UPDATE 2-YouGov swings to year loss; trading challenging

* Posts pretax loss of 0.7 mln stg vs 4.0 mln stg profit

* Says cut costs by 2.5 million pounds a year

* Shares up 2 percent

(Adds company comments, shares, analyst reaction)

By Paul Sandle

LONDON, Oct 12 (Reuters) - British online market research agency YouGov Plc (YOU.L) swung to a pretax loss for the year to end-July and said it expected challenging trading conditions to continue as clients keep a tight hold of expenditure.

The company, which predicts elections and provides research for Google (GOOG.O) and Timewarner's (TWX.N) CNN, on Monday posted a pretax loss of 0.7 million pounds ($1.1 million), against a pretax profit of 4.0 million pounds a year earlier.

Normalised pretax profit, which excludes amortisation and some one-off costs, fell to 3.9 million pounds from 9.5 million, while turnover of 44.3 million pounds was down 3 percent at constant exchange rates, the company said.

Chief Executive Nadhim Zahawi said the firm had geared up for growth in the financial sector that failed to materialise.

"Before the credit crunch we were anticipating higher revenue from the investment community clients, but that didn't come through," he said in an interview on Monday.

The company had stripped out 2.5 million pounds of costs in reaction to the lower-than-expected revenue growth, he said.

However, its Omnibus product in the UK, which provides answers to questions in 24 hours for companies, performed well, as did its BrandIndex tracking product in the United States, he said.

Zahawi said the coming UK election was an opportunity to showcase the company's research, which is carried in The Daily Telegraph, The Sunday Times, and by broadcasters Sky and Channel 4.

But he would not predict when significant spending on research by companies would resume.

"(Clients) are back to transacting, but they are treading very, very cautiously," he said.

Shares in the group, which have lost 41 percent of their value since the start of the year, were 2 percent higher at 50.25 pence by 0856 GMT.

Broker Numis trimmed its 2010 pretax profit forecast to 4.2 million pounds from 4.6 million due to the challenging trading environment.

"YouGov anticipates the challenging conditions to continue, however it highlights its lower cost base and greater focus," the broker said in a note.

"This outlook is consistent with recent comments form other research groups, notably Kantar (WPP (WPP.L)) and Synovate (Aegis) (AEGS.L)." (Editing by Victoria Bryan and Hans Peters) ($1=.6304 Pound)