Preliminary Results - year ended 31 December 2015

Delivering strong growth and building scale

Full year results for the year ended 31st December 2015

Revenue growth across all parts of the business

· Total external revenue up 15% at £2,972m (2014: £2,590m)

· 6% growth in Net Advertising Revenue to £1,719m (2014: £1,629m)

· Online, Pay & Interactive up 23% to £188m (2014: £153m)

· Total ITV Studios revenue up 33% to £1,237m (2014: £933m)

· 25% growth in Non-NAR to £1,664m (2014: £1,327m)

Sixth consecutive year of double digit profit growth

· Adjusted EBITA up 18% to £865m (2014: £730m)

· Broadcast & Online adjusted EBITA up 16% to £659m (2014: £568m)

· Studios adjusted EBITA up 27% to £206m (2014: £162m)

· Adjusted PBT up 18% to £843m (2014: £712m)

· Adjusted EPS up 20% to 16.5p (2014: 13.8p)

Strong cash flows funding investment and increased shareholder returns

· International content business strengthened by further acquisitions including Talpa Media, Twofour Group and Mammoth Screen

· Given our strong performance the Board is proposing a final dividend of 4.1p, giving a full year dividend of 6.0p per share, ahead of our previous guidance

· Reflecting ITV's strong cash generation and the Board's confidence in the business, it is also proposing a 10.0p special dividend, equivalent to £400m

Positive outlook for 2016

· Expect another good year in 2016 with continued revenue growth across both businesses

· Over the full year we expect to outperform the television advertising market

· Euros football will impact phasing of ITV Family NAR, with Q1 flat while Q2 should be positive

· Online, Pay & Interactive will again deliver double-digit revenue growth

· ITV Studios will deliver double-digit revenue and profit growth, driven primarily by recent acquisitions

· We continue to see opportunities to invest across the business, organically and through acquisitions
 

Adam Crozier, ITV plc Chief Executive, said:

"ITV delivered another strong year as we continue to grow and strengthen the business in the UK and internationally. Revenues were up 15% to just under £3bn and for the sixth consecutive year we achieved double digit profit growth, as adjusted EBITA grew 18% to £865m, with all parts of the business performing well.

Our Broadcast and Online business remains strong with advertising revenue up 6% and Online, Pay & Interactive up 23%. While our Family Share of Viewing was down 3% for 2015 we have started this year well with SOV on our main channel up 5% and ITV Family SOV up 2%. We have a strong programme slate for 2016, with 50 hours more drama as well as major rugby and football tournaments. ITV uniquely delivers the mass audiences demanded by advertisers. Continuing to deliver this scale and reach, as well as further strengthening our onscreen performance, remains a key focus for the company and particularly for the new creative leadership in the Broadcast business.

ITV Studios continues to perform strongly both organically and from our recent acquisitions, particularly Talpa. Through our ongoing investment ITV Studios has become a global production business with total revenue up 33% to £1.2bn and with 53% of revenues now coming from outside the UK.

We have a very strong international pipeline of new and returning drama including Victoria, Tutankhamun, Houdini and Doyle, Cold Feet, Poldark, Shetland, Aquarius, Endeavour and Vera as well as entertainment formats The Voice, The Voice Kids, Dance Dance Dance, I'm a Celebrity… Get Me Out Of Here!, The Chase, Hell's Kitchen and Saturday Night Takeaway. ITVS has already secured a higher proportion of 2016 revenue at this point in the year than in previous years and our good drama slate gives us confidence into 2017.

We'll continue to build scale and to capitalise on the strong demand for high quality content that travels, with a particular focus on investing in creative talent and scripted projects, and working with more channels and platforms in the UK and internationally.

In November we launched the ITV Hub, which is now the digital home for all our channels and services both live and on demand, with live viewing at centre stage. The Hub, which is available on 27 platforms, marks a major step forward in the quality, innovation and ease of use of ITV's online service and has had a really encouraging start. Online demand for our content is growing strongly with people spending 42% more time watching ITV online in 2015 than the previous year. Overall, our Online, Pay & Interactive business is rapidly growing and profitable and is on track to deliver double-digit revenue growth again in 2016.

We will continue to build our expertise in digital media to drive closer engagement with online audiences, develop more targeted and innovative advertising with new initiatives including AdSync+ and ITV AdVentures, and maximise our ability to monetise our content online as well as on pay channels.

For this year we anticipate that the phasing of our television advertising will be very different to 2015 due to the timing of major sporting events. We expect ITV NAR to be flat in Q1, marginally behind the market, against 12% growth in Q1 last year. Q2, which will benefit from the Euros, should be positive. For the full year we again expect to outperform our estimate of the TV ad market.

ITV's strong performance in 2015 builds on the consistently good results we have delivered since we launched our strategy six years ago. Given these results the Board has proposed a final dividend of 4.1p bringing the full year dividend to 6.0p, up 28%, which is ahead of previous guidance.

As we look to 2016 and beyond we see further significant opportunities for growth across the company organically and through acquisitions and partnerships. Reflecting ITV's ongoing strength and confidence for future growth the Board is proposing a £400m special dividend, equivalent to 10.0p per share. Our strong cash generation and robust financial position gives us the flexibility to invest in growing the business while at the same time delivering returns to our shareholders."

Full year results

Management look at adjusted results as they reflect the way the business is managed and measured on a day-to-day basis. Adjusted EBITA is before exceptional items and includes the benefit of production tax credits ('adjusted EBITA'). Adjusted profit before tax and EPS primarily remove the effect of amortisation of intangible assets acquired through business combinations and acquisition related costs. A full reconciliation between the adjusted and statutory results is provided in the financial review. 

The statutory profit before tax and EPS from the Consolidated Income Statement are as follows:

Statutory EPS grew 7% to 12.4p (2014: 11.6p), which is at a slower rate than adjusted EPS primarily because operating exceptional items of £109 million were significantly higher than in 2014. This is as a result of the treatment of employment linked consideration for our acquisitions, primarily for Talpa, which is included within statutory EPS, but excluded from adjusted EPS as in our view these costs are part of capital consideration.

Financial performance

We delivered another strong performance in 2015, with revenue growth across the group as we continue to strengthen the business creatively, commercially and financially. Group external revenues increased 15% to £2,972 million (2014: £2,590 million), reflecting 6% growth in NAR to £1,719 million (2014: £1,629 million) and over £300 million increase in non-NAR to £1,664 million (2014: £1,327 million), up 25%. Broadcast & Online revenues grew 6% to £2,146 million (2014: £2,023 million) and ITV Studios total revenues grew 33% to £1,237 million (2014: £933 million).

Together with our continued focus on cash and costs we delivered another year of double digit profit growth with total adjusted EBITA up 18% to £865 million (2014: £730 million), corresponding to an improved adjusted EBITA margin of 29% (2014: 28%). Adjusted EPS in the year increased 20% to 16.5p (2014: 13.8p) and statutory EPS increased 7% to 12.4p (2014: 11.6p).

The business remains highly cash generative and profit to cash conversion was 91%, even after increased investment in our scripted business. Free cash flow was up 18% to £562 million. We ended the year with net debt of £319 million (2014: net cash £41 million) after acquisitions of £406 million (net of cash acquired) including Talpa Media, dividend payments of £459 million and pension deficit contributions of £90 million. At 31st December our reported net debt to adjusted EBITDA was 0.4x.

Reflecting ITV's strong performance in 2015 and in line with its policy, the Board has proposed a final dividend of 4.1p. This equates to a full year dividend of 6.0p, up 28%, which is well ahead of earnings growth.

Broadcast & Online

Broadcast & Online delivered another strong performance, with total revenue up 6% to £2,146 million (2014: £2,023 million) driven by 6% growth in NAR and 23% growth in Online, Pay & Interactive.

There was continued good growth across all the major advertising categories and as expected the phasing of UK television advertising was different in 2015 reflecting the timing of major sporting events. Over the full year we increased our estimated share of broadcast to 46.1% (2014: 45.9%) as we once again outperformed our estimate of the UK television advertising market. It is becoming increasingly difficult to measure the pure spot advertising market as all broadcasters use different definitions, which may include additional sources of revenue such as sponsorship and VOD in their estimates of television advertising.

ITV Family SOV declined 3% in 2015. This reflects a 4% decline in the ITV main channel SOV which was impacted by more competition from the launch of new digital channels in the year, some of our shows not performing as well as we had expected and the relatively strong performance of the BBC. Going forward we remain focused on strengthening our viewing performance and continuing to deliver mass audiences.

Online, Pay & Interactive revenue continued to show strong growth, up 23% to £188 million (2014: £153 million) reflecting further growth in both our online advertising and pay businesses. In November we successfully launched the ITV Hub, the new digital home for our online services, which has had a very encouraging start. Audience demand for VOD continues to grow strongly which helped drive a 14% increase in long form video requests and 42% increase in consumption. There remains strong demand for online advertising which helped drive significant growth in Online revenue. We continue to develop our pay services with Pay revenue benefitting from a full twelve months of revenue from ITV Encore and strong demand for ITV video on demand services.

Schedule costs were up 3% predominantly due to the full year costs of ITVBe and ITV Encore. We maintain a tight control on costs and aim to continue to deliver savings to mitigate inflationary pressure.

Overall Broadcast & Online adjusted EBITA was up 16% to £659 million (2014: £568 million). The continued growth in our highly geared advertising revenue, together with high margin revenue growth in Online, Pay & Interactive, resulted in the adjusted EBITA margin increasing 3% to 31% (2014: 28%).

On 29th February 2016, ITV completed its acquisition of 100% of UTV Ltd, which owns the televisions assets of UTV Plc, for £100 million. This will further strengthen ITV's free to air business and enable it to run a more efficient network.

ITV Studios

ITV Studios total revenue grew strongly in 2015, exceeding £1 billion for the first time as we continue to build scale in creative content markets and strengthen our international portfolio of programmes that return and travel. ITV Studios is becoming increasingly international with 53% of ITV Studios total revenue in the year generated outside the UK (2014: 47%).

Total organic revenue, which excludes our current and prior year acquisitions as well as foreign exchange movements, was up 8% with growth across the business and a particularly strong performance from ITV America and Global Entertainment. Our acquisitions continue to come through, with twelve months of Leftfield Entertainment and Talpa Media from 30 April 2015. The foreign exchange impact was immaterial in the year as the stronger US dollar was offset by our greater exposure to a weakening Euro following the Talpa acquisition.

Studios UK revenue was up 19% to £547 million (2014: £459 million) reflecting 13% growth in internal revenue and 39% growth in external revenue. Organic revenue was up 5%.

ITV America grew strongly in 2015, with revenue up 36% to £320 million (2014: £235 million) as we benefitted from good organic growth, up 15% driven by the delivery of our three US dramas, Best Time Ever and two series of Hell's Kitchen USA, as well as the first full year of Leftfield Entertainment, acquired in May 2014.

Studios Rest of World (RoW) also showed strong growth, up 124% to £213 million (2014: £95 million), with organic revenue up 4%. We have benefitted from Talpa Media which we acquired on 30 April 2015, significantly strengthening our position as a leading international producer.

Global Entertainment revenue increased 9% in the year to £157 million (2014: £144 million). Revenue growth was supported by our strong programme slate including new titles Poldark and Schitt's Creek, as well as US drama Aquarius and the launch of Thunderbirds Are Go!

Overall, we have delivered many creative successes in the year, including two of our US dramas - Aquarius and The Good Witch - being recommissioned. Due to the nature of our business, not all our programmes will return for another series in 2016 but we have a strong portfolio of programmes and formats to distribute internationally and we will continue to invest in our creative pipeline to build upon this.

Reflecting the strong revenue growth across ITV Studios, adjusted EBITA increased 27% to £206 million (2014: £162 million).

Acquisitions

We made a number of acquisitions in 2015. In April we completed the acquisition of Talpa Media in the Netherlands, the creator of worldwide entertainment formats, including The Voice, The Voice Kids, I Love My Country, Dating In The Dark and Dance Dance Dance. We paid an initial cash consideration of €500 million (£362 million) for 100% of Talpa's fully diluted share capital with further payments dependent on Talpa's future performance as well as John de Mol's continued commitment to the business during this time. The total maximum consideration, including the initial payment, is €1.1 billion which is contingent on Talpa continuing to deliver significant profit growth to 2022.

In the UK we made a number of smaller acquisitions. In May we acquired the remaining 75% of Mammoth Screen, one of the UK's leading scripted production companies, whose successful slate of high end drama includes Poldark, Endeavour and the forthcoming Victoria. In June we completed the acquisition of Boom Supervisory Limited, the holding company of UK based Twofour Group which produces factual entertainment and drama programmes. Also in June we acquired a new label, Cats on the Roof Media which owns a number of creative labels focused on developing entertainment and scripted comedy programmes.

In December Brent Montgomery, the founder of Leftfield, became CEO of ITV America and in order to facilitate the integration of Leftfield within the US business we acquired the outstanding 20% which we did not own.

The cash cost of all of these acquisitions was £406 million (net of cash acquired).

EPS

Adjusted profit before tax, after financing costs, was up 18% at £843 million (2014: £712 million). The total adjusted tax charge for 2015 was £177 million (2014: £151 million), corresponding to an effective tax rate on adjusted PBT of 21% (2014: 21%) which is broadly in line with the standard UK corporation tax rate of 20.25% (2014: 21.5%).

Overall, adjusted profit after tax was up 19% at £666 million (2014: £561 million). After non-controlling interests of £7 million (2014: £7 million), adjusted basic earnings per share was 16.5p (2014: 13.8p), up 20%.

Statutory EPS is adjusted to reflect the underlying performance of the business providing a more meaningful comparison of how the business is managed and measured on a day-to-day basis. Adjustments include: all operating and non-operating exceptional items primarily acquisition-related costs such as employment linked consideration and professional fees for due diligence; impairment of intangible assets; amortisation of intangible assets acquired through business combinations including formats and customer contracts; net financing cost adjustments; and tax adjustments relating to these items. Amortisation of intangible assets that are required to run our business, including software licences, is not adjusted for. The most significant adjustment relates to the treatment of employment linked consideration for Talpa.

Balance sheet and cash flow

ITV remains highly cash generative reflecting our continued focus on cash and costs. In the period we generated £788 million (2014: £665 million) of cash from adjusted EBITA of £865 million (2014: £730 million), which equates to a strong profit to cash ratio of 91%. This ratio has remained the same despite our increased investment in scripted content and demonstrates our continued disciplined approach.

After payments for interest, tax and pension funding, our free cash flow also remained strong in the period, up 18% to £562 million (2014: £478 million). Overall, after dividends, acquisitions and debt repayments we ended the year with net debt of £319 million, compared to net debt of £540 million at 30 June 2015 and £41 million net cash at 31 December 2014.

We have a £525 million Revolving Credit Facility in place until 2019 provided by a number of core relationship banks. We also have a £175 million bilateral financing facility and a £75 million invoice discounting facility, both of which are free of financial covenants. At 31 December 2015 these facilities were all undrawn.

In 2015, to fund the acquisition of Talpa Media, we entered into a 12 month €500 million bridge loan facility provided by five of our relationship banks. This was repaid and cancelled in September 2015 when we issued a seven-year €600 million Eurobond at a fixed coupon of 2.125%. The bond will mature on 21 September 2022. The proceeds from the bond were also used to fund the maturing £78 million Eurobond in October 2015.

As we enter the next phase of our strategy our balance sheet strength together with our continued strong free cash flow will enable us to invest in opportunities to grow the business and enhance shareholder value. To preserve our financial flexibility, our policy is to maintain at least £250 million of available liquidity at any point.

Our objective is to run an efficient balance sheet, and to balance investment for further growth with attractive returns to shareholders. Over time we will continue to look to increase our balance sheet leverage and we believe maintaining leverage below 1.5x reported net debt to adjusted EBITDA will optimise our cost of capital, allow us to sustain a progressive dividend policy and enable us to retain flexibility to continue to invest for further growth. As at 31 December 2015 reported net debt to adjusted EBITDA was 0.4x.

Dividend per share

The Board has committed to growing the full year ordinary dividend by at least 20% per annum for three years to 2016, by which time we will achieve a dividend cover of between 2.0 and 2.5x adjusted earnings per share. Reflecting ITV's strong performance in 2015 and in line with its policy, the Board has proposed a final dividend of 4.1p. This equates to a full year dividend of 6.0p, up 28%, which is well ahead of earnings growth and is a significant step forward in taking ITV's dividend cover closer to its policy range.

The Board is also proposing a 10.0p special dividend, worth just over £400 million, which comes after a year of significant investment and reflects ITV's strong cash generation and the Board's confidence in the business. Adjusted for this special distribution ITV's pro forma leverage would be 0.8x reported net debt to EBITDA, which provides flexibility to continue to invest in the business for further growth.

Pension

The aggregate IAS 19 deficit of the defined benefit scheme at 31 December 2015 was £176 million (31 December 2014: £346 million). The reduction reflects lower pension liabilities as a result of rising bond yields over the year, deficit funding contributions of £90 million and the difference between the actual inflation experienced in the period compared to the expected rate. Pensions continue to be paid from the Scheme based on actual requirements.

The last actuarial valuation was undertaken in 2014. On the basis adopted by the Trustee, the combined deficits as at 1 January 2014 amounted to £540 million.

Following completion of the actuarial valuations, the Group has agreed to make deficit funding contributions in order to eliminate the deficits in each section. From 2016 ITV will pay deficit funding contributions of around £80 million, a £10 million reduction on 2015. Going forward these payments will be paid more evenly throughout the year.

2016 full year planning assumptions (including UTV)

· Total network programme budget is expected to be around £1,050 million, weighted to the first half due to the timing of sport, including the Euro Football Championship

· Adjusted interest is expected to be around £25 million, reflecting a full year of the €600 million Eurobond

· Adjusted effective tax rate is expected to be similar to 2015

· Capex is expected to be £50 to £55 million

· Profit to cash conversion is expected to be around 85-90%, reflecting our continued strong cash generation and investment in scripted content

· Total pension deficit funding will be £80 million and will be paid more evenly over the year

· Ordinary dividend will move in line with our cover policy of 2 to 2.5x adjusted EPS

· The translation impact of foreign exchange if rates stay as they currently are, could be £50 million more revenue and £9 million more profit

· Exceptional items are expected to be around £110 million in 2016, again as a result of the treatment of employment linked consideration for our acquisitions which is included within statutory EPS, but excluded from adjusted EPS as in our view it is part of capital consideration

Outlook

We expect to deliver another good performance in 2016 with continued revenue growth across both businesses.

Over the full year we expect to outperform our estimate of the television advertising market but the shape of the market is expected to be different in 2016, driven by the timing of major sporting events. ITV Family NAR is expected to be flat in Q1, marginally behind the market, against 12% growth in Q1 last year. Q2, which will benefit from the Euros, should be positive.

We remain focused on strengthening our viewing performance and we have started 2016 well, with ITV SOV up 5% and ITV Family SOV up 2%. Online, Pay & Interactive will deliver double-digit revenue growth, driven particularly by Online and Pay as we continue to invest in the ITV Hub and further develop our international pay model. ITV Studios is on track to report double-digital revenue and profit growth, primarily driven by our recent acquisitions.

Overall, we see clear opportunities for investment in all parts of the business, and because of our strong financial position and cash conversion, we are confident in delivering both continued growth and shareholder returns.

Notes to editors

1.  Unless otherwise stated, all financial figures refer to the 12 month period ended 31 December 2015, with growth compared to the same period in 2014.

2.  Group external revenue

3.  ITV Family NAR is expected to be flat in Q1, marginally behind the market, against 12% growth in Q1 last year. Q2, which will benefit from the Euros, should be positive. January was down 1%, February down 4%, March up around 5% and April down around 5%. This revenue is pure NAR, excluding the benefit of sponsorship and online revenue. From March 2016, ITV Family NAR includes advertising revenue from the UTV Channel 3 licence. For the full year we again expect to outperform our estimate of the TV advertising market.

4.  Broadcast & Online performance indicators

SOV data based on BARB/AdvantEdge data and Share of Commercial Impacts (SOCI) data based on BARB/DDS data. SOV data is for individuals and SOCI data is for adults. ITV Family includes: ITV, ITV2, ITV3, ITV4, ITV Encore, ITVBe, CITV, ITV Breakfast, CITV Breakfast and associated "HD" and "+1" channels.

% change is calculated on unrounded SOV and SOCI figures. Total long form video requests across all platforms are based on data from ComScore Digital Analytix, Virgin, BT, iTunes, Amazon Prime Instant Video, Netflix, Sky and Hospedia and include simulcast.

5.  The 2015 final and special dividend will be paid on 27 May 2016. The ex-dividend date is 28 April 2016 and the record date is 29 April 2016.

6.  This announcement contains certain statements that are or may be forward looking with respect to the financial condition, results or operations and business of ITV. By their nature forward looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward looking statements. These factors include, but are not limited to (i) a major deterioration in the current outlook for UK advertising and consumer demand, (ii) significant change in regulation or legislation, (iii) failure to identify and obtain, or significant loss of, optimal programme rights, and (iv) the loss or failure of transmission facilities or core systems and (v) a significant change in demand for global content.

Undue reliance should not be placed on forward looking statements which speak only as of the date of this document. The Group accepts no obligation to revise publicly or update these forward looking statements or adjust them to future events or developments, whether as a result of new information, future events or otherwise, except to the extent legally required.

For further enquiries please contact:

Investor Relations

Pippa Foulds        +44 20 7157 6555 or +44 7778 031097

Media Relations

Mary Fagan           +44 20 7157 3965 or +44 7736 786448

Mike Large            +44 20 7157 3021 or +44 7768 261528

Strategy and Operations
 

Chief Executive's Review
 

In 2015 ITV delivered another strong performance as we continue to strengthen and grow the business.

We achieved good revenue growth across all parts of the business, with external revenue up 15%, and for the sixth consecutive year we delivered double-digit growth in our key profit measures.

ITV's performance in 2015 builds on our consistent record of strong results since we launched our strategy six years ago. Since 2009 we have increased Group external revenues by 58%, adjusted EBITA by 328%, adjusted earnings per share (EPS) by over 800% and basic EPS by over 400%. We have improved our cash position by turning this profit into cash, which has allowed us to significantly invest in the business while at the same time returning over £1.1 billion to shareholders to date, with more proposed for 2016. We will also maintain financial flexibility to continue to invest in the business.

ITV today is a demonstrably better business creatively, commercially and financially. We've made significant progress in reducing our dependence on UK spot advertising and in growing new revenue streams. In 2015, 49% of ITV's total revenues came from sources other than traditional spot advertising.

Our global production business, ITV Studios, continues to grow in the UK and internationally, both organically and through acquisitions in key creative markets, and is now a global player of scale with over half of its revenues coming from outside the UK. Our Broadcast business is robust and growing as we continue to deliver unrivalled audience reach for advertisers, and further strong growth in Online, Pay & Interactive, which is a material and profitable part of the business.

We are committed to our original vision of ITV as an owner and producer of world-class content. We are confident that our strategy to maximise our value as an integrated producer broadcaster, making our content famous on multiple platforms before distributing it around the world, is the right long-term path for ITV.

We will continue to strengthen the business and grow new revenue streams both organically and through acquisitions, as we see investment opportunities across the business. There will be an increasing emphasis on building a global pay and distribution business as we seek to deliver and monetise our content on multiple platforms, free and pay.

We remain focused on delivering against our three strategic priorities in the areas where we can achieve most growth:

maximising

maximise audience and revenue share from free-to-air broadcast and VOD business

growing

grow an international content business

building

build a global pay and distribution business

ITV delivers another strong performance

In 2015 we grew external revenue by 15% to £2,972 million (2014: £2,590 million), reflecting 6% growth in NAR to £1,719 million (2014: £1,629 million) and over £300 million growth in non-NAR to £1,664 million (2014: £1,327 million), up 25%. Together with our continued focus on cash and costs we delivered another year of double-digit profit growth with total adjusted EBITA up 18% to £865 million (2014: £730 million), corresponding to an improved adjusted EBITA margin of 29% (2014: 28%). Adjusted EPS in the year increased 20% to 16.5p (2014: 13.8p) and statutory EPS increased 7% to 12.4p (2014: 11.6p).

The business remains highly cash generative and profit to cash conversion was 91%, even after increased investment in our scripted business. We ended the year with net debt of £319 million (2014: net cash £41 million) after acquisitions of £406 million (net of cash acquired), dividend payments of £459 million and pension deficit contributions of £90 million.

With a strong balance sheet we are able to continue to invest in the assets underpinning our strategy, developing our content, our people and our brand. As a people and talent business we also continue to drive high employee engagement and attract a diverse workforce to support the success of ITV. Reflecting ITV's strong performance in 2015 and in line with its policy, the Board has proposed a final dividend of 4.1p. This equates to a full year dividend of 6.0p, up 28%, which is well ahead of earnings growth and is a significant step forward in taking ITV's dividend cover closer to its policy range.

The Board is also proposing a £400 million (10.0p per share) special dividend, which comes after a year of significant investment at ITV and reflects ITV's strong cash generation and the Board's confidence in the business. Following this distribution ITV's leverage remains well below the 1.5x net debt to EBITDA ceiling and gives ITV the flexibility to continue to invest across the business for further growth.

Maximise audience and revenue share from free-to-air broadcast and VOD business

Against the backdrop of a rapidly changing media environment, our Broadcast business has performed consistently well over the last few years and has generated significant profit and cash, supported by our strong programme schedule, tight cost control and a sustained recovery in the UK advertising market.

In 2015 Broadcast & Online revenues were up 6% to £2,146 million (2014: £2,023 million), with adjusted EBITA up 16% to £659 million (2014: £568 million), which reflects 6% growth in highly geared NAR and 23% growth in high margin Online, Pay & Interactive revenue.

Continued strong advertising growth

In 2015 ITV again outperformed its estimate of the television advertising market. ITV invests over £1 billion annually in programming and has unique scale and reach which is much in demand from advertisers, delivering mass audiences on the ITV main channel as well as more targeted demographics on the family of channels and on the ITV Hub. This scale and strength of our brand underpins the success of our free-to-air and on demand platforms.

ITV is also driving more value from its brands and for advertisers through partnerships and sponsorship deals, increased consumer interactivity, and by developing new and more targeted advertising initiatives to extend advertising campaigns beyond the television spot, such as AdSync+ and ITV AdVentures.

Focus on strengthening viewing performance

In 2015 ITV Family Share of Viewing (SOV) declined by 3%. While there were many successful programmes in the first half, our viewing performance was impacted by the launch of a number of new free-to-air digital channels, some of our shows, particularly in the factual genre, not performing as well as we had expected and relatively strong competition from BBC. ITV Family Share of Commercial Impacts (SOCI ) was down 4%.

We have new creative leadership in place and we remain focused on strengthening our viewing performance to ensure we continue to deliver standout content that drives mass audiences for our advertisers. We believe that around £1 billion is the right level of investment for our programme budget and we have a strong slate of programmes for 2016 with many new and returning programmes across all key genres.

Responsive to a dynamic environment

The market environment in which we operate is constantly changing which provides both opportunities and challenges. Viewers, and particularly the younger generation, are changing the way they consume content and the digital revolution has dramatically increased the number of devices and platforms on which content is viewed. As a result online is one of the fastest growing businesses within ITV and we will continue to invest in the quality and accessibility of the ITV Hub, the new digital home for all our channels and services, as well as seeking new ways to monetise and distribute our content.

However, while online viewing is growing rapidly in the UK, it remains a small proportion of total viewing at 7%, with the majority of television watched live.

Broadcast markets differ internationally and therefore there cannot necessarily be a direct read across. However, what is common to all markets is that at the heart of a successful Broadcast business is owning and exploiting the rights to high-quality, 'must have' content. That is why growing an international content business remains central to our strategy as an integrated producer broadcaster.

Grow international content business

In 2015, reflecting the strength of our global production labels, ITV Studios delivered good revenue growth both organically and from our acquisitions, with growth across the business. Total revenue was up 33% to £1,237 million (2014: £933 million), of which organic revenue was up 8%, while adjusted EBITA increased 27% to £206 million (2014: £162 million).

Our vision is to be a scaled international business, owning and exploiting rights in key genres that travel. In line with this, we continue to strengthen our position as the UK's largest commercial production company, as well as creating an increasingly international business with production bases in America, the Netherlands, France, Germany, the Nordics and Australia. Over half of ITV Studios total revenue is generated outside the UK and we have become a top independent producer across Europe and
the US.

It is clear that there remains strong global demand for high-quality content from both broadcasters and platform owners. We estimate that the global content market is growing at about 5% per annum. Capitalising on this demand, ITV's strategy continues to be to develop, own and manage content with international appeal in the key creative markets.

Over the last few years we have built scale in production markets with solid creative track records both organically and through acquisitions. This year we have strengthened our business, with the acquisitions of Talpa Media in the Netherlands and Twofour Group and Mammoth Screen in the UK.

We continue to build scale internationally and develop a larger portfolio of successful series and formats across genres and across their content lifecycle. We will focus on programmes that return and travel internationally, namely drama, entertainment and factual entertainment. We have a good slate of new and returning programmes with 166 new commissions and 176 recommissions delivered in 2015 and many more in the creative pipeline for 2016 and beyond.

Building a global pay and distribution business

As we grow our investment in content and own more hit shows that can be exported around the world, we are creating new windows to extend the reach of that content and monetise it across more platforms and markets.

Capitalising on growing demand for video on demand

Growth in Online, Pay & Interactive remains strong with revenue up 23% to £188 million (2015: £153 million) as viewers are changing the way they consume content. We continue to see good growth in long-form video requests, up 14% while total video consumption, which is the measure of how long viewers are spending online, was up 42%.

In Autumn 2015 we successfully launched our new online service the ITV Hub, through which audiences can access ITV broadcast content both live and on demand. This is a major step forward in the quality, innovation and ease of use of our online service. Live content is central to the Hub and live simulcast viewing is becoming increasingly popular particularly around sporting events and large entertainment shows, as viewers are using connected devices as a television set. The new service has been very well received with consumption growing strongly since launch. To continue to drive growth in our online audiences and advertising revenues, we will continuously invest in improving the user experience, technology and the reach of the ITV Hub, which is now available on 27 platforms.

Further developing pay opportunities

We have built a fast-growing and profitable pay business in the UK from licensing our channels, including our pay channel ITV Encore, and content to platforms such as Sky and Virgin. Outside the UK we have established a number of smaller pay propositions including Cirkus and ITV Choice.

Going forward we are looking to explore new models for content creation and distribution, through a mix of pay channels and online. We have invested in a number of digital media companies and will continue to develop a greater expertise and scale in monetising our content through a mixed economy of organic growth, partnerships and acquisitions.

Expanding our global distribution network

Global Entertainment's revenues grew 9% in 2015 to £157 million (2014: £144 million) as we have driven value from the investments we have made in creating and owning content with international appeal. In 2015 we invested £163 million in scripted content, up £60 million and we continue to strengthen our portfolio including acquiring third-party content.

As ITV grows in scale, we will further enhance our distribution network, benefitting from our increased rights ownership and from the stronger network relationships we build.

Our acquisitions have also strengthened Global Entertainment's position as a leading international distributor of content and our focus is now on leveraging our creative talent and distribution network to build on these successes and develop new ways to package and sell our content internationally.

Confident of delivering further good growth in 2016 and beyond

We expect to deliver another good performance in 2016 with continued revenue growth across both businesses.

Over the full year we expect to outperform our estimate of the television advertising market but the phasing of NAR over the year is expected to be different in 2016, driven by the timing of major sporting events. We expect ITV NAR to be flat in Q1, marginally behind the market, against 12% growth in Q1 last year. Q2, which will benefit from the Euros, should be positive.

We remain focused on strengthening our viewing performance and we have started 2016 well, with ITV SOV up 5% and ITV Family SOV up 2%. Online, Pay & Interactive will deliver double digit revenue growth, driven particularly by Online and Pay as we continue to invest in the ITV Hub and further develop our international pay model. ITV Studios is on track to report double-digit revenue and profit growth, primarily driven by our recent acquisitions.

Overall, we see clear opportunities for investment in all parts of the business. And because of our strong financial position and cash conversion, we are confident in delivering both continued growth and shareholder returns. ITV remains well positioned to drive value from its talented and creative people, our commercial scale, and our global network in the creation and distribution
of content.

Strategic Priority 1

Maximise audience and revenue share from free-to-air broadcast and VOD business
 

While the media environment in which we operate is constantly changing our Broadcast business remains robust and adaptable. ITV is the biggest marketing platform in the UK and because of the scale of our commercial channels, we reach around 80% of the television owning population every week. We invest over £1 billion in our programme budget, significantly more than our commercial competitors, and have an unrivalled ability to deliver mass audiences across all demographics.

As a result, there continues to be a strong demand for advertising on our family of channels, which generates significant profit and cash to reinvest across ITV. Additionally, as an integrated producer broadcaster, our broadcast channels also provide an important platform to showcase ITV Studios content and give it a proven track record, before exploiting it internationally.

Continued strong advertising growth driven by our unique offering

Since 2009 ITV has maintained its leading position as the only commercial broadcaster consistently able to deliver mass audiences to our advertisers. In 2015 ITV delivered 98% of all audiences over five million and 93% of all audiences over three million.

ITV's unique ability to deliver these mass audiences, as well as more targeted demographics across the family of channels and the ITV Hub, has enabled us to once again grow ITV Family NAR ahead of our estimate of the television advertising market, even though our SOV declined in the year. SOV provides an overall measure of viewing performance, however because advertisers are buying scale and breadth of audience, SOV is not necessarily a direct indicator of advertising performance.

Television remains the most efficient and effective advertising medium for advertisers to achieve mass simultaneous reach. Although television has seen some price inflation over the last few years, the cost of advertising is similar to 2004 levels and compared to many other advertising media it remains good value, especially given the reach and scale that it delivers. As the viewing and advertising landscape continues to fragment, the scale of audience that television, and particularly ITV delivers, becomes increasingly valuable.

Maximising the value of our airtime

ITV is also focused on maximising the value of its airtime and driving new revenue streams through sponsorship, interactivity and branded content. ITV can utilise its core assets of its strong brand and reputation, unique commercial relationships and quality production capability to deliver a wide variety of marketing solutions. To date we have implemented many innovative sponsorship deals including Aunt Bessie's for I'm A Celebrity… Get Me Out Of Here! and Land Rover and SSE for the Rugby World Cup. We have also produced a number of branded content solutions with our new service ITV AdVentures for Suzuki and National Lottery and we have launched AdSync+, a partnership with RadiumOne to amplify the reach of our television advertising. In 2016 we will also be introducing more targeted advertising.

Ongoing focus on strengthening viewing performance

Although we had many on-screen successes in 2015, ITV Family's SOV declined by 3% with ITV main channel SOV down 4% and the digital channels SOV down 3%. This performance was a result of the launch of some new free digital channels, a number of our shows not performing as well as we had expected, particularly in the factual genre, and relatively strong competition from the BBC.

However, we enjoyed many real successes in the year - we broadcast the most watched entertainment show in Britain's Got Talent, the most watched soap in Coronation Street, the most watched drama in Downton Abbey and the most watched sporting event with England vs. Wales during the Rugby World Cup. Our daytime schedule improved, including Good Morning Britain, and we also launched a number of new entertainment shows including Mission Survive, Ninja Warrior UK and You're Back in the Room, as well as driving significant audiences with our returning brands, I'm A Celebrity… Get Me Out Of Here!, Britain's Got Talent and The X Factor. Our drama schedule, which included Code of a Killer, Safe House, Downton Abbey, Home Fires, Unforgotten and the second series of Broadchurch, continued to deliver large-scale audiences.

To drive viewing and engagement in our content, we are further developing programme apps which continue to grow in popularity. Our digital engagement has grown significantly in the year, delivering 100 million votes across our big entertainment shows and 40 million paid competition entries.

Looking ahead we have new creative leadership in place and we remain very focused on strengthening our viewing performance in 2016. We believe that around £1 billion is the appropriate programme budget for ITV's family of channels to ensure we continue to deliver standout content that drives the scale and breadth of audiences that advertisers demand. We have a strong slate of new and returning programmes across the key genres. We have 50 hours more drama, major football and rugby tournaments and will continue to invest in daytime and soaps. Our 2016 schedule includes new programmes such as Victoria, Cold Feet, The Durrells, Maigret, Brief Encounters, Family Guy, American Dad, Drive, Euro 2016 and the Rugby Six Nations and returning programmes Vera, Endeavour, Britain's Got Talent, X-Factor, I'm A Celebrity… Get Me Out Of Here!, Love Island, Ninja Warrior UK, Long Lost Family, The Chase and the Tour de France.

Remaining responsive to a changing media environment

The market in which we operate is constantly changing but traditional linear television viewing remains resilient despite significant changes in the availability and delivery of content. Broadcaster and other VOD is growing rapidly, but it is a gradual process and still only accounts for 7% of total viewing.

On average viewers watch 216 minutes of television a day, which is a similar level to 2004 of 222 minutes. The majority of television viewing is live, which we estimate to be 81%, as television continues to have the power to bring audiences together. Live event television in particular has demonstrated resilience and a growing relevance as viewers increasingly connect through social media and they continue to deliver very significant audiences. Therefore large sporting events, which also deliver valuable demographics, continue to be an important part of our schedule and as well as the Rugby Six Nations we have also recently secured British horseracing from 2017.

Many consumers, particularly younger viewers, are engaging in an increasing amount of content and entertainment via other platforms such as social media and video games, but television viewing continues to dominate the way people like to be entertained.

Broadcast markets differ internationally. The key European markets are structurally different to the US, driven by the strength of free-to-air television, the level of pay penetration and the cost of pay. Therefore while lessons can be learnt from other countries, there can be no direct read-across.

Three attributes lie at the heart of ITV's successful Broadcast proposition: it's first-class distribution and reach across all platforms; owning the rights to high-quality, must have content, for all key audiences; and providing advertisers with creative access to the biggest and most effective marketing platform in the UK.

2016 and beyond

On 29th February 2016 ITV completed its acquisition of 100% of UTV Ltd, the television assets of UTV plc. This further strengthens ITV's free-to-air business and enables it to run a more efficient network.

As we continue to invest in our integrated producer broadcast model, our priority is to strengthen our on‑screen performance and we have started 2016 well, with ITV SOV up 5% and ITV Family SOV up 2%. We are also focused on maintaining the scale of our audiences because as the viewing and advertising landscape continues to fragment, this becomes increasingly valuable to advertisers.

Over the full year we again expect to outperform our estimate of the television advertising market, although the phasing of NAR is expected to be different in 2016, driven by the timing of major sporting events. We expect ITV NAR to be flat in Q1, marginally behind the market, against 12% growth in Q1 last year. Q2, which will benefit from the Euros, should be positive.

Strategic Priority 2

Grow international content business

Growing a scaled international content business is central to our strategy as an integrated producer broadcaster. As ITV creates and owns more content, our channels provide a platform to showcase our programmes before distributing them across multiple platforms in the UK and internationally.
 

Growing global demand for content

The strong global demand for content from broadcasters and platform owners provides a significant opportunity for ITV Studios. We estimate that the global content market is growing at about 5% per annum, with some genres such as drama growing more quickly than others. To capitalise on this, our strategy remains to develop, own and manage content rights in genres that return and travel internationally, namely drama, entertainment and factual entertainment.

In 2015 we again delivered strong growth with revenues up 33% to £1,237 million (2014: £933 million) and EBITA up 27% to £206m (2014: £162 million). This builds on the significant growth we have achieved over the last few years, more than doubling revenues from £600m in 2009 to over £1.2 billion in 2015. This growth has been achieved organically as well as through a mix of acquisitions, partnerships, investments and talent deals.

Building scale in creative markets

ITV Studios has three production divisions - ITV Studios UK, ITV America and ITV Studios Rest of World. The US and UK are the dominant creative markets, with the US the largest exporter of scripted content and the UK the world leader for exported formats.

Over the last few years we have built scale in these key markets, developing a portfolio of successful series and formats. We have made 16 acquisitions since 2012 mainly in the UK and US and also more recently Talpa Media in the Netherlands. Our original business (excluding all acquisitions we have made) continues to perform well, delivering a 5% compound annual growth rate since 2009, although production businesses do not deliver straight-line revenue growth.

ITV Studios UK performed strongly in 2015 with overall revenues up 19%, with good growth in sales to ITV and to other UK broadcasters. With the acquisition of Mammoth Screen and Twofour Group we have strengthened our production capability across the genres of drama, entertainment, factual entertainment and comedy, as well as helping to drive further growth in our off-ITV commissions. We have delivered series such as The Graham Norton Show (BBC1), 24 Hours in A&E (Channel 4), 10,000 BC (Channel 5), and following these recent acquisitions our portfolio includes Poldark (BBC), The Voice (BBC), Educating Cardiff (Channel 4) and Posh Pawn (Channel 4).

ITV Studios UK is also focused on growing its share of original content commissioned on the ITV main channel. In 2015 ITV Studios delivered 60% of the total spend on original commissions on the ITV main channel. This is a similar proportion to 2014 but in terms of revenue, total sales to Broadcast increased by 12%. New commissions delivered to ITV include Thunderbirds Are Go!, Ninja Warrior UK, Home Fires, Unforgotten and Jekyll & Hyde.

ITV America also had a strong year with revenues up 36% as it benefitted from the delivery of major new dramas and a high volume of programmes from our stable portfolio of unscripted series, including Duck Dynasty, Pawn Stars and two series of Hell's Kitchen USA.

We saw good growth across ITV Studios Rest of World (RoW) with revenues up 124%, where our production bases in Australia, Germany, France, the Netherlands and the Nordics produce original content as well as local versions of ITV Studios formats. This division benefitted from the significant acquisition of Talpa Media in the year and also delivered a number of new and returning commissions including I'm A Celebrity… Get Me Out Of Here! in Denmark and Australia, The Chase in Norway, Come Dine With Me in Sweden, The Chase, Quizduell and I'm A Celebrity…Get Me Out Of Here! in Germany and A Mother's Son in France.

In total in 2015 we produced over 7,000 hours of content by our 58 labels, supplying over 90 channels. We have delivered good revenue growth across our three production divisions and we have cemented our position as the number one commercial producer in the UK and have become a leading independent producer in Europe and the US. Over half of our revenues now come from outside the UK as we are becoming an increasingly international business.

Investing in content with international appeal

To become increasingly international we must continue to expand our portfolio of successful series and formats that return and that can be distributed globally. We have a strong mix of programmes across genres and also across their content life cycle which balances our risk and financial exposure. We continue to invest in our pipeline of ideas to ensure that we are adding to our catalogue of programmes every year.

Demand for drama is growing strongly as standout, original content becomes brand defining for both broadcasters and OTT players in an increasingly competitive global environment. We are looking to leverage our network relationships and international distribution network, to expand our global scripted business and develop a strong portfolio of international and returning drama.

Reflecting the Group's strong financial position and cash generation, we are now able to finance larger-scale scripted projects through working capital. The production cost is partly funded by the initial sale of the series to the broadcaster, while the deficit is recovered through distribution revenue from selling the finished product globally to other broadcasters and platforms. We balance our financial exposure through our portfolio approach, with successful international dramas offsetting the risk that we will not recover the full deficit on every show.

During 2015 we have delivered three major drama series in the US, The Good Witch, Aquarius and Texas Rising, of which The Good Witch and Aquarius have been recommissioned. In the UK we have also delivered or have in production Mr Selfridge s4, Endeavour s3, Poldark s2 and Vera s6 which all have international appeal.

We continue to perform well internationally in the entertainment and factual entertainment genres. In response to continued demand from networks, we have grown a solid portfolio of high volume, high margin formats including Duck Dynasty, Pawn Stars, Come Dine with Me, I'm A Celebrity… Get Me Out Of Here!, Hell's Kitchen USA and The Chase.

Over the last few years we have strengthened our exposure to this genre with a number of partnerships, including in 2015, Possessed Television and Cats on the Roof and most significantly Talpa Media, which we acquired in April 2015 which is focused on developing new entertainment formats that attract large audiences and have significant commercial potential. Benefitting from the creative input of John De Mol and his management team, who will continue to work with ITV, Talpa has created 75 shows and has aired programmes in more than 180 countries over the last six years, including The Voice, The Voice Kids, I Love My Country, Dating in the Dark and Dance Dance Dance.

2016 and beyond

We have a very strong international pipeline of programmes and brands across genres and across their content life cycle. New programmes include Victoria, Cold Feet, Tutankhamun, Houdini & Doyle, Married by Mom and Dad and Killing Fields and returning programmes which include Aquarius, Thunderbirds Are Go!, Home Fires, The Good Witch, Poldark, Endeavour, Vera, Coronation Street, Emmerdale, The Voice, The Voice Kids, Pawn Stars, Come Dine With Me, The Chase, I'm A Celebrity… Get Me Out Of Here! and Countdown.

ITV Studios is now a global business and going forward we aim to utilise our scale to grow our market share and expand the number of networks and OTT players we work with, particularly in the US. With a strong portfolio of new and returning programmes we will build further scale internationally, both organically and through partnerships and acquisitions, as we continue to reduce our reliance on the UK market.

Strategic Priority 3

Build a global pay and distribution business

As digital media and consumer behaviour continue to evolve, our ability to create and distribute high-value content in new and efficient ways is of increasing significance. ITV is continually exploring and experimenting with new ways to distribute our content to broadcasters and platform owners, both free and pay, while also seeking new opportunities to extend the reach of our content for the consumer.

Capitalising on growing demand for VOD through the ITV Hub

Changes in technology and the growing base of connected devices are driving rapid growth in audiences' appetite for VOD and in turn fuelling demand from advertisers for VOD inventory. ITV as a creator and owner of content, particularly sought after drama and entertainment content, is well placed to exploit this growing customer base.

Our Online business has grown rapidly over the last few years and is contributing meaningful revenue to the Group. In November we successfully launched the ITV Hub to replace ITV Player and ITV.com across mobile, PC and connected TV, through which audiences can access ITV content on different devices, live or on demand. This is a major step forward in the quality, innovation and ease of use of ITV's online services. The biggest change is that live content is now central to the ITV Hub and live simulcast viewing is becoming increasingly popular particularly around sporting events and large entertainment shows, as viewers are using their connected devices as a television set. Simulcast viewing now represents about 30% of viewing on the platforms on which it is available.

To drive growth in our online audiences and online advertising revenues we have also been working to increase the distribution of the ITV Hub which is now available on 27 platforms, most recently launching on Amazon Fire, YouView Sony and Freeview Play. Long-form video requests continue to grow strongly up 14% in 2015, driven by mobile and connected televisions. Online consumption, which is the measure of how long viewers are spending online, has also increased by 42% reflecting the quality of ITV's content and the improved viewing experience of the ITV Hub.

To date there have been 21 million downloads of our app and to further increase usage we will continually extend and enhance the ITV Hub with improvements in technology and new content, such as premieres, box sets and short-form content.

Overall the new service has been very well received by both audiences and advertisers, with consumption growing strongly since launch, particularly for live viewing where our audiences enjoy the new 'live swipe' feature on smartphones and tablets and the ITV Hub's improved streaming quality.

Additionally, we are working to maximise the value of our digital data. We have introduced new digital advertising features like AdSync+ as well as dynamically-served advertising on ITV's live simulcast channels on PC and Apple platforms. With 13 million registered users of the ITV Hub, we are not only able to understand and engage with our audiences better but we are also developing more targeted advertising online in 2016.

Further developing our pay offering in the UK and internationally

ITV earns revenue from pay television through licensing our channels and content. 2015 pay revenue grew by 38% as we continued to develop our services across multiple platforms.

Our pay business in the UK includes deals with Sky and Virgin for our HD channels and catch-up VOD, an advertising free subscription version of the ITV Hub on iOS and a deal with Sky to make ITV's content available through its connected platforms including Sky Go and Now TV. In 2014 we launched our first pay channel, ITV Encore, which we are strengthening with more exclusive content including original commissions such as The Frankenstein Chronicles and Houdini & Doyle and critically acclaimed acquired series such as The Americans and Jordskott.

Outside the UK we have established a number of smaller pay propositions including Cirkus, a subscription VOD service that offers the 'Best of British' content to international pay platforms which is available in the Nordics and more recently in Iceland. We also distribute ITV Essentials, an online service for expats, and ITV Choice, a general entertainment channel for emerging markets which was recently launched in South Africa.

As we look to increase ITV brand loyalty, we have already increased our exposure to new types of content including short-form and younger focused long-form programming and new types of distribution. We are widening our digital reach by expanding our presence on YouTube to bring new audiences to our programmes. In 2015 we launched 22 new ITV branded channels across a range of our biggest programme brands. We saw usage increase over 400% across the year on the ITV branded channels to deliver over 160million views, the equivalent of over 8 million hours of viewing.

Talpa has a very strong digital presence internationally across its range of formats. Since 2014 it has developed 10 successful connected live formats including The Voice, The Voice Kids and Dance Dance Dance, in 40 countries, with 90 apps/sites and 100 YouTube channels, in total delivering over 12 billion views.

We have made investments in the digital arena as we look to develop our expertise in monetising online audiences. These include: Believe Entertainment Group, a producer of digital-branded short-form entertainment; Zealot, a digital content multi-platform network; Indigenous Media, a producer of scripted digital content; and Channel Mum, the first ever online video network dedicated to young mothers.

Looking ahead we will further develop our pay offering both in the UK and internationally exploring opportunities for both pay and online as we seek to monetise our content further. We will look to do this through a mixed economy of organic growth, partnerships and acquisitions. We will also increasingly look for opportunities to 'window' our content across our free channels, pay channels and the ITV Hub to derive maximum value for audiences, platforms and advertisers.

Expanding our global distribution network

In 2015 Global Entertainment, the distribution arm of ITV Studios, delivered revenue growth of 9% to £157 million (2014: £144 million) as we have continued to drive value from the investment we have made in creating and owning the rights to quality content with international appeal.

Our distribution business has a substantial archive of over 40,000 hours of television and film content that we distribute to broadcasters and platform owners around the world. In 2015 we have continued to enhance our distribution network, benefitting from our increased rights ownership and strong network relationships as ITV Studios has grown in scale.

We have a strong and balanced portfolio of scripted and unscripted programmes and formats, both new and returning. We continuously strengthen this using ITV's strong cash flow to create and fund new content and acquire third-party rights. ITV Studios creates new programmes in the key genres of drama, entertainment and factual entertainment.

Our scripted content has sold well internationally with programmes such as Poldark, Aquarius, Texas Rising, Endeavour, Jekyll & Hyde and Mr Selfridge all selling to over 100 countries. Our entertainment and factual entertainment content also continues to sell well with programmes such as Come Dine With Me, The Voice, The Voice Kids, I Love My Country, The Chase, I'm A Celebrity… Get Me Out Of Here! and the Price of Beauty.

During the year we have also signed a number of new multi-year and multi-territory deals including a seven year deal for Coronation Street with CBC in Canada. In early 2016 we agreed a multi series and territory deal for Thunderbirds Are Go! with Amazon covering the US and India for first run and UK and Germany for second run. We are now starting to benefit from merchandising around Thunderbirds Are Go! as we look to extend the franchise beyond the television set.

Global Entertainment also invests in the funding of scripted content with international appeal. ITV has invested around £160 million in the year, up £60 million, in scripted programmes such as Texas Rising, Aquarius and The Good Witch, two of which have been recommissioned and they are selling well internationally.

In addition to distributing ITV's own content, we have also acquired the third-party distribution rights to a number of international shows including Schitt's Creek from Canada and Nordic thriller Jordskott.

2016 and beyond

Looking ahead we expect to deliver double-digit growth in our Online, Pay & Interactive revenues as we further develop our ability to distribute and sell our content. We will continue to invest to enhance the ITV Hub and through a mixed economy of organic growth, partnerships and acquisitions, we will develop our pay and online services and channels and explore new ways to package and sell our content to take advantage of demand for quality content in the UK and internationally from consumers, broadcasters and platform owners.

Lastly, we are also continuing to drive the debate around the implementation of retransmission fees in the UK to ensure that we are fairly compensated for our investment in content for the ITV main channel when it is carried on pay TV platforms.

Performance Dashboard

Demonstrating continued progress against our strategic priorities.

1 Maximise audience and revenue share from free-to-air broadcast and VOD business

2015 performance

· ITV NAR growth of 6%, ahead of our estimate of the TV advertising market

· Share of broadcast up to 46.1% in 2015 (2014: 45.9%)

· ITV Family SOV down 3%

· ITV delivered 98% of commercial audiences over five million and 93% of audiences over three million

· Delivered most watched entertainment drama, soap and sporting event

· ITV2 and ITV3 largest digital channels in the UK

· Innovative sponsorship and brand extension partnerships with advertisers

· Launched AdSync+, a partnership with RadiumOne to amplify the reach of our TV advertising

· Dynamic advertising now served to ITV simulcast content on PC and iOS

· Significant digital engagement with 100 million votes across our big entertainment shows and 40 million paid competition entries

Focus for 2016

· Strengthen on-screen viewing in key demographics

· Further invest in our content, channels and brand to maintain our unique scale

· Grow our share of total television and VOD advertising

· Continue to maximise the value of our programme brands through sponsorship, interactivity and brand extensions

· Developing new and more targeted advertising opportunities

· Developing branded content solutions through our new content creation service ITV AdVentures

·   Integration of UTV

Key Performance Indicators

· ITV Family SOV

· ITV Family SOCI

· ITV Family share of broadcast

· Percentage of commercial audiences over three million and over five million

2 Grow international content business

2015 performance

· Good growth across ITV Studios with 8% organic and 33% including the acquisitions

· ITV Studios' share of ITV main channel output at 60%

· 46% growth in Off-ITV production revenue in the UK

· Continued investment in creative pipeline with over 7,000 hours of original content produced and delivered

· Completed three acquisitions including Talpa Media, our biggest acquisition to date

· 53% of ITV Studios revenue generated outside the UK

· Top indie producer across Europe and the US

· Delivered three US scripted series in the year, two of which have been recommissioned

Focus for 2016

· Build further scale internationally

· Continue to develop IP in key creative markets to exploit growing worldwide demand

· Build a pipeline of programmes across genres and content life cycle

· Develop more 16 to 24 focused content

· Attract and retain key creative talent

· Continue to look at acquisitions, investments and talent deals

Key Performance Indicators

· Number of new commissions for ITV Studios

· Percentage of ITV output from ITV Studios

3 Build a global pay and distribution business

2015 performance

· Successful launch of the ITV Hub

· Long-form video requests up 14%, consumption up 42%

· 21 million downloads of app and 13 million registered users

· Launched new original programming on ITV Encore

· New pay deal with Virgin and others including Amazon TVOD and TalkTalk

· Cirkus and ITV Choice now launched in four countries

· Launched many YouTube channels across our programme brands focusing on short-form content, which has driven very significant views

· A leading European distributor of content, with Aquarius, Mr Selfridge, Poldark and Hell's Kitchen USA all sold to over 100 countries

· Six formats sold to three or more countries

Focus for 2016

· Further invest in the quality and distribution of the ITV Hub

· Build a network of pay channels and OTT services

· Consider wider partnerships with OTT/VOD players

· Continue to trial direct to consumer pay opportunities

· Develop innovative new content windowing strategy

· Further grow our international distribution network with high-quality content

· Maximise the use of our strong cash flows to finance the production of high-profile dramas that return and travel internationally

· Invest in developing third-party distribution deals

· Secure retransmission fees in the medium term

Key Performance Indicators

· Total long-form video requests

· Number of new commissions for ITV Studios

Key Performance Indicators across all three priorities

Our Key Performance Indicators (KPIs) align our performance and accountability to our strategy of continuing to develop a creative, commercial and global organisation. Five KPIs measure the Group's operational and financial performance across all three priorities:

· Adjusted EBITA

· Adjusted EPS

· Profit to cash conversion

· Non-NAR revenue

· Employee engagement

Financial and Performance Review
 

ITV delivered another strong performance in 2015 with growth across the business.

Reflecting our continued investment in quality content, we grew revenue across all parts of the business and reported our sixth consecutive year of double-digit growth in our key profit measures, while further improving our adjusted EBITA margin. We remain highly cash generative which, together with our continued focus on costs, places us in a strong position to invest for further growth and enhance shareholder value into 2016 and beyond.

The unadjusted profit before tax and EPS from the Consolidated Income Statement are as follows:

Total ITV revenue increased 14% to £3,383 million (2014: £2,956 million), with external revenue up 15% at £2,972 million (2014: £2,590 million). This reflects 6% growth in NAR to £1,719 million (2014: £1,629 million), and 25% growth in non-NAR revenue to £1,664 million (2014: £1,327 million). Non-NAR now accounts for 49% (2014: 45%) of total revenue.

Growth in NAR and high margin Online, Pay & Interactive revenue combined with the growth in ITV Studios and our continued focus on costs, delivered an 18% increase in adjusted EBITA to £865 million (2014: £730 million), resulting in a 1% improvement in the adjusted EBITA margin to 29%. Adjusted EPS grew 20% to 16.5p (2014: 13.8p) while reported EPS grew 7% to 12.4p (2014: 11.6p). Reported EPS grew at a slower rate than adjusted EPS primarily because of the treatment of employment linked consideration for our acquisitions which is included within reported earnings. This is explained over the following pages.

We remain focused on balance sheet efficiency and working capital management. Despite increased investment in scripted content, our profit to cash ratio remained strong at 91%. After acquisitions of £406 million (net of cash acquired), dividend payments of £459 million and our deficit pension contributions of £90 million, we ended 2015 with net debt of £319 million (31 December 2014: net cash of £41 million). This gives us the financial flexibility to continue to invest in the business.

The Financial and Performance Review focuses on the adjusted results, which, in management's view, reflect the underlying performance of the business, providing a more meaningful comparison of how the business is managed and measured on a day-to-day basis.

The key adjustments are to reflect production tax credits in EBITA before exceptional items ('adjusted EBITA') and remove the effect of certain items from adjusted profit before tax and EPS. These include all operating and non-operating exceptional items primarily acquisition-related costs such as: employment linked consideration and professional fees for due diligence; impairment of intangible assets; amortisation of intangible assets acquired through business combinations including formats and customer contracts; net financing cost adjustments; and tax adjustments relating to these items.

Broadcast & Online

Broadcast & Online delivered another strong performance, with total revenue up 6% to £2,146 million (2014: £2,023 million) driven by 6% growth in NAR and 23% growth in Online, Pay & Interactive.

The television advertising market again showed strong growth with NAR up 6% to £1,719 million (2014: 1,629 million) and continued good growth across all the major advertising categories. The Finance advertising category was driven by traditional banking brands and the Retail and Food sectors remained strong with supermarkets and furniture stores increasing spend. We saw strong growth from technology companies such as Google and Facebook as well as new digital brands, such as Just Eat and Purple Bricks, all using TV to build brand awareness. Entertainment & Leisure did see a decline which was as a result of significant spend by bookmakers in 2014 around the Football World Cup.

As expected, the phasing of NAR was different in 2015 reflecting the timing of major sporting events. The first quarter saw strong growth of 12% benefitting from an earlier Easter, while the second quarter was flat against a strong Q2 2014 which benefitted from the Football World Cup. The third quarter was up 8% with increased spend around the Rugby World Cup with the fourth quarter up 4%. Overall ITV's underlying advertising performance was consistently strong in both the first and second halves of the year.

Over the full year we increased our estimated share of broadcast to 46.1% (2014: 45.9%) as we once again outperformed our estimate of the UK television advertising market. It is becoming increasingly difficult to measure the pure spot advertising market as all broadcasters use different definitions, which may include additional sources of revenue such as sponsorship and VOD in their estimates of television advertising.

ITV Family SOV declined 3% in 2015. This reflects a 4% decline in the ITV main channel SOV which was impacted by more competition from the launch of new digital channels in the year including Spike and Your TV, some of our shows not performing as well as we had expected and the relatively strong performance of the BBC. ITV2 also contributed to the decline, partly as a result of our repositioning of the channel to provide more targeted audiences for our advertisers. We remain focused on strengthening our viewing performance and continuing to deliver mass audiences.

Online, Pay & Interactive revenue continued to show strong growth, up 23% to £188 million (2014: £153 million) reflecting further growth in both our online advertising and pay businesses. In November we successfully launched the ITV Hub, the new digital home for our online services, which has had a very encouraging start. Audience demand for VOD continues to grow strongly which helped drive a 14% increase in long-form video requests and 42% increase in consumption. There remains strong demand for online advertising which helped drive significant growth in online revenue. We continue to develop our pay services with Pay revenue benefitting from a full twelve months of revenue from ITV Encore and strong demand for ITV video on demand services. Interactive revenue was up in the year with daytime competitions performing well. Voting on our programme apps increased exponentially as we introduced a free voting strategy. X Factor delivered 24 million votes and I'm A Celebrity… Get Me Out Of Here! delivered total votes of over 56 million.

SDN external revenue, which is generated from licence sales for DTT Multiplex A, decreased 10% to £64 million (2014: £71 million). This was as a result of lower renewal fees for existing long-term contracts which expired during the year.

Other commercial income was up 3% to £175 million (2014: £171 million), reflecting growth in sponsorship for the Rugby World Cup and brand extensions through a number of innovative solutions including Land Rover and SSE for the Rugby World Cup and Aunt Bessie's for I'm A Celebrity…Get Me Out Of Here! Other commercial income also includes revenue from media sales, which relates to commission earned by ITV on sales of airtime for the non-consolidated licensees, as well as minority revenue from these licensees for ITV content. As expected, performance across both revenue streams was largely unchanged.

Schedule costs were up 3% to £1,045 million (2014: £1,018 million) predominantly due to the full year costs of ITVBe and ITV Encore. Sports rights savings on the FA Cup and Champions League were partly offset by the costs of the Rugby World Cup. Going forward we believe that this is around the right level of programme spend although the genre mix will change each year.

Other Broadcast costs increased marginally, up 1% to £442 million (2014: £437 million). We maintain a tight control on costs and will continue to deliver savings to mitigate inflationary pressure.

Overall Broadcast & Online adjusted EBITA was up 16% to £659 million (2014: £568 million). The continued growth in our highly geared advertising revenue, together with high margin revenue growth in Online, Pay & Interactive, resulted in the adjusted EBITA margin increasing 3% to 31% (2014: 28%).

On 29th February 2016, ITV completed its acquisition of 100% of UTV Ltd, which owns the televisions assets of UTV Plc, for £100 million. This will further strengthen ITV's free-to-air business and enable it to run a more efficient network. As part of the transaction ITV has taken on responsibility for the UTV defined benefit pension scheme.

ITV Studios

* Includes the benefit of production tax credits.

ITV Studios total revenue grew strongly, exceeding £1 billion for the first time as we continue to build scale in creative content markets and strengthen our international portfolio of programmes that return and travel. ITV Studios is becoming increasingly international, and reflecting our growth and increasing scale in key production markets in Europe and the US, 53% of ITV Studios total revenue in the year was generated outside the UK (2014: 47%).

Total organic revenue, which excludes our current and prior year acquisitions as well as foreign exchange movements, was up 8%. There was growth across the business, with a particularly strong performance from ITV America and Global Entertainment. Our acquisitions continue to come through, with twelve months of Leftfield Entertainment as well as Talpa Media from 30 April 2015 and our UK acquisitions including Twofour Group from 24 June 2015. The foreign exchange impact was immaterial as the stronger US dollar was offset by our greater exposure to a weakening Euro following the Talpa acquisition.

Studios UK revenue was up 19% to £547 million (2014: £459 million) reflecting 13% growth in internal revenue and 39% growth in external revenue. Organic revenue was up 5%. There were increased programming sales to Broadcast across both drama and entertainment, with new deliveries including The Trials of Jimmy Rose, Unforgotten, Home Fires, Thunderbirds Are Go! and Ninja Warrior UK. Successful recommissions On-ITV included Saturday Night Takeaway, The Chase and Judge Rinder. Off-ITV revenue grew strongly with successful deliveries including Poldark and The Graham Norton Show for the BBC and Come Dine With Me and 24 Hours in A&E for Channel 4.

ITV America grew strongly in 2015, with revenue up 36% to £320 million (2014: £235 million) as we benefitted from good organic growth, up 15% driven by the delivery of our three US dramas, Best Time Ever, a US remake of Saturday Night Takeaway, and two series of Hells Kitchen. ITV America also benefitted from the first full year of Leftfield Entertainment, acquired in May 2014. Following this acquisition, we became the largest unscripted independent producer in the US and we now have a strong portfolio of returning series and formats including Hell's Kitchen, Pawn Stars, Duck Dynasty, Marriage Bootcamp, The Real Housewives of New Jersey and The Rich Kids Of Beverly Hills.

Studios RoW also showed strong growth, up 124% to £213 million (2014: £95 million), with organic revenue up 4%. We have benefitted from Talpa Media which we acquired on 30 April 2015, significantly strengthening our position as a leading international producer. We also saw good growth in Australia and Denmark from exporting UK formats. 2015 deliveries included I'm A Celebrity… Get Me Out Of Here! in Australia and Denmark, The Chase in Germany and Norway, and Hell's Kitchen in France.

Global Entertainment revenue increased 9% in the year to £157 million (2014: £144 million). Revenue growth was supported by our strong programme slate including new titles Poldark and Schitt's Creek, as well as US drama Aquarius and the launch of Thunderbirds Are Go!, which has now been sold to 90 countries with key territories such as the US and France launching in 2016. We expect to benefit from merchandising around the series as we continue to extend the franchise beyond the television set.

Reflecting the strong revenue growth across ITV Studios, adjusted EBITA increased 27% to £206 million (2014: £162 million). The adjusted EBITA margin remains unchanged at 17% even after significant investment in scripted content. In 2015 we invested £163 million in scripted content, up £60 million. We are financing our larger-scale scripted projects through our strong underlying cashflows. The production cost is partly funded by the initial sale of the series to a broadcaster, while the deficit is recovered through distribution revenue from selling the finished product globally to other broadcasters and platforms. We balance our financial exposure through our portfolio approach, with successful international dramas offsetting the risk that we will not recover the full deficit on every show.

Overall, we delivered many creative successes in the year, including two of our US dramas - Aquarius and The Good Witch being recommissioned. Given the nature of our business not all our programmes will return for another series in 2016, for example Jekyll & Hyde and Best Time Ever, but we have a strong portfolio of programmes and formats and we will continue to invest in our creative pipeline to build upon this. We are on track to deliver good revenue and profit growth in 2016, primarily driven by our acquisitions.

Acquisitions

We have built scale in our international content business, focusing our growth in key creative markets that have a track record for creating and owning intellectual property. Since 2012 we have acquired a number of content businesses in the UK, US and creative locations across Europe, developing a strong portfolio of programmes that return and travel. As we have grown in size and expanded our network relationships and distribution capability, this has helped to strengthen our creative talent pool and build our reputation as a leading European producer and the largest unscripted independent production company in the US.

We have strict criteria for evaluating potential acquisitions. Financially, we assess ownership of intellectual property, earnings growth and valuation based on return on capital employed and discounted cash flow. Strategically, we ensure an acquisition target has a strong creative track record and pipeline in content genres that return and travel, namely drama, entertainment and factual entertainment, as well as succession planning for key individuals in the business.

We generally structure our deals with earnouts or with put and call options in place for the remainder of the equity, capping the maximum consideration payable. By basing a significant part of the consideration on future performance in this way, not only can we lock in creative talent and ensure our incentives are aligned, but we also reduce our risk by only paying for the actual, not expected, performance delivered over time. The majority of earnouts or put and call options are dependent on the seller remaining within the business. Where consideration paid or contingent consideration payable in the future is employment linked, it is treated as an expense in our statutory results rather than as capital. All consideration of this type is excluded from adjusted profit after tax and adjusted EPS as, in our view, these items are part of capital consideration.

In April 2015 we completed the acquisition of 100% of Talpa Media in the Netherlands, the creator of worldwide entertainment formats, including The Voice, The Voice Kids, I Love My Country, Dating In The Dark and Dance Dance Dance. We paid an initial cash consideration of €500 million (£362 million) for 100% of Talpa's fully diluted share capital with further payments dependent on Talpa's future performance. The total maximum consideration, including the initial payment, is up to €1.1 billion which is contingent on Talpa continuing to deliver significant profit growth to 2022 as well as John de Mol's continued commitment to the business during this time. Under the deal structure, because all future payments and €150 million of the initial consideration are directly related to John de Mol remaining with the business, these payments are treated as employment costs and therefore on a statutory basis are part of our reported results. However, we exclude them from adjusted profits as an exceptional item, which is consistent with our treatment of all costs of this type.

We also acquired a minority stake in Monumental Television in April, the UK scripted independent producer founded by Oscar nominated film producers Alison Owen and Debra Hayward. As part of the agreement, Global Entertainment acquired exclusive distribution rights to all of its future television productions.

In May we acquired the remaining 75% of Mammoth Screen, one of the UK's leading scripted production companies, having held a 25% investment in the producer since 2007. Its successful slate of high-end drama includes Poldark, Endeavour and the forthcoming Victoria.

In June we completed the acquisition of Boom Supervisory Limited, the holding company of UK based Twofour Group which produces factual entertainment and drama programmes. We paid an initial cash consideration of £55 million for 75% of the Group. There is a put and call option for the remaining 25% that can be exercised at the end of 2017 and between the end of 2019 and 2021. Additionally, Twofour has a put and call option to acquire the remaining 49% of its subsidiary Mainstreet Pictures that can be exercised between 2018 and 2023. The total maximum consideration for 100% of the business is £280 million with contingent payments dependent on delivering exceptional profit growth to £60 million in aggregate over the final two-year payment period and key individuals remaining with the Group.

Also in June we acquired a new label, Cats on the Roof Media which owns a number of creative labels focused on developing entertainment and scripted comedy programmes.

Acquisitions - 2012 to 2015 (undiscounted)

1. Including the initial cash consideration and excluding working capital adjustments. All future payments are performance related.

2. The amounts have been updated to reflect the accelerated buyout of the remaining 20% of Leftfield.

In December Brent Montgomery, the CEO of Leftfield, became CEO of ITV America. In order to facilitate the integration of Leftfield within the US business, we acquired the outstanding 20% of Leftfield which we did not own. The original terms under which ITV acquired its initial 80% interest included potential future payments linked to Leftfield's profit growth and put and call options under which ITV would acquire the remaining 20%. In consideration for the acquisition of the outstanding 20%, these arrangements have been cancelled and ITV has assumed certain obligations of Brent Montgomery in relation to Leftfield, most notably settlement of the earnouts for its subsidiaries. There was no cash consideration payable at the time by ITV. The maximum consideration payable by ITV for the remaining obligations under the Leftfield acquisition is $100m and is dependent on future performance and is linked to ongoing employment.

The 2015 acquisitions we have made have resulted in a £297 million increase in intangible assets, mainly relating to Talpa formats and £102 million of goodwill.

The table above sets out the initial consideration payable on our acquisitions, our expected future payments based on our current view of performance and the total maximum consideration payable which is only payable if exceptional compound earnings growth is delivered.

We closely monitor the forecast performance of each acquisition and where there has been a change in expectations, we adjust our view of potential future commitments through the income statement.

Total expected consideration for all acquisitions since 2012 has increased by £656 million since 2014. This relates to the total expected amount payable for our 2015 acquisitions. This is made up of the initial consideration of £432 million (£406 million plus the cash acquired) and expected future payments which are only payable if significant compound earnings growth is delivered.

Net financing costs

Adjusted financing costs increased to £13 million (2014: £7 million), due to increased borrowing for the acquisition of Talpa and costs associated with raising the funding which included the initial €500 million acquisition bridge loan that was repaid in September following the issue of the seven year €600 million Eurobond.

Net financing costs are adjusted to reflect the underlying funding costs of the business providing a more meaningful comparison of how the business is managed and funded on a day-to-day basis. These adjustments include mark-to-market on swaps and foreign exchange, imputed pension interest, losses on debt buybacks and other financial loss/income.

Net financing costs were £20 million lower in 2015 at £31 million (2014: £51 million), as the prior year included losses incurred on the repurchase of the remaining £62 million 2019 bilateral loan. This was partially offset by the reduction in other net financial income, which in 2014 related to a reduction in expected future payments for acquisitions as a result of ITV's assessment of their future performance. The imputed pension charge also decreased as a result of the reduction in pension liabilities.

Profit before tax

Adjusted profit before tax, after financing costs, was up 18% at £843 million (2014: £712 million). Profit before tax is adjusted to reflect the impact of production tax credits, net exceptional items, amortisation and impairment of intangible assets and the adjustments to net financing costs, to reflect the underlying performance of the business. Statutory profit before tax increased by 6%, which is less than the increase in adjusted profit before tax, as a result of the exceptional items described below.

Profit before tax (PBT)

* In respect of intangible assets arising from business combinations.

Production tax credits are recognised in adjusted PBT as in our view they relate directly to the production of programmes and reflect the way the business is managed and measured on a day-to-day basis. The ability to access these tax credits is fundamental when assessing the viability of investment decisions in high-end drama. ITV considers these to be part of the overall cost of production rather than a corporate tax item. In 2015 significant tax credits were available to us because of our investment in high-end drama in the UK.

Exceptional items are set out in the table below. Operating exceptional items largely relate to acquisition related expenses which are predominantly performance based employment linked consideration, in particular regarding Talpa as discussed earlier. Other operating exceptional items relate to restructuring costs in particular in relation to the US business. Non-operating income relates to the gain on the sale of the freehold property in Manchester.

Exceptional items

Amortisation and impairment of intangible assets acquired through business combinations is not included within adjusted earnings. However, amortisation of software licences and development is included as management considers these assets to be core to supporting the operations of the business.

Tax

The total adjusted tax charge for 2015 was £177 million (2014: £151 million), corresponding to an effective tax rate on adjusted PBT of 21% (2014: 21%) which is broadly in line with the standard UK corporation tax rate of 20.25% (2014: 21.5%). The adjustments made to reconcile the tax charge with the adjusted tax charge are the tax effects of the adjustments made above to reconcile PBT and adjusted PBT.

*           In respect of intangible assets arising from business combinations. Also reflects the cash tax benefit of tax deductions for US goodwill. In 2014, this was included in other tax adjustments.

Cash tax paid in the year was £117 million (2014: £85 million), the majority of which is paid in the UK. The 2015 cash figure is net of production tax credits received in the year. The cash tax paid is lower than the total tax charge for 2015 largely due to the tax treatment of allowable pension contributions.

ITV is a responsible business, and we take a responsible attitude to tax, recognising that it affects all of our stakeholders. We seek at all times to comply with the law in each of the jurisdictions in which we operate, and to build open and transparent relationships with those jurisdictions' tax authorities. Our tax strategy is in line with that of the business and its commercial activities, and within our overall governance structure, the governance of tax and tax risk is given a high priority by the Board and Audit Committee, including through the operation of the Tax & Treasury Committee.

EPS

Overall, adjusted profit after tax was up 19% at £666 million (2014: £561 million). After non-controlling interests of £7 million (2014: £7 million), adjusted basic earnings per share was 16.5p (2014: 13.8p), up 20%. The weighted average number of shares was broadly in line at 4,006 million (2014: 4,002 million). Diluted adjusted EPS in 2015 was 16.3p (2014: 13.7p) reflecting a weighted average diluted number of shares of 4,035 million (2014: 4,040 million).

The table below reconciles basic to adjusted EPS and the adjustments are explained in the previous sections.

* £23 million adjustment relates to production tax credits.

Dividend per share

The Board has committed to growing the full year ordinary dividend by at least 20% per annum for three years to 2016, by which time we will achieve a dividend cover of between 2.0 and 2.5x adjusted earnings per share. Reflecting ITV's strong performance in 2015 and in line with its policy, the Board has proposed a final dividend of 4.1p. This equates to a full year dividend of 6.0p, up 28%, which is well ahead of earnings growth and is a significant step forward in taking ITV's dividend cover closer to its policy range.

The Board is also proposing a 10.0p special dividend, worth just over £400 million, which comes after a year of significant investment at ITV and reflects ITV's strong cash generation and the Board's confidence in the business. Adjusted for this special distribution ITV's pro forma leverage would be 0.8x reported net debt to adjusted EBITDA, which provides flexibility to continue to invest in the business for further growth.

Cash generation

Profit to cash conversion

Note: Except where disclosed, management views the acquisition of operating property, plant and equipment and intangibles as necessary ongoing investment in the business.

ITV remains highly cash generative reflecting our continued focus on cash and costs. In 2015 there was another working capital outflow as we continued to invest in our creative pipeline.

 In the year we generated £788 million of operational cash (2014: £665 million) from £865 million of adjusted EBITA (2014: £730 million), which equates to a strong profit to cash ratio of 91%. The ratio has remained the same despite our increased investment in scripted content and demonstrates our disciplined approach to cash and costs.

Cash spent on the acquisition of property, plant and equipment and intangible assets increased year-on-year as we invest in infrastructure to support the business.

The difference between the reported and adjusted cash flow in 2015 relates to the cash inflow from production tax credits which ITV considers a working capital item.

Free cash flow

Note: Adjusted cash tax is total cash tax paid excluding receipt of production tax credits which are included within adjusted cashflow.

After payments for interest, tax and pension funding, our free cash flow also remained strong in the period, up 18% to £562 million (2014: £478 million).

Overall, after dividends, acquisitions and debt repayments we ended the year with net debt of £319 million, compared to net debt of £540 million at 30 June 2015 and £41 million net cash at 31 December 2014. Our cash generation was weighted towards the second half of 2015 due to the payment of the special dividend and the significant acquisition of Talpa, all of which took place in the first half of 2015.

Funding and liquidity

Debt structure and liquidity

We have a £525 million Revolving Credit Facility in place until 2019 provided by a number of core relationship banks. We also have a £175 million bilateral financing facility and a £75 million invoice discounting facility, both of which are free of financial covenants. At 31 December 2015 these facilities were all undrawn.

In 2015, to fund the acquisition of Talpa Media, we entered into a 12 month €500 million bridge loan facility provided by five of our relationship banks. This was repaid and cancelled in September 2015 when we issued a 7 year €600 million Eurobond at a fixed coupon of 2.125%. The bond will mature on 21 September 2022. The proceeds from the bond were also used to fund the maturing £78 million Eurobond in October 2015.

As we enter the next phase of our strategy, our balance sheet strength together with our continued strong free cash flow will enable us to invest in opportunities to grow the business and enhance shareholder value. To preserve our financial flexibility, our policy is to maintain at least £250 million of available liquidity at any point.

Leverage

Our objective is to run an efficient balance sheet. Our priority is to invest to drive organic growth and make acquisitions in line with our strategic priorities. We will balance this investment for further growth with attractive returns to shareholders.

Over time we will continue to look to increase our balance sheet leverage and we believe maintaining leverage below 1.5x reported net debt to adjusted EBITDA will optimise our cost of capital, allow us to sustain a progressive dividend policy and enable us to retain flexibility to continue to invest for further growth. As at 31 December 2015, reported net debt to adjusted EBITDA was 0.4x.

We also look at an adjusted measure of net debt, taking into consideration all of our financial commitments which reflects how credit rating agencies look at our balance sheet. At 31 December 2015, adjusted net debt was £1,144 million (31 December 2014: £765 million) reflecting an increase in expected contingent payments on acquisitions as a result of the acquisitions we have made in the year, partly offset by a reduction in the pension deficit under IAS 19 and lower undiscounted finance lease commitments which mainly relate to broadcast transmission contracts and property. As at 31 December 2015 adjusted net debt to adjusted EBITDA was 1.3x.

Financing

We are financed using debt instruments with a range of maturities. During the year we repaid the £78 million Eurobond which matured in October 2015. Borrowings at 31 December 2015 were repayable as follows:

Ratings

We are rated investment grade by two ratings agencies: BBB- by Standard and Poor's and Baa3 by Moody's Investor Services. The factors that are taken into account in assessing our credit rating include our degree of operational gearing, exposure to the economic cycle, as well as business and geographical diversity.

Foreign exchange

As ITV continues to grow internationally, we are increasingly exposed to foreign exchange on our overseas operations. It is our policy not to hedge our exposure to revenues and profits generated overseas, as this is seen as an inherent risk. We do hedge our overseas net assets, where material, and so we have hedged a significant portion of the euro net assets arising from the Talpa acquisition.

ITV is also exposed to foreign exchange risk on transactions we undertake in a foreign currency. Our policy is to hedge a portion of any transaction that is either a firm commitment or highly probable for up to two years forward. The amount hedged depends on the level of certainty we have on the final size of the transaction.

Finally, ITV is exposed to foreign exchange risk on the re-translation of foreign currency loans and deposits. Our policy is to hedge such exposures where there is an expectation that any changes in the value of these items will result in a realised cash movement over the short to medium term.

Pensions

IAS 19

The aggregate IAS 19 deficit of the defined benefit scheme at 31 December 2015 was £176 million (31 December 2014: £346 million). The reduction reflects lower pension liabilities as a result of rising bond yields over the year, deficit funding contributions of £90 million and the difference between the actual inflation experienced in the period compared to the expected rate. Pensions continue to be paid from the Scheme based on actual requirements.

Actuarial valuation

The last actuarial valuation was undertaken in 2014. On the bases adopted by the Trustee, the combined deficits as at 1 January 2014 amounted to £540 million.

Deficit funding contributions

The Group's deficit funding contributions in 2015 were £90 million (2014: £91 million).

Following completion of the actuarial valuations, the Group has agreed to make deficit funding contributions in order to eliminate the deficits in each section. From 1 January 2016 the contributions are paid on the following basis:

Section A - £5.0 million per month until 31 May 2021

Section B - £0.15 million per month until 28 February 2023

Section C - £0.3 million per month until 31 July 2021

In addition to these contributions, payments are made into Section A as a result of the SDN and LTC Pension Funding Partnership structures and during 2015 these payments amounted to £13 million.

The new funding structure above results in a £10 million reduction in deficit funding contributions payable in 2016 compared to 2015, which will be paid more evenly throughout the year.

Ian Griffiths

Group Finance Director

Financial Statements

In this section
The financial statements have been presented in a style that attempts to make them less complex and more relevant to shareholders. We have grouped the note disclosures into five sections: 'Basis of Preparation', 'Results for the Year', 'Operating Assets and Liabilities', 'Capital Structure and Financing Costs' and 'Other Notes'. Each section sets out the accounting policies applied in producing the relevant notes, along with details of any key judgements and estimates used. The purpose of this format is to provide readers with a clearer understanding of what drives financial performance of the Group. The aim of the text in boxes is to provide commentary on each section, or note, in plain English.

Keeping it simple
Notes to the financial statements provide information required by statute, accounting standards or Listing Rules to explain a particular feature of the financial statements. The notes which follow will also provide explanations and additional disclosure to assist readers' understanding and interpretation of the Annual Report and the financial statements.
 

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

The accounts were approved by the Board of Directors on 2 March 2016 and were signed on its behalf by:

Ian Griffiths

Group Finance Director

Consolidated Statement of Changes in Equity

(a) Movements reported in merger and other reserves include a put option for the acquisition of non-controlling interests.

(a) Movements reported in merger and other reserves include a put option for the acquisition of non-controlling interests.

Consolidated Statement of Cash Flows

Notes to the Financial Statements

Section 1: Basis of Preparation

In this section

This section sets out the Group's accounting policies that relate to the financial statements as a whole. Where an accounting policy is specific to one note, the policy is described in the note to which it relates. This section also shows new EU endorsed accounting standards, amendments and interpretations, and whether they are effective in 2015 or later years. We explain how these changes are expected to impact the financial position and performance of the Group.

The financial statements consolidate those of ITV plc ('the Company') and its subsidiaries (together referred to as the 'Group') and the Group's interests in associates and jointly controlled entities. The Company is domiciled in the United Kingdom.

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

The financial statements are principally prepared on the basis of historical cost. Where other bases are applied these are identified in the relevant accounting policy.

The parent company financial statements have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS101).

The financial information in this preliminary announcement represents non-statutory accounts within the meaning of Section 435 of the Companies Act 2006. The auditors have reported on the statutory accounts for the year ended 31 December 2015. Their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. These accounts will be sent to the Registrar of Companies following the Company's Annual General Meeting. A separate dissemination announcement in accordance with the Disclosure and Transparency Rules (DTR) 6.3 will be made when the annual report and audited financial statements are available on the Group's website.

Going concern

At 31 December 2015 the Group was in a net debt position. The Group's strong balance sheet and continued generation of significant free cash flows has enabled further acquisitions as well as the payment of a special dividend. The Group has also sought to gain further efficiencies in the balance sheet and maintain the flexibility to invest in the business by issuing a new Eurobond (see section 4 for details on capital structure and financing).

The Group continues to review forecasts of the television advertising market to determine the impact on ITV's liquidity position. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group will be able to operate within the level of its current funding.

The Group also continues to focus on development of the non-advertising business, and evaluates the impact of further investment in acquisitions against the strategy and cash headroom of the business.

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operation for at least twelve months from the date of this report. Accordingly, the Group continues to adopt the going concern basis in preparing its consolidated financial statements.

Subsidiaries, joint ventures, associates and available for sale investments

Subsidiaries are entities that are directly or indirectly controlled by the Group. Control exists where the Group has the power to govern the financial and operating policies of the entity in order to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account.

A joint venture is a joint arrangement in which the Group holds an interest under a contractual arrangement where the Group and one or more other parties undertake an economic activity that is subject to joint control. The Group accounts for its interests in joint ventures using the equity method. Under the equity method the investment in the entity is stated as one line item at cost plus the investor's share of retained post-acquisition profits and other changes in net assets.

An associate is an entity, other than a subsidiary or joint venture, over which the Group has significant influence. Significant influence is the power to participate in, but not control or jointly control, the financial and operating decisions of an entity. These investments are also accounted for using the equity method.

Investments where the Group concludes it does not have significant influence are deemed 'available for sale'. These investments are held at fair value unless the investment is a start-up business, in which case it is valued at cost and assessed for impairment.

Current/non-current distinction

Current assets include assets held primarily for trading purposes, cash and cash equivalents, and assets expected to be realised in, or intended for sale or use in, the course of the Group's operating cycle. All other assets are classified as non-current assets.

Current liabilities include liabilities held primarily for trading purposes, liabilities expected to be settled in the course of the Group's operating cycle and those liabilities due within one year from the reporting date. All other liabilities are classified as non-current liabilities.

Classification of financial instruments

The financial assets and liabilities of the Group are classified into the following financial statement captions in the statement of financial position in accordance with IAS 39 Financial Instruments: