Music publisher Chrysalis (CHS) said its second half had started well due to a number of chart successes from its artists, but the group still expected to report a full-year operating loss.
Chrysalis, which rejected a £100 million takeover offer in April and called off all sale talks, said its net publishing share rose 12.8 per cent in the third quarter on the back of hits from artists such as R&B star Estelle.
However, results in the first 10 months of its financial year saw NPS fall 2.9 per cent on a year ago after a quieter first half, the uncertainty of the offer process and the effect of the Hollywood Screenwriters strike late last year and early 2008, the company said.
It expects to make an annual underlying operating loss similar to that seen at the interim stage, when it reported losses trebling from £400,000 to £1.2 million.
Chrysalis also said full-year NPS was likely to be lower than the previous year, while its Echo label had underperformed, with higher write-offs for new unproven artists.
It has signed a number of high profile new artists to its Chrysalis Music arm since the half-year, including White Lies and Mercury award-nominated Laura Marling.
Chrysalis said the signings, together with its existing catalogue, should help the music publishing arm return to NPS growth.
Meanwhile, its wholesale distribution division Lasgo Chrysalis remains on track to exceed the group’s expectations, it added.
Chrysalis, which also has bands such as Feeder and Portishead on its artist roster, has been reviewing the business after calling off sale discussions earlier this year.
It said it was continuing to cut costs and was restructuring its Echo label into an “exploitation company”, which will see it no longer act as a record company, instead focusing only on its masters and past catalogue.
Around 10 per cent of its 150 staff are being shed amid the overhaul.
Chrysalis is aiming to focus its business on its core music publishing arm, which releases material by artists such as Blondie, David Bowie and OutKast.
The group sold its Heart and Galaxy radio business for £170 million last year.
Along with other music businesses such as EMI, Chrysalis has been under pressure amid the rise in popularity of digital downloading and declining sales of physical formats, such as CDs.
Illegal download piracy has also hit the entire industry hard, with fellow music group EMI also reporting hefty losses in its latest annual results.
But music publishing is enjoying better fortunes, as music firms are able to make profits from royalties on back catalogues.
Chrysalis had been looking at a sale of whole group since December, but said on terminating talks in April that the credit crunch had hit buyer appetite and valuations.
In reaction, Steve Liechti, analyst at Investec Securities, said that while the third quarter looked fine, the group’s outlook was disappointing. He is forecasting annual pre-tax losses of £800,000 against losses of £500,000 the previous year.
Meanwhile, Dresdner Kleinwort lowered its price target – to 103p from 115p – as it urged investors to ‘hold’ the stock for now.
It thinks the macro backdrop is now starting to bite into even Chrysalis’ more defensive music publishing business, pushing forecasts lower once more.