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EMI loses £757m for Terra Firma
• "Cost Base Too High"
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By
The Minx
Friday,
24 October, 2008
EMI, the music company behind Coldplay and Katy Perry, made a loss of £757 million in the year it was acquired by Terra Firma, run by Guy Hands, amid heavy restructuring costs, financial charges and a collapsing music market.
The losses were accompanied by a frank annual report, with a introduction written by Lord Birt, the former Director-General of the BBC who now advises Mr Hands, comprising "a forthright presentation of problems" and "the absence of rosy assurances about the future".
Nevertheless, despite the deficit and the new owner's criticism, Lord Birt said that the report "does not signal any lack of confidence in EMI, but sets out the problems that were faced in the year."
Lord Birt said EMI's cost base was too high and that its reporting system could not easily tell how profitable individual artists were.
The annual report admitted that EMI has been losing share of a market that fell by 7.9 per cent last year, but could not see how poorly it was performing because it was shipping too many CDs, such as Norah Jones's Not Too Late, to retailers.
Terra Firma bought EMI for £2.1 billion in August 2007 and Mr Hands and his colleagues, such as Lord Birt, have been vocal in spelling out the company's problems. However, their criticisms have dented morale and some artists, such as The Rolling Stones, have walked out.
Revenues plunged 19 per cent to £1.45 billion the year to March 2008, in which there were few major releases, and the company was hit by £123 million of one-off restructuring costs relating to the dismissal of 1,500 staff. Underlying profits of £164 million were wiped out by the interest charge of £165 million.
Terra Firma has published EMI's results to comply with the recently agreed Walker Code, which requires private equity- owned businesses to release accounts annually.
The Naked Reader 2008
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