Platform for Change ITV Plc Report and Accounts 2009 Contents
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Platform for change ITV plc Report and accounts 2009 Contents Financial summary 01 Chairman’s statement 02 About us 04 2009 at a glance 06 Directors’ report Business review Operating review 08 Stakeholders 27 Risks and uncertainties 30 Key performance indicators 32 Financial review 34 Governance Board of Directors 44 Corporate Governance 46 Audit Committee report 50 Remuneration report 53 Other governance and statutory disclosures 62 Financial statements Statement of directors’ responsibilities 63 Independent auditor’s report 64 Consolidated income statement 65 Consolidated statement of comprehensive income 66 Consolidated statement of financial position 67 Consolidated statement of changes in equity 68 Consolidated statement of cash flows 70 Notes to the accounts 71 ITV plc Company Financial Statements 108 Notes to the ITV plc Company Financial Statements 109 Other information Shareholder information 113 Glossary of terms 115 Financial record 116 ITV plc Report and accounts 2009 01 Financial summary Group revenues of £1,879m 2008: £2,029m EBITA before exceptional items of £202m 2008: £211m Adjusted cash flow of £358m* 2008: £158m Profit before tax of £25m 2008: Loss before tax of £2,732m Earnings per share of 2.3p 2008: Loss per share of 65.9p Adjusted earnings per share of 1.8p* 2008: 1.8p Net debt of £612m 2008: £730m * See definitions on page 32. ITV’s Business review The Business review is prepared in line with the relevant In setting out the Company’s main risks and uncertainties, The Business review explains in detail how we have provisions of the Companies Act 2006. In preparing the an indication of likely future developments, and in other performed this year and sets out a fair review of the Business review the Company has had regard to the content, this report and accounts contains statements business, balanced and comprehensive analysis of our guidance issued by the Accounting Standards Board in its which, by their nature, cannot be considered indications performance, the use of financial and non-financial key Reporting Statement on narrative reporting. The Business of likelihood or certainty. The statements are based on performance indicators to explain how much progress review is intended to provide shareholders with a greater the knowledge and information available at the date of we have made, a description of the principal risks and understanding of the Company, of its position in the preparation of the Business review, and what are believed uncertainties facing the Company, and an indication markets within which it operates, and of its prospects. to be reasonable judgements. A wide range of factors may of likely future developments. cause the actual outcomes and results to differ materially from those contained within, or implied by, these various forward-looking statements. Nor should any of these statements be construed as a profit forecast. ITV plc Report and accounts 2009 02 Chairman’s statement Dear Shareholder Future challenges Against this recent context, it is clear that ITV now faces an I am delighted to have joined ITV as Chairman on 1 January imperative for change. The traditional free-to-air advertising- 2010. Whilst the business faces many difficult challenges, it fuelled television model will see long-term decline in share of remains an exciting place to work with a unique role in national viewing and share of UK media revenues. To secure and grow life. Its revitalisation is important, not just to shareholders, shareholder value, we need to ensure we use the extraordinary but to millions of viewers across the country. My objective is to talent base of ITV to compete, not only in conventional work with the executive team to transform the Company so as broadcasting, but also as a developer and exploiter of content to enable it to prosper in a rapidly changing media landscape. across multiple platforms in the UK and internationally. Progress in 2009 Seizing the opportunities ahead will require changes to ITV’s ITV came through a very challenging year in 2009. Not only organisation, systems, people and culture. was it the worst television advertising recession on record, Our first challenge will be to sustain the creative and commercial but the difficulties of the leadership succession provided a health of our free-to-air broadcast business. In doing so, we face distracting context for the business and the executive team. intense competition from the BBC, whose taxpayer-funded Against this background, ITV delivered a remarkably resilient revenue has been unaffected by the economic downturn, and performance, very much as a result of decisive management from BSkyB, whose satellite platform continues to grow and, action to reduce costs and strengthen the balance sheet. as it does so, erode the share of traditional free-to-air viewing. As a consequence, the business avoided a serious liquidity The rapid development of digital media means that the British crisis and EBITA before exceptional items fell only marginally. public will increasingly view television through the internet, via Adjusted cash flow increased by £200 million and net debt internet-enabled television, personal computers and mobile reduced by over £100 million. ITV’s debt repayments have devices. ITV currently has a small share of online video, lagging been rescheduled and its pension scheme liabilities have behind our competitors. Furthermore new competitors, such been stabilised. In the light of the continuing economic as Google, are strongly positioned to play a leading role, uncertainty, the Board is not proposing payment of a final potentially displacing broadcasters as the initial point of access. dividend. However, financially we now have a more stable platform from which to address the challenges ahead. As the market for content globalises and rights ownership becomes a more important part of the value chain, the In response to the advertising downturn, the programme integrated broadcaster-producer model should be a source budget was cut by over £100 million. Nonetheless, ITV ended of competitive advantage. However, ITV Studios, our content the year with a strong schedule performance. Although ITV1 creation and distribution business, has lost market share, continued to lose audience share, the ITV channel family held both within ITV and the wider UK market, partly as a result of its share overall. There were some significant programming reduced internal commissions. Restoring growth at ITV Studios successes, notably The X Factor, but also Law & Order: UK, and reinvesting in talent is a vital part of our future. Whitechapel, Dancing on Ice, and Britain’s Got Talent. Both our valuable long-running soaps, Coronation Street Finally, despite successive reviews by the Government and and Emmerdale, remain in good health. Such programming Ofcom, ITV remains one of Britain’s most heavily regulated success is critical to sustaining ITV’s share of the free-to-air businesses. Consequently our freedom to operate is severely advertising market. limited, in particular compared to our new media competitors. The adverse impact on the profitability of all free-to-air Our content business, ITV Studios, held profits, with increased broadcasters is resulting in declining investment in UK content international production offsetting a decline in the UK business. with serious implications for Britain’s creative industries. Internal ITV commissions in particular came under some pressure, as the ITV1 programming budget was reduced. Nevertheless, ITV Studios is making progress with its third party business and remains a hive of creative talent. Overall therefore, ITV has weathered the storm. The business has a manageable balance sheet, a strong brand and a talented broadcasting and creative team. ITV plc Report and accounts 2009 Chairman’s statement 03 Archie Norman Chairman Platform for change Outlook The task therefore for the new management team at ITV is to In my short time at ITV, I have met many highly talented take advantage of the opportunity last year’s changes have people at all levels of the organisation. There is a shared created and to address resolutely the challenges ahead. I am recognition that the business will need to change substantially therefore delighted that Adam Crozier will be joining from going forward if we are to return to sustained growth. In the Royal Mail Group as Chief Executive shortly. Adam has an coming months we will outline in more detail the outcome outstanding track record of transformational management, of our current strategic review and the journey ahead. has worked successfully with creative and media talent, and Whilst this new phase in the development of ITV is going has long experience of dealing with regulators and government. to be a challenging one, we enter it with a vibrant pipeline of programmes, a very strong brand and a talented team. As we embark on this journey, we inherit a platform for Ours is a people business and, with the right people, culture, change created out of the fire of recession by my predecessor, motivation and leadership, the future of ITV will lie in our Michael Grade, and by John Cresswell, the Interim Chief own hands. Executive. Michael has been an iconic figure at the helm of ITV and handed over a business with a spring once more in its step. He arrived at a very difficult time for ITV and leaves a business strengthened in many respects. Throughout, John Cresswell has provided calm and strong leadership. We are grateful to them both. Archie Norman Since my arrival we have moved to streamline the Board to prepare for the journey ahead and to create a strong and very engaged team. As a result some very distinguished non-executive directors have stood down. These include our Deputy Chairman, Sir George Russell, who made a substantial contribution to ITV from the days of the merger. Sir James Crosby played an important role as ITV’s Senior Independent Director, a position which has now been taken on by Mike Clasper.