Currency fluctuations, weak release schedule blamed

A weak release schedule and a strong pound dealt a double blow to sales and profits at EMI in the first half of 2004.

With its major acts loaded into the latter half of the year, EMI reported an 11.4% drop in sales to £851 million ($1.58 billion) for the six months to June, and a 7.3% decline in pre-tax profits to $68.5 million.

But much of the damage was done by exchange rate movements. At constant currency, profits were up 9% and sales only down by 5.4%.

Chairman Eric Nicoli delivered an optimistic verdict both on EMI’s underlying performance, and on the recovering strength of the music market as a whole.

“We have seen an improving trend in the global recorded music industry,” Nicoli commented. “The industry decline of 1.3% for our first six months represents a signficant improvement on the 9.6% decline seen in the same period of the previous year.”

Growth is being led by the U.S. market, according to Nicoli, with Japan also bouncing back and the U.K. remaining solid. But he identified Continental Europe as the most difficult region, experiencing “significant” declines.

He also suggested that the music industry is finally coming to grips with the challenge and the opportunity presented by digital downloading.

“The legitimate digital music market continues to expand rapidly and we remain confident that digital represents a key driver for future industry growth,” he said.

EMI Music’s digital revenues increased more than fivefold to $22.6 million, but that still represents only 2% of EMI Music’s $1.22 billion sales.

That total was 7.2% down at constant currency, reflecting EMI’s decision to delay its biggest releases, such as greatest hits al-bums from Robbie Williams, Kylie Minogue and Tina Turner, to the pre-Christmas selling period.

EMI Music spent the first half of the year focussing on newer, developing artists, such as Joss Stone, Keith Urban and Yel-lowcard, and mid-level established acts such as the Beastie Boys, Norah Jones and Lenny Kravitz.

Nonetheless, operating profit grew 18.4% at constant currency, as the music arm continued to make progress on cost-cutting, restructuring of its labels and outsourcing of manufacturing.

EMI Music Publishing had a more robust first half, with sales up 1.1% at constant currency to $354 million, and operating profit up 1.7% to $90.8 million.

The growth of the mobile ringtones market resulted in a doubling of digital revenues for the music publishing arm, up from $5.2 million to $11.3 million

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