Pre-tax half-year profits rose by 15% to �315m this time from �274m last year, better than expected by analysts.

TV programming has proved profitable

The results exclude the start-up costs of OnDigital, which is engaged in a fierce war for customers with Sky Digital. Granada has spent �38m on its share of the pay TV channel so far.

Granada said it would propose a two-for-one share split, and increase its dividend to 5.9p.

Granada chairman Gerry Robinson said the company was on track for double digit profit growth for the next three years.

Granada shares rose 1.3% in early trading in London, reaching �13.31.

"Granda's figures are certainly the pick of the bunch today, with a good dividend and a stock split too," one dealer said.

TV profits higher

The results were boosted by strong results from the group's media division, which made a profit of �122m, largely because of increased advertising revenue from television.

The catering business is growing fast

As well as owning the ITV franchise for Northwest England, Granada also owns Yorkshire, Tyne-Tees and London Weekend Television - in total nearly one-third of the ITV system.

Programme sales are expected to increase by 20% in the second half of the year.

The hotel and catering business also had a strong start to the second half of the year.

Sales at its restaurants were up 10% in April and May, while sales at the budget hotel chain Travelodge showed a 13% increase.

Granada acquired the hotel business of Trusthouse Forte, but had encountered earlier criticism that it was slow to dispose of unwanted businesses.

ONdigital on-track

The company said that subscriptions to its digital pay TV channel had been increasing dramatically since it launched the offer of free decoder boxes.

"Sales are going extremely well since the digital decoder offer, especially through our own Granada rental shops," Mr Robinson said.

There were 110,000 subscribers by the end of March - far below the target of 2 million by 2001.

Granada said that if ONdigital was successful, it could float the venture as a separate company.

It is jointly owned with Carlton, another leading ITV company.