ITV plc Full Year results 2023

ITV PLC

07 March 2024

ITV Plc Full Year results for the twelve months ending 31 December 2023

Strong strategic execution driving robust financial and operating performance, despite challenging macroeconomic environment

● Significant progress against ITV's three strategic pillars

● ITV Studios delivered record revenues and profits

● ITVX delivered strong growth in digital viewing and revenues

● 2026 KPI targets on track

Carolyn McCall, ITV Chief Executive, said:

"In 2023 we saw the benefit of the actions we have taken to reposition ITV towards higher sustainable growth. Our Studios business recorded the highest ever revenues and profits and in its first year ITVX delivered strong growth in viewing and digital revenue with investment on plan. This growth in production and streaming substantially offset the challenging linear TV advertising market conditions.

"We remain confident in delivering our KPI targets, and are making good progress towards these - most notably ITV Studios organic revenue growth of 5% on average per annum between 2021 and 2026 at a margin of 13 to 15% and to deliver at least £750 million of digital revenues by 2026.

"We remain firmly committed to creating shareholder value and applying a disciplined approach to capital allocation. As announced on 1 March 2024, we will return the entire net proceeds of the sale of BritBox International through a share buyback of £235 million and the Board has proposed a final dividend of 3.3p giving an ordinary dividend of 5.0p per share or c.£200 million, for the full year.

"Our existing cost saving programme targeting £150 million between 2019 and 2026, has delivered £130 million of annualised savings to date. We are on track to deliver the full £150 million by 2025 - one year early. In addition, we are now in the early stages of a new strategic restructuring and efficiency programme across the Group to reshape the cost base, enhance profitability, and support the growth drivers of Studios and Streaming. By the end of 2024 we expect the programme to have delivered incremental annualised gross savings of at least £50 million per year, giving a £30 million in year gross benefit in 2024. The ongoing programme is designed to deliver further material incremental savings over a number of years.

"2023 was the year of peak investment for Streaming, which together with the successful execution of our strategy and the efficiencies delivered to date have made ITV more robust. ITV has a leading, scaled, global Studios business, a high growth Streaming service and a cash generative linear advertising business. This ensures that we are well placed to grow profits from here as we continue to drive material efficiencies, invest behind our strategic priorities and deliver returns to shareholders."

Robust financial performance, with good growth in ITV Studios and M&E digital revenues

● Total revenue was down 2% and total external revenue was down 3% at £3,624 million, with record revenues in ITV Studios, up 4%, and 19% growth in digital revenues substantially offsetting a 15% decline in linear advertising due to a challenging advertising market

● Group adjusted EBITA^{^[1]} was down 32% at £489 million which reflects the decline in linear advertising revenue and the previously guided investment in ITVX. Adjusted EPS¹ was down 41% at 7.8p

● EBITA^{^[2]} was £404 million (31 December 2022: £668 million). Statutory profit before tax was £193 million (31 December 2022: £501 million) and statutory EPS was 5.2p (31 December 2022: 10.7p)

● Strong cash generation with 102% profit to cash conversion^{^[3]} and robust balance sheet, with net debt of £553 million (31 December 2022: £623 million) and net debt to adjusted EBITDA leverage of 1.0x (31 December 2022: 0.8x)

● In line with ITV's dividend policy, the Board has declared a final dividend of 3.3p (2022: 3.3p), giving an ordinary dividend of 5.0p per share for the full year 2023 (2022: 5.0p)

● On 1 March 2024 we announced that ITV had sold its 50% holding of BritBox International to the BBC for a total consideration of £255 million. The Board intends to return the entire net proceeds to shareholders through a £235 million share buyback, which is expected to commence today.

Strong operating performance

ITV Studios - delivered record revenues and profits

● Total revenue grew 4%, with growth remaining ahead of the market. Adjusted EBITA¹ grew 10% with an industry-leading adjusted EBITA margin of 13.2%, restored to within our target range. Total organic revenue grew 3%, again ahead of the market

● ITV Studios delivered a good performance against its KPIs in 2023 with outstanding creative deliveries including;

○ Mr Bates vs The Post Office (ITV's biggest new drama in over a decade)

○ Fool Me Once (one of Netflix's all time top 10 English language dramas)

○ Squid Game: The Challenge (one of Netflix's most-watched unscripted originals in 2023)

○ Love Island (format sold to 27 countries) and

○ My Mum, Your Dad (new format already sold to 10 countries)

● Since 2018, ITV Studios total revenue (excluding acquisitions) has grown by c.5% CAGR, faster than the market CAGR of c.4% CAGR^{^[4]}

Media & Entertainment (M&E) - ITVX driving significant growth in digital viewing and revenues

● Media & Entertainment (M&E) revenue was down 7% at £2,090 million, with total advertising revenue (TAR) down 8% as guided and outperforming the TV ad market

● ITVX's strong performance has continued. Monthly active users were up 19%, and total streaming hours increased by 26%, which drove 19% growth in digital revenues^{^[5]} to £490 million

● Planet V is seeing growing demand for data-driven, targeted advertising benefitting from the increased scale of online inventory on ITVX driving digital advertising revenue up 21%

● We have maintained our unique position in linear television through the quality and breadth of our schedule as we continue to deliver mass simultaneous reach and innovative commercial and creative partnerships

● M&E adjusted EBITA^{^[6]} was £205 million, reflecting the decline in linear television advertising and the planned investment in ITVX (2022: £464 million)

Restructuring and efficiency programme

Our existing cost saving programme targeting £150 million between 2019 and 2026, has delivered £130 million of annualised savings to date. We are on track to deliver the full £150 million by 2025 - one year early.

In addition, we are now in the early stages of a new strategic restructuring and efficiency programme across the Group to reshape the cost base, enhance profitability, and support the growth drivers of Studios and Streaming. We are building on the foundations we have established in digital and data and the significant progress we have made in transforming ITV from a linear broadcaster to a multi-platform broadcaster and streamer.

Savings will come mainly from technology and operational efficiencies, organisational redesign across Group functions, M&E and Studios and permanent reductions in discretionary spend across the Group.

By the end of 2024 we expect the programme to have delivered incremental annualised savings of at least £50 million gross per year, giving a £30 million in year gross benefit in 2024. There will be c.£50 million of one-off costs to deliver these savings. The ongoing programme is designed to deliver further incremental material savings over a number of years which will further build ITV's resilience. We will provide further information as the programme progresses.

Outlook

We have made great progress towards our 2026 KPIs. 2023 was the year of peak investment for Streaming, which together with the successful execution of our strategy and the efficiencies delivered to date, have made ITV more robust. ITV has a leading, scaled, global Studios business, a high growth Streaming service and a cash generative linear advertising business. This ensures that we are well placed to grow profits from here as we continue to drive material efficiencies, invest behind our strategic priorities and deliver returns to shareholders.

ITV Studios:

● ITV Studios is on track to deliver total organic revenue growth of 5% on average per annum from 2021 to 2026 - ahead of the market, and at a margin of 13 to 15%

● Going forward we expect to see growth in key segments in which we operate - content licensing, demand from streaming platforms for unscripted content and cost effective premium scripted content which we are well positioned to take advantage of

● We are confident that we will continue to grow our market share to 2026 driven by our scale; our diversification by customer, geography and genre; a strong track record of high-quality content; a very strong slate for 2024 and beyond; and our leading creative talent

● As previously guided, 2024 will be impacted by the 2023 US writers and actors strikes, which will delay around £80 million of revenue from 2024 to 2025 as well as weaker demand from free-to-air broadcasters in Europe who are holding back spend until they see more certainty in the advertising market

Media & Entertainment:

● We remain on track to deliver at least £750 million of digital revenues by 2026

● We have had a good start to 2024 and will build on ITVX's successful launch year through continuous improvements in content, product, distribution and marketing

● ITVX's strong performance in 2023 has shown us that we can grow viewing significantly with slightly lower overall content spend. Therefore we expect to marginally reduce our content cost in 2024 to around £1,275 million as we further optimise linear, evolve our windowing strategy and improve personalisation. At the same time we will increase our marketing spend by £15 million to drive both streaming and linear viewing

● Non-TAR M&E revenues will come down year on year in 2024. This will reflect lower partnership revenues following our decision to revise our partnership agreements to improve the viewer proposition and our monetisation. In addition subscription revenue will be broadly flat as we simplify our paid streaming proposition and migrate subscribers from BritBox UK onto ITVX Premium

● Compared to the same period in 2023, TAR is expected to be up 3% in Q1, with continued strong growth in digital advertising revenues.

Virtual Results presentation webcast and Q&A:

ITV's virtual results presentation and Q&A session will be held for investors and analysts at 9.00am today via the following link: https://www.investis-live.com/itv/65ae9816bacfa60c00b892a8/wopwp. You are now able to pre-register to join.

If you would like to ask a question, you will be able to do so via the following Conference Call details:

o United Kingdom (Toll-free): +44 800 358 1035

o United Kingdom (Local): +44 20 3936 2999

o All other locations please refer to: https://www.netroadshow.com/events/global-numbers?confId=60300

o Participant access code: 631126 - Participants will be greeted by an operator who will register their details.

Notes to editors

1. Unless otherwise stated, all financial figures refer to the twelve months ended 31 December 2023, with the change compared to the same period in 2022.

2. Group financial performance

We measure performance through a range of metrics, particularly through our alternative performance measures and KPIs, as well as statutory results, all of which are set out and defined in this report. Please refer to the APMs for a reconciliation between adjusted and statutory results.

Twelve months to 31 December	2023 £m	2022 £m	Change £m	Change %
ITV Studios total revenue	2,170	2,096	74	4
Total advertising revenue	1,778	1,931	(153)	(8)
M&E non-advertising revenue	312	318	(6)	(2)
M&E total revenue	2,090	2,249	(159)	(7)
Total group revenue	4,260	4,345	(85)	(2)
Internal supply	(636)	(617)	(19)	3
Group external revenue	3,624	3,728	(104)	(3)
Total non-advertising revenue	2,482	2,414	68	3
ITV Studios adjusted EBITA	286	259	27	10
M&E adjusted EBITA	205	464	(259)	(56)
Adjusted EBITA	491	723	(232)	(32)
Unrealised profit in stock adjustment	(2)	(6)	4	(67)
Group adjusted EBITA	489	717	(228)	(32)
Group adjusted EBITA margin	13%	19%	-	(6% points)
Statutory operating profit	238	519	(281)	(54)
Profit before tax (adjusted)	396	672	(276)	(41)

Adjusted EPS	7.8p	13.2p	(5.4p)	(41)
Statutory EPS	5.2p	10.7p	(5.5p)	(51)
Net debt as at 31 December	(553)	(623)	70	11
Reported net debt to adjusted EBITDA leverage	1.0x	0.8x
Profit to cash conversion	102%	75%

3. Total advertising revenue (TAR), which includes ITV Family NAR, digital advertising and sponsorship, is expected to be up around 3% in Q1 with continued strong growth in digital advertising revenues. Figures for ITV plc are based on ITV estimates and current forecasts.

4. Key performance indicators

Twelve months to 31 December	2023	2022	Change %
Group adjusted EPS	7.8p	13.2p	(41%)
Cost savings	£24m	£23m	4%
Profit to cash conversion	102%	75%	27% pts
ITV Studios total organic revenue growth	3%	14%	(11%)
ITV Studios adjusted EBITA margin %	13.2%	12.4%	0.8% pts
Total high-end scripted hours	316hrs	276hrs	14%
Number of formats sold in 3 or more countries	19	19	-
% of ITV Studios total revenue from streaming platforms	32%	22%	10% pts
Total digital revenue	£490m	£411m	19%
Total streaming hours	1,505m	1,192m	26%
Monthly active users	12.5m	10.5m	19%
Share of top 1,000 commercial broadcast TV programmes	91%	93%	(2% pts)
Share of commercial viewing (SOCV)	32.6%	33.8%	(1.2% pts)
UK subscribers as at 31 December	1.3m	1.4m	(7%)

● Total digital revenue includes digital advertising revenue and subscription revenue as well as linear addressable revenue, digital sponsorship and partnership revenue, ITV Win and any other revenues from digital business ventures.

● UK subscribers captures total UK subscriptions to ITV streaming platforms and services (including free trials).

● Total streaming hours measures the total number of hours viewers spent watching ITV across all streaming platforms. This figure includes both ad-funded and subscription streaming. For the 2022 full-year, total streaming hours were reported as 1,139 million hours, which included some estimates of total streaming viewing from third-party data providers. This has since been updated to reflect more recently available and accurate data.

● Monthly active users captures the average number of registered users throughout the period who accessed our owned and operated on demand platforms each month.

● The share of top 1,000 commercial broadcast TV programmes KPI includes TV viewing from transmission and seven days post-transmission on catch up, as well as six weeks prior to the transmission window. It excludes programmes with a duration of <ten minutes. This metric is calculated as a 12-month rolling average to normalise seasonal scheduling

● ITV Family share of commercial viewing is the total viewing of audiences over the period achieved by ITV's family of channels as a proportion of all commercial broadcast TV viewing in the UK, from transmission and seven days post transmission on catch up. ITV Family includes ITV1, ITV2, ITV3, ITV4, ITVBe, CITV, ITV Breakfast, CITV Breakfast and associated "HD" and "+1" channels

● % change for performance indicators is calculated on rounded numbers

5. Digital revenue breakdown

	2023 £m	2022 £m	Change %
Digital advertising revenue	415	343	21
Subscription revenue	59	54	9
Other digital revenue	16	14	14
Total digital revenue	490	411	19

6. 2024 full-year planning assumptions - based on our current best view but may change over the year.

Profit and Loss impact:

● Total content costs are expected to be around £1,275 million as we further optimise linear, evolve our windowing strategy and improve personalisation. We will invest an additional £15 million in marketing

● Delivery off £40 million of savings - made up of £10 million from our existing £150 million cost saving target and £30 million of additional in year savings as part of the new strategic restructuring and efficiency programme

● Adjusted financing costs are expected to be around £35 million

● The adjusted effective tax rate is expected to be 25% over the medium term in line with the UK statutory tax rate of 25%

● Exceptional items are expected to be around £90 million mainly due to costs associated with the new strategic restructuring and efficiency programme and digital transformation costs

Cash impact:

● Total capex is expected to be around £75 million as we further invest in our digital capabilities

● The cash cost of exceptionals is expected to be around £90 million mainly due to costs associated with the restructuring and efficiency programme and digital transformation cost

● Profit to cash conversion is expected to be around 80% out to 2026. In 2024 profit to cash conversion will be lower reflecting an increase in working capital. Across 2023 and 2024 we expect cash conversion to be around 80%

● Total pension deficit funding contributions for 2024 are expected to come down year on year. More detailed guidance will be given following the completion of the triennial valuation

● The Board has proposed a final dividend of 3.3p, which will be paid in May 2024. This gives a full year dividend of 5.0p. Going forward, the Board intends to pay a full year ordinary dividend of at least 5.0p, which it expects to grow over the medium term

7. This announcement contains certain statements that are or may be forward looking statements. Words such as "targets", "expects", "aim", "anticipate", "intend", or the negative of these terms and other similar expressions of future performance or results, and their negatives, are intended to identify such forward-looking statements. These forward-looking statements are based upon current expectations and assumptions regarding anticipated developments and other factors affecting ITV. Although ITV believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. By their nature forward looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. They are not historical facts, nor are they guarantees of future performance; actual results may differ materially from those expressed or implied by these forward-looking statements. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward looking statements. These factors include, but are not limited to (i) the general economic, business, political, regulatory and social conditions in the key markets in which the Group operates, (ii) a significant event impacting ITV's liquidity or ability to operate and deliver effectively in any area of our business, (iii) a major change in the UK advertising market or consumer demand, (iv) significant change in regulation or legislation, (v) a significant change in demand for global content, and iv) a material change in the Group strategy to respond to these and other factors. Certain of these factors are discussed in more detail elsewhere in this announcement and in ITV's 2023 Annual Report and Accounts including, without limitation, in ITV's approach to risk management.

Forward-looking statements speak only as of the date they are made and, except as required by applicable law or regulation, ITV undertakes no obligation to update any forward-looking statements, whether written or oral that may be made from time to time, whether as a result of new information, future events or otherwise. Nothing in this statement should be construed as a profit forecast.

8. The financial information set out above does not constitute the Company's statutory accounts for the period ended 31 December 2023. Statutory accounts for 2022 have been delivered to the registrar of companies, and those for 2023 will be delivered in due course. PwC has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor 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.

For further enquiries please contact:

Investor Relations

Pippa Foulds +44 7778 031097

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Media Relations

Paul Moore +44 7860 794444

Laura Wootton +44 7917 862293

Chief Executive's Statement

"EXECUTING OUR MORE THAN TV STRATEGY"

The successful execution of ITV's strategy of investing in and growing both production in ITV Studios, and ITVX in Media and Entertainment (M&E), is evident through the robust financial and operating performance in 2023, despite a challenging macroeconomic environment.

ITV Studios delivered record revenues and profits as the business continued to demonstrate its strong market position, with outstanding creative deliveries globally. In Media and Entertainment, ITVX drove significant growth in digital viewing and advertising revenues, with the investment on plan. It was the year's biggest and most successful streaming launch in the UK, firmly establishing its place in the market, and winning the award for Best On-Demand Service at the Edinburgh TV Festival.

Financial highlights

2023 was the second-highest revenue outturn in ITV's history. Total ITV group revenue was down 2% and total external revenue declined by just 3% in 2023 despite the severe decline in linear advertising. ITV's growth drivers continued to perform well, with 4% growth in ITV Studios and 19% growth in digital revenues helping to substantially offset a 15% decline in linear advertising due to the challenging advertising market. In total, M&E revenues were down 7% in the year.

As expected, group adjusted EBITA was down 32% at £489 million which reflects the decline in linear advertising revenue and the planned investment in ITVX. Adjusted EPS was down 41% at 7.8p. We have reached a peak level of net investment in our streaming business in 2023 and we continue to expect to grow profits from here.

Statutory profit before tax was down 61% and statutory EPS decreased by 51% to 5.2p.

There was strong cash generation in the year, with 102% profit to cash conversion and a robust balance sheet, net debt of £553 million and net debt to adjusted EBITDA leverage of 1.0x.

In line with ITV's dividend policy, the Board has declared a final dividend of 3.3p (2022: 3.3p), giving an ordinary dividend of 5.0p per share for the full year 2023 (2022: 5.0p).

As announced on 01 March 2024, ITV sold its 50% holding of BritBox International to BBC Studios for a total consideration of £255 million. The Board will return the entire net proceeds to shareholders through a share buyback of £235 million which we expect to complete within the next 18 months.

Our Purpose, Vision and More than TV Strategy

The strong operating performance in 2023 demonstrates that the strategy we started implementing in 2018, and evolved in 2022 with the launch of ITVX, is working. We have been able to withstand macroeconomic headwinds because of the actions we have taken to reposition ITV towards higher, sustainable growth areas in global production and digital. The business is demonstrably more balanced and has strong delivery momentum as we continue to drive our strategy.

The media landscape continues to evolve rapidly and is more competitive for viewers and advertising, with recent new entrants. We are in a far stronger position than we were in 2018, to focus on ITV's value drivers and competitive advantages and are confident that we can compete, as evidenced by a very strong programming slate: Mr Bates vs The Post Office is the highest audience drama on any platform for five years; Fool me Once by ITV Studios' Quay Steet Productions is in Netflix's top 10 English-language dramas of all time, and ITV Commercial consistently outperforms the market.

Our purpose remains unchanged, we entertain and connect with millions of people in the UK and globally, reflecting and shaping culture and building brands, with brilliant content and creativity.

Our vision is that by 2026 ITV will be a leader in UK advertiser-funded streaming, and an expanding global force in content. We are focused on three strategic pillars to deliver this vision:

· Expand our UK and global production business

· Supercharge our Streaming business, and

· Optimise our Broadcast business

These pillars are underpinned by a number of priorities, and we have set key performance indicators and targets to deliver by 2026. With the strong progress we have made to date, we are on track and confident we can deliver against these targets. The following page provides further detail on our strategic priorities, why they are important and what they drive.

Integrated producer broadcaster and streamer

ITV has a unique market position as a global and diversified vertically integrated producer broadcaster and streamer with content central to everything we do. This model benefits both divisions and therefore the Group:

For ITV Studios it:

· Provides a sustainable base of core commissions which gives stability in a changeable industry;

· Helps with attracting and retaining industry-leading talent which is key to a successful creative business;

· Provides a platform to make Studios' content famous and enables cross-promotion, supporting the international sale of our content and formats, and the monetisation of our IP across our business models

For M&E it:

· Provides access to world-class content for ITV's linear TV channels and ITVX, driving viewing growth;

· Enables deeper and more creative and productive partnerships with advertisers, driving revenue;

· Helps protect from content price inflation

For the Group, this gives us a real competitive advantage, providing attractive economics as we operate across the entire value chain, and benefit from diversification in a cyclical industry.

ITV Studios

ITV Studios is a scaled and global creator, owner and distributor of high-quality content operating in 13 countries and across 60+ labels; diversified by genre, geography and customer in the key creative markets around the world.

ITV Studios benefits from its scale as the largest producer in the UK, one of the largest unscripted producers in the US and one of the top three in the majority of the remaining international markets in which it operates. ITV Studios is a trusted supplier with well-established relationships with key content buyers and leading creative talent in those markets.

In 2023 we further delivered against our four strategic priorities (as set out in the Strategy section on the following page) and we remain on track to achieve all our 2026 KPI targets and deliver a 5% total organic revenue CAGR target from 2021 to 2026 - ahead of the market, and operate at industry-leading margins of 13 to 15%.

We have grown our scripted business with 316 hours of high-end scripted content delivered in 2023, an increase of 14% from the prior year. This has helped to further diversify our customer base, with almost a third of Studios revenues coming from streaming platforms in 2023, up from 22% in 2022.

We also continued to monetise our global formats with 19 formats in 2023 sold in three or more countries (2022: 19). Supported by our integrated model the final priority is to attract and retain the leading talent in the industry. We have seen outstanding creative deliveries from recent talent deals and acquisitions including Fool Me Once and After the Flood from Quay Street Productions, One Piece from Tomorrow Studios, and Big Beasts from Plimsoll Productions.

The global content market is large and attractive, with all platforms needing a mix of content to succeed in a very competitive landscape to attract audiences. We expect to see growth in key segments in which we operate - content licensing, demand from streaming platforms for unscripted content and cost effective premium scripted content.

ITV Studios is very well positioned to take advantage of this growth and to grow our market share over the medium term, driven by our scale and diversified position, our investment in development and creative talent and our high-quality IP.

As previously guided, 2024 will be impacted delays in production as a result of the writers' and actors' strike in the US, combined with the continuation of weaker demand from FTA broadcasters in Europe who are holding back spend until they see more certainty in the TV advertising market.

Media & Entertainment (M&E)

ITV M&E is the largest commercial broadcaster and streamer in the UK, delivering unrivalled audience scale and reach. It is underpinned by two strategic pillars; Supercharge Streaming and Optimise Broadcast.

By Supercharging Streaming, we aim to drive digital revenues through ITVX and Planet V (ITV's proprietary, self-service programmatic addressable advertising platform).

We launched ITVX on time and our investment is on plan and on budget. In our first full year of ITVX we delivered a step change in viewing and digital revenues were up 19%. We increased the number of monthly active users by almost 20%, up to 12.5 million and those users are spending more time engaging with the platform with streaming hours up 26% to 1.5 billion hours. Brand awareness is now up to over 90% and we have seen a significant increase in streaming hours for light viewers who are harder to reach, up 65%, and our key target audience of 25-54s which was up 47%.

The key focus of ITVX is our ad-funded proposition which is where we have channelled our efforts and resources in its launch year. In addition, we have ITVX Premium, a subscription service, which is primarily an ad-free offering for viewers. The number of paid-for UK subscribers declined marginally year on year as we started transitioning subscribers from our standalone app, BritBox UK, into ITVX Premium, combined with the closure of the ITV Catch Up service on Amazon Prime Video Channels.

In 2024, the BritBox UK service on Amazon Prime Video Channels and the BritBox UK standalone app will close as we further simplify our offering. This will consolidate all our subscribers under one ITVX Premium brand and will give us complete ownership of the subscriber base. The closure of these services is expected to impact subscriber numbers and subscription revenues in 2024.

Planet V is the platform enabling the growth of ITV's digital advertising - it is a market-leading addressable advertising platform which creates and delivers targeted advertising at scale.

It enables us to create sophisticated audience segments and serve ads directly to them. All the major agencies are using Planet V and see it as an intuitive, easy-to-buy self-serve platform, allowing them to streamline their approach to planning and buying. ITV has one of the largest first-party data sets in the UK, with over 40 million registered users on ITVX. Agencies and advertisers can make use of this alongside their own data and other first and third-party datasets, to create more precise addressable campaigns. Advertisers are prepared to pay more for this increasingly sophisticated and valuable ad inventory.

This capability underpins our ability to now compete for online video budgets, particularly budgets allocated to platforms such as YouTube, and take share in this growing addressable advertising market.

OUR MORE THAN TV STRATEGY

Our strategy is focused on three strategic pillars 1) Expand Studios; 2) Supercharge Streaming; and 3) Optimise Broadcast. These pillars are underpinned by a number of priorities (detailed below) to ensure that ITV is best placed to capitalise on the opportunities presented by the rapidly changing viewing, content production and advertising environments. These pillars are not independent. They work together - reinforcing each other, creating synergies and delivering value.

To support the successful delivery of the strategy, we have key performance indicators (KPIs) and related targets to be delivered from 2021 to 2026 which we are on track to deliver. The key to successfully delivering this strategy is digitally transforming everything we do.

The successful execution of our strategy to date has made ITV more robust. ITV has a leading, scaled, global Studios business, a high growth streaming service and a cash generative linear advertising business. This ensures that we are well placed to grow profits from here as we continue to drive material efficiencies, invest behind our strategic priorities and deliver returns to shareholders.

Vertically Integrated Producer, Broadcaster and Streamer

Expand Studios Further expanding by genre, geography and customer and growing faster than market

2026 STUDIOS TARGET Grow total organic revenues by 5% on average per annum to 2026 - which is ahead of the market at a margin of 13% to 15%

Supercharge Streaming Driving digital viewing and revenue through ITVX and Planet V, ITV's leading addressable advertising platform

Optimise Broadcast Digitally transforming as we continue to attract commercial broadcast audiences of unparalleled scale

2026 M&E TARGET Grow digital revenues to at least £750m across M&E

ITV Studios - STRATEGIC PRIORITES AND KPI TARGETS

Expanding UK and global productions is central to ITV's strategy. ITV Studios' ambition is to be a leading force in the creation and ownership of intellectual property (IP), global content production and distribution. We are achieving this by focusing on our four strategic priorities to drive revenue and profit growth.

	PRIORITIES	WHY IT'S IMPORTANT	FY 2026 TARGET	FY 2023	WHAT IT DRIVES
STUDIOS	1. Grow our scripted business	To meet the growing global demand for scripted content particularly from streaming platforms	400 high-end scripted hours per annum	316 hours (2022: 276 hours)	Growth in total organic revenue of 5% on average per annum to 2026[7] which is ahead of the market Delivers adjusted EBITA[8] margins of 13% to 15% In 2023, total organic revenue grew 3% at an adjusted EBITA margin of 13.2%
	2. Grow our global formats business	To maximise international monetisation of high-value formats	20 formats sold in three or more countries	19 formats (2022: 19 formats)
	3. Further diversify our customer base	To capture the growth in content spend from local and global streaming platforms	30% of total revenues from streaming platforms	32% (2022: 22%)
	4. Attract and retain leading talent	Key to creative success of a Studios business	N/A	N/A

MEDIA & ENTERTAINMENT - STRATEGIC PRIORITES AND KPI TARGETS

ITV's M&E strategy is based on two core pillars: Supercharge Streaming and Optimise Broadcast, with strategic priorities to drive growth in digital revenues and maintain strength in linear.

	PRIORITIES	WHY IT'S IMPORTANT	FY 2026 TARGET	FY 2023	WHAT IT DRIVES
STREAMING	1. Attract more monthly active users to ITVX	ITV's reach is key to retaining and attracting advertisers	Grow monthly active users to 20 million	12.5 million (2022: 10.5 million)	Growth in digital revenues to at least £750m by 2026 Revenues from linear TV advertising, commercial and creative partnerships, and sponsorship In 2023, total digital revenues were £490 million, up 19% year-on-year
	2. Increase the time users spend on ITVX	ITV's scale is key to retaining and attracting advertisers	Grow total streaming hours to 2 billion hours	1,505 million hours (2022: 1,192 million hours)
	3. Increase UK subscriber base	Monetising ITV viewers who are willing to pay for ad-free and additional content	Grow subscribers to 2.5 million	1.3 million (2022: 1.4 million)
BROADCAST	4. Maintain our strength in delivering mass linear audiences	ITV's mass linear audiences remains very important to UK advertisers	Maintain a share of at least 80% of the top 1,000 programmes	91% (2022: 93%)
BROADCAST	5. Maintain ITV's position in UK broadcast market	ITV's scale remains very important to UK advertisers	Maintain a share of commercial viewing of 33%	32.6% (2022: 33.8%)

The progress we have made in Streaming and against our KPIs means that we are confident of delivering at least £750 million of digital revenues by 2026, with the focus continuing to be ad-funded.

We have started 2024 really well and will further enhance ITVX in 2024 building on the momentum we have. We will increase the depth and breadth of content, deliver continuous improvements in the product and user experience, and expand its distribution and marketing.

Within Broadcast, we have now digitally transformed the business and will continue to do so as we become increasingly agile and adapt to changing viewer habits. Internally this means we are always looking at ways to increase our efficiency and productivity, whether that is through the operational use of AI or ensuring our cost base is the right shape and size. Externally for viewers, it is ensuring we continue to engage our audiences through live content such as sports and successful entertainment shows to continue to deliver mass audiences which are so valuable to advertisers, together with the personalisation and targeting that comes with ITVX.

ITV continues to be the best destination for advertisers to reach valuable mass audiences in the UK. Our share of those mass linear TV audiences continued with over 90% of the top 1,000 programmes appearing on ITV and our share of commercial viewing has also been broadly maintained at just under 33%. This robust performance demonstrates ITV's unique market-leading position in broadcast in the UK.

What sets ITV apart from all its competitors commercially is the ability to deliver four things:

· Mass simultaneous reach,

· Sophisticated targeted advertising

· Commercial and creative partnerships

· A brand-safe and trusted environment.

All of this ensures that we can remain highly competitive in an increasingly competitive market.

ITVX's strong performance has continued into 2024. Total advertising revenue (TAR) is expected to be up 3% in Q1 compared to the same period in 2023, with continued strong growth in digital advertising revenues.

Refer to the Operating and Financial Performance Review for further details of ITV Studios and M&E's strategic priorities and how the divisions performed in the year.

Cost and efficiency programme

Our existing cost saving programme of £150 million between 2019 and 2026, has delivered £130 million of annualised savings to date and we are on track to deliver the full £150 million by 2025 - one year early.

We are now in the early stages of a new strategic restructuring and efficiency programme across the Group to reshape the cost base, enhance profitability, and support the growth drivers of Studios and Streaming. We are building on the foundations we have established in digital and data and the significant progress we have made in transforming ITV from a linear broadcaster to a multi-platform broadcaster and streamer.

Savings will come mainly from technology and operational efficiencies, organisational redesign across Group, M&E and ITV Studios and permanent reductions in discretionary spend across the Group.

By the end of 2024, we expect the programme to have delivered incremental annualised savings of at least £50 million gross per year, giving a £30 million in year gross benefit in 2024. There will be c.£50 million of one-off costs to deliver these savings. The ongoing programme is designed to deliver further incremental material savings over a number of years which will further build ITV's resilience. We will provide further information as the programme progresses.

Our Social Purpose

We reach millions of viewers globally, through our content, and in the UK, through our linear channels and ITVX. We are proud of our position as a Public Service Broadcaster (PSB) in the UK, telling the stories that are at the heart of culture and society. We have the opportunity to advocate for positive change from social issues to environmental matters and beyond, providing the UK public with unbiased information and diverse perspectives.

Our Social Purpose strategy has four focus areas: Better Health; Diversity, Equity and Inclusion; Climate Action and Giving Back.

2023 saw us reach the major milestone for Better Health in surpassing our five-year goal which was to encourage audiences to take over 200 million actions to support their mental or physical wellbeing. We hit an extraordinary 249 million actions by the end of 2023 with our flagship mental health campaign, Britain Get Talking, playing a significant role in achieving our target.

Our Giving Back activity in 2023 continued with our biggest fundraising event, Soccer Aid for UNICEF. Since its launch in 2006, over £90 million has been raised. As we move forward, our Giving Back work will shift towards supporting the next generation called Better Futures.

Climate Action remains a priority across our whole organisation, ensuring we achieve Net Zero by 2050 in how we make, broadcast and stream our shows, and use our reach to inform and inspire audiences to make greener choices. Our first Climate Transition Plan is published alongside this report.

ITV continues to consolidate our Diversity, Equity and Inclusion work. We have championed diversity across our biggest shows introducing a range of new voices on-screen and off-screen and have created new opportunities for under-represented groups to thrive in our business.

Refer to the Social Purpose section for further details on the work we have done in 2023.

Duty of Care

Supporting the mental and physical health and safety of colleagues and others who work with ITV and those participating in our productions remains a key priority. We are committed to addressing promptly, fairly and confidentially all concerns and monitoring the channels we have in place to ensure they remain appropriate. During 2023 we continued to strengthen our Speaking Up programme by driving continuous communication, awareness and training of our speaking up channels for individuals to register concerns, including our speaking up hotline, SafeCall. I continue to chair the Duty of Care Operating Board which meets regularly.

Following the outcome of the external KC Review, which found that ITV's handling of the case surrounding Phillip Schofield and This Morning was adequate and appropriate. In 2024 we will focus on implementing the recommendations arising from the review. This includes enhanced speaking up related training focused on different parts of the Group and further strengthening our complaints handling processes.

Regulation

The Media Bill which is currently working its way through Parliament, will update the legal and regulatory framework for television, particularly delivered online. This should help ensure that content from PSBs, including ITV, will be included and easily discoverable on all major streaming platforms, on fair commercial terms. Once the Bill becomes law, we will remain fully engaged with Ofcom and the government throughout any subsequent processes necessary for its full implementation.

In May 2023, we submitted our application to Ofcom for the renewal of our Channel 3 licenses, which expire on 31 December 2024. We are fully engaged in the process, which we expect to conclude in the first half of 2024.

Colleagues

Our colleagues are central to everything that we do and are fundamental to the success of ITV. They have played a significant role in delivering our strategy effectively this year and I am incredibly grateful for the hard work and commitment all our colleagues show. I always appreciate how our people love collaborating with each other and with so many partners externally, and how motivated they are to be part of making great shows that lift people and change people's lives.

We have continued to invest in the development of our colleagues and in ensuring we have an inclusive culture where everyone can be their authentic selves. I am pleased that in our 2023 Engagement and Culture Survey, 75% of colleagues who responded, feel like they belong at ITV.

In 2024 we will be running a series of Roadshows across ITV and I am really looking forward to meeting many of our colleagues from all areas of the business. With their input, commitment and energy, ITV will continue to successfully execute our strategy.

Outlook

We have made great progress towards our 2026 KPIs. 2023 has been the year of peak investment for streaming and the successful execution of our strategy and the efficiencies delivered to date have made ITV more robust. ITV has a leading, scaled, global Studios business, a high growth streaming service and a cash generative linear advertising business. This ensures that we are well placed to grow profits from here as we continue to drive material efficiencies, invest behind our strategic priorities and deliver returns to shareholders.

CAROLYN MCCALL
CHIEF EXECUTIVE

Key Performance Indicators

Our KPIs and related targets for 2026 align our performance and accountability with our strategic priorities. This is detailed further in the Strategy section of the Chief Executive's Statement.

All KPIs are reported on a six‑month basis. The following are reported quarterly: ITV Studios total revenue growth, total digital revenue, total streaming hours, share of commercial viewing and share of top 1,000 commercial broadcast TV programmes.

Refer to the Operating and Financial Performance Review for further details on the performance of all our KPIs.

ITV GROUP
Adjusted EPS[9]
Adjusted EPS represents the adjusted profit after tax³ attributable to each equity share in the year. It is an important measure as we aim to create long-term value for our shareholders.	Performance Adjusted EPS decreased by 41% from 13.2p to 7.8p. Strong growth in ITV Studios adjusted EBITA³, up 10%, was offset by a decline in total advertising revenues (TAR), down 8%, and an increase in M&E costs from the planned investment in content for ITVX, higher streaming related costs and third-party commercial payaways.	2023 7.8p ‑41% on 2022
Cost savings
Cost savings are permanent savings to the business. Managing our cost base and mitigating the impact of inflation is key as we aim to run our business as efficiently as possible and fund investments in line with our strategic priorities.	Performance We delivered £24 million of permanent cost savings in 2023, which is ahead of the £15 million in year target. To date, we have delivered £130 million of our 2019 to 2026 target of £150 million. We are now in the early stages of a new strategic restructuring and efficiency programme across the Group which will deliver incremental annualised savings of at least £50 million gross per year, giving a £30 million in year gross benefit in 2024.	2023 £130m cumulative savings since 2018 2026 Target Deliver over £150 million of cumulative savings between 2018 and 2026
Profit to cash conversion³
One of ITV's strengths is its cash generation, reflecting our ongoing tight management of working capital balances. Profit to cash conversion serves as a key indicator in measuring our effectiveness. It is calculated as our adjusted cash flow as a proportion of adjusted EBITA¹.	Performance Profit to cash conversion was 102% in the year. The strong outturn compared to 2022 was due a favourable movement in working capital from the unwind of programme rights and inventory previously built up for the launch of ITVX. In addition, there has been a reduction in production inventories predominantly in the US as a result of the 2023 writers' and actors' strike.	2023 102% 2026 Target Maintain at around 85%
EXPAND STUDIOS UK and global production
ITV Studios total organic revenue growth[10]
ITV Studios total organic revenue growth measures the scale and success of our global studios business. It includes revenues from programmes sold to M&E, which as a vertically integrated producer, broadcaster and streamer, is an important part of our business.	Performance Total organic revenue was up 3% following a strong 2022 which was up 14%. Organic revenue excludes the benefit of our acquisitions of Plimsoll Productions and Lingo Pictures in 2022, and the unfavourable impact of a £15 million foreign exchange movement. ITV Studios total revenue grew 4% to £2,170 million.	2023 +3% on 2022 2026 Target Grow by 5% on average per annum (from 2021)
ITV Studios adjusted EBITA⁴ margin %
This is the key profitability measure used across the ITV Studios business. The margin is calculated on ITV Studios total revenue.	Performance ITV Studios adjusted EBITA margin was 13.2% (2022: 12.4%), which is restored within the targeted range.	2023 13.2% +0.8 basis points on 2022 2026 Target Deliver in the 13% to 15% range
Total high‑end scripted hours
Total high‑end scripted hours is an important measure in assessing the success of our strategic priority, to grow our scripted business. High‑end scripted hours include new commissions or returning franchises that have a higher cost per hour than continuing drama.	Performance The number of high‑end scripted hours produced by ITV Studios increased by 14% to 316 hours in 2023 driven by titles such as Big Beasts, Fool Me Once and Love Island in the UK, and Twin Love and Physical in the US.	2023 316hrs +14% on 2022 2026 Target Grow to 400 hours
Number of formats sold in three or more countries[11]
The Studios business is focused on maximising the international monetisation of high-value formats. A good measure of international success is when a format is commissioned in three or more countries in the year.	Performance The number of formats sold in three or more countries was 19, which was flat year-on-year. Recent formats that have sold in three or more countries include; My Mum, Your Dad; Pranked; and Song of my Life.	2023 19 formats flat on 2022 2026 Target Grow to 20 formats
% of ITV Studios total revenue from streaming platforms
Over the medium term, the key driver of growth in the global content market is expected to be from streaming platforms. The percentage of ITV Studios total revenue from streaming platforms is an important measure of delivering its strategic priority of further diversifying its customer base and meeting its 2026 total organic revenue growth target.	Performance The percentage of ITV Studios total revenue from streaming platforms grew to 32%, hitting the target three years early. Meeting this target is impacted by the phasing of deliveries and therefore our target is to maintain at least 30%. Notable deliveries to streaming platforms in 2023 included: Squid Games: The Challenge and One Piece for Netflix, and Franklin for Apple TV+	2023 32% +10 basis points on 2022 2026 Target Grow to 30% of ITV Studios total revenue

M&E

Supercharge streaming

Total digital revenue[12]

Total digital revenue comprises all revenue streams from our digital businesses, predominantly digital advertising. It is an important measure of the acceleration of our digital strategy as we supercharge streaming.

Performance

Total digital revenue grew 19% to £490 million. The growth was driven by digital advertising revenue, which was up 21%. This was marginally offset by a decline in competition revenues through ITV Win.

2023

£490m

+19% on 2022

2026 Target

More than double (compared to 2021) to at least £750m

Total streaming hours[13]

Increasing the time users spend streaming ITV content is a key strategic priority. It drives scale which is important to attract and retain advertisers, and contributes to total digital revenue growth.

Performance

Total streaming hours increased 26% to 1,505 million hours. This growth reflects our high-quality content offering, along with our investment in ITVX to enhance the product and user experience and to expand our distribution and marketing activity. This has helped retain and attract more users who have watched content for longer.

2023

1,505m hrs

+26% on 2022

2026 Target

Double (compared to 2021) to 2bn hours

Monthly active users (MAU)[14]

Attracting more monthly active users to ITVX is a key strategic priority. It increases reach which is important to attract and retain advertisers and contributes to total digital revenue growth.

Performance

Monthly active users grew 19% to 12.5 million. As with total streaming hours, the growth in monthly active users has been driven by investment in the quality and scale of content on ITVX, the enhanced product and user experience, and the expanded distribution and marketing activity.

2023

12.5m

+19% on 2022

2026 Target

Double (compared to 2021) to 20m

UK subscribers[15]

UK subscribers capture total UK subscriptions to ITV streaming platforms. It is an important measure of how we are monetising ITV viewers who are willing to pay for ad-free and additional content.

Performance

Total UK subscribers as of 31 December 2023 was down 7% year-on-year as we transitioned subscribers from our standalone app, BritBox UK, into ITVX Premium, combined with the closing of the legacy ITV Catch Up service on Amazon Prime Video Channels.

The key focus of ITVX is our ad-funded proposition which is where we have channelled our efforts and resources in its launch year.

2023

1.3m

-7% on 2022

2026 Target

Double (compared to 2021) to 2.5m

M&E

Optimise Broadcast

Share of top 1,000 commercial broadcast TV programmes[16]

Maintaining our strength in delivering mass commercial linear TV audiences enables ITV to attract and retain advertisers and command a premium from them.

Performance

Our 2023 share was 91%, which was down 2% points year-on-year, with 2022 benefiting significantly from the FIFA World Cup. In 2023, dramas such as Unforgotten and The Bay, entertainment formats such as Britain's Got Talent and Saturday Night Takeaway and sporting events such as Rugby World Cup, helped to maintain ITV's strong commercial mass audience proposition.

2023

91%

-2 basis points on 2022

2026 Target

Maintain a share of at least 80%

Share of commercial viewing[17]

Maintaining ITV's number one position in the UK broadcast market helps us attract and retain advertisers and is vital to maximising advertising revenues.

Performance

Share of commercial viewing decreased by 1.2% points to 32.6% in 2023, with strong viewing for the FIFA World Cup benefiting our share in 2022.

2023

32.6%

-1.2 basis points on 2022

2026 Target

Maintain at 33%

OPERATING AND FINANCIAL PERFORMANCE REVIEW

ITV continued to successfully execute its strategy in 2023 despite the challenging macroeconomic environment. It delivered a robust financial performance with ITV Studios recording its highest-ever revenues and profit, and within Media & Entertainment (M&E), ITVX drove a step change in key viewing metrics and delivered strong growth in digital advertising revenues.

FINANCIAL HIGHLIGHTS[18]

Twelve months to 31 December	2023 £m	2022 £m	Change £m	Change %
ITV Studios	2,170	2,096	74	4
M&E	2,090	2,249	(159)	(7)
Total revenue	4,260	4,345	(85)	(2)
Internal supply	(636)	(617)	(19)	(3)
Total external revenue	3,624	3,728	(104)	(3)
ITV Studios adjusted EBITA	286	259	27	10
M&E adjusted EBITA	205	464	(259)	(56)
Adjusted EBITA	491	723	(232)	(32)
Unrealised profit in stock adjustment	(2)	(6)	4	67
Group adjusted EBITA	489	717	(228)	(32)
Group adjusted EBITA margin	13%	19%		(6%) pts
Statutory operating profit	238	519	(281)	(54)
Profit before tax (adjusted)	396	672	(276)	(41)
Adjusted EPS (p)	7.8p	13.2p	(5.4p)	(41)
Statutory EPS (p)	5.2p	10.7p	(5.5p)	(51)

KEY FINANCIALS¹²

Group external revenue

£3,624m

-3% vs 2022

Total ITV Studios revenue

£2,170m

+4% vs 2022

Total digital revenue

£490m

+19% vs 2022

Group adjusted EBITA

£489m

-32% vs 2022

Statutory operating profit

£238m

-54% vs 2022

Adjusted EPS

7.8p

-41% vs 2022

Statutory EPS

5.2p

-51% vs 2022

Net debt

£553m

31 Dec 2022: £623m

Group financial overview

2023 was the second-highest total revenue outturn in ITV's history. While total revenue decreased by 2% and total external revenue was down by 3% in 2023, our growth drivers continued to perform well. ITV Studios grew by 4% and digital revenues2 grew by 19%, both of which substantially offset a 15% decline in linear advertising due to the challenging advertising market. Total non-advertising revenue grew by 3%.

Group adjusted EBITA decreased by 32%, reflecting the challenging advertising market and planned investment in ITVX. ITV Studios adjusted EBITA increased by 10%, with the margin 13.2% restored to within our target range. M&E adjusted EBITA decreased by 56% for the reasons noted above.

We continue to focus on reducing costs and driving efficiencies. In the year, we exceeded our £15 million cost savings target, delivering £24 million of permanent cost savings across the business, which included headcount savings from changes in our operating model in M&E, permanent operational efficiencies across ITV Studios and M&E, property savings from our US Studios business, and contractual renegotiations.

Our existing cost saving target of £150 million between 2019 and 2026, has delivered £130 million of annualised savings to date and we are on track to deliver the full £150 million by 2025 - one year early.

Savings will come mainly from technology and operational efficiencies, organisational redesign across Group, M&E and ITV Studios, and permanent reductions in discretionary spend across the Group.

Total operating exceptional items were £77 million (2022: £65 million) which included £24 million of acquisition-related expenses and £25 million of restructuring and transformation costs. This stems from the Group-wide commitment to reduce the overhead cost base, and includes restructuring and transformation programme costs to deliver our strategy (see note 2.2 to the financial information for further detail).

Adjusted financing costs were up year-on-year at £29 million (2022: £26 million) largely due to higher market interest rates at similar levels of debt. Statutory net financing costs were £45 million, up year-on-year (2022: £26 million) due to charges related to acquisition-related put and call options.

Our adjusted effective tax rate was 21.5% (2022: 20.1%) and the statutory effective tax rate was (8.3%) (2022: 13.2%). The lower statutory effective tax rate in the year was due to higher HETV tax credits relative to the tax charge, and a proportionally lower profit before tax in the year compared to 2022.

Adjusted EPS for the year was 7.8p (2022: 13.2p), with statutory EPS decreasing from 10.7p to 5.2p. See the Finance Review for further detail.

Our profit to cash conversion (which is an APM) in 2023 was high at 102% (2022: 75%). Conversion in 2023 has been distorted by the writers' and actors' strike in the US, and it will also impact 2024. In 2023 there was a release in working capital which will reverse in 2024 as we resume US scripted productions. Across the two years we expect profit to cash conversion to be at the normal levels of around 80%.

At 31 December 2023 we had £361 million of free cash flow (31 December 2022: £280 million), our net debt was £553 million (31 December 2022: £623 million) and our net debt to adjusted EBITDA was 1.0x (31 December 2022: 0.8x). Refer to the Finance Review for more detail.

We have good access to liquidity. At 31 December 2023, we had cash and committed undrawn facilities totalling £1,240 million, including total cash of £340 million (31 December 2022: £1,098 million, including total cash of £348 million).

We have a clear capital allocation policy and our priorities remain unchanged (see the Finance Review for further details).

The Board recognises the importance of the ordinary dividend to ITV shareholders. Reflecting its confidence in the business and its strategy, as well as the continued strong cash generation, the Board has declared a final dividend of 3.3p, giving a full year ordinary dividend of 5.0p per share for 2023, which is a total return of c.£200 million (2022: 5.0p). The Board remains committed to paying a full year ordinary dividend of at least 5.0p in 2024, which it expects to grow over the medium term, whilst balancing further investment in our strategy and our commitment to investment grade metrics over the medium term.

On 01 March 2024 ITV announced the sale of its 50% shareholding in BritBox International to BBC Studios for a cash consideration of £255 million. The Board intends to return the entire net proceeds to shareholders through a £235 million share buyback which will be completed within the next 18 months.

We remain focused on managing our cash and costs while continuing to invest in delivering our strategic priorities. Our robust balance sheet allows us to do this while delivering returns to shareholders.

A range of scenarios reflecting ITV's principal risks has been modelled and considered in the assessment of ITV's longer‑term viability. Refer to Risks and Uncertainties section for further details.

ITV Studios

ITV Studios is a scaled and global creator, owner and distributor of high-quality TV content operating in 13 countries and across 60+ labels; diversified by genre, geography and customer in the key creative markets around the world.

ITV Studios benefits from scale, being the largest producer in the UK, one of the largest unscripted producers in the US and one of the top three in the majority of the remaining international markets in which it operates. ITV Studios is a trusted supplier with well established relationships with key content buyers and leading creative talent in those markets; and with a combined content library of over 90,000 hours, it is also one of the pre‑eminent global distributors.

The global content market is large, (c.$226 billion in 2023) and attractive with all platforms needing a mix of content to succeed in a very competitive market. Going forward, we expect to see growth in the key segments in which ITV Studios operates, including content licensing and demand from streaming platforms for unscripted content and cost effective premium scripted content which we are well positioned to take advantage of. We are confident that we will continue to grow our market share to 2026 driven by our scale; our diversification by customer; geography and genre; a strong track record of high-quality content; a very strong slate for 2024 and beyond; and our leading creative talent.

Over the last six years ITV Studios revenue (excluding acquisitions) has grown by around 5% CAGR, faster than the market of around 4% CAGR (Source: Ampere Analysis - based on the ITVS addressable market).

ITV Studios' ambition is to be a leading force in the creation and ownership of intellectual property (IP), global content production and distribution. We are achieving this by focusing on our four strategic priorities to drive revenue and profit growth:

1. Growing our scripted business to meet the growth in global demand

2. Growing our global formats business to maximise the monetisation of high‑value formats

3. Diversifying our customer base to capture the growth in content spend from local and global streaming platforms

4. All of which is underpinned by our ability to attract and retain leading creative talent.

We have KPI targets for 2026 which reflect the key drivers of growth and value. See the Strategy section within the CEO Report for more details on our KPIs, why they are important and how they will enable us to deliver total organic revenue growth of 5% on average per annum over the five years from 2021 to 2026 - ahead of the market, at an adjusted EBITA margin of 13% to 15%.

Growing our scripted business

Growing our scripted business is one of our key strategic priorities

Scripted content plays a key role in attracting and retaining viewers and subscribers on both FTA and streaming platforms. This together with the increase in the number of streaming platforms has led to an increase in original scripted commissions in the UK, US, Australia and Europe. Furthermore, over recent years there has been increasing demand for locally produced non-English language scripted content. With our global production presence and a strong track record for delivering high-quality scripted content, ITV Studios is well-positioned to cater to this demand, and importantly grow its share of the market.

ITV has a portfolio of scripted labels in the UK and internationally, which creates and produces high-quality content with global appeal for both FTA and streaming platforms. We continue to see good momentum in our creative pipeline with several of our 2023 deliveries, such as Mr Bates vs The Post Office, Fool Me Once and One Piece gaining global attention and driving significant audiences on their respective platforms.

In 2023, ITV Studios high‑end scripted hours increased by 14% year-on-year to 316 hours (2022: 276 hours) and we remain on track to produce 400 hours of high‑end scripted content per annum by 2026.

Global Partnerships (previously Global Formats and Distribution) plays a key role in growing scripted value across the business. Global Partnerships invests around £70 million annually to acquire the distribution rights (across both scripted and unscripted genres) in ITV Studios‑produced content and selective third‑party content. Having the integrated producer‑distributor relationship enables Global Partnerships to make strategic investment decisions around content funding. By finding co‑production partners and licensees around the world for our scripted catalogue (of more than 22,000 hours), Global Partnerships maximises the value of these projects over a long‑term sales lifecycle.

Growing our Global Formats business

Unscripted content also remains important to ITV Studios. Through our Global Partnerships business, we monetise our portfolio of some of the world's most successful travelling entertainment formats, as well as maximise commercial opportunities from our brands. We are focused on driving growth across our unscripted offering by monetising our existing high‑value formats effectively as well as supporting the creation of new global formats.

Our portfolio of world‑class brands includes our established formats such as The Voice (one of the most successful unscripted format brands in the world), Love Island, The Chase, Come Dine With Me, Hell's Kitchen and I'm A Celebrity…Get Me Out Of Here!. These formats continue to sell in new territories and attract mass audiences for our clients. They are highly sought after by both traditional broadcasters and streaming platforms, offering cost-effective content with a proven track record of audience success. We also have several new formats that have been commissioned in our UK, US and international production bases, with the potential to be future global hits. These include My Mum, Your Dad (our first global format to originate from the US); I Kissed A Boy; and Make Love Fake Love.

As well as protecting our biggest brands, we are also focused on expanding our franchises by creating successful spin-offs that allow us to evolve existing formats. Examples include The Voice, which now has six spin‑off versions; Love Island has two new spin-offs, Love Island Games and Love Island All Stars; and I'm A Celebrity…Get Me Out Of Here! South Africa is a new spin-off in the UK.

In 2023, across our Global Partnerships business, we sold 63 unique formats internationally (2022: 64), 19 of which were sold to three or more countries (2022: 19). By 2026, we expect to have 20 such formats, with a view that one of these may be a significant new format like The Voice or Love Island.

Our Global Partnerships business also focuses on leveraging our vast content library and maximising the value of both primary and secondary windows with FTA broadcasters, Pay TV and streaming platforms - a growth area for the business. Global Partnerships has recently launched a collection of owned and operated FAST1 channels across the world which features our content, on platforms such as Pluto, Samsung and Rakuten. This aligns with the business strategically positioning itself to adapt to the evolving media landscape, taking advantage of various distribution channels and platforms to reach a global audience.

Further diversifying our customer base

As the demand for content from streaming platforms grows globally, this presents a significant opportunity for ITV Studios to further diversify its customer base and remains a key priority of ITV Studios strategy to grow its market share and meet its 2026 KPI targets.

In the US, we have well-established and trusted relationships with all the major streaming platforms. We currently have scripted or unscripted projects either in development or commissioned by all of them. In 2023, over 40% of US unscripted revenues and nearly 100% of US scripted revenues came from streaming platforms.

The percentage of ITV Studios total revenues from streaming platforms increased to 32% (2022: 22%) in 2023 and exceeds our 2026 target of 30%. This has been impacted by the phasing of large deliveries in the year and therefore we are maintaining our target at 30%. Deliveries in 2023 included the following for Netflix: Fool Me Once - one of their all-time top 10 English language dramas, Squid Game: The Challenge, One Piece, and SUBURRÆTERNA; Playdate for Disney+; Franklin, Physical and Big Beasts for Apple TV+; Twin Love for Amazon; and Love Island US and Love Island Games for Peacock.

Whilst further diversifying our customer base with streaming platforms is a key strategic priority for ITV Studios, it requires careful management of our working capital as streaming platforms typically expect extended payment profiles. In some instances, it may also limit our ability to maintain all rights for high‑value scripted titles as streaming platforms usually seek worldwide distribution rights for original commissions, in return for a premium fee on commissions.

Attracting and retaining leading talent

A key part of ITV Studios investment strategy and its overall success is its ability to attract and retain the best creative talent. ITV Studios offers talent a unique combination of creative independence, an entrepreneurial culture, and the resources of a global studio business. This includes access to ITV Studios global distribution network, and in the UK, the benefit of being a vertically integrated producer broadcaster and streamer. We are proud to be able to continue to attract the best talent in the market, most recently welcoming Plimsoll Productions, Lingo Pictures and Ben Stephenson, who set up a transatlantic scripted label, Poison Pen Studios, in ITV Studios.

ITV has successfully integrated its new labels - many set up through recent talent deals - and they have delivered an impressive slate of programmes, including A Year On Planet Earth and Big Beasts, both from Plimsoll Productions in the UK, Prosper from Lingo Pictures in Australia, Fool Me Once, Playdate and After the Flood from Quay Street Productions in the UK, and Night in Paradise from Windlight Pictures in Germany. This strong pipeline demonstrates ITV Studios commitment and success in nurturing and leveraging top creative talent to deliver engaging and high-quality content.

ITV Studios 2023 financial performance

Twelve months to 31 December	2023 £m	2022 £m	Change £m	Change %	Organic Change* %
ITV Studios UK	962	822	140	17	16
ITV Studios US	395	467	(72)	(15)	(13)
ITV Studios International	445	465	(20)	(4)	(8)
Global Partnerships	368	342	26	8	8
Total ITV Studios revenue	2,170	2,096	74	4	3
Total ITV Studios costs	(1,884)	(1,837)	(47)	(3)	(2)
Total ITV Studios adjusted EBITA**	286	259	27	10	8
ITV Studios adjusted EBITA margin	13.2%	12.4%

* The organic change assumes exchange rates remain consistent with the comparative period and it removes the impact of acquisitions in the current or comparative period.

** Includes the benefit of production tax credits. Refer to Alternative Performance Measures for key adjustments to EBITA and adjusted EBITA.

Twelve months to 31 December	2023 £m	2022 £m	Change £m	Change %
Sales from ITV Studios to M&E	629	611	18	3
External revenue	1,541	1,485	56	4
Total ITV Studios revenue	2,170	2,096	74	4

Twelve months to 31 December	2023 £m	2022 £m	Change £m	Change %
Scripted1	802	723	79	11
Unscripted	1,057	1,038	19	2
Core ITV2 and Other	311	335	(24)	(7)
Total ITV Studios revenue	2,170	2,096	74	4

1. Includes high-end scripted and other scripted revenues

2. Core ITV includes the soaps and daytime shows produced by ITV Studios for ITV1

ITV Studios delivered its highest-ever revenues and profits in 2023. Total revenue was up 4%, and external revenue was up 4% driven predominantly by growth in the UK. Sales from ITV Studios to M&E were up 3%, with several new dramas for ITV1 and ITVX. Total organic revenue at constant currency was up 3%, impacted by a £15 million unfavourable foreign exchange movement in the year and a £65 million inorganic contribution from Plimsoll Productions and Lingo Pictures which were both acquired in 2022.

Reflecting our presence in key global production markets, 58% of ITV Studios revenue was generated outside the UK (2022: 60%).

ITV Studios adjusted EBITA was up 10% year-on-year, with our adjusted EBITA margin of 13.2% (2022: 12.4%) restored to within our 13% to 15% target range. There was a £3 million unfavourable impact from foreign exchange. During the year, £13 million of permanent cost savings were delivered relating to operational efficiencies, our US property move and a permanent reduction in discretionary spend.

We continue to look at ways to drive efficiencies and improve margins over the medium term, including rationalising our property footprint, using technology and data to drive cost and revenue efficiencies, utilising our production hubs for our key global formats, taking further steps to digitise our production processes, as well as using remote editing more routinely and the operational use of AI where possible. We remain committed to our adjusted EBITA margin guidance of 13% to 15%.

ITV Studios UK

ITV Studios UK has a diverse range of scripted and unscripted titles for broadcasters and streaming platforms. The business is built upon many long‑running and recurring titles, the majority of which are sold to the M&E business for transmission on ITV's family of linear TV channels and ITVX. The core portfolio includes daytime programmes such as Good Morning Britain, This Morning, Loose Women, and Lorraine; the soaps: Coronation Street and Emmerdale; and entertainment programmes such as The Voice, The Chase, Love Island and I'm A Celebrity…Get Me Out Of Here!

ITV Studios UK saw strong revenue growth in 2023, up 17% to £962 million (2022: £822 million) and up 16% to £920 million on an organic basis, which adjusts for the acquisition of Plimsoll Productions in 2022. It had an impressive slate of deliveries for a broad customer base, which included a Love Island winter and summer series, I'm a Celebrity…Get Me Out Of Here! South Africa, After the Flood, and Grace, all for ITV; as well as The Completely Made-Up Adventures of Dick Turpin for AppleTV+, Squid Game: The Challenge for Netflix - which was one of their most watched unscripted original productions globally in 2023, Vigil, World On Fire, The Outlaws, and Shetland for the BBC, and Dinner With The Parents for FreeVee. 61% of revenue was derived from sales to the M&E business (2022: 65%).

Deliveries expected in the first half of 2024 include internal sales to M&E of new and returning entertainment programmes such as Love Island All Stars, Saturday Night Takeaway, and the Chase, and returning dramas, The Bay and Vera. External sales include The Reluctant Traveller for Apple TV+, Missing You for Netflix and The Gathering for Channel 4.

ITV Studios US

ITV Studios US provides content to all the major networks and cable channels in the US, along with every major streaming platform. It has a good foundation of core programmes, including unscripted titles with multiple seasons and a high volume of episodes, along with premium scripted content, which has enabled the business to grow its presence significantly and develop deep client relationships, in a highly competitive market.

In 2023, ITV Studios US total revenue declined by 15% to £395 million (2022: £467 million) and by 13% to £405 million on an organic basis when adjusted for the unfavourable foreign exchange impact. The decrease in revenue year-on-year reflects the phasing of large, unrepeated scripted and unscripted deliveries year-on-year, including Snowpiercer, Let The Right One In and Hell's Kitchen, combined with lower demand from networks.

Within ITV Studios America (scripted), 2023 deliveries included Franklin for Apple TV+ which is ITV Studios America's biggest scripted production to date, Physical S3 for AppleTV+, as well as executive producing One Piece for Netflix - which was one of the platform's most-watched original scripted productions globally in 2023. ITV America (unscripted) saw the delivery of new and returning titles such as Love Island and Love Island Games for Peacock, The Prank Panel for ABC and Twin Love for Amazon.

In 2024, ITV Studios America will be impacted by the US writers' and actors' strikes in 2023 which delayed the development of several projects which were due for delivery in 2024. This will delay around £80 million of revenue from 2024 to 2025.

In the first half of 2024, unscripted deliveries from ITV America are expected to include Queer Eye for Netflix and Alone for History Channel.

ITV Studios International

ITV Studios International produces original scripted and unscripted content across our production bases, as well as local versions of key formats developed through our Global Partnerships business. Growing our European scripted business allows us to benefit from the demand for locally‑produced content with global appeal, and we have scripted projects in production and development with Amazon, Netflix, Paramount+, and Disney+, as well as local streaming platforms, such as Videoland in the Netherlands, and Stan in Australia.

Revenue within ITV Studios International decreased by 4% to £445 million (2022: £465 million) in 2023, and by 8% to £428 million on an organic basis when adjusted for the unfavourable impact of foreign currency and the acquisition of Lingo Pictures in 2022. This decline reflects lower deliveries year-on-year, mainly in Italy and Germany and some scripted deliveries being delayed to 2024. Deliveries in 2023 included I'm A Celebrity... Get Me Out Of Here! in Germany and Australia, Love Island in Australia, as well as Diana and SUBURRÆTERNA from Cattleya in Italy, and Prosper from Lingo Pictures in Australia.

Deliveries expected in the first half of 2024 include Comedy Camp in France, as well as key formats such as I'm A Celebrity…Get Me Out Of Here!, The Voice and The Chase being delivered across multiple countries.

Global Partnerships

Global Partnerships saw good revenue growth in 2023, up 8% year-on-year to £368 million (2022: £342 million) and 8% to £369 million on an organic basis when adjusted for the unfavourable impact of foreign currency. The business benefited from the international distribution of returning titles such as World On Fire and Vigil, and has leveraged the breadth and depth of its extensive catalogue with sales to other broadcasters and streaming platforms globally - which are a growth area for Global Partnerships. Finished programming sales of unscripted formats were also good, including The Voice, Love Island and The Graham Norton Show, all delivering across multiple different territories.

2024 and beyond should see an increased pipeline of new content for Global Partnerships. New titles expected to sell internationally in 2024 include A Cruel Love: The Ruth Ellis Story and After The Flood.

OUTLOOK

ITV Studios remains on track to deliver total organic revenue growth of 5% on average per annum from 2021 to 2026 - ahead of the market, at an adjusted EBITA margin of 13% to 15%.

Going forward we expect to see growth in key segments in which we operate - content licensing, demand from streaming platforms for unscripted content and cost effective premium scripted content which we are well positioned to take advantage of.

We are confident that we will continue to grow our market share to 2026 driven by our scale; our diversification by customer; geography and genre; a strong track record of high-quality content; a very strong slate for 2024 and beyond; and our leading creative talent.

As previously guided, 2024 will be impacted by the 2023 US writers' and actors' strikes which will delay around £80 million revenue from 2024 to 2025. In addition, we are seeing weaker demand from FTA broadcasters in Europe who are holding back spend until there is more certainty in the advertising market.

MEDIA & ENTERTAINMENT

Media & Entertainment (M&E) is the largest commercial broadcaster and streamer in the UK, delivering unrivalled audience scale and reach. It includes Streaming and Broadcast, distributing content through ITVX, our free advertiser-funded streaming service, and our free-to-air linear TV channels.

ITV's M&E strategy recognises and capitalises on the change in viewer behaviour and the evolving needs of advertisers. It is based on two strategic pillars: Supercharge Streaming and Optimise Broadcast. Our focus is to retain our existing viewers and advertisers while also attracting new ones. ITV offers viewers the choice to watch whenever and however they wish, with a strong reputation for brilliant content suited to British audiences. ITV offers advertisers a unique combination of mass simultaneous reach, targeted advertising at scale, and commercial and creative partnerships in a brand-safe and reliably measured environment.

Our strategic pillars have KPIs and 2026 targets which reflect the key drivers of growth and value. See the Strategy section within the CEO's Report for more details on these KPIs, why they are important and how they will enable us to grow digital revenues to at least £750 million by 2026, and drive revenues from linear TV advertising, commercial and creative partnerships, and sponsorship.

Supercharge Streaming

Growing and enhancing our streaming service ITVX

We successfully launched ITVX in December 2022 (which combined our previous offerings ITV Hub, ITV Hub+ and BritBox UK) to transform our streaming service from a catch up service to a content destination and to deliver the inventory to fulfil the growing demand for our digital advertising. Although the main focus of ITVX is the free ad-funded offering, there is also a subscription tier, ITVX Premium.

ITVX's strong performance in its first year is evident by the step change in our KPIs and other viewing metrics as we attract more users who are engaging for longer across our streaming platforms year-on-year. In 2023, the service:

· Attracted more users - monthly active users (MAUs) increased by 19% to 12.5 million year-on-year (2022: 10.5 million)

· Attracted a larger audience - total streaming hours were up 26% to 1,505 million (2022: 1,192 million[19])

· Increased viewing by our target audience - streaming hours amongst light viewers who are harder to reach, increased by 65%, and streaming hours among the 25-54 age group demographic increased by 47%

· Increased engagement and content discovery - streaming hours per viewer, was up 27% and 90% of users that watched an ITVX exclusive, went on to watch other content on the platform

· Increased brand awareness - growing from around 60% at launch to over 90%[20] in 2023

This increased reach and frequency of viewers provide advertisers with valuable addressable audiences at scale in a brand-safe and measured environment. Our robust data and analytics capabilities enable us to offer high-value, data-driven inventory and to generate higher digital revenues, which was up 19% year-on-year.

To deliver and maintain this strong performance we focus our ITVX investment on enhancing the depth and breadth of content, continuous improvements in the product and user experience, and expanding the distribution and marketing of ITVX.

Content: There are over 25,000 hours of content available (including over 7,000 hours exclusively on the premium ad-free tier), including on-demand content from our five linear TV channels, FAST channels, exclusive ITVX content (such as anime, true crime and US box sets), ITVX Kids, and over 300 films creating one of the UK's largest free film libraries. Programmes which contributed significantly to the year-on-year increase in streaming hours include: Love Island, Rugby World Cup, The Only Way Is Essex and Big Brother.

We are constantly testing, learning and evolving our content proposition and windowing strategy between ITVX and our linear TV channels to optimise viewing and monetisation. We are implementing many of the insights gained during 2023 and utilising the data we have, particularly around how we window exclusives, such as dramas, on our platforms.

News is an important driver of viewing and our ITV News proposition is now fully embedded within ITVX, with News streaming hours up 20% year-on-year and we have launched exclusive 90-second ITV News bulletins, a new News category page on the service and regional short and long-form catch up.

Product: Throughout 2023, we have implemented a series of enhancements to improve ITVX's product and user experience. This included the integration of deeper personalisation in Q4, driving content recommendations specific to users. We have started to see positive results with an uplift in MAUs and streaming hours, and an increase in repeat visits by lighter users, who are harder to reach and a key target for us to attract to the service. In addition, ITVX Kids launched in the second half of 2023 as a fully digital experience; and over 90% of our content on ITVX is now subtitled.

In the first half of 2024, we will continue to integrate personalisation across the user experience and utilise it as a driver for marketing. We will further monetise our inventory, by introducing features such as Pause Ads, which seamlessly play ads when a user pauses content, and roll-out out new ways for clients to sponsor collections of content across the service. We will also be introducing subtitles on adverts, something that is extremely important to our advertising clients.

Distribution: The integration of ITVX into third-party platforms substantially increased in 2023, with over 40 new ways for a user to access the service. We have improved the discoverability of ITVX on third-party platforms which has helped drive bigger audiences to our content and the service is now available in almost 100% of UK households.

The introduction of ITVX on Sky Q in Q1 2023, combined with stronger partnerships with both Sky and Virgin has resulted in streamed, on demand viewing with targeted advertising, replacing viewing recorded by users which cannot be monetised. We can now deliver targeted advertising across all our channels on mobile and web, enabling better monetisation opportunities across these platforms.

In 2024, ITVX will roll-out on PlayStation 4 and 5. We will further improve the discoverability of ITVX on third-party platforms through creating additional links that bring users directly into ITVX programmes from the main screens of their devices. The launch of Freely, the new TV streaming service which combines live TV and catch up of the FTA broadcasters will also help make ITV, along with the other PSB's, more accessible. All of this will further expand our distribution footprint, making our content more widely available.

Marketing: Our marketing strategy following ITVX's launch has been focused on driving awareness, consideration and viewing to the service to support the delivery of our KPIs. We have seen awareness for both adults and light viewers grow strongly and our campaigns have helped contribute to the increase in MAUs and streaming hours during the year.

Marketing is an important tool to continue to attract users and viewing on ITVX, and also on our linear TV channels. We see an opportunity to adopt a more responsive approach helping highlight popular programs to commercial valuable audiences. The opportunity and returns from this area are very attractive. In 2024 we will increase our marketing spend by £15 million to drive both streaming and linear viewing. This will include investing in data and on the prominence of our content on third-party platforms; campaigns to engage more 25-54 year-old light viewers - who are highly valuable to advertisers - showcasing the breadth and depth of our quality content; along with continuous focus on measurement and optimisation of our investment. We will continue to evaluate content and marketing ROI and adjust as necessary.

ITVX Premium offers users the opportunity to enjoy all ITVX programming ad-free plus exclusive content and access to BritBox UK (content from the ITV and BBC libraries). Although the main focus of ITVX's launch has been to promote the ad-funded service, we have improved the premium offering by incorporating additional content from our partnership with StudioCanal and worked with third-party platforms to enable greater prominence on device interfaces. We are now simplifying our viewer proposition for ITVX Premium and taking ownership of the relationship with the subscribers. As a result, in 2023, UK streaming subscriptions declined marginally to 1.3 million (2022: 1.4 million) as we transitioned users from our standalone app, BritBox UK, to ITVX Premium, combined with the closure of the Amazon ITV catch up channel.

In addition, in 2024 the BritBox UK service on Amazon Prime Video Channels and the BritBox UK standalone app will also close as we further simplify our offering. This will consolidate all our subscribers under one ITVX Premium brand, and will give us complete ownership of the subscriber base. The closure of these services is expected to impact subscriber numbers and subscription revenues in 2024.

Optimise Broadcast

Continuing to deliver unrivalled audiences with high‑quality programming

Within our Broadcast business, we operate the largest family of free‑to‑air commercial television channels in the UK. These channels provide unparalleled audience scale and reach, as well as targeted demographics demanded by advertisers. Despite the growth in streaming viewing, linear TV remains important for both our viewers and advertisers.

To optimise Broadcast and maintain our USP of delivering mass audiences for advertisers, we will continue to invest in live content, such as sports and large entertainment shows, as well as dramas, factual and news. In total ITV invests over £1.2 billion annually in our content budget across all our linear TV channels and ITVX in order to drive these mass audiences on our linear TV channels, and live and on demand viewing on ITVX.

Over the last few years, linear TV audiences in the UK have gradually declined with audiences spending an increasing amount of time on streaming platforms, both ad-funded and paid. In 2023, total ITV viewing (which includes viewing of all ITV content, across all devices) was down 5% to 13.1 billion hours. For the first ten months of the year, the growth of ITV's digital viewing largely offset the decline in linear viewing, however November and December 2023 were impacted by the strong viewing comparatives of the FIFA World Cup in 2022. Total broadcaster viewing (broadcaster viewing across all devices) declined by 3% in the year and total broadcaster and subscription streaming service viewing (viewing of all broadcaster and subscription streaming service content across all devices) declined by 1% (Source: ITV, BARB).

Despite the challenging linear viewing landscape, our share of the top 1,000 commercial broadcast TV programmes was 91% in 2023 (2022: 93%) and our share of commercial viewing[21] was 32.6% (2022: 33.8%) and we continue to have the largest share of commercial viewing versus our commercial competitors. Content such as I'm A Celebrity…Get Me Out Of Here!, Love Island, Unforgotten, The Bay and the Rugby World Cup, all contributed to our viewing KPIs remaining ahead of our 2026 targets, in the year.

We have an exciting schedule for 2024 to keep our audiences informed and entertained. This includes entertainment shows Celebrity Big Brother and Wheel of Fortune, new dramas Breathtaking, Protection and Ruth Ellis, along with sporting events including UEFA Euros and both men's and women's international football qualifiers.

Strong linear and online advertising proposition

While the advertising market is getting more competitive, ITV is in a good position to be able to compete for advertising in a long-term growing advertising market with its unique combination of mass simultaneous reach, targeted advertising and commercial and creative partnerships. ITV has deep relationships with agencies and advertisers; brand-safe and measured advertising and a strong track record of commissioning and producing content which appeals to UK audiences.

Mass simultaneous reach

Television continues to be a highly effective and efficient medium for advertisers to achieve mass scale and reach. As the viewing and advertising landscape becomes more fragmented, the scale and reach provided by television, and particularly ITV, becomes even more valuable to advertisers. With global steaming platforms entering the advertising market and introducing ad-supported tiers to their subscription plans, ITV's USP as the largest commercial public service broadcaster in the UK remains incredibly important. The advertising and viewing proposition ITV provides to clients is unparalleled, and something that no streamer can match.

Targeted advertising - Planet V

Planet V is ITV's wholly-owned, scaled programmatic addressable advertising platform with an intuitive self-service interface that allows agencies and advertisers to seamlessly and cost-effectively buy highly targeted video advertising on ITVX. Planet V is the second‑largest programmatic video advertising platform in the UK after Google and utilises ITV's extensive data assets and capabilities to provide compelling advertising products for advertisers. ITVX has over 40 million registered users, giving ITV and its advertisers one of the largest first party data sets in the UK. Being wholly owned ensures that all the returns generated by the platform go directly to ITV without any value leakage through third-party commissions.

The platform is used by over 2,000 users in the UK and offers agencies and advertisers access to over 20,000 data-targeting options to create sophisticated audience segments. They can also incorporate their own first-party data in a GDPR-compliant environment using InfoSum (an identity infrastructure provider) and monitor their campaigns through a custom‑built user interface. Advertisers are prepared to pay more for this increasingly sophisticated and valuable ad inventory.

With the expansion of ITVX's online inventory and reach, ITV is well positioned to meet the increasing demand for targeted advertising. We have a significant opportunity to partake in the addressable market of around £6.8 billion in 2023 (Source: AA/WARC Q3 2023 Expenditure Report), and have the foundations in place to successfully compete for the long tail of advertisers within the online video market which were previously inaccessible to ITV due to their scale and targeting requirements. Since we launched Planet V we have attracted in excess of 1,000 new advertisers to ITV.

ITVX and Planet V have helped drive growth in digital advertising revenue in the year, up 21%.

Commercial and creative partnerships

ITV's Commercial team delivers strategic commercial and creative partnerships with advertisers who highly value ITV's large and targeted audiences to establish and grow their own brands. This includes product placement, ad‑funded programming and other partnerships that leverage the strength of our programme brands to help advertisers connect with audiences in unique ways. As a vertically integrated producer broadcaster and streamer, we have the advantage of having editorial, commercial, creative, and production teams working together, creating valuable opportunities for advertisers.

Our Commercial team also has various initiatives to attract and engage advertisers, attracting over 250 new brands to TV and nearly 400 digital-only advertisers to ITV in 2023. For example:

· ITV AdVentures Ignite: Encouraging digitally native brands to advertise on television for the first time

· ITV AdVentures Invest: Through our Media for Equity program, we take minority stakes in direct-to-consumer businesses in return for advertising inventory across ITV's linear TV channels and ITVX, for example, Flarin, a pain relief brand, and Resi, an architectural design company

· ITV Ad Labs: This brings together all innovations under one proposition and includes data solutions which can securely match client data with ITV's existing registered first‑party audience and Boots' Advantage Card and Tesco's Dunnhumby Clubcard databases.

M&E 2023 financial performance

Twelve months to 31 December	2023 £m	2022 £m	Change £m	Change %
Total advertising revenue	1,778	1,931	(153)	(8)
Subscription revenue	59	54	5	9
SDN	48	55	(7)	(13)
Partnerships and other revenue	205	209	(4)	(2)
M&E non-advertising revenue	312	318	(6)	(2)
Total M&E revenue	2,090	2,249	(159)	(7)
Content costs	(1,293)	(1,216)	(77)	(6)
Variable costs	(153)	(130)	(23)	(18)
M&E infrastructure and overheads	(439)	(439)	-	-
Total M&E costs	(1,885)	(1,785)	(100)	(6)
Total M&E adjusted EBITA*	205	464	(259)	(56)
Total adjusted EBITA margin	10%	21%

* Refer to APMs for key adjustments to EBITA

Twelve months to 31 December	2023 £m	2022 £m	Change £m	Change %
Digital advertising revenue	415	343	72	21
Subscription revenue	59	54	5	9
Other	16	14	2	14
Total digital revenue	490	411	79	19

Total M&E revenue was down 7% in 2023 with the decrease predominantly driven by the expected decline in total advertising revenue which was down 8% to £1,778 million. Digital revenue[22], an important Streaming KPI, was up 19% in the year and within this, digital advertising revenues were up 21% year-on-year.

M&E non-advertising revenues were down 2% in 2023, with growth in subscription revenue offset by the expected and continuing decline in SDN revenue, and a reduction in partnerships and other revenue. Further detail on the year-on-year movement is included on the following page.

Total M&E costs were up 6% in the year and within this, content costs was up 6% reflecting the additional planned investment in content for ITVX which was partially offset by a reduction in content amortisation to reflect the windowing of content between linear and streaming, as previously guided.

Variable costs were up 18%, driven by an increase in bandwidth costs and other streaming-related costs, along with third-party commercial payaways.

M&E infrastructure and overhead costs were flat year-on-year with inflation and the investment in headcount associated with ITVX, offset by a reduction in the employee bonus payout and permanent cost savings of £11 million delivered in the year relating to the renegotiation of transmission contracts and property savings.

M&E adjusted EBITA was down 56% with a margin of 10% reflecting the challenging advertising market and planned investment in ITVX.

Total advertising revenue (TAR)

TAR was down 8% year-on-year in 2023 which was in line with our expectations.

The start of 2023 saw TAR down 10% in Q1 and down 11% in Q2 against tough comparatives and the challenging macroeconomic environment. Q3 was up 1% and Q4 was down 9% with October up 2%, November down 15% and December down 14% against strong comparatives in 2022 from the FIFA World Cup.

As expected, most TAR categories were down year-on-year, with the largest being Finance, down 31% driven by online and retail banks and insurance companies. Publishing and Broadcasting was down 28% with decreases from streaming platforms and social media sites, and Entertainment and Leisure was down 18% with declines from gaming, music and film companies.

Categories that increased spend during the year included FMCGs, who used brand advertising to help push through price increases to consumers. Airlines and Travel were up 3%, driven by online holiday companies and overseas tourism boards.

After many years of double digit growth, e-commerce companies, excluding gambling, decreased 29% driven by online car and retail brands, as a result of the reduced availability of venture capital funding.

Subscription revenue

Subscription revenue is generated directly from the premium tier of ITVX, our standalone BritBox UK app, and BritBox UK and ITV Catch Up services on Amazon Prime Video Channels. It does not include BritBox International, which is included within JVs and Associates.

In 2023, subscription revenue increased by 9% due to the annualisation of subscribers in 2022, combined with new ITVX Premium subscribers. This was partly offset by a reduction in subscribers on our BritBox UK standalone app and the closure of ITV Catch Up on Amazon Prime Video Channels.

In 2024 the BritBox Amazon and the BritBox direct to consumer service will close, which will impact our number of subscribers and subscription revenues in 2024.

SDN

SDN generates revenue by licensing video streams to broadcast channels, radio stations and data providers on digital terrestrial television (DTT) or Freeview. SDN customers include ITV and third parties. SDN's current licence has been renewed until 2034.

In 2023, external revenue (non-ITV) declined as expected by 13%. This decrease is primarily due to the renewal of long-term contracts with third parties at current market rates, in the current and prior year. This trend is expected to continue.

Partnerships and other revenue

Partnerships and other revenue include revenue from platforms, such as Sky and Virgin Media O2, competition revenue, third‑party commission, e.g. for services we provide to STV, and commercial revenue from our creative partnerships.

Partnerships and other revenue declined by 2% in the year mainly driven by lower competition revenue.

We expect Partnerships and other revenues to decline in 2024 following our decision to revise our partnership agreements to allow ITVX viewers to watch in HD, and allow ITV to target ads to a much larger proportion of those viewers, using Planet V.

BritBox International

On 01 March 2024, ITV announced the sale of its 50% shareholding in BritBox International to the BBC Studios for £255 million. ITV Studios will continue to receive an ongoing revenue stream from BritBox International similar to current levels for the use of ITV content under new extended licensing agreements.

Prior to this date, BritBox International was ITV's joint venture with the BBC, providing an ad‑free subscription streaming service offering the most comprehensive collection of British content available in the US, Canada, Australia, South Africa and the Nordics (made up of Sweden, Finland, Denmark and Norway). Subscribers on 31 December 2023 were 3.7 million. (31 December 2022: 3.0 million). BritBox International revenue and profit or loss, is included in share of profits/losses on JVs and not within M&E adjusted EBITA.

OUTLOOK

We remain on track to deliver at least £750 million of digital revenues by 2026.

We have had a good start to 2024 and will build on ITVX's successful launch year through continuous improvements in content, product, distribution and marketing.

ITVX's strong performance in 2023 has shown us that we can grow viewing significantly with slightly lower overall content spend. Therefore we expect to marginally reduce our content cost in 2024 to around £1,275 million as we further optimise linear, evolve our windowing strategy and improve personalisation. At the same time we will increase our marketing spend by £15 million to drive both streaming and linear viewing. We will continue to evaluate content and marketing ROI and adjust as necessary.

Compared to the same period in 2023, TAR is expected to be up 3% in Q1 2024, with continued strong growth in digital advertising revenues.

ALTERNATIVE PERFORMANCE MEASURES

The Annual Report and Accounts includes both statutory and adjusted measures (Alternative Performance Measures or APMs), the latter of which, in management's view, reflect the underlying performance of the business and provide a more meaningful comparison of how the business is managed and measured on a day‑to‑day basis.

Our APMs and KPIs are aligned with our strategy and business divisions and together are used to measure the performance of our business and form the basis of the performance measures for remuneration. Adjusted results exclude certain items because, if included, they could distort the understanding of our performance for the period and the comparability between periods. APMs are not defined terms under IFRS and may not be comparable with similarly titled measures reported by other companies.

As adjusted results exclude certain items (such as significant legal, major restructuring and transaction items), they should not be regarded as a complete picture of the Group's financial performance. The exclusion of adjusting items may result in adjusted earnings being materially higher or lower than statutory earnings. In particular, when significant impairments, restructuring charges and legal costs are excluded, adjusted earnings will be higher than statutory earnings.

The Audit and Risk Committee has oversight of ITV's APMs and actively reviews, challenges, revises and approves the policy for classifying adjustments and exceptional items. Further detail is included in the following section.

Key adjustments for EBITA, adjusted EBITA, profit before tax and EPS

EBITA is calculated by adjusting statutory operating profit for operating exceptional items and amortisation and impairment.

Adjusted EBITA is calculated by adding back high‑end production tax credits to EBITA. Further adjustments, which include the gain/loss on the sale of non‑current assets, amortisation and impairment of assets acquired through business combinations and investments, and certain net financing costs, are made to remove their effect from adjusted profit before tax and adjusted EPS. The tax effects of all these adjustments are reflected in the adjusted tax charge. These adjustments are detailed below.

Adjusted EBITDA, which is used to calculate the Group's leverage, is calculated by adding back depreciation to adjusted EBITA.

Production tax credits

The ability to access tax credits, which are rebates based on production spend, is fundamental to our ITV Studios business across the world when assessing the viability of investment decisions, especially with regard to drama and comedy. ITV reports tax credits generated in the US and other countries (e.g. Italy, Canada and Spain) within cost of sales, whereas in the UK tax credits for high‑end drama must be classified as a corporation tax item. However, in our view all tax credits relate directly to the production of programmes. Therefore, to align treatment, regardless of production location, and to reflect the way the business is managed and measured on a day‑to‑day basis, the UK tax credits are recognised in adjusted EBITA. Our cash measures, including profit to cash conversion and free cashflow are also adjusted for the impact of production tax credits.

In 2024, the adjustment we make to add back high‑end production tax credits to EBITA will change. See the Tax note in the Finance Review Section for further details.

Exceptional items

These items are excluded to reflect performance in a consistent manner and in line with how the business is managed and measured on a day‑to‑day basis. They are typically material amounts related to costs, gains or losses arising from events that are not considered part of the core operations of the business, though they may cross several accounting periods. These include, but are not limited to, costs directly related to acquisition activity, costs related to major reorganisation and restructuring programmes, material onerous contracts, significant impairments, employee‑related tax provisions related to earlier financial periods (IR35) and other items such as legal settlements and non‑routine legal costs (e.g. legal costs related to items which are themselves considered to be exceptional items). We also adjust for the tax effect of these items.

See note 2.2 to the financial information for further detail.

Acquisition‑related costs

We structure our acquisitions with earnouts or put and call options, to allow part of the consideration to be based on the future performance of the business as well as to lock in and incentivise creative talent. Where consideration paid or contingent consideration payable in the future is employment‑linked, it is treated as an expense (under accounting rules) and therefore part of our statutory results. However, we exclude all consideration of this type from adjusted EBITA, adjusted profit after tax and adjusted EPS as, in our view, these items are part of the capital transaction and do not form part of the Group's core operations. The Finance Review explains this further. Acquisition‑related costs, including legal and advisory fees on completed deals or significant deals that do not complete, are also treated as an expense (under accounting rules) and therefore on a statutory basis form part of our statutory results. In our view, these items also form part of the capital transaction or are one‑off and material in nature and are therefore excluded from our adjusted measures.

Restructuring and reorganisation costs

Where there has been a material change in the organisational structure of a business area or a material initiative, these costs are highlighted and are excluded from our adjusted measures. These costs arise from significant initiatives to reduce the ongoing cost base and improve efficiency in the business to enable the delivery of our strategic priorities. We consider each project individually to determine whether its size and nature warrant separate treatment and disclosure.

Amortisation and impairment

Amortisation and any initial impairment of assets acquired through business combinations and investments are not included within adjusted earnings. As these costs are acquisition‑related, and in line with our treatment of other acquisition‑related costs, we consider them to be capital in nature as they do not reflect the underlying trading performance of the Group. Amortisation of software licences and development is included within our adjusted profit before tax as management consider these assets to be core to supporting the operations of the business

Net financing costs

Net financing costs are adjusted to reflect the underlying cash cost of interest for the business, providing a more meaningful comparison of how the business is managed and funded on a day‑to‑day basis. The adjustments made remove the impact of mark‑to‑market gains or losses on swaps and foreign exchange, one‑off fees and premiums relating to the buyback of bonds, exceptional interest and other finance costs on acquisitions, imputed pension interest and other financial gains and losses that do not reflect the relevant interest cash cost to the business and are not yet realised balances.

Reconciliation between statutory and adjusted results

Twelve months to 31 December	2023 Statutory £m	2023 Adjustments £m	2023 Adjusted £m	2022 Statutory £m	2022 Adjustments £m	2022 Adjusted £m
EBITA1	404	85	489	668	49	717
Exceptional items (operating)2	(77)	77	-	(65)	65	-
Amortisation and impairment3	(89)	25	(64)	(84)	57	(27)
Operating profit	238	187	425	519	171	690
Net financing costs4	(45)	16	(29)	(26)	-	(26)
Share of profits on JVs and associates	-	-	-	8	-	8
Profit before tax	193	203	396	501	171	672
Tax5	16	(101)	(85)	(66)	(69)	(135)
Profit after tax	209	102	311	435	102	537
Non‑controlling interests	1	-	1	(7)	-	(7)
Earnings	210	102	312	428	102	530
Shares (million), weighted average	4,023	-	4,023	4,010	-	4,010
EPS (p)	5.2p	-	7.8p	10.7p	-	13.2p
Diluted EPS (p)6	5.2p	-	7.7p	10.6p	-	13.1p

1. £85 million (2022: £49 million) adjustment relates to production tax credits which we consider to be a contribution to production costs and working capital in nature rather than a corporate tax item. EBITA is not a statutory measure

2. Exceptional items of £77 million (2022: £65 million) largely relate to acquisition-related expenses, restructuring, transformation and property move costs. Refer to the Finance Review

3. £25 million (2022: £57 million) adjustment relates to amortisation and impairment of assets acquired through business combinations and investments. We include only amortisation on purchased intangibles, such as software within adjusted profit before tax

4. £16 million (2022: £nil) adjustment is for non-cash interest cost. This provides a more meaningful comparison of how the business is managed and funded on a day-to-day basis

5. Tax adjustments are the tax effects of the adjustments made to reconcile profit before tax and adjusted profit before tax. A full reconciliation is included in the Finance Review

6. Weighted average diluted number of shares in the period was 4,059 million (2022: 4,046 million)

Adjusted EBITDA (used to calculate the group's leverage) for the year is £535 million (2022: £770 million), calculated by adding back depreciation of £46 million (2022: £53 million) to adjusted EBITA (which is shown in the table above).

OTHER ALTERNATIVE PERFORMANCE MEASURES

Total revenue

As a vertically integrated producer broadcaster and streamer, we look at the total revenue generated by the business including internal revenue, which is the sale of ITV Studios programmes to M&E. ITV Studios selling programmes to the M&E business is an important part of our strategy as a vertically integrated business and it ensures we own all the rights to the content.

A reconciliation between external revenue and total revenue is provided below.

Twelve months to 31 December	2023 £m	2022 £m
External revenue (Statutory)	3,624	3,728
Internal supply	636	617
Total revenue (Adjusted)	4,260	4,345

ITV Studios organic revenue growth

ITV Studios organic revenue growth adjusts revenue growth for the impacts of foreign currency and acquisitions in the current or comparative period. Current period revenues are measured at constant currency which assumes exchange rates remain consistent with the comparative period. The table below shows the calculation of our organic revenue growth within ITV Studios:

Twelve months to 31 December	2023 £m	2022 £m	Change £m	Change %
ITV Studios total revenue	2,170	2,096	74	4
Adjustment for constant currency	15	-	-	-
Adjustment for acquisitions in prior period	(65)	(32)	(33)	103
ITV Studios total revenue - organic basis	2,120	2,064	56	3

Net pension surplus/deficit

This is our defined benefit pension scheme surplus or deficit under IAS 19 adjusted for other pension assets, mainly gilts, which are held by the Group as security for future unfunded pension payments for four Granada executives and over which the unfunded pension scheme holds a charge. See note 3.7 to the financial information.

Profit to cash conversion

This is the measure of our effectiveness at working capital management. It is calculated as our adjusted cash flow as a proportion of adjusted EBITA. Adjusted cash flow, which reflects the cash generation of our underlying business, is calculated on our statutory cash generated from operations and adjusted for exceptional items, net of capex on property, plant and equipment and intangible assets, and including the cash impact of high‑end production tax credits.

Covenant net debt and covenant liquidity

Covenant net debt is our leverage as defined in our Revolving Credit Facility (RCF) agreement. This calculation is materially different to how net debt is defined and is relevant in demonstrating we have met the required RCF financial covenants at our reporting date.

Covenant adjusted EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) is used to calculate our covenant compliance and our leverage, and is defined in the RCF agreement. The calculation of covenant adjusted EBITDA, covenant net debt and covenant liquidity are detailed in the tables below:

	31 December 2023 £m	31 December 2022 £m
Statutory operating profit	238	519
Exceptional items	77	65
Amortisation and impairment	89	84
EBITA	404	668
Depreciation	46	53
Right of use assets depreciation	(19)	(25)
Interest charged on lease liabilities	(4)	(4)
Covenant adjusted EBITDA	427	692

	31 December 2023 £m	31 December 2022 £m
Net debt (including IFRS 16 lease liabilities)	(553)	(623)
Impact of IFRS 16 lease liabilities	115	132
Long‑term trade payables	(25)	(17)
Other pension asset	48	47
Covenant net debt	(415)	(461)
Covenant adjusted EBITDA*	427	692
Covenant net debt to adjusted EBITDA*	1.0x	0.7x

Cash and cash equivalents	340	348
Undrawn RCF	600	450
Undrawn CDS facility	300	300
Covenant liquidity**	1,240	1,098

* Covenant adjusted EBITDA is defined per the facility agreement. The Finance Review includes further detail on our covenant ratios.

** Covenant liquidity is defined as cash and cash equivalents plus undrawn committed facilities.

FINANCE REVIEW

CHRIS KENNEDY
GROUP CFO & COO

This Finance Review focuses on the more technical aspects of our financial results while the operating and financial performance of the Group, M&E and ITV Studios has been discussed within the Operating and Financial Performance Review.

Our Alternative Performance Measures (APMs) section, explains the adjustments we make to our statutory results. This enables focus on the key measures that we report on and use as KPIs across the business. See earlier sections for further details.

Twelve months to 31 December	2023 £m	2022 £m	Change £m	Change %
ITV Studios total revenue	2,170	2,096	74	4
Total advertising revenue	1,778	1,931	(153)	(8)
M&E non-advertising revenue	312	318	(6)	(2)
M&E total revenue	2,090	2,249	(159)	(7)
Total non-advertising revenue	2,482	2,414	68	3
Total group revenue	4,260	4,345	(85)	(2)
Internal supply	(636)	(617)	(19)	(3)
Group external revenue	3,624	3,728	(104)	(3)
Group adjusted EBITA	489	717	(228)	(32)
Group adjusted EBITA margin	13%	19%		(6)
Statutory operating profit	238	519	(281)	(54)
Adjusted EPS	7.8p	13.2p	(5.4p)	(41)
Statutory EPS	5.2p	10.7p	(5.5p)	(51)
Dividend per share	5.0p	5.0p
Net debt as at 31 December	(553)	(623)	70	11

Exceptional items

Twelve months to 31 December	2023 £m	2022 £m
Acquisition-related expenses	(24)	(4)
Restructuring and transformation costs	(25)	(28)
Property costs	(10)	(24)
Costs relating to the passing of Her Majesty Queen Elizabeth II	-	(16)
Sports rights impairment reversal	-	5
Pension related costs	-	(4)
Employee‑related tax provision	3	(10)
Insured trade receivable	3	23
Legal settlements	(13)	-
Legal and other costs	(11)	(7)
Operating exceptional items	(77)	(65)
Total exceptional items	(77)	(65)

Total exceptional items in the period were £77 million (2022: £65 million). Acquisition-related expenses of £24 million (2022: £4 million) are predominantly performance-based, employment-linked consideration to former owners, and professional fees related to acquisitions and potential acquisitions.

Restructuring and transformation costs of £25 million (2022: £28 million) relate to one-off restructuring projects in respect of the Group-wide commitment to reduce the overhead cost base, as well as reorganisation and transformation programme costs to deliver our strategy. Significant projects include the implementation of a new cloud-based ERP solution and rationalisation of the Studios operational structures outside the UK.

Property costs relate to the London office move to Broadcast Centre. No further exceptional costs are expected related to this move.

Employee‑related tax provisions credit of £3 million relates to the release of provisions in respect of years that are no longer in scope and confirmation from HMRC that certain individuals are no longer under review in respect of IR35. The £10 million charge in 2022 reflected an increase in the provision for potential employment taxes due to HMRC in relation to the employment status of individuals contracted by the Group for periods before 2022.

In 2017, the Group recorded a bad debt provision of US$41 million related to trade receivables for The Voice of China. As the Directors anticipated recovering the amount either from the counterparty or from trade credit insurance, US$37 million was treated as an exceptional cost and the insurance excess of US$4 million was treated as an operating cost. US$34 million of cash received in 2018 and 2019 on behalf of the debtor was placed under review and the bad debt provision remained in place. During 2022, the review was completed, leading to the release of the corresponding bad debt provision of which £23 million was treated as an exceptional credit. During 2023, a settlement of the remaining claim was agreed upon with insurers resulting in an exceptional credit of £3 million.

Legal settlements of £13 million relate to settlements or proposed settlements on a number of significant legal cases which are considered to be outside the normal course of business.

Legal and other costs relate primarily to legal costs for matters considered to be outside the normal course of business, including Box Clever, The Voice of Holland, the UK Competition and Markets Authority (CMA) investigation and the Phillip Schofield KC Review.

Net financing costs

Twelve months to 31 December	2023 £m	2022 £m
Financing costs directly attributable to loans and bonds	(24)	(26)
Cash-related net financing costs	(5)	1
Amortisation on bonds and gilts	-	(1)
Adjusted financing costs	(29)	(26)
Net pension interest	8	-
Other net financial losses and unrealised foreign exchange	(24)	-
Statutory net financing costs	(45)	(26)

Adjusted financing costs were £29 million (2022: £26 million) largely due to financing costs attributable to loans and bonds. Statutory net financing costs were £45 million (2022: £26 million) mainly driven by charges related to acquisition-related put and call options.

JVs and associates

Our share of profits from JVs and associates in the period was £nil (2022: profit of £8 million). This was our share of the net profits and losses arising from our investments, such as BritBox International, Bedrock Entertainment and Blumhouse Television. The reduction year-on-year primarily results from the phasing of the delivery of productions.

Profit before tax

Statutory profit before tax decreased significantly year-on-year to £193 million (2022: £501 million) as a result of the impact of the challenging advertising market and planned ITVX investment.

Twelve months to 31 December	2023 £m	2022 £m
Statutory profit before tax	193	501
Production tax credits	85	49
Exceptional items	77	65
Amortisation and impairment*	25	57
Adjustments to net financing costs	16	-
Adjusted profit before tax	396	672

* In respect of assets arising from business combinations and investments.

Tax

Adjusted tax charge

The total adjusted tax charge for the year was £85 million (2022: £135 million), corresponding to an effective tax rate on adjusted PBT of 21.5% (2022: 20.1%), which is lower than the standard UK corporation tax rate of 23.5% (2022: 19%). We expect the adjusted effective tax rate to be around 25% in 2024, as a result of the increase in the UK statutory rate to 25% from April 2023.

On a reported basis, there is a tax credit of £16 million (2022: £66 million tax charge) which corresponds to an effective tax rate of (8.3%) (2022: tax charge rate 13.2%). This rate in 2023 is lower than in previous years due to the impact of higher HETV tax credits relative to the tax charge, as well as a proportionally lower profit before tax in the period compared to the prior year. The adjustments made to reconcile the statutory tax charge with the adjusted tax charge are the tax effects of the adjustments made to reconcile PBT and adjusted PBT, as detailed in the previous table.

Twelve months to 31 December	2023 £m	2023 Effective tax rate	2022 £m	2022 Effective tax rate
Statutory tax (credit)/charge	(16)	(8.3)%	66	13.2%
Production tax credits	85	100%	49	100%
Charge for exceptional items	12	15.6%	8	12.3%
Charge in respect of amortisation and impairment*	6	24.0%	12	21.1%
Charge in respect of adjustments to net financing costs	(2)	(12.5)%	-	-
Adjusted tax charge**	85	21.5%	135	20.1%

* In respect of intangible assets arising from business combinations and investments. Also reflects the cash tax benefit of tax deductions for US goodwill.

** As a percentage of adjusted profit before tax.

Cash tax

Cash tax paid in the year was £32 million (2022: £55 million) and is net of £38 million of production tax credits received (2022: £31 million). The majority of the cash tax payments were made in the UK. The cash tax paid is lower compared to the previous year due to lower profits and higher production tax credits received. A reconciliation between the tax charge for the year and the cash tax paid in the year is shown below.

Twelve months to 31 December	2023 £m	2022 £m
Tax credit/(charge) (statutory)	16	(66)
Temporary differences recognised through deferred tax*	7	44
Prior year adjustments to current tax	12	(9)
Current tax, current year	35	(31)
Phasing of tax payments (including in respect of pension contribution benefits)	(20)	(6)
Production tax credits - timing of receipt	(47)	(18)
Cash tax paid (statutory)	(32)	(55)

* Further detail is included within Note 2.3 of the financial information.

Changes to the current UK system of Audio-Visual tax credits

On 29 November 2023, the UK government issued final legislation to reform the current system of Audio-Visual Expenditure Credit ('AVEC') tax credits to merge the four existing AVEC schemes (Film, High-End Television (HETV), Children's Television and Animation) into a single scheme and has reviewed the qualifying criteria. The AVEC legislation was substantively enacted on 5 February 2024 and can be claimed on expenditure incurred from 1 January 2024.

The new scheme is one of expenditure credits as opposed to corporate tax relief, requiring a change to the accounting treatment to include them within statutory operating profit rather than within the consolidated tax charge. The effect of this change in legislation will therefore be to increase our EBITA, adjusted EBITA, adjusted EBITA margin, profit before tax and tax expense but will leave our profit after tax unchanged, this is compared to the previous AVEC accounting treatment. We continue to assess the impact on the Group and do not anticipate there to be a material change in their net economic value.

Base Erosion and Profit Shifting (BEPS) Pillar Two

On 20 June 2023, Finance (No.2) Act 2023 was substantively enacted in the UK, introducing a global minimum effective tax rate of 15% for large groups and for financial years beginning on or after 31 December 2023. Taxation balances are adjusted for a change in tax law if the change has been substantively enacted by the balance sheet date. However the amendments to IAS 12 'Income Taxes' Pillar Two income taxes provides an exemption from the requirement to recognise and disclose deferred taxes arising from enacted or substantively enacted tax law that implements the Pillar Two model rules.

Based on an initial analysis of the current year financial data, most territories in which the Group operates are expected to qualify for one of the safe harbour exemptions such that top-up taxes should not apply. In territories where this is not the case there is the potential for Pillar Two taxes to apply, but these are not expected to be material. The Group continues to refine this assessment and analyse the future consequences of these rules.

Tax strategy

ITV is a responsible business, and we take a responsible attitude to tax, recognising that it affects all of our stakeholders. To allow those stakeholders to understand our approach to tax, we have published our Global Tax Strategy, which is available on our corporate website.

www.itvplc.com/investors/governance/policies

We have four key strategic tax objectives:

1. Engage with tax authorities in an open and transparent way to minimise uncertainty

2. Proactively partner with the business to provide clear, timely, relevant and business focused advice across all aspects of tax

3. Take an appropriate and balanced approach when considering how to structure tax sensitive transactions

4. Manage ITV's tax risk by operating effective tax governance and understanding our tax control framework with a view to continuously adjusting our approach to be compliant with our tax obligations.

Our tax strategy is aligned with that of the business and its commercial activities and establishes a clear Group‑wide approach based on openness and transparency in all aspects of tax reporting and compliance, wherever the Company and its subsidiaries operate. The strategy confirms that ITV does not engage in or condone tax evasion or the facilitation of tax evasion in any form and that we have in place reasonable procedures to prevent the facilitation of tax evasion. Within our overall governance structure, the governance of tax and tax risk is given a high priority by the Board, and Audit and Risk Committee (ARC). The ITV Global Tax Strategy, approved by the Board and ARC in September 2023, and as published on the ITV plc website, is compliant with the UK tax strategy publication requirement set out in Part 2 Schedule 19 of the Finance Act 2016.

EPS - adjusted and statutory

Overall, adjusted profit after tax was down at £311 million (2022: £537 million). Non-controlling interest was a share of losses of £1 million (2022: share of profit of £7 million) which is the net result from the non-ITV owned share in entities such as Plimsoll, Cattleya and Tomorrow Studios.

Adjusted basic EPS was down 41% to 7.8p in the year (2022: 13.2p). The weighted average number of shares increased year-on-year to 4,023 million (2022: 4,010 million). Diluted adjusted EPS in the year was 7.7p (2022: 13.1p) reflecting a weighted average diluted number of shares of 4,059 million (2022: 4,046 million).

Statutory EPS decreased by 51% to 5.2p (2022: 10.7p).

A full reconciliation between statutory and adjusted EPS is included in the Alternative Performance Measures section.

Dividend per share

The Board recognises the importance of the ordinary dividend to ITV shareholders. Reflecting its confidence in the business and its strategy, as well as the continued strong cash generation, in line with ITV's dividend policy, the Board has declared a final dividend of 3.3p (2022: 3.3p), giving an ordinary dividend of 5.0p per share for the full year 2023 (2022: 5.0p), a total payout of £201 million. The Board remains committed to paying a total dividend of at least 5.0p in 2024, which it expects to grow over the medium term, whilst balancing further investment to support our strategy and our commitment to investment grade metrics over the medium term.

Dividends are distributed based on the realised distributable reserves (within retained earnings) of ITV plc (the Company) and not based on the Group's retained earnings.

The dividend timetable is as follows:

Announcement	Thursday 7 March 2024
Ex-dividend date	Thursday 11 April 2024
Record date	Friday 12 April 2024
Dividend paid	Thursday 23 May 2024

Acquisitions

As part of our strategy to Expand Studios, we consider selective value-creating M&A and talent deals in both scripted and unscripted to obtain further creative talent and IP.

We have strict criteria for evaluating potential acquisitions. Financially, we assess ownership of IP, 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, as well as retention and succession planning for key individuals in the business.

We have generally structured 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. This has allowed us to lock in creative talent and ensure our incentives are aligned, and 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 future payments are directly related to the seller remaining with the business, these payments are treated as employment costs and, therefore, are part of our statutory results. However, we exclude these payments from adjusted profits and adjusted EPS as an exceptional item, as in our view, for the reasons set out above, these items are part of the capital consideration reflecting how we structure our transactions and do not form part of the core operations.

Acquisition-related liabilities or performance-based employment-linked earnouts are amounts estimated to be payable to previous owners. The estimated future payments as at 31 December 2023 are £105 million and are sensitive to forecast profits as they are based on a multiple of earnings. The range of reasonably possible outcomes for the liability is between £86 million and £147 million. The estimated future payments, treated as employment costs, are accrued over the period the sellers are required to remain with the business, and those not linked to employment are recognised at acquisition at their time discounted value.

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. Expected future payments of £105 million have increased by £16 million since 31 December 2022, due to increases in forecast profits.

At 31 December 2023, £78 million of expected future payments had been recorded on the balance sheet, with the balance of £27 million to be accrued over the period in which the sellers are required to remain with the business.

There were no acquisitions during 2023.

Cash generation

Profit to cash conversion

Twelve months to 31 December	2023 £m	2022 £m
Adjusted EBITA	489	717
Working capital movement	90	(150)
Adjustment for The Voice of China cash received*	-	23
Adjustment for production tax credits	(47)	(18)
Depreciation**	46	53
Share-based compensation	16	19
Acquisition of property, plant and equipment and intangible assets***	(70)	(78)
Lease liability payments (including lease interest)	(26)	(26)
Adjusted cash flow	498	540
Profit to cash ratio (adjusted EBITA/adjusted cash flow)	102%	75%

* Cash received in 2018 and 2019 for The Voice of China was placed under review and treated as an exceptional cash receipt and excluded from the profit to cash conversion calculation. In 2022, the review completed and the cash was released. This adjustment shows the conversion of exceptional cash to operation cash.

** Depreciation of £46 million (2022: £53 million) includes £28 million (2022: £33 million) which relates to ITV Studios and £18 million (2022: £20 million) relating to Media & Entertainment.

*** Except where disclosed, management views the acquisition of property, plant and equipment and intangibles as business as usual capex, necessary to the ongoing investment in the business.

Cash generated from operations is reconciled to the adjusted cash flow as follows:

Twelve months to 31 December	2023 £m	2022 £m
Cash generated from operations	488	537
Cash outflow from exceptional items	68	53
Cash generated from operations excluding exceptional items	556	590
Adjustment for production tax credits	38	31
Adjustment for The Voice of China cash received	-	23
Acquisition of property, plant and equipment and intangible assets	(70)	(78)
Lease liability payments (including lease interest)	(26)	(26)
Adjusted cash flow	498	540

One of ITV's strengths is its cash generation, reflecting our ongoing tight management of working capital balances. We manage risk when making all investment decisions, particularly in scripted content and ITVX, through having a disciplined approach to cash and costs. Remaining focused on cash and costs means we are in a good position to continue to invest across the business in line with our strategic priorities.

In the year, we generated £498 million of operational cash (2022: £540 million) from £489 million of adjusted EBITA (2022: £717 million), resulting in a profit to cash ratio of 102% (2022: 75%). The increase in our profit to cash ratio year-on-year reflects a favourable movement in working capital due to the unwind of programme rights and inventory previously built up for the launch of ITVX. In addition, there has been a reduction in production inventories predominantly in the US as a result of the 2023 writers' and actors' strike.

Free cash flow

Twelve months to 31 December	2023 £m	2022 £m
Adjusted cash flow	498	540
Net interest paid (excluding lease interest)	(27)	(37)
Adjusted cash tax*	(70)	(86)
Pension funding	(40)	(137)
Free cash flow	361	280

* Adjusted cash tax of £70 million is total net cash tax paid of £32 million plus receipt of production tax credits of £38 million, which are included within adjusted cash flow from operations, as these production tax credits relate directly to the production of programmes.

Our free cash flow after payments for interest, cash tax and pension funding was £361 million (2022: £280 million).

Funding and liquidity

Debt structure and liquidity

The Group's financing policy is to manage its liquidity and funding risk for the medium to long term. ITV uses debt instruments with a range of maturities, has access to appropriate short-term borrowing facilities and has a policy to maintain a minimum of £250 million of cash and undrawn committed facilities available at all times. We have three committed facilities in place to maintain our financial flexibility, which includes a £500 million multilateral Revolving Credit Facility (RCF). £83 million of this facility matures in January 2028, and £417 million remains committed until January 2029. The RCF has leverage and interest cover covenants which require us to maintain a covenant net debt to adjusted EBITDA ratio of below 3.5x and interest cover (adjusted EBITDA to net finance charges) above 3.0x.

At 31 December 2023, ITV's financial position was well within its covenants. During the year, the Group secured an additional £100 million of committed funding via a bilateral RCF which matures in 2028. The terms and conditions, including financial covenants, are aligned to the £500 million multilateral RCF facility.

We also have a bilateral financing facility of £300 million, which is free of financial covenants and matures on 30 June 2026. At 31 December 2023, all facilities were undrawn (31 December 2022: only £50 million from the £500 million RCF was drawn), which with cash and cash equivalents of £340 million, provided total liquidity of £1,240 million (31 December 2022: £1,098 million). This provides us with sufficient liquidity to meet the requirements of the business in the short to medium term under a variety of scenarios, including a severe but plausible downside scenario.

After acquisition-related costs, pension and tax payments, we ended the period with reported net debt of £553 million (31 December 2022: £623 million).

Reported net debt

At 31 December	2023 £m	2022 £m
Gross cash	340	348
Gross debt (including IFRS 16 lease liabilities)	(893)	(971)
Net debt	(553)	(623)

Financing - gross debt

We are financed using debt instruments and facilities with a range of maturities. Borrowings at 31 December 2023 were repayable as follows:

Amount repayable as at 31 December 2023	£m	Maturity
€600 million Eurobond*	535	Sep 2026
£230 million term loan	230	Jul 2027
Other loans	13	Various
Total debt repayable on maturity**	778

* Includes £15 million currency component of swaps held against euro-denominated bond.

** Excludes £115 million of IFRS16 Lease Liabilities.

The Group's €259 million Eurobond which matured in December 2023 was refinanced by drawing on the £230 million committed four year term loan, maturing in July 2027. The term loan has the same financial covenants as ITV's Revolving Credit Facility and is excluded from the total committed undrawn facilities of £900 million.

Capital allocation and leverage

In line with our capital allocation policy, our priorities remain as follows: to invest organically in line with our strategic priorities; manage our financial metrics consistent with our commitment to investment grade metrics over the medium term; sustain a regular ordinary dividend which can grow over the medium term; continue to consider value creating inorganic investment against strict financial and strategic criteria, and any surplus capital will be returned to shareholders.

Our objective is to run an efficient balance sheet and manage our financial metrics appropriately, consistent with our commitment to investment grade metrics over the medium term. At 31 December 2023, our leverage, or net debt to adjusted EBITDA was 1.0x (31 December 2022: 0.8x).

Credit ratings

We continue to be rated investment grade by two rating agencies. Our current ratings are BBB‑ (stable outlook) by Standard and Poor's and Baa3 (stable outlook) by Moody's Investor Services. The factors that are taken into account in assessing our credit rating include our degree of operational gearing and 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. We do not hedge our exposure to revenues and profits generated overseas, as this is seen as an inherent risk. We may elect to hedge our overseas net assets, where material.

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 known or forecast transaction where there is an underlying cash exposure for the full tenor of that exposure, to a maximum of five years forward, where the portion 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 retranslation of foreign currency loans and deposits. Our policy is to keep these balances to a minimum and hedge 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. The foreign exchange and interest rate hedging strategy is set out in our Treasury policies which are approved by the ITV PLC Board.

Production inventories, contract assets and liabilities

In 2023, contract assets increased by £37 million, production inventories decreased by £259 million and contract liabilities decreased by £185 million compared to 31 December 2022. Contract assets increased due to UK scripted growth with streaming platforms. The production inventories decrease was driven predominantly by key US and UK deliveries. Contract liabilities decreased due to the phasing of production deliveries, particularly in the US and the UK.

Pensions

The net pension surplus for the defined benefit schemes at 31 December 2023 on an accounting basis was £209 million (31 December 2022: £192 million). The movement in the year was driven by employer contributions and a reduction in liabilities due to changes in demographic assumptions partly offset by a fall in corporate bond yields.

The net pension assets include £48 million of gilts, which are held by the Group as security for future unfunded pension payments to four former Granada executives, the liabilities of which are included in our pension obligations. A full reconciliation is included within note 3.7 to the financial information.

Deficit funding contributions

The accounting surplus or deficit does not drive the deficit funding contribution. The Group's deficit funding contributions in 2023 were £40 million, which included £37 million following the agreement of the 2019 Triennial valuation of the main section of the Scheme, and £3 million annual payment under the London Television Centre pension funding partnerships. Further details are included in Note 3.7 to the financial information.

SDN pension funding partnership

In 2010, ITV established a Pension Funding Partnership (PFP) with the Trustees backed by SDN, which was subsequently extended in 2011. The PFP addressed £200 million of the funding deficit in Section A of the defined benefit pension scheme and under the original agreement, a payment of up to £200 million was due in 2022. The existing PFP agreement was amended and extended to 2031. As a result of this agreement, payments of £94 million were made under the SDN PFP arrangement in 2022. The Group is committed to up to nine annual payments of £16 million from 2023. These payments are required if the Scheme is calculated to be in a technical deficit. This calculation is based upon the most recent triennial valuation updated for current market conditions. The partnership's interest in SDN provides collateral for these payments. The £16 million payment under the SDN PFP was not required to be paid in 2023. However, this assessment is made on an annual basis and therefore the £16 million payment may resume in 2024. The Group retains day-to-day operational control of SDN and SDN's revenues, profits and cashflows continue to be consolidated in the Group's accounts. On completion of the final payment in 2031, the Scheme's partnership interest will have been repaid in full and it will have no right to any further payments.

Post balance sheet event

On 01 March 2024 the Group announced the sale of its entire 50% interest in BritBox International to its joint venture partner BBC Studios for a cash consideration of £255 million. The Board intends to return the entire net proceeds to shareholders through a £235 million share buyback which will be completed within 18 months. Refer to notes 3.4 and 5.3 to the financial information for further details.

Planning assumptions for the full year 2024

The following planning assumptions for 2024 are based on our current best view but may change depending on how events unfold over the rest of the year.

Profit and Loss impact:

· Total content costs are expected to be around £1,275 million as we further optimise linear, evolve our windowing strategy and improve personalisation. We will invest an additional £15 million in marketing

· We will deliver £40 million of savings - comprising of £10 million from our existing £150 million cost saving target and £30 million of additional in year savings as part of the new strategic restructuring and efficiency programme

· Adjusted financing costs are expected to be around £35 million

· The adjusted effective tax rate is expected to be 25% over the medium term in line with the UK statutory tax rate of 25%

· Exceptional items are expected to be around £90 million mainly due to costs associated with the ongoing strategic restructuring and efficiency programme and digital transformation costs

Cash impact

· Total capex is expected to be around £75 million as we further invest in our digital capabilities

· The cash cost of exceptionals is expected to be around £90 million mainly due to costs associated with the restructuring and efficiency programme and digital transformation cost

· Profit to cash conversion is expected to be around 80% out to 2026. In 2024 profit to cash conversion will be lower reflecting an increase in working capital. Across 2023 and 2024 we expect cash conversion to be around 80%

· Total pension deficit funding contributions for 2024 are expected to come down year on year. More detailed guidance will be given following the completion on the triennial valuation

· The Board has proposed a final dividend of 3.3p, which will be paid in May 2024. This gives a full year dividend of 5.0p. Going forward, the Board intends to pay a full year ordinary dividend of at least 5.0p, which it expects to grow over the medium term

CMA Investigation

As previously reported, on 12 July 2022, the UK Competition and Markets Authority (CMA) opened an investigation into certain conduct of ITV and other named companies in the sector relating to the production and broadcasting of sports content in the UK. The investigation is at an early stage and the CMA has confirmed it is currently undertaking further investigation until at least March 2024, subsequent to which ITV anticipates it will receive additional detail regarding any future steps.

On 11 October 2023, the CMA opened an investigation into certain conduct of ITV and other named companies in the sector relating to the production and broadcasting of television content in the UK, excluding sports content. The investigation remains at an early stage and it is not currently possible to reliably quantify any liability that might result from the investigation. ITV is committed to complying with competition law, and is cooperating with the CMA's enquiries in relation to both investigations.

Foreign exchange sensitivity

The following table highlights ITV Studios sensitivity, for the remainder of the year (using internal forecasts), to translation resulting from a 10% appreciation/depreciation in sterling against the US dollar and euro, assuming all other variables are held constant. An appreciation in sterling has a negative effect on revenue and adjusted EBITA; a depreciation has a positive effect.

Currency	Revenue £m	Adjusted EBITA £m
US dollar	+/-40-55	+/- 5-7
Euro	+/- 40-50	+/-7-9

Currency

Revenue
£m

Adjusted

EBITA

£m

US dollar

+/-40-55

+/- 5-7

Euro

+/- 40-50

+/-7-9

CHRIS KENNEDY
GROUP CFO & COO

RISKS AND UNCERTAINTIES

Risk Landscape

The increasing pace of change in the market and the continued impact of the macroeconomic environment and global uncertainty means we must continue to be agile in the way we implement our strategy and manage the resulting risks.

Our approach

The focus in 2023 has been on evolving our approach to risk management to ensure it remains appropriate for the risk landscape and proportionate so as not to stifle creativity. We started the year by reassessing our risk landscape and deep diving into the risk categories that this is made up of. The learnings from this exercise allowed us to adapt our approach to further drive standardisation in our risk management processes and enhance our understanding of ITV's most critical risks.

Our approach places emphasis on the importance of collaboration between the Central teams that set expectations and the Divisions. On a periodic basis, the Divisions review their exposure to the key risk categories managed centrally to identify any significant and emerging risks that might affect their performance. In addition, the Divisional Leadership teams bring together their most significant risks and uncertainties, including emerging risks, for discussion and prioritisation. This 'top-down' and 'bottom-up' approach is facilitated and overseen by the Group Risk team.

Emerging risks

Given the changing landscape in which we operate, we have increased our focus during 2023 on identifying and understanding the emerging risks we face so we can proactively take action now. This involved expanding the ongoing horizon scanning performed to embed it as a key consideration when assessing the current position of each principal risk category.

Our two key emerging risks are climate and the transformative impact of Generative Artificial Intelligence (Generative AI).

SPOTLIGHT ON…

Climate

· We approach the actual and emerging risks associated with the climate no differently to how we manage any other risk faced by ITV. The activities taken to manage our responsibilities related to emerging regulations, investor expectations and our external disclosure requirements are of particular interest to the Board.

· Upskilling and educating the business forms the basis for ensuring we have effective management and accountability for our environmental obligations. This is supported by a network of green leads to support both the owners of climate-related risks and colleagues across ITV to transform our business so we are fit to thrive in a sustainable economy. Our Sustainability team acts as the glue to oversee these activities, join the dots and provide advice and guidance.

· Whilst we do not categorise Climate as a standalone principal risk, which could materially threaten our viability or strategy, we recognise that climate needs to be considered as part of our everyday activities and is intrinsically linked to many of our risks.

· For more information on our climate-related risks, see our Climate-Related Financial Disclosures Report.

Risk appetite

To help focus the way we manage our principal risk categories, the Board has defined our risk appetite for each one to enable us to strike the right balance between risk taking and risk mitigation. Our risk appetite reflects ITV's willingness to be innovative and open to ideas as we pursue our strategy, whilst maintaining our low tolerance in operational areas, such as duty of care, data protection and corporate compliance.

Risk leadership and governance

Our leadership plays an important role in ensuring risk management is considered in key decision making. Each of our principal risk categories has a Management Board sponsor. They articulate each risk, how we manage them and the actions being taken to operate within our risk appetite.

ITV's risk oversight and governance framework has been set up to assist the PLC Board in fulfilling its responsibility for overseeing the management of risk across ITV.

The Risk and Compliance Steering Committee (RCSC) plays an integral part in assisting the Management Board in overseeing the management of risk across ITV. It provides the central teams and divisions with a route to escalate risks and commissions deep dives into principal and emerging risks to enhance understanding of the key drivers, mitigating activities and identify further management activity required.

The Management Board conducts a robust assessment of principal and emerging risks faced by the Group twice a year. This includes consideration of the potential impact and probability of each of these occurring. The outcome of these assessments is presented to the Audit and Risk Committee and the PLC Board for review and approval.

SPOTLIGHT ON…

Climate

· The Climate Action Delivery Group (CADG) has been established to support the Management Board in overseeing the management of climate-related risks. This Group, chaired by the CFO/COO, meets four times a year to review and challenge progress against plans, deep dive into escalated risks and identify areas where further management activity is required.

· The CADG plays an important role in ITV's risk oversight and governance. It reports and escalates key risks to the RCSC that are considered as part of the Management Board's robust assessment of principal and emerging risks. It also provides updates to the Management Board, Audit and Risk Committee and PLC Board on progress against climate-related targets and our climate-related disclosures for review and challenge.

Risk Management Effectiveness

The PLC Board continues to monitor the effectiveness of risk management at ITV. An independent assessment of ITV's risk management framework and practices was conducted during Q4 2023 as part of the 2023 internal audit plan. The review concluded that significant progress has been made over the last year to achieve an effective state for principal risk management within ITV, with a number of opportunities to enhance the framework and practices identified and reflected in our risk management plans for 2024.

Changes to principal risks during the year

The ongoing management and monitoring of ITV's most critical risks throughout the year has led to changes to the principal risks from the previous reporting period (H1 2023). These included:

· Splitting 'cyber-attack or data breach incident' into two separate principal risks to enhance transparency, improve accountability and enable us to establish more focused mitigation strategies

· Removing 'Pensions Deficit' as the ITV pension scheme position has significantly improved

· The addition of 'Third-Party Risk Management' to recognise the increasing complexity and importance of our third-party relationships and the potential these have to cause significant damage to our reputation

· Promoting 'Operational Resilience' to recognise the importance of being able to withstand and recover from our technology and/or services being compromised.

Principal risks and mitigations

Set out below is a description of each of our principal risks and how they are being managed and mitigated.

Key

Link to strategy	Risk direction of travel (after current mitigations)	Emerging risks
E Expand Studios globally S Supercharge Streaming O Optimise Broadcast	↑ Risk is increasing ↓ Risk is reducing - Risk remains static	£	Indicates where there are macroeconomic related factors, which may influence the risk.
		R	Indicates where there are climate-related factors, which may influence the risk.
		°	Indicates where there are AI-related factors, which may influence the risk.

N.B. - Risks are grouped by category and are not disclosed in order of importance or significance

STRATEGIC RISKS

1. Streaming
Link to strategy	S		MB Sponsor: Managing Director, Streaming, Interactive & Data
Description		What this risk category covers:	Some of the things we do to manage it:
ITVX does not grow at the pace required to deliver the desired strategic or financial outcomes Link to Viability Scenarios: 1 \| 2 \| 6 £   Risk direction: 2023 2022 - ↑		· How we attract viewers to our streaming services in an increasingly competitive and challenging market · How we maintain strong relationships with platforms and distributors · How we create a competitive subscription proposition whilst continuing to drive ad-funded video on demand viewing · How we manage the complexity of the infrastructure and technology chains involved in the transition to streaming	· Continue to invest in our streaming capability (e.g. personalisation) · Continue to evolve our partnership & distribution strategy · Continue to invest in content and marketing · Ongoing monitoring of our performance KPIs · Horizon scanning of the external market
		Examples risks in this category: · Inability to maximise prominence and inclusion · Increased competition for viewer attention · Maintaining pace with the market and viewer expectations	Some of the metrics we track: · Monthly Active Users (MAUs) · Total Streaming Hours · UK Subscribers · Digital Revenues · Share of Voice

2. Content Market
Link to strategy	E		MB Sponsor: Managing Director. ITV Studios
Description		What this risk category covers:	Some of the things we do to manage it:
Fundamental changes in the content market may result in reduced opportunities, non-renewal of premium programmes, and/or impact the profitability of ITV Studios content Link to Viability Scenarios: N/A £  Risk direction: 2023 2022 ↑ -		· The impact the structural decline in linear audiences has on programming budgets and slots for free-to-air (FTA) broadcasters · The impact increased vertical integration (traditional and streaming platforms) and market consolidation have on intensifying market competition · The impact that market changes could have on the demand for, and profitability of ITV's content	· Continue to invest in developing, attracting and retaining world-class creative talent · Continue to grow and maintain relationships with a diverse customer base, including global streamers · Continue to seek opportunities to increase market share and drive efficiencies across our productions
		Examples risks in this category: · Content spend cuts from FTA broadcasters and streamers · Inability to grow streamer customer base as they become a growing part of the content market · Increased pressure on our pricing, rights and production premium	Some of the metrics we track: · ITV Studios total organic revenue growth · ITV Studios adjusted EBITA margin % · Total high-end scripted hours · Number of formats sold in three or more countries · % of ITV Studios total revenue from streaming platforms

3. Commercial
Link to strategy	S O		MB Sponsor: Managing Director, Commercial
Description		What this risk category covers:	Some of the things we do to manage it:
Increasing competition and challenging advertising market conditions impact our revenue stream affecting our ability to fund our content budget Link to Viability Scenarios: 1 \| 2 \| 4 \| 6 £  Risk direction: 2023 2022 ↑ ↑		· How we compete for share of advertising spend in a challenging macroeconomic environment and with the large streamers launching advertising tiers · The impact redistribution of advertising budgets away from broadcasting to online platforms could have on ad revenue · How we respond to continued tightening of data protection and privacy regulations that impact our ability to provide targeted advertising	· Continue to enhance our integrated advertising proposition to offer i) mass simultaneous reach, ii) data driven target addressable and iii) the ability to integrate brands creatively into our content and the future development of outcome-based advertising products · Continue to invest and extend Planet V to offer unrivalled addressability at scale · Continue to offer a unique creative proposition to advertisers through brand partnerships, product placements, sponsorships, advertiser funded programmes (AFPs) and digital advertising solutions · Continue to invest in an outcomes proposition that enables advertisers to measure the effectiveness of their campaigns · Build strategic partnerships with advertisers and agencies · Continue to monitor the actual and potential advertising restrictions
		Examples risks in this category: · Structural decline in broadcast advertising · Increased competition for market share from the larger streamers introducing ad tiers and the growth of online video · Failure to grow monetisable streaming viewers	Some of the metrics we track: · Total Advertising Revenue (TAR) · Category spend

4. Changing Viewer Habits
Link to strategy	S O		MB Sponsor: Managing Director, Media & Entertainment
Description		What this risk category covers:	Some of the things we do to manage it:
Inability to respond to changing viewing habits and deliver the forecasted audiences/viewing for both linear and streaming will result in failure to monetise and deliver against Commercial revenue targets Link to Viability Scenarios: 1 \| 2 \| 3 \| 6 £ Risk direction: 2023 2022 ↑ ↑		· How we attract our most commercially valuable viewers to both linear and streaming content · How we drive reach, scale and simultaneous viewing across linear and streaming · How we anticipate, respond and adapt to the shift towards digital viewing, whilst we maintain and increase our share of media time · How we ensure that our content is accessible wherever, whenever, and however viewers choose to engage with it · How we retain viewers and increase the volume of the content they consume	· Continue to invest in and showcase great content on our channels and ITVX, with a focus on our most commercially valuable viewers · Continue to invest in marketing · Continue to evolve our partnership and distribution strategy to position ourselves where our viewers are · Continue to invest in ITVX to ensure viewers spend longer on the platform once they're there e.g. personalisation · Continue to focus on understanding viewer habits to optimise the relationship between linear and streaming to help drive the way we commission content for ITVX to grow overall reach
		Examples risks in this category: · Accelerated decline in linear viewing · Inability to capitalise on the shift to digital viewing through ITVX · Increase competition for viewer attention from large streamers introducing ad tiers and the growth of online video	Some of the metrics we track: · Share of commercial viewing · Share of Top 1000 commercial broadcast TV Programmes · TV Viewing - Hours per person per day (adults & 16 to 34s) · Ad viewing time trends

5. Content Pipeline
Link to strategy	S O		MB Sponsor: Managing Director, Media & Entertainment
Description		What this risk category covers:	Some of the things we do to manage it:
Lack of diversified commissioning pipeline (whilst balancing/maintaining mass simultaneous reach on linear TV; attracting light viewers on ITVX; and managing rising content costs) may impact total viewing Link to Viability Scenarios: 1 \| 2 \| 3 \| 6 £   Risk direction: 2023 2022 ↑ -		· How we anticipate and adapt to changes in the tastes and habits of viewers · How we develop a quality and appealing content pipeline that is both resilient to changes in viewer preferences, as well as being financially viable · How we leverage the value of being an integrated producer, broadcaster and streamer to enable us to continue to provide unrivalled viewers of scale for UK advertisers and to grow our digital revenues · How we ensure we are commissioning content by, with and for everyone (Diversity, Equity & Inclusion) whilst also considering the impact our behaviours and those portrayed through our content have on society and the wider environment	· Our data and insights team focuses on understanding the preferences of our most commercially valuable viewers to help drive the way we commission content · Continue to invest in content and talent · Continue to focus on our key franchises and brands to ensure editorial protection · Continue to evolve the way we commission and acquire content as well as innovating how we fund content (e.g. partnerships, Advertiser Funded Programmes (AFPs) and co-productions) · Continue to focus on maintaining strong relationships with independent studios from whom we commission content · Continue to invest in live sports, high-end drama and entertainment programmes to maintain mass simultaneous reach and to attract our most commercially valuable viewers · Continue to commission content by, with and for everyone (e.g. £80 million Diversity Commissioning fund) and to identify ways to make our content accessible to all (e.g. Dedicated British Sign Language (BSL) FAST channel)
		Examples risks in this category: · Increased cost of content driven by rising costs of production and increased competition from competitors · Failing to secure the right talent at the right price · Accelerated decline in linear viewing and growth of other digital offerings	Some of the metrics we track: · Share of Commercial Viewing · Share of Top 1000 commercial broadcast TV Programmes · Total Streaming Hours · UK Subscribers

6. Partnerships
Link to strategy	S O		MB Sponsor: Chief Finance Officer / Chief Operating Officer
Description		What this risk category covers:	Some of the things we do to manage it:
An inability to develop and maintain adequate relationships with major platform and distribution providers may result in reduced brand prominence, viewers being unable to find our content and a lack of fair value for that content Link to Viability Scenarios: 1 \| 2 \| 6 £ Risk direction: 2023 2022 - ↑		· How we develop and maintain strong partnerships with major platforms and distribution partners to maximise prominence and inclusion of our content · How we manage the trade-offs inherent in our commercial arrangements with our platforms and distribution partners · How we actively plan for long term changes in traditional distribution (DTT & DSat) as viewing continues to transition online (IP)	· Continue to supercharge our streaming service to strengthen our offering to our most commercially valuable viewers and advertisers · Work closely with Ofcom and the government (DCMS) to modernise the PSB regulatory regime · Continue to evolve our partnership and distribution strategy to reduce reliance on single platforms and secure more advantageous commercial relationships · We have a dedicated team that continues to build relationships with the major distribution providers and platforms to ensure ITV remains attractive from a distribution perspective · Continue to collaborate with the other PSBs to a compelling consumer controlled entry point to our content in readiness for the shift to IP only viewing through Freely · Proactive involvement of the ITV Legal team to ensure we continue to operate within our framework
		Examples risks in this category: · Failure to negotiate and re-negotiate favourable carriage terms with platforms and distribution partners · Our partners demanding a direct or indirect financial return for continued carriage · The increasing prevalence of biased algorithmic or AI personalisation impacting the prominence of our content	Some of the metrics we track: · Relationship health check status

7. Data
Link to strategy	E S O		MB Sponsor: General Counsel and Company Secretary
Description		What this risk category covers:	Some of the things we do to manage it:
Failure to ensure appropriate access to consistent and trustworthy data and remaining compliant with our regulatory obligations. We must ensure the whole of ITV follows the applicable data regulations while anticipating and adequately preparing for future ones. Link to Viability Scenarios: 4  Risk direction: 2023 2022 - ↑		· How we create value and enable efficiency while providing a robust framework for data governance · How we identify the data we have, who is responsible for looking after it, how it moves around ITV, who is using it and how is it being used/what is it being used for · How we remain vigilant in protecting our corporate data and the personal data we are entrusted with whilst following today's global data regulations and anticipating and preparing for tomorrow's	· We structure our approach to data use and management around three pillars - Privacy by design, Security by design and Value by design. · Continue to use the OneTrust privacy compliance management tool to determine whether a Data Protection Impact Assessment (DPIA) is required · Data privacy lawyers and data governance experts are embedded within each of the business areas to act as partners, monitor data activity and usage, and educate the business on their data obligations · We have established policies and procedures which set out what is expected of people across ITV with respect to data · We provide mandatory data privacy and data governance training and promote good data behaviour through awareness campaigns · We perform due diligence on our third parties prior to onboarding · AI SteerCo was established to provide oversight of the use and implications of AI for ITV
		Examples risks in this category: · Using data to inform decision making without understanding its quality, accuracy, validity, ownership or legality · Failing to comply with data protection laws or regulations that apply to ITV · Unintentional data exposure (corporate or personal) as a result of insufficient employee awareness of data governance and data privacy · Cyber-attacks from well organised threat groups targeting ITV resulting in a data breach	Some of the metrics we track: · Mandatory Training · Data Subject Requests · Total investigated incidents · High Risk DPIA's

COMPLIANCE RISKS

8. Policy & Regulation
Link to strategy	S O		MB Sponsor: Group Director of Strategy, Policy & Regulation
Description		What this risk category covers:	Some of the things we do to manage it:
We engage with regulators and governments to put our case to shape the future regulation that protects viewers whilst ensuring PSBs can compete fairly and deliver their remits. We must then be in compliance with these regulations whilst maintaining trust and delivering our strategy Link to Viability Scenarios: 1 \| 2 \| 6 £   Risk direction: 2023 2022 - -		· The impact the new Media Bill will have on the visibility and viability of our content distribution and advertising businesses · The impact changes in advertising regulation may have on our Total Advertising Revenue (TAR) · The impact of emerging regulations and policy on our business (e.g. sustainability and child protection) · How unfavourable changes to European Works quotas could impact the demand for UK content · How we continue to meet the expected requirements of a Public Service Broadcaster (PSB)	· Continue to monitor potential policy, legal and regulatory developments · Analyse the impact of potential changes and proactively put forward our position during the development of new policies, legislation and regulations. · Continue to engage with the government and regulators on the PSB regime and other topics relevant to our industry · Actively participating in consultations on areas which may impact ITV and collaborating with other organisations in the industry, where appropriate in line with our competition law obligations. e.g. with pan-European report on possible European Works quota changes · Horizon scanning to identify future changes, analysing the impact this would have on ITV and agreeing our position (e.g. medium to long term future of DTT)
		Examples risks in this category: · Regulation not keeping pace with the market · Keeping up with evolving regulation · Failing to comply with standards, rules, requirements and obligations · Continuing to fulfil the requirements of being a Public Service Broadcaster (PSB) · Renewal of Channel 3 nations, regions and breakfast licenses	Some of the metrics we track: · Regulatory outlook

9. Corporate Compliance
Link to strategy	E S O		MB Sponsor: General Counsel and Company Secretary
Description		What this risk category covers:	Some of the things we do to manage it:
We seek to remain compliant with all substantive laws. Key areas of compliance activity in respect of relevant laws, for example, those relating to anti-bribery & corruption, modern slavery, anti-competitive behaviour, competition, trade sanctions and Speaking Up Link to Viability Scenarios: N/A £ Risk direction: 2023 2022 - ↑		· Breaches of corporate compliance could lead to prosecution, fines, litigation or a regulator stepping in, which might impact our reputation and our ability to operate if it resulted in the loss of licenses · How we set the expectations of our people and develop the operational infrastructure and tools to drive and make compliance easy for the business	· Through our Code of Ethics & Conduct, we foster a culture where colleagues know the standards expected of them and can speak up if something's not right · We Implement a robust tailored compliance programme based on our risk assessment, including undertaking compliance monitoring and effectiveness reviews · Promote good compliance behaviour in our colleagues, through awareness and mandatory training · Work with the business to support the adoption and implementation of compliance policies and standards · Conduct due diligence on potential third parties · Horizon scan to prepare for legislative changes and developing policies to address them
		Examples risks in this category: · Being exposed to third parties or colleagues engaging in unlawful or non-compliant activities on ITV's behalf · Inadequate operational infrastructure to drive and support the execution of a strong third party risk management process · Lack of clear infrastructure and appropriate culture for compliance matters in the business	Some of the metrics we track: · Speaking Up · Mandatory training

OPERATIONAL RISKS

10. Cyber Security
Link to strategy	E S O		MB Sponsor: Chief Technology Officer
Description		What this risk category covers:	Some of the things we do to manage it:
We aim to protect ITV, our content, our colleagues, our viewers and our partners from harm and financial loss caused by cyber security events. We adapt our controls accordingly to detect and respond to the evolving threat Link to Viability Scenarios: 4  Risk direction: 2023 2022 ↑ ↑		· A successful cyber-attack could lead to 'black screens' and result in a commercial impact due to operational disruption or critical system outage · A catastrophic data breach could result in ITV receiving a fine from the Information Commissioner's Office (ICO) of up to 4% of worldwide turnover · Failure to maintain trust and live up to regulatory, viewer, partner and other stakeholder expectations related to cyber security could weaken our reputation	· Implement a robust cyber security risk management (NIST)framework to protect our applications, systems and networks · Monitor external threats and gather intelligence on evolving cyber techniques, tactics, capabilities and the threat landscape · Maintaining a vigilant security setup to quickly detect and respond to cyber risks before they become incidents, whilst continuing to invest in new and emerging cyber defence and security tooling · Promote good security behaviour in our colleagues, through awareness campaigns and mandatory training · Perform due diligence on our third parties and monitor our online applications and technical validation · Model a severe but plausible hypothetical cyber-attack scenario annually and facilitate cyber exercises with the Management Board to simulate an attack to rehearse how ITV would respond and identify and implement improvement areas · Continue to focus on ITV's recovery capability and minimal viable company
		Examples risks in this category: · Cyber-attacks from organised threat groups targeting ITV · Being exposed to third parties with vulnerabilities that can access our systems · End of life legacy IT estate vulnerabilities · Labels IT infrastructure Independent to Group	Some of the metrics we track: · Attack path stats (by severity) · Endpoint-related incidents (No. per quarter & trends) · ITVX Bot Attacks · Minimum Viable Company (MVC) Recovery Capability · Third party assessment (critical suppliers)

11. Transformation
Link to strategy	E S O		MB Sponsor: Chief Finance Officer / Chief Operating Officer
Description		What this risk category covers:	Some of the things we do to manage it:
We are accelerating transformation delivery to build a simpler, more efficient and dynamic ITV in pursuit of our More Than TV Strategy Link to Viability Scenarios: N/A £ Risk direction: 2023 2022 - -		· Failing to deliver our transformation ambitions will adversely impact our efficiency, financial performance, and viewer experience while impacting our reputation · We are focused on enabling and driving digital transformation by enhancing organisational agility, improving commercial control and flexibility and embedding a culture of achievement · We do this while remaining cognisant of the volume, speed and extent of change required to achieve this	· Our Transformation Operations Directors Office (TODO) focuses on operational issues and reducing the risk involved in a number of significant and costly transformation activities · Management Board sponsors, and experienced and skilled programme directors across all transformation programmes · Continue to instil new ways of working through implementing Agile and standardising tooling · Continue to upskill key business stakeholders with sufficient knowledge to hold their programme teams to account. · Monthly Transformation Steering Group (TSG) to track the overall portfolio delivery and programme dependencies · Group Design Authority (GDA) and Group Investment Committee (GIC) to manage technical design and investment across the portfolio
		Examples risks in this category: · Inadequate change management to overcome resistance to change · Insufficient resource, lack of required capabilities and reliance on contractors / third parties · Failure to manage complex interdependencies · Transformation programmes fail to deliver the intended value	Some of the metrics we track: · Programme Milestones · Programme Benefits

12. People
Link to strategy	E S O		MB Sponsor: Chief Finance Officer / Chief Operating Officer
Description		What this risk category covers:	Some of the things we do to manage it:
An inability to attract, develop and retain key creative, commercial, technical and managerial talent could adversely affect our business Link to Viability Scenarios: N/A £  Risk direction: 2023 2022 - ↑		· To attract and retain the right people in the right places for an organisation as complex and diverse as ITV, we need to have effective strategic workforce planning · Day-to-day people management activities include managing high levels of recruitment, onboarding and terminations, and providing access to relevant training and development opportunities · Failure to engage our people to ensure their health and wellbeing and create a diverse and inclusive workplace could impact our performance and growth ambitions	· Continue to develop our Employee Value Proposition (EVP) · Continue to evolve our approach to mandatory training and speaking up through updating existing modules, introducing new modules and phasing the launch throughout the year · Ongoing development of succession plans for business critical and management roles (including nominated deputies). · Continue to identify future talent (High potential programme), support the development of people of colour (RISE programme), develop the skills needed to help drive the business forward (Digital skills programme) and offer industry-leading production training (ITV Academy) · Our global Employee Assistance Programme (EAP) is available to permanent, fixed term and freelance colleagues, as well as to dependents. · Create an inclusive culture through Disability Access Passports, Amplify, Fresh Cuts and continuing our Step Up 60 initiative · Run engagement surveys and targeted pulse surveys to deep dive into specific topics
		Examples risks in this category: · Failure to attract and retain colleagues in a highly competitive industry · Technological advancements resulting in a workforce skills gap · The actions of onscreen talent impacting ITV's reputation and brand · Failing to maintain a diverse organisation impacting our innovation and creativity	Some of the metrics we track: · Resignation Index · New Hires (Women, Disability, Colour and LGBTQ+)Diversity Data (Demographic and disability information)

13. Duty of Care
Link to strategy	E S O		MB Sponsor: Chief Executive Officer
Description		What this risk category covers:	Some of the things we do to manage it:
Failure to extend an adequate duty of care or the occurrence of a major health and safety incident could result in physical and mental harm, loss of human life and reputational damage Link to Viability Scenarios: N/A Risk direction: 2023 2022 - -		· Ensuring we run our business safely with consideration to our duty of care and the impact we could have on society · Supporting the mental and physical health and safety of colleagues, those working with ITV and those participating in and contributing to our productions, is a key priority · Our commitment to addressing promptly, fairly and confidentially all concerns and monitoring the channels we have in place to ensure they remain appropriate	· We maintain a 'Speaking Up' framework that allows anyone working for or with ITV to raise concerns in confidence through Safecall , alongside other channels to raise concerns. · Continue to drive awareness of 'Speaking up' through communications and mandatory duty of care training module · We have a comprehensive operational risk management process, and through this, we identify risks to both people's physical and mental health and safety and put in place measures to manage them appropriately · The ITV Feel Good offering continues to provide advice, support, resources and tools for inspiring and enabling colleagues to look after their own well-being and have a balanced and healthy working lifestyle in a hybrid world · We continue to evolve the Participant Aftercare Programme (PAP) · We support participants through the Participant Crisis Care Stabilisation Pathway, an Out of Hours Welfare Helpline and a 'call off' contract with the Nightingale Hospital · Partner with the BBC, to develop an Industry Media Psychologist Development Programme · Our social purpose campaigns seek to support the viewing public, including the award-winning Britain Get Talking. · Continue to monitor and respond to historical issues to further strengthen our Duty of Care policies
		Examples risks in this category: · Failure to appropriately support individuals working with ITV in our pursuit of editorial content that is relevant and entertaining · Failure to adequately consider the impact our content could have on society	Some of the metrics we track: · Speaking Up data · Accident/Incident Data

14. Third Party Risk Management
Link to strategy	E S O		MB Sponsor: Chief Finance Officer / Chief Operating Officer
Description		What this risk category covers:	Some of the things we do to manage it:
ITV relies on a wide range of third parties to operate its business. We therefore must have robust processes in place for risk assessing, onboarding and the ongoing management Link to Viability Scenarios: N/A £ Risk direction: 2023 New Risk		· The robustness of our due diligence process for onboarding third parties to make sure they meet our standards · How we adequately monitor and manage the impacts of third-party relationships · Maintaining a holistic alongside a detailed overview of the third parties ITV engages with	· Continue to evolve our Third Party Risk Management (TPRM) framework to support ITV with assessing and managing risks associated with vendor relationships · Ongoing input from the risk domain leads to enhanced due diligence performed across all third-party relationships · Our supplier code of conduct sets out the minimum standards we expect of all suppliers · Continue to extend the use of the Prevalent platform to automate the risk management of our vendors · Continue to set expectations in contracts for talent · Ongoing monitoring of our distribution providers
		Examples risks in this category: · Failure to adequately assess, monitor and manage the impacts of third-party relationships · Colleagues bypass the due diligence process · Lack of holistic overview of the third parties ITV engages with	Some of the metrics we track: · The development and agreement of metrics for the new principal risk is underway

15. Operational Resilience
Link to strategy	E S O		MB Sponsor: Chief Finance Officer / Chief Operating Officer
Description		What this risk category covers:	Some of the things we do to manage it:
A major business continuity incident with linear/online transmission or a critical ad system may result in service interruption and revenue loss Link to Viability Scenarios: 4 Risk direction: 2023 New Risk		· Maintaining business operations, including our ability to broadcast linear TV, distribute & stream content and generate Ad revenue is imperative · We recognise the complexity of the infrastructure and technology our critical business operations rely on, and the impact these being compromised could have on our resilience. In particular, the number of third parties we rely on, the increasing number of platform partners that we broadcast content across/through, the range of broadcasting operations (i.e., multiple regions, sites and across multiple systems) and the continually evolving methods by which we distribute content · We seek to build resilience into our key IT systems and focus on maintaining robust and tested disaster recovery and business continuity plans	· Continue to focus on understanding the minimal viable company and ITV's recovery capability · Annual major incident scenario testing and ahead of major live events · Maintain and regularly update business continuity and disaster recovery plans · Continue to review and monitor operational performance · Continue to closely manage our broadcast chain partners and suppliers to ensure the risk of incidents is minimised
		Examples risks in this category: · Lack of resilience in our key IT systems · Inadequate IT disaster recovery plans to meet ITV's business operation needs · Ineffective operational business continuity plans	Some of the metrics we track: · The development and agreement of metrics for the new principal risk is underway

LONG-TERM VIABILITY STATEMENT (LTVS) DISCLOSURE

How we assess prospects and risks

The Board continually assesses ITV's prospects and risks at its meetings, including the following:

· Holding 'Strategy Days' twice a year, to oversee the delivery of the Strategy and consider changes or new initiatives to further improve the ITV Strategy.

· Considering ad-hoc topics on aspects of the strategy at Board meetings.

· Performing a robust assessment of the principal and emerging risks twice a year.

As part of the assessment of prospects and risks, the Board and management routinely receive briefings and consider topics related to changing viewer habits, competitor strategies, the broadcasting advertising market and developments in the global content market. It is also kept informed of ITV's resilience to environmental and climate related risks; technological advancements in the areas of Generative Artificial Intelligence (AI) and how the ITV Strategy responds to these; and sessions led by external analysts on investors' perceptions of the ITV business.

The Board and management continued to closely scrutinise the impact of the current macroeconomic environment on the business. This included identifying cost interventions/mitigations to respond to possible severe downside scenarios; and increasing the focus and detail provided in financial performance reviews and reforecasting to track performance.

How we assess viability

When assessing the longer-term viability of ITV, we considered

· ITV's strategy and business plan;

· The principal risks and uncertainties;

· The Group's financing facilities including covenant clauses and future funding plans;

· The long range financial plan and cash forecast; and

· Other sensitivity factors or risks which have the potential to materially impact liquidity and/or covenant headroom in the assessment period.

Based on this review a set of hypothetical severe but plausible scenarios were developed. These scenarios have then been modelled against the first three years of the long range financial plan and cash forecast, both individually and collectively, in order to assess viability.

Whilst all principal risks identified could have an impact on ITV's performance, the scenarios reflect the specific risks which could potentially impact the Group's financial position and viability during the period to 31 December 2026.

The output from this modelling was reviewed by the Audit and Risk Committee in detail, with a report from the Committee to the Board to support the Board's review and approval. In reaching its view, the Board and Committee also considered external views, including analyst and other industry commentary, to understand the wider market views on the Group's future prospects, and the external auditor's findings and conclusions on this matter.

Assessment period for viability

The Board is of the view that a three year assessment period (to 31 December 2026) continues to be the most appropriate. The factors the Board considered in adopting this timeframe were as follows:

· ITV's long range financial and strategic planning cycle

· Visibility over ITV's advertising business is short term. Advertising remains cyclical and closely linked to the UK and global economic growth and impacted by the uncertain macroeconomic environment.

· The commissioning process and life cycle of programming gives the Studios division a more medium-term outlook. However, while non-returning brands are replaced with new commissions, over time there is less visibility as programmes can experience changes in viewer demand or come to a natural expiration

· Technology in the media industry continues to rapidly change the demand for content and also how it is consumed

· ITV's business model does not typically necessitate investment in large capital projects that would require a longer-term horizon assessment or returns

· Pension funding, which is one of ITV's key funding obligations, is agreed triennially with the Trustees of the pension scheme

Assumptions Applied

For the LTVS, we have assumed:

· EBITA impacts from LTVS scenarios flow through to cash in full except for tax savings at 25%, with the exception of settlement impacts (in scenarios 4 and 5) and Scenario 5 remedial costs which are assumed to be disallowable for tax purposes

· Any settlements related to ongoing litigation or fines will be treated as exceptional items (and therefore excluded from covenant calculations)

· No acquisitions are made (consistent with 'Base case')

· Management and employee Incentive payments (such as the annual bonus) are assumed to reflect the Impact of the LTVS scenario assumptions on earnings

· Dividends of 5.0p per share maintained throughout, resulting in around £180 million of dividends paid out per year following the disposal of ITV's 50% shareholding in BritBox International.

· Identified cost savings continue to deliver to plan

We have also assumed that the revolving credit facilities of £500 million and £100 million are available throughout the period and that the Credit Suisse CDS facility of £300 million (which matures in June 2026) and the EUR 600 million Eurobond (which matures in September 2026) are re-financed (and not repaid from cash reserves). The intention is to refinance a significant proportion of the 2026 full year financing arrangements well before maturity.

Taking into account current operational and financial performance, the Board has analysed the impact of the following hypothetically severe but plausible scenarios. These scenarios were assessed in isolation and as combinations of two or three risks and, although not regarded as plausible but as a reverse stress test, an assessment of all scenarios occurring simultaneously was undertaken:

	Scenario Modelled	Link to Principal risks or Accounting judgements and estimates
1+2	A significant and sustained downturn in advertising revenue from 2024, as a result of a decline in the advertising market and linear viewing, driven by macroeconomic factors or increased competition from large streamers. In this scenario we also fail to replace the advertising revenue lost as result of the confirmed restrictions on High in Fat, Salt or Sugar (HFSS) and potential restrictions on other advertising categories (e.g. gambling and high carbon products). Additionally, our Streaming strategy fails to fully deliver the expected consumption hours (for the digital advertising element) or subscriber growth (for the SVOD element), impacting revenue Advertising revenues year on year (including digital advertising revenues) (2024 vs 2023 - 3%; 2025 vs 2024 - 4%; 2026 vs 2025 - 4%) Total EBITA impact in 2024 is £62 million, followed by an impact of £130 million in 2025 and £203 million in 2026. Business area impacted: Media & Entertainment	Principal Risk 1: Streaming; Principal Risk 3: Commercial; Principal Risk 4: Changing Viewer Habits; Principal Risk 5: Content Pipeline; Principal Risk 6: Partnerships; and Principal Risk 8: Policy & Regulation Further detail on how we mitigate these risks is provided in the principal risk and uncertainties section
3	A number of key programme brands within the ITV Studios division are not recommissioned and new format growth does not materialise The scenario assumes key shows come to an end from 2024 (2024 EBITA impact: c. £28 million; 2025 EBITA impact c. £58 million and 2026 EBITA impact: c. £77 million). Business area impacted: Studios	Principal Risk 4: Changing Viewer Habits Principal Risk 5: Content Pipeline Further detail on how we mitigate these risks is provided in the principal risk and uncertainties section
4	ITV is subject to a cyber-attack which results in a major operational disruption, critical system outage or loss of intellectual property (IP), customer or business data This scenario assumes that a class action is filed against ITV, following a major cyber attack which results in a blank screen causing £100 million of lost advertising revenue, which requires a substantial compensation payment and results in a fine from the Information Commissioner's Office (ICO). Business area impacted: Group	Principal Risk 3: Commercial Principal Risk 7: Data Principal Risk 10: Cyber Security Principal Risk 15: Operational Resilience Further detail on how we mitigate these risks is provided in the principal risk and uncertainties section
5	Settlements for ongoing litigation are significantly higher than estimated, resulting in large one-off cash payments This scenario assumes a higher than provisioned cash outflow in 2024 and 2025 in respect of settlements for ongoing litigation. Business area impacted: Group	The complexity and potential scale of the ongoing litigation cases result in a lack of certainty in the final liabilities and payments. Further detail of the accounting judgements and estimates applied to ongoing litigation and earnouts are provided in Section 1 to the Financial Information. An overview the assessments performed by the Audit and Risk Committee with respect to these accounting judgements is provided within the Audit and Risk Committee report in the Annual Report and Accounts
6	A combination of scenarios 1 to 3 above occurring simultaneously. This scenario would result in an EBITA impact of £90m in 2024, £188m in 2025 and £280 million in 2026. Neither covenant is breached at any time during the assessment period and liquidity headroom is maintained Business area impacted: Group	Principal Risk 1: Streaming; Principal Risk 3: Commercial; Principal Risk 4: Changing Viewer Habits; Principal Risk 5: Content Pipeline; Principal Risk 6: Partnerships; and Principal Risk 8: Policy & Regulation Further detail on how we mitigate these risks is provided in the principal risk and uncertainties section

Scenario Modelled

Link to Principal risks or Accounting judgements and estimates

1+2

A significant and sustained downturn in advertising revenue from 2024, as a result of a decline in the advertising market and linear viewing, driven by macroeconomic factors or increased competition from large streamers. In this scenario we also fail to replace the advertising revenue lost as result of the confirmed restrictions on High in Fat, Salt or Sugar (HFSS) and potential restrictions on other advertising categories (e.g. gambling and high carbon products).

Additionally, our Streaming strategy fails to fully deliver the expected consumption hours (for the digital advertising element) or subscriber growth (for the SVOD element), impacting revenue

Advertising revenues year on year (including digital advertising revenues) (2024 vs 2023 - 3%; 2025 vs 2024 - 4%; 2026 vs 2025 - 4%)

Total EBITA impact in 2024 is £62 million, followed by an impact of £130 million in 2025 and £203 million in 2026.

Business area impacted: Media & Entertainment

Principal Risk 1: Streaming;

Principal Risk 3: Commercial;

Principal Risk 4: Changing Viewer Habits;

Principal Risk 5: Content Pipeline;

Principal Risk 6: Partnerships; and

Principal Risk 8: Policy & Regulation

Further detail on how we mitigate these risks is provided in the principal risk and uncertainties section

A number of key programme brands within the ITV Studios division are not recommissioned and new format growth does not materialise

The scenario assumes key shows come to an end from 2024 (2024 EBITA impact: c. £28 million; 2025 EBITA impact c. £58 million and 2026 EBITA impact: c. £77 million).

Business area impacted: Studios

Principal Risk 4: Changing Viewer Habits

Principal Risk 5: Content Pipeline

Further detail on how we mitigate these risks is provided in the principal risk and uncertainties section

ITV is subject to a cyber-attack which results in a major operational disruption, critical system outage or loss of intellectual property (IP), customer or business data

This scenario assumes that a class action is filed against ITV, following a major cyber attack which results in a blank screen causing £100 million of lost advertising revenue, which requires a substantial compensation payment and results in a fine from the Information Commissioner's Office (ICO).

Business area impacted: Group

Principal Risk 3: Commercial

Principal Risk 7: Data

Principal Risk 10: Cyber Security

Principal Risk 15: Operational Resilience

Further detail on how we mitigate these risks is provided in the principal risk and uncertainties section

Settlements for ongoing litigation are significantly higher than estimated, resulting in large one-off cash payments

This scenario assumes a higher than provisioned cash outflow in 2024 and 2025 in respect of settlements for ongoing litigation.

Business area impacted: Group

The complexity and potential scale of the ongoing litigation cases result in a lack of certainty in the final liabilities and payments.

Further detail of the accounting judgements and estimates applied to ongoing litigation and earnouts are provided in Section 1 to the Financial Information. An overview the assessments performed by the Audit and Risk Committee with respect to these accounting judgements is provided within the Audit and Risk Committee report in the Annual Report and Accounts

A combination of scenarios 1 to 3 above occurring simultaneously.

This scenario would result in an EBITA impact of £90m in 2024, £188m in 2025 and £280 million in 2026. Neither covenant is breached at any time during the assessment period and liquidity headroom is maintained

Business area impacted: Group

Principal Risk 1: Streaming;

Principal Risk 3: Commercial;

Principal Risk 4: Changing Viewer Habits;

Principal Risk 5: Content Pipeline;

Principal Risk 6: Partnerships; and

Principal Risk 8: Policy & Regulation

Further detail on how we mitigate these risks is provided in the principal risk and uncertainties section

We have considered the impact of climate change risks and do not believe they would have a significant financial impact on the business in the assessment period. Please refer to our Climate-related Financial Disclosures section for further details.

Viability assessment

Our balance sheet and liquidity position remains strong. At 31st December 2023, this comprised unrestricted cash of £340.5 million; undrawn Revolving Credit Facilities (RCF) of £500 million and £100 million available throughout the viability period; and undrawn bilateral facility/CDS of £300 million maturing in June 2026 (assumed to be replaced with a new facility).

During the viability period, the €600 million Eurobond maturing September 2026 is assumed to be refinanced.

We have considered both the individual scenarios and various combinations of the scenarios in order to assess viability. Our modelling concludes that If all scenarios were to occur concurrently (considered implausible), management action would be required to ensure the leverage covenant in the Revolving Credit Facility (RCF) is not breached in 2026.

Potential Mitigations

In the unlikely event that all scenarios were to impact ITV concurrently, ITV would breach it's RCF Net Debt / EBITDA covenant in H2 2026 with a ratio of 3.94x compared to the threshold of 3.5x. The threshold is not breached in any other half-yearly period during the assessment period. ITV could eliminate the need for any further management action in H2 2026 by exercising its option under the terms of the RCF to increase the covenant threshold to 4.0x for up to 2 consecutive half-yearly periods. Interest cover remains greater than 3.0x throughout the viability period.

Viability Statement

Based on the above, the Board has a reasonable expectation that ITV will remain viable and be able to continue operations and meet its liabilities as they fall due over the three year-period ending 31 December 2026. The assessment has been made with reference to ITV's strategy and the current position and prospects and risks.

The Strategic Report was approved by the Board and signed on its behalf by:

CHRIS KENNEDY
GROUP CFO & COO
07 March 2024

Financial Information

In this
section

The financial information has been presented in a style that attempts to make them less complex and more relevant to shareholders and other stakeholders. 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 information provide information required by statute, accounting standards or Listing Rules to explain a particular feature of the financial information. The notes are a part of the financial information and will also provide explanations and additional disclosure to assist readers' understanding and interpretation of the Annual Report and the financial information.

Contents

Primary Statements
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Section 1: Basis of Preparation
Section 2: Results for the Year
2.1 Profit before tax
2.2 Exceptional items
2.3 Taxation
2.4 Earnings per share
Section 3: Operating Assets and Liabilities
3.1 Working capital
3.2 Property, plant and equipment
3.3 Intangible assets
3.4 Assets classified as held for sale
3.5 Investments
3.6 Provisions
3.7 Pensions
Section 4: Capital Structure and Financing Costs
4.1 Net debt
4.2 Borrowings
4.3 Managing market risks: derivative financial instruments
4.4 Net financing costs
4.5 Fair value hierarchy
4.6 Lease liabilities
4.7 Equity
4.8 Share-based compensation
Section 5: Other Notes
5.1 Related party transactions
5.2 Contingent assets and liabilities
5.3 Subsequent events
5.4 Subsidiaries exempt from audit
ITV plc Company Financial Information
Notes to the ITV plc Company Financial Information

Consolidated Income Statement

For the year ended 31 December	Note	2023 £m	2022 £m
Revenue	2.1	3,624	3,728
Operating costs	2.1	(3,386)	(3,209)
Operating profit		238	519

Presented as:
Earnings before interest, tax and amortisation (EBITA) before exceptional items	2.1	404	668
Operating exceptional items	2.2	(77)	(65)
Amortisation and impairment	3.3, 3.5	(89)	(84)
Operating profit		238	519

Financing income	4.4	25	13
Financing costs	4.4	(70)	(39)
Net financing costs		(45)	(26)
Share of profits after tax of joint ventures and associated undertakings	3.5	-	8
Profit before tax		193	501
Taxation	2.3	16	(66)
Profit for the year		209	435

Profit/(loss) attributable to:
Owners of the Company		210	428
Non-controlling interests	4.7.6	(1)	7
Profit for the year		209	435

Earnings per share
Basic earnings per share	2.4	5.2p	10.7p
Diluted earnings per share	2.4	5.2p	10.6p

Consolidated Statement of Comprehensive Income

For the year ended 31 December	Note	2023 £m	2022 £m
Profit for the year		209	435

Other comprehensive (expense)/income:
Items that are or may be reclassified to profit or loss
Revaluation of financial assets	4.7.4	(1)	(19)
Net gain/(loss) on cash flow hedges and costs of hedging	4.7.3	12	(2)
Exchange differences on translation of foreign operations	4.7.3	(42)	75
Income tax (charge)/credit on items that may be reclassified to profit or loss	2.3	(3)	6
Items that will never be reclassified to profit or loss
Remeasurement (losses)/gains on defined benefit pension schemes	3.7	(35)	80
Income tax credit/(charge) on items that will never be reclassified to profit or loss	2.3	9	(23)
Other comprehensive (expense)/income for the year, net of income tax		(60)	117
Total comprehensive income for the year		149	552

Total comprehensive income/(expense) attributable to:
Owners of the Company		154	537
Non-controlling interests	4.7.6	(5)	15
Total comprehensive income for the year		149	552

Consolidated Statement of Financial Position

	Note	31 December 2023 £m	31 December 2022 £m
Non-current assets
Property, plant and equipment	3.2	263	286
Intangible assets	3.3	1,542	1,609
Investments in joint ventures, associates and equity investments	3.5	68	130
Derivative financial instruments	4.3	1	2
Distribution rights	3.1.2	14	17
Contract assets	3.1.6	13	-
Defined benefit pension surplus	3.7	187	172
Other pension asset	3.7	48	47
Deferred tax asset	2.3	6	19
		2,142	2,282
Current assets
Programme rights and other inventory	3.1.1	413	377
Trade and other receivables due within one year	3.1.3	630	692
Trade and other receivables due after more than one year	3.1.3	62	44
Trade and other receivables		692	736
Contract assets	3.1.6	189	185
Production inventories	3.1.7	234	493
Current tax receivable	2.3	111	52
Derivative financial instruments	4.3	4	2
Assets classified as held for sale	3.4	66	-
Cash and cash equivalents	4.1	340	348
		2,049	2,193
Current liabilities
Borrowings	4.1, 4.2	(5)	(289)
Lease liabilities	4.6	(18)	(21)
Derivative financial instruments	4.3	(1)	(7)
Trade and other payables due within one year	3.1.4	(950)	(901)
Trade payables due after more than one year	3.1.5	(25)	(17)
Trade and other payables		(975)	(918)
Contract liabilities	3.1.6	(187)	(372)
Current tax liabilities	2.3	-	(7)
Provisions	3.6	(137)	(139)
		(1,323)	(1,753)
Net current assets		726	440
Non-current liabilities
Borrowings	4.1, 4.2	(758)	(541)
Lease liabilities	4.6	(97)	(111)
Derivative financial instruments	4.3	(16)	(8)
Defined benefit pension deficit	3.7	(26)	(27)
Deferred tax liabilities	2.3	(59)	(57)
Other payables	3.1.5	(67)	(72)
Provisions	3.6	(17)	(30)
		(1,040)	(846)
Net assets		1,828	1,876

Attributable to equity shareholders of the parent company
Share capital	4.7.1	406	403
Share premium	4.7.1	174	174
Merger and other reserves	4.7.2	211	211
Translation reserve	4.7.3	78	107
Fair value reserve	4.7.4	(2)	(1)
Retained earnings	4.7.5	919	928
Total equity attributable to equity shareholders of the parent company		1,786	1,822
Non-controlling interests	4.7.6	42	54
Total equity		1,828	1,876

Consolidated Statement of Changes in Equity

		Attributable to equity shareholders of the parent company
	Note	Share capital £m	Share premium £m	Merger and other reserves £m	Translation reserve* £m	Fair value reserve £m	Retained earnings £m	Total £m	Non- controlling interests £m	Total equity £m
Balance at 1 January 2023	4.7	403	174	211	107	(1)	928	1,822	54	1,876
Total comprehensive income/(expense) for the year
Profit/(loss) for the year		-	-	-	-	-	210	210	(1)	209
Other comprehensive (expense)/income
Revaluation of financial assets	4.7.4	-	-	-	-	(1)	-	(1)	-	(1)
Net gain on cash flow hedges and costs of hedging	4.7.3	-	-	-	12	-	-	12	-	12
Exchange differences on translation of foreign operations	4.7.3	-	-	-	(38)	-	-	(38)	(4)	(42)
Remeasurement loss on defined benefit pension schemes	3.7	-	-	-	-	-	(35)	(35)	-	(35)
Income tax (charge)/credit on other comprehensive income/(expense)	2.3	-	-	-	(3)	-	9	6	-	6
Total other comprehensive expense		-	-	-	(29)	(1)	(26)	(56)	(4)	(60)
Total comprehensive (expense)/income for the year		-	-	-	(29)	(1)	184	154	(5)	149
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Issue of shares	4.7.1	3	-	-	-	-	(2)	1	-	1
Equity dividends		-	-	-	-	-	(201)	(201)	(1)	(202)
Movements due to share-based compensation	4.8	-	-	-	-	-	16	16	-	16
Movements in the employee benefit trust		-	-	-	-	-	(5)	(5)	-	(5)
Tax on items taken directly to equity	2.3	-	-	-	-	-	(2)	(2)	-	(2)
Total transactions with owners		3	-	-	-	-	(194)	(191)	(1)	(192)
Changes in non-controlling interests	4.7.6	-	-	-	-	-	1	1	(6)	(5)
Balance at 31 December 2023	4.7	406	174	211	78	(2)	919	1,786	42	1,828

* See note 4.3 for further breakdown of Translation Reserve, including Hedging Reserve and Cost of Hedging Reserve

		Attributable to equity shareholders of the parent company
	Note	Share capital £m	Share premium £m	Merger and other reserves £m	Translation reserve* £m	Fair value reserve £m	Retained earnings £m	Total £m	Non- controlling interests £m	Total equity £m
Balance at 1 January 2022	4.7	403	174	215	41	13	634	1,480	38	1,518
Total comprehensive income for the year
Profit for the year		-	-	-	-	-	428	428	7	435
Other comprehensive (expense)/income
Revaluation of financial assets	4.7.4	-	-	-	-	(19)	-	(19)	-	(19)
Net loss on cash flow hedges and costs of hedging	4.7.3	-	-	-	(2)	-	-	(2)	-	(2)
Exchange differences on translation of foreign operations	4.7.3	-	-	-	67	-	-	67	8	75
Remeasurement gain on defined benefit pension schemes	3.7	-	-	-	-	-	80	80	-	80
Income tax credit/(charge) on other comprehensive income/(expense)	2.3	-	-	-	1	5	(23)	(17)	-	(17)
Total other comprehensive income/(expense)		-	-	-	66	(14)	57	109	8	117
Total comprehensive income/(expense) for the year		-	-	-	66	(14)	485	537	15	552
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Equity dividends		-	-	-	-	-	(201)	(201)	(3)	(204)
Movements due to share-based compensation	4.8	-	-	-	-	-	19	19	-	19
Movements in the employee benefit trust		-	-	-	-	-	(2)	(2)	-	(2)
Tax on items taken directly to equity	2.3	-	-	-	-	-	(7)	(7)	-	(7)
Total transactions with owners		-	-	-	-	-	(191)	(191)	(3)	(194)
Changes in non-controlling interests	4.7.6	-	-	(4)	-	-	-	(4)	4	-
Balance at 31 December 2022	4.7	403	174	211	107	(1)	928	1,822	54	1,876

* See note 4.3 for further breakdown of Translation Reserve, including Hedging Reserve and Cost of Hedging Reserve

Consolidated Statement of Cash Flows

For the year ended 31 December	Note	£m	2023 £m	£m	2022 £m
Cash flows from operating activities
Cash generated from operations before exceptional items	2.1		556		590
Cash flow relating to operating exceptional items:
Operating exceptional items	2.2	(77)		(65)
Increase in exceptional payables		9		12
Cash outflow from exceptional items			(68)		(53)
Cash generated from operations			488		537
Defined benefit pension deficit funding		(40)		(137)
Interest received		20		15
Interest paid*		(51)		(56)
Net taxation paid		(32)		(55)
			(103)		(233)
Net cash inflow from operating activities			385		304

Cash flows from investing activities
Acquisition of property, plant and equipment		(31)		(34)
Acquisition of intangible assets		(39)		(44)
Acquisition of subsidiary undertakings, net of cash acquired		(1)		(96)
Acquisition of investments		(19)		(13)
Dividends received from investments		3		-
Loans granted to associates and joint ventures		(13)		(13)
Loans repaid by associates and joint ventures		3		4
Net cash outflow from investing activities			(97)		(196)

Cash flows from financing activities
Bank and other loans - amounts repaid		(401)		(539)
Settlement of derivatives***		(10)		-
Bank and other loans - amounts raised		351		282
Release of restricted cash		-		50
Payment of lease liabilities**		(22)		(22)
Issue of share capital		1		-
Acquisition of non-controlling interests		(4)		(25)
Dividends paid to non-controlling interests		(1)		(3)
Equity dividends paid		(201)		(201)
Net cash outflow from financing activities			(287)		(458)

Net increase/(decrease) in cash and cash equivalents			1		(350)

Cash and cash equivalents at 1 January	4.1		348		686
Effects of exchange rate changes and fair value movements			(9)		12
Cash and cash equivalents at 31 December	4.1		340		348

* Interest paid includes interest on bank, other loans, derivative financial instruments and lease liabilities

** Net cash flow on lease liabilities in note 4.1 of £26 million (2022: £26 million) includes interest on lease liabilities included in interest paid of £4 million (2022: £4 million)

*** Net cash flow from forwards and swaps held against the euro denominated bond repaid in the year

Notes to the Financial Information

Section 1: Basis of Preparation

In this
section

This section sets out the Group's accounting policies that relate to the financial information 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 UK-adopted accounting standards, amendments and interpretations, and whether they are effective in 2023 or later years. We explain how these changes are expected to impact the financial position and performance of the Group.

The financial information consolidates 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 registered in England and Wales.

This Group financial information was prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.

The accounting policies have been applied consistently in the financial years presented, other than where new policies have been adopted.

The financial information is 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 information has been prepared in accordance with Financial Reporting Standard 101 'Reduced Disclosure Framework' ('FRS 101').

The notes form part of the financial information.

Going concern

As at 31 December 2023, the Group was in a net debt position of £553 million (2022: £623 million), including gross borrowings of £893 million (2022: £971 million) offset by cash and cash equivalents of £340 million (2022: £348 million).

In addition to £340 million of cash and cash equivalents (2022: £348 million), the Group has a syndicated £500 million Revolving Credit Facility (RCF) entered into during 2022 which was undrawn at 31 December 2023 (31 December 2022: £50 million drawn). £83 million of this facility expires in January 2028 and the remaining £417 million expires in January 2029. In December 2023, the Group entered into an additional £100 million bilateral RCF which matures in December 2028, and which is undrawn at 31 December 2023. The Group also has a £300 million committed and undrawn bilateral facility expiring in June 2026 (31 December 2022: undrawn). This provides £1,240 million (2022: £1,098 million) of liquidity.

The €259 million Eurobond matured in December 2023 and was repaid through cash proceeds drawn in full from a £230 million term loan facility entered into in August 2023. The term loan matures in July 2027 and interest on the loan is determined as an aggregate of compounded Sterling Overnight Index Average (SONIA) plus a margin. The term loan has the same financial covenants as the Group's RCF facility.

The two RCFs are subject to leverage and interest cover semi-annual covenant tests that require the Group to maintain a leverage ratio of below 3.5x and interest cover above 3.0x (measures as defined in the RCF documentation). In addition, the £500 million RCF is subject to ESG targets linked to the delivery of ITV's science-based carbon emissions targets. As at 31 December 2023, the Group had covenant net debt of £415 million (2022: £461 million) and its financial position was well within its covenants. The leverage and interest cover tests will be tested again on 30 June 2024.

The £500 million RCF contains Scope 1, 2 and 3 greenhouse gas emissions targets which align to ITV's stated objective to have Net Zero carbon emissions by 2030. These targets are measured at the end of each financial year and independently verified in July following the relevant December year end. Scope 1 and 2 emissions are measured separately to Scope 3 emissions. The margin on the facility reduces by 2.5bps if Scope 1, 2 and 3 targets are met, by 1.25bps if either Scope 1 and 2 targets are met or Scope 3 targets are met, and increases by 2.5bps if neither target is met. Failing to meet targets does not impact the availability of the RCF. The Group met Scope 1, 2 and 3 targets for 2022, however 2023 emissions will not be verified until July 2024. Over the life of the facility, it may be necessary to recalibrate the baseline emissions level set in 2019, particularly in relation to Scope 3 emissions and there is a mechanism in the RCF documentation that allows for this.

The Directors have prepared forecasts for three cash flow scenarios (mid, high and low cases), for the period of three years from 1 January 2024 (in line with the viability assessment period). The mid case scenario is based on the 2024 Board approved budget and 2024 to 2026 strategic plan, also approved by the Board. The key assumptions in the scenarios relate to fluctuations in the advertising market due to audience and/or market decline and the evolving demand in the content market, specifically relating to content pipeline. All scenarios have embedded inflationary impacts with increased production costs in the short to medium term as well as continued structural changes in the advertising market and viewing habits with increased focus on streaming. The Directors have also considered a number of sensitivities to the mid case scenario to arrive at a severe but plausible downside scenario that has been used to assess the appropriateness of preparing this consolidated financial information using the going concern basis. These sensitivities include settlements in respect of ongoing litigation, lost and/or delayed Studios productions, a failure to deliver the expected consumption hours or subscriber growth for Streaming and a decline in advertising revenue in comparison to 2023. The severe but plausible scenarios do not assume the adoption of a range of mitigations available to the Board.

After considering the severe but plausible scenarios, the Group remains able to operate within its financial covenants and will have sufficient liquidity during the going concern period to 30 June 2025.

The Directors propose a final dividend of 3.3 pence per share (2022: 3.3 pence), which equates to a full year dividend of 5.0 pence per share, subject to approval by shareholders at the AGM on 2 May 2024. The Directors intend to at least maintain this dividend over the medium term (this was included in all scenarios modelled). The Directors will continue to balance shareholder returns with a commitment to maintain investment grade credit metrics over the medium term and to continue to invest in the Group's strategy.

Consequently, the Directors are confident that the Group will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of this consolidated financial information and therefore have prepared the consolidated financial information on a going concern basis.

Subsidiaries, joint ventures, associates and investments

Subsidiaries are entities that are directly or indirectly controlled by the Group. Control exists where the Group is exposed, or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. 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 or losses, less any dividends received 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 are entities where the Group concludes it does not have significant influence and are held at fair value unless the investment is a start-up business, in which case it is valued initially at cost as a proxy for fair value.

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 Consolidated Statement of Financial Position in accordance with IFRS 9 'Financial Instruments':

• Financial assets/liabilities at fair value through OCI - measured at fair value through other comprehensive income -separately disclosed as financial assets/liabilities in current and non-current assets and liabilities or equity investments in non-current assets

• Financial assets/liabilities at fair value through profit or loss - separately disclosed as derivative financial instruments in current and non-current assets and liabilities and included in other payables (put option liabilities and contingent consideration) or convertible loan receivable within other receivables

• Financial assets measured at amortised cost - separately disclosed as cash and cash equivalents and trade and other receivables

• 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, requiring assessment of contractual provisions that do or may change the timing or amount of contractual cash flows. Details of the accounting policies for measurement of the above instruments are set out in the relevant note. Where unconditional rights to set off financial instruments exist, and the Group intends to either settle on a net basis or realise the asset and settle the liability simultaneously, the Group presents the relevant instruments net in the Consolidated Statement of Financial Position.

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 Consolidated 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 and call deposits with a maturity of less than or equal to three months from the date of acquisition. 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 information 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. 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, expenses and other comprehensive income 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.

The Group's net investments in companies outside the UK may be hedged where the currency exposure is considered to be material. Hedge accounting is implemented on certain foreign currency firm commitments, for which the effective portion of any foreign exchange gains or losses is recognised in other comprehensive income (note 4.3).

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 foreign subsidiary, 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.

Where a forward currency contract is used to manage foreign exchange risk and hedge accounting is not applied, any impact of movements in currency for both the forward currency contracts and the assets and liabilities is taken to the income statement.

Accounting judgements and estimates

The preparation of financial information 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. The current macroeconomic environment has caused greater estimation and judgement to be applied, particularly in respect of pension obligations and discount rates used for impairment reviews.

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 material judgement or complexity and therefore may have a material impact on the financial information in the next 12 months are set out below. Additional detail on the judgements and sources of estimation uncertainty applied by management are set out in the accounting policies section of the relevant notes:

Area	Key judgements	Key sources of estimation uncertainty
Exceptional items (See note 2.2)	The classification of income or expenses as exceptional items
Defined benefit pension (See note 3.7)		Estimates of the assumptions for valuing the defined benefit obligation
Provisions related to Box Clever (see note 3.6)	The basis for calculating the provision	Estimates of the amount required to settle the potential liability
Employee-related provisions (See note 3.6)	The individuals who are included in the calculation	Estimates of the amounts required to settle the liability
Acquisition-related liabilities (See note 3.1.4 and 3.1.5)	Whether future amounts payable are linked to employment	Estimates of cash-flow forecasts to support the calculation of the future liabilities
Transmission commitments (See note 3.1.1)	Whether the transponder contracts should be classified as leases in accordance with IFRS 16

In addition to the above, there are a number of areas which involve a high degree of estimation and are significant to the financial information but are not expected to have a material impact on them in the next 12 months. The key areas underlying estimation uncertainty include the estimation of net realisable values for programme rights, allocation of programme rights between linear and ITVX, impairment of intangible assets and taxation. More detail on each of these items is given in the relevant notes.

The Directors recognise the climate crisis and the potential impact it may have on both the wider world and the success of ITV. The threat continues to evolve and businesses globally have a responsibility to take meaningful action to mitigate and prevent further climate change. The Directors are committed to reducing the impact of ITV on the environment. Climate-related risks have been identified as an emerging business risk; however, the Directors do not view them as a source of material estimation uncertainty for the Group. For further detail, see the Risks and Uncertainties section of the Strategic Report.

New or amended accounting standards

The following new standards and/or amendments were effective 1 January 2023, but have not had a significant impact on the Group's results or Consolidated Statement of Financial Position.

Accounting standard	Requirement	Impact on financial information
IFRS 17 'Insurance Contracts' and related amendments	IFRS 17 'Insurance Contracts' is a comprehensive new accounting standard covering recognition, measurement, presentation and disclosures. This standard replaces IFRS 4 'Insurance Contracts'.	No material change to the Group's financial position or performance.
Amendments to IAS 1 'Presentation of Financial Statements' and IFRS Practice Statement 2 'Making Materiality Judgements'	The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their 'significant' accounting policies with a requirement to disclose their 'material' accounting policies. The IFRS Practice Statement 2 has been amended by adding guidance and examples to explain and demonstrate the application of the 'four-step materiality process' in making decisions about accounting policy disclosures.	No material change to the Group's financial position or performance.
Amendments to IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors'	The amendments introduce a new definition of accounting estimates and clarify how entities use measurement techniques and inputs to develop accounting estimates.	No material change to the Group's financial position or performance.
Amendments to IAS 12 'Income taxes' - Initial recognition exception	The amendments aim to narrow the scope of the initial recognition exception under IAS 12 so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences.	No material change to the Group's financial position or performance.
Amendments to IAS 12 'Income Taxes'- Pillar Two income taxes	The amendments provide a temporary exception from the requirement to recognise and disclose deferred taxes arising from enacted or substantively enacted tax law that implements the Pillar Two model rules published by the OECD, including tax law that implements qualified domestic minimum top-up taxes described in those rules.	The Group has applied the exception under IAS 12 to recognising and disclosing information about deferred tax assets and liabilities related to top-up income taxes.

Finance (No 2) Bill and Pillar Two impact on financial information

On 20 June 2023, Finance (No.2) Act 2023 was substantively enacted in the UK, introducing a global minimum effective tax rate of 15% for large groups and for financial years beginning on or after 31 December 2023. Taxation balances are adjusted for a change in tax law if the change has been substantively enacted by the balance sheet date, however the amendments to IAS 12 'Income Taxes' Pillar Two income taxes provides an exemption from the requirement to recognise and disclose deferred taxes arising from enacted or substantively enacted tax law that implements the Pillar Two model rules.

Accounting standards effective in future periods

The Directors have considered the impact on the Group of new and revised accounting standards, interpretations or amendments that are not yet effective and do not expect them to have a significant impact on the Group's results and Consolidated Statement of Financial Position.

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.

Total revenue and adjusted earnings before interest, tax and amortisation (adjusted EBITA) (both as defined in the APMs section of the Annual Report) are the Group's key performance and profit indicators. They reflect 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 adjusted EBITA.

The Group is a vertically integrated producer broadcaster and streamer, consisting of ITV Studios and Media & Entertainment (M&E).

ITV Studios

ITV Studios is a scaled and global creator, owner and distributor of high-quality TV content. ITV Studios is the largest producer in the UK, one of the largest unscripted producers in the US and one of the top three producers in the majority of the international markets in which it operates. ITV Studios has established relationships with key content buyers and leading creative talent in those markets; and with a combined content library of over 90,000 hours, it is also one of the pre-eminent global distributors.

ITV Studios UK, the largest producer in the UK, produces programming for the Group's own channels, accounting for 70% of ITV main channel spend on commissioned programming (2022: 65%). Programming is also sold to other UK broadcasters, networks and streaming platforms.

ITV Studios US is one of the largest unscripted producers in the US and continues to grow its scripted presence by investing in high-profile dramas.

ITV Studios also operates in ten other international locations, together called ITV Studios International, being Australia, Germany, France, Italy, Spain, the Netherlands, Sweden, Norway, Finland and Denmark where content is produced for local and international broadcasters, networks and streaming platforms. This content is either locally created IP or formats that have been created elsewhere by ITV, primarily in the UK, the Netherlands and in Israel.

ITV Studios Global Partnerships license ITV's finished programmes, formats and third-party content internationally. Within this business, the Group also finances productions both on and off ITV to acquire global distribution rights.

Media & Entertainment

ITV is the largest commercial broadcaster and streamer in the UK, delivering unrivalled audience scale and reach. Media & Entertainment (M&E) includes Streaming and Broadcast through which we distribute content via ITVX, our free advertiser-funded streaming service, and via our free-to-air linear TV channels. Our content is also distributed on third-party partner platforms such as Sky and Virgin.

ITVX also includes a subscription tier, ITVX Premium, which provides subscribers with all of ITVX's programming ad-free along with other exclusive content.

ITV offers advertisers a unique combination of mass simultaneous reach, targeted advertising, and commercial and creative partnerships, in a brand-safe environment across ITVX and our linear TV channels.

Digital revenue is predominantly made up of digital advertising revenues, subscription revenue and digital sponsorship and commercial partnerships.

Non-digital advertising revenue is predominantly made up of advertising, sponsorship and commercial partnership revenue from our linear television channels.

Other revenue is predominantly made up of competitions around our linear television programming and third party licensing revenue.

Accounting policies

Revenue measurement and recognition

The Group derives revenue from the transfer of goods and services. Revenue recognition is based on the delivery of performance obligations and an assessment of when control is transferred to the customer. Revenue is recognised either when the performance obligation in the contract has been performed ('point in time' recognition) or 'over time' as control of the performance obligation is transferred to the customer.

Customer contracts can have a wide variety of performance obligations, from production contracts to format licences and distribution activities. For these contracts, each performance obligation is identified and evaluated. Under IFRS 15 the Group needs to evaluate if a format or licence represents a right to access the content (revenue recognised over time) or represents a right to use the content (revenue recognised at a point in time). The Group has determined that most format and licence revenues are satisfied at a point in time due to there being limited ongoing involvement in the use of the licence following its transfer to the customer.

The transaction price, being the amount to which the Group expects to be entitled and has rights to under the contract is allocated to the identified performance obligations. The transaction price will also include an estimate of any variable consideration where the Group's performance may result in additional revenues. Variable consideration is estimated based on the achievement of agreed targets, such as audience targets. Variable consideration is recognised only to the extent that it is highly probable that a significant reversal of revenue recognised will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

Revenue is stated exclusive of VAT and equivalent sales taxes.

Complexity in advertising revenue measurement and recognition is driven by a combination of automated and manual processes involved in measuring the value delivered to the customer and therefore the value of variable consideration due.

In assessing the transaction price, any non-cash consideration received from a customer is included. Non-cash consideration is measured at fair value. It takes into account the value of what the Group is receiving rather than the value of what the Group is giving up.

Complex one-off contracts in all classes of revenue are assessed individually and judgement is exercised in identifying performance obligations and allocating price to them. Timing of revenue recognition is another area of judgement particularly in respect of contracts in the ITV Studios division to assess whether revenue should be recognised at a point in time or over time.

Revenue recognition criteria for the key classes of revenue are as follows:

Segment	Major classes of revenue and revenue recognition policy	Payment terms
ITV Studios
Programme production	• Revenue generated from the programmes produced for broadcasters and streaming platforms in the UK, US and internationally is recognised at the point of delivery of an episode and acceptance by the customer. Revenue from producer for hire contracts, where in an event of cancellation, cost is recovered plus a margin, is recognised over time, over the term of the contract	• Payment term is over the term of the contract
Format licences	• A licence is granted for the exploitation of a format in a stated territory, media and period. Licence revenue is recognised when the licence period has commenced (point in time)	• Payment term is over the term of the contract
Programme distribution rights	• A licence is granted for the transmission of a programme in a stated territory, media and period and revenue is recognised at the point when the contract is signed, the content is available for download and the licence period has started (point in time)	• Payment term is over the term of the contract

Segment	Major classes of revenue and revenue recognition policy	Payment terms
Media & Entertainment
Total advertising revenue	• Net advertising revenue is generated from selling spot airtime on linear TV and is recognised at the point of transmission • Online advertising revenue from video on demand is generated from selling advertising on ITVX (ITV Hub before the launch of ITVX in December 2022) and is recognised at the point of delivery • Revenue from the sponsorship of programmes across ITV linear channels and online is recognised over the period of transmission	• Received in the month after transmission • Received in the month after campaign is delivered • Received prior to transmission
Subscriptions	• Revenue from subscription services is recognised over the subscription period	• Payment term is over the term of the contract or subscription period
SDN	• Revenue is generated from the carriage fee or capacity of the digital multiplex and is recognised over the term of the contract	• Payment term is over the term of the contract
Partnerships and other revenue	• Revenue from platforms such as Sky and Virgin Media O2, and third-party commissions. Revenue related to performance obligations delivered over time (e.g. provision of HD and SD channels and updated library content) are recognised over the term of the contract while revenues related to one-time provision of content are recognised on delivery of the content (point in time) • Interactive revenue is earned from entries to competitions and is recognised as the event occurs (point in time) • Minorities revenues is the revenue received from Channel 3 licencees that are not part of the ITV Group. The performance obligations are delivered as programming is delivered to the licensee and revenue is recognised over the term of the contract (over time) • Other categories of revenues within 'Partnerships and other revenue' are individually immaterial	• Payment term is over the term of the contract • Payment term is within two months of the competition being aired • Payment term is over the term of the contract

The results for the year aggregate these classes of revenue into the following categories:

	2023 £m	2023 % of total	2022 £m	2022 % of total
ITV Studios UK	962		822
ITV Studios US	395		467
ITV Studios International	445		465
Global Partnerships*	368		342
Total ITV Studios**	2,170	51%	2,096	48%

Total advertising revenue (TAR)	1,778	42%	1,931	44%
Subscriptions	59		54
SDN	48		55
Partnerships and other revenue	205		209
Media & Entertainment	2,090	49%	2,249	52%
Total revenue***	4,260		4,345

* Global Formats and Distribution was rebranded as Global Partnerships in the year

** ITV Studios UK, ITV Studios US and Studios International revenues are mainly programme production. Global Partnerships revenue is from programme distribution rights, format licences and gaming, live events and merchandising.

*** Includes internal supply as discussed in the APMs.

Digital revenues of £490 million (2022: £411 million) include digital advertising revenue and subscription revenue, digital sponsorship and partnership revenue, ITV Win and other revenues from digital business ventures.

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 Management Board. The Management Board is regarded as the chief operating decision-maker and considers the business, primarily from an operating activity perspective.

The Groups' segments are Media & Entertainment and ITV Studios, the results of which are outlined in the following tables:

	ITV Studios* 2023 £m	Media & Entertainment 2023 £m	Consolidated 2023 £m
Total segment revenue	2,170	2,090	4,260
Intersegment revenue	(629)	(7)	(636)
Revenue from external customers	1,541	2,083	3,624

Adjusted EBITA**	286	205	491
Unrealised profit in stock adjustment			(2)
Group adjusted EBITA***			489
	ITV Studios* 2022 £m	Media & Entertainment 2022 £m	Consolidated 2022 £m
Total segment revenue	2,096	2,249	4,345
Intersegment revenue	(611)	(6)	(617)
Revenue from external customers	1,485	2,243	3,728

Adjusted EBITA**	259	464	723
Unrealised profit in stock adjustment			(6)
Group adjusted EBITA***			717

* Intersegment revenue originates mainly in the UK.

** Adjusted EBITA is EBITA adjusted to exclude exceptional items and includes the benefit of production tax credits. It is stated after the elimination of intersegment revenue and costs.

*** Group adjusted EBITA removes the profit recorded in the ITV Studios business related to content sold to the Media & Entertainment business but unutilised and held on the balance sheet at the year end. A reconciliation of Group adjusted EBITA to statutory profit before tax is provided.

The Group's principal operations are in the United Kingdom. Revenue from external customers in the United Kingdom is £2,272 million (2022: £2,376 million) and revenue from external customers in other countries is £1,352 million (2022: £1,352 million), of which revenue of £641 million (2022: £655 million) was generated in the US during the year. The Operating and Financial Performance Review provides further detail on ITV's international revenues.

Intersegment revenue, which is earned on arm's length terms, is mainly generated from the supply of ITV Studios programmes to Media & Entertainment for transmission primarily on the ITV network. This revenue stream is a measure that informs the Group's strategic priority of building a strong international content business, as producing and retaining rights to the shows broadcast on the ITV network benefits the Group further from subsequent international content and format sales.

In preparing the segmental information, centrally managed costs have been allocated between reportable segments on a methodology driven principally by revenue, headcount or building occupancy of each segment. This is consistent with the basis of reporting to the Board of Directors.

There is one media buying agency (2022: two) acting on behalf of a number of advertisers that represent the Group's major customers. This agency is the only customer that individually represents over 10% of the Group's revenue. Revenue of approximately £478 million was derived from this customer in 2023. In 2022, there were two media buying agencies that represented over 10% of the Group's revenue with £548 million and £355 million respectively. This revenue is attributable to the Media & Entertainment segment.

The following table shows the total of non-current assets other than financial instruments, deferred tax assets, and pension assets broken down by location of the assets:

	2023 £m	2022 £m
UK	1,372	1,415
US	391	472
Rest of the world	137	155
Total non-current assets	1,900	2,042

Timing of revenue recognition

The following table includes classes of revenue from contracts disaggregated by the timing of recognition:

	2023 £m	2022 £m	2023 £m	2022 £m
	Products and services transferred at a point in time		Products and services transferred over time
Total advertising revenue, subscriptions, SDN and other M&E	1,755	1,902	328	341
Programme production, programme distribution rights	1,187	1,169	266	236
Format licences	82	76	6	4
Total external revenue	3,024	3,147	600	581

Forward bookings

The following table includes revenue from contracts signed before the reporting date that is to be recognised in periods after the reporting date (i.e. the performance obligations remain unsatisfied or partially unsatisfied at the reporting date):

	2024 £m	2025 £m	2026 £m	Beyond £m
Media & Entertainment	92	73	53	29
ITV Studios	151	180	39	12
Total revenue	243	253	92	41
Internal supply	(43)	(52)	-	-
Total external revenue	200	201	92	41

The Group applies the practical expedients in IFRS 15 and, therefore, does not disclose information about remaining performance obligations that have original expected durations of less than one year or where the price is not yet known (e.g. net advertising revenue (NAR)).

Group adjusted EBITA

The Directors assess the performance of the reportable segments based on a measure of adjusted EBITA. The Directors use this non-IFRS measurement basis as it excludes the effect of transactions that could distort the understanding of the Group's performance for the year and comparability between periods. See the Operating and Financial Performance Review for the detailed explanation of the Group's use of adjusted performance measures. A reconciliation of Group adjusted EBITA to statutory profit before tax is provided as follows:

	Note	2023 £m	2022 £m
Group adjusted EBITA		489	717
Production tax credits		(85)	(49)
EBITA before exceptional items		404	668
Operating exceptional items	2.2	(77)	(65)
Amortisation and impairment		(89)	(84)
Net financing costs	4.4	(45)	(26)
Share of profits of joint ventures and associated undertakings		-	8
Statutory profit before tax		193	501

Cash generated from operations

A reconciliation of profit before tax to cash generated from operations before exceptional items is as follows:

	Note	2023 £m	2022 £m
Cash flows from operating activities
Statutory profit before tax		193	501
Add back:
Share of profits of joint ventures and associated undertakings		-	(8)
Net financing costs	4.4	45	26
Operating exceptional items	2.2	77	65
Depreciation of property, plant and equipment (net of exceptional items)	3.2	46	53
Amortisation and impairment		89	84
Share-based compensation	4.8	16	19
Increase in programme rights and distribution rights		(33)	(70)
Decrease/(increase) in receivables, contract assets and production inventories		274	(133)
(Decrease)/increase in payables and contract liabilities		(151)	53
Movement in working capital		90	(150)
Cash generated from operations before exceptional items		556	590

Operating costs

The major components of operating costs of £3,386 million (2022: £3,209 million) are content costs of £1,293 million
(2022: £1,216 million), other net costs of production of £1,496 million (2022: £1,444 million), staff costs of £385 million (2022: £347 million), depreciation, amortisation and impairment of £135 million (2022: £137 million) and operating exceptional items of £77 million (2022: £65 million).

Staff costs

Staff costs can be analysed as follows:

	2023 £m	2022 £m
Wages and salaries	548	497
Social security and other costs	98	80
Share-based compensation (see note 4.8)	16	19
Pension costs	31	35
Total staff costs*	693	631
Less: staff costs allocated to productions, exceptional items or capitalised	(308)	(284)
Net staff costs	385	347

* Staff costs includes the management board including two executive directors but excludes the non-executives and the Chairman.

Full-time equivalent employees (FTEE) include those FTEEs that are allocated to the cost of productions during the year; however, they exclude short-term contractors and freelancers who are engaged on productions. The weighted average FTEE over the year is:

	2023	2022
ITV Studios	4,017	4,042
Media & Entertainment	2,852	2,635
	6,869	6,677

The monthly average number of people employed over the year is:

	2023	2022
ITV Studios	4,248	4,144
Media & Entertainment	2,939	2,681
	7,187	6,825

The increase in headcount is due to a continued investment in digital and technical expertise to drive our digital revenue primarily on ITVX.

Depreciation

Depreciation in the year was £46 million (2022: £53 million), of which £28 million (2022: £33 million) relates to ITV Studios and £18 million (2022: £20 million) to Media & Entertainment. A further £6 million (2022: £8 million) in respect of accelerated depreciation following a change in useful life of the related assets in relation to the move to a new London site has been included in exceptional items. See notes 2.2 and 3.2 for further details.

Audit fees

The Group's auditors are PricewaterhouseCoopers LLP. The Group may engage PricewaterhouseCoopers LLP on assignments additional to its statutory audit duties where its expertise and experience with the Group are important and are in line with the Group's policy on auditor independence. In 2023, non-audit fees of £1.3 million (2022: £nil) were paid to PricewaterhouseCoopers LLP for services related to a proposed acquisition. Fees for audit-related assurance services of £0.2 million (2022: £0.2 million), being the review of the interim results for the six months to 30 June 2023 were also incurred. Fees paid to PricewaterhouseCoopers LLP and its associates during the year are set out below:

	PwC 2023 £m	PwC 2022 £m
For the audit of the Group's annual financial statements	2.1	1.8
For the audit of subsidiaries of the Group	1.7	1.3
Audit-related assurance services	0.2	0.2
Total audit and audit-related assurance services	4.0	3.3

Other assurance services	1.3	-
Total non-audit services	1.3	-

Total fees paid to auditors	5.3	3.3

Other than noted above, there were no fees payable in 2023 or 2022 to PricewaterhouseCoopers LLP or their associates for the audit of financial statements of any associate or pension scheme of the Group, or internal audit activities.

2.2 Exceptional items

Keeping
it simple

Exceptional items are excluded from management's assessment of profit because by their size or nature they could distort the Group's underlying quality of earnings. They are typically gains or losses arising from events that are not considered part of the core operations of the business. These items are excluded to reflect performance in a consistent manner and are in line with how the business is managed and measured on a day-to-day basis.

Accounting policies

Exceptional items as described above are highlighted on the face of the Consolidated Income Statement. See the Operating and Financial Performance Review for the detailed explanation of the Group's use of adjusted performance measures. Gains or losses on disposal of non-core assets are also considered exceptional due to their nature and impact on the Group's underlying quality of earnings.

Exceptional items

Operating exceptional items are analysed as follows:

(Charge)/credit	Ref.	2023 £m	2022 £m
Operating exceptional items:
Acquisition-related expenses	A	(24)	(4)
Restructuring and transformation costs	B	(25)	(28)
Property costs	C	(10)	(24)
Pension related costs	D	-	(4)
Costs related to the passing of Her Majesty Queen Elizabeth II	E	-	(16)
Sports rights	F	-	5
Employee-related tax provision	G	3	(10)
Insured trade receivable provision	H	3	23
Legal settlements	I	(13)	-
Legal and other costs	J	(11)	(7)
Total operating exceptional items		(77)	(65)
Tax on operating exceptional items		12	8
Total operating exceptional items net of tax		(65)	(57)

A. Acquisition-related expenses

Acquisition-related expenses of £24 million (2022: £4 million) are predominantly performance-based, employment-linked consideration to former owners and professional fees related to acquisitions and potential acquisitions.

B. Restructuring and transformation costs

Restructuring and transformation costs of £25 million (2022: £28 million) relate to one-off significant restructuring and transformation programmes of the business.

Significant projects include a business transformation programme which commenced in 2021. This programme includes the implementation of a new cloud-based ERP solution, a software as a service (SaaS) solution where the implementation costs are expensed as incurred. The implementation commenced in 2021 and is expected to continue into 2024.

Other significant projects include a rationalisation of the Studios operational structures outside the UK. Costs relating to this review will continue throughout 2024.

C. Property costs

Following the decision to move to Broadcast Centre in early 2022, £10 million (2022: £17 million) of property costs and move related costs have been recognised as exceptional, including accelerated depreciation following a change in useful life of the related assets. No further exceptional costs are expected related to the move to Broadcast Centre.

In 2022, an additional £7 million impairment on leasehold improvements and right of use asset was provided following the decision to vacate our New York office and reduce our property footprint in the US.

D. Pension related costs

The 2022 charge relates to the risk premium paid in relation to the buy-out of Section C of the ITV Pension Scheme.

E. Costs related to the passing of Her Majesty Queen Elizabeth II

Following the passing of Her Majesty Queen Elizabeth II in September 2022, the M&E business incurred significant additional costs related to news coverage associated with the reporting of the death of the Queen, the funeral and programmes featuring the character of the Queen that will unlikely ever be screened. £16 million of costs were recognised in 2022.

F. Sports rights

In 2021, certain sporting events were cancelled by the relevant governing body. The Group had previously recognised an impairment provision for these events. £5 million was released in 2022 as a refund of earlier payments made was expected.

G. Employee-related tax provisions

From April 2021 the responsibility for undertaking IR35 employment status assessments, and where necessary withholding PAYE and paying NICs, passed to the employer, rather than remaining with individuals and their personal service companies. HMRC have issued assessments on the Group for several individuals engaged by the Group during the tax years 2016/17 to 2018/19 as employed for tax purposes. This is a complex area and the Group has been in continuous discussion with HMRC on this matter throughout 2023.

In 2023, HMRC advised that certain individuals were no longer of interest to them and the related provision previously classified as exceptional was released.

Due to ongoing reviews by HMRC and court cases in this matter, the final amount payable could be significantly different to amounts currently provided.

H. Insured trade receivable provision

In 2017, the Group recorded a bad debt provision of US$41 million related to trade receivables for The Voice of China. Subsequently, US$34 million of cash was received from the licensee and the corresponding bad debt provision was released. The Directors anticipated recovering the remainder of the trade receivable from the trade credit insurance.

In 2023, a settlement of the claim was agreed with the insurers resulting in an exceptional credit of US$5 million (£3 million). No further recovery of the remaining trade receivable is expected.

I. Legal settlements

Legal settlements of £13 million (2022: £nil) relate to settlements or proposed settlements on a number of significant legal cases which are considered outside the normal course of business.

J. Legal and other costs

Legal and other costs of £11 million (2022: £7 million) relates primarily to legal costs for matters considered to be outside the normal course of business, including Box Clever, The Voice of Holland, the UK Competition and Markets Authority (CMA) investigations and the Phillip Schofield KC Review.

2.3
Taxation

Keeping
it simple

This section sets out the Group's tax accounting policies, the current and deferred tax charges or credits in the year (which together make up the total tax charge or credit in the Consolidated Income Statement), a reconciliation of profit before tax to the tax charge for the year and the movements in deferred tax assets and liabilities.

Accounting policies

The tax charge for the year is recognised in the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income and directly in equity, according to the accounting treatment of the related transactions. The tax charge comprises both current and deferred tax. The calculation of the Group's tax charge involves estimation and judgement in respect of certain items whose tax treatment cannot be fully determined until a resolution has been reached by the relevant tax authority.

Current tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the year and any adjustment in respect of previous years.

The Group recognises liabilities for anticipated tax issues based on estimates and judgement of the additional taxes that are likely to become due. Amounts are accrued based on management's interpretation of specific tax law and the likelihood of settlement. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current tax and deferred tax provisions in the period in which such determination is made.

Deferred tax

Deferred tax arises due to certain temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and those for taxation purposes.

The following temporary differences are not provided for:

· The initial recognition of goodwill

· The initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination

· Differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities. Deferred tax is calculated using tax rates that are enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that sufficient taxable profit will be available to utilise the temporary difference. Recognition of deferred tax assets, therefore, involves judgement regarding the timing and level of future taxable income.

Deferred tax assets and liabilities are disclosed net to the extent that they relate to taxes levied by the same authority and the Group has the right of set-off.

Taxation - Consolidated Income Statement

The total taxation charge in the Consolidated Income Statement is analysed as follows:

	2023 £m	2022 £m
Current tax:
Current tax credit/(charge) on profit before exceptional items	24	(38)
Current tax credit on exceptional items	11	7
	35	(31)
Adjustments related to prior periods	(12)	9
	23	(22)
Deferred tax:
Origination and reversal of temporary differences	(7)	(34)
Deferred tax credit on exceptional items	1	1
Impact of changes to statutory tax rates	1	(6)
	(5)	(39)
Adjustments related to prior periods	(2)	(5)
	(7)	(44)
Total taxation credit/(charge) in the Consolidated Income Statement	16	(66)

In order to understand how, in the Consolidated Income Statement, a tax credit of £16 million (2022: £66 million charge) arises on a profit before tax of £193 million (2022: £501 million), the taxation charge that would arise at the standard rate of UK corporation tax is reconciled to the actual tax credit as follows:

	2023 £m	2022 £m
Profit before tax	193	501
Notional taxation charge at UK corporation tax rate of 23.5% (2022: 19%) on profit before tax	(45)	(95)
Non-taxable income/non-deductible expenses	(10)	(15)
Prior year adjustments	(14)	4
Other taxes	(8)	(8)
Previously unrecognised deferred tax assets	6	-
Current year losses not recognised	(17)	(8)
Impact of overseas tax rates	2	(1)
Impact of changes in tax rates	1	(6)
Movement on tax provisions	(1)	(1)
Production tax credits	102	64
Statutory taxation credit/(charge) in the Consolidated Income Statement	16	(66)

Non-deductible expenses are expenses that are not expected to be allowable for tax purposes. Similarly, non-taxable income is income that is not expected to be taxable.

Adjustments to prior periods primarily arise where an outcome is obtained on certain tax matters, which differs from expectations held when the related provision was made. Where the outcome is more favourable than the provision made, the difference is released, lowering the current year tax charge. Where the outcome is less favourable than our provision, an additional charge to current year tax will occur. The total current tax credit of £23 million (2022: £22 million charge) includes a £12 million charge (2022: £9 million credit) relating to prior years, and the deferred tax charge of £7 million (2022: £44 million charge) includes a £2 million charge (2022: £5 million charge) relating to prior years. This adjustment has arisen following changes in estimates of taxes that have already become due, or will become due in the future.

Other taxes of £8 million charge (2022: £8 million charge) includes state taxes of £3 million in the US, local taxes of £1 million in Italy and France plus £4 million of irrecoverable withholding tax in the UK.

A previously unrecognised deferred tax asset of £6 million relating to historical capital losses, has been recognised in 2023, as they will be utilised against the capital profits realised on the sale of BritBox International, announced on 1 March 2024.

The tax impact of current year losses not recognised is £17 million (2022: £8 million), this relates to £2 million in Australia, £1 million in France, £13 million in Italy and £1 million in other overseas jurisdictions. No deferred tax on these losses has been recognised as we do not have certainty over future taxable profits in those jurisdictions nor are they suitable taxable temporary differences against which the losses can unwind.

The impact of overseas tax rates reflects the fact that some of our profits are earned in territories other than the UK and taxed at rates different from the UK corporation tax rate. In 2023, the total impact is £2 million credit (2022: £1 million charge) due to profits arising in lower tax jurisdictions.

The UK corporation tax rate increased from 19% to 25%, effective from 1 April 2023. The current year movement through the Consolidated Income Statement, on the deferred tax liability created in respect of the change in the tax rate, is a
£1 million credit (2022: £6 million charge).

In line with our accounting policy on current tax, provisions are held on the balance sheet within current tax liabilities in respect of uncertain tax positions where management believes that it is probable that future payments of tax will be required.

The production tax credits included within the reconciliation above are UK High-End Television (HETV) tax credits and Children's Television tax credits, which are part of a group of incentives provided to support the creative industries in the UK. The ability to access these tax credits is fundamental when assessing the viability of investment decisions in the production of high-end drama and children's programmes. Under IFRS, these production tax credits are reported within the total taxation charge in the Consolidated Income Statement. However, ITV considers them to be a contribution to production costs, and therefore working capital in nature, and excludes them from its adjusted tax charge, including them instead within Adjusted EBITA.

The effective tax rate is (8.3)% (2022: 13.2%), and is the statutory tax charge on the face of the Consolidated Income Statement expressed as a percentage of the statutory profit before tax. The tax rate is lower than in 2022 primarily due to significantly higher HETV tax credits compared to the profits. As explained in the Finance Review, the Group uses an adjusted tax rate to show how tax impacts total adjusted earnings in a way that is more aligned with the Group's cash tax position. The adjusted tax rate is 21.5% (2022: 20.1%).

In 2023, the current year movement recognised in the Consolidated Income Statement on origination and reversal of temporary differences (excluding exceptional items) is a charge of £7 million, compared with a charge of £34 million in 2022.

Taxation - Other comprehensive income (OCI) and equity

As analysed in the table below a deferred tax charge of £2 million (2022: £23 million charge) has been recognised on actuarial movements on pensions. Other temporary differences recognised in other comprehensive income include, no deferred tax (2022: credit of £5 million) on gilts, £1 million deferred tax charge on derivatives (2022: £1 million credit) and £2 million deferred tax charge on the cost of hedging (2022: £nil). A deferred tax charge of £3 million (2022: £7 million charge) has been recognised in equity in respect of share-based payments.

There has been £11 million current tax credit recognised in other comprehensive income in the current year on pensions. There has been no current tax on foreign exchange movements net of hedging (2022: £nil). There has been £1 million current tax credit recognised in equity in the current year in relation to share-based compensation (2022: £nil).

Taxation - Consolidated Statement of Financial Position

The table below outlines the deferred tax assets/(liabilities) that are recognised in the Consolidated Statement of Financial Position, together with their movements in the year:

	At 1 January 2023 £m	Recognised in the income statement £m	Recognised in OCI and equity £m	Other £m	Foreign exchange £m	At 31 December 2023 £m
Tangible assets	1	(6)	-	-	-	(5)
Intangible assets	(49)	(1)	-	-	1	(49)
Pension scheme	(56)	(1)	(2)	-	-	(59)
Tax losses	27	7	-	-	(2)	32
Share-based compensation	9	(1)	(3)	-	-	5
Other temporary differences	30	(5)	(3)	1	-	23
	(38)	(7)	(8)	1	(1)	(53)

	At 1 January 2022 £m	Recognised in the income statement £m	Recognised in OCI and equity £m	Other £m	Foreign exchange £m	At 31 December 2022 £m
Tangible assets	4	(3)	-	-	-	1
Intangible assets	(45)	1	-	(3)	(2)	(49)
Pension scheme	(6)	(27)	(23)	-	-	(56)
Tax losses	32	(8)	-	-	3	27
Share-based compensation	11	5	(7)	-	-	9
Other temporary differences	29	(12)	6	4	3	30
	25	(44)	(24)	1	4	(38)

At 31 December 2023, the net deferred tax liability position is £53 million (2022: £38 million liability), consisting of total deferred tax assets of £106 million (2022: £133 million) and total deferred tax liabilities of £159 million (2022: £171 million). The Consolidated Statement of Financial Position presents deferred tax after netting off balances within countries - a deferred tax asset of £6 million and a deferred tax liability of £59 million (2022: deferred tax asset of £19 million and a deferred tax liability of £57 million).

The deferred tax balances relate to:

· Property, plant and equipment temporary differences arising on assets qualifying for tax depreciation

· Temporary differences on intangible assets, including those arising on business combinations

· Programme rights - temporary differences on intercompany profits on stock

· Pension scheme temporary differences on the IAS 19 pension surplus and SDN and LTVC pension funding partnerships

· Temporary differences arising from the timing of the use of tax losses

· Share-based compensation temporary differences on share schemes

· Other temporary differences on provisions and financial instruments

The deferred tax balance associated with the pension surplus is partially driven by the employer contributions to the Group's defined benefit pension scheme made during the year. The adjustment in other comprehensive income to the deferred tax balances relates to the actuarial loss recognised in the year.

A deferred tax asset of £32 million (2022: £27 million) has been recognised for tax losses where a full recovery is expected based on forecasted taxable profits. A deferred tax asset of £371 million (2022: £558 million) in respect of capital losses of
£1,483 million (2022: £2,231 million) has not been recognised due to uncertainties as to whether capital gains will arise in the appropriate form and relevant territories against which such losses could be utilised. The decrease in the capital losses not recognised compared to the prior year is due to the dissolution of a company that held capital losses. Due to uncertainty over the timing and extent of their utilisation, the Group has not recognised deferred tax assets of £10 million (2022: £13 million) in respect of UK losses of £38 million (2022: £53 million), £25 million (2022: £19 million) in respect of overseas losses of £106 million (2022: £84 million) including £2 million in respect of losses that expire between 2024 and 2028. In addition to this the Group has not recognised £5 million (2022: £5 million) in respect of other overseas short-term timing differences of £21 million.

Subsidiaries of ITV plc Group have undistributed earnings of £42 million (2022: £26 million) which, if paid out as dividends, would be subject to tax in the hands of the recipient. An assessable temporary difference exists, but no deferred tax liability has been recognised as ITV plc Group is able to control the timing of the distributions from these subsidiaries and is not expected to distribute these profits in the foreseeable future.

Finance (No 2) Bill and Pillar Two impact on financial information

On 20 June 2023, Finance (No.2) Act 2023 was substantively enacted in the UK, introducing a global minimum effective tax rate of 15% for large groups and for financial years beginning on or after 31 December 2023. Taxation balances are adjusted for a change in tax law if the change has been substantively enacted by the balance sheet date however the amendments to IAS 12 'Income Taxes' Pillar Two income taxes provides an exemption from the requirement to recognise and disclose deferred taxes arising from enacted or substantively enacted tax law that implements the Pillar Two model rules.

Changes to the current UK system of Audio-visual tax credits

On 29 November 2023, the UK government issued final legislation to reform the current system of Audio-Visual Expenditure Credit (AVEC) tax credits to merge the four existing AVEC schemes (Film, High-End Television (HETV), Children's Television and Animation) into a single scheme and has reviewed the qualifying criteria. The AVEC legislation was substantively enacted on 5 February 2024 and can be claimed on expenditure incurred from 1 January 2024. The new scheme is one of expenditure credits as opposed to corporate tax relief, requiring a change to the accounting treatment to include them within statutory operating profit rather than within the consolidated tax charge. The effect of this change in legislation will therefore be to increase our EBITA, adjusted EBITA, adjusted EBITA margin, profit before tax and tax expense but will leave our profit after tax unchanged, compared to the previous HETV tax credit accounting treatment. We continue to assess the impact on the Group and do not anticipate there to be a material change in their net economic value.

2.4
Earnings
per share

Keeping
it simple

Earnings per share (EPS) is the amount of post-tax profit attributable to each share.

Basic EPS is calculated on the Group profit for the year attributable to equity shareholders of £210 million (2022: £428 million) divided by 4,023 million (2022: 4,010 million), being the weighted average number of shares in issue during the year, which excludes Employee Benefit Trust (EBT) shares held in trust (see note 4.8).

Diluted EPS reflects any commitments made by the Group to issue shares in the future and so it includes the impact of share options.

Adjusted EPS is presented in order to show the business performance of the Group in a consistent manner and reflect how the business is managed and measured on a day-to-day basis. Adjusted EPS reflects the impact of operating and non-operating exceptional items on Basic EPS. Other items excluded from Adjusted EPS are amortisation and impairment of intangible assets acquired through business combinations; net financing cost adjustments; and the tax adjustments relating to these items. Each of these adjustments is explained in detail in the section below.

The calculation of Basic EPS and Adjusted EPS, together with the diluted impact on each, is set out below:

Basic earnings per share

	2023	2022
Statutory profit for the year attributable to equity shareholders of ITV plc (£m)	210	428
Weighted average number of ordinary shares in issue - million	4,023	4,010
Basic earnings per ordinary share	5.2p	10.7p

Diluted earnings per share

	2023	2022
Statutory profit for the year attributable to equity shareholders of ITV plc (£m)	210	428
Weighted average number of ordinary shares in issue - million	4,023	4,010
Dilution due to share options - million	36	36
Total weighted average number of ordinary shares in issue - million	4,059	4,046
Diluted earnings per ordinary share	5.2p	10.6p

Adjusted earnings per share

	Ref.	2023 £m	2022 £m
Statutory profit for the year attributable to equity shareholders of ITV plc		210	428
Exceptional items (net of tax)	A	65	57
Profit for the year before exceptional items		275	485
Amortisation and impairment of acquired intangible assets	B	19	45
Adjustments to net financing costs	C	18	-
Adjusted profit for the year attributable to ITV shareholders		312	530

Total weighted average number of ordinary shares in issue - million		4,023	4,010
Adjusted earnings per ordinary share		7.8p	13.2p

Diluted adjusted earnings per share

	2023	2022
Adjusted profit (£m)	312	530
Weighted average number of ordinary shares in issue - million	4,023	4,010
Dilution due to share options - million	36	36
Total weighted average number of ordinary shares in issue - million	4,059	4,046
Diluted adjusted earnings per ordinary share	7.7p	13.1p

Details of the adjustments to earnings are as follows:

A. Exceptional items (net of tax) £65 million (2022: £57 million)

Exceptional items of £77 million (2022: £65 million), net of related tax credit of £12 million (2022: £8 million). The exceptional items have been taxed in accordance with the tax treatment of the underlying transaction at the tax rate of the jurisdiction to which they relate. The £77 million exceptional charge comprises exceptional costs of £88 million and an exceptional credit of £11 million. £26 million of the net exceptional costs were disallowed for tax purposes and so there is no associated tax credit. See note 2.2 for the detailed composition of exceptional items.

B. Amortisation and impairment of acquired intangible assets (net of tax) of £19 million (2022: £45 million)

Amortisation and impairment of assets acquired through business combinations and investments of £89 million (2022: £84 million), excluding amortisation of software licences and development of £64 million (2022: £27 million), net of related tax credit of £6 million (2022: £12 million).

C. Adjustments to net financing costs (net of tax) £18 million (2022: £nil)

Net financing costs of £45 million (2022: £26 million), is adjusted to reflect the underlying cash cost of interest for the business. These adjustments of £16 million (2022: £nil) relates principally to finance costs on acquisitions, imputed pension interest and other financial gains and losses that do not reflect the relevant interest cash cost to the business and are not yet realised balances. The tax charge in relation to these adjustments is £2 million (2022: £nil).

Section 3: Operating Assets and Liabilities

In this
section

This section shows the assets used to generate the Group's trading performance and the liabilities incurred as a result. On the following pages, there are notes covering working capital, non-current assets and liabilities, acquisitions and disposals, provisions and pensions.

Liabilities relating to the Group's financing activities are addressed in section 4. Deferred tax assets and liabilities are shown in note 2.3.

3.1
Working
capital

Keeping
it simple

Working capital represents the assets and liabilities the Group generates through its trading activity. The Group therefore defines working capital as distribution rights, programme rights, trade and other receivables, trade and other payables, contract assets and liabilities and production inventories.

Careful management of working capital ensures that the Group can meet its trading and financing obligations within its ordinary operating cycle.

Working capital is a driver of the profit to cash conversion ratio, a key performance indicator for the Group. For those subsidiaries acquired during the year, working capital at the date of acquisition is excluded from the profit to cash calculation so that only subsequent working capital movements in the period controlled by ITV are reflected in this metric.

In the following note, you will find further information regarding working capital management and analysis of the elements of working capital.

3.1.1 Programme rights and commitments

Accounting policies

Rights are recognised when the Group controls the respective rights and the risks and rewards associated with them.

Programme rights not yet utilised are included in the Consolidated Statement of Financial Position at the lower of cost and net realisable value. In assessing net realisable value for programmes in production, judgement is required when considering the contracted sales price and estimated costs to complete.

Programme rights

The Group's policies with respect to programme rights recognise that the pattern of consumption on linear and streaming (ITVX) varies. Consumption of content varies based on the type of programme right as well as the type of platform it is transmitted on. Programme rights are expensed through operating costs reflecting the pattern in which management expects the right to be consumed.

The Group has defined policies on how programme rights are allocated to linear and streaming based on a pattern of viewing. There are also distinct policies across the platforms when these programme rights are recognised in the Consolidated Statement of Financial Position; when these costs are released to the Consolidated Income Statement; and the impairment review of the carrying values of programme rights held.

Type of programme	Streaming policy	Linear policy
Acquired content	Cost charged to the Income Statement on a declining-balance method over the licence period	Cost charged to the Income Statement over a number of linear transmissions (episodic)
Commissioned content	Cost charged to the Income Statement on a declining-balance method over the licence period	Cost charged to the Income Statement on first linear transmission (episodic)
Sports rights	Cost charged to the Income Statement on first transmission	Cost charged to the Income Statement on first linear transmission
Current affairs, live events, soaps	Cost charged to the Income Statement on first transmission	Cost charged to the Income Statement on first linear transmission
Library of content (ITVX only)	Straight-line amortisation over licence windows

Acquired programme rights are purchased for the primary purpose of broadcasting on the ITV family of channels, including ad-funded streaming service and subscription streaming service platforms. These are recognised within current assets the earlier of when payments are made or when the rights are ready for exploitation.

Commissions, which primarily comprise programmes purchased, based on editorial specification and over which the Group has some control, are recognised in current assets as payments are made.

The net realisable value assessment for acquired, commissioned and sports rights is based on estimated airtime value. The net realisable value is assessed on a portfolio basis unless specific indicators of impairment are identified. During the pandemic, sports rights were reviewed separately for impairment following the impact of the pandemic on the planned sporting schedule and the consequential impact on TAR and audience mix for certain sporting events. There are no current specific indicators of impairment, therefore sports rights have now reverted to being assessed with all other content on a portfolio basis.

Programme rights and other inventory at the year end are shown in the table below:

	2023 £m	2022 £m
Acquired programme rights	284	225
Commissions	83	103
Sports rights	46	49
	413	377

£nil million relates to stock that will be transmitted in 2025 and beyond (2022: £6 million transmitted in 2024 and beyond).

Included within programme rights and other inventory is £46 million (2022: £49 million) relating to programme rights that have been paid for but that are not yet in licence. These amounts are considered to be prepayments but are included within programme rights and other inventory as it is more useful to the reader to show all such rights together.

Programme and transmission commitments

Transmission commitments are the contracted future payments under transmission supply agreements that require the use of transponder capacity for a period of up to ten years with payments increasing over time, limited by specific RPI caps. The application of IFRS requires judgement regarding the classification of transmission commitments. The Group has concluded that these contracts do not constitute leases as defined in IFRS 16 'Leases', as the Group does not control these assets due to the nature of the operation of the assets and the rights retained by the supplier under the contracts.

Programming commitments are transactions entered into in the ordinary course of business with programme suppliers, sports organisations and film distributors in respect of rights to broadcast on the ITV network including ITVX and on BritBox UK.

The Group has onerous contract provisions of £18 million (2022: £34 million) in respect of transponder capacity usage and sports rights commitments. See note 3.6 for further details.

Commitments in respect of these transactions, which are not reflected in the Consolidated Statement of Financial Position, are due for payment as follows:

2023	Transmission £m	Programme £m	Total £m
Within one year	20	488	508
Later than one year and not more than five years	-	380	380
	20	868	888

2022	Transmission £m	Programme £m	Total £m
Within one year	25	466	491
Later than one year and not more than five years	19	349	368
	44	815	859

3.1.2 Distribution rights

Accounting policies

Distribution rights are programme rights the Group buys from producers to derive future revenue, principally through licensing to other broadcasters. These are classified as non-current assets as these rights are used to derive long-term economic benefit for the Group.

Distribution rights are recognised initially at cost and charged through operating costs in the Consolidated Income Statement over a period not exceeding five years, reflecting the value and pattern in which the right is consumed. Advances paid for the acquisition of distribution rights are disclosed as distribution rights as soon as they are contracted. These advances are not expensed until the programme is available for distribution. Up to that point, they are assessed annually for impairment through the reassessment of the future sales expected to be earned from that title.

The net book value of distribution rights at the year end is as follows:

	2023 £m	2022 £m
Distribution rights	14	17

During the year, £18 million was charged to the Consolidated Income Statement (2022: £25 million).

3.1.3 Trade and other receivables

Accounting policies

Trade receivables are recognised initially at the value of the invoice sent to the customer and subsequently at the amounts considered recoverable (amortised cost). Where payments are not due for more than one year, they are shown in the financial information at their net present value to reflect the economic cost of delayed payment. The Group provides goods and services to substantially all of its customers on credit terms.

The credit risk management practices of the Group include internal review and reporting of the ageing of trade and other receivables by days past due. The Group applies the IFRS 9 simplified approach in measuring expected credit losses, which use a lifetime expected credit loss allowance for all trade receivables.

To measure expected credit losses, trade receivables and contract assets have been grouped by shared credit risk characteristics and days past due. As part of the expected credit losses, the Group may make additional provisions for the receivables of particular customers if the deterioration of financial position was observed.

The carrying value of trade receivables is considered to approximate fair value. Trade and other receivables can be analysed as follows:

	2023 £m	2022 £m
Due within one year:
Trade receivables	427	476
Other receivables	145	162
Prepayments	58	54
	630	692
Due after more than one year:
Trade receivables	37	24
Other receivables	25	20
	62	44
Total trade and other receivables	692	736

£464 million (2022: £500 million) of total trade receivables, stated net of provisions for impairment, are aged as follows:

	2023 £m	2022 £m
Current	408	437
Up to 30 days overdue	29	34
Between 30 and 90 days overdue	21	20
Over 90 days overdue	6	9
	464	500

Movements in the Group's provision for impairment of trade receivables and contract assets can be shown as follows:

	2023 £m	2022 £m
At 1 January	24	43
Charged during the year	4	14
Bad debts written off	(8)	-
Release of provision	(11)	(33)
At 31 December*	9	24

* £1 million (2022: £8 million) of the provision relates to contract assets and is included in the balance disclosed in note 3.1.6.

Of the provision total, £7 million relates to balances overdue by more than 90 days (2022: £22 million) and £2 million relates to current balances (2022: less than £1 million).

In 2023, a settlement of the claim was agreed with the credit insurers in relation to the remaining amount receivable for The Voice of China, resulting in an exceptional credit of US$5 million (£3 million) consistent with the original treatment. See note 2.2. No further recovery of the remaining trade receivable is expected.

The remaining release of the provision relates to other settlements for outstanding production related receivables and contract assets. The credit has been taken to operating profit.

3.1.4 Trade and other payables due within one year

Accounting policies

Trade payables are recognised at the value of the invoice received from a supplier. The carrying value of current and
non-current trade payables is considered to approximate fair value. Trade and other payables due within one year can be analysed as follows:

	2023 £m	2022 £m
Trade payables	105	141
VAT and social security	35	38
Other payables	170	146
Acquisition-related liabilities - employment-linked contingent consideration	5	2
Acquisition-related liabilities - payable to sellers under put options agreed on acquisition	39	1
Accruals	596	573
	950	901

3.1.5 Trade and other payables due after more than one year

Trade and other payables due after more than one year can be analysed as follows:

	2023 £m	2022 £m
Trade payables	25	17

Other payables	33	28
Acquisition-related liabilities - employment-linked contingent consideration	10	6
Acquisition-related liabilities - payable to sellers under put options agreed on acquisition	24	38
	67	72
Total trade and other payables due after more than one year	92	89

Trade payables due after more than one year relates primarily to royalties in both 2023 and 2022. Other payables due after more than one year relates primarily to film creditors of £24 million (2022: £22 million).

Acquisition-related liabilities or performance-based employment-linked earnouts are the estimated amounts payable to previous owners. The estimated future payments that are accrued over the period the sellers are required to remain with the business are treated as exceptional costs (see note 2.2). Those amounts not linked to employment are estimated and recognised at acquisition at their time discounted value, with the unwind of the discount recorded as part of finance costs.

Acquisition related liabilities at 31 December 2023 were £78 million (2022: £47 million) which represents the amount accrued to date at their time discounted value. The total undiscounted estimated future payments of £105 million (2022: £89 million) are sensitive to forecast profits as they are based on a multiple of earnings. The range of reasonably possible outcomes for the undiscounted liability is between £86 million and £147 million. The liabilities due after more than one year are expected to be settled between 2025 and 2028.

All earnouts are sensitive to forecast profits as they are based on a multiple of earnings and judgement is required where there may be adjustments to forecasted profits or when earnouts are negotiated, hence the reason for the range noted above.

3.1.6 Contract assets and liabilities

Contract assets (accrued income) primarily relate to the Group's right to consideration for work unbilled at the reporting date. Many of the programmes the Studios division produces are sold internationally and also used within the ITV network.

Contract liabilities (deferred income) primarily relate to the consideration received from customers in advance of transferring a good or service. The following table provides movements in contract assets and liabilities in the year:

	2023		2022
	Contract assets £m	Contract liabilities £m	Contract assets £m	Contract liabilities £m
Balance at 1 January	185	(372)	189	(359)
Decrease due to balance transferred to trade receivables	(152)	-	(180)	-
Increases as a result of the changes in the measure of progress	169	-	170	-
Decreases due to revenue recognised in the year	-	332	-	405
Increase due to cash received	-	(147)	-	(383)
Acquisitions	-	-	6	(35)
Balance at 31 December*	202	(187)	185	(372)

* Contract assets is stated net of provisions for impairment of £1 million (2022: £8 million) which have been included in the reconciliation in note 3.1.3. Non-current contract assets of £13 million (2022: £nil) is included in the above reconciliation.

3.1.7 Production inventories

Production inventories includes work in progress and finished programmes in relation to costs capitalised by ITV Studios in the course of fulfilling production contracts. These costs are capitalised when they relate directly to a contract or to a specifically identifiable anticipated contract, the costs generate or enhance the resources of the entity that will be used in satisfying or continuing to satisfy performance obligations in the future, and the costs are expected to be recovered.

These costs are presented as production inventories assets and represent actual costs incurred on the production. The asset is charged to the income statement as the performance obligations are satisfied.

Production inventories at the year end is detailed below:

	2023 £m	2022 £m
Production inventories	234	493

During the year, £498 million was charged to the Consolidated Income Statement for completed productions delivered (2022: £368 million).

3.1.8 Working capital management

Cash and working capital management has been a critical area of focus during 2023 and 2022. During the year, the cash inflow from working capital was £90 million (2022: outflow of £150 million) derived as follows:

			2023 £m	2022 £m
Increase in programme rights and distribution rights			(33)	(70)
Decrease/(increase) in receivables, contract assets and production inventories			274	(133)
(Decrease)/increase in payables and contract liabilities			(151)	53
Working capital inflow/(outflow)			90	(150)
3.2 Property, plant and equipment	Keeping it simple	The following note shows the physical assets used by the Group to operate the business, generating revenues and profits. These assets include office buildings and studios, as well as equipment used in broadcast transmission, programme production and support activities. The cost of these assets is the amount initially paid for them or for right of use assets, the discounted future lease payments. A depreciation expense is charged to the Consolidated Income Statement to reflect annual wear and tear and the reduced value of the asset over time. Depreciation is calculated by estimating the number of years the Group expects the asset to be used (useful economic life). If there has been a technological change or decline in business performance, the Directors review the value of the assets to the business to ensure they have not fallen below their depreciated value. If an asset's value falls below its depreciated value, an additional impairment charge is made against profit. This note also explains the accounting policies followed by ITV and the specific estimates made in arriving at the net book value of these assets.

Accounting policies

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Certain items of property, plant and equipment that were revalued to fair value prior to 1 January 2004 (the date of transition to IFRS) are measured on the basis of deemed cost, being the revalued amount less depreciation up to the date of transition.

Right of use assets

A contract contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. These assets are called right of use assets and have been included on the Group's balance sheet at a value equal to the discounted future lease payments. For leases recognised on transition to IFRS 16 'Leases' the value is also adjusted by any prepayments or lease incentives recognised immediately before the date of initial application.

Depreciation

Depreciation is provided to write off the cost of property, plant and equipment less estimated residual value, on a straight-line basis over their estimated useful lives. The annual depreciation charge is sensitive to the estimated useful life of each asset and the expected residual value at the end of its life. The major categories of property, plant and equipment are depreciated as follows:

Asset class	Depreciation policy
Freehold land	not depreciated
Freehold buildings	up to 60 years
Leasehold improvements	shorter of residual lease term or estimated useful life
Vehicles, equipment and fittings*	3 to 20 years
Right of use assets	over the term of the lease

* Equipment includes studio production and technology assets.

Assets under construction are not depreciated until the point at which the asset comes into use by the Group.

Impairment of assets

Property, plant and equipment that is subject to depreciation is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Indicators of impairment may include changes in technology and business.

Property, plant and equipment

Property, plant and equipment can be analysed as follows:

	Freehold land and buildings £m	Improvements to leasehold land and buildings		Vehicles, equipment and fittings	Right of use assets £m	Total £m
	Freehold land and buildings £m	Long £m	Short £m	Owned £m	Right of use assets £m	Total £m
Cost
At 1 January 2022	12	87	26	235	154	514
Additions	-	2	-	33	57	92
Reclassifications	-	-	-	4	1	5
Foreign exchange	-	2	-	4	6	12
Disposals and retirements	-	(6)	-	(62)	(10)	(78)
At 31 December 2022	12	85	26	214	208	545
Additions	-	2	-	28	12	42
Derecognition of right of use asset	-	-	-	-	(14)	(14)
Foreign exchange	-	(1)	-	(2)	(3)	(6)
Disposals and retirements	-	(2)	(8)	(33)	(43)	(86)
At 31 December 2023	12	84	18	207	160	481

Depreciation
At 1 January 2022	-	25	19	152	64	260
Charge for the year	1	3	1	31	25	61
Foreign exchange	-	-	-	3	2	5
Disposals and retirements	-	(1)	-	(62)	(4)	(67)
At 31 December 2022	1	27	20	124	87	259
Charge for the year	1	3	1	25	22	52
Derecognition of right of use asset	-	-	-	-	(6)	(6)
Foreign exchange	-	-	-	(2)	(1)	(3)
Disposals and retirements	-	(2)	(8)	(32)	(42)	(84)
At 31 December 2023	2	28	13	115	60	218

Net book value
At 31 December 2023	10	56	5	92	100	263
At 31 December 2022	11	58	6	90	121	286

Included within property, plant and equipment are assets in the course of construction of £19 million (2022: £34 million).

Included within the depreciation charge for the year of £52 million (2022: £61 million) is £6 million (2022: £8 million) in respect of accelerated depreciation following a change in useful life of the related assets in relation to the move to a new London site. This depreciation has been included in exceptional items. See note 2.2 for further details.

Disposals and retirements for the year include assets written off with nil net book value that are not expected to generate any future economic benefits.

Included in net book value of right of use assets is £100 million (2022: £121 million) related to properties and £nil (2022: £nil) relating to vehicles, equipment and fittings.

The Group signed a subleasing arrangement, which is classified as a finance lease in accordance with IFRS 16 'Leases'. In accordance with the standard, the right of use asset with a net book value of £8 million was derecognised and replaced by a net investment in the sublease which has been recognised within other receivables. This arrangement does not impact the lease liabilities arising from the original lease which have been included in note 4.6.

Capital commitments

The Group has capital commitments of £2 million at 31 December 2023 (2022: £11 million).

3.3
Intangible assets

Keeping
it simple

The following note identifies the non-physical assets used by the Group to generate revenue and profits.

These assets include formats and brands, customer contracts and relationships, contractual arrangements, licences, software development, film libraries and goodwill. The cost of these assets is the amount that the Group has paid or, where there has been a business combination, the fair value of the specific intangible assets that could be sold separately or which arise from legal rights. In the case of goodwill, its cost is the amount the Group has paid in acquiring a business over and above the fair value of the individual assets and liabilities acquired. The value of goodwill is the 'intangible' value that comes from, for example, a uniquely strong market position and the outstanding productivity of its employees.

The value of intangible assets, with the exception of goodwill, reduces over the number of years the Group expects to use the asset, the useful economic life, via an annual amortisation charge to the Consolidated Income Statement. Where there has been a technological change or decline in business performance, the Directors review the value of assets, including goodwill, to ensure they have not fallen below their amortised value. Should an asset's value fall below its amortised value, an additional impairment charge is made against profit.

This note explains the accounting policies applied and the specific judgements and estimates made by the Directors in arriving at the net book value of these assets.

Accounting policies

Goodwill

Goodwill represents the future economic benefits that arise from assets that are not capable of being individually identified and separately recognised. Goodwill is stated at its recoverable amount being cost less any accumulated impairment losses and is allocated to the business to which it relates.

All business combinations that have occurred since 1 January 2009 were accounted for using the acquisition method. Under this method, goodwill is measured as the fair value of the consideration transferred (including the recognition of any part of the business not yet owned (non-controlling interests)), less the fair value of the identifiable assets acquired and liabilities assumed, all measured at the acquisition date. The identification of acquired assets and liabilities and the allocation of the purchase price to them is considered a key judgement and is based on the Group's understanding and experience of the media business. Any contingent consideration expected to be transferred in the future is recognised at fair value at the acquisition date and recognised within other payables. Contingent consideration classified as an asset or liability that is a financial instrument is measured at fair value with changes in fair value recognised in the Consolidated Income Statement. The determination of fair value is based on an estimate of discounted cash flows. The key assumptions take into consideration the probability of meeting each performance target and the discount rate.

Where less than 100% of a subsidiary is acquired, and call and put options are granted over the remaining interest, a
non-controlling interest is initially recognised in equity at fair value, which is established based on the value of the put option. A call option is recognised as a derivative financial instrument, carried at fair value. The put option is recognised as a liability within other payables, carried at the present value of the put option exercise price, and a corresponding charge is included in merger and other reserves. Any subsequent remeasurement of the put option liability is recognised within finance income or cost.

Subsequent adjustments to the fair value of net assets acquired can only be made within 12 months of the acquisition date, and only if fair values were determined provisionally at an earlier reporting date. These adjustments are accounted for from the date of acquisition.

Acquisitions of non-controlling interests are accounted for as transactions with owners and therefore no goodwill is recognised as a result of such transactions. Transaction costs incurred in connection with those business combinations, such as legal fees, due diligence fees and other professional fees, are expensed as incurred. The Directors consider these costs to reflect the cost of acquisition and to form a part of the capital transaction, and highlight them separately as exceptional items.

Other intangible assets

Intangible assets other than goodwill are those that are distinct and can be sold separately or which arise from legal rights.

The main intangible assets the Group has valued are formats, brands, licences, contractual arrangements, customer contracts and relationships and libraries.

Within ITV, there are two types of other intangible assets: those assets directly purchased by the Group for day-to-day operational purposes (such as software licences and development) and intangible assets identified as part of an acquisition of a business.

Intangible assets acquired directly by the Group are stated at cost less accumulated amortisation. Those separately identified intangible assets acquired as part of an acquisition or business combination are shown at fair value at the date of acquisition less accumulated amortisation.

Each class of intangible assets' valuation method on initial recognition, amortisation method and estimated useful life is set out in the table below:

Class of intangible asset	Amortisation method	Estimated useful life	Valuation method
Brands	Straight-line	8 to 14 years	Applying a royalty rate to the expected future revenue over the life of the brand
Formats	Straight-line	up to 8 years	Expected future cash flows from those assets existing at the date of acquisition are estimated. If applicable, a contributory charge is deducted for the use of other assets needed to exploit the cash flow. The net cash flow is then discounted back to present value
Customer contracts	Straight-line or reducing balance as appropriate	up to 6 years
Customer relationships	Straight-line	5 to 10 years
Contractual arrangements	Straight-line	up to 13 years depending on the contract terms	Expected future cash flows from those contracts existing at the date of acquisition are estimated. If applicable, a contributory charge is deducted for the use of other assets needed to exploit the cash flow. The net cash flow is then discounted back to present value
Licences	Straight-line	11 to 29 years depending on term of licence	Start-up basis of expected future cash flows existing at the date of acquisition. If applicable, a contributory charge is deducted for the use of other assets needed to exploit the cash flow. The net cash flow is then discounted back to present value. Public service broadcasting (PSB) licences are valued as a start-up business with only the licence in place
Libraries and other	Sum of digits or straight-line as appropriate	up to 20 years	Initially at cost and subsequently at cost less accumulated amortisation
Software licences and development	Straight-line	1 to 10 years	Initially at cost and subsequently at cost less accumulated amortisation

Cloud computing arrangements

Cloud computing arrangements are reviewed to determine if they are within the scope of IAS 38 'Intangible Assets', IFRS 16 'Leases', or a service contract. This is to determine if the Group has control of the software intangible asset. Control is assumed if the Group has the right to take possession of the software and run it on its own or a third-party's computer infrastructure or if the Group has exclusive rights to use the software whereby the supplier cannot make the software available to other customers.

Configuration of the software involves the setting of various flags or switches within the application software or defining values to set up the software's existing code to function in a specified way. Customisation involves modifying the software code in the application or writing additional code. Customisation generally changes or creates additional functionalities within the software. In both situations, the Group also needs to assess if there is a separate intangible asset. If no separate intangible asset is identified, then these costs are expensed when incurred. If an asset is identified, it is capitalised and amortised over the life of the asset.

Fair value on acquisition

Determining the fair value of the purchase consideration allocated to intangible assets arising on acquisition requires judgement. The Directors make estimates regarding the timing and amount of future cash flows derived from exploiting the assets being acquired. The Directors then estimate an appropriate discount rate to apply to the forecast cash flows. Such estimates are based on current budgets and forecasts, extrapolated for an appropriate period taking into account growth rates, operating costs and the expected useful lives of assets. Judgements are also made regarding whether, and for how long, licences will be renewed; this drives our amortisation policy for those assets.

The Directors estimate the appropriate discount rate that reflects current market assessments of the time value of money and the risks specific to the assets or businesses being acquired.

Amortisation

Amortisation is charged to the Consolidated Income Statement over the estimated useful lives of intangible assets unless such lives are judged to be indefinite. Indefinite life assets, such as goodwill, are not amortised but are tested for impairment at each year end.

Impairment

Goodwill is not subject to amortisation and is tested annually for impairment and when circumstances indicate that the carrying value may be impaired.

Other intangible assets are subject to amortisation and are reviewed for impairment whenever events or changes in circumstances indicate that the amount carried in the Consolidated Statement of Financial Position is less than its recoverable amount.

Determining whether the carrying amount of intangible assets has any indication of impairment requires judgement. Any impairment is recognised in the Consolidated Income Statement.

An impairment test is performed by assessing the recoverable amount of each asset, or for goodwill the cash-generating unit (CGU), or group of CGUs, related to the goodwill. Total assets (which include goodwill) are grouped at the lowest levels for which there are separately identifiable cash flows. The Directors have identified three CGUs, Media & Entertainment, ITV Studios and SDN.

The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. The value in use is based on the present value of the future cash flows expected to arise from the asset.

In testing for impairment, estimates are used in deriving cash flows and the discount rates. Such estimates reflect current market assessments of the risks specific to the asset and the time value of money. The estimation process is complex due to the inherent risks and uncertainties associated with long-term forecasting. If different estimates of the projected future cash flows or a different selection of an appropriate discount rate or long-term growth rate were made, these changes could materially alter the projected value of the cash flows of the asset, and as a consequence materially different amounts would be reported in the financial information.

Impairment losses in respect of goodwill cannot be reversed. In respect of assets other than goodwill, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

There is a wide range of potential outcomes regarding the possible future performance of each of ITV Group's cash-generating units, Media & Entertainment, ITV Studios and SDN. In the impairment review the Directors used the scenarios utilised for the viability statement. The Directors, however, do not consider that any reasonably possible changes in the key assumptions would cause the recoverable amount of the Group's cash-generating units to fall below their carrying values and therefore they are not considered key sources of estimation uncertainty.

Intangible assets

Intangible assets can be analysed as follows:

	Goodwill £m	Formats and brands £m	Customer contracts and relationships £m	Contractual arrangements £m	Licences £m	Libraries and other £m	Software licences and development £m	Total £m
Cost
At 1 January 2022	3,893	527	441	11	176	104	240	5,392
Additions	-	-	-	-	-	-	44	44
Acquisitions	107	1	13	-	-	-	-	121
Disposals	-	-	-	-	-	-	(5)	(5)
Foreign exchange	37	21	8	-	-	2	1	69
At 31 December 2022	4,037	549	462	11	176	106	280	5,621
Additions	-	-	-	-	-	-	39	39
Disposals	-	-	(1)	-	-	-	(63)	(64)
Foreign exchange	(18)	(9)	(4)	-	-	(1)	-	(32)
At 31 December 2023	4,019	540	457	11	176	105	256	5,564
Amortisation and impairment
At 1 January 2022	2,654	460	433	11	129	93	134	3,914
Charge for the year	-	41	6	-	2	-	27	76
Reclassifications	-	-	-	-	-	-	(5)	(5)
Foreign exchange	-	19	7	-	-	-	1	27
At 31 December 2022	2,654	520	446	11	131	93	157	4,012
Charge for the year	-	17	4	-	2	-	64	87
Disposals	-	-	(1)	-	-	-	(63)	(64)
Foreign exchange	-	(8)	(4)	-	-	(1)	-	(13)
At 31 December 2023	2,654	529	445	11	133	92	158	4,022
Net book value
At 31 December 2023	1,365	11	12	-	43	13	98	1,542
At 31 December 2022	1,383	29	16	-	45	13	123	1,609

Goodwill impairment tests

The carrying amount of goodwill for each CGU is represented as follows:

	2023 £m	2022 £m
ITV Studios	903	921
Media & Entertainment	386	386
SDN	76	76
	1,365	1,383

There has been no impairment charge for any CGU during the year (2022: £nil).

When assessing impairment, the recoverable amount of each CGU is based on value in use calculations. These calculations require the use of estimates, specifically: pre-tax cash flow projections; long-term growth rates; and a pre-tax market discount rate. Cash flow projections are based on the Group's current long-term plan. Beyond the plan, these projections are extrapolated using an estimated nominal long-term growth rate of 1.5% (2022: 1.5%). The growth rate used is consistent with the long-term average growth rates for both the industry and the countries in which the CGUs are located and is appropriate because these are long-term businesses.

The discount rate has been updated for each CGU to reflect the latest market assumptions for the risk-free rate, the equity risk premium and the net cost of debt. There is currently no reasonably possible change in discount rate that would reduce the headroom in any CGU to zero.

ITV Studios

The goodwill for ITV Studios has arisen as a result of the acquisition of production businesses since 1999. Significant balances were created from the acquisition by Granada of United News and Media's production businesses in 2000 and the merger of Granada and Carlton in 2004 to form ITV plc. ITV Studios goodwill also includes the goodwill arising from acquisitions since 2012, with the largest acquisitions being Leftfield in 2014, followed by Talpa in 2015 and Plimsoll in 2022.

The key assumptions on which the forecast cash flows for the whole CGU were based (as represented by the approved financial budget for 2024 and forecast to 2026) include revenue (including international revenue and the ITV Studios share of ITV output, growth in commissions and hours produced), margins and the pre-tax market discount rate. These assumptions have been determined by using a combination of extrapolation of historical trends within the business, industry estimates and in-house estimates of growth rates in all markets. No impairment was identified.

A pre-tax discount rate of 10.7% (2022: 10.5%) has been used in discounting the projected cash flows. No reasonably possible change in assumptions or discount rate would lead to an impairment.

Media & Entertainment

The goodwill in this CGU arose as a result of the acquisition of broadcasting businesses since 1999, the largest of which was the merger of Carlton and Granada in 2004 to form ITV plc, which was treated as an acquisition of Carlton for accounting purposes. Media & Entertainment goodwill also includes the goodwill arising on acquisition of UTV Limited in February 2016.

The main assumptions on which the forecast cash flow projections for this CGU are based (as represented by the approved financial budget for 2024 and forecast to 2026) include: the size, performance and share of the television and streaming advertising market; share of commercial impacts; programme and other costs; and the pre-tax market discount rate.

In forming its assumptions about the television and streaming advertising market, the Group has used a combination of long-term trends, industry forecasts and in-house estimates, which place greater emphasis on recent experience. No impairment was identified.

An impairment charge of £2,309 million was recognised in the Media & Entertainment CGU in 2008, as a result of the downturn in the short-term outlook for the advertising market. The current year impairment review, set out above, results in significant headroom. Even though the advertising market has improved since the impairment was recognised in 2008 and the impaired assets are still owned and operated by the Group, due to accounting rules the impairment to goodwill cannot be reversed.

A pre-tax discount rate of 10.4% (2022: 10.4%) has been used in discounting the projected cash flows. No reasonably possible change in assumptions or discount rate would lead to an impairment.

SDN

Goodwill was recognised when the Group acquired SDN (the licence operator for DTT Multiplex A) in 2005. It represented the wider strategic benefits of the acquisition specific to the Group, principally the enhanced ability to promote Freeview as a platform, business relationships with the channels which are on Multiplex A and additional capacity available from 2010. SDN's multiplex licence was renewed during 2022 and expires in 2034.

The main assumptions on which the forecast cash flows are based (as represented by the approved financial budget for 2024 and forecast to 2026) are: income to be earned from renewals of medium-term contracts; the market price of available multiplex video streams; and the pre-tax market discount rate. These assumptions have been determined by using a combination of current contract terms, recent market transactions and in-house estimates of video stream availability and pricing. No impairment was identified.

A pre-tax discount rate of 9.1% (2022: 9.4%) has been used in discounting the projected cash flows. No reasonably possible change in assumptions or discount rate would lead to an impairment.

3.4
Assets classified as held for sale

Keeping
it simple

The following section outlines the Group's assets and liabilities held for sale.

Assets and any associated liabilities, where management is committed to a plan to sell, are recognised as held for sale in the Consolidated Statement of Financial Position.

The sale should be highly probable and within 12 months of classification as held for sale.

Accounting policies

The Group measures non-current assets that are classified as held for sale at the lower of their carrying amount and fair value less costs to sell.

On 1 March 2024, the Group announced the sale of its entire 50% interest in digital streaming service, BritBox International to its joint venture partner BBC Studios for a cash consideration of £255 million. The transaction has been effected by the disposal of the Group's 50% interests in BritBox LLC, BB Rights LLC, Denipurna Limited and BritBox International Limited and the 100% interest in ITV SVOD Australia Pty Ltd, which holds the 50% interest in BritBox Australia Management Pty Limited.

At 31 December 2023, the Group included these interests at their carrying value, as held for sale in the Consolidated Statement of Financial Position. There are no liabilities associated with this sale.

	2023 £m	2022 £m
Assets classified as held for sale - investments in joint ventures	66	-
	66	-

The results for the entities held for sale (other than ITV SVOD Australia Pty Ltd) are included in share of profits and losses after tax of joint ventures and associated undertakings and not within the M&E reportable segment.

Cash Balances held within ITV SVOD Australia Pty Ltd were fully utilised prior to completion of the sale and therefore have not been included in the above assets held for sale.

Included in the Group's Consolidated Statement of Financial Position are working capital balances with the entities held for sale, for content and other related trading activities. These balances will be settled in the normal course of business.

3.5
Investments

Keeping
it simple

The Group holds non-controlling interests in a number of different entities. Accounting for these investments, and the Group's share of any profits and losses, depends on the level of control or influence the Group is granted via its interest. The three principal types of non-consolidated investments are joint arrangements (joint ventures or joint operations), associates, and equity investments.

A joint arrangement is an investment where the Group has joint control, with one or more third parties. An associate is an entity over which the Group has significant influence (i.e. power to participate in the investee's financial and operating decisions). Any other investment is an equity investment.

Accounting policies

For joint ventures and associates, the Group applies equity accounting. Under this method, it recognises the investment in the entity at cost and subsequently adjusts this for its share of profits or losses, which are recognised in the Consolidated Income Statement within non-operating items and included in adjusted profit.

Where the Group has invested in associates by acquiring preference shares or convertible debt instruments, the share of profit recognised is usually £nil as no equity interest exists.

Equity investments are held at fair value unless the investment is a start-up business, in which case it is valued initially at cost as a proxy for fair value.

The carrying amount of each category of our investments is represented as follows:

	Joint ventures £m	Associates £m	Equity investments £m	Total £m
At 1 January 2022	43	51	4	98
Additions	5	6	7	18
Share of profits	7	1	-	8
Impairments/fair value adjustments	-	(4)	-	(4)
Foreign exchange	4	6	-	10
At 31 December 2022	59	60	11	130
Additions	5	3	10	18
Share of profits/ (losses)	8	(8)	-	-
Impairments/fair value adjustments	-	(5)	-	(5)
Dividends received	(3)	-	-	(3)
Foreign exchange	(3)	(3)	-	(6)
Classified as held for sale	(66)	-	-	(66)
At 31 December 2023	-	47	21	68

At 31 December 2023, the Group included these interests at their carrying value of £66 million, as held for sale in the Consolidated Statement of Financial Position. See notes 3.4 and 5.3.

At 31 December 2023, there were no other significant investments in joint ventures (2022: £48 million invested in BritBox LLC in the US). The Group's associates include £31 million (2022: £38 million) relating to a 45% investment in Blumhouse TV Holdings LLC, a film and television production company in the US. The equity investments relate primarily to Group's Media for Equity programme. No individual investment is considered material to the Group.

3.6
Provisions

Keeping
it simple

A provision is recognised by the Group where an obligation exists relating to events in the past and it is probable that cash will be paid to settle it.

A provision is made where the Group is not certain how much cash will be required to settle a liability, so an estimate is required. The main estimates relate to the cost of holding properties that are no longer in use by the Group, the likelihood of settling legal claims and contracts the Group has entered into that are now unprofitable.

Accounting policies

A provision is recognised in the Consolidated Statement of Financial Position when the Group has a present legal or constructive obligation arising from past events, it is probable cash will be paid to settle it and the amount can be estimated reliably. Provisions are determined by discounting the expected future cash flows by a rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a financing cost in the Consolidated Income Statement. The value of the provision is determined based on assumptions and estimates in relation to the amount and timing of actual cash flows, which are dependent on future events.

Provisions

The movements in provisions during the year are as follows:

	Contract provisions £m	Property provisions £m	Legal and other provisions £m	Total £m
At 1 January 2023	34	9	126	169
Additions	-	2	20	22
Utilised	(16)	(1)	(15)	(32)
Released	-	-	(5)	(5)
Foreign exchange	-	-	-	-
At 31 December 2023	18	10	126	154

Analysed between:
Current	12	1	124	137
Non-current	6	9	2	17

Provisions of £137 million are classified as current liabilities (2022: £139 million). Unwind of the discount is £nil in 2023 and 2022.

Contract provisions £18 million (2022: £34 million)

Contract provisions represent liabilities in respect of onerous contracts in relation to individual sports rights of £11 million (2022: £17 million) and transmission capacity supply contracts of £7 million (2022: £17 million).

Sports rights

Following the pandemic and up to 31 December 2022, the Group recognised provisions for individual sports rights when estimated revenues were less than the value of the rights. This was considered an indicator of impairment. The provision is sensitive to the changes in the sporting schedule and consequential impact on TAR. In calculating the provision for sports rights, management has made estimates and used assumptions in determining the nature, amount and timing of potential outflows, including the commercial impacts of the target audience that will be generated by those rights, scheduling of the events and revenue forecasts.

In periods prior to the pandemic, all programme rights (including sports rights) were assessed for impairment on a portfolio basis unless specific indicators of impairment were identified. In 2023, the Group has included sports rights in the portfolio assessment as there are no specific indicators of impairment. No further impairments have arisen.

The provision held at 31 December 2023 is £11 million (2022: £17 million). £6 million of the provision was utilised during the year. In the prior year £5 million was released due to certain sporting events being cancelled and a refund issued to the Group. The remaining provision is expected to be utilised between 2024 and 2025.

Transponders

In 2020 and 2021, the Group reviewed the efficiency of its transponder capacity usage with a view to reducing capacity requirements. This has allowed the Group to reorganise channels over fewer transponders with the result that all channels have been cleared from two transponders. They are no longer utilised and are therefore not generating revenues. Management has applied judgement in its assessment that the individual element of the contract is separable from the remaining elements of the contract, which are not considered onerous. The contracted future commitment to October 2024 was therefore recognised as a provision in 2020 and 2021 as there are no future economic benefits expected.

The total provision for onerous contracts at 31 December 2023 is £7 million (2022: £17 million). £10 million of the provision was utilised during the year (2022: £10 million).

Property provisions £10 million (2022: £9 million)

These provisions primarily relate to expected dilapidation costs at the Group's rental properties.

Legal and other provisions £126 million (2022: £126 million)

Represents provisions for potential liabilities (arising from legal disputes and claims) and their related legal costs. These include £52 million (2022: £52 million) for the potential liability that may arise as a result of the Box Clever Financial Support Directions (FSDs) issued by the Pensions Regulator (tPR), employee-related tax and other provisions of £61 million (2022: £59 million) and other legal and related costs.

Box Clever Pension Scheme

Box Clever Technology Limited (Box Clever) was a TV rental business joint venture set up by Granada Rental and Retail Limited and Carmelite Investments Limited (parent company of Thorn Limited (Thorn) in 1999. The business went into administrative receivership in 2003. The Box Clever Pension Scheme (the Scheme) was managed from its establishment by an independent Trustee and the Group has not had any commercial connection with the Box Clever business since it went into administrative receivership in 2003. After proceedings in the Upper Tribunal and Court of Appeal were dismissed, certain companies within ITV were issued with FSDs by tPR on 17 March 2020. An FSD does not set out what form any financial support should take, nor its amount, and those issues have not yet been resolved as part of the legal process.

The legislation provides that any contribution that ITV may make must be considered reasonable. If an agreement is reached with tPR there may not be an immediate cash flow impact. If an agreement cannot be reached, further legal proceedings could take several years to resolve.

At 31 December 2003, the Scheme was estimated to have had a deficit on a buyout basis of £25 million. An estimate of the deficit in the Box Clever Group Pension Scheme was calculated at £110 million as at 31 March 2021. This estimate was calculated on a buyout basis based on membership data as of February 2020. This estimate has been updated based on 31 December 2023 market conditions and has reduced to £78 million primarily due to the increase in gilt yields and recent changes in inflation. All of these valuations were of the whole Scheme, encompassing liabilities in respect of former employees of Granada's joint venture partner, Thorn, as well as former employees of the Group.

As reported previously, in 2022 the Group received a warning notice from tPR that it was considering exercising its power to issue a contribution notice for the amount of £133 million, which is based on a buyout estimate as at 31 March 2021 provided by the Scheme's actuarial adviser, plus a prudent margin. The Group made representations in relation to the warning notice on 31 October 2022, tPR responded on 28 July 2023 and the Group replied on 14 November 2023. ITV has continued to engage with tPR during the relevant period.

There remains a significant number of undecided issues as to the quantum and form of financial support and the Directors continue to believe there are many important factors which need to be taken into account in any decision, and therefore there remains uncertainty around the financial support to be provided. The provision remains at £52 million, and represents the offer made to settle the matter and is based on an IAS 19 valuation to transfer certain liabilities into the existing ITV pension scheme, which we consider to be the most likely form of settlement. We are continuing to engage with tPR to resolve the matter.

Employee-related

The determination of the employment tax status of some individuals contracted by the Group is complex. HMRC has issued assessments to the Group for several individuals engaged by the Group during the tax years 2016/17 to 2018/19 as employed for tax purposes and a provision of £56 million was made.

During 2023, we have further reviewed the provision, which has resulted in an increase in the provision of £2 million (2022: £20 million). This has resulted in a £5 million charge to the profit and loss account and a £3 million credit to exceptional items (2022: £10 million) as this relates to periods up to 31 December 2022 and therefore does not relate to the current year.

Due to ongoing reviews by HMRC and court cases in this matter, the final amount payable could be significantly different to the £58 million currently provided (2022: £56 million). It is difficult to provide a range for the expected final amounts payable as case law is continually evolving on this matter, particularly in relation to Front of Camera presenters. Very few cases have reached the higher courts and fact patterns can be very different in individual cases, so determination of employment status for tax purposes remains very subjective.

A further £3 million (2022: £3 million) is provided in relation to other employment related matters.

Other

Other provisions relate to settlements or proposed settlements on a number of legal cases as well as historical environmental provisions in relation to our production sites, closure costs and provision for legal fees for other ongoing litigation.

3.7
Pensions

Keeping
it simple

In this note, we explain the accounting policies governing the Group's pension schemes, followed by analysis of the components of the net defined benefit pension deficit, including assumptions made, and where the related movements have been recognised in the financial information. In addition, we have placed text boxes to explain some of the technical terms used in the disclosure.

What are the Group's pension schemes?
There are two types of pension schemes. A 'Defined Contribution' scheme that is open to ITV employees, and a number of 'Defined Benefit' schemes that have been closed to new members since 2006 and closed to future accrual in 2017. In 2016, on acquisition of UTV Limited, the Group took over the UTV Defined Benefit Scheme, which closed to future accrual at the end of March 2019.

What is a Defined Contribution scheme?
The Defined Contribution scheme is where the Group makes fixed payments into a separate fund on behalf of those employees participating in saving for their retirement. ITV has no further obligation to the participating employee and the risks and rewards associated with this type of scheme are assumed by the members rather than the Group. Although the Trustee of the scheme makes available a range of investment options, it is the members' responsibility to make investment decisions relating to their retirement benefits.

What is a Defined Benefit scheme?
In a Defined Benefit scheme, members receive payments during retirement, the value of which is dependent on factors such as salary and length of service. The Group makes contributions to the scheme, a separate Trustee-administered fund that is not consolidated in this financial information, but is reflected on the defined benefit pension surplus or deficit line in the Consolidated Statement of Financial Position.

The Trustee, appointed according to the terms of the Schemes' documentation, is required to act in the best interest of the beneficiaries and is responsible for managing and investing the assets of the Scheme and its funding position.

Schemes can be funded, where regular cash contributions are made by the employer into a fund which is invested. In the event of poor investment returns or increases in liabilities, the Group may need to address this through increased levels of contribution. Alternatively, schemes can be unfunded, where no regular money or assets are required to be put aside to cover future payments but in some cases, security is required.

The accounting defined benefit pension surplus or deficit (IAS 19) is different from the actuarial valuation surplus or deficit as they are calculated on the basis of different assumptions, such as discount rate. The accounting defined benefit pension surplus or deficit (IAS 19) figure is calculated as at the balance sheet date. While the actuarial surplus or deficit (which drives cash funding requirements) is calculated as part of the triennial valuations. The next triennial valuation will be as at 31 December 2022 and is currently underway for the ITV Pension Scheme. The triennial valuation at 30 June 2023 for the UTV Pension Scheme was agreed in early 2024.

Accounting policies

Defined contribution scheme

Obligations under the Group's defined contribution schemes are recognised as an operating cost in the Consolidated Income Statement as incurred. For 2023, total contributions expensed were £25 million (2022: £29 million).

Defined benefit scheme

The Group's obligation in respect of the Defined Benefit Scheme is calculated by estimating the amount of future retirement benefit that eligible employees ('beneficiaries') have earned during their services. That benefit payable in the future is discounted to today's value and then the fair value of scheme assets is deducted to measure the defined benefit pension position.

Unless otherwise stated, references to Defined Benefit Schemes ('the Schemes') within this note refer to the ITV Pension Scheme, the Unfunded Scheme and the UTV Pension Scheme combined. Details on each scheme are provided below.

The liabilities of the Schemes are measured by discounting the best estimate of future cash flows to be paid using the 'projected unit' method. These calculations are complex and are performed by a qualified actuary. There are many judgements and estimates necessary to calculate the Group's estimated liabilities, the main assumptions are set out later in this note. Movements in assumptions during the year are called 'actuarial gains and losses' and these are recognised in the period in which they arise through the Consolidated Statement of Comprehensive Income.

The latest triennial valuation of the ITV Pension Scheme was undertaken as at 31 December 2019 by an independent actuary appointed by the Trustee of the Scheme and agreed in early 2022. The funding deficit of Section A of the ITV Pension Scheme as at 31 December 2019 amounted to £252 million, down from £489 million at 1 January 2017.

The IAS 19 surplus or deficit does not drive the deficit funding contribution. Following the above triennial valuation of Section A of the ITV Pensions Scheme, ITV paid deficit reduction contributions of £40 million in 2023, and expects the deficit reduction contributions to be £53 million in 2024 and £28 million in 2025.

The next triennial valuation of the ITV Pension Scheme as at 31 December 2022 by an independent actuary appointed by the Trustee of the Scheme is currently underway and is expected to be agreed in the coming months. The Group will then update any required deficit reduction contributions in line with the valuation.

An unfunded scheme in relation to former beneficiaries who accrued benefits in excess of the maximum allowed for tax purposes is accounted for under IAS 19 and the Group is responsible for meeting the pension obligations as they fall due. For the four former Granada executives within the unfunded scheme, there is additional security in the form of a charge over £48 million (2022: £47 million) of securitised gilts held by the Group, which are classified as other pension assets to reflect the Group's net pension deficit.

Due to the size of the UTV Pension Scheme, the Directors present the results and position of the UTV Pension Scheme within this note combined with the existing ITV Schemes. In January 2024, the triennial valuation of the UTV Scheme as at 30 June 2023 was completed. The Scheme had assets of £91 million as at the valuation date and £88 million of liabilities resulting in an agreed Technical Provisions surplus of £3 million and hence there are no deficit contributions payable.

The principal employer of the ITV Pension Scheme and the Unfunded Scheme is ITV Services Limited, the Granada supplementary scheme is Granada Group Limited and the UTV Pension Scheme is UTV Limited.

The defined benefit pension surplus (under IAS 19)

Net pension surplus of £209 million at 31 December 2023 (2022: £192 million) is stated after including the unfunded scheme security asset of £48 million (2022: £47 million). The totals recognised in 2023 and 2022 are:

	2023 £m	2022 £m
Total defined benefit scheme obligations	(2,194)	(2,292)
Total defined benefit scheme assets	2,355	2,437
Defined benefit pension surplus (IAS 19)	161	145

Presented as:
Defined benefit pension surplus*	187	172
Defined benefit pension deficit	(26)	(27)
Defined benefit pension surplus/(deficit) (IAS 19)	161	145

Other pension asset	48	47
Net pension surplus	209	192

* Included with the defined benefit pension surplus is the UTV Scheme. The defined benefit scheme assets in the UTV Scheme were valued at £94 million as at 31 December 2023 (2022: £94 million) and the defined benefit scheme obligations were £85 million (2022: £85 million).

The following notes provide further detail on the value of the Schemes' assets and liabilities, how these are accounted for and their impact on the financial information.

Defined benefit scheme obligations

Keeping
it simple

What causes movements in the defined benefit pension obligations?
The areas that impact the defined benefit obligation (the pension scheme liabilities) position at the year end are as follows:

· Past service cost - is a change in present value of the benefits built up by the beneficiaries in the prior periods; can be positive or negative resulting from changes to the existing plan as a result of an agreement between ITV and employees or legislative change (including legal rulings) or as a result of significant reduction by ITV in the number of employees covered by the plan (curtailment)

· Interest cost - the pension obligations payable in the future are discounted to the present value at year end. A discount factor is used to determine the current value today of the future cost. The interest cost is the unwinding of one year's movement in the present value of the obligation. It is broadly determined by multiplying the discount rate at the beginning of the year by the updated present value of the obligation during the year. The discount rate is a key assumption explained later in this note. This interest cost is recognised through net financing costs in the Consolidated Income Statement (see note 4.4)

· Actuarial gains or losses - there are broadly two causes of actuarial movements: 'experience' adjustments, which arise when comparing assumptions made when estimating the liabilities and what has actually occurred, and adjustments resulting from changes in actuarial assumptions e.g. movements in corporate bond yields or change in mortality. Key assumptions are explained in detail later in this note. Actuarial gains or losses are recognised through other comprehensive income

· Benefits paid - any cash benefits paid out by the Scheme will reduce the obligation

The movement in the present value of the Group's defined benefit obligation is analysed below:

	2023 £m	2022 £m
Defined benefit obligation at 1 January	2,292	3,943
Interest cost	112	63
Actuarial gain	(63)	(1,119)
Settlement payments from plan assets - buyout of Section C	-	(439)
Benefits paid	(147)	(156)
Defined benefit obligation at 31 December	2,194	2,292

Of the above total defined benefit obligation at 31 December 2023 £39 million relates to the unfunded schemes (2022: £40 million).

In April 2022, the Trustee completed a buyout of Section C, which in practical terms split the bulk annuity policy into individual annuity policies for each scheme member. At that time, the relevant scheme assets were transferred to the insurance company, which became responsible for paying the pensions and therefore it removed those liabilities from the pension scheme, represented by 'settlement payments from plan assets - buyout of Section C' in the table above. The value of the assets and liabilities settled was equal and therefore the settlement cost was £nil. The buyout represents a full and definitive settlement of the liabilities insured, which as at 31 December 2021 represented around 13% of ITV's total defined benefit obligation on the IAS 19 accounting basis.

Assumptions used to estimate the Scheme obligations

Keeping
it simple

What are the main assumptions used to estimate the Scheme obligations?
The main assumptions are:

· An estimate of increases in pension payments and the effect of inflation

· The life expectancy of beneficiaries

· The discount rate used to estimate the present day fair value of these obligations

How do we determine the appropriate assumptions?
The Group takes independent actuarial advice relating to the appropriateness of the assumptions used.

IFRS requires that we estimate a discount rate by reference to high-quality fixed income investments in the UK that match the estimated term of the pension obligations.

The inflation assumption has been set by looking at the difference between the yields on fixed and index-linked government bonds. The inflation assumption is used as a basis for the remaining financial assumptions, except where caps have been implemented.

The discount rate has therefore been obtained using the yields available on AA rated corporate bonds, which match projected cash flows. The Group's estimate of the weighted average term of the liabilities is 12 years (2021: 15 years).

The principal assumptions used in the Schemes' valuations at the year end were:

	2023	2022
Discount rate	4.75%	5.05%
Inflation assumption (RPI)	3.05%	3.15%
Rate of increase in pension payment (LPI* 5% pension increases)	Deferred/ Pensioner 2.80%/3.00%	Deferred/ Pensioner 2.80%/3.00%
Rate of increase to deferred pensions (CPI)	2.50%	2.50%

* Limited Price Index.

From February 2030 onwards, increases in the RPI will be aligned with those under the Consumer Prices Index (CPI). For Defined Benefit schemes, it means that members with RPI-linked pension increases will see future retirement benefits increase more slowly from 2030 than they otherwise would. The Group's approach to setting RPI and CPI inflation assumptions is as follows:

• The Group continued to set RPI inflation in line with the market break-even expectations for inflation less an inflation risk premium of 0.3%

• The assumptions linked to RPI and CPI as at 31 December 2023 have been determined by weighting the cash flows to which the link applies

The table below reflects published mortality investigation data in conjunction with the results of investigations into the mortality experience of Scheme beneficiaries. The assumed life expectations on retirement for Section A are:

	2023	2023	2022	2022
Retiring today at age	60	65	60	65
Males	25.7	21.1	26.2	21.6
Females	27.3	22.6	28.9	24.1
Retiring in 20 years at age	60	65	60	65
Males	27.1	22.3	27.5	22.7
Females	28.9	24.0	30.4	25.5

The net pension surplus is sensitive to changes in assumptions. These are disclosed further in this note.

Total defined benefit scheme assets

Keeping
it simple

The Scheme holds assets across a number of different classes, which are managed by the Trustee, who consults with the Group on changes to its investment policy.

What are the Pension Scheme assets?
At 31 December 2023, the Schemes' assets were invested in a diversified portfolio that consisted primarily of debt securities, infrastructure, property and insurance policies matching the pensions due to certain beneficiaries. The tables below set out the major categories of assets.

Financial instruments are in place in order to provide protection against changes in market factors (interest rates and inflation), which could act to increase the net pension surplus/deficit.

One such instrument is the longevity swap, which the Scheme transacted in 2011 to obtain protection against the effect of increases in the life expectancy of the majority of pensioner beneficiaries at that date. Under the swap, the Trustee agreed to make
pre-determined payments in return for payments to meet the specified pension obligations as they fall due, irrespective of how long the beneficiaries and their dependants live. The difference in the present values of these two streams of payments is reflected in the Scheme assets. The swap had a nil valuation at inception and, using market-based assumptions, is subsequently adjusted for changes in the market life expectancy and market discount rates, in line with its fair value.

How do we measure the pension Scheme assets?
Defined benefit scheme assets are measured at their fair value and can change due to the following:

· Interest income on scheme assets - this is determined by multiplying the fair value of the Scheme assets by the discount rate, both taken as of the beginning of the year. This is recognised through net financing costs in the Consolidated Income Statement

· Return on assets arise from differences between the actual return and interest income on Scheme assets and are recognised in the Consolidated Statement of Other Comprehensive Income

· Employer's contributions are paid into the Scheme to be managed and invested, and

· Benefits and administrative expenses paid out by the Schemes will lower the fair value of the Schemes' assets

The movement in the fair value of the defined benefit schemes' assets is analysed below:

	2023 £m	2022 £m
Fair value of Scheme assets at 1 January	2,437	3,873
Interest income on Scheme assets	120	63
Loss on assets, excluding interest income	(98)	(1,039)
Employer contributions	50	145
Settlement payments from plan assets - buyout of Section C	-	(439)
Benefits paid	(147)	(156)
Administrative expenses paid	(7)	(6)
Pension insurance risk premium - buyout of Section C	-	(4)
Fair value of Scheme assets at 31 December	2,355	2,437

How are the Schemes' assets invested?

At 31 December 2023, the Schemes' assets were invested in a diversified portfolio that consisted primarily of debt securities, infrastructure, property and insurance policies matching pensions due to certain beneficiaries. The Trustee is responsible for deciding the investment strategy for the Schemes' assets, although changes in investment policies require consultation with the Group. The assets are invested in different classes to hedge against unfavourable movements in the funding obligation. When selecting the mix of assets to hold, and considering their related risks and returns, the Trustee will weigh up the variability of returns against the target long-term rate of return on the overall portfolio.

The fair value of the Schemes' assets is shown in the following table by major category:

	Market value 2023 £m	Quoted 2023 £m	Market value 2023 %	Market value 2022 £m	Quoted 2022 £m	Market value 2022 %
Liability hedging assets
Fixed interest gilts	449	449		365	365
Index-linked interest gilts	516	516		788	786
Interest rate and inflation hedging derivatives (swaps and repos)	(112)	(142)		(375)	(401)
	853	823	36%	778	750	32%

Other bonds	1,456	62	62%	1,447	58	59%

Return seeking investments
Infrastructure	175			174
Property	149			171
	324		14%	345		14%
Other investments
Cash and cash equivalents	41			121
Insurance policies	41			17
Longevity swap fair value	(360)			(271)
	(278)		(12%)	(133)		(5%)
Total Scheme assets	2,355	885	100%	2,437	808	100%

Included in the above are overseas assets of £24 million (2022: £315 million). None of these assets are quoted.

The Trustee entered into a longevity swap in 2011, which hedges the risk of increasing life expectancy over the next 70 years for 11,700 current pensioners at inception covering £1.7 billion of the pension obligation. The fair value of the longevity swap is negative due to declining mortality assumptions and equals the discounted value of the projected net cash flows resulting from the contract. The fair value loss has increased in 2023 due to the latest mortality analysis from the triennial valuation.

Defined pension deficit sensitivities

Keeping
it simple

Which assumptions have the biggest impact on the Scheme?
It is important to note that comparatively small changes in the assumptions used may have a significant effect on the Consolidated Income Statement and Consolidated Statement of Financial Position. This 'sensitivity' to change is analysed below to demonstrate how small changes in assumptions can have a large impact on the estimation of the defined benefit pension obligation. The Trustee manages the investment, mortality and inflation risks to ensure the pension obligations are met as they fall due.

The investment strategy is aimed at the Trustee's actuarial valuation liabilities rather than IAS 19 defined pension liabilities. As such, the effectiveness of the risk hedging strategies on a valuation basis will not be the same as on an accounting basis. Those hedging strategies have significant impact on the movement in the net pension deficit as assumptions change, offsetting the impacts on the obligation disclosed below.

In practice, changes in one assumption may be accompanied by offsetting changes in another assumption (although this is not always the case). Changes in the assumptions may occur at the same time as changes in the market value of Scheme assets, which may or may not offset the changes in assumptions.

Changes in assumptions have a different level of impact as the value of the net pension surplus/(deficit) fluctuates, because the relationship between them is not linear.

The analysis below considers the impact of a single change in principal assumptions on the defined benefit obligation while keeping the other assumptions unchanged and does not take into account any risk hedging strategies:

Assumption	Change in assumption	Impact on defined benefit obligation
Discount rate	Increase by 0.1%	Decrease by £25 million
	Decrease by 0.1%	Increase by £25 million
	Increase by 0.5%	Decrease by £115 million
	Decrease by 0.5%	Increase by £125 million
Rate of inflation (Retail Price Index)	Increase by 0.1%	Increase by £10 million
Rate of inflation (Retail Price Index)	Decrease by 0.1%	Decrease by £10 million
Rate of inflation (Consumer Price Index)	Increase by 0.1%	Increase by £5 million
Rate of inflation (Consumer Price Index)	Decrease by 0.1%	Decrease by £5 million
Life expectancies	Increase by one year	Increase by £70 million

The sensitivity analysis has been determined by extrapolating the impact on the defined benefit obligation at the year end with changes in key assumptions that might reasonably occur.

While the Schemes' risk hedging strategy is aimed at a valuation basis, the Directors estimate that on an accounting basis any change in asset values would significantly offset the above impact on the defined benefit obligation.

In particular, while an increase in assumption of life expectancies by one year would increase the defined benefit obligation by £70 million, the assets would benefit from an estimated increase of the value of the longevity swap by £60 million, resulting in a net increase in the defined pension deficit of £10 million.

Further, the ITV Pension Scheme invests in UK government bonds and interest rate and inflation swap contracts and therefore movements in the defined benefit obligation are typically offset, to an extent, by asset movements.

Keeping
it simple

What was the impact of movements on the Schemes' assets and liabilities?
The notes above describe how the Scheme obligations and assets are comprised and measured. The following note sets out the impact of various movements and expenses on the Scheme on the Group's financial information.

Amounts recognised through the Consolidated Income Statement

Amounts recognised through the Consolidated Income Statement are as follows:

	2023 £m	2022 £m
Amount charged to operating costs:
Scheme administration expenses	(7)	(6)
	(7)	(6)
Amount charged to exceptional costs:
Pension insurance risk premium - buyout of Section C	-	(4)

Amounts credited to net financing cost
Net interest on defined benefit obligation	8	-

Total charged in the Consolidated Income Statement	1	(10)

Amounts recognised through the Consolidated Statement of Comprehensive Income

The amounts recognised through the Consolidated Statement of Comprehensive Income are:

	2023 £m	2022 £m
Remeasurement (losses)/gains
Loss on scheme assets excluding interest income	(98)	(1,039)
Actuarial gains/(losses) on liabilities arising from change in:
- experience adjustments	45	(119)
- financial assumptions	(68)	1,228
- demographic assumptions	86	10
	63	1,119
Total recognised in the Consolidated Statement of Comprehensive Income	(35)	80

The £63 million actuarial gain (2022: £1,119 million actuarial gain) on the Schemes' liabilities was principally due to the change in the mortality assumptions in line with the latest mortality analysis from the triennial valuation and the updated census data underlying the liability calculations, and to a lesser extent the decrease in market implied inflation. This actuarial gain was partially offset by the decrease in bond yields which increased the value of the liabilities.

The £98 million loss (2022: £1,039 million loss) on the Schemes' assets was principally due to a decrease in the fair value of the longevity swap, driven by updating the value of the swap in line with the latest mortality analysis from the triennial valuation, and to a lesser extent by the assets slightly underperforming expectations.

Addressing the defined benefit pension deficit

Keeping
it simple

The Group works closely with the Trustee to agree appropriate levels of funding for the Scheme. This involves agreeing a Schedule of Contributions at each triennial valuation, which specifies the contribution rates for the employer and, where relevant, scheme beneficiaries and the date these contributions are due. A recovery plan setting out the steps that will be taken to address a funding shortfall is also agreed.

In the event that the Group's defined benefit scheme is in a net liability position, the Directors must take steps to manage the size of the deficit. Apart from the funding agreements mentioned above, this could involve pledging additional assets to the Scheme, as was the case in the SDN and London Television Centre pension funding partnerships.

The levels of ongoing contributions to the Scheme are based on the expected future cash flows of the Scheme. Contributions in 2023 for administration expenses are £7 million (2022: £6 million).

The Group has two asset-backed pension funding agreements with the Trustee - the SDN pension funding partnership and the London Television Centre pension funding partnership which were set up in 2010 and 2014 respectively to address the pension deficit.

SDN Pension Funding Partnership

The £16 million payment under the SDN PFP was not required to be paid in 2023. However, this assessment is made on an annual basis and therefore the £16 million payment may resume in 2024. The Group retains day to day operational control of SDN and SDN's revenues, profits and cashflows continue to be consolidated in the Group's financial information. On completion of the final payment in 2031, the Scheme's partnership interest will have been repaid in full and it will have no right to any further payments.

London Television Centre Pension Funding Partnership

In 2014, ITV established a Pension Funding Partnership with the Trustees backed by the London Television Centre, which resulted in the assets of Section A of the defined benefit pension scheme being increased by £50 million. In November 2019, the London Television Centre was sold. £50 million of the proceeds was previously held in a restricted bank account as a replacement asset in the pension funding arrangement. In 2022, this security was replaced with a surety bond and the cash was released to the Group. This structure continues to be reviewed.

The Scheme's interest in these Partnerships reduces the deficit on a funding basis but does not impact the deficit on an IAS 19 basis as the Scheme's interest is not a transferrable financial instrument.

Deficit funding contributions

The accounting surplus or deficit does not drive the deficit funding contribution. The Group's deficit funding contributions in 2023 were £40 million (31 December 2022: £137 million). This included £37 million deficit contribution agreed as part of the triennial valuation and £3 million annual payment under the London Television Centre PFP.

The 2022 amount included £15 million deferred from 2020 and £25 million of deficit contributions agreed as part of the triennial valuation, £80 million one-off payment following the extension of the SDN PFP, a £3 million payment on the SDN PFP for the bridging period between the end date of the original agreement and the date of the extension, and £11 million and £3 million annual payments due under the SDN and London Television Centre PFPs respectively.

Deficit contributions for 2024 and 2025 consist of contributions agreed with the Trustees following the last finalised triennial valuation (£53 million and £28 million respectively) and the annual payments under the SDN PFP and London Television Centre PFP (£16 million and £3 million respectively).

IFRIC 14 clarifies how the asset ceiling rules should be applied if the Schemes are expected to be in surplus, for example as a result of deficit funding agreements. The Group has determined that it has an unconditional right to a refund of any surplus assets if the Schemes are run off until the last member dies. On this basis, IFRIC 14 rules do not cause any change in the pension deficit accounting or disclosures.

In June 2023, the High Court ruled in the Virgin Media case that some historical rule amendments made without the correct actuarial certification were not valid. The Trustees of ITV's defined benefit pension schemes have taken advice on the implications of the Virgin Media decision. Initial investigations have not revealed evidence that this will be a material issue for ITV's pension schemes, and the Trustees are awaiting the outcome of the appeal (due in 2024) before deciding if further investigations are necessary. As a result, ITV does not consider it necessary to make any allowance for the potential impact of the Virgin Media case in its financial information.

Section 4: Capital Structure and Financing Costs

In this
section

This section outlines how the Group manages its capital structure and related financing costs, including its balance sheet liquidity and access to capital markets.

The Directors determine the appropriate capital structure of ITV; specifically how much is raised from shareholders (equity) and how much is borrowed from financial institutions (debt) in order to finance the Group's activities both now and in the future. Maintaining capital discipline and balance sheet efficiency remains important to the Group. Any potential courses of action in relation to this will take into account the Group's liquidity needs, flexibility to invest in the business, pension deficit initiatives and impact on credit ratings.

The Directors consider the Group's capital structure and dividend policy at least twice a year ahead of announcing results. The Directors take into account the available realised distributable reserves from which a dividend would be paid in addition to liquidity and solvency of the Group. The Directors also consider the capital structure and dividend policy in the context of the Group's ability to continue as a going concern, to execute the strategy and to invest in opportunities to grow the business and enhance shareholder value. The ITV plc Board oversees governance and approves tax and treasury related policies and procedures.

4.1
Net debt

Keeping
it simple

Net debt is the Group's key measure used to evaluate total cash resources net of the current outstanding debt, including our discounted lease liabilities. A full analysis and discussion of net debt and covenant net debt is included in the Operating and Financial Performance Review.

The tables below analyse movements in the components of net debt during the year:

	1 January 2023 £m	Net cash flow £m	Currency and non-cash movements £m	31 December 2023 £m
Loans and facilities due within one year	(289)	278	6	(5)
Loans and facilities due after one year	(541)	(228)	11	(758)
Total loans and facilities	(830)	50	17	(763)

Currency component of forwards and swaps held against euro denominated bonds*	(9)	10	(16)	(15)
Lease liabilities	(132)	26	(9)	(115)
Total debt	(971)	86	(8)	(893)



Cash	257	(37)	(5)	215
Cash equivalents	91	38	(4)	125
Total cash and cash equivalents	348	1	(9)	340

Net debt	(623)	87	(17)	(553)

* Net cash flow from currency component of forwards and swaps relates to the euro denominated bond repaid in the year

	1 January 2022 £m	Acquisitions** £m	Net cash flow £m	Currency and non-cash movements £m	31 December 2022 £m
Loans and facilities due within one year	(290)	(19)	257	(237)	(289)
Loans and facilities due after one year	(732)	-	-	191	(541)
Total loans and facilities	(1,022)	(19)	257	(46)	(830)

Currency component of forwards and swaps held against euro denominated bonds	(36)	-	-	27	(9)
Lease liabilities	(92)	-	26	(66)	(132)
Total debt	(1,150)	(19)	283	(85)	(971)

Restricted cash	50	-	(50)	-	-

Cash	246	-	5	6	257
Cash equivalents	440	-	(355)	6	91
Total cash and cash equivalents*	686	-	(350)	12	348

Net debt	(414)	(19)	(117)	(73)	(623)

* On 1 January 2022, £50 million of cash was presented as restricted in favour of the commitments under the asset-backed pension agreements. This balance was £nil at 31 December 2022 given the restriction was removed in the year and the cash replaced with a surety bond.

** Loans on acquisition included £98 million for Plimsoll Productions and £4 million for Lingo Pictures. The Plimsoll Productions loan was reduced by £83 million, which was repaid as part of the acquisition using cash raised from the Group's subscription for new shares. This £83 million was treated as a cash outflow on acquisition rather than a repayment of debt.

Loans and facilities due within one year

The €259 million Eurobond was repaid in December 2023. The sterling-equivalent repayment value, totalling £233 million, had been hedged using forward exchange contracts.

Loans and loan notes due after one year

In January 2022, the Group entered into a new syndicated £500 million Revolving Credit Facility (RCF) to meet short-term funding requirements. The original terms of the RCF ran until January 2027; however, the Group took the opportunity to request an extension for one year on the first and second anniversary of the facility. As a result, £83 million of the £500 million RCF matures in 2028 and £417 million matures in January 2029. The RCF was undrawn as at 31 December 2023 (2022: £50 million drawn).

The Group has a €600 million Eurobond in issue at a fixed coupon of 1.375%, which matures in September 2026 and has been swapped back to sterling (£533 million) using a number of cross-currency interest rate swaps. The resulting fixed rate payable in sterling is c.2.9%.

A new £230 million term loan was taken out in the year, and was fully drawn-down in December 2023 in order to repay the
€259 million Eurobond. The term loan matures in July 2027. Interest on the loan is determined as an aggregate of compounded SONIA plus a margin.

Available facilities

The Group has good access to liquidity:

• The Group has a £300 million bilateral loan facility, which matures on 30 June 2026. Utilisation requests are subject to the lender's ability to source ITV Credit Default Swaps (CDS) in the market at the time the utilisation request is made. The facility remains free of financial covenants. The facility is currently undrawn (31 December 2022: undrawn).

• As noted above, the Group has £500 million of committed funding through a RCF with a group of relationship banks, which is currently fully available until January 2028. £417 million of the funding remains committed until 2029. At 31 December 2023, the facility was unutilised (31 December 2022: £50 million drawn). The RCF documentation defines a leverage covenant (which has to be maintained at less than 3.5x) and an interest cover covenant (which has to be maintained at greater than 3.0x). Both are tested at 30 June and 31 December each year. All financial covenants were met and the facility remains available at 31 December 2023. The £500 million RCF contains Scope 1, 2 and 3 greenhouse gas emissions targets which align to ITV's stated objective to have Net Zero carbon emissions by 2030. These targets are measured at the end of each financial year and independently verified in July following the relevant December year end. Scope 1 and 2 emissions are measured separately to Scope 3 emissions. The margin on the facility reduces by 2.5bps if Scope 1, 2 and 3 targets are met, by 1.25bps if either Scope 1 and 2 targets are met or Scope 3 targets are met, and increases by 2.5bps if neither target is met. Failing to meet targets does not impact the availability of the RCF. The Group met Scope 1, 2 and 3 targets for 2023; however, 2023 emissions will not be verified until July 2024. Over the life of the facility, it may be necessary to recalibrate the baseline emissions level set in 2019, particularly in relation to Scope 3 emissions and there is a mechanism in the RCF documentation that allows for this.

• In December 2023, the Group secured £100 million of committed funding via a new bilateral RCF, which matures in December 2028. The terms and conditions, including financial covenants but not emissions targets, are aligned to the £500 million RCF facility. The facility is currently undrawn.

4.2 Borrowings

Keeping
it simple

The Group borrows money from financial institutions in the form of bonds, bank facilities and other financial instruments. The interest payable on these instruments is shown in the net financing costs note (note 4.4).

There are Board-approved policies in place to manage the Group's financial risks. Macroeconomic market risks, which impact currency transactions and interest rates, are discussed in note 4.3. Credit and liquidity risks are set out below.

· Credit risk: the risk of financial loss to the Group if a customer or counterparty fails to meet its contractual obligations

· Liquidity risk: the risk that the Group will not be able to meet its financial obligations as they fall due

The Group is required to disclose the fair value of its debt instruments. The fair value is the amount the Group would pay a third party to transfer the liability. This estimation of fair value is consistent with instruments included in note 4.5.

Accounting policies

Borrowings

Borrowings are recognised initially at fair value less directly attributable transaction costs, with subsequent measurement at amortised cost using the effective interest rate method. Under the amortised cost method, the difference between the amount initially recognised and the redemption value is recorded in the Consolidated Income Statement over the period of the borrowing on an effective interest rate basis.

Managing credit and liquidity risk

Credit risk

The Group's maximum exposure to credit risk is represented by the carrying amount of derivative financial assets (see note 4.3), trade receivables (see note 3.1.3), contract assets (see note 3.1.6) and cash and cash equivalents (see note 4.1).

Trade and other receivables

The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The majority of trade receivables relate to airtime sales contracts with advertising agencies and advertisers. Credit insurance has been taken out against these companies to minimise the impact on the Group in the event of a possible default. The Group also reviews other significant receivables and will seek to take out credit insurance on an individual basis where appropriate. Credit risk over contract assets is monitored proactively using daily reports from an external credit risk company. These reports are used to determine contractual obligations, monitor risk and amend terms where required.

Cash and cash equivalents and derivative financial instruments

The Group operates investment guidelines with respect to surplus cash that emphasise preservation of capital. The guidelines set out procedures and limits on counterparty risk and maturity profile of cash placed. Counterparty limits for cash deposits are largely based upon long-term ratings published by the major credit rating agencies. Cash and cash equivalents include money market funds valued at fair value through profit and loss.

Cash and cash equivalents and derivative financial instruments exposure is limited to high credit quality financial institutions rated by two of the key rating agencies used by the Group. Counterparty credit limits are set in relation to these ratings, in order to limit the concentration of exposure to individual counterparties based on their credit quality. As such, investments are sufficiently spread across high credit quality rated counterparties.

Counterparty credit limits are reviewed by the Group's Board of Directors on an annual basis and may be updated throughout the year subject to approval of the Group's Audit & Risk Committee. Investment exposure with external counterparties is made only with Board approved counterparties and within credit limits assigned to each counterparty. The credit quality of financial counterparties and the outstanding exposure is monitored throughout the year by the Group's Treasury function in accordance with the Group's policy.

Borrowings

ITV is rated as investment grade by Moody's and S&P. ITV's credit ratings, which in turn are affected by key metrics, such as leverage, the cost of credit default swap hedging, and the absolute level of interest rates are key determinants in the cost of new borrowings for ITV.

Liquidity risk

The Group's financing policy is to fund itself for the medium to long-term by using debt instruments with a range of maturities and to ensure access to appropriate short-term borrowing facilities with a minimum of £250 million of undrawn facilities available at all times.

Long-term funding comes from the UK and European capital markets, while any short to medium-term debt requirements were provided throughout 2023 through bank credit facilities totalling £900 million (see below). Management monitors rolling forecasts of the Group's liquidity reserve (comprising undrawn bank facilities and cash and cash equivalents) on the basis of expected cash flows. This monitoring includes financial ratios to assess any possible future impact on credit ratings and headroom and takes into account the accessibility of cash and cash equivalents.

Fair value versus book value

The tables below provide fair value information for the Group's borrowings:

		Book value		Fair value
	Maturity	2023 £m	2022 £m	2023 £m	2022 £m
Loans due within one year

€259 (previously €500) million Eurobond	Dec 2023	-	229	-	227
Revolving credit facility*		-	50	-	50
Other short-term loans	Various	5	10	5	10
		5	289	5	287

Loans due in more than one year

€600 million Eurobond	Sept 2026	520	531	490	480
£230 million Term Loan	July 2027	230	-	230	-
Other long-term loans	Various	8	10	8	10
		758	541	728	490

		763	830	733	777

* The £500 million Revolving Credit Facility matures in January 2028 (£83 million) and January 2029 (£417 million)

4.3
Managing
market risks: derivative financial instruments

Keeping
it simple

What is a derivative?
A derivative is a type of financial instrument typically used to manage risk. A derivative's value changes over time in response to underlying variables, such as exchange rates or interest rates and is entered into for a fixed period. A hedge is where a derivative is used to manage exposure in an underlying variable.

The Group is exposed to certain market risks. In accordance with Board-approved policies, which are set out in this note, the Group manages these risks by using derivative financial instruments to hedge the underlying exposures.

Why do we need them?
The key market risks facing the Group are:

· Currency risk arising from:

i. Translation risk, that is the risk in the period of adverse currency fluctuations in the translation of foreign currency profits, assets and liabilities ('balance sheet risk') and non-functional currency monetary assets and liabilities ('income statement risk') and

ii. Transaction risk, that is the risk that currency fluctuations will have a negative effect on the value of the Group's non-functional currency trading cash flows. A non-functional currency transaction is a transaction in any currency other than the reporting currency of the subsidiary

· Interest rate risk to the Group arises from significant changes in interest rates on borrowings issued at or swapped to floating rates

How do we use them?
The Group mainly employs three types of derivative financial instruments when managing its currency and interest rate risk:

· Foreign exchange swap contracts are derivative instruments used to hedge income statement translation risk arising from short-term intercompany loans denominated in a foreign currency

· Forward foreign exchange contracts are derivative instruments used to hedge transaction risk so they enable the sale or purchase of foreign currency at a known fixed rate on an agreed future date and

· Cross-currency interest rate swaps are derivative instruments used to exchange the principal and interest coupons in a debt instrument from one currency to another

Analysis of the derivatives used by the Group to hedge its exposure and the various methods used to calculate their respective fair values are detailed in this section.

Accounting policies

Derivative financial instruments are initially recognised at fair value and are subsequently remeasured at fair value with the movement recorded in the Consolidated Income Statement, except where derivatives qualify for cash flow hedge accounting. In this case, the effective portion of a cash flow hedge is recognised in other comprehensive income and presented in the hedging reserve within equity. The cumulative gain or loss is later reclassified to the Consolidated Income Statement in the same period as the relevant hedged transaction is realised. Derivatives with positive fair values are recorded as assets and negative fair values as liabilities.

Determining fair value

The fair value of forward foreign exchange contracts is determined by the change in price between the contracted rates and the market rates at the reporting date. The contracted cash flows are then discounted by the time remaining to the settlement date of the contract, with a discount curve that incorporates credit risk. The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to exit the swap at the reporting date, taking into account current interest rates and the Group's current creditworthiness, as well as that of the swap counterparties.

Third-party valuations are used to fair value the Group's cross currency interest rate derivatives. The valuation techniques use inputs, such as interest rate yield curves and currency prices/yields, volatilities of underlying instruments and correlations between inputs.

How do we manage our currency and interest rate risk?

Currency risk

As the Group expands its international operations, the performance of the business becomes increasingly sensitive to movements in foreign exchange rates, primarily with respect to the US dollar and the euro.

The Group's foreign exchange policy is to use forward foreign exchange contracts to hedge material non-functional currency denominated costs or revenue for up to five years forward.

The Group ensures that its net exposure to foreign currency denominated cash balances is kept to a minimal level, where necessary using foreign currency swaps to exchange balances back into sterling or by buying or selling foreign currencies at spot rates.

The Group also utilises foreign exchange swaps and cross-currency interest rate swaps both to manage foreign currency cash flow timing differences and to hedge foreign currency denominated monetary items.

The following table highlights the Group's exposure to foreign currency risk resulting from a 10% strengthening/weakening in sterling against the US dollar, euro and Australian dollar, assuming all other variables are held constant:

	Impact on profit before tax 2023 £m	Impact on profit before tax 2022 £m	Impact on Equity 2023 £m	Impact on Equity 2022 £m
US dollar - increase 10%	(6)	(9)	7	6
US dollar - decrease 10%	7	9	(8)	(8)
Euro - increase 10%	(1)	(4)	1	(3)
Euro - decrease 10%	2	5	-	4
Australian dollar - increase 10%	(1)	(1)	(2)	(4)
Australian dollar - decrease 10%	1	1	2	4

Interest rate risk

The Group's interest rate policy is to allow fixed rate gross debt to vary between 20% and 100% of total gross debt to accommodate floating rate borrowings under the Revolving Credit Facility.

For financial assets and liabilities classified at fair value through profit or loss, the movements in the year relating to changes in fair value and interest are not separated.

At 31 December 2023, the Group's fixed rate debt represented 69.9% of total gross debt (2022: 93.8%), therefore the majority of debt is issued at fixed rates, and changes in the floating rates of interest do not materially affect the Group's net interest charge.

What is the value of our derivative financial instruments?

The following table shows the fair value of derivative financial instruments analysed by type of contract. Interest rate swap fair values exclude accrued interest.

At 31 December 2023	Assets £m	Liabilities £m
Current
Foreign exchange forward contracts and swaps - cash flow hedges	3	(1)
Foreign exchange forward contracts and swaps - fair value through profit or loss	1	-
Non-current
Cross-currency interest swaps - cash flow hedges	-	(15)
Foreign exchange forward contracts and swaps - cash flow hedges	1	(1)
	5	(17)

At 31 December 2022	Assets £m	Liabilities £m
Current
Foreign exchange forward contracts and swaps - cash flow hedges	2	(6)
Foreign exchange forward contracts and swaps - fair value through profit or loss	-	(1)
Non-current
Cross-currency interest swaps - cash flow hedges	-	(8)
Foreign exchange forward contracts and swaps - cash flow hedges	2	-
	4	(15)

Cash flow hedges

The Group applies hedge accounting for certain foreign currency firm commitments and highly probable cash flows where the underlying cash flows are payable within the next five years. In order to fix the sterling cash outflows associated with the commitments and interest payments - which are mainly denominated in US dollars or euros - the Group has taken out forward foreign exchange contracts and cross-currency interest rate swaps for the same foreign currency amount and maturity date as the expected foreign currency outflow.

There is an economic relationship between the hedged items (being between 60% to 100% of the total exposure) and the hedging instruments as the terms of the foreign exchange forward contracts and cross-currency interest rate swaps match the terms of the expected highly probable forecast transactions or firm commitments (i.e. % notional amount and expected receipt or payment date). The Group has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the foreign exchange forward contracts are identical to the hedged risk components.

Sources of ineffectiveness include:

• Different interest rate curve applied to discounting the hedged items and hedging instruments

• Differences in the timing of the cash flows of the hedged items and the hedging instruments

• The counterparties' credit risk differently impacting the fair value movements of the hedging instruments and hedged items and

• Changes to the forecasted amount of cash flows of hedged items and hedging instruments

The Group uses the hedge relationship, credit risk and hedge ratio to measure the hedge effectiveness.

The amount recognised in other comprehensive income during the year all relates to the effective portion of the revaluation loss associated with these contracts. A cumulative loss of £28 million (2022: £33 million of cumulative gain) was recycled to the Consolidated Income statement to off-set movements on the hedged item, a residual £7 million loss (2022: £3 million loss) remained on the income statement which were not offset.

Under IFRS 9, the Group has adopted the 'cost of hedging' approach which allows the recognition of the value of the currency basis at inception of the hedge to be recorded on the Consolidated Statement of Financial Position and amortised through net financing costs in the Consolidated Income Statement over the life of the bond. Any mark-to-market change in fair value of the currency basis is recognised in 'cost of hedging' in the Consolidated Statement of Comprehensive Income.

Net investment hedges

The Group ceased net investment hedging in May 2022 using euro denominated debt to hedge against the change in the sterling value of its euro denominated net assets due to movements in foreign exchange rates. A change to the risk management objective meant that the remaining euro denominated monetary items on the Consolidated Statement of Financial Position could be considered in isolation on a net basis and therefore manage the remaining foreign exchange volatility in a more efficient way. The amount relating to discontinued hedges is a loss of £19 million at 31 December 2023 (2022: £19 million loss).

Undiscounted financial liabilities

Keeping
it simple

The Group is required to disclose the expected timings of cash outflows for each of its financial liabilities (including derivatives). The amounts disclosed in the table are the contractual undiscounted cash flows (including interest), so will not always reconcile with the amounts disclosed on the Statement of Financial Position.

At 31 December 2023	Carrying value £m	Total contractual cash flows £m	Less than 1 year £m	Between 1 and 2 years £m	Between 2 and 5 years £m	Over 5 years £m
Non-derivative financial liabilities
Borrowings	(763)	(785)	(12)	(8)	(763)	(2)
Lease liabilities	(115)	(140)	(18)	(19)	(52)	(51)
Trade and other payables	(931)	(931)	(906)	(25)	-	-
Other payables - non-current	(33)	(33)	-	(33)	-	-
Other payables - commitments on acquisitions	(78)	(105)*	(47)	-	(55)	(3)
Derivative financial instruments
Foreign exchange forward contracts and swaps - cash flow hedges
Inflow	4	195	150	45	-	-
Outflow	(2)	(193)	(149)	(44)	-	-
Cross-currency swaps - cash flow hedges
Inflow	-	542	7	7	528	-
Outflow	(15)	(580)	(16)	(16)	(548)	-
Foreign exchange forward contracts and swaps - fair value through profit or loss
Inflow	1	177	171	6	-	-
Outflow	-	(176)	(170)	(6)	-	-
	(1,932)	(2,029)	(990)	(93)	(890)	(56)

At 31 December 2022	Carrying value £m	Total contractual cash flows £m	Less than 1 year £m	Between 1 and 2 years £m	Between 2 and 5 years £m	Over 5 years £m
Non-derivative financial liabilities
Borrowings	(830)	(865)	(302)	(8)	(550)	(5)
Lease liabilities	(132)	(149)	(21)	(26)	(37)	(65)
Trade and other payables	(915)	(915)	(898)	(14)	(3)	-
Other payables - non-current	(28)	(28)	-	(25)	(3)	-
Other payables - commitments on acquisitions	(47)	(89)*	(8)	(26)	(33)	(22)
Derivative financial instruments
Foreign exchange forward contracts and swaps - cash flow hedges
Inflow	4	480	401	63	16	-
Outflow	(6)	(486)	(409)	(61)	(16)	-
Cross-currency swaps - cash flow hedges
Inflow	-	560	7	7	546	-
Outflow	(8)	(596)	(16)	(16)	(564)
Foreign exchange forward contracts and swaps - fair value through profit or loss
Inflow	-	51	45	6	-	-
Outflow	(1)	(52)	(46)	(6)	-	-
	(1,963)	(2,089)	(1,247)	(106)	(644)	(92)

* Undiscounted expected future payments depending on performance of acquisitions

Timing profile of hedging instrument

Keeping
it simple

The Group is required to provide a breakdown that discloses a profile of the timing of the nominal amount of the hedging instrument and if applicable, the average price or rate (for example strike or forward prices etc.) of the hedging instrument.

The Group is holding the following foreign exchange and cross-currency interest rate swap contracts:

At 31 December 2023	Less than 1 year	Between 1 to 2 years	Between 2 to 5 years	Greater than 5 years	Total
Foreign exchange forward contracts and swaps
Notional amount (£m)	(5)	-	-	-	(5)
Average forward rate (AUD/EUR)	1.6933	-	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	(1)	(11)	-	-	(12)
Average forward rate (AUD/GBP)	1.2773	1.7559	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	9	2	-	-	11
Average forward rate (CAD/GBP)	1.7711	1.6594	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	(1)	-	-	-	(1)
Average forward rate (DKK/GBP)	8.6515	-	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	1	8	-	-	9
Average forward rate (EUR/GBP)	1.1278	1.1272	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	1	-	-	-	1
Average forward rate (ILS/GBP)	4.6398	-	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	(1)	-	-	-	(1)
Average forward rate (SEK/GBP)	12.9636	-	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	4	-	-	-	4
Average forward rate (NOK/GBP)	13.2027	-	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	(4)	-	-	-	(4)
Average forward rate (ZAR/AUD)	12.6830	-	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	(56)	20	-	-	(36)
Average forward rate (USD/GBP)	1.3431	1.2188	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	(5)	-	-	-	(5)
Average forward rate (ZAR/EUR)	20.6262	-	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	(1)	-	-	-	(1)
Average forward rate (ZAR/GBP)	23.0200	-	-	-
Cross-currency interest rate swaps
Notional amount (£m)	-	-	533	-	533
Average hedge rate (EUR/GBP)	-	-	1.1264	-

At 31 December 2022	Less than 1 year	Between 1 to 2 years	Between 2 to 5 years	Greater than 5 years	Total
Foreign exchange forward contracts and swaps
Notional amount (£m)	(5)	-	-	-	(5)
Average forward rate (AUD/EUR)	1.5688	-	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	(4)	(12)	(16)	-	(32)
Average forward rate (AUD/GBP)	1.7205	1.7967	1.7909	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	7	3	-	-	10
Average forward rate (CAD/GBP)	1.7155	1.6446	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	(2)	-	-	-	(2)
Average forward rate (CAD/USD)	1.2400	-	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	(1)	-	-	-	(1)
Average forward rate (DKK/GBP)	8.3506	-	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	(241)	(14)	-	-	(255)
Average forward rate (EUR/GBP)	1.1097	1.1485	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	(6)	-	-	-	(6)
Average forward rate (EUR/USD)	0.8859	-	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	8	-	-	-	8
Average forward rate (NOK/GBP)	12.0018	-	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	(4)	-	-	-	(4)
Average forward rate (ZAR/AUD)	11.7780	-	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	67	16	-	-	83
Average forward rate (USD/GBP)	1.2627	1.1389	-	-
Foreign exchange forward contracts and swaps
Notional amount (£m)	(1)	-	-	-	(1)
Average forward rate (ZAR/GBP)	20.8998	-	-	-
Cross-currency interest rate swaps
Notional amount (£m)	-	-	539	-	539
Average hedge rate (EUR/GBP)	-	-	1.1253	-

Impact of hedged items on Consolidated Statement of Financial Position, Consolidated Statement of Other Comprehensive Income and Consolidated Statement of Changes in Equity

Keeping
it simple

This table provides the following details in relation to cash flow hedge and net investment hedge:

· The change in value of the hedged item used as the basis for recognising hedge ineffectiveness for the year

· The balances in the cash flow hedge reserve and the foreign currency translation reserve for continuing hedges and

· The balances remaining in the cash flow hedge reserve and the foreign currency translation reserve from any hedging relationships for which hedge accounting is no longer applied

The impact of hedged items on the Consolidated Statement of Financial Position is as follows:

Cash flow hedge

	2023			2022
At 31 December	Change in fair value used for measuring ineffectiveness £m	Pre-tax closing cash flow hedge reserve £m	Pre-tax closing cost of hedging reserve £m	Change in fair value used for measuring ineffectiveness £m	Pre-tax closing cash flow hedge reserve £m	Pre-tax closing cost of hedging reserve £m
Highly probable/firm commitment forecast transactions	1	3	-	3	2	(1)
Borrowings	11	1	(2)	(5)	(4)	(8)

The hedging gain recognised in the Consolidated Statement of Changes in Equity before tax is equal to the change in fair value used for measuring effectiveness. There is £7 million of ineffectiveness recognised in the Consolidated Income Statement.

Keeping
it simple

This table details the effect of the cash flow hedge in the Consolidated Income Statement and Consolidated Statement of Comprehensive Income.

The effect of the cash flow hedge in the Consolidated Income Statement and Consolidated Statement of Comprehensive Income is as follows:

At 31 December 2023	Total hedging gain/(loss) recognised in OCI £m	Ineffectiveness recognised in Income Statement £m	Line item in the Income Statement	Cost of hedging recognised in OCI £m	Amounts reclassified from OCI to Income Statement £m	Line item in the Income Statement
Highly probable/firm commitment forecast transactions	1	-	Net financing cost	4	2	Cost of sales/ overheads
Borrowings	11	7	Net financing cost	2	26	Net financing cost

At 31 December 2022	Total hedging gain/(loss) recognised in OCI £m	Ineffectiveness recognised in Income Statement £m	Line item in the Income Statement	Cost of hedging recognised in OCI £m	Amounts reclassified from OCI to Income Statement £m	Line item in the Income Statement
Highly probable/firm commitment forecast transactions	3	-		(4)	11	Overheads/Work in progress
Borrowings	(5)	3	Net financing cost	4	(37)	Net financing cost

Keeping
it simple

This table provides a reconciliation of each component of the translation reserve reported within equity and an analysis of other comprehensive income in accordance with IAS 1.

Set out below is the reconciliation of each component of the translation reserve reported in the Consolidated Statement of Changes in Equity and the analysis of other comprehensive income:

	Cash flow hedge reserve £m	Cost of hedge reserve £m	Foreign currency reserve £m	Translation reserve £m
As at 1 January 2022	3	(7)	45	41
Effective portion of changes in fair value arising from:
Foreign exchange forward contracts	(1)	(4)	-	(5)
Cross-currency interest rate swaps - borrowings:
• Change in fair value from the effective hedge instrument	25	4	-	29
Amount reclassified to Income Statement
• FX forward reclassified to cost of sales/overheads	4	-	-	4
• FX forward and swaps reclassified to finance costs	(10)	-	-	(10)
• Amounts reclassified to work in progress	7	-	-	7
• CCIRS reclassified to finance costs	(27)	-	-	(27)
Net loss on cash flow hedges and cost of hedging	(2)	-	-	(2)
Foreign currency revaluation of the net foreign operations	-	-	67	67
Exchange differences on translation of foreign operations	-	-	67	67
Income tax credit on other comprehensive income/(expense)	1	-	-	1
As at 31 December 2022	2	(7)	112	107
Effective portion of changes in fair value arising from:
Foreign exchange forward contracts	(13)	4	-	(9)
Cross-currency interest rate swaps - borrowings:
• Change in fair value from the effective hedge instrument	(9)	2	-	(7)
Amount reclassified to Income Statement
• FX forward reclassified to cost of sales/overheads	2	-	-	2
• FX forward and swaps reclassified to finance costs	15	-	-	15
• CCIRS reclassified to finance costs	11	-	-	11
Net gain on cash flow hedges and cost of hedging	6	6	-	12
Foreign currency revaluation of the net foreign operations	-	-	(38)	(38)
Exchange differences on translation of foreign operations	-	-	(38)	(38)
Income tax charge on other comprehensive income/(expense)	(1)	(2)	-	(3)
As at 31 December 2023	7	(3)	74	78

Netting arrangements of financial instruments

Keeping
it simple

This section details the Group's financial assets and financial liabilities that are subject to netting and set-off arrangements. Financial assets and liabilities that are subject to set-off arrangements and disclosed on a net basis in the Group's Statement of Financial Position relate to cash pooling arrangements. Amounts which do not meet the criteria for offsetting on the Consolidated Statement of Financial Position but could be settled net in certain circumstances principally relate to derivative transactions executed under ISDA agreements where each party has the option to settle amounts on a net basis in the event of default of the other party.

At 31 December 2023	Gross financial assets/ liabilities £m	Gross collateral assets/liabilities set-off £m	Net financial assets/liabilities per balance sheet £m	Related amounts not set-off in the balance sheet £m	Net £m
Assets
Derivative financial instruments	5	-	5	(2)	3
Cash and cash equivalents	340	-	340	-	340

Liabilities
Derivative financial instruments	(17)	-	(17)	2	(15)
Loans and facilities	(763)	-	(763)	-	(763)

At 31 December 2022	Gross financial assets/liabilities £m	Gross collateral assets/liabilities set-off £m	Net financial assets/liabilities per balance sheet £m	Related amounts not set-off in the balance sheet £m	Net £m
Assets
Derivative financial instruments	4	-	4	(4)	-
Cash and cash equivalents	348	-	348	-	348

Liabilities
Derivative financial instruments	(15)	-	(15)	4	(11)
Loans and facilities	(830)	-	(830)	-	(830)

4.4
Net financing costs

Keeping
it simple

This section details the interest income generated on the Group's cash and other financial assets and the interest expense incurred on borrowings and other financial liabilities.

In reporting 'adjusted profit', the Group adjusts net financing costs to exclude unrealised mark-to-market movements on interest rate and foreign exchange derivatives, gains/losses on bond buybacks, net pension interest, interest and fair value movements in acquisition-related liabilities and other financing costs.

Our rationale for adjustments made to financing costs is set out in the Finance Review.

Accounting policies

Net financing costs comprise interest income on funds invested, gains/losses on the disposal of financial instruments, changes in the fair value of financial instruments, interest expense on borrowings, unwinding of the discount on provisions, unwinding of the discount on liabilities to non-controlling interest, foreign exchange gain/losses, and imputed interest on pension assets and liabilities. Interest income and expense is recognised as it accrues in profit or loss, using the effective interest method.

Net financing costs

Net financing costs can be analysed as follows:

	2023 £m	2022 £m
Financing income
Interest income	14	9
Foreign exchange gain	2	3
Pension interest income (see note 3.7)	9	-
Other finance income	-	1
	25	13

Financing costs
Pension interest expense (see note 3.7)	(1)	-
Interest expense on financial liabilities measured at amortised cost	(15)	(18)
Foreign exchange loss	(7)	(1)
Other finance expense	(47)	(20)
	(70)	(39)
Net financing costs	(45)	(26)

Other finance expense includes lease interest payments, finance costs including fair value adjustments on acquisition-related liabilities and bank charges.

4.5
Fair value hierarchy

Keeping
it simple

The financial instruments included in the Consolidated Statement of Financial Position are measured at either fair value or amortised cost. The measurement of this fair value can in some cases be subjective, and can depend on the inputs used in the calculations. The Group generally uses external valuations using market inputs or market values (e.g. external share prices). The different valuation methods are called 'hierarchies' and are described below.

Level 1
Fair values are measured using quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2
Fair values are measured using inputs, other than quoted prices included within Level 1, which are observable for the asset or liability either directly or indirectly.

Interest rate swaps and options are accounted for at their fair value based upon exit prices at the current reporting period. Forward foreign exchange contracts are accounted for at the difference between the contract exchange rate and the quoted forward exchange rate at the reporting date.

Level 3
Fair values are measured using inputs for the asset or liability that are not based on observable market data.

The tables below set out the financial instruments included on the Consolidated Statement of Financial Position at fair value:

	Fair value 31 December 2023 £m	Level 1 31 December 2023 £m	Level 2 31 December 2023 £m	Level 3 31 December 2023 £m
Assets measured at fair value
Financial instruments at fair value through reserves
Other pension assets - gilts (see note 3.7)	48	48	-	-
Financial instruments at fair value through profit or loss
Money market funds	125	125	-	-
Equity investments (see note 3.5)	21	-	-	21
Financial assets at fair value through profit or loss
Foreign exchange forward contracts and swaps	1	-	1	-
Convertible loan receivable	2	-	-	2
Financial assets at fair value through reserves
Cash flow hedges	4	-	4	-
	201	173	5	23

	Fair value 31 December 2023 £m	Level 1 31 December 2023 £m	Level 2 31 December 2023 £m	Level 3 31 December 2023 £m
Liabilities measured at fair value
Financial liabilities at fair value through profit or loss
Acquisition-related liabilities - payable to sellers under put options agreed on acquisition (see notes 3.1.4 and 3.1.5)	(63)	-	-	(63)
Financial liabilities at fair value through reserves
Cash flow hedges	(17)	-	(17)	-
	(80)	-	(17)	(63)

There have been no changes in the classification of assets and liabilities and there have been no movements within levels. Information on the fair value measurements of level 3 assets and liabilities is detailed in the relevant notes referenced above.

	Fair value 31 December 2022 £m	Level 1 31 December 2022 £m	Level 2 31 December 2022 £m	Level 3 31 December 2022 £m
Assets measured at fair value
Financial instruments at fair value through reserves
Other pension assets - gilts (see note 3.7)	47	47	-	-
Financial instruments at fair value through profit or loss
Money market funds	91	91	-	-
Equity investments (see note 3.5)	11	-	-	11
Financial assets at fair value through profit or loss
Convertible loan receivable	3	-	-	3
Financial assets at fair value through reserves
Cash flow hedges	4	-	4	-
	156	138	4	14

	Fair value 31 December 2022 £m	Level 1 31 December 2022 £m	Level 2 31 December 2022 £m	Level 3 31 December 2022 £m
Liabilities measured at fair value
Financial liabilities at fair value through profit or loss
Foreign exchange forward contracts and swaps	(1)	-	(1)	-
Acquisition-related liabilities - payable to sellers under put options agreed on acquisition (see notes 3.1.4 and 3.1.5)	(39)	-	-	(39)
Financial liabilities at fair value through reserves
Cash flow hedges	(14)	-	(14)	-
	(54)	-	(15)	(39)

Refer to note 4.3 for how we value interest rate swaps and forward foreign currency contracts.

4.6
Lease liabilities

Keeping
it simple

The Group accounts for operating leases under IFRS 16 'Leases'. Lease liabilities representing the discounted future lease payments and right of use assets are recognised in the Consolidated Statement of Financial Position. Lease costs such as property rent are now recognised in the form of depreciation and interest in the Consolidated Income Statement.

Accounting policies

Lease liabilities represent the discounted future lease payments. Discount rates are calculated for similar assets, in similar economic environments, taking into account the length of the lease. The unwinding of the discounting is recognised in net financing costs in the Consolidated Income Statement. The following table outlines the maturity analysis of the lease liabilities:

	2023 £m	2022 £m

Contractual discounted cash flows
Less than one year	18	21
Two to five years	57	55
More than five years	40	56

Lease liabilities at 31 December	115	132

	1 January 2023 £m	Net cash flow £m	Currency and non-cash movements £m	31 December 2023 £m
Lease liabilities	(132)	26	(9)	(115)
Total lease liabilities	(132)	26	(9)	(115)

	1 January 2022 £m	Net cash flow £m	Currency and non-cash movements £m	31 December 2022 £m
Lease liabilities	(92)	26	(66)	(132)
Total lease liabilities	(92)	26	(66)	(132)

The following amounts have been included in the Consolidated Income Statement:

	2023 £m	2022 £m
Interest expense on lease liabilities	(4)	(4)

Amounts recognised in the Consolidated Income Statement	(4)	(4)

The Group has elected not to recognise right of use assets and lease liabilities for short-term leases (i.e. lease term less than 12 months) or low-value assets (i.e. under £5,000). The Group will continue to expense the lease payments associated with these leases on a straight-line basis over the lease term. At 31 December 2023, this was less than £1 million (2022: less than £1 million).

Variable lease payments that depend on an index or a rate are also less than £1 million (2022: less than £1 million).

Some property leases contain extension options beyond the non-cancellable period. The Group assesses at the lease commencement date whether it is reasonably certain to exercise the extension options. The lease liability at 31 December 2023 includes one such extension which resulted in an increase in the lease liability of £2 million. There are no other significant extension options.

The Group signed a subleasing arrangement, which is classified as a finance lease in accordance with IFRS 16 'Leases'. In accordance with the standard, the right of use asset with a net book value of £8 million was derecognised and replaced by a net investment in the sublease which has been recognised within other receivables. See note 3.2. This arrangement does not impact the lease liabilities arising from the original lease which have been included in this note.

4.7
Equity

Keeping
it simple

This section explains material movements recorded in shareholders' equity, presented in the Consolidated Statement of Changes in Equity, which are not explained elsewhere in the financial information.

Accounting policies

Fair value reserve

Financial assets are stated at fair value, with any gain or loss recognised directly in the fair value reserve in equity, unless the loss is a permanent impairment, when it is then recorded in the Consolidated Income Statement.

Dividends

Dividends are recognised through equity on the earlier of their approval by the Company's shareholders or their payment. Dividends are distributed based on the realised distributable reserves (within retained earnings) of ITV plc (the Company) and not based on the Group's retained earnings.

4.7.1 Share capital and share premium

The Group's share capital at 31 December 2023 of £406 million (2022: £403 million) and share premium of £174 million (2022: £174 million) is the same as that of ITV plc. Details of this are given in the ITV plc Company financial information section of this Annual Report.

4.7.2 Merger and other reserves

Merger and other reserves at 31 December include the following reserves:

	2023 £m	2022 £m
Merger reserves	95	95
Capital reserves	112	112
Capital redemption reserves	36	36
Revaluation reserves	2	2
Put option liabilities arising on acquisition of subsidiaries	(34)	(34)
Total	211	211

Merger reserves, Capital reserves and Capital redemption reserves relate primarily to balances arising on previous mergers and acquisitions, including the merger of Granada and Carlton in 2003. Put option liabilities arising on acquisition of subsidiaries relates to options and forwards contracts over shares relating to non-controlling interests.

4.7.3 Translation reserve

The translation reserve comprises:

• All foreign exchange differences arising on the translation of the accounts of, and investments in, foreign operations

• The gains or losses on the portion of cash flow hedges that have been deemed effective and costs of hedging under IFRS 9 (see note 4.3)

• The net movement in the cash flow hedge reserve was a gain of £5 million (2022: loss of £1 million). This is made up of a gain on cash flow hedges in the year of £6 million (2022: loss of £2 million) and a related tax charge of £1 million (2022: credit of £1 million)

• The net movement in the cost of hedging reserve was a gain of £4 million (2022: no movement). This is made up of a gain on the cost of hedging in the year of £6 million (2022: £nil million) and a related tax charge of £2 million (2022: £nil million)

4.7.4 Fair value reserve

The fair value reserve comprises all movements arising on the revaluation of gilts accounted for at fair value through OCI. The movement in 2023 is a £1 million loss on revaluation (2022: loss of £19 million) and a related tax credit of £nil (2022: £5 million credit). See notes 2.3 and 3.7.

4.7.5 Retained earnings

The retained earnings reserve comprises profit for the year attributable to owners of the Company of £210 million (2022: £428 million) and other items recognised directly through equity as presented in the Consolidated Statement of Changes in Equity. Other items include the credit for the Group's share-based compensation schemes, which are described in note 4.8.

The Board recognises the importance of the ordinary dividend to ITV shareholders. Reflecting its confidence in the business and its strategy, as well as the continued strong cash generation, the Board proposes a final dividend of 3.3p (2022:3.3p), giving a full year dividend of 5.0p (2022: 5.0p) per share. £201 million of dividends were paid (2022: £201 million), representing a final 2022 dividend of 3.3p per share and an interim 2023 dividend of 1.7p per share.

4.7.6 Non-controlling interests

Non-controlling interest (NCI) represents the share of non-wholly owned subsidiaries' net assets that are not directly attributable to the shareholders of ITV. The movement for 2023 comprises:

• The share of loss attributable to NCI of £1 million (2022: share of profit attributable to NCI of £7 million)

• Foreign exchange losses of £4 million (2022: gains of £8 million)

• The distributions made to NCI of £1 million (2022: £3 million)

• The share of net assets attributable to NCI relating to subsidiaries acquired, disposed or changes in ownership interest in 2023 of £6 million (2022: £4 million)

4.8
Share-based compensation

Keeping
it simple

The Group utilises share award schemes as part of its employee remuneration packages, and therefore operates a number of share-based compensation schemes, namely the Deferred Share Award (DSA), Executive Share Plan (ESP), Performance Share Plan (PSP), Long Term Incentive Plan (LTIP) and Save As You Earn (SAYE) schemes. The share-based compensation is not pensionable.

A transaction will be classed as share-based compensation where the Group receives services from employees and pays for these in shares or similar equity instruments. If the Group incurs a liability linked to the price or value of the Group's shares, this will also fall under a share-based transaction.

Accounting policies

For each of the Group's share-based compensation schemes, the fair value of the equity instrument granted is measured at grant date and spread over the vesting period via a charge to the Consolidated Income Statement with a corresponding increase in equity.

The fair value of the share options and awards is measured using either market price at grant date or, for the SAYE scheme, a Black-Scholes model, taking into account the terms and conditions of the individual scheme. Expected volatility is based on the historical volatility of ITV plc shares over a three or five year period, based on the life of the options.

Vesting conditions are limited to service conditions and performance conditions. For performance-based schemes, the relevant Group performance measures are projected to the end of the performance period in order to determine the number of options expected to vest. This estimate of the performance measures is used to determine the option fair value, discounted to present value. The Group revises the number of options that are expected to vest, including an estimate of forfeitures at each reporting date based on forecast performance measures. The impact of the revision to original estimates, if any, is recognised in the Consolidated Income Statement, with a corresponding adjustment to equity.

Exercises of share options granted to employees can be satisfied by market purchase or issue of new shares. No new shares may be issued to satisfy exercises under the terms of the DSA. During the year, exercises were satisfied by using shares purchased in the market and held in the ITV Employees' Benefit Trust as well as the issue of new shares.

Share-based compensation charges totalled £16 million in 2023 (2022: £19 million).

Share options outstanding

The table below summarises the movements in the number of share options outstanding for the Group and their weighted average exercise price:

	Number of options ('000)	2023 Weighted average exercise price (pence)	Number of options ('000)	2022 Weighted average exercise price (pence)
Outstanding at 1 January	104,729	24.74	98,934	24.98
Granted during the year - nil priced	20,993	-	17,238	-
Granted during the year - other	16,395	59.21	13,814	62.85
Forfeited during the year	(4,210)	68.61	(3,095)	56.49
Exercised during the year - nil priced	(15,551)	-	(6,201)	-
Exercised during the year - other	(12,954)	49.31	(110)	50.61
Expired during the year	(19,168)	15.57	(15,851)	35.87
Outstanding at 31 December	90,234	25.88	104,729	24.74
Exercisable at 31 December	12,933	34.88	4,383	30.63

The average share price during 2023 was 73.10 pence (2022: 78.32 pence).

Of the options still outstanding, the range of exercise prices and weighted average remaining contractual life of these options can be analysed as follows:

Range of exercise prices (pence)	Weighted average exercise price (pence)	Number of options ('000)	2023 Weighted average remaining contractual life (years)	Weighted average exercise price (pence)	Number of options ('000)	2022 Weighted average remaining contractual life (years)
Nil	-	49,386	0.33	-	59,056	0.29
20.00 - 49.99	49.17	15,330	1.17	49.17	29,225	1.81
50.00 - 69.99	58.51	21,454	2.79	61.73	10,878	3.44
70.00 - 99.99	79.42	3,965	2.12	85.22	5,351	1.35
100.00 - 109.99	105.98	61	0.92	105.98	90	1.46
120.00 - 149.99	135.20	38	0.33	130.61	129	0.94

Assumptions

ESP, DSA, LTIP and PSP options are valued directly by reference to the share price at date of grant.

The options granted in the current and prior year for the HMRC approved SAYE scheme, are valued using the Black-Scholes model, using the assumptions below:

Scheme name	Date of grant	Share price at grant (pence)	Exercise price (pence)	Expected volatility %	Expected life (years)	Gross dividend yield %	Risk-free rate %	Fair value (pence)
3 Year	12 April 2022	79.08	67.72	47.00	3.25	-	1.55	21.19
5 Year	12 April 2022	79.08	67.72	40.05	5.25	-	1.58	18.45
3 Year	5 September 2022	62.74	57.73	47.80	3.25	-	2.97	14.95
5 Year	5 September 2022	62.74	57.73	41.03	5.25	-	2.85	12.63
3 Year	5 April 2023	79.78	70.12	45.43	3.25	-	3.40	21.53
5 Year	5 April 2023	79.78	70.12	42.41	5.25	-	3.28	20.99
3 Year	13 September 2023	72.34	56.37	40.60	3.25	-	4.47	20.17
5 Year	13 September 2023	72.34	56.37	42.27	5.25	-	4.29	20.57

Employees' Benefit Trust

The Group has investments in its own shares as a result of shares purchased by the ITV Employees' Benefit Trust (EBT). Transactions with the Group-sponsored EBT are included in this financial information and consist of the EBT's purchases of shares in ITV plc, which is accounted for as a reduction to retained earnings.

The table below shows the number of ITV plc shares held in the EBT at 31 December 2023 and the releases from the EBT made in the year to satisfy awards under the Group's share schemes:

Scheme	Shares held at	Number of shares (released)/purchased	Nominal value £
	1 January 2023	14,587,379	1,458,738
LTIP releases		(93,835)
DSA releases		(3,115,726)
ESP releases		(226,277)
PSP releases		(5,995,984)
SAYE releases		(13,150,667)
Market purchased shares		9,510,276
Newly issued shares		27,000,000
	31 December 2023	28,515,166	2,851,517

The total number of shares held by the EBT at 31 December 2023 represents 0.77% (2022: 0.36%) of ITV's issued share capital. The market value of own shares held at 31 December 2023 is £18 million (2022: £11 million).

The shares will be held in the EBT until such time as they may be transferred to participants of the various Group share schemes. Rights to dividends have been waived by the EBT in respect of shares held that do not relate to restricted shares under the DSA. In accordance with the Trust Deed, the Trustees of the EBT have the power to exercise all voting rights in relation to any investment (including shares) held within that trust. The Trust is accounted for as a separate entity and therefore is only accounted for in the consolidated financial information and not included in the ITV plc Company financial information.

Section 5: Other Notes

5.1
Related
party
transactions

Keeping
it simple

The related parties identified by the Directors include joint ventures, associated undertakings, fixed asset investments and key management personnel.

To enable users of our financial information to form a view about the effects of related party relationships on the Group, we disclose the Group's transactions with those related parties during the year and any associated year end trading balances.

Transactions with joint ventures and associated undertakings

Transactions with joint ventures and associated undertakings during the year were:

	2023 £m	2022 £m
Sales to joint ventures	60	41
Sales to associated undertakings	13	16
Purchases from joint ventures	33	33
Purchases from associated undertakings	78	77

The transactions with joint ventures primarily relate to sales and purchases of digital multiplex services with Digital 3&4 Limited and distribution revenue from BritBox LLC, BritBox International Limited and BritBox Australia Management Pty Limited. Sales to associated undertakings include airtime sales to DTV Services Limited. Purchases from associated undertakings primarily relate to the purchase of news services from ITN Limited.

All transactions with associated undertakings and joint ventures arise in the normal course of business on an arm's length basis. The amounts owed by and to these related parties at 31 December were:

	2023 £m	2022 £m
Amounts owed by joint ventures	41	12
Amounts owed by associated undertakings	10	19
Amounts owed to joint ventures	6	5
Amounts owed to associated undertakings	8	17

None of the balances are secured.

Amounts owed by joint ventures primarily relate to trading with BritBox LLC and BritBox Australia Management Pty Limited. Balances owed by associated undertakings largely relate to Bedrock Entertainment LLC and Southrock Productions LLC. Balances owed to associated undertakings primarily relate to trading with ITN Limited and amounts owed to Bedrock Entertainment LLC.

Amounts paid to the Group's retirement benefit plans are set out in note 3.7.

Transactions with key management personnel

Key management consists of ITV plc Executive and Non-executive Directors and the other members of the ITV Management Board. Key management personnel compensation is as follows:

	2023 £m	2022 £m
Short-term employee benefits	11	11
Share-based compensation	6	6
	17	17

5.2
Contingent assets and liabilities

Keeping it simple

A contingent asset or liability is a liability that is not sufficiently certain to qualify for recognition as an asset or provision where uncertainty may exist regarding the outcome of future events.

Contingent liabilities

There are contingent liabilities in respect of certain litigation and guarantees, broadcasting issues, and in respect of warranties given in connection with certain disposals of businesses. In addition, the determination of employment tax status of some individuals contracted by ITV is complex and a future liability could arise in relation to this. None of these items are expected to have a material effect on the Group's results or financial position.

As previously reported, on 12 July 2022, the UK Competition and Markets Authority (CMA) opened an investigation into certain conduct of ITV and other named companies in the sector relating to the production and broadcasting of sports content in the United Kingdom. The investigation is at an early stage and the CMA has confirmed it is currently undertaking further investigation until at least March 2024, subsequent to which ITV anticipates it will receive additional detail regarding any future steps.

5.3
Subsequent events

Keeping it simple

P2562C3T51#y1

Where the Group receives information in the period between 31 December 2023 and the date of this report about conditions related to certain events that existed at 31 December 2023, we update our disclosures that relate to those conditions in light of the new information. Such events can be categorised as adjusting or non-adjusting depending on whether the condition existed at 31 December 2023. If non-adjusting events are material, non-disclosure could influence the economic decisions that users make on the basis of the financial information. Accordingly, for each material category of non-adjusting event after the reporting period we disclose in this section the nature of the event and an estimate of its financial effect, or a statement that such an estimate cannot be made.

Disposal of the Group's Interests in BritBox International

At 31 December 2023, the Group included these interests at their carrying value of £66 million, as held for sale in the Consolidated Statement of Financial Position. See notes 3.4 and 3.5.

5.4
Subsidiaries exempt
from audit

Keeping
it simple

Certain subsidiaries of the Group can take an exemption from having an audit. Strict criteria must be met for this exemption to be taken, and it must be agreed by the Directors of that subsidiary entity.

Listed below are subsidiaries controlled and consolidated by the Group, where the Directors have taken the exemption from having an audit of its financial statements. This exemption is taken in accordance with the Companies Act 2006 s479A.

Company number	Company name	Company number	Company name
04195187	12 Yard Productions (Investments) Limited	03089273	ITV Ventures Limited
04145307	12 Yard Productions Limited	11107431	ITV Vera Limited
10058419	Back Productions Limited	14460676	ITV WKOW Limited
13087812	Big Talk Alone Limited	13087699	ITV Y&M Limited
10496857	Big Talk Cold Feet Limited	05518785	Juice Music UK Limited
12092620	Big Talk Friday Limited	05976348	Mammoth Screen Limited
11109596	Big Talk Goes Wrong Limited	09355455	Mammoth Screen (End) Limited
13087733	Big Talk Horseface Limited	08546227	Mammoth Screen (End2) Limited
13087735	Big Talk I Hate You Limited	10528827	Mammoth Screen (End9) Limited
07037447	Big Talk Investments Limited	11109917	Mammoth Screen (End6) Limited
10528952	Big Talk Living the Dream Limited	11908267	Mammoth Screen (End7) Limited
13813181	Big Talk Ludwig Limited	12368766	Mammoth Screen (End8) Limited
11723899	Big Talk Offenders Limited	13087685	Mammoth Screen (Evans) Limited
11109572	Big Talk Peacock Limited	12368661	Mammoth Screen (FS) Limited
02897434	Big Talk Pictures Limited	13989267	Mammoth Screen (GK) Limited
06567813	Big Talk Studios Limited	11995990	Mammoth Screen (MD) Limited
02936337	Boom Cymru TV Ltd	12735978	Mammoth Screen (MD2) Limited
07922831	Boom Pictures Limited	13989179	Mammoth Screen (MIE) Limited
03866274	Box Clever Technology Limited	11062257	Mammoth Screen (NC) Limited
04192851	Box Clever Trustees Limited	09660486	Mammoth Screen (Pol2) Limited
11801341	BritBox SVOD Limited	10031005	Mammoth Screen (Pol3) Limited
01891539	Broad Street Films Limited	10528763	Mammoth Screen (Pol4) Limited
02285229	Campania Limited	11108289	Mammoth Screen (Pol5) Limited
04159249	Carlton Content Holdings Limited	08799982	Mammoth Screen (Poldark) Limited
00301188	Carlton Film Distributors Limited	09646520	Mammoth Screen (QV) Limited
01692483	Carlton Finance Limited	11108327	Mammoth Screen (Serpent) Limited
03984490	Carlton Food Network Limited	11204836	Mammoth Screen (SG) Limited
03053908	Carlton Programmes Development Limited	NI678277	Mammoth Screen (TJ) Limited
03210452	Carlton Screen Advertising (Holdings) Limited	13087656	Mammoth Screen (Tower) Limited
03210363	Carltonco Ninety-Six	10528702	Mammoth Screen (VF) Limited
02280048	Castlefield Properties Limited	11108322	Mammoth Screen (Vic3) Limited
06409013	Cat's on the Roof Media Limited	11108320	Mammoth Screen (WOF) Limited
04257248	Channel Television Holdings Limited	NI687412	Mammoth Screen (WOF2) Limited
08195508	Cirkus Limited	10973979	Mammoth Screen (WOTW) Limited
10240192	Cloth Cat LBB Limited	13412337	Metavision Limited
02852812	Cosgrove Hall Films Limited	09477931	Monumental Television Limited
09366309	Crook Productions Limited	04201477	Morning TV Limited
05421502	Cynhyrchiadau Boomerang Cyfyngedig	12368748	MT Ghosts Limited
08479545	Double Double Limited	14764613	MT Marlow Murder Club Limited
07821062	EQ Pictures Limited	13813329	MT Mrs Sidhu Limited
09366308	Gameface Productions Limited	13989060	MT Maryland Limited
05946785	Gorilla TV Group Limited	13087117	MT Murder in Provence Limited
03776018	Gorilla TV Limited	14763338	Output Productions Limited
00290076	Granada Group Limited	07473151	Oxford Scientific Films Limited
03962410	Granada Limited	13506403	Planet Woo Limited
03106798	Granada Media Limited	15175627	Planet V Limited
05344772	Granada Screen (2005) Limited	09020906	Possessed Limited
00733063	Granada Television Overseas Limited	14163547	QSP ATF Limited
00250311	Granada UK Rental and Retail Limited	14784655	QSP Buried Limited
04842712	Interactive Telephony Limited	14163654	QSP FMO Limited
00608490	ITC Entertainment Group Limited	14460916	QSP Ghosted Limited
SC375274	ITV (Scotland) Limited	14496123	QSP Men Up Limited
11516620	ITV 112 Limited	14458573	QSP MU Limited
12956892	ITV AdVentures Limited	14462220	QSP MY Limited
13087805	ITV Alder Limited	14460933	QSP PD Limited
14047839	ITV Archie Limited	14460663	QSP TRK Limited
11667230	ITV Barking Limited	13714204	QSP Nolly Limited
02578005	ITV Breakfast Limited	14048037	QSP SO limited
02937518	ITV Consumer Limited	12350991	Second Act (Grace) Limited
13087759	ITV Duneen Limited	09366311	Second Act Productions Limited
10494684	ITV Enterprises Limited	07714999	Sightseers Film Limited
04159210	ITV Holdings Limited	03991026	So Television Limited
14133299	ITV Grace Limited	11423826	The Addressable Platform Limited
04159213	ITV International Channels Limited	07155077	The Garden Productions Limited
14846610	ITV JCDM Limited	02351132	TwoFour Broadcast Limited
SC473179	ITV LTVC (Scotland) Limited	08602993	TwoFour Group Holdings Limited
14863612	ITV Mandrake Limited	05493388	TwoFour Group Limited
13989147	ITV Maternal Limited	11109744	WP Anne Limited
00603893	ITV Network Limited	10796122	WP Bodyguard Limited
11723842	ITV Nightingale Limited	14360979	WP Delia Limited
00603471	ITV Pension Scheme Limited	12368643	WP Diplomat Limited
14461569	ITV POS Limited	13988864	WP Fifteen Limited
01565625	ITV Properties (Developments) Limited	12116627	WP Karen Pirie Limited
13087782	ITV Ralph and Katie Limited	14988579	WP Lockerbie Limited
14460328	ITV RE Limited	11109287	WP LOD5 Limited
08554937	ITV Shetland Limited	12116457	WP LOD6 Limited
11723826	ITV Spy Limited	13087865	WP Malpractice Limited
02203983	ITV Studios Global Distribution Limited	12116461	WP Pembrokeshire Limited
09498877	ITV TFG Holdings Limited	13087860	WP RM Limited
11107934	ITV The Bay Limited	11109929	WP Save Me 2 Limited
13087693	ITV The Reckoning Limited	12368475	WP Showtrial Limited
12368504	ITV TLC Limited	14653603	WP The Gathering Limited
09498177	ITV Top Class Limited	12368477	WP The Suspect Limited
14048049	ITV Venturer Limited	11109437	WP Vigil Limited

ITV Properties (Jersey) Limited is exempt from audit under article 113 of the Companies Act (Jersey) Law 1991.

ITV plc Company Financial Information

Statement of Financial Position

As at 31 December	Note	2023 £m	2022 £m
Non-current assets
Investments in subsidiary undertakings	iii	3,224	3,224
Derivative financial instruments	vi	2	2
Other receivables		4	-
Deferred tax asset		2	3
		3,232	3,229
Current assets
Amounts owed by subsidiary undertakings due within one year	iv	3,569	2,954
Amounts owed by subsidiary undertakings due after more than one year	iv	97	96
Amounts owed by subsidiary undertakings	iv	3,666	3,050
Derivative financial instruments	vi	5	7
Other receivables		28	17
Cash and cash equivalents		226	197
		3,925	3,271

Borrowings		-	(279)
Amounts owed to subsidiary undertakings	iv	(3,563)	(2,681)
Accruals		(9)	(8)
Derivative financial instruments	vi	(5)	(8)
Current liabilities		(3,577)	(2,976)

Net current assets		348	295

Borrowings	v	(750)	(531)
Derivative financial instruments	vi	(16)	(10)
Non-current liabilities		(766)	(541)

Net assets		2,814	2,983

Share capital	vii	406	403
Share premium	viii	174	174
Other reserves	viii	34	29
Retained earnings	viii	2,200	2,377
Total shareholders' funds		2,814	2,983

The Company has elected to take the exemption under section 408 of the Companies Act 2006 from presenting the parent company Income Statement. The Company's profit for the year was £7 million (2022: profit of £800 million).

Company Statement of Changes in Equity

	Note	Share capital £m	Share premium £m	Other reserves £m	Retained earnings £m	Total £m
Balance at 1 January 2023	vii/viii	403	174	29	2,377	2,983
Total comprehensive income for the year
Profit for the year		-	-	-	7	7
Net gain on cash flow hedges and cost of hedging		-	-	5	-	5
Total comprehensive income for the year		-	-	5	7	12
Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Issue of shares		3	-	-	-	3
Equity dividends		-	-	-	(201)	(201)
Movements due to share-based compensation		-	-	-	16	16
Tax on items taken directly to equity		-	-	-	1	1
Total transactions with owners		3	-	-	(184)	(181)
Balance at 31 December 2023		406	174	34	2,200	2,814

	Note	Share capital £m	Share premium £m	Other reserves £m	Retained earnings £m	Total £m
Balance at 1 January 2022		403	174	31	1,760	2,368
Total comprehensive income for the year
Profit for the year		-	-	-	800	800
Net loss on cash flow hedges and cost of hedging		-	-	(2)	-	(2)
Total comprehensive income for the year		-	-	(2)	800	798
Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Equity dividends		-	-	-	(201)	(201)
Movements due to share-based compensation		-	-	-	19	19
Tax on items taken directly to equity		-	-	-	(1)	(1)
Total transactions with owners		-	-	-	(183)	(183)
Balance at 31 December 2022	vii/viii	403	174	29	2,377	2,983

Notes to the ITV plc Company Financial Information

Note i
Accounting policies

In this
section

This section sets out the notes to the ITV plc Company only financial information. This information forms the basis of the dividend decisions made by the Directors, as explained in detail in note viii below. The notes form part of the financial information.

Basis of preparation

The Company is a qualifying entity as it is a member of the ITV plc Group where ITV plc, the ultimate parent prepares publicly available consolidated financial statements. This financial information was prepared in accordance with Financial Reporting Standard 101 'Reduced Disclosure Framework' ('FRS 101'). The Company is registered in England and Wales.

In preparing this financial information, the Company applies the recognition, measurement and disclosure requirements of international accounting standards in conformity with the requirements of the Companies Act 2006 ('Adopted IFRSs'), but makes amendments where necessary in order to comply with Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.

Exemptions applied

The following exemptions from the requirements of IFRS have been applied in the preparation of these financial information, in accordance with FRS 101:

• Presentation of a Statement of Cash Flows and related notes

• Disclosure in respect of capital management

• Disclosure of related party transactions between wholly-owned subsidiaries and parents within a group

• Disclosures required under IFRS 2 'Share Based Payments' in respect of group settled share-based compensation

• Disclosures required by IFRS 7 'Financial Instruments: Disclosure'

• Certain disclosures required under IFRS 13 'Fair Value Measurement'

• Disclosure of information in relation to new standards not yet applied

The Company proposes to continue to apply the reduced disclosure framework of FRS 101 in its next financial statements.

The financial information has been prepared on a going concern basis.

Changes in accounting policy

New accounting standards, interpretations and amendments that are effective from 1 January 2023 have not had significant impact on the Company's results or Statement of Financial Position.

Accounting standards effective in future periods

The Directors have considered the impact on the Company of new and revised accounting standards, interpretations or amendments that are not yet effective and do not expect them to have a significant impact on the Company's results and Statement of Financial Position.

Accounting judgements and estimates

The preparation of financial information requires management to exercise judgement in applying the Company'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.

Expected credit losses on amounts due from subsidiary undertakings is considered a key source of estimation uncertainty.

Subsidiaries

Subsidiaries are entities that are directly or indirectly controlled by the Company. Control exists where the Company has the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities. The investment in the Company's subsidiaries is recorded at cost.

Foreign currency transactions

Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Foreign currency monetary assets and liabilities at the balance sheet date are translated into sterling at the rate of exchange ruling at that date. Foreign exchange differences arising on translation are recognised in the profit and loss account. Non-monetary assets and liabilities measured at historical cost are translated into sterling at the rate of exchange on the date of the transaction.

Borrowings

Borrowings are recognised initially at fair value including directly attributable transaction costs, with subsequent measurement at amortised cost using the effective interest rate method. The difference between initial fair value and the redemption value is recorded in the profit and loss account over the period of the liability on an effective interest basis.

Derivatives and other financial instruments

The Company uses a limited number of derivative financial instruments to hedge its exposure to fluctuations in interest and other foreign exchange rates. The Company does not hold or issue derivative instruments for speculative purposes.

Derivative financial instruments are initially recognised at fair value and are subsequently remeasured at fair value with the movement recorded in the profit and loss account within net financing costs, except where derivatives qualify for cash flow hedge accounting. In this case, the effective portion of cash flow hedge is recognised in other reserves within equity. The cumulative gain or loss is later reclassified to the profit and loss account in the same period as the relevant hedged transaction is realised. Derivatives with positive fair values are recorded as assets and negative fair values as liabilities.

The fair value of foreign currency forward contracts is determined by using the difference between the contract exchange rate and the quoted forward exchange rate at the balance sheet date.

The fair value of interest rate swaps is the estimated amount that the Company would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the current creditworthiness of swap counterparties.

Third-party valuations are used to fair value the Company's derivatives. The valuation techniques use inputs such as interest rate yield curves and currency prices/yields, volatilities of underlying instruments and correlations between inputs. For financial assets and liabilities classified at fair value through profit or loss, the fair value change and interest income/expense are not separated.

Current tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the year and any adjustment in respect of previous years.

The Company recognises liabilities for anticipated tax issues based on estimates of the additional taxes that are likely to become due, which require judgement. Amounts are accrued based on management's interpretation of specific tax law and the likelihood of settlement. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current tax and deferred tax provisions in the period in which such determination is made.

Deferred tax

The tax charge for the year is recognised in the Income Statement or directly in equity according to the accounting treatment of the related transaction.

Deferred tax arises due to certain temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and those for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities. A deferred tax asset is recognised only to the extent that it is probable that sufficient taxable profit will be available to utilise the temporary difference. Recognition of deferred tax assets therefore involves judgement regarding timing and level of future taxable income.

Share-based compensation

The Company utilises share award schemes as part of its employee remuneration packages, and therefore operates a number of share-based compensation schemes, namely the Deferred Share Award (DSA), Executive Share Plan (ESP) Performance Share Plan (PSP), Long Term Incentive Plan (LTIP) and Save As You Earn (SAYE) schemes.

A transaction will be classed as share-based compensation where the Company receives services from employees and pays for these in shares or similar equity instruments. If the Company incurs a liability based on the price or value of the shares, this will also fall under a share-based transaction. The Company recognises the retained earnings impact of the share-based compensation for the Group as awards are settled in ITV plc shares. The cost of providing those awards is recognised as a cost of investment to the subsidiaries that receive the service from employees.

The fair value of the equity instrument granted is measured at grant date and spread over the vesting period via a charge to the Income Statement with a corresponding increase in equity. The fair value of the share options and awards is measured using either market price at grant date or, for the SAYE scheme, a Black-Scholes model, taking into account the terms and conditions of the individual scheme.

Vesting conditions are limited to service conditions and performance conditions. For performance-based schemes, the relevant performance measures are projected to the end of the performance period in order to determine the number of options expected to vest. The estimate is then used to determine the option fair value, discounted to present value. The Company revises its estimates of the number of options that are expected to vest, including an estimate of forfeitures at each reporting date. The impact of the revision to original estimates, if any, is recognised in the Income Statement, with a corresponding adjustment to equity.

Exercises of share options granted to employees can be satisfied by market purchase or issue of new shares. No new shares may be issued to satisfy exercises under the terms of the DSA.

During the year, all exercises were satisfied by using shares held in the ITV Employees' Benefit Trust. The Trust is accounted for as a separate entity and therefore is only accounted for in the consolidated ITV financial information.

Dividends to shareholders

Dividends payable to shareholders are recognised through equity on the earlier of their approval by the Company's shareholders or their payment. Dividends are distributed based on the realised distributable reserves (within retained earnings) of ITV plc (Company) and not based on the Group's retained earnings.

Note ii
Employees and share-based compensation

Employees

Two (2022: two) Directors of ITV plc (i.e. the Executive Directors) were employees of the Company during the year, both of whom remain employed at the year end. The costs relating to these Directors are disclosed in the Remuneration Report.

Share-based compensation

The weighted average share price of share options exercised during the year was 49.3 pence (2022: 50.6 pence) (excluding nil priced share options). The options outstanding at the year end have an exercise price in the range of nil to 135.20 pence (2022: nil to 130.61 pence) and a weighted average contractual life of one year (2022: two years) for all the schemes in place for the Group.

Note iii
Investments
in subsidiary undertakings

The carrying value of the Company's investments in subsidiary undertakings at 31 December 2023 was £3,224 million (2022: £3,224 million).

The carrying value of the Company's investments in subsidiary undertakings is assessed for impairment on an annual basis. Determining whether the carrying amount has any indication of impairment requires judgement. In testing for impairment, estimates are used in deriving cash flows and the discount rates. The estimation process is complex due to the inherent risks and uncertainties associated with long-term forecasting. The outcome of the value in use calculation including borrowings supports the carrying value of the investments in subsidiary undertakings.

Due to the significant headroom, there is no reasonably possible scenario that would result in a material adjustment to the amounts reported in the financial information.

The Company's review resulted in no impairment for 2023 (2022: no impairment).

Note iv
Amounts
owed (to)/from subsidiary undertakings

The Company operates an intra-group cash pool policy with certain 100% owned UK subsidiaries. The pool applies to bank accounts where there is an unconditional right of set off and involves the daily closing cash position for participating subsidiaries whether positive or negative, being cleared to £nil via daily bank transfers to/from ITV plc. These daily transactions create a corresponding intercompany creditor or debtor, which can result in significant movements in amounts owed to and from subsidiary undertakings in the Company balance sheet. Interest is payable on intra-group cash pool balances at 0.5% above base rate per annum and the balances are repayable on demand. Other loans to subsidiary undertakings are repayable according to contractual terms. The classification of balances as due after more than one year is based on the intention of when the balances are expected to be settled rather than the contractual terms.

The credit risk management practices of the Company include internal review and reporting of the historical credit losses and forward-looking data. The Company applies the IFRS 9 simplified approach in measuring expected credit losses, which use a lifetime expected credit loss allowance for amounts due from subsidiary undertakings, and other receivables.

To measure expected credit losses, amounts due from subsidiary undertakings, and other receivables have been grouped by shared credit risk characteristics. In addition to the expected credit losses, the Company may make additional provisions for the particular receivables if the deterioration of financial position is observed.

During the year, the Company provided for £22 million (2022: £192 million) of doubtful debts for amounts owed by its subsidiary undertakings. £2 million (2022: £11 million) was written back to the Income Statement for provisions of doubtful debts no longer required.

The recoverability of the amounts owed by subsidiary undertakings is assessed on an annual basis or more frequently when an indication of impairment exists. Determining whether there is an indication of impairment requires judgement as the assessment is based on either net assets of the undertaking or forecast future performance.

Note v
Net debt

Keeping
it simple

The Directors manage the Group's capital structure as disclosed in section 4 to the consolidated financial information. Borrowings, cash and derivative financial instruments are mainly held by ITV plc and disclosed in these Company financial information.

Cash and cash equivalents

At 31 December 2023, the Company has a cash position of £226 million (2022: £197 million).

Loans and facilities due within one year

In January 2022, the Company entered into a new syndicated £500 million Revolving Credit Facility (RCF) to meet short-term funding requirements which was undrawn at 31 December 2023. The original terms of the RCF ran until January 2027; however, the Group took the opportunity to request an extension for one year on the first and second anniversary of the facility. As a result, £83 million of the RCF is committed until January 2028 and £417 million is committed until January 2029. The RCF was undrawn as at 31 December 2023 (2022: drawn-down by £50 million).

The €259 million Eurobond was repaid in December 2023. The sterling-equivalent repayment value, totalling £233 million, had been hedged using FX forward rate agreements.

Loans and loan notes due after one year

The Company has a €600 million Eurobond in issue at a fixed coupon of 1.375%, which matures in September 2026 and has been swapped back to sterling (£533 million) using a number of cross-currency interest rate swaps. The resulting fixed rate payable in sterling is c.2.9%.

A new £230 million term loan was taken out in the year, and was fully drawn-down in December 2023 in order to repay the €259 million Eurobond. The term loan matures in July 2027. Interest on the loan is determined as an aggregate of compounded SONIA plus a margin.

See section 4.1 of the Group Notes for further details of borrowings and available facilities.

Note vi
Managing market risks: derivative financial instruments

What is the value of our derivative financial instruments?

	Assets 2023 £m	Liabilities 2023 £m
Current
Foreign exchange forward contracts and swaps - fair value through profit or loss	5	(5)
Non-current
Cross-currency interest swaps - cash flow hedges	-	(15)
Foreign exchange forward contracts and swaps - fair value through profit or loss	2	(1)
	7	(21)

Assets
2022
£m

Liabilities
2022
£m

Current

Foreign exchange forward contracts and swaps - fair value through profit or loss

(7)

Foreign exchange forward contracts and swaps - cash flow hedges

(1)

Non-current

Cross-currency interest swaps - cash flow hedges

(8)

Foreign exchange forward contracts and swaps - fair value through profit or loss

(2)

(18)

The Company employs cross-currency interest rate swaps to exchange the principal and interest coupons in a debt instrument from one currency to another.

Currency risk

The Company's foreign exchange policy is to use forward foreign exchange contracts and cross-currency interest rate swaps both to manage foreign currency cash flow timing differences and to hedge foreign currency denominated monetary items.

Cash flow hedges

In order to fix the sterling cash outflows associated with the commitments and interest payments - which are mainly denominated in euros - the Company has taken out forward foreign exchange contracts and cross-currency interest rate swaps for the same foreign currency amount and maturity date as the expected foreign currency outflow.

The amount recognised in other comprehensive income during the year all relates to the effective portion of the revaluation loss associated with these contracts. A cumulative loss of £26 million (2022: £37 million of cumulative gain) was recycled to the Consolidated Income statement to off-set movements on the hedged item, a residual £7 million loss (2022: £3 million loss) remained on the income statement which were not offset.

Under IFRS 9, the Company has adopted the 'cost of hedging' approach which allows the recognition of the value of the currency basis at inception of the hedge to be recorded on the Statement of Financial Position and amortised through net financing costs in the Income Statement over the life of the bond. Any mark-to-market change in fair value of the currency basis is recognised in 'cost of hedging' in the Statement of Comprehensive Income.

Undiscounted financial liabilities

The Company is required to disclose the expected timings of cash outflows for each of its derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows (including interest), so will not always reconcile with the amounts disclosed on the Statement of Financial Position.

At 31 December 2023*	Carrying value £m	Total contractual cash flows £m	Less than 1 year £m	Between 1 and 2 years £m	Between 2 and 5 years £m	Over 5 years £m
Non-current and current
Cross-currency swaps - cash flow hedges
Inflow	-	542	7	7	528	-
Outflow	(15)	(580)	(16)	(16)	(548)	-
Foreign exchange forward contracts and swaps - fair value through profit or loss
Inflow	7	614	514	100	-	-
Outflow	(6)	(614)	(514)	(100)	-	-
	(14)	(38)	(9)	(9)	(20)	-

At 31 December 2022*	Carrying value £m	Total contractual cash flows £m	Less than 1 year £m	Between 1 and 2 years £m	Between 2 and 5 years £m	Over 5 years £m
Non-current and current
Foreign exchange forward contracts and swaps - cash flow hedges
Inflow	-	233	233	-	-	-
Outflow	(1)	(236)	(236)	-	-	-
Cross-currency swaps - cash flow hedges
Inflow	-	560	7	7	546	-
Outflow	(8)	(596)	(16)	(16)	(564)	-
Foreign exchange forward contracts and swaps - fair value through profit or loss
Inflow	9	570	403	136	31	-
Outflow	(9)	(570)	(403)	(136)	(31)	-
	(9)	(39)	(12)	(9)	(18)	-

* The Company is jointly and severally liable for VAT at 31 December 2023 of £43 million (31 December 2022: £35 million)

Note vii Share capital		Allotted, issued and fully paid 2023 £m	Allotted, issued and fully paid 2022 £m
	Allotted, issued and fully paid ordinary shares of 10 pence each	406	403
	Total	406	403

The Company's ordinary shares give shareholders equal rights to vote, receive dividends and to the repayment of capital.

The Company issued 27 million ordinary shares in the year to the ITV Employees' Benefit Trust (EBT) to satisfy the share-based compensation awards. See note 4.8 for further details.

Note viii
Equity and dividends

Keeping
it simple

ITV plc is a non-trading investment holding company and derives its profits from dividends paid by subsidiary companies.

The Directors consider the Company's capital structure and dividend policy at least twice a year ahead of announcing results and do so in the context of its ability to continue as a going concern, to execute the strategy and to invest in opportunities to grow the business and enhance shareholder value.

The dividend policy is influenced by a number of the principal risks that could have a negative impact on the performance of the Company.

In determining the level of dividend in any year, the Directors follow the dividend policy and also consider a number of other factors that influence the proposed dividend and dividend policy, including:

· The level of retained distributable reserves in ITV plc the Company

· Availability of cash resources (as disclosed in note 4.1 to the consolidated financial information) and

· Future cash commitments and investment plans, to deliver the Company's long-term strategic plan

· Consideration of the factors underlying the Directors' viability assessment and

· The future availability of funds required to meet longer-term obligations including pension commitments.

Equity

The retained earnings reserve includes profit after tax for the year of £7 million (2022: £800 million), which includes dividends of £nil million from subsidiaries in 2023 (2022: £980 million).

The recoverability of the amounts owed by subsidiary undertakings is assessed on an annual basis or more frequently when circumstances indicate that the carrying value may be impaired. Determining whether there is an indication of impairment requires judgement as the assessment is based on either net assets of the undertaking or forecast future performance.

The share premium of £174 million remains unchanged in the year. Other reserves of £34 million (2022: £29 million) comprises Merger reserves of £36 million (2022: £36 million) which relate to share buybacks in prior years and Translation reserves with net losses of £2 million (net losses of £7 million) which relate to cash flow hedges and cost of hedging.

Dividends

The Board recognises the importance of the ordinary dividend to ITV shareholders. Reflecting its confidence in the business and its strategy, as well as the continued strong cash generation, the Board proposes a final dividend of 3.3p (2022:3.3p), giving a full year dividend of 5.0p (2022: 5.0p) per share. In 2023, £201 million of dividends were paid (2022: £201 million), representing a final 2022 dividend of 3.3p per share and an interim 2023 dividend of 1.7p per share.

Note ix
Contingent liabilities

Keeping
it simple

A contingent liability is a liability that is not sufficiently certain to qualify for recognition as a provision where uncertainty may exist regarding the outcome of future events.

As previously reported, on 12 July 2022, the UK Competition and Markets Authority (CMA) opened an investigation into certain conduct of ITV and other named companies in the sector relating to the production and broadcasting of sports content in the United Kingdom. The investigation is at an early stage and the CMA has confirmed it is currently undertaking further investigation until at least March 2024, subsequent to which ITV anticipates it will receive additional detail regarding any future steps.

Under a Group registration, the Company is jointly and severally liable for VAT at 31 December 2023 of £43 million (31 December 2022: £35 million).

The Company has guaranteed certain performance and financial obligations of subsidiary undertakings.

Note x
Capital and other commitments

The Company enters into guarantee contract to guarantee the performance and/or financial obligations of other companies within the Group. In this respect, the Company treats these guarantee contracts as a contingent liability until it becomes probable that the Company will be required to make a payment under the relevant guarantee.

The Company has a £300 million bilateral loan facility which matures on 30 June 2026. Utilisation requests are subject to the lender's ability to source ITV Credit Default Swaps (CDS) in the market at the time the utilisation request is made. The facility remains free of financial covenants. At 31 December 2023, the facility was undrawn.

During 2023, the Group secured £100 million of committed funding via a new bilateral RCF, which matures in December 2028. The terms and conditions, including financial covenants but not emissions targets, are aligned to the £500 million RCF facility. The facility is currently undrawn.

There are no capital commitments at 31 December 2023 (2022: none).

Note xi
Related party transactions

Keeping
it simple

The related parties identified by the Directors include amounts owed to and from subsidiary undertakings that are not wholly owned within the Group as well as transactions with key management. The Company is a holding company with no commercial activity.

To enable the users of the financial information to form a view about the effects of related party relationships on the Company, we disclose the Company's transactions with those during the year.

Transactions with subsidiary undertakings that are not wholly owned

The amounts owed by and to these related parties at the year end were:

	2023 £m	2022 £m
Amounts owed by subsidiary undertakings that are not wholly owned	42	55
Amounts owed to subsidiary undertakings that are not wholly owned	(24)	(4)

Amounts owed by subsidiary undertakings that are not wholly owned relate mainly to funding provided to production companies in our Studios division.

Amounts owed to subsidiary undertakings that are not wholly owned, relate mainly to amounts owed to 3sixtymedia Limited and World Productions Limited.

Transactions with key management personnel

Key management consists of ITV plc Executive Directors.

Key management personnel compensation, on an accounting basis, is as follows:

	2023 £m	2022 £m
Short-term employee benefits	3	3
Share-based compensation	2	3
	5	6

Total emoluments and gains on share options received by key management personnel in the year were:

	2023 £m	2022 £m
Emoluments	2	3
Gains on exercise of share options	1	-
	3	3

^{^[1]} Reconciliation between adjusted and statutory results is provided in the APM section

^{^[2]} Statutory operating profit before interest, tax, amortisation and exceptional items

^{^[3]} See APM section for further details

^{^[4]} Source: Ampere Analysis - ITVS addressable market

^{^[5]} Digital revenues include digital advertising, subscription and other digital revenue. Refer to Note 5 for breakdown.

^{^[6]}Refer to APMs for key adjustments to EBITA and adjusted EBITA

[7] Average annual growth rate from 2021

[8] Refer to APMs for detail on our adjusted measures.

[9] A full reconciliation between our adjusted and statutory results is provided in the APMs section

[10] Our APMs are defined within the APMs section of this report. It also includes a full reconciliation between our adjusted and statutory results

[11] Spin‑offs such as Love Island Games, are considered distinct from the original format (i.e. Love Island) for the purpose of this indicator

[12] Total digital revenue includes revenue from digital advertising, subscriptions, linear addressable advertising, digital sponsorship and partnerships, ITV Win and any other revenues from digital business ventures

[13] Total streaming hours is the total number of hours viewers spent watching ITV across all streaming platforms, reported at a device level. This figure includes both ad-funded and subscription streaming. In 2022, full year results, total streaming hours were reported as 1,139 million hours, which included some estimates of total streaming viewing from third-party data providers and has been updated to reflect more recently available and accurate data

[14] Monthly active users captures the average number of registered users throughout the year who accessed our owned and operated on-demand platforms each month

[15] UK subscribers are users of ITVX's premium tier and the BritBox UK standalone service. It includes those who pay ITV directly, those who are paid for by an operator, and free trialists. Before the launch of ITVX in December 2022, this also included ITV Hub+ subscriptions.

[16] The share of top 1,000 commercial broadcast TV programmes is measured by BARB based on viewing figures. This includes TV viewing from transmission and seven days post-transmission on catch up, as well as six weeks prior to the transmission window. It excludes programmes with a duration of <ten minutes. This metric is calculated as a 12-month rolling average to normalise seasonal scheduling

[17] Share of commercial viewing is the total viewing of audiences over the period achieved by ITV's family of channels as a proportion of all ad-supported commercial broadcaster viewing in the UK. ITV Family includes ITV, ITV2, ITV3, ITV4, ITVBe, CITV, ITV Breakfast, CITV Breakfast and associated 'HD' and '+1' channels. Note that CITV closed down and became a fully on demand service on ITVX in September 2023

[18] We measure performance through a range of metrics, particularly through our APMs and KPIs, as well as statutory results, all of which are set out and defined in the APMs section

[19] The full year 2022 comparative for total streaming hours has been restated from 1,139 million due to it including some estimates of total streaming viewing from third-party data providers. This has since been updated to accurately reflect the actual outcome

[20] ITV / YouGov - base: 4,659 Nat Rep UK Adults - Dec 2023

[21] ITV's share of viewing as a proportion of all commercial ad-funded channels in the UK

[22] Includes revenue from digital advertising, digital sponsorship and our subscription services

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ITV (ITV)

Monday, 29th April 2024

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