REG - ITV PLC - Preliminary Results - year ended 31 December 2015 <Origin Href="QuoteRef">ITV.L</Origin> - Part 2

ITVAnnouncement

02/03/2016 07:11

- Part 2: For the preceding part double click  ID:nRSB7134Qa 

Me, I'm A Celebrity… Get Me Out Of Here!, Hell's Kitchen USA and The Chase. 
 
Over the last few years we have strengthened our exposure to this genre with a number of partnerships, including in 2015,
Possessed Television and Cats on the Roof and most significantly Talpa Media, which we acquired in April 2015 which is
focused on developing new entertainment formats that attract large audiences and have significant commercial potential.
Benefitting from the creative input of John De Mol and his management team, who will continue to work with ITV, Talpa has
created 75 shows and has aired programmes in more than 180 countries over the last six years, including The Voice, The
Voice Kids, I Love My Country, Dating in the Dark and Dance Dance Dance. 
 
2016 and beyond 
 
We have a very strong international pipeline of programmes and brands across genres and across their content life cycle.
New programmes include Victoria, Cold Feet, Tutankhamun, Houdini & Doyle, Married by Mom and Dad and Killing Fields and
returning programmes which include Aquarius, Thunderbirds Are Go!, Home Fires, The Good Witch, Poldark, Endeavour, Vera,
Coronation Street, Emmerdale, The Voice, The Voice Kids, Pawn Stars, Come Dine With Me, The Chase, I'm A Celebrity… Get Me
Out Of Here! and Countdown. 
 
ITV Studios is now a global business and going forward we aim to utilise our scale to grow our market share and expand the
number of networks and OTT players we work with, particularly in the US. With a strong portfolio of new and returning
programmes we will build further scale internationally, both organically and through partnerships and acquisitions, as we
continue to reduce our reliance on the UK market. 
 
Strategic Priority 3 
 
Build a global pay and distribution business 
 
As digital media and consumer behaviour continue to evolve, our ability to create and distribute high-value content in new
and efficient ways is of increasing significance. ITV is continually exploring and experimenting with new ways to
distribute our content to broadcasters and platform owners, both free and pay, while also seeking new opportunities to
extend the reach of our content for the consumer. 
 
Capitalising on growing demand for VOD through the ITV Hub 
 
Changes in technology and the growing base of connected devices are driving rapid growth in audiences' appetite for VOD and
in turn fuelling demand from advertisers for VOD inventory. ITV as a creator and owner of content, particularly sought
after drama and entertainment content, is well placed to exploit this growing customer base. 
 
Our Online business has grown rapidly over the last few years and is contributing meaningful revenue to the Group. In
November we successfully launched the ITV Hub to replace ITV Player and ITV.com across mobile, PC and connected TV, through
which audiences can access ITV content on different devices, live or on demand. This is a major step forward in the
quality, innovation and ease of use of ITV's online services. The biggest change is that live content is now central to the
ITV Hub and live simulcast viewing is becoming increasingly popular particularly around sporting events and large
entertainment shows, as viewers are using their connected devices as a television set. Simulcast viewing now represents
about 30% of viewing on the platforms on which it is available. 
 
To drive growth in our online audiences and online advertising revenues we have also been working to increase the
distribution of the ITV Hub which is now available on 27 platforms, most recently launching on Amazon Fire, YouView Sony
and Freeview Play. Long-form video requests continue to grow strongly up 14% in 2015, driven by mobile and connected
televisions. Online consumption, which is the measure of how long viewers are spending online, has also increased by 42%
reflecting the quality of ITV's content and the improved viewing experience of the ITV Hub. 
 
To date there have been 21 million downloads of our app and to further increase usage we will continually extend and
enhance the ITV Hub with improvements in technology and new content, such as premieres, box sets and short-form content. 
 
Overall the new service has been very well received by both audiences and advertisers, with consumption growing strongly
since launch, particularly for live viewing where our audiences enjoy the new 'live swipe' feature on smartphones and
tablets and the ITV Hub's improved streaming quality. 
 
Additionally, we are working to maximise the value of our digital data. We have introduced new digital advertising features
like AdSync+ as well as dynamically-served advertising on ITV's live simulcast channels on PC and Apple platforms. With 13
million registered users of the ITV Hub, we are not only able to understand and engage with our audiences better but we are
also developing more targeted advertising online in 2016. 
 
Further developing our pay offering in the UK and internationally 
 
ITV earns revenue from pay television through licensing our channels and content. 2015 pay revenue grew by 38% as we
continued to develop our services across multiple platforms. 
 
Our pay business in the UK includes deals with Sky and Virgin for our HD channels and catch-up VOD, an advertising free
subscription version of the ITV Hub on iOS and a deal with Sky to make ITV's content available through its connected
platforms including Sky Go and Now TV. In 2014 we launched our first pay channel, ITV Encore, which we are strengthening
with more exclusive content including original commissions such as The Frankenstein Chronicles and Houdini & Doyle and
critically acclaimed acquired series such as The Americans and Jordskott. 
 
Outside the UK we have established a number of smaller pay propositions including Cirkus, a subscription VOD service that
offers the 'Best of British' content to international pay platforms which is available in the Nordics and more recently in
Iceland. We also distribute ITV Essentials, an online service for expats, and ITV Choice, a general entertainment channel
for emerging markets which was recently launched in South Africa. 
 
As we look to increase ITV brand loyalty, we have already increased our exposure to new types of content including
short-form and younger focused long-form programming and new types of distribution. We are widening our digital reach by
expanding our presence on YouTube to bring new audiences to our programmes. In 2015 we launched 22 new ITV branded channels
across a range of our biggest programme brands. We saw usage increase over 400% across the year on the ITV branded channels
to deliver over 160million views, the equivalent of over 8 million hours of viewing. 
 
Talpa has a very strong digital presence internationally across its range of formats. Since 2014 it has developed 10
successful connected live formats including The Voice, The Voice Kids and Dance Dance Dance, in 40 countries, with 90
apps/sites and 100 YouTube channels, in total delivering over 12 billion views. 
 
We have made investments in the digital arena as we look to develop our expertise in monetising online audiences. These
include: Believe Entertainment Group, a producer of digital-branded short-form entertainment; Zealot, a digital content
multi-platform network; Indigenous Media, a producer of scripted digital content; and Channel Mum, the first ever online
video network dedicated to young mothers. 
 
Looking ahead we will further develop our pay offering both in the UK and internationally exploring opportunities for both
pay and online as we seek to monetise our content further. We will look to do this through a mixed economy of organic
growth, partnerships and acquisitions. We will also increasingly look for opportunities to 'window' our content across our
free channels, pay channels and the ITV Hub to derive maximum value for audiences, platforms and advertisers. 
 
Expanding our global distribution network 
 
In 2015 Global Entertainment, the distribution arm of ITV Studios, delivered revenue growth of 9% to £157 million (2014:
£144 million) as we have continued to drive value from the investment we have made in creating and owning the rights to
quality content with international appeal. 
 
Our distribution business has a substantial archive of over 40,000 hours of television and film content that we distribute
to broadcasters and platform owners around the world. In 2015 we have continued to enhance our distribution network,
benefitting from our increased rights ownership and strong network relationships as ITV Studios has grown in scale. 
 
We have a strong and balanced portfolio of scripted and unscripted programmes and formats, both new and returning. We
continuously strengthen this using ITV's strong cash flow to create and fund new content and acquire third-party rights.
ITV Studios creates new programmes in the key genres of drama, entertainment and factual entertainment. 
 
Our scripted content has sold well internationally with programmes such as Poldark, Aquarius, Texas Rising, Endeavour,
Jekyll & Hyde and Mr Selfridge all selling to over 100 countries. Our entertainment and factual entertainment content also
continues to sell well with programmes such as Come Dine With Me, The Voice, The Voice Kids, I Love My Country, The Chase,
I'm A Celebrity… Get Me Out Of Here! and the Price of Beauty. 
 
During the year we have also signed a number of new multi-year and multi-territory deals including a seven year deal for
Coronation Street with CBC in Canada. In early 2016 we agreed a multi series and territory deal for Thunderbirds Are Go!
with Amazon covering the US and India for first run and UK and Germany for second run. We are now starting to benefit from
merchandising around Thunderbirds Are Go! as we look to extend the franchise beyond the television set. 
 
Global Entertainment also invests in the funding of scripted content with international appeal. ITV has invested around
£160 million in the year, up £60 million, in scripted programmes such as Texas Rising, Aquarius and The Good Witch, two of
which have been recommissioned and they are selling well internationally. 
 
In addition to distributing ITV's own content, we have also acquired the third-party distribution rights to a number of
international shows including Schitt's Creek from Canada and Nordic thriller Jordskott. 
 
2016 and beyond 
 
Looking ahead we expect to deliver double-digit growth in our Online, Pay & Interactive revenues as we further develop our
ability to distribute and sell our content. We will continue to invest to enhance the ITV Hub and through a mixed economy
of organic growth, partnerships and acquisitions, we will develop our pay and online services and channels and explore new
ways to package and sell our content to take advantage of demand for quality content in the UK and internationally from
consumers, broadcasters and platform owners. 
 
Lastly, we are also continuing to drive the debate around the implementation of retransmission fees in the UK to ensure
that we are fairly compensated for our investment in content for the ITV main channel when it is carried on pay TV
platforms. 
 
Performance Dashboard 
 
Demonstrating continued progress against our strategic priorities. 
 
1 Maximise audience and revenue share from free-to-air broadcast and VOD business 
 
2015 performance 
 
· ITV NAR growth of 6%, ahead of our estimate of the TV advertising market 
 
· Share of broadcast up to 46.1% in 2015 (2014: 45.9%) 
 
· ITV Family SOV down 3% 
 
· ITV delivered 98% of commercial audiences over five million and 93% of audiences over three million 
 
· Delivered most watched entertainment drama, soap and sporting event 
 
· ITV2 and ITV3 largest digital channels in the UK 
 
· Innovative sponsorship and brand extension partnerships with advertisers 
 
· Launched AdSync+, a partnership with RadiumOne to amplify the reach of our TV advertising 
 
· Dynamic advertising now served to ITV simulcast content on PC and iOS 
 
· Significant digital engagement with 100 million votes across our big entertainment shows and 40 million paid competition
entries 
 
Focus for 2016 
 
· Strengthen on-screen viewing in key demographics 
 
· Further invest in our content, channels and brand to maintain our unique scale 
 
· Grow our share of total television and VOD advertising 
 
· Continue to maximise the value of our programme brands through sponsorship, interactivity and brand extensions 
 
· Developing new and more targeted advertising opportunities 
 
· Developing branded content solutions through our new content creation service ITV AdVentures 
 
·   Integration of UTV 
 
Key Performance Indicators 
 
· ITV Family SOV 
 
· ITV Family SOCI 
 
· ITV Family share of broadcast 
 
· Percentage of commercial audiences over three million and over five million 
 
2 Grow international content business 
 
2015 performance 
 
· Good growth across ITV Studios with 8% organic and 33% including the acquisitions 
 
· ITV Studios' share of ITV main channel output at 60% 
 
· 46% growth in Off-ITV production revenue in the UK 
 
· Continued investment in creative pipeline with over 7,000 hours of original content produced and delivered 
 
· Completed three acquisitions including Talpa Media, our biggest acquisition to date 
 
· 53% of ITV Studios revenue generated outside the UK 
 
· Top indie producer across Europe and the US 
 
· Delivered three US scripted series in the year, two of which have been recommissioned 
 
Focus for 2016 
 
· Build further scale internationally 
 
· Continue to develop IP in key creative markets to exploit growing worldwide demand 
 
· Build a pipeline of programmes across genres and content life cycle 
 
· Develop more 16 to 24 focused content 
 
· Attract and retain key creative talent 
 
· Continue to look at acquisitions, investments and talent deals 
 
Key Performance Indicators 
 
· Number of new commissions for ITV Studios 
 
· Percentage of ITV output from ITV Studios 
 
3 Build a global pay and distribution business 
 
2015 performance 
 
· Successful launch of the ITV Hub 
 
· Long-form video requests up 14%, consumption up 42% 
 
· 21 million downloads of app and 13 million registered users 
 
· Launched new original programming on ITV Encore 
 
· New pay deal with Virgin and others including Amazon TVOD and TalkTalk 
 
· Cirkus and ITV Choice now launched in four countries 
 
· Launched many YouTube channels across our programme brands focusing on short-form content, which has driven very
significant views 
 
· A leading European distributor of content, with Aquarius, Mr Selfridge, Poldark and Hell's Kitchen USA all sold to over
100 countries 
 
· Six formats sold to three or more countries 
 
Focus for 2016 
 
· Further invest in the quality and distribution of the ITV Hub 
 
· Build a network of pay channels and OTT services 
 
· Consider wider partnerships with OTT/VOD players 
 
· Continue to trial direct to consumer pay opportunities 
 
· Develop innovative new content windowing strategy 
 
· Further grow our international distribution network with high-quality content 
 
· Maximise the use of our strong cash flows to finance the production of high-profile dramas that return and travel
internationally 
 
· Invest in developing third-party distribution deals 
 
· Secure retransmission fees in the medium term 
 
Key Performance Indicators 
 
· Total long-form video requests 
 
· Number of new commissions for ITV Studios 
 
Key Performance Indicators across all three priorities 
 
Our Key Performance Indicators (KPIs) align our performance and accountability to our strategy of continuing to develop a
creative, commercial and global organisation. Five KPIs measure the Group's operational and financial performance across
all three priorities: 
 
· Adjusted EBITA 
 
· Adjusted EPS 
 
· Profit to cash conversion 
 
· Non-NAR revenue 
 
· Employee engagement 
 
Financial and Performance Review 
 
ITV delivered another strong performance in 2015 with growth across the business. 
 
Reflecting our continued investment in quality content, we grew revenue across all parts of the business and reported our
sixth consecutive year of double-digit growth in our key profit measures, while further improving our adjusted EBITA
margin. We remain highly cash generative which, together with our continued focus on costs, places us in a strong position
to invest for further growth and enhance shareholder value into 2016 and beyond. 
 
 Twelve months to 31 December       2015£m  2014£m  Change£m  Change%  
 NAR                                1,719   1,629   90        6        
 Total non-NAR                      1,664   1,327   337       25       
 Total revenue                      3,383   2,956   427       14       
 Internal supply                    (411)   (366)   45        12       
 Group external revenue             2,972   2,590   382       15       
                                                                       
 Adjusted EBITA                     865     730     135       18       
 Group adjusted EBITA margin        29%     28%                        
                                                                       
 Adjusted EPS                       16.5p   13.8p   2.7p      20       
 Adjusted diluted EPS               16.3p   13.7p   2.6p      19       
 Dividend per share                 6.0p    4.70p   1.3p      28       
 Special dividend                   10.0p   6.25p   -         -        
 Net (debt)/cash as at 31 December  (319)   41      (360)     -        
 
 
The unadjusted profit before tax and EPS from the Consolidated Income Statement are as follows: 
 
 Twelve months to 31 December  2015£m  2014£m  Change£m  Change%  
 Profit before tax             641     605     36        6        
 EPS                           12.4p   11.6p   0.8p      7        
 Diluted EPS                   12.3p   11.5p   0.8p      7        
 
 
Total ITV revenue increased 14% to £3,383 million (2014: £2,956 million), with external revenue up 15% at £2,972 million
(2014: £2,590 million). This reflects 6% growth in NAR to £1,719 million (2014: £1,629 million), and 25% growth in non-NAR
revenue to £1,664 million (2014: £1,327 million). Non-NAR now accounts for 49% (2014: 45%) of total revenue. 
 
Growth in NAR and high margin Online, Pay & Interactive revenue combined with the growth in ITV Studios and our continued
focus on costs, delivered an 18% increase in adjusted EBITA to £865 million (2014: £730 million), resulting in a 1%
improvement in the adjusted EBITA margin to 29%. Adjusted EPS grew 20% to 16.5p (2014: 13.8p) while reported EPS grew 7% to
12.4p (2014: 11.6p). Reported EPS grew at a slower rate than adjusted EPS primarily because of the treatment of employment
linked consideration for our acquisitions which is included within reported earnings. This is explained over the following
pages. 
 
We remain focused on balance sheet efficiency and working capital management. Despite increased investment in scripted
content, our profit to cash ratio remained strong at 91%. After acquisitions of £406 million (net of cash acquired),
dividend payments of £459 million and our deficit pension contributions of £90 million, we ended 2015 with net debt of £319
million (31 December 2014: net cash of £41 million). This gives us the financial flexibility to continue to invest in the
business. 
 
The Financial and Performance Review focuses on the adjusted results, which, in management's view, reflect the underlying
performance of the business, providing a more meaningful comparison of how the business is managed and measured on a
day-to-day basis. 
 
The key adjustments are to reflect production tax credits in EBITA before exceptional items ('adjusted EBITA') and remove
the effect of certain items from adjusted profit before tax and EPS. These include all operating and non-operating
exceptional items primarily acquisition-related costs such as: employment linked consideration and professional fees for
due diligence; impairment of intangible assets; amortisation of intangible assets acquired through business combinations
including formats and customer contracts; net financing cost adjustments; and tax adjustments relating to these items. 
 
Broadcast & Online 
 
 Twelve months to 31 December             2015£m   2014£m   Change£m  Change%  
 NAR                                      1,719    1,629    90        6        
 Online, Pay & Interactive revenue        188      153      35        23       
 SDN external revenue                     64       71       (7)       (10)     
 Other commercial income                  175      170      5         3        
 Broadcast & Online non-NAR revenue       427      394      33        8        
 Total Broadcast & Online revenue         2,146    2,023    123       6        
 Total schedule costs                     (1,045)  (1,018)  (27)      (3)      
 Other costs                              (442)    (437)    (5)       (1)      
 Total Broadcast & Online adjusted EBITA  659      568      91        16       
 Adjusted EBITA margin                    31%      28%                         
 
 
Broadcast & Online delivered another strong performance, with total revenue up 6% to £2,146 million (2014: £2,023 million)
driven by 6% growth in NAR and 23% growth in Online, Pay & Interactive. 
 
The television advertising market again showed strong growth with NAR up 6% to £1,719 million (2014: 1,629 million) and
continued good growth across all the major advertising categories. The Finance advertising category was driven by
traditional banking brands and the Retail and Food sectors remained strong with supermarkets and furniture stores
increasing spend. We saw strong growth from technology companies such as Google and Facebook as well as new digital brands,
such as Just Eat and Purple Bricks, all using TV to build brand awareness. Entertainment & Leisure did see a decline which
was as a result of significant spend by bookmakers in 2014 around the Football World Cup. 
 
As expected, the phasing of NAR was different in 2015 reflecting the timing of major sporting events. The first quarter saw
strong growth of 12% benefitting from an earlier Easter, while the second quarter was flat against a strong Q2 2014 which
benefitted from the Football World Cup. The third quarter was up 8% with increased spend around the Rugby World Cup with
the fourth quarter up 4%. Overall ITV's underlying advertising performance was consistently strong in both the first and
second halves of the year. 
 
Over the full year we increased our estimated share of broadcast to 46.1% (2014: 45.9%) as we once again outperformed our
estimate of the UK television advertising market. It is becoming increasingly difficult to measure the pure spot
advertising market as all broadcasters use different definitions, which may include additional sources of revenue such as
sponsorship and VOD in their estimates of television advertising. 
 
ITV Family SOV declined 3% in 2015. This reflects a 4% decline in the ITV main channel SOV which was impacted by more
competition from the launch of new digital channels in the year including Spike and Your TV, some of our shows not
performing as well as we had expected and the relatively strong performance of the BBC. ITV2 also contributed to the
decline, partly as a result of our repositioning of the channel to provide more targeted audiences for our advertisers. We
remain focused on strengthening our viewing performance and continuing to deliver mass audiences. 
 
Online, Pay & Interactive revenue continued to show strong growth, up 23% to £188 million (2014: £153 million) reflecting
further growth in both our online advertising and pay businesses. In November we successfully launched the ITV Hub, the new
digital home for our online services, which has had a very encouraging start. Audience demand for VOD continues to grow
strongly which helped drive a 14% increase in long-form video requests and 42% increase in consumption. There remains
strong demand for online advertising which helped drive significant growth in online revenue. We continue to develop our
pay services with Pay revenue benefitting from a full twelve months of revenue from ITV Encore and strong demand for ITV
video on demand services. Interactive revenue was up in the year with daytime competitions performing well. Voting on our
programme apps increased exponentially as we introduced a free voting strategy. X Factor delivered 24 million votes and I'm
A Celebrity… Get Me Out Of Here! delivered total votes of over 56 million. 
 
SDN external revenue, which is generated from licence sales for DTT Multiplex A, decreased 10% to £64 million (2014: £71
million). This was as a result of lower renewal fees for existing long-term contracts which expired during the year. 
 
Other commercial income was up 3% to £175 million (2014: £171 million), reflecting growth in sponsorship for the Rugby
World Cup and brand extensions through a number of innovative solutions including Land Rover and SSE for the Rugby World
Cup and Aunt Bessie's for I'm A Celebrity…Get Me Out Of Here! Other commercial income also includes revenue from media
sales, which relates to commission earned by ITV on sales of airtime for the non-consolidated licensees, as well as
minority revenue from these licensees for ITV content. As expected, performance across both revenue streams was largely
unchanged. 
 
Schedule costs were up 3% to £1,045 million (2014: £1,018 million) predominantly due to the full year costs of ITVBe and
ITV Encore. Sports rights savings on the FA Cup and Champions League were partly offset by the costs of the Rugby World
Cup. Going forward we believe that this is around the right level of programme spend although the genre mix will change
each year. 
 
Other Broadcast costs increased marginally, up 1% to £442 million (2014: £437 million). We maintain a tight control on
costs and will continue to deliver savings to mitigate inflationary pressure. 
 
Overall Broadcast & Online adjusted EBITA was up 16% to £659 million (2014: £568 million). The continued growth in our
highly geared advertising revenue, together with high margin revenue growth in Online, Pay & Interactive, resulted in the
adjusted EBITA margin increasing 3% to 31% (2014: 28%). 
 
On 29th February 2016, ITV completed its acquisition of 100% of UTV Ltd, which owns the televisions assets of UTV Plc, for
£100 million. This will further strengthen ITV's free-to-air business and enable it to run a more efficient network. As
part of the transaction ITV has taken on responsibility for the UTV defined benefit pension scheme. 
 
ITV Studios 
 
 Twelve months to 31 December   2015£m   2014£m  Change£m  Change%  
 Studios UK                     547      459     88        19       
 Studios US                     320      235     85        36       
 Studios RoW                    213      95      118       124      
 Global Entertainment           157      144     13        9        
 Total Studios revenue          1,237    933     304       33       
 Total Studios costs            (1,031)  (771)   (260)     (34)     
 Total Studios adjusted EBITA*  206      162     44        27       
 Studios adjusted EBITA margin  17%      17%                        
 
 
* Includes the benefit of production tax credits. 
 
 Twelve months to 31 December                  2015£m  2014£m  Change£m  Change%  
 Sales from ITV Studios to Broadcast & Online  411     366     45        12       
 External revenue                              826     567     259       46       
 Total Studios revenue                         1,237   933     304       33       
 
 
ITV Studios total revenue grew strongly, exceeding £1 billion for the first time as we continue to build scale in creative
content markets and strengthen our international portfolio of programmes that return and travel. ITV Studios is becoming
increasingly international, and reflecting our growth and increasing scale in key production markets in Europe and the US,
53% of ITV Studios total revenue in the year was generated outside the UK (2014: 47%). 
 
Total organic revenue, which excludes our current and prior year acquisitions as well as foreign exchange movements, was up
8%. There was growth across the business, with a particularly strong performance from ITV America and Global Entertainment.
Our acquisitions continue to come through, with twelve months of Leftfield Entertainment as well as Talpa Media from 30
April 2015 and our UK acquisitions including Twofour Group from 24 June 2015. The foreign exchange impact was immaterial as
the stronger US dollar was offset by our greater exposure to a weakening Euro following the Talpa acquisition. 
 
Studios UK revenue was up 19% to £547 million (2014: £459 million) reflecting 13% growth in internal revenue and 39% growth
in external revenue. Organic revenue was up 5%. There were increased programming sales to Broadcast across both drama and
entertainment, with new deliveries including The Trials of Jimmy Rose, Unforgotten, Home Fires, Thunderbirds Are Go! and
Ninja Warrior UK. Successful recommissions On-ITV included Saturday Night Takeaway, The Chase and Judge Rinder. Off-ITV
revenue grew strongly with successful deliveries including Poldark and The Graham Norton Show for the BBC and Come Dine
With Me and 24 Hours in A&E for Channel 4. 
 
ITV America grew strongly in 2015, with revenue up 36% to £320 million (2014: £235 million) as we benefitted from good
organic growth, up 15% driven by the delivery of our three US dramas, Best Time Ever, a US remake of Saturday Night
Takeaway, and two series of Hells Kitchen. ITV America also benefitted from the first full year of Leftfield Entertainment,
acquired in May 2014. Following this acquisition, we became the largest unscripted independent producer in the US and we
now have a strong portfolio of returning series and formats including Hell's Kitchen, Pawn Stars, Duck Dynasty, Marriage
Bootcamp, The Real Housewives of New Jersey and The Rich Kids Of Beverly Hills. 
 
Studios RoW also showed strong growth, up 124% to £213 million (2014: £95 million), with organic revenue up 4%. We have
benefitted from Talpa Media which we acquired on 30 April 2015, significantly strengthening our position as a leading
international producer. We also saw good growth in Australia and Denmark from exporting UK formats. 2015 deliveries
included I'm A Celebrity… Get Me Out Of Here! in Australia and Denmark, The Chase in Germany and Norway, and Hell's Kitchen
in France. 
 
Global Entertainment revenue increased 9% in the year to £157 million (2014: £144 million). Revenue growth was supported by
our strong programme slate including new titles Poldark and Schitt's Creek, as well as US drama Aquarius and the launch of
Thunderbirds Are Go!, which has now been sold to 90 countries with key territories such as the US and France launching in
2016. We expect to benefit from merchandising around the series as we continue to extend the franchise beyond the
television set. 
 
Reflecting the strong revenue growth across ITV Studios, adjusted EBITA increased 27% to £206 million (2014: £162 million).
The adjusted EBITA margin remains unchanged at 17% even after significant investment in scripted content. In 2015 we
invested £163 million in scripted content, up £60 million. We are financing our larger-scale scripted projects through our
strong underlying cashflows. The production cost is partly funded by the initial sale of the series to a broadcaster, while
the deficit is recovered through distribution revenue from selling the finished product globally to other broadcasters and
platforms. We balance our financial exposure through our portfolio approach, with successful international dramas
offsetting the risk that we will not recover the full deficit on every show. 
 
Overall, we delivered many creative successes in the year, including two of our US dramas - Aquarius and The Good Witch
being recommissioned. Given the nature of our business not all our programmes will return for another series in 2016, for
example Jekyll & Hyde and Best Time Ever, but we have a strong portfolio of programmes and formats and we will continue to
invest in our creative pipeline to build upon this. We are on track to deliver good revenue and profit growth in 2016,
primarily driven by our acquisitions. 
 
Acquisitions 
 
We have built scale in our international content business, focusing our growth in key creative markets that have a track
record for creating and owning intellectual property. Since 2012 we have acquired a number of content businesses in the UK,
US and creative locations across Europe, developing a strong portfolio of programmes that return and travel. As we have
grown in size and expanded our network relationships and distribution capability, this has helped to strengthen our
creative talent pool and build our reputation as a leading European producer and the largest unscripted independent
production company in the US. 
 
We have strict criteria for evaluating potential acquisitions. Financially, we assess ownership of intellectual property,
earnings growth and valuation based on return on capital employed and discounted cash flow. Strategically, we ensure an
acquisition target has a strong creative track record and pipeline in content genres that return and travel, namely drama,
entertainment and factual entertainment, as well as succession planning for key individuals in the business. 
 
We generally structure our deals with earnouts or with put and call options in place for the remainder of the equity,
capping the maximum consideration payable. By basing a significant part of the consideration on future performance in this
way, not only can we lock in creative talent and ensure our incentives are aligned, but we also reduce our risk by only
paying for the actual, not expected, performance delivered over time. The majority of earnouts or put and call options are
dependent on the seller remaining within the business. Where consideration paid or contingent consideration payable in the
future is employment linked, it is treated as an expense in our statutory results rather than as capital. All consideration
of this type is excluded from adjusted profit after tax and adjusted EPS as, in our view, these items are part of capital
consideration. 
 
In April 2015 we completed the acquisition of 100% of Talpa Media in the Netherlands, the creator of worldwide
entertainment formats, including The Voice, The Voice Kids, I Love My Country, Dating In The Dark and Dance Dance Dance. We
paid an initial cash consideration of E500 million (£362 million) for 100% of Talpa's fully diluted share capital with
further payments dependent on Talpa's future performance. The total maximum consideration, including the initial payment,
is up to E1.1 billion which is contingent on Talpa continuing to deliver significant profit growth to 2022 as well as John
de Mol's continued commitment to the business during this time. Under the deal structure, because all future payments and
E150 million of the initial consideration are directly related to John de Mol remaining with the business, these payments
are treated as employment costs and therefore on a statutory basis are part of our reported results. However, we exclude
them from adjusted profits as an exceptional item, which is consistent with our treatment of all costs of this type. 
 
We also acquired a minority stake in Monumental Television in April, the UK scripted independent producer founded by Oscar
nominated film producers Alison Owen and Debra Hayward. As part of the agreement, Global Entertainment acquired exclusive
distribution rights to all of its future television productions. 
 
In May we acquired the remaining 75% of Mammoth Screen, one of the UK's leading scripted production companies, having held
a 25% investment in the producer since 2007. Its successful slate of high-end drama includes Poldark, Endeavour and the
forthcoming Victoria. 
 
In June we completed the acquisition of Boom Supervisory Limited, the holding company of UK based Twofour Group which
produces factual entertainment and drama programmes. We paid an initial cash consideration of £55 million for 75% of the
Group. There is a put and call option for the remaining 25% that can be exercised at the end of 2017 and between the end of
2019 and 2021. Additionally, Twofour has a put and call option to acquire the remaining 49% of its subsidiary Mainstreet
Pictures that can be exercised between 2018 and 2023. The total maximum consideration for 100% of the business is £280
million with contingent payments dependent on delivering exceptional profit growth to £60 million in aggregate over the
final two-year payment period and key individuals remaining with the Group. 
 
Also in June we acquired a new label, Cats on the Roof Media which owns a number of creative labels focused on developing
entertainment and scripted comedy programmes. 
 
Acquisitions - 2012 to 2015 (undiscounted) 
 
 Company              Geography    Genre             Initialconsideration(£m)  Expected future payments(£m)  Total expectedconsideration1(£m)  Expectedpaymentperiod  Total maximumconsideration(£m)  
 2015                                                                                                                                                                                                 
 Talpa Media          Netherlands  Entertainment     362                       186                           548                               2015-2019              796                             
 Twofour Group        UK           Fact Ent & Drama  55                        10                            65                                2016-2021              280                             
 Other                UK           Various           15                        28                            43                                2015-2020              81                              
 Total for 2015                                      432                       224                           656                                                      1,157                           
 Total for 2012-2014                                 328                       792                           407                               2016-2021              5882                            
 Total                                               760                       303                           1,063                                                    1,745                           
 
 
1. Including the initial cash consideration and excluding working capital adjustments. All future payments are performance
related. 
 
2. The amounts have been updated to reflect the accelerated buyout of the remaining 20% of Leftfield. 
 
In December Brent Montgomery, the CEO of Leftfield, became CEO of ITV America. In order to facilitate the integration of
Leftfield within the US business, we acquired the outstanding 20% of Leftfield which we did not own. The original terms
under which ITV acquired its initial 80% interest included potential future payments linked to Leftfield's profit growth
and put and call options under which ITV would acquire the remaining 20%. In consideration for the acquisition of the
outstanding 20%, these arrangements have been cancelled and ITV has assumed certain obligations of Brent Montgomery in
relation to Leftfield, most notably settlement of the earnouts for its subsidiaries. There was no cash consideration
payable at the time by ITV. The maximum consideration payable by ITV for the remaining obligations under the Leftfield
acquisition is $100m and is dependent on future performance and is linked to ongoing employment. 
 
The 2015 acquisitions we have made have resulted in a £297 million increase in intangible assets, mainly relating to Talpa
formats and £102 million of goodwill. 
 
The table above sets out the initial consideration payable on our acquisitions, our expected future payments based on our
current view of performance and the total maximum consideration payable which is only payable if exceptional compound
earnings growth is delivered. 
 
We closely monitor the forecast performance of each acquisition and where there has been a change in expectations, we
adjust our view of potential future commitments through the income statement. 
 
Total expected consideration for all acquisitions since 2012 has increased by £656 million since 2014. This relates to the
total expected amount payable for our 2015 acquisitions. This is made up of the initial consideration of £432 million (£406
million plus the cash acquired) and expected future payments which are only payable if significant compound earnings growth
is delivered. 
 
Net financing costs 
 
 Twelve months to 31 December                              2015£m  2014£m  
 Financing costs directly attributable to loans and bonds  (10)    (8)     
 Cash-related net financing (costs)/income                 (3)     2       
 Cash-related financing costs                              (13)    (6)     
 Amortisation of bonds                                     -       (1)     
 Adjusted financing costs                                  (13)    (7)     
 Mark-to-market on swaps and foreign exchange              (4)     (9)     
 Imputed pension interest                                  (10)    (17)    
 Losses on buybacks                                        -       (30)    
 Other net financial (loss)/income                         (4)     12      
 Net financing costs                                       (31)    (51)    
 
 
Adjusted financing costs increased to £13 million (2014: £7 million), due to increased borrowing for the acquisition of
Talpa and costs associated with raising the funding which included the initial E500 million acquisition bridge loan that
was repaid in September following the issue of the seven year E600 million Eurobond. 
 
Net financing costs are adjusted to reflect the underlying funding costs of the business providing a more meaningful
comparison of how the business is managed and funded on a day-to-day basis. These adjustments include mark-to-market on
swaps and foreign exchange, imputed pension interest, losses on debt buybacks and other financial loss/income. 
 
Net financing costs were £20 million lower in 2015 at £31 million (2014: £51 million), as the prior year included losses
incurred on the repurchase of the remaining £62 million 2019 bilateral loan. This was partially offset by the reduction in
other net financial income, which in 2014 related to a reduction in expected future payments for acquisitions as a result
of ITV's assessment of their future performance. The imputed pension charge also decreased as a result of the reduction in
pension liabilities. 
 
Profit before tax 
 
Adjusted profit before tax, after financing costs, was up 18% at £843 million (2014: £712 million). Profit before tax is
adjusted to reflect the impact of production tax credits, net exceptional items, amortisation and impairment of intangible
assets and the adjustments to net financing costs, to reflect the underlying performance of the business. Statutory profit
before tax increased by 6%, which is less than the increase in adjusted profit before tax, as a result of the exceptional
items described below. 
 
Profit before tax (PBT) 
 
 Twelve months to 31 December                       2015£m  201427      
 Share-based compensation and pension service costs                               17      14      
 Cash flow generated from operations before exceptional items                     837     702     
 Acquisition of property, plant and equipment and intangible assets               (49)    (37)    
 Adjusted cash flow                                                               788     665     
 Profit to cash ratio                                                             91%     91%     
 
 
Note: Except where disclosed, management views the acquisition of operating property, plant and equipment and intangibles
as necessary ongoing investment in the business. 
 
ITV remains highly cash generative reflecting our continued focus on cash and costs. In 2015 there was another working
capital outflow as we continued to invest in our creative pipeline. 
 
In the year we generated £788 million of operational cash (2014: £665 million) from £865 million of adjusted EBITA (2014:
£730 million), which equates to a strong profit to cash ratio of 91%. The ratio has remained the same despite our increased
investment in scripted content and demonstrates our disciplined approach to cash and costs. 
 
Cash spent on the acquisition of property, plant and equipment and intangible assets increased year-on-year as we invest in
infrastructure to support the business. 
 
The difference between the reported and adjusted cash flow in 2015 relates to the cash inflow from production tax credits
which ITV considers a working capital item. 
 
Free cash flow 
 
 Twelve months to 31 December  2015£m  2014£m  
 Adjusted cash flow            788     665     
 Net interest paid             (9)     (11)    
 Adjusted cash tax             (127)   (85)    
 Pension funding               (90)    (91)    
 Free cash flow                562     478     
 
 
Note: Adjusted cash tax is total cash tax paid excluding receipt of production tax credits which are included within
adjusted cashflow. 
 
After payments for interest, tax and pension funding, our free cash flow also remained strong in the period, up 18% to £562
million (2014: £478 million). 
 
Overall, after dividends, acquisitions and debt repayments we ended the year with net debt of £319 million, compared to net
debt of £540 million at 30 June 2015 and £41 million net cash at 31 December 2014. Our cash generation was weighted towards
the second half of 2015 due to the payment of the special dividend and the significant acquisition of Talpa, all of which
took place in the first half of 2015. 
 
Funding and liquidity 
 
Debt structure and liquidity 
 
We have a £525 million Revolving Credit Facility in place until 2019 provided by a number of core relationship banks. We
also have a £175 million bilateral financing facility and a £75 million invoice discounting facility, both of which are
free of financial covenants. At 31 December 2015 these facilities were all undrawn. 
 
In 2015, to fund the acquisition of Talpa Media, we entered into a 12 month E500 million bridge loan facility provided by
five of our relationship banks. This was repaid and cancelled in September 2015 when we issued a 7 year E600 million
Eurobond at a fixed coupon of 2.125%. The bond will mature on 21 September 2022. The proceeds from the bond were also used
to fund the maturing £78 million Eurobond in October 2015. 
 
As we enter the next phase of our strategy, our balance sheet strength together with our continued strong free cash flow
will enable us to invest in opportunities to grow the business and enhance shareholder value. To preserve our financial
flexibility, our policy is to maintain at least £250 million of available liquidity at any point. 
 
Leverage 
 
Our objective is to run an efficient balance sheet. Our priority is to invest to drive organic growth and make acquisitions
in line with our strategic priorities. We will balance this investment for further growth with attractive returns to
shareholders. 
 
Over time we will continue to look to increase our balance sheet leverage and we believe maintaining leverage below 1.5x
reported net debt to adjusted EBITDA will optimise our cost of capital, allow us to sustain a progressive dividend policy
and enable us to retain flexibility to continue to invest for further growth. As at 31 December 2015, reported net debt to
adjusted EBITDA was 0.4x. 
 
We also look at an adjusted measure of net debt, taking into consideration all of our financial commitments which reflects
how credit rating agencies look at our balance sheet. At 31 December 2015, adjusted net debt was £1,144 million (31
December 2014: £765 million) reflecting an increase in expected contingent payments on acquisitions as a result of the
acquisitions we have made in the year, partly offset by a reduction in the pension deficit under IAS 19 and lower
undiscounted finance lease commitments which mainly relate to broadcast transmission contracts and property. As at 31
December 2015 adjusted net debt to adjusted EBITDA was 1.3x. 
 
                                               2015£m   2014£m  
 Net debt at 31 December                       (319)    41      
 Expected contingent payments on acquisitions  (303)    (79)    
 Pension deficit (IAS 19R)                     (176)    (346)   
 Operating leases                              (346)    (381)   
 Adjusted net debt at 31 December              (1,144)  (765)   
 Adjusted net debt to adjusted EBITDA          1.3x     1.0x    
 
 
Financing 
 
We are financed using debt instruments with a range of maturities. During the year we repaid the £78 million Eurobond which
matured in October 2015. Borrowings at 31 December 2015 were repayable as follows: 
 
 Amount repayable                  £m   Maturity  
 £161 million Eurobond             161  Jan 2017  
 E600 million Eurobond             437  Sep 2022  
 Finance leases                    10   Various   
 Other debt                        5    Various   
 Total debt repayable on maturity  613            
 
 
Ratings 
 
We are rated investment grade by two ratings agencies: BBB- by Standard and Poor's and Baa3 by Moody's Investor Services.
The factors that are taken into account in assessing our credit rating include our degree of operational gearing, exposure
to the economic cycle, as well as business and geographical diversity. 
 
Foreign exchange 
 
As ITV continues to grow internationally, we are increasingly exposed to foreign exchange on our overseas operations. It is
our policy not to hedge our exposure to revenues and profits generated overseas, as this is seen as an inherent risk. We do
hedge our overseas net assets, where material, and so we have hedged a significant portion of the euro net assets arising
from the Talpa acquisition. 
 
ITV is also exposed to foreign exchange risk on transactions we undertake in a foreign currency. Our policy is to hedge a
portion of any transaction that is either a firm commitment or highly probable for up to two years forward. The amount
hedged depends on the level of certainty we have on the final size of the transaction. 
 
Finally, ITV is exposed to foreign exchange risk on the re-translation of foreign currency loans and deposits. Our policy
is to hedge 

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