ITV, the UK's largest free-to-air broadcaster, yesterday reported a 39 per cent fall in half-year profit but forecast a return to revenue growth in the third quarter.

The company said it expected net advertising revenues for its flagship ITV1 channel to grow by 1 per cent in the third quarter compared with last year, while advertising revenues at the company overall would grow by 4 per cent.

The UK television advertising market as a whole is expected to grow 6 per cent in the third quarter (Q3).

"ITV1 has begun its recovery," said executive chairman Michael Grade. "We are at the very early stages but we have slowed down the rate of decline. I am very pleased with progress in ITV1's schedule performance and the outlook for revenue in Q3 is encouraging."

UTV owns the franchise for ITV1 in the North.

Mr Grade highlighted ITV's exclusive rights to the Rugby World Cup as a key element of the autumn schedule, which was attracting back male-oriented advertising such as cars and financial products.

The comments came as ITV revealed that pretax profits for the six months to the end of June were £105 million (€155 million), down 39 per cent from £173 million last year.

Advertising revenues have been falling at ITV1 for the past two years as new digital television channels and the internet have eaten into its audience share. The company has also been hit by scandals over phone-in competitions and premium-rate lines, which have tarnished reputations across the industry.

ITV revealed that it had seen a £21 million decline in revenues from its premium-rate phone-ins in the first half. "There is no question that consumer confidence has been severely dented," said Mr Grade.

"I don't think the public have lost their appetite for getting involved in TV in different ways, but I think they are not as willing to get involved until we prove that our systems are robust and give them precisely what they pay for."

He added that it was "impossible to know" whether there would be further financial impact from the premium-rate issues.

Auditors from Deloitte are conducting an independent review of ITV's phone-in activities and will report findings in October.

Earnings before interest, tax, depreciation and amortisation were £151 million for the six months to the end of June, higher than analysts' consensus estimates of £141 million.