EMI GROUP PLC INTERIM RESULTS TO 30 SEPTEMBER 2003
STABLE TURNOVER, OPERATING PROFIT AND MARGIN, OUTPERFORMING INDUSTRY
LONDON 19 November 2003: EMI Group plc today announces its interim results.
Financial overview
Six months ended 30 September (�m, unless noted)
2003 2002
Group turnover 960.3 961.5
Group operating profit (EBITA) (i) 79.7 79.0
Return on sales (ii) 8.3% 8.2%
Adjusted profit before tax (iii) 39.4 42.2
Profit before taxation 11.9 194.3
Adjusted diluted earnings per share 3.6p 2.9p
(iii)
Basic earnings per share 1.1p 17.7p
Dividend per share 2.0p 2.0p
Operating cash flow 45.0 (147.0)
Net debt 946.8 1,084.5
Notes:
i. Group operating profit (EBITA) is before operating exceptional items and
amortisation of goodwill and music copyrights
ii. Return on sales is defined as Group operating profit before operating
exceptional items and amortisation of goodwill and music copyrights as a
percentage of Group turnover
iii. Adjusted profit before tax and adjusted diluted earnings per share are
before both operating and non-operating exceptional items and amortisation
of goodwill and music copyrights
EMI Group - continued progress
* Turnover held firm at �960.3m, outperforming recorded music industry sales
which declined by 10.4%
* Operating profit (EBITA) up 0.9% to reach �79.7m
* Adjusted PBT of �39.4m compares with �42.2m, with decline due entirely to
increased interest charges
* Profit before tax (PBT) of �11.9m compares with �194.4m last year, and was
affected by:
*
+ an operating exceptional charge of �21.8m due to unprecedented levels
of retailer de-stocking in Japan and a reorganisation in EMI Music
Publishing
+ a non-operating exceptional gain of �20.5m relating to property
disposals
+ a non-operating exceptional gain of �174.8m in prior year
* Operating cash flow increased by �192.0m to �45.0m for the half
* Net debt reduced by �137.7m to �946.8m
*
+ Net debt / EBITDA ratio improved from 4.0 to 3.2
* Debt restructuring programme completed in early October, diversifying the
Group's sources of funds and extending average debt maturity
* Interim dividend declared at 2.0p per share, in line with last year
Recorded Music - outperforming the industry
* Turnover broadly maintained at �758.6m, prevailing over the industry
decline of 10.4%
* Share of industry sales improved by 1 percentage point to reach 12.9%, with
particularly good performance in North America where industry share rose
1.4 percentage points to 11%, reflecting improved creative output
* EBITA increased by 0.7% to �28.2m
* Continued expansion in digital music offerings in North America, Europe and
Asia
Music Publishing - continued stability
* Turnover declined only slightly by 0.2% to �201.7m, in spite of pressures
from the declining recorded music industry
* EBITA increased by 1.0% to �51.5m
* Performance and synchronisation income increased strongly, offsetting the
weakness in mechanical income
Eric Nicoli, Chairman, said: "EMI continued to make good progress in the first
six months of the fiscal year delivering a small increase in operating profit
and level sales in the context of a global recorded music industry decline of
over 10%. It is most encouraging that, in these extremely challenging industry
conditions, both of our businesses, recorded music and music publishing,
maintained sales, operating profit and margin at last year's level and
outperformed the rest of the industry.
"Especially pleasing in the half year was the improvement in cash flow. Good
cash management and the on-going sale of non-core assets, allowed us to make
further investments in Jobete (the Motown catalogue), in new technology, as
well as in our artists, and still end the half year with net borrowings �137.7m
lower than one year earlier.
"We also successfully restructured the Group's debt, completing a programme in
October to diversify our sources of funding and extend debt maturity. The
strong acceptance of our debt offerings demonstrates the financial community's
appetite for our credit and confidence in our disciplined approach to managing
the business, now and for the future.
"As we move forward, we are committed to building a company with the capability
to meet the challenges of an industry undergoing unprecedented change. We aim
to improve and increase our creative output while continuing to invest in the
people, processes and systems necessary to assure our future. Our progress over
the last two years is evidence of our determination to succeed.
While it is too early to predict accurately the industry trends for the second
half of the year or our performance within it, we are sharply focused on
delivering a solid performance for the year as a whole. Against that
background, the Board has maintained the interim dividend at the previous
year's level of 2p per share."
"We announced on 22 September that EMI had entered non-exclusive discussions
with Time Warner Inc. about a possible transaction involving the recorded music
division of the Warner Music Group. Those discussions have progressed well and
are at an advanced stage. We have made a firm proposal to Time Warner which, we
believe, would create substantial value for the shareholders of both companies.
As soon as we are able, we will make a further announcement. It would be
inappropriate to say more at this time."
Enquiries
EMI Group plc
Amanda Conroy Corporate Communications +44 20 7795 7529
Claudia Palmer Investor Relations +44 20 7795 7635
Brunswick Group Limited
Patrick Handley +44 20 7404 5959
A live webcast of the presentation to investors and analysts will take place at
9:00 am GMT today, 19 November. The live webcast and an archive of the
presentation can be accessed via the company's website, www.emigroup.com
Chairman's Statement
The results for the six months to 30 September 2003 show that EMI continued to
make good progress in the first half of the fiscal year delivering a small
increase in operating profit and level sales in the context of a global
recorded music industry decline of over 10%. It is most encouraging that, in
these extremely challenging industry conditions, both of our businesses,
recorded music and music publishing, maintained sales, operating profit and
margins at similar levels to last year and outperformed the rest of the
industry.
EMI Group
For the Group as a whole, operating profit before exceptional items (EBITA)
increased 0.9% to reach �79.7m against �79.0m last year. Exchange rate effects
were almost neutral, costing �0.1m. The benefit to our results from the
stronger Euro was offset by the adverse impact of the weaker US Dollar. The
EBITA result is based on turnover down 0.1% to �960.3m. Return on sales
increased to 8.3% from 8.2% in the prior year. As a consequence, basic adjusted
earnings per share increased to 3.6p per share from 2.9p per share last year.
The profit before tax, amortisation and exceptional items (adjusted PBT) for
the six months of �39.4m compares to �42.2m last year. The decline is entirely
driven by an increase in interest charges that is a direct consequence of the
move to longer-term debt and the additional interest payable arising from a
credit rating downgrade at the end of the prior fiscal year.
The Group is reporting operating exceptional costs of �21.8m as well as �1.7m
shown as exceptional finance charges, and non-operating exceptional credits of
�20.5m. The net tax credit in respect of these items is �5.8m. The operating
exceptional charge comprises the cost to EMI of the unprecedented returns in
Japan of �16.9m and �4.9m in respect of the reorganisation of Music Publishing.
The non-operating exceptional credit is entirely in respect of gains on sale of
properties.
The profit after taxation, amortisation and exceptional costs and minority
interests was �8.8m compared to the previous year's higher level of �138.4m,
which included after tax profits of �136.6m from the sale of HMV Group plc
shares and other assets.
Especially pleasing in the half year was the improvement in cash flow. Good
cash management and the earlier sale of non-core assets allowed us to make
further investments in Jobete (the Motown catalogue), in new technology, as
well as in our artists, and still end the half year with net borrowings �137.7m
lower than a year earlier.
Under the leadership of CFO Roger Faxon, the Group successfully restructured
its debt, completing a programme in October to diversify sources of funding and
extend debt maturity. The strong acceptance of our debt offerings demonstrates
the financial community's appetite for our credit and confidence in our
disciplined approach to managing the business, now and for the future.
The Board has declared an interim dividend of 2.0p per share, in line with last
year.
Recorded Music
The step change in our recorded music division's strategy and performance, so
evident in 2002/03, has continued in 2003/04. With improved creative output,
Recorded Music realised gains in its share of industry sales, reaching 12.9%
industry share globally, with a particularly good performance in North America
where share rose to 11%. By delivering music that consumers wanted to buy, EMI
achieved flat sales within a very challenging environment.
EBITA before exceptional items and after central costs grew from �28.0m to �
28.2m. A key driver was the major step forward in profitability in North
America where a loss in the first half of last year was transformed into a
sizeable profit this year. Disappointingly, the performance in Japan declined
substantially, due in part to an anticipated weaker release schedule as well as
the effects of difficult industry conditions. The major regions of UK and
Ireland and Continental Europe both showed increased profitability.
In addition, the second phase of restructuring activity, which Alain Levy and
David Munns outlined in March 2002, is also now well under way. The elements of
this phase comprise enhanced IT support to the business, harnessing the digital
revolution to the benefit of the business and transforming the division from a
record company to a music company. We are now seeing the first deliverables of
these projects which will fuel the division's future growth.
Music Publishing
Our music publishing division has once again delivered strong results
overcoming the pressures of the declining recorded music industry. For the half
year, EBITA before exceptional items and after central costs grew from �51.0m
to �51.5m on sales 0.2% down to �201.7m. Our Continental European businesses
performed particularly well during the half. Under the leadership of Martin
Bandier, EMI Music Publishing achieved strong growth in performance and
synchronisation revenues, offsetting a downturn in mechanical revenue.
Recognising the changing and challenging environment, the music publishing
division launched a reorganisation programme designed to enhance efficiency and
take cost out of the business. This resulted in a one-off exceptional charge of
�4.9m in the period but is expected to lead to good ongoing cost savings. The
components of the programme are headcount reductions in excess of 5% of the
staff at the outset, and an increased focus on technologies that can provide
more automation and efficiency.
Continuing discussions on a potential transaction
EMI announced on 22 September that it had entered non-exclusive discussions
with Time Warner Inc. about a possible transaction involving the recorded music
division of the Warner Music Group. Those discussions have progressed well and
are at an advanced stage. We have made a firm proposal to Time Warner which, we
believe, would create substantial value for the shareholders of both companies.
As soon as we are able, we will make a further announcement. It would be
inappropriate to say more at this time.
Recorded Music Operating Review
The six months ended 30 September 2003 saw the continuation of the turnaround
in performance that was evident in 2002/03. The background to the performance
was a further fall in the global music industry, with a decline of 10.4% in the
half year. Each of the geographic regions saw declines in industry size over
the last six months. Within this environment, EMI improved global industry
share by about 1 percentage point to reach 12.9% and, as a result, sales were
almost flat at �758.6m against �759.3m last year. Exchange effects were
favourable at �3.2m but, even at constant exchange rates, the turnover decline
was restricted to �3.9m or 0.5%.
The range of the top selling albums was encouraging; strong sell through on
earlier releases from Norah Jones and Coldplay was complemented by new releases
from established artists like Robbie Williams, Radiohead and Pur and by
breakthroughs from Chingy, Stacie Orrico and The Thrills.
Before central costs, EBITA grew from �35.2m to �36.7m, whilst after these
costs, it grew from �28.0m to �28.2m. Growth at constant exchange rates was �
0.1m higher.
One of the strongest achievements of the period was the continued improvement
in our performance in North America where EBITA grew from a loss to a profit,
as our industry share increased from 9.6% to 11% for the half. Each of the main
business units reported improved results as the benefits from the widespread
restructuring programme of the previous eighteen months were felt. In
particular, Capitol Records posted a strong increase in sales with releases
from such artists as Chingy, The Beach Boys and Radiohead.
The Latin American recorded music industry continued to struggle, with a
decline of 19%. It was disappointing to see the Brazilian industry, which had
recovered in 2002/03, turn down again in the last six months.
In the UK and Ireland, our business continued to perform very well. Growth was
achieved in EBITA, even after a strong prior year performance, as a schedule of
releases from, amongst others, Radiohead, Robbie Williams, Blur and Iron Maiden
sold strongly.
In Continental Europe, our performance in sales and EBITA was flat over the
previous year, which is a commendable result given the industry conditions. We
witnessed some strong local releases from Pur, IAM and Helmut Lotti. Even
though most territories recorded a higher share than they did in 2002/03, the
two main countries, France and Germany, each experienced industry declines of
about 20%.
The disappointment of the period was in Japan. Continuing industry declines
caused an unprecedented level of returns for the industry. Retailers undertook
a major de-stocking, exacerbated by amended trading terms, in the early part of
the first half. As a result, we had to take a �16.9m exceptional charge. Our
Japanese business was expected to see a decline as its release schedule for
this half was not comparable to that of the prior year. While releases from
175R and the American artist Stacie Orrico met with strong consumer acceptance,
other releases had sales that were lower than expected.
In business development, we continue to make progress in two areas. Firstly,
through intensive investment in technology, we are transforming the ways we
manage our music and do business. Secondly, we are continuing to make strides
in developing our digital distribution platform.
Both physical and online piracy continue to be a major problem for the
industry. A flood of blank CDRs, mainly coming from Asia, has fuelled physical
piracy in many parts of the world and is contributing to industry declines. In
the online world, even though the US industry has shown a small decline in
illegal file sharing as a result of industry action, online piracy continues to
do massive damage.
We will continue to need heavy investment in preventative measures, government
lobbying and consumer education in the coming years, as well as robust
legitimate online services to meet consumer demand.
Our second half release schedule includes albums from Janet Jackson, Norah
Jones, Renaud, Utada Hikaru, The Beatles, Coldplay, Kylie Minogue, Tiziano
Ferro, Atomic Kitten and Blue.
Music Publishing Operating Review
EMI Music Publishing has once again delivered strong results in a difficult
environment, demonstrating the versatility and flexibility of our catalogue and
our continued ability to identify and develop new uses for our songs. Sales for
the six months, at �201.7m, were 0.2% down on the prior year, of which adverse
currency exchange movements accounted for 0.1%.
Before central costs, EBITA grew from �52.5m to �53.3m. EBITA after central
costs was up 1.0% at �51.5m, at both constant currency exchange and actual
rates. The operating margin in the first half of 2003/04 was 26.4% against 26%
in the same period of 2002/03, reflecting favourable variations in revenue
streams as well as tight cost control.
Underlying the achievement of broadly flat turnover, is EMI Music Publishing's
continuing ability to generate new and additional uses of music so as to reduce
its reliance on mechanical revenues, which are primarily derived from the sales
of recorded music. Mechanical revenues declined year-on-year and now account
for 51% of total revenues. Performance revenues, earned from the public
performance of songs, show a good increase and now contribute 27% of total
revenues. Synchronisation revenues, which are generated from the use of songs
in audiovisual works such as advertisements, television programmes, films and
computer games, grew strongly and now represent 15% of divisional turnover.
Other revenues also moved upwards and now contribute 8% of the total.
On a geographic basis the most notable profit improvements were in Continental
Europe, particularly in France, Italy and Belgium. Contributing to the first
half success around the world were Pink, Pharrell Williams, Alan Jackson, Sean
Paul and Evanescence.
Revenue from theatre productions has assumed a significant importance in recent
years. We Will Rock You and Mamma Mia continue to be successful shows in the US
and London; and the former opened recently in both Spain and Australia. Rod
Stewart's Tonight's The Night has also opened well in London. Songs licensed to
EMI feature in all of these performances.
Within the period we launched a reorganisation programme that has the
objectives of increasing the division's efficiency and lowering costs. The key
components are headcount reduction and the decommissioning of systems which are
now obsolete. The cost in the period was �4.9m, which has been reported as an
operating exceptional item. This programme offers an attractive payback,
including a modest contribution to these results.
The acquisition of a further 30% stake in Jobete was completed in April 2003.
We are delighted to increase our ownership of this successful catalogue of
Motown hits, featuring writers such as Smokey Robinson, Marvin Gaye and Stevie
Wonder.
The second half will see releases from a range of artists including Sting,
Ludacris, Alicia Keys, Enrique Iglesias, Jay-Z, Texas, Busted and Pink.
Financial Review
Group turnover decreased by �1.2m to �960.3m in the first half of the year (at
constant currency the decrease was �4.1m). This comprises a decrease in first
half sales in Recorded Music of 0.1% (decrease at constant currency of 0.5%)
and a decrease of 0.2% in Music Publishing (decrease at constant currency of
0.1%). Turnover in North America grew by 5.0% at constant currency over the
first half of the prior year.
Group operating profit before exceptional items (EBITA) for the first half grew
by 0.9% to �79.7m (at constant currency an increase of 1.0%). Both divisions
contributed to this increase. The Recorded Music contribution, after allocation
of central costs, grew from �28.0m to �28.2m whilst the Music Publishing
contribution grew from �51.0m to �51.5m. The operating profit in North America
grew from �19.9m to �43.2m (�46.3m at constant currency) driven by a
significant increase in the Recorded Music business. On the other hand, the
result in Asia Pacific fell from �23.2m to �1.7m (�1.2m at constant currency).
Group finance charges before exceptional items increased from �36.0m in the
first six months of 2002/03 (excluding our share of HMV Group plc's costs) to �
40.1m. The increase in the interest charge is a direct consequence of the move
to longer-term debt and the additional interest payable arising from a credit
rating downgrade in March 2003.
The Group profit after tax and minority interest for the half year was �8.8m,
in comparison with �138.4m in the prior year, a decrease entirely attributable
to the reporting of �136.6m after tax profit on non-operating exceptional items
in 2002/03.
The basic earnings per share is 1.1p in comparison with 17.7p in the first half
of 2002/03 but the adjusted diluted earnings per share, from which the
exceptional items are excluded, has increased over the same period from 2.9p to
3.6p.
Other items affecting earnings
Amortisation of goodwill and copyrights, including that on associates, amounted
to �24.5m in the first half in comparison with �22.7m last year because of the
impact of recent acquisitions.
The Group reports operating exceptional costs of �21.8m and non-operating
exceptional income of �20.5m as against �nil and �174.8m respectively in the
first half of the prior year, the latter arising principally from the gain of �
181.1m on the sale of HMV Group plc shares. The costs comprise �16.9m in
respect of the product returns resulting from the retail destocking programme
in Japan, consequent upon the sharp market deterioration and exacerbated by
amended trading terms, and �4.9m in respect of a business reorganisation in
Music Publishing. The income represents gains on sale of three properties.
In addition, �1.7m is reported as an exceptional finance cost, being the
write-off of borrowing costs previously capitalised in relation to bank
facilities that were terminated on 3 October 2003.
The Group tax charge for the first half, after amortisation and exceptional
costs, was �6.0m as against �51.7m in the first half of last year. The
underlying tax rate in each year was 30%.
The minority interest share reversed from a charge of �4.2m in the prior year
first half to a credit of �2.9m in 2003/04. This primarily reflects the change
in the holding in Jobete and also the decline in profits in TOEMI.
In recognition of the solid results in a demanding market place, the Board
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 flow from operating activities improved from an outflow of �147.0m
last year to an inflow of �45.0m this year.
After net interest payments of �57.8m, tax payments of �14.5m, dividend
payments to shareholders and minorities of �18.6m, payments in respect of
acquisitions of �82.2m and net income from property sales less capital spend of
�17.0m, the net debt movement increased by �111.1m. After currency exchange
gains the increase in net debt in comparison with 31 March 2003 was �87.0m.
However, in comparison with 30 September 2002, net debt has fallen by �137.7m
from �1,084.5m to �946.8m.
Treasury
On 2 and 3 October 2003, the Group completed a reorganisation of its borrowings
with the objective of lengthening the maturity dates, thereby strengthening
the base on which to build the underlying business, as well as diversifying the
lender base and the currencies of borrowing. Two capital market issues were
successfully completed; a high yield offering of Euro425m 8.625% Senior Notes
maturing in 2013 and an offering of US$243.3m Guaranteed Convertible Bonds
maturing in 2010. In parallel, certain of the existing Senior Notes were
prepaid and the existing revolving credit bank facilities cancelled and new
revolving credit bank facilities agreed.
Note: Industry share figures based on industry data from the IFPI
ATTACHMENTS
EMI GROUP PLC INTERIM REPORT 2003/04 (unaudited)
(a) Financial highlights for the six months ended 30 September 2003.
(b) Consolidated profit and loss account for the six months ended 30
September 2003.
(c) Consolidated balance sheet at 30 September 2003.
(d) Statement of total recognised gains and losses for the six months
ended 30 September 2003.
(d) Reconciliation of movements in shareholders' funds for the six months
ended 30 September 2003.
(e) Consolidated cash flow statement for the six months ended 30 September
2003.
(f) Notes to the consolidated cash flow statement for the six months ended
30 September 2003.
(g)-(j) Notes to the accounts for the six months ended 30 September 2003.
Attachment (a)
FINANCIAL HIGHLIGHTS
for the six months ended 30 September 2003 (unaudited)
Six months Six months
ended ended
30 September 30 September
2003 2002
Notes �m �m
Group turnover 2 960.3 961.5
EBITDA (i) 98.7 100.2
Group operating profit (EBITA)(ii) 2 79.7 79.0
Adjusted PBT(iii) 39.4 42.2
Profit before taxation 11.9 194.3
Adjusted diluted earnings per share 3.6p 2.9p
(iv)
Basic earnings per share 1.1p 17.7p
Dividend per share 6 2.0p 2.0p
Return on sales (v) 8.3% 8.2%
Interest cover (vi) 2.4x 2.8x
(i) EBITDA is Group operating profit before operating exceptional items,
depreciation and amortisation of goodwill and music copyrights.
(ii) Group operating profit (EBITA) is before operating exceptional items
and amortisation of goodwill and music copyrights.
(iii) Adjusted PBT is before both operating and non-operating exceptional
items and amortisation of goodwill and music copyrights.
(iv) Adjusted diluted earnings per share is before both operating and
non-operating exceptional items and amortisation of goodwill and music
copyrights.
(v) Return on sales is defined as Group operating profit before operating
exceptional items and amortisation of goodwill and music copyrights as
a percentage of Group turnover.
(vi) Interest cover is defined as the number of times EBITDA is greater
than Group finance charges.
Attachment (b)
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months ended 30 September 2003 (unaudited)
Six months ended Six months ended
30 September 2003 30 September 2002
Total Before excep Before excep Total
items & items &
amortn amortn
�m �m �m �m
Group turnover (note 2) 960.3 960.3 961.5 961.5
Group operating profit before 79.7 79.7 79.0 79.0
exceptional items and amortisation
Operating exceptional items (21.8) - - -
Group operating profit (loss) before 57.9 79.7 79.0 79.0
amortisation
Amortisation (24.4) - - (22.6)
Group operating profit (loss) (notes 2 33.5 79.7 79.0 56.4
&3)
Share of operating profit in joint - - 0.4 0.4
venture (discontinued)
Share of operating (losses) profits in (0.3) (0.2) 0.1 -
associates
Total operating profit (loss) 33.2 79.5 79.5 56.8
Non-operating exceptional items 20.5 - - 174.8
Profit (loss) before finance charges 53.7 79.5 79.5 231.6
Finance charges
Group (inc. associates) (41.8) (40.1) (36.0) (36.0)
Joint venture (discontinued) - - (1.3) (1.3)
Total finance charges (note 4) (41.8) (40.1) (37.3) (37.3)
Profit (loss) on ordinary activities 11.9 39.4 42.2 194.3
before taxation
Taxation on profit (loss) on ordinary (6.0) (11.8) (13.5) (51.7)
activities (note 5)
Profit (loss) on ordinary activities 5.9 27.6 28.7 142.6
after taxation
Minority interests (equity) 2.9 (4.2)
Profit attributable to members of the 8.8 138.4
Holding Company
Dividends (equity) (note 6) (15.5) (15.6)
Transfer (from) to profit & loss (6.7) 122.8
reserve
Earnings per share (EPS) Six months ended Six months ended
30 September 2003 30 September 2002
Basic earnings per Ordinary Share 1.1p 17.7p
Diluted earnings per Ordinary Share 1.1p 17.7p
Adjusted basic earnings per Ordinary 3.6p 2.9p
Share
Adjusted diluted earnings per Ordinary 3.6p 2.9p
Share
Adjusted earnings are included as they provide a better understanding of the
underlying trading performance of the Group on a normalised basis.
Average exchange rates for the period Six months ended Six months ended
30 September 2003 30 September 2002
US$ to �1 1.62 1.51
Euro to �1 1.43 1.58
Yen to �1 189.03 184.68
The results for the period have been translated into sterling at the
appropriate average exchange rates.
Attachment (c)
CONSOLIDATED BALANCE SHEET
at 30 September 2003 (unaudited)
At 30 At 30
September 2003 September
2002
�m �m
Fixed assets
Music copyrights 450.3 462.1
Goodwill 57.6 59.2
Tangible fixed assets 266.5 274.3
Investments 27.9 54.7
802.3 850.3
Current assets
Stocks 37.1 36.7
Debtors, including deferred taxation 875.8 923.2
Investments: liquid funds 1.1 1.0
Cash at bank & in hand and cash deposits 127.5 111.0
1,041.5 1,071.9
Creditors: amounts falling due within one year
Borrowings (49.5) (38.6)
Other creditors (1,163.7) (1,127.4)
(1,213.2) (1,166.0)
Net current liabilities (171.7) (94.1)
Total assets less current liabilities 630.6 756.2
Creditors: amounts falling due after more than
one year
Borrowings (1,025.9) (1,157.9)
Other creditors (112.9) (41.3)
(1,138.8) (1,199.2)
Provisions for liabilities and charges (89.7) (144.0)
(597.9) (587.0)
Capital and reserves
Called-up share capital 110.4 110.4
Share premium account 445.8 445.8
Capital redemption reserve and other reserves 751.8 751.8
Profit & loss reserve (1,996.9) (2,024.8)
Equity shareholders' funds (688.9) (716.8)
Minority interests (equity) 91.0 129.8
(597.9) (587.0)
Period end exchange rates
At 30 September 2003 At 30
September
2002
US$ to �1 1.66 1.57
Euro to �1 1.43 1.59
Yen to �1 185.60 191.45
The balance sheet has been translated into sterling at the appropriate period
end exchange rates.
Attachment (d)
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the six months ended 30 September 2003 (unaudited)
Six months Six months ended
ended
30 September 2002
30 September
2003
�m �m �m �m
Profit for the period 8.8 138.4
Currency retranslation - Group 11.1 7.1
Currency retranslation - joint venture (HMV (0.2) (0.2)
Group plc - discontinued) and associates
Other recognised gains 10.9 6.9
Total recognised gains and losses relating 19.7 145.3
to the period
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the six months ended 30 September 2003 (unaudited)
Six months Six months ended
ended
30 September 2002
30 September
2003
�m �m
Opening shareholders' funds (693.1) (1,030.2)
Profit for the period 8.8 138.4
Dividends (equity) (note 6) (15.5) (15.6)
Other recognised gains 10.9 6.9
Goodwill adjustments - 183.7
Net increase in shareholders' funds 4.2 313.4
Closing shareholders' funds (688.9) (716.8)
Attachment (e)
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 September 2003 (unaudited)
Six months Six months
ended ended
30 September 30 September
2003 2002
�m �m
Net cash inflow (outflow) from operating 45.0 (147.0)
activities
Dividends received from associates - 0.1
Returns on investments and servicing of finance
Net interest paid (57.8) (33.6)
Dividends paid to minorities (2.9) (6.5)
Net cash outflow from returns on investments and (60.7) (40.1)
servicing of finance
Tax paid (14.5) (12.2)
Net cash inflow from capital expenditure and 17.0 143.9
financial investment
Net cash outflow from acquisitions and disposals (82.2) (6.4)
(note 7)
Equity dividends paid (15.7) -
Net cash outflow before management of liquid (111.1) (61.7)
resources and financing
Management of liquid resources (note b) (1.7) 0.4
Financing: New loans (note b) 201.0 818.1
Loans repaid (note b) (79.1) (722.9)
Net cash inflow from management of liquid 120.2 95.6
resources and financing
Increase in cash (note b) 9.1 33.9
Reconciliation of net cash flow to movement in net debt
Six months ended Six months
ended
30 September 2003
30 September
2002
�m �m
Increase in cash 9.1 33.9
Cash outflow (inflow) from increase 1.7 (0.4)
(decrease) in liquid resources
Cash inflow from increase in loans (201.0) (818.1)
Cash outflow from repayment of loans 79.1 722.9
Change in net debt resulting from cash (111.1) (61.7)
flows
Loans acquired (0.4) (5.5)
Exchange differences 24.5 40.6
Movement in net debt (87.0) (26.6)
Net debt at beginning of period (859.8) (1,057.9)
Net debt at end of period (946.8) (1,084.5)
Attachment (f)
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 September 2003 (unaudited)
a) Reconciliation of operating profit to net cash flow from operating
activities:
Six months Six months
ended ended
30 September 30 September
2003 2002
�m �m
Group operating profit 33.5 56.4
Depreciation charge 19.0 21.2
Amortisation charge:
Music copyrights 22.3 20.8
Goodwill 2.1 1.8
Amounts provided 3.9 7.2
Provisions utilised (21.1) (59.4)
(Increase) decrease in working capital:
Stock (0.9) 0.5
Debtors 39.9 (86.0)
Creditors (53.7) (109.5)
Net cash inflow (outflow) from operating 45.0 (147.0)
activities
b) Analysis of movement in the Group's net borrowings in the period
At Cash flow Acquisitions Exchange At 30
movement September
1 April (disposals) 2003
2003
�m �m �m �m �m
Cash at bank and in 99.9 25.1 - 1.1 126.1
hand
Overdrafts (25.0) (16.0) - 1.7 (39.3)
Cash 74.9 9.1 - 2.8 86.8
Debt due after more (920.5) (127.0) - 21.6 (1,025.9)
than one year
Debt due within one (12.8) 3.0 (0.4) 0.1 (10.1)
year
Finance leases (2.2) 2.1 - - (0.1)
Financing (935.5) (121.9) (0.4) 21.7 (1,036.1)
Investments: liquid 0.5 0.6 - - 1.1
funds
Cash deposits 0.3 1.1 - - 1.4
Liquid resources 0.8 1.7 - - 2.5
Total (859.8) (111.1) (0.4) 24.5 (946.8)
Cash inflow on financing of �(121.9)m is split between new loans of �(201.0)m
and loans repaid of �79.1m.
The Group has cash and liquid resources balances of �24.5m held with banks
within the UK and �104.1m held with banks outside, but freely transferable to,
the UK.
The following definitions have been used:
Cash: Overdrafts, cash in hand and deposits repayable on demand if available
within 24 hours without penalty.
Liquid resources: Investments and deposits, other than those included as cash,
which are readily convertible into known amounts of cash.
Financing: Borrowings, less overdrafts which have been treated as cash.
Attachment (g)
NOTES TO THE ACCOUNTS
for the six months ended 30 September 2003 (unaudited)
NOTE 1 - ACCOUNTING POLICIES - basis of preparation
The interim financial information comprises the accounts of the Company and its
subsidiaries prepared under the historic cost convention and in accordance with
applicable accounting standards. The results for the six months ended 30
September 2003 and 30 September 2002 represent continuing operations, except
where expressly stated on the consolidated profit and loss account and in the
notes to the accounts.
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's accounts for the year ended 31 March
2003. Statutory accounts for the year ended 31 March 2003, which incorporate an
unqualified auditor's report, have been filed with the Registrar of Companies.
NOTE 2 - SEGMENTAL ANALYSES
TURNOVER Six months Six months
ended ended
30 September 30 September
2003 2002
�m �m
By class of business:
Recorded Music 758.6 759.3
Music Publishing 201.7 202.2
Group 960.3 961.5
By origin:
United Kingdom 129.3 135.4
Rest of Europe 303.0 272.1
Latin America 16.8 26.2
North America 328.5 333.6
Asia Pacific 173.8 187.5
Other 8.9 6.7
Group 960.3 961.5
Turnover excludes the Group's share of amounts relating to the joint venture
(HMV Group plc - discontinued) and associates.
Attachment (h)
NOTES TO THE ACCOUNTS continued
for the six months ended 30 September 2003 (unaudited)
NOTE 2 - SEGMENTAL ANALYSES continued
OPERATING PROFIT Six months Six months
ended ended
30 September 30 September
2003 2002
�m �m
By class of business:
Recorded Music 28.2 28.0
Music Publishing 51.5 51.0
Group 79.7 79.0
Operating exceptional items and amortisation
Recorded Music (20.6) (2.8)
Music Publishing (25.6) (19.8)
Group operating profit 33.5 56.4
By origin:
United Kingdom 22.3 20.9
Rest of Europe 17.0 17.2
Latin America (5.4) (2.7)
North America 43.2 19.9
Asia Pacific 1.7 23.2
Other 0.9 0.5
Group 79.7 79.0
Operating profit excludes the Group's share of amounts relating to the joint
venture (HMV Group plc - discontinued) and associates.
OPERATING ASSETS Six months Six months
ended ended
30 September 30 September
2003 2002
�m �m
By class of business:
Recorded Music 202.9 252.4
Music Publishing 406.9 443.3
Group 609.8 695.7
By origin:
United Kingdom 49.6 85.4
Rest of Europe 64.3 39.3
Latin America 3.8 6.7
North America 359.2 440.6
Asia Pacific 127.5 115.9
Other 5.4 7.8
Group 609.8 695.7
Operating assets include deferred consideration of �25.7m. This amount is not
conditional upon the satisfaction of future performance criteria.
Attachment (i)
NOTES TO THE ACCOUNTS continued
for the six months ended 30 September 2003 (unaudited)
NOTE 3 - EXCEPTIONAL ITEMS
(i) Operating exceptional items
Six months Six months
ended ended
30 September 30 September
2003 2002
�m �m
Impact of retail destocking in Japan, including (16.9) -
amended returns terms
Reorganisation costs* (4.9) (4.2)
Release of overprovision for reorganisation - 4.2
costs charged in prior year
Total (21.8) -
The attributable tax benefit is �7.4m (2002/03:
�nil).
* The 2003/04 costs refer to headcount reduction and system write-offs in Music
Publishing (2002/03 - headcount reduction in Recorded Music)
(ii) Non-operating exceptional items
Six months Six months
ended ended
30 September 30 September
2003 2002
�m �m
Net gain (provision for loss) on sale of fixed 20.5 19.2
assets and investments
Profit on sale of HMV Group plc, including - 181.1
goodwill of �262.5m.
(Loss) on sale of subsidiary undertaking, - (25.5)
including goodwill of �8.4m
Total 20.5 174.8
The attributable tax charge is �1.6m (2002/03: �
38.2m).
NOTE 4 - FINANCE CHARGES
Six months Six months
ended ended
30 September 30 September
2003 2002
�m �m
Interest payable on:
Bank overdrafts and loans 33.5 29.5
Other 7.6 8.8
41.1 38.3
Interest receivable on:
Bank balances (0.9) (1.0)
Other (0.1) (1.3)
(1.0) (2.3)
Group finance charges (including associates) 40.1 36.0
Joint venture finance charges (HMV Group plc - - 1.3
discontinued)
Exceptional refinancing costs 1.7 -
Total 41.8 37.3
Finance charges for associates are �nil (2002/
03: �nil).
Attachment (j)
NOTES TO THE ACCOUNTS continued
for the six months ended 30 September 2003 (unaudited)
NOTE 5 - TAXATION
The tax charge for the six months ended 30 September 2003 has been calculated
by reference to the proforma tax rate for the year ending 31 March 2004. The
total tax charge of �6.0m (2002/03: �51.7m) includes �5.8m credit on
exceptional items (2002/03: �38.2m charge).
The Group's share of the tax for the joint venture (HMV Group plc -
discontinued) was �nil (2002/03: credit of �0.3m).
NOTE 6 - DIVIDENDS (equity)
Six months Six months
ended ended
30 September 30 September
2003 2002
�m �m
Ordinary dividends:
Interim 15.8 15.8
Adjustment to the 2003 final dividend (0.3) -
Adjustment to the 2002 final dividend - (0.2)
Total 15.5 15.6
The interim dividend of 2.0p per share will be paid on 2 April 2004 to
shareholders on the register at the close of business on 5 March 2004.
NOTE 7 - INVESTMENTS
The Group acquired a further 30% of Jobete Music Co., Inc. on 10 April 2003,
for a consideration of US$109.3m. It had acquired an initial 50% of Jobete
Music Co., Inc. in 1997. Jobete Music Co., Inc. owns the Jobete song catalogue,
one of the world's premier music publishing catalogues containing the classic
standards of the Motown era. The minority shareholder has the right to require
the Group to buy the remaining shareholding at a date not earlier than April
2004 and not later than April 2005, failing which the Group has the option,
exercisable in October 2005, to purchase the shareholding. The consideration
payable for the remaining 20% will be not less than US$75.1m and not more than
US$86.3m.
The accounting for this transaction has not been finalised at 30 September
2003, as is allowed by accounting standards. The full acquisition accounting
and disclosure will be included in the financial statements for the year ending
31 March 2004. At 30 September 2003, the minority interest has been reduced by
�34.6m, to reflect the buyout of 30%, with the excess consideration paid being
reflected as an addition to music copyrights, �33.4m, until the accounting is
finished.
Cash consideration paid in respect of other investments during the period
totalled �14.5m, offset by cash acquired of �0.3m.
NOTE 8 - POST BALANCE SHEET EVENT
On 2 and 3 October 2003 the Group completed a major restructuring of its
borrowings. Five separate but related transactions were completed: (a) the
issue of Euro425m 8.625% Senior Notes due 2013; (b) the issue of US$243.3m
Guaranteed Convertible Bonds due 2010; (c) the cancellation of the existing
revolving credit bank facilities due 2005; (d) the finalisation of a new �250m
revolving credit bank facility due 2007; and (e) prepayment of US$25m Senior
Notes due 2012 and US$31.25m Senior Notes due 2009. These transactions and
their related costs will be reported in the full year.
6
END