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PolyGram profit doubles
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October 21, 1998: 11:28 a.m. ET
Music division boosts third-quarter earnings ahead of Seagram takeover
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LONDON (CNNfn) - Music and film group PolyGram's share price soared Wednesday after it reported a 95 percent leap in third-quarter net profits.
The sharply higher-than-expected rise to 166 million guilders ($90 million) from 85 million a year ago took the market by surprise.
The consensus among analysts had been for net profit to hit 70 million guilders.
PolyGram's share price jumped 6.37 percent to 108.60 guilders on the news.
The results could be the Dutch company's last ahead of its takeover by Seagram Co. PolyGram chief executive Jan Cook said the deal now is expected to go through in the last quarter despite market rumors that it could falter.
Seagram already has agreed with PolyGram's current majority shareholder, Philips NV, to pay 115 guilders per share. Philips owns 75 percent of the company.
PolyGram can thank its music division for the rise. Operating income in the division rose 44 percent to 248 million guilders, with group operating income up 32 percent to 171 million guilders.
But after a poor first half, group operating income was 280 million guilders for the first nine months of the year, exactly half that of a year earlier.
Operating income in the music division for the nine months was down more than 25 percent to 522 million guilders.
Group sales rose 7 percent to 2,668 million guilders, with music sales up 4 percent to 2.170 billion, though they fell 21 percent in Asia.
Group sales for the first nine months of 1998 were 7.318 billion, up 1.6 percent from last year. Music sales for the period were down 2.2 percent.
Profits rose more quickly because the company was able to improve its margin to 11.4 percent.
An 11 million guilder tax gain, compared with a 36 million charge in the same period last year, helped drive net income up to almost twice its 1997 third-quarter level.
But for the nine months it is down 43 percent to 204 million guilders.
HSBC Securities European media analyst Terry Povey said the results were triple his expectations and showed the company had put bad first and second quarters behind it.
But he added that little had changed. The huge profits improvement can be attributed to the removal of trading provisions in the second quarter to ensure no shocks emerged after the Seagram deal was sealed.
"I don't think very much has happened to change things," he said. "There are one or two positives but basically I think that is the main thing."
PolyGram's third-quarter releases included albums by Sheryl Crow, Japanese band Glay and country singer Shania Twania as well as the British film "Lock, Stock and Two Smoking Barrels".
"As expected, PolyGram's music performance in the third quarter has sown encouraging improvement despite challenging market conditions," Cook said in a press release.
Sales of charity recordings in memory of Diana, Princess of Wales, have been removed from the 1997 results. 
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Seagram
PolyGram
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