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Granada, which has already cut 650 jobs this year, has been hit by a 12% reduction in advertising revenues and the cost of funding ITV Digital.

The figure is worse than forecast by analysts, who had predicted earnings before interest, tax and amortisation of between £209m and £266m. Loss before interest and tax was up by 27% to £234m, and turnover was down 7% to £1.5bn.

Charles Allen, executive chairman of Granada, admitted it had been a tough year. He blamed the global slowdown in ad expenditure and the compounding effect of the September 11 terrorist attacks in the US for what he described as "a significant reduction in profit this year".

ITV's net advertising revenue was £1.76bn -- 12% lower than last year. However, sponsorship revenues were up by 10% on last year's figure to £23m. Last week, analysts had predicted a fall of 10% in ad revenues for the year.

As far as ITV Digital is concerned, Granada said costs will be reduced by £104m in 2002. This is partly to be achieved by pay freezes for staff and management. However, the company warned that the cost of the ITV Sport channel will increase in 2002 from the £11m spent on the service this year. Granada shareholders have already contributed £394m of the total £788m spent on the digital broadcaster in total.

Allen once again underlined the company's intent to continue with ITV Digital -- despite pressure from investors earlier in the year to get out of the loss-making venture.

This morning, Granada's shares were trading up by 1.18% to 149.75p, continuing the week's trend. On Monday, its share price responded favourably to the government's media-ownership consultation paper, rising by 6.2%.

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