PolyGram’s Profit Falls 18% in ’96

European entertainment conglomerate PolyGram said Wednesday that it took a $66-million charge related to a previously disclosed reorganization of its music operations, much of that revamping in the company’s sluggish Motown Records unit.

The music and film giant said that as a result of the charge, its 1996 profit fell 18% to $349 million from $426 million. The numbers reflect Netherlands guilders converted to U.S. dollars at the Dec. 31 exchange rate.

PolyGram said its results were also hurt by the continuing softness in the music market, adding that it has increased the money set aside to cover potential bad debts from troubled U.S. music retailers.

Separately, Chief Executive Alain Levy in an interview denied rumors that Dutch electronics giant Philips, which owns 75% of PolyGram, plans to spin off all or part of the company. Levy said that Philips is planning to issue a statement denying the rumors, possibly as early as today.

Levy also said the company is sticking to its plan of developing its movie division, saying that the 14 Oscar nominations the company earned for films such as “Fargo,” from its Gramercy Pictures unit, show that the company is a significant player.

Levy said PolyGram’s film operation showed a slight profit for the six months ended Dec. 31, thanks to the $106 million grossed to date worldwide by “Sleepers” and video sales of 500,000 each for two films, “Dead Man Walking” and “The Usual Suspects.”

For all of 1996, Polygram’s film unit lost about $20 million, he said, about half of what it lost a year ago, on sales of about $900 million.

Overall, PolyGram’s sales climbed nearly 8% to $5.5 billion from $5.1 billion a year earlier.

Levy said PolyGram’s film unit won’t be profitable in 1997 due to the costs of establishing a distribution operation, which he predicted would be up and running later this year. In addition, PolyGram is spending substantial amounts to invest in future movies that carry much higher budgets than past PolyGram films.

One of the first is “The Game” with Michael Douglas, with a budget said to be more than $60 million.

Levy said he expects PolyGram to make as many as four films a year with budgets in the $50-million-to-$75-million range.