Cricketer Phil Tufnell, winner of "I'm A Celebrity..."

The company said profits before taxes and one-off costs for the six months to late March came in at �92m ($147m), up from �75m one year earlier.

The pre-tax result easily outstripped City forecasts, with most analysts predicting that profits would fall to just �69m.

Revenues also rose, climbing 3% on the year to �734m.

Once big exceptional costs were factored in, including a �75m decline in the value of its stake in broadcasting group SMG, Granada made a loss for the period of �37m.

But City investors focused on the pre-tax figure, marking Granada shares 9.5% higher to 77.6p by the close.

Advertising hope

The increase in pre-tax profits reflected a combination of cost-cutting and the sale of rights to some of Granada's new programmes, including the popular reality TV show "I'm A Celebrity...Get Me Out Of Here" and journalist Martin Bashir's ratings-grabbing documentary on Michael Jackson.

"Our content strategy is delivering - resulting in topline growth and increased profitability," said Granada chairman Charles Allen.

Mr Allen said Granada's ITV television channel - run jointly with Carlton Communications - had extended its peak time viewing lead over arch rival BBC 1, run by the publicly funded British Broadcasting Corporation.

He also held out hope of a recovery in the advertising market, saying ad revenues had risen 1% to �442m despite the Iraq war and an uncertain economic climate.

"Most of the big advertisers, the big categories, are up. Some of the smaller ones are down," Mr Allen told the Reuters news agency.

Merger snag

Kingsley Wilson, media analyst at Investec bank, said the company had performed better than expected.

"It's encouraging that ITV isn't the dying dinosaur some thought it was," he said.

Granada is attempting to merge with Carlton Communications, its chief partner in the ITV network, and the company with which it ran the now defunct pay TV service ITV Digital.

The merger received a setback earlier this week when the competition watchdog signalled that it might order both Granada and Carlton to sell off their advertising sales divisions as a condition of the tie-up going ahead.

Some analysts believe that this would defeat the purpose of the merger, effectively killing the deal.