US setback clouds pounds 500m EMI handout
Sir Colin Southgate, chairman, said the company had decided to cut costs to improve its position in the US. The process of restructuring EMI Music's North American division will result in roughly 35 job losses among senior management. The shares fell 49p to pounds 11.72.
Charles Koppelman, head of EMI Capitol, is to leave the company, and his role will be absorbed by Ken Berry, head of EMI Music International and Virgin Records. The head office of EMI Capitol in New York will be closed. Sir Colin blamed the cuts on a proliferation of retail outlets in the North American market.
Analysts said the announcement added fuel to the stock market's belief that EMI's strategy in the US was confused. One analyst said EMI should be making acquisitions in the US rather than rationalising its business.
The decision to return around pounds 500m to shareholders was seen by the City as a device to ward off bidders. Derek Terrington, media analyst at Teather & Greenwood, said the move was hard to rationalise as EMI was not an excessively cash-generative company. He added: "It's not as if they were paddling about in pools of money, so they're either looking quite a long way ahead or they're putting a prop under the share-price. "
Sir Colin said that authorisation to return 10 per cent of EMI's capital would be sought from shareholders at its annual meeting in July and implemented shortly afterwards.
Meanwhile Sir Colin attempted to quash press speculation that EMI had held merger talks with Seagram earlier this year, saying that he and Seagram's president, Edgar Bronfman Jnr, had not met since a social occasion last Autumn. He added that rumours that EMI was interested in buying Reed Books were also unfounded, but said that acquisitions in EMI's core area of catalogues and record labels were more plausible.
Pre-exceptional profit before tax was up 3.6 per cent to pounds 380.5m, in line with City expectations. EMI Music's "biggest success" was the Spice Girls, signed by Mr Berry when the group formed last year. Their debut album, Spice, sold 11.5m copies, contributing around two per cent of total group sales of pounds 3.39 billion. Sir Colin said he had no doubt there would be "some new material" this year.
EMI is also planning to repackage some of David Bowie's recordings after buying the world-wide distribution rights to his back catalogue earlier this month for $30m (pounds 18m).
Comment, page 21
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