EMI, the world's largest music publisher with artists such as the Spice Girls and The Beatles, has said it could remain an independent force in the music industry despite a sharp decline in earnings and the intense takeover speculation that has surrounded the group over the last few months.

EMI's underlying annual profits fell by almost a fifth to £307m ($500m) due to the strong pound and the economic turmoil in South East Asia, which lead to a plunge in record sales in the region.

EMI disappointed the City earlier this month when talks with a potential suitor, widely believed to be Seagram, the North American music giant, broke down. Seagram went on to buy Polygram, the Dutch film and music publisher, in a $10.6bn deal. EMI claims that its business will not be hit by the planned marriage of two of its main rivals.

Walt Disney may launch a take-over bid for EMI

Simon Duffy, finance director of the group, said: "I don't think it will be a problem for us in any market. The market that regulators will need to look at most closely is North America, but we're fairly well established there."

Nevertheless analysts now believe that EMI could be susceptible to a takeover bid, with Walt Disney among the favourite candidates to launch an offer.

Sir Colin Southgate, EMI's chairman, said: "EMI has the right management team, the right strategy and the financial strength to be a vigorous and successful competitor in the music industry. We look forward to a great future as an independent force in music."

EMI has made a £43.3m charge to principally cover the cost of closing its head office in New York and a £12m pay off to Jim Fifield, the former head of its music business. The group also made a profit of £101m from selling its HMV music chain to a new media joint venture.

EMI said it had gained market share in Britain, the US and France, three of the world's five major music markets, but suffered disappointing performances in Japan and Germany. Although Mr Southgate said that popular record releases by the Spice Girls, Garth Brooks, Janet Jackson and The Verve helped operating profits recover by 5.1% in the second half of its financial year. EMI's shares fell 6p to 526p.

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