March 5 (Bloomberg) -- ITV Plc, the U.K.'s biggest commercial broadcaster, said profit fell in 2007 on lower sales and forecast a rebound in advertising revenue this quarter as viewer numbers rise.

Net income dropped to 137 million pounds ($271 million) from 219 million pounds a year earlier, London-based ITV said today in a statement. Sales at ITV fell 4.5 percent to 2.08 billion pounds. First-quarter ad sales will rise 1.9 percent, while the overall ad market will decline 0.7 percent, ITV forecast today.

The broadcaster's goal is to return to earnings growth in 2009 and 2010, Finance Director John Cresswell said in an interview with Bloomberg Television today. Executive Chairman Michael Grade, who started in January 2007, has invested in programming and Internet products to fend off competition. ITV, whose shows include ``Coronation Street'' and ``X Factor,'' increased its share of U.K. viewers to 23.2 percent in 2007 from 23.1 percent the year before.

``It is still relatively early days, but there are some glimmers of hope that Grade's tenure may have arrested ITV's previous decline,'' Richard Hunter, head of U.K. equities at Hargreaves Lansdown Stockbrokers, said in a note today. ``The company's group of channels has attracted an increase in viewers not seen for some considerable time.''

ITV rose 1.4 percent to 67.4 pence in London trading. Before today, the stock had lost 39 percent in a year.

`Positive Development'

The ``positive development'' in market share continued in the first quarter, Grade said on a conference call today. ``The viewers are finally coming back to ITV,'' he said, adding that the results and audience share gains counter the ``myth that ITV is a business managing decline.''

The report showed ``a more favorable start to the year than some had feared,'' Credit Suisse analysts including Simon Baker said in a note to investors. ITV's competitors include British Sky Broadcasting Group Plc and the British Broadcasting Corp.

Advertising revenue in 2007 declined 0.3 percent to 1.49 billion pounds, a smaller drop than the 8.4 percent slide in 2006. On Dec. 13, ITV said it would finish 2007 with a 0.6 percent drop.

In the first quarter, advertising sales at the ITV1 flagship channel may drop about 0.5 percent, Grade said today. In April, ITV's total advertising sales may drop by 1 percent with a decline of 5 percent at ITV1 because Easter is in March this year, he said.

Earnings per share before exceptional items and amortization fell to 5 pence from 6.3 pence a year earlier, beating the 4.7 pence median estimate of 22 analysts in a Bloomberg survey.

Reviving ITV1

``We're confident that we've seen a good start to the year, probably the best start to the year that ITV has seen in the past few years,'' Cresswell said today.

ITV said Sept. 12 it would expand Web content, produce more TV programs and close some regional newsrooms to spur revenue and cut costs.

Grade, the former head of the BBC, said in August his priority was reviving ITV1, which was looking ``a little tired and has lost its edge.'' ITV1's ad sales fell 4 percent last year, after a 12 percent decline in 2006.

New Shows

On Jan. 14, ITV1 started broadcasting a new version of the ``News at Ten'' show, which had been ended in 2004. In the first month, the program reached an average audience of about 2.7 million people, compared with 4.8 million viewers for BBC1's ``Ten O'Clock News,'' according to figures provided by the two broadcasters.

Other programs were more successful. ``Britain's Got Talent'' was the highest-rated new TV show last year, and its final episode reached 11.6 million viewers, a market share of 44.7 percent. The broadcaster has also secured long-term deals with celebrities such as Simon Cowell, a judge on ``The X- Factor.''

In a move to bolster its Internet business, ITV introduced the ITV.com Web site in May. The company said it would broadcast more advertising-funded videos and sell its own programming to other Web sites.

ITV's Friends Reunited Web site, which fosters school reunions and was bought by ITV in 2005, has lost users to social- networking Web sites such as Facebook. Market researcher Nielsen Online said in February that Friends Reunited lost 47 percent of its users in the past 12 months, while Facebook's U.K. users grew eightfold. Grade said in March 2007 that Friends Reunited remained a key part of the company's online strategy.

Cost Cuts

Grade has said ITV's recovery can be achieved within its existing program budget. To contain costs, the company will find new suppliers of programs and services and commission longer runs of programs, he said.

The executive chairman will also revamp ITV's regional news operations by reducing the number of regional newsrooms to 9 from 17, for annual savings of 35 million pounds to 40 million pounds.

The stock's decline has led to renewed speculation about a takeover. In March 2006, ITV rejected an offer for a controlling stake in the company from a group of buyout firms. Speculation is also driven by the U.K. government's ruling that BSkyB, the U.K.'s biggest pay-television provider, must cut its stake in ITV to less than 7.5 percent from 17.9 percent to avoid harming competition.

Grade, a 34-year veteran of British TV, became the BBC's chairman in 2004 after the state-funded broadcaster came under criticism for its reporting of the Iraq war. Grade, who turns 65 March 8, was previously controller of its flagship BBC-1 channel.

Last week, ITV said Grade will remain until the end of 2010, one year longer than his original three-year term.

ITV also said today it sold its 50 percent stake in the Liverpoolfc.tv Web site to Liverpool Football Club for 15.75 million pounds. The broadcaster has said that it will sell stakes in businesses that aren't strategic.

To contact the reporter on this story: Simon Thiel in London at sthiel1@bloomberg.net.

Last Updated: March 5, 2008 11:55 EST