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Governors report progress in delivery - ±«Óãtv Annual Report Accounts 2005/06
The Board of Governors has today published the ±«Óãtv's Annual Report and Accounts (ARA) for 2005/2006 which records further progress in delivering an efficient
±«Óãtv focussed on providing licence fee payers with quality content across all
platforms.
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At a press conference in Westminster to mark publication of the document -
brought forward in advance of the Commons debate on the ±«Óãtv's next Charter and
Agreement on Monday 10 July - ±«Óãtv Chairman Michael Grade noted this was the last
ARA from the Board of Governors who will be replaced by the ±«Óãtv Trust at the end
of the year.
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He said: "Two years ago, together with the Director-General, I launched Building Public
Value, a prospectus for radical change at the ±«Óãtv.
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"I promised a new system of governance that would place the interests of licence
fee payers, and not the interests of ±«Óãtv management, at the very heart of the
Board's remit.
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"The Governors demanded that the ±«Óãtv should become more
efficient, and that the editorial teams should concentrate on providing a
quality of content that is distinctive from what is provided by the commercial
sector.
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"We asked for renewed efforts by the ±«Óãtv's commercial businesses, and set a
target for Worldwide of doubling its profits in two years.
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"We asked the ±«Óãtv to prepare for the next Charter period by ensuring its
services will be universally available to all licence fee payers.
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"At the same
time we also made clear that the ±«Óãtv could not, and should not, attempt to do
everything, and that it must work constructively alongside the rest of the
industry in preparation for the digital future.
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"The Director-General and his team responded to these new objectives and I am
pleased to report that there is real evidence of progress in delivering them in
the year under review."
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Efficiency savings
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The Chairman singled out increased efficiency as a key achievement, but noted
also that further work was necessary:
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"The challenging first year target of £105m cash savings has been met. This is
a considerable achievement but, the pressure is still on.
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"The Governors have
prescribed very clear measures to ensure the year two target of an additional £112m of cash savings is also delivered, ensuring the continuing cash savings
target of £355m annually is met from 2007/2008.
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"These savings will release the funds that are necessary to address audience
expectations of quality content.
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"But achieving the savings will require
transformational change in ways of working, and not just the reduction in
headcount that is already being implemented."
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Responding to licence fee payers
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Michael Grade highlighted improved performance that was in response to the
concerns of licence fee payers and linked to the savings already achieved:
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"Last year, as a direct result of consultation with the public, the Governors
requested a reduction in repeats in peak-time on ±«Óãtv ONE. These have fallen
from 9.7% to 8.9% and a new target of 5% to be met by 2008/09 has been set.
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"The ±«Óãtv's distinctiveness from the commercial sector must be evident in a
willingness to take creative risks - even if that means the inevitable
occasional failure.
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"But it also requires the confidence to end successful
programmes that have reached the end of their natural creative life, to create
space for the next round of innovation.
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"C±«Óãtv and CBeebies demonstrated
particular evidence of this last year, having the courage to discontinue some of
their most acclaimed titles that could have been damaged if continued, to make
way for new ideas and programmes.
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"On behalf of audiences - who have identified tired formats and worn programming
as indicators of poor quality - we will be looking for more evidence of creative
renewal in the year ahead, and expect ±«Óãtv ONE to make a particular effort in its
early evening schedule.
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"Overall, the Governors assess the ±«Óãtv to have had a better year creatively and
are pleased that total ±«Óãtv reach to audiences is broadly stable."
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Executive pay
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In last year's Annual Report, the Governors announced a change in executive
remuneration policy.
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A two-stage, two-year process had begun to bring base pay
to around the market median, it having fallen on average to around 15% below the
market median in previous years.
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In addition the bonus potential was reduced
for Executive Board directors from 30% to 10% of base pay.
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The executive pay information in this year's annual report reflects the final
and completed stage of this process overall.
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Base pay before bonus is now moderately above the market median, at around 4.5%,
but total pay for the Executive Directors - salary and bonus combined - places
the ±«Óãtv nearly 20% below the market median.
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Further, the total cash payout from public funds to Executive Board members this
year - on a like-for-like basis - is over £100,000 lower than it would have been
without the change to bonus arrangements. The total payout is also slightly
less than last year.
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Michael Grade said: "The Governors believe the ±«Óãtv's executive pay policy now
properly reflects our combined duty to licence fee payers and our responsibility
as employers."
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Director-General's report
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Commenting on the ±«Óãtv's overall performance, Director-General Mark Thompson said:
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"The ±«Óãtv is going through huge change, moving from traditional linear
broadcasting to the challenging and exciting world of interactive, on-demand
digital media.
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"It means the ±«Óãtv's relationship with audiences is also constantly
changing.
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"Over the last year audiences have been telling us what they love and
value from the ±«Óãtv. There was huge appreciation for innovative drama and
adaptations like Bleak House, Life on Mars and Doctor Who, to Strictly Come
Dancing, The Apprentice, Martin Scorsese's Dylan epic No Direction ±«Óãtv,
Catherine Tate and Facing the Truth.
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"And on radio The Raj Quartet, the
dramatisation of Paul Scott's novel about India in the 1940s, was a creative
highlight; meanwhile, The Archers, the world's longest running radio drama,
marked its 55th anniversary.
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"Our website continues to set new records for reach
- now over 15.3 million a month - and our radio portfolio continues to carve
its distinctive path.
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"Evidence of the changing nature of our relationship with audiences came on July
7 last year when audiences used bbc.co.uk to share their own pictures and
experiences of the London bombings.
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"Radio 3's Beethoven Experience and Bach
Christmas and our ongoing podcasting trials show a real appetite for different
ways of accessing, using and enjoying the ±«Óãtv's content.
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"New investment in content is coming through the value-for-money savings
highlighted in this year's report.
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"We have also launched our Creative Future
content vision for the on-demand world.
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"The next challenge is to bring about
transformational change within the ±«Óãtv to achieve that vision, to simplify how
we bring the best creative ideas to our audiences and deliver the public
purposes, including leading digital switchover, which have been laid down for us
for the next Charter."
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Financial accounts
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The ±«Óãtv's Accounts for 2005/2006 are audited by KPMG on behalf of the Board of
Governors.
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At the press conference Zarin Patel, the ±«Óãtv Group Finance Director,
gave a presentation summarising the ±«Óãtv's financial performance for the year.
[See Notes to Editors for key financial data].
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She said: "The ±«Óãtv is on track to deliver the financial strategy it set in 2000.
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"Crucially, it will end this Charter period at a broadly zero debt position after
several years in deficit, which allowed increased investment to deliver the new
digital services.
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"At this year end, the ±«Óãtv had a net cash position of £18m, up
from £89m in debt last year. We are on track to exceed the £3.3billion
cumulative seven year self-help target (including both income growth and cost
efficiency targets) set by DCMS at the time of the last licence fee settlement.
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"A significant area of savings during the year was the reduction in headcount,
with 1,132 posts closed. Next year's targets are substantial with over 2,000
staff scheduled to leave the ±«Óãtv."
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Zarin Patel added that the one-off implementation costs for the three-year
efficiency programme had been forecast to increase from £197m to £241m,
resulting mainly from increased pension augmentation costs of post closures.
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On funding sources, she said: "Licence fee revenue was above £3billion for the first time last year.
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"Evasion
fell again, and the combined cost of collection and evasion at 9.6% of revenue
is at the lowest level since the ±«Óãtv took over responsibility for collection.
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"±«Óãtv Worldwide returned a 28% increase in cash to the ±«Óãtv, reflecting the
doubling of profits to £89m."
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On the ±«Óãtv's Pension Scheme, Zarin Patel said:
"The actuarial valuation of the ±«Óãtv's Pension Scheme shows a surplus of £13m,
down from £441m at the time of the last formal actuarial valuation in 2002.
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"Some changes to the pension arrangements have been proposed in order to protect
the benefits of existing members and maintain competitive pensions for new staff
in an environment of increasing costs and investment uncertainty."
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Zarin Patel noted that the FRS17 accounting standards requirement of a market-based valuation showed a significant improvement in the pension scheme's
position from deficit to surplus year-on-year, but pointed out that this was
based on a single snapshot of the market and could not be relied upon to inform
long-term decisions.
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New Charter, new ±«Óãtv Trust
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Stating that this Annual Report & Accounts is the last from the Board of
Governors and looking ahead to the arrival of the new ±«Óãtv Trust, Michael Grade
said that:
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"In 2004 I outlined radical changes in governance which we believed would be
sufficient for the ±«Óãtv in the next Charter period.
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"In the last two years the
Governors have indeed become more separate from management, and the new
Governance Unit provides independent advice and this has transformed our ways of
working.
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"But the establishment of the ±«Óãtv Trust and the new mechanisms it will
deploy from January 2007 will deliver a further degree of change that will
ensure even greater transparency in the way the ±«Óãtv operates and is supervised.
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"I am confident that the Governors are handing to the new Trust a ±«Óãtv in good
shape for the challenges of the next Charter.
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"The ±«Óãtv should be proud of its ambitions to serve licence fee payers and should
not be afraid to speak positively about them. But the media environment in
which it operates is increasingly complex.
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"To ensure continuing public support
and satisfaction, and to avoid legitimate criticism from the commercial sector,
the ±«Óãtv must demonstrate that it is driven by two key motives:
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"First, the pursuit and delivery of efficiency in providing quality content and
services in return for the licence fee.
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"Second, a real awareness of its potential impact and a commitment to working
constructively with others in the industry for the greater good of licence fee
payers.
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"I believe the new Charter and Agreement, and new governance regime, will
provide the framework to ensure both of these will be delivered.
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"In the last 80 years the ±«Óãtv has remained independent, and free to deliver
creatively for those who pay for it. It is what has made the ±«Óãtv worth having
in the past, and it is my firm belief that in a very different future, an
independent and effective ±«Óãtv remains as important as ever in serving and
satisfying the British public.
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"I am certain that the new Trust has an
appropriate remit and effective powers to ensure that the ±«Óãtv will continue to
meet the expectations we all place upon it."
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See also - Notes to Editors
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±«Óãtv Governance Unit
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