Asia takes spice out of EMI profits

The home of the Spice Girls, EMI, has warned that a slump in Asian music sales is to wipe £25m off its expected annual profits.

EMI, one of the world's top five music companies, said trading in Japan and other Asian Pacific markets was "not good".

The company's share price plummeted on the news - diving 44.75p, or more than 9%, to 434p.

Chairman Sir Colin Southgate said: "Consumer confidence in these countries has suffered a severe setback and this is being reflected in music sales.

"Recognising the well-publicised difficulties, and consequently poor outlook for consumer spending in these markets, we have decided to make additional provisions against a number of artist deals and to rationalise some of our operations in the region."

Together with the effect of softer trading in the Asia Pacific markets, the provisions "will in aggregate result in operating profits being about £25m lower than planned", Sir Colin warned.

Panmure Gordon analyst Anthony de Larrinaga said: "The squeeze in Japan and the Asian markets is not unexpected", but he added that a question mark remains over how much of the £25m would be provisions for rationalisation.

The latest announcement followed a spate of bad news from EMI and was further justification for the market's cautious stance on the stock, he said.

But the analyst added that the amount, which equates to about 7% off EMI's earnings-per-share, should be seen in the context of a much larger £125m charge taken last year for restructuring in the US.

There was good value in EMI, and the Asian market presented a long term source of growth for the company after these temporary difficulties were overcome, he said.