EMI Group PLC
25 September 2001
EMI GROUP PLC - TRADING UPDATE
LONDON, 25th SEPTEMBER 2001 - At our last trading update in July, we indicated
difficult and unpredictable music market conditions. Since then, we have seen
a marked deterioration in these conditions and our own trading in Recorded
Music, particularly in the USA and Latin America, has been weaker than
EMI Music Publishing continues to demonstrate its resilience, and is
performing well despite these challenges. It will generate an operating profit
for the first half broadly in line with last year's level of £51m.
We now expect EMI Recorded Music sales for the full year to be lower than in
the previous year, but with market share unchanged. Although the first quarter
of our financial year was steady, the second quarter saw a fall in sales, and
September is proving to be particularly difficult. As a result of lower
turnover, coupled with significant margin pressure, we now expect our first
half operating result in Recorded Music to be a small loss.
We are taking swift, decisive and wide-ranging action towards improving
operational efficiency and profitability in EMI Recorded Music. In particular,
* rationalise further the Recorded Music business following the first half
changes in Latin America, where we have already removed approximately 100
jobs in response to the deepening economic crisis there;
* restructure under-performing labels;
* continue to explore an exit from manufacturing and distribution. We are in
active discussions with a number of parties, and expect to announce our
intentions regarding these operations around the turn of the year;
* consolidate back office services in both North America and Europe.
The eventual annualised benefit of these initiatives will be approximately £
65m, with some positive impact in the current year. To cover the one-off costs
of these far-reaching measures we will create an exceptional restructuring
provision of approximately £100m. £15m will be recognised in the first half.
With the background of the current political and economic uncertainty, it is
difficult to predict our full year outcome. Given the measures to streamline
the cost base and the expected impact of a good second half release schedule,
including albums from Lenny Kravitz, Robbie Williams, Garth Brooks and Pink
Floyd, EMI Recorded Music is targeting a second half operating profit in line
with last year, while EMI Music Publishing aims to deliver a small year on
year increase. Such an outcome would represent approximately a 20% decrease in
the group's full year adjusted profit before tax.
Eric Nicoli, Chairman of EMI, said: 'We have wasted no time in addressing our
cost base in these difficult times. Notwithstanding the first half setback,
and the ongoing uncertainty in out markets, we expect a much improved
performance from Recorded Music in the second half, together with another good
contribution from Music Publishing. While not immune to external influences,
our business is fundamentally sound and we will be well placed to strengthen
our position as market conditions improve.'
Amanda Conroy EMI Group, London Tel: 44 20 7667 3216
Patrick Handley Brunswick Group, London Tel: 44 20 7404 5959