Virgin Music contributed a four-month profit of T5 million ($ 8.5 million) to the half-year earnings of EMI Music, which rose 15.8% to a record T60.6 million ($ 103.2 million).
Virgin’s performance surprised analysts, who had not been expecting the newly acquired label to make much impact on EMI’s bottom line until the second half of the year.
Parent Thorn EMI also comfortably beat the predictions, reporting a 10.9% increase in profits to T105.2 million ($ 178.8 million) for the six months ended Sept. 30. Analysts had been predicting profits of no more than T95 million ($ 161.5 million) .
Group sales reached T1.95 billion ($ 3.3 billion), up from T1.76 billion ($ 2 .99 million) last year. EMI Music contributed sales of T614 million ($ 1.04 billion), a 24.6% increase, including T77.1 million ($ 131 million) from Virgin.
The unexpected improvement in the music division figures was largely due to the early release of Garth Brooks’ latest album, “The Chase,” on EMI’s Liberty Records label. Disc went straight to No. 1 on the U.S. charts. The first two weeks of sales, totaling 5 million units, fell into the first half of Thorn’s year.
Virgin has recently suffered the departure of several senior exex, prompting suggestions that Thorn’s T560 million ($ 952 million) purchase of Richard Branson’s label was overpriced. But Thorn chairman Colin Southgate said, “We anticipated they would leave before we bought the company. We think the deal is fine.”
Southgate said the restructuring and integration of Virgin into EMI Music was “virtually complete,” and that “the relationships with major artists have been preserved.” Artist rosters have been “trimmed” to reflect “a more focused approach to release management.”
But Simon Taylor, an analyst at Robert Fleming, commented, “It is unproven whether they paid too much, just enough or too little. It won’t really be until the end of 1993 that we can tell.”
Group earnings were also boosted by a T17.1 million ($ 29 million) profit contribution from Thames TV, the London-based ITV company in which Thorn holds the majority stake. Thames contributed just T3.6 million ($ 6.1 million) in the same period last year.
Thames has slashed costs and worked hard to squeeze every last drop out of the London advertising market, in preparation for the loss of its broadcasting franchise at the end of this year.
From next year, Thames will operate primarily as a producer and distributor. Thames originally was planning to take just a 15% stake in Channel 5, whose projected launch costs are between T120 million ($ 204 million) and T150 million ($ 255 million). However, it is struggling to attract any co-investors, and Thorn reportedly has agreed to let Thames take a stake of 30% to 35%.