EMI issues profit warning, downgrades forecast

Music giant EMI Group on Friday came up with an array of announcements, which includes a shuffle in board and senior management, a restructuring programme, an update on current trading and a revised outlook for the Group.

Headquartered in Brook Green in London, England, the music publisher said Alain Levy, who has been Chairman and Chief Executive Officer of EMI Music since October 2001, will step down from the post, and along with David Munns, Vice Chairman of EMI Music, would leave the company with immediate effect, as part of its boardroom shake-up.

Levy will be replaced by Eric Nicoli, who has been Executive Chairman of EMI Group since July 1999. Nicoli will also take direct responsibility for the management of EMI Music, the Group’s recorded music business.

John Gildersleeve, the Non-executive Deputy Chairman of EMI Group and Senior Non-executive director, is promoted to Non-executive Chairman of EMI Group, while Martin Stewart, Chief Financial Officer of the group, would continue with his current post, though responsibility for the finance function of EMI Music is added to his functions.

As part of its cost-cutting plan, the Group will significantly reduce the size of its cost base. In a statement, EMI unveiled its plans for 110 million pounds ($213 million) of annual cost savings, over half of the savings made in the year to March, 2008.

It also said that the one-time expense of a cost-cutting program, including an unspecified number of job cuts, will be as much as 150 million pounds ($291 million), saying further that the cost savings will be generated mainly from EMI Music, with the remainder from EMI Music Publishing.

The world's third-largest music company, EMI also announced that annual profits at its music business would fall short of expectations, blaming a weaker than expected second half and trading over the Christmas period.

"EMI Music's second-half performance to date, in terms of revenues and profits, has been below prior expectations," the group said in a trading update. "This has resulted from weak market conditions, particularly over the Christmas period, and lower-than-expected sales from EMI Music's portfolio of second-half releases to date."

While announcing the downgraded outlook for the group for the financial year ended 31 March 2007, EMI said annual revenues at its music business were likely to fall between 6 percent and 10 percent on a constant currency basis. The sales of music unit fell 5.2 percent in the six months to September 30.

EMI shares fell as much as 26.75 pence or 9.6 percent to 239 pence in early trade today in London.