EMI Group today (Nov. 15) posted a sharp decline in operating profit and revenue as the London-based firm felt the impact of a “one off” accounting fraud at its Brazilian arm.
The major music company reported revenues in the first six months at £867.9 million, down 4.1% at constant currency compared with the corresponding period in 2005. Operating profit declined to £62.7 million ($118.79 million) from £86.7 million ($164.26 million).
The group result was dragged down by the company’s recorded music division, which reported a 5.2% slide in revenues to £667.1 million ($1.263 billion). One of the key reasons for the hit, EMI explained, was the fraud discovered at EMI Music Brazil in October, which resulted in an overstatement of revenue by an estimated £12 million ($22.7 million).
Despite the weakened financial report, EMI Group said it was confident on delivering results in-line with full-year expectations, thanks to a strong release schedule, achieving “good progress” on its restructuring programs, and expected solid performances from digital and music publishing activities.
EMI explained that the recorded music dip reflected the phasing of its release schedule, which is weighted to the second half.
EMI Music’s “outstanding collection” of second-half releases includes sets from Robbie Williams, Norah Jones, Keith Urban, Joss Stone and the Beatles’ “Love” project, while EMI Music Publishing is counting on sets from Natasha Bedingfield, Kelly Clarkson and Daddy Yankee, among others.
“In EMI Music, our A&R strategy is proving to be successful. We continue to break new acts, who are not only producing the hits of today, but are strengthening our roster for the long term,” commented EMI Group chairman Eric Nicoli in a statement issued this morning to the London Stock Exchange.
On another high-note, digital revenues increased by 68.4% to £73.7 million ($139 million) in the six months to Sept. 30. Digital revenues accounted for 8.5% of group revenues, up from 5.4% in the financial year ending March 31, 2006.
