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

However, 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 third-quarter 2004 Rajar survey, has led to revenues for Chrysalis Radio showing a decline in the region of 3% in the first five months from September 1 2004 until January 31 2005." he said in a trading statement to coincide with the group's annual general meeting.

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" this month. The group is hoping for good news from the next two Rajar surveys, the first of which is today.

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 1p, or 0.5%, to 183p last night.

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

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

Meanwhile, its merger partner, GWR, said the market was "inconsistent" and the visibility "short term".

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