The Channel 4 chief executive, Andy Duncan, has warned there will be a period of decline at the broadcaster unless the Government increases its funding.
The stark warning comes despite the broadcaster revealing pre-tax profits growth of 4.9 per cent last year.
Duncan said: "We may have defied gravity in 2005, but it would be naive to assume we can do so forever."
The broadcaster posted pre-tax profits of £66.8 million, from £63.7 million in 2004. Duncan said Channel 4's performance last year was owing to a "virtuous circle of strong programming, increased audiences and in turn bigger ad revenues".
However, Duncan said the ad market was "not exactly booming at the moment" and predicted "it will remain, at best, low growth" during the next 12 months.
Duncan said Channel 4 was now focused on continuing last year's performance and establishing its new video-on- demand business.
In its annual report, Channel 4 also revealed the salaries of its board members. Duncan took home £549,000 in 2005. The figure is up £302,000 on his previous year's salary,because Duncan joined Channel 4 halfway through 2004.
The sales director, Andy Barnes, earned £409,000 last year, with a £129,000 bonus. His total salary in 2005 was £55,000 down on the previous year.
The director of television, Kevin Lygo, was the highest earner in 2005, earning £565,000 in total, down £24,000 on his 2004 salary.
Revenue at the broadcaster rose to £894.3 million from £841.4 million, as the group launched More4 and E4 on Freeview.The new multichannel additions boosted revenues at Channel 4's multichannel operations by 14 per cent to £88 million.
The increase in profits has allowed Channel 4 to allocate extra funding to its programming and content budget, which will benefit from an increase in spend of £50 million to £625 million.