EMI upbeat despite slow first half
EmptyMusic company EMI Group said Wednesday that despite a lower bottom line during its fiscal first half, it expects a strong recovery in the second half with new albums from Scissor Sisters, Robbie Williams, Norah Jones, Depeche Mode, Moby and the Beatles.
EMI said it was on track to deliver results in line with full-year expectations as it posted an underlying pretax profit of £18.6 million ($35.1 million) for the six months ending Sept. 30, down from £41 million a year ago. This excluded a one-time £9 million hit from a previously disclosed accounting fraud in EMI's Brazilian operations and other items.
On a net basis, the company swung to a loss of £30.6 million ($58 million) from a year-ago profit of £36.7 million.
Revenue fell 4.1% on a constant currency basis, or 6%, to £867.9 million ($1.7 billion), driven by a 5.2% decline in the recorded music unit. The EMI Music Publishing division reported virtually unchanged revenue.
"Our first half is always proportionately less important than the second half and in this case we are comparing it with a six months when there were releases from the likes of Gorillaz and Coldplay," EMI chairman Eric Nicoli said.
In a conference call, he described the second-half release lineup as "exceptional."
EMI cheered a 68.4% increase at constant currency rates in digital revenue to £73.7 million ($139.3 million) and said it expected more good news in the second half with the launch of new portable MP3 players. Digital made up 8.5% of the firm's total revenue during the first half.
"We believe the fundamentals remain in place for the music market to return to growth driven by digital development," EMI said. "In the short term, the industry release schedule will help drive the market's trajectory, and we are encouraged by the slate of industry releases due out for this Christmas."
UBS analyst Ian Whittaker said EMI's latest results were "broadly in line with expectations" after a recent preannouncement.
The accounting fraud in EMI's recorded music business in Brazil resulted in first-half revenue for the unit being reduced by £11 million, the company said. "We are confident that this is a one-off impact," Nicoli said, adding that the company's investigation into the matter is "well advanced."
In London, EMI shares closed up 1.4% on Wednesday at £2.77 ($5.23).
Ralf Ludemann reported from London. Georg Szalai reported from New York.