Carlton is investing in the digital future. Profound changes are taking place in our industry and we are investing to deliver long term growth and value for shareholders.

Our operating profit before digital television and exceptional items was ahead of last year and cash flow remained strong.

In television we have grown our free-to-air broadcasting business and established ONdigital as a pay television platform.The new business has started strongly, winning over 550,000 subscribers in just over a year. We will continue to invest in ONdigital, bringing a range of new features during the year, including e-mail, interactive services and pay-per-view.

At Technicolor we have stepped up production of the new DVD formats and started to build a digital film business.

Our strong cash flows are funding these new businesses, including Carlton Online. During the year we expanded in television production and content libraries, acquiring Planet 24 and the ITC film and programme catalogue.

The outlook for television advertising revenue is encouraging and Technicolor has started the current year well.

The proposed merger of Carlton and United News & Media offers an excellent opportunity to expand in television and media as a highly focused and financially strong UK-based company.

Merging our two companies inevitably involves board and management changes. Steven Cain will not be joining the board of the new company and is leaving Carlton at the end of January. He achieved a great deal in a short time and we wish him every success in the future.

I would like to thank everyone at Carlton for their hard work, enthusiasm and loyalty. Within Carlton we have the people and the businesses to play an important part in the fast growing worldwide media industry - and 2000 promises to be a particularly exciting year.

Michael Green,
Chairman
14th January 2000

FROM THE CHIEF EXECUTIVE

Results
Turnover increased by 5 per cent to £1,938m (1998: £1,842m) and operating profit before digital television and exceptional items of £320m was ahead of last year (1998: £318m).

Our divisional reporting structure has been changed to reflect the new management organisation of the Carlton Media Group and the Technicolor Group.

Carlton Media Group's turnover was £860m (1998: £833m) and operating profits increased by 10 per cent to £176m (1998: £161m), with strong ITV advertising growth.

Technicolor's turnover was up 11 per cent to £908m (1998: £820m) and profits up 6 per cent to £149m (1998: £141m). Turnover in the video and disc business grew by 28 per cent to £646m (1998: £505m) and with firm cost control profits increased to £104m (1998: £82m). In film, turnover of £262m (1998: £315m) and profits of £45m (1998: £59m) were impacted by a reduction in the number of wide releases, pricing pressure and the loss of a major contract.

At Quantel, a further reduction in sales resulted in a break-even situation.

The rapid growth of subscribers at ONdigital and increased investment in our digital channels and online services resulted in net digital television costs of £133m (1998: £28m).

In line with our strategy we sold a number of smaller businesses including TVi, Cabletime and Comelim.These sales resulted in a net loss before tax of £25m, principally due to the writing back of goodwill. After the year end we sold Solid State Logic to 3i, backed by the management, for £44m.

Headline diluted earnings per share at 31.6p were similar to last year (1998: 31.3p). Headline earnings are calculated before digital television (14.1p) and exceptional items (4.9p). Diluted earnings after these items were 12.6p (1998: 29.7p). Carlton ended the year with net debt of £253m (1998: £60m), with the strong cash flows from our core businesses invested in digital television and acquisitions.

In summary, Carlton's two principal businesses made good progress and we have established clear goals for their future development. With ONdigital, digital channels, a growing internet presence, a rapid growth in DVD capacity and the development of a digital cinema system, we are laying the foundations and investing for a digital future.

The Carlton/United merger is the right move for both companies. I enjoyed playing a part in making it happen and will watch the new company's progress with great interest.

Steven Cain
Chief Executive
14th January 2000