LONDON — In the wake of being left at the altar by Seagram’s takeover of Polygram, EMI has released results for the year ending March 31 that read like a warning to anyone else thinking of proposing marriage.
At constant exchange rates, the third-largest of the soon-to-be Big Five music companies posted a pre-exceptional operating profit of £408.5 million ($668.7 million) on sales of $5.87 billion, up 2.3% and 5.8% respectively.
Pre-exceptional profit before tax, however, fell 10% to $560.5 million. And at actual exchange rates, pre-exceptional pre-tax profit was $502.7 million, down 19.3% from last year and likely an indicator as to why Seagram was unwilling to pay more than a reported £6.00 ($9.80) per share for EMI. Actual rate sales were $5.4 billion.
An exceptional charge of $70.8 million was put down to the closure of EMI’s New York offices, former EMI prexy Jim Fifield’s $20 million payoff, the disposal of the HMV record store chain and integration costs for businesses acquired in 1997.
EMI chairman Colin Southgate said: “Our financial results were adversely affected by a number of cyclical issues this year — the strength of sterling, lower growth in the global music market and the economic downturn in Japan and Southeast Asia — and so do not reflect the underlying strength of our business across both emerging and developed markets.”
EMI’s world market share grew 0.5% to 14.8% in 1997, largely on the back of significantly increased U.S. market share, up to over 12% from 9.7% in 1996. North American sales at actual rates were $1.36 billion against the previous year’s $1.25 billion.
U.K. sales — where EMI is the biggest music company — were $1.42 billion, up from $1.33 billion. But in continental Europe, sales were down to $1.35 billion from $1.52 billion. EMI said its performance in Germany — the third-largest music market — was “disappointing” and that “a relatively weak local release schedule resulted in a loss of market share.”
Asia Pacific sales were down from $1.2 billion to $1.01 billion.
Elsewhere, EMI pointed to Latin America as a strong growth area — in particular Mexico, Argentina and Chile — and said that it also enjoyed growth in emerging markets such as South Africa.
The star performers for the company were the two Spice Girls albums, Garth Brooks’ “Sevens,” Janet Jackson’s “The Velvet Rope,” The Rolling Stones’ “Bridges to Babylon,” and breakthrough releases from Radiohead, Meredith Brooks, The Verve and Marcy Playground.
HMV — which was spun off March 28, making EMI purely a music company — saw its sales at actual rates climb 8.9% to $1.57 billion. Operating profit was up 17.9% to $48.5 million.
On continued speculation about a takeover bid for EMI there was only a veiled reference.
“EMI has the right management team, the right strategy and the financial strength to be a vigorous and successful competitor in the music industry,” Southgate said. “We look forward to a great future as an independent force in music.”