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  Print      Mail a friend       Annual reports

Wednesday 07 March, 2007


Final Results

07 March 2007

                ITV plc results for year ended 31 December 2006

                     Strengthening ITV1 the key to success

2006 Financial highlights

  • Solid revenue performance despite soft advertising market and lower ITV1
      • Total revenue of £2,181m (2005: £2,196m), adjusted for disposals
        £2,173m (2005: £2,159m)
      • Revenue outside ITV1 NAR up 23% at £900m almost balancing reduction in
        ITV1 NAR
      • Digital Channels NAR exceeds £150m target a year early
  • Operating EBITA £375m* (2005: £460m*)
  • Adjusted EPS 6.4p* (2005: 8.0p*)
  • Disposals £0.5 billion since merger
  • Full Year dividend 3.15p
  • Pension fund deficit reduced by £247m to £285m (after £207m deficit
  • Non-core asset disposals delivered £189m cash in 2006

  *  Before exceptional items, amortisation and tax adjustments

Operating highlights

Strengthening ITV1 and growing digital revenues

   • Digital channels growing strongly with revenue up 41% at £157m,
     partly offsetting ITV1 NAR down 12% at £1,281m
   • ITV1 is the only UK commercial channel regularly attracting big
     audiences - 442 shows broadcast with more than 8m viewers in 2006
   • Over the first eight weeks of 2007, ITV1 adult SOCI is down 5.4% on
     the same period in 2006 and the ITV family is down 3.0%
   • Accelerated commissioning of new programmes with focus on longer
     running, more contemporary, drama and new entertainment formats

Expanding our content business

   • Producer/broadcaster model is key - ensuring ownership of
     intellectual property to leverage/exploit beyond ITV1
   • Produced Oscar winning film The Queen with Helen Mirren
   • ITV Content external sales up 18% at £282m in 2006:
       • UK production revenue outside ITV up 12%
       • International production up 16%
       • Distribution and exploitation up 24%
   • Focus on high value genres
   • Increase content for multichannels and made-for-broadband content
   • Building MPEG digital 'content store' for programmes - target 20,000
     hours by end 2007

Growing consumer revenues

   • Consumer revenues growing strongly - up 129% to £142m
   • Developing online initiatives:
      • New ITV broadband service will build mass audiences using
        high-quality 'click and watch' content
      • Roll out for ITV Local regional broadband operations with London and
        Central going live today.
      • Friends Reunited, set for further growth in 2007 with 5 new censuses
        to be integrated and new mobile, texting and video facilities built into 
        the sites
   • Freeview growth helping drive 56% increase in SDN revenue. Freeview
     set to overtake Sky in 2007 as the most popular digital platform

Commenting on the results Michael Grade, Executive Chairman, ITV said:

'Our overall strategy is right, but we need to improve our allocation of
resources in order to accelerate the rate of improvement across all our

ITV is a hugely popular brand with the UK's largest family of commercial
channels, driven by quality programmes from the biggest and most successful
commercial production business in the UK.  This in turn enables us to extend our
value chain with online distribution.  These unique strengths in brand, content
and distribution are cause for considerable optimism in our ability to deliver
real value for our viewers, advertisers and shareholders.'


For further enquiries please contact:

ITV plc
Tel: 020 7843 8000

Press enquiries
Brigitte Trafford                               Group Communications Director
Jim Godfrey                                     Director of Corporate Affairs

Analysts' enquiries
James Tibbitts                                  Company Secretary
Georgina Blackburn                              Head of Investor Relations

Citigate Dewe Rogerson
Tel: 020 7638 9571

Jonathan Clare
Simon Rigby
George Cazenove

Website:, investor information:
An analysts presentation will be held at 09:30hrs on 7th March 2007 at the City
Presentation Centre, 4 Chiswell Street, London EC1Y 4UP

Message from the Executive Chairman Michael Grade

On Monday, 8 January, 2007 I returned to work for ITV. From the moment I was
approached by the Board last year, I had no doubt that I would accept this most
stimulating and challenging position in British broadcasting.

ITV has not had an easy time in recent history, operating in the highly
competitive and technology driven media sector. It faced a challenging
advertising market and speculation over both its leadership and its ownership.

My brief is to restore the fortunes of the Group and thus return the business to

Having been in post for two months it is too soon to conclude definitive plans
for the business, but generally I have developed more positive impressions than
negative ones, and the latter are mostly within our control to remedy.

On the positive side:

- There are talented and dedicated people across all areas of the Company;

- ITV Productions is a superb business of real scale with the ability to deliver
  outstanding content, from the Oscar winning film 'The Queen' starring 
  Dame Helen Mirren, to Coronation Street and Emmerdale, to Dancing on Ice;

- ITV remains a much-loved brand and ITV1 is still the UK's most popular
  television channel in peak-time with the England v Sweden game during the
  football World Cup achieving the highest audience (18.5 million) on any 
  channel in 2006;

- Our strong regional presence is a greater asset than is recognised and the
  growth in regional advertising has been particularly buoyant against a 
  depressed national TV advertising market. We need to find ways to sustain and 
  even enhance this valuable public service. It is part of what binds ITV to 
  its audiences throughout the UK and distinguishes us from our competitors.

- Our digital channels are the most successful free to air commercial family of
  digital channels in the UK, each with distinctive branding and programming. We
  must ensure that they have the investment they need to grow their leading 
  market position as we approach digital switchover;

- The Consumer businesses represent an area of proven growth which we will seek
  to accelerate; and

- The Board's strategy which I inherit is essentially sound. The businesses that
  have been recently acquired and developed are all natural extensions of the 
  core operations.

On the negative side:

- Whilst the strategy is sound, we are playing catch up in many areas, no doubt
  due to the efforts required to 'bed in' the successful Carlton/Granada merger.
  We have a valuable multichannel offering and exciting web opportunities - but
  still a long way to grow;

- There is a lack of innovation in our programming, partly resulting from a fear
  of ratings failure and the punitive consequences that follow under the 
  Contract Rights Renewal (CRR) remedy;

- The Company has developed a tendency towards bureaucracy. The cure for this
  lies with the example set by the leadership team within the businesses. I will
  improve delegation, and place emphasis on the need to make the ITV values  a
  reality in our actions;

- We need to continue strengthening the relationship between our commissioning
  teams and both internal and external producers. This is critical to ensure 
  that the commissioning pipeline is filled with the high-quality programmes 
  that deliver the audiences which in turn our commissioning team need to 
  fulfil our advertisers' and viewers' aspirations; and

- Our regulatory environment needs to reflect the reality of our 21st century
  structure and the developing market in which we operate these days. ITV may 
  have consolidated, but it is a long way from the advertising monopoly of 
  yesteryear. The regulatory burden has yet fully to reflect this.

My task, after the recent distractions - together with ITV's senior management
team - is to build a sense of confidence in our people and the wider creative
community to ensure that together we deliver more consistently for our viewers,
our customers and our shareholders.

My immediate priorities are developing the strength of our programming and new
media businesses, and working to reduce overly onerous regulatory constraints.

Raising our creative sights

On the programming side we must raise our creative ambition. We must be more
innovative and take more risks. We must be more relevant and we must be ahead of
audience tastes. In particular we must regain our pre-eminence in drama series
on ITV1 at 9.00 pm. I am definitely encouraged by what I have heard and seen so
far from the new commissioning team headed by Simon Shaps.  They have already
started to cull some of the older programmes which were past their sell by date,
and we are introducing a range of new programmes in 2007.

I am now working with them on the plans that are being formulated for 2008 and

Content creation is at the core of our future

High quality, home produced, popular content attracts the mass audiences which
only ITV can offer advertisers, thus generating value. Content creation is
today, and will remain, at the heart of ITV. I am committed to the continuing
development of ITV Productions. It is already one of Europe's most successful
commercial production companies supplying programmes in many different genres
both for ITV and other UK broadcasters. Our licensing, distribution and
international production businesses which are also important to our content
development strategy, are growing and moving into new markets and territories,
providing important additional revenue streams. The value chain for content is
getting longer and more lucrative thanks to the digital present - and future.

New media platforms

Increasingly our viewers are demonstrating a desire to move beyond a simple
passive viewing experience and expect to interact with, and participate in, our
programming. People are also accessing our content from a much wider range of
media platforms. Our Consumer team has responded, developing ways of enabling
viewers to do this. Technology creates new opportunities for content
consumption, and we must ensure that we exploit the opportunities that this
brings, delivering new services that viewers can access whenever, wherever, and
however they want. The launch of our new broadband proposition this Spring will
significantly enhance our online offering. I will be promoting the acceleration
of our new media businesses. With our high-quality content and services for
viewers, I believe that 2007 will be the year that ITV comes of age as a
deliverer of online entertainment with real commercial opportunities.

Appropriate regulation for the digital age

ITV is subject to a high degree of regulation, some of it the legacy of an age
of analogue broadcasting and an oligopolistic commercial broadcasting structure.
This regulatory burden is not entirely compatible with the increase in
competition driven by digital technology and new media, and by the public's
appetite to access new distribution platforms as they appear. One of our
priorities is to seek some alternative to the Contracts Rights Renewal remedy
(CRR). The CRR undertakings were given in 2003 as a pre-condition to the merger
of Carlton and Granada to create ITV, and the effect is to link ITV1's
advertising share (Share of Broadcast) directly to its commercial viewing share
measured by Share of Commercial Impacts (SOCI). It has become apparent that this
not only prevents ITV from receiving fair value for the mass audiences it
delivers, and which are so sought after by advertisers, but it is also damaging
to the overall UK television advertising market. A number of well respected
figures in media and advertising now accept that CRR needs urgent review, and we
are lobbying hard for that process to begin.

We continue to look for operating efficiencies across the business. We announced
in June 2006 an operational review with plans to save £40 million over three
years. We are on track to deliver these efficiency savings.


During 2006, ITV was the subject of much bid speculation, with potential
offerors being forced on two occasions to make public statements about their
intentions. In neither case was a formal offer tabled, and in both cases the
Board carefully considered firstly the limited information provided by the
potential offerors, and secondly detailed internal and external valuation work.
On both occasions the Board concluded that it was in all ITV shareholders'
interests that such proposals should be rejected.

On 17 November 2006, British Sky Broadcasting (BSkyB) acquired a 17.9% holding
in ITV at a price of 135 pence per share. At the present time, BSkyB's holding
is subject to regulatory reviews by Ofcom, the OFT and the DTI in relation to
both competition and broader public interest issues; Ofcom is also separately
reviewing 'change of control' under the Broadcasting Act.  ITV has made
submissions in response to the authorities, at their request, and has noted the
concern that BSkyB (as a competitor) may be able, with the size of its holding
and given historic voting patterns, to block a shareholder resolution requiring
a 75% majority and that this may not be in the interest of ITV's shareholders as
a whole.  The authorities will consider whether there should be any form of
restriction on BSkyB in respect of their holding in the Company.  The Board will
continue to act in the interests of all shareholders.

In reviewing the level of the final dividend to propose at the forthcoming AGM
your Board has considered a number of factors. The UK television advertising
market deteriorated over the late Summer and Autumn of 2006, resulting in a near
5% fall for the calendar year. It was in part as a result of this that the Board
of ITV plc decided to halt the share buy-back programme at £251 million. Market
estimates for 2007 were that the UK television advertising market would be
either flat or decline a little further, with the first half of 2007 likely to
be more adversely affected as a result of comparative 2006 monthly revenue
patterns. Over the first quarter of 2007 we believe that the UK television
market will be approximately 0.5% higher than 2006, and ITV's total advertising
revenue will be down by approximately 4.5% as the effect of CRR and SOCI decline
on ITV1 reduce the channel's share of advertising. Whilst we expect this decline
to slow and stabilise as multichannel digital television fully replaces
analogue, it is probable that ITV1 revenues will decline in 2007, and may not be
wholly made up by the growing advertising revenue from our successful digital
channels.  Having regard to this, your Board has decided to propose that the
final dividend for the year ended 31 December 2006 should be held at the same
rate as for 2005 of 1.8 pence, to be paid on 2 July 2007 to shareholders on the
register on 20 April 2007.

My Board colleagues and I would formally like to record our thanks to Sir Peter
Burt and Charles Allen for their contributions to ITV. The creation of 'one ITV'
from 11 separate regional ITV companies owes much to Charles' vision and
determination. Under Sir Peter's steady stewardship through an unsettling
period, Charles directed the integration of Granada and Carlton ahead of
schedule and produced greater synergies than originally forecast.

I would like to thank all of my new colleagues within ITV for their warm
welcome, and to express my belief that together we can lift our game and create
new and valuable content for our viewers and uniquely effective airtime for our

Michael Grade
Executive Chairman

Operating review


2006 was a year of significant change for both the sector and the Company. Our
traditional core business, ITV1, continued to be affected by a number of
negative factors and we continued to develop new businesses and revenue streams.

2006 has seen ITV continue to adapt to the demands of the digital world. Our
programming consistently delivers mass audiences on ITV1 and we have launched
more new channels to add to our successful family of digital channels. Our
online presence will achieve a significant step forward with the launch of our
new broadband portal in the Spring of this year.

The Board of ITV have made significant changes to the leadership of the Company
in recent months. In November the Board announced the appointment of Michael
Grade as its new Executive Chairman. He took up his position on 8 January 2007
and assumed the responsibilities of the Chairman, Sir Peter Burt, who resigned
on the same day, and the executive responsibilities of the former Chief
Executive, Charles Allen, who left the company on 4 January 2007. Although the
appointment of an Executive Chairman is not consistent with the provisions of
the Combined Code, the Board considered the circumstances within which it was
made justifiable in terms of restoring strategic leadership to the Company. The
appointment has been warmly welcomed by ITV's leading investors, the
broadcasting industry, media commentators, the advertising community and other
key stakeholders.

In 2007 John Cresswell, ITV Finance Director, was also appointed to the role of
Chief Operating Officer. He takes on all operating responsibility and the
executive team report directly to him.

Operating review


In 2006 we put in place the strategies we believe will deliver long-term
sustainable growth in our broadcasting business.

These include:

- a new commissioning team and continued investment of approximately £1 billion
  per annum in our programme schedule;
- investing in new programming and channel brands;
- optimising schedule efficiency; and
- working to modernise our regulation including CRR and our Public Service
  Broadcasting (PSB) obligations.

We maintain tight control on costs and are one of the most efficient
broadcasters in the UK as measured by the relationship between programme spend
and audience share.

Highly efficient UK broadcaster

UK channels programme efficency (2005)          
                                          Share of total      Total    
                                               programme   audience     
                                                   spend      share   Efficiency
                                                     (%)        (%)        ratio
Five                                                 4.0        6.6         1.65
ITV1                                                17.3       21.3         1.23
BBC1                                                19.2       23.1         1.20
BBC2                                                 8.0        9.5         1.19
C4                                                  10.4        9.8         0.94

Source: 1 Ofcom Communications Market
        2 BARB, Ofcom Communications Market, BBC Annual Report 2005

In 2006, ITV remained the leading free to air commercial broadcaster in the UK,
and ITV1 was the most popular channel in peak time between 7.00pm and 10.30pm in
the evening. In our programming, we broadcast a mixed portfolio of genres
including high budget entertainment and drama, major sporting events, popular
factual programming and agenda setting news and current affairs. Whilst
long-running popular shows such as Coronation Street, Emmerdale and The Bill
have seen some overall audience decline during 2006, we are working hard to
revitalise them. ITV had significant rating successes in 2006 with newer
programmes such as Dancing on Ice, Wild At Heart, Soapstar Superstar and Lewis.
In 2006, ITV produced more new programmes with an audience in excess of 5
million viewers than all other UK broadcasters combined including the BBC.

In 2006, ITV News opened a bureau in Beijing to expand its coverage from one of
the world's largest economies and, in October, China correspondent John Ray
marked the opening with a week of special reports from the region. In March
2006, ITV News launched the highly acclaimed Three Degrees from Disaster series,
assessing the evidence of climate change around the world. This has been
followed up in January 2007 with Mark Austin providing the first ever live
coverage from Antarctica for ITV News, with film of the melting glacial ice cap.
ITV News also managed to secure exclusively the only phone video footage of the
police raids in Forest Gate on 2 June. In the week that marked the anniversary
of the 7/7 London bombings, ITV News set the news agenda after undertaking the
biggest ever survey of British Muslims.

Digital channels

We increased our investment in our digital channels by £14 million to £75
million in 2006, with a further £25 million projected for 2007 to increase our
audience reach, and we launched a number of new channels. Because of the
strength of ITV's family of digital channels, we were able to keep high-value
audiences within the ITV family through cross-promotion, complementary
scheduling and strong distinctive branding for each of our channels. We
increased audience reach using the ITV Family of channels to target valuable,
but distinct, demographics at different times of day. For example, our younger
audiences were attracted to programmes on ITV2 or ITV4, when ITV1 was showing
programming with more appeal to older viewers. The success of this approach in
2006 was that ITV2, ITV3 and ITV4 produced 29% of all year on year multichannel
adult impact volume growth and 50% of all year on year multichannel advertising
revenue growth.  Overall advertising revenue from our digital channels grew by
41% to £157 million in 2006, exceeding our target of £150 million p.a. a full
year ahead of plan.

Delivering for our advertisers

In 2006, ITV1 broadcast all the programmes on any commercial channel achieving
over 8.2 million viewers (2005 - all programmes over 7.5 million). With this
scale, ITV helped advertisers achieve their brand building objectives of high
impact delivery and viewer engagement.

In 2006, ITV created a new Integrated Planning team to build stronger
relationships with strategic planning advertising agencies. They work alongside
the airtime Trading team, who focus on ITV's portfolio of programming and
digital channels and negotiate directly with media buying agencies. The two
teams work closely with our advertisers to offer them bespoke multimedia
solutions for both mass audiences with ITV1, and targeted audiences across our
digital channels and new media platforms such as mobile and online. We are also
unique in our competitive environment in having regional and local advertising
sales capabilities, and our ability to offer regional and sub-regional
advertising solutions has driven regional advertising revenue growth by 14% in

SOCI performance in 2006

A number of factors have contributed to the decline in ITV SOCI during 2006. For
ITV1 the decline in adult SOCI was 10% to 33.1%. Under the CRR mechanism our
advertisers would be able to reduce the share of their total UK TV advertising
committed to ITV1 by a proportionate 10% in 2007 whilst retaining their previous
discount and pricing structure. This loss will be partially offset through the
continued investment and growth in our digital channels' revenue and through
some outperformance against CRR on ITV1, where for instance regional advertising
has been performing strongly.


ITV Productions is one of Europe's largest and most successful commercial
producers, creating more than 3,000 hours of original programming each year.

ITV Channels 2006 all time adult impact share and volume in all homes

                                                  Share of     Volume of impacts
                                                 commercial         (billion)
                                                 impacts (%)
Channel                                         2006     2005      2006    2005

ITV1                                            33.1     37.0     234.8   258.2
ITV2                                             3.0      2.8      21.5    19.3
ITV3                                             2.3      1.6      16.7    11.3
ITV4                                             0.7      0.1       5.0     0.6
M&M                                              0.4      0.4       2.6     2.6
Citv                                             0.1        -       0.8       -
ITV News                                           -      0.1         -     1.1
GMTV                                             2.5      2.6      17.3    17.8
GMTV2                                            0.1        -       0.4     0.3

Total                                            42.2    44.6     299.1   311.2

(Source: BARB)

ITV Productions has dominated ITV1's list of top ten most popular programmes in
terms of viewing share in 2006 with eight of the top ten programmes (2005: six
of the top ten). Five of the top ten shows on all UK television were made by ITV
Productions (2005: four of the top ten). ITV Productions made seven of the top
ten dramas on all UK television (2005: five of the top ten).

Moving forward, as part of ITV's strategy for growth, ITV Productions is
focusing on high-value genres, such as high-end contemporary drama and factual
entertainment, and exiting low-growth and low-margin businesses.

It is almost impossible for all programmes to be instant successes, and ITV
Productions during 2006 did make a number of programmes that did not deliver the
expected audiences. Whilst acknowledging that there will continue to be some
programmes, including well made and presented programmes, that do not achieve
the ratings expected of them, we are working hard to improve the hit rate for
both new and returning shows and recognise that we must not be risk averse.

As a producer-broadcaster ITV generates a significant amount of content
in-house. There are clear synergies involved in combining our broadcasting and
production operations.

For broadcasting, the advantages are that we can secure development and
innovation in-house, keep programme inflation costs to a minimum, and gain
access to rights and key talent.

For our production team the advantages include; a high volume of production
attracting and supporting key talent both in front of and behind the camera, the
ability to develop formats for ITV that can then be produced for and sold to
broadcasters in other countries, and increasingly the opportunities in digital
and new media to exploit the rights that are created when programmes are

We continued to grow our production for other broadcasters, in the UK, with hits
like The Street for BBC.


Internationally, our ITV Worldwide production businesses increased their
turnover by 16% in 2006. Growth at Granada America, Granada Germany and Granada
Australia was fuelled by a strong year for returning formats such as Nanny 911
and Hell's Kitchen with Gordon Ramsay in America, Das Perfekte Dinner (Come Dine
With Me) in Germany, and Dancing on Ice and Dancing with the Stars (Strictly
Come Dancing) in both Australia and Germany. In 2006 Granada America produced
programmes for major cable television and US networks including Hit Me Baby One
More Time (NBC), Gameshow Marathon (CBS) and Nanny 911 (Fox).

Granada International increased its sales by 31% in 2006 to TV broadcasters,
home entertainment partners and new media platforms in more than 200 countries
worldwide. Particular successes included TV movies, and format sales including
Dancing On Ice to 12 territories including Russia, Belgium and Holland.

Granada Ventures increased revenue in 2006 by 13%, particularly from DVD sales.
Key programming included box sets for Cracker and Agatha Christie's Poirot, the
launch of Pocoyo on DVD, and a range of interactive DVD games launched at
Christmas. Two of these interactive games featured in the Top 10 releases in the
UK, with Little Britain the fourth best selling title in the UK active charts.


Throughout 2006, ITV continued to develop its presence and pursue growth
opportunities in new markets and on new platforms. ITV's expanding Consumer team
raised our business-to-consumer capability through a range of innovative market
offerings, and 'new pay' revenue opportunities. In 2006 ITV Consumer made a
number of senior appointments to help drive this growth forward in the coming
months. The performance of its separate businesses are set out below.


Our platforms business focuses on exploiting and managing ITV's interests in
broadcasting platforms. Our Freeview multiplex SDN - one of the six multiplexes
carrying digital channels on Freeview - will deliver increasing revenues as the
digital terrestrial platform grows in popularity and our contracts with channel
operators come up for review from 2008 onwards.


Our online presence has three key components. In 2006 we started the planning
and preparation for to be re-launched with improved functionality,
content and design. In Spring 2007, we will re-launch the new, having
committed more than £20 million to the development of a fully interactive
broadband platform and content digitisation. The site will enable viewers to
watch all of ITV's channels live, catch up on any programme from the last 30
days, and access ITV's extensive archive. Revenues will initially be delivered
through advertising, and the ITV brand and cross-promotional capability will be
used to drive traffic to the site. Alternative revenue models such as
subscription and pay per view will be trialled in due course, building on the
success of the on-demand Champions League service launched in September 2006.

Our wholly-owned community website, Friends Reunited, is the second key part of
our online strategy and builds on user-generated content. Friends Reunited has
grown under ITV's ownership with EBITA of £8.8 million in 2006 up 52% on 2005.

Integration of Friends Reunited moved apace during the year, with work
undertaken to maintain its leading market positions in schools reunion and
genealogy, improve the consumer proposition, and increase functionality through
the upload of user-generated content. Advertising sales for the sites are now
handled in-house at ITV, and Friends Reunited provides dating and jobs services
for and ITV Local. Friends Reunited also provides with the
infrastructure and traffic to leverage a host of significant, related commercial
opportunities, including targeted advertising, the provision of enriched online
content, and interactive services, to drive further growth. These are some of
the ways that Friends Reunited and our other operations can leverage off each
other's core competencies.

ITV Local is the third business in our online portfolio. Following a successful
trial in the Meridian area, we have identified a strong consumer demand for
local information, news and services that are accessible online. ITV Local
blends two key ITV strengths, our regional news brands, and our relationships
with advertisers.  In 2006, ITV acquired business directory specialist Enable
Media (currently operating as Scoot) which gave us an immediate and significant
foothold into the online business directory listings sector, a market which is
estimated to be worth approximately £150 million, and is projected to grow by
20% in 2007 and strongly thereafter. Intended as a richer video-led, more
interactive, version of a local paper, ITV Local is now adding London and
Central regions to its service, with other regions to follow throughout the


In 2006 we launched ITV Play, our participation TV brand. This has proved
popular with both viewers and those who participate. In 2006 we have given away
nearly £12 million to over 26,000 winners. ITV Play has a well-used and
well-publicised free route through which comes one in five entries. The vast
majority of viewers enjoy ITV Play without phoning in - three quarters of
viewers typically watch the show on ITV1 during the night without participating.
Viewers generally play in moderation. When they do play, 77% of entrants play
fewer than five times a day and typically play once every five weeks.

We await the result of the current enquiry into participation TV formats and we
are ensuring that our own systems are robust and our programmes are compliant.

ITV Play Viewer Care

Participation TV is a new sector, and we will continue to work with all relevant
regulatory bodies to ensure that standards of viewer care across the industry
are appropriate. Examples of measures ITV Play has in place include:

- Reminder phone alerts every 10 calls
- On-screen information about all available entry routes, referred to regularly
  by the presenters
- An in-house viewer care team
- Caller activity monitoring with pro-active calls to high-volume players
- Daily limit on all entry routes
- Entry limited to over 18s
- A code of conduct in place with our production company suppliers


2006 saw some strategic developments for ITV's mobile presence. We re-launched
our entertainment portal, which offers news, entertainment, TV listings,
weather, ring-tones and wallpapers, and many other services for mobile users.
ITV also agreed content partnerships with Virgin Mobile and 3, becoming the
first UK terrestrial to stream its channels on 3G phones. Within a month of
operation more than 100,000 sessions took place on the 3 mobile TV simulcast
service, demonstrating a real demand for ITV's mobile TV services. We will
continue to work with mobile network operators as they experiment with new


The Operating Review highlights how the strengths of ITV's operations helped us
deliver programmes and services to satisfy our viewing and advertising
customers. Many of our successes have been significant peaks of performance in
the face of ever more challenging competitive pressures. However, our aim is to
achieve more consistency in our on-screen performance.

The degree of structural market change, especially the move to digital and
channel proliferation, has meant that some areas of performance have declined,
as shown by some of our non-financial KPIs. Some of these pressures will reduce,
as the move to digital nears completion.

The Financial Review that follows explains how these factors have translated
into the financial results.


Statutory results for the year ended 31 December 2006

Total revenue for the year ended 31 December 2006 was slightly lower at £2,181
million (2005 restated: £2,196 million) whilst revenue before disposed
businesses was slightly up at £2,173 million (2005 restated: £2,159 million).
Operating profit decreased to £264 million (2005: £329 million) with underlying
operating profit before amortisation and exceptional items down 18% at £375
million (2005: £460 million). Profit before tax, amortisation and exceptional
items decreased by 19% to £364 million (2005: £452 million).

                                                           2006            2005
                                                             £m        Restated

Broadcasting                                              1,665           1,783
Content                                                     652             672
- less internal                                            (370)           (432)
                                                            282             240
Consumer                                                    126              61
Other revenues                                               12              20
Producer/Broadcaster segment                              2,085           2,104
Other segment                                                96              92
Total                                                     2,181           2,196

PRTS restatement                                                            (19)

Total previously reported                                                 2,177

The table above includes the results of disposed businesses (021 and Granada
Learning) of £8 million in 2006 and £37 million in 2005. These businesses were
sold in 2006.


Broadcasting sales comprise net advertising revenues, sponsorship income and
other revenues.

Total ITV NAR decreased by 8% during the year to £1,494 million (2005: £1,631

                                                     2006      2005      Change
                                                       £m        £m          £m

ITV1                                                1,281     1,462       (181)
ITV2, ITV3, ITV4, ITV News Channel,
M&M, Citv                                             157       111         46
GMTV                                                   56        58         (2)

Total NAR                                           1,494     1,631       (137)

ITV1's NAR in the year was £1,281 million (2005: £1,462 million), £181 million
lower than 2005, however, this reduction was partially offset by the strong
performance of ITV2, ITV3 and ITV4 which, together with Men and Motors and Citv
contributed 41% year on year growth of £46 million resulting in total NAR of
£157 million (2005: £111 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.

2006 was a difficult year for the television advertising market, with a decline
of 4.9% compared to growth of 2.6% in 2005. Coupled with the effect of CRR
(following the 11% decline in ITV1 SOCI in 2005), this results in ITV1's 2006
NAR being down 12% on 2005.

In 2006, ITV's total share of commercial impacts on UK television was 42.2%
(2005: 44.6%).

The 2007 advertising trading season is now substantially complete, with the
majority of agency deals agreed. 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.

Sponsorship income increased by 29% in 2006 to £53 million (2005: £41 million)
due to price increases as the cost of sponsorship moves closer to airtime value
and also the successful sponsorship of new programmes and events such as the
2006 World Cup.

Other broadcasting revenues of £118 million (2005: £111 million) include airtime
sales on behalf of third parties, sales of ITV programming by the Network Centre
to Channel 3 licences not owned by ITV and interactive transactions from GMTV.


Content 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 and in 2006 this internal programming amounted to £370
million of ITV network programme spend (2005: £432 million). In 2006, total
external sales of £282 million (2005: £240 million) included original
productions for other broadcasters of £139 million (2005: £122 million),
distribution and exploitation sales of £123 million (2005: £99 million) and
revenue from the hire of studio and technical facilities of £20 million (2005:
£19 million).


Consumer revenues include interactive and online transactions of £47 million
(2005: £44 million), income from the first full year of ITV Play of £54 million
(2005: £1 million) and revenues from our digital terrestrial multiplex SDN of
£25 million (2005: £16 million).

Other revenues

Other revenues include property rental income and 021 (sold in 2006).

Other segment

Revenues from outside of the main producer/broadcaster segment include those for
Carlton Screen Advertising of £72 million (2005: £61 million), Friends Reunited
of £16 million (2005: £1 million) and Granada Learning of £8 million (2005: £30


During the period the Group has reviewed its revenue recognition policy for
premium rate telephony services acknowledging the increasing significance of
this revenue stream. The Group's policy has consequently been revised to reflect
revenue as the amount billed net of operator costs. Previously revenue was shown
net of other costs, such as production costs, in addition to operator costs.
2005 revenue and operating costs have therefore been restated, reflecting an
increase in both of £19 million. The impact of this change in accounting policy
in 2006 was that revenue and operating costs are both £16 million higher than
under the previous accounting policy. 2006 was the first full year of operation
of ITV Play which also earns revenues from premium rate telephony services.  ITV
Play's revenues and operating costs in 2006 would have been £34 million lower if
the new accounting policy had not been adopted. There is no impact on either
profit or balance sheet.

Broadcasting schedule costs
                                                                 2006      2005
                                                                   £m        £m
ITV1 (plc share)                                                  783       776
Regional news and non-news                                        119       125
                                                                  902       901
ITV2                                                               36        38
ITV3                                                               14         9
ITV4                                                               18         6
GMTV                                                               36        36
Other channels                                                      7         8

Total schedule costs                                             1013       998

Cost of programmes sold to minorities                              57        53

Total Broadcasting schedule costs                               1,070     1,051

The £6 million savings in regional programme costs are from increased
efficiencies across our regional production centres and the greater use of
co-productions. The increased investment in ITV's digital channels has been a
key factor in attracting new advertisers and viewers to our channels offering.

Licence fees

Licence fees comprise both a fixed annual sum (the cash bid) and a variable
element representing a percentage of our ITV1 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 2006 is based on a digital
penetration of 70% (2005: 61%).

                                                       2006     2005     Change
                                                         £m       £m         £m

Cash bid payment                                          4        4          -
PQR Levy                                                175      192        (17)
Digital rebate                                         (128)    (121)        (7)

Total                                                    51       75        (24)

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.

Exceptional items

The operating exceptional items in the year total a net £35 million and include
costs associated with takeover approaches, the departure of senior management
and the £40 million efficiency programme.

Net financing charge

Financing income                                                 2006      2005
                                                                   £m        £m

Expected return on pension scheme assets                          144       112
Interest income                                                    23        21
Net gain on remeasurement of interest rate swaps to fair value      -        11

                                                                  167       144

Financing costs                                                  2006      2005
                                                                   £m        £m

Interest cost on pension scheme liabilities                      (126)     (125)
Interest expense on debt  instruments and finance leases          (66)      (54)
Net loss on remeasurement of interest rate swaps to fair value     (1)        -

                                                                 (193)     (179)

Net finance charge                                                (26)      (35)

The decrease in the net finance charge in 2006 is primarily due to a higher
expected return on pension scheme assets as a result of the deficit funding
payments. The increase in interest expense on debt instruments and finance
leases is due to the bonds issued in October 2005 and 2006.

Investment income

Investment income of £3 million comprises dividend income principally from
holdings in SMG and Seven Network in Australia.

Gain on sale of property

The £4 million profit from the sale of properties in the year principally arose
from a gain on the sale of the Newcastle site.

Gain on sales of fixed asset investments

During the period, as part of the ongoing process to dispose of non-core
businesses and investments, the Group sold 021 and Granada Learning and its
investments in Seven Network and TV3. The disposal of the 021 business for £4
million resulted in a nil gain or loss being booked. The sale of Granada
Learning took place in April for a potential maximum consideration of £53
million. This comprises £17.5 million in cash, £17.5 million in loan notes (of
which £28 million was received in 2006) and a further £18 million which is
contingent on the future performance of the business. The fair value of expected
proceeds has been taken as £31 million for accounting purposes resulting in a
£12 million loss on disposal.

The interest in Seven Network was sold for total consideration of £87 million
resulting in a profit of £29 million booked through the income statement. The
interest in TV3 was sold for a total consideration of £70 million resulting in a
profit of £40 million booked through the income statement. Offsetting these
disposal profits is a £22 million impairment relating to our interest in SMG
which has experienced a significant decline in the share price since July 2006.

After the year end ITV announced that it had given an irrevocable undertaking to
sell its 9.99% shareholding in The Liverpool Football Club and Athletic Grounds
plc, for proceeds of £17 million. The profit booked through the income statement
is forecast to be £7 million in 2007.


The effective rate of tax on PBT is 23%. The underlying rate of tax on operating
profits is 30% as shown below:

Underlying rate of tax                                                       £m
Operating profit before exceptional items, amortisation
and share of profits of joint ventures and associates
- Profit before tax as reported                                             288
- Exceptional items (net)                                                     -
- Amortisation                                                               76
- Share of profits of joint ventures and associates                          (8)
Underlying tax charge
- Tax charge as reported                                                     66
- Net charge for exceptional items                                           (2)
- Credit in respect of amortisation                                          17
- Credit in respect of prior period items                                    36
- Other irregular tax effects                                               (11)
Underlying rate of tax                                                       30%

Earnings per share

Basic earnings per share are 5.5 pence (2005: 5.4 pence). Adjusted earnings per
share before exceptional items, amortisation and tax adjustments are 6.4 pence
(2005: 8.0 pence).


The Board is proposing a final dividend of 1.8 pence per share which is
unchanged on the 2005 final dividend. The total dividend proposed for the period
is therefore 3.15 pence which is an increase of 1% over 2005 and is covered 2.03
times by the adjusted earnings per share (before exceptional items,amortisation
and tax adjustments) of 6.4 pence.

Acquisitions of businesses

In November, ITV acquired Enable Media Limited (formerly trading as Scoot) which
provides online business directories, for a total cash outflow in 2006 of £3

Intangible assets

Total intangible assets at 31 December 2006 are £3,895 million being principally
goodwill and acquired intangible assets. Goodwill balances are not amortised but
are instead subject to annual impairment testing. An impairment charge of £20
million has been recognised in 2006 relating to Carlton Screen Advertising as a
result of reduced profitability following structural changes in the cinema
advertising market. Other intangible assets are amortised over their useful
lives. The total amortisation charge for the year including the £20 million
impairment is £76 million (2005: £102 million).

Cash flow and net debt

The cash generated from operations was £342 million (2005: £456 million) and was
down on the prior period due to a £85 million decrease in operating profit
before exceptional items and amortisation and a working capital outflow in 2006
of £36 million versus a £10 million outflow in 2005. In 2005 the working capital
benefited by £34 million from the exercise of a currency option hedging the
Exchangeable Bond which was no longer required.

Net cash interest paid on the Group's net debt position was £47 million.
Taxation paid reflects payments on account during the period. The equity
dividends paid comprise the 2005 interim and final dividends of £54 million and
£74 million respectively. Expenditure on property, plant and equipment totalled
£79 million. During the period the Group brought three properties that were
previously held under long-term leases with the intention of subsequently
disposing of them. Two of these are shown in the balance sheet as assets held
for sale. Cash received from the sale of the investment in Seven Network (£87
million) and TV3 (£70 million) totalled £157 million. Cash received from assets
held for sale of £40 million included the proceeds from the sale of 021 (£4
million), Granada Learning (£28 million) and three properties (£8 million).

As announced in November 2006, the Group has suspended its share buy-back
programme at £251 million.

As described in more detail under pensions, a £207 million deficit funding
payment into the defined benefit schemes is reflected in cash flows.

In October 2006, the Group issued a €500 million Eurobond with a 2011 maturity
and a £250 million Eurobond with a 2017 maturity. The interest coupons currently
payable on these instruments are 4.75% pa and 6.125% pa respectively.

The principal movements in net debt in the year are shown in the table below:

                                                                   £m        £m
Net debt at 31 December 2005                                               (481)
Cash generated from operations                                    342
Net interest paid                                                 (47)
Taxation paid                                                     (50)
Equity dividends paid                                            (128)
Expenditure on property, plant and equipment                      (79)
Proceeds from sale of investments and assets held for sale        197
Other movements                                                   (30)
Share buy-back                                                             (251)

Defined benefit pension deficit funding                                    (207)

Net debt at 31 December 2006                                               (734)


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 scheme actuaries at 31 December 2004.
Following the scheme merger referred to below, actuarial funding valuations of
certain sections of the merged scheme are being prepared as at 1 January 2005.

i) Scheme merger

At the beginning of 2006 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, with the merged scheme comprising three
separate sections. 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 values the annual cost
and assets and liabilities of the scheme on disclosed bases and includes those
in the Company's consolidated income statement and consolidated balance sheet.

In 2006 the IAS 19 operating charge for defined benefit schemes was £25 million
(2005: £24 million). The charge within net financing costs for the net result of
the expected return on scheme assets less the interest cost on liabilities was a
credit of £18 million (2005: £13 million). The Group's defined contribution
schemes gave rise to an operating charge of £2 million (2005: £2 million).

The IAS 19 deficit at 31 December 2006 was £285 million (2005: £532 million). A
net actuarial gain of £29 million has been recognised as a credit to reserves.

The reduction in the IAS 19 deficit during 2006 is primarily due to the funding
payments made as described above and the £29 million of net actuarial gains.

The funding of the defined benefit pension schemes is based upon the actuarial
funding valuations conducted by the scheme actuaries.

iv) Pension tax simplification

The new tax regime for pension funds came into effect on 6 April 2006. This
change, referred to as 'A' Day, has significant consequences for senior
executives for whom tax relief on pension accruals changed from that time. ITV
took professional advice and 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 past.

v) Proposed changes to future defined benefit scheme accruals

During 2006 ITV concluded that the future cost of defined benefit pension scheme
accruals was too great, being approximately 24% of salary as the employer's
contribution in the main section of the scheme, and that the wide range of
benefit levels across the merged scheme should be standardised.

ITV started a consultation with employees proposing possible changes from April
2007. This consultation has involved many presentations and meetings with staff,
and consideration of the changes that might be made. Members will be notified of
changes prior to implementation.

International Financial Reporting Standards
ITV plc has adopted EU endorsed IFRS for group reporting.

Forward look

This Business Review has set out the reasons why we believe that, despite a
challenging market environment, ITV has the strengths and strategy to regain and
grow market share beyond the ITV1 channel.

The media industry changes at an ever swifter pace:

- New channels continue to be launched;
- Digital switchover is approaching, starting in 2008;
- New distribution platforms develop: broadband, mobile, portable devices; and
- Interactivity increases and viewers expect their content to be delivered when
  and where they want it, not simply within a broadcast schedule.

These changes offer ITV opportunities for our broadcasting, content and consumer
teams. We believe we have the right strategy, and the execution skills, to
develop our business within these new areas.

In a world of fragmented viewing, the channels that are able to offer a shared
viewing experience for viewers and a mass audience to advertisers become ever
more valuable. ITV1 remains the most-watched channel in peak-time and is still
the most effective way for advertisers to build awareness and brands in a short
space of time. We also believe that ITV's regional presence, an intrinsic part
of the Company's history and identity, will increasingly be a point of
difference and a competitive advantage as other commercial players will be
unable to match our 'local' connection with viewers or our regional advertising

Our estimates for net advertising revenue in the first quarter of 2007 are:

- UK television market             +0.5%
- ITV1 (reflecting CRR effect)     -9.2% at £291.8 million
- ITV plc excluding ITV1           +28.2% at £58.8 million
- Total ITV plc                    -4.5% at £350.6 million

While it is difficult to predict how and where people will choose to watch or
consume content in the long-term, as one of Europe's leading commercial
production companies we can be confident that we will find more outlets and
channels for our content, both in the UK and internationally. We are also
growing our consumer businesses which will provide ITV with new and sustainable
revenue streams in the future. Our new broadband portal,, will launch in
the Spring of 2007 and we believe will help drive the way consumers use
broadband to access top quality content.

Consolidated income statement

                                                                 2006  Restated
For the year ended 31 December:                       Note         £m        £m

Revenue                                                         2,181     2,196
Operating costs before amortisation of intangible             
assets and exceptional items                                   (1,806)   (1,736)
Operating costs - exceptional items                      1        (35)      (29)
Earnings before interest, tax and amortisation (EBITA)            340       431
Amortisation and impairment of intangible assets         6        (76)     (102)
Total operating costs                                          (1,917)   (1,867)
Operating profit                                                  264       329
Financing income                                                  167       144
Financing costs                                                  (193)     (179)
Net financing costs                                               (26)      (35)
Share of profits of joint ventures and 
associated undertakings                                   7         8        11
Investment income                                                   3         5
Gain on sale of properties                                          4        11
Gain/(loss) on sale and impairment of subsidiaries 
and investments (exceptional items)                       1        35       (10)
Profit before tax                                                 288       311
Taxation                                                  4       (66)      (85)
Profit for the year                                               222       226

Attributable to:
Equity shareholders of the parent company                         219       222
Minority interests                                                  3         4
Profit for the year                                               222       226

Basic earnings per share                                  2       5.5p      5.4p
Diluted earnings per share                                2       5.4p      5.3p

Operating exceptional items during the year comprise reorganisation and
integration costs and expenditure relating to the two takeover approaches (see
note 1 for details).

Consolidated balance sheet

                                                                2006   Restated
At 31 December:                                      Note         £m         £m
Non-current assets
Property, plant and equipment                                    193        235
Intangible assets                                       6      3,895      3,947
Investments in joint ventures and associated 
undertakings                                            7         66         93
Equity investments                                      8         37        181
Distribution rights                                               11         13
Net deferred tax asset                                  4          -         74
                                                               4,202      4,543
Current assets
Assets held for sale                                             132         63
Programme rights and other inventory                             400        388
Trade and other receivables due within one year                  405        362
Trade and other receivables due after more than one year           7          7
Trade and other receivables                                      412        369
Cash and cash equivalents                               9        961        663
                                                               1,905      1,483
Current liabilities
Liabilities held for sale                                          -         (9)
Borrowings                                              9       (471)      (288)
Trade and other payables due within one year                    (706)      (734)
Trade and other payables due after more than one year             (9)        (4)
Trade and other payables                                        (715)      (738)
Current tax liabilities                                         (159)      (217)
Provisions                                                        (9)       (23)
                                                              (1,354)    (1,275)

Net current assets                                               551        208

Non-current liabilities
Borrowings                                              9     (1,224)      (856)
Defined benefit pension deficit                         5       (285)      (532)
Net deferred tax liability                              4         (7)         -
Other payables                                                   (56)       (29)
Provisions                                                       (18)       (29)
                                                              (1,590)    (1,446)

Net assets                                                     3,163      3,305

Attributable to equity shareholders of the 
parent company
Share capital                                          10        401        423
Share premium                                          10        120         98
Merger and other reserves                              10      2,690      2,666
Translation reserve                                    10         (3)        (1)
Available for sale reserve                             10         17         33
Retained earnings                                      10        (69)        74
Total attributable to equity shareholders of the 
parent company                                         10      3,156      3,293
Minority interest                                      10          7         12
Total equity                                           10      3,163      3,305

Consolidated cash flow statement
                                                     2006                  2005
For the year ended 31 December:             £m         £m         £m         £m
Cash flows from operating activities
Operating profit before exceptional 
 items                                     299                   358
Depreciation of property, plant and 
 equipment                                  32                    34
Amortisation and impairment of intangible 
 assets                                     76                   102
Increase in programme rights and other 
inventory, and distribution rights         (10)                  (30)
(Increase)/decrease in receivables         (33)                   23
Increase/(decrease) in payables              7                    (3)
Movement in working capital                (36)                  (10)
Cash generated from operations before 
exceptional items                                     371                   484
Cash flow relating to operating 
exceptional items:
  Operating loss                           (35)                  (29)
  Increase in payables and provisions*       6                     1
Cash outflow from exceptional items                   (29)                  (28)
Cash generated from operations                        342                   456
Defined benefit pension deficit funding   (207)                 (118)
Interest received                           22                    20
Interest paid on bank and other loans      (66)                  (42)
Interest paid on finance leases             (3)                   (4)
Investment income                            3                     5
Taxation paid                              (50)                 (120)
                                                     (301)                 (259)
Net cash from operating activities                     41                   197
Cash flows from investing activities
Acquisition of subsidiary undertakings, 
 net of cash and cash equivalents 
 acquired and debt repaid  on acquisition   (3)                 (208)
Proceeds from sale of assets held for sale  40                     3
Proceeds from sale of property, plant 
 and equipment                               -                    29
Acquisition of property, plant and 
 equipment                                 (79)                  (46)
Acquisition of intangibles                  (4)                    -
Acquisition of associates and investments   (1)                  (30)
Loans repaid by joint ventures               2                     -
Proceeds from sale of subsidiaries           -                     2
Proceeds from sale of investments and 
 associates                                157                     -
Net cash from/(used in) investing 
 activities                                           112                  (250)
Cash flows from financing activities
Proceeds from issue of ordinary share 
capital                                      -                    50
Purchase of US held shares                   -                   (42)
Bank and other loans - amounts repaid      (13)                  (88)
Bank and other loans - amounts raised      581                   322
Capital element of finance lease payments   (3)                   (3)
Dividends paid to minority interest         (8)                    -
Redemption of preference shares              -                    (8)
Share buy-back                            (251)                    -
Purchase of own shares via employee 
benefit trust                              (31)                    -
Equity dividends paid                     (128)                  (98)
Net cash from financing activities                    147                   133
Net increase in cash and cash equivalents             300                    80
Cash and cash equivalents at 1 January                663                   582
Effects of exchange rate changes and 
fair value movements on cash                           (2)                    1
  and cash equivalents
Cash and cash equivalents at 31 December              961                   663

* Includes £6 million (2005: £4 million) relating to expenditure against
provisions held in respect of activities which have been previously

Consolidated statement of recognised income and expense

For the year ended 31 December:                      Note       2006       2005
                                                                  £m         £m
Exchange differences on translation of foreign 
 operations                                                       (2)         1
Revaluation of available for sale investments                      4         20
Disposal and impairment transferred from 
 available for sale reserve to income statement                  (20)         -
Movements in respect of cash flow hedges                           -         (1)
Actuarial gains and losses on defined benefit 
 pension schemes                                        5         29         35
Taxation on items taken directly to equity              4         (4)        (8)
Net income recognised directly in equity                           7         47
Profit for the year                                              222        226
Total recognised income and expense for the year                 229        273

Attributable to:
   Equity shareholders of the parent company           10        226        269
   Minority interests                                  10          3          4

Total recognised income and expense for the year       10        229        273

Notes to the accounts

1      Exceptional items
                                                                 2006      2005
                                                                   £m        £m
Operating exceptional items:
  Reorganisation and integration costs                            (23)      (40)
  Receipt from liquidators                                          2        11
  Fees in relation to takeover approaches                         (14)        -

                                                                  (35)      (29)

Non-operating exceptional items:
     Gain on sale of subsidiaries and investments                  57         -
     Impairment of investments and revaluation of disposal 
      groups held for sale                                        (22)      (10)
                                                                   35       (10)

Total exceptional items before tax                                  -       (39)

In 2006 a charge of £23 million, including £17 million staff costs, was incurred
in respect of reorganisation and restructuring costs including the closure of
the Bristol and children's programme production centres, the continuation of the
regional news consolidation programme and redundancy and share costs arising
from the restructuring of the senior management team. A liquidation settlement
of £2 million was received from the liquidators of the Shop! Channel.

Fees of £14 million were incurred in respect of the two takeover approaches
received in 2006.

A £35 million net gain has been recognised from the sale of subsidiaries and the
sale and impairment of investments. This includes the profit on disposal of the
stakes in Seven Network (£29 million) and TV3 (£40 million), the loss on sale of
the education business (£12 million) and an impairment of the holding in SMG,
which is held within our producer/broadcaster segment, (£22 million) following a
significant decline in its share price.

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

2      Earnings per share
                                                       2006                2005
                                          Basic     Diluted   Basic     Diluted
                                             £m          £m      £m          £m
Profit for the year attributable to 
 equity shareholders of the parent company  219         219     222         222
Exceptional items (including related tax 
 effect of an expense of £2 million,                     
 2005: credit of £4 million)                  2           2      35          35
Profit for the year before exceptional 
 items                                      221         221     257         257
Amortisation and impairment of intangible 
 assets (including related tax               59          59      71          71
Prior period tax adjustments                (36)        (36)     (7)         (7)
Other tax adjustments                        12          12       4           4
Profit for the year before exceptional 
items, amortisation and impairment of                     
intangible assets and prior period tax 
adjustments                                   256       256     325         325
Weighted average number of ordinary shares 
 in issue - million                         4,017     4,017   4,082       4,082
Dilution impact of share options - million      -        34       -          46

                                            4,017     4,051   4,082       4,128
Earnings per ordinary share                   5.5p      5.4p    5.4p        5.3p
Adjusted earnings per ordinary share
Basic earnings per ordinary share             5.5p      5.4p    5.4p        5.3p
Add: Loss per ordinary share on exceptional 
 items                                        0.0p      0.0p    0.9p        0.9p
Earnings per ordinary share before 
 exceptional items                            5.5p      5.4p    6.3p        6.2p
Add: Loss per ordinary share on amortisation 
 and impairment of intangible assets          1.5p      1.5p    1.7p        1.7p
Subtract: Profit per ordinary share on 
 prior period tax adjustments                (0.9)p    (0.9)p  (0.1)p      (0.1)p
Add: Loss per ordinary share on other 
 tax adjustments                              0.3p      0.3p    0.1p        0.1p
Earnings per ordinary share for the year 
 before exceptional items, amortisation      
 and impairment of intangible assets 
 and prior period tax adjustments             6.4p      6.3p     8.0p       7.9p

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

3      Dividends

Dividends declared and recognised through equity in the year were:

                                                                 2006      2005
                                                                   £m        £m
Equity shares:
   Final 2004 dividend of 1.3 pence per share                       -        53
   Interim 2005 dividend of 1.32 pence per share                    -        54
   Final 2005 dividend of 1.8 pence per share                      74         -
   Interim 2006 dividend of 1.35 pence per share                   53         -

                                                                  127       107

A final dividend of 1.8 pence per share, totalling £70 million, has been
proposed after the balance sheet date in respect of the year ended 31 December
2006 (2005: 1.8 pence per share, totalling £74 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:
                                                                 2006      2005
                                                                   £m        £m
Current tax expense:
   Current tax before exceptional items                           (37)     (129)
   Current tax (expense)/credit on exceptional items               (2)        4
                                                                  (39)     (125)
   Adjustment for prior periods                                    48         9
                                                                    9      (116)
Deferred tax:
     Origination and reversal of temporary differences            (63)       33
     Adjustment for prior periods                                 (12)       (2)
                                                                  (75)       31
Total taxation expense in the income statement                    (66)      (85)

Reconciliation of taxation expense:
                                                                 2006      2005
                                                                   £m        £m
Profit before tax                                                 288       311
Taxation expense at UK corporation tax rate of 30% (2005: 30%)    (86)      (93)
Non-taxable/non-deductible exceptional items                       (2)       (8)
Non-taxable income/non-deductible expenses                         (7)       (5)
Effect of tax losses utilised                                       4        18
Over provision in prior periods                                    36         7
Other                                                             (11)       (4)
                                                                  (66)      (85)

In the year ended 31 December 2006 the effective tax rate on profits is lower
(2005: lower) than the standard rate of UK corporation tax primarily as a result
of adjustments in respect of prior periods due to progress in the agreement with
revenue authorities of prior period's tax liabilities (2005: utilisation of tax
losses in respect of which deferred tax assets were not previously recognised).
The underlying tax rate on profits, after adjusting for the irregular tax
effects caused by issues such as exceptional items, impairments, joint ventures
and associates and adjustments in respect of prior periods, is 30% (2005: 28%).

The current tax expense for the year is reduced primarily as a result of the
reversal of temporary differences on which deferred tax assets previously were
recognised relating to pension scheme deficits and funding payments.

A tax expense totalling £4 million (2005: expense of £8 million) has been
recognised directly in equity representing a current tax credit of £2 million
(2005: credit of £2 million) and a deferred tax expense of £6 million (2005:
expense of £10 million).

Deferred tax assets and liabilities recognised and their movements are:

                    At                    in the                         At  31
             1 January       Business     income  Recognised  Business December
                  2006   combinations  statement   in equity     sales     2006
                    £m             £m         £m          £m        £m       £m
Property, plant 
 and equipment      (3)             -         (2)          -         1       (4)
Intangible assets (155)            (1)        17           -         -     (139)
Programme rights     5              -          2           -         -        7
Pension scheme 
 deficits          160              -        (65)         (9)        -       86
Pensions funding 
 payments           29              -         (8)          -         -       21
 loans and 
 borrowings, and 
 derivatives         3              -         (7)          -         -       (4)
 payments           32              -         (9)          3         -       26
Unremitted earnings 
 of subsidiaries, 
 associates and  
 joint ventures      -              -         (3)          -         -       (3)
Other                3              -          -           -         -        3
                    74             (1)       (75)         (6)        1       (7)

                    At                    in the              Transfer     At 31
             1 January       Business     income  Recognised   to held  December
                  2005   combinations  statement   in equity  for sale      2005
                    £m             £m         £m          £m        £m        £m

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

                    68            (17)        31         (10)        2       74

At 31 December 2006 total deferred tax assets are £143 million (2005: £232
million) and total deferred tax liabilities are £150 million
(2005: £158 million).

Deferred tax assets estimated at £600 million and £100 million (2005: £600
million and £100 million) in respect of capital losses and loan relationship
deficits respectively, 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. For the same
reasons, deferred tax assets in respect of overseas losses of £10 million (2005:
£10 million) which time expire between 2017 and 2026 have not been recognised.

5      Pension schemes

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

The pension scheme assets are held in a separate trustee-administered fund to
meet long-term pension liabilities to past and present employees. The trustees
of the fund are required to act in the best interest of the fund's
beneficiaries. The appointment of trustees to the fund is determined by the
scheme's trust documentation.

Defined contribution schemes

Total contributions recognised as an expense in relation to defined contribution
schemes during 2006 were £2 million (2005: £2 million).

Defined benefit schemes

The Group provides retirement benefits to some of its former and approximately
31% of current employees through defined benefit schemes. The Group's main
scheme was formed from a merger of a number of schemes on 31 January 2006. The
level of retirement benefit is principally based on basic salary at retirement.

The liabilities of the defined benefit scheme are measured by discounting the
best estimate of future cash flows to be paid out by
the scheme using the projected unit method. This amount is reflected in the
deficit in the balance sheet. The projected unit method is an accrued benefits
valuation method in which the scheme liabilities make allowance for projected
earnings. The accumulated benefit obligation is an actuarial measure of the
present value of benefits for service already rendered but differs from the
projected unit method in that it includes an allowance for early leaver
statutory revaluations rather than projected earning increases. At the balance
sheet date the accumulated benefit obligation was £2,580 million.

The statutory funding objective is that the scheme has sufficient and
appropriate assets to pay its benefits as they fall due. This is a
long-term target. Future contributions will always be set at least at the level
required to satisfy the statutory funding objective. The general principles
adopted by the trustees are that the assumptions used, taken as a whole, will be
sufficiently prudent for pensions and benefits already in payment to continue to
be paid, and to reflect the commitments which will arise from members' accrued
pension rights.

The most recently completed triennial actuarial valuations in respect of the
schemes forming the largest section of the Group's main retirement benefits fund
was performed by an independent actuary for the trustees of the scheme and was
carried out as at 1 January 2005. As part of the merger exercise, the Group paid
£325 million into the scheme towards the current deficit. The first triennial
valuation of the merged scheme is due to be completed as at 1 January 2008 in
respect of the largest section and 31 December 2006 in respect of other
sections. In the interim the Group will monitor funding levels annually.

The levels of contributions are based on the current service costs and the
expected future cash flows of the defined benefit scheme.
The Group estimates the duration of UK scheme liabilities will on average fall
due over 18 years.

The movement in the present value of the defined benefit obligation for these
schemes is analysed below:

                                                                 2006      2005
                                                                   £m        £m
Defined benefit obligation at 1 January                         2,604     2,357
Current service cost                                               23        26
Curtailment loss/(gain)                                             2        (2)
Interest cost                                                     126       125
Net actuarial loss                                                  3       184
Contributions by scheme participants                                4         5
Benefits paid                                                    (105)      (91)
Defined benefit obligation at 31 December                       2,657     2,604

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

                                                                 2006      2005
                                                                   £m        £m
Defined benefit obligation in respect of funded schemes         2,619     2,573
Defined benefit obligation in respect of wholly unfunded 
 schemes                                                           38        31
Total defined benefit obligation                                2,657     2,604

The movement in the fair value of the defined benefit scheme assets is analysed

                                                                 2006      2005
                                                                   £m        £m
Fair value of assets at 1 January                               2,072     1,685
Expected return on assets                                         144       112
Net actuarial gain                                                 32       219
Employer contributions                                            225       142
Contributions by scheme participants                                4         5
Benefits paid                                                    (105)      (91)
Fair value of assets at 31 December                             2,372     2,072

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

                                                       2006      2005      2004
                                                         £m        £m        £m
Total defined benefit scheme assets                   2,372     2,072     1,685
Total defined benefit scheme obligations             (2,657)   (2,604)   (2,357)
Net amount recognised within the balance sheet         (285)     (532)     (672)

Amounts recognised through the income statement are as follows:

                                                                 2006   2005
                                                                   £m     £m
Amount (charged)/credited to operating costs:                                
Current service cost                                             (23)   (26) 
Curtailment (loss)/gain                                           (2)     2  
                                                                 (25)   (24) 
Amount credited/(charged) to net financing costs:                            
Expected return on pension scheme assets                         144    112  
Interest cost                                                   (126)  (125) 
                                                                  18    (13) 
Total charge in the income statement                              (7)   (37) 


The amounts recognised through the statement of recognised income and expense

                                                                  2006   2005
                                                                    £m     £m
Actuarial gains and (losses):                                                
Arising on scheme assets                                            32    219  
Arising on scheme liabilities                                       (3)  (184) 
                                                                    29     35  


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 £59 million (2005: £88 million).


Included within actuarial gains and losses are experience adjustments as

                                                          2006   2005   2004
                                                            £m     £m     £m
Experience adjustments on scheme assets                     32    219     56  
Experience adjustments on scheme liabilities               (12)     9    (70) 


At 31 December 2006 the scheme assets were invested in a diversified portfolio
that consisted primarily of equity and debt securities.


The scheme assets are shown below by major category along with the associated
expected rates of return.

                                                                            Expected long    Market  Expected    Market
                                                                                term rate     value long term     value
                                                                                of return      2006      rate      2005
                                                                                     2006        £m of return        £m
                                                                                        %                2005          
Market value of assets -  equities and  property                                     7.6     1,436        7.5     1,421 
Market value of assets -  bonds                                                4.5 - 5.2       898  4.1 - 5.6       618 
Market value of assets -  other                                                      5.0        38  4.5 - 4.9        33 
Total scheme assets                                                                          2,372                2,072 


The expected return on plan assets is based on market expectations at the
beginning of the financial period for returns over the life of the related
obligation. The expected yield on bond investments with fixed interest rates can
be derived exactly from their market value. Some of these bond investments are
issued by the UK Government. The risk of default on these is very small. The
trustees also hold bonds issued by public companies. There is a more significant
risk of default on these which is assessed by various rating agencies.


The trustees also have a substantial holding of equity investments. The
investment return related to these is variable and they are generally considered
much 'riskier' investments. It is generally accepted that the yield on equity
investments will contain a premium ('the equity risk premium') to compensate
investors for the additional risk of holding this type of investment. There is
significant uncertainty about the likely size of the risk premium.


The expected return for each asset class is weighted based on the asset
allocation for 2007 to develop the expected long term rate of return on assets
assumption for the portfolio.


The fair value of the scheme assets as a percentage of total scheme assets as at
31 December 2006 and 31 December 2005 and target allocations for 2007 are set
out below:


The benchmark for 2007 is to hold broadly 60% equities and 40% bonds. The
majority of the equities held by the scheme are in international blue chip
entities. The aim is to hold a globally diversified portfolio of equities, with
a target of 40% of equities being held in UK and 60% of equities held overseas.
Within the bond portfolio the aim is to hold 50% of the portfolio in government
bonds (gilts) and 50% of the portfolio in corporate bonds.


The actual return on plan assets in the year ended 31 December 2006 was £176
million (2005: £331 million).

                                                         Planned  2006   2005  
(as a percentage of total scheme assets)                                      
Equities and property                                       60%    61%    69% 
Bonds                                                       40%    38%    30% 
Other                                                        0%     1%     1% 


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

                                                                2006   2005  
Rate of general increase in salaries                            4.25%  4.00% 
Rate of increase in pension payment (LPI 5% pension increases)  2.90%  2.75% 
Rate of increase to deferred pensions                           3.00%  2.75% 
Discount rate for scheme liabilities                            5.12%  4.90% 
Inflation assumption                                            3.00%  2.75% 


IAS 19 requires that the discount rate used be determined by reference to market
yields at the balance sheet date on high quality fixed income investments. The
currency and term of these should be consistent with the currency and estimated
term of the post-employment obligations. The discount rate has been based on the
yield available on AA rated corporate bonds of a term similar to the


The expected rate of inflation is an important building block for salary growth
and pension increase assumption. A rate of inflation is 'implied' by the
difference between the yields on fixed and index-linked Government bonds.
However, differences in demand for these can distort this implied figure. The
Bank of England target inflation rate has also been considered in setting this


The Group has used PA92 tables with mortality projected to 2015/2020 for
pensioner members and to 2030/2035 for non-pensioner members. Using these
tables, the assumed life expectations on retirement at age 60 are:

                                                                2006   2005  
Retiring today                                                               
Males                                                           24.4   24.0  
Females                                                         27.4   27.0  
Retiring in 20 years                                                         
Males                                                           25.5   25.2  
Females                                                         28.4   28.1  


The Group reflected this recognition that mortality rates have reduced in its
2004 valuation. The tables above reflect published mortality investigation data
in conjunction with the results of investigations into the mortality experience
of scheme members. The allowance for future mortality improvement has been
increased from that incorporated for 2005 when mortality was projected to 2015
for pensioner members and to 2030 for non-pensioner members.


The sensitivities regarding the principal assumptions used to measure the
schemes liabilities are set out below. The illustrations consider the single
change shown with the other assumptions assumed to be unchanged. In practice,
changes in one assumption may be accompanied by offsetting changes in another
assumption (although this is not always the case). The company liability is the
difference between the scheme liabilities and the scheme assets. Changes in the
assumptions may occur at the same time as changes in the market value of scheme
assets. These may or may not offset the change in assumptions. For example, a
fall in interest rates will increase the scheme liability, but may also trigger
an offsetting increase in the market value so there is no net effect on the
company liability.

Assumption                                                       Change in Assumption     Impact on scheme liabilities
Discount rate                                               Increase/decrease by 0.5%          Decrease/increase by 8%
Rate of inflation                                           Increase/decrease by 0.5%          Increase/decrease by 7%
Rate of salary growth                                       Increase/decrease by 0.5%          Increase/decrease by 1%
Rate of mortality                                                  Increase by 1 year                   Increase by 3%


Normal contributions into the schemes in 2007 are expected to be in the region
of £20 million assuming current contribution rates continuing as agreed with the
scheme trustees.


6      Intangible assets

                                                  Goodwill   Brands       Customer  Licences       Film   Total
                                                        £m       £m  contracts and        £m  libraries      £m
                                                                     relationships            and other         
                                                                                £m                   £m         
At 1 January                                                                                                     
2005                                                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  
Additions                                              18        -              2         -          4       24  
At 31 December                                                                                                   
2006                                                3,443      199            338       121         82    4,183  
Amortisation and impairment                                                                                      
At 1 January                                                                                                     
2005                                                    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  
Charge for the                                                                                                   
year                                                    -       18             24         9          5       56  
charge                                                 20        -              -         -          -       20  
At 31 December                                                                                                   
2006                                                   20       50            182        20         16      288  
Net book value                                                                                                   
At 31 December                                                                                                   
2006                                                3,423      149            156       101         66    3,895  
At 31 December                                                                                                   
2005                                                3,425      167            178       110         67    3,947  


Amortisation of intangible assets is shown within operating costs in the income
statement. The £20 million impairment charge in 2006 related to Carlton Screen
Advertising cash-generating unit as a result of structural changes in the cinema
advertising market. In calculating this impairment, growth rates and discount
rates consistent with those below have been used, and calculations have been
made on a value in use basis, using cash flow projections over the next four
years. Carlton Screen Advertising is part of the Other operations segment.

Impairment tests for cash-generating units containing goodwill

The following units have significant carrying amounts of goodwill:

                                                                2006    2005
                                                                  £m      £m
Broadcasting                                                   2,963   2,963  
Multiple units without individually significant goodwill         460     462  
                                                               3,423   3,425  


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
12.5% 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 market Long term trends, industry forecasts   
                                       and in-house 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   Associated Total
                                                  ventures undertakings    £m
                                                        £m           £m      
At 1 January 2005                                       55           28    83  
Share of attributable                                                          
profits                                                  5            6    11  
Other                                                    -           (1)   (1) 
At 31 December 2005                                     60           33    93  
Additions                                                -            1     1  
Share of attributable                                                          
profits                                                  5            3     8  
Disposals                                                -          (29)  (29) 
Repayment of loans                                      (1)           -    (1) 
Reclassification as                                                            
assets held for sale                                    (3)           -    (3) 
Exchange movement and                                                          
other                                                   (2)          (1)   (3) 
At 31 December 2006                                     59            7    66  


The aggregated summary financial information in respect of associates in which
the Group has an interest is as follows:

                                                                2006   2005
                                                                  £m     £m
Assets                                                            54    143  
Liabilities                                                      (56)  (108) 
Revenue                                                          118    142  
Profit                                                             4     13  


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

                                                                2006   2005
                                                                  £m     £m
Non-current assets                                                54     66  
Current assets                                                    43     49  
Current liabilities                                              (26)   (27) 
Non-current liabilities                                          (25)   (29) 
Revenue                                                           62     66  
Expense                                                          (59)   (61) 



8      Equity investments
At 1 January 2005                                                       153  
Additions at fair value                                                  13  
Disposals                                                                (3) 
Revaluation to fair value                                                18  
At 31 December 2005                                                     181  
Disposals                                                               (90) 
Revaluation to fair value                                                (6) 
Reclassification as assets held for sale                                (48) 
At 31 December 2006                                                      37  




9      Analysis of net debt
                                                                  1 January           Net   Currency        31
                                                                       2006 cash flow and        and  December
                                                                             acquisitions   non-cash      2006
                                                                   Restated            £m  movements        £m
                                                                         £m                       £m          
Cash                                                                    522           303         (1)      824  
Cash equivalents                                                        141            (3)        (1)      137  
Cash and cash equivalents                                               663           300         (2)      961  
Loans and loan notes due within one year                               (285)           13       (196)     (468) 
Finance leases due within one year                                       (3)            3         (3)       (3) 
Loans and loan notes due after one year                                (781)         (581)       210    (1,152) 
Finance leases due after one year                                       (75)            -          3       (72) 
                                                                     (1,144)         (565)        14    (1,695) 
Net debt                                                               (481)         (265)        12      (734) 


Included within non-cash movements is the movement of the £200 million Eurobond
into amounts payable in less than one year based on its payment due date.

                                                                    1 January           Net   Currency        31
                                                                         2005 cash flow and        and  December
                                                                     Restated  acquisitions   non-cash      2005
                                                                           £m            £m  movements  Restated
                                                                                                    £m        £m
Cash                                                                    441            81            -       522  
Cash equivalents                                                        141            (1)           1       141  
Cash and cash equivalents                                               582            80            1       663  
Loans and loan notes due within one year                               (252)          (22)         (11)     (285) 
Finance leases due within one year                                       (3)            3           (3)       (3) 
Loans and loan notes due after one year                                (568)         (234)          21      (781) 
Finance leases due after one year                                       (78)            -            3       (75) 
Preference shares                                                        (8)            8            -         -
                                                                       (909)         (245)          10    (1,144) 
Net debt                                                               (327)         (165)          11      (481) 


Included within cash equivalents is £75 million (2005: £78 million) the use of
which is restricted to meeting finance lease commitments under programme sale
and leaseback commitments and Gilts of £31 million (2005: £29 million) over
which the unfunded pension promises have a charge.


The restatements above are due to the reclassification of the unsecured €356
million Exchangeable Bond as falling due within one year.

10      Capital and reserves
                                                      Attributable to equity shareholders of                   
                                                                          the parent company                   
                             Share    Share    Merger Translation Available Retained   Total  Minority    Total
                           capital  premium and other     reserve  for sale earnings      £m  interest   equity
                                £m       £m  reserves          £m   reserve       £m                £m       £m
                                                   £m                    £m                                    
At 1 January 2005              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  
Share buy-backs                (24)       -         24          -         -     (251)   (251)        -     (251) 
Shares issued in the year        2       22          -          -         -        -      24         -       24  
Cancellation of convertible                                                                                             
shares                         (12)       -          -          -         -        -     (12)        -      (12) 
Issue of deferred shares        12        -          -          -         -        -      12         -       12  
Total recognised income                                                                                                 
and expense                      -        -          -         (2)      (16)     244     226         3      229  
Movements due to       
share-based compensation         -        -          -          -         -       (9)     (9)        -       (9) 
Dividends paid to minority                                                                                              
interests                        -        -          -          -         -        -       -        (8)      (8) 
Equity dividends                 -        -          -          -         -     (127)   (127)        -     (127) 
At 31 December 2006            401      120      2,690         (3)       17      (69)  3,156         7    3,163  


Included within retained earnings is a £25 million (2005: £26 million) deduction
for investments held in ITV plc shares by the Group-sponsored employee benefit

Merger and other reserves

Merger and other reserves at 31 December 2006 include merger reserves of £2,548
million (2005: £2,548 million), capital reserves of £112 million (2005: £112
million), capital redemption reserves of £24 million (2005: £nil) and
revaluation reserves of £6 million (2005: £6 million).

Translation reserve

The translation reserve comprises all foreign exchange differences arising on
the translation of the accounts of, and investments in, foreign operations.

Available for sale reserve

The available for sale reserve comprises all movements arising on the
revaluation of assets accounted for as available for sale.

11      Basis of preparation

The Group accounts consolidate those of ITV plc, ('the Company'), a company
domiciled in the United Kingdom and its subsidiaries (together referred to as
the 'Group') and the Group's interest in associates and jointly controlled

As required by EU law (IAS Regulation EC 1606/2002) the Group's accounts have
been prepared and approved by the directors in accordance with International
Financial Reporting Standards as adopted by the EU ('IFRS').


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


During the period, the Group has reviewed its revenue recognition policy for
premium rate telephony services recognising the increasing significance of this
revenue stream. The Group's policy has consequently been revised to reflect
revenue as the amount billed net of operator costs. Previously revenue was shown
net of other costs, such as production costs, in addition to operator costs.
2005 revenue and operating costs have therefore been restated, reflecting an
increase in both of £19 million. The impact of this change in accounting policy
in 2006 was that revenue and operating costs are both £16 million higher than
under the previous accounting policy. 2006 was the first full year of operation
of ITV Play which also earns revenues from premium rate telephony services. ITV
Play's revenue and operating costs in 2006 would have been £34 million lower if
the new accounting policy had not been adopted. There is no effect on profit or
the balance sheet.


At 31 December 2005, the Company had outstanding an unsecured €356 million
Exchangeable Bond which matured in January 2007.

The Exchangeable Bond was able to be exchanged at any time at the option of
investors for shares in Thomson SA at an exchange rate of €41.2 per share. At 31
December 2005 the Thomson share price was €17.7, having traded below €24 since
August 2002. Independent market estimates were that the Thomson share price
would not recover to the conversion price by January 2007. The Company therefore
took the view that the possibility of exchange before January 2007 was remote
and classified the Exchangeable Bonds as a loan repayable between one and two
years in the December 2005 balance sheet. IAS 1.60(d) states that - 'a liability
shall be classified as current when the entity does not have an unconditional
right to defer settlement of the liability for at least 12 months after the
balance sheet date'. Although, as explained above, it is very unlikely that any
bondholder would have exercised its option before January 2007, bondholders
could technically exercise that right at any time. Therefore the Company did not
have an unconditional right to defer settlement. Accordingly the Company has
reclassified the liability as current in its 2005 balance sheet (£245 million).


The financial information set out herein does not constitute the Company's
statutory report and accounts for the year ended 31 December 2006. Statutory
accounts for 2006 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 2006 annual report and accounts will be
sent to all shareholders and will be available from the registered office of the
Company, 200 Gray's Inn Road, London, WC1X 8HF.


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