EMI Expects Full-Year Sales to Fall

LONDON (AP) — Struggling music company EMI PLC said Wednesday that it was suspending dividend payments while it works through a cost-cutting program which it said is nearly complete and less expensive than expected.

In a trading update, EMI said revenue for its music division for the year ending March 31 will likely be down 15 percent, in line with previous guidance. Revenue for EMI Music Publishing is expected to be broadly flat, the company said.

Underlying group earnings before tax, exceptional items and other costs will probably be 174 million pounds (euro256 million; US$348 million), ahead of consensus market predictions, the company said.

EMI, whose artists include Norah Jones, Coldplay and Robbie Williams, said last month that it had rejected a 2.1 billion pound (euro3.1 billion; US$4.2 billion) takeover proposal from Warner Music Group.

EMI said a 110 million pound (euro162 million; US$ 220 million) restructuring program announced in January last year is nearly complete.

"As a result, the company now expects at least 70 million pounds (euro103 million; US$140 million) of the savings will be achieved by 31 March 2008 with the remainder being reflected in the results for the year ending 31 March 2009," the company said.

The cash cost of the program will be no more than 125 million pounds (euro184 million; US$250 million) rather than the 150 million pounds (euro221 million US$ 300 million) previously forecast, EMI said.

EMI said it had appointed Deutsche Bank and the Royal Bank of Scotland to analyze the possible securitization – substituting securities for loans – of its music publishing assets. Recommendations are expected by the end of the year, it said.

The update cheered investors, with EMI shares rising 3.3 percent to 218.5 pence (euro3.22; US$4.37) on the London Stock Exchange. Warner's rejected offer was 260 pence per share.

Lorna Tilbian, a media analyst at Numis Securities, rated EMI as an "add."

"While fundamentals remain challenging, our 'add' recommendation reflects consolidation potential," said Tilbian. "We continue to believe that Warner Music is a natural home for EMI, although investors may have to wait until the regulatory environment clears."

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