8 ITV plc Annual Report and Accounts 2023 ITV plc Annual Report and Accounts 2023 9 S T CHIEF EXECUTIVE’S STATEMENT R A T E G I Our purpose remains unchanged, we ITV Studios We also continued to monetise our global C R entertain and connect with millions of people formats with 19 formats in 2023 sold in three E ITV Studios is a scaled and global creator, P in the UK and globally, reflecting and shaping or more countries (2022: 19). Supported by O owner and distributor of high-quality content R culture and building brands, with brilliant operating in 13 countries and across 60+ our integrated model the final priority is to T content and creativity. labels; diversified by genre, geography and attract and retain the leading talent in the customer in the key creative markets around industry. We have seen outstanding creative Our vision is that by 2026 ITV will be a leader the world. deliveries from recent talent deals and in UK advertiser-funded streaming, and an acquisitions including Fool Me Once and expanding global force in content. We are ITV Studios benefits from its scale as the After the Flood from Quay Street EXECUTING focused on three strategic pillars to deliver largest producer in the UK, one of the largest Productions, One Piece from Tomorrow this vision: unscripted producers in the US and one of Studios, and Big Beasts from Plimsoll • Expand our UK and the top three in the majority of the remaining Productions. OUR MORE global production business international markets in which it operates. The global content market is large and • Supercharge our ITV Studios is a trusted supplier with attractive, with all platforms needing a mix Streaming business, and well-established relationships with key of content to succeed in a very competitive • Optimise our content buyers and leading creative talent landscape to attract audiences. We expect THAN TV Broadcast business in those markets. to see growth in key segments in which we In 2023 we further delivered against our four operate – content licensing, demand from STRATEGY These pillars are underpinned by a number strategic priorities (as set out in the Strategy streaming platforms for unscripted content of priorities, and we have set key performance section on the following page) and we remain and cost effective premium scripted content. indicators and targets to deliver by 2026. on track to achieve all our 2026 KPI targets With the strong progress we have made to and deliver a 5% total organic revenue CAGR ITV Studios is very well positioned to take date, we are on track and confident we can target from 2021 to 2026 – ahead of the advantage of this growth and to grow our deliver against these targets. The following market, and operate at industry-leading market share over the medium term, driven page provides further detail on our strategic margins of 13 to 15%. by our scale and diversified position, our priorities, why they are important and what investment in development and creative they drive. We have grown our scripted business with talent and our high-quality IP. 316 hours of high-end scripted content As previously guided, 2024 will be impacted Integrated producer broadcaster delivered in 2023, an increase of 14% from and streamer the prior year. This has helped to further delays in production as a result of the writers’ diversify our customer base, with almost and actors’ strike in the US, combined with ITV has a unique market position as a global the continuation of weaker demand from FTA and diversified vertically integrated producer a third of Studios revenues coming from broadcasters in Europe who are holding back The successful execution of ITV’s strategy of investing in and growing both broadcaster and streamer with content streaming platforms in 2023, up from spend until they see more certainty in the TV production in ITV Studios, and ITVX in Media and Entertainment (M&E), is evident central to everything we do. This model 22% in 2022. advertising market. benefits both divisions and therefore through the robust financial and operating performance in 2023, despite a the Group: challenging macroeconomic environment. For ITV Studios it: • Provides a sustainable base of core commissions which gives stability ITV Studios delivered record revenues As expected, group adjusted EBITA was Our Purpose, Vision and More in a changeable industry; and profits as the business continued to down 32% at £489 million which reflects the than TV Strategy • Helps with attracting and retaining demonstrate its strong market position, decline in linear advertising revenue and the industry-leading talent which is key with outstanding creative deliveries globally. planned investment in ITVX. Adjusted EPS The strong operating performance in 2023 demonstrates that the strategy we started to a successful creative business; In Media and Entertainment, ITVX drove was down 41% at 7.8p. We have reached a significant growth in digital viewing and peak level of net investment in our streaming implementing in 2018, and evolved in 2022 • Provides a platform to make Studios’ advertising revenues, with the investment business in 2023 and we continue to expect with the launch of ITVX, is working. We have content famous and enables cross- on plan. It was the year’s biggest and most to grow profits from here. been able to withstand macroeconomic promotion, supporting the international successful streaming launch in the UK, headwinds because of the actions we have sale of our content and formats, and firmly establishing its place in the market, Statutory profit before tax was down 61% taken to reposition ITV towards higher, the monetisation of our IP across our and winning the award for Best On-Demand and statutory EPS decreased by 51% to 5.2p. sustainable growth areas in global business models Service at the Edinburgh TV Festival. production and digital. The business is There was strong cash generation in the year, demonstrably more balanced and has strong For M&E it: Financial highlights with 102% profit to cash conversion and a delivery momentum as we continue to drive • Provides access to world-class content for robust balance sheet, net debt of £553 our strategy. ITV’s linear TV channels and ITVX, driving 2023 was the second-highest revenue million and net debt to adjusted EBITDA outturn in ITV’s history. Total ITV group The media landscape continues to evolve viewing growth; revenue was down 2% and total external leverage of 1.0x. • Enables deeper and more creative and AN AUDIENCE rapidly and is more competitive for viewers revenue declined by just 3% in 2023 despite and advertising, with recent new entrants. productive partnerships with advertisers, WITH KYLIE aired on the severe decline in linear advertising. In line with ITV’s dividend policy, the Board driving revenue; ITV in December 2023. has declared a final dividend of 3.3p (2022: We are in a far stronger position than we were ITV’s growth drivers continued to perform in 2018, to focus on ITV’s value drivers and • Helps protect from content price inflation THE LONG SHADOW is well, with 4% growth in ITV Studios and 3.3p), giving an ordinary dividend of 5.0p per a true-crime drama and share for the full year 2023 (2022: 5.0p) competitive advantages and are confident was the most-watched 19% growth in digital revenues helping that we can compete, as evidenced by a very For the Group, this gives us a real competitive series of the year to substantially offset a 15% decline in strong programming slate: Mr Bates vs The advantage, providing attractive economics on ITVX. linear advertising due to the challenging As announced on 01 March 2024, ITV sold its 50% holding of BritBox International to BBC Post Office is the highest audience drama on as we operate across the entire value chain, advertising market. In total, M&E revenues Studios for a total consideration of £255 any platform for five years; Fool me Once by and benefit from diversification in a were down 7% in the year. million. The Board will return the entire net ITV Studios’ Quay Street Productions is in cyclical industry. proceeds to shareholders through a share Netflix’s top 10 English-language dramas of buyback of £235 million which we expect to all time, and ITV Commercial consistently complete within the next 18 months. outperforms the market.