EMI reports massive loss

16:30 | Friday October 24, 2008

The major today released its Annual Review 2008 in which it outlines adjusted Ebitda of £164m, down 5% year-on-year, a £192m charge arising from the re-valuation of assets and liabilities on its balance sheet, restructuring costs of £123m, depreciation of £109m and £520m of net financing costs.

Lord Birt, the chairman of Maltby Capital, the investment vehicle used by Terra Firma to buy EMI, emphasises several key points in the report that are intended to put the loss into perspective.

“The main factor behind the very large loss was continued operational poor performance, but more particularly accounting factors, in particular the revaluation of the balance sheet and the requirement to mark assets and liabilities to fair values.

“While interest charges will recur annually and we anticipate a restructuring charge in the next financial year, we do not expect to see other costs and charges recur at the same level.

“Operating performance for the full year continued to be poor and this reflected long-term weaknesses in EMI Music which we discuss in this report.”

Birt nonetheless emphasises the positives, saying, “EMI’s operational performance has improved significantly during the first seven and a half months of Maltby ownership and we expect the six months results ended September 30 2008 to show year-on-year improvement. EMI now has a stronger balance sheet and team with which to start a new era.”

“We have got costs under control, and introduced compensation policies in line with general business norms,” he adds, noting that plans to cut the number of employees by 1,500 is on track and a new organisational structure is in place.

“The numbers presented here today tell you clearly that this is the first year in the radical turnaround of a company culture, a business model and perhaps even a market. It will not be a quick fix,” he adds.

“We are in the process of taking EMI back to business basics: understanding customers, sourcing an excellent product, finding the right channels to market, and packaging and marketing music in an appealing way.

“These basics will take us a long way. Keeping close to today’s demanding customers, while thinking constantly of artist profitability, will concentrate EMI on finding outstanding new music, and fresh, imaginative ways of getting it to listeners. This is the only way we can succeed for our artists and all our stakeholders.”