EMI Music has increased EBITDA to £163 million ($246 million) for the year ending March 2009, an increase of 219.6% on the 2007-2008 EBITDA of £51 million ($77 million).
The earnings increase at the recorded music division occurred during the first full year of ownership by private equity firm Terra Firma, which introduced a major reorganization of the business.
In a statement, the major said that EBITDA growth was driven by a cost-cutting process that saw a £48 million ($72.4 million) year-on-year reduction in the cost of returns, cost management which has now been embedded at EMI Music and overhead savings from the restructuring. EMI says it is on track to deliver the £200 million ($301.85 million) of cost savings earmarked at the time of the acquisition in August 2007.
Net sales increased 4% to £1.07 billion ($1.62 billion), although there was a 10% decline if currency fluctuations were excluded, “slightly more than the contraction in the overall market,” according to the company statement. EMI Music said that it broadly maintained market share at approximately 9.5% (9.7% in the prior year), while U.S. market share was up 1.5 percentage points.
The major said it has started to “rejuvenate its creative output” and named its 2008 best-seller as Coldplay’s “Viva La Vida Or Death And All His Friends” – the biggest-selling global release of the year, according to the IFPI. Other strong sellers included albums by Katy Perry, Lily Allen, Darius Rucker and Herbert Grönemeyer.
Depeche Mode’s “Sounds of the Universe” was cited as an early, strong performer in this financial year and EMI Music said its release schedule for 2009 includes new sets by Air, Alice in Chains, Corinne Bailey Rae, Beastie Boys, Gorillaz, David Guetta, Norah Jones, Massive Attack, Kylie Minogue, Willie Nelson, 30 Seconds to Mars, KT Tunstall, Keith Urban and Robbie Williams, as well as the Beatles reissues.
EMI Music has also been working develop new revenue streams to counter the market decline in physical sales, and today it reported that non-physical sales (including digital and licensing) represented more than 35% of EMI Music’s income compared to 20% in the prior year.
“I am very pleased we have delivered this strong operating performance and would like to thank all the staff and artists whose talent, creativity and hard work made it possible,” said Elio Leoni-Sceti, chief executive of EMI Music, in a statement.
“These results are an important first step in building EMI’s future. We cannot afford to be complacent, however, since there is still a great deal of work to be done to restore EMI to its former greatness and we are doing it in the face of challenging economic conditions. Looking ahead we have some exciting new releases coming up, a much deeper understanding of the music consumer and a new engaged relationship with our artists to build on. Now it has established this platform, EMI can look to the future with confidence and optimism.”
The company also generated operating cash flow of £190 million ($286.4 million) during the year, in contrast to the cash outflow of £142 million ($214 million) it recorded in 2008. The business generated free cash flow of £58 million ($87.4 million), before costs incurred as a result of the restructuring.
All figures are unaudited.
