EMI's shares lost 16 per cent yesterday, after the world's third largest music group said music sales for the year to March 31st would be 8-10 per cent down on the previous year and pre-tax profits before exceptional items would fall by about 15 per cent.
The announcement prompted Standard & Poor's, the credit rating agency, to place EMI on credit watch for a possible downgrade to junk status. The music group's debt is currently rated at BBB-, the lowest investment grade. S&P said it was concerned that "EMI's financial profile will remain weak due to loss of market share, despite improvements in several major music markets".
EMI blamed the delay on the releases of albums from groups Coldplay and Gorillaz, which were originally scheduled for the current financial year. They will now be launched in the first half of the next fiscal year.
EMI, which posted annual music sales of £1.72 billion (€2.5 billion) in the year to the end of March 2004, had expected music sales to be flat or to decline by 4 per cent in line with the overall market.
The company said yesterday that profits before tax, amortisation and exceptional items for the year to March would be £138 million compared with analysts' forecasts of about £170 million and £163.3 million last year.
Yesterday's warning follows an upbeat trading assessment at the interim stage in November, and took investors and analysts by surprise. "There is a worry that something big went quite wrong," said one analyst. EMI, home to artists such as Norah Jones and Kylie Minogue, also pointed to weakness in repeat orders for newly-released albums last year, and said it would lose some market share, which stood at 13 per cent globally last year. - (Financial Times service)
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