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Emap, the UK magazines and radio group, on Friday warned that underlying revenue for the first half was expected to fall by 2 per cent as it continues to feel the pinch of a slowing UK consumer advertising market.

“Trading conditions have remained tough in the first half of the 2007 financial year, particularly UK consumer advertising,” said the group in its latest trading update.

As was the case when it issued a surprise revenue warning in July, Emap, which owns magazines such as FHM, Zoo and Grazia, blamed the trading slowdown on the accelerating decline in its cars and men’s magazine circulation.

ABC’s latest data shows that in January to June, average monthly sales for FHM, published by Emap, declined 25 per cent to 420,688. Reflecting the tough trading conditions, the group said underlying revenue from its international consumer magazines was expected to fall by 18 per cent, while revenue from consumer magazine advertising was expected to be flat.

Nonetheless, Tom Moloney, chief executive, insisted the group was on track to meet its full year expectations.

“Despite no early signs of a consumer recovery, Emap continues to grow through innovative launches, a balanced portfolio and step-change acquisitions,” he said. “Emap cannot defy market trends but we have a long experience of managing through cycles and our costs are firmly under control.”

Emap has focused on areas offering stronger growth amid mounting signs that marketing spending by UK companies would this year grow at the slowest pace since 2002.

Earlier this summer, Emap sold off its struggling French consumer magazines division to Italy's Mondadori for €550m (£381m) in order to step up its acquisition of digital businesses both in the UK and overseas.

As a result of this growth-through-acquisition strategy, digital revenues are expected to jump 55 per cent to £59m.

Analysts and shareholders were unimpressed, however, with shares in Emap falling 2.7 per cent to 743½p in early trading in London.

Reacting to the uninspiring numbers, both Panmure Gordon and Bridgewell Securities cut their ratings on the stock.

Collins Stewart maintained its “hold” recommendation but cautioned on Emap’s increasing dependence on acquisition growth. It noted that accquisitions have contributed 8 per cent of Emap’s revenue, compared with 4 per cent and 3.5 per cent in the previous 2 years.

“Our experience from Emap is that the fade rate of returns from previous acquisitions has been very rapid,” said analyst Simon Wallis. “Deals which looked like they held promise one year after the acquisition looked far less smart a few years down the road.”

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