Chrysalis today added to the uncertainty in the radio market by reporting a 3% fall in advertising revenues over the first five months of its financial year.

But the company, which owns the Heart, Galaxy and LBC radio brands, said business had improved this month.

The Chrysalis chairman, Chris Wright, put the decline down to "marked volatility with specific softness in the national marketplace".

"This, combined with the lower audience figures generated by the Q3 2004 Rajar survey, has led to revenues for Chrysalis Radio showing a decline in the region of 3% in the first 5 months from 1st September 2004 until 31st January 2005," he told investors in a trading statement to coincide with the group's annual general meeting today.

The decline compares with 21% revenue growth in the same period a year ago.

Mr Wright said there had been "signs of improvement in the national advertising market" since the beginning of January.

The group is also hoping for good news from the next two Rajar surveys, the first of which is tomorrow.

Chrysalis's Heart has lost ground in its battle with Capital's 95.8FM, having dethroned it from the top slot in London for one quarter in 2003.

Shares in Chrysalis fell by 1% to 181.75p in early trading today, valuing the group at £305m.

The gloomy update follows mixed messages about the state of the radio market earlier this week.

Capital said yesterday its advertising revenues had slipped by 4% in the last three months of 2004, but that there had been "some signs of an improvement", with January set to be flat year-on-year.

Its merger partner, GWR, warned that the market was "inconsistent" and visibility "short term".

But the misery has not been shared by Emap and Scottish Radio Holdings, which both issued upbeat statements on Monday, reporting good trading.

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