Chrysalis looks to Gnarls Barkley to boost year

LONDON (Reuters) - British music company Chrysalis Group Plc said on Tuesday trading was in line with expectations and albums out shortly from Gnarls Barkley and Feeder gave it confidence for the full-year.

The group, which has been the subject of bid speculation since it sold its radio assets earlier this year, said its remaining music unit had performed well but the retail Lasgo division was experiencing weakness in the market.

"After a quiet start to the financial year, we now have David Gray's 'Greatest Hits' album just out and albums in the New Year expected from Gnarls Barkley, Feeder and The Raconteurs, which gives us confidence in achieving a satisfactory outcome for the year," the group said.

The group said it would monitor the performance of Lasgo and reiterated that against a backdrop of change and consolidation in the wider music industry, it would also continue to "monitor its performance and positioning of the group."

"We've got a very strong business and we know how we can grow it .. but having said that we are a Plc and we know what our obligations are," Chief Executive Jeremy Lascelles told Reuters, declining to comment on whether the group had received any expressions of interest.

Market rumors have recently linked Chrysalis with music giants Universal and Warner Music Group.

The group's shares were flat at 107 pence at 4:20 a.m. EST.

Chrysalis said its Music division, comprising the music publishing and recording companies, had shown strong growth and increased earnings before interest, tax and amortization (EBITA) by 28.2 percent in the year ended August to 3.1 million pounds.

Its music publishing catalogue increased net publisher's share by 5.7 percent to 11.9 million pounds ($24.43 million), against growth of 5.3 percent in 2006 and an industry which it believes was growing at 0 to 2 percent.

The group said in September it expected a weaker first half for the 2008 financial year due to a relatively quiet release schedule and on Tuesday it said the increased levels of visibility were coming through as planned.

LASGO

EBITA at Lasgo Chrysalis, however, fell 45.1 percent to 1.7 million pounds due to ongoing challenges in the retail entertainment product market and tough comparatives from 2006.

"It's fair to say that (Lasgo) will be producing more modest profits rather than the extremely healthy profits that it has done in the past," Lascelles said.

"It's still a profitable business and we have stated that we will not allow the business to run unprofitably."

Revenues from continuing operations were down 16.9 percent at 56.4 million pounds, mainly due to a 30 percent fall in turnover at Lasgo.

Chrysalis sold its radio assets to Global Radio for 170 million pounds in July and the group expects to return 96.5 million pounds, or 57.5 pence per share, to shareholders in mid-December.

It will not pay a dividend in light of the capital return to shareholders.

Analysts at Numis said the results were in line with their expectations and they would not change their forecasts.

(Editing by Elaine Hardcastle/Elizabeth Fullerton)

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