Digital downloads allow EMI to record a year of growth

The music group EMI is set to enjoy its first year of growth for five years, with digital sales more than doubling and artists such as Coldplay and KT Tunstall driving sales.

A trading update from the company yesterday, before full-year results, beat City expectations, with EMI shares closing up 8 per cent at 277.25p.

The company, the world's third-largest music group, said full-year revenues would be up almost 4 per cent for the year ended March 2006. Digital sales increased by more than 150 per cent to £110m - accounting for more than 5.5 per cent of group revenues.

Within EMI's recorded music division, sales were up 2 per cent - compared with a 3 per cent decline in the overall market.

"EMI Music gained market share in the year, outperforming a global recorded music market which remained challenging in some regions," the company said.

EMI's successes were led by Coldplay's X&Y, which sold more than 9 million copies to become the bestselling album in the world last year. It was also the highest-selling digital album in the US. Other hits included records from Robbie Williams, which sold 6 million, Gorillaz, which sold 5.5 million, and the newcomer KT Tunstall, who sold 2.5 million. In the US, more than 16 per cent of her sales were in a digital format.

Universal, the world's largest music company, has reported that digital sales for the first quarter accounted for 10 per cent of total revenues. Mark Harrington, an analyst at ABN Amro, said: "Digital sales represent a much greater proportion of total sales than we expected. I think there's a strong probability that digital sales will start to compensate for the decline of physical sales for the global recorded music industry this year."

EMI reported that the operating profit in its recorded music division had jumped 15 per cent and said it would deliver an extra £30m of cost savings. The company also said it would restructure its Japanese business to boost market share and profitability in the country.

Analysts raised forecasts for 2006 and 2007. Citigroup, which raised its 2006 profits estimate from £145m to £158m, said the 2007 financial year could benefit from releases from stars such as Corinne Bailey Rae, Norah Jones, Joss Stone and Utada.