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WorldReginfo - 5364f83b-8f81-4880-8c8d-55f6146b26da - WorldReginfo Stories for for Stories our time. ITV plc Report and accounts 2006 ITV plc Report and accounts 2006 ondon WC1X 8HF Investors: www.itvplc.com Investors: L www.itv.com 200 Gray’s Inn Road 200 Gray’s ITV plc Contents Financial highlights Message from the Executive Chairman 01 Revenue ITV at a glance 14 Business Review Our market environment 17 Our strategy 21 £2,181m Resources and relationships 24 Key performance indicators 29 05 £2,196m (restated) Risks and uncertainties 30 Operating review 31 Operating Profit Financial review 37 Forward look 42 Glossary of terms 43 Governance £264m Board of directors 44 Directors’ report 46 05 £329m Statement of directors’ responsibilities 49 Independent auditor’s report to 50 Profit before tax the members of ITV plc Corporate governance 89 Remuneration report 93 Shareholder information 102 Financial record 104 £288m Financial Statements 05 £311m Consolidated income statement 51 Consolidated balance sheet 52 Cash generated from operations Consolidated cash flow statement 53 Consolidated statement of recognised 54 income and expense Notes to the accounts 55 ITV plc Company Financial Statements 84 £342m ITV’s Business Review 05 £456m The Business Review explains in detail how we have performed this year and sets out a fair review of the business, balanced and comprehensive analysis of our performance, the use of Earnings per share financial and non-financial key performance indicators to explain how much progress we have made, a description of the principal risks and uncertainties facing the Company, and an indication of likely future developments. The Business Review is prepared in line with the relevant provisions of the Companies Act 1985 and in accordance with the guidance issued by the Accounting Standards Board in its 5.5 pence Reporting Statement on narrative reporting. It is intended that the Business Review will provide shareholders with a greater 05 5.4 pence understanding of the Company, of its position in the markets within which it operates, and of its prospects. Dividend per share In setting out the Company’s main risks and uncertainties, an indication of likely future developments, and in other content, this Annual Report contains statements which, by their nature, cannot be considered indications of likelihood or certainty. The statements are based on the knowledge and information available at the date of preparation of this Business Review, and what are believed to be reasonable judgments. A wide range of factors may cause the actual outcomes and results 3.15 pence to differ materially from those contained within, or implied by, these various forward-looking statements. Nor should any of 05 3.12 pence these statements be construed as a profit forecast. Cover image Helen Mirren in the Oscar winning ITV Production, Design and production Radley Yeldar The Queen, go to page 32 for more details. Print St Ives Westerham Press, environmentally accredited printers ISO 14001, using vegetable based inks. Paper Hello silk, made from virgin wood fibre from sawmill residues, forest thinnings and sustainable forests in Europe. It is fully biodegradable and recyclable and produced in mills which hold ISO 9002 and ISO 14001 accreditation. WorldReginfo - 5364f83b-8f81-4880-8c8d-55f6146b26da 01_ITV plc Report and accounts 2006 Message from the Executive Chairman Michael Grade Together I believe we can raise our game to create more innovative content for our viewers and more valuable airtime for our advertisers. On Monday, 8 January, 2007 I returned to work for ITV. From – The Consumer businesses represent an area of proven growth the moment I was approached by the Board last year, I had no which we will seek to accelerate; and doubt that I would accept this most stimulating and challenging – The Board’s strategy which I inherit is essentially sound. position in British broadcasting. The businesses that have been recently acquired and developed ITV has not had an easy time in recent history, operating in the are all natural extensions of the core operations. highly competitive and technology driven media sector. It faced On the negative side: a challenging advertising market and speculation over both its leadership and its ownership. – Whilst the strategy is sound, we are playing catch up in many areas, no doubt due to the efforts required to ‘bed in’ the My brief is to restore the fortunes of the Group and thus return successful Carlton/Granada merger. We have a valuable the business to growth. multichannel offering and exciting web opportunities – but Having been in post for two months it is too soon to conclude still a long way to grow; definitive plans for the business, but generally I have developed – There is a lack of innovation in our programming, partly more positive impressions than negative ones, and the latter are resulting from a fear of ratings failure and the punitive mostly within our control to remedy. consequences that follow under the Contract Rights Renewal On the positive side: (CRR) remedy (described below); – There are talented and dedicated people across all areas – The Company has developed a tendency towards bureaucracy. of the Company; The cure for this lies with the example set by the leadership team within the businesses. I will improve delegation, and place – ITV Productions is a superb business of real scale with the ability emphasis on the need to make the ITV values (described on to deliver outstanding content, from the Oscar winning film page 25) a reality in our actions; “The Queen” starring Dame Helen Mirren, to Coronation Street and Emmerdale, to Dancing on Ice; – We need to continue strengthening the relationship between our commissioning teams and both internal and external – ITV remains a much-loved brand and ITV1 is still the UK’s most producers. This is critical to ensure that the commissioning popular television channel in peak-time with the England v pipeline is filled with the high-quality programmes that deliver Sweden game during the football World Cup achieving the the audiences which in turn our commissioning team need to highest audience (18.5 million) on any channel in 2006; fulfil our advertisers’ and viewers’ aspirations; and – Our strong regional presence is a greater asset than is – Our regulatory environment needs to reflect the reality of recognised and the growth in regional advertising has been our 21st century structure and the developing market in which particularly buoyant against a depressed national TV advertising we operate these days. ITV may have consolidated, but it market. We need to find ways to sustain and even enhance is a long way from the advertising monopoly of yesteryear. this valuable public service. It is part of what binds ITV to its The regulatory burden has yet fully to reflect this. audiences throughout the UK and distinguishes us from our competitors. – Our digital channels are the most successful free to air commercial family of digital channels in the UK, each with distinctive branding and programming. We must ensure that they have the investment they need to grow their leading market position as we approach digital switchover; WorldReginfo - 5364f83b-8f81-4880-8c8d-55f6146b26da 02_ITV plc Report and accounts 2006 Message from the Executive Chairman Michael Grade The value chain for content is getting longer and more lucrative thanks to the digital present – and future. My task, after the recent distractions, – together with ITV’s New media platforms senior management team – is to build a sense of confidence Increasingly our viewers are demonstrating a desire to move in our people and the wider creative community to ensure beyond a simple passive viewing experience and expect to that together we deliver more consistently for our viewers, interact with, and participate in, our programming. People are our customers and our shareholders. There is a section on ITV also accessing our content from a much wider range of media strategy later in this report on pages 21 to 22. platforms. Our Consumer team has responded, developing My immediate priorities are developing the strength of our ways of enabling viewers to do this. Technology creates new programming and new media businesses, and working to opportunities for content consumption, and we must ensure reduce overly onerous regulatory constraints. that we exploit the opportunities that this brings, delivering new services that viewers can access whenever, wherever, and however Raising our creative sights they want. The launch of our new broadband proposition this Spring will significantly enhance our online offering. I will be On the programming side we must raise our creative ambition. promoting the acceleration of our new media businesses. We must be more innovative and take more risks. We must With our high-quality content and services for viewers, I believe be more relevant and we must be ahead of audience tastes. that 2007 will be the year that ITV comes of age as a deliverer of In particular we must regain our pre-eminence in drama series online entertainment with real commercial opportunities. on ITV1 at 9.00 pm. I am definitely encouraged by what I have heard and seen so far from the new commissioning team headed Appropriate regulation for the digital age by Simon Shaps. They have already started to cull some of the older programmes which were past their sell by date, and we ITV is subject to a high degree of regulation, some of it the are introducing a range of new programmes in 2007. legacy of an age of analogue broadcasting and an oligopolistic commercial broadcasting structure. This regulatory burden is not I am now working with them on the plans that are being entirely compatible with the increase in competition driven by formulated for 2008 and beyond. digital technology and new media, and by the public’s appetite to access new distribution platforms as they appear.

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