Delivering strong growth and building scale ITV plc Annual Report and Accounts for the year ended 31 December 2015 Welcome to our Annual Report 2015 We are an integrated producer broadcaster, creating, owning and distributing high-quality content on multiple platforms. Emmerdale had an average share of viewing of 32% in 2015 maximising and reached 62% of the UK population, which is more than 35 million We invest over £1 billion annually in our programming, viewers. Emmerdale significantly more than our commercial competitors, has been sold to 139 countries. and have an unrivalled ability to deliver mass audiences across all demographics for our advertisers. See page 18 for more The Chase has now been produced in nine countries and sold growing to over 130 countries. As an integrated producer broadcaster we create value from world-class content that we develop, own and distribute around the world. See page 22 for more Thunderbirds Are Go! has now been sold to 90 countries, including building a four-series deal with Amazon to debut on Prime Video in the US. As we grow our investment in content, we are We are also starting creating more windows to extend the reach of that to drive value from merchandising as we content and monetise it across more markets and extend the franchise platforms, both free and pay. beyond the television set. See page 26 for more Front Cover Clockwise from the top: Poldark (ITV Studios UK for the BBC); 2015 Rugby World Cup winners New Zealand; Rovers Return from Coronation Street; I’m A Celebrity...Get Me Out Of Here!; Family Guy launched in February 2016 on ITV2; The Voice (Talpa Media for the BBC). Contents Strategic Report Strategic Strategic Report Overview Provides a comprehensive 2015 Highlights 2 review of ITV’s business Investor Proposition 4 and strategy. ITV at a Glance 6 Market Review 8 Strategy and Operations Our Strategy and Business Model 10 Chairman’s Statement 12 Learn more… Chief Executive’s Review 14 The Online Annual Report Strategic Priorities 18 Is available at ar2015.itvplc.com Performance Dashboard 30 Performance and Financials Key Performance Indicators 32 Financial and Performance Review 36 Risks and Uncertainties 46 Governance Chairman’s Governance Statement 52 Presents a clear view Board of Directors 54 of ITV’s governance. Management Board 56 Corporate Governance 58 Audit Committee Report 62 Corporate website Annual Remuneration Report 68 We maintain a corporate website at Remuneration Policy 81 www.itvplc.com containing a wide range Directors’ Report 85 of information of interest to institutional Directors’ Responsibilities 91 and private investors including: Financial Statements Financial Statements 92 • Latest news and press releases ITV’s audited financial Independent Auditor’s Report 93 • Annual reports and investor statements for the year Primary Statements 97 presentations ended 31 December 2015. ITV plc Company Financial • Governance documents Statements 157 • Corporate Responsibility Additional information Shareholder Information 171 Glossary 172 Video content See our latest showreels at www.itvplc.com/media/showreel 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 Key those contained within, or implied by, these various forward-looking statements. None of these statements should be construed as a profit forecast. Read more content within this report Read more content online ITV plc Annual Report and Accounts 2015 1 Strategic Report Overview 2015 Highlights ITV delivered another strong performance in 2015 as we continued to strengthen, rebalance and grow the business. Group external revenue £m Non-NAR revenue1 £m Adjusted EBITA2 £m £2,972m £1,664m £865m 865 2,972 1,664 15% 25% 18% 730 2,590 YoY YoY YoY 1,327 2,389 620 1,211 2,196 2,140 2,064 513 1,879 1,036 922 462 850 829 408 +58% +96% +328% Increase Increase Increase 202 on 2009 on 2009 on 2009 09 10 11 12 13 14 15 09 10 11 12 13 14 15 09 10 11 12 13 14 15 Adjusted profit before tax3 £m Adjusted EPS4 p Dividend per share p Special £843m 16.5p 16.0p Ordinary 843 16.5 10.0 712 18% 20% 46% YoY 13.8 YoY YoY 581 11.2 6.25 9.1 457 7.9 4.0 398 4.0 6.4 6.0 321 +681% +817% +16.0p 4.7 108 1.8 1.6 Increase Increase 3.5 Increase on 2009 on 2009 2.6 on 2009 09 10 11 12 13 14 15 09 10 11 12 13 14 15 09 10 11 12 13 14 15 Group EBITA margin of Proposed an increase of 29% 28% in the up from 28% ordinary in 2014 Online, Pay dividend and a 10p & Interactive special dividend revenue up 23% 1. Non-Net Advertising Revenue (Non-NAR) includes all ITV revenue, both internal and external, except Net Advertising Revenue (NAR). 2. EBITA before exceptional items has been adjusted to reflect the inclusion of production tax credits (‘adjusted EBITA’). 3. Profit before tax is £641 million (2014: £605 million). 4. Reported EPS is 12.4p (2014: 11.6p). 2 ITV plc Annual Report and Accounts 2015 2015 Highlights Strategic Report Strategic Pictured left to right: Good Morning Britain is broadcast on ITV five mornings a week; Unforgotten was a critically acclaimed drama produced by Mainstreet Pictures, which was acquired by ITV Studios UK in 2015. ITV is the biggest marketing In 2015 we grew our share platform in the UK, reaching 6% growth of broadcast to in NAR around Again outperforming our estimate of the 80% total television 46.1% of the television owning advertising market population every week 33% growth in total ITV Studios revenue Poldark has now been sold to Coronation Street was the most With over half its revenue 107 countries. It has been watched soap of 2015 with an recommissioned for a average of eight million viewers generated outside the UK second series. over the year. It has been sold to 132 countries. Non-NAR revenues account for 49% of total Britain’s Got Talent was the The England vs Wales Rugby revenues most watched entertainment World Cup match was watched programme of 2015 with an by 9.7 million viewers and was in 2015 average of over 10.5 million the most watched sporting viewers across the series. event of 2015. ITV plc Annual Report and Accounts 2015 3 Strategic Report Overview Investor Proposition ITV continues to make significant progress in growing and strengthening the business creatively, commercially Pictured top to bottom: ITV and financially. on -screen ident; Multiscreening for the Rugby World Cup. A strong track record for delivery Over the last six years we have delivered strong revenue growth and double-digit profit growth +800% in our key profit measures every year increase in adjusted EPS since 2009 We have made significant progress rebalancing the business, reducing our dependence on UK advertising and driving new revenue streams 49% to build a more global organisation of total revenue is from sources other than spot advertising Pictured top to bottom: Broadchurch returned for a second series in January 2015; X Factor returned for a 12th series with two new judges. 4 ITV plc Annual Report and Accounts 2015 Investor proposition Strategic Report Strategic Strong market position The Broadcast business delivers unrivalled audience reach for advertisers in the UK and we will benefit from our continued creative investment as we exploit our content across multiple platforms, both free and pay Online, Pay & Interactive is a material, fast- growing and profitable part of the business with continued strong growth expected as we build a global pay and distribution business Our international content business is now a global player of scale, creating and owning rights and we will continue to grow both organically and through acquisitions in key creative markets 98% of all commercial audiences over Highly cash generative five million are on ITV We are a highly cash generative business and our disciplined approach to cash, costs and capital +50% has strengthened our balance sheet and allowed of total Studios revenues is from us to invest in the business organically and outside the UK through acquisitions Investment opportunities to grow As we continue to deliver our strategy we see good investment opportunities to grow the business and enhance shareholder value whilst maintaining capital discipline Compelling shareholder returns Pictured: The England football We are committed to growing shareholder team will be part of the 2016 returns and have targeted to deliver 20% ordinary UEFA European Championships which will be broadcast on ITV.