Itv Fy12 Call

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Company Name: ITV PLC

Company Ticker: ITV LN

Date: 2013-02-27

Event Description: Q4 2012 Earnings Call

Market Cap: 4,655.40

Current PX: 119.00

YTD Change($): +13.80

YTD Change(%): +13.118

Bloomberg Estimates - EPS

Current Quarter: N.A.

Current Year: 0.095

Bloomberg Estimates - Sales

Current Quarter: 456.000

Current Year: 2281.727

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Q4 2012 Earnings Call

Company Participants• Archie J. Norman

• Adam Crozier

• Ian Griffiths

Other Participants• Filippo P. Lo Franco

• Ian R. Whittaker

• Steve C. Liechti

• Thomas A. Singlehurst

• Adrien de Saint Hilaire

• Omar F. Sheikh

• Patrick T. Wellington

• Giasone U. Salati

• Laurie Davison

• Richard G. Jones

MANAGEMENT DISCUSSION SECTION

Archie J. Norman

Right. Good morning, everybody, and welcome. Thank you for coming. I think probably it's fair to say this isn't the

most difficult set of results to present, but it is easy to forget that it was only three years ago that we were standing here

actually before Adam had even arrived, talking about a very different set of results and a very different context. And

actually, as somebody who sits on the inside, a very different sort of ITV, and although it's still early stages in the

transformation program, we're now in the third year, the encouraging thing for me about these results is they

demonstrate a significant improvement in operating performance in almost every aspect of the business, and at the

same time, a real change in the emerging shape and economic architecture of the business.

I think the results probably speak for themselves, but that certainly won't stop Adam and Ian speaking at great length

about them, which they're just about to do. Adam's also going to show you an absolutely brilliant film for your

entertainment and we will then move on to some, hopefully, very brief questions and answers.

So, I'm just going to hand you over to Adam.

Adam Crozier

Thanks, Archie. Just to let you know, this morning – and thank you, again, as Archie said, to everyone for taking the

time to come this morning. We're just going to run through, and I'll, in a second, just show you a film. But we're going

to run through the financial highlights, which I will do. Ian will take you through the results then in some detail, not as

much as normal, you'll be pleased to hear, but some detail. And then, I just want to then give you a real feel for what's

driving the transformation over the last three years and where I think we are and what stage we're at in that

transformation, so that you see a little bit behind the numbers as well.

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But before we start I just want to show you a film. As you know, creativity and great programs lie at the heart of

everything that ITV is all about as a producer broadcaster. And I thought it might be helpful to get us all in the mood by

showing you a tape of what sort of drove our strong performance last year and indeed a look ahead to this coming year.So, if we could run the tape that would be terrific.

[Video Presentation] (2:37 – 6:03)

So, where are we? As Archie said, we're three years into our Five-Year Transformation Plan and very much on track to

deliver real sustainable improvement in performance and results. And we remain committed to the strategy, which is a

lean ITV that can create world-class content, executed across multiple platforms and sold around the world. And we've

got our four consistent priorities that underpin that: creating a lean, creatively dynamic, fit for purpose organization;

really maximizing audience and revenue share from our existing free-to-air business; drive those new revenue streams

by exploiting our content across multiple platforms, free and pay; and building a strong international content business.

And our focus over the last three years has been and will continue to be all about execution and delivery.

So, how are we doing so far? I guess, a summary of our progress to-date is that we've got a very clear consistent

strategy, which our people support and very much drive. We're delivering real growth across the business withdouble-digit earnings growth for the third year in a row. And we are creating a better, more efficient and balanced ITV,

as I think we'll show you. Importantly, our core Broadcast business is robust and growing and we've made real progress

in Online, Pay & Interactive, where our revenue streams are now a material part of the business with significant

opportunities there for growth. We're now absolutely ready and able to compete in that area.

And our focus on creativity and content is delivering sustainable organic growth in Studios in the UK and

internationally, and obviously we're beginning to enhance that strong organic growth with some targeted acquisitions in

the key creative and emerging markets. And of course, all of that performance is leading to a more robust balance sheet

and stronger cash flows, which can support not just the investment required to deliver our growth, but also future

shareholder returns at the same time.

I guess, our results – Archie talked about the changing ITV, but I guess our results also need to be seen in the context of

this has been economically, certainly, for the UK and internationally, a very difficult three years, and certainly for the

last couple, it's been a broadly flat advertising market as well. So, in the light of that difficult background, I think theperformance is good. Our external revenues up 3% to £2.196 million.

In terms of advertising, we were flat across the year versus a market that was down minus 1%. For those who like to

know the detail of these things, just to give you a note of quarter four, October was minus 2.5%, November minus 0.8%

and December plus 2.1%, giving negative 0.6% for the final quarter.

Very importantly for us, part of the rebalancing, non-advertising revenue was up from £922 million to £1.036 billion,

so up 12% or £114 million, so real progress there, driven by Studios and Online, Interactive & Pay. And the revenue

growth and focus on efficiency and cost control has led to real growth in earnings. But at the same time, we have been

investing behind our strategic priorities. So, Studios, a really strong performance there, EBITA up 29% to £107 million

Broadcast, as I said, robust and growing, up 9% from £379 million to £413 million, and Group EBITA up 13% from

£462 million to £520 million, and obviously PBT up 17% to £464 million and our adjusted EPS up from 7.9p to 9.2p.

Very focused – remaining very focused on profit to cash conversion at 95%, and we finished the year, despite some of the acquisitions, with around £206 million of positive cash versus £45 million at the same stage last year. And as a

consequence of all of that, the Board has proposed a full-year dividend, a final year dividend rather of 1.8p, bringing

the total for 2012 to 2.6p versus 1.6p in 2011. As well, as you've seen already this morning, as a special dividend of 4p

or £156 million, balancing the need for a reasonably conservative balance sheet, the need for continued investment in

growth and, of course, financial discipline.

So, three years into our Five-Year Transformation Plan, we are delivering positive momentum and improved

sustainable results. And we've seen consistent top-line revenue growth. We've been building our non-NAR revenue in

line with our rebalancing strategy, whilst continuing at the same time to outperform the advertising market. Revenue

growth, alongside very strong tight management of costs and a focus on being both creative and commercial, is driving

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very strong growth in profits at all levels.

You can see there 157% increase in EBITA over the period, 330% increase in adjusted profit before tax, which is

flowing through into an improved EPS performance of plus 411%, and a significant improvement in our cash position,

over £800 million improvement. And obviously, it's that combination of all of that, which is enabling us to invest in our

future growth and to maintain that flexibility and reward shareholders appropriately.

That's enough from me for now. I just wanted to give you the edited highlights. I'm going to ask Ian now to take us

through the 2012 results in some detail, and then I'll take you through a summary of the strategy operations and we'll

have a bit of a look ahead to 2013. Ian?

Ian Griffiths

Thanks, Adam. Good morning, everyone. As you just heard, the highlights show another strong set of results. Good

revenue growth, driven by non-advertising revenues, double-digit profit growth, EBITA, PBT and EPS, and by

delivering our costs savings we fund our investments and improve our margins. We turned nearly all of the profit tocash, ending the year with over £200 million on the balance sheet. All of which is leading to 16% growth in adjusted

earnings and increased returns to shareholders through the improved ordinary and the proposed 4p special dividend.

In terms of revenue, these results show the benefits of having a more balanced business. Studios is a key driver of the

overall growth, but the new revenue streams in Broadcast & Online are also making a material contribution, all of

which shows we can grow the top line, even if the advertising market is flat.

Looking at advertising, there is no major change in the trends we've seen over the past two years. There continues to be

significant volatility by month and across sectors, but the underlying trend, as the MAT chart line shows, remains

broadly flat. In 2012, we estimate the TV advertising market was down 1% with ITV flat, again gaining share. Our

share of broadcast is now 45.8%, a half-point gain in the year. The cash we spend tends to mirror the UK economy.

Retail is down, driven by electrical, supermarkets and a weak high street; cars, airlines and household stores are also

down, as consumers avoid big ticket expenditure.

The growth sectors are finance, telecoms and entertainment, advertisers that use the ITV shop window to build their

product offering. A common link across these categories is technology. The growth advertisers are often online or

broadband-related businesses. In summary, there has been no change in the underlying advertising trend. And as we

often say, one month or one quarter's numbers should not automatically lead to the conclusion that things are going to

be different.

We started 2013 well, up 5%, but the comps mean that Q2 is likely to be challenging. And the low-growth macro

environment suggests there's no reason to be anything, other than cautious, in our short-term advertising outlook.

However, we're more optimistic about the growth of our non-advertising revenues. In 2012, these revenues exceeded

£1 billion for the first time, growing by 12%. ITV Studios is delivering significant growth across all its businesses.

The improved creative in the UK is increasing revenues and supporting the international business. And together, this

means more finished programs and formats for our distribution business, Global Entertainment. In addition, our new

revenues in Broadcast are coming through strongly. This includes non-advertising, our pay revenues from the dealsdone with Sky and Virgin, and increasingly our content deals with new distribution channels, such as Lovefilm and

Netflix.

We've greater visibility on all these revenues when compared to advertising. In Studios, we've already secured around

70% of our target for 2013 and some of our new pay deals have minimum guaranteed revenues. This is another benefit

of having a more balanced business. And because of this visibility, we're confident there will be further good growth in

these revenues in 2013.

In profit terms, we've delivered £520 million of adjusted EBITA, up 13%, with good growth and improved margins

from both businesses. There is a good profit contribution from Online & Pay as these new revenue streams are fairly

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high margin. The increase in Studios revenues is converting to profit at a margin of around 15%, helped by strong

international sales in GE. We've delivered £30 million of cost savings. In Broadcast, there were savings in our

transmission costs. In Studios, we delivered more production efficiencies and the shared central costs improve everyyear. These savings have again funded the investments we've made delivering the Transformation Plan. The key

investment initiatives have been the Studios' creative, our brand re-launch, YouView, the Pay Player and News and

Sport online.

Quickly looking at the divisions, the Broadcast summary is simple. Flat advertising, ITV gaining advertising share,

strong growth from the high-margin new revenue streams, coupled with tight cost control and the NPB broadly flat at

around £1 billion, means we've delivered good profit growth, up 9% to £413 million, margins improving by 2

percentage points to 23%. Overall, a good result in a flat advertising market, demonstrating that Broadcast is robust and

growing.

Looking at Studios, all parts of the business had a strong year. The investments we've made in talent and the creative

pipeline are now coming through in the financials. UK Productions was up 18%, up 9% excluding the benefit from ITV

Breakfast. Original hours produced were up 23% to over 3,000 hours. And we saw strong growth in entertainment, ove

130 hours of new content from shows such as Surprise Surprise, Superstar and The Chase, plus 26 more hours of original drama from Mrs Biggs, Titanic, Homefront and Vera. And once again, we grew ITV Studios' share of ITV

output, now up to 58%. Off ITV, we grew UK revenues by 10%, and in 2013 the acquisition of So TV will increase our

supply to other broadcasters.

Internationally, we delivered very strong revenue growth, up 21%, driven by the U.S., our biggest international

business. Shows such as Jeremy Kyle, Hell's Kitchen, Bill Cunningham, America Now, contributed to an 80% increase

in hours. We also had good growth in Australia and our new business in France doubled its hours and is now profitable

three years after being set up. This strong growth in production is helping GE, which delivered 6% revenue growth,

mainly due to international sales of Titanic and Prime Suspect, offsetting the ongoing decline of the DVD business.

Producing more content, which we own, will benefit the distribution business, improving its catalog of programs and

formats to sell around the world. Overall, the continued focus on production efficiencies and reducing our overheads

has helped deliver an improved margin, even with the investments made in the creative pipeline. This has been a reallygood performance by ITV Studios with £100 million of revenue growth and profits a record of £107 million. The

outlook for 2013 is for good – is for continued good growth, not least as all of the above was achieved without a

material contribution from the acquisitions we made in 2012.

Back to the group level and this all adds up to a strong set of results and 13% growth in adjusted EBITA. Interest costs

are lower due to bond buybacks over the past two years and there are savings to come in 2013. Adjusted PBT is £464

million, up 17%. And with tax at 23%, similar to last year, the net effect is a 16% increase in adjusted EPS to 9.2p.

There is an 8% increase in statutory EPS, which has been impacted by the loss on bond buybacks and the

mark-to-market movement on interest rate swaps.

This strong earnings performance gives us the confidence to increase the ordinary dividend to 2.6p, slightly ahead of

our previous guidance. And to reflect the strength of the balance sheet and our strong cash generation, we're proposing

the 4p special dividend. A return at this level still leaves us with a conservative balance sheet, which we believe is right

given our exposure to the UK advertising market and our other cash commitments, such as pensions, but it also gives usthe flexibility to continue to invest in the business for future growth.

Moving on, this slide shows the strength of our cash generation and we remain focused on managing cash and working

capital tightly. We've delivered 95% profit to cash conversion, which is just under £0.5 billion of cash. This is after £61

million of CapEx that is mainly from the move to Media City and investment in technology, such as new desktops right

across the business.

Our free cash flow after pensions, tax, interest and operating CapEx is over £300 million and this provides the ongoing

cash generation to support the strategy. In the year, we bought back £275 million of our bonds and we'll continue to

look at ways to further improve our balance sheet efficiency, if we can do so in a way that represents a good use of our

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Current Year: 0.095




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cash. Having said that, we do have a strong balance sheet, with no material debt repayments over the next three years,

no covenants on this debt and a new pension funding plan, which gives us more certainty over cash over the medium

term.

The pension deficit is one of our ongoing cash commitments, as are our operating leases, which relate to transmission

and property costs. If you factor these obligations into an adjusted net debt number, our total leverage is 1.7 times

EBITDA. Also included in this calculation are the potential future payments for our recent acquisitions, as set out on

the following slide.

These acquisitions are aligned to our content strategy and meet strict financial criteria. And we've structured all of them

with some form of earn-out or contingent consideration. This means we manage our initial capital cost, align our

interests with the vendors so that we both benefit as the business grows, and we lock in the creative talent. The deals

announced to-date have seen us pay cash of £38 million upfront with a total maximum, including this upfront

consideration, of £96 million, payable three to five years from the date of the transaction. For all of these deals, the

final consideration will be driven by the underlying performance of the acquired businesses.

Briefly on pensions, and whilst we've taken actions to remove some of our underlying risks, the deficit has risen to£551 million due to the very low bond yields. The deficit is very sensitive to change in assumptions and the fall in bond

yields has added almost £700 million to the deficit over the past three years, £240 million in 2012 alone. The

accounting deficit has no impact on the funding plan that we agreed earlier in the year and full details of that are

included in the back of your packs. And as you all probably know, IAS19 has been revised and the changes are set out

on the slide. Our adjusted profit for 2013 will be impacted by £5 million to reflect the running costs of the scheme. This

will come through as an increased pension service cost.

Other factors that impact 2013, £20 million more cost savings. These savings will again fund the investments we're

making in technology and the creative pipeline. We will deliver a net £15 million saving in the program budget as we

reinvest part of our £35 million of sports savings. The total program budget will be around £980 million. Our interest

will be lower this year at around £35 million, reflecting the benefit of the 2012 bond buybacks. The effective tax rate

will remain in the range of 22% to 24%. And CapEx will be about £110 million to £120 million, which is the cost of

acquiring our London headquarters as we announced last month, plus our normal CapEx of around £60 million.In summary, we've delivered a strong result for 2012 and we're in good shape as we enter 2013. Adam?

Adam Crozier

Thanks, Ian. Nicely swift, that's what we like to see. So, I'd just like to take the opportunity now in this section to give

you a feel for what we've done in 2012, the progress we've made in the plan against the key priorities and really look

forward to 2013. And just for the avoidance of any doubt, there's no change in the strategy. We remain committed to

the strategy going forward. We believe it's working and it's certainly delivering improvements in performance and

results.

So, looking at our first priority, we continue to believe – I know all companies say this, but I think for us, our people

really are at the heart of our success. We changed, as you know, over the period, around a half of the wider leadershipteam of around the top 150. In fact, we changed, over the period, around a third of the total workforce. So, a lot of new

people at ITV alongside some fantastic people who have been there for some time and they're genuinely engaged in

what we're doing and helping us deliver these great results.

Costs, as Ian said, we delivered £30 million against the £20 million planned, and we continue to believe there's more to

come. We're constantly looking at ways to simplify the business and take complexity out of the business. We're driving

value from being an integrated producer broadcaster. Working as OneITV, breaking down those old silos we talked

about two or three years ago really does help us drive down costs across the business.

And of course, you get the more obvious benefits from the producer broadcaster relationship coming through ITV

Studios in terms of the creativity and number of commissions and programs and what have you. But of course, there is

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another benefit coming the other way from the producer broadcaster model, which benefits broadcast, which is by

owning more of our own rights that helps drive the performance of our online and pay businesses. Because we own

those rights, we can do more with them and more of the benefit comes to us.

So, if you look at a lot of these third-party pay deals that we're doing, many of those are done at 50%, 60%, margins

plus. So, it's very profitable work for us and that's partly because we've got our own content driving that. And of

course, being more integrated, you're seeing us drive growth across all parts of ITV.

And the rebrand was very important for us. It was announced at the back end of the year, so we're really just starting on

that. It's new branding, it's modern, it's very vibrant. It impacted every area of ITV. As you know, ITV was always a

sort of collection of regional companies. In fact, you can still go somewhere and see it was called Yorkshire TV. You

could go to Australia and see that our content business was called Granada. And it's really brought everyone in ITV

right together, it's very much called ITV now, and the branding changed on everything, everywhere and every place on

a single day at the beginning of January.

And of course, part of it isn't just the rebranding; it's about a clear positioning for all our channels, which I'll talk a bit

more about later. Pensions, as Ian said, reducing risk and improving certainty, which I think is a good thing, and of course improved shareholder returns, as we discussed earlier. Just making the point there that over the three years, our

people really have been an important part of what we've done here and what we've delivered working as OneITV, and

very importantly they're really engaged with the strategy. Our engagement levels have gone up from 65% in 2009 to

88% last year, so really engaged workforce that's delivering.

Relentless focus on cost efficiency, we've delivered £90 million of cost savings over the three years, and as we saw

earlier, a much improved performance across ITV.

Looking ahead in this area, we do need to keep simplifying our operating structures and driving out complexity and

we've identified a further £20 million of cost savings there. And we think in future years, there is absolutely more to go

for. As we continue to grow in content and online and pay and interactive, so the benefits of being an integrated

producer broadcast will continue to grow and really continue to underpin our performance.

In terms of driving the benefits of the ITV rebranding exercise through what we do, ITV at its best is at the heart of popular culture. To be high quality and extremely popular is actually one of the toughest things to do. And when we're

at our best, we are fantastic at that. And that's what drives this sort of unique scale of commercial audience that we

deliver. And that's why it's so important that we continue to perform in that way.

And then, lastly, as Ian said, that relentless focus on cash conversion, this, if run properly, is a highly cash generative

business, as Ian said, just under £500 million of cash flow generated from our operations in 2012.

In terms of maximizing audience and revenue share from our existing free-to-air business, we've really worked hard

under Peter Fincham's guidance to really increase the variety and the quality across the ITV schedule over the last two

to three years with biggest dramas, soap and entertainment shows, as said on the video earlier. Big things like Euro

2012, Champions League, and of course, the Tour de France, which was wonderful with Bradley Wiggins last year.

Great drama, Endeavour, Whitechapel, Scott and Bailey, Vera, Mrs Biggs, I'm a Celebrity, an entertainment on great

form, and things like The Agenda and Paul O'Grady in several documentaries. So, a really high-quality rich-variety

schedule.

Obviously, we were disappointed that the ITV share of viewing – Family Share of Viewing was down 3%. We

expected to be impacted, as we said earlier last year, by the Olympics and Paralympics and Jubilee and we were. To

give you some idea of the scale of that, nine of the top-10 programs last year don't replay this year. So, it was a very

unusual year for British TV for obvious reasons. And we certainly are very much focused on moving forward our share

of viewing this year.

Digital channels continue to perform well, up 3%. ITV2 was up 3%, ITV3 up 4% and ITV4 up 2%. And just by way of

scaling that for you, that means that our digital channels combined, ITV multi-channels, at 6.7% share of viewing

combined, are now bigger than Channel 4 main channel. So, these are really important channels for us now and they

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deliver very valuable advertising demographics. So, for example, ITV3, its ABC1 SOCI was up almost 7% last year;

ITV4, its ABC1 men SOCI was up 5.6% last year. So, these are really important valuable advertising audiences that are

being driven by those digital channels.

We did outperform the market in 2012 and, certainly, we have the deals in place having gone through all of these to

support 2013 performance. And I think very importantly, in a number of cases, we've reduced our future exposure by

securing staggered multi-year deals, so that we don't have the situation of all the deals coming up each year. And I

think that's a very sensible way for us to plan ahead.

We are certainly working very hard, Fru and her team doing a great job delivering those results, but also working very

hard to change the way that we continue to deal with advertisers and clients. We're much more creative, much more

interactive with them. We've done some really interesting sponsorship deals with people like Morrisons, involving both

programs and talents, involving Ant and Dec, compare the market, a multi-year sponsorship with Coronation Street.

On the interactive side, we've launched six advertising innovations, including Shazam, AdExplore and AdSync. And

they're all really about working with advertisers to engage with consumers on second screens in real time. So, to

shorten the time period between a consumer seeing something they're interested in and actually taking action. Andthat's partly what's behind this very strong performance is the creativity that we're putting into the sales process is really

paying off from the sales team.

Underpinned, of course, by the fundamentals, as I will show you in a second, from the Broadcast business actually

being very robust and strong, and of course, as you know, the Government and Ofcom announced last year, we're in the

final throes of putting together the new 10-year license that we have.

Just putting that in a bit of context for you, I think the first thing I want to say is that the fundamentals that underpin

broadcasting remain strong. People watched more TV in 2012 than they did in 2009, around four hours and one minute

per day. Just by way of scaling it, again, that's about half an hour more than 10 years ago. So, just sort of common view

of a few years ago that TV was sort of dying, if you like, and people would stop watching TV is absolutely not being

borne out at the moment. People are watching more than they did 10 years ago.

On top of that viewing, because it's measured separately, the research we show from the information broadcasters haveprovided, there's around an additional three minutes per day, maybe a better way of looking at it is 90 minutes per

month, on other devices.

So, in other words, an additional 1.2% of viewing is provided by all these other platforms that are coming on stream.

So, they're still relatively small at the moment, but growing at reasonably fast. I think, again interestingly, in the last 10

years, commercial TV viewing has increased by 23%. And perhaps, a final point, that commercial TV accounts for

about 66% of linear TV viewing, and for those who don't – who assume that young people don't watch commercial TV,

actually it's 74% for 16 to 34-year-old. So, strong fundamentals underpinning the Broadcast business.

TV advertising, as a share of total advertising, has also grown from 27.5% in 2009 to 28.1% in 2012. Obviously, the

Internet advertising has been growing, but by and large it's been hitting other media rather than TV, because it's doing

quite a different job from television advertising. And I think there are some opportunities, increasing opportunities for

all broadcasters, not just ITV, in potential further growth from these future interactive and more two-way relationships

between advertisers and viewers. And that's something we're obviously very focused on.

We're consistently outperforming the market. There you can see constant growth from Fru and the team in terms of our

share of broadcast. And in 2012, our gain in share – the two broadcasters that gained, by and large, were ourselves and

Sky at the expense of Channel 4 and Channel 5.

And then, after a decade of decline – if you remember, when we started, we showed you a chart of share of viewing

declining for 10 years, largely, we've arrested that decline and it's been relatively stable over the last three to four years

Obviously, as I mentioned earlier, we had a slightly difficult 2012, but we would hope to redress that going forwards.

And I guess, the combination – well, yeah, I guess the combination of the quality of schedule, the programs, improved

marketing, advertising performance and creative selling, strong online pay and interactive performance and, indeed,

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cost efficiency is what's led to the significantly improved profit performance in Broadcast. A robust and growing

business, highly cash generative and, as Ian mentioned earlier, improving margins.

Going forwards in this area, we do want to continue to underpin the good performance of our schedule by investing in

high-quality programs and a variety of programs across all the key genres. So, we are reinvesting £20 million of the

sport savings that we made and taking £15 million or so to the bottom line.

We want to grow Family Share of Viewing. We've had a good start to 2013. As of the end of week eight, at the

weekend there, both our ITV Family Share of Viewing and our ITV Family SOCI are both up year-on-year. And we've

had some really strong performances from Lewis, averaging around 8 million; Mr Selfridge, consolidated averaging

around 8.3 million; and on the entertainment side, Splash! averaging around 5.4 million; and Takeaway, which

launched at the weekend, just over 7 million, and other ITV Studios program.

Very importantly, having these big programs that deliver these large audiences allows us to maximize the value of

scale. We've produced 99% of all the commercial audiences, over 5 million, last year. Just again to give you a feel for

that, we had around 600 peak slots at over 7 million audience. Channel 4 had four. So, that just gives you the different

scale of audience that we are out there selling in the market and that's very important in terms of what we do.

We have been outperforming the ad market. The market, so far we expect the first quarter to be up 5%. Just to give you

a feel for that, January up around 8%, February flat and March up 7%. And that growth in the first quarter is by and

large coming from retail, it's coming from telecoms and it's coming from broadband.

Continued momentum in building non-NAR revenues, that's a very important part as you've seen earlier of what we're

doing, and of course really taking forward the rebranding. And just to give you a feel for the channels, ITV is the scale

channel, it's there for everybody; ITV2, increasingly young, 16 to 34, aimed at entertainment; ITV3, crafty drama,

ABC1 adults; ITV4, sport and cult classics aimed at men and CITV aimed at kids. So, allowing us to pick off all the

key valuable audiences, but bringing them together in the main ITV channel.

And of course, it goes without saying, we need to finalize the license, but I'm pleased to say that Ofcom have been and

Government have been extremely supportive of our proposals for doing that, including supportive of the regional news

changes that we want to make, which will deliver, we think, both a better product and a much improved efficiency forus.

And priority three, I think we are much, much clearer, as I think we've said to many of you in the room over the last

few months around what people want from ITV online. Effectively, they want access to our programs and channels on

any device, anywhere, at any time that happens to suit them. And increasingly, alongside that, they want second screen

engagement and interaction.

As you know, this was one of the most difficult areas. We inherited a lot of very difficult underlying technology and

we've made great strides in that in terms of sorting that technology out and I think we're now in the game. And we can

see that from a number of things we've done including, for example, our new online news site, which by putting that in

place in the early summer we've already multiplied the number of browsers by four compared to the old site.

Much improved distribution, 7 million downloads of our app. YouView launched, as you know. It's a very strong

product. It's getting very good press and write-up from all the various experts. Very helpful that both of the ISPs aregiving it away for free, albeit you have to pay for the broadband connection. Of course, by giving it away free, that

limits for now the retail opportunity, but BT at the end of Jan, I think, had installed 60,000 boxes, TalkTalk at the end

of December around 80,000.

And I think they've both said that they are able to connect around 10,000 a week each. So, it's growing very fast, doing

very well in comparison to Sky or Virgin, if you look at their numbers. And I think all the signs are that it's a good

product, it's helpful that it comes from the brand names that it does. And our view is that still in the longer term

YouView should really be the future version, if you like, of Freeview.

Not surprisingly long form video requests, given the change in the market, are up, up around 22% and our online

revenues up around 40%. Our pay strategy is really starting to take shape now. It ranges from having our HD channels

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on Sky to the various third-party content and pay deals we do with the likes of Sky, Virgin, Lovefilm, Netflix, et cetera

and those are very high margin, as I said earlier.

We've done a number of deals with international video-on-demand aggregators, including deals in Scandinavia and

China. We launched our new Pay Player on PC and Mac just before Christmas, which as of last week I think had 1

million registered users in a very short space of time.

And all of those things, as I said earlier, helped by the sort of producer broadcaster model, because it means we own the

rights to enable us to go and do a lot of those things and make a lot of those deals without paying away too much of the

value contained. And that means that online pay and interactive revenues are now up 26% to £102 million as Ian said.

So, it really is becoming a meaningful number. I think, very importantly, it's a profitable number for us.

We are making money in those areas, which I know is something that others have struggled with. And then,

importantly, a sort of deepening consumer engagement all the time. We have 22 million – by way of example, 22

million Facebook likes, which is 40% up year-on-year. And we have contactable email addresses, around 4.4 million of

those, up 22% year-on-year. And those are real two-way relationships, they're not as Fru likes to call them, looky-likey

addresses.

If we look at what that means, we've made real progress in this area over the last three years. We've gone from being on

two platforms three years ago to now being on 15 platforms. The technology has improved, the user experience has

improved. Not surprisingly, that's driven – that growth in distribution has driven a strong growth in long form video

views, up 205% over the period, last year 458 million long form video views, and our online revenues up over the same

period 104% to £102 million. So, it's material, it's profitable and it's a growing part of ITV.

Going forward, I think this area will continue to be demand-led. There is strong demand from both competing

platforms and indeed international broadcasters and indeed international video-on-demand aggregators and, most of all,

consumers. So, strong demand from all parties. We are now well positioned to be able to compete in this area after a

very difficult start and to take advantages of the opportunities arising from all of these platforms needing high-quality

content, and of course to take advantage of the big change, which is the shift away from PC and Mac onto these mobile

devices.

And clearly, we want to build our online advertising revenues in line with increasing audiences. There are sort of three

phases, if you like, of video-on-demand consumption. It sort of started with PC, Macs. We're very much into the

second phase of mobile now, and we're very much at the beginning of the phase of connected TVs.

Obviously, what we also want to do during the course of this year, having put our Pay Player in place on PCs and Macs

is to roll out different pay mechanisms on different mobile platforms. Mobile, for those who are interested, actually

overtook PCs in terms of video-on-demand requests for the first time last month. So, you can just see the sort of shift

occurring there. And in fact, 95% of our growth online is coming from mobile. So, you can see how important that's

becoming, whether it's tablets or mobile phones.

And I think the interesting thing there for us, and indeed possibly other broadcasters, is that, of course, people are

increasingly familiar with paying for content on mobile, whether it happens to be music or video, and I think that's also

very helpful as we go forward. And there are more third-party content deals for Pay that we can do. We're approached

all the time by a number of different platforms. There will be more deals to come. And of course, we're doingreasonably short-term deals, because by and large when we're renewing these deals, the new deal is sort of a multiple of

the old one, because of the speed at which this area is growing. And clearly, one of the bigger ones that we're working

on at the moment is a renewal of the Virgin deal.

We want to maintain and enhance our online premiums. As you know, we limit the amount of advertising that we carry

online. Roughly speaking, I think we said it before, our online rates are around £20 – the CPM is around £25 on air for

adults, linear TV, it's about £5. But also, we're trying to lift that up with all these creative ways of approaching things

like Shazam and AdSync and AdExplore. That's adding value to the advertiser, and again allows us to charge a

premium for that, because it works.

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We are developing pay channel opportunities and we're increasingly building and owning customer data for future

targeting upon it. We're testing and learning a lot in this area and certainly looking very hard to do a number of things

and increasing the sort of second-screen opportunities that we have.

Content, again, as with online, content, and the growth in Studios is, again, demand led. All these new platforms and

particularly international broadcasters are looking to de-risk their schedules by buying proven content. And the

investments we've made in creative talent, in program development, piloting, script development and research over the

last three years are starting to pay off.

As Ian said earlier, we've had strong organic growth in all key territories, not just the UK, but internationally, as well,

and it's also now beginning to flow through into GE, our distribution arm, and that's growth in terms of hours, in terms

of revenue and in terms of profit.

Higher-quality programs that can travel, that's very important to us. In 2012, we had 10 programs that we produced in

three or more countries, and that compares to four in 2011. And so, we've got more programs that are traveling and

being reproduced in more territories. And then, of course, in drama, you saw there Vera sold to over 130 countries. Mr

Selfridge, at very early stages, done very well in the UK, already being re-commissioned by ITV and already sold to 35countries and well into profit.

And we're building on that strong organic growth with acquisitions in key and emerging creative markets. We've got a

very clear, as we've discussed before, strategic criteria. Gurney fits right into that. It's a leading supplier to cable TV

networks in the U.S., So TV, Reshet in Israel and some work in the Nordics that we did. No material contribution last

year, but obviously will impact on our numbers this year.

So, the team in Studios really continued to build real positive momentum in that business. Everything is commissioned

on a merit basis. But on a merit basis, we've consistently increased ITV Studios' share of ITV1 original output from

50% to 58%, whilst, of course, in the early years, particularly 2010, losing a number of tired and older brands that ITV

Studios produced, so sort of clearing the decks and moving on to the new program. And as you can see, in the UK

there, 40% increase in hours. We're now producing around 5,000 hours of television in the UK.

A very healthy pipeline of new commissions, 103 in 2012, including Mrs Biggs, Mr Selfridge, Surprise Surprise andPaul O'Grady, and just as importantly, we're starting to see now strong re-commissions coming through, which by and

large means the programs are working, things like Vera. International production hours have more than doubled over

the period, from 750 hours to over 1,500 hours, as we focus on growing our output in the key markets. And in fact, the

number of international hours grew by 47% alone last year, so you can see that there is some good, strong momentum

there.

And our continued investment in this high-quality content that can travel is now coming through in both revenue and

profit performance in ITV Studios. Depending on where you take the start point, of course, 2010, we saw it slightly slip

back, because we canceled a number of the older formats. So, it's 29% growth in revenues since 2010, or 19% since

2009, and as you can see, a very strong growth in profit there too, at £107 million last year. And as Ian said, I think

importantly, the outlook for 2013, given our visibility of that, is for continued good growth.

Going forward in Studios, I think the demand from platform owners and international broadcasters, if anything, is

likely to increase, so very healthy demand. We will absolutely keep investing to maintain momentum, and I think thehelpful thing is that unlike advertising, where we often only have a couple of months visibility, sometimes even less, in

Studios we have good strong visibility of the business going forward.

We remain focused on the three genres that travel internationally; entertainment, drama and factual entertainment. We

will continue to make acquisitions if on strategy and if they present good value for us in those key markets that we've

identified. And clearly, we want to, over time, as these new programs come through, really increasingly scale our

content business – our distribution business, which also allows us then to bundle up all that content and resell an

amount of that content and, indeed, do more international video-on-demand deals.

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All right. Going back to where we were earlier, on an earlier chart, I hope we have shown that we are making some real

progress on delivering our strategy, and I guess most importantly that it's working. I think we have – if I was summing

it up, we have a robust, growing Broadcast business. Our Online, Pay & Interactive revenues are now material andprofitable and a growing part of ITV, and we're well positioned to take advantage of the opportunities arising from

these increasing number of platforms and their desire for high-quality content, as well as that changing consumer

behavior.

I think we are building a strong, growing and sustainable international content business. And of course, financially,

we're in a much more robust position with a stronger balance sheet and strong cash flows to support not just the

continued investment in our growth, but of course future shareholder returns as well.

And then, lastly, going forward, we need to continue to focus on executing and delivering our strategy. That's the most

important thing for us, not talking about it, but actually making it happen. Of course, maintain a tight grip of the

business, keep reducing complexity, relentlessly focus on cash and costs.

I think Broadcast has made a really good start to 2013, as I said before. Share of viewing, Family Share of Viewing, up

Family SOCI, up; and an advertising, of course, is up, but we do, as Ian said, have some more difficult comparatives inthe second quarter.

We've got strong growth forecast for Online, Pay & Interactive and continued good growth in ITV Studios, with good

visibility of the pipeline, underpinned by strong demand. And we will continue to invest in future growth, reward

shareholders and maintain capital discipline.

Thank you. That's all we wanted to say this morning, and we'd like to throw it open for any questions now. Thank you

very much.

Archie J. Norman

Thank you. Just before we take any questions, I should mention that, of course, all these results have only been

achievable because of the brilliance of the management team, not just the two distinguished men to my left, but most ofthe Management Board here with us in the front row today, Peter Fincham, Fru Hazlitt, Paul Dale, Mary, Simon,

Kevin, Andy and there are a few less immodest members of the management team sitting further back in the room.

We'd all be glad to stay after the formal Q&A and answer any further interesting questions you may have.

Now, we'll take questions. Could you please introduce yourself, name and where you work and anything else important

you think we should know about you, and – hopefully, not too long. And we'll take one question at a time. Thank you

very much. Filippo, do you want to kick us off?

Q&A<Q - Filippo P. Lo Franco>: Hi. Good morning. It's Filippo Lo Franco with JPMorgan Cazenove. So, I have three

questions. The first one is – actually, the first two are on content, but I start with the first. Are you happy about the

operating margin at the moment and how do you think going forward? I think that's – I mean, to see it 15% is quite

already good results, but do you think you can grow farther?

<A - Adam Crozier>: Well, certainly, it's improved. It obviously is reduced by the fact we're still investing very

heavily in Studios, and we continue to believe that's the right thing to do, because we're interested in driving that

business forward for the longer term and making sure that we have a really healthy pipeline coming through.

The margins improved. You would hope that as revenue flows through from these new programs into GE that it would

improve a bit again. But as you're creating new content, each type of content has a different margin. So, there is one

margin goes with reproducing a program in another country versus just selling a drama, a finished drama, into another

country.

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So, it all depends on the mix of content coming through. So, it will constantly change a bit. But we are – we're very

focused on the margin in Studios, but we're equally clear that we want to keep investing going forward because what

drove that really difficult period for ITV on the content side was it just stopped investing for years, and you saw theresults of that when we started this process three years ago, which is it just didn't have anything coming through the

pipeline to create those future hits. And it's important we keep that going positively.

<Q - Filippo P. Lo Franco>: Second question, on content, is that in the past you said that you would like to become

big enough, not to be just a nice-to-have supplier of content for big networks. How far do you think you are from this

stage?

<A - Adam Crozier>: Well, look, we want to go further. We're clearly very focused on growth, and I think we can

grow. If I look at the speed of growth that Ian mentioned in the States, we are absolutely now one of the leading

providers of reality and entertainment programming in the States. And given the importance of that market, I think,

that's a really good position to have got ourselves to.

But, clearly, it's one of the key markets we're targeting in terms of growth. So, I think we've made some real progress.

We've seen some good growth off ITV in the UK. And I think what's heartening for us is that we're seeing – in everycountry, in which Studios is operating, we're seeing growth. So, I guess, it's good progress, but still quite some way to

go.

<Q - Filippo P. Lo Franco>: And final question, on advertising, on Q1, how much was the 5% growth is related to the

transfer of the WPP deal from Channel 4, if I may?

<A - Adam Crozier>: A little bit in January, probably, I don't know, it'd be hard to put a number on it, because it

depends how they phase it back out, and you don't know what the original plans were. But I would say possibly 1% to

2% of the January number.

But again, if you look at February, interesting enough, we are flat in February. Actually, the market is pretty flat as

well, so not much transference there. Of course, March is slightly affected by the fact that Easter this year falls into

March as opposed to April. So, as always, it's difficult to sort of strip that out.

But, of course, across the year, it makes no difference at all is probably the best way to explain it. So, I would largely

ignore it, actually, and just look at the market on its own merits.

<Q - Filippo P. Lo Franco>: Okay. Thank you. Sorry, I could not resist about this, but is there – this is I think the first

time that I see you with a tie. Is there any particular reason – is it special dividend tie or?

<A - Adam Crozier>: Do you want to make a point of it or do you want to go ahead. I would equally like to say, it's

nice to see you wearing a suit. I assume your wife chose it.

<A - Archie J. Norman>: Okay. Let's just move two down.

<Q - Ian R. Whittaker>: Ian Whittaker from Liberum. Three questions, please. First of all, just in terms of cash

returns and the linkage with pension, just wondering, sort of, when you look at – sort when you look to returning cash,

sort of, how much discussion did you have with the pension trustees, and how did that affect the level that you returned

and sort of especially given the increase that you saw in the accounting pension deficit?

The second thing is could you just give us an idea, you said there wasn't much contribution from the acquisitions in

productions in 2012. Can you give us a pro forma number for 2012 of those acquisitions, both in terms of revenues and

EBITA? And then, the third question is just on the efficiency – sorry.

<A - Adam Crozier>: Sorry. Give us your third. I'll write it down.

<Q - Ian R. Whittaker>: Okay.

<A - Adam Crozier>: We'll probably come back.

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<Q - Ian R. Whittaker>: Sorry. And then the third one is just on the efficiency post 2013. You mentioned there's more

potentially to go. Could you give us an idea of what your thinking is, whether that could be similar to previous years?

Obviously, there is a limited number of efficiency that you can do, but should we expect post 2013 similar sorts of numbers?

<A - Adam Crozier>: Yeah. And I'll ask Ian to talk about the pension side in a second. I would just say, overall –

because I'd be happy to pass that over. Overall, there is no magic formula to deciding, in terms of dividend, what we

do. We've tried to look at this as a Board, or rather the Board have looked to it, I think, in a very sensible way, which is

to take a balanced view.

This is only our second year of actually having a dividend, and it's grown substantially in the second year, and we

upped it a bit from what we said at the half year. We've tried to take a balance between – absolutely, given the industry

we're in, we think it's right that we have a reasonably conservative balance sheet.

We obviously want to be able to have the flexibility to keep investing to grow, but we are very clear, as a team, that we

should show some real financial discipline and that cash needs to work hard. And so, the balance of all that has resulted

in the special dividend that we've announced today, and we think on balance that's about right, given where we are.

In terms of the pension, Ian, you wanted to touch on that?

<A - Ian Griffiths>: Yeah. We've got an established protocol, way of working with the pension scheme, where if we're

doing something like this, we will talk to them. But in terms of impact on the actual amount that we've returned, it had

no impact at all. Because if you remember the funding plan that we put in place, which, as I said, the detail's all in the

back of your pack, part of the way we structured it is we have a low fixed cost, or a lower annual contribution as a fixed

amount.

And on top of that, the pension trustees get a top up, depending on our profitability. And we – so that sort of structure,

which has been in place now for a couple of years, means that when we do have a good year, the pension trustees get an

increase in contribution.

So, that principle has been well established and they were very comfortable that the covenant is strong enough for them

to support the payments going forward, so not an issue at all. And your second one, on the acquisition front, I'll deal

with that one, as well.

<A - Adam Crozier>: Indeed, yeah. Thanks.

<A - Ian Griffiths>: Revenues on a full-year basis will increase £40 million to £50 million and profit £8 million to £10

million for all the acquisitions we've done, the main contributor to that clearly being the Gurney acquisition.

<A - Adam Crozier>: And having asked you your third question, I've now forgotten it, Ian, actually. Can you – what

was that one again?

<Q - Ian R. Whittaker>: It was the.

<A - Adam Crozier>: Efficiency, sorry. That's right. Yeah, sorry. Yeah. Look, I think what we're trying to do is we're

trying to sort of improve the simplification of the company and the efficiency of the company, whilst growing and

getting that balance right so that we don't take our eye off growing the top line. I think we've shown that we can

consistently take cost out. My view is that we can keep doing that, and there are things we can identify, and we

constantly look at ways to restructure.

And of course, part of what we're dealing with is taking what was a company, if you remember, that was not remotely

joined up. And the more you join it up and the more you piece it together, the easier it is to see the wood from the trees

and to take that cost out. So, I think we're reasonably confident that, going forward, we can continue to take cost out of

the business.

<A - Archie J. Norman>: Okay. Should we, for efficiency yeah.

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<Q - Steve C. Liechti>: Morning. Steve Liechti from Investec. Just on the return question, can you just give me your

thinking in terms of special dividend, against share buyback, what your thoughts were there? And then, secondly, just

on the regional news comment that you made about potential efficiencies and things like that should we think aboutthat as rolling up in the overall cost savings that you've done, or is there a significant incremental element that we

should factor in going forward?

<A - Adam Crozier>: Sure. Taking the first question on the dividend first, as you might imagine, we discussed a

number of routes. I think our view was that we wanted to reward all shareholders equally, and importantly, we wanted

to reward shareholders who were staying with us and were going to be part of the growth going forward. That's the

reason and the rationale for the special dividend.

And then secondly, on the regional news point, you should see that as part of the £20 million cost savings that we've

identified. A good chunk of that is changing what we're doing on regional news, which is effectively making it more

local because one of the problems is, if you're sitting in Milton Keynes, watching Meridian local news about Torquay

or whatever, that doesn't seem particularly relevant

So, from a viewer point of view, that's pretty suboptimal. So, we want to make the regional news more local, but doless of it and make it higher quality. And we did a lot of research, which we've given to Ofcom and they have

published, and that's partly why they're so supportive. Basically, this is what the viewers want. They want more local

news and they want it to be higher quality. And often, you'd get towards the end of a regional news program, and on

some days there isn't quite enough to keep it going.

So, what it will provide is more flexible time, where if there are local news stories like very important weather stories

or a big incident, they can take more time. And if those stories aren't there, they'll take less time. And that allows us to

be much more efficient in the way that we produce and run regional news. So, better-quality product, lower cost.

<A - Archie J. Norman>: Okay. Shall we go to the back there as a change of tack? Yeah. Fine, thanks.

<Q - Thomas A. Singlehurst>: I just managed to steal the microphone. It's Tom Singlehurst from Citigroup. The first

question I have is on the proportion of the programming budget that's being sourced internally. With pressure on the

overall budget, i.e., the £50 million of efficiencies, should we start to see less growth in the internal revenue element ofITV Studios?

<A - Archie J. Norman>: Yeah.

<Q - Thomas A. Singlehurst>: That's the first question.

<A - Adam Crozier>: Yeah. No is the short answer. We always do this on a merit basis. That's really important. There

is no upside to putting something on air just because it comes from ITV Studios. It's got to merit it in terms of the

quality of the program, because the progress we're making, we've used that to allow us to continue to grow, and

certainly our plan is to grow it further this year.

<Q - Thomas A. Singlehurst>: Okay. And presumably, because it's merit based, there's no official target level in terms

of?

<A - Adam Crozier>: No. We don't work on a cost basis, again, quite deliberately, because I think that would start topush people to make choices for the wrong reasons. It's back to it needs to be merit based. And because the team are

producing better and better programs, that allows us to keep continuing to grow the share.

<Q - Thomas A. Singlehurst>: The second question I have is on online advertising. Of the video views, long form

video views you're doing, what proportion are monetized to-date with advertising? That's the first part of it. And the

second part is, within the bit that is monetized, are we – are you saturated in terms of the sellout rates on a per video

basis? How much sort of upside have we got just from better monetization of what you're already doing, before we

consider total advertising?

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<A - Adam Crozier>: I think we've mentioned before, the main deal that doesn't carry advertising is the Virgin deal

and that's the deal we're renegotiating at the moment and that's the main one. And I think it accounted for about 40%.

<A - Ian Griffiths>: It's about a third now, because of the growth in mobile.

<A - Adam Crozier>: About a third of it. So, I mean, a third of our output didn't carry advertising, to give that scale

for you. And that's one of the things we're looking to change in the deal we're currently negotiating with Virgin.

And then, secondly, no, we don't sell out our advertising. In fact, we limit the amount of advertising we carry, because I

think we've got to strike the right balance, if you like, between creating a good, strong, growing revenue stream and

making sure that the customer and viewer experience online is a good one.

And, of course, a lot of viewing online doesn't have advertising and, of course, online you can't fast forward through

the ads. So, we've got to strike that balance between the amount of advertising we carry. We want to continue to see

that as being reasonably in short supply, so that we can keep selling at a premium, adding on interactive experiences.

But not overdoing it so that it destroys the customer proposition. So, it's just creating that balance. And of course, it's a

judgment call how you do that going forward.

<A - Archie J. Norman>: Okay. Yeah, just in front there.

<Q - Adrien de Saint Hilaire>: Good morning, everyone. So, it's Adrien de Saint Hilaire from Exane BNP Paribas.

So, I've got two questions, please. First on content, I think one of your main competitors, Fremantle, has seen a big

margin pressure in 2012 and is talking about margin pressure coming from broadcasters themselves being under

pressure. Can you explain why ITV is different? Why ITV Studios is different and why it's doing a better job?

<A - Adam Crozier>: Well, I don't know the detail of the Fremantle situation, so I can't really content – comment

rather on that. Of course, quite different companies. A lot of their revenue comes from production of shows like X

Factor and Britain's Got Talent and Idol, where the rights actually sit somewhere else. So, they're producing those

shows for someone else and those are quite longstanding programs and maybe that's partly behind their issue.

Frankly, I don't know. But for us, we're generating new content. It's really high-quality content and it's much in

demand. And of course, the margin on that is very different, depending as I said earlier on the type of content that it is.It partly comes from, of course, if you go back to 2010, when we started this, we jettisoned some of the older brands

that were starting to struggle. And I guess, we would have come under quite a bit of margin pressure if we'd tried to

carry on with them.

So again, I think sort of slightly wiping the slate clean a bit and sort of really focusing on new, growing content was

probably the right – hindsight, by the way – probably the right decision. But I suspect it's in that story that the

difference lies. We're still finding, as I said earlier, that compared to the risk a broadcaster takes of creating its own

content that doesn't work, buying proven content from a producer broadcaster is actually a much safer way for them to

go. So, we're finding demand continues to be high.

<Q - Adrien de Saint Hilaire>: Okay. And second question, that doesn't fully rely on you, but can you give us your

view on BSkyB's stake in ITV and at what point you would consider buying it back and, therefore, again, returning

more cash to shareholders?

<A - Adam Crozier>: I don't think about it at all, actually. I think it's their issue, their shares. It's not an issue for us at

all and it's not one we spend any time thinking about.

<Q - Adrien de Saint Hilaire>: Okay. And the very last one on advertising, can you clarify what you were saying, I

think, earlier about the difference between your 5% advertising revenue guidance for Q1 and what it would be,

including sponsorship?

<A - Adam Crozier>: Yes. This year included in the way we trade with advertisers and agencies is our sponsorship

revenues, and that's a slight change. So, to some extent, it's a little bit apple-and-pears, and that may be why some of

the rumors around how much the market is up by are slightly different. Roughly, the differential is about 3%.

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<A - Archie J. Norman>: Around 3%,

<A - Adam Crozier>: Around 3%, and I think some of the rumors going around whether the market was up 8%, and

that's why you see us today talking about it being up around 5%. And as a general guide, our sponsorship revenues are

about 3% of those revenues. So, that gives you a rough scale.

<Q - Adrien de Saint Hilaire>: Thank you.

<A - Archie J. Norman>: Okay. Two rows behind. You don't have to ask three questions, by the way. One is fine.

<A - Adam Crozier>: One is quite acceptable.

<Q - Omar F. Sheikh>: I have six. No, it's Omar Sheikh from Credit Suisse. I do actually have three. They're very

short, though. The first question is on Studios. Could you just quantify how much you invested in Studios out of the

Transformation Plan spend during 2012, and is that the right way of thinking about the underlying margin in that

business?

<A - Adam Crozier>: Ian, do you want to take that one?

<A - Ian Griffiths>: Yes. Without giving the specific number, the investment of £25 million was broadly split

two-thirds into Broadcast and a third in Studios, so Broadcast getting the bulk of it, because that's where the online,

pay, YouView investments sit, and of course, there's some central, i.e., pan-ITV initiatives like the rebrand, which we

don't allocate across each of the businesses. So, of the £25 million, Studios got about a third and most of it was in

creative pipeline; talent, scripts and new formats.

<Q - Omar F. Sheikh>: And will that investment continue in 2013?

<A - Ian Griffiths>: The areas we invest behind are going to be broadly the same areas. How that then gets allocated

as the year progresses we will do on a project-by-project basis, case by case. Some of it's already allocated, but there's a

chunk unallocated, which we'll get to as the ideas come forward.

<Q - Omar F. Sheikh>: Great. And second question was on the deals that you've done with new platforms like Netflix

and Amazon during 2012. Can you just quantify what the contribution was and give us a sense of when those contractsroll off?

<A - Adam Crozier>: Well, as you know, we don't break down those numbers individually by sector. We group

together our Online, Pay & Interactive revenues. All the deals with each of the third-party platforms are different. Some

are just archive, some are archive and catch up. So, without going into every one of them in detail, they're all different.

Therefore, the margins in each are all different. It also depends how much of it is our own content versus also some

third-party content. But we take those third-party deals. The margins, depending on the pay-aways can be around sort

of 50% to 60%, just to give you a guide. And obviously, that's very helpful when you look at the overall Broadcast

margin that we talked about increasing earlier.

<Q - Omar F. Sheikh>: Thanks. And just final question is on the dividend policy, could you just help us think about

the two forms of dividend that you've announced today? How that might sort of change going forward? So, on the

ordinary dividend, should we just think about progressive beyond earnings growth going forward?

And on the special, obviously, you're going to be in pretty much the same net cash position at the end of this year,

probably, as you were last year, even after paying out a special dividend. So, should we think about it as something you

could do going forward or simply as a one-off? Thanks.

<A - Adam Crozier>: Well, as we said earlier, we've – in deciding what we've done in dividend, we've taken that

balanced view of what was right for the business and the shareholders. We've improved the dividend quite substantially

year-on-year. It's our second year of dividend. And I think we said last year and we would absolutely say it again this

year, in terms of the ordinary dividend, we see it as a progressive dividend policy.

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In terms of the special dividend, we've made huge improvements in terms of the balance sheet in efficiency, but we

want to have the flexibility to invest in our future growth. But I think we've said pretty clearly that, as a Board and as a

business, we believe in really tight capital management and financial management, and we agree that cash needs towork hard. And if it can't work hard, then we should do something about that. So, I'm giving you as sensible a clue to

future direction as I can. And we will continue to take that balanced view. And if we think the opportunity is there and

its right, then we will do something.

<A - Archie J. Norman>: Excellent. Right. Front row.

<Q - Patrick T. Wellington>: Good morning. It's Patrick Wellington at Morgan Stanley. Just two questions, on share

of voice and the SOCI trends, can you tell us a bit more how you expect the year to pan out, because you've started

well, and yet the big Olympics, Paralympics, Jubilee effects are not in your comp. So, in theory, you should get better

as the year goes on, all other things being equal.

<A - Adam Crozier>: Theories always worry me. But leaving that aside, yes, I mean, obviously, at the moment – the

key, big events that affected last year were a run of Jubilee, where those things tend to favor the BBC for fairly obvious

reasons. The Olympics, which – and in truth it wasn't just the Olympic period, it was the sort of hangover from theOlympic period because to some extent people sort of got into the habit of watching BBC.

So, there was sort of a tail-end effect post the Olympics of people sort of readjusting to their more normal way of

watching TV, having sort of had the Olympics on almost as background noise or radio, as much as anything. And then,

of course, from a SOCI point of view, you also had the Paralympics on Channel 4, delivering them some very strong

audiences.

So – and clearly, it's good that we're ahead at this stage of the year, where we've got direct comps, and obviously it's

helpful to us in theory and, hopefully, in practice, that when we get to the summer period, that will be more of a

struggle for some of the other broadcasters than it will be for us in terms of the comps. So, there should be a benefit

there. But of course, we've then got to deliver that benefit with great programs.

<Q - Patrick T. Wellington>: And the second one is, can you just try and – I know you don't want to break it down in

detail, but your Online, Interactive & Pay, can you give us some sort of feel for the proportions of those threecategories in the hundred of million or so?

<A - Adam Crozier>: No. But I'll tell you what – perhaps, it will be helpful, Patrick, is I think we're seeing good

growth there, as you can see, 26%, up to £102 million. And Interactive is profitable. Pay is clearly, from everything I

said, you can sensibly glean, is profitable. And our pure Online business has been profitable for the last few months and

will be this year. So, I think what gives me real heart is this is an area where people talk about revenues, but actually

usually go quite quiet on profitability. I think we are managing to do this in a profitable way across the piece, and that's

obviously what we've got to keep continue doing.

<Q - Patrick T. Wellington>: Can we just ask what interactive is? Is that Red Button, or is it more?

<A - Adam Crozier>: Well, we are interacting right now, of course. And it's – no, it's lots of different things. It's

competitions, both on screen and online. It's people engaging with the programs and brands. It's all these new things

we're doing like AdExplore and Shazam and AdSync. All of those things sort of pile into interactive.

<A - Archie J. Norman>: Voting.

<A - Adam Crozier>: And voting and things, as well, obviously.

<A - Archie J. Norman>: Okay. I think we'll just take a couple more because we are going to be available after the

meeting. And so, yeah. Let's go to the third row. Yeah.

<Q - Giasone U. Salati>: Hi. It's Giasone Salati from Espirito. Three questions, please. First one, given the good

guidance on Studios, do you think at this point you can give us guidance for 2013 in terms of growth? Is that going to

be mid- to high-single digits, or we should look at something more ambitious?

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<A - Adam Crozier>: I think we've said good at the minute, and we've allowed you to take your view. I don't know,

Ian, if you want to say anything else. Probably not. No. There you go. That would be a no, then.

<Q - Giasone U. Salati>: Okay. I'll take back your visibility in that area, then. In terms of double-digit EPS growth,

has been – has come out a number of times in your presentations for the last few years, what kind of advertising

revenue growth do you need to keep growing EPS double digits?

<A - Adam Crozier>: Well, I think what you've seen and in – I think it's quite important, in the rebalancing of ITV

and creating these new revenue streams, Online, Pay & Interactive, and sourcing out the Studios business, I think what

we're showing, clearly, is that the Broadcast business can continue to grow, if we manage it right, irrespective of

whether we have a flat advertising market or a growing advertising market.

Clearly, we would like to see the advertising market improve. To some extent, I think that will be tied to the economy

and what happens there. But at some point, you would like to think that, as things improve, companies and brands will

want to reinvest in driving their own top-line growth.

I think you're all perfectly capable, probably more capable than me, of taking your own view as to when that might start

to happen. So, in the meantime, I think we're running the business exactly as we should to try and continue to drive

growth, and I think that's the right thing to do. And that rebalancing, I think, is something that we've talked about right

at the beginning as being right at the heart of our strategy, and I think that's what we remain focused on.

<Q - Giasone U. Salati>: Are you saying that you're hoping to get double-digit EPS growth even on a flat advertising

market.

<A - Adam Crozier>: I don't think I commented on that at all, actually. I think I did a remarkably good job at avoiding

the question.

<Q - Giasone U. Salati>: Obviously. On the last one, I'm going to try my luck on acquisitions. You mentioned a clear

number for free cash flow, and let's just focus on the ordinary dividend. That might leave – and also, you mentioned a

gearing level, including all of the leases and stuff. Is £0.5 billion the maximum you would want – you could spend in

2013 in acquisitions, or there is more room?

<A - Ian Griffiths>: We've not set a target on that. We've not set any hurdles in terms of what the balance sheet looks

like. So, one of the key strengths of the business, as we've demonstrated, is the ongoing cash generation, the strength of

our cash generation. It's an area we focus on. It does give us the flexibility to invest going forward, as we've said. We

haven't done deals of that scale to-date. It doesn't mean that we won't, but our priority has been focusing on the core

and starting to build the international content business with deals like the Gurney deal.

<A - Archie J. Norman>: Okay.

<Q - Giasone U. Salati>: Okay.

<A - Archie J. Norman>: Let somebody else try.

<Q - Laurie Davison>: Okay. It's Laurie here from Deutsche. Just two questions. The first is, given the rise in the

pension deficit and what you mentioned on the operating leases, what is now the level of leverage there, which is

consistent with investment grade, do you think, on those metrics? And the second question is?

<A - Archie J. Norman>: Let's just take that. Ian?

<Q - Laurie Davison>: Sure.

<A - Ian Griffiths>: Below two-times would give us investment grade, but that's not something we've set out as a

deliberate target to achieve yet. We're at our current level of rating, which is a significant improvement from where we

were. We're one notch below, but that doesn't mean that we're setting out to get to investment grade. I think at some

point, it might be the appropriate thing, but here and now, more important that we keep a flexible balance sheet and do

the right things to move the business forward, rather than get caught by setting a balance sheet target that is not

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appropriate at this point in the Transformation Plan.

<Q - Laurie Davison>: And just to get an idea with Studios about how much the turnaround plan is impacting that

revenue growth, could you give us some idea of the hours produced in 2012 or the revenues, what percentage came

from commissions or productions made since the turnaround plan started, I know it's a hard breakout to make? Thanks.

<A - Adam Crozier>: I'm not sure I could do that, to be honest. Not off the top of my head, actually. I haven't really

thought about it that way. We can try and get back to you, if you like.

<Q - Laurie Davison>: I'll give you two minutes.

<A - Adam Crozier>: Kevin's advised me I can switch decks rather than answer that. We'll figure it out, but I

genuinely don't know off the top of my head.

<Q - Laurie Davison>: Okay. Good one.

<A - Archie J. Norman>: Okay. We'll just take one last one, just right behind you. Thank you.

<Q - Richard G. Jones>: Hi. It's Richard Jones at Goldman. I've just got one question. Just wondering how you think about the ITV1 audience. Even excluding the Olympics, it has been declining a few percent for a while, so just

wondering how you think about that. Does that matter in the context of the ITV Family Share, as long as that is flat?

So, is there a differential on the pricing that matters to you? If it does matter, how you think about improving it? And,

obviously, you've got some big reality shows that have been around a long time. Some of them have had declining

audiences. How do you think about that playing out going forward?

<A - Adam Crozier>: Sure. Well, it matters very much. I mean, we care about it a great deal, as we do about the

viewing audiences on all our channels. And the important thing is that the family of channels, number one, is healthy,

because that's what drives our performance in the advertising market.

So, if you look over the last 10 years, the share of viewing for the main PSBs, sort of BBC, ITV, Channel 4, et cetera,

really, over 10 years, hasn't really changed much at all. It's within 1%. But each now has a family of channels, rather

than just a main channel, but the reality is the shape of that viewing hasn't changed very much. And that's important,because it means we've reacted well to the change in the marketplace and we've grabbed our fair share of that.

And by the way of example, that's partly why I mentioned the fact that our multi-channels together are now actually

bigger than the main Channel 4 channel. So, they're important to us. ITV1, the thing about ITV1 is it's the one that

delivers these really big scale audiences that, of course, allow us – give us a massive point of difference in the market.

And they're driven by the big entertainment programs, the big sporting events and the big dramas. So, that's something

that Peter focuses on all the time, is keeping the quality levels up there.

We've got a bit like Strictly Come Dancing on the BBC had a difficult two or three years and has now come back quite

strongly. Actually, Britain's Got Talent had a couple of difficult years and last year came back strong. I don't think

anyone would have thought that I'm a Celebrity would be continuing to improve all these years later, after being

launched at its second best-ever year. I think last year, averaged about 10.5 million viewers across the series.

So, these things do ebb and flow a bit, and obviously it's the job of Peter and the team to make sure that we constantlylook at how we can improve them, but at the same time, look to bring through new things, like Downton Abbey, which

is relatively recent, which rates very well. Things like Mr Selfridge doing well, Lewis, Ant and Dec last Saturday at

over 7 million.

These big audiences are very important to us, and it's something we spend a huge amount of time talking and thinking

about, how we can improve that, and part of the marketing change we talked about a number of times today is part of

that, making sure that we market those programs properly to our audiences as well.

It's not – you can't just put it on air and people will come. You've got to market what you've got in this more

fragmented marketplace.

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<Q - Richard G. Jones>: Okay. Thanks.

Archie J. Norman

Okay. Good. Thank you very much. Well, look, I just wanted to say in concluding that I hope you got the impression

from Adam's presentation that we – this is a much, much stronger business than it was there years ago. But that doesn't

mean the challenges facing ITV have gone away. And we're under no illusion that this is still quite an early stage in the

transformation. And what I look at is not just the improvement in operating performance. It's fantastic we delivered the

savings we have. It's fantastic that the Broadcast performance, whether you look at Coronation Street now or

Emmerdale last year, or I'm a Celebrity, is in very good health. But what I really look out for is the breakthrough

things, the things that are changing the shape of the business.

And I think that just the fact that we are able to say that we've got a profitable online business is highly significant for

the future. The fact that Studios last year made £100 million profit for the first time ever is highly significant. The

developments internationally in the content business, small as they are, in significance, in terms of changing the shape

of ITV really, really important. The rebranding, moving away from those funny vertical blue lines, which made it look as if your television had gone wrong, I think is a breakthrough. I really do. And I really think that when you go through

these changes, these transformation programs, as far reaching as the one that Adam and the team are lending at ITV,

change is cumulative.

So, it actually starts quite slowly, and now three years in, the pace of change at ITV is faster than it's ever been. The

team is much stronger than it's ever been, and there's a real excitement and confidence around the place, which will

generate, in the future, surprises and boldness and an outlook, which I think has gone from being exciting in the way of

interesting, slightly dangerous, to being exciting in the way of extremely attractive, and it makes ITV a magnet for

talent and a very exciting place to work.

So, thank you very much.

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