6 August 2008

ITV plc

Interim Results for six months ended 30 June 2008

Financial summary

* before exceptional items, amortisation, impairment of intangible assets and including tax adjustments 

Operating summary

Revenue growth of 3% delivered by a strong operational performance in ITV's Broadcasting, Global Content and Online businesses. 

• ITV Family net advertising revenue ("NAR") was up 1% and viewing share up 2.5%. ITV Family share of commercial impacts was flat at 41.4% (2007: 41.4%) with ITV1 down 5.1% (2007: down 5.9%).

• Global Content revenues (including internal) were up 3% with external revenues up 30%.

• Online revenues were up 6% with ITV sites delivering 50 million online video views over the period and itv.com unique users averaging 6 million per month.

The reduction in operating EBITA reflects, in particular, the first half weighting of ITV1 sports costs (up £29m compared to 2007) primarily due to Euro 2008, as indicated in the Interim Management Statement in May. Over the full year, the ITV1 network programme budget will be held at its 2007 level and this effect will reverse.  

Current trading

ITV estimates that total TV NAR for the eight months to August will be down 1% year-on-year, with ITV NAR flat. On current estimates, the television advertising market has weakened in September, where tough year-on-year comparisons apply, given the Rugby World Cup in 2007. ITV estimates that ITV NAR for September will be down 20% with the total market down 17%. Whilst ITV has limited visibility on advertising revenues beyond September, ITV expects to outperform the total market over the full year.  

Goodwill impairment

As a result of reduced advertising market forecasts for 2008/09 and in accordance with IAS 36, an impairment loss against Broadcasting goodwill has been recognised. A non-cash impairment charge of £1,600 million is included in operating costs in the income statement. The goodwill arose from acquisitions in 2000 and 2004 leading to the creation of ITV plc.  

Dividend 

In view of the uncertain economic outlook and the Company's decision to maintain the investment in programming to deliver the Turnaround Strategy, the interim dividend has been set at 0.675 pence per share. The level of the final dividend will be considered in the light of second half trading and the economic outlook. The Company's policy remains to deliver dividend cover of 2 to 2½ times over the medium term.

Turnaround Strategy 

The Board has reassessed the Turnaround Strategy with management in the light of the weaker advertising and economic outlook. The Board remains confident that the Turnaround Strategy will deliver sustainable, long-term growth and is therefore maintaining its investment in programming. However, given the market uncertainty, ITV is revising its Global Content and Online targets:

• In Global Content, ITV is seeking to grow its annual revenues (including internal), through organic growth and acquisition, to a run-rate of £1 billion by the end of 2012. The previous target was to double revenues to £1.2 billion by 2012.  

• In Online, ITV is seeking to grow its annual revenues to a run-rate of £150 million by the end of 2012. The change to the previous target of £150 million online revenues by 2010 also reflects regulatory delay to the planned Kangaroo service. We expect to meet the revised online target without relying on substantial acquisitions.  

ITV's Broadcasting target of an ITV Family share of commercial impacts of at least 38.5% in 2012 is unchanged. In addition, ITV had previously set a group revenue target of 3-5% compound annual growth to 2010. With Broadcasting revenues accounting for 80% of overall revenues, group revenue growth will be largely dependent on television advertising market growth.  

Cost savings

The Company is today publishing a new target of achieving a £35 million run-rate of additional cost savings by the end of 2010. ITV is already on track to deliver £41 million in savings by the end of 2008 and £40 million of additional regional savings from the end of 2009.  

Debt and liquidity

The liquidity position of the Company remains strong and has been strengthened further since the end of the half year. In July, ITV raised £110 million from an issue of Eurosterling bonds with a maturity date of 20 March 2013. The Company has also secured a further £200 million of 5 year committed bi-lateral financing. Net debt at 30 June 2008 stood at £663 million, down £5 million on 31 December 2007.  

Michael Grade, Executive Chairman of ITV, said:

"Almost a year into the Turnaround Strategy, we have made considerable operational progress. With more viewers watching more ITV programmes, we are delivering greater value for advertisers. We have out-performed the market in terms of advertising revenues and viewing share. Our Global Content business is growing strongly and our presence online is strengthening, notwithstanding the delay in launching Kangaroo.  

"Whilst our visibility on advertising revenues beyond September is limited, with a strong schedule in place for the rest of the year and planned for 2009, we are confident that we will continue to outperform.

"However we cannot control the economic environment in which we operate. As a result of the recent slowdown in the television advertising market, the Board has taken some tough decisions which are reported here today.  

"We are implementing a new cost efficiency plan which will deliver £35 million in additional annual savings by the end of 2010. We are taking a £1,600 million impairment charge on Broadcasting goodwill and we are adjusting the turnaround targets for Global Content and Online. We continue to work with regulators, making the case for an urgent reduction in ITV's regulatory burden.

"In the light of the uncertain economic outlook and the importance of maintaining programming investment, the Board has also reduced the level of the interim dividend to 0.675 pence per share. 

"The Board's confidence in the Turnaround Strategy is reflected in the decisions we have announced today. In particular, we are committed to maintaining investment, notwithstanding the cyclical downturn. By holding our focus on delivering the Turnaround Strategy, we are confident ITV will be strongly positioned to grow as the economy recovers.  

"ITV's long-term goal remains to create greater value for shareholders in the digital world from our position as the UK's favourite source of free entertainment."

Enquiries

ITV plc

Analysts

Christy Swords        Investor Relations        020 7156 7022

Pippa Strong                                                     020 7156 7039

Press

Louise Evans        Media Relations              020 7156 7358

Tulchan

Susanna Voyle                                                 020 7353 4200

Lizzie Morgan

Notes:

1.    ITV Family includes ITV1, ITV2, ITV3, ITV4, CITV, GMTV, GMTV2 and associated "+1" channels

2.    All viewing and commercial impact figures based on BARB / Infosys data for January-June 2008 and 2007. Viewing share figures are for all

       individuals; commercial impact figures are for all adults.  

3.    NAR forecasts are based on ITV estimates. 

 EXECUTIVE CHAIRMAN'S STATEMENT

Michael Grade

It is just under a year since we published our Turnaround Strategy. We set out a content-led recovery plan to return the Company to sustainable revenue and earnings growth over a five-year timeframe. That growth would be based on ITV's ability to leverage a uniquely powerful combination of media assets: our mass broadcast channels; the content we create and own; and online businesses with the potential to create real scale rapidly in this exciting new market. 

Some of the early operational progress we have made is reflected in the results for the first half of the year. Revenue was up by 3%. We have delivered revenue growth in television advertising, global content and online. In Broadcasting, the ITV Family of channels delivered 6% more impacts year-on-year, with good growth in the valuable upmarket and younger audiences. Overall our channels held their share of commercial impacts at 41.4% and net advertising revenue ("NAR") was up by 1%, well ahead of the market which was down 0.5%. In Global Content, revenues from external customers grew by 30%, led by strong growth in international production. Online revenues were up by 6%. Over the period, we delivered 50 million video views online. We also re-launched the core Friends Reunited reunion site on an advertising-funded basis. 

Despite this progress and the growth in revenues delivered in the first half, our earnings are down, largely as a result of phasing issues, previously signalled. In particular, reflecting the impact of Euro 2008, the network sports budget increased by £29 million compared to the first half of 2007. Over the full year, this effect will reverse. ITV commissions will be weighted to the second half, which impacts on Global Content internal revenues and on profits. Online losses increased compared to the first half of 2007, but are in line with the second half of 2007, with its investment in the re-launch of itv.com and national roll out of itvlocal.com. Reflecting these factors, adjusted earnings per share, before exceptional items, amortisation and impairment and tax adjustments for the first half are 1.5 pence (2007: 2.3 pence). 

As required by IAS 36 the Board has reviewed the carrying value of goodwill where there has been an indicator of impairment. As a result of reduced advertising market forecasts for 2008/09, an impairment loss against Broadcasting goodwill (which arose from ITV business combinations in 2000 and 2004) has been recognised. A non-cash impairment charge of £1,600 million is included within operating costs in the consolidated income statement. 

In view of the uncertain economic outlook and the investment in programming and other areas essential to deliver the Turnaround Strategy, the interim dividend has been reduced to 0.675 pence per share. The interim dividend will be payable on 5 January 2009 to shareholders on the register as at 7 November 2008. The ex-dividend date will be 5 November 2008. The level of the final dividend will be considered in light of second half trading and the economic outlook. The Board's policy remains to deliver dividend cover of 2 to 2½ times over the medium term.

Overall the liquidity position of the Company remains strong and has been strengthened further since June. In July, we announced a £110 million Eurosterling issue of bonds with a maturity date of 20 March 2013. We have also recently secured a further £200 million of 5-year committed bi-lateral financing. Net debt at 30 June 2008 stood at £663 million, down £5 million on the end of 2007. 

Outlook

Notwithstanding the operational progress we have made, ITV is not immune to wider economic pressures. With 80% of ITV's total revenues coming from Broadcasting, ITV remains a business with high operational gearing and earnings sensitive to the economic cycle. Despite some dire predictions, UK television advertising held up relatively well over the first half of the year and through the summer. ITV estimates that total TV Net Advertising Revenue (NAR) for the eight months to August will be down 1% year-on-year, with ITV plc NAR flat. However, on current estimates, the television advertising market has weakened significantly in September, where trading is impacted by tough comparisons with the successful Rugby World Cup in 2007. ITV currently estimates that ITV NAR for September will be down 20% year-on-year with the total market down 17%.  ITV has limited visibility on advertising revenues beyond September.  

We have not waited for the downturn before responding. We indicated in May that we were focusing on reducing our costs further. We have today announced £35 million of additional annual savings across the business to be delivered by the end of 2010. These are over and above the existing programme of cost savings which will deliver operating savings of £41 million by the end of this year and regional news savings of £40 million that we will deliver by the end of next year. By 2010, management will have taken £116 million of costs out of the business over a five year period. 

Turnaround Strategy

The priority for the ITV Board and management is to ensure that any downturn does not jeopardise delivery of the Turnaround Strategy, which we are confident will return the Company to sustainable growth in earnings and revenues. By far our largest area of investment is in our network programme budget. However, slashing our investment in programming would represent a false economy, with any short-term earnings gain outweighed by the inevitable drop in our share of commercial impacts in the short-term and damage to the growth prospects of the whole business over the longer term. 

Nonetheless, 2008 is proving a tougher first year for the five-year Turnaround Strategy than anyone could have predicted a year ago. The Turnaround Strategy assumed growth in total UK television advertising of 1.5-2.0% per annum. In fact, over the first three quarters of 2008, we expect the total TV market to be down by 3%. Many forecasters see weak or negative advertising growth continuing into 2009. Given the proportion of total group revenues accounted for by advertising, weakness in TV advertising clearly impacts on growth for the business as a whole. Global Content is also likely to be impacted as its main customers are advertising funded broadcasters. 

Online advertising continues to grow, but at a slower rate than previously expected due to the downturn. In addition within Online, a key new product launch has been delayed by referral to the Competition Commission. Project Kangaroo, our planned online video archive service with BBC Worldwide and Channel 4, cannot now launch in 2008 as originally planned. 

In light of these developments, ITV has reassessed its turnaround targets to ensure that they remain challenging and realistic. Our targets for Global Content and Online have been revised as follows:

• In Global Content, ITV is seeking to grow its annual revenues (including internal), through organic growth and acquisition, to a run-rate of £1 billion by the end of 2012. Our previous target was to double revenues to around £1.2 billion by 2012. 

• In Online, ITV is seeking to grow its annual revenues to a run-rate of £150 million by the end of 2012. Although this pushes back the previous target by two years, we expect to meet our revised online target without relying on substantial acquisitions. 

ITV's Broadcasting target, ITV Family share of commercial impacts of at least 38.5% in 2012, is unchanged. In addition ITV had previously set a group revenue target to 2010 of 3-5% compound annual growth.  Notwithstanding revenue growth in the first half and the rapid growth we continue to target in Global Content and Online, given the current market context in particular, group revenue growth will inevitably be largely dependent on television advertising market growth. 

Regulation

In a weaker market, the regulatory burden ITV bears as a legacy of analogue licensing threatens our ability to maintain high levels of investment in UK production. Likewise Contract Rights Renewal ("CRR") prevents ITV getting fair reward for its massive investment in UK programming and could undermine our ability to invest in the future. 

Formal reviews of Public Service Broadcasting and of CRR are both now well underway. We have made representations to the regulator and continue to press the case for more urgent regulatory reform. We are reassured that our analysis and that of the regulator agree in substance. As the Chairman of Ofcom, Lord Currie, recently concluded, the "future compact" for ITV "will need to be much more limited, explicit and transparent". 

The Board has been mindful of the prospects for rapid progress with respect to regulatory reform in taking its decision - notwithstanding the cyclical pressures on the business - to maintain investment in programming. The sudden downturn must serve to remove any possible doubt on the part of the regulator regarding the urgency of the need for substantial regulatory reform. What is at stake is ITV's position as one of the three pillars of UK broadcasting, alongside the BBC and BSkyB. 

ITV Board and staff

Sir Brian Pitman retired from the Board in May 2008 following the Company's AGM. Sir Brian was Chairman of ITV plc on its formation and, on behalf of the Board and shareholders, I would like to thank Sir Brian for his contribution to the company since merger. 

Lee Bartlett, who joined ITV from Fox in the US, has now taken over as Managing Director of Global Content, following the departure of Dawn Airey. Former Controller of BBC1, Peter Fincham, has also joined as Director of Television. 

I remain hugely impressed by the dedication of ITV staff in all areas of the business and their shared determination to deliver. Thanks to their efforts, ITV has made considerable operational progress over the last 12 months.

In the light of economic and market conditions, the Board of ITV has taken a number of significant decisions, which are fully detailed in this report. All the decisions that we have taken - and in particular, our commitment to maintain programme investment, notwithstanding the cyclical downturn - reflect the Board's confidence in the Turnaround Strategy.  

By holding our focus on delivering the Turnaround Strategy, we are confident ITV will be strongly positioned to grow as the economy recovers. ITV's long-term goal remains to create greater value for shareholders in the digital world from our position as the UK's favourite source of free entertainment.

BUSINESS REVIEW

OUR MARKET ENVIRONMENT

Advertising market trends

Following a strong finish to 2007, the UK television advertising market declined by around 0.5% over the first six months of 2008 compared to the same period last year. There has been further evidence of weakness going into the second half. We currently expect the total market in the third quarter to decline by around 9%. 

Internet advertising has continued to grow strongly. However there are some indications that the wider slowdown in advertising will impact online revenue. Nonetheless, as broadband video delivery continues to increase, we expect to see further internet video advertising growth, which our online properties will seek to exploit.

Platform growth

By the end of the first quarter 2008, nearly 90% of UK homes had access to digital television. Freeview has continued to account for the majority of digital growth with nearly 40% of UK homes using Freeview on their primary set. In addition, Freeview is the main driver of non-primary set digital sales, the majority of which - Ofcom estimates - are now converted for digital reception.

Around one third of UK homes are BSkyB subscribers and a further 12.5% subscribe to Virgin Media. Nearly 3% of homes access digital television via satellite without subscription, including the Freesat service offered by the BBC and ITV.

The final switchover to fully digital transmission starts in the Border region in the second half of 2008. By 2012 the whole of the UK will have converted fully to digital with the cessation of analogue terrestrial broadcasting. 

Commercial impacts

Digital platform growth has the effect of growing the volume of commercial impacts in the UK market. One commercial impact is defined as one person viewing one 30-second television advertisement. As digital penetration increases, the BBC - which delivers no commercial impacts - is losing audience to commercial digital channels. In addition the established commercial terrestrial channels - ITV1, Channel 4 and five - lose share to digital commercial channels which are permitted to carry more advertising minutage. Both these trends have the effect of increasing the volume of commercial impacts in the market. In the first half of 2008, the total volume of commercial impacts in the UK market increased by over 6% compared to the previous year. 

In particular for ITV1 under the Contract Rights Renewal mechanism, the channel's share of commercial impacts is a key determinant of the advertising revenue and share it can attract. 

Content

In the UK market place, the main commissioners of original programming are the BBC, ITV, Channel 4 and - to a lesser extent - five. The regulator Ofcom has estimated that the four main terrestrial channels account for around 90% of UK commissions. For the most part, exclusively digital broadcasters, such as BSkyB, Virgin and UKTV rely on acquired programmes and repeats, sport, and films, with low levels of original commissioning. 

The main UK producers include the BBC, ITV Productions and Fremantle (owned by RTL), plus the independent sector, which comprises many hundreds of production companies. Exploiting the value of content across multiple channels, platforms and territories is increasingly critical to success in the production sector. 

Regulation

Ofcom is currently undertaking its second review of Public Service Broadcasting. Following its first review, there were significant changes to ITV1's programme requirements, including a reduction in regional non-news programming. The future of news - in particular regional news on ITV1 - is a core focus of the current review. A publication from Ofcom marking the second phase of the review process is expected in September, with the full review concluding in early 2009. 

The Office of Fair Trading ("OFT") opened a review into the Contract Rights Renewal mechanism in January 2008 following an application from ITV. The review is being conducted in partnership with Ofcom. If the OFT recommends change, the Competition Commission will undertake its own review. Any change to CRR is unlikely to come into effect until contracts for 2010 are negotiated (in late 2009).

With respect to both PSB and CRR, ITV is making the case that the current weakness in the television advertising market argues for more urgent and comprehensive regulatory reform. 

On the 30 June 2008, the OFT referred the anticipated joint venture between ITV, BBC Worldwide Limited and Channel Four Television Corporation (known as "Project Kangaroo") to the Competition Commission. The review is expected to take several months.

Following the Competition Commission's ruling that BSkyB must sell their 17.9% stake in ITV plc down to 7.5%, BSkyB have appealed against this decision and this is currently being reviewed by the Competition Appeals Tribunal.

Corporate Responsibility (CR)

ITV has focused on addressing much-publicised shortcomings with respect to use of premium rate services in competitions and voting by implementing compulsory trust and compliance training for ITV staff. In addition ITV made provision for reimbursing all affected viewers in full, donating £7.8 million of unclaimed funds set aside for reimbursements to a number of charities in early 2008. A £5.7 million fine was imposed by Ofcom relating to failings with respect to PRS in ITV programming in May 2008 and is included in the exceptional items for the first half. 

ITV continues to seek to meet all programme requirements, where practicable. For example, by the end of 2007, ITV had exceeded Ofcom quotas for access services (subtitling and audio description). ITV also continues to meet its licence requirements with respect to independent and original production, plus its quotas for news, current affairs, regional news and regional non-news programming. In addition, ITV provides high levels of PSB programming in the genres of arts, children and religion. A shortfall with respect to ITV1's out-of-London network production requirement - which is set higher for ITV1 than for any other UK channel - is currently being investigated by the regulator. 

Following the success of the People's Millions and Carer of the Year, ITV continues to develop innovative social action programming and campaigns, building in particular on its network of regional services and their strong links with their respective communities.

OPERATING REVIEW

BROADCASTING

ITV1

ITV1 increased by 1% the volume of impacts delivered over the half year compared to the equivalent period in 2007. The quality of ITV1's impacts also improved. ITV1 was the only terrestrial broadcaster to see an increase in the volume of impacts in the important and valuable 16-34 year old group, where ITV1 impacts rose by 3.9%. The volume of ABC1 impacts increased by 2.5% and the volume of ABC1 male impacts rose by an impressive 5.9%. 

Despite this rise in impact volumes, ITV1's share of commercial impacts (SOCI) for the period was 30.5% (2007: 32.2%), a decline of 5.1%. The decline in ITV1's share of impacts was offset by increases in the digital channels giving a flat share for the ITV family of 41.4% (2007: 41.4%).

ITV1's schedule was re-launched early in the year with the return of News at Ten and a number of new drama launches, including notable successes such as The Fixer and the innovative Moving Wallpaper, both of which have been re-commissioned for a second series. These new shows supplemented a large number of successful returning series, such as Kingdom and Wild at Heart. Entertainment and comedy saw a very successful return of Benidorm and the launch of ground-breaking animation series Headcases from the creator and director of Spitting Image, which debuted with 4 million viewers. Against these successes, there were inevitably a number of programmes which did not deliver the level of audiences we had hoped for, including Honest and The Palace. However, given the level of schedule change and the number of new shows launched, we are pleased with the early performance of the new ITV1 schedule. 

In the first half of the year, six of the top ten programmes across all channels were broadcast on ITV1, and included four of the top five. Top shows included long-running classics such as Coronation Street and Emmerdale, along with returning entertainment series Dancing on Ice, and returning drama, Lewis. ITV1 has broadcast the top programme of the year so far, with 13.9 million viewers watching the final of Britain's Got Talent (56.3% share) and the top comedy programme, Harry Hill's TV Burp. ITV remains the only commercial channel which can regularly attract big audiences, accounting for 99% of commercial programmes attracting more than 5 million viewers and showing all of the top 375 commercial programmes for the first half of the year. 

ITV continues to perform well in sport. ITV1 showed the top rating sports event of the first six months with the UEFA Champions' League final achieving an audience of over 10 million. The 2008 European Championships were screened in June, performing well despite the lack of any home nations in the tournament. Going forward ITV has retained the rights to broadcast UEFA Champions' League matches as part of a new three-year deal covering the 2009-2012 seasons. For the next four years, ITV will be the home of premium live football on free-to-air television - broadcasting live UEFA Champions' League, FA Cup and home England international matches until 2012. Given this significant investment in football and consistent with ITV's commitment to hold the ITV1 network programme budget flat in 2009, ITV elected to exit its Formula 1 motor-racing contract after the 2008 season ends.

Major events coming up over the next few months include the new show Britannia High, a unique musical drama that promises to be one of the television events of 2008, with music penned by Gary Barlow. This will run alongside autumn schedule highlights The X Factor, I'm A Celebrity…Get Me Out of Here!, the climax of the 2008 Formula 1 season and England home football internationals, including the first World Cup qualifier. 

Peter Fincham took over as ITV Director of Television from Simon Shaps in May and is bringing new ideas to programme commissioning and scheduling across ITV1 and all ITV's digital channels. 

Digital Channels

ITV's Family of digital channels continues to grow ahead of the market in terms of ratings and revenues. Across the first half, ITV's digital channel NAR was up by 19% and the channels' combined SOCI was up around 25%. ITV2, ITV3 and ITV4 all rank in the top ten non-terrestrial channels based on SOCI, with ITV2 and ITV3 taking first and second positions respectively. In addition ITV2 and ITV3 remain the top performing non-terrestrial channels in Freeview homes. 

In May 2008, a new, free, digital satellite television service, Freesat was launched. Freesat is a joint venture between the BBC and ITV and carries the BBC's HD channel and ITV's HD service. It can reach 98% of all UK households and is expected to play a key role for those households who cannot receive DTT. 

ITV2

ITV2 continues to perform well against the competition, with the channel reaching 8.5 million more adults than Sky One in an average week. In the first half ITV2 recorded its best performance ever with an audience of 3 million viewers for its US acquisition, Bionic Woman. Other successes included the second series of Britain's Got More Talent, averaging 1 million viewers, and the 'Ghosthunting with…' series. 

ITV2's SOCI was 3.9% for the period (2007: 3.2%) an increase in share of 20.3%. ITV2's volume of impacts increased by 27.7%. 

ITV3

In the first half of 2008 ITV3's SOCI was 3.0% (2007: 2.4%) an increase in share of 24.0%. ITV3's volume of impacts increased by 31.8%. The most popular programmes broadcast on ITV3 include Midsomer Murders and A Touch of Frost.

ITV4

ITV4 is now the 6th most popular channel for men in multichannel homes (2007: 15th). The channel has achieved year on year impact volume and SOCI growth every month so far in 2008 for its key male audiences. 

ITV4's SOCI was 1.4% for the period (2007: 0.8%) an increase in share of 78.8%, boosted in part by an extension in transmission hours. ITV4's volume of impacts increased by 90.0%.

SDN

Our wholly-owned DTT multiplex operator, SDN, enjoyed a successful first half of the year in 2008. There have been no major new contracts, although a video stream available from 2009 is currently being auctioned. The regulator has confirmed the process for the renewal of the SDN licence from 2010. Ofcom has confirmed that there will be no spectrum payments associated with the licence until 2015 at the earliest. 

GLOBAL CONTENT

In the first half we have continued to make progress in our Global Content division. New acquisitions and partnerships have included Silverback in Scandinavia, Crackit in the UK and a programming partnership with 20th Century Fox in the US. 

Lee Bartlett joined ITV from Fox Broadcasting and was appointed the Managing Director of Global Content in June.   Lee has extensive international experience, which will help meet the objectives of the Turnaround strategy and deliver 360 degree value to our content properties. 

ITV Productions

In the first six months of 2008 ITV Productions made six out of the top ten highest-rating programmes on ITV1 excluding sport (2007: six out of ten). 

The first half of the year also saw ITV Productions earn a number of international awards. Highlights were three Golden Globes for the drama Longford (Channel 4/HBO) including Best Mini Series or Motion Picture Made for Television. Amongst the awards won at the New York Festivals Television Broadcasting Awards, Prime Suspect: The Final Act (ITV1) received Gold World Medals for Best Performance, Best Writing and Best Direction and Dracula (BBC1) picked up Gold for Best Costume Design. The Jimmy McGovern series, The Street (BBC1) received a Special Mention at the Rose d'Or festival and in the UK for the second year running it won the coveted Drama Series award at both the BAFTA Television Awards and the RTS Programme Awards. An RTS Programme award was also picked up by Come Dine With Me (Channel 4) for Daytime Programme.

Coronation Street and Emmerdale have both performed well for ITV1 in the first half with average audiences of 10.0 million and 7.2 million viewers respectively. Coronation Street ranks as the top performing soap on any channel with its best episode this year pulling in 13.0 million viewers. 

Non-ITV UK Production

We continued to produce programmes for the other main UK broadcasters, with our external UK production revenue up by 65% in the period. 

Programming successes include Come Dine with Me for Channel 4, which averaged an audience of 2.6 million and a 12% share of all viewing for Channel 4. This was first commissioned by Channel 4 in 2004 for their daytime schedule. The 4th series aired in early 2008 in prime time. This format has proved to be popular around the world, with versions of the show sold to numerous regions including Germany, France, Spain and the US.

Other successes include University Challenge and The Street for the BBC and Countdown for Channel 4. 

The integration of 12 Yard was completed following its acquisition at the end of 2007. A major re-commission has been secured from the BBC and the company is in advanced discussions regarding a new peak time ITV1 commission. A further UK acquisition has been made by ITV, with a 25% equity investment in Crackit, a new independent production start-up company established by the former MD of Endemol's Brighter Pictures. 

International Production

International production revenue was up 62% at £55 million in the first half with growth in each of our US, German and Australian businesses.

In the US ITV entered into a ground-breaking international programming partnership with 20th Century Fox. The companies will look to identify properties and formats from each other's rosters of hits that can be developed for their home markets. In addition, the two companies announced the establishment of a co-financed joint development fund to formulate original programming which they may develop and produce either separately or together for exploitation internationally.

The acquisition of Scandinavian independent producer and programme formats business, Silverback, gives ITV the exclusive international rights to all content, formats and series developed by Silverback and establishes ITV's presence in the Scandinavian market. 

International distribution and exploitation

External sales in our international distribution and exploitation business were £4 million higher in the first half at £57 million in comparison to the same period last year. 

During the period we have expanded our international distribution, with June seeing the launch of our pan-regional general entertainment channel across Asia, exploiting ITV's production archive.

We continue to be focused on producing formats which have 360 degree exploitation potential. Successes in this area include Dancing on Ice, Hell's Kitchen, Jeremy Kyle and Coronation Street. 

ONLINE

itv.com

Following the re-launch of the itv.com site last year unique user numbers have continued to increase throughout 2008.  Between January and June unique users rose by 23%, peaking in May with 6.8 million users.  Average daily unique users have doubled since the re-launch.

Video views on itv.com grew threefold between January and June, peaking at almost 8 million in May. On Sunday, 1 June, the day after ITV's hit entertainment finale show for Britain's Got Talent, 1.1 million video views were recorded across itv.com and over 8,000 hours of video watched on the Britain's Got Talent site. 

During the period ITV announced that a selection of its award-winning programming is now available for purchase or download from the iTunes Store in the UK.  iTunes customers can now choose from over 260 hours of ITV programming, including series Lewis and Cold Feet. Additional programming will follow throughout the year.

itvlocal.com

ITV Local has now been rolled out across all ITV regions. In June the site had almost 1 million unique users, a 34% increase on January 2008. 1,000 hours of programming are now available through video on demand across the itvlocal.com network. The public have submitted 11,000 videos and pictures. 

The content plan for itvlocal.com is on course. New channels have been added such as 'Traffic and Travel' with live pictures from the country's motorways, and the new crime channel in association with Crimestoppers. A new Job Finder service has been launched in association with Career Builder and the Scoot online directory service is set to be re-launched in September. 

ITV Mobile

Our mobile business continues to be developed. We have secured a deal with Nokia to pre-load ITV on a range of UK devices later in the year. ITV's mobile site is now the number two mobile entertainment site in the UK. 

Friends Reunited

Friends Reunited, one of  the UK's largest membership-based websites, dropped its subscription fees and was re-launched as a free website in May. In addition, a range of new social networking tools have been added to the site such as the 'Timeline' feature.

The Genes Reunited and Friends Reunited Dating sites also continue to be developed, increasing traffic for the group.

OUTLOOK

Television advertising revenue for the third quarter is estimated to be down 10% year-on-year for ITV and down 9% for the market as a whole. September is estimated to be down 20% for ITV and 17% for the market, impacted by the year-on-year comparisons with September 2007, when television advertising grew strongly, thanks in part to ITV's successful broadcasting of the Rugby World Cup. The Company has limited visibility with respect to the market beyond September 2008. 

Although the advertising market is uncertain, we are looking forward to a strong autumn schedule on-screen, with some of our most popular returning series and major events including the conclusion of the Formula 1 season. In addition, from the start of the 2008/9 season, ITV will offer live FA Cup, UEFA Champions' League, England internationals and UEFA Cup, becoming the home of premium, live football on free-to-air television.  With television viewing levels in the UK remaining stable and ITV actually delivering more commercial impacts year on year via ITV1 and ITV's family of channels, we remain confident in the power and effectiveness of television advertising overall and via ITV's family of channels in particular. Given the strength of the schedule, we are well-positioned to continue to outperform the wider television market in share terms over the full year. 

In Global Content, we anticipate growth in internal ITV commissions over the second half, with international production and UK production outside ITV both showing growth over the full year. In Online, following the recent conversion of the core Friends Reunited site to a free model, we have commenced on-air marketing which will continue over the course of the second half with a view to building on recent growth in user numbers. As unique users and video views grow across all ITV online sites, building the online video advertising market represents a key ITV priority going forward. 

Significant progress with respect to important regulatory issues is anticipated. In September 2008, the regulator Ofcom is due to publish their phase two document and recommendations as part of the PSB review. Important reviews are also ongoing with respect to product placement and advertising minutage. The first phase of the CRR review, involving the OFT and Ofcom, is expected to finish around the end of the year, with any recommendations being considered by the Competition Commission during the course of 2009. 

 KEY PERFORMANCE INDICATORS

ITV's Key Performance Indicators (KPIs) are the core measures used by the company to assess its own performance and allow shareholders and other stakeholders to judge how the business is doing. 

ITV's KPI framework seeks to provide stakeholders with a means of assessing ITV's progress towards the objectives set out in the Turnaround Strategy. It includes a balance of financial and non-financial KPIs.

Financial KPIs

The financial performance of the company depends on our ability to sustain growth in the revenues we are able to attract and in the profits we are able to earn on those revenues. This dual focus is reflected in ITV's financial KPIs for revenues and for profits. Further detail on our performance in these areas is set out in the Operating and Financial Reviews. 

Revenues

The Turnaround Strategy seeks to return ITV as a whole to sustainable revenue growth. Achieving this target will depend on ITV's ability to maximise its television advertising revenues, which still account for the majority of overall group revenues. In addition, ITV has adopted challenging targets for the growth of Global Content and Online revenues.