BROADCASTER Granada announced the start of an ITV fightback yesterday after seeing half-year underlying profits surge 35 per cent to £65m.

The company, which holds seven of the ITV licences, including Tyne Tees, said the network was benefiting from better scheduling and a bigger programme budget.

Revenues in the six months to March 31 rose three per cent to £734m, despite difficult conditions in the advertising market.

Those pressures, coupled with tough comparisons with last year's World Cup, mean ITV1 advertising revenues are likely to be 1.5 per cent lower than a year ago in the nine months to the end of June.

But Granada - which also owns Yorkshire TV and Border - said annual cost savings of £81m, a new approach to ITV programming and progress in its content division had boosted its showing.

Chairman Charles Allen said: ''The ITV fightback is well under way. ITV's performance is benefiting from a clear strategy, better scheduling, more focused marketing and a bigger programme budget."

The company is seeking regulatory approval for a merger with Carlton Communications.

At the bottom line, half-year losses narrowed to £13m from £169m last year, a figure which included the cost of the collapse of ITV Digital.

Granada was knocked into the red during this half financial year because of a £75m write-down on the value of its stake in media group SMG.

Shareholders were also told they will receive an interim dividend of 1p a share, unchanged on a year earlier.