2016 Annual Report
Total Page:16
File Type:pdf, Size:1020Kb
ITV plc Annual Report and Accounts for the year ended 31 December 2016 Rebalanced ITV delivers continued growth ITV plc Annual Report and Accounts for the year ended 31 December 2016 Strategic Report Overview We are an integrated producer broadcaster, creating, owning and distributing high-quality content on multiple platforms. Contents Strategic Report Overview Governance Chairman’s Governance Statement 58 Provides a 2016 Highlights 2 Presents a clear view Board of Directors 60 comprehensive review Investor Proposition 4 of ITV’s governance. Management Board 62 of ITV’s business ITV at a Glance 6 Corporate Governance 64 and strategy. Market Review 8 Audit and Risk Committee Report 68 Remuneration Report 75 Strategy and Operations Annual Report on Remuneration 79 Our Strategy and Business Model 12 Remuneration Policy 89 Chairman’s Statement 14 Directors’ Report 98 Chief Executive’s Review 16 Strategic Priorities 20 Performance Dashboard 32 Financial Financial Statements 105 Performance and Financials Statements Independent Auditor’s Report 106 Alternative Performance Measures 34 ITV’s audited financial Primary Statements 110 Key Performance Indicators 36 statements for ITV plc Company Financial Financial and Performance Review 40 the year ended Statements 175 Risks and Uncertainties 50 31 December 2016. Additional Shareholder Information 189 information Glossary 190 Key Read more content within this report Read more content online 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 2016 Strategic Report maximising We invest over £1 billion annually in our programming, significantly more than our commercial competitors, and have an unrivalled ability to deliver mass audiences Series 16 of I’m a Celebrity...Get Me Out of Here! across all demographics for our advertisers. launched in the UK with 12.7 million viewers making it ITV’s most watched entertainment programme in 2016. The series averaged 10.4 See page 20 for more million viewers and had a 50% share for the 16-34s demographic. Poldark is produced by Mammoth Screen (part of ITV Studios UK) for the BBC and has been recommissioned growing for a third series to be delivered in 2017. As an integrated producer broadcaster we create value from world-class content that we develop, own and distribute around the world. See page 24 for more building As we grow our investment in content, we are creating more windows to extend the reach of that content and monetise it across more markets and Vera is a British based detective drama. platforms, both free and pay. The sixth series was broadcast on ITV in 2016 and was the most watched to date, averaging 7.2 million across the See page 28 for more series. It has had huge international success, selling to over 150 countries. Strategic Report The Strategic Report explains in detail how we have performed this year and sets out 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 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, these various forward-looking statements. None of these statements should be construed as a profit forecast. Front Cover Victoria, produced by ITV Studios UK. 1 Strategic Report Overview 2016 Highlights ITV delivered another strong performance in 2016 as we continued to strengthen, rebalance and grow the business. Group external revenue1 £m Non-NAR revenue2 £m Adjusted EBITA3 £m £3,064m £1,855m £885m 885 865 1,855 3,064 2,972 1,664 % % 730 % 2,590 3 11 2 YoY YoY YoY 2,389 620 2,196 1,327 2,140 1,211 2,064 513 1,879 462 1,036 922 850 408 829 +63% +118% +338% Increase Increase 202 Increase on 2009 on 2009 on 2009 09 10 11 12 13 14 15 16 09 10 11 12 13 14 15 16 09 10 11 12 13 14 15 16 Adjusted EPS p Statutory EPS4 p Dividend per share p (ordinary) 17.0p 11.2p 7.2p 7.2 17.0 10.0 12.4 16.5 11.6 11.2 6.0 13.8 3% -10% 20% YoY YoY YoY 8.3 4.7 11.2 9.1 6.6 6.9 6.4 3.5 7.9 6.4 2.6 + % + % + p 1.8 844 387 7.2 Increase Increase 1.6 Increase on 2009 2.3 on 2009 on 2009 09 10 11 12 13 14 15 16 09 10 11 12 13 14 15 16 09 10 11 12 13 14 15 16 Adjusted EBITA growth of Proposed an increase of Online, Pay 338% 20% in the & Interactive since 2009 ordinary revenue up dividend 23% Alternative Performance Measures We use both statutory and adjusted measures in our Strategic Report, the latter of which, 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 definitions on page 34. Our KPIs are set out on pages 36 to 39. 1. The Strategic Report also refers to total revenue which includes all ITV revenue, both internal and external . 2. Non-Net Advertising Revenue (Non-NAR) includes all ITV revenue, both internal and external, except Net Advertising Revenue (NAR). Unforgotten is a detective drama produced by Good Morning Britain is broadcast on ITV five 3. EBITA before exceptional items has been adjusted Mainstreet Pictures (part of ITV Studios UK) and mornings a week and reaches 5 million viewers to reflect the inclusion of production tax credits (‘adjusted EBITA’). has been recommissioned for a second series across this period. Its biggest audience was 1.2 4. Statutory profit before tax is £553 million to be broadcast on ITV in 2017. million following the EU referendum result. (2015: £641 million). 2 ITV plc Annual Report and Accounts 2016 Strategic Report In 2016 we grew our share of the UK television ad market to 21.4% 24% increase in long-form video share of viewing requests in 2016 to for ITV Family, up 1% since 2015 over 1bn 47.4 % 90% increase in total ITV Studios hours produced since 2010 80 ITV formats sold in 2016 Britain’s Got Talent averaged 9.9 million viewers across the series with two episodes achieving over 12 million viewers. 50% of the audience was the 16-34s demographic. Marcella was one of the top ten new dramas Coronation Street was the most watched soap The England vs Iceland Euros football match in 2016, launching with 8.0 million viewers. in 2016 averaging 7.6 million viewers across the in June 2016 was watched by 15.2 million It averaged 6.8 million viewers across the year. It reached over 60% of the viewing viewers and was the most watched sporting series and has been recommissioned. population which is around 36 million. event of 2016. 3 Strategic Report Overview Investor Proposition ITV continues to make significant progress in growing and strengthening the business creatively, commercially and financially. Pictured top to bottom: ITV on-screen ident; Multiscreening of a football match broadcast on ITV. A strong track record for delivery Since 2009 we have grown adjusted earnings per share by 844%. Even in 2016 when NAR declined by 3% we delivered revenue and adjusted EBITA +844% growth as a result of the significant progress we increase in adjusted have made in rebalancing the business. We are EPS since 2009 reducing our dependence on UK advertising and driving new revenue streams to build a more global and diversified organisation 53% of total revenue is from sources other than spot advertising Pictured left to right: Joanna Lumley presented a three-part documentary on Japan for ITV; ITV hosted the Six Nations Rugby Championships for the first time in 2016. England vs Ireland was the most watched match on ITV with an average of 6.6 million viewers. 4 ITV plc Annual Report and Accounts 2016 Strategic Report Strong market position The Broadcast business remains robust. Our on-screen and online viewing performance is strong and we continue to deliver unrivalled audience scale and reach for advertisers as well as more targeted demographics on our digital channels and on the ITV Hub. Online, Pay & Interactive is a material, fast-growing and profitable part of the business and we are continuing to build our digital business with the announced launch of our Subscription Video on Demand (SVOD) service BritBox US Our international content business is now a global player of scale, creating, owning and managing rights and we will continue to grow both organically and through acquisitions in key creative markets 99% of all commercial audiences over 5 million are on ITV Pictured: The Tour de France has been broadcast on ITV and ITV4 for nine years.