Southgate dismisses demerger speculation: Splitting Thorn EMI 'will not be considered for three years'

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The Independent Online
SPLITTING Thorn EMI into a rental and a music business will not be considered for at least another three years, Sir Colin Southgate, its chairman, said yesterday.

He was seeking to end speculation that the group was poised to announce a demerger, despite an earlier denial at the annual meeting in July.

He dismissed continued rumours about demerger as due to 'summer boredom' in the City and said: 'Demerger is not in the interests of shareholders at this point in time.' He added that, although nothing could be ruled out forever, 'I can't believe we will look at it seriously for at least another three years'.

The categorical denial sent Thorn's shares down 9p to 1,054p. They gained 32p last week as investors hoped that Sir Colin would accompany yesterday's results - the first quarterly results statement from the group - with an announcement that he was considering splitting the group in two.

Profits in the three months to June were pounds 33.1m, down from pounds 40.4m the previous year. But the result was distorted by a pounds 13.1m exceptional charge on the disposal of its security business. Last year, it made a pounds 1.8m exceptional gain on the sale of fixed assets.

The figures were also affected by the disposal of its stake in Thames Television and its lighting business, which contributed pounds 9.1m to the previous year's figures. Excluding these, operating profits from continuing businesses were 25 per cent ahead at pounds 52.5m.

The best performance came from EMI Music, where profits rose 14.6 per cent to pounds 33m, helped by the continued success of Canto Gregoriano - the chart-topping Gregorian chants by Spanish monks - as well as Pink Floyd's new album and the Beastie Boys' new release.

Sir Colin warned that the pattern of profits in the music division is unpredictable, so it should not be assumed that level of growth would continue for the year as a whole. However, the industry was enjoying sales increases of between 6 and 7 per cent a year.

In rental, profits rose 10 per cent to pounds 25.8m on sales 6.2 per cent higher at pounds 374.1m. Sir Colin said that he expected sales in the UK rental business to start increasing by the end of the year as a number of new initiatives took effect.

These include adding items like telephones to the list of products for rent and increasing the number of contracts with an ownership option - now at 35 per cent. It is also testing demand for rental of furniture in two stores in Birmingham.

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