GRAMPIAN Television's first-half profits were boosted by a #4.7m gain from the sale of its loss-making radio station Scot FM, but the North of Scotland broadcaster also revealed a strong underlying performance.

Television advertising revenue rose 4% during the six months to August 31, cruising ahead of a 3.4% increase for the ITV network as a whole.

Operating profits rose by 16% to #3.1m, but the sale of Scot FM in July more than doubled pre-tax profits to #8.15m.

However, turnover slipped by #750,000 to #11.9m as a result of the disposal of Scot FM and a lack of programme sales to the ITV network.

Looking ahead Grampian sees the good times continuing. Chairman Calum Macleod said: ``The strength of our current advertising sales provides an encouraging outlook for the company's full-year performance.''

Grampian signalled that in future it intends to pay out more of its retained income by boosting the interim dividend 60% to 2p.

This was partly done to reduce the gap between interim and final payouts. Chief executive Donald Waters would not say how much the full-year dividend would rise, but predicted it would show an increase on last year.

The City reacted positively to this solid set of results sending Grampian shares up 22p to 292p.

``They are doing better than the network, which is always a good sign and they are out of jail as far as Scot FM is concerned,'' said Jamie Matheson, an analyst with stockbroker Bell Lawrie White in Glasgow.

The Leith-based radio station broadcasting to central Scotland was bedevilled by start-up problems, but Grampian managed to sell it for a respectable #5.25m to the Independent Radio Group.

However, a big question still hangs over the future of Grampian which is sitting on a cash pile of #18.6m and has become the target of intense takeover speculation.

Media analysts believe that Scottish Television may well launch an agreed bid for Grampian to follow up its recent acquisition of Caledonian Publishing, the owner of The Herald and Evening Times.

Last week Scottish sold its 20% stake in Wales and West of England broadcaster HTV and its 5% stake in Independent Television News (ITN) for #78.8m to pay off debts and clear the way for further expansion.

Anthony de Larinnaga at stockbroker Panmure Gordon in London said Scottish could gain more from a takeover of Grampian than any other television company.

``I think you could maybe squeeze about #3m of costs out of the combined entity which would probably make it worth paying up to #120m,'' he said.

He also remarked that by joining forces they could probably boost advertising revenues by up to #1.5m a year.

Mark Sevier at Rowan Dartington in Bristol said that if any predator were planning a move on Grampian it would probably pounce in the next few weeks before uncertainty over the coming General Election began to cloud the market. And he too pointed to Scottish Television as the most logical bidder.

Mr Waters said Grampian had not so far received any bid approaches, but he gave little away about the company's future plans.

He said the Aberdeen-based company was still deciding whether to plough its growing cash pile into new investments in the media or property sectors or return it to shareholders through a special dividend or share buy-back.

Last year Grampian bid unsuccessfully for the Aberdeen Press & Journal and its sister paper the Evening Express, which eventually went to the Northcliffe group of regional newspapers instead.

``We are looking at all the options,'' Mr Waters said. ``We are looking at new investments both in television and in property.''

Grampian's property arm, Glenburnie Properties, specialises in building pre-let office space for blue-chip companies in the North-east.

Mr Waters said any further property projects would be in the same area, bounded by Inverness to the north and Perth to the south.

The one area where Grampian is definitely committed to further development in the near future is digital television, but this will not necessarily involve large amounts of money.

In the first instance Grampian, like other ITV companies, is planning to replicate its analogue broadcasts in digital form.

Mr Waters said the company may subsequently multiplex its digital transmission band in order to launch a second channel with different programming.

It would then be able to broadcast two channels instead of one on the same frequency. But such a move would probably involve a heavy increase in spending on programme development.

City analysts expect Grampian profits in the second half to be boosted by the elimination of losses at Scot FM, which amounted to #934,000 last year. The company should also benefit from higher interest income on its enlarged cash pile. Most are expecting full-year pre-tax profits of around #7m, before accounting for the gain on selling Scot FM.




Pre-tax profit#8.15m#2.92m