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ITV PLC (ITV)

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Wednesday 07 September, 2005

ITV PLC

Interim Results

ITV PLC
07 September 2005







             ITV plc interim results for six months to 30 June 2005



                        Building on multichannel success

                 Interim operating profit* doubled in two years



Financial highlights



•    Revenue before joint ventures up 9% at £1,044 million

•    Revenue before joint ventures, and excluding ITV1 advertising and
     sponsorship revenues, up 36%

•    Operating profit* up 65% at £201 million

•    Profit before tax* up 60% at £205 million

•    EPS* up 46% at 3.5 pence

•    Interim dividend up 20% at 1.32 pence with intention for greater
     increase in final dividend

•    Cash generated from operations £196 million





Operating highlights



•    Advertising revenue ('NAR') in H1

     -    ITV plc total NAR up 3.4% including GMTV

     -    ITV2 and ITV3:

          -   NAR doubled on 2004

          -   Delivered half of all multichannel advertising revenue growth

     -    NAR from ITV1, ITV2, ITV3 and ITV News down 0.3%



•    Multichannel strategy delivering ratings growth

     -    ITV total commercial viewing share in multichannel homes up 5% to
          33.7%

     -    ITV4 launching 1 November 2005

     -    Launch of ITV children's channel in 2006



•    Modernising regulation

     -    Digital licences completed

     -    63% (£135 million) reduction in 2005 licence fees

     -    Licence fees to reduce to £4 million at digital switchover

     -    Reduction in PSB requirements for religion, children and regional
          non-news





•    Driving digital

     -    Additional DTT channel capacity contracted from Crown Castle

     -    136 million acquisition of SDN - ITV now operates 38% of DTT
          commercial capacity

     -    Additional DSat channel capacity contracted from SES

     -    DSat transmissions to be un-encrypted

     -    Working with BBC on free satellite service



•    Granada

     -    The most cost efficient deliverer of commercial impacts for ITV1

     -    Production turnover from continuing operations up £19 million

     -    Seven series produced for US television

     -    Delivered seven of ITV1's top ten ranking programmes



•    ITV Consumer

     -    Mobile portal launched as entertainment destination

     -    ITV Local broadband trials in Hastings and Brighton



•    Costs and operating margin

     -    On track for early delivery of £120 million of merger savings

     -    Operating margin increased by six percentage points



•    Pension Scheme

     -    £325 million lump sum funding will significantly reduce actuarial
          funding valuation deficit with expected investment returns enabling 
          the scheme to move towards a fully funded basis


Outlook for quarter to September 2005



•    Strong Autumn schedule - additional investment in programmes

•    Advertising revenue performing better in Q3 than in the first half

     -    ITV plc total NAR up 4.3% including GMTV

     -    NAR from ITV2 and ITV3 up 87%

     -   NAR from ITV1, ITV2, ITV3 and ITV News up £2 million



Commenting, Charles Allen, Chief Executive of ITV said:


'These results show very clearly that ITV has rapidly come of age as a balanced
and diverse broadcaster.  ITV is now a genuine family of channels united under a
strong brand and appealing to a broadening demographic profile.


'Revenues from operations outside ITV1 advertising and sponsorship are growing
strongly and were up by 36% to £317 million in the period; representing 30% of
total revenue.  ITV2 and ITV3 are helping us to grow our overall share of
commercial impacts in multichannel homes and the launch of ITV4 and an ITV
children's channel will broaden our reach still further.  We are confident that
ITV has the diversity and balance of quality channels to provide a solid
platform for growth.'


* from continuing operations before amortisation and material non-recurring
items



For further enquiries please contact:



ITV plc
Tel: 020 7620 1620



Press enquiries

Charles Allen                        -  Chief Executive
Henry Staunton                    -  Finance Director
Brigitte Trafford                   -  Communications Director



Analysts' enquiries

James Tibbitts                      -  Company Secretary
Georgina Blackburn             -  Head of Investor Relations
Caroline Bailey                     -  Investor Relations Analyst



Citigate Dewe Rogerson

Tel: 020 7638 9571



Jonathan Clare
Simon Rigby
Anthony Kennaway



Website: www.itv.com, investor information www.itvplc.com
An analysts presentation will be held at 09.30hrs on 7 September 2005 at the
City Presentation Centre, 4 Chiswell Street, London EC1Y 4UP



Chairman's statement

During the first half of 2005 we have made excellent progress in shaping our
business for the digital age.

Our profits are significantly ahead of last year with adjusted basic earnings
per share (before amortisation and material non-recurring items) up by 46% on
the comparable period last year to 3.5 pence per share. We have decided to
increase the interim dividend this year by 20% to 1.32 pence per share, payable
on 9 January 2006 to shareholders on the register on 11 November 2005.  The
ex-dividend date will be 9 November 2005. As we have previously outlined, we
intend to rebalance over the medium term, the respective levels of interim and
final dividend, such that the interim dividend represents approximately
one-third of the total.  At the full year, the Board therefore intends, in the
absence of any unforeseen circumstances, to recommend an increase in the final
dividend by more than the increase in the interim dividend.

ITV is proud to be celebrating 50 years as the UK's leading commercial
broadcaster this year.  Since the historic opening broadcast in September 1955
the channel has produced more than 70% of the nation's most popular television
programmes.  Programming therefore is at the heart of the ITV50 celebrations
this autumn.  The channel will broadcast a series of special programmes
including Avenue of the Stars and a major television event in which viewers will
select their favourite shows from ITV's 50 Greatest Shows. Other programming
highlights include star studded dramas, Ant and Dec's Gameshow Marathon and
special news and sport events.  Off screen the anniversary will be marked by the
release of a special collection of ITV50 stamps from the Royal Mail and a major
three year project where ITV viewers will determine the allocation of £65
million of Lottery funds.


Broadcasting

On 29 June 2005 Ofcom confirmed the new financial terms for our Channel 3
licences. Our cash payments have reduced by approximately £135 million, but we
still are paying a very substantial amount.

Our strategy of developing our multichannel offer is progressing well. ITV2 and
ITV3 have continued to beat both internal targets and external forecasts for
ratings and for revenues. We aim to match and build on their success with the
launch of ITV4 in November.

We have acquired additional broadcasting bandwidth on the digital terrestrial
television platform which will ensure that we have transmission capacity for our
channels following digital switchover.


New revenue streams

We have established a dedicated consumer team to provide a clear focus on the
creation of new revenue streams through different platforms, including mobile
and broadband, and through new channels including interactive and transactional
elements. The first two elements of this work are already being delivered with
our mobile portal now in operation and with the first trials of an ITV local
broadband service planned during the coming months.


Pension schemes

At the Annual General Meeting in May I said that we expected to address the
funding deficit in our defined benefit pension schemes before the end of the
calendar year.  Many defined benefit arrangements in the UK have a funding
deficit due to a combination of factors, of which the most significant include
the effect of poor market performance at the beginning of the decade and the
effects of increased life expectancy with the current low level of long-term
real interest rates, both of which raise the net present value of liabilities.

We have decided to address this issue by making a £325 million lump sum
contribution into our schemes.  Based upon an analysis carried out for the
Company by our actuaries, we expect that this sum, together with future
investment returns on the schemes' assets, will enable the schemes to move
towards being fully funded (on an ongoing basis) over an appropriate period of
time.

This substantial injection of funds will give our pension scheme members greater
confidence in their individual positions and should be seen as a proactive step
in administering our defined benefit arrangements.


People

Finally, I would like to extend the Board's thanks to our executives and all our
colleagues for their contribution to our results. They have continued to improve
the efficiency of our business and have delivered the full merger savings. The
success of our new channels is clear evidence of the strength and popularity of
our programmes.

The Board and I look forward to working with our colleagues as we continue to
structure the business to take increasing advantage of our undoubted business
strengths in the digital age.




Sir Peter Burt
Chairman





Operating review



Introduction

Following the completion of the merger we are now focused on our current
strategic initiatives to drive the business forward.

We have achieved a substantial improvement in our first half results. Our
revenue for the six months to 30 June 2005 was up 9% at £1,044 million. Revenue,
excluding advertising revenue and sponsorship from our ITV1 channel, was up by
36% to £317 million and now represents over 30% of our total revenue.  As
explained below, this was driven by strong performances from our new channels
ITV2 and ITV3.  Our operating profit before amortisation and material
non-recurring items was up 65% at £201 million compared to the same period in
2004 and has doubled compared to the same period in 2003 prior to the merger.
Profit before tax, amortisation and material non-recurring items was up by 60%
at £205 million on the same basis.

We remain ahead of schedule on the timing of delivery of the £120 million of
merger savings and are continually seeking opportunities to improve the
operating efficiency of the ongoing business. Clear evidence of this can be seen
in the improving margin, with operating profit, before amortisation and material
non-recurring items, as a percentage of revenue up by more than 6 percentage
points. Our cash flow has, once again, been strong in the first half with cash
generated from operations of £196 million. A detailed financial review is
included in this report.


Modernise regulation

2005 has already seen a significant move for us with the setting of new
financial terms for our Channel 3 licences. In 2004 the combined licence
payments (including GMTV) were £215 million net of the digital rebate. In 2005
we expect that figure to be less than £80 million, a reduction of over 60%. The
payment will continue to fall as digital penetration increases and will reduce
to around £4 million in current terms by the time analogue transmissions cease.
The reduced financial terms reflect the declining value of the analogue
broadcasting spectrum and will allow us to continue to invest in high quality
programming across our family of channels and in our digital strategy.

In both our provision of Public Service Broadcasting and Ofcom's forthcoming TV
advertising market review, ITV will continue to look for more appropriate
regulations for the multichannel world in which we now operate.


UK advertising market

ITV plc's net advertising revenue was up 3.4% in the first six months of 2005
reflecting strong growth in our digital channels (ITV2 and ITV3), up by more
than 100% on 2004, and a first time contribution from GMTV. The net advertising
revenue of our eleven ITV1 licences was down by 3.5%. This was due to several
factors including the Contract Rights Renewal (CRR) remedy. CRR, agreed as a
condition of the merger, ties our ITV1 share of the UK TV advertising market to
the ITV1 share of commercial viewing. Our commercial impact performance is
affected as viewers move to digital platforms (Freeview, cable and satellite)
where there is more channel choice and the viewing levels of all the five main
terrestrial channels are inevitably lower than in analogue homes. As digital
viewing approaches saturation this effect will reduce.

In the second quarter, ITV1's advertising performance was influenced by the
general election, which led to depressed advertising in part due to reduced
Government spending. This accentuated the already tough comparisons to 2004,
when the European Football Championship attracted significant advertising
revenue. Without any major sporting event this year we have seen a reduction in
first half revenue from cars, finance and alcoholic drinks which traditionally
advertise around major sporting events.

The category which has grown most is food with spend up by 25% in the first
half. Entertainment and telecoms have also seen good year-on-year growth.

ITV continues to promote the benefits of television advertising. This includes
new digital opportunities, such as interactive advertising. Examples of this
work are our 'Values of Fame' campaign and our 'Fame Metrics' initiative which
demonstrates that brand fame is linked to company profitability. These
initiatives enable us to engage with our advertisers and show them the benefits
of TV advertising to improving both consumer loyalty and earnings.


Driving multichannel

In the first half, the viewing share of our ITV channels grew on both digital
terrestrial and digital satellite platforms. ITV1 remains the most popular
channel in peak time and continues to maintain its mass market leadership
against a backdrop of increasing audience fragmentation. It is the most watched
commercial channel across all multichannel homes with an 18.4% share of
individuals in the first half, increasing to 22.3% in Freeview homes. We have
had notable successes such as the Champions League Final between Liverpool and
AC Milan which peaked close to 15 million viewers at the penalty shoot out,
ranking as the highest peak audience for ITV1 since Euro 2004.

ITV2 and ITV3 viewing shares continue to grow strongly. By share of adult
commercial impacts ITV2 and ITV3 are the first and third largest commercial
digital channels in multichannel homes over the first half of the year, and
these two channels alone contributed 55% of the growth in multichannel adult
commercial impact volume for the approximately 200 digital channels during that
period.  ITV2 and ITV3 also accounted for half of the total multichannel
advertising revenue growth over the first half of the year.  The success of our
channels results largely from our strategy of scheduling the separate channels
to attract different demographic audiences and actively using cross promotion of
their complementary schedules.  ITV2's programming has a 16-34 audience profile
whilst ITV3 targets a 35+ demographic.  Amongst ITV2's successes have been the
Tour de France, UEFA Champions League and Extra Time, a brand extension of
Footballers' Wives.

The viewing share for individuals of our combined ITV channels in multichannel
homes in the first half was 21.9%, up by 2% on the same half year period three
years ago. This is a considerable achievement given the ever increasing number
of channels available.

We remain firmly on track to achieve at least our target of £150 million pa of
multichannel revenue by the end of 2007. We are now looking at opportunities to
invest in US acquired programming and other popular material for the channels to
drive their viewing shares even harder.


Freeview and free satellite service

Freeview continues  to be the digital platform on which ITV performs best, and
is by far the fastest growing platform accounting for approximately 75% of all
new digital homes.  It is therefore a strategic objective for us to support the
growth of Freeview.

In April we announced the acquisition of SDN (making ITV the operator of 38% of
the commercial capacity on DTT excluding the BBC) at a total cost of £136
million. SDN owns the licence to operate digital terrestrial Multiplex A which
currently broadcasts ten channels on Freeview. This acquisition, which provides
a new revenue stream for ITV, is immediately earnings enhancing (before
amortisation of intangible assets), and is an exciting step forward in our
digital strategy. It gives ITV the potential for additional broadcast capacity
from 2010 and the prospect of advances in digital compression technology
allowing an extra channel to be added to the multiplex in 2007.

We are working with the BBC on the marketing of a free satellite service and
will be moving to decrypt our digital satellite transmissions for ITV1, ITV2 and
ITV3 so that they are freely available to viewers equipped with digital
satellite receivers.


Content for the future

Our production business continues to focus on delivering high quality
programming and excellent value for broadcasters. In the first half of 2005
Granada productions have accounted for seven of the top ten highest rating
programmes on ITV1. Granada productions are the most efficient source of
programmes for the channel having delivered 55% of adult commercial impacts
during network programming in 2004 in return for just 40% of the network
programme budget.

Our soaps have been performing strongly with Coronation Street winning its
timeslot the whole year. Emmerdale has been on a roll and on 17 March this year
celebrated its 4,000th episode with an hour-long special. Emmerdale has
consistently been closing the ratings gap on the BBC's EastEnders, and in some
weeks has beaten EastEnders outright.

Diamond Geezer was a great success attracting almost 10 million viewers, a 44%
share of adults. Heartbeat remains the top performing long-running drama series
on television consistently achieving an audience share of over 35%.

In entertainment programming the ITV1 success in the first half was Granada's
Ant & Dec's Saturday Night Take Away which returned an average 41% viewing share
of 16-34s over the series.

Our international production business has also seen considerable success.
Revenue was up by 26% as we delivered a number of series to our US Network
customers. These include Nanny 911 and Hell's Kitchen for Fox Broadcasting
Network, Celebrity Fit Club for VH1 and Hit Me Baby One More Time for NBC.

International secondary sales of our programmes to other broadcasters continued
to be a source of high margin revenue with the top selling title being Agatha
Christie's Poirot generating £2.4 million in the six months. As well as
producing Nanny 911 in America, we hold the international rights to that
production which we have sold to 20 major territories and we have also licensed
the programme format. We have made further progress on video-on-demand trials
and are in the process of assessing the revenue opportunities for downloadable
archives via broadband. We have expanded our DVD sales, both through sales to
the public and by leasing the rights to newspapers and other publications
throughout the UK. Granada International have also been winning mandates to
represent third parties.


News

ITV's commitment to investment in the latest news technology has resulted in
both improved ratings for our early evening regional bulletin and cost savings.
We have continued to install new digital TV centres and digital news rooms, with
Central, Meridian, Manchester, Newcastle and Leeds completed so far this year
and Norwich to be fully equipped before the year end.

Editorial content continues to benefit from a single news management with ITN
achieving a number of notable news scoops. This was particularly evident with
ITV News' 48 hour coverage of the 2012 Olympic bid and the London bombings on 7
July when we were able to bring our viewers the top stories ahead of our
competitors through our ability to co-ordinate the deployment of both network
and regional resources. ITV has also won 'News Programme of the Year' at the
Broadcast Awards and Alastair Stewart won 'Presenter of the Year' at the RTS
Journalism Awards 2005.


New revenue streams

The role of ITVC, our new Consumer team, is to build ITV's non Free-to-Air
business, with a focus on direct consumer revenues.

We have appointed Jeff Henry as Chief Executive to drive these opportunities.
His experience in running pay television operations is being complemented by a
team with experience in other fields that will help us to develop ways to
exploit our content and aggregation skills through mobile, broadband and new
technologies such as DVB-H and other consumer devices.

ITVC has launched our mobile portal in three different versions: WAP, Flash and
Java, making it the most accessible TV mobile portal. Driven primarily by ITV
content, it will provide up-to-date news and weather services, TV guides and
entertainment stories. We are planning trials of a broadband based ITV Local
Service with news, travel, classified advertising and other transactional
services for towns and cities in our regions.

We have an enormous quantity of popular library material and high rating current
productions which lend themselves to the creation of must-view content for
delivery direct to consumers across a variety of platforms.


Outlook


ITV channels

The ITV1 2005 Autumn schedule focuses on ITV's core strengths of big name stars,
strong programme brands and must-see entertainment.

In Drama we will see an exciting selection of series and two-part programmes
starring high-profile faces such as Ray Winston, Robert Carlyle, Robert Lindsay,
Rik Mayall, Caroline Quentin, Sarah Lancashire, Tamzin Outhwaite and Matthew
Kelly and the return of David Jason in A Touch of Frost and Martin Clunes in Doc
Martin.

In Entertainment I'm A Celebrity Get Me Out Of Here will be returning for a new
series in November, fronted by Ant and Dec. X Factor, featuring Simon Cowell,
Louis Walsh and Sharon Osbourne has also returned to the screen and Michael
Parkinson's hugely successful Saturday night chat show will follow later in the
Autumn. We have also secured the rights to the network premiere of Harry Potter
and the Chamber of Secrets and have a number of new movie deals starting in
early 2006 with the Hollywood studios.

Sport remains a key area of focus for ITV1 and we look forward to screening the
UEFA Champions League and the FIFA football World Cup in 2006 and have secured
the FIFA football World Cup rights for 2010 and 2014. Boxing has now returned to
ITV with a two year contract signed with Frank Warren and we will continue to
screen the best of Formula 1 action.

We are looking forward to the launch of ITV4 which will target a male
demographic, one which is particularly sought after by advertisers. ITV4 will be
an entertainment channel showcasing a mix of brand new US drama, top end British
drama, comedy, movies, sport, sci-fi and factual programming. We will also be
launching an ITV children's channel in the next six months. This channel will be
the only commercial children's channel available on all platforms, using the
rich heritage of CiTV's multi-award winning programmes. The channel will also
premiere new programmes and cover every genre.


Advertising

Advertising revenue in the third quarter is stronger than in the first half. ITV
plc's advertising revenue in the quarter to 30 September 2005 will be up
approximately 4% on the same period last year including a first time
contribution from GMTV. ITV plc's combined advertising revenue from our
channels, excluding GMTV, over that period will be up by approximately 0.7% on
the same period last year.

I would particularly like to join with Sir Peter Burt in expressing our thanks
to everyone in ITV for their continuing dedication to bringing the best
television to our screens and for their contribution to delivering these results
for our shareholders.


Charles Allen
Chief Executive



Financial review

Statutory results for the six months ended 30 June 2005

Revenue for the six months to 30 June 2005 was up 9% at £1,044 million (2004:
£956 million). Operating profit increased to £150 million (2004: £39 million)
with underlying operating profit before amortisation and material non-recurring
items up 65% at £201 million (2004: £122 million). Profit before tax,
amortisation and material non-recurring items increased by 60% to £205 million
(2004: £128 million). Profit before tax includes a £9 million gain on sale of
property, principally arising from the sale of the Nottingham Studios.

Tax was charged on profits before amortisation and material non-recurring items
at an effective rate of 28% (2004: 27%).

Adjusted basic earnings per share before amortisation and material non-recurring
items were up 46% at 3.5 pence (2004: 2.4 pence).


Pro forma result for six months ended 30 June 2004

For the six months ended 30 June 2004 pro forma results were prepared to show
the results of ITV as if the merger between Granada plc and Carlton
Communications Plc had taken place before the start of that period.  In summary,
and adjusted for IFRS, these are:
                                                                               Published  Pro forma  Published
                                                                                    2005       2004       2004

                                                                                      £m         £m         £m
Revenue                                                                            1,044        986        956
Operating margin EBITA*                                                              201        123        122
Profit before tax*                                                                   205        128        128
Operating margin (EBITA* as a percentage of revenue)                               19.3%      12.5%      12.8%
Adjusted* earnings per share - basic                                                3.5p       2.3p       2.4p

* Pre amortisation and material non-recurring items

On this basis, revenue for the six months to 30 June 2005 was up 6% at £1,044
million (2004: £986 million).  Operating profit before amortisation and material
non-recurring items was up 63% at £201 million (2004: £123 million).  Profit
before tax, amortisation and material non-recurring items increased by 60% to
£205 million (2004: £128 million).

The increase in revenue reflects movements in net advertising revenue (NAR) as
follows:
                                                                                    2005       2004      Change

                                                                                      £m         £m           %
ITV1                                                                                 710        736       (3.5)
ITV2, ITV3, ITV News, Men & Motors                                                    48         24         100
GMTV                                                                                  28          -           -
Total NAR                                                                            786        760         3.4



The increase in operating profit reflects the reduction in licence fees as
follows:
                                                                                    2005       2004      Saving

                                                                                      £m         £m          £m
PQR Levy                                                                             103        132          29
Cash bid payment                                                                       2         33          31
Digital licence rebate                                                              (65)       (64)           1
Total                                                                                 40        101          61



Dividend

The interim dividend is increased by 20% to 1.32 pence per share (2004: 1.1
pence). This is covered 2.65 times by the earnings per share (before
amortisation and material non-recurring items) of 3.5 pence.



Acquisition of businesses

During the period, ITV acquired SDN at a total cost of £136 million. As required
by IFRS 3 (Business combinations) SDN's assets have been adjusted to reflect the
fair value of the acquired net assets at the date of acquisition by ITV.
Intangible assets of £82 million (in respect of the multiplex licence and
customer contracts) have been recognised along with an associated deferred tax
liability of £25 million. Goodwill is £80 million. Further details are given in
note 6 to the accounts.


Net debt

The principle movements in net debt during the period are shown in the table
below:
                                                                                                             £m
Net debt at 31 December 2004                                                                              (280)

Adjustment for IAS 32 and IAS 39 (see note 9)                                                              (47)
Net debt at 1 January 2005 (restated)                                                                     (327)
Cash generated from operations                                                                              196
Acquisition of SDN                                                                                        (136)
Taxation paid                                                                                              (66)
Dividends paid                                                                                             (45)
Other movements                                                                                             (6)

Net debt at 30 June 2005                                                                                  (384)



Cash generated from operations was £196 million (2004: £207 million) reflecting
the strong trading in the six months to 30 June 2005. This is after a net
outflow of £47 million cash in respect of licence fees in excess of the income
statement charge for the period. Excluding this, the working capital inflow
would be £48 million and cash generated from operations, £243 million.

The total cash outflow to acquire SDN was £136 million. Taxation paid of £66
million includes payments on account during the period and payment following the
settlement of prior years' Group relief with United Business Media plc which had
been previously provided for. The 2004 interim dividend of £45 million was paid
at the beginning of 2005.

During the period €125 million of the Exchangeable bond was repaid.



International Financial Reporting Standards (IFRS)

ITV plc adopted IFRS on 1 January 2005 and has presented its accounts under IFRS
for the first time in this report. The basis of preparation, along with ITV
plc's significant accounting policies, is set out in note 11. The 2004
comparative financial information has been restated and represented under IFRS.
Details of this conversion are given later in this report and further
information is given in ITV plc's Preliminary International Financial Reporting
Standards Financial Statements for 2004 which is available on the corporate
website www.itvplc.com.



Consolidated income statement
                                                                                             2005         2004
For the six months ended 30 June:                                               Note           £m           £m

Group and share of joint ventures' revenue                                                  1,073          991
Less share of joint ventures' revenue                                                        (29)         (35)

Revenue                                                                                     1,044          956

Operating costs before depreciation, amortisation of intangible assets and                  (828)        (815)
material non-recurring items
Operating costs - material non-recurring items                                     1          (1)         (23)
EBITDA                                                                                        215          118
Depreciation of property, plant and equipment                                                (15)         (19)
EBITA                                                                                         200           99
Amortisation of intangible assets                                                  5         (50)         (60)

Total operating costs                                                                       (894)        (917)

Operating profit                                                                              150           39

Financing income                                                                                7            9
Financing costs                                                                              (18)         (17)

Net financing costs                                                                          (11)          (8)
Share of profit of associates and joint ventures                                                4            5
Investment income                                                                               2            4
Gain on sale of property                                                                        9            5

Profit before tax                                                                             154           45
Taxation                                                                                     (43)          (8)

Profit for the period                                                                         111           37
Profit attributable to minority interest                                                      (2)          (5)

Profit attributable to equity shareholders of the Company                                     109           32

Basic earnings per share                                                           2         2.7p         0.8p
Diluted earnings per share                                                         2         2.7p         0.8p

All results are from continuing operations.




Consolidated balance sheet
                                                                              30 June   31 December     30 June
                                                                                 2005          2004        2004
                                                                      Note         £m            £m          £m

Non-current assets
Property, plant and equipment                                                     240           258         259
Intangible assets                                                        5      3,909         3,797       3,756
Distribution rights                                                                16            12          18
Investments in joint ventures and associates                             7         85            83         113
Other investments                                                        7        170           140         151

Deferred tax asset in respect of pension scheme deficits                          204           202         168
Other deferred tax balances                                                     (144)         (136)       (129)

Net deferred tax asset                                                             60            66          39

                                                                                4,480         4,356       4,336

Current assets
Current asset investments                                                           -             -         174
Assets held for resale                                                              -             -          59
Programme rights and other stock                                                  321           368         271

Trade and other receivables due within one year                                   356           349         336
Trade and other receivables due after more than one year                           10             8          30

Trade and other receivables                                                       366           357         366
Cash and cash equivalents                                                8        415           582         400

                                                                                1,102         1,307       1,270

Current liabilities
Borrowings                                                               8       (10)          (10)       (412)

Trade and other payables due within one year                                    (622)         (713)       (617)
Trade and other payables due after more than one year                               -             -        (20)

Trade and other payables                                                        (622)         (713)       (637)
Current tax liabilities                                                         (221)         (225)       (222)
Provisions                                                                       (28)          (32)        (20)

                                                                                (881)         (980)     (1,291)

Net current assets/(liabilities)                                                  221           327        (21)

Non-current liabilities
Borrowings                                                               8      (789)         (852)       (557)
Defined benefit pension deficit                                                 (679)         (672)       (559)
Other payables                                                                    (6)           (7)         (7)
Provisions                                                                       (41)          (43)        (62)

                                                                              (1,515)       (1,574)     (1,185)

Net assets                                                                      3,186         3,109       3,130

Attributable to equity shareholders
Share capital                                                           10        423           422         422
Share premium account                                                   10         94            91          90
Merger and other reserves                                               10      2,666         2,666       2,660
Translation reserve                                                     10        (3)           (2)         (1)
Available for sale reserve                                              10         18             -           -
Retained earnings                                                       10       (22)          (84)        (63)

Total attributable to equity shareholders                               10      3,176         3,093       3,108
Minority interest                                                       10         10            16          22

Total equity                                                            10      3,186         3,109       3,130





Consolidated cash flow statement


                                                                                    2005                  2004
For the six months ended 30 June:                              Note        £m         £m        £m          £m

Cash flows from operating activities
Operating profit before material non-recurring items                      151                   62
Depreciation of property, plant and equipment                              15                   19
Amortisation of intangible assets                                          50                   60
Movement in working capital**                                               1                   96

Cash generated from operations before material                                       217                   237
non-recurring items
Cash flow relating to material non-recurring items:
Operating loss                                                            (1)                 (23)
Increase in debtors                                                      (11)                    -
Decrease in creditors and provisions*                                     (9)                  (7)

Cash outflow from material non-recurring items                                      (21)                  (30)

Cash generated from operations                                                       196                   207
Interest received                                                           7                    7
Interest paid on bank and other loans                                    (20)                 (25)
Interest paid on finance leases                                           (2)                  (2)
Investment income                                                           2                    4
Dividends received from investments in joint ventures and                   -                    2
associates
Taxation paid                                                            (66)                  (8)

                                                                                    (79)                  (22)

Net cash from operating activities                                                   117                   185

Cash flows from investing activities
Acquisition of subsidiary undertakings, net of cash and           6     (136)                  461
cash equivalents acquired, and debt repaid on acquisition
Proceeds from sale of property, plant and equipment                        23                   19
Acquisition of minority interest                                            -                (140)
Acquisition of property, plant and equipment                             (16)                  (7)
Acquisition of investments                                               (30)                  (2)
Purchase from sale of subsidiaries                                          5                    -
Proceeds from sale of investments                                           -                    2
Net cash from investing activities                                                 (154)                   333

Cash flows from financing activities
Proceeds from issue of ordinary share capital                              46                    7
Purchase of US held shares                                               (42)                    -
Bank and other loans repaid                                              (88)                 (85)
Capital element of finance lease payments                                 (2)                  (2)
Preference dividends paid to shareholders                                   -                  (5)
Redemption of redeemable shares on merger                                   -                (200)
Equity dividends paid                                                    (45)                 (28)

Net cash used in financing activities                                              (131)                 (313)

Net (decrease)/increase in cash and cash equivalents                               (168)                   205
Cash and cash equivalents at 1 January                                               582                   185
Effects of exchange rate changes and fair value movements              
on cash and cash equivalents                                                           1                    10

Cash and cash equivalents at 30 June                                                 415                   400




*Includes £6 million (2004: £6 million) relating to expenditure against
provisions held in respect of activities which have been previously
discontinued.

** Licence fees paid in the period were £47 million greater than the income
statement charge.  This excess has now been repaid and will represent a working
capital inflow in the second half of the year.



Consolidated statement of recognised income and expense


                                                                                               2005        2004
For the six months ended 30 June:                                                                £m          £m

Exchange differences on translation of foreign operations                                       (1)         (1)
Movements in respect of cash flow hedges                                                        (2)           -
Revaluation of available for sale investments                                                     5           -

Net income recognised directly in equity                                                          2         (1)
Profit for the period                                                                           111          37

Total recognised income and expense for the period                                              113          36

Attributable to:
Equity shareholders of the Company                                                              111          31
Minority interests                                                                                2           5

Total recognised income and expense for the period                                              113          36







Notes to the accounts



1.      Material non-recurring items
                                                                                          2005            2004
For six months ended 30 June:                                                               £m              £m

Operating items:
Reorganisation and integration costs                                                      (12)            (23)
Receipt from the liquidators of ITV Digital                                                 11               -

Total material non-recurring items                                                         (1)            (23)





2.      Earnings per share
                                                                             2005                        2004
                                                                Basic     Diluted       Basic         Diluted
For the six months ended 30 June:                                  £m          £m          £m              £m

Profit for the financial period attributable to             
shareholders                                                      109         109          32              32
Material non-recurring items (including related tax effect          
of £nil, 2004: £6 milllion)                                         1           1          17              17
Profit before material non-recurring items                        110         110          49              49
  Amortisation of intangible assets (including related tax     
   effect of £15 million, 2004: £18 million)                       35          35          42              42

Profit for the financial period before material                   145         145          91              91
non-recurring items and amortisation of intangible assets

Weighted average number of shares in issue - million            4,075       4,075       3,824           3,824
Dilution impact of share options - million                          -          49           -              70

                                                                4,075       4,124       3,824           3,894

                                                                 2.7p        2.7p        0.8p            0.8p

Earnings per ordinary share

Adjusted earnings per share
Basic earnings per share                                         2.7p        2.7p        0.8p            0.8p

Add: Loss per share on material non-recurring items                 -           -        0.5p            0.4p

Earnings per share before material non-recurring items           2.7p        2.7p        1.3p            1.2p
Add: Loss per ordinary share on amortisation of intangible   
assets                                                           0.8p        0.8p        1.1p            1.1p

Earnings per share for the financial period before              
material non-recurring items and amortisation of
intangible assets                                                3.5p        3.5p        2.4p            2.3p



All profits arise from continuing operations. An adjusted earnings per share has
been disclosed because in the view of the directors this gives a true reflection
of the results of the underlying business.




3.      Dividends

Dividends are recognised in equity during the period in which they are declared.
  Dividends recognised in equity for the six months ended 30 June 2005 total £53
million (six months ended 30 June 2004: £20 million) and represent the 2004
final dividend declared by the Company on 8 March 2005 (six months ended 30 June
2004: 2003 final dividend declared on 3 March 2004).


The Company has declared a dividend in respect of the six months ended 30 June
2005 of 1.32 pence (six months ended 30 June 2004: 1.1 pence) per ordinary share
totalling £54 million (six months ended 30 June 2004: £45 million) which will be
paid on 9 January 2006 to shareholders on the register at 11 November 2005.  The
ordinary shares will be quoted ex dividend from 9 November 2005.



4.      Segmental analysis

ITV comprises one main producer/broadcaster business segment.  This segment
includes all activities related to the production and broadcasting of television
programmes and channels, including the exploitation of related rights and
assets. Any businesses falling outside of this main segment are grouped together
as other operations.


                                                                Producer/             Other
                                                              broadcaster        operations     Consolidated
                                                               2005  2004       2005   2004      2005   2004

For the six months ended 30 June:                                £m    £m         £m     £m        £m     £m

Segment revenue                                               1,001   917         43     39     1,044    956

Segment result                                                  149    37          1      2       150     39



5.      Intangible assets
                                   Goodwill     Brands     Licences        Customer          Film       Total
                                                                      contracts and libraries and
                                                                      relationships         other          
                                         £m         £m           £m              £m            £m          £m
Cost
At 31 December 2004                   3,294        173           48             319            81       3,915
Acquisitions                             80          -           73               9             - 162

At 30 June 2005                       3,374        173          121             328            81       4,077

Amortisation
At 31 December 2004                       4         15            4              86             9         118
Charge for period                         -          9            3              35             3 50

At 30 June 2005                           4         24            7             121            12         168


Net book value
At 30 June 2005                       3,370        149          114             207            69       3,909

At 31 December 2004                   3,290        158           44             233            72       3,797





6.      Acquisition of businesses

On 27 April 2005, the Group acquired 50.1% of the shares in SDN Ltd and 100% of
the shares in United Media & Information Ltd (which holds the remaining shares
in SDN Ltd) for a total consideration of £83 million in cash.  As part of the
acquisition, loan amounts due by these companies, totalling £53 million, were
repaid bringing the total cash outflow of the Group to £136 million.  SDN holds
the licence to operate Multiplex A on digital terrestrial television.


In the two months to 30 June 2005 the acquired entities contributed £1 million
to the consolidated operating profit of the Group (before additional
amortisation of £1 million). Had the acquisition occurred on 1 January 2005, the
estimated revenue for the Group would have been £7 million higher at £1,051
million and operating profit before amortisation and material non-recurring
items £2 million higher at £203 million (additional amortisation would have been
£2 million) for the six months ended 30 June 2005.  The acquired net assets of
SDN are set out in the table below.

                                                                      Book value
                                                                          before
                                                                     acquisition    Fair value   Fair value to
                                                                                   adjustments         ITV plc
                                                                              £m            £m              £m

Intangible assets                                                              -            82              82
Trade and other receivables                                                    6             -               6
Borrowings                                                                  (53)             -            (53)
Trade and other payables                                                     (7)             -             (7)
Deferred tax liability                                                         -          (25)            (25)

Net assets and liabilities                                                  (54)            57               3

Goodwill on acquisition                                                                                     80

Consideration paid                                                                                          83
Borrowings settled at date of acquisition                                                                   53

Total cash outflow                                                                                         136


The intangible assets recognised at a fair value of £82 million include the
multiplex licence and customer contracts.  A deferred tax liability of £25
million has been recognised in respect of these intangible assets.


The goodwill recognised represents the wider strategic benefits of the
acquisition to ITV plc.  Principally these are the enhanced ability to promote
Freeview as a platform, business relationships with the channels which are on
Multiplex A and the additional capacity available from 2010.  These, in
combination with existing ITV assets, including the ITV brand and programming,
generate the goodwill on acquisition.





7.      Investments
                                                 Joint     Associated        Listed      Unlisted         Total
                                              ventures   undertakings   investments   investments
                                                    £m             £m            £m            £m            £m

At 31 December 2004                                 55             28           128            12           223
Adjustment for IAS 32 and IAS 39 (note 9)            -              -            13             -            13

1 January 2005 (restated)                           55             28           141            12           236
Additions at market value                            -              -            13             -            13
Share of attributable profits                        1              2             -             -             3
Revaluation of listed investments to      -                         -             4             -             4
market value at 30 June 2005
Other                                     -                       (1)             -             -           (1)

At 30 June 2005                           56                       29           158            12           255




8.      Analysis of net debt
                                                Adjustment                                Currency and   30 June
                                                for IAS 32                                    non-cash
                                           31   and IAS 39    1 January       Net cash       movements      2005
                                     December     (note 9)         2005                             £m        £m
                                         2004           £m    (restated)       flow and              
                                           £m                        £m    acquisitions
                                                                                     £m

Cash and cash equivalents                 582            -          582          (168)               1       415

Loans and loan notes due within
one year                                  (7)            -          (7)              -               -       (7)
                                        
Loans and loan notes due after one    
year                                    (774)         (39)        (813)             88              12     (713)
Preference shares                           -          (8)          (8)              -               8         -
Finance leases                           (81)            -         (81)              2               -      (79)

                                        (862)         (47)        (909)             90              20     (799)

Net debt                                (280)         (47)        (327)           (78)              21     (384)


Included within cash and cash equivalents is £79 million (31 December 2004: £81
million) the use of which is restricted to meeting finance lease commitments.
€125m of the Exchangeable bond was repaid in January 2005.  The Preference
shares were redeemed on 29 June 2005.





9.      Adoption of IAS 32 and IAS 39

The Group has taken the IFRS 1 option to apply IAS 32 and IAS 39 prospectively
from 1 January 2005.  The impact on the Group's opening balance sheet at 1
January 2005, by balance sheet category, is outlined below:


                                                                                        Effect of
                                                                    31 December        IAS 32 and      1 January
                                                                           2004            IAS 39           2005
                                                                             £m                £m             £m

Other investments (a)                                                       140                13            153
Net deferred tax asset (b)                                                   66                 2             68
Trade and other receivables due within one year (c)                         349                34            383
Trade and other payables due within one year (d)                          (713)                 2          (711)
Borrowings (non-current) (e)                                              (852)              (47)          (899)

Impact on net assets                                                                            4



a)  Revaluation of investments to 1 January 2005 fair values.

b)  Deferred tax effect of IAS 39 adjustments.

c)  Reclassification of currency option relating to Exchangeable bond from
    borrowings.

d)  Revaluation of interest rate swaps and foreign exchange contracts to 1
    January 2005 fair values

e)  Reclassification of currency option to trade and other receivables (see c
    above), revaluation of loans and loan notes

    to 1 January 2005 fair values and reclassification of Carlton Preference
    shares from minority interests.




10.    Consolidated statement of changes in equity

                                                                    Attributable to equity shareholders

                            Share     Share     Merger  Translation  Available  Retained  Total  Minority   Total
                          capital   premium  and other      reserve   for sale  earnings         interest  equity
                                              reserves                 reserve
                               £m        £m         £m           £m         £m        £m     £m        £m      £m

At 31 December 2004           422        91      2,666          (2)          -      (84)  3,093        16   3,109
Adjustment for IAS 32       
and IAS 39 (note 9)             -         -          -            -         13       (1)     12       (8)       4

1 January 2005              
(restated)                    422        91      2,666          (2)         13      (85)  3,105         8   3,113
Cancellation of shares        (3)      (39)          -            -          -         -   (42)         -    (42)
Shares issued in the      
period                          4        42          -            -          -         -     46         -      46
Total recognised income     
and expense                     -         -          -          (1)          5       107    111         2     113
Movements due to share       
based compensation              -         -          -            -          -         9      9         -       9
Equity dividends                -         -          -            -          -      (53)   (53)         -    (53)

At 30 June 2005               423        94      2,666          (3)         18      (22)  3,176        10   3,186


                                                      Attributable to equity shareholders

                              Share     Share     Merger  Translation  Retained     Total  Minority        Total 
                            capital   premium  and other      reserve  earnings            interest       equity        
                                                reserves
                                 £m        £m         £m           £m        £m        £m        £m           £m

At 31 December 2003             277         -      1,191            -      (81)     1,387         1        1,388
Business combinations           143        85      1,669            -         -     1,897       167        2,064
Redemption of Granada            
redeemable shares                 -         -      (200)            -         -     (200)         -        (200)
Purchase of minority          
interest                          -         -          -            -         -         -     (146)        (146)
Shares issued in the period       2         5          -            -         -         7         -            7
Total recognised income and      
expense                           -         -          -          (1)        32        31         5           36
Movements due to share        
based compensation                -         -          -            -         6         6         -            6
Dividends paid to               
non-equity shareholders           -         -          -            -         -         -       (5)          (5)
Equity dividends                  -         -          -            -      (20)      (20)         -         (20)

At 30 June 2004                 422        90      2,660          (1)      (63)     3,108        22        3,130




11.    Significant accounting policies

a)       Basis of preparation

EU law (IAS Regulation EC 1606/2002) requires that the Group's next annual
consolidated financial statements, for the year ending 31 December 2005, be
prepared in accordance with International Financial Reporting Standards and
International Accounting Standards adopted by the International Accounting
Standards Board (IASB), and interpretations issued by the International
Financial Reporting Interpretations Committee of the IASB as adopted for use in
the EU (called 'IFRS' in this document).

This interim financial information has been prepared on the basis of the
recognition and measurement requirements of IFRSs in issue that either are
endorsed by the EU and effective (or available for early adoption) at 31
December 2005 or are expected to be endorsed and effective (or available for
early adoption) at 31 December 2005, the Group's first annual reporting date at
which it is required to use adopted IFRSs.  Based on these adopted and unadopted
IFRSs, assumptions have been made about the accounting policies expected to be
applied, when the first annual IFRS financial statements are prepared for the
year ending 31 December 2005.

In particular, it has been assumed that the amendment to IAS 19 (Employee
Benefits) and the fair value option amendment to IAS 39 (Financial Instruments:
Recognition and Measurement) will be adopted by the EU in sufficient time that
they will be available for use in the annual IFRS financial statements for the
year ending 31 December 2005.

Were these standards not to be endorsed in time for 2005 financial reporting
then the accounting policies or presentation of certain financial information
contained in this document may need to be changed.  It is therefore possible
that further changes will be required to this information before it is presented
in the 2005 annual report.

The comparative information presented in these accounts has been restated and
represented under IFRS.  In respect of financial instruments, the Group's
policy, as permitted under IFRS 1, has been to adopt IAS 32 (Financial
Instruments: Disclosure and Presentation) and IAS 39 (Financial Instruments:
Recognition and Measurement) from 1 January 2005.  Comparatives have therefore
not been restated to reflect the requirements of IAS 32 and IAS 39 and continue
to be prepared in accordance with UK GAAP for the comparative period.  Note 9
sets out the impact of the adoption of IAS 32 and IAS 39 at 1 January 2005.
Further details on the restatement of comparative information and conversion to
IFRS are given later in this report.

The accounting policies set out below have been applied consistently in
presenting this financial information.



b)       Revenue recognition

Revenue is stated exclusive of VAT and consists of sales of goods and services
to third parties.  Revenue from services is recognised when the outcome can be
estimated reliably and by reference to the stage of completion of the
transaction.  Revenue from the sale of goods is recognised when the Group has
transferred the significant risks and rewards of ownership and control of the
goods sold and the amount of revenue can be measured reliably.  Key classes of
revenue are recognised on the following basis:

Advertising and sponsorship                  on transmission

Programme production                         on delivery

Programme rights                             when contracted and available 
                                             for exploitation

Revenue on barter transactions is recognised only when the goods or services
being exchanged are of a dissimilar nature.

c)       Subsidiaries, associates and joint ventures

Subsidiaries are entities that are directly or indirectly controlled by the
Group.  Control exists where the Group has the power to govern the financial and
operating policies of the entity so as to obtain benefits from its activities.
The proportion of net income and net assets attributable to minority
shareholders is presented separately as a minority interest in the consolidated
income statement and consolidated balance sheet.

A joint venture is an entity 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.

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 the financial and operating decisions of an entity but is not
control or joint control over those policies.  These investments are accounted
for using the equity method.

d)       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
consumption 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.

e)       Property, plant and equipment

Owned assets

Property, plant and equipment are stated at cost less accumulated depreciation
and impairment losses.  Certain items of property, plant and equipment that had
been 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 at the
date of that revaluation.

Leases

Finance leases are those which transfer substantially all the risks and rewards
of ownership to the lessee. Assets held under such leases are capitalised within
property, plant and equipment and depreciation is provided where appropriate.
Outstanding finance lease obligations, which comprise the principal plus accrued
interest, are included within borrowings.  The finance element of the agreements
is charged to the income statement over the term of the lease on a systematic
basis.

All other leases are operating leases the rentals on which are charged to the
income statement on a straight line basis over the lease term.

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
future lives. The major categories of property, plant and equipment are
depreciated as follows:
Vehicles, equipment and fittings      3 to 10 years
Plant and machinery                   10 to 15 years
Properties:
television studios                    50 years
leaseholds                            shorter of residual lease term or 50 years
Freehold land                         not depreciated
Freehold buildings                    up to 50 years



f)        Intangible assets

Business combinations and goodwill

All business combinations that have occurred since 1 January 2004 are accounted
for by applying the purchase method.  Goodwill represents the difference between
the cost of the acquisition and the fair value of the identifiable net assets
acquired.  Subsequent adjustments to the fair values of assets acquired made
within 12 months of the acquisition date are accounted for from the date of
acquisition.  The interim financial information presented has been restated to
reflect changes to the fair value adjustments made subsequent to the prior
year's interim accounts.

For business combinations prior to this date, but after 30 September 1998,
goodwill is included at its deemed cost, which represents the amount recorded
under the relevant GAAP at that time.  The classification and accounting
treatment of business combinations occurring prior to 1 January 2004, the date
of transition to IFRS, has not been reconsidered as permitted under IFRS 1.

Goodwill is stated at cost less any accumulated impairment losses and is
allocated to cash generating units.  Goodwill is not amortised but tested
annually for impairment.

Goodwill arising on acquisitions prior to 30 September 1998 was recognised as a
deduction from equity.



Other intangible assets

Other intangible assets acquired by the Group are stated at cost less
accumulated amortisation except those acquired as part of a business combination
which are shown at fair value at the date of acquisition (in accordance with
IFRS 3 (Business Combinations)) less accumulated amortisation.



Amortisation

Amortisation is charged to the income statement over the estimated useful lives
of intangible assets unless such lives are indefinite.  Goodwill is not
amortised but is tested for impairment at each balance sheet date.  The useful
lives and amortisation methods for each major class of intangible asset are as
follows:

Film libraries                          20 years              sum of digits

Licences                                11 to 17 years        straight line

Brands                                  11 years              straight line

Customer contracts                      up to 6 years         straight line

Customer relationships                  7 to 10 years         straight line


g)       Distribution rights

Programme rights acquired primarily for the purposes of distribution are
classified within the balance sheet as non-current assets.  They are recognised
initially at cost and charged through the income statement over either a 3 or 5
year period depending on genre.

h)       Other investments

Other investments comprise equity securities which do not meet the definition of
subsidiaries, joint ventures and associates, and are stated at fair value, with
any resultant gain or loss recognised directly in the available for sale reserve
in equity.  Prior to the Group's adoption of IAS 32 (Financial Instruments:
Disclosure and Presentation) and IAS 39 (Financial Instruments: Recognition and
Measurement) from 1 January 2005, investments in equity securities were held at
initial cost less any impairment subsequently recognised.  The effect of
adopting IAS 32 and IAS 39 is shown in note 9.

i)        Impairment of assets

Assets that have an indefinite useful life are not subject to amortisation and
are tested annually for impairment.  Assets that are subject to amortisation or
depreciation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.  An
impairment loss is recognised in the income statement for the amount by which
the asset's carrying amount exceeds its recoverable amount. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash-generating units).


The recoverable amount is the higher of an asset's fair value less costs to sell
and value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to
the asset.


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.  Impairment losses in respect of goodwill are not reversed.



j)        Foreign currencies

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 income statement.  Non-monetary assets and
liabilities measured at historical cost are translated into sterling at the rate
of exchange on the date of the transaction.



Financial statements of foreign operations

The assets and liabilities of foreign operations are translated into sterling at
the rate of exchange ruling at the balance sheet date.  The revenues and
expenses of foreign operations are translated into sterling at the average rate
of exchange ruling during the financial period.  Exchange differences arising on
translation are recognised directly in the translation reserve in equity.



Net investment in foreign operations

Exchange differences arising on the translation of the net investment in foreign
operations, and of related hedges, are taken directly to the translation reserve
within equity.


In respect of all foreign operations only those translation differences arising
since 1 January 2004, the date of transition to IFRS, are presented as a
separate component of equity as permitted under IFRS 1.



k)       Programme rights

Where programming, sports rights and film rights are acquired for the primary
purpose of broadcasting these are recognised within current assets.  An asset is
recognised when the Group controls, in substance, the respective assets and the
risks and rewards associated with them.  For acquired programme rights an asset
is recognised as payments are made and is recognised in full when the acquired
programming is available for transmission.  Programming produced internally
either for the purpose of broadcasting or to be sold in the normal course of the
Group's operating cycle is recognised within current assets at production cost.


Programme costs and rights are written off to operating costs in full on first
transmission except certain film rights which are written off over a number of
transmissions.  Films and programme costs not yet written off at the balance
sheet date are included on the balance sheet at the lower of cost and net
realisable value.



l)        Cash and cash equivalents

Cash and cash equivalents comprises cash balances and call deposits with
maturity of less than or equal to three months.



m)     Provisions

A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation arising from past events and it is probable
that an outflow of economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future cash flows by a
rate which reflects current market assessments of the time value of money and
the risks specific to the liability.



n)       Borrowings

Borrowings consist of loans, loan notes and finance leases. Borrowings are
recognised initially at fair value, less attributable transaction costs.  In
subsequent periods loans accounted for using the fair value option amendment to
IAS 39 are stated at fair value with the movement recorded in the income
statement.  Other loans and borrowings are stated at amortised cost with any
difference between cost and redemption value being recognised in the income
statement over the period of the borrowings on an effective interest basis.
Prior to the Group's adoption of IAS 32 and IAS 39 from 1 January 2005, amounts
were recognised in the balance sheet at cost.  The effect of adopting IAS 32 and
IAS 39 is shown in note 9.



o)       IFRS 5 (Non-Current Assets Held for Sale and Discontinued Operations)

IFRS 5 applies prospectively for periods beginning on or after 1 January 2005
and has therefore not been adopted  for the comparative period.



p)       Taxation

The tax charge for the period comprises both current and deferred tax.  Taxation
is recognised in the income statement except to the extent that it relates to
items recognised directly in equity, in which case it is recognised in equity.

Current tax is calculated based on the expected rate of tax payable on the
taxable income for the year and any adjustment to tax payable in respect of
previous years.

Deferred tax is provided using the balance sheet liability method on any
temporary differences between the carrying amounts 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
sufficient taxable profit will be available to utilise the temporary difference.

q)       Employee benefits

Defined contribution schemes

Obligations under the Group's defined contribution schemes are recognised as an
expense in the income statement as incurred.



Defined benefit plans

The Group's obligation in respect of defined benefit pension plans is calculated
separately for each plan by estimating the amount of future benefit that
employees have earned in return for their service in the current and prior
periods; that benefit is discounted to determine its present value and the fair
value of plan assets is deducted.  The discount rate is the yield at the
valuation date on high quality corporate bonds.  The calculation is performed by
a qualified actuary using the projected unit credit method.  A full valuation is
carried out at the full year only.  The pension cost for the interim period is
calculated on a year to date basis by using the actuarially determined pension
cost rate at the end of the prior financial year, adjusted for significant
market fluctuations since that time and for significant curtailments,
settlements, or other significant one-time events.


In accordance with IFRS 1 ITV has chosen to recognise the full pensions deficit
on the balance sheet at 1 January 2004.  The Group has taken the option of
adopting early the amendment to IAS 19 (Employee Benefits) issued on 16 December
2004.  As a result, actuarial gains and losses are recognised in full in the
period in which they arise through the statement of recognised income and
expense.



Share based compensation

The Group operates a number of share based compensation schemes.  The fair value
of the equity instrument is measured at grant date and spread over the vesting
period through the income statement with a corresponding increase in equity.
The fair value of the share options and awards is measured using either a
Monte-Carlo or Black-Scholes model as appropriate taking into account the terms
and conditions of the individual scheme.  The amount recognised as an expense is
adjusted to reflect the actual vesting except where forfeiture is due only to
market based criteria not being achieved.



r)        Derivatives and other financial instruments

The Group uses a limited number of derivative financial instruments to hedge its
exposure to fluctuations in interest and other foreign exchange rates.  The
Group does not hold or issue derivative instruments for speculative purposes.


Derivative financial instruments are initially recognised at cost and are
subsequently remeasured at fair value.


Changes in the fair value of derivatives that are designated and qualify as fair
value hedges in respect of on-balance sheet assets and liabilities are recorded
in the income statement.  Foreign exchange differences on the hedged asset or
liability and any movements in the fair value of any hedged bond that is
attributable to the hedged risk are also recorded in the income statement.


The accounting treatment applied to cash flow hedges in respect of off-balance
sheet assets and liabilities relating to contractual purchases of foreign
currency sports, programme and film rights can be summarised as follows:



  • For qualifying hedges, the effective component of changes in the fair
    value of the foreign currency forward contract is deferred within a separate
    component of retained earnings.  Releases from equity occur via a basis
    adjustment when the right is recognised on-balance sheet in accordance with
    the Group's policy.

  • The ineffective component of the changes in fair value of the hedging
    instrument is recorded immediately in the income statement.


The fair value of foreign currency forward contracts is determined by using
forward exchange market rates at the balance sheet date.  The fair value of
interest rate swaps is the estimated amount that the Group 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.


For qualifying hedge relationships, the Group documents at the inception of the
transaction the relationship between hedging instruments and hedged items, as
well as its risk management objective and strategy for undertaking the hedge.
The Group also documents both at the hedge inception and on an on-going basis,
its assessment of whether the hedging derivatives are effective in offsetting
changes in fair values or cash flows of the hedged items.


Prior to the Group's adoption of IAS 32 and IAS 39 from 1 January 2005 interest
receipts and payments under interest rate swap and option agreements were
accrued so as to match the net income or cost with the related finance expense.
No amounts were recognised in respect of future periods. The difference between
the fair value and book value of bonds and derivative instruments arising on the
acquisition accounting for Carlton was amortised through net interest over the
remaining life of the instruments.  The effect of adopting IAS 32 and IAS 39 is
shown in note 9.


s)        Dividends

Dividends are recognised through equity in the period in which they are
declared.


t)        Investment income

Investment income comprises dividends received from the Group's investments.
Dividend income is recognised in the income statement on the date the Group's
right to receive payments is established.



Conversion to International Financial Reporting Standards (IFRS)

Following ITV plc's adoption of IFRS, the 2004 comparative financial information
in these accounts has been restated and represented under IFRS.  The
reconciliations below highlight the key impacts on both the profit attributable
to equity shareholders and on total equity.  ITV plc has produced Preliminary
International Financial Reporting Standards Financial Statements for 2004 which
set out in greater detail the impact of IFRS on ITV plc's 2004 results and
include detailed reconciliations from UK GAAP of the balance sheets at 1 January
2004, 30 June 2004 and 31 December 2004 and the income statements for the six
months ended 30 June 2004 and the year ended 31 December 2004.  This document is
available on the ITV plc corporate website at www.itvplc.com.



Reconciliation of profit attributable to equity shareholders from UK GAAP to
IFRS


                                                                               12 months ended      Six months
                                                                              31 December 2004   ended 30 June
                                                                                                          2004
                                                                                            £m              £m

Profit attributable to equity shareholders (UK GAAP)                                       139              37
IAS 19 (Employee benefits) *                                                               (3)             (1)
IFRS 2 (Share based payment) *                                                             (3)             (1)
IFRS 3 (Business combinations) *                                                             5             (3)
Other                                                                                      (1)               -

Profit attributable to equity shareholders (IFRS)                                          137              32


* Includes related deferred tax effect

Reconciliation of total equity from UK GAAP to IFRS

                                                          31 December 2004              30 June    1 January
                                                                                           2004         2004
                                                                        £m                   £m           £m

Total equity (UK GAAP)                                               3,418                3,378        1,656
IAS 10 (Events after the balance sheet date)                            53                   45           20
IAS 19 (Employee benefits) *                                         (389)                (301)        (274)
IFRS 3 (Business combinations) *                                        39                   20            -
IAS 12 (Taxation)                                                      (5)                  (5)          (9)
Other                                                                  (7)                  (7)          (5)
Total equity (IFRS)                                                  3,109                3,130        1,388


* Includes related deferred tax effect




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