Chrysalis sounds off-key after year of troubles

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The Independent Online

Chrysalis, the publisher of David Bowie and Gnarls Barkley, is predicting full-year losses after a "perfect storm" of events wreaked havoc with its performance.

The first 10 months of the financial year saw the company's Net Publishing Share (NPS) fall by 2.9 per cent, and despite a 12.8 per cent year-on-year increase in the third quarter it expects annual underlying losses on a par with March's half-year results, which recorded losses trebling to £1.2m.

Chrysalis has had some successes in 2008. Estelle was number one in the singles chart for several weeks, and Pendulum, another Chrysalis signing, have two albums in the Top 40. But they were not enough to tip the balance.

"We've had a tough 12 months or so because of a number of factors all conspiring at one time," said Jeremy Lascelles, its chief executive.

The biggest single drag on performance was the 155p-a-share takeover proposal from EMI, which was finally rebutted by Chrysalis in April on the basis that it undervalued the company. Not only did the negotiation process cost around £1m, but it also left the group unable to sign new artists.

There was also the US screenwriters' strike. Mr Lascelles said: "In difficult times, the go-to places to drive revenue in the licensing part of our business is film and TV in the US, so that made life very tricky indeed."

The takeover and the strike were against a backdrop of falling sales of physical music worldwide as the internet eats into the traditional models of publishing. Chrysalis itself also suffered an unusual dearth. "To cap it all, at the end of 2007 and into the start of this year we had a freakishly light release schedule," Mr Lascelles said.

Chrysalis shares dropped 0.25p to 98.75p yesterday, a far cry from April's rejected offer. But the management remains convinced they made the right decision, emphasising that the business is more accurately valued by its NPS rather than its share price.

The company has also signed a number of promising artists – including White Lies and the Mercury award-nominated Laura Marling – since the freeze ended in the spring.

Steve Liechti, an analyst at Investec, said: "The rejected 155p cash offer still looks relatively low, but less unattractive in hindsight given clear forecast risk in Chrysalis as a standalone sub- scale entity."