ITV : 2022 Full Year Results and presentation (Press release)

ITV Full Year results for the period ending 31 December 2022

Strong end to 2022; successful strategic execution; powerful momentum into 2023 and on track to deliver KPI targets for 2026

Carolyn McCall, ITV Chief Executive, said:

"2022 was a year of significant strategic progress and ITV delivered a robust set of financial results. The successful execution and delivery of ITVX in Q4 was a major digital milestone. The platform has received a very positive reception from viewers and advertisers alike, with its newly expanded range of original content and a superior user experience engaging more viewers, and lighter viewers, and encouraging them to spend more time with ITV. The user experience and personalisation elements will continue to improve throughout 2023.

"Our total external revenue growth of 8% was driven by double-digit increases from our growth drivers, ITV Studios and our digital businesses in M&E. Our mass reach linear advertising business has also performed well and ITV total advertising revenue (TAR) was down only 1%, delivering the second highest TAR in ITV's history.

"As a result of ITV's deliberate strategic actions and strong execution, ITV has a scaled and expanding global production business, a rapidly growing targeted digital advertising business, a resilient linear TV advertising business and a unique vertically integrated producer broadcaster and streamer model. This means that ITV is now a demonstrably more balanced business which is ideally placed to take advantage of the growing demand for quality content from viewers, broadcasters and streamers and take a larger share of the digital advertising market.

"We enter 2023 with strong momentum and are on track to deliver all our 2026 KPI targets1 despite a continuing uncertain macro environment. ITV's balance sheet is robust enabling us to continue to invest to support our strategy and deliver returns to shareholders."

Group financial highlights: revenue driven by double digit growth in ITV Studios and M&E digital revenues

• Total external revenue up 8% at £3,728 million, total group revenue2 up 7% at £4,345 million o Total ITV Studios revenue up 19% at £2,096 million with growth across the business
  o Media & Entertainment (M&E) revenue down 1% at £2,249 million driven by 1% decline in total advertising revenue (TAR), as expected. Within this digital advertising revenue was up 17% to £343 million3
• Adjusted group EBITA4 was down 12% at £717 million (31 December 2021: £813 million) largely reflecting the planned investment in M&E to drive future growth, which was partly funded by £23 million of cost savings. This takes total savings delivered since 2018 to £106 million
• Adjusted EPS2 was down 14% at 13.2p (31 December 2021: 15.3p)
• EBITA5 was £668 million (31 December 2021: £784 million). Statutory operating profit was £519 million (31 December 2021: £519
  million) and statutory EPS was 10.7p (31 December 2021: 9.4p)
• Profit to cash conversion2 was 75%, reflecting the growth in Studios and commissions for ITVX
• Balance sheet strength with net debt of £623 million (31 December 2021: £414 million) and net debt to adjusted EBITDA leverage of
  0.8x (31 December 2021: 0.5x).
• In-linewith ITV's dividend policy, the Board has proposed a final dividend of 3.3p (2021: 3.3p), giving an ordinary dividend of 5.0p per
  share for the full year 2022 (2021: 3.3p)

ITV Studios: growing ahead of the market and increasing diversification

• Strong revenue growth, ahead of the market, and industry leading adjusted EBITA margin of 12.4% driven by

• 1. 58% increase in high-end scripted hours produced as we have taken advantage of the global demand for scripted content o 19 formats sold in three or more countries, as our programmes continue to travel, including My Mom, Your Dad and Make
     Love Fake Love (2021: 15 formats)
     o Percentage of total Studios revenue from streaming platforms grew from 13% to 22% with commissions or development deals with most of the major streamers. Given this success we are increasing our target for 2026 from 25% to 30%
• Total ITV Studios revenues in 2022 are 15% higher than 2019 with a record Q4 which was stronger than expected due to the phasing of deliveries

Media & Entertainment (M&E): Record digital viewing and revenues; Second highest TAR in ITV's history

• M&E KPIs demonstrate strong strategic progress with a significant increase in the volume of content available for streaming from 4,000 in 2021 to 19,000 hours; improved user experience; successful launch of ITVX; and further roll out and development of Planet V, ITV's self-service programmatic advertising platform. Planet V is the second largest video ad tech platform in the UK, after Google and underpins our ability to drive digital targeted advertising revenues whilst retaining control of our own sales and avoiding value leakage to adtech intermediaries
  o Total digital revenues up 18% to £411 million3; total streaming hours up 9% and within that, total monetisable streaming hours up 18%6; monthly active users up 6%; and UK subscribers up 17% to 1.4 million
  o 90% of ITV's digital inventory is now sold through Planet V, which has over 20,000 data targeting options around which advertisers can build campaigns, and helped attract 400 new digital advertisers to ITV in the year
  o In its first two months since launch, ITVX has attracted more users, and harder to reach lighter viewers, who are spending longer on ITV's digital content. In the first two months, ITVX attracted 1.5 million new registrations, saw total streaming hours grow 69% and streaming hours of lighter viewers grow 94% compared to the same period in the prior year on ITV's streaming platforms
• TAR performance reflects the resilience of linear and the important role of mass reach to build brands and drive performance. ITV maintained its strength in linear with
  o 33.8% share of commercial viewing (SOCV) (2021: 33.1%) and
  o 93% of top 1,000 commercial broadcast TV programmes (2021: 93%)
• M&E adjusted group EBITA4 was down 22% at £464 million largely reflecting the planned investment in content and ITVX to drive future growth
• BritBox International subscribers are up 25% to 3.0 million

1. See KPI section for further details
2. See APM section for further details
3. See note 5 in Notes to Editors for a breakdown of digital revenue
4. Reconciliation between adjusted and statutory results in provided in the APM section
5. Statutory profit before interest, tax, amortisation and exceptional items
6. See note 4 in Notes to Editors

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Outlook: entering 2023 with strong momentum

ITV Studios

• With ITV's strong position in a growing market, we expect ITV Studios to deliver at least 5% average revenue growth per annum to 2026, and grow ahead of the market.
• We remain committed to our ITV Studios adjusted EBITA margin guidance of 13% to 15% from 2023 onwards. Given the current inflation in the production market and general cost inflation, we expect the margin to be at the lower end of the range in the shorter term, as we previously guided. We continue to drive efficiencies through the digital innovation programme.

Media & Entertainment

• With 18% growth in digital revenues to £411 million7 in 2022 and our planned continuous enhancements in ITVX's product, content and distribution, we remain confident in delivering at least £750 million of digital revenues by 2026
• In Q1 we continue to see strong growth in digital advertising with revenues expected to be up around 25%. Nevertheless, the outlook for TAR is challenging given the current macroeconomic environment and TAR is expected to be down around 11% in Q1 compared to 2022 and down around 1% compared to 2019. Early indications are that TAR will be down between 10 and 15% in April

Overall, our progress in delivering Phase 2 of the More Than TV Strategy gives us confidence in our ability to achieve our KPI targets for 20268.

We are mindful of the current macro and geopolitical uncertainty and continue to manage our costs tightly. We expect to deliver £15 million of cost savings in 2023 as part of our previously announced £50 million cost saving target by 2026. This is in addition to the £106 million saving programme between 2018 and 2022. We continue to look carefully at further mitigation measures to offset the impact of high levels of inflation on our cost base.

ITV's balance sheet is robust enabling it to invest behind the strategy and deliver returns to shareholders in line with its capital allocation policy.

Virtual Results presentation webcast and Q&A:

ITV's virtual results presentation and Q&A session will be held for investors and analysts at 9.30am today via the following link:

https://www.investis-live.com/itv/63ca6e6baba36a0c00445512/shate

You are now able to pre-register to join.

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

• United Kingdom: 0800 640 6441
• United Kingdom (Local): 020 3936 2999
• All other locations: [phone]
• Participant access code: 313837 - Participants will be greeted by an operator who will register their details.

1. See note 5 in Notes to Editors for a breakdown of digital revenue
2. See KPI section for further details

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Notes to editors

1. Unless otherwise stated, all financial figures refer to the 12 months ended 31 December 2022, with the change compared to the same period in 2021.
2. Group financial performance

		2022		2021		Change	Change
12 months to 31 December		£m			£m	£m	%
ITV Studios total revenue				1,760		336	19%
	2,096
Total advertising revenue					(26)	(1%)
	1,931			1,957
M&E non-advertising revenue					(7)	(2%)
	318			325
M&E total revenue					(33)	(1%)
	2,249			2,282
Total group revenue					303	7%
	4,345			4,042
Internal supply		(617)			(589)		(28)	(5%)
Group external revenue					275	8%
	3,728			3,453
ITV Studios adjusted EBITA					46	22%
	259			213
M&E adjusted EBITA					(134)	(22%)
	464			598
Adjusted EBITA					(88)	(11%)
	723			811
Unrealised profit in stock adjustment					(8)	(400%)
	(6)			2
Group adjusted EBITA					(96)	(12%)
	717			813
Group adjusted EBITA margin		19%			24%
Statutory operating profit					-	-
	519			519
Profit before tax (statutory)					21	4%
	501			480
Profit before tax (adjusted)		672			774		(102)	(13%)
Adjusted EPS		13.2p			15.3p		(2.1p)	(14%)
Statutory EPS		10.7p			9.4p		1.3p	14%
Net debt as at 31 December		(623)			(414)		(209)	(50%)
Reported net debt to adjusted EBITDA leverage		0.8x			0.5x
Profit to cash conversion
	75%			80%

3. Total advertising revenue (TAR), which includes ITV Family NAR, digital advertising and sponsorship is forecast to be down around 11% in Q1 with January down 9%, February down 9% and March down around 16% compared to the same period in 2022. Q1 is expected to be down around 1% compared to 2019. Early indications are that total advertising revenue will be down between 10 and 15% in April. Figures for ITV plc are based on ITV estimates and current forecasts.

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4. Key performance indicators

			Change
12 months to 31 December	2022	2021	%
Group adjusted EPS	13.2p	15.3p	(14%)
Cost savings	£23m	£37m	-
Profit to cash conversion	75%	80%	(5% pts)
ITV Studios total revenue growth	19%	28%	-
ITV Studios adjusted EBITA margin %	12.4%	12.1%	0.3% pts
Total high-end scripted hours	276 hrs	175 hrs	58%
Number of formats sold in 3 or more countries	19	15	27%
% of ITV Studios total revenue from streaming platforms	22%	13%	9% pts
Total digital revenue	£411m	£347m	18%
Total streaming hours*	1,139m	1,048m	9%
Monthly active users**	10.5m	9.9m	6%
UK subscribers	1.4m	1.2m	17%
Share of top 1,000 commercial broadcast TV programmes	93%	93%	-
Share of commercial viewing (SOCV)	33.8%	33.1%	0.7% pts
Total BritBox International subscribers	3.0m	2.4m	25%

• • Total digital revenue includes digital advertising revenue and subscription revenue as well as linear addressable revenue, digital sponsorship and partnership revenue, ITV Win and any other revenues from digital business ventures.
  • UK subscribers captures total UK subscriptions to ITV streaming platforms and services (including free trials).
  • Total streaming hours measures the total number of hours viewers spent watching ITV across all streaming platforms. This figure includes both ad-funded and subscription streaming
  • Monthly active users captures the average number of registered users throughout the period who accessed our owned and operated on demand platforms each month.
  • The share of top 1,000 commercial broadcast TV programmes KPI includes TV viewing from transmission and seven days post- transmission on catch up, as well as six weeks prior to the transmission window. It excludes programmes with a duration of 12-month rolling average to normalise seasonal scheduling
  • ITV Family share of commercial viewing is the total viewing of audiences over the period achieved by ITV's family of channels as a proportion of all commercial broadcast TV viewing in the UK. ITV Family includes ITV1, ITV2, ITV3, ITV4, ITVBe, CITV, ITV Breakfast,
    CITV Breakfast and associated "HD" and "+1" channels.
  • % change for performance indicators is calculated on rounded numbers.
• Whilst total streaming hours were up 9%, monetisable streaming hours were up 18% for the full year. ITV has taken the strategic decision to reduce the availability of pre-transmission drama drops and box sets outside of its own streaming services, such as on Sky and Virgin, where we cannot serve and monetise dynamic advertising. Therefore, this decision does not reduce existing revenues. Over time and with the launch of ITVX we anticipate that we will see this viewing move to ITV's streaming services and be more effectively monetised.
• 2021 Monthly active users have been restated from 9.6 million to 9.9 million due to a change in methodology

5. Digital revenue breakdown

			Change
Digital Revenue (£m)	2022	2021	%
Digital advertising revenue	343	293	17%
Subscription revenue	54	42	29%
Other	14	12	17%
Total digital revenue	411	347	18%

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6. 2023 full year planning assumptions - based on our current best view but may change depending on how events unfold over the year. Profit and Loss impact:

• Total content costs are expected to be around £1.3 billion, rather than £1.35 billion as previously guided, largely due to a reduction in 2023 content amortisation to reflect the windowing of content between linear and streaming
• Permanent overhead cost savings are expected to be around £15 million in 2023. This is part of the £50 million of permanent cost savings to be delivered by 2026, as previously guided
• Adjusted financing costs are expected to be around £30 million
• The adjusted effective tax rate is expected to be around 23.5% in 2023, and then move to around 25% over the medium term due to the increase in the UK statutory tax rate to 25% in April 2023.
• Exceptional items are expected to be around £40 million, mainly due to costs associated with our digital transformation and London property move

Cash impact:

1. • Total capex is expected to be around £75 million as we further invest in our digital capabilities
   • The cash cost of exceptional items is expected to be around £35 million, largely relating to costs associated with our digital transformation and London property move
   • Profit to cash conversion is expected to be between 70% and 75%, reflecting increases in working capital as we continue to grow ITV Studios and invest in ITVX
   • Total pension deficit funding contribution for 2023 is £62 million, made up of £43 million relating to the main section of the Scheme, £16 million relating to the SDN PFP arrangement and £3 million relating to the LTVC PFP
   • The Board has proposed a final dividend of 3.3p, giving a 2022 full year dividend of 5.0p per share. The final dividend will be paid in May 2023. Going forward, the Board intends to pay a full year ordinary dividend of at least 5.0p which it expects to grow over time whilst balancing further investment to support our strategy and our commitment to investment grade metrics over the medium term
2. This announcement contains certain statements that are or may be forward looking statements. Words such as "targets", "expects", "aim", "anticipate", "intend", or the negative of these terms and other similar expressions of future performance or results, and their negatives, are intended to identify such forward-looking statements. These forward-looking statements are based upon current expectations and assumptions regarding anticipated developments and other factors affecting ITV. Although ITV believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. By their nature forward looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. They are not historical facts, nor are they guarantees of future performance; actual results may differ materially from those expressed or implied by these forward-looking statements. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward looking statements. These factors include, but are not limited to (i) the general economic, business, political, regulatory and social conditions in the key markets in which the Group operates, (ii) a significant event impacting ITV's liquidity or ability to operate and deliver effectively in any area of our business, (iii) a major change in the UK advertising market or consumer demand, (iv) significant change in regulation or legislation, (v) a significant change in demand for global content, and iv) a material change in the Group strategy to respond to these and other factors. Certain of these factors are discussed in more detail elsewhere in this announcement and in ITV's 2022 Annual Report and Accounts including, without limitation, in ITV's approach to risk management.
   Forward-looking statements speak only as of the date they are made and, except as required by applicable law or regulation, ITV undertakes no obligation to update any forward-looking statements, whether written or oral that may be made from time to time, whether as a result of new information, future events or otherwise. Nothing in this statement should be construed as a profit forecast.
3. The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2022 but is derived from those accounts. Statutory accounts for 2021 have been delivered to the registrar of companies, and those for 2022 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified,, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006

For further enquiries please contact:

Investor Relations
Pippa Foulds	[phone]
Sarah Comfort	[phone]
Media Relations
Paul Moore	[phone]
Jenny Cummins	[phone]

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