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Channel 4 has announced record profits of £46 million for 2004, which has helped it build up an investment fund of £188 million to plough into digital services and finance acquisitions over the next few years.

The broadcaster’s performance was boosted by a huge jump in advertising revenue and audience figures over the past year following the popularity of shows such as Big Brother and Desperate Housewives.

Chief executive Andy Duncan said: “The creative strength of our schedule has allowed us to buck the downward trend in terrestrial viewing. We are the only one of the five major channels to experience growth so far in 2005.”

He warned that the impressive financial performance should not blind anyone to the challenges it faces and stressed that investment in new areas was vital to ensure its survival after digital switchover.

“We finished last year with £188 million in cash and liquid assets. We’re investing in E4, More4 and we’ve tripled our new media spend. Over the next couple of years we have a real opportunity to make sensible, smart investments,” he added.

Duncan said he aimed to capitalise on the popularity of Channel 4 with young people and pointed to figures showing how the channel’s audience share with the lucrative 16-34 age demographic had leapt 13% in the past year, compared to an 18% decline for ITV.

The broadcaster recently acquired a 51% stake in digital radio station Oneword and last month launched a new standalone gossip and music website with an investment of £2 million. E4’s budget has been increased by £20 million to £60 million and the new documentary-led digital channel More4 will launch in October at a cost of £33 million. Channel 4’s main budget is likely to increase to around £500 million by the end of 2005.

Last year Duncan warned the channel could face a deficit of £100 million a year by 2009 and would need government subsidy to meet the costs of analogue switch-off. However media regulator Ofcom has said there is no immediate case for direct public funding of Channel 4.

The STAGE