ITV plc ITV plc Annual Report and Accounts for the year ended 31 December 2012 December 31 ended year the for Accounts and Report Annual Delivering growth through Transformation ITV plc Annual Report and Accounts for the year ended 31 December 2012 Stock code: ITV 22018-04 11/12/2012 Proof Two Inside this report Overview Directors’ Report Financial Statements Who We Are 02 Strategy & Operations Independent Auditor’s Report 94 Our Investor Proposition 04 CE0 Review 10 Introduction and Table of Contents 95 2012 Key Highlights 05 Performance Dashboard 14 Consolidated Income Statement 96 Chairman’s Statement 06 Strategic Priority 1 16 Consolidated Statement of Strategic Priority 2 20 Comprehensive Income 97 Strategic Priority 3 24 Consolidated Statement of Financial Position 98 Strategic Priority 4 28 Consolidated Statement of Changes in Equity 99 Consolidated Statement of Cash Flows 101 Notes to the Accounts 102 Performance & Financials Section 1: Basis of Preparation 102 Key Performance Indicators 34 Section 2: Results for the Year 107 Financial and Performance Review 36 Section 3: Operating Assets and Liabilities 115 Risks and Uncertainties 48 Section 4: Capital Structure and Financing Costs 136 Responsibility Section 5: Other Notes 150 Operating Responsibly 52 ITV plc Company Financial Statements 152 Notes to the ITV plc Company Governance Financial Statements 153 Board of Directors 58 Shareholder Information 157 Management Board 60 Financial Record 160 Chairman’s Governance Statement 62 Glossary IBC Corporate Governance 63 Audit Committee Report 70 Remuneration Report 75 Other Governance and Statutory Disclosures 89 Statement of Directors’ Responsibilities 91 Look out for these icons View more content online Read more content within this report Corporate Website We maintain a corporate website at www.itvplc.com containing a wide range of information of interest to institutional and private investors including: • Latest news and press releases • Annual reports and investor presentations See further content for the Scan the QR Code to 2012 Annual Report online take you directly to our at ar2012.itvplc.com corporate website Directors’ Report The Directors’ 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 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 Directors’ Report is prepared in line with the relevant provisions of the Companies Act 2006. In preparing the Directors’ Report the Company has had regard to the guidance issued by the Accounting Standards Board in its Reporting Statement on narrative reporting. The Directors’ Report is intended to provide shareholders with a greater 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 likely future developments, and in other content, this report and accounts 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 the Directors’ Report, and what are believed to be reasonable judgements. 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. Pictured: Front Cover Mr Selfridge 22018-04 11/12/2012 Proof Two 22018-04 11/12/2012 Proof Two ITV plc ar2012.itvplc.com Annual Report and Accounts 2012 Stock code: ITV Overview Who We Are ITV is an integrated producer broadcaster. It is the largest commercial television network in the UK operating a family of channels including the rebranded ITV. It also delivers content across multiple platforms either directly or via itv.com and ITV Player. ITV Studios is an international production and distribution business which produces and sells programmes and formats in the UK and worldwide. UK Share of Broadcast Broadcast & Online (SOB) ITV plc: 45.8% The ITV broadcast network is made its share of total advertising spend, up of ITV – the largest commercial whilst the Internet, which is growing 14.3% ITV plc channel in the UK – and the digital rapidly, continues to take share from Channel 4 channels ITV2, ITV3, ITV4 and CITV. Press. 15.6% 45.8% Channel 5 00% ITV2 and ITV3 are the largest digital channels in the UK. The ITV Family ITV also delivers programming across Sky Sold* 7.9% of channels attracts the largest multiple platforms either through Other audience of any UK broadcaster other ITV Player which allows users to 16.4% than the BBC, with a 22.3% Share of access catch up services, for example * Includes sales by Sky for non-Sky owned channels. Viewing, and has the largest share of on Virgin and Sky, or through the UK television advertising market content deals, for example Netflix at 45.8%. and LoveFilm. ITV content is now UK Share of Viewing (SOV) available on 15 platforms. Online, Pay For viewers, ITV competes with and Interactive revenues are sourced ITV Family: 22.3% the BBC and other commercial through advertising and through pay broadcasters – predominantly C4, deals for either our entire schedule or ITV Family 18.3% 22.3% C5 and Sky. For advertising revenue, for selected programmes within our BBC Family ITV competes with commercial catalogue. C4 Family 8.3% 00% broadcasters and other advertising C5 Family 6.0% media, such as the Internet and Sky Family Press. Over the last few years Other 11.5% 33.6% television has broadly maintained Total UK Advertising TV: 28.1% TV 28.1% Press 36.5% Radio 00% Cinema Outdoor 1.3% Internet 6.6% 24.5% 3.0% 02 22018-04 11/12/2012 Proof Two ar2012.itvplc.com Stock code: ITV Overview Directors’ Report Directors’ ITV Studios ITV Studios is the largest production company in the UK producing over 3,000 hours Key to icons International production bases: & Operations Strategy of original content each year featuring ITV Studios UK ITV Studios France ITV Studios America ITV Studios Germany Drama, Factual and Entertainment, and ITV Studios Australia ITV Studios Nordic has an archive of around 35,000 hours. It comprises ITV’s UK and International production companies and Global Entertainment – ITV’s international Media environment linear viewing remains robust. The distribution business. In 2012 we made proliferation of entertainment a number of strategic acquisitions to and our strategy platforms and the increasingly Performance & Financials Performance strengthen these businesses. competitive nature of the broadcasting Our vision remains to create world class industry is creating demand for quality ITV Studios UK produces programming content which we can make famous and proven content and formats that for ITV’s own channels and for other on our channels, before exploiting its travel. As an integrated producer UK broadcasters – such as BBC, C4, C5 value across multiple platforms, free broadcaster, with strong channel and Sky. ITV’s International production and pay, in the UK and internationally. brands and the ability to create business has five bases – US, Australia, content, we are in a unique position to Responsibility Germany, France and the Nordics, who ITV operates in an evolving digital be able to execute on our strategy. produce for local broadcasters in these market in which advances in regions. Global Entertainment licenses technology are changing the way ITV’s finished programmes and formats people consume media. In spite of and third party content internationally. the rapid increase in online viewing, In the UK and internationally we Read more in our Glossary on the Inside Back Cover Governance compete with a large number of independent producers, which range in size from the super-indies such as Fremantle and Endemol, to a large number of small independent producers. They are largely privately owned and do not have the advantage that ITV has of being an integrated producer broadcaster. Financial Statements 03 22018-04 11/12/2012 Proof Two ITV plc ar2012.itvplc.com Annual Report and Accounts 2012 Stock code: ITV Overview Our Investment Proposition Delivering growth through Transformation • We are now three years into the Transformation Plan and are delivering real growth across all parts of the business, with double digit earnings growth for the third year in a row. • Through our clear and consistent strategy we are creating a stronger, more efficient and balanced business. As a producer broadcaster we are in a unique position to exploit the increasing demand for proven content globally. • Our Broadcasting business is robust and growing and our new Online, Pay & Interactive revenue streams are increasing rapidly and are now a material part of the business. We believe there are significant opportunities as digital media continues to develop. • Our focus on creativity and content is building strong sustainable organic growth in our UK and International Studios business, which we are enhancing through targeted acquisitions and partnerships in key creative markets. • We have a strong and flexible balance sheet, which can support the investment required to deliver our strategy, drive future growth and grow shareholder returns. In the short term we remain