Profits fall at EMI

Big sellers don't always translate into big profits, EMI has discovered

EMI, the only one of the world's big five record companies to be based in the UK, has seen profits slide 40% in what it termed a "challenging year".

The company, home to artists such as Kylie Minogue and Robbie Williams, has been beset by falling sales and piracy problems like the rest of the music business.

But its own mistakes have also proved problematic, including heavy debts, underperforming artists, and a £38m bill for extricating itself from a massive long-term deal with Mariah Carey.

Meanwhile it still has to renegotiate its deal with Robbie Williams, a process which has not yet begun despite newspaper reports that the star is close to signing a £40m, five-album contract.

His most recent album, Swing When You're Winning, has sold 5.4 million copies since its release last October, and is the company's top seller.

Off the pace

The result overall is a fall in pre-tax profits to £153.3m in the 12 months to March 2002, from £259.5m the previous year.

Sales, meanwhile, were down 9% to £2.,67bn as its share of the global market slipped 0.7 percentage points to 13.4%. The US position was also lower, at 10.4% from 10.8%.

And while the company's debts cost less to service - thanks to the worldwide slide in interest rates - overall indebtedness crept up slightly to £1.06bn from £993m.

The City's response was muted but negative, as the company's shares slipped 4.5 pence to 285.5p by 0811 GMT.

Turnaround?

The company insisted that its restructuring - which has seen 1,800 jobs go this year, and its High Street arm, HMV, floated on the stock market - would produce dividends this year.

Operating performance should be considerably better, building on growth in sales in the UK, while the culling of 400 artists from its list would allow it to concentrate on its successful performers.

It also promised swift execution of a turnaround plan outlined in March, which hopes to find at least five new international stars in the next three years.

Falling sales

Still, the company has a mountain to climb.

Although its music publishing division is still fairly strong, recording a turnover up 6.6%, record sales are in the doldrums.

Overall sales of recorded music were down 11%, with sales in the Japanese market dropping more than 13%.

"The recorded music market was difficult, and our performance within it was not good," the company said.

And the prospects of early recovery appear far from certain, as piracy of CDs in Italy and Spain is on the increase and growth in global music sales is likely to be virtually non-existent this year.