ITV plc, the leading commercial television company in the United Kingdom, has reported a drop in pre-tax profits of nearly 40% over the last six months. The broadcaster has been hit by a reduction in advertising revenues and a fall of over £20 million in returns from premium rate phone calls. Executive chairman Michael Grade denies that recent phone-in failures had damaged the ITV brand and says he is confident that there is still a big place for interactive television.

He repeated his “zero tolerance” approach to those in the television industry responsible for what he called an “apparent and casual contempt towards viewers”.

“We have to convince the public that our systems ensure that they get precisely what they pay for,” he said. “It would be foolish to predict when public confidence will be restored.”

“There’s no question that there is a huge public appetite for becoming involved in programmes,” he claimed, pointing to the large number of phone votes for its Dancing on Ice show even after a number of irregularities had emerged on other shows and auditors had been called in. ITV is still awaiting the outcome of a review by Deloitte, which is expected in October.

The future of the phone-in quiz ITV Play, which was scrapped as a standalone channel but continued as an overnight programme, remains in the air. Michael Grade said that its business model had clearly been impacted by controversies around phone-ins and ITV would have to decide whether it is making sufficient returns.

ITV has been working hard to restore its image with the addition of more serious drama and documentaries, but some see that its brand has become tarnished and tainted by cheap participation programming.

“Turning a business of this complexity and size around in an incredibly competitive market is a mammoth undertaking and it will take time to prove to me, to my board, my shareholders that we have achieved that,” said Michael Grade. “But I am encouraged that so many of the numbers are beginning to move in the right direction, where they have actually been moving in the wrong direction for some time.”

It is not entirely clear precisely which numbers are moving in the right direction, or exactly where ITV is headed. ITV posted pre-tax profits for the first six months of 2007 down 39% to £105 million, compared to a rise of 12% in the same period the previous year. Net advertising on the main ITV 1 channel revenue has continued to fall, dropping a further 9% to £595 million, compared to a decline of 8% a year ago.

ITV had hoped to sustain the apparently irrevocable decline in advertising revenue with a multichannel strategy and the creation of a consumer division charged with building transactional revenues. Ultimately, however, it will be judged by the quality of its programming and whether it can attract an audience that is attractive to advertisers.