EMI warns of 20 percent drop in profits
LONDON - EMI, the music company behind artists including Roxette, Robbie Williams and Kylie Minogue, stunned investors this past week by warning of a 20% slide in full-year profits. Shares in the company plunged by 35 percent to 214p, wiping about £900m off the value of the company. At their peak, at the beginning of last year, the shares were worth 799p.
In a trading update, EMI said its core recorded music business would fall into an operating loss in the first half, blaming a "marked deterioration" in market conditions. The company, which has a global share of 14.1%, said the US and Latin America had been particularly weak. The firm's market share, it added, should hold steady.
The figures will prove a severe disappointment to shareholders who have endured prolonged uncertainty as EMI was forced to abandon two planned mergers, the first with Warner Music and the second with BMG.
"It's a huge profit warning," said one industry analyst. "You would have been a fool not to expect some sort of downgrade, but nobody expected it to be that big."
The company is aiming to cut out annual costs of £65m by restrucuring some underperforming labels, but declined to comment on potential job losses other than 100 posts already lost in Latin America. The group employs 10,000 around the world.
EMI also confirmed that talks have begun to shed its manufacturing and distribution business, either through a sale or joint venture. It will take a one-off charge for restructuring of £100m.
Eric Nicoli, EMI's chairman, said the company expects a much better performance from its core music recording division in the second half of the year due to a strong release schedule. New albums are due from artists including Lenny Kravitz, Robbie Williams, Garth Brooks and the "definitive" greatest hits of Pink Floyd, which should help the company match its second-half performance of last year. The debut album by Gorillaz has turned platinum in the US by selling one million copies.
EMI Music Publishing, which owns song copyrights, is expected to give a positive contribution. "We have wasted no time in addressing our cost base in these difficult times," Mr Nicoli said. "While not immune to external influences our business is fundamentally sound, and we will be well placed to strengthen our position as market conditions improve."
Technical errors may occur.