ITV delivers strong operational performance in an uncertain economic environment 2017 Full Year Results

Transcription

1 ITV delivers strong operational performance in an uncertain economic environment 2017 Full Year Results 28 February 2018 The Voice UK

2 Agenda 1. Key Messages & Initial Impressions Carolyn McCall 2. Operating & Financial Review Ian Griffiths 3. Outlook for 2018 Carolyn McCall 4. Q&A Coronation Street 2

3 Key Messages & Initial Impressions Carolyn McCall I m A Celebrity Get Me Out Of Here!

4 Key Messages Financial performance delivers as expected ITV delivered a strong operating performance in a challenging environment in 2017 Linear viewing share up for second consecutive year Significant growth in online viewing and revenue ITV Studios delivered strong revenue growth Good performance has created a solid foundation Rapidly changing industry creates opportunities and challenges Strategy refresh for what ITV needs to be in 3 and 5 years Emmerdale Soap of the year 4

5 Places visited so far: Getting to know ITV Offices: London, Manchester, Leeds, people and places New York Meeting key stakeholders Newsrooms: Meridian, Granada, Yorkshire Strategic refresh well underway Coronation Street and Emmerdale Production Companies: Mammoth, Shiver, Twofour, ITV America and Talpa 5

6 Great culture talented and creative people Strong consumer brand ITV s unique proposition of mass audiences the power of TV Direct to Consumer relationships through the ITV Hub Studios is a scaled international business with a healthy pipeline of new and returning programmes Integrated producer broadcaster Strong balance sheet 6

7 Data Strategy Operating Model 7

8 Operating & Financial Review Ian Griffiths ITV Horse Racing

9 Dancing on Ice 9

10 ITV NAR 1,591 1,672 (5) Online, Pay & Interactive SDN (external) Other commercial income Non-NAR revenue Total revenue 2,075 2,132 (3) Schedule costs (1,025) (1,050) (2) Other costs (451) (440) 3 Broadcast & Online EBITA (7) EBITA margin 29% 30% Good growth in Non-NAR partly offsetting decline in NAR ITV NAR down 5% as guided Double-digit growth in high margin VOD Schedule costs lower in non-sport year maintained investment in original commissions Cost savings offset by investment in the ITV Hub and Pay/SVOD platforms Margins down 1% to 29% 10

11 11

12 21m registered users Market leader in live simulcast 75% of UK s 16-24s registered Requests and simulcast growing faster than C4 and BBC catch-up Available on 29 platforms Only commercial PSB broadcaster to launch SVOD service, Hub+ 27m app downloads Over 250k subscribers for BritBox US and Canada 12

13 Category FY 2017 ( m) NAR down 5% as guided FY YOY % change Retail 324 (3) Entertainment and Leisure 158 (4) Finance Cosmetics and Toiletries 112 (5) Food 101 (23) Cars and Car Dealers Telecommunications Airlines, Travel and Holidays 80 (3) Publishing and Broadcasting 69 (10) Household Stores 53 (12) Others 354 (8) Total 1,591 (5) 5% 0% -5% -10% -15% 1% (4)% (7)% (9)% Q1 Q2 Q3 Q4 Quarterly YOY Moving Annual Total Total advertising down 3% including sponsorship and VOD Retail down 3% - high street weak, supermarkets increased spending FMCG advertisers have been reducing their spend but allocating more back to TV Cars and Telecommunications up year on year driven by new product launches Digital businesses continue to build brands on TV, including Netflix, Amazon, Twitter and Facebook Q continues the growth seen in Q4 H1 expected to be up, helped by the football 13

14 Studios UK ITV America Studios RoW Global Entertainment Total Studios revenue 1,582 1, Total Studios costs (1,339) (1,152) 16 ITV Studios EBITA EBITA margin 15% 17% Internal ITVS to ITV Network External revenue 1, Total revenue 1,582 1, Total revenue up 13% Good growth across all parts of the business Organic revenue, excluding currency, grew 7% Studios UK - healthy revenue growth driven by entertainment ITV America - strong growth from entertainment and scripted Studios RoW - benefitted from growth in UK and Talpa formats in Australia, France and the Nordics Global Entertainment - good slate of programmes, especially scripted Margin impacted by genre mix on new shows 43m revenue and 7m EBITA benefit from FX 14

15 2017 ITV Studios Total Revenue ( m) ,395 (336) 1,582 FY 2016 Non-returning New shows (potential to return) Recommissions Acquisitions FX Other FY 2017 Managing the portfolio of new and returning shows is key to Studios growth New shows include Bancroft, The Voice Kids UK, 5 Gold Rings, Love Island Germany, Big Star s Little Star US, Snowpiercer Recommissions include The Voice UK, I m A Celebrity, Love Island UK, Hell s Kitchen US, Aber Bergen 15

16 *Organic excludes all acquisitions since 2012; ROI is based on EBITA and expected consideration 16

17 Scripted Hours UK US & RoW Returning Scripted Hours +277% Entertainment Hours 3,000 2,000 1, ,500 2,000 1,500 1, Returning Entertainment Hours +84% Good growth in scripted content in UK and US with new and returning series Victoria, Cold Feet, Unforgotten, Snowpiercer, Good Witch Acquisition of Tetra and Cattleya in 2017 strengthens international scripted business More entertainment formats lead to growth across the business Love Island, The Voice, The Voice Kids, I m A Celebrity Get Me Out Of Here!, Hell s Kitchen, The Chase, Come Dine with Me Revenue mix impacts margins New shows, especially scripted, have lower margins in the early years *Data incudes acquisitions 17

18 2017 Adjusted EBITA ( m) 885 (81) (37) 29 6 (15) 842 FY 2016 NAR Network Schedule Online, Pay & Interactive ITV Studios Underlying The Voice Of China FX & Other Cost Savings Investments FY 2017 NAR biggest impact on 2017 profit Offset by delivering cost savings and lower schedule costs Continued to invest in the Hub, ITV Box Office and Studios creative/scripted Good underlying profit growth in Studios, but The Voice of China included in 2016 comparatives 18

19 19

20 P&L Cash Schedule Costs Around 1,055-60m increase of around 30m and weighted to H1 due to the Football World Cup Capex Around 100m with 60m of regular capex and 40m relating to the London property move in 2018 Investments Total of around 15-20m new property, online and initial data investments Profit to cash Around 85% continued strong cash flow generation Adjusted Interest Around 35m broadly unchanged from 2017 Pension 80m deficit funding contribution no change, subject to agreeing triennial valuation Tax Adjusted effective tax rate around 19%, unchanged and expected to be sustainable over the medium term Exceptional Items Cash cost of exceptionals will be around 85m Foreign Exchange Translation impact of FX, assuming rates remain at current levels, will negatively impact revenue by 35m and profit by 5m Exceptional Items Around 85m, mainly due to acquisition accounting and London office and Studios moves 20

21 Outlook for 2018 Carolyn McCall Good Morning Britain

22 Coming up On ITV Coming up Off ITV Coming up internationally 22

23 Significant advertising and sponsorship opportunities Produced by ITV Studios Premiering on Amazon Prime in US 7 episodes 31 matches on ITV 2018 FIFA World Cup UK broadcast expected in H2 Extended run on ITV2 Multiple commercial partnerships secured Enhanced digital offerings including daily podcasts Format sold to 6 countries Vanity Fair 23

24 Strategic refresh in progress In the meantime we remain very focused on the business Strong culture - talented and creative people Strong balance sheet and healthy cash flow Committed to our ordinary dividend policy Solid foundation for the future 24

25 Q&A

26 Appendix Full Year Results

27 12 months to 31 December 2017 ( m) 2016 ( m) Change Commissions (563) (564) 0% Sport (82) (111) 26% Acquired (38) (37) (3)% ITN News and Weather (48) (48) - Total ITV main channel (731) (760) 4% Regional news and non-news (72) (70) (3)% ITV Breakfast (42) (44) 5% Total ITV incl. regional & Breakfast (845) (874) 3% ITV2, ITV3, ITV4, ITV Encore, ITVBe, CITV (180) (176) (2)% Total schedule costs (1,025) (1,050) 2% 27

28 12 months to 31 December 2017 ( m) 2016 ( m) Change Organic change* Studios UK % 9% Studios US % 28% Studios RoW % (8)% Global Entertainment % 1% Total revenue 1,582 1,395 13% 7% *At constant currencies, and excluding revenue from 2017 acquisitions 28

29 12 months to 31 December 2017 ( m) 2016 ( m) Change Adjusted EBITA (5)% Internally generated amortisation (5) (12) 58% Financing costs (33) (26) (27)% Share of losses on JVs and associates (4) - 100% Profit before tax (6)% Tax (154) (160) 4% Profit after tax (6)% Non-controlling interests (4) (4) 0% Earnings (6)% EPS (p) 16.0p 17.0p (6)% Diluted EPS (p) 16.0p 17.0p (6)% 29

30 12 months to 31 December 2017 ( m) 2016 ( m) Change EBITA (5)% Exceptional items (operating) (153) (164) (7)% Amortisation and impairment (102) (89) (15)% Operating profit (8)% Net financing costs (50) (51) 2% Share of losses on JVs and associates (4) - 100% Gain on sale of non-current assets and subsidiaries (non-operating exceptional items) (1) - 100% Profit before tax (10)% Tax (87) (100) 13% Profit after tax (9)% Loss after tax for the period from discontinuing operations - (1) 100% Non-controlling interests (4) (4) 0% Earnings (9)% EPS (p) 10.2p 11.2p (9)% Diluted EPS (p) 10.2p 11.1p (8)% 30

31 12 months to 31 December Reported ( m) Adjustments ( m) Adjusted ( m) EBITA* Exceptional items (operating) (153) Amortisation and impairment (102) 97 (5) Operating profit Net financing costs (50) 17 (33) Share of losses on JVs and Associates (4) - (4) Gain on sale of non-current assets and subsidiaries (non-operating exceptional items) (1) 1 - Profit before tax Tax (87) (67) (154) Profit after tax Non-controlling interests (4) - (4) Earnings Number of shares (weighted average)** 4,006-4,006 Earnings per share 10.2p 16.0p *Adjusted EBITA includes the benefit of production tax credits; **Diluted number of shares is 4,017m 31

32 12 months to 31 December 2017 ( m) 2016 ( m) Acquisition-related expenses (96) (131) Restructuring and property-related cost (30) (14) Insured trade receivables provision (27) - Pension curtailment - (19) Total operating exceptional items (153) (164) Non-operating exceptional items (1) - Total exceptional items (154) (164) 32

33 12 months to 31 December 2017 ( m) 2016 ( m) 161m Eurobond at 6.125% coupon Jan 17 - (7) 600m Eurobond at 2.125% coupon Sept 22 (11) (10) 500m Eurobond at 2% coupon Dec 23* (15) (1) 630m Revolving Credit Facility (4) (2) 150m and 100m Bilateral loans - (2) Financing costs directly attributable to loans and bonds (30) (22) Cash-related net financing costs (2) (3) Amortisation of bonds (1) (1) Adjusted financing costs (33) (26) Mark-to-market on swaps and foreign exchange - (3) Imputed pension interest (9) (5) Unrealised foreign exchange and other net financial losses (8) (17) Net financing costs (50) (51) * effective swapped coupon of 3.5% 33

34 12 months to 31 December 2017 ( m) 2016 ( m) Profit before tax Production tax credits Exceptional items Amortisation and impairment* Adjustments to net financing costs Adjusted profit before tax Tax charge (87) (100) Production tax credits (32) (28) Charge for exceptional items (12) (15) Charge in respect of amortisation and impairment* (19) (11) Charge in respect of adjustments to net financing costs (4) (6) Adjusted tax charge (154) (160) Effective tax rate on adjusted profits 19% 19% Total cash tax paid (including receipt of production tax credits) Total adjusted cash tax paid (excluding the receipt of production tax credits) *In respect of intangible assets arising from business combinations and investments. Also reflects the cash tax benefit of tax deductions for US goodwill. 34

35 Company Initial consideration ( m) Additional consideration paid in 2017 ( m) Expected future payments* ( m) Total expected consideration** ( m) Expected payment dates Total maximum consideration** ( m) 2017 Various Total for Total for , ,923 Total ,324 2,341 Of 292m expected future payments, 161m recorded on the balance sheet to date * Undiscounted and adjusted for foreign exchange. All future payments are performance related. ** Undiscounted and adjusted for foreign exchange, including initial consideration and excluding working capital adjustments. 35

36 2017 ( m) 2016 ( m) Adjusted EBITA Working capital movement (58) (28) Adjustment for high end production tax credits (9) 8 Share-based compensation and pension service cost Acquisition of property, plant and equipment, and intangible assets* (71) (44) Adjustment to capex relating to redevelopment of London HQ 16 - Depreciation Adjusted cash flow Profit to cash ratio 91% 97% Adjusted cash flow Net cash interest paid (38) (20) Adjusted Cash tax paid (118) (126) Pension funding (80) (80) Free cash flow *Except where disclosed, management views the acquisition of operating property, plant and equipment and intangibles as business as usual capex, necessary to the ongoing investment in the business. 36

37 31 December 2017 ( m) 2016 ( m) 630m RCF (60) - 161m Jan 17 - (161) 100m bilateral loan - (100) 600m Eurobond (529) (508) 500m Eurobond* (424) (425) Finance Leases - (4) Other debt (25) - Cash and cash equivalents Net debt (912) (637) 31 December 2017 ( m) 2016 ( m) Cash and cash equivalents Debt (1,038) (1,198) Net debt (912) (637) *Net of 20m cross currency swap (2016: 2m) 37

38 m 150 (50) 527 (250) (637) (450) (912) (650) (494) (126) (850) (95) (36) (20) (16) (15) (1,050) Dec-16 Net Debt Free cash flow Dividends Exceptional items Acquisitions and investments Purchase of shares for EBT FX on retranslation of debt London property capex Other Dec-17 Net Debt 38

39 Type of Facility Facility Amount Amount drawn at 31/12/2017 Maturity Revolving credit facility (RCF) 630m 60m 2022, option to extend to 2023 Bilateral financing facility 300m 0m 2021 Total 930m 60m 39

40 m (83) (100) (328) 145 (59) 6 (39) (200) 80 (300) (400) Dec 16 Deficit funding Update in scheme membership data Change in assets Change in inflation assumptions Change in bond yields Other Dec-2017 Net pension deficit 40

41 Revenue by currency 12 months to 31 December 2017 ( m) 2016 ( m) GBP 2,313 2,357 US Dollar Euro Other Currencies External revenue 3,132 3,064 Foreign Exchange Sensitivity impact of a 10% appreciation/depreciation in Sterling* Currency Revenue ( m) Adjusted EBITA ( m) USD ($) ±50-60 ±6-8 EUR ( ) ±40-50 ±4-5 *An appreciation in Sterling has a negative effect on revenue and adjusted EBITA, a depreciation has a positive effect 41