Information  X 
Enter a valid email address

EMI Group PLC (EMI)

  Print      Mail a friend

Monday 19 November, 2001

EMI Group PLC

Interim Results

EMI Group PLC
19 November 2001

EMI Group plc

                      Six months ended 30 September 2001



EMI Group plc ('EMI') today announces its results for the six months ended 30
September 2001:



Summary trading results

Six months ended 30 September                   2001         2000       Change

                                                  £m           £m           £m


Turnover                                      1067.0       1144.1       (77.1)
EBITDA                                          69.0        139.2       (70.2)
Operating profit (EBITA)                        43.1        110.9       (67.8)
Adjusted PBT                                   (2.0)         59.1       (61.1)
Diluted EPS (pence)                            (0.8)          4.5        (5.3)
Dividend per share                              4.25         4.25            -



Key points

*        Difficult and unpredictable market conditions worsened in second
quarter

*        Interim dividend held at 4.25p

*        Recorded Music turnover was down 8.9%, generating an operating loss
of £8.1m (2000/01: operating profit £59.9m)

*        Music Publishing performance remains strong, with turnover up 4.0% to
£200.0m and operating profit flat at £51.2m (up 5.1% excluding new media).

*        Music Publishing showed strong organic growth across its entire
business and in all major revenue streams

*        New management in Recorded Music undertaking comprehensive review of
its business and strategy in order to improve performance and reduce costs

*        Second half release schedule strong, with good sales so far from
Kylie Minogue, Lenny Kravitz, Garth Brooks and Pink Floyd, and upcoming
releases from Robbie Williams, Mick Jagger, Yumi Matsutoya, NOW 8 and NOW 50.



Eric Nicoli, Chairman of EMI, said, 'In uncertain market conditions, it
remains difficult to predict the outcome for the full year.  In September, we
indicated that with a strong release schedule and our actions to reduce costs,
we aimed to achieve a second half operating profit in EMI Recorded Music in
line with last year's level.  That target is not out of reach but the final
result will depend critically on market trends which have shown some
deterioration in the past two months.  We expect EMI Music Publishing to
produce another good performance in the second half.'



Enquiries:


EMI Group plc
Amanda Conroy     SVP, Corporate Communications          +44 20 7667 3216

Brunswick Group
Patrick Handley   Partner                                +44 20 7404 5959





Chairman's Statement



The first half of this financial year has been very challenging.  The music
markets became increasingly difficult and unpredictable over the period.  In
the six months ended 30 September 2001, our sales and profits in EMI Recorded
Music, our largest division, reduced significantly, causing Group turnover to
fall 6.7% to £1,067.0m in the first half.  Group operating profit (EBITA)
decreased to £43.1m from £110.9m.



The Group made a pre-tax loss, before exceptional items and amortisation, of £
2.0m, compared with a profit of £59.1m last year.  Net earnings per share,
before exceptional items, amortisation and the impact of related tax and
minority interests, decreased to a loss of 0.8p from earnings of 4.5p for the
same period last year.



EMI Recorded Music turnover was down 8.9% to £867.0m.  It incurred a first
half operating loss of £8.1m, compared with a profit of £59.9m last year.
Excluding new media, the loss was £7.2m.  Economic conditions in Latin America
and underperformance in the US were the major factors in this poor result, and
we have taken action to improve our position in these markets and to equip
ourselves to operate more profitably across the Group.



EMI Music Publishing turnover grew 4.0% to £200.0m.  Operating profit remained
steady at £51.2m including the contribution from new media, and grew by 5.1%
excluding new media.  We have continued to develop our world-leading catalogue
and to pursue licensing opportunities aggressively, resulting in growth in
each of our major income streams: mechanical, performance and synchronisation.



We are restructuring and rationalising our labels and other recorded music
operations to become more focused and more flexible.  As a result, in the six
months ended 30 September 2001, we incurred an exceptional charge of £15.1m.
There will be a larger charge in the second half of the financial year to fund
a far-reaching programme of actions.



EMI has also incurred an exceptional charge of £12.4m in relation to our share
of an exceptional item taken by HMV Media Group plc, in which EMI has a 42.65%
equity holding.  This charge, announced by HMV in August, is intended to help
position the group for further growth and principally related to stock
provisions, asset impairment, store closure and senior debt renegotiation
costs.



The effect of the pre-tax loss, amortisation, exceptional items, tax and
minority interests on the overall result of the Group was a net loss for the
first half of £54.4m compared with a loss of £31.3m last year.



The Board has declared an interim dividend of 4.25p per share, unchanged from
last year.  The level of the final dividend will be set in light of our
financial performance and prospects at the time and in the context of our
strategic review of the Recorded Music business.



In October, the Board appointed Alain Levy Chairman and CEO of EMI Recorded
Music and an executive director of the Board.  Alain has extensive experience
of the music business; for seven years he was President and CEO of PolyGram,
which he built into the world's largest and most profitable music company. I
am delighted to welcome him to EMI and I believe that EMI Recorded Music will
flourish under his leadership.  His strategic review of the business, which
will be completed in early 2002, is expected to result in a restructuring plan
that will deliver greater savings than previously indicated, and will require
a higher exceptional provision.



Alain succeeded Ken Berry, who left EMI by mutual agreement.  Ken spent nearly
30 years at Virgin and EMI, and played a large part in its success.  He leaves
with our best wishes and thanks.



In uncertain market conditions, it remains difficult to predict the outcome
for the full year.  In September, we indicated that with a strong release
schedule and our actions to reduce costs, we aimed to achieve a second half
operating profit in EMI Recorded Music in line with last year's level.  That
target is not out of reach but the final result will depend critically on
market trends which have shown some deterioration in the past two months.  We
expect EMI Music Publishing to produce another good performance in the second
half.





Eric Nicoli

Chairman

EMI Group plc





Recorded Music Operating Review



The six months ended 30 September 2001 were a difficult period for EMI
Recorded Music.  The market as a whole shrank 5.0%, while our market share
decreased slightly from 13.0% last year to 12.4%.  Turnover was down 8.9% from
£951.8m to £867.0m.  This fall in turnover, coupled with higher overhead costs
and increased losses from certain US satellite labels, led to an operating
loss of £8.1m in the first half, compared with a profit of £59.9m for the same
period last year.



Worldwide, EMI Recorded Music's biggest selling albums during the period were
All for You from Janet Jackson (4.8m units), NOW 7 (3.1m units), Gorillaz, the
self-titled debut album from the world's first virtual band (2.8m units) and
Aaliyah, which saw sales surge after the tragic death of the young artist
Aaliyah in August (2.2m units).



EMI Classics has continued to have success in establishing long-term
relationships with major artists.  In the six months ended 30 September 2001
we extended our existing 23-year contract with conductor Sir Simon Rattle, who
takes up his position with the Berlin Philharmonic in 2002, for a further
seven years.



The North American market saw a marginal decrease of 0.4% in the period, while
EMI's market share increased slightly to 10.3%.  However, costs rose
significantly, with increased royalties from a release schedule mix with more
superstars than usual, higher artist advance provisions and poor performance
from some of our satellite US labels.



In the period, the Latin American recorded music market dropped dramatically,
down 30.9% compared with a relatively modest fall of 3.7% last year.  The
breadth and depth of this regional economic downturn resulted in several
retail failures, leading to significantly higher bad and doubtful debts.
EMI's market share dropped from 15.5% last year to 11.4% this year as we
deliberately scaled back our activities in the region to minimise this bad
debt exposure.



In Europe, the music markets grew in the UK, driven by economic growth and a
strong release schedule, and in France from strength in local repertoire.
However, this was insufficient to counteract the substantial decrease in the
German market, which has suffered from illegal CD burning.  The European
market as a whole fell 4.7% while EMI's European market share remained steady
at 18.1%.



The slowdown in the Japanese market continued, although less markedly, falling
7.5% compared with 11.3% in the first half of the last fiscal year.  EMI's
market share decreased from 10.3% to 8.8%, reflecting the strength of last
year's Japanese release schedule.  The Asian market outside Japan fell 7.9%,
principally because of weakness in the Taiwanese market.  This compares with
growth of 2.1% in the first six months of last year.  EMI's market share
remained stable at 7.6%.



Other markets around the world were stronger, growing 5.2% compared with a
fall of 4.4% last year, while our market share decreased marginally, from
17.1% to 16.5%.



EMI Recorded Music continues to pursue a new media strategy of making music
available through as many channels as possible to as many people as possible.
We have entered into a number of regional new media deals in the period, and
most significantly, we have become the first music company to license content
to both online music platforms supported by the music majors, MusicNet and
pressplay.



A comprehensive review of its business and strategy is underway and will take
several months to complete.  Out of this review, we anticipate a substantial
reorganisation, with the dual goals of improving performance and reducing
costs.



A&R remains key to long-term growth, and we will focus on it carefully.  The
US, as the world's largest recorded music market and a major source of
international repertoire, will be a priority, but we will also aim to build on
our solid positions elsewhere, particularly Europe and Japan.  This is a
long-term approach of building sustainable growth from the ground up, and we
are neither targeting nor anticipating instant results.



We are reviewing our options for our manufacturing and distribution
operations.  We see the advantages of greater flexibility and lower
operational gearing in an exit from manufacturing.  Besides cost savings,
service considerations are key, and we will take the necessary time to ensure
that any exit provides the best long term position for EMI Recorded Music.  We
anticipate reaching a decision early in 2002.



The recorded music market remains difficult and unpredictable.  My immediate
priorities are to maximise sales in the important Christmas period, and to
improve the communication and co-operation between labels and regions.  The
business faces a number of challenges in the near and longer term, but I am
confident that with a high performing team and a clear focus on creativity and
profitability, EMI Recorded Music will be well placed to meet them.





Alain Levy

Chairman and CEO

EMI Recorded Music





Music Publishing



EMI Music Publishing, in a difficult market, has again turned in a good
performance, with turnover for the six months ended 30 September 2001 up 4.0%
to £200.0m and net publisher's share ahead 2.1%.  Operating profit increased
modestly, by 0.4% to £51.2m.  Excluding new media income, which last year
included a settlement with MP3.com, operating profit grew by 5.1%.



These results not only reflect the quality of our catalogue, but also the
talent of our active roster of songwriters.  EMI Music Publishing has
reinforced its position as the largest and, we believe, the best music
publishing business in the world, which we achieved by showing strong organic
growth across our entire business and in all income streams.



Mechanical royalties comprise 54% of our total revenue and grew 3.9% compared
with last year.  This is a particularly strong performance in the context of a
worldwide recorded music market that decreased 5.0% over the same period.
This market share gain was led by notable success in the US with Janet
Jackson, Ludacris and Jay-Z, in Germany with Pur, Guano Apes, Ayman and Echt,
and in the UK with The Avalanches, Gorillaz, and Jamiroquai.



Performance royalties comprise 24% of our revenue.  Fuelled by our efforts to
expand our representation on play lists in an increasing number of broadcast
outlets, this revenue stream grew 10.6% in the six months ended 30 September
2001 compared with the same period last year.  Virtually every territory
demonstrated strong performance royalty growth, but the success has been
spurred by the UK, Germany, and in particular the US.



Our third major revenue stream is synchronisation, which represents 14% of our
music publishing revenue.  We again had strong success in the US, the UK and
in Germany, where we agreed a record fee for the licensing of a song in an
advertisement.



We also saw significant growth in other revenue sources.  Our background
library business provides specially-created music for non-featured uses in
advertisements and film and television productions.  In addition, we have
increased our concentration on stage productions and have realised a
significant increase in revenues as a result.  Shows such as Mamma Mia and the
revival of Hair not only produce revenues in themselves, but can also
revitalise a catalogue of songs by bringing the music to a whole new audience.



Our ability to compete and succeed in challenging markets is driven by our
ability to identify and promote the best music of and for its time. We achieve
this by finding the hits, either within our existing catalogue or roster of
talented writers, or by finding new catalogues and writers.  As an indication
of the effectiveness of our efforts, over the last six months we have achieved
an unprecedented one-third share of the singles charts in the US, the UK and
Germany, three of the top ten music markets in the world.



To achieve such a strong presence in the market, and to do so profitably,
requires a persistent focus in three key areas.  First, we are continuing to
expand our catalogue through signings and acquisitions.  Secondly, we are
promoting and licensing that catalogue in as many places and for as many uses
as we can - including to a wide and expanding array of internet services - to
generate further top line growth.  Thirdly, we constantly defend our margins,
both in our day-to-day business and in our deals, so that the full benefit of
revenue growth flows through to the bottom line.



In EMI Music Publishing, our focus is on achieving year-on-year earnings
growth, and on building the long term value of our music assets. The
continuing success of a number of albums including Alicia Keys' multi-platinum
album Songs in A Minor and new releases from artists including Enrique
Iglesias, Michael Jackson and Lenny Kravitz, we are well placed for the second
half of the financial year.  We face some very real challenges in the current
market, but I believe that with a strong focus on finding and building the hit
songs and songwriters, we will be able to meet these challenges successfully.





Martin Bandier

Chairman and CEO

EMI Music Publishing





Financial Review



Group turnover for the first half fell £77.1m, or 6.7%, including a £2.5m gain
from exchange on translation.  In Recorded Music, turnover decreased 8.9% in a
world market that was down 5.0%, with all major regions having lower sales
than in the same period last year.  Music Publishing turnover increased by
4.0%.



Group operating profit (EBITA) fell £67.8m, or 61.1%, to £43.1m reflecting a
disappointing first half in Recorded Music, particularly in Latin America and
the USA, and a steady performance from Music Publishing.  New media activities
generated £1.1m operating profit across both businesses.  New media earnings
comprised e-commerce, licence and other realised new media revenues, less the
related artist costs and new media infrastructure investment costs.  Exchange
on translation contributed a loss of £0.5m to first-half profits.



Group finance charges of £31.4m were £3.8m lower than last year.  This
reduction includes £2.7m from lower market interest rates, £1.7m from higher
average debt levels, and £2.3m from favourable exchange rate movements.



EMI has a 42.65% investment in HMV Media Group, the music and book retailer.
In the first half, this investment yielded a pre-tax loss before exceptional
items of £5.7m, compared with a loss of £14.1m in the six months ended 30
September 2000.  This result reflects both improved trading, with the joint
venture operating profit up £2.5m to £3.8m, and a £5.9m reduction in interest
charges to £9.5m.



As a result of the decrease in operating profit, despite the improved
performance at HMV and the lower Group interest charges, adjusted profit
before tax (adjusted PBT) before amortisation and exceptional items, decreased
from a profit of £59.1m in the six months ended 30 September 2000 to a loss of
£2.0m in the same period this year.



Other items affecting earnings



The amortisation charge for copyrights acquired and goodwill on acquisitions
increased from £25.9m to £27.1m.



The £15.1m operating exceptional item represents the costs arising from label
restructuring and rationalisation, the impact of management action in response
to market conditions in Latin America, and redundancy costs.  HMV also
incurred exceptional operating and non-operating items, of which our share
totalled £12.4m



The Group tax rate, before amortisation and exceptional items, but including
HMV Media Group, remained at 30% (2000/01: 30%).



The minority interest charge decreased from £3.8m to £2.3m, principally
because of lower profits in Japan.



The overall result was a net loss of £54.4m for the first half, compared with
a loss of £31.3m last year.  Adjusted diluted losses per share were 0.8p,
compared with earnings of 4.5p per share in the six months ended 30 September
2000.



The Board has declared an interim dividend of 4.25p, unchanged from last year.



Treasury



During the first half, net borrowings increased by £203.4m to £1196.2m.
EBITDA of £69.0m (2000/01: £139.2m) was more than offset by an additional
working capital requirement of £183.5m (2000/01: £221.1m) to produce a net
operating cash outflow of £114.5m (2000/01: £81.9m).  This additional working
capital requirement reflects normal seasonality and is a lower increase than
in the six months ended 30 September 2000, mainly from the lower level of
trading this year.  During this period, additional cash outflows amounted to £
88.9m, including interest of £30.8m and tax of £26.3m.  Favourable exchange
rate movements decreased the sterling value of net borrowings by a further £
16.3m.





Tony Bates

Finance Director

EMI Group plc






ATTACHMENTS



EMI GROUP PLC INTERIM REPORT (unaudited)




(a)    Financial highlights for the six months ended 30 September 2001.
(b)    Consolidated profit and loss account for the six months ended 30
       September 2001.
(c)    Consolidated balance sheet at 30 September 2001.
(d)    Statement of total recognised gains and losses for the six months ended
       30 September 2001.
(d)    Reconciliation of movements in shareholders' funds for the six months
       ended 30 September 2001.
(e)-(f)Consolidated cash flow statement for the six months ended 30 September
       2001.
(g)-(m)Notes to the accounts for the six months ended 30 September 2001.






                                                                 Attachment (a)






                             FINANCIAL HIGHLIGHTS

            for the six months ended 30 September 2001 (unaudited)




                                                 6 mths ended      6 mths ended
                                                      30.9.01           30.9.00
                                      Notes                £m                £m
Group turnover                          2             1,067.0           1,144.1
EBITDA (i)                                               69.0             139.2
Group operating profit (EBITA)(ii)      2                43.1             110.9
Adjusted (loss) profit before                           (2.0)              59.1
taxation (iii)
Adjusted diluted earnings per share     8              (0.8)p              4.5p
(iv)
Dividend per share                      7               4.25p             4.25p
Return on sales (v)                                      4.0%              9.7%
Interest cover (vi)                                      2.2x              4.0x


(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 (loss) profit before taxation 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 turnover.
(vi)  Interest cover is defined as the number of times Group EBITDA is greater
      than Group finance charges.









                                                                 Attachment (b)





                     CONSOLIDATED PROFIT AND LOSS ACCOUNT

            for the six months ended 30 September 2001 (unaudited)




                                  6 mths ended 30.9.01     6 mths ended 30.9.00
                                      EMI Group (excl. EMI Group (excl.
                                        HMV Media Grp)   HMV Media Grp)
                              Total       Before excep     Before excep   Total
                                        items & amortn   items & amortn
                                   £m               £m               £m      £m

Group turnover (note 2)       1,067.0          1,067.0         1,144.1  1,144.1
Group operating profit (notes     1.7             43.1           110.9     42.1
2&3)
    Share of operating profit     3.8                -                -     1.3
    in joint venture
    before exceptional items

    Share of operating profit  (10.3)                -                -       -
    in joint venture -
    exceptional items (note 4)

Share of operating (loss)       (6.5)                -                -     1.3
profit in joint venture
Share of operating (losses)     (8.8)            (8.0)            (2.5)   (2.5)
in associates
Total operating (loss) profit  (13.6)             35.1           108.4     40.9

FINANCE CHARGES
      Group (inc. associates)  (31.4)           (31.4)           (35.2)  (35.2)
          Joint venture         (9.5)                -                -  (15.4)
          before exceptional items
          Joint venture -       (2.1)                -                -       -
          exceptional items
      Joint venture            (11.6)                -                -  (15.4)
Total finance charges (note    (43.0)           (31.4)           (35.2)  (50.6)
5)
Loss on ordinary activities    (56.6)              3.7            73.2    (9.7)
before taxation

Taxation on (loss) profit on      4.5                                    (17.8)
ordinary activities (note 6)
Loss on ordinary activities    (52.1)                                    (27.5)
after taxation

Minority interests (equity)     (2.3)                                     (3.8)
Loss attributable to members   (54.4)                                    (31.3)
of the holding company
Dividends (equity) (note 7)    (32.8)                                    (32.8)
Transfer from profit & loss    (87.2)                                    (64.1)
reserve






                                                                 Attachment (c)





                          CONSOLIDATED BALANCE SHEET

                       at 30 September 2001 (unaudited)




                                                                   at        at
                                                              30.9.01   30.9.00
                                                      Notes        £m        £m
FIXED ASSETS
Music copyrights                                                518.0     541.9
Goodwill                                                         62.4      59.8
Tangible fixed assets                                           298.9     317.6
Investments: associates                                          20.8      17.8
Other fixed asset investments                                    21.9      22.2
Investments: own shares                                          14.0      20.2
                                                                936.0     979.5
CURRENT ASSETS
Stocks                                                           51.2      47.0
Debtors                                                         956.0   1,037.9
Investments: liquid funds                               9         0.9       2.0
Cash at bank & in hand & cash deposits                  9        92.9     171.7
                                                              1,101.0   1,258.6
CREDITORS: amounts falling due within one year
Borrowings                                              9     (927.9)   (838.5)
Other creditors                                             (1,152.3) (1,197.6)
                                                            (2,080.2) (2,036.1)
NET CURRENT LIABILITIES                                       (979.2)   (777.5)
TOTAL ASSETS LESS CURRENT LIABILITIES                          (43.2)     202.0
CREDITORS: amounts falling due after more than one
year
Borrowings                                              9     (362.1)   (467.0)
Other creditors                                                (27.2)    (71.4)
                                                              (389.3)   (538.4)
PROVISIONS FOR LIABILITIES AND CHARGES
Deferred taxation                                              (27.5)    (27.5)
Other provisions                                               (97.1)   (119.3)
Investments: joint venture (HMV Media Group)                  (182.1)   (186.3)
                                                              (306.7)   (333.1)
                                                              (739.2)   (669.5)
CAPITAL AND RESERVES
Called-up share capital                                         110.4     110.4
Share premium account                                           445.8     445.5
Capital redemption reserve                                      495.8     495.8
Other reserves                                                  256.0     256.0
Profit & loss reserve (including goodwill previously        (2,175.5) (2,108.3)
written off)
Equity shareholders' funds                                    (867.5)   (800.6)
Minority interests (equity)                                     128.3     131.1
                                                              (739.2)   (669.5)



                                                                 Attachment (d)





                STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

            for the six months ended 30 September 2001 (unaudited)




                                                6 mths ended       6 mths ended
                                                     30.9.01            30.9.00
                                                £m        £m       £m        £m
Loss for the period                                   (54.4)             (31.3)
Currency retranslation - Group               (1.6)              (3.1)
Currency retranslation - joint venture         0.7              (0.8)
Other recognised losses                                (0.9)              (3.9)
Total recognised gains and losses                     (55.3)             (35.2)
relating to the period













              RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

            for the six months ended 30 September 2001 (unaudited)




                                               6 mths ended        6 mths ended
                                                    30.9.01             30.9.00
                                                         £m                  £m
Opening shareholders' funds                         (788.4)             (727.6)

Loss for the period                                  (54.4)              (31.3)
Dividends (equity) (note 7)                          (32.8)              (32.8)
Other recognised losses                               (0.9)               (3.9)
Goodwill adjustments                                    5.2               (3.5)
Shares issued                                           0.2                 0.9
Share of joint venture reserves                         3.6               (2.4)
adjustments
Net decrease in shareholders' funds                  (79.1)              (73.0)
Closing shareholders' funds                         (867.5)             (800.6)






                                                                 Attachment (e)





                       CONSOLIDATED CASH FLOW STATEMENT

            for the six months ended 30 September 2001 (unaudited)




                                                    6 mths ended   6 mths ended
                                                         30.9.01        30.9.00
                                                              £m             £m
Net cash outflow from operating activities               (114.5)         (81.9)

Dividends received from associates                           0.4              -

RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Net interest paid                                         (30.8)         (36.4)
Dividends paid to minorities                               (1.1)         (15.1)
Net cash outflow from returns on investments and          (31.9)         (51.5)
servicing of finance
Tax paid                                                  (26.3)         (27.2)

Net cash outflow from capital expenditure and             (28.7)          (4.8)
financial investment
Net cash outflow from acquisitions and disposals          (18.5)          (7.6)
Equity dividends paid                                          -              -

Net cash outflow before management of liquid             (219.5)        (173.0)
resources and financing
Issue of Ordinary Share capital                              0.2            0.9
Management of liquid resources (note 9)                      5.3           40.4
Financing:       New loans (note 9)                        280.5          330.0
                 Loans repaid (note 9)                   (154.8)        (260.5)
Net cash inflow from management of liquid                  131.2          110.8
resources and financing
Decrease in cash (note 9)                                 (88.3)         (62.2)



                                                                 Attachment (f)





                  CONSOLIDATED CASH FLOW STATEMENT continued

            for the six months ended 30 September 2001 (unaudited)





Reconciliation of operating profit to net cash flow from operating activities:


                                               6 mths ended       6 mths ended
                                                    30.9.01            30.9.00
                                                         £m                 £m
Group operating profit                                  1.7               42.1
Depreciation charge                                    25.9               28.3
Amortisation charge:
   Music copyrights                                    21.4               20.6
   Goodwill                                             4.9                5.3
Amounts provided                                        3.8                4.0
Provisions utilised:
   Disposals and fundamental                              -              (5.0)
   reorganisations
   Other                                             (12.0)             (11.1)
(Increase) decrease in working capital:
   Stock                                              (5.7)              (6.1)
   Debtors                                            (6.1)            (161.9)
   Creditors                                        (148.4)                1.9
Net cash outflow from operating                     (114.5)             (81.9)
activities



                                                                 Attachment (g)





                            NOTES TO THE ACCOUNTS

            for the six months ended 30 September 2001 (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 2001 and 30 September 2000 represent continuing operations.
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
2001.  Statutory accounts for the year ended 31 March 2001, which incorporate
an unqualified auditor's report, have been filed with the Registrar of
Companies.
The geographical segments shown in Note 2 have been revised to reflect more
accurately the way the business is currently managed.  The prior year
comparatives have been restated to reflect this.
The Accounting Standards Board issued the following Financial Reporting
Standards effective for the Company's year ending 31 March 2002: FRS17 -
Retirement Benefits; FRS18 - Accounting Policies; and FRS19 - Deferred Tax.
FRS18 and FRS19 were adopted by the Group effective 1 April 2001 and they have
had no material impact on the accounts.  The transitional arrangements for
FRS17 will be adopted from 31 March 2002.



NOTE 2 - SEGMENTAL ANALYSES


TURNOVER                        6 mths ended 30.9.01       6 mths ended 30.9.00

                                                  £m                         £m
BY CLASS OF BUSINESS:
    Recorded Music                             867.0                      951.8
    Music Publishing                           200.0                      192.3
Group turnover*                              1,067.0                    1,144.1

BY ORIGIN:
    United Kingdom                             132.0                      139.6
    Rest of Europe                             312.1                      315.5
    North America                              390.3                      386.2
    Asia Pacific                               189.9                      232.3
    Other                                       42.7                       70.5
Group turnover*                              1,067.0                    1,144.1

BY DESTINATION:
    United Kingdom                             139.1                      147.4
    Rest of Europe                             320.9                      320.9
    North America                              373.0                      367.7
    Asia Pacific                               192.4                      234.4
    Other                                       41.6                       73.7
Group turnover*                              1,067.0                    1,144.1



*    Group turnover excludes the Group's share of amounts relating to the joint
venture (HMV Media Group) and associates.





                                                                 Attachment (h)





                       NOTES TO THE ACCOUNTS continued

            for the six months ended 30 September 2001 (unaudited)





NOTE 2 - SEGMENTAL ANALYSES continued


OPERATING PROFIT                                6 mths ended       6 mths ended
                                                     30.9.01            30.9.00
                                                          £m                 £m
BY CLASS OF BUSINESS:
     Recorded Music                                    (8.1)               59.9
     Music Publishing                                   51.2               51.0
Group*                                                  43.1              110.9

Operating exceptional items and                       (41.4)             (68.8)
amortisation**
Group operating profit*                                  1.7               42.1

BY ORIGIN:
     United Kingdom                                     17.3               18.5
     Rest of Europe                                     22.6               36.2
     North America                                     (3.6)               25.0
     Asia Pacific                                       15.9               24.5
     Other                                             (9.1)                6.7
Group*                                                  43.1              110.9



* Group operating profit excludes the Group's share of amounts relating to the
  joint venture (HMV Media Group) and associates.
* Comprises operating exceptional items of £(15.1)m (2000/01: £(42.9)m) and
* amortisation of goodwill and music copyrights of £(26.3)m (2000/01: £(25.9)
  m).
  Operating exceptional items and amortisation of goodwill and music copyrights
  by class of business is as follows: Recorded Music £(20.5)m (2000/01: £(42.2)
  m); Music Publishing £(20.9)m (2000/01: £(26.6)m).
  Operating exceptional items and amortisation of goodwill and music copyrights
  by origin is as follows: United Kingdom £(3.6)m (2000/01: £(6.8)m);  Rest of
  Europe £(6.3)m (2000/01: £(13.0)m); North America £(27.5)m (2000/01: £(37.3)
  m); Asia Pacific £(2.7)m (2000/01: £(8.9)m); Other £(1.3)m (2000/01: £(2.8)
  m).





                                                                 Attachment (i)





                       NOTES TO THE ACCOUNTS continued

            for the six months ended 30 September 2001 (unaudited)





NOTE 2 - SEGMENTAL ANALYSES continued


OPERATING ASSETS               6 mths ended 30.9.01        6 mths ended 30.9.00

                                                 £m                          £m
BY CLASS OF BUSINESS:
    Recorded Music                            378.2                       374.0
    Music Publishing                          503.6                       517.9
    Other (HMV Media Group)                 (182.1)                     (186.3)
Group operating assets                        699.7                       705.6

BY ORIGIN:
    United Kingdom                           (43.9)                       (5.7)
    Rest of Europe                             44.8                        21.7
    North America                             536.7                       533.4
    Asia Pacific                              143.3                       132.6
    Other                                      18.8                        23.6
Group operating assets                        699.7                       705.6






NOTE 3 - EXCEPTIONAL ITEMS - GROUP



Operating exceptional items
                                                 6 mths ended      6 mths ended
                                                      30.9.01           30.9.00
                                                           £m                £m
Reorganisation costs                                   (15.1)                 -
Proposed merger with Warner Music Group -                   -            (42.9)
deal costs
Total operating exceptional items                      (15.1)            (42.9)
The attributable tax benefit is £4.5m (2000
/01: £nil).


There were no non-operating exceptional items during the six months ended 30
September 2001, nor for the corresponding six months in the prior year.





                                                                 Attachment (j)





                       NOTES TO THE ACCOUNTS continued

            for the six months ended 30 September 2001 (unaudited)





NOTE 4 - EXCEPTIONAL ITEMS - JOINT VENTURE (HMV MEDIA GROUP)


(i) Share of operating exceptional items in       6 mths ended    6 mths ended
joint venture                                          30.9.01         30.9.00
                                                            £m              £m
Restructuring, store closure and fixed asset            (10.3)               -
impairment costs
The attributable tax benefit is £nil (2000/01:
£nil).




(ii) Share of non-operating exceptional finance     6 mths ended   6 mths ended
charges in joint venture                                 30.9.01        30.9.00
                                                              £m             £m
Renegotiation of senior credit facilities                  (2.1)              -
The attributable tax charge is £nil (2000/01: £
nil).





NOTE 5 - FINANCE CHARGES


                                                  6 mths ended     6 mths ended
                                                       30.9.01          30.9.00
                                                            £m               £m
Interest payable on:
    Bank overdrafts and loans                             32.8             36.6
    Other                                                  4.6              2.7
                                                          37.4             39.3
Interest receivable on:
    Bank balances                                        (1.5)            (3.0)
    Other                                                (4.5)            (1.1)
                                                         (6.0)            (4.1)
Group finance charges (including associates)              31.4             35.2
Joint venture finance charges (HMV Media                  11.6             15.4
Group)
Total finance charges                                     43.0             50.6
Finance charges for associates are £nil (2000
/01: £nil).







                                                                 Attachment (k)





                       NOTES TO THE ACCOUNTS continued

            for the six months ended 30 September 2001 (unaudited)





NOTE 6 - TAXATION


The tax charge for the six months ended 30 September 2001 has been calculated
by reference to the forecast tax rate for the year ending 31 March 2002
(30.0%).  However, due to the loss before amortisation and exceptional items
reported for the six months ended 30 September 2001, the tax charge is nil.
The total tax credit of £4.5m (2000/01: £17.8m charge) includes £4.5m benefit
on exceptional items (2000/01: £nil benefit).





NOTE 7 - DIVIDENDS


                                               6 mths ended        6 mths ended
                                                    30.9.01             30.9.00
                                                         £m                  £m
Ordinary dividends:
      Interim                                          33.5                33.5
      Adjustment to the 2001 final                    (0.7)                   -
dividend
      Adjustment to the 2000 final                        -               (0.7)
dividend
                                                       32.8                32.8
The interim dividend of 4.25p per share will be paid on 1 March 2002 to
shareholders on the register at the close of business on 1 February 2002.





                                                                 Attachment (l)





                       NOTES TO THE ACCOUNTS continued

            for the six months ended 30 September 2001 (unaudited)





NOTE 8 - EARNINGS PER SHARE


                                                  6 mths ended     6 mths ended
                                                       30.9.01          30.9.00
Basic earnings per Ordinary Share is calculated as follows:
   Earnings                                           £(54.4)m         £(31.3)m
   Weighted average number of Ordinary Shares           782.5m           782.2m
   in issue
   Earnings per Ordinary Share                          (6.9)p           (4.0)p
Diluted earnings per Ordinary Share is calculated as follows:
   Earnings                                           £(54.4)m         £(31.3)m
   Adjusted weighted average number of                  782.8m           783.2m
   Ordinary Shares
   Earnings per Ordinary Share                          (6.9)p           (4.0)p
Adjusted basic earnings per Ordinary Share is calculated as follows:
   Adjusted earnings                                   £(6.4)m           £35.4m
   Weighted average number of Ordinary Shares           782.5m           782.2m
   in issue
   Adjusted earnings per Ordinary Share                 (0.8)p             4.5p
Adjusted diluted earnings per Ordinary Share is calculated as follows:
   Adjusted earnings                                   £(6.4)m           £35.4m
   Adjusted weighted average number of                  782.8m           783.2m
   Ordinary Shares
   Adjusted earnings per Ordinary Share                 (0.8)p             4.5p
Adjusted earnings per Ordinary Share calculations are based on earnings before
the impact of both operating and non-operating exceptional items and
amortisation of goodwill and music copyrights.  These calculations are included
as they provide a better understanding of the underlying trading performance of
the Group on a normalised basis.
The adjusted weighted average number of Ordinary Shares used in the diluted
earnings per share calculations, 782.8m (2000/01: 783.2m), is the weighted
average number of Ordinary Shares in issue, 782.5m (2000/01: 782.2m), plus
adjustments for dilutive share options, 0.3m (2000/01: 1.0m).

Reconciliation of adjusted earnings:
                                                  6 mths ended     6 mths ended
                                                       30.9.01          30.9.00
                                                            £m               £m
Earnings                                                (54.4)           (31.3)
Adjustments:
    Operating exceptional items                           15.1             42.9
    Share of operating exceptional items in               10.3                -
joint venture
    Share of exceptional finance charges in                2.1                -
joint venture
    Amortisation of goodwill and music                    27.1             25.9
copyrights
    Attributable taxation                                (4.5)                -
    Minority interest (re music copyright                (2.1)            (2.1)
amortisation)
Adjusted earnings                                        (6.4)             35.4




                                                                 Attachment (m)





                       NOTES TO THE ACCOUNTS continued

            for the six months ended 30 September 2001 (unaudited)





NOTE 9 - CASH, LIQUID RESOURCES AND FINANCING

The following definitions have been used:
CASH: Cash in hand and deposits repayable on demand if available within 24
hours without penalty and including overdrafts.
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.



Analysis of movement in the Group's net borrowings in the period:


                                   Cash     Acquisitions/    Exchange
                                   flow       (disposals)    movement
                      At 1.4.01                                       At
                                                                      30.9.01

                             £m      £m                £m          £m        £m
Cash at bank and in       130.4  (38.0)                 -       (0.5)      91.9
hand
Overdrafts               (25.6)  (50.3)                 -         0.9    (75.0)
Cash                      104.8  (88.3)                 -         0.4      16.9

Debt due after more     (464.9)    93.7             (0.4)        11.9   (359.7)
than one year
Debt due within one     (636.0) (219.6)                 -         3.9   (851.7)
year
Finance leases            (3.9)     0.2                 -         0.1     (3.6)
Financing             (1,104.8) (125.7)             (0.4)        15.9 (1,215.0)

Investments: liquid         0.7     0.2                 -           -       0.9
funds
Cash deposits               6.5   (5.5)                 -           -       1.0
Liquid resources            7.2   (5.3)                 -           -       1.9

Total                   (992.8) (219.3)             (0.4)        16.3 (1,196.2)
Cash inflow on financing of £(125.7)m is split between new loans of £(280.5)m
and loans repaid of £154.8m.


The Group's net borrowings at 30 September 2001 comprised:
                                              Liquid resources and          Net
                                                         financing   borrowings
                                     Cash
                                       £m                       £m           £m
Investments: liquid funds               -                      0.9          0.9
Cash at bank and in hand and cash    91.9                      1.0         92.9
deposits
Borrowings due within one year     (75.0)                  (852.9)      (927.9)
Borrowings due after more than one      -                  (362.1)      (362.1)
year
At 30 September 2001                 16.9                (1,213.1)    (1,196.2)
At 31 March 2001                    104.8                (1,097.6)      (992.8)