EMI returns to 2nd-half profit after artists dropped

Quoted from: http://www.bloomberg.com

May 24 (Bloomberg) -- EMI Group Plc, the world's third- largest music company, returned to profit after cutting jobs and releasing albums by Robbie Williams and Joss Stone that helped stem a decline in recorded-music sales.
Net income was 56.7 million pounds ($103.7 million) in the second half ended March 31, compared with a loss of 80.4 million pounds a year earlier, when London-based EMI took a charge to cut staff and artists. Revenue fell 5.9 percent to 1.09 billion pounds. The figures were compiled by Bloomberg using full-year numbers released today in a statement.
EMI's digital sales more than tripled in the past fiscal year, and the company predicted that growth in digital revenue will now outstrip any further declines in CD sales. Some analysts said revenue may suffer as consumers download individual tracks rather than buy more expensive albums. EMI's North American revenue fell 14 percent in the year through March.
``The outlook is still uncertain as the business goes through this digital transformation,'' said Richard Hitchcock, a media analyst for Numis Securities. ``It's not clear if net revenue will come up and what the margins will be.''
Shares in EMI declined 2.25 pence to 238.75 pence at 3:24 p.m. in London. The stock has risen 9.9 percent in a year, increasing the company's market value to 1.88 billion pounds. The company said in its statement today that the North American market ``softened'' during the year, particularly in the second half.
EMI said it saved 35 million pounds in the latest year and expects an additional 15 million pounds of savings this year. EMI has shed hundreds of artists and last year said it would cut 1,500 jobs as global sales of recorded music fell to $33.6 billion from $39.7 billion in 2000.
Greatest Hits
The company's best-selling album was the ``Greatest Hits'' of the British singer Robbie Williams, with sales of more than 6 million. Second was ``Mind, Body & Soul'' by the U.K. teenager Joss Stone, with 2.8 million. The first two albums by Norah Jones, ``Come Away With Me'' and ``Feels Like Home,'' together sold more than 4 million copies in the fiscal year.
EMI said it has 50 ``global superstars,'' including Lenny Kravitz, Kylie Minogue, Beastie Boys, Paul McCartney and Tina Turner. Under recorded-music head Alain Levy, EMI has focused on a smaller group of acts that can sell across borders.
``We're now a very different company than we were five years ago,'' Chairman Eric Nicoli said on a conference call today. EMI has had two cost-cutting rounds in the past five years, in which such acts as pop singer Mariah Carey were pared from the roster.
`Harder to Predict'
Nicoli, 54, declined to give a forecast for the global music market this year, saying it's become ``harder and harder to predict'' given that digital sales growth is ``dramatic and not straight line.'' He said it is ``entirely possible'' the industry could return to revenue growth this year.
The EMI chairman said it was interesting that Warner Music Group is now a listed company following this month's initial stock sale because ``it's good to have another publicly quoted music company to attract investor interest.''
Asked whether Warner's listed status makes a potential merger with EMI easier, he said, ``We have no intention of fueling any more speculation'' about a possible linkup. Analysts including Alex de Groote of Credit Agricole Cheuvreux predict such a merger will occur. EMI twice previously sought to merge with Warner.
Full-year net income was 56.3 million pounds, from a loss of 71.6 million pounds a year earlier, when there was a charge of 138 million pounds. Sales fell 8.4 percent to 1.94 billion pounds. Bloomberg calculated the second half by subtracting the first half from the annual figures published today.
`Positive Outlook'
Nicoli said EMI was ``positive on the outlook for the music industry,'' citing improvement in continental Europe, particularly France and Germany, and in Japan.
EMI shares have declined 9.1 percent this year, prior to today, in part because of a 16 percent decline on Feb. 7, when the company cut its earnings forecast. EMI said then that results would be hurt by delays to two albums, ``X&Y'' by Coldplay and ``Demon Days'' by Gorillaz. The Coldplay album is scheduled for release on June 6, while the Gorillaz album came out yesterday.
``They're going to be big albums, both of them,'' Levy said on the conference call. EMI declined to predict precise sales figures for the albums.