EMI warns on profits as music boss goes
EMI Group issued a profit warning on Friday, blaming poor Christmas sales of new albums such as Robbie Williams's "Rudebox", and announced the departure of its head of music and plans to slash costs.
Shares in the world's third biggest music group, which were boosted throughout 2006 by regular takeover speculation, fell almost 10 percent in early trading.
"EMI Music's second half performance to date, in terms of revenues and profits, has been below prior expectations," EMI said in a statement that also unveiled plans for 110 million pounds of annual cost savings, including an unspecified number of job cuts.
"This has resulted from weak market conditions, particularly over the Christmas period, and lower than expected sales from EMI Music's portfolio of second half releases to date."
EMI, which is also home to Coldplay and holds the Beatles catalogue, rejected a bid approach in December that a source familiar with the situation said was from private equity group Permira, and has been locked in a takeover battle with rival Warner Music on and off for the past six years.
"Yet again the company has embarked on a restructuring programme, despite reassurances over the autumn that the business was strong and that the group felt sufficiently confident to reject a private equity bid for the business rumoured to be in excess of the Warner offer of 310 pence over the summer," said Bridgewell Securities analyst Patrick Yau.
"These valuations now look like wishful thinking and leave management struggling for a plausible strategy," he said, slashing his full year pretax profit forecast to 112.8 million pounds from 160 million.
EMI shares, which outperformed the DJ Stoxx European media sector by around 4 percent last year, were down 9.6 percent at 239 pence at 8:10 a.m., valuing the business at about 1.9 billion pounds.
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EMI, which had been pinning its hopes on new releases such as the Beatles' "Love" album, said annual revenues at its music business were likely to fall between 6 percent and 10 percent on a constant currency basis. The division's revenues fell 5.2 percent in the six months to September 30.
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