GCap Media warned of further job cuts as it revealed annual cost savings from the merger of Capital Radio and Classic FM owner GWR had soared to £25 million.

GCap, which is the UK's largest commercial radio company, said gross savings from the merger would be well above the £7.5 million originally expected, offsetting difficult trading conditions and a continued fall in revenues.

In the Midlands, GCap owns radio brands including BRMB, Capital Gold, Beacon, Wyvern, Mercia and Trent.

Most of the savings related to job cuts, with staff levels down from 1,600 to 1,400 since the merger in May and likely to fall by up to another 100.

A company spokeswoman could not say where the jobs were likely to go.

Shares in GCap surged 16 per cent following the announcement.

This was despite a like-forlike fall in revenues for the second quarter to the end of September of eight per cent, a slight improvement on the first quarter when revenues were down 11 per cent.

The £725 million merger saw GCap take control of more than 100 radio stations, including Century FM, Capital Gold and Xfm, as well as regional stations such as Red Dragon in South Wales and BRMB.

The company said the majority of cost savings from the merger related to staff costs.

Referring to the 200 job cuts so far, a GCap spokeswoman said: "There will be further job cuts of up to 100 people."

GCap said it planned to reinvest around £2 million of the savings back into the business this year and a

further £7 million in 2007.

Much of that investment will be spent on improving the quality of GCap's analogue radio stations.

The company added it expects one-off costs of around £7 million, mainly in the current financial year, to achieve the extra savings, bringing the total cost of all merger synergies to £18 million.

In a trading update for the first six months of the year to the end of September, GCap said revenues were down nine per cent on the same period last year.

The company said the figure had been affected by lower advertising and that although October was looking "slightly better" it "remained cautious" about prospects for the next three months.

Newly appointed chief executive Ralph Bernard said trading conditions remained difficult.

And he said GCap was " adjusting the cost base to reflect the realities of a depressed market". He added that the move would make the company "much more fleet of foot in our decision making".

GCap had warned of a brutal summer advertising market as anaemic consumer confidence levels spurred marketers to cut their budgets. Yesterday it cautioned that first-half revenues would be down nine per cent.

"Trading in the six months to September 30 continued to be affected by weak consumer confidence and low spends from key advertisers," the company said.

"October trading is currently looking slightly better. However, visibility remains limited and we remain cautious about prospects for the October to December quarter."