Downbeat EMI tries a rock'n'roll revival

WHAT were you doing during the World Cup and Golden Jubilee? Glued to the television probably, and not listening to music. Recent record sales have slumped, according to shocking new figures from the British Phonographic Industry, knocking shares in music group

UK sales of recorded music fell 15.4% in value between April and June compared with a year ago. The volume of albums fell 11%, while sales of singles fell for the fifth consecutive quarter. It is the latest setback for EMI, on top of growing music piracy and a continuing dearth of major global acts on the scale of the Spice Girls. Bankrupt of ideas, it is turning to 40-year-old groups for inspiration. Having already done the Beatles, EMI is preparing a major retrospective album on the Rolling Stones called 'Forty Licks'.

Broker Merrill Lynch thinks the shares, trading on just nine times forward earnings, look cheap after hefty 30% falls since the end of April, but warns the industry backdrop remains weak.

The BPI figures sent shares in retailer HMV, which floated at 192p, tumbling 7 1/2p to 129p. Music accounts for about 50% of sales. WH Smith, another major record chain, fell 5 1/2p to 330p. Woolworths, at the centre of bid speculation, slipped 1/2p to 26 1/2p.

It was a damp, dull day for the rest of the media sector. Amid fears over advertising prospects, reports of big writedowns this week at international giants News Corporation and Vivendi added to the gloom. Granada, where chief executive Steve Morrison is under fire, fell 4 1/2p to 85 1/2p. Carlton, its partner in the £1bn ITV Digital fiasco, fell 8 1/4p to 160 1/2p.

The latest near-term worry centres on how advertisers will react to the first anniversary of September 11. American TV networks are said to be bracing themselves for a virtual advertising freeze as companies shy away from promoting themselves at this time. WPP fell 14 1/2p to 465p, and Cordiant closed 4p cheaper at 60 1/2p.

Paul Richards, media analyst at Numis, said: 'Some advertising stocks could be affected, depending on whether money for September marketing budgets is deferred or if it disappears.'

Lord Bell's Chime Communications rose 5p to 61 1/2p amid speculation WPP will buy its HHCL advertising agency within a month.

Elsewhere, the market came back to earth after last week's 6% rally. The Footsie closed down 100.8 points at 4221.6, wiping out Friday's gains, weighed down by a weak opening on Wall Street. Amid diminishing expectations of a US rate cut today, and news of US Airways filing for Chapter 11, the dollar remained under pressure. The greenback was trading at 0.977 cents to the euro. Sterling was trading at $1.53 or 63.8p to the euro.

Abbey National fell 7p to 729 1/2p following the reported collapse of merger talks with National Australia Bank. Rumours circulated that NAB is turning its attention to Alliance & Leicester, down 8 1/2p to 836 1/2p. However, A&L bought back 200,000 of its own shares, indicating it cannot be in price sensitive talks.

Gas supply group Lattice firmed 1/4p to 173p after Royal Bank of Scotland, down 30p to 1530p, denied reports it is leading a group of investors planning to scupper the £15bn merger between Lattice and National Grid, unchanged at 461p. Oils fell on concerns over slowing economic growth and fears President Bush will launch a military strike against Iraq.

BP was 21 1/2p lower at 503p, and Shell down 14p at 433 1/2p. Broker J P Morgan trimmed its price forecasts on both stocks, reacting to rising risks in the sector.

Biotech firm Acambis surged 14p to 251 1/2p as investors switched out of PowderJect, down a hefty 99 1/2p to 324 1/2p, after withdrawing its tuberculosis vaccine from sale. Irving Kuczynski, new chairman at property group Wiggins, off 1/4p to 5 1/2p, has bought 500,000 shares.

Burger King franchisee Gowrings sold its remaining motor dealerships to Inchcape for £3.9m. But a profit warning in the restaurants division sent shares down 4p to 88 1/2p.