EMI Cuts Full-Year Sales, Profit Outlook
Monday, February 7th 2005, 9:53 am
By: News On 6
LONDON (AP) _ EMI Group PLC, one of the world's largest music companies, warned Monday that its full-year sales and profits will be below expectations because of the delayed release of two key albums and market weakness in the fourth quarter. Its shares fell 16 percent.
EMI, which owns several record labels including Virgin and Capitol, said the latest offerings from the bands Coldplay and Gorillaz _ both expected to be big sellers _ will be released in the first half of the next financial year. The albums had been due to hit the shelves before the end of the current fiscal year in March.
The company added that reorders _ the demand from shops for its previously released titles _ was lower than expected in January, leaving forecasts for annual sales from its music division between 8 percent and 9 percent lower than a year earlier.
It said it expected the trend for sales, particularly in reorders, to remain weak during February and March.
``We generated good initial sales from our second-half major releases, but given recent reorder levels and the revised timing of these two major albums, we will now not maintain market share for the full financial year,'' Chairman Alain Levy said.
EMI said annual pretax profits would be about 138 million pounds ($258.40 million), substantially lower than analyst expectations of around 163 million pounds ($305.26 million) and down from the previous year's pretax profit of 163.4 million pounds.
Shares in EMI slumped to 237 pence ($4.43) on the London Stock Exchange.
``The net result of this statement is a downward profits revision and a big disappointment following recent upbeat comments from the management team,'' said Paul Kavanagh, an analyst with stockbrokers Killik & Co.
``It would be natural to believe that next year will be better, although the current trading numbers will provide some degree of caution,'' he added.
EMI did not give a reason for postponing the release of the Coldplay and Gorillaz albums, but Levy said that that creating and marketing new products was ``not an exact science and cannot always coincide with our reporting periods.''
``Whilst this rescheduling and recent softness is disappointing, it does not change my views of the improving health of the global recorded music industry,'' he added.
The company said its music publishing arm, which holds the rights to more than 1 million musical compositions, continued to perform well.
It added that savings from its restructuring _ the merger of record labels and the outsourcing of manufacturing operations in the United States and Europe _ are running ahead of schedule.
The company now expects to deliver 35 million pounds ($65.53 million) of improvements in this financial year _ 10 million pounds ($18.72 million) more than first thought. The remaining 15 million pounds ($28.08 million) of anticipated savings will be realized in the next financial year, the company said.