EMI spins on sales slide, HMV exit
SHARES in music giant EMI slid 11 1/4p to 173p today as it warned that music sales would not meet forecasts and it sold its remaining stake in High Street chain HMV for £70m, a huge discount to May's flotation price.
Chairman Eric Nicoli said: 'In the second half of the year we expect the global recorded music market to continue to decline, but at a reducing rate. Market weakness will now result in full-year sales in recorded music below last year's.'
At the start of the financial year, new recorded music boss Alain Levy expected the group to produce flat sales in a falling market. Today he revised that to a slide of between 3% and 6%. That would still be an improvement on the first half when, as EMI delayed album releases during a management shake-up, its album sales fell about 7.5% against a global market decline of 6.1%.
EMI also told brokers UBS Warburg and Salomon Smith Barney to sell its 58.4m shares in HMV, the High Street record and Waterstone's bookshops-chain, at 120p, raising £70m-for the 14.5% stake. HMV shares today fell as low as 114p before rallying to 125p, a 2p gain. They lost 8% of their value in late trade on Monday on rumours of the sale. The sale price is a 38% discount to May's float price of 192p.
Chief financial officer Roger Foxton denied EMI was a distressed seller. He said: 'This is part of the orderly disposal of HMV which began way back in 1998 when we spun it off as a joint venture. Yes, the price is lower than the initial public offering but the share market has rerated every stock in the FTSE since.'
He also played down suggestions the cash-raising was in part to fund EMI's recent record-busting five album deal with Robbie Williams said to be worth up to £80m. Instead, he claimed, it was more directed at next January's $170m (£108m) deal to buy the 50% of Motown owner Jobete which EMI does not already own.
First-half numbers were up to most analysts' expectations with a return to headline pre-tax profits of £44.2m compared with a £2m loss in the six months to September. Total sales fell 10% to £961m.
The group swung from losses of 0.8p to earnings of 2.9p a share and said it would hold the interim dividend at 2p with a planned 6p final also the same as last year's.
Nicoli forecast a strong improvement for the whole year despite the disappointing album sales. He said: 'We expect significant and accelerating margin improvement in that business alongside continued strength at music publishing.'
