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| Carlton is a media company with businesses
in free and pay television, programme making and distribution, and interactive
television and the internet. Carlton accounts for 40 per cent of ITV, Britain's most popular television channel. Our stations broadcast to 26m people - almost half the UK population - and our sales teams book around £1billion of advertising revenue a year for Carlton and other companies. Carlton owns 50 per cent of ONdigital, offering 54 channels, pay-per-view, games, e-mail and the internet - no dish, no cable. Carlton invests over £200m a year in making television programmes and sells a library of 18,000 hours of television programmes and 2,000 films. In 2000, Carlton made headline pre-tax profits of £342m (US$506m) on sales of £2bn (US$3bn).There are 14,000 employees. Carlton is listed on the London Stock Exchange (CCM) and Nasdaq (CCTVY). |
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| FINANCIAL HIGHLIGHTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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- TURNOVER EXCEEDS £2 BILLION. - HEADLINE PRE-TAX PROFITS UP 8 PER CENT TO £342M. - HEADLINE EBITDA UP 8 PER CENT TO £410M. - CARLTON MEDIA PROFITS UP 13 PER CENT TO £201M. - ONdigital GROWING RAPIDLY - OVER 1,OOO,OOO SALES. |
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| CHAIRMAN'S STATEMENT | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17th January 2001 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2000 was a defining year for Carlton. The consolidation of ITV took a vital step forward.While Carlton's proposed merger with United News & Media was effectively blocked by the Competition Commission, our acquisition of HTV and the consolidation of United's other licences has created two major companies at the heart of ITV. Looking ahead, there is significant potential for enhancing ITV's revenues and reducing its costs. We are developing a focused television business with strong positions in free television, pay television, programme making and the digital, interactive future. We have made progress in three key areas. First, we have helped to open up the market for major sports' rights, acquiring the Football League and Worthington Cup for ONdigital and the Premiership highlights for ITV. The days of one dominant pay television operator winning all of the nation's most valuable sports rights are over. Second, we have given new impetus to Carlton's programme making, increasing our output for ITV, other terrestrial television channels and a wide range of new digital distribution platforms. Third, we have established ONdigital as one of the UK's major pay television operators. The business has now made over 1 million sales and is delivering 54 television channels, digital text services, e-mail, pay-per-view and the internet-on-television. In January, Carlton announced that contracts had been signed with Thomson Multimedia for the proposed sale of Technicolor for a total consideration of $2.1 billion. As part of the transaction Carlton will receive 15.5 million Thomson shares accounting for approximately 5.5 per cent of the company's issued share capital. Together we are also planning a strategic alliance covering digital and interactive television. Carlton is using its position in network television to drive into the digital world. The rapid growth of digital television and the prospect of a nationwide switch over from analogue to digital broadcasting bring significant opportunities. ITV is Britain's most watched television channel. ONdigital is the simplest way to receive multi-channel television and access the internet. By working together, ITV and ONdigital can help close the digital divide, offering the potential of universal access to digital interactive services. The company is proposing a 10 per cent increase in Ordinary dividends to 16.55p for the year 2000. During the current year the Board will carry out a full review of our dividend policy, bearing in mind the on-going investment in Digital Media and the changing shape of the group as a whole. Gerry Murphy joined Carlton as Chief Executive during the summer. He is developing our strategy and we all look forward to working with him in the years ahead. Sir Derek Birkin will be standing down from the Board in March after eight years as a non-executive Director. Carlton has benefited considerably from his wise counsel. He leaves with our gratitude and best wishes. I would like to thank our employees for their hard work and loyalty over the past year. We should look forward to the challenges and opportunities in the coming year with confidence and enthusiasm. |
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| CHIEF EXECUTIVE'S STATEMENT | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 17th January 2001 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| In 2000 Carlton's media businesses delivered double-digit
profit growth and progress was made in divesting non-core assets. Headline pre-tax profits for the group before digital investment, exceptionals and businesses discontinued during the year, were up 8 per cent at £342m (1999: £317m). In free-to-air television we are working with Granada to streamline ITV and grow the business. Our acquisition of HTV and the contract to sell airtime for Scottish Television and Grampian Television mean that Carlton now broadcasts to almost 50 per cent of the UK population, owns regional licences accounting for 40 per cent of ITV and manages 46 per cent of ITV's net advertising revenue. ITV's brand will be extended into multi-channel digital television, interactive services and the internet. Carlton will play a leading part in these moves. In pay television, ONdigital is making good progress towards its goal of 2m subscribers and profitability. What began as a 30-channel pay television operation is now delivering e-mail, pay-per-view, games, digital teletext and full internet access to its rapidly expanding customer base. The impact on the Group's profits of Carlton's investment in Digital Media totalled £238 million in the full year, including 50 per cent of ONdigital's investment. In programme making, Carlton's creative teams are winning a greater share of commissions from ITV and other channels while extending output to include long running drama series and day-time magazine formats. We are introducing interactive content that will drive traffic across all platforms and establishing new services, like interactive advertising, that will become important sources of revenue in the future. Carlton's new management structure addresses more effectively the opportunities in these markets. Our television and media businesses have been grouped into two operating sectors: Channels, consisting of our broadcasting, advertising and digital channels businesses; and Content, drawing together Carlton Productions, Carlton International and our New Media operations. A successful media business requires a combination of talent, creativity and a rigorous assessment of the risks and rewards of investing in new ventures. I am determined to make sure that we attract, retain and back the people and businesses that will make Carlton as successful in the next decade as it has been in the last. By expanding in ITV, investing in Digital Media and growing our content businesses, Carlton's development will continue in the year ahead. While the television advertising market is currently subdued, compared to a buoyant 2000, the medium term outlook remains positive. |
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| AUDIENCES FOR ADVERTISERS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Delivering mass audiences to advertisers is the most valuable
thing that we do. Our customers want the fastest possible access to the
greatest number of people in order to deliver their messages. We meet that demand by investing in original productions, sporting events and high profile, live entertainment. Next year ITV will invest over £900m on a television schedule packed with compelling viewing. The Remorseful Day, the last Inspector Morse film, starring John Thaw and Kevin Whateley won an audience of 14 million viewers. It was part of a Carlton drama slate that included Big Bad World, The Vice, Peak Practice and The Railway Children. ITV's sports coverage is unmatched by any other free channel, with Champions League football, Premiership highlights (from Autumn 2001) and Formula One motor racing. In 2000, Carlton's 200-strong advertising sales team sold 137,923 minutes of airtime in our ITV regions to 911 clients across 23,441 campaigns. Our customers range from giants, like Proctor & Gamble, Unilever and BT to local advertisers like Coldseal and Microban. Our inventory is growing. We are now selling the airtime for six ITV regions, 11 digital, cable and satellite channels, 18,000 cinema screens in the UK, the Republic of Ireland and the US and a growing number of websites and videocassettes. |
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| PROGRAMMES FOR VIEWERS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Carlton believes in nurturing talent and encouraging
creativity to bring big ideas to the small screen. Our goals are to win
commissions from ITV and other channels and to produce quality, popular
programmes. The return of Crossroads, five times a week, has involved 150 people and a £10m investment in our Nottingham Studios, where the series is being produced. Carlton's creative teams encompass 600 people in 6 different locations.They include Carlton Productions, making over 1,600 hours of programmes for ITV, Channels 4, 5, Sky and the BBC; Planet 24, producer of Channel 4's The Big Breakfast; and Action Time, creator of game show formats broadcast around the world. Our Outside Broadcast business - Carlton 021 - covers 650 hours of live events and sporting action every year, including the Premier League. Our sports' production teams will produce over 1,000 hours of football for ITV and ONdigital in the coming year. Carlton America, based in Hollywood, co-produces up to 17 films a year for the major US networks, including the winner of four EMMYs Tuesdays with Morrie. Closer to home, we make children's programmes like Mopatop's Shop, comedy such as Kiss Me Kate and respected documentaries like Britain at War in Colour and Churchill's Secret Army. Talent working with Carlton includes Lily Savage, Ken Stott, John Thaw, Kevin Whateley, Amanda Holden, Ardal O'Hanlon, Gary Mavers, Simon Shepherd, Gwen Taylor, Caroline Quentin and John Pilger. |
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| CONTENT FOR WORLD-WIDE DISTRIBUTION | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| As digital distribution platforms multiply and grow, the
demand for quality content will increase. Carlton has built a library of 18,000 hours of television programmes and 2,000 films. Our library ranges from classic films (The Fabulous Baker Boys, Sophie's Choice and Brief Encounter) to cult television series (The Saint) and from comedy classics like Carry On films to contemporary work like our adaptations of Daphne Du Maurier's novels (Rebecca, Frenchman's Creek). The classic series Thunderbirds - part of the Carlton library - has been re-launched in the UK, backed by over 150 different lines of product.The Thunderbirds brand will be rolled out in 20 countries around the world. Carlton's library is sold to over 1,000 broadcasters, video-on-demand and pay-per-view operators in 221 countries. In the UK alone we license our content to more than 40 television channels. We add to the library every year with new television programmes, like the The Railway Children and The Second World War in Colour, and with television movies from Carlton America. Carlton Books and Carlton Video publish our television and film properties and other content in paperback, hardback, video, DVD and CD-ROM. |
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| NEWS FOR OUR REGIONS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Carlton's 19 studios, 73 camera crews and 224 news journalists
produce nearly 350 regional news bulletins each week. In our larger geographical
regions we broadcast additional regional news services. In the Midlands,
Carlton broadcasts three separate news services during the day, covering
the Southern, Eastern and Western areas. HTV broadcasts a national news
service for Wales and a regional service for the West of England. In total,
we broadcast ten local news services and over 1,300 hours of regional
news every year. We have studios as far afield as Cardiff, Penzance, Nottingham
and Bristol. Carlton makes over 3,000 hours of original regional programming for our 26 million viewers every year. From Legends - an eight part series looking at the lives of famous Londoners such as Michael Caine and Dirk Bogarde - to WaterWorld - a look at life on the canals of the Midlands, Carlton's regional programmes reflect the differing interests of viewers across our regions. Our regional programmes and presenters win mass audiences and awards. LNN's coverage of the Soho pub bombing won an RTS Award. London Tonight reaches 2.8m viewers every week. |
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| INTERACTIVE CONTENT FOR ALL PLATFORMS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Digital technology is making the television an interactive
medium. ONdigital subscribers can send e-mails, order movies through pay-per-view and access the internet.They can shop, bank, play games and surf the world wide web…all while watching television. Viewers can interact with programmes and commercials, accessing extra information and advice. Advertisers can give more information about their products and services. Programme makers can offer viewers far more, through hot links to additional services and, in time, to the internet itself. Carlton's creative teams are developing interactive content for all users and all platforms. Our web sites covering films, food, games and entertainment are available via the internet, digital television,WAP phones and palm pilots. We are providing interactive information for the Champions League on ITV and ONdigital. We are producing an interactive service for The Brit Awards and CITV, ITV's Children's programme service. And we are working with over 20 advertisers - including Unilever - so that we will be able to deliver fully interactive commercials. Television is the strongest medium for advertisers - it packs the biggest punch, delivers the clearest message. With interactivity, it can do even more. |
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| CHOICE FOR SUBSCRIBERS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ONdigital has brought multi-channel television to a brand
new audience. Launched in November 1998, the business has made over a
million sales in just over two years. ONdigital brings more television choice through a standard television aerial. No dish, no cable. More free channels from the BBC and ITV. Specialist channels, like the Cartoon Network for children, PlayUK for comedy, MTV for music, Carlton Cinema for film enthusiasts. ONdigital provides over 200 top films every week - and more football than any other service. The Premier League. The FA Cup. England Internationals.The Football League. The Worthington Cup. Only ONdigital subscribers have been able to watch every game involving a British team in the UEFA Champions League. ONdigital's and ITV's coverage has included Manchester United, Leeds United, Arsenal and Rangers taking on the cream of Europe - Real Madrid, Barcelona, Bayern Munich and Lazio. |
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| WORKING FOR OUR COMMUNITIES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All Carlton companies play an active role in their local
communities, funding projects, forming partnerships and supporting local
events and organisations. Carlton's Homeless Campaign 2000 aimed to make a visible and sustainable impact on homelessness in London. Carlton formed a partnership with The London Connection, a day centre for young homeless people. We are providing practical, personal and financial support to enable The London Connection to offer real solutions and opportunities to help young people break the cycle of 'no home - no job - no home'. Similar commitment to our communities is repeated throughout the group with each company focusing on projects that are relevant to their local areas. Major projects include Carlton Sanctuary 2000 in the Central region to help protect and promote the countryside; the regeneration of the Mayflower Steps in Plymouth,West Country region; drug prevention in HTV Wales, and the promotion of a healthier West of England in HTV West. Since 1993,The Carlton Television Trust has distributed £3.5m to good causes throughout the London region. |
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| THE BOARD OF DIRECTORS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EXECUTIVES Michael Green, Chairman Aged 53. Michael has been Chairman of Carlton since 1983. He is a director of ONdigital and a non-executive director of ITN. He is Chairman of The Media Trust. (Nomination Committee) Gerry Murphy, Chief Executive Aged 45. Gerry joined the Company as Chief Executive in July 2000 from Exel plc. He is a director of ONdigital and a non-executive director of Novar plc. Bernard Cragg, Finance Director Aged 46. Bernard has been Finance Director since 1987. He joined Carlton in 1985 as Group Financial Controller. He is a non-executive director of Arcadia Group plc. Nigel Walmsley, Deputy Chief Executive Aged 58. Nigel joined the Board of Carlton in 1991. He is Chairman of GMTV, a director of ONdigital and a non-executive director of Energis PLC. He is also Vice-President of the Advertising Association. NON-EXECUTIVES Sir Derek Birkin, TD Aged 71. Sir Derek joined Carlton as a non-executive director in 1992. He was previously Chairman of The RTZ Corporation PLC. Sir Derek will leave the Board in March 2001. (Audit and Remuneration Committees) Anthony Forbes Aged 63.Anthony joined Carlton as a non-executive director in 1994. Previously he was joint senior partner of Cazenove & Co. He is a non-executive director of Royal & Sun Alliance Insurance Group plc and The Merchants Trust PLC. (Audit, Nomination and Remuneration Committees) David Green Aged 54. David has been a director of the Company since 1983. He became a non-executive director in 1990. He is Chairman of Colefax Group PLC. Leslie Hill Aged 64. Leslie became a non-executive director in January 1996. He was Chief Executive and then Chairman of Central Independent Television P.L.C. from March 1991 to December 1995. He is Chairman of the ITV Network. (Audit and Remuneration Committees) Sir Sydney Lipworth, QC Aged 69. Sir Sydney joined Carlton as a non-executive director in 1993. He is Chairman of the Financial Reporting Council and a non-executive director of Centrica plc. (Audit, Nomination and Remuneration Committees) Sir Brian Pitman Aged 69. Sir Brian joined Carlton as a non-executive director in 1998. He is Chairman of Lloyds TSB Group plc and non-executive Chairman of NEXT PLC and non-executive director of Tomkins PLC. (Nomination and Remuneration Committees) GROUP EXECUTIVES
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| KEY EVENTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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