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The company's radio operations, which include Heart, Galaxy and LBC, outperformed the rest of the radio market, which Chrysalis estimated dropped 4%.

Chrysalis said it expects the radio market to remain tough and predicts that revenues for the next financial year will be flat.

Like-for-like revenues for the year to the end of August were flat at £61.6m but Century FM, the East Midlands station acquired from Capital in May 2005 and rebranded as part of the Heart network, helped overall revenues climb to £65.6m.

The strong performance of Heart nationally and in London helped Chrysalis negotiate better rates with media agencies during the year and revenues, excluding the East Midlands station, were up 4.5%.

However, the company said its youth-orientated Galaxy dance network needs attention after revenues dropped 15.9%. The network's audience dropped 4% over the year, and advertisers are looking at other ways of reaching the youth market.

"We are looking at increasing the number of platforms on which Galaxy is available, enhancing the interactivity of our websites and extending the brand into related lifestyle offerings," the company said.

London station LBC has now reached breakeven because of a reduction of overheads and a 10.3% increase in revenues from better volumes, improved pricing and an increase in sponsorship and promotions activity.

The company spent £2.8m on digital radio transmission, programming and marketing this year. It is currently assessing which digital platforms its brands should be available on and the opportunities for brand extension.

Chrysalis recently offered £70m to its rival GCap for the two Century stations covering Manchester and the North-East but its bid was turned down in favour of Guardian Media Group, which paid £60m.

The radio network's parent company Chrysalis was also buoyed by the improving performance of its music arm, which grew operating profit from £3.5m to £5.6m despite a fall in revenues from £73.5m to £67.9m.

Group revenue fell from £133.6m to £131.9m and pre-tax profit leaped from £1m to £5.3m, leading the board to propose a 10% increase in the dividend to 1.375p.

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