Stock in EMI Group took a hit after the London-based major today (Feb. 7) warned that recorded music sales are performing below expectations. EMI also said that two major album releases would be delay
Stock in EMI Group took a hit after the London-based major today (Feb. 7) warned that recorded music sales are performing below expectations. EMI also said that two major album releases would be delayed.
In morning trading on the London stock exchange, EMI's share price was down 16% to 236p, as the company said its recorded music activities would register flat operating profit for the year ended March 31. EMI said it anticipates recorded music sales to be 8%-9% less than the previous year, due in part to "softness" in re-orders in the early part of this year.
EMI profits before tax, amortization and exceptional items for the financial year are now forecast at £138 million ($260 million).
Two frontline albums -- Coldplay's follow-up to "A Rush of Blood to the Head" and Gorillaz's sophomore set -- will be pushed from this financial year to the first half of the next period.
"We generated good initial sales from our second-half major releases, but given recent re-order levels and the revised timing of these two major albums, we will now not maintain market share for the full financial year," EMI Music chairman/CEO Alain Levy says.
One city analyst told Billboard.biz that EMI's revision sparked a "shocking morning" for the company.
In an upbeat tone, EMI says its music publishing operations continue to "perform well and in line" with expectations.
Levy also said savings from restructuring are running ahead of schedule. The company is poised to post £35 million ($65.9 million) in savings for this financial period, about £10 million ($18.8 million) ahead of plans, he said. The remaining £15 million of savings are expected to be realized in the next financial year.
"We remain positive about the overall industry trends and EMI's prospects," says chairman Eric Nicoli in the statement.
Investment bank UBS Warburg today reiterated its "Buy 2" rating on EMI stock after cutting its estimates on the company's recorded music revenues. UBS has also set a new price target for EMI of 277p.
"Like us, EMI remains confident the market is stabilizing and is optimistic on the outlook," says UBS in a memo to investors. "Today's warning, however, is likely to reduce confidence in management's ability to capture its fair share of future growth."