Profits fall at EMI

The Beatles back catalogue is one of EMI's most lucrative assets

Profits at British music giant EMI fell to £59.1m in the first half of the year, compared with profits of £86.1m last year.

But the exceptional costs of the failed merger with Time Warner pushed the company into the red.

The music group is expected to recover some ground in the second half of the year, when new releases from groups such as the Spice Girls should boost profits.

Profits were in part hurt by the £42.9m legal costs of EMI's failed attempt to merge with Warner Music earlier this year, which coupled with other exceptional costs led to a one-off loss of £9.7m.

Radiohead's Kid A was one of EMI's most high-profile releases this year

First half results compare with a bumper period last year, when the latest album from Japanese phenomonen Utada Hikaru sold nine million copies.

EMI stressed that propects for its existing businesses were bright, whether or not it found a merger partner.

Merger options

Since its merger with Warner Music collapsed earlier this year, the British music company has been tipped to merge with German media giant Bertelsmann.

Bertelsmann initiated talks with EMI earlier this month.

EMI said on Tuesday that the talks with Bertelsmann were likely to take some weeks.

In a statement, EMI said it was still reviewing its merger with Warner Music.

EMI is hoping the Spice Girls' latest album will improve their figures

"We are examining these options to create substantial additional value within a challenging regulatory environment , and it is likely that our assessment will take some weeks," EMI chairman Eric Nicoli said.

In a conference call, he added:"The reason we're taking a rigorous and cautious approach to the Bertelsmann opportunity is that the regulatory landscape has changed dramatically over the last year and we need fully to understand the implications of any combination before we put a deal to shareholders."

EMI's release schedule is heavily weighted towards the second half, with its second half including releases from Blur, the Beatles, the Spice Girls and Lenny Kravitz.

"The results are a fraction better than expected but most of the profits come in the second half and there's no real news on Bertelsmann," Paul Richards, analyst at WestLB Panmure said.