Defence losses hit Thorn

UNEXPECTEDLY heavy losses in defence electronics left Thorn EMI's half-year pre-tax profits barely changed at pounds 105m - at the bottom end of City expectations - despite a record performance from its music business, boosted by the inclusion of Virgin, writes Terence Wilkinson.

The market was not impressed by an unchanged interim dividend of 9p nor by a promise that Thorn EMI would increase its final dividend at least in line with inflation. Amid widespread downgradings of profit forecasts the share price slumped 35p to 914p.

Thorn's shares, already under a cloud from a Monopolies and Mergers Commision investigation of CD prices in Britain, have been battered by allegations of over-enthusiastic bad debt collection at a US subsidiary. A 48.3 per cent jump to pounds 89.9m in profits from Thorn's music division, on sales 26.8 per cent higher at pounds 778.3m, was the main contributor to a 24.3 per cent rise in operating profits.

Total operating profits rose from pounds 120.7m to pounds 131.2m. This increase was offset at the pre- tax level by a pounds 10m exceptional charge, caused by the two disposals, and a rise in Thorn's interest bill from pounds 15.5m to pounds 16.2m in the wake of last year's purchase of Virgin and a continued high degree of capital spending.

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