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REG - ITV PLC - Half Yearly Report <Origin Href="QuoteRef">ITV.L</Origin> - Part 1

ITVAnnouncement

06/09/2014 22:34

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RNS Number : 6632N
ITV PLC
30 July 2014

ITV plc Interim Results

for the half year ended 30 June 2014

ITV on track to deliver another year of growth

Revenue growth delivered by all parts of the business

· Total external revenues up 7% to £1,225m

· ITV Family NAR up 7% ahead of the market, as expected

· Online, Pay & Interactive up 20% to £67m

· Total ITV Studios revenues up 2% to £402m

Another period of double digit profit growth

· EBITA before exceptional items up 11% at £322m

· Broadcast & Online EBITA up 10% to £250m

· ITV Studios EBITA up 14% to £72m

· Adjusted PBT up 16% at £312m

· Adjusted EPS up 15% at 6.1p

Further investment in content - ITV Studios and on-screen

· Completed acquisition of 80% of Leftfield Entertainment

· Acquisitions coming through as expected

· Investing in organic growth of our international scripted business

· Successful launch of ITV Encore - ITVBe on track to launch later this
year

· ITV SOV down 3% in H1, improved from Q1

· Further strong growth in long form video requests, up 20%

Positive outlook for full year and next phase of our strategy

· Total cost savings of around £15m for the full year - £5m ahead of
original target

· ITV Family NAR expected to be up 4% to 5% in Q3 and up around 6% in the
nine months to 30 September. We will significantly outperform the market over
the full year

· Online, Pay & Interactive will deliver strong revenue growth, at least
in line with H1

· Our acquisitions will ensure continued good growth in ITV Studios this
year and into next year, and we will see a return to good organic growth in
2015 helped by investment in scripted

· Looking ahead we are committed to our original vision for ITV

· We see clear opportunities for investing in growth across the business -
in content, online, pay and advertising

· As our strategy evolves we will continue to rebalance the business and
grow new revenue streams and there will be an increasing emphasis on
international content creation and distribution

Delivering increased shareholder returns

· The Board has declared an interim dividend of 1.4p which will be roughly
a third of the full year dividend

· The Board has committed to at least 20% annual growth in the ordinary
dividend over the next three years

Adam Crozier, ITV Chief Executive, said:

"We have made further good progress with our strategy of growing and
strengthening all parts of ITV. In the first six months of the year we again
delivered double digit profit growth in every area of the business and
increased revenues by 7%. ITV Family NAR was up 7%, ahead of the TV
advertising market and Online, Pay & Interactive performed strongly, up 20%.
Share of viewing improved during Q2, helped by the FIFA World Cup, and we're
confident of our strong Autumn schedule with both new and returning drama and
entertainment. Online, Pay & Interactive is on track to deliver strong growth
for the year as a whole, at least in line with the first half. The economic
recovery is leading to an improved advertising market, with good growth across
all key categories and ITV is well placed to take market share. We expect ITV
Family NAR to be up around 6% in the nine months to the end of September and
we will significantly outperform the market over the full year.

For the first half total Studios revenues were up 2% with the acquisitions
coming through as expected while organic growth was impacted by the phasing in
the delivery of some programmes and the proportion of ITV's programme budget
allocated to the FIFA World Cup. We continue to invest in growing
internationally and, following the acquisition of Leftfield Entertainment, ITV
is now the biggest unscripted independent production company in the US.

Looking forward we expect good growth in ITV Studios in 2014, driven by our
acquisitions. In 2015 we will see further growth from these acquisitions and
we will return to good organic growth helped by our investment in global
scripted content, such as Texas Rangers and Aquarius in the US and Jekyll &
Hyde, Jambusters and Thunderbirds Are Go in the UK.

We enter the next phase of ITV's growth strategy as a demonstrably better
business than when we launched the Transformation Plan in 2010. The plan we
embarked on four years ago of rebalancing and strengthening ITV creatively and
financially, both in the UK and internationally, is clearly the right one for
the Company and our vision remains unchanged.

We will continue to rebalance the business and grow new revenue streams, both
organically and through acquisition. We see clear opportunities for growth
across the business - in content, online, pay and advertising and there will
be an increasing emphasis on international content creation and distribution.

The market environment in which we operate is constantly changing,
characterised by converging media and the increasing influence of technology,
which brings both challenges and opportunities. ITV's financial strength and
its strategic advantages including the scale of our UK channels, our share of
the advertising market, and our growing global network in the development,
production and distribution of content, put us in a strong position to be able
to meet these challenges and exploit opportunities for growth.

As ITV enters the next phase of the plan the Board believes it is important
that we maintain capital discipline and the flexibility to invest in the
business at the same time as delivering a normal payout ratio for
shareholders. Reflecting the Board's confidence in the ongoing growth and
cash generation of the business the Board is committed to the full year
ordinary dividend growing by at least 20% per annum over the next three years
- starting this year."

Half year results

Broadcast & Online revenue 981 914 67 7
ITV Studios revenue 402 395 7 2
Total revenues 1,383 1,309 74 6
Internal supply (158) (165) (7) (4)
Group External revenues 1,225 1,144 81 7

Broadcast & Online EBITA 250 228 22 10
ITV Studios EBITA 72 63 9 14
EBITA before exceptional items 322 291 31 11
EBITA margin 26% 25%

Adjusted profit before tax 312 270 42 16
Adjusted earning per share (EPS) 6.1p 5.3p 0.8p 15
Dividend 1.4 1.1p 0.3p 27

Dividend

1.4

1.1p

0.3p

Adjusted profit before tax and adjusted EPS remove the effect of exceptional
items which include acquisition related costs (professional fees, primarily
due diligence, and contingent payments), impairment of intangible assets,
amortisation of intangible assets acquired through business combinations, net
financing cost adjustments and other tax adjustments.

The profit before tax and EPS from the Consolidated Income Statement are as
follows:

Profit before tax £250m £179m £71m 40
Earnings per share (EPS) 4.9p 3.4p 1.5p 44
Diluted earnings per share 4.8p 3.3p 1.5p 45

Diluted earnings per share

4.8p

3.3p

1.5p

Financial performance

We have delivered a good performance in the first half of the year with
revenue growth across the business and double digit EPS growth. External
revenues were up 7% driven by 7% growth in NAR as expected and continued
growth in non-NAR revenues up 4%. This, combined with our continued focus on
cash and costs and our higher margin new revenue streams, saw us deliver 11%
growth in EBITA to £322m and 15% growth in adjusted EPS to 6.1p, with reported
EPS up 44%. Group margins have again improved, up one percentage point to
26%.

We have ended the first half with net debt of £201m following the acquisition
of Leftfield Entertainment, dividend payments, debt buyback and pension
deficit contributions. Our tight focus on working capital management remains
and our profit to cash conversion was 99% on a six month basis and 97% on a
rolling 12 month basis.

Broadcast & Online

Broadcast & Online delivered a strong performance with a 7% increase in
revenues driven by 7% growth in ITV Family NAR and 20% growth in Online, Pay &
Interactive. Schedule costs were up as a result of the FIFA World Cup but
given the highly geared nature of advertising revenues and the higher margins
of Online, Pay & Interactive revenues, EBITA grew 10%.

The economic recovery is leading to an improved advertising market with good
growth across all key categories. However, as we anticipated the television
advertising market again showed significant fluctuations across the period
particularly around the timing of Easter and the FIFA World Cup. ITV Family
NAR was up 7% in the first half, ahead of our estimate of the television
advertising market. We expect ITV Family NAR to be up around 6% in the nine
months to the end of September and we will significantly outperform the market
over the full year.

Our on-screen performance was down in the first half with ITV main channel
share of viewing (SOV) down 3% with an improvement in Q2. ITV Family SOV was
down 5%, impacted by a disappointing performance from ITV2 and ITV3. However,
we have confidence in our strong Autumn schedule with many new and returning
programmes and later this year we will also be launching our new free to air
lifestyle and reality channel, ITVBe.

Online, Pay & Interactive revenues continued to grow strongly, up 20%, as we
further improved the quality and distribution of our content and the rapid
growth in audiences' appetite for video on demand (VOD) is in turn fuelling
demand from new and existing platforms for quality content both free and pay,
and from advertisers for VOD inventory. Our content is now available on 20
platforms which has helped drive long form video requests up 20%, with the
soaps, The Only Way is Essex and Britain's Got Talent particularly popular. We
continue to develop our pay services. In the first half we renewed our
agreement with Virgin for a further year and we announced a new four year deal
with Sky which sees our content available on more platforms and included the
successful launch of ITV Encore, our new pay channel.

ITV Studios

ITV Studios delivered 2% growth in total revenues to £402m. Both our UK and
International Production businesses showed growth over the half year,
particularly International Productions up 9% driven by the acquisitions we
have made. Organic revenues for the first half were down 8%, with UK
Productions down 4% and International Productions down 13% (8% at constant
currencies). Organic growth was impacted by the phasing in the delivery of
some programmes and by the proportion of the ITV programme budget allocated to
the FIFA World Cup in H1. At constant currencies organic growth in the first
half was down 6%.

The production efficiencies we have achieved and the higher margin revenue
mix, including US merchandising sales, has helped deliver a 14% increase in
EBITA to £72m.

As we become an increasingly international business our performance is also
impacted by movements in foreign exchange. At constant currencies (using the
2013 exchange rates) ITV Studios revenues would have been £12m higher. If
exchange rates stay at current levels for the remainder of the year, the full
year impact on revenue will be around £25-30m and around £6-8m on EBITA.

We made three acquisitions in the first half of 2014. In February we acquired
a 51% controlling interest in DiGa Vision, the US independent producer of
reality and scripted programming and 100% of United Production, a Danish
producer of factual and entertainment programmes.

In May we made the significant acquisition of Leftfield Entertainment a fast
growing, high margin US producer of reality programmes. We made an initial
cash payment of $360m for 80% of Leftfield, with further potential payments
dependent upon Leftfield's continued delivery of significant profit growth.
There are put and call options to buy the remainder of DiGa and Leftfield over
three to six years, with the total amount payable linked to the performance of
the company over that period.

Leftfield also owns Sirens Media and has established two ventures - Loud
Television and Outpost Entertainment. Together these businesses produce more
than 300 hours of unscripted programming for over 30 US networks. The
portfolio includes Pawn Stars, Counting Cars, American Restoration and Real
Housewives of New Jersey.

The acquisition of Leftfield makes ITV Studios the largest independent
unscripted producer in the US and represents a major step forward in ITV's
strategy of building a strong international content business. All three
acquisitions are important additions to the Group's growing portfolio of
production companies. They follow ITV's acquisition in the last two years of
Gurney Productions, High Noon Entertainment and Thinkfactory Media in the US
as well as UK producers The Garden Productions, Big Talk Productions and So
TV.

The growth in our UK and International Production businesses is starting to
feed our global distribution business. However, in the first half of the year
Global Entertainment was impacted by a reduction in drama, including Marple
and Poirot, and currency movements. In 2015 we expect to see good growth in
our distribution revenues from our strong creative pipeline and our investment
in scripted content, both from ITV Studios and third parties.

Looking forward we expect good growth from ITV Studios in 2014, driven by our
acquisitions. In 2015 we will see further growth from these acquisitions and
we will return to good organic growth helped by our investment in global
scripted content, such as Texas Rangers and Aquarius in the US and Jekyll and
Hyde, Jambusters and Thunderbirds Are Go in the UK.

Adjusted EPS

Adjusted EPS was up 15% at 6.1p (2013: 5.3p). Adjusted financing costs of £4m
were down £10m as a result of the debt bought back in the second half of 2013
and 2014. Diluted adjusted EPS was up 20% to 6.1p (2013: 5.1p).

The weighted average number of shares increased by more than100m over the
comparative period (3%) to 4,003m, largely due to the redemption of the
convertible bond in 2013 where 94m shares were issued.

The adjusted effective tax rate of 21% in the first half is versus a rate of
23% in 2013 and is now largely in line with the statutory rate of UK
corporation tax. The effective tax rate is expected to be approximately 21%
for the full year, slightly lower than previous guidance.

Basic EPS

EPS is 4.9p (2013: 3.4p), up 44%. The main differences between EPS and
adjusted EPS are exceptional items including acquisition related costs,
impairment of intangible assets, amortisation of intangible assets acquired
through business combinations, net financing cost adjustments and other tax
adjustments.

Balance sheet and net debt

Net debt at the end of June 2014 was £201m (31 December 2013: net cash of
£164m). We also look at an adjusted net debt figure which includes our other
financial commitments - expected contingent payments on acquisitions of £117m,
IAS 19 pension deficit of £362m and operating leases of £398m. At 30 June 2014
adjusted net debt was £1,078m (31 December 2013: £792m).

Over the half year we increased our free cash flow by £19m (12%) to £183m. One
of the key strengths of ITV is our strong cash generation which tends to be
weighted to the second half of the year as we continue to make a number of
significant payments both regular and one-off in the first half of the year,
including the acquisition of Leftfield Entertainment, dividends, the annual
pension deficit funding contribution and debt buyback.

At the beginning of the year we again improved the efficiency of our balance
sheet when we repaid the remaining £62m of the 2019 bilateral loan. The
repayment will save around £8m in adjusted financing costs on an annualised
basis and was satisfied by a one-off cash payment of £95m. Over the last few
years we have bought back over £1.1bn in debt and the rates on our remaining
debt better reflect our investment grade status.

We have improved our financial flexibility with a number of new financing
facilities. In April we obtained a committed £525m Revolving Credit Facility
provided by a number of core relationship banks. The facility has a five year
maturity and contains leverage and interest cover financial covenants as is
normal for a facility of this nature. This replaces the previous £250m
facility. At the end of June, £210m of this facility had been drawn down. In
addition we have secured £250m of financial covenant free financing which runs
for three to seven years.

On 30 June 2014 our E50m Eurobond and the related cross currency interest rate
swaps matured and were settled. Our next bond repayment is in October 2015.

Pension

The aggregate IAS19 Pension deficit at 30 June 2014 was £362m (31 December
2013: £445m). An increase in the liabilities has been offset by asset
outperformance, a slight lowering of market expectations for long-term
inflation and £91m of pension funding contributions paid in the first half.

The 10 to 15 year funding plan that we have agreed following the actuarial
valuations as at 1 January 2011 remains in place. It is a mixture of fixed and
performance related contributions. The next actuarial valuation is being
undertaken as at 1 January 2014 with the outcome expected in 2015.

In March ITV entered into a Pension funding partnership with the Trustees of
the main section of the ITV Pension Scheme, backed by the London Television
Centre (LTC) property, and, as a consequence, ITV's pension deficit on a
funding basis was immediately reduced by £50m. This agreement does not impact
the deficit calculated on an IAS 19 basis. Ownership of LTC remains with ITV.

Dividend

In reinstating the dividend in 2011 the Board committed to a progressive
dividend that balanced the need to invest in the business with increasing
returns to shareholders. As ITV enters the next phase of the plan the Board
believes it is just as important that we maintain capital discipline and the
flexibility to invest at the same time as delivering a more normal payout
ratio for shareholders. To that end the Board expects the ordinary dividend to
have a normal level of payout with cover of between 2.0 and 2.5 times adjusted
earnings per share and for this to be achieved over the next three years.

In line with this new policy and three-year commitment, the Board has declared
an interim dividend of 1.4p (2013: 1.1p), with the interim dividend expected
to be roughly a third of the full year dividend.

2014 Planning assumptions

· Total NPB is expected to be around £1,010m excluding the two new
channels

· Total cost savings of £15m for the full year- £5m ahead of the original
target

· Investment of £15-£20m, including the net cost of the launch of two new
channels

· Adjusted interest expected to be £8-10m as a result of the impact of
debt buybacks

· Effective tax rate is expected to be approximately 21%, slightly lower
than previous guidance

· Capex reduces to around £40-£45m after significant investment in
MediaCity in previous years

· Profit to cash conversion for the full year is expected to be 80-85%, as
a result of the £45-50m additional investment in scripted content

· Pension deficit contribution of £91m to reflect 2013 profit and the new
LTC asset backed pension partnership

· If exchange rates stay at current levels for the remainder of the year,
the full year impact of foreign exchange on revenues will be around £25-30m
and on EBITA will be around £6-8m

Outlook for 2014 and the next phase of the ITV Strategy

We expect all parts of the business to see growth over the full year. We
expect to see further strong growth from Online, Pay & Interactive, at least
in line with the first half. ITV Family NAR is expected to be up around 6%
over the nine months to the end of September and we will significantly
outperform our estimate of the television advertising market over the full
year. In ITV Studios we anticipate good growth in 2014, driven by the
acquisitions we have made. In 2015 we will see further growth from these
acquisitions and we will return to good organic growth helped by our
investment in global scripted content.

We enter the next phase of ITV's growth strategy as a demonstrably better
business than when we launched the Transformation Plan in 2010. The plan we
embarked on four years ago of rebalancing and strengthening ITV creatively and
financially - both in the UK and internationally - is clearly the right one
for the Company and our vision remains unchanged.

The market environment in which we operate is constantly changing,
characterised by converging media and the increasing influence of technology,
which brings both challenges and opportunities. ITV's financial strength and
its strategic advantages, including the scale of our UK channels, our share of
the advertising market, and our growing global network in the development,
production and distribution of content, put us in a strong position to be able
to meet these challenges and exploit opportunities for growth.

Notes to editors

1. Unless otherwise stated, all financial figures refer to the six month
period ended 30 June 2014, with growth compared to the same period in 2013.

ITV Family NAR 795 741 7
Non-NAR Revenue 588 568 4
Internal Supply (158) (165) (4)
Group External revenues 1,225 1,144 7

Group External revenues

1,225

1,144

2. ITV Family NAR was up 2% in Q1 and 19% in April, 7% in May and 14% in
June giving Q2 up 13% and H1 up 7%. We expect ITV Family NAR to be up 1% in
July, up 9% in August and up 2% to 5% in September, with Q3 up 4% to 5%.
Overall we expect ITV Family NAR for the nine months to the end of September
to be up around 6%.

Figures for ITV plc and TV market NAR are based on ITV estimates and current
forecasts.

3. Operational summary

ITV Family SOV 22.1% 23.2% (5)
ITV SOV 15.8% 16.3% (3)
ITV Family SOCI 36.6% 39.2% (7)
ITV SOCI 25.6% 27.0% (5)
ITV adult impacts 111bn 122bn (9)
Total long form video requests (all platforms) 328m 274m 20
Share of Broadcast 45.5% 44.8% 2

328m

274m

Share of Broadcast

45.5%

44.8%

Share of viewing data based on BARB/AdvantEdge data and share of commercial
impact (SOCI) data based on BARB/DDS data. Share of viewing data is for
individuals and SOCI data is for adults. ITV Family includes: ITV, ITV2, ITV3,
ITV4, Encore, CITV, ITV Breakfast, CITV Breakfast and associated "HD" and "+1"
channels. Total long form video requests across all platforms are based on
data from ComScore Digital Analytix, Virgin, BT, iTunes, Lovefilm, Netflix,
Sky, 3UK and Hospedia and include simulcast.

4. Dividend payment date is 1 December and dividend record date is 31
October 2014.

5. This announcement contains certain statements that are or may be forward
looking with respect to the financial condition, results or operations and
business of ITV. By their nature forward looking statements involve risk and
uncertainty because they relate to events and depend on circumstances that
will occur in the future. There are a number of factors that could cause
actual results and developments to differ materially from those expressed or
implied by such forward looking statements. These factors include, but are not
limited to (i) a major deterioration in the current outlook for UK advertising
and consumer demand, (ii) significant change in regulation or legislation,
(iii) failure to identify and obtain, or significant loss of, optimal
programme rights, and (iv) the loss or failure of transmission facilities or
core systems and (v) a significant change in demand for global content.

Undue reliance should not be placed on forward looking statements which speak
only as of the date of this document. The Group accepts no obligation to
publicly revise or update these forward looking statements or adjust them to
future events or developments, whether as a result of new information, future
events or otherwise, except to the extent legally required.

For further enquiries please contact:

Investor Relations

Pippa Foulds 020 7157 6555 or 07778 031097

Media Relations

Mary Fagan 020 7157 3965 or 07736 786448

Mike Large 020 7157 3021 or 07768 261528

Caroline Cook 020 7157 3709 or 07799 071509

Strategy & Operations

We have made further good progress with our strategy of growing and
strengthening all parts of ITV. In the first six months of the year we again
delivered double digit profit growth in every area of the business and
increased revenues by 7%. Broadcast & Online delivered 7% growth in revenue
and 10% growth in EBITA, and ITV Studios delivered 2% growth in revenue and
14% growth in EBITA. Adjusted EPS was up 15% at 6.1p.

We ended the period with net debt of £201m (31 December 2013: £164m net cash)
following the acquisition of Leftfield Entertainment, dividend payments, debt
buyback and pension deficit contributions. Our profit to cash conversion
remains strong at 99% for the first half and 97% on a rolling 12 month basis.

Create a lean, creatively dynamic and fit-for-purpose organisation

Making ITV a better business both creatively and commercially remains a
priority for ITV and in the first half of the year we have again made good
progress.

Key to this is continually developing and supporting our people to enable us
to attract and retain the best talent. We invest in simplifying the way we
operate to help drive value from our integrated producer broadcaster model and
to deliver future growth.

Our relentless focus on cash and costs has seen us deliver strong cash
conversion through tight working capital management, take further strides to
improve balance sheet efficiency and increase our full year cost savings
target from £10m to £15m. These savings will largely fund the investments we
are making across the business, specifically in online, technology, the
creative pipeline and new channel launches.

We have bought back the remaining £62m tranche of the 2019 bond leading to
further interest cost savings and our profit to cash conversion on a rolling
12 month basis remains strong.

During the period we have taken further risk out of the pension scheme by
entering into a pension partnership with the Trustees of the Pension Scheme
backed by the London Television Centre (LTC) property which immediately
reduced ITV's pension deficit on a funding basis by £50m.

Maximise audience and revenue share from existing free-to-air business

A strong Broadcast business remains central to our strategy. It generates
significant profits and cash and its content can be distributed on other
platforms to drive new revenue streams. As an integrated producer broadcaster,
our family of broadcast channels provides a platform on which to make ITV
Studios content famous so we can sell it globally.

Our broadcast performance has helped to drive 7% growth in Broadcast & Online
revenues to £981m and 10% growth in EBITA to £250m. The economic recovery is
leading to an improved advertising market, with good growth across all key
categories. In the first half ITV Family NAR grew 7% based on pure spot
advertising. The first quarter was up 2%, while the second quarter was up 13%
impacted by the timing of Easter and the broadcast of the FIFA World Cup. ITV
Family NAR growth in the first half was ahead of our estimate of the total
television advertising market and we will significantly outperform the market
over the full year.

Our viewing performance was lower in the first half than we expected, although
it improved in the second quarter. For the first six months ITV main channel
SOV was down 3% and ITV Family SOV was down 5%, impacted by a disappointing
performance from ITV2 and ITV3. ITV main channel SOCI was down 5% and ITV
Family SOCI was down 7%.

ITV had many on-screen successes in the first half as we continued to deliver
a high quality and varied schedule that drives the unrivalled reach and mass
audiences that advertisers demand. We broadcast the highest rating comedy in
Birds of a Feather, the highest rating entertainment series in Britain's Got
Talent, the highest rating new drama series in The Widower, Britain's most
watched soap in Coronation Street and the overall most watched programme in
the England vs Uruguay World Cup match. ITV remains the home of mass
audiences, delivering 99% of all commercial audiences over five million. The
improved quality of ITV's content was recognised publically when we won eight
BAFTAs for content broadcast on ITV.

ITV2 and ITV3 remain the two largest digital channels in the UK and new and
returning programmes aired on our digital channels during the first half
included Celebrity Juice, The Only Way is Essex, Educating Joey Essex, Storage
Wars and The French Open. With the launch of ITVBe on track for the Autumn we
continue to reposition our digital channels to make them more targeted,
particularly focusing ITV2 on a younger audience while ITVBe will be focused
on the valuable young female audience.

We have confidence in our strong Autumn schedule with new programmes such as
Chasing Shadows and Cilla from ITV Studios, Granchester and The Great Fire as
well as the return of Downton Abbey, The X Factor and I'm a Celebrity Get Me
Out Of Here! We continually work to increase the success rate in launching new
programmes through research, viewer panels and pilots as well as keeping
returning programmes fresh and appealing.

We compete with rival broadcasters and other media for our share of television
advertising and advertising revenues in general and we must continue to
maximise the value of the 30 second spot and drive related revenues through
sponsorship, interactivity and brand extensions. This year we have sold over
half a million tickets for live events including the Coronation Street set
tour and Saturday Night Takeaway Live, and implemented sponsorship campaigns
and off-air endorsements including Morrisons for Britain's Got Talent and
Saturday Night Takeaway, McCain for Emmerdale and Sony, Santander and Carling
for the FIFA World Cup.

While the media environment is changing rapidly, the traditional broadcast
model remains structurally robust, with the economic recovery fuelling
advertising growth across all major categories. People continue to watch
around four hours of television per day and, in addition to this, on demand
viewing remains around 3% of total viewing.

While the Broadcast business is strong we must continue to improve the quality
and availability of our digital services to enable us to successfully compete
in this growing part of the market.

Drive new revenue streams by exploiting our content across multiple platforms,
free and pay

Online, Pay & Interactive again delivered strong revenue growth, up 20% in the
first half of the year. The rapid growth in audiences' appetite for video on
demand (VOD) is in turn fuelling demand from new and existing platforms for
quality content, both free and pay.

As we distribute our content across a wide range of platforms we are driving
these new revenue streams either by selling advertising around content or by
receiving pay revenues through licensing our content to third party platform
owners.

We continue to invest in improving the quality of our online services and the
ITV Player is now fit to compete. We are also striving to increase the
incremental reach of our content which is now available on 20 platforms. This
has led to further good growth in long form video requests which were up 20%
in the first half of the year.

As consumer viewing behaviour evolves we continue to explore, experiment and
develop our pay services with broadcasters and platform owners to drive the
most value from the high quality content we air on our channels.

During the first half we renegotiated a number of deals. Most significantly in
January we announced a new four year deal with Sky which makes ITV content
available through Sky's range of connected platforms including Sky Go, Now TV
and Sky Store. This deal also includes our first ever pay only channel, ITV
Encore, which we successfully launched in June. We have also extended our deal
with Virgin for a further year and agreed a deal with YouTube to launch up to
18 short form channels including I'm A Celebrity Get Me Out Of Here! This
Morning and our soaps.

We are further deepening our relationship with our viewers and ITV Player now
has 5.6 million registered users. We are increasing our interaction and
consumer engagement through competitions, voting, second screens and through
social media to drive more value from our brands for ITV and for our
advertisers.

Build a strong international content business

A strong international content business lies at the heart of our strategy to
create and own more content, make it famous in the UK on our channels and
distribute it across multiple platforms in the UK and internationally. As an
integrated producer broadcaster we are in a unique position to do this.

The high demand globally from broadcasters and platform owners for quality
content provides a significant opportunity for us. We are now becoming a
scaled global content business through our investment in a strong and healthy
creative pipeline in key creative markets and specifically in genres that
return and travel - drama, entertainment and factual entertainment.

During the period we have delivered 2% growth in total ITV Studios revenues
and 14% growth in EBITA, with both our UK and International Production
businesses showing growth over the half year. The acquisitions we have made
are coming through as expected, however organic growth was impacted by the
phasing in the delivery of some programmes. Organic revenues for the first
half were down 8%, with UK Productions down 4% and International Productions
down 13% (8% at constant currencies). As we become an increasingly
international business our performance is inevitably impacted by movements in
foreign exchange. At constant currencies (using the 2013 exchange rates) ITV
Studios revenue would have been £12m higher.

In the UK we are the number one commercial producer. The UK business delivered
1% revenue growth, driven by our performance off-ITV, up 27%. Internal
revenues in the first half were impacted by the allocation of the ITV
programme budget as a result of the broadcast of the FIFA World Cup during the
period. Programmes delivered in the first half of the year include Mr
Selfridge, Amazing Greys, Ant & Dec's Saturday Night Takeaway, Job Lot and The
Chase for ITV; Shetland, The Graham Norton Show, The Guess List and Rev for
BBC; and Come Dine With Me and Friday Night Dinner for Channel 4. ITV Studios
were awarded five BAFTAs in 2014 for productions including Ant & Dec's
Saturday Night Takeaway, Coronation Street and Bedlam.

International Production revenues were up 9%, driven by the acquisitions we
have made. We are now the largest independent producer of unscripted
programmes in the US with a portfolio of programmes which includes Duck
Dynasty, Hell's Kitchen, Cake Boss and Kitchen Nightmares. In the US on an
annualised basis we now produce 122 progammes and 1,112 hours of content in
partnership with 41 networks.

We are also now beginning to build a global scripted business, which will
benefit our growth in future years. Three US dramas have already been
commissioned including Aquarius and Texas Rangers for delivery in 2015, as
well as a number of UK dramas with international appeal, including Jekyll and
Hyde and Jambusters, and the launch of Thunderbirds Are Go.

Our other international production bases in Australia, Germany, France and the
Nordics produce their own original content and versions of UK formats, and we
have seen good growth from Germany and France. International successes include
programmes such as Ich Bin Ein Star, The Chase and Hell's Kitchen in Germany,
Keeping the Nation Alive and Night Patrol in Norway, Four Weddings and Party
Wars in France and Come Dine with Me in Sweden and Australia.

We made three acquisitions in the first half of 2014. In February we acquired
a 51% controlling interest in DiGa Vision, the US independent producer of
reality and scripted programming, and 100% of United, a Danish producer of
factual and entertainment programmes.

In May we made the significant acquisition of 80% of Leftfield Entertainment,
a high margin US producer of reality programmes. Leftfield also owns Sirens
Media and has established two ventures - Loud Television and Outpost
Entertainment. Together these businesses produce more than 300 hours of
unscripted programming for over 30 US networks with a portfolio that includes
Pawn Stars, Counting Cars, American Restoration and Real Housewives of New
Jersey.

The acquisition of Leftfield represents a major step forward in ITV's strategy
of building a strong international content business. These latest acquisitions
follow our acquisition in the last two years of Gurney Productions, High Noon
Entertainment and Thinkfactory Media in the US as well as UK producers The
Garden Productions, Big Talk Productions and So TV.

ITV is the third largest European distributor of content. We distribute our
own content including Mr Selfridge, Lewis and Hell's Kitchen US which have now
been sold to over 150 countries. We have also acquired third party
distribution rights including The Great Fire from Ecosse Films, Rectify from
AMC and Poldark from Mammoth, which gives us the right to sell these titles
internationally. We continue to sell formats successfully and 11 of our
formats are now produced in three or more countries including The Chase,
Keeping The Nation Alive, Surprise Surprise, Saturday Night Takeaway and
Hell's Kitchen. The growth in our UK and International Production businesses
is starting to feed our global distribution business. However, in the first
half of the year Global Entertainment was impacted by a reduction in drama,
including Marple and Poirot, and currency movements. In 2015 we expect to see
good growth in our distribution revenues from our strong creative pipeline,
our investment into scripted content, and from third party distribution
agreements.

Outlook for 2014 and the next phase of the ITV Strategy

We enter the next phase of ITV's growth strategy as a demonstrably better
business than when we launched the Transformation Plan in 2010. From 2009 to
2013 we have grown our external revenues 27%, non-NAR revenues 42%, EBITA
before exceptional items 207%, adjusted profit before tax 438%, adjusted EPS
by 522% and increased our cash by £1.1bn including distributions to
shareholders. Our broadcast business is robust and growing strongly, we have
made good progress with revenue diversification as we have built a strong
international content business and our Online, Pay & Interactive business is
now a material and profitable part of ITV.

The plan we embarked on four years ago of rebalancing and strengthening ITV
creatively and financially - both in the UK and internationally - is clearly
the right one for the Company and our vision remains unchanged.

To take advantage of these opportunities we need to evolve our corporate
priorities to focus on the key areas of growth. Over time as we continue to
rebalance the business and grow new revenue streams, both organically and
through acquisitions, there will be an increasing emphasis on international
content creation and distribution. Therefore the next phase of the ITV
strategy will be based on the following three key areas, many of which we have
already started to invest in and develop:

1 maximise audience and revenue share from free-to-air broadcast and VOD
business

· economic recovery driving growth in TV advertising

· strengthen our content, channels and brand to maintain our unique scale

· grow our share in key demographics

· maximise total viewing and revenue across all platforms

· grow our share of total TV/VOD advertising, exploiting our unique scale
in a fragmenting media landscape

· support platforms that make ITV content prominent

· secure retransmission fees over the medium term

2 grow international content business

· exploit the increasing demand for quality content globally

· leverage UK producer broadcaster status and new scale in US to develop
and own more quality content

· develop global scripted business of scale (6 to 10 new series per
annum)

· continue to attract and retain key creative talent to create more new
hits

· develop / commission more 16-24 focused content

· invest in and develop third party distribution deals

· build content supply partnerships in US

3 build a global pay and distribution business

· package and sell our content to maximise its value, exploiting
competition in a converged media landscape

· launch new pay services and channels to take advantage of demand in the
UK and internationally

· take advantage of the growth in VOD by providing content to
international pay platforms

· develop wider partnerships with OTT/VOD players

We will also continue to run the business efficiently with our tight focus on
cash and costs, while developing a creative, commercial and global
organisation.

In this intervening period, and, reflecting the Board's confidence in the
ongoing growth and cash generation of the business, the Board is committed to
the full year ordinary dividend growing by at least 20% per annum over the
next three years, starting this year. In line with this new policy and three
year commitment, the Board has declared an interim dividend of 1.4p (2013 :
1.1p), with the interim dividend expected to be roughly a third of the full
year dividend.

Adam Crozier

Chief Executive

Key Performance Indicators

We have defined our Key Performance Indicators (KPIs) to align performance and
accountability to our strategy. These remain appropriate for the next phase of
ITV's growth strategy.

Further detail on our financial performance and KPIs can be found in the
Strategy & Operations section and the Financial and Performance Review. All
our KPIs remain under review.

EBITA before exceptional items £322m £291m £31m
Adjusted earnings per share 6.1p 5.3p 0.8p
'Profit to cash' ratio 12 months rolling 97% 96% 1%
ITV Family Share of Viewing ('SOV') 22.1% 23.2% (1.1)%
ITV Family Share of Commercial Impacts ('SOCI') 36.6% 39.2% (2.6)%
ITV Family Share of Broadcast ('SOB') 45.5% 44.8% 0.7%
Total long form video requests 328m 274m 54m
Non-NAR revenues £588m £568m £20m

Non-NAR revenues

£588m

£568m

£20m

Three of our KPIs are only reported on a full year basis: percentage of ITV
output from ITV Studios, number of new commissions for ITV Studios and
employee engagement. The ITV Studios KPIs are not reported externally on a six
monthly basis as they are materially impacted by phasing and therefore the
full year number gives a more meaningful measurement of performance. Employee
engagement is based on an annual survey undertaken in the autumn but our
interim abbreviated surveys suggest that engagement remains strong.

Disclaimer on forward-looking statements

This announcement contains certain statements that are or may be
forward-looking with respect to the financial condition, results or operations
and business of ITV. By their nature forward-looking statements involve risk
and uncertainty because they relate to events and depend on circumstances that
will occur in the future. There are a number of factors that could cause
actual results and developments to differ materially from those expressed or
implied by such forward-looking statements. These factors include, but are not
limited to: (i) a major deterioration in the current outlook for UK
advertising and consumer demand; (ii) significant change in regulation or
legislation; (iii) failure to identify and obtain, or significant loss of,
optimal programme rights; (iv) the loss or failure of transmission facilities
or core systems; and (v) a significant change in demand for global content.

Undue reliance should not be placed on forward-looking statements which speak
only as of the date of this document. The Group accepts no obligation to
publicly revise or update these forward-looking statements or adjust them to
future events or developments, whether as a result of new information, future
events or otherwise, except to the extent legally required.

Financial and Performance Review

We have delivered a good performance in the first half of the year with
revenue growth from across the business and double digit profit growth.
External revenues were up 7% driven by 7% growth in NAR and continued growth
in non-NAR revenues, up 4%. This, combined with our continued focus on cash
and costs and our higher margin new revenue streams, saw us deliver 11% growth
in EBITA to £322m and 15% growth in adjusted EPS to 6.1p. Group margins have
again improved, up one percentage point to 26%.

We have ended the first half with net debt of £201m (31 December 2013: £164m
of net cash) following the acquisition of Leftfield, dividend payments, debt
buyback and pension deficit contributions. Our tight focus on working capital
management has again delivered good profit to cash conversion at 99% for six
months and at 97% on a 12 month rolling basis.

Net Advertising Revenue ('NAR') 795 741 54 7
Total non-NAR revenue 588 568 20 4
Total revenue 1,383 1,309 74 6
Internal supply (158) (165) (7) (4)
Total external revenue 1,225 1,144 81 7

EBITA before exceptional items 322 291 31 11
Group EBITA Margin 26% 25%
Adjusted earnings per share 6.1p 5.3p 0.8p 15
Adjusted diluted earnings per share 6.1p 5.1p 1.0p 20
Dividend per share 1.4 1.1p 0.3p 27
Net debt as at 30 June 201 52 149 287

Net debt as at 30 June

201

149

287

The profit before tax (PBT) and earnings per share (EPS) from the Consolidated
Income Statement are as follows:

Profit before tax 250 179 71 40
Earnings per share (EPS) 4.9p 3.4p 1.5p 44
Diluted earnings per share 4.8p 3.3p 1.5p 45

Diluted earnings per share

4.8p

3.3p

1.5p

The Financial and Performance Review focuses on the adjusted results, which in
management's view shows our business performance in a more meaningful and
consistent manner and reflects how the business is managed and measured on a
daily basis. A reconciliation to the reported results is set out in the
earnings per share section that follows.

Broadcast & Online

Six months to 30 June 2014£m 2013£m Change£m Change%
Net Advertising Revenue ('NAR') 795 741 54 7
SDN external revenues 36 35 1 3
Online, Pay & Interactive 67 56 11 20
Other commercial income 83 82 1 1
Broadcast & Online non-NAR revenue 186 173 13 8
Total Broadcast & Online revenue 981 914 67 7
Total schedule costs (530) (490) 40 8
Other costs (201) (196) 5 3
Total Broadcast & Online EBITA before exceptional items 250 228 22 10
Broadcast & Online EBITA margin 25% 25%

Broadcast & Online delivered a strong performance with 7% increase in revenues
driven by 7% growth in ITV Family NAR and 20% growth in Online, Pay &
Interactive. Schedule costs were up year on year as a result of the FIFA World
Cup but given the highly geared nature of advertising revenues and the higher
margins of Online, Pay & Interactive revenues, EBITA grew 10%.

Over the first half as a whole ITV NAR was up 7%, ahead of our estimate of the
television advertising market. Our share of broadcast (SOB) increased to 45.5%
(2013: 44.8%). We expect ITV Family NAR to be up around 6% over the nine
months to the end of September and over the full year we will significantly
outperform the television advertising market. While we are confident in our
performance versus the market all broadcasters have slightly differing
definitions and include sources of revenue other than pure spot advertising
and therefore it is getting harder to compare.

The economic recovery is leading to an improved advertising market, with good
growth across all key categories. However, as we anticipated the television
advertising market showed significant fluctuations across the period. In Q1
ITV Family NAR was up 2%, while Q2 was up 13% with the inclusion of Easter and
the FIFA World Cup. There continues to be variances by sector and within
sectors, with the competitive and online based categories continuing to
perform well. Retail has been strong driven by supermarkets, furniture and
department stores, Entertainment & Leisure growth is driven by online
businesses, Food is up strongly driven by cereals, snacks and ready meals, and
Airlines & Holidays have performed well, particularly online travel agents.
Telecommunications was down year on year, impacted by a lack of new product
launches in 2014. Male orientated sectors, such as Gaming and Cars have
performed strongly in June around the football.

Our on-screen performance has been lower than we expected in the first half
with ITV main channel share of viewing (SOV) down 3% and ITV Family SOV down
5%. However, we have confidence in our strong schedule to come with many new
and returning programmes. Later this year we will also be launching our new
free to air lifestyle and reality channel, ITVBe.

SDN external revenues increased 3% year on year in line with contractual
increases.

Online, Pay & Interactive revenues continued to grow strongly up 20% as we
further improved the quality and distribution of our content and the rapid
growth in audiences' appetite for video on demand (VOD) is in turn fuelling
demand from new and existing platforms for quality content, both free and pay,
and from advertisers for VOD inventory. Our content is now available on 20
platforms which has helped drive long form video requests up 20%. We continue
to develop our pay services and in June we successfully launched ITV Encore,
our new pay channel on Sky.

Other commercial income includes sponsorship, minority revenues, media sales
and other income. In total these are up 1%, with growth coming from
sponsorship and brand extensions as we have broadened our commercial
relationship with our advertisers. Examples include the launch of Coronation
Street The Tour, and sponsorship campaigns and off-air endorsements including
Morrisons with Britain's Got Talent and Ant & Dec's Saturday Night Takeaway
and Sony, Santander and Carling with the FIFA World Cup. This growth in
sponsorship revenue has more than offset a small decline in other commercial
income.

Schedule costs were up £40m reflecting the cost of the World Cup. Other costs
were up 3% year on year due to marketing costs around our new channels and
content, and online investment. We continue to manage our overheads tightly to
largely mitigate inflationary pressures and to fund our investment in the
business.

ITV Studios

Six months to 30 June 2014£m 2013£m Change£m Change%
UK Productions 205 202 3 1
International Productions 136 125 11 9
Global Entertainment 60 68 (8) (12)
Total Studios revenue 402 395 7 2
Total Studios costs (330) (332) 2 1
Total Studios EBITA before exceptional items 72 63 9 14
Studios EBITA margin 18% 16%

Sales from ITV Studios to Broadcast & Online 158 165 (7) (4)
External revenue 244 230 14 6
Total Studios revenue 402 395 7 2

ITV Studios delivered 2% growth in total revenues to £402m. The production
efficiencies we have achieved and the higher margin revenue mix has helped us
deliver a 14% increase in EBITA to £72m. Both our UK and International
Productions businesses showed growth over the half year, particularly
International Productions with revenues up 9%. Organic revenues for the first
half were down 8%, with UK Productions down 4% and International Productions
down 13% (8% at constant currencies), impacted by the phasing of some
programme deliveries and the proportion of the ITV programme budget allocated
to the FIFA World Cup. As we become an increasingly international business our
performance is also impacted by movements in foreign exchange. At constant
currencies (using the 2013 exchange rates) ITV Studios revenues would have
been £12m higher. At constant currencies organic growth in the first half was
down 6%. If exchange rates stay at current levels for the remainder of the
year, the full year impact on revenue will be around £25-30m and on

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