15 November 2006
EMI GROUP PLC RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006
In the first half, EMI Group delivered rapid digital growth, continued creative
success across both divisions and made good progress on its restructuring
initiatives.
Strong second-half release schedules for both divisions, together with
continued growth in digital revenues and on-going cost discipline, give the
Board confidence that the Group is on track to deliver results in line with its
expectations for the full year, after taking into account the impact of the
fraud in Brazil.
* EMI Group reports revenue of £867.9m compared to £924.6m in the prior year,
a decline of 4.1% at constant currency.
* Group digital revenues grew by 68.4% at constant currency, totalling £73.7m
in the first half. Digital revenues represented 8.5% of total Group
revenues, significantly up from 5.4% in the financial year ended 31 March
2006.
* EMI Music revenues declined by 5.2% at constant currency, largely
reflecting the phasing of the planned release schedule which, as previously
indicated, has a greater weighting to the second half of the financial
year. Digital revenues grew by 78.2% at constant currency, representing
9.4% of total divisional revenues in the half.
* EMI Music Publishing delivered revenues in line with last year at constant
currency and an increase in reported profit from operations of 5.8%.
* A&R strength across both divisions:
* EMI Music continues to break new talent with success in North America in
the first half including Letoya, Cherish, 30 Seconds to Mars and The Red
Jumpsuit Apparatus;
* Second-half releases from EMI Music include albums from Robbie Williams,
Norah Jones, Keith Urban, Joss Stone, Dierks Bentley, RBD, Relient K, All
Saints, Vasco Rossi, Simon Webbe, Depeche Mode, The Magic Numbers, The
Thrills and Moby. The Beatles also have an exciting new release, where the
legendary producer Sir George Martin, and his son Giles, have been working
with the entire archive of Beatles recordings to create the LOVE album;
* EMI Music Publishing's first-half chart share reflects the high quality of
its songwriting talent and resulted in mechanical and performance revenues
outperforming the recorded music market;
* Key second-half releases for EMI Music Publishing include albums from
Natasha Bedingfield, Kelly Clarkson, Daddy Yankee, Diddy, Snoop Dogg, Good
Charlotte, Il Divo, Jay-Z, My Chemical Romance, Scissor Sisters, Sting,
Kanye West and Amy Winehouse.
* Group profit from operations reduced to £62.7m from £86.7m in the prior
year. This largely reflects the decline in first-half revenues at EMI
Music, and the one-off impact of £9.0m from the previously reported
accounting fraud at EMI Music's Brazilian operations.
* Underlying profit before tax of £18.6m, after taking into account the
one-off profit impact of the fraud in Brazil, compared to £41.0m in the
prior year.
* Underlying diluted EPS decreased to 1.4p from 3.8p in the prior year.
* Interim dividend maintained at 2.0p per share.
Enquiries
EMI Group plc
Amanda Conroy Corporate Communications +44 20 7795 7529
Susie Bell Investor Relations +44 20 7795 7971
Sonia Shah Investor Relations +44 20 7795 7625
Brunswick Group LLP
Patrick Handley +44 20 7404 5959
A live webcast of EMI's presentation to investors and analysts will take place
at 9.00 am (UK time) today, 15 November 2006, and can be accessed via the
Company's web site, www.emigroup.com. An archive will be available for viewing
shortly thereafter.
This press release contains forward-looking statements that are subject to risk
factors associated with, amongst other things, the economic and business
circumstances occurring from time to time in the countries, sectors and markets
in which the Group operates. By their nature, forward-looking statements
involve a number of risks, uncertainties and assumptions because they relate to
events and/or depend on circumstances that may or may not occur in the future
and could cause actual results and outcomes to differ materially from those
expressed in or implied by the forward-looking statements. Whilst it is
believed that the expectations reflected in these statements are reasonable, no
assurances can be given that the forward-looking statements in this press
release will be realised.
Chairman's statement
The results for the first half of the financial year largely reflect the
phasing of EMI Music's planned release schedule which, as previously indicated,
has a greater weighting to the second half of the financial year than in prior
years. EMI Music Publishing once again delivered a strong performance.
Group revenue for the six months to 30 September 2006, declined by 4.1% at
constant currency and by 6.1% on a reported basis. The lower first-half
revenues at EMI Music, and the £9.0m one-off cost of the fraud discovered in
October at our recorded music business in Brazil, are the key reasons for the
reported first-half decline in Group profit from operations from £86.7m to £
62.7m. The Board has declared an unchanged interim dividend of 2.0p per share.
Digital revenue continues to grow rapidly, substantially increasing its share
of total Group revenue. At EMI Music, digital revenue increased to £62.4m
representing 9.4% of divisional revenue compared to 5.6% in the financial year
to 31 March 2006. We expect continued strong growth in this revenue stream in
the second half driven by EMI Music's release schedule, the expected launch of
new portable music players and the seasonal pick up in digital revenue that has
been seen in the past two years. For EMI Music Publishing, digital revenue grew
to £11.3m representing 5.6% of divisional revenue. The full tracking and
auditing of the increasing number of uses for our songs remains a key priority
and EMI Music Publishing continues to drive the industry's agenda on issues
such as rate setting and collection. While we are making progress, there is
some way to go in fully capturing all music publishing digital revenues.
In EMI Music, our A&R strategy is proving to be successful. We continue to
break new acts, who are not only producing the hits of today, but are
strengthening our roster for the long term. In particular, during the half, we
saw a number of artists break through in the US including Letoya, Cherish, 30
Seconds To Mars and The Red Jumpsuit Apparatus. In the UK, we saw continued
success from KT Tunstall, Corinne Bailey Rae and The Kooks, whilst Lily Allen
burst onto the music scene in July heading to the top of the charts.
At EMI Music Publishing, the outstanding quality of our songwriting talent has
once again been reflected in our chart share over the period as well as in our
mechanical and performance revenues, which have outperformed the recorded music
industry.
In October 2006, we announced Marty Bandier's resignation as Chairman and joint
CEO of EMI Music Publishing. I would like to thank Marty for the immense
contribution he has made to the development of EMI Music Publishing over the
past 17 years. Roger Faxon, who is currently President and joint CEO of EMI
Music Publishing, will succeed Marty as sole CEO from April 2007 when Marty
will leave the business. I am confident that Roger and his highly talented
management team will drive this exceptional business to new heights in the
years ahead.
We have made strong progress on the Group-wide cost saving initiatives
announced in April 2006. We are on track to achieve £10.0m of savings over the
full year and a total of £30.0m by the end of the 2007/08 financial year.
Industry environment
A fall in the industry's physical music revenue in the six months to 30
September 2006, resulted in an overall decline in the value of the recorded
music market over the period. Digital revenues, however, continued to show
strong growth and the evolution of new digital services, business models,
devices and technologies continued at a rapid pace. Consumer take up of digital
music devices is growing at an impressive rate and, with market penetration
still at less than 30%, there is significant untapped potential. Product
innovation and the entry of new players underpin our confidence that we will
continue to see substantial growth in digital revenue. Microsoft announced the
launch of its portable digital music player, the Zune, which is now being
rolled out in the US, with tracks and videos from EMI Music artists pre-loaded
onto the device. Over the next six months, we will continue to see the launch
of a new generation of mobile phones with enhanced music capabilities from, for
example, Nokia and Sony Ericsson, as handset manufacturers continue to drive
uptake through improved media functionality.
The fight against piracy remains a key priority. The industry has secured a
number of important results over the period such as an industry-wide settlement
with Kazaa, a ruling against StreamCast and the suspension of Mastercard and
Visa's payment services to Russian site AllofMP3.com. It is reassuring that a
number of courts and governments around the world have held that it is not
acceptable to authorise the widespread infringement of others' intellectual
property. The industry's anti-piracy efforts also appear to be having an impact
on consumer behaviour with, for example, peer-to-peer usage remaining
relatively stable in the US despite a significant increase in the number of
households with broadband access. With the on-going evolution in the music
market we expect the battle against piracy to remain a continuing challenge.
We believe that the fundamentals remain in place for the music market to return
to growth driven by digital development. In the short term, the industry
release schedule will help to drive the market's trajectory and we are
encouraged by the slate of industry releases due out for this Christmas season.
Group outlook
We have an outstanding collection of releases due in the second half of the
financial year from both divisions.
From EMI Music, we have albums from Robbie Williams, Norah Jones, Keith Urban,
Joss Stone, Dierks Bentley, RBD, Relient K, All Saints, Vasco Rossi, Simon
Webbe, Depeche Mode, The Magic Numbers, The Thrills and Moby. We also have an
exciting new release from The Beatles, where the legendary producer Sir George
Martin, and his son Giles, have been working with the entire archive of Beatles
recordings to create the LOVE album.
Key second-half releases for EMI Music Publishing include albums from Natasha
Bedingfield, Kelly Clarkson, Daddy Yankee, Diddy, Snoop Dogg, Good Charlotte,
Il Divo, Jay-Z, Norah Jones, My Chemical Romance, Scissor Sisters, Sting, Kanye
West and Amy Winehouse.
The strength of this line up, together with continued strong growth in digital
revenues and on-going cost discipline, give the Board confidence that the Group
is on track to deliver results in line with its expectations for the full year,
after taking into account the impact of the fraud in Brazil.
Business review
Part I
EMI Music
EMI Music reported first-half revenues of £667.1m, a decline of 5.2% at
constant currency. This year-on-year decline largely reflects the phasing of
the planned release schedule which is more heavily weighted to the second half
than in prior years.
Digital revenues continued to grow rapidly and during the half represented 9.4%
of total divisional revenue compared to 5.6% for the financial year to 31 March
2006. In particular, we have seen strong growth in revenue from mobile music
products in North America with, for example, Bubba Sparxxx's single Ms. New
Booty selling more than 1m full-track single downloads to mobile during the
period. Revenue from the sale of music videos has also grown strongly, albeit
off a small base, with the particularly strong growth being seen in Japan where
revenue was generated from mobile services including KDDI and DoCoMo. We have
also been working closely with Napster who recently launched the first paid
subscription service in Japan.
Reported profit from operations, after adjusting for the accounting fraud in
Brazil, was £11.5m in the first half. The impact on underlying profit from
operations of lower revenue and the changed mix of releases as compared the
prior year was partly mitigated by the delivery of cost savings from the
initiatives announced in April 2006 and higher operating margin achieved from
digital music revenue.
During the past six months we have made good progress with our cost saving and
other initiatives. In particular, the restructuring of our Japanese operations
is well underway and, since April 2006, we have seen the introduction of a new
organisational structure with a focus on the reallocation of resources into the
key areas of A&R and marketing. Across Continental Europe, we have successfully
restructured a number of areas including the Mute label and operations in
Scandinavia, Austria and Portugal. In particular, our shared finance service
programme is well advanced and is expected to be completed shortly.
Our North American business delivered an encouraging performance in the first
half driven by a healthy mix of releases. This included albums from established
artists such as Janet Jackson, Bob Seger and Trace Adkins, new developing
artists such as Letoya, 30 Seconds to Mars, Cherish and The Red Jumpsuit
Apparatus as well as developing international artists, such as Corinne Bailey
Rae and KT Tunstall who have successfully broken into the US market. The North
American release schedule for the second half is strong, including new albums
from Dierks Bentley, Keith Urban, Norah Jones, Relient K and Joss Stone. Latin
sensation, RBD, who are signed to our EMI Televisa joint-venture, continue to
go from strength to strength. Their much anticipated new album Celestial will
be released prior to Christmas and will be followed by an English language
album, both on international release.
As expected, the UK had a light first-half release schedule with no new
releases during the period from any of our major-selling established artists.
Importantly, we continued to see good success in developing and breaking new
artists in the UK. In the first half, Corinne Bailey Rae's self-titled debut
album continued to sell well with total unit sales, including digital,
exceeding 2.5m. The Kooks' debut album, Inside In/Inside Out, which has now
sold more than 1.5m units, has seen sustained success being in the top 10 of
the UK charts for an impressive 25 weeks. Lily Allen has firmly positioned
herself as one of the UK's leading female artists, with her debut album Alright
Still selling more than 750k units to date. She has also seen success in
Continental Europe and is now working on entering the US market. From the UK in
the second half, the latest album from Robbie Williams, Rudebox, the LOVE album
from The Beatles, and releases from All Saints, Depeche Mode, The Magic
Numbers, Moby, The Thrills and Simon Webbe, are expected to sell well.
In Continental Europe, we continued to maximise the opportunity from the sale
of local repertoire in the first half. Top-selling local EMI Music artists
included Renaud, Diam's and Raphael from France; Pur, Lafee and Helmut Lotti
from Germany; and Tiziano Ferro from Italy. Second-half releases include albums
from local artists Vasco Rossi, Wir Sind Helden and Arrebato. International
releases from Moby, Depeche Mode, Norah Jones and Joss Stone are also expected
to sell well in the region.
In Japan, local superstar artist Hikaru Utada released her new album, Ultra
Blue, in June. Through a focus on mobile music marketing initiatives, almost 1m
full-track singles from the album were downloaded to mobile in the half. Other
top-selling albums in Japan during the period included G4 from Glay, A Girl in
Summer from Yumi Matsutoya and 20 Y.O. from Janet Jackson.
Part II
EMI Music Publishing
EMI Music Publishing has again outperformed the recorded music industry over
the six months to 30 September 2006, delivering revenue in line with the prior
year at constant currency. The quality of the division's roster of songwriters
was reflected in strong on-going chart share and demonstrated the continued
success of our A&R strategy. Notable hits over the period included songs by
Scissor Sisters, Fergie, James Blunt, Beyonce, Kasabian, Christina Aguilera,
Pink, Rihanna, The Feeling and The Zutons.
The division has built an exceptional catalogue of song copyrights featuring
all-time classics as well as today's hottest hits and is focused on maximising
the value of this asset through existing and new uses. In pursuing this
objective, good progress has been made with our planned systems' investment and
we have recently implemented a new programme for tracking the use of our
digital rights called Digits'. We believe we are taking a big step forward to
enable faster and more efficient licensing of our content through our
initiative to establish a pan-European one-stop shop for online rights, which
is due to go live in January 2007.
Over the period, mechanical revenues, primarily generated from the sale of CDs,
contributed 43.6% of divisional revenue and, despite declining by 1.4% at
constant currency, outperformed the recorded music market. The division's
creative success limited the impact of challenging industry conditions and, by
region, the US was a particular area of robust performance.
Performance revenues saw an especially strong increase, growing by 8.5% at
constant currency to represent just over 30.8% of divisional revenue.
Performance income is generated when a song is broadcast on the radio or
television, performed live on stage or played in a public venue such as a bar.
The strength of this revenue stream in the period primarily reflected EMI Music
Publishing's share of hit songs, which resulted in particularly strong radio
and television airplay.
Synchronisation revenues accounted for 17.4% of divisional revenue and grew by
2.0% over the period. Such revenues are derived from the use of songs in
audiovisual works such as television programmes, advertisements, films and
computer games. Advertising and TV revenue saw good growth over the period and
the division's songs were licensed by a huge range of brands including Orange,
Bacardi, Lee Jeans, Starwood Sheraton and Verizon. In the mobile arena, there
has been a shift from ring tones to newer products such as master tones and
ring backs. The structure of the industry means that it is taking longer for
the division to receive payment for these newer mobile revenue streams. We are
working hard to resolve this issue and, while we are making good progress, we
recognise that it may take some time before we fully capture our share of
income for these products. Overall, we believe that synchronisation revenues
will continue to be an engine for growth in the coming months and years.
Other revenues comprise receipts from stage productions, background library and
enforcement actions. We have intensified our efforts in the area of enforcement
in recent years, resulting in an increasing contribution from this activity. By
their nature, enforcement revenues tend to be irregular and unpredictable and
they were lower in the first half versus the prior year.
Recent and forthcoming releases from artists including Beyonce, Natasha
Bedingfield, Kelly Clarkson, Daddy Yankee, Diddy, Snoop Dogg, Good Charlotte,
Il Divo, Jay-Z, Norah Jones, My Chemical Romance, Scissor Sisters, Sting, Kanye
West and Amy Winehouse will underpin the division's second-half performance.
Part III
Finance
Underlying trading
Group revenue decreased by 4.1% at constant currency in the first half of the
year, comprising flat revenues for EMI Music Publishing and a 5.2% decrease in
first-half revenues for EMI Music. At constant currency there were revenue
decreases in all geographic regions apart from North America, where there was a
1.5% increase. The impact on translation from the material strengthening of
Sterling during the period resulted in a further 2.0% decrease in revenue
against the equivalent period in 2005/06. Overall, Group reported revenue
decreased from £924.6m in the first half of the 2005/06 financial year to £
867.9m in the equivalent period in 2006/07, a decrease of 6.1%.
Group underlying profit from operations (EBITA)(i) for the first half fell by
27.7% to £62.7m. EMI Music Publishing's contribution, after allocation of
central costs, increased to £51.2m from £48.4m in the prior year, whilst that
of EMI Music, again after allocation of central costs, fell to £11.5m from £
38.3m. North America and Asia Pacific were the only geographic regions to
report an increase in EBITA.
The above results are stated post the impact of the accounting fraud at EMI
Music's business in Brazil which we announced on 25 October 2006. The fraud
resulted in statutory revenues for EMI Music for the first half being reduced
by £11.0m and EBITA being reduced by £9.0m from the levels indicated in the 16
October 2006 Trading Update. In light of our investigations to date, we believe
that the one-off financial impact of the fraud, is limited to the above
amounts. However, given the disruption to the business, it is likely that EMI
Music's operations in Brazil will underperform in the full financial year.
The Group's share of profit from associates increased from £0.6m in 2005/06 to
£0.7m in 2006/07.
Group underlying finance charges decreased from £46.3m in the first six months
of 2005/06 to £44.8m in the equivalent period in 2006/07. The decreased finance
charges, which resulted from lower average net borrowings, favourable changes
in the mix of borrowing currencies, and higher notional net interest on pension
fund assets, were achieved in spite of generally higher interest rates.
The Group's underlying tax charge decreased from £9.0m to £4.1m in the first
half of the year. As in prior years, the underlying tax rate used in the
calculation of the tax charge for the first half year was the proforma rate for
the full year. For both 2005/06 and 2006/07, the rate is 22.0%.
The Group's underlying profit on ordinary activities after taxation(ii)
decreased from £32.0m in the first six months of 2005/06 to £14.5m in 2006/07.
Underlying basic earnings per share(ii) were 1.4p in the first half of 2006/07
compared with 3.9p in the first half of 2005/06. Underlying diluted earnings
per share, the calculation of which includes the impact of the possible
exercise of dilutive share options, decreased over the same period from 3.8p to
1.4p.
Notes:
(i) Underlying Group profit from operations (EBITA) is before operating
exceptional items and amortisation and before share of profit in associates.
(ii) Before exceptional items and amortisation.
Exceptional items and amortisation
Exceptional items and amortisation comprise operating exceptional costs,
finance exceptional costs and amortisation of music copyrights and intangibles.
The Group reported operating exceptional income of £13.8m in the first half of
2006/07 compared with income of £2.6m in the first half of the prior year. In
2006/07, the exceptional income comprised gains on the sale of properties
totalling £53.5m (mainly in Japan and the USA), less the costs of the headcount
reduction and reorganisation project of £33.5m, and the costs of £6.2m incurred
in connection with the potential acquisition of Warner Music Group.
The Group reported net finance exceptional costs relating to remeasurements of
£5.6m compared to a credit of £28.6m in the first half of 2005/06. The two most
significant elements of this movement were the loss on revaluation to fair
value of the convertible bond derivative of £16.5m (2005/06: £14.2m gain), and
the fair value revaluation of the Eurobond call feature derivative asset of £
1.5m credit (2005/06: £14.2m credit). The remainder of the reported total in
each year mainly arose from foreign exchange movements on unhedged borrowings.
Amortisation and impairment of music copyrights and other intangibles amounted
to £23.6m in the first half of 2006/07 in comparison with £25.4m in the
equivalent period last year.
Reported results
Total Group profit from operations, including share of associates, for the
first six months of 2006/07 was £53.6m compared to £64.5m in the prior period.
This reflected the partial offset of the reduction in total Group profit from
operations by the increase in operating exceptional income. Total Group profit
before taxation was £3.2m in the first half of 2006/07 as against £46.8m in the
equivalent period of 2005/06.
The minority interest charge reduced from £1.1m in the prior year's first half
to £0.5m in 2006/07. This primarily reflected the results of TOEMI, our
Japanese recorded music business, and Tooth & Nail, a US music label.
The Group reported a loss on continuing operations after taxation for the first
half of £30.1m as compared to a reported profit of £37.8m in the first six
months of 2005/06.
The Board has declared an interim dividend of 2.0p per share, in line with the
interim dividend last year.
Cash flow and net borrowings
The net cash outflow from operating activities was £156.1m for the first half
of 2006/07 compared with an outflow of £79.0m in the first half of the prior
year. The increased cash outflow was driven by reduced underlying profit, cash
spend on the reorganisation programme and a working capital outflow, reflecting
sales phasing.
The net cash inflow from investing activities was £76.9m in comparison with an
outflow of £3.7m in the first half of the prior year. The higher amount in 2006
/07 was the consequence of the proceeds from property disposals in Tokyo and
Los Angeles.
The net interest payment totalled £66.0m in the first half of 2006/07. As in
prior years, the cash interest paid was higher than the charge in the
consolidated income statement as the interest on the Group's Sterling bond was
paid in one instalment in May 2006.
After net interest payments, dividends to shareholders and minorities of £14.1m
and other payments of £3.7m, the increase in net debt resulting from cashflows
was £164.2m, similar to the movement in the first half of 2005/06. After
currency exchange gains of £28.9m and fair value remeasurements of £8.8m, the
total movement in net debt was an increase of £126.5m, taking reported net debt
to £1,006.0m at 30 September 2006. Given the seasonality in our business, net
debt at the half year is typically higher than at the financial year end.
ATTACHMENTS
EMI GROUP PLC INTERIM REPORT 2006/07
(a) Financial highlights for the six months ended 30 September 2006.
(b) Consolidated income statement for the six months ended 30 September
2006.
(c) Consolidated balance sheet at 30 September 2006.
(d) Consolidated statement of recognised income and expense for the six
months ended 30 September 2006.
(e) Consolidated cash flow statement and note for the six months ended 30
September 2006.
(f)-(i) Notes to the financial statements for the six months ended 30 September
2006.
Attachment (a)
FINANCIAL SUMMARY
for the six months ended 30 September 2006 (unaudited)
Six months ended Six months ended
30 September 2006 30 September 2005
Restated
£m £m
Revenue 867.9 924.6
EBITDA (i) 74.9 99.6
Underlying Group profit from 62.7 86.7
operations (EBITA) (ii)
Underlying PBT (iii) 18.6 41.0
Total profit before taxation 3.2 46.8
Underlying diluted earnings per 1.4p 3.8p
share (iv)
Basic earnings per share (3.9)p 4.7p
Dividend per share 2.0p 2.0p
Return on sales (v) 7.2% 9.4%
Interest cover (vi) 1.7x 2.2x
(i) EBITDA is Group profit from operations before depreciation and operating
exceptional items and amortisation.
(ii) Underlying Group profit from operations (EBITA) is before operating
exceptional items and amortisation.
(iii) Underlying profit before taxation (PBT) is before exceptional items and
amortisation.
(iv) Underlying diluted earnings per share is before exceptional items and
amortisation.
(v) Return on sales is defined as Group profit from operations before
operating exceptional items and amortisation as a percentage of Group
revenue.
(vi) Interest cover is defined as the number of times EBITDA is greater than
Group underlying net finance charges.
Exceptional items include operating exceptional items and finance exceptional
items. Operating exceptional items include impairment of goodwill and music
copyrights and intangibles, gains (losses) on disposal of property, plant and
equipment and remeasurement of listed investments. Finance exceptional items
include remeasurement of financial assets and liabilities to be included within
finance charges and exceptional refinancing costs.
Attachment (b)
CONSOLIDATED INCOME STATEMENT
for the six months ended 30 September 2006 (unaudited)
Six months ended 30 September 2006 Six months ended 30
September 2005
Total Exceptional Underlying Underlying Exceptional Total
Items & Items &
amortisation amortisation
* *
Restated Restated
£m £m £m £m £m £m
Revenue (note 2) 867.9 - 867.9 924.6 - 924.6
Group profit from 62.7 - 62.7 86.7 - 86.7
operations before
exceptional items and
amortisation
Exceptional items and (9.8) (9.8) - - (22.8) (22.8)
amortisation (note 3)
Share of profits from 0.7 - 0.7 0.6 - 0.6
associates
Profit from operations 53.6 (9.8) 63.4 87.3 (22.8) 64.5
Finance charges:
Finance income (notes 3 43.7 12.4 31.3 28.3 33.8 62.1
& 4)
Finance costs (notes 3 (94.1) (18.0) (76.1) (74.6) (5.2) (79.8)
& 4)
Total net finance (50.4) (5.6) (44.8) (46.3) 28.6 (17.7)
charges
Profit before taxation 3.2 (15.4) 18.6 41.0 5.8 46.8
Overseas (33.3) (29.2) (4.1) (9.0) - (9.0)
UK - - - - - -
Total taxation (note 5) (33.3) (29.2) (4.1) (9.0) - (9.0)
Profit from continuing (30.1) (44.6) 14.5 32.0 5.8 37.8
operations after
taxation
Attributable to:
Equity holders of the (30.6) 36.7
parent
Minority interest 0.5 1.1
Earnings per share (EPS)
Six months ended 30 Six months ended
September 2006 30 September 2005
Restated
Basic earnings per Ordinary Share (note (3.9)p 4.7p
7)
Diluted earnings per Ordinary Share (3.9)p 3.1p
(note 7)
Underlying basic earnings per Ordinary 1.4p 3.9p
Share (note 7)
Underlying diluted earnings per Ordinary 1.4p 3.8p
Share (note 7)
Underlying earnings are included as they provide a better understanding of the
underlying trading performance of the Group on a normalised basis.
Dividends (equity)
Six months ended 30 Six months ended
September 2006 30 September 2005
Restated
£m £m
Dividends paid and proposed (note 6) 63.2 62.9
Average exchange rates for the period
Six months ended 30 Six months ended
September 2006 30 September 2005
US Dollar to £1 1.87 1.82
Euro to £1 1.47 1.47
Yen to £1 214.48 200.54
The results for the period of subsidiaries reporting in foreign currencies have
been translated into Sterling at the appropriate average exchange rate.
* Exceptional items and amortisation include operating exceptional items and
amortisation and finance exceptional items. See the Group accounting policies
section of the Group's 2006 Annual Report for definitions of these terms and
for examples of the types of transactions that may fall into each category.
Attachment (c)
CONSOLIDATED BALANCE SHEET
at 30 September 2006 (unaudited)
At 30 At 30 At 31 March
September 2006 September 2005 2006
Restated Audited
£m £m £m
Assets
Non-current assets
Music copyrights and intangibles 345.7 404.5 389.3
Goodwill 41.4 39.2 43.0
Property, plant and equipment 152.4 200.0 196.8
Investments in associates 9.0 9.5 8.8
Other investments 12.1 15.6 15.0
Deferred taxation 21.6 30.5 22.8
Financial derivatives 39.4 62.7 41.3
Other receivables 4.4 - 4.4
626.0 762.0 721.4
Current assets
Inventories 34.3 30.2 37.2
Advances 331.7 352.6 330.1
Trade receivables 412.7 404.0 408.5
Corporation tax recoverable 16.7 11.3 16.7
Other receivables 95.0 101.0 110.6
Investments: liquid funds 2.1 3.1 1.6
Cash at bank and in hand and cash 150.8 193.2 190.9
deposits
1,043.3 1,095.4 1,095.6
Total assets 1,669.3 1,857.4 1,817.0
Liabilities
Non-current liabilities
Borrowings (1,141.8) (1,239.6) (1,049.4)
Other payables (4.2) (11.2) (9.5)
Deferred taxation (4.9) (8.3) (5.1)
Pension provisions (80.6) (72.3) (31.1)
Financial derivatives (105.5) (83.3) (100.3)
(1,337.0) (1,414.7) (1,195.4)
Current liabilities
Borrowings (17.1) (21.4) (22.6)
Other payables (979.9) (1,051.1) (1,149.0)
Current tax liability (153.1) (142.4) (143.1)
Other provisions for liabilities (35.0) (36.9) (33.5)
and charges
(1,185.1) (1,251.8) (1,348.2)
Total liabilities (2,522.1) (2,666.5) (2,543.6)
Net liabilities (852.8) (809.1) (726.6)
Equity
Capital and reserves
Share capital 111.5 110.6 110.7
Share premium account 453.8 447.3 447.8
Capital redemption reserve 495.8 495.8 495.8
Foreign exchange reserve 4.1 (11.2) (17.1)
Other reserves 214.5 237.1 206.4
Retained earnings (2,175.1) (2,137.2) (2,019.0)
Equity attributable to equity (895.4) (857.6) (775.4)
holders of the parent
Minority interests (equity) 42.6 48.5 48.8
Total equity (852.8) (809.1) (726.6)
Period exchange rates
At 30 At 30 At 31 March
September 2006 September 2005 2006
US Dollar to £1 1.87 1.77 1.73
Euro to £1 1.47 1.47 1.43
Yen to £1 220.54 200.51 204.66
The balance sheets of subsidiary undertakings reporting in foreign currencies
have been translated into Sterling at the appropriate period end exchange
rate.
Attachment (d)
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the six months ended 30 September 2006 (unaudited)
Six months Six months
ended ended
30 September 30 September
2006 2005
£m Restated
£m
Income and expense recognised directly in equity
Exchange difference on retranslation of foreign 17.5 (14.0)
operations
Pension funds: actuarial gains and losses (51.0) 25.0
Gains (losses) on the revaluation of (0.3) -
available-for-sale assets
Revaluation of music copyrights and intangibles - 2.4
Net income directly recognised in equity (33.8) 13.4
(Loss) profit for the period (30.1) 37.8
Total recognised income and expense for the period (63.9) 51.2
Attributable to:
Equity holders of the parent (60.7) 49.5
Minority interest (3.2) 1.7
Total recognised income and expense for the period (63.9) 51.2
Attachment (e)
CONSOLIDATED CASH FLOW STATEMENT AND NOTE
for the six months ended 30 September 2006 (unaudited)
Six months Six months
ended ended
30 September 30 September
2006 2005
Restated
£m £m
Cash flows from operating activities
Cash receipts from operations 853.9 848.9
Cash used in operations (991.6) (909.2)
Tax paid (18.4) (18.7)
Net cash used in operating activities (156.1) (79.0)
Net cash flows generated from investing activities 76.9 (3.7)
Net cash flows generated from financing activities
Issue of ordinary share capital 6.5 -
Purchase of own shares (10.2) (0.6)
Equity dividends paid (10.9) (15.7)
Dividends paid to minorities (3.2) (2.3)
Management of liquid resources (2.4) 0.2
Financing:
New loans 191.0 193.4
Loans repaid (59.1) (69.9)
Capital element of finance lease repayments (0.4) (0.4)
Interest paid (67.2) (74.4)
Interest element of finance lease repayments (0.3) (0.3)
Net cash generated from financing activities 43.8 30.0
Net (decrease) in cash and cash equivalents (35.4) (52.7)
Cash and cash equivalents at the beginning of the 168.7 227.3
period
Exchange gains (losses) on cash and cash (2.7) 0.4
equivalents in the period
Cash and cash equivalents at the end of the period 130.6 175.0
Reconciliation of profit from operations to net cash flow from operating
activities
Six months ended Six months
ended
30 September
2006 30 September
2005
£m £m
Group profit from operations before exceptional 62.7 86.7
items and amortisation
Remeasurement - revaluation to fair value of - 1.6
investments at fair value through profit and loss
Reorganisation costs (33.5) -
Costs of proposed Warner transaction (6.2) -
Gain on disposal of property, plant and equipment 53.5 1.0
Amortisation and impairment of music copyrights and (23.6) (25.4)
intangibles
Group profit from operations (before share of 52.9 63.9
profit in associates)
Depreciation charge 12.2 12.9
Gain on disposal of property, plant and equipment (53.5) (1.2)
Accelerated depreciation of property, plant and 0.3 -
equipment
Amortisation and impairment of music copyrights and 23.6 25.4
intangibles
Amounts provided 43.6 1.6
Provisions utilised (35.0) (12.1)
Remeasurement - revaluation to fair value of investments - (1.6)
at fair value through profit and loss
Share-based payment transactions 2.8 2.0
Decrease (increase) in inventories 1.1 (1.0)
(Increase) in receivables (26.7) (84.5)
(Decrease) in payables (159.0) (65.7)
Net cash used in operations (137.7) (60.3)
Tax paid (18.4) (18.7)
Net cash used in operating activities (156.1) (79.0)
Attachment (f)
NOTES TO THE FINANCIAL STATEMENTS
for the six months ended 30 September 2006 (unaudited)
1. Basis of preparation
The interim financial information which comprises the accounts of the Company
and its subsidiaries has been prepared on the basis of the accounting policies
set out in the Group's financial statements for the year ended 31 March 2006.
The September 2005 interim financial information has been restated for the
following changes in accounting treatment:
- the reconsideration of the effect of IAS 39 Financial Instruments:
Recognition and Measurement, on recording the impact of the call feature
embedded in the Euro 425m 8.625% senior notes; and
- under IAS 10 Events After the Balance Sheet Date, dividends proposed or
declared cannot be recognised until they are authorised and no longer at the
discretion of the Group. The effect of this on the Group's financial statements
is that neither the interim dividend nor the final dividend relating to any
particular financial year can be accounted for until the following financial
year.
The financial information contained in the interim statement does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985. The figures for the year ended 31 March 2006 are derived from the
published statutory accounts. These published accounts were reported on by the
auditors without qualification or statement under Sections 237(2) or (3) of the
Companies Act 1985 and have been delivered to the Registrar of Companies.
2. Segmental analysis
Six months ended 30 Six months ended 30
September 2006 September 2005
EMI EMI Music Total EMI EMI Music Total
Music Publishing Music Publishing
£m £m £m £m £m £m
By class of business:
Segment revenue 667.1 200.8 867.9 720.7 203.9 924.6
Segment result 29.3 23.6 52.9 39.2 24.7 63.9
The Segment result includes operating exceptional items and amortisation of
music copyrights and intangibles but excludes the Group's share of profit in
associates.
3. Exceptional items and amortisation
(i) Operating exceptional items and amortisation
Six months Six months
ended ended
30 30
September September
2006 2005
£m £m
Net gain on sale of property, plant and equipment 53.5 1.0
Gain on revaluation to fair value of investments at - 1.6
fair value through profit and loss
Restructuring and reorganisation costs: 2006/07 (33.5) -
programme
Release of overprovision for reorganisation costs 0.2 2.4
charged in prior years
Reorganisation costs in respect of prior year (0.2) (2.4)
reorganisation programmes
Amortisation and impairment of music copyrights and (23.6) (25.4)
intangibles
Costs incurred in connection with the possible (6.2) -
transaction with Warner Music Group
Total (9.8) (22.8)
The attributable tax charge is £29.2m (30 September 2005: £nil) (Note 5).
(ii) Finance exceptional items
Six months Six months
ended ended
30 30 September
September 2005
2006
Restated
£m £m
Fair value revaluation of convertible bond derivative (16.5) 14.2
liability
Fair value revaluation of interest rate swaps 0.6 1.4
Amortisation of fair value adjustment (US$500m 8.375% 1.6 -
guaranteed notes)
Fair value revaluation of Eurobond call feature (1.5) 14.2
derivative asset
Foreign exchange on unhedged Euro borrowings 8.1 4.0
Foreign exchange on unhedged foreign currency 2.1 -
borrowings
Exceptional refinancing costs - (5.2)
Total (5.6) 28.6
The attributable tax charge is £nil (30 September 2005: £nil).
Attachment (g)
NOTES TO THE FINANCIAL STATEMENTS
for the six months ended 30 September 2006 (unaudited) - continued
4. Finance charges
Six months Six months
ended ended
30 30 September
September 2005
2006
Restated
£m £m
Finance costs:
Interest payable on bank overdrafts and loans 47.9 46.1
Interest payable on other loans 3.7 4.1
Interest payable on finance leases 0.5 0.2
52.1 50.4
Interest payable on defined benefit pension scheme 24.0 24.2
liabilities
76.1 74.6
Finance income:
Interest receivable on bank balances (0.8) (1.0)
Other interest receivable (0.2) (0.2)
(1.0) (1.2)
Expected return from defined benefit pension scheme (30.3) (27.1)
assets
(31.3) (28.3)
Underlying net finance charges 44.8 46.3
Finance exceptional items (see Note 3(ii)) 5.6 (28.6)
Total net finance charges 50.4 17.7
Finance charges for associated undertakings are £nil (30 September 2005: £nil).
5. Taxation
The tax charge on the underlying profit for the six months ended 30 September
2006 has been calculated by reference to the proforma tax rate for the year
ending 31 March 2007. The total tax charge of £33.3m (30 September 2005: £9.0m)
includes £29.2m in respect of exceptional items (30 September 2005: £nil). The
principal component of the exceptional tax charge is the taxable gain on the
disposal of property, plant and equipment in Japan.
6. Dividends (equity)
2006 2005 2006 2005
Restated
Per share Per share £m £m
Ordinary dividends:
2006/2005 final dividends 6.0p 6.0p 47.5 47.2
2006/2005 interim dividends 2.0p 2.0p 15.7 15.7
Total 8.0p 8.0p 63.2 62.9
The 2006 interim dividend of 2.0p per share (30 September 2005: 2.0p per share)
was paid on 3 April 2006 to shareholders on the register at the close of
business on 13 January 2006. The 2006 final dividend per share of 6.0p per
share (30 September 2005: 6.0p per share) was approved on 13 July 2006 and paid
on 2 October 2006 to shareholders on the register at the close of business on
21 July 2006.
The Board has approved an interim dividend of 2.0p per share to be paid on 2
April 2007 to shareholders on the register of members at the close of business
on 12 January 2007. It is the Board's intention to apply the Scrip Dividend
Scheme to the interim dividend.
Attachment (h)
NOTES TO THE FINANCIAL STATEMENTS
for the six months ended 30 September 2006 (unaudited) - continued
7. Earnings per Ordinary Share (EPS)
Six months ended Six months
ended
30 September 2006
30 September
2005
Restated
EPS is calculated using the following:
Earnings £(30.6)m £36.7m
Underlying earnings £11.4m £30.7m
Basic
Weighted average number of Ordinary Shares 792.2m 786.3m
Diluted
Adjusted weighted average number of Ordinary 801.2m 874.1m
Shares
Diluted underlying
Adjusted weighted average number of Ordinary 801.2m 795.2m
Shares
The adjusted weighted average number of Ordinary Shares used in the diluted
underlying earnings per share calculations, 801.2m (30 September 2005: 795.2m),
is the weighted average number of Ordinary Shares, 792.2m (30 September 2005:
786.3m) adjusted by the effect of dilutive share options, 9.0m (30 September
2005: 8.9m).
The number of Ordinary Shares arising from the conversion of convertible bond
options, 78.9m (30 September 2005: 78.9m), is not included in the calculation
of the diluted underlying earnings per share because of its anti-dilutive
effect. Similarly it is not included in the calculation of the diluted earnings
per share calculation at 30 September 2006 because of its anti-dilutive effect.
It is however included in the calculation of diluted earnings per share at 30
September 2005 because it is dilutive.
Reconciliation from basic to diluted earnings per Ordinary Share
Six months ended Six months ended
30 September 2006 30 September
2005
Restated Restated
£m Per £m Per
Share Share
Earnings/basic EPS (30.6) (3.9)p 36.7 4.7p
Dilutive adjustments:
Convertible bond - attributable interest - - (9.6) (1.6)p
cost* and dilution
Dilutive share options - dilution - 0.0p - 0.0p
Earnings adjusted for effects of dilution / (30.6) (3.9)p 27.1 3.1p
diluted EPS
* Including the fair value revaluation of the convertible bond derivative
liability included within finance exceptional items.
Reconciliation from basic to underlying and underlying diluted earnings per
Ordinary Share
Six months ended Six months ended
30 September 2006 30 September 2005
£m Per Restated Restated
Share
£m Per
Share
Earnings/basic EPS (30.6) (3.9)p 36.7 4.7p
Exceptional items and amortisation:
Operating exceptional items and 15.4 1.9p (2.6) (0.3)p
attributable taxation
Amortisation and impairment of music 23.6 3.0p 25.4 3.2p
copyrights and intangibles
Minority interest in operating exceptional (2.4) (0.3)p - 0.0p
items and attributable taxation
Minority interest in amortisation of music (0.2) 0.0p (0.2) 0.0p
copyrights and intangibles
Finance exceptional items 5.6 0.7p (28.6) (3.7)p
Underlying earnings / underlying basic EPS 11.4 1.4p 30.7 3.9p
Dilutive adjustments:
Convertible bond - attributable interest - - - -
cost and dilution
Dilutive share options - dilution - 0.0p - (0.1)p
Underlying earnings adjusted for effects of 11.4 1.4p 30.7 3.8p
dilution / underlying diluted EPS
Attachment (i)
NOTES TO THE FINANCIAL STATEMENTS
for the six months ended 30 September 2006 (unaudited) - continued
8. Reconciliation of movements in equity attributable to equity holders of the
parent
Six months ended 30 Six months ended 30
September 2006 September 2005
£m £m £m £m
Opening balance (775.4) (883.4)
Prior year adjustment - 37.8
Opening shareholders' funds - restated (775.4) (845.6)
(Loss) profit for the financial period (30.6) 36.7
Dividends (equity) (Note 6) (63.2) (62.9)
Other recognised gains and losses (30.1) 12.8
Scrip dividend 4.5 -
Purchase of shares by EBT (10.2) (0.6)
Share-based payment transactions 2.8 2.0
Shares issued 6.8 -
Net decrease for the period (120.0) (12.0)
Closing balance (895.4) (857.6)
END
© 2006 PR Newswire
