2: Results for the Year continued

Timing of revenue recognition
The following table includes revenue from contracts disaggregated by the timing of recognition:

Products transferred at a point in time
Products and services transferred over time
Total external revenue

2018
£m

2,709
502
3,211

Restated
2017
£m

2,607
523
3,130

Included in the above ‘Products transferred at a point in time’ is Total advertising revenue, DTC, SDN (2018: £1,802 million,
2017: £1,766 million), Programme production, programme distribution rights, digital archive (2018: £1,340 million,
2017: £1,272 million); and Formats and Licences (2018:£122 million, 2017: £95 million).

Included in the above ‘Products and services transferred over time’ is Total advertising revenue, DTC, SDN (2018:
£294 million, 2017: £310 million), Programme production, programme distribution rights, digital archive (2018:
£199 million, 2017: £201 million); and Formats and Licences (2018:£9 million, 2017: £11 million).

Forward bookings
The following table includes revenue from contracts signed before the reporting date that is to be recognised in
periods post the reporting date (i.e. the performance obligations remain unsatisfied or partially unsatisfied at the
reporting date):

Broadcast & Online
ITV Studios
Revenue

2019
£m

134
204
338

2020
£m

113
96
209

2021
£m

56
71
127

Beyond
£m

34
15
49

The Group applies the practical expedients in IFRS 15 and, therefore, does not disclose information about remaining
performance obligations that have original expected durations of less than one year or where the price is not yet
known (e.g. NAR).

Broadcast & Online
The Group operates the largest commercial family of channels in the UK and delivers content through multiple
platforms. In addition to linear television broadcast, the Group delivers its content on the ITV Hub, catch up services
on pay platforms, and through direct content deals. Content commissioned and scheduled by this segment is funded
primarily by advertising, where revenue is generated from the sale of audiences for advertising spot airtime, online
advertising, sponsorship and licencing.

Other sources of revenue are from: Direct to Consumer revenue (which includes interactive sales from competitions
as well as ITV Hub+ and Commerce & Ventures); SDN revenue (which generates licence sales for DTT Multiplex A);
HD digital channels on pay platforms (e.g. Sky and Virgin) and the ITV Choice subscription service in other countries.

ITV Studios
ITV Studios is the Group’s international content business, creating and producing programmes and formats that return
and travel, namely drama, entertainment and factual entertainment.

ITV Studios UK is the largest commercial producer in the UK and produces programming for the Group’s own channels,
accounting for 67% of ITV main channel spend on commissioned programming (2017: 66%). Programming is also sold
to other UK broadcasters such as the BBC, Channel 4 and Sky.

ITV America is the leading unscripted independent producer of content in the US and is growing its scripted presence
by increasing investment in high-profile dramas.

ITV Studios also operates in nine other international locations, being Australia, Germany, France, Italy, the Netherlands
(primarily Talpa Media), Sweden, Norway, Finland and Denmark where content is produced for local broadcasters. This
content is either locally created IP or formats that have been created elsewhere by ITV, primarily in the UK and the
Netherlands.

Global Entertainment and Talpa Global, ITV’s distribution businesses, license ITV’s finished programmes and formats
and third-party content internationally. Within this business, we also finance productions both on and off ITV to acquire
global distribution rights.

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> Section 2: Results for the Year

Adjusted EBITA
The Directors assess the performance of the reportable segments based on a measure of adjusted EBITA. The Directors
use this measurement basis as it excludes the effect of transactions that could distort the understanding of the Group’s
performance for the year and comparability between periods. See the Operating and Performance Review on pages
32 to 43 for the detailed explanation of the Group’s use of adjusted performance measures. A reconciliation from
adjusted EBITA to profit before tax is provided as follows:

Adjusted EBITA
Production tax credits
EBITA before exceptional items
Operating exceptional items
Amortisation and impairment
Net financing costs
Share of losses of joint ventures and associated undertakings
Gain/(loss) on sale of non-current assets (exceptional items)
Profit before tax

2018
£m

810
(25)
785
(93)
(92)
(43)
–
10
567

Cash generated from operations
A reconciliation from profit before tax to cash generated from operations before exceptional items is as follows:

Cash flows from operating activities
Profit before tax
Add back:
(Gain)/loss on sale of non-current assets (exceptional items)
Share of losses of joint ventures and associated undertakings
Net financing costs
Operating exceptional items
Depreciation of property, plant and equipment
Amortisation and impairment
Share-based compensation and pension service costs

Decrease /(increase) in programme rights and distribution rights
(Increase) /decrease in receivables and contract assets
(Decrease) / increase in payables and contract liabilities

Movement in working capital
Cash generated from operations before exceptional items

2018
£m

567

(10)
–
43
93
28
92
10
14
(103)
(4)
(93)
730

Operating costs
The major components of operating costs are Network schedule costs of £1,055 million (2017 £1,025 million),
Staff costs of £473 million (2017: £449 million), Depreciation, Amortisation and Impairment of £120 million
(2017: £132 million) and Operating exceptional items of £93 million (2017: £153 million).

Staff costs
Staff costs before exceptional items can be analysed as follows:

Wages and salaries
Social security and other costs
Share-based compensation (see note 4.7)
Pension costs
Total staff costs
Less: staff costs allocated to productions
FTEE staff costs (non-production)

Exceptional staff costs are disclosed separately in note 2.2.

2018
£m

384
52
10
27
473
(189)
284

2017
£m

842
(32)
810
(153)
(102)
(50)
(4)
(1)
500

2017
£m

500

1
4
50
153
30
102
13
(94)
13
23
(58)
795

2017
£m

358
55
12
24
449
(166)
283

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Strategic ReportAdditional informationFinancial StatementsGovernance

Financial Statements
Financial Statements

Notes to the Financial Statements
Section 2: Results for the Year continued

The number of full-time equivalent employees (FTEE) (excluding short-term contractors and freelancers who are
predominantly allocated to the cost of productions), calculated as a weighted average over the year:

Broadcast & Online
ITV Studios

2018

2,143
4,138
6,281

2017

2,053
4,002
6,055

The increase in full-time equivalent employees is primarily driven by the full year impact of acquisitions completed in
2017. Details of Directors’ emoluments, share options, pension entitlements and long-term incentive scheme interests
are set out in the Remuneration Report. Listed Directors’ gains on share options for 2018 are set out in the ITV plc
Company financial statements.

Depreciation
Depreciation in the year was £28 million (2017: £30 million), of which £12 million (2017: £11 million) relates to Broadcast
& Online and £16 million (2017: £19 million) to ITV Studios. A further £2 million in respect of accelerated depreciation
for assets made redundant under restructuring projects. See notes 2.2 and 3.3 for further details.

Operating leases
The Group’s operating leases relate to offices, studio properties and other assets such as cars and office equipment.
Property leases run for terms ranging from five to 20 years, depending on the expected operational use of the site.
Leases may include break clauses or options to renew (options to renew are not included in the commitments table).
Lease payments are generally subject to market review every five years to reflect market rentals, but because of the
uncertainty over the amount of any future changes, such changes have not been reflected in the table below. None
of the lease agreements include contingent rentals. The total undiscounted future minimum lease payments under
non-cancellable operating leases are due for payment as follows:

2018

Within one year
Later than one year and not later than five years
Later than five years

2017

Within one year
Later than one year and not later than five years
Later than five years

Property
£m

Other
£m

27
83
31
141

3
3
–
6

Property
£m

Other
£m

28
89
19
136

3
4
–
7

Total
£m

30
86
31
147

Total
£m

31
93
19
143

The total operating lease expenditure recognised during the year was £26 million (2017: £21 million) and total sublease
payments received were £1 million (2017: £1 million).

IFRS 16 ‘Leases’ is effective 1 January 2019 and will change lease accounting for lessees under operating leases. The
impact to the Group has been outlined in Section 1. Non-current assets and gross liabilities are both expected to
increase by £90 million to £120 million with net assets remaining unchanged.

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ITV plc Annual Report and Accounts 2018

> Section 2: Results for the Year

Audit fees
The Group engages KPMG LLP (KPMG) on assignments additional to its statutory audit duties where its expertise and
experience with the Group are important and are in line with Group’s policy on auditor independence. Fees paid to
KPMG and its associates during the year are set out below:

For the audit of the Group’s annual accounts
For the audit of subsidiaries of the Group
Audit-related assurance services
Total audit and audit-related assurance services
Taxation advisory services
Other assurance services
Total non-audit services
Total fees paid to KPMG

2018
£m

0.7
0.7
0.1
1.5
–
–
–
1.5

2017
£m

0.6
0.6
0.2
1.4
–
–
–
1.4

There were no fees payable in 2018 or 2017 to KPMG and associates for the auditing of accounts of any associate
or pension scheme of the Group, internal audit, and services relating to corporate finance transactions entered
into or proposed to be entered into, by or on behalf of the Group or any of its associates. Fees paid to KPMG for audit
and other services to the Company are not disclosed in its individual accounts as the Group accounts are required to
disclose such fees on a consolidated basis.

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Financial Statements
Financial Statements

Notes to the Financial Statements
Section 2: Results for the Year continued

2.2
Exceptional
items

Keeping
it simple

Exceptional items are excluded from management’s assessment of profit because
by their size or nature they could distort the Group’s underlying quality of earnings.
They are typically gains or losses arising from events that are not considered part of
the core operations of the business (e.g. costs relating to capital transactions, such as
professional fees on acquisitions). These items are excluded to reflect performance in
a consistent manner and are in line with how the business is managed and measured
on a day-to-day basis.

Accounting policies
Exceptional items as described above are highlighted on the face of the income statement. See the Operating
and Performance Review on pages 32 to 43 for the detailed explanation of the Group’s use of adjusted performance
measures. Gains or losses on disposal of non-core assets are also considered exceptional due to their nature and
impact on the Group’s underlying quality of earnings.

Exceptional items
Operating and non-operating exceptional items are analysed as follows:

(Charge)/credit

Operating exceptional items:

Acquisition-related expenses
Restructuring and property-related costs
Insured trade receivable provision
Pension related costs
Other

Total operating exceptional items
Non-operating exceptional items:

Gain/(loss) on sale of non-current assets

Total non-operating exceptional items
Total exceptional items before tax

Tax on exceptional items

Total exceptional items net of tax

Ref.

A
B
C
D
E

2018
£m

(60)
(26)
4
4
(15)
(93)

10
10
(83)
9
(74)

2017
£m

(90)
(30)
(27)
–
(6)
(153)

(1)
(1)
(154)
12
(142)

A – Acquisition-related expenses
Acquisition-related expenses of £60 million includes £54 million (2017: £86 million) relating to performance-based,
employment-linked costs to former owners. The remaining £6 million (2017: £4 million) is primarily comprised of
professional fees (mainly financial due diligence and legal costs in respect of potential acquisitions during the year).
See note 3.4 for further details on acquisitions.

B – Restructuring and property-related costs
In October 2018, the Directors reversed their prior decision, reported in 2017 and agreed not to redevelop the Group’s
headquarters at The London Television Centre and the site is now for sale. £13 million of dual rent, other property costs
and move related costs have been recognised as exceptional.

In 2018, we announced our strategy ‘More than TV’ and as a result incurred £13 million of costs from restructuring
our business.

In 2017, the Group incurred £30 million of costs in relation to the London property project including the closure of
The London Studios business.

C – Insured trade receivable provision
Refer to section 5.2 for further details.

D – Pension related costs
A past service cost of £6 million has been included in the measurement of the Pension scheme liabilities for Guaranteed
Minimum Pension (‘GMP’) equalisation. This is to equalise the benefits between men and women following a High Court
ruling around equalisation of GMP.

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ITV plc Annual Report and Accounts 2018

> Section 2: Results for the Year

In November 2018, the Pension Trustee entered into a bulk annuity insurance contract in respect of the benefits of two
sections of the ITV Pension Scheme. This type of deal is also known as a ‘Buy-in’, which resulted in recognition of a loss
of £94 million in other comprehensive income as explained in section 3.7. Further, as part of the buy-in transaction,
certain amendments were made to the scheme. As a result, a past service cost of £5 million has been included in the
measurement of the pension scheme liabilities for the pension increase exchange option no longer being available
to members of these schemes. Certain members of the sections also had a change of rate of pension increases. This
change resulted in a credit of £15 million which has also been recognised as an exceptional past service cost.

E – Other
Other relates to ongoing litigation costs outside the normal course of business.

F – Gain/(loss) on sale of non-current assets
The gain on sale of non-current assets arose primarily as a result of the sale of freehold land and buildings in
Manchester and Belfast.

2.3
Taxation

Keeping
it simple

This section sets out the Group’s tax accounting policies, the current and deferred
tax charges or credits in the year (which together make up the total tax charge
or credit in the income statement), a reconciliation of profit before tax to the tax
charge for the period and the movements in deferred tax assets and liabilities.

Accounting policies
The tax charge for the period is recognised in the income statement, the statement of comprehensive income and
directly in equity, according to the accounting treatment of the related transactions. The tax charge comprises both
current and deferred tax. The calculation of the Group’s tax charge involves a degree of estimation and judgement in
respect of certain items whose tax treatment cannot be fully determined until a resolution has been reached by the
relevant tax authority.

Current tax
Current tax is the expected tax payable or receivable on the taxable income or loss for the year and any adjustment
in respect of previous years.

The Group recognises liabilities for anticipated tax issues based on estimates of the additional taxes that are likely
to become due, which require judgement. Amounts are accrued based on management’s interpretation of specific tax
law and the likelihood of settlement. Where the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the current tax and deferred tax provisions in the period in which
such determination is made.

Deferred tax
Deferred tax arises due to certain temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and those for taxation purposes.

The following temporary differences are not provided for:

• The initial recognition of goodwill
• The initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business

combination and

• Differences relating to investments in subsidiaries to the extent that they will probably not reverse in the

foreseeable future

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying
amount of assets and liabilities. Deferred tax is calculated using tax rates that are enacted or substantively enacted
at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that sufficient taxable profit will be available
to utilise the temporary difference. Recognition of deferred tax assets, therefore, involves judgement regarding the
timing and level of future taxable income.

Deferred tax assets and liabilities are disclosed net to the extent that they relate to taxes levied by the same authority
and the Group has the right of set-off.

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Financial Statements
Financial Statements

Notes to the Financial Statements
Section 2: Results for the Year continued

Taxation – Income statement
The total taxation charge in the income statement is analysed as follows:

Current tax:

Current tax charge on profit before exceptional items
Current tax credit on exceptional items

Adjustments to prior periods

Deferred tax:

Origination and reversal of temporary differences
Deferred tax credit on exceptional items
Impact of changes to statutory tax rates

Adjustments to prior periods

Total taxation charge in the income statement

2018
£m

(123)
3
(120)
(14)
(134)

5
6
1
12
25
37
(97)

2017
£m

(110)
8
(102)
(2)
(104)

13
4
(6)
11
6
17
(87)

In order to understand how, in the income statement, a tax charge of £97 million (2017: £87 million) arises on a profit
before tax of £567 million (2017: £500 million), the taxation charge that would arise at the standard rate of UK
corporation tax is reconciled to the actual tax charge as follows:

Profit before tax
Notional taxation charge at UK corporation tax rate of 19% (2017: 19.25%) on
profit before tax
Non-taxable income/non-deductible expenses
Prior year adjustments
Other taxes
Previously unrecognised deferred tax assets
Current year losses not recognised
Impact of overseas tax rates
Impact of changes in tax rates
Production tax credits
Total taxation charge in the income statement

2018
£m

567

(108)
(30)
11
(1)
3
–
2
1
25
(97)

2017
£m

500

(96)
(35)
4
–
11
(4)
7
(6)
32
(87)

Non-deductible expenses are expenses that are not expected to be allowable for tax purposes. Similarly, non-taxable
income is income that is not expected to be taxable.

Adjustments to prior periods primarily arise where an outcome is obtained on certain tax matters, which differs from
expectations held when the related provision was made. Where the outcome is more favourable than the provision
made, the difference is released, lowering the current year tax charge. Where the outcome is less favourable than
our provision, an additional charge to current year tax will occur. The current tax charge includes a £14 million charge
relating to prior years, and the deferred tax credit includes a £25 million credit relating to prior years. These
adjustments largely represent a movement between current tax and deferred tax, however differences have also
arisen following changes in estimates of taxes that have already become due, or will become due in the future.

Previously unrecognised deferred tax assets are in relation to capital losses utilised against gains on sale of property.

The impact of overseas tax rates reflects the fact that some of our profits are earned in territories other than the
UK and taxed at rates different from the UK corporation tax rate. This year, losses arising in higher taxed jurisdictions,
which we recognise through deferred tax, give rise to a reconciling benefit.

The UK corporation tax rate fell from 20% to 19% from 1 April 2017 and has been enacted to fall further to 17% from
1 April 2020. These rates were enacted at the previous balance sheet date, and the carrying value of UK temporary
differences were adjusted accordingly. To the extent that temporary differences have unwound in the current year,
this has given rise to a credit of nil (2017: charge of £6 million) of which £1 million is recognised as a credit in the
income statement and £1 million as a debit in other comprehensive income.

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> Section 2: Results for the Year

The production tax credits included within the reconciliation above are UK High-End Television (HETV) tax credits and
Children’s Television tax credits, which are part of a group of incentives provided to support the creative industries in
the UK. The ability to access these tax credits is fundamental when assessing the viability of investment decisions in the
production of high-end drama and children’s programmes. Under IFRS, these production tax credits are reported within
the total taxation charge in the income statement. However, ITV considers them to be a contribution to production
costs, and therefore working capital in nature, and excludes them from its adjusted tax charge, including them instead
within Adjusted EBITA.

The effective tax rate is 17.1% (2017: 17.4%), and is the tax charge on the face of the income statement expressed as
a percentage of the profit before tax. As explained in the Finance Review, the Group uses an adjusted tax rate to show
how tax impacts total adjusted earnings in a way that is more aligned with the Group’s cash tax position.

This year, the current year movement on origination and reversal of temporary differences (excluding exceptional
items) is a credit of £5 million, compared with a credit of £13 million in 2017.

Taxation – Other comprehensive income and equity
As analysed in the table below, a deferred tax credit of £8 million on actuarial movements on pensions has been
recognised in other comprehensive income (2017: £39 million charge). A deferred tax credit of £6 million has been
recognised in equity in respect of share-based payments (2017: charge of £1 million).

There is no current tax recognised in equity in relation to share-based payments (2017: credit of £1 million).

Taxation – Statement of financial position
The table below outlines the deferred tax assets/(liabilities) that are recognised in the statement of financial position,
together with their movements in the year:

Tangible assets
Intangible assets
Programme rights
Pension scheme deficits
Tax losses
Share-based compensation
Other temporary differences

At
1 January
2018
£m

Other
movements
£m

Recognised in
the income
statement
£m

Recognised in
OCI and equity
£m

Business
acquisitions
£m

Foreign
exchange
£m

At
31 December
2018
£m

–
(80)
1
(18)
21
(5)
1
(80)

–
–
–
–
–
–
1
1

5
14
(1)
4
15
(1)
1
37

–
–
–
8
–
6
–
14

–
–
–
–
–
–
–
–

–
–
–
–
1
–
1
2

5
(66)
–
(6)
37
–
4
(26)

At
1 January
2017
£m

Other
movements
£m

Recognised in
the income
statement
£m

Recognised in
OCI and equity
£m

Business
acquisitions
£m

Foreign
exchange
£m

At
31 December
2017
£m

–
(94)
1
34
30
(4)
(20)
(53)

3
–
–
–
–
–
(2)
1

(3)
22
–
(13)
(6)
–
17
17

–
–
–
(39)
–
(1)
–
(40)

–
(6)
–
–
–
–
4
(2)

–
(2)
–
–
(3)
–
2
(3)

–
(80)
1
(18)
21
(5)
1
(80)

At 31 December 2018, total deferred tax assets are £46 million (2017: £23 million) and total deferred tax liabilities
are £72 million (2017: £103 million). After netting off balances within countries, there is a deferred tax liability of
£64 million and a deferred tax asset of £38 million (2017: deferred tax liability of £111 million and deferred tax asset
of £31 million) recognised in the Consolidated Statement of Financial Position.

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Notes to the Financial Statements
Section 2: Results for the Year continued

The deferred tax balances relate to:

• Property, plant and equipment temporary differences arising on assets qualifying for tax depreciation
• Temporary differences on intangible assets, including those arising on business combinations
• Programme rights – temporary differences on intercompany profits on stock
• Pension scheme deficit temporary differences on the IAS 19 pension deficit
• Temporary differences arising from the timing of the use of tax losses
• Share-based compensation temporary differences on share schemes and
• Other temporary differences on provisions and other items

The deferred tax balance associated with the pension deficit reflects the current tax benefit obtained in the current
year following the employer contributions of £89 million to the Group’s defined benefit pension scheme. The
adjustment in other comprehensive income to the deferred tax balance primarily relates to the actuarial loss
recognised in the period.

A deferred tax asset of £375 million (2017: £377 million) in respect of capital losses of £2,205 million (2017: £2,217 million)
has not been recognised due to uncertainties as to whether capital gains will arise in the appropriate form and relevant
territories against which such losses could be utilised. For the same reasons, deferred tax assets of £19 million (2017:
£13 million) in respect of overseas losses that time expire between 2019 and 2026 have not been recognised.

In line with our accounting policy on current tax, provisions are held on the balance sheet within current tax liabilities
in respect of uncertain tax positions where management believe that it is probable that future payments of tax will
be required. At the balance sheet date, these tax provisions were not material for the Group.

2.4
Earnings
per share

Keeping
it simple

Earnings per share (‘EPS’) is the amount of post-tax profit attributable to each
share.

Basic EPS is calculated on the Group profit for the year attributable to equity
shareholders of £466 million (2017: £409 million) divided by 3,999 million
(2017: 4,006 million), being the weighted average number of shares in issue
during the year, which excludes EBT shares held in trust (see note 4.7).

Diluted EPS reflects any commitments made by the Group to issue shares in the
future and so it includes the impact of share options.

Adjusted EPS is presented in order to show the business performance of the Group
in a consistent manner and reflect how the business is managed and measured on
a day-to-day basis. Adjusted EPS reflects the impact of operating and non-operating
exceptional items on Basic EPS. Other items excluded from Adjusted EPS are
amortisation and impairment of intangible assets acquired through business
combinations; net financing cost adjustments; and the tax adjustments relating
to these items. Each of these adjustments is explained in detail in the section below.

The calculation of Basic EPS and Adjusted EPS, together with the diluted impact on each, is set out below:

Basic earnings per share

Profit for the year attributable to equity shareholders of ITV plc
Weighted average number of ordinary shares in issue – million
Basic earnings per ordinary share

2018
£m

466
3,999
11.7p

2017
£m

409
4,006
10.2p

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> Section 2: Results for the Year

Ref.

B
C

2018
£m

466
3,999
14
4,013
11.6p

2018
£m

466
74
540
71
6
617
3,999
15.4p

2018
£m

617
3,999
14
4,013
15.4p

2017
£m

409
4,006
11
4,017
10.2p

2017
£m

409
142
551
78
13
642
4,006
16.0p

2017
£m

642
4,006
11
4,017
16.0p

Diluted earnings per share

Profit for the year attributable to equity shareholders of ITV plc
Weighted average number of ordinary shares in issue – million
Dilution due to share options
Total weighted average number of ordinary shares in issue – million
Diluted earnings per ordinary share

Adjusted earnings per share

Profit for the year attributable to equity shareholders of ITV plc
Exceptional items (net of tax)
Profit for the year before exceptional items
Amortisation and impairment of acquired intangible assets
Adjustments to net financing costs
Adjusted profit
Total weighted average number of ordinary shares in issue – million
Adjusted earnings per ordinary share

Diluted adjusted earnings per share

Adjusted profit
Weighted average number of ordinary shares in issue – million
Dilution due to share options
Total weighted average number of ordinary shares in issue – million
Diluted adjusted loss per ordinary share

Details of the adjustments to earnings are as follows:

A. Exceptional items (net of tax) £74 million (2017: £142 million)
• Exceptional items of £83 million (2017: £154 million), net of related tax credit of £9 million (2017: £12 million).

See note 2.2 for the detailed composition of exceptional items

B. Amortisation and impairment of acquired intangible assets of £71 million (2017: £78 million)
• Amortisation and impairment of assets acquired through business combinations and investments of £92 million

(2017: £102 million), excluding amortisation of software licences and development of £7 million (2017: £5 million),
net of related tax credit of £14 million (2017: £19 million)

C. Adjustments to net financing costs £6 million (2017: £13 million)
• Mark-to-market movements on derivative instruments, foreign exchange and imputed pension interest charges

of £7 million (2017: £17 million), net of related tax credit of £1 million (2017: £4 million)

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Financial Statements
Financial Statements

Notes to the Financial Statements
Section 3: Operating Assets and Liabilities

In this
section

This section shows the assets used to generate the Group’s trading performance
and the liabilities incurred as a result. On the following pages, there are notes
covering working capital, non-current assets and liabilities, acquisitions and
disposals, provisions and pensions.

Liabilities relating to the Group’s financing activities are addressed in section 4.
Deferred tax assets and liabilities are shown in note 2.3.

3.1
Working
capital

Keeping
it simple

Working capital represents the assets and liabilities the Group generates through
its trading activity. The Group therefore defines working capital as distribution
rights, programme rights, trade and other receivables, trade and other payables and
contract assets and liabilities.

Careful management of working capital ensures that the Group can meet its trading
and financing obligations within its ordinary operating cycle.

Working capital is a driver of the profit to cash conversion ratio, a key performance
indicator for the Group. For those subsidiaries acquired during the year, working
capital at the date of acquisition is excluded from the profit to cash calculation so
that only subsequent working capital movements in the period controlled by ITV are
reflected in this metric.

In the following section, you will find further information regarding working capital
management and analysis of the elements of working capital.

3.1.1 Programme rights and commitments
Accounting policies
Rights are recognised when the Group controls the respective rights and the risks and rewards associated with them.

Programme rights not yet utilised are included in the statement of financial position at the lower of cost and net
realisable value. In assessing net realisable value for programmes in production, judgement is required when
considering the contracted sales price and estimated costs to complete.

Broadcast programme rights
Acquired programme rights (which include films) and sports rights are purchased for the primary purpose of
broadcasting on the ITV family of channels, including VOD and SVOD platforms. These are recognised within
current assets as payments are made or when the rights are ready for broadcast. The Group generally expenses
these rights through operating costs over a number of transmissions reflecting the pattern and value in which
the right is consumed.

Commissions, which primarily comprise programmes purchased, based on editorial specification and over which
the Group has some control, are recognised in current assets as payments are made and are generally expensed
to operating costs in full on first transmission. Where a commission is repeated on any platform, incremental costs
associated with the broadcast are included in operating costs.

The net realisable value assessment for acquired and commissioned rights is based on estimated airtime value,
with consideration given to whether the number of transmissions purchased can be efficiently played out over
the licence period.

The Broadcast programme rights and other inventory at the year end are shown in the table below:

Acquired programme rights
Commissions
Sports rights

2018
£m

154
99
45
298

Restated*

2017
£m

177
86
58
321

* The Group has applied IFRS 15 ‘Revenue from Contracts with Customers’ at 1 January 2018. Under the transition method chosen, the comparative information

has been restated. See section 1.

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> Section 3: Operating Assets and Liabilities

Broadcast programme and transmission commitments
Transmission commitments are the contracted future payments under transmission supply agreements that require
the use of transponder assets for a period of up to ten years with payments increasing over time, limited by specific
RPI caps.

Programming commitments are transactions entered into in the ordinary course of business with programme
suppliers, sports organisations and film distributors in respect of rights to broadcast on the ITV network.

Commitments in respect of these transactions, which are not reflected in the statement of financial position, are due
for payment as follows:

2018

Within one year
Later than one year and not more than five years
More than five years

2017

Within one year
Later than one year and not more than five years
More than five years

Transmission
£m

Programme
£m

34
135
5
174

471
610
50
1,131

Transmission
£m

Programme
£m

32
132
58
222

455
709
47
1,211

Total
£m

505
745
55
1,305

Total
£m

487
841
105
1,433

3.1.2 Distribution rights
Accounting policies
Distribution rights are programme rights the Group buys from producers to derive future revenue, principally through
licensing to other broadcasters. These are classified as non-current assets as these rights are used to derive long-term
economic benefit for the Group.

Distribution rights are recognised initially at cost and charged through operating costs in the income statement
over a period not exceeding five years, reflecting the value and pattern in which the right is consumed. Judgement is
required when estimating future patterns of consumption. Advances paid for the acquisition of distribution rights are
disclosed as distribution rights as soon as they are contracted. These advances are not expensed until the programme
is available for distribution. Up to that point, they are assessed annually for impairment through the reassessment
of the future sales expected to be earned from that title.

The net book value of distribution rights at the year end is as follows:

Distribution rights

During the year, £56 million was charged to the income statement (2017: £35 million).

2018
£m

2017
£m

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Financial Statements
Financial Statements

Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued

3.1.3 Trade and other receivables
Accounting policies
Trade receivables are recognised initially at the value of the invoice sent to the customer and subsequently at the
amounts considered recoverable (amortised cost). Where payments are not due for more than one year, they are
shown in the financial statements at their net present value to reflect the economic cost of delayed payment.
The Group provides goods and services to substantially all of its customers on credit terms.

Estimates are used in determining the level of receivables that will not, in the opinion of the Directors, be collected.
These estimates include such factors as historical experience, the current state of the UK and overseas economies
and industry specific factors. A provision for impairment of trade receivables is established when there is sufficient
evidence that the Group will not be able to collect all amounts due. We have applied the expected loss model and
the impact was not material.

The carrying value of trade receivables is considered to approximate fair value. Trade and other receivables can be
analysed as follows:

Due within one year:
Trade receivables
Other receivables
Prepayments

Due after more than one year:

Trade receivables
Other receivables

Total trade and other receivables

2018
£m

261
48
46
355

36
35
71
426

Restated*
2017
£m

311
51
51
413

19
8
27
440

* The Group has applied IFRS 15 ‘Revenue from Contracts with Customers’ at 1 January 2018. Under the transition method chosen, the comparative information

has been restated. See section 1.

£297 million (2017: £330 million) of total trade receivables, stated net of provisions for impairment, are aged as follows.

Current
Up to 30 days overdue
Between 30 and 90 days overdue
Over 90 days overdue

2018
£m

265
24
6
2
297

2017
£m

275
28
16
11
330

Movements in the Group’s provision for impairment of trade receivables and contract assets can be shown as follows:

At 1 January
Charged during the year – insured trade receivable provision
Charged during the year
Unused amounts reversed
At 31 December

2018
£m

35
–
9
(5)
39

2017
£m

4
30
5
(4)
35

Of the provision total, £21 million relates to balances overdue by more than 90 days (2017: £4 million) and less than
£1 million relates to current balances (2017: £1 million). £26 million of the provision relates to the overdue Talent
receivable which includes £10 million of trade receivables and £16 million of contract assets (accrued income). The
provision for these insured receivables, net of insurance excess, was recognised as an exceptional expense in 2017
(see note 2.2).

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> Section 3: Operating Assets and Liabilities

3.1.4 Trade and other payables due within one year
Accounting policies
Trade payables are recognised at the value of the invoice received from a supplier. The carrying value of current and
non-current trade payables is considered to approximate fair value. Trade and other payables due within one year
can be analysed as follows:

Trade payables
VAT and social security
Other payables
Acquisition-related liabilities – employment-linked contingent consideration
Acquisition-related liabilities – payable to sellers under put options agreed on acquisition
Accruals

3.1.5 Trade and other payables due after more than one year
Trade and other payables due after more than one year can be analysed as follows:

Trade payables

Other payables
Acquisition-related liabilities – employment-linked contingent consideration
Acquisition-related liabilities – payable to sellers under put options agreed on acquisition

Total Trade and other payables due after more than one year

2018
£m

62
56
226
13
42
369
768

2018
£m

9
94
27
130
179

Restated*

2017
£m

63
67
233
34
42
371
810

2017
£m

21
54
31
106
174

Trade payables due after more than one year, relate primarily to film creditors of £24 million and royalties of £25 million.

Acquisition-related liabilities or performance-based employment-linked earnouts are estimated payable to previous
owners. The estimated future payments of £252 million are sensitive to forecast profits as they are based on a multiple.

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Financial Statements
Financial Statements

Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued

3.1.6 Contract assets and liabilities
Contract assets (accrued income) primarily relate to the Group’s right to consideration for work completed but not
billed at the reporting date. Contract liabilities (deferred income) primarily relate to the consideration received from
customers in advance of transferring a good or service. The following table provides significant changes to contract
assets and liabilities in the period:

Balance at 1 January
Decrease due to balance transferred to trade receivables
Increases as a result of the changes in the measure of progress
Decreases due to revenue recognised in the period
Increase due to cash received
Business combination
Balance at 31 December

Contract
assets
£m

2018

Contract
liabilities
£m

Contract
assets
£m

352
(115)
233
–
–
–
470

(219)
–
–
216
(252)
–
(255)

261
(88)
126
–
–
53
352

Restated*

2017

Contract
liabilities
£m

(205)
–
–
196
(179)
(31)
(219 )

* The Group has applied IFRS 15 ‘Revenue from Contracts with Customers’ and IFRS 9 ‘Financial Instruments’ at 1 January 2018. Under the transition method

chosen, the comparative information has been restated. See section 1.

3.1.7 Working capital management
Cash and working capital management continues to be a key focus. During the year, the cash outflow from working
capital was £93 million (2017: outflow of £58 million) derived as follows:

Decrease/(increase) in programme rights, and distribution rights
(Increase)/decrease in receivables and contract assets
(Decrease)/increase in payables and contract liabilities
Working capital outflow

2018
£m

14
(103)
(4)
(93)

2017
£m

(94)
13
23
(58)

The working capital outflow for the year excludes the impact of balances acquired on the acquisition of subsidiaries
during the year (see note 3.4).

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> Section 3: Operating Assets and Liabilities

3.2
Property,
plant and
equipment

Keeping
it simple

The following section shows the physical assets used by the Group to operate the
business, generating revenues and profits. These assets include office buildings and
studios, as well as equipment used in broadcast transmission, programme production
and support activities.

The cost of these assets is the amount initially paid for them. A depreciation expense
is charged to the income statement to reflect annual wear and tear and the reduced
value of the asset over time. Depreciation is calculated by estimating the number of
years the Group expects the asset to be used (useful economic life). If there has been
a technological change or decline in business performance, the Directors review the
value of the assets to ensure they have not fallen below their depreciated value.
If an asset’s value falls below its depreciated value, an additional impairment charge
is made against profit.

This section also explains the accounting policies followed by ITV and the specific
estimates made in arriving at the net book value of these assets.

Accounting policies
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Certain
items of property, plant and equipment that were revalued to fair value prior to 1 January 2004 (the date of transition
to IFRS) are measured on the basis of deemed cost, being the revalued amount less depreciation up to the date of
transition.

Assets held for sale
Non-current assets classified as held for sale are measured at the lower of carrying amount and fair value less costs
to sell. An asset is held for sale if its carrying amount will be recovered through a sale transaction rather than through
continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for
immediate sale in its present condition. Management must be committed to the sale which should be expected to
qualify for recognition as a completed sale within one year from the date of classification.

Depreciation
Depreciation is provided to write off the cost of property, plant and equipment less estimated residual value, on a
straight-line basis over their estimated useful lives. The annual depreciation charge is sensitive to the estimated useful
life of each asset and the expected residual value at the end of its life. The major categories of property, plant and
equipment are depreciated as follows:

Asset class

Freehold land
Freehold buildings
Leasehold improvements
Vehicles, equipment and fittings*

* Equipment includes studio production and technology assets.

Depreciation policy

not depreciated
up to 60 years
shorter of residual lease term or estimated useful life
3 to 20 years

Assets under construction are not depreciated until the point at which the asset comes into use by the Group.

Impairment of assets
Property, plant and equipment that is subject to depreciation is reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. Indicators of impairment may include
changes in technology and business performance.

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Financial Statements
Financial Statements

Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued

Property, plant and equipment
Property, plant and equipment can be analysed as follows:

Cost
At 1 January 2017
Additions
Acquisitions
Foreign exchange
Disposals and retirements
At 31 December 2017
Additions
Reclassifications
Foreign exchange
Classified as held for sale
Disposals and retirements
At 31 December 2018

Depreciation
At 1 January 2017
Charge for the year
Foreign exchange
Disposals and retirements
At 31 December 2017
Charge for the year
Reclassifications
Foreign exchange
Classified as held for sale
Disposals and retirements
At 31 December 2018
Net book value
At 31 December 2018
At 31 December 2017

Freehold
land and
buildings

£m

92
–
7
–
–
99
2
(1)
–
(87)
(4)
9

7
8
–
–
15
1
(1)
–
(15)
–
–

9
84

Improvements to
leasehold land and
buildings

Long
£m

Short

£m

Vehicles,
equipment
and fittings

Owned
£m

66
6
–
–
(2)
70
8
6
1
(13)
(3)
69

16
2
–
(2)
16
4
3
–
–
(2)
21

48
54

20
–
–
–
–
20
8
(2)
–
–
–
26

16
–
–
–
16
–
–
–
–
–
16

10
4

272
40
4
(3)
(30)
283
35
(3)
1
–
(79)
237

167
31
(1)
(28)
169
25
(2)
–
–
(79)
113

124
114

Total

£m

450
46
11
(3)
(32)
472
53
–
2
(100)
(86)
341

206
41
(1)
(30)
216
30
–
–
(15)
(81)
150

191
256

Included within property, plant and equipment are assets in the course of construction of £14 million (2017: £41 million).

Included within the depreciation charge for the year of £30 million is £2 million in respect of accelerated depreciation
for assets made redundant as a result of restructuring. This accelerated depreciation has been recorded as an
exceptional item in 2018. Refer to note 2.2 for further details.

Included in disposals and retirements for the year are assets written off with nil net book value that are not expected
to generate any future economic benefits. This is mainly due to our departure from the London Television Centre and
premises in Northern Ireland previously occupied by UTV.

In 2018, management committed to a plan to sell the London Television Centre. Accordingly, the related assets have
been presented at its carrying value ‘Asset held for sale’ in the Consolidated Statement of Financial Position. The Group
acquired the freehold for the London Television Centre in 2013 for £58 million, although the Directors’ view is that the
fair value of the property would be significantly higher than the carrying value.

Capital commitments
There are £4 million of capital commitments at 31 December 2018 (2017: £15 million).

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> Section 3: Operating Assets and Liabilities

3.3
Intangible
assets

Keeping
it simple

The following section shows the non-physical assets used by the Group to generate
revenue and profits.

These assets include formats and brands, customer contracts and relationships,
contractual arrangements, licences, software development, film libraries and
goodwill. The cost of these assets is the amount that the Group has paid or, where
there has been a business combination, the fair value of the specific intangible assets
that could be sold separately or which arise from legal rights. In the case of goodwill,
its cost is the amount the Group has paid in acquiring a business over and above the
fair value of the individual assets and liabilities acquired. The value of goodwill is the
‘intangible’ value that comes from, for example, a uniquely strong market position
and the outstanding productivity of its employees.

The value of intangible assets, with the exception of goodwill, reduces over the
number of years the Group expects to use the asset, the useful economic life,
via an annual amortisation charge to the income statement. Where there has been
a technological change or decline in business performance, the Directors review
the value of assets, including goodwill, to ensure they have not fallen below their
amortised value. Should an asset’s value fall below its amortised value, an additional
impairment charge is made against profit.

This section explains the accounting policies applied and the specific judgements
and estimates made by the Directors in arriving at the net book value of these assets.

Accounting policies
Goodwill
Goodwill represents the future economic benefits that arise from assets that are not capable of being individually
identified and separately recognised. The goodwill recognised by the Group has all arisen as a result of business
combinations. Goodwill is stated at its recoverable amount being cost less any accumulated impairment losses
and is allocated to the business to which it relates.

Due to changes in accounting standards, goodwill has been calculated using three different methods depending on
the date the relevant business was purchased.

Method 1: All business combinations that have occurred since 1 January 2009 were accounted for using the acquisition
method. Under this method, goodwill is measured as the fair value of the consideration transferred (including the
recognition of any part of the business not yet owned (non-controlling interests)), less the fair value of the identifiable
assets acquired and liabilities assumed, all measured at the acquisition date. Any contingent consideration expected to
be transferred in the future will be recognised at fair value at the acquisition date and recognised within other payables.
Contingent consideration classified as an asset or liability that is a financial instrument is measured at fair value with
changes in fair value recognised in the income statement. The determination of fair value is based on discounted cash
flows. The key assumptions take into consideration the probability of meeting each performance target and the
discount rate.

Where less than 100% of a subsidiary is acquired, and call and put options are granted over the remaining interest,
a non-controlling interest is initially recognised in equity at fair value, which is established based on the value of the put
option. A call option is recognised as a derivative financial instrument, carried at fair value. The put option is recognised
as a liability within other payables, carried at the present value of the put option exercise price, and a corresponding
charge is included in merger and other reserves. Any subsequent remeasurement of the put option liability is
recognised within finance income or cost.

Subsequent adjustments to the fair value of net assets acquired can only be made within 12 months of the acquisition
date, and only if fair values were determined provisionally at an earlier reporting date. These adjustments are
accounted for from the date of acquisition.

Acquisitions of non-controlling interests are accounted for as transactions with owners and therefore no goodwill is
recognised as a result of such transactions. Transaction costs incurred in connection with those business combinations,
such as legal fees, due diligence fees and other professional fees, are expensed as incurred. The Directors consider these
costs to reflect the cost of acquisition and to form a part of the capital transaction, and highlight them separately as
exceptional items.

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Method 2: All business combinations that occurred between 1 January 2004 and 31 December 2008 were accounted
for using the purchase method in accordance with IFRS 3 ‘Business Combinations’ (2004). Goodwill on those combinations
represents the difference between the cost of the acquisition and the fair value of the identifiable net assets acquired
and did not include the value of the non-controlling interest. Transaction costs incurred in connection with those
business combinations, such as legal fees, due diligence fees and other professional fees, were included in the cost
of acquisition.

Method 3: For business combinations prior to 1 January 2004, goodwill is included at its deemed cost, which represents
the amount recorded under UK GAAP at that time less accumulated amortisation up to 31 December 2003. The
classification and accounting treatment of business combinations occurring prior to 1 January 2004, the date of
transition to IFRS, has not been reconsidered, as permitted under IFRS 1.

Other intangible assets
Intangible assets other than goodwill are those that are distinct and can be sold separately or which arise from legal rights.

The main intangible assets the Group has valued are formats, brands, licences, contractual arrangements, customer
contracts and relationships and libraries.

Within ITV, there are two types of other intangible assets: those assets directly purchased by the Group for day-to-day
operational purposes (such as software licences and development) and intangible assets identified as part of an
acquisition of a business.

Intangible assets acquired directly by the Group are stated at cost less accumulated amortisation. Those separately
identified intangible assets acquired as part of an acquisition or business combination are shown at fair value at the
date of acquisition less accumulated amortisation.

Each class of intangible assets’ valuation method on initial recognition, amortisation method and estimated useful
life is set out in the table below:

Class of intangible asset Amortisation method Estimated useful life Valuation method

Brands

Straight-line

8 to 14 years

up to 8 years
up to 6 years

5 to 10 years

up to 10 years
depending on
the contract
terms

11 to 29 years
depending on
term of licence

up to 20 years

Applying a royalty rate to the expected future revenue over
the life of the brand.
Expected future cash flows from those assets existing at the
date of acquisition are estimated. If applicable, a contributory
charge is deducted for the use of other assets needed to
exploit the cash flow. The net cash flow is then discounted
back to present value.

Expected future cash flows from those contracts existing
at the date of acquisition are estimated. If applicable, a
contributory charge is deducted for the use of other assets
needed to exploit the cash flow. The net cash flow is then
discounted back to present value.
Start-up basis of expected future cash flows existing at the
date of acquisition. If applicable, a contributory charge is
deducted for the use of other assets needed to exploit the
cash flow. The net cash flow is then discounted back to
present value.

PSB licences are valued as a start-up business with only the
licence in place.
Initially at cost and subsequently at cost less accumulated
amortisation.

1 to 10 years

Initially at cost and subsequently at cost less accumulated
amortisation.

Formats
Customer
contracts

Customer
relationships
Contractual
arrangements

Straight-line
Straight-line or
reducing balance
as appropriate
Straight-line

Straight-line

Licences

Straight-line

Libraries and other Sum of digits or
straight-line as
appropriate
Straight-line

Software licences
and development

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> Section 3: Operating Assets and Liabilities

Determining the fair value of intangible assets arising on acquisition requires judgement. The Directors make estimates
regarding the timing and amount of future cash flows derived from exploiting the assets being acquired. The Directors
then estimate an appropriate discount rate to apply to the forecast cash flows. Such estimates are based on current
budgets and forecasts, extrapolated for an appropriate period taking into account growth rates, operating costs and
the expected useful lives of assets. Judgements are also made regarding whether, and for how long, licences will be
renewed; this drives our amortisation policy for those assets.

The Directors estimate the appropriate discount rate using pre-tax rates that reflect current market assessments of
the time value of money and the risks specific to the assets or businesses being acquired.

Amortisation
Amortisation is charged to the income statement over the estimated useful lives of intangible assets unless such lives
are judged to be indefinite. Indefinite life assets, such as goodwill, are not amortised but are tested for impairment at
each year end.

Impairment
Goodwill is not subject to amortisation and is tested annually for impairment and when circumstances indicate that
the carrying value may be impaired.

Other intangible assets are subject to amortisation and are reviewed for impairment whenever events or changes in
circumstances indicate that the amount carried in the statement of financial position is less than its recoverable amount.

Determining whether the carrying amount of intangible assets has any indication of impairment requires judgement.
Any impairment is recognised in the income statement.

An impairment test is performed by assessing the recoverable amount of each asset, or for goodwill the cash-
generating unit (‘CGU’), or group of CGUs, related to the goodwill. Total assets (which include goodwill) are grouped
at the lowest levels for which there are separately identifiable cash flows.

The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. The value in use is based
on the present value of the future cash flows expected to arise from the asset.

In testing for impairment, estimates are used in deriving cash flows and the discount rates. Such estimates reflect
current market assessments of the risks specific to the asset and the time value of money. The estimation process
is complex due to the inherent risks and uncertainties associated with long-term forecasting. If different estimates
of the projected future cash flows or a different selection of an appropriate discount rate or long-term growth rate were
made, these changes could materially alter the projected value of the cash flows of the asset, and as a consequence
materially different amounts would be reported in the financial statements.

Impairment losses in respect of goodwill cannot be reversed. In respect of assets other than goodwill, an impairment
loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

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Section 3: Operating Assets and Liabilities continued

Intangible assets
Intangible assets can be analysed as follows:

Formats
and brands
£m

Customer
contracts and
relationships
£m

Contractual
arrangements
£m

Goodwill
£m

Libraries
and other
£m

Software
licences and
development
£m

Licences
£m

Cost
At 1 January 2017
Additions
Acquisitions
Foreign exchange
Disposals, retirements
and impairment
At 31 December 2017
Additions
Acquisitions
Foreign exchange
Disposals, retirements
and impairment
At 31 December 2018
Amortisation and
impairment
At 1 January 2017
Charge for the year
Foreign exchange
Disposals, retirements
and impairment
At 31 December 2017
Charge for the year
Foreign exchange
Disposals, retirements
and impairment
At 31 December 2018
Net book value
At 31 December 2018
At 31 December 2017

3,835
–
85
(21)

(10)
3,889
–
–
15

–
3,904

2,654
–
–

–
2,654
–
–

–
2,654

1,250
1,235

535
–
–
9

–
544
–
–
7

–
551

254
46
3

–
303
43
3

–
349

202
241

420
–
21
(4)

(1)
436
–
–
2

–
438

387
17
(4)

(1)
399
16
3

–
418

20
37

11
–
–
–

–
11
–
–
–

–
11

10
1
–

–
11
–
–

–
11

–
–

176
–
–
–

–
176
–
–
–

–
176

100
6
–

–
106
6
–

–
112

64
70

103
–
–
(2)

–
101
–
–
2

–
103

76
7
(1)

–
82
4
3

–
89

14
19

117
23
–
–

(5)
135
27
–
2

–
164

92
5
–

(5)
92
7
1

–
100

64
43

Total
£m

5,197
23
106
(18)

(16)
5,292
27
–
28

–
5,347

3,573
82
(2)

(6)
3,647
76
10

–
3,733

1,614
1,645

Gurney Productions LLC has been treated as if it would have been wound down, with no further results to be recognised
in the accounts. A provision of £13 million was recognised in 2017 against onerous contracts and various assets and
liabilities relating to Gurney Productions LLC, which included £3 million write-off of goodwill.

Goodwill impairment tests
The carrying amount of goodwill for each CGU is represented as follows:

Broadcast & Online
SDN
ITV Studios

2018
£m

386
76
788
1,250

2017
£m

386
76
773
1,235

There has been no impairment charge for any CGU during the year (2017: £nil).

When assessing impairment, the recoverable amount of each CGU is based on value in use calculations. These calculations
require the use of estimates, specifically: pre-tax cash flow projections; long-term growth rates; and a pre-tax market
discount rate. Cash flow projections are based on the Group’s current five year plan. Beyond the five year plan, these
projections are extrapolated using an estimated nominal long-term growth rate of 1.5% (2017: 1.5%). The growth rate
used is consistent with the long-term average growth rates for both the industry and the countries in which the CGUs
are located and is appropriate because these are long-term businesses.

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> Section 3: Operating Assets and Liabilities

The discount rate has been revised for each CGU to reflect the latest market assumptions for the risk-free rate, the
equity risk premium and the net cost of debt. There is currently no reasonably possible change in discount rate that
would reduce the headroom in any CGU to zero.

Broadcast & Online
The goodwill in this CGU arose as a result of the acquisition of broadcasting businesses since 1999, the largest of
which was the merger of Carlton and Granada in 2004 to form ITV plc, which was treated as an acquisition of Carlton
for accounting purposes. Broadcast & Online goodwill also includes the goodwill arising on acquisition of UTV Limited
in February 2016.

The main assumptions on which the forecast cash flow projections for this CGU are based include: the performance and
share of the television advertising market; share of commercial impacts; programme and other costs; and the pre-tax
market discount rate.

The key assumption in assessing the recoverable amount of Broadcast & Online goodwill is the size of the television
advertising market. In forming its assumptions about the television advertising market, the Group has used a
combination of long-term trends, industry forecasts and in-house estimates, which place greater emphasis on recent
experience. No impairment was identified. Also as part of the impairment review, a sensitivity of up to -10% of growth
was applied to 2020 and -3% to 2021 with no subsequent recovery, with no impairment identified. The Directors believe
that currently no reasonably possible change in these assumptions would reduce the headroom in this CGU to zero.

An impairment charge of £2,309 million was recognised in the Broadcast & Online CGU in 2008, as a result of the
downturn in the short-term outlook for the advertising market. The current year impairment review, set out above,
results in significant headroom in excess of the 2008 impairment amount. Even though the advertising market has
improved since then and the impaired assets are still owned and operated by the Group, due to accounting rules the
impairment cannot be reversed.

A pre-tax market discount rate of 8.5% (2017: 9.5%) has been used in discounting the projected cash flows.

SDN
Goodwill was recognised when the Group acquired SDN (the licence operator for DTT Multiplex A) in 2005. It
represented the wider strategic benefits of the acquisition specific to the Group, principally the enhanced ability
to promote Freeview as a platform, business relationships with the channels which are on Multiplex A and additional
capacity available from 2010.

The main assumptions on which the forecast cash flows are based are: income to be earned from renewals of medium-
term contracts; the market price of available multiplex video streams; and the pre-tax market discount rate. These
assumptions have been determined by using a combination of current contract terms, recent market transactions
and in-house estimates of video stream availability and pricing. No impairment was identified.

As part of the impairment review, sensitivity was applied to the main assumptions with no impairment identified
(2020: -10% growth, 2021: 0% growth). The Directors believe that currently no reasonably possible change in the
cash flow and availability assumptions would reduce the headroom in this CGU to zero.

A pre-tax market discount rate of 10.2% (2017: 11.4%) has been used in discounting the projected cash flows.

ITV Studios
The goodwill for ITV Studios has arisen as a result of the acquisition of production businesses since 1999. Significant
balances were created from the acquisition by Granada of United News and Media’s production businesses in 2000
and the merger of Granada and Carlton in 2004 to form ITV plc. ITV Studios goodwill also includes the goodwill arising
from recent acquisitions since 2012, with the largest acquisitions being Leftfield in 2014, followed by Talpa in 2015.

The key assumptions on which the forecast cash flows for the whole CGU were based include revenue (including
international revenue and the ITV Studios share of ITV output, growth in commissions and hours produced),
margins and the pre-tax market discount rate. These assumptions have been determined by using a combination
of extrapolation of historical trends within the business, industry estimates and in-house estimates of growth
rates in all markets. No impairment was identified.

As part of the impairment review, sensitivity was applied to the main assumptions with no impairment identified
(2020: -10% growth, 2021: 0% growth). The Directors believe that currently no reasonably possible change in the
cash flow assumptions would reduce the headroom in this CGU to zero.

A pre-tax market discount rate of 9.5% (2017: 10.8%) has been used in discounting the projected cash flows.

Following the acquisitions made by ITV Studios in 2017, the Directors considered how assets and resources are shared
across the ITV Studios division and the level of integration within the management structure for the purposes of
reporting and strategic decision-making. They concluded that a single ITV Studios CGU continues to remain appropriate.

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Financial Statements

Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued

3.4
Acquisitions

Keeping
it simple

The following section outlines what the Group has acquired in the year.

Most of the deals are structured so that a large part of the payment made to the
sellers (‘consideration’) is determined based on future performance. This is done so
that the Group can both align incentives for growth, while reducing risk so that total
consideration reflects actual performance, not expected.

IFRS accounting standards require some of this consideration to be included in the
purchase price used in determining goodwill (‘contingent consideration’). Examples
of contingent consideration include top-up payments and recoupable performance
adjustments. Any remaining consideration is required to be recognised as a liability
or expense outside of acquisition accounting (put option liabilities and employment-
linked contingent payments known as ‘earnout’ payments).

The Group considers the income statement impact of all consideration to be capital in
nature and so excludes it from adjusted profit. Therefore, for each acquisition below,
the distinction between the types of consideration has been explained in detail.

Acquisitions in the current year – 2018
The Group did not make any acquisitions in the current year.

Acquisitions in the prior year – 2017
In 2017, the Group made payments totalling £54 million for five acquisitions within the ITV Studios operating segment.
The businesses fit with the strategy of strengthening the Group’s existing position as a producer for major television
networks in the UK, Europe, US and OTT platforms.

Tetra Media Studio SAS
On 28 February 2017, the Group purchased 65.04% of the share capital of Tetra Media Studio SAS, a French television
production group which specialises in drama, including flagship crime series Profilage, and political crime thriller Les
Hommes de l’Ombre.

Tomorrow ITV Studios LLC
On 1 April 2017, the Group gained control of Tomorrow ITV Studios LLC due to the conversion of its 75% preference
share capital into 75% ordinary share capital. The company produced Aquarius, a US period crime series, which aired
on NBC, and is producing Snowpiercer, an action sci-fi drama series, expected to be released in the US in 2019.

World Productions Limited
On 30 April 2017, the Group purchased 92% of the share capital of World Productions Limited, a company which
specialises in producing drama series with titles including Line of Duty, an award-winning British police crime drama,
and Born to Kill, a British thriller television mini-series.

Elk Production AB
On 21 June 2017, the Group acquired 96% of the share capital of Elk Production AB. Elk is one of the leading
independent production companies in Sweden. Key titles produced by the company include Ninja Warrior, an obstacle
course competition series, Dessertmästarna, a dessert cooking competition, and award-winning TV series Wahlgrens
and Parneviks.

Cattleya S.r.l.
On 11 October 2017, the Group purchased 51% of the share capital of Cattleya Srl, an Italian scripted production
company behind international hit TV dramas Gomorrah, Romanzo Criminale and Suburra, Netflix’s first Italian original
TV series.

Acquisition accounting:
Put and call options have been granted over the non-controlling interest of all five acquisitions, exercisable over
the next two to seven years. The total maximum consideration for the acquisitions is capped at £418 million
(undiscounted). All future payments are dependent on future performance of the business and linked to ongoing
employment.

The Group paid total consideration of £35 million with the fair value of previously held preference shares of £29 million,
non-controlling interests of £25 million and acquired net assets with a fair value of £4 million resulting in goodwill
of £85 million. The present value of the expected liability on put options was £23 million and the present value
of the expected earnout payment at acquisition was £11 million. As disclosed in 2017, the contribution to the
Group’s performance from the date of acquisition to the end of 2017 was Revenue of £59 million and EBITA before
exceptionals £nil. The proforma contribution to the Group’s performance from January to December 2017 was
Revenue £131 million and EBITA before exceptionals £nil.

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> Section 3: Operating Assets and Liabilities

3.5
Investments

Keeping
it simple

The Group holds non-controlling interests in a number of different entities.
Accounting for these investments, and the Group’s share of any profits and losses,
depends on the level of control or influence the Group is granted via its interest.
The three principal types of non-consolidated investments are: joint arrangements
(joint ventures or joint operations), associates and equity investments.

A joint arrangement is an investment where the Group has joint control, with one
or more third parties. An associate is an entity over which the Group has significant
influence (i.e. power to participate in the investee’s financial and operating decisions).
Any other investment is an equity investment.

Accounting policies
For joint ventures and associates, the Group applies equity accounting. Under this method, it recognises the investment
in the entity at cost and subsequently adjusts this for its share of profits or losses, which are recognised in the income
statement within non-operating items and included in adjusted profit. Where the Group has invested in associates by
acquiring preference shares or convertible debt instruments, the share of profit recognised is usually £nil as no equity
interest exists. Equity investments are held at fair value unless the investment is a start-up business, in which case it is
valued at cost and assessed for impairment.

The carrying amount of each category of our investments is represented as follows:

Joint ventures
Associates
Equity investments

2018
£m

1
41
9
51

2017
£m

2
68
4
74

Equity investments have increased during the year due to an investment in Quibi, a US venture aimed at delivering high-
quality content to mobile devices. Further smaller investments have been made in line with Group’s strategy to grow
the international content business.

In the current year, the carrying amount of certain short-form content investments was written down following an
impairment review.

Please refer to page 198 for the list of principal investments held at 31 December 2018.

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Financial Statements

Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued

3.6
Provisions

Keeping
it simple

A provision is recognised by the Group where an obligation exists relating to events
in the past and it is probable that cash will be paid to settle it.

A provision is made where the Group is not certain how much cash will be required
to settle a liability, so an estimate is required. The main estimates relate to the cost
of holding properties that are no longer in use by the Group, the likelihood of settling
legal claims and contracts the Group has entered into that are now unprofitable.

Accounting policies
A provision is recognised in the statement of financial position when the Group has a present legal or constructive
obligation arising from past events, it is probable cash will be paid to settle it and the amount can be estimated
reliably. Provisions are determined by discounting the expected future cash flows by a rate that reflects current
market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount
is recognised as a financing cost in the income statement. The value of the provision is determined based on
assumptions and estimates in relation to the amount and timing of actual cash flows, which are dependent
on future events.

Provisions
The movements in provisions during the year are as follows:

At 1 January 2018
Additions
Utilised
Released
At 31 December 2018

Contract
provisions
£m

Property
provisions
£m

Legal and Other
provisions
£m

3
–
(1)
–
2

4
1
–
(3)
2

16
–
–
–
16

Total
£m

23
1
(1)
(3)
20

Provisions of £16 million are classified as current liabilities (2017: £16 million). Unwind of the discount is £nil in 2018
and 2017.

Contract provisions comprise onerous commitments on playout and related services that are not expected to be
utilised over the remaining contract period.

Property provisions primarily relate to expected dilapidation costs at rental properties.

Legal and Other provisions totalling £16 million (31 December 2017: £16 million) primarily relate to potential liabilities
that may arise as a result of Boxclever having been placed into administrative receivership, most of which relate to
pension arrangements. In 2011, the Determinations Panel of the Pensions Regulator determined that Financial Support
Directions (FSD) should be issued against certain Group companies, which would require those companies to put in
place financial support for the Boxclever Pension Scheme. An FSD does not set out what form any financial support
should take, nor its amount. The Group challenged the Regulator’s decision in the Upper Tribunal. However, in May 2018,
the Upper Tribunal reached a decision to allow the Pension Regulator to issue an FSD. Subsequently the Upper Tribunal
gave ITV permission to appeal its decision to the Court of Appeal. Such appeal was made in July 2018 and the appeal
has been fixed for May 2019. During the period of the appeal, an FSD cannot be issued.

The Directors, having taken advice, believe that they continue to have a strong case. There are significant points of legal
principle at issue and consequently any potential liability may take a considerable period to resolve. While any potential
liability might be significant, the Directors continue to believe that the provision held is appropriate

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3.7
Pensions

Keeping
it simple

> Section 3: Operating Assets and Liabilities

In this note, we explain the accounting policies governing the Group’s pension
schemes, followed by analysis of the components of the net defined benefit pension
deficit, including assumptions made, and where the related movements have been
recognised in the financial statements. In addition, we have placed text boxes to
explain some of the technical terms used in the disclosure.

What are the Group’s pension schemes?
There are two types of pension schemes. A ‘Defined Contribution’ scheme that
is open to ITV employees, and a number of ‘Defined Benefit’ schemes that have
been closed to new members since 2006 and closed to future accrual in 2017.
In 2016, on acquisition of UTV Limited, the Group took over the UTV Defined Benefit
Scheme, which remains open to future accrual.

What is a Defined Contribution scheme?
The Defined Contribution scheme is where the Group makes fixed payments into
a separate fund on behalf of those employees participating in saving for their
retirement. ITV has no further obligation to the participating employee and the risks
and rewards associated with this type of scheme are assumed by the members rather
than the Group. Although the Trustee of the scheme makes available a range of
investment options, it is the members’ responsibility to make investment decisions
relating to their retirement benefits.

What is a Defined Benefit scheme?
In a Defined Benefit scheme, members receive payments during retirement, the
value of which is dependent on factors such as salary and length of service. The Group
makes contributions to the scheme, a separate trustee-administered fund that is not
consolidated in these financial statements, but is reflected on the defined benefit
pension deficit line on the consolidated statement of financial position.

It is the responsibility of the Trustee to manage and invest the assets of the Scheme
and its funding position. The Trustee, appointed according to the terms of the
scheme’s documentation, is required to act in the best interest of the members
and is responsible for managing and investing the assets of the scheme and its
funding position.

The Group has a Pension Steering Committee, which liaises with the Trustee and
has oversight of the management of the pension schemes and underlying risks.

In the event of poor returns, the Group may need to address this through a
combination of increased levels of contribution or by making adjustments to the
scheme. Schemes can be funded, where regular cash contributions are made by
the employer into a fund which is invested, or unfunded, where no regular money
or assets are required to be put aside to cover future payments but in some cases
security is required.

The accounting defined benefit pension deficit (IAS 19) is different from the actuarial
valuation deficit as they are calculated on the basis of different assumptions, such
as discount rate. The accounting defined benefit pension deficit (IAS 19) figure
is calculated as at the balance sheet date, and the actuarial deficit was calculated
for the last triennial valuation as of 1 January 2017 for the ITV Pension Scheme and
30 June 2017 for the UTV Pension Scheme.

Accounting policies
Defined contribution scheme
Obligations under the Group’s defined contribution schemes are recognised as an operating cost in the income
statement as incurred. For 2018, total contributions expensed were £21 million (2017: £18 million).

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Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued

Defined benefit scheme
The Group’s obligation in respect of the Defined Benefit Scheme (the ‘Scheme’) is calculated by estimating the
amount of future retirement benefit that eligible employees (‘members’) have earned during their services. That
benefit payable in the future is discounted to today’s value and then the fair value of scheme assets is deducted
to measure the defined benefit pension position.

The liabilities of the Scheme are measured by discounting the best estimate of future cash flows to be paid using
the ‘projected unit’ method. These calculations are complex and are performed by a qualified actuary. There are many
judgements and estimates necessary to calculate the Group’s estimated liabilities, the main assumptions are set out
later in this section. Movements in assumptions during the year are called ‘actuarial gains and losses’ and these are
recognised in the period in which they arise through the statement of comprehensive income.

The latest triennial valuation of the ITV Pension Scheme was undertaken as at 1 January 2017 by an independent
actuary appointed by the Trustee of the Scheme and agreed in early 2018. The combined funding deficits of the ITV
Pension Scheme as at 1 January 2017 amounted to £470 million. The deficit funding contributions for the ITV main
scheme will be £60 million per annum. The next triennial valuation will be as at 1 January 2020. This will drive
subsequent contribution rates.

An unfunded scheme in relation to four former Granada executives is accounted for under IAS 19 and the Group
is responsible for meeting the pension obligations as they fall due. The unfunded scheme has additional security
compared with the ITV main scheme, in the form of a charge over gilts held by the Group. Therefore, the £49 million
securitised gilts have been classified as other pension assets to reflect the Group’s net pension deficit.

Due to the size of the UTV Pension Scheme, the Directors present the results and position of the UTV Scheme within
this note combined with the existing ITV Schemes. The latest triennial valuation was undertaken as at 30 June 2017
and was agreed during the second half of 2018. The next triennial valuation will be as at 30 June 2020.

Unless otherwise stated, references to ‘the Schemes’ within this note refer to the ITV Pension Scheme, the unfunded
scheme and the UTV Scheme combined. The sponsoring company of the ITV Pension Scheme is ITV Services Limited,
the unfunded scheme is Granada Group Limited and the UTV Scheme is sponsored by UTV Limited.

The defined benefit pension deficit
Net pension deficit of £38 million at 31 December 2018 (2017: £83 million) is stated after including the unfunded
scheme security asset of £49 million (2017: £38 million).

The totals recognised in the current and previous years are:

Total defined benefit scheme obligations
Total defined benefit scheme assets
Defined benefit pension deficit (IAS 19)

Presented as:
Defined benefit pension surplus*
Defined benefit pension deficit
Defined benefit pension deficit (IAS 19)

Other pension asset
Net pension deficit

2018
£m

(3,719)
3,632
(87)

19
(106)
(87)

49
(38)

2017
£m

(3,987)
3,866
(121)

16
(137)
(121)

38
(83)

* The defined benefit pension surplus relates solely to the UTV Scheme. The defined benefit scheme assets in the UTV Scheme were £126 million as at

31 December 2018 (2017: £130 million) and the defined benefit scheme obligations were £107 million (2017: £114 million).

The remaining sections provide further detail of the value of the Scheme’s assets and liabilities, how these are
accounted for and the impact on the financial statements.

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> Section 3: Operating Assets and Liabilities

Defined benefit scheme obligations

Keeping
it simple

What causes movements in the defined benefit pension obligations?
The areas that impact the defined benefit obligation (the pension scheme liabilities)
position at the year end are as follows:

• Current service cost – the cost to the Group of the future benefits earned

by members that relates to the members’ service in the current year. This is charged
to operating costs in the income statement

• Past service cost – is a change in present value of the benefits built up by the

members in the prior periods; can be positive or negative resulting from changes
to the existing plan as a result of an agreement between ITV and employees or
legislative change (including legal rulings) or as a result of significant reduction by
ITV in the number of employees covered by the plan (curtailment)

• Interest cost – the pension obligations payable in the future are discounted to the
present value at year end. A discount factor is used to determine the current value
today of the future cost. The interest cost is the unwinding of one year’s movement
in the present value of the obligation. It is broadly determined by multiplying the
discount rate at the beginning of the period by the updated present value of the
obligation during the period. The discount rate is a key assumption explained later
in this section. This interest cost is recognised through net financing costs in the
income statement (see note 4.4)

• Actuarial gains or losses – there are broadly two causes of actuarial movements:
‘experience’ adjustments, which arise when comparing assumptions made when
estimating the liabilities and what has actually occurred, and adjustments resulting
from changes in actuarial assumptions e.g. movements in corporate bond yields or
change in mortality. Key assumptions are explained in detail later in this section.
Actuarial gains or losses are recognised through other comprehensive income

• Benefits paid – any cash benefits paid out by the Scheme will reduce the obligation
• One-off events – for example, the acquisition of UTV Limited

The movement in the present value of the Group’s defined benefit obligation is analysed below:

Defined benefit obligation at 1 January

Current service cost
Past service cost
– GMP equalisation
– Changes in relation to pension increases
– Pension increase exchange option
Interest cost
Actuarial gain
Benefits paid

Defined benefit obligation at 31 December

2018
£m

3,987
–

6
(15)
5
97
(166)
(195)
3,719

2017
£m

4,200
2

–
–
–
107
(121)
(201)
3,987

Of the above total defined benefit obligation at 31 December 2018, £56 million relates to unfunded schemes (2017:
£58 million), including the scheme in relation to the four former Granada executives.

On 26 October 2018, a High Court ruling (‘the Lloyds Case’) determined that pension schemes need to address
inequalities between men and women in Guaranteed Minimum Pension (GMP) earned between 17 May 1990 and 5 April
1997. This is to comply with sex discrimination legislation known as ‘GMP equalisation’. In previous years, given the legal
uncertainty on the treatment of GMP equality, no allowance had been made in the IAS 19 defined benefit obligation.
The court ruling has now clarified how GMPs should be equalised and as a result, a past service cost of £6 million has
been recognised in the current period.

In November 2018, the Pension Trustee entered into a bulk annuity insurance contract in respect of the benefits of two
sections of the ITV Pension Scheme. This type of deal is also known as a ‘Buy-in’. As a result of the buy-in, a past service
cost of £5 million has been included in the measurement of the pension scheme liabilities. This is due to the pension
increase exchange (‘PIE’) option no longer being available to members of these schemes. PIE is an option to give up
future increases on your pension, in exchange for a higher immediate pension with lower (or no) further increases.
Certain members of the sections also had a change of rate of pension increases. This change resulted in a credit of
£15 million which has also been recognised as an exceptional past service cost.

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Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued

Assumptions used to estimate the Scheme obligations

Keeping
it simple

What are the main assumptions used to estimate the Scheme obligations?
The main assumptions are:
• An estimate of increases in pension payments
• The life expectancy of members
• The effect of inflation on all these factors
• The discount rate used to estimate the present day fair value of these obligations
• Future salary levels for the UTV Scheme and
• Future pensionable salary levels for the UTV Scheme

How do we determine the appropriate assumptions?
The Group takes independent actuarial advice relating to the appropriateness
of the assumptions used.

IFRS requires that we estimate a discount rate by reference to high-quality
fixed income investments in the UK that match the estimated term of the
pension obligations.

The inflation assumption has been set by looking at the difference between the
yields on fixed and index-linked Government bonds. The inflation assumption is
used as a basis for the remaining financial assumptions, except where caps have
been implemented.

The discount rate has therefore been obtained using the yields available on AA rated
corporate bonds, which match projected cash flows. The Group’s estimate of the
weighted average term of the liabilities is 15 years (2017: 15 years).

The principal assumptions used in the Scheme’s valuations at the year end were:

Discount rate for:

Past service liabilities
Future service liabilities

Inflation assumption for:
Past service liabilities
Future service liabilities

Rate of pensionable salary increases

UTV Pension Scheme

Rate of increase in pension payment (LPI1 5% pension increases)
Rate of increase to deferred pensions (CPI)

1. Limited Price Index.

2018

2017

2.85%
2.85%

3.20%
3.20%

3.70%
3.05%
2.20%

2.50%
2.50%

3.15%
3.15%

3.65%
2.95%
2.15%

The table below reflects published mortality investigation data in conjunction with the results of investigations into
the mortality experience of Scheme members. The assumed life expectations on retirement are:

Retiring today at age
Males
Females
Retiring in 20 years at age
Males
Females

2018

60
27.2
29.3
60
28.8
30.9

2018

65
22.5
24.5
65
24.0
26.0

2017

60
27.1
29.2
60
28.7
30.8

2017

65
22.5
24.4
65
23.9
25.9

The net pension deficit is sensitive to changes in assumptions. Those are disclosed further in this section.

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> Section 3: Operating Assets and Liabilities

Total defined benefit scheme assets

Keeping
it simple

The Scheme holds assets across a number of different classes, which are managed
by the Trustee, who consults with the Group on changes to its investment policy.

What are the pension Scheme assets?
At 31 December 2018, the Scheme’s assets were invested in a diversified portfolio
that consisted primarily of equity and debt securities and insurance policies matching
the pensions due to certain members. The tables below set out the major categories
of assets.

Financial instruments are in place in order to provide protection against changes
in market factors (interest rates and inflation), which could act to increase the net
pension deficit.

One such instrument is the longevity swap, which the Scheme transacted in 2011
to obtain protection against the effect of increases in the life expectation of the
majority of pensioner members at that date. Under the swap, the Trustee agreed
to make pre-determined payments in return for payments to meet the specified
pension obligations as they fall due, irrespective of how long the members and
their dependants live. The difference in the present values of these two streams of
payments is reflected in the Scheme assets. The swap had a nil valuation at inception
and, using market-based assumptions, is subsequently adjusted for changes in the
market life expectancy and market discount rates, in line with its fair value.

How do we measure the pension Scheme assets?
Defined benefit scheme assets are measured at their fair value and can change due
to the following:

• Interest income on scheme assets – this is determined by multiplying the fair

value of the Scheme assets by the discount rate, both taken as of the beginning of
the year. This is recognised through net financing costs in the income statement

• Return on assets arise from differences between the actual return and
interest income on Scheme assets and are recognised through other
comprehensive income

• Employer’s contributions are paid into the Scheme to be managed

and invested and

• Benefits and administrative expenses paid out by the Schemes will lower the

fair value of the Scheme’s assets

The movement in the fair value of the defined benefit scheme’s assets is analysed below:

Fair value of Scheme assets at 1 January

Interest income on Scheme assets
Return on assets, excluding interest income
Employer contributions
Benefits paid
Administrative expenses paid

Fair value of Scheme assets at 31 December

2018
£m

3,866
95
(218)
90
(195)
(6)
3,632

2017
£m

3,833
98
51
90
(201)
(5)
3,866

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Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued

How are the Scheme’s assets invested?
At 31 December 2018, the Scheme’s assets were invested in a diversified portfolio that consisted primarily of equity
and debt securities and insurance policies matching pensions due to certain members. The Trustee is responsible for
deciding the investment strategy for the scheme’s assets, although changes in investment policies require consultation
with the Group. The assets are invested in different classes to hedge against unfavourable movements in the funding
obligation. When selecting the mix of assets to hold, and considering their related risks and returns, the Trustee will
weigh up the variability of returns against the target long-term rate of return on the overall portfolio.

The fair value of the Scheme’s assets is shown in the following table by major category:

Liability hedging assets
Fixed interest gilts
Index-linked interest gilts
Interest rate and inflation hedging derivatives (swaps and
repos)

Other bonds

Return seeking investments
Quoted equities
Infrastructure
Property
Hedge funds/alternatives

Other investments
Cash and cash equivalents
Insurance policies
Longevity swap fair value

Total Scheme assets

Market value
2018
£m

Market value
2017
£m

475
1,067

230
1,772

834

169
171
106
172
618

183
530
(305)
408
3,632

49%

23%

17%

11%
100%

633
1,456

279
2,368

865

260
88
109
193
650

240
41
(298)
(17)
3,866

61%

22%

17%

–
100%

Included in the above are overseas assets of £725 million (2017: £978 million), comprised of quoted equities of
£68 million (2017: £244 million) and bonds of £657 million (2017: £734 million).

In November 2018, the Pension Trustee entered into a bulk annuity insurance contract in respect of the benefits of two
sections of the ITV Pension Scheme. This type of deal is also known as a ‘Buy-in’. A buy-in is where the Trustee purchases
an insurance policy which is effectively a scheme asset which pays the members benefits. The ultimate obligation to
pay the members benefits still remains with the scheme.

As the acquisition of the insurance contract is an investment decision and this has been accounted for through the
Statement of Other Comprehensive Income. For IAS 19 purposes, the fair value of this insurance contract is set equal
to the valuation of the insured member benefits using the IAS 19 assumptions. As these two sections of the ITV Pension
Scheme were in a surplus position under IAS 19, this has resulted in an investment loss of £94 million within the Group’s
Statement of Other Comprehensive Income.

The Trustee entered a longevity swap in 2011, which provides cash flow certainty by hedging the risk of increasing life
expectancy over the next 70 years for 11,700 of current pensioners at inception covering £1.7 billion of the pension
obligation. The fair value of the longevity swap equals the discounted value of the projected net cash flows resulting
from the contract and has reduced in value in 2018.

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> Section 3: Operating Assets and Liabilities

Defined pension deficit sensitivities

Keeping
it simple

Which assumptions have the biggest impact on the Scheme?
It is important to note that comparatively small changes in the assumptions used
may have a significant effect on the consolidated income statement and statement
of financial position. This ‘sensitivity’ to change is analysed below to demonstrate
how small changes in assumptions can have a large impact on the estimation of the
defined benefit pension deficit. The Trustee manages the investment, mortality and
inflation risks to ensure the pension obligations are met as they fall due.

The investment strategy is aimed at the valuation obligation rather than IAS 19
defined pension deficit value. As such, the effectiveness of the risk hedging strategies
on a valuation basis will not be the same as on an accounting basis. Those hedging
strategies have significant impact on the movement in the net pension deficit as
assumptions change, offsetting the impacts on the obligation disclosed below.

In practice, changes in one assumption may be accompanied by offsetting changes in
another assumption (although this is not always the case). Changes in the assumptions
may occur at the same time as changes in the market value of Scheme assets, which
may or may not offset the changes in assumptions.

Changes in assumptions have a different level of impact as the value of the net
pension deficit fluctuates, because the relationship between them is not linear.

The analysis below considers the impact of a single change in principal assumptions on the defined benefit obligation
while keeping the other assumptions unchanged and does not take into account any risk hedging strategies:

Assumption

Discount rate

Rate of inflation (Retail Price Index)

Rate of inflation (Consumer Price Index)

Life expectations

Change in assumption

Impact on defined benefit obligation

Increase by 0.1%
Decrease by 0.1%
Increase by 0.1%
Decrease by 0.1%
Increase by 0.1%
Decrease by 0.1%
Increase by one year

Decrease by £60 million
Increase by £60 million
Increase by £30 million
Decrease by £30 million
Increase by £10 million
Decrease by £10 million
Increase by £100 million

The sensitivity analysis has been determined by extrapolating the impact on the defined benefit obligation
at the year end with changes in key assumptions that might reasonably occur.

While the Scheme’s risk hedging strategy is aimed at a valuation basis, the Directors estimate that on an accounting
basis it would significantly reduce the above impact on the defined benefit obligation.

In particular, an increase in assumption of life expectations by one year would benefit from an estimated increase
of the value of the longevity swap by £100 million and the value of the bulk annuity insurance contracts by £15 million,
resulting in a net reduction in the defined pension deficit of £15 million.

Further, the ITV Pension Scheme invests in UK Government bonds and interest rate and inflation swap contracts
and therefore movements in the defined benefit obligation are typically offset, to an extent, by asset movements.

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Financial Statements

Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued

Keeping
it simple

What was the impact of movements on the Scheme’s assets and liabilities?
The sections above describe how the Scheme obligations and assets are comprised
and measured. The following section sets out the impact of various movements and
expenses on the Scheme on the Group’s financial statements.

Amounts recognised through the income statement
Amounts recognised through the income statement are as follows:

Amount charged to operating costs:

Current service cost
Scheme administration expenses

Amount charged to exceptional costs:

Past service credit

Amount charged to net financing costs:

Net interest on defined benefit obligation

Total charged in the consolidated income statement

Amounts recognised through the consolidated statement of comprehensive income
The amounts recognised through the consolidated statement of comprehensive income/(cost) are:

Remeasurement gains/(losses):

Return on scheme assets excluding interest income
Actuarial gains/(losses) on liabilities arising from change in:
– experience adjustments
– financial assumptions
– demographic assumptions

Total recognised in the consolidated statement of comprehensive income

2018
£m

2017
£m

–
(6)
(6)

(2)

(4)

2018
£m

(218)

(6)
172
–
166
(52)

(2)
(5)
(7)

–

(9)

(16)

2017
£m

138
12
(29)
121
172

The £166 million actuarial gain on the Scheme’s liabilities was principally due to changes in bond yields. The £218 million
loss on the Scheme’s assets primarily results from increase bond yields and the purchase of the bulk annuity insurance
contracts which have led to assets underperforming expectations.

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> Section 3: Operating Assets and Liabilities

Addressing the defined benefit pension deficit

Keeping
it simple

The Group works closely with the Trustee to agree appropriate levels of funding
for the Scheme. This involves agreeing a Schedule of Contributions at each triennial
valuation, which specifies the contribution rates for the employer and, where relevant,
scheme members and the date these contributions are due. A recovery plan setting
out the steps that will be taken to address a funding shortfall is also agreed.

In the event that the Group’s defined benefit scheme is in a net liability position,
the Directors must take steps to manage the size of the deficit. Apart from the
funding agreements mentioned above, this could involve pledging additional assets
to the Scheme, as was the case in the SDN and London Television Centre pension
funding partnerships.

The levels of ongoing contributions to the Scheme are based on the current service costs (as assessed by the Scheme
Trustee) and the expected future cash flows of the Scheme. Normal employer contributions in 2019 for UTV Scheme
current service and administration expenses are expected to be in the region of £6 million (2018: £6 million) and deficit
funding contributions for the main ITV scheme in 2019 are expected to be £60 million (2018: £66 million), assuming
current contribution rates continue as agreed with the Trustee.

The Group has two asset-backed pension funding agreements with the Trustee and makes annual payments of
£11 million for 12 years from 2011, and also £3 million, increasing by 5% per annum until 2038. In 2019, a payment
of £14 million is expected as a result of those agreements.

With the London Television Centre held for sale, we will be reviewing the asset-backed structures.

IFRIC 14 clarifies how the asset ceiling rules should be applied if the Schemes are expected to be in surplus, for example
as a result of deficit funding agreements. The Group has determined that it has an unconditional right to a refund of
any surplus assets if the Schemes are run off until the last member dies. On this basis, IFRIC 14 rules do not cause any
change in the pension deficit accounting or disclosures.

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Financial Statements
Financial Statements

Notes to the Financial Statements
Section 4: Capital Structure and Financing Costs

In this
section

This section outlines how the Group manages its capital structure and related
financing costs, including its balance sheet liquidity and access to capital markets.

The Directors determine the appropriate capital structure of ITV; specifically how
much is raised from shareholders (equity) and how much is borrowed from financial
institutions (debt) in order to finance the Group’s activities both now and in the future.
Maintaining capital discipline and balance sheet efficiency remains important to the
Group. Any potential courses of action will take into account the Group’s liquidity
needs, flexibility to invest in the business, pension deficit initiatives and impact on
credit ratings.

The Directors consider the Group’s capital structure and dividend policy at least twice
a year ahead of announcing results and do so in the context of its ability to continue
as a going concern, to execute the strategy and to invest in opportunities to grow
the business and enhance shareholder value.

A Tax and Treasury Committee, which oversees governance, recommends policies for
approval by the Board and exercises delegated authority to approve certain other tax
and treasury related policies and procedures within the business

Net debt is the Group’s key measure used to evaluate total cash resources
net of the current outstanding debt.

Adjusted net debt is also monitored by the Group and more closely reflects
how credit agencies see the Group’s gearing. To arrive at the adjusted net debt
amount, we add our total undiscounted expected contingent payments on
acquisitions, our net pension deficit and our undiscounted operating lease
commitments. A full analysis and discussion of adjusted net debt is included
in the Operating and Performance Review.

The tables below analyse movements in the components of net debt during
the year:

4.1
Net debt

Keeping
it simple

Cash
Cash equivalents

Total cash and cash equivalents

Loans and facilities due within one year
Finance leases due within one year
Loans and facilities due after one year

Total debt

Currency component of swaps held against
euro denominated bonds

Net debt

1 January
2018
£m

121
5
126
(76)
–
(982)
(1,058)

20
(912)

Net cash flow

£m

(37)
5
(32)
22
–
1
23

–
(9)

Currency and
non-cash
movements
£m

31 December
2018
£m

1
–
1
–
–
(12)
(12)

5
(6)

85
10
95
(54)
–
(993)
(1,047)

25
(927)

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> Section 4: Capital Structure and Financing Costs

Cash
Cash equivalents

Total cash and cash equivalents

Loans and facilities due within one year
Finance leases due within one year
Loans and facilities due after one year

Total debt

Currency component of swaps held against
euro denominated bonds

Net debt

* Balances as at acquisition date.

1 January
2017
£m

549
12
561
(161)
(4)
(1,035)
(1,200)

2
(637)

Net cash flow

Acquisitions*

£m

(438)
(7)
(445)
115
4
100
219

–
(226)

£m

19
–
19
(26)
–
(9)
(35)

–
(16)

Currency and
non-cash
movements
£m

31 December
2017
£m

(9)
–
(9)
(4)
–
(38)
(42)

18
(33)

121
5
126
(76)
–
(982)
(1,058)

20
(912)

Loans and facilities due within one year
At various periods during the year, the Group drew down on the £630 million Revolving Credit Facility (‘RCF’) to meet
short-term funding requirements. At 31 December 2018, the Group had drawings of £50 million under the RCF (2017:
£60 million), leaving £580 million available to draw down at year end. The maximum draw down of the RCF during the
year was £400 million (2017: £390 million).

Loans and loan notes due after one year
The Group has issued the following Eurobonds:

• A seven year €600 million Eurobond at a fixed coupon of 2.125%, which matures in September 2022; and
• A seven year €500 million Eurobond at a fixed coupon of 2.0%, which will mature in December 2023. The bond

issued in December 2016 has been swapped back to sterling using a cross-currency interest rate swap. The resulting
fixed rate payable in sterling is c. 3.5%

In June 2017, the Group repaid in full a £100 million bilateral loan facility.

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Financial Statements
Financial Statements

Notes to the Financial Statements
Section 4: Capital Structure and Financing Costs continued

4.2
Borrowings
and finance
leases

Keeping
it simple

The Group borrows money from financial institutions in the form of bonds, bank
facilities and other financial instruments. The interest payable on these instruments
is shown in the net financing costs note in note 4.4.

There are Board-approved policies in place to manage the Group’s financial risks.
Macroeconomic market risks, which impact currency transactions and interest rates,
are discussed in note 4.3. Credit and liquidity risks are discussed below.

• Credit risk: the risk of financial loss to the Group if a customer or counterparty fails

to meet its contractual obligations and

• Liquidity risk: the risk that the Group will not be able to meet its financial obligations

as they fall due

The Group is required to disclose the fair value of its debt instruments. The fair value
is the amount the Group would pay a third party to transfer the liability. It is sourced
in the capital markets. This estimation of fair value is consistent with instruments
valued under level 1 in note 4.5.

Accounting policies
Borrowings
Borrowings are recognised initially at fair value less directly attributable transaction costs, with subsequent
measurement at amortised cost using the effective interest rate method. Under the amortised cost method,
the difference between the amount initially recognised and the redemption value is recorded in the income
statement over the period of the borrowing on an effective interest rate basis.

Managing credit and liquidity risk
Credit risk
The Group’s maximum exposure to credit risk is represented by the carrying amount of derivative financial assets
(see note 4.3), trade receivables (see note 3.1.3), and cash and cash equivalents (see note 4.1).

Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The majority
of trade receivables relate to airtime sales contracts with advertising agencies and advertisers. Credit insurance has
been taken out against these companies to minimise the impact on the Group in the event of a possible default. The
Group also reviews other significant receivables and will seek to take out credit insurance on an individual basis where
appropriate.

In 2016, the Group signed a £100 million non-recourse receivables purchase agreement. As at 31 December 2018,
this was fully utilised with £nil remaining available under the agreement (2017: £10 million).

The receivables in relation to the invoices sold were derecognised and the Group collects cash on behalf of the
counterparty as payments fall due.

Cash
The Group operates investment guidelines with respect to surplus cash that emphasise preservation of capital.
The guidelines set out procedures and limits on counterparty risk and maturity profile of cash placed. Counterparty
limits for cash deposits are largely based upon long-term ratings published by the major credit rating agencies.
Deposits longer than 12 months require the approval of the Board.

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> Section 4: Capital Structure and Financing Costs

Borrowings
ITV is rated as investment grade by Moody’s and S&P. ITV’s credit ratings, the cost of credit default swap hedging
and the absolute level of interest rates are key determinants in the cost of new borrowings for ITV.

Liquidity risk
The Group’s financing policy is to fund itself for the medium to long-term by using debt instruments with a range
of maturities and to ensure access to appropriate short-term borrowing facilities with a minimum of £250 million
of undrawn facilities available at all times.

Long-term funding comes from the UK and European capital markets, while any short to medium-term debt
requirements are provided through bank credit facilities totalling £930 million (see below). Management monitors
rolling forecasts of the Group’s liquidity reserve (comprising undrawn bank facilities and cash and cash equivalents)
on the basis of expected cash flows. This monitoring includes financial ratios to assess any possible future impact
on credit ratings and headroom and takes into account the accessibility of cash and cash equivalents.

The Group has a £630 million Revolving Credit Facility with a group of relationship banks. This facility, which was
extended in October 2018, matures in 2023 and is committed with leverage and interest cover financial covenants.
In addition, the Group has £300 million of financial covenant free financing, which runs to 2021.

Fair value versus book value
The tables below provide fair value information for the Group’s borrowings:

Loans due within one year
£630 million Revolving Credit Facility
Other short-term loans

Loans due in more than one year

€600 million Eurobond
€500 million Eurobond
Other long-term loans

Maturity

Various
Various

Sept 2022
Dec 2023
Various

2018
£m

50
4
54

536
449
8
993
1,047

Book value

2017
£m

60
16
76

529
444
9
982
1,058

2018
£m

50
4
54

555
456
8
1,019
1,073

Fair value

2017
£m

60
16
76

560
461
9
1,030
1,106

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Notes to the Financial Statements
Section 4: Capital Structure and Financing Costs continued

Keeping
it simple

4.3
Managing
market risks:
derivative
financial
instruments

What is a derivative?
A derivative is a type of financial instrument typically used to manage risk.
A derivative’s value changes over time in response to underlying variables such
as exchange rates or interest rates and is entered into for a fixed period. A hedge
is where a derivative is used to manage exposure in an underlying variable.

The Group is exposed to certain market risks. In accordance with Board-approved
policies, which are set out in this note, the Group manages these risks by using
derivative financial instruments to hedge the underlying exposures.

Why do we need them?
The key market risks facing the Group are:

• Currency risk arising from:

i. Translation risk, that is the risk in the period of adverse currency fluctuations

in the translation of foreign currency profits, assets and liabilities (‘balance sheet
risk’) and non-functional currency monetary assets and liabilities (‘income
statement risk’) and

ii. Transaction risk, that is the risk that currency fluctuations will have a negative
effect on the value of the Group’s non-functional currency trading cash flows.
A non-functional currency transaction is a transaction in any currency other
than the reporting currency of the subsidiary

• Interest rate risk to the Group arises from significant changes in interest rates

on borrowings issued at or swapped to floating rates

How do we use them?
The Group mainly employs three types of derivative financial instruments when
managing its currency and interest rate risk:

• Foreign exchange swap contracts are derivative instruments used to hedge

income statement translation risk arising from short-term intercompany loans
denominated in a foreign currency

• Forward foreign exchange contracts are derivative instruments used to hedge

transaction risk so they enable the sale or purchase of foreign currency at a known
fixed rate on an agreed future date and

• Cross-currency interest rate swaps are derivative instruments used to exchange the
principal and interest coupons in a debt instrument from one currency to another

Analysis of the derivatives used by the Group to hedge its exposure and the various
methods used to calculate their respective fair values are detailed in this section.

Accounting policies
Derivative financial instruments are initially recognised at fair value and are subsequently remeasured at fair
value with the movement recorded in the income statement, except where derivatives qualify for cash flow hedge
accounting. In this case, the effective portion of a cash flow hedge is recognised in other comprehensive income
and presented in the hedging reserve within equity. The cumulative gain or loss is later reclassified to the income
statement in the same period as the relevant hedged transaction is realised. Derivatives with positive fair values
are recorded as assets and negative fair values as liabilities.

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> Section 4: Capital Structure and Financing Costs

Determining fair value
The fair value of forward foreign exchange contracts is determined by using the difference between the contract
exchange rate and the quoted forward exchange rate at the reporting date from third parties. The fair value of interest
rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the reporting date,
taking into account current interest rates and our current creditworthiness, as well as that of our swap counterparties.

Third-party valuations are used to fair value the Group’s interest rate derivatives. The valuation techniques use inputs
such as interest rate yield curves and currency prices/yields, volatilities of underlying instruments and correlations
between inputs.

How do we manage our currency and interest rate risk?
Currency risk
As the Group expands its international operations, the performance of the business becomes increasingly sensitive
to movements in foreign exchange rates, primarily with respect to the US dollar and the euro.

The Group’s foreign exchange policy is to use forward foreign exchange contracts to hedge material non-functional
currency denominated costs or revenue for up to five years forward.

The Group ensures that its net exposure to foreign currency denominated cash balances is kept to a minimal level by
using foreign currency swaps to exchange balances back into sterling or by buying or selling foreign currencies at spot
rates when necessary.

The Group also utilises foreign exchange swaps and cross-currency interest rate swaps both to manage foreign
currency cash flow timing differences and to hedge foreign currency denominated monetary items.

The Group’s net investments in overseas subsidiaries may be hedged where the currency exposure is considered
to be material. The Group designated a portion of its euro borrowings into a net investment hedge against its euro
denominated assets following the acquisition of Talpa Media.

The following table highlights the Group’s sensitivity to translation risk resulting from a 10% strengthening/weakening
in sterling against the US dollar and euro, assuming all other variables are held constant:

US dollar
Euro

2018 – post-
tax profit

2018 – equity

£nil million £25 million
£2 million £16 million

2017 – post-
tax profit

£1 million
£3 million

2017 – equity

£23 million
£17 million

The Group’s sensitivity to translation risk for revenue and adjusted EBITA is disclosed in the Finance Review on page 51.
The key difference between the foreign currency sensitivity for adjusted EBITA and profit after tax is the impact
on the US dollar and euro denominated exceptional costs, including acquisition-related costs, acquired intangible
amortisation and net financing cost.

Interest rate risk
The Group’s interest rate policy is to allow fixed rate gross debt to vary between 20% and 100% of total gross debt
to accommodate floating rate borrowings under the Revolving Credit Facility.

At 31 December 2018, the Group’s fixed rate debt represented 99% of total gross debt (2017: 98%). Consequently,
a 1% movement in interest rates on floating rate debt would impact the 2018 post-tax profit for the year by less than
£1 million (2017: £1 million).

For financial assets and liabilities classified at fair value through profit or loss, the movements in the year relating to
changes in fair value and interest are not separated.

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Notes to the Financial Statements
Section 4: Capital Structure and Financing Costs continued

What is the value of our derivative financial instruments?
The following table shows the fair value of derivative financial instruments analysed by type of contract. Interest rate
swap fair values exclude accrued interest.

At 31 December 2018

Current
Foreign exchange forward contracts and swaps – cash flow hedges
Foreign exchange forward contracts and swaps – fair value through profit or loss
Non-current
Cross-currency interest swaps – cash flow hedges
Foreign exchange forward contracts and swaps – cash flow hedges
Foreign exchange forward contracts and swaps – fair value through profit or loss

At 31 December 2017

Assets
£m

Liabilities
£m

1
1

26
–
–
28

(2)
(2)

–
(1)
–
(5)

Assets
£m

Liabilities
£m

4
2

10
–
16

(1)
(1)

–
(1)
(3)

Cash flow hedges
The Group applies hedge accounting for certain foreign currency firm commitments and highly probably cash flows
where the underlying cash flows are payable within the next seven years. In order to fix the sterling cash outflows
associated with the commitments and interest payments – which are mainly denominated in AUD or euros – the
Group has taken out forward foreign exchange contracts and cross-currency interest rate swaps for the same foreign
currency amount and maturity date as the expected foreign currency outflow.

The amount recognised in other comprehensive income during the period all relates to the effective portion of the
revaluation loss associated with these contracts. There was less than £1 million (2017: £1 million) ineffectiveness taken
to the income statement and £6 million cumulative gain (2017: £20 million gain) recycled to the income statement in
the year.

In 2016, on issuing the 2023 Eurobond, the Group entered into a portfolio of cross-currency interest rate swaps, which
swapped the euro principal and fixed euro interest rate coupons into fixed sterling interest rate. As a result, the Group
makes sterling interest payments at a fixed rate.

Under IFRS 9, the Group has adopted the ‘cost of hedging’ approach which allows the recognition of the value of the
currency basis at inception of the hedge to be recorded on the Consolidated Statement of Financial Position and
amortised through net financing costs in the Consolidated Income Statement over the life of the bond. Any mark-to-
market change in fair value of the currency basis is recognised in ‘cost of hedging’ in the Consolidated Statement of
Comprehensive Income.

Net investment hedges
The Group uses euro denominated debt to partially hedge against the change in the sterling value of its euro
denominated net assets due to movements in foreign exchange rates. The fair value of debt in a net investment
hedge was £176 million (2017: £177 million). A foreign exchange loss of £2 million (2017: £6 million) relating to the
net investment hedges has been netted off within exchange differences on translation of foreign operations as
presented on the consolidated statement of comprehensive income.

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> Section 4: Capital Structure and Financing Costs

Undiscounted financial liabilities

Keeping
it simple

The Group is required to disclose the expected timings of cash outflows for each of
its financial liabilities (including derivatives). The amounts disclosed in the table are the
contractual undiscounted cash flows (including interest), so will not always reconcile
with the amounts disclosed on the Statement of Financial Position.

At 31 December 2018

Non-derivative financial liabilities
Borrowings
Trade and other payables
Contract liabilities
Other payables – non-current
Other payables – commitments on acquisitions
Derivative financial instruments
Foreign exchange forward contracts and swaps –
cash flow hedges

Inflow
Outflow

Cross-currency swaps – cash flow hedges

Inflow
Outflow

Foreign exchange forward contracts and swaps –
fair value through profit or loss

Inflow
Outflow

At 31 December 2017

Inflow
Outflow

Cross-currency swaps – cash flow hedges

Inflow
Outflow

Foreign exchange forward contracts and swaps –
fair value through profit or loss

Inflow
Outflow

Carrying
value
£m

Total
contractual
cash flows
£m

Less than
1 year
£m

Between
1 and 2 years
£m

Between
2 and 5 years
£m

Over
5 years
£m

(1,047)
(762)
(255)
(9)
(176)

(1,170)
(762)
(255)
(9)
(252)*

1
(3)

26
–

220
(222)

524
(502)

(76)
(713)
(255)
–
(55)

121
(122)

10
(15)

(20)
(43)
–
(7)
(148)

(1,069)
(6)
–
(2)
(46)

54
(55)

8
(16)

45
(45)

506
(471)

1
(2)
(2,226)

238
(239)
(2,429)

225
(225)
(1,105)

11
(11)
(227)

2
(3)
(1,089)

(5)
–
–
–
(3)

–
–

–
–
(8)

Carrying
value
£m

Total
contractual
cash flows
£m

(1,058)
(802)
(219)
(21)
(161)

(1,171)
(802)
(219)

(21)
(292)*

4
(2)

10
–

206
(204)

557
(513)

Less than
1 year
£m

Between
1 and 2 years
£m

Between
2 and 5 years
£m

Over
5 years
£m

(97)
(734)
(219)
–
(78)

148
(146)

11
(15)

(21)
(47)
–
(19)
(19)

58
(58)

11
(15)

(595)
(16)
–
(1)
(190)

(458)
(5)
–
(1)
(5)

–
–

32
(44)

503
(439)

2
(1)
(2,248)

136
(135)
(2,458)

124
(123)
(1,129)

7
(7)
(110)

5
(5)
(814)

–
–
(405)

* Undiscounted expected future payments depending on performance of acquisitions; the total maximum consideration is discussed in the Finance Review.

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Notes to the Financial Statements
Section 4: Capital Structure and Financing Costs continued

4.4
Net financing
costs

Keeping
it simple

This section details the interest income generated on the Group’s cash and other
financial assets and the interest expense incurred on borrowings and other
financial liabilities.

In reporting ‘adjusted profit’, the Group adjusts net financing costs to exclude
unrealised mark-to-market movements on interest rate and foreign exchange
derivatives, gains/losses on bond buybacks, net pension interest, interest and fair
value movements in acquisition-related liabilities and other financing costs.

Our rationale for adjustments made to financing costs is set out in the
Finance Review.

Accounting policies
Net financing costs comprise interest income on funds invested, gains / losses on the disposal of financial instruments,
changes in the fair value of financial instruments, interest expense on borrowings and finance leases, unwinding
of the discount on provisions, unwinding of the discount on liabilities to non-controlling interest, foreign exchange
gain/losses, and imputed interest on pension assets and liabilities. Interest income and expense is recognised as it
accrues in profit or loss, using the effective interest method.

Net financing costs
Net financing costs can be analysed as follows:

Financing income
Interest income

Financing costs

Interest expense on financial liabilities measured at amortised cost
Net pension interest (see note 3.7)
Change in fair value of instruments classified at fair value through profit or loss
Foreign exchange loss
Other finance expense

Net financing costs

2018
£m

(30)
(2)
–
(2)
(12)
(46)
(43)

2017
£m

(30)
(9)
–
(3)
(12)
(54)
(50)

Interest on financial liabilities relates to the interest incurred on the Group’s borrowings in the year.

Other finance expense includes the amortisation of facility commitment and upfront fees as well as movements
in the estimated value of acquisition-related contingent liabilities. This is where estimates of the future performance
against stretch targets is reassessed, resulting in adjustments to the related put option liabilities.

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> Section 4: Capital Structure and Financing Costs

4.5
Fair value
hierarchy

Keeping
it simple

The financial instruments included on the ITV statement of financial position
are measured at either fair value or amortised cost. The measurement of this fair
value can in some cases be subjective, and can depend on the inputs used in the
calculations. ITV generally uses external valuations using market inputs or market
values (e.g. external share prices). The different valuation methods are called
‘hierarchies’ and are described below.

Level 1
Fair values are measured using quoted prices (unadjusted) in active markets for
identical assets or liabilities.

Level 2
Fair values are measured using inputs, other than quoted prices included within
Level 1, which are observable for the asset or liability either directly or indirectly.

Interest rate swaps and options are accounted for at their fair value based upon
termination prices. Forward foreign exchange contracts are accounted for at the
difference between the contract exchange rate and the quoted forward exchange
rate at the reporting date.

Level 3
Fair values are measured using inputs for the asset or liability that are not based
on observable market data.

The tables below set out the financial instruments included on the ITV statement of financial position at ‘fair value’.

Assets measured at fair value
Financial instruments

Other pension assets – gilts (see note 3.7)
Equity investments (see note 3.5)

Financial assets at fair value through profit or loss
Foreign exchange forward contracts and swaps

Financial assets at fair value through reserves

Cash flow hedges

Liabilities measured at fair value
Financial liabilities at fair value through profit or loss
Foreign exchange forward contracts and swaps
Acquisition-related liabilities – payable to sellers under
put options agreed on acquisition

Financial liabilities at fair value through reserves

Cash flow hedges

Fair value
31 December
2018
£m

Level 1
31 December
2018
£m

Level 2
31 December
2018
£m

Level 3
31 December
2018
£m

49
9

49
–

–

–
–

–
9

–

Fair value
31 December
2018
£m

Level 1
31 December
2018
£m

Level 2
31 December
2018
£m

Level 3
31 December
2018
£m

(2)

(69)

(3)

–

(2)

–

(3)

–

(69)

–

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Notes to the Financial Statements
Section 4: Capital Structure and Financing Costs continued

Assets measured at fair value
Financial instruments

Other pension assets – gilts (see note 3.7)
Equity investments (see note 3.5)

Financial assets at fair value through profit or loss
Foreign exchange forward contracts and swaps

Financial assets at fair value through reserves

Cash flow hedges

Financial liabilities at fair value through reserves

Cash flow hedges

Fair value
31 December
2017
£m

Level 1
31 December
2017
£m

Level 2
31 December
2017
£m

Level 3
31 December
2017
£m

38
4

14
58

38
–

–

–
38

–
–

14
16

–
4

–

–
4

Fair value
31 December
2017
£m

Level 1
31 December
2017
£m

Level 2
31 December
2017
£m

Level 3
31 December
2017
£m

(1)

(73)

(2)
(76)

–

–
–

(1)

–

(2)
(3)

–

(73)

–
(73)

Refer to note 4.3 for how we value interest rate swaps and forward foreign currency contracts. The equity investments
are valued at cost and assessed for impairment.

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> Section 4: Capital Structure and Financing Costs

4.6
Equity

Keeping
it simple

This section explains material movements recorded in shareholders’ equity, presented
in the Consolidated Statement in Changes in Equity, which are not explained
elsewhere in the financial statements.

Accounting policies
Fair value reserve
Financial assets are stated at fair value, with any gain or loss recognised directly in the fair value reserve in equity, unless
the loss is a permanent impairment, when it is then recorded in the income statement.

Dividends
Dividends are recognised through equity on the earlier of their approval by the Company’s shareholders or their payment.

4.6.1 Share capital and share premium
The Group’s share capital at 31 December 2018 of £403 million (2017: £403 million) and share premium of £174 million
(2017: £174 million) is the same as that of ITV plc. Details of this are given in the ITV plc Company financial statements
section of this Annual Report.

4.6.2 Merger and other reserves
Merger and other reserves at 31 December include the following reserves:

Merger reserves
Capital reserves
Capital redemption reserves
Revaluation reserves
Put option liabilities arising on acquisition of subsidiaries
Total

4.6.3 Translation reserve
The translation reserve comprises:

2018
£m

98
112
36
2
(42)
206

2017
£m

98
112
36
2
(49)
199

• All foreign exchange differences arising on the translation of the accounts of, and investments in, foreign operations
• The gains or losses on the portion of cash flow hedges that have been deemed effective and costs of hedging under

IFRS 9 (see note 4.3).

4.6.4 Fair value reserve
The fair value reserve comprises all movements arising on the revaluation of gilts accounted for fair value through
OCI financial instruments (see note 3.7).

4.6.5 Retained earnings
The retained earnings reserve comprises profit for the year attributable to owners of the Company of £466 million
(2017: £409 million) and other items recognised directly through equity as presented in the consolidated statement
of changes in equity. Other items include the credit for the Group’s share-based compensation schemes and the charge
for the purchase of ITV shares via the ITV Employees’ Benefit Trust, which are described in note 4.7.

The distributable reserves of ITV plc are disclosed in note viii to the ITV plc Company financial statements. See details
on distributable reserves on page 196.

The Directors of ITV plc propose a final dividend of 5.4 pence per share, which equates to a full year dividend of 8 pence
per share. In 2018, £315 million of dividend payments were made (2017: £494 million).

4.6.6 Non-controlling interests
Non-controlling interest (NCI) represents the share of non-wholly owned subsidiaries’ net assets that are not directly
attributable to the shareholders of the ITV Group. The movement for the year comprises:

• The share of profits attributable to NCI of £4 million (2017: £4 million)
• The distributions made to NCI of £8 million (2017: £4 million)
• The share of net assets attributable to NCI relating to subsidiaries acquired or disposed of in the year of £nil

(2017: £25 million)

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Financial Statements
Financial Statements

Notes to the Financial Statements
Section 4: Capital Structure and Financing Costs continued

4.7
Share-based
compensation

Keeping
it simple

The Group utilises share award schemes as part of its employee remuneration
packages, and therefore operates a number of share-based compensation schemes,
namely the Deferred Share Award (DSA), Performance Share Plan (PSP), Long Term
Incentive Plan (LTIP) and Save As You Earn (SAYE) schemes. The share-based
compensation is not pensionable.

A transaction will be classed as share-based compensation where the Group receives
services from employees and pays for these in shares or similar equity instruments.
If the Group incurs a liability linked to the price or value of the Group’s shares, this will
also fall under a share-based transaction.

A description of each type of share-based payment arrangement that existed at any
time during the period is set out in the Annual Remuneration Report.

Accounting policies
For each of the Group’s share-based compensation schemes, the fair value of the equity instrument granted is
measured at grant date and spread over the vesting period via a charge to the income statement with a corresponding
increase in equity.

The fair value of the share options and awards is measured using either market price at grant date or, for the SAYE
scheme, a Black–Scholes model, taking into account the terms and conditions of the individual scheme.

Vesting conditions are limited to service conditions and performance conditions. For performance-based schemes,
the relevant Group performance measures are projected to the end of the performance period in order to determine
the number of options expected to vest. The estimate is then used to determine the option fair value, discounted
to present value. The Group revises its estimates of the number of options that are expected to vest, including an
estimate of forfeitures at each reporting date. The impact of the revision to original estimates, if any, is recognised
in the income statement, with a corresponding adjustment to equity.

Exercises of share options granted to employees can be satisfied by market purchase or issue of new shares. No new
shares may be issued to satisfy exercises under the terms of the DSA. During the year, all exercises were satisfied by
using shares purchased in the market and held in the ITV Employees’ Benefit Trust.

Share-based compensation charges totalled £10 million in 2018 (2017: £12 million).

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> Section 4: Capital Structure and Financing Costs

Share options outstanding
The table below summarises the movements in the number of share options outstanding for the Group and their
weighted average exercise price:

Outstanding at 1 January
Granted during the year – nil priced
Granted during the year – other
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 31 December
Exercisable at 31 December

2018
Weighted
average
exercise price
(pence)

69.17
–
126.23
156.99
18.39
–
49.33
54.32

Number
of options
(‘000)

36,155
14,450
8,561
(8,452)
(4,510)
(2,182)
44,022
1,736

2017
Weighted
average
exercise price
(pence)

67.86
–
145.66
121.37
44.87
–
69.17
110.17

Number
of options
(‘000)

36,533
7,996
7,911
(5,614)
(9,883)
(788)
36,155
2,808

The average share price during 2018 was 158.29 pence (2017: 185.15 pence).

Of the options still outstanding, the range of exercise prices and weighted average remaining contractual life of these
options can be analysed as follows:

Range of exercise prices (pence)

Nil
20.00 – 49.99
50.00 – 69.99
70.00 – 99.99
100.00 – 109.99
110.00 – 119.99
120.00 – 149.99
150.00 – 199.99
200.00 – 249.99

Weighted
average
exercise price
(pence)

–
–
–
–
–
–
129.51
165.20
206.83

Number
of options
(‘000)

28,619
–
–
–
–
–
10,966
3,993
444

2018
Weighted
average
remaining
contractual life
(years)

Weighted
average
exercise price
(pence)

1.62
–
–
–
–
–
3.08
0.89
0.14

–
–
66.60
–
–
–
138.99
168.21
206.83

2017
Weighted
average
remaining
contractual life
(years)

1.65
–
–
–
–
–
3.06
1.39
0.39

Number
of options
(‘000)

20,417
–
34
–
–
–
5,672
9,447
585

Assumptions
DSA, LTIP and PSP options are valued directly by reference to the share price at date of grant.

The options granted in the year for the SAYE scheme, an HMRC approved SAYE scheme, are valued using the
Black–Scholes model, using the assumptions below:

Scheme name

Date of grant

Share price
at grant
(pence)

Exercise price
(pence)

Expected
volatility
%

Expected life
(years)

Gross dividend
yield
%

Risk-free
rate
%

3 Year
5 Year
3 Year
5 Year
3 Year
5 Year
3 Year
5 Year

29 March 2017
29 March 2017
16 Sept 2017
16 Sept 2017
29 March 2018
29 March 2018
6 Sept 2018
6 Sept 2018

218.90
218.90
156.20
156.20
144.15
144.15
158.75
158.75

164.22
164.22
138.99
138.99
123.82
123.82
135.20
135.20

30.02
28.61
29.35
28.55
29.54
27.87
29.65
27.89

3.25
5.25
3.25
5.25
3.25
5.25
3.25
5.25

3.00
3.00
3.00
3.00
5.55
5.55
5.04
5.04

0.58
1.28
0.51
1.12
1.54
1.68
1.54
1.68

Fair value
(pence)

58.50
60.36
30.80
33.88
26.4
25.06
31.02
29.94

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Financial Statements
Financial Statements

Notes to the Financial Statements
Section 5: Other Notes

Employees’ Benefit Trust
The Group has investments in its own shares as a result of shares purchased by the ITV Employees’ Benefit Trust (‘EBT’).
Transactions with the Group-sponsored EBT are included in these financial statements and primarily consist of the
EBT’s purchases of shares in ITV plc, which is accounted for as a reduction to retained earnings.

The table below shows the number of ITV plc shares held in the EBT at 31 December 2018 and the purchases/(releases)
from the EBT made in the year to satisfy awards under the Group’s share schemes:

Scheme

LTIP releases
DSA releases
PSP releases
SAYE releases
Shares purchased

Shares held at

1 January 2018

31 December 2018

Number of shares
(released) / purchased

26,989,521
(623,191)
(715,817)
(729,742)
(561,128)
2,571,890
26,931,533

Nominal value
£

2,698,952

2,693,153

The total number of shares held by the EBT at 31 December 2018 represents 0.67% (2017: 0.67%) of ITV’s issued share
capital. The market value of own shares held at 31 December 2018 is £34 million (2017: £45 million).

The shares will be held in the EBT until such time as they may be transferred to participants of the various Group share
schemes. Rights to dividends have been waived by the EBT in respect of shares held that do not relate to restricted
shares under the DSA. In accordance with the Trust Deed, the Trustees of the EBT have the power to exercise all voting
rights in relation to any investment (including shares) held within that trust.

5.1
Related
party
transactions

Keeping
it simple

The related parties identified by the Directors include joint ventures, associated
undertakings, fixed asset investments and key management personnel.

To enable users of our financial statements to form a view about the effects
of related party relationships on the Group, we disclose the Group’s transactions with
those related parties during the year and any associated year end trading balances.

Transactions with joint ventures and associated undertakings
Transactions with joint ventures and associated undertakings during the year were:

Sales to joint ventures
Sales to associated undertakings
Purchases from joint ventures
Purchases from associated undertakings

2018
£m

12
13
29
67

2017
£m

15
10
28
70

The transactions with joint ventures primarily relate to sales and purchases of digital multiplex services with Digital
3&4 Limited and distribution revenue from BritBox LLC.

Sales to associated undertakings include airtime sales to DTV Services Limited. Purchases from associated undertakings
primarily relate to the purchase of news services from ITN Limited.

All transactions with associated undertakings and joint ventures arise in the normal course of business on an arm’s
length basis. None of the balances are secured.

The amounts owed by and to these related parties at the year end were:

Amounts owed by joint ventures
Amounts owed by associated undertakings
Amounts owed to joint ventures
Amounts owed to associated undertakings

186
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ITV plc Annual Report and Accounts 2018

2018
£m

6
7
3
5

2017
£m

6
6
–
4

> Section 5: Other Notes

Amounts owed by joint ventures primarily relate to trading with BritBox LLC. Balances owed by associated undertakings
largely relate to loan notes and trading balances with Monumental TV Limited. Balances owed to associated
undertakings primarily relate to trading with ITN Limited.

Amounts paid to the Group’s retirement benefit plans are set out in note 3.7.

Transactions with key management personnel
Key management consists of ITV plc Executive and Non-executive Directors and the ITV Management Board. Key
management personnel compensation is as follows:

Short-term employee benefits
Share-based compensation

2018
£m

12
3
15

2017
£m

10
1
11

5.2
Contingent
assets and
liabilities

Keeping
it simple

A contingent asset or liability is a liability that is not sufficiently certain to qualify
for recognition as an asset or provision where uncertainty may exist regarding the
outcome of future events.

Contingent assets
In 2017 Talpa Media took back the licence for The Voice of China due a breach of the agreement by the customer,
Talent, for not fulfilling their payment obligations. The Group is pursuing Talent vigorously for the £26 million still
due under the agreement, which was recognised as an exceptional cost in 2017. Further, the Group has credit insurance
in place and a claim is in progress.

Whilst the Directors are confident of recovering the remaining amounts due, accounting standards set very specific
requirements for the recognition of contingent assets, which is how the recovery of the amount due has been
accounted for. As discussions with the insurers and the claim against Talent are still in progress, the Group is not able
to demonstrate sufficient certainty to be able to recognise a cash receivable at the year end.

Contingent liabilities
In late 2016, the Group initiated legal proceedings against the minority owners of Gurney Productions LLC for alleged
breaches of contracts and their fiduciary duties, as well as self-dealing and fraudulent concealment. The minority
owners dispute the allegations and they have counter-claimed for damages of at least $150 million. The action is
ongoing and, having taken legal advice, the Directors believe this counter-claim is completely without merit.

There are contingent liabilities in respect of certain litigation and guarantees, broadcasting issues, and in respect
of warranties given in connection with certain disposals of businesses. None of these items are expected to have
a material effect on the Group’s results or financial position.

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Financial Statements
Financial Statements

Notes to the Financial Statements
Section 5: Other Notes continued

5.3
Subsidiaries
exempt
from audit

Keeping
it simple

Certain subsidiaries of the Group can take an exemption from having an audit. Strict
criteria must be met for this exemption to be taken, and it must be agreed by the
Directors of that subsidiary entity.

Listed below are subsidiaries controlled and consolidated by the Group, where the Directors have taken the exemption
from having an audit of its financial statements. This exemption is taken in accordance with Companies Act s479A.]

Company number Company name

10058419
10404493
10496857
10528766
11081338
10528952
11109753
11109596
11723899
11109572
11109865
01891539
02285229
05078683
04159249
00301188
01692483
03984490
03053908
03210452
03307790
02625225
03210363
02280048
04257248
02852812
11723731
10500295
03209058
00290076
03962410
03106798
05344772
00733063
06914987
11423826
11423730
11667230
11107990
10058008
10494684
11723800
10671435
04159210
04207680
04206925
11107681
04033106

Back Productions Limited
Big Talk Bliss Limited
Big Talk Cold Feet Limited
Big Talk Diana Limited
Big Talk Guilty Limited
Big Talk Living the Dream Limited
Big Talk Mum Limited
Big Talk Goes Wrong Limited
Big Talk NEWCO 5 Limited
Big Talk Peacock Limited
Big Talk Time Limited
Broad Street Films Limited
Campania Limited
Carbon Media Limited
Carlton Content Holdings Limited
Carlton Film Distributors Limited
Carlton Finance Limited
Carlton Food Network Limited
Carlton Programmes Development Ltd
Carlton Screen Advertising (Holdings) Ltd
Carltonco 103
Carltonco Forty Investments
Carltonco Ninety-Six
Castlefield Properties Limited
Channel Television Holdings Limited
Cosgrove Hall Films Limited
COTR (NEWCO 1) Limited
Denipurna Limited
DTV Limited
Granada Group Limited
Granada Limited
Granada Media Limited
Granada Screen (2005) Limited
Granada Television Overseas Limited
ITV (HC) Limited
ITV (Victor) Limited
ITV Bancroft 2 Limited
ITV Barking Limited
ITV Confession Limited
ITV Dark Heart Limited
ITV Enterprises Limited
ITV F&B Limited
ITV HG Limited
ITV Holdings Limited
ITV Home Fires Limited
ITV Investments Limited
ITV Leila Limited
ITV Mr Selfridge Limited

00603471
03799828
01565625
08554937
11723826
11723842
11723851
11723881
08516153
11107934
10602705
08586211
09498177
11107431
11108813
05518785
00920028
11108285
10528851
10528827
11109917
11062257
10491117
10062923
10646873
09660486
10031005
10528763
11108289
09646520
11108327
11204836
10528702
11108322
10043079
11108320
10973979
04201477
10789616
06469484
06469482
10796122
11109437
11109929
11109744
11109287
04145307

ITV Pension Scheme Limited
ITV Play Limited
ITV Properties (Developments) Limited
ITV Shetland Limited
ITV Studios NEWCO 14 Limited
ITV Studios NEWCO 15 Limited
ITV Studios NEWCO 16 Limited
ITV Studios NEWCO 17 Limited
ITV Text Santa Limited
ITV The Bay Limited
ITV The Man Limited
ITV Thunderbirds Limited
ITV Top Class Limited
ITV Vera Limited
ITV Wild Bill Limited
Juice Music UK Limited
Link Electronics Limited
Mammoth Screen (ABC) Limited
Mammoth Screen (City) Limited
Mammoth Screen (END5) Limited
Mammoth Screen (END6) Limited
Mammoth Screen (NC) Limited
Mammoth Screen (NOK) Limited
Mammoth Screen (NW) Limited
Mammoth Screen (OBI) Limited
Mammoth Screen (Pol2) Limited
Mammoth Screen (Pol3) Limited
Mammoth Screen (Pol4) Limited
Mammoth Screen (Pol5) Limited
Mammoth Screen (QV) Limited
Mammoth Screen (Serpent) Limited
Mammoth Screen (SG) Limited
Mammoth Screen (VF) Limited
Mammoth Screen (VIC3) Limited
Mammoth Screen (WFTP) Limited
Mammoth Screen (WOF) Limited
Mammoth Screen (WOTW) Limited
Morning TV Limited
The Garden Production (Films) Limited
VOD Member (ITVA) Limited
VOD Member (ITVB) Limited
WP BodyGuard Limited
WP (NEWCO 3) Limited
WP (NEWCO 4) Limited
WP Anne Limited
WP LOD5 Limited
12 Yard Productions Limited

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ITV plc Annual Report and Accounts 2018

ITV plc Company Financial Statements

> Notes to the ITV plc Company Financial Statements

Company Balance Sheet

As at 31 December

Non-current assets
Investments in subsidiary undertakings
Derivative financial instruments
Deferred tax asset

Current assets
Amounts owed by subsidiary undertakings
Derivative financial instruments
Other receivables
Cash and cash equivalents

Current liabilities
Bank overdrafts
Borrowings
Amounts owed to subsidiary undertakings
Accruals and deferred income
Current tax liabilities
Derivative financial instruments

Net current assets
Total assets less current liabilities

Non-current liabilities
Borrowings
Derivative financial instruments

Net assets

Capital and reserves
Share capital
Share premium
Other reserves
Retained earnings
Total equity

2017
£m

4,230
7
5
17
4,259

–
(60)
(3,237)
(8)
(2)
(7)
(3,314)

(973)
(1)
(974)

Note

2018
£m

4,167
4
5
4
4,180

(5)
(50)
(3,209)
(13)
(1)
(4)
(3,282)

(985)
–
(985)

iii
vi

iv
vi

v
iv

v
vi

vii
viii
viii
viii

2018
£m

2,286
26
1
2,313

898
3,211

2,226

403
174
37
1,612
2,226

The accounts were approved by the Board of Directors on 27 February 2019 and were signed on its behalf by:

Chris Kennedy
Director

Carolyn McCall
Director

2017
£m

2,191
11
1
2,203

945
3,148

2,174

403
174
26
1,571
2,174

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Financial Statements
Financial Statements

ITV plc Company Financial Statements continued

Company Statement of Changes in Equity

Balance at 1 January 2018
Total comprehensive income for the year
Profit
Net loss on cash flow hedges and cost of hedging
Total comprehensive income for the year
Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Equity dividends
Movements due to share-based compensation
Tax on items taken directly to equity
Total transactions with owners
Balance at 31 December 2018

Balance at 1 January 2017
Total comprehensive income for the year
Profit
Net loss on cash flow hedges and cost of hedging
Total comprehensive income for the year
Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Equity dividends
Movements due to share-based compensation
Total transactions with owners
Balance at 31 December 2017

Note

vii/viii

Note

vii/viii

Share
capital
£m

403

–
–
–

–
–
–
–
403

Share
Capital
£m

403

–
–
–

–
–
–
403

Share
premium
£m

174

–
–
–

–
–
–
–
174

Other
reserves
£m

–
11
11

–
–
–
–
37

Share
Premium
£m

174

Other
Reserves
£m

–
–
–

–
–
–
174

–
(2)
(2)

–
–
–
26

Retained
earnings
£m

1,571

344
–
344

(315)
10
2
(303)
1,612

Retained
Earnings
£m

1,702

351
–
351

(494)
12
(482)
1,571

Total
£m

2,174

344
11
355

(315)
10
2
(303)
2,226

Total
£m

2,307

351
(2)
349

(494)
12
(482)
2,174

190
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ITV plc Annual Report and Accounts 2018
ITV plc Annual Report and Accounts 2018

Financial Statements

Notes to the ITV plc Company Financial Statements

Note i
Accounting
policies

In this
section

This section sets out the notes to the ITV plc Company only financial statements.
Those statements form the basis of the dividend decisions made by the
Directors, as explained in detail in note viii below. The notes form part of the
financial statements.

Basis of preparation
The Company is a qualifying entity as it is a member of the ITV plc Group where ITV plc, the ultimate parent prepares
publicly available consolidated financial statements. These financial statements were prepared in accordance with
Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (‘FRS 101’) as adopted by the EU. The amendments
to FRS 101 (2014/15 Cycle) issued in July 2015 and FRS 101 (2015/16) issued in July 2016 have been applied.

Exemptions applied
The Company is taking advantage of the following disclosure exemptions under FRS 101:

• Presentation of a Statement of Cash Flows and related notes
• Disclosure in respect of capital management
• Disclosure of related party transactions between wholly-owned subsidiaries and parents within a group
• Disclosures required under IFRS 2 ‘Share Based Payments’ in respect of group settled share based payments
• Disclosures required by IFRS 7 ‘Financial Instrument: Disclosure’
• Certain disclosures required under IFRS 13 ‘Fair Value Measurement’
• Disclosure of information in relation to new standards not yet applied

As permitted by section 408 (3) of the Companies Act 2006, a separate income statement dealing with the results
of the parent company has not been presented.

Subsidiaries
Subsidiaries are entities that are directly or indirectly controlled by the Company. Control exists where the Company
has the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
The investment in the Company’s subsidiaries is recorded at cost.

Foreign currency transactions
Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the
transaction. Foreign currency monetary assets and liabilities at the balance sheet date are translated into sterling
at the rate of exchange ruling at that date. Foreign exchange differences arising on translation are recognised in
the profit and loss account. Non-monetary assets and liabilities measured at historical cost are translated into sterling
at the rate of exchange on the date of the transaction.

Borrowings
Borrowings are recognised initially at fair value including directly attributable transaction costs, with subsequent
measurement at amortised cost using the effective interest rate method. The difference between initial fair value
and the redemption value is recorded in the profit and loss account over the period of the liability on an effective
interest basis.

Derivatives and other financial instruments
The Company uses a limited number of derivative financial instruments to hedge its exposure to fluctuations in interest
and other foreign exchange rates. The Company does not hold or issue derivative instruments for speculative purposes.

Derivative financial instruments are initially recognised at fair value and are subsequently remeasured at fair value
with the movement recorded in the profit and loss account within net financing costs, except where derivatives qualify
for cash flow hedge accounting. In this case, the effective portion of cash flow hedge is recognised in retained profits
within equity. The cumulative gain or loss is later reclassified to the profit and loss account in the same period as the
relevant hedged transaction is realised. Derivatives with positive fair values are recorded as assets and negative fair
values as liabilities.

The fair value of foreign currency forward contracts is determined by using the difference between the contract
exchange rate and the quoted forward exchange rate at the balance sheet date.

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Financial Statements
Financial Statements

Notes to the ITV plc Company Financial Statements continued

The fair value of interest rate swaps is the estimated amount that the Company would receive or pay to terminate
the swap at the balance sheet date, taking into account current interest rates and the current creditworthiness of
swap counterparties.

Third-party valuations are used to fair value the Company’s derivatives. The valuation techniques use inputs such as
interest rate yield curves and currency prices/yields, volatilities of underlying instruments and correlations between
inputs. For financial assets and liabilities classified at fair value through profit or loss, the fair value change and interest
income/expense are not separated.

Current tax
Current tax is the expected tax payable or receivable on the taxable income or loss for the year and any adjustment
in respect of previous years.

The Company recognises liabilities for anticipated tax issues based on estimates of the additional taxes that are likely
to become due, which require judgement. Amounts are accrued based on management’s interpretation of specific tax
law and the likelihood of settlement. Where the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the current tax and deferred tax provisions in the period in which
such determination is made.

Deferred tax
The tax charge for the period is recognised in the income statement or directly in equity according to the accounting
treatment of the related transaction.

Deferred tax arises due to certain temporary differences between the carrying amount of assets and liabilities for
financial reporting purposes and those for taxation purposes. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount of assets and liabilities. A deferred tax asset is
recognised only to the extent that it is probable that sufficient taxable profit will be available to utilise the temporary
difference. Recognition of deferred tax assets therefore involves judgement regarding timing and level of future
taxable income.

Share-based compensation
The Company utilises share award schemes as part of its employee remuneration packages, and therefore operates
a number of share-based compensation schemes, namely the Deferred Share Award (DSA), Performance Share Plan
(PSP), Long Term Incentive Plan (LTIP) and Save As You Earn (SAYE) schemes.

A transaction will be classed as share-based compensation where the Company receives services from employees
and pays for these in shares or similar equity instruments. If the Company incurs a liability based on the price or value
of the shares, this will also fall under a share-based transaction. The Company recognises the retained earnings impact
of the share-based compensation for the Group as awards are settled in ITV plc shares. The cost of providing those
awards is recognised as a cost of investment to the subsidiaries that receive the service from employees.

The fair value of the equity instrument granted is measured at grant date and spread over the vesting period via
a charge to the income statement with a corresponding increase in equity. The fair value of the share options and
awards is measured using either market price at grant date or, for the SAYE scheme, a Black–Scholes model, taking
into account the terms and conditions of the individual scheme.

Vesting conditions are limited to service conditions and performance conditions. For performance-based schemes,
the relevant performance measures are projected to the end of the performance period in order to determine the
number of options expected to vest. The estimate is then used to determine the option fair value, discounted to
present value. The Company revises its estimates of the number of options that are expected to vest, including an
estimate of forfeitures at each reporting date. The impact of the revision to original estimates, if any, is recognised
in the income statement, with a corresponding adjustment to equity.

Dividends
Dividends are recognised through equity on the earlier of their approval by the Company’s shareholders or their payment.

192
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ITV plc Annual Report and Accounts 2018

> Notes to the ITV plc Company Financial Statements

Two (2017: two) Directors of ITV plc were employees of the Company during the year, one of whom remains employed
at the year end. The costs relating to these Directors are disclosed in the Remuneration Report.

Share-based payments
The weighted average share price of share options exercised during the year was 18.39 pence (2017: 44.87 pence).
The options outstanding at the year end have an exercise price in the range of nil to 206.83 pence (2017: nil to 206.83
pence) and a weighted average contractual life of one year (2017: two years) for all the schemes in place for the Group.

The principal subsidiary undertakings are listed on page 198. The carrying value at 31 December 2018 was £2,286 million
(2017: £2,191 million).

In 2018, the Company increased investment in subsidiaries by £95 million mainly due to a subscription of one ordinary
share in Carlton Communications Limited for £76 million and a capital contribution of £19 million (€22 million) to ITV
(Europe) Holdings BV.

The Company operates an intra-group cash pool policy with certain 100% owned UK subsidiaries. The pool applies
to bank accounts where there is an unconditional right of set off and involves the daily closing cash position for
participating subsidiaries whether positive or negative, being cleared to £nil via daily bank transfers to/from ITV plc.
These daily transactions create a corresponding intercompany creditor or debtor, which can result in significant
movements in amounts owed to and from subsidiary undertakings in the Company balance sheet.

Note ii
Employees
and share-
based
payments

Note iii
Investments
in subsidiary
undertakings

Note iv
Amounts
owed
(to)/from
subsidiary
undertakings

Note v
Borrowings

Keeping
it simple

The Directors manage the Group’s capital structure as disclosed in section 4
to the consolidated financial statements. Borrowings, cash and derivative
financial instruments are mainly held by ITV plc and disclosed in these Company
financial statements.

Loans and facilities due within one year
At various periods during the year, the Group drew down on the £630 million Revolving Credit Facility (‘RCF’)
to meet short-term funding requirements. At 31 December 2018, the Group had drawings of £50 million under
the RCF (2017: £60 million), leaving £580 million available to draw down at year end. The maximum draw down
of the RCF during the year was £400 million (2017: £390 million).

Loans and loan notes due after one year
The Company has issued the following Eurobonds:

• A seven year €600 million Eurobond at a fixed coupon of 2.125%, which matures in September 2022 and
• A seven year €500 million Eurobond at a fixed coupon of 2.0%, which will mature in December 2023. The bond

issued in December 2016 has been swapped back to sterling using a cross-currency interest rate swap. The resulting
fixed rate payable in sterling is c. 3.5%

In June 2017, the Company repaid in full a £100 million bilateral loan facility.

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Strategic ReportAdditional informationFinancial StatementsGovernance

Financial Statements
Financial Statements

Notes to the ITV plc Company Financial Statements continued

Note vi
Managing
market risks:
derivative
financial
instruments

What is the value of our derivative financial instruments?

Current
Foreign exchange forward contracts and swaps – cash flow hedges
Foreign exchange forward contracts and swaps – fair value through profit or loss
Non-current
Cross-currency interest swaps – cash flow hedges
Foreign exchange forward contracts and swaps – fair value through profit or loss
Foreign exchange forward contracts and swaps – cash flow hedges

Assets
2018
£m

Liabilities
2018
£m

3
1

26
–
–
30

(3)
(1)

–
–
–
(4)

Assets
2017
£m

Liabilities
2017
£m

5
2

10
1
18

(5)
(2)

–
(1)
(8)

The Company mainly employs three types of derivative financial instruments when managing its currency and interest
rate risk:

• Foreign exchange swap contracts are derivative instruments used to hedge income statement translation risk

arising from short-term intercompany loans denominated in a foreign currency

• Forward foreign exchange contracts are derivative instruments used to hedge transaction risk so they enable the

sale or purchase of foreign currency at a known fixed rate on an agreed future date and

• Cross-currency interest rate swaps are derivative instruments used to exchange the principal and interest coupons

in a debt instrument from one currency to another

Currency risk
The Company’s foreign exchange policy is to use forward foreign exchange contracts to hedge material non-functional
currency denominated costs or revenue for up to five years forward. The Company also utilises foreign exchange swaps
and cross-currency interest rate swaps both to manage foreign currency cash flow timing differences and to hedge
foreign currency denominated monetary items.

Cash flow hedges
The Company applies hedge accounting for certain foreign currency firm commitments and highly probably cash flows
where the underlying cash flows are payable within the next seven years. In order to fix the sterling cash outflows
associated with the commitments and interest payments – which are mainly denominated in AUD or euros – the
Company has taken out forward foreign exchange contracts and cross-currency interest rate swaps for the same
foreign currency amount and maturity date as the expected foreign currency outflow.

The amount recognised in other comprehensive income during the period all relates to the effective portion of the
revaluation loss associated with these contracts. There was less than £1 million (2017: £1 million) ineffectiveness taken
to the income statement and £5 million cumulative gain (2017: £17 million gain) recycled to the income statement in
the year.

In 2016, on issuing the 2023 Eurobond, the Company entered into a portfolio of cross-currency interest rate swaps,
which swapped the euro principal and fixed euro interest rate coupons into fixed sterling interest rate. As a result,
the Company makes sterling interest payments at a fixed rate.

Under IFRS 9, the Company has adopted the ‘cost of hedging’ approach which allows the recognition of the value
of the currency basis at inception of the hedge to be recorded on the Consolidated Statement of Financial Position
and amortised through net financing costs in the Consolidated Income Statement over the life of the bond. Any mark-
to-market change in fair value of the currency basis is recognised in ‘cost of hedging’ in the Consolidated Statement of
Comprehensive Income.

194
194

ITV plc Annual Report and Accounts 2018
ITV plc Annual Report and Accounts 2018

> Notes to the ITV plc Company Financial Statements

Undiscounted financial liabilities
The Company is required to disclose the expected timings of cash outflows for each of its derivative financial liabilities.
The amounts disclosed in the table are the contractual undiscounted cash flows (including interest), so will not always
reconcile with the amounts disclosed on the statement of financial position.

At 31 December 2018

Non-current and current
Foreign exchange forward contracts
and swaps – cash flow hedges

Inflow
Outflow

Cross-currency swaps – cash flow
hedges

Inflow
Outflow

Foreign exchange forward contracts
and swaps – fair value through profit
or loss

Inflow
Outflow

Restated *

At 31 December 2017

Non-current and current
Foreign exchange forward contracts
and swaps – cash flow hedges

Inflow
Outflow

Cross-currency swaps – cash flow
hedges

Inflow
Outflow

Foreign exchange forward contracts
and swaps – fair value through profit
or loss

Inflow
Outflow

Carrying
value
£m

Total
contractual
cash flows
£m

Less than
1 year
£m

Between
1 and 2 years
£m

Between
2 and 5 years
£m

Over 5 years
£m

3
(3)

26
–

1
(1)
26

441
(441)

524
(502)

386
(386)
22

243
(243)

109
(109)

10
(15)

362
(362)
(5)

8
(16)

19
(19)
(8)

89
(89)

506
(471)

5
(5)
35

–
–

–
–
–

Carrying
value
£m

Total
contractual
cash flows
£m

Less than
1 year
£m

Between
1 and 2 years
£m

Between
2 and 5 years
£m

Over 5 years
£m

6
(6)

10
–

2
(2)
10

399
(399)

501
(513)

193
(193)
12

283
(283)

116
(116)

–
–

10
(15)

168
(168)
(5)

10
(15)

15
(15)
(5)

30
(44)

451
(439)

10
(10)
(14)

–
–
12

* The company re-analysed contractual cash-flows to present them in the correct categories of derivate instruments. There has been no impact on the

carrying value of the financial liabilities

195
195

Strategic ReportAdditional informationFinancial StatementsGovernance

Financial Statements
Financial Statements

Notes to the ITV plc Company Financial Statements continued

Note vii
Share capital

Authorised ordinary shares of 10 pence each
Allotted, issued and fully paid ordinary shares of 10 pence each
Total

8,000,000,000
4,025,409,194

Authorised
2018 & 2017
£m

800

Allotted, issued
and fully paid
2018 & 2017
£m

403

The Company’s ordinary shares give shareholders equal rights to vote, receive dividends and to the repayment of capital.

Note viii
Equity and
dividends

Keeping
it simple

ITV plc is a non-trading investment holding company and derives its profits from
dividends paid by subsidiary companies.

The Directors consider the Company’s capital structure and dividend policy at least
twice a year ahead of announcing results and do so in the context of its ability to
continue as a going concern, to execute the strategy and to invest in opportunities
to grow the business and enhance shareholder value.

The dividend policy is influenced by a number of the principal risks as identified
on pages 56 to 61 that could have a negative impact on the performance of
the Company.

In determining the level of dividend in any year, the Directors follow the dividend
policy and also consider a number of other factors that influence the proposed
dividend, including:

• The level of retained distributable reserves in ITV plc the Company
• Availability of cash resources (as disclosed in note 4.1 to the consolidated

financial statements) and

• Future cash commitments and investment plans, in line with Company’s

strategic plan

Equity
The retained earnings reserve includes profit after tax for the year of £344 million (2017: £351 million), which includes
dividends of £400 million from subsidiaries in 2018 (2017: £426 million). Other reserves of £37 million (2017: £26 million)
relate to share buybacks in prior periods and foreign currency translation net of cash flow hedging.

Dividends
The Directors of the Company propose a final dividend of 5.4 pence per share, which equates to a full year dividend
of 8 pence per share.

Distributable reserves
The distributable reserves of ITV plc approximate to the balance of the retained earnings reserve of £1,612 million
(2017: £1,571 million) as at 31 December 2018.

Note ix
Contingent
liabilities

Keeping
it simple

A contingent liability is a liability that is not sufficiently certain to qualify
for recognition as a provision where uncertainty may exist regarding the
outcome of future events.

Under a Group registration, the Company is jointly and severally liable for VAT at 31 December 2018 of £39 million
(31 December 2017: £45 million). The Company has guaranteed certain finance and operating lease obligations of
subsidiary undertakings.

196
196

ITV plc Annual Report and Accounts 2018
ITV plc Annual Report and Accounts 2018

> Notes to the ITV plc Company Financial Statements

Note x
Capital and
other
commitments

Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies
within its Group, the Company considers these to be insurance arrangements, and accounts for them as such. In this
respect, the Company treats the guarantee contract as a contingent liability until such time as it becomes probable
that the Company will be required to make a payment under the guarantee.

There are no capital commitments at 31 December 2018 (2017: none).

Note xi
Related party
transactions

Keeping
it simple

The related parties identified by the Directors include solely key management,
as ITV plc is a holding company with no commercial activity.

To enable the users of the financial statements to form a view about the effects
of related party relationships on the Company, we disclose the Company’s
transactions with those during the year.

Transactions with key management personnel
Key management consists of ITV plc Executive Directors.

Key management personnel compensation, on an accounting basis, is as follows:

Short-term employee benefits
Share-based compensation

2018
£m

5
1
6

Total emoluments and gains on share options received by key management personnel in the year were:

Emoluments
Gains on exercise of share options
Gains on release of restricted share awards

2018
£m

4
–
1
5

2017
£m

4
–
4

2017
£m

2
1
2
5

197
197

Strategic ReportAdditional informationFinancial StatementsGovernance

Financial Statements

Notes to the Financial Statements
continued

Subsidiary undertakings and investments
Principal subsidiary undertakings

The principal subsidiary undertakings of the Company at 27 February 2019, all of which are wholly owned (directly or indirectly)
and incorporated and registered where stated.

Company Name

Country

Principal Business Activity

% Holding

Carlton Communications Limited (1)(a)(d)

ITV Broadcasting Limited (1)(a)

ITV Consumer Limited (1)(a)

ITV Digital Channels Limited (1)(a)

ITV Global Entertainment Limited (1)(a)

ITV Network Limited (1)(i)

ITV Rights Limited (1)(a)

ITV Services Limited (1)(a)(e)

ITV Studios Limited (1)(a)

ITV2 Limited (1)(a)

SDN Limited (1)(a)

Talpa Media B.V. (52)(a)

ITV America Inc. (63)(j)

ITV Global Entertainment, Inc. (63)(j)

Southbank Studios Inc. (63)(j)

Holding company

Broadcast of television programmes

Development of platforms, broadband, transactional and mobile services

Operation of digital television channels

Rights ownership and distribution of television programmes and ﬁlms

Scheduling and commissioning of television programmes

Rights ownership

Provision of services for other companies within the Group

Production of television programmes

Operation of digital television channels

Operation of Freeview Multiplex A

Netherlands

Production of television programmes

USA

Production of television programmes

Rights ownership and distribution of television programmes and ﬁlms

Production of television programmes

100

Subsidiary undertakings
Company Name

12 Yard (North) Productions Limited (1)(a)

12 Yard Limited (1)(a)

12 Yard Productions (Investments) Limited (1)(a)

12 Yard Productions Limited (1)(a)

A.C.E. (1988) Limited (1)(a)

Back Productions Limited (7)(a)

BGSS Limited (1)(a)

Big Talk Bliss Limited (1)(a)

Big Talk Cold Feet Limited (1)(a)

Big Talk Diana Limited (1)(a)

Big Talk Investments Limited (1)(a)

Big Talk JL Limited (1)(a)

Big Talk Living the Dream Limited (1)(a)

Big Talk Mum Limited (1)(a)

Big Talk NEWCO 4 Limited (1)(a)

Big Talk NEWCO 5 Limited (1)(a)

Big Talk Peacock Limited (1)(a)

Big Talk Pictures Limited (1)(a)

Big Talk Productions Limited (1)(a)

Big Talk Time Limited (1)(a)

Boom Cymru TV Ltd (5)(a)

Broad Street Films Limited (1)(a)

Campania Limited (1)(a)(k)

Carbon Media Limited (1)(a)

Carlton Active Limited (1)(a)

Carlton Cinema Limited (1)(a)

Carlton Content Holdings Limited (1)(a)

Carlton Entertainment (1)(a)

Carlton Film Distributors Limited (1)(a)

Carlton Films Limited (1)(a)

Carlton Finance Limited (1)(a)

Carlton Food Network Limited (1)(a)

Country

% Holding

Company Name

Country

% Holding

100

Carlton Productions Limited (1)(a)

Carlton Programmes Development Limited (1)(a)

Carlton Screen Advertising (Holdings) Limited (1)(a)

Carltonco 103 (1)(a)

Carltonco 99 Limited (1)(a)

Carltonco Eighty-One Limited (1)(a)(b)

Carltonco Fifty Limited (1)(a)(k)

Carltonco Forty Investments (1)(a)

Carltonco Forty-Five Limited (1)(a)

Carltonco Ninety-Six (1)(a)(f)

Carltonco Seventeen Limited (1)(a)

Castleﬁeld Properties Limited (1)(a)

Cat’s on the Roof Media Limited (1)(a)

Central Television Limited (1)(a)

Channel Television Holdings Limited (1)(a)

Cosgrove Hall Films Limited (1)(a)

COTR (NEWCO) Limited (1)(a)

Cynhyrchiadau Boomerang Cyf (2)(a)

Denipurna Limited (1)(a)

DTV Limited (1)(a)

Electronic Rentals Group (1)(a)

EQ Pictures Limited (1)(a)

GIL Limited (1)(a)

Gorilla TV Group Limited (5)(a)

Gorilla TV Limited (5)(a)

Granada AV Solutions Limited (1)(a)

Granada Film (1)(a)

Granada Film Productions Limited (1)(a)

Granada Group Limited (1)(a)

Granada Limited (1)(a)

Granada Media Limited (1)(a)(l)

Granada Productions Limited (1)(a)

100

198

ITV plc Annual Report and Accounts 2018

List of subsidiaries

Country

% Holding

Company Name

Country

% Holding

100

ITV T&B Limited (1)(a)

ITV Tennison Limited (1)(a)

ITV Text Santa Limited (1)(a)

ITV The Bay Limited (1)(a)

ITV The Man Limited (1)(a)

ITV Thunderbirds Limited (1)(a)

ITV Top Class Limited (1)(a)

ITV Trauma Limited (1)(a)

ITV Ventures Limited (1)(a)

ITV Vera Limited (1)(a)

ITV (Victor) Limited (1)(a)

ITV Wales & West Group Limited (1)(a)

ITV Wales & West Limited (1)(a)

ITV Wild Bill Limited (1)(a)

ITV3 Limited (1)(a)

ITV4 Limited (1)(a)

Juice Music UK Limited (1)(a)

London News Network (1)(a)

London Weekend Television Limited (1)(a)

LWT (Holdings) Limited (1)(a)(c)

LWT Productions Limited (1)(a)

Mammoth Screen (ABC) Limited (1)(a)

Mammoth Screen (AR) Limited (1)(a)

Mammoth Screen (ATTWN) Limited (1)(a)

Mammoth Screen (Bouquet) Limited (1)(a)

Mammoth Screen (BW) Limited (26)(a)

Mammoth Screen (City) Limited (1)(a)

Mammoth Screen (End) Ltd (1)(a)

Mammoth Screen (End2) Limited (1)(a)

Mammoth Screen (End5) Limited (1)(a)

Mammoth Screen (End6) Limited (1)(a)

Mammoth Screen (Falcon) Limited (1)(a)

Mammoth Screen (Fearless) Limited (1)(a)

Mammoth Screen Ltd (1)(a)

Mammoth Screen (Monroe) Limited (1)(a)

Mammoth Screen (NC) Limited (1)(a)

Mammoth Screen (NE) Limited (1)(a)

Mammoth Screen (NI) Limited (35)(a)

Mammoth Screen (NOK) Limited (1)(a)

Mammoth Screen (NW) Limited (1)(a)

Mammoth Screen (OBI) Limited (1)(a)

Mammoth Screen (PE) Limited (1)(a)

Mammoth Screen (Pol2) Limited (1)(a)

Mammoth Screen (Pol3) Limited (1)(a)

Mammoth Screen (Pol4) Limited (1)(a)

Mammoth Screen (Pol5) Limited (1)(a)

Mammoth Screen (Poldark) Limited (1)(a)

Mammoth Screen (QV) Limited (1)(a)

Mammoth Screen (RM) Limited (1)(a)

Mammoth Screen (Serpent) Limited (1)(a)

Mammoth Screen (SG) Limited (1)(a)

Mammoth Screen (VF) Ltd (1)(a)

Mammoth Screen (Vic3) Limited (1)(a)

Mammoth Screen (WFTP) Limited (1)(a)

Mammoth Screen (WH) Limited (1)(a)

Mammoth Screen (WOF) Limited (1)(a)

100

199

Company Name

Granada Properties (1)(a)

Granada Screen (2005) Limited (1)(a)

Granada Television International (1)(a)

Granada Television Limited (1)(a)

Granada Television Overseas Limited (1)(a)

Granada Television Productions Limited (1)(a)

Granada UK Rental and Retail Limited (1)(a)(e)

Indus Films Limited (2)(a)

Interactive Telephony Limited (1)(a)

International Television Enterprises London Limited (1)(a)(d) UK

ITC Distribution (1)(a)

ITC Entertainment Group Limited (1)(a)

ITC Entertainment Holdings Limited (1)(a)

ITV 112 Limited (9)(a)

ITV (HC) Limited* (1)(a)

ITV (Scotland) Limited (30)(a)

ITV Bancroft Limited (1)(a)

ITV Bancroft 2 Limited (1)(a)

ITV Barking Limited (1)(a)

ITV Border Limited (1)(a)

ITV Breakfast Broadcasting Limited (1)(a)

ITV Breakfast Limited (1)(a)

ITV Central Limited (1)(a)

ITV Channels Limited (1)(a)

ITV Confession Limited (1)(a)

ITV Dark Heart Limited (1)(a)

ITV DC Trustee Limited (1)(a)

ITV Digital Holdings Limited (1)(a)

ITV Enterprises Limited (1)(a)

ITV Global Content Limited (1)(a)

ITV HG Limited (1)(a)

ITV Holdings Limited (1)(a)

ITV Home Fires Limited (1)(a)

ITV International Channels (Asia) Limited (1)(a)

ITV Investments Limited* (1)(a)

ITV Leila Limited (1)(a)

ITV Little Boy Blue Limited (1)(a)

ITV Loch Ness Limited (1)(a)

ITV LTVC (Scotland) Limited (30)(a)

ITV Meridian Limited (1)(a)

ITV Moorside Limited (1)(a)

ITV Mr Selfridge Limited (1)(a)

ITV News Channel Limited (1)(a)(k)

ITV Pension Scheme Limited (1)(a)(b)

ITV Play Limited (1)(a)

ITV Productions Limited (1)(a)

ITV Properties (Developments) Limited (1)(a)

ITV Shetland Limited (1)(a)

ITV Sport Channel Limited (1)(a)

ITV Studios (Israel) Limited (1)(a)

ITV Studios NEWCO 13 Limited

ITV Studios NEWCO 14 Limited

ITV Studios NEWCO 15 Limited

ITV Studios NEWCO 16 Limited

ITV Studios NEWCO 17 Limited

ITV Supplementary Pension Scheme Limited (1)(a)

Strategic ReportGovernanceAdditional informationFinancial StatementsFinancial Statements

Notes to the Financial Statements
continued

Company Name

Country

% Holding

Company Name

Mammoth Screen (WOTW) Limited (1)(a)

Millbank Studios (1)(a)

Morning TV Limited (1)(a)

Moving Picture Company Films Limited (1)(a)

New Providence Productions Limited (1)(a)

Pickwick Packaging Limited (1)(a)

Sightseers Film Limited (1)(a)

So Television Developments Limited (1)(a)

So Television Limited (1)(a)

Television Music Limited (1)(a)

The CITV Channel Limited (1)(a)

The Garden Productions (Film) Limited (1)(a)

The Garden Productions Limited (1)(a)

The London Studios Limited (1)(a)

UTV Limited (34)(a)

UTV Pension Scheme Limited (100)(a)

VOD Member (ITVA) Limited (1)(a)

VOD Member (ITVB) Limited (1)(a)

World of Sport Wrestling Limited (1)(a)

Westcountry Television Limited (1)(a)

Yorkshire Television Limited (1)(a)

Yorkshire-Tyne Tees Productions Limited (1)(a)

Yorkshire-Tyne Tees Television Enterprises Limited (1)(a) UK

Zebedee Productions Limited (1)(a)

Artist Services Cable Pty Ltd (36)(a)

Artist Services Investments Pty Limited (36)(a)

Artist Services Productions Pty Ltd (36)(a)

Australia

Granada Media International (Australia) Pty Ltd (36)(a)

Australia

Granada Media Investments (Australia) Pty Ltd (36)(a)

Australia

Granada Productions Pty Ltd (36)(a)

ITV Global Entertainment Pty Limited (36)(a)

ITV Services Pty Ltd (36)(a)

ITV Studios Australia Pty Limited (36)(a)

Talpa Cabo Verde SA (a) (113)

Australia

Cape Verde

Totally Full Frontal Productions Pty Limited (36)(a)

Australia

100

Granada December Eight Limited (38)(a)

Granada December Nine Limited (38)(a)

ITV Holdings (Cayman) Limited (38)(a)

Talpa Chile SpA (94)(a)

ITV Studios Denmark Holdings Aps (104)(a)

United Productions ApS (42)(a)

ITV Studios Finland Oy (43)(a)

Beaubourg Audiovisuel (50)(a)

ITV Studios France Holdings SAS (95)(a)

ITV Studios France SAS (95)(a)

ITV Studios Talpa France

Phara Prod International (105)(a)

Tetra Media Studio SAS (105)(a)

ITV Studios Germany GmbH (46)(a)

ITV Studios Germany Holdings GmbH (46)(a)

Talpa Germany Fiction GmbH (96)(a)

Talpa Germany Gmbh & Co KG (47)(a)

Talpa Germany Verwaltungs GmbH (47)(a)

Elecrent Insurance Limited (31)(a)

Cayman Islands 100

Chile

Denmark

Finland

France

Germany

Guernsey

100

ITV Global Entertainment (Hong Kong) Limited (49)(a)

Hong Kong

Talpa China Limited (48)(a)

Hong Kong

200

ITV plc Annual Report and Accounts 2018

North America Studios Investments DAC (110)(a)

Channel Television Limited (32)(a)

ITV London Properties Limited (33)(a)

ITV Properties (Jersey) Limited (33)(a)

April, May en June BV (57)(a)

Global Music & Talent Agency B.V. (90)(a)

ITV (Europe) Holdings B.V.* (55)(a)

ITV Studios Netherlands B.V. (52)(a)

MasMedia B.V. (56)(a)

Stitchting ‘Derdengelden’ TV Producties (52)(a)

Talpa Content B.V. (52)(a)

Talpa Fictie B.V. (53)(a)

Talpa Germany Holding B.V. (90)(a)

Talpa Global B.V. (90)(a)

Talpa Non-Spot B.V. (52)(a)

Talpa Producties B.V. (52)(a)

Utopia B.V. (57)(a)

Vorst Media B.V. (99)(a)

Wardour Street Films B.V. (59)(a)

ITV Studios Norway AS (73)(a)

ITV Studios Nordic AB (74)(a)

ITV Studios Scandinavia Holdings AB (74)(a)

Talpa Asia Pte. Ltd. (93)(a)

ITV Studios Germany GmbH, Köln, Zweigniederlassung
Zürich (75)(m)

ALB1819 Productions Inc. (63)(j)

Anglia Television, Inc. (68)(j)

Cardinal Productions of Ohio, Inc. (63)(j)

Carlton Media Company, Inc. (63)(j)

Chad Alan Productions, LLC (63)(j)

Critical Productions Inc (63)(j)

DGK 5, LLC (63)(h)

Double Down Films, LLC (63)(h)

Electric Farm Entertainment Holdings Inc. (63)(j)

Film Productions Rentals, LLC (68)(h)

Fourth State Productions Inc (108) (j)

Gear Shop Inc. (63)(j)

Granada Cracker US Productions (68)(j)

Granada Television International, Inc. (63)(j)

Gritty Productions, LLC (63)(h)

GWC Enterprises Inc. (63)(j)

Hamdon Entertainment, Inc. (63)(j)

Highball Music Group, LLC (63)(h)

ITC Distribution, LLC (63)(j)

ITC Entertainment Group, Inc (63)(j)

ITC Films, LLC (63)(j)

ITC Productions, LLC (63)(j)

ITV Believe Holding, Inc. (63)(j)

ITV Blumhouse Holding Inc (63)(j)

ITV Diga Holding, Inc (63)(j)

ITV Entertainment Services Inc.(63)(j)

ITV Gritty Holding Inc. (63)(j)

ITV Gurney Holding Inc. (63)(j)

ITV HN Holding Inc. (63)(j)

ITV International Corporation (63)(j)

ITV Leftﬁeld Holding Inc. (63)(j)

Country

Ireland

Jersey

Netherlands

Norway

Sweden

Singapore

Switzerland

USA

% Holding

100

List of subsidiaries

Country

% Holding

Company Name

Country

% Holding

USA

100

Cloth Cat LBB Limited (5)(a)

Thud Media Limited (5) (a)

Malacara Limited (2)(a)

Box Clever Technology Limited (8)(a)

British Film-Makers Limited (1)(a)

Digital 3 and 4 Limited (16)(a)

Freesat (UK) Limited (18)(a)

Harlequin Agency Limited (5)(a)

Noho Film and Television Limited (28)(a)

Pink Rose Bud Limited (2)(a)

Possessed Limited (1)(a)

Standard Music Limited (29)(a)

Second Act Productions Limited (1)(a)

Gameface Productions Limited (1)(a)

Crook Productions Limited (1)(a)

Bait Studio Limited (5)(a)

Cirkus Limited (13)(a)

Boom Pictures Limited (1)(a)

Double Double Limited (1)(a)

ITV TFG Holdings Limited (1)(a)

TwoFour Broadcast Limited (3)(a)

Twofour Group Holdings Limited (1)(a)

TwoFour Group Limited (3)(a)

3sixtymedia Limited (1)(a)

OSF (Wales) Limited (5)(a)

Oxford Scientiﬁc Films Limited (5)(a)

WP Anne Limited (1)(a)

WP Bodyguard Limited (1)(a)

WP LOD5 Limited (1)(a)

WP (NEWCO 3) Limited (1)(a)

WP (NEWCO 4) Limited (1)(a)

World Productions Limited (1)(a)

World Productions (BTK) Limited (1)(a)

World Productions (Dark Angel) Limited (1)(a)

World Productions (Gone) Limited (1)(a)

World Productions (Northern Ireland) Limited (1)(a)

GC Films Pty Limited (36)(a)

Think Factory Productions Canada Ltd (77)(j)

LTP Productions Inc. (109)(h)

Country

% Holding

Apple Tree Productions ApS (101)(a)

Talpa Nordic ApS (41)(a)

15.15 Productions (59)(a)

Beaubourg Audiovisuel (50)(a)

Beaubourg Fiction (50)(a)

Beaubourg Stories (50)(a)

SCI MD 60 (105)(a)

Gedesel (107)(a)

Funny Corp (105)(a)

Macondo Productions Audiovisueles (105)(a)

Tangaro (105)(a)

Tetra Media Fiction (105)(a)

Shoot Again Productions (105)(a)

Phara Prod International (105)(a)

24.9

24.92

28.58

38.25

41.25

Australia

Canada

Denmark

France

Imago TV Film und Fernsehproduktion GmbH (45)(a)

Germany

The Lab Television 2013 Limited Partnership (78)(a)

Cattleya Srl (103)(a)

Israel

Italy

41.25

50.001

50.01

55.67

32.52

33.17

42.28

50.7

61.79

65.04

201

Company Name

ITV New Form Holding Inc. (63)(j)

ITV NewTV Holding Inc. (63)(j)

ITV Popco Holding Inc. (63)(j)

ITV Southpoint Holding Inc (63)(j)

ITV Studios America Inc. (63)(j)

ITV Studios, Inc. (68)(j)

ITV SVOD Holding Inc. (63)(j)

ITV Thinkfactory Holding Inc. (63)(j)

ITV Tomorrow Holding, Inc. (63)(j)

ITV US Holdings, Inc. (63)(j)

ITV Videology Inc. (63)(j)

JB Entertainment Holding Company, Inc. (63)(j)

Kirkstall Road Enterprises, Inc. (63)(j)

Krewed Inc (63)(j)

Leftﬁeld Entertainment, LLC (63)(h)

Leftﬁeld Pictures of NY Holdings, LLC (63)(j)

Leftﬁeld Pictures of NY, LLC (63)(j)

Leftﬁeld Ventures, LLC (63)(j)

LWT Enterprises Inc. (63)(j)

Marriage Boot Camp Reality Stars, LLC (63)(h)

Moving Pictures Services Inc. (63)(j)

Over the Pond Productions, Inc. (63)(j)

Post 460 Inc (63)(j)

Quay Street Enterprises, Inc. (63)(j)

Signal Post Facilities, LLC (63)(h)

Sirens Media, LLC (63)(h)

Solowe Productions Inc (63)(j)

Sound and Stage Studios, LLC (63)(h)

Southsquare Productions Inc. (63)(j)

Talpa Media USA, Inc. (68)(j)

Talpa North America Inc. (63)(j)

Thinkfactory Group, LLC (63)(h)

Thinkfactory Media, LLC (63)(h)

Trailer Park Productions, Inc (63)(j)

Upper Ground Enterprises, Inc. (63))(j)

Web Legal, LLC (63)(h)

Westside Film Partners, LLC (63)(h)

Joint ventures and Investments
Company Name

Absolutely Rights Limited (6)(f)

DTV Services Limited (17)(a)

That Mitchell and Webb Company Limited (7)(a)

Route 24 Limited (24)(a)

Monumental Television Limited (76)(a)

Clearcast Limited (14)(a)

Genial Productions Limited(a)(111)

Koska Limited (105)(a)

Cirkus International Limited (13)(a)

Thinkbox TV Limited (23)(a)

Age Before Beauty Limited (4)(a)

Gold Digger Productions Limited (4)(a)

Mainstreet Pictures Limited (4)(a)

Unforgotten 3 Limited (4)(a)

Independent Television News Limited (20)(a)

Cloth Cat Animation Limited (5)(a)

Strategic ReportGovernanceAdditional informationFinancial StatementsFinancial Statements

Notes to the Financial Statements
continued

Company Name

Radio Cattleya Srl (103)(a)

Talpa Italia Srl (79)(a)

Think Cattleya Srl (103)(a)

Pomper & Linders B.V. (98)(a)

Identity Mansion B.V. (92)(a)

Appletree Productions AB (74)(a)

ITV Studios Sweden AB (74)(a)

Maximum Media Production FZ-LLC (81)(a)

Talpa Arabia Holding Ltd (81)(a)

Talpa Middle East FZ-LLC (81)(a)

Country

% Holding

Italy

Netherlands

Sweden

UAE

Memberships, Partnerships and Companies Limited
by Guarantee

Company Name

Country

% Holding

ITV LTVC Scottish Limited Partnership (30)(h)

ITV Scottish Limited Partnership (30)(h)

Digital Production Partnership Limited (1)(i)

Producers Rights Agency Limited (25)(i)

DTT Multiplex Operators Limited (17)(i)

Digital UK Limited (17)(i)

100

25.5

61.5

Talpa Middle East Lebanon S.A.R.L (81)(a)

Lebanon

Electric Farm Entertainment LLC (63)(h)

Blumhouse TV Holdings LLC (63)(h)

Circle of Confusion Television Studios LLC (63)(h)

South Circle Productions LLC (63)(a)

BB Rights, LLC (63)(h)

Britbox, LLC (89)(h)

Jaffe/Braunstein Entertainment, LLC (67)(h)

High Noon Group, LLC (69)(h)

High Noon Productions, LLC (69)(h)

Feeding Time Productions, LLC (86)(h)

FT Productions, LLC (63)(h)

Gurney Productions, LLC (68)(h)

Hollywood Camera and Lighting, LLC (68)(h)

RICMA, LLC (68)(h)

Yukon RAFT Productions, LLC (88)(h)

East Olive Productions LLC (68)(h)

Twofour America, LLC (68)(h)

Loud Television, LLC (63)(h)

Next Steps Productions, LLC (63)(h)

Tomorrow Studios LLC (63)(h)

Outpost Entertainment, LLC (63)(h)

USA

202

ITV plc Annual Report and Accounts 2018

List of subsidiaries

(64)

(65)

(66)

Corporation Service Company, 2711 Centreville Road (Suite 400), Wilmington,
Newcastle DE 19808, USA
The Corporation Trust Company, 311 South Division Street,
Carston City NV 89703, USA
United Corporate Services, Inc., 874 Walker Road (Suite C), Dover,
Kent DE 19904, USA

(67) 321 Southern Beverly Drive, Suite M, Beverly Hills, CA 90212, USA
(68)

CT Corporation System, 818 West Seventh Street, Suite 930, Los Angeles,
CA 90017, USA

CT Corporation System, 28 Liberty Street, New York, NY 10005, USA

(69) The Hodson Law Firm, 1129, East 17th Avenue, Denver, CO 80014, USA
(70)
(71) 21 Holborn Viaduct, London, EC1A 2DY, United Kingdom
(72) 120 West 3rd Avenue #201, Vancouver, BC VSY 1EG, Canada
(73) Lars Hilles Gate 30, 5008, Bergan, Norway
(74) Soder Malarstrand 65, 11825, Stockholm, Sweden
(75) Scharenmoosstrasse 105, 8052, Zurich, Switzerland
(76) 9 St. Peters Street, London, N1 8JD, United Kingdom
(77)

Bucchil Goldstein LLP, 662 King Street West, Suite 304, Toronto ON
M5V 1M7, Canada

(78) 23 Habarzel Street, Tel Aviv, 69710, Israel
(79) Via Enrico, Tazzoli 6, Rome, Italy
(80)

Gonzales Carillo, SC Abogados, Montes Urales no 632, Piso 3,
Lomas de Chapaltpec, DF 11000, Mexico
(81) Building 2, Dubai Media City, Dubai, UAE
(82) 3035 South Parker Road, Suite 500, Denver, CO 80014, USA
(83)
(84) 1640 South Sepulveda Boulevard, Suite 300, Los Angeles, CA 90025, USA
(85)
(86)

CT Corporation System, 306 Main Street, Suite 512, Frankfort, KY 40601, USA
CT Corporation System, 3867 Plaza Tower Drive East Baton Rouge Parish,
Baton Rouge, LA 70816, USA

eResident Acent Inc. 12121 Wilshire Boulevard ~1201, Los Angeles, CA 90025, USA

(87) 24955 Paciﬁc Coast Highway, Suite C302, Malibu, CA 90265, USA
(88)

Incorp Services Inc, 101 E. 9th Avenue, Suite 12-B, Anchorage,
AK99501-3651, USA

(89) 1120 Avenue of Americas, 5th Floor, New York, NY10036, USA
(90) Family de Mollaan 1, 1217 ZB Hilversum, Netherlands
(91) 15000 Ventura Blvd, Suite 202, Sherman Oaks, CA 91403, USA
(92) Westersingel 108, 3015 LD Rotterdam, Netherlands
(93) 198A Telok Ayer Street, Singapore 068637, Singapore
(94)

calle Cerro El Plomo 5855, oﬁcina 1605, comuna de Las Condes,
Region Metropolitana, Chile

(95) 38 quai du Point du Jour, 92100 Boulogne-Billancourt, France
(96) Gethiner Strasse 5, 10785, Berlin, Germany
(97) August-Bebel Strasse 58, 15711, Konigs Wusterhausen, Germany
(98) Keizersgracht 149a, 1015CL, Amsterdam, Netherlands
(99) Hollandse Kade 34, 1391JM, Abcoude, Netherlands
(101) Aumento Advokatﬁrma, Ny Osteragde 3,4, 1101, Kobenhavn, Denmark
(103) Piazzale Valerio Massimo, 7, 00162, Roma, Italy
(104) DLA Piper Denmark, Radhuspladsen 4, 1550 Kobenhavn V, Denmark
(105) 60 rue Marcel Dassault, 92100, Boulogne-Billancourt, France
(106) Jessop House, Jessop Avenue, Cheltenham, Gloucestershire GL50 3WG,

United Kingdom

(107) 4 rue de Commaille, 75007, Paris, France
(108) CT Corporation System, 289 S. Culver Street, Lawrenceville, GA, 30046-4805, USA
(109) Orange Tower, Media City UK, Salford M50 2HF
(110) 4th Floor, 76 Lower Baggot Street, Dublin, Dublin 2, Republic of Ireland
(111) 39 Long Acre, London, WC2E 9LG, United Kingdom
(112)

Chandler Fogden Aldous Law Corporation, #201-120 West 3rd Ave. Vancouver,
BC V5Y 1E9 Canada
Avenida Cidade de Lisboa, Frente Sucupira, 2° andar, Cidade de Praia, Cape Verde

(113)

Interest key
Ordinary
(a)
(b) Deferred
(c)
(d)
(e)
(f)
(g)

Special deferred
Redeemable preference
Cumulative preference
Cumulative redeemable preference
Convertible preference

Guarantee
Common
preference
Part preference

(h) Membership/Partnership
(i)
(j)
(k)
(l)
(m) Branch
* Direct subsidiary

203

Address key
(1)
(2)
(3)
(4)
(5) Gloworks, Porth Teigr Way, Cardiff, Wales, CF10 4GA, United Kingdom
(6)

2 Waterhouse Square, 140 Holborn, London, EC1N 2AE, United Kingdom
218 Penarth Road, Cardiff, CF11 8NN, United Kingdom
Twofour Studios, Estover, Plymouth, Devon, PL6 7RG, United Kingdom
Kingsbourne House, 229–231 High Holborn, London, WC1V 7DA, United Kingdom

18 The Glasshouse Studios, Fryern Court Road, Fordingbridge, Hampshire,
SP6 1NG, United Kingdom
26 Nassau Street, London, W1W 7AQ, United Kingdom
5 New Street Square, London, EC4A 3TW, United Kingdom
20 Cathedral Road, Cardiff, CF11 9LJ, United Kingdom

(7)
(8)
(9)
(10) 9 Mansﬁeld Street, London, W1M 9FH, United Kingdom
(11) 20 Orange Street, 3rd Floor, London, WC2H 7EF, United Kingdom
(12) 21 Hatton Gardens (Room 9), London, EC1N 9BA, United Kingdom
(13) The Met Building, 22 Percy Street, London, W1T 2BU, United Kingdom
(14) 4 Roger Street, 2nd Floor, London, WC1X 2JX, United Kingdom
(15)

c/o Creative Skillset, 1-3 Grosvenor Place, Fifth floor (Suite 5B), London,
SW1X 7HJ, United Kingdom

(16) 124 Horseferry Road, London, SW1P 2TX, United Kingdom
(17) 27 Mortimer Street, London, W1T 3JF, United Kingdom
(18) 23-24 Newman Street, London, W1T 1PJ, United Kingdom
(19)

Unit 8 Acorn Production Centre, R/O 105 Blundell Street, London, N7 9BN,
United Kingdom

(20) 200 Gray’s Inn Road, London, WC1X 8HF, United Kingdom
(21)

Clay Barn, Ipsley Court, Berrington Close, Redditch, Worcestershire, B98 0TD,
United Kingdom
10 Lower Thames Street, (Third Floor), London, EC3R 6YT, United Kingdom

(22)
(23) Manning House, 22 Carlisle Place, London, SW1P 1JA, United Kingdom
(24)
(25)

York House, Empire Way, Wembley, Middlesex, HA9 0FQ, United Kingdom
Fitzrovia House, (3rd Floor), 153-157 Cleveland Street, London, W1T 6QW,
United Kingdom
Round Foundry Media Centre, Foundry Street, Leeds, LS11 5QP, United Kingdom

(26)
(27) c/o Archery Pictures, 3 Archery Close, London, W2 2BE, United Kingdom
(28) 59 Charlotte Street, (Third Floor), London, W1T 4PE, United Kingdom
(29)
(30)

Roundhouse, 212 Regent’s Park Road, London, NW1 8AW, United Kingdom
Quartermile One, 15 Lauriston Place, Edinburgh, Scotland, EH3 9EP,
United Kingdom
P.O. Box 308, St. Peter Port House, Union Street, St. Peter Port,
GY1 3TA, Guernsey
Le Capelain House, Castle Quay, St. Helier, JE2 3EH, Jersey

(32)
(33) Ogier House, The Esplanade, St. Helier, JE4 9WG, Jersey
(34) City Quays 2, 8th Floor, 2 Clarendon Road, Belfast, BT1 3YD, United Kingdom
5 Cromac Avenue, The Gasworks, Belfast, Northern Ireland, BT7 2JA,
(35)
United Kingdom
Level 5, Building 61, Fox Studios Australia, 38 Driver Avenue, Moore Park
NSW 2021, Australia
c/o Addisons, Level 12, 60 Carrington Street, Sydney NSW 2000, Australia
c/o Estera Trust (Caymen) Limited, Clifton House, 75 Fort Street, PO Box 1350,
Grand Cayman, KY1-1108

(37)
(38)

(36)

(31)

(41) Mosedalvej 14, 2500, Valby, Copenhagen, Denmark
(42) Finsensvej 6E, 2000, Frederiksberg, Denmark
(43) Elimaenkatu 9 A, Helsinki, 00510, Finland
(44) 23 rue Montorgueil, 75001, Paris, France
(45) Keplerstrasse 4-6, 10589, Berlin, Germany
(46) Agrippastraße, 87-93, 50676, Köln, Germany
(47) Jenfelder Allee 80, 22039, Hamburg, Germany
(48)
(49)

11/F, Unit B, Winbase Centre, 208 Queen’s Road Central, Sheung Wan, Hong Kong
Rooms 517–520, 5th Floor, Sun Hung Kai Centre, 30 Harbour Road, Wan Chai,
Hong Kong

(50) 5–7 rueSaint-Augustin, 75002, Paris, France
(51) Mayor Street Upper, Dublin , DUBLIN 1, Ireland
(52) Familie de Mollaan 1, 1217 ZB, Hilversum, Netherlands
(53) Haarlemmer Houttuinen, 21 1013 GL, Amsterdam, Netherlands
(54) Heemraadssingel 180, 3021 DL, Rotterdam, Netherlands
(55) Hoogoorddreef 15, 1101 BA, Amsterdam, Netherlands
(56) Noorderweg 8, 1221 AA, Hilversum, Netherlands
(57) Zevenend 45, 1251 RL, Laren, North Holland, Netherlands
(58) Voorstraat 61, 4797 BE, Willemstad, Netherlands
(59) 10 rue Maître Jacques, 92100 Boulogne, Billancourt, France
(60) 121 West Lexington Drive, Suite 401, Glendale CA 91203, USA
(61) 1633 Bayshore Highway, Suite 320, Burlingame CA 94010, USA
(62) 3867 Plaza Tower, 1st Floor, Baton Rouge, Los Angeles CA 70816, USA
(63)

The Corporation Trust Company, Corporate Trust Center, 1209 Orange Street,
Wilmington, Newcastle, DE 19801, USA

Strategic ReportGovernanceAdditional informationFinancial StatementsAdditional Information

Glossary

Advertiser funded platform – platforms
that include advertising as part of the user
experience e.g. itv.com, iOS, and Android

AVOD – ad-funded service where
subscribers have access to a wide range
of content whenever they request it
without charge

Broadcasters’ Audience Research
Board (BARB) – organisation owned by
broadcasters and advertisers providing
data on linear and online television
viewing statistics by UK households

Catch up viewing – non-live viewing
of recently broadcast television
programmes, either via a recording device
(often called a PVR or DTR) such as Sky+
or through a Video on Demand service
such as the ITV Hub, BBC iPlayer, All 4 or My5

Channel 3 licences – the 15 regional
licences and one national licence awarded
to transmit Channel 3 across the UK. All are
owned by ITV with the exception of two
of the regional licences which are owned
by STV

Contract Rights Renewal (CRR) – the
remedy agreed by Carlton and Granada
in 2003 as a pre-condition of the merger,
which governs the way in which ITV airtime
is sold by ITV to its advertising customers

Free-to-Air (FTA) television – viewing
of television through devices not requiring
a subscription such as the Freeview or
Freesat services

High Deﬁnition (HD) – channels or services
broadcast in substantially higher resolution
than standard, providing improved
picture quality

Intellectual Property – intangible property
that is the result of creativity

Inventory – Advertising inventory is the
number of advertisements, or amount of
advertising space, we have available to sell
to advertisers

Impact or Commercial Impact – one
Commercial Impact is deﬁned as one
viewer watching one 30-second
television commercial

ITV Family – the ITV family of channels
which includes ITV, ITV2, ITV3, ITV4, ITVBe,
ITV Encore, CITV, ITV Breakfast, CITV
Breakfast and all associated +1 and
HD equivalents.

Key demographics – ITV monitors viewing
performance across a group of audiences
that constitute the majority of our targeted
advertising revenue. In addition to
individuals and adults, we also consider
16-34 year-olds, social grades ABC1 and
house-persons with children

Linear television – television service where
the viewer has to watch a scheduled TV
programme at the particular time it’s
offered, and on the particular channel
it’s presented on

Long-form video requests – measured
across all platforms, based on data from
comScore Digital Analytix, Crocus, Virgin, BT,
iTunes, Netflix, Amazon Video and Sky and
include simulcast (in November 2017 we
moved from comScore Digital Analytix
to Crocus, an in-house analytics system).
A long-form video is a programme that
has been broadcast on television and is
available to watch online and on demand
in its entirety

Long-form online viewing (consumption)
– total number of hours ITV VOD content
is viewed on ad funded platforms (such as
on mobile, tablet and PC), based on data
from ComScore Digital Analytix and Crocus

Media sales commission – commission
earned by ITV plc on sales of airtime on
behalf of the non-consolidated licensees

Net Advertising Revenue (NAR) – the
amount of money received by a broadcaster
as payment for television spot advertising
net of any commission paid to agencies

Total Schedule Costs/Total Network
Programme Budget (NPB) – the budget
spent on programming broadcast on the
ITV family of channels, including spend on
regional programming and ITV Breakfast

Non-consolidated licensees – the
two regional channel 3 licences which ITV
does not own. These licences are owned
by STV and revenues received from these
licences for ITV programming content are
referred to as minority revenues

Ofcom – communications regulator in the
UK who regulate the TV, radio and video-
on-demand sectors, ﬁxed-line telecoms
(phones), mobiles and postal services,
plus the airwaves over which wireless
devices operate

204

ITV plc Annual Report and Accounts 2018

Over-the-top (OTT) – delivery
of audio, video, and other media over
the internet, this includes content
from providers such as Netflix, Amazon
and Hulu and also our own on demand
service, the ITV Hub

SDN – multiplex operator owned by ITV,
which operates one of the eight national
multiplex licences in the UK on Freeview

Share of Broadcast (SOB) – ITV’s share
of UK television advertising revenue (NAR),
a measure of market share

Share of Commercial Impacts (SOCI) –
the term used to deﬁne the share of
total UK television commercial impacts
delivered by one channel or group of
channels. This measure excludes viewing
of BBC channels as they do not generate
commercial impacts. Unless stated
otherwise, SOCI ﬁgures cited throughout
this report are based on BARB data and
are based on the universe of Adults (16+)

Share of Viewing (SOV) – the share of
the total viewing audience during a deﬁned
period gained by a programme or channel.
This measure includes viewing of BBC
channels. Unless stated otherwise, SOV
ﬁgures cited throughout this report are
based on BARB data and are based on
the universe of individuals

Simulcast – streaming live TV channels via
a broadcaster’s on demand service, at the
same time as broadcast on linear TV

Spot advertising – linear television
advertising occupying a short break during
or between programmes

Subscription Video on Demand (SVOD) –
a paid for service where subscribers have
access to a wide range of content whenever
they request it

Video on Demand (VOD) – the ability
to deliver video content to a customer’s
television set, computer or device when
the customer requests it

YouView – a joint venture (with the BBC,
Channel 4, Channel 5, BT, TalkTalk, and Arqiva)
to operate and promote a hybrid television
platform combining Freeview channels with
catch up and on demand services

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