ITV plc Annual Report and Accounts
for the year ended 31 December 2019
Accelerating ITV’s
digital transformation
We are More than TV.
We connect with millions of people
every day, make content they can’t
get enough of and reflect and shape
the world we live in…
…and we do all this through the
power of creativity.
Our strategic vision
We will be a digitally led media and
entertainment company that creates and brings
our brilliant content to audiences wherever,
whenever and however they choose.
Key financial
highlights
Adjusted EBITA3
Statutory EBITA
£729m
(-10%) (2018: £810m)
£693m
(-12%) (2018: £785m)
Group external revenue1
Adjusted EPS
Statutory EPS
£3,308m
(+3%) (2018: £3,211m)
13.9p
(-10%) (2018: 15.4p)
11.8p
(+1%) (2018: 11.7p)
Non-advertising revenue2
£2,117m
(+7%) (2018: £1,971m)
Dividend per share
(ordinary)
8.0p
(2018: 8.0p)
Leverage4
1.0x
(2018: 1.1x)
Notes
Alternative Performance Measures
We use both statutory and adjusted
measures in our Strategic Report. The
latter, in management’s view, reflects the
underlying performance of the business and
provides a more meaningful comparison of
how the business is managed and measured
day-to-day. A full reconciliation between
our reported and adjusted results is
provided in our Alternative Performance
Measures section on pages 52 and 53.
Our KPIs are set out on pages 26 to 29.
1.
2.
3.
4.
The Strategic Report also refers to total
revenue, which includes all ITV revenue, both
internal and external.
Non-advertising revenue includes all ITV
revenue (both internal and external), and
excludes total advertising revenue.
EBITA before exceptional items has been
adjusted to reflect the inclusion of production
tax credits (‘adjusted EBITA’).
Leverage is reported net debt to adjusted
EBITDA.
Corporate website
We maintain a corporate
website at www.itvplc.com
containing our financial
results and a wide range
of information of interest
to institutional and
private investors.
Strategic Report
Governance
Financial Statements
Additional Information
Contents
Strategic Report
2019 Highlights
ITV at a Glance
Chairman’s Statement
Chief Executive’s Report
Investor Proposition
Market Review
Our Strategy
Our Business Model
Key Performance Indicators
Operating and Performance Review
Social Purpose
Our People
Alternative Performance Measures
Finance Review
Task Force on Climate-related
Financial Disclosures (TCFD)
Section 172 Statement
Non-Financial Information Statement
Risks and Uncertainties
Governance
Chairman’s Governance Statement
Board of Directors
Management Board
Corporate Governance
Nominations Committee Report
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
2
4
6
8
15
16
22
24
26
30
44
50
52
54
62
63
64
66
80
82
84
86
99
102
116
144
149
150
157
222
236
Strategic Report
The Strategic Report explains in detail how we have
performed this year and sets out, amongst other
things, a fair review of the business, a balanced and
comprehensive analysis of our performance, the use
of key performance indicators to explain the progress
we have made, a description of the principal risks and
uncertainties facing the Company, and an indication
of potential future developments.
The Strategic Report is prepared in line with the relevant
provisions of the Companies Act 2006 and the Company
has had regard to the guidance issued by the Financial
Reporting Council. It is intended to provide shareholders
and other stakeholders with a better understanding of
the Company, of its position in the markets within which
it operates, and of its prospects. In setting out the
Company’s main risks and uncertainties, an indication of
potential future developments, and in other content, this
report and accounts contains statements that are based
on knowledge and information available at the date of
preparation of the Strategic Report, and what are believed
to be reasonable judgements, and therefore cannot be
considered as indications of likelihood or certainty.
A wide range of factors may cause the actual outcomes
and results to differ materially from those contained
within, or implied by, the various forward-looking
statements in this Annual Report and Accounts. None of
these statements should be construed as a profit forecast.
1
Strategic Report
ITV delivered a good performance in
2019, with the full year results ahead
of expectations, and made significant
progress in executing our strategy
to build a digitally led media and
entertainment company.
+13%
increase in Online viewing
98%
of all commercial audiences
over 5 million were on ITV
(2018: 98%)
>1.0m
subscribers of BritBox US
Bradley Walsh & Son: Breaking Dad was
ITV’s most watched pre-watershed
documentary in more than a decade, with
an average audience of 6.1 million.
The 2019 Rugby World Cup final was the
most watched sport’s programme of the year
with an average match audience of 11.8 million.
+9%
increase in ITV Studios total revenue
2019
Highlights
The Chase had its best ever series in the
UK in 2019. It averaged 3.4 million viewers,
up 4% on 2018.
2
ITV plc Annual Report and Accounts 2019
2019 Highlights
58%
of ITV Studios total revenue
generated outside the UK
I’m A Celebrity...Get Me Out Of Here!
was the most watched entertainment
series of the year in the UK, including
for 16–34s, with an average of
10.6 million viewers.
Coronation Street remains the UK’s
most watched soap, with an average of
6.8 million viewers across all devices. It
celebrates its 60th anniversary in 2020
making it the world’s longest running soap.
95%
increase in original hours of content
supplied to over-the-top (OTT)
providers by ITV Studios
Manhunt was the most watched new
drama on any channel in 2019, and ITV’s
most watched new drama in six years.
It averaged nine million viewers.
Good Morning Britain had its best year
ever, averaging 0.8 million viewers a day,
up 3% on 2018.
3
Strategic ReportGovernanceFinancial StatementsAdditional Information ITV at a Glance
ITV, as an integrated producer broadcaster (IPB), creates,
owns and distributes high-quality content on multiple
platforms globally. We also continue to diversify our
business through the opportunities presented from
consumers’ willingness to pay for great content and
to engage with ITV as a trusted brand.
ITV Studios
We have built significant scale in key
creative markets around the world,
creating and producing programmes
and formats that return and travel,
namely drama, entertainment
and factual.
ITV Studios creates and produces content in the
UK and internationally across 13 countries, while
our global formats and distribution business
sells, commercialises and distributes formats
and finished programmes worldwide.
46,000+ hrs
of content in our catalogue
50+ labels
in 13 different countries
supplying over 200 channels
or platforms
62 ITV
formats
sold in 2019
(2018: 57 ITV formats)
ITV Studios UK
ITV Studios UK is the largest
commercial producer in the UK.
We produce programming
across a diverse range of genres,
such as drama, entertainment
and factual entertainment for
ITV’s own channels, as well
as for other UK broadcasters
such as the BBC, Channel 4,
Channel 5 and Sky.
ITV Studios US
ITV Studios US is underpinned by
the production of unscripted
content (through ITV America).
However, we have been growing
our presence in the scripted
content market (through ITV
Studios America), using our
strong cash flows to produce
high-profile dramas with the
potential to travel and build
international appeal. We sell
to over 30 broadcasters and
platform owners across the US.
ITV Studios
International
ITV Studios also operates in the
Netherlands, Germany, France,
Italy, Australia, the Nordics,
and the Middle East, producing
entertainment, unscripted
and scripted content, for
local broadcasters and OTT
platforms. This is either locally
created content, or are formats
that have been created
elsewhere by ITV.
Global formats
and distribution
Global formats focuses on
the sale and exploitation of
unscripted formats around the
world. The distribution business
focuses on the international
distribution of drama, third-
party content and the finished
tape versions of all other ITV
Studios shows to broadcasters
and platforms internationally.
Within this business, we also
finance productions for ITV and
third parties to acquire global
distribution rights.
4
ITV plc Annual Report and Accounts 2019
Snowpiercer is
a scripted production
by Tomorrow
Studios. It will air on
TNT in the US, and
Netflix globally.
x The Voice
remains a successful
global format.
The Voice is produced
in 70 countries, with
The Voice Kids in
40 countries.
Strategic Report ITV at a Glance
ITV total revenue
ITV adjusted EBITA
ITV Studios
£1,822m
(2018: £1,670m)
ITV Studios
£267m
(2018: £255m)
Broadcast
£2,063m
(2018: £2,096m)
Broadcast
£462m
(2018: £555m)
Broadcast
We operate the largest family of
free-to-air commercial channels in the
UK, and deliver our content through
linear television broadcasting and on
demand via the ITV Hub.
Our investment in programming is primarily
funded by television and online advertising
revenue. We sell all of our key demographics
across 13 regional licences, with more targeted
advertising on the ITV Hub.
23.2%
share of viewing for the
ITV Family in 2019
(2018: 23.2%)
6%
increase in 16-34s share of
viewing on ITV2 to 6.4%
(2018: 6.0%)
31m
registered user accounts on
the ITV Hub, up 12%
(2018: 28m)
Our family of channels consists
of ITV main channel, which is the
largest commercial channel in
the UK, ITV2 and ITV3 – the two
largest digital channels in the
UK, ITV4, ITVBe, and CITV.
In addition to linear broadcast,
ITV delivers its content across
multiple platforms. This is either
through our advertiser funded
OTT service, the ITV Hub, pay
providers such as Virgin and Sky,
and through direct content deals
with services such as Amazon
and Apple.
Direct to Consumer
ITV generates revenue directly
from consumers through
subscription video on demand
(SVOD) services, competitions,
live events, gaming and
merchandise.
ITV has several SVOD services
including BritBox UK, ITV Hub+,
and BritBox US and Canada.
BritBox UK has the largest
collection of British box sets and
is controlled by ITV, with the BBC
as a strategic and equity partner,
Channel 4 and Channel 5 as
content partners, and EE and
BT as distribution partners.
BritBox US and Canada is a joint
venture with the BBC and
provides local audiences with
an unrivalled collection of
British box sets and original
series all in one place.
The ITV Hub+ is an ad-free
version of the ITV Hub, which
also allows download and EU
portability currently.
ITV also holds an equity stake in
a British content SVOD service,
Cirkus, in the Nordics, Germany,
Austria and Switzerland.
£84m
Direct to Consumer revenue
in 2019
(2018: £81m)
5
Strategic ReportGovernanceFinancial StatementsAdditional Information Chairman’s Statement
2019 has been a year of
significant progress for ITV as
we build a future-facing, truly
digital media and entertainment
company. I’d like to thank all my
colleagues for working hard
during the year to turn digital
threats into opportunities.
We look forward to 2020.
Sir Peter Bazalgette
Chairman
6
ITV plc Annual Report and Accounts 2019
Delivering compelling programmes in the
UK and internationally is at the heart of
everything ITV does. We tell great stories,
many with a clear public purpose. We fund
this by selling our programmes and by
maintaining a trusted place in which brands
are happy to advertise.
Beyond our important mass audience
channels, we increasingly engage with
audiences and advertisers via our online
services and also with broadcasters and online
platforms through our global production
business. This is developing rapidly through
the execution of our strategy. We’re
diversifying the business and becoming a truly
digital media and entertainment company.
All our stakeholders – our viewers,
customers and partners, citizens, legislators
and regulators, programme participants,
colleagues and shareholders and debt
investors – are very important to us.
Our Board discussions consider each of
them – how we engage with them, how
we respond to their views and concerns and
how we can better deliver for them. You can
read further information on how they and
their interests have been considered in
Board discussions on pages 89 to 92.
But here’s how we think about them:
Viewers, customers and partners
Our growing Studios business works closely
with broadcasters and, increasingly, platform
owners in the UK and internationally.
It creates and produces the quality content
that drives engagement and audiences.
We remain the largest commercial
broadcaster in the UK. We reach millions
of people every day with our news,
entertainment and drama, produced at
our centres across the Nations and Regions.
We’re thus an important part of the
national conversation.
All our stakeholders are
very important to us.
Our Board discussions
consider each of them –
how we engage with
them, how we respond to
their views and concerns
and how we can better
deliver for them.
Strategic Report Chairman’s Statement
In 2019 we maintained our share of linear TV
viewing in the UK, the second highest in a
decade, and we continue to deliver significant
growth in online viewing as viewers choose
to watch our content in different ways.
We’re increasingly building one-to-one
relationships with consumers through our
Direct to Consumer business – whether
it’s the ITV Hub+, BritBox US or the recent
launch of BritBox in the UK. And, through
improved data insights and research, we’ll
better understand what and how viewers
want to watch.
We’re establishing stronger creative and
commercial partnerships with brands
in the UK around big entertainment
programmes, sports tournaments and
our drama season. These partnerships fund
our investment in compelling content that
entertains viewers and delivers effective,
safe and innovative marketing opportunities
for our advertisers.
Maintaining strong and mutually beneficial
relationships with our key partners and
suppliers is very important to delivering
our strategy and upholding our values.
ITV has well established supplier governance
processes in place with our key relationships
to ensure ITV’s standards are maintained
throughout the value chain, for example
with regards to modern slavery.
Citizens
In 2019 we launched our new Social Purpose
strategy which aims to use the power of
TV and ITV’s enviable reach to help shape
culture for good.
This year we started our campaign for
healthier eating – Eat Them to Defeat
Them – which has encouraged an extra
18 million servings of vegetables to be
bought. We’re promoting this again in
2020, with Channel 4 and Sky joining the
campaign. We’ve also launched our mental
health campaign, Britain Get Talking, which
has led to 2.8 million people taking action
to support the mental health of family
and friends. The ITV2 Blood Squad blood
donation campaign was even bigger and
better this year. And we launched The
Rundown, a digital news service on
Instagram and Snapchat, aimed at 14 to
17 year olds.
Programme participants
The health and safety of everyone who
takes part in our programmes is our highest
priority. In 2019 ITV introduced refreshed
and enhanced processes and guidance for
producers, to manage and support the
mental health and wellbeing of programme
participants before, during and after
production. These processes are constantly
under review with the advice of third-party
specialists. We’ll ensure they remain
appropriate and relevant. Key elements are
enshrined in the producer guidelines for all
our programme suppliers outlining what
we deem to be best practice. They include
reference to the proposed new Ofcom rules
for the protection of adult participants.
ITV’s Duty of Care Charter details our
commitment to the care we take for the
physical and mental health and wellbeing
of amongst others, those participating
in our productions. It contains a
comprehensive operational risk process
through which we identify risks to both
physical and mental health and put in place
measures to manage them appropriately.
ITV has also announced the creation of
a Mental Health Advisory Group. This will
provide guidance and support for all aspects
of ITV’s approach to mental health and
wellbeing among its people, production
teams and participants.
In 2019 ITV took the decision to end the
production of The Jeremy Kyle Show.
Legislators and regulators
As a public service broadcaster and a quoted
company we have public service obligations
and legal and regulatory obligations: paying
the appropriate tax; producing popular
‘Soaps’ that unpack social issues; and
providing impartial regional, national and
international news. Late 2019 saw a general
election in which our news services were
once again to the fore – democracy cannot
function without a citizenry informed by
trusted and impartial sources of information.
We work closely with regulators, politicians
and policy makers to ensure that we fulfil
our obligations. We also engage with them
on new initiatives, for example this year with
Ofcom on our strategic partnership with the
BBC to launch BritBox UK.
Sustainability is becoming an increasingly
important item on our Board’s agenda.
And we won’t just focus on financial metrics.
ITV considers wider sustainable growth as
critical, including reducing carbon emissions,
aiming for zero waste and ensuring
responsible resourcing. ITV is now carbon
neutral and has no single use plastics in its
major sites. We have published ambitious
environmental targets in these areas.
Colleagues
Our performance in 2019 is a reflection
of the hard work and commitment of our
6,000 colleagues globally. Attracting and
retaining diverse creative and commercial
talent is key to our success. We run an
Ambassador network across all our offices
with which our Senior Independent Director,
Edward Bonham Carter, liaises closely, as
our designated Board link to our workforce.
During the year we ran a programme of
19 roadshows in the UK and internationally
to give our colleagues the opportunity
to hear directly from and question our
Chief Executive (CEO), Carolyn McCall,
and other members of the management
team. Feedback from these roadshows is
informing the Board’s meeting agenda for
2020 and beyond. We have also undertaken
a full employee engagement survey to give
everyone the opportunity to provide their
feedback anonymously.
We run five active networks for our
colleagues, including Able – our network for
disability – which we launched in 2019. We
published ambitious diversity targets this
year which we are striving hard to achieve.
That work goes on to ensure our Board
and our Company reflect true diversity.
Shareholders and debt investors
ITV is focusing on driving shareholder
value through delivering its strategy.
In 2019, ITV again delivered a solid operating
performance in an uncertain economic
and political environment. Total external
revenue grew by 3%. Earnings per share
decreased by 10%. This was due to the fall
in total advertising and the investments
we are making to deliver ITV’s digital
transformation. This will help build a robust
and growing business in the future. The Board
is proposing a full year dividend of 8.0p for
2019 and plans to pay another 8.0p dividend
for 2020. The Board intends to announce
a medium term dividend policy with the
full year 2020 results, once greater clarity
has been established on the economic
environment and outlook in the UK following
its departure from the European Union.
ITV engages with its shareholders on a regular
basis, through one-to-one meetings,
conferences and the Annual General Meeting
(AGM). In 2019 this included a ‘Meet the ITV
Management’ event giving investors and
analysts an opportunity to meet the wider
senior team. ITV also engaged with its debt
investors in the UK and Continental Europe as
part of its successful bond issue. The Board is
also available to meet shareholders and this
year members of the Board have engaged to
discuss general investor questions and consult
on the audit tender and Remuneration Policy.
Shareholder feedback is frequently discussed
and informs Board decisions.
2019 has been a year of significant progress
for ITV as we build a future-facing, truly
digital media and entertainment company.
I’d like to thank all my colleagues for working
hard during the year to turn digital threats
into opportunities. We look forward to 2020.
Sir Peter Bazalgette
Chairman
7
Strategic ReportGovernanceFinancial StatementsAdditional Information Chief Executive’s Report
Carolyn McCall
Chief Executive
8
ITV plc Annual Report and Accounts 2019
ITV delivered a good performance
in 2019 in spite of the uncertain
economic and political
environment. Full year results
were ahead of expectations and
we made good progress in
executing our strategy to build
a digitally led media and
entertainment company.
We are growing our stable margin
Studios business, transforming
Broadcast and expanding our
Direct to Consumer business.
The investments in our strategic
priorities are delivering. We are
strengthening our creative talent
in ITV Studios; accelerating
the growth of ITV Hub; rolling
out Planet V, our addressable
advertising platform;
strengthening our data and tech
capabilities; and we successfully
launched BritBox UK.
We are very focused on building
a stronger, more diversified and
structurally sound business. The
media market is changing rapidly
and our strategy continues to
evolve to position ITV to take
advantage of the opportunities
in advertising video on demand
(AVOD) and streaming, while
mitigating the effect of
competition for viewing.
We are very focused
on building a stronger,
more diversified
and structurally
sound business.
Strategic Report Chief Executive’s Report
2019 Financial highlights
Total ITV revenue increased by 3% driven
by 7% growth in total non-advertising
revenue as we continue to diversify the
business. ITV Studios total revenue was
up 9% in 2019 with growth in all areas,
particularly ITV Studios US and ITV Studios
International. Direct to Consumer
revenues grew 4% driven by ITV Hub+.
Broadcast revenues declined by 2%,
with continued strong growth in online
advertising, up 21%, and growth in
sponsorship and creative partnerships,
more than offset by the decline in spot
advertising revenues.
Adjusted EBITA and adjusted EPS declined
by 10%. This was a result of the 1.5% decline
in total advertising revenue and the
strategic investments we are making to
drive future growth in the schedule; the
essential investments; and the launch of
BritBox UK. ITV Studios adjusted EBITA was
up 5% year-on-year at £267 million with an
adjusted EBITA margin stable at 15% – firmly
within our target range. Broadcast adjusted
EBITA was down 17% at £462 million.
Statutory profit before tax fell by 7% to
£530 million (2018: £567 million) which
includes a £62 million gain on the sale of the
London Television Centre (LTVC). Statutory
EPS increased by 1% to 11.8p (2018: 11.7p),
with the decline in statutory profit before
tax offset by the decline in the reported
effective tax rate, partly as a result of the
sale of LTVC.
We were highly cash generative in 2019,
with profit to cash conversion at 87% and
our reported net debt to adjusted EBITDA
leverage was 1.0x. We expect to continue
to deliver good profit to cash conversion in
2020, and there are a number of one-off
cash outflows which can be seen in further
detail in the Finance Review on page 54.
Reflecting ITV’s continued strong operational
performance, the Board has proposed a full
year dividend of 8.0p for 2019.
ITV purpose
We are focused on all our stakeholders:
our viewers, our customers, partners,
programme participants, regulators,
government, shareholders and debt
investors. Our own people are extremely
important to us and we have a range
of ways to ensure we listen to them
and respond.
Our purpose is to be More than TV. We
connect millions of people every day, make
content they can’t get enough of and reflect
and shape the world we live in… and we do
all this through the power of creativity.
As a commercial public service broadcaster
ITV is a major investor in regional creative
economies. We create shared national
moments and make programmes for people
across the whole of the UK, available for free
to everyone. We contribute to the health of
democracy, providing trusted, impartial and
high-quality local and national news.
It is our purpose and our culture which defines
our organisation and everything we do.
Our strategic vision
Viewing habits, technological innovation
and the competitive landscape are all
developing. While television continues to
reach 90% of the population each week,
viewers and particularly younger viewers,
are watching less live linear television.
We continue to see strong growth in online
viewing and particularly SVOD, which is
now a significant feature of the market.
Advertising is also changing with the rapid
growth in online advertising and the market
is becoming increasingly competitive.
While ITV has a strong market position we
recognise that we need to develop at pace to
deliver future success and to mitigate the risks
of the changing market. Our strategic vision is
to be a digitally led media and entertainment
company that creates and brings our brilliant
content to audiences wherever, whenever and
however they choose.
We have evolved our strategy to deliver
this with three clear priorities:
• Continue to grow UK and Global
Production
• Transform our Broadcast business, and
• Expand our Direct to Consumer activities
At the centre of this is the production and
commissioning of great content, which we
are able to monetise through our multiple
touchpoints in three different business
models: advertising through linear, online
and creative partnerhips around our brands;
selling our content to broadcasters and
platform owners; and directly to consumers
through SVOD, merchandise, gaming, and
events around our brands.
Being an integrated producer broadcaster
gives us a competitive advantage. Owning
and managing our own content enables
us to drive maximum value from our
intellectual property (IP). We also have
a significant promotional engine and
have the ability to cross promote across
our business models.
Johnson v Corbyn: The ITV
Debate was the most watched
TV debate of December’s General
Election with an average audience
of 7.3 million viewers.
Noughts and Crosses is
a scripted title produced by
Mammoth Screen (part of
ITV Studios UK) for the BBC,
and is due for broadcast in 2020.
9
Strategic ReportGovernanceFinancial StatementsAdditional Information Chief Executive’s Report continued
A Confession was ITV Studios biggest new
drama on ITV main channel, launching with
9.5 million viewers.
Gomorrah is an Italian crime drama,
produced by Cattleya (part of ITV Studios
International) for Sky. It is in its fourth season.
Hell’s Kitchen US remains a huge
international format. Two seasons were
produced by ITV America in 2019.
Strategic progress in 2019
While there is a great deal to do to deliver
our vision, we are making good progress
and the benefits of the investments are
already evident.
Growing UK and Global Production
ITV Studios is now a scaled international
business, delivering good growth at a stable
margin and we are well on track to deliver
our target of a 5% average compound
annual growth rate (CAGR) in total revenue
at a 14% to 16% margin. In line with our
strategy, we are growing scripted revenues
strongly, up 37%, partly driven by the
significant increase in the original hours
commissioned by OTT platforms which
was up 95%. ITV Studios has a large portfolio
of successful formats that return and travel
and increasingly we are producing them
locally, therefore capturing the full margin.
In 2019 we sold 62 formats with 14 sold
in three or more countries. We continue
to attract new creative talent and in 2019
two highly regarded producers, Patrick
Spence and Dominic Treadwell-Collins,
joined ITV. Reflecting growth in key global
production markets, 58% of Studios
revenue was generated outside the UK,
up from 56% in 2018, and ITV Studios
delivered 37% of ITV plc’s adjusted EBITA.
We are also on track to deliver 10,000
production hours by 2021 but in 2019 this
was impacted by the discontinuation of
The Jeremy Kyle Show and a number of
other high volume and lower value daytime
programmes not returning in the UK
and internationally.
Transforming Broadcast
In 2019 we repositioned the ITV brand to drive
more light viewers and increase reach and
we have seen an increase in share of viewing
(SOV) for light viewers. As the media market
is changing, we are now competing with
SVOD platforms as well. Our brand
consideration across all adults was down
6% as the streamers are reaching real scale
and investing heavily in marketing. The
cancellation of The Jeremy Kyle Show
has affected this score. However, ITV
outperformed our closest public service
broadcasters (PSBs) with its decline in brand
consideration lower than the other PSBs.
Critical to our strategy is reaching light
viewers and brand consideration for light
viewers only declined by one percentage
point. Given that light viewers is the measure
we watch most closely, going forward we
believe it is more appropriate to measure
our light viewer brand consideration.
We have delivered a good viewing
performance on-screen and online. We
maintained ITV Family SOV at the second
highest level for a decade. We continued
to deliver mass audiences, with 98% of all
commercial audiences over five million as
well as key demographics, with 16–34’s SOV
on ITV2 up 6%. Total viewing, which combines
live viewing of ITV channels, recorded and
video on demand (VOD) was down 4%,
impacted by the tough comparatives of
the Football World Cup last year. Over two
years, total viewing was down 2%.
Online viewing was strong, up 13%, with
a 6% increase in dwell time and 28%
increase in monthly active users. We are
very pleased to already have 31 million
registered users on the ITV Hub, ahead
of our target of 30 million by 2021.
This performance has been driven by
our great content and improved user
experience, supported and enhanced by
a process of continued development and
investment around the user interface
and our underlying digital platform.
We continue to invest in our data
capabilities from a technical, value
realisation, and compliance perspective.
A better understanding of our data
processing activities across the business
enables us to manage privacy risk, whilst
consolidating our data across the business.
This enables us to drive viewing – scaling
our recommendation model and optimising
our marketing spend. It allows us to
drive consumer revenues with our
SVOD subscriber acquisition and churn
models and grow our addressable
advertising opportunities.
We have built and successfully started to
run live programmatic addressable
advertising campaigns delivered through
Planet V, and this will ramp up in March.
We saw very strong growth in online
revenue in 2019 but this was more than
offset by the decline in spot advertising
revenues impacted by the political and
economic uncertainty of 2019. ITV’s
proposition is strong giving immediate
reach and scale to advertisers in a safe,
trusted and transparent environment
and the ITV Hub offers more targeted
demographics and addressable advertising.
In 2019 we also strengthened our
client strategy team and our creative
partnerships to drive our sponsorship
and partnerships revenues.
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ITV plc Annual Report and Accounts 2019
Strategic Report Chief Executive’s Report
Priorities for 2020
We are very focused on the execution of our
strategy and have specific priorities for 2020.
Growing UK and Global Production
We have three key priorities for ITV Studios.
Firstly, integrating Talpa into ITV Studios
and reorganising the distribution and
commercial division into our three centres
of excellence – The Creative Network, Global
Distribution and Global Entertainment.
This will enable ITV to create more hits, build
international brands and formats more
effectively and maximise the value of them.
Secondly, to further strengthen creative
talent, in January we announced that Lisa
Perrin will join ITV as Managing Director
of ITV Studios International, bringing both
creative and commercial expertise.
Thirdly, we are continuing to build and
monetise a strong pipeline of programmes
internationally; growing scripted; creating
global formats; creating programmes
for OTT platforms; and sustaining our
core content for ITV Broadcast and
Direct to Consumer.
Transforming Broadcast
Key to the strategy is delivering digital
transformation in Broadcast using data, tech
and analytics effectively (see further detail
below). We will also accelerate the growth
of the ITV Hub to increase viewing and
monetisable monthly active users (MAUs).
We will do this by strengthening our content
offering, further improving the user
experience with increased personalisation,
better navigation and features, and
enhancing its prominence. We will further
roll out and embed Planet V and key to this is
a strong VOD offering. We will continue to
work more closely with advertisers through
our strategic and creative partnership teams
to further drive our advertising revenues.
A strong schedule which drives the audiences
needed by advertisers and the engagement of
our viewers is essential. We are focused on
driving mass simultaneous audiences, light
viewers, live audiences, digital and young
viewers. In 2020 we will increase our schedule
cost investment to around £1.11 billion.
Our marketing plans will be focused on
driving light viewers and ITV Hub viewers,
with programme prioritisation and equal
billing for the ITV Hub, and smarter use of
our data assets.
Expanding Direct to Consumer
We will grow our subscription business
through BritBox UK, BritBox US and the
ITV Hub+.
Our priorities for BritBox UK are growing
distribution, strengthening the content
offering and continuing to deliver effective
11
Being an integrated producer broadcaster
gives us a competitive advantage. Owning and
managing our own content enables us to drive
maximum value from our IP.
Our significant progress during the year has
been enabled and supported by our tech
investment and delivery. We have evolved
the digital video platform which supports
the ITV Hub, ITV Hub+ and BritBox; we have
designed and built Planet V with our tech
partner, Amobee; and evolved the audience
data platform.
Expanding Direct to Consumer (DTC)
In November we successfully launched BritBox
UK, the largest collection of British box sets all
in one place, with the BBC as a strategic and
equity partner, C4 and C5 as content partners
and EE and BT as distribution partners. Early
results show a good performance in line with
our business plan, with brand awareness high
following a successful advertising and brand
launch. We are seeing strong subscriber appeal
with the majority of customers converting to
become paying subscribers after the free trial
period. BritBox UK is now on ten platforms
making it available on 15 million UK TV screens.
Our other SVOD platforms are performing
well – ITV Hub+ has over 400,000
subscribers which is up over 50% year-on-
year, and BritBox US has over one million
subscribers and is profitable.
We are also driving competition revenues
through our competition portal ITV Win, and
we are building customer relationships and
engagement around our key brands, including
merchandise, live events and gaming.
Delivering our strategic vision
To deliver our strategic vision we have very
clear priorities across the business.
Growing UK and Global Production
Demand for great content has never been
stronger – so this continues to be a real
growth opportunity. We will continue to
grow our scripted business, where we are
seeing strong demand, and increasingly
from the OTT platforms; we will globalise
and maximise the value of our key format
and brands; and we will focus on organic
growth with mergers and acquisitions (M&A)
when appropriate.
Transforming Broadcast
ITV remains the only place to get mass
simultaneous reach at scale and we
continue to focus on light viewers and
digital viewing. We will accelerate ITV Hub
growth; grow addressable VOD; roll out
Planet V; and build more strategic and
creative partnerships with advertisers.
Expanding Direct to Consumer
As we build our relationships directly with
consumers we will grow SVOD subscribers
and optimise retention on BritBox UK;
grow ITV Hub+; continue to develop and
expand BritBox US and roll out BritBox
internationally. We will also drive direct to
consumer revenues through ITV Win and
focused merchandise and events.
Strategic ReportGovernanceFinancial StatementsAdditional Information Chief Executive’s Report continued
v
Riding the Dream was a documentary
on ITV, following Khadijah Mellah, the first
female British Muslim jockey to win a
UK race.
The Graham Norton Show is produced by
So Television (part of ITV Studios UK) for the
BBC and has been broadcast for 12 years.
Social Purpose strategy –
shaping culture for good
With the massive reach of our platforms, our
much-loved shows and creative talent, we have
a unique ability to drive meaningful change.
In 2019, ITV launched its new Social Purpose
strategy, setting ambitious targets to shape
culture for good. We have identified four priority
areas in which we are committed to making
a difference, both on and off-screen.
Better Health
Diversity
& Inclusion
Environment
Giving Back
Inspiring change in how
we look after our mental
and physical health.
Fostering creativity
by championing diversity
and encouraging
inclusion.
Creating programmes
with the biggest impact
on the audience and the
smallest impact on
the planet.
Giving back to our local
and international
communities through
causes we care about.
Our Goal:
Our Goal:
Our Goal:
Our Goal:
Encourage 10 million
people to take action to
improve their mental
or physical health
by 2023.
Improve gender,
BAME, disability and LBGT+
representation on and
off screen by 2022.
Reduce our carbon
emissions and waste,
and source responsibly.
Raise over £6 million
a year for Soccer Aid,
increase staff
volunteering and lend
our support to causes.
See Social Purpose on pages 44 to 49
marketing. We have a good pipeline of
new content coming onto BritBox with C4
in Q2, Film4 in Q3 and our first original
commission, Spitting Image, expected in
Q4. With our EE distribution partnership
going live in Q1 and BritBox UK becoming
available on YouView and all Freeview Play
devices in Q2, BritBox UK will be available
on 20 million UK TV screens in the spring.
Our marketing will be very focused around
these planned content and distribution
launches. While there is clearly increasing
competition in the SVOD market, research
shows that there continues to be strong
demand for uniquely British content and
for multiple subscriptions. BARB data shows
the annual growth in homes with any SVOD
service is 16% and the growth in homes with
multiple services is 37% year-on-year, with
over five million homes now having more
than one subscription.
We are continuing to develop the ITV Hub+
and BritBox US, and in 2020 we will be
launching BritBox in Australia and will
work to identify other possible
international markets.
Our other DTC activities will include further
growing the ITV Win competition portal
and focusing on fewer, more valuable
activities and products around our key
successful brands. For example, through
introducing an I’m A Celebrity live attraction,
scaling the Hell’s Kitchen and Love Island
games and growing merchandising globally.
We have decided to stop low margin pay
per view Boxing.
Enablers
To deliver the strategy, we need to do four
things extremely well: ensure we have the
right capabilities, skills, tools and culture to
be more agile and flexible; manage our rights
effectively to maximise the value of our IP;
build strong partnerships to improve the
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ITV plc Annual Report and Accounts 2019
Strategic Report v
Chief Executive’s Report
distribution, discoverability and prominence
of all our content; and deliver digital
transformation right across the business.
This includes work in three areas. Firstly,
in growing our consumer facing products –
ITV Hub, ITV Hub+, BritBox, ITV Win and our
programme apps.
Secondly, it includes digitising our content
supply chain and core processes. We are
embedding data-driven insights and
automation into our processes which
will deliver efficiency gains, business agility,
operational scale and revenue uplift. We
have already started a project to provide our
scheduling teams with modern digital
planning tools and data enabled real-time
insights. We will also shortly be launching
our rights management project.
Thirdly, we are looking in depth at our core
central functions. We recognise that to
deliver new digital models and ways of
working we need to invest in developing new
capabilities across ITV. This means ensuring
teams have the rights tools and skills and
our culture is shifting to embrace digital
ways of working. We have already delivered
Talent Pay, a new system to pay our talent,
and we are now working on FreeCon which
will enable efficient management of the
entire freelance contracting process. We
have also launched a workplace tech project
to ensure people have the right tools and
this will help smart working.
Investments and cost savings
Delivering our strategy and ensuring ITV
has a sustainable future requires
investment – in the schedule, in BritBox
UK and in data, tech and the ITV Hub.
In 2018, we set out our £60 million essential
investment plan over three years to 2021,
which is on track. In 2019 we invested
£32 million, which is lower than previously
guided principally due to the timing of
payments in relation to our addressable
advertising platform which will now fall
in 2020. As previously announced these
investments will be partly offset by cost
savings. We continue to target £55 million
to £60 million of savings by 2022.
We delivered £25 million in 2019, ahead
of our £20 million target.
BritBox UK venture losses were £21 million
in 2019 and we expect the venture losses
to be around £55 million to £60 million
in 2020, broadly equivalent to the net
investment we previously guided to.
Social purpose
As a commercial public service broadcaster
and a responsible business, our social
purpose is very important to our people and
to delivering our strategy. With the massive
reach of our platforms, our much-loved
shows and creative talent, we have a unique
ability to drive meaningful change. We
recognise the climate crisis, and the role we
must play in mitigating the impact on both
the wider world and our business.
In 2019, we launched our new Social Purpose
strategy, setting ambitious targets to shape
culture for good. We’ve identified four
priority areas in which we are committed
to making a difference, both on-screen
and behind the screens. These are:
• Better Health – inspiring change in how we
look after our mental and physical health
• Environment – creating programmes with
the biggest impact on the audience and
the smallest impact on the planet
• Giving Back – giving back to our local
and international communities through
causes we care about
• Diversity and Inclusion – fostering
creativity by embracing diversity and
encouraging inclusion.
We have made a good start in 2019.
We launched our five year mental wellness
campaign, including our on-air campaign
Britain Get Talking, which was the most
well-known mental health campaign of the
autumn. We have signed up for and support
the Taskforce for Climate-related Financial
Disclosures (TCFD) and were carbon neutral
in 2019. We helped raise £7.9 million for
Unicef with Soccer Aid and we continue to
work hard to try and ensure that ITV reflects
and represents society on and off-screen.
Colleagues
Our people are the driving force of ITV and
are vital to our success as a business. I want
ITV to be a nurturing and inclusive company
where everyone can reach their full potential
and thrive. We have five active colleague
networks to help strengthen and build our
diverse and inclusive environment and I have
set up the ITV Inclusion and Diversity Council
to share and learn how to drive our progress
in this area. And the ITV Way reinforces our
values, defines our ways of working and how
we treat each other.
Our ambition is to be the most flexible
employer across the media and entertainment
industry and we launched Smart Working in
2019. Our investment in technology and our
digital transformation will help deliver this.
Regulation
In 2018 the Government announced the
Second Chapter in its Obesity strategy. As part
of that, there was a consultation which closed
in June 2019 on the possibility of introducing a
9pm watershed on TV advertising of High Fat
Salt and Sugar (HFSS) products and similar
protection for children viewing adverts online.
The government consultation also included
an option to make no change to the current
rules and it has committed to explore options
to ensure that any restrictions are
proportionate and evidence based. We are
fully engaged with this process and believe
that there is a strong, evidence-based case
for alternatives to a pre 9pm ban.
The Company continues to keep the
potential implications of the UK’s departure
from the European Union 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 potential impact
on the wider advertising market.
Outlook
Our outlook for the full year 2020 remains
on track to deliver our medium term targets.
We have started the year well with very
strong online viewing up 89% driven
particularly by The Masked Singer and Love
Island. ITV’s Family SOV is flat year to date
and, we have a strong schedule coming up
with the return of Saturday Night Takeaway,
new entertainment show The Epic
Gameshow, dramas including the second
series of The Bay, and Quiz, and
the European Football Championships.
Total advertising revenue is expected to be
up 2% in Q1. Early indications are that total
advertising revenue will be down 10% in
April. In March and April, we have seen an
impact from travel advertising deferments
relating to the Coronavirus. All deferments
to date have been included in this guidance.
Despite the ongoing uncertainty around the
outlook for the UK following its departure
from the European Union we currently remain
on track to deliver our medium term targets.
At this stage it is too difficult to assess the
further implications of the Coronavirus but we
continue to monitor the situation closely.
We are clear about what we need to do and
it requires a relentless focus on delivery to
build a stronger, more diversified and
structurally sound business. Our people have
embraced the changes we are making and
are fully committed and enthusiastic about
delivering the strategy. I would like to thank
everyone for their hard work in what has
been a very busy year at ITV.
We have strong foundations in place and
the next phase of the strategy will further
position ITV to take advantage of evolving
viewing and advertising trends as we
become a digitally led media and
entertainment company. In line with 2018
and 2019, the Board intends to pay another
8.0p dividend in 2020.
Carolyn McCall
Chief Executive
13
Strategic ReportGovernanceFinancial StatementsAdditional Information Poldark is produced by Mammoth
Screen (part of ITV Studios UK) for
the BBC. The fifth and final series
was broadcast in 2019. It has sold to
190 countries since it began in 2015.
14
ITV plc Annual Report and Accounts 2019
Strategic Report Investor Proposition
ITV has a clear strategy which is already making
significant progress in building a digitally led media
and entertainment company.
A strong platform
for delivery
ITV is an increasingly global and
diversified business, with more than
half of ITV total revenue coming from
non-advertising.
However, the market continues to
change and we have a vision and
strategy to build on ITV’s unique and
winning combination of creativity and
commercial strength. We have clear
priorities and initiatives which we
believe will deliver growth and
strengthen ITV to ensure that it is
well positioned to address the
opportunities and challenges of
a competitive media landscape.
We are continuing to grow our stable
margin Studios business, transforming
Broadcast, and expanding our Direct
to Consumer business.
We have delivered a good operational
performance in 2019, despite the
economic and political uncertainty,
which means we are executing the
strategy from a position of strength.
54%
of total revenue is from
non-advertising revenue
streams (2018: 52%)
87%
profit to cash conversion
(2018: 88%)
Unique market
position
As an Integrated Producer Broadcaster,
ITV is in a unique position to create and
own world-class content, broadcast
it on one of the biggest and most
trusted marketing platforms in the
UK, distribute it globally through its
international network and use it to
build valuable relationships directly
with consumers. Therefore we drive
revenue and profit through three
different business models –
advertisers, broadcasters and
platform owners, and consumers.
ITV Studios is a strong and scaled
international production business,
creating, owning and managing rights.
We will continue to grow in key
creative markets, driving value from
the strong demand for new and
returning quality content from new
and established distribution platforms.
Broader market uncertainty has
impacted the advertising market
and ITV is sensitive to this. However,
our on-screen and online viewing
performance is strong. We continue
to deliver unrivalled audience scale
and reach and creative marketing
solutions for advertisers as well as
addressable advertising on the ITV
Hub. With trusted and engaging
brands ITV is well positioned to create
value by developing and nurturing
direct relationships with our viewers,
where people want to spend money on
a range of content and experiences.
Good cash generation
We believe that if we successfully
execute our strategy we will continue
to deliver good cash generation and
our disciplined approach to cash, costs
and capital will enable us to continue
to invest across the business in line with
our strategic priorities.
Attractive investment
opportunities
We have highlighted a number of
investment opportunities across the
business, to strengthen and grow
the business. Areas of focus for this
investment are in BritBox, in the
ITV Hub and in data, analytics and
technology which we will embed
right across the business as we drive
our digital transformation. These
investments will partly be funded
by cost savings as we become
a more lean and agile organisation.
8.0p
full year dividend proposed
by the Board (2018: 8.0p)
Shareholder returns
Reflecting ITV’s continued strong
operating performance, the Board has
proposed a dividend of 8.0p for 2019
in line with its intention. The Board
plans to pay another 8.0p dividend
for the full year 2020. The Board
intends to announce a medium-term
dividend policy with the full year
2020 results, once greater clarity
has been established on the economic
environment and outlook in the UK
following its departure from the
European Union.
15
Strategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Market Review
The market environment in which we operate is dynamic, increasingly competitive and
rapidly changing. Consolidation of media and telecoms companies, the increasing influence
of technology and data, growing consumer demands and the evolution in the way viewers
consume media, bring both challenges and exciting opportunities.
Key market trends
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 ability
to drive viewing.
We are a major producer of
scripted content delivering
some of the most unmissable
scripted content in 2019 both
on and off ITV, including
The Bay, A Confession, Vera,
Gold Digger, Poldark, Line of
Duty and World on Fire.
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.
Global demand for content has grown strongly over recent
years, driven by the evolution in the delivery and availability
of content, with a substantial increase in the number of ways
to consume content. Viewers are able to choose from a variety
of free and pay platforms to watch live, catch up, and box set
content. This, along with the significant growth of online
players, including Netflix, Amazon, YouTube and Facebook,
has led to significant growth in online viewing.
The growth in demand for content can be further attributed
to a number of other factors, including: a larger international
pay television market; the consolidation of pay providers with
content companies and distributors; convergence in the
television market, where telecoms and new media companies
are competing with traditional media companies for content
and viewers; new and established online players, such as
Disney, Apple, Netflix and Amazon investing heavily in
new original and local content to drive viewing and attract
subscribers; and online advertising-driven platforms,
such as Google and Facebook creating a new market for
short-form and digital content.
Viewers are demanding high-quality global and local content,
and the proliferation of channels and platforms looking for
brand-defining content has increased viewer expectations.
This has driven an increase in production costs of some
content, particularly scripted due to rising talent costs.
We have also seen changes in the advertising market which
has become more competitive over recent years. Online
advertising has grown rapidly with Google and Facebook
dominating the market for search, online video and display.
World on Fire was produced by
Mammoth Screen (part of ITV Studios
UK) for the BBC in 2019.
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ITV plc Annual Report and Accounts 2019
Strategic Report Market Review
Global content
Scripted
International
In Europe, there has been a
resurgence in demand for
local scripted content by
broadcasters. 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 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
Gomorrah, Suburra and Zero
Zero Zero from Cattleya.
US
The US dominates global
production and is the largest
content market in the world.
This represents a significant
opportunity for ITV Studios
America (scripted division of
ITV Studios US) , which while
a small producer in US scripted,
has a strong, and growing
presence in this genre.
As with the UK, the market
continues to see a significant
increase in demand for drama,
particularly US drama. Drama
is brand-defining, and is used
as a tool for differentiation
and prominence in an
increasingly competitive global
environment. Netflix and
Amazon are investing heavily
in high-quality original scripted
content to attract subscribers,
and this has significantly
increased competition in the
market, particularly for talent.
Leveraging our network
relationships and international
distribution network, we have
expanded our US scripted
business and are developing
a portfolio of drama. We are
taking advantage of the
increased demand from OTT
platforms and other viewing
windows around the world.
Our 2019 scripted pipeline
included the delivery of
Snowpiercer to TNT (with
international distribution
on Netflix), and the delivery
of series five of Good Witch
to Hallmark.
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 reduced risks
and attractive returns.
Snowpiercer stars
Balthazar is a French crime drama
Jennifer Connelly and is due for
broadcast on TNT in the US in 2020.
It has already been commissioned
for a second season.
produced by Tetra Media (part of
ITV Studios International) for TF1.
It is has been recommissioned for
a third season.
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Strategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Market Review continued
Global content
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.
Returning series, including
The Voice, Love Island, I’m
a Celebrity... Get Me Out of
Here!, Come Dine With Me and
The Chase achieved strong
audiences in 2019, and continue
to be very popular in the UK,
and internationally.
Dancing on Ice had its 11th
series in the UK, with an average
audience of 6.2 million viewers.
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 are increasingly
supplementing 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 (unscripted division
of ITV Studios US) is one of the
largest producers of unscripted
content in the US with over
400 hours of original content
produced in 2019. 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, The First 48, and
Forged in Fire, along with award
winning Queer Eye, and Girls
Incarcerated, to Netflix.
2019 also saw Love Island
US launch on CBS, which has
since been recommissioned
for a second series.
Crank Yankers returned
in the US after a 12 year break,
and was produced by ITV
America for Comedy Central.
International
Demand remains strong
across all major territories
for unscripted content and
the market demands
a combination of proven
global formats, as well as the
development and production
of local original ideas.
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. We have
further boosted our portfolio
with the acquisition of
Armoza Formats, an Israeli
based formats creator and
distributor with a catalogue
that includes global hits,
The Four and Still Standing.
Formats which continue to drive
international growth include
Love Island, I’m A Celebrity…Get
Me Out Of Here!, Four Weddings,
The Voice, and Dancing on Ice.
Four Weddings remains
a popular format in France.
It is in its ninth series on TF1.
18
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ITV plc Annual Report and Accounts 2019
Strategic Report Market Review
Broadcast television, online
and Direct to Consumer
Changes in viewing habits
The number of ways for viewers
to engage with content has
expanded and offers increased
flexibility, which has impacted
viewing habits globally. We have
seen a significant increase in
VOD viewing on TVs (particularly
connected TVs) and non-TV
devices (such as smartphones,
games consoles and tablets).
This evolution is not uniform
across demographics, with
younger viewers spending
proportionally more time
consuming video content,
while older demographics
spend comparatively more time
engaging with linear television.
Linear viewing
In the UK, linear viewing remains
a popular form of media
entertainment and reaches 90%
of the population each week.
Linear television is offered
through both free-to-air
and pay services in the UK.
Free-to-air television is delivered
through services including,
Freeview, YouView and
Freesat, while linear pay
television is delivered through
operators such as Sky, BT,
Virgin and TalkTalk. The market
dynamics of the pay market
are changing as established
pay television providers’ face
increasing competition from
telecom providers and the
established OTT providers.
TV viewing, and in particular
free-to-air TV and public service
broadcaster viewing, is more
resilient in the UK than in other
markets. This is because per
capita, we have a higher spend
on local, original content than
most other developed markets,
and also due to the existence
of the BBC, with which we have
to compete for viewers but not
revenue. That in turn gives us
a platform from which to launch
SVOD services using similar,
indigenous content that
connects to viewers.
The UK average linear television
viewing in 2019 was 183 minutes
per person per day, down 5%
year-on-year (2018: 192
minutes). There was a large
decline for 16–34s, the average
being 90 minutes per day
(2018: 106 minutes). ITV Family
remained the largest family
of channels for 16–34s in the
K in 2019 (Source: BARB
seven-day consolidated data).
While it is clear that younger
viewers do watch less linear
television, if the right content
is delivered, they will watch it
either via linear television or
online. Love Island on ITV2 and
I’m A Celebrity…Get Me Out
Of Here! on the main channel
were examples of this in 2019,
with both achieving an episode
average of over two million
16-34 year old viewers
(Source: BARB).
ITV competes for linear viewers
with the BBC and commercial
broadcasters, including Channel
4, Sky and Channel 5. ITV and
BBC One continue to be the
only channels consistently able
to deliver mass audiences. In
2019, ITV delivered 98% of all
commercial audiences over five
million (2018: 98%) and 95%
over three million (2018: 96%).
In 2019, the ITV Family of
channels maintained SOV, the
second highest in a decade at
23.2%, with the BBC family
down 1% year-on-year.
Share of viewing
by broadcaster
ITV Family
BBC Family
Channel 4 Family
Five Family
Sky Family
Other
Source: BARB
23.2%
30.5%
9.8%
6.3%
7.3%
22.9%
Loose Women celebrated its 20th
anniversary in 2019. It has an average
UK daytime audience of 0.9 million,
and a weekly reach of
3.4 million viewers.
19
Strategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Market Review continued
Broadcast television, online
and Direct to Consumer
Changes in viewing habits
Advertising revenue
Online viewing
Online viewing includes catch up
viewing of broadcaster content
via the television set or non-TV
devices, and VOD delivery of
other long-form content (i.e.
longer than ten minutes) such
as box sets and movies via
platforms such as Sky, Netflix
and Amazon.
Online viewing has grown
rapidly over recent years and
while it is a competitor to linear
television for viewing, it remains
small, with linear television
remaining dominant. In the
UK we estimate that 70% of
all viewing of legal long-form
content is live (2018: 71%), with
a further 14% time shifted via
a Personal Video Recorder (PVR)
and watched within 28 days of
the original broadcast date
(2018: 13%).
Of the estimated 16% of content
viewed on demand (2018: 16%),
4% is catch up viewing of
broadcaster content via the
television set or to non-TV
devices (2018: 4%).
The remaining 12% is other VOD
viewing via services such as Sky,
Netflix and Amazon (2018: 12%).
The growth in online viewing
over recent years has been
driven by the accessibility of
these services on smartphones,
tablets and connected TVs,
providing flexibility in viewing
and facilitating viewers to watch
content whenever, and
wherever they want.
Long-form content viewing
Advertising revenue is ITV’s
largest revenue stream and
is generated through linear
television, online VOD and
sponsorship, competing with
both other commercial
broadcasters and alternative
advertising media. ITV’s total
advertising revenue in 2019
was £1,768 million, down 1.5%
year-on-year. As an integrated
producer broadcaster, revenue
from these streams helps to
fund 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) continued to take
the second largest share of
total advertising spend with
a 21.7% share (2018: 23.7%).
The decrease year-on-year
was partly attributed to the
continued political and
economic uncertainty in the
UK, with advertisers reducing
spend on television to manage
margins, in addition to using
online advertising to gain
short-term impact and benefit
from low production costs.
Live
Timeshifted (PVR)
up to 28 days
VOD: Broadcaster catch up
VOD: Other
Source: 2019 BARB/Thinkbox data
70%
14%
4%
12%
Britain’s Got Talent had two series in 2019,
both averaging a share of over 40% of 16–34s.
Family Guy was one of the top five
programmes watched on the ITV Hub in 2019.
20
20
ITV plc Annual Report and Accounts 2019
ITV plc Annual Report and Accounts 2019
Strategic Report Market Review
Broadcast television, online
and Direct to Consumer
Advertising revenue
Subscription video-on-demand (SVOD)
In November 2019, ITV launched
an SVOD proposition with the
BBC, BritBox UK, which provides
UK audiences with an unrivalled
collection of British box sets and
original series all in one place.
The service includes BBC, ITV
and Channel 5 content, with
Channel 4 and Film4 content
becoming available in 2020.
While BritBox UK is new to the
market and small compared
to its competitors, it is a unique
proposition and fills the gap
in the SVOD market for
high-quality, British content.
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.
Our focus on SVOD is an
important part of our strategy.
We plan to launch BritBox in
Australia in the second half of
2020, and continue to look at
opportunities to launch the
service on other platforms and
in other territories, to capitalise
on the growing global demand
for SVOD services and to enable
our content to reach as many
people as possible.
UK advertising market
Television
Press
Radio
Outdoor
Cinema
Online
21.7%
10.1%
3.1%
5.6%
1.4%
58.1%
Source: Advertising Association
January 2020
Online advertising has grown
rapidly, with spend on this
category increasing by over 50%
in the last five years. Within
online advertising, Search is the
largest, dominated by Google,
followed by Display and Online
Video, both dominated by
Google and Facebook.
The ITV Hub and our
programmatic addressable
advertising platform, Planet V,
allow ITV to compete in this
market, delivering the key
demographics online which
advertisers want. While our
proposition is small relative to
Google and Facebook, it allows
advertisers to access targeted
advertising at scale around
our premium inventory in a high-
quality, brand safe, trusted and
measured environment.
51% of homes in
the UK have an
SVOD service, up
from 43% in 2018
Source: BARB Q4 2019 data
The UK is a developed market
for SVOD and this market is
likely to continue to grow
further with the upcoming
launch of new SVOD services
from US networks and media
and entertainment companies.
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
Now TV. Many households have
multiple subscriptions to paid
content, and we expect this to
increase. Over 50% of homes in
the UK have at least one SVOD
service (2018: 43%), with 16%
having multiple subscriptions,
and this is growing at a steady
rate (Source: BARB).
BritBox UK launched in
November 2019, providing an
unrivalled collection of British
box sets.
Other Direct
to Consumer
8.4m
Paying Direct
to Consumer
relationships
Consumers are increasingly
willing to pay to engage with
great brands, content and IP,
whether that is through SVOD,
competitions, live events,
gaming, merchandise or pay
per view.
Developing higher quality
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
currently small, is not new for
ITV. It presents an area of
potential growth with our
fantastic brands and loyal
viewers. We are focused on
key activities to drive our viewer
relationships and maximise
revenue. Vital to this growth
is making data analytics a key
competency across the
organisation. To support this
we have invested in technology
platforms to collect, process,
store, and analyse these data
sets. We have also invested in
the development of an
improved data governance and
privacy framework to support
the activities that enable us to
turn data into insight.
21
Strategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Our Strategy
In 2018 we undertook a strategic review to help us
highlight the opportunities for ITV and also the
challenges we need to address. We are making good
progress in executing our strategy, to create a stronger,
more diversified and structurally sound business.
In 2019 we continued to evolve our strategy to ensure
we are well placed to take advantage of the rapidly
changing viewing and advertising opportunities and
to accelerate our digital transformation.
ITV strategy
Our strategic vision is to be a digitally led
media and entertainment company that
creates and brings our brilliant content
to audiences wherever, whenever and
however they choose.
Our vision and our initiatives to drive
growth and future value are clear,
building upon ITV’s unique and winning
combination of creativity and
commercial strength. We will continue
to drive profits from three business
models – from advertisers, broadcasters
and platform owners; through ITV
Studios; and directly from consumers.
Delivering on our strategic vision will be
achieved by focusing on three areas:
• Grow UK and Global Production
• Transform Broadcast
• Expand Direct to Consumer
These are not independent silos. They
work together – reinforcing each other,
creating synergies and delivering value.
Successful delivery of our strategic
vision is enabled by four areas:
• People – continue to strengthen both
our creative and commercial teams.
Ensure we have the right skillsets and
culture to deliver our evolving strategic
vision, including in our technology and
data functions
• Rights – ensure we own and manage
our rights efficiently and effectively.
Maximise the value of these rights across
our advertising, Studios and Direct to
Consumer business models
• Partnerships – create strong
partnerships with broadcasters,
platforms and technology companies
both in the UK and globally. Work with
these partners to ensure our content
is prominent and we can monetise it
wherever it is consumed
• Digital – deliver digital transformation
across our whole business. This includes
our consumer-facing products, as well
as our content supply chain and our
core central functions
22
ITV plc Annual Report and Accounts 2019
PartnershipsPeopleDigitalRightsGrowUK and globalproductionTransformBroadcastExpandDirect toConsumer Our Strategy
Good Witch is a scripted production by
ITV Studios America for the Hallmark channel.
It has been recommissioned for a sixth season,
due for broadcast in 2020.
Emmerdale remains the UK’s second
biggest soap, with an average of 6.1 million
viewers in 2019. It has been on-air for over
45 years.
Grow
UK and Global Production
Transform
Broadcast
Expand
Direct to Consumer
We are very focused on driving
our SVOD services in the UK and
internationally with the successful
launch of BritBox UK in 2019 and the
continued strong growth in Hub+ and
BritBox US subscribers. We are now
looking to further roll out BritBox
internationally.
We are also growing our interactive
revenues through ITV Win, our
competitions portal, and focusing
on driving growth in our Direct to
Consumer products and engagement
around our key programme brands.
We are well positioned to grow our
Direct to Consumer relationships and
revenue with our significant reach,
engagement, insight into viewers and
enhanced data analytics capabilities.
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.
We are very focused on:
• Developing new hits
• Attracting and retaining leading
talent, and nurturing the right
creative and commercial
environment to do this
• Growing our scripted business
• Globalising and maximising the
value of our key formats and
brands as we integrate Talpa
into ITV Studios
We will also consider selective value
creating acquisitions and talent deals
in both scripted and unscripted to
obtain creative talent and IP.
See KPIs on pages 26
We will transform our Broadcast
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.
The four key components of our
Broadcast strategy are to:
• Accelerate the growth of ITV Hub,
including driving digital ad-funded
viewing, particularly amongst our
light viewers
• Grow and deliver our addressable
advertising capabilities, including
strengthening our data, analytics
and digital capabilities. Our
addressable advertising is initially
on the ITV Hub
• Build more strategic and creative
partnerships with our advertisers
• Continue to drive mass audiences,
which remain highly valuable to
our advertisers
We will deliver on these areas whilst
maximising the total value of our
Studios content across both linear
and our digital products.
23
Strategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Our Business Model
Our strategic vision is to be a digitally led media and entertainment
company that creates and brings our brilliant content to audiences
wherever, whenever and however they choose.
We will continue to grow
the UK and global content
business, transform our
Broadcast business, and
expand our Direct to Consumer
business, creating value in
developing and enhancing
our consumer relationships.
We are confident that our
vision and strategy is the
right long-term plan for
ITV in a dynamic market
environment.
The successful execution of
our strategy will strengthen,
diversify and grow ITV,
creating a robust, future-
facing digital business.
Competitive advantage
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 formats
& 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.
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.
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.
90%
Our channels reach
90% of the
UK population
each week
31m
We have 31m
registered users in
the UK, with over
80% of 16–34s
registered
£1.1bn
We invest
£1.1 billion annually
in content for
our UK family
of channels
46,000+
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
24
ITV plc Annual Report and Accounts 2019
PartnershipsPeopleDigitalRightsGrowUK and globalproductionTransformBroadcastExpandDirect toConsumer Our Business Model
Our diversified revenue streams
Creating value for…
By developing, owning and managing the rights to content, ITV is
able to maximise the value of its programme brands across a range
of revenue streams. This makes ITV a more diversified business
and enables 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 mass audiences and more
targeted demographics on linear television and addressable
advertising on the ITV Hub. This funds our investment in the
programme budget.
Commercial partnerships
We work with advertisers and advertising agencies to provide
unique and innovative commercial and creative partnerships and
sponsorship opportunities that extend beyond pure spot advertising.
Direct to Consumer
We monetise our consumer interactions through SVOD,
competitions, live events and merchandising. In the UK, we currently
generate SVOD revenue through the ITV Hub+ and BritBox UK
following its successful launch in 2019. 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. In 2020 we will look to further roll out
BritBox internationally.
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.
Advertisers
Through delivering unique scale
and breadth of demographics
as well as targeted advertising
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.
Debt investors
Through a track record of delivering
strong profit to cash conversion.
Our people
Through investing in and
developing our talent and
creating a culture that nurtures
them to be productive, commercial
and creative.
Risk Management Framework
ITV operates in an increasingly complex
business environment and there are risks
to the delivery of our strategic goals and
the sustainability of our business model.
We have identified the key risks through
our risk management framework and
we have considered them as part of our
viability assessment. The risk management
framework also provides the tools to
manage and continually review our risks
and seeks to drive accountability and the
insight required for the Board to monitor
our risk management system. This also
allows management and the Board to
adapt the strategy to ensure that we are
not taking unnecessary risks and that the
underlying risks in the strategy are being
appropriately mitigated, therefore
enabling delivery of the strategy.
25
Strategic ReportGovernanceFinancial StatementsAdditional Information Key Performance Indicators (KPIs)
We defined our KPIs to align our performance and accountability to our
strategic priorities. As we continue to evolve our strategy, our KPIs may be
redefined to ensure they remain appropriate to our business and our priorities.
In 2018, we set targets or strategic ambitions for our KPIs for three years
to 2021 where it is appropriate to do so.
ITV Group
Adjusted EPS1
Total non-advertising
revenues
Cost savings
Profit to cash
conversion1
Total Studios
revenue growth
Studios adjusted
EBITA margin2
Total production
Total advertising
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 acquired through
business combinations, 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 10%
from 15.4p to 13.9p. This was
predominantly due to a decline
in net advertising revenue (NAR),
higher schedule costs, and the
impact of our investments to
support our strategic priorities.
This more than offset growth in
VOD and ITV Studios.
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
We delivered £25 million of cost
savings in 2019 which was ahead
of the target of £20 million
for the year. ITV’s cost savings
target remains at £55 million
to £60 million by 2022.
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 7% in 2019 driven
by growth in ITV Studios total
revenue of 9% to £1,822 million
along with 4% growth in Direct
to Consumer revenue to
£84 million. This growth was
marginally offset by a decline
in SDN revenues and other
Broadcast revenues.
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 relocation to our
new London headquarters) and
intangible assets, and including
the cash impact of high-end
production tax credits.
Performance
Profit to cash conversion was
87% in the year and included
investment in Planet V, in
scripted content and in BritBox
UK (2018: 88%). Excluding the
investment into BritBox UK,
profit to cash was 88%.
Target
3 years to 2021
Target
4 years to 2022
Target
3 years to 2021
Grow by at least 5% CAGR
Deliver £55–£60 million
run-rate of savings by 2022
Maintain at around 85%
2019
13.9p
.
0
7
1
.
0
6
1
.
4
5
1
.
9
3
1
2019
£2,117m
7
1
1
2
,
1
7
9
1
,
4
7
8
1
,
7
8
6
1
,
10%
decline in 2019
2016 not
fully restated
for IFRS 15
7%
growth in 2019
2019
87%
7
9
1
9
8
8
7
8
16
17
18
19
16
17
18
19
16
17
18
19
16
17
18
19
16
17
18
19
16
17
18
19
16
17
18
19
1. A full reconciliation between our adjusted and statutory results is provided in the APMs on page 53.
26
ITV plc Annual Report and Accounts 2019
Grow
UK and Global production
Transform
Broadcast
revenue
Definition
hours
Definition
Definition
Definition
Total Studios revenue
This is the key profitability
Total hours of programming
Total advertising revenue
measures the scale and success
measure used across the Studios
produced is an important
of our global studios business.
business. The profile of adjusted
measure of the scale and
measures all our advertising
revenues and includes ITV
It includes revenues from
EBITA margin differs for
success of our global studios
Family NAR, VOD, sponsorship
programmes sold to the ITV
production and distribution
business. It measures the
and other advertising revenues.
Network, which as an integrated
activities, and further varies
number of hours produced
producer broadcaster are an
with each production due to
across all genres and
Performance
important part of our business.
genre and maturity. Adjusted
geographies for ITV and
Performance
earnings before interest, tax
other broadcasters and
and amortisation (EBITA) is
platform owners.
ITV Studios total revenue grew
calculated by adding back
9% to £1,822 million. Revenue
exceptional items and including
Performance
Total advertising revenue
declined by 1.5% to £1,768
million with strong growth
in online revenues, up 21%,
along with growth in
growth was driven by ITV
Studios US and ITV Studios
high-end production tax credits.
The number of hours of content
sponsorship and creative
It reflects the underlying
produced by ITV Studios
partnerships revenue.
International, as we continue
performance of the business
declined by 6% to 8,393 hours.
This was more than offset
to build our capabilities in key
and provides a more meaningful
This was driven by a reduction
by a decline in NAR which
creative markets.
comparison of how the business
in a number of high volume
continued to be impacted
is managed and measured on
shows not returning in the
by the macro environment.
Total organic revenue, which
a day-to-day basis. The margin
UK and Internationally.
excludes our 2019 acquisitions
is calculated based on total
However, total revenue grew
and is adjusted for currency,
ITV Studios revenue.
by 9% in the year.
was also up 9%. There was no
net currency impact in the year.
Performance
We remain on track to deliver
ITV Studios adjusted EBITA
our target of 10,000 production
margin was 15%, consistent
hours by 2021.
with prior year and with our
target range.
Target
3 years to 2021
Grow by at least 5%
average CAGR
2019
£1,822m
2
2
8
,
1
0
7
6
,
1
9
7
5
,
1
5
9
3
,
1
Target
3 years to 2021
Target
3 years to 2021
Maintain at 14% to 16%
Grow to 10,000
2019
15%
7
1
5
1
5
1
5
1
2019
8,393 hours
7
1
9
,
8
8
6
4
,
8
3
9
3
,
8
2
0
8
,
7
Strategic ambition
To grow total advertising
in a flat NAR market
2019
£1,768m
3
3
8
,
1
1
8
7
,
1
5
9
7
,
1
8
6
7
,
1
9%
growth in 2019
Flat in 2019
6%
decline in 2019
1.5%
decline in 2019
Strategic Report
Key Performance Indicators
ITV Group
Grow
UK and Global production
Transform
Broadcast
Adjusted EPS1
Total non-advertising
Cost savings
revenues
Profit to cash
conversion1
Total Studios
revenue growth
Studios adjusted
EBITA margin2
Total production
hours
Total advertising
revenue
Definition
Definition
Definition
Definition
Adjusted EPS represents the
Total non-advertising revenue
Cost savings are permanent
This is our measure of our
adjusted profit for the year
is total ITV revenue (including
savings to the business.
effectiveness of cash generation
attributable to equity
internal revenue) excluding
Managing our cost base is key
used for working capital
shareholders. Adjusted profit
advertising revenue from net
as we aim to run our business
management. It is calculated
is defined as profit for the
year attributable to equity
advertising revenue (NAR),
as efficiently as possible and
as our adjusted cash flow as
VOD and sponsorship. This is
fund investments in line with
a proportion of adjusted EBITA.
shareholders after adding back
an important measure as we
our strategic priorities.
exceptional items and including
continue to rebalance the
high-end production tax credits.
business away from our
Performance
Adjusted cash flow, which
reflects the cash generation
of our underlying business, is
Further adjustments include
reliance on advertising.
We delivered £25 million of cost
calculated on our statutory cash
amortisation and impairment
of assets acquired through
business combinations, net
financing costs and the tax
effects relating to these
Performance
savings in 2019 which was ahead
generated from operations and
of the target of £20 million
adjusted for exceptional items,
Non-advertising revenue
for the year. ITV’s cost savings
net of capex on property, plant
increased by 7% in 2019 driven
target remains at £55 million
and equipment (excluding capex
by growth in ITV Studios total
to £60 million by 2022.
items. It reflects the business
revenue of 9% to £1,822 million
performance of the Group in
along with 4% growth in Direct
a consistent manner and in
to Consumer revenue to
line with how the business is
£84 million. This growth was
managed and measured on
marginally offset by a decline
a day-to-day basis.
in SDN revenues and other
Broadcast revenues.
Performance
Adjusted EPS decreased by 10%
from 15.4p to 13.9p. This was
predominantly due to a decline
in net advertising revenue (NAR),
higher schedule costs, and the
impact of our investments to
support our strategic priorities.
This more than offset growth in
VOD and ITV Studios.
relating to the relocation to our
new London headquarters) and
intangible assets, and including
the cash impact of high-end
production tax credits.
Performance
Profit to cash conversion was
87% in the year and included
investment in Planet V, in
scripted content and in BritBox
UK (2018: 88%). Excluding the
investment into BritBox UK,
profit to cash was 88%.
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
9% to £1,822 million. Revenue
growth was driven by ITV
Studios US and ITV Studios
International, as we continue
to build our capabilities in key
creative markets.
Total organic revenue, which
excludes our 2019 acquisitions
and is adjusted for currency,
was also up 9%. There was no
net currency impact in the year.
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. The margin
is calculated based on total
ITV Studios revenue.
Performance
ITV Studios adjusted EBITA
margin was 15%, consistent
with prior year and with our
target range.
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
The number of hours of content
produced by ITV Studios
declined by 6% to 8,393 hours.
This was driven by a reduction
in a number of high volume
shows not returning in the
UK and Internationally.
However, total revenue grew
by 9% in the year.
We remain on track to deliver
our target of 10,000 production
hours by 2021.
Definition
Total advertising revenue
measures all our advertising
revenues and includes ITV
Family NAR, VOD, sponsorship
and other advertising revenues.
Performance
Total advertising revenue
declined by 1.5% to £1,768
million with strong growth
in online revenues, up 21%,
along with growth in
sponsorship and creative
partnerships revenue.
This was more than offset
by a decline in NAR which
continued to be impacted
by the macro environment.
Target
3 years to 2021
Target
4 years to 2022
Target
3 years to 2021
Grow by at least 5% CAGR
Deliver £55–£60 million
Maintain at around 85%
run-rate of savings by 2022
Target
3 years to 2021
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
2019
13.9p
0
.
7
1
0
.
6
1
4
.
5
1
9
.
3
1
2019
£2,117m
7
1
1
,
2
1
7
9
,
1
4
7
8
,
1
7
8
6
,
1
10%
decline in 2019
7%
growth in 2019
2019
87%
7
9
1
9
8
8
7
8
2019
£1,822m
2
2
8
1
,
0
7
6
1
,
9
7
5
1
,
5
9
3
1
,
2016 not
fully restated
for IFRS 15
9%
growth in 2019
2019
15%
7
1
5
1
5
1
5
1
2019
8,393 hours
7
1
9
8
,
8
6
4
8
,
3
9
3
8
,
2
0
8
7
,
Flat in 2019
6%
decline in 2019
1.5%
decline in 2019
16
17
18
19
16
17
18
19
16
17
18
19
16
17
18
19
16
17
18
19
16
17
18
19
16
17
18
19
2. A full reconciliation between our adjusted and statutory results is provided in the APMs.
27
Strategic ambition
To grow total advertising
in a flat NAR market
2019
£1,768m
3
3
8
1
,
1
8
7
1
,
5
9
7
1
,
8
6
7
1
,
Strategic ReportGovernanceFinancial StatementsAdditional Information
Key Performance Indicators continued
Transform
Broadcast
Expand
Direct to Consumer
Online revenue
growth
Total ITV viewing1
ITV Family share
of viewing (SOV)
Online viewing
ITV Hub registered
Brand consideration
Direct to
user accounts
Consumer revenue
Paying product
relationships
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 21% in 2019,
as we delivered significant
growth in online viewing,
up 13%.
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,
third-party VOD platforms,
ITV Hub on owned and operated
and ad-funded platforms,
ITV Hub+, and managed
YouTube channels.
Definition
Keeping our free-to-air
proposition strong and our
audiences healthy is vital for
the Broadcast 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
Total ITV viewing declined by
4% to 16.3 billion hours. This
was in line with the market and
includes strong comparatives
from the Football World Cup in
2018. Across two years, ITV total
viewing was down 2% compared
to the market which was down
8% over the same period.
External source: BARB, Crocus, comScore
Data Analystics and third-party platforms
Performance
ITV Family SOV was flat in 2019
at 23.2%, which is our second
highest SOV performance for
a decade. Within this, ITV main
channel and the other ITV
channels were flat at 16.9%
and 6.3% respectively, which
was a strong performance
given 2018 included the
Football World Cup. ITV2
was the most watched digital
channel for 16-34s, growing
6% to a SOV of 6.4% for the
target demographic.
External source: BARB/AdvantEdge
Definition
Online viewing is an important
indicator of our online success
as it measures how long viewers
are spending online watching
long-form content2. 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 13% in 2019, driven by
viewing on connected TVs.
External source: Crocus
ITV Hub for simulcast as well
brand consideration for light
version of the ITV Hub.
Target
3 years to 2021
Double digit growth
per annum
2019
21%
2
4
6
3
1
2
4
1
Strategic ambition
Strategic ambition
To maintain total viewing1
Above 21%
2019
16.3bn hours
.
9
6
1
.
6
6
1
.
0
7
1
.
3
6
1
2019
23.2%
.
3
1
2
.
7
1
2
.
2
3
2
2
.
3
2
Target
3 years to 2021
Double digit growth
per annum
2019
506m hours
6
0
5
7
4
4
7
3
3
0
4
2
4%
decline in 2019
Flat in 2019
13%
growth in 2019
16
17
18
19
16
17
18
19
16
17
18
19
16
17
18
19
16
17
18
19
16
17
18
19
16
17
18
19
17
18
19
1. Maintain total viewing compared to the 2015 – 2018 average of 16.8 billion hours.
2. Long-form is content which is more than ten minutes in length.
28
ITV plc Annual Report and Accounts 2019
Definition
Definition
Definition
Definition
A registered user is an individual
UK public perception of the ITV
Direct to Consumer revenue is
We aim to grow ITV’s Direct to
viewer who has signed up to the
brand as measured by YouGov.
a key measure of the success
Consumer revenues through
ITV Hub who has been active in
Our brand perception is very
of our strategy. It measures
increasing the number of people
the last three years. The size of
important as we look to attract
revenue generated directly
who pay for an ITV product as
our viewer online reach is key
light viewers to ITV and build
from relationships with a
well as increasing spend per
for our advertising proposition.
a Direct to Consumer business.
customer through the purchase
customer. This KPI measures
of goods and services, and entry
the total number of paying
Performance
Performance
into competitions.
The ITV Hub grew the number
Brand consideration in 2019 was
relationships we have
with consumers.
of registered user accounts
by 12% to 31 million in 2019,
53%, down six percentage points
Performance
on 2018. This was impacted by
Direct to Consumer revenue
Performance
achieving the 2021 target two
the strong competition from
grew 4% to £84 million in 2019,
Paying product relationships
years early. This growth is driven
the SVOD platforms who are
and we are on track to achieve
declined by 2% to 8.4 million
by the great content and good
reaching real scale and investing
the £100 million revenue by
in 2019. The target excludes
user experience, supported
heavily in marketing. It was also
2021 as set out in the strategy.
relationships from BritBox UK.
and enhanced by a process
of continued improvement
and investment.
impacted by the discontinuation
The target excludes revenue
of The Jeremy Kyle Show. ITV
from BritBox UK.
outperformed our closest PSB’s
There was a decline in the
number of pay per view
The ITV Hub helps ITV reach
consideration than the other
driven by an increase in
valuable younger audiences,
PSBs. Critical to our strategy
subscriptions to ITV Hub+,
due to the discontinuation of
the low value Boxing pay per
who are increasingly using the
is reaching light viewers and
the subscription ad-free
view proposition as we focus on
with a lower decline in brand
Growth was predominantly
relationships in the year, largely
as catch up. Over 80% of the
viewers only declined by one
UK’s 16-34 year olds are
registered on the ITV Hub.
percentage point.
Simulcast requests were up
Given that light viewers is the
17% year-on-year.
measure we watch most closely,
going forward we believe it is
more appropriate to measure our
light viewer brand consideration.
External source: YouGov
more profitable opportunities.
Excluding Boxing pay per view,
paying relationships were
marginally up year-on-year,
driven by ITV Hub+ subscribers
and live event attendees.
We are on track to deliver our
target of 10 million paying
product relationships by 2021.
Target
3 years to 2021
Increase to 30 million
2019
30.8m
8
.
0
3
6
.
7
2
3
.
1
2
9
.
6
1
Target
3 years to 2021
Increase to 60%
for all adults
2019
52.9%
1
.
8
5
9
.
8
5
3
.
6
5
9
.
2
5
Target
3 years to 2021
Grow to at least
£100 million
2019
£84m
5
6
8
5
1
8
4
8
Target
3 years to 2021
Grow to 10 million
2019
8.4m
5
.
8
4
.
8
7
.
6
12%
growth in 2019
6%
decrease in 2019
4%
growth in 2019
a
/
n
16
2%
decline in 2019
Strategic Report Key Performance Indicators
Transform
Broadcast
Expand
Direct to Consumer
Online revenue
growth
Total ITV viewing1
Online viewing
ITV Family share
of viewing (SOV)
ITV Hub registered
user accounts
Brand consideration
Direct to
Consumer revenue
Paying product
relationships
Definition
Definition
Definition
Definition
Online revenues are advertising
Keeping our viewing healthy
Keeping our free-to-air
revenues from VOD via the
is vital for our advertising
proposition strong and our
Online viewing is an important
indicator of our online success
ITV Hub. With the investment
proposition. Total ITV viewing
audiences healthy is vital for
as it measures how long viewers
in the ITV Hub and the
is the total number of hours
the Broadcast business, and
are spending online watching
significant growth of viewing
spent watching ITV channels
ITV Family SOV helps measure
long-form content2. It is
on the ITV Hub these are now
live and recorded within 28 days,
this. ITV Family SOV is the total
calculated as the total number
a material part of our advertising
third-party VOD platforms,
viewing audience over the year
of hours ITV VOD content is
revenues and an important
ITV Hub on owned and operated
achieved by ITV’s family of
viewed on owned and operated
measure of our success.
channels as a proportion of
ad-funded platforms and ITV
and ad-funded platforms,
ITV Hub+, and managed
YouTube channels.
total television viewing,
including the BBC Family.
Hub+ viewing.
Performance
grow strongly, up 21% in 2019,
Performance
Performance
The ITV Hub and ITV Hub+, the
Performance
Online revenue continued to
as we delivered significant
growth in online viewing,
up 13%.
Total ITV viewing declined by
ITV Family SOV was flat in 2019
online home for our family of
4% to 16.3 billion hours. This
at 23.2%, which is our second
channels and content, is
was in line with the market and
highest SOV performance for
growing rapidly, driven by
includes strong comparatives
a decade. Within this, ITV main
viewers’ appetite for our
from the Football World Cup in
channel and the other ITV
content on catch up, VOD
2018. Across two years, ITV total
channels were flat at 16.9%
and simulcast. Online viewing
viewing was down 2% compared
and 6.3% respectively, which
was up 13% in 2019, driven by
to the market which was down
was a strong performance
viewing on connected TVs.
8% over the same period.
External source: BARB, Crocus, comScore
Data Analystics and third-party platforms
given 2018 included the
Football World Cup. ITV2
was the most watched digital
channel for 16-34s, growing
6% to a SOV of 6.4% for the
target demographic.
External source: BARB/AdvantEdge
External source: Crocus
Strategic ambition
Strategic ambition
Double digit growth
To maintain total viewing1
Above 21%
2019
16.3bn hours
9
.
6
1
6
.
6
1
0
.
7
1
3
.
6
1
2019
23.2%
3
.
1
2
7
.
1
2
2
.
3
2
2
.
3
2
Target
3 years to 2021
per annum
2019
21%
2
4
6
3
1
2
4
1
Target
3 years to 2021
Double digit growth
per annum
2019
506m hours
6
0
5
7
4
4
7
3
3
0
4
2
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.
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
The ITV Hub grew the number
of registered user accounts
by 12% to 31 million in 2019,
achieving the 2021 target two
years early. 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. Over 80% of the
UK’s 16-34 year olds are
registered on the ITV Hub.
Simulcast requests were up
17% year-on-year.
Performance
Brand consideration in 2019 was
53%, down six percentage points
on 2018. This was impacted by
the strong competition from
the SVOD platforms who are
reaching real scale and investing
heavily in marketing. It was also
impacted by the discontinuation
of The Jeremy Kyle Show. ITV
outperformed our closest PSB’s
with a lower decline in brand
consideration than the other
PSBs. Critical to our strategy
is reaching light viewers and
brand consideration for light
viewers only declined by one
percentage point.
Given that light viewers is the
measure we watch most closely,
going forward we believe it is
more appropriate to measure our
light viewer brand consideration.
External source: YouGov
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 4% to £84 million in 2019,
and we are on track to achieve
the £100 million revenue by
2021 as set out in the strategy.
The target excludes revenue
from BritBox UK.
Growth was predominantly
driven by an increase in
subscriptions to ITV Hub+,
the subscription ad-free
version of the ITV Hub.
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
declined by 2% to 8.4 million
in 2019. The target excludes
relationships from BritBox UK.
There was a decline in the
number of pay per view
relationships in the year, largely
due to the discontinuation of
the low value Boxing pay per
view proposition as we focus on
more profitable opportunities.
Excluding Boxing pay per view,
paying relationships were
marginally up year-on-year,
driven by ITV Hub+ subscribers
and live event attendees.
We are on track to deliver our
target of 10 million paying
product relationships by 2021.
Target
3 years to 2021
Increase to 30 million
2019
30.8m
.
8
0
3
.
6
7
2
.
3
1
2
.
9
6
1
Target
3 years to 2021
Increase to 60%
for all adults
2019
52.9%
.
1
8
5
.
9
8
5
.
3
6
5
.
9
2
5
Target
3 years to 2021
Grow to at least
£100 million
2019
£84m
5
6
8
5
1
8
4
8
Target
3 years to 2021
Grow to 10 million
2019
8.4m
.
5
8
.
4
8
.
7
6
16
17
18
19
16
17
18
19
16
17
18
19
16
17
18
19
16
17
18
19
16
17
18
19
16
17
18
19
4%
decline in 2019
Flat in 2019
13%
growth in 2019
12%
growth in 2019
6%
decrease in 2019
4%
growth in 2019
a
/
n
16
17
18
19
2%
decline in 2019
29
Strategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
Operating and
Performance Review
ITV delivered a strong operating performance in
2019, demonstrating good progress in executing
the strategy, and in building a digitally led media
and entertainment company.
Overview
ITV delivered a strong operating
performance in 2019, with our financial
performance better than expected,
despite the uncertain economic
environment. We made good progress
in executing the strategy and investing
in our priorities, the benefits of which
started to deliver during the year.
We have successfully launched BritBox
in the UK, as well as Planet V (our
programmatic addressable advertising
platform), and we continue to strengthen
our capabilities in advertising, data
and technology. ITV Studios is a scaled
global business delivering strong
revenue and profit growth. We remain
focused on building a digitally led media
and entertainment company to create
a stronger, more diversified and
structurally sound business, ensuring
that ITV is well positioned to address
the opportunities and challenges
of an increasingly competitive
media landscape.
On-screen and online, our viewing
performance was strong. We maintained
ITV Family SOV at 23.2% (2018: 23.2%),
with strength across the schedule.
There were outstanding contributions
from the Rugby World Cup, Love Island
and drama. The ITV Hub continued to
deliver strong viewing, up 13%. Total
ITV viewing combining ITV channels live,
recorded and VOD, was down 4%
year-on-year against tough comparatives
of the Football World Cup.
Total advertising revenue declined by
1.5% due to a decrease in NAR, which
more than offset 21% growth in online
revenues and the increase in sponsorship
and creative partnerships. ITV Studios
total revenue increased 9% driven by
ITV Studios US and ITV Studios
International. We have developed a solid
pipeline of high-quality programmes,
particularly drama and entertainment,
and we continue to perform well across
the key genres that return and travel.
We delivered £25 million of cost savings
in the year, which was ahead of our planned
£20 million. Our target of £55 million
to £60 million of cost savings to 2022
remains unchanged.
Our essential investments to support our
strategic priorities totalled £32 million in
the year, which was lower than our planned
£40 million due to timing. We expect this
timing difference to unwind in 2020.
The BritBox venture loss was £21 million,
which is lower than the £25 million
expected due to the timing of content costs.
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 £3,885
million (2018: £3,766 million), with external
revenue up 3% at £3,308 million (2018:
£3,211 million). Total non-advertising
revenue grew 7% to £2,117 million (2018:
£1,971 million), now accounting for 54%
of total revenue (2018: 52%).
Adjusted EBITA declined by 10% to
£729 million (2018: £810 million), with
a 17% decline in Broadcast adjusted EBITA,
driven by the fall in total advertising
revenue, our strategic investments in the
schedule, our essential investments and
the launch of BritBox UK. This decline was
partially offset by a 5% increase in ITV
Studios adjusted EBITA, along with lower
share-based payments in the year.
Net exceptional items were £22 million,
down £61 million year-on-year, primarily
due to a £62 million gain on sale from
the London Television Centre. Adjusted
financing costs were up £4 million year-on-
year at £40 million due to the inclusion of
IFRS 16, and our adjusted tax rate has come
down to 18% (2018: 19%). Adjusted EPS
declined 10% to 13.9p (2018: 15.4p).
Group external revenue
£3,308m
(+3%) (2018: £3,211m)
Total advertising revenue
£1,768m
(-1.5%) (2018: £1,795m)
Total non-advertising revenue
£2,117m
(+7%) (2018: £1,971m)
Adjusted EBITA
£729m
(-10%) (2018: £810m)
Adjusted EPS
13.9p
(-10%) (2018: 15.4p)
Statutory EPS
11.8p
(+1%) (2018: 11.7p)
Net debt
£804m
(2018: £927m)
Dividend per share (ordinary)
8.0p
(2018: 8.0p)
See APMs on page 53 for a full
reconciliation between our statutory
and adjusted results.
30
30
ITV plc Annual Report and Accounts 2019
ITV plc Annual Report and Accounts 2019
Strategic Report Operating and Performance Review
The Bay was a crime drama
produced by Tall Story Pictures
(part of ITV Studios UK) . It was one
of the biggest new dramas in 2019
and has been recommissioned for
a second series.
Statutory EBITA was £693 million, down 12%
(2018: £785 million), which was more than
the decline in adjusted EBITA due to an
increase in production tax credits in the year.
Statutory financing costs were £68 million,
up £25 million year-on-year (2018:
£43 million) due to the one-off fees and
premiums in relation to the buy-back of
bonds in the year. Our reported effective
tax rate was lower at 10% (2018: 17%) due
to the tax impact of the gain on sale of the
London Television Centre and an increase
in high-end production tax credits in the
year. Statutory profit before tax fell by 7%
to £530 million (2018: £567 million) and
statutory EPS increased by 1% to 11.8p
(2018: 11.7p), with the decline in statutory
profit before tax offset by the reported
effective tax rate reducing from 17% to
10% due to the gain on sale of the London
Television Centre as explained above.
See Finance Review for further detail.
We have good access to liquidity. Our profit
to cash conversion was 87% and we ended
the year with net debt of £804 million
(2018: £927 million), reflecting the
exceptional cash inflow of £146 million
following the sale of the London
Television Centre.
Our objective is to run an efficient balance
sheet and manage our financial metrics
appropriately, consistent with investment
grade metrics. Our aim is to continue to
invest in growing a more robust business
and executing our strategy, whilst
continuing to deliver returns to our
shareholders. Our adjusted net debt
was £1,215 million (31 December 2018:
£1,364 million. Our reported net debt to
adjusted EBITDA was 1.0x (31 December
2018: 1.1x) and adjusted net debt to
adjusted EBITDA, which better reflects
how credit agencies look at us, was 1.5x
(31 December 2018: 1.6x).
Reflecting ITV’s continued good operational
performance, the Board has proposed a full
year dividend of 8.0p, flat year-on-year.
This is in line with the Board’s intention
to pay a full year dividend of at least 8.0p
in 2019. The Board plans to pay another
8.0p dividend for the full year 2020.
The Board intends to announce a medium
term dividend policy with the full year
2020 results, once greater clarity is
established on the economic environment
and outlook in the UK following its
departure from the European Union.
We are More than TV
Our strategic vision is to be a digitally led
media and entertainment company that
creates and brings our brilliant content
to audiences wherever, whenever and
however they choose. To deliver this
we are focused on three priorities; (i)
transforming our Broadcast business, (ii)
growing our UK and global production
business, and (iii) expanding our strong
direct to consumer relationships.
We have a clear vision, priorities and
initiatives for how we can compete in
a changing environment. We have strong
foundations – our integrated producer
broadcaster (IPB) model, world-class
content, strong advertiser and customer
relationships, a powerful brand, talented
commercial and creative people and
sufficient financial flexibility to invest
and grow.
The Company continues to keep the
potential implications of the UK’s
departure from the European Union
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 continues to be the impact on the
wider advertising market. See Risks and
Uncertainties on page 71.
31
31
Strategic ReportGovernanceFinancial StatementsAdditional Information Operating and Performance Review continued
ITV Studios
The Voice UK is in its ninth
series on ITV main channel. The
format is broadcast in over
180 countries (both finished tape
sales and locally produced).
Come Dine With Me remains
an important format for ITV
Studios. It is produced in over
40 territories and has been
broadcast for over 15 years.
ITV Studios is the number one commercial
producer in the UK, one of the largest
producers in Europe and one of the largest
independent unscripted producers in the US.
It is a scaled business delivering growth at
a stable margin. Growing UK and global
production is central to ITV’s strategy 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. We have built significant
scale in key creative markets around the
world, creating and producing programmes
and formats that return and travel, namely
drama, entertainment and factual.
As part of the strategy to grow UK and
global production, we have reorganised our
international distribution and commercial
business in order to strengthen our position
as a creator, producer and distributor of
world-leading formats.
The new structure focuses on three centres
of excellence which will work closely
together and with ITV Studios’ world-class
international production business.
Twelve months to 31 December
ITV Studios UK
ITV Studios US
ITV Studios International
Global Formats and Distribution
Total ITV Studios revenue*
Total ITV Studios costs
Total ITV Studios adjusted
EBITA**
ITV Studios adjusted EBITA margin
2019
£m
725
271
508
318
1,822
(1,555)
267
15%
2018
£m
695
245
418
312
1,670
(1,415)
255
15%
In line with the reorganisation of the business, 2018 comparatives have been reclassified.
*
** Includes the benefit of production tax credits.
Twelve months to 31 December
Sales from ITV Studios to
Broadcast and DTC
External revenue
Total ITV Studios revenue
Twelve months to 31 December
Scripted
Unscripted
Core ITV* and Other
Total ITV Studios revenue
2019
£m
573
1,249
1,822
2019
£m
520
1,018
284
1,822
2018
£m
551
1,119
1,670
2018
£m
380
997
293
1,670
Change
£m
Change
%
30
26
90
6
152
(140)
12
–
4
11
22
2
9
(10)
5
–
Change
£m
Change
%
22
130
152
4
12
9
Change
£m
Change
%
140
21
(9)
152
37
2
(3)
9
* Core ITV includes the soaps and daytime shows produced by ITV for the ITV main channel.
32
ITV plc Annual Report and Accounts 2019
Strategic Report Operating and Performance Review
ZeroZeroZero is an
English language
drama produced by
Cattleya (part of ITV
Studios International)
for Sky Italia.
33
Strategic ReportGovernanceFinancial StatementsAdditional Information Operating and Performance Review continued
Scripted
Unscripted
Core ITV
The three centres are:
1. The Creative Network, which will boost
creativity across the 36 unscripted
format labels in ITV Studios to increase
the potential of developing global
hit shows;
2. Global Entertainment, which brings
together international unscripted format
sales and exploitation across the Group
under one roof. It will be the home of
licensing for some of the most powerful
unscripted formats in the world such as
The Voice, Hell’s Kitchen, Come Dine
With Me and The Four. It will represent
the catalogues of Talpa Media, Armoza
Formats, Twofour and the existing ITV
Studios unscripted format catalogue; and
3. Global Distribution, which will focus on
the international distribution of drama
and the finished tape versions of all other
ITV Studios programmes. It will also build
on the expertise it has in high-end drama
financing and co-production deals.
ITV Studios will now be reported with
three distinct production businesses;
ITV Studios UK, ITV Studios US and ITV
Studios International (previously Rest
of World). Global Entertainment and
Global Distribution will be reported as
Global Formats and Distribution, which
includes what we previously disclosed
as Global Entertainment.
Financial performance
ITV Studios saw strong external revenue
growth in 2019, up 12% to £1,249 million
(2018: £1,119 million), with total revenue up
9% to £1,822 million (2018: £1,670 million).
There was growth across all areas,
particularly ITV Studios US and ITV Studios
International, which both had strong growth
in scripted revenues. Total organic revenue
at constant currency, which excludes our
2019 acquisitions, was also up 9%. The net
impact of foreign exchange was nil. The
number of hours delivered in the year was
down 6% mainly driven by high volume,
non-returning commissions in the UK and
International Studios business.
Reflecting our growth in key global
production markets, 58% of Studios revenue
was generated outside the UK, up on prior
year (2018: 56%) due to strong growth in
scripted revenue in the US and Europe.
Adjusted EBITA was up 5% year-on-year at
£267 million (2018: £255 million). Adjusted
EBITA margin was stable at 15%. In the year,
there was a £2 million unfavourable impact
from foreign exchange on ITV Studios
adjusted EBITA.
Strong global demand for content
The demand for quality content from
broadcasters and platform owners has
never been stronger and this provides
a significant opportunity for ITV Studios.
We estimate that the global content market
is growing at around 3%–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. We have built a healthy
pipeline of returning programmes, which
we will continue to nurture and develop.
To continue to build upon our strong
creative pipeline and capitalise on growth,
our investments within ITV Studios over
the next few years are focused on:
strengthening our creative talent; growing
our scripted business; and building our
monetisation capabilities to further
globalise and maximise the value of
our key formats and brands.
Strengthening creative talent
A key part of ITV Studios investment is to
strengthen and retain our creative talent.
We made good progress in 2019 in
attracting key talent to the business,
including Patrick Spence – the award-
winning producer behind programmes
such as Fortitude and Silent Witness
joining from Endemol, along with Dominic
Treadwell-Collins – the executive producer
behind the multi-award winning A Very
English Scandal. In July 2019, we increased
our minority stake to take a controlling
interest in Monumental Television, the
production company behind Harlots.
In 2020 we appointed Lisa Perrin as
Managing Director of International
Studios, joining from Endemol Shine Group.
Growing scale in key creative markets
ITV Studios has three production
divisions – ITV Studios UK, ITV Studios
US and ITV Studios International. Our
performance in different territories is
impacted by phasing, with the risk
managed through the portfolio.
34
ITV plc Annual Report and Accounts 2019
Strategic Report Operating and Performance Review
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. Europe is a
growing creative market, with particular
demand for foreign language drama
internationally and local scripted content
from broadcasters and OTT platforms.
Over recent years, we have also
strengthened our position in the European
market with the acquisition of Tetra Media
in France and Cattleya in Italy, both of which
produced a number of scripted titles that
were delivered in 2019. Our portfolio of
acquisitions (since 2012), delivered a return
in excess of our corporate weighted average
cost of capital (WACC) during the year.
ITV Studios UK
In 2019, total ITV Studios revenue in the
UK was up 4% at £725 million (2018: £695
million) and also up 4% on an organic basis.
Sales to Broadcast and Direct to Consumer,
grew 4% driven by extra episodes of
Emmerdale and new dramas such as
The Bay, A Confession, Sticks and Stones
and Singapore Grip. ITV Studios UK’s share
of original content on ITV main channel was
marginally down at 65% (2018: 67%) driven
by lower volumes of Judge Rinder and the
discontinuation of The Jeremy Kyle Show.
The first half of 2020 will see the delivery of
new and returning programmes, including,
The Bay, Cold Feet, Unforgotten, The Chase,
and Love Island winter and summer series.
Off-ITV revenues in the UK increased by
13%, with new and returning dramas,
including: Line of Duty, Gold Digger, World
on Fire, Noughts and Crosses, and Poldark
all for the BBC; Save Me for Sky Atlantic,
along with returning factual entertainment
commissions 24 Hours in A&E and
Countdown for Channel 4. Partly offsetting
this growth were 2018 commissions not
returning in the year, including Bodyguard,
Vanity Fair, and Friday Night Dinner.
ITV Studios US
ITV Studios US total revenue was
significantly weighted towards the second
half of 2019 and grew 11% to £271 million
(2018: £245 million), and 7% to £263 million
when adjusted for the favourable foreign
exchange impact. The increase was driven
by a number of new and returning
unscripted titles, including: Love Island US
for CBS, Crank Yankers for Comedy Central,
Queer Eye for Netflix, Forged in Fire for
History and Hell’s Kitchen for Fox, along with
new and returning scripted titles:
Snowpiercer for TNT and Good Witch for
Hallmark, which returned for its fifth season.
This growth offset The Four not returning
following the delivery of two series in 2018.
Deliveries in the first half of 2020 include:
Cannonball, the sixth season of Good Witch,
Marriage Bootcamp and Alone.
ITV Studios International
ITV Studios International 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 key
formats from the Global Formats and
Distribution business. Revenue grew 22%
to £508 million (2018: £418 million), and by
24% to £517 million when adjusted for the
unfavourable impact of foreign currency.
This growth was driven mainly by our
European scripted business in France and
Italy, which had strong demand from
broadcasters and OTT platforms for local
content with global appeal. Key scripted
titles delivered by Tetra in France included
Profilage (S10) and Balthazar (S2), both for
TF1, and by Cattleya in Italy were Zero Zero
Zero and Gomorrah for Sky Italia, Tre Metri
Sopra for Netflix, and Carlo & Malik for RAI.
ITV Australia also produced a new scripted
title Seachange, which was the revival of
a series from the 1990s. Unscripted
productions included The Voice in France,
Dancing on Ice in Germany, I’m A Celebrity…
Get Me Out Of Here! in Australia and
Germany, and Love Island in Australia and
Germany. In 2020 we will continue to focus
on growing our European scripted business
to allow us to benefit from the increasing
demand for locally produced content with
global appeal. Tetra has new titles Vampires
for Netflix and Paris Police for TFI. Cattleya
has the third season of Suburra for Netflix
and also has Romulus in production, the
archaic latin drama series for Sky Italia, and
due for delivery in 2021.
Line of Duty is produced by World
Productions (part of ITV Studios UK) for
the BBC. The sixth series is due for
broadcast in 2020.
Queer Eye is an Emmy award-winning,
unscripted production by ITV America
for Netflix. It has been recommissioned
for a fifth season.
35
Strategic ReportGovernanceFinancial StatementsAdditional Information Operating and Performance Review continued
Investing in scripted and serving OTTs
Polarisation of content demand remains a
feature of the market. This is driven by the
growth of viewing platforms looking for
channel defining content, along with
demand for both local adaptations of
proven entertainment formats and
standout original scripted content.
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 due to the upfront cash
requirements and the extended payment
profile from the OTTs.
We have seen very strong growth in
scripted revenue in the year, up 37%, driven
by the UK, US and Europe. While ITV Studios
is predominantly unscripted in terms of
scale, scripted, especially driven by demand
from the OTT platforms, is likely to be an
area of higher growth over the medium
term. We are seeing increasing demand
from platforms internationally for original
long-form and secondary rights.
To capitalise on this increasing demand, 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.
Through our Global Distribution business,
we finance our large-scale scripted projects,
and to a limited degree some unscripted
projects, through our underlying 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
Harlots is a scripted production by
Monumental Television (part of ITV Studios
UK) for Hulu, and is in its third series.
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.
As well as distributing library content to
OTT platforms, including BritBox, in 2019
we produced and jointly commissioned
a number of scripted and unscripted
programmes with OTT platforms,
including Queer Eye, Girls Incarcerated,
Tre Metri Sopra with Netflix along with
Harlots for Hulu. In 2020 we have a number
of deliveries, including the fifth season
of Queer Eye, The Great Flower Fight, the
third season of Suburra and Vampires,
all for Netflix, as well as international
rights for The Serpent and Snowpiercer
on Netflix, Love Island France for Amazon –
the first reality show on the service,
Hot Drop for Quibi – which we are an
investor in, and Becoming for Disney+.
Original hours supplied to OTTs increased
by 95% in 2019.
Globalising and maximising the value of
key formats and monetising our strong
pipeline of programmes
Global Formats and Distribution revenues
were up 2% year-on-year to £318 million
(2018: £312 million), with nil impact from
foreign exchange. The growth was driven
by a number of multi-year deals secured
for The Voice, along with the distribution
revenue of new ITV Studios UK scripted
commissions mentioned earlier.
A key strength of our Global Formats
business is the large portfolio of successful
entertainment and factual entertainment
formats that return and travel, which we
are strengthening each year. This includes
programmes such as The Voice, Love Island,
Hell’s Kitchen, The Graham Norton Show,
I’m A Celebrity…Get Me Out Of Here!,
Catchpoint, The Chase, Dancing on Ice,
Come Dine With Me, and Four Weddings.
In 2019 we sold 62 (2018: 57) different
formats internationally, 14 of which were
sold to three or more countries.
We are very focused on maximising the
value of our formats and brands
internationally. There are exciting
opportunities to licence our brands and
library content and drive value through
merchandising using our significant
capabilities across our network of labels
and our global relationships.
During the year we acquired Armoza
Formats, an Israeli based creator and
distributor of several top-selling global
formats, including primetime singing
show The Four, and non-scripted format
Still Standing, as we look to continue
to build our creative strength and
monetisation capabilities.
Global Distribution is 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 linear broadcasters,
the global OTTs and new and emerging
digital platforms, such as FilmRise.
The content pipeline is healthy with the
international distribution of War of the
Worlds, World on Fire, Gold Digger,
A Confession, Good Witch and Balthazar.
2020 will see the international distribution
of Flesh and Blood, The Serpent, Noughts
& Crosses, Singapore Grip, and Snowpiercer,
the second season of which has been
commissioned before the first season has
even aired. We also have multiple deals
with Netflix, Amazon and Hulu. Unscripted
deliveries included: Hell’s Kitchen US, Love
Island, I’m A Celebrity...Get Me Out Of Here!
and The Voice all delivering across a number
of different territories.
Our content continues to sell well
internationally to both broadcasters
and OTT platforms and in particular
our scripted programmes. Over ten of our
scripted programmes have been sold to
date in more than 100 countries, including
War of the Worlds, Harlots, Vera, Poldark,
Endeavour and Cold Feet.
Our distribution business also sells content
to BritBox US and Canada and during the
year, started selling content to BritBox UK
for its launch in November 2019.
36
ITV plc Annual Report and Accounts 2019
Strategic Report Operating and Performance Review
Broadcast
Cheat was one of the top new dramas
on ITV in 2019, launching with 8.5 million
viewers. It was the biggest series on the ITV
Hub, based on average requests per episode.
Horse Racing was broadcast across
ITV main channel and ITV4 in 2019, with
an average of 0.7 million viewers across
all meetings.
Twelve months to 31 December
Total advertising revenue
Direct to Consumer
SDN
Other revenue
Total Broadcast revenue
Network schedule costs
Variable costs
Broadcast infrastructure and
overheads
Total Broadcast costs
Total Broadcast adjusted EBITA
Total adjusted EBITA margin
BritBox UK venture loss
Adjusted EBITA Broadcast
(ex BritBox UK)
Adjusted EBITA margin
(ex BritBox UK)
2019
£m
1,768
84
69
142
2,063
(1,091)
(134)
(376)
(1,601)
462
22%
(21)
483
23%
2018
£m
1,795
81
73
147
2,096
(1,055)
(123)
(363)
(1,541)
555
26%
-
555
26%
The media market environment in which
we operate is dynamic. The viewing and
advertising landscape is evolving rapidly
and becoming increasingly competitive,
presenting both challenges and
opportunities. Our Broadcast business
is constantly adapting and our strategy
and digital transformation must be
delivered at pace to take advantage of
the opportunities, and address the
challenges that arise.
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 content on our family
of channels, is growing rapidly, driven by
viewers’ appetite for our content on catch
up, VOD and simulcast. Through our Direct
to Consumer business we are building
relationships with consumers who are
increasingly willing to pay to engage with
our brands, content and IP. This is through
SVOD, competitions, voting, live events,
gaming and merchandising. Data and
technology are key to evolving our
broadcast business and driving revenue
growth and new revenue streams.
Change
£m
Change
%
(27)
3
(4)
(5)
(33)
(36)
(11)
(13)
(60)
(93)
(4)%
(21)
(72)
(3)%
(1.5)
4
(5)
(3)
(2)
(3)
(9)
(4)
(4)
(17)
-
(13)
37
Strategic ReportGovernanceFinancial StatementsAdditional Information Operating and Performance Review continued
There were eight England Euro 2020
Football Qualifiers in 2019, achieving
an average audience of 4.9 million. ITV
will share the broadcast of the Euros with
the BBC in 2020.
Tenable is a UK daytime game show
and had its best ever performance in 2019,
averaging 1.0 million viewers, up 7%
on 2018.
have spent more in the year. Spend by online
brands grew by 11% excluding gambling
spend, which is no longer permitted around
live sport following the self-imposed whistle
to whistle advertising ban by the gambling
industry. These online brands can see
the immediate benefits of TV advertising
and demonstrate how valuable it is.
The continued challenges faced by the
high street, retail and fast moving consumer
goods (FMCG) companies have put pressure
on their budgets and they are spending less
across all media. There was also a decline
in Entertainment & Leisure compared to
the significant gambling spend around the
Football World Cup in 2018.
Direct to Consumer revenue grew 4% to
£84 million (2018: £81 million) with
growth driven by an increase in ITV Hub+
subscriptions. We remain on track to achieve
the targeted £100 million revenue by 2021
as set out in the strategy.
Total costs were up 4%, driven by higher
schedule costs, up £36 million to
£1,091 million, primarily due to coverage of
the Rugby World Cup, England football
qualifiers for the European Football
Championships, and new and returning
dramas. Our variable costs were up 9% at
£134 million, with higher bandwidth and
rights costs associated with our online
business, and marketing investment in our
brand to support the launch of BritBox UK.
Broadcast infrastructure and overhead costs
also increased by 4% to £376 million, with
higher property costs for our new London
buildings as previously announced, along with
£22 million of investments around our
advertising capabilities, data, the ITV Hub,
ITV Hub+ and technology to enable us to
deliver our strategic priorities. This increase
was partly offset by £16 million of cost
savings made across Broadcast in the year,
and lower share-based payments.
Broadcast adjusted EBITA (excluding BritBox
UK) declined 13% to £483 million (2018:
£555 million), with a margin of 23%. Total
Broadcast adjusted EBITA (including BritBox)
was £462 million, with a 22% margin.
Viewing
During 2019 we invested to reposition ITV,
drive more light viewers and increase reach.
Our investments focused on evolving
the brand to be more creative and
contemporary, which is now visible on
ITV and the ITV Hub. We launched our new
‘More than TV’ viewer campaign and
developed consistent off-air marketing
across multiple media channels, including
established media and social media.
ITV Family SOV for light viewers was up
0.1 percentage points. Spontaneous
consideration amongst light viewers was
down one percentage points year-on-year,
however, this decline was significantly lower
than that of the BBC and Channel 4 and
demonstrates the impact our marketing
investment has made to date.
In 2019 we delivered a good viewing
performance both on-screen and online,
against tough comparatives in 2018 from
Financial performance
Broadcast total revenue was down 2% in the
year at £2,063 million (2018: £2,096 million).
Total advertising revenue declined by 1.5%
to £1,768 million (2018: £1,795 million) which
was slightly better than our expectations.
The decline was driven by NAR, with VOD
revenue up 21% and good growth in
sponsorship and creative partnerships.
TV advertising continued to be impacted
by political and economic uncertainty in
the year, however, we saw an improvement
in the second half of 2019, with total
advertising up 2% compared to the same
period in 2018. There has been a great deal
of change in viewing and advertising trends
which we are keeping under constant focus.
Our strategy is focused to ensure we adapt
and respond to the change in behaviour in
the market. Research shows that digital is
less effective than TV advertising, but it
allows advertisers to gain short-term impact
and benefit from low production costs.
The composition of TV advertisers is
changing as markets are being disrupted by
new categories and insurgent brands. Some
categories are growing rapidly. Publishers,
Airlines and Travel and Cars and Car Dealers
38
ITV plc Annual Report and Accounts 2019
Strategic Report Operating and Performance Review
the Football World Cup. We maintained our
ITV Family SOV at 23.2% (2018: 23.2%)
which is now the second highest SOV
performance in a decade.
Total ITV viewing, which combines live
viewing of ITV channels, recorded and
video on demand (VOD), decreased by 4%
year-on-year against the Football World Cup
in 2018 which saw strong viewing volumes.
This decline was in line with the market.
Over two years, total ITV viewing was down
2%, compared to the market which was
down 8% over the same period. On the main
channel, many daytime shows grew their
audiences year-on-year, including: Good
Morning Britain – with its highest share ever,
Loose Women, Tenable and The Chase. Our
soaps, Coronation Street and Emmerdale,
maintained their position as the UK’s two
largest soaps, although their viewing was
marginally down year-on-year against big
storylines in 2018. We successfully aired a
range of new programmes, including five of
the top six most watched new dramas such
as Manhunt, A Confession and The Bay;
new entertainment shows, including
In For A Penny; and successful factual
entertainment, including; Ant and Dec’s
DNA Journey, Bradley Walsh & Son: Breaking
Dad and Harry’s Heroes. We continue to
drive significant audiences with our
returning brands such as Vera – which had
its most successful series to date, Cold Feet,
I’m A Celebrity…Get Me Out Of Here! – which
was the most watched entertainment
programme in the year, Britain’s Got Talent
and The Voice UK. Our news programming
continues to perform well, as does our
sporting schedule with the Rugby World
Cup – the final of which was the most
watched sporting programme in the year,
horse racing and the Six Nations Rugby
Championships. While overall our schedule
is performing strongly, not all of our
programmes will return, including Sanditon
and Wild Bill, and The Jeremy Kyle Show
has been discontinued.
We continue to target the demographics
most highly demanded by advertisers –
particularly young and male audiences –
through our family of channels and online, and
have seen good share growth in our target
demographics on ITV2, ITV3 and the ITV Hub.
ITV2 remained the most watched digital
channel for the 16–34s for the third year in a
row. This was helped by the summer series
of Love Island which had its best performing
series to date. It averaged 4.3 million TV
viewers (share of 19%), which increased to
5.6 million including non-TV viewing. It
was the largest 16–34s audience across all
channels averaging 2.2 million TV viewers
with a 55% share. Love Island, together with
Plebs, Ibiza Weekender, Hey Tracey! and
Celebrity Juice, helped ITV2 achieve a SOV
of 6.4% and SOCI of 10.0% for the 16–34s
demographic, up 6% and 9% respectively.
ITV3’s viewing performance improved in
the year due to the strong slate of dramas,
such as Midsomer Murders, Vera, Poirot,
Doc Martin, as well as repeats of Emmerdale
and Coronation Street. ABC1 adults SOV
and SOCI on ITV3 were both up 4% in 2019.
On ITV4, Male SOV was up 2% while Male
SOCI was down 1% year-on-year. The ITV4
sports schedule remained healthy in 2019
with horse racing, the French Open, the
British Touring Car Championships, darts
and snooker.
We have a strong schedule in 2020 with
new dramas, including: Flesh and Blood,
Quiz, Honour, and Belgravia; returning
dramas including: Liar, Vera, Marcella,
The Bay and Endeavour; and new and
returning entertainment including:
The Masked Singer, the Epic Gameshow,
Saturday Night Takeaway, and I’m
A Celebrity...Get Me Out Of Here!
ITV commercial audiences
9
5 9
9
9
9
6
9
6
9
8
59
9
8
9
2019
95%
98%
16
17
18
19
Over 3 million
Over 5 million
Vera returned for series nine in 2019.
Produced by ITV Studios UK, it averaged
7.9 million across the series.
Don’t Hate The Playaz is an ITV2
quiz show, which had its second series in
2019. Over half of the average viewers
per episode were 16–34 year olds.
39
Strategic ReportGovernanceFinancial StatementsAdditional Information Operating and Performance Review continued
Our sporting schedule includes the Rugby
Six Nations and the European Football
Championships.
ITV Hub
The ITV Hub 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 the
majority of connected televisions currently
sold in the UK.
Online viewing, which measures the total
number of hours viewers are spending
online, was up 13% driven by viewing on
connected TVs and through streaming
devices. Dwell time, which measures the
average time spent viewing per session
across all platforms, was up 6% in the year.
The ITV Hub now has 31 million registered
user accounts (2018: 28 million), already
ahead of the 30 million target by 2021
and monthly active users was up 28%.
This growth was driven by our great content
and good user experience, supported and
enhanced by a process of continued
improvement and the investment we have
made in the year in the ITV Hub. This was
specifically around the brand, the user
experience and interface – including offering
recommendations on what to watch, cross
platform resume, and a redesign of the
homepage, along with data-driven marketing
to target light viewers, and evolving the
underlying digital platform, which also
supports ITV Hub+ and BritBox UK. Our 2020
investment in the ITV Hub will be focused
on further accelerating its growth through
increased personalisation and prominence to
make it a destination for viewing our content,
enhancing data and technology to support it,
and increasing the monetisation of our
monthly active users for our advertisers
particularly through the roll out of Planet V.
The ITV Hub helps ITV reach valuable
younger audiences – over 80% of the UK’s
16–34 year olds are registered. Younger
viewers use the ITV Hub for simulcast
viewing, as well as catch up. The 2019
summer series of Love Island achieved an
average of 0.5 million viewers via simulcast
per episode, up from 0.3 million in 2018.
The Rugby World Cup delivered 0.9 million
simulcast viewers for England’s final
against South Africa, which is greater
than linear audiences on most digital
channels. Total simulcast viewing hours
Deep Water was a six-part drama
in 2019. The full series was made
available to stream on the ITV Hub
following the broadcast of the first
episode. It was the second most
requested programme, by average
episode, on the ITV Hub.
Cleaning Up was one of the top
new dramas in 2019, averaging
7.2 million viewers across the series
on TV. Viewing on the ITV Hub was
also strong with an average of over
one million requests per episode.
was up 17% year-on-year, driven by more
simulcast viewing on connected TVs and
digital media players in the year.
Growth in ITV Hub and our investment in
our data and tech capabilities enables us to
collect, consolidate and unify data sources
from across the business. This has helped
us drive viewing and customer relationships
through data-driven marketing and testing
of our recommendation engine on the ITV
Hub. We are also growing consumer revenue
with our ITV Hub+ subscriber acquisition
model and have established a data
framework for BritBox UK. In 2020 we will
continue to build upon the progress we have
made in our data capabilities, scaling and
strengthening them and deploying them
more widely across the business. This
includes BritBox UK, ITV Interactive, and
Planet V, our programmatic addressable
advertising platform which will roll out to
agencies across 2020.
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.
TV, and specifically ITV, remains the only
place to get immediate reach and scale. In
2019, ITV delivered 98% of all commercial
audiences over five million and 95% of all
commercial audiences over three million.
Online advertising is growing rapidly and
we have seen double digit 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 to develop
our VOD advertising capabilities we signed
a perpetual UK licence for the Amobee
technology in April 2019 enabling us to
deliver programmatic addressable
advertising around our premium VOD
inventory. Planet V, our scaled,
programmatic addressable advertising
proposition for the ITV Hub, will be rolled
out to media buyers and advertisers during
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ITV plc Annual Report and Accounts 2019
Strategic Report Operating and Performance Review
This Morning is an
integral part of ITV’s
daytime schedule.
It averaged 0.8 million
viewers per day in 2019
and reached more than
26 million viewers over
the year.
41
Strategic ReportGovernanceFinancial StatementsAdditional Information Operating and Performance Review continued
2020. This will put buying in advertisers’
hands, enabling them, from their own
terminals, to buy ITV Hub inventory
seamlessly and cost effectively, build
their own audiences, add their own data
and monitor their own campaigns. Our
Commercial business is therefore able to
offer our clients the best of both worlds,
mass audiences with simultaneous reach
on linear channels, and addressable
targeting at scale around our premium
inventory on the ITV Hub.
ITV aims to maximise 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 we
have built a client relationship team and
scaled up the creative partnerships team
to work closely with advertisers and provide
original, engaging and brand-defining
marketing propositions. During 2019, Marks
& Spencer (M&S) engaged with ITV in a fully
integrated linear and digital advertising
proposition around Britain’s Got Talent
with sponsorship, product placement,
a bespoke spot ad made by ITV as well as
instore branding and social media content.
Following the positive impact for M&S,
they decided to also sponsor the autumn
series of Britain’s Got Talent:
The Champions. The 2019 series of Love
Island attracted nine commercial partners,
including Uber Eats, Samsung and
Superdrug, engaging in programme and
podcast sponsorship, brand licences,
instore branding, exclusive product lines
and merchandise, and product placement.
This drove total incremental revenue of
around £8 million year-on-year.
Responsive to a changing media
environment
The way in which people watch television
has changed rapidly over the last few years,
particularly for younger demographics.
ITV’s position overall is strong but there
is increasing competition for eyeballs and
advertisers. Our strategy has evolved to
address this shift, and our priorities are
aimed at making sure we continue to
maintain mass audiences, drive light
viewers, attract live audiences and grow
the number of 16–34 year old viewers.
ITV and M&S formed a creative partnership
around Britain’s Got Talent, involving on and
off-screen advertising initiatives.
Most importantly it is ensuring that we
are bringing our quality content to audiences
wherever, whenever and however
they choose.
Linear television viewing remains resilient
despite significant changes in the
availability and delivery of content.
On average, viewers watched 183 minutes
of television per day in 2019, down 5% from
192 minutes in 2018 (Source: BARB C7 data).
Including all viewing across TV, SVOD and
all devices, the majority of viewing remains
live at 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 Britain’s Got Talent,
I’m A Celebrity…Get Me Out Of Here! and
Love Island, the ITV Family remained the
largest family of channels for the 16–34s
demographic in the year. Nevertheless,
it is a constant challenge to maintain
total advertising revenue in light of
declining viewing, especially amongst
16–34 year olds.
SVOD has seen strong growth over the last
few years and is now a developed market
in the UK, with approximately 51% of UK
households subscribing to at least one of
Netflix, Amazon or Now TV. 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.
The growth in viewers’ appetite for having
SVOD subscriptions and increasingly multiple
subscriptions (37% of households have more
than one SVOD service), also means that we
are well placed to benefit from this demand
with the launch of our SVOD service BritBox
UK (Source data: BARB Q4 2019). Our recent
research shows that people’s intent to buy
BritBox is on a par with Now TV and Apple TV+.
Direct to Consumer
Direct to Consumer generates revenue
directly from the customer, and includes
SVOD, competitions, merchandise, live
events and gaming. In 2019, total revenue
increased by 4% to £84 million (2018:
£81 million) predominantly due an increase
in ITV Hub+ subscriptions. Direct to
Consumer revenue does not include
BritBox UK or US.
Our SVOD propositions include BritBox UK,
ITV Hub+ in the UK, BritBox in the US and
Canada, and Cirkus in the Nordics, Germany,
Austria and Switzerland.
We successfully launched BritBox UK, with
the BBC in November 2019. The service
provides UK audiences with an unrivalled
collection of British box sets and original
series all in one place. BritBox UK includes
both ITV and BBC box sets, and has content
partnerships with Channel 4 (including
Film4 content) and Channel 5, and
distribution partnerships with, BT and EE.
Our EE distribution partnership is currently
in the pre-sale phase, launching fully on
13 March 2020. BritBox UK is an ITV
controlled entity with a holding of 90%
and the BBC holding 10% of the equity with
an option to increase it to 25%.
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ITV plc Annual Report and Accounts 2019
Strategic Report Operating and Performance Review
The service had a successful operational
launch, which was issue free and on time,
and early results show a good performance
in line with the business plan. We are seeing
strong subscriber appeal with the majority
of customers converting to become a
paying subscriber after the free trial period.
BritBox UK is now on ten platforms and
available on 15 million UK screens. We are
continuing to explore opportunities to
expand the distribution of BritBox UK, and
by April 2020, we expect it to be available
on 20 million UK screens. In addition to the
breadth of content currently available on
BritBox UK, the first original commission,
Spitting Image, is expected to launch on the
service in the second half of 2020. Channel 4
content will also be available in April with
Film4 content arriving in the autumn.
The 2019 net investment in BritBox UK
was £19 million, which was lower than the
£25 million expected due to the timing of
content costs. The BritBox UK venture
loss, which excludes the benefit of other
revenues earnt across ITV, was £21 million.
We expect venture losses in BritBox UK of
£55 million to £60 million in 2020, which
is broadly in line with the £40 million net
investment previously guided and the
£6 million timing difference from the
2019 investment, unwinding in 2020. We
anticipate that BritBox UK will remain in the
net investment phase for a number of years
as we build its subscriber base, but in time will
provide a meaningful profit stream to ITV.
ITV Hub+ offers an ad-free subscription
version of the ITV Hub with content download
capability and EU portability, although,
following the UK’s departure from the
European Union, this may not be available
once trading arrangements are agreed at end
of 2020. The number of subscribers increased
by over 50% year-on-year to over 400,000.
The subscriber growth has been driven by
our great content, increased marketing and
EU portability. We are using our investment
in data capabilities to understand what
drives customer acquisition and retention,
and to provide us with high quality insights
into our subscribers.
Our joint venture (JV) 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, currently exceeding one
million, and the service is now profitable,
just three years following launch. We plan
to launch BritBox in Australia in 2020 as
we continue to explore opportunities for
BritBox US on other platforms and in other
territories internationally.
A significant portion of our Direct to Consumer
revenues comes from competitions.
The majority of our competitions have
performed well across the schedule,
benefiting from the investment in the
competition portal which has been
rebranded to ITV Win, along with marketing
of the platform through some of our key
programming. Programme related app
downloads were strong in the year,
encouraging engagement and driving
linear viewing. The Love Island app had over
six million downloads, and over nine million
votes were cast via the app in 2019.
The Love Island game has also been
downloaded over 3.5 million times in the
UK and ten million times globally.
We continue to host a number of live events
based around our key brands, including: the
Coronation Street set tour and Emmerdale
village tour and studio experience, five
branded Ninja Warrior Experiences around
the UK, and we are due to launch an I’m
A Celebrity…Get Me Out Of Here! leisure
attraction which will open in the UK during
2020. All of these initiatives help build
relationships directly with our viewers
and we will continue to have a focused
approached to opportunities in this area.
SDN
SDN generates revenue by licensing
multiplex capacity to broadcast channels,
radio stations and data providers on digital
terrestrial television or Freeview.
Currently, the SDN platform utilises the
radio spectrum licensed 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) declining
by 5%, driven by deal renewals in the year.
SDN’s multiplex licence expires in 2022 and
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 3% year-
on-year due to the closure of Encore at the
end of April 2018, along with lower revenue
from our non-consolidated license.
Ninja Warrior UK branded adventure
parks opened in Cardiff, Wigan and Gloucester
during 2019.
43
Strategic ReportGovernanceFinancial StatementsAdditional Information Social Purpose
With the massive reach of our platforms, our much-loved shows and creative talent,
we have a unique ability to drive meaningful change. In 2019 ITV launched its new
Social Purpose strategy, setting ambitious targets, to shape culture for good, against
four priorities: Better Health, Diversity and Inclusion, Environment and Giving Back.
showcasing brands who also fell quiet to
support Britain Get Talking. The campaign
ran for four weeks, accompanied by
a press, social and digital campaign. ITV
editorial covered mental health topics,
while #BritainGetTalking was fast-adopted
as a hashtag for mental health awareness
and action.
Results
The most well-known mental health
campaign of the autumn
2.8m
people started a conversation with their
children, family and friends, or had a better
quality of conversation, as a result of seeing
the campaign.2
Mental wellness
Britain Get Talking
In October 2019 we launched a five
year campaign to encourage people
to take action to look after their
mental health.
The issue
Since 2004 there has been a 48% increase
in anxiety and depression amongst
children and as such, our first campaign
focused on families.
The campaign
Supported by the charities Mind and
YoungMinds, it was launched by Ant and Dec
during Britain’s Got Talent: The Champions
final. The show was paused for a minute
to give families watching time to start
a conversation. This was followed by a
60 second television advert showcasing
some of ITV’s best-known faces, all in silence
to encourage families to talk. A unique silent
advertising commercial break followed
4.1m
people took an action in 2019
to improve their, or their family’s
mental or physical health as a
result of ITV campaigns, beating
our 2019 target of two million.1
Better Health
Inspiring change in how
we look after our mental
and physical health.
Our Goal:
Encourage 10 million
people to take action to
improve their mental
or physical health
by 2023.
Sustainable
Development
Goal
Off-screen initiatives
Mental Health Training
ITV’s Learning and Development team
has extended the provision of mental
health training, including additional
workshops on how to talk about
mental health. Over 1,000 colleagues
attended mental health training or
workshops in 2019.
Duty of Care
ITV launched new guidelines on Duty
of Care for productions, and established
a Duty of Care Operating Board,
chaired by Carolyn McCall.
Time to Change Pledge
ITV is committed to the Time to Change
Pledge, consolidating our commitment
to reducing the stigma of mental health
in the workplace. Over 900 ITV colleagues
participated in the Mind Workplace
Wellbeing Index and we received a silver
award from Mind, for making an impact
in promoting employee mental health
through our policies and procedures.
1. Sum of actions taken across Better Health.
2. Extrapolated from YouGov survey of over 2,000 UK adults (October 2019).
44
ITV plc Annual Report and Accounts 2019
Strategic Report Social Purpose
Mental wellness
Eat better
Move More
Results
650,000
children said they’d eaten more
vegetables as a result of the campaign
(29% of those who saw the campaign)1.
2.3%
uplift in vegetable sales during the
campaign, the equivalent of 17.7 million
units of vegetables. That’s enough for
an extra portion of vegetables per
household with kids for every week
of the campaign2.
The Daily Mile
We continued to partner with the
Daily Mile, promoting Daily Mile
activity through programming.
656,000
more children did the Daily Mile in 2019.
A push in ITV editorial in September saw the
biggest uplift of the year in schools signing
up to participate in the scheme3.
Eat Them to Defeat Them
In January 2019, ITV launched
a partnership with Veg Power
and an alliance of supermarkets
and food brands to encourage
children to eat vegetables.
The issue
By the time children start school, one in
four children in the UK is living with obesity;
by Year 6, it’s one in three. With 80% of
children not eating their recommended
daily recommended portions of vegetables,
our campaign set out to change the
narrative, moving from the worn-out
‘Eat your Greens’ message to a child-
focused, exciting proposition: Eat Them
to Defeat Them.
The campaign
Recognising that kids often really feel they
don’t like vegetables, ITV worked with
ad agency adam&eveDDB to develop an
advertising campaign to make vegetables
the baddies, who can only be defeated if
kids eat them. ITV donated £2 million of
airtime to show the television advert to
family audiences and brought together
12 supermarkets and food brands to
fund the creation of the campaign.
Mental Health Advisory Group
ITV formed a Mental Health Advisory
Group, chaired by Ruth Davidson, with
Mind, YoungMinds and the Scottish
Association for Mental Health (SAMH)
as founding members, to help provide
guidance and support on all aspects of our
approach to mental health and wellbeing.
Feel Good Wellbeing Programme
We continued to build Feel Good, ITV’s
wellbeing programme, which supports
the mental and physical wellbeing of
colleagues through a programme of
classes, check-ups and workshops.
Attendance at Feel Good sessions
in 2019 reached over 3,000.
Work/life Balance
ITV announced our new Smart Working
initiative, aiming at making ITV the most
flexible employer in media.
1. Extrapolated from YouGov survey of 1,148 UK children aged 6-14.
2. PearlMetrics econometric modelling 2019.
3. Based on 2,410 schools signing up to the Daily Mile.
45
Off-screen initiatives
Strategic ReportGovernanceFinancial StatementsAdditional Information Social Purpose continued
Environment
Creating programmes
with the biggest impact
on the audience and
the smallest impact
onthe planet.
Our Goal:
Reduce our carbon
emissions and waste,
and source responsibly.
Sustainable
Development
Goals
Reduce energy
New energy targets1
Flagship target
Sub targets
Reduce greenhouse gas
emissions according to
a 1.5° science based
target (SBT)
• Reduce carbon emissions by 10% each year until
SBT is in place
• Become a carbon neutral business
• Purchase 100% renewable energy and join RE100
ITV has signed up to support the Taskforce for Climate-related Financial Disclosures.
See page 62 for more information.
We are measuring our carbon emissions
more accurately
•
In 2019, we implemented a new process
to capture global greenhouse gas (GHG)
emissions to enable us to get more
accurate data. This provides a new
baseline for our science-based target
(the GHG reduction necessary at ITV for
a 1.5 degree global warming limit), and
for current and future energy reduction
• On a like-for-like basis, our 2019 emissions
reduced by 21% compared to 20182
• During 2019, we continued to invest in
emissions reduction initiatives. We began
a major infrastructure project to upgrade
the Emmerdale studios to low energy
production lighting and efficient air
conditioning, and have reduced the
impact of outside broadcasting by
expanding our use of Hybrid Electric
Vehicles across Daytime, Continuing
Dramas and Regional News
We are increasing our purchase of
renewable energy
•
In 2019 we renewed the renewable
energy contracts at all our owned sites
• We began a full renewable energy review
of our global sites. We will work with
our landlords in 2020 to increase the
number of sites powered by renewable
energy globally
We are carbon neutral
• All of ITV’s 2019 emissions from our
operations (scope 1), energy use
(scope 2) and business travel (scope 3)
were offset by purchasing certified
carbon offsetting credits
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
2019 is disclosed here for
direct (gas, vehicle fuel,
fuel oils and refrigerants
consumption) and
indirect (electricity
consumption) emissions.
2019 Greenhouse Gas Emissions
Indicator
Total gross CO2e emissions
(tCO2e)
Scope 1: Direct emissions (tCO2e)
Scope 2: Indirect emissions
(tCO2e)
Total Group Revenue
Emissions per unit/£m revenue
(tCO2e)
2019
New Baseline
2018
20,812
9,111
20,066
6,770
11,701
£3,885m
13,293
£3,766m
5.4
5.3
Source: 2019 emissions data covers 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 Scope 1 emissions,
and the latest conversion factors from the International Energy Agency
to calculate Scope 2 emissions in tonnes of carbon dioxide equivalents.
31% of our data set is based on estimated data. Estimates are calculated
from previous consumption trends and published benchmarks.
Environmental targets are new in the year and have been set as part of our new strategy. During 2020 we will develop a timeframe in order to deliver these targets.
1.
2 Had 2018 been calculated under the new methodology, the estimated total of Scope 1&2 emissions would have been 26,450 tCO2e, which equates to a 21% decrease in 2019.
46
ITV plc Annual Report and Accounts 2019
Strategic Report
Social Purpose
Reduce energy
Zero waste
Sustainable supply chain
New waste targets
New sourcing targets
Flagship target
Sub targets
Flagship targets
Sub targets
Zero waste
• Decrease waste by increasing volume
of waste avoided, reused and recycled
• Zero single-use plastics in operations,
productions and supply chain
100% sustainable
sourcing
• All our suppliers must meet our
sustainability criteria
• Support SME suppliers to improve
their environmental impact
• We conducted an in-depth review of our waste approach in our
UK offices and on location productions. In 2020 we will use
the findings and recommendations to develop a roadmap to
achieving our zero waste target
• We removed single use plastic from our hub site canteens in
London, Leeds and Manchester
• We established a working group with our main UK broadcast
peers in 2019 to develop a best practice approach to securing
a sustainable supply chain across the industry
• We are reviewing how to evaluate the environmental risk of our
suppliers, and what tools and platforms we need to track action
on those risks. This information will enable us to determine the
roadmap to our 100% sustainable supply chain target
Sustainable culture
On-screen initiatives
New culture targets
Flagship target
Sub targets
100% training
• Environmental awareness training
for all staff and freelancers
100% albert
certification1
• For all programmes we produce
and commission
• We recognise the role ITV plays in covering the climate crisis and
promoting sustainable behaviours. We covered environmental
topics in a number of programmes in 2019, such as on current
affairs show Tonight and through the On Assignment
international magazine programme
•
ITV News’s latest series Earth on the Edge featured monthly
reporting on how climate change is happening in our world today,
covering the topics of water shortages, extreme heat, rising sea
levels, overpopulation and pollution
• We increased the number of productions being recognised
for sustainable production practices in 2019 by 92%, with
73 programmes achieving albert certification. We have
encouraged all our productions to complete the albert
calculator2 and certification and reduce their impact
• We almost tripled the number of colleagues completing
environmental training online or in person, to over 1,800.
An internal engagement series on the climate crisis
achieved the highest feedback rating of any 2019 event
• We established an ITV Green Team Steering Group, with
representatives from all business areas, to help deliver
our environmental targets throughout the business
1.
albert sustainable production certification is a certification for a television production’s efforts to reduce its carbon footprint.
Productions are rewarded with one, two or three stars for reducing the impact of their production.
2. albert carbon calculator quantifies the carbon impact of a production.
47
Strategic ReportGovernanceFinancial StatementsAdditional Information Social Purpose continued
Giving Back
Giving back to our local
and international
communities through
causes we care about.
Our Goal:
Raise over £6 million
a year for Soccer Aid,
increase staff
volunteering and lend
our support to causes.
Sustainable
Development
Goals
XXXX
Soccer Aid
Soccer Aid for Unicef is a partnership
between Unicef and ITV that has
raised £38 million since the appeal
began in 2006.
Unicef is the world’s leading organisation
for children in danger, and is ITV’s principal
fundraising partner.
The campaign
The 2019 Soccer Aid for Unicef football
match saw women join the team for the
first time. ITV editorial supported Soccer Aid
from daily updates on Good Morning Britain
through to The Chase Celebrity Special.
Results
Raised
£7.9m
The programme achieved an average
audience of nearly four million and over
£7.9 million was raised, beating our target.
Volunteering
All ITV employees are encouraged
to take three days a year to
volunteer and in December 2019
we launched a volunteering month.
•
In 2019 we renewed our partnership with
volunteering social enterprise Benefacto
to ensure colleagues are able to easily find
organisations to give their time to
• Over 1,000 colleagues volunteered
with take-up of the volunteering days
increasing by 11% year-on-year
•
ITV came top of the GivX Index of
companies for corporate giving, and
was listed by Tortoise Responsibility
100 Index as the most generous
company in the FTSE 100
48
ITV plc Annual Report and Accounts 2019
Diversity
& Inclusion
Fostering creativity
by championing diversity
and encouraging
inclusion.
Our Goal:
Improve gender,
BAME, disability and LBGT+
representation on and
off screen by 2022.
Sustainable
Development
Goals
Strategic Report
Social Purpose
ITV’s creative and commercial talent is vital
to our success as a business so we seek to
attract a workforce that is diverse in all
respects, and to nurture an inclusive,
enabling environment for all. We also
ensure that ITV is for everyone, by working
towards true representation on-screen,
as well as behind-the-screens.
On-screen
On-screen targets by 2022
Gender
50%
BAME
15%
Declared disability
10%
LGBT+
7%
Off-screen
ITV workforce targets by 2022
Gender
Declared disability
50%
of women in SLT,
managers and
colleagues
8%
of SLT, managers
and colleagues
BAME
LGBT+
7%
of SLT, managers
and colleagues
15%
of SLT, managers
and colleagues.
And 30% women,
and 10% BAME on
the PLC Board.
SLT = Senior Leadership Team, the top c.200 senior leaders
in the business.
1.
Data as at 31 December 2019.
Page 51 further details on our approach
to recruiting, retaining and developing
a diverse workforce, and the recognition
we have received. For information regarding
the Board’s diversity policy, see page 101.
We work hard to ensure ITV reflects
and represents everyone on-screen.
One of the key tools for this is our Social
Partnership Commissioning Commitments
form that every production uses. This
details the commitments producers are
expected to make around diversity and
inclusion, alongside environmental
sustainability and charitable causes.
Programme-makers are expected to
actively consider the diversity of not
just lead characters, presenters and
contributors, but also the secondary
and background roles, and those behind
the camera too. They are also required
to ensure case-studies, features and
storylines themselves reflect a diverse
range of storytelling.
In 2019 we published for the first time
ambitious targets on workforce diversity.
A wide range of initiatives will help us
reach these objectives, see page 51 for
more detail.
ITV has published its gender pay report
which includes reporting on ethnicity pay,
www.itvplc.com/investors/governance
For more information see our Social
Purpose Report and website:
www.itvplc.com/socialpurpose
Progress against Targets1
BAME
LGBT+
We have increased representation of BAME
colleagues to 12.1% among colleagues
and 9.4% and 9.8% of SLT and managers
respectively. On-screen we surpassed
our representation of BAME at 21.4%.
We have surpassed our target for on-screen
representation, which is at 14.0% for LGBT+,
and for all colleagues and managers. We’re
working on SLT representation which is
currently at 4.0%.
Gender
Declared disability
We have surpassed our on-screen targets
and most of our off-screen targets, with
53.6% of colleagues and 51.0% of managers
being female. With women making up
44.8% of our senior leadership team (SLT)
we are ahead of most of the FTSE 100, but
we are still working on reaching 50%.
ITV has been ranked in the 2019 Hampton
Alexander Review as the fourth best
performer in the FTSE 100 for gender
diversity in our combined Executive
Committee and direct report roles (42.1%).
Representation amongst all colleagues
has increased to 7.0%. We have surpassed
our target for SLT, but continue to work
to increase the number of managers
and colleagues with disability, as well
as on-screen representation, which is
currently at 5.8%.
49
Strategic ReportGovernanceFinancial StatementsAdditional Information Our People
Our people are the driving force of ITV. We are dedicated to
nurturing an inclusive working environment where everybody
can reach their full potential and thrive, and our ambition is to
be the most flexible employer across Media and Entertainment.
The ITV Way reinforces our values,
defines our ways of working and how
we treat each other – supporting us
to deliver our strategy. These values
are encapsulated in our Code of Conduct,
which in turn reinforces the importance
of maintaining high standards of safety
and applying good ethics and judgement
when making decisions.
For more details on our culture, and how
the Board monitors and assesses culture,
please see page 94
The ITV Way
Make it brilliant
Creativity for everyone, without fear or caution
At ITV we connect with millions of people every day, make
content they can’t get enough of and reflect and shape the
world we live in… and we do all of this through the power of
creativity. That means creativity at scale. It means creativity
without fear or caution. It means creativity from everyone.
For everyone. Every day.
Make it new
Openness to change, with no barriers
ITV is a place to make things happen. New ideas. New shows.
New takes on old shows. New technology. New relationships
with our audiences and customers. There are no barriers here.
ITV is changing. And when we change, we change the game,
because we reach millions.
Make it together
Collaborating, respecting and embracing differences
ITV is for everyone. It is yours. It is ours. It is open. So take
ownership. Work together. Embrace every difference.
Our difference creates better stories. Our difference
makes a difference. We are together. We are proud.
50
ITV plc Annual Report and Accounts 2019
Strategic Report Our People
Department for Work and Pensions with
Disability Confident Leader accreditation.
The Company gives full and fair consideration
to the employment of people with a
disability or health condition, and
guarantees an interview to any candidate
with a disability who meets the minimum
requirement for a role. We continue to work
with specialist providers who advise and
support colleagues and managers regarding
workplace adjustments as well as any
adjustments candidates need through the
application and hiring process. 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 equal career opportunities for
growth and progression. For any employee
who becomes disabled whilst in
employment we ensure the right support
is in place to enable them to return to work.
This may include an occupational health
assessment, a phased return to work and
reasonable adjustments as required,
supported by our specialist partners. We
recognise that not all disabilities are visible
and that mental health is also a type of
disability we need to consider. We have
become members of the Valuable 500 and
as a member we are committed to putting
disability inclusion on the leadership agenda.
On recruitment and development of a
diverse workforce more widely, we are
members of the Apprenticeship Diversity
Champions Network, which aims to make
a positive change to diversity and inclusion
in apprenticeships and increase BAME,
disability, and disadvantaged background
representation. As part of our pledge we
have committed to increase the diversity,
particularly in BAME and disability
representation, of our apprentices by
15%. We continue to actively participate
in the Social Mobility Business Partnership
and support the Social Mobility Pledge to
enable people of all backgrounds to reach
their full potential in the workplace. We
have continued to successfully develop
Company wide initiatives, including: the
establishment of a new Inclusion Council
chaired by the Chief Executive; the launch
of ITV Able (our Disability Network); the
roll out of an updated interview skills for
hiring managers masterclass to ensure
our recruitment and selection is consistent
and inclusive; and the introduction of
inclusive leader sessions regarding working
inclusively and being aware of bias.
For further information on our Diversity and
Inclusion strategy in our Social Purpose,
including our gender and BAME workforce
metrics, please see page 49 and our Social
Purpose Report. For further information
on the Nominations Committee’s work in
Diversity and Inclusion and the Board
Diversity policy, please see page 101.
Investing in and rewarding our people
We are committed to investing in and
building a productive, creative and diverse
workforce. We adopt a comprehensive
and inclusive approach to investing in
and rewarding our workforce, ranging
from apprenticeship and mentoring
programmes, to the ITV Career Returners
Programme that offers experienced and
talented professionals the opportunity
to return to the career they love after
an extended break.
We continue to invest in the development
of our workforce through a range of
on-line and classroom based workshops,
including our on-line development portal
‘My Academy’. These build leadership
and line manager capability and support
personal skills development, wellbeing
and resilience for all colleagues.
At ITV, we understand the need to stay
competitive to retain our talent. Our
approach to attracting and retaining
talent through pay is set out on page 129.
Our successful and popular Save As You
Earn scheme gives our workforce the
opportunity to engage with and celebrate
in ITV’s success, and encourages voluntary
investment in ITV shares. ITV’s package
of voluntary benefits also provides
valuable cost savings for both colleagues
and the Company. Further information
on the Remuneration Committee’s
consideration of workforce remuneration
and related policies see page 129.
Health, Safety and Wellbeing
We prioritise the health, safety and
wellbeing of our employees, contractors
and those participating in our productions.
Please refer to page 65 for information
on our policies and commitment to
our colleagues’ health and safety. For
information on our health and safety
work from a wellbeing and mental
health perspective, please refer to the
‘Off-screen initiatives’ on pages 44 to 45.
51
Engagement
We are committed to regularly engaging
with the workforce to ensure their views
are heard and understood. Our colleagues
are encouraged to communicate and
engage with each other, management
and the Board through both formal and
informal channels. This year, a full employee
engagement survey was undertaken to
give employees the opportunity to provide
feedback anonymously. For further
information on how the Board and
management engages with the workforce,
please see pages 92 and 93.
Diversity and Inclusion
At ITV, we understand and value the
creativity that diversity brings to our
business, and want to ensure that we have
an inclusive environment where everyone
can be their authentic self. Our aim is to
reflect the diversity of modern society
both on and off-screen.
To celebrate and have engagement around
our inclusive environment, ITV has five
colleague networks – ITV Pride (our LGBT+
network), The Women’s Network, ITV
Balance (to discuss work-life balance), ITV
Embrace (our BAME network) and ITV Able
(our Disability Network). These networks
are open to all colleagues. Please refer to our
Social Purpose Reports (on our website) for
further information on the networks’
inspirational events with external speakers,
development workshops and other activities.
On disability, ITV’s steadfast commitment
to recruiting, retaining and developing
disabled people has been recognised by the
Strategic ReportGovernanceFinancial StatementsAdditional Information Alternative Performance Measures
The Annual Report and Accounts 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.
The Audit and Risk Committee have oversight of ITV’s
APMs and actively review, revise and approve the policy
for classifying adjustments and exceptional items. Further
detail is included on page 108.
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 the gain/loss on the sale of non-current assets,
amortisation and impairment of assets acquired through business
combinations and investments, 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 in the
Tax section of the Financial Review.
Exceptional items
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. These include, but are not
limited to, acquisition-related costs, reorganisation and restructuring
costs, property costs, non-routine legal costs and non-routine
pension-related costs. We also adjust for the tax effect of these
items. Note 2.2 to the financial statements includes further detail.
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 initiatives to reduce the ongoing cost base
and improve efficiency in the business, to enable the delivery
of our strategic priorities. 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 initiative, these costs
are highlighted and are excluded from our adjusted measures.
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, one-off
fees and premiums relating to the buyback of bonds, 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.
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. Selling programmes to the Broadcast and Direct
to Consumer business is an important part of our strategy
as an integrated producer broadcaster, and it ensures we own
all the rights to the content.
A reconciliation between external revenue and total revenue
is provided below.
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
Twelve months to 31 December
External revenue (Reported)
Internal supply
Total revenue (Adjusted)
2019
£m
3,308
577
3,885
2018
£m
3,211
555
3,766
52
ITV plc Annual Report and Accounts 2019
Strategic Report 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 profits on JVs and Associates
Gain 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)
2019
Statutory
£m
693
(84)
(74)
535
(68)
1
2019
Adjustments
£m
36
84
63
183
28
–
(62)
149
(67)
82
–
82
62
530
(52)
478
(5)
473
4,000
11.8p
11.8p
2019
Adjusted
£m
729
–
(11)
718
(40)
1
–
679
(119)
560
(5)
555
4,000
13.9p
13.8p
2018
Statutory
£m
785
(93)
(92)
600
(43)
–
2018
Adjustments
£m
25
93
85
203
7
–
(10)
200
(49)
151
–
151
–
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
£36 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.
1.
2. Exceptional items largely relate to acquisition costs, primarily employment linked consideration, as well as restructuring and property costs, along with the gain on sale from the
London Television Centre. Further detail is included in the Finance Review.
3. £63 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. £28 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.
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.
Adjusted free cash flow
This is our measure of adjusted 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.
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.
At 31 December
Net debt
Expected contingent payments on acquisitions
Net pension deficit
Lease liabilities**
Adjusted net debt
Adjusted net debt to adjusted EBITDA
Reported net debt to adjusted EBITDA
2019
£m
(804)
(230)
(87)
(89)
(1,210)
1.5x
1.0x
2018*
£m
(927)
(252)
(38)
(147)
(1,364)
1.6x
1.1x
*
The Group has adopted IFRS 16 under the modified retrospective approach and is not
required to restate 2018 numbers.
** The 2018 lease liabilities represent the undiscounted operating lease commitments of
£147 million which when converted to IFRS 16 discounted liabilities is £121 million.
Net pension deficit/surplus
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 to the financial statements.
53
Strategic ReportGovernanceFinancial StatementsAdditional Information Finance Review
ITV delivered a strong operating performance in 2019
despite the uncertain economic environment, and is making
good progress in executing the strategy to build a digitally
led media and entertainment company.
While the macro environment in 2019
continued to impact the demand for television
advertising and therefore ITV’s financial
performance, our full year results were ahead
of expectations, and we have made good
progress in executing our strategy. Our
investment and cost saving programmes
are on track, and our focus on cash and costs
enables us to make the right investment
decisions to build a robust and growing
business and to deliver returns to shareholders
in line with our guidance.
Chris Kennedy
Group Chief Financial Officer
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 Measures section explains the
adjustments we make to our statutory results and focuses on
the key measures that we report on internally and use as KPIs
across the business.
Twelve months to 31 December
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
2019
£m
1,768
2,117
3,885
(577)
3,308
729
22%
693
13.9p
11.8p
8.0p
(804)
2018
£m
Change
£m
Change
%
1,795
1,971
3,766
(555)
3,211
810
25%
785
15.4p
11.7p
8.0p
(927)
(27)
146
119
(22)
97
(1.5)
7
3
(4)
3
(81)
(10)
(92)
(12)
(1.5)p
0.1p
–
123
(10)
1
–
13
Total ITV revenue grew by 3% to £3,885 million (2018: £3,766
million), with external revenue also up 3% to £3,308 million
(2018: £3,211 million). Total advertising revenue was down 1.5%,
slightly better than expectations. VOD revenue was up 21%
year-on-year but was more than offset by the decline in NAR.
Total non-advertising revenue was up 7% to £2,117 million (2018:
£1,971 million). ITV Studios total revenue increased by 9% to
£1,822 million (2018: £1,670 million), with growth across all parts
of the business. The net impact of currency in the year was nil.
Direct to Consumer revenue grew 4% to £84 million (2018:
£81 million), with strong growth in ITV Hub+ subscriptions.
Group adjusted EBITA declined 10% to £729 million (2018:
£810 million). ITV Studios adjusted EBITA was up 5% at £267 million
(2018: £255 million) with the adjusted EBITA margin flat at 15%,
in line with our guidance. Broadcast adjusted EBITA (excluding the
£21 million investment in BritBox UK) declined 13% to £483 million
(2018: £555 million), with a margin of 23%. Total Broadcast adjusted
EBITA (including BritBox UK) was £462 million, with a 22% margin.
This was impacted by the decline in TAR and the investments we
are making in schedule costs with higher spend on sport and
drama, marketing, the ITV Hub, ITV Hub+, data, technology and
BritBox UK to build a robust and growing business. Group statutory
EBITA declined 12% to £693 million (2018: £785 million) which
was more than the decline in adjusted EBITA due to an increase
in high-end production tax credits in the year, which are included
only in adjusted EBITA.
54
ITV plc Annual Report and Accounts 2019
Strategic Report Finance Review
Included within other items are: the release of legal cost accruals
in relation to litigation outside the normal course of business
settled in the year; the release of the Box Clever provision; and
the movement in the insured trade receivables provision.
This was partly offset by costs in relation to the cancellation
of The Jeremy Kyle Show.
Non-operating exceptional items relate to the gain on sale of the
London Television Centre, which was sold in November 2019.
Further details are provided in note 3.2 to the financial statements.
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
Other net financial losses and unrealised foreign
exchange
Net financing costs
2019
£m
2018
£m
(31)
(8)
(1)
(40)
(1)
(27)
(68)
(30)
(5)
(1)
(36)
(2)
(5)
(43)
Adjusted financing costs were up £4 million year-on-year at £40
million (2018: £36 million) reflecting higher levels of net debt during
the year, foreign exchange and the impact of IFRS 16. Statutory net
financing costs were £68 million, up £25 million year-on-year (2018:
£43 million), largely due to one-off fees and premiums in relation to
the buyback of €506 million of Eurobonds in the year as well as the
acceleration of amortisation on these bonds. The cash impact of the
buyback was small.
JVs and associates
There was a £1 million share of profits from JVs and associates
in the year (2018: £nil), relating to the net profit from a range of
investments, including BritBox US and Canada, Blumhouse and
Circle of Confusion.
Adjusted EBITA tracker
£m
850
810
800
750
700
25
13
(3)
(27)
(36)
810
(32)
729
(21)
December
2018
Total
Advertising
Revenue
ITV
Studios
Cost
Savings
Other
Network
Schedule
Essential
Invest-
ments
BritBox
UK
December
2019
Adjusted financing costs were up £4 million year-on-year and our
adjusted tax rate came down to 18% from 19% in 2018. The net of
these movements resulted in a 10% decline in adjusted EPS to
13.9p (2018: 15.4p). Statutory EPS was up 1% to 11.8p, predominantly
due to the gain on sale of the London Television Centre on the
South Bank, our previous London headquarters.
Our key strengths include our high margins and cash conversion,
which, together with our ongoing focus on costs, put us in a good
position to balance investment in growing an even stronger and
more resilient business going forward, while delivering returns to
our shareholders in line with our guidance.
Exceptional items
Twelve months to 31 December
Acquisition-related expenses
Restructuring and property-related costs
Pension related costs
Other
Total operating exceptional items
Non-operating exceptional items
Net exceptional items
2019
£m
(75)
(24)
1
14
(84)
62
(22)
2018
£m
(60)
(26)
4
(11)
(93)
10
(83)
Total exceptional items in the period were £22 million (2018:
£83 million). Operating exceptional items principally relate
to acquisition-related expenses, which are predominantly
performance based, employment-linked consideration to former
owners, and professional fees (mainly financial due diligence
and legal costs in respect of potential acquisitions during the year).
Restructuring and property-related costs of £24 million relate
primarily to one-off restructuring projects stemming from the
Group-wide commitment to reduce the overhead cost base and
those costs associated with the delivery of the strategy.
55
Strategic ReportGovernanceFinancial StatementsAdditional Information Finance Review continued
Profit before tax
Adjusted profit before tax, after amortisation and impairment of
assets and financing costs, was down 11% at £679 million (2018:
£767 million). Statutory profit before tax decreased by 7% to
£530 million (2018: £567 million) in the year. Production tax credits
increased to £36 million in the year (2018: £25 million) as a result
of more high-value dramas such as World on Fire, Line of Duty,
A Confession and Noughts and Crosses.
Cash tax
Cash tax paid in the period was £108 million (2018: £92 million) and
is net of £37 million of production tax credits received (2018:
£27 million). The majority of the cash tax payments were made
in the UK. The cash tax paid is higher compared to the previous
year due to the timing of tax credit receipts, and the receipt in
the previous year of a prior year repayment. A reconciliation
between the tax charge for the year and the cash tax paid in
the year is shown below.
Profit before tax (PBT)
Twelve months to 31 December
Profit before tax
Production tax credits
Net exceptional items
Amortisation and impairment*
Adjustments to net financing costs
Adjusted profit before tax
2019
£m
530
36
22
63
28
679
2018
£m
567
25
83
85
7
767
*
In respect of assets arising from business combinations and investments.
Tax
Adjusted tax charge
The total adjusted tax charge for the period was £119 million (2018:
£146 million), corresponding to an effective tax rate on adjusted
profit before tax (PBT) of 18% (2018: 19%), which is slightly lower
than the standard UK corporation tax rate of 19% (2018: 19%). We
expect the effective tax rate to be between 18% and 19% over the
medium term, if, as is expected, the UK government announce that
the previously enacted reduction in the UK statutory tax rate to 17%
from 1 April 2020 is reversed. On a reported basis, the tax charge of
£52 million (2018: £97 million) corresponds to an effective tax rate
of 10% (2018: 17%). The reported rate is lower than the prior year
due to the tax treatment of the sale of the London Television Centre
and an increase in high-end production tax credits. 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.
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
2019
£m
(52)
(36)
(6)
2018
£m
(97)
(25)
(9)
(19)
(14)
(6)
(119)
18%
(1)
(146)
19%
*
In respect of intangible assets arising from business combinations and investments.
2018 also reflects the cash tax benefit of tax deductions for US goodwill.
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
2019
£m
(52)
(21)
(8)
(81)
(28)
1
(108)
2018
£m
(97)
(37)
14
(120)
26
2
(92)
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 we
have in place appropriate 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. 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.
56
ITV plc Annual Report and Accounts 2019
Strategic Report Finance Review
EPS – adjusted and statutory
Overall, adjusted profit after tax was down 10% at £560 million
(2018: £621 million). After non-controlling interests of £5 million
(2018: £4 million), adjusted basic earnings per share was 13.9p
(2018: 15.4p), down 10%, which is consistent with the decrease in
adjusted EBITA of 10%. The weighted average number of shares
remained broadly flat year-on year at 4,000 million (2018:
3,999 million). Diluted adjusted EPS in 2019 was 13.8p (2018: 15.4p)
reflecting a weighted average diluted number of shares of
4,018 million (2018: 4,013 million).
Statutory EPS increased by 1% to 11.8p (2018: 11.7p) predominantly
due to the gain on sale of the London Television Centre in the year
and the related tax impact.
Acquisitions
Since 2012, we have acquired a number of content businesses in
the UK, US and creative locations across Europe and the Middle East,
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 Studios 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.
A full reconciliation between statutory and adjusted EPS is included
within the Alternative Performance Measures section.
During 2019, we increased our holding in Monumental Television
in the UK to take a controlling interest and we acquired Armoza
Formats, an Israeli formats creator and distributor.
Dividend per share
Reflecting ITV’s continued good operational performance, the
Board has proposed a full year dividend of 8.0p which is flat
year-on-year. This is in line with the Board’s intention to pay
a full year dividend of at least 8.0p in 2019.
The Board is planning to pay another full year dividend of 8.0p
in 2020. The Board intends to announce a medium-term dividend
policy with the full year 2020 results, once greater clarity is
established on the economic environment and outlook in the
UK following its departure from the European Union.
Dividends are distributed based on the realised distributable
reserves (within retained earnings) of ITV plc (the Company) and
not based on the Group’s retained earnings. The 2019 full year
dividend will be paid on 21 May 2020.
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.
57
Strategic ReportGovernanceFinancial StatementsAdditional Information Finance Review continued
Acquisitions – between 2012 and 2019 (undiscounted)
Company
Geography
Genre
Initial
consideration
£m
Additional
consideration
paid
£m
Expected
future
payments*
£m
Total
expected
consideration**
£m
Expected
payment
period
Total for 2012–2019
Various
Content & Broadcast TV
972
191
230
1,393
2020-2025
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. Total maximum consideration which was
potentially payable at the time of acquisition was £2.4 billion.
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 expected consideration
payable, which is only payable if exceptional compound earnings
growth is delivered.
Acquisition-related liabilities or performance-based employment-
linked earnouts are amounts estimated to be payable to previous
owners. The estimated future payments of £230 million are
sensitive to forecast profits as they are based on a multiple of
earnings. The estimated future payments, treated as employment
costs, are accrued over the period the sellers are required to
remain with the business, and those not linked to employment
are recognised at acquisition at their time discounted value.
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 £230 million have decreased by £22 million since
31 December 2018, due to payments made to acquire full
ownership of Gurney Productions and High Noon and earnouts
paid to Mainstreet and Leftfield. This was partly offset by an
increase in expected future payments on certain acquisitions.
At 31 December 2019, £197 million of expected future payments
had been recorded on the balance sheet.
A large proportion of the expected future payments relate to
our best estimate of the final payment we will make in relation
to the acquisition of Talpa. The amount payable will depend on
the average EBITDA from 2017 to 2019 being between €75 million
and €100 million. Contractually the payment is capped at
€400 million if the average EBITDA for 2017-2019 is €100 million
or more. See Note 3.1.5 of the Financial Statements for further detail.
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
new London headquarters
Lease liability payments
Adjusted cash flow
Profit to cash ratio
2019
£m
729
(63)
1
56
2018*
£m
810
(93)
2
28
10
10
(68)
(82)
2
(35)
632
87%
37
–
712
88%
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.
*2018 has not been restated for the impact of IFRS 16
One of ITV’s strengths is its cash generation reflecting our ongoing
tight management of working capital balances. We manage risk
when making all investment decisions, particularly into scripted
content and BritBox UK, through having a disciplined approach to
cash and costs. This is particularly important when there is wider
political and economic uncertainty.
In the year, we generated £632 million of adjusted operational cash
(2018: £712 million) from £729 million of adjusted EBITA (2018:
£810 million), resulting in a profit to cash ratio of 87% (2018: 88%)
which included investment in Planet V, our addressable advertising
platform, in scripted productions and in BritBox UK. Profit to cash
conversion excluding BritBox UK was 88%.
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 2019, £100 million of receivables were sold
under the purchase agreement (2018: £100 million). From 2020
onwards, movements in this receivables facility will be excluded
from our profit to cash conversion calculation.
58
ITV plc Annual Report and Accounts 2019
Strategic Report Finance Review
Adjusted free cash flow
Twelve months to 31 December
Adjusted cash flow
Net interest paid
Adjusted cash tax*
Pension funding
Adjusted free cash flow
2019
£m
632
(54)
(145)
(74)
359
2018
£m
712
(42)
(119)
(82)
469
*
Adjusted cash tax of £145 million is total cash tax paid of £108 million plus receipt
of production tax credits of £37 million, which are included within adjusted cash
flow from operations, as these production tax credits relate directly to the
production of programmes.
Our adjusted free cash flow after payments for interest, cash
tax and pension funding in the period was £359 million (2018:
£469 million).
Overall, after dividends, acquisitions and acquisition-related costs,
pension and tax payments, we ended the period with net debt of
£804 million, compared with net debt of £1,082 million at 30 June
2019 and £927 million at 31 December 2018. Included within 2019
net debt is £50 million of restricted cash in relation to the sale of
the London Television Centre, see further detail on page 61.
There was a £12 million net exceptional cash inflow in the year
(2018: £90 million outflow) largely due to the timing of VAT
received on the sale of the London Television Centre, and
acquisition related cashflows.
Net debt tracker
Funding and liquidity
Debt structure and liquidity
The Group’s financing policy to manage its liquidity and funding risk is
to fund itself for the medium to long-term. ITV uses debt instruments
with a range of maturities to ensure access to appropriate short-term
borrowing facilities with a minimum of £250 million of undrawn
facilities available at all times. To manage our liquidity, during the
year we extended the maturity of our debt instruments. We also
have a number of facilities in place to preserve our financial flexibility,
which includes 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. In total £930 million of facilities
remained undrawn at 31 December 2019.
Net debt
At 31 December
Gross cash
Gross debt
Net debt
2019
£m
246*
(1,050)
(804)
2018
£m
95
(1,022)
(927)
*
Gross cash includes £50 million of restricted cash in relation to the LTVC Pension
Funding Partnership. See page 203.
Financing – gross debt
We are financed using debt instruments and facilities with a range of
maturities. Borrowings at 31 December 2019 were repayable as follows:
£m
0
(200)
(400)
(600)
(800)
359
(70)
(1,000)
(927)
(1,200)
(320)
Amount repayable as at 31 December 2019
£630 million Revolving Credit Facility
€600 million Eurobond
€335 million Eurobond
€259 million Eurobond
Other loans
Total debt repayable on maturity*
* Net of £24 million cross-currency swaps.
12
146
(4)
(804)
£m
–
Maturity
Various
508 Sep 2026
283 Sep 2022
219 Dec 2023
Various
16
1,026
Dec 18
Net debt
Adjusted
free cash
flow
Acquisition
of invest-
ments
and NCI
Dividends
paid
Excep-
tional
items
Sale of
London
TV Centre
Other
Dec 19
Net Debt
In September, ITV issued a new €600 million seven year Eurobond
at a coupon of 1.375% which was swapped into sterling using
a number of cross currency swaps. The net sterling interest
rate payable on these swaps is 2.94%. The proceeds of the bond
were used to partly refinance the existing notes which expire in
2022 and 2023 to extend ITV’s debt maturity, and to pay down
part of the RCF.
At 31 December 2019, the £630 million RCF was undrawn.
59
Strategic ReportGovernanceFinancial StatementsAdditional Information Finance Review continued
Capital allocation and leverage
Our objective is to run an efficient balance sheet and manage our
financial metrics appropriately, consistent with investment grade
metrics. At 31 December 2019 reported net debt to adjusted
EBITDA was 1.0x (31 December 2018: 1.1x).
We also use 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 discounted IFRS 16 lease liabilities, which mainly relate
to property. This adjusted leverage metric better reflects how the
credit rating agencies look at our balance sheet. At 31 December
2019 adjusted net debt was £1,210 million (31 December 2018:
£1,364 million) and adjusted net debt to adjusted EBITDA was 1.5x
(31 December 2018: 1.6x). A reconciliation of net debt to adjusted
net debt is provided in the APMs, see page 53.
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 returns to shareholders.
Our investment decisions are based upon value creation and
returns analysis. Our returns analysis looks at all aspects of value
creation and the long-term future value of our investments in
ITV Studios, Broadcast and Direct to Consumer.
Credit ratings
We continue to be 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.
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 set out
in our Treasury policies which are approved by the ITV plc Board.
60
ITV plc Annual Report and Accounts 2019
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
+/- 50–60
+/- 35–45
Adjusted EBITA
£m
+/- 7–9
+/- 4–6
Pensions
The net pension deficit for the defined benefit schemes at
31 December 2019 was £87 million (31 December 2018: £38 million
deficit). The year-on-year increase in the deficit was principally due
to a decrease in bond yields, offset by a reduction in the market
implied inflation, our deficit funding contributions and an increase in
asset values following a strong performance in the equity markets.
The net pension assets include £58 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
50
74
(38)
£m
200
100
0
(100)
(200)
(300)
(400)
(500)
284
(6)
(87)
(451)
Dec 18
Deficit
funding
Decrease
in inflation
assumptions
Decrease
in bond
yields
Other gains
in scheme
assets
Other
Dec 19
Actuarial valuation
The last triennial actuarial valuation was undertaken in 2017.
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. The next actuarial valuation will be
as at 1 January 2020.
Strategic Report Finance Review
Closure to future accrual
Following a member consultation, in 2019 the Group decided to
close the defined benefit sections of the UTV Pension Scheme
to future benefit accrual with effect from 31 March 2019. Members’
benefits are no longer linked to pensionable salary; the benefits are
now linked to statutory revaluation until retirement. This change
has resulted in a one-off, non-cash curtailment credit of £1 million
and is recognised within exceptionals.
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 2019 were £74 million.
Further details are included within note 3.7 to the financial
statements. In 2020 we expect deficit funding contributions
to be in line with 2019 at around £75 million.
SDN pension funding partnership
In 2010, ITV established a Pension Funding Partnership (PFP) with
the Trustees backed by SDN which resulted in the assets of Section
A of the defined benefit pension scheme being increased by
£200 million. The Group is contracted to provide additional
collateral to support the original value of the structure at the rate
of £50.7 million each year from March 2019 to March 2022. This cash
collateral would not leave the Group, but would be maintained in
a restricted bank account. The Trustee agreed to accept a bank
guarantee as an alternative to the 2019 collateral instalment with
the result that £101 million becomes due in March 2020. However,
we are looking to agree with the Trustee a similar approach in
respect of that payment. The PFP is currently being reviewed as
we look to replace it with an alternative asset. If the asset in the
|SDN PFP structure is not replaced, the Group will pay to the pension
scheme the lower of any deficit calculated on the funding basis in
2022 or £200 million.
London property
On 8 November 2019, ITV exchanged contracts for the sale of
the London Television Centre on the South Bank to Mitsubishi
Estate London Limited in an all-cash transaction for £145.6 million.
Completion of the sale occurred at the end of November. 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 defined benefit pension scheme being increased
by £50 million. Part of the proceeds of the sale of the South Bank
site, net of tax and fees, has been used to replace the asset security,
and therefore £50 million of the proceeds has been held in a
restricted bank account as a replacement asset in the pension
funding arragement. The remaining sale proceeds have been used
to reduce ITV’s net debt. The accounting profit on the sale of the
South Bank has been treated as exceptional.
New accounting standards
IFRS 16 ‘Leases’, was effective from 1 January 2019. The Group has
adopted the modified retrospective approach with the right of use
asset equal to the lease liability at transition date. IFRS 16 has no
impact at a profit before tax level but increases both our full year
EBITA and interest by £4 million and gross liabilities by £89 million
with net assets remaining largely unchanged. Section 1 of the notes
to the financial statements provides further detail on this new
accounting standard.
2020 full year planning assumptions
Profit and Loss impact
• Total schedule costs are estimated to be around £1.11 billion
• Total essential investment of around £18 million in 2020, which
includes £10 million as previously guided, and the phasing of
2019 investments which fall into 2020
• Total BritBox UK venture losses of £55 million to £60 million,
£6 million higher than previously anticipated due to the timing
of 2019 investment which falls into 2020. This is broadly in line
with the £40 million of net investment previously guided, plus the
£6 million of 2019 investment which has been rephased into 2020
• Cost savings expected to be around £10 million
• Adjusted interest is expected to be around £40 million, which is
in line with 2019
• The adjusted effective tax rate for 2020 is expected to be around
18% to 19% and remain at that level over the medium term
• The translation impact of foreign exchange, assuming rates
remain at current levels, could have an adverse impact of around
£50 million on revenue and around £7 million on profit
• Exceptional items are expected to be around £25 million, mainly
due to acquisition related expenses, and restructuring and
reorganisation costs
Cash impact
• Cash tax will reflect six quarters of UK corporation tax payments,
rather than the standard four quarters. This is a one-off phasing
impact and will return to four quarters in 2021
• Total capex is expected to be around £95 million which includes
investment in our addressable advertising platform and our
US property moves
• The cash cost of exceptionals are expected to be around
£210 million, largely relating to accrued earnouts which
includes the final earnout payment for Talpa
• Profit to cash conversion is expected to be around 75% to 80%
reflecting our continued good cash generation , investment
in ITV Studios scripted working capital, our addressable
advertising platform and BritBox
• Total pension deficit funding contribution for 2020 is expected
to be around £75 million, in line with 2019
• The Board intends to pay a full year dividend of 8.0p for 2020
Chris Kennedy
Group Chief Financial Officer
61
Strategic ReportGovernanceFinancial StatementsAdditional Information Task Force on Climate-related
Financial Disclosures (TCFD)
We recognise the climate crisis and the role
we must play to mitigate the impacts on
both the wider world and our own business.
Our commitment is demonstrated by our
public support for TCFD. Climate change
could pose particular challenges to our
productions, supply chain and operations.
For the first time we are making disclosures
structured around the TCFD framework.
We will develop the depth of our TCFD
disclosure over time as we complete
this analysis.
Governance
We recognise that evaluating and
monitoring the challenges we face
regarding climate change as a business
requires the embedding of a climate change
focused mindset, supported by an effective
governance process. A summary of the
governance structure we are implementing
from 2020 onwards, approved by the Board,
is set out on this page. Below the
Management Board level, we are working
on climate change related targets, and
monitoring these, at the Studios, Integrated
Broadcast and BritBox business division
levels to further drive changes to our
business practices. Underpinning this
structure is the ITV Green Team made
up of senior managers from every business
area, embedding and championing
environmentally sustainable behaviours
across the organisation and assessing
and identifying risk as part of our risk
management process.
Strategy
Action on climate change is defined within
ITV’s Social Purpose strategy as set out
on page 46. Reducing our impact on the
environment is one of the four pillars of
the strategy, underpinned by environmental
targets that have been informed using the
climate-related risks and opportunities we
have identified over the short, medium and
long term. These targets cover the areas
that are most material to our business: the
emissions we create, the waste we make,
the sustainability of our supply chain, and
the everyday culture of the business.
In 2020, ITV will also conduct scenario
analysis to understand the risks and
opportunities climate change poses to
the business, and the ways to mitigate and
adapt to different possible outcomes. The
results of our scenario analysis will inform
our long-term strategic business planning.
Group CFO
The Group CFO is a member of, or attends, each of the below Boards/
Committee and is responsible for:
• the business climate-related agenda, including risks and opportunities
• driving the required behaviours to focus the business on climate
change related issues
• ensuring such issues are considered and actioned at the right levels
PLC Board
Climate change risk, opportunities and targets will be:
• brought to the Board annually
• considered as part of the bi-annual review of principal and emerging risks
• considered as part of stakeholder engagement
Audit and Risk
Committee
In late 2019, the Committee discussed climate change risks as part of
the Company’s emerging risks. The Committee will continue to discuss
this risk during 2020 and also review:
• how the organisation will look to comply with the TCFD
recommendations
• the appropriateness of the metrics used to measure and manage
physical risks, transition risks and opportunities
Management
Board
Principal and emerging risks reviewed at least bi-annually, including
climate change related risks. Monthly reporting on climate change
issues, including metrics and KPIs. Climate change issues are tabled
three times a year.
We are conscious not just of the risk
surrounding climate change but also the
opportunity for ITV to really make a
difference to wider society in highlighting
the climate crisis and normalising low-
carbon lifestyles as a broadcaster and
content producer. Please refer to page 47
for the work we are doing as part of our
Social Purpose in this regard.
Risk management
The Board has identified climate change
as an emerging risk and this is reviewed
by the Board bi-annually. The processes
for identifying, assessing and managing
climate-related risks are integrated into
the organisation’s overall risk management
processes, which are described on pages 66
to 68. Climate change risks are included and
considered in each of the risk registers for
the Integrated Broadcast, Studios and
BritBox divisions respectively. In addition,
ITV’s Green Team Steering Group meets
monthly to define the actions needed
from all business areas to achieve our
environmental targets and mitigate
climate-related risks.
Metrics and targets
In July 2019, ITV announced the ambition
to set a science-based emissions target,
aligned to the Paris Agreement’s 1.5 degree
warming limit, using 2019 as the baseline.
ITV has also committed to powering the
business with 100% renewable energy,
and becoming carbon neutral, which was
achieved in 2019 by offsetting 2018’s scope
1, 2 and business travel emissions by
investing in certified carbon offset projects.
ITV has also committed to becoming a zero
waste business, run a 100% sustainable
supply chain, and embed sustainable
decision-making into every part of the
business. All finalised targets and roadmaps
for delivery will be published in 2020.
To support the actions of the ITV Green Team
mentioned above, we will define emissions
reduction targets specific to each business
area, to address climate change in every part
of the business. ITV will also calculate its
scope 3 impact in order to evaluate the
opportunity to influence emissions
reductions within the full value chain.
Climate change metrics and targets are
disclosed on page 46
62
ITV plc Annual Report and Accounts 2019
Strategic Report Section 172 Statement
Section 172 Statement
Directors’ Statement in performance of their duties
under section 172(1).
The Directors consider, both individually and
collectively, that they have acted in the way
they consider, in good faith, would be most
likely to promote the success of the Company
for the benefit of its members as a whole
(having regard to the stakeholders and
matters set out in section 172(1)(a-f) of the
Companies Act 2006) in the decisions taken
during the year ended 31 December 2019.
The content on stakeholder engagement on
pages 89 to 92 highlight key actions in this
area. Please also refer to the case study
below which exemplifies how the Board takes
into account the various section 172 factors in
its deliberations and decision-making.
• The long term: the Board remains
cognisant of the evolving competitor and
viewer landscape in which ITV operates. The
acceleration of ITV’s digital transformation
underpins our strategy, ensuring that we
can take advantage of opportunities now
and in the long-term (see pages 22 and 23).
The Company’s overall purpose and
strategic vision was refreshed this year
and at the Board’s strategy offsite, as well
as at subsequent meetings, focus was on
the long-term strategic direction of the
Company (see case study below). The
launch of BritBox UK and Planet V, our
addressable advertising platform, this year
as well as future international BritBox
expansion plans, also exemplify the Board’s
considerations regarding longer term
investment opportunities for ITV. The Board
also considers long-term factors when
setting the dividend policy – see page 229
for factors that influence the proposed
dividend and dividend policy.
• Employees: Our employees are key to
our success. For the Board’s workforce
engagement, please refer to page 93;
on how the Board engages and takes
our workforce into consideration in its
discussions and decision-making page
92; and page 50 for more information
on ‘Our People’ and ITV’s commitment
to their interests, including increasing
diversity and inclusion.
• Business relationships – suppliers,
customers: The Board is committed
to fostering the Company’s business
relationships with suppliers, customers
and other stakeholders. Please refer to
pages 89 to 92 regarding our engagement
with our key stakeholders, including
viewers, consumers and partners
(including suppliers), and the Board’s focus
on the Modern Slavery Act (page 91) and
our processes in place on anti-bribery and
corruption (page 65).
• Community & environment: The Board
takes ITV’s responsibility, as a public service
broadcaster with the power to reflect and
shape the communities that we reach, very
seriously. Please refer to page 91 on citizen
stakeholder considerations, as well as our
Social Purpose section on pages 44 to 49
which illustrates how the Board has regard
to the impact of ITV’s operations on the
community and environment. On the
environment, the Board has nominated the
Group CFO to lead (on behalf of the Board)
the Group’s business climate-related
agenda, including risks and opportunities,
and driving the required behaviours to focus
the business on climate change-related
issues. The governance structure for
considering climate change issues, of which
the Board is an integral part, is set out on
page 62 and the environmental targets
reviewed and approved by the Board are
set out on pages 46 and 47.
• High standards of business conduct:
Our intention is to ensure that we and
our colleagues operate the business in
an ethical and responsible way. A healthy
corporate culture is the cornerstone of
high standards of business conduct and
governance. The Board’s commitment to,
and promotion of, these facets, and how
it monitored and assessed culture during
the year, is reflected on page 94. Our
commitment to high standards of
business conduct is also enshrined in our
Code of Conduct available on our website.
ITV’s culture also pervades our business
dealings with stakeholders outside of the
organisation, as exemplified by our work
on suppliers in relation to modern slavery
(page 65) and our membership of the
Prompt Payment Code.
• Capital providers: We recognise the
importance of our various capital provider
groups – individual retail shareholders,
institutional shareholders and our debt
investors. Our stakeholder relationships
are also valuable to us. Like any business,
there may be times when we have to take
decisions that adversely affect one or
more of these groups and, in such cases,
we always look to ensure that those
impacted are treated fairly. See pages
89 to 92 for the various ways in which we
engage with our different shareholder
and stakeholder groups.
Section 172 case study:
our strategy meeting and follow-up
strategy sessions
In June, the Board held their annual two-day
strategy meeting. The main purpose of the
meeting was to focus on the strategic
direction of the Company with a view to its
long-term success. As part of this meeting,
the Board held a session on ‘Viewer journeys’,
reviewing and reflecting on the results of
in-depth qualitative and quantitative
research which had been commissioned
regarding current and potential future
viewing behaviour amongst different
demographics, and what ITV’s positioning
and strategy should be with regard to its
programming and distribution. The Board
also held a session reviewing five year
advertising revenue scenarios and their
implications. As part of these analyses the
Board discussed the impact of regulatory
changes and the need for further
engagement with regulators, and our
responsibilities around regional broadcasting
and communities. The session also
crystallised the importance of building
constructive business relationships with
partners in order to deliver our strategic plan.
The Board heard from external speakers
who provided an independent perspective
on the most significant changes in the media
landscape. These included artificial
intelligence, gaming, data and analytics and
creating a culture of innovation in established
businesses. The Board also discussed the plan
for communicating the output of the strategy
session to its employees and shareholders,
and recognised the importance of bringing
them on the journey of an evolved strategic
vision. At a follow-up strategy session, the
Board set the Company’s purpose statement
(see page 9), which amongst other things,
threaded ITV’s unique relationship with
people (workforce and viewers)
throughout. The Chief Executive also hosted
19 employee roadshows across ITV’s offices,
including internationally, to ensure that the
strategic vision, purpose and what each
colleague should do to deliver the vision
was embedded throughout the business.
The Chief Executive was clear that colleagues
continuing to apply high standards of
business conduct and ethical values is
critical to our ability to deliver on this vision.
63
Strategic ReportGovernanceFinancial StatementsAdditional Information Non-Financial Information Statement
The table below, and the information it refers to, sets out our position on non-financial reporting requirements in accordance with sections
414CA and 414CB of the Companies Act 2006. The description of our business model can be found on pages 24 to 25.
Policies
Environment
Due diligence in pursuance of policies
Outcomes of policies and impacts of
activities including related KPIs
Related principal risks
(pages 70 to 78)
• Our Environmental Management Policy
sets out our commitment to reducing
our greenhouse gas emissions, reducing
our waste, and sourcing sustainably from
all our suppliers.
• We are a signatory to the Task Force on
Climate-related Financial Disclosures
(TCFD).
• We evaluate and monitor climate
change through our governance
structure and via the ITV Green Team
(page 62).
• Progress against our environmental
targets are reported to the
Management Board three times a
year, and annually to the Board.
Social matters
• Social Purpose is a core part of ITV’s
overall strategy. We use ITV’s scale and
creativity to shape culture for good.
We have set and published ambitious
targets which align to the United Nations
Sustainable Development Goals.
• We evaluate and monitor all our
Social Purpose campaigns and
progress against our four goals.
• Progress against our targets and
the impact of our campaigns are
reported to the Management Board
three times a year, and annually to
the Board.
Colleagues
• Our Code of Conduct promotes the
highest standards of ethical business,
underpinning our values and corporate
culture. It reinforces the importance of
maintaining high standards of safety,
and applying good ethics and judgement
when making decisions.
• All colleagues are required to
complete mandatory training
aligned with the Code of Conduct,
and systems are in place to enable
employees to identify and raise
issues, including suspected
wrongdoing, fraud or malpractice
in the workplace.
• The Code of Conduct is reviewed and
updated regularly.
• Reducing our impact on the
environment is one of the
four priorities of ITV’s Social
Purpose strategy (see pages
46 and 47 for our
environmental activities
and achievements in 2019).
• Refer to page 46 for our
greenhouse gas emissions
data.
• We are members of the albert
directorate and consortium,
and committed to reducing
the impact of production by
ensuring all the programmes
we produce and commission
are albert certified.
• Our Social Purpose strategy
has four priorities relating
to Better Health, Diversity
and Inclusion, the Environment
and Giving Back (see pages 44
to 49).
• Through our Social Purpose
strategy we are able to make
a difference to issues that are
important to our viewers and
to society.
• Our annual engagement
survey addressed employee
engagement and culture,
the results of which have
informed Board discussions
(see page 96).
Climate change is not
currently recognised
as a principal risk, but
is recognised as an
emerging risk. This
categorisation is kept
under regular review
by the ITV Green Team
(see page 62).
Social matters are not
considered to be
a principal risk.
We do not regard
employee conduct
and ethics to be a
principal risk. However,
we regularly monitor
and assess potential
risks through our
HR processes.
64
ITV plc Annual Report and Accounts 2019
Strategic Report Non-Financial Information Statement
Policies
Due diligence in pursuance of policies
Outcomes of policies and impacts of
activities including related KPIs
Related principal risks
(pages 70 to 78)
• Our Diversity and Inclusion strategy is
aligned with and supports our business
strategy.
• Our employment and recruitment
•
•
policies are based on equal opportunities
and non-discrimination, and set out
our commitment to an open and
inclusive culture.
ITV’s Duty of Care Charter sets out our
commitment to the care we take for
the physical and mental health and
safety of employees and others we
work with including contractors, those
participating in our productions and
visitors to our premises.
ITV has a ‘speaking up’ framework for
employees and freelancers to raise
concerns and grievances in confidence
(and if they wish anonymously), as well
as a freelancer complaints procedure.
This includes our bullying, harassment and
dignity at work, and grievance policies,
which cover bullying, harassment and
grievances in any work-related setting.
• As part of the ‘speaking up’ framework,
our Whistleblowing policy provides a
mechanism to enable colleagues and
others acting on behalf of ITV to voice
concerns in a responsible and
effective manner.
Failure to deliver our
Diversity and Inclusion
plan is a risk area which
remains under review,
monitored by the
Nominations Committee.
Failure to extend an
adequate duty of care
or a major health and
safety incident is
recognised as a
principal risk (Risk 11).
• Diversity and Inclusion is one
of the four priorities of ITV’s
Social Purpose strategy (see
page 49).
•
• Our Diversity and Inclusion
plan is aligned with and
supports our business strategy
(see page 13).
In 2019 we launched a new
reporting tool that enables
all colleagues and freelancers
to report incidents and
share observations.
• During 2019, ITV Studios Group
won the International Institute
of Risk and Safety
Management (IIRSM) Risk
Excellence award.
• The ITV Inclusion Council chaired
by the Chief Executive drives the
diversity and inclusion agenda
throughout the organisation. The
Nominations Committee monitors
progress against diversity targets
regularly, with diversity on the Board
agenda annually.
• The Audit and Risk Committee
reviews the Group’s health and
safety procedures at least annually,
and receives regular reports on
duty of care from the Duty of Care
Operating Board.
• Within all our health and safety
activity, we use best practice
methodology to engage with the
business, building out understanding
of the effectiveness of safety
management, enabling us to
continually improve and refine
our approach.
• Our whistleblowing arrangements
and the wider ‘speaking up’
framework are monitored and
reviewed annually by the Audit
and Risk Committee, which provides
feedback to the Board.
Anti-corruption and anti-bribery
• Our Anti-Bribery Policy sets out our
• Compliance with the policy is kept
responsibilities and provides information
and guidance on how to deal with bribery
and corruption issues. Those working for
or with us must observe and uphold the
Policy. We also 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.
Human rights
•
•
ITV is fully committed to ensuring that
we do not participate in the violation of
human rights and we expect the same
of our suppliers. We are a founding
member of the TV Industry and Human
Rights Forum set up to identify and
proactively address labour 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.
under review by the ITV
Management Board.
• The policy and policy compliance is
reviewed at least annually by the
Audit and Risk Committee.
• Ultimate oversight belongs to
•
the Board.
ITV’s Modern Slavery Steering
Committee is responsible for
identifying and addressing modern
slavery issues at ITV. Our Modern
Slavery Statement is reviewed by
the Board on an annual basis.
• 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.
Legal and regulatory
non-compliance
(including the Bribery
Act 2010) is recognised
as a principal risk
(Risk 12). We have a
compliance programme
in place to mitigate the
risk of bribery, and
which is articulated in
our Anti-Bribery Policy.
This area is not
regarded as a principal
risk. However, we
regularly assess areas
that may be susceptible
to risk through our risk
management
processes.
• No incidences of human rights
abuse or modern slavery have
been identified.
• This year ITV worked closely
with an independent modern
slavery expert consultant,
which enabled ITV to
undertake an objective review
of our business activities and
processes in greater detail
and in so doing develop a
thorough risk assessment
across the business.
65
Strategic ReportGovernanceFinancial StatementsAdditional Information Risks and Uncertainties
ITV operates in an increasingly complex business environment and the level of
uncertainty we face continues to evolve. Risks are impacting more quickly and more
significantly than in the past and our continued success is dependent on how well
we understand and respond to these risks. ITV’s risk management framework is
designed to provide the tools to identify, manage and continually review 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
The key objective of our risk management framework is to support the achievement of our strategic goals. Our risk management
framework seeks to drive accountability and proactivity in managing our risks. We have defined Management Board ownership for each
of our principal risks and have established reporting and escalation procedures to provide the Board with the insight required to continually
monitor our risk management and internal control systems.
In 2019, we have undertaken an exercise to review the existing risk management framework and identify opportunities where we
can do things differently to better support our teams in managing risks. As an outcome of this review, we will be introducing a series
of enhancements to the enterprise risk management framework during 2020 that are designed to increase confidence in our capability
to understand and respond effectively to key risks and opportunities.
66
ITV plc Annual Report and Accounts 2019
Strategic Report Risks and Uncertainties
Direction and Management
Mitigation and Reporting
Advice and Oversight
Risk governance
structure
Board
• Sets strategic objectives
• Identifies and evaluates principal
risks and uncertainties
• Sets our strategy on risk and
establishes tolerance levels
and risk appetite
• Continually monitors the risk
management framework and
internal control systems
Management Board
Has responsibility for:
• The development and
operation of the risk
management framework
and systems of internal
control, including:
– Risk identification and
assessment and establishing
controls and procedures to
monitor and mitigate risks
– Reviewing and monitoring the
effectiveness of internal controls
and putting in place remedial
plans where required. Serious
control weaknesses (if any) are
reported to the Board and action
is taken as appropriate
• Routinely reviewing and
challenging risks and mitigations,
including relevant reports or other
performance indicators
• Continuously reviewing risk
exposure and ensuring that
decisions taken are in line
with the organisation’s risk
appetite and within the
defined tolerance levels
• Identifying and reporting
emerging risks
Divisional Boards and
Central Functions
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 local policies and
monitoring the local
implementation of key
group policies and
procedures
• Identifying and reporting
emerging risks through
the risk management
framework
Group risk
Has responsibility for:
• Maintaining the risk
management framework
and supporting management
in its adoption
• Coordinating all risk identification,
reporting and governance forum
activity
• Supporting and advising the
business on the development
of risk management
solutions
Audit and Risk Committee
Has responsibility for:
• Overseeing and advising the
Board on risk exposures
and future mitigation strategy
• Reviewing the effectiveness
of the risk management
framework and internal
control systems
• 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 implementation
of internal audit actions
• Overseeing and monitoring the
business’ compliance with the
risk appetite set by the Board
Details of risk reviews undertaken
during the year are set out in the
Audit and Risk Committee Report
on page 112.
Three lines of defence
The three lines of
defence model
represents a core
component of our
risk management
framework. We operate
a three lines of defence
model to gain ongoing
assurance over the
effectiveness of our
approach to managing
our most critical risks.
Business Operations and Divisions: The Divisions and Central functions are
ultimately responsible for identifying, assessing and managing their risks. This includes
operation and maintenance of the internal control framework to mitigate key risks.
Risk
Group Risk and Central Functions: Where relevant, Group Risk and Central
Functions support the business in their risk management activities. They are responsible
for setting policies related to their remit, monitoring application of policies within the
business and advising the business on risk mitigations.
Risk
Internal Audit: Internal Audit provides independent assurance over the operation of the
Group’s internal control systems and risk management processes. The Internal Audit plan is
driven from ITV’s risk management framework and is aligned to auditable elements of the
Group’s principal risks.
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67
Strategic ReportGovernanceFinancial StatementsAdditional Information
Risks and Uncertainties continued
Principal risks
The recent review of our risk management
framework included refreshing our principal
risks and updating the way they are
presented and defined. We took a blank
sheet, top down approach with stakeholders
across the business to better define
existing risks and also identify potential
emerging risks. The Divisional Boards and
Management Board then took part in a
series of externally facilitated workshops
to assess and prioritise these risks. The
outcome of this exercise is our refreshed
principal risks, which have been reviewed
and approved by the Board.
Categories
We have also refreshed the manner in which
we categorise our risks. These categories
support us in determining the approach
we take to managing our risks.
• Strategic/External – external
environmental risks, including
macroeconomic, socio-political or
market changes, that may impact
ITV’s strategic vision or ability to
deliver the strategic initiatives
• Change – internal risks, including culture
and capability, that may impede the
achievement of strategic and/or
operational change goals
• Operational – risks that could impact our
operational and business as usual activities
• Emerging – risks from known or previously
unconsidered sources, which may
significantly impact our business now or in
future but which are not clearly understood,
visible or possible to fully assess
All principal risks have been assigned
ownership to a Management Board
member, with responsibility for ongoing
monitoring and mitigating of the risk.
Key changes in our principal risks
Our principal risks currently fall into the
strategic, change and operational
categories. Key changes to our principal risks
as a result of our refresh exercise are:
• We have identified four new principal
risks, which are all driven by changes
in the external market and continual
evolution of our strategy. These risks
relate to platform relationships,
BritBox growth, cultural change and
leadership/ways of working
• We have separated the risk relating to
the macroeconomic environment and
the pension deficit into two risks, taking
into account the broader implications
a macroeconomic or political crisis may
have on our business model
• The previous risk relating to legacy
technology systems has been
incorporated into a broader risk relating
to strategic delivery and digital
transformation
• We have downgraded the risk of a major
failure in complex broadcast system
chains, as we continue to review and
improve our technological infrastructure
and resilience systems. This risk continues
to be tracked and managed through our
internal risk management processes but
is no longer considered a principal risk
• The wording and presentation of our
remaining principal risks has been
refined in order to improve clarity
and understanding
Risk appetite
Our risk appetite has been defined at a
category level and approved by the Board.
Our risk appetite helps inform our decisions
with respect to our strategy and supports
us in determining the most appropriate way
to manage each of our principal risks.
• Strategic/External – we have a neutral
appetite for risk with respect to the
external environment. We monitor the
external environment and continue to
identify areas where we can adapt our
approach to respond to external threats
• Change – the industry environment is
evolving rapidly and we have to take
a ‘test and learn’ approach, including
some calculated risks, in order to
respond sufficiently quickly
• Operational – we have a lower appetite
for risk with respect to operational or
regulatory failure. We seek to manage
these risks to the lowest possible level
and mitigate through our controls
As part of our activities to further enhance
our enterprise risk management framework
in 2020, we will be refining and improving
the articulation of our risk appetite.
Emerging risks
We define emerging risks as uncertainties
which originate from known or previously
unconsidered sources, but which are not
clearly understood, visible or possible to
fully assess. These risks could impact over
a longer period and have the potential to
significantly impact our business model
and/or operations.
Emerging risks are identified by the business
on an ongoing basis and are escalated
through risk management processes and
reporting. ITV’s Group Risk team supports
the business in identifying and highlighting
emerging risks to the Board. They do this
through undertaking horizon scanning,
maintaining ongoing dialogue with the
business and keeping up to date with wider
market and environment movements.
As part of our efforts to redefine our
principal risks this year, we also considered
emerging risk areas. We have undertaken
exercises to analyse emerging risk areas in
order to determine whether they should
be promoted to principal risks and
monitored as part of our existing risk
management processes. Where the risks
have not been assessed as principal risks
they have been categorised as emerging
risks, have been reviewed by the Board,
and will continue to be periodically reported
and reviewed internally.
Climate change
Climate change is not currently reported
as an ITV principal risk, however, it has been
recognised as an emerging risk and remains
an area we keep under regular review
through our risk management process.
ITV’s climate change risks fall into two
categories. The first relates to threats
to our business model, as a result of
changes in regulation or consumer
attitudes with respect to climate change.
The second relates to the potential impact
climate change may have on business as
usual operations.
We are committed to reducing the impact
our business has on the environment and
have implemented Group-wide targets
for reducing carbon emissions in line with
a 1.5 degree warming scenario. The Group
CFO has been nominated to be responsible
for the organisation’s climate change
agenda. Please see page 62 for further
information on risk management in this area.
68
ITV plc Annual Report and Accounts 2019
Strategic Report Risks and Uncertainties
Risks mapped to strategy
Grow
UK and global
production
3
12
14
1
11
4
9
6
13
10
16
7
15
5
Expand
Direct to
Consumer
8
Transform
Broadcast
2
Many of our principal risks are intrinsically
connected, and in certain cases were a risk
to change or materialise this may have
an impact on risks in another area of our
business. For example the changing nature
of viewer habits (Risk 1), is a driver for
changing demand in the advertising market
(Risk 2) and the content market (Risk 3).
Due to the interconnectivity and the
importance of all our principal risks, we
do not individually rank our principal risks
based on severity and likelihood. Instead
we recognise that all of these are the most
critical risks facing our business, many of
which could have a direct impact on our
strategic priorities, and therefore should
be regularly scrutinised by our senior
leadership. As a result, we focus on ensuring
we understand how our principal risks are
connected and the potential impact they
may have on all areas of our business, in
order to develop a joined up strategy to
manage these.
Principal risks
Strategic/external
1
Changing viewer habits
2 Advertising market changes
3
Evolving demand in the content market
4 Pension deficit increase
5 Platform relationship risk
6 Macroeconomic and geopolitical risk
Change
7 Commissioning pipeline risk
8 Insufficient BritBox growth
9 Strategic and digital transformation risk
10 Insufficient cultural change
Operational
11 Duty of care and health and safety incident
12 Legal and regulatory non-compliance
13 Cyber attack or data breach incident
14 Recruitment and retention of talent risk
15 Leadership and ways of working risk
16 Unfavourable legal dispute
69
Strategic ReportGovernanceFinancial StatementsAdditional Information Risks and Uncertainties continued
Principal risks and mitigations
Link to Strategy
Risk direction of travel
(after current mitigations)
Grow
UK and global production
Transform
Broadcast
Expand
Direct to Consumer
Risk is increasing
Risk remains static
Risk is reducing
Strategic/external risks
1. Changing viewer habits
Link to strategy
Description
Context
Mitigating activities
Direction
A failure to anticipate or
respond to fast changing
viewer habits and
behaviours may impact
total viewing and the
success of our productions.
• Content is now available across many
different devices and platforms, which is
impacting how viewers consume video
• Viewers are watching less linear television
and more digital content, in particular
through video-on-demand services
• Consumers are also increasingly engaging
with alternative content, moving away from
long-form video, in particular short-form
content and gaming
• A faster than anticipated shift towards digital
viewing and alternate content would impact
the total audience and reach of ITV and
therefore the advertising revenue we are
able to realise
Changes in direction of travel
• This risk continues to trend upwards,
as viewing continues to fragment across
platforms and devices. There is also
an increasing propensity to watch
short-form content, particularly
amongst younger viewers
• Our strategy includes strengthening our digital
viewing proposition, to better serve evolving
audience preferences, both in advertising
video-on-demand (AVOD) and subscription
video-on-demand (SVOD)
• In AVOD, this involves making all our linear content
available on digital platforms, whilst continuing
to invest in the ITV Hub product. We also take
a commercially balanced view with respect to
the content we make available in short-form on
partner platforms. In SVOD, we have developed and
released BritBox, in partnership with the BBC, and
will continue to invest in this product and consider
suitable international markets for expansion
• We also continue to invest in sports, entertainment
and other events. This maximises live viewing,
including amongst harder to reach audiences
• We also have a dedicated Research team, focused
on developing a better understanding of our
audience. Insight from this team is used to
pre-empt viewer behaviours and support the
continual development of our linear, AVOD and
SVOD products
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Risks and Uncertainties
2. Advertising market changes
Link to strategy
Description
Context
Mitigating activities
Direction
Continued changes in the
advertising market may
result in a decline in ITV’s
advertising revenue.
• The current overall economic environment is
uncertain which may impact advertising spend
and demand for ITV’s advertising products
• Changing viewer habits have resulted in an
increased proportion of advertising budgets
being spent on digital and mobile offerings.
This could impact the value and volume of
deals advertisers make with ITV. In addition,
an increasing number of viewers are using
advertising-skipping technology on linear
products, reducing revenue
• There is an increasing number of diverse
participants entering the advertising market,
which could adversely impact our market
share. These participants have advertising
products with advanced audience attribution,
which makes them very appealing to clients.
They often have large sales teams who are
increasingly dealing with digitally native
Chief Marketing Officers
• Certain sectors are either already or may
become subject to regulatory advertising
restriction
Changes in direction of travel
• Increased uncertainty in the economic
environment in 2019 along with the continued
change in viewing habits has meant this risk
is trending upwards
• We closely monitor the potential impact of an
economic downturn on advertising revenues
• We also continue to demonstrate the benefits
of advertising on ITV to existing and prospective
clients across all sectors, whilst seeking to
increase awareness within faster growing sectors.
This has involved creating a Client Strategy and
Planning team, who work closely with our
advertising clients to ensure we are better aligned
with their objectives
• As part of our strategy to grow our digital viewing
and reach of ITV content across all platforms, we
seek to serve advertising wherever our viewers
consume our content. This includes working with
partners and platforms to investigate methods
to minimise the financial impact of ad skipping
• We are also focused on developing our
addressable advertising capability. Our Planet V
initiative is designed to provide advertisers an
easy to use, self-service platform to deliver highly
targeted adverts
• We continue to monitor the regulatory landscape
and understand the potential impact on our
advertising revenues
3. Evolving demand in the content market
Link to strategy
Description
Context
Mitigating activities
Direction
Fundamental changes in the
content market may result
in reduced opportunities
for and/or profitability of
ITV Studios content.
• While there continues to be increasing
• We continue to invest in attracting and retaining
demand for content, driven by new platforms
with high-content budgets, there is a risk
that they will increasingly use their scale to
produce content in-house and/or to seek
better terms on pricing and rights
• The increasing demand for content and the
arrival of influential new buyers in the market
is driving the cost of production up, which
may impact our profitability
• The increasing complexity of the rights market
and the increased influence of our SVOD
customers may result in us being unable
to secure all of the most valuable rights
Changes in direction of travel
• This risk continues to trend upwards, as we are
seeing increasing instances of SVOD players
producing in-house and using their growing
scale to seek better terms on price and rights
world class creative talent to ensure we can
provide quality content to local and global buyers
• We maintain relationships with a diversified set of
customers, with varied business models, including
SVOD and over the top (OTT) platforms. We also
continue to build relationships with new potential
customers, in order to demonstrate the value of
the content we produce
• We have processes in place to drive continued
efficiency in our production. These include robust
procurement procedures, maximisation of tax
credits and analysis of data relating to production
filming, providing opportunities for improvements
• We have created a Global Entertainment team,
focused on developing a centrally coordinated
approach to rights commercialisation,
management and protection. This includes
developing standard rights packages and content
management processes, which are focused on
protecting and exploiting existing rights
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Risks and Uncertainties continued
4. Pension deficit increase
Link to strategy
Description
Context
Mitigating activities
Direction
A financial crisis or macro-
economic change could
impact the value of pension
scheme investments and
increase the deficit.
• Changes in credit spreads could result in
• The pension schemes assets are invested in a
material movements in the Group’s defined
benefit pension scheme
diversified portfolio, with a significant amount
of the fund held in bonds
• A major change in longevity, 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
Changes in direction of travel
• This risk remains static, with increased
uncertainty in the macroeconomic
environment having been offset through
our diversified investment approach
• We have worked with the pension trustees to limit
the potential deficits by a series of asset backed
arrangements. In addition, we have removed some
of the 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 purchase of a bulk annuity policy (a ‘buy-in’
policy) for a section of the scheme. This contract
matches the pension liabilities covered by the
policy and, therefore, removes the investment,
interest rate and inflation risks associated with
those liabilities. In order to mitigate the risk of
not being able to meet our liabilities as they arise,
we have reviewed our cash matching and
hedging strategies
• We also have regular communication with the
pension trustees
5. Platform relationship risk
Link to strategy
Description
Context
Mitigating activities
Direction
An inability to maintain
adequate negotiating
positions with major platform
providers may result in
reduced brand prominence
and disproportionate value
extraction by platforms.
• Video content is viewed across a wide variety
of platforms and devices. Our commercial
arrangements with these platforms are
increasingly complex and multi-faceted.
Platforms are commonly customers, suppliers
and partners in co-creation activities
• Within the linear EPG grid we are guaranteed
prominence in the UK. However, as linear
viewing declines, we must form strong
relationships with major platform providers,
under mutually favourable terms, to ensure
we maintain our UK prominence
• Our aim is to maintain a strong negotiating
position with these platforms in order to
fully monetise our content
Changes in direction of travel
• As viewing continues to shift away from linear
and onto other platforms and devices, these
platforms have increasing negotiating power,
resulting in this risk trending upwards
• We have a dedicated team who have developed
relationships with all the major TV platforms
and device manufacturers in the UK. We are
therefore in a position to negotiate the presence
and prominence of ITV’s content on their
platform/ devices
• We have also established a strategic partnership
framework that dictates how we engage with
these industry partners and how this is governed
internally. Progress and challenges in dealing with
these partners is discussed at the Management
Board quarterly
• We also continue to have an active dialogue with
Ofcom and government, regarding regulation
related to PSB prominence on platforms (and the
modernisation of that regulation)
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Risks and Uncertainties
6. Macroeconomic or geopolitical risk
Link to strategy
Description
Context
Mitigating activities
Direction
Macroeconomic or
geopolitical conditions could
adversely affect our business.
• The current position with regard to the
consequences of Brexit is uncertain and could
impact the overall economic environment
and demand for our services and products
• Political uncertainty in a number of our
core global markets may lead to significant,
legislative or regulatory change, which could
adversely impact our global operations
Changes in direction of travel
• This risk is on an upward trend as a result of
ongoing uncertainty with regard to Brexit
and the wider geopolitical environment
• Macroeconomic and geopolitical risks, including
consideration of potential downturns in certain
markets and geographies, have been actively
factored into our strategic planning processes
• Funding and capital requirements are considered
during the annual budgeting process, overseen by
Group Finance, and are continuously monitored
throughout the year
• We have a Brexit working group in place which
meets regularly to consider the implications of
different scenarios for Brexit . Plans have been
developed in conjunction with teams across the
business and are designed to mitigate the impact
of Brexit and to identify any opportunities
• We undertake ongoing horizon scanning to
monitor potential policy, legal and regulatory
developments. We have a systematic approach
to analysing the impact of potential regulatory
changes and are proactive in putting forward
our position and views as part of regulatory
consultation processes
Change risks
7. Commissioning pipeline risk
Link to strategy
Description
Context
Mitigating activities
Direction
Failure to sustain a diversified
content pipeline, that is both
resilient and financially viable,
may reduce profitability.
• Our revenues are largely dependent on ITV’s
continued ability to anticipate and adapt to
changes in consumer taste
• We must ensure that our content pipeline
is both resilient to changes in consumer
preferences and habits, as well as being
financially viable, in order to prevent declines
in total viewing, advertising and secondary
distribution markets
• Commissioners are becoming increasingly
more risk averse in response to tightening
regulation and changing public attitudes,
making it harder to create profitable IP
Changes in direction of travel
• This risk remains static and ongoing.
As viewer habits change, ITV continues
to need to deliver compelling content
wherever our viewers are choosing to watch it
• We continue to invest £1.1 billion annually into our
UK broadcast programming budget in order to
develop content that is relevant and appealing
to our viewers
• Our focus is on developing the creative pipeline
and identifying programmes and formats which
have national appeal, as well as the potential to
travel internationally. In order to increase the
resilience of our pipeline and reduce our reliance
on historically successful programmes, we also
continue to invest in new premium formats
• In addition to our own Studios business, we have
strong relationships with independent studios,
both in the UK and internationally, from whom
we commission content
• We also have a dedicated Research team, focused
on understanding our audience preferences and
reporting on the success of programmes. We use
this insight to adapt our commissioning strategy
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Risks and Uncertainties continued
8. Insufficient BritBox growth
Link to strategy
Description
Context
Mitigating activities
Direction
Subscribers to BritBox do not
grow at the pace required to
deliver the desired strategic
or financial outcomes.
• We have launched BritBox in a SVOD market
which is already highly competitive, both
in the UK and globally
• We will be detrimentally impacted if we are
unable to attract new customers, convert
them to paying subscribers and subsequently
retain them
• The success of BritBox is reliant on
maintaining strong relationships with other
UK broadcasters to ensure we have the
option to license all suitable content
Changes in direction of travel
• This is a new risk as we launched BritBox UK
in 2019. Additional UK market entrants in late
2019 and 2020 (including Apple, Disney and
NBC) create more competition in the market
and result in this risk trending upwards
• We continue to invest in an extensive marketing
campaign to increase market awareness of the
product and scale and increase subscriber growth.
In order to maximise reach, we have developed
distribution deals with hardware and software
providers in order to make the BritBox product
available on all major platforms and devices
in the UK
• In order to increase BritBox’s appeal and optimise
customer retention we continue to engage with
partners around additional content for BritBox.
We continue to invest in product capability and
development in order to increase customer
satisfaction and retention
• We also track and evaluate the performance of
Britbox through an extensive suite of KPIs. Root
cause analysis is performed on subscriber growth
and customer churn data, in order to drive continual
improvement. Performance of the BritBox
platform is also reported to the Management
Board and the PLC Board on a ongoing basis
9. Strategic and digital transformation risk
Link to strategy
Description
Context
Mitigating activities
Direction
Failure to successfully
deliver key components
of our strategy and digital
transformation, due to
the speed and extent of
change required.
• We must be able to operate at pace to
achieve our strategic objectives. This
requires significant alignment and effort
across the whole Group
• Failure to transition to be a digitally-led
business may have a negative impact on
our financial position and reputation
Changes in direction of travel
• We have introduced additional strategic
initiatives in 2019 and this increases our
exposure with respect to this risk
• Our strategy is articulated by 20 strategic
initiatives. Each initiative is sponsored by a
Management Board member and led day-to-day
by a member of the ITV Executive Leadership Team
• We have formal processes in place, led by the
Group Strategy team, to report monthly on the
performance of each of these initiatives to the
Chief Executive and Group CFO. This includes
details on challenges and interdependencies.
The Management Board also reviews progress of
strategic initiatives on a monthly basis
• The strategic initiatives include the digital
transformation of ITV, including our front-end
(Hub, Planet V, BritBox), as well as our middle and
back office. We have initiated the digital
transformation of the middle and back office
through wider adoption of agile processes on
priority projects
• As part of our efforts to move to a more digitised
business, we have also defined and communicated
digital principles for the way we expect our
colleagues to work
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Risks and Uncertainties
10. Insufficient cultural change
Link to strategy
Description
Context
Mitigating activities
Direction
Failure to evolve the
underlying culture of the
business may result in an
inability to deliver the level
of change required to
continually evolve.
• We could be affected if we fail to recognise
the cultural change required in order to
deliver the strategy and become a digitally-
led business
• Our culture needs to support agility and
openness to new initiatives, in order to
allow us to continually evolve
Changes in direction of travel
• Our evolved strategy in 2019 increasingly
requires our staff to be more agile and open
to change, causing this risk to trend upwards
• During the year we developed and communicated
the ‘ITV Way’. The ITV Way defines the culture
needed to ensure our future success and outlines
the behaviours we expect from our staff to
support our desired culture. Regular meetings
focused on cultural and strategic topics take place
with the executive and senior leadership teams
• We completed a series of ITV Roadshows
throughout the year, where the Management
Board communicated the importance of the ITV
Way and agility to the business
• We also undertake regular Pulse and employee
engagement surveys, which include questions
focused around culture. Learnings from these
surveys feed into future improvement plans.
The Board also undertakes a formal programme
of employee engagement (led by our Workforce
Engagement Director), in order to obtain insight
into culture
• We also continue to positively reinforce desired
behaviours and attributes through direct links to
reward and recognition
Operational risks
11. Duty of care and health & safety incident
Link to strategy
Description
Context
Mitigating activities
Direction
Failure to extend an adequate
duty of care or a major health
and safety incident on an
ITV production could result
in harm, loss of human life
and reputational damage.
• We have a responsibility to extend
an adequate duty of care (DoC) to our
employees, contractors, participants on
our shows and the general public
• As we continue to increase production hours,
our risks in relation to health and safety
continues to increase. We need to consider
the DoC across all aspects of productions
• As we diversify our Direct to Consumer
business and launch new propositions,
our DoC also becomes broader
Changes in direction of travel
• Whilst increases in our production hours
means the inherent nature of this risk is
increasing, we continue to review and
improve our processes with respect to this
area. For this reason the risk remains static
• We have enhanced our existing DoC processes,
which encompass procedures relating to both
physical and mental health and safety
• We have established a Duty of Care Operating
Board (DoC Board), with responsibility for
monitoring implementation and continuous
improvement of our DoC framework and policies.
This DoC Board is chaired by the Chief Executive
and includes senior representation from our
Studios, Broadcast, Legal, HR and Risk areas of
the business. The DoC Board meetings are also
attended by the Chair of the Audit and Risk
Committee on behalf of the Board
• We also have a central health and safety risk
management team with responsibility for
developing and implementing our health and
safety management system which covers both
physical and mental health and safety
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Risks and Uncertainties continued
12. Legal and regulatory non-compliance
Link to strategy
Description
Context
Mitigating activities
Direction
Failure to comply with
applicable regulation could
result in reputational
damage, financial penalties
or suspension of our licences
to operate.
• We are a global business and are therefore
subject to multiple local and international
regulatory regimes. These cover areas
including: broadcasting and media
regulations, anti-trust and competition
law compliance, anti-bribery and corruption,
data privacy and health and safety
• We must remain compliant with relevant
laws and regulations to avoid reputational
damage, financial or operational penalties
Changes in direction of travel
• This risk remains static, as there have been
no major changes in regulation within the
year and our focus remains on ongoing
compliance with existing legal and
regulatory requirements
• We have Group Legal and Business Affairs teams in
place, which consist of subject matter experts who
oversee and are responsible for ensuring business
compliance with all elements of regulatory and
legal requirements
• We have a robust compliance programme in
place, which is outlined within our internal policy
framework. Internal policies are owned by business
leaders, regularly reviewed by the Management
Board and the Audit and Risk Committee, and
include processes with respect to all compliance
areas. Where changes are required or made
to reflect improvements in best practice, the
compliance and legal team works with the
respective business leaders to ensure changes
are implemented into business processes
• Our Regulatory Affairs team regularly engages
with regulators such as Ofcom and the
Advertising Standards Agency (ASA) in order
to understand and interpret changes in policy
and compliance requirements
• We also have a suite of mandatory compliance
training and learning in place, which helps drive
positive attitudes to compliance across the
whole business
13. Cyber attack or data breach incident
Link to strategy
Description
Context
Mitigating activities
Direction
A cyber attack may result
in major operational
disruption, critical system
outage or loss of IP, customer
or business data and
potentially lead to material
financial fines/penalties.
• We operate in a highly public environment
and, due to our reputation, we are at greater
risk of attack (than the norm) from well
organised threat groups
• As technology becomes increasingly more
complex, we are required to evolve our cyber
security procedures in line with the pace of
change in order to effectively protect and
respond to cyber threats
• As we continue to grow our Direct to
Consumer business and digital product
offering, we work increasingly with
third-party partners and suppliers. A failure
by these partners to implement suitable
security processes may result in potential
liability or reputational damage for ITV
Changes in direction of travel
• As cyber hacking tools become more
sophisticated and easier to access, the
cyber security risk facing all businesses is
on an upward trend
• We have implemented a robust cyber security risk
management framework across the organisation
to address the evolving nature of the cyber security
threat landscape. Our framework is designed to be
a risk-based approach to cyber security, which is fit
for purpose and can operate within the creative
nature of our business. Our framework incorporates
a variety of technical preventative and detective
measures, as well as an extensive training and
awareness programme
• We have implemented standardised processes
and controls across the business. This includes
managing cyber security risk in our supply chain
and undertaking cyber security due diligence
assessments on key suppliers as part of
procurement activities
• The strength of our control environment is tested
on an ongoing basis by independent security
experts and recommendations are implemented in
a prioritised manner. We also work with our security
partners to undertake cyber simulation exercises
at all levels of the organisation to continuously
improve our response to cyber attack
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Risks and Uncertainties
14. Recruitment and retention of talent risk
Link to strategy
Description
Context
Mitigating activities
Direction
An inability to attract,
develop and retain key
creative, commercial,
technical and managerial
talent could adversely
affect our business.
• The market for talent is extremely
competitive
• We must be able to attract, develop and retain
the best creative, technological, commercial
and managerial talent in order to successfully
grow our business
• Failure to recognise and respond to skills and
experience gaps in a timely manner may result
in us failing to deliver our strategic objectives
Changes in direction of travel
• Attrition within the business remains stable
and the risks in relation to losing talent are
offset by our continued understanding of
the talent required. Therefore this risk
remains static
• There is a deep understanding across the business
of the skills and capability required to deliver our
business objectives. Our HR department works
closely with the business in order to ensure those
needs are met and to support teams in addressing
skills gaps
• We also continue to strengthen our existing capability,
through a combination of learning, development and
performance management initiatives
• Whilst a certain level of attrition is inevitable, we
evaluate root causes through exit interviews and
declared reasons for leaving. Furthermore,
succession plans have been developed and
implemented for business critical and management
roles (which includes nominated deputies)
15. Leadership and ways of working risk
Link to strategy
Description
Context
Mitigating activities
Direction
The fast pace of change in
our operating landscape
and transition to our new
ways of working will require
continual assessment of the
Group’s necessary skills
and experience to deliver
the strategy.
• We must ensure we possess the appropriate
skills, knowledge and experience to
successfully deliver our strategy
• Delivering digital transformation poses a new
set of challenges to the Group’s leadership team
• We must ensure that we are organised to
promote alignment, cooperation and
engagement across all our businesses
and geographies
Changes in direction of travel
• We continue to have to evolve the knowledge
base of our leadership team and ensure there
is alignment around our strategic initiatives.
This is a continuous and ongoing process
and as such this risk remains static
• Our Nominations Committee has responsibility
for reviewing the skills and capability of senior
leadership, identifying any potential gaps in light
of strategic requirements and identifying
approaches to address existing gaps and this
review was carried out during the year
• Our senior leadership team is also subject to
performance management and development
initiatives in line with the rest of the organisation
• We have forums in place to reduce risks of siloed
working, including the Management Board, the
Broadcast Board and the Studios Board. We also
create cross functional working groups to address
specific topics
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Risks and Uncertainties continued
16. Unfavourable legal dispute
Link to strategy
Description
Context
Mitigating activities
Direction
An unfavourable outcome
following a major legal
dispute may have material
reputational, financial or
operational consequences
for the business.
• We operate in a public environment and are
exposed to a high degree of media interest
• We are closely associated with all content
we broadcast, including that produced by
independent production companies
• We could be impacted by an unfavourable
outcome in litigation with any of our
production, talent or commercial partners
• There are financial consequences associated
with protracted litigation (even in the event
of a favourable outcome)
Changes in direction of travel
• Our exposure and the nature of potential
legal disputes are in line with previous years,
therefore this risk remains static
• The in-house Group Legal and Business Affairs
teams monitor and manage potential legal
disputes. Where necessary these teams are
supported by a panel of external counsel,
selected for relevant jurisdictional and subject
matter expertise
• Oversight is provided by the Audit and Risk
Committee (‘ARC’). Material legal disputes are
formally reported to the ARC at each meeting,
with regular ad hoc reports as required
• We have financial provisions and a Group insurance
programme in place to mitigate the financial
impact of unfavourable outcomes
• At an operational level the Group Legal and
Business Affairs teams ensure that robust and
appropriate contractual arrangements are in
place with all our third parties, in order to mitigate
the risk of a dispute arising
Viability Statement
What is the process ITV follows?
The Board continually assesses ITV’s prospects and risks at
its meetings. Amongst other topics, the Board reviews the
five year financial plan, which is based on our strategic priorities.
In 2019, we continued to update the strategy to highlight the
opportunities for ITV and also the challenges we need to
address. Pages 22 to 25 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 2022 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 ITV 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 schemes
ITV’s business model does not necessitate investment
in large capital projects that would require a longer-term
horizon assessment or returns
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Risks and Uncertainties
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
Scenario 1:
The Broadcast division experiencing a significant downturn as a result
of changes in the advertising market, a global macro event or as a result
of leaving the EU without an agreed deal.
Based on the 2008/09 financial crisis, the scenario assumes total
advertising revenues declining sharply for two years (2020: -10%,
2021: -5%) followed by a year of flat revenue.
Scenario 2:
A number of key programme brands within the ITV Studios division are
not recommissioned.
The scheduling decisions of commissioners are made in advance, so
we have clear sight on 2020; however, key shows could come to an end
at the same time in 2021 impacting approximately a quarter of the
division’s profits (c. £65 million).
Scenario 3:
A significant change in ITV’s pension funding obligations, following
the triennial valuation in 2020 resulting in a more than doubling of
the current deficit funding payments from £75 million p.a. to
£155 million p.a.
Scenario 4:
The scenario assumes better performance within our acquisitions
portfolio that results in the payouts significantly increasing for our
larger acquisitions.
Link to Principal risks (pages 70 to 78) or Accounting
judgements and estimates (page 165)
Advertising Market Changes: Continued changes in
the advertising market may result in a decline in ITV’s
advertising revenue.
Macroeconomic or geopolitical risk: Macroeconomic
or geopolitical conditions could adversely affect
our business.
Evolving demand in the content market:
Fundamental changes in the content market may result
in reduced opportunities for and/or profitability of ITV
Studios content.
Pension deficit increases: A financial crisis or
macroeconomic change could impact the value of
pension scheme investments and increase the deficit.
Accounting judgements and estimates: Acquisition-
related liabilities or performance-based employment-
linked earnouts are estimated amounts payable to
previous owners. These are highly sensitive to forecast
profits as they are based on a multiple.
We have considered the impact of climate change and do not believe it would have a significant impact on the business in the time
period outlined.
The viability review involved flexing the underlying strategic forecast for the above impacts, both individually and concurrently.
The underlying strategic forecast assumed: business as usual operational and capital spending; the ongoing availability of the
financing facilities 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. In addition, we have an
accordion option in our revolving credit facility, under which ITV has the ability to request an increase in the size of the facility of
up to £250 million, subject to the banks’ consent, on the same terms as the existing £630 million. This potential additional liquidity
is not factored into our model.
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 the events that these scenarios occur, there are reasonable options at the disposal of the Board to maintain
liquidity and continue operations, such as reducing M&A activity and non-essential operational and 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 operations and meet
its liabilities as they fall due over the three year-period ending 31 December 2022. 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:
Chris Kennedy
Group CFO
5 March 2020
79
Strategic ReportGovernanceFinancial StatementsAdditional Information Chairman’s Governance Statement
Governance
With the application of the revised UK
Corporate Governance Code (the Code)
from this 2019 financial year, we have
spent some time reflecting on our own
governance framework and initiatives.
This included, amongst other things,
corporate culture, our sustainability, safety
and wellbeing processes, and stakeholder
engagement. This will continue to be an
area of focus for us in the year ahead.
As part of the review of our governance
framework, we implemented the
following changes:
• The Nominations Committee
membership was refined to four
members to enable the Nominations
Committee to take on more delegated
responsibility from the Board and meet
more regularly. The Board is focused
on the progress being made with the
organisation’s diversity and inclusion
initiatives (one of the four priorities of
the Social Purpose strategy) and will
monitor this closely through
the Nominations Committee.
• The Duty of Care Operating Board
was established to ensure appropriate
governance was in place for clear and
accountable reporting to the Board
(via the Audit and Risk Committee)
on ITV’s continually evolving duty
of care processes (see page 90). The
Chair of the Audit and Risk Committee
attends meetings of the Duty of Care
Operating Board.
• We have implemented a clear governance
structure around the Company’s business
climate-related agenda, as the Company
works towards compliance with the
Task Force on Climate-related Financial
Disclosures (TCFD) recommendations,
and nominated the Group CFO as having
responsibility in this important area
(see page 62). Our commitment is also
demonstrated by our public support
via TCFD’s website.
• We have also reviewed and refreshed
the terms of reference of all Board
Committees ensuring consistency, clarity
and compliance with the revised Code.
Board composition
Following an in-depth review of the Board’s
composition, including its skills, experience,
diversity and knowledge, the Board decided
to undertake a search for a Non-executive
Sir Peter Bazalgette
Chairman
Dear Shareholder
On behalf of the Board, I am pleased to
present our Corporate Governance Report
for 2019. The Board remains committed to
maintaining effective corporate governance
and integrity, enabling us to deliver our
strategy for the long-term benefit of all
our stakeholders.
Engaging with our stakeholders
We place a huge amount of importance
on our relationships with, and our
responsibilities and statutory duties to,
our stakeholders and I have dedicated my
statement in the Strategic Report on pages
6 and 7 to setting out the ways in which
we engage and work with them to support
delivery of our strategy and business
sustainability. Pages 89 to 92 set out our key
stakeholders, forms of engagement with
them, their specific interests relating to
ITV, and how they and their interests have
been considered in Board discussions and
decision-making. The Board and the Group
will continue to listen and be responsive
to the views of all our stakeholders.
Our colleagues are particularly important
to us and Edward Bonham Carter, our Senior
Independent Director, took on the role of
Workforce Engagement Director this year,
attending a number of meetings and
lunches with our Ambassador network in
Leeds, Manchester and across two of our
sites in London. Through Edward’s regular
feedback, the Board has gained a deeper
insight into the views and concerns of
our colleagues. As part of its Manchester
visit, the Board held a buffet lunch with
senior managers based there, the Non-
executive Directors also hosted a dinner
with senior leaders in Manchester and the
Audit and Risk Committee met with the
leadership team from, and toured the
offices of, the Business Services Centre.
For further information on Edward’s role
and work, and the Board’s workforce
engagement activities, please refer
to pages 93 and 94.
Culture
It is the Board’s responsibility to ensure
that the Company’s purpose, values and
strategy are aligned with its culture and
ITV is justifiably proud of its open and
collaborative culture. We have a deep sense
of purpose, bourne out of being a public
services broadcaster. With the refreshing
of the Company’s strategic vision and
purpose during the year, the Board
recognised that the organisation’s values,
behaviours and mindset had to follow and
drive this reinvigorated perspective on the
Group’s strategy. To this end, the Board
encouraged and informed the approach
the Chief Executive and other members of
the Management Board took in investing
their time and efforts in leading 19 roadshows
in five locations during the autumn. The key
objective of the roadshows was to explain
our updated strategic vision and purpose
(including the Social Purpose element),
and also to inspire our people to take
accountability, be innovative, welcome
change and continuously seek out improved
and more efficient ways of working to
deliver that vision and fulfil our purpose.
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ITV plc Annual Report and Accounts 2019
Governance Chairman’s Governance Statement
Director who would bring deep experience
of digital transformation with a disruptor
mindset. A search for a new Non-executive
Director is underway and we expect
to announce the appointment of a new
independent Non-executive Director in
the first half of 2020.
Committees
I also want to highlight one key achievement
(of many) for each of the Board Committees
during the year:
• The Audit and Risk Committee led a
robust competitive tender process for
the appointment of a new external
auditor (see page 115).
• The Remuneration Policy is due for
approval by the Company’s shareholders
in 2020 and the Remuneration
Committee worked closely with the
Group and its advisers to put forward
a policy that promotes the sustainable
long-term success of the business
(see page 121).
• The Nominations Committee has been
leading the search process for a new
Non-executive Director (see page 100).
Effectiveness and evaluation
As Chairman, I am responsible for providing
leadership to ensure the operation of an
effective Board. For the year under review
we conducted an externally facilitated
Board performance evaluation, the findings
of which and the Board’s response (including
agreed actions) are set out on page 98.
I am pleased that the review was positive
overall and found there to be an effective,
open and collaborative Board, and that the
individual contribution from each Non-
executive Director is seen to be strong
by all the Board members. The evaluation
has identified some opportunities for
improved performance by the Board and
I will continue to work with my fellow
Directors to seek enhancements to the
Board’s effectiveness and create further
focus on those areas that the Board believes
will make the greatest difference to the
Company’s continuing success.
Sir Peter Bazalgette
Chairman
5 March 2020
The 2018 UK Corporate Governance Code
(the Code)
The Board considers that during 2019 the Company has complied with the principles
and provisions of the Code. In respect of provision 38 of the Code, the steps intended
to be taken to ensure more effective alignment of incumbent Executive Director
pension contributions to those available to the workforce are set out on page 136.
The Code (July 2018), issued by the Financial Reporting Council (FRC), and associated
guidance are available on the FRC website at www.frc.org.uk
Taking each of the main headings of the Code:
Board Leadership
and Company
purpose
The Board’s ultimate objective is the long-term sustainable success
of the Company. Read more about our strategy in the Strategic
Report and how the Board achieves this through, amongst other
things, stakeholder and workforce engagement (pages 89 to 94)
and establishing a clear and aligned Company purpose, strategy
and values (page 94). See pages 94 to 96 for how the Board
assesses and monitors culture.
Division of
responsibilities
The Board is made up of two Executive Directors, seven independent
Non-executive Directors and the Non-executive Chairman, who was
considered independent on appointment to the Board. As stated in
last year’s Annual Report, the Chairman was Executive Chairman for
a six-month period until the Chief Executive joined the business in
January 2018. For Board meeting attendance, please see page 87.
Additional external appointments by Board members during 2019
received prior Board approval. The Directors’ other time
commitments are in line with the key institutional investor
and investor body guidelines.
Composition,
succession and
evaluation
The Nominations Committee report (pages 99 to 101) sets out its
activities this year, including information regarding succession planning
and progress on achieving the Board diversity objectives. Read more
about the external Board evaluation which took place during the year
on pages 97 and 98 and Board composition on page 87.
Audit, Risk
and internal
control
Remuneration
The Audit and Risk Committee report (pages 102 to 115) describes
the work of the Committee and how it discharges its roles and
responsibilities. See page 115 regarding the external audit tender
which took place in 2019. The Board completed a robust assessment
of the Company’s emerging and principal risks during the year and
has well established procedures to manage risk, enhanced during
the year. The Company’s disclosures regarding principal risks are
on pages 66 to 78.
The Remuneration Committee report (pages 116 to 143) describes
the work of the Committee during the year, and sets out how
executive remuneration is aligned to the Company’s purpose,
values and strategy and how workforce remuneration and related
policies have been considered in its decision-making regarding
executive remuneration.
81
Strategic ReportGovernanceFinancial StatementsAdditional Information Board of Directors
Carolyn McCall
Chief Executive
Chris Kennedy
Group CFO
Appointed: February 2019
Key skills and experience: Chris joined ITV as
Group CFO in February 2019. Previously he was
Chief Financial Officer of Micro Focus International
plc, ARM Holdings and easyJet plc where he spent
five years and was voted FTSE100 CFO in 2015.
He has a strong media background, holding senior
management positions over a 17 year career
at EMI. His experience in executing and driving
strategy play an important role in the delivery
of the ITV strategy and driving a rationalisation/
cost savings initiative.
Current external appointments: Non-executive
Director, Chair of the Audit Committee and
member of the Nomination Committee
Whitbread plc; Non-executive Director of
the Great Ormond Street Hospital for
Children NHS Foundation Trust; Trustee of
the EMI Group Archive Trust.
Margaret Ewing
Non-executive Director, Chair of the Audit
and Risk Committee
A
Appointed: October 2017
Key skills and experience: Margaret joined ITV
in October 2017 and was appointed Chair of the
Audit and Risk Committee in May 2018 having
served as a member of the Committee since
October 2017. She has extensive experience
in financial accounting, corporate finance,
strategic and corporate planning having served
as a Managing Partner of Deloitte LLP and Chief
Financial Officer of BAA plc and Trinity Mirror plc.
Margaret also held Non-executive Director and
Audit Committee positions with Standard
Chartered plc and Whitbread plc and was an
external member of the Audit and Risk Committee
of the John Lewis Partnership. Margaret’s skills
and experience give her substantial insight into
the Company’s reporting and risk
management processes.
Current external appointments: Non-executive
Director and member of the Audit and Compliance
Committee of International Consolidated Airlines
Group, S.A.; Senior Independent Director, Chair of
the Audit and Risk Committee and member of
the Nominations, Remuneration and Corporate
Responsibility Committees of ConvaTec Group plc;
Trustee of the Board and Chair of the Finance
and Audit Committee of Great Ormond Street
Hospital Children’s Charity.
Appointed: January 2018
Key skills and experience: Carolyn joined ITV
in 2018 as Chief Executive. Previously she was
Chief Executive of easyJet plc for seven years and
spent over 20 years at the Guardian Media Group
holding a number of senior roles including nine
years as Chief Executive. She has previously served
as a Non-executive director of Lloyds TSB plc,
Tesco plc and New Look Group plc. In 2008,
Carolyn was awarded an OBE for services to
women in business and in 2016 received a
Damehood for services to the aviation industry.
She has an impressive track record in business,
including digital and change leadership and
running international operations. She has clear
strategic acumen and a strong record of driving
operational excellence and delivering value to
shareholders. Carolyn has been developing the
ITV strategy which she is responsible for executing
with her experienced leadership team.
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.
Sir Peter Bazalgette
Chairman, Chair of the Nominations Committee
N R
Appointed: June 2013
Key skills and experience: Peter joined ITV in
June 2013 and was appointed Chairman in 2016.
He is also a member of the Remuneration and
Nominations Committees, chairing the latter.
He has over 40 years’ extensive media experience
having served as Chairman of the Arts Council,
President of the Royal Television Society, and
Chairman of Endemol UK Ltd as well as the
Chief Creative Officer of Endemol where he
created successful television formats that were
exploited globally. In 2017 Peter led the
Independent Review of the Creative Industries
for the government and outlined key
recommendations for how the creative Industries
can underpin the UK’s future economic growth.
He has a track record of successfully managing
creativity in television and tremendous knowledge
and commercial experience of the global content
business, deep commercial skills with wide
knowledge and understanding of the creative
industries. Since his appointment he has
demonstrated strong and decisive leadership
and has been instrumental in working with the
Executive Directors in establishing the ITV strategy.
Current external appointments: Chairman,
Lovecraft Collective Ltd; Non-executive
Director of UK Research and Innovation;
Member of Advisory Board for YouGov plc
and Bartle Bogle Hegarty.
82
ITV plc Annual Report and Accounts 2019
Carolyn McCall
Sir Peter Bazalgette
Chris Kennedy
Margaret Ewing
Edward Bonham Carter
Governance Board of Directors
Committee membership
A Audit and Risk
N Nominations
R Remuneration
Salman Amin
Duncan Painter
Mary Harris
Anna Manz
Roger Faxon
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
Edward Bonham Carter
Senior Independent Director
N A
Appointed: October 2018
Key skills and experience: Edward joined ITV
in October 2018. He is our Senior Independent
Director, Workforce Engagement Director and
a member of both the Audit and Risk and
Nominations Committees. He is currently
Vice Chairman of Jupiter Fund Management plc
(2014). He joined Jupiter in 1994 as a UK fund
manager and held the position of Chief
Investment Officer from 1999 to 2010 and
Group Chief Executive until 2014. He started
his career at Schroders as an investment analyst
before moving to Electra Investment Trust where
he was a fund manager. He brings to the Board
a wide range of City experience and invaluable
insight in the understanding of stock markets
and investor expectations.
Current external appointments: Vice Chairman,
Jupiter Fund Management plc; Senior Independent
Director, Land Securities Group plc; Senior
Independent Director, The Investor Forum CIC;
Trustee, The Esmee Fairbairn Foundation; Member
of the Strategic Advisory Board, Livingbridge;
Non-executive Director, Netwealth Investments Ltd.
Salman Amin
Non-executive Director
N R
Appointed: January 2017
Key skills and experience: Salman joined ITV in
January 2017 and is a member of the Remuneration
and Nominations Committees.He is Chief Executive
Officer of food group Pladis. Previously he was COO,
Global Commercial Division at SC Johnson & Son,
and has held positions at Procter & Gamble and
PepsiCo. He brings to the Board a wealth of
experience in global businesses having worked
for over 30 years managing global brand
advertising and media spend.
Current external appointments: Chief Executive
Officer, Pladis.
Duncan Painter
Non-executive Director
R
Appointed: May 2018
Key skills and experience: Duncan joined ITV in
May 2018 and is a member of the Remuneration
Committee. He is currently Chief Executive Officer
of Ascential plc and a Board Adviser to Investis
Digital. Previously he was an executive at
BSkyB and Global Product Leader at Experian plc
following its acquisition of ClarityBlue, a consumer
intelligence company which he founded. He brings
to the Board a broad range of experience
particularly in digital media, consumer intelligence
systems and targeted advertising.
Current external appointments: Chief
Executive Officer, Ascential plc; Board Adviser,
Investis Limited.
Mary Harris
Non-executive Director, Chair of the
Remuneration Committee
N A R
Appointed: July 2014
Key skills and experience: Mary joined ITV in
July 2014, and became Chair of the Remuneration
Committee in May 2017 having served on the
Committee since May 2016. She is also a
member of the Audit and Risk and Nominations
Committees. She is a former partner at McKinsey
& Company, where she worked primarily with
retail and consumer clients in China, South East
Asia and Europe. She brings to the Board extensive
experience in executive remuneration, 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 Chair of the Remuneration
Committee, Reckitt Benckiser Group PLC;
Vice-chair of the supervisory board and Chair
of the Remuneration Committee of Unibail
Rodamco Westfield SE; Member of Remuneration
Committee, St Hilda’s College, Oxford University.
Anna Manz
Non-executive Director
A R
Appointed: February 2016
Key skills and experience: Anna joined ITV
in February 2016 and is a member of the
Remuneration and Audit and Risk Committees.
She is currently Chief Finance Officer at Johnson
Matthey plc and prior to that held senior strategy
and financial roles at Diageo plc, both in the UK
and internationally. She brings over 20 years’
consumer, financial and strategic experience
to her role on the Board and the Committees
on which she sits.
Current external appointments: Chief Finance
Officer, Johnson Matthey plc.
Roger Faxon
Non-executive Director
R
Appointed: October 2012
Key skills and experience: Roger joined ITV
in October 2012. He has extensive experience
in international media and digital rights
management having held roles at EMI for nearly
20 years, including Chief Executive Officer
of EMI Group and Chairman of EMI Music
Publishing. Roger has broad unmatchable
experience of the adaptation of media and
rights management business to the digital
world bringing insight into his roles on the
Board and Remuneration Committee.
Current external appointments: Director,
The John Hopkins University.
83
Strategic ReportGovernanceFinancial StatementsAdditional Information Management Board
Julian Bellamy
Managing Director, ITV Studios
Carolyn McCall
Chief Executive
Appointed: February 2016
Experience: Julian joined ITV in 2014 as
Managing Director of ITV Studios in the UK.
He was promoted to Managing Director of
ITV Studios and appointed to the Management
Board in February 2016. He has responsibility for
running ITV’s global production and distribution
business that creates, produces and sells finished
programmes and formats in the UK and
internationally. 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. He was promoted to
Group HR Director and appointed to the
Management Board in 2014. He has responsibility
for formulating and implementing ITV’s global
HR strategy and policies. Prior to joining ITV
David gained substantial experience in both the
UK and internationally whilst working in a variety
of businesses, including EMI Music, Vodafone,
Visa Europe and Marks & Spencer.
Appointed: January 2018
Experience: Biography on page 82.
Kevin Lygo
Director of Television
Appointed: August 2010
Experience: Kevin joined ITV as Managing Director
of ITV Studios and a member of the Management
Board in 2010. He became Director of Television
in February 2016. He has responsibility for running
ITV’s family of channels, the ITV Hub and
BritBox, commissioning popular programming
in order to drive share of viewing. 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
Chief Marketing Officer and Director of Direct
to Consumer
Appointed: April 2017
Experience: Rufus joined ITV as Group Marketing
and Research Director in 2011. He was promoted
to Chief Marketing Officer and appointed to the
Management Board in 2017. In 2019 he took
additional responsibility for the Direct to
Consumer division. He has responsibility for
brand and marketing, digital products including
the ITV Hub, the Direct to Consumer business
(which includes ITV Hub+, gaming, live events,
merchandise and competitions) and the
development of ITV’s data insight strategy.
Before joining ITV, Rufus spent ten years at
Channel 4, and prior to that held various
positions at McCann Erickson and JWT.
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ITV plc Annual Report and Accounts 2019
Julian Bellamy
David Osborn
Carolyn McCall
Kevin Lygo
Rufus Radcliffe
Governance Management Board
Chris Kennedy
Kelly Williams
Mark Smith
Kyla Mullins
Paul Moore
Chris Kennedy
Group CFO
Appointed: February 2019
Experience: Biography on page 82.
Kelly Williams
Managing Director, Commercial
Appointed: December 2014
Experience: Kelly joined ITV in 2011 as Group
Commercial Director. He was promoted to
Managing Director, Consumer and appointed
to the Management Board in 2014. He also sits
on the board of Thinkbox TV; is Vice Chairman
of the Advertising Association; is a member of
the BARB Strategy board; and sits on the RTL
Adconnect board. He has responsibility for all
commercial advertising deals across the ITV
family of channels. Prior to joining ITV, Kelly
was the Sales Director at Channel 5 and prior
to that held various positions at UKTV, Sky
and Thames Television.
Mark Smith
Group Chief Technology Officer
Appointed: September 2018
Experience: Mark joined ITV in 2011 as a member
of the technology management team. He was
promoted to Chief Technology Officer in 2015,
before taking on the Group Chief Technology
Officer role and joining the Management Board
in 2018. He has responsibility for all technology
and related operational matters across the
Group, including leading on the digital
transformation strategy. 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 as General Counsel
and Company Secretary and a member of the
Management Board in 2019. She has responsibility
for legal, company secretarial, compliance and
regulatory matters across the Group. Prior to
joining ITV, Kyla held senior legal positions in the
media, entertainment, strategic outsourcing
and aviation sectors. She 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. Kyla is currently Chair of Independent
Television News Limited (ITN).
Paul Moore
Group Communications and Corporate
Affairs Director
Appointed: June 2018
Experience: Paul joined ITV as Group
Communications and Corporate Affairs Director
and member of the Management Board in 2018.
He has responsibility for all Group communications,
including corporate and internal communications,
public affairs, programme publicity and the
recently launched Social Purpose strategy. Prior
to joining ITV, Paul was the Communications and
Public Affairs Director at easyJet plc for eight years
and before 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.
85
Strategic ReportGovernanceFinancial StatementsAdditional Information Corporate Governance
Our Governance structure
Shareholders
Chairman
Leads the Board and is responsible for its overall effectiveness. In doing so promotes a culture of openness and debate,
and ensures that ITV maintains effective and regular engagement with its shareholders and stakeholders.
The PLC Board
Responsible for providing leadership to the Group’s business, including setting the Group’s purpose, strategy and values
and promoting its long-term sustainable success.
Board
Committees
The terms of reference for each Committee are documented and agreed by the Board. These terms of reference are
reviewed annually and are available on our website: www.itvplc.com/investors/governance/terms-of-reference.
Nominations
Committee
Remuneration
Committee
Audit and Risk
Committee
Disclosure
Committee
See the Nominations
Committee Report
on page 99.
See the Remuneration
Report on page 116.
See the Audit and Risk Committee
Report on page 102.
Duty of Care Operating Board
Consisting of key Management
Board members including the Chief
Executive, the Operating Board sets
the Group’s duty of care processes,
and monitors and assesses the
processes in place to ensure they
continue to evolve as appropriate.
The Audit and Risk Committee Chair
also attends meetings.
Consisting of the Chairman of the Board,
Chief Executive, Audit and Risk Committee
Chair, Group CFO, General Counsel and
Company Secretary, and Director of Investor
Relations. The Committee signs off and
approves the release of RNS announcements
relating to financial results or other material
information. It also makes inside information
determinations, including approving the
disclosure (or delay in disclosure) of any
inside information, and supports the Board
in drawing up and maintaining procedures
and controls for the identification, treatment
and disclosure of inside information.
Chief Executive
Responsible for the day-to-day running of the Group’s business and performance, the development and implementation
of strategy and promoting our culture and standards.
Management
Board
Led by the Chief Executive, the Management Board members are collectively responsible for overseeing and driving the
overarching Group financial and operational performance against strategic initiatives set by the PLC Board. The Management
Board balances the needs and resources of the business divisions to make decisions based on what’s best for ITV as a whole.
Studios Board
Integrated Broadcast Board
BritBox Operational Committee
Responsible for developing and implementing
strategic objectives and operational plans
for the ITV Studios business, monitoring
operational and financial performance, and
assessing and managing risk, in line with
the Group’s risk management framework.
Responsible for developing and implementing
strategic objectives for the Integrated
Broadcast business (including the Hub,
Hub+ and Direct to Consumer), monitoring
operational and financial performance,
and assessing and managing risk, in line with
the Group’s risk management framework.
An ITV Executive Committee responsible
for making and implementing operational
and commercial decisions relating to the
BritBox business, in accordance with the
BritBox governance framework established
together with the BBC.
86
ITV plc Annual Report and Accounts 2019
Governance
Corporate Governance
Board composition
Gender diversity
Skills and experience
Board tenure
Age
Business transformation
Strategy
Media and media IP
7
Male
Female
6
4
Finance
Digital
Data
5
5
1
9
9
10
10
10
10
10
10
0–2 years
2–5 years
5–9 years
3
4
3
46–55
56–65
66–75
3
5
2
Board and Committee membership and attendance
Board and Committee membership and attendance at scheduled meetings in 2019 is set out below.
Status
Notes
Date of appointment
to the Board
Date elected by
shareholders
Board 1
Nominations
Committee 6
Remuneration
Committee
Audit and Risk
Committee
Attendance at scheduled meetings
Chairman
Independent
Current
Peter Bazalgette
Salman Amin
Edward Bonham Carter Independent (SID)
Margaret Ewing
Roger Faxon
Mary Harris
Chris Kennedy
Anna Manz
Carolyn McCall
Duncan Painter
Independent
Independent
Independent
Executive
Independent
Executive
Independent
2
3
4
5
1 June 2013
9 January 2017
11 October 2018
31 October 2017
31 October 2012
28 July 2014
21 February 2019
1 February 2016
8 January 2018
1 May 2018
8/8
14 May 2014
8/8
10 May 2017
8/8
8 May 2019
8/8
10 May 2018
8/8
15 May 2013
14 May 2015
8/8
8 May 2019 7/7, 1*
8/8
12 May 2016
8/8
10 May 2018
8/8
8 May 2019
3/3
3/3
3/3
–
–
3/3
–
–
3*
–
6/6
6/6
–
3*
6/6
6/6
4*
6/6
3*
5/5, 1*
6*
–
6/6
6/6
–
6/6
6*
6/6
4*
–
*
Indicates where a Director has attended a Board or Committee meeting by invitation (i.e. when not a member or prior to being a Director). The Executive Directors did not attend
parts of any Committee meetings where to do so would result in a conflict of interest.
In June a series of Board meetings were held over a full two day strategy offsite meeting. For the purposes of this table this offsite is counted as one meeting.
1.
2. Peter Bazalgette was invited and attended all Audit and Risk Committee meetings during the year.
3. Margaret Ewing was invited and attended three Remuneration Committee meetings during the year.
4. Chris Kennedy joined the Board on 21 February 2019, however he attended the January meeting by invitation.
5. Duncan Painter was appointed to the Remuneration Committee on 1 February 2019. He was invited and attended the meeting in January, and then all meetings after this date
as a Committee member.
6. Membership of the Nominations Committee was formalised in May 2019, with three meetings held after this date. Prior to this all Non-executive directors had been
Committee members.
Focus for 2020
Strategy and operations
• Strategy implementation progress
• Deep dives on strategic initiatives
• Data strategy
• Brexit and regulatory issues
• Digital transformation and innovation
• Total advertising
• BritBox UK growth
Governance
• Deep dives into key risks
• Monitoring and assessing culture
• Stakeholder engagement
• Duty of Care
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Strategic ReportGovernanceFinancial StatementsAdditional Information Corporate Governance continued
Key matters considered in 2019
Stakeholder Groups
S Shareholders
C Colleagues
P Partners CZ Citizens PP Programme participants VC Viewers and consumers LR Legislators and regulators
2019 activity
Link to principal risks
Continued evaluation of the ITV strategy, impact of external forces, technological trends, threats
and opportunities
Links to all
principal risks
Strategy
and
performance
Refresh of ITV’s strategic vision to 2023 and purpose, ensuring alignment of purpose, values,
strategy and culture
Principal risk 9
Review of existing five year plan
Principal risk 9
Succession planning and organisation design – reviewed proposals to reorganise resource
more efficiently and effectively to enable delivery of the renewed strategy
Principal risks 10,
14 and 15
Investor insights and dividend policy
–
Link to key
stakeholders
S P C VC
LR
S C
S C P
S C
Transform
Broadcasting
Addressable advertising – consideration and approval of a licensing deal with Amobee enabling
ITV to launch a premium advanced advertising platform Planet V
Principal risk 2
P
Viewer journeys – understanding how viewer and customer needs are changing and how this
affects ITV’s strategy
Principal risk 1
P VC
Grow
UK and
global
production
Expand
Direct to
Consumer
Commercialisation project – consideration and approval of proposals to improve the structure,
direction and integration of the ITV Studios business to maximise IP value
Principal risks 3
and 7
Review of prior acquistions performance
Five year US strategy plan
–
Principal risk 9
S C
S
S C
BritBox pre-and post launch updates with regular updates on research, risks and challenges
Data and analytics strategy – reviewed plans for enhancing data analytics
A more in-depth data strategy will be considered in 2020
Digital transformation – considered how to develop a commercial and innovative mindset
Principal risks 1
and 8
S P VC C
Principal risk 9
S P
Principal risks 9
and 10
S P C
Other
Brexit and regulation – continued to review key policy and regulatory issues, including Brexit,
CRR and advertising restrictions, PSB review. This continues to be kept under review together
with other issues that could have a potential long-term impact on the business
Principal risks 6
and 12
Property portfolio – agreed the sale of the Southbank site in November 2019 for £145.6 million
–
Pension funding
Duty of Care – leading an internal review of production processes and establishing the Duty
of Care Operating Board and updating Duty of Care Charter
Social purpose strategy
Stakeholder and employee engagement, culture
For further information on principal risks please see pages 66 to 78.
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ITV plc Annual Report and Accounts 2019
S LR
S C
S C
P VC C PP CZ
LR
S C CZ VC LR
PP
Principal risk 4
Principal risk 11
–
Principal risks 10
and 14
S C CZ P VC
LR PP
Governance Corporate Governance
Engaging with our stakeholders
Why it matters: We believe that the
successful delivery of our strategy, the
continued achievement of our purpose
and ultimately the long-term success of
our business depends on effective Board
decision-making and debate which, in
order to be holistic, and relevant, must
take into consideration the views of all
key stakeholders. We recognise that it is
fundamental that the Board understands
the issues relating to our stakeholders
so their views are taken into account in
Board deliberations, and that building and
maintaining successful relationships with
a wide range of stakeholders will serve to
deepen that understanding. All Board
decisions are made with ITV’s success in mind,
and stakeholder considerations and views
are therefore an important part of that.
The Board’s approach: Through its
engagement mechanisms and at various
levels of the organisation, the Board seeks to
enrich and verify its understanding of what
matters to stakeholders and keep it current.
The Board considers stakeholders
throughout the year and at every meeting
through information provided by
management and also by direct
engagement with stakeholders.
The General Counsel and Company
Secretary provides support to the Board
in ensuring that due consideration is given
to stakeholder issues. We interact with
many stakeholders at different levels of
the organisation and not all information
is reported directly to the Board.
However, the information will inform
business-level decisions, with an overview
of developments being reported on a
regular basis to the Board or a Committee.
Key engagement mechanisms are set out
in the table below and focuses on those
that are reported up to the Board or Board
Committees and enable the stakeholder
voice to be heard in the Boardroom.
Shareholders (Individual and Institutional), Bond Holders and other Providers of Debt and Analysts
What’s important to them Forms of engagement
How considered in Board discussions and decision-making
• Financial and
operating
performance,
creating shareholder
value, sustainable
cash flows and
delivering
shareholder returns
• Company’s strategy
and investment
plans and delivery
against strategic
and financial targets
and KPIs
• Environmental,
social and
governance (ESG)
performance
• Confidence and
belief in the
Company’s
leadership
Over the year, the Executive Directors held over 70 meetings
with investors representing around 70% of the Company’s
share capital and potential investors across the UK, US and
parts of Europe. These meetings were part of roadshows
and conferences in Europe and the US, and ad hoc meetings,
including post-results engagement. Senior management
also met with investors and sell-side research analysts.
The Chairman was available to meet with investors and
met with investors holding approximately 3% of the
Company’s share capital.
• At the Annual General Meeting (fully attended by the
Board), all our shareholders were given the opportunity
to ask our Board members questions and interact more
informally before and after the meeting. All shareholders,
investors and analysts are also able to access our results,
reports, presentations and webcasts on the ITV plc website
• ITV hosted two site visits for institutional investors and
analysts, offering the opportunity to visit ITV sites and
meet the wider management team. This included the
‘Meet the ITV Management’ event in November
• Consultations with our top institutional shareholders and
investor bodies were held this year on the external audit
tender, by the Chair of the Audit and Risk Committee; and
the proposed Remuneration Policy for approval in 2020
and the 2019 and 2020 LTIP targets, by the Chair of the
Remuneration Committee
• Meetings were held between the Group CFO, senior
managers and prospective debt investors in the UK and
Continental Europe to discuss our bond issue and tender
offer as part of a three day deal roadshow
• The Executive Directors undertook other investor
engagements during the year, including a senior fund
manager dinner and attendance at four conferences
which included the Citi, JP Morgan and Barclays media
conferences in London and the Morgan Stanley conference
in Barcelona
In decision making, the Board remains cognisant of a director’s
duty to promote the success of the Company for the benefit
of its members. In order to achieve this, understanding investor
(equity and debt) views and interests is invaluable.
Investor feedback is presented to the Board through regular
reports on key shareholder engagement activities undertaken
by the Chief Executive, Group CFO and the IR team, any
significant changes in investor holdings since the previous
report, and regular summaries of sector research notes
and broker notes, allowing the Board to understand the key
opinions being communicated to investors by sell-side analysts.
The Board also ensures that it seeks investors’ views from
outside management, including receiving presentations from
the Company’s brokers. For example, in assessing the going
concern and viability statements, the Board and Audit and
Risk Committee also received assurance from analyst
commentary and thereby took into account information
and assertions from the market that had not been provided
by management regarding views on the Group’s future
financial performance and viability.
A sub-committee of the Board was tasked with overseeing
the bond issue and tender offer that took place during the
year. As part of this transaction, the views of prospective
bond investors gathered during the deal roadshow were
fed back to the Committee from the Group CFO and senior
managers in advance of pricing.
The Board uses the feedback from the Company’s shareholder
engagement to inform, amongst other things, its long-term
strategy, five year plan, and approach to governance issues.
Some issues of focus this year were the increasing importance
of environmental, social and governance (ESG) matters to
investors, particularly climate change.
Of real benefit to the Board in its deliberations and discussions
is the valuable investor perspective shared by Edward Bonham
Carter as Vice Chair of a large fund management group.
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Programme participants
What’s important to them Forms of engagement
How considered in Board discussions and decision-making
• Trusting that we
take our duty of
care to them very
seriously, knowing
we will do the right
thing to safeguard
their physical and
mental health
and wellbeing
• The Duty of Care Operating Board approved the ITV Duty
of Care Charter enshrining its commitment to programme
participants and others which is published on our website
• From February 2020, the Board will receive feedback from
ITV’s Mental Health Advisory Group, which will provide
guidance and support on all aspects of ITV’s approach
to mental health and wellbeing among its people,
production teams, participants in its shows and audiences
• The Board is regularly updated on duty of care processes
and issues
The Board has been updated regularly during the year on
the steps management has taken to further enhance
processes and guidance for producers to support programme
participants before, during and after production, and on issues
relating to ITV’s response to the DCMS Select Committee
inquiry into reality television.
The Chief Executive also established the Duty of Care
Operating Board, whose members include the Chief Executive
and General Counsel and Company Secretary, with the Audit
and Risk Committee Chair being a standing invitee who has
attended and reported back to the Board, via the Audit and
Risk Committee, on the Operating Board’s discussions and
activities. The Board has received assurance from the
additional governance and reporting that has been
implemented that ITV is maintaining best existing practice
and continuing to evolve and shape new thinking on mental
health, as well as physical health and safety, which helps ITV
prioritise changes or improvements.
Viewers, Customers and Subscribers
What’s important to them Forms of engagement
How considered in Board discussions and decision-making
• ITV broadcasting
and producing high
quality programmes
appealing to viewers
from a wide range
of backgrounds
and regions, and
reflecting a
modern society
• Having a trusted
and impartial source
of information
for national,
international and
regional news
• Bringing awareness
of key social and
topical issues
• Representative
on-screen diversity
• Viewer and customer shareholders have an opportunity to
meet the Board at the Annual General Meeting. Every year
shareholders at the meeting ask us questions about our
programming in their capacity as viewers
• The Management Board receives monthly reports on
viewer ratings and channel (including the Hub)
performances including updates on all research, data
and insight work streams
• Our viewer services team handles viewer feedback and
escalates any issues to the relevant senior managers as
necessary. The Chief Executive and other Management
Board members review and, as appropriate, discuss a
selection of viewer comments and concerns regularly.
The Executive Directors, as members of the Integrated
Broadcast Board, receive regular compliance reports
detailing viewer or regulator concerns
• As part of her CEO report, the Chief Executive will report
to the Board at every meeting on viewing figures including
for broadcast series performance
The Board recognises the evolution of ITV’s relationship with
viewers and customers and how this needs to be considered
as part of the Company’s strategy. This relationship is
becoming increasingly direct through the launch of BritBox
UK during the year, and through our growing Direct to
Consumer business including ITV Hub+, but also viewer
behaviours are changing with a shift particularly from
younger viewers, from linear television viewing to more IP
streaming of content.
Extensive viewer research was commissioned and carefully
considered during the year as part of the Board strategy
offsite deliberations.
With the launch of BritBox UK this year, the Board regularly
had presentations from the BritBox management team and
sought assurance regarding the call centre services and data
security in relation to subscribers.
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ITV plc Annual Report and Accounts 2019
Governance Corporate Governance
Partners (including Suppliers, Advertisers, other Broadcasters and Platform Owners)
What’s important to them Forms of engagement
How considered in Board discussions and decision-making
• Maintaining strong
• The Executive Directors have met with and attended
conferences and engagements to foster relations with
key suppliers and partners
• The Executive Directors are on the BritBox Partnership
Board with their BBC counterparts and other senior
managers
• ITV benefits from well-established supplier governance
processes in place with the key supplier relationship owners
engaging directly with suppliers on key issues to ensure
its values are upheld throughout the supply chain
• During the year, further engagement with suppliers
identified as being within potentially high-risk categories
took place. Further details of our work to identify, address
and prevent modern slavery throughout our supply chains
and operations are available in our 2019 Modern Slavery
Statement, which is available on our website, and also set
out on page 65
and mutually
beneficial
opportunities
• Building capability
and expertise
• Responsible,
transparent and
fair procurement,
trust and ethics
• Alignment of values
in developing
best-in-class work
practices, including
digital and
operational
improvements
• HSE performance
and appropriate
duty of care
processes
• Management and
mitigation of
social and
environmental
impacts
Citizens
The Board annually reviews and approves the Modern Slavery
statement, and we have continued to increase the depth and
breadth of our work across the whole of ITV’s business in the
area of preventing labour rights issues well before they reach
the threshold of modern slavery, ensuring that we have in
place effective oversight of and mitigations to potential risk.
Strategic partnerships are presented and discussed at least
quarterly at the Management Board, and the Chief Executive
reports on key partner relationships at every Board meeting
as part of her CEO report. The Board considers and approves
high value or otherwise significant contracts with suppliers or
partners in accordance with the Group Approvals Framework.
This year this included, amongst others, the BritBox
Memorandum of Understanding with the BBC and the
subsequent agreements for the launch of BritBox UK and
a renewed carriage agreement with Sky.
The Audit and Risk Committee has also been focused on
reviewing supplier practices and processes, including ITV’s
payment practices reporting, and the procedures in place
to safeguard both ITV and suppliers from fraud.
The Board discussions benefit from Salman Amin’s experience
in the consumer packaged goods sector. Salman provides
valuable insight into the advertisers’ mindset and how
advertisers might be impacted by an external situation or
Board decision.
What’s important to them Forms of engagement
How considered in Board discussions and decision-making
• Harnessing our
• Being a public services broadcaster, we both strive to remain
in touch with and reflect public sentiment and national
conversations. Our engagement in this stakeholder
category is an integral part of our Social Purpose strategy.
Please refer to page 44 for our work in this area.
For information regarding our charitable giving
and volunteering, please refer to page 48
unique mass reach
platform and the
power of our
programmes to raise
awareness of issues
and matters that are
important and help
shape culture
for good
• Our sustainability
• Our contribution
to wider society in
other ways, including
charitable giving
and volunteering
• Representative
on-screen diversity
The Board reviewed and endorsed the new Social Purpose
strategy prior to launch, including the better health
campaigns to be run during 2019. The Company’s Social
Purpose was considered in the context of the Company’s
wider refreshed purpose, and ensuring that it also aligned
with the Company’s strategy and values.
The Board also spent time reviewing and discussing ITV’s
diversity targets both on-screen and at various levels of the
organisation and is focusing on ensuring ITV and the Board
reflects the UK’s rich diversity.
On sustainability, the Board committed to setting ambitious
environmental targets, signing up to, and reporting on its
progress in complying with the TCFD recommendations, as
set out on page 62.
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Legislators and Regulators
What’s important to them Forms of engagement
How considered in Board discussions and decision-making
Regulatory and governmental issues were discussed at every
Board meeting during the year, not least given the outcome
of the Brexit referendum and the difference in stance on
policy issues between the two major parties, which could
have had a significant macroeconomic and legislative effect
on the UK economy.
Other policy and regulatory matters that the Board discussed
included updates regarding the government’s HFSS food and
drink advertising consultation, discussion of Select
Committee hearings relating to the reality TV inquiry, and
the proposed approach to the expiry of the Public Services
Broadcasting licence in 2024.
All Board members also attended a creative arts industries
network drinks reception in Manchester and engaged directly
with journalists, politicians and industry-related influencers.
The Chief Executive and Chairman also hosted a dinner
for senior MPs the same evening and the matters arising
from both these events were discussed at the subsequent
Board meeting.
• Our conduct as
• Dedicated policy/regulatory and public affairs teams
undertake frequent meetings, lunches and dinners with MPs,
government ministers, civil servants, government advisers
as well as regulators such as Ofcom in relation to policy and
legislation of specific and generic relevance to ITV
• The ITV All Party Parliamentary Group, which met twice
during the year, provides a forum for parliamentarians
to consider and discuss the role and contribution of ITV
in broadcasting in the UK and regulatory issues
• During the year we interacted with the Competition Markets
Authority regarding the proposed BritBox partnership with
the BBC. We also engage in relevant CMA consultations
• ITV maintains an open communication with the ICO to keep
them updated on our approach to data privacy as well as
complying with any mandatory reporting requirements. ITV
also engages in relevant ICO consultations, often along with
other broadcasters
• The Group CFO, General Counsel and Company Secretary
and senior management met with the pension trustees,
and the General Counsel and Company Secretary met with
the Pensions Regulator during the year
• The Chief Executive met with a number of ministers in 2019,
through her ITV activities as well as Co-chair of the Prime
Minister’s Telecom, Media and Technology Business Council
as a non-executive board member of the Department
for Business, Energy and Industrial Strategy (BEIS)
• Senior leaders engage on consultations and new initiatives
with government and with regulators. These types of
interaction frequently involve the Chief Executive and
other senior ITV employees
a UK public service
broadcaster and
delivery of our
PSB obligations
• Constructive
engagement around
the policy and
regulatory agenda
• Our conduct as a UK
listed company
• Trust and ethics
• Governance and
transparency
• Sustainability
performance
• Regulatory
compliance
(including tax)
Colleagues
What’s important to them Forms of engagement
How considered in Board discussions and decision-making
• Reward
• Development and
career progression
• Workplace culture,
including flexible
working patterns
and work
environment
• Diversity and
inclusion
• Employee
engagement and
communications
• Brand and
reputation
• Talent pipeline
and retention
• HSE performance
• We run an Ambassador network across all our offices with
which our Senior Independent Director, Edward Bonham-
Carter, liaises closely as our designated Board link to our
workforce. Management Board members also regularly
attend Ambassador meetings
• During the year, the Chief Executive led 19 roadshows
across five locations to give our colleagues the opportunity
to hear directly from and question her and the
management team
• A full employee engagement survey was launched to
give everyone the opportunity to provide their
feedback anonymously
• The Management Board attend and coordinate regular
senior leader events to ensure that senior leaders
understand the views of the Board and Management Board
and have the opportunity to provide input into the strategy
they are instrumental in implementing
Management Board engagement with colleagues is reported
to the Board in the CEO report, keeping colleagues at the
forefront of Board considerations and decision-making. Key
topics discussed at Board level in connection with colleagues
included: our refreshed purpose and values, strategy and how
to communicate this to colleagues, talent development and
people strategy (at the Nominations Committee), colleague
pay and recognition (at the Remuneration Committee), and
steps taken to drive further diversity and inclusion at ITV.
Edward Bonham Carter, as Workforce Engagement Director,
provides feedback to the Board on employee topics of
interest and/or concern following meetings with the
Ambassador network. He reports annually on a more formal
basis on the insights gained from this engagement and on
any outcomes or proposed recommendations that arise
(see page 93 for specific outcomes in 2019).
• The Board held a set of meetings at ITV’s Manchester
offices in October and had lunch, dinner and a meeting with
local senior leaders on this visit
• Management uses numerous channels to communicate and
The feedback and results from the 2019 employee
engagement survey were presented to the Board in January
2020 with findings, trends and actions discussed and agreed
by the Board and the divisional boards.
engage with employees, including regular newsletters,
monthly managers’ bulletin, Chief Executive’s vodcast and
podcast, and the Chief Executive’s Ask Carolyn email address
Please refer to page 93 for further information on employee
engagement by the Board and page 94 for how employees
were actively engaged to refresh our purpose.
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ITV plc Annual Report and Accounts 2019
Governance Corporate Governance
Workforce engagement
To ensure effective engagement with
the workforce, the Board uses two of
the methods stipulated under the Code:
Edward Bonham Carter, our Senior
Independent Director, is the designated
Workforce Engagement Director and we
also utilise a formal workforce advisory
panel, our Ambassador network. As well
as these mechanisms, the Board recognises
the benefits of personal interaction
and informal discussion in learning more
about day-to-day operations, the practical
execution of strategy, and gathers direct
insights into workforce sentiment. Set out
below are the key instances of the direct
engagement the Board members have
had with our employees.
Our Ambassador network represents all
parts of the business and was established
in 2015 to represent employee interests,
share information and help inform our
culture by giving our employees a voice.
Each Ambassador represents about
50 colleagues from their business area,
called their constituency. Some larger
constituencies have more than one
Ambassador, while smaller departments
have been grouped together within
a single constituency. There are
approximately 75 Ambassador
constituencies. The Ambassadors are
organised through five groups: Manchester,
Leeds, London Waterhouse Square offices,
London Grays Inn Road offices, and our
International offices. The Ambassadors
meet in their groups four times a year
and they also participated in an all
Ambassador conference in 2019. The
Ambassadors meetings allow good
engagement regarding business issues
affecting colleagues. For example, during
2019, Ambassadors were instrumental
in feeding back on flexible working and
providing an insight into colleague
understanding of the ITV strategy.
Management Board members, including
the Executive Directors, also regularly
attend Ambassador meetings to provide
updates from their business areas and
hear feedback and themes from
the Ambassadors.
Our designated Workforce Engagement
Director, Edward Bonham Carter, has
attended a number of meetings and lunches
with Ambassadors across our sites in Leeds,
Manchester, and two of our London sites,
as well as meeting the Ambassador Chairs
separately. Through active two-way
dialogue, these meetings have provided
Edward with the opportunity to share
insights into external factors affecting ITV
and the Ambassadors then share this insight
back with their constituents. Edward’s
feedback has also highlighted to the Board
the importance of issues which are key
to employees and either accelerated or
informed outcomes (see his quote on this
page). Where there have been Ambassador
meetings since the previous Board meeting,
Edward has had time on the Board agenda
to feedback on employee views or any issues
that employees have wanted to raise.
The Board and ITV’s Management Board
use a number of other arrangements
for direct workforce engagement.
This includes, for example:
• As well as the usual engagement that
the Board has with the members of the
Management Board, through regular
dinners with the Management Board
and at the Board’s strategy sessions,
plus interactions outside the Boardroom
with other senior leaders, the Board met
with employees at the AGM
• The Board held its October Board and
Committee meetings in Manchester.
The Board’s employee engagement on
the visit is referenced on page 80
• The Chairman and Roger Faxon visited the
New York offices of ITV Studios America.
The Chairman is present in the ITV offices
for a full day at least once a week and
during this time is visible in the workplace
and meets with senior leaders
• The Executive Directors hold frequent
Executive Leadership Team and Senior
Leadership Team sessions (made up of
approximately 40 and approximately
200 of the top senior leaders
respectively). The Chief Executive also
delivers regular vodcasts and podcasts
to update colleagues on developments
and encourages direct contact through
her Ask Carolyn email address
Edward Bonham Carter
Attending the Ambassador meetings
has been an invaluable opportunity
to hear directly from my fellow
colleagues, who in turn have proactively
sought out views, from their colleague
constituents, on how they feel about
life at ITV.
Not only do I feel I have a good
understanding of the range of topics
close to the hearts of our workforce,
I am able to raise the profile of those
issues – our constructive two-way
dialogue on flexible working and
understanding the ITV’s strategy have
informed the approach to the Smart
Working Initiative and the employee
roadshows during the year.
As part of my role in ensuring that
information flows both ways, I also
shared the Board’s views on the
challenging external environment
and the impact this has on the
FTSE 100 share index.
Edward’s activities as Workforce
Engagement Director
• Attended four Ambassador meetings
in Leeds, Manchester and two
London sites
• Held formal introductory meeting
with Ambassador Chairs
• Hosted informal lunches with
Ambassadors in Leeds and Manchester
• Filmed short clip regarding his role
and availability played at
Ambassador conference in May
and for intranet
• Gave three verbal updates to
Board on activities
• Presented one formal paper
regarding activities and outcomes
to the Board
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• This year the Chief Executive led, together
with the Management Board members,
19 roadshows across five locations to give
our colleagues the opportunity to hear
directly from and question her and the
management team, and also to enable
employees to understand ITV’s Strategy
and the role that they would play in
delivering that strategy.
The mechanisms above relate to
engagement with our employees and
not freelancers, to avoid conflict with
our responsibilities under HMRC contract
and compliance requirements. For all our
colleagues, including freelancers, we have
our ‘speaking up’ process that includes
a reporting tool (AVA), as well as a freelancer
complaints procedure, both of which enable
freelancers to raise concerns around
inclusion and culture at ITV. Through the
trade unions, the Directors UK forum and
the Producers Alliance for Cinema and
Television (PACT), we gain feedback from
the freelancer perspective which helps
us address other issues and concerns that
may be raised by this group.
Employee Roadshows During the year
the Chief Executive led 19 roadshows across
five locations giving colleagues the chance
to raise questions with her and the
management team.
Values in action – understanding
and monitoring our culture
To support the creation of long-term value
for the mutual benefit of stakeholders,
we recognise the importance of building
and promoting a culture of openness and
integrity, where inclusion and diversity
are valued. Our culture also extends to
consideration of our dealings with all our
stakeholders (including the interaction
with our partners) and our Social Purpose
initiatives. In our unique position, where
we have the opportunity to shape society,
start conversations and encourage action
on things that matter through the millions
of people we reach, it is even more
fundamental that our organisation’s culture
reflects the values that we promote
more widely.
In discharging its duty in monitoring and
assessing culture, and ensuring that the
culture of openness, inclusivity and integrity
continues to pervade through all levels and
divisions of the organisation, in the UK and
internationally, the Board seeks evidence-
based assurance of the right behaviours
representing the organisation’s values
being reflected in systems and people. This
includes interaction with our colleagues
and stakeholders giving us direct cultural
insights, further illustrated in the ‘Workforce
engagement’ (page 93) and ‘Stakeholder
engagement’ (page 89) sections.
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ITV plc Annual Report and Accounts 2019
This year the refresh of the Company’s
strategic vision and purpose has been
established by the Board with the clear
embodiment of ITV’s cultural values in mind.
The Board is very supportive of the
significant Management Board time and
resource invested in extensive employee
roadshows and manager training. This has
ensured that our employees understand and
embrace the updated strategic vision and
purpose, and their roles in continuing to
apply responsible, inclusive and ethical
behaviours, underpinned in the ‘ITV Way’,
to deliver our purpose, strategy and vision.
Next year the Board will continue to focus
on cultural alignment, particularly across
the international offices and within each
business division. This follows some
significant changes to the business structure
during the end of 2019, including the deeper
integration of the Talpa business, the digital
transformation and Smart Working
initiatives being embraced throughout
the organisation, all of which are creating
a shift in cultural mindset.
During 2019, the Board and/or its
Committees sought assurance in the
following key ways in assessing, monitoring
and upholding our culture, and ensuring
that there is consistency and, therefore,
authenticity between what is said, done
and prioritised. Through discussion of
relevant observations, the Chief Executive’s
focus on people and culture in her Board
reports, and the Board discussions and
reviews noted below, culture is covered,
whether implicitly or explicitly, at every
Board meeting.
• The Board oversaw management’s
development of the purpose and
strategic vision, which was achieved
through colleague collaboration. For
the purpose, 15 employee focus groups,
selected to represent a breadth of
roles, skills, divisions and locations,
were instrumental in developing our
commercial purpose statement. Similarly,
a series of Executive Leadership team
workshops established and evaluated
the potential strategic options leading
to the finalised strategic vision. These
processes served to ensure that our
strategic vision and purpose genuinely
represent what we stand for and
what we are driving to deliver.
Governance Corporate Governance
Our ITV values underpin the culture
at ITV and these are embedded
through our Code of Conduct:
• Creativity – without fear or caution
• Collaboration – working together
at pace
• Inclusion – respecting and
embracing differences
The ITV Way encapsulates the
values that underpin the culture
at ITV:
• Make it Brilliant – creativity for
everyone, without fear or caution
• Make it New – openness to change,
with no barriers
• Make it Together – collaborating,
respecting and embracing
differences
98%
completion rate of Code of Conduct
annual training
Silver award
in Mind Workplace Wellbeing Awards
75%
of colleagues told us in an all employee
survey that ITV is an inclusive place
to work
and safeguarding of mental wellbeing
and that our culture, both organisationally
and in what we broadcast, embraces
social inclusion.
• As well as mental health, we are focused
on physical health and safety. The Audit
and Risk Committee reviews the systems
in place to enable all employees, suppliers
and programme participants, and all
others involved in our production business
to identify and raise health and safety
issues, as well as duty of care concerns.
• Internal audit reports and findings take
into account culture where considered
relevant. The Audit and Risk Committee
has specifically considered culture in the
context of the embedding of ITV’s culture
into systems and processes the cultural
alignment across international offices
and business divisions. During 2019 this
has included a review of the internal audit
findings relating to the business services
centre operations in Manchester and
certain other ITV production companies
and subsidiaries (UK and international).
The Committee has been satisfied with
the findings on such cultural aspects
during the year. For 2020, the Audit
and Risk Committee and Group CFO will
continue to request observations and
commentary from internal audit on
culture to help understand why certain
behaviours occur and any pressures that
might be driving behaviour.
• Consideration of the conclusions
of external audits on subsidiary
accounts has also supported the
Audit and Risk Committee’s assurance
on positive cultural behaviours within
subsidiaries, including production and
overseas companies.
• As part of the external Board evaluation
during the year, a deep dive was
undertaken on, amongst other things,
culture and purpose. The Board
evaluation report noted that the Board
feels there is a common understanding
of the strong purpose and values that
ITV wishes to uphold.
•
In May the Board reviewed and endorsed
the Company’s Social Purpose and its
priorities including, amongst other things,
diversity and inclusion and campaigning
for better mental and physical health (see
page 44). In this session, the Board
discussed the importance of the Social
Purpose dovetailing with the shift in
strategic vision and the wider purpose
and continued to keep this in mind when
setting these latter strategic components
later in the year. The Board also expressed
the importance of ensuring the Social
Purpose priorities, while being promoted
externally, were also embraced and
reflected credibly within the organisation.
On diversity and inclusion, the Board is
keeping the pressure on meeting, if not
exceeding, our diversity targets through
discussion regarding the activities of the
ITV Inclusion Council chaired by the Chief
Executive. The Nominations Committee is
also monitoring progress against diversity
targets regularly, with diversity on the
Board agenda annually.
• The Board is very supportive of the
focus on mental health in ITV’s Social
Purpose campaigns, which is an issue
which we seek to promote awareness
and acceptance of very broadly, as
demonstrated by our continued
commitment to our evolving duty
of care processes and the wellbeing
initiatives we have in place for our
colleagues and programme participants.
Through ITV’s new Mental Health
Advisory Group, consisting of a panel of
independent leading advisers with
expertise in the field, ITV is doing its part
in creating a culture which supports the
mental health of one another.
From 2020, the Board and its Committees
will receive ideas, feedback and practical
advice on mental health from the
Advisory Group to consider reflecting
in our policies and decision-making
regarding our processes, programmes,
and external campaigns. The Duty of
Care Operating Board, which reports to
the Audit and Risk Committee, focuses on
continuing to optimise
ITV’s duty of care processes and the
processes we expect from our partners
producing shows for broadcast on ITV.
It will draw on the expertise of the
Mental Health Advisory Group to ensure
ITV remains at the leading edge of best
practice. This helps us ensure that we
promote the acceptance, importance
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Strategic ReportGovernanceFinancial StatementsAdditional Information Corporate Governance continued
• Site visits to enhance understanding of
day-to-day operations, observe the
practical execution of strategy and
gather insights into the cultural
context in which employees work are
fundamental to deepening the Board’s
understanding of culture and assessing
culture first-hand. Please see page 93
for the ways in which the Directors have
engaged with the workforce this year.
Also of value is the Board’s engagement
with our key stakeholders and
understanding how, through our dealings
with them, they perceive our culture.
•
In their conduct inside and outside the
Boardroom, Directors strive to lead
by example, reinforcing the cultural
tone and promoting the right behaviours.
Cultural fit with the principles of
integrity, openness and inclusion is
a pre-requisite for the appointment
of any new Board member by the
Board and Nominations Committee.
• The Audit and Risk Committee monitors
and reviews the effectiveness of the
Group’s whistleblowing arrangements
annually, as well as the wider ‘speaking
up’ framework of raising concerns and
grievances, and provides feedback to the
Board. The Audit and Risk Committee
Chair is named, with her contact details,
in the internal whistleblowing policy as
the nominated Board director for final
escalation of a concern. The integrity
of these processes is an important part
of our governance arrangements and in
2020, on the Audit and Risk Committee’s
recommendation, management will
undertake further work in embedding
the speaking up framework so that it also
joins-up the escalation of concerns from
a health and safety and duty of care
perspective and the processes in place for
dealing with employees whose behaviour
falls short of required standards.
• A dedicated Board session on culture
was held in January 2020 following the
closing of the employee engagement
survey in December 2019. Matters
considered by the Board included:
– a cultural KPI dashboard which
• The Board is conscious of the role that
remuneration, and setting performance
goals, has on promoting the right
behaviours and the need to align
incentives and rewards with culture.
Please refer to the Remuneration
Report for further details on how the
Remuneration Committee has been
effecting this (which includes its
amendment of malus and clawback
provisions, the use of discretion in
ensuring executive pay is appropriate
from a cultural context, and making
pay decisions in light of what is going
on in the rest of the organisation by
considering, for example, the CEO pay
ratio and pension contributions).
allowed the Board to benchmark
key indicators of our organisational
culture with external measures in
a tangible way;
– output from the all employee survey
(see bullet point immediately below);
– an analysis of the Company’s culture
through issues raised through the
feedback from the 19 employee
roadshows led by the Chief Executive
during the year;
– a review of ITV’s Code of Conduct and
how it promotes the highest standards
of ethical business underpinning our
values and corporate culture;
– a review of how the Company supports
understanding and embedding of the
Code of Conduct and related policies
and standards, through a programme
of targeted training, including
mandatory annual e-learning modules
and practical training sessions, and
frequent communications regarding,
and reviews of, its content; and
– a review of the reinforcement of
the ‘ITV ways of working’ through the
Company’s recruitment and selection
processes, new joiner inductions,
management and all colleague
development, performance reviews,
and colleague remuneration.
As part of this session, the Board satisfied
itself that the policies, practices and
behaviour throughout the Group are
aligned with ITV’s purpose (including
the Social Purpose element within this),
vision, values and strategy.
• As part of the Board culture session,
the outputs from this year’s employee
engagement survey were reviewed.
The Board considered both the positive
and more challenging aspects revealed
by the survey. The Board will continue to
take a keen interest in such surveys and
will review, in due course, the actions to
be taken forward to address areas of
employee focus. The Board will also
consider whether to request specific
pulse surveys to seek feedback from
employees on key matters.
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ITV plc Annual Report and Accounts 2019
Governance
Corporate Governance
Board evaluation
In 2019, the Board undertook an externally
facilitated self evaluation, following the
last external review in 2016. The review was
conducted by No 4, an independent advisory
firm. No 4 has no other connection with the
Company or individual directors and has not
previously facilitated Board reviews for the
Company or the Chairman.
No 4 evaluated the performance of ITV’s
Board and Committees through a formal
and rigorous review of its composition,
diversity, and members’ contribution, both
individually and together, and through an
assessment of the Board’s effectiveness
in meeting its strategic objectives and
leading the business. The evaluation found
that the Board and its Committees
continue to operate to a high standard.
The Directors work effectively together
and value each other’s contributions at
Board and Committee meetings.
The process, outcomes and follow-up
actions are described in more detail on
the following two pages, all of which
were agreed with No 4.
2019 External evaluation process
No 4 was selected to conduct the evaluation
through a process overseen by the
Nominations Committee. The General
Counsel and Company Secretary proposed
a shortlist of five potential external
evaluators. Out of the shortlist, two
candidates, endorsed by the Nominations
Committee, were interviewed by the
Chairman, Senior Independent Director
and General Counsel and Company
Secretary. The appointment of No 4 as
the external evaluator was approved by
the Nominations Committee.
The Chairman and General Counsel and
Company Secretary met with No 4 in
advance to agree the objectives and scope
of the evaluation. Our areas of focus were
also agreed (see next page).
Phase
01
Selection
Phase
04
Findings
Phase
02
Planning
Phase
03
Insight
The findings of the evaluation were
presented to the Board in January 2020,
and the Board discussed the points raised
by the review and recommendations on
follow-up actions. The Board further
discussed the evaluation at the Board in
February 2020, and reviewed and endorsed
the action plan proposed by the General
Counsel and Company Secretary.
The Senior Independent Director also led
a separate Chairman evaluation with the
Non-executive Directors to appraise the
Chairman’s performance.
The General Counsel and Company
Secretary coordinated the evaluation and
provided No 4 with the necessary access
and resources, including recent Board and
Committee papers, and other relevant
information to enable No 4 to undertake
a thorough review of the Board. No 4
held face-to-face confidential interviews
with each Director and the General Counsel
and Company Secretary, as well as certain
other Management Board members. ITV’s
remuneration advisers and the external
auditor were also interviewed to seek
their views on the Board’s effectiveness.
No 4 also gathered insight into the Board’s
dynamics, culture, leadership and individual
director contribution through observing
Board and Committee meetings held in
October and December.
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Strategic ReportGovernanceFinancial StatementsAdditional Information Corporate Governance continued
2019 External evaluation outcomes and actions
We covered a broad range of areas including:
Stakeholders
Strategy and
performance
delivery
Purpose,
values and
culture
Risk
Governance
Board
composition
and succession
planning
Board
dynamics and
individual
contribution
Meetings and
organisation
Committees
What we focused on:
Strategy and performance
delivery
The Board is appropriately
involved with overseeing strategy
formulation and execution.
The strategy offsite during the
year was considered insightful as
to the opportunities and challenges
facing the business and effective
in progressing the evolution of the
Company’s strategy. The Board is
aligned on the strategic priorities
of the business.
Our key follow up actions:
KPIs supporting monitoring of
performance delivery progress
to be kept under review.
Risk
The Board, with the support
of the Audit and Risk Committee,
effectively assesses and
manages risk through its
controls framework.
Strategic and reputational risk
issues were a focus for the Board
during the year, and the Board
was fully supportive of the swift
actions taken by management
to address the issues that arose.
Board composition and
succession planning
The Board has good diversity of
both background and thought and
effective succession planning is
in place.
The evaluation confirmed the
Nominations Committee’s analysis
of Board composition in the
context of Board succession
planning – that the Board would
benefit from additional expertise
in the digital landscape.
Meetings and organisation
Board meetings are well led;
the Chairman promotes a
culture of openness and debate,
and facilitates constructive
Board relations.
The organisation, information
and agenda are all felt to be good.
Deep dives of certain principal
risks to be tabled at the Board in
addition to the Audit and RIsk
Committee in order to encourage
debate of our most critical risks at
the highest level of governance.
Continued focus on Board
composition and succession
planning.
Give further guidance to
presenters and paper contributors
to the Board and Committees
regarding clarity on the Board
output sought, appropriate level
of detail and consideration of
stakeholders.
The General Counsel and Company Secretary is responsible for driving the actions forward. She compiled an action plan listing specific actions to address
the findings of the evaluation and further enhance the Board’s effectiveness. The Board will monitor the implementation of the follow-up actions and
No 4 is due to come back to the Board later in 2020 to review progress against the recommendations.
Progress against 2018 actions:
Action
Nominations 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.
Outcome
The Nominations Committee structure was
refined this year with more meetings, together
with more focus on Board composition and
succession planning (see page 100).
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.
Outcome
All Committee terms of reference were updated
during 2019 and the job descriptions of the
Chairman, Senior Independent Director and
Chief Executive were updated in 2020.
Action
Review and consider approach and programme
for continuing professional development, as part
of the external evaluation exercise.
Outcome
Following feedback from the Board, a workshop
on addressable advertising was held for
Non-executive Directors during the year.
The Remuneration and Audit and Risk
Committees have been receiving regular
market practice updates from external advisers.
The Audit and Risk Committee discussed a paper
tabled by the Committee Chair regarding
training, education and skills needs.
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ITV plc Annual Report and Accounts 2019
Governance Corporate Governance
Nominations Committee Report
In this report:
The purpose of this report is to highlight the
invaluable role that the Nominations Committee
plays in ensuring that the Board has the appropriate
balance of skills, experience, knowledge and
background to give us the breadth, depth, diversity
of thinking and perspective needed to effectively
deliver long-term sustainable success.
Sir Peter Bazalgette
Chairman
Who is on the Committee
The Committee is composed entirely of
Non-executive Directors.
The current members are:
• Sir Peter Bazalgette (Chair)
• Salman Amin
• Edward Bonham Carter
• Mary Harris
Full details of attendance
at Committee meetings
can be found on the table
on page 87.
Detailed biographies
can be found on
pages 82 and 83.
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 main role of the
Committee is to:
• Regularly review Board
composition and the
balance of skills, knowledge,
experience and diversity
• Determine when
appointments and
retirements are
appropriate, and lead on
any Director searches
• Give full consideration to
succession planning and
oversee the development
of a diverse pipeline for
succession, at Board and
senior management level
• Set measurable objectives
on Board diversity and
monitor progress on
these objectives, as well as
reviewing Company-wide
targets
Meetings in 2019
In addition to Committee members, the
Chief Executive, Group HR Director and
General Counsel and Company Secretary
regularly attended meetings.
June
• Terms of Reference
• Board succession planning
• Diversity
• Board evaluation
July
• Board succession planning
(including short-term cover)
• Board evaluation process
• Director time
commitments
October
• People strategy review
(including review of
executive succession plans)
• Non-executive Director
search
Annual review
An annual review of the performance
of the Committee is conducted each year.
In 2019 an independent Board
evaluation was undertaken,
which included a review of the
Committee. The results are
summarised on page 98.
Overall, the evaluation
concluded that the Committee
is working effectively and
responding appropriately to
its terms of reference.
The Committee discussed the
evaluation of the Committee
and its findings at its meeting
in February 2020.
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Strategic ReportGovernanceFinancial StatementsAdditional Information Nominations Committee Report continued
Board diversity
40%
female Board representation
4th
in the 2019 Hampton-Alexander review’s
‘Top Ten Best Performers’ with
42.1% female representation on
the Combined Executive Committee
and direct reports
10%
BAME Board representation
Key areas of focus for the
Committee during the year
Board composition and
succession planning
Composition: During the year, the
Committee undertook an analytical review
of Board composition, assessing the range
and balance of skills, experience, diversity,
knowledge and independence to identify
any gaps and to consider the need to refresh
the Board. A breakdown of the Board’s skills,
experience and certain diversity measures
are set out on page 87. In the context of
the digital transformation and shift in
our strategic vision to becoming a digitally
led entertainment and media company,
the Committee recommended to the
Board that a search be commenced for
a Non-executive Director who would bring
deep experience of digital transformation
with a disruptor mindset.
Non-executive Director succession
planning: The Board also reviewed
succession planning for each of the
Chairman, Senior Independent Director,
Committee Chair and Workforce
Engagement Director roles, and identified
either where internal candidates are
appropriate, or an external search may be
needed, for both emergency and longer-
term succession. Given the Chairman will
have been on the Board for nine years as at
June 2022, it is the Committee’s intention
to start a search process, also taking into
account internal candidates, in 2021.
Executive Director and Management
Board succession planning: During the
year, the Chief Executive and Group HR
Director reported on the succession
planning measures in place for the
Management Board (including the
Executive Directors), as well as the
Executive Leadership Team (the top 40
senior leaders in the organisation). This
included Management Board and Executive
Leadership Team bench strength analysis
for each role identifying short and
medium-term successors and the diversity
of the pipeline. The Committee was satisfied
that the Company has effective executive
succession planning processes in place, and
was able to understand in what areas
external candidates may need to be
considered. The Committee also had a
session on improving the strength, depth
and diversity of our talent. Board members
also have the opportunity to meet potential
succession candidates for senior, business
critical roles when they present to the
Board or at Committee or, more informally,
at dinners or lunches.
Non-executive Director search
During the year, the Committee commenced
a Non-executive Director search. It is
expected that the appointment of a new
Non-executive Director will be announced
in the first half of 2020.
Search process being undertaken for
a new Non-executive Director
• Selection of recruitment consultants:
Founders Keepers were selected for the
recruitment consultant role given their
specialism in transformative digital and
technology talent. Their appointment
was approved by the Committee.
Other than the provision of recruitment
services, Founders Keepers has no other
connection with the Company or any
individual director, with the exception
of Duncan Painter, who was similarly
recruited to ITV by the firm.
• Candidate specification: The
specification for candidates was discussed
at the Committee, setting out the agreed
key skills and character profile being
sought to fit with the current balance,
membership and dynamics of the Board.
As in prior years, the Committee
continued to seek diversity as part of the
overall selection of the highest calibre
candidates for appointment to the Board,
based on merit and objective criteria.
• Potential candidates: A longlist of
candidates meeting the specification
was identified by the search firm through
their network, database and deep market
research. In accordance with the Board’s
Diversity Policy this included a diverse
range of backgrounds and a gender
balance. These were finessed by the
Chairman and Chief Executive, who
suggested some other potential
candidates for contacting. Founders
Keepers then assessed and vetted those
potential candidates via their network in
digital and technology.
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ITV plc Annual Report and Accounts 2019
Governance Nominations Committee Report
• Interviews: A shortlist of candidates
has been interviewed by members of
the Nominations Committee (including
the Chairman) and the Chief Executive
and Group CFO. Candidates will be
meeting other Directors on the Board
as appropriate prior to Board approval
for the appointment being made.
Board diversity policy
Our objective of driving the benefits of
a diverse Board, senior management team
and wider workforce is underpinned by
our Board Diversity Policy. Our belief is that
diversity at all levels makes business sense
as it allows the organisation to harness the
benefit of differences in skills, experience,
culture, personality, background and work
style. We are proud of our commitment to
driving further diversity Company-wide, as
exemplified by diversity being one of our
four priorities in our Social Purpose strategy.
Please refer to page 49 for further
information including our Company-wide
diversity targets.
A copy of the policy can be found on
our website www.itvplc.com/investors/
governance/directors
Set out below are the objectives of our
Board Diversity Policy, and how we are doing
against them. These objectives ensure that
both appointments and succession planning
support developing a diverse pipeline.
Ensure ITV has a development pipeline of
high calibre senior executive candidates
and encourage senior executives to
obtain external board experience
The ongoing development of senior leaders
to ensure we retain the best talent and to
broaden their skillsets and experience to
prepare them for future senior roles is
important, and the Committee held a session
on succession planning at the senior executive
level during the year. ITV runs a high potential
leadership programme, building a pipeline
of diverse talent for senior level roles and
launched a Returners Programme in 2019,
identifying senior external female talent that
have potential to move into roles at ITV.
Bespoke development is in place for
identified senior successors and this is
identified based on the development
need and could include:
• External executive coaching, with clear
coaching objectives (including 360
feedback where relevant);
• Psychometrics such as the Hogan
Leadership series that identifies
leadership strengths, derailers and values;
• Mentoring by a Non-executive Director;
• Business School executive education
programmes; and
• Non-executive Director and Trustee
appointments where there is a suitable
match and development support for those
interested in these opportunities. One of
our senior leaders has secured a place on
the Deloitte BAME on Boards programme.
Maintain at least 30% female Directors on
the Board over the short to medium term
During 2019, the Board had a 40% female
representation, including one Executive
Director and two Committee Chairs,
and therefore we have gone beyond this
target as well as the Hampton-Alexander
target of 33% representation by 2020.
Whilst the Board recognises that an
effective Board with broad strategic
perspective requires diversity, ultimately
the Board appoints candidates based on
merit and assesses Directors against
measurable, objective criteria.
Our principles for Board diversity also apply
to our Management Board and senior
management below this level. We are
therefore pleased to be ranked fourth in
the Hampton-Alexander 2019 review for
female representation on the Combined
Executive Committee and Direct Reports,
with female representation of 42.1%.
We are cognisant that diversity is more
than gender. Our Board already complies
with the recommendation of the Parker
Review to have at least one director of
colour by 2021.
Use search firms who have signed up
to the Voluntary Code of Conduct on
gender diversity
The Board supports the provisions of the
Voluntary Code of Conduct for Executive
Search Firms. During the year, our work on
Non-executive Director recruitment was
supported by Founders Keepers, an
independent executive search agency.
Although Founders Keepers is a recently
established firm, and is still in the process of
signing up to the Voluntary Code of Conduct
for Executive Search Firms, it fully complies
with the code’s provisions and its spirit.
Founders Keepers is closely allied to the
‘AccelerateHer’ initiative, part of their wider
corporate group’s mission to champion and
support women working in technology and
break down the barriers that deter women
from entering the sector.
Ensure Non-executive Director shortlists
include at least 50% female candidates
Given our strong female Board
representation on the Board, the Board
determined that other diversity elements
including ethnicity, should also be a focus in
this year’s Non-executive Director search.
The long list of candidates consisted of 50%
female candidates. This list was reviewed
and refined based on measurable, objective
criteria, to come to a short list made up of
50% diverse candidates (female and BAME).
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
As part of the Non-executive search, the
Committee worked closely with Founders
Keepers in compiling long and shortlists
of candidates from various backgrounds
and industries, including BAME backgrounds.
30% of the longlist consisted of BAME
candidates. Candidates were identified,
interviewed and measured against
pre-determined criteria.
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Strategic ReportGovernanceFinancial StatementsAdditional Information Audit and Risk Committee Report
In this report:
The purpose of this report is to highlight
areas that the Audit and Risk Committee has
reviewed, considered and discussed 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 also explain the Committee’s
approach to reviewing the effectiveness of our
internal and external auditors.
Margaret Ewing
Chair, Audit and Risk Committee
Dear Shareholder
I am pleased to present the Audit and Risk
Committee Report, which provides an
overview of the role of the Committee and
the matters considered during the year.
The membership of the Committee has
remained consistent during this last
financial year. I and the Board believe we
have the right mix of skills and experience
represented on the Committee to provide
independent and robust challenge to
management and our internal and external
auditors to ensure there are effective
and high-quality controls in place and
appropriate judgements are taken.
Chris Kennedy joined ITV as Group CFO in
February 2019 and the Committee and
the auditors have established an open
and constructive working relationship
with him since his appointment.
This year, the Committee led a competitive
tender process for the appointment of
a new external auditor. A case study of the
external audit tender process can be found
on page 115. As announced in November,
and subject to shareholder approval in 2021,
PriceWaterhouseCoopers LLP (PwC) has
been proposed as the external auditor to
take effect from, and including, the 2021
financial year. Due to KPMG LLP’s (KPMG)
length of tenure, ITV was required to
conduct a tender process for the 2022
financial year end onward. With the current
audit partner required to rotate from the
audit following the 2020 financial year end,
we decided to tender the audit for the 2021
financial year onwards. We undertook the
tender process this year to ensure there is
a smooth and orderly transition starting
during 2020 and to allow PwC to resolve any
conflicts of independence and objectivity
well ahead of the proposed appointment.
KPMG will continue to be ITV’s external
auditor for the 2020 financial year.
• Support management in undertaking
a thorough review of the Group’s
framework of financial reporting and
internal controls (including financial,
operational and compliance controls)
to ensure they are designed, documented
and operating effectively and robust
monitoring processes are in place;
The second matter to highlight relates to our
considerable focus on the enhancement of
the Group’s enterprise risk management
framework and processes. In order to increase
line of sight over emerging risks and gain
greater confidence in the management of
our ongoing key organisational risks, ITV
has completed a thorough exercise to review
and refresh the identification of the Group’s
principal risks and undertaken a series of
comprehensive interviews with senior
management across all aspects of the
Group to identify further emerging risk areas.
The Company also reviewed its existing risk
management approach and identified a series
of improvement opportunities designed to
further strengthen the framework. These
improvements will be implemented and
further embedded during 2020.
In addition to routine business, during
2020 the Committee will have the
following areas of focus:
• Monitor and evaluate the embedding
of the enhanced Enterprise
Risk Management model and
framework and ensure that they
are operating effectively;
• Continue to monitor and assess the impact
of regulatory changes affecting the audit
industry and how this will impact ITV and
the work of the Committee;
• Undertake a competitive tender process
for the appointment of internal auditor,
having concluded with management
during 2019 that an outsourced model
for internal audit is the optimum solution
for the Group; and
• Oversee the preparation for the transition
from KPMG to PwC, ensuring that it is
smooth and orderly and that PwC is well
prepared to embark on the 2021 audit.
I hope that you find this report informative
and can continue to take assurance from
the work undertaken by the Committee this
year. We seek to respond to shareholders’
expectations in our reporting and, as always,
welcome any feedback from shareholders,
including engaging directly with
shareholders in meetings.
Margaret Ewing
Chair, Audit and Risk Committee
5 March 2020
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Governance Audit and Risk Committee Report
Who is on the Committee?
Our role
Definition
The Committee is composed entirely of
independent Non-executive Directors.
The current members are:
• Margaret Ewing
• Edward Bonham Carter
• Mary Harris
• Anna Manz
Full details of attendance at Committee
meetings can be found on the table
on page 87.
Detailed biographies can
be found on pages 82 and 83.
The Committee members have
between them a wide range of business
and financial experience. For the
purposes of the Code, the Board
considers that Margaret Ewing (a
chartered accountant, previous FTSE
100 CFO and, until 2012, an executive
member of the Board of Deloitte LLP)
and Anna Manz (a chartered accountant
and currently a Chief Financial Officer
of a FTSE 100 company) have recent
and relevant financial experience.
Edward Bonham Carter, as Vice Chair
of a large fund management group,
provides valuable investor insight and
challenge to the Committee’s
deliberations. In addition, Mary Harris
has had executive sector experience
as a management consultant with
experience in media, television and
interactive media investments.
The Committee, therefore, as a whole
has financial expertise and considerable
competence relevant to the sector
in which the Company operates
(particularly as certain of the members
have been Non-executive Directors of
ITV for a number of years).
The main role of the Committee is set
out below.
Following each meeting, the Committee
Chair communicates its main discussion
points and findings to the Board.
The Committee’s terms of reference,
updated in July 2019, can be accessed
on our website.
External audit
• Review the quality and effectiveness of
the external audit and the procedures
and controls designed to ensure auditor
independence and objectiveness.
• Review and make recommendations
to the Board on the tendering of
the external audit contract, and the
appointment, remuneration and terms
of engagement of the external auditor.
The main duties of the Committee are to:
Financial Reporting
• Monitor the integrity of published
financial information and review and
challenge significant financial reporting
issues and judgements.
• Review the appropriateness of
accounting policies and practices.
• 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.
• Provide advice to the Remuneration
Committee on financial reporting
matters and related judgements as
they affect executive remuneration
performance objectives.
Risk management and internal control
• 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 into high-risk business areas
or processes.
• Review the effectiveness of the
internal control and risk
management processes.
• Oversee appropriate whistleblowing
and fraud prevention arrangements.
Internal audit
• Monitor and review the effectiveness
and independence of the internal
audit function.
• Review and approve the internal audit
plan and monitor its implementation.
• Oversee the tendering of the internal
audit contract and approve the
appointment of the internal auditor
and the remuneration and terms
of engagement.
Annual review
The annual review of the performance
of the Committee during 2019 was
considered as part of the external Board
evaluation undertaken by Jan Hall at
No 4 (please refer to page 97 for
further details on the 2019 Board and
Committees evaluation). The Committee
also held a separate evaluation session
and, in addition to feedback from the
members of the Committee, input was
sought from the Director of Group
Finance, and members of the external and
internal audit teams. The evaluation
concluded that the Committee had
performed effectively.
Following the Board and Committee
evaluation, it was agreed that deep dives
of certain principal risks would be tabled
at the Board in addition to the Committee
in order to encourage debate of our
most critical risks at the highest level
of governance.
103
Strategic ReportGovernanceFinancial StatementsAdditional Information Audit and Risk Committee Report continued
Meetings in 2019
February
April
July
October
December
At every scheduled meeting this
year, the Committee also reviewed:
In addition to Committee members,
the Chairman of the Board, Executive
Directors, Director of Group Finance,
General Counsel and Company
Secretary, Head of Internal Audit,
Director of Tax and external audit
partner regularly attend meetings.
The Committee meets regularly with
the external audit partner and Head
of Internal Audit without
executives present.
2019 key matters considered at each
main meeting of the Audit and Risk
Committee (in addition to topics
covered at every meeting indicated
in the furthermost right-hand column
on page 105 included those shown in
the table opposite. The Committee
also addresses specific queries
referred to it by the Board or
Remuneration Committee.
As well as topics mentioned in this
table, which are relevant to all
businesses, ITV reviewed the following
matters specific to the business:
• Deal debt*: see page 108 for
further detail.
• Acquisition earnout liabilities*:
see page 107 for further detail.
• BritBox accounting treatment and
controls relating to subscriber
personal data: BritBox was launched
in November and is operated through
a subsidiary majority-controlled by
ITV. The Committee reviewed the
costs capitalised in developing the
BritBox service, the revenue streams
and recognition under IFRS 15 and the
controls in place to safeguard
subscriber personal data and to
record subscription revenue.
• 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 and the associated accounting
can be complex.
Areas of significant issues considered
by the Committee (set out in further
detail on pages 106 to 111) are indicated
with an asterix (*) in this table.
Review programme relating
to external audit quality,
effectiveness, independence
and objectivity
(see page 114 for further details)
• Review of external audit quality
• External audit scope and
framework
• Recommendation to reappoint
KPMG at AGM
materiality, identification and
agreement of significant audit risks
• External auditor engagement
• External auditor’s independence,
letter
quality and effectiveness
assessment
• External auditor’s independence
quality and effectiveness
assessment
Financial disclosure
and judgements
• Review of Q1 trading update
announcement
• Early consideration of known
half year financial reporting issues
and judgements
• Year end financial reporting issues,
including estimates, judgements
and exceptional items
• Draft Annual Report and Accounts
review, including review and
assessment of whether they are
fair, balanced and understandable
and the underlying assumptions
of the viability statement*
(including related disclosures)
• Review of FY18 results
announcement and attached
financial statements to ensure
consistency with Annual Report
and Accounts
External audit
(see page 113 for further details)
• Meeting with the external auditor in
• External audit strategy for 2019
• Meeting with the external auditor in
• Review of incoming external
• Known full year financial reporting
• Reporting from the external auditor,
the absence of management
• KPMG’s report on the external
audit conclusions and findings
• Auditor opinion
and half year review plan
• Review of external audit
tender plan
Internal controls and audit
(please also refer to the risk
management and internal
controls section on page 112)
• Internal audit independence and
service framework
• Meeting with the internal auditors
in the absence of management
• Review of procedures for the
detection and prevention of fraud*
• Material litigation report
Risk
(please also refer to the risk
management and internal
controls section on page 112)
• Principal risks and uncertainties
and risk mitigations
Governance and other
• Bonus and share plan outcomes
• Consideration of skills and training
for FY18
• 2018 Committee evaluation and
2019 Committee priorities
requirements for Committee
members
• Review and approval of revised
• Governance and audit reform
Committee Terms of Reference,
developments and investor
including in relation to duties
views update
regarding the external auditor
• Minutes and actions from previous
meetings
• External auditor’s independence,
• External auditor fees approval
• 2019 external audit strategy
quality and effectiveness
• External auditor’s independence,
update (including audit risks
assessment
quality and effectiveness
and scope)
• Approval of the external auditor
assessment
• External auditor’s independence,
engagement letter
• Revised External Auditor
quality and effectiveness
Independence policy approved
assessment
• Permitted non-audit services
(provided by external auditor)
review
• Review of draft half year results
• Review of Q3 trading update
• Year end planning
announcement
announcement
• Review of policy on exceptional
items*
• Report from the ITV Group Finance
management. During the year this
report regularly covered, amongst
other things:
estimates
– Accounting judgements and
– Developments in financial reporting
– Lease accounting (IFRS 16)
– Acquisition earnout liabilities *
– Goodwill impairment
– Appropriateness of Alternative
Performance Measures
– Litigation provisions*
– London property sale*
– Pension accounting*
– Tax (including IR35* and
employment status)
the absence of management
auditor transition arrangements
issues and judgements
including audit findings, progress
• KPMG interim review findings
and conclusions
• External audit tender process
discussion and recommendation
to the Board
• KPMG interim controls review
and independent audit opinion
findings
and independent review reports
• The ongoing independence of the
external auditor and the evidence
of quality and effectiveness in the
delivery of the audit
• Insurance renewal and programme
• Post acquisition reviews of recent
• Meeting with the internal auditor
• Reporting from the internal
update
Studios’ business acquisitions,
in the absence of management
auditor, including a review of activity
• Pensions and tax updates
including acquisition earnouts
• Effectiveness of internal audit
and status report on action plans
(including tax strategy for approval
and related accounting*
• Review and approval of the 2020
and regulatory and programme
and publication)
• Anti-bribery and corruption
internal audit plan
compliance. See page 112 for
procedures review
• Annual tax, pensions and treasury
examples of the controls and
reviews, including controls and
projects reviewed by the
policies
Committee
• Whistleblowing process, statistics,
themes, learning and status
• Supplier payment practices review
• Principal risks half year review
• Risk management framework
• Health and Safety update,
progress update
including review of Duty of Care*
• Technology modernisation
• Risk management framework
and cyber security update,
review
including controls
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Governance Audit and Risk Committee Report
Meetings in 2019
February
April
July
October
December
At every scheduled meeting this
year, the Committee also reviewed:
In addition to Committee members,
Review programme relating
• Review of external audit quality
• External audit scope and
the Chairman of the Board, Executive
to external audit quality,
framework
materiality, identification and
Directors, Director of Group Finance,
effectiveness, independence
• Recommendation to reappoint
agreement of significant audit risks
General Counsel and Company
and objectivity
KPMG at AGM
• External auditor engagement
Secretary, Head of Internal Audit,
(see page 114 for further details)
• External auditor’s independence,
letter
quality and effectiveness
• External auditor’s independence
assessment
quality and effectiveness
assessment
Financial disclosure
and judgements
• Year end financial reporting issues,
• Review of Q1 trading update
including estimates, judgements
announcement
and exceptional items
• Early consideration of known
• Draft Annual Report and Accounts
half year financial reporting issues
review, including review and
and judgements
• External auditor’s independence,
quality and effectiveness
assessment
• Approval of the external auditor
engagement letter
• External auditor fees approval
• External auditor’s independence,
quality and effectiveness
assessment
• Revised External Auditor
Independence policy approved
• 2019 external audit strategy
update (including audit risks
and scope)
• External auditor’s independence,
quality and effectiveness
assessment
• Permitted non-audit services
(provided by external auditor)
review
• Review of draft half year results
• Review of Q3 trading update
• Year end planning
announcement
announcement
• Review of policy on exceptional
items*
External audit
• Meeting with the external auditor in
• External audit strategy for 2019
(see page 113 for further details)
the absence of management
and half year review plan
• KPMG’s report on the external
• Review of external audit
audit conclusions and findings
tender plan
• Auditor opinion
• Meeting with the external auditor in
• Review of incoming external
• Known full year financial reporting
the absence of management
• KPMG interim review findings
and conclusions
• External audit tender process
discussion and recommendation
to the Board
auditor transition arrangements
issues and judgements
• KPMG interim controls review
findings
• Internal audit independence and
• Meeting with the internal auditors
• Insurance renewal and programme
• Post acquisition reviews of recent
in the absence of management
• Review of procedures for the
detection and prevention of fraud*
• Material litigation report
update
• Pensions and tax updates
(including tax strategy for approval
and publication)
Studios’ business acquisitions,
including acquisition earnouts
and related accounting*
• Meeting with the internal auditor
in the absence of management
• Effectiveness of internal audit
• Review and approval of the 2020
• Anti-bribery and corruption
internal audit plan
procedures review
• Annual tax, pensions and treasury
reviews, including controls and
policies
• Whistleblowing process, statistics,
themes, learning and status
• Supplier payment practices review
• Report from the ITV Group Finance
management. During the year this
report regularly covered, amongst
other things:
– Accounting judgements and
estimates
– Developments in financial reporting
– Lease accounting (IFRS 16)
– Acquisition earnout liabilities *
– Goodwill impairment
– Appropriateness of Alternative
Performance Measures
– Litigation provisions*
– London property sale*
– Pension accounting*
– Tax (including IR35* and
employment status)
• Reporting from the external auditor,
including audit findings, progress
and independent audit opinion
and independent review reports
• The ongoing independence of the
external auditor and the evidence
of quality and effectiveness in the
delivery of the audit
• Reporting from the internal
auditor, including a review of activity
and status report on action plans
and regulatory and programme
compliance. See page 112 for
examples of the controls and
projects reviewed by the
Committee
deals and the associated accounting
Governance and other
• Bonus and share plan outcomes
• Consideration of skills and training
for FY18
requirements for Committee
• 2018 Committee evaluation and
members
2019 Committee priorities
• Review and approval of revised
Committee Terms of Reference,
including in relation to duties
regarding the external auditor
including review of Duty of Care*
• Risk management framework
review
progress update
• Technology modernisation
and cyber security update,
including controls
• Governance and audit reform
developments and investor
views update
• Minutes and actions from previous
meetings
105
• Principal risks half year review
• Risk management framework
• Health and Safety update,
Director of Tax and external audit
partner regularly attend meetings.
The Committee meets regularly with
the external audit partner and Head
of Internal Audit without
executives present.
2019 key matters considered at each
main meeting of the Audit and Risk
Committee (in addition to topics
covered at every meeting indicated
in the furthermost right-hand column
on page 105 included those shown in
the table opposite. The Committee
also addresses specific queries
referred to it by the Board or
Remuneration Committee.
As well as topics mentioned in this
table, which are relevant to all
businesses, ITV reviewed the following
matters specific to the business:
• Deal debt*: see page 108 for
further detail.
• Acquisition earnout liabilities*:
see page 107 for further detail.
• BritBox accounting treatment and
controls relating to subscriber
personal data: BritBox was launched
in November and is operated through
a subsidiary majority-controlled by
ITV. The Committee reviewed the
costs capitalised in developing the
and recognition under IFRS 15 and the
controls in place to safeguard
subscriber personal data and to
record subscription revenue.
• 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
can be complex.
Areas of significant issues considered
by the Committee (set out in further
detail on pages 106 to 111) are indicated
with an asterix (*) in this table.
assessment of whether they are
fair, balanced and understandable
and the underlying assumptions
of the viability statement*
(including related disclosures)
• Review of FY18 results
announcement and attached
financial statements to ensure
consistency with Annual Report
and Accounts
BritBox service, the revenue streams
controls section on page 112)
Internal controls and audit
(please also refer to the risk
management and internal
service framework
Risk
(please also refer to the risk
management and internal
controls section on page 112)
• Principal risks and uncertainties
and risk mitigations
Strategic ReportGovernanceFinancial StatementsAdditional Information Audit and Risk Committee Report continued
Significant financial reporting issues considered by the Audit and Risk Committee
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.
During 2019, after robust challenge and debate, there were no topics where the conclusion resulted in 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 significant issues considered during the year.
Significant issues relating to financial statements are detailed below.
Review of legal cases
Issue
Action taken by Committee
Outcome/future actions
ITV is currently subject to ongoing litigation
where the outcome of the proceedings is not
certain, including the Box Clever litigation.
The Committee agreed that adequate
provision and/or disclosure has been made
for all material litigation and disputes,
based on the currently most likely
outcomes or unknown positions.
See note 5.2 to the financial statements.
The Committee reviewed the material
litigation report and discussed the key
cases, including Box Clever, with the
General Counsel and Company Secretary. In
addition, the Committee Chair met with
external legal advisers on key litigation
matters, such as Box Clever, to discuss the
litigation status and views on likely
timetables and outcome.
Following the Supreme Court’s refusal to
hear the Group’s appeal on the legal
dispute with the Pensions Regulator in
respect of the Box Clever Pension Scheme,
the Committee held private meetings with
the external auditor and management
separately to understand the uncertainty
around the quantum of the liability and
seek assurance around the treatment of
this as a contingent liability.
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Governance Audit and Risk Committee Report
Acquisition earnout liabilities
Issue
Action taken by Committee
Outcome/future actions
The complexity and potential scale of
the expected earnouts of our acquisitions
results in the potential total liability
for earnouts being a significant
business liability.
Pensions
Issue
The Group’s net defined benefit pension
deficit increased by £58 million during 2019
to £145 million at 31 December (2018: £87
million deficit) primarily due to a decrease
in discount rates.
The asset-backed pension funding
arrangements with the Pensions trustee
relate to the London Television Centre
(LTVC) on the South Bank and SDN. The
LTVC was sold in November, and SDN’s
multiplex licence expires in 2022.
The Committee was given an in depth
understanding of the issues and was
satisfied with the level of accrual for
the earnout liabilities and the related
disclosures. Please refer to notes 3.1.4
and 3.1.5 to the financial statements.
The first of the significant acquisition
earnouts payable in 2020 is Talpa. The
Committee received updates from
management throughout the year
regarding the Talpa earnout liability.
External advisors were also involved to
support the estimated range. In October
and December the Committee held
discussions with the external auditor on
the year end audit plan for this liability,
including understanding the focus of the
lead partner’s visit to the Talpa offices in
the Netherlands with the Group CFO in
January. The Committee assessed the
audit plan related to the audit procedures
to be undertaken in relation to this topic.
Action taken by Committee
Outcome/future actions
The Committee concluded that the
assumptions applied in determining
the net liability of the pension was
appropriate, and the net deficit correctly
reflected evidenced market values of
the assets held in the schemes at
31 December.
The Committee also concluded
management had robust plans in place
to provide alternatives to the existing
asset-backed pension funding
arrangements in due course.
See note 3.7 to the financial statements.
The Committee reviewed the elements
and amounts driving the increase in net
deficit, as well as the key assumptions
(as detailed in note 3.7 on page 195)
applied in determining the net liability
at 31 December. The Committee also
sought assurance from the external
auditor whose view was that the financial
assumptions applied in estimating the
net deficit were considered to be
appropriately balanced when compared
to KPMG benchmarks, and that the
reasonableness of the assumptions
applied were appropriate.
The Committee reviewed the impact
of the sale of the LTVC and the upcoming
expiry of the SDN licence on ITV’s
asset-backed pension structures
and reviewed alternative pension
funding structures.
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London properties
Issue
Action taken by Committee
Outcome/future actions
ITV completed the sale of the London
Television Centre on the South Bank to
Mitsubishi Estate London in an all-cash
transaction for £145.6 million in November.
Further to the assessment of the
accounting treatment in the previous
year, the Committee reviewed the
accounting impact of the sale and
the related disclosures in the
financial statements.
See note 3.2 to the financial statements.
Deal debt
Issue
Taking into account the current and recent
trading position in respect of the delivery of
advertising value to customers,
management’s approach in estimating the
over or under delivery of advertising value
to agencies and method of determining the
provisions were reviewed.
Action taken by Committee
Outcome/future actions
The rationale for the provision was
discussed by the Committee, taking into
account the views of the external auditor.
The Committee was comfortable with
the deal debt provision recognised at
31 December (within Total Advertising
Revenue).
Management reviews the deal debt
provision as part of the wider negotiations
with the agencies and any future changes
in the provision level will be discussed
by the Committee.
See note 2.1 to the financial statements.
Exceptional items
Issue
Action taken by Committee
Outcome/future actions
During 2019, there were acquisition-related
costs, reorganisation and restructuring
costs, exceptional property costs and
disposal profit and non-routine legal costs
to consider classifying as exceptional items.
(See an explanation of the exceptional
items policy on page 52).
The Committee re-assessed the policy in
light of the FRC guidance, considered the
classification of the exceptional items in
the financial statements with reference to
the policy, and took into account the views
of the external auditor.
The Committee concluded that the
approach taken was appropriate and
had been consistently applied in line
with the policy.
The Committee noted that it would
continue to review the exceptional items
policy and definitions regularly to ensure
that the classification of the items as
exceptional continues to be appropriate,
particularly in relation to acquisition-
related costs and reorganisation and
restructuring costs.
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Governance Audit and Risk Committee Report
Other significant issues
Highlights of key matters which the Committee considered outside of its financial reporting responsiblities are set out below.
For the Committee’s work during 2019 in relation to the audit tender and the risk management framework please refer to page
115 and 112 respectively.
Tax – IR35
Issue
Action taken by Committee
Outcome/future actions
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.
The Committee considered updates from
management on the implications for ITV,
and the steps being taken to ensure the
Company is ready to apply the legislation.
The Committee received updates on IR35
readiness at four of the five Committee
meetings in the year.
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 relevant IR35
Readiness programme board meetings to
ensure all related risks are being
adequately identified and addressed.
Post-acquisition review
of production businesses
Issue
Action taken by Committee
Outcome/future actions
ITV Studios has a portfolio of acquired
production companies which are important
to the financial and strategic performance
of the ITV group.
The Committee was assured from this
session that each of the acquisitions had
strengthened ITV Studios’ overall
production position in key markets and
genres.
The Committee will continue to retain
oversight of how acquired production
companies are performing financially and
ensure there is clear accountability for
their financial performance against the
acquisition value.
The Committee requested that
management undertake a post-acquisition
review of a sample of acquired production
companies, particularly as the structure of
each acquisition is different but normally
includes an element of deferred
consideration (which is based on future
earnings) or a put and call option.
Management provided an analysis of the
financial performance of three significant
production company acquisitions, each
nearing the end of the initial buyout term
and being considered for renewal of
contract with the vendors or key creative
personnel. The analysis included a
comparison of the initial business case
(including forecasts) against which the
decision to acquire the companies was
made with the performance to date
and forecast.
The Committee reviewed the analyses
and discussed each acquisition in turn
and considered its financial performance
against expectations and its integration
into the Group.
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Fraud procedures
Issue
Action taken by Committee
Outcome/future actions
There has been an increase (not specific to
ITV) in supplier-related fraud attempts in
recent years.
The Committee undertook a deep dive in
reviewing the key controls in place that
were designed to prevent and detect fraud.
The Committee reviewed the measures
taken to combat fraud and the internal
audit findings in relation to the key
controls at the Group’s business services
centre in Manchester. The Committee also
discussed the fraud procedures in place
directly with the senior managers in the
business services centre when they visited
Manchester in October.
The Committee will continue to monitor
fraud and internal controls carefully, and
has requested a review be undertaken by
an independent third party of the design,
effectiveness and documenting of internal
controls and processes to ensure that the
framework around internal controls is
operating appropriately and will be ready
for any potential audit reform in this area.
Health and Safety, including
Duty of Care
Issue
Action taken by Committee
Outcome/future actions
The health and safety of our employees,
contractors and those participating in our
productions is one of our highest priorities.
ITV continuously evolves its duty of care
processes, particularly given the increasing
popularity of reality programmes such as
Love Island and the increased social and
media attention on participants.
The Committee satisfied itself that the
processes in place were robust and fit for
purpose.
Given the importance of this topic, the
Committee will continue to review the
Group’s health and safety procedures and
record on a regular basis, and receive
regular reports on duty of care from the
Operating Board.
The Duty of Care Operating Board
(Operating Board) was established during
the year, reporting to the Committee (on
behalf of the Board). The Committee Chair
is a standing invitee and has attended the
Operating Board meetings and reported
back to the Committee.
The Committee also reviewed the health
and safety risk management processes in
place more widely in the organisation and
those required from content suppliers.
Specific documents reviewed as part of
this included the ITV Duty of Care charter,
the assessment process for auditing shows
and the ITV Studios’ procedures policy
document regarding the mental health
of programme participants.
Committee members asked the Director
of Operational Risk, reporting on the topic,
a number of questions around the
assessment and aftercare of programme
participants, the qualifications and
independent status of Dr. Paul Litchfield
(who works with ITV to evolve and
enhance our processes and oversee our
duty of care) and the physical health and
safety procedures.
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Viability and going concern
assessments
Issue
Action taken by Committee
Outcome/future actions
In light of recent collapses, the Committee
felt it was important to continue to ensure
a thorough assessment of the
management assumptions, stress testing
and scenario analyses supporting the
going concern and viability statements,
as well as seeking impartial external views
on ITV’s viability.
The Committee (and the Board) reviewed
the Group’s going concern and viability
statements, including the parameters
applied in stress testing and scenario
analyses, and the assessment reports
prepared by management in support of
such statements. The Committee also
reviewed the external auditor’s findings
and conclusions on this matter.
In reaching its view, the Committee
reviewed analyst commentary to
understand the wider market and
views on the Group’s future financial
performance and viability.
Following this thorough assessment,
the Committee considered the level
of the assessment appropriate and
recommended the draft viability
statement and related disclosures
(for inclusion in the 2019 Annual Report
and Accounts) for approval by the Board.
The Committee will continue to
monitor the Group’s viability assessment
going forward.
The Committee’s stakeholder engagement
Information regarding the Board’s stakeholder engagement is
set out on pages 89 to 92. During the year, the Committee also
ensured it took account of the views of the Company’s key
stakeholders and considered their interests in its discussions
and decision-making. Some examples of how the Committee
did this are set out below.
Suppliers
Reviewed the Group’s supplier payment practices reporting to
ensure that ITV’s supplier practices were fair and reasonable, and
reviewed the procedures in place to safeguard both ITV and
suppliers from fraud (see page 110).
Customers/viewers
Asked internal audit for, and received, assurance on the security
of the payment mechanisms in place for BritBox subscribers.
Programme participants
Reviewed the duty of care and health and safety processes in
place (see page 110).
Regulators
Received regular updates from the external auditor regarding
FRC developments and proposed regulatory changes, as well as
knowledge sharing between Committee members attending
relevant briefings on such topics.
Investors
Received a report from the Director of Investor Relations on, and
discussed with her, investors and analysts views in relation to
ITV’s accounting policies, risks and disclosures. This report
identified some potential improvements to our financial
reporting, which the Committee discussed and requested be
implemented in this Annual Report. The Committee also wrote
to its top institutional investors and key investor associations at
the beginning and towards the end of the audit tender process to
seek investor input. We received only one response, which was
supportive of the process adopted.
Employees
At the Board’s visit to ITV’s Manchester office, the Committee
had a presentation session with the senior managers of the
business services centre based there. The session was a two-way
dialogue between the Committee members and the senior
managers, which enabled the Committee to understand
first-hand the activities and focus on continuous improvement of
the business services, and the key issues of importance to the
business service centre employees.
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Strategic ReportGovernanceFinancial StatementsAdditional Information Audit and Risk Committee Report continued
Risk management and internal controls
Risk management
During the year, the Committee continued
to consider the process for managing risk
within the business and assisted the Board
in relation to compliance with the 2018 UK
Corporate Governance Code and FRC
guidance. Further information on our risk
management approach, including details
of our principal risks and our processes for
identifying and responding to principal and
emerging risks are set out on pages 66 to 78.
Development of the enterprise risk
management framework was an area of
focus for the Committee in 2019, with
the Committee providing challenge and
guidance as appropriate.
ITV operates in an increasingly complex
business environment and the type, level
and speed at which risks are impacting our
strategy and business operations are
different to past experience. Recognising
the challenge this brings to the business,
management has undertaken an exercise to
thoroughly review the existing risk
management framework and identify
opportunities where we can do things
differently to better help and support our
management teams. As an outcome of this
review, the business will be introducing a
series of changes to the risk management
framework during 2020 that will improve
business capability to better identify and
understand risks, examine how key risks
are being managed and help management
respond more effectively to key risks
and opportunities.
The Committee reviewed a number of risk
topics during the year, including technology
and digital modernisation, cyber security,
health and safety, fraud, data privacy,
anti-bribery and corruption, Airtime Sales
system implementation and the readiness
to record and screen live the Japan Rugby
World Cup. The Group’s principal risks reflect
those inherent within the annual budget
and five year plan, whilst also taking into
account developments in the markets in
which we operate and in society generally.
Internal controls
The Board has overall responsibility for the
Group’s framework for internal control and
for regularly reviewing the effectiveness of
internal controls. The Committee supports
the Board in assessing the effectiveness of
the framework. 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 satisfies itself that internal
controls are operating throughout the year.
This is 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.
During the year, the Committee also
received reports from the treasury, legal,
pensions, technology, information security,
tax, financial reporting, and health and
safety functions. These reports gave the
Committee an overview of the controls
in place to mitigate key risks within each
of these functions.
The Committee also reviewed the
governance for key projects, changes
(which it approved) to the Group Approvals
framework, use of the core international
controls framework and assessment of
controls effectiveness through the Group
Finance Assurance Plan. The Committee
noted the continuing enhancements to
processes, procedures and controls atthe
business services centre. The Committee
also reviewed the fraud prevention
framework (see page 110) and interaction
with external and internal audit.
As part of our internal control process an
annual strategy review, including
preparation of a rolling five year financial
plan, is undertaken by management and
reviewed and approved by the Board. The
five year plan feeds into the annual budget
cycle. The Executive Directors (along with
the other members of the Management
Board) 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. The
Committee reviews actual results,
compared with budget and forecasts,
and key trends and variances are explained
and analysed, and the actions taken to
address performance variances or
emerging issues, which are subsequently
reported back to the Committee.
Our auditors
Internal auditor
The Group’s internal audit activity is
outsourced to Deloitte LLP (Deloitte),
who report directly to the Committee.
During the year, the Committee considered
the internal audit models that ITV could
implement, and supported the proposal
that the current model of a fully
outsourced internal audit function should
be continued as it allowed best practice in
terms of risk-based approach and auditing
techniques, continuous robust and
independent challenge, and the use of
specialists in high-risk areas and across
the various geographies.
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 Committee had planned
on undertaking a competitive tender
process for the appointment of internal
auditor during 2019, following the
completion of the external audit tender
process. However, due to the significant
change agenda within the Group, and the
quality of the audits and support provided
by Deloitte’s internal audit team, the
Committee concluded that the tender
process should be deferred until 2020.
Deloitte will be invited to participate
in this tender process.
The effectiveness of internal audit
is assessed over the year using a
number of measures that include
(but are not limited to):
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• Reports from internal audit on the
development and delivery of the internal
audit plan and the completion of agreed
actions arising from reviews;
• Management feedback from the
Chief Executive, Group CFO, Director
of Group Finance and other members
of senior management;
• An evaluation of each audit assignment
completed using feedback from the part/
area of the business that has been
audited; and
• An annual review that is completed
by obtaining feedback from senior
management in each division and
Committee members.
Having considered the measures above,
the Committee is satisfied that the quality,
experience and expertise of the internal
auditor is appropriate for the business and
the internal auditor remains independent
of management.
Prior to the start of the year, the Committee
considered and approved the 2019 internal
audit plan, which was structured to align
with ITV’s strategic drivers and principal
risks. This included audits across the
Group as well as assurance over live
projects and readiness assessments,
including the airtime sales project, the
live screening of the Japan Rugby World
Cup and the BritBox UK launch. At every
Committee meeting, the Committee received
a report from the internal audit team on
the progress of the internal audit plan, and
reviewed findings from the completed internal
audits, the actions taken to implement the
recommendations made in the reports and
the status of progress against previously
agreed actions. All detailed internal audit
reports are available to the Committee.
The internal audits performed provided
assurance over areas deemed to be of
greater risk and relative importance to
the Group in 2019. As well as the readiness
assessments set out in the previous
paragraph, the audits included visits to
three of our international subsidiaries as
well as reviewing controls in a number
of areas including anti-piracy, deficit
financing, the business services centre,
a UK production subsidiary and user access
management. The internal auditor also
provides the Committee (and therefore
the Board) with valuable insight on the
culture across the Group and the reflection
of the Group’s values by management
and other employees. The opportunity
to enhance cross-team ways of working
was highlighted in a number of the audits
during the year, which the relevant
management teams are addressing
through agreed action plans.
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
The Committee considers
carefully, before approving the
scope of planned audit work, the
assessment of risk and
materiality on which it is based.
The Committee’s aim is to
support a robust, quality 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 senior team
members. It also 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.
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. Following a
competitive tender in 2012, KPMG
was reappointed as auditor. The
current lead audit partner, Paul
Sawdon, has been audit partner
since January 2016 and will finish
his role following completion of
the audit for the year ending
31 December 2020.
During the year, the Committee
led a tender process for the
appointment of the external
auditor, effective from 1 January
2021. Please refer to page 115 for
further details.
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
The Committee updated its
Auditor Independence policy this
year, which includes a revised
policy on the provision of
non-audit services and the hiring
of former external auditor
employees. See also the
non-audit services section on
page 114.
We monitor relationships with
other audit firms to ensure we
have sufficient choice for any
future appointment.
Please also refer to pages 104
and 105 in relation to the review
programme the Committee
follows during the year to assess
external auditor independence
and objectivity.
Throughout the year, the
Committee considered the audit
quality and performance of our
auditor, and the level of non-audit
work undertaken. This resulted in
the Committee recommending
to the Board the reappointment
of KPMG as the Company’s
auditor at the AGM in May 2019.
Following shareholder approval,
KPMG was reappointed.
The Committee is recommending
the reappointment of KPMG at its
2020 AGM for the 2020 financial
year, following which PwC will
be proposed for appointment
as external auditor in 2021.
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Non-audit services
In order to safeguard auditor independence and objectivity, the external auditor does not provide non-audit services unless this is in
compliance with the Group’s non-audit services policy. During the year, the Committee implemented a revised non-audit services policy
contained in ITV’s Auditor Independence policy to reflect the FRC’s 2019 Ethical Standard. The policy is available on the governance
section of ITV’s website: www.itvplc.com/investors/governance/policies.
In accordance with this policy, during the year, KPMG undertook work to: (i) review the interim financial information for which the fees
were £114,558; and (ii) provide a comfort letter in relation to the Company issuing a new €600 million seven year Eurobond for which the
fees were £45,000. The Committee approved this work under the non-audit services policy. The interim review forms an integral part of
the overall audit engagement but has to be reported separately under the 2019 Ethical Standard as a closely related non-audit service,
and the comfort letter was considered a non-audit service in relation to the capital transaction required under the regulations and usually
performed by the statutory auditor. In the 2019 financial year therefore, the Company incurred non-audit services of £159,558 (2018:
no non-audit services fees were reported as incurred, however applying the 2019 Ethical Standard, £90,624 was incurred on reviewing
the interim financial information). For information on audit fees see note 2.1 on page 172.
External audit effectiveness and quality
Please refer to pages 104 and 105 in relation to the review programme the Committee follows throughout the year to satisfy itself of
external audit effectiveness and quality.
The Committee remains focused on audit effectiveness, which is reviewed on an ongoing basis to ensure the quality, rigour and challenge
of the external audit process is maintained. The Committee continues to use the Financial Reporting Council’s Audit Quality Practice Aid
to structure its review of audit quality, including obtaining feedback from management and all Committee members. When making its
assessment of audit quality, the factors the Committee focused on included:
Audit
scope
and
strategy
The detailed audit scope and strategy for the year, including the coverage of emerging risks and recent acquisitions and partnerships in all
geographies. During the year, the Committee requested a review of issues emerging from statutory audits performed both on the entities
within and out of scope for the Group audit. The external auditor provided the Committee with a summary of issues that arose during the
statutory audits of all entities within the Group, enabling the Committee to be satisfied that those entities ‘out of scope’ for a full audit as
part of the Group audit would not have impacted the overall Group audit outcome if they had been in scope.
External audit
quality
reports
The audit strategy for the year addressed thematic concerns that the FRC had highlighted in its annual review of corporate reporting.
The Committee also discussed KPMG’s latest FRC Audit Quality Review report and the actions it was taking to address the identified
issues and the results, and related actions, from any KPMG internal quality review of the audit of ITV.
Auditor
interaction
with
management
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 judgements and estimates and accounting treatments and disclosures with clear
indications of scepticism being applied when appropriate. The Committee Chair also met frequently with the lead audit partner during the
year to discuss emerging audit risks or issues and obtain additional insight on quality or performance capability of the ITV finance function.
Auditor’s
own view of
effectiveness
Enquiries regarding:
• 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
• Which element of the audit has taken longer than it should and why this happened
• How they gain assurance on the effectives of the Group’s internal controls
• The experience of the senior members of the audit team
The Committee referred to, and discussed with KPMG, its 2018 UK Transparency report describing KPMG’s audit quality initiatives.
Other
Committee
assessments
Other assessments included:
• Group and component levels of materiality
• Delivery and execution of the agreed external audit process for 2019
• Quality, knowledge and expertise of the KPMG audit team
• The competence with which KPMG handled and communicated the key accounting and audit judgements
See also the Engagement section on page 113.
There were no significant findings from the assessment this year and the Committee considers the external audit to have been robust,
effective and of a high quality.
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External Audit tender in 2019
In 2019, the Committee led a formal,
rigorous and competitive tender process
for external audit services for the 2021
financial year onwards. The steps that
were undertaken as part of the process
are set out below:
Lead audit partner interviews
and references
Members of the Committee interviewed
two proposed lead audit partners from
each firm to enable the Committee to
select the lead partner for each firm.
Investor consultation
The Committee Chair wrote to major
investors and key investor associations
at the outset of the process to invite
them to discuss ITV’s proposed approach
to the tender process, including details
of audit firms to be invited to participate
in the tender process. No responses were
received so the Committee concluded
that investors were satisfied with the
proposed approach.
Expressions of interest
ITV management held meetings with
the Big Four firms (excluding the current
external auditor) as well as two mid-tier
firms to capture expressions of interest.
Invitation to tender
ITV issued a formal Request for Proposal
to the three firms who had confirmed a
willingness to participate in the tender
process, detailing the evaluation criteria
which would be used by the Committee
in informing its decision, which included
but was not limited to:
• Quality and clarity of audit approach
• Demonstration of a challenging and
sceptical mindset
• Quality record of the firm, lead
partner and senior audit personnel
• Appropriate geographical breadth
to cover our locations
• The quality of understanding of the
audit risk areas
• Demonstration of an ever evolving
audit approach, particularly in respect
of the use of technology and AI
• Depth of understanding of ITV’s
business, its industry and the risks
in the industry
• Audit team experience, including
specialist resource
• Overall quality of the response
Data room and preliminary meetings
The data room was opened to participating
firms who were also granted access to key
management and Committee members.
Further engagement
Initial questions/requests for further
information were received from the
participants. ITV provided detailed
responses to these requests to all
participating firms, not just the firm
that requested the information.
Written proposal
ITV received a written proposal from
each of the firms. The firms were also
asked to review and comment on the
previous year’s Annual Report as part
of their submission proposals.
References
Independent references for each firm’s lead
partner were taken by the Committee Chair.
Presentations and Q&A session
At the final stage, the participating firms
delivered presentations and their proposed
audit plan, followed by a question and
answer session. The meetings were
attended by the Committee members
(with the exception of one Committee
member who was unable to attend but
who reviewed and provided comments
on the proposal documents beforehand).
The Chairman of the Board, the Group
CFO and the Director of Group Finance also
attended the presentations and contributed
to the question and answer session.
Evaluation, assessment and
Committee recommendation
The Committee’s unanimous view was
that each firm could perform a quality
audit of ITV. However, based on the
evaluation criteria above, the Committee
discussed and agreed on two final
shortlisted firms and unanimously agreed
to recommend PwC for approval to the
Board, as they had performed better
against the Committee’s pre-agreed
selection and assessment criteria.
Investor engagement
Prior to obtaining Board approval, the
Committee Chair wrote to major investors
and key investor associations to inform
them of the conclusions at that stage
of the tender process and to seek
feedback regarding the proposed auditor
appointment. Only one response was
received, commending the process that
had been adopted.
Board decision
The Committee recommended two firms to
the Board, with a preference for the tender
to be awarded to PwC. The Board endorsed
the Committee’s recommendation.
Announcement
Once the terms of engagement were
finalised, and the Company was clear on
transition arrangements, the Company
announced the results of the audit tender.
Audit transitional plans
The proposed external auditor, PwC, will
start undertaking transitional activity
from July 2020 in preparation for the
external audit cycle in 2021, by shadowing
the outgoing external auditor and
attending the Committee meetings from
July 2020. This will aid a smooth transition
and allow PwC to embark on the 2021
audit as well prepared as possible. PwC
will also hold meetings with key members
of the senior management team regularly
during this period.
In anticipation of this start date and to
ensure full auditor independence and
objectivity, PwC and ITV management
reviewed the non-audit services provided
by PwC to ITV in 2019. All prohibited
services will have ceased by 30 June 2020.
The Committee will monitor the transition
of the auditor throughout the year
to ensure the effectiveness and
independence of PwC. The Board will seek
approval for PwC to be elected as external
auditor at the 2021 AGM for the year
ending 31 December 2021.
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Mary Harris
Chair, Remuneration Committee
Remuneration review
page 118
Committee governance
page 120
Directors’ Remuneration
Policy
Annual Report
on Remuneration
Remuneration Policy
application 2019
Remuneration Policy
application 2020
Other disclosures
page 121
page 131
page 131
page 136
page 138
We remain committed to
taking a measured approach
to pay and continue to
value the support of our
shareholders in this approach.
In this report:
The purpose of this report is to set out for
shareholders the principles and policy we apply
to remuneration for our Directors and to update
you on how we have applied these for the financial
year ended 31 December 2019. 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.
Dear Shareholder
Over the past year the business has made
significant strides in executing the strategy
put forward to our shareholders in 2018.
The management team has delivered
strongly against our strategic goals while
delivering a solid set of financial results.
The strategy is focused on creating
a stronger, more diversified and structurally
sound business to enable ITV to take
advantage of evolving viewing and
advertising opportunities. ITV is making
good progress in each area of our strategy
as we become an increasingly digital
media and entertainment company, and
the investments we are making are vital
to deliver this. During the year, the business
invested heavily in a number of areas:
strenghtening our creative talent in ITV
Studios; accelerating the growth of ITV Hub;
rolling out Planet V, our addressable
advertising platform; strenghtening our
data and technology capabilities; and
successfully launching BritBox UK.
There was prolonged economic and political
uncertainty in 2019 that impacted on the
Group’s results. However, given strong
operating performance, adjusted EBITA
was ahead of internal expectations.
The Studios business delivered another
strong year of revenue growth and the
cost-saving programmes delivered
£5 million more than targeted. In 2019 we
also maintained our share of linear TV viewing
in the UK, the second highest in a decade and
we continue to deliver significant growth in
online viewing as viewers choose to watch
our content in different ways. Sustainability is
also an increasing area of focus for the Board,
and we are pleased to note that ITV is now
carbon neutral, with no single use plastics
in its major sites.
Overall, the Board is satisfied that the
business has delivered a solid operating
performance in an uncertain economic and
political environment. This has been a year
of significant progress as we build a future-
facing, truly digital media and entertainment
company. Reflecting ITV’s continued strong
performance, the Board is proposing a full
year dividend of 8p for 2019.
Remuneration outcomes for the year
In light of the inherent cyclicality of the
advertising market, the Committee has
to adapt targets to ensure that they are
realistic but stretching and incentivise
management to outperform the market
across the cycle.
The performance against targets set at
the start of the year, resulted in a strong
bonus outcome for both Executive
Directors. There was outperformance
of expectations on profit, continued solid
cash generation and cost savings were
delivered ahead of plan. These results
were delivered in a year in which significant
progress has also been made against our
strategic goals. As noted above, the
Committee were particularly pleased to
see that the business had outperformed
the television advertising market.
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In line with the UK Corporate Governance
Code, the Committee reviewed both the
formulaic outcome and overall performance
context. Notwithstanding the progress
made during the year, the Committee has
opted to scale back the outcomes under
the financial element of the bonus for
Executive Directors by 10%, to reflect
the macroeconomic uncertainty which
continues to impact the sector and our
shareholders. This is the second year in
succession that the Committee has
exercised negative discretion. The all-
colleague bonus award for 2019 will be
paid at £1,750 (100% of maximum).
Further details on the bonus for 2019
are set out in the Annual Report on
Remuneration on page 132.
Neither Executive Director participated in
the 2017 LTIP grant cycle, and therefore
did not have any interests in the
performance cycle ending 31 December
2019. However it is noted that this award
has lapsed in full reflecting the shift in
market conditions since the time that the
original targets were set.
As disclosed in prior years, Carolyn McCall
and Chris Kennedy were entitled to certain
buy-out awards on recruitment. While these
awards are included in the 2019 single
figure, they relate to legacy arrangements
implemented by their respective previous
employers. No further buyout awards are
due for either director.
Policy Review
Our last Remuneration Policy was approved
by shareholders in 2017 and therefore under
the normal three-year renewal cycle, a new
policy is being presented to shareholders
for approval at the 2020 AGM. The overall
structure of the existing policy remains in
line with mainstream FTSE 100 practices,
and therefore no major changes are being
proposed. The updates largely reflect
developments in market and best practice
over the last three years.
Under the new policy we have formalised
our practice of ensuring that future Board
appointments have pension benefits
aligned with the wider workforce. This
represents a significant reduction from
the 25% of salary benefit available under
the previous policy.
The pension for Carolyn McCall, which was
determined on appointment prior to the
publication of the 2018 UK Corporate
Governance Code, is currently 15% of salary.
The pension for Chris Kennedy is aligned
with the current all-employee rate at 9%
of salary. The Company is currently
undertaking a review of its pension
policy for the wider employee base and
a further review of director benefits has
been deferred until the completion of this
review. Our current intention is that pension
benefits for both Executive Directors will
be aligned with the all-employee rate by
the end of 2022.
As part of the review of the policy, the
shareholding guidelines for the Executive
Directors have been extended, with the
guideline for the Group CFO being increased
to 225% of salary to align with his annual
LTIP grant level. As well as the significant
in-post shareholding guidelines, in future
years Executive Directors will now also be
expected to retain a material number of
shares for two years following departure.
Finally shareholders will note that the
existing malus and clawback provisions
have been further strengthened under the
new policy. These updated safeguards will
improve the Committee’s ability to prevent
payments for failure.
For a number of years, the Committee
has been kept informed of pay trends in
the wider group. This provides important
context when determining pay for the most
senior levels. While the pay arrangements
across the organisation are tailored to
reflect the role and seniority of individuals,
the Committee is satisfied that there is
consistency in the underlying principles
which are used in the approach to pay.
Shareholder Engagement and 2020
arrangements
Over recent years, we have engaged
with our major shareholders and their
representatives on multiple occasions to
ensure that investor views are taken into
account when formulating our approach
to pay. We would like to thank everyone
who has taken part in these discussions.
In recent years, a number of our major
shareholders have requested that we
incorporate a Total Shareholder Return
(TSR) metric within the LTIP performance
framework. In direct response to this
feedback we have added a relative TSR
measure for 2020 LTIP awards as part
of the assessment of overall Group
performance. The Committee consulted
with major shareholders regarding the
proposed framework prior to adoption
by the Committee, and overall feedback
from investors was generally positive.
The remaining pay elements remain
unchanged for 2020. Salary increases are
aligned with the wider workforce and
the maximum incentive opportunities will
remain unchanged for 2020. The annual
bonus will also continue to be based on
the same metrics as for 2019.
We continue to be committed to ensuring
all colleagues earn at least the Living Wage
or greater, and where appropriate we have
agreed additional increases. On 1 January
2020, all eligible colleagues received a pay
increase of 2.25%.
Further details on all of the matters
described above are set out in the main
body of the Remuneration Report.
We remain committed to taking a measured
approach to pay and continue to value
the support of our shareholders in this
approach. We hope that you will therefore
support both remuneration resolutions at
the upcoming AGM.
Mary Harris
Chair, Remuneration Committee
5 March 2020
117
Strategic ReportGovernanceFinancial StatementsAdditional Information Remuneration Report continued
Remuneration overview
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Fixed pay
Paid over
financial year
2020 salaries: Chief Executive –
£943,256; Group CFO – £674,850
Annual Bonus
Cash element paid
after year end
Deferral into shares for three years (one-third)
2020 Maximum: Chief Executive 180% of
salary; Group CFO 165% of salary
LTIP
Performance period – three years
Holding period – two years
2020 grants: Chief Executive 265%,
Group CFO 225% of salary
Shareholding
Safeguards –
Annual Bonus
Safeguards –
LTIP
Chief Executive: 400% of salary/Group CFO: 225% of salary with additional post-employment requirements
Malus and Clawback apply
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.
Transform
Broadcast
Grow
UK and global
production
Expand
Direct to Consumer
KPIs are set out on pages 26 to 29
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 priorities
Specific targets for each Executive Director to deliver on strategic priorities.
These are adjusted annually to reflect strategic need.
LTIP
TSR
A measure of the Company’s share price performance and dividend payments against
certain FTSE 350 companies.
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 catch up and other devices.
Single figure remuneration at a glance
Carolyn McCall total £2.5m
(£3.8m including buy outs)
Chris Kennedy total £1.4m
(£2.2m including buy outs)
Salary
Benefits
Pension
Bonus
Buy out awards
118
ITV plc Annual Report and Accounts 2019
Governance Remuneration Report
In developing the approach to pay, the Remuneration Committee have discussed the impact of the 2018 UK Corporate Governance
Code and a summary of the deliberations is below.
Clarity
2018 provision: Remuneration
arrangements should be transparent
and promote effective engagement
with shareholders and the workforce.
• Performance-related remuneration supports our strategy with targets aligned to key KPIs (see pages 26
to 29). This provides clarity to all stakeholders on the relationship between successful implementation of
strategy and how we reward our leadership.
• The Company places great importance on communicating with all of its stakeholders in a timely,
transparent and relevant way. Further information on how ITV engages with stakeholders can be found
on pages 89 to 92.
Simplicity
2018 provision: Remuneration structures
should avoid complexity and their rationale
and operation should be easy to understand.
The Company operates a market standard approach to elements of remuneration that is familiar to key
stakeholders with three main elements:
• Fixed element: comprising base salary, taxable benefits and a pension scheme allowance.
• Short-term element: an annual performance-related bonus with a selection of financial and
non-financial targets measured over the financial year, two-thirds paid in cash and one-third in
shares deferred for a three-year period.
• Long-term element: a Long Term Incentive Plan with targets aligned to our KPIs over a three-year
period, with awards subject to an additional two year holding period.
Risk
2018 provision: Remuneration
arrangements should ensure reputational
and other risks from excessive rewards,
and behavioural risks that might arise
from target-based incentive plans,
are identified and mitigated.
Predictability
2018 provision: The range of possible
values of awards to individual directors
and any other limits or discretions should
be identified and explained at the time
of approving the policy.
A combination of capped reward for short and long-term incentives together with holding periods
encourages Executive Directors to deliver long-term sustainable shareholder returns, discouraging
short-term decisions.
The Committee retains flexibility to adjust payments through malus and clawback provisions, and an
overriding discretion to depart from formulaic outcomes where behaviours may be viewed as inappropriate
or criteria on which the award was based do not reflect the underlying performance of the Company.
Shareholders are kept fully informed and are consulted on the values that can be earned under the incentive
plans for different levels of performance.
The chart on page 126 provide estimates of potential future reward in different remuneration scenarios.
Proportionality
2018 provision: The link between individual
awards, the delivery of strategy and the
long-term performance of the company
should be clear. Outcomes should not
reward poor performance.
The Company’s incentive plans clearly reward the successful implementation of our Strategy –
performance targets are relevant, transparent, stretching and vigorously applied.
The performance periods and subsequent deferral of vested awards ensure that the Executive Directors
are fully committed to sustainable long-term performance.
The Committee’s overriding discretion over eventual outcomes when they do not reflect good business
performance, and/or shareholder experience, ensures that poor performance would not be rewarded.
Alignment to culture
2018 provision: Incentive schemes should
drive behaviours consistent with company
purpose, values and strategy.
When considering the alignment of incentive schemes and culture the Committee considers the following –
• Metrics – ensuring that performance targets used in the incentive schemes are aligned to our culture and
do not drive the wrong behaviour.
• Governance – ensuring adoption of best practice through a robust malus and clawback policy with
a substantial list of relevant trigger events, such as corporate failure and reputational damage.
The Committee also retains discretion under the plan rules to override formulaic vesting outcomes
and to extend holding periods. These initiatives enable the Committee to satisfy itself that the right
steps have been taken to ensure executive remuneration is appropriate from a cultural context.
• Engagement – understanding remuneration for the wider workforce and ensuring that pay decisions
are aligned across the Group, ensures we maintain an important part of our wider engagement with our
stakeholders, including our employees. Further details can be found on page 89 to 92.
119
Strategic ReportGovernanceFinancial StatementsAdditional Information Remuneration Report continued
Who is on the
Committee
The Committee is composed
entirely of independent
Non-executive Directors.
The current members are:
• Mary Harris (Chair) – independent on appointment
• Salman Amin
• Sir Peter Bazalgette
• Roger Faxon
• Anna Manz
• Duncan Painter
Full details of attendance at
Committee meetings can be
found on the table on page 87.
Detailed biographies can
be found on page 82 and 83.
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 2019
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, whilst taking
into account workforce
remuneration and related
policies, and the alignment
of incentives and reward
• 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 129
• 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
January
• Financial performance update
• Indicative bonus outcomes and
• Remuneration Report
• Compliance with Remuneration
Policy
pay out levels
• Indicative LTIP performance
and vesting levels
• Pay review outcomes and
changes to Senior Executive
Group
• Gender and BAME pay gap
reporting and CEO pay ratios
April
• Market update – including US
• Financial performance update
June
• Performance targets
• Remuneration Policy review
• Committee terms of reference
• Adviser independence
review
February
• Bonus targets considered
for current year
• LTIP awards and targets
considered for current
year in conjunction with
strategic review
October
• Employee reward framework
(including review of
remuneration and related
policies) and remuneration
trends
• Review of shareholding
guidelines and consideration
of post-employment
shareholding requirements
December
• Bonus framework and targets
• LTIP performance targets and
shareholder consultation
• Review of remuneration
consultants
• Annual pay review
• Remuneration Policy renewal
and compliance with the 2018
UK Corporate Governance Code
Annual review
An annual review of
the performance
of the Committee
is conducted each year.
In 2019 an externally facilitated
Board evaluation was undertaken,
which included a review of the
Committee. The results are
summarised on page 98
Overall, the evaluation concluded
that the Committee is working
effectively and responding
appropriately to its terms
of reference
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ITV plc Annual Report and Accounts 2019
Governance Remuneration Report
Directors’ Remuneration Policy
The following sets out the proposed ITV’s Directors’ Remuneration Policy (the Policy). The Policy is subject to a binding shareholder vote
at ITV’s AGM on 24 April 2020 and, if approved, will apply from this date.
In determining the new Policy the Committee followed a robust process. The Committee discussed the detail of the Policy over a series
of meetings in 2019 and early 2020. The Committee considered the strategic priorities of the business, evolving market practice and
investor guidance. Input was sought from the management team, while ensuring that conflicts of interests were suitably mitigated.
External perspective was provided by our independent advisers. The Committee also assessed the Policy against the principles of clarity,
simplicity, risk-management, predictability, proportionality and alignment to culture, and consulted with major shareholders and their
representatives/proxy bodies.
The previous policy received strong support when adopted by shareholders at the 2017 AGM. The Committee concluded that the overall
structure of the policy previously approved by shareholders continues to align with mainstream FTSE practices, remains fit-for-purpose
and has broadly operated as intended. Therefore no significant changes have been proposed in respect of the overall pay structure.
However, as part of this renewal process the detail of the Policy has been updated to reflect developments in market and best practice,
in particular those arising as a result of the changes introduced by the 2018 UK Corporate Governance Code (the Code). Other minor
changes have also been made to improve the operation and effectiveness of the Policy.
The key changes between this Policy and the policy which was approved by shareholders at ITV’s AGM in 2017 are:
• Reduced retirement benefits – under the previous policy, retirement benefits of up to 25% of salary could be provided to Executive
Directors. The current Chief Executive and Group CFO were both appointed with a reduced benefit, and this is reflected in the new Policy.
• Expanded shareholding requirements – the shareholding requirements for the Executive Directors have been extended so that
Executive Directors will normally be expected to retain an interest in shares after they step down from the Board.
Executive Director Remuneration Policy Table
Fixed pay policy for Executive Directors
Base salary
Purpose and link
to strategy
Reflects the individual’s skills, responsibilities and experience. Supports the recruitment and retention of Executive Directors of the
calibre required to deliver the business strategy within the competitive media market.
Operation
Reviewed annually and paid monthly in cash. Consideration is typically given to a range of factors when determining salary levels,
including:
– Personal and Company-wide performance.
– Typical pay levels in relevant markets for each executive whilst recognising the need for an appropriate premium to attract and
retain superior talent, balanced against the need to provide a cost-effective overall remuneration package.
– The wider employee pay review.
Maximum
potential
payment
Ordinarily salary increases will be in line with the average increase awarded to other employees in the Company. Increases may be
made above this level to take account of individual and business circumstances, which may include factors such as: an increase in size
or scope of the role or responsibility; or an increase to reflect the individual’s development and performance in the role.
While there is no maximum, salary levels for each individual are responsibly set taking into account the factors described above.
Performance
metrics
None, although overall individual and business performance is considered when setting and reviewing salaries.
121
Strategic ReportGovernanceFinancial StatementsAdditional Information Remuneration Report continued
Retirement benefits
Purpose and link
to strategy
To provide competitive post-retirement benefits or cash allowance as a framework to save for retirement.
Supports the recruitment and retention of Executive Directors of the calibre required to deliver the business strategy
within the competitive media market.
Operation
Executives can choose to participate in the ITV defined contribution scheme, receive a cash allowance or receive payments
into a personal pension or a combination thereof.
Contributions are set as a percentage of base salary.
Post-retirement benefits do not form part of the base salary for the purposes of determining incentives.
Maximum
potential
payment
The maximum benefit will normally be capped at a level comparable to the benefit available to the wider employee base.
This is currently 9% of salary.
The benefit for the current Chief Executive is 15% of salary. As noted in the Annual Report on Remuneration, the Committee
intends to keep this under review. The benefit for the current Group CFO is 9% of salary.
Performance
metrics
None
Benefits
Purpose and link
to strategy
Ensures the overall package is competitive and provides financial protection for employees and their families.
Operation
The Company provides a range of market competitive benefits, including travel related benefits, private medical insurance
and other insurance benefits.
Additional benefits may also be provided in certain circumstances, if required for business needs. For example (but not limited to),
relocation expenses, housing allowance and education support.
Executive Directors are also entitled to participate in any tax-approved all-employee share plans operated by the Company from
time-to-time, on the same basis as other employees.
Maximum
potential
payment
Set at a level which the Committee considers to be appropriately positioned taking into account typical market levels for comparable
roles, individual circumstances and the overall cost to the business.
While there is no maximum monetary value for benefits, any benefits provided will be reasonable in the context of relevant market
practice, individual circumstances and overall cost to the business.
In addition, the Company may reimburse relocation expenses and/or provide for tax equalization arrangements. Participation in any
tax-approved all-employee share plans will be limited by the maximum permitted under the relevant legislation.
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ITV plc Annual Report and Accounts 2019
Governance Remuneration Report
Variable pay policy for Executive Directors
Annual Bonus Scheme (Bonus) and Deferred Share Award Plan (DSA)
Purpose and link
to strategy
Incentivises executives and colleagues to achieve key strategic outcomes on an annual basis. Focus on key financial metrics
and objectives to deliver the business strategy.
The element of the Bonus compulsorily deferred into shares rewards delivery of sustained long-term performance, provides
alignment with the shareholder experience and supports the retention of executives.
Operation
Measures and targets are set annually, normally based on business plans at the start of the financial year and pay-out levels are
determined by the Committee following the year end based on performance against objectives.
Paid once the results have been audited. Financial results used for bonus calculation will subject to suitable review (e.g. sign-off
by Audit and Risk Committee) before consideration by the Committee.
The Committee has the discretion to amend the bonus outcome if any formulaic assessment of performance is considered
to be inappropriate taking into account factors such as a balanced view of overall business or individual performance for the year,
and the original intentions of the plan.
Not more than two-thirds of the Bonus is delivered in cash with the balance deferred into shares under the DSA normally for
a period of three years.
During the deferral period share awards may be reduced or cancelled in certain circumstances. Further detail is provided on page 125.
Dividends or equivalents may be earned on deferred shares.
Maximum
potential
payment
The maximum Bonus opportunity for any Executive Director will not exceed 200% of salary.
The current maximum Bonus opportunities are 180% of salary for the Chief Executive and 165% of salary for the Group CFO.
Increases above the current opportunities, up to the maximum limit, may be made to take account of individual circumstances,
which may include: an increase in size or scope of the role or responsibility; a change in business circumstances; or an increase to
reflect the individual’s development and performance in their role.
Performance
metrics
Performance measures and targets are set by the Committee each year based on corporate objectives closely linked to strategic
priorities of the business. The majority of the Bonus opportunity will be based on corporate and financial measures. The remainder
of the Bonus will be based on performance against individual and/or strategic objectives.
Details of the performance criteria for the Bonus in 2019 and 2020 are set out in the Annual Report on Remuneration.
Up to 20% of the maximum opportunity will be received for threshold performance.
123
Strategic ReportGovernanceFinancial StatementsAdditional Information Remuneration Report continued
Long Term Incentive Plan (LTIP)
Purpose and link
to strategy
Incentivises Executive Directors to deliver the business strategy and align with the longer-term Company performance and the
shareholder experience.
Acts as a retention tool to retain the executives required to deliver the business strategy.
Operation
Awards are made under the shareholder approved LTIP.
Awards are normally made annually with vesting dependent on business performance during the performance period.
The performance period will be determined by the Committee, but will not normally be less than three years, other than
in exceptional circumstances.
The Committee has discretion to amend the final vesting level if any formulaic assessment of performance is considered to
be inappropriate taking into account factors such as a balanced view of overall business or individual performance for the year,
and the original intentions of the plan.
Awards will normally be required to be held for an additional two year holding period after the end of the performance period.
During the holding period awards may be reduced or cancelled in certain circumstances. Further detail is provided on page 125.
Dividends (or equivalents) may be earned in respect of any vested shares.
Maximum
potential
payment
In line with the LTIP rules, the maximum annual award that may be granted in any financial year is 350% of salary. Our current
operational policy is to make awards of 265% of salary to the Chief Executive and 225% to the Group CFO each year.
Performance
metrics
The Committee may set such performance conditions on LTIP awards as it considers appropriate (whether financial or non-financial
and whether corporate, divisional or individual). The Committee would seek to set measures which are closely linked to the
Company’s financial and strategic priorities.
The proportion of each element of the award that will vest for threshold performance against a metric will be not more than 20%.
Information on the 2020 LTIP grant is set out in the Annual Report on Remuneration.
Shareholding guidelines
Purpose and link
to strategy
To create alignment between Executive Directors and shareholders both during service and after departure.
Operation
Shareholding guidelines are in place which encourage Executive Directors to build up a holding in Company shares during the
course of tenure.
The shareholding guideline for the Chief Executive is 400% of base salary and for the Group CFO 225%.
Executive Directors will normally also be expected to retain an interest in Company shares for two years following departure.
The expected holding requirement following departure will be equal to the individual’s normal LTIP grant level (or actual holding
if lower). The relevant holding requirement will apply to shares acquired from Company incentive plans.
Further details of current shareholdings of the Executive Directors, together with further detail on the operation of the
shareholding guidelines are set out in the Annual Report on Remuneration.
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ITV plc Annual Report and Accounts 2019
Governance Remuneration Report
Detailed provisions
The Committee may make any remuneration payments and payments for loss of office (including exercising any discretions available to it
in connection with such payments) notwithstanding that they are not in line with the Policy set out above, where the terms of the payment
were agreed either: (i) during the term of, and was consistent with, the 2014 or 2017 policy; or (ii) at a time when the relevant individual was
not a director of the Company and the payment was not in consideration for the individual becoming a director of the Company.
The Committee may adjust or amend Bonus and share awards only in accordance with the provisions of the relevant plan rules. This
includes making adjustment to reflect one-off corporate events, such as a change of control or a change in the Company’s capital
structure. In accordance with the plan rules, share awards may be settled in cash rather than shares where the Committee considers
this appropriate (e.g. to comply with securities law).
The Committee may make minor amendments to the Policy to aid its operation or implementation without seeking shareholder approvals
(e.g. for regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation) provided that any such
change is not to the material advantage of the participant.
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.
For awards granted from 2020 onwards, the Committee has the discretion to apply malus and/or clawback in the event of the following
circumstances: material misstatement of financial results; gross misconduct; fraud; payments based on an erroneous calculation or data;
serious reputational damage or material corporate failure.
Performance measures and target setting
The annual bonus is assessed against financial, strategic and individual targets determined by the Committee. This enables the Committee
to reward annual financial performance delivered for shareholders, and performance against specific financial, operational or strategic
objectives set for each director, which are closely linked to the strategic priorities of the business.
The Committee sets targets for the LTIPs taking into account external forecasts, internal budgets and business priorities. Targets are set
to be appropriately stretching in this context with maximum performance being set at a level which is considered to be the delivery of
exceptional performance.
When considering performance outcomes the Committee will look beyond formulaic results to ensure the outcomes align with the
overall business or individual performance. The Committee may adjust the targets for awards or the calculation of performance measures
and vesting outcomes for events not foreseen at the time the targets were set to ensure they remain a fair reflection of performance
over the relevant period. Discretion will be exercised mindful of broader performance, and any change to the outcome will be fully
disclosed in the next Annual Report on Remuneration.
125
Strategic ReportGovernanceFinancial StatementsAdditional Information Remuneration Report continued
Application of Remuneration Policy
The chart below provides an indication of the level of remuneration that would be received by each Executive Director under the following
three assumed performance scenarios:
Below threshold
performance
Fixed elements of remuneration only – base salary, benefits and pension
Mid-performance
Assumes 50% pay-out under the annual bonus
Assumes 50% pay-out under the LTIP
Maximum
performance
Assumes 100% pay-out under the annual bonus
Assumes 100% pay-out under the LTIP
Scenario charts
Carolyn McCall
Minimum
100%
£1.1m
34%
21%
27%
39%
£3.2m
32%
47%
£5.3m
£
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
Mid performance
Maximum
Chris Kennedy
Minimum
100%
£0.75m
Mid performance
36%
27%
37%
£2.1m
Maximum
22%
33%
45%
£3.4m
£
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
Notes:
1. Fixed pay is the salary as at 1 January 2020, pension is per the Policy, and the value for benefits is equivalent to that included in the remuneration table on page 131.
2. Annual bonus is based on 180% of salary for Carolyn McCall and 165% of salary for Chris Kennedy.
3. LTIP amount is based on 265% for Carolyn McCall and 225% for Chris Kennedy.
Impact of share price
As LTIP awards are granted in shares, the value of the award can vary significantly depending on the extent to which the performance
criteria are achieved and the movement of the share price over the relevant vesting and holding period. For example, if the share price
increased by 50% over the relevant vesting and holding period, the maximum values shown in the charts above would increase to
£6.5 million for Carolyn McCall and to £4.1 million for Chris Kennedy. Conversely if the share price was to fall by 50%, the maximum
values shown in the charts above would reduce to £4.0 million for Carolyn McCall and to £2.6 million for Chris Kennedy.
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Governance Remuneration Report
Recruitment remuneration
When agreeing the components of a remuneration package for a new Executive Director, the Committee will apply the principles detailed below.
The package will be competitive to attract and retain the most suitable candidate for the job. Where possible, the Committee will always
seek to align the remuneration package with the Policy outlined above. However, where appropriate, detailed elements of the package
may be tailored to the circumstances of the individual upon recruitment. The Committee will ensure that the arrangements are in the best
interests of both ITV and its shareholders and remain subject to the overall variable pay limits set out below.
Ongoing
remuneration
In determining an appropriate remuneration structure and levels, the Committee will take into account all relevant factors to ensure
that they are able to recruit the most appropriate candidate for the job and that the arrangements are in the best interests of both
ITV and its shareholders. The Committee will typically seek to align the ongoing remuneration package with the ongoing Policy
outlined on pages 121 to 125.
Fixed pay will be determined in line with the policy table above. The Committee may also hire a new Executive Director at a lower
salary, with more significant increases to salary being awarded as the individual gains experience.
The maximum level of variable remuneration which may be granted to a new director upon appointment (excluding any buy out
awards for forfeited remuneration) will not be greater than 550% of salary (the sum of the maximum bonus and maximum LTIP
opportunities). Within these limits the Committee may tailor the award (e.g. timeframe, form, performance criteria, etc.) based
on the commercial circumstances at the relevant time.
Buy out awards
for forfeited
remuneration
The Committee may make awards to ‘buy out’ a candidate’s remuneration arrangements that are forfeited as a result of joining
the Company.
In doing so, the Committee will take account of relevant factors, including any performance conditions attaching to forfeited awards,
the likelihood of the awards vesting and the form and timing of the awards. The Committee will typically seek to make buy out
awards on a comparable basis to those that have been forfeited but, particularly where the performance period is substantially
complete, may reflect such conditions in some other way such as through a significant discount to the face value of awards forfeited.
Exceptionally, where necessary, this may include a guaranteed or non-prorated annual bonus in the year of joining.
In exceptional circumstances, the Committee may grant a buy out award under a structure not included in the policy but that is
consistent with the principles set out above (and may rely upon Listing Rule 9.4.2 in structuring such a buy out).
The Committee will take all relevant factors into account (including the candidate’s location, the calibre of the individual, external
influences, internal relativities and the overall business context) when determining the new remuneration package and seek to ensure
that no more is paid than necessary.
In the Remuneration Report following the appointment, the Committee will fully explain to shareholders the remuneration package
for the appointed individual and the rationale for such arrangements.
On the appointment of a new Non-executive Chairman or Non-executive Director, the terms and fees will normally be consistent with
the fee policy outlined in the Policy.
Service contracts and loss of office
Executive Directors
Executive Directors have rolling service contracts that provide for 12 months’ notice on either side. For a new joiner, the contract may
commence with a notice period of up to two years reducing to the standard 12 months over time. There are no special provisions that
apply in the event of a change of control. Service contracts are available for inspection at the Company’s registered office.
A payment in lieu of notice, including base salary, benefits and retirement benefits may be made in certain circumstances, including if:
• the Company terminates the employment of the executive with immediate effect, or without due notice; or
• termination is agreed by mutual consent.
Service contracts normally include clauses requiring departing directors to mitigate losses from termination, balancing the commercial
circumstances at the time (e.g. impact on non-compete/non-solicitation clauses, protection of intellectual property).
The Company may also make a payment in respect of outplacement costs, legal fees and the cost of any settlement agreement
where appropriate.
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With the exception of termination for cause, Executive Directors may be eligible for a bonus award prorated to reflect the proportion of
the financial year for which they were employed and subject to the performance achieved, provided they have a minimum of three months’
service in that bonus year.
In accordance with the terms of the relevant incentive plans rules, the Committee retains discretion to determine the treatment of any
outstanding awards held by a departing Executive Director. The appropriate treatment will vary depending on the relevant facts and
circumstances at the time. The table below sets out the general position and range of approaches in respect of incentive arrangements.
Good leaver
(e.g. ill health)
Bad leaver
(e.g. dismissed for cause)
Change of control
Plan
Bonus
DSA
LTIP – during the
performance
period
Executive Directors may be eligible for
a bonus award prorated to reflect the
proportion of the financial year for
which they were employed and subject
to the performance achieved, provided
they have a minimum of three months’
service in that bonus year.
Injury, ill health, disability or transfer of
undertakings. Awards release in full at
the leaving date.
For other good leavers identified by the
Committee, awards release at the end
of the deferral period unless the
Committee decides to release the
shares earlier.
Awards are typically prorated for time
served and subject to achievement
of the performance conditions during
the performance period.
Awards become exercisable at end of
holding period unless the Committee
decides to release the shares earlier.
Awards lapse.
Awards would normally continue unless
the Committee determined otherwise.
Awards lapse.
Awards release in full at effective date
of change.
Awards lapse.
Outstanding awards would normally
vest and become exercisable subject to
satisfaction of performance conditions
and capped based on the time in the
performance period since grant,
subject to the discretion of the
Committee.
Awards become exercisable at
effective date of change.
LTIP – during
the additional
holding period
Awards become exercisable at end of
holding period unless the Committee
decides to release the shares earlier.
Awards are normally retained, and
become exercisable at end of holding
period unless the Committee decides
to release the shares earlier.
In the case of misconduct, awards
will lapse.
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External appointments
With specific prior approval of the Board, Executive Directors may undertake one external appointment as a non-executive director
of another publicly quoted company and retain any related fees paid to them.
Non-executive Directors
The table below summarises the main elements of remuneration for Non-executive Directors.
Component
Approach of the Company
Maximum potential payment
Non-executive
Director fees
The Committee determines the fees of the Non-executive Chairman. The Board
determines the fees of the Non-executive Directors.
Additional benefits may also be provided in certain circumstances. This includes
the reimbursement of any travel expenses (and associated tax on those expenses).
The fees are set at a level that is considered to be appropriate, taking into account
the size and complexity of the business and the expected time commitment and
contribution of the role.
Additional fees may be payable for membership and/or chair of a committee or
other additional responsibilities.
Non-executive Directors are not entitled to any performance-related pay or pension.
Role-appropriate benefits may also be provided in certain circumstances. This includes
the reimbursement of any travel expenses (and associated tax on those expenses).
The aggregate fees of the
Chairman and Non-executive
Directors wil not exceed the limit
from time to time prescribed within
the Company’s Articles of
Association (currently £1,500,000
p.a.). The value of benefits
(including the reimbursement
of travel and other expenses, and
associated taxes) provided will be
reasonable in the market context
and take account of the individual
circumstances and requirements of
the Company.
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 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 Chairman). The Directors’ service contracts and letters
of appointment are available for inspection at the Company’s registered office.
Employment conditions elsewhere in the Company
The Committee has responsibility for ensuring effective engagement and alignment with the workforce in relation to remuneration and
related policies and practices. When setting the policy for Directors’ remuneration, the Committee considers the pay and employment
conditions of employees to ensure fairness across the organisation. Although it doesn’t consult directly with employees in respect of
determining the Directors’ Remuneration Policy, it receives general feedback from employees via the HR function as part of the output
from the employee engagement survey and receives a report on employment practices elsewhere in the Company. Edward Bonham
Carter, as our designated Workforce Engagement Director, regularly attends Ambassador meetings to understand any views and concerns
colleagues may have on this matter and is responsible for sharing these with the Committee – more information on this can be found on
page 93. In her role as Chair of the Committee, Mary Harris will be joining Edward at Ambassador meetings in 2020 in order to share the
Committee’s approach to remuneration in the wider context.
The approach to determining the compensation for employees globally follows the same principles as for our Executive Directors.
Consideration is given to the level of experience, responsibility, individual performance and remuneration paid for comparable roles
within the market. The Committee considers data on pay trends and practices, such as gender pay gap information, and the CEO to
worker pay ratio.
The principles that apply to the Executive Directors are used throughout the Company. We offer competitive pay and career opportunities
in order to attract the best talent. When determining compensation, local managers consider how the employee’s pay compares to the
local market alongside other factors, such as experience and sustained performance. Incentive arrangements across the Company are
tailored based on the nature of the role. Bonuses operate on a wide basis across the Company and long-term share awards are offered
to senior management.
Being a great place to work is key to developing our culture. Pay is just one factor used to attract, retain and develop a talented and diverse
workforce. The latest employee survey shows that 87% of employees are proud to work at ITV, and more information on this can be found
on pages 50 to 51.
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Shareholder views
The Committee maintains regular and transparent communication with shareholders. We believe that it is important to regularly meet
with our key shareholders to understand their views on our remuneration arrangements and what they would like to see going forward.
We welcome feedback from shareholders at any time during the year.
Where we are proposing to make any significant changes to the remuneration framework or the manner in which the framework is
operated we would seek major shareholders’ views and take these into account. In recent years, the Committee has consulted with major
shareholders regarding the operation of the policy on numerous occasions. The Committee also consulted with major shareholders prior
to the renewal of the policy in 2020. Changes made to our approach, for example to the LTIP targets for 2020 awards, have often been
made in direct response to investor feedback. We intend to maintain this dialogue in future years.
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Annual Report on Remuneration
The sections of the Annual Report on Remuneration that have been audited by KPMG are pages 131 to 135, and pages 139 to 140.
Remuneration Policy application in 2019
The following section provides details of how the current Remuneration Policy was implemented in 2019.
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), after discretion
Share awards
Transitional arrangements
Buy out awards
Total
Total (excluding transitional arrangements)
Total fixed remuneration
Total variable remuneration
Notes
2
3, 4, 5
Carolyn McCall
Chris Kennedy1
2019
£000
923
17
138
1,453
–
1,308
3,839
2,531
1,078
2,761
2018
£000
887
17
133
1,175
–
1,483
3,695
2,212
1,037
2,658
2019
£000
565
14
51
816
–
799
2,245
1,446
630
1,615
2018
£000
–
–
–
–
–
–
–
–
–
–
Chris Kennedy was appointed to the Board on 21 February 2019 and remuneration is prorated from that date.
1.
2. The 2019 bonus outcome for both Executive Directors has been scaled back. Discretion was exercised to reduce the outcome of the financial element by 10%.
3. The figure shown against Carolyn McCall for 2019 represents an award made in March 2019 to replace the 2016 easyJet LTIP award forfeited on joining ITV that met performance
conditions in 2019. Further details are shown on page 134.
4. The 2018 figure for Carolyn McCall includes the indicative vesting value of a buy out award over 54,293 shares made to replace the 2016 easyJet bonus shares, valued using the
share price on 8 January 2018, the date she joined ITV (169.6 pence) - £92,080. The subsequent value of the shares on the vesting date of 19 December 2019 using the share price on
that date (149.96p) - £81,418.
5. The figure shown against Chris Kennedy for 2019 represents awards made in March 2019 to replace awards forfeited on joining ITV. Further details are shown on page 134.
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 135.
Sir Peter Bazalgette was Executive Chairman for the period 30 June 2017 to 8 January 2018. He did not receive any additional remuneration for this role. Details of his remuneration
arrangements are set out on page 135.
Further information in relation to each of the elements of remuneration for 2019 set out in the table above is detailed below. An explanation
for 2018 is set out in detail in our 2018 Annual Report and Accounts, which can be found on our website.
www.itvplc.com/investors
Salary
As disclosed in last year’s report, Carolyn McCall received a 2.5% salary increase from 1 January 2019 in line with the wider employee group.
For 2019, her salary was £922,500.
Chris Kennedy’s annual salary for the year was £660,000. He was appointed to the Board on 21 February 2019.
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Taxable benefits and pension
The benefits provided to the Executive Directors include the cost of private medical insurance and car-related benefits.
The Executive Directors were not part of an ITV pension scheme but received a cash allowance in lieu of pension. Carolyn McCall received
15% of base salary. In accordance with the 2018 UK Corporate Governance Code (the Code) the Committee determined that directors
joining from 1 January 2019 would receive pension contributions in line with the wider employee group, therefore Chris Kennedy received
a cash allowance in lieu of pension of 9% of salary. This is aligned with the maximum matching percentage amount payable to employees
in the ITV Defined Contribution Pension Scheme, which is the pension scheme offered to the majority of Group employees.
Bonus (cash and shares)
Annual incentives are provided to Executive Directors through the bonus, with one-third of any award 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.
The majority of the 2019 bonus (75%) was based upon the achievement of corporate and financial targets, with bonus outcomes
determined in accordance with pre-set target ranges. In line with principles applied in prior years, the financial outcomes used for
the bonus are adjusted (both positively and negatively) for certain items such as acquisitions and currency movements to ensure a fair
like-for-like comparison against the targets set at the start of the year. As part of the assessment of performance, the Committee also
undertook a detailed quality of earnings review, to ensure that outcomes were a fair reflection of underlying performance.
The corporate and financial targets applied for 2019, together with performance against those targets and the resulting level of bonus,
are set out below.
Performance measure
ITV adjusted EBITA
Profit to cash conversion
Cost savings
Performance required
Weighting
60%
10%
5%
20%
£640m
81%
£15m
100%
£740m
89%
£23m
Adjusted
performance
achieved1
£745.6m
89.4%
£25m
Payout level
(% of maximum)
100%
100%
100%
1. For 2019, the financial outcomes were primarily adjusted for translational currency movements, investments not accounted for in the original targets and the impact of IFRS16.
The advertising industry is inherently cyclical, and the Committee takes this into account when setting financial targets. In a growing
market, management would be expected to deliver higher levels of growth. This is balanced by the need to set realistic but stretching
targets during periods of market contraction. The intention is to incentivise the business to outperform the market across the cycle. As
disclosed in last year’s report, the financial targets for 2019 were set to reflect planned essential investments and television advertising
market expectations. At the start of the year, the Board had forecast a c. 2% contraction in the television advertising market, which proved
to be an accurate forecast of market conditions evidenced by the decline in the total advertising revenue year on year. A market
contraction of this order has a direct and sizeable impact on both ITV revenue and EBITA.
In addition the profit forecasts were impacted by essential investments, increased programme budget and BritBox. Taking these
circumstances into account, the Committee was satisfied that the target ranges set were realistic but also highly stretching.
The profit to cash conversion target range was adjusted to exclude the investment in BritBox UK and the capex cost of the acquired
intangible in relation to Planet V, both of which were not budgeted. This target was considered to be more stretching than in prior years
in light of the planned investment in scripted content.
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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. Given the scale of the strategic change programme, for 2019 the Executive Directors had common objectives focussed on delivery
of cultural change in the organisation.
Highlights of performance achieved
Outcome
(% of maximum)
Fully aligned the senior management with clear focus on execution of the strategy
80%
Drove culture change, particularly in sales, with more brand-direct business
Launch of smart working initiative for colleagues
Area of
focus
Cultural
change
programme
and role
model new
ways of
working
Strategic
progress
Grow studios – sold 62 formats internationally; attracted key talent in the scripted genre; 9% growth in
revenue and 5% growth in EBITA
Transform Broadcast – development of Planet V platform; successful redesign of Hub, demonstrated by
achieving over 30m registered users, two years ahead of plan; five of the top six new dramas for the year;
biggest day of sports viewing (11.8m) since 2018 Football World Cup; secured commercial deals including
M&S Food and Just Eat
Expand Direct to Consumer – launched BritBox UK; 1m users of Britbox US; 10m downloads of Love Island
Game; 400k Hub+ users, 57% growth from prior year
Completion of deal with Amobee and launch of Planet V
Established Data & Insights group, improving market insights, optimising viewer experience, maximising
revenue from advertising and non-advertising
Delivered debt refinancing through a bond buy-back
Successful sale of the London Television Centre at South Bank
Consistent with the requirements of the Code, the Committee takes into account wider performance before approving the formulaic
outcomes from incentive plans. Where appropriate, the Committee has scope to apply judgement and discretion.
In 2019, ITV demonstrated its resilience in what was a testing year for the UK economy. During 2019, there was contraction in the spot
advertising market due to continued economic and political uncertainty impacting business confidence. Given this backdrop, the EBITA
result for 2019 represents a robust outcome. During the year, ITV outperformed the rest of the UK television advertising market. This
outcome was underpinned by another year of strong cash conversion, the maintaining of share of viewing at 23.2% (2018: 23.2%) and
a 7% 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 performance is reflected in the full year dividend for 2019.
While the Committee is fully satisfied that the wider executive team performed well against the targets set at the start of the year,
with clear evidence of outperformance of wider market trends, the Committee recognised that macroeconomic uncertainty continues
to impact the sector and our shareholders. Therefore the Committee exercised discretion to reduce the outcomes from the financial
element of the bonus by 10%.
Carolyn McCall
Chris Kennedy
Formulaic outcome
before discretion
(% of maximum)
95
95
Total value
£1,577,475
£886,000
% of bonus earned
after discretion
applied
87.5
87.5
Total value
£1,452,938
£816,081
Value delivered
in shares under
the DSA
£484,313
£272,027
Value paid
in cash
£968,625
£544,054
In line with the Remuneration Policy, bonus awards (including deferred elements) remain subject to malus and clawback provisions which
seek to safeguard against payments for failure. Further detail on these clauses are set out on page 137.
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Share awards
The LTIP awards made in 2017 were subject to performance measured to 31 December 2019. Neither Executive Director had any interest in
this annual cycle. The performance conditions for the 2017 award were not met and therefore this award will now lapse. Further details on
this legacy award, including performance measures, can be found in the 2017 Remuneration Report.
Transitional arrangements
Carolyn McCall: As disclosed last year, in addition to the awards made in March 2018, Carolyn McCall was 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 was based on the
same performance measures as the 2018 LTIP, subject to ITV performance to 31 December 2019.
Details of the performance achieved are below.
Adjusted EPS
Total non-advertising revenues
Viewing health:
– ITV Family SOV
– Online viewing
Weightings
40%
40%
Threshold
(20% vesting)
13p
3% growth pa
17p
6.5% growth pa
Maximum
(100% vesting)
Peformance
achieved
Payout level
% of maximum)
13.9p
6.2%
23.2%
169.8m
15.20
37.15
10.00
0
10%
21.2%
10% +200m hours growth
23.1%
+400m hours growth
Based on the above, 62.35% of the total award met performance conditions with the indicative value of the award set out below. The
equivalent easyJet award would have vested at 70% of maximum. The vested shares will be subject to a two-year holding period and will
release in December 2021.
Carolyn McCall
1,520,249
£2,578,342
572,373
947,876
£1,308,068
Dividends will accrue on the vested shares during the holding period.
For the purpose of the single figure table, the share price used to value the shares is based on the average share price in the final quarter of 2019 (138 pence).
The share price used to calculate the number of shares under award were the easyJet plc and ITV share prices on 8 January 2018, which were £15.245 and 169.6 pence respectively.
Number of
shares awarded
Value at
award date
Number of
shares due to lapse
Number of shares
due to vest
Value at
31 December 2019
Chris Kennedy: As a result of joining ITV, Chris Kennedy forfeited various interests under legacy incentive arrangements operated by his
previous employer, Micro Focus International plc. As disclosed in full in last year’s Remuneration Report, the Committee agreed to buy out
these arrangements on a comparable basis.
The single figure table for 2019 includes a payment relating to: (i) the 2018 Micro Focus cash bonus (£372k); (ii) the 2018 Micro Focus
deferred bonus (£186k); and (iii) the 2018 Micro Focus LTIP (£241k). In all cases, the level of pay out reflected the value of the forfeited
awards. There are no further buy out awards to be made to Chris. Further details of the buy out arrangements delivered in shares are
set out on page 140. All elements of the buy out package are subject to continued employment.
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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.
The level of fees paid to Non-executive Directors remains unchanged since 2016, for further details see page 137. Any increase or decrease
to fees that have been paid below reflects either a change to committee membership or where a director has not served for a full year.
Peter Bazalgette (Chairman)
Salman Amin
Edward Bonham Carter
Margaret Ewing
Roger Faxon
Mary Harris
Andy Haste
Anna Manz
John Ormerod
Duncan Painter
Fees
Taxable benefits1
Notes
2
3
3
4
2019
£000
450
70
95
85
70
90
–
76
–
70
1,006
2018
£000
450
68
20
80
70
101
35
76
33
43
976
2019
£000
2018
£000
3
1
1
1
4
4
–
1
–
1
16
3
8
–
1
6
4
–
–
–
–
22
Total
2019
£000
453
71
96
86
74
94
–
77
–
71
1,022
2018
£000
453
76
20
81
76
105
35
76
33
43
998
1.
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. Mary Harris acted as interim Senior Independent Director from 10 May 2018 to 11 October 2018, and received additional fees whilst in this role.
3. Andy Haste and John Ormerod both stepped down from the Board and Committees on 10 May 2018 and are included for comparison purposes.
4. Duncan Painter joined the Remuneration Committee on 1 February 2019.
LTIP awards made in 2019
On 28 March 2019, awards were made under the LTIP to Carolyn McCall and Chris Kennedy, subject to performance over the period to
31 December 2021 as set out below.
% salary
awarded
Number of share
options (nil cost) 1
Value at
award date
Performance
period ends
Holding period
Vesting date
Release date
Carolyn McCall
Chris Kennedy
265
225
1,934,498
1,175,121
£2,444,625
£1,485,000
31 December 2021
31 December 2021
2 years
2 years
28 March 2022
28 March 2022
28 March 2024
28 March 2024
1. Awards were granted based on the average share price over the three days prior the grant date which was 126.37 pence.
For the 2019-21 performance cycle the performance measures selected are intended to be directly aligned to the three pillars of the
strategy communicated to the market during 2018 and as set out on page 23. The alignment between the strategy and the performance
measures is summarised in the table on page 118.
When setting the performance measures and targets the Committee took into account the 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 2019 are:
Adjusted EPS
Total non-advertising revenues
Viewing health:
– ITV Family SOV
– Online viewing
see page 26
see page 26
see page 28
see page 28
KPI
Weightings
40%
40%
Threshold
(20% vesting)
12.5p
3% growth p.a.
Maximum
(100% vesting)
17p
6.5% growth p.a.
10%
21.2%
10% +200m hours growth
23.2%
+450m 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.
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Strategic ReportGovernanceFinancial StatementsAdditional Information Remuneration Report continued
The 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 Code, the 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 2019 onwards.
Remuneration Policy application in 2020
Executive Directors
The following section provides details of how the Policy will be implemented in 2020.
Salary
Salaries are paid in line with the Policy. On 1 January 2020, both Executive Directors received an increase of 2.25% in line with the wider
employee group.
Carolyn McCall
Chris Kennedy
2020 Salary
£943,256
£674,850
Taxable benefits and pension
These are provided in line with the 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 2020 will remain unchanged (15% of salary). In accordance with the 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 receives a cash allowance in lieu of pension of 9% of salary.
The Company is currently undertaking a review of its pension policy for the wider employee base. Following the completion of this review,
the Committee will give further consideration to whether any changes are required to the benefits offered to incumbent Executive
Directors with a view to full alignment by 2022.
Bonus (cash and shares)
The maximum bonus opportunity for 2020 remains unchanged: Carolyn McCall – 180% of salary; and 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 2020 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
2020. Overall the Committee is satisfied that the target ranges are realistic but highly stretching in this context. The Board considers the
actual targets for 2020 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 118.
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 performance
of the year.
Share awards
In recent years, a number of our major shareholders have requested that part of the LTIP should be based on a Total Shareholder Return
(TSR) performance measure. In direct response to this feedback we are adding a relative TSR measure for the 2020 awards as part of the
assessment of overall Group performance. The remaining performance measures are unchanged. These performance targets have been
discussed at length with our largest shareholders, prior to final approval by the Committee.
Awards in 2020 will be made to the Executive Directors with a value of 265% of salary for the Chief Executive, and 225% of salary for the
Group CFO. These levels remain unchanged from 2019.
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The performance measures and targets for awards to be made in 2020 are detailed below.
KPI
Weightings
TSR v. a cross sector of UK companies
Adjusted Earnings per Share
Total non-advertising revenues
Viewing health:
– ITV Family SOV
– Online viewing
see page 26
see page 26
see page 28
see page 28
20%
20%
40%
Threshold
(20% vesting)
Median
12.5p
3% growth pa
Maximum
(100% vesting)
Upper quartile
17p
6.5% growth pa
21.2%
10%
10% +250m hours growth
23.5%
+500m hours growth
There will be straight-line vesting between the threshold and maximum level for all targets apart from ITV Family SOV. The interim vesting points for the SOV target 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.
TSR will be assessed against a cross-sector comparator group comprising FTSE 350 companies that predominantly operate in the UK (excluding financial services and
extractive industries).
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 or release from
a holding period if applicable. Malus/clawback can be operated up to four years following the start of the relevant bonus year for bonuses
(for cash and shares), 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 financial results, gross
misconduct or fraud, material reputational damage. The Committee reviewed the plan rules and to maintain sufficient scope to exercise
discretion and judgement in line with the spirit of the Code have amended the provisions to include material corporate failure as a relevant
event for awards granted from 2020.
Non-executive Directors
There has not been an increase to Non-executive Director fees since 2016. Current fees are as set out below.
Chairman
Board fee
Additional fees for:
Senior Independent Director
Audit and Risk Committee Chair
Audit and Risk Committee member
Remuneration Committee Chair
Remuneration Committee member
In addition to his fee, Peter Bazalgette received private medical insurance.
Details of Committee membership can be found on page 87.
1 January 2020
£
1 January 2019
£
% Change
450,000
65,054
450,000
65,054
25,000
20,000
5,371
20,000
5,371
25,000
20,000
5,371
20,000
5,371
–
–
–
–
–
–
–
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 2018 and 31 December 2019 compared with the average percentage change for other employees.
Chief Executive
All employees
Notes
1
2, 3
% change in
base salary
% change
in benefits
% change in
bonus payments
2.5
5.57
0.67
(5.08)
23.69
41.40
1. Benefits include the cost of medical insurance and car-related benefits.
2. 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.
3. 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 percentage
decrease in benefits received by employees is due to a decrease in car related costs.
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Strategic ReportGovernanceFinancial StatementsAdditional Information Remuneration Report continued
CEO pay ratio
We are committed to ensuring colleagues earn at least the Living Wage or greater, and where appropriate we have agreed additional
increases. On 1 January 2020, all eligible UK colleagues received a pay increase of 2.25%. In addition, a bonus arrangement extends to all
our colleagues and is paid in March each year. The UK all-colleague bonus award for 2019 was paid at £1,750 (100% of maximum) (2018: £1,325).
The remuneration for the Chief Executive (CEO) is intended to be performance related and can therefore vary significantly on a year to year
basis. This will have a corresponding effect on the CEO ratio. For example, when performance is strong the ratio can be expected to rise,
and in contrast where incentives for the CEO lapse in full, the ratio would fall.
Due to the different full-time working hours and practices in different parts of ITV, and the flexibility that all employees have around
pension and benefits participation, we would expect a degree of variation in the all-employee reference points from one year to the
next and this will have a corresponding impact on the CEO pay ratio.
Year
2019
Methodology 25th percentile pay ratio
Median pay ratio 75th percentile pay ratio
Option B
92:1
80:1
53:1
The employees at the 25th percentile, median and 75th percentile were determined based on ITV’s most recent gender pay gap
information as at 30 April 2019 (Option B in the Reporting Regulations).
This calculation methodology was selected so that we are using an approach that is consistent with our separate Company pay gap
reporting while also taking into account the size and diverse nature of ITV’s UK workforce, with data held on multiple payroll systems
and the practicalities of making the analysis for this data set.
The three employees used in the calculations above are considered to be reasonably representative of the 25th, 50th and 75th percentiles
of Company remuneration in the relevant financial year. They received the employee bonus award, were members of the ITV DC Pension
Plan and did not participate in a long-term incentive plan.
The total remuneration of each comparator employee has been calculated using the actual values received in respect of the full financial
year and in accordance with the methodology used to calculate the single figure of remuneration for the CEO. We have not omitted any
component from their pay and benefits and the only adjustment has been to gross up the actual part-time remuneration for one
comparator employee to the full-time equivalent values.
The full-time equivalent remuneration values for the individuals in the table above are as follows:
Salary
Total remuneration
CEO
25th percentile
£922,500
£3,838,794
£36,627
£41,535
Median
£42,971
£47,711
75th percentile
£63,205
£72,680
The median pay ratio for 2019 is considered to be consistent with the pay, reward and progression policies for the Company’s UK employees
taken as a whole. It is reflective of the fact that a significant proportion of the total remuneration of the CEO is linked to participation in the
Company’s long-term incentive schemes (or for 2019 the buyout of a share award that was forfeited on the CEO leaving their previous
employer to join ITV) and participation in similar plans is limited to members of the senior executive group.
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 were paid until 31 March 2019 when his employment ceased. Further details can be
found in the 2018 Remuneration Report.
138
ITV plc Annual Report and Accounts 2019
Governance Remuneration Report
Directors’ share interests and post-cessation shareholding
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. Following adoption of the new Remuneration Policy, the guideline will be 400% of salary for the Chief Executive and 225%
of salary from the Group CFO. 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.
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 share awards following departure enable departing Executive 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 Executive Directors may retain a significant interest in shares
for up to five years following departure from the Company. The Committee has considered these arrangements as part of the review of
the Remuneration Policy.
Following adoption of the Policy, Executive Directors will normally be required to retain an interest equivalent to their annual LTIP grant
(265% for the Chief Executive and 225% for the Group CFO or the actual holding on departure if lower) for two years following departure.
This requirement will apply to shares acquired from Company incentive plans.
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 2019. To show alignment with the shareholding guidelines the net number of unvested share awards not subject
to performance conditions are included for the Executive Directors. The Committee continues to keep both the shareholding guidelines
and actual Director shareholdings under review and will take appropriate action should they feel it necessary.
Executive Directors
Carolyn McCall
Chris Kennedy
Non-executive Directors
Salman Amin
Peter Bazalgette
Edward Bonham Carter
Margaret Ewing
Roger Faxon
Mary Harris
Anna Manz
Duncan Painter
Interests in shares
Unconditional
shares held at
31 December
20191
Restricted
shares held at
31 December
2019 2
% shareholding
guidelines met 3
Unconditional
shares held at
31 December
2018
% required
under
shareholding
guidelines
254,962
87,831
275,021
179,086
50,674
357,245
–
22,700
40,935
41,442
33,565
–
21
30
100
100
–
62
100
100
95
–
181,598
–
14,795
313,497
–
22,700
40,935
31,078
33,268
–
400
200
100
100
100
100
100
100
100
100
Notes
4
5, 6
7
8
9
10
1. Shares beneficially held by Directors and family interests.
2. Unvested restricted share awards (under the DSA or buy out arrangements) not subject to performance conditions, accounted for on a net of tax basis.
3. In order to reflect economic exposure, shareholding guidelines are assessed on the greater of the share price on 31 December 2019 (151 pence) and the value at acquisition/grant.
4. Carolyn McCall was appointed to the Board on 8 January 2018 and has until 2023 to meet her shareholding guidelines.
5. Chris Kennedy was appointed to the Board on 21 February 2019 and has until 2024 to meet his shareholding guidelines.
6. The shareholding requirement for Chris Kennedy will increase to 225% following adoption of the new Remuneration Policy at the 2020 AGM.
7. Edward Bonham Carter was appointed to the Board on 11 October 2018 and has until 2024 to meet his shareholding guidelines.
8. Margaret Ewing was appointed to the Board on 31 October 2017 and has until 2023 to meet her shareholding guidelines.
9. Anna Manz was appointed to the Board on 1 February 2016 and has until 2022 to meet her shareholding guidelines.
10. Duncan Painter was appointed to the Board on 1 May 2018 and has until 2024 to meet his shareholding guidelines.
139
Strategic ReportGovernanceFinancial StatementsAdditional Information Remuneration Report continued
Outstanding interests under share schemes
The following tables provide details of the Executive Directors’ interests in outstanding share awards.
At
1 January
2019
Notes
Awarded
in year
Vested
in year
Exercised
in year
Lapsed
in year
At
31 December
2019
Share price
used for
award (pence)
Share
option
price
(pence)
Share price
at date of
vesting
(pence)
Vesting date
Carolyn McCall
Buy out awards
28 March 2018
28 March 2018
28 March 2019
LTIP
28 March 2018
28 March 2019
DSA
28 March 2019
Chris Kennedy
Buy out awards
28 March 2019
28 March 2019
28 March 2019
LTIP
28 March 2019
54,293
1
1 209,049
2
– 54,293 54,293
–
–
–
–
–
– 1,520,249
–
–
–
209,049
– 1,520,249
145.25
145.25
169.60
3 1,641,997
–
– 1,934,498
3, 4
5
–
309,860
–
–
–
166,179
24,532
147,187
3, 4
–
1,175,121
– 1,641,997
– 1,934,498
145.25
126.37
–
309,860
126.37
–
–
–
166,179
24,532
147,187
126.37
126.37
126.37
–
1,175,121
126.37
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
149.96 19 December 2019
28 March 2021
28 March 2020
–
–
–
–
–
28 March 2021
28 March 2022
28 March 2022
28 March 2021
–
– 2 September 2021
– 2 September 2021
–
28 March 2022
SAYE
2 September 2019
–
20,578
–
20,578
109.33
87.47
–
1 November 2022
1.
The buyout awards made in 2018 relate to: (i) 2016 easyJet deferred bonus (54,293 ITV shares), which released in December 2019 - sufficient shares were sold to cover tax and NIC
liabilities, and the balance retained; (ii) 2016/17 easyJet bonus – one-third deferred into shares for three years (209,049 ITV shares). The values reflect awards forfeited under
previous easyJet incentive arrangements and will vest and release over the same time horizons as the awards that were forfeited.
2. The buyout award made in 2019 relates to 2016 easyJet long-term incentive based on performance to September 2019. This award was made subject to ITV performance to
31 December 2019. As noted on page 134 this award will vest at 62.35% of maximum. The remaining shares will be subject to a holding period releasing in December 2021.
3. Awards under the LTIP are subject to performance over a three-year period. Any proportion of the award that meets the performance conditions will become exercisable after
a two-year holding period.
4. The face value of awards granted in the financial year to Carolyn McCall under the LTIP was £2,444,625 and to Chris Kennedy was £1,485,000.
5. DSA awards made in 2019 for 2018 performance and buy out awards are included in the single figure table on page 131. There are no performance conditions attaching to the DSA.
Performance conditions that apply to the unvested awards under the LTIP are summarised in the table below. Full details for the 2018
award were provided in the 2018 Remuneration Report. For awards made in 2019 see page 135.
Adjusted EPS
Annual non-NAR growth
ITV Family SOV
Online viewing, hours of VOD consumption growth
Weighting
Threshold
vesting
40%
40%
10%
10%
20%
20%
20%
20%
2018
2019
Threshold
Maximum
Threshold
Maximum
13p
3%
21.2%
200m
17p
6.5%
23.1%
400m
12.5p
3%
21.2%
200m
17p
6.5%
23.2%
450m
140
ITV plc Annual Report and Accounts 2019
Governance Remuneration Report
External directorships
With specific approval of the Board, Executive Directors may undertake one external appointment as a non-executive director of another
publicly quoted company and retain any related fees paid to them.
During the year, the Executive Directors retained fees for the directorships set out below.
Carolyn McCall
Chris Kennedy
Company
Burberry Group plc
Whitbread plc
2019
£000
80
70
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
Nature of contract
8 January 2018
21 February 2019
Rolling
Rolling
Notice period
from Company
12 months
12 months
Notice period
from Director
12 months
12 months
Compensation for
early termination
None
None
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 re-election at the AGM in 2020. Details of tenure are set out in the table on page 87.
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 87.
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 was appointed by the Committee as the independent adviser on remuneration policy and the external remuneration
environment from September 2017 following a review of other advisers in the market place. Total fees for advice provided to the
Committee during the year amounted to £181k on a time/material basis (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.
The wider UK Deloitte firm provided ITV with a number of other services during the year relating to risk and internal audit, tax, financial
advice and consultancy. The members of executive remuneration consulting team are not incentivised to cross-sell non-related services
to ITV.
The Committee is satisfied that the Deloitte LLP engagement partner and advisory team that provide remuneration advice to the
Committee, do not have any connections with the Company or individual directors that may impair their independence.
141
Strategic ReportGovernanceFinancial StatementsAdditional Information Remuneration Report continued
Relative importance of spend on pay
The table below shows pay for all employees compared with other key financial indicators.
Employee pay1
Ordinary dividend
Employee headcount2
2019
£m
491
320
6,416
2018
£m
473
315
6,281
% Change
3.81
1.59
2.15
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 172.
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 172.
There were no share buybacks during either year.
Historical performance
The graph below shows the TSR performance of the Company against the FTSE 100 index over the ten year period to 31 December 2019.
The FTSE 100 was chosen as ITV has been a member of the FTSE 100 during the ten year period.
900
800
700
600
500
400
300
200
100
0
)
0
1
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
31/12/2009
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
31/12/2019
ITV
FTSE 100
Source: Thomson Reuters Datastream
142
ITV plc Annual Report and Accounts 2019
Governance
Remuneration Report
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.
Total
remuneration
£000
Bonus %
of maximum
Long-term incentive
award vesting % of
maximum
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
Carolyn McCall
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
3,839
3,695
225
2,050
3,632
3,881
4,842
8,399
2,915
2,158
1,350
661
2,583
87.5
73.6
–
97.9
40
96
94
93
91
88
95
83
94
62.35
–
–
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. For 2019 the vesting
percentage relates to the buy out award for Carolyn McCall. It is noted that the 2017 LTIP award lapsed in full.
Shareholder voting
Votes cast by proxy and at the meeting by poll 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 (2019 AGM) 3,008,508,628
2,945,550,900
Remuneration Policy (2017 AGM)
95.69
98.75
135,610,807
37,188,567
4.31 3,144,119,435
1.25 2,987,579,168
73,974,173
4,839,701
143
Strategic ReportGovernanceFinancial StatementsAdditional Information Directors’ Report
The Directors present their Annual Report and the audited consolidated and parent company financial statements for the year ended
31 December 2019. The Directors’ Report comprises this report and the entire Governance section including the Chairman’s Governance
Statement. In accordance with the Financial Conduct Authority’s Listing Rules, the information to be included in the 2019 Annual Report
and Accounts, where applicable, under LR 9.8.4, is set out in this Directors’ Report. Other information that is relevant to this report, and
which is incorporated by reference, can be located as follows:
Information
Carbon and greenhouse gas emissions
Corporate Governance Report
Directors’ service contracts
Employee engagement and involvement
Employee equality, diversity, reward and inclusion
Future developments of the business of the Group
Membership of the Board during the 2019 financial year
Research and development
Stakeholder engagement and Company’s business relationships
Page number
See page 46
See pages 80 to 143
See page 141
See pages 51 and 92 to 94
See pages 50 to 51
See pages 30 to 43
See page 87
See pages 30 to 43
See pages 63 and 89 to 92
Corporate
Articles of Association: 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 24 April 2020.
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.
Other agreements: The Company does not have any agreements with any Director or employee that would provide compensation for loss
of office or employment resulting from a takeover bid.
Dividends: The Board has proposed a final dividend for the year ended 31 December 2019 subject to shareholder approval at the AGM on
24 April 2020. The final dividend will be paid on 21 May 2020 to shareholders on the register on 14 April 2020 (the record date). The
ex-dividend date is 9 April 2020. Details of this and other dividends paid for the year are as follows:
Interim dividend
Final dividend
Total ordinary dividend payment
2019
2.6p
5.4p
8.0p
2018
2.6p
5.4p
8.0p
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 2019 AGM. During 2019 there were no payments made by the Group falling within this definition (2018: nil).
Branches: Branches of the Group outside the United Kingdom are indicated in the Subsidiary undertakings and investments section on
pages 231 to 234.
144
ITV plc Annual Report and Accounts 2019
Governance
Directors’ Report
Directors
Appointments: A table showing Directors who served in the year can be found on page 87. Biographies for Directors currently in office can
be found on pages 82 and 83 and on our website.
www.itvplc.com/about/board-of-directors
The Directors may from time to time appoint one or more Directors. Any such Director shall hold office only until the next AGM and shall
then be eligible for appointment by the Company’s shareholders in accordance with the Corporate Governance Code. Subject to annual
shareholder approval, Directors are appointed for an initial three year period and annually thereafter. Each Director will retire and submit
themselves for re-election at the AGM on 24 April 2020.
Conflicts of interest: The Board has delegated the authorisation of any conflicts to the Nominations 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.
Powers including in relation to issuing or buying back shares: Subject to applicable law and the Company’s Articles of Association the
Directors may exercise all powers of the Company, including the power to authorise the issue and/or market purchase of the Company’s
shares (subject to an appropriate authority being given to the Directors by shareholders in a general meeting and any conditions attaching
to such authority). The Articles and a schedule of Matters Reserved for the Board can be found on our website (below).
At the 2019 AGM, the Directors were given the following authority:
• to allot a maximum of 1.34 billion shares, representing approximately one-third of the Company’s issued share capital, extending to
2.68 billion if used for a rights issue ;
• to allot a maximum of 402.5 million shares, without first offering them to existing shareholders in proportion to their holdings,
representing approximately 10% of the Company’s issued share capital; and
• to purchase in the market a maximum of 402.5 million shares, representing up to approximately 10% of the Company’s issued share capital.
No shares were allotted or bought back under these authorities during the 2019 financial year and up to the date of this report. These
standard authorities will expire on 8 August 2020 or at the conclusion of the 2020 AGM, whichever is earlier. The Directors will seek to
renew the authorities at the AGM In 2020.
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 certain directors of associated companies. A copy of the
indemnity can be found on our website. The indemnities, which constitute a qualifying third party indemnity as defined in Section 234
of the Companies Act 2006, were in force for the financial year ended 31 December 2019.
www.itvplc.com/investors/governance
Disclosures
Listing Rule 9.8.4 disclosures: There are no disclosures to be made under Listing Rule 9.8.4 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 and emerging risks facing the Company,
including in relation to its business model, future performance, solvency and liquidity. Details of our principal risks and associated
mitigations, together with details of our approach to risk management, are set out on pages 66 to 78. Note 4.3 to the financial statements
on page 208 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.
Going concern: The going concern statement is set out on page 163. This note is incorporated by reference and deemed to form part
of this report.
Subsequent events: There were no post balance sheet events to report.
Data: As a part of our business activity, ITV processes large amounts of personal data. ITV recognises that to enable this use of personal
data to transform our business and to meet the expectations of our viewers, advertisers and employees, it is critical that we continue to
build on our approach to applying privacy in a lawful and ethical way. A programme of work to support this is being led by our Global
Protection Officer. This work includes making improvements to our data governance framework and delivering our data privacy function
145
Strategic ReportGovernanceFinancial StatementsAdditional Information Directors’ Report continued
to protect rights, engender trust and make data available for commercial purposes. ITV has a number of policies, procedures and tools
in place to support this, including our Privacy and Data Protection Policy and an Information Security Policy that governs the processing
and security 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.
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.
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 Chair — five appointed by the Company and four nominated by the members. The Company
appointed trustee directors include the Chair and two professional independent trustees, one of who joined the trustee board with effect
from 1 January 2020. The structure of the trustee board will change with effect from 1 March 2020.
Currently, 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. A budget is agreed each year.
The trustee board manages risk through its meeting agendas and has 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 the relevant 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 Chair 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. The next actuarial valuation will be as at 1 January 2020.
ITV Defined Contribution Plan (the Plan): The 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 employees 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 Chair — three appointed by the Company and two nominated by the members. One of the member-nominated
Directors resigned at the start of December, so there is currently a vacancy that is required to be filled within 12 months. 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 ITV Pension Scheme.
The Chair 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.
Ulster Television Pension and Assurance Scheme (the UTV Scheme): The UTV Scheme provides DB benefits. It closed to new members in
2002 and following a comprehensive consultation exercise with active members, the UTV Scheme closed to future accrual with effect from
31 March 2019.
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 Chair — three appointed by the Company (including a professional trustee as chairman) and two
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ITV plc Annual Report and Accounts 2019
Governance Directors’ Report
nominated by the members, both of whom were re-elected following an election in December 2019 for a further two year term. It is the
responsibility of the trustee to have in place appropriate training for its directors. The governance framework for managing the UTV
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, with the next
valuation due as at 1 July 2020. 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 enroll all eligible individuals into a pension scheme
automatically (auto-enrolment). This applies to all eligible individuals who are contracted to work for us, regardless of their contract type or
tax status (i.e. it applies to workers and not simply employees). The auto-enrolment plan is 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 2019 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 incurred as a director or officer of ITV Pension Scheme Limited, ITV DC Trustee Limited and UTV Pension
Scheme Limited.
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.
Rights: The rights attaching to the Company’s ordinary shares are set out in the Articles of Association.
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. With regard to the deadline for exercising voting rights, votes are exercisable at a general meeting of
the Company in respect of which the business being voted upon is being heard. Votes may be exercised in person, by proxy or, in relation
to corporate members, by corporate representatives. The Articles provide a deadline for submission of proxy forms of not less than
48 hours before the time appointed for the holding of the meeting or adjourned meeting. However, when calculating the 48-hour period,
the directors can, and have, decided not to take account of any part of a day that is not a working day. 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.
Share schemes: Details of employee share schemes are set out in note 4.8 on page 217. The Company has an Employees’ Benefit Trust
(EBT) funded by loans to acquire shares for the potential benefit of employees. Details of shares held by the EBT at 31 December 2019
are set out on page 219. During the year shares have been released from the EBT in respect of share schemes for employees. 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 4 March 2020, 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
Black Rock Inc.
Ameriprise Financial, Inc and its group
% of interest
in shares
9.99
9.90
5.21
5.08
Nature of
interest
in shares
Indirect
Indirect
Indirect
Indirect
Total number
of shares
as notified
402,336,662
398,515,510
209,575,328
204,366,654
1. The Company received notifications from Goldman Sachs Group in respect of an interest in 21.15% of voting rights, most recently in December 2019, held through financial
instruments.
2. The number of shares is based on announcements made by each relevant shareholder using the Company’s issued share capital at that date.
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Strategic ReportGovernanceFinancial StatementsAdditional Information Directors’ Report continued
Statement of Directors’
Responsibilities
The Directors consider the Annual Report
and Accounts, 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.
Each of the Directors, whose name and
functions are listed on pages 82 to 83,
confirm that, to the best of their knowledge:
• The financial statements, prepared in
accordance with the applicable set of
accounting standards, give a true and fair
view of the assets, liabilities, financial
position and profit or loss of the Company
and the undertakings included in the
consolidation taken as a whole, and
• The Strategic Report includes a fair review
of the development and performance of
the business and the position of the issuer
and the undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks
and uncertainties that they face.
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, including financial,
operational and compliance controls,
for the year ended 31 December 2019.
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 Accounts 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 International
Financial Reporting Standards as adopted by the European Union (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
• Make judgements and estimates that are reasonable, relevant, reliable and prudent
• For the Group financial statements, 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
• Assess the Group and parent Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
• 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 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, Directors’ Remuneration Report and Corporate Governance
Statement that complies 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
Chris Kennedy
Group CFO
5 March 2020
ITV plc
Registered Number: 4967001
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ITV plc Annual Report and Accounts 2019
Governance > 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 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
4.3 Managing market risks: derivative financial instruments
4.4 Net financing costs
4.5 Fair value hierarchy
4.6 Lease liabilities
4.7 Equity
4.8 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
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157
157
158
159
160
162
163
167
167
173
174
177
179
179
184
186
191
193
194
195
204
204
206
208
212
213
215
216
217
219
219
220
221
222
224
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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 2019 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 2019
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 and Risk 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 16 financial years ended 31 December 2019. 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, 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.
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> Independent Auditor’s Report to the members of ITV plc
The risk
Our response
Earnout liability: £165m (2018: £107m) Risk vs 2018: New
Refer to page 102 (Audit and Risk Committee report), page 182 (accounting policy) and page 182 (financial disclosures)
Subjective estimate
Acquisition-related liabilities include performance based, employment-
linked earnouts which are estimated future payments to previous
owners of the businesses acquired by the Group (the “earnout liability”).
The estimated future payments are often based on a multiple of
profits of the acquired entity. The most significant earnout relates to
the acquisition of Talpa Media in 2015. The earnout period ends on
31 March 2020, with the liability for the final payout calculated based
on a multiple of average EBITDA for the three year period ended
31 December 2019 under the terms of the Sales & Purchase
Agreement (the “SPA”).
Due to the size of the business and the multiple applied, the earnout
liability at 31 December 2019 is material to the Group financial
statements. There is judgement involved in relation to the interpretation
under the SPA of certain transactions for the purposes of the earnout
calculation including the treatment of the insured trade receivable.
The effect of these matters is that, as part of our risk assessment,
we determined that the Talpa earnout liability has a high degree
of estimation uncertainty, with a potential range of reasonable
outcomes greater than our materiality for the financial statements
as a whole, and possibly many times that amount. The financial
statements (note 3.1.5) disclose the range estimated by the Group.
Our procedures included:
• Enquiry of external advisors: assessing correspondence and
discussions with the Group’s external advisors in relation to the
merits of the treatments supporting the estimated liability.
• Tests of details: assessing the calculation of the earnout payment
with reference to the terms of the Sale and Purchase Agreement.
We challenged management on their treatment of certain
transactions including the insured trade receivable for the purpose
of the calculation with reference to the contract terms.
• Management representations: obtaining management
representations to confirm that the calculation represents
management’s best estimate based on the information available.
• Assessing transparency: assessing the adequacy of the Group’s
disclosures in relation to the earnout liability.
Our results:
• We found the resulting estimate of the earnout liability and the
related disclosures to be acceptable (2018: acceptable).
Total Advertising Revenue: £1,768 million (2018: £1,795 million) Risk vs 2018: ◄ ►,
Refer to page 102 (Audit and Risk Committee report), page 167 (accounting policy) and pages 168 to 170 (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.
• Tests of details: challenging the year-end deal debt positions based
on comparison with customers’ correspondence and agreed terms
of business.
• Tests of details: testing that the revenue is recognised post
transmission by matching the transmissions to the corresponding
spots and by agreeing invoices to subsequent cash receipts on a
sample basis.
• Assessing disclosures: assessing the adequacy of the Group's
disclosures in respect of the accounting policy on revenue recognition.
Our results:
• From the evidence we obtained we found the resulting amount
of recorded spot advertising to be acceptable (2018: acceptable).
Accounting treatment
The majority of the Group’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 the Group 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.
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 the Group 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 the Group’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 complexity of contractual agreements with advertising agencies;
• The complexity of the systems and processes of control used to
record revenue; and
• The judgement involved in determining any deal debt liability at the
period end.
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Financial Statements
Independent Auditor’s Report to the
members of ITV plc continued
The risk
Our response
Non-advertising revenue – Studios £1,822m million (2018: £1,670 million) Risk vs 2018: ◄ ►
Refer to page 102 (Audit and Risk Committee report), pages 167 to 168 (accounting policy) and pages 168 to 170 (financial disclosures)
Accounting treatment
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 the 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 applied in determining
the 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: considering the Group’s revenue recognition
policies against the relevant accounting standards.
• Tests of details: on a sample basis, including significant one-off
contracts, for revenue contracts entered into during the year,
assessing 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: assessing the adequacy of the Group’s
disclosures in respect of the accounting policy on revenue recognition.
Our results:
• From the evidence we obtained we found the resulting amount
of recorded non-advertising revenue within the Studios segment
to be acceptable (2018: acceptable).
Gross defined benefit pension scheme obligations £4,037 million (2018: £3,719 million) Risk vs 2018: ◄ ►
Refer to page 102 (Audit and Risk Committee report), page 195 and 196 (accounting policy) and pages 196 to 203 (financial disclosures)
Subjective valuation
Significant estimates are made in determining the key assumptions
used in valuing the Group's gross defined benefit pension scheme
obligations. When making these assumptions the directors take
independent actuarial advice relating to their appropriateness.
The valuation of the gross defined benefit pension scheme obligations
is considered a significant risk given the quantum of the gross defined
benefit pension scheme obligations and that a small change in
assumptions can have a material financial impact on the Group.
The effect of these matters is that, as part of our risk assessment,
we determined that the gross defined benefit pension scheme
obligations have a high degree of estimation uncertainty, with a
potential range of reasonable outcomes greater than our materiality
for the financial statements as a whole, and possibly many times
that amount. The financial statements (note 3.7) disclose the
sensitivity estimated by the Group.
Our procedures included:
• Benchmarking assumptions: challenging the key assumptions
applied in determining the Group's gross defined benefit pension
scheme obligations, being the discount rate, inflation rate and
mortality/life expectancy against externally derived data, with the
support of our own actuarial specialists.
• Assessing disclosures: assessing the adequacy of the Group’s
disclosures in respect of the sensitivity of the gross defined benefit
pension scheme obligations to these assumptions.
Our results:
• From the evidence we obtained we found the resulting valuation
of the gross defined benefit pension scheme obligations to be
acceptable (2018: acceptable).
Recoverability of the parent Company’s investment in, and amounts due from, its subsidiaries Investment carrying value £2,733 million
(2018: £2,286 million), and amounts due from subsidiaries £4,541 million (2018: £4,167 million) Risk vs 2018: ◄ ►
Refer to page 224 (accounting policy) and pages 226 (financial disclosures)
Low risk, high value
The carrying amount of the parent Company’s investments in, and
amounts due from, its subsidiaries represents 37% and 61% (2018:
35% and 64%) of the Company’s total assets respectively. 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:
• Tests of details: comparing the carrying amount of 100% of
investments 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; assessing 100% of amounts due from subsidiaries to identify,
with reference to the relevant debtors’ draft balance sheet, whether
they have a positive net asset value and therefore coverage of the
debt owed, 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, and amounts due from, its subsidiaries to be
acceptable (2018: acceptable).
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> 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 £23.0m (2018: £28.0m), determined with reference to a benchmark of
Group profit before tax, normalised to exclude the gain on sale of non-current assets disclosed in note 2.2, of £468m, of which materiality
represents 4.9% (2018: 4.9% of Group profit before tax normalised to exclude pension exceptional items, of £563m). 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 at £22.0m (2018: £27.0m), determined with reference to a
benchmark of the company total assets, of which it represents 0.3% (2018: 0.4%).
We agreed to report to the Audit and Risk Committee any corrected or uncorrected identified misstatements exceeding £1.15m (2018: £1.4m),
in addition to other identified misstatements that warranted reporting on qualitative grounds.
Scoping and coverage
Revenue
Full scope audit
76%
Specified risk-based
audit procedures
Out of scope
10%
14%
Profit before tax
Full scope audit
Specified risk-based
audit procedures
Out of scope
96%
1%
3%
Total assets
Group audited
89%
Specified risk-based
audit procedures
Out of scope
3%
8%
Of the Group's 6 (2018: 6) components, we subjected 3 (2018: 3) to full scope audits for Group purposes and 2 (2018: 2) to specified risk-focused
audit procedures. The latter were not individually financially significant enough to require a full scope audit for Group purposes, but did present
specific individual risks that needed to be addressed. For these 2 components, the specified risk-focused procedures were performed over
revenue, stock, contract assets and liabilities, debtors and cash.
For the remaining component, we performed analysis at an aggregated Group level to re-examine our assessment that there were no
significant risks of material misstatement within these. The Group team performed procedures on the items excluded from normalised Group
profit before tax.
The Group audit team approved the component materiality levels, which ranged from £2.5 million to £22.0 million (2018: £5.0 million to
£27.0 million), having regard to the mix of size and risk profile of the Group across the components. The work on 3 of the 6 components (2018:
3 of the 6 components) was performed by component auditors and the rest, including the audit of the parent company, was performed by the
Group team.
Detailed audit instructions were sent to the component auditors. These instructions covered the significant audit areas that should be covered
by these audits (which included the relevant risks of material misstatement detailed above) and set out the information required to be reported
back to the Group audit team. Telephone conference meetings were held with component auditors throughout the audit. The Group audit
team also visited the component in the Netherlands. At these meetings, the findings reported to the Group team were discussed in more detail,
and any further work required by the Group team was then performed by the component auditor.
Together the above audit and the specified audit procedures covered 86% (2018: 88%) of Group revenue, 97% (2018: 95%) of Group profit
before taxation; and 92% (2018: 91%) 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; and
• A number of key programme brands within the Studios division not being recommissioned.
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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 significant downturn in advertising revenues, and a significant change in
pension funding obligations following the triennial valuation in 2020, 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 163 to 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 148 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 and Accounts
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 emerging and 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 78 that they have carried out a robust assessment of the emerging
and principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity;
• the Principal Risks disclosures 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.
154
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ITV plc Annual Report and Accounts 2019
> 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 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 148, 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.
First, 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. We identified the following areas as those most likely to have such an effect: broadcasting and media regulations, anti-trust and
competition law compliance, anti-bribery and corruption, data privacy and health and safety recognising the nature of the Group’s activities.
155
155
Strategic ReportGovernanceFinancial StatementsAdditional InformationStrategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Independent Auditor’s Report to the
members of ITV plc continued
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. Through these procedures, we became aware of actual
or suspected non-compliance and considered the effect as part of our procedures on the related financial statement items. The identified
actual or suspected non-compliance was not sufficiently significant to our audit to result in our response being identified as a key audit matter.
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
5 March 2020
156
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ITV plc Annual Report and Accounts 2019
> Primary Statements
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 profits of joint ventures and associated undertakings
Gain 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
Note
2.1
2.1
2.2
3.3, 3.5
4.4
4.4
4.4
3.5
2.2, 3.2
2.3
4.7.6
2019
£m
3,308
(2,773)
535
693
(84)
(74)
535
12
(80)
(68)
1
62
530
(52)
478
473
5
478
2.4
2.4
11.8p
11.8p
2018
£m
3,211
(2,611)
600
785
(93)
(92)
600
3
(46)
(43)
–
10
567
(97)
470
466
4
470
11.7p
11.6p
157
157
Strategic ReportGovernanceFinancial StatementsAdditional InformationStrategic ReportGovernanceFinancial StatementsAdditional Information
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 (loss)/gain 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 on defined benefit pension schemes
Income tax credit on items that will never be reclassified
Other comprehensive loss 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
4.7.4
4.7.3
4.7.3
3.7
2.3
4.7.6
2019
£m
478
9
(17)
–
(11)
(134)
20
(133)
345
340
5
345
2018
£m
470
(1)
7
(15)
12
(52)
8
(41)
429
425
4
429
158
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ITV plc Annual Report and Accounts 2019
> Primary Statements
Consolidated Statement of Financial Position
Non-current assets
Property, plant and equipment
Intangible assets
Investments in joint ventures, associates and equity investments
Derivative financial instruments
Distribution rights
Contract assets
Defined benefit pension surplus
Other pension asset
Deferred tax asset
Current assets
Programme rights and other inventory
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
Lease liabilities
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
Non-current liabilities
Borrowings
Lease liabilities
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
Note
3.2
3.3
3.5
4.3
3.1.2
3.1.6
3.7
3.7
2.3
3.1.1
3.1.3
3.1.3
3.1.6
2.3
4.3
4.1
3.2
4.1, 4.2
4.6
4.3
3.1.4
3.1.4
3.1.6
2.3
3.6
4.1, 4.2
4.6
4.3
3.7
2.3
3.1.5
3.6
4.7.1
4.7.1
4.7.2
4.7.3
4.7.4
4.7.5
4.7.6
The accounts were approved by the Board of Directors on 5 March 2020 and were signed on its behalf by:
Chris Kennedy
Group Chief Financial Officer
31 December
2019
£m
31 December
2018
£m
269
1,592
52
–
22
3
17
58
47
2,060
323
413
63
476
442
15
6
246
–
1,508
(10)
(25)
(5)
(917)
(61)
(978)
(219)
(81)
(2)
(1,320)
188
(1,016)
(64)
(43)
(162)
(29)
(51)
(5)
(1,370)
878
403
174
224
32
14
1
848
30
878
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
60
5
(33)
815
34
849
159
Strategic ReportGovernanceFinancial StatementsAdditional InformationStrategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Consolidated Statement of Changes in Equity
Attributable to equity shareholders of the parent company
Share
capital
£m
403
Note
4.7
Share
premium
£m
Merger
and other
reserves
£m
Translation
reserve
£m
Fair value
reserve
£m
Retained
earnings
£m
174
206
60
(33)
Non-
controlling
interests
£m
34
Total
£m
815
Total
equity
£m
849
5
–
9
–
–
–
–
9
9
–
–
–
–
–
–
14
473
473
–
–
–
9
(17)
(11)
(134)
(134)
20
20
(114)
(133)
359
340
5
–
–
–
–
–
–
5
478
9
(17)
(11)
(134)
20
(133)
345
(320)
(320)
(2)
(322)
10
–
(4)
(314)
(11)
1
10
–
(4)
(314)
7
848
–
–
–
(2)
(7)
30
10
–
(4)
(316)
–
878
Balance at 1 January 2019
Total comprehensive income/(loss)
for the year
Profit for the year
Other comprehensive income/(loss)
Revaluation of 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 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 2019
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
403
–
–
–
174
–
–
18
224
4.7.4
4.7.3
4.7.3
3.7
2.3
4.8
2.3
4.8
4.7.6
4.7
–
–
(17)
(11)
–
–
(28)
(28)
–
–
–
–
–
–
32
(a) Movements reported in merger and other reserves include a put option for the acquisition of non-controlling interests.
160
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ITV plc Annual Report and Accounts 2019
> Primary Statements
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
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
41
6
(136)
Non-
controlling
interests
£m
45
Total
£m
687
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
403
–
–
–
174
–
–
7
206
4.7.4
4.7.3
4.7.3
3.7
2.3
4.8
2.3
4.8
4.7.5
4.7
–
–
7
12
–
–
–
19
19
–
–
–
–
–
–
60
–
466
466
–
–
–
(1)
7
12
(52)
(52)
(15)
(15)
8
8
(59)
(41)
407
425
4
–
–
–
–
–
–
–
4
(315)
10
6
(5)
(304)
–
(33)
(315)
10
6
(5)
(304)
7
815
(8)
–
–
–
(8)
(7)
34
(1)
–
–
–
–
–
(1)
(1)
–
–
–
–
–
5
(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.
Total
equity
£m
732
470
(1)
7
12
(52)
(15)
8
(41)
429
(323)
10
6
(5)
(312)
–
849
161
161
Strategic ReportGovernanceFinancial StatementsAdditional InformationStrategic ReportGovernanceFinancial StatementsAdditional Information
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 in exceptional payables
(Increase)/decrease in exceptional prepayments and other receivables
Cash inflow/(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
Proceeds from sale of assets held for sale
Purchase of gilts (other pension assets)
Loans granted to associates and joint ventures
Loans repaid by associates and joint ventures
Dividends received from investments
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Bank and other loans – amounts repaid
Bank and other loans – amounts raised
Payment of lease liabilities
Equity dividends paid
Acquisition of non-controlling interests
Dividends paid to non-controlling interests
Purchase of own shares via employees’ benefit trust
Net cash outflow from financing activities
Net increase/(decrease) in cash and cash equivalents
2.1
2.2
3.4
(84)
98
(2)
(74)
30
(84)
(108)
(11)
(30)
(38)
(18)
–
146
–
(5)
1
1
(931)
968
(35)
(320)
(41)
(2)
(4)
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
4.1
2019
£m
696
12
708
(236)
472
2018
£m
730
(90)
640
(216)
424
£m
(93)
1
2
(82)
10
(52)
(92)
–
(56)
(26)
(13)
17
–
(11)
(4)
–
–
46
(93)
(422)
400
–
(315)
(10)
(8)
(5)
(365)
153
95
(2)
246
(360)
(29)
126
(2)
95
162
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ITV plc Annual Report and Accounts 2019
> Section 1: Basis of Preparation
Notes to the Financial Statements
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 2019 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’).
The notes form part of the financial statements.
Going concern
At 31 December 2019, the Group was in a financial net debt position with a positive gross cash balance. The Group
is in a net current asset position and continues to generate significant cash from operations which enables it 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 are entities where the Group concludes it does not have significant influence and 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.
163
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Strategic ReportGovernanceFinancial StatementsAdditional InformationStrategic ReportGovernanceFinancial StatementsAdditional Information
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 (put option liabilities and contingent consideration)
• 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 and call deposits with a maturity of less than or equal to three months
from the date of acquisition. 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 areas involving material judgement or complexity are set out below and in more detail in the related notes:
• Revenue recognition (note 2.1)
• Defined benefit pension (note 3.7)
• Contingent liabilities (note 5.2) and
• Acquisition-related liabilities (note 3.1.4 and note 3.1.5)
Defined benefit pension and acquisition-related liabilities are also most sensitive to estimation, where the assumptions
applied could have a material impact on the financial statements in the next 12 months. Details of the estimation
sensitivity are disclosed in the related notes.
In addition to the above, the areas involving the high degree of estimation that are significant to the financial statements,
but not expected to have a material impact on them in the next 12 months, are set out below and in more detail in the
related notes:
• Taxation (note 2.3) and
• Business combinations (note 3.4)
New or amended EU endorsed accounting standards
Changes in significant accounting policies
The Group has adopted IFRS 16 ‘Leases’ from 1 January 2019 which has changed lease accounting for lessees under
operating leases. Such agreements now 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) are recognised in the form of
depreciation and interest, rather than as an operating cost.
The Group has adopted the modified retrospective approach with the right of use asset equal to the lease liability
at transition date, adjusted by any prepayments or lease incentives recognised immediately before the date of initial
application. Under the modified retrospective transition approach, the comparative information is not restated.
The Group has elected to apply a single discount rate to assets with similar characteristics.
On transition, the Group adopted the practical expedient to apply IFRS 16 to contracts that were previously identified
as leases. The Group has also elected not to recognise right of use assets and lease liabilities for short-term leases
(i.e. lease terms less than 12 months) or low-value assets (i.e. under £5,000). The Group will continue to expense the
lease payments associated with these leases on a straight-line basis over the lease term.
Leases
The Group leases many assets, including office space, production properties, vehicles and office equipment.
Balance on transition at 1 January 2019
Net book value at 31 December 2019
Impact on Financial Statements
1) Impact on transition
Note
3.2
3.2
Property
£m
108
85
Vehicles,
equipment
and fittings
£m
4
2
Total
£m
112
87
On transition to IFRS 16, the Group recognised right of use assets and lease liabilities. This impact on transition is
summarised below.
Right-of-use assets presented in property, plant and equipment (net of rent incentives)
Right-of-use assets presented in vehicles, equipment and fittings (net of rent incentives)
Lease liabilities
1 January
2019
£m
108
4
(121)
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Financial Statements
Notes to the Financial Statements
Section 1: Basis of Preparation continued
When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease
payments using its incremental borrowing rate at 1 January 2019. The weighted-average rate applied is 3.39%.
Operating lease commitment at 31 December 2018 as disclosed in the Group’s
consolidated financial statements
Impact of discounting using the incremental borrowing rate at 1 January 2019
Recognition exemption for leases with less than 12 months of lease term at transition
Lease liabilities recognised at 1 January 2019
2) Impact for the year
1 January
2019
£m
(147)
25
1
(121)
As a result of applying IFRS 16, in relation to the leases that were previously classified as operating leases, the Group
recognised £87 million of right of use assets in property, plant and equipment (see section 3.2) and £89 million of lease
liabilities (see section 4.6) as at 31 December 2019.
Also, in relation to those leases under IFRS 16, the Group has recognised depreciation and interest costs, instead of
operating lease expense. During the year ended 31 December 2019, the Group recognised £25 million of depreciation
charges and £4 million of interest costs from those leases. IFRS 16 has no impact at a profit before tax level but
increases both our EBITA and financing costs by £4 million.
For leases excluded from IFRS 16 under the exemption for leases with terms of less than 12 months, and low-value
assets (i.e. under £5,000), the Group recognised less than £1 million in rent expense in the period.
Other new or amended accounting standards
Accounting standard
Requirement
Amendment to IAS 19
‘Employee Benefits’
Amendment to IAS 28
‘Investments in
Associates and Joint
Ventures’
IFRIC 23 ‘Uncertainty
over Income Tax
treatments’
Amendment to IFRS 9
‘Financial Instruments’
Annual Improvements
to IFRS Standards 2015 –
2017 cycle
The amendment clarifies that the current service costs and net interest for the period after
a plan amendment, curtailment or settlement, are determined using the assumptions used
for the remeasurement.
The amendment clarifies the application of IFRS 9 ‘Financial Instruments’ to long-term
interests in associates or joint ventures.
The interpretation clarifies the determination of taxable profits or losses, tax bases, unused
tax losses or credits and tax rate, when there is uncertainty over income tax treatments
under IAS 12 ‘Income Taxes’.
The amendment allows for more assets to be measured at amortised cost in particular
some prepayable financial assets. The amendment also clarifies how to account for a
modification of a financial liability.
Amendments to a number of IFRSs including IFRS 3 ‘Business Combinations’, IFRS 11 ‘Joint
Arrangements’ providing clarity on control of a business that is a joint operation, IAS 12
‘Income Taxes’ clarifying income tax consequences of dividends, IAS 23 ‘Borrowing costs’
clarifying borrowings outstanding after the related asset is ready for use or sale.
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. The Directors do not expect any other standards to
have a significant impact on the Group’s results.
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> Section 2: Results for the Year
Notes to the Financial Statements
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 there being limited ongoing involvement in the
use of the licence 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 a combination of automated and manual processes involved
in measuring the value delivered to the customer. Complex one-off contracts in all classes of revenue are assessed
individually and judgement is exercised in identifying performance obligations and allocating price to them. Timing of
revenue recognition is another area of judgement in such contracts.
Revenue recognition criteria for the Group’s key classes of revenue are as follows:
Segment
Major classes of revenue
Payment terms
Broadcast
Total advertising
revenue
Direct to
Consumer
• Net advertising revenue (NAR) is generated from selling spot airtime
on linear TV and is recognised at the point of transmission
• Online advertising revenue from 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 to third parties 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
• Revenue from subscription services is recognised over the
subscription period
• Received in the month
after transmission
• Received in the
month after campaign
is delivered
• Received prior
to transmission
• Payment term is over
the term of the contract
or subscription period
SDN
• Revenue is generated from the carriage fee or capacity of the
• Payment term is over
digital multiplex and is recognised over the term of the contract
the term of the contract
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Financial Statements
Notes to the Financial Statements
Section 2: Results for the Year continued
Segment
Major classes of revenue
Payment terms
ITV Studios
Programme
production
• Revenue generated from the programmes produced for broadcasters
and OTT platforms in the UK, US and internationally is recognised at
the point of delivery of an episode and acceptance by the customer.
Revenue from producer for hire contracts, where in an event of
cancellation cost is recovered plus a margin, is recognised over time
• Payment term
is over the term
of the contract
Format licences
• A licence is granted for the exploitation of a format in a stated
Programme
distribution rights
territory, media and period. These are recognised when the licence
is granted to the customer (point in 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
The results for the year aggregate these classes of revenue into the following categories:
Total advertising revenue
Direct to consumer
SDN
Other
Total Broadcast
ITV Studios UK
ITV Studios US
ITV Studios International
Global Formats and Distribution
Total ITV Studios*
Total revenue**
2019
£m
1,768
84
69
142
2,063
725
271
508
318
1,822
3,885
2019
% of total
46%
53%
47%
2018
£m
1,795
81
73
147
2,096
695
245
418
312
1,670
3,766
2018
% of total
48%
56%
44%
* Studios UK, ITV Studios US and Studios International revenues are mainly programme production. Global Formats and Distribution revenue is from
programme distribution rights and format licences.
** Includes internal supply.
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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 2019 and 31 December 2018 are therefore Broadcast 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
2019
£m
ITV Studios(i)
2019
£m
Consolidated
2019
£m
2,063
(4)
2,059
1,822
(573)
1,249
3,885
(577)
3,308
462
267
729
Broadcast
2018
£m
ITV Studios(i)
2018
£m
Consolidated
2018
£m
2,096
(4)
2,092
1,670
(551)
1,119
3,766
(555)
3,211
555
255
810
(i) Revenue of £394 million (2018: £354 million) was generated in the US during the year; the US represented £312 million (2018: £329 million) of non-current
assets at year end. Intersegment revenue originates mainly in the UK.
(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.
The Group’s principal operations are in the United Kingdom. Revenue from external customers in the United Kingdom
is £2,213 million (2018: £2,250 million), and revenue from external customers in other countries is £1,095 million
(2018: £961 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 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 (2018: one) acting on behalf of a number of advertisers that represent the Group’s
major customer. This agency is the only customer that individually represents over 10% of the Group’s revenue.
Revenue of approximately £551 million (2018: £554 million) was derived from this customer. This revenue is attributable
to the Broadcast segment.
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Financial Statements
Notes to the Financial Statements
Section 2: Results for the Year continued
Timing of revenue recognition
The following table includes classes of revenue from contracts disaggregated by the timing of recognition:
Total advertising revenue, DTC, SDN
Programme production, programme distribution rights
Format licences
Total external revenue
2019
£m
2018
£m
2019
£m
2018
£m
Products and services
transferred at a point in time
Products and services
transferred over time
1,771
944
92
2,807
1,798
789
122
2,709
288
200
13
501
294
199
9
502
Forward bookings
The following table includes revenue from contracts signed before the reporting date that is to be recognised in
periods after the reporting date (i.e. the performance obligations remain unsatisfied or partially unsatisfied at the
reporting date):
Broadcast
ITV Studios *
Revenue
* Includes internal supply.
2020
£m
165
141
306
2021
£m
131
138
269
2022
£m
77
48
125
Beyond
£m
24
39
63
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
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 licensing.
Other sources of revenue are from: Direct to Consumer revenue (which includes interactive sales from competitions,
ITV Hub+, BritBox UK, and Gaming, live events and merchandise); 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.
In November 2019, we launched our new SVOD service with the BBC, BritBox UK. The service provides UK audiences with
an unrivalled collection of British box sets all in one place. BritBox UK includes both ITV and BBC box sets, and has content
partnerships with Channel 4 (including Film4 content) and Channel 5, and distribution partnerships with BT and EE.
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 65% of ITV main channel spend on commissioned programming (2018: 67%). Programming is also sold
to other UK broadcasters and OTT platforms.
ITV Studios US 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, together called ITV Studios International, being Australia,
Germany, France, Italy, the Netherlands, Sweden, Norway, Finland and Denmark where content is produced for local
broadcasters and international OTT platforms. This content is either locally created IP or formats that have been
created elsewhere by ITV, primarily in the UK, the Netherlands and in Israel.
ITV’s distribution and commercial division has been reorganised, with effect from 1 January 2020, into three centres of
excellence – The Creative Network, Global Distribution and Global Entertainment. This will enable the Group to create
more hits, to better build brands and formats internationally and to monetise them more effectively. Global Formats
and Distribution license ITV’s finished programmes, formats and third-party content internationally. Within this
business, the Group also finances 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 30
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 profits of joint ventures and associated undertakings
Gain on sale of non-current assets (exceptional items)
Profit before tax
2019
£m
729
(36)
693
(84)
(74)
(68)
1
62
530
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 on sale of non-current assets (exceptional items)
Share of profits 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
(Increase)/decrease in programme rights and distribution rights
Increase in receivables and contract assets
Decrease in payables and contract liabilities
Movement in working capital
Cash generated from operations before exceptional items
2019
£m
530
(62)
(1)
68
84
56
74
10
(18)
(37)
(8)
(63)
696
2018
£m
810
(25)
785
(93)
(92)
(43)
–
10
567
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 £1,091 million (2018: £1,055 million), staff costs
of £491 million (2018: £473 million), depreciation, amortisation and impairment of £130 million (2018: £120 million) and
operating exceptional items of £84 million (2018: £93 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 4.8)
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.
2019
£m
400
53
10
28
491
(199)
292
2018
£m
384
52
10
27
473
(189)
284
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Financial Statements
Notes to the Financial Statements
Section 2: Results for the Year continued
Full-time equivalent employees (FTEE) includes those FTEEs that are allocated to the cost of productions during the
year, however excludes short-term contractors and freelancers who are allocated to productions. The weighted
average FTEE over the year is:
Broadcast
ITV Studios
2019
2,211
4,205
6,416
2018
2,143
4,138
6,281
The increase in full-time equivalent employees is primarily driven by the full year impact of strategic investment and
acquisitions completed in 2019. Details of Directors’ emoluments, share options, pension entitlements and long-term
incentive scheme interests are set out in the Remuneration Report. ITV plc Directors’ gains on share options for 2019
are set out in the ITV plc Company financial statements.
Depreciation
Depreciation in the year was £56 million (2018: £28 million), of which £21 million (2018: £12 million) relates to
Broadcast and £35 million (2018: £16 million) to ITV Studios. The increase in depreciation in the year is as a result
of implementation of IFRS 16 ‘Leases’ which now requires the depreciation of right of use assets over the term
of the lease. See note 3.2 for further details.
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
Other assurance services
Total non-audit services *
Total fees paid to KPMG
2019
£m
0.9
0.7
0.1
1.7
0.1
0.1
1.8
2018
£m
0.7
0.7
0.1
1.5
–
–
1.5
* See details of non-audit services in the Audit and Risk Committee Report on page 114.
There were no fees payable in 2019 or 2018 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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> Section 2: Results for the Year
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. 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 30 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
Pension related costs
Other
Total operating exceptional items
Tax on operating exceptional items
Total operating exceptional items net of tax
Non-operating exceptional items:
Gain on sale of non-current assets
Total non-operating exceptional items
Tax on non-operating exceptional items
Total exceptional items net of tax
Ref.
2019
£m
2018
£m
A
B
C
D
E
(75)
(24)
1
14
(84)
6
(78)
62
62
–
(16)
(60)
(26)
4
(11)
(93)
9
(84)
10
10
–
(74)
A – Acquisition-related expenses
Acquisition-related expenses of £75 million (2018: £60 million) relate primarily to performance-based, employment-
linked expected payments to former owners, and 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
Restructuring and property-related costs of £24 million (2018: £26 million) relate primarily to one-off restructuring
projects stemming from the Group-wide commitment to reduce the overhead cost base. In 2019, £6 million (2018:
£13 million) of the total relates to property costs, and move related costs for the Group’s headquarters at The London
Television Centre (which has now been sold). A further £18 million (2018: £13 million) of costs related to restructuring
our business as part of our strategy.
C – Pension related costs
In March 2019, the UTV Pension Scheme was closed to future benefit accruals. This resulted in a one-off, non-cash
£1 million curtailment credit.
In 2018, a past service cost of £6 million had been included in the measurement of the Pension scheme liabilities for
Guaranteed Minimum Pension equalisation. Also in 2018, the Pension Trustee entered into a bulk annuity insurance
contract in respect of the benefits of two sections of the ITV Pension Scheme (buy-in) resulting in a credit of £10 million.
D – Other
Included in other are releases of legal cost accruals in relation to litigation outside the normal course of business
settled in the year, release of the provision in relation to Box Clever (see note 3.6) and movement in the insured trade
receivables provision, offset by the costs in relation to the cancellation of The Jeremy Kyle show.
E – Gain on sale of non-current assets
The gain on sale of non-current assets in 2019 arose primarily as a result of the sale of the London Television Centre on
the South Bank. Further details are provided in note 3.2. The tax charge on the gain is £nil, as a result of the significant
tax base cost of the asset, and the availability of capital losses to offset the remaining chargeable gain.
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Financial Statements
Notes to the Financial Statements
Section 2: Results for the Year continued
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
• 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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> Section 2: Results for the Year
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
2019
£m
(84)
3
(81)
8
(73)
7
3
5
15
6
21
(52)
2018
£m
(123)
3
(120)
(14)
(134)
5
6
1
12
25
37
(97)
In order to understand how, in the income statement, a tax charge of £52 million (2018: £97 million) arises on a profit
before tax of £530 million (2018: £567 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% (2018: 19%) on
profit before tax
Non-taxable income/non-deductible expenses
Sale of the London Television Centre
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
2019
£m
530
(101)
(16)
12
14
(4)
3
(1)
–
5
36
(52)
2018
£m
567
(108)
(30)
–
11
(1)
3
–
2
1
25
(97)
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 an £8 million credit
relating to prior years, and the deferred tax credit includes a £6 million credit relating to prior years. These adjustments
have 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, the total impact is £nil (2018: £2 million credit due to
losses arising in higher taxed jurisdictions, which were recognised through deferred tax, give rise to a reconciling benefit).
The UK corporation tax rate has been enacted to fall to 17% from 1 April 2020. As this change in rate was enacted at
the previous balance sheet date, the carrying values of UK temporary differences have previously been adjusted
accordingly. To the extent that temporary differences have unwound in the current year, this has given rise to a charge
of £2 million of which £1 million is recognised as a credit in the income statement and £3 million as a charge in other
comprehensive income. In addition, the corporate income tax rate in the Netherlands has been enacted to fall to 21.7%
from 1 January 2021. We have adjusted the carrying value of deferred tax assets and liabilities of our Netherlands
businesses accordingly, giving rise to a credit in the income statement of £4 million. In total, the impact of the changes
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Financial Statements
Notes to the Financial Statements
Section 2: Results for the Year continued
in tax rates is a credit in the income statement of £5 million (2018: £1 million credit) and a charge in other
comprehensive income of £3 million (2018: £1 million charge).
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 9.8% (2018: 17.1%), and is the tax charge on the face of the income statement expressed
as a percentage of the profit before tax. The tax rate is lower than in 2018 primarily due to the tax treatment of the
disposal of the London Television Centre and an increase in HETV production tax credits. 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. The adjusted tax rate is 18%.
This year, the current year movement on origination and reversal of temporary differences (excluding exceptional
items) is a credit of £7 million, compared with a credit of £5 million in 2018.
Taxation – Other comprehensive income (OCI) and equity
As analysed in the table below, a deferred tax credit of £22 million on actuarial movements on pensions has been
recognised in other comprehensive income (2018: £8 million credit). A deferred tax charge of £nil has been recognised
in equity in respect of share-based payments (2018: credit of £6 million).
A current tax charge of £2 million on foreign exchange movements has been recognised in other comprehensive
income (2018: £nil). There is no current tax recognised in equity in relation to share-based payments (2018: £nil).
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
Tangible assets
Intangible assets
Programme rights
Pension scheme deficits
Tax losses
Share-based compensation
Other temporary differences
At
1 January
2019
£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
2019
£m
5
(66)
–
(6)
37
–
4
(26)
–
–
–
–
–
–
1
1
2
15
1
(8)
1
6
4
21
–
–
–
22
–
–
–
22
–
(1)
–
–
–
–
–
(1)
–
2
–
–
(1)
–
–
1
7
(50)
1
8
37
6
9
18
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 31 December 2019, total deferred tax assets are £74 million (2018: £46 million) and total deferred tax liabilities are
£56 million (2018: £72 million). After netting off balances within countries, there is a deferred tax liability of £29 million
and a deferred tax asset of £47 million (2018: deferred tax liability of £64 million and a deferred tax asset of £38 million)
recognised in the Consolidated Statement of Financial Position.
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> Section 2: Results for the Year
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
• 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 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 £458 million (2018: £460 million) in respect of capital losses of £2,696 million (2018: £2,707 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, total deferred tax assets of £16 million
(2018: £19 million) in respect of overseas losses have not been recognised (including £5 million in respect of losses that
expire between 2020 and 2027).
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 believes 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 £473 million (2018: £466 million) divided by 4,000 million
(2018: 3,999 million), being the weighted average number of shares in issue
during the year, which excludes EBT shares held in trust (see note 4.8).
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
2019
£m
473
4,000
11.8p
2018
£m
466
3,999
11.7p
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Financial Statements
Notes to the Financial Statements
Section 2: Results for the Year continued
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 earnings per ordinary share
Details of the adjustments to earnings are as follows:
Ref.
A
B
C
2019
£m
473
4,000
18
4,018
11.8p
2019
£m
473
16
489
44
22
555
4,000
13.9p
2019
£m
555
4,000
18
4,018
13.8p
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
A. Exceptional items (net of tax) £16 million (2018: £74 million)
• Exceptional items of £22 million (2018: £83 million), net of related tax credit of £6 million (2018: £9 million). See note
2.2 for the detailed composition of exceptional items
B. Amortisation and impairment of acquired intangible assets of £44 million (2018: £71 million)
• Amortisation and impairment of assets acquired through business combinations and investments of £74 million
(2018: £92 million), excluding amortisation of software licences and development of £11 million (2018: £7 million),
net of related tax credit of £19 million (2018: £14 million)
C. Adjustments to net financing costs £22 million (2018: £6 million)
• Adjustments to net financing costs includes the acceleration of amortisation of previously capitalised transaction
costs and one-off fees and premiums relating to the buyback of the bonds, mark-to-market movements on
derivative financial instruments, foreign exchange and imputed pension interest charges of £28 million (2018:
£7 million), net of related tax credit of £6 million (2018: £1 million)
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ITV plc Annual Report and Accounts 2019
> Section 3: Operating Assets and Liabilities
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
£3 million (2018: £2 million) relates to stock that will be transmitted in 2021 and beyond.
2019
£m
173
106
44
323
2018
£m
154
99
45
298
179
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Financial Statements
Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued
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 and on BritBox UK.
Commitments in respect of these transactions, which are not reflected in the statement of financial position, are due
for payment as follows:
2019
Within one year
Later than one year and not more than five years
2018
Within one year
Later than one year and not more than five years
More than five years
Transmission
£m
Programme
£m
35
126
161
376
609
985
Transmission
£m
Programme
£m
34
135
5
174
471
610
50
1,131
Total
£m
411
735
1,146
Total
£m
505
745
55
1,305
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, £49 million was charged to the income statement (2018: £56 million).
2019
£m
22
2018
£m
29
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ITV plc Annual Report and Accounts 2019
> Section 3: Operating Assets and Liabilities
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. The expected loss model was applied to trade and other
receivables, contract assets 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
2019
£m
309
55
49
413
34
29
63
476
2018
£m
261
48
46
355
36
35
71
426
£343 million (2018: £297 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
2019
£m
280
35
25
3
343
2018
£m
265
24
6
2
297
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
Unused amounts reversed
At 31 December
2019
£m
39
1
(2)
38
2018
£m
35
9
(5)
39
Of the provision total, £36 million relates to balances overdue by more than 90 days (2018: £21 million) and less than
£2 million relates to current balances (2018: £1 million).
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Financial Statements
Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued
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
2019
£m
66
77
238
151
–
385
917
2019
£m
61
5
14
32
51
112
2018
£m
62
56
226
13
42
369
768
2018
£m
49
9
94
27
130
179
Trade payables due after more than one year, relate primarily to film creditors of £33 million and royalties of £28 million.
Acquisition-related liabilities or performance-based employment-linked earnouts are the estimated amounts payable
to previous owners. The estimated future payments, treated as exceptional employment costs (see note 2.2), are
accrued over the period the sellers are required to remain with the business. Those amounts not linked to employment
are recognised at acquisition at their time discounted value, with the unwind of the discount recorded as part of
operating finance costs.
Acquisition related liabilities accrued as at 31 December 2019 were £197 million. The total estimated future payments
of £230 million are sensitive to forecast profits as they are based on a multiple of earnings. The range of reasonably
possible outcomes for the liability is between £145 million and £414 million. To arrive at ITV’s current best estimate of
the accrued liability at 31 December 2019, total future payments and the possible range of outcomes for the liability,
the Directors have taken into account the views of external advisors. The liabilities are expected to be settled between
2020 and 2025.
The most material payable is to the previous owner of the shares in Talpa Media B.V (now known as ITV Studios
Holding B.V.), purchased in 2015 for the initial cash consideration of €500 million (£362 million) with further payments
dependent on Talpa’s future performance, up to a maximum consideration, including the initial payment, of €1.1 billion
across three earnouts. The first earnout was paid in 2017 (€100 million), the second earnout (in respect of the 2017,
2018 and 2019 years) is payable following determination of the earnout calculation for that period and the final
payment will not fall due given that John de Mol did not exercise his option to extend the earnout to 2022. The other
significant earnouts included within our expected future payments include Tomorrow Studios and Cattleya.
All earnouts are sensitive to forecast profits as they are based on a multiple of earnings and judgement is required
where there may be adjustments to forecasted profits or when earnouts are negotiated, hence the reason for the
range noted above. In the case of Talpa’s earnout, the outcome of the ongoing review in relation to funds received for
the insured trade receivable could have a material impact. The treatment of this receipt could increase the earnout
by £150 million, within the range noted above (see note 5.2).
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ITV plc Annual Report and Accounts 2019
> Section 3: Operating Assets and Liabilities
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. As ITV is an integrated producer broadcaster, many of the programmes the Studios division
produces are sold internationally and also used within the ITV network. Production work in progress is treated as a
contract asset until the point the programme is completed.
Contract liabilities (deferred income) primarily relate to the consideration received from customers in advance of
transferring a good or service. The following table provides movements in 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
2019
Contract
liabilities
£m
Contract
assets
£m
2018
Contract
liabilities
£m
470
(462)
437
–
–
–
445
(255)
–
–
255
(217)
(2)
(219)
352
(115)
233
–
–
–
470
(219)
–
–
216
(252)
–
(255)
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 £63 million (2018: £93 million) derived as follows:
(Increase)/decrease in programme rights and distribution rights
Increase in receivables and contract assets
Decrease in payables and contract liabilities
Working capital outflow
2019
£m
(18)
(37)
(8)
(63)
2018
£m
14
(103)
(4)
(93)
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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Financial Statements
Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued
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.
Right of use assets
A contract contains a lease if the contract conveys the right to control the use of an identified asset for a period of
time in exchange for consideration. These assets are called right of use assets and have been included on the Group’s
balance sheet at a value equal to the discounted future lease payments. For leases recognised on transition to IFRS 16
‘Leases’ the value is also adjusted by any prepayments or lease incentives recognised immediately before the date of
initial application.
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*
Right of use assets
Depreciation policy
not depreciated
up to 60 years
shorter of residual lease term or estimated useful life
3 to 20 years
over the term of the lease
* Equipment includes studio production and technology assets.
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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Property, plant and equipment
Property, plant and equipment can be analysed as follows:
Freehold land
and buildings
Improvements to leasehold
land and buildings
Cost
At 1 January 2018
Additions
Reclassifications
Foreign exchange
Classified as held for sale
Disposals and retirements
At 31 December 2018
IFRS 16 transition
Additions
Foreign exchange
Disposals and retirements
At 31 December 2019
Depreciation
At 1 January 2018
Charge for the year
Reclassifications
Foreign exchange
Classified as held for sale
Disposals and retirements
At 31 December 2018
Charge for the year
Foreign exchange
Disposals and retirements
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
£m
99
2
(1)
–
(87)
(4)
9
–
3
–
–
12
15
1
(1)
–
(15)
–
–
1
–
–
1
11
9
Vehicles,
equipment
and fittings
Owned
£m
Right
of use
assets*
Total
£m
£m
Long
£m
Short
£m
70
8
6
1
(13)
(3)
69
–
1
–
–
70
16
4
3
–
–
(2)
21
2
–
–
23
47
48
20
8
(2)
–
–
–
26
–
1
–
–
27
16
–
–
–
–
–
16
–
–
–
16
11
10
283
35
(3)
1
–
(79)
237
–
25
(4)
(18)
240
169
25
(2)
–
–
(79)
113
28
3
(17)
127
113
124
–
–
–
–
–
–
–
112
–
–
–
112
–
–
–
–
–
–
–
25
–
–
25
87
–
472
53
–
2
(100)
(86)
341
112
30
(4)
(18)
461
216
30
–
–
(15)
(81)
150
56
3
(17)
192
269
191
* Under the modified retrospective approach in IFRS 16 ‘Leases’, the 2018 numbers are not restated.
Included within property, plant and equipment are assets in the course of construction of £14 million (2018: £14 million).
Included in net book value of right of use assets is £85 million related to properties and £2 million relating to vehicles,
equipment and fittings.
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.
In 2019, London Television Centre was sold for £146 million, which generated a profit of £62 million.
Capital commitments
There is £1 million of capital commitments at 31 December 2019 (2018: £4 million).
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Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued
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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> Section 3: Operating Assets and Liabilities
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
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
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.
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Financial Statements
Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued
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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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 2018
Additions
Foreign exchange
Disposals, retirements
and impairment
At 31 December 2018
Additions
Acquisitions
Foreign exchange
Disposals, retirements
and impairment
At 31 December 2019
Amortisation and
impairment
At 1 January 2018
Charge for the year
Foreign exchange
Disposals, retirements
and impairment
At 31 December 2018
Charge for the year
Foreign exchange
Disposals, retirements
and impairment
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
3,889
–
15
–
3,904
–
9
(16)
–
3,897
2,654
–
–
–
2,654
–
–
–
2,654
1,243
1,250
544
–
7
–
551
–
–
(21)
–
530
303
43
3
–
349
44
(11)
–
382
148
202
436
–
2
–
438
–
6
(3)
–
441
399
16
3
–
418
7
(3)
–
422
19
20
11
–
–
–
11
–
–
–
–
11
11
–
–
–
11
–
–
–
11
–
–
176
–
–
–
176
–
–
–
–
176
106
6
–
–
112
6
–
–
118
58
64
101
–
2
–
103
1
–
(1)
–
103
82
4
3
–
89
4
(2)
–
91
12
14
Goodwill impairment tests
The carrying amount of goodwill for each CGU is represented as follows:
Broadcast
SDN
ITV Studios
Total
£m
5,292
27
28
–
5,347
58
15
(41)
135
27
2
–
164
57
–
–
(14)
207
(14)
5,365
92
7
1
–
100
11
(2)
(14)
95
112
64
2019
£m
386
76
781
1,243
3,647
76
10
–
3,733
72
(18)
(14)
3,773
1,592
1,614
2018
£m
386
76
788
1,250
There has been no impairment charge for any CGU during the year (2018: £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% (2018: 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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Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued
The discount rate has been updated 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
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 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 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 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 8.7% (2018: 8.5%) 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 licence is up for renewal in 2022.
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: -5% growth, 2021: -10% growth, no renewal of the licence to operate in 2022). 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 13.6% (2018: 10.2%) 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 8.8% (2018: 9.5%) has been used in discounting the projected cash flows.
Following the organisational redesign and acquisitions made by ITV Studios in 2019, 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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> Section 3: Operating Assets and Liabilities
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 – 2019
In 2019, the Group made payments totalling £11 million for two acquisitions within the ITV Studios operating segment.
The businesses fit with the strategy of strengthening the Group’s existing position as a producer and global distributor
of world-class content.
Armoza International Media Limited
On 31 July 2019, the Group purchased 100% of the share capital of Armoza International Media Ltd, one of Israel’s
leading television developers and distributors. Armoza’s catalogue numbers over 100 formats, including the prime time
singing show The Four, commissioned in over 15 territories and game show Still Standing, Israel’s most successful
international non-scripted format with over 6,000 episodes globally.
Monumental Television Limited
On 18 July 2019, the Group increased its stake in Monumental Television from 26% to a 51% majority in the UK
production company. Monumental Television are producers of Harlots for Hulu, available via Starzplay in the UK,
and Ghosts on BBC One.
Acquisition accounting:
Put and call options over the non-controlling interest and performance-related top up payments have been granted,
with payments expected in the next five years. The total maximum consideration for the acquisitions is capped at
£62 million (undiscounted). All future payments are dependent on future performance of the business and linked
to ongoing employment.
Acquisitions in the prior year – 2018
The Group did not make any acquisitions in 2018.
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Financial Statements
Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued
Consideration transferred:
Initial consideration (net of cash acquired) (Note A)
Total consideration
Fair value of net assets acquired:
Intangible assets
Deferred tax liabilities
Inventory
Trade and other receivables
Trade and other payables
Borrowings
Net assets held for sale
Fair value of net assets
Non-controlling interest measured at fair value (Note B)
Goodwill
Other information
Present value of the expected liability on put options
Present value of the expected earnout payment at acquisition
Contributions to the Group’s performance:
From date of acquisition
Revenue
EBITA before exceptionals
Proforma – January to December
Revenue
EBITA before exceptionals
2019
Total*
£m
2018
Total
£m
11
11
6
(1)
9
6
(14)
(3)
–
3
1
9
–
7
9
1
19
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
* Provisional values as the acquisition accounting is finalised in the 12 month period following acquisition.
Note A: Consideration for all acquisitions is net of cash acquired and estimated debt and working capital settlements. Cash acquired during the period is
£4 million (2018: Nil).
Note B: Non-controlling interest arises where the Group acquires less than 100% of the equity interest in a business, but obtains control.
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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
Please refer to page 231 for the list of principal investments held at 31 December 2019.
2019
£m
1
43
8
52
2018
£m
1
41
9
51
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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 31 December 2018
Released
At 31 December 2019
Contract
provisions
£m
Property
provisions
£m
2
–
2
2
–
2
Legal and
Other
provisions
£m
16
(13)
3
Total
£m
20
(13)
7
Provisions of £2 million are classified as current liabilities (2018: £16 million). Unwind of the discount is £nil in 2019
and 2018.
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 total £3 million (31 December 2018: £16 million).
In 2018, this included a £13m provision for potential liabilities that may arise due to an ongoing legal dispute with
the Pensions Regulator in respect of the Box Clever Pension Scheme. Historically this has been held as a provision
on the basis that there were a number of potential resolutions available including a potential negotiated settlement.
Following the Supreme Court’s decision to refuse to hear the Group's appeal, the Pensions Regulator will issue Financial
Support Directions (FSDs) in the near future. In the first instance the Group will seek to establish whether the amount
and form of any financial support can be agreed with the Pensions Regulator, but given the significant number of
undecided issues both as to the quantum and form of financial support that it would be reasonable to provide, the
Group is no longer able to reliably estimate the cost of resolving this matter. Accordingly, it is no longer appropriate
to carry this provision, and the Directors believe this is now a contingent liability (see note 5.2 for further details).
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3.7
Pensions
Keeping
it simple
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 closed
to future accrual at the end of March 2019.
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 investment 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 2019, total contributions expensed were £23 million (2018: £21 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 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.
Unless otherwise stated, references to Defined Benefit Schemes (‘the Schemes’) within this note refer to the ITV
Pension Scheme, the unfunded scheme and the UTV Scheme combined. Details on each scheme are provided below.
The liabilities of the Schemes 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 Pension
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 the benefits for former members who accrued benefits in excess of the maximum
allowed for tax purposes is accounted for under IAS 19 and the Group is responsible for meeting the pension obligations
as they fall due. For the four former Granada executives within the unfunded scheme, there is additional security
compared with the ITV main scheme, in the form of a charge over gilts held by the Group. Therefore, the £58 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.
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 £87 million at 31 December 2019 (2018: £38 million) is stated after including the unfunded
scheme security asset of £58 million (2018: £49 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
2019
£m
(4,037)
3,892
(145)
17
(162)
(145)
58
(87)
2018
£m
(3,719)
3,632
(87)
19
(106)
(87)
49
(38)
* The defined benefit pension surplus relates solely to the UTV Scheme. The defined benefit scheme assets in the UTV Scheme were £133 million as at
31 December 2019 (2018: £126 million) and the defined benefit scheme obligations were £116 million (2018: £107 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
Past service cost
– GMP equalisation
– Changes in relation to pension increases
– Pension increase exchange option
– Curtailment credit for the UTV scheme closure to future accrual
Interest cost
Actuarial loss/ (gain)
Benefits paid
Defined benefit obligation at 31 December
2019
£m
3,719
–
–
–
(1)
103
410
(194)
4,037
2018
£m
3,987
6
(15)
5
–
97
(166)
(195)
3,719
Of the above total defined benefit obligation at 31 December 2019, £60 million relates to the unfunded schemes
(2018: £56 million).
In March 2019, the UTV scheme closed to future accrual which resulted in a past service credit or curtailment credit
of £1 million.
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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 and
• The discount rate used to estimate the present day fair value of these obligations
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 16 years (2018: 15 years).
The principal assumptions used in the Scheme’s valuations at the year end were:
Discount rate
Inflation assumption (RPI)
Rate of increase in pension payment (LPI1 5% pension increases)
Rate of increase to deferred pensions (CPI)
1. Limited Price Index.
2019
2.05%
3.00%
2.90%
2.20%
2018
2.85%
3.20%
3.05%
2.20%
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
2019
60
27.3
29.4
60
28.9
31.0
2019
65
22.6
24.6
65
24.1
26.1
2018
60
27.2
29.3
60
28.8
30.9
2018
65
22.5
24.5
65
24.0
26.0
The net pension deficit is sensitive to changes in assumptions. These are disclosed further in this section.
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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 2019, 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
2019
£m
3,632
102
276
82
(194)
(6)
3,892
2018
£m
3,866
95
(218)
90
(195)
(6)
3,632
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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 2019, 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
2019
£m
Market value
2018
£m
689
886
127
1,702
1,425
76
161
134
49
420
140
544
(339)
345
3,892
475
1,067
230
1,772
834
169
171
106
172
618
183
530
(305)
408
3,632
49%
23%
17%
11%
100%
43%
37%
11%
9%
Included in the above are overseas assets of £404 million (2018: £725 million), comprised of quoted equities of
£72 million (2018: £68 million), other assets of £338 million (2018: £657 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. The assets in respect of the buy-in are included in the
insurance policies listed above.
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 2019.
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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 expectancies
Change in assumption
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
Impact on defined benefit obligation
Decrease by £60 million
Increase by £60 million
Increase by £30 million
Decrease by £20 million
Increase by £10 million
Decrease by £10 million
Increase by £135 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 expectancies 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 increase in the defined pension deficit of £20 million.
The insured assets in respect of the buy-in will move in line with the change to the defined benefit obligation, partially
offsetting the change to the impacts in the table above.
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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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:
2019
£m
2018
£m
Amount charged to operating costs:
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:
(6)
(6)
1
(1)
(6)
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
2019
£m
276
(7)
(403)
–
(410)
(134)
(6)
(6)
4
(2)
(4)
2018
£m
(218)
(6)
172
–
166
(52)
The £410 million actuarial loss on the Scheme’s liabilities was principally due to changes in bond yields, offset by a
reduction in the market implied inflation. The £276 million gain on the Scheme’s assets follows a strong performance
in the equity markets.
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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 expected future cash flows of the Scheme.
Contributions in 2020 for administration expenses are expected to be in the region of £6 million (2019: £6 million)
and deficit funding contributions for the main ITV scheme in 2020 are expected to be £60 million (2019: £60 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 2020, a payment
of £14 million is expected as a result of those agreements.
In November 2019 the London Television Centre was sold. £50 million of the proceeds has been held in a restricted
bank account as a replacement asset in the pension funding arrangement.
For the SDN structure, as the value of the security provided by SDN diminishes within the arrangement, the Group is
contracted to provide additional collateral to support the original value of the structure at the rate of £50.7 million
each year from March 2019 to March 2022. This cash collateral would not leave the Group, but would be maintained
in a restricted bank account. The Trustee agreed to accept a bank guarantee as an alternative to the 2019 collateral
instalment with the result that £101 million becomes due in March 2020, however we are looking to agree with the
Trustee a similar approach in respect of that payment. The pension funding agreement is currently being reviewed
as the Group looks to replace it with an alternative asset. If the asset in the SDN structure is not replaced, the Group
will pay to the pension scheme the lower of any deficit calculated on the funding basis in 2022 or £200 million.
These structures are being reviewed in 2020.
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
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 in relation to this 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. The Directors also take into account the available
realised distributable reserves from which a dividend would be paid in addition to
liquidity and solvency of the Group. The Directors also review the above in the context
of the Group’s 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 ITV
plc Board oversees governance and approves tax and treasury related policies and
procedures with 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 discounted lease liabilities. 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 reported 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
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
** IFRS 16 lease liabilities are detailed in section 4.6.
1 January
2019
£m
85
10
95
(54)
(993)
(1,047)
25
(927)
Net cash flow
£m
7
143
150
47
(84)
(37)
(25)
88
Acquisitions*
£m
Currency and
non-cash
movements
£m
31 December
2019
£m
4
–
4
(3)
–
(3)
–
1
(3)
–
(3)
–
61
61
(24)
34
93
153
246
(10)
(1,016)
(1,026)
(24)
(804)
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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
Loans and facilities due after one year
Total debt
Currency component of swaps held against
euro denominated bonds
Net debt
1 January
2018
£m
Net cash flow
£m
Currency and
non-cash
movements
£m
31 December
2018
£m
121
5
126
(76)
(982)
(1,058)
20
(912)
(37)
5
(32)
22
1
23
–
(9)
1
–
1
–
(12)
(12)
5
(6)
85
10
95
(54)
(993)
(1,047)
25
(927)
Cash and cash equivalents
Included within cash equivalents is £50 million (2018: £nil), the use of which is restricted to meeting the commitments
under the asset-backed pension agreements, and £25 million (2018: £nil) restricted money market funds. See note 3.7
for further details on the asset-backed pension arrangements.
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 2019, the Group had drawings of £nil under the RCF
(2018: £50 million), leaving £630 million available to draw down at year end. The maximum draw down of the RCF
during the year was £400 million (2018: £400 million).
Loans and loan notes due after one year
During the year the Group issued a new seven year €600 million Eurobond and used the proceeds to buyback of
€506 million of old bonds.
The Group has in issue the following Eurobonds:
• €335 million at a fixed coupon of 2.125%, which matures in September 2022
• €259 million at a fixed coupon of 2.0%, which will mature in December 2023
• €600 million at a fixed coupon of 1.375%, which matures in September 2026
The bond issued in September 2019 has been swapped back to sterling using a number of cross-currency interest rate
swaps. The resulting fixed rate payable in sterling is c. 2.9%.
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Notes to the Financial Statements
Section 4: Capital Structure and Financing Costs continued
4.2
Borrowings
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 (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 set out 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. 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 2019,
this was fully utilised with £nil remaining available under the agreement (2018: £nil).
The receivables in relation to the invoices sold were derecognised and the Group collects cash on behalf of the
counterparty as payments fall due.
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> Section 4: Capital Structure and Financing Costs
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.
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 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 June 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
Maturity
Various
Various
Loans due in more than one year
€335 (previously €600) million Eurobond
€259 (previously €500) million Eurobond
€600 million Eurobond
Other long-term loans
Sept 2022
Dec 2023
Sept 2026
Various
2019
£m
–
10
10
283
219
508
6
1,016
Book value
2018
£m
50
4
54
536
449
–
8
993
2019
£m
–
10
10
297
231
511
6
1,045
Fair value
2018
£m
50
4
54
555
456
–
8
1,019
1,026
1,047
1,055
1,073
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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
2019
Revenue
£m
Adjusted
EBITA
£m
Profit
after tax
£m
±50-60
±35-45
±7-9
±4-6
±1
±2
Equity
£m
±38
±17
Revenue
£m
±40-50
±45-55
2018
Adjusted
EBITA
£m
Profit
after tax
£m
±7-9
±5-7
–
±2
Equity
£m
±25
±16
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 2019, the Group’s fixed rate debt represented 99% of total gross debt (2018: 99%). Consequently,
a 1% movement in interest rates on floating rate debt would impact the 2019 post-tax profit for the year by less than
£1 million (2018: £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 2019
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 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
Assets
£m
Liabilities
£m
3
3
–
–
–
6
(3)
(2)
(39)
(4)
–
(48)
Assets
£m
Liabilities
£m
1
1
26
–
–
28
(2)
(2)
–
(1)
–
(5)
Cash flow hedges
The Group applies hedge accounting for certain foreign currency firm commitments and highly probable 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 (2018: £1 million) of ineffectiveness
taken to the income statement and £21 million of cumulative loss (2018: £6 million gain) was recycled to the income
statement in the year.
In 2019, on completion of the buyback of €506 million of the Eurobonds, the Group also closed out the portfolio of
cross-currency interest rate swaps taken out in 2016. On issuing the 2026 Eurobond, the Group subsequently entered
into a new 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 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 £209 million
(2018: £176 million). A foreign exchange gain of £12 million (2018: loss of £2 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 2019
Non-derivative financial liabilities
Borrowings
Lease liabilities
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 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
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
(1,026)
(89)
(828)
(219)
(5)
(197)
(1,095)
(103)
(828)
(219)
(5)
(230)*
3
(7)
–
(39)
199
(203)
557
(642)
(18)
(26)
(767)
(219)
–
(162)
128
(129)
7
(16)
3
(2)
(2,406)
339
(338)
(2,568)
335
(334)
(1,201)
(17)
(27)
(36)
–
(4)
(2)
45
(46)
7
(16)
4
(4)
(96)
(539)
(30)
(25)
–
(1)
(59)
(521)
(20)
–
–
–
(7)
26
(28)
21
(47)
–
–
522
(563)
–
–
(682)
–
–
(589)
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)
* Undiscounted expected future payments depending on performance of acquisitions; the total maximum consideration is discussed in the Finance Review.
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Financial Statements
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, 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
Foreign exchange gain
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
2019
£m
4
8
12
(31)
(1)
–
–
(48)
(80)
(68)
2018
£m
3
–
3
(30)
(2)
–
(2)
(12)
(46)
(43)
Interest on financial liabilities relates to the interest incurred on the Group’s borrowings in the year.
During the year, the Group completed the buyback of €506 million of the Eurobonds and closed out the portfolio of
cross-currency interest rate swaps taken out in 2016. This transaction resulted in the acceleration of amortisation of
previously capitalised transaction costs on the bonds as well as one-off fees and premiums paid to the bond holders.
These costs have been included in other finance expense together with 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
2019
£m
Level 1
31 December
2019
£m
Level 2
31 December
2019
£m
Level 3
31 December
2019
£m
58
8
3
3
58
–
–
–
–
–
3
3
–
8
–
–
Fair value
31 December
2019
£m
Level 1
31 December
2019
£m
Level 2
31 December
2019
£m
Level 3
31 December
2019
£m
(2)
(32)
(46)
–
–
–
(2)
–
(46)
–
(32)
–
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Financial Statements
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
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
1
27
49
–
–
–
–
–
1
27
–
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)
–
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
Lease
liabilities
Keeping
it simple
From 1 January 2019, the Group accounts for operating leases under IFRS 16 ‘Leases’.
Lease liabilities representing the discounted future lease payments and right of use
assets are recognised in the Statement of Financial Position. Lease costs such as
property rent are now recognised in the form of depreciation and interest rather than
as an operating cost.
Accounting policies
Lease liabilities represent the discounted future lease payments. Discount rates are calculated for similar assets,
in similar economic environments, taking into account the length of the lease. The unwinding of the discounting is
recognised in net financing costs in the Income Statement. The following table outlines the maturity analysis of the
lease liabilities:
Contractual discounted cash flows
Less than one year
Two to five years
More than five years
Lease liabilities at 31 December
Lease liabilities
Total lease liabilities
1 January
2019
£m
(121)
(121)
Net cash flow
£m
35
35
The following amounts have been included in the Income Statement:
Interest expense on lease liabilities
Operating costs relating to short-term leases and low value assets
Amounts recognised in the Income Statement
2019
£m
25
50
14
89
Currency and
non-cash
movements
£m
31 December
2019
£m
(3)
(3)
(89)
(89)
2019
£m
(4)
–
(4)
The Group has elected not to recognise right of use assets and lease liabilities for short-term leases (i.e. lease term
less than 12 months) or low-value assets (i.e. under £5,000). The Group will continue to expense the lease payments
associated with these leases on a straight-line basis over the lease term. At 31 December 2019, this was less than
£1 million.
Variable lease payments that depend on an index or a rate are also less than £1 million.
The total undiscounted future minimum lease payments under non-cancellable operating leases as at 31 December 2018
was as follows:
2018
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
Total
£m
30
86
31
147
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Financial Statements
Notes to the Financial Statements
Section 4: Capital Structure and Financing Costs continued
4.7
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. Dividends are distributed based on the realised distributable reserves (within retained earnings) of ITV plc
(the Company) and not based on the Group’s retained earnings.
4.7.1 Share capital and share premium
The Group’s share capital at 31 December 2019 of £403 million (2018: £403 million) and share premium of £174 million
(2018: £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.
4.7.2 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
4.7.3 Translation reserve
The translation reserve comprises:
2019
£m
98
112
36
2
(24)
224
2018
£m
98
112
36
2
(42)
206
• 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)
• The net loss on cash flow hedges was £17 million (2018: net gain of £7 million) included cost of hedging £8 million
(2018: £4 million)
4.7.4 Fair value reserve
The fair value reserve comprises all movements arising on the revaluation of gilts accounted for fair value through
OCI financial instruments. The movement in the current year is a £9 million gain (2018: £1 million gain). See note 3.7.
4.7.5 Retained earnings
The retained earnings reserve comprises profit for the year attributable to owners of the Company of £473 million
(2018: £466 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 4.8.
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 229.
The Directors of ITV plc propose a final dividend of 5.4 pence per share, which equates to a full year dividend of
8.0 pence per share. In 2019, £320 million of dividend payments were made (2018: £315 million).
4.7.6 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 £5 million (2018: £4 million)
• The distributions made to NCI of £2 million (2018: £8 million)
• The share of net assets attributable to NCI relating to subsidiaries acquired or disposed of in the year of £nil (2018: £nil)
216
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ITV plc Annual Report and Accounts 2019
> Section 4: Capital Structure and Financing Costs
4.8
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.
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. This estimate of the performance measures is used to determine the option fair
value, discounted to present value. The Group revises the number of options that are expected to vest, including an
estimate of forfeitures at each reporting date based on forecast performance measures. 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 2019 (2018: £10 million).
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 – nil priced
Exercised during the year – other
Expired during the year
Outstanding at 31 December
Exercisable at 31 December
2019
Weighted
average
exercise price
(pence)
49.33
–
94.83
128.35
–
129.82
87.09
36.88
55.78
Number
of options
(‘000)
44,022
19,754
22,525
(1,241)
(2,805)
(24)
(22,158)
60,073
3,090
Number
of options
(‘000)
36,155
14,450
8,561
(8,452)
(3,884)
(626)
(2,182)
44,022
1,736
2018
Weighted
average
exercise price
(pence)
69.17
–
126.23
156.99
–
132.62
–
49.33
54.32
The average share price during 2019 was 126.10 pence (2018: 158.29 pence).
217
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Strategic ReportGovernanceFinancial StatementsAdditional InformationStrategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Financial Statements
Section 4: Capital Structure and Financing Costs continued
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)
–
–
–
87.47
105.98
–
131.18
162.25
206.83
Number
of options
(‘000)
38,685
–
–
13,335
2,685
–
3,481
1,851
36
2019
Weighted
average
remaining
contractual life
(years)
Weighted
average
exercise price
(pence)
2.25
–
–
3.73
3.21
–
2.11
0.84
1.33
–
–
–
–
–
–
129.51
165.20
206.83
2018
Weighted
average
remaining
contractual life
(years)
1.62
–
–
–
–
–
3.15
1.65
0.58
Number
of options
(‘000)
28,619
–
–
–
–
–
10,966
3,993
444
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 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
%
Fair value
(pence)
3 Year
5 Year
3 Year
5 Year
3 Year
5 Year
3 Year
5 Year
29 March 2018
29 March 2018
6 Sept 2018
6 Sept 2018
04 April 2019
04 April 2019
05 September 2019
05 September 2019
144.15
144.15
158.75
158.75
132.48
132.48
109.33
109.33
123.82
123.82
135.20
135.20
105.98
105.98
87.47
87.47
29.54
27.87
29.65
27.89
30.68
28.57
26.73
28.79
3.25
5.25
3.25
5.25
3.25
5.25
3.25
5.25
5.55
5.55
5.55
5.55
6.04
6.04
6.04
6.04
1.16
1.50
1.13
1.50
0.82
1.09
0.36
0.45
25.81
24.70
28.98
27.28
26.14
23.58
18.61
18.66
218
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ITV plc Annual Report and Accounts 2019
> Section 5: Other Notes
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 2019 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 2019
31 December 2019
Number of shares
(released)/purchased
26,931,533
(613,716)
(680,838)
(193,130)
(18,316)
–
25,425,533
Nominal value
£
2,693,153
2,542,553
The total number of shares held by the EBT at 31 December 2019 represents 0.63% (2018: 0.67%) of ITV’s issued share
capital. The market value of own shares held at 31 December 2019 is £38 million (2018: £34 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. The Trust is accounted for as a separate
entity and therefore is only accounted for in the consolidated financial statements and not included in the ITV plc
Company financial statements.
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
2019
£m
19
8
28
64
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
2019
£m
14
7
1
5
2018
£m
12
13
29
67
2018
£m
6
7
3
5
219
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Strategic ReportGovernanceFinancial StatementsAdditional InformationStrategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Financial Statements
Section 5: Other Notes continued
Amounts owed by joint ventures primarily relate to trading with BritBox LLC. Balances owed by associated undertakings
largely relate to loan notes with Route 24 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
2019
£m
11
4
15
2018
£m
12
3
15
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 to a breach of the agreement by the customer,
Talent, for not fulfilling their payment obligations. During 2018 and 2019 £27 million has been received in relation to
the amounts due. However, those receipts are currently the subject of an ongoing review. As a result the provision for
bad debt, originally recognised as an exceptional cost in 2017, has been reinstated.
Whilst the Directors remain confident of recovering the amounts due, accounting standards set very specific
requirements for the recognition of an asset. As the review of the receipts remains in progress, as well as discussions
with the credit insurers, the Group is not able to demonstrate sufficient certainty to be able to recognise a receivable
at 31 December 2019.
Contingent liabilities
In 2011, the Determinations Panel of the Pensions Regulator determined that Financial Support Directions (FSDs)
should be issued against certain Group companies, which would require those companies to put in place financial
support for the Box Clever Pension Scheme. The Group challenged the Regulator’s decision in the Upper Tribunal.
However, in May 2018, the Upper Tribunal handed down judgment allowing the Pensions Regulator to issue FSDs.
Subsequently, ITV appealed the Upper Tribunal's decision to the Court of Appeal. The Court of Appeal dismissed the
appeal in June 2019. ITV applied for permission to appeal the Court of Appeal's decision to the Supreme Court, but this
was refused on 13 February 2020. The Group expects FSDs to be issued in the near future.
An FSD does not set out what form any financial support should take, nor its amount, and no issues as to the quantum
and form of any liability have yet been addressed or resolved as part of the legal process. The case may continue to
take significant time to resolve.
The Box Clever Pension Scheme (‘the Scheme’) was managed from its establishment by an independent trustee and
the Group has not had any commercial connection with the Box Clever business since it went into administrative
receivership in 2003. At that time, the Scheme is estimated to have had a deficit on a buyout basis of £25m. The most
recent estimate of the deficit in the Box Clever Pension Scheme available to the Group, as at 31 August 2017, calculated
for the purposes of the litigation, was £115m. This estimate was calculated on a buyout basis, used membership data
dating from 2014 (the most recent that were available), and an estimate of the Scheme's assets rather than a precise
value. Both these valuations were of the whole Scheme, encompassing liabilities in respect of former employees of
Granada's joint venture partner, Thorn, as well as former employees of the Group. Given the significant number of
undecided issues as to the quantum and form of financial support, the Group will strongly contest any attempt to
impose liability in an amount the Directors consider unreasonable. The Directors continue to believe there are many
important factors which need to be taken into account in any decision and therefore there remains a great deal of
uncertainty around the quantum and form of financial support to be provided.
Aside from above, 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.
220
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ITV plc Annual Report and Accounts 2019
> Section 5: Other Notes
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 the Companies Act 2006 s479A.
Company number Company name
Company number Company name
04145307
10058419
10404493
10496857
10528766
12092620
11109596
11081338
10528952
11109753
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
11723842
11423730
11667230
11107990
10058008
10494684
11723800
10671435
04159210
04207680
04206925
11107681
04033106
00603471
03799828
12 Yard Productions Limited
Back Productions Limited
Big Talk Bliss Limited
Big Talk Cold Feet Limited
Big Talk Diana Limited
Big Talk Friday Limited
Big Talk Goes Wrong Limited
Big Talk Guilty Limited
Big Talk Living the Dream Limited
Big Talk Mum Limited
Big Talk Offenders 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 Limited
Carlton Screen Advertising (Holdings) Limited
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 AL 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
ITV Pension Scheme Limited
ITV Play Limited
01565625
08554937
11723826
11723851
11723881
12368504
12368748
12368661
12368766
08516153
11107934
10602705
08586211
09498177
11107431
11108813
05518785
00920028
11108285
10528827
11109917
11908267
11995990
11062257
11908285
09660486
10031005
10528763
11108289
09646520
11108327
11204836
10528702
11108322
11108320
10973979
04201477
10789616
06469484
06469482
12368643
12368475
12368477
11109744
10796122
11109437
11109287
12116457
12116461
11109929
12116627
ITV Properties (Developments) Limited
ITV Shetland Limited
ITV Spy Limited
ITV Studios NEWCO 16 Limited
ITV Studios NEWCO 17 Limited
ITV Studios NEWCO 18 Limited
ITV Studios NEWCO 19 Limited
ITV Studios NEWCO 20 Limited
ITV Studios NEWCO 21 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 (End5) Limited
Mammoth Screen (End6) Limited
Mammoth Screen (END7) Limited
Mammoth Screen (Invisible) Limited
Mammoth Screen (NC) Limited
Mammoth Screen (PH) 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 (WOF) Limited
Mammoth Screen (WOTW) Limited
Morning TV Limited
The Garden Productions (Film) Limited
VOD Member (ITVA) Limited
VOD Member (ITVB) Limited
WP (NEWCO 5) Limited
WP (NEWCO 6) Limited
WP (NEWCO 7) Limited
WP Anne Limited
WP Bodyguard Limited
WP Faslane Limited
WP LOD5 Limited
WP LOD6 Limited
WP Pembrokeshire Limited
WP Save Me 2 Limited
WP Secret Limited
221
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Strategic ReportGovernanceFinancial StatementsAdditional InformationStrategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
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 due within one year
Amounts owed by subsidiary undertakings due after more than one
year
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
Note
2019
£m
4,236
305
4,541
9
5
108
4,663
–
–
(4,070)
(16)
–
(9)
(4,095)
(1,010)
(42)
iii
vi
iv
iv
iv
vi
v
iv
vi
v
vi
vii
viii
viii
viii
2018
£m
3,844
323
4,167
4
5
4
4,180
(5)
(50)
(3,209)
(13)
(1)
(4)
(3,282)
(985)
–
2019
£m
2,733
4
1
2,738
568
3,306
(1,052)
2,254
403
174
22
1,655
2,254
2018
£m
2,286
26
1
2,313
898
3,211
(985)
2,226
403
174
37
1,612
2,226
The accounts were approved by the Board of Directors on 5 March 2020 and were signed on its behalf by:
Chris Kennedy
Director
222
222
ITV plc Annual Report and Accounts 2019
> ITV plc Company Financial Statements
Company Statement of Changes in Equity
Balance at 1 January 2019
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 2019
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
Note
vii/viii
Note
vii/viii
vii/viii
Share
capital
£m
403
–
–
–
–
–
–
–
403
Share
capital
£m
403
–
–
–
–
–
–
–
403
Share
premium
£m
174
Other
reserves
£m
37
–
–
–
–
–
–
–
174
Share
premium
£m
174
–
–
–
–
–
–
–
174
–
(15)
(15)
–
–
–
–
22
Other
reserves
£m
26
–
11
11
–
–
–
–
37
Retained
earnings
£m
1,612
353
–
353
(320)
10
–
(310)
1,655
Retained
earnings
£m
1,571
344
–
344
(315)
10
2
(303)
1,612
Total
£m
2,226
353
(15)
338
(320)
10
–
(310)
2,254
Total
£m
2,174
344
11
355
(315)
10
2
(303)
2,226
223
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Strategic ReportGovernanceFinancial StatementsAdditional InformationStrategic ReportGovernanceFinancial StatementsAdditional Information
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 (2015/16 cycle) issued in July 2016, amendments to FRS 101 (2016/17 cycle) issued in July 2017 and other
amendments 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.
The Company proposes to continue to apply the reduced disclosure framework of FRS 101 in its next financial statements.
Change in accounting policy
New standards, interpretations and amendments effective
The following have been applied for the first time from 1 January 2019.
IFRS 16 Leases
The Company has adopted IFRS 16 ‘Leases’ from 1 January 2019 which has changed lease accounting for lessees under
operating leases. Such agreements now 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) are recognised in the form of
depreciation and interest, rather than as an operating cost.
The Company has adopted the modified retrospective approach with the right of use asset equal to the lease liability
at transition date, adjusted by any prepayments or lease incentives recognised immediately before the date of initial
application. Under the modified retrospective transition approach, the comparative information is not restated.
The Company does not have any leases and therefore the standard has not resulted in any changes to the
financial statements.
None of the other standards, interpretations and amendments effective for the first time from 1 January 2019
have had a material effect on the financial statements.
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.
224
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ITV plc Annual Report and Accounts 2019
> Notes to the ITV plc Company Financial Statements
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.
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.
225
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Strategic ReportGovernanceFinancial StatementsAdditional InformationStrategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the ITV plc Company Financial Statements continued
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. The Trust is accounted for as a
separate entity and therefore is only accounted for in the consolidated financial statements.
Dividends
Dividends are recognised through equity on the earlier of their approval by the Company’s shareholders or their
payment. Dividends are distributed based on the realised distributable reserves (within retained earnings) of ITV plc
(Company) and not based on the Group’s retained earnings.
Note ii
Employees
and share-
based
payments
Two (2018: two) Directors of ITV plc (i.e. the Executive Directors) were employees of the Company during the year, both of
whom remain 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 129.82 pence (2018: 132.62 pence)
(excluding nil priced share options). The options outstanding at the year end have an exercise price in the range of nil
to 206.83 pence (2018: nil to 206.83 pence) and a weighted average contractual life of one year (2018: one year) for all
the schemes in place for the Group.
Note iii
Investments
in subsidiary
undertakings
Note iv
Amounts
owed
(to)/from
subsidiary
undertakings
The principal subsidiary undertakings are listed on page 231. The carrying value at 31 December 2019 was £2,733 million
(2018: £2,286 million). This is assessed for impairment on an annual basis and no impairment was recognised in 2019
(2018: £nil).
In 2019, the Company increased its investment in subsidiaries by £786 million mainly due to three subscriptions of
one ordinary share in Carlton Communications Limited. During the year the Company restructured its investment
in North America Studios Investment DAC with a reduction of £339 million.
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. The expected loss
model was applied to amounts owed from subsidiary undertakings and the impact was not material.
Note v
Net debt
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.
Cash and cash equivalents
Included within cash equivalents is £50 million (2018: £nil), the use of which is restricted to meeting the commitments
under the asset-backed pension agreements, and £22 million (2018: £nil) restricted money market funds. See note 3.7
for further details on the asset-backed pension arrangements.
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 2019, the Group had drawings of £nil million under the RCF
(2018: £50 million), leaving £630 million available to draw down at year end. The maximum draw down of the RCF
during the year was £400 million (2018: £400 million).
226
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ITV plc Annual Report and Accounts 2019
> Notes to the ITV plc Company Financial Statements
Loans and loan notes due after one year
During the year the Group issued a new seven year €600 million Eurobond and used the proceeds to buyback of
€506 million of old bonds.
The Group has issued the following Eurobonds:
• €335 million at a fixed coupon of 2.125%, which matures in September 2022
• €259 million at a fixed coupon of 2.0%, which will mature in December 2023
• €600 million at a fixed coupon of 1.375%, which matures in September 2026
The bond issued in September 2019 has been swapped back to sterling using a number of cross-currency interest rate
swaps. The resulting fixed rate payable in sterling is c. 2.9%.
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
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
2019
£m
Liabilities
2019
£m
6
3
–
–
4
13
(6)
(3)
(38)
–
(4)
(51)
Assets
2018
£m
Liabilities
2018
£m
3
1
26
–
–
30
(3)
(1)
–
–
–
(4)
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.
227
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Strategic ReportGovernanceFinancial StatementsAdditional InformationStrategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the ITV plc Company Financial Statements continued
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 (2018: £1 million) ineffectiveness taken
to the income statement and £19 million cumulative loss (2018: £5 million gain) recycled to the income statement in
the year.
In 2019, on completion of the buyback of €506 million of the Eurobonds, the Group also closed out the portfolio of
cross-currency interest rate swaps taken out in 2016. On issuing the 2026 Eurobond, the Group subsequently entered
into a new 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.
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 2019
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
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
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
10
(10)
–
(38)
3
(3)
(38)
375
(375)
229
(229)
557
(642)
7
(16)
451
(451)
(85)
338
(338)
(9)
91
(91)
7
(16)
113
(113)
(9)
55
(55)
21
(47)
–
–
(26)
–
–
522
(563)
–
–
(41)
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
–
–
–
–
–
–
–
228
228
ITV plc Annual Report and Accounts 2019
> Notes to the ITV plc Company Financial Statements
Note vii
Share capital
Allotted, issued and fully paid ordinary shares of 10 pence each
Total
4,025,409,194
Allotted, issued
and fully paid
2019 & 2018
£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 70 to 78 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 and dividend policy, 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, to deliver the Company’s long
term strategic plan
• Consideration of the factors underlying the Directors’ viability assessment and
• The future availability of funds required to meet longer-term obligations
including pension commitments.
Equity
The retained earnings reserve includes profit after tax for the year of £353 million (2018: £344 million), which includes
dividends of £400 million from subsidiaries in 2019 (2018: £400 million). Other reserves of £22 million (2018: £37 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 8.0 pence per share.
Distributable reserves
The distributable reserves of ITV plc approximate to the balance of the retained earnings reserve of £1,655 million
(2018: £1,612 million) as at 31 December 2019.
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 2019 of £40 million
(31 December 2018: £39 million). The Company has guaranteed certain finance and operating lease obligations of
subsidiary undertakings.
229
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Strategic ReportGovernanceFinancial StatementsAdditional InformationStrategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the ITV plc Company Financial Statements continued
Note x
Capital and
other
commitments
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 Company’s results or financial position.
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.
In 2019, the Company entered into a stand-by letter of credit for £50 million in respect of one of the ITV Group
asset-backed pension agreements.
There are no capital commitments at 31 December 2019 (2018: 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
2019
£m
3
2
5
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
2019
£m
4
1
1
6
2018
£m
5
1
6
2018
£m
4
–
1
5
230
230
ITV plc Annual Report and Accounts 2019
List of subsidiaries
Subsidiary undertakings and investments
Principal subsidiary undertakings
The principal subsidiary undertakings of the Company at 5 March 2020, all of which are wholly owned (directly or indirectly)
and incorporated and registered where stated.
Company Name
Carlton Communications Limited (1)(a)(d)
ITV Broadcasting Limited (1)(a)
ITV Consumer Limited (1)(a)
ITV Digital Channels Limited (1)(a)
ITV Studios Global Distribution 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)
ITV Studios Holding B.V. (52)(a)
ITV America Inc. (63)(j)
ITV Studios Global Distribution, Inc. (63)(j)
Southbank Studios Inc. (63)(j)
Country
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Netherlands
USA
USA
USA
Principal Business Activity
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
Production of television programmes
Production of television programmes
Rights ownership and distribution of television programmes and films
Production of television programmes
Wholly-owned 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)
Big Talk Bliss Limited (1)(a)
Big Talk Cold Feet Limited (1)(a)
Big Talk Diana Limited (1)(a)
Big Talk Friday Limited (1)(a)
Big Talk GuiltyLimited (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)
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)
Country
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
% Holding
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Country
Company Name
UK
Carltonco Fifty Limited (1)(a)(k)
UK
Carltonco Forty Investments (1)(a)
UK
Carltonco Forty-Five Limited (1)(a)
UK
Carltonco Ninety-Six (1)(a)(f)
UK
Carltonco Seventeen Limited (1)(a)
UK
Castlefield Properties Limited (1)(a)
UK
Cat’s on the Roof Media Limited (1)(a)
UK
Central Television Limited (1)(a)
UK
Channel Television Holdings Limited (1)(a)
UK
Cosgrove Hall Films Limited (1)(a)
UK
COTR (NEWCO) Limited (1)(a)
UK
Cynhyrchiadau Boomerang Cyf (2)(a)
UK
Denipurna Limited (1)(a)
UK
DTV Limited (1)(a)
UK
Electronic Rentals Group (1)(a)
UK
EQ Pictures Limited (1)(a)
UK
GIL Limited (1)(a)
UK
Gorilla TV Group Limited (5)(a)
UK
Gorilla TV Limited (5)(a)
UK
Granada AV Solutions Limited (1)(a)
UK
Granada Film (1)(a)
UK
Granada Film Productions Limited (1)(a)
UK
Granada Group Limited (1)(a)
UK
Granada Limited (1)(a)
UK
Granada Media Limited (1)(a)(l)
UK
Granada Productions Limited (1)(a)
UK
Granada Properties (1)(a)
UK
Granada Screen (2005) Limited (1)(a)
UK
Granada Television International (1)(a)
UK
Granada Television Limited (1)(a)
UK
Granada Television Overseas Limited (1)(a)
UK
Granada Television Productions Limited (1)(a)
UK
Granada UK Rental and Retail Limited (1)(a)(e)
UK
Indus Films Limited (2)(a)
Interactive Telephony Limited (1)(a)
UK
International Television Enterprises London Limited (1)(a)(d) UK
UK
ITC Distribution (1)(a)
UK
ITC Entertainment Group Limited (1)(a)
UK
ITC Entertainment Holdings Limited (1)(a)
% Holding
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
% Holding
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
231
Strategic ReportGovernanceFinancial StatementsAdditional InformationStrategic ReportGovernanceFinancial StatementsAdditional Information Notes to the Financial Statements continued
Company Name
ITV 112 Limited (9)(a)
ITV (HC) Limited* (1)(a)
ITV (Scotland) Limited (30)(a)
ITV AL 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 F&B 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 Limited (1)(a)
ITV Investments Limited* (1)(a)
ITV Leila 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 Spy Limited (1)(a)
ITV Studios NEWCO 16 Limited (1)(a)
ITV Studios NEWCO 17 Limited (1)(a)
ITV Studios NEWCO 18 Limited (1)(a)
ITV Studios NEWCO 19 Limited (1)(a)
ITV Studios NEWCO 20 Limited (1)(a)
ITV Studios NEWCO 21 Limited (1)(a)
ITV Supplementary Pension Scheme 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 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)
Country
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
% Holding
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Country
Company Name
UK
Mammoth Screen (AR) Limited (1)(a)
UK
Mammoth Screen (ATTWN) Limited (1)(a)
UK
Mammoth Screen (Bouquet) Limited (1)(a)
UK
Mammoth Screen (BW) Limited (26)(a)
UK
Mammoth Screen (City) Limited (1)(a)
UK
Mammoth Screen (End) Ltd (1)(a)
UK
Mammoth Screen (End2) Limited (1)(a)
UK
Mammoth Screen (End5) Limited (1)(a)
UK
Mammoth Screen (End6) Limited (1)(a)
UK
Mammoth Screen (End7) Limited (1)(a)
UK
Mammoth Screen (Falcon) Limited (1)(a)
UK
Mammoth Screen (Fearless) Limited (1)(a)
UK
Mammoth Screen (Invisible) Limited (1)(a)
UK
Mammoth Screen Ltd (1)(a)
UK
Mammoth Screen (Monroe) Limited (1)(a)
UK
Mammoth Screen (NC) Limited (1)(a)
UK
Mammoth Screen (NE) Limited (1)(a)
UK
Mammoth Screen (NI) Limited (35)(a)
UK
Mammoth Screen (NOK) Limited (1)(a)
UK
Mammoth Screen (NW) Limited (1)(a)
UK
Mammoth Screen (OBI) Limited (1)(a)
UK
Mammoth Screen (PE) Limited (1)(a)
UK
Mammoth Screen (PH) Limited (1)(a)
UK
Mammoth Screen (Pol2) Limited (1)(a)
UK
Mammoth Screen (Pol3) Limited (1)(a)
UK
Mammoth Screen (Pol4) Limited (1)(a)
UK
Mammoth Screen (Pol5) Limited (1)(a)
UK
Mammoth Screen (Poldark) Limited (1)(a)
UK
Mammoth Screen (QV) Limited (1)(a)
UK
Mammoth Screen (RM) Limited (1)(a)
UK
Mammoth Screen (Serpent) Limited (1)(a)
UK
Mammoth Screen (SG) Limited (1)(a)
UK
Mammoth Screen (VF) Ltd (1)(a)
UK
Mammoth Screen (Vic3) Limited (1)(a)
UK
Mammoth Screen (WFTP) Limited (1)(a)
UK
Mammoth Screen (WH) Limited (1)(a)
UK
Mammoth Screen (WOF) Limited (1)(a)
UK
Mammoth Screen (WOTW) Limited (1)(a)
UK
Millbank Studios (1)(a)
UK
Morning TV Limited (1)(a)
UK
Moving Picture Company Films Limited (1)(a)
UK
New Providence Productions Limited (1)(a)
UK
Pickwick Packaging Limited (1)(a)
UK
Sightseers Film Limited (1)(a)
UK
So Television Limited (1)(a)
UK
Television Music Limited (1)(a)
UK
The CITV Channel Limited (1)(a)
UK
The Garden Productions (Film) Limited (1)(a)
UK
The Garden Productions Limited (1)(a)
UK
The London Studios Limited (1)(a)
UK
UTV Limited (34)(a)
UK
UTV Pension Scheme Limited (100)(a)
UK
VOD Member (ITVA) Limited (1)(a)
UK
VOD Member (ITVB) Limited (1)(a)
UK
World of Sport Wrestling Limited (1)(a)
UK
Westcountry Television Limited (1)(a)
UK
Yorkshire Television Limited (1)(a)
Yorkshire-Tyne Tees Productions Limited (1)(a)
UK
Yorkshire-Tyne Tees Television Enterprises Limited (1)(a) UK
UK
Zebedee Productions Limited (1)(a)
Australia
Artist Services Cable Pty Ltd (36)(a)
Australia
Artist Services Investments Pty Limited (36)(a)
Australia
Artist Services Productions Pty Ltd (36)(a)
% Holding
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
232
ITV plc Annual Report and Accounts 2019
Financial Statements List of subsidiaries
% Holding
Country
100
Australia
100
Australia
100
Australia
100
Australia
100
Australia
100
Australia
100
Australia
Cape Verde
100
Cayman Islands 100
Cayman Islands 100
100
Denmark
100
Denmark
100
Finland
100
Fiji
100
France
100
France
100
France
100
Germany
100
Germany
100
Germany
100
Germany
100
Germany
100
Germany
100
Guernsey
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Company Name
Granada Media International (Australia) Pty Ltd (36)(a)
Granada Media Investments (Australia) Pty Ltd (36)(a)
Granada Productions Pty Ltd (36)(a)
ITV Services Pty Ltd (36)(a)
ITV Studios Australia Pty Limited (36)(a)
ITV Studios Global Distribution Pty Limited (36)(a)
Totally Full Frontal Productions Pty Limited (36)(a)
Talpa Cabo Verde SA (113)(a)
Granada December Nine Limited (38)(a)
ITV Holdings (Cayman) Limited (38)(a)
ITV Studios Denmark Holdings Aps (104)(a)
United Productions ApS (42)(a)
ITV Studios Finland Oy (43)(a)
Granada (Fiji) Pte Ltd. (116)(a)
ITV Studios France Holdings SAS (95)(a)
ITV Studios France SAS (95)(a)
ITV Studios TV France (94)(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 Infotainment GmbH (47)(a)
Talpa Germany Verwaltungs GmbH (47)(a)
Elecrent Insurance Limited (31)(a)
ITV Studios Global Distribution (Hong Kong) Limited (49)(a)Hong Kong
Hong Kong
Talpa China Limited (48)(a)
Ireland
North America Studios Investments DAC (110)(a)
Israel
Armoza International Media Ltd (115)(a)
Jersey
Channel Television Limited (32)(a)
Jersey
ITV London Properties Limited (33)(a)
Jersey
ITV Properties (Jersey) Limited (33)(a)
Netherlands
April, May en June BV (57)(a)
Netherlands
Global Music & Talent Agency B.V. (90)(a)
Netherlands
ITV (Europe) Holdings B.V.* (55)(a)
Netherlands
ITV Studios Global Entertainment B.V. (52)(a)
Netherlands
ITV Studios Netherlands B.V. (52)(a)
Netherlands
ITV Studios Netherlands Content B.V. (52)(a)
Netherlands
ITV Studios Netherlands Drama B.V. (53)(a)
Netherlands
MasMedia B.V. (56)(a)
Netherlands
Stitchting ‘Derdengelden’ TV Producties (52)(a)
Netherlands
Talpa Germany Holding B.V. (90)(a)
Netherlands
Talpa Non-Spot B.V. (52)(a)
Netherlands
Utopia B.V. (57)(a)
Netherlands
Vorst Media B.V. (99)(a)
Norway
ITV Studios Norway AS (73)(a)
Sweden
ITV Studios Nordic AB (74)(a)
Sweden
ITV Studios Scandinavia Holdings AB (74)(a)
Switzerland
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)(h)
Cranktown Productions Inc. (63)(j)
Critical Productions Inc (63)(j)
Electric Farm Entertainment Holdings Inc. (63)(j)
Feeding Time Productions, LLC (86)(h
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)
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Company Name
Gurney Productions, LLC (68)(h)
GWC Enterprises Inc. (63)(j)
Hamdon Entertainment, Inc. (63)(j)
High Noon Group, LLC (69)(h)
High Noon Productions, LLC (69)(h)
ITC Distribution, LLC (63)(h)
ITC Entertainment Group, Inc (63)(j)
ITC Films, LLC (63)(h)
ITC Productions, LLC (63)(h)
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 Gurney Holding Inc. (63)(j)
ITV HN Holding Inc. (63)(j)
ITV International Corporation (63)(j)
ITV Leftfield Holding Inc. (63)(j)
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 Studios The Voice USA, 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)(h)
Leftfield Pictures of NY, LLC (63)(h)
Leftfield Ventures, LLC (63)(h)
Loud Television, LLC (63)(h)
LWT Enterprises Inc. (63)(j)
Marriage Boot Camp Reality Stars, LLC (63)(h)
Moving Pictures Services Inc. (63)(j)
Outpost Entertainment LLC, (63)(h)
Over the Pond Productions, Inc. (63)(j)
Post 460 Inc (63)(j)
Quay Street Enterprises, Inc. (63)(j)
Sirens Media, LLC (63)(h)
Solowe Productions Inc (63)(j)
Sound and Stage Studios, LLC (63)(h)
Southsquare Productions 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)
Country
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
% Holding
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
233
Strategic ReportGovernanceFinancial StatementsAdditional InformationStrategic ReportGovernanceFinancial StatementsAdditional Information Notes to the Financial Statements continued
Company Name
GC Films Pty Limited (36)(a)
LTP Productions Inc. (109)(h)
Apple Tree Productions ApS (101)(a)
15.15 Productions (59)(a)
Balina Films SA (50)(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)
Tetra Media Studios SAS (105)(a)
Imago TV Film und Fernsehproduktion GmbH (45)(a)
The Lab Television 2013 Limited Partnership (78)(a)
Cattleya Srl (103)(a)
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)
ITV Studios Arabia Holding Ltd (81)(a)
ITV Studios Middle East FZ-LLC (81)(a)
ITV Studios Lebanon S.A.R.L (81)(a)
Blumhouse TV Holdings LLC (63)(h)
Circle of Confusion Television Studios LLC (63)(h)
South Circle Productions LLC (63)(h)
BB Rights, LLC (63)(h)
Britbox, LLC (89)(h)
Jaffe/Braunstein Entertainment, LLC (67)(h)
Twofour America, LLC (68)(h)
Next Steps Productions, LLC (63)(h)
Tomorrow Studios LLC (63)(h)
Country
Australia
Canada
Denmark
France
France
France
France
France
France
France
France
France
France
France
France
France
France
Germany
Israel
Italy
Italy
Italy
Italy
Netherlands
Netherlands
Sweden
Sweden
UAE
UAE
UAE
Lebanon
USA
USA
USA
USA
USA
USA
USA
USA
USA
Memberships, Partnerships and Companies Limited
by Guarantee
Company Name
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)
Futureflip Entertainment India LLP (117)(h)
Country
UK
UK
UK
UK
UK
UK
India
% Holding
49
75
25
32.52
32.52
32.52
32.52
32.52
32.52
33.17
33.17
33.17
42.28
50.7
61.79
65.04
65.04
90
50
51
51
50
25.5
20
25
25
95
90
90
90
90
45
49
49
50
50
51
75
75
75
% Holding
100
100
50
50
25
25
100
Other subsidiaires, joint ventures, associates
and other significant holdings
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)
Clearcast Limited (14)(a)
Genial Productions Limited (111)( a)
Koska Limited (105)(a)
South Shore Productions Limited (114) (a)
Cirkus International Limited (13)(a)
Thinkbox TV Limited (23)(a)
Independent Television News Limited (20)(a)
Malacara Limited (2)(a)
Cloth Cat Limited (5)(a)
Cloth Cat LBB Limited (5)(a)
Thud Media Limited (5) (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)
Standard Music Limited (29)(a)
Zomboat Limited (28)(a)
Second Act Productions Limited (1)(a)
Second Act (Grace) Limited (1)(a)
Gameface Productions Limited (1)(a)
Crook Productions Limited (1)(a)
Possessed Limited (1)(a)
Monumental Television Limited (1)(a)
MT Ghosts 2 Limited (1)(a)
Cloth Cat Animation Limited (5)(a)
Cirkus Limited (13)(a)
Age Before Beauty Limited (4)(a)
Gold Digger Productions Limited (4)(a)
Mainstreet Pictures Limited (4)(a)
Unforgotten 3 Limited (4)(a)
Unforgotten 4 Limited (4)(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)
BritBox SVOD Limited (1)(a)
WP Anne Limited (1)(a)
WP Bodyguard Limited (1)(a)
WP LOD5 Limited (1)(a)
WP Faslane Limited (1)(a)
WP LOD6 Limited (1)(a)
WP (NEWCO 4) Limited (1)(a)
WP (NEWCO 5) Limited (1)(a)
WP (NEWCO 6) Limited (1)(a
WP (NEWCO 7) Limited (1)(a
WP Pembrokeshire Limited (1)(a)
WP Secret Limited (1)(a)
World Productions Limited (1)(a)
World Productions (Northern Ireland) Limited (1)(a)
Country
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
234
ITV plc Annual Report and Accounts 2019
% Holding
20
20
20
24.9
25
25
25
25
28
28.58
40
49
55
55
55
50
50
50
50
50
50
50
50
50
50.001
50.001
50.01
50.01
51
51
51
55
55.67
67.5
67.5
67.5
67.5
67.5
75
75
75
75
75
75
80
85
85
90
92
92
92
92
92
92
92
92
92
92
92
92
92
Financial Statements List of subsidiaries
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)
(13) The Met Building, 22 Percy Street, London, W1T 2BU, United Kingdom
(14) 4 Roger Street, 2nd Floor, London, WC1X 2JX, 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
(20) 200 Gray’s Inn Road, London, WC1X 8HF, United Kingdom
(21)
Clay Barn, Ipsley Court, Berrington Close, Redditch, Worcestershire, B98 0TD,
United Kingdom
(31)
(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)
(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
(35)
Office 306, Forsyth House, Cromac Square, Belfast, Northern Ireland, BT2 8LA,
United Kingdom
Level 5, Building 61, Fox Studios Australia, 38 Driver Avenue, Moore Park
NSW 2021, Australia
c/o Estera Trust (Caymen) Limited, Clifton House, 75 Fort Street, PO Box 1350,
Grand Cayman, KY1-1108
(36)
(38)
(42) Finsensvej 6E, 2000, Frederiksberg, Denmark
(43) Elimaenkatu 9 A, Helsinki, 00510, Finland
(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
(95) 38 quai du Point du Jour, 92100 Boulogne-Billancourt, France
(96) Gethiner Strasse 5, 10785, Berlin, Germany
(98) Keizersgracht 149a, 1015CL, Amsterdam, Netherlands
(99) Hollandse Kade 34, 1391JM, Abcoude, Netherlands
(100) City Quays 2, 8th Floor, 2 Clavendon Road, Belfast, BT1 3YD, United Kingdom
(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
(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
(113)
(114) 14 Red Lion Square, London, WC1R 4QH, United Kingdom
(115) 16 Haarbaa St, Tel Aviv 6473916, Israel
(116) Level 3, Pacific House, Butt Street. Suva, Fiji
(117) #1302, Tower-3, Indiabulls Finance Centre, Senapati Bapat Road, Elphinstone
Avenida Cidade de Lisboa, Frente Sucupira, 2° andar, Cidade de Praia, Cape Verde
Road (West), Mumbai, Mumbai City, Maharashtra 40013, India
Interest key
(a) Ordinary
(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
(50) 5–7 rue Saint-Augustin, 75002, Paris, France
(52) Familie de Mollaan 1, 1217 ZB, Hilversum, Netherlands
(53) Haarlemmer Houttuinen, 21 1013 GL, Amsterdam, Netherlands
(55) Hoogoorddreef 15, 1101 BA, Amsterdam, Netherlands
(56) Noorderweg 8, 1221 AA, Hilversum, Netherlands
(57) Zevenend 45, 1251 RL, Laren, North Holland, Netherlands
(59) 10 rue Maître Jacques, 92100 Boulogne, Billancourt, France
(63)
The Corporation Trust Company, Corporate Trust Center, 1209 Orange Street,
Wilmington, Newcastle, DE 19801, USA
United Corporate Services, Inc., 874 Walker Road (Suite C), Dover,
Kent DE 19904, USA
(66)
(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
(69) The Hodson Law Firm, 1129, East 17th Avenue, Denver, CO 80014, USA
(73) Lars Hilles Gate 30, 5008, Bergan, Norway
(74) Soder Malarstrand 65, 11825, Stockholm, Sweden
(75) Scharenmoosstrasse 105, 8052, Zurich, Switzerland
(78) 23 Habarzel Street, Tel Aviv, 69710, Israel
(79) Via Enrico, Tazzoli 6, Rome, Italy
(81) Building 2, Dubai Media City, Dubai, UAE
(86)
CT Corporation System, 3867 Plaza Tower Drive East Baton Rouge Parish,
Baton Rouge, LA 70816, USA
(89) 1120 Avenue of Americas, 5th Floor, New York, NY10036, USA
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Strategic ReportGovernanceFinancial StatementsAdditional InformationStrategic ReportGovernanceFinancial StatementsAdditional Information Glossary
Advertiser funded platform – platforms
that include advertising as part of the user
experience e.g. itv.com, iOS, and Android
Advertising video on demand (AVOD) –
advertiser 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 personal video recorder (PVR) or digital
video recorder (DVR), 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
Free-to-Air (FTA) television – viewing of
television through devices not requiring
a subscription such as the Freeview or
Freesat services
Intellectual Property (IP) – 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
Light viewer – the lightest 20% of viewers
to ITV across a rolling 12 month period
Share of Broadcast (SOB) – ITV’s share
of UK television advertising revenue (NAR),
a measure of market share
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 online viewing (consumption)
– total number of hours ITV VOD content is
viewed on owned and operated ad funded
platforms, and Hub+ viewing on owned
and operated platforms, based on data
from Crocus
Monthly Active User – a registered user
account that has accessed the ITV Hub on an
owned and operated app (mobile or
connected TV), or web platform in any given
month. The number is deduplicated across
platforms (user is only counted once if they
watch on multiple platforms)
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
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 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
Total Advertising Revenue (TAR) – the
amount of money received by a broadcaster
as payment for NAR, VOD and Sponsorship
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 service
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ITV plc Annual Report and Accounts 2019
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