REG - ITV PLC - Preliminary Results - year ended 31 December 2015 <Origin Href="QuoteRef">ITV.L</Origin> - Part 3
02/03/2016 07:12
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such exposures where there is an expectation that any changes in the value of these items will result in a
realised cash movement over the short to medium term.
Pensions
IAS 19
The aggregate IAS 19 deficit of the defined benefit scheme at 31 December 2015 was £176 million (31 December 2014: £346
million). The reduction reflects lower pension liabilities as a result of rising bond yields over the year, deficit funding
contributions of £90 million and the difference between the actual inflation experienced in the period compared to the
expected rate. Pensions continue to be paid from the Scheme based on actual requirements.
Actuarial valuation
The last actuarial valuation was undertaken in 2014. On the bases adopted by the Trustee, the combined deficits as at 1
January 2014 amounted to £540 million.
Deficit funding contributions
The Group's deficit funding contributions in 2015 were £90 million (2014: £91 million).
Following completion of the actuarial valuations, the Group has agreed to make deficit funding contributions in order to
eliminate the deficits in each section. From 1 January 2016 the contributions are paid on the following basis:
Section A - £5.0 million per month until 31 May 2021
Section B - £0.15 million per month until 28 February 2023
Section C - £0.3 million per month until 31 July 2021
In addition to these contributions, payments are made into Section A as a result of the SDN and LTC Pension Funding
Partnership structures and during 2015 these payments amounted to £13 million.
The new funding structure above results in a £10 million reduction in deficit funding contributions payable in 2016
compared to 2015, which will be paid more evenly throughout the year.
Ian Griffiths
Group Finance Director
Financial Statements
In this section
The financial statements have been presented in a style that attempts to make them less complex and more relevant to
shareholders. We have grouped the note disclosures into five sections: 'Basis of Preparation', 'Results for the Year',
'Operating Assets and Liabilities', 'Capital Structure and Financing Costs' and 'Other Notes'. Each section sets out the
accounting policies applied in producing the relevant notes, along with details of any key judgements and estimates used.
The purpose of this format is to provide readers with a clearer understanding of what drives financial performance of the
Group. The aim of the text in boxes is to provide commentary on each section, or note, in plain English.
Keeping it simple
Notes to the financial statements provide information required by statute, accounting standards or Listing Rules to explain
a particular feature of the financial statements. The notes which follow will also provide explanations and additional
disclosure to assist readers' understanding and interpretation of the Annual Report and the financial statements.
Consolidated Income Statement
Fortheyearended31December Note 2015£m 2014£m
Revenue 2.1 2,972 2,590
Operatingcosts (2,306) (1,939)
Operatingprofit 666 651
Presentedas:
Earningsbeforeinterest,tax,amortisation(EBITA)beforeexceptionalitems 2.1 842 730
Operating exceptionalitems 2.2 (109) (12)
Amortisation of intangibleassets 3.3 (67) (67)
Operatingprofit 666 651
Financingincome 4.4 6 22
Financingcosts 4.4 (37) (73)
Net financingcosts 4.4 (31) (51)
Gainonsaleofnon-currentassets(exceptionalitems) 2.2 5 4
Gainonsaleofsubsidiariesandinvestments(exceptionalitems) 2.2 1 1
Profit beforetax 641 605
Taxation 2.3 (139) (132)
Profit for theyear 502 473
Profit attributableto:
Owners of theCompany 495 466
Non-controllinginterests 4.6.6 7 7
Profit for theyear 502 473
Earnings pershare
Basic earnings pershare 2.4 12.4p 11.6p
Diluted earnings pershare 2.4 12.3p 11.5p
Consolidated Statement of Comprehensive Income
Fortheyearended31December Note 2015£m 2014£m
Profit for theyear 502 473
Other comprehensiveincome:
Items that are or may be reclassified to profit orloss
Revaluationofavailableforsalefinancialassets 4.6.4 (1) 3
Net loss on cash flowhedges 4.3/4.6.3 - (4)
Exchangedifferencesontranslationofforeignoperations(netofhedging) 4.6.3 10 22
Items that will never be reclassified to profit orloss
Remeasurementgainsondefinedbenefitpensionschemes 3.7 91 24
Incometaxchargeonitemsthatwillneverbereclassified 2.3 (19) (3)
Other comprehensive income/(cost) for the year, net of incometax 81 42
Total comprehensive income for theyear 583 515
Total comprehensive income attributableto:
Owners of theCompany 576 508
Non-controllinginterests 4.6.6 7 7
Total comprehensive income for theyear 583 515
Consolidated Statement of Financial Position
As at 31December Note 2015£m 2014£m
Non-currentassets
Property, plant andequipment 3.2 239 248
Intangibleassets 3.3 1,500 1,129
Investmentsinjointventures,associatesandequityinvestments 3.5 30 14
Derivative financialinstruments 4.3 8 16
Distributionrights 3.1.1 29 13
Deferred taxasset 2.3 - 43
1,806 1,463
Current assets
Programme rights and otherinventory 3.1.2 373 367
Tradeandotherreceivablesduewithinoneyear 3.1.4 531 385
Tradeandotherreceivablesdueaftermorethanoneyear 3.1.4 33 24
Trade and otherreceivables 564 409
Current taxreceivable 13 -
Derivative financialinstruments 4.3 1 11
Cash and cashequivalents 4.1 294 297
1,245 1,084
Currentliabilities
Borrowings 4.2 (11) (85)
Derivative financialinstruments 4.3 (5) (12)
Tradeandotherpayablesduewithinoneyear 3.1.5 (786) (699)
Tradepayablesdueaftermorethanoneyear 3.1.6 (48) (27)
Trade and otherpayables (834) (726)
Current taxliabilities (69) (72)
Provisions 3.6 (28) (17)
(947) (912)
Net currentassets 298 172
Non-currentliabilities
Borrowings 4.2 (602) (171)
Derivative financialinstruments 4.3 (6) (12)
Defined benefit pensiondeficit 3.7 (176) (346)
Deferred taxliabilities 2.3 (79) -
Otherpayables (89) (38)
Provisions 3.6 (5) (4)
(957) (571)
Net assets 1,147 1,064
Attributable to equity shareholders of the parentcompany
Sharecapital 4.6.1 403 403
Sharepremium 4.6.1 174 174
Merger and otherreserves 4.6.2 221 228
Translationreserve 35 25
Available for salereserve 6 7
Retainedearnings 275 177
Total equity attributable to equity shareholders of the parentcompany 1,114 1,014
Non-controllinginterests 33 50
Totalequity 1,147 1,064
The accounts were approved by the Board of Directors on 2 March 2016 and were signed on its behalf by:
Ian Griffiths
Group Finance Director
Consolidated Statement of Changes in Equity
Attributabletoequityshareholdersoftheparentcompany
Note Sharecapital£m Sharepremium£m Merger andother reserves£m Translation reserve£m Available for sale reserve£m Retainedearnings£m Total£m Non- controllinginterests£m Total equity£m
Balance at 1 January2015 403 174 228 25 7 177 1,014 50 1,064
Total comprehensive income for the year
Profit - - - - - 495 495 7 502
Other comprehensiveincome/(cost)
Revaluationofavailableforsale financialassets - - - - (1) - (1) - (1)
Exchange differences on translation offoreignoperations(netofhedging) - - - 10 - - 10 - 10
Remeasurement gains on definedbenefit pensionschemes 3.7 - - - - - 91 91 - 91
Reclassification of revaluation reserve on disposalofproperty,plantandequipment - - (4) - - 4 - - -
Income tax charge on other comprehensiveincome 2.3 - - - - - (19) (19) - (19)
Total other comprehensiveincome - - (4) 10 (1) 76 81 - 81
Total comprehensive income for the year - - (4) 10 (1) 571 576 7 583
Transactions with owners, recorded directly inequity
Contributions by and distributions to owners
Equitydividends - - - - - (459) (459) (5) (464)
Movements due toshare-based compensation 4.7 - - - - - 14 14 - 14
Tax on items taken directly toequity 2.3 - - - - - 5 5 - 5
Purchaseofownsharesviaemployees' benefittrust 4.7 - - - - - (33) (33) - (33)
Total contributions by and distributions toowners - - - - - (473) (473) (5) (478)
Total transactions withowners - - - - - (473) (473) (5) (478)
Changes in non-controllinginterests(a) 3.4 - - (3) - - - (3) (19) (22)
Balance at 31 December2015 4.6 403 174 221 35 6 275 1,114 33 1,147
(a) Movements reported in merger and other reserves include a put option for the acquisition of non-controlling interests.
Attributabletoequityshareholdersoftheparentcompany
Note Sharecapital£m Sharepremium£m Merger andother reserves£m Translation reserve£m Available for sale reserve£m Retainedearnings£m Total£m Non- controllinginterests£m Total equity£m
Balance at 1 January2014 403 174 248 7 4 22 858 31 889
Total comprehensive income for theyear
Profit - - - - - 466 466 7 473
Other comprehensiveincome/(cost)
Revaluationofavailableforsale financialassets - - - - 3 - 3 - 3
Net loss on cash flowhedges - - - (4) - - (4) - (4)
Exchange differences on translation offoreignoperations(netofhedging) - - - 22 - - 22 - 22
Remeasurement gains on definedbenefit pensionschemes 3.7 - - - - - 24 24 - 24
Income tax charge onother comprehensiveincome 2.3 - - - - - (3) (3) - (3)
Total other comprehensiveincome - - - 18 3 21 42 - 42
Total comprehensive income for theyear - - - 18 3 487 508 7 515
Transactions with owners, recorded directly inequity
Contributions by and distributions to owners
Equitydividends - - - - - (313) (313) (8) (321)
Movements due toshare-based compensation 4.7 - - - - - 14 14 - 14
Purchaseofownsharesviaemployees' benefittrust 4.7 - - - - - (33) (33) - (33)
Total contributions by and distributions toowners - - - - - (332) (332) (8) (340)
Total transactions withowners - - - - - (332) (332) (8) (340)
Changes in non-controllinginterests(a) 3.4 - - (20) - - - (20) 20 -
Balance at 31 December2014 4.6 403 174 228 25 7 177 1,014 50 1,064
(a) Movements reported in merger and other reserves include a put option for the acquisition of non-controlling interests.
Consolidated Statement of Cash Flows
Fortheyearended31December Note £m 2015£m £m 2014£m
Cash flows from operatingactivities
Cashgeneratedfromoperationsbeforeexceptionalitems: 2.1 827 702
Cashflowrelatingtooperatingexceptionalitems:
Operating exceptionalitems 2.2 (109) (10)
Prepaid employment linkedconsideration 3.4 (109) -
Increase in exceptionalpayables 60 3
Decreaseinexceptionalprepaymentsandotherreceivables 36 -
Cash outflow from exceptionalitems (122) (7)
Cash generated fromoperations 705 695
Defined benefit pension deficitfunding (90) (91)
Interestreceived 25 41
Interestpaidonbankandotherloans (34) (51)
Interest paid on financeleases - (1)
Net taxationpaid (117) (85)
(216) (187)
Net cash inflow from operatingactivities 489 508
Cash flows from investingactivities
Acquisition of subsidiary undertaking, net of cashacquired 3.4 (406) (214)
Prepaid employment linkedconsideration 3.4 109 -
Net considerationpaid (297) (214)
Proceedsfromsaleofproperty,plantandequipment 28 15
Acquisitionofproperty,plantandequipment (33) (27)
Acquisition of intangibleassets (16) (10)
Acquisition ofinvestments (14) (7)
Loansgrantedtoassociatesandjointventures (2) (3)
Proceedsfromsaleofsubsidiaries,jointventuresandavailableforsale investments 1 1
Net cash inflow/(outflow) from investingactivities (333) (245)
Cash flows from financingactivities
Bankandotherloans-amountsrepaid (447) (110)
Bankandotherloans-amountsraised 797 -
Capital element of finance leasepayments (7) (21)
Issue of sharecapital - -
Equity dividendspaid (459) (313)
Dividend paid to minorityinterest (5) (8)
Purchaseofownsharesviaemployees'benefittrust (33) (33)
Net cash outflow from financingactivities (154) (485)
Net increase / (decrease) in cash and cashequivalents 2 (222)
Cash and cash equivalents at 1January 4.1 297 518
Effectsofexchangeratechangesandfairvaluemovements (5) 1
Cash and cash equivalents at 31December 4.1 294 297
Notes to the Financial Statements
Section 1: Basis of Preparation
In this section
This section sets out the Group's accounting policies that relate to the financial statements as a whole. Where an
accounting policy is specific to one note, the policy is described in the note to which it relates. This section also shows
new EU endorsed accounting standards, amendments and interpretations, and whether they are effective in 2015 or later
years. We explain how these changes are expected to impact the financial position and performance of the Group.
The financial statements consolidate those of ITV plc ('the Company') and its subsidiaries (together referred to as the
'Group') and the Group's interests in associates and jointly controlled entities. The Company is domiciled in the United
Kingdom.
As required by European Union law (IAS Regulation EC 1606/2002) the Group's financial statements have been prepared in
accordance with International Financial Reporting Standards as adopted by the EU ('IFRS'), and approved by the Directors.
The financial statements are principally prepared on the basis of historical cost. Where other bases are applied these are
identified in the relevant accounting policy.
The parent company financial statements have been prepared in accordance with Financial Reporting Standard 101 Reduced
Disclosure Framework (FRS101).
The financial information in this preliminary announcement represents non-statutory accounts within the meaning of Section
435 of the Companies Act 2006. The auditors have reported on the statutory accounts for the year ended 31 December 2015.
Their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006. These accounts will be sent to the Registrar of Companies following the Company's Annual General
Meeting. A separate dissemination announcement in accordance with the Disclosure and Transparency Rules (DTR) 6.3 will be
made when the annual report and audited financial statements are available on the Group's website.
Going concern
At 31 December 2015 the Group was in a net debt position. The Group's strong balance sheet and continued generation of
significant free cash flows has enabled further acquisitions as well as the payment of a special dividend. The Group has
also sought to gain further efficiencies in the balance sheet and maintain the flexibility to invest in the business by
issuing a new Eurobond (see section 4 for details on capital structure and financing).
The Group continues to review forecasts of the television advertising market to determine the impact on ITV's liquidity
position. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show
that the Group will be able to operate within the level of its current funding.
The Group also continues to focus on development of the non-advertising business, and evaluates the impact of further
investment in acquisitions against the strategy and cash headroom of the business.
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in
operation for at least twelve months from the date of this report. Accordingly, the Group continues to adopt the going
concern basis in preparing its consolidated financial statements.
Subsidiaries, joint ventures, associates and available for sale investments
Subsidiaries are entities that are directly or indirectly controlled by the Group. Control exists where the Group has the
power to govern the financial and operating policies of the entity in order to obtain benefits from its activities. In
assessing control, potential voting rights that are currently exercisable or convertible are taken into account.
A joint venture is a joint arrangement in which the Group holds an interest under a contractual arrangement where the Group
and one or more other parties undertake an economic activity that is subject to joint control. The Group accounts for its
interests in joint ventures using the equity method. Under the equity method the investment in the entity is stated as one
line item at cost plus the investor's share of retained post-acquisition profits and other changes in net assets.
An associate is an entity, other than a subsidiary or joint venture, over which the Group has significant influence.
Significant influence is the power to participate in, but not control or jointly control, the financial and operating
decisions of an entity. These investments are also accounted for using the equity method.
Investments where the Group concludes it does not have significant influence are deemed 'available for sale'. These
investments are held at fair value unless the investment is a start-up business, in which case it is valued at cost and
assessed for impairment.
Current/non-current distinction
Current assets include assets held primarily for trading purposes, cash and cash equivalents, and assets expected to be
realised in, or intended for sale or use in, the course of the Group's operating cycle. All other assets are classified as
non-current assets.
Current liabilities include liabilities held primarily for trading purposes, liabilities expected to be settled in the
course of the Group's operating cycle and those liabilities due within one year from the reporting date. All other
liabilities are classified as non-current liabilities.
Classification of financial instruments
The financial assets and liabilities of the Group are classified into the following financial statement captions in the
statement of financial position in accordance with IAS 39 Financial Instruments:
· Loans and receivables - separately disclosed as cash and cash equivalents (excluding gilts over which unfunded pension
commitments have a charge) and trade and other receivables
· Available for sale financial assets - measured at fair value through other comprehensive income. Includes gilts over
which unfunded pension commitments have a charge
· Financial assets/liabilities at fair value through profit or loss - separately disclosed as derivative financial
instruments in assets/ liabilities and included in non-current other payables (contingent consideration) and
· Financial liabilities measured at amortised cost - separately disclosed as borrowings and trade and other payables
Judgement is required when determining the appropriate classification of the Group's financial instruments. Details on the
accounting policies for measurement of the above instruments are set out in the relevant note.
Recognition and derecognition of financial assets and liabilities
The Group recognises a financial asset or liability when it becomes a party to the contract. Financial instruments are no
longer recognised in the statement of financial position when the contractual cash flows expire or when the Group no longer
retains control of substantially all the risks and rewards under the instrument.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances, call deposits with a maturity of less than or equal to three months from
the date of acquisition, cash held to meet certain finance lease commitments and gilts in respect of which a charging deed
was executed on the unfunded pension commitments of four former Granada executives. The carrying value of cash and cash
equivalents is considered to approximate fair value.
Foreign currencies
The primary economic environment in which the Group operates is the UK and therefore the consolidated financial statements
are presented in pounds sterling ('£').
Where Group companies based in the UK transact in foreign currencies, these transactions are translated into pounds
sterling at the exchange rate on the transaction date. Foreign currency monetary assets and liabilities are translated into
pounds sterling at the year end exchange rate. Where there is a movement in the exchange rate between the date of the
transaction and the year end, a foreign exchange gain or loss is recognised in the income statement.
Hedge accounting is implemented on certain foreign currency firm commitments, which allows for the effective portion of any
foreign exchange gains or losses to be recognised in other comprehensive income (note 4.3).
Where a forward currency contract is used to manage foreign exchange risk and hedge accounting is not applied, any movement
in currency is taken to the income statement.
Non-monetary assets and liabilities measured at historical cost are translated into pounds sterling at the exchange rate on
the date of the transaction.
The assets and liabilities of Group companies outside of the UK are translated into pounds sterling at the year end
exchange rate. The revenue and expenses of these companies are translated into pounds sterling at the average monthly
exchange rate during the year. Where differences arise between these rates, they are recognised in the translation reserve
within other comprehensive income.
Exchange differences arising on the translation of the Group's interests in joint ventures and associates are recognised in
the translation reserve within other comprehensive income.
On disposal of a subsidiary outside the UK or an interest in a joint venture or an associate, the related translation
reserve is released to the income statement as part of the gain or loss on disposal.
Accounting judgements and estimates
The preparation of financial statements requires management to exercise judgement in applying the Group's accounting
policies. It also requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis, with revisions recognised in the period in which the
estimates are revised and in any future periods affected.
The areas involving a higher degree of judgement or complexity are set out below and in more detail in the related notes:
· Revenue recognition (note 2.1)
· Business combinations (note 3.3 and note 3.4)
· Allocation of goodwill and assets to CGUs and impairment of assets (note 3.3)
In addition to the above, the areas involving the most sensitive estimates and assumptions that are significant to the
financial statements are set out below and in more detail in the related notes:
· Defined benefit pension schemes, including the related longevity swap (note 3.7)
· Taxation (note 2.3)
New or amended EU endorsed accounting standards
The table below represents new or amended EU endorsed accounting standards relevant to the Group's results that are
effective in 2015:
AccountingStandard Requirement Impactonfinancialstatements
IAS 19 Employee Benefits The amendment was to simplify the accounting for contributionsthatareindependentofthenumberofyearsof employeeservice. The amendment has nothad any impact on theGroup.
Annual Improvements to IFRS 2010 -2012cycle Various amendments to simplify various standards including IFRS 2 Share-based payment, IFRS 3 Business Combinations, IFRS 8 Operating Segments, IFRS 13 Fair ValueMeasurement,IAS16Property,PlantandEquipment, IAS 24 Related Party Disclosures and IAS 38 Intangible Assets. The amendments do not change our accounting and therefore have no impact on the Group's financial position orperformance.
Annual Improvements to IFRS 2011 -2013cycle Various amendments to simplify various standards including IFRS1First-timeAdoptionofInternationalFinancialReporting Standards, IFRS 3 Business Combinations, IFRS 13 Fair ValueMeasurement,IAS40InvestmentProperty. The amendments do not change our accounting and therefore have no impact on the Group's financial position orperformance.
The Directors also considered the impact on the Group of other new and revised accounting standards, interpretations or
amendments that are currently endorsed but not yet effective. There are none that are effective for periods beginning on or
after 1 January 2015 that are expected to have a significant impact on the Group's results.
IFRS 9 Financial Instruments is effective 1 January 2018 but has not yet been endorsed by the EU. The Directors are
currently assessing the impact this standard would have on its financial position and performance.
IFRS 15 Revenue from Contracts with Customers is also effective 1 January 2018 and has also not been endorsed by the EU.
The Directors have performed an initial assessment and do not expect a material impact on our Broadcast business. The
assessment on our Studios business is ongoing.
IFRS 16 Leases is effective 1 January 2019 and has not been endorsed by the EU. The Directors are currently assessing the
impact this standard would have on its financial position and performance.
Section 2: Results for the Year
In this section
This section focuses on the results and performance of the Group. On the following pages you will find disclosures
explaining the Group's results for the year, segmental information, exceptional items, taxation and earnings per share.
2.1 Profit before tax
Keeping it simple
This section analyses the Group's profit before tax by reference to the activities performed by the Group and an analysis
of key operating costs.
Earnings before interest, tax, amortisation (EBITA) and before exceptional items remains the Group's key profit indicator.
This reflects the way the business is managed and how the Directors assess the performance of the Group. This section
therefore also shows each division's contribution to total revenue and EBITA.
Accounting policies
Revenue recognition
Revenue is stated exclusive of VAT and comprises the sale of products and services to third parties. Judgement is required
when determining the appropriate timing and amount of revenue that can be recognised, specifically around whether there is
a firm contract and that the service has been provided, and if so, whether there is a fixed or reasonably determinable
price that is reasonably certain will be collected.
Revenue from the sale of products is recognised when the Group has transferred both the significant risks and rewards of
ownership and control of the products sold, and the amount of revenue can be measured reliably. Revenue recognition
criteria for the Group's key classes of revenue are recognised on the following bases:
Applicablesegment Classofrevenue Recognitioncriteria
Broadcast &Online Advertising (NAR), Video onDemand (VOD) on transmission, as audience targets aremet
Broadcast &Online Sponsorship across period of transmission of thesponsored programme orseries
Broadcast &Online Pay over the term of the contract or accrued in the month for the expected revenue per subscriber or download and trued up on receipt of third-party reports showing revenue share calculation (showing subscribers or number ofdownloads)
Broadcast &Online Participation (Interactive &Brand Extensions) as the service is provided or eventoccurs
Studios Programmeproduction on delivery of episode and acceptance bythe customer
Studios Programme distributionrights whenthecontractissignedandcontentisavailable forexploitation
Studios Format andlicences at the point in time when the license is transferred andthecustomerisabletouseandbenefitfromthe licence
Studios Digital:Archive on delivery of content (one-off) or over thecontract period in a manner that reflects the flow of content delivered(top-up)
The results for the year aggregate these classes of revenue into four significant categories:
2015£m 2014£m
Broadcast &Online
NAR 1,719 1,629
Non-NAR 427 394
ITVStudios
Productions 1,045 789
Distribution 192 144
Totalrevenue 3,383 2,956
Segmental information
Operating segments, which have not been aggregated, are determined in a manner that is consistent with how the business is
managed and reported to the Board of Directors. The Board is regarded as the chief operating decision maker.
The Board considers the business primarily from an operating activity perspective. The reportable segments for the years
ended 31 December 2015 and 31 December 2014 are therefore Broadcast & Online and ITV Studios, the results of which are
outlined in the following tables:
Broadcast &Online2015£m ITVStudios*2015£m Consolidated2015£m
Total segmentrevenue 2,146 1,237 3,383
Intersegmentrevenue - (411) (411)
Revenue from externalcustomers 2,146 826 2,972
EBITA before exceptionalitems 659 183 842
Shareoflossesofjointventuresandassociatedundertakings - - -
Broadcast &Online 2014£m ITVStudios*2014£m Consolidated2014£m
Total segmentrevenue 2,023 933 2,956
Intersegmentrevenue - (366) (366)
Revenue from externalcustomers 2,023 567 2,590
EBITA before exceptionalitems 568 162 730
Shareoflossesofjointventuresandassociatedundertakings - - -
* Revenue of £389 million (2014: £255 million) was generated in the US during the year, and represented £314 million (2014:
£297 million) of non-current assets at year end.
Intersegment revenue, which is carried out on arm's length terms, is generated from the supply of ITV Studios programmes to
Broadcast & Online for transmission primarily on ITV. This revenue stream is a measure which forms part of the Group's
strategic priority of building a strong international content business, as by producing and retaining rights to the
broadcast shows the Group benefits further from subsequent international content and format sales.
In preparing the segment information, centrally managed costs have been allocated between reportable segments on a
methodology driven principally by revenue, headcount and building occupancy of each segment. This is consistent with the
basis of reporting to the Board of Directors.
Broadcast & Online
The Group operates the largest commercial family of channels in the UK and delivers content through traditional television
broadcasting. In addition to linear broadcast, the Group delivers its content on multiple platforms including the ITV Hub,
pay platforms, or through direct content deals. Content, that is commissioned and scheduled by this segment, is funded
primarily by television advertising, where revenue is generated from the sale of audiences for advertising airtime and
sponsorship.
Other sources of revenue are from: online advertising, HD digital channels on pay platforms (e.g. Sky and Virgin), SDN
revenue (which generates licence sales for DTT Multiplex A), and participation revenue (which includes interactive sales
from competitions) and ITV Choice in other countries.
ITV Studios
ITV Studios is the Group's international content business, creating and producing programmes and formats that return and
travel, namely drama, entertainment and factual entertainment.
ITV Studios UK is the largest commercial producer in the UK and produces programming for the Group's own channels,
accounting for 60% of ITV main channel spend on commissioned programming. Programming is also sold to other UK broadcasters
such as the BBC, Channel 4 and Sky.
ITV America is the largest unscripted independent producer of content in the US and is growing its scripted presence by
increasing investment in high profile dramas straight to series.
ITV Studios also operates in five other international locations being Australia, Germany, France, Netherlands (primarily
Talpa) and the Nordics, where content is produced for local broadcasters. This content is either locally created IP or
formats that have been created elsewhere by ITV, primarily in the UK.
Global Entertainment and Talpa Global, ITV's distribution businesses, license ITV's finished programmes and formats and
third-party content internationally. Within this business we also finance productions both on and off ITV to acquire global
distribution rights.
EBITA before exceptional items
The Directors assess the performance of the reportable segments based on a measure of EBITA before exceptional items. The
Directors use this measurement basis as it excludes the effect of non-recurring income and expenditure. Amortisation and
share of profit/(losses) of joint ventures and associates are also excluded to reflect more accurately how the business is
managed and measured on a day-to-day basis. Net financing costs and tax are not allocated to segments as the funding, cash
and tax management of the Group are activities carried out by the central treasury and tax functions.
A reconciliation from EBITA before exceptional items to profit before tax is provided as follows:
2015£m 2014£m
EBITA before exceptionalitems 842 730
Operating exceptionalitems (109) (12)
Amortisation of intangibleassets (67) (67)
Net financingcosts (31) (51)
Shareoflossesofjointventuresandassociatedundertakings - -
Gainonsaleofnon-currentassets(exceptionalitems) 5 4
Gainonsaleofsubsidiariesandinvestments(exceptionalitems) 1 1
Profit beforetax 641 605
The Group's principal operations are in the United Kingdom. Revenue from external customers in the United Kingdom is£2,275
million (2014: £2,123 million), and total revenue from external customers in other countries is £697 million (2014: £467
million).
There are two media buying agencies (2014: two) acting on behalf of a number of customers that represent the Group's major
customers. These agencies are the only customers which individually represent over 10% of the Group's revenue. Revenue of
approximately £576 million (2014: £571 million) and £339 million (2014: £312 million) was derived from these customers.
This revenue is attributable to the Broadcast & Online segment.
Cash generated from operations
A reconciliation from profit before tax to cash generated from operations before exceptional items is as follows:
2015£m 2014£m
Cash flows from operatingactivities
Profit beforetax 641 605
Gainonsaleofsubsidiariesandinvestments(exceptionalitems) (1) (1)
Gainonsaleofnon-currentassets(exceptionalitems) (5) (4)
Net financingcosts 31 51
Operating exceptionalitems 109 12
Depreciation of property, plant andequipment 27 27
Amortisation of intangibleassets 67 67
Share-based compensation and pension servicecosts 17 14
Decrease/(increase)inprogrammerightsandotherinventory,anddistributionrights 4 (39)
(Increase)/decrease inreceivables (21) 18
Decrease inpayables (42) (48)
Movement in workingcapital (59) (69)
Cash generated from operations before exceptionalitems 827 702
Operating costs
Staff costs
Staff costs before exceptional items can be analysed as follows:
2015£m 2014*£m
Wages andsalaries 318 277
Social security and othercosts 43 44
Share-based compensation (see note4.7) 14 14
Pensioncosts 25 21
Total staffcosts 400 356
Less: staff costs allocated toproductions (137) (118)
FTEE staff costs(non-production) 263 238
* The prior year classification of 'staff costs allocated to productions' has been revised to present a consistent and
comparable methodology to the 2015 allocation. There is no change in the total FTEE staff costs and no impact on the Income
Statement.
The number of full-time equivalent employees ('FTEE') (excluding short-term contractors and freelancers who are
predominantly allocated to the cost of productions), calculated on a weighted average basis, during the year was:
2015 2014
Broadcast &Online 2,109 2,042
ITV Studios 3,449 2,517
5,558 4,559
The increase in full-time equivalent employees in ITV Studios is primarily driven by the acquisitions completed in 2015.
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