I T V P L C A N N U A L R E P O R T A N D A C C O U N T S
F O R T H E Y E A R E N D E D 3 1 D E C E M B E R 2 0 2 0
Strategic Report
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.
Chief Executive’s
Report
8
Operating and
Performance Review
28
28
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.
Finance
Review
56
Strategic Report
Strategic Report
Governance
Governance
Financial Statements
Financial Statements
Additional Information
Additional Information
Key financial highlights
Group external revenue1
Non-advertising revenue2
£2,781m
-16% (2019: £3,308m)
£1,683m
-21% (2019: £2,117m)
Adjusted EBITA3
£573m
-21% (2019: £729m)
Adjusted EPS
10.9p
-22% (2019: 13.9p)
Reported net debt4
£545m
(2019 net debt: £893m)
Notes
Statutory EBITA
£561m
-19% (2019: £693m)
Statutory EPS
7.1p
-40% (2019: 11.8p)
Leverage4
0.9x
(2019: 1.2x)
Alternative Performance Measures (APMs)
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 54 and 55. Our KPIs are set out on pages 24 to 27.
1. The Strategic Report also refers to total revenue, which includes all ITV
revenue, both internal and external.
2. Non-advertising revenue includes all ITV revenue (both internal and
external), and excludes total advertising revenue.
3. EBITA before exceptional items has been adjusted to reflect the inclusion
of production tax credits (‘adjusted EBITA’).
4. Reported net debt includes IFRS 16 lease liabilities. Leverage is reported
net debt to adjusted EBITDA.
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.
Contents
Strategic Report
2
4
6
8
15
16
20
22
24
28
42
50
54
56
2020 Highlights
ITV at a Glance
Chairman’s Statement
Chief Executive’s Report
Investor Proposition
Market Review
Our Strategy
Our Business Model
Key Performance Indicators (KPIs)
Operating and Performance Review
Social Purpose
Our People
Alternative Performance Measures
Finance Review
Task Force on Climate-related
62
Financial Disclosures (TCFD)
Our Commitment to Section 172(1)
67
Non-Financial Information Statement 69
72
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
88
90
92
94
111
114
126
152
157
158
167
232
246
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.
ITV plc Annual Report and Accounts 2020
1
Strategic Report
2020 Highlights
2020 Highlights
56%of ITV Studios total revenue was
of ITV Studios total revenue was
generated outside the UK
26%of ITV Studios total revenue
is scripted
+1%increase in ITV total viewing
94%of all commercial audiences over
of all commercial audiences over
5 million were on ITV
>2.6mglobal subscriptions across all ITV’s
subscription video on demand
(SVOD) services
Net
Zero
Carbon emissions business
by 2030
2
ITV plc Annual Report and Accounts 2020
Gordon, Gino and Fred: Road Trip was ITV’s
biggest factual show in 2020, with an average of
6.6 million viewers across the series.
Beat The Chasers was the biggest new
entertainment series launch since 2007. It
averaged 6.4 million viewers across the series.
Strategic Report
Governance
Financial Statements
Additional Information
I’m A Celebrity...Get Me Out Of
Here! is a global format for ITV
Studios, and is in over ten countries.
In the UK, it was the most watched
television series in 2020, including
for 16-34s. It had an average of 11.5
million viewers across all devices.
M O R E T H A N T V
M O R E T H A N T V
Coronation Street celebrated its 60th
Coronation Street celebrated its 60th
anniversary in 2020, making it the world’s longest
anniversary in 2020, making it the world’s longest
running soap. It remains the UK’s most watched
running soap. It remains the UK’s most watched
soap with an average of 6.9 million viewers per
soap with an average of 6.9 million viewers per
episode in 2020.
episode in 2020.
was the most watched new drama on any
Des was the most watched new drama on any
channel in 2020, and was ITV’s biggest new drama
channel in 2020, and was ITV’s biggest new drama
series since 2013. It averaged 10.1 million viewers
series since 2013. It averaged 10.1 million viewers
across all devices (including repeats).
across all devices (including repeats).
ITV plc Annual Report and Accounts 2020
3
Strategic Report
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 total revenue
ITV Studios
ITV Studios
£1,370m
(2019: £1,822m)
46,000+ hrs
of content in our catalogue
50+ labels
in 12 different countries
supplying over 200 channels
or platforms
14 Formats
sold in 3 or more countries
(2019: 14)
We have built significant
scale globally in key
creative markets and are
now one of the largest
independent producers
in the world. We create,
produce, and distribute a
broad range of
programmes, including
drama, entertainment
and factual. Our
customer base is diverse,
producing for
international television
broadcasters and over-
the-top (OTT) platforms.
ITV Studios creates and
produces content across
12 countries, while our
global formats and
distribution business sells,
commercialises and
distributes formats and
finished programmes
worldwide.
ITV Studios UK
ITV Studios UK is the largest
commercial producer in the UK.
We have nearly 30 labels and
produce programming across a
diverse range of genres, such as
drama, entertainment and
factual entertainment for ITV’s
channels, other UK public
service broadcasters (PSBs),
including the BBC, Channel 4,
Channel 5, along with OTT
platforms.
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
all the major networks, cable
channels and OTT platforms
across the US.
ITV Studios
International
ITV Studios also operates in the
Netherlands, Germany, France,
Italy, the Nordics and Australia,
producing entertainment,
unscripted and scripted content
for local broadcasters and OTT
platforms. This is either locally
created content, or formats that
have been created elsewhere by
ITV, primarily in the UK, the
Netherlands and in Israel.
Global formats
and distribution
Global formats focus 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.
Broadcast
£1,890m
(2019: £2,063m)
ITV adjusted EBITA*
ITV Studios
£152m
(2019: £267m)
Broadcast
£421m
(2019: £462m)
*A full reconciliation between our
adjusted and statutory numbers is
included in our APMs on page 55.
4
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
This Morning and Loose
Women are a core part of the ITV
daytime schedule. In 2020, both
programmes saw their average
daily audience increase
year-on-year.
The Voice celebrates its tenth
anniversary in 2021. It remains
one of the most successful global
formats, being sold to over 70
countries.
Broadcast
22.2%
share of viewing for the
ITV Family in 2020
(2019: 23.2%)
>2.6m
subscriptions globally across
our SVOD services
33m
registered user accounts
on the ITV Hub
(2019: 31m)
The Broadcast division is
home to the ITV family
of channels – the largest
family of free-to-air
commercial channels
in the UK, with
programming delivered
across multiple
platforms, including
linear television, on
demand via the ITV Hub,
ITV’s OTT service, and
through pay providers
such as Sky and Virgin.
ITV’s family of channels consists
of ITV main channel, the largest
commercial channel in the UK,
ITV2, ITV3, ITV4, ITVBe, and CITV.
ITV’s family of channels and ITV
Hub are advertiser funded, the
revenue from which enables
investment in high-quality
programming across a range of
genres. ITV offers unique
audience scale and simultaneous
reach to television advertisers,
as well as a more targeted
advertising proposition on the
ITV Hub.
ITV also generates revenue
directly from consumers who
are willing to pay to engage with
ITV brands and content. This is
through subscription video on
demand (SVOD) services,
in-programme competitions
and voting.
ITV has several SVOD services,
including BritBox UK, BritBox
International which is available
in the US, Canada and Australia,
and ITV Hub+ (the ad-free
version of the ITV Hub with
download functionality).
BritBox UK has the largest
collection of British box sets and
is controlled and managed 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.
The international BritBox SVOD
service 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.
As part of our More than
TV strategy and to better
reflect and serve changing
viewing habits, the
Broadcast business
is being restructured,
creating a new Media and
Entertainment division
effective from 1 April 2021
with two business
streams – Broadcast and
On-Demand.
The Broadcast business will
remain the home of ITV
main channel and
will continue to deliver
ITV’s USP of mass
simultaneous reach and
unmissable content. ITV3
and ITV4 will also be
included within Broadcast.
The On-Demand business
will focus on digital product
development and growth
for ITV, providing new
content that appeals to
audiences who already do
most or all of their viewing
on demand, and will deliver
it to them in whatever way
they want to access it.
It will include our advertiser
funded channels of ITV Hub,
ITV2, ITVBe and CITV and
Direct to Consumer through
SVOD on ITV Hub+ and
BritBox. It will also include
our Direct to Consumer
interactive revenues and
ITV Win.
ITV plc Annual Report and Accounts 2020
5
Strategic Report
Chairman’s Statement
The impact of COVID-19 has made 2020 a year like
no other. It forced us to stop the majority of our
productions in the Spring and our advertising
revenues fell rapidly. I am very proud of ITV’s
response, which clearly demonstrates what a
resilient and responsible business ITV is.
Our Board is always mindful of
the interests of our stakeholders
and their perspective informs
our decision-making. Board
discussions and decisions
consider implications for each
of our relevant stakeholders:
what’s important to them; how
we engage with them; how we
deliver for them. Further detail
is set out in the Corporate
Governance section of the
report, but here’s how we have
considered our stakeholders
during this unprecedented year.
Sir Peter Bazalgette, Chairman
We have a clear purpose: to
connect with millions of people
every day, to make content they
can’t get enough of and to reflect
and shape the world we live in...
and we do this through the power
of our creativity. This, together
with our More than TV strategy,
is designed to deliver a positive
impact for our stakeholders – our
viewers, customers and partners,
citizens, legislators and
regulators, colleagues and
suppliers along with our
shareholders and debt investors.
2020 has delivered this positive
impact, despite the disruption of
COVID-19 and its impact on our
financial performance.
6
ITV plc Annual Report and Accounts 2020
Viewers, subscribers, customers
and partners
At the height of the pandemic’s first wave,
we knew we had a critical national role to
perform: to produce our impartial and
trusted news whatever the challenges, to
keep our informative and morale-building
daytime programming on air, and to
maintain an interesting and varied schedule
of soaps, drama and entertainment, which
enriches the national conversation. This we
achieved, despite our Studios business being
severely impacted by COVID-19 restrictions.
My thanks to our colleagues, who delivered
for the business and for the country.
Of course, fantastic content is at the heart
of everything we do. ITV Studios creates
quality content for broadcasters and
platform owners in the UK and
internationally. This drives engagement
and revenues on their respective platforms.
ITV Studios’ determination to restart
productions safely and as quickly as possible
has been highly valued by our customers
globally. ITV’s own channels and services
are one example of this. Our Studios
business and our investment in content
beyond our own Studios business also plays
an important part in strengthening the
creative industries across the country, a key
future sector.
With increased data insights and research,
we now understand more about what our
viewers want to watch and how they want
to watch it and therefore provide a better
experience for them. This includes an
increasingly personalised offering through
ITV Hub and delivering content to them
through ITV Hub+ and BritBox, in the UK
and internationally, as we build more
relationships directly with consumers.
We’re establishing deeper bonds with
consumer brands across the UK, creating
innovative and relevant marketing solutions
for them. We now give them access to both
mass audiences and more targeted
opportunities online, all in a trusted and
measurable environment. We also help
brands with their broader marketing
messages around social purpose, using our
understanding of popular culture and our
mass reach. And we work with the UK
government to integrate public health
messages into our broadcasting.
We’re fostering durable links with our
suppliers and partners to ensure we uphold
ITV’s standards throughout the supply chain,
thereby optimising our strategy delivery.
We’ve established enhanced governance
processes for our suppliers. These
increasingly include requirements related to
climate change which align to our new
environmental targets.
Strategic Report
Governance
Financial Statements
Additional Information
Citizens
With our creativity and scale, ITV can
powerfully help shape culture for good.
During 2020 we’ve further raised awareness
of key social issues and inspired positive
change through the massive reach of our
programmes. We extended our mental
health campaign Britain Get Talking which,
during lockdown, widened to promote
neighbourliness. Eat Them To Defeat Them
(our healthy eating campaign) and our
support of The Daily Mile (promoting
exercise) both continued. And we launched
the diversity campaign Black Voices. We
recognise the importance of ITV reflecting
and representing all our communities on
and off-screen. To this end we launched our
five-point Diversity Acceleration Plan. It will
ensure ITV better represents contemporary
life, both within our workforce and on-screen.
The significant impact of climate change
and the potential risks to all businesses
has become even clearer. In 2020 we set
ambitious environmental targets, including
our commitment to become a Net Zero
carbon business, to be zero waste and to
have a 100% sustainable supply chain
by 2030. All staff will be trained on
environmental matters and all programmes
in the UK albert-certified from 2021. We’re
founding members of the Media Climate
Pact. Where possible we also adhere to
Task Force for Climate-related Financial
Disclosures (TCFD).
Legislators and regulators
The Board takes ITV’s responsibility as
a public service broadcaster (PSB) very
seriously. This has been at the core of our
DNA long before the initials ESG became
popular. We work closely with regulators,
politicians and policymakers to ensure that
we fulfil our obligations. ITV has engaged
with Ofcom throughout 2020, particularly
on its PSB review. And we’re encouraged by
its recognition of both the huge value that
PSB brings to the UK and the disruptive
challenges the PSB system faces. We’ve also
engaged with government and regulators
on a wide variety of other issues affecting
ITV, including COVID-19 restrictions, the
regulation of advertising on TV as well as
Brexit-related trade issues.
Our intention is to ensure that ITV and all our
colleagues operate the business in an ethical
and responsible way – from paying the
appropriate tax, to remunerating suppliers
on time, to upholding high standards of
business conduct and governance.
Colleagues, programme
participants and everyone we
work with
People are our first priority at ITV. This is
reflected in our commitment to care for the
physical and mental health and safety of
colleagues, contractors, and everyone who
participates in our programming, before,
during and after productions. COVID-19 has
presented many challenges for ITV. One of
the most fundamental has been the
protection of our colleagues via careful
compliance with the applicable rules in ITV’s
territories of operation.
ITV’s Duty of Care Charter sets out our
commitment to protect all who work with
and for ITV. It’s underpinned by our
operational risk process. Through this we
identify duty of care related risks and put in
place measures to manage them, reporting
to our Duty of Care Board. We have guidelines
in place for our own productions and external
suppliers, which we constantly enhance with
the assistance of third-party specialists. This
includes support from our Consultant Clinical
Psychologist and also Independent Medical
Adviser. In addition, we have a Mental Health
Advisory Group, comprising external experts,
which provides guidance and support for
ITV’s holistic approach to mental health and
wellbeing among its people, production
teams and participants.
Our significant achievements in 2020 reflect
the commitment and determination of our
colleagues. I would like to record a heartfelt
‘thank you’ to them all. While many have
worked remotely since early March, and
some were furloughed for a period, ITV has
remained connected with all of our
colleagues through very regular vodcasts by
Carolyn McCall, our CEO, and the wider
leadership team, as well as providing advice,
support, workshops and tools to help
colleagues look after their own wellbeing.
We’ve also undertaken a number of
employee pulse surveys to help monitor the
wellbeing of our colleagues and ensure we
have the appropriate support in place.
In addition, Edward Bonham Carter, our
Senior Independent Director and Workforce
Engagement Director, continues to work
closely with our Ambassador Network
across all our offices. This creates an active
two-way dialogue between colleagues and
the Board, as Edward regularly provides
feedback to the Board which informs our
discussions and decision-making.
Attracting and retaining diverse creative
and commercial talent is key to our success.
This year we became the first FTSE 100
company to appoint an executive to ITV’s
Management Board specifically charged
with our diversity and inclusion policy. To
celebrate and encourage engagement
around our diversity and inclusion, we have
five active networks open to all our
colleagues. In addition, our senior leadership
has been recognised for its diversity by the
Hampton-Alexander report.
Shareholders and debt investors
It’s fundamentally important that the Board
clearly understands the views and concerns
of our shareholders and debt investors.
Members of the Board have spent valuable
time with representatives of some of our
major shareholders in one-to-one meetings
and we have again consulted on the
Remuneration policy. This year, given the
restrictions in place, our AGM was held
virtually. However, we remained committed
to ensuring proper engagement with our
investors providing all of them with the
opportunity to ask questions in advance
of the meeting. We also posted an ‘AGM
vodcast’ with key statements and responses
after the event. Shareholder feedback is
frequently discussed at the Board and
informs our decision-making.
ITV has made significant progress in
delivering its strategic priorities in 2020 and
addressing the interests of its stakeholders.
However, its financial performance has been
severely impacted by COVID-19. Total
external revenue was down 16 % and
adjusted earnings per share decreased 22%.
The Board and Management Board has had
to make a number of decisions this year to
retain adequate liquidity, ensuring ongoing
resilience and the ability to invest in the
delivery of our strategy. These include
significant cost savings; cancelling the
Company-wide annual bonus; reducing the
base pay and fees for all Directors; and not
paying a dividend for 2020. The Board
recognises the importance of the dividend
to our shareholders and intends to restore
future dividend payments as soon as
circumstances permit.
We are committed to creating substantial
value for our shareholders and other
stakeholders, and I look forward to
reporting on our progress. In the meantime,
thank you all for your continued support.
Finally, I’m really pleased to welcome
Sharmila Nebhrajani to the Board. She joined
in December and will further strengthen the
Board’s mix of expertise and experience.
I’d also like to thank Roger Faxon, who
stepped down in December after eight
diligent years, for his significant contribution
and wise counsel.
My thanks to all my colleagues for
negotiating such a difficult year.
Sir Peter Bazalgette
Chairman
ITV plc Annual Report and Accounts 2020
7
Strategic Report
Strategic Report
Chief Executive’s Report
ITV took swift action from the very beginning of the pandemic
and worked with real determination to successfully manage and
mitigate the impact of COVID-19 while continuing to invest in our
future. Our overriding priority was the physical safety and mental
wellbeing of our colleagues, while they were working from home
or on furlough, or while they were producing programmes.
(See Response to COVID-19 section for further details)
ITV Studios has been very innovative and
agile in restarting productions and our
commercial teams have worked closely
with advertisers to produce creative
marketing solutions and attract new
advertisers to TV. Throughout the
pandemic, ITV has been on air informing
and entertaining the nation.
Despite the disruption, and our focus on
conserving cash, we have protected our
strategic investment and are making
good progress in executing our strategy.
ITV Studios is continuing to strengthen
its creative pipeline and diversify its
customer base; we are implementing the
Hub Acceleration plan which is delivering
improvements in the user experience and
content; Planet V has been successfully
rolled out to the majority of major
agencies, to a very positive response;
BritBox UK is ahead of its plan hitting
500,000 subscriptions in January 2021;
and BritBox US increased its subscriptions
by 50% over the year.
We are well placed to continue to deliver
our strategy despite the current
uncertainty. As a world class global
production business, ITV Studios is well
positioned to take advantage of strong
growth in demand for quality content.
The restructure of the Broadcast business
creating Media and Entertainment (M&E)
enables us to better respond to changing
viewer habits and we will continue to
manage our costs tightly. We have
identified further permanent overhead
cost savings across the business which
will be delivered in 2021 and 2022.
These will more than fund additional
investment opportunities we have
identified to further accelerate the
delivery of the strategy.
Carolyn McCall, Chief Executive
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ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
Isolation Stories was a short four-part
drama written, filmed and edited during the
UK lockdown.
Robert Moore is ITV News’ Washington
correspondent. He was the only reporter in
the world to make it into the US Capitol
Building as rioters stormed Congress.
His coverage has had over 11 million views
on Twitter.
Balthazar is a French crime drama
produced by Tetra Media (part of ITV Studios
International) for TF1. It had its third season
in 2020 and has recently been renewed for
a fourth.
Despite the disruption,
and our focus on
conserving cash, we
have protected our
investment and are
making good progress in
executing our strategy.
2020 Financial highlights
ITV’s operational and financial performance
in 2020, as expected, was materially
impacted by the COVID-19 pandemic.
Government imposed lockdowns and
containment measures in the UK and
internationally caused us to stop productions
for a period of time and COVID-19 protocols
have increased production costs as we have
returned to production. It has also resulted
in a significant decline in the demand
for advertising.
Total external revenue was down 16%, with
total advertising revenue (TAR) down 11%
in spite of online video on demand (VOD)
advertising revenue being up 17% in the
year. ITV Studios revenue was down 25%.
Adjusted EBITA declined 21% to £573 million,
in spite of the benefit of £116 million of cost
savings. ITV Studios adjusted EBITA declined
by 43% and Broadcast adjusted EBITA
declined by 9%. The margins of both
businesses have been significantly impacted
by the decline in revenue, ongoing fixed costs
and our essential investments to support the
delivery of our strategic priorities. Adjusted
EPS declined 22% to 10.9p. Statutory EBITA
was down 19% to £561 million and statutory
EPS decreased by 40% to 7.1p.
Despite the decline in profits, we were highly
cash generative in 2020, with profit to cash
conversion of 138%. At 31 December 2020
our reported net debt (including IFRS 16
liabilities) was £545 million (31 December
2019: £893 million) which benefited from
the deferred VAT payments and is before
earnout payments that we anticipate paying
in 2021. Our reported net debt (including
IFRS 16 liabilities) to adjusted EBITDA was
0.9x (31 December 2019: 1.2x).
We remain committed to investing in our
key priorities and value drivers to deliver
organic growth in line with our strategy.
We will balance this investment with returns
to shareholders, with our commitment to
maintain investment grade metrics over the
medium term and the ongoing uncertainty
with COVID-19. The Board recognises the
importance of the dividend to our
shareholders and intends to restore
dividend payments as soon as
circumstances permit.
ITV purpose
Our purpose and our culture defines ITV.
Our purpose is to be More than TV. We
connect millions of people every day, make
content they can’t get enough of and we
reflect and shape the world we live in… and
we do all this through the power of creativity.
Our colleagues are always our priority –
we are also focused on all our stakeholders:
our viewers, subscribers, customers and
partners; citizens; legislators and regulators;
programme participants and others we
work with; and our shareholders and
debt investors.
The pandemic has amplified the enduring
value of ITV as a Public Service Broadcaster.
We contribute to our culture and society,
creating shared national moments,
highlighting difficult issues, and running
programmes and campaigns for mental and
physical wellbeing. We make programmes
by us, for us and about us 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. And we play an
important part in economic growth,
investing in regional creative economies
and the independent production sector.
Our strategic vision
In 2020 we undertook a review of our
strategy in light of the challenges created
by COVID-19. The conclusion was that
COVID-19 was accelerating some of the
trends already identified. For example,
increasing viewership of streaming, and
increased demand for content. This has
meant the key change in the strategy
is in the pace of execution particularly
in transforming the business digitally, in
order to be able to continue to manage
the challenges and take advantage
of opportunities.
ITV plc Annual Report and Accounts 2020 9
Strategic Report Chief Executive’s Report continued
Our goal 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 strategy will continue to evolve but
we remain focused on three priorities:
• Growing our UK and global production
business
• Transforming our Broadcast business,
now called Media and Entertainment, and
• Expanding and strengthening our now
established Direct to Consumer (DTC)
relationships
These are supported by embedding data,
analytics and tech across the business;
ensuring we own and manage rights
efficiently; continuing to build upon our
strong partnerships in the UK and
internationally; and delivering our social
purpose strategy.
Being an integrated producer broadcaster
gives us a competitive advantage. It
provides Studios with a bedrock of core
commissions and a formidable promotional
engine for its content; it enables cross
promotion and 360 degree monetisation of
Studios content across our business models;
secures access to great content for ITV’s
channels, advertiser funded video on
demand (AVOD) and SVOD businesses; and
all this helps attract and retain the best
creative talent in the industry.
We are making strong progress in delivering
our strategy and we continue to focus on
the speed of delivery in each of the four
pillars of the business that drive value.
Firstly, ITV Studios is a world class
international production company. It is the
largest commercial producer in the UK, one
of the largest producers in the Europe and
one of the largest unscripted producers in
the US. Therefore, it is in a strong position
to benefit from the growing demand for
quality content internationally. We expect
the global content market to continue to
grow 3 to 5% per annum – predominantly
driven by OTT platforms.
Secondly, our linear channels. They have a
unique ability to drive live mass audiences
which continue to be an important part of
marketing campaigns and TV remains the
media delivering the highest return on
advertising investment.
Thirdly, in the rapidly growing AVOD market,
the ITV Hub is capturing the shift to online
viewing and strong demand for online
advertising. The rollout of Planet V provides
advertisers with targeted advertising in a
brand safe environment.
And finally, DTC. BritBox UK enables ITV to
monetise our Best of British content in the
UK in collaboration with other PSBs. And
internationally with the BBC we are able
to take advantage of high growth markets
for British content. We now have over
2.6 million SVOD subscriptions globally
across our services. In addition, we are able
to drive revenues from our IP ownership
and ITV Win, as consumers are increasingly
willing to pay to engage with a trusted
brand and its content.
Social purpose is an integral part
of delivering our strategy
It is increasingly clear that companies with
a strong and clear purpose drive increased
value. Our ESG strategy is an integral part
of delivering our purpose and our business
goals. ITV does much more than entertain
– it makes a difference to British culture in
a way that global competitors can not.
We have a unique ability to drive meaningful
change, raising awareness and inspiring
positive change through the massive reach
of our platforms. Our social purpose
strategy is built around four areas: Better
Health, Diversity & Inclusion, Climate Action
and Giving Back. 2020 highlights include:
Better Health: physical and
mental health
• Our healthy eating campaign, Eat Them to
Defeat Them, encourages children to eat
vegetables; we have supported the Daily
Mile since 2019; and we have been
working with Public Health England and
the government on encouraging healthy
behaviours during the pandemic
• We relaunched our mental health
campaign Britain Get Talking during the
COVID-19 pandemic, encouraging people
to stay connected; 6.4 million people
started a conversation as a result
Diversity & Inclusion:
• Our focus for 2020 was particularly
on improving opportunities for people
from Black, Asian and Minority Ethnic
backgrounds and to increase
representation for those with a disability,
where our target has increased by 50%
Britain Get Talking is ITV’s Mental
Wellness campaign and encouraged people
to stay connected during the UK lockdown.
Queer Eye is an award-winning unscripted
production by ITV America and in its six season
for Netflix.
10
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
• We have appointed a Group Diversity
Director and launched our Diversity
Acceleration Plan across ITV on and
off screen. This sets out steps ITV will
take to deliver measurable change.
We will report on progress annually.
Climate Action:
• We have set an ambitious target to be net
zero carbon emissions by 2030. We will do
this is by reducing the emissions we
control by 46% and reducing emissions
we influence, such as business travel and
the products and services we use, by 28%.
In addition we are one of the founding
signatories of the Media Climate Pact and
among the first to join The Climate
Pledge and Ad Net Zero. We are working
with our commercial partners to help
them deliver their environmental
strategies and we have increasingly used
our programmes to raise awareness,
inform and inspire sustainable habits.
Giving Back:
• During the pandemic we have helped
raise over £3.6 million for NHS Charities
Together and raised £9.3 million for
UNICEF on Soccer Aid 2020. And we
continue to encourage our colleagues to
use their three paid days a year for
volunteering and have put in place online
volunteering opportunities.
Strategic progress in 2020
We have made good progress in delivering
our strategic priorities in 2020 but as
expected our performance has been
significantly impacted by COVID-19.
Alison Hammond: Back to School was a
one-off documentary specially commissioned
by ITV as part of Black History Month in the UK.
Growing UK and Global
Productions
We paused our productions systematically
in March to enable them to resume quickly
and to minimise the costs of disruption.
With the innovation and dedication of the
ITV Studios team we continued to produce
our daytime schedule and News and started
to resume productions from the summer.
ITV worked closely with the UK government
and the industry to develop a set of
protocols to minimise health and safety
risks during production. There remain
operational challenges with producing
content particularly large entertainment
programmes and multi-location dramas.
However we are working hard on
overcoming these and have delivered large
scale entertainment programmes such as
Love Island in the US, I’m A Celebrity in the
UK and dramas such as The Bay in the UK
and Paris Police 1900 in France. The majority
of programmes are now back in production.
We have further strengthened our talent,
which remains absolutely key to building a
successful Studios business. Most recently,
Nicola Shindler, the multi-award winning
producer has launched a scripted label within
ITV Studios UK, and we have increased our
shareholding in Danish Producer, Apple Tree
Productions, to a controlling interest.
Despite the pandemic, we have maintained
our development budget and focused on
further building the creative pipeline. We
continue to build our portfolio of scripted
programmes which we have targeted as an
area of growth. We saw real success in the
US with Snowpiercer for TNT which has been
recommissioned for a third series; Good
Witch for Hallmark has been renewed for
a seventh season; The Pembrokeshire
Murders for ITV which launched with
12.5 million viewers; and The Serpent on
BBC which has had 31 million streams on
the iPlayer. In Europe we are continuing
to produce for OTT platforms and local
broadcasters with programmes such as
Suburra and Balthazar.
In 2020, we reorganised our international
distribution and commercial business to
strengthen our position as a creator,
producer and distributor of world-leading
formats. We have a portfolio of world-class
brands which we continue to strengthen
and protect. Love Island has now been
sold in 20 countries, up from 13 in 2019.
The Chase formats continue to travel
internationally, most recently commissioned
in the US by ABC and is now in 16 countries.
We have a number of new formats that
have been developed, including Rat In The
Kitchen and Let Love Rule.
We have further diversified our customer
base as we have strengthened our
relationships with OTT platforms, particularly
in the US, where we have development
projects with all the main OTT platforms for
scripted and unscripted content. We
produced a number of programmes for them
in 2020, including the fifth season of Queer
Eye, The Big Flower Fight, and Suburra for
Netflix, Love Island France for Amazon and
Becoming for Disney+. We have also sold
international rights to a number of significant
dramas, including Snowpiercer and The
Serpent. Since 2017 we have tripled our
distribution revenues from OTT platforms.
Transforming Broadcast (Media
and Entertainment)
Our priority at the start of the pandemic
was to keep ITV on air and the ITV Hub and
BritBox fully operational. While our schedule
was impacted by production stoppages we
continued to broadcast 10 hours of live
Daytime and News programming each
weekday. This played a key part in providing
viewers with accurate and trustworthy
information, and a broad schedule of
entertainment and drama to provide an
escape from it. Total ITV viewing was up
during the year, although our online viewing
was down, impacted by no summer Love
Island, fewer episodes of the soaps and
no major sporting event. Excluding the
impact of Love Island and the soaps, online
viewing was up over 5%.
While the viewing landscape changed
during the pandemic, with people streaming
more content than ever before, ITV’s
extensive offering of linear television
channels, the ITV Hub and BritBox, gave
viewers the choice in how, where and when
they consume content, while continuing to
provide advertisers with mass simultaneous
reach, alongside a more targeted
advertising proposition.
We have restructured Broadcast to create
the Media and Entertainment division,
with two business units – Broadcast and
On-Demand. Broadcast is focused on
delivering live mass audiences and On-
Demand is focused on driving digital viewing
through our digital products – both
advertiser funded on ITV Hub, ITV2, ITVBe
and CITV, and DTC through SVOD, as well as
our interactive business. This new structure
will enable us to: better serve changing
viewer habits; be more agile and flexible;
drive mass audiences and digital viewing;
ensure we have the appropriate allocation
of resources between broadcast and AVOD;
further develop our digital capabilities; and
streamline the ways we are working to
improve productivity and reduce cost.
ITV is the home of mass quality reach which
is recognised by the industry. As viewing and
advertising becomes more fragmented, the
scale and reach of advertising that
ITV plc Annual Report and Accounts 2020 11
Strategic Report Chief Executive’s Report continued
television, and particularly ITV, delivers
becomes increasingly valuable. We provide
a safe, trusted, measured and transparent
environment in which to advertise. In 2020
we delivered 94% of all commercial
audiences over 5 million.
Advertising demand has been significantly
impacted by the crisis, but our Commercial
team continues to deepen its relationship
with our advertisers and agencies to create
innovative and relevant marketing
opportunities which started before COVID-19.
We use the breadth of our experience,
creativity and our unique platform, to bring
new campaigns and brands to television.
Throughout the COVID-19 pandemic we
provided frequent webinars and teach-ins to
over 3,000 customers; marketing support
and digital content; consumer insight to help
advertisers stay close to their customers; and
made booking with ITV more flexible.
We have created a number of specific
initiatives to help advertisers, which include
ITV AdVentures for digitally native brands;
ITV Backing Business, our B to B initiative,
supporting businesses; and ITV Home
Planet – an initiative for sustainable brands to
tell their environmental stories and encourage
viewers to reduce their carbon footprint.
We have further improved the ITV Hub,
which now has 33 million registered users,
up 6% year-on-year, as we deliver the Hub
acceleration plan. Our investment has been
focused on redesigning the interface to
improve the overall user experience; further
personalisation; increased distribution; and
strengthening the content available,
including the extended catch-up window,
full series drops and short form.
We are continuing to successfully roll out
Planet V to the majority of large agencies,
to a very positive response. With our tech
partnership with InfoSum, advertisers are
also able to add their own first party data to
campaigns in a secure and compliant way.
And we have confirmed that Samsung TV
Plus will be our first third party
publisher partner.
Expanding Direct to Consumer
Our DTC business has seen a positive uplift
from COVID-19. We have delivered good
growth in our interactive revenue as we
have improved the ITV Win platform and
extended our competitions. We have
however had to temporarily close all our live
events and tours.
We have also seen strong growth in our
SVOD products. BritBox UK is ahead of plan
hitting 500,000 subscriptions in January
2021 and conversion and churn rates are
tracking in line with our expectations. We
have strengthened its content with the
successful launch of the first original ‘Spitting
Image’ and Film4 content and extended its
distribution, with the roll out of the EE/BT
deal. The service is now available on around
20 million devices and its brand awareness is
over 90%. This presents a real opportunity
for us to grow our subscriber base as we
further improve our content offering.
Subscriptions for BritBox US have continued
to grow strongly, up 50% in the year and the
service is profitable. We successfully
launched BritBox in Australia in Q4. Hub+
continues to perform well with around
410,000 subscriptions.
Priorities for 2021 and beyond
We have clear priorities for this year and
beyond as we continue to execute
our strategy.
In Studios, key in the short term is
to continue to produce safely and at scale.
At the same time we are focused on further
building and monetising our strong pipeline
of programmes internationally; growing
scripted; creating global formats that travel
and return; and diversifying our customer
base as we create more programmes for
streaming platforms. In 2021 we expect to
double our revenues from OTT platforms.
We will continue to look at opportunities
to further grow our creative talent.
We expect ITV Studios to perform well in
2021 but it will continue to be impacted by
national lockdowns, social distancing and
other COVID-19 measures.
Across M&E we need to achieve the right
balance between delivering mass live
audiences and growing our digital viewers.
Therefore we will be testing and trialling our
content windowing strategy and the
appropriate allocation of the programme
budget between our linear channels and
AVOD. We have a strong schedule lined up
for 2021 including the Euros, Finding Alice,
The Bay, Unforgotten, The Masked Singer,
Saturday Night Takeaway, and Love Island.
Some of these programmes have already
aired and performed very well driving mass
audiences and light viewers.
We are continuing to deepen our strategic
and creative relationships with advertisers
and are also exploring linear addressable
opportunities.
In addition, we are launching a Media for
Equity fund, where we will take minority
stakes within early stage digital and
direct-to-consumer businesses, in return for
advertising inventory. The scheme will serve
as an innovative opportunity for
entrepreneurial companies to accelerate
their growth and establish their brands by
accessing ITV’s unique reach and scale.
12
ITV plc Annual Report and Accounts 2020
The Beast Must Die is the first original
scripted commission for BritBox UK. It is
expected launch on the service in the first
half of 2021.
Unforgotten is a British crime drama
produced by Mainstreet Pictures (part of ITV
Studios UK). The fourth series started on ITV
in February 2021, launching with its biggest
overnight audience yet of 5.1 million viewers.
Dancing on Ice had its 12th series in the UK
in 2020, with an average of 5.2 million viewers
per episode. The 13th series started in January
2021 on ITV.
Strategic Report
Governance
Financial Statements
Additional Information
To drive On-Demand viewing and increase
engagement with light viewers, we will
further strengthen the Hub to make it a
destination and not just a catch up service;
focusing on its continuous redesign;
leveraging our data capabilities; and
trialling a new content strategy to further
strengthen it with more originals and
exclusive programming.
We will also continue to roll out Planet V
in self-serve and build further third
party partnerships.
In DTC we are further growing BritBox UK –
strengthening the content offering and
exploring opportunities to expand its
distribution, with the confirmed launch on
Amazon in 2021. We have an exciting slate
of originals in 2021, which include The Beast
Must Die and The Secrets of the Krays in H1.
We are working through the planning for
a phased roll out of BritBox internationally,
with South Africa due to launch in 2021
and more markets following thereafter.
Digital transformation
Digital transformation is key to unlocking
success in many areas of our strategy
and therefore to accelerate our strategy
we need to fast forward our digital
transformation.
This is not only the digital transformation of
our products to respond to changing viewing
habits, including the Hub, Planet V, SVOD, but
also how we work. Transforming our internal
systems, processes and behaviours to
support a digital business, be more agile and
efficient and ensure our colleagues have the
digital tools to drive the most effective ways
of working. Our culture is key – having the
right mindset and capabilities will enable us
to achieve this more quickly.
We are transforming our core systems,
digitising end to end processes more widely
and adopting digital ways of working. We
are making good progress with new systems
and processes in place, such as Talent Pay
and FreeCon; Smart Working, an initiative
started before COVID-19 has been
accelerated with good results.
Investments and cost savings
Throughout the pandemic we have
continued to invest behind our strategic
initiatives in the ITV Hub, Planet V, BritBox,
data and technology.
In 2018, we set out our £60 million essential
investment plan over three years to 2021,
which is on track with cumulative
investments to date of £48 million. In 2021, in
addition to the original planned investments
of £12 million, we have highlighted a further
£13 million of investments to accelerate the
delivery of our strategy, which will be funded
by further cost savings.
In 2020, we delivered £116 million of cost
savings, well ahead of our planned £60
million for the year. Of this, £21 million were
permanent as we have challenged the cost
base line by line and in particular relate to
contract renegotiation and headcount
savings from reorganisational changes. The
temporary savings were in relation to steps
taken to mitigate the impact of COVID-19
including: a reduction in executive and
non-executive director pay of 20%; a
suspension of performance-related cash
bonuses; the furlough of colleagues during
the height of the pandemic; and the natural
decrease in non-essential spend, such as
travel and entertainment.
We are now targeting £100 million of
annualised permanent overhead cost
savings by 2022 (from 2019), compared to
our previous target of £55 million to £60
million over that period. We expect to
deliver around £30 million of these savings
in 2021 with savings coming from our new
operating model, the increased use of
technology and data, digitising end to end
processes and increased smart working.
The venture loss of BritBox UK was
£59 million in line with our guidance
of £55 million to £60 million.
Colleagues
Our colleagues are key to the success of
ITV and delivering our strategy. I am incredibly
proud of the way our colleagues have
responded to the crisis and worked with such
determination and a real sense of purpose.
We want ITV to have an inclusive culture,
where everybody can perform at their
best, realise their full potential and thrive.
The ITV Way provides all our colleagues with
the guiding principles of how we like to work
in order to achieve this and to deliver our
strategy. We have five active colleague
networks and in 2020 we launched the
Diversity Acceleration Plan to increase the
pace of progress in this area.
Regulation
In late 2020, Ofcom published its review of
public service broadcasting, ahead of
making recommendations to government
by the summer as to how the system might
be maintained and strengthened. It has
concluded that there is now an urgent need
for a new framework to support an effective
transition to public service media (PSM),
straddling online and broadcast TV. We are
fully engaged with Ofcom and government
as part of this process, particularly in
relation to the need for reform of the rules
governing prominence, inclusion and fair
value for PSB on all major platforms.
In 2020, the government announced it
would introduce a 9pm watershed ban on
TV advertising of High Fat Salt and Sugar
(HFSS) products and similar protection for
children viewing adverts online. It also
announced it would bring in equivalent
restrictions for online advertising, in parallel,
by the end of 2022. Whilst we remain fully
engaged with this process – and continue
to believe that there is a strong, evidence-
based case for alternatives to the pre 9pm
ban – we nonetheless face significant loss
in relation to HFSS advertising revenue.
The government has also issued a call for
evidence in relation to gambling, ahead of
the launch of a full review of the Gambling
Act 2005, expected later this year. The call
for evidence was very broad encompassing
the industry as a whole, though advertising
may well be part of the review.
Outlook
We have taken difficult decisions to deal
with the crisis, but they have enabled us to
continue to invest in and successfully
execute our strategy. There is much we have
learnt in the crisis including how to work
very effectively remotely – from presenting
news to remote editing – and we will
continue to learn and iterate as we digitally
transform the business. Certain parts of our
business such as DTC have seen a positive
uplift from COVID-19 which we will further
build upon.
We are encouraged by the roadmap out of
lockdown and are seeing more positive
trends. The majority of ITV Studios
programmes in the UK and internationally
are back in production, although with the
prevalence of the virus there may be some
further disruption. The lockdown in Q1 has
impacted the demand for advertising, with
TAR expected to be down around 6% in Q1.
However, March is expected to be up around
8% and April is expected to be up between
60% and 75%, with January to April up
between 5% and 7%. This assumes there is no
change in the current planned restrictions.
We monitor our performance very carefully
and the risks associated with COVID-19 and
are very focused on tightly managing our
costs and cash.
Delivering the More than TV strategy puts
ITV in a good position to respond to
changing viewing habits and to take
advantage of the continued strong demand
for quality content internationally. We have
strong foundations across our four pillars of
the business and are clear about what we
need to do to ensure we emerge as an even
more resilient, digital and future facing
media and entertainment business.
Carolyn McCall
Chief Executive
ITV plc Annual Report and Accounts 2020 13
Strategic Report Chief Executive’s Report continued
Response to COVID-19
We address the impacts posed by the
pandemic through our COVID-19
response governance structure,
coordinated by a crisis project
management office reporting to the
Management Board. This addresses the
unprecedented challenges, operational
uncertainty and risks created by the
pandemic. Reporting to the crisis
project management office, we have
working parties focused on the
significant areas of concern. The health
and safety of our colleagues and
individuals involved in our productions
is our overriding priority.
COVID-19 governance structure
This structure and approach remains in place today as we continue to address the challenges created by the pandemic.
The Board: Oversight and regular updates (weekly in the height of the crisis)
Management Board: Oversight and weekly updates (daily at height of crisis)
Crisis PMO & Strategy: Co-ordinating response across the business and reporting to the Management Board
Working groups focused on the following areas:
Situation analysis
Regular conversations with
government and external
advisers to understand
how the crisis is playing out
medically, politically and
economically.
Cash and Costs
Modelling our financial
position across a range of
scenarios (informed by
situational analysis),
developing costs
mitigation and cash
management.
Revenue
Developing and
implementing plans to
continue identifying
opportunities and mitigate
against negative sales
impacts.
Tech and Ops
Invoking existing business
continuity plans to ensure
critical operations can
continue through the crisis.
People and Comms
Putting in place processes
and responses that protect
our people and support
the wider community.
The severity of COVID-19 and the ongoing
uncertainty it posed meant that we needed to
take a series of measures to increase our
resilience, manage the business for the long
term and protect the interest of all our
stakeholders. These included:
Situational analysis
As the situation with COVID-19 evolved we have
continued to keep an open dialogue with the
Government and Department for Digital,
Culture, Media and Sport to understand the risks
associated with the crisis and also put forward
our views on measures which could support the
industry. This has included successful
engagement on issues, such as financial support
for the freelancer population, work restriction
exemptions for key production and operational
staff and production pandemic insurance.
We constantly review the medical situation to
understand further measures we can introduce
to keep our colleagues safe. We have engaged
medical advisers to support us in developing
these measures.
Cash and Costs
In response to the uncertainty and challenges to
our revenue streams presented by COVID-19, ITV
took swift action to preserve cash, reduce costs
and manage working capital in the business.
These actions included:
• Reducing Executive Directors and
necessary technology and support to allow them
to continue performing their roles as normal.
Management Board salaries along with
the fees of the Board from April to the end
of October
• Recruitment and pay freezes across the
business, except in the case of critical roles
• Cancelling the 2020 bonus for the entire
Company
• Furloughing colleagues as appropriate
• Restricting non-essential travel and other
expenses
• A commitment to reduce the Broadcast
programme budget by at least £100 million
• Agreements with ITV pension trustees and tax
authorities to delay at least £150 million of
payments out of the first half of 2020 and into
the second half of 2020 and 2021
• Withdrawal of the 2019 final dividend and the
intention to pay 8p for the full year 2020 was
withdrawn
We will continue to track our financial
performance against a range of scenarios and
internal and external analysis.
Revenue
See section on ‘Strategic progress in 2020’ for
details on actions taken to mitigate against the
impact of the pandemic and identify
opportunities.
Technology and Operations
By rapidly flexing to home working in early
March, our critical technology and operations
have remained uninterrupted. Our Technology
team has worked closely with the business to
ensure all colleagues have access to the
People and Communications
Protecting the health, safety and wellbeing of
our colleagues and individuals involved in our
productions continues to be our overriding
priority.
The majority of our colleagues continue to work
from home, benefiting from the investment we
have made in technology and systems. Those
colleagues who are working on site – in our
offices, our studios and on location are
protected by robust safety protocols. We
currently have no staff who are on furlough.
To enable our colleagues to remain feeling
connected to and engaged with the wider
business, purpose and aims, we have held
fortnightly CEO led vodcasts (weekly for 12
weeks in the height of the crisis) covering a
range of topics and involving management from
across the business. We have leveraged our
existing tools to further support the mental
wellbeing of our colleagues during this time, and
also launched new ones, such as Big White Wall,
a mental health peer-to-peer platform
accessible to all staff. We regularly review our
support programmes with colleagues to ensure
we are providing practical, useful and easily
accessible support.
See ‘Social Purpose’ section for the actions
we undertook to support our communities.
14
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
Investor Proposition
ITV has a clear strategy and is making significant
progress in building a digitally led media and
entertainment company.
A strong platform for delivery
ITV is a global and diversified business,
with more than half of its total revenue
generated from non-advertising and over
half of ITV Studios revenues coming from
outside the UK.
and challenges of a competitive media
landscape across our four pillars of the
business that drive value: ITV Studios;
linear Broadcast; AVOD and Direct to
Consumer – in particular SVOD.
The market continues to evolve 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 strengthen the sustainability
of ITV. This will ensure that ITV is well
positioned to address the opportunities
Our operational and financial performance
has been significantly impacted by
COVID-19, but throughout the pandemic
we have continued to invest in our
strategic priorities and therefore we are
well placed to create a robust and
sustainable, future facing digital business.
52%
of total revenue is from non-advertising
revenue streams (2019: 54%)
56%
of total Studios revenues is from outside
the UK (2019: 58%)
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 either at
scale or targeted, distribute it globally
through its international network and use
it to build valuable relationships directly
with consumers.
quality content from new and established
distribution platforms.
Our Broadcast business (Media and
Entertainment) continues to provide
creative and relevant marketing solutions
for advertisers as it delivers unrivalled
audience scale and reach as well as
addressable advertising on ITV Hub.
ITV Studios is a strong, diversified and
scaled international production business,
creating, owning and managing rights.
We will continue to grow in key creative
markets with our increasing portfolio of
scripted and unscripted programmes,
driving value from the strong demand for
ITV is well positioned to create value
through direct relationships with
consumers around its significant content
ownership in SVOD, as well as with its
trusted and engaging brands through
competitions and experiences.
Good cash generation
We believe that if we successfully
execute our strategy we will continue
to deliver good cash generation over
the medium term 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.
138%
profit to cash conversion* (2019: 87%)
* Refer to page 61 for detail on our 2021 profit to cash
conversion.
Attractive investment opportunities
Shareholder returns
We are investing in a number of areas to strengthen and grow
the business. Areas of focus for this investment are; BritBox in
the UK and internationally; in the ITV Hub; in Planet V; and in
data, analytics and technology, which we are embedding right
across the organisation as we drive our digital transformation.
These investments will partly be funded by our significant cost
savings as we become a leaner and more agile business.
The Board recognises the importance of the dividend to our
shareholders and intends to restore dividend payments as soon
as circumstances permit. The Board will balance shareholder
returns with our commitment to maintain investment grade
metrics over the medium term, to continue to invest behind
the strategy and the ongoing uncertainty with COVID-19.
ITV plc Annual Report and Accounts 2020
15
Strategic Report
Market Review
The markets in which we operate are dynamic,
increasingly competitive and rapidly changing. We are
seeing increasing global demand for content driven
by the proliferation of channels and platforms, which
combined with changes in the way viewers consume
media, brings both challenges and exciting
opportunities to ITV.
COVID-19
The COVID-19 pandemic has accelerated
some of the trends we were previously
seeing with increasing viewership
towards OTT content, particularly for
younger audiences, and changes in the
advertising market fuelled by increased
competition and demand for online
advertising. Our strategy is designed to
mitigate some of the longer-term
impacts, and we are increasing the pace
of implementation of our strategic
initiatives.
Increasing global demand for content
Trend
How we are responding
The demand for quality content from
broadcasters and platform owners remains
strong and we expect that post the
COVID-19 pandemic, global content spend
will continue to grow at around 3% to 5%
per annum over the medium term, driven
by OTT platforms. While many free-to-air
broadcasters (FTA) have been challenged
by COVID-19 and some have reduced their
underlying broadcast budgets, they are
continuing to invest in their schedules.
SVOD platforms have been less financially
impacted and are expected to grow their
budgets significantly, making up around
25% of the overall market by 2024 (Source:
Ampere Analysis. Includes all spend on
content including sports rights). All are
demanding exclusive, brand-defining
original content, including local language
content to meet the increased expectations
of new and existing subscribers. AVOD
platforms are also demanding content,
with new entrants in the market such as
Tubi and Pluto, alongside established
names, Google and Facebook.
The demand for high-quality scripted
content, in particular, has increased
significantly with the global SVOD platforms
investing heavily to attract subscribers,
and use as a tool for differentiation and
prominence in an increasingly competitive
global environment. This has significantly
increased competition in the market,
particularly for talent, reducing the margin
for scripted content, which is generally
lower than other genres.
Demand for unscripted content remains
strong as platforms and channels continue
to require lower-cost, high-volume
popular series to fill the gaps around
more expensive scripted titles, to attract
mass simultaneous viewing, appeal to new
audiences, or supplement the viewing of
existing subscribers.
The UK remains the dominant producer
and exporter of unique unscripted formats.
The US dominates scripted and is the
largest content market in the world.
Other key attractive creative markets
include France, Nordics, Italy, Germany,
Australia, and Spain which has access to
Latin American markets.
ITV Studios is a leading global creator,
producer and distributor of content and due
to its scale and presence, is well-positioned
to capture this growing demand for content.
We produce content in the genres highly
demanded and have production bases or
production partnerships in all the key
creative markets around the world, being a
top-three indie in these markets (based on
internal estimates).
A key part of our ITV Studios strategy is to
grow scale in scripted content in English and
local languages, along with increasing our
relationships with OTT platforms. Our US
business has successfully pivoted to SVOD
customers in both scripted and unscripted
content, and we are starting to leverage
these relationships and harness the
strength and position of the ITV Studios
group to benefit our wider production
business.
We have strength in unscripted content
which is around 70% of our overall ITV
Studios production revenues, and it remains
important to us. We have built a healthy
pipeline of returning formats and
programmes, which we will continue to
nurture and develop as well as focusing on
the development of new global unscripted
and large entertainment formats.
Snowpiercer is produced by ITV Studios
America for TNT in the US and Netflix globally.
It is currently in its second season and has
recently been renewed for a third, which is
expected at the end of 2021.
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Additional Information
Alone is an unscripted programme produced
by ITV America and is in its seventh season on the
History channel. The catalogue has been sold to a
number of OTT platforms, with season six now
available on Netflix.
BritBox is ITV’s SVOD proposition, providing an
unrivalled collection of the best of British content
all in one place. It is available in the UK, US and
Canada, Australia and will be launching in South
Africa in the second half of 2021.
Increasing global demand for content
The rise of digital platforms
Trend
How we are responding
Trend
How we are responding
At the start of 2020, the international
distribution and commercial exploitation
business of ITV Studios was reorganised.
This created a new centre of excellence to
boost creativity across unscripted format
labels in ITV Studios to increase the
potential of developing global hit shows.
We have also strengthened creative talent
across ITV Studios in 2020 and will continue
to develop, retain and attract new talent in
2021, to further drive our creativity and
ownership of content.
Where possible, we maximise the value
of our IP across primary and secondary
windows of our content, driving growth
from optimal windowing strategies with
FTA, SVOD and AVOD clients. This has
allowed us to maintain a higher overall
margin relative to our industry peers.
As an integrated producer broadcaster, ITV
Studios also benefits from demand for its
content from ITV’s FTA linear, AVOD and
SVOD channels, providing Broadcast with
a strong and secure content supply.
See the Operating and Performance Review
for further detail on these areas.
In November 2019, ITV launched our SVOD
proposition with the BBC, BritBox UK, aimed
at being a complementary service to the
global streaming platforms and to provide
UK audiences with an unrivalled collection
of British box sets and original series all in
one place. While BritBox UK is relatively 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.
We also have our successful BritBox
international SVOD service in the US, Canada
and Australia. It will shortly launch in South
Africa with more countries to follow as we
look to roll it out to up to 25 countries, and
demonstrates our ability and ambition to
compete in this market internationally.
We also have our smaller offering Cirkus
in the Nordics, Germany, Austria and
Switzerland. See the Operating and
Performance Review for further detail.
Our AVOD service, the ITV Hub also provides
a destination for viewers to watch live
simulcast content from our linear channels,
exclusive and catch up content providing
viewers with the opportunity to watch
however and whenever they want. We are
investing in the ITV Hub to accelerate
growth in this area. See the following page
for further detail.
There has been a rapid growth in the
number of global SVOD platforms available
over the last ten years, with the largest,
Netflix having over 200 million global
subscribers at the end of 2020. This is
followed by Amazon, Disney+ and Apple TV
as the three other leading global streaming
platforms. Many countries have also
launched local SVOD services to take
advantage of this market growth and
complement existing revenues streams.
This includes BritBox from ITV and the BBC,
Salto from M6 and TF1, Joyn from ProSieben
and Discovery, and Viaplay from NENT, with
several new entrants expected over the
next few years.
The UK is a developed market for SVOD with
60% of households having an SVOD service
in Q3 2020, with Netflix in over 80% of SVOD
homes. In the UK, the growth of SVOD has
been complementary to pay-TV with SVOD
being in 50% of pay homes, and those
without an SVOD service being
predominantly FTA homes (Source: BARB).
In other counties like the US, the growth of
SVOD has been at the detriment of pay-TV,
which has suffered significant ‘cord-cutting’
of pay-TV subscriptions in the last few years.
The COVID-19 pandemic has helped boost
the number of subscribers for the global
SVOD platforms, with Netflix nearly
doubling new subscribers in Q1 2020
compared to Q4 2019, and Amazon and
Disney+ also seeing significant growth.
Alongside the growth in SVOD has been
a proliferation of AVOD services including
PlutoTV, Tubi, Roku TV and Vudu who offer
free, ad-supported content, many of which
are rolling out internationally.
ITV plc Annual Report and Accounts 2020
17
Strategic Report Market Review continued
Strategic Report
Family Guy remains a popular
Family Guy remains a popular
series for 16-34s on ITV2 and the
series for 16-34s on ITV2 and the
ITV Hub.
ITV Hub.
Share of viewing by broadcaster
BBC Family
ITV Family
Channel 4 Family
Channel 4 Family
31.0%
(2019: 30.5%)
22.2%
(2019: 23.2%)
10.0%
10.0%
(2019: 9.8%)
(2019: 9.8%)
Sky Family
Five Family
Other channels
Other channels
7.9%
(2019: 7.6%)
6.1%
(2019: 6.3%)
22.8%
22.8%
(2019: 22.6%)
(2019: 22.6%)
Source: BARB
Changing viewing habits
Trend
How we are responding
The number of ways for viewers
to engage with content is
expanding, offering increased
choice and flexibility, which is
impacting viewing habits
globally. 2020 saw an
acceleration of digital trends
across many sectors and
television was no exception
with several notable new online
video platform launches. There
has been a significant increase in
VOD viewing on TVs (particularly
connected TVs) and non-TV
devices (such as smartphones,
tablets and computers). 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.
In the UK, linear viewing remains
popular and reaches around
90% of the population each
week, with live viewing being
84% of all broadcast viewing in
2020 (Source: BARB – C7 viewing
via a TV set, within seven days of
original transmission, recorded
or VOD), and over 65% of total
viewing (Source: BARB/
Thinkbox). Viewing to public
service broadcasters (PSB) has
remained more resilient than
linear channels in other markets
and is helped by the strength
and investment in original
content made by the PSBs,
particularly the BBC and ITV.
The stay-at-home restrictions
brought about by the COVID-19
pandemic boosted total
broadcast TV viewing in the UK,
which increased by 6% in 2020.
Total TV set viewing which
includes unmatched viewing
(content that cannot be matched
to broadcast TV content such
as SVOD, YouTube, games
consoles), increased by 15% in
2020, with the average number
of daily minutes watched per
person, increasing by 14% to
277 minutes (2019: 243 minutes).
Within this, unmatched viewing
increased by nearly 50%
with the growth attributed
predominantly to SVOD viewing.
For 16-34s, the number of
unmatched minutes watched
per day is a much greater
proportion than the rest of the
population, spending much
more time online, and away
from broadcast TV compared
to older demographics.
We recognise that the viewing
landscape has become
increasingly competitive and our
strategy is designed to mitigate
the long-term impact of
changing viewing patterns. We
announced the restructure of
our Broadcast business to better
reflect and serve changing
viewing habits, creating two
divisions to focus on our mass
live audiences, and to grow our
digital capabilities.
We invest c£1.1 billion annually
in broadcasting high-quality,
trusted content across a wide
range of genres, including large
family entertainment shows,
sport, drama, factual and news
to give our viewers choice. Our
main channel remains the only
commercial channel to
consistently deliver mass
audiences. Our digital products,
ITV Hub, ITV Hub+ and BritBox
are all aimed at strengthening
our offering to viewers and to
capture them in however they
choose to watch and we have
been investing to enhance the
content, experience and
distribution of these platforms
as part of our strategy.
For younger viewers, we have
unmissable content, such as I’m
A Celebrity…Get Me Out Of Here!
Love Island, The Cabins, The
Only Way is Essex and the
Real Housewives series, which
all drove significant 16-34s
audiences in the year both
on linear and online, proving
that with the right content,
younger audiences will watch
FTA channels.
See the Operating and
Performance Review,
and Strategy sections
for further detail.
Britain’s Got Talent had its 14th
series in 2020 and filming was split
across the year due to COVID-19. It
had an average of 7.6 million viewers.
The Masked Singer launched on
ITV in 2020 averaging 6.3 million
viewers. Series two concluded in
February 2021, and average viewing
increased to 7.7 million.
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Additional Information
UK advertising market
Source: Advertising
Association January 2021
Online
TV
Press
66.2%
(2019: 59.6%)
20.1%
(2019: 20.7%)
7.4%
(2019: 10.0%)
Outdoor
Radio
Cinema
3.3%
(2019: 5.4%)
2.7%
(2019: 3.0%)
0.3%
(2019: 1.3%)
The UK advertising market
Planet V is ITV’s programmatic addressable
advertising platform for VOD advertising on
the ITV Hub. It has been rolled out to most of
the major agencies to plan and book
campaigns around ITV’s premium inventory.
Trend
How we are responding
In the UK, online advertising is
the largest category of
advertising spend followed by
TV advertising (including spot,
broadcaster VOD, sponsorship
and other television revenues),
together making up over 85% of
the advertising market in 2020
(2019: 80%). Outdoor, press and
cinema advertising were
adversely all impacted by
COVID-19 restrictions.
Over the last four years the
advertising market in the UK,
and in particular television spot
advertising (NAR), has been
impacted by political and
economic uncertainty,
particularly related to Brexit,
which has negatively impacted
the demand from advertisers.
Many advertisers have also
faced their own challenges and
structural pressures during this
time. COVID-19 further
accelerated the decline in
television advertising in 2020,
disproportionally affecting
categories such as travel and
non-essential retail. It is too
early to determine whether this
decline will be permanent or
whether it will recover with
the economy.
Online advertising has remained
more resilient during this period
and has grown rapidly, with
spend almost doubling over 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.
Advertisers are seen to reduce
spend on television to manage
margins during challenging
times, using online advertising
to gain short-term impact
and benefit from low
production costs.
Television advertising revenue
is ITV’s largest revenue stream
and as an integrated producer
broadcaster, helps to fund
the broadcast of our content
in the UK and content
creation globally.
ITV’s linear television channels
continue to offer unique scale
and reach of all the key
demographics advertisers
target, and it remains the most
cost-efficient way of advertising
and an important part of
marketing campaigns. We have
focused on developing deep
strategic partnerships with
our advertisers and agencies
to demonstrate the power of
television, and have successfully
brought new advertisers to
television during the pandemic.
We have also encouraged
existing brands to increase
their spend in innovative ways
such as advertiser-funded
content, brand partnerships and
sponsorship, as well as helping
many brands to create their
adverts in a low cost and
efficient way using our in-house
creative team.
The ITV Hub allows ITV to
capture online advertising
revenues in a brand-safe,
trusted and measured
environment, and this has
remained strong in 2020.
We have also launched Planet V,
which is our programmatic
addressable advertising
platform, allowing advertisers
and agencies to plan and book
their campaigns 24/7 using ITV’s
data, which can also be blended
with advertisers’ own first party
data. While our proposition is
small relative to Google and
Facebook, it allows advertisers
to access targeted advertising
at scale around our premium
VOD inventory. We are also
exploring opportunities for
linear addressable advertising.
See the Operating and
Performance Review
for further detail.
ITV plc Annual Report and Accounts 2020
19
Strategic Report
Our Strategy
We are making good progress in executing our
strategy, to create a stronger, more diversified
and structurally sound business. In 2020 we
undertook a review of our strategy in light
of the challenges created by the COVID-19
pandemic, to identify if there were changes
that needed to be made. We concluded that
our strategy remains the right one although
we will increase the pace of execution.
Our strategy, when executed effectively,
will ensure that we are well placed to take
advantage of the rapidly changing viewing,
content production and advertising
environments.
ITV purpose and strategy
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.
This is aligned to our strategic vision, 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 initiatives to drive growth and future value are
clear, building upon ITV’s unique and winning
combination of creativity and commercial strength.
Delivering on our strategy will be achieved by
focusing on three critical priorities:
Grow UK and global production
Transform Media and Entertainment (Broadcast)
Expand Direct to Consumer
These are not independent. They work together –
reinforcing each other, creating synergies and
delivering value.
Successful delivery of our strategic
vision is dependent on four enablers:
Continue to strengthen both
our creative and commercial
teams. Ensure we have the
right skillsets and culture
to deliver our evolving
strategic vision, particularly
in respect of technology
and data functions
People
Partnerships
Grow
UK and global
production
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
Transform
Broadcast
(M&E)
Expand
Direct to
Consumer
Rights
Digital
Ensure we own and manage
our rights efficiently and
effectively. Maximise the
value of these rights
across our linear and
VOD advertising, Studios
and Direct to Consumer
(DTC) business models
See Social Purpose from page 42
Deliver digital
transformation across our
whole business. This includes
our external consumer-
facing products, as well
as internal transformation,
including our core
central functions and
ways of working
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Financial Statements
Additional Information
Grow UK and global production
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
• Nurturing existing relationships and
continuing to diversify our customer
base, serving new fast growing OTT
customers
• Continuing to collaborate across our
network of production bases to benefit
from ITV’s scale and diversity
We also consider selective value creating
acquisitions and talent deals in both
scripted and unscripted to obtain creative
talent and IP.
Transform Media and Entertainment (Broadcast)
We have restructured the Broadcast
business to create the Media and
Entertainment division with two
business units – Broadcast and
On-Demand – to better reflect and
serve changes in viewer habits.
Broadcast is focused on our linear
channels, while On-Demand is focused
on our AVOD and SVOD businesses,
and our interactive DTC business
(see below). This will ensure that we
can better address the opportunities
and challenges of structural change
and provide a strong, branded and
data rich relationship with our
viewers and advertisers.
The key components of our Media and
Entertainment strategy are to:
• Continue to drive mass audiences on
our linear channels, which remain
highly valuable to our advertisers
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, the
continued strong growth in BritBox US
subscriptions and the launch of BritBox
Australia in Q4 2020. We are now
looking to further roll out BritBox
internationally and to continue to
drive Hub+ subscribers.
We are also growing our interactive
revenues through ITV Win, our
competitions portal, and focusing
• Drive on-demand viewing by
Drive on-demand viewing by
accelerating the ITV Hub development
accelerating the ITV Hub development
and content that targets on-demand
and content that targets on-demand
audiences
• Grow our addressable advertising
Grow our addressable advertising
capabilities, including strengthening
capabilities, including strengthening
our data, analytics and digital
our data, analytics and digital
capabilities. Our addressable
capabilities. Our addressable
advertising is currently available on
advertising is currently available on
catch up on ITV Hub. We are also
catch up on ITV Hub. We are also
exploring opportunities for linear
exploring opportunities for linear
addressable advertising.
• Build more strategic and creative
Build more strategic and creative
partnerships with our advertisers
partnerships with our advertisers
We will deliver on these areas whilst
We will deliver on these areas whilst
maximising the total value of our
maximising the total value of our
Studios and third party content, across
Studios and third party content, across
both linear and our digital products.
both linear and our digital products.
on driving growth in our DTC products
on driving growth in our DTC products
and engagement around our key
and engagement around our key
programme brands.
We are well positioned to grow our DTC
We are well positioned to grow our DTC
relationships and revenue with our
relationships and revenue with our
significant reach, engagement, insight
cant reach, engagement, insight
into viewers and enhanced data analytics
into viewers and enhanced data analytics
capabilities.
See KPIs from page 24
Emmerdale remains the UK’s second
biggest soap with an average of
5.9 million viewers per episode across
the year.
Love Island USA had its second
successful season in 2020 on CBS, being
filmed in a Las Vegas hotel under strict
health and safety protocol. It has since
health and safety protocol. It has since
been renewed for a third season.
been renewed for a third season.
ITV plc Annual Report and Accounts 2020
21
Strategic Report
Our Business
Model
Our strategic vision to be
a digitally led media and
entertainment company
that creates and brings our
brilliant content to audiences
wherever, whenever and
however they choose is
aligned to our purpose 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.
We will continue to grow the
UK and global content business,
transform our Broadcast (Media and
Entertainment) business, and expand
our Direct to Consumer business.
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 and
diversify ITV, creating a robust,
and sustainable, future-facing
digital business.
Our 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 and distribution
ITV has built relationships and a diverse customer base globally with major networks,
platform owners and local broadcasters, to whom we sell our world-class content.
Intellectual property
ITV has developed, acquired and owns the rights to a diverse portfolio of shows, particularly
drama and entertainment, 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 and consumer products.
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. It also gives us insight into
viewer and advertiser behaviour which helps us build deeper and more strategic
relationships with advertisers and agencies.
Integrated producer broadcaster
Being an integrated producer broadcaster enables us to drive maximum value from our
intellectual property. We also have a significant promotional engine and have the ability
to cross promote across our business models.
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
90%
Our channels reach around 90% of the
UK population each week
33m
We have 33 million registered users on
the ITV Hub in the UK
c£1bn
We invest c.£1 billion annually in content for
our UK family of channels and the ITV Hub
46,000+
hours of television and film content in the
Global Entertainment catalogue
The Chase is a growing global format
for ITV Studios. It has been sold to over
15 countries, with the original UK version
now in its 14th series.
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. Our risk
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Strategic Report
Governance
Financial Statements
Additional Information
Our diversified revenue streams
Creating value for...
A diversified business
By developing, owning and managing the rights to content, ITV is able to maximise
the value of its programme brands across four pillars of value: ITV Studios; Linear
Broadcast; AVOD and Direct to Consumer (in particular subscription video on demand
(SVOD). This ensures ITV is a more diversified business and enables it to drive value
from different revenue models.
Original production
We produce original content commissions for broadcasters and platform owners (in
the UK and internationally) from our production bases in the UK, the US, the
Netherlands, Germany, France, Italy, Australia and the Nordics.
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.
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, with BritBox in the US,
Canada and Australia , and Cirkus in the Nordics, Germany, Austria and Switzerland.
We will further roll out BritBox internationally and in 2021 will launch in South Africa.
Pay
We earn pay revenue from platforms in the UK by licensing our HD channels and our
online VOD services.
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.
Our colleagues, programme
participants and everyone we
work with
Through protecting, investing in and
developing our talent and creating a culture
that nurtures them to be productive,
commercial and creative. People, and their
physical and mental health and safety, are
our first priority at ITV.
Citizens
With our creativity and scale, ITV can
powerfully help shape culture for good. Our
offering of free and universally available high
quality and trusted news services, helps to
inform UK citizens and underpin democratic
debate.
Legislators and regulators
ITV takes its responsibilities and obligations
as a public service broadcaster (PSB)
seriously.
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.
management framework provides
the business with the tools to
identify, manage and continually
review our risks and regular
reporting provides the Board with
the required insight to monitor the
overall risk landscape. This also
allows management and the Board
to adapt the strategy to ensure that
we are striking the right balance
between risk-taking and risk-
mitigation and that any underlying
risks in the strategy are being
appropriately managed, therefore
enabling delivery of the strategy.
We have identified the principal
risks through our risk management
framework and we have
considered them as part of our
viability assessment.
ITV plc Annual Report and Accounts 2020
23
Strategic Report
Key Performance
Indicators (KPIs)
We define 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 appropriate to do so).
ITV Group
Grow
UK and global production
Adjusted EPS1
Total non-advertising
revenues
Cost savings
Profit to cash
conversion1
Studios adjusted EBITA
Total production hours
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 22%
from 13.9p to 10.9p. This was
predominantly due to the
decline in total advertising
revenue (TAR), and Studios
revenues and margin as a result
of the impact of COVID-19.
Definition
Total non-advertising revenue
is total ITV revenue (including
internal revenue) excluding
advertising revenue (being 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.
Definition
Cost savings are permanent
savings to the business. In 2020,
this also includes temporary
savings as a result of the
COVID-19 pandemic. 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
Non-advertising revenue
decreased by 21% in 2020 to
£1,683 million, driven almost
entirely by the decline in ITV
Studios total revenue by 25% to
£1,370 million due to
productions pausing in March as
a result of the pandemic.
Offsetting this were increases
in Direct to Consumer revenue
of 4% to £87 million, SDN
revenue of 6% to £73 million,
and other Broadcast revenue
(which includes BritBox UK) of
8% to £153 million.
Performance
We delivered £116 million of
cost savings in 2020 which was
ahead of the target of £60
million for the year. Of the cost
savings achieved £21 million are
permanent and £95 million are
temporary savings.
Since 2019, we have delivered
a cumulative £46 million of
permanent cost savings.
In 2021, we will deliver around
£30 million of permanent cost
savings, with total cumulative
cost savings of around
£100 million by 2022. This is
£40 million – £45 million more
than our original guidance of
£55 million to £60 million over
this period.
2020
10.9p
22% decline
in 2020
2020
£1,683m
21% decline
in 2020
2017
2018
2019
2020
16.0
2017
15.4
2018
13.9
10.9
2019
2020
1,874
1,971
2,117
1,683
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 (see definition within
Studios adjusted EBITA margin).
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.
Performance
Profit to cash conversion was
138% in the year, driven by a
large working capital inflow
arising from a reduction in
programme stock (where we
delivered programmes but
were unable to continue
producing) and the timing of
VAT payments which have been
deferred. This is expected to
unwind in 2021.
2020
138%
2017
2018
2019
2020
91
88
87
138
Target
3 years to 2021
Target
4 years to 2022
Target
3 years to 2021
Target
3 years to 2021
Target
3 years to 2021
Strategic ambition
Grow by at least 5% CAGR
Deliver £55–£60 million
run-rate of savings by 2022
Maintain at around 85%
Grow by at least 5% average
Maintain at 14% to 16%
Grow to 10,000
Target
3 years to 2021
CAGR
1. A full reconciliation between our adjusted and statutory results is provided in the APMs on page 55.
2. A full reconciliation between our adjusted and statutory results is provided in the APMs.
24
ITV plc Annual Report and Accounts 2020
Total Studios
revenue growth
Definition
margin2
Definition
Definition
Total Studios revenue
This is the key profitability
Total hours of programming
measures the scale and success
measure used across the
produced is an important
of our global studios business.
Studios business. The profile of
measure of the scale and
It includes revenues from
programmes sold to ITV
adjusted EBITA margin differs
success of our global studios
for production and distribution
business. It measures the
Broadcast (M&E), which as an
activities, and further varies
number of hours produced
integrated producer
with each production due to
across all genres and
broadcaster, is an important
genre and maturity. Adjusted
geographies for ITV and
part of our business.
earnings before interest, tax
other broadcasters and
Performance
ITV Studios total revenue
declined by 25% to £1,370
and amortisation (EBITA) is
platform owners.
calculated by adding back
exceptional items and
Performance
including high-end production
The number of hours of
million. This was impacted by
tax credits. It reflects the
content produced by ITV
the pause in global productions
underlying performance of
Studios declined by 15% to
due to the COVID-19 pandemic
the business and provides
7,120 hours. This was driven
which caused a significant delay
a more meaningful comparison
by the pause in global
in the delivery of productions.
of how the business is
productions and the
The subsequent social
managed and measured on
subsequent delay in deliveries.
distancing and health and
a day-to-day basis. The margin
safety protocols that have had
is calculated based on total
to be implemented, have caused
ITV Studios revenue.
further delays to productions,
particularly scripted.
Performance
Total organic revenue at
constant currency (which
ITV Studios adjusted EBITA
margin was 11% (2019: 15%),
impacted by the lost revenue,
excludes 2019 acquisitions
ongoing fixed costs within the
and assumes exchange rates
business, and incremental costs
remain consistent with 2019)
associated with social
was also down 25%. There was
distancing guidelines and
a £3 million unfavourable
health and safety protocols
currency impact in the year.
in productions.
2020
£1,370m
25% decline
in 2020
2020
11%
4% point
decline
in 2020
2020
7,120 hrs
15% decline
in 2020
2020
£1,577m
11% decline
in 2020
Transform
Broadcast (M&E)
revenue
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 11% to £1,577
million. There was strong
growth in online revenues,
up 17%, but this was more
than offset by a decline in
NAR, sponsorship and
creative partnerships
revenues, all of which were
impacted by the pandemic.
2017
2018
2019
2020
1,781
1,795
1,768
1,577
To grow total advertising in
a flat NAR market
Strategic Report
Governance
Financial Statements
Additional Information
In 2020, the performance of all our KPIs and
the delivery of corresponding targets has been
impacted by the COVID-19 pandemic. Further
detail is included in the following tables and
within our Operating and Performance Review.
ITV Group
Grow
UK and global production
Transform
Broadcast (M&E)
Adjusted EPS1
Total non-advertising
Cost savings
Profit to cash
conversion1
Total Studios
revenue growth
Studios adjusted EBITA
margin2
Total production hours
Total advertising
revenue
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 15% to
7,120 hours. This was driven
by the pause in global
productions and the
subsequent delay in deliveries.
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 11% to £1,577
million. There was strong
growth in online revenues,
up 17%, but this was more
than offset by a decline in
NAR, sponsorship and
creative partnerships
revenues, all of which were
impacted by the pandemic.
Definition
Total Studios revenue
measures the scale and success
of our global studios business.
It includes revenues from
programmes sold to ITV
Broadcast (M&E), which as an
integrated producer
broadcaster, is an important
part of our business.
Performance
ITV Studios total revenue
declined by 25% to £1,370
million. This was impacted by
the pause in global productions
due to the COVID-19 pandemic
which caused a significant delay
in the delivery of productions.
The subsequent social
distancing and health and
safety protocols that have had
to be implemented, have caused
further delays to productions,
particularly scripted.
Total organic revenue at
constant currency (which
excludes 2019 acquisitions
and assumes exchange rates
remain consistent with 2019)
was also down 25%. There was
a £3 million unfavourable
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 11% (2019: 15%),
impacted by the lost revenue,
ongoing fixed costs within the
business, and incremental costs
associated with social
distancing guidelines and
health and safety protocols
in productions.
2020
£1,370m
25% decline
in 2020
2020
11%
4% point
decline
in 2020
2020
7,120 hrs
15% decline
in 2020
2020
£1,577m
11% decline
in 2020
2017
2018
2019
2020
1,579
1,670
2017
2018
1,822
2019
1,370
2020
11
15
15
15
2017
2018
2019
2020
8,468
8,917
8,393
7,120
2017
2018
2019
2020
1,781
1,795
1,768
1,577
revenues
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. In 2020,
effectiveness of cash
attributable to equity
internal revenue) excluding
this also includes temporary
generation used for working
shareholders. Adjusted profit
advertising revenue (being net
savings as a result of the
capital management. It is
is defined as profit for the
year attributable to equity
advertising revenue (NAR),
COVID-19 pandemic. Managing
calculated as our adjusted cash
VOD and sponsorship). This is
our cost base is key as we aim to
flow as a proportion of adjusted
shareholders after adding back
an important measure as we
run our business as efficiently
EBITA (see definition within
exceptional items and including
continue to rebalance the
as possible and fund
Studios adjusted EBITA margin).
high-end production tax
business away from our
investments in line with our
Adjusted cash flow, which
credits. Further adjustments
reliance on advertising.
strategic priorities.
include amortisation and
impairment of assets acquired
Performance
Performance
reflects the cash generation
of our underlying business,
is calculated on our statutory
through business combinations,
Non-advertising revenue
We delivered £116 million of
cash generated from
net financing costs and the tax
decreased by 21% in 2020 to
cost savings in 2020 which was
operations and adjusted for
effects relating to these
£1,683 million, driven almost
ahead of the target of £60
exceptional items, net of
items. It reflects the business
entirely by the decline in ITV
million for the year. Of the cost
capex on property, plant and
performance of the Group in
Studios total revenue by 25% to
savings achieved £21 million are
equipment and intangible
a consistent manner and in
£1,370 million due to
permanent and £95 million are
assets, and including the cash
line with how the business is
productions pausing in March as
temporary savings.
impact of high-end production
managed and measured on
a result of the pandemic.
tax credits.
a day-to-day basis.
Offsetting this were increases
Since 2019, we have delivered
in Direct to Consumer revenue
a cumulative £46 million of
Performance
Performance
of 4% to £87 million, SDN
permanent cost savings.
Profit to cash conversion was
Adjusted EPS decreased by 22%
revenue of 6% to £73 million,
In 2021, we will deliver around
138% in the year, driven by a
from 13.9p to 10.9p. This was
and other Broadcast revenue
£30 million of permanent cost
large working capital inflow
(which includes BritBox UK) of
savings, with total cumulative
arising from a reduction in
8% to £153 million.
cost savings of around
programme stock (where we
predominantly due to the
decline in total advertising
revenue (TAR), and Studios
revenues and margin as a result
of the impact of COVID-19.
£100 million by 2022. This is
delivered programmes but
£40 million – £45 million more
were unable to continue
than our original guidance of
producing) and the timing of
£55 million to £60 million over
VAT payments which have been
this period.
deferred. This is expected to
unwind in 2021.
2020
10.9p
22% decline
2020
in 2020
£1,683m
21% decline
in 2020
2020
138%
Target
3 years to 2021
Target
4 years to 2022
Target
3 years to 2021
Target
3 years to 2021
Target
3 years to 2021
Target
3 years to 2021
Strategic ambition
Grow by at least 5% CAGR
Deliver £55–£60 million
Maintain at around 85%
run-rate of savings by 2022
Grow by at least 5% average
CAGR
Maintain at 14% to 16%
Grow to 10,000
To grow total advertising in
a flat NAR market
1. A full reconciliation between our adjusted and statutory results is provided in the APMs on page 55.
2. A full reconciliation between our adjusted and statutory results is provided in the APMs.
ITV plc Annual Report and Accounts 2020
25
Strategic Report KPIs continued
Transform
Broadcast (M&E) (continued)
Online revenue growth
Total ITV viewing1
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 17% in the
year, despite the uncertainty
caused by the COVID-19
pandemic.
Definition
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.
Performance
Total ITV viewing grew by 1% to
16.6 billion hours with more
viewing across our live linear
channels. This was driven by
our good schedule and also
benefited from lockdown
restrictions in the UK. Total
broadcast viewing (broadcast
channels including TV VOD) was
up 6% with growth on: the BBC
(for news and daily government
briefings); Channel 4 (for The
Great British Bake Off and
Gogglebox); and Sky (for box
sets and football). Including
unmatched viewing (SVOD,
YouTube, games consoles),
total TV set viewing was up
15%, driven by growth to
SVOD platforms.
External source: BARB/Advantage,
Crocus and third-party platforms
ITV Family share
of viewing (SOV)
Definition
Keeping our free-to-air
proposition strong with
unrivalled commercial
audiences, 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
ITV Family SOV declined 4% to
22.2% in 2020. Within this, ITV
main channel was down 1% to
16.7%, which is the third biggest
SOV in a decade. ITV’s other
channels were down 13%
to 5.5% which was driven
predominantly by ITV2 due to
no summer Love Island and a
lower volume of the soaps/new
content. While our daytime
linear viewing was strong in
2020, our share of peak hours
was impacted by the increased
news output on the BBC, fewer
episodes of the soaps and a
lower volume of new content.
External source: BARB/AdvantEdge
Online viewing
ITV Hub registered user
Brand consideration
Direct to
Consumer revenue
Paying product
relationships
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+, is the
online home for our family of
channels and content. While
viewing on the ITV Hub has
grown rapidly in prior years,
online viewing in 2020 declined
by 5% to 482 million hours. This
was significantly impacted by
no summer Love Island, less
episodes of the soaps, no major
sporting event and a lower
volume of new content in the
year. We expect an increase in
online viewing in 2021.
External source: Crocus
Expand
Direct to Consumer
accounts
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 and have been active in
Our brand perception is very
of our strategy. It measures
increasing the number of
the last three years. The size of
important as we look to attract
revenue generated directly
people who pay for an ITV
our viewer online reach is key
light viewers to ITV and build
from relationships with a
for our advertising proposition.
a Direct to Consumer business.
customer through the
purchase of goods and
services, and entry into
product as well as increasing
spend per customer. This KPI
measures the total number of
paying relationships we have
The target of 30 million
Performance
registered user accounts was
Brand consideration in 2020
competitions. This excludes
with consumers.
achieved in 2019.
was 50%, down three
BritBox revenues.
percentage points on 2019. This
Performance
Performance
was driven by the absence of
Performance
Paying product relationships
The ITV Hub grew the number
key content in the schedule
Direct to Consumer revenue
declined by 7% to 7.8 million
of registered user accounts by
which would normally have a
grew 4% to £87 million in
in 2020. The excludes
6% to 32.6 million in 2020.
positive impact (sport, dramas,
2020. Growth was
relationships from BritBox.
This growth continues to be
key entertainment), along with
predominantly driven by an
driven by our high-quality
strong competition from the
increase in competitions
The decline in the year was
content and good user
SVOD platforms who
revenue which benefited from
largely due to the absence of
experience, which has been
significantly benefited from
strong daytime viewing during
pay per view boxing matches,
supported and enhanced by
marketing during the pandemic.
the year. Offsetting this was
and a reduction in the average
a process of continued
All PSBs saw a decline in their
the absence of pay per view
number of Hub+ subscriptions
improvement and investment
brand consideration during
boxing matches in the year,
and lower live event
in the year.
2020. ITV’s brand consideration
and the closure of the majority
attendees, both of which were
The ITV Hub helps ITV reach
two percentage points.
2020 in line with government
restrictions, nationwide
for light viewers declined by
of our live events from March
impacted by travel
External source: YouGov
impacted this revenue stream.
ITV Hub+ in particular, no
restrictions, which adversely
lockdowns in the UK, and for
valuable light viewers and
younger audiences, who
are increasingly using the
ITV Hub for simulcast as well
as catch-up. Simulcast viewing
hours were up 13% year-
on-year.
summer Love Island, less
requirement for downloading
for EU portability, and a lower
volume of new content in
the year.
2020
17%
2020
16.6bn hrs
1% increase
in 2020
2020
22.2%
4% decline
in 2020
2020
482m hrs
5% decline
in 2020
2020
32.6m
6% growth
in 2020
2020
49.6%
3% pts
decline
in 2020
2020
£87m
4% growth
in 2020
2020
7.8m
7% decline
in 2020
2017
14
2017
2018
2019
2020
21
17
36
2018
2019
2020
16.6
2017
17.0
2018
16.3
2019
21.7
2017
337
23.2
2018
23.2
2019
16.6
2020
22.2
2020
447
506
482
2017
2018
2019
2020
21.3
27.6
2017
2018
30.8
2019
32.6
2020
58.1
58.9
52.9
49.6
Target
3 years to 2021
Double digit growth
per annum
Strategic ambition
Strategic ambition
To maintain total viewing1
Above 21%
Target
3 years to 2021
Double digit growth
per annum
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.
26
ITV plc Annual Report and Accounts 2020
Target
3 years to 2021
Increase to 30 million
Target
3 years to 2021
Increase to 60%
for all adults
Target
3 years to 2021
Grow to at least
£100 million
Target
3 years to 2021
Grow to 10 million
Strategic Report
Governance
Financial Statements
Additional Information
Transform
Broadcast (M&E) (continued)
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
Total ITV viewing is the total
Keeping our free-to-air
revenues from VOD via the
number of hours spent watching
proposition strong with
Online viewing is an important
indicator of our online success
ITV Hub. With the investment
ITV channels live and recorded
unrivalled commercial
as it measures how long
in the ITV Hub and the
within 28 days, third-party VOD
audiences, is vital for the
significant growth of viewing
platforms, ITV Hub on owned
Broadcast business, and ITV
viewers are spending online
watching long-form content2.
on the ITV Hub these are now
and operated and ad-funded
Family SOV helps measure this.
It is calculated as the total
a material part of our
platforms, ITV Hub+, and
ITV Family SOV is the total
number of hours ITV VOD
advertising revenues and an
managed YouTube channels.
viewing audience over the year
content is viewed on owned
important measure of our
success.
Performance
achieved by ITV’s family of
and operated ad-funded
channels as a proportion of
platforms and ITV Hub+
Total ITV viewing grew by 1% to
total television viewing,
viewing.
Performance
16.6 billion hours with more
including the BBC Family.
Online revenue continued to
viewing across our live linear
Performance
grow strongly, up 17% in the
channels. This was driven by
Performance
The ITV Hub and ITV Hub+, is the
year, despite the uncertainty
our good schedule and also
ITV Family SOV declined 4% to
online home for our family of
caused by the COVID-19
benefited from lockdown
22.2% in 2020. Within this, ITV
channels and content. While
pandemic.
restrictions in the UK. Total
main channel was down 1% to
viewing on the ITV Hub has
broadcast viewing (broadcast
16.7%, which is the third biggest
grown rapidly in prior years,
channels including TV VOD) was
SOV in a decade. ITV’s other
online viewing in 2020 declined
up 6% with growth on: the BBC
channels were down 13%
by 5% to 482 million hours. This
(for news and daily government
to 5.5% which was driven
was significantly impacted by
briefings); Channel 4 (for The
predominantly by ITV2 due to
no summer Love Island, less
Great British Bake Off and
no summer Love Island and a
episodes of the soaps, no major
Gogglebox); and Sky (for box
lower volume of the soaps/new
sporting event and a lower
sets and football). Including
content. While our daytime
volume of new content in the
unmatched viewing (SVOD,
YouTube, games consoles),
linear viewing was strong in
year. We expect an increase in
2020, our share of peak hours
online viewing in 2021.
total TV set viewing was up
was impacted by the increased
15%, driven by growth to
news output on the BBC, fewer
External source: Crocus
SVOD platforms.
External source: BARB/Advantage,
Crocus and third-party platforms
episodes of the soaps and a
lower volume of new content.
External source: BARB/AdvantEdge
Definition
A registered user is an individual
viewer who has signed up to the
ITV Hub and have 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
Brand consideration in 2020
was 50%, down three
percentage points on 2019. This
was driven by the absence of
key content in the schedule
which would normally have a
positive impact (sport, dramas,
key entertainment), along with
strong competition from the
SVOD platforms who
significantly benefited from
marketing during the pandemic.
All PSBs saw a decline in their
brand consideration during
2020. ITV’s brand consideration
for light viewers declined by
two percentage points.
External source: YouGov
The target of 30 million
registered user accounts was
achieved in 2019.
Performance
The ITV Hub grew the number
of registered user accounts by
6% to 32.6 million in 2020.
This growth continues to be
driven by our high-quality
content and good user
experience, which has been
supported and enhanced by
a process of continued
improvement and investment
in the year.
The ITV Hub helps ITV reach
valuable light viewers and
younger audiences, who
are increasingly using the
ITV Hub for simulcast as well
as catch-up. Simulcast viewing
hours were up 13% year-
on-year.
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. This excludes
BritBox revenues.
Performance
Direct to Consumer revenue
grew 4% to £87 million in
2020. Growth was
predominantly driven by an
increase in competitions
revenue which benefited from
strong daytime viewing during
the year. Offsetting this was
the absence of pay per view
boxing matches in the year,
and the closure of the majority
of our live events from March
2020 in line with government
restrictions, which adversely
impacted this revenue stream.
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 7% to 7.8 million
in 2020. The excludes
relationships from BritBox.
The decline in the year was
largely due to the absence of
pay per view boxing matches,
and a reduction in the average
number of Hub+ subscriptions
and lower live event
attendees, both of which were
impacted by travel
restrictions, nationwide
lockdowns in the UK, and for
ITV Hub+ in particular, no
summer Love Island, less
requirement for downloading
for EU portability, and a lower
volume of new content in
the year.
2020
17%
2017
14
2018
2019
2020
21
17
Target
3 years to 2021
per annum
2020
16.6bn hrs
1% increase
in 2020
2020
22.2%
4% decline
in 2020
2020
482m hrs
5% decline
in 2020
2020
32.6m
6% growth
in 2020
2020
49.6%
3% pts
decline
in 2020
2020
£87m
4% growth
in 2020
2020
7.8m
36
2018
2017
2019
2020
16.6
2017
17.0
2018
16.3
2019
21.7
2017
337
23.2
2018
23.2
2019
447
506
482
16.6
2020
22.2
2020
2017
2018
2019
2020
21.3
27.6
2017
2018
30.8
2019
32.6
2020
58.1
58.9
52.9
49.6
2017
2018
2019
2020
65
81
2017
2018
84
2019
87
2020
7% decline
in 2020
6.7
8.5
8.4
7.8
Strategic ambition
Strategic ambition
Double digit growth
To maintain total viewing1
Above 21%
Target
3 years to 2021
Double digit growth
per annum
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.
Target
3 years to 2021
Increase to 30 million
Target
3 years to 2021
Increase to 60%
for all adults
Target
3 years to 2021
Grow to at least
£100 million
Target
3 years to 2021
Grow to 10 million
ITV plc Annual Report and Accounts 2020
27
Strategic Report
Strategic Report
Operating and
Performance Review
ITV’s operational and financial performance in 2020
was materially impacted by the COVID-19 pandemic,
which caused the majority of productions to pause
and a significant decline in advertising demand.
Despite this, ITV continued to make good progress in
executing its strategy, building a digitally led media
and entertainment company.
Following the restart of productions after
global COVID-19 lockdown restrictions, our
productions follow country specific health and
safety protocols and social distancing measures.
Key financial
highlights
See APMs on page 55 for a
full reconciliation between our
statutory and adjusted results.
Group external revenue
Total advertising revenue
£2,781m
-16% (2019: £3,308m)
£1,577m
-11% (2019: £1,768m)
Total non-advertising
revenue
£1,683m
-21% (2019: £2,117m)
Adjusted EBITA
Adjusted EPS
Statutory EPS
Reported net debt
£573m
-21% (2019: £729m)
10.9p
-22% (2019: 13.9p)
7.1p
-40% (2019: 11.8p)
£545m
(2019: £893m)
ITV’s operational and financial performance
in 2020 was materially impacted by the
COVID-19 pandemic, with government
imposed lockdowns and containment
measures in the UK and internationally
negatively impacting productions and
causing a significant decline in the demand
for advertising. Despite the disruption and
challenges created, we worked with purpose
and determination to successfully manage
our way through the crisis while investing in
our future. The significant value of being an
integrated producer broadcaster was
evident during 2020 and enabled us to
continue investing in and delivering our key
strategic priorities. Within ITV Studios, we
further invested in creative talent and our
content pipeline, and across the business
focused on digitally transforming the
business externally and internally.
We have restructured the Broadcast
business to create a new Media and
Entertainment division to better reflect and
serve changing viewing habits; the delivery
of the ITV Hub acceleration plan remains on
track; Planet V (our programmatic
addressable advertising platform) was
successfully rolled out to the majority of
major agencies; content and distribution on
BritBox UK were extended, along with the
international roll out of BritBox in Australia,
and, we augmented our data and
analytics team.
The global lockdown restrictions during
2020 drove an increase in viewing and
demand for content across all platforms.
ITV Studios’ strong position in the
international market, with its diversity in
scripted and unscripted content production,
enviable talent pool, development pipeline,
and strength in relationships with
broadcasters, distribution networks and
platform owners was critical during this
time. It was able to capitalise on the demand
for content from broadcasters and OTT
platforms for both new and library content.
While this revenue stream is small, it helped
to partly offset some of ITV Studios’ overall
revenue decline from the delay in
productions. SVOD platforms, who have
been less financially impacted than FTA
broadcasters during the pandemic have
continued to commission new content,
which ITV Studios has been in a good
position to serve.
Our Broadcast business, while seeing a
decline in advertising, saw an increase in
total viewing in 2020 with people watching
more linear television during lockdown
restrictions. Our schedule was impacted
during the pandemic but we continued to
broadcast live daytime and news
programming that played a key part in
providing viewers with accurate and
trustworthy information, and a broad
schedule of entertainment and drama to
provide an escape. While the viewing
landscape changed during the pandemic,
with people streaming more content than
ever before, ITV’s extensive offering of
linear television channels, the ITV Hub and
BritBox, gave viewers the choice in how,
where and when they consume content,
while continuing to provide advertisers with
mass simultaneous reach, alongside a more
targeted advertising proposition.
Group financial overview
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.
The COVID-19 pandemic significantly
impacted our two main sources of revenue –
production and advertising – which were
both down in 2020. Total ITV revenue
decreased by 16% to £3,260 million (2019:
£3,885 million), with external revenue down
16% at £2,781 million (2019: £3,308 million).
Total advertising revenue was down 11% to
£1,577 million (2019: £1,768 million) driven
by a decrease in NAR, partly offset by online
VOD advertising revenue which was up 17%
in the year. Total non-advertising revenue
was down 21% to £1,683 million (2019: £2,117
million), of which ITV Studios was down 25%
at £1,370 million (2019: £1,822 million).
Network schedule costs were £156 million
lower in the year at £935 million (2019: £1,091
million), and this coupled with the delivery of
£116 million of overhead cost savings, more
than offset the decline in TAR in the year. The
28
ITV plc Annual Report and Accounts 2020
Key financial
highlights
See APMs on page 55 for a
full reconciliation between our
statutory and adjusted results.
£2,781m
-16% (2019: £3,308m)
£1,577m
-11% (2019: £1,768m)
revenue
£1,683m
-21% (2019: £2,117m)
Strategic Report
Strategic Report
Governance
Governance
Financial Statements
Financial Statements
Additional Information
Additional Information
Group external revenue
Total advertising revenue
Total non-advertising
Adjusted EBITA
Adjusted EPS
Statutory EPS
Reported net debt
Ant and Dec’s Saturday Night Takeaway, produced
by ITV Studios UK, had its 16th series in 2020 and was
partly filmed under UK lockdown restrictions. It
averaged 8.5 million viewers across the series.
£573m
-21% (2019: £729m)
10.9p
-22% (2019: 13.9p)
7.1p
-40% (2019: 11.8p)
£545m
(2019: £893m)
£116 million of cost savings delivered was
ahead of our planned £60 million. Of this,
£21 million were permanent and £95 million
were temporary. The permanent savings
include contract renegotiations across the
business and headcount savings from
reorganisational changes, particularly in ITV
Studios. The temporary savings were in
relation to steps taken to mitigate the
impact of COVID-19, including a reduction in
executive and non-executive director pay of
20%, a suspension of performance-related
cash bonuses, the furlough of colleagues
during the height of the pandemic, and the
natural decrease in non-essential spend such
as travel and entertainment. Since 2019,
we have delivered a cumulative £46 million
of permanent cost savings. In 2021 we will
deliver around £30 million of permanent cost
savings, with total cumulative cost savings
of around £100 million by 2022 (from 2019).
This is £40 million to £45 million more than
our original guidance over this period. We
continue to take a systematic multi year
approach to our cost saving programme
which is increasing in its effectiveness as
it matures.
Our essential investments to support our
strategic priorities totalled £16 million in
the year which was slightly lower than our
planned £18 million due to timing. This
will unwind in 2021, and our essential
investments will be £25 million, £13 million
ahead of our previous guidance as we
accelerate the delivery of our strategy.
BritBox UK venture loss was £59 million
which was in line with our guidance of £55
million to £60 million.
Adjusted EBITA declined 21% to £573 million
(2019: £729 million), with a 43% decline in
ITV Studios adjusted EBITA and a 9% decline
in Broadcast adjusted EBITA. The margins of
both businesses have been impacted by the
decline in revenue, ongoing fixed costs and
our essential investments to support the
delivery of our strategic priorities.
Adjusted financing costs were down £4 million
year-on-year to £36 million and our adjusted
tax rate was 18% (2019: 18%). Adjusted EPS
declined 22% to 10.9p (2019: 13.9p).
Statutory EBITA was £561 million, down 19%
(2019: £693 million), which was marginally
lower than the decline in adjusted EBITA
due to a decrease in production tax credits
in the year. Total exceptional items were
£114 million (2019: £22 million) and
includes costs relating to COVID-19, the
impairment of sports rights, and an onerous
contract provision.
Statutory financing costs were £44 million
which was down in 2020 due to the inclusion
of Eurobond buyback costs in 2019 (2019:
£68 million). Our reported effective tax rate
was 13.5% (2019: 9.8%) and statutory EPS
decreased by 40% to 7.1p (2019: 11.8p).
See the Finance Review for further detail.
We have good access to liquidity. At
31 December 2020, we had cash and
committed undrawn facilities totalling
£1,447 million, including unrestricted cash of
£618 million. Our profit to cash conversion
was 138% (2019: 87%). At 31 December 2020
our reported net debt (including IFRS16
liabilities) was £545 million (31 December
2019: £893 million) which benefited from
the deferred VAT payments and is before
earnout payments which we anticipate
paying in 2021. Our reported net debt
(including IFRS 16 liabilities) to adjusted
EBITDA was 0.9x (31 December 2019: 1.2x).
We continue to maintain tight control over
cashflow and costs whilst continuing to
pay our suppliers on the agreed terms.
Our objective is to run an efficient balance
sheet and manage our financial metrics
appropriately, consistent with investment
grade metrics over the medium term. Our
priority remains to invest in our key assets
and value drivers in line with our strategic
priorities and balance this investment with
the returns to shareholders. The Board
recognises the importance of the dividend
to our shareholders and intends to restore
dividend payments as soon as
circumstances permit.
A range of scenarios reflecting ITV’s
principal risks, including those arising from
the ongoing COVID-19 pandemic, have been
modelled and considered in the assessment
of the longer-term viability of ITV. See page
86 of our Viability Statement.
ITV plc Annual Report and Accounts 2020 29
Strategic Report Operating and Performance Review continued
Strategic Report
ITV Studios
ITV Studios is the largest commercial
producer in the UK, as well as one of the
largest producers in Europe, and one of
the largest independent unscripted
producers in the US. With a combined
content library of over 46,000 hours,
it is also one of the largest distributors
in the UK.
Growing UK and global productions is
central to ITV’s More than TV strategy,
with ITV Studios aiming to be a leading
creative force in global content
production and distribution. As ITV
Studios creates more content, our linear
and on-demand channels in the UK
provide a platform to showcase our
programmes before distributing them
further in the UK and internationally. In
addition, we have built significant scale in
the key creative markets around the
world that also drive content revenues,
creating and producing programmes and
formats that return and travel.
At the start of 2020, the international
distribution and commercial exploitation
business of ITV Studios was reorganised
from an operational perspective to
strengthen ITV Studios’ position as a
creator, producer and distributor of
world-leading programmes. The new
structure focuses on three centres of
excellence – the Creative Network, which
boosts creativity across ITV Studios’
unscripted format labels to increase the
potential of developing global hit shows;
Global Entertainment, which brings
together international unscripted format
sales and exploitation across the group
under one roof, and Global Distribution,
which focuses on the international
distribution of finished tape versions of
both drama and unscripted programmes.
The three centres of excellence will work
closely together and with ITV Studios’ UK
and international production businesses.
30
ITV plc Annual Report and Accounts 2020
The Serpent was produced by Mammoth
Screen (part of ITV Studios UK) for the BBC and
Netflix internationally. It has been well received
generating over 30 million streams on the BBC
iPlayer.
The Graham Norton Show is produced by
So Television (part of ITV Studios UK) for the
BBC and has been broadcast for 13 years.
Line of Duty is a popular scripted series
produced by World Productions (part of ITV
Studios UK) for the BBC. The sixth series is due
for delivery in 2021.
Strategic Report
Governance
Financial Statements
Additional Information
Resilient and diverse production
and distribution businesses in a
challenging year
Performance in our different production
territories can be impacted by phasing and
in a normal year, we manage this risk
through our portfolio. COVID-19 impacted
the production business differently in each
territory due to restrictions varying by
country, and different customer bases,
however, through the resilience and
diversity of each territory, we were able to
mitigate some of the negative impact
caused by the pandemic.
While the majority of our productions were
paused in mid-March, the teams focused on
remote post-production, creative
development and growing the creative
pipeline. We did not cut development spend
during 2020 and this places ITV Studios in a
strong position to meet the increasing
global demand for content. Our scale means
that we were able to manage risks
effectively when restarting productions,
and the safeguards in place have enabled us
to be more resilient in subsequent
lockdowns, continuing to producing content.
During the first government lockdown in the
UK, with the innovation, creativity and
dedication of our production teams, we
were able to keep producing our daytime
shows. In addition, we filmed other shows
without a studio audience, including The
Graham Norton Show, The Martin Lewis
Money Show and Saturday Night Takeaway,
and we made Isolation Stories a short
four-part drama written, filmed and edited
during the UK lockdown. Differing country
restrictions also enabled us to continue
filming in some of our international
locations, including the Netherlands
(Koffietijd – daily morning talk show),
Germany (The Chase) and Australia (The
Voice and The Chase).
ITV worked closely with the UK government
and the industry to develop a set of
protocols to minimise COVID-19 health and
safety risks to our talent, participants,
colleagues and crew during content
production. We have undertaken risk
assessments on all productions since the
start of the pandemic, and have developed
procedures outlining how the protocols
should be applied to each production
globally. This has enabled us to continue to
produce large scale entertainment formats,
such as Love Island in the US, and I’m A
Celebrity…Get Me Out Of Here! in both the
UK and Australia.
Despite the challenges presented by
COVID-19, ITV Studios was able to build upon
its global profile of being a leading creator,
producer and distributor of content, and
shaping the path for longer-term revenue
growth by focusing on the following
key areas:
Love Island continues to sell well
internationally. The format has been sold to
20 countries including the UK, USA, Australia,
Germany and South Africa, and is produced by
ITV Studios in many of those countries.
Strengthening creative talent
A key part of ITV Studios investment
strategy is to strengthen and retain our
creative talent and despite the challenges
caused by the pandemic, we continued to do
this successfully during 2020. ITV Studios US
entered into several new partnerships
aimed at further building and strengthening
the US business and establishing it as a
leading independent television studio in the
highly competitive US market. Within
scripted, ITV Studios America has partnered
with Tomorrow Studios and Nick Weidenfeld
to launch Work Friends, an animation label,
which secured its first commission for HBO
Max called 10-Year-Old-Tom. ITV Studios
America also invested in a new drama label
run by acclaimed producer Tony To (Band of
Brothers) and Dan Sackheim (True
Detective) called Bedrock Entertainment.
Within unscripted, ITV America partnered
with production label Nobody’s Hero,
created by Christopher Potts and Jonty
Nash, (Nailed It! and Sugar Rush for Netflix)
to develop and produce unscripted content
and formats, working alongside the
ITV team.
In the UK, award-winning producer Nicola
Shindler (Happy Valley, Last Tango in Halifax,
It’s A Sin, The Stranger) joined ITV Studios UK
launching a new scripted label focusing on
producing premium drama for the UK and
international market.
During the year ITV Studios also expanded
its existing production partnership with
Boomerang TV in Spain, giving Boomerang
exclusive production rights to a large
selection of the ITV Studios formats
catalogue. The Spanish market has a strong
demand for non-scripted programming and
is a bridge towards other Spanish speaking
countries. Altresmedia has since
commissioned ITV formats, Love Island and
game show, Divided, to be produced by
Boomerang TV in Spain.
In March 2021, ITV Studios International
stepped up its investment in Apple Tree
Productions in Denmark to take a
controlling stake.
Growing scripted
While ITV Studios is predominantly
unscripted in terms of scale, scripted is an
area of higher growth driven by demand
from the OTT platforms, and we also are
seeing increasing demand from platforms
internationally for original long-form and
secondary rights. Part of our strategy within
ITV Studios is to build a scripted business of
scale and we have boosted this through the
recent talent deals mentioned previously
and we will look at further investments in
other key scripted markets to continue to
take advantage of the demand for local
scripted content.
ITV plc Annual Report and Accounts 2020 31
Strategic Report Operating and Performance Review continued
we will not recover the full deficit on every
show. This efficiently uses the rights
windows of our content to maximise
monetisation opportunities.
ITVS Sweden and ITVS UK (commissioned as
The Cabins for ITV2), and also commissioned
in Belgium.
Globalising and maximising the value of
key formats and monetising our strong
pipeline of programmes
Our Global Formats business includes
a large portfolio of some of the world’s
most successful entertainment and factual
entertainment formats that return and
travel, many of which are made globally
through ITV Studios’ production bases. We
are very focused on developing, managing
and exploiting our global formats to
maximise IP revenues. We have a portfolio
of world-class brands which we continue to
protect and strengthen each year, including
(number of countries the format has been
sold to, to date is included in brackets);
The Voice (70+ countries), Love Island (20
countries), The Chase (16 countries), Beat
The Chasers (5 countries), Four Weddings
(20+ countries), I’m A Celebrity…Get Me Out
Of Here! (11 countries) and Come Dine With
Me (40+ countries). These formats continue
to generate strong mass audiences for our
clients, with I’m A Celebrity…Get Me Out Of
Here! in the UK having one of its best
viewing performances in 2020, and Beat The
Chasers in the UK and Netherlands, and The
Chase in the US all launching successfully on
their respective channels/networks.
We have several new formats recently
commissioned in our UK, US and
International production bases that have
the potential to be future global hits. These
include UK formats; Moneyball, and Rat
In The Kitchen, which has had its first
commission in the US to be produced by
ITV America. In addition, Let Love Rule, an
ITVS Netherlands format produced by
Building on the success of key franchises,
we are also focusing on expanding our
production hubs, driving further sales of
formats by supporting productions in a
cost- effective and safe environment (e.g.
Love Island, I’m A Celebrity...Get Me Out
Of Here!). During 2020 we acquired the
unscripted formats catalogue from Elk
Entertainment, which includes the formats
and IP of 65 titles, as we look to continue
building our creative strength and
monetisation capabilities.
In 2020 across our Global Formats business
we sold 56 (2019: 62) different formats
internationally, 14 of which were sold to
three or more countries (2019: 14).
Through our Global Distribution business,
we focused on exploiting our 46,000+ hour
library of global scripted and unscripted
content assets and maximising the value of
primary and secondary windows with FTA,
Pay TV, SVOD and AVOD customers. We are
investing in ITV Studios produced content
(including Vigil, Line of Duty, Vera, and
McDonald & Dodds), selective third-party
content (including A Year on Planet Earth,
and Harry Palmer: The Ipcress File) as well
as executing high profile English and local
language drama deals, in turn attracting
more opportunities and talent. We also sell
an increasing amount of content to BritBox
UK and BritBox internationally. Going
forward we will look at how we drive
long-term revenues from new AVOD market
entrants such as Tubi, and Pluto, as well as
continuing to exploit new rights opportunities
including stacking and box sets.
Many of our scripted labels are creating and
producing high-quality content with global
appeal for FTA and OTT platforms, including
Mammoth Screen, creators of The Serpent,
McDonald & Dodds, Victoria, World on Fire
and Poldark, and World Productions
creators of Line of Duty, Save Me, The
Pembrokeshire Murders, Vigil and
Bodyguard. Our international scripted
businesses Cattleya in Italy and Tetra Media
Studio in France, also create and produce
long-running and new critically acclaimed
foreign-language dramas, including Paris
Police 1900 and Balthazar in France, and
Gomorrah, Suburra, Zero Zero Zero and
Summertime in Italy.
Diversifying customer base particularly
with local and international OTT
platforms
As the demand from OTT platforms grows,
this presents a significant opportunity for
ITV Studios to diversify its customer base
and grow revenues. In the US, we have
strengthened our relationships with SVOD
platforms, having both scripted and
unscripted development projects and
commissions in place with all the major
platforms. A third of US scripted revenues
now come from OTT’s. Our UK and
International Studios (aside from Italy)
remain more reliant on local broadcasters,
and going forward they will harness the
strength and position of the ITV Studios
group and key creative talent, to develop
their relationships with these platforms.
Original hours supplied to OTT platforms
increased by 4% in 2020, with scripted and
unscripted programmes including; Queer
Eye, Suburra, The Big Flower Fight and
Snowpiercer (internationally) all for Netflix,
Love Island France for Amazon – the first
reality show on the service and Becoming
for Disney+. New commissions for future
broadcast by OTTs include Spy Amongst
Friends for BritBox UK, Cowboy Bebop and
One Piece for Netflix, Physical for Apple TV,
along with several other titles in progress
with HBO Max, Netflix, Hulu and Amazon.
We expect that in 2021 we will double our
revenues from OTT platforms.
Producing more content for, and distributing
more content to OTT platforms will
impact our working capital going forward
due to the upfront cash requirements
and the extended payment profile from
the OTTs. In addition, it limits the ability
for us to maximise margins on high-value
scripted titles as the OTT platforms
invariably want worldwide rights for
original commissions.
We balance our financial exposure through
building a portfolio of customers and
programmes, across genres and their
content life cycle, with successful
international dramas offsetting the risk that
32
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
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
*
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
*
Includes the benefit of production tax credits.
Twelve months to 31 December
Scripted
Unscripted
Core ITV* and Other
Total ITV Studios revenue
2020
£m
535
234
343
258
1,370
(1,218)
152
11%
2020
£m
472
898
1,370
2020
£m
354
773
243
1,370
2019
£m
725
271
508
318
1,822
(1,555)
267
15%
2019
£m
573
1,249
1,822
2019
£m
520
1,018
284
1,822
Change
£m
Change
%
(190)
(37)
(165)
(60)
(452)
337
(115)
(26)
(14)
(32)
(19)
(25)
(22)
(43)
Change
£m
Change
%
(101)
(351)
(452)
Change
£m
(166)
(245)
(41)
(452)
(18)
(28)
(25)
Change
%
(32)
(24)
(14)
(25)
* Core ITV includes the soaps and daytime shows produced by ITV Studios for the ITV main channel.
Suburra is an Italian crime drama produced
by Cattleya (part of ITV Studios International)
for Netflix.
Crank Yankers is a comedy prank show
produced by ITV America for Comedy Central.
It had its fifth season in 2020 and has been
renewed for a sixth.
Let Love Rule is a new unscripted format
developed in the Netherlands. To date it has
been sold to four countries, and was adapted
as ‘The Cabins’ in the UK.
ITV Studios financial performance
in 2020
ITV Studios started 2020 with good
momentum, expecting a good slate of
programme deliveries over the full year and
to see revenue growth and a stable margin
being delivered. The COVID-19 pandemic
changed this outlook, causing around 230
of ITV Studios productions globally to be
paused or impacted as a result of country
lockdowns and restrictions on working
practises. While the majority of productions
were able to resume in the second half of
2020, the delay in production and delivery
of a number of our programmes caused ITV
Studios total revenue to decline by 25% in
2020 to £1,370 million (2019: £1,822 million),
with external revenue down 28% to £898
million (2019: £1,249 million). Total organic
revenue at constant currency was down
25%. There was a £3 million unfavourable
impact from foreign exchange in the year.
Due to the pause in productions, the
number of hours delivered in 2020 was
down 15% year-on-year to 7,120 hours,
this was lower than the decrease in
total revenue of 25%, due to the mix
of productions that were delivered.
While the year-on-year decrease in
scripted production hours was lower than
the decrease in unscripted hours, scripted
is of higher value and therefore had a more
significant impact on revenue in the year.
Scripted revenue was down 32% to
£354 million (2019: £520 million), with
unscripted revenue down 24% to
£773 million (£1,018 million) in the year.
Reflecting our presence in key global
production markets, 56% of ITV Studios’
revenue was generated outside the UK. This
was marginally lower than the prior year
(2019: 58%).
Adjusted EBITA was down 43% year-on-year
at £152 million (2019: £267 million), with the
adjusted EBITA margin at 11% (2019: 15%) and
a £1 million favourable impact from foreign
exchange. While ITV Studios is a largely
variable cost business, the decline in margin
reflects the lost revenue, ongoing fixed costs
in the business, investments of £8 million in
line with our strategic priorities, and costs
associated with social distancing guidelines
and health and safety protocols in
productions. This more than offset the £63
million of overhead cost savings delivered in
the year (£50 million of which are temporary
and £13 million permanent). While guidelines
remain in place globally to mitigate the
transmission of COVID-19, our productions
will continue to be impacted by increased
costs to adhere to social distancing and
safety protocols. Going forward we will
improve the use of technology and data to
drive cost and revenue efficiencies, taking
steps to digitalise processes and use remote
editing more routinely.
ITV plc Annual Report and Accounts 2020 33
Scripted
Unscripted
Core ITV
Strategic Report Operating and Performance Review continued
ITV Studios UK
As the largest commercial producer of
content in the UK, ITV Studios UK is made
up of nearly 30 production labels, with a
diverse range of scripted and unscripted
titles for the UK’s PSBs and OTT platforms.
The business is built upon many long-
running and recurring titles, the majority of
which are sold to the Broadcast business for
transmission on ITV’s family of channels,
ITV Hub and BritBox UK. The core portfolio
includes daytime programmes such as:
Good Morning Britain, This Morning, Loose
Women; the soaps: Coronation Street and
Emmerdale; and entertainment
programmes such as The Voice, Love Island
and I’m A Celebrity…Get Me Out Of Here! ITV
Studios UK’s share of original content on ITV
main channel was up at 68% (2019: 65%),
however, this is based on a lower available
network programme budget year-on-year.
In 2020, total ITV Studios UK revenue was
down 26% to £535 million (2019: £725
million), and also down 26% on an organic
basis. Internal sales to Broadcast and Direct
to Consumer was down 18% across the year,
with the first quarter of 2020 benefiting
from the return of Saturday Night Takeaway
and the new winter series of Love Island.
From the end of Q1, the rest of the year was
subsequently impacted by COVID-19 with
the delay and cancellation of productions.
This included a lower number of episodes of
Coronation Street and Emmerdale delivered
to Broadcast across Q2 and part of Q3, no
summer series of Love Island and, a lower
volume of drama deliveries compared
to 2019, with several planned deliveries
delayed into 2021. Deliveries in 2020
included: Saturday Night Takeaway, The Bay,
Beat The Chasers, The Pembrokeshire
Murders, The Voice Kids, The Chase,
I’m A Celebrity…Get me Out Of Here! and
the winter series of Love Island.
Internal deliveries in the first half of
2021 should include new and returning
programmes, Unforgotten, McDonald &
Dodds, Grace, Vera and the first series
of The Cabins.
Off-ITV revenues (productions for non-ITV
channels in the UK) decreased by 39%,
impacted by the delay of planned deliveries,
combined with strong comparatives from
the delivery of 2019 high-end scripted
commissions, including Noughts & Crosses,
World on Fire, Poldark and Harlots.
Offsetting this, was growth from new
and returning deliveries in 2020, such as:
The Big Flower Fight for Netflix; The
Serpent, Four Lives and Ghosts all for BBC;
and Back and Friday Night Dinner for
Channel 4. Deliveries in the first half of 2021
should include: Line of Duty, Vigil and The
Graham Norton Show all for the BBC; and 24
Hours in A&E and Countdown for Channel 4.
ITV Studios US
ITV Studios US is a scaled production
business, providing content to all the major
networks and cable channels in the US,
along with every major SVOD platform. It
has a good foundation of core programmes,
including unscripted titles with multiple
seasons and a high volume of episodes,
which, combined with the output from our
investment in scripted content over the last
few years, has enabled the business to grow
its presence significantly in a highly
competitive market. This diversity of content
and customer base has enabled ITV Studios
US to mitigate some of the impact seen
from the pandemic. In addition, a number of
programmes were remotely post-produced
during this time, many of which were
delivered in the first half of 2020.
ITV Studios US total revenue declined by
14% to £234 million (2019: £271 million)
and 12% to £238 million when adjusted for
the unfavourable foreign exchange impact.
Within ITV Studios America (scripted),
deliveries included Snowpiercer S2 to
TNT and S1 to Netflix, and Good Witch S6
to Hallmark. ITV America (unscripted)
deliveries included: Cannonball to NBC
and USA, Crank Yankers to Comedy Central,
Love Island S2 for CBS, and Becoming to
Disney+ along with core unscripted titles:
Alone, Marriage Bootcamp and First 48,
all delivered in the year. Offsetting this
was strong comparatives in 2019, which
included the delivery of two seasons of
Hell’s Kitchen to Fox.
ITV Studios America has several larger
scripted programmes which should deliver
in 2021, these include Physical for Apple TV,
10-Year-Old Tom for HBO Max, Cowboy
Bebop for Netflix, the third season of
Snowpiercer for TNT, and the seventh
season of Good Witch. Within ITV America,
deliveries expected in 2021 include Love
Island S3, Rat In The Kitchen for TBS, The
Chase for ABC, and Forged in Fire for History.
The development and commissioning
pipeline for the ITV Studios US is strong, with
several large scale unscripted commissions
in progress with existing and emerging
SVOD platforms, which have the potential
for multiple series.
ITV Studios International
ITV Studios International has production
bases in Australia, Germany, France, the
Netherlands, the Nordics, and Italy, where
we produce original scripted and unscripted
we produce original scripted and unscripted
content, as well as local versions of key
formats developed through our Global
Formats business.
Revenue within ITV Studios International
declined by 32% to £343 million
(2019: £508 million), and by 32% to
34
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
£342 million when adjusted for the favourable
impact of foreign currency. While the pause
in productions impacted most of our
territories, the decline was also driven by
strong comparatives in 2019 which had
deliveries of high-end scripted titles, such
as Zero Zero Zero and Gomorrah in Italy,
and Profilage and Une Belle Histoire in
France. Deliveries in 2020 included: Love
Island France for Amazon; Suburra and
Vampires for Netflix; Paris Police 1900 for
Canal+, Masantonio for Mediaset; and
Romulus for Sky Italia.
Productions across all our international
bases have largely resumed, but with many
of our large entertainment franchises
being filmed but with no audience. We
have scripted productions in France and
Italy underway but there remain challenges
operating under COVID-19 restrictions.
We have a good diversity of shows in our
portfolio across multiple territories and
we continue to strengthen the depth of
our offering.
In 2021 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.
Deliveries expected in the first half of 2021
should include Summertime for Netflix,
The Voice in France and Netherlands, The
Voice Kids in Germany, Love Island in
Germany and I’m A Celebrity…Get Me Out
Of Here in Australia and Germany.
Global Formats and Distribution
Global Formats and Distribution revenues
were down 19% year-on-year to £258 million
(2019: £318 million), with nil impact from
foreign exchange. Much of this decline was
driven by Global Formats, which had strong
comparatives due to a number of multi-year
deals secured for The Voice in 2019, and
other unrepeated 2019 format licensing
deals. Global Distribution saw increased
catalogue sales due to high demand for our
content globally as networks and platforms
tried to fill gaps in their schedule left by
the delay in productions during the year.
However, this was offset by the delay of new
scripted and unscripted content in the year.
Classic British scripted titles such as Marple,
Vera, Endeavour, Victoria and Poldark sold
well, with many territories relicensing old
seasons of programmes. We also benefited
from the international distribution of
Snowpiercer to Netflix and Little Birds
to Starz, Bodyguard entering its second
window rights, the distribution of natural
history titles such as Wild Tokyo and India’s
Wild Karnataka and global sales of Emmy
and Golden Globe award-winning Schitt’s
Creek. Unscripted titles such as The Graham
Norton Show, 24 Hours in Police Custody
and Autopsy USA also sold well.
In 2021, the full pipeline of new content for
Global Distribution will be dependent on
whether COVID-19 restrictions continue to
impact the filming of productions. However,
we have a strong slate of new scripted titles
including Grace, Line of Duty, Vigil and
The Serpent, and finished tapes sales of
unscripted formats including The Voice, Love
Island, Hell’s Kitchen, The Chase and Come
Dine With Me, all delivering across a number
of different territories. We will also start the
pre-selling third-party productions including
international spy drama, Harry Palmer:
The Ipcress File, and A Year On Planet Earth,
a new natural history series.
Romulus is a scripted production by
Cattleya for Sky Italia. It is based on the Roman
mythology story of Romulus and Remus and
filmed in archaic Latin.
Good Witch is a scripted production by ITV
Studios America for the Hallmark Channel. It
had its sixth season in 2020 and has been
renewed for its seventh, due in 2021.
Schitt’s Creek has received critical acclaim
globally. The six season sitcom started on CBC
in Canada and Pop TV in the USA, and is also
available on Netflix. ITV Studios owns the
global distribution and format rights.
ITV plc Annual Report and Accounts 2020 35
Strategic Report Operating and Performance Review continued
Strategic Report
Broadcast (M&E)
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, the online home
for content on our family of channels,
has grown rapidly over a number of years,
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 intellectual property (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.
The media market environment in which
we operate is dynamic. The viewing and
advertising landscape is evolving rapidly
and becoming increasingly competitive,
and our Broadcast business is constantly
adapting. COVID-19 accelerated some of
the changes we were already seeing
presenting both challenges and
opportunities. Our strategy is designed
to mitigate the long-term impact of
changing viewing patterns, and we are
increasing the pace of implementation.
As part of our More than TV strategy and
to better reflect and serve changing
viewing habits, the Broadcast business
has been restructured, creating a new
Media and Entertainment division which
is effective from 1 April 2021 with two
business streams – Broadcast and
On-Demand. The Broadcast business will
remain the home of ITV main channel and
will continue to deliver ITV’s USP of mass
simultaneous reach and unmissable
content. The On-Demand business will
focus on digital product development
and digital growth for ITV, providing new
content that appeals to audiences who
already do most or all of their viewing
on demand, and will serve it to them in
whatever way they want to access it.
36
ITV plc Annual Report and Accounts 2020
The Pembrokeshire Murders was produced
by World Productions for ITV. It was delivered
in 2020, and broadcast in January 2021. It is the
biggest drama on television to date in 2021,
with the series averaging 12.1 million viewers
across all devices.
Who Wants To Be A Millionaire had its
sixth series with Jeremy Clarkson as the
presenter. It remains a popular entertainment
game show on ITV.
The Virtual Grand National was broadcast
on ITV following the cancellation of the annual
live race due to COVID-19. It included 40 virtual
horses and riders and used technology and
data to determine how the race would have
been run, and the most likely winner.
Strategic Report
Governance
Financial Statements
Additional Information
Continuing to deliver
unrivalled audiences
ITV’s on-screen viewing in 2020 benefited
from lockdown restrictions in the UK, with
more people at home watching linear
television. Total ITV viewing (which
combines live viewing of ITV channels,
recorded and VOD) was up 1%, with ITV main
channel share of commercial impacts (SOCI)
up 2% to 25.8% (2019: 25.3%). ITV main
channel SOV and ITV Family SOV, however,
declined by 1% and 4% respectively to 16.7%
and 22.2% (2019: 16.9% and 23.2%) partly
impacted by the volume of news output on
the BBC, fewer episodes of the soaps and
less new content as a result of COVID-19.
Despite this, ITV main channel had its
third-biggest SOV in a decade.
Total broadcaster TV viewing (live and catch
up viewing to broadcast channels including
TV VOD) was up 6% in the year, benefiting
from the increase in viewing on the BBC,
along with Channel 4 (with increased
viewing for The Great British Bake Off and
Gogglebox), and Sky (due to increased
viewing for its box sets and football). Total
TV set viewing, which includes unmatched
viewing (content that cannot be matched to
broadcast TV such as SVOD, YouTube, games
consoles) was up 15% and driven by the
significant increase in viewing on SVOD
platforms during the year (Source: BARB).
With the lack of on-demand viewing drivers
such as the absence of summer Love Island,
fewer episodes of the soaps, lower volumes
of new content following the pause in
production and no major sporting event,
online viewing (which measures the total
number of hours viewers are spending
online) on the ITV Hub was down 5%
year-on-year. Within this, simulcast viewing
hours were up 13% in the year, as more
viewers used the ITV Hub as a destination
for live viewing via connected TVs and
streaming devices. The growth of the ITV
Hub is a key part of our strategy. We have a
number of initiatives focused on improving
the user experience and content to help
drive strong viewing over the coming year.
Further details are included in the ITV Hub
section on the following page. In addition,
as part of the restructure of the Broadcast
business, we will assess the appropriate
allocation of the network schedule cost
between our linear channels and AVOD to
balance our ability to deliver mass audiences
and increase on-demand viewing.
On average the number of minutes of
television viewers watched per day in 2020
was 192 minutes (C7 total broadcast TV
including catch up), up 5% on the previous
year (2019: 183 minutes), this is the first time
growth has been seen in total broadcast TV
viewing since 2010. Despite the decline in
SOV and online viewing, ITV delivered
record-breaking audiences both in linear and
on-demand, with programming such as Des,
Quiz, I’m A Celebrity…Get Me Out Of Here!
and The Chase. During the day, most of our
daytime shows had their strongest viewing
in years, including Good Morning Britain,
This Morning and Loose Women. However,
during peak hours, our share of linear
viewing was impacted by the factors
mentioned previously and the significant
increase in viewing on SVOD platforms,
particularly amongst 16-34s. While younger
viewers are watching less linear television
than they used to, television still reaches
on average, around 80% of young people
Bradley Walsh and Son: Breaking Dad
returned for its second series on ITV. It
averaged 5.6 million viewers and was ITV’s
third biggest factual show in 2020.
each week. Through delivering great
content such as Saturday Night Takeaway,
winter Love Island and Gordon, Gino and
Fred: Road Trip, we were able to reach them
both through linear and online, with ITV
main channel being the most-watched
channel for 16-34s in 2020 (Source:
BARB C7 viewing).
On ITV main channel, Coronation Street and
Emmerdale maintained their position as
the UK’s two largest soaps, with Coronation
Street increasing its audience year-on-year.
We successfully aired a range of new
programmes, including four of the top five
most-watched new dramas such as Des –
ITV’s biggest new drama ever, White House
Farm and Van Der Valk; new entertainment
shows, including The Masked Singer and
Beat The Chasers – the two biggest new
entertainment series launches in 13 years;
and successful factual entertainment,
including; Bradley Walsh & Son: Breaking
Dad, Gordon, Gino and Fred: Road Trip, and
Long Lost Family: Born Without A Trace. We
continue to drive significant audiences with
our returning brands such as The Voice,
Britain’s Got Talent, and I’m A Celebrity…Get
Me Out Of Here! – which was the most-
watched entertainment series of the year.
Our news programming performed well,
with our national weekday bulletins
increasing their share year-on-year. Viewing
was however impacted by the decision to
cancel or postpone the majority of sporting
tournaments and live entertainment
shows including the European Football
Championships, horse racing and the
summer series of Love Island. The delay
in delivery of a number of programmes,
particularly scripted, arising from the pause
in production in ITV Studios and other indies
also had an impact on viewing.
We continue to target the demographics
most highly demanded by advertisers –
particularly young and male audiences –
through our family of channels and online.
On ITV2, SOV and SOCI for 16-34s were
down 27% and 25% respectively, with
the cancellation of the summer series of
Love Island and less new content, having
a significant impact on the schedule.
Despite this, ITV2 remained the most-
watched digital channel for 16-34s for
the fourth year in a row. This was helped
by the winter series of Love Island, Ibiza
Weekender, and several box-office films.
On ITV3, ABC1 adults SOV was up 6% in the
year due to the strong slate of classic
dramas which appealed to the increased
number of people at home looking for
quality content to watch. Programmes
included Downton Abbey, Midsomer
Murders and Vera, as well as repeats of
Emmerdale and Coronation Street.
ITV plc Annual Report and Accounts 2020 37
BritBox
BritBox UK has seen good growth in
subscriptions in the year, and as expected,
the lockdown restrictions along with the
increase in content and distribution of the
service, increased the number of customers
signing up for the free trial period. We have
continued to see strong subscriber appeal
and in January 2021 we had over 500,000
subscriptions, which was ahead of our
business plan. Conversion and churn rates
are in line with our plan. Distribution of
BritBox UK was extended during the year,
with the roll out through BT and EE, the
service now available on over 20 million
devices and to 65% of streaming
households. It has also reached over 90%
brand awareness in the UK (Source: YouGov).
We are continuing to explore opportunities
to expand the distribution of BritBox UK and
are working with a number of platforms to
enable this. During the year Channel 4 and
Film4 content became available on the
platform and we saw the launch of our first
original commission, Spitting Image, which
helped drive a ten-fold increase in
subscriptions to the service. Spitting Image
has been recommissioned for a second
series in 2021, with four original dramas, and
one factual expected to launch on the
service across 2021 and 2022. The first will
be The Beast Must Die, and Secrets of the
Krays in the first half of 2021, followed by
Magpie Murders, Crime and A Spy Amongst
Friends. The content pipeline for BritBox UK
is healthy with further originals currently
in development.
Strategic Report Operating and Performance Review continued
On ITV4, Male SOV was down 1%, impacted
by the loss of sport in the schedule, such
as the Isle of Man TT, Tour of Britain and
Yorkshire and the Snooker Tour
Championship. The return of live sport with
snooker and horse racing in June helped to
mitigate some of this viewing decline.
We have a strong schedule in 2021 with
new and returning dramas including: The
Pembrokeshire Murders, Finding Alice,
Grace, Viewpoint, The Bay, Marcella,
Unforgotten, McDonald & Dodds and Vera;
and new and returning entertainment
including: The Masked Singer, Saturday
Night Takeaway, The Cabins, and the
summer series of Love Island. Our sporting
schedule includes the Rugby Six Nations
and the rescheduled European Football
Championships, along with the FA Cup
which we will start broadcasting in the
second half of 2021.
While there remains a risk that some
programmes due to broadcast during the
year, may be delayed due to continued
COVID-19 restrictions, being an integrated
producer broadcaster puts us in a unique
position enabling us to work with ITV
Studios to develop filming plans on key
programmes, and to source additional
library content for our channels.
Spontaneous consideration amongst all
adults and light viewers was down 3.3
percentage points and 2.5 percentage
points respectively year-on-year, mainly
impacted by the growth in SVOD brands
during the pandemic. Our decline was less
than that of the BBC demonstrating the
high-quality of our content and the positive
impact of our marketing investment.
Growing and enhancing our AVOD and
SVOD propositions
Our AVOD proposition is the ITV Hub in the
UK and our SVOD propositions are ITV Hub+,
BritBox UK, BritBox International in the US,
Canada and Australia, and Cirkus in the
Nordics, Germany, Austria and Switzerland.
ITV Hub
The ITV Hub has 32.6 million registered user
accounts (31 December 2019: 30.8 million)
and is available on 28 platforms, and is
pre-installed on the majority of connected
televisions currently sold in the UK.
During 2020, despite the challenges
presented by the COVID-19 pandemic, we
continued to invest in, and deliver the Hub
acceleration plan which is a key part of the
More than TV strategy. There has been a
process of continued enhancement and
improvement in the ITV Hub over the last
two years, focused on redesigning the
interface on all platforms to further
improve the overall user experience,
increasing personalisation, prominence
and distribution to make it a destination
for viewing our content, and integrating
BritBox UK, to make the transition to the
service seamless. We have also redesigned
the ITV News online site. During 2020 we
strengthened the content available
through extending the catch up window
for content from 30 days to 12 months;
trialling short-form content on iOs and
itv.com; showing live exclusive events
such as British Touring Cars, and had the
re-run of the 1996 European Football
Championship and the 2003 Rugby World
Cup. We also launched a ‘Continue
Watching’ option, a recommendations
rail, and a ‘My List’ function.
Our investment in the ITV Hub in 2021 will
be focused on further accelerating its
growth to make the ITV Hub a destination,
not just catch up service, along with rolling
out the redesign across connected TVs.
We plan to trial a new windowing strategy
which will include: increasing the number of
dramas series we make available in full on
the ITV Hub once the first episode launches
on linear – such as Finding Alice, The Bay
and Marcella; having exclusive content
including spin-offs from large
entertainment shows such as The Masked
Singer and Saturday Night Takeaway; and
increasing the curation of content using our
vast archive. We will also focus on the
increased distribution of the ITV Hub on new
platforms and TVs. In 2021 we would expect
our investment to drive an increase in online
viewing and monthly active users.
ITV Hub+
The ITV Hub+ offers an ad-free subscription
version of the ITV Hub with content
download capability. The number of
download capability. The number of
subscriptions at the end of December 2020
subscriptions at the end of December 2020
was c410,000 which was broadly in line with
was c410,000 which was broadly in line with
2019. The absence of key programming,
2019. The absence of key programming,
a lower volume of new content along
a lower volume of new content along
with travel restrictions resulting in people
with travel restrictions resulting in people
not requiring download functionality or EU
not requiring download functionality or EU
portability, all had an impact on our ability
portability, all had an impact on our ability
to drive new subscriptions in the year.
to drive new subscriptions in the year.
We continued our process of
We continued our process of
improvement on ITV Hub+, launching
improvement on ITV Hub+, launching
an annual subscription pass,
an annual subscription pass,
incorporating programme
incorporating programme
download functionality on
download functionality on
Android devices and
integrating in-app
purchases on Amazon.
At 31 December 2020,
EU portability on ITV Hub+ was
EU portability on ITV Hub+ was
disabled as the Brexit transition
disabled as the Brexit transition
period ended. In 2021 we would expect
period ended. In 2021 we would expect
the return of key entertainment shows
the return of key entertainment shows
and sport to positively impact our Hub+
and sport to positively impact our Hub+
subscriptions and we will focus on other
subscriptions and we will focus on other
initiatives including embedding Google
initiatives including embedding Google
Play billing in the app and creating
Play billing in the app and creating
more upselling opportunities for
more upselling opportunities for
ITV Hub+ within the ITV Hub.
ITV Hub+ within the ITV Hub.
38
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
Our international BritBox joint venture with
the BBC is currently available in the US,
Canada, and Australia, and provides an
ad-free SVOD service offering the most
comprehensive collection of British content
available in those territories. Subscriptions
have grown strongly, increasing by 50% in
the US and Canada in 2020. We now have
over 1.7 million BritBox subscriptions
internationally. We are planning a phased
roll out of BritBox in up to 25 countries, with
South Africa expected to launch in 2021. The
countries we have identified are those
where research indicates we could launch
the service profitably, managing our SVOD
rights more effectively and drive more value
from them. Our funding for the next phase
of the roll out will be from our share of
BritBox US cashflows, which is a profitable
service, and we will undertake a full business
case review for each territory before
deciding to launch.
Across all our SVOD services (including Hub+)
we now have over 2.6 million
subscriptions globally.
Strong linear and online advertising
proposition
While the COVID-19 pandemic and uncertain
outlook led advertisers to reduce their total
advertising spend, our Commercial team
continued to work very closely with
advertisers and agencies during the year to
create relevant and innovative marketing
and advertising opportunities. They helped
brands to market themselves in a way that
was socially responsible and reflected the
mood of the nation. During the height of the
pandemic, the team hosted weekly webinars
reaching over 3,000 customers and sent
weekly updates to all our customers during
this time. We removed the late booking
penalty for advertisers and had no charges
for making amendments to existing
campaigns to give advertisers as much
flexibility as possible during the uncertain
backdrop. ITV Creative remained operational
and was able to help advertisers film and
produce campaigns. Some of the innovative
campaigns we were involved in included BT
providing technology tips in the wake of the
pandemic, The People’s Ad Break, Waitrose
Pick For Britain, and Just Eat taking over an
ad break to support Britain Get Talking, our
mental health campaign.
Spitting Image was the first original for
BritBox UK. It helped drive a ten-fold increase in
subscriptions to the service and has been
recommissioned for a second series in 2021.
The Martin Lewis Money Show is produced
by Multistory Media (part of ITV Studios UK) and
started its tenth series in 2020. It was one of the
first productions to restart filming in the UK,
with a number of ‘specials’ across March to July.
ITV partnered with BT for an innovative
advertising campaign to promote technology
tips following the first lockdown in the UK.
Television remains one of the most efficient
and effective mediums for advertisers to
achieve mass reach and in 2020, ITV
delivered 94% of all commercial audiences
over three million and over five million.
As viewing and advertising become more
fragmented, the scale and reach of
advertising that television, and particularly
ITV, delivers becomes increasingly valuable.
We provide a safe, trusted, measured and
transparent environment in which to
advertise, and television generates the
highest return on investment of any media.
With the significant increase in television
viewing volumes, combined with the decline
in advertising revenue, there was 50% to
60% deflation in the cost of television
advertising during the height of the
pandemic compared to before the
pandemic. With the proven return on
investment which television offers, we set
up ITV AdVentures, aimed at encouraging
digitally native brands to advertise on
television for the first time, including car
insurance brand By Miles, pregnancy app
Peanut, business-to-business comparison
site Bionic, and Butternut Box, a subscription
service dog food brand.
The focus going forward will be to continue
to build deep strategic relationships with
our advertisers and the Commercial team
has a number of initiatives underway to help
drive this. This includes ITV Backing Business,
making it as flexible as possible for British
businesses to advertise on television,
providing them with marketing support and
a wealth of resources to help them return
to growth. We also forged partnerships
between Backing Business and established
advertisers, such as NatWest’s business
banking unit, as they launched a
competition for small businesses to win
advertising creative; and with Facebook
Portal to help people connect with their
friends and families over Christmas. In
addition, we created ITV Home Planet,
a new initiative for sustainable brands to
encourage viewers to reduce their carbon
footprint, with Quorn (meat substitute
brand) becoming ITV’s first brand partner.
During 2021 we will also continue to
explore linear addressable advertising
opportunities.
Online video advertising on the ITV Hub
delivers targeted demographics in a
high-quality, trusted and measured
environment for advertisers. We have
now rolled out Planet V, our scaled
programmatic addressable advertising
platform, to the majority of major agencies,
with around 85% of all customer orders now
managed on the platform. Planet V is
designed and deployed as a self-service
platform for advertisers and agencies,
enabling them to plan and buy ITV Hub
inventory seamlessly and cost effectively,
ITV plc Annual Report and Accounts 2020 39
Strategic Report Operating and Performance Review continued
create bespoke audiences, add their first
party data and monitor their campaigns
via a custom built user interface. 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. We have also agreed our first
third-party partnership with Samsung Plus
TV for their inventory to be plannable and
buyable via Planet V.
We have recently invested in InfoSum, a
data and identity infrastructure company,
to augment Planet V’s first party data
capabilities. Infosum allows us to merge
advertisers first-party data with ITV’s data,
in a secure and compliant way. This will
enable more granular targeting and
measurement across ITV’s premium video
inventory, providing the capability to build
new and more powerful audience segments,
at scale, unique to each advertiser.
To provide more insight into the
effectiveness of television advertising,
ITV has joined Channel 4 and Sky to launch
a new total television advertising
measurement system in the UK. CFlight
(designed by NBCU in the US) is a post-
campaign online evaluation tool, using
combined linear television and Broadcaster
VOD (BVOD) data to show advertisers and
media agencies what the overall advertising
exposure is for television advertising,
including reach and frequency metrics.
This will give advertisers and agencies a
unique view of the coverage achieved by
their commercial campaigns across both
linear and BVOD. We expect this to be
available during 2021.
Broadcast financial performance in 2020
Broadcast total revenue was down 8% in the
year at £1,890 million (2019: £2,063 million).
This decline was entirely driven by a
decrease in total advertising revenue
which was down 11% to £1,577 million
(2019: £1,768 million) in 2020. Within this
VOD advertising revenues up 17%.
Broadcast non-advertising revenues were
up 6% in the year to £313 million (2019:
£295 million) with growth across all areas.
Further detail on the year-on-year
movement in revenue is detailed below.
Total costs within Broadcast were down
8%, primarily driven by lower schedule costs,
which were down 14% to £935 million (2019:
£1,091 million) due to the cancellation or
delay of programming impacted by the
pandemic. This included the UEFA European
Football Championship, the summer series
of Love Island, a reduction in episodes of the
soaps and the delay of some scripted titles
into 2021. It is expected that schedule costs
in 2021 will return to previous levels of
around £1.1 billion. Variable costs were up
40
ITV plc Annual Report and Accounts 2020
20% at £161 million (2019: £134 million),
mainly driven by costs for marketing and
content for BritBox UK and higher
interactive costs associated with the
increase in revenue and prize costs in the
year. Broadcast infrastructure and overhead
costs decreased by 1% to £373 million,
with additional overhead costs associated
with BritBox UK and Planet V, along with
investments of £8 million in data, the ITV
Hub, ITV Hub+ and technology in line with
our strategic priorities. This was offset by
£53 million of cost savings made across
Broadcast (£45 million of which are
temporary and £8 million are permanent).
The 2020 net investment in BritBox UK was
£49 million (2019: £19 million) with venture
losses of £59 million (2019: £21 million), both
of which were in line with expectation. We
anticipate that as we build BritBox UK’s
subscriber base, it will remain in the net
investment phase for several years.
Broadcast adjusted EBITA (excluding BritBox
UK) was down 1% to £480 million (2019:
£483 million), with a margin of 25% (2019:
23%). Total Broadcast adjusted EBITA
(including BritBox) was down 9% to £421
million (2019: £462 million), with a 22%
margin (2019: 22%).
Within exceptional items we have included
a £23 million impairment to sports rights,
reflecting the impact of COVID-19, along
with changing forecasts of audience mix
and revenues for certain sporting events.
We have also included a £19 million onerous
contract provision for one of our satellite
transponders which we are no longer
utilising. See the exceptional items note
within the Finance Review for further detail.
Total advertising revenue (TAR)
At the start of 2020, there was good
momentum in total advertising with
revenues in Q1 up 2%, preceded by two-
quarters of growth in the second half of
2019. However, the COVID-19 pandemic had
a severe negative impact on advertising
demand from Q2. The announcement of the
UK government imposed lockdown and
containment measures in March, caused an
almost immediate decline in advertising,
with many brands reducing, or stopping
their advertising spend completely. Total
advertising in Q2 2020 was down 43%, the
most severe decline in the history of TV. We
saw trends improve in Q3 with TAR down 7%
and in Q4 with TAR up 3%, as advertisers
spent more in advance of Christmas with
confidence boosted from the
commencement of the roll out of the
COVID-19 vaccine.
Most advertising categories decreased their
spend during 2020, with categories such as
Airlines and Travel, Entertainment and
Leisure, and Retail being the hardest hit as
travel restrictions were imposed and shops,
leisure facilities and showrooms were
closed. While the spend from online brands
(excluding gambling) also declined in the
year, they declined less than most
categories and we did see increased spend
from social networking brands, OTT
platforms and food delivery brands, who
benefited from people being at home.
Twelve months to 31 December
Total advertising revenue
Direct to Consumer
SDN
Other revenue
Broadcast non-advertising
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)
2020
£m
1,577
87
73
153
313
1,890
(935)
(161)
(373)
(1,469)
421
22%
59
480
25%
2019
£m
1,768
84
69
142
295
2,063
(1,091)
(134)
(376)
(1,601)
462
22%
21
483
23%
Change
£m
Change
%
(191)
3
4
11
18
(173)
156
(27)
3
132
(41)
38
(3)
(11)
4
6
8
6
(8)
14
(20)
1
8
(9)
-
(1)
* There are no adjusting items within Broadcast EBITA.
** BritBox UK venture loss includes the cost of advertising on ITV, and the acquisition of programmes from ITV Studios.
The venture loss better reflects the stand-alone performance of BritBox.
Strategic Report
Governance
Financial Statements
Additional Information
Government, Charities and Other, Publishing
and Broadcasting, Cosmetics and Toiletries,
and Household Stores were key categories
which grew spend in the year.
VOD advertising revenue on the ITV Hub
was up 17% in the year, with the second
half of 2020 seeing strong demand
from advertisers.
The current advertising environment remains
challenging, and the tightening of restrictions
at the end of 2020 and further national
lockdown introduced at the beginning of
January 2021, has impacted Q1 2021 with TAR
expected to be down around 6%. March is
expected to be up around 8%, and April up
between 60% and 75%, with January to April
up between 5% and 7%. This assumes there is
no change in the current planned restrictions.
Direct to Consumer
Direct to Consumer (DTC) generates revenue
directly from the customer and includes ITV
Hub+, competitions, merchandise, live events
and gaming. DTC revenue does not include
BritBox UK (which is included within Other
Revenue) or BritBox US/Australia (which is
included within JVs and Associates).
In 2020, DTC revenue increased by 4% to
£87 million (2019: £84 million)
predominantly due to an increase in
competitions revenues which performed
strongly across the schedule. Daytime was
particularly important, which corresponded
with the increase in viewers, and also
programming such as Saturday Night
Takeaway and I’m A Celebrity…Get Me Out
Of Here! Our rebranded competitions portal,
ITV Win, has seen a significant uplift in
traffic in the year, with an increasing
proportion of competitions revenue being
generated through it. We will continue to
extend the offering and marketing around
ITV Win in 2021.
Partly offsetting some of the DTC growth
in the year, was the absence of pay per view
boxing revenues included within the 2019
comparatives, along with a decline in live
events revenue. All our live events were
closed in line with government restrictions
from March. Events such as the Coronation
Street set tour and Emmerdale village tour
and studio experience are linked to our
production sets and therefore are likely
to remain closed until social distancing
guidelines are eased further. Our branded
Ninja Warrior Experiences around the UK
are managed by third parties and opened
briefly when restrictions were relaxed. Our
I’m A Celebrity…Get Me Out Of Here! leisure
attraction in the UK which was due to launch
in 2020, has been delayed until the first half
of 2021. These initiatives help build
relationships directly with our viewers and,
while the current environment has impacted
our ability to generate revenues, we will
continue to have a focused approach to
opportunities in this area. With the
restructure of Broadcast, gaming, live events
and merchandising revenues around our IP
will move to Global Formats and Distribution
within ITV Studios from 2021. The impact to
Broadcast from the reclassification of this
revenue stream will be small.
SDN
SDN generates revenue by licensing
multiplex capacity to broadcast channels,
radio stations and data providers on digital
terrestrial television (DTT) or Freeview.
Currently, the SDN platform utilises the
radio spectrum licensed to it to provide
capacity for 18 broadcast channels and
a number of data and radio services.
SDN customers include ITV and third parties,
with external revenue (non-ITV) increasing
by 6% in the year to £73 million (2019: £69
million), driven by the launch of two new
video streams in January 2020.
SDN’s current multiplex licence expires
towards the end of 2022. The Government
is currently consulting on the future of the
SDN licence (as well as most of those held
by Arqiva, the BBC and Channel 4). The
consultation indicated that the Government
is seeking to renew the licence and not to
hold an open competition, though the
period of the possible renewal is not yet
determined. The Government recognises
the need to ensure that Ofcom can
undertake the renewal of these licences
sufficiently in advance of their expiry in
2022, and is aiming for the amended
legislation to come into force during 2021.
In 2022 and 2023, some long-standing
contracts which were agreed at the peak of
the DTT capacity market ten years ago will
come to an end, which we expect these to
revert to current market rates.
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, along with subscription
revenue for BritBox UK. This is up 8%
year-on-year to £153 million (2019: £142
million) predominantly due to BritBox UK
which has seen good growth since its launch
in 2019 and has benefited during the
pandemic. A reduction in third-party
commission due to the corresponding
decline in NAR in the year partly offset
this growth.
Don’t Hate The Playaz returned for a third
series on ITV2 in 2020. The comedy game show
is popular for 16-34s, with over half the
audience being within this demographic.
The Six Nations Rugby Championship had
seven matches across 2020 on ITV, with some
being postponed due to COVID-19. The England
vs. Wales match had the biggest audience with
5.3 million viewers.
ITV plc Annual Report and Accounts 2020 41
Strategic Report
Social Purpose
Social purpose is central to ITV’s
More than TV strategy. ITV is a creative
force that does more than entertain –
it makes a difference to British
culture in a way that global
competitors cannot. With the huge
reach of our platforms, much-loved
shows and creative talent, ITV has
a unique ability to drive meaningful
change by reflecting and
shaping culture.
Our Social Purpose strategy, Shaping Culture for
Good, is built on four priorities: Better Health,
Diversity and Inclusion, Climate Action and Giving
Back, each with goals on and off screen, which
were set in 2019. We identified better mental and
physical health as the cause we want to be known
for and it is where we focus our major behaviour
change campaigns.
The performance of our campaigns is monitored
through extensive research commissioned from
YouGov and other partners. Performance and
plans are reviewed by the Board annually and
Management Board quarterly. The Studios and
Media and Entertainment Boards review progress
against environmental targets quarterly and
progress against diversity targets biannually.
Our social purpose goals align with the UN’s
Sustainable Development Goals (SDGs). The
following nine SDGs are those where we believe
ITV can make the most significant contribution.
Mental Wellness
Britain Get Talking
Throughout 2020 we continued
our award-winning campaign
supported by the charities Mind
and YoungMinds to encourage
people to improve mental
wellbeing by staying connected.
It is the UK’s most recognised
mental health campaign for the
second year running.
The campaigns
COVID-19 lockdown restrictions
in the UK and around the world
created a real risk to mental
health. ITV launched a campaign
before the UK lockdown began
to encourage people to stay
connected to reduce stress and
ease the anxiety of loneliness.
Ant and Dec spoke at the end
of Saturday Night Takeaway,
talking to 7.5 million viewers,
about the importance of
keeping in touch. In addition,
we broadcast over 200
messages of support from over
100 celebrities and from ITV
viewers, all about staying in
touch while we stayed at home.
The campaign further extended
its reach through brand
partnerships with TalkTalk
and Just Eat.
Our priorities:
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.
(2 million each year
from 2019)
Sustainable Development Goals
ITV puts the power of TV
behind behaviour change
campaigns. We have created
a distinctive approach
which is built around:
encouraging preventative
action; being disruptive;
always entertaining;
learning from experts; and
demonstrating results.
Off-screen we also have
a real focus on the wellbeing
of our people, producers
and participants.
42
ITV plc Annual Report and Accounts 2020
Mental Wellness
Britain Get Talking
Throughout 2020 we continued
our award-winning campaign
supported by the charities Mind
and YoungMinds to encourage
people to improve mental
wellbeing by staying connected.
It is the UK’s most recognised
mental health campaign for the
second year running.
The campaigns
COVID-19 lockdown restrictions
in the UK and around the world
created a real risk to mental
health. ITV launched a campaign
before the UK lockdown began
to encourage people to stay
connected to reduce stress and
ease the anxiety of loneliness.
Ant and Dec spoke at the end
of Saturday Night Takeaway,
talking to 7.5 million viewers,
about the importance of
keeping in touch. In addition,
we broadcast over 200
messages of support from over
100 celebrities and from ITV
viewers, all about staying in
touch while we stayed at home.
The campaign further extended
its reach through brand
partnerships with TalkTalk
and Just Eat.
Strategic Report
Governance
Financial Statements
Additional Information
For Mental Health Awareness
Week in May, the focus turned
to connecting with those
outside our inner circle. Again,
20 well-loved ITV faces joined
in the campaign and it was
accompanied by a series of
animated adverts encouraging
people to get in touch.
ITV launched a fundraiser on
World Mental Health Day to
help support the vital helplines
provided by Mind, YoungMinds,
SAMH and CALM. Inspired by
the campaign, the UK
government pledged an
additional £1 million to support
mental health helplines,
announced on air, during the
final of Britain’s Got Talent.
The results
6.4 million
people started a
conversation1 with friends
or family as a result of the
campaigns, in 15 million
phone calls and 27 million
text messages
£1.4 million
was generated for mental
health helplines
Eat Better
Eat Them To
Defeat Them
In February 2020, ITV continued
its partnership with Veg Power
to encourage children to eat
vegetables.
The campaign
Following impressive results in
2019, Eat Them To Defeat Them
returned in 2020 with six brand
new ten-second adverts, each
focusing on a different
vegetable. These ran alongside
the original adverts over seven
weeks of family-focused
commercial airtime.
Sky and Channel 4 also joined
in to support with commercial
airtime as part of our shared
£10 million commitment to
supporting children’s health
from 2020-2022
The results
9 out of 10
households
The campaign reached nearly
9 out of 10 households with
4-9 year olds2
425,000
children took part in the
campaign in schools3
217 million
additional portions of
vegetables were sold as
a result of the campaign4
Move More
Daily Mile
ITV began supporting the Daily
Mile in 2018, an initiative that
encourages school children to
complete 15 minutes of daily
exercise. In 2020 we continued
to support this through regional
News coverage and a September
on air campaign with the
message ‘It’s never been more
important to get back moving
with the Daily Mile’.
The results5
Over 70,000
more children are doing the
Daily Mile as a result of the
September campaign
1.63 million
Since ITV began supporting
the Daily Mile in April 2019,
1.63m more children are
doing the Daily Mile, in over
6,000 more schools
1. Source: Extrapolated from YouGov, May 2020, Sample: 2078 UK adults
2. Source: BARB
3. Source: Data supplied by VegPower, 2020
4. Source: PearlMetrics econometric analysis of sales factors, 2020
5. Source: Daily Mile schools registrations, supplied by the Daily Mile
ITV plc Annual Report and Accounts 2020
43
Strategic Report Social Purpose continued
Strategic Report
Additional response to COVID-19
In addition to our planned
campaigns, ITV helped promote
public health messages and
raise morale during the
pandemic.
Colleague wellbeing
The wellbeing of colleagues
continues to be a priority.
Further detail on how we
have engaged with, and
supported the mental health
and wellbeing of our
colleagues during the
pandemic is included in the
Chief Executive’s Report and
Our People section.
1. Source: BARB
2. Source: YouGov, June 2020, Sample:
2,023 UK Adults
3. Source: BARB
4. Source; YouGov, July 2020, Sample:
1,105 UK Adults
5. Source: NHS Charities Together
Stay at Home
Handwashing
NHS Day
Public Health England
approached ITV for help in
encouraging people to stay at
home during the first lockdown.
The campaign
In May 2020 we developed
two irreverent campaigns on
ITV2 and ITV4, to encourage
audiences to rethink their
decisions on breaking
lockdown rules.
The results
5.7 million
The campaign reached
5.7 million adults1
25%
of those who saw the
campaign said they were
more aware of why they
shouldn’t break lockdown,
and
24%
said they were more
motivated to stay at home2
The campaign
Handwashing is considered one
of the simplest and most
effective ways of preventing the
spread of COVID-19. To make the
public health message around
handwashing more engaging,
we translated the critical
handwashing time of 20
seconds into something
relatable for our young viewers.
We created a series of
20-second spots with hilarious
moments from Ibiza Weekender,
Keith Lemon, and Love Island
showing young people exactly
how long 20 seconds is.
The results
11.5 million
The campaign reached
11.5 million people3
64%
of people surveyed thought
this campaign stood out
from other COVID-19 themed
adverts,
41%
said it would make them
more likely to wash their
hands for longer4
ITV wanted to highlight the
incredible work of the NHS
during the pandemic and raise
money to help support NHS
workers.
The campaign
ITV paused the main channel
each Thursday at 8pm to
support the Clap for Our Carers
and celebrate NHS workers.
On 16 April, the whole day was
dedicated to the NHS, with the
main channel celebrating the
NHS across daytime, and news.
An appeal advert ran during
breaks to raise money for the
NHS Charities Together One
Million Claps campaign.
Proceeds from the Virtual Grand
National also went to NHS
Charities Together.
The results5
Over
200,000
viewers donated to NHS
Charities Together which,
combined with our efforts
for the Virtual Grand
National, raised
£3.6 million
44
44
ITV plc Annual Report and Accounts 2020
ITV plc Annual Report and Accounts 2020
Strategic Report
Strategic Report
Governance
Governance
Financial Statements
Financial Statements
Additional Information
Additional Information
Our priorities:
Fundraising
Volunteering
Soccer Aid for UNICEF
ITV and Unicef have partnered
on Soccer Aid since 2006, and in
2020 teams of celebrities and
former professional footballers
played for ‘Generation Covid’.
Money raised will help Unicef
stop the spread of coronavirus
and limit its impact on children’s
lives around the world.
The event
Due to lockdown restrictions,
the match was moved to
September and played behind-
closed-doors at Old Trafford
stadium. In support of the
appeal, ITV commissioned a
special documentary ‘A Game
of Two Halves’.
Giving Back
Giving back to our
local and international
communities through
causes we care about.
Our goal
Increase the amount raised
for Soccer Aid for UNICEF
and increase the amount of
colleague volunteering
Sustainable Development Goals
The results
£9.3 million
A record-breaking
£9.3 million was raised
18%
uplift year-on-year6
ITV’s Giving Back focus is
on giving time, money
and support to those who
need it, both at home and
further away.
6. Source: ITV Interactive/Unicef
7. Source: BARB
8. Source: Extrapolated from YouGov,
November 2020 Sample: 2,037
UK Adults
ITV encourages colleagues to
use three paid days a year to
volunteer. In 2020, most
volunteer. In 2020, most
volunteering opportunities were
volunteering opportunities were
moved online. For example, we
moved online. For example, we
were still able to encourage
were still able to encourage
outreach to those interested in
outreach to those interested in
a career in TV through sessions,
a career in TV through sessions,
such as the ITV and Media Trust
such as the ITV and Media Trust
workshop day. We also
workshop day. We also
partnered with the National
partnered with the National
Lottery to create ‘Miss Out to
Lottery to create ‘Miss Out to
Help Out’, an on-air campaign
Help Out’, an on-air campaign
to encourage the general public
to encourage the general public
to miss out on a TV show in
to miss out on a TV show in
order to volunteer.
order to volunteer.
The results
The results
9.5 million
9.5 million
saw ITV and The National
saw ITV and The National
Lottery’s ‘Miss Out To Help
Lottery’s ‘Miss Out To Help
Out’ campaign.7 As a result,
Out’ campaign.7 As a result,
over
700,000
700,000
people looked for
people looked for
volunteering opportunities
volunteering opportunities
in their community8
in their community8
With COVID-19 restrictions, we
With COVID-19 restrictions, we
have and will continue to put
have and will continue to put
in place online volunteering
in place online volunteering
opportunities as well as
opportunities as well as
in-person volunteering.
in-person volunteering.
ITV plc Annual Report and Accounts 2020
45
Strategic Report Social Purpose continued
Strategic Report
Our priorities:
Climate Action
Creating programmes
with the biggest
impact on the
audience and the
smallest impact on
the planet.
Our goals
• Net Zero Carbon by 2030
• 2030 science-based
targets to reduce Scope
1&2 emissions by 46.2%
and Scope 3 by 28%
• Zero waste by 2030
• 100% sustainable supply
chain by 2030
• 100% albert certified and
trained by 2030
Sustainable Development Goals
In 2020, ITV made significant
progress on climate action.
We announced 2030 Net
Zero1 targets. Sustainability
was embedded through new
governance structures,
platforms and training, and
a new data platform was
commissioned to collate all
emissions and waste data.
We achieved a B for our first
response to the CDP Climate
Change questionnaire. This
puts ITV in the top 15% of
the 9,526 companies that
responded to the
questionnaire which is above
the media industry average.
ITV joined external initiatives
to drive global action on
Net Zero; becoming one of
the founding signatories of
the Media Climate Pact and
was among the first to join
The Climate Pledge and
Ad Net Zero.
ITV is a signatory to the
Taskforce for Climate-related
Financial Disclosures (TCFD),
and in 2020 Climate Scenario
Analysis began, to determine
how the changing climate
could impact business
strategy. See further detail
on this and our goals, in the
TCFD section, from page 62.
1. Net Zero is a state when no incremental emissions are released into the atmosphere.
It is achieved when absolute emissions are reduced in line with science based targets
to as close to zero as possible, and any remaining emissions are taken out of the
atmosphere through carbon sequestration such as tree planting.
46
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ITV plc Annual Report and Accounts 2020
ITV plc Annual Report and Accounts 2020
Energy
Net Zero by 2030
To become a Net Zero Carbon
business by 2030, ITV will reduce
emissions in line with our
Science Based Targets (SBT) by
46.2% in the emissions we
control (scope 1 & 2), and by 28%
in the emissions we influence,
such as business travel and
products and services that we
use (scope 3). Any remaining
emissions will be sequestered in
nature-based solutions such as
tree planting. ITV’s SBTs have
been validated by the Science
Based Targets initiative.
In 2020, our scope 1&2
emissions reduced by
26%
and Scope 3 reduced by
16%
Our reduction in Scope 1&2 and
Scope 3 emissions has been
influenced by remote working,
travel restrictions and
production pauses due COVID-19,
as well as the initiatives we have
taken to reduce our impact
across the business.
To address scope 3 emissions
ITV’s procurement team has
•
begun work to identify our
highest environmental impact
suppliers and has published
a new ‘Procuring with Social
Purpose’ framework to
influence sustainability
through our supply chain
• Our Technology team helped
build the world’s first carbon
calculator for digital content
distribution along with
Bristol University – DIMPACT.
This tool is being used to
inform decision-making
to reduce emissions in the
infrastructure ITV does
not own
• Our Technology team also
developed a cloud efficiency
calculator improving the
efficiency of ITV’s web
services. This helped to save
20 tonnes of carbon in 2020
by reducing electricity usage
Further energy efficiency
initiatives in 2020 and for
2021, have been included under
the Streamlined Energy and
Carbon Reporting table on
the following page.
Waste
Sourcing
Zero waste by 2030
ITV is committed to achieving
zero waste by 2030, which
means 90% of our waste in the
UK will be reused or recycled.
We have begun work on our
2019 baseline, and will develop
our waste reduction roadmap
in 2021.
100% sustainable supply
chain by 2030
ITV’s target is to make sure all
our highest environmental risk
suppliers align to our enhanced
sustainability criteria by 2025,
and to work with all our
suppliers to improve their
impact by 2030.
In 2020 ITV focused on improving
waste segregation in our offices,
piloting a new bin configuration
and internal communications to
increase the amounts recycled.
Our initial results are positive,
and we will explore ways to
improve this in 2021, as and when
more colleagues return to work
at ITV offices. We will also
engage with our productions on
reducing waste.
In 2020 the Procurement team
developed a new Supplier Code
of Conduct, to launch in 2021,
that sets out the expectation
of all our suppliers to help
deliver against our 2030 climate
action targets. The new
‘Procuring with Social Purpose’
framework helps weigh up
decision-making factors
including cost, service, social and
environmental factors.
Strategic Report
Strategic Report
Governance
Governance
Financial Statements
Financial Statements
Additional Information
Additional Information
Streamlined Energy and Carbon Reporting (SECR) – based on data for year ended 31 December
Scope
Description
1
2
Location-based
Market-based
1&2
Location-based
Market-based
1&2
Location-based
Market-based
Emissions from gas, refrigerants and
owned vehicles
Electricity emissions using geographical
location
Electricity emissions using purchased
electricity factor
Total emissions
Direct & Indirect Energy Consumption
Total revenue
Unit
tCO2e
tCO2e
tCO2e
kWh
£m
Normalised emissions to revenue
tCO2e/£m
2020
UK
2020 Global
(excl UK)
2019
UK
2019 Global
(excl UK)
1,631
923
2,031
1,370
9,118
774
11,569
1,994
4,954
595
6,347
1,994
10,749
6,585
44,290,976
1,698
1,518
3,060,668
13,600
8,378
58,153,385
3,364
3,364
8,664,993
3,260
3,885
3.2971
2.0198
0.5208
0.4657
3.5006
2.1565
0.8659
0.8659
3
3
Total Scope 1, 2 & 3 (market-based)
Purchased Goods and Services
Business travel
tCO2e
tCO2e
tCO2e
345,097
13,650
366,850
382,305
43,618
437,665
Methodology
2020 Scopes 1 &2 emissions data covers global operations for which we have operational
control. We use the Greenhouse Gases (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. 9% of our data set is based on estimated data. Estimates are
calculated from previous consumption trends and published benchmarks.
Energy efficiency initiatives
•
In 2020, we continued installing LED lighting in our Emmerdale studios in the UK,
completing two out of seven studios to date, saving up to 85% of energy compared to
the previous lighting infrastructure. Due to the pandemic, we were also able to switch
off a number of boilers in our main UK offices as the majority of colleagues have
worked from home since mid-March. The sale of our Southbank site in 2019 also
helped reduce gas consumption in the UK. A number of planned 2020 efficiency
initiatives, including upgrade of LED lighting to two further Emmerdale studios, has
been postponed to 2021, and will recommence once we return to our offices.
• As an outcome of our 2019 Energy Savings Opportunities Scheme (ESOS) review, in
2020 we ran a test in our Coronation Street computer room to reduce the amount of
lighting and air conditioning used. We made small adjustments which allowed us to
save 50% of the energy previously used. We plan to roll out the same methodology in
all our computer rooms in 2021.
• A renewable energy review was conducted on ITV’s UK properties, and we are working
with relevant landlords to upgrade to renewable energy contracts. In 2020, 46% of our
energy came from renewables, up by six percentage points compared to 2019.
Culture
Climate action on-screen
100% environmentally
trained and certified
ITV has committed to training
100% of our global workforce
in climate action by the end of
2021, and we are the first
broadcaster to announce that
all programmes produced and
commissioned in the UK will be
environmentally certified using
BAFTA’s albert carbon
calculator2 by the end of 2021.
In 2020 ITV rolled out Climate
Crisis to Climate Action training
for all UK colleagues which was
delivered virtually by the albert
BAFTA team. In addition, a new
mandatory Climate Action
e-learning module was
introduced and to date has been
completed by over 90% of all
colleagues globally.
ITV made good progress on
albert environmental
certification3 in 2020, with 60%
more certifications compared
to 2019, including ITV’s Regional
News Services which became
albert certified.
2. albert carbon calculator quantifies
the carbon impact of a production.
3. 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.
Driving climate action
on-screen
TV programmes can inspire
the public to adopt more
sustainable habits and in 2020
ITV continued to normalise
sustainable living across a range
of programmes.
ITV launched our first climate
action campaign, The Shows We
Never Want to Make, which told
of ITV’s Net Zero ambition, and
drove viewers to a dedicated
website where they could
measure their carbon footprint.
For more information see:
www.itv.com/footprint/
4. Source: BARB
The campaign reached
24 million4 people and has led
to thousands completing WWF’s
carbon footprint tool. The
campaign will run again in 2021.
A new climate action
commercial proposition, ITV
Home Planet, was also launched
to help advertisers scale up
new sustainable products and
services, with the first brand
partnership agreed in early 2021.
ITV plc Annual Report and Accounts 2020
47
Strategic Report Social Purpose continued
Strategic Report
Our priorities:
Diversity
& Inclusion
Fostering creativity by
embracing diversity
Our goal
Improve gender, BAME,
disability and LGBT+
representation on and
off-screen by 2022
Sustainable Development Goals
On-screen
On-screen targets by 2022
Gender
50%
BAME
15%
Declared disability
10%
LGBT+
7%
Off-screen
ITV workforce targets
by 2022
Gender
50%
of women in SLT, managers
and colleagues
BAME
15%
of SLT, managers and
colleagues
And 30% women, and 10%
BAME on the PLC Board
Declared disability
12%
of SLT, managers and
colleagues
LGBT+
7%
SLT = Senior Leadership Team, the top
c.200 senior leaders in the business.
ITV will report on progress on
each of these commitments
every year and will also establish
a Cultural Advisory Council –
a group of independent external
advisers who will advise,
challenge and counsel ITV.
Following the publication of this
plan, we launched Black Voices,
a series of short films offering
Black people a platform to share
stories of racism and their vision
of fundamental changes they
would like to see in the future.
It promoted understanding and
discussion around a cause of
profound importance and
featured a range of voices,
including MPs, journalists,
on-screen talent, and other
colleagues from across ITV.
On-screen
We work to ensure that ITV
authentically represents the
many diverse ways of life and
experiences in contemporary
society on-screen. One of the
key tools for ensuring this is
ITV’s Commissioning
Commitments which forms
part of the commissioning
process. All programme makers
are required to take measurable
actions to improve diversity and
inclusion, alongside
commitments to environmental
sustainability and charitable
causes. This year the focus was
on improving the diversity of
main characters, presenters and
contributors in our biggest
shows. Commissioning editors
and producers are also expected
to actively work to ensure better
representation in those working
behind the camera.
In October, ITV celebrated
Black History Month on-air
for the first time with a range
of newly commissioned
programmes shown across
ITV’s family of channels.
As a commercial public service
broadcaster and a responsible
business, we aim to represent
the rich diversity of modern
Britain in our programming,
behind-the-screens and within
our workforce. We want our
viewers to see their lives
authentically reflected
on-screen and to change
perceptions at the heart of
mainstream television. This is
crucial to ITV’s success, both
creatively and commercially.
We must attract the very best
talent, from the widest range
of backgrounds and nurture
an inclusive, enabling
environment for all.
In July, ITV launched its Diversity
Acceleration Plan, which set out
the steps we will take to create
more opportunities for those
from Black, Asian, minority
ethnic (BAME) and other
underrepresented groups across
all levels and parts of ITV.
There are five key areas of
action, each of which has a
detailed series of supporting
activities illustrated by the
commitments outlined below
and will be delivered over the
next 12 months:
1. Increasing diversity on ITV’s
Management Board and
senior leadership teams
2. Commissioning to ensure
ITV better represents
contemporary British life
on-screen within the next
12 months
3. Improving diversity and
career progression in
TV production
4. Recruitment – taking
positive action at entry
level as well as middle and
senior leadership
5. Educating and developing
ourselves so everyone
understands racism and
their role in creating an
inclusive culture
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ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
Off-screen
ITV was recognised as one of
The Times’ Top 50 Employers
for women. We have established
a data-driven, systemic
approach to increasing female
representation, building a
pipeline to recruit and develop
women at all levels. To improve
BAME representation in
senior editorial roles behind
the camera, ITV’s ‘Step Up
60’ initiative will create
opportunities for at least 60
people to ‘step up’ and secure
their first ITV senior editorial and
production role, such as directing
or writing episodes of ITV shows.
Our Inclusion and Diversity
Council, which meets quarterly
and is chaired by our CEO,
ensures greater Management
Board focus and provides
challenge and external stimulus
to help drive our Diversity and
Inclusion strategy.
and SLT level by providing
Black and Asian colleagues
greater visibility with senior
leaders through networking
and sponsorship, alongside
career coaching.
Our five internal staff networks
– Able, Balance, Embrace, Pride
and The Women’s Network are
instrumental in embedding our
diversity activities and helping
us to create an inclusive culture.
At the end of Q3 2020, the total
number of members across all
our networks, increased by over
100%. They have proved an
essential source of support and
connection whilst people have
been working from home, due
to COVID-19 restrictions.
ITV has published its Gender Pay
Gap Report which includes
Ethnicity Pay Gap Reporting,
see www.itvplc.com/investors/
governance
To help us achieve our published
target, we launched the ITV Rise
Programme to promote BAME
talent progression at manager
For more information see our
Social Purpose Report and
website: www.itvplc.com/
socialpurpose
Progress against Targets1
BAME
LGBT+
We have increased our off-screen
BAME representation in the year,
being 12.9% of all colleagues, 10.6%
of SLT and 10.1% of managers.
On-screen we surpassed our BAME
target, with 17.6%2 representation.
We have surpassed most of our
targets for LGBT+ representation,
with on-screen at 14.8%2, and
off-screen being 7.3% for all
colleagues and 7.2% for managers.
We are working to improve SLT
representation which is currently
at 4.9%.
Gender
Disability
We have surpassed most of our
female representation targets,
with on-screen being 53.8%2, and
off-screen being 52.9% of
colleagues and 49.3% of managers
being female. Our SLT
representation of 45.3% is ahead of
most of the FTSE 100, however are
still working to reach 50%.
In 2020, disability representation
amongst all colleagues was 11.0%,
exceeding our previous 2022 target
of 8%. We have subsequently
increased our 2022 target to 12.0%,
with the aim to review again at the
end of 2021. On-screen disability is
11.2%2, which is the highest of all
the UK broadcasters.
The 2020 Hampton-Alexander
report ranked ITV tenth in FTSE
250 for female representation in
our combined Executive
Committee and direct report roles,
and second within the FTSE 350
Media sector.
1. Data as at 31 December 2020
2. Source: 2019-20 Diamond:
The Fourth Cut report published by
the Creative Diversity Network
Off-screen Diversity Data (based on disclosed population at 31 December 2020)
Characteristic
Colleagues who are female
Black, Asian & minority ethnic
LGBT+**
Colleagues with a disability or
long-term health condition
Senior Leadership
Team (SLT)*
Managers
All colleagues
2020
45.3%
10.6%
4.9%***
2022
Target
2020
2022
Target
2020
50.0%
15.0%
49.3%
10.1%
7.0% 7.2%***
50.0%
15.0%
52.9%
12.9%
7.0% 7.3%***
2022
Target
50.0%
15.0%
7.0%
11.6%
12.0%
9.2%
12.0%
11.0%
12.0%
* Senior Leadership Team (SLT) includes management board –there is no separate target for the Management Board
as the numbers are too small, however there is an expectation that this will also be representative in terms of
diversity.
** This target is based on estimated working population data in these communities.
*** This number is based on LGB disclosure only (trans/non-binary data is too small to report).
ITV plc Annual Report and Accounts 2020
49
Strategic Report
Our People
Our people are at the heart of ITV. The development
we offer leaders, managers and colleagues is
designed to drive our inclusive culture, where
everybody can perform at their best, realise their
potential and thrive. Our ambition is to be the most
flexible employer across Media and Entertainment.
our recruitment practices,
onboarding experience and
Talking Performance approach
(set out on page 51).
The ITV Way
The ITV Way provides all
colleagues with the guiding
principles of how we like to
work at ITV in order to deliver
our strategy.
The ITV Way is embedded
throughout the organisation
through leader, manager and
colleague workshops,
supplemented with online
resources, and through setting
consistent expectations within
Make it brilliant
Make it new
Make it together
Creativity for everyone,
without fear or caution
Openness to change,
with no barriers
Collaborating, respecting
and embracing differences
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.
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.
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.
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ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
Composition of our workforce
Our workforce consists of permanent and
fixed term employees, freelancers and
contractors.
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, including
apprenticeship and mentoring programmes.
Our apprentice programme continues to
provide a diverse pipeline of entry level
talent into ITV, developing individuals at the
beginning of their career in the media
industry. We had 23 apprentices on our
2019/2020 programme located across
London, Cardiff, Manchester and
Birmingham and the group completed
Level 3 apprentice qualifications across
Business Administration, Junior Journalism,
Junior Content Producer, Digital Marketing
and Broadcast Production. We are looking
forward to welcoming circa 45 apprentices
into ITV in 2021, to continue to grow this
pipeline of talent into ITV.
We continue to invest in the development of
our workforce through a range of online and
classroom based workshops, including our
online development portal ‘My Academy’.
These build leadership and line manager
capability and support personal skills
development, wellbeing and resilience for
all colleagues. Furthermore, the ITV Way is
the foundation for our newly developed
leadership behaviours which fit into three
broad themes – resilient leader, agile leader
and driven leader – and underpins the
selection and development of our leaders.
During 2020, we developed our leadership
capability through investment in the
following leadership programmes
and initiatives:
• Leadership Labs: we’ve invested in
the development of our leaders and
managers to equip them with the
mindset, behaviours and tools to manage
dispersed teams within the context of
our digital transformation and a changing
external landscape. We’ve provided
external stimulus and worked with the
latest insights from leading experts to
build capabilities in leading change,
harnessing diverse thinking, developing
psychological fitness and inspiring
creativity whilst working remotely.
a working environment where all
colleagues feel valued, increasing the
awareness of bias and for harnessing
the full potential of their teams.
2. With a particular focus on racial inclusion,
we’ve launched mandatory race fluency
workshops for all leaders and managers.
3. All hiring managers are expected to
attend Inclusive Hiring – a three-part
programme looking at unconscious bias,
equality legislation and the selection
and assessment process.
4. We have launched ITV Rise, a holistic
• Manager Essentials: in light of COVID-19
and our new remote working practices,
we redesigned and relaunched the
Manager Essentials programme to consist
of three bite-size online workshops
focused on the managers’ mindset,
building trust and motivating teams.
• Talking Performance: our Talking
Performance approach continues to
drive high performance, providing the
opportunity for managers and colleagues
to engage in regular, good quality
conversations about objectives,
performance reviews and career
development. It equips managers with
the tools to check in with their teams on
a regular basis, whether managing teams
remotely or with a mix of remote and
in-office working, with regular workshops
allowing managers to refresh their
knowledge and learn some new skills
to support their conversations.
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 139.
Our successful and popular Save As You
Earn scheme gives our workforce the
opportunity to engage with and celebrate
ITV’s success, and encourages voluntary
investment in ITV shares. For further
information on the Remuneration
Committee’s consideration of workforce
remuneration and related policies see
page 139.
Building an inclusive culture
At ITV, we understand and value the
creativity that diversity brings to our
business, and strive for 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 this end, ITV launched
an accelerated Diversity and Inclusion Plan
in July (see page 48 for further details).
There are a number of workforce initiatives
that support this plan and drive our
inclusive culture, as follows:
1. Leaders and managers have attended
mandatory inclusive leader sessions,
taking away practical tools for creating
12-month culture change programme
designed for 45 Black, Asian and ethnic
minority colleagues, working with their
line managers and senior leader
advocates to build race confidence,
promote talent progression into
manager roles and accelerate inclusive
culture change.
We were named one of The Times Top
50 Employers for Women in recognition
of the actions we have taken to increase
representation of women into senior
positions, and ensuring gender balance
at all levels and within both recruitment
and progression.
We have continued to position ITV
as an inclusive employer of choice by
strengthening and broadening our
talent attraction strategy, including:
• Expanding our reach through specialist
job board partners, for example
Evenbreak, a specialist disability
job board with a reach of 33,000
disabled candidates
• Engaging and building strong
relationships with new partner
organisations who work with young
people across all strands of diversity
to advertise opportunities
• Our sign production house ITV Signpost,
who employ at least 50% disabled crew
on every production, ran a new trainee
scheme in 2020 with the British Sign
Language Broadcasting Trust for deaf
film-makers and production talent who
want to break into the industry
ITV’s Able network group champions the
disability agenda throughout the
organisation, supported by our Group Chief
Technology Officer at Management Board
Level, and has had a 364% increase in
membership in the last year. ITV’s steadfast
commitment to recruiting, retaining and
developing disabled people has been
recognised by the 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
ITV plc Annual Report and Accounts 2020
51
and we have not needed to take any actions
in relation to COVID-19. We have also
adopted all government and public health
authority guidelines in each of our markets.
psychological fitness. In addition, we
launched TogetherAll, an anonymous online
resource designed to encourage peer to
peer support which includes support
documents, resources and self assessments.
Engagement
We continue to connect and engage with
our workforce, providing a forum for
colleagues to have their views heard. In light
of COVID-19, we undertook a ‘pulse’ survey
to understand colleague confidence in our
response to the pandemic and obtain
learnings for future ways of working. 92% of
colleagues said that ITV is supporting its
colleagues during COVID-19 and 88% said
that they have confidence in ITV’s response
to COVID-19 – they feel well informed and
able to continue working effectively.
Insights from this survey enabled us to
target our wellbeing offering to provide
focused support for the mental and physical
wellbeing of colleagues and provide
managers with further tools to check in with
their teams. For further information on how
the Board and management engages with
the workforce, please see pages 102 to 105.
Mental health and wellbeing
Supporting the mental and physical health
of colleagues remains a priority, particularly
in light of COVID-19 and the arrangements
we have made to enable colleagues to work
from home. Our ITV Feel Good offering
continues to provide advice, support and
tools for inspiring and enabling colleagues
to look after their own wellbeing and have a
balanced and healthy working lifestyle. This
is combined with the use of specific online
workshops and curation of resources each
focused on assisting colleagues to work
remotely and build personal resilience and
Having achieved a Silver award in the MIND
Wellbeing Index, which recognises the
progress made in promoting and positively
impacting colleague mental health, the
best practice and key recommendations
provided continue to inform our offering
in 2020:
• The Duty of Care Board and Mental
Health Advisory Group (comprising
external subject matter experts as well
as ITV relevant leaders), meet regularly to
provide practical guidance and support on
all aspects of our approach to the mental
health and wellbeing of our colleagues,
programme participants, and viewing
public. Their advice includes best existing
practice and evolving new thinking on
mental health, which in turn is reflected in
our policies and decision-making.
• The development of a robust portfolio of
online development and support for
leaders, managers and colleagues to build
resilience and continue to lead high
performing teams during 2020.
Please refer to page 70 for information on
our policies in relation to our colleagues’
health and safety.
Strategic Report Our People continued
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
have become members of the global
disability inclusion group, Valuable 500, and
as a member we are committed to putting
disability inclusion on the leadership agenda.
See pages 105 to 108 for our culture, and how
the Board monitors and assesses culture
See pages 48 and 49 for our Diversity and
Inclusion strategy, including our gender and
BAME workforce metrics
See page 113 for the Nomination Committee’s
work in Diversity and Inclusion and the Board
Diversity Policy
Smart Working and the impact
of COVID-19 on our people
COVID-19 has accelerated the adoption
of Smart Working, our flexible and digital
approach to how we work, which is in
support of our ambition to be the most
flexible employer in media and
entertainment. COVID-19 has also
accelerated our digital capability, with the
rapid adoption of virtual collaboration tools,
new ways to communicate and remote
production edits and operational processes.
Smart Working remains a key focus to
retain the benefits gained from the
accelerated adoption of remote working,
and to reach a balance of colleagues
working from home and using ITV locations
as a place to deliver productions and news
as well as for collaboration.
For those colleagues unable to work from
home or who need to attend the office for
mental health or physical safety reasons,
we have implemented both social distancing
and elevated health measures, including
mandatory face coverings and additional
cleaning regimes, to ensure the safety of
our people. All colleagues classified as
vulnerable, or with a vulnerable family
member, were identified early on and special
measures put in place to support and
safeguard them. In the UK, inspections by
the Health and Safety Executive and/or
Local Health Authority have been exemplary
52
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
Holly Willoughby and Phillip
Schofield are an integral part of
the ITV family, having presented
both This Morning, and Dancing
on Ice, for many years in the UK.
ITV plc Annual Report and Accounts 2020
53
Strategic ReportGovernanceFinancial StatementsAdditional Information Strategic Report
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, they could distort the
understanding of our performance
for the period and the comparability
between periods. The Audit and Risk
Committee has oversight of ITV’s APMs
and actively reviews, revises and
approves the policy for classifying
adjustments and exceptional items.
Further detail is included below.
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 adjusted 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. 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 is
included in the Finance 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 material gains or losses arising
from events that are not considered part of
the core operations of the business, though
they may cross several accounting periods.
These include, but are not limited to, costs
directly related to the impact of COVID-19,
impairment of sports rights, acquisition-
related costs, reorganisation and
restructuring costs, non-routine legal costs
(e.g. legal costs related to items which are
themselves considered to be exceptional
items), and onerous contracts. We also adjust
for the tax effect of these items. Further
detail is included in note 2.2.
Acquisition-related costs
We structure our acquisitions with earnouts
or put and call options, to allow part of the
consideration to be based on the future
performance of the business as well as to
lock in and incentivise creative talent.
Where consideration paid or contingent
consideration payable in the future is
employment-linked, it is treated as an
expense (under accounting rules) and
therefore part of our statutory results.
However, we exclude all consideration of this
type from adjusted EBITA, adjusted profit
after tax and adjusted EPS as, in our view,
these items are part of the capital transaction
and do not form part of the Group’s core
operations. The Finance Review explains this
further. Acquisition-related costs, including
legal and advisory fees on completed deals
54
ITV plc Annual Report and Accounts 2020
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
and material in nature and are therefore
excluded from our adjusted measures.
Restructuring and reorganisation costs
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. These costs arise from
significant 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.
COVID-19 related costs
These are direct incremental costs incurred
exclusively as a result of COVID-19 and include;
costs associated with closure of ITV Studios
productions and their subsequent restart in
a safe environment, and additional costs
incurred to maintain the production of
daytime and news programming during
the government imposed lockdown.
Impairment of sports rights
COVID-19 has impacted our planned 2020-21
sporting schedule. This combined with the
consequential impact on TAR, changing
forecasts of audience mix and revenues for
certain sporting events has resulted in a
material impairment to our sports rights.
It is not possible to split the impairment
between that caused by COVID-19 and
underlying market movements.
Onerous contracts
A contract is considered onerous when the
unavoidable costs of the contract exceed
the revenues associated with it. In 2020
we had a significant onerous transmission
contract relating to committed costs of
transmission capacity on a satellite
transponder that is no longer used in
the Broadcast business. There are no
revenues associated with this capacity
as there are no channels on the relevant
satellite transponder.
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
Strategic Report
Governance
Financial Statements
Additional Information
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 gains or losses 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 that do not reflect the
relevant interest cash cost to the business
and are not yet realised balances.
Other Alternative Performance Measures
Total revenue
As an integrated producer broadcaster,
we look at the total revenue generated by
the business including internal revenue,
which is the sale of ITV Studios programmes
to Broadcast and Direct to Consumer.
ITV Studios selling programmes to the
Broadcast and Direct to Consumer
businesses is an important part of our
strategy as an integrated producer
broadcaster and it ensures we own all
the rights to the content.
Twelve months to 31 December
External revenue (Reported)
Internal supply
Total revenue (Adjusted)
2020
£m
2,781
479
3,260
2019
£m
3,308
577
3,885
Net pension deficit/surplus
This is our defined benefit pension scheme
surplus or 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. See note
3.7 of the financial statements.
Profit to cash conversion
This is the 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.
Prior to 2020, any movement in our
non-recourse receivables purchase
agreement was included in our profit to cash
conversion calculation. From 2020 onwards,
any such movement will be excluded. We
regard any drawing on this agreement as
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)
2020
Statutory
£m
561
2020
Adjustments
£m
12
2020
Adjusted
£m
573
2019
Statutory
£m
693
2019
Adjustments
£m
36
2019
Adjusted
£m
729
(118)
(87)
356
(44)
9
4
325
(44)
281
4
285
4,002
7.1p
7.1p
118
68
198
8
–
(4)
202
(51)
151
–
151
–
(19)
554
(36)
9
–
527
(95)
432
4
436
(84)
(74)
535
(68)
1
62
530
(52)
478
(5)
473
4,002
10.9p
10.8p
4,000
11.8p
11.8p
84
63
183
28
–
(62)
149
(67)
82
–
82
–
(11)
718
(40)
1
–
679
(119)
560
(5)
555
4,000
13.9p
13.8p
1.
£12 million (2019: £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.
2. Exceptional items largely relate to the impairment of sports rights, COVID-19 related costs, an onerous contract
provision, a settlement of the Box Clever legal case, and acquisition-related costs . Refer to the Finance Review.
3. £68 million (2019: £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. £8 million (£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.
a form of funding and believe that cash
generated from funding activities should be
excluded from our profit to cash conversion
calculation. This gives a better measure of
the underlying working capital performance
of the business. At 31 December 2019 the
amount sold under the non-recourse
receivables purchase agreement, and
therefore included in our profit to cash
conversion was £100 million. At 31
December 2020 no receivables were sold.
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
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 on page 59.
Covenant net debt and covenant liquidity
Covenant net debt is our leverage as defined
in our revolving credit facility (RCF)
agreement. This calculation is materially
different to how we define reported net debt
and is relevant in demonstrating we have
met required RCF financial covenants at our
reporting date. Prior to 2020, we disclosed
adjusted net debt as an APM which better
reflected how credit rating agencies looked
at our balance sheet. As the methodology to
calculate net debt differs by credit rating
agency, replicating this calculation is not
deemed necessary going forward.
At 31 December
Reported net debt
(including IFRS 16
lease liabilities)
Impact of IFRS 16
Long-term trade and
other payables
Other pension assets
Covenant net debt
Covenant net debt to
adjusted EBITDA**
Cash and cash equivalents
Undrawn RCF
Undrawn CDS facility
Covenant liquidity*
2020
£m
2019
£m
(545)
105
(54)
62
(432)
(893)
89
(61)
58
(807)
0.7x
1.1x
668
630
199
1,497
246
630
300
1,176
*
Total liquidity is defined as: unrestricted cash and cash
equivalents plus undrawn committed facilities.
** Adjusted EBITDA is defined per the facility agreement.
The Finance Review includes further detail on our
covenant ratios.
ITV plc Annual Report and Accounts 2020
55
Strategic Report
Finance Review
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 (APMs) section,
explains the adjustments we make
to our statutory results. This enables
focus on the key measures that we
report on and use as KPIs across the
business. See earlier sections for
further detail.
Chris Kennedy, Group Chief Financial Officer
Our adjusted and statutory results detailed below, have been
significantly impacted by COVID-19. The Operating and Performance
Review includes further detail on how it has impacted the
operational and financial performance of our two businesses,
ITV Studios and Broadcast.
Total exceptional items in the period were £114 million (2019:
£22 million). Acquisition-related expenses of £13 million are
predominantly performance based, employment-linked
consideration to former owners. This has decreased year-on-year
as we approach the end of the earnout period for several of
our acquisitions.
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
Reported net debt as at
31 December
Exceptional items
2020
£m
1,577
1,683
3,260
(479)
2,781
573
21%
561
10.9p
7.1p
–
2019
£m
Change
£m
Change
%
1,768
2,117
3,885
(577)
3,308
729
22%
693
13.9p
11.8p
8.0p
(191)
(434)
(625)
98
(527)
(11)
(21)
(16)
17
(16)
(156)
(21)
(132)
(19)
(3.0p)
(4.7p)
(8.0p)
(22)
(40)
–
(545)
(893)
348
Restructuring and reorganisation costs of £11 million relate to
one-off restructuring projects stemming from the Group-wide
commitment to reduce the overhead cost base and reorganisation
costs to deliver strategy.
COVID-19 related costs of £11 million includes direct incremental
costs incurred exclusively as a result of COVID-19. These relate to
the closure of ITV Studios productions and the subsequent restart
in a safe environment, along with additional costs incurred to
maintain the production of daytime programming during the
government imposed lockdown.
Impairment of sports rights relates to the impact of COVID-19
on the planned sporting schedule for 2020 and 2021 and the
consequential impact on TAR, along with changing forecasts of
audience mix and revenues for certain sporting events. The Group
has recognised a provision for these sporting events of £23 million,
which is included in programme rights and programme
commitments. It is not possible to split the impairment between
that caused by COVID-19 and underlying market movements.
Twelve months to 31 December
Acquisition-related expenses
Restructuring and reorganisation costs
COVID-19 related costs
Impairment of sports rights
Other
Total operating exceptional items
Non-operating exceptional items
Total exceptional items
2020
£m
(13)
(11)
(11)
(23)
(60)
(118)
4
(114)
2019
£m
(75)
(24)
–
–
15
(84)
62
(22)
Other exceptional costs of £60 million include: an estimate for
the settlement of the Box Clever case of £31 million; an onerous
contract provision of £19 million for satellite transponder capacity
no longer required (see below for further detail); past service
charges on pension schemes of £6 million; and other legal costs
in relation to legal matters which are considered to be outside the
normal course of business (see exceptionals note 2.2 for further
detail). In 2019, other exceptionals included the release the Box
Clever provision, as the cost of resolving the matter at that time
could not be reliably estimated. This was partly offset by the trade
insurance receivables provision. See note 3.6 for further detail.
56
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
During the year, we commenced a review of the efficiency of our
satellite transponder capacity usage, aimed at reducing our capacity
requirements. This has allowed us to reorganise and clear all
channels from one transponder, and as we are now no longer
utilising it in our Broadcast business, we are including £19 million
from the date the transponder was cleared, as an onerous contract
provision. The review is ongoing and we expect to clear a second
transponder in 2021.
Non-operating exceptional items relate to a gain on the sale of
Freeview channel, Merit, during the year. In 2019, there was a gain
on the sale of the London Television Centre.
Tax
Adjusted tax charge
The total adjusted tax charge for the year was £95 million (2019:
£119 million), corresponding to an effective tax rate on adjusted
profit before tax (PBT) of 18% (2019: 18%), which is lower than the
standard UK corporation tax rate of 19% (2019: 19%). We expect the
adjusted effective tax rate to be between 18% and 19% in 2021 and
2022, and then move to around 25% over the medium term. On a
reported basis, the tax charge is £44 million (2019: £32 million tax
charge) and corresponds to an effective tax rate of 13.5% (2019:
9.8%). 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 detailed in the table above.
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
2020
£m
2019
£m
Twelve months to 31 December
(27)
(9)
–
(36)
(2)
(6)
(44)
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
(31)
(8)
(1)
(40)
(1)
(27)
(68)
2020
£m
(44)
(12)
(21)
2019
£m
(52)
(36)
(6)
(16)
(19)
(2)
(95)
18%
(6)
(119)
18%
Adjusted financing costs were down £4 million to £36 million
(2019: £40 million) reflecting lower levels of net debt in the year.
Net financing costs were £24 million lower in 2020 at £44 million
(2019: £68 million) and largely due to the prior year including
one-off fees and premiums in relation to the buyback of
€506 million of Eurobonds, as well as the acceleration
of amortisation on these bonds.
JVs and associates
Our share of profits from JVs and associates in the year was £9 million
(2019: profit of £1 million). This was the net profit arising from our
investments, such as BritBox US and Canada, Circle of Confusion and
Blumhouse Television.
Profit before tax
Statutory profit before tax decreased by 39% to £325 million (2019:
£530 million) in the year. Production tax credits decreased to
£12 million (2019: £36 million) as a result of fewer high-value dramas
due to the pause in productions. Adjusted profit before tax was
down 22% to £527 million (2019: £679 million).
Profit before tax (PBT)
Twelve months to 31 December
Profit before tax
Production tax credits
Exceptional items
Amortisation and impairment*
Adjustments to net financing costs
Adjusted profit before tax
2020
£m
325
12
114
68
8
527
2019
£m
530
36
22
63
28
679
*
In respect of assets arising from business combinations and investments.
*
In respect of intangible assets arising from business combinations and investments.
Also reflects the cash tax benefit of tax deductions for US goodwill.
Cash tax
Cash tax paid in the year was £88 million (2019: £108 million)
and is net of £22 million of production tax credits received
(2019: £37 million). The majority of the cash tax payments were
made in the UK. Cash tax paid is lower than the prior year due to
reduced payments on account resulting from a lower profit
forecast. As previously guided, 2020 included six quarterly tax
payments rather than four. This was a one-off and will return to
four quarterly payments in 2021. A reconciliation between the tax
charge for the year and the cash tax paid in the year is shown below.
Twelve months to 31 December
Tax charge
Temporary differences recognised through
deferred tax
Prior year adjustments to current tax
Current tax, current year
Phasing of tax payments (including in respect of
pension contribution benefits)
Production tax credits – timing of receipt
Cash tax paid
2020
£m
(44)
(1)
(7)
(52)
(46)
10
(88)
2019
£m
(52)
(21)
(8)
(81)
(28)
1
(108)
Tax strategy
ITV is a responsible business, and we take a responsible attitude
to tax, recognising that it affects all of our stakeholders. 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
ITV plc Annual Report and Accounts 2020
57
Strategic Report Finance Review continued
We have four key strategic tax objectives:
1. Engage with tax authorities in an open and transparent way
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 reasonable procedures to prevent the facilitation
of tax evasion. Within our overall governance structure, the
governance of tax and tax risk is given a high priority by the Board
and Audit and Risk Committee (ARC). The ITV Global Tax Strategy,
approved by the Board and ARC in September 2020, and as
published on the ITV plc website, is compliant with the UK tax
strategy publication requirement set out in Part 2 Schedule 19
of the Finance Act 2016.
EPS – adjusted and statutory
Overall, adjusted profit after tax was down 23% to £432 million
(2019: £560 million). Non-controlling interests was a share of
losses of £4 million (2019: £5 million share of profits) which is the
net loss from our unowned share in entities such as BritBox UK,
Work Friends, Cattleya and Tetra Media. Adjusted basic EPS was
10.9p (2019: 13.9p), down 22%, which is broadly in line with the
decrease in adjusted EBITA of 21%. The weighted average number
of shares increased to 4,002 million in the year (2019: 4,000 million).
Diluted adjusted EPS in the year was 10.8p (2019: 13.8p) reflecting
a weighted average diluted number of shares of 4,025 million
(2019: 4,018 million).
Statutory EPS declined by 40% to 7.1p (2019: 11.8p), which is larger
than the decline in adjusted EPS, predominantly due to the increase
in exceptional costs in the period, as explained earlier.
A full reconciliation between statutory and adjusted results is
included within the Alternative Performance Measures section.
Dividend per share
The Board recognises the importance of the dividend to our
shareholders and intends to restore dividend payments as soon
as circumstances permit. The Board will balance shareholder
returns with our commitment to maintain investment grade
metrics over the medium term, to continue to invest behind the
strategy and with the ongoing uncertainty with COVID-19.
Acquisitions
Since 2012, we have acquired a number of content businesses in the
UK, US and creative locations across Europe, developing a strong
portfolio of programmes that return and travel. As we have grown
in size and expanded our network relationships and distribution
capability, this has helped to renew and strengthen our creative
talent and build our reputation as a leading European producer
and distributor and a leading unscripted independent production
company in the US.
As part of our strategy, we will consider selective value-creating
M&A and talent deals in both scripted and unscripted to obtain
further creative talent and IP.
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 these payments 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 the
capital consideration reflecting how we structure our transactions
and do not form part of the core operations.
The following table sets out the initial consideration payable on
our acquisitions, additional consideration subsequently paid, 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 £227 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.
Acquisitions – between 2012 and 2020 (undiscounted)
Company
Geography
Initial
consideration
£m
Genre
Additional
consideration
paid
£m
Expected future
payments*
£m
Total expected
consideration**
£m
Expected
payment
period***
Total for 2012–2020
Various
Content & Broadcast TV
957
205
227
1,389
2021-2026
* 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.
*** £163 million is expected to be paid in 2021
58
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
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 £227 million have decreased by £3 million since 31 December
2019 mainly due to payments made in the year being offset by an
increase in expected future payments on certain acquisitions and
the associated impact of foreign exchange. At 31 December 2020,
£209 million of expected future payments had been recorded on
the balance sheet, with the balance of £18 million to be accrued
over the period in which the sellers are required to remain with
the business.
To facilitate our working capital management, we have a £100
million non-recourse receivables purchase agreement (free of
financial covenants), which gives us the flexibility to access
additional liquidity when required. At 31 December 2020, no
receivables were sold under this agreement (2019: £100 million).
Prior to 2020, any movement in our non-recourse receivables
purchase agreement was included in our profit to cash conversion
calculation. From 2020 onwards, any such movement is excluded.
Further detail is included on page 55 of our APMs.
Adjusted free cash flow
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.
Twelve months to 31 December
Adjusted cash flow
Net interest paid (excluding lease interest)
Adjusted cash tax*
Pension funding
Adjusted free cash flow
2020
£m
791
(17)
(110)
(59)
605
2019
£m
632
(54)
(145)
(74)
359
There were no significant acquisitions in 2020. However, during the
year we agreed a number of talent deals within ITV Studios UK and
ITV Studios US to strengthen our creative talent pool.
*
Adjusted cash tax of £110 million is total cash tax paid of £88 million plus receipt of
production tax credits of £22 million, which are included within adjusted cash flow
from operations, as these production tax credits relate directly to the production
of programmes.
Our free cash flow after payments for interest, cash tax and pension
funding remained healthy in the year at £605 million (2019: £359
million). As agreed with the tax authorities and our pension trustees,
we deferred £90 million of payments out of 2020, with £75 million
of VAT payments payable in 2021 and £15 million of pension
contributions payable across 2022 – 2025.
Overall, after acquisitions and acquisition-related costs, pension
and tax payments, we ended the period with reported net debt
(including IFRS 16 lease liabilities) of £545 million (31 December
2019: £893 million). This has benefited from the deferred VAT
and pension payments above and is before earnout payments
which we anticipate paying in 2021.
Reported net debt tracker
£m
0
(100)
(200)
(300)
(400)
(500)
(600)
(700)
(800)
(900)
(893)
Dec 19
605
(100)
(20)
(68)
(58)
(11)
(545)
Adjusted
free cash
flow
Non-
recourse
receivables
purchase
facility
Exceptional
items
Acquisition
of
investments
and NCI
Other
Revaluation
of
non-hedged
bonds
Dec 20
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
Acquisition of property, plant and equipment
and intangible assets**
Capex relating to redevelopment of new
London headquarters
Lease liability payments (including lease interest)
Adjusted cash flow
Profit to cash ratio
2020
£m
573
237
10
57
6
2019
£m
729
(63)
1
56
10
(66)
(68)
–
(26)
791
138%
2
(35)
632
87%
* Working capital movement in 2020 excludes the unwind of the £100 million
non-recourse receivables purchase agreement
** Except where disclosed, management views the acquisition of operating property,
plant and equipment and intangibles as business as usual capex, necessary to the
ongoing investment in the business.
One of ITV’s 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 has been particularly important during the
COVID-19 pandemic. Remaining focused on cash and costs means
we are in a good position to continue to invest across the business
in line with our strategic priorities.
In the year, we generated £791 million of adjusted operational cash
(2019: £632 million) from £573 million of adjusted EBITA (2019:
£729 million), resulting in a profit to cash ratio of 138% (2019: 87%).
This increase was driven by a large working capital inflow arising
from a reduction in programme stock (where we delivered
programmes but were unable to continue producing) and the timing
of VAT payments which have been deferred (see further detail
below). This working capital benefit is expected to unwind in 2021.
ITV plc Annual Report and Accounts 2020
59
Strategic Report Finance Review continued
Funding and liquidity
Debt structure and liquidity
The Group’s financing policy is to manage its liquidity and funding
risk 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 cash and
undrawn committed facilities available at all times. We 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. The RCF has leverage and interest cover covenants which
require us to maintain a covenant net debt to adjusted EBITDA ratio
of below 3.5x and interest cover (adjusted EBITDA to net finance
charges) above 3.0x. As a precautionary measure, during the first
half of 2020, we agreed with our banking group to replace the
leverage and interest cover covenants in the RCF with a cap on
covenant net debt at £1.8 billion and a minimum covenant liquidity
requirement (cash plus undrawn committed funding lines) of £250
million until 30 December 2021. In addition, ITV has agreed not to
pay a dividend in the period of the amendment. ITV has the right
to restore its original covenants at any time should it so choose, in
which case the dividend restriction would fall away. At 31 December
2020, ITV’s financial position was well within its covenants.
We also have a bilateral financing facility of £300 million, which is
free of financial covenants. In March 2020, the Group extended the
maturity of its existing £300 million bilateral loan facility by five
years to 30 June 2026.
This provides us with sufficient liquidity to meet the requirements
of the business in the short to medium term under a variety of
scenarios, including a severe but plausible downside scenario. At
31 December 2020, the £630 million RCF was undrawn and £199
million of the £300 million bilateral facility was available, which
with unrestricted cash of £618 million, provided total liquidity at
31 December 2020 of £1,447 million.
Capital allocation and leverage
Our objective is to run an efficient balance sheet and manage our
financial metrics appropriately, consistent with our commitment to
investment grade metrics over the medium term. At 31 December
2020 reported net debt (including IFRS 16 liabilities) to adjusted
EBITDA was 0.9x (31 December 2019: 1.2x).
Our priority remains to invest in our key assets and value drivers in
line with our strategic priorities and balance this investment with
the returns to shareholders.
Credit ratings
We continue to be rated investment grade by both ratings agencies:
BBB- (negative outlook) by Standard and Poor’s and Baa3 (stable
outlook) by Moody’s Investor Services. These ratings were reiterated
in Q2. The factors that are taken into account in assessing our credit
rating include our degree of operational gearing and 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.
Reported net debt
At 31 December
Gross cash*
Gross debt (including IFRS 16 lease liabilities)
Reported net debt
2020
£m
668
(1,213)
(545)
2019
£m
246
1,139
(893)
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.
*
Gross cash includes £50 million of restricted cash in relation to the LTVC Pension
Funding Partnership (2019: £75 million of restricted cash).
Financing – gross debt
We are financed using debt instruments and facilities with a range
of maturities. Borrowings at 31 December 2020 were repayable
as follows:
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.
Amount repayable as at 31 December 2020
£630 million Revolving Credit Facility
€600 million Eurobond
€335 million Eurobond
€259 million Eurobond
Other loans
Total debt*
£m Maturity
– Dec 2023
537 Sep 2026
299 Sep 2022
232 Dec 2023
17 Various
1,085
Currency
US dollar
Euro
*
Net of £23 million cross-currency swaps and excluding £105 million of IFRS 16
lease liabilities.
Revenue
£m
Adjusted
EBITA
£m
+/- 20-30 +/- 0-2
+/- 30-40 +/- 3-5
60
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
2021 full year planning assumptions
The following planning assumptions for 2021 are based on our
current best view but may change depending on how events unfold
over the year.
Profit and Loss impact
• Total schedule costs are estimated to be around £1.1 billion
• Total essential investment of around £25 million in 2021, which
includes £10 million as previously guided, the phasing of 2020
investments which fall into 2021 and £13 million of additional
investments to accelerate the delivery of our strategy
• Total BritBox UK venture losses are expected to be around the
same level as 2020 and will decline thereafter
• Overhead cost savings are expected to be around £30 million in
2021. We will deliver around £100 million of annualised
permanent overhead cost savings by the end of 2022 (from 2019)
compared to our previous guidance of £55 million to £60 million
over that period
• Adjusted interest is expected to be around £36 million, which is
in line with 2020
• The adjusted effective tax rate is expected to be between 18%
and 19% in 2021 and 2022, and then move to around 25% over
the medium term
• The translation impact of foreign exchange, assuming rates
remain at current levels, could have an adverse impact of around
£25 million on revenue and around £3 million on profit
• Exceptional items are expected to be around £25 million, mainly
due to acquisition related expenses, restructuring and
reorganisation costs, and reducing our transponder capacity
Cash impact
• Tax will reflect the payment of £75 million deferred VAT
from 2020
• Total capex is expected to be around £75 million as we further
invest in our digital transformation
• The cash cost of exceptionals are expected to be around £190
million, largely relating to accrued earnouts which includes the
final earnout payment for Talpa
• Profit to cash conversion is expected to be around 30% in 2021,
as the favourable working capital position in 2020 unwinds.
Taking 2020 and 2021 together, cash conversion is expected to
be 80% to 85% over the two year period in line with historic levels
• Total pension deficit funding contribution for 2021 is expected
to be around £75 million
Chris Kennedy
Group Chief Financial Officer
Pensions
The net pension deficit for the defined benefit schemes at 31
December 2020 was £26 million (31 December 2019: £87 million
deficit). The movement in the year was driven by an increase
in liabilities caused by a reduction in corporate bond yields and
changes in the longevity swap, offset by updated inflation and
demographic assumptions and our deficit funding contributions
made in the year. The pension assets have increased due to a
reduction in gilt yields.
The net pension assets include £62 million of gilts (2019: £58
million), 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 in note 3.7 of the financial statements.
Actuarial valuation
The last triennial actuarial valuation was undertaken in 2017. On
the basis agreed with the Trustee, the combined deficits of the
ITV defined benefit pension scheme as at 1 January 2017 amounted
to £470 million.
The Trustee is in the process of undertaking a full actuarial valuation
of all sections of the scheme as at 1 January 2020, which we expect
to agree during 2021.
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 2020 were £59 million.
We have agreed with the pension Trustees to delay around £15
million, which will be deferred across 2022 to 2025 (subject to the
new funding schedule which will be finalised as part of the Triennial
valuation). Further details are included within note 3.7 of the
financial statements.
In 2021 we expect deficit funding contributions to be around
£75 million.
SDN pension funding partnership
In 2010, ITV established a Pension Funding Partnership (PFP) with
the Trustee backed by the asset of 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 and 2020 collateral
instalments with the result that £101 million cash collateral did not
become due in March 2020. The PFP is currently being reviewed as
we look to replace it with an alternative asset to SDN. 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.
ITV plc Annual Report and Accounts 2020
61
Strategic Report
Task Force on Climate-related
Financial Disclosures (TCFD)
We recognise the climate crisis and the role we must
play to mitigate the impact on both the wider world
and our business. The threat of climate change poses
some challenges to certain areas of ITV, including our
productions, supply chain and operations. It also
offers opportunities to increase engagement with
viewers through programming on climate change
and grow advertising with brands seeking to
showcase their environmental credentials.
Our commitment is
demonstrated by the ambitious
environmental targets we have
set, including Net Zero by 2030,
and as a signatory to TCFD. In
2019 we started to make
disclosures structured around
the TCFD framework and we
have built on this in 2020. We
will continue to develop the
detail of our TCFD disclosure as
we complete further analysis.
Governance
To successfully evaluate and respond to
the challenges and opportunities posed
by climate change, we must embed an
understanding and awareness of climate
change issues across the business,
supported by effective governance. During
2020, we published ITV’s environmental
targets and, as detailed below, updated
our Environmental Governance Structure
in order to facilitate their delivery. The
governance structure is aligned with our
wider risk management framework and
will also be used to identify, escalate and
monitor the effectiveness of our response
to climate-related risks and opportunities.
In 2020, we established ITV’s Climate
Change Delivery Group, chaired by Chris
Kennedy, the Group Chief Financial Officer
(CFO). In addition, we also set up the ITV
Green Team Steering Group. Both of these
groups support the Environmental
Governance Structure, and a summary of
their functions (and how they interact and
support the governance and reporting
structure of the Group) are set out in the
diagram on the following page.
Strategy
Action on climate change is defined within
ITV’s Social Purpose strategy as set out
on page 42 and aligned to our corporate
purpose and strategy. Reducing our impact
on the environment is one of the four pillars
of the Social Purpose strategy.
We have committed to becoming a Net Zero
business by 2030 and have set 1.5oC aligned
science-based emissions targets (SBTs) for
our Scope 1 and 2 emissions (emissions we
control), and well below 2oC targets for
Scope 3 (emissions we influence, such as
business travel and products and services
we use). We have also set targets for the
areas that are most material to our business:
the waste we generate, the sustainability of
our supply chain, and our culture. These
targets are important so we can reduce the
impact our operations have on the
environment and reduce our exposure to
climate related risks.
To deliver against our global emissions
targets, we have developed roadmaps and
action plans for the business areas with the
most opportunity to drive down ITV’s
emissions. The work has provided each
business area with their Scope 1, 2 and 3
emissions baseline and target. The business
areas/functions have responsibility for
developing their action plans to achieve
their targets and this is monitored through
the Environmental Governance structure.
The business areas/functions are:
• Production (UK and International)
• Operations
• Technology
• Broadcast (will become Media and
Entertainment)
• Procurement
62
ITV plc Annual Report and Accounts 2020
Risk management
We also recognise the impact climate
change may have on our strategy and
operations. Climate-related risks have
been identified by the Board as an emerging
business risk. Emerging risks are defined in
ITV as uncertainties which originate from
known or previously unconsidered sources
and which are not clearly understood,
visible or possible to fully assess.
In 2020, ITV began climate scenario analysis,
starting with a detailed review of the risks
and opportunities climate change poses for
the business. Climate related risks have been
identified by members of the Climate
Change Delivery Group with the support of
Group Risk and subject matter expert teams.
As part of this exercise, we used our existing
risk management framework to perform
an initial assessment of the risks and
prioritised these in a workshop with
business stakeholders based on their
potential for some financial impact, taking
into account existing mitigations. Our initial
assessment of the risks suggests we are not
materially exposed to climate change and
that these risks (individually or collectively)
do not represent a threat to our strategy,
long-term viability, liquidity or ability to
operate. Furthermore, we do not expect
that either the risks identified as part of our
TCFD work nor the actions required to meet
net zero will have a significant financial
impact, in terms of operating costs, capital
investment or balance sheet valuations.
However, as noted below in 2021 we will
undertake further analysis.
The major infrastructure for our Broadcast
(Media and Entertainment) business is based
in the UK, and is less exposed to physical
climate risks. Furthermore, our Studios
business can operate in an agile manner,
changing filming locations to respond to
evolving physical climate and other risks
and events (as has been proven during the
COVID-19 pandemic). However, we recognise
there remains some uncertainty and further
work is needed to better understand the
potential scale of these risks. In 2021 the
prioritised risks will be taken forward into
quantitative analysis in high and low carbon
scenarios. The results of our quantitative
analysis will help us better understand our
exposure; develop metrics to monitor our
exposure and strengthen our mitigations;
and inform our long-term strategic, financial
and operational business planning.
Further detail of how we track, monitor and
report our emerging risks is set out in the
Risks and Uncertainties, and Governance
sections of the report.
Strategic Report
Governance
Financial Statements
Additional Information
Environmental Governance structure
Board
Responsible for:
• Ensuring the effective
delivery of environmental
targets
• Reviewing key climate-
related risks and
opportunities and overseeing
mitigation strategies as part
of the bi-annual review of
principal and emerging risks
• Considering climate change
as part of stakeholder
engagement
Management Board
Responsible for:
• Reviewing and monitoring
climate-related risks at least
bi-annually, as part of the
principal and emerging risks
reviews and establishing
effective mitigation and
controls to manage risks
• Ensuring appropriate action is
being taken to meet our
environmental targets,
through review of quarterly
reporting on climate change
issues, including proposed
metrics and KPIs
Divisional Boards
(Studios and Media &
Entertainment)
Responsible for:
• Monitoring divisional
progress on environmental
targets through tracking KPIs
and assessing climate change
risks and opportunities within
the division
Climate Change Delivery
Group
Chaired by the Group CFO, this
group is responsible for:
• Identifying all climate-
related risks and
opportunities, including and
developing appropriate
mitigation strategies
• Establishing action plans to
deliver our environmental
targets, tracking progress
against the targets and
reporting to the PLC Board/
Audit and Risk Committee
and Management Board
• Embedding accountability in
each business area for
delivery of the targets and
monitoring progress and
actions
• The group meets quarterly
and comprises senior
business leaders from across
ITV, who also lead working
groups in their respective
business to deliver actions
required
Green Team Steering Group and
business area Green Teams
Responsible for:
• Embedding and championing environmentally
sustainable behaviours across the organisation
• Supporting local green team champions in
business areas
• This group is chaired by the Senior Manager of
our Social Purpose team and comprises senior
leaders across the business
Direct and advise
Report and escalate
Audit and Risk Committee
Responsible for supporting the Board in
its responsibilities with respect to climate
change, including:
• Considering climate change risks as
part of the bi-annual review of principal
and emerging risks
• Overseeing compliance with, and
progress on, climate change reporting
• Overseeing ITV’s environmental data
and its accuracy and completeness, the
Company’s environmental targets set
in 2020, and the governance and
planned roadmap to enable the targets
to be achieved
Working Groups
Responsible for:
• Delivering the relevant actions related
to their area to meet our environmental
targets
• Day-to-day management of climate-
related risks
• Embedding the climate change culture
and mindset within their business area
• Working groups are led by senior
business leaders from across ITV,
supported by colleagues within
their area
TCFD progress roadmap
2019
2020
2021
We have made significant
progress in improving how we
manage our environmental
targets and climate-related
risks and opportunities.
However, we recognise that
we can build on these
priorities further, to continue
enhancing our approach and
strengthen the quality of
our reporting.
• Launched ITV’s Social Purpose
strategy
• Updated Environmental
Governance structure
• Obtain verification for SBT from
the SBT initiative
• Identified Group CFO as owner
• Created Climate Change Delivery
• Complete climate scenario
for climate-related risks
• Set baseline for targets,
including SBTs
• Carbon neutral across Scope 1, 2
and 3 (for business travel only)
• Updated ITV’s global emissions
data collection process
• Launched the Green Team
Steering Group
• Established Environmental
Governance
Group chaired by Group CFO
• Launched ITV’s environmental
analysis quantification of climate-
related risks
2030 targets, including SBTs and
100% renewable electricity
target by 2025
• Set a Net Zero target by 2030
• Achieved a B rating for Climate
Change for our responses in the
Carbon Disclosure Project program
• Started climate scenario analysis
and identified key risks and
opportunities with stakeholders
• Developed a climate risk register
• Finalise emissions reduction
roadmaps for all business areas
• Launched new global
environmental data platform
for emissions and waste
• Establish business area
environmental key performance
indicators
ITV plc Annual Report and Accounts 2020
63
Strategic Report TCFD continued
Detailed risks and opportunities
Link to Strategy
Risk direction of travel
(after current mitigations)
Impact time
horizon
From
(years)
To
(years)
Aligned to
Grow
UK and global production
Transform
Broadcast
Expand
Direct to Consumer
Risk is increasing
Short term
2020
Risk remains static
Medium term
2021
Risk is reducing
Long term
2024
end
2021
end
2023
end
2030
ITV annual reporting period
ITV long-term viability assessment
period and strategic planning cycle
ITV science-based and Net Zero
targets
Temperature scenarios
High carbon scenarios: (‘business as usual’/4ºC)
This is where physical impacts of climate change are likely to be most
impactful, for example with higher sea level rise, higher temperatures
and extreme weather events
Low carbon scenarios (1.5ºC/2ºC)
This is where the impacts of transitioning to a low carbon economy are likely
to be most impactful as governments worldwide commit to driving down
emissions; this could be manifested as higher carbon prices and greater
regulation on land use and raw materials
Prioritised climate-related risks
Through our risk identification process we identified three risks which have potential for some financial impact. Our initial review of the risks is
that we do not expect they present a material financial impact or a threat to viability and liquidity. However, we intend to perform quantitative
analysis on these risks to assess them further and to support us in developing mitigations.
1. Carbon pricing
Link to strategy
Context
How we are responding
Direction in a high
carbon scenario
Direction in a low
carbon scenario
As governments increasingly intervene to limit the impact of
climate change, we may see an increase in carbon pricing/
taxations on organisations to encourage carbon reduction.
As a result, we may be exposed to some additional costs of
operating in areas of our business where we produce carbon.
This may include pricing on the use of generators on remote
filming locations, business travel, or on directly purchased
goods such as technology equipment.
By committing to our net zero carbon target we
are actively seeking to limit the amount of
carbon we use in our business. As we reduce our
carbon emissions and increase our use of
renewable energy to deliver against this target,
our exposure to this risk will be reduced.
Link to existing principal risk
N/A
Time horizon
Medium
2. Extreme weather events
Link to strategy
Context
How we are responding
Direction in a high
carbon scenario
Direction in a low
carbon scenario
If governments and organisations fail to adequately respond
to climate change, we are likely to see an increase in physical
climate risks, such as extreme weather events causing floods,
wildfires and acute heatwaves.
Within the international Studios business, we are
monitoring the local situation in each of the
territories we operate, and respond on a
case-by-case basis to potential weather events.
We build contingency and business continuity
into all our productions and are able to be agile
to respond to changing circumstances.
64
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
2. Extreme weather events continued
Context
How we are responding
ITVs highest value property and infrastructure assets
are located within the UK, as part of our Media and
Entertainment and Group business areas and, therefore,
less exposed to physical climate risks, when compared to
other global territories. However, extreme weather events
do have the capacity to result in some business or service
interruption, including production delay and damage
to property.
We also have extensive business continuity and
resilience measures built into our existing Media
and Entertainment transmission and Group
operations and will continue to develop these
in light of this evolving risk.
Link to existing principal risk
N/A
Time horizon
Medium
3. Government and regulatory action
Link to strategy
Context
How we are responding
Direction in a high
carbon scenario
Direction in a low
carbon scenario
Many governments globally have announced their
commitments to responding to climate change and are
likely to enact legislation/regulation on organisations to
support this.
We may be impacted by changing regulation, such as
advertising restrictions on high carbon products and
services, travel restrictions, or quotas on goods and services.
These restrictions may result in operational challenges or, in
the case of advertising, restrictions impacting revenue.
Time horizon
Medium
We have an experienced Policy and Regulatory
Affairs team that are responsible for
undertaking ongoing horizon scanning to
monitor potential policy, legal and regulatory
developments.
With respect to advertising restrictions, we have
a systematic approach to analysing the impact
of potential changes and implementing
processes to replace any lost revenue.
Organisations are also increasingly investing in
the development of substitute products as
alternatives to high carbon products, which will
materially limit this risk.
Link to existing principal risk
• Policy and regulatory changes
• Advertising market changes
See page 79 of the Risks and
Uncertainties section
Other climate related risks
We also identified two further risks with a low potential for financial impact. We have existing processes in place to manage these risks and
therefore they will not be subject to quantitative analysis at this stage.
Health and safety
Changing attitudes
We recognise that the environmental impacts of climate change have
the potential to impact worker productivity and/or the physical and
mental health and wellbeing of our staff, cast, crew and contributors in
the future. Protecting our people will always remain our top priority and
we have existing controls and processes in place which we can leverage
to mitigate this risk to the lowest possible level.
Link to principal risks
• Duty of care and health and safety risk
Social and government attitudes to climate change are evolving and
are increasingly seen as a key human issue. We understand that failure
to (i) address the environmental impact of our programming, (ii) publish
targets and (iii) comply with any applicable regulation, may result in
damage to the ITV brand and reputation. However, our commitment to
the environment, as demonstrated by our environmental targets, risk
identification process and the robust governance we have put around
these will help us manage this risk. Furthermore, we will also take
advantage of the opportunities to use our content to influence the
public’s conversation around climate change and enhance our brand,
as set out on the following page.
Link to principal risks
• Commissioning risk, changing viewer habits
ITV plc Annual Report and Accounts 2020
65
Strategic Report TCFD continued
Climate-related opportunities
We are conscious not just of the risk surrounding climate change but also the opportunities. We are and will continue to take advantage of these
opportunities to make a difference to wider society and promote our business.
Advertising
Brand and programming
Technology
More and more of our advertising clients are
seeking the trusted advertising environment
of ITV to showcase their environmental
credentials and encourage sustainable
consumption. In response to this demand,
we’ve created ‘ITV Home Planet’, a commercial
initiative that provides a platform for
advertisers to communicate their message,
grow their business and help to increase
environmentally conscious purchasing
amongst consumers.
We are in a position to use our brand and
programming to raise the profile of climate
change and promote or normalise positive
sustainable behaviours amongst our viewers
and wider society. As audiences are
increasingly looking for ways to reduce their
own carbon footprint, we can educate and
inspire them through engaging programming.
For example, vegan recipes are regularly
featured in cooking shows, sustainable
behaviours are shown within our continuing
dramas such as Emmerdale, and our Tonight
programmes cover topics such as electric
vehicles and food waste. See our Social
Purpose section for further information.
We also have the opportunity to increase the
use of sustainable technology, which will
support us in mitigating some of the risks
highlighted earlier and reduce our
environmental impact. We are in the process
of investigating potential options across our
workspace and operations.
Metrics and targets
Current targets:
•
In August 2020, ITV announced the
commitment to be a Net Zero business by
2030, having set a Scope 1 and 2 science-
based emissions target aligned to the
Paris Agreement’s 1.5oC warming limit,
and a Scope 3 target aligned to well
below 2oC, using 2019 as the baseline. This
equates to 46.2% reduction for Scope 1
and 2, and 28% reduction for Scope 3
• Net Zero will be achieved by reducing
emissions in line with our science-based
targets, setting an internal carbon price
on business travel that will be invested
into nature-based sequestration
solutions, and investing the impact of our
programmes into nature-based solutions
via albert’s Creative Offsets. ITV has also
committed to powering the business with
100% renewable energy by 2025. The
Group achieved its carbon neutral target
in 2019 by offsetting 2018’s Scope 1, 2 and
business travel emissions by investing in
certified carbon offset projects
• Business area emissions reduction
• An internal audit of ITV’s environmental
roadmaps and action plans have been
developed, and progress against these
actions is being assessed within the
Climate Change Delivery Group
•
•
ITV has also committed to becoming a
zero-waste business; running a 100%
sustainable supply chain; and embedding
sustainable decision-making into every
part of the business by 2030. The
roadmaps for these targets will be
developed and published in 2021
ITV is also the first broadcaster to
commit to obtaining albert certification
for 100% of programmes produced and
commissioned in the UK by the end of
2021. The albert certification is the
industry authority on sustainable TV
and film production. Teams are able to
use the albert calculator to assess the
environmental impact of their production
and in completing a Carbon Action Plan,
achieve an albert rating
reporting approach conducted by
ITV’s internal auditor (Deloitte) in 2020
recommended the implementation of
a global environmental data platform
in order to ensure robust, accurate and
timely reporting on our global emissions.
ITV has adopted the recommendation
and is currently implementing a global
environmental data platform, having
consulted with the internal auditor on
the structure, reporting approach
and workflow of the platform. The
platform will be used for ITV’s 2021
data and reporting
For further detail on ITV’s 2020 energy
consumption and GHG emissions disclosure,
please refer to page 47.
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ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
Our commitment to Section 172(1)
some of the key strategic issues considered
and decisions made by the Board during the
year and an explanation of how the Board
has had regard to the matters in section
172(1) (a-f) in reaching decisions are set out
in the table below.
See pages 97 to 102 to read more on
Stakeholder Engagement
See pages 42 to 49 to read more on Social
Purpose
See pages 50 to 52 to read more on Our People
long-term impact of key actions throughout
its decision-making process. The Board also
undertakes a formal assessment on an
annual basis of whether the key
stakeholders identified remain appropriate.
The Directors consider that they have acted,
in good faith, in a way that is most likely to
promote the success of the Company for
the benefit of its members as a whole,
having regard (among other matters) to the
matters set out in section 172(1)(a-f) of the
Companies Act 2006. As the Chairman
makes clear in his introduction, the Board
regularly considers stakeholder groups and
their most significant issues, views and
interests as well as the financial and
During 2020, the challenges arising from
COVID-19 required the Board to act swiftly
and approve measures to increase the
resilience of the business and protect the
interests of all stakeholders. Examples of
See pages 102 to 105 to read more on
Workforce Engagement
See pages 6 and 7 to read the Chairman’s
Statement
Long-term impact
Interests of colleagues
Fostering business
relationships
Impact on community
and environment
Maintaining reputation
for high standards of
business conduct
Acting fairly between
members
Maintaining the resilience of the business in the
context of the significant financial and economic
uncertainty caused by COVID-19 and BREXIT
Directors consideration of key factors set out in section 172(1)
Outcomes on Board decision-making and other key strategic decisions
Long-term impact:
• In response to the uncertainty and pressures on revenue streams caused
by COVID-19, the Board focused on preserving cash, which was paramount
to safeguarding financial stability and longer-term sustainability
• The Board has regularly considered the range of forecasts available to it,
particularly in light of the uncertainties caused by COVID-19 and Brexit
on the advertising market. Whilst the direct impacts of Brexit are not
significant in the short-term, traditional TV spenders are contributing
less towards advertising in the face of economic headwinds
• The Board was mindful that the continued growth of the Studios business
in 2021 would depend on how quickly COVID-19 restrictions are eased
and therefore ensured that the budget and five year plan took this
into account
• Replacement of the leverage and interest cover covenants in the
Revolving Credit Facility with a cap on covenant net debt at £1.8 billion
and a minimum covenant liquidity requirement of £250 million until
30 December 2021
• Reductions to Executive Director and Management Board salaries and
a voluntary 20% reduction in fees for Board members from April 2020
to October 2020
• Ongoing monitoring by the Board of:
– business performance against a wide range of scenarios as well as
analysis to inform planning and decision-making to ensure costs and
cash are managed appropriately
– the risks associated with COVID-19 and changes in regulation and impact
of Brexit on the business
Shareholders: The Board was mindful of shareholders’ concerns regarding
the impact of COVID-19 on ITV’s financial and operating performance and
resilience as well as its ongoing ability to pay dividends.
• Withdrawal of the 2019 final dividend and previously announced intention
to pay an 8.0p full year dividend for 2020
• Increased Chief Executive and Group CFO meetings with shareholders
during the initial phase of the crisis
Colleagues: The Board recognised that the economic uncertainty caused
by COVID-19 could result in our colleagues worrying about their personal
financial situation and was regularly updated on communications, which
included the Chief Executive’s vodcast and through the Workforce
Engagement Director, to ensure colleagues were kept informed about
cost-reduction measures that would impact them.
• Implementation of other cost-reduction measures, including: recruitment
and pay freezes across the business; the cancellation of the 2020 bonus
for all colleagues; furloughing colleagues as appropriate; reducing
non-essential travel and other expenses
Partners and customers: The Board considered an inability to complete
productions in light of global restrictions, the impact this would have
on revenue and our free-to-air customers and the impact on delivering
content to customers. The Board also considered business continuity
risks with critical suppliers and the evolving competitor landscape due
to COVID-19.
• Ongoing monitoring of advertising trends and the impact of those trends
in the medium to long-term, and the impact of COVID-19 restrictions on
Studios productions and production restarts globally
• Increased supplier due diligence and acceleration of initiatives in relation
to enhancing partnerships
ITV plc Annual Report and Accounts 2020
67
Strategic Report Section 172 continued
Looking after the health and safety of colleagues,
programme participants and the wider community
in the context of COVID-19
Directors consideration of key factors set out in section 172(1)
Outcomes on Board decision-making and other key strategic decisions
Colleagues: The Board recognised that the pandemic could have a
negative impact on our colleagues’ physical and mental wellbeing,
reinforcing that people and communications continue to be our top
priority. Regular updates on colleagues are provided to the Board in
the Chief Executive report. In addition, ITV took a leading role in the
development of COVID-19 TV production protocols with UK government
to minimise health and safety risks for colleagues – a role that has been
specifically recognised by the government in Parliament.
• Use and development of existing programmes to support the mental
wellbeing of our colleagues (refer to page 52), especially in the context of
working from home
• Continued investment in technology and systems to enable colleagues to
optimise digital working. For more detail on measures put in place for
colleagues, refer to page 52
• Development of a phased approach to re-entering the office safely (to be
implemented as appropriate in line with government guidelines)
Customers and programme participants: In order to protect the health
and safety of our talent and crew, ITV productions were paused at the start
of the pandemic, whilst recognising the impact and costs for the business
of having to take such actions in the long-term.
• Implementation of new processes and protocols to minimise health and
safety risks for colleagues and programme participants working on
content production to allow them to work safely during the pandemic.
This included working with partners to drive the government’s
introduction of the COVID indemnity scheme (Film & TV Production
Restart Scheme)
Legislators and Regulators: The UK government and industry players
were consulted when agreeing measures to protect our employees and
programme participants from the risk of infection. Public health (mental
and physical) has been a particularly important topic over the past year.
Public Health England asked ITV to help communicate critical health
messages to key demographics.
• Integration of public health messaging into our broadcasting. In addition
to editorial content, we created campaigns with messages on mental
health (e.g. how to combat loneliness), the importance of staying at home,
handwashing, healthy eating (Eat Them To Defeat Them) for children and
exercise (with the Daily Mile)
Community, environment, viewers and subscribers: The pandemic
presented new opportunities for ITV to further its Social Purpose priorities
(Better Health, Diversity and Inclusion, Environment, and Giving Back), raise
awareness of key issues and shape culture for good. The Board considered
ITV’s responsibility as a public service broadcaster to ensure that it informs,
entertains and provides companionship to viewers, in particular to help
build resilience to cope with lockdown.
• Running our award-winning mental health campaign, Britain Get Talking,
and Board discussion on the widening of Britain Get Talking beyond
mental health to neighbourliness
• Other examples of how we have raised awareness and delivered against
our Social Purpose priorities during the pandemic are set out on page 44
• Running public health messaging campaigns (as described above)
Restructuring of the Broadcast business to
establish a new Media and Entertainment division
with two new business units
Directors consideration of key factors set out in section 172(1)
Outcomes on Board decision-making and other key strategic decisions
Long-term impact: The Board believes the restructuring will ensure that
ITV’s business model better reflects and serves changing viewing habits in
the longer-term and will enable the Company to reduce the ongoing cost
base, improve efficiency and accelerate delivery of ITV’s strategic priorities.
• Review of analysis/modelling to understand the financial impact of
the restructuring (following which the Board concluded that its
implementation would be in the long-term interests of the Company)
Colleagues: The Board considered how best to preserve the culture of the
Broadcast business, ensure transparency through communications with
colleagues and minimise disruption to the business. The Board also
discussed the necessary reallocation of resources between the On Demand
and Broadcast business units within the Media and Entertainment division.
• Open and transparent communications with colleagues in relation to
the restructuring, including through regular vodcasts with the Chief
Executive where colleagues were able to ask questions anonymously.
When necessary, we also undertook individual and collective
consultations. Individuals at risk were supported by our ITV Ambassadors
(our employee representatives)
Viewers and subscribers: The Board believes that the restructuring will
facilitate the growth of ITV’s online offering to provide new content that
appeals and improves accessibility to audiences who already do most or all
of their viewing on demand.
• Feedback from viewers, subscribers and customers indicated that
this would strengthen ITV’s digital offering and attract a broader
demographic who would spend more time with ITV content. The
impact of the restructuring on revenue will continue to be monitored
Partners and customers: The Board was mindful of how the restructuring
would impact how we work with our partners. Growing our digital viewing
will provide more opportunities for advertisers to reach new audiences.
• Discussions with advertisers to ensure they understand what the
restructuring will mean for the business
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Strategic Report
Governance
Financial Statements
Additional Information
Non-Financial
Information Statement (NFIS)
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.
Environment
Policies
Due diligence in pursuance of policies
• Our Environmental Management Policy
sets out our commitment to Net Zero
Carbon, zero waste and a sustainable
supply chain by 2030
• We are also a signatory to the Task
Force on Climate-related Financial
Disclosures (TCFD), which provides a
framework for assessing our exposure
to climate-related risks and processes
to mitigate against these risks
• Our Supplier Code of Conduct sets out
our expectation of our suppliers to align
to our 2030 environmental targets
• We evaluate and monitor climate change
risks and progress against our
environmental targets through our
governance structure, which includes the
Climate Change Delivery Group, and is
referenced in further detail in our TCFD
report (see pages 62 to 66)
• Progress against our environmental
targets are reported to the Studios,
Media and Entertainment, and
Management Boards four times a year,
and annually to the Board. The Audit and
Risk Committee also has oversight of
environmental matters, receiving
frequent updates (page 121)
• All colleagues are required to complete
mandatory training on climate action
Social impact
Policies
Due diligence in pursuance of policies
• Social Purpose is a core part of ITV’s
• We evaluate and monitor all our Social
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 (UN SDGs)
Purpose campaigns and progress against
our goals
• A Mental Health Advisory Group, chaired
by Ruth Davidson (former leader of the
Scottish Conservative Party), comprises
external expert advisers and provides
guidance on best practice for people,
productions and campaigns
• ITV is a member of the Responsible
Media Forum
• Progress against our targets and the
impact of our campaigns are reported to
the Management Board four times a year,
and annually to the Board
The description of Our
Business Model can be found
on pages 22 and 23.
Outcomes of policies and
impacts of activities including
related KPIs
Related principal risks
(pages 76 to 85)
• Reducing our impact on the
environment is one of the
four priorities of ITV’s Social
Purpose strategy (see pages
46 and 47)
• Refer to page 47 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
• Climate change is not
currently recognised as
a principal risk, but is
categorised as an
emerging risk and kept
under regular review
through our risk
management framework.
In 2020 we performed an
assessment of this area,
in order to identify specific
climate risks for ITV and
the result of this
assessment is detailed in
our TCFD report on
page 62
Outcomes of policies and
impacts of activities including
related KPIs
Related principal risks
(pages 76 to 85)
• Social impact matters are
not considered to be a
principal risk as we are
committed to our Social
Purpose and have taken
steps to deliver this
• Our Social Purpose strategy
has four priorities relating to
Better Health, Diversity and
Inclusion, the Environment
and Giving Back (see pages
42 to 49)
• The Social Purpose strategy
is aligned to the UN SDGs.
ITV has identified SDGs 3, 5,
7, 10, 12, 13 where it can have
the most impact
ITV plc Annual Report and Accounts 2020
69
Strategic Report Section 172 continued
Colleagues
Policies
Due diligence in pursuance of policies
• Our Code of Conduct promotes the
highest standards of ethical business,
underpinning our values and corporate
culture. Adherence to the Code of
Conduct is a key requirement of our
overall compliance framework
• All colleagues are required to complete
annual mandatory training aligned with
the Code of Conduct. Board members
also completed the mandatory training
for colleagues in 2020
• The Code of Conduct is reviewed and
• Our Diversity and Inclusion strategy
updated regularly
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
• ITV has a ‘Speaking Up’ framework
(revised in 2020) for employees and
freelancers to raise concerns and
grievances in confidence (and if they
wish anonymously), as well as a
freelancer complaints procedure
• We also have policies on bullying,
harassment and dignity at work,
and grievances
• Our Inclusion and Diversity Council,
chaired by the Chief Executive, drives the
organisation’s diversity and inclusion
agenda (see page 49)
• Progress against our diversity targets are
reported to the Studios and Media and
Entertainment Boards biannually, the
Management Board four times a year,
the Nominations Committee regularly,
and annually to the Board
• 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, providing feedback
to the Board
• Our Speaking Up arrangements and the
wider ‘Speaking Up’ framework, including
incident statistics, are monitored and
reviewed annually by the Audit and Risk
Committee, which provides feedback
to the Board
Anti-corruption and anti-bribery
Policies
Due diligence in pursuance of policies
• Our Code of Conduct promotes the
highest standards of ethical business
and reinforces the importance of
awareness of compliance requirements
and maintaining high ethical standards
• Our Anti-Bribery Policy sets out our
responsibilities and provides
information and guidance on what
bribery is and how to deal with bribery
and corruption issues. Those working
or or with us must observe and uphold
the Policy
• Our Sanctions Policy ensures that the
business complies with all relevant
international and financial sanctions
in force at the time by the UN, EU or
UK government
• Our Supplier Code of Conduct sets out
our expectation of our suppliers to
comply with all anti-bribery laws
• All colleagues are required to complete
annual 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
• Bespoke training on the Anti-Bribery
Policy is provided to employees working
in roles or territories at higher risk of
bribery and corruption issues
• Compliance with the Anti-Bribery Policy
is kept under review and reported to the
Management Board and Audit and Risk
Committee biannually
• Bribery and corruption risks are reviewed
annually by the Audit and Risk
Committee, as is wider policy compliance
Outcomes of policies and
impacts of activities including
related KPIs
Related principal risks
(pages 76 to 85)
• In 2020, a ‘pulse’ survey was
carried out to understand
colleague confidence in our
response to the COVID-19
pandemic and obtain
learnings for future ways
of working, the results of
which have informed Board
discussions (see pages 104
and 106)
• Diversity and Inclusion is one
of the four priorities of ITV’s
Social Purpose strategy (see
pages 48 and 49)
• During 2020 we appointed
a Group Diversity and
Inclusion Director to the
Management Board
• In 2020 we launched the
Diversity Acceleration Plan,
which is aligned with and
supports our business
strategy (see page 48)
• Non-compliance with laws
and regulation is
recognised as a principal
risk (for which we have
zero tolerance) and we
regularly assess potential
risks associated with
employee conduct and
ethics as part of our
compliance processes
• Failure to deliver our
Diversity Acceleration Plan
is a risk which remains
under review, monitored
by the Nominations
Committee
• Failure to create the right
organisational culture,
which allows colleagues
to speak up and deliver
the strategy (Risk 11), and
failure to extend an
adequate duty of care
or a major health and
safety incident (Risk 12)
are recognised as
principal risks
Outcomes of policies and
impacts of activities including
related KPIs
• 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
Related principal risks
(pages 76 to 85)
• Legal and regulatory
non-compliance (including
the Bribery Act 2010) is
recognised as a principal
risk (Risk 13). We have
a compliance programme
in place to mitigate the
risk of bribery, which is
articulated in our
Anti-Bribery Policy
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Strategic Report
Governance
Financial Statements
Additional Information
Human rights
Policies
Due diligence in pursuance of policies
• Ultimate oversight belongs to the Board
• ITV’s Modern Slavery Steering Group
is responsible for overseeing modern
slavery risk management for ITV in
a manner that places concerns for
potential victims at the centre. It agrees
strategies for addressing key risks
identified and raises awareness among
ITV’s decision-makers of labour rights
considerations and seeks their support
for appropriate initiatives
• Our Modern Slavery Statement is
reviewed by the Board on an annual basis
• 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
• Our Supplier Code of Conduct sets out
our expectation of our suppliers to
protect human rights of workers and
communities impacted by operations
and supply chains
Outcomes of policies and
impacts of activities including
related KPIs
• No incidences of human
rights abuse or modern
slavery have been identified
• During 2020, we
strengthened risk
management processes,
and new reporting
processes are being
established to ensure better
data from the due diligence
processes we perform for
new suppliers and the
targeted assessments being
undertaken for our current
suppliers that pose the
highest (material) risk of
modern slavery across our
supply chain. This will
help us measure the
effectiveness of our supply
chain risk mitigation
Related principal risks
(pages 76 to 85)
• Legal and regulatory
non-compliance (including
labour rights issues) is
recognised as a principal
risk (Risk 13). We have a
compliance and risk
management framework
in place to identify
potential risks and
mitigate these
ITV plc Annual Report and Accounts 2020
71
Strategic Report
Risks and Uncertainties
ITV operates in a rapidly changing
business environment. Viewer
behaviours, competitors and the
broader industry are evolving at
a significantly faster pace than before,
creating an increasingly complex
risk landscape.
The COVID-19 pandemic has created
unprecedented challenges for ITV, impacting
many of the principal risks facing our business and
further highlighting to us the importance of
having an effective understanding of and ability
to respond quickly to changing and
emerging risks.
We understand that taking certain risks is
unavoidable and necessary to enable us to pursue
our strategic goals. However, we must also
adequately manage and respond to risks which
represent a threat to our reputation, finances, the
safety of our staff, contributors and the
environment. Our continued success is dependent
on striking the right balance between risk-taking
and risk-mitigation. ITV’s risk management
framework is designed to support strategic and
operational decision-making by providing us with
the tools to identify, manage and continually
review our risks.
Enhancing risk management
Throughout 2020, we have introduced enhancements to better
support our teams to effectively understand and respond to
risks. We will continue to build on this work in 2021.
Key enhancements
in 2020
Building on these
priorities in 2021
• Increasing the frequency of
• Continuing to embed and build
risk discussions at all levels of
the business
• Performing deep dives with
management, the Audit and
Risk Committee and the
Board, to further scrutinise
the approach we take to our
principal risks (detail of the
deep dives completed in 2020
are outlined within each
principal risk identified on
the following pages
• Further developing the risk
appetite framework for the
business and articulating our
risk appetite in respect of
key risks
• Supporting the business with
the management of risks and
evolving threats created as
a result of COVID-19
• Undertaking a series of
workshops to identify
climate-related risks and
improve our related disclosures
and mitigations/response
• Improving the robustness of our
processes to monitor third
party and supplier risks
risk management capability and
culture within the business
• Increasing the number of risk
deep dives with the Board
• Enhancing risk reporting to
better support decision-
making, by incorporating
increased metrics and
scenario modelling
• Improving quantitative and
qualitative risk appetite
metrics, which allow us to
monitor compliance and focus
on areas outside of tolerance
• Continuing to learn from our
response to COVID-19 and build
learnings into existing crisis
management and business
continuity activities
• Building on the work in 2020 by
performing climate scenario
analysis, to better quantify
climate risks
• Further developing the
third-party risk management
framework and rolling this out
to the business
Risk management
framework
The key objective of our risk
management framework is to
support the achievement of
our strategic goals. The
framework seeks to drive
clarity and proactivity and
enable us to respond to
threats, by defining the
required governance, process
and enablers for effective risk
management at ITV.
Governance
Process
Enablers
Risk
Governance
Structure
Risk
Appetite
Report
Monitor
Identify
Risks
Manage
Assess
Principal
Risks
Emerging
Risks
Business
Risks
Board and
Executive
sponsorship
Risk
management
systems and
process
Risk culture
and
accountability
Three lines of
defence and
assurance
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Governance
Financial Statements
Additional Information
Risk governance structure
Board
• Sets strategic objectives
• Reviews and evaluates
principal risks and
uncertainties
• Sets our strategy on risk and
establishes tolerance levels
and risk appetite
• Ensures the effective
operation of 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:
– 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
migrations, 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
• Reviewing 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
• Reviewing emerging risks
identified through the risk
management framework
Group Risk
Has responsibility for:
• Maintaining the risk
management framework,
systems and processes and
supporting management
in its adoption and embedding
• Developing risk capability and
culture in the business
• Coordinating all risk
• Supporting and advising the
identification, reporting and
governance forum activity
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 gain assurance of the
effectiveness of key risk
controls and mitigations
• Reviewing implementation
of internal audit actions
• Overseeing and monitoring the
business’s 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
within the Governance section of
the report.
Key
Direction and Management
Reporting and Escalation
Advice and Oversight
Three lines of defence
The three lines of
defence model is
a core enabler within
our risk management
framework and
provides ongoing
assurance over the
effectiveness of our
risk management
activities.
Business Operations and
Divisions: Divisions and
Central Functions identify, assess
and manage risk on an ongoing
basis, including maintenance and
operation of the internal control
framework to mitigate key risks.
These risks are reported and
escalated through the risk
governance structure
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 effectiveness 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.
Reporting
Reporting
Reporting
The Board: Oversight over principal risks
Audit and Risk Committee: Oversight over risk management framework
Senior management: Oversight over all business risks
ITV plc Annual Report and Accounts 2020
73
Strategic Report Risks and Uncertainties continued
Strategic Report
Risk appetite
In 2020, we undertook an exercise to
improve the articulation of our risk
appetite across key areas of the business
in order to better support management’s
ability to identify and respond to risks as
they arise and strike the right balance
between taking too much or too little risk.
This involved a workshop with the
Management Board, facilitated by Group
Risk, to define our risk appetite for each
principal risk and across other key areas.
This included, but was not limited to,
liquidity, acquisitions, data privacy,
business continuity and resilience, and
people and culture. The output from this
workshop was a set of risk appetite
statements for Studios, Media and
Entertainment, and Group. Our risk
appetite reflects ITV’s willingness to be
innovative and open to new ideas as we
pursue our strategy, whilst maintaining
our low tolerance in operational areas
such as compliance, duty of care, cyber
and data protection.
The risk appetite statements have been
approved by the Board and in 2021 we will
build on this work by developing metrics to
support the Management Board’s role in
monitoring compliance against risk appetite.
Principal risks
COVID-19
A member of the Management Board
is responsible for monitoring and
ensuring mitigation of each of the
principal risks on an ongoing basis. The
principal risks are reviewed on an
ongoing basis by senior management,
subject to periodic deep dives at the
Board, Audit and Risk Committee,
Management Board and Divisional
Boards, and are formally reviewed and
approved by the Board twice a year.
Despite the unprecedented
challenges presented by the
COVID-19 pandemic, we have
continued to broadcast, serve
our advertising clients and agencies, and
have restarted production on the majority
of our programmes internationally.
However, COVID-19 remains a risk for ITV
and we continue to respond to the
emerging health and safety threats the
pandemic presents. During 2020, we made
changes to our office and production-
based health and safety protocols, which
has allowed us to continue operating and
safeguard our people, cast, crew and
programme participants.
We have also observed changes in viewer
behaviours during the pandemic, which
may exacerbate many of our existing
strategic risks and result in those risks
materialising sooner than anticipated.
We have accelerated the pace of our
strategic delivery to address these shifting
dynamics in the market and to respond to
the increasing risk.
We have included a new COVID-19 principal
risk below, which provides an overview of
the broader uncertainties related to the
pandemic for ITV and have provided
additional context within existing principal
risks, where appropriate, to reflect the
impacts of COVID-19. Further detail of our
response to COVID-19 can be found on
page 14.
Other changes in our principal risks
• We have removed the principal risk relating to legal disputes, as we no longer consider
this risk as having the same level of potential long-term impact as other principal risks.
We recognise that some litigation is ongoing and there remains uncertainty as to the
estimations and potential final financial quantum of that litigation. As a result, we have
continued to include this risk as a sensitivity factor within the assessment of going
concern and long-term viability, in order to further stress test our cash and liquidity
assumptions. Whilst there are certain discussions ongoing that may lead to litigation, we
continue to improve our processes to mitigate the risk of a dispute arising and track this
through our internal risk management processes
• The principal risk relating to the macroeconomic environment has been removed as a
standalone risk and incorporated into existing principal risks
• The principal risk in relation to structure and ways of working has been removed, as it
continues to be substantially mitigated through ongoing work to restructure the
business and improve ways of working
• The principal risk in relation to BritBox growth has been expanded to encompass all of
our digital and On demand products, which are all fundamental to our Media and
Entertainment strategy
• We have included a new principal risk relating to regulatory change, which is driven
primarily by the uncertainty around the government’s PSB review, advertising sector
restrictions and Brexit
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Financial Statements
Additional Information
Emerging risks
Climate change
We define emerging risks as
uncertainties which originate from
known or previously unconsidered
sources, and which are not clearly
understood, visible or possible to fully
assess. These risks could impact ITV
over a longer period and have the
potential to significantly impact our
business model and/or operations.
As part of the enhancements made to
the risk management framework in
2020, we have improved our processes
to identify, assess and report emerging
risks. ITV’s Group Risk team supports
management in the identification of
emerging risks by undertaking horizon
scanning, maintaining ongoing
dialogue with the business and keeping
up-to-date with wider market
movements. Emerging risks are
tracked and escalated through the risk
management framework and are
formally reviewed by the Board twice
a year.
Throughout 2020, we undertook
a series of workshops to identify
climate change risks and
opportunities for ITV. We
identified some potential risk areas which
are detailed in our TCFD report. There are
some risks associated with transitioning
to a low carbon economy, for example,
the risk of governments introducing
carbon taxation measures and or quotas
on certain activities carried out in the
jurisdictions in which our business
operates. However, government actions
to respond to climate change are
evolving, and the extent of potential
risks remain unclear.
We have been impacted by the physical
effects of climate change on a small
number of our productions, including the
wildfires in California and Australia;
however, to date, we have been able to
deploy localised responses to mitigate
against production delay or financial loss.
Viewer and consumer sentiment with
respect to climate change is also
fragmented and continues to change.
Our initial assessment of the risks suggests
we are not materially exposed to climate
change or that this represents a threat to
our long-term viability, liquidity or ability
to operate. However, there remains some
uncertainty as to the potential
significance, impact or timing of these
risks. These factors all limit our ability to
fully assess our risk profile and as a result
we continue to categorise climate change
as an emerging risk for ITV.
We also recognise that there are also
opportunities for ITV to use its content and
platform to educate our viewers about
climate change and promote sustainable
behaviours. Please refer to our Social
Purpose section further information on
the work we are doing in this regard.
In 2021, we will complete detailed climate
scenario modelling to develop a more
accurate picture of our climate change risk
profile and the potential impact risks may
have on our strategy, operations and
finances. We will also continue to monitor
the risks identified to date through the
existing risk management framework and
develop mitigations to respond. Further
detail on the risks and opportunities we
identified as part of our exercise and risk
management in this area is provided in the
TCFD section of the report. Where relevant
we have also included additional climate
risk commentary in our principal risks on
the following page.
ITV plc Annual Report and Accounts 2020
75
Strategic Report Risks and Uncertainties continued
Detailed Principal Risks
Link to Strategy
Risk direction of travel
(after current mitigations)
Principal and emerging risks
Grow
UK and global production
Transform
Broadcast
Expand
Direct to Consumer
Strategic, External risks
Risk is increasing
Risk remains static
Risk is reducing
We have indicated below if there is a change in the risk
profile associated with a particular risk that is attributable
to COVID-19.
We have also indicated where there are specific
environmental or climate related factors, which may
impact our risks.
Risk
direction
2020
NEW
2019
N/A
External environmental risks, including macroeconomic, socio-political or market changes,
that may impact ITV’s strategic vision or ability to deliver the strategic initiatives
1. COVID-19 pandemic
Link to strategy
Description
Context
Mitigating activities
The COVID-19
pandemic may
have longer-term
implications on the
macroeconomic
environment or
impact our people,
operations or
ability to deliver
our strategy.
• COVID-19 has had, and may continue to have a strategic,
operational and financial impact on all areas of our
business.
• We are observing further (and potentially more serious)
waves of the virus in many of the territories in which we
operate, which may result in a short-term increase of all
aspects of this risk, including:
• A prolonged negative impact on the global economy,
which may impact sales activity
• Operational challenges associated with filming during
COVID-19, resulting in further production delays
• Increased health and safety risks, resulting in the need
for additional steps to keep our staff, crew, cast and
participants safe, and increased costs of operating
• The potential for high employee absence, resulting in
challenges in operational and strategic delivery
• Increased costs of operating, reduced revenue and
delayed payments from customers, which may have an
adverse impact on our cash position
Changes in direction of travel
The COVID-19 pandemic has affected all areas of our
business, and accordingly, we have moved this risk from
an emerging risk to a principal risk. The development of a
planned roll out of a vaccine in the UK will lead to an
overall reduction of the level of this risk. However, when
balanced against the current and potential future waves
of the pandemic, different timelines for the roll out of a
vaccine in our international markets and the potential
restrictions to activities imposed by governments, the
level of this risk is increasing at present.
We have developed a COVID-19 response governance
structure, with responsibility for managing the risks
associated with the pandemic. This is supported by a
Project Management Office function, which regularly
reports into the Management Board and the Board.
We manage the risks associated with COVID-19 across
five fronts:
• Situational Analysis: Regular conversations with
government and external advisors on the medical,
political and economic impact of COVID-19
• Cash and Costs: Modelling our financial position across
a range of scenarios (informed by situational analysis),
developing cost mitigations (with defined trigger
points), and cash monitoring and management
• Revenue: Developing and implementing plans to
continue identifying opportunities and mitigate
against negative sales impacts
• Technology and Operations: Invoking existing business
continuity plans to ensure critical operations can
continue through the crisis
• People and Communications: Putting in place
processes and responses that protect the health and
wellbeing of our people, cast, crew, participants and
support the wider community
We have also made improvements to our crisis
management and business continuity approach across the
Group. We have identified further activities to protect our
critical services and have implemented those activities
into business as usual. This has included implementing
additional security measures on our enterprise systems;
improving efficiency and resilience in production through
technology and remote editing; and increasing the
adoption of tools to facilitate remote working.
Board oversight
• Monthly reports to the Board on the emerging
COVID-19 situation and impact to ITV (weekly at the
height of the crisis)
• Risk deep dive at the Audit and Risk Committee,
focused on health, safety and wellbeing during
COVID-19 (April 2020)
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Additional Information
2. Changing viewing habits
Link to strategy
Risk
direction
2020
2019
Risk
direction
2020
2019
Description
Context
Mitigating activities
A failure to
anticipate or
respond to fast
changing viewer
habits and
behaviours may
impact total
viewing and the
success of our
channels.
• Content is now available across many different devices
and platforms, which is impacting how viewers consume
video
• Viewers are watching less linear television and are
increasingly accessing content through video on demand
(VOD) services
Our strategy is focused on allowing our audiences to
access our content wherever, whenever and however they
choose to watch. In 2020, we developed an On Demand
business unit to accelerate the growth of our digital
viewing propositions, both in advertising video on demand
(AVOD) and subscription video on demand (SVOD).
• Younger viewers are also engaging with alternative
media, moving away from long-form video
• A faster than anticipated shift towards digital viewing
and alternative content would impact the reach of ITV
viewing and in turn the advertising revenue we are able
to realise
Changes in direction of travel
Whilst there has been increased ITV viewing
during the pandemic, the acceleration in VOD
viewing results in this risk increasing.
In AVOD, this involved making all our linear content
available on digital platforms, as well as investing in
the enhancement of the ITV Hub product. In SVOD,
we continue to invest in BritBox and will be rolling out
the product to further international markets in 2021
and beyond.
Our strategy also involves investing in alternative media
products to more effectively compete for non-viewing
time and allow viewers to engage with the ITV brands
and formats in different ways. This includes investing in
gaming, short-form content and podcasts.
Board oversight
• Strategy session with the Board, focused on evolving
viewer habits in light of COVID-19 (June 2020)
3. Advertising market changes
Link to strategy
Description
Context
Mitigating activities
Ongoing changes
in the advertising
market may result
in reduced demand
for ITV’s
advertising
products and a
longer-term
decline in
advertising
revenue.
Advertising is slowly returning to pre-COVID
levels. However, the advertising market was
significantly impacted by COVID-19 and
advertiser spend may continue to be impacted
by ongoing decline of certain sectors and the UK economy
more broadly, driven by COVID-19 and also Brexit.
• An increasing proportion of advertising budgets is also
being spent on digital offerings and with media owners
with advanced features, such as audience attribution
• An increasing number of viewers are using advertising-
skipping technology on linear products, reducing
revenue
Certain sectors are either already or may
become subject to regulatory advertising
restriction, impacting the advertising they can
do with ITV. Particular industries which are at
higher risk of advertising restriction include gambling and
food and drink. In addition, we are monitoring the
potential for advertising restrictions on high carbon
emitting products and services, for example air travel and
motor vehicles.
Changes in direction of travel
Continued uncertainty in the economic environment
means this risk is trending upwards.
We are closely monitoring the economic environment
and tracking the potential financial impact on
advertising revenues in a defined range of scenarios. We
continue to demonstrate the benefits of advertising on
ITV to our existing clients, whilst seeking to increase
awareness of these benefits within growing sectors.
As part of our strategy to grow our digital viewing and
reach, we seek to serve advertising wherever our viewers
consume our content. This includes working with
technology and distribution partners to allow us to insert
advertising across all platforms and investigate methods
to minimise the financial impact of ad skipping.
We are also focused on enhancing the features and
attractiveness of our advertising products, including by
investing in addressable advertising capability. Our
Planet V product was successfully launched in 2020 and
is designed to provide advertisers an easy-to-use,
self-service platform to deliver highly targeted ads.
We monitor the regulatory landscape and engage with
the UK government to understand and limit the impact
of advertising restrictions on our revenues. Specifically, in
relation to the intended ban on advertising for high fat,
salt and sugar products, we are assessing the potential
financial impact and identifying approaches to mitigate
the loss of revenue while we wait for further details on
the scope of the ban and timing of application.
Board oversight
• Deep dive on advertising market risk with the Board
(July 2020)
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77
Strategic Report Risks and Uncertainties continued
4. Evolving demand in the content market
Link to strategy
Risk
direction
2020
2019
Risk
direction
2020
2019
Description
Context
Mitigating activities
Fundamental
changes in the
content market
may result in
reduced
opportunities,
non-renewal of
premium
programmes, and/
or impact the
profitability of ITV
Studios content.
COVID-19 has resulted in delays to the
completion of a number of shows on the
Studio’s slate. Although production is resuming
globally, further waves of the virus and the
introduction of further restrictive measures by
governments (including periods of lockdown) may
continue to impact our ability to produce.
• The demand for content globally continues to increase,
in particular from SVOD buyers. However, there is a risk
that these players will increasingly use their scale to
produce content in-house.
• The profitability of the Studios business may be
impacted by buyers seeking better terms on pricing and
rights and increased costs of production as a result of
new ways of working during COVID-19.
Costs associated with carbon offsetting and
new technologies to reduce the environmental
impact of our productions may also impact
margins in the future.
Changes in direction of travel
Whilst there is continued risk to our production pipeline
caused by COVID-19, the global demand for content
remains high and we anticipate being able to continue
production with the support of our COVID-19 safety
protocols.
ITV has been actively involved in the development of
industry-wide production protocols to support the
industry return to work. The protocols have also been
rolled out across our productions internationally, with
some variances to respond to local requirements. As
the situation has evolved, we have responded by rapidly
flexing the protocols to continue production.
We are also growing and maintaining relationships with
a diversified set of local and global customers, with
varied business models. We have continued to invest in
development and in attracting creative talent
throughout the pandemic in order to ensure we can
continue to provide quality content to these customers.
We believe that by taking action now to reduce the
environmental impact of our productions, we are
mitigating against longer-term increases in costs, e.g.
arising from carbon taxation or higher prices of fossil
fuel. From a cost perspective, we are also continually
implementing new processes to drive efficiency in our
production and project margins. These include robust
procurement procedures, maximisation of tax credits
and technological approaches to optimising filming.
Board oversight
• Deep dive on studios market risk with the Board
(September 2020)
5. Platform relationship risk
Link to strategy
Description
Context
Mitigating activities
An inability to
develop and
maintain adequate
relationships with
major platform
and distribution
providers may
result in viewers
being unable to
find our content
and lack of fair
value for that
content.
• Video content is viewed across a very wide variety of
platforms and devices and ITV needs to work with these
platform providers to ensure viewers can continue to
find ITV content whenever and wherever they choose to
watch
• As a public service broadcaster (PSB), we are guaranteed
prominence in the UK within the linear Electronic
Program Guide (EPG) grid. However, this prominence is
not guaranteed for digital viewing and other ways
viewers now or will choose to consume ITV content
• Our commercial arrangements with platform owners are
increasingly complex and, in the absence of regulatory
protections, we must form strong relationships under
mutually favourable terms, to allow viewers to continue
to easily find our content and in order to fully monetise
that content
Changes in direction of travel
As viewing continues to shift away from linear and onto
other platforms and devices, the need for strong
distribution arrangements increases.
Our aim is to allow viewers to access our content,
wherever, whenever and however they choose to watch
and this is underpinned by a defined partnership and
distribution strategy, which has been further developed
throughout 2020. We will continue to focus on this as a
priority as we transition to our new organisational
structure.
We have a dedicated team that has developed
relationships with all the major distribution providers
and TV platform/device manufacturers in the UK. This
team is also responsible for inputting into product and
commercial decision-making, to confirm ITV remains an
attractive proposition from a distribution perspective.
We are therefore in a position to negotiate the
prominence and monetisation of ITV’s content on their
platform/devices.
We also continue to actively participate in the dialogue
with Ofcom and the UK government regarding the
modernisation of the PSB regulatory regime and make
the case for addressing the key areas of inclusion,
prominence and fair value.
Board oversight
• Strategy session with the Board, focused on
partnership strategy in light of platform relationship
risk (June 2020)
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Additional Information
6. Pension deficit increase
Link to strategy
Description
Context
Mitigating activities
A financial crisis or
macro-economic
change could
impact the value of
pension scheme
investments and
liabilities and
increase the
deficit.
• Changes in credit spreads could result in material
movements in the Group’s defined benefit pension
scheme liabilities
• 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 respond in such an event by increasing future
contributions
Changes in direction of travel
The pension scheme trustees’ approach has
always been focused on taking a conservative
approach to limit the impact of uncertainty.
Therefore, the wider implications of COVID-19
have not impacted the value of the scheme significantly
or our ability to meet liabilities.
The pension scheme assets are invested in a diversified
portfolio, with a significant amount of the fund held in
lower risk bonds, with interest and inflation rate
hedging in place. We have worked with the pension
trustees to limit the potential deficits through a series
of asset backed arrangements. In addition, the trustees
have removed some of the mortality risk with a
longevity swap and by hedging a portion of inflation
and interest rate variability.
Increased monitoring of the pensioner population and
mortality rates of the schemes has taken place to
assess the likely risk of a mortality shock as a result of
COVID-19. This would result in a requirement to increase
collateral in relation to the longevity swap and
restrictions on the preferred investment strategy.
However, a mortality shock would also reduce the
scheme’s liabilities, partly offsetting the risk of the
deficit.
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.
Board oversight
• Annual pension process and controls review at the
Audit and Risk Committee (December 2020)
Risk
direction
2020
2019
7. Regulatory policy changes
Link to strategy
Description
Context
Mitigating activities
Changes to policy
and regulation or a
failure by the UK
government to
regulate may have
a negative impact
on the future of
public service
broadcast, our
business model
and/or the cost of
operations.
• Public service broadcasters (PSB) regulation needs
reform to respond to changes in viewer behaviours and
the increasing scale of digital media companies. The
outcomes of the ongoing PSB regime review may have a
significant impact on ITV’s business model and strategy
• Changes in advertising regulation for certain sectors
may have a negative impact on the revenue we are able
to generate from these sectors
• The agreement of a deal between the UK and EU has
gone some way to managing Brexit uncertainty. Whilst
there may be additional operational requirements and
cost resulting from future regulation (e.g. requirements
to obtain working visas), these do not present a material
barrier or threat to ITV
Other areas of regulation and policy which
could have an impact on our business, include:
sustainability, child protection, broadcasting
regionality and longer-term regulation in
relation to pandemic preparedness.
We have an experienced Policy and Regulatory Affairs
team that monitors for potential policy, legal and
regulatory developments. We have a systematic
approach to analysing the impact of potential changes
and are proactive in putting forward our position during
the development of new policies, legislation and
regulation.
We continue to engage with the government and
regulators on the PSB regime and other topics affecting
our industry. This includes collaborating with other
organisations in the industry, where appropriate and
objectives align.
From a COVID-19 perspective, we held regular CEO-led
conversations with the UK government to influence
decision-making on specific areas affecting our industry.
We are also monitoring the emerging regulatory
landscape with respect to the pandemic to understand
and prepare for changes.
Risk
direction
2020
NEW
2019
N/A
Continued next page
ITV plc Annual Report and Accounts 2020
79
Strategic Report Risks and Uncertainties continued
7. Regulatory policy changes continued
Description
Context
Mitigating activities
Changes in direction of travel
Reform of the PSB regime represents both a risk and an
opportunity to ITV. However, a reluctance by government
to intervene on key issues (such as fair value, prominence,
and the influence of digital players) may have a negative
impact on ITV’s business model and strategy.
Throughout 2020, our Brexit working group met
regularly to consider the implications of different
scenarios for Brexit. Plans were developed to mitigate
the impact of Brexit and to identify any process
changes required. Those processes are now being rolled
out and transitioned into business as usual activities.
Our Social Purpose team works alongside the Policy and
Regulatory Affairs team to identify regulatory changes
related to the environment/sustainability and to
support the business to implement processes to comply
with such changes. This included advising the business
on requirements for TCFD, of which we were an early
signatory.
Board oversight
• Regular reports to the Board on PSB reform
• Regular updates on emerging regulation in light of
COVID-19
Strategic, Internal, Change risks
Internal risks, including culture and capability, that may impede the achievement
of strategic and/or operational change goals
8. Commissioning pipeline risk
Link to strategy
Description
Context
Mitigating activities
Failure to sustain
a diversified
broadcast
commissioning
pipeline that is
resilient and
financially viable
may reduce
profitability.
• In order to protect viewing and, in turn, advertising
revenues, we must develop a broadcast pipeline that is
both resilient to changes in viewer preferences and is
financially viable. In particular, we must commission
programmes with broad appeal and that attract younger
audiences
The COVID-19 crisis impacted producers’ ability
to make content, which has impacted our
broadcast schedule and resulted in delays in
producers delivering programmes.
• The public response to the Black Lives Matter movement
has further highlighted the need to respond to
increasing scrutiny in relation to on-screen diversity
Furthermore, we also need to be conscious of
the environmental impact of our programming
and how environmental behaviours are
presented in our content.
Changes in direction of travel
Further waves of the virus and continued challenges for
producers in developing content may impact the
commissioning pipeline, resulting in this risk increasing.
We have an experienced Commissioning team in place,
which is focused on identifying programmes and
formats which have national appeal. In order to increase
the resilience of our pipeline and reduce reliance on
historically successful programmes, we also continue to
invest in new premium formats, live sports, high-end
drama and programmes which appeal to younger
audiences.
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, which is
responsible for providing insight on audience
preferences that is used to adapt our commissioning
strategy.
We have developed a Diversity Acceleration Plan which
aims to improve our on-screen diversity, develop a
representative talent pipeline and better represent all
communities in our programmes.
We are also committed to reducing our environmental
impact and communicating the need to respond to
climate change to our viewers. We have developed
plans to help us meet our environmental targets and
routinely use our content to raise the profile of the
climate change agenda.
Board oversight
• Deep dive with the Board on commissioning pipeline
risk (July 2020)
Risk
direction
2020
2019
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Financial Statements
Additional Information
9. Insufficient growth in our On Demand products
Link to strategy
Description
Context
Mitigating activities
The Hub, Hub+ and
Britbox do not
grow at the pace
required to deliver
the desired
strategic or
financial outcomes.
• The video on demand market is highly competitive
market, both in the UK and internationally
• The success of the Hub is dependent on maximising the
number of viewers on the Hub product (reach) and then
maximising the amount of content they view on Hub
(consumption)
• The success of Hub+, BritBox UK and BritBox
International is dependent on attracting new customers,
converting them to paying subscribers and subsequently
retaining them
• We need to maintain strong relationships with platforms
and distributors to maximise the availability and reach of
our all our on demand products
Content is key to the attractiveness of our On
Demand products. There is a risk of delays in
receiving this content due to production
pauses during the COVID-19 pandemic.
Changes in direction of travel
We have seen some positive outcomes for our On
Demand products, as a result of increased viewing during
the COVID-19 pandemic. However, further competition in
the market means this risk is increasing.
We invest in data driven and mass marketing campaigns
to increase market awareness of our On Demand
products (both in the UK and internationally).
We continue to investigate creative ways to deliver our
content on the ITV Hub and Hub+ in order to maximise
viewing on the product. This has included curating
short-form content specifically for the Hub; extending
online catch up windows for selected content; making
previous series programme box sets available in advance
of new series transmission, and making current series
available on ITV Hub in full directly following
transmission of the first episode on our channels.
For Britbox, COVID-19 and our first original programme,
Spitting Image, have increased the rate at which we
have acquired subscribers. In order to increase BritBox’s
appeal and optimise customer retention, we continue to
invest in additional and original content for the service.
We also assess the performance of our On Demand
products on an ongoing basis, to identify and
implement user experience and functionality
improvements. We use data to enhance user experience
and personalisation on our On Demand products and
will continue to focus on this as a key priority in 2021.
In order to maximise reach, we have developed
distribution deals with hardware and software providers
in order to make our On Demand products available on a
growing number of major platforms and devices.
We track and evaluate the performance of our On
Demand products through a suite of KPIs. Root cause
analysis is performed on subscriber growth and customer
churn data for BritBox and ITV Hub+, and on registered
user growth and consumption volumes for the ITV Hub.
Board oversight
• Regular On Demand performance reports to the Board
10. Strategic and digital transformation risk
Link to strategy
Description
Context
Mitigating activities
Failure to
successfully
deliver key
components of our
strategy and
digital
transformation,
due to the speed
and extent of
change required,
may negatively
impact our
business.
• Digital transformation underpins all elements of our
strategy and is a key enabler for increasing operational
efficiency. Failure to effectively deliver digital
transformation projects could impact ITV’s ability to
keep pace with changes in the market and ultimately
future growth
• As we digitally transform the business, our exposure to
cyber security and data privacy risk increases. We need
to manage these risks in order to continue protecting our
viewer and staff data. For further detail on these risks
and mitigations, refer to the cyber security and data
breach risk and the legal and regulatory non-
compliance risk below
Despite the challenges presented by COVID-19, we have
continued to successfully deliver against our strategy.
Our strategy is articulated through defined 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 CEO and CFO.
Risk
direction
2020
2019
Continued next page
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81
Strategic Report Risks and Uncertainties continued
Risk
direction
2020
2019
Risk
direction
2020
2019
10. Strategic and digital transformation risk continued
Description
Context
Mitigating activities
Failure to
successfully
deliver key
components of our
strategy and
digital
transformation,
due to the speed
and extent of
change required,
may negatively
impact our
business.
COVID-19 has resulted in an acceleration of
previously observed viewer trends and the
need to increase the pace of strategic delivery.
This requires significant alignment and effort
across the whole Group.
Changes in direction of travel
The move to remote working, as a result of COVID-19, has
accelerated the adoption of digital tools within our
business. However, further fracturing of viewing across
platforms has highlighted the increasing importance of
transitioning to a digitally led business. As a result, this
risk is trending upwards.
The strategic initiatives involve the digital
transformation of ITV, including enhancement of our
digital viewer/customer facing products (Hub, Planet V,
BritBox), as well as optimising the use of technology in
our middle and back office. We have initiated the digital
transformation of the middle and back office through
wide adoption of agile processes and initiating a
number of digital ‘lighthouse’ projects, aimed at
improving efficiency and operations.
Furthermore, this year we announced an organisational
restructuring, which is aimed at removing barriers to
strategic delivery in our operational ways of working.
The creation of a new Media and Entertainment division
will support us in accelerating the strategy and growing
our digital products.
Board oversight
• Board Strategy session (June 2020)
11. Insufficient cultural change
Link to strategy
Description
Context
Mitigating activities
Failure to evolve
the underlying
culture of the
business may
result in an
inability to deliver
the level of change
required to achieve
our strategic
objectives.
• We could be negatively impacted if we fail to create the
agile and collaborative culture required to deliver our
strategy
• During COVID-19, we have seen increased adoption of
digital tools in the business, which demonstrates a
positive shift towards moving to a digital culture.
However, there remains a risk that the protracted period
of home-working may lead to siloed working and impact
collaboration
There is a risk that engagement and
morale may be negatively impacted by
fatigue as a result of additional work due
to COVID-19.
Changes in direction of travel
There remains uncertainty as to how sustained
home-working may impact wider culture. However,
we have taken many steps to move towards our cultural
vision, including the organisational restructure. As a
result, this risk remains static.
In 2019 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.
Throughout the pandemic, we have held fortnightly all
staff vodcasts, chaired by the CEO (weekly at the height
of the crisis). We have also moved many events online,
developed remote onboarding for new staff, and have
provided training to line managers on managing remote
teams. All of these initiatives are focused on ensuring
that the culture we are aiming to create remains visible
to and resonates with our colleagues. We have also
undertaken regular Pulse and Employee Engagement
Surveys throughout the COVID-19 pandemic. Learnings
from these surveys have fed into short-term actions
and longer-term improvement plans.
The Board undertakes a formal programme of
employee engagement (led by a Non-executive
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.
Board oversight
• Board Strategy session (June 2020)
• Regular updates to the Board from the Non-executive
Director on employee engagement and from HR on
results of Pulse and Engagement Surveys
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Additional Information
Operational risks
Risks that could impact our operational and business as usual activities
12. Duty of care and health & safety incident
Link to strategy
Description
Context
Mitigating activities
Risk
direction
Failure to extend
an adequate duty
of care, or the
occurrence of a
major health and
safety incident or a
global pandemic,
could result in
physical and
mental harm, loss
of human life and
reputational
damage.
• We have a duty of care (DoC) to our staff, cast, crew,
• We have a central team with responsibility for
2020
programme participants and the general public
COVID-19 has resulted in increased risks to
health and safety (H&S), both in our offices and
on our productions.
• As we continue to increase production hours, our risks in
relation to health and safety continue to increase. We
need to consider the duty of care across all aspects of
productions, taking into account the physical health and
safety risks posed by COVID-19 and broader aspects of
mental wellbeing
• Amongst our staff (employees, contractors and
freelancers) we must monitor the impact the COVID-19
crisis is having on mental health and ensure we provide
support
Changes in direction of travel
As our production hours increase to pre COVID-19 levels
and COVID-19 continues to have an impact on physical
and mental health, this risk increases.
2019
implementing controls and processes for DoC and H&S.
During the crisis, we have leveraged existing controls
and implemented new processes in order to further
protect our staff and individuals involved on our
productions. This has included implementing a new
mental health peer-to-peer platform for staff
(employees, contractors and freelancers),
implementation of home-working for the majority of
staff and development of robust office and production
safety protocols, which have been agreed with the UK
government and the industry
• We have also enhanced our existing DoC processes,
which encompass procedures relating to both physical
and mental health and safety. This has included
engaging two medical professionals (a former Chief
Medical Officer and a clinical psychologist) on an
advisory basis, to provide ongoing support and
challenge to our DoC activities. We have a Duty of Care
Operating Board (DoC Board) in place, with
responsibility for monitoring implementation and
continuous improvement of our DoC framework and
policies. This DoC Board is chaired by the Group Chief
Executive Officer (CEO) and includes senior
representation from our Studios, Media and
Entertainment, 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
Board oversight
• Deep dive on duty of care risk with the Audit and Risk
Committee (July 2020)
• Risk deep dive at the Audit and Risk Committee,
focused on health, safety and wellbeing during the
COVID-19 pandemic (April 2020)
13. Legal and regulatory non-compliance
Link to strategy
Description
Context
Mitigating activities
• We are a global business and are therefore subject to
multiple local and international legal and regulatory
regimes. These cover a range of areas including:
broadcasting and media regulations, anti-trust and
competition law, anti-bribery and corruption, data
privacy, and health and safety
We have a Group Legal and Business Affairs team in
place, which consists of subject matter experts who
oversee and are responsible for ensuring business
compliance with all elements of regulatory and legal
requirements. Where appropriate we also engage
specialist external legal advisers to support.
Failure to comply
with applicable
laws and
regulation could
result in
reputational
damage, financial
penalties or
suspension of
our licences to
operate.
Risk
direction
2020
2019
Continued next page
ITV plc Annual Report and Accounts 2020
83
Strategic Report Risks and Uncertainties continued
Risk
direction
2020
2019
Risk
direction
2020
2019
13. Legal and regulatory non-compliance continued
Description
Context
Mitigating activities
Failure to comply
with applicable
regulation could
result in
reputational
damage, financial
penalties or
suspension of our
licences to
operate.
During the COVID-19 pandemic, the scope of
laws and regulations has increased and we
have needed to respond to various
government guidelines and restrictions across
all the territories in which we operate.
• As we develop our data and digital strategy and evolve
the way we use personal data to deliver transformation
in our Media and Entertainment business, we need to
confirm we remain in compliance with data protection
and privacy regulation.
Changes in direction of travel
This risk is trending upwards, due to ongoing changes in
the compliance landscape, as a result of increased
requirements all employers have to comply with respect
to COVID-19 and a potential broadening of our data
privacy compliance obligations as a result of our digital
and data strategy.
We operate a compliance programme which is
embedded within our internal policy framework.
Internal policies are owned by business leaders,
regularly reviewed by the Management Board and the
Audit and Risk Committee. The Group Legal and
Business Affairs team works with the business to
support the adoption and implementation of these
policies.
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. This
team has worked closely with the industry during the
COVID-19 crisis in order to engage the government on a
range of issues impacting the business.
We also have a suite of mandatory compliance training
and learning in place, which helps drive positive
attitudes to compliance across the whole business.
Board oversight
• Deep dive on compliance framework and risk with the
Audit and Risk Committee (July 2020)
14. Cyber attack or data breach incident
Link to strategy
Description
Context
Mitigating activities
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 and
reputational
damage.
• 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 and
we transition to a digitally led business, we are required
to evolve our cyber security procedures in order to
effectively protect against and respond to evolving
cyber threats
Remote working results in increasing activity
occurring outside the enterprise network and
increases cyber and data breach risk.
• As we continue to grow our digital product offerings,
we work increasingly with third-party partners and
suppliers. A failure by these partners to implement
suitable security processes may result in increased
risk to ITV
Changes in direction of travel
As threats become more active and increasing activity
takes place outside the network the cyber security risk
facing ITV is increasing.
We have implemented a robust cyber security risk
management framework across the organisation to
address the evolving nature of the cyber security
threats. Our framework incorporates a variety of
technical preventative and detective measures to
mitigate the risk of an incident, as well as an extensive
training and awareness programme. We have
strengthened and accelerated previously planned
enhancements to our controls and technical
measures in response to the increased risk caused
by remote working.
We actively manage cyber and data security in our
supply chain and undertake due diligence assessments
on key suppliers as part of procurement activities. We
also have an incident response and notification process
in place, which are followed in the event a cyber or data
breach incident were to occur.
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 or data attacks.
Board oversight
• Deep dive on cyber risk with the Audit and Risk
Committee (September 2020)
• Data privacy programme and risk review with the Audit
and Risk Committee (September 2020)
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Governance
Financial Statements
Additional Information
15. Recruitment and retention of talent risk
Link to strategy
Description
Context
Mitigating activities
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
There is a deep understanding of the skills and
capability required to deliver our strategic objectives
and our HR department works closely with the business
to confirm those needs are met.
• There is increasing scrutiny in relation to diversity and
inclusion. We must commit to improving inclusivity and
diversity across our business (across all aspects, including
race, gender and disability) through both our recruitment
and retention processes
Changes in direction of travel
Economic and behavioural factors may mean
individuals in our sector are less inclined to
move jobs due to COVID-19, however, there is
also opportunity for ITV if organisations let go
of talent due to financial pressures. Therefore this risk
remains static.
We also continue to strengthen our existing capability,
through a combination of learning, development and
performance. Our Board Nominations Committee
reviews the skills and capability of senior leadership
twice a year and supports leaders in addressing
potential gaps in light of strategic requirements.
We have developed a Diversity Acceleration Plan, which
aims to improve diversity and inclusion within the ITV
workforce, through a combination of development,
training and recruitment 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).
Board oversight
• Ongoing updates to and succession planning reviews
with the Nominations Committee
Risk
direction
2020
2019
Viability statement
How we assess prospects and risks
How we assess viability
The Board continually assesses ITV’s prospects and risks at its meetings,
including the following:
• Holding ‘Strategy Days’ twice a year, to oversee the delivery of the
Strategy and consider changes to or new initiatives to further improve
the ITV Strategy. Further detail can be found in the overview of Board
meetings in 2020, from page 116
• Considering ad-hoc topics on strategic areas at the periodic Board
meetings. Further detail can be found in the overview of Board
meetings in 2020, from page 116
• Performing a full review of the principal and emerging risks twice a year.
Further detail can be found earlier within the Principal Risks and
Uncertainties section
• Performing periodic deep dives on specific risk areas, to further
scrutinise the effectiveness of risk mitigation approaches and confirm
operation within risk appetite. Further detail can be found earlier within
the Principal Risks and Uncertainties section
• The Board and management significantly increased their focus on
ITV’s prospects, risks and viability in light of the evolving COVID-19
situation. This involved holding a session on the specific impact of
COVID-19 on ITV’s Strategy (June 2020); developing a range of
COVID-19 scenarios for 2020 and beyond and modelling their
potential financial impact; identifying cost interventions/mitigations
to respond to severe downside scenarios; and increasing the level
of financial performance reviews and reforecasting to track
performance against these scenarios. Further details of the specific
measures to respond to COVID-19 are provided in the Chief Executive’s
Report, page 14.
When assessing the longer-term viability of ITV, we considered (i) ITV’s
strategy and business model (page 20 to 23); (ii) the principal risks and
uncertainties (page 76 to 84); (iii) the Group’s financing facilities,
including covenant tests and future funding plans (page 60); (iv) the
long range financial plan and cash forecast; and (v) other sensitivity
factors or risks which have the potential to materially impact liquidity
and cash in the assessment period.
Based on this review a set of hypothetical and severe but plausible
scenarios were developed. We then modelled these scenarios against
the long-range financial plan and cash forecast both individually and in
parallel, in order to assess viability.
The output from this work was reviewed and approved by the Board and
the Audit and Risk Committee. In reaching its view, the Board and
Committee also considered analyst commentary, to understand the
wider market and views on the Group’s future prospects, and the
external auditor’s findings and conclusions on this matter. Further detail
of the work performed by the Audit and Risk Committee to consider
assumptions applied in the assessment viability is set out on page 118.
ITV plc Annual Report and Accounts 2020
85
Strategic Report Risks and Uncertainties continued
Assessment period for viability
The Board reviewed the long range financial
and strategic planning horizon and is of the
view that a three year assessment period
(1 January 2021 to 31 December 2023)
continues to be most appropriate. The
factors the Board considered in adopting
this timeframe were as follows:
• 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
• The situation with respect to the
COVID-19 pandemic remains uncertain
and is likely to continue impacting ITV
in the medium term. We are closely
monitoring the external environment and
continue to manage the risks associated
with the pandemic to support us in
returning to pre-COVID performance
levels. Further detail of our response to
COVID-19 is provided within the Chief
Executive’s Report, page 14 and in the
COVID-19 principal risk mitigations,
page 76
• Visibility over ITV’s broadcast advertising
business is relatively short term.
Advertising remains cyclical and closely
linked to the UK economic growth,
which may continue to be impacted
by the COVID-19 pandemic, Brexit and
other uncertainties in the UK
macroeconomic climate
• Technology and innovation 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 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
Assumptions applied
We applied the following assumptions when
assessing viability in the scenarios below:
• A vaccine is not rolled out to a substantial
number of the population in territories in
which we operate until the end of 2022,
which delays businesses returning to
normal operations
• Consequently, there is the possibility of
national and local lockdowns during
this period
• Ongoing additional production costs
associated with COVID-19 protocols and
health and safety measures until the
vaccine is rolled out
• Ongoing access to the UK bond market,
but with an increased interest rate on
bonds renewed in the period to reflect
a potential decrease in credit rating
• Ongoing availability of the financing
facilities, but at increased interest rates.
This comprises of; an undrawn Revolving
Credit Facility of £630 million expiring
on 15 December 2023; and a bilateral
financing facility of £300 million expiring
in June 2026, of which £199 million is
available as at 9 March 2021
Taking into account current operational and financial performance, the Board has analysed the impact of following hypothetical scenarios.
These scenarios were assessed in isolation and in parallel to further stress test viability:
Scenario modelled
Scenario 1
Link to Principal risks
A significant and sustained downturn in the advertising market when compared to 2019,
as a result of further COVID-19 lockdowns, the possible impact of Brexit or other macro
economic factors. In this scenario we also fail to replace the advertising revenue lost as
a result of the government’s announced restriction on HFSS advertising, which is due to
come into force from the beginning of 2023.
Based on our experiences during the initial 2020 COVID-19 lockdown the scenario assumes total
advertising revenues continuing to remain significantly below 2019 level (2021 versus 2019: -9%);
(2022 versus 2021: 1%*); (2023 versus 2022: -4%)
1. *1% year-on-year increase, reflects marginal macroeconomic recovery in 2022 versus 2021, but still represents
a significantly reduced position when compared to 2019. 2023 is further impacted by HFSS regulation.
• Advertising market changes
• Policy and regulatory changes
• COVID-19 pandemic
• Changing viewer habits
Further detail of how we are mitigating
these risks are included in the earlier Risks
and Uncertainties section
Business area impacted
Broadcast (to become Media and Entertainment)
Scenario 2
A number of key programme brands within the ITV Studios division are not recommissioned
and new format growth does not materialise.
Although 2021 would typically be too imminent for commissioners to make a decision to cancel a
show, we have included the scenario from 2021 onwards to reflect ongoing risk of decreased
production activity/delivery due to COVID-19. The scenario assumes key shows come to an end
from 2021 (2021 impact: circa £45 million; 2022 and 2023 impact: circa £65 million p.a.)
• Evolving demand in the content market
• COVID-19 pandemic
Further detail of how we are mitigating
these risks are included in the earlier Risks
and Uncertainties section
Business area impacted
Studios
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Governance
Financial Statements
Additional Information
Scenario modelled
Scenario 3
A significant change in ITV’s pension funding obligations, following the triennial valuation
in March 2021 resulting in a significant increase in pension deficit funding payments.
This scenario assumes that pension funding payments increase from £75 million p.a. to £115 million
p.a. in 2021 and remain flat in the following two years.
Business area impacted
Group
Scenario modelled
Scenario 4
Settlements for ongoing litigation and earnouts for our larger acquisitions are significantly
higher than estimated, resulting in large one-off cash payments.
This scenario assumes increased acquisition earnout payouts in 2021 (see note 3.1.5 of the financial
statements) and payments in 2023 (see note 4.3 of the financial statements).
Business area impacted
Group
Link to Principal risks
• Pension deficit increases
Further detail of how we are mitigating
these risks are included in the earlier Risks
and Uncertainties section
Link to Accounting judgements and estimates
• The complexity and potential scale
of the ongoing litigation settlements
and earnout negotiations, results in a
lack of certainty in the final liabilities
and payments
Further detail of the accounting
judgements and estimates applied to
ongoing litigation and earnouts are
provided in Section 1 of the Financial
Statements. An overview the assessments
performed by the Audit and Risk
Committee with respect to these
accounting judgements is provided on page
115 of the Audit and Risk Committee report
We have considered the impact of climate change risks and do not believe they represent a material threat to the long-term viability,
liquidity or operations of the business in the assessment period.
Viability assessment
If any of the above scenarios were to
occur in isolation we would maintain
sufficient liquidity and would not breach
any banking covenants.
Management and the Board are of the view
that the likelihood of all the above scenarios
and sensitivities occurring concurrently is
remote. If this situation were to occur and
no action was taken to mitigate the
financial losses sustained, we would still
have sufficient liquidity to remain viable,
but would risk breaching our revolving credit
facility banking covenant in December 2022,
June 2023 and December 2023.
Potential mitigations
In the event that these scenarios occur
simultaneously, there are reasonable
options at the disposal of the Board to
maintain liquidity to continue operations
and to avoid breaching banking covenants.
These include but are not limited to,
reducing capital and investment
expenditure, suspending payment of
discretionary bonuses, reducing the
programming budget, further reductions
in operational and overhead costs, and
refinancing the pension asset.
Viability statement
Based on the above, 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 2023.
The assessment has been made with
reference to ITV’s strategy and the current
position and prospects and risks.
The Strategic Report was approved by the
Board and signed on its behalf by:
Chris Kennedy
Group CFO
9 March 2021
ITV plc Annual Report and Accounts 2020
87
Governance
Chairman’s Governance
Statement
Dear Shareholder
On behalf of the Board, I am pleased to
present our Corporate Governance Report
for 2020. 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.
Year in review
Much of 2020 was dominated by COVID-19
and the unprecedented challenges it
presented. The Board’s immediate priority
was to act swiftly and decisively to oversee
the delivery of a comprehensive set of
measures (including in relation to cost
reduction and cash management) to
mitigate the risks arising or exacerbated
as a result of the pandemic and to protect
the business going forward, ensuring it
remains well positioned for the longer-
term (see further detail in the Strategic
Report on page 14). The pandemic has also
propelled us into increasing the pace of
implementation of our strategic initiatives
(taking into consideration the Group’s
medium and longer-term prospects) and
we have made significant progress in this
regard (see pages 20 and 21).
Our robust governance arrangements and
well established processes gave the Board
and its Committees the flexibility to adapt
their focus to address the rapidly evolving
developments and challenges facing the
business. Following the imposition of the
first lockdown, physical Board meetings
became impossible. However, in order to
address the impact of COVID-19 (particularly
on our productions and advertising revenue),
the Board needed to communicate on a
more frequent basis so that it could guide
the business’s response to the challenges.
The Non-executive Directors devoted
considerable additional time and support to
management during this period, providing
independent guidance and advice as
required (see page 96).
I would like to take this opportunity to thank
my Board colleagues and the Management
Board team who served during this most
challenging year for ITV; they made
themselves available whenever required,
frequently at short notice, and their diverse
and extensive set of skills and experience
have been invaluable in navigating the Group
through this uncertain period.
Changes to the Board
Through the Nominations Committee, we
focus on Board succession and composition,
to ensure that we have the appropriate
balance of skills, independence, experience
and diversity. During the year, we welcomed
Graham Cooke and Sharmila Nebhrajani as
independent Non-executive Directors. Both
Graham and Sharmila strengthen the broad
range of skills and experience on the Board.
These appointments were subject to a
formal, rigorous and transparent procedure,
led by the Nominations Committee. More
information on Graham and Sharmila’s
inductions and search processes can be
found on pages 112 and 113. Roger Faxon,
our longest serving Board member, stepped
down from the Board in December. I would
like to reiterate my thanks to Roger for his
very significant contribution to ITV over the
past eight years.
Diversity
The Board fully recognises the importance
of diversity in all forms on the Board and
across the organisation. We are encouraged
by ITV’s significant progress, demonstrated
in particular by the launch of the Diversity
Acceleration Plan and the appointment of
Ade Rawcliffe, as Group Director of
Diversity and Inclusion, to the Management
Board. Diversity was a key consideration in
the two Non-executive Director searches
undertaken during the year and we
complied with the objectives of our Board
Diversity Policy in respect of both searches
(see page 113). We are pleased with, but not
complacent regarding, our gender and
ethnic diversity representation on the
Board (45.5% and 18.2% respectively) which
exceeds the Hampton-Alexander and
Parker recommendations. We are conscious
that diversity extends beyond race and
gender and therefore for the first time
this year, we have collected data from our
Board members on other diversity
measures, including social mobility and
disability. 18.2% of the Board has identified
as having a disability as defined by the
2010 Equality Act.
Engaging with our stakeholders,
including our workforce
We place a huge amount of importance
on our relationships with our stakeholders.
I have focused my statement in the
Strategic Report (on pages 6 and 7) on
setting out the ways in which we engaged
and worked with stakeholders during 2020
to support the delivery of our strategy and
88
ITV plc Annual Report and Accounts 2020
Sir Peter Bazalgette, Chairman
business sustainability. Pages 97 to 102 set
out details of our key stakeholders, their
interests, the forms of engagement with
them and how they and their interests have
been considered in Board discussions and
decision-making.
The Board devoted additional time to
considering the impact of COVID-19 on the
Company’s stakeholders and how to reflect
this in its decision-making. We also sought
to balance their interests throughout the
year. See page 96 for examples of key
strategic issues considered and Board
decisions taken in 2020, and pages 67 and
68 for an explanation of how the Board has
had regard to the section 172 matters
(including certain key stakeholder
considerations). This includes the Board’s
careful considerations regarding the
withdrawal of the 2019 final dividend and
previously announced intention to pay 8.0p
full year dividend for 2020.
Our colleagues are particularly important
to us and Edward Bonham Carter, our Senior
Independent Director and Workforce
Engagement Director, has taken steps to
ensure their interests and concerns are
understood and addressed by the Board.
Although the pandemic has meant that not
as much face-to-face interaction has taken
place as Edward would have liked, the use
of technology has allowed engagement
with more Ambassador constituents than
last year. For further information on
Edward’s role and work, and the Board’s
workforce engagement activities, please
refer to pages 102 to 105.
Culture
The Board has continued to ensure that the
Company’s purpose, values and strategy are
aligned with its culture, particularly during
Strategic Report
Governance
Financial Statements
Additional Information
2020, in light of the changes to the working
environment brought about by COVID-19.
Please see pages 105 to 108 on the key
ways in which the Board and Committees
monitored culture during 2020.
2021 Annual General Meeting and
matters being brought to the meeting
Given the ongoing situation as regards
COVID-19, regretfully, restrictions will
continue to prevent large physical
gatherings and we will not be able to
hold a fully-attended physical Annual
General Meeting (AGM) in April. In the
prevailing circumstances, we are grateful
for your understanding. Details of how to
follow proceedings at the AGM through
a livestream and how to vote by proxy as
well as how questions can be put to the
Board are set out in the Notice of AGM.
Further details of and any required changes
in the meeting arrangements will be
posted on the Company’s website.
You will also note that, at this year’s AGM,
we propose to amend our Articles to bring
them up-to-date with market practice and,
most importantly, to allow for hybrid
meetings in order to give flexibility to
participate either electronically or in
person at future AGMs. Further details of
the proposed amendments to the Articles
are included in the Notice of AGM.
Another special business matter which is
being put to shareholders for approval is
a proposed Remuneration Policy which
involves a shift to a restricted share plan
for our senior executives (including the
Executive Directors), which the
Remuneration Committee has determined
fits better than a traditional long-term
incentive plan with the characteristics
of the media sector in the current and
anticipated future environment.
The Remuneration Committee spent
considerable time reviewing the
remuneration structure for our senior
executives in 2020. Accordingly, Mary Harris,
Chair of the Remuneration Committee,
engaged extensively with our largest
shareholders in relation to the proposed
changes to the Directors’ Remuneration
Policy (provided in the Remuneration
Report on page 132).
With the expectation that the year ahead
will continue to be impacted by challenging
external factors, the Board will continue to
work with management to deliver on our
strategic initiatives while ensuring that we
continue to safeguard our business and
the wellbeing of our colleagues and
other stakeholders.
Sir Peter Bazalgette
Chairman
9 March 2021
The 2018 UK Corporate Governance Code
(the Code)
The Board considers that, during 2020, the Company has complied
with the principles and provisions of the Code. In respect of provision
38 of the Code, the relevant 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
pages 140 and 141.
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 97 to 105) and establishing a clear and aligned Company purpose, strategy
and values (page 105). See pages 105 to 108 for how the Board assesses and
monitors culture.
Division of Responsibilities
The Board is made up of two Executive Directors, eight 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 95.
Additional external appointments of Board members during 2020 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 111 to 113) sets out its activities during
2020, including information regarding succession planning and progress on achieving
the Board’s diversity objectives. Read more about the internal Board evaluation which
took place during the year on page 109 and Board composition on page 95.
Audit, Risk and Internal Control
The Audit and Risk Committee Report (pages 114 to 125) describes the work of the
Committee and how it discharges its roles and responsibilities. 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, which were further enhanced
during the year. The Company’s disclosures regarding principal risks are on pages
74 to 85.
Remuneration
The Remuneration Report (pages 126 to 151) describes the work of the
Remuneration 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.
ITV plc Annual Report and Accounts 2020 89
Governance Board of Directors
Board of Directors
Sir Peter Bazalgette
Carolyn McCall
Salman Amin
Chris Kennedy
Edward Bonham Carter
Margaret Ewing
Mary Harris
Anna Manz
Duncan Painter
Committee
membership
A Audit and Risk
N Nominations
R Remuneration
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
Graham Cooke
Sharmila Nebhrajani
Board of Directors changes during 2020
and up to 9 March 2021
• Graham Cooke was appointed to the Board as
a Non-executive Director on 1 May 2020
• Sharmila Nebhrajani was appointed to the Board
as a Non-executive Director on 10 December 2020.
• Roger Faxon stepped down from the Board on
10 December 2020.
90
ITV plc Annual Report and Accounts 2020
Sir Peter Bazalgette N R
Chairman, Chair of the Nominations Committee
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 ITV’s More
than TV strategy.
Current external appointments: Chairman,
Lovecraft Collective Ltd; Non-executive
Director of UK Research and Innovation, and Edge
Performance VCT plc; Member of Advisory Board
for Bartle Bogle Hegarty.
Carolyn McCall
Chief Executive
Appointed: January 2018
Key skills and experience: Carolyn joined ITV in
2018 as Chief Executive. Previously she was Chief
Executive of easyJet plc for over seven years and
spent over 20 years at the Guardian Media Group
holding a number of senior roles, including CEO of
Guardian News and Media and then four years as
Chief Executive of Guardian Media Group. She has
previously served as a Non-executive Director of
Lloyds TSB, Tesco plc and New Look Group plc.
In 2008, Carolyn was awarded an OBE for her
services to women in business and in 2016 a
Damehood for her services to the aviation
industry. She has an impressive track record
in media and experience of leading digital
transformational change both in an international
and regulated environment. She has clear
strategic acumen and a strong record of driving
operational excellence and delivering value to
shareholders. Carolyn created ITV’s More than
TV strategy in 2018 when she joined, which she
continues to execute effectively through her
strong leadership of the Company ensuring ITV’s
transformation into a successful digitally led
media and entertainment company.
Current external appointments: Senior
Independent Director and member of the Audit
and Nomination Committees, Burberry Group plc;
Trustee of the Development Board of the Royal
Academy of Arts.
Strategic Report
Governance
Financial Statements
Additional Information
Salman Amin N R
Non-executive Director
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.
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 FTSE 100 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 More than TV 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.
Edward Bonham Carter N A
Senior Independent Director
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;
Chairman, Netwealth Investments Ltd.
Please see page 110 for further information
on Edward’s external time commitments.
Margaret Ewing A
Non-executive Director, Chair of the Audit
and Risk Committee
Appointed: October 2017
Key skills and experience: Margaret joined ITV
and its Audit and Risk Committee in October 2017
and was appointed Chair of the Committee in May
2018. 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, Chair of the Audit and Compliance
Committee and member of the Nominations
Committee of International Consolidated Airlines
Group, S.A.; Senior Independent Director, Chair of
the Audit and Risk Committee and member of the
Nominations Committee of ConvaTec Group plc.
Please see page 110 for further information on
Margaret’s external time commitments.
Mary Harris N A R
Non-executive Director, Chair of the
Remuneration Committee
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;
Non-executive Director, HAL Holding NV;
Member of Remuneration Committee, St Hilda’s
College, Oxford University.
Anna Manz A R
Non-executive Director
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 Financial Officer of The
London Stock Exchange Group and prior to that
held the role of Group Finance Director at Johnson
Matthey plc. Previously Anna 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 Financial
Officer, The London Stock Exchange Group plc.
Duncan Painter R
Non-executive Director
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.
Graham Cooke
Non-executive Director
Appointed: May 2020
Key skills and experience: Graham joined ITV in
May 2020. He has extensive technical and digital
experience, a focus in user-centric product design,
coupled with in-depth knowledge of the
e-commerce and digital sectors. He is a founder
and CEO of Qubit, the leading provider of
e-commerce personalisation technology. Prior to
founding Qubit, he spent five years working at
Google. His most recent role there was as global
leader on Google’s strategy for conversion rate
improvement. Graham has been working with web
technology since 1995, designing and building
websites with emergent technology.
Current external appointments: CEO, Qubit.
Sharmila Nebhrajani R
Non-executive Director
Appointed: December 2020
Key skills and experience: Sharmila joined ITV
in December 2020. She has strong public sector,
commercial, government and non-profit
experience across a wide range of sectors. She
was previously chief executive at Wilton Park,
an executive agency of the FCO, and prior to that
held various roles in global health and medical
research. Earlier in her career, she held the post
of Chief Operating Officer at BBC Future
Media & Technology, where she managed the
business functions of bbc.co.uk, including the
launch of iPlayer. Sharmila studied medicine at
the University of Oxford, is a chartered accountant
and was made an OBE in 2014 for services to
medical research.
Current external appointments: Non-executive
Director, Severn Trent plc; Chairman of National
Institute for Health and Care Excellence;
Non-executive Director, National Savings &
Investments; Independent Trustee, Lifesight
Limited; Governor, The Health Foundation.
ITV plc Annual Report and Accounts 2020
91
Julian Bellamy
Managing Director, ITV Studios
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.
Carolyn McCall
Chief Executive
Appointed: January 2018
Experience: Biography on page 90.
Governance Management Board
Management Board
Julian Bellamy
David Osborn
Carolyn McCall
Kevin Lygo
Rufus Radcliffe
Chris Kennedy
Kelly Williams
Mark Smith
Kyla Mullins
Management Board
changes during 2020
and up to 9 March 2021
It was announced on
•
8 February 2021
that Magnus Brooke
and Dan Colton were
both appointed as
members of the
Management Board.
Paul Moore
Ade Rawcliffe
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ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
Kevin Lygo
Managing Director, Media and Entertainment
Kelly Williams
Managing Director, Commercial
Appointed: August 2010
Appointed: December 2014
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 and in October 2020 he was
appointed Managing Director of the newly
created Media and Entertainment division. As well
as having overall responsibility for the Media and
Entertainment division, Kevin continues to run the
Broadcast business unit (one of the two business
units making up the division) and to oversee
the commissioning of popular programming
delivering ITV’s USP of mass simultaneous reach.
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
Managing Director, On Demand
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 on
additional responsibility for the Direct to
Consumer division as Chief Marketing Officer
and Director of Direct to Consumer. In October
2020 he was appointed Managing Director of
On Demand, one of the two business units making
up the newly created Media and Entertainment
division. Rufus has responsibility for heading up
the On Demand business unit, which will be the
focus of digital product development and growth
for ITV, and includes Hub, Hub+ (the ad free
version of the Hub) and BritBox. Before joining
ITV, Rufus spent ten years at Channel 4, and
prior to that held various positions at McCann
Erickson and JWT.
Chris Kennedy
Group CFO
Appointed: February 2019
Experience: Biography on page 91.
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 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 and compliance
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) and is also a Non-executive Director
on the Board of Northern Ballet.
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.
Ade Rawcliffe
Group Director of Diversity and Inclusion
Appointed: September 2020
Experience: Ade joined ITV as Head of Diversity
Commissioning in 2017. She was later promoted
to Director of Creative Diversity, before taking
on the role of Group Director of Diversity
and Inclusion and joining the Management
Board in 2020. She has responsibility for all
diversity and inclusion related matters across
the Group, including leading, developing and
growing ITV’s Diversity and Inclusion strategy on
and off-screen. Prior to joining ITV, Ade spent over
10 years at Channel 4, most recently as Creative
Diversity Manager, where she supported and
nurtured the careers of diverse creative talent
and sought out and commissioned a slate of
developments which encouraged diversity,
risk-taking and innovation. Ade is currently
a Trustee of BAFTA, Chair of BAFTA’s Learning
and New Talent Committee, and a Trustee of
the National Trust.
ITV plc Annual Report and Accounts 2020
93
Governance Corporate Governance
Corporate Governance
The written responsibilities of the
Chairman, Senior Independent Director
and Chief Executive are available on
the ITV plc website: www.itvplc.com
Our governance structure
Shareholders
Chairman
Leads the PLC Board and is responsible for its overall effectiveness, including its Committees. 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.
PLC Board
Committees
The terms of reference for each Committee are documented and agreed by the PLC Board. These terms of reference are reviewed
annually and are available on our website: www.itvplc.com/investors/governance/terms-of-reference.
Nominations
Committee
See the
Nominations
Committee
Report on
page 111.
Remuneration
Committee
See the
Remuneration
Report on
page 126.
Audit and Risk Committee
See the Audit and Risk Committee Report on
page 114.
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 on behalf of the Board.
Disclosure Committee
Consists of the Chairman of the PLC Board,
Chief Executive, Audit and Risk Committee Chair,
Group CFO, and General Counsel and Company
Secretary. The Director of Investor Relations also
attends meetings. 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 PLC 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 and executing on the strategic initiatives required to deliver the Group’s
strategy 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
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.
Media and Entertainment Board
Responsible for developing and implementing strategic objectives for the
Media and Entertainment business (Broadcast and On Demand business
units, including Hub, Hub+ and BritBox), monitoring operational and
financial performance, and assessing and managing risk, in line with the
Group’s risk management framework.
94
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
Board composition
Gender diversity
Skills and experience
Ethnicity
PLC Board tenure
Age
Business
transformation
Strategy
Media and
media IP
Finance
Male
Female
6
5
Digital
Data
2
10 11
10 11
11
11
11
11
7
5
5
BAME
White
2
9
0–2 years
2–5 years
5–9 years
2
6
3
36–45
46–55
56–65
66–75
1
4
4
2
PLC Board and Committee membership and attendance
PLC Board and Committee membership and attendance at scheduled meetings in 2020 is set out below.
Current
Peter Bazalgette
Salman Amin
Edward Bonham Carter
Margaret Ewing
Roger Faxon
Graham Cooke
Mary Harris
Chris Kennedy
Anna Manz
Carolyn McCall
Sharmila Nebhrajani
Duncan Painter
Status
Notes
Date of appointment
to the Board
Board 1
Nominations
Committee7
Remuneration
Committee
Audit and Risk
Committee
Attendance at scheduled meetings
Chairman
Independent
Independent (SID)
Independent
Independent
Independent
Independent
Executive
Independent
Executive
Independent
Independent
2
3
4
5
6
1 June 2013
9 January 2017
11 October 2018
31 October 2017
31 October 2012
1 May 2020
28 July 2014
21 February 2019
1 February 2016
8 January 2018
10 December 2020
1 May 2018
9/9
9/9
9/9
9/9
9/9
6/6, 1*
9/9
9/9
9/9
9/9
–
9/9
3/3
3/3
3/3
1*
1*
1*
3/3
1*
1*
1*
–
1*
6/6
6/6
–
2*
6/6
–
6/6
3*
6/6
1*
–
6/6
7*
–
7/7
7/7
–
–
7/7
7*
7/7
–
–
–
*
Indicates where a Director has attended a PLC 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.
1.
In June a series of PLC Board meetings were held over a two day virtual strategy meeting. For the purposes of this table these two days are counted as one meeting. In addition
a half-day strategy session was held in December, which is not reflected in the table above.
2. Peter Bazalgette was invited and attended all Audit and Risk Committee meetings during the year.
3. Margaret Ewing was invited and attended two Remuneration Committee meetings during the year.
4. Roger Faxon stepped down from the PLC Board on 10 December 2020.
5. Graham Cooke attended one PLC Board meeting prior to his appointment on 1 May 2020.
6. Sharmila Nebhrajani was appointed to the PLC Board and Remuneration Committee on 10 December 2020, and no meetings were held after this date.
7. All PLC Board members were invited to, and attended, a Nominations Committee meeting for a senior management succession planning session.
In order to respond effectively to the challenges presented by the COVID-19 pandemic, the PLC Board also held two formal ad hoc
meetings in the year to make key decisions to mitigate the impact of the pandemic, which were attended by all Board members. There
were also two Sub-Committee meetings to consider the Company’s funding and liquidity requirements.
The Nominations Committee also held a number of ad hoc meetings in relation to the Non-executive Director searches and selection of the
executive search firm for the Chairman’s successor search. These additional meetings are not reflected in the table above.
The Chairman and Non-executive Directors met without any of the Executive Directors three times during the year. In addition, the
Non-executive Directors met without the Chairman or management during the year to discuss Chairman performance, and also on an
informal basis to discuss matters relevant to the Group.
ITV plc Annual Report and Accounts 2020
95
Governance Corporate Governance continued
Key strategic matters considered by the Board in 2020
S Shareholders
PP Programme participants
C Colleagues
VC Viewers and subscribers
P Partners
CT Customers (including advertisers)
CZ Citizens
LR Legislators and regulators
Strategy and performance
Re-evaluation of the ITV strategy in light of the COVID-19 pandemic
• Principal risks 1 , 2, 3, 4, 5, 9 and 10
Reviews of capital structure, liquidity, investor proposition
and valuation
• Principal risk 1
Review of five year plan with focus on COVID-19 pandemic
• Principal risks 1 and 10
Programme of cost and complexity reduction
• Principal risks 1 and 10
Future of our commercial model
• Principal risks 2, 3 and 9
Investor insights and dividend policy
N/A
Transform Broadcasting
Plans for next generation IP proposition for TV viewing
• Principal risks 2, 5 and 9
Viewer journeys – understanding how viewer and customer needs
and behaviours are changing and how this affects ITV’s strategy
• Principal risks 1 , 2, 3, 5, 9 and 10
Vision for our channels
Creation of a Media and Entertainment division with two business
units – Broadcast and On Demand, including Hub, Hub+ and
BritBox to streamline the development and implementation
of strategic objectives
• Principal risks 2 and 8
• Principal risk 10
S C P VC CT
LR
S LR
S C LR
S C P VC CT
P CT LR
S C
P VC CT
P VC
VC CT
S C P VC CT
Grow UK and global production
Pandemic planning – development of production protocols to enable
key productions to continue; change of working plans
• Principal risks 1, 4 and 12
C CZ PP VC LR
Expand Direct to Consumer
Vision and strategy for our Digital products – developing the Hub,
Hub + and BritBox to maximise digital viewing and revenue
• Principal risks 9 and 10
BritBox international expansion plans
• Principal risks 9 and 10
Partnership Strategy – our partnership priorities and relationships
• Principal risks 5, 9 and 10
Other
Brexit and regulation – continued focus on key policy and regulatory
issues, including Brexit, CRR and advertising restrictions (e.g. HFSS),
PSB review. These continue to be kept under close review along
with other issues that could have a potential long-term impact on
the business
• Principal risks 7 and 13
Social Purpose strategy – delivery of strategy with launch of
environmental targets and mental health and ‘giving back’
campaigns
• Principal risk 10
Accelerating change in Diversity and Inclusion
• Principal risks 8 and 15
For further information on principal risks please see pages 76 to 85.
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ITV plc Annual Report and Accounts 2020
S P VC
P VC
P VC
S C LR
S C CZ VC
S C CZ VC
Strategic Report
Governance
Financial Statements
Additional Information
Engaging with our stakeholders
Why it matters
It is fundamental to the successful delivery
of our strategy and continued achievement
of our purpose for the Board to understand
the issues relating to and expectations of
our stakeholders so that their views are
taken into account during decision-making
processes.
The Board’s approach
The Board both directly engages with
relevant stakeholders and also assesses
details provided by management and other
colleagues of how decisions made across
the organisation have taken into account
stakeholder interests. The General Counsel
and Company Secretary supports the Board
in ensuring that due consideration is given
to stakeholder issues and papers submitted
to the Board detail the impact of proposals
on key stakeholder groups. At least once
a year, the Board identifies its key
stakeholders, reviews the issues that matter
to them most and discusses potential
enhancements to engagement with them.
Examples of engagement
The table below sets out some key
engagement mechanisms used in 2020.
COVID-19 has required us to adapt the ways
in which we engage with key stakeholders,
especially those who were hardest hit. It
also meant that planned engagement, such
as the Chairman’s visit to the Border news
region and the Board’s visit to the
Viewers and Subscribers
Emmerdale site in Leeds, had to be
postponed. We have nevertheless sought to
demonstrate in the following table our
ability to move at pace with the changing
circumstances and ensure we engage
meaningfully with key stakeholders during
these challenging times.
Through regular engagement, the Board recognises the evolution of
ITV’s relationship with viewers, which has been pivotal in shaping the
Company’s strategy.
Link to strategic priorities
Grow digital viewing: see Our Strategy (from page 20)
Forms of engagement
Outcomes and impact on principal decisions
External meetings and presentations
• AGM vodcast (providing an overview of how ITV was continuing to
provide news, factual, drama and entertainment programmes to
viewers during the COVID-19 pandemic)
Internal Board and Committee reviews and assessments
• Reviews by Executive Directors, as members of the Media and
Entertainment Board, of compliance reports detailing viewer/regulator
concerns
• Regular Chief Executive reports to the Board on viewing and
subscription figures and increased data insights and research into
programming (Hub, Hub+ and BritBox UK)
• Regular reviews by the Chief Executive of viewer comments and
concerns (including discussion with the Management Board) and
reviews of research on the opinions of viewers (as well as viewing data)
reported by Ofcom
Key issues or priorities identified
General
• Consideration of changes in viewer habits, particularly the decline in
linear viewing and increase in on demand viewing and impact of this
on ITV, as part of the Board strategy offsite sessions
• Enhanced delivery of content to viewers directly through Hub, Hub+
and BritBox in the UK and internationally
• Board approval of the expansion of BritBox to Australia
• Use of a campaign on air regarding everyday racism (with people
contributing stories about their experiences)
COVID-19
• Increase in the pace of implementation of our strategic initiatives and
operating model (e.g. the restructuring of the Broadcast business to
establish a new Media and Entertainment division – see page 68 for
how Directors have had regard to the matters in section 172(1) (a-f)
• Increasingly changing viewing habits (including as a result of COVID-19)
• Providing our viewers with accurate and trustworthy information during
and ITV’s digital viewing proposition
the COVID-19 pandemic
• Further international expansion of BritBox
• Ongoing need to respond on a timely basis to viewer/subscriber
• Bringing awareness of key social and topical issues
• Representative on-screen diversity
complaints and issues
Read more
Our Business Model
(from page 22)
Key Performance Indicators
(from page 24)
Social Purpose strategy
(from page 42)
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97
Governance Corporate Governance continued
Customers (including advertisers)
Customers and advertiser relationships are integral to monetising our
content and delivering on our strategy.
Link to strategic priorities
Grow digital and data solutions; grow UK and global production:
see Our Strategy (from page 20)
Forms of engagement
Outcomes and impact on principal decisions
External meetings and presentations
• Attendance by Board members at the virtual 2020 ITV Palooza event,
our annual commercial and programming showcase for our buyers
• Chief Executive participation in the ITV Studios Fall Festival, a virtual
global-event held for our buyers in September 2020
General
• 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
• Meetings between the Chief Executive and Group CFO and their industry
• Increased focus on intellectual property and advanced advertising in
counterparts (many of whom are also buyers of ITV Studios content)
• Meetings between the Chief Executive and key partners in advertising
Internal Board and Committee reviews and assessments
• Updates from the Chief Executive on key advertising relationships
and developments in the advertising market (included in the Chief
Executive Report)
• Receipt by the Board of regular reports on ITV’s engagement and
relationship initiatives with its advertisers and agencies during the
pandemic which included creating a series of webinars called ‘Backing
Business’, increasing flexibility on planning TV advertising at short
notice and reacting appropriately to changing government guidelines
• Regular reports on Commercial and Studios performance by the Chief
Executive to rest of the Board
• Regular engagement by various members of the Management Board
with advertisers and agencies through key ITV events, such as the ITV
Palooza, the ITV Regional Showcase, Marketing Director dinners
(pre-lockdown) and CEO virtual gatherings, as well as more specific,
regular advertising meetings and key industry events such as
Advertising Association Lead, and the ISBA Conference (pre-lockdown)
Key issues or priorities identified
• Impact of COVID-19 on production
• Investment in talent
• Impact of COVID-19 on the advertising market
• Flexibility (booking airtime)
Read more
response to stakeholders’ desired outcomes. Board discussions on this
topic benefited from Graham Cooke and Duncan Painter’s digital and
commercial expertise
COVID-19
• Acceleration of initiatives in relation to advertising, including by holding
a deep dive session on the risk of declines in TV advertising as a result of
COVID-19 and broader market changes, and endorsing the assessments
and approach to managing this risk
• Effectiveness of advertising and partnerships
• Audience profile and size (big audiences particularly in key demographics
such as 16-34s)
• Quality programming environments
Our Business Model (from
page 22)
Key Performance Indicators
(from page 24)
Risks and Uncertainties
(from page 72)
Partners (including Suppliers, other Broadcasters and Platform Owners)
Strong relationships with our partners are fundamental to our
business and operating model, and to ensure we meet the high
standards of conduct that we set ourselves.
Link to strategic priorities
Create and deliver enhanced partnership strategy:
see Our Strategy (from page 20)
Forms of engagement
Outcomes and impact on principal decisions
External meetings and presentations
• Executive Directors’ engagements (meetings, conferences) with key
General
• Appointment of Non-executive Director, Graham Cooke who has in-depth
suppliers and partners (including distribution partners)
• Executive Directors sit on the BritBox Partnership Board with their BBC
counterparts and other senior managers, and regular Chief Executive
counterpart meetings take place with other key partners
Internal Board and Committee reviews and assessments
• Board approval of significant contracts with suppliers or partners
• Chief Executive reports on key/strategic partner relationships, and
Group CFO reports on key negotiations with key partnerships, at
every Board meeting
• Audit and Risk Committee review of the Group’s supplier payment
practices and the procedures in place to safeguard both ITV and
suppliers from fraud (see page 121)
knowledge of key players in the e-commerce, data and digital sectors
• Completion of a modern slavery risk assessment (to understand the
areas in our supply chain where modern slavery could manifest), and
increased level of oversight and mitigations over our suppliers and
partners (to mitigate and prevent labour rights issues)
• Increased supplier due diligence; development of our third-party risk
framework and ongoing risk monitoring to inform supplier management
processes and the controls within this
COVID-19
• Acceleration of initiatives in relation to enhancing partnerships
• In-depth strategy session on Partnership Strategy in relation to ITV’s
highest priority partners
Continued next page
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Additional Information
Partners (including Suppliers, other Broadcasters and Platform Owners) continued
Key issues or priorities identified
• ITV’s Partnership strategy and ITV’s approach and proposed trade-offs
over the next five years with strategic partners, including PayTV, Big
Tech and other UK broadcasters
• Impact of COVID-19 on business continuity risks with critical suppliers
• Responsible, transparent and fair procurement, trust and ethics
Read more
Our Business Model
(from page 22)
Key Performance Indicators
(from page 24)
Social Purpose strategy
(from page 42)
Citizens
As a public broadcaster, we strive to reflect, remain in touch with, and
shape public sentiment and national conversations. Our engagement
in this stakeholder category is an integral part of our Social Purpose
strategy. Please refer to page 42 for our work in this area. For
information regarding our charitable giving and volunteering,
please refer to page 45.
Link to strategic priorities
Social Purpose: see our Social Purpose strategy
(from page 42)
Forms of engagement
Outcomes and impact on principal decisions
External meetings and presentations
• Chairman’s speech at the virtual Albert Conference on Climate
General
• Appointment of new Non-executive Director, Sharmila Nebhrajani, who
Change ‘Net Zero and the Economics of Broadcasting’ (on the role
that broadcasting plays in UK society and in relation to the climate
change crisis)
• Chief Executive’s participation in the virtual Power Up Festival (focused
on wellbeing) to discuss how ITV is making wellbeing in the workplace a
strategic priority and the impact of ITV’s Britain Get Talking campaign
Internal Board and Committee reviews and assessments
• Group CFO’s overall responsibility for ITV’s climate change agenda
and leadership of ITV’s Climate Change Delivery Group
• Board receipt of annual updates on Social Purpose, the Group’s
climate-related agenda including risk, opportunities and targets,
and Diversity and Inclusion
has experience across a wide range of sectors, particularly in the
environmental, social and governance fields and broadcasting
• Establishment of the Mental Health Advisory Group chaired by Ruth
Davidson (former leader of the Scottish Conservative Party) comprising
external expert advisers
• Investment in marketing campaigns to drive social purpose and
responsible behaviour (e.g. behaviour change campaigns, to support
better mental health, healthy-eating and activity, diversity, promoting
volunteering, fundraising for Unicef and encouraging people to adopt
more environmentally sustainable behaviours)
COVID-19
• For Social Purpose initiatives that were influenced by the COVID-19
• Training undertaken by Board and Audit and Risk Committee members
pandemic, please refer to page 44
on climate change (see page 121 for further details)
• Audit and Risk Committee monitoring of compliance with, and progress
on, climate change reporting; reports to the Board on its outcome
(see page 121)
• Board annual review of progress against ITV’s Diversity Acceleration
Plan (including discussion of ITV’s diversity targets both on-screen
and at various levels of the organisation)
• Board discussion of the impact and reaction to the killing of George
Floyd and wider Black Lives Matter movement, and the action ITV was
taking to accelerate change in diversity and inclusion
Key issues or priorities identified
• Harnessing our unique mass-reach platform and the power of our
programmes to raise awareness and action on issues that are important
and help shape culture for good; and helping the nation take better care
of its mental health
• Our sustainability and setting of new environmental targets
• Our contribution to wider society in other ways, including charitable
giving and volunteering
• Increased focus and commitment to increasing on and off-screen
diversity through our Diversity Acceleration Plan (see page 48)
Read more
Task Force on Climate-related
Financial Disclosures
(from page 62)
Our environmental targets
(page 46)
ITV plc Annual Report and Accounts 2020
99
Governance Corporate Governance continued
Legislators and Regulators
The Board is committed to its responsibility as a public service
broadcaster (PSB) and conducting business in line with the
appropriate laws and regulation, to ensure we operate in an
ethical and responsible way.
Link to strategic priorities
Availability of viewer content:
see Our Strategy (from page 20)
Forms of engagement
Outcomes and impact on principal decisions
General
• Two Board sessions on the proposed HFSS advertising ban (including
discussion of the impact of the ban on revenue and strategy) and
engagement between the policy/regulatory and public affairs teams
and the UK government, and a subsequent Board discussion on
proposed actions to mitigate the impact of HFSS on ITV
• Further Board discussion and consideration of the PSB regulation and
proposed approach to the expiry of the Public Services Broadcasting
licence in 2024 (which remains subject to further discussion in the
coming year)
• Audit and Risk Committee discussion of the gap between current status
and expected regulatory reform related to audit, and the development
of a plan to ensure compliance with anticipated changes
COVID-19
• Taking the lead in developing an industry protocol for the safe return
of TV production (which was approved by the UK government and led
directly to the widespread resumption in TV production in the summer
of 2020). ITV’s leadership role in this area was specifically recognised
by the government in Parliament
• Implementation of specific COVID-19 initiatives, including working
with the UK government to integrate public health messages in
our broadcasting
• Regulatory compliance (including tax)
• HFSS food and drink advertising consultation
• PSB regulation
External meetings and presentations
• Meeting between the Chief Executive and the Prime Minister’s Chief
Business Adviser responsible for developing policies and working with
business and across government to support UK businesses
• Chairman’s meeting with the Ofcom Chair on PSB and COVID-19 matters
• Regular meetings of the Audit and Risk Committee Chair, with the Chief
Executive and other leaders of the Financial Reporting Council regarding
corporate and audit regulatory reform
• Regular (at least monthly) meetings of the Chief Executive and Director
of Policy and Regulatory Affairs with the Minister of State for Media and
Data (on matters, including the response to COVID-19, the future of PSB,
and other key issues of concern to the TV industry) as well as other
ministers on an ad hoc basis
• Provision of evidence by the Chief Executive and Director of Policy and
Regulatory Affairs to the House of Commons Select Committee on
Digital, Culture, Media and Sport as part of the Committee’s inquiry
into the future of PSB
• Regular meetings of the Chief Executive and Director of Policy and
Regulatory Affairs with the Chief Executive and other senior officials
at Ofcom including participation in a live Ofcom event about the future
of PSB
• Engagement by the Chief Executive and other senior ITV employees
in consultations and new initiatives with the government and with
regulators
Internal Board and Committee reviews and assessments
• Updates from the Chief Executive, supported as appropriate by the
Director of Policy and Regulation, on policy and regulation at every
Board meeting
• Updates to the Audit and Risk Committee from the Committee Chair
and external auditor regarding FRC developments and proposed
regulatory changes
Key issues or priorities identified
• COVID-19 restrictions
• Brexit and related trade issues
• Sustainability performance
Read more
Our Business Model
(from page 22)
Social Purpose strategy
(from page 42)
Colleagues
For information on how Directors have engaged with colleagues, and
the effect of their regard for colleague interests on principal decisions
taken by the Company, please refer to page 102.
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Financial Statements
Additional Information
Programme participants
So that participants know and are assured that we take our duty of
care to them very seriously, and trust that we will do the right thing
to safeguard their physical and mental health and wellbeing.
Link to strategic priorities
Development of the creative pipeline:
see Our Strategy (from page 20)
Forms of engagement
Outcomes and impact on principal decisions
External meetings and presentations
• Chief Executive/Managing Director of ITV Studios visited the set of I’m A
Celebrity... Get Me Out Of Here in Wales (to assess and monitor working
conditions and the strict COVID-19 procedures that were in place)
Internal Board and Committee reviews and assessments
• Regular Board updates on duty of care processes and issues, and on
the Duty of Care Operating Board’s discussions and activities (including
feedback from ITV’s Mental Health Advisory Group), through updates
from the Audit and Risk Committee Chair, who is a standing attendee
of the Operating Board
• Board updates from Management regarding the steps taken to further
enhance processes and guidance for producers to support programme
participants before, during and after production, and on any challenges
relating to, or publicity surrounding, duty of care processes relating to
any programmes produced or broadcast by ITV
• Three Audit and Risk Committee sessions on duty of care and health
General
• Annual review by the Duty of Care Operating Board of ITV’s Guidance on
protecting programme participants and the ITV Duty of Care Charter
• Appointment of a Clinical Psychologist to review and enhance
psychological processes and strategy relating to duty of care
• Initiatives to educate the business and labels on ITV’s duty of care model
and processes, for example, the use of a Wellbeing Working Group
(which was set up to ensure the wellbeing approach and supporting
activities for participants)
• Ongoing engagement with Dr Paul Litchfield CBE, independent
medical adviser to ITV, advising on continued enhancement of duty
of care processes
• Input from Board members into the Ofcom consultation on protecting
participants in TV and radio programmes
COVID-19
• Increased implementation of processes and safeguards to maintain
and safety processes
participant safety
• Annual Audit and Risk Committee reviews of duty of care risks and
mitigations for the business
• Board updates from the Chief Executive on physical security measures
being taken in relation to production restarts halted by COVID-19
• Board review of minutes from the Duty of Care Operating Board
• Regular Board updates from the Chief Executive on processes in place to
manage the increased health and safety risks as a results of COVID-19
• Audit and Risk Committee review of the risk approach to the pandemic,
which included a ‘deep-dive’ on wellbeing during this period
meetings
Key issues or priorities identified
• Duty of care to participants (this is a principal risk – see page 83)
• Mental health and wellbeing of our participants
• Safety of participants during the COVID-19 pandemic
Read more
Our Business Model
(from page 22)
Risks and Uncertainties
(from page 72)
Social Purpose strategy
(from page 42)
Our People
(from page 50)
Shareholders (Individual and Institutional), Bond Holders and other Providers of Debt and Analysts
Delivering for our investors (equity and debt) and understanding their
views and interests ensures the business continues to be successful in
the long-term and therefore can deliver for all our stakeholders.
Link to strategic priorities
Deliver value for shareholders: see Our Strategy (from page 20)
Forms of engagement
Outcomes and impact on principal decisions
External meetings and presentations
• Direct meetings between:
– Executive Directors and institutional investors representing about
70% of the Company’s share capital, as well as potential investors
across the UK, US and parts of Europe
– the Chairman, Senior Independent Director, Remuneration Committee
Chair and Audit and Risk Committee Chair and investors
General
• Feedback from the Company’s shareholder engagement informs,
amongst other things, its long-term strategy, five year plan, capital
structure and approach to ESG and other governance issues
• Board sessions with the Company’s brokers and advisers on market
performance, bid defence and capital structure in light of additional
pressures faced as a result of the COVID-19 pandemic
– the Chief Executive and Group CFO and shareholders (in particular,
• Increased Board reviews of progress made against the 2020 Social
throughout the evolving COVID-19 crisis)
Purpose targets and endorsement of the approach for 2021
– the Chief Executive and Group CFO and analysts (for Full and Half Year
• Training undertaken by the Audit and Risk Committee on climate change
presentations and Q&A)
– the Group CFO and analysts on a regular basis
and other ESG reporting; these materials were shared with the Board
Continued on next page
ITV plc Annual Report and Accounts 2020
101
Governance Corporate Governance continued
Shareholders (Individual and Institutional), Bond Holders and other Providers of Debt and Analysts
continued
Forms of engagement
Outcomes and impact on principal decisions
External meetings and presentations
• Virtual investment Salesforce presentations and other virtual investor
engagements by the Executive Directors
• AGM vodcast on our website (providing updates on how the Company
was managing through the COVID-19 pandemic)
• Regular dialogue between the Group CFO and Director of Tax & Treasury
and the Rating Agencies (Standard & Poors and Moody’s) and the Core
Banking Group throughout 2020, providing updates on the performance
of the business, specifically in relation to COVID-19
COVID-19
• Further engagement with investors and market analysts regarding the
withdrawal of the 2019 final dividend and withdrawal of the previously
announced intention to pay an 8.0p full year dividend for 2020 – see
page 67 for how Directors have had regard to the matters in section
172(1) (a-f)
• Increased Board calls to consider ITV’s financial position across a range
of scenarios, cost mitigations, regular reforecasting and cash monitoring
• Increased Board strategy sessions focused on the impact of COVID-19 on
• Consultations with our top institutional shareholders and investor
ITV and the acceleration of the delivery of ITV’s strategic initiatives
bodies on the proposed Remuneration Policy for approval in 2020 and
2021 by the Chair of the Remuneration Committee. We consulted with
around 70% of our share register
Internal Board and Committee reviews and assessments
• Board reviews of reports on key shareholder engagement activities
undertaken by the Chief Executive, Group CFO and Investor
Relations team
• Board presentations by brokers on shareholder sentiment regarding
ITV’s performance, strategy and capital structure
• Audit and Risk Committee review and discussion of a report from the
Director of Investor Relations on investors’ and analysts’ views in
relation to ITV’s accounting policies, risks and disclosures
Key issues or priorities identified
• Impact of COVID-19 on financial and operating performance
• Strategy and investment plans and delivery against strategic
and financial targets and KPIs
• Share price performance
Read more
• Impact of COVID-19 on dividend and leverage
• Environmental, social and governance (ESG) performance
• Planned changes to the Remuneration Policy. See the Remuneration
Committee report from page 126 for more details
Our Business Model
(from page 22)
Investor Proposition
(page 15)
Social Purpose strategy
(from page 42)
Task Force on Climate-related
Financial Disclosures
(from page 62)
Colleagues
The workforce voice is integral to the
Board’s decision-making. It has been
particularly important in 2020 as a result
of the challenges we have experienced
because of the COVID-19 pandemic, and we
have taken extra measures to ensure the
wellbeing of our colleagues during this
difficult time.
For a definition of our workforce, please
refer to page 51
Workforce engagement
To ensure effective engagement with
the workforce, the Board uses two of the
methods stipulated under the Code:
a designated Workforce Engagement
Director (Edward Bonham Carter, our Senior
Independent Director) and a formal
workforce advisory panel (our Ambassador
network). The Board also recognises the
benefits of personal interaction and
informal discussion to both learn more
about day-to-day operations and the
practical execution of strategy, and gather
direct insights into workforce sentiment.
Regrettably, during 2020, the Board was not
able to go ahead with some planned
engagement, such as the Board’s visit to
our office and Emmerdale site in Leeds.
However, set out below are the key
instances of the direct engagement the
Board members have had with our
employees, some important insights and
priorities identified through engagement
with them, and the outcomes and impact of
discussions with them on principal decisions
taken by the Company.
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 around 50
colleagues from their business area,
called their constituency. Some larger
constituencies have more than one
Ambassador, while smaller departments are
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 this year,
throughout the pandemic, additional
remote meetings were organised to ensure
Ambassadors were connected and able to
share any concerns effectively. This year
eight Management Board members
attended Ambassador meetings to provide
updates from their business areas and hear
feedback and themes from the
Ambassadors. For example, the Group HR
Director attended a meeting to discuss the
Broadcast restructuring and the Group
Director of Diversity and Inclusion joined a
meeting to talk about ITV’s approach to
diversity and inclusion. The Ambassador
meetings allow good engagement
regarding business issues affecting
colleagues, and this year, allowed them to
receive valuable feedback regarding
communications, support and wellbeing of
colleagues during the COVID-19 pandemic.
The Board and Management Board also
receive feedback from other ITV colleague
networks, including Embrace (the black,
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Additional Information
Asian and ethnic minority network),
through regular Social Purpose and
Diversity and Inclusion updates. The ITV
colleague networks’ observations are
shared with the Chief Executive at the
quarterly Inclusion and Diversity Council
meetings directly by the networks’ chairs.
For example, in 2020 they were asked
to relay the experiences of their
members during lockdown and how
the pandemic was affecting them.
Our designated Workforce Engagement
Director, Edward Bonham Carter, attended
14 Ambassador meetings, including a Q&A
session on employee and executive
remuneration (more than double the
number of meetings he attended in 2019).
Through active two-way dialogue, these
meetings have provided Edward with the
opportunity to share insights into external
factors affecting ITV, which the
Ambassadors then share with their
constituents. Following these meetings,
Edward provides feedback to the Board on
employee topics and issues of interest and/
or concern. He also reports to the Board
annually, on a more formal basis, on the
insights gained from these engagements
and on any outcomes and proposed
recommendations that arise.
This year, attending the Ambassador
meetings has been invaluable to my
understanding of colleague sentiment,
as I was able to obtain feedback on
how colleagues regarded ITV’s
response to the COVID-19 pandemic
and whether they felt supported
during this time.
Not only do I feel that I have a good
understanding of the range of topics
close to the hearts of our workforce,
but I am also able to raise the profile of
those issues – our constructive
two-way dialogue on the new
operating model and understanding
ITV’s strategy has helped inform our
communications approach and our
discussion on Smart Working
highlighted the breadth of views
across ITV. Additionally, during my
meetings with Ambassadors, we have
had a number of conversations
about mental health, wellbeing and
resilience and the support ITV can
provide employees.
As part of my role in ensuring that
information flows both ways, I also
shared the Board’s views on the
changing media landscape and
impact that COVID-19 has had on
the business.”
NED attends
One ITV
Ambassador
Meetings and
collects feedback/
insights
NED provides
feedback from One
ITV Ambassadors at
Plc Board Meeting
NED collects
feedback/insights
from PLC Board
Meeting to share
with One ITV
Ambassadors
NED shares
feedback/insights
from PLC Board
Edward Bonham Carter
Ambassador Feedback
Loop
Edward’s activities during 2020 as Workforce
Engagement Director
Key priorities observed and reported by Edward
to the Board
• Attended eight UK Ambassador meetings from three
• The wellbeing and mental health of colleagues during the
UK regions
COVID-19 pandemic
• Attended five international Ambassador meetings
• The additional pressures and intensity of digital remote
representing all ITV territories
working, including IT support
• Together with the Remuneration Committee Chair, hosted
• The impact of COVID-19 on job security and future
the live Q&A session for all Ambassadors on the approach to
executive and employee pay at ITV
arrangements regarding ‘return to work’
• Organisation and job security in relation to the restructuring
• Gave five verbal updates to the Board on activities
of the Broadcast business
• Presented one formal paper regarding activities and
• How structural changes may affect the Diversity and
outcomes to the Board
Inclusion agenda
• More awareness and visibility of the Ambassador network
and their roles
ITV plc Annual Report and Accounts 2020
103
Governance Corporate Governance continued
The Board and Management Board use a number of other arrangements for direct workforce engagement.
Examples are set out as follows:
Primary methods of engagement
Outcomes and impact on principal decisions
and considerations
• Engagement through Workforce Engagement Director
• A ‘pulse’ survey to understand colleague confidence in our
response to the COVID-19 pandemic and obtain learnings for
future ways of working
• Direct contact with the Chief Executive through her Ask
Carolyn email address
• The feedback and results from the COVID-19
‘pulse’ survey were presented to the Duty of Care
Operating Board in July 2020 as well as the Board
(via the Audit and Risk Committee) in September
• The Board regularly considers colleague wellbeing
as part of Board discussions, for example, in
relation to remote ways of working, and ensures
adequate support is provided to colleagues
92% of colleagues felt
that ITV is supporting
its colleagues during
COVID-19; 88% of
colleagues have
confidence in ITV’s
response to COVID-19
• The Workforce Engagement Director identified key priorities
in relation to the impact of COVID-19 on job security, and
organisation and job security in relation to the restructuring
of the Broadcast business
• The Chief Executive reports on employee engagement as part
of her Chief Executive report. People and communications
have been and will continue to be a core priority during the
pandemic, and regular updates are provided to the Board
• The Workforce Engagement Director identified that the
Ambassadors’ felt there could be more awareness and
visibility of the Ambassador network and their roles
• Management Board members have also attended
Ambassador meetings to provide updates from their
respective areas of the business, take questions and hear
feedback from the Ambassador network
• The Chief Executive vodcast has played a major role during
the pandemic in ensuring our colleagues continue to feel
connected to ITV despite being required to work remotely.
Our colleagues are able to submit questions ahead of the
vodcast recording which are answered directly. Board
members also listen to the vodcasts, which enable them to
understand the issues that matter to the workforce
• The Board Chairman also joined the Chief Executive’s vodcast
during the year to answer questions on ITV leaving the FTSE
100, and discuss the acceleration of strategic initiatives given
COVID-19
• The Workforce Engagement Director identified key priorities
in relation to the wellbeing and mental health of colleagues
during the COVID-19 pandemic and added additional
pressures and intensity of digital remote working, including IT
support
• As part of Board discussions, the Board considered
the impact of the restructuring on colleagues,
including redundancies and communications to
the wider business. The Board ensured there was
regular communication between management
and colleagues on these issues
• Ambassadors joined one of the Chief Executive’s
vodcasts to increase visibility and raise awareness
of the Ambassador network amongst colleagues
The Chief Executive
focused on the
restructure during two
of her vodcasts and
continues to respond to
colleagues questions as
part of the Q&A and
directly through her Ask
Carolyn email address
The vodcast with the
Ambassadors had
1,000 views and 522
transcript reads
• The Chief Executive communicated to colleagues
about the future of working and took questions
via her vodcasts
Chief Executive’s
vodcasts peaked at
70% of ITV viewing
• After six months of weekly vodcast recordings, an
employee survey was conducted to enable the
Board and Management to understand the
opinions of colleagues on the vodcast recordings.
The results and recommendations of this survey
were shared with the Board and have shaped the
way vodcasts are now conducted. For example, at
the peak of the pandemic, the vodcasts were
broadcast weekly and now they are fortnightly
• The Audit and Risk Committee reviewed deep
dives related to, among other things: the
wellbeing of ITV’s people, talent and programme
participants during the COVID-19 pandemic; duty
of care; health and safety; cyber security and
increased risks and mitigating controls of
widespread remote working
Events promoting a
balanced and healthy
working lifestyle have
been made available
to the whole of ITV
globally since the start
of the pandemic
• The Remuneration Committee Chair and the Workforce
Engagement Director hosted a live Zoom session for the
Ambassadors which focused on Board governance and
executive and employee remuneration (which was recorded
for wider circulation)
• The Remuneration Committee endorsed the
approach to workforce engagement in relation to
executive remuneration and considered the
impact of COVID-19 on wider employee reward
and remuneration, including a review of the
benefits available to colleagues during this period
68% of the
Ambassadors
attended the
Remuneration
session
• Engagement though the Workforce Engagement Director
• The Board reviewed and endorsed the 2019
and Group Director of Diversity and Inclusion to reassure on
the continued focus of our inclusion strategy despite
structural changes
• The Audit and Risk Committee Chair met with members from
the ITV Able Network and attended an Able Network Board
meeting; the Able Network champions the disability agenda
throughout the organisation
Gender and Ethnicity Pay Gap report and reviews
at least annually ITV’s approach to diversity and
inclusion
• The Audit and Risk Committee Chair ensures that
the disability element of diversity is represented
at the Board
ITV’s Able network
has had a 364%
increase in
membership in
the last year
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Strategic Report
Governance
Financial Statements
Additional Information
Examples of other arrangements for direct
workforce engagement:
Values in action – understanding
and monitoring our culture
• The Chairman has regular contact with
Management Board members and
Divisional heads, who feed back to him on
workforce issues. Prior to COVID-19, the
Chairman would be present in the ITV
offices for a full day at least once a week
and during this time was visible in the
workplace and met with senior leaders.
• This year, the Chief Executive, together
with the Management Board, led virtual
town halls in order to keep employees in
their business area engaged and up-to-
date during the COVID-19 pandemic; these
town halls also gave our employees the
opportunity to hear directly from and
question the Chief Executive and the
management team, and enabled
employees to understand ITV’s Strategy
and the role that they would play in
delivering that strategy.
• The Board regularly engages with the
members of the Management Board,
including at the Board’s strategy days.
• Board members undertook the 2020
mandatory training for colleagues. Refer
to page 106 for how this engagement
informs culture.
• The Executive Directors hold frequent
Executive Leadership Team and Senior
Leadership Team sessions (made up of
approximately 50 and approximately 200
of the top senior leaders respectively).
• The Management Board attends and
coordinates 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 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. This year, with
oversight from the Audit and Risk
Committee and input from key
stakeholders, we have refreshed our
Speaking Up process and updated our
Speaking Up policy in line with the EU
Whistleblowing Directive and best practice,
including the implementation of an external
Speaking Up hotline and reporting system
(refer to page 122). We also gain feedback
from the freelancer perspective through
the trade unions, the Directors UK forum
and the Producers Alliance for Cinema and
Television (PACT), which helps us address
other issues and concerns that may be
raised by this group.
To support the creation of long-term value
for the mutual benefit of stakeholders, it is
critical we continue to build and promote
a culture of openness and integrity, where
inclusion and diversity are valued. We also
recognise that the failure to evolve the
underlying culture of the business may
result in an inability to deliver the level of
change required to achieve our strategic
objectives, which is identified as a principal
risk (see page 82).
Our culture also extends to consideration of
our dealings with all our stakeholders
(including partners and colleagues) who give
us direct cultural insights (pages 97 to 105)
and our Social Purpose initiatives (from page
42). 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.
The COVID-19 pandemic has shaped the
framework and engagement structures
within which we have operated during the
last nine months of 2020 and continue to
operate. In particular, the move to a digital
culture in the context of the protracted
period of working from home has required
us to take measures to accelerate the
implementation of our digital strategy. The
Board has been regularly monitoring
Management’s response to, and actions
taken during, the COVID-19 pandemic to
ensure that the Company’s response remains
aligned to our desired values and behaviours,
understanding that their actions will
inevitably shape culture for years to come.
Measuring and monitoring culture
During 2020, the Board has continued to
drive the Company’s strategic vision and
purpose with the clear embodiment of ITV’s
cultural values in mind. It has focused, and
will continue to focus, on cultural alignment
across all offices and within each business
division following changes to the Company’s
business structure and operating model (for
example, the full integration of the Talpa
business, and the digital transformation and
Smart Working initiatives being embraced
throughout the organisation).
The Board formally considers culture on an
annual basis and, through its activities
during the year, is able to satisfy itself that
the policies, practices and behaviour
throughout the Group are aligned with ITV’s
purpose (including its Social Purpose), vision,
values and strategy. Through discussion of
relevant observations, the Chief Executive’s
focus on people and culture in her Board
reports, and the methods listed below,
culture is covered, whether implicitly or
explicitly, at every Board meeting.
Our ITV values underpin the culture
at ITV and these are embedded
through our Code of Conduct:
The ITV Way encapsulates the
values that underpin the culture
at ITV:
Creativity
Without fear or caution
Collaboration
Working together at pace
Inclusion
Respecting and embracing
differences
The ITV Way
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
96%
Completion rate of Code
of Conduct annual
training
8.2%
Voluntary employee
turnover
Silver
award
2019 Mind Workplace
Wellbeing Survey
ITV plc Annual Report and Accounts 2020
105
Governance Corporate Governance continued
The table below sets out key ways in which the Board and/or Committees monitored culture during 2020 and how these contributed to
delivering insights into ITV’s culture. The matters set out below are regularly considered by the Board at their meetings.
How the Board monitors culture
Cultural insight gained
Engagement
Board culture review
The Board reviewed an analysis of the Company’s culture through the
results from the ‘pulse’ survey focused on COVID-19 in 2020, and by
benchmarking ITV’s data against key indicators of organisational
culture (gender pay gap, ethnicity pay gap, voluntary employee
turnover, wellbeing survey score).
Results from the ‘pulse’ survey identified high levels of confidence
amongst colleagues in ITV’s response to COVID-19 and demonstrated
that colleagues felt supported during the crisis (88% of colleagues
had confidence in ITV’s response to COVID-19; 92% of colleagues felt
supported during COVID-19; and 89% felt that ITV was making sufficient
adjustments to deal with COVID-19).
Chief Executive
The Board received a weekly written report from the Chief Executive
between March and May (moving to fortnightly until July) commenting
on, amongst other things, culture and morale. The Board has access to
the regular Chief Executive vodcast and Q&A. Please see pages 102 to
105 for more ways in which the Directors have engaged with the
workforce this year.
Outcome
An understanding of day-to-day operations, the practical execution of
strategy and the cultural context in which employees work. During the
COVID-19 pandemic, this was fundamental to providing the Board with
an understanding of how employees were coping with the changed
working environment and their view on management’s response to
the crisis.
Insights from the ‘pulse’ survey enabled us to target our wellbeing, offering to provide focused support for the mental and physical wellbeing of
colleagues, which was monitored by the Board through updates from the Chief Executive.
Compliance
Board updates
The Board and its Committees are updated on a broad range of
business integrity matters, including approaches to combating modern
slavery, anti-bribery and corruption, and reporting against the Prompt
Payment Code in the UK.
Mandatory training
Board members undertook the 2020 mandatory training for colleagues
on the Code of Conduct, cyber security, data protection and privacy and
climate action, and subsequently reviewed how the Company supports
the understanding and embedding of the Code of Conduct and related
policies and standards through this training.
A broad understanding of practices and behaviours and how these align
with the purpose, values and strategy of the Group, including an
understanding of the Group’s approach to supply chain partners.
A deeper understanding of how ITV’s values and standards are imparted
and how colleagues are kept safe and secure and act in a compliant way.
Board culture review
The Board reviewed ITV’s Code of Conduct.
Insight into how the Code of Conduct promotes the highest standards
of ethical business underpinning ITV’s values and corporate culture.
Outcome
The members of the Board will continue to undertake training on an annual basis, to ensure their understanding of how colleagues are kept safe and secure
and act in a compliant way remains current.
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Strategic Report
Governance
Financial Statements
Additional Information
How the Board monitors culture
Cultural insight gained
Health and Safety
The Audit and Risk Committee reviews the systems in place to enable
all employees, suppliers, 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. This includes review of
metrics on safety observations reported by colleagues.
Further insight into safety behaviours by evidencing the individual
responsibility taken by employees with regard to proactively reporting
safety concerns. This has included insight into the additional measures
put in place to ensure the physical safety of our colleagues, suppliers
and production participants during the COVID-19 pandemic.
Outcome
Through regular Board updates from the Chief Executive and from the Audit and Risk Committee, the Board will continue to ensure the right processes
and procedures are in place for the safety of our employees, suppliers and programme participants, and that ITV continues to uphold high standards of
duty of care.
Wellbeing and Mental Health
‘Deep-dive’
The Audit and Risk Committee undertook a ‘deep dive’ on wellbeing
during COVID-19 for our people, talent and programme participants.
Insight into how the business was prioritising the health and wellbeing
of our colleagues across five fronts during the COVID-19 pandemic:
health, security, environment, relationships and purpose.
Review of mental health in ITV’s Social Purpose campaigns
The Board reviews the impact of our Social Purpose campaigns
annually.
Duty of care
The Audit and Risk Committee reviewed ITV’s duty of care processes
and received updates from the Duty of Care Operating Board (which
were reported to the Board), on the processes and standards in place
for employee wellbeing and what we expect from our partners
producing shows for broadcast on ITV. There was also feedback from
the Mental Health Advisory Group (external expert advisers) regarding
our programmes and external campaigns, as well as guidance and
support on all aspects of ITV’s approach to mental health and wellbeing
in the areas of workforce, production teams, participants in our
programmes and viewers, to ensure ITV remains at the leading edge of
best practice. This included feedback regarding ITV’s management of
the COVID-19 crisis and the Britain Get Talking campaign, one of ITV’s
mental wellness campaigns to help families get closer.
Outcome
Insight into how ITV’s Social Purpose campaigns promote awareness
and acceptance of mental health issues on-screen and off-screen,
and the success of these initiatives in influencing culture internally
and externally.
• Insight into mental wellbeing processes and support for colleagues,
to ensure that the acceptance, importance and safeguarding of
culture, both organisationally and in what we broadcast, embraces
social inclusion. This has enabled the Board, through management,
to monitor colleagues’ mental and physical wellbeing during the
COVID-19 pandemic and ensure the appropriate tools and support
are in place.
• Insight into the Mental Health Advisory Group’s recommendations
and guidance on approaching mental health, both internally and
externally, and into the ways in which ITV uses its platform to get
messages across to audiences, which during 2020, included
key demographics seen to be particularly vulnerable during the
COVID-19 crisis.
Additional measures were put in place to further support colleagues’ health and wellbeing when working remotely during the COVID-19 pandemic (as
detailed on page 52). The Duty of Care Board is responsible for monitoring the efficacy of these actions on culture, which is reported to the Board.
Social Purpose, Diversity and Inclusion
The Board annually reviews Social Purpose, Diversity and Inclusion. The
appointment of Ade Rawcliffe to the Management Board as the Group
Diversity and Inclusion Director in 2020 has added further importance
to the topic of diversity and inclusion in the Boardroom. Ade provides
updates to the Board on progress on ITV’s Diversity and Inclusion
strategy (see page 48).
• Insight into key priorities and initiatives in pursuit of the Company’s
wider strategic vision, and how these translate into shaping society
for good both on-screen and off-screen. This includes insight into the
pace of delivery of the Diversity Acceleration Plan, the impact this
plan is having on colleague sentiment and ITV’s reputation as having
an inclusive culture, and the latter’s appeal to future employees.
• Insight into internal and external engagement with the Company’s
strategy and how ITV’s Social Purpose is perceived amongst
stakeholders.
Continued on next page
ITV plc Annual Report and Accounts 2020
107
Governance Corporate Governance continued
How the Board monitors culture
Cultural insight gained
Social Purpose, Diversity and Inclusion continued
The Nominations Committee monitors progress against diversity
targets regularly, with diversity on the Board agenda annually.
Insight into management’s accountability for improving BAME and
disability representation in their functions year-on-year, and also into
how change is being accelerated through Group-wide initiatives.
Outcome
See pages 42 to 49 for outcomes related to Social Purpose, Diversity and Inclusion.
Speaking Up
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. See page 122 for how the Speaking Up
framework is being revised.
A perspective on the nature of employee concerns and trends in the
behaviours of the workforce generally, which was also considered in
light of the ongoing difficulties created by the COVID-19 pandemic.
The Audit and Risk Committee was pleased with the proposed
improvements, which will enhance our people’s ability to raise
concerns and support ITV’s open culture, and enable more meaningful
reporting on Speaking Up concerns to the Management Board
and Audit and Risk Committee.
Outcome
The Audit and Risk Committee Report is responsible for tracking progress and monitoring the revised Speaking Up framework, and feeding back to the
Board on how this has supported the openness of ITV’s culture (refer to page 122).
Internal Audit
Internal Audit provides the Audit and Risk Committee with observations
and commentary on culture to help the Committee understand why
certain behaviours occur and any pressures that might be driving those
behaviours. Also, the details of outcomes of internal audit reports
judged to be less than satisfactory are available to all Board members.
• Insight from an independent third party, Deloitte, on the culture
across the Group and the reflection of the Group’s values by
management and other employees.
• A direct view of areas of practice, policy and behaviours that were not
at the desired standard and details of the corrective action
being taken.
Outcome
The 2021 internal audit plan includes a proposed standalone review of management’s approach to monitoring culture and assessment against ITV’s values.
The findings will be reported back to the Audit and Risk Committee.
Remuneration
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.
Outcome
Please refer to the Remuneration Report on page 130 for specific actions taken, and how the Committee will monitor performance goals and align
incentives and rewards with culture (with oversight from the Board).
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Additional Information
Board evaluation
Having undertaken an external evaluation
in 2019, in 2020 the Board undertook an
internally facilitated evaluation using a
bespoke online questionnaire. The General
Counsel and Company Secretary, regular
attendees of Board and Committee meetings
and some external advisers also completed
certain parts of the questionnaire to take
non-Director views into account. The review
sought to evaluate a number of aspects of
Board, Committee, Chairman and individual
performance, including:
• Board: composition, diversity, dynamics,
expertise, time management, support,
stakeholders and workforce, effectiveness
in its strategic oversight and risk
management, risk appetite, succession
planning and human resource management
and priorities for change.
• Committees: effectiveness of
Committees’ use of time, structure,
performance, competencies and
composition.
• Chairman: relationships and
communications with Board members,
chairing and managing of Board meetings,
relationship with the Company’s
stakeholders, including shareholders.
• Individuals: contribution at, and
preparation for, meetings, time
commitment, relationship with fellow
Board members, extent to which
knowledge and experience is drawn upon.
The evaluation found that the Board and its
Committees continue to operate at a high
standard. The Board’s management of the
COVID-19 response, and its understanding of
the challenges facing the Group and what
ITV was doing to address those challenges,
were rated particularly highly. The findings of
the evaluation were presented to the Board
in January 2021, and the Board discussed the
points raised by the review and
recommendations on follow-up actions.
The Board also reviewed and endorsed the
action plan proposed by the General Counsel
and Company Secretary. The General
Counsel and Company Secretary also held
individual meetings to follow up on certain
commentary and ratings with a number
of respondents to understand their views
or recommendations.
The Senior Independent Director also led
a separate evaluation of the Chairman with
the Non-executive Directors to appraise the
Chairman’s performance. It was concluded
that Sir Peter Bazalgette’s performance
and contribution remain strong and that
he demonstrates effective leadership.
2020 Internal evaluation areas of focus and actions
Areas of focus identified:
Succession planning
Stakeholder engagement
Board development
and training
Our key follow up actions:
Ensure an effective and orderly process for the
succession of the Chairman and continue to
give the Board visibility of the positive progress
made on succession planning at the Management
Board and Executive Leadership Team level.
Continue to build on the processes and
significant work which the Board already
undertakes to integrate stakeholders interests
in Board decision-making processes and to
raise the visibility of stakeholder concerns in
Board discussions.
Offer the Board training and deep dive sessions
on topics that Board members have identified
in the Board evaluation questionnaire.
The General Counsel and Company Secretary is responsible for driving the actions forward. She compiled a detailed 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
to review progress against the recommendations.
Progress against 2019 actions
Action
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.
Outcome
During 2020, three risk deep
dive sessions were tabled at
the Board and two at the Audit
and Risk Committee. See page
121 for details of the progress
made in the ongoing embedding
of the enhanced Enterprise
Risk Management model
and framework.
Action
Continued focus on Board
composition and succession planning.
Outcome
Following an analytical review of
Board composition, including
diversity, skills and expertise, the
Nominations Committee led searches
for two Non-executive Directors
(see pages 112 and 113). In December,
Spencer Stuart was appointed to lead
the search for a new Chairman as
Peter Bazalgette will have been on
the Board for nine years by Spring
2022. All Board members attended the
Nominations Committee session on
talent succession planning at the
Management Board and Executive
Leadership Team level.
Action
Give further guidance to
presenters and paper contributors
for Board and Committee papers
regarding clarity on the Board
output sought, appropriate level
of detail and consideration of
stakeholders.
Outcome
Templates and guidelines for
preparing papers and presenting
at Board meetings were rolled out
in 2020. The quality of
management’s presentations to
the Board was rated very highly
overall in the 2020 evaluation.
Action
KPIs supporting the monitoring
of performance delivery
progress to be kept under
review.
Outcome
ITV regularly reviews its KPIs
to ensure that they align
performance and
accountability to its strategic
priorities. With the
establishment of the new
Media and Entertainment
division, the Board is cognisant
that some of the KPIs may need
redefining to ensure they
remain appropriate to our
business and priorities.
ITV plc Annual Report and Accounts 2020
109
Governance Corporate Governance continued
Director training, induction
and time commitments
Ongoing training and development
The Chairman, with the support of the
General Counsel and Company Secretary,
keeps the training and development needs
of Directors under review. In support of the
ongoing development of Directors, teach-ins
and technical updates are provided at Board
and Committee meetings to ensure that
Directors remain up-to-date with key
developments in the business environment
in which ITV operates, including on legal,
regulatory, compliance and governance
matters. For example, the Board received
foundational information ahead of their
strategy sessions regarding, amongst other
things, the UK distribution landscape,
changes in linear TV viewing and commercial
model, and background on prominence
regulation. Further, Board members
completed the mandatory training for
colleagues, and PwC ran a session for the
Audit and Risk Committee on climate change
and other ESG reporting; the materials were
also shared with the Board (see page 121). In
2021, the Board development and training
programme will include the topics identified
in the 2020 Board evaluation, on which
Directors felt they could benefit from
further training and deep dive sessions.
Directors are encouraged to attend training
sessions and to ask for any support they
need; they are aware that there is always an
open line to management on any topic and
during the COVID-19 pandemic have been
encouraged to set up calls with
management. Non-executive Directors also
have access to a professional development
pack, which contains Non-executive Director
programmes from Deloitte, PwC and KPMG.
In more normal circumstances, we also
encourage all Directors to visit our sites and
offices to meet colleagues and broaden
their understanding of the business; for
more information on stakeholder and
workforce engagement see pages 97 to
105. In addition, each Director may obtain
independent professional advice at the
Company’s expense as required.
Tailored induction for new Directors
The General Counsel and Company
Secretary assists the Chairman in designing
and facilitating an induction programme for
new Directors and their ongoing training.
Each newly appointed Director receives a
comprehensive induction programme
designed to give them a thorough overview
and understanding of the business, covering
the Company’s core purpose and values,
strategy, key business areas and operations,
and corporate governance structure. This is
tailored to take into account a Director’s
previous experience and responsibilities.
Directors are also briefed on their roles and
responsibilities as Directors of a listed
company. For Non-executive Directors,
specific Committee responsibilities relevant
to their Committee memberships are
covered, to enable them to function
effectively as quickly as possible.
For the Non-executive Director
appointments of Graham Cooke and
Sharmila Nebhrajani, the induction
programme included the following elements:
• One-to-one meetings with both Executive
and each of the Non-executive Directors
• Briefing from the Chief Executive on the
Group’s strategy, and from the Chief
Executive and Group CFO on
operational matters
• Briefing from the Group CFO on
financial matters
• Briefings from the General Counsel and
Company Secretary and the Head of
Investor Relations on legal and governance
matters and shareholder relationships,
which were followed up by sessions with
the Group’s brokers and external advisers
• Briefings from senior executives and
managers across our key business areas
and operations, including Studios, Media
and Entertainment, Commercial, Policy
and Regulatory Affairs, Diversity and
Inclusion, Communications and
Technology
• Access to a library of reference materials,
including key information on our
governance framework, recent financial
data and the policies supporting our
business practices, including our share
dealing policies, conflicts of interest
procedure and gifts and hospitality policy
Regrettably, given the COVID-19 pandemic,
these sessions were held remotely and
onsite visits were not possible. However, as
soon as restrictions ease, visits to our office
locations and other direct engagement with
advisers and staff will be arranged.
In addition, Graham and Sharmila’s induction
covered deep dives relevant to their
background and experience. For Graham this
included a deep dive into technology and
data (given his extensive technical and
digital experience), and increased focus on
listed company governance and regulation
(as he was assuming his first role as director
of a listed company). For Sharmila this
included training on the competitive
environment for key creative talent as part
of a deep dive into remuneration and
reward (as an onboarding member of the
Remuneration Committee), and sessions on
ESG and duty of care (given her expertise
and background on health and public policy).
Directors were also offered follow up
sessions in any areas they wanted to
increase their knowledge on, or if they felt
they could support management with
their experience.
Time commitments
The Directors have demonstrated a strong
commitment to their roles on our Board and
Committees in a year where all companies
have asked more of their directors to meet
the challenges of the global pandemic crisis.
The Directors attended 100% of the Board
and Committee meetings scheduled in 2020
as well as the additional ad hoc meetings
and certain Directors also attended two
Finance Sub-Committee meetings that took
place last year. The Directors have also given
careful consideration to their external time
commitments to ensure that they are able
to devote an appropriate amount of time to
their roles on our Board and Committees.
For each of the Directors, the Board
considers that the time commitment that he
or she is required to devote to those roles do
not compromise their commitments to their
roles at ITV (on the Board, Committees and
otherwise). The Nominations Committee
reviews on an ongoing basis Directors’ time
commitments against the recommended
guidance from investor bodies and our top
shareholders to anticipate any perception of
overboarding at the forthcoming AGM, and
confirmed that they were fully satisfied with
the amount of time each Director devoted
to the business.
Two Directors in particular had changes to
their time commitments during 2020; the
Board does not consider that these changes
in external time commitments compromise
their commitments to their roles on our
Board and Committees. Since last year’s
AGM, Margaret Ewing has stepped down
from her roles as Chair of the Finance and
Audit Committee, Deputy Chair of the
Board, and member of a number of other
committees of Great Ormond Street
Hospital and Children’s Charity (GOSHC) as
well as Trustee of Sparks Charity (a charity
owned by GOSHC). She has also ceased to be
a member of the Remuneration and
Corporate Responsibility Committees of
ConvaTec Group plc. Margaret also became
Chair of IAG’s Audit and Compliance
Committee in September 2020 and a
member of IAG’s Nominations Committee in
January 2021. Margaret has given careful
consideration to her external time
commitments to ensure she is able to
devote an appropriate amount of time to
her role on our Board and Committees and
considers the roles she has stepped down
from required more of her time than the
additional commitments she has taken on
during 2020. Edward Bonham Carter will
step down from the Board of Jupiter Fund
Management plc at its upcoming AGM, but
will continue his tenure as an executive for
approximately two days per week.
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ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
Nominations
Committee Report
In this report:
The purpose of this report is to highlight the role that the
Nominations Committee plays in ensuring that the Board has the
appropriate balance of skills, experience, knowledge and background
to provide the breadth, depth, diversity of thinking and perspective
needed to effectively deliver long-term sustainable success.
Who is on the
Committee
The Committee is composed
entirely of Non-executive
Directors.
Our role
Following each meeting, the
Committee communicates its
main discussion points and
findings to the Board.
The Committee’s terms of
reference can be accessed on
our website.
www.itvplc.com/investors/
governance
Meetings in 2020
In addition to Committee
members, the Group HR Director
and General Counsel and
Company Secretary regularly
attended meetings of the
Committee.
Sir Peter Bazalgette
Chairman
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 95
Detailed biographies can
be found on page 90 and 91
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 levels
• Set measurable objectives on
Board diversity and monitor
progress on these objectives,
as well as review Company-
wide targets
February
• Update on Non-executive
Director search
• Board succession planning
(including short-term cover)
• Board and Group-wide diversity
• Committee evaluation
• Review of draft Nominations
Committee Report in Annual
Report
July
• Board succession planning
update (including review
of Board composition)
• Annual review of Terms
of Reference
• Director time commitments and
‘overboarding’ considerations
• Appointment of search firm
for second Non-executive
Director search
November – attended by all
members of the Board
• People strategy review
(including review of executive
succession plans)
• Update on Non-executive
Director search
• Conflicts of interest process
The Committee also held a
number of ad hoc meetings in
relation to the Non-executive
Director searches which took
place (including discussion of
the candidate specifications
and longlists, approval of the
candidate shortlists, discussion
of the candidates following
interview), and selection of the
executive search firm for the
Chairman’s successor search.
Annual review
An annual review of the
performance of the Committee
is conducted each year.
In 2020, an internally facilitated
Board evaluation was
undertaken which included
a review of the Committee.
The results are summarised on
page 109.
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 January 2021. As part of the
Committee’s succession planning
agenda, the key priority
identified for 2021 is to
undertake and complete
a rigorous search process to
identify and appoint (subject
to shareholder approval) a
new Chair of the Board by the
Spring of 2022.
ITV plc Annual Report and Accounts 2020
111
Governance Nominations Committee Report continued
Board diversity
Key areas of focus for the
Committee during the year
Board members attended the Committee
meeting on this topic.
45.5%
female Board representation
10th
in the 2020 Hampton-Alexander
review’s ‘Top Ten Best Performers’
with 43% female representation on
the Combined Executive Committee
and Direct Reports
18.2%
BAME Board representation
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 inform the proposed Non-
executive Director searches to take place
during the year. A breakdown of the Board’s
skills, experience and certain diversity
measures are set out on page 95. The
review highlighted that the search for
Non-executive Directors should focus
on additional experience of digital
transformation with a disruptor mindset,
and also environmental, social and
governance experience, as well as further
ethnic diversity.
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, the Committee began its initial
evaluations regarding the search process for
a new Chair of the Board. In December 2020,
the Committee appointed Spencer Stuart to
commence the search in 2021. Other than
the provision of search services, Spencer
Stuart has no connection with ITV, with the
exception of supporting the Board’s desktop
succession planning review, and has
previously supported the recruitment of
the current Executive Directors and some
of ITV’s Non-executive Directors.
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 direct reports of
the Management Board. 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,
including appropriate development plans
for individuals, and was able to understand
the areas where external candidates may
need to be considered. The Committee also
had a session on improving the strength,
depth and diversity of our talent. All of the
Non-executive Director searches
During the year, the Committee oversaw
the search process for two Non-executive
Directors, resulting in the appointment
of Graham Cooke in May and Sharmila
Nebhrajani in December. Their
appointments further strengthen the
diverse mix of expertise and experience on
the Board; Graham brings digital content
and direct to consumer expertise to the
Board, and Sharmila adds further public
affairs, broadcasting and ESG experience.
Search process
• Selection of recruitment consultants:
Founders Keepers was selected for the
search which led to the appointment of
Graham Cooke, given its specialism in
transformative digital and technology
talent. Russell Reynolds was engaged
to conduct the second search during
the year, given its broad expertise and
network. These appointments were
approved by the Committee. Other than
the provision of search services, neither
Founders Keepers nor Russell Reynolds
have any other connection with the
Company or any individual director, and
both have previously supported the
recruitment of Non-executive Directors
to the Board.
• Candidate specification: The
specification for each candidate – setting
out the agreed key skills and character
profile being sought to fit with the current
balance, membership and dynamics of
the Board – was discussed with the
Committee. As in prior years, the
Committee focused on diversity as part
of the selection criteria, selecting 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 each 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. The Committee members
and Chief Executive reviewed the
longlist and also identified some other
potential candidates for consideration.
The search firms then assessed and
vetted those potential candidates via
their network. An assessment of the
candidates’ time commitments was also
taken into account.
• Interviews: A shortlist of candidates
was interviewed by all the members of
the Nominations Committee (led by
the Chairman) and the Chief Executive
and Group CFO.
112
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
• Recommendation to, and approval by,
the Board: Following this, the Committee
recommended the appointments of
Graham Cooke and Sharmila Nebhrajani
to the Board which the Board
subsequently approved.
Both new Non-executive Directors undertook
comprehensive induction programmes. See
page 110 for further information.
Board diversity policy
Our objective of driving the benefits of a
diverse 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 on a Group-wide basis. This
is exemplified by diversity being one of the
four priorities in our Social Purpose strategy
and the launch of our Diversity Acceleration
Plan in July. Please refer to pages 48 and 49
for further information on our Group-wide
diversity plan and 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 our assessment
of performance 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 to us. ITV runs a high potential
leadership programme, building a pipeline
of diverse talent for senior levels roles and
launched a Returners Programme in 2019,
identifying senior external female talent
that have potential to move into roles at ITV.
The Rise Programme launched in 2020 aims
to promote BAME talent progression at
manager and Senior Leadership Level by
providing BAME colleagues greater visibility
with senior leaders through networking and
sponsorship, alongside career coaching. The
programme also works with Managers and
Executive Leadership Team advocates to
build race confidence and accelerate an
inclusive culture change at ITV.
Bespoke development initiatives are in
place for senior executives who have been
identified as potential successors, based
on particular development needs.
These include:
• External executive coaching, with clear
coaching objectives (including 360
degrees feedback where relevant)
• Psychometric testing such as the Hogan
Leadership series that identifies
leadership strengths, derailers and values
• Mentoring by a Non-Executive Director
• Business School executive education
programmes
• 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 and another on the Deloitte
Women on Boards Programme
The Committee held a session on succession
planning at the senior executive level during
the year which the whole Board attended.
Maintain at least 30% female Directors on
the Board over the short to medium term
As at 31 December 2020, the Board had
45.5% female representation, including one
Executive Director and two Committee
Chairs; we have therefore exceeded both
the target of 30% as well as the Hampton-
Alexander target of 33% female
representation by the end of 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 potential 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 10th in the
Hampton-Alexander 2020 review for female
representation on the Combined Executive
Committee and Direct Reports, with female
representation of 43%.
Maintain at least 10% BAME Directors on
the Board over the short to medium term
As at 31 December 2020, the Board had
18.2% BAME representation with two BAME
Directors on the Board. We therefore also
comply with the recommendation of the
Parker Review to have at least one director
of colour on the Board 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. Two executive search agencies
supported our two Non-executive Director
searches this year: Russell Reynolds and
Founders Keepers, both of which are
signatories to the Voluntary Code of
Conduct for Executive Search Firms.
Founders Keepers, as a recently established
firm, became a signatory to the Code during
the Non-executive Director search. Spencer
Stuart, who is supporting our Chairman
search, is also a signatory to the Code.
Ensure Non-executive Director shortlists
include at least 50% female candidates
Given that there was already strong female
Board representation at the beginning of
2020, the Board determined that other
diversity elements, including ethnicity,
should be a particular focus in the searches
for Non-executive Directors during 2020.
The longlist of candidates for both searches
consisted of at least 50% female candidates.
These lists were reviewed and refined based
on measurable, objective criteria, to come to
a shortlist made up of at least 50% diverse
candidates (female and/or 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 Director
searches during 2020, the Committee
worked closely with both executive search
agencies in compiling long and shortlists of
candidates from various backgrounds and
industries, including BAME backgrounds. In
Sharmila’s search, at least 30% of the
longlist consisted of BAME candidates.
Candidates were identified and interviewed
and their skills and qualities were assessed
against measurable, objective criteria.
ITV plc Annual Report and Accounts 2020
113
Governance
Audit and Risk
Committee
Report
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, reviewed and
discussed in 2020.
The fundamental priorities for the
Committee are to ensure the integrity of
the Group’s financial reporting (including
the quality and effectiveness of the
external and internal audit processes) and
monitor the management of the principal
risks of the business on an ongoing basis.
We have spent considerable time reviewing
and scrutinising the Group’s financial results
and details of the significant issues we
considered can be found on pages 118 to 120.
COVID-19 has clearly had a major impact on
the business and, in particular, presented a
number of challenges for the Committee in
relation to financial reporting by increasing
the degree and complexity of certain
estimates, judgements and exceptional
items that have needed to be reflected in
the financial statements and consideration
of the going concern status of the Group.
The Committee responded to these
challenges by applying an increased level of
focus to these matters and effectively
114
ITV plc Annual Report and Accounts 2020
continued to perform its oversight
responsibilities as set out in further detail in
this report.
The finance team and our external auditor
also had to adapt quickly to the remote
working restrictions. I am pleased to report
that both worked extremely hard to ensure
the integrity of our financial reporting,
reflecting the underlying complex estimates
and judgements, and management was able
to maintain a rigorous financial control
environment despite the circumstances.
The internal audit plan also continued to
be adjusted with the evolving COVID-19
situation to adapt appropriately to the
changing needs of the business. The
response and agility of the ITV management
and finance teams and external and internal
audit teams clearly demonstrated their
professional dedication and the quality of
their processes. During these extraordinary
circumstances, I have been able to maintain
regular dialogue with other members of the
Committee, management and the auditors
(the incoming and outgoing external auditor
and the internal auditor), asking questions,
challenging proposals and ideas where
relevant and providing input as solutions to
issues started to unfold, ensuring that the
Committee would be provided with the
necessary information to enable it to guide,
challenge and advise and, when required,
make informed decisions.
Throughout the year, the Committee
requested additional items on its meeting
agendas to ensure it had clear oversight
over the evolving impact of COVID-19 on the
business, and how management’s response
was being adapted. This included a review of
IT controls given increased remote working,
management’s risk approach to the
COVID-19 outbreak, a deep dive on the
enhanced measures to safeguard physical
and mental wellbeing for our people, talent
and programme participants during
COVID-19, and reviews of the frequently
updated cash and liquidity forecasts.
Following each Committee meeting,
I communicated our main discussion points
and findings to the Board.
Paul Sawdon and KPMG conducted their
last audit for the 2020 financial year as
the external audit engagement partner and
firm respectively, and I would like to take
the opportunity to thank them for their
diligence and constructive challenge during
their tenure.
Our focus for 2020 in light of the matters
highlighted above, and the priorities for
2021, are set out on the next page. 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’
Who is on the Committee?
Composition
The Committee is composed entirely of
independent Non-executive Directors
and its membership has remained
consistent during the year.
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 95.
Detailed biographies can be found on
pages 90 and 91.
The Committee members have between
them a wide range of business and
financial experience. This enables the
Committee to fulfil its terms of reference,
including by providing 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. For the purposes
of the Code, the Board considers that
Margaret Ewing (a chartered accountant,
previous FTSE 100 Chief Financial Officer
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, with extensive executive fund
management experience, 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.
expectations in our reporting and, as always,
welcome any feedback from shareholders
or other stakeholders. I and other members
of the Committee would be very happy
to meet with shareholders and other
stakeholders to answer any questions
you may have on matters pertinent to
the Committee’s remit.
Margaret Ewing
Chair, Audit and Risk Committee
9 March 2021
Strategic Report
Governance
Financial Statements
Additional Information
Our role
The Committee’s terms of reference,
reviewed annually and last updated
in July 2020, can be accessed on our
website. The role and main duties of
the Committee are to:
Financial Reporting
• Monitor the integrity of published
financial information and review
and challenge significant financial
reporting issues, estimates and
judgements
audit contract, and the
appointment, remuneration and
terms of engagement of the
external auditor
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 appropriateness of
• Review the risk identification and
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
External audit
• Review the quality and
effectiveness of the external
audit, including approval of the
annual audit plan, 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
mitigation 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, approving any
amendments to the plan
• Review the continued
appropriateness of the outsourcing
of the internal audit function,
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
During the year, the Committee
members and regular attendees
(including the internal and external
auditors) completed a detailed and
customised questionnaire to
evaluate the Committee’s
effectiveness. The findings related to
the Committee were discussed and
shared with the Board. Overall, it was
concluded that the Committee
continued to perform effectively.
Following discussion regarding the
conclusions of the Committee
evaluation, it was agreed that the
Committee should focus in 2021 on
continuing to enhance ITV’s risk
appetite processes within the wider
risk management framework,
monitoring readiness for internal
controls regulation, and have regular
updates on the status of acquisition
earnouts. Committee members also
agreed they should receive further
training on climate change and other
non-financial information regulation
and reporting.
Key activities and priorities in addition to
routine business
Focus – 2020 Financial Year
• COVID-19 pandemic outbreak and corresponding financial
consequences – impact on going-concern statement,
viability assessment, business model resilience, financing
arrangements and other financial reporting, internal
controls and the audit process
• Consideration of the status of the Company’s
communications with the Pensions Regulator in respect of
the Box Clever pension scheme deficit and consequential
liability quantum and accounting implications
• Understanding the status of the determination of the
final earnout payment to be made in relation to the
acquisition of Talpa
See pages 118 to 120 (Significant Issues)
• Overseeing the ongoing embedding of the enhanced
Enterprise Risk Management model and framework
See page 121 (Risk Management)
• Preparation of transition of external audit appointment
from KPMG to PwC for the 2021 audit
See page 125 (External Auditor transition)
• External assessment of the Group’s internal controls over
financial reporting
See page 121 (Internal controls)
• Preparation of a revised ‘Speaking Up’ framework
See page 122 (Speaking Up)
• Overseeing the development of additional data protection
risk mitigations, in light of the enhanced data strategy
See page 121 (Data privacy)
• Assessment of UK audit reform status, potential impact,
and planning requirements for anticipated changes
Focus – 2021 Financial Year
• Competitive tender process for the fully outsourced
internal audit provision – this was planned to take place
in 2020 but was delayed given the significant change to
the Group’s agenda caused by COVID-19 as well as the
impact of COVID-19 on the Group’s resources, along with
the ongoing transition to new external auditor for 2021
and significant change currently being implemented
across the Group. The appointment arising from the tender
in 2021 will be effective for the financial year 2022.
• UK audit reform – once published, respond to BEIS
consultation on UK audit reform, update assessment of
potential impact and plan requirements for complying
with anticipated changes.
• Internal controls and financial reporting framework –
supporting management in guiding the design and
implementation of its ‘HR and Finance transformation
programme’ and the delivery of its 2021 roadmap in
enhancing its framework of financial reporting and
internal controls (financial, operational and compliance).
• Material litigation and final payment matters –
specifically Box Clever and Talpa.
See page 121 (Internal controls)
ITV plc Annual Report and Accounts 2020 115
Governance Audit and Risk Committee continued
Meetings in 2020
Review, challenge and agreement
of financial disclosure, estimates
and judgements
External audit
(including transition and audit quality,
effectiveness and independence)
The Committee held five formally
planned meetings during the year.
There was also an ad hoc meeting in
August, to finalise the review and
recommendation to the Board of the
H1 financial statements and trading
announcement, and in November to
review and recommend the Q3 trading
update announcement.
In addition to Committee members,
the Chairman of the Board, Executive
Directors, Director of Finance, General
Counsel and Company Secretary,
Head of Internal Audit, Director of
Tax and Treasury and external audit
partner regularly attend meetings.
The Committee meets regularly with
the external audit partner and
Head of Internal Audit without
executives present.
2020 key matters considered at each
main meeting of the Audit and Risk
Committee are set out in this table.
The Committee also addresses specific
queries referred to it by the Board or
Remuneration Committee.
February
February
• FY19 financial reporting issues, including
estimates, judgements and exceptional items
• Draft FY19 Annual Report and Accounts
review, including review and assessment
of whether they were fair, balanced and
understandable and of the underlying
assumptions of the viability and going
concern statements (including related
disclosures)
• Review of FY19 results announcement and
attached financial statements to ensure
consistency with Annual Report and Accounts
• Ad hoc meeting to conclude on treatment
and disclosure re Talpa final earnout payment
April
• Review of Q1 trading update announcement
• Review on maintaining financial and IT
general controls whilst remote working
July
• Progress report on key areas of judgement
and issues for H1 results
• Review of policy on exceptional items
• Tax and treasury update
August
• Interim accounting update
• Review of H1 results report and announcement
September
• Meeting with the external auditor in the
absence of management
• KPMG’s report on the FY19 external audit
conclusions and findings
• Auditor opinion on FY19 financial statements
• Review of external audit quality framework
• Recommendation to reappoint KPMG at
2020 AGM
• Approval of revised non-audit services policy
• External auditor FY19 fees approval
April
• External audit half year review plan
• External auditor response to COVID-19
outbreak
July
• Meeting with the external auditor in the
absence of management
• KPMG initial findings on interim review
• PwC presentation on transition plan
August
• KPMG interim review findings and
conclusions
• Approval of the external auditor H1 review
representation letter
• Approval of the external auditor
engagement letter
• Subsidiary accounts audit and approval
September
update
November
• Year end audit plan and strategy
• PwC update on transition plan
• Review of Q3 trading update announcement
December
• KPMG interim report including processes and
• controls review
• PwC update on transition plan
At every scheduled meeting this year, the
Committee also reviewed:
• Reporting from the external auditor,
including audit findings, progress, review
reports and audit opinion
• The ongoing independence of the external
auditor and the evidence of quality and
effectiveness in the delivery of the audit
December
• Anticipated year end accounting and audit
matters
• Exceptional items review
At every scheduled meeting this year, the
Committee also reviewed:
• Report from ITV Director of Finance covering,
amongst other things:
– Accounting judgements and estimates
– Developments in financial reporting
– Programme rights
– Acquisition earnout liabilities, including Talpa
– Intangible and goodwill impairment
– Legal provisions including Box Clever liability
determination
– Pension accounting
– Tax (including IR35 and employment status)
– Finance team structure and resourcing
– Treasury policies and strategy
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Strategic Report
Governance
Financial Statements
Additional Information
Internal controls and audit
Risk
Governance and other
February
February
February
• Internal audit independence and
• Principal and emerging risks and
effectiveness review
• Internal controls framework and
effectiveness review
• Material litigation report
• Internal audit plan mapped to principal
and emerging risks
April
uncertainties and risk mitigations review
April
• Tax update
• Bonus and share plan outcomes for FY19
• 2019 Committee evaluation findings and
2020 Committee priorities
• Risk approach to COVID-19 outbreak
• Risk deep dive on colleague wellbeing during
April
COVID-19
• Update on ERM framework implementation
• Consideration of investor/analyst views
regarding accounting policies, risks
and disclosure
• Review and approval of internal audit charter
July
and comparison of ITV internal audit
approach with IIA Code of Practice
• Review of internal audit approach and
• Principal and emerging risks FY20 H1 review
• Duty of Care and Health and Safety risk
annual plan in light of COVID-19 outbreak
deep dive
July
• Regulatory developments update
• Review and approval of revised Committee
• Review of key fraud risks and fraud
prevention, detection and controls
framework
July
• Finance and HR transformation programme
• Insurance renewal and programme update
September
• General IT controls during COVID-19 update
• Compliance framework and risk update,
incorporating the anti-bribery and corruption
risk assessment
Terms of Reference
September
September
• Cyber security programme update and risk
deep dive
• Data privacy risk and programme review
• Risk management framework
• Tax strategy review and approval
• Compliance with, and progress on,
climate change and other non-financial
information reporting
• Governance and audit reform developments
(including Brydon recommendations)
• Update on legal cases
• Meeting with the internal auditor in the
implementation progress update
absence of management
• Duty of Care risk update
December
Please also refer to the risk management
and internal controls section on page 121
• Approval of Group Approvals Framework
and M&A approvals process
• 2020 Committee evaluation findings and
2021 Committee priorities
• Update on compliance with, and progress
on, climate change and NFI reporting
At every scheduled meeting this year, the
Committee also reviewed:
• Minutes and actions from previous meetings
• Management and Committee requested
Internal Audit undertake a review of a
whistleblowing incident
December
• Internal controls effectiveness review findings
• Approval of 2021 internal audit plan
• Internal auditor independence review
• Annual tax, pensions and treasury reviews,
including controls and policies
• Speaking Up process, statistics, themes,
learning and status
• Supplier payment practices review
At every scheduled meeting this year, the
Committee also reviewed:
• Internal audit plan adjustments
• Reports from the internal auditor, including
a review of activity, key conclusions and
recommendations arising from audits, status
report on action plans and regulatory and
programme compliance
See pages 121 and 122 for examples of
the controls and projects reviewed by
the Committee
ITV plc Annual Report and Accounts 2020 117
Governance Audit and Risk Committee 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 has, during the
year, taken into account significant
operational and financial issues and risks
which may have had an impact on the
Company’s financial statements, internal
controls and/or the delivery and execution
of the Company’s strategy (including
changes in the Group’s key risks).
Significant issues relating to the Company’s
financial statements are detailed below.
These issues were subject to robust
challenge and debate between
management, the external auditor and the
Committee, following which there was no
significant disagreement or unresolved issue
that required referral to the Board.
The Committee focused on assessing
whether management had made
appropriate judgements and estimates,
focusing in particular on the significant
issues listed below. The Committee also
reviewed detailed external auditor reports
outlining work performed and any issues
identified in respect of key judgements
and estimates – see the Independent
Auditor’s Report on pages 158 to 166.
Viability and going concern assessments
Issue
Action taken by Committee
Outcome/future actions
The uncertainty caused by the
COVID-19 pandemic required the
Committee to apply enhanced
scrutiny to management’s
assumptions, stress testing and
scenario analyses supporting
the going concern and viability
statements as well as seek
impartial external views on
ITV’s viability.
The Committee reviewed and challenged management’s
assessment of going concern, longer-term prospects and
viability by considering forecast cash flows that took into
account potential impacts of COVID-19 restrictions and other
principal risks, including uncertainties arising from the
advertising market and Studios market.
In reaching its view, the Committee also considered: (i) analyst
and other expert commentary to understand the wider
market and views on the Group’s future financial performance
and viability; (ii) financial forecasts for a range of scenarios
stress testing the assumptions, including severe but plausible
downside scenarios and a reverse stress test scenario; (iii) the
Group’s financing facilities including covenant tests, covenant
waivers granted and future funding plans; and (iv) the external
auditor’s findings and conclusions on this matter.
The Committee challenged in particular whether the
downside scenarios reflected severe but plausible impacts of
COVID-19 on the business, and considered the assumptions
applied in each downside scenario particularly given the
uncertainty of the trajectory of the pandemic and upcoming
government responses, including potential further lockdowns.
We also considered the quality of the basis of the preparation.
The Committee also considered the adequacy and accuracy of
the disclosures in the Annual Report in respect of the Group’s
ability to continue as a going concern and its future viability.
Following this thorough assessment, the
Committee considered the extent of the
assessment made by management to be
appropriate and recommended the draft
viability statement and related disclosures
(for inclusion in the 2020 Annual Report) for
approval by the Board. The Committee also
concluded that it remained appropriate to
adopt the going concern basis of accounting in
preparing the consolidated financial
statements without a material uncertainty, and
that the disclosure in the Annual Report, in
respect of the Group’s ability to continue as a
going concern, was appropriate. See page 173.
The Committee will continue to monitor the
Group’s going concern basis and viability
assessment going forward and will give further
consideration to providing a resilience statement
in the 2021 Annual Report and Accounts.
Recoverability of programme rights
Issue
Action taken by Committee
Outcome/future actions
The Committee enhanced scrutiny over management’s review
of the recoverability of the purchase costs of programme rights
held in the Broadcast business, including understanding the
impact of postponements of events on the revenue and cost
assumptions used in the impairment review and whether the
impact of the COVID-19 pandemic was separately identifiable.
Management’s assessment of the recoverability
of the purchase cost of the programme rights
and the requirement for impairment and
onerous contract provisions was considered
appropriate by the Committee. As timings of
planned sporting events that the Company has
purchased the broadcast rights to may change
as the pandemic progresses, the Committee will
regularly review management’s assessment of
potential further impairment.
Changing forecasts of audience
mix and revenues for certain
sporting events led to an
increased focus on the
recoverability of the purchase
cost of programme rights.
This was further impacted by
the pandemic during 2020 leading
to rescheduling or cancellation of
sports programmes over which
the Group has purchased or
committed to purchase rights
leading to an impairment in
carrying value of certain
sports rights.
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Strategic Report
Governance
Financial Statements
Additional Information
Impairment assessment
Issue
Action taken by Committee
Outcome/future actions
The economic uncertainty caused
by the COVID-19 pandemic
triggered an additional goodwill
impairment assessment during
2020. Other assets including trade
receivables, Studios work in
progress balances, accrued
income and other receivables
were also considered at a higher
risk of impairment due to the
economic uncertainty and
were assessed for potential
impairment of carrying value.
The Committee reviewed management’s assessment of
the level of aggregation of assets for cash-generating units
(CGUs). It was agreed that no changes were required to the
CGU assessment.
The annual impairment review of CGUs was undertaken at
both half year and year end, given the economic uncertainty
caused by the pandemic. The Committee challenged
management’s assessment, incorporating the cash flows
used to assess going concern and noted that no impairment
was required in either the base case scenario or scenarios
adjusted for sensitivities.
The Committee also discussed management’s assessment of
the impairment of other assets, in particular the recoverability
of the Studios work in progress balances and the treatment of
one-off costs incurred as a result of productions shutting down.
Legal provisions
The Committee agreed that management’s
assessment that no impairment of CGUs is
required was appropriate.
The Committee was also comfortable with
management’s assessment of impairment of
other assets and agreed to keep the assessment
under review as the pandemic progresses.
Issue
Action taken by Committee
Outcome/future actions
ITV is currently subject to
ongoing legal disputes where the
outcome is not certain, including
the quantum of liability in respect
of the Box Clever pension
scheme deficit.
The Committee spent considerable time over a number of
meetings during the year reviewing the material litigation
report and discussed the key cases, including Box Clever,
with the General Counsel and Company Secretary.
The Committee held private meetings with the external
auditor and management separately to understand and
challenge the high level of uncertainty around the quantum
of the Box Clever liability and the potential length of the legal
process based on the Company’s latest communications with
the Pensions Regulator. The Committee Chair met with
external legal advisers to discuss views on likely timetables
and outcome. The Committee considered whether the nature
and status of the matter, and information available to the
Company relating to the current position of the pension
scheme, lent itself better to being treated as a contingent
liability or provision.
Acquisition-related liabilities
The Committee agreed that the best estimate
provisions and disclosure had been made for all
material litigation and disputes, including in
respect of Box Clever based on the currently
available information (that had become
available to the Company during 2020), most
likely outcomes or unknown positions.
See note 3.6 to the financial statements.
Issue
Action taken by Committee
Outcome/future actions
The complexity and potential
scale of the expected earnouts
of Company acquisitions results
in the potential total liability
for earnouts being a significant
business liability, particularly
in respect of the Talpa
acquisition, which is in the
process of being determined.
The most material acquisition earnout liability relates to the
acquisition of Talpa. The Committee received regular updates
regarding the Talpa earnout liability. External advisers
supported management’s estimated range of possible final
consideration. The Committee and external auditor assessed
the key assumptions underlying management’s calculations.
The Committee held discussions with the external auditor
(including assessing the adequacy of the year end audit
procedures and approach in respect of this liability) and with
management to identify any material changes to the status of
the determination of the earnout liability. The Committee
Chair also met with the Company’s external legal and
accounting expert advisers.
The Committee was given an in-depth
understanding of the issues, challenged
management’s assumptions in respect of the
treatment of certain sources of revenue in the
earnout calculations and was subsequently
satisfied that the accrual for the earnout
liabilities was appropriately based on best
estimate and the related disclosures provided
appropriate transparency of the quantum of
the range of the potential final determination
of the liability. Please refer to notes 3.1.4 and
3.1.5 to the financial statements.
ITV plc Annual Report and Accounts 2020 119
Governance Audit and Risk Committee continued
Pensions
Issue
Action taken by Committee
Outcome/future actions
The Group’s net defined benefit
pension deficit decreased by
£57 million during 2020 to
£88 million at 31 December
(2019: £145 million deficit)
primarily due to increased
market volatility, including
movements in the corporate
bond yields and updated
demographic assumptions.
Exceptional items
The Committee reviewed the elements and amounts driving
the decrease in net deficit, as well as the key assumptions (as
detailed in note 3.7) 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 concluded that the
assumptions applied in determining the net
liability of the pension were appropriate, and
the net deficit correctly reflected evidenced
market values of the assets held in the schemes
at 31 December.
See note 3.7 to the financial statements.
Issue
Action taken by Committee
Outcome/future actions
During 2020, there were,
amongst other things,
acquisition-related costs,
reorganisation and restructuring
costs, provisions for onerous
capacity contracts and costs
relating to the COVID-19
pandemic to consider classifying
as exceptional items. (See an
explanation of the exceptional
items policy on page 183).
The Committee required management to give a detailed
breakdown of the exceptional costs and justify the inclusion
of those items under the exceptional items policy. The
Committee considered the classification of the exceptional
items in the financial statements with reference to the policy
and FRC guidance, and took into account the views of the
external auditor.
The Committee scrutinised in particular the exceptional
COVID-19 related costs and asked management to reconsider
the treatment of some of the low value costs in terms of
materiality and the treatment of certain sunk costs (such
as costs of furloughed staff) as exceptional costs.
Following management’s response to the
Committee’s challenge, the Committee was
able to conclude that the final 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
the light of evolving regulatory scrutiny.
Deal debt
Issue
Action taken by Committee
Outcome/future actions
Taking into account the current
and recent trading position in
respect of the delivery of
advertising value to customers,
particularly in light of the impact
of COVID-19, management’s
approach in estimating the over
or under delivery of advertising
value to agencies and method
of determining the related
provisions were reviewed.
Management reviews the deal debt provision as part of the
wider negotiations with the agencies on an annual basis.
The rationale and methodology of calculation of the deal debt
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 as at 31 December
(within Total Advertising Revenue). Any future
changes in the provision level or methodology
of calculation will be discussed by the
Committee. See note 2.1 to the financial
statements.
The Committee’s stakeholder engagement
Information regarding the Board’s stakeholder engagement is set out on pages 97 to 105, which also indicates where the Committee
took account of the views of the Company’s key stakeholders and considered their interests in its discussions and decision-making.
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Strategic Report
Governance
Financial Statements
Additional Information
Risk management and
internal controls
Risk management
During 2020, the Committee continued to
consider the process for identifying and
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 72 to 85.
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 the
Company operates and in society generally.
Risks are emerging at a faster pace than
previously observed. COVID-19 has
presented unprecedented challenges for
businesses globally and has further
highlighted the importance of companies
effectively understanding and responding
to risks. Recognising the challenges this
brings to ITV, the business delivered the
core enhancements to the enterprise risk
management framework to improve the
manner in which risks are identified, assessed,
managed and reported. The Group Risk teams
also supported the Management Board in
coordinating the COVID-19 response across
the business. Embedding the enterprise risk
management framework and assessing
management’s response to the evolving
threats presented by COVID-19 was an area
of focus for the Committee during the year,
with the Committee providing challenge
and guidance as appropriate.
The Chair of the Committee also regularly
met with management in order to further
understand the progress of the embedding
of the enterprise risk management
framework and provide guidance in the
implementation of enhancements.
During 2020, in addition to the risk deep dives
undertaken by the Board, the Committee
reviewed deep dive reports and met with
relevant senior management relating to
certain principal risks in order to understand
and challenge the related governance, risk
management and effective mitigation of
those risks. These included the wellbeing of
ITV’s people, talent and participants during
COVID-19, cyber security and duty of care.
The Committee also reviewed a number of
other risk topics during the year, including
risks arising from COVID-19, health and
safety, fraud, data privacy, IT general
controls, compliance and anti-bribery and
corruption. Detail of the risk deep dives
performed in the year and the relevant
governance group that considered those
deep dives are set out on pages 76 to 85.
In 2020 the Committee also reviewed
proposed enhancements to the compliance
framework for ITV. The report also covered
key elements of compliance within the
Group, to give the Committee a more
complete picture of compliance risks,
incidents and processes for compliance
across key regulatory areas. The Committee
noted the requirement for increased focus
on the Group’s compliance risk, including
the need for additional resource to
provide a second line of defence, and will
continue to monitor progress of the
proposed enhancements identified and
discussed to bring some areas to the
target level of maturity.
Data privacy: One of the focuses for the
Committee in 2020 was overseeing the
enhancement of ITV’s data privacy practice
and development of additional data
protection risk mitigations, in light of the
Group’s acceleration of the implementation
of its data strategy. A Global Data Protection
Officer was recruited in 2019 and, together
with her team, has been enhancing the
Group’s data privacy framework. This has
included working closely with the Chief
Data Officer to implement effective data
protection risk mitigations to ensure ITV is
able to leverage data in an appropriate way
when delivering its data strategy. The
Committee and management recognise
that the digital transformation the Group is
undergoing requires close scrutiny, given the
significant changes and cultural shifts taking
place in some areas of the business. An
internal audit was undertaken to provide
the Committee with additional assurance
over the approach taken in this area. The
Committee reviewed the recommendations
from the 2019 internal audit and requested
a further review in 2021 to continue to
monitor progress made in this key area.
Environment: The Committee plays a key
role in the governance of climate-related
risks and opportunities and other
environmental related regulatory reporting
requirements. Please see page 63 for the
Committee’s responsibilities with respect to
environmental matters, particularly climate
change, which it discharged in 2020 during
two focused sessions, and in which PwC and
KPMG both provided input. The Committee
is pleased with the significant progress
made by management on the TCFD
disclosures in this year’s Annual Report
(pages 62 to 66), the approach outlined by
management to meet the ambitious
environmental targets which were set in
2020 and the establishment of the Climate
Change Delivery Group to further define
and monitor the roadmap to meet these
environmental targets. Going forward, the
Committee will monitor how climate risks
disclosed on pages 64 and 65 are reflected
in the financial statements. All the
Committee members also attended
bespoke training given by PwC on climate
change considerations and other non-
Financial Reporting, which also considered
ITV specific matters in relation to, for
example, climate risk in connection
with productions.
Internal controls
The Board has overall responsibility for
overseeing and reviewing the effectiveness
of the Group’s framework for internal control.
The Committee supports the Board in
assessing the effectiveness of the framework.
The primary responsibility for the operation
of the framework for internal control 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, reviews of controls operating
in the COVID-19 environment 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
and compliance, pensions, technology,
information security, data privacy, insurance,
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
received assurance over the governance for
key projects through the combination of
updates from management and specific
internal audits on projects, changes (which it
approved) to the Group Approvals Framework,
and the assessment of the effectiveness
of controls through the Group Finance
Assurance Plan. The Committee also
reviewed the fraud prevention framework,
including the continuing enhancements to
processes, procedures and controls at the
business services centre in response to
increasingly sophisticated fraud from
purported suppliers.
As part of our internal control process, an
annual strategy review, including preparation
of a rolling five year financial plan, is
ITV plc Annual Report and Accounts 2020 121
Governance Audit and Risk Committee continued
Governance continued
undertaken by management and reviewed
and approved by the Board. The five year
plan feeds into the annual budget cycle. The
Executive Directors (together 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 on the Group’s
performance against strategic KPIs and cash
targets. The Committee reviews actual
results, compared with budget and forecasts;
key trends and variances for reasonableness
and consistency of explanation and analysis;
and the actions proposed to address
performance variances or emerging issues,
which are subsequently reported back to
the Committee once implemented.
Management are in the initial stages of
defining an HR and Finance Transformation
Programme incorporating ITV’s core HR and
Finance operating models, processes, and
systems, and its enabling internal controls
framework. The Committee is conscious of
the business imperative and magnitude of
the programme and the critical factors
necessary to enable the programme to
succeed. The Committee will therefore
provide strong governance and robust
challenge over the course of this programme
to support management in its delivery.
To prepare for anticipated regulation on
enhanced internal controls over financial
reporting (ICFR) regimes for companies, and
to inform the HR and Finance Transformation
Programme being designed and
implemented, an external consultant was
engaged to perform a high level ‘health
check’ of ITV’s ICFR framework, environment
maturity and readiness. The assessment
considered our ICFR maturity across the
Group and in individual businesses, functions
and other COSO categories. The assessment
classified the maturity of ITV’s current ICFR
framework as ‘developing’, and concluded
that processes and controls are in place in
most cases and that its control environment
is broadly in line with ITV’s sector and the
consultant’s benchmark. Although the
Committee drew some comfort from the
assessment’s conclusions, the review
highlighted a number of key improvement
opportunities, particularly in ITV’s IT
environment (including legacy systems) and
standardisation of processes and control
documentation, which the HR and Finance
Transformation Programme will address.
Some clear proposed focus areas and a 2021
improvement roadmap were set out, which
will be incorporated into the HR and Finance
Transformation Programme workstream.
The Committee will closely monitor
progress against these focus areas and the
delivery of the roadmap in 2021, ensuring
that the Company is able to be compliant
with any potential regulatory changes to be
introduced relating to management or
Board attestation regarding the effective
operation of the Company’s ICFR processes.
Speaking Up
In 2020, the Committee requested that an
internal audit of the Company’s ‘Speaking
Up’ processes be undertaken. The Committee
considered this course of action to be
appropriate in light of the increased
regulatory focus on whistleblowing (e.g. the
EU Whistleblowing Directive and the two
Private Members’ Bills which could lead to a
step change from the current UK legislation)
and the ongoing difficulties which the
COVID-19 pandemic has presented with
traditional face-to-face exchanges as a
channel for raising concerns. The Committee
reviewed a revised Speaking Up policy and
framework in December 2020 and was
pleased with the proposed improvements,
which will enhance both our people’s ability
to raise concerns and ITV’s open culture.
The policy and processes are due to be
implemented internationally in Q1 of 2021.
The improvements include, amongst other
things, the appointment of Safecall, an
independent third party, to provide a
confidential Speaking Up telephone hotline
and web-based reporting tool and proposals
for fuller and more meaningful reporting on
Speaking Up concerns to the Management
Board and the Committee. The Committee
will review the roll out of the Speaking Up
policy and the revised elements of the
framework in 2021.
Our auditors
Internal auditor
The Group’s internal audit activity is
outsourced to Deloitte LLP (Deloitte), who
report directly to the Committee. The
Committee continues to support ITV’s
current model of a fully outsourced internal
audit function which allows 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 2020. However, due to the
significant change agenda within the Group,
including the impact of COVID-19 on the
Group’s resources, the Committee concluded
that the tender process should be deferred
until 2021. Deloitte will be invited to
participate in this tender process.
The effectiveness of the internal audit is
assessed over the year using a number of
measures, including reports from internal
audit on the development and delivery of
the internal audit plan and the completion
of agreed actions arising from reviews.
The Committee also had a private discussion
with the Group CFO on internal auditor
effectiveness in December. The discussion
was guided by a series of questions
circulated by the Committee Chair, which
included internal auditor independence
and objectivity, resourcing, involvement
with business discussions on risk, and
communications between the internal
auditor and the Committee. The Group CFO’s
input to the session with the Committee was
informed by a prior meeting with relevant
colleagues across the business and at various
levels who had worked with the internal
auditor on internal audits or more generally.
Having carefully considered the findings
arising from our deliberations and 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.
During the year, the Committee reviewed
and approved ITV’s new internal audit
charter, which sets out and clarifies internal
audit’s role in the overall internal control
framework of the Group, and also assessed
the alignment of the internal audit function
and approach to the Institute of Internal
Auditors (IIA) Code of Practice, which it
found to be closely aligned. The Committee
welcomes the direction the new Code brings
in increasing the status, scope and skills of
the internal audit function.
Prior to the start of the year, the Committee
considered and approved the 2020 internal
audit plan for operational, financial and
technology controls, which was structured
to align with ITV’s strategic drivers and
principal risks. During the course of 2020,
as result of the disruption to the business
caused by COVID-19, an agile and flexible
approach was adopted for reconsidering
and redeveloping the internal audit plan and
delivering internal audits. 21 internal audits
were completed during the year, which
covered business continuity and crisis
management during COVID-19,
environmental matters, Group procurement
processes, music rights and clearance
management processes, operational
readiness for the Planet V launch and a
review of a sample of internal and subsidiary
studios for key finance control changes due
to remote working practices. The internal
audits performed provided assurance over
areas deemed to be of greater risk and
relative importance to the Group in 2020.
Regrettably, given the restrictions imposed
122
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
by the COVID-19 pandemic, visits to some
international subsidiaries and internal audits
on productions had to be deferred. Other
internal audits were also completed in
relation to the shared service centre, cloud
software and cyber.
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. A cultural assessment is
routinely incorporated in audit ratings.
At the majority of Committee meetings,
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.
We pay particular attention to identified
themes across the business, relative
importance and relationship of findings,
recommended and agreed remedial actions
and compliance with timescales for
resolution and follow-up. Following some of
the internal audit findings, we asked certain
members of management to present their
remediation plans directly to the Committee.
Cloud software was an example of where
the Committee requested further
information following the audit outcome.
The Committee also specifically requested
certain internal audits be undertaken, for
example, on the review of the Group’s
Speaking Up framework (which is ongoing),
and a further review of the GDPR framework
(in 2020). The internal auditor was also
requested to undertake a review of a matter
arising from a whistleblowing incident, the
results of which were reported to
management and the Committee and
appropriate action taken to address the
issues identified, which did not lead to a risk
to the financial statements.
The Committee is satisfied that delivery of
the approved internal audit strategy and
plan is providing timely and appropriate
assurance on the effectiveness of controls
in place to successfully manage relevant
Group principal risks.
External auditor
The Group’s external auditor is KPMG.
The table on page 124 summarises the
process followed to manage the
relationship and audit process.
Non-audit services
In order to safeguard auditor independence
and objectivity, the external auditor does
not provide non-audit services unless this is
Engagement
Audit tendering
and rotation
Independence
and objectivity
The Committee carefully
considers, 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 was appointed as
auditor of ITV plc in December
2003. 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 his tenure
ends following completion
of the audit for the 2020
financial year.
In light of the length of
KPMG’s tenure, in 2019 the
Committee led a tender
process for the appointment
of the external auditor,
effective from 1 January
2021. As a result, the Board
will seek approval for PwC
to be appointed as external
auditor for the year ending
31 December 2021, at the
2021 AGM.
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
• Its Auditor Independence
policy (updated in 2020),
which includes a policy on
the provision of non-audit
services and the hiring of
former external auditor
employees
See below for detail on
the approach to non-audit
services and page 116 for
the Committee’s review
programme during the year
to assess external auditor
independence and
objectivity.
in compliance with the Group’s non-audit
services policy. During the year, the
Committee revised the non-audit services
policy contained in ITV’s Policy on Auditor
Independence and Objectivity to reflect the
final version of 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, in the 2020
financial year, the Company incurred fees
for non-audit services of £295,000 (2019:
£159,558) which related to: (i) work to review
the interim financial information £215,000
(2019: £114,558); and (ii) audit related
assurance over the government salary
compensation scheme in the Netherlands
£80,000 (2019: £nil). In 2019, fees for
non-audit services related to the issuance
of a €600 million Eurobond were £45,000.
The Committee approved this work under
the non-audit services policy. The services
are permissible under the 2019 Ethical
Standard, and both are considered to be
a closely related non-audit service. For
information on audit fees see note 2.1 to
the financial statements.
External audit effectiveness and quality
Please refer to page 116 in relation to the
review programme the Committee follows
throughout the year to ensure the quality
and effectiveness of the external audit. In
making this assessment, the Committee has
regard to the external audit team’s
objectivity, professional scepticism,
continuing professional education and its
relationship with the finance team. In
particular, the Committee assesses the
depth of review and level of challenge
provided by the external auditor over the
significant judgements and estimates made
by management.
The Committee remains focused on audit
effectiveness, independence and objectivity,
which is reviewed on an ongoing basis to
ensure the quality, rigour and challenge of
the external audit process is maintained. As
referred to above in respect of the internal
auditor, the Committee also met in private
with the Group CFO and had an open
discussion on these matters in December.
This discussion covered an assessment of
the factors set out below, as well as the
audit partner, communication by KPMG,
audit planning and auditor independence
and objectivity. The Group CFO’s input to
this session with the Committee was
informed by a prior meeting with relevant
members of the finance team to ensure that
feedback was obtained from all levels and
divisions of the finance team that interacted
with KPMG. Following the Committee’s
assessment session, the Committee Chair
and Group CFO held a meeting with the
KPMG lead audit partner to discuss potential
improvements to KPMG’s 2020 financial
year end planning and resourcing
capabilities, given the additional level of
scrutiny that would need to be applied to
ITV plc Annual Report and Accounts 2020 123
the 2020 financial statements and the
increased audit work required for the 2020
year end as a result of the COVID-19
pandemic, plus the impact of COVID-19 and
government responses on the availability of
relevant resources. KPMG was able to satisfy
the Group CFO and Committee Chair that
adequate resources would be available for
the Group audit to ensure delivery of a
quality audit within the timetable set by
the Company.
As noted above, the lead audit partner
attended all Committee meetings in 2020
and the Committee met regularly with
him throughout the year, without
management present.
The Committee also continued to use the
FRC’s Audit Quality Practice Aid to structure
its review of audit quality. In making its
assessment, the matters the Committee
focused on included the factors set out to
the left. 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.
Governance Audit and Risk Committee continued
Audit scope
and strategy
The Committee and KPMG discussed the detailed audit scope and
strategy for the year, taking into account the impact of the COVID-19
pandemic, the restructuring of the Dutch business (formerly Talpa) and
other proposed areas of focus and risks identified, including the level of
materiality to be applied by the auditor. The Committee challenged
KPMG on the appropriateness of the basis of determining materiality that
had been applied and the timing of aspects of the audit. After discussion,
the Committee approved the scope of the audit, the proposed materiality
threshold, and key audit risks identified but noted that the scope and
materiality would be kept under review and adapted as required to
address the implications of the final Brexit agreement and the ongoing
and uncertain trajectory of the COVID-19 pandemic.
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 (including
narrative reporting, the section 172 statement, significant accounting
judgements and estimates and reporting on cash and revenue).
Auditor
interaction with
management
Auditor’s own
view of
effectiveness
The Committee also reviewed KPMG’s 2020 FRC Audit Quality Review
report and the actions it was taking to address the identified issues
including to take further steps to ensure that audit teams apply
appropriate levels of challenge and scepticism.
KPMG had discussions throughout the year with management and
challenged them on key judgements and estimates, accounting
treatments and disclosures, with clear indications of scepticism being
applied when appropriate. This included COVID-19 costs, acquisition
earnouts, asset valuations, going concern underlying assumptions and
the Box Clever provision.
The Committee Chair also met frequently with the lead audit partner to
discuss emerging audit risks and issues identified by KPMG and obtain
additional insight on quality and performance capability of the ITV
finance function.
The Committee made enquiries of KPMG regarding:
• The proposed audit methodology and its effective application to ITV
• The 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 elements of the audit have taken longer than they should and
why this had happened
• How they gained assurance on the effectiveness of the Group’s
internal controls
• The experience of the senior members of the audit team and their
interactions with management and the ITV finance function
Other Committee
assessments
Other assessments made by the Committee relate to:
• Group and component levels of materiality
• Delivery and execution of the agreed external audit process for 2020
• 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 123.
124
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
External Auditor transition
In 2019, the Committee led a formal,
rigorous and competitive tender process
for external audit services for the 2021
financial year onwards (detailed in the
2019 Annual Report and Accounts). We
have therefore complied (and will
continue to comply) with the UK
Competition and Market’s Authority’s
Statutory Audit Services Order, which
states, among other matters, that FTSE
350 listed companies should put their
external audit contract out to public
tender at least every ten years.
In anticipation of this start date and to
ensure full auditor independence and
objectivity, PwC and ITV management
ensured that all prohibited non-audit
services provided by PwC to ITV had
ceased by 30 June 2020.
The proposed external auditor, PwC,
started their transition from July 2020, in
preparation for the external audit cycle in
2021, by shadowing the outgoing external
auditor in the 2020 interim review and
year end audit, and attending the
Committee meetings from July 2020
onwards, presenting an update paper on
their transition plan at every main
Committee meeting.
We are pleased to note that PwC have
already immersed themselves
comprehensively in the business, holding
meetings with the various finance
directors, senior finance staff and the IT
team to build up their understanding of
the Group, the key processes and critical
systems, and undertaking walkthroughs
for key IT systems and business processes
in ITV’s business services centre. In
addition, and importantly, they have been
able to confirm, with support from ITV’s
IT team, that PwC will be able to apply
their digital audit tools to ITV’s IT systems,
to continue to uphold the quality and
effectiveness of the audit. They have been
shadowing KPMG on key accounting
matters and judgements during the audit
and providing input when requested in
Committee meetings.
Accordingly, the Board is recommending
to shareholders the appointment of PwC
as its external auditor at the 2021 AGM for
the year ending 31 December 2021.
Following our review, we advised the
Board that the Company’s Annual
Report and Accounts for the year ended
31 December 2020 were fair, balanced
and understandable.
Fair, balanced and understandable
The Board is required to provide its
opinion on whether it considers that the
Company’s Annual Report and Accounts,
taken as a whole, are fair, balanced
and understandable, and provide the
information necessary for shareholders
to assess the Company’s position
and performance, business model
and strategy.
We discussed the preparation of the
Company’s Annual Report and Accounts
with the Board and have reviewed and
assigned responsibilities for its content
and overall cohesion and clarity. To further
support the Board in providing its opinion,
we assessed the quality of reporting
through discussion with members of
management and our external auditor
and ensured that feedback from
stakeholders and other individuals had
been addressed and that examples of
best practice had carefully been
considered in the context of the Group.
The process included considering each
of the elements (fair, balanced and
understandable) on an individual basis to
ensure our reporting was comprehensive
in a clear and consistent way, and in
compliance with accounting standards
and regulatory and legal requirements.
The reviews carried out by internal
functions within the Company and
independent reviewers have been
undertaken with a view to ensuring that
all material matters have been reflected
in the Company’s Annual Report and
Accounts and that they correctly reflect:
• The Company’s position and
performance as described on pages
28 to 41
• The Company’s business model as
described on pages 22 and 23
• The Company’s strategy, as described
on pages 20 and 21
ITV plc Annual Report and Accounts 2020 125
Governance
Remuneration Report
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 2020. The report also aims to demonstrate how our
current approach and our proposed Remuneration Policy aligns with
our strategy, supports the retention of key talent and rewards them
for strong performance.
term. We therefore undertook a review of
our approach to pay and have consulted
with our major shareholders on a revised
approach. Further details are set out below.
Review of Remuneration Policy
The previous remuneration structure for
senior executives at ITV had been in place
for a number of years. While the formal
Remuneration Policy was technically
renewed at the 2020 AGM, the structure
remained largely unchanged, with only
minimal updates made to reflect evolving
best practice. While this policy renewal was
recent, it was in practice designed and
conceived in mid-2019.
Our aim 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. The strategy is focused on: (i)
transforming our Broadcast business; (ii)
growing our UK and global production
business; and (iii) expanding our already
established DTC business. We have a clear
vision, and clear priorities each supported
by a number of 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 relationships, loyal audiences,
a powerful brand, talented commercial
and creative colleagues and sufficient
financial flexibility to invest.
Dear Shareholder
Over recent years, the business has sought
to take a measured approach on pay. This
has been demonstrated by being a first
mover on reducing executive pensions and
seeking to exercise negative discretion
where appropriate. In April 2020, quick
proactive steps were taken in response
to COVID-19 to ensure pay impacts for
executives and wider employees were
closely aligned. Firstly, the Board voluntarily
agreed a 20% reduction in base salaries and
fees, and secondly, the bonus scheme for
2020 was cancelled so that no award would
be made to either Executive Director.
Despite 2020 being one of the most
challenging times in the history of ITV,
our colleagues responded brilliantly to
the COVID-19 pandemic and helped
demonstrate the enduring value of ITV as
a public service broadcaster. While our two
main sources of revenue – production and
advertising – were down significantly over
the year, we had a strong end to the year
with Q4 advertising revenues up 3%
year-on-year and the majority of our
programmes are now back in production.
The action taken to manage and mitigate
the impact of COVID-19 puts us in a good
position to continue to invest in our strategy
of transforming ITV into a digitally led
media and entertainment company.
In light of the strategic priorities for the
business and the accelerating shift seen in
what remains a highly cyclical sector, the
Committee was focused on ensuring that
the pay structure for our wider senior
executive population was able to support
the business over the medium and longer
126
ITV plc Annual Report and Accounts 2020
Mary Harris
Chair, Remuneration Committee
Remuneration review
Committee governance
Directors’ Remuneration
Policy
Annual Report
on Remuneration
Remuneration Policy
application in 2020
Remuneration Policy
application in 2021
Other disclosures
page 129
page 131
page 132
page 140
page 140
page 143
page 146
We remain committed
to taking a measured
approach to pay and
continue to value
the support of our
shareholders in
this approach.
Strategic Report
Governance
Financial Statements
Additional Information
The Remuneration Committee conducted
a review of our policy to ensure that it
continued to support the execution of this
strategy. The Committee was particularly
mindful of the following challenges:
• Retaining key talent – The market in
which ITV seeks to retain and recruit
talent is increasingly global and impacted
by the practices adopted by larger global
media companies. The reward structure
must be cognisant of this and the
increased intensity of these competitors’
interest in ITV talent.
• Digital transformation and strategic
investment – Our On Demand business
will be a key growth engine attracting
younger and more targeted audiences to
ITV. Given the nature of the sector, it will
be important for the Company to be agile
in how it implements the strategy over a
number of years. The reward structure
must permit this flexibility, to allow the
delivery of the strategy to be judged over
the longer term rather than within fixed
three year performance periods.
• Advertising market volatility –
The performance of the Company is still
inherently linked to the buoyancy of the
wider advertising market. The advertising
market is highly cyclical and driven by
external factors that are outside
management’s control. This makes
long-term target setting highly
challenging, as targets can be too soft
or too hard based on actual market
conditions. Therefore, there is a risk of
a mismatch between reward and the
successful execution of the strategy
that is in the long-term interests of
shareholders. This is a challenge that
the Committee has struggled with for a
number of years, without being able to
identify a satisfactory solution.
Several external factors, such as Brexit,
regulatory changes and now COVID-19
have further amplified this volatility
and the Committee has concluded it is
imperative to take action now. The
reward structure must be robust against
this cyclicality.
Ultimately, the Committee concluded that
annual grants of restricted shares provided
a more effective mechanism for aligning
executive and shareholder interests over
the long-term. This alternative structure is
simple, reflects practices in the global talent
market, rewards strategic investment that
delivers long-term sustainable performance
rather than short-term gain and enables the
business to remain agile in a dynamic and
cyclical sector where viewer behaviours
continue to evolve.
The Committee has been very mindful
regarding the discount level, taking into
account best practice guidance, historical
vesting levels and the overall shareholder
experience. Further details of historic
vesting levels are shown on page 151
of this Remuneration Report. In light of
ongoing market volatility the Committee
will continue to keep grant levels under
review, however, we currently remain
comfortable that the discount has been
set appropriately.
Introducing a Restricted Share Plan
The current LTIP was based on a
combination of metrics that sought to
measure the successful execution of the
strategy. While there was a clear rationale
for the selection of each metric in a more
stable economic environment, they have
proved to be problematic in recent years,
including in terms of effective target
setting. The Committee was also concerned
that some metrics set over a three year
period may potentially create perverse
incentives to focus on the shorter term
and underinvest in the long-term future of
the business.
Given the pace of sectoral change, the
strategic decisions required for the
Company to achieve value for shareholders,
the intensification of competition for
talent and the difficulty of effective target
setting in an uncertain environment, the
Committee has concluded that the
creation of long-term value would be
better supported by the introduction of a
Restricted Share structure. This will be
operated as a simple plan, which encourages
the management team to make decisions,
which are in the long-term interests of our
shareholders, where the effective execution
of the strategy is ultimately reflected in the
ITV share price.
The key design features of the new
structure will be as follows:
• a discount of 50% on the previous LTIP
award levels – i.e. proposed grant levels:
Chief Executive – 132.5% of salary; Group
CFO – 112.5% of salary;
• shares released after five years; and
• the vesting of awards subject to a
performance underpin. If any of the
underpin thresholds set are not met, the
Committee would consider the extent to
which vesting levels should be scaled back
(including to nil) to reflect this.
The Committee is also keen to stress the
importance of retaining discretion to
adjust awards. As well as making awards
conditional on financial returns above
our cost of capital, the Committee has
deliberately provided for flexibility within
the underpin as this: (i) enables the
Committee to assess how the business
has performed against evolving strategic
priorities and market conditions; and (ii)
provides sufficient flexibility to exercise
judgement and act to reduce awards in
the event of circumstances that were
unforeseen at the point of grant. The
Committee believes that this approach
will ensure a robust and sustainable
safeguard against payments for failure.
The Committee intends to disclose
information on how the underpin has been
assessed at the point of vesting. In line with
best practice, awards also remain subject
to malus and clawback provisions.
In order to accommodate the new
Restricted Share structure, a new
Remuneration Policy and share plan will be
presented to shareholders for approval at
the 2021 AGM. Other than the change to the
long-term incentive structure, no further
material changes are being proposed as the
remaining elements of the previous policy
continue to remain in line with mainstream
FTSE 100 practice and best practice
developments over recent years.
The Executive Directors will receive no
salary increase for 2021 and the bonus
structure for 2021 will be consistent with
prior years. As noted in last year’s report,
while pension levels for the CEO role have
already been reduced in 2017 from 25% of
salary to 15% of salary, the intention is to
align the Chief Executive’s pension with the
rate for wider employees by 1 January 2023.
There are no changes to inflight long-term
incentive plans.
ITV plc Annual Report and Accounts 2020
127
Shareholder Engagement
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 have consulted with our major
shareholders regarding the introduction of
the new Restricted Shares structure. We
recognised at the outset that moving to
Restricted Shares marks a significant change
for ITV and this structure naturally attracts
more diverse views than other pay proposals.
However, we have been pleased with the
balance of feedback received to date and
the overall level of support indicated by our
major shareholders.
I would like to thank all of our shareholders
who contributed to what was an open and
constructive consultation process. The
feedback helped frame the Committee’s
discussions and facilitated a more robust
decision-making process.
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 the
remuneration resolutions and the
introduction of the new ITV plc Executive
Share Plan at the upcoming AGM.
Mary Harris
Chair, Remuneration Committee
9 March 2021
Governance Remuneration Report continued
Remuneration outcomes for the year
As in prior 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.
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. The Committee
ensures they have sufficient insight into the
views of the wider workforce through our
designated Workforce Engagement
Director, Edward Bonham Carter, who
regularly attends Ambassador meetings to
understand workforce views, sharing these
with the Committee. As the Remuneration
Committee Chair I also attended an
Ambassador meeting in December 2020
in order to share the Committee’s approach
to remuneration in the wider context.
Around 1,500 employees were initially
placed on furlough, of which circa 450 were
freelancers. The majority of employees had
returned to work by the end of August.
The Company has not utilised any
government-funded furlough schemes
beyond 31 October 2020. During this period
of furloughing employees, the Board and
Management Board voluntarily agreed to
a 20% reduction in base salary and fees.
These arrangements remained in place
until 31 October 2020.
The Bonus scheme for 2020 was also
cancelled across the workforce as part
of the actions taken in April 2020, and
therefore no bonus awards are being made
to either Executive Director for 2020.
In January 2021, more junior colleagues
received a one-off payment of £750 as a
thank you for their contribution in 2020.
The LTIP granted in 2018 was assessed
based on performance over the three year
period to 31 December 2020. While the
targets were set in a different economic
context, there will be a very modest vesting
of 8.83% of this award. The vesting levels
have been heavily impacted by COVID-19
despite the business making good progress
on the execution of the strategy. Awards
vesting in Spring 2021 will be subject to a
two year holding period.
128
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
Overview of Remuneration Policy
How executives will be paid in future years
Salary and benefits
Retirement benefits
Chief Executive Officer
£943,256
Group Chief Financial Officer
£674,850
• No salary increases for 2021
• Benefits package remains
unchanged – includes private
medical insurance and
car-related benefit
Annual bonus
Cash element
25%
15%
9%
• Limit under 2017 Policy
• Paid to previous Chief
Executive and Group CFO
• Chief Executive appointed
at lower rate in 2018
• Policy on new appointments
aligns with wider employees
• Chief Executive to align with
employees by 1 January 2023
• Group CFO appointed at
employee rate in 2019
Deferral into shares for three years
• Cash element – Chief Executive: up to 120% of salary; Group CFO: up
to 110% of salary
• Deferred shares – Chief Executive: up to 60% of salary; Group CFO:
2021 bonus metrics – measure and support execution of the strategy
Adjusted EBITA – profitability of
underlying business
Profit to cash conversion – effective
cash generation
Cost savings – savings from cost base
to fund investment
Grow UK and global
production
Transform Media and
Entertainment (Broadcast)
Expand Direct to Consumer
up to 55% of salary
• Awards subject to malus and clawback
Individual strategic – deliver
strategic priorities
Restricted shares
Released after five years
• Annual grant: Chief Executive: up to 132.5% of salary; Group CFO: up
to 112.5% of salary – 50% discount to previous LTIP awards
• Release of shares subject to performance underpin: assessed
after year three – ability for Remuneration Committee to scale back
awards if hurdles not met
• Awards subject to malus and clawback
Shareholding guidelines
Carolyn McCall
Guidelines apply in post, and extend beyond tenure
Successful execution of strategy ultimately reflected in the share price
Simple structure – aligns with strategy and shareholders over
the long-term
Retains key talent – aligned to global talent market and peer practices
Rewards strategic investment – delivery of long-term sustainable
performance, rather than short-term gain
Reflective of dynamic and cyclical nature of sector and viewer behaviours,
where business needs to remain agile and adapt
Focus on long-term stewardship of the brand
• In-post guideline – Chief Executive: 400% of salary/Group CFO: 225% of salary
• Post-employment – applies for two years after departure, equal to two times
the award of restricted shares under the ITV plc Executive Share Plan
Remuneration for 2020 – What did Executive Directors earn during 2020
Single figure remuneration at a glance
Carolyn McCall
Chris Kennedy
Salary
Benefits
Pension
Share awards
• Executive Directors agreed to 20% reduction in base salary and cash allowances
payable in respect of pension and car-related benefits, for the period 1 April
2020 to 31 October 2020
• No bonus paid in respect of 2020
• 2018 LTIP to vest at 8.83% of maximum for Chief Executive
Chris Kennedy
ITV plc Annual Report and Accounts 2020
129
Governance Remuneration Report continued
In developing the approach to pay, the Remuneration Committee has discussed the impact of the 2018
UK Corporate Governance Code and a summary of the deliberations is below.
Clarity
Code provision: Remuneration
arrangements should be transparent
and promote effective engagement
with shareholders and the workforce.
• A balance of performance-related and shareholder approved remuneration supports our strategy. 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 97 to 105.
Simplicity
Code provision: Remuneration structures
should avoid complexity and their
rationale and operation should be easy
to understand.
The Company operates an approach to remuneration that is simple to understand and familiar to key
stakeholders with three key 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
• Restricted share element: normally released after five years subject to achievement of an underpin
Risk
Code 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
Code 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.
Proportionality
Code 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.
Alignment to culture
Code provision: Incentive schemes
should drive behaviours consistent with
company purpose, values and strategy.
A combination of capped reward for short and long-term incentives with the majority delivered in shares
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 136 provides estimates of potential future reward in different performance scenarios.
The Company’s incentive plans clearly reward the successful implementation of our Strategy.
The weighting of the package towards deferred shares ensures that the Executive Directors are fully
committed to sustainable long-term performance.
The Committee has overriding discretion over eventual outcomes when they do not reflect business
performance, and/or shareholder experience, and ensures that poor performance would not be rewarded.
When considering the alignment of incentive plans 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 behaviours.
• 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 and wider engagement with our stakeholders, including our employees.
Further details can be found on pages 97 to 105.
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Governance
Financial Statements
Additional Information
Remuneration Committee
Who is on the
Committee
The Committee is composed
of independent Non-executive
Directors.
Our role
Following each meeting, the
Committee communicates its
main discussion points and
findings to the Board.
The Committee’s terms of
reference can be accessed
on our website.
www.itvplc.com/investors/
governance
Meetings in 2020
In addition to Committee
members, the Executive
Directors, Group HR Director,
General Counsel and Company
Secretary, Director of Reward
and Pensions and independent
adviser Deloitte attend
meetings as required.
The current members are:
• Mary Harris (Chair)
• Salman Amin
• Sir Peter Bazalgette –
independent on appointment
• Anna Manz
• Sharmila Nebhrajani – joined
December 2020
• Duncan Painter
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
• Roger Faxon served on the
Committee until December
2020 when he stepped down
from the Board
Full details of attendance at
Committee meetings can be
found in the table on page 95.
Detailed biographies can
be found on pages 90 and 91.
• 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 139
• 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
• Indicative bonus outcomes and
April
• COVID-19 impact and
November
• Review of alternative incentive
LTIP performance
• Pay review outcomes
• Financial performance update
• Gender and BAME pay gap
reporting and CEO pay ratios
• Adviser independence
• Compliance with shareholding
guidelines
February
• Financial performance update
• Bonus targets for 2020
• LTIP awards and targets for
2020
• Remuneration Report and new
Remuneration Policy
• Shareholder consultation and
the new Remuneration Policy
reductions to pay, cancellation
of bonus arrangements
July
• Workforce engagement update
• Performance targets
• Committee terms of reference
review
September
• Employee reward framework
(including review of
remuneration and related
policies) and remuneration
trends
• Review of existing LTIP
arrangements
• Review of COVID-19 pay
adjustments
structures
December
• Proposed Restricted Share
structure arrangements, new
Remuneration Policy and
shareholder consultation
process
• Bonus framework and targets
for 2021
• Pension arrangements
• Review of remuneration
consultants
• Workforce engagement
update
• Committee evaluation
Annual review
An annual review of the
performance of the Committee
is conducted each year.
In 2020 an internally facilitated
Board evaluation was
undertaken, which included
a review of the Committee.
The results are summarised
on page 109
Overall, the evaluation concluded
that the Committee is working
effectively and responding
appropriately to its terms
of reference
ITV plc Annual Report and Accounts 2020
131
Governance Remuneration Report continued
Directors’ Remuneration Policy
The following sets out the proposed ITV Directors’ Remuneration Policy (the Policy). The Policy is subject to a binding shareholder vote at
ITV’s AGM on 29 April 2021 and, if approved, will apply from this date.
The previous remuneration structure for senior executives at ITV has been in place for a number of years. While the formal Remuneration
Policy (the Current Policy) was last renewed at the 2020 AGM, the structure from prior years was largely retained.
As noted in the statement from the Chair, the Committee discussed the Current Policy over a series of meetings throughout 2020 and early
2021, debating its continued effectiveness given the strategic priorities of the business, the cyclical nature of the sector, evolving market
trends and investor guidance. Input was sought from the management team, while ensuring that conflicts of interest were suitably
mitigated. An external perspective was provided by the Committee’s independent advisers. The Committee undertook an extensive
consultation process with major shareholders before finalising the Policy. The key features of our approach were also assessed against
the principles of clarity, simplicity, risk management, predictability, proportionality and alignment to culture.
On balance, the Committee decided that a Restricted Shares structure would be a more appropriate and effective long-term incentive
vehicle for ITV, and therefore the Policy is proposed for approval at the 2021 AGM. The introduction of Restricted Shares is the key change
to the Current Policy. The remaining features of the Current Policy previously approved by shareholders continue to align with mainstream
market and best practice and have therefore been largely retained.
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
Normally 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.
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.
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Governance
Financial Statements
Additional Information
Retirement benefits continued
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 current benefit levels are 15% of salary for the Chief Executive and 9% of salary for the Group CFO. As noted in the Annual
Report on Remuneration, the Committee intends to move all benefit levels to be comparable with the wider employee base
by 1 January 2023.
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 all-employee share plans (e.g. tax-approved 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.
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 be 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 135.
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.
ITV plc Annual Report and Accounts 2020
133
Governance Remuneration Report continued
Annual Bonus Scheme (Bonus) and Deferred Share Award Plan (DSA) continued
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 2021 are set out in the Annual Report on Remuneration.
Up to 20% of the maximum opportunity will be received for threshold performance.
Restricted Shares
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 will be granted under the proposed ITV plc Executive Share Plan which will be presented to shareholders for approval at the
2021 AGM.
Awards will be structured as conditional rights or nil-cost options (or economic equivalent). Awards will normally be granted annually
with vesting after three years, subject to satisfaction of a performance underpin. Awards will normally be required to be held for an
additional two year holding period so that the award is released after five years. During the holding period awards may be reduced or
cancelled in certain circumstances. Further detail is provided on page 135.
Dividends (or equivalents) may be earned in respect of any vested shares.
Maximum
potential
payment
Performance
metrics
The maximum award level under the ITV plc Executive Share Plan is 175% of salary.
Our current operational policy is to make annual awards of 132.5% of salary to the Chief Executive and 112.5% to the Group CFO.
The Committee may define the terms of the performance underpin. The criteria may be based on financial and/or non-financial
metrics and include reference to corporate, divisional or individual performance. When determining vesting the Remuneration
Committee will take into account all factors deemed relevant at the time (e.g. progress against execution of the strategy, the nature
of the wider trading environment).
Information on the proposed 2021 grants is set out on page 144 of 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 two times the Executive Director’s Restricted Stock grant level.
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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Financial Statements
Additional Information
Legacy awards – Long Term Incentive Plan (LTIP)
Operation
Long-term incentive awards were previously made under the shareholder approved LTIP. Awards were made annually with vesting
dependent on business performance during the performance period. Performance periods were set by the Committee, and were
usually three years.
The Committee has discretion to amend the final vesting level if any formulaic assessment of performance is considered to be
inappropriate.
Awards made under the LTIP will usually 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. Dividends (or
equivalents) may be earned in respect of vested shares.
Although executives will continue to hold an interest in unvested awards, no further awards will be granted to the current Executive
Directors under this incentive vehicle.
Performance
metric
The performance criteria for unvested awards are detailed in the Annual Report on Remuneration. The proportion of each element of
the award that will vest for threshold performance against a metric is not more than 20%.
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
was agreed either: (i) during the term of, and was consistent with any previous 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 Director.
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, Restricted Share awards and legacy LTIP awards. Under malus, unvested share awards (including any Restricted Share or legacy
LTIP awards 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 Restricted Share and 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 taking into
account external forecasts, internal budgets and business priorities.
A key feature of Restricted Share awards is that the successful execution of the strategy and the success of the business is ultimately
reflected in the share price, therefore providing strong alignment with the interests of our shareholders. The vesting of Restricted Share
awards is subject to a performance underpin. For 2021 awards, full vesting would require Return on Capital Employed to exceed the
Company’s cost of capital. In addition, the Committee has retained a broader discretion to also enable reduction in vesting levels where
there is a material weakness in the underlying financial health and sustainability of the business. These underpins have been selected as
they are considered to provide a robust and sustainable safeguard against payments for failure. Further detail on performance criteria is
set out in the Annual Report on Remuneration.
ITV plc Annual Report and Accounts 2020
135
Governance Remuneration Report continued
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 disclosed in the next
Annual Report on Remuneration.
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 100% vesting of the Restricted Shares
Maximum
performance
Assumes 100% pay-out under the annual bonus
Assumes 100% vesting of the Restricted Shares
Scenario charts
Carolyn McCall
Minimum
Mid performance
Maximum
100%
£1.1m
34%
27%
39%
£3.2m
27%
42%
31%
£4.0m
£
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
Chris Kennedy
Minimum
Mid performance
Maximum
100%
£0.75m
36%
29%
27%
37%
£2.1m
42%
29%
£2.6m
£
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 2021, pension is per the Policy, and the value for benefits is equivalent to that included in the remuneration table on page 140.
2. Annual bonus is based on 180% of salary for Carolyn McCall and 165% of salary for Chris Kennedy.
3. Based on Restricted Share grants of 132.5% for Carolyn McCall and 112.5% for Chris Kennedy.
Impact of share price
The value of Restricted Shares will fluctuate based on 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
£4.67 million for Carolyn McCall and to £3.0 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 £3.42 million for Carolyn McCall and to £2.25 million for Chris Kennedy.
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.
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Governance
Financial Statements
Additional Information
Ongoing
remuneration
In determining an appropriate remuneration structure and levels, the Committee will take into account all relevant factors to ensure
that ITV 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 132 to 139.
Fixed pay will be determined in line with the policy table on page 132. 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 375% of salary (the sum of the maximum bonus opportunity and the
maximum Restricted Share award under the proposed ITV plc Executive Share Plan. Under the previous policy the maximum variable
incentive on recruitment was 550% of salary.
Buyout awards
for forfeited
remuneration
The Committee may make awards to ‘Buyout’ 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 Buyout 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 Buyout).
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.
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 overleaf sets out the general position and range of approaches in respect of incentive arrangements.
ITV plc Annual Report and Accounts 2020
137
Governance Remuneration Report continued
Plan
Bonus
DSA
Good leaver
(e.g. ill health)
Bad leaver
(e.g. dismissed for cause)
Change of control
Awards lapse.
Awards would normally continue unless
the Committee determined otherwise.
Awards lapse.
Awards release in full at effective date
of change.
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.
Restricted Shares
– during the
performance
period
Awards are typically prorated for time
served (where departure occurs during
the first three years) and vest subject to
satisfaction of performance underpins.
Awards lapse.
Awards are released at the end of
holding period unless the Committee
decides to release the shares earlier.
Restricted Shares
– during
the additional
holding period
Awards are released at end of holding
period unless the Committee decides
to release the shares earlier.
Legacy LTIP
– during the
performance
period
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.
Legacy 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 are
released at end of holding period
unless the Committee decides to
release the shares earlier.
In the case of misconduct, awards
will lapse.
Awards lapse.
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.
Outstanding awards would normally
vest and be released subject to
satisfaction of performance underpins
and capped based on the time elapsed
since grant, subject to the discretion of
the Committee.
Awards are released at the effective
date of change.
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.
External appointments
With specific prior approval of the Board, Executive Directors may normally undertake one external appointment as a non-executive
director of another publicly quoted company and retain any related fees paid to them.
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Additional Information
Non-executive Directors
The table below summarises the main elements of remuneration for Non-executive Directors.
Component
Operation
Maximum potential payment
Non-executive
Director fees
The Committee determines the fees of the Non-executive Chairman. The Chairman
and the Executive Directors determine the fees of the Non-executive Directors,
which are accepted by the Board.
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 will 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 103. In her role as Chair of the Committee, Mary Harris joined Edward at an Ambassador meeting in December 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. More information on ITV’s commitment to investing in and building a productive, creative and diverse
workforce can be found on pages 50 to 52 and 102 to 108.
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.
Prior to the finalisation of this Policy, the Committee undertook an extensive consultation with major shareholders regarding the key
terms. During consultation considerable time was spent explaining the strategic rationale for the proposed structure as well as key terms
of the policy. The consultation enabled the Committee to identify and refine plan features that were of particular interest to our major
investors, including the detail of how the performance underpin for Restricted Share awards would be operated.
We intend to maintain a dialogue with our shareholders in future years, particularly when the Committee anticipates any substantial
change to the remuneration framework.
ITV plc Annual Report and Accounts 2020
139
Governance Remuneration Report continued
Annual Report on Remuneration
The sections of the Annual Report on Remuneration that have been audited by KPMG are the Executive Directors’ single total figure
of remuneration; the Non-executive Directors’ remuneration; LTIP awards made in 2020; Outstanding interests in share plans; and
Directors’ interests.
Remuneration Policy application in 2020
On 23 March 2020, ITV plc announced a number of measures that would cut costs and manage its cash flow in response to the COVID-19
pandemic. As a result the Executive Directors asked the Committee to consider the application of the Remuneration Policy in 2020 and
the Committee decided to apply its discretion in the following ways:
• The annual bonus opportunity was cancelled with no annual bonuses payable to Executive Directors in respect of performance in 2020
• All Directors agreed to a voluntary reduction in base salary, cash allowances and fees for the period from 1 April to 31 October 2020, the
period during which the Company had furloughed staff. The Company did not utilise the UK government-funded furlough scheme after
31 October 2020
The following section provides details of how the current Remuneration Policy was implemented in 2020.
Executive Directors
The table below sets out in a single figure the total remuneration for both Executive Directors for the financial year.
Salary
Taxable benefits
Pension
Bonus (cash and shares)
Share awards
Transitional arrangements
Buyout awards
Total
Total (excluding transitional arrangements)
Total fixed remuneration
Total variable remuneration
Carolyn McCall
Chris Kennedy5
Notes
1
1
1
2
3
4
2020
£000
833
15
125
–
129
–
1,102
1,102
973
129
2019
£000
923
17
138
1,453
–
591
3,122
2,531
1,078
2,044
2020
£000
596
15
54
–
–
–
665
665
665
–
2019
£000
565
14
51
816
–
799
2,245
1,446
630
1,615
1.
Both Executive Directors voluntarily agreed to take a 20% reduction to their basic salary, car and pension allowance payments from 1 April 2020 to 31 October 2020. Before the
reduction, total fixed remuneration for Carolyn McCall would have been £1,102k (a reduction of £128k) and for Chris Kennedy would have been £753k (a reduction of £88k).
2. Bonus payments for 2020 were cancelled.
3. The 2018 LTIP awards were subject to performance conditions measured to 31 December 2020. The amount shown is the indicative vesting value using the average share price in Q4
of 2020 (88.58 pence). The awards will vest in March 2021. Following a two year holding period they will become exercisable from March 2023. These awards were granted at a share
price of 145.25 pence.
4. In the 2019 Annual Remuneration Report, the amount shown for the Buyout awards made to Carolyn McCall was the indicative vesting value of an award made in March 2019, that
met performance conditions in 2019, and was valued using the average share price in Q4 of 2019 (138 pence). The figure for Carolyn McCall has been adjusted in the table above to
show the subsequent value of the shares on the vesting date of 28 March 2020 using the share price on that date (62.38 pence). Following a holding period the shares will become
exercisable in December 2021.
5. Chris Kennedy was appointed to the Board on 21 February 2019 and remuneration in 2019 is pro-rated from that date.
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 142.
Further information in relation to each of the elements of remuneration for 2020 set out in the table above is detailed below. An explanation
for 2019 is set out in detail in our 2019 Annual Report and Accounts, which can be found on our website.
www.itvplc.com/investors
Salary
As disclosed in last year’s report, both Executive Directors received a 2.25% salary increase from 1 January 2020 in line with the wider
employee group. For 2020 Carolyn McCall’s salary was £943,256 and Chris Kennedy’s salary was £674,850.
The figures shown in the table above take into account the Executive Directors’ decision to accept a 20% reduction in salary for the period
from 1 April 2020 to 31 October 2020.
140
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
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. The intention
is for Carolyn McCall’s pension to be aligned to the wider employee rate from 1 January 2023.
In line with the Executive Directors’ decision to accept a reduction in base salary, cash allowances payable in respect of pension and
car-related benefits were reduced by 20% for the period 1 April 2020 to 31 October 2020. The figures in the single figure table reflect
this deduction.
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.
Early in the 2020 financial year, the Company announced a number of measures to reduce its costs and manage its cash flow in response to
the COVID-19 pandemic. In April 2020 it was announced that at the request of the Executive Directors, the Remuneration Committee had
determined that the Annual Bonus for the Executive Directors and Management Board would be cancelled and there will be no award
payable to them in respect of 2020. Therefore, no bonus payments are shown in the single figure table above.
The original corporate and financial targets for the year were set in January 2020, before the global impact of COVID-19 had become fully
apparent. The financial element of the 2020 bonus was initially based on Adjusted EBITA (60%), cash conversion (10%) and cost savings (5%).
Threshold payments required Adjusted EBITA of £571m, cash conversion of 72% and cost savings of £17m. Full payment under these
elements required Adjusted EBITA of £671m, cash conversion of 80% and cost savings of £25m.
The remainder of the bonus (25%) is normally based upon the Committee’s assessment of the contribution each Executive Director made
to the overall strategy through the delivery of specific targets. The targets for the year included focus on execution of the strategy and
diversification of revenue streams, driving digital transformation, risk management and delivering improvements in diversity and inclusion
of the ITV workforce.
The financial targets set at the start of the year were partially met, for further details see pages 24 and 29. As noted in the Strategic
Report, progress was made in the continued execution of our strategic goals. However, no bonus was payable due to the cancellation
of the 2020 award.
Share awards
The LTIP awards made in 2018 were subject to performance measured to 31 December 2020. The indicative value of these awards is set
out below.
Carolyn McCall
Number of
shares awarded
Value at
award date £
Number of
shares vesting1
1,641,997
2,385,000
144,989
Value at
31 December
20202 £
£128,431
1.
The vesting figures shown in the table above reflect the 8.83% of the total award that met performance conditions on 31 December 2020. The vesting shares will become
exercisable after a two year holding period on 28 March 2023.
2. The share price used to value the shares at 31 December 2020 is the average share price for the final quarter of 2020 (88.58 pence). The share price used to calculate the number of
shares under award was 145.25 pence (the average of the share prices on the three days before grant – 23, 26, 27 March 2018).
When considering performance outcomes the Committee looks beyond formulaic results to ensure the outcomes align with overall
business performance. The outcomes for this award were primarily based on results for 2020 and were therefore heavily impacted by
COVID-19. Although the pandemic had a material impact on the financial results for the year, the business has continued to make progress
in a number of areas. Performance trends in the latter half of the year were also more positive. Therefore, the formulae were applied
without adjustment. Details of the performance achieved for the 2018 LTIP awards 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)
Performance
achieved
Payout level
(% of maximum)
7.8p
(3.5)%
22.22%
179.9m
0
0
8.83
0
21.2%
10%
10% +200m hours growth
23.1%
+400m hours growth
ITV plc Annual Report and Accounts 2020
141
Governance Remuneration Report continued
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 figures take into
account their decision to take a 20% reduction in their fees for the period from 1 April 2020 to 31 October 2020.
The level of fees paid to Non-executive Directors remains unchanged since 2016, for further details see page 144. 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
Graham Cooke
Margaret Ewing
Roger Faxon
Mary Harris
Anna Manz
Sharmila Nebhrajani
Duncan Painter
Notes
2
3
4
Fees
Taxable benefits1
Total
2020
£000
398
62
84
41
75
59
80
67
4
62
932
2019
£000
450
70
95
–
85
70
90
76
–
70
1,006
2020
£000
2019
£000
2
–
–
–
–
1
1
–
–
–
4
3
1
1
–
1
4
4
1
–
1
16
2020
£000
400
62
84
41
75
60
81
67
4
62
936
2019
£000
453
71
96
–
86
74
94
77
–
71
1,022
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. Graham Cooke joined the Board on 1 May 2020.
3. Roger Faxon stepped down from the Board on 10 December 2020.
4. Sharmila Nebhrajani joined the Board on 10 December 2020.
LTIP awards made in 2020
On 6 April 2020, awards were made under the LTIP to Carolyn McCall and Chris Kennedy, subject to performance over the period to
31 December 2022 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
3,575,495
2,171,954
£2,499,628
£1,518,413
31 December 2022
31 December 2022
2 years
2 years
6 April 2023
6 April 2023
6 April 2025
6 April 2025
1.
Awards were granted based on the average share price on the 30 days preceding the award date which was 69.91 pence. The closing share price on the date of grant was
58.66 pence.
As disclosed last year, in response to feedback from major shareholders a relative TSR measure was introduced as a part of the assessment
of overall Group performance in 2020. This will measure performance against FTSE 350 firms who principally derive their revenues in the
UK. The remaining performance measures were unchanged.
When setting the performance measures and targets the Committee took into account the strategy, the planned essential investments
over the period and internal and external forecasts for future performance. The targets are reflective of legislative and regulatory
frameworks at the time of award. Delivery of performance at the top of the range was intended to represent significant outperformance of
expectations. It should be noted that these performance targets were agreed before the global impact of COVID-19 was fully understood.
142
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
The performance measures and targets for 2020 are:
KPI
Weightings
Adjusted EPS
TSR versus a cross sector of UK companies
Total non-advertising revenues
Viewing health:
– ITV Family SOV
– Online viewing
see page 24
see page 24
see page 26
see page 26
Threshold
(20% vesting)
12.5p
Median
3% growth p.a.
Maximum
(100% vesting)
17p
Upper quartile
6.5% growth p.a.
20%
20%
40%
21.2%
10%
10% +250m hours growth
23.5%
+500m hours growth
TSR will be assessed against a comparator group of FTSE 350 companies that predominantly operate in the UK (excluding financial services and extractive industries). With the
exception of the SOV target, there will be straight-line vesting between the threshold and maximum levels.
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 applies to all LTIP awards granted
from 2019 onwards.
Remuneration Policy application in 2021
Executive Directors
The following section provides details of how the Policy will be implemented in 2021.
Salary
Salaries are paid in line with the Policy. In line with the wider employee group there were no salary increases from 1 January 2021.
Carolyn McCall
Chris Kennedy
2021 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 2021 will remain unchanged (15% of salary). Chris Kennedy receives a cash allowance in lieu of pension
of 9% of salary.
As advised in last year’s report, in 2020 the Company undertook a review of its pension policy for the wider employee base. Following the
completion of this review, the Committee has agreed that the contribution rate for Carolyn McCall will be reduced to 9% by 1 January 2023,
fully aligning both Executive Directors with the wider employee group.
Bonus (cash and shares)
The maximum bonus opportunity for 2021 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 2021 bonuses will be broadly similar to previous years with a focus on profit, cashflow, cost
savings and delivery of strategic goals. The target ranges for financial measures have been set to reflect planned essential investments
and current expectations regarding advertising market performance for 2021. Overall the Committee is satisfied that the target ranges
are realistic but highly stretching in this context. The Board considers the actual targets for 2021 to be commercially sensitive at this time,
however, we envisage providing retrospective disclosure of these targets in next year’s report.
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 overall performance in the year.
ITV plc Annual Report and Accounts 2020
143
Governance Remuneration Report continued
Restricted Share awards
As detailed in the Committee Chair’s letter and in the proposed Remuneration Policy, the intention is to grant awards of Restricted Shares
to Executive Directors in 2021. Subject to shareholder approval of the new policy and the accompanying ITV plc Executive Share Plan,
awards would be granted to Executive Directors following the AGM.
The maximum Restricted Share award will be 132.5% of salary for the Chief Executive and 112.5% of salary for the Group CFO. This
represents a 50% reduction compared to the previous annual LTIP awards granted under the previous policy.
Awards will normally vest after three years following the date of award subject to the satisfaction of a performance underpin. Any vested
awards would then be subject to a two-year holding period.
For 2021 awards, the Remuneration Committee will retain the ability to reduce vesting of the Restricted Shares (including to nil) where:
• Adjusted Return on Capital Employed is below the Company’s cost of capital; and/or
• There is a material weakness in the underlying financial health or sustainability of the business.
When assessing the latter, the Committee will take into account all factors deemed relevant at the time, including for example, progress
against execution of the strategy, performance against financial and non-financial KPIs and the nature of the wider trading environment.
In line with best practice, the Remuneration Committee will retain the discretion to adjust any incentive awards where vesting outcomes
are considered to be inappropriate.
Further detail on the assessment of the underpin will be disclosed at the time of vesting.
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 Restricted Share awards. Under malus, unvested share awards (including any Restricted Share
awards 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 Restricted Share 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 maintains sufficient scope in the ITV plc
Executive Share Plan rules to exercise discretion and judgement in line with the spirit of the Code.
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 95.
1 January 2021
£
1 January 2020
£
% 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
–
–
–
–
–
–
–
144
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
Comparison of Directors to wider employees
In line with the requirements in The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019,
which implement Articles 9a and 9b of European Directive 2017/828/EC1 (commonly known as the Revised Shareholder Rights Directive
or SRD), the table below provides details of the percentage change in the base salary, benefits and bonus of the Directors between
31 December 2019 and 31 December 2020 compared with the average percentage change for other employees.
The absence of a global salary review in 2020 and the announcement that there would be no annual bonus payments in 2020 for the
Executive Directors and wider workforce is reflected in the table.
Executive Directors1
Non-executive Directors2
Year-on-year change in pay for Directors compared to wider employees
2020
Average
employee3
Carolyn
McCall
Chris
Kennedy
Peter
Bazalgette
Salman
Amin
Edward
Bonham
Carter
Graham
Cooke4
Margaret
Ewing
Roger
Faxon5
Mary
Harris
Anna
Manz
Sharmila
Nehbrajani6
Duncan
Painter
4.26% (9.68)% (9.68)%
Salary
Bonus7
(100)% (100)% (100)%
Benefits8,9 5.86% (9.24)% (9.24)%
(11.7)% (11.7)% (11.7)% -
-
-
(17.7)% (81.4)% (92.0)% -
-
-
(11.7)% (11.7)% (11.7)% (11.7)% -
-
-
-
(91.8)% (63.8)% (84.3)% (88.3)% -
-
-
(11.1)%
-
(88.3)%
1. Calculated using the data from the single figure table on page 140 . Benefits include the cost of medical insurance and car-related benefits.
2. Calculated using the fees and taxable benefits disclosed under the Non-executive Directors’ remuneration in the table on page 142. Taxable benefits for Non-executive Directors
comprise expense reimbursements relating to attendance at Board meetings. In addition, Peter Bazalgette received private healthcare.
3. The Executive Directors are the only employees of the parent company, and therefore there is no comparator data for this sample. In the interests of transparency, the percentage
change in pay for all UK employees has been disclosed on a voluntary basis. As the majority of employees are based in the UK and share the same benefits as the Executive
Directors, overseas employees have not been included.
4. Graham Cooke joined the Board in May 2020.
5. Roger Faxon stood down from the Board on 10 December 2020, for comparator reasons his figures have been rounded up for the full year.
6. Sharmila Nebhrajani joined the Board In December 2020.
7.
There were no bonuses paid for 2020. A one-off thank you payment of £750 was made to eligible employees for their contribution in 2020. As this was not a payment made under
the Annual Bonus Scheme this has not been included in the table above.
8. The percentage change in benefits is the average change for all UK employees (excluding the Chief Executive and Group CFO) with any of the same benefits as the Chief Executive
and Group CFO.
9. The taxable benefits for Non-executive Directors relate to relevant travel and accommodation expenses for attending Board meetings and related business, rather than
conventional employee benefits. The reductions seen in the year are primarily due to the majority of meetings being held on a virtual basis during 2020.
CEO pay ratio
Year
2020
2019
Methodology 25th percentile pay ratio
Median pay ratio 75th percentile pay ratio
Option A
Option A
31:1
89:1
23:1
66:1
17:1
49:1
The employee at the 25th percentile, median and 75th percentile was determined based on the single figure of total remuneration for
every UK employee, Option A in the Reporting Regulations.
We have changed our calculation methodology from Option B, which was used to calculate the pay ratios in the 2019 Remuneration Report
based on ITV’s most recent gender pay gap information, to Option A, as this is the most statistically accurate approach and is in line with the
majority of other FTSE companies. It is our intention to continue to use the Option A methodology for future pay ratio disclosures.
As a result, our 2019 ratios have been recalculated using the Option A methodology and also the final actual 2019 remuneration values for the
CEO and all other employees. Our 2020 pay ratios are based on the current CEO single figure and the indicative value of share awards that
were subject to performance measured to 31st December, based on the average share price over the final quarter of the year. The 2020 ratios
will be restated in the 2021 Remuneration Report to reflect the updated CEO single figure and the actual value of shares on the vesting date.
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 remuneration for any comparator
employees who were part-time or had taken family leave to the normal full-time equivalent values.
The full-time equivalent remuneration values for the individuals in the table above are as follows:
2020
Salary
Total remuneration
Updated for 2019
Salary
Total remuneration
CEO
25th percentile
Median
75th percentile
£833,290
£1,103,426
£32,307
£35,199
£45,909
£47,184
£58,628
£63,788
CEO
25th percentile
£922,500
£3,122,011
£32,018
£35,010
Median
£37,915
£47,270
75th percentile
£54,987
£63,715
ITV plc Annual Report and Accounts 2020
145
Governance Remuneration Report continued
The median pay ratio for 2020 is considered to be consistent with the pay, reward and progression policies during the year for the
Company’s UK employees taken as a whole. The total remuneration values for the comparator employees remain consistent year-on-year.
There was no Company-wide annual pay increase in January 2021, but we remain committed to ensuring colleagues earn at least the real
Living Wage or greater, and we implemented the increased rates that were announced by the Living Wage Foundation in November 2020.
In January 2021, all eligible UK and international colleagues with a base salary below £100,000 received a one-off payment of £750 as a
thank you for their contribution during 2020, with currency equivalent values applied outside of the UK.
The reduction in our 2020 pay ratios, compared to 2019, is attributable to the change in remuneration of the CEO as a result of the
pandemic, and the actions we took in relation to remuneration arrangements. A significant proportion of the remuneration for the CEO
is performance related and the level of actual performance outcomes has a corresponding effect on the CEO pay ratios. With the
cancellation of the 2020 annual bonus and the modest vesting level of the 2018 LTIP award, as well as the voluntary reduction in base
salary and cash allowances during 2020, the total remuneration figure for the CEO is considerably lower than in 2019, and the pay ratios
have reduced accordingly.
Other Disclosures
Payments to past Directors
There were no payments made to past Directors in 2020. Ian Griffiths retains an interest in the 2018 LTIP grant with awards subject to
pro-rating and performance. The performance assessment for this award is as detailed above for Carolyn McCall.
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. The guideline is 400% of salary for the Chief Executive and 225% of salary for the Group CFO. Normally, 50% of the requirement must
be obtained within three years of appointment and the remainder within five years.
Shares counted towards satisfaction of the requirement include all beneficially-owned shares. When assessing the level of interest in ITV
shares, awards that are not subject to performance conditions (including vested LTIP awards subject to a holding period only, Deferred Share
Awards and Restricted Share Awards subject to an underpin only), may be considered on a net-of-tax basis.
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, legacy LTIP awards and proposed Restricted Share awards 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.
Executive Directors will normally be required to retain an interest equivalent to twice their Restricted Shares grant level (or the actual holding
on departure if lower) for two years following departure. This requirement will apply to shares acquired from the Company’s standard
incentive plans. The Committee will be formalising the implementation processes in place in order to enforce our post-employment
shareholding later in the year.
146
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
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 2020. 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
Graham Cooke
Margaret Ewing
Mary Harris
Anna Manz
Sharmila Nebhrajani
Duncan Painter
Interests in shares
Unconditional
shares held at
31 December
20201
Restricted
shares held at
31 December
20202
Notes
% shareholding
guidelines met3
Unconditional
shares held at
31 December
2019
% required
under
shareholding
guidelines
4
5
6
7
8
9
10
11
254,962
87,831
1,144,562
385,315
50,674
357,245
50,000
–
37,700
59,815
33,565
–
–
–
–
–
–
–
–
–
–
–
48
33
100
100
82
–
78
100
95
–
–
254,962
87,831
50,674
357,245
–
–
22,700
41,442
33,565
–
–
400
225
100
100
100
100
100
100
100
100
100
1. Shares beneficially held by Directors and family interests.
2. Unvested restricted share awards (under the DSA or Buyout 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 2020 (106.8 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. Following the vesting of the 2018 LTIP on 28 March 2021, she
is expected to have a shareholding equivalent to 52% of salary.
5. Chris Kennedy was appointed to the Board on 21 February 2019 and has until 2024 to meet his shareholding guidelines.
6. Edward Bonham Carter was appointed to the Board on 11 October 2018 and has until 2024 to meet his shareholding guidelines.
7. Graham Cooke was appointed to the Board on 1 May 2020 and has until 2026 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. Sharmila Nebhrajani was appointed to the Board on 10 December 2020 and has until 2026 to meet her shareholding guidelines.
11. Duncan Painter was appointed to the Board on 1 May 2018 and has until 2024 to meet his shareholding guidelines.
ITV plc Annual Report and Accounts 2020
147
Governance Remuneration Report continued
Outstanding interests under share plans
The following tables provide details of the Executive Directors’ interests in outstanding share awards.
At
1 January
2020
Notes
Awarded
in year
Vested
in year
Exercised
in year
Lapsed
in year
At
31 December
2020
Share price
used for
award (pence)
Share
option
price
(pence)
Share price
at date of
vesting
(pence)
Vesting date
Holding
period
ends
Carolyn McCall
Buyout awards
28 March 2018
1 209,049
–
–
–
–
209,049
145.25
28 March 2019
2 1,520,249
– 947,876
– 572,373
947,876
169.60
LTIP
28 March 2018
3 1,641,997
–
28 March 2019
6 April 2020
DSA
3 1,934,498
–
– 3,575,495
3, 4
28 March 2019
6 April 2020
309,860
–
5
–
692,767
Chris Kennedy
Buyout awards
28 March 2019
28 March 2019
28 March 2019
LTIP
6
6
6
166,179
24,532
147,187
–
–
–
28 March 2019
6 April 2020
3
3, 4
1,175,121
–
–
2,171,954
DSA
6 April 2020
SAYE
2 Sept 2019
7 April 2020
5
–
389,111
20,578
–
–
24,426
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 1,641,997
145.25
– 1,934,498
– 3,575,495
126.37
69.91
–
–
–
–
–
–
–
–
309,860
692,767
126.37
69.91
166,179
126.37
24,532
126.37
147,187
126.37
1,175,121
2,171,954
126.37
69.91
389,111
69.91
–
–
–
–
–
–
–
–
–
–
–
–
–
28 March
2021
–
–
19 Dec
2021
–
28 March
2021
28 March
2022
–
– 6 April 2023
28 March
–
2022
– 6 April 2023
28 March
2021
2 September
2021
2 September
2021
–
–
–
28 March
–
2022
– 6 April 2023
– 6 April 2023
1 November
2022
–
– 1 June 2022
– 20,578
–
–
–
24,426
109.33
92.11
87.47
73.69
1.
The buyout awards made in 2018 relate to the 2016/17 easyJet bonus – one-third deferred into shares for three years (209,049 ITV shares). The value reflects award forfeited under
previous easyJet incentive arrangements and will vest and release over the same time horizons as the award that was 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. This award vested at 62.35% and the vesting shares are subject to a holding period releasing in December 2021.
3. The 2018 LTIP performance conditions were met in December 2020. 8.83% of the award will vest in March 2021 and become exercisable after a two year holding period in
March 2023.
4. The face value of awards granted in 2020 under the LTIP to Carolyn McCall was £2,499,628 and Chris Kennedy was £1,518,143.
5. DSA awards made in 2020 for 2019 performance. There are no performance conditions attaching to the DSA.
6. Buyout awards made in 2019 to replace those forfeited by Chris Kennedy on joining ITV.
148
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
Performance conditions that apply to the unvested awards under the LTIP are summarised in the table below. Full details for the 2019
award were provided in the 2019 Remuneration Report. For awards made in 2020 see page 143.
Adjusted EPS
Annual non-NAR
growth
ITV Family SOV
Online viewing,
hours of VOD
consumption
growth
TSR v. cross sector
of UK companies
Weighting
40%
40%
10%
Threshold
vesting
20%
20%
20%
2018
2019
2020
Threshold
Maximum
Threshold
Maximum
Weighting
Threshold
Maximum
13p
17p
12.5p
17p
20%
12.5p
17p
3%
21.2%
6.5%
23.1%
3%
21.2%
6.5%
23.2%
40%
10%
3%
21.2%
6.5%
23.5%
10%
20%
200m
400m
200m
450m
10%
250m
20%
Median
500m
Upper
quartile
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 McCall1
Chris Kennedy
Company
Burberry Group plc
Whitbread plc
2020
£000
85
78
1. Carolyn McCall was appointed Senior Independent Director on 15 July 2020. In line with other Directors she waived 20% of her base fee for the period 1 April to 30 June 2020.
The Committee is satisfied that these commitments do not compromise their duties as Executive Directors of ITV plc.
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 2021. Details of tenure are set out in the table on page 95.
ITV plc Annual Report and Accounts 2020
149
Governance Remuneration Report continued
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 131.
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 £127k 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.
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
2020
£m
473
0
6,273
2019
£m
491
320
6,416
% Change
(3.66)
(100)
(2.23)
1. Employee pay is the total remuneration paid to all employees across ITV on a full-time equivalent basis. More detail is set out in note 2.1 of the Financial Statements.
2. Employee headcount is the monthly average number of employees across ITV on a full-time equivalent basis. More detail is set out in note 2.1 of the Financial Statements.
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
)
1
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
31/12/2011
31/12/2012
31/12/2013
31/12/2014
31/12/2015
31/12/2016
31/12/2017
31/12/2018
31/12/2019
31/12/2020
31/12/2021
ITV
FTSE 100
Source: Thomson Reuters Datastream
150
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
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
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
Carolyn McCall
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
1,103
3,122
3,695
225
2,050
3,632
3,881
4,842
8,399
2,915
2,158
1,350
661
–
87.5
73.6
–
97.9
40
96
94
93
91
88
95
83
8.83
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 2020 there was no bonus payment.
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 (2020 AGM)
Remuneration Policy (2020 AGM)
2,910,001,914
3,044,060,745
92.48
96.74
236,735,826
102,655,697
7.52 3,146,737,740
3.26 3,146,716,442
977,125
998,423
This Remuneration Report was approved by the Board on 9 March 2021 and signed on its behalf by -
Mary Harris
Chair, Remuneration Committee
9 March 2021
ITV plc Annual Report and Accounts 2020
151
Governance
Directors’ Report
The Directors present their Annual Report and the audited consolidated and parent company financial statements for the year ended
31 December 2020. 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 2020 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
Culture
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 2020 financial year
Research and development
Stakeholder engagement and Company’s business relationships
Page number
See page 47
See pages 88 to 110
See pages 105 to 108
See page 149
See pages 102 to 105
See pages 50 to 52
See pages 20 to 23
See page 95
See pages 28 to 41
See pages 97 to 105
Corporate
Articles of Association: The Articles of Association may only be amended by special resolution of the shareholders. The current Articles
are available on our website. A resolution to amend the Articles will be proposed at the forthcoming AGM.
www.itvplc.com/investors/governance
Auditor: The external auditor for the 2020 financial year was KPMG LLP. The Independent Auditors’ Report starting on page 158 sets out
the information contained in the Annual Report which has been audited by the external auditor.
In 2019 the Audit and Risk Committee undertook an external audit tender and PricewaterhouseCoopers LLP was proposed as the external
auditor, with its appointment to take effect from, and including, the 2021 financial year. Accordingly, a resolution to appoint
PricewaterhouseCoopers LLP as external auditor to the Company from 2021 will be proposed at the forthcoming AGM.
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 to sub investment grade). 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 change of control following a takeover bid.
Dividends: The Board is not proposing payment of a final dividend for the year ended 31 December 2020. For more information please
refer to page 58.
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 2020 AGM. During 2020 there were no payments made by the Group falling within this definition (2019: nil). The Directors will
seek to renew this authority at the 2021 AGM.
Branches: Branches of the Group outside the United Kingdom are indicated in the Subsidiary undertakings and investments section on
pages 241 to 245.
152
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
Directors
Appointments: A table showing Directors who served in the year and to the date of this report can be found on page 95. Biographies for
Directors currently in office can be found on pages 90 and 91 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, Non-executive Directors are appointed for an initial three year period and annually thereafter. Each Director will
retire and submit themselves for election or re-election at the forthcoming AGM.
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 2020 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 2020 financial year and up to the date of this report. These
standard authorities will expire on 24 July 2021 or at the conclusion of the 2021 AGM, whichever is earlier. The Directors will seek to renew
the authorities at the AGM In 2021.
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 indemnity, which constitutes a qualifying third party indemnity as defined in Section 234 of
the Companies Act 2006, was in force during the 2020 financial year.
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 72 to 85. Note 4.3 to the financial statements
on page 218 gives details of the Group’s financial risk management policies and related exposures. Note 4.3 incorporated by reference and
deemed to form part of this report.
Going concern: The going concern statement is set out on page 173. The statement is incorporated by reference and deemed to form part
of this report.
Subsequent events: On 3 March 2021, the UK Government announced a change in the UK corporation tax rate from 19% to 25% with
effect from 1 April 2023. The rate change has not yet been enacted into law and therefore is not reflected in the deferred tax assets or
liabilities as at 31 December 2020. The impact on deferred tax assets and liabilities is not expected to be material.
ITV plc Annual Report and Accounts 2020
153
Governance Directors’ Report continued
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 colleagues, 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 has been led by our Global Data
Protection Officer. The work includes making improvements to our data governance framework and delivering our data privacy function
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.
ITV Pension Scheme (the Scheme): The Scheme is predominantly a defined benefit (DB) scheme, which is closed to future accrual, but
also includes a small 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
six directors including the Chair — four appointed by the Company and two nominated by the members. The Company-appointed trustee
directors include the Chair and two professional independent trustees.
Currently, the trustee has two committees: Investment 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 the main DB scheme was carried out as at
1 January 2017. Discussions are in progress relating to the latest actuarial valuation due as at 1 January 2020 and it is expected that the
process will be completed by 31 March 2021.
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 fixed term and permanent employees are invited to join the Plan
after completing the required time in the Company’s auto-enrolment (AE) arrangement – the AE Section of the Plan, which was set up on
1 April 2020. 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. There is currently a vacancy that will
be filled by 30 June 2021. 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 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
nominated by the members. It is the responsibility of the trustee to have in place appropriate training for its directors. The governance
framework for managing the UTV Scheme and developing the board is in line with that in place for the Scheme.
154
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
Full valuations are carried out every three years. The latest completed actuarial valuation was carried out as at 1 July 2017. Discussions are
in progress relating to the latest actuarial valuation due as at 1 July 2020 and it is expected that the process will be completed by
30 September 2021. The trustee board has adopted the Pensions Regulator’s integrated risk management framework taking a holistic
approach and looking at how risks around the employer covenant, funding and investment strategy are all linked and inter-dependent.
A cashflow driven investment strategy was introduced from March 2018.
The People’s Pension: Since 2013, employers within the Group have been required to enrol all eligible individuals into a pension scheme
automatically (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). For freelancers and employees not eligible to join the DC Plan 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 2020 financial year 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. The Company is not aware of any agreements between shareholders that may result in restrictions on
the transfer of securities and/or voting rights. 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 of the Financial Statements. 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 as at
31 December 2020 are set out in note 4.8. 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 9 March 2021, 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. However these holdings are likely to have changed since notified to the Company;
notification of any change is not required until the next applicable threshold is crossed.
The number of shares is based on announcements made by each relevant shareholder using the Company’s issued share capital at
that date.
Liberty Global Incorporated Limited
Ameriprise Financial, Inc and its group
% of interest
in shares
9.90
5.08
Nature of
interest
in shares
Total number
of shares
as notified
Indirect 398,515,510
Indirect 204,366,654
ITV plc Annual Report and Accounts 2020
155
Governance Directors’ Report continued
Statement of Directors’
Responsibilities
The Directors consider that the Annual
Report and Accounts, taken as a whole,
is fair, balanced and understandable and
provides the information necessary for
shareholders to assess the Group’s
position and performance, business
model and strategy.
Each of the Directors, whose name and
function are listed on pages 90 and 91,
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 Company 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 2020.
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.
156
ITV plc Annual Report and Accounts 2020
The Directors are responsible for preparing the Annual Report and Accounts and the
Group and parent Company financial statements in accordance with applicable law and
regulations. Company law requires the Directors to prepare Group and parent
Company financial statements for each financial year. Under that law they are required
to prepare the Group financial statements in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006 and
applicable law. In addition, the Group financial statements are required under the UK
Disclosure Guidance and Transparency Rules to be prepared in accordance with
International Financial Reporting Standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union (“IFRSs as adopted by the EU”). They
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 international accounting standards in conformity with the
requirements of the Companies Act 2006 and International Financial Reporting
Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union (“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 comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Company’s website. Legislation in the UK
governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
By order of the Board
Chris Kennedy
Group CFO
9 March 2021
ITV plc
Registered Number: 4967001
> 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 and other stakeholders. 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 Subsequent events
5.4 Subsidiaries exempt from audit
ITV plc Company Financial Statements
Notes to the ITV plc Company Financial Statements
158
167
167
168
169
170
172
173
177
177
183
184
187
189
189
194
196
201
203
203
205
214
214
216
218
222
223
225
226
227
229
229
230
230
231
232
234
ITV plc Annual Report and Accounts 2020
157
157
Strategic ReportGovernanceFinancial StatementsAdditional Information
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 2020 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 throughout the financial statements.
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 2020
and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006;
• 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 to the extent applicable.
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 17 financial years ended 31 December 2020. 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.
Going concern: Risk vs 2019: New
Refer to page 118 (Audit and Risk Committee report), pages 173 and 174 (accounting policy) and pages 173 and 174 (financial disclosures)
The risk
Our response
Disclosure quality
The financial statements explain how the Board has formed a
judgement that it is appropriate to adopt the going concern basis of
preparation for the Group and parent Company.
That judgement is based on an evaluation of the inherent risks to the
Group’s and Company’s business model and how those risks might
affect the Group’s and Company’s financial resources or ability to
continue operations over a period of at least a year from the date of
approval of the financial statements.
The risks most likely to adversely affect the Group’s and Company’s
available financial resources and/or metrics relevant to debt
covenants over this period were:
• A prolonged downturn in the television advertising market;
• Cancellation or inability to re-commission a number of key formats,
alongside a lack of growth in the new formats in the Studios
business;
• Significant increase in the Group’s pension funding obligations;
• Significantly larger than estimated cash settlements for ongoing
litigations and earnout payments.
We considered whether these risks could plausibly affect the liquidity
or covenant compliance in the going concern period by assessing the
directors’ sensitivities over the level of available financial resources
and covenant thresholds indicated by the Group’s financial forecasts
taking account of severe, but plausible, adverse effects that could
arise from these risks individually and collectively.
Our procedures also included:
• Funding assessment: assessment of the financing arrangements
currently in place and the actions taken by the Group, including
covenant waivers, and headroom in existing facilities;
• Historical comparisons: assessment of the directors’ track record
of forecasts vs actual cashflows by analysing actual results for the
past five years against forecasts for those periods;
• Key dependency assessment: identification of critical factors in
determining whether there is a risk of failure with reference to our
knowledge of the business and the audit work performed on the
areas such as revenue, earnout liabilities, pensions, litigation and
principal risks. We used our knowledge of inter-dependencies in our
assessment of the severe but plausible downside.
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ITV plc Annual Report and Accounts 2020
158
Financial Statements
> Independent Auditor’s Report to the members of ITV plc
The risk for our audit was whether or not those risks were such
that they amounted to a material uncertainty that may have cast
significant doubt about the Group’s ability to continue as a going
concern. Had they been such, then that fact would have been
required to have been disclosed.
• Sensitivity analysis: considering sensitivities over the level of
available financial resources indicated by the Group’s financial
forecasts taking account of plausible (but not unrealistic) adverse
effects that could arise from these risks individually and collectively;
• Benchmarking assumptions: critically assessing the key
assumptions in the base and downside scenarios in relation to
specific risks with reference to market trends (for advertising, as
well as scripted and non-scripted Studios productions), third-party
economic forecasts and ITV’s performance in period, assessment of
secured bookings underpinning revenue forecasts, and our findings
in relation to the work performed on other areas of the audit such
as pensions, earnout liabilities and litigations.
• Evaluating directors’ intent: evaluating the achievability of the
actions the directors consider they would take to improve the
position should the risks materialise, which included: reducing the
programming budget, capital and investment expenditure;
suspending payment of discretionary bonuses; and further
reductions in operational and overhead costs, taking into account
the extent to which the directors can control the timing and
outcome of these.
• Assessing transparency: considering whether the going concern
disclosure in Section 1 to the financial statements gives a full and
accurate description of the Directors’ assessment of going concern,
including the identified risks, dependencies, and related sensitivities.
Our results:
We found the going concern disclosure indicating no material
uncertainty to be acceptable (2019 result: acceptable).
Total Advertising Revenue: £1,577 million (2019: £1,768 million) Risk vs 2019: ◄►,
Refer to page 120 (Audit and Risk Committee report), pages 177 and 178 (accounting policy) and pages 178 to 180 (financial disclosures)
The risk
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
accumulated 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 reflecting the agency’s contractual entitlement to an airtime
credit. Net deal credit positions are not recognised.
Our response
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; link to transmission/viewer data; invoicing post
transmission 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, contracts and
agreed terms of business.
• Tests of details: 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 (2019: acceptable).
ITV plc Annual Report and Accounts 2020
159
159
Strategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Independent Auditor’s Report to the
members of ITV plc continued
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.
Earnout liability: £164 million (2019: £165 million) Risk vs 2019: ◄►
Refer to page 119 (Audit and Risk Committee report), page 192 (accounting policy) and page 192 (financial disclosures)
The risk
Our response
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 ended 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 2020 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.
Whilst the earnout period has ended, the final payment has not
yet been made as the parties are still in dispute over the treatment
of certain transactions under the SPA, an external arbiter was
appointed in the year.
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.
We performed the tests below rather than seeking to rely on any of
the group’s controls because the nature of the balance is such that we
would expect to obtain audit evidence primarily through the detailed
procedures described.
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 of items under discussion with the
previous owners in the calculation of the estimated liability, and
whether there is any new information which indicates that the
assumptions used in the calculation of the estimate are no longer
appropriate.
• Tests of details: assessing whether the basis of the calculation
of the earnout payment remains appropriate with reference
to the terms of the Sale and Purchase Agreement and latest
correspondence between the parties on the matter. We challenged
the directors on their treatment of certain transactions including
the insured trade receivable for the purpose of the calculation with
reference to the contract terms.
• 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 (2019: acceptable).
160
ITV plc Annual Report and Accounts 2020
160
Financial Statements
> Independent Auditor’s Report to the members of ITV plc
Gross defined benefit pension scheme obligations £4,120 million (2019: £4,037 million) Risk vs 2019: ◄►
Refer to page 120 (Audit and Risk Committee report), pages 205 and 206 (accounting policy) and pages 206 to 213 (financial disclosures)
The risk
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 response
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 (2019: acceptable).
Recoverability of the parent Company’s investment in, and amounts due from, its subsidiaries Investment carrying value £2,733 million
(2019: £2,733 million), and amounts due from subsidiaries £4,291 million (2019: £4,541 million) Risk vs 2019: ◄►
Refer to page 236 (accounting policy and financial disclosures)
The risk
Our response
Low risk, high value
The carrying amount of the parent Company’s investments in, and
amounts due from, its subsidiaries represents 36% and 57% (2019:
37% and 61%) 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.
We performed the tests below rather than seeking to rely on any of
the group’s controls because the nature of the balance is such that we
would expect to obtain audit evidence primarily through the detailed
procedures described.
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, where relevant,
whether those subsidiaries have historically been profit-making.
Our results:
We found the carrying amounts of investments and the of
intercompany receivables to be acceptable (2019: acceptable).
We continue to perform procedures over non-advertising revenue. However, following completion of our procedures, we have not identified
revenue recognition complexities that required additional audit effort. We therefore have not assessed this as one of the most significant risks
in our current year audit and, therefore, it is not separately identified in our report this year.
ITV plc Annual Report and Accounts 2020
161
161
Strategic ReportGovernanceFinancial StatementsAdditional Information
> Independent Auditor’s Report to the members of ITV plc
Independent Auditor’s Report to the
members of ITV plc continued
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 £19.0m (2019: £23.0m) determined with reference to a benchmark of the
88% of the three year average of the Group’s normalised profit before tax averaged across 3 years. In 2020, materiality represents 4.8% of this
benchmark of £395m, (2019: 4.9% of Group profit before tax normalised to exclude a gain on sale of non-current assets, of £468m).
Performance materiality was set at 75% (2019: 75%) of materiality for the financial statements as a whole, which equated to £14.25m (2019:
£17.25m) for the group and £13.5m (2019: £16.5m) for the parent company. We applied this percentage in our determination of performance
materiality because we did not identify any factors indicating an elevated level of risk.
In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold,
performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account
balances add up to a material amount across the Financial Statements as a whole.
Materiality for the parent Company financial statements as a whole was set at £18.0m (2019: £22.0m), determined with reference to a
benchmark of the company total assets, of which it represents 0.2% (2019: 0.3%).
We agreed to report to the Audit and Risk Committee any corrected or uncorrected identified misstatements exceeding £0.95m (2019: £1.15m),
in addition to other identified misstatements that warranted reporting on qualitative grounds.
Scoping and coverage
Revenue
Full scope audit
78%
Specified risk-based
audit procedures
Out of scope
9%
13%
Profit before tax
Full scope audit
Specified risk-based
audit procedures
Out of scope
94%
2%
4%
Total assets
Full scope audit
89%
Specified risk-based
audit procedures
Out of scope
6%
5%
Of the Group's 6 (2019: 6) components, we subjected 3 (2019: 3) to full scope audits for Group purposes and 2 (2019: 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, 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 the component. 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 £3 million to £18.0 million (2019: £2.5 million to
£22.0 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
(2019: 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. Virtual meetings were held with component auditors throughout the audit. 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 87% (2019: 86%) of Group revenue, 96% (2019: 97%) of Group profit
before taxation; and 95% (2019: 92%) of total Group assets.
4 Going concern
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Company
or to cease their operations, and as they have concluded that the Group’s and the Company’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”).
An explanation of how we evaluated the directors’ assessment of going concern is set out in the related key audit matter in section 2 of this report.
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> Independent Auditor’s Report to the members of ITV plc
Our conclusions based on this work:
• we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate;
• we have not identified, and concur with the directors’ assessment that there is not, a material uncertainty related to events or conditions
that, individually or collectively, may cast significant doubt on the Group’s or Company's ability to continue as a going concern for the going
concern period;
• we have nothing material to add or draw attention to in relation to the directors’ statement in Note 1 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 the going concern period, and we found the going concern disclosure in note 1 to be acceptable; and
• the related statement under the Listing Rules set out on page 153 is materially consistent with the financial statements and our audit
knowledge.
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 above conclusions are not a guarantee that the Group or the Company will
continue in operation.
5 Fraud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or
pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:
• Enquiring of directors, the audit committee, internal audit and inspection of policy documentation as to the Group’s high-level policies
and procedures to prevent and detect fraud, including the internal audit function, and the Group’s channel for “whistleblowing”, as well
as whether they have knowledge of any actual, suspected or alleged fraud.
• Reading Board, and audit committee minutes.
• Considering remuneration incentive schemes and performance targets for management and directors, including the EPS target for
management remuneration.
• Using analytical procedures to identify any unusual or unexpected relationships
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit.
This included communication from the group to component audit teams of relevant fraud risks identified at the Group level and request to
component audit teams to report to the Group audit team any instances of fraud that could give rise to a material misstatement at group.
As required by auditing standards, and taking into account possible pressures to meet profit targets, recent revisions to guidance, and our
overall knowledge of the control environment, we perform procedures to address the risk of management override of controls and the risk
of fraudulent revenue recognition, in particular the risk that advertising revenue and non-advertising revenue is recorded in the wrong period
and the risk that Group and component management may be in a position to make inappropriate accounting entries, and the risk of bias in
accounting estimates and judgements such as revenue recognition, impairment of assets, provisions for onerous contracts, and acquisition-
related liabilities.
Further detail in respect of total advertising revenue is set out in the key audit matter disclosures in section 2 of this report
In determining the audit procedures we took into account the results of our evaluation and testing of the operating effectiveness of the
Group-wide fraud risk management controls. We did not identify any additional fraud risks.
We also performed procedures including:
• Identifying journal entries to test for all full scope components based on risk criteria and comparing the identified entries to supporting
documentation. These included unusual account pairings and those posted to unusual accounts.
• Challenging the year-end deal debt positions based on comparison with customers’ correspondence and agreed terms of business.
• Testing that the revenue is recognised post transmission by testing IT controls and by agreeing invoices to subsequent cash receipts on
a sample basis.
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Strategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Independent Auditor’s Report to the
members of ITV plc continued
Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations
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 and through discussion with the directors and other management (as required by auditing
standards), and 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 the Group level, and a request for component auditors to report
to the group team any instances of non-compliance with laws and regulations that could give rise to a material misstatement at group.
The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly affect the financial statements including financial reporting legislation
(including related companies legislation), distributable profits legislation, taxation legislation and we assessed the extent of compliance with
these laws and regulations as part of our procedures on the related financial statement items.
Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on
amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or the loss of the Group’s license
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.
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. Therefore if a breach of operational regulations is not
disclosed to us or evident from relevant correspondence, an audit will not detect that breach.
We discussed with the audit committee matters related to actual or suspected breaches of laws or regulations, for which disclosure
is not necessary, and considered any implications for our audit.
Context of the ability of the audit to detect fraud or breaches of law or regulation
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 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 fraud, as these may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We
are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.
6 We have nothing to report on the other information in the Annual Report
The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion
on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly
stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the
information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work
we have not identified material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
• we have not identified material misstatements in the strategic report and the directors’ report;
• in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
• in our opinion those reports have been prepared in accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006.
164
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Financial Statements
> Independent Auditor’s Report to the members of ITV plc
Disclosures of emerging and principal risks and longer-term viability
We are required to perform procedures to identify whether there is a material inconsistency between the directors’ disclosures in respect
of emerging and principal risks and the viability statement, and the financial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or draw attention to in relation to:
• the directors’ confirmation within the viability statement on page 85 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 and Emerging Risks disclosures describing these risks and how emerging risks are identified, 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.
We are also required to review the viability statement, set out on page 85 under the Listing Rules. Based on the above procedures, we have
concluded that the above disclosures are materially consistent with the financial statements and our audit knowledge.
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.
Corporate governance disclosures
We are required to perform procedures to identify whether there is a material inconsistency between the directors’ corporate governance
disclosures and the financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of the following is materially consistent with the financial statements and our audit
knowledge:
• 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;
• the section of the annual report describing the work of the Audit Committee, including the significant issues that the audit committee
considered in relation to the financial statements, and how these issues were addressed; and
• the section of the annual report that describes the review of the effectiveness of the Group’s risk management and internal control systems.
We are required to review the part of Corporate Governance Statement relating to the Group’s compliance with the provisions of the UK
Corporate Governance Code specified by the Listing Rules for our review. We have nothing to report in this respect.
Based solely on our work on the other information described above:
• with respect to the Corporate Governance Statement disclosures about internal control and risk management systems in relation to
financial reporting processes and about share capital structures:
• we have not identified material misstatements therein; and
• the information therein is consistent with the financial statements; and
• in our opinion, the Corporate Governance Statement has been prepared in accordance with relevant rules of the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority.
7 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.
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Strategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Independent Auditor’s Report to the
members of ITV plc continued
8 Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 156, 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 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 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.
9 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
9 March 2021
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ITV plc Annual Report and Accounts 2020
166
Financial Statements
Financial 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
2.4
2.4
2020
£m
2,781
(2,425)
356
2019
£m
3,308
(2,773)
535
561
(118)
(87)
356
2
(46)
(44)
9
4
325
(44)
281
285
(4)
281
7.1p
7.1p
693
(84)
(74)
535
12
(80)
(68)
1
62
530
(52)
478
473
5
478
11.8p
11.8p
ITV plc Annual Report and Accounts 2020
167
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Strategic ReportGovernanceFinancial StatementsAdditional Information
> Primary Statements
Consolidated Statement of Comprehensive Income
For the year ended 31 December
Profit for the year
Other comprehensive loss:
Items that are or may be reclassified to profit or 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)
Items that will never be reclassified to profit or loss
Remeasurement gains/(losses) on defined benefit pension schemes
Income tax (charge)/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
2020
£m
281
4
(6)
(19)
5
(1)
(17)
264
268
(4)
264
2019
£m
478
9
(17)
(11)
(134)
20
(133)
345
340
5
345
168
ITV plc Annual Report and Accounts 2020
168
Financial Statements
Financial 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
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
4.1, 4.2
4.6
4.3
3.1.4
3.1.5
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
31 December
2020
£m
31 December
2019
£m
285
1,545
77
2
18
7
22
62
34
2,052
308
458
46
504
409
6
6
668
1,901
(7)
(22)
(7)
(959)
(54)
(1,013)
(271)
(25)
(59)
(1,404)
497
(1,078)
(83)
(24)
(110)
(20)
(61)
(22)
(1,398)
1,151
403
174
224
7
18
296
1,122
29
1,151
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
169
169
The accounts were approved by the Board of Directors on 9 March 2021 and were signed on its behalf by:
Chris Kennedy
Group Chief Financial Officer
ITV plc Annual Report and Accounts 2020
Strategic 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
224
32
14
1
Non-
controlling
interests
£m
30
Total
£m
848
Total
equity
£m
878
Balance at 1 January 2020
Total comprehensive income/(loss)
for the year
Profit/(loss) 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 gains on defined
benefit pension schemes
Income tax charge 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
Balance at 31 December 2020
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
403
–
–
174
–
–
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
–
–
(6)
(19)
(25)
(25)
–
–
–
–
–
–
7
–
4
–
–
–
–
4
4
–
–
–
–
285
285
(4)
281
–
–
–
5
(1)
4
4
(6)
(19)
5
(1)
(17)
–
–
–
–
–
–
4
(6)
(19)
5
(1)
(17)
289
268
(4)
264
–
6
3
–
6
3
–
9
(3)
296
–
9
(3)
1,122
–
–
18
(1)
–
–
–
(1)
4
29
(1)
6
3
–
8
1
1,151
170
ITV plc Annual Report and Accounts 2020
170
Financial Statements
> Primary Statements
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 losses 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
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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
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
(a) Movements reported in merger and other reserves include a put option for the acquisition of non-controlling interests.
ITV plc Annual Report and Accounts 2020
171
171
Strategic ReportGovernanceFinancial StatementsAdditional Information
> Primary Statements
Consolidated Statement of Cash Flows
For the year ended 31 December
Note
£m
2.1
2.2
3.4
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
Decrease/(increase) in exceptional prepayments and other receivables
Cash (outflow)/inflow from exceptional items
Cash generated from operations
Defined benefit pension deficit funding
Interest received
Interest paid on bank, other loans and lease liabilities*
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
Proceeds from sale of subsidiaries and available for sale investments
Loans granted to associates and joint ventures
Loans repaid by associates and joint ventures
Dividends received from investments
Net cash (outflow)/inflow 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 in cash and cash equivalents
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
* Included in Interest paid on bank, other loans and lease liabilities is £4 million relating to lease liabilities (2019: £4 million)
(118)
47
3
(59)
13
(34)
(88)
–
(35)
(31)
(18)
4
–
5
(2)
5
–
(7)
5
(22)
–
(2)
(1)
(1)
2020
£m
761
(68)
693
(168)
525
2019
£m
696
12
708
(240)
468
£m
(84)
98
(2)
(74)
30
(88)
(108)
(11)
(30)
(38)
(18)
–
146
(5)
1
1
(72)
46
(931)
968
(31)
(320)
(41)
(2)
(4)
(28)
425
246
(3)
668
(361)
153
95
(2)
246
172
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ITV plc Annual Report and Accounts 2020
Financial Statements
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 2020 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.
These Group financial statements were prepared in accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
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
The management and Board of Directors of ITV plc continue to closely monitor the COVID-19 situation and its impact
on business performance and the Group’s liquidity position.
As at 31 December 2020, the Group was in a reported net debt position of £545 million (2019: £893 million) with a
positive gross cash position.
The Group had £618 million of unrestricted cash, a £630 million committed and undrawn Revolving Credit Facility
expiring in December 2023 and a £300 million committed bilateral facility expiring in June 2026, of which £199 million
was available at 31 December 2020, providing £1,447 million of liquidity. In addition, bond repayments only commence
in September 2022 and there are no financial covenants in relation to the bonds in issue although there are cross
default provisions.
The Revolving Credit Facility (RCF) is subject to leverage and interest cover semi-annual covenant tests that require the
Group to maintain a leverage ratio of below 3.5x and interest cover above 3.0x (as defined in the RCF documentation),
however, as a precautionary measure, the Group was granted replacement covenants for the tests at June 2020,
December 2020 and June 2021. During this period two replacement covenants apply: a covenant net debt cap of
£1.8 billion and a minimum covenant liquidity requirement of £250 million, which will be tested quarterly. As at
31 December 2020, the Group had covenant net debt of £432 million (30 June 2020: £679 million) and covenant
liquidity of £1,497 million (30 June 2020: £1,264 million). The leverage and interest cover tests will be tested again
on 31 December 2021.
The Directors have prepared forecasts for three cash flow scenarios (mid, high, and low cases), for the period of one
year from the date of approval of these consolidated financial statements. The mid case scenario is the basis for the
2021 budget. The key assumptions in the scenarios relate to the degree of recovery of the advertising market and the
scale and timing of productions for ITV Studios. All scenarios assume an impact from lockdowns and continued
structural changes in the advertising market and to viewing habits.
The Directors have also considered a number of sensitivities to the mid case scenario to arrive at a severe but plausible
scenario that has been used to assess the appropriateness of preparing these consolidated financial statements using
the going concern concept. These sensitivities include an increase in acquisition-related items, increased pension
contributions, lost and/or delayed Studios productions, and an increased rate of decline in advertising revenue in
comparison to 2019.
In the severe but plausible downside scenario the Group experiences significant loss of profit and cash outflows but
remains able to operate within its financial covenants and has adequate covenant liquidity available throughout the
period of review.
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Financial Statements
Notes to the Financial Statements
Section 1: Basis of Preparation continued
The Directors will continue to monitor the changing impact of COVID-19 and the Group’s performance against the
scenarios. Management continue to manage costs and cash appropriately. The Directors recognise the importance
of the dividend to our shareholders and intend to restore dividend payments as soon as circumstances permit. The
Directors will balance shareholder returns with our commitment to maintain investment grade metrics over the
medium term, to continue to invest behind the strategy and with the ongoing uncertainty with COVID-19. In 2020,
no dividend payments were made (2019: £320 million).The Directors do not currently intend to pay any dividends
during 2021.
Consequently, the Directors are confident that the Group will have sufficient funds to continue to meet its liabilities as
they fall due for at least 12 months from the date of approval of these consolidated financial statements and therefore
have prepared the consolidated financial statements on a going concern basis.
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.
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/liabilities at fair value through OCI – measured at fair value through other comprehensive income –
separately disclosed as derivative financial instruments in assets/liabilities
• 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.
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174
Financial Statements
> Section 1: Basis of Preparation
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. 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.
Non-monetary assets and liabilities measured at historical cost are translated into pounds sterling at the exchange
rate on the date of the transaction.
The assets and liabilities of Group companies outside of the UK are translated into pounds sterling at the year end
exchange rate. The revenue, expenses and other comprehensive income 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.
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. Additional detail on the judgements applied by
Management are set out in the accounting policies section of the relevant notes:
• Revenue recognition (note 2.1)
• Acquisition-related liabilities (note 3.1.4 and note 3.1.5)
• Defined benefit pension (note 3.7)
• Provisions related to Box Clever (note 3.6)
• Impairment of intangible assets (note 3.3)
A summary of the key sources of estimation uncertainty is detailed below. Additional detail on the estimates,
underlying assumptions and related sensitivities (where applicable) is given in the relevant notes.
Defined benefit pension and acquisition-related liabilities are 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 determining the estimate for the Box Clever provision, management has provided for the initial offer made to the
Pensions Regulator (tPR), which is the Directors’ and Management’s current best estimate (see note 3.7). No provision
was held at 31 December 2019 as the Financial Support Direction (FSD) had not yet been issued and Management could
not reliably estimate the provision.
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Strategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Financial Statements
Section 1: Basis of Preparation continued
In addition to the above, there are a number of areas which involve a high degree of estimation and are significant to
the financial statements but are not expected to have a material impact on them in the next 12 months. These areas
include the reviews of the carrying value of goodwill and intangible assets, onerous contract and impairment provisions
in relation to sports rights reviewed as a result of the COVID-19 pandemic and its economic effects and taxation.
More detail on each of these items is given in the relevant notes.
New or amended EU endorsed accounting standards
The following new standards and/or amendments are effective 1 January 2020:
Changes in significant accounting policies
Accounting standard
Requirement
IFRS 3 'Business
combinations'
The amendment provides entities with clearer application guidance to help distinguish
between a business and a group of assets when applying IFRS 3.
IAS 1 'Presentation of
financial statements' and
IAS 8 'Accounting policies,
changes in accounting
estimates and errors'
The amendment clarifies the definition of material throughout IFRSs and the Conceptual
Framework for Financial Reporting.
IFRS 9, IAS 39 and IFRS 17:
– Interest rate benchmark
reform
The amendments provide temporary reliefs which enable hedge accounting to continue
during the period of uncertainty before the replacement of an existing interest rate
benchmark with an alternative nearly risk-free interest rate.
Amendments to the
Conceptual framework
The revised Framework will be used in future standard-setting decisions, but no changes
will be made to current IFRS. Preparers might also use the Framework to assist them in
developing accounting policies where an issue is not addressed by an IFRS.
IFRS 16 ‘Leases’
In response to the COVID-19 coronavirus pandemic, the amendments to IFRS 16 ‘Leases’
to allow lessees not to account for rent concessions as lease modifications if they are a
direct consequence of COVID-19 and meet certain conditions.
EU endorsed accounting standards effective in future periods
The above changes in accounting policies have been effective throughout 2020 but have not had a significant impact
on the Group’s results or Statement of Financial Position.
The Directors have also considered the impact on the Group of new and revised accounting standards, interpretations
or amendments that are currently endorsed but not yet effective and do not expect them to have a significant impact
on the Group’s results and Statement of Financial Position.
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ITV plc Annual Report and Accounts 2020
176
Financial Statements Financial Statements
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) (as defined in
the APMs) 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
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
• Payment term is over
territory, media and period. Licence revenue is recognised when the
licence period has commenced (point in time)
the term of the
contract
Programme
distribution rights
• 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 (point in time)
• Payment term is over
the term of the
contract
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Strategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Financial Statements
Section 2: Results for the Year continued
Segment
Major classes of revenue
Payment terms
Broadcast
Total advertising
revenue
Direct to
Consumer
• Net advertising revenue 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
• Pay revenue 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 (point in time)
• Interactive revenue is earned from entries to competitions and is
recognised as the event occurs (point in time)
• 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 digital
• Payment term is over
multiplex and is recognised over the term of the contract
the term of the
contract
The results for the year aggregate these classes of revenue into the following categories:
ITV Studios UK
ITV Studios US
ITV Studios International
Global Formats and Distribution
Total ITV Studios*
Total advertising revenue (‘TAR’)
Direct to consumer
SDN
Other
Total Broadcast
Total revenue**
2020
£m
535
234
343
258
1,370
1,577
87
73
153
1,890
3,260
2020
% of total
42%
48%
58%
2019
£m
725
271
508
318
1,822
1,768
84
69
142
2,063
3,885
2019
% of total
47%
46%
53%
* 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 as discussed in the APMs.
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178
Financial Statements
> 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 2020 and 31 December 2019 are, therefore, ITV Studios and
Broadcast, the results of which are outlined in the following tables:
Total segment revenue
Intersegment revenue
Revenue from external customers
ITV Studios(i)
2020
£m
Broadcast
2020
£m
Consolidated
2020
£m
1,370
(472)
898
1,890
(7)
1,883
3,260
(479)
2,781
Adjusted EBITA(ii)
152
421
573
Total segment revenue
Intersegment revenue
Revenue from external customers
Adjusted EBITA(ii)
ITV Studios(i)
2019
£m
Broadcast
2019
£m
Consolidated
2019
£m
1,822
(573)
1,249
2,063
(4)
2,059
3,885
(577)
3,308
267
462
729
(i) Revenue of £312 million (2019: £394 million) was generated in the US during the year; the US represented £346 million (2019: £312 million) of non-current
assets at year end. Intersegment revenue originates mainly in the UK.
(ii) Adjusted EBITA is reported EBITA adjusted to exclude exceptional items and includes the benefit of production tax credits. It is stated 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 £1,985 million (2019: £2,213 million), and revenue from external customers in other countries is £796 million (2019:
£1,095 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
informs 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 are two media buying agencies (2019: one) acting on behalf of a number of advertisers that represent the
Group’s major customers. These agencies are the only customers that individually represent over 10% of the Group’s
revenue. Revenue of approximately £775 million (2019: £551 million) was derived from these customers. This revenue
is attributable to the Broadcast segment.
In October 2020, the Group announced a restructure within its Broadcast segment to better reflect and serve the
changing viewing habits. Broadcast will be renamed Media and Entertainment and will continue to include Broadcast
and On-Demand services. The restructure will be effective from 1 April 2021 and is, therefore, not reflected in these
financial statements.
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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
2020
£m
2019
£m
2020
£m
2019
£m
Products and services
transferred at a point in time
Products and services
transferred over time
1,585
684
94
2,363
1,771
944
92
2,807
298
114
6
418
288
200
13
501
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.
2021
£m
125
240
365
2022
£m
101
162
263
2023
£m
23
21
44
Beyond
£m
19
26
45
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).
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 68% of ITV main channel spend on commissioned programming (2019: 65%). 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 ten 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 was reorganised, with effect from 1 January 2020, into three centres of
excellence – The Creative Network, Global Distribution and Global Entertainment. This enables 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.
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.
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Financial Statements
> 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 non-IFRS 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 28 to 41 for the detailed explanation of the Group’s use of adjusted performance measures. A reconciliation of
adjusted EBITA to reported 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)
Reported profit before tax
Ref.
2.2
4.4
2020
£m
573
(12)
561
(118)
(87)
(44)
9
4
325
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
Reported 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
Decrease/(increase) in programme rights and distribution rights
Decrease/(increase) in receivables and contract assets
Increase/(decrease) in payables and contract liabilities
Movement in working capital
Cash generated from operations before exceptional items
Ref.
4.4
2.2
3.2
4.8
2020
£m
325
(4)
(9)
44
118
57
87
6
16
2
119
137
761
2019
£m
729
(36)
693
(84)
(74)
(68)
1
62
530
2019
£m
530
(62)
(1)
68
84
56
74
10
(18)
(37)
(8)
(63)
696
Operating costs
The major components of operating costs of £2,425 million (2019: £2,773 million) are network schedule costs of
£935 million (2019: £1,091 million), staff costs of £473 million (2019: £491 million), depreciation, amortisation and
impairment of £144 million (2019: £130 million) and operating exceptional items of £118 million (2019: £84 million).
During the year, the Group received £21 million income under government support schemes resulting from the
Covid-19 pandemic. This income is netted against staff costs.
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.
2020
£m
382
55
6
30
473
(191)
282
ITV plc Annual Report and Accounts 2020
2019
£m
400
53
10
28
491
(199)
292
181
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Financial Statements
Notes to the Financial Statements
Section 2: Results for the Year continued
Full-time equivalent employees (FTEE) include those FTEEs that are allocated to the cost of productions during the
year, however they exclude short-term contractors and freelancers who are engaged on productions. The weighted
average FTEE over the year is:
ITV Studios
Broadcast
2020
3,893
2,380
6,273
2019
4,205
2,211
6,416
The decrease in full-time equivalent employees is primarily driven by restructuring activities in ITV Studios. Details of
Directors’ emoluments, share options, pension entitlements and long-term incentive scheme interests are set out
in the Remuneration Report. ITV plc Executive Directors’ gains on share options for 2020 are set out in the ITV plc
Company financial statements.
Depreciation
Depreciation in the year was £57 million (2019: £56 million), of which £36 million (2019: £35 million) relates to ITV
Studios and £21 million (2019: £21 million) to Broadcast. 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
2020
£m
0.9
0.9
0.3
2.1
–
–
2.1
2019
£m
0.9
0.7
0.1
1.7
0.1
0.1
1.8
* See details of non-audit services in the Audit and Risk Committee Report on page 114.
There were no fees payable in 2020 or 2019 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 28 to 41 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) /credit
COVID-19 directly related net costs
Sports rights
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.
A
B
C
D
E
F
G
2020
£m
(13)
(11)
(6)
(11)
(23)
(54)
(118)
22
(96)
4
4
(1)
(93)
2019
£m
(75)
(24)
1
–
–
14
(84)
6
(78)
62
62
–
(16)
A – Acquisition-related expenses
Acquisition-related expenses of £13 million (2019: £75 million) relate to performance-based, employment-linked
expected payments to former owners. In 2019, the expense also includes professional fees (mainly financial due
diligence and legal costs in respect of potential acquisitions during the year).
B – Restructuring and property-related costs
Restructuring costs of £11 million (2019: £18 million) relate to one-off significant restructuring projects of the business.
In 2019, property-related costs of £6 million related to the Group’s former headquarters at The London Television
Centre, which was sold in November 2019.
C – Pension related (costs)/credit
On 20 November 2020, a High Court ruling determined that pension schemes need to address inequalities between
men and women in Guaranteed Minimum Pension (GMP) for those members that transferred out of the Schemes
between May 1990 and October 2018. A past service cost for GMP Equalisation in transfers out of £1 million (2019: £nil)
was recognised. Also during 2020, the Group completed the rectification of historical benefits of the members of the
Network Section of Section A of the ITV Pension Scheme. The change in benefits of £5 million (2019: £nil) have been
recognised as a past service cost in the current year. Further details are provided in section 3.7.
The UTV Pension Scheme was closed to future benefit accruals in March 2019. This resulted in a one-off, non-cash
£1 million curtailment credit in 2019.
D – COVID-19 directly related net costs
Costs directly related to the COVID-19 pandemic have been recognised as exceptional items. These include £11 million
related to the costs incurred in productions shutting down and restarting in a safe environment and additional one-off
costs to maintain production during the lockdown for certain daytime shows.
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Financial Statements
Notes to the Financial Statements
Section 2: Results for the Year continued
E – Sports rights
As a result of the impact of COVID-19 on the planned sporting schedule for 2020 and 2021 and the consequential
impact on TAR, along with changing forecasts of audience mix and revenues for certain sporting events, the Group has
recognised an impairment for these sporting events included in programme rights and programme commitments of
£23 million. It is not possible to split the impairment between that caused by the COVID-19 pandemic and underlying
market movements.
F – Other
Included in other costs for the current year, is an estimate of the settlement in relation to the Box Clever case
(£31 million (2019: £nil)), a provision of £19 million (2019: £nil) for an onerous transmission supply contract for excess
satellite transponder capacity and £4 million (2019: £4 million) of other costs in relation to legal matters outside the
normal course of business. See note 3.6 for further details.
During the year, we commenced a review of the efficiency of our transponder capacity usage with a view to reducing
our capacity requirements. This has allowed us to reorganise our channels over fewer transponders with the result
that we have cleared all channels from one transponder and are no longer utilising it. We have provided for an onerous
contract of £19 million from the date the transponder was cleared. The transponder efficiency review is ongoing and
we expect to clear a second transponder in 2021.
In 2019, following the Supreme Court’s decision to refuse to hear the Group appeal in relation to Box Clever, the
provision previously held was released as the Group could not reliably estimate the cost of resolving the matter at that
time. This was offset by movements in the insured trade receivables provision and costs in relation to the cancellation
of The Jeremy Kyle show.
G – Gain on sale of non-current assets
The gain on sale of non-current assets in 2020 arose primarily as a result of the sale of Freeview channel Merit.
The gain on sale of non-current assets in 2019 arose primarily as a result of the sale of the London Television Centre.
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.
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 year 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
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> Section 2: Results for the Year
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.
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 related 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 related to prior periods
Total taxation charge in the income statement
2020
£m
2019
£m
(73)
21
(52)
7
(45)
3
–
(2)
1
–
1
(44)
(84)
3
(81)
8
(73)
7
3
5
15
6
21
(52)
In order to understand how, in the income statement, a tax charge of £44 million (2019: £52 million) arises on a profit
before tax of £325 million (2019: £530 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% (2019: 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
2020
£m
325
(62)
2
–
7
(4)
–
(3)
3
(2)
15
(44)
2019
£m
530
(101)
(16)
12
14
(4)
3
(1)
–
5
36
(52)
Non-deductible expenses are expenses that are not expected to be allowable for tax purposes. Similarly, non-taxable
income is income that is not expected to be taxable.
Adjustments to prior periods primarily arise where an outcome is obtained on certain tax matters, which differs from
expectations held when the related provision was made. Where the outcome is more favourable than the provision
made, the difference is released, lowering the current year tax charge. Where the outcome is less favourable than our
provision, an additional charge to current year tax will occur. The current tax charge includes a £7 million credit relating
to prior years. This adjustment has arisen following changes in estimates of taxes that have already become due, or will
become due in the future.
Previously unrecognised deferred tax assets in the prior year are in relation to capital losses utilised against gains on
sale of property.
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Financial Statements
Notes to the Financial Statements
Section 2: Results for the Year continued
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. In 2020, the total impact is £3 million credit (2019: £nil credit) due
to losses arising in higher taxed jurisdictions, which were recognised through deferred tax, giving rise to a reconciling benefit.
An increase in the UK corporation tax rate from 19% to 25% (effective 1 April 2023) was announced on 3 March 2021.
This will increase the Group's future current tax charge accordingly and have minimal impact on deferred tax.
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 13.5% (2019: 9.8%), 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 higher than in 2019 primarily because the 2019 tax rate was reduced
by the disposal of the London Television Centre. 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 18.0% (2019: 18.0%).
In 2020, the current year movement recognised in the income statement on origination and reversal of temporary
differences (excluding exceptional items) is a credit of £3 million, compared with a credit of £7 million in 2019.
Taxation – Other comprehensive income (OCI) and equity
As analysed in the table below, a deferred tax charge of £8 million (2019: £22 million credit) on actuarial movements on
pensions and a deferred tax credit of £5 million (2019: £nil) on derivative financial instruments has been recognised in
other comprehensive income. A deferred tax credit of £3 million (2019: £nil) has been recognised in equity in respect of
share-based payments.
A current tax credit of £2 million on foreign exchange movements net of hedging has been recognised in other
comprehensive income (2019: £2 million charge). There is no current tax recognised in equity in relation to share-based
payments (2019: £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
At
1 January
2020
£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
2020
£m
7
(50)
1
8
37
6
9
18
–
–
–
–
–
–
–
–
1
10
(1)
(5)
–
(1)
(3)
1
–
–
–
(8)
–
3
5
–
–
–
–
–
–
–
–
–
–
(1)
–
–
(2)
–
(2)
(5)
8
(41)
–
(5)
35
8
9
14
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
Tangible assets
Intangible assets
Programme rights
Pension scheme deficits
Tax losses
Share-based compensation
Other temporary differences
5
(66)
–
(6)
37
–
4
(26)
–
–
–
–
–
–
1
1
2
15
1
(8)
1
6
4
21
–
–
–
22
–
–
–
22
–
(1)
–
–
–
–
–
(1)
–
2
–
–
(1)
–
–
1
186
ITV plc Annual Report and Accounts 2020
7
(50)
1
8
37
6
9
18
186
Financial Statements
> Section 2: Results for the Year
At 31 December 2020, total deferred tax assets are £22 million (2019: £74 million) and total deferred tax liabilities are
£8 million (2019: £56 million). After netting off balances within countries, there is a deferred tax asset of £34 million and
a deferred tax liability of £20 million (2019: deferred tax liability of £29 million and a deferred tax asset of £47 million)
recognised in the Consolidated Statement of Financial Position.
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 derivative financial instruments
The deferred tax balance associated with the pension deficit reflects the current tax benefit obtained in 2020 following
the employer contributions to the Group’s defined benefit pension scheme. The adjustment in other comprehensive
income to the deferred tax balance relates to the actuarial gain recognised in the year and a prior year adjustment.
A deferred tax asset of £425 million (2019: £458 million) in respect of capital losses of £2,237 million (2019: £2,696 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. The decrease in capital losses compared to the prior year has
arisen due to a company with substantial capital losses being liquidated during the period. For the same reasons, total
deferred tax assets of £17 million (2019: £16 million) in respect of overseas losses have not been recognised
(including £4 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 £285 million (2019: £473 million) divided by 4,002 million (2019:
4,000 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
2020
£m
285
4,002
7.1p
2019
£m
473
4,000
11.8p
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Strategic ReportGovernanceFinancial StatementsAdditional Information
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
2020
£m
285
4,002
23
4,025
7.1p
2020
£m
285
93
378
52
6
436
4,002
10.9p
2020
£m
436
4,002
23
4,025
10.8p
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
A. Exceptional items (net of tax) £93 million (2019: £16 million)
Exceptional items of £114 million (2019: £22 million), net of related tax credit of £21 million (2019: £6 million). See note
2.2 for the detailed composition of exceptional items
B. Amortisation and impairment of acquired intangible assets of £52 million (2019: £44 million)
Amortisation and impairment of assets acquired through business combinations and investments of £87 million
(2019: £74 million), excluding amortisation of software licences and development of £19 million (2019: £11 million),
net of related tax credit of £16 million (2019: £19 million)
C. Adjustments to net financing costs £6 million (2019: £22 million)
Adjustments to net financing costs includes foreign exchange, pension interest charges and the unwind of discounting
on acquisition related liabilities of £8 million (2019: £28 million), net of related tax credit of £2 million (2019: £6 million)
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188
Financial Statements
Financial Statements
Notes to the Financial Statements
Section 3: Operating Assets and Liabilities
In this
section
This section shows the assets used to generate the Group’s trading performance and
the liabilities incurred as a result. On the following pages, there are notes covering
working capital, non-current assets and liabilities, acquisitions and disposals,
provisions and pensions.
Liabilities relating to the Group’s financing activities are addressed in section 4.
Deferred tax assets and liabilities are shown in note 2.3.
3.1
Working
capital
Keeping
it simple
Working capital represents the assets and liabilities the Group generates through its
trading activity. The Group therefore defines working capital as distribution rights,
programme rights, trade and other receivables, trade and other payables and
contract assets and liabilities.
Careful management of working capital ensures that the Group can meet its trading
and financing obligations within its ordinary operating cycle.
Working capital is a driver of the profit to cash conversion ratio, a key performance
indicator for the Group. For those subsidiaries acquired during the year, working
capital at the date of acquisition is excluded from the profit to cash calculation so
that only subsequent working capital movements in the period controlled by ITV are
reflected in this metric.
In the following section, you will find further information regarding working capital
management and analysis of the elements of working capital.
3.1.1 Programme rights and commitments
Accounting policies
Rights are recognised when the Group controls the respective rights and the risks and rewards associated with them.
Programme rights not yet utilised are included in the statement of financial position at the lower of cost and net
realisable value. In assessing net realisable value for programmes in production, judgement is required when
considering the contracted sales price and estimated costs to complete.
Broadcast programme rights
Acquired programme rights (which include films) and sports rights are purchased for the primary purpose of broadcasting
on the ITV family of channels, including VOD and SVOD platforms. These are recognised within current assets the earlier
of when payments are made or when the rights are ready for exploitation. 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 (excluding sports 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 net realisable value is assessed on a portfolio basis unless specific indicators of
impairment are identified.
The net realisable value assessment for sports rights is based on the estimated airtime value on the transmission date
of the sporting event.
As a result of the impact of COVID-19 on the planned sporting schedule for 2020 and 2021 and the consequential
impact on TAR, along with changing forecasts of audience mix and revenues for certain sporting events, the Group has
recognised an impairment for certain sporting events included in programme rights as well as onerous contract
provisions for future commitments. Further details are provided in section 3.6.
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Strategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued
The Broadcast programme rights and other inventory at the year end are shown in the table below:
Acquired programme rights
Commissions
Sports rights
2020
£m
169
69
70
308
2019
£m
173
106
44
323
£19 million relates to stock that will be transmitted in 2022 and beyond (2019: £3 million transmitted in 2021 and beyond)
Broadcast programme and transmission commitments
Transmission commitments are the contracted future payments under transmission supply agreements that require
the use of transponder capacity for a period of up to ten years with payments increasing over time, limited by specific
RPI caps. In 2020, we have recognised an onerous contract provision for £19 million in respect of transmission
commitments. See note 3.6 for further details.
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:
2020
Within one year
Later than one year and not more than five years
2019
Within one year
Later than one year and not more than five years
Transmission
£m
Programme
£m
35
95
130
479
465
944
Transmission
£m
Programme
£m
35
126
161
376
609
985
Total
£m
514
560
1,074
Total
£m
411
735
1,146
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. 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, £19 million was charged to the income statement (2019: £49 million).
2020
£m
18
2019
£m
22
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Financial Statements
> 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 and 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
TToottaall ttrraaddee aanndd ootthheerr rreecceeiivvaabblleess
2020
£m
360
49
49
458
33
13
46
504
2019
£m
309
55
49
413
34
29
63
476
£393 million (2019: £343 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
2020
£m
357
16
19
1
393
2019
£m
280
35
25
3
343
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
2020
£m
38
12
(4)
46
2019
£m
39
1
(2)
38
Of the provision total, £45 million relates to balances overdue by more than 90 days (2019: £36 million) and less than £1
million relates to current balances (2019: £2 million).
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Strategic ReportGovernanceFinancial StatementsAdditional Information
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
2020
£m
54
132
237
157
6
373
959
2020
£m
54
15
7
39
61
115
2019
£m
66
77
238
151
–
385
917
2019
£m
61
5
14
32
51
112
Trade payables due after more than one year, relate primarily to film creditors of £35 million (2019: £33 million) and
royalties of £19 million (2019: £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 estimated and recognised at acquisition at their time discounted value, with the unwind of the discount recorded
as part of finance costs.
Acquisition related liabilities at 31 December 2020 were £209 million (2019: £197 million) which represents the amount
accrued to date at their time discounted value. The total estimated future payments of £227 million (2019: £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 £139 million and £427 million. To arrive at ITV’s current best estimate of the accrued liability
at 31 December 2020, 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 due after more than one year are expected to be
settled between 2022 and 2026.
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
determination of the second earnout is currently undergoing an assessment by the independent arbiter. Payment will
be made following the conclusion of that process. 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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Financial Statements
> 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. 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:
BBaallaannccee aatt 11 JJaannuuaarryy
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
BBaallaannccee aatt 3311 DDeecceemmbbeerr
Non-current contract assets of £7 million (2019: £3 million) is included in the above reconciliation.
Contract
assets
£m
445
(409)
380
–
–
–
416
2020
Contract
liabilities
£m
Contract
assets
£m
2019
Contract
liabilities
£m
(219)
–
–
208
(260)
–
(271)
470
(462)
437
–
–
–
445
(255)
–
–
255
(217)
(2)
(219)
3.1.7 Working capital management
Cash and working capital management has been a critical area of focus during 2020 and will continue to be in 2021.
During the year, the cash inflow from working capital was £137 million (2019: outflow of £63 million) derived as follows:
Decrease/(increase) in programme rights and distribution rights
Decrease/(increase) in receivables and contract assets
Increase/(decrease) in payables and contract liabilities
WWoorrkkiinngg ccaappiittaall iinnffllooww//((oouuttffllooww))
2020
£m
16
2
119
137
2019
£m
(18)
(37)
(8)
(63)
The working capital inflow/(outflow) excludes the impact of balances acquired on the acquisition of subsidiaries during
the period (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
Depreciation policy
Freehold land
Freehold buildings
Leasehold improvements
Vehicles, equipment and fittings*
Right of use assets
* Equipment includes studio production and technology assets.
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
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 and, in respect of 2020, the longer-term implications of the
disruption caused by COVID-19. No impairments identified were linked directly to the pandemic.
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> Section 3: Operating Assets and Liabilities
Property, plant and equipment
Property, plant and equipment can be analysed as follows:
Freehold land
and buildings
Improvements to leasehold
land and buildings
CCoosstt
At 1 January 2019
IFRS 16 transition
Additions
Foreign exchange
Disposals and retirements
At 31 December 2019
Additions
Foreign exchange
Disposals and retirements
AAtt 3311 DDeecceemmbbeerr 22002200
DDeepprreecciiaattiioonn
At 1 January 2019
Charge for the year
Foreign exchange
Disposals and retirements
At 31 December 2019
Charge for the year
Foreign exchange
Disposals and retirements
AAtt 3311 DDeecceemmbbeerr 22002200
NNeett bbooookk vvaalluuee
AAtt 3311 DDeecceemmbbeerr 22002200
At 31 December 2019
£m
9
–
3
–
–
12
1
–
(1)
12
–
1
–
–
1
1
–
–
2
10
11
Long
£m
Short
£m
69
–
1
–
–
70
15
(1)
(4)
80
21
2
–
–
23
3
–
(4)
22
58
47
26
–
1
–
–
27
1
–
–
28
16
–
–
–
16
–
–
–
16
12
11
Vehicles,
equipment
and fittings
Owned
£m
Right
of use
assets*
Total
£m
£m
237
–
25
(4)
(18)
240
20
–
(38)
222
113
28
3
(17)
127
26
–
(36)
117
–
112
–
–
–
112
40
(1)
(4)
147
–
25
–
–
25
27
(1)
(4)
47
341
112
30
(4)
(18)
461
77
(2)
(47)
489
150
56
3
(17)
192
57
(1)
(44)
204
105
113
100
87
285
269
* Under the modified retrospective approach in IFRS 16 ‘Leases’, the 1 January 2019 numbers are not restated.
Included within property, plant and equipment are assets in the course of construction of £17 million (2019: £14 million).
Included in net book value of right of use assets is £99 million (2019: £85 million) related to properties and £1 million
(2019: £2 million) relating to vehicles, equipment and fittings.
Capital commitments
There is £1 million of capital commitments at 31 December 2020 (2019: £1 million).
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Strategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
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 is 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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Financial Statements
> 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
Straight-line
Straight-line or
reducing balance
as appropriate
Customer relationships
Straight-line
Contractual arrangements Straight-line
Licences
Straight-line
Libraries and other
Software licences and
development
Sum of digits or
straight-line as
appropriate
Straight-line
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.
In the light of the uncertainty caused by the COVID-19 outbreak, the Group has assessed goodwill and other assets for
impairment as at 31 December 2020.
There is a wide range of potential outcomes regarding the possible future performance of each of ITV Group’s cash-
generating units, Broadcast, ITV Studios and SDN. The Directors, however, do not consider that any reasonably possible
changes in the key assumptions would cause the value in use of the Group’s cash-generating units to fall below their
carrying values.
Other non-current and current assets were also reviewed for impairment in light of the disruption caused by COVID-19
as at 31 December 2020. Impairments identified, which were linked directly to the pandemic, have been treated as
exceptional items discussed in detail in note 2.2.
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Financial Statements
> Section 3: Operating Assets and Liabilities
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
CCoosstt
At 1 January 2019
Additions
Acquisitions
Foreign exchange
Disposals, retirements
and impairment
At 31 December 2019
Additions
Foreign exchange
AAtt 3311 DDeecceemmbbeerr 22002200
AAmmoorrttiissaattiioonn aanndd
iimmppaaiirrmmeenntt
At 1 January 2019
Charge for the year
Foreign exchange
Disposals, retirements
and impairment
At 31 December 2019
Charge for the year
Foreign exchange
AAtt 3311 DDeecceemmbbeerr 22002200
NNeett bbooookk vvaalluuee
AAtt 3311 DDeecceemmbbeerr 22002200
At 31 December 2019
3,904
–
9
(16)
–
3,897
–
(2)
3,895
2,654
–
–
–
2,654
–
–
2,654
1,241
1,243
551
–
–
(21)
–
530
–
17
547
349
44
(11)
–
382
42
11
435
112
148
438
–
6
(3)
–
441
–
–
441
418
7
(3)
–
422
6
(1)
427
14
19
11
–
–
–
–
11
–
–
11
11
–
–
–
11
–
–
11
–
–
176
–
–
–
–
176
–
–
176
112
6
–
–
118
6
–
124
52
58
103
1
–
(1)
–
103
1
(1)
103
89
4
(2)
–
91
1
(1)
91
12
12
Goodwill impairment tests
The carrying amount of goodwill for each CGU is represented as follows:
ITV Studios
Broadcast
SDN
164
57
–
–
(14)
207
21
–
228
100
11
(2)
(14)
95
20
(1)
114
114
112
2020
£m
779
386
76
1,241
Total
£m
5,347
58
15
(41)
(14)
5,365
22
14
5,401
3,733
72
(18)
(14)
3,773
75
8
3,856
1,545
1,592
2019
£m
781
386
76
1,243
There has been no impairment charge for any CGU during the year (2019: £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 long-term plan. Beyond the plan, these
projections are extrapolated using an estimated nominal long-term growth rate of 1% (2019: 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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Financial Statements
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.
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 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 (profit
reduction between 12% and 23% in the five year outlook). 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 7.7% (2019: 8.8%) has been used in discounting the projected cash flows.
Following the organisational redesign by ITV Studios, 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.
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 a significant decline in the
advertising market with no subsequent recovery was applied, 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 7.8% (2019: 8.7%) 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 due 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: -10% 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 11.4% (2019: 13.6%) has been used in discounting the projected cash flows.
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Financial Statements
> 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 – 2020
There have been no acquisitions in 2020.
Acquisitions in the prior 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.
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.
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 two acquisitions in 2019 is
capped at £62 million (undiscounted). All future payments are dependent on future performance of the businesses
and linked to ongoing employment.
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201
Strategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued
CCoonnssiiddeerraattiioonn ttrraannssffeerrrreedd::
Initial consideration (net of cash acquired) (Note A)
TToottaall ccoonnssiiddeerraattiioonn
FFaaiirr vvaalluuee ooff nneett aasssseettss aaccqquuiirreedd::
Intangible assets
Deferred tax liabilities
Inventory
Trade and other receivables
Trade and other payables
Borrowings
Net assets held for sale
FFaaiirr vvaalluuee ooff nneett aasssseettss
NNoonn--ccoonnttrroolllliinngg iinntteerreesstt mmeeaassuurreedd aatt ffaaiirr vvaalluuee ((NNoottee BB))
GGooooddwwiillll
OOtthheerr iinnffoorrmmaattiioonn
Present value of the expected liability on put options
Present value of the expected earnout payment at acquisition
CCoonnttrriibbuuttiioonnss ttoo tthhee GGrroouupp’’ss ppeerrffoorrmmaannccee::
FFrroomm ddaattee ooff aaccqquuiissiittiioonn
Revenue
EBITA before exceptionals
PPrrooffoorrmmaa –– JJaannuuaarryy ttoo DDeecceemmbbeerr
Revenue
EBITA before exceptionals
2020
Total
£m
2019
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 nil (2019:
£4 million).
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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Financial Statements
> 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
2020
£m
24
52
1
77
2019
£m
1
43
8
52
Investments have increased during the year primarily due to an increase in investment in BritBox US (to increase our
investment to 50%) and an investment in Bedrock Entertainment, a US Studios business which develops and produces
premium television content. Further smaller investments have been made in line with Group’s strategy to grow the
international content business. The Group also recognised share of profits in equity accounted investments of £9 million.
In 2020, following the closure of Quibi the Group’s investment was fully written down.
Significant investments in associates include £30 million (2019: £30 million) relating to a 45% investment Blumhouse
TV Holdings LLC, a film and television production company in the US.
Please refer to page 241 for the list of principal investments held at 31 December 2020.
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.
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Strategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued
Provisions
The movements in provisions during the year are as follows:
At 31 December 2019
Additions
Utilised
Released
AAtt 3311 DDeecceemmbbeerr 22002200
Contract
provisions
£m
Property
provisions
£m
Legal and
Other
provisions
£m
2
56
(12)
(9)
37
2
1
–
–
3
3
38
–
–
41
Total
£m
7
95
(13)
(8)
81
Provisions of £59 million are classified as current liabilities (2019: £2 million). Unwind of the discount is £nil in 2020 and
2019.
• Contract provisions of £41 million (2019: £2 million) represent liabilities in respect of onerous contracts in relation
to individual sports rights of £22 million (2019: £nil) and transmission capacity supply contract of £19 million
(2019: £2 million).
The provision for sports rights is sensitive to the changes in the sporting schedule and consequential impact on TAR. As
a result of the impact of COVID-19 and consequential changes to the sporting schedule, along with resulting changing
forecasts of audience mix and revenues for certain sporting events, the Group has recognised a provision for the
sporting events directly impacted by these changes. In calculating the provision, management has made estimates
and used assumptions in determining the nature, amount and timing of potential outflows including the commercial
impacts of the target audience that will be generated by those rights, scheduling of the events and revenue forecasts.
A provision is recognised for rights where the estimated revenues are less than the obligation held. An initial provision
was raised during the year for £37 million, of which £11 million has been utilised during the year and £8 million
was released.
The onerous contract for the transmission supply contract of £19 million has been recognised in the current year as the
capacity on the satellite transponder is no longer used by the Group. £2 million of the provision was utilised during the year.
Management have applied judgement in their assessment that the individual element of the contract is separable from
the remaining elements of the contract which are not considered onerous. The capacity on the satellite transponder is no
longer used by the Broadcast business and is therefore not generating revenues. The contracted future commitment has
therefore been recognised as a provision as there are no future economic benefits expected.
• Property provisions primarily relate to expected dilapidation costs at rental properties.
• Legal and Other provisions of £40 million (2019: £3 million) includes a provision of £31 million for the potential liability
that may arise as a result of the Box Clever Financial Support Directions (‘FSDs’) being issued by the Pensions
Regulator (‘tPR’).
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. After court proceedings in the Upper Tribunal and Court of Appeal were dismissed, certain
companies within ITV were issued with FSDs by tPR on 17 March 2020. An FSD does not set out what form any
financial support should take, nor its amount, and those issues have not yet been resolved as part of the legal process.
The legislation provides that any contribution that ITV may make must be considered reasonable and have regard to
the Group’s financial circumstances. If an agreement is reached with tPR there may not be an immediate cash flow
impact. If an agreement cannot be reached then settlement may be protracted and subject to further legal
proceedings over several years.
At 2003, the Scheme was estimated to have had a deficit on a buyout basis of £25 million. The most recent estimate of
the deficit in the Box Clever Group Pension Scheme is £110 million as at 30 April 2020 and remains management’s best
estimate of the required provision. This estimate was calculated on a buyout basis, using membership data and benefits
currently being provided in that Scheme, and based on membership data as of February 2020. Both of 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.
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> Section 3: Operating Assets and Liabilities
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. The provision of £31 million is based on our proposal issued to the regulator on 31 July 2020 and represents
the IAS 19 valuation, using market conditions at 30 April 2020. That proposal has not been accepted but it is expected
that the Company and tPR will have discussions to try to resolve the matter on a consensual basis. No provision
was held at 31 December 2019 as the Financial Support Direction (FSD) had not yet been issued and Management
could not reliably estimate the provision as sufficient data around Scheme participants had not yet been received.
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 in the consolidated statement of financial position.
The Trustee, appointed according to the terms of the Schemes’ documentation,
is required to act in the best interest of the beneficiaries and is responsible
for managing and investing the assets of the Scheme and its funding position.
Schemes can be funded, where regular cash contributions are made by the employer
into a fund which is invested. In the event of poor investment returns or increases
in liabilities, the Group may need to address this through increased levels of
contribution. Alternatively, schemes can be 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. The 2020 Triennial valuations for each of
the schemes are under way. The valuations are expected to be agreed during 2021.
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 2020, total contributions expensed were £25 million (2019: £23 million).
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Strategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
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 (‘beneficiaries’) 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 accounting defined benefit pension surplus or 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
surplus or deficit (IAS 19) figure is calculated as at the balance sheet date, and the actuarial valuation deficit is
calculated per the last triennial valuation.
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 Trustee is in the process of undertaking a full actuarial valuation of the ITV Pension Scheme as at 1 January 2020,
which we expect to agree during 2021. This valuation will drive subsequent contribution rates.
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 IAS 19 deficit does not drive the deficit funding contribution.
An unfunded scheme in relation to former beneficiaries 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 in the form of a
charge over £62 million of securitised gilts held by the Group, which are 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. The
Trustee is in the process of undertaking a full actuarial valuation as at 30 June 2020, which we expect to agree during 2021.
The principal employer of the ITV Pension Scheme is ITV Services Limited, the unfunded scheme is Granada Group
Limited and the UTV Scheme is UTV Limited.
The defined benefit pension deficit
Net pension deficit of £26 million at 31 December 2020 (2019: £87 million) is stated after including the unfunded
scheme security asset of £62 million (2019: £58 million).
The totals recognised in 2020 and 2019 are:
Total defined benefit scheme obligations
Total defined benefit scheme assets
DDeeffiinneedd bbeenneeffiitt ppeennssiioonn ddeeffiicciitt ((IIAASS 1199))
Presented as:
Defined benefit pension surplus*
Defined benefit pension deficit
Defined benefit pension deficit (IAS 19)
Other pension asset
NNeett ppeennssiioonn ddeeffiicciitt
2020
£m
(4,120)
4,032
(88)
22
(110)
(88)
62
(26)
2019
£m
(4,037)
3,892
(145)
17
(162)
(145)
58
(87)
* The defined benefit pension surplus relates solely to the UTV Scheme. The defined benefit scheme assets in the UTV Scheme were £142 million as at
31 December 2020 (2019: £133 million) and the defined benefit scheme obligations were £120 million (2019: £116 million).
The remaining sections provide further detail of the value of the Schemes’ assets and liabilities, how these are
accounted for and the impact on the financial statements.
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Financial Statements
> 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:
• Past service cost – is a change in present value of the benefits built up by the
beneficiaries 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:
DDeeffiinneedd bbeenneeffiitt oobblliiggaattiioonn aatt 11 JJaannuuaarryy
Past service cost
– GMP equalisation
– ITV A rectification
– Curtailment credit for the UTV scheme closure to future accrual
Interest cost
Actuarial loss
Benefits paid
DDeeffiinneedd bbeenneeffiitt oobblliiggaattiioonn aatt 3311 DDeecceemmbbeerr
2020
£m
4,037
1
5
–
81
183
(187)
4,120
2019
£m
3,719
–
–
(1)
103
410
(194)
4,037
Of the above total defined benefit obligation at 31 December 2020, £60 million relates to the unfunded schemes
(2019: £60 million).
On 20 November 2020, a High Court ruling determined that pension schemes need to address inequalities between
men and women in Guaranteed Minimum Pension (GMP) for those beneficiaries that transferred out of the Schemes
between May 1990 and October 2018. An allowance of £1 million (2019: £nil) for GMP Equalisation was recognised as
a past service cost in the current year.
During 2020, the Group completed the rectification of historical benefits for the members of the Network Section of
Section A of the ITV Pension Scheme. The review, which involved detailed individual member calculations, amended the
benefits of the Network Section members accrued between 1991 and 1997 in accordance with an agreement approved
by the High Court in February 2019. As part of the review, changes to membership data were also identified. The change
in benefits of £5 million (2019: £nil) have been recognised as a past service cost in the current year. The change in
membership data of £7 million (2019: £nil) has been included within the actuarial loss in Other Comprehensive Income.
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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Strategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
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 beneficiaries
• 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 (2019: 16 years).
The principal assumptions used in the Schemes’ valuations at the year end were:
Discount rate
Inflation assumption (RPI) – before 2030
Inflation assumption (RPI) – post 2030
Rate of increase in pension payment (LPI1 5% pension increases)
Rate of increase to deferred pensions (CPI)
1. Limited Price Index.
2020
1.35%
2.95%
2.70%
2.75%
2.05%
2019
2.05%
3.00%
3.00%
2.90%
2.20%
The Retail Prices Index (‘RPI’) reform consultation outcome was announced on 25 November 2020. The announcement
means that from February 2030 onwards, increases in the RPI will be aligned with those under the Consumer Prices
Index (‘CPI’). For Defined Benefit schemes, it means that members with RPI-linked pension increases will see future
retirement benefits increase more slowly from 2030 than they otherwise would. The Group updated its approach to
setting RPI and CPI inflation assumptions as follows:
• The Group continued to set RPI inflation in line with the market break-even expectations less an inflation risk
premium. The inflation risk premium has been increased from 0.25% at 31 December 2019 to 0.25% per annum
pre-2030 and 0.5% per annum post-2030 at 31 December 2020. The estimated impact of the change in inflation
risk premium in respect of Section A of the ITV Pensions Scheme is a reduction in the defined benefit obligation of
approximately £40 million to £50 million. Section C of the ITV Pension Scheme, the Unfunded Scheme and the UTV
Scheme is not expected to have a material change in the defined benefit obligations.
• For CPI, the Group changed the assumed difference between the RPI and CPI from 0.8% at 31 December 2019 to
1.00% per annum pre-2030 and 0% post-2030 at 31 December 2020. The change in approach is intended to be
broadly equivalent to the prior year end.
The table below reflects published mortality investigation data in conjunction with the results of investigations into the
mortality experience of Scheme beneficiaries. The assumed life expectations on retirement are:
RReettiirriinngg ttooddaayy aatt aaggee
Males
Females
RReettiirriinngg iinn 2200 yyeeaarrss aatt aaggee
Males
Females
2020
60
26.3
28.9
60
27.6
30.4
2020
65
21.7
24.1
65
22.8
25.5
2019
60
27.3
29.4
60
28.9
31.0
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ITV plc Annual Report and Accounts 2020
The net pension deficit is sensitive to changes in assumptions. These are disclosed further in this section.
2019
65
22.6
24.6
65
24.1
26.1
208
Financial Statements
> Section 3: Operating Assets and Liabilities
Total defined benefit scheme assets
Keeping
it simple
The Scheme holds assets across a number of different classes, which are managed
by the Trustee, who consults with the Group on changes to its investment policy.
What are the pension Scheme assets?
At 31 December 2020, the Schemes’ assets were invested in a diversified portfolio
that consisted primarily of debt securities, infrastructure, property and insurance
policies matching the pensions due to certain beneficiaries. 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 expectancy of the
majority of pensioner beneficiaries 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 beneficiaries 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 Schemes’ assets
The movement in the fair value of the defined benefit schemes’ assets is analysed below:
FFaaiirr vvaalluuee ooff SScchheemmee aasssseettss aatt 11 JJaannuuaarryy
Interest income on Scheme assets
Return on assets, excluding interest income
Employer contributions
Benefits paid
Administrative expenses paid
FFaaiirr vvaalluuee ooff SScchheemmee aasssseettss aatt 3311 DDeecceemmbbeerr
2020
£m
3,892
78
188
67
(187)
(6)
4,032
2019
£m
3,632
102
276
82
(194)
(6)
3,892
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Strategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued
How are the Schemes’ assets invested?
At 31 December 2020, the Schemes’ assets were invested in a diversified portfolio that consisted primarily of debt
securities, infrastructure, property and insurance policies matching pensions due to certain beneficiaries. The Trustee
is responsible for deciding the investment strategy for the Schemes’ 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 Schemes’ assets is shown in the following table by major category:
LLiiaabbiilliittyy hheeddggiinngg aasssseettss
Fixed interest gilts
Index-linked interest gilts
Interest rate and inflation hedging derivatives
(swaps and repos)
OOtthheerr bboonnddss
RReettuurrnn sseeeekkiinngg iinnvveessttmmeennttss
Quoted equities
Infrastructure
Property
Hedge funds/alternatives
OOtthheerr iinnvveessttmmeennttss
Cash and cash equivalents
Insurance policies
Longevity swap fair value
TToottaall SScchheemmee aasssseettss
Market value
2020
£m
Market value
2019
£m
591
1,142
57
1,790
1,815
–
181
144
2
327
149
553
(602)
100
4,032
689
886
127
1,702
1,425
76
161
134
49
420
140
544
(339)
345
3,892
44%
45%
8%
2%
43%
37%
11%
9%
Included in the above are overseas assets of £275 million (2019: £404 million), comprised of quoted equities of £nil
(2019: £72 million) and other assets of £275 million (2019: £338 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 into a longevity swap in 2011, which hedges the risk of increasing life expectancy over the next
70 years for 11,700 current pensioners at inception covering £1.7 billion of the pension obligation. The fair value of the
longevity swap is negative due to declining mortality assumptions and equals the discounted value of the projected net
cash flows resulting from the contract. The fair value loss has increased in 2020.
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210
Financial Statements
> Section 3: Operating Assets and Liabilities
Defined pension deficit sensitivities
Keeping
it simple
Which assumptions have the biggest impact on the Scheme?
It is important to note that comparatively small changes in the assumptions used
may have a significant effect on the consolidated income statement and statement
of financial position. This ‘sensitivity’ to change is analysed below to demonstrate
how small changes in assumptions can have a large impact on the estimation of the
defined benefit pension obligation. 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 Trustee’s actuarial valuation deficit 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 £30 million
Increase by £10 million
Decrease by £10 million
Increase by £185 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 Schemes’ 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, while an increase in assumption of life expectancies by one year would increase the defined benefit
obligation by £185m, the assets would benefit from an estimated increase of the value of the longevity swap by
£105 million and the value of the bulk annuity insurance contracts by £20 million, resulting in a net increase in the
defined pension deficit of £60 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.
ITV plc Annual Report and Accounts 2020
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Strategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Financial Statements
Section 3: Operating Assets and Liabilities continued
Keeping
it simple
What was the impact of movements on the Schemes’ assets and liabilities?
The sections above describe how the Scheme obligations and assets are comprised
and measured. The following section sets out the impact of various movements
and expenses on the Scheme on the Group’s financial statements.
Amounts recognised through the income statement
Amounts recognised through the income statement are as follows:
Amount charged to operating costs:
Scheme administration expenses
Amount charged to exceptional costs:
Past service (cost)/credit
Amount charged to net financing costs:
Net interest on net pension deficit
TToottaall cchhaarrggeedd iinn tthhee ccoonnssoolliiddaatteedd iinnccoommee ssttaatteemmeenntt
Amounts recognised through the consolidated statement of comprehensive income
The amounts recognised through the consolidated statement of comprehensive income/(cost) are:
Remeasurement gains/(losses):
Return on scheme assets excluding interest income
Actuarial gains/(losses) on liabilities arising from change in:
– experience adjustments
– financial assumptions
– demographic assumptions
TToottaall rreeccooggnniisseedd iinn tthhee ccoonnssoolliiddaatteedd ssttaatteemmeenntt ooff ccoommpprreehheennssiivvee iinnccoommee
2020
£m
2019
£m
(6)
(6)
(6)
(2)
(14)
2020
£m
188
35
(355)
137
(183)
5
(6)
(6)
1
(1)
(6)
2019
£m
276
7
(402)
(15)
(410)
(134)
The £183 million actuarial loss on the Schemes’ liabilities was principally due to changes in bond yields offset by
updated demographic assumptions. The £188 million gain on the Schemes’ assets follows a fall in the gilts yields. This
has been partially offset by a fall in market implied inflation, reducing the value of the inflation-linked assets, and a fall
in the value of the longevity swap.
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212
Financial Statements
> 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 beneficiaries 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 2021 for administration expenses are expected to be in the region of £6 million (2020: £6 million)
and deficit funding contributions for the main ITV scheme in 2021 are expected to be £60 million (2020: £45 million),
assuming current contribution rates continue as agreed with the Trustee.
The Group’s deficit funding contributions for the year was £45 million (2019: £60 million). As part of the action to
tighten cash flows as a result of COVID-19, we agreed with the pension Trustees to defer £15 million of the 2020
funding contributions across 2022 to 2025. This is subject to the new funding schedule which will be finalised as part
of the Triennial valuation in 2021.
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 2021, a payment
of £14 million is expected as a result of those agreements.
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. The Trustee agreed to accept a letter of credit as an alternative to the 2019 and 2020
collateral instalment with the result that £152.1 million becomes due in March 2021, however if required we would look
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.
London Television Centre pension funding partnership
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. 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.
Both these structures continue to be reviewed in 2021.
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.
ITV plc Annual Report and Accounts 2020
213
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Strategic ReportGovernanceFinancial StatementsAdditional Information
> Section 4: Capital Structure and Financing Costs
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 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 consider the
capital structure and dividend policy 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.
The emphasis throughout 2020 has been on the liquidity of the Group and,
therefore, the Board withdrew the 2019 final dividend, decided not to pay a 2020
interim dividend and is not recommending the payment of a final 2020 dividend
in light of the ongoing impact of the COVID-19 pandemic leading to continued
economic uncertainty.
4.1
Net debt
Keeping
it simple
Reported net debt is the Group’s key measure used to evaluate total cash resources
net of the current outstanding debt including our discounted lease liabilities. A full
analysis and discussion of reported net debt and covenant 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:
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
Lease liabilities
Reported net debt including lease liabilities
1 January
2020
£m
93
153
246
(10)
(1,016)
(1,026)
(24)
(804)
(89)
(893)
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ITV plc Annual Report and Accounts 2020
Net cash flow
£m
Acquisitions
£m
Currency and
non-cash
movements
£m
31 December
2020
£m
205
220
425
7
(5)
2
–
427
26
453
–
–
–
–
–
–
–
–
–
–
(2)
(1)
(3)
(4)
(57)
(61)
1
(63)
(42)
(105)
296
372
668
(7)
(1,078)
(1,085)
(23)
(440)
(105)
(545)
214
Financial Statements
> 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
Lease liabilities
Reported net debt including lease liabilities
* Balances as at acquisition date
1 January
2019
£m
85
10
95
(54)
(993)
(1,047)
25
(927)
(121)
(1,048)
Net cash flow
£m
Acquisitions*
£m
Currency and
non-cash
movements
£m
31 December
2019
£m
7
143
150
47
(84)
(37)
(25)
88
35
123
4
–
4
(3)
–
(3)
–
1
–
1
(3)
–
(3)
–
61
61
(24)
34
(3)
31
93
153
246
(10)
(1,016)
(1,026)
(24)
(804)
(89)
(893)
Cash and cash equivalents
Included within cash equivalents is £50 million (2019: £50 million), the use of which is restricted to meeting the
commitments under the asset-backed pension agreements, and £nil (2019: £25 million) 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 2020, the Group had drawings of £nil under the RCF (2019: £nil),
leaving £630 million available to draw down. The maximum draw down of the RCF during the year was £210 million
(2019: £400 million).
Loans and loan notes due after one year
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 matures in December 2023
• €600 million at a fixed coupon of 1.375%, which matures in September 2026
The €600 million 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%.
Available facilities
The Group has taken a series of steps to strengthen the Group’s liquidity:
• In March 2020 the Group extended the maturity of its existing £300 million bilateral loan facility by 5 years to
30 June 2026. Utilisation requests are subject to the lender’s ability to source ITV Credit Default Swaps (CDS) in
the market at the time the utilisation request is made. The facility remains free of financial covenants and at
31 December 2020 £101 million of the facility was utilised as a letter of credit to support the Group’s asset-backed
pension scheme arrangement currently in place in respect of the defined benefit pension scheme. See section 3.7
for details.
• As noted above, the Group has £630 million of committed funding through a Revolving Credit Facility (‘RCF’) with
a group of relationship banks which is available until 2023. The RCF documentation defines a leverage covenant
(which has to be maintained at less than 3.5x) and an interest cover covenant (which has to be maintained at
greater than 3.0x). Both are tested at 30 June and 31 December each year. During the first half of 2020, as a
precautionary measure, these financial covenants were replaced with two new covenants requiring covenant net
debt to be maintained below £1,800 million and covenant liquidity (defined as cash and cash equivalents plus unused
committed credit lines) to be maintained at greater than £250 million. Both of these financial covenants are tested
on a quarterly basis from 30 June 2020 through to 30 December 2021 when the testing of the leverage and interest
cover financial covenant tests will be reinstated and the two new but temporary covenants fall away. All financial
covenants were met and the facility remains available at 31 December 2020.
• The Group has £100 million available under a non-recourse receivables purchase agreement. As at 31 December 2020
£100 million was available under the agreement (31 December 2019: £nil).
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Strategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
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 entered into a £100 million non-recourse receivables purchase agreement. As at 31 December 2020,
this was not utilised with £100 million remaining available under the agreement (2019: £nil).
Any receivables in relation to the invoices sold are derecognised and the Group collects cash on behalf of the
counterparty as payments fall due.
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216
Financial Statements
> 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 2026.
Fair value versus book value
The tables below provide fair value information for the Group’s borrowings:
Loans due within one year
Other short-term loans
Maturity
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
2020
£m
7
7
299
232
537
10
1,078
Book value
2019
£m
10
10
283
219
508
6
1,016
2020
£m
7
7
308
240
553
10
1,111
Fair value
2019
£m
10
10
297
231
511
6
1,045
1,085
1,026
1,118
1,055
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Strategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
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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218
Financial Statements
> 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:
2020
Adjusted
EBITA
£m
±0-2
±3-5
Profit
after tax
£m
±1
±4
Revenue
£m
±20-30
±30-40
2019
Equity
£m
±36
±16
Revenue
£m
Adjusted EBITA
£m
±50-60
±35-45
±7-9
±4-6
Profit
after tax
£m
±1
±2
Equity
£m
±38
±17
US dollar
Euro
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 2020, the Group’s fixed rate debt represented 99% of total gross debt (2019: 99%). Consequently,
a 1% movement in interest rates on floating rate debt would impact the 2020 post-tax profit for the year by less than
£1 million (2019: less than £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.
AAtt 3311 DDeecceemmbbeerr 22002200
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 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
Assets
£m
Liabilities
£m
4
2
–
2
–
8
(2)
(5)
(23)
(1)
–
(31)
Assets
£m
Liabilities
£m
3
3
–
–
–
6
(3)
(2)
(39)
(4)
–
(48)
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 (2019: less than £1 million) of
ineffectiveness taken to the income statement and less than £1 million of cumulative gain (2019: £21 million loss)
was recycled to the income statement in the year.
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 £216 million
(2019: £209 million). A foreign exchange loss of £11 million (2019: gain of £12 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.
AAtt 3311 DDeecceemmbbeerr 22002200
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
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
(1,085)
(105)
(850)
(271)
(15)
(209)
(1,155)
(118)
(850)
(271)
(15)
(227)*
6
(3)
–
(23)
170
(169)
580
(627)
(26)
(27)
(796)
(271)
–
(166)
113
(113)
7
(16)
(318)
(29)
(43)
–
(8)
(22)
50
(49)
7
(16)
(261)
(31)
(11)
–
(7)
(17)
(550)
(31)
–
–
–
(22)
7
(7)
–
–
22
(47)
544
(548)
2
(5)
(2,558)
370
(388)
(2,700)
367
(385)
(1,313)
3
(3)
(428)
–
–
(352)
–
–
(607)
Less than
1 year
£m
Between
1 and 2 years
£m
Between
2 and 5 years
£m
Over
5 years
£m
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
Carrying
value
£m
Total
contractual
cash flows
£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)
* Undiscounted expected future payments depending on performance of acquisitions; the total maximum consideration is discussed in the Finance Review.
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Notes to the Financial Statements
Section 4: Capital Structure and Financing Costs continued
4.4
Net financing
costs
Keeping
it simple
This section details the interest income generated on the Group’s cash and
other financial assets and the interest expense incurred on borrowings and other
financial liabilities.
In reporting ‘adjusted profit’, the Group adjusts net financing costs to exclude
unrealised mark-to-market movements on interest rate and foreign exchange
derivatives, gains/losses on bond buybacks, net pension interest, interest and fair
value movements in acquisition-related liabilities and other financing costs.
Our rationale for adjustments made to financing costs is set out in the Finance
Review.
Accounting policies
Net financing costs comprise interest income on funds invested, gains/losses on the disposal of financial instruments,
changes in the fair value of financial instruments, interest expense on borrowings, 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)
Foreign exchange loss
Other finance expense
Net financing costs
2020
£m
2
-
2
(27)
(2)
(3)
(14)
(46)
(44)
2019
£m
4
8
12
(31)
(1)
–
(48)
(80)
(68)
Interest on financial liabilities relates to the interest incurred on the Group’s borrowings in the year.
Other finance expense includes lease interest payments, interest on acquisition-related contingent liabilities and bank
charges.
In 2019, 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
and was also recognised in other finance expense.
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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
2020
£m
Level 1
31 December
2020
£m
Level 2
31 December
2020
£m
Level 3
31 December
2020
£m
62
1
2
6
71
62
–
–
–
62
–
–
2
6
8
–
1
–
–
1
Fair value
31 December
2020
£m
Level 1
31 December
2020
£m
Level 2
31 December
2020
£m
Level 3
31 December
2020
£m
(5)
(45)
(26)
(76)
–
–
–
–
(5)
–
(26)
(31)
–
(45)
–
(45)
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Notes to the Financial Statements
Section 4: Capital Structure and Financing Costs continued
Assets measured at fair value
Financial instruments
Other pension assets – gilts (see note 3.7)
Equity investments (see note 3.5)
Financial assets at fair value through profit or loss
Foreign exchange forward contracts and swaps
Financial assets at fair value through reserves
Cash flow hedges
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)
–
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.
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
2020
£m
2019
£m
22
42
41
105
25
50
14
89
1 January
2020
£m
(89)
(89)
Net cash flow
£m
26
26
Currency and
non-cash
movements
£m
31 December
2020
£m
(42)
(42)
(105)
(105)
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
2020
£m
(4)
–
(4)
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 2020, this was less than £1 million.
Variable lease payments that depend on an index or a rate are also less than £1 million.
Some property leases contain extension options beyond the non-cancellable period. The Group assesses at the
lease commencement date whether it is reasonably certain to exercise the extension options. The lease liability at
31 December 2020 does not include such extensions however the Group estimated that the future lease payments,
should it exercise the extension option, would result in an increase in the lease liability of £2 million.
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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 2020 of £403 million (2019: £403 million) and share premium of £174 million
(2019: £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:
2020
£m
98
112
36
2
(24)
224
2019
£m
98
112
36
2
(24)
224
• 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 in the period was £6 million (2019: net loss £17 million) and included a movement
in the cost of hedging of £6 million (2019: £8 million)
4.7.4 Fair value reserve
The fair value reserve comprises all movements arising on the revaluation of gilts accounted for at fair value through
OCI financial instruments. The movement in 2020 is a £4 million gain (2019: £9 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 £285 million
(2019: £473 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 239.
The Directors recognises the importance of the dividends to our shareholders and intends to restore dividend
payments as soon as circumstances permit. The Directors will balance shareholder returns with our commitment
to maintain investment grade metrics over the medium term, to continue to invest behind the strategy and with
the ongoing uncertainty with COVID-19. In 2020, no dividend payments were made (2019: £320 million).
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> Section 4: Capital Structure and Financing Costs
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 2020 comprises:
• The share of losses attributable to NCI of £4 million (2019: share of profits attributable to NCI of £5 million)
• The distributions made to NCI of £1 million (2019: £2 million)
• The share of net assets attributable to NCI relating to subsidiaries acquired, disposed or changes in ownership interest in
2020 of £6 million (2019: £nil)
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 £6 million in 2020 (2019: £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
Number
of options
(‘000)
60,073
34,192
48,347
(3,354)
(6,017)
(3)
(26,935)
106,303
2,247
2020
Weighted
average
exercise price
(pence)
36.88
–
56.10
83.27
–
87.47
76.87
24.25
34.42
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
The average share price during 2020 was 86.44 pence (2019: 126.10 pence).
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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)
–
49.17
–
80.00
105.98
–
131.50
167.99
206.83
Number
of options
(‘000)
62,666
34,413
–
6,019
1,043
–
1,939
200
23
2020
Weighted
average
remaining
contractual life
(years)
Weighted
average
exercise price
(pence)
1.26
3.70
–
2.91
2.22
–
1.10
1.53
0.33
–
–
–
87.47
105.98
–
131.18
162.25
206.83
2019
Weighted
average
remaining
contractual life
(years)
2.25
–
–
3.73
3.21
–
2.11
0.84
1.33
Number
of options
(‘000)
38,685
–
–
13,335
2,685
–
3,481
1,851
36
Assumptions
DSA, LTIP and PSP options are valued directly by reference to the share price at date of grant.
The options granted in the current and prior years 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
4 April 2019
4 April 2019
5 September 2019
5 September 2019
7 April 2020
7 April 2020
7 September 2020
7 September 2020
132.48
132.48
109.33
109.33
65.60
65.60
63.80
63.80
105.98
105.98
87.47
87.47
73.69
73.69
49.17
49.17
30.68
28.57
26.73
28.79
34.52
33.54
39.08
36.29
3.25
5.25
3.25
5.25
3.25
5.25
3.25
5.25
6.04
6.04
6.04
6.04
–
–
–
–
0.82
1.09
0.36
0.45
0.16
0.19
(0.10)
(0.04)
26.14
23.58
18.61
18.66
13.37
17.24
23.79
26.31
228
ITV plc Annual Report and Accounts 2020
228
Financial Statements
Financial Statements
Notes to the Financial Statements
Section 5: Other Notes
Employees’ Benefit Trust
The Group has investments in its own shares as a result of shares purchased by the ITV Employees’ Benefit Trust (‘EBT’).
Transactions with the Group-sponsored EBT are included in these financial statements and primarily consist of the
EBT’s purchases of shares in ITV plc, which is accounted for as a reduction to retained earnings.
The table below shows the number of ITV plc shares held in the EBT at 31 December 2020 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 2020
31 December 2020
Number of shares
(released)/purchased
25,425,533
(139,810)
(597,933)
(2,685,206)
(3,212)
–
21,999,372
Nominal value
£
2,542,553
2,199,937
The total number of shares held by the EBT at 31 December 2020 represents 0.55% (2019: 0.63%) of ITV’s issued share
capital. The market value of own shares held at 31 December 2020 is £23 million (2019: £38 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
2020
£m
17
9
29
63
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.
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
None of the balances are secured.
2020
£m
9
5
–
6
ITV plc Annual Report and Accounts 2020
2019
£m
14
7
1
5
229
229
Strategic ReportGovernanceFinancial StatementsAdditional Information
Financial Statements
Notes to the Financial Statements
Section 5: Other Notes ccoonnttiinnuueedd
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
2020
£m
6
–
6
2019
£m
11
4
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, was reinstated at 31 December 2019.
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 2020.
Contingent liabilities
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.
5.3
Subsequent
events
Keeping
it simple
Where the Group receives information in the period between 31 December 2020
and the date of this report about conditions related to certain events that existed
pat 31 December 2020, we update our disclosures that relate to those conditions in
light of the new information. Such events can be categorised as adjusting or non-
adjusting depending on whether the condition existed at 31 December 2020. If non-
adjusting events are material, non-disclosure could influence the economic decisions
that users make on the basis of the financial statements. Accordingly, for each
material category of non-adjusting event after the reporting period we disclose in
this section the nature of the event and an estimate of its financial effect, or a
statement that such an estimate cannot be made.
Announcement of change in UK corporation tax rate
On 3 March 2021, the UK Government announced a change in the UK corporation tax rate from 19% to 25% with effect
from 1 April 2023. The rate change has not yet been enacted into law and therefore is not reflected in the deferred
tax assets or liabilities as at 31 December 2020. The impact on deferred tax assets and liabilities is not expected to
be material.
230
ITV plc Annual Report and Accounts 2020
230
Financial Statements
> Section 5: Other Notes
5.4
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
04195187
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
03209058
00290076
03962410
03106798
05344772
00733063
00608490
06914987
11516620
11423730
11667230
11107990
10494684
11723800
10671435
04159210
04206925
04033106
11723842
00603471
03799828
01565625
08554937
11723826
13087656
13087860
13087865
12 Yard Productions (Investments) Limited
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 Limited
Carltonco Forty Investments Limited
Carltonco Ninety-Six Limited
Castlefield Properties Limited
Channel TV Holdings Limited
Cosgrove Hall Films Limited
DTV Limited
Granada Group Limited
Granada Limited
Granada Media Limited
Granada Screen (2005) Limited
Granada Television Overseas Limited
ITC Entertainment Group Limited
ITV (HC) Limited
ITV 112 Limited
ITV Bancroft 2 Limited
ITV Barking Limited
ITV Confession Limited
ITV Enterprises Limited
ITV F&B Limited
ITV HG Limited
ITV Holdings Limited
ITV Investment Limited
ITV Mr Selfridge Limited
ITV Nightingale Limited
ITV Pension Scheme Limited
ITV Play Limited
ITV Properties (Developments) Limited
ITV Shetland Limited
ITV Spy Limited
ITV Studios NEWCO 1 Limited
ITV Studios NEWCO 10 Limited
ITV Studios NEWCO 11 Limited
13087685
13087699
13087693
13087733
13087735
13087759
13087782
13087812
08516153
11107934
10602705
08586211
12368504
09498177
13087805
11107431
05518785
00920028
11108285
12368661
10528827
11109917
11908267
12368766
11995990
12735978
11062257
11908285
09660486
10031005
10528763
11108289
09646520
11108327
11204836
10528702
11108322
11108320
10973979
04201477
12368748
13087117
10789616
06469484
06469482
11109744
10796122
12368477
12368643
11109437
12116627
11109287
12116457
12116461
11109929
12368475
ITV Studios NEWCO 2 Limited
ITV Studios NEWCO 3 Limited
ITV Studios NEWCO 4 Limited
ITV Studios NEWCO 5 Limited
ITV Studios NEWCO 6 Limited
ITV Studios NEWCO 7 Limited
ITV Studios NEWCO 8 Limited
ITV Studios NEWCO 9 Limited
ITV Text Santa Limited
ITV The Bay Limited
ITV The Man Limited
ITV Thunderbirds Limited
ITV TLC Limited
ITV Top Class Limited
ITV TWI Limited
ITV Vera Limited
Juice Music UK Limited
Link Electronics Limited
Mammoth Screen (ABC) Limited
Mammoth Screen (BHR) Limited
Mammoth Screen (End5) Limited
Mammoth Screen (End6) Limited
Mammoth Screen (END7) Limited
Mammoth Screen (End8) Limited
Mammoth Screen (Invisible) Limited
Mammoth Screen (MD2) 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
MT Ghosts 3 Limited
MT MURDER IN PROVENCE Limited
The Garden Productions (Film) Limited
VOD Member (ITVA) Limited
VOD Member (ITVB) Limited
WP (Anne) Limited
WP (Bodyguard) Limited
WP (NEWCO 7) Limited
WP Diplomat Limited
WP Faslane Limited
WP Karen Pirie Limited
WP LOD5 Limited
WP LOD6 Limited
WP Pembrokeshire Limited
WP Save Me 2 Limited
WP Showtrial Limited
• ITV Properties (Jersey) Limited is exempt from audit under article 113 of the Companies Act (Jersey) Law 1991
ITV plc Annual Report and Accounts 2020
231
231
Strategic ReportGovernanceFinancial StatementsAdditional Information
Company Financial Statements
> ITV plc Company 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
Amounts owed to subsidiary undertakings
Accruals and deferred income
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
2020
£m
3,782
509
4,291
9
4
449
4,753
(4,197)
(7)
(11)
(4,215)
(1,067)
(25)
iii
vi
iv
iv
iv
vi
iv
vi
v
vi
vii
viii
viii
viii
2019
£m
4,236
305
4,541
9
5
108
4,663
(4,070)
(16)
(9)
(4,095)
(1,010)
(42)
2020
£m
2,733
3
1
2,737
538
3,275
(1,092)
2,183
403
174
10
1,596
2,183
The accounts were approved by the Board of Directors on 9 March 2021 and were signed on its behalf by:
Chris Kennedy
Director
232
ITV plc Annual Report and Accounts 2020
2019
£m
2,733
4
1
2,738
568
3,306
(1,052)
2,254
403
174
22
1,655
2,254
232
> ITV plc Company Financial Statements
Company Statement of Changes in Equity
Balance at 1 January 2020
Total comprehensive income for the year
Loss
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 2020
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
Note
vii/viii
Note
vii/viii
Share
capital
£m
403
–
–
–
–
–
–
–
403
Share
capital
£m
403
–
–
–
–
–
–
–
403
Share
premium
£m
174
Other
reserves
£m
22
Retained
earnings
£m
1,655
–
–
–
–
–
–
–
174
Share
premium
£m
174
–
–
–
–
–
–
–
174
–
(12)
(12)
–
–
–
–
10
Other
reserves
£m
37
–
(15)
(15)
–
–
–
–
22
(65)
–
(65)
–
6
–
6
1,596
Retained
earnings
£m
1,612
353
–
353
(320)
10
–
(310)
1,655
Total
£m
2,254
(65)
(12)
(77)
–
6
–
6
2,183
Total
£m
2,226
353
(15)
338
(320)
10
–
(310)
2,254
ITV plc Annual Report and Accounts 2020
233
233
Strategic ReportGovernanceFinancial StatementsAdditional Information
Company Financial Statements
> ITV plc Company 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’).
In preparing these financial statements, the Company applies the recognition, measurement and disclosure
requirements of international accounting standards in conformity with the requirements of the Companies Act 2006
(‘Adopted IFRSs’), but makes amendments where necessary in order to comply with Companies Act 2006 and has set
out below where advantage of the FRS 101 disclosure exemptions has been taken.
Exemptions applied
• 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
There are no new accounting standards, interpretations and amendments effective from 1 January 2020.
Accounting judgements and estimates
The preparation of financial statements requires management to exercise judgement in applying the Company’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.
The area involving material judgement is the recoverability of investments in subsidiary undertaking. Further details are
provided in note iii.
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.
234
ITV plc Annual Report and Accounts 2020
234
> 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.
ITV plc Annual Report and Accounts 2020
235
235
Strategic ReportGovernanceFinancial StatementsAdditional Information
Company Financial Statements
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 to shareholders
Dividends payable to shareholders 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.
Two (2019: 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 87.47 pence (2019: 129.82 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 (2019: nil to 206.83 pence) and a weighted average contractual life of two years (2019: one year) for all
the schemes in place for the Group.
The principal subsidiary undertakings are listed on page 241. The carrying value at 31 December 2020 was £2,733 million
(2019: £2,733 million).
The carrying value of the Company’s investments in subsidiary undertakings is assessed for impairment on an annual
basis. Determining whether the carrying amount has any indication of impairment requires judgement. In testing for
impairment, estimates are used in deriving cash flows and the discount rates. The estimation process is complex due to
the inherent risks and uncertainties associated with long-term forecasting. The outcome of the value in use calculation
supports the carrying value of the investment in subsidiary undertakings with headroom of £5,009 million.
Due to the significant headroom, there is no reasonably possible scenario that would result in a material adjustment
to the amounts reported in the financial statements.
The Company’s review resulted in no impairment for 2020 (2019: no impairment).
Note ii
Employees
and share-
based
payments
Note iii
Investments
in subsidiary
undertakings
Note iv
Amounts
owed
(to)/from
subsidiary
undertakings
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 classification of
balances as due after more than one year is based on the intention of when the balances are expected to be settled
rather than the contractual terms.
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 (2019: £50 million), the use of which is restricted to meeting the
commitments under the asset-backed pension agreements, and £nil (2019: £22 million) 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 2020, the Group had drawings of £nil million under the RCF (2019:
£nil), leaving £630 million available to draw down at year end. The maximum draw down of the RCF during the year was
£210 million (2019: £400 million).
236
ITV plc Annual Report and Accounts 2020
236
> Notes to the ITV plc Company Financial Statements
Loans and loan notes due after one year
The Company 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 €600 million 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%.
See section 4.1 of the Group Notes for further details of borrowings and available facilities.
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
2020
£m
Liabilities
2020
£m
6
3
–
3
–
12
(5)
(6)
(22)
(3)
–
(36)
Assets
2019
£m
Liabilities
2019
£m
6
3
–
–
4
13
(6)
(3)
(38)
–
(4)
(51)
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.
ITV plc Annual Report and Accounts 2020
237
237
Strategic ReportGovernanceFinancial StatementsAdditional Information
Company Financial Statements
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 (2019: less than £1 million)
ineffectiveness taken to the income statement and £4 million cumulative gain (2019: £19 million loss) recycled to
the income statement in the year.
On issuing the 2026 Eurobond in September 2019, 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.
AAtt 3311 DDeecceemmbbeerr 22002200
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
AAtt 3311 DDeecceemmbbeerr 22001199
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
238
ITV plc Annual Report and Accounts 2020
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
9
(8)
–
(22)
3
(6)
(24)
341
(341)
580
(627)
465
(468)
(50)
227
(227)
100
(100)
7
(16)
7
(16)
458
(461)
(12)
7
(7)
(9)
14
(14)
22
(47)
–
–
(25)
–
–
544
(548)
–
–
(4)
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)
557
(642)
451
(451)
(85)
229
(229)
7
(16)
338
(338)
(9)
91
(91)
7
(16)
113
(113)
(9)
55
(55)
21
(47)
–
–
(26)
–
–
522
(563)
–
–
(41)
238
> 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
2020 & 2019
£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 76 to 85 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 loss after tax for the year of £65 million (2019: profit after tax £353 million),
which includes dividends of £nil from subsidiaries in 2020 (2019: £400 million). Other reserves of £10 million
(2019: £22 million) relate to share buybacks in prior periods and foreign currency translation net of cash flow hedging.
Dividends
The Directors recognises the importance of the dividend to our shareholders and intends to restore dividend payments
as soon as circumstances permit. The Board will balance shareholder returns with our commitment to maintain
investment grade metrics over the medium term, to continue to invest behind the strategy and with the ongoing
uncertainty with COVID-19. In 2020, no dividend payments were made (2019: £320 million).
Distributable reserves
The distributable reserves of ITV plc approximate to the balance of the retained earnings reserve of £1,596million
(2019: £1,655 million) as at 31 December 2020.
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 2020 of £53 million
(31 December 2019: £40 million). The Company has guaranteed certain lease obligations of subsidiary undertakings.
ITV plc Annual Report and Accounts 2020
239
239
Strategic ReportGovernanceFinancial StatementsAdditional Information
Company Financial Statements
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 2020, the Company entered into a stand-by letter of credit for £101 million in respect of one of the ITV Group
asset-backed pension agreements.
There are no capital commitments at 31 December 2020 (2019: none).
Note xi
Related party
transactions
Keeping
it simple
The related parties identified by the Directors include amounts owed to and from
subsidiary undertakings that are not wholly owned within the Group as well as
transactions with key management. The company 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 subsidiary undertakings that are not wholly owned
The amounts owed by and to these related parties at the year end were:
Amounts owed by subsidiary undertakings that are not wholly owned
Amounts owed to subsidiary undertakings that are not wholly owned
2020
£m
81
9
2019
£m
16
26
Amounts owed by subsidiary undertakings that are not wholly owned relate mainly to funding to Britbox SVOD Limited
and intra-group cash pooling balances with World Productions Limited. Amounts owed to subsidiary undertaking relate
mainly to funding due to Tomorrow ITV Studios and intra-group cash pooling balances with 3sixtymedia Limited.
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
2020
£m
2
–
2
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
2020
£m
3
–
–
3
240
ITV plc Annual Report and Accounts 2020
2019
£m
3
2
5
2019
£m
4
1
1
6
240
Strategic Report
Governance
Financial Statements
Additional Information
Subsidiary undertakings and investments
Principal subsidiary undertakings
The principal subsidiary undertakings of the Company at 31 December 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.* (41)(a)
ITV America Inc. (30)(j)
ITV Studios Global Distribution, Inc. (30)(j)
Southbank Studios Inc. (30)(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 Guilty Limited (1)(a)
Big Talk Investments Limited (1)(a)
Big Talk JL Limited (1)(a)
Big Talk Living the Dream Limited (1)(a)
Big Talk Mum Limited (1)(a)
Big Talk NEWCO 4 Limited (1)(a)
Big Talk NEWCO 5 Limited (1)(a)
Big Talk Peacock Limited (1)(a)
Big Talk Pictures Limited (1)(a)
Big Talk Productions Limited (1)(a)
Big Talk Time Limited (1)(a)
Boom Cymru TV Ltd (5)(a)
Boom Pictures Limited (1)(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 Film Distributors Limited (1)(a)
Carlton Finance Limited (1)(a)
Carlton Food Network Limited (1)(a)
Carlton Programmes Development Limited (1)(a)
Carlton Screen Advertising (Holdings) Limited (1)(a)
Carltonco 103 (1)(a)
Carltonco 99 Limited (1)(a)
Carltonco Eighty-One Limited (1)(a)(b)
Carltonco Fifty Limited (1)(a)(k)
Carltonco Forty Investments (1)(a)
Carltonco Forty-Five Limited (1)(a)
Carltonco Ninety-Six (1)(a)(f)
Carltonco Seventeen Limited (1)(a)
Castlefield Properties Limited (1)(a)
Cat’s on the Roof Media Limited (1)(a)
Central Television Limited (1)(a)
Channel Television Holdings Limited (1)(a)
Cosgrove Hall Films Limited (1)(a)
Cynhyrchiadau Boomerang Cyf (5)(a)
Double Double 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
% 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
Country
Company Name
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 Properties (1)(a)
UK
Granada Screen (2005) Limited (1)(a)
UK
Granada Television Limited (1)(a)
UK
Granada Television Overseas Limited (1)(a)
UK
Granada UK Rental and Retail Limited (1)(a)(e)
UK
Interactive Telephony Limited (1)(a)
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)
UK
ITV (HC) Limited* (1)(a)
UK
ITV (Scotland) Limited (20)(a)
UK
ITV (Victor) Limited (1)(a)
UK
ITV 112 Limited (9)(a)
UK
ITV AdVentures Limited (1)(a)
UK
ITV Bancroft 2 Limited (1)(a)
UK
ITV Barking Limited (1)(a)
UK
ITV Border Limited (1)(a)
UK
ITV Breakfast Broadcasting Limited (1)(a)
UK
ITV Breakfast Limited (1)(a)
UK
ITV Central Limited (1)(a)
UK
ITV Channels Limited (1)(a)
UK
ITV Confession Limited (1)(a)
UK
ITV Dark Heart Limited (1)(a)
UK
ITV DC Trustee Limited (1)(a)
UK
ITV Digital Holdings Limited (1)(a)
UK
ITV Enterprises Limited (1)(a)
UK
ITV F&B Limited (1)(a)
UK
ITV Global Content Limited (1)(a)
UK
ITV HG Limited (1)(a)
UK
ITV Holdings Limited (1)(a)
UK
ITV Home Fires Limited (1)(a)
UK
ITV International Channels Limited (1)(a)
UK
ITV Investments Limited* (1)(a)
UK
ITV Leila Limited (1)(a)
UK
ITV LTVC (Scotland) Limited (20)(a)
UK
ITV Meridian Limited (1)(a)
UK
ITV Moorside 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
100
100
100
100
100
100
100
100
100
100
ITV plc Annual Report and Accounts 2020
241
Financial Statements List of subsidiaries continued
Financial Statements
Company Name
ITV Mr Selfridge Limited (1)(a)
ITV News Channel Limited (1)(a)(k)
ITV Nightingale Limited (1)(a)
ITV Pension Scheme Limited (1)(a)(b)
ITV Productions Limited (1)(a)
ITV Properties (Developments) Limited (1)(a)
ITV Shetland Limited (1)(a)
ITV Sport Channel Limited (1)(a)
ITV Spy Limited (1)(a)
ITV Studios (Israel) Limited (1)(a)
ITV Studios NEWCO 1 Limited (1)(a)
ITV Studios NEWCO 10 Limited (1)(a)
ITV Studios NEWCO 11 Limited (1)(a)
ITV Studios NEWCO 2 Limited (1)(a)
ITV Studios NEWCO 3 Limited (1)(a)
ITV Studios NEWCO 4 Limited (1)(a)
ITV Studios NEWCO 5 Limited (1)(a)
ITV Studios NEWCO 6 Limited (1)(a)
ITV Studios NEWCO 7 Limited (1)(a)
ITV Studios NEWCO 8 Limited (1)(a)
ITV Studios NEWCO 9 Limited (1)(a)
ITV Supplementary Pension Scheme Limited (1)(a)
ITV Text Santa Limited (1)(a)
ITV TFG Holdings Limited (1)(a)
ITV The Bay Limited (1)(a)
ITV The Man Limited (1)(a)
ITV Thunderbirds Limited (1)(a)
ITV TLC Limited (1)(a)
ITV Top Class Limited (1)(a)
ITV TWI Limited (1)(a)
ITV Ventures Limited (1)(a)
ITV Vera 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)
Mammoth Screen (ABC) Limited (1)(a)
Mammoth Screen (ATTWN) Limited (1)(a)
Mammoth Screen (BHR) Limited (1)(a)
Mammoth Screen (City) Limited (1)(a)
Mammoth Screen (End) Ltd (1)(a)
Mammoth Screen (End2) Limited (1)(a)
Mammoth Screen (End5) Limited (1)(a)
Mammoth Screen (End6) Limited (1)(a)
Mammoth Screen (End7) Limited (1)(a)
Mammoth Screen (End8) Limited (1)(a)
Mammoth Screen (Invisible) Limited (1)(a)
Mammoth Screen (MD2) Limited (1)(a)
Mammoth Screen (Monroe) Limited (1)(a)
Mammoth Screen (NC) Limited (1)(a)
Mammoth Screen (NI) Limited (25)(a)
Mammoth Screen (OBI) Limited (1)(a)
Mammoth Screen (PH) Limited (1)(a)
Mammoth Screen (Pol2) Limited (1)(a)
Mammoth Screen (Pol3) Limited (1)(a)
Mammoth Screen (Pol4) Limited (1)(a)
Mammoth Screen (Pol5) Limited (1)(a)
Mammoth Screen (Poldark) Limited (1)(a)
Mammoth Screen (QV) Limited (1)(a)
Mammoth Screen (Serpent) Limited (1)(a)
Mammoth Screen (SG) Limited (1)(a)
Mammoth Screen (VF) Ltd (1)(a)
Mammoth Screen (Vic3) Limited (1)(a)
Mammoth Screen (WFTP) Limited (1)(a)
Mammoth Screen (WOF) Limited (1)(a)
Mammoth Screen (WOTW) Limited (1)(a)
Mammoth Screen Ltd (1)(a)
Millbank Studios (1)(a)
Morning TV 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
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
100
100
100
100
100
100
100
100
100
100
100
242
ITV plc Annual Report and Accounts 2020
Company Name
Moving Picture Company Films Limited (1)(a)
MT Ghosts 3 Limited (1)(a)
MT Murder in Provence Limited (1)(a)
New Providence Productions Limited (1)(a)
Pickwick Packaging Limited (1)(a)
Sightseers Film Limited (1)(a)
So Television Limited (1)(a)
The CITV Channel Limited (1)(a)
The Garden Productions (Film) Limited (1)(a)
The Garden Productions Limited (1)(a)
TwoFour Broadcast Limited (3)(a)
Twofour Group Holdings Limited (1)(a)
TwoFour Group Limited (3)(a)
UTV Limited (24)(a)
UTV Pension Scheme Limited (24)(a)
VOD Member (ITVA) Limited (1)(a)
VOD Member (ITVB) Limited (1)(a)
Westcountry Television Limited (1)(a)
World of Sport Wrestling Limited (1)(a)
Yorkshire Television Limited (1)(a)
Zebedee Productions Limited (1)(a)
Artist Services Cable Pty Ltd (26)(a)
Artist Services Investments Pty Limited (26)(a)
Artist Services Productions Pty Ltd (26)(a)
Granada Media International (Australia) Pty Ltd (26)(a)
Granada Media Investments (Australia) Pty Ltd (26)(a)
Granada Productions Pty Ltd (26)(a)
ITV Services Pty Ltd (26)(a)
ITV Studios Australia Pty Limited (26)(a)
ITV Studios Global Distribution Pty Limited (26)(a)
ITV SVOD Australia Pty Limited (26)(a)
Totally Full Frontal Productions Pty Limited (26)(a)
Talpa Cabo Verde SA (65)(a)
ITV Holdings (Cayman) Limited (27)(a)
ITV Studios Denmark Holdings Aps (73)(a)
United Productions ApS (74)(a)
ITV Studios Finland Oy (40)(a)
Granada (Fiji) Pte Ltd. (48)(a)
ITV Studios France Holdings SAS (64)(a)
ITV Studios France SAS (64)(a)
ITV Studios TV France (64)(a)
ITV Studios Germany GmbH (28)(a)
ITV Studios Germany Holdings GmbH (28)(a)
Talpa Germany Fiction GmbH (55)(a)
Talpa Germany Gmbh & Co KG (55)(a)
Talpa Germany Infotainment GmbH (55)(a)
Talpa Germany Verwaltungs GmbH (55)(a)
Elecrent Insurance Limited (21)(a)
ITV Studios Global Distribution (Hong Kong) Limited (58)(a)Hong Kong
Hong Kong
Talpa China Limited (57)(a)
Israel
Armoza International Media Ltd (56)(a)
Jersey
Channel Television Limited (22)(a)
Jersey
ITV London Properties Limited (23)(a)
Jersey
ITV Properties (Jersey) Limited (23)(a)
Netherlands
April, May en June BV (46)(a)
Netherlands
Global Music & Talent Agency B.V. (41)(a)
Netherlands
ITV (Europe) Holdings B.V.* (44)(a)
Netherlands
ITV Studios Global Entertainment B.V. (41)(a)
Netherlands
ITV Studios Netherlands B.V. (42)(a)
Netherlands
ITV Studios Netherlands Content B.V. (42)(a)
Netherlands
ITV Studios Netherlands Drama B.V. (43)(a)
Netherlands
Stitchting ‘Derdengelden’ TV Producties (41)(a)
Netherlands
Talpa Germany Holding B.V. (41)(a)
Netherlands
Talpa Non-Spot B.V. (41)(a)
Netherlands
Vorst Media B.V. (47)(a)
Norway
ITV Studios Norway AS (70)(a)
Norway
ITV Studios Norway Vest AS (70)(a)
Singapore
ITV GE (Asia) Ptd Limited (77)(a)
Spain
ITV Studios Spain SL (78)(a)
Sweden
ITV Studios Sweden Drama AB (59)(a)
Sweden
ITV Studios Scandinavia Holdings AB (59)(a)
Switzerland
ITV Studios Germany GmbH, Köln, Zweigniederlassung
Zürich (60)(m)
ALB1819 Productions Inc. (30)(j)
% Holding
Country
100
UK
100
UK
100
UK
100
UK
100
UK
100
UK
100
UK
100
UK
100
UK
100
UK
100
UK
100
UK
100
UK
100
UK
100
UK
100
UK
100
UK
100
UK
100
UK
100
UK
100
UK
100
Australia
100
Australia
100
Australia
100
Australia
100
Australia
100
Australia
100
Australia
100
Australia
100
Australia
100
Australia
100
Australia
Cape Verde
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
USA
100
Strategic Report
Governance
Financial Statements
Additional Information
Company Name
Cardinal Productions of Ohio, Inc. (30)(j)
Carlton Media Company, Inc. (30)(j)
Chad Alan Productions, LLC (30)(h)
Cranktown Productions Inc. (30)(j)
Critical Productions Inc (30)(j)
Electric Farm Entertainment Holdings Inc. (30)(j)
Feeding Time Productions, LLC (34)(h
Fourth State Productions Inc (35) (j)
Gear Shop Inc. (30)(j)
Granada Cracker US Productions (32)(j)
Granada Television International, Inc. (30)(j)
Grafting 101, Inc. (30)(h)
Gurney Productions, LLC (32)(h)
GWC Enterprises Inc. (30)(j)
Hamdon Entertainment, Inc. (30)(j)
High Noon Group, LLC (33)(h)
High Noon Productions, LLC (33)(h)
ITC Distribution, LLC (30)(h)
ITC Entertainment Group, Inc (30)(j)
ITC Films, LLC (30)(h)
ITC Productions, LLC (30)(h)
ITV Bedrock Holding, Inc. (30)(h)
ITV Believe Holding, Inc. (30)(j)
ITV Blumhouse Holding Inc (30)(j)
ITV Diga Holding, Inc (30)(j)
ITV Entertainment Services Inc.( 30)(j)
ITV Gurney Holding Inc. (30)(j)
ITV HN Holding Inc. (30)(j)
ITV International Corporation (30)(j)
ITV Leftfield Holding Inc. (30)(j)
ITV New Form Holding Inc. (30)(j)
ITV NewTV Holding Inc. (30)(j)
ITV Popco Holding Inc. (30)(j)
ITV Southpoint Holding Inc (30)(j)
ITV Studios America Inc. (30)(j)
ITV Studios, Inc. (32)(j)
ITV Studios The Voice USA, Inc. (32)(j)
ITV SVOD Holding Inc. (30)(j)
ITV Thinkfactory Holding Inc. (30)(j)
ITV Tomorrow Holding, Inc. (30)(j)
ITV US Holdings, Inc. (30)(j)
JB Entertainment Holding Company, Inc. (30)(j)
Kirkstall Road Enterprises, Inc. (30)(j)
Krewed Inc (30)(j)
Leftfield Entertainment, LLC (30)(h)
Leftfield Pictures of NY Holdings, LLC (30)(h)
Leftfield Pictures of NY, LLC (30)(h)
Leftfield Ventures, LLC (30)(h)
Loud Television, LLC (30)(h)
LWT Enterprises Inc. (30)(j)
Marriage Boot Camp Reality Stars, LLC (30)(h)
Moving Pictures Services Inc. (30)(j)
Outpost Entertainment LLC, (30)(h)
Over the Pond Productions, Inc. (30)(j)
Post 460 Inc (30)(j)
Quay Street Enterprises, Inc. (30)(j)
Sirens Media, LLC (30)(h)
Solowe Productions Inc (30)(j)
Southsquare Productions Inc. (30)(j)
Thinkfactory Group, LLC (30)(h)
Thinkfactory Media, LLC (30)(h)
Trailer Park Productions, Inc (30)(j)
Upper Ground Enterprises, Inc. (30))(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
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
100
100
100
100
100
100
100
100
100
100
100
Other subsidiaires, joint ventures, associates
and other significant holdings
Company Name
Absolutely Rights Limited (6)(f)
DTV Services Limited (13)(a)
That Mitchell and Webb Company Limited (7)(a)
Route 24 Limited (17)(a)
Clearcast Limited (11)(a)
Genial Productions Limited (39)( a)
Koska Limited (53)(a)
South Shore Productions Limited (54) (a)
Cirkus International Limited (10)(a)
Thinkbox TV Limited (16)(a)
Independent Television News Limited (15)(a)
Malacara Limited (5)(a)
Cloth Cat LBB Limited (5)(a)
Box Clever Technology Limited (8)(a)
British Film-Makers Limited (1)(a)
Denipurna Limited (1)(a)
Digital 3 and 4 Limited (12)(a)
Freesat (UK) Limited (14)(a)
Harlequin Agency Limited (5)(a)
Noho Film and Television Limited (18)(a)
Pink Rose Bud Limited (5)(a)
Standard Music Limited (19)(a)
Tell Me Everything Limited (18)(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)
Cirkus Limited (10)(a)
3sixtymedia Limited (1)(a)
OSF (Wales) Limited (5)(a)
Oxford Scientific Films Limited (5)(a)
Age Before Beauty Limited (4)(a)
Gold Digger Productions Limited (4)(a)
Mainstreet Pictures Limited (4)(a)
Unforgotten 2 Limited (4)(a)
Unforgotten 3 Limited (4)(a)
Unforgotten 4 Limited (4)(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 Save Me 2 Limited (1)(a)
WP Diplomat Limited (1)(a)
WP Showtrial Limited (1)(a)
WP (NEWCO 7) Limited (1)(a)
WP Pembrokeshire Limited (1)(a)
WP Karen Pirie Limited (1)(a)
World Productions Limited (1)(a)
World Productions (Northern Ireland) Limited (1)(a)
BritBox SVOD Limited (1)(a)
GC Films Pty Limited (26)(a)
Britbox Australia Management Pty Limited (38)(a)
LTP Productions Inc. (76)(h)
Apple Tree Productions ApS (75)(a)
15.15 Productions (71)(a)
Balina Films SA (72)(a)
Beaubourg Audiovisuel (72)(a)
Beaubourg Fiction (72)(a)
Beaubourg Stories (72)(a)
SCI MD 60 (51)(a)
Gedesel (52)(a)
Funny Corp (51)(a)
Macondo Productions Audiovisueles (51)(a)
Tangaro (51)(a)
Tetra Media Fiction (51)(a)
Shoot Again Productions (51)(a)
Phara Prod International (51)(a)
Tetra Media Studios SAS (51)(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
Australia
Australia
Canada
Denmark
France
France
France
France
France
France
France
France
France
France
France
France
France
France
% Holding
20
20
20
24.9
25
25
25
25
28
28.58
40
49
55
50
50
50
50
50
50
50
50
50
50
50.001
50.001
50.01
50.01
51
51
51
55.67
80
85
85
90
90
90
90
90
90
92
92
92
92
92
92
92
92
92
92
92
92
92
90
49
50
100
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
ITV plc Annual Report and Accounts 2020
243
Financial Statements List of subsidiaries continued
Financial Statements
Company Name
Imago TV Film und Fernsehproduktion GmbH (29)(a)
The Lab Television 2013 Limited Partnership (61)(a)
Think Cattleya Srl (37)(a)
Talpa Italia Srl (62)(a)
Cattleya Srl (37)(a)
Radio Cattleya Srl (37)(a)
Appletree Productions AB (59)(a)
ITV Studios Sweden AB (59)(a)
Maximum Media Production FZ-LLC (63)(a)
ITV Studios Arabia Holding Ltd (63)(a)
ITV Studios Middle East FZ-LLC (63)(a)
ITV Studios Lebanon S.A.R.L (63)(a)
Tomorrow Friends LLC (30)(h)
Bedrock Entertainment LLC (30)(h)
Southrock Productions LLC (30)(h)
Blumhouse TV Holdings LLC (30)(h)
Circle of Confusion Television Studios LLC (30)(h)
South Circle Productions LLC (30)(h)
BB Rights, LLC (30)(h)
Britbox, LLC (36)(h)
Jaffe/Braunstein Entertainment, LLC (31)(h)
Next Steps Productions, LLC (30)(h)
Tomorrow Studios LLC (30)(h)
Country
Germany
Israel
Italy
Italy
Italy
Italy
Sweden
Sweden
UAE
UAE
UAE
Lebanon
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
Memberships, Partnerships and Companies Limited
by Guarantee
Company Name
ITV LTVC Scottish Limited Partnership (68)(h)**
ITV Scottish Limited Partnership (68)(h)**
Digital Production Partnership Limited (1)(i)
Producers Rights Agency Limited (66)(i)
DTT Multiplex Operators Limited (67)(i)
Digital UK Limited (13)(i)
Britbox Australia Partnership
Futureflip Entertainment India LLP (69)(h)
Country
UK
UK
UK
UK
UK
UK
Australia
India
% Holding
90
50
25.5
50
51
51
25
95
90
90
90
90
25
40
40
45
49
49
50
40.5
51
75
75
% Holding
100
100
50
50
25
25
50
100
244
ITV plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Additional Information
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
(7)
(8)
(9) Orange Tower, Media City UK, Salford M50 2HF
(10) The Met Building, 22 Percy Street, London, W1T 2BU, United Kingdom
(11) 4 Roger Street, 2nd Floor, London, WC1X 2JX, United Kingdom
(12)
124 Horseferry Road, London, SW1P 2TX, United Kingdom
(13) Fieldfisher Riverbank House, Swan Lane, London, England, EC4R 3TT
(14) 23-24 Newman Street, London, W1T 1PJ, United Kingdom
(15) 200 Gray’s Inn Road, London, WC1X 8HF, United Kingdom
(16) Manning House, 22 Carlisle Place, London, SW1P 1JA, United Kingdom
(17) 325-327 Oldfield Lane North, Greenford, Middlesex, United Kingdom, UB6 0FX
(18) 3rd Floor 20-22 Berkeley Square, London, United Kingdom, W1J 6EQ
(19) Roundhouse, 212 Regent’s Park Road, London, NW1 8AW, United Kingdom
Quartermile One, 15 Lauriston Place, Edinburgh, Scotland, EH3 9EP,
(20)
United Kingdom
P.O. Box 308, St. Peter Port House, Union Street, St. Peter Port, GY1 3TA,
Guernsey
(21)
(22) Le Capelain House, Castle Quay, St. Helier, JE2 3EH, Jersey
(23) Ogier House, The Esplanade, St. Helier, JE4 9WG, Jersey
(24) City Quays 2, 8th Floor, 2 Clarendon Road, Belfast, BT1 3YD, United Kingdom
(25)
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
Ocorian Trust (Cayman) Limited, Windward 3, Regatta Office Park, PO Box 1350,
Grand Cayman KY1-1108, Cayman Islands
(26)
(27)
(28) Agrippastraße, 87-93, 50676, Köln, Germany
(29) Keplerstrasse 4-6, 10589, Berlin, Germany
(30)
The Corporation Trust Company, Corporate Trust Center, 1209 Orange Street,
Wilmington, Newcastle, DE 19801, USA
(31) 321 Southern Beverly Drive, Suite M, Beverly Hills, CA 90212, USA
(32)
CT Corporation System, 818 West Seventh Street, Suite 930, Los Angeles, CA
90017, USA
(33) The Hodson Law Firm, 1129, East 17th Avenue, Denver, CO 80014, USA
(34)
CT Corporation System, 3867 Plaza Tower Drive East Baton Rouge Parish, Baton
Rouge, LA 70816, USA
CT Corporation System, 289 S. Culver Street, Lawrenceville, GA, 30046-4805,
USA
(35)
(36) 1120 Avenue of Americas, 5th Floor, New York, NY10036, USA
(37) Piazzale Valerio Massimo, 7, 00162, Roma, Italy
(38) Level 1, 35-51 Mitchell Street, McMahons Point, NSW 2060, Australia
(39) 39 Long Acre, London, WC2E 9LG, United Kingdom
(40) Hämeentie 15A, 00500 Helsinki, Finland
(41) Familie de Mollaan 1, 1217 ZB, Hilversum, Netherlands
(42) Koos Postemalaan 8, 1217 ZC, Hilversum, Netherlands
(43) Haarlemmer Houttuinen, 21 1013 GL, Amsterdam, Netherlands
(44) Hoogoorddreef 15, 1101 BA, Amsterdam, Netherlands
(45) Noorderweg 8, 1221 AA, Hilversum, Netherlands
(46) Zevenend 45, 1251 RL, Laren, North Holland, Netherlands
(47) Hollandse Kade 34, 1391JM, Abcoude, Netherlands
(48) Level 3, Pacific House, Butt Street. Suva, Fiji
(49) Westersingel 108, 3015 LD Rotterdam, Netherlands
(50) Keizersgracht 149a, 1015CL, Amsterdam, Netherlands
(51) 60 rue Marcel Dassault, 92100, Boulogne-Billancourt, France
(52) 4 rue de Commaille, 75007, Paris, France
(53)
Jessop House, Jessop Avenue, Cheltenham, Gloucestershire, United Kingdom,
GL50 3WG
(54) 210 High Holborn, London, England, WC1V 7HD
(55) Genthiner Strasse 5, 10785 Berlin, Germany
(56) 16 Haarbaa St, Tel Aviv 6473916, Israel
(57) 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,
(58)
Hong Kong
(59) Soder Malarstrand 65, 11825, Stockholm, Sweden
(60) Scharenmoosstrasse 105, 8052, Zurich, Switzerland
(61) 23 Habarzel Street, Tel Aviv, 69710, Israel
(62) Via Enrico, Tazzoli 6, Rome, Italy
(63) Building 2, Dubai Media City, Dubai, UAE
(64) 12 boulevard des Iles, 92130 Issy-les-Moulineaux, Paris, France
(65) Avenida Cidade de Lisboa, Frente Sucupira, 2° andar, Cidade de Praia, Cape Verde
Fitzrovia House, (3rd Floor), 153-157 Cleveland Street, London, W1T 6QW,
(66)
United Kingdom
(67) 27 Mortimer Street, London, England, W1T 3JF
(68)
C/O Dentons UK and Middle East LLP, Quartermile One 15 Lauriston Place,
Edinburgh, EH3 9EP
#1302, Tower-3, Indiabulls Finance Centre, Senapati Bapat Road, Elphinstone
Road (West), Mumbai, Mumbai City, Maharashtra 40013, India
(69)
(70) Lars Hilles Gate 30, 5008, Bergan, Norway
(71) 10 rue Maître Jacques, 92100 Boulogne, Billancourt, France
(72) 5–7 rue Saint-Augustin, 75002, Paris, France
(73) DLA Piper Denmark, Radhuspladsen 4, 1550 Kobenhavn V, Denmark
(74) Finsensvej 6E, 2000, Frederiksberg, Denmark
(75) Aumento Advokatfirma, Ny Osteragde 3,4, 1101, Kobenhavn, Denmark
(76) 120 West 3rd Avenue #201, Vancouver BC V5Y 1E9, Canada
(77) 101c Telok Ayer Street, Singapore 068574
(78) Calle Velaquaz 18, 6-D, 28001 Madrid, Spain
(h) Membership/Partnership
(i)
(j)
(k)
(l)
(m) Branch
Guarantee
Common
preference
Part preference
Interest key
(a) Ordinary
(b) Deferred
(c)
(d)
(e)
(f)
(g)
Special deferred
Redeemable preference
Cumulative preference
Cumulative redeemable preference
Convertible preference
*
**
Direct subsidiary
Having met the criteria under under
Regulation 7 of the Partnership
(Account) Regulations 2008 (SI
2008/569) these Limited
Partnerships have taken the
exemption to deliver accounts to
the Registrar of Companies
ITV plc Annual Report and Accounts 2020
245
Additional 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 main channel, ITV2,
ITV3, ITV4, ITVBe, CITV 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
246
ITV plc Annual Report and Accounts 2020
Light viewer – the lightest 20% of viewers
to ITV across a rolling 12 month period
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 (MAU) – 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)
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
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
Spot advertising – linear television
advertising occupying a short break during
or between programmes
Subscriptions – entitled users of ITV SVOD
services, which includes those who pay ITV
directly, those who are paid for by an
operator, and free triallists
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) – this
includes ITV Family NAR, online advertising
via the ITV Hub, programme sponsorship
revenue and other affiliated advertising
revenue streams
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
Network Programme Budget (NPB) – the
budget spent on programming broadcast
on the ITV family of channels
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 Broadcast (SOB) – ITV’s share
of UK television advertising revenue (NAR),
a measure of market share
Designed and produced by
ITV plc
2 Waterhouse Square
140 Holborn
London
EC1N 2AE
www.itv.com
Investors:
www.itvplc.com Stock code: ITV