REG - ITV PLC - ITV Final Year Results 2014 <Origin Href="QuoteRef">ITV.L</Origin> - Part 6
04/03/2015 07:00
- Part 6: For the preceding part double click ID:nRSD4544Ge
with the amounts disclosed on the statement of financial position.
At 31 December 2014 Total Less than Between Between Over
contractual 1 year 1 and 2 years 2 and 5 years 5 years
cash flows £m £m £m £m
£m
Non-derivative financial liabilities
Borrowings (357) (100) (16) (175) (66)
Trade and other payables (726) (699) (23) (4) -
Other payables - non-current (4) - (3) (1) -
Other payables - commitments on acquisitions (96) - (9) (81) (6)
Derivative financial instruments
Interest rate swaps 20 10 3 7 -
Foreign exchange forward contracts (4) (2) (2) - -
(1,167) (791) (50) (254) (72)
At 31 December 2013 Total Less than Between Between Over
contractual 1 year 1 and 2 years 2 and 5 years 5 years
cash flows £m £m £m £m
£m
Non-derivative financial liabilities
Borrowings (483) (92) (108) (216) (67)
Trade and other payables (744) (702) (31) (10) (1)
Other payables - non-current (1) - - (1) -
Other payables - commitments on acquisitions (97) - (4) (75) (18)
Derivative financial instruments
Interest rate swaps 55 37 9 9 -
(1,270) (757) (134) (293) (86)
4.4 Net financing costs
Keeping it simple . . .
This section details the interest income generated on the Group's cash and other financial assets and the interest expense
incurred on borrowings and other financial liabilities.
In reporting 'adjusted profit', the Group adjusts net financing costs to exclude mark-to-market movements on interest rate
and foreign exchange derivatives, gains/losses on bond buybacks, net pension interest, interest and fair value movements in
acquisition-related liabilities and other financing costs.
Read more on our rationale for adjustments made to financing costs in the Financial and Performance Review.
Accounting policies
Net financing costs comprise interest income on funds invested, gains/losses on the disposal of financial instruments,
changes in the fair value of financial instruments, interest expense on borrowings and finance leases, unwinding of the
discount on provisions, unwinding of the discount on liabilities to non-controlling interest, foreign exchange
gains/losses, and imputed interest on pension assets and liabilities. Interest income and expense is recognised as it
accrues in profit or loss, using the effective interest method.
Net financing costs
Net financing costs can be analysed as follows:
2014 2013
£m £m
Financing income:
Interest income 4 7
Change in fair value of instruments classified at fair value through profit or loss - 3
Foreign exchange gain 1 -
Other finance income 17 -
22 10
Financing costs:
Interest expense on financial liabilities measured at amortised cost (19) (29)
Net pension interest (see note 3.7) (17) (20)
Losses on early settlement (30) (61)
Foreign exchange loss - (1)
Other finance expense (7) (14)
(73) (125)
Net financing costs (51) (115)
As detailed in note 4.1, losses on early settlement of £30 million (2013: £61 million) were incurred as a result of the
remaining repurchase of the £62 million 2019 bilateral loan.
Interest on financial liabilities relates to the interest incurred on the Group's borrowings in the year.
Other finance income primarily relates to acquisition-related contingent liabilities, where estimates of the future
performance against stretch targets is reassessed, resulting in adjustments to the related put option liabilities and
contingent consideration are required. Other finance expense includes the amortisation of facility commitment and upfront
fees.
Read more in the Financial and Performance Review.
4.5 Fair value hierarchy
Keeping it simple . . .
The financial instruments included on the ITV statement of financial position are measured at either fair value or
amortised cost. The measurement of this fair value can in some cases be subjective, and can depend on the inputs used in
the calculations. ITV generally uses external valuations using market inputs or market values (e.g. external share prices).
The different valuation methods are called 'hierarchies' and are described below.
The tables below set out the financial instruments included on the ITV statement of financial position at 'fair value'.
Fair value Level 1 Level 2 Level 3
31 December 31 December 31 December 31 December
2014 2014 2014 2014
£m £m £m £m
Assets measured at fair value
Available for sale financial instruments
Available for sale gilts 39 39 - -
Financial assets at fair value through profit or loss
Contingent consideration 32 - - 32
Interest rate swaps 27 - 27 -
98 39 27 32
Fair value Level 1 Level 2 Level 3
31 December 31 December 31 December 31 December
2014 2014 2014 2014
£m £m £m £m
Liabilities measured at fair value
Financial liabilities at fair value through profit or loss
Interest rate swaps (20) - (20) -
Contingent consideration (3) - - (3)
Financial liabilities at fair value through reserves
Cash flow hedges (4) - (4) -
(27) - (24) (3)
Fair value Level 1 Level 2 Level 3
31 December 31 December 31 December 31 December
2013 2013 2013 2013
£m £m £m £m
Assets measured at fair value
Available for sale financial instruments
Available for sale gilts 36 36 - -
Financial assets at fair value through profit or loss
Interest rate swaps 73 - 73 -
109 36 73 -
Fair value Level 1 Level 2 Level 3
31 December 31 December 31 December 31 December
2013 2013 2013 2013
£m £m £m £m
Liabilities measured at fair value
Financial liabilities at fair value through profit or loss
Interest rate swaps (33) - (33) -
Contingent consideration (7) - - (7)
(40) - (33) (7)
Level 1
Fair values are measured using quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2
Fair values are measured using inputs, other than quoted prices included within Level 1, that are observable for the asset
or liability either directly or indirectly.
Interest rate swaps and options are accounted for at their fair value based upon termination prices. Forward foreign
exchange contracts are accounted for at the difference between the contract exchange rate and the quoted forward exchange
rate at the reporting date.
Level 3
Fair values are measured using inputs for the asset or liability that are not based on observable market data.
Contingent consideration is the Group's only financial instrument classified as Level 3 in the fair value hierarchy. As
noted in the accounting policy section of note 3.3, the key assumptions taken into consideration when measuring this
acquisition-related liability are the performance expectations of the acquisition and a discount rate that reflects the
size and nature of the new business. There is no reasonable change in discount rate or performance targets that would give
rise to a material change in the liability at year end.
The table below summarises the key movement in the contingent consideration during the year.
Asset 2014£m Liability2014£m Asset2013£m Liability2013£m
At 1 January - (7) - (1)
Acquisitions (see note 3.4) 30 (1) - (6)
Changes in estimates (income statement) - 5 - -
Currency translation 2 - - -
At 31 December 32 (3) - (7)
Current - - - -
Non-current 32 (3) - (7)
At 31 December 32 (3) - (7)
Changes in estimates, including the unwind of interest and fair value movements, are recognised in net financing costs.
4.6 Equity
Keeping it simple . . .
This section explains material movements recorded in shareholders' equity that are not explained elsewhere in the financial
statements. The movements in equity and the balance at 31 December 2014 are presented in the consolidated statement of
changes in equity.
Accounting policies
Available for sale reserve
Available for sale assets are stated at fair value, with any gain or loss recognised directly in the available for sale
reserve in equity, unless the loss is a permanent impairment, when it is then recorded in the income statement.
Dividends
Dividends are recognised through equity on the earlier of their approval by the Company's shareholders or their payment.
4.6.1 Share capital and share premium
The Group's share capital at 31 December 2014 of £403 million (2013: £403 million) and share premium of £174 million (2013:
£174 million) is the same as that of ITV plc. Details of this are given in the ITV plc Company financial statements section
of this annual report.
4.6.2 Merger and other reserves
Merger and other reserves at 31 December 2014 include the following reserves:
2014£m 2013£m
Merger reserves 119 119
Capital reserves 112 112
Capital redemption reserves 36 36
Revaluation reserves 6 6
Put option liabilities arising on acquisition of new subsidiaries (45) (25)
Total 228 248
The £20 million increase in liabilities on the put options for the acquisition of new subsidiaries relates to the
non-controlling interests of Leftfield Entertainment and DiGa Vision, as detailed in note 3.4.
4.6.3 Translation reserve
The translation reserve comprises:
· all foreign exchange differences arising on the translation of the accounts of, and investments in, foreign
operations;
· the gains or losses on the portion of cash flow hedges that have been deemed effective (see note 4.3).
4.6.4 Available for sale reserve
The available for sale reserve comprises all movements arising on the revaluation of gilts accounted for as available for
sale.
4.6.5 Retained earnings
The retained earnings reserve comprises profit for the year attributable to owners of the Company of £466 million (2013:
£326 million) and other items recognised directly through equity as presented in the consolidated statement of changes in
equity. Other items include the credit for the Group's share-based compensation schemes and the charge for the purchase of
ITV shares via the ITV Employees' Benefit Trust, which are described in note 4.7.
The Directors of ITV plc propose a final dividend of 3.3p per share and a special dividend of 6.25p per share.
4.6.6 Non-controlling interests
The movement for the year comprises:
· the fair value of the non-controlling interests acquired in the year of £20 million (2013: £13 million);
· the share of profits attributable to non-controlling interests on US acquisitions of £7 million (2013: ££4 million);
and
· the distributions made to non-controlling interests of £8 million (2013: £1 million).
4.7 Share-based compensation
Keeping it simple . . .
The Group utilises share award schemes as part of its employee remuneration packages, and therefore operates a number of
share-based compensation schemes, namely the Deferred Share Award (DSA), Performance Share Plan (PSP), Long Term Incentive
Plan (LTIP) and Save As You Earn (SAYE) schemes.
A transaction will be classed as share-based compensation where the Group receives services from employees and pays for
these in shares or similar equity instruments. If the Group incurs a liability whose amount is based on the price or value
of the Group's shares then this will also fall under a share-based transactionRecent news on ITV
See all newsREG - ITV PLC - Holding(s) in Company
AnnouncementREG - ITV PLC - Directorate change
AnnouncementREG - ITV PLC - Total Voting Rights
AnnouncementREG - ITV PLC - Transfer of Treasury Shares
AnnouncementREG - ITV PLC - Response to Recent Speculation
Announcement