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ITV PLC (ITV)

  Print      Mail a friend       Annual reports

Wednesday 08 March, 2006

ITV PLC

Final Results

ITV PLC
08 March 2006



                ITV plc results for year ended 31 December 2005



 Exploiting content on every platform and delivering ITV's digital future today



Financial highlights



• Revenue up 6% at £2,177m 1

  -  Revenue outside ITV1 NAR grown by 25% to £715m, 33% of ITV's revenues

• Operating profit up 42% at £460m 1

  -  Profits doubled in two years

  -  Increased profitability in all areas

• Cash generated from operations of £456m

  -  Cash conversion ratio of 98%

• Adjusted EPS up 25% to 8.0p 2

• Final dividend up 38% to 1.8p

• Pension fund deficit halved from £672m in 2004 to £325m now

• £300m cash back to shareholders



Operating highlights



• Delivering ITV's digital future today



  -  Digital channels continue to grow strongly - Revenue up 91%

  -  2007 target of £150m from multi-channel expected to be achieved one
     year early

  -  New target set of £250m of multichannel advertising/interactive revenue
     by end 2008

  -  New channel launches - CITV, ITV Play and ITV Broadband

  -  ITV is the biggest commercial family of channels in Freeview homes 3

  -  Targeting 50% of revenue outside ITV1 NAR by end 2010



• Exploiting content - driving value through the business



  -  Creating and owning content is key strength and a unique commercial 
     advantage

  -  Good content performs well on all platforms

  -  Commencing digitisation of library

  -  International and UK production (ex ITV) up strongly

  -  40,000 hours of programmes sold internationally in 2005



• Strengthening channel brands



  -  ITV Family SOCI has increased by 1.4 percentage points in Multichannel
     homes

  -  8 out of top 10 UK programmes broadcast in 2005 were on ITV1

  -  Strengthening commissioning structure to drive creativity



• New revenue streams



  -  ITV Play to become a £20 million profit business in its first full year

  -  itv.com - creating a content rich broadband multimedia proposition

  -  Friends Reunited acquisition, unique business opportunity

             -  significantly strengthening our online proposition

             -  January revenue up 75% yoy



• Distribution



  -  SDN provides certainty of DTT transmission capacity and adds significant 
     value to ITV

  -  ITV operates 38% of commercial DTT bandwidth

  -  Three out of four new digital homes choose Freeview

  -  A Freeview viewer is an ITV viewer



Commenting, Charles Allen, Chief Executive of ITV said:



'ITV has had another very successful year with strong profit growth helping us
to double our profits in the last two years. We have strong cashflow which has
allowed us to invest in our businesses, improve the pension position and still
be able to return cash to shareholders.



'These results demonstrate that we are delivering ITV's digital future today. We
have transformed ITV from an analogue, single channel federation to a
multi-channel, multi-platform, content driven business firmly focused on the
needs of viewers and advertisers.'





1  Up 3% on a pro forma basis including GMTV for a full year

2  Before amortisation and exceptioal items

3  ITV Family of channels in Freeview homes 26.2% viewing share





For further enquiries please contact:



ITV plc

Tel: 020 7620 1620



Press enquiries
Brigitte Trafford             -  Communications Director
Jim Godfrey                   -  Head of Corporate Affairs



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 8th March 2006 at the City
Presentation Centre, 4 Chiswell Street, London EC1Y 4UP

Chairman's statement



In ITV's second year as a single Company we have continued to build on last
year's progress, further improving our structure and our profitability.



2005 results

After a good first half our operating profit before amortisation and exceptional
items continued to grow in the second half of the year, and for the full year is
up by 42% on last year to £460 million before exceptionals and amortisation.
Earnings per share (before amortisation and exceptional items) increased by 25%
to 8.0 pence (up 54% to 5.4 pence after amortisation and exceptional items).



Your Board is proposing a final dividend of 1.8 pence per share payable on 3
July 2006 to shareholders on the register on 21 April 2006. The ex-dividend date
will be 19 April 2006. This will increase the full year dividend by 30% to 3.12
pence compared to 2004, and will help achieve our stated aim of rebalancing the
levels of interim and final dividend over the medium term such that the interim
will ultimately represent approximately one-third of the total dividend.



Cash return to shareholders

In 2005 we reviewed the possibility of returning cash to our shareholders and
concluded that before doing so we should:



• complete the process of renewing the financial terms of our ITV1 licences; and



• address the deficit funding of our defined benefit pension schemes.



We have now completed those processes and have the capacity to return £300
million to shareholders. We propose to do this over the coming few months by way
of market purchase of ordinary shares.



Building new businesses and revenue streams

We have made real progress in:



• expanding the audience for our growing television channels;



• building our production business and exploiting our content across all
  platforms and media; and



• developing new businesses and revenue streams in pay and consumer areas.



Every part of the Group has contributed to this success.



In broadcasting we have seen tremendous success for our new channels and growing
sponsorship and interactive revenues.



In production we have continued to grow our UK sales to other broadcasters and
we are expanding our profitable US and Australian production businesses with
commissions for network broadcasters.



Our new consumer team has launched a number of successful ventures in 2005,
which will enable us to grow our non-advertising revenues. In 2005 we acquired
SDN and Friends Reunited. These acquisitions support our strategy; with SDN
providing long term digital terrestrial transmission capacity and already
growing in value, and Friends Reunited increasing customers for its content
based services and building communities through cross promotion from television.
Organic growth is increasing from our interactive revenues, with ITV Play making
a very promising start.



Regulation

We have made some significant progress in bringing regulation up to date; but we
still have a long way to go before we are as free of regulation as our main
competitors.



Our licence payments to the government were reviewed in 2005 by our regulator,
Ofcom, and as a result were reduced from a pro forma figure of £207 million in
2004 to £75 million in 2005. Over the period to digital switchover they will
continue to reduce towards £4 million in constant prices.



Our Public Service Broadcasting ('PSB') obligations still cost nearly £250
million a year including programme costs and revenue foregone during lower
rating PSB programmes. Whilst we have recently received some dispensation to
reduce our commitments to, for instance, the hours of religious and regional
programming, we still have to bear costs which are both disproportionate to the
ratings achieved from such material and almost unique to ITV as a commercial
broadcaster. It is essential that we are able to reduce these PSB costs further
over the medium term.



Contracts Right Renewal ('CRR') is a further burden that has had the unintended
consequence of changing the way that our advertising market works. Our ITV1
advertisers now contract to deliver to us the share of broadcast expenditure
calculated under CRR and we therefore have fewer opportunities to take advantage
of strengths in our schedule such as the Football World Cup during 2006. We will
continue to lobby for CRR, which has become a disproportionate remedy, to be
relaxed as the share of the market that ITV1 attracts is reduced by the growing
multichannel universe.



Corporate governance and CR

We are publishing a corporate responsibility report for 2005 which sets out the
detail of our activities across the Group. ITV was the highest contributor to
charitable causes in both the 2005 Guardian Giving List and Business in the
Community Percent Club, ranking contributions to charitable causes as a
percentage of profits of FTSE 100 Companies.  A large part of ITV's giving is
supplied as airtime across our family of channels.



Pension schemes

We are in a period of unprecedented pressures on companies' defined benefit 
('DB') pension schemes.



Over recent years the factors to which scheme deficits have been exposed have
included increasing life expectancy of members and falling world equity markets.
The most material factor now is the level of UK long term real interest rates
where a small reduction can have a large impact by increasing the net present
value of a scheme's liabilities.



Our work on the DB pension schemes has continued during 2005:



a) Scheme mergers

We have merged six DB schemes in the Group into a single scheme with savings in
cost and improved focus.



b) Deficit funding and IAS 19 valuations

We have completed the £325 million of deficit funding that we announced in
September 2005, with the last tranche of £207 million paid early in 2006. Our
IAS 19 aggregate deficit has reduced during 2005 from £672 million to £532
million and the last £207 million reduces that to £325 million.



c) Tax simplification

We have considered how we should deal with aspects of the tax simplification
regime coming into effect on 6 April 2006.



We will not separately compensate any executives for this change, but will
establish alternate arrangements designed to leave both individuals and the
Group in a broadly similar position.



Further details relating to the Group's pension schemes are given later in this
document.



People

Henry Staunton will be stepping down from the Board on 31 March after 13 years
as Finance Director, first of Granada and then of ITV. The Board would like to
thank Henry for his contribution to the Company and for his expertise in the
mergers and acquisitions that have formed it.



John Cresswell, our Chief Operating Officer since 2005, joined the Board in
January and is now our Finance Director. John has 18 years of experience in
operational and financial roles in television companies which will be of great
assistance to us as we deal with the many changes facing our industry.



I am pleased to welcome Mike Clasper, who joined the Board in January, as a
non-executive director. Mike has experience in running service businesses, as
well as in advertising and marketing, that will be valuable to us.  David Chance
stepped down from the Board in February 2006. As his involvement in other
television ventures has developed over recent months, he decided that it was
appropriate for him to resign from the Board. We wish David well with his future
ventures.



Once again I would like to extend the Board's thanks to our management and
employees whose continued commitment and drive make ITV the nation's favourite
commercial broadcaster.







Sir Peter Burt

Chairman

Chief Executive's review



During 2005 we have continued with our programme of developing our business and
changing our operations to enable us to take advantage of the rapidly evolving
digital television world. In early 2006 we re-branded our operations, from a
fresh new look onscreen for our channels through to new signage and logo for our
ITV production business. The feedback from our viewers has been very positive.



Improving and simplifying our structure

During 2005 we made some changes to simplify our management and structure, and
increase the focus on our core business. Simon Shaps as Director of Television
now heads up our channels operations and he has brought in a number of key new
commissioning executives.  He is also increasing the emphasis on US programme
acquisitions across all our channels.



Ian McCulloch heads up the commercial operations, contracting with our
advertisers and marketing our channels and programmes. His role is to build
relationships directly with our advertising customers, and to address the
challenge of reducing the burden that CRR places upon us.



Owning content and intellectual property rights is key to ITV's future success
and John Whiston, amongst our most talented of programme makers, now heads up
the ITV production operation.



Jeff Henry has been developing our consumer operations with a number of
successful organic developments and acquisitions which are explained later.



We are also recruiting for a new head of our international production and
distribution operations.



Freeview growth

Freeview was the fastest growing broadcasting platform across 2005 with
three-quarters of all households that went digital choosing Freeview. We are
actively promoting our channels, both on air and in other display media, and
expect Freeview rapidly to become the UK's number one digital television
platform in 2006.



We acquired SDN in April 2005 for £136 million. This acquisition boosts our
digital strategy (ITV now operates 38% of commercial DTT bandwidth). SDN
contributed £16 million of revenue in eight months of 2005. The market rate for
a videostream in DTT has been increasing and videostream contract renewals for
SDN begin in 2008.  SDN has been an extremely profitable acquisition for our
shareholders.



Channel schedule performance

Our new digital channels continued to grow their audience share and in November
2005 we launched our latest channel, ITV4. This channel is aimed at a male
demographic and its schedule includes a higher proportion of US acquired
material than our other channels. ITV4 has attracted a 0.5% share of
multichannel viewing in its early months on screen. ITV2 and ITV3 have increased
their viewing share in 2005 and our share of commercial viewing across all our
channels in multichannel homes increased by 7% to 32%.



As viewers move to the greater channel choice available on digital television,
the viewing share of ITV1 inevitably decreases. Under the CRR undertakings,
agreed with the Office of Fair Trading as part of the ITV merger, the
consequence of that is a proportionate decrease in the ITV1 share of television
advertising revenue. During 2005 our ITV1 advertising revenue was £50 million
lower than in 2004.



The success of our new business operations helped to increase our pro forma
revenues outside ITV1 advertising by £144 million in 2005, more than offsetting
the ITV1 reduction and increasing our revenues from these sources from 27% of
the total last year to 33% of the total in 2005.



As digital television approaches universal takeup in the near future, the
downward pressure on ITV1 viewing share and revenues will slow, enabling ITV1 to
return to growth alongside our rapidly growing digital channels.



In December, we took the difficult decision to close the ITV News Channel, as
the increasing opportunity cost of digital transmission capacity made running a
commercial 24 hour news channel economically unviable.



Developing non-ITV production assets in the UK and overseas

ITV productions had a very successful year, we created Sex Traffic for C4,
Casanova for the BBC, another series of Brainiac for Sky and Countdown for C4.



International production (part of ITV Worldwide) had another excellent year. In
America we made Hell's Kitchen and Nanny 911 for Fox, both US primetime shows
that will return, Hit Me Baby for NBC, Airline and 1st 48 for A&E and
Roomraiders for MTV. In Australia and Germany we made a number of primetime
shows for the top broadcasters. We are able to create and produce hits for
international broadcasters, increase our market share and add the new material
to our media catalogue and distribution business.



We have increased the profitability of Granada International and extended our
third party distribution sales worldwide. This includes such clients as HBO,
Aardman, CNN and Chorion. We have begun the digitisation of our media catalogue
and have been trialling video-on-demand which should develop into a new means of
content exploitation.



Growing consumer revenues

A major focus for ITV is the development of our consumer operations; those parts
of our business that deliver products and services directly to viewers who pay
for them through subscription, transactional or interactive revenues.



ITV Play is the brand name for a portfolio of 'participation' TV formats
designed to engage our mass-market audiences in high-quality original
interactive programming. ITV Play has been trialling across our Channels in
night time. We will be launching a dedicated channel in April. This has proved
to be very popular and we are currently developing more Play programming and
formats which will be shown across our family of channels including online and
mobile.



We have acquired Friends Reunited, the UK's leading reunion website. There are
five separate business strands: the Schools reunion site; Genes Reunited; dating
and jobs sites; and Connections, a general chat room and message board site. The
dating and jobs sites can already be found within our existing itv.com
environment and we are seeing increased traffic as a result.



itv.com is ITV's broadband site. Our aim is to create a content-rich multimedia
proposition. itv.com will be restructured and relaunched as a broadband content
on demand portal later in 2006; improving functionality and consumer experience.
This will increase dwell times and stickiness to drive subscription and
advertising revenues. Internet advertising is increasing rapidly, and is likely
to have overtaken radio and outdoor in 2006.



ITV is a producer-broadcaster. We believe that there will be an increasing
competition in Local Loop unbundling and that prices for bandwidth will be
driven towards marginal cost. Consumers will pay for content, and we will strive
to ensure that in this world of convergence, where viewers may be able to
receive content via cable, satellite, DTT, broadband or mobile, that ITV's brand
and content are available for them to enjoy.



Outlook

In 2005 our first quarter advertising revenue was particularly strong with
Easter falling in March.



In 2006 both Easter and the Football World Cup fall in the second quarter and
will move money into that period.  As a result advertising revenue has been
lower in the first few months of 2006 and total ITV advertising revenue will be
down by approximately 10% in the first quarter.



In April we expect that ITV1 will be up 2% year on year and our total
advertising revenue will be up 6% year on year.



People

I would like to join with Sir Peter Burt and the rest of the Board in thanking
all of our employees for their continuing work and dedication to the Company and
to our programmes and services. The broadcasting world is seeing more change
than many other industries and we continue to lead and embrace that change as we
move towards a fully digital environment in which viewers are able to increase
the level of personalisation of their viewing from more channels and
prospectively from delivery systems such as broadband. We look forward to these
changes and to remaining the producer and broadcaster of many of the nation's
favourite shows.





Charles Allen CBE

Chief Executive



Financial review



Statutory results for the year ended 31 December 2005

Revenue for the year ended 31 December 2005 was up 6% at £2,177 million (2004:
£2,053 million). Operating profit increased to £329 million (2004: £143 million)
with underlying operating profit before amortisation and exceptional items up
42% at £460 million (2004: £324 million). Profit before tax, amortisation and
exceptional items increased by 36% to £452 million (2004: £332 million).



Pro forma results for the year ended 31 December 2004

For the year ended 31 December 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 1 January 2004. In summary, and adjusted for IFRS,
these are:

---------------------------------------------                 ---------           ----------         ---------
                                                              Published            Pro forma         Published
                                                                   2005                 2004              2004
                                                                     £m                   £m                £m
Revenue                                                           2,177                2,083             2,053
Operating EBITA*                                                    460                  325               324
Profit before tax*                                                  452                  331               332
Adjusted* earnings per share - basic                               8.0p                 6.3p              6.4p
---------------------------------------------                 ---------           ----------         ---------          
                                                        



*Pre amortisation and exceptional items



On this basis, revenue for the year ended 31 December 2005 was up 5% at £2,177
million (2004: £2,083 million). Operating profit before amortisation and
exceptional items was up 42% at £460 million (2004: £325 million). Profit before
tax, amortisation and exceptional items increased by 37% to £452 million (2004:
£331 million).



The following comparisons to 2004 for net advertising revenue, other sales, ITV
schedule and licence fees are on a pro forma basis.

---------------------------------------------                                      ----------         ---------
                                                                                    Published         Pro forma
                                                                                         2005              2004
Revenue                                                                                    £m                £m
Net advertising revenue                                                                 1,631             1,588
Other broadcasting revenue                                                                140               133
Interactive, online and other segment revenue                                              67                30
Production revenue                                                                        247               233
Producer/broadcaster segment revenue                                                    2,085             1,984
Other operations revenue                                                                   92                99
Total revenue                                                                           2,177             2,083
---------------------------------------------                                      ----------         ---------





Net advertising revenue ('NAR')

Total ITV plc NAR increased by 2.7% during the year to £1,631 million (2004:
£1,588 million). This result includes a full year contribution of £58 million
from GMTV (2004: £18 million), which became a subsidiary in October 2004.

---------------------------------------------                 ---------           ----------         ---------
                                                             Published          Pro forma
                                                                  2005               2004                Change
                                                                    £m                 £m                     %
ITV1                                                             1,462              1,512                (3.3%)
ITV2, ITV3, ITV4, ITV News Channel, Men & Motors                   111                 58                   91%
GMTV                                                                58                 18                  222%
Total ITV plc NAR                                                1,631              1,588                  2.7%
---------------------------------------------                 ---------           ----------         ---------


ITV plc ITV1 NAR in the year was £1,462 million (2004: £1,512 million), £50
million lower than 2004, however, this reduction was outweighed by the strong
performance of ITV2 and ITV3 which, together with ITV News Channel, Men and
Motors and the newly launched ITV4 contributed 91% year on year growth of £53
million resulting in total NAR of £111 million (2004: £58 million) across these
channels.



ITV's NAR is a function of audience share which is measured in terms of
commercial impacts, prevailing advertising market conditions and television's
share of that market. In 2005, ITV's total share of commercial impacts on UK
television was 42.0% (2004: 42.7%). The reduction in 2005 was principally due to
the rapid take-up of digital multichannel television and the increasing number
of channels available to viewers.



ITV continues to develop its effective multichannel strategy, which has seen
ITV2 establish itself during the year as the most popular digital channel in
multichannel homes and strong performances from ITV3 and the recently launched
ITV4. 2005 was a difficult year for the television advertising market, with
growth of 2.6% compared to 6.0% in 2004. The market was adversely affected by a
slowdown in economic growth combined with a fall in consumer confidence,
resulting in reductions in advertising spend, particularly in the household
stores and motoring sectors.



The 2006 advertising trading season is now substantially complete, with the
majority of agency deals concluded. Our ITV1 negotiations are within the
framework of the Contracts Rights Renewal ('CRR') remedy agreed with the Office
of Fair Trading as a condition to the merger creating ITV plc.

Other sales

Other broadcasting sales of £140 million (2004: £133 million) principally
comprise sponsorship income, fees for airtime sales on behalf of third parties,
and sales of ITV programming by the Network Centre to Channel 3 licencees not
owned by ITV plc.



Other revenue within our producer/broadcaster segment of £67 million (2004: £30
million) includes interactive transactions and online advertising sales of £45
million (2004: £21 million) of which £19 million (2004: £5 million) relates to
GMTV, and revenue from the SDN business which we acquired during the year of £16
million (2004: £nil).



Production revenue includes original productions for the UK and international
markets, the distribution and exploitation of internally generated and acquired
rights, and studios and facilities revenue. Programming made by ITV for ITV
channels is not included in Group revenue as it represents an internal
programming cost of sale. In 2005, total external sales of £247 million (2004:
£233 million) included original productions for other broadcasters of £121
million (2004: £108 million), distribution and exploitation sales of £99 million
(2004: £103 million) and revenue from the hire of studio and technical
facilities of £27 million (2004: £22 million).



Other operations revenue comprises cinema advertising sales of £61 million
(2004: £65 million), revenue from education sales of £30 million (2004: £34
million) and revenue from Friends Reunited which was acquired during the year,
£1 million (2004: £nil).

ITV schedule

The cost of the ITV1 network schedule (ITV plc share) in 2005 was £776 million
(2004: £796 million). Regional programme costs for ITV1 were £125 million (2004:
£142 million).  Ofcom's reduction in our non-news regional programming
commitment has resulted in a cost saving of £7 million to ITV plc.  In addition
to this, we have achieved savings of £10 million on last year from increased
efficiencies across our regional production centres.  Schedule costs for ITV2
were £38 million (2004: £26 million) and the first full year schedule costs of
ITV3 were £9 million (2004: £2 million). ITV4 schedule costs were £6 million
(2004: £nil) in its launch year. The increased investment in these digital
channel schedules has been a key factor in attracting new advertisers and
viewers to our multichannel offering. The first full year schedule cost of GMTV,
which became a subsidiary in October 2004, was £29 million (2004: £7 million).



Licence fees

Licence fees comprise both a fixed annual sum (the cash bid) and a variable
element representing a percentage of our NAR and sponsorship income (PQR Levy).
The PQR Levy is reduced by the percentage of homes which receive ITV1 in digital
format. The digital licence rebate for 2005 is based on a digital penetration of
61%. In 2004 the licence fee payment including a full 12 months of GMTV was £215
million.

------------------                                               ---------         ---------           -------
                                                                 Published         Pro forma
                                                                      2005              2004            Saving
                                                                        £m                £m                £m
Cash bid payment                                                         4                67                63
PQR Levy                                                               192               277                85
Digital rebate                                                       (121)             (137)              (16)
------------------                                               ---------         ---------           -------
Total                                                                   75               207               132
------------------                                               ---------         ---------           -------


2005 has seen the setting of new financial terms for our Channel 3 licences
which has resulted in a reduction in the net licence fees paid of 64% to £75
million. The payment will continue to fall as digital penetration increases and
will reduce to around £4 million in constant prices by the time analogue
transmissions cease.



Together with the tax charge of £85 million, the licence fee of £75 million
produces a combined tax and licence fee rate of 41% on our profit before tax and
licence fees of £386 million.



Exceptional items

The operating exceptional items in the year total £29 million and primarily
represent reorganisation and integraton costs, partially offset by liquidation
dividends received. Reorganisation and integration costs include costs
associated with the consolidation of regional news production centres as part of
the ongoing efficiency gains following the merger between Granada and Carlton.
Further such projects are planned for 2006.



Non-operating exceptional items show a £10 million charge recognised in respect
of education business after its classification as a disposal group held for
sale.



Net financing costs

The net financing charge is £35 million. Financing income of £144 million
includes the expected return on pension scheme assets (£112 million), interest
income (£21 million) and net gains on remeasurement of interest rate swaps to
fair value (£11 million). Financing costs of £179 million includes the interest
on pension scheme liabilities (£125 million) and interest expense of £54 million
arising on our principal debt instruments and interest payments under finance
lease obligations.



Investment income

Investment income of £5 million comprises dividend income principally from
holdings in SMG and Channel 7 in Australia.



Gain on sale of property

The £11 million profit from the sale of properties in the year principally arose
from a gain on the sale of the Nottingham Studios.



Tax

The effective rate of tax on PBT is 27%. The underlying effective rate on
operating profits is 28% as shown below:

--------------------------------------------------------------------------------                        -------
Underlying effective rate of tax                                                                             £m
Operating profit before exceptional items and share of profits of associates
and joint ventures
• Profit before tax as reported                                                                             311
• Exceptional items                                                                                          39
• Share of profits of associates and joint ventures                                                        (11)
--------------------------------------------------------------------------------                        -------
                                                                                                            339
--------------------------------------------------------------------------------                        -------
Underlying tax charge
• Tax charge as reported                                                                                     85
• Credit for exceptional costs                                                                                4
• Credit in respect of prior year items                                                                       7
--------------------------------------------------------------------------------                        -------
                                                                                                             96
--------------------------------------------------------------------------------                        -------
Underlying effective rate of tax                                                                            28%
--------------------------------------------------------------------------------                        -------


Earnings per share

Basic earnings per share are 5.4 pence (2004: 3.5 pence). Adjusted earnings per
share before amortisation and exceptional items are 8.0 pence (2004: 6.4 pence).



Dividend

The Board is proposing a final dividend of 1.8 pence per share which represents
an increase of 38% over the 2004 final dividend. The total dividend proposed for
the period is therefore 3.12 pence which is covered 2.56 times by the adjusted
earnings per share (before amortisation and exceptional items) of 8.0 pence.



Acquisition of businesses

ITV made two material acquisitions during 2005: SDN and Friends Reunited.
Friends Reunited has been acquired for an initial consideration of £120 million
with additional consideration of up to £55 million based on future performance.
SDN was acquired at a total cost of £136 million.



As required under IFRS 3 (Business combinations) the net assets of the
businesses have been adjusted to reflect their fair value at the date of
acquisition and goodwill has been calculated based on the fair value of the
consideration.



For SDN, intangible assets of £82 million (in respect of the multiplex licence
and customer contracts) have been recognised with an associated deferred tax
liability of £25 million. Goodwill is £77 million.



The principal adjustments for Friends Reunited are to recognise additional
intangible assets of £34 million (in respect of brands and customer
relationships), with an associated deferred tax liability of £10 million, and to
recognise a tax asset of £21 million in respect of the exercise of share
options. Goodwill of £100 million has been recognised based on the expected
total consideration taken at a fair value of £145 million.





Intangible assets

Total intangible assets at 31 December 2005 are £3,947 million being principally
goodwill and acquired intangible assets. Additions during the year arise
principally from the acquisitions of SDN and Friends Reunited and total £294
million. Goodwill balances are not amortised but are instead subject to annual
impairment testing. No impairment has been recognised in 2005. Other intangible
assets are amortised over their useful lives. The total amortisation charge for
the year is £102 million (2004: £111 million).



Cash flow and net debt

The cash generated from operations was £456 million reflecting strong trading.
Exceptional cash payments of £28 million reflect restructuring and integration
costs offset by a receipt from the liquidators of ONdigital.



Property, plant and equipment expenditure was £46 million and £29 million was
raised from sales. A net debt movement of £230 million in respect of the
acquisitions of SDN and Friends Reunited is recognised.



In January 2005, €125 million of the Exchangeable bond was repaid while in April
the remaining £8 million of the Carlton Communications Limited Preference shares
were called. In October, ITV issued £325 million Eurobonds with a maturity of
October 2015 and carrying a coupon of 5.375% in order to secure long term
financing for the Group at a very attractive fixed rate.



As described in more detail under pensions, a £118 million deficit funding
payment into the defined benefit schemes is reflected in cash flows.


The principal movements in net debt in the year are shown in the table below:
------------------------------------------------------------------                         -------       ------
                                                                                                £m           £m
Net debt at 31 December 2004                                                                              (280)
Adjustment on adoption of IAS 32 and IAS 39                                                                (47)
------------------------------------------------------------------                         -------       ------
Net debt at 1 January 2005 (restated)                                                                     (327)
Cash generated from operations                                                                 456
Defined benefit pension deficit funding                                                      (118)
Acquisition of SDN and Friends Reunited                                                      (230)
Taxation paid                                                                                (120)
Property, plant and equipment (acquisitions less disposals)                                   (17)
Net interest paid                                                                             (26)
Equity dividends paid                                                                         (98)
Other movements                                                                                (1)
------------------------------------------------------------------                         -------       ------
Movement in net debt                                                                                      (154)
------------------------------------------------------------------                         -------       ------
Net debt at 31 December 2005                                                                              (481)
------------------------------------------------------------------                         -------       ------

Treasury operations and policies

A central department in London following policies and procedures laid down by
the Board, manages the Group's treasury operations. The most significant
treasury exposures faced by ITV are raising finance, managing interest rate and
currency positions and investing surplus cash in high quality assets. Treasury
policies have been approved by the Board for managing each of these exposures
including levels of authority on the type and use of financial instruments.
Transactions are only undertaken if they relate to underlying exposures. The
treasury department reports regularly to the Audit Committee and treasury
operations are subject to periodic independent reviews and internal audit.



ITV has established and retains strong relationships with a number of banks to
ensure a balanced spread of risk and to facilitate future funding requirements.



Set out below are ITV's principal treasury policies:



-   Financing: ITV's financing policy is to fund itself long term using debt
instruments with a range of maturities. It is substantially funded from the UK
and European capital markets and has bank facilities from the UK syndicated
market.



-    Interest rate management: the Group's interest rate policy is to have fixed
interest rate debt of between 30% and 70% of its total net indebtedness over the
medium term in order to provide a balance between certainty of cost and benefit
from low floating rates. ITV uses interest rate swaps and options in order to
achieve the desired mix between fixed and floating.



-   Currency management: the Group's foreign exchange policy is to hedge foreign
currency denominated costs at the time of commitment and to hedge a proportion
of foreign currency denominated revenues on a rolling 12 month basis. The
policies significantly reduce the Group's earnings and balance sheet exposures
to changes in exchange rates.



-   Investment in cash: ITV operates strict investment guidelines with respect
to surplus cash and the emphasis is on preservation of capital. Counterparty
limits for cash deposits are largely based upon long term ratings published by
the major credit rating agencies. Deposits longer than three months require the
approval of the Management Committee of the Board.



Pensions

The Group's pension schemes are run independently by the schemes' trustees. All
pension scheme assets are administered separately by the trustees using a number
of external fund managers and custodians.



The defined benefit schemes are funded on a long term basis with advice from the
scheme actuaries. Actuarial valuations of the assets and liabilities of the
schemes are carried out every three years with the most recent valuation of the
main scheme having been conducted by the actuaries at 31 December 2004.



As at 31 December 2005, the make up of the membership of the Group's defined
benefit schemes was:

-----------------------------------                   --------
                                                         000's
Active employees                                             3
Deferreds                                                   14
Pensioners                                                  12
-----------------------------------                   --------
                                                            29
-----------------------------------                   --------


This is a mature profile and the active employees therefore have a relatively
small impact on changes in scheme liabilities compared to deferreds and
pensioners.



i) Scheme merger

At the beginning of 2005 there were six separate defined benefit pension schemes
in the Group, a legacy of the company mergers that created ITV. Terms were
agreed with the trustees to merge those into a single scheme and that process
completed at the end of January 2006. This will save significantly on the costs
of administration and professional advice, and also enable a clearer focus on
the issues for a single scheme than was possible with separate schemes.



ii) Deficit funding

It was announced in September 2005 that ITV plc would make a £325 million
contribution into the defined benefit pension schemes as part of a plan to
address the deficit. The amount had been calculated so that, together with
estimated future investment returns on the schemes' assets, it would enable the
schemes to move towards being fully funded (on an ongoing basis) over an
appropriate period of time.



The funding was made in cash with £118 million paid in December 2005 and £207
million in January and February 2006.



iii) IAS 19

IAS 19 accounting for the Group's defined benefit schemes does not affect the
ongoing funding of those schemes.



In 2005 the IAS 19 operating charge for defined benefit schemes was £24 million
(2004: £24 million). The charge within net financing costs for the net of the
expected return on scheme assets and the interest cost on liabilities was an
additional £13 million (2004: £6 million). The Group's defined contribution
schemes gave rise to an operating charge of £2 million (2004: £2 million).



The IAS 19 deficit on the defined benefit schemes was £672 million at 31
December 2004. The valuation at that date reflected the recognition of improving
mortality rates which had been assessed on a scheme specific basis and there has
been no need to make any further adjustment to those mortality rates in 2005.



The principal movements in assets and liabilities of the defined benefit pension
schemes during the year have resulted from the significant reduction in the long
term real interest rates which have increased liabilities, and the very strong
investment returns (especially on the equity portfolio) which have provided a
compensating increase in scheme assets.



The IAS 19 deficit at 31 December 2005 was £532 million reflecting the £118
million lump sum payment in December 2005 and an improvement of £22 million in
the underlying funding position during the year before that lump sum payment.  A
net actuarial gain of £35 million has been recognised as a credit to reserves.



Following the £207 million lump sum payment in early 2006 that £532 million
deficit would reduce to £325 million pre tax on a pro forma basis (or £228
million after a deferred tax asset of £97 million).



The pension schemes are funded on a long term basis and therefore the IAS 19
disclosures are not relevant to the ongoing funding of the schemes.  The last
ongoing actuarial valuations of the defined benefit schemes (at 31 December 2004
for the main ITV Scheme and other dates for some of the remaining schemes)
showed a deficit of £586 million compared to the IAS 19 deficit of £672 million
at 31 December 2004.



Over 2005 the difference in real long term interest rates applied to our IAS 19
valuations was 0.5%. If this reduction had not occurred then our year end
liabilities would have been over £200 million less than reported.



As a result of the improved funding position it is expected that the net return
on scheme assets and liabilities in 2006 will give rise to a credit to the net
financing costs of the Group.



iv) Pension tax simplification

The new tax regime for pension funds comes into effect on 6 April 2006. This
change, referred to as 'A' Day, will have significant consequences for senior
executives for whom tax relief on pension accruals will change from that time.
ITV has taken professional advice and has concluded that it should not
separately compensate any executives for this change, but should establish
alternate pension arrangements for those immediately impacted which leave both
the individual and the Group in positions broadly similar to the present.



Individuals whose pension arrangements are wholly within an approved scheme will
remain in that scheme up to the maximum permitted without adverse tax
consequences, and will have any accrual above that level provided from a secured
unfunded unapproved retirement benefit scheme.



Individuals currently subject to the earnings cap within an approved scheme, and
having additional benefits provided through an unfunded unapproved retirement
benefit scheme, will accrue benefits under the approved scheme up to the maximum
permitted without adverse tax consequences, and will have any accrual above that
level provided from the unfunded unapproved retirement benefit scheme.



International Financial Reporting Standards

ITV plc adopted IFRS for group reporting on 1 January 2005 and has presented its
group financial statements under IFRS for the first time in this report. The
basis of preparation, is set out in note 11. The 2004 comparative financial
information has been restated and represented under IFRS. Details of this
conversion 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.







Risks and uncertainties

ITV has an established programme of risk assessment.  Key risks, mitigating
controls and actions required to enhance controls are identified and monitored
by the management, executive directors and Audit Committee. ITV currently
considers its key risks and uncertainties to be as follows:



• The total level of advertising expenditure is driven by conditions within the
  UK and global economies over which ITV has no control;



• The high level of competition between media owners for share of the total
  display advertising market;



• The increasingly competitive market for television viewers in the UK and the
  impact of new technologies that may change viewing behaviour;



• Adherence to UK broadcasting regulations;



• Exposure to the risk that pension scheme assets are insufficient to meet the
  present and future scheme liabilities;



• Exposure to increasing cost of programmes, talent and rights acquired from
  third parties;



• Exposure to counterparty credit risk; and



• Reliance on third party technology for the operation of key activities.







John Cresswell
Finance Director


Consolidated income statement
--------------------------------                  ---------  ---------   --------
                                                                2005       2004
For the year ended 31 December:                  Note             £m         £m

Group and share of joint ventures' revenue                     2,243      2,132
Less share of joint ventures' revenue                            (66)       (79)
--------------------------------                  ---------  ---------   --------
Revenue                                                        2,177      2,053
--------------------------------                  ---------  ---------   --------
Operating costs before amortisation of
intangible                                                    
assets and exceptional items                                  (1,717)    (1,729)
Operating costs - exceptional items                     1        (29)       (70)
Earnings before interest, tax and amortisation                   
(EBITA)                                                          431        254
Amortisation of intangible assets                       6       (102)      (111)
--------------------------------                  ---------  ---------   --------
Total operating costs                                         (1,848)    (1,910)
--------------------------------                  ---------  ---------   --------
Operating profit                                                 329        143
--------------------------------                  ---------  ---------   --------
Financing income                                                 144        128
Financing costs                                                 (179)      (147)
--------------------------------                  ---------  ---------   --------
Net financing costs                                              (35)       (19)
Share of profits of associates and joint                
ventures                                                7         11         13
Investment income                                                  5          7
Gain on sale of property                                          11          7
(Loss)/gain on sale of subsidiaries and
investments                                             
(exceptional items)                                     1        (10)        17
--------------------------------                  ---------  ---------   --------
Profit before tax                                                311        168
Taxation                                                4        (85)       (25)
--------------------------------                  ---------  ---------   --------
Profit for the year                                              226        143
--------------------------------                  ---------  ---------   --------

Attributable to:
Equity shareholders of the parent company                        222        137
Minority interests                                                 4          6
--------------------------------                  ---------  ---------   --------
Profit for the year                                              226        143
--------------------------------                  ---------  ---------   --------

Basic earnings per share                                2        5.4p       3.5p
Diluted earnings per share                              2        5.3p       3.4p

All results are from continuing operations.

Operating exceptional items during the year comprise reorganisation and
integration costs net of a liquidation dividend received (see note 1 for
details).



Consolidated balance sheet
---------------------------------                     --------  --------  --------
                                                                  2005      2004
At 31 December:                                      Note           £m        £m

Non-current assets
Property, plant and equipment                                      235       258
Intangible assets                                          6     3,947     3,797
Investments in joint ventures and associates               7        93        83
Equity investments                                         8       181       140
Distribution rights                                                 13        12
---------------------------------                     --------  --------  --------
Deferred tax asset in respect of pension scheme                    
deficits                                                           160       202
Other deferred tax balances                                        (86)     (136)
---------------------------------                     --------  --------  --------
Net deferred tax asset                                     4        74        66
---------------------------------                     --------  --------  --------
                                                                 4,543     4,356
---------------------------------                     --------  --------  --------

Current assets
Assets held for sale                                                63         -
Programme rights and other inventory                               388       368
---------------------------------                     --------  --------  --------
Trade and other receivables due within one year                    362       349
Trade and other receivables due after more than one                  
year                                                                 7         8
---------------------------------                     --------  --------  --------
Trade and other receivables                                        369       357
Cash and cash equivalents                                  9       663       582
---------------------------------                     --------  --------  --------
                                                                 1,483     1,307
---------------------------------                     --------  --------  --------

Current liabilities
Liabilities held for sale                                           (9)        -
Borrowings                                                 9       (43)      (10)
---------------------------------                     --------  --------  --------
Trade and other payables due within one year                      (734)     (713)
Trade and other payables due after more than one                    (4)        -
year                                                  --------  --------  --------
---------------------------------
Trade and other payables                                          (738)     (713)
Current tax liabilities                                           (217)     (225)
Provisions                                                         (23)      (32)
---------------------------------                     --------  --------  --------
                                                                (1,030)     (980)
---------------------------------                     --------  --------  --------
---------------------------------                     --------  --------  --------
Net current assets                                                 453       327
---------------------------------                     --------  --------  --------

Non-current liabilities
Borrowings                                                 9    (1,101)     (852)
Defined benefit pension deficit                            5      (532)     (672)
Other payables                                                     (29)       (7)
Provisions                                                         (29)      (43)
---------------------------------                     --------  --------  --------
                                                                (1,691)   (1,574)
---------------------------------                     --------  --------  --------
---------------------------------                     --------  --------  --------
Net assets                                                       3,305     3,109
---------------------------------                     --------  --------  --------

Attributable to equity shareholders of the parent
company
Share capital                                             10       423       422
Share premium                                             10        98        91
Merger and other reserves                                 10     2,666     2,666
Translation reserve                                       10        (1)       (2)
Available for sale reserve                                10        33         -
Retained earnings                                         10        74       (84)
---------------------------------                     --------  --------  --------
Total attributable to equity shareholders of the
parent company                                            10     3,293     3,093
Minority interest                                         10        12        16
---------------------------------                     --------  --------  --------
Total equity                                              10     3,305     3,109
---------------------------------                     --------  --------  --------



Consolidated cash flow statement
----------------------------                  --------  ------  ------  -------
                                                        2005             2004
For the year ended 31 December:                   £m      £m      £m       £m

Cash flows from operating activities
Operating profit before exceptional items        358             213
Depreciation of property, plant and               
equipment                                         34              35
Amortisation of intangible assets                102             111
----------------------------                  --------  ------  ------  -------
Increase in programme rights and other
inventory, and                                   
distribution rights                              (30)            (22)
Decrease in receivables                           23              34
(Decrease)/increase in payables                   (3)             10
----------------------------                  --------  ------  ------  -------
Movement in working capital                      (10)             22
----------------------------                  --------  ------  ------  -------
Cash generated from operations before                    
exceptional items                                        484              381
Cash flow relating to exceptional items:
Operating loss                                   (29)            (70)
Asset write-offs                                   -               4
Provision for impairment                           -               5
Increase in payables and provisions*               1               1
----------------------------                  --------  ------  ------  -------
Cash outflow from exceptional items                      (28)             (60)
----------------------------                  --------  ------  ------  -------
Cash generated from operations                           456              321
Defined benefit pension deficit funding         (118)              -
Interest received                                 20              19
Interest paid on bank and other loans            (42)            (43)
Interest paid on finance leases                   (4)             (4)
Investment income                                  5               7
Dividends received from investments in
joint ventures and associates                       -               4
Taxation paid                                   (120)            (12)
----------------------------                  --------  ------  ------  -------
                                                        (259)             (29)
----------------------------                  --------  ------  ------  -------
Net cash from operating activities                       197              292

Cash flows from investing activities
Acquisition of subsidiary undertakings, net
of cash and cash                                
equivalents acquired and debt repaid on
acquisition                                     (208)            434
Proceeds from sale of assets held for              
resale                                             3              59
Proceeds from sale of property, plant and         
equipment                                         29              35
Acquisition of minority interest                   -            (154)
Acquisition of property, plant and               
equipment                                        (46)            (36)
Acquisition of investments                       (30)             (2)
Proceeds from sale of subsidiaries                 2               -
Proceeds from sale of investments                  -             208
----------------------------                  --------  ------  ------  -------
Net cash (used in)/from investing                       
activities                                              (250)             544

Cash flows from financing activities
Proceeds from issue of ordinary share             
capital                                           50               8
Purchase of US held shares                       (42)              -
Bank and other loans - amounts repaid            (88)           (192)
Bank and other loans - amounts raised            322               -
Capital element of finance lease payments         (3)             (4)
Preference dividends paid to shareholders          -              (5)
Redemption of preference shares                   (8)              -
Redemption of redeemable shares on merger          -            (200)
Equity dividends paid                            (98)            (48)
----------------------------                  --------  ------  ------  -------
Net cash from/(used in) financing                        
activities                                               133             (441)
----------------------------                  --------  ------  ------  -------
Net increase in cash and cash equivalents                 80              395
Cash and cash equivalents at 1 January                   582              185
Effects of exchange rate changes and fair
value movements on                                         
cash and cash equivalents                                  1                2
----------------------------                  --------  ------  ------  -------
Cash and cash equivalents at 31 December                 663              582
----------------------------                  --------  ------  ------  -------



* Includes £4 million (2004: £8 million) relating to expenditure against
provisions held in respect of activities which have been previously
discontinued.



Consolidated statement of recognised income and expense

-------------------------------                     ----------  -------  --------
                                                        Note     2005      2004
For the year ended 31 December:                                    £m        £m

Exchange differences on translation of foreign                      1        (2)
operations
Revaluation of available for sale investments                      20         -
Movements in respect of cash flow hedges                           (1)        -
Actuarial gains and losses on defined benefit
pension schemes                                            5       35      (123)
Taxation on items taken directly to equity                 4       (8)       37
-------------------------------                     ----------  -------  --------
Net income/(expense) recognised directly in                        
equity                                                             47       (88)
Profit for the year                                               226       143
-------------------------------                     ----------  -------  --------
Total recognised income and expense for the year                  273        55
-------------------------------                     ----------  -------  --------

Attributable to:
Equity shareholders of the parent company                 10      269        49
Minority interests                                        10        4         6
-------------------------------                     ----------  -------  --------
Total recognised income and expense for the year                  273        55
-------------------------------                     ----------  -------  --------
Effect of change in accountancy policy:
Impact of adoption of IAS 32 and IAS 39 on
equity at 1  January 2005                                 10        4         -
-------------------------------                     ----------  -------  --------
                                                                  277        55
-------------------------------                     ----------  -------  --------



1.     Exceptional items
----------------------           -----        -----------------  --------  --------
                                                                   2005      2004
                                                                     £m        £m
Operating exceptional items:
Reorganisation and integration  costs                               (40)      (65)
Receipt from the liquidators of                                      
ONdigital                                                            11         -
Provision for goodwill                                                
impairment                                                            -        (5)
----------------------           -----        -----------------  --------  --------
                                                                    (29)      (70)
----------------------           -----        -----------------  --------  --------
Non-operating exceptional items:
(Loss)/gain on sale of subsidiaries and investments                 (10)       17
----------------------           -----        -----------------  --------  --------
                                                                    (10)       17
----------------------           -----        -----------------  --------  --------
Total exceptional items before                                      
tax                                                                 (39)      (53)
----------------------           -----        -----------------  --------  --------


In 2005 a charge of £40 million was incurred in respect of reorganisation and
integration costs including the consolidation of regional news production
centres and technical facilities. The largest element of this (£25 million) was
staff related. Also included in 2005 is an £11 million receipt from the
liquidators of ONdigital. A £10 million loss has been recognised in relation to
the education business after its classification as a disposal group held for
sale.

Reorganisation and integration costs in 2004 of £65 million were principally
costs associated with the integration of the Carlton, Granada and new subsidiary
businesses into ITV plc. The largest element of these costs (£41 million) were
staff related with further costs incurred arising as a result of integrating our
IT systems and infrastructure, property portfolio and fixed asset base.





2.     Earnings per share
----------------------                    ------------ --------- --------- ---------
                                                          2005                2004
                                               Basic   Diluted     Basic   Diluted
                                                  £m        £m        £m        £m

Profit for the year attributable to
equity                                           222       222       137       137
shareholders of the parent company
Exceptional items (including related tax
effect of £4 million, 2004: £14 million)          35        35        39        39
----------------------                    ------------ --------- --------- ---------
Profit for the year before exceptional
items                                            257       257       176       176
Amortisation of intangible assets
(including related tax effect of £31
million, 2004: £33 million)                       71        71        78        78
----------------------                    ------------ --------- --------- ---------
Profit for the year before exceptional
items and amortisation of intangible
assets                                           328       328       254       254
----------------------                    ------------ --------- --------- ---------

Weighted average number of ordinary
shares                                         4,082     4,082     3,947     3,947
in issue - million
Dilution impact of share options -                 
million                                            -        46         -        60
----------------------                    ------------ --------- --------- ---------
                                               4,082     4,128     3,947     4,007
----------------------                    ------------ --------- --------- ---------

Earnings per ordinary share                      5.4p      5.3p      3.5p      3.4p
----------------------                    ------------ --------- --------- ---------

Adjusted earnings per ordinary share
Basic earnings per ordinary share                5.4p      5.3p      3.5p      3.4p
Add: Loss per ordinary share on
exceptional items                                0.9p      0.9p      1.0p      1.0p
----------------------                    ------------ --------- --------- ---------
Earnings per ordinary share before
exceptional items                                6.3p      6.2p      4.5p      4.4p
Add: Loss per ordinary share on
amortisation of intangible assets                1.7p      1.7p      1.9p      1.9p
----------------------                    ------------ --------- --------- ---------
Earnings per ordinary share for the year
before exceptional items and amortisation
of intangible assets                             8.0p      7.9p      6.4p      6.3p
----------------------                       ---------  --------  --------  --------


An adjusted earnings per share has been disclosed because in the view of the
directors this gives a fairer reflection of the results of the underlying
business.



3.     Dividends

Dividends declared and recognised through equity in the year were:
-----------------------------------                         -----------   --------
                                                                 2005       2004
                                                                   £m         £m
Equity shares:
Interim 2003 dividend of 0.5 pence per share                        -         20
Interim 2004 dividend of 1.1 pence per share                        -         45
Final 2004 dividend of 1.3 pence per share                         53          -
Interim 2005 dividend of 1.32 pence per share                      54          -
-----------------------------------                         -----------   --------
                                                                  107         65
-----------------------------------                         -----------   --------

A final dividend of 1.8 pence per share, totalling £74 million, has been
proposed after the balance sheet date in respect of the year ended 31 December
2005 (2004: 1.3 pence per share, totalling £53 million). As is required by IAS
10 (Events after the balance sheet date) this amount has not been provided for
at the balance sheet date.



4.     Taxation

Recognised in the income statement:
------------------------------                     ----------  ---------
                                                       2005       2004
                                                         £m         £m
Current tax expense:
Current tax before exceptional items                   (129)       (73)
Current tax credit on exceptional items                   4         14
------------------------------                     ----------  ---------
                                                       (125)       (59)
Adjustment for prior periods                              9         17
------------------------------                     ----------  ---------
                                                       (116)       (42)
------------------------------                     ----------  ---------
Deferred tax:
Origination and reversal of temporary                    
differences                                              33         17
Adjustments for prior periods                            (2)         -
------------------------------                     ----------  ---------
                                                         31         17
------------------------------                     ----------  ---------
Total taxation expense in the income statement          (85)       (25)
------------------------------                     ----------  ---------


Reconciliation of taxation expense:
----------------------------------                       ----------  ---------
                                                             2005       2004
                                                               £m         £m

Profit before tax                                             311        168
----------------------------------                       ----------  ---------
Taxation expense at UK corporation tax rate of 30%            
(2004: 30%)                                                   (93)       (50)
Non-taxable/non-deductible exceptional items                   (8)        (2)
Non-taxable income/non-deductible expenses                     (5)        (7)
Effect of tax losses utilised                                  18         17
Over provision in prior years                                   7         17
Other                                                          (4)         -
----------------------------------                       ----------  ---------
                                                              (85)       (25)
----------------------------------                       ----------  ---------


In the year ended 31 December 2005 the effective tax rate on profits is lower
(2004: lower) than the standard rate of UK corporation tax primarily as a result
of the utilisation of tax losses on which deferred tax assets were not
previously recognised, offset by exceptional items which are not deductible for
corporation tax purposes. The underlying tax rate on operating profits, after
adjusting for exceptional items, overprovisions in prior years and excluding
associates and joint ventures is 28% (2004: 27%).


A tax expense totalling £8 million (2004: credit of £37 million) has been
recognised directly in equity representing a current tax credit of £2 million
(2004: £nil) and a deferred tax expense of £10 million (2004: credit of £37
million).



Deferred tax assets and liabilities recognised and their movements are:

--------     --------   --------    -------    ---------   --------   --------  ------- --------
                At 31 Adjustment       At 1     Business Recognised Recognised Transfer    At 31
             December        for    January combinations     in the  in equity  to held December
                 2004 IAS 32 and       2005                  income            for sale     2005
                          IAS 39 (restated)               statement
                   £m         £m         £m           £m         £m         £m       £m       £m

Property,
plant and
equipment          (3)         -         (3)           -         (2)         -        2       (3)
Intangible
assets           (151)         -       (151)         (35)        31          -        -     (155)
Programme
rights              7          -          7            -         (2)         -        -        5
Pension scheme
deficits          202          -        202            -        (31)       (11)       -      160
Pensions
funding
payments            2          -          2            -         27          -        -       29
Interest-bearing 
loans and
borrowings,
and
derivatives        (8)         2         (6)           -         10         (1)       -        3
Share-based
payments            8          -          8           18          4          2        -       32
Tax losses          5          -          5            -         (5)         -        -        -
Other               4          -          4            -         (1)         -        -        3
--------     --------   --------    -------    ---------   --------   --------  ------- --------
                   66          2         68          (17)        31        (10)       2       74
--------     --------   --------    -------    ---------   --------   --------  ------- --------

-------------------            --------   ----------  ---------  ---------  --------
                                 At 1     Business Recognised Recognised     At 31
                              January combinations     in the  in equity  December
                                 2004                  income                 2004
                                                    statement
                                   £m           £m         £m         £m        £m

Property,
plant and
equipment                          (6)           4         (1)         -        (3)
Intangible
assets                              -         (184)        33          -      (151)
Programme
rights                              -            9         (2)         -         7
Pension scheme
deficits                          127           41         (3)        37       202
Pensions
funding
payments                            -            -          2          -         2
Interest-bearing 
loans and
borrowings,
and
derivatives                         -            9        (17)         -        (8)
Share-based
payments                            1            5          2          -         8
Tax losses                          -            5          -          -         5
Other                               2           (1)         3          -         4
-------------------            --------   ----------  ---------  ---------  --------
                                  124         (112)        17         37        66
-------------------            --------   ----------  ---------  ---------  --------


At 31 December 2005 total deferred tax assets are £232 million (2004: £228
million) and total deferred tax liabilities are £158 million (2004: £162
million).


Potential deferred tax assets estimated at £0.7 billion, primarily in respect of
capital losses and loan relationship deficits, have not been recognised due to
uncertainties as to amount and whether gain or income will arise in the
appropriate form and relevant territory against which such losses could be
utilised.

Deferred tax liabilities relating to investments in subsidiaries, associates and
joint ventures are also not recognised because the Group controls whether the
liability will be incurred and is satisfied that it will not be incurred in the
foreseeable future.





5.     Pension schemes

The Group operates a number of defined benefit and defined contribution pension
schemes.

Defined contribution schemes

Total contributions recognised as an expense in relation to defined contribution
schemes during 2005 were £2 million (2004: £2 million).

Defined benefit schemes

The Group operates a number of final salary defined benefit schemes. The
majority of these schemes are funded and associated scheme assets are held in
separate trustee administered funds.

The movement in the present value of the defined benefit obligation for these
schemes is analysed below:
----------------------------------                     ---------  --------
                                                          2005      2004
                                                            £m        £m

Defined benefit obligation at 1 January                  2,357     1,552
Business combinations                                        -       570
Current service cost                                        26        28
Curtailment gain                                            (2)       (4)
Interest cost                                              125       113
Net actuarial loss                                         184       179
Contributions by scheme participants                         5         6
Benefits paid                                              (91)      (87)
----------------------------------                     ---------  --------
Defined benefit obligation at 31 December                2,604     2,357
----------------------------------                     ---------  --------


The present value of the defined benefit obligation is analysed between wholly
unfunded and funded defined benefit schemes in the table below:

----------------------------------                       -----------  --------
                                                              2005      2004
                                                                £m        £m

Defined benefit obligation in respect of funded schemes      2,573     2,330
Defined benefit obligation in respect of wholly
unfunded schemes                                                31        27
----------------------------------                       -----------  --------
Total defined benefit obligation                             2,604     2,357
----------------------------------                       -----------  --------


The movement in the fair value of the defined benefit scheme assets is analysed
below:
----------------------------------                       -----------   --------
                                                              2005       2004
                                                                £m         £m

Fair value of assets at 1 January                            1,685      1,130
Business combinations                                            -        432
Expected return on assets                                      112        107
Net actuarial gain                                             219         56
Employer contributions                                         142         41
Contributions by scheme participants                             5          6
Benefits paid                                                  (91)       (87)
----------------------------------                       -----------   --------
Fair value of assets at 31 December                          2,072      1,685
----------------------------------                       -----------   --------

The assets and liabilities of the scheme are recognised in the balance sheet and
shown within non-current liabilities. The total recognised is:
----------------------------------                       -----------   --------
                                                              2005       2004
                                                                £m         £m

Total defined benefit scheme assets                          2,072      1,685
Total defined benefit scheme obligations                    (2,604)    (2,357)
----------------------------------                       -----------   --------
Net amount recognised within the balance sheet                (532)      (672)
----------------------------------                       -----------   --------





Amounts recognised through the income statement are as follows:
----------------------------------                       -----------  --------
                                                               2005     2004
                                                                 £m       £m

Amount (charged)/credited to operating costs:
Current service cost                                           (26)      (28)
Curtailment gain                                                 2         4
----------------------------------                       -----------  --------
                                                               (24)      (24)
Amount credited/(charged) to net financing costs:
Expected return on pension scheme assets                       112       107
Interest cost                                                 (125)     (113)
----------------------------------                       -----------  --------
                                                               (13)       (6)
----------------------------------                       -----------  --------
Total charge in the income statement                           (37)      (30)
----------------------------------                       -----------  --------

The amounts recognised through the statement of recognised income and expense
are:
----------------------------------                       -----------  --------
                                                              2005      2004
                                                                £m        £m
Actuarial gains and (losses):
Arising on plan assets                                         219        56
Arising on scheme liabilities                                 (184)     (179)
----------------------------------                       -----------  --------
                                                                35      (123)
----------------------------------                       -----------  --------

The cumulative amount of actuarial gains and losses recognised through the
statement of recognised income and expense since 1 January 2004 is an actuarial
loss of £88 million (2004: £123 million).

Included within actuarial gains and losses are experience adjustments as
follows:
----------------------------------                       -----------  --------
                                                              2005      2004
                                                                £m        £m
Experience adjustments on scheme assets                        219        56
Experience adjustments on scheme liabilities                     9       (70)
----------------------------------                       -----------  --------

The scheme assets are shown below by major category along with the associated
expected rates of return.
-----------------------             ----------       ---------- --------    --------
                                Expected long          Market    Expected   Market
                                 term rate of           value   long term    value
                                       return            2005     rate of     2004
                                                                   return     
                                         2005              £m        2004       £m
                                            %                           %
                                                                        

Market value
of assets -
equities and
property                                  7.5           1,421         7.5     1,198
Market value
of assets -
bonds                               4.1 - 5.6             618   4.5 - 6.1       453
Market value
of assets -
other                               4.5 - 4.9              33  4.75 - 5.4        34
-----------------------             ----------       ---------- --------    --------
Total scheme
assets                                                  2,072                 1,685
-----------------------             ----------       ---------- --------    --------

The expected long term rate of return on assets assumption is assessed by
considering the current level of expected returns on risk free investments
(primarily government bonds), the historical level of the risk premium
associated with the other asset classes in which the portfolio is invested and
the expectations for future returns of each asset class. The expected return for
each asset class is then weighted based on the asset allocation to develop the
expected long term rate of return on assets assumption for the portfolio.

The actual return on plan assets in the year ended 31 December 2005 was £331
million (2004: £163 million).

The principal assumptions used in the scheme valuations at the balance sheet
date were:
------------------             ---------   --------
                                  2005       2004

Rate of general increase in       
salaries                          4.00%      4.25%
Rate of increase in pension       
payment                           2.75%      2.75%
Rate of increase to deferred      
pensions                          2.75%      2.75%
Discount rate for scheme          
liabilities                       4.90%      5.40%
Inflation assumption              2.75%      2.75%
------------------             ---------   --------

For mortality rates the Group has used PA92 tables with mortality projected to
2015 for pensioner members and to 2030 for non-pensioner members. Using these
tables a male member currently aged 40 is expected to live for a further 45
years, while a male pensioner aged 60 is expected to live a further 24 years.
The Group reflected this recognition that mortality rates have reduced in its
2004 valuation. The tables above have been used for both 2005 and 2004 and
reflect published mortality investigation data in conjunction with the results
of investigations into the mortality experience of scheme members.

Normal contributions into the schemes in 2006 are expected to be in the region
of £20 million based on contribution rates agreed with scheme trustees. Payments
totalling £207 million have been made in early 2006 as part of the announced
£325 million lump sum payment to address the schemes' deficit being the balance
following the £118 million payment in December 2005.



6.     Intangible assets
----------------       -------- ------     ---------   -------  ---------- -------
                       Goodwill Brands      Customer  Licences        Film   Total
                                       contracts and             libraries
                                       relationships             and other    
                             £m     £m            £m        £m          £m      £m
Cost
At 1 January
2004                      1,256      -             -        -            8   1,264
Additions                 2,004    173           319       48           74   2,618
Reclassifications 
(see note 7)                 40      -             -        -            -      40
Disposals                    (4)     -             -        -            -      (4)
----------------         -------- ------     ---------  -------   ---------- -------
At 31 December
2004                      3,296    173           319       48           82   3,918
Additions                   174     26            17       73            4     294
Reclassification 
as assets
held for sale               (45)     -             -        -           (7)    (52)
Disposals                     -      -             -        -           (1)     (1)
----------------         -------- ------     ---------  -------   ---------- -------
At 31 December
2005                      3,425    199           336      121           78   4,159
----------------         -------- ------     ---------  -------   ---------- -------
Amortisation and
impairment
At 1 January
2004                          -      -             -        -            5       5
Charge for the
year                          -     15            86        4            6     111
Impairment
charge                        5      -             -        -            -       5
----------------         -------- ------     ---------  -------   ---------- -------
At 31 December
2004                          5     15            86        4           11     121
Charge for the
year                          -     17            72        7            6     102
Reclassification 
as assets
held for sale                (5)     -             -        -           (5)    (10)
Disposals                     -      -             -        -           (1)     (1)
----------------         -------- ------     ---------  -------   ---------- -------
At 31 December
2005                          -     32           158       11           11     212
----------------         -------- ------     ---------  -------   ---------- -------
Net book value
At 31 December
2005                      3,425    167           178      110           67   3,947
----------------         -------- ------     ---------  -------   ---------- -------
At 31 December
2004                      3,291    158           233       44           71   3,797
----------------         -------- ------     ---------  -------   ---------- -------
At 1 January
2004                      1,256      -             -        -            3   1,259
----------------         -------- ------     ---------  -------    --------- -------

Amortisation of intangible assets is shown within operating costs in the income
statement. In 2004 an impairment of £5 million was recognised within exceptional
items as a result of an impairment review on elements of goodwill attached to
the education business.

Impairment tests for cash-generating units containing goodwill

The following units have significant carrying amounts of goodwill:
-----------------------------------                         -------------  -------
                                                                   2005     2004
                                                                     £m       £m

Broadcasting                                                      2,963    2,889
Multiple units without significant goodwill                         462      402
-----------------------------------                         -------------  -------
                                                                  3,425    3,291
-----------------------------------                         -------------  -------


The recoverable amount of the Broadcasting cash-generating units is based on
value in use calculations. Those calculations use cash flow projections based on
actual operating results and the five year business plan. Cash flows in
perpetuity are extrapolated using a 2.5% growth rate and are appropriate because
broadcasting is a long term business. The growth rate used is consistent with
the long term average growth rate for the industry. A pre-tax discount rate of
11.4% has been used in discounting the projected cash flows.

The key assumptions and the approach to determining their value are:
Assumption                       How determined
Total advertising market         Long term trends, industry forecasts and
                                 macro-economic outlook
Television share of advertising  Long term trends, industry forecasts and in-house
market                           estimates
Digital penetration              Industry forecasts and government stated
                                 objectives
ITV1 share of commercial impacts Impact of digital penetration and historic
----------------------           viewing shares by platform
                                 --------------------------------



7.     Investments in joint ventures and associated undertakings
----------------------------                    -------------    ---------  -------
                                            Joint ventures    Associated    Total
                                                            undertakings
                                                         £m           £m       £m

At 1 January 2004                                         2           31       33
Additions                                                 -            2        2
Business combinations                                    80            4       84
Reclassification (GMTV)                                   6           (6)       -
Reclassification as
subsidiaries (ITV2, LNN,
ITFC, ITV News Channel,
GMTV, GSkyB)*                                           (39)          (6)     (45)
Share of attributable
profits                                                   9            4       13
Dividends received                                       (3)          (1)      (4)
----------------------------                    -------------    ---------  -------
At 31 December 2004                                      55           28       83
Share of attributable
profits                                                   5            6       11
Other                                                     -           (1)      (1)
----------------------------                    -------------    ---------  -------
At 31 December 2005                                      60           33       93
----------------------------                    -------------    ---------  -------

* Included within the 2004 £45 million reclassification as subsidiaries was £40
million of goodwill (see note 6).


The aggregated summary financial information in respect of associates in which
the Group has an interest is as follows:
-----------------------------------                         -------------  -------
                                                                   2005     2004
                                                                     £m       £m

Assets                                                              143      125
Liabilities                                                        (108)     (87)
Revenue                                                             142      135
Profit                                                               13        8
-----------------------------------                         -------------  -------



The aggregated summary financial information in respect of the Group's share of
interests in joint ventures is as follows:
-----------------------------------                         -------------  -------
                                                                   2005     2004
                                                                     £m       £m

Non-current assets                                                   66       65
Current assets                                                       49       45
Current liabilities                                                 (27)     (19)
Non-current liabilities                                             (29)     (30)
Revenue                                                              66       79
Expense                                                             (61)     (70)
-----------------------------------                         -------------  -------





8.     Equity Investments
-----------------------------                    ------------
                                                         £m

At 1 January 2004                                       157
Business combinations                                     2
Disposals                                               (16)
Other                                                    (3)
-----------------------------                    ------------
At 31 December 2004                                     140
Adjustment on adoption of IAS 32 and IAS 39              13
-----------------------------                    ------------
At 1 January 2005 (restated)                            153
Additions at fair value                                  13
Disposals                                                (3)
Revaluation to fair value                                18
-----------------------------                    ------------
At 31 December 2005                                     181
-----------------------------                    ------------






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

Cash                     441          -        441           81          -      522
Cash
equivalents              141          -        141           (1)         1      141
-------------         --------  ---------  ---------    ---------  --------- --------
Cash and cash
equivalents              582          -        582           80          1      663
-------------         --------  ---------  ---------    ---------  --------- --------
Loans and loan
notes due
within one year           (7)         -         (7)         (22)       (11)     (40)
Finance leases
due within one
year                      (3)         -         (3)           3         (3)      (3)
Loans and loan
notes due
after one year          (774)       (39)      (813)        (234)        21   (1,026)
Finance leases
due after one
year                     (78)         -        (78)           -          3      (75)
Preference
shares                     -         (8)        (8)           8          -        -
-------------         --------  ---------  ---------    ---------  --------- --------
                        (862)       (47)      (909)        (245)        10   (1,144)
-------------         --------  ---------  ---------    ---------  --------- --------
Net debt                (280)       (47)      (327)        (165)        11     (481)
-------------         --------  ---------   --------    ---------  --------- --------

--------------------             --------    ---------  --------  ---------  --------
                              1 January Acquisitions  Net cash   Currency        31
                                   2004    excluding      flow        and  December
                                                cash             non-cash      2004
                                                                movements
                                     £m           £m        £m         £m        £m

Cash at bank
and in hand                          91            -       349          1       441
Cash
equivalents                          94           27        19          1       141
--------------------             --------    ---------  --------  ---------  --------
Cash and cash
equivalents                         185           27       368          2       582
--------------------             --------    ---------  --------  ---------  --------
Loans due
within one
year                                 (3)          (1)        -         (3)       (7)
Finance leases
due within one
year                                 (1)           -         4         (6)       (3)
Loan and loan
notes due
after one year                        -         (965)      192         (1)     (774)
Finance leases
due after one
year                                (54)         (30)        -          6       (78)
--------------------             --------    ---------  --------  ---------  --------
                                    (58)        (996)      196         (4)     (862)
--------------------             --------    ---------  --------  ---------  --------
Net
funds/(debt)                        127         (969)      564         (2)     (280)
--------------------             --------    ---------  --------  ---------  --------


Included within cash equivalents is £78 million (2004: £81 million) the use of
which is restricted to meeting finance lease commitments and Gilts of £29
million (2004: £24 million) over which the unfunded pension promises have a
charge.




10.  Consolidated statement of changes in equity

------------                 ------- --------  ----------   ---------  --------  ------- -------  ------- -------
                             Attributable to equity shareholders of the parent company
                             Share    Share  Merger and Translation Available Retained   Total Minority   Total
                           capital  premium       other     reserve  for sale earnings         interest  equity
                                               reserves               reserve
                                £m       £m          £m          £m        £m       £m      £m       £m      £m
At 1 January
2004                           277        -       1,191           -         -      (81)  1,387        1   1,388
Business
combinations                   143       85       1,675           -         -        -   1,903      174   2,077
Redemption of
Granada
redeemable
shares                           -        -        (200)          -         -        -    (200)       -    (200)
Purchase of
minority
interest                         -        -           -           -         -        -       -     (159)   (159)
Shares issued
in the year                      2        6           -           -         -        -       8        -       8
Total
recognised
income and
expense                          -        -           -          (2)        -       51      49        6      55
Movements due
to share-based
compensation                     -        -           -           -         -       11      11        -      11
Dividends paid
to non-equity
shareholders                     -        -           -           -         -        -       -       (6)     (6)
Equity
dividends                        -        -           -           -         -      (65)    (65)       -     (65)
------------                 ------- --------  ----------   ---------  --------  ------- -------  ------- -------
At 31 December
2004                           422       91       2,666          (2)        -      (84)  3,093       16   3,109
Adjustment on
adoption of
IAS 32 and IAS
39                               -        -           -           -        13       (1)     12       (8)      4
------------                 ------- --------  ----------   ---------  --------  ------- -------  ------- -------
At 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 year                      4       46           -           -         -        -      50        -      50
Total
recognised
income and
expense                          -        -           -           1        20      248     269        4     273
Movements due
to share-based
compensation                     -        -           -           -         -       18      18        -      18
Equity
dividends                        -        -           -           -         -     (107)   (107)       -    (107)
-------------                ------- --------  ----------   ---------  --------  -------  ------  ------- -------
At 31 December
2005                           423       98       2,666          (1)       33       74   3,293       12   3,305
-------------                 ------  -------    --------   ---------  --------  -------  ------  ------- -------



11. Basis of preparation


The group financial statements consolidate those of ITV plc and its subsidiaries
(together referred to as the 'Group') and the Group's interest in associates and
jointly controlled entities.

As required by EU law (IAS Regulation EC 1606/2002) the Group's accounts have
been prepared in accordance with International Financial Reporting Standards
adopted by the International Accounting Standards Board (IASB), and
interpretations issued by the International Financial Reporting Interpretations
Committee of the IASB, as adopted by the EU ('IFRS'). These are the Group's
first consolidated financial statements to be prepared under IFRS and IFRS 1
'First-time Adoption of International Financial Reporting Standards' has been
applied.

The accounts are principally prepared on the historical cost basis except where
other bases are applied under the Group's accounting policies.

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.

The financial information set out herein does not constitute the Company's
statutory report and accounts for the year ended 31 December 2005. Statutory
accounts for 2005 will be delivered to the Registrar of Companies following the
Company's annual general meeting. The auditor has reported on those accounts;
their report was unqualified and did not contain statements under 237(2) or (3)
of the Companies Act 1985. Copies of the 2005 annual report and accounts will be
sent to all shareholders and will be available from the registered office of the
Company, London Television Centre, Upper Ground, London, SE1 9LT.










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