Profits double at bullish Thorn

NIGEL COPE

Thorn EMI, the music and rentals business that is considering a demerger, reported a bullish set of quarterly results yesterday but warned that one-off gains meant current growth rates would not continue for the rest of the year.

Reporting doubled pre-tax profits of pounds 64m for the three months to June, Sir Colin Southgate, chairman, said the results were boosted by the elimination of losses at the Rumbelows chain of electrical stores, which were closed earlier this year.

The inclusion of figures from the Toshiba-EMI joint venture also led to sharply higher profits at the EMI music-label subsidiary.

"As a result, we would caution against extrapolating this quarter's growth rate to the year- end," Sir Colin said. "However, our performance in the first quarter leads us to anticipate another good year."

Shares in Thorn, which have almost doubled this year on de-merger speculation, fell in early trading yesterday as the company failed to make any further comments on the separation of its music business, but closed 4p higher at 1,437p.

At the company's annual meeting in July, Sir Colin confirmed that a demerger would be in the best interests of shareholders. The company will consider plans to hive off its rental business, which includes the Radio Rentals chain and the fast-growing Crazy George's format. The HMV record chain will be included with the EMI music business. City analysts expect the split to go ahead next year.

Several American groups are rumoured to be interested in acquiring EMI, including Disney, Viacom and Dreamworks, the David Geffen-Stephen Spielberg entertainment company that recently signed George Michael from Sony.

EMI is Britain's last remaining large record label, competing against Time Warner of the US, Sony of Japan, Bertellsman of Germany and Polygram, part of the Dutch group Philips. The break-up value of the group is estimated at around pounds 6.4bn. EMI could be worth pounds 4.6bn, the rentals business pounds 1.5bn and HMV around pounds 300m.

All three of Thorn's main businesses reported strong growth in the three months to June, contributing to doubled group profits of pounds 64m. EMI saw profits increase 20 per cent to pounds 40m. Profits at the rentals business rose by 42 per cent to pounds 36m, helped by the sale of Rumbelows, which recorded a loss of pounds 6m in the same period last year.

HMV also improved, helped by the opening of 20 more stores, while stronger trading at Dillons, the bookstore group bought from the receivers earlier this year, lifted like-for-like sales 3.6 per cent.

Investment Column, page 18

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