Solid pop sales pump up the profits at EMI

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The Independent Online
EMI, the music recording, publishing and retail arm of the now- demerged Thorn-EMI, yesterday cheered the City with better-than-expected half-year results, buoyed by solid sales from such lead acts as George Michael and Tina Turner.

Analysts said that big sellers in the current period, led by the new all-female band Spice Girls, would give an extra boost to the crucial second half, which includes the Christmas season.

Pre-tax profits of pounds 112.5m, up 9.4 per cent on a pro forma basis, indicated that recent gloom and doom in the music business might have been overplayed, analysts added yesterday. The shares, which still bear a slight stock market premium on takeover hopes, rose 23.5p to pounds 12.94p yesterday.

Sir Colin Southgate, EMI's chairman, said yesterday the market had been misled by recent poor results from such music giants as Polygram and MCA, which did not necessarily point to a downward secular trend in sales.

"There is a tremendous misunderstanding about the [music] market," he said. "When you account for differences in wholesale and retail markets, and recent currency movements, the trends are actually quite good."

The US market had been softer, he conceded, but Europe and the dynamic economies of South-east Asia and Latin America more than made up for it. EMI's business is heavily weighted toward Europe and other world markets, and the company has never developed a leading presence in the US.

The results were also helped by EMI's relatively light exposure to such difficult markets as classical music, and by its strong local catalogues, particularly in South America and Europe.

EMI's third quarter, which coincides with the Christmas selling period, is likely to be somewhat disappointing, however, due to the lack of big- name releases. The company is expected to rely more on its back catalogue to drive compilation sales, and on one or two big sellers, which could include the new Spice Girls album and the third and final instalment of the Beatles Anthology album, which entered the US charts at number one. Also scheduled for third-quarter release is a three-album special from the Artist Formerly Known as Prince.

EMI has high hopes for Spice Girls, the UK-based band. The all-girl group is "definitely part of a trend", Sir Colin said. "We have seen all-boy bands, but now it the turn of the girls."

The fourth quarter, starting 1 January, is expected to be particularly strong, with new work from Duran Duran, Simple Minds, Blur, Supergrass and Robbie Williams, formerly with the hit group Take That.

Elsewhere in the group, the music publishing arm had a record half, which the company is actively seeking to build. The HMV retail operations, meanwhile, saw sales ahead by 17.4 per cent to pounds 359.8m, on which the company made an expected seasonal loss of pounds 11m.

Analysts expect full-year figures of about pounds 400m, or about 54p a share. The company declared an interim dividend of 8p a share, up from 7.1p last time.