ITV plc Final Results 2008 4th March 2009 1 Introduction Michael - - PowerPoint PPT Presentation

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ITV plc Final Results 2008

4th March 2009

2

Introduction

Michael Grade

Executive Chairman

3

Agenda

Introduction and overview Michael Grade Financial review Ian Griffiths Current trading and strategic update John Cresswell

4

Overview

2008 results Total revenue £2,029m (2007: £2,082m) Operating EBITA £211m (2007: £311m) Impacted by NAR downturn and online investment Reported numbers reflect impact of £2.7bn impairment of goodwill Adjusted EPS 2.7p (2007: 5.0p) 2008 operating and strategic highlights ITV share of viewing held for second year running ITV share of UK TV advertising held for first time in 25 years Global Content revenues (including internal) increased by 10% Online users and video views growing steadily 2009 update TV market and economic outlook remains weak

5

ITV’s priorities

Core business, cost savings and cash

Focusing on our core business as a producer broadcaster Further non-core disposals and business closures Additional and accelerated cost savings Total savings of £155m in 2009, rising to £245m in 2011 Cash and liquidity Additional covenant-free financing secured Board recommending suspension of final dividend

Note: cost savings include previously announced savings of £35m over 2009/10 and regional savings of £40m in 2009

6

Accelerated regulatory progress

CRR OFT consultation on possible changes now closed Review on schedule to conclude ahead of 2010 trading season PSB Confirmation of changes on regional and PSB for 2009/10 Ofcom recommend new model for regional news from 2011 Digital Britain Final report due in June Inviting radical proposals for PSB

7

Financial review

Ian Griffiths

Group Finance Director

8

2,082 2,029 20 21 97 33 35 23 1900 1950 2000 2050 2100

2007 ITV1 NAR Channels NAR PRS International production UK production CSA / Other 2008

Group revenue

£m

9

211 311 64 9 19 8 38 100 120 140 160 180 200 220 240 260 280 300 320 2007 NAR NPB PRS Online CSA / Other 2008

Group profit

£m

10

Broadcasting

Revenue and EBITA

(3) 6 1,087 407 1,125 382 Schedule costs Other Broadcasting costs (4) 1,489 1,425 ITV plc NAR (43) 244 140 EBITA pre exceptionals (5) 1,738 1,647 Total (8) 36 33 SDN (17) 157 131 Media sales, PRS and other income

• 4

56 56 56 58

• GMTV

Sponsorship 16 209 242

• ITV2, 3, 4, News, CITV, M&M

(8) 1,224 1,127

• ITV1

Change % 2007 2008 12 months to 31st December - £m

11

Global Content

Revenue and EBITA

10 564 622 Total Revenue (inc ITV supply)

• 90

90 EBITA pre exceptionals (1) 320 316 Supply to ITV 25 244 306 Total External Revenue 8 114 123 Distribution and exploitation 56 63 98 International production International (11) 19 17 Resources 42 48 68 UK Production Change % 2007 2008 12 months to 31st December - £m

12

Online

Revenue and EBITA

* Includes itv.com, itvlocal, ITV Mobile and Other Revenues

9 33 36 Total (67) (12) (20) EBITA pre exceptionals (18) 22 18 Friends Reunited 64 11 18 itv.com and other* Change % 2007 2008 12 months to 31st December - £m

13

Profit and loss

138 (2,554) (Loss)/profit after tax (50) 178 Tax 188 (2,732) (Loss)/profit before tax (33) (60) Interest 221 (2,672) (Loss)/profit before interest and tax 3 (14) Associates, JVs and Investment income (9) (108) Exceptional Items (total) (28) (2,695) Goodwill reduction and impairment (56) (66) Normal Amortisation 311 211 Operating EBITA pre exceptionals 2,082 2,029 Revenue 2007 2008 12 months to 31st December - £m

14

Adjusted Profit and Loss

*Before exceptional items, amortisation, impairments of intangible assets ** Before exceptional items, amortisation, impairments of intangible assets, amortised cost adjustment and in addition for EPS, before tax adjustments

(33) (30) Interest (before amortised cost adjustment) 3 (14) Associates, JVs and Investment income 311 211 Operating EBITA pre exceptionals* 5.0 2.7 EPS (p)** 194 106 Profit for the period (1) (2) Minority interests 195 108 Profit after tax (86) (59) Tax 281 167 Profit before tax** 2007 2008 12 months to 31st December - £m

15

Exceptional items

12 months to 31st Dec - £m 2008 2007

Reorganisation and integration costs (40) (8) PRS (6) (18) Onerous contract provision (50) (9) Kangaroo (1)

• Total operating exceptional items

(97) (35) (Loss)/gain on the sale and impairment of properties (17) 9 Gain on the sale, net of impairment, of subsidiaries and investments 17 43 Impairment of available for sale financial assets (7) (26) Kangaroo (4)

• Total non-operating exceptional items

(11) 26 Total exceptional items (108) (9)

16

Interest charge

(29) (3)

• less non cash movements (net)
• (30)

Non cash amortised cost adjustment (62) (63) Cash interest paid (33) (60) P&L charge 18 16 Non cash IAS19 imputed pension interest (7) 24 Swap fair value movements 31 28 Interest on cash and other (75) (98)

• (16)

One-off financial instrument closure costs (75) (82) Interest on bonds 2007 2008 12 months to 31st December

17

Tax

P&L tax credit and cash tax

43 Net cash received 62 Cash tax refunds for prior years (14) Payments made relating to prior years (5) Cash paid on account for 2008 (50) 178 P&L tax (credit)/charge 25 198 Prior year adjustments (20) (15) Deferred tax (55) (5) Current year tax expense 2007 2008 12 months to 31st December - £m

18

178 112 17 88 39 100 200 31.12.07 £39m deficit funding Asset/liability and

• ther movements

Impact of change in mortality assumption 31.12.08

Pension deficit

16 162 (146) 2008 (15) Imputed interest

• n P&L charge

129 Expected return

• n assets

(144) Interest cost 2009f £m £m

IAS 19 deficit

2,491 2,161 Fair value of scheme assets 1,087 1,330 Bonds 120 127 Other (178) (2,339) 704 2008 (112) Deficit (2,603) Value of scheme liabilities 1,284 Equities and property 2007 £m

19

Movement in net debt

15 10 Share based compensation 66 (62) Movement in net debt 262 138 Cash generated from operations (post-capex) 99 (23) Cash generated from business activities (33) (39) Defined benefit pension deficit funding 668 730 Net debt (26) 2 Other movements (122) (123) Equity dividends 60 20 Sale/purchase of businesses, investments and assets (44) (20) Taxation and interest (31) (40) Exceptional items (55) (52) Capital expenditure less sale of fixed assets (44) (67) Working capital 346 247 EBITDA 2007 2008 12 months to 31st Dec - £m

20

2009 funding update

Funding

• £125m facility to 2013 drawn down
• £50m new 10-year financing secured February 2009, with potential to

increase to £200m

• Financial covenants apply only to undrawn £450m facility running to 2011

Outflows in 2009

• Pension deficit funding of £30m in line with 5-year funding plan
• 2008 interim dividend of £26m
• Friends Reunited contingent consideration of £50m paid in January 2009
• £250m bond repaid in March 2009
• Next bond repayment £335m in October 2011

21

Current trading and strategic update

John Cresswell

Chief Operating Officer

22

Current trading

2009

(30) (25) (20) (15) (10) (5) 5 January February March Q1 ITV Family NAR UK TV NAR

NAR, % change year on year

Total TV including intra-group monies, ITV Family excluding.

23

Reshaping the business

Focus on core, cost savings and cash

Radical reassessment of ITV’s structure, activities and efficiency Enables ITV to manage extended economic downturn New plan will make ITV leaner, fitter and simpler Prioritising the core business, delivering cost savings and managing cash

24

Cost savings

Summary of total savings, 2009-11

175 65 40 70 2010 70 50 Efficiency savings >40 40 Regional news 155 65 2009 >245 135 2011 Savings vs 2008 Network schedule £m

Notes Network schedule savings vs 2008 P&L schedule costs and based on current ITV planning New targets include all previously announced efficiency and regional savings No benefits included from proposals for further regional changes from 2011

35 27 Efficiency savings 40 40 Regional news 67

• 2009

75

• 2010

Savings vs 2008 Network schedule £m

Previously announced targets New targets

25

Efficiency savings

£50m savings in 2009, rising to £70m in 2010 Additional headcount reduction of c600 posts Total costs of change £40m Tight management of capex and working capital 70 50 Cumulative Total 23 16 Central Services 4 4 Online 18 11 Global Content 25 19 Broadcast 2010 2009 Cumulative savings

Note: new target includes previously announced £35m saving for 2009/10; costs of change in addition to 2008 costs

26

Programme investment

3-year plan to increase schedule efficiency

175 105 105 P&L savings vs 2008 750 815 805 867 Total ITV1 network 34 34 34 34 GMTV 71 71 71 112 Regional 950 1,020 1,020 1,125 Total schedule costs 110 2009 100 2010 95 112 ITV digital channels 2011 2008 £m

• World Cup costs back out and low committed spend
• P&L aligns with lower cash spend

2011

• £65m network and £40m regional savings
• Focus on entertainment and existing stock

2009

• Impact of World Cup costs to be contained
• Cash spend running £100m below P&L NPB

2010

27

Broadcasting

Greater spend efficiency Focus investment on peak-time Further savings post-World Cup from 2011 Tight management of cash spend Considering options for SDN CRR reform on track for autumn 2009 deal round Continue to outperform UK TV ad market Drive continuing impact growth across channels

28

(8) (7) (6) (5) (4) (3) (2) (1) 1

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: BARB Infosys / Ratings Analyser, Individuals, All time

%

Broadcasting

ITV holding share of viewing…

ITV Family – Year on year % change in share of viewing

29

(8) (7) (6) (5) (4) (3) (2) (1) 1

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: BARB Infosys, Individuals All time, Jan to Dec 2008 vs Jan to Dec 2007

Broadcasting

… and holding share of TV advertising

± ± ± ±% YOY

ITV Family share of broadcast

30

2 4 6 8 10 12 Q 1 2 4 Q 2 2 4 Q 3 2 4 Q 4 2 4 Q 1 2 5 Q 2 2 5 Q 3 2 5 Q 4 2 5 Q 1 2 6 Q 2 2 6 Q 3 2 6 Q 4 2 6 Q 1 2 7 Q 2 2 7 Q 3 2 7 Q 4 2 7 Q 1 2 8 Q 2 2 8 Q 3 2 8 DTT homes Analogue terrestrial homes

• Operating margin over 60% on £33m revenues
• New channel agreement takes effect from 2009
• 10th video stream from 2009
• Licence renews to 2022 from 2010

SDN channels

millions

Broadcasting

SDN leveraging increased digital penetration

31

Online

Friends Reunited to be sold when time is right ITV Local to close as a stand alone business Scaling back mobile and gaming Integration of itv.com with Channels Drive growth of online video via itv.com and VOD Increase monetisation of unique users and video views

32

200 400 600 800 1000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Video advertising Whitespace / sponsorship

itv.com

Online video viewing comes of age

2 4 6 8 10 Unique Users (Highest Month) Unique Users (Monthly Average) 2007 2008 20 40 60 80 100 Video Views 2007 2008

itv.com revenues

£k millions

Unique users

millions

Video views

33

Global Content

Building portfolio of “seed-corn” production investments / partnerships Reducing overheads and site costs to protect margins Grow international production businesses Maximise share of high value ITV commissions Focusing development on globally exploitable factual entertainment / gameshows

34

Global Content

Building partnerships and investments Acquisitions Indy stakes Partnerships

35

Summary

Core, costs and cash

Reducing costs £155m cost reduction in 2009, rising to £245m in 2011 Cash and liquidity Reduced capex and non-core investment Additional disposals New financing secured Maintaining strength of the core business Broadcasting performance improving Online tighter focus on core itv.com Global Content building revenues

36

Michael Grade

Executive Chairman

37

ITV in 2009

The forces shaping the business PERFORMANCE ITV performance improving DIGITAL SWITCHOVER Pressure from digital transition easing REGULATION Regulatory burden lightening ECONOMY Economic context hugely uncertain

38

ITV plc Final Results 2008

4th March 2009

39

Appendices

40 Source: Datawarehouse, ITV1 (inc NCLs), ITV2, ITV3, ITV4, CITV, Men and Motors. Includes Intra Group Monies. YTD = Jan-Mar 09

YTD 09 index vs YTD 08 Index vs 2007 2008 revenue £m Category 82 90 61 111 103 83 85 73 90 84 86 93 77 97 123 Cosmetics & Toiletries 99 138 Food 111 143 Entertainment and Leisure 89 70 Telecommunications 120 54 Government 95 1,498 Total ITV sales 90 41 Airlines, Travel and Holidays 91 52 Publishing and Broadcasting 90 55 Pharmaceuticals 94 77 Household Stores 82 90 Cars and Car Dealers 82 111 Finance 103 292 Retail

Current trading

Category movements

Top 12 advertising categories

41

Broadcasting performance

ITV leads the commercial TV market

0.0 5.0 10.0 15.0 20.0 25.0 30.0 ITV1 C4 Total Five ITV Digital channels C4 Digital channels Five Digital channels

Source: BARB/DDS, 2008, C4 Total = C4 & C4+1

Adult SOCI

SOCI (%)

42 Source: BARB/DDS

Broadcasting

ITV delivering more impacts

50 100 150 200 250 300 350 2004 2005 2006 2007 2008 ITV1 GMTV ITV digital channels

• 1%

+1%

• 4%

+3% +4%

Volume of adult commercial impacts

43

Broadcasting

ITV1 delivering mass audiences

1 25 200 400 600 800 1000 1200 1400 1600 1800 3m+ 4m+ 5m+ 6m+ 7m+ 8m+ 9m+ 10m+ 11m+ ITV1 C4 Total Five

Source: BARB/Infosys, Individuals, All time, 2008, programmes of 10 mins+ duration, C4 Total = C4/C4+1

Mass audience programmes by channel

Number of shows

44

200 400 600 800 1000 1200 1400 1600 1800 3m+ 4m+ 5m+ 6m+ 7m+ 8m+ 9m+ 10m+ 11m+

Global Content performance

Prime deliverer of ITV ratings

Number of shows Number of viewers (millions)

Source: BARB/Infosys, Individuals, All time, 2008, programmes of 10 mins+ duration

Mass audience shows on ITV1 by source

ITV Studios Network news programming Other ITV1 programmes

45

Segmental performance

109 (11) 1 EBITA (40) 67 40 Revenue Other (67) (12) (20) EBITA 9 33 36 Revenue Online

• 90

90 EBITA (1) 320 316 Internal Revenue 25 244 306 External Revenue Global Content (43) 244 140 EBITA (5) 1,738 1,647 Revenue Broadcasting Change % 2007 Published 2008 Published 12 months to 31st December £m

46

Broadcasting

Schedule costs

Note: Numbers include minority share of schedule costs – 2008:£56m (2007:£56m)

4 837 867 Total ITV1 3 1,087 1,125 Total Schedule Costs (3) 35 34 GMTV 11 101 112 ITV2, 3, 4, CITV, M&M 3 951 979 Total ITV1 inc regional (2) 114 112 Regional news & non news 8 37 40 ITN news & weather 52 48 73 Acquired 4 140 146 Sport (1) 612 608 Commissions Change % 2007 2008 12 months to 31st December - £m

47

ITV Broadcasting

Licence fees

32 44 30 Total 2 (140) (143) Digital licence rebate 6 180 169 PQR levy

• 4

4 Cash bid payment Change % 2007 2008 12 months to 31st December - £m

48

Interest charge

• 30

Non cash amortised cost adjustment

• (30)

Non cash amortised cost adjustment

• (19)

£125m facility

• (5)

£110m at LIBOR+2.7% Mar 13 (62) (63) Cash interest (11) (17) Swap and bond fair value and timing differences (18) (16) Imputed interest on net pension deficit (33) (60) P&L charge 31 28 Interest on cash and other 18 16 Imputed interest on net pension deficit (7) 24 Swap/Bond fair value movements (75) (98) (5) (4) Other bonds, loan notes and finance leases (15) (14) £250m Eurobond at 6.125% Jan 17 (17) (18) £325m at 5.375% Oct 15 (17) (24) €500m Eurobond at 4.75% / 6%* Oct 11 (14) (14) £250m at 5.625% Mar 09 (7)

• £200m at 7.625% Jun 07

2007 2008 12 months to 31st December

* Coupon step up in 2008

49

JVs, Associates & Investment income

* 2008: relates to loan repaid previously written off

(1) (3) Kangaroo (2) (4) Freesat 3 3 Liverpool.com*/Arsenal.com 3 (14) Total 1 1 Investment Income 2 (15) Total (4) (3) Interest and Tax 1 (1) ITN Associates 5 (7) Screenvision JV’s 2007 2008 12 months to 31st December - £m

50

Underlying rate of tax

31% 32% Underlying rate of tax 86 59 Underlying tax charge 11 186 Credit in respect of prior period items 19

• 19

9 Credit in respect of amortisation Credit in respect of amortised cost adjustment 6 23 Net credit for exceptional items 50 (178) Tax (credit)/charge as reported 279 182 Adjusted profit before tax (2) 15 Share of profits of joint ventures and associates 84

• 2,761

30 Amortisation Amortised cost adjustment 9 108 Exceptional items (net) 188 (2,732) (Loss)/profit before tax as reported 2007 2008

51

Analysis of net debt

• (30)

Amortised cost adjustment 668 730 Statutory net debt (498) (616) Cash & cash equivalents (100)

• UBS Note

85 79 Finance leases# 27 2 Other loans & loan notes 248 266 £250m Eurobond Jan 17 322 323 £325m Eurobond Oct 15 335

• 346

110 €500m Eurobond^ Oct 11 £110m Eurobond Mar 13 249 250 £250m Eurobond Mar 09 Dec 2007 Dec 2008

^ Net of £147m cross-currency swap asset (Dec 07: £30m)

# Finance leases predominantly associated with sale and leasebacks of programmes and matched by equal cash deposits

52

Disposals

• £5.0m
• 4. Property

5th March 2008 £15.5m

• 1. Liverpool FC.tv Limited

£35.0m Total 10th July 2008 £0.5m

• 3. CSA assets

7th April 2008 £14.0m

• 2. Arsenal Broadband Limited

Date Cash Disposal (£m)

53

Movement from reported to adjusted

21 (9) 30 Amortised cost adjustment 3,877 3,877 Weighted Average 2.7p

• 65.9p

EPS 106 (2,556) Earnings (2) (2) Minority interests 108 (186) 2,742 (6) 17 74 (2,554) Profit after tax (59) (186) (19) (23) 178 Tax 167 (2,732) Profit before tax (30) (60) Interest 197

• 2,761

(6) 17 97 (2,672) PBIT

• (6)

6 Gain on sale of sub’s & inv’s

• 17

(17) Gain on sale of property 1 1 Investment Income (15) (15) JV’s & Associates

• 2,761

(2,761) Amortisation and impairment 211 97 114 Operating EBITA 2,029 2,029 Revenues Adjusted Other tax adjustments Amortisation Gain on sale of subsidiaries & investments Gain on sale of property Operating Exceptional items Per Annual Report 2008

54 3,874 3,874 Weighted Average 5.0p 3.5p EPS 194 137 Earnings (1) (1) Minority interests 195 (11) 65 (17) (8) 28 138 Profit after tax (86) (11) (19) 1 (7) (50) Tax 281 188 Profit before tax (33) (33) Interest 314 84 (17) (9) 35 221 PBIT (17) 17 Gain on sale of sub’s & inv’s (9) 9 Gain on sale of property 1 1 Investment Income 2 2 JV’s & Associates 84 (84) Amortisation and impairment 311 35 276 Operating EBITA 2,082 2,082 Revenues Adjusted Other tax adjustments Amortisation Gain on sale of subsidiaries & investments Gain on sale

• f property

Operating Exceptional items Per Annual Report 2007

Movement from reported to adjusted