When Adam Crozier got the top job at ITV two years ago, he signed up for a pay and bonus package said to be worth up to £15m if he could pull off a five-year turnaround. Nearly two years in, Mr Crozier says he is making "good progress" on that transformation after yesterday reporting a 14 per cent rise in annual pre-tax profits to £327m. So he ought to be hitting at least some bonus targets.
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On the basis of the balance sheet, Mr Crozier and the chairman, Archie Norman, who recruited him, can claim that ITV is in far better health. ITV has swung from net debt of £612m at the start of 2010 to a surplus of £45m. A canny deal over its pension and bond buybacks mean that the Downton Abbey and Only Way Is Essex broadcaster is "cash positive", fuelling talk of possible acquisitions.
Revenues last year rose only 4 per cent to £2.14bn yet ITV was able to bank fatter profits thanks to its stronger financial position. On an adjusted basis, before exceptionals, profits surged by a quarter.
Advertising was virtually flat – up 1 per cent last year – but the programme-making arm, ITV Studios, is finally fulfilling some promise as it sells more shows to other broadcasters. It's all part of Mr Crozier's masterplan to make more money from programming content, pay TV and online – and reduce dependence on volatile advertising.
Non-advertising revenues rose 11 per cent because ITV sold more shows such as Come Dine With Me to Channel 4, White Van Man to BBC3 and the new drama Titanic, written by the Downton screenplay writer, Julian Fellowes, to 86 countries.
Mr Crozier was also able to announce a full-year dividend of 1.6p – the first payout to shareholders for three years. It sent the shares up almost 7 per cent, or 5.45p, to 85.95p.
However, ITV is still below the 95p level it hit exactly year ago on results day. That suggests Mr Crozier still has plenty to do. As the five-year share price graph shows, ITV is still below pre-recession levels seen in 2007 under its previous boss Michael Grade.
Mr Crozier set four key targets in his 2010 transformation plan. These were: create a new, lean fit-for-purpose organisation; maximise audience and revenue share from existing TV channels; expand through free and pay models across new platforms such as online, mobile and cable TV; and build a strong international programme-making business. Judged by those four criteria, Mr Crozier's record is mixed.
In terms of making the organisation fit for purpose and selling programmes, he has made some clear progress. The programme-making arm won 111 new commissions during 2011, up 28 per cent, and 45 of those were from international buyers. It makes good sense for ITV to expand its own production hub as it keeps hold of the intellectual property, rather than relying on external producers such as Fremantle, maker of X Factor and Britain's Got Talent, or Carnival, which produced Downton Abbey.
However, on two other key measures – improving audience share and increasing revenues from new media platforms – there has been less success.
Audience share for the flagship channel, ITV1, fell 2 per cent last year, which Mr Crozier admits is "disappointing". He blames weaker ratings for X Factor and Coronation Street at the end of last year, and says, only half-joking, "there wasn't enough snow" so fewer people stayed at home to watch television compared to December 2010.
On the plus side, the digital channels ITV2, ITV3 and ITV4 continue to grow, and Mr Crozier maintains that ITV is outperforming the wider ad market. However, the breakfast show Daybreak remains without any permanent presenters after Adrian Chiles and Christine Bleakley were axed in December. The new game show Red or Black was also a flop. He admits that ITV needs to "step up" with a new entertainment hit, as I'm A Celebrity and Dancing On Ice have been around for a long time.
Arguably, making money from new platforms such as online and pay is ITV's biggest weakness. Online revenues were £34m against £28m a year earlier – just 1.5 per cent of turnover.
ITV has been woefully slow to start charging for online content, while new entrants such as the US website Net Flix rush in. Mr Crozier said last summer that he planned to begin charging online micropayments by the start of 2012. Now he admits that the launch of the ITV "Pay Player" won't happen for many more months, with internal testing only due to begin in June. He blames poor technology that he inherited.
Mr Crozier insists he is still making progress: high-definition versions of ITV2, ITV3 and ITV4 are on pay-TV – although he won't say how much that makes. ITV has belatedly become available on Apple and Android phones and on computer games consoles. And it should also make more money when it renegotiates long-running deals with Virgin Media and BT, which don't carry advertising around ITV's on-demand content at present.
City analysts are backing Mr Crozier as they forecast higher profits for 2012, despite the ad market looking flat again in this Olympics year. There's a third series of the ratings blockbuster Downton Abbey to come, and another new, high-end drama series, Mr Selfridge, an adaptation of Lindy Woodhead's history of the department store and its late boss Harry Gordon Selfridge.
Some say Mr Crozier should make a big acquisition to transform the business. The Big Brother production firm Endemol, which has a big international presence, could fit the bill, but he maintains he doesn't think it's for sale.
Instead he is focusing on organic growth and talking about the possibility of expanding overseas by launching an ITV channel in several unnamed overseas countries. Mr Crozier can justly argue that ITV has its destiny in its own hands.