EMI Group Plc played down chances of an attempt to merge or sell its business on Friday, saying it was more convinced than ever it was best off alone despite a rapidly shrinking music industry.
Signs so far this year point to a steeper than expected decline in global music sales of four percent, but the world’s third biggest music group remains on track to meet its targets, EMI’s head of recorded music Alain Levy said.
“When we originally announced a merger with Warner Music, we made clear the best option after that was to remain as a stand-alone. That merger didn’t work and two years on, we’re even more convinced EMI is best-placed as a stand-alone,” EMI Chairman Eric Nicoli told reporters at a shareholder meeting.
EMI shares slipped deeper into negative ground on Nicoli’s comments, trading 2.7 percent down at 215 pence at 1415 GMT. The pan-European DJ Stoxx index was three percent down.
The music industry is under mounting pressure to revive its fortunes after one of the worst years on record as the economic downturn and piracy ravaged music sales, forcing EMI to slash 1,800 jobs and axe 400 second-ranking acts.
Nicoli told shareholders EMI’s radical overhaul was still going to plan and it would deliver a substantial improvement in operating performance both for the half year and full year.
Nicoli batted off investor grumbles about executive pay, insisting contracts of recently-appointed managers were in line with the industry and linked to achieving good results.
“We have no reason to change the contracts,” he said.
Britain’s National Association of Pension Funds (NAPF), which covers 1,000 pension funds, had recommended its members vote against the re-election of Levy and finance director Roger Faxon over fat pay-offs agreed if the company is taken over.
However, both directors were re-elected.
Nevertheless, shareholders remained vocal about salaries at the annual meeting, with the decision to pay Levy’s predecessor Ken Berry a million-dollar package as part of an exit deal last year coming under particular attack.
In response to one shareholder tirade, EMI non-executive director Dominic Cadbury conceded it was a make-or-break year for EMI’s board.
“It’s all to play for this year and if the board does not produce results, it has a dim future in front of it,” he told investors. “But I am confident that they will produce results.”
EMI said the first quarter had been in line with its expectations and its release schedule this year included Atomic Kitten, Coldplay, Massive Attack, Phil Collins, and the Vines.
“Looking ahead to the rest of this financial year, we continue to expect to meet our revenue targets (and) achieve our planned cost savings,” Nicoli said. That includes reaching an operating margin of nine percent this year, Levy added.
MERGER OFF AGENDA
EMI has tried and failed to merge with two of its four main rivals in the past two years – first Warner Music, then BMG. But European regulators made clear they would not put up with the world’s five biggest music groups shrinking to four.
Despite growing evidence that European regulators have softened their stance on similar mergers, Nicoli said he was no more convinced now that a merger would be possible.
“There is no reason to believe the European position has changed,” Nicoli told reporters.
EMI also said it was buying out the remaining 50 percent of the Jobete song catalog it does not already own.
The Jobete catalog includes classics like “I Heard It Through the Grapevine,” “I Just Called to Say I Love You,” and “You Are the Sunshine of My Life.”
EMI also appointed Peter Georgescu as a non-executive director, to replace Hugh Jenkins who is retiring.