EMI, the world's third largest music group, reported first-half profits ahead of expectations this morning and reiterated its optimism about a second half that will see releases from Robbie Williams and Norah Jones.
After taking into account the effect of an accounting fraud at its Brazilian arm revealed by EMI last month, underlying profit before tax came in at £18.6m for the six months to September 30. That was down sharply on last year's £41m but above City analysts' forecasts for £18m. The group put the decline down to the £9m one-off cost from Brazil and the fact its music division was this year weighting its release schedule towards the second half.
The latest first half suffers from a tough comparison against last year when EMI benefited from releases from Coldplay [pictured], Gorillaz and the Rolling Stones. In the second half, EMI will raise the stakes with new albums from Joss Stone, All Saints and Australian country singer Keith Urban.
The music publishing arm, where first-half revenues were in line with last year, is pinning its hopes on albums from Natasha Bedingfield, Kelly Clarkson and Jay-Z.
"The strength of this line up, together with continued strong growth in digital revenues and ongoing cost discipline, give the board confidence that the group is on track to deliver results in line with its expectations for the full year," EMI said in a statement.
It reiterated last month's message to investors that the Brazilian accounting fraud was a one-off. It predicted that the financial impact would be limited to the music division's statutory revenues being reduced by £11m. Earnings before interest, tax and amortisation would also be knocked down by £9.0m from the amounts indicated in October's trading update.
"However, given the disruption to the business, it is likely that EMI Music's operations in Brazil will underperform in the full financial year," the group said.
EMI did not provide any update on the senior managers it said it had suspended while investigating the fraud.
Overall, revenues at the music division slipped 5.2% at constant currency. But the company suggested it had made some headway in protecting itself against falling CD sales by raising the proportion of revenues from digital sales, such as internet downloads.
Group digital revenues jumped by 68.4% to £73.7m in the first half and they represented 8.5% of total revenues, up from 5.4% in the financial year ended March 31.
That compares with figures from the IFPI global industry group last month showing that digital sales now account for 11% of the total recorded music market.
EMI's shares have been been buoyed by recent talk that Warner Music Group might make a renewed bid for its rival after failing earlier this year.
Today's results shed no light on whether either music group will consider pursuing the other again any time soon.
The two rivals terminated their tit-for-tat pursuit of each other in July after a European court ruling cast doubt on the chances of a deal succeeding.
The bidding contest reached stalemate when the court stunned the record industry by striking out the commission's approval of the merger between Sony Music and Bertelsmann's BMG.
Source: http://business.guardian.co.uk
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