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EMI Group PLC (EMI)

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Tuesday 19 November, 2002

EMI Group PLC

Interim Results


              EMI GROUP plc INTERIM RESULTS TO 30 SEPTEMBER 2002               

                     OPERATING PROFIT UP 83% IN FIRST HALF                     

              FURTHER MARGIN IMPROVEMENT EXPECTED IN SECOND HALF               

LONDON 19th November 2002: EMI Group plc announces its trading results for the
six months ended 30 September 2002:

Summary trading results

Six months ended 30 September 2002

                                               2002         2001       Change
                                                                             
                                                 £m           £m           £m
                                                                             
Turnover                                      961.5       1067.0      (105.5)
                                                                             
Operating profit (EBITA)                       79.0         43.1         35.9
                                                                             
Adjusted PBT                                   42.2        (2.0)         44.2
                                                                             
Net profit after tax                          138.4       (54.4)        192.8
                                                                             
Diluted earnings per share (pence)              2.9        (0.8)          3.7

Highlights

- Operating profit £79.0m (up 83.3%) on group sales down 9.9% (7.3% at constant
currency);

- Profit before tax, amortisation and exceptional items rises to £42.2m
compared with a loss of £2.0m last year;

- Net profit after tax £138.4m (compared with a loss of £54.4m last year)
including net profits from disposals;

- Turnaround in Recorded Music with restructuring programme delivering improved
margins, predicted fixed cost savings and better cash management;

- Music Publishing continuing to make progress notwithstanding the fall in the
global recorded music market;

- Group successfully refinanced, with debt re-structured to assure liquidity
and provide healthy balance of long and short term borrowings;

- Dividend declared at 2.0 pence per share in anticipation of performance
supporting a full year payment of 8.0 pence per share, maintaining last year's
level.

Eric Nicoli, Chairman of EMI Group plc, said, "These results reflect another
solid performance from EMI Music Publishing and demonstrate the scale and
success of the changes we have implemented in EMI Recorded Music in the year
since Alain Levy's appointment.

"In the second half of the financial year we expect the global recorded music
market to continue to decline, but at a reducing rate. This market weakness
will now result in full year sales in Recorded Music below last year's level.
Nonetheless, we expect that significant and accelerating margin improvement in
that business, coupled with continued strength in Music Publishing, will enable
us to deliver a substantial full year improvement at all levels of
profitability for the group.

"We are committed to changing the way we do business. Great progress has been
made, but there is much work still to do. Increasingly sophisticated consumers
and advancing technology present us with a host of opportunities and
challenges. We are taking determined steps to develop compelling business
models for the legitimate digital delivery of music as well as introducing new
physical products. In parallel, we are taking the battle to the pirates, and
are intent on making real progress in reducing the level of illegal copying. We
call on governments and enforcement agencies around the world to work with us
to protect the rights of all intellectual property holders, and give support to
the creative community."

Enquiries

EMI Group plc                                                                
                                                                             
Amanda Conroy             Corporate Communications    +44 20 7667 3216       
                                                                             
Siobhan Turner            Investor Relations          +44 20 7667 3234       
                                                                             
Brunswick Group Limited                                                      
                                                                             
Patrick Handley                                       +44 20 7404 5959       

Chairman's Statement

These results reflect another solid performance from EMI Music Publishing and
demonstrate the scale and success of the changes we have implemented in EMI
Recorded Music in the year since Alain Levy's appointment. The group made a
pre-tax profit, before exceptional items and amortisation, of £42.2m, compared
with a loss of £2.0m last year. Net earnings per share, before exceptional
items, amortisation, and the impact of related tax and minority interests,
increased to 2.9p from a loss of 0.8p last year.

EMI Recorded Music turnover was down 12.4% to £759.3m, reflecting the impact of
our decision to hold back key releases from the first quarter of our financial
year to minimise the disruption from our comprehensive restructuring of the
recorded music operations. On a constant currency basis, turnover decreased
9.9%. The success of our re-creation programme can be measured in the very
substantial uplift in operating profit in Recorded Music, from an operating
loss last year of £8.1m to a profit of £28.0m, an increase of £36.1m.

EMI Music Publishing grew turnover to £202.2m, an increase of 1.1% on the six
months ended 30 September 2001. On a constant currency basis, turnover grew by
4.1%. Operating profit decreased marginally to £51.0m from £51.2m the prior
year, but on a constant currency basis increased by 2.3%.

In May 2002, HMV Group plc ("HMV"), of which we owned 42.65%, floated on the
London Stock Exchange, and EMI sold part of its stake, realising cash of £
140.6m and an exceptional profit before tax of £181.1m. We also realised cash
of £33.0m and an exceptional gain of £27.4m on the sale of our stake in Viva
Media AG. These gains were partially offset by losses on the disposal of
certain other assets, resulting in a net exceptional gain for the six months
ended 30 September 2002 of £174.8m.

Overall, group profit after amortisation, exceptional items, tax and minority
interests was £138.4m, compared with a loss in the prior year of £54.4m, an
increase of £192.8m.

The Board has declared an interim dividend of 2.0p per share in anticipation of
performance supporting a total dividend of 8.0p per share, maintaining last
year's level.

October marked one year since the appointment of Alain Levy as Chairman and CEO
of EMI Recorded Music. The magnitude of the change he and his team have made in
that time has been enormous. Fixed costs have been very significantly reduced,
giving the business more flexibility. But, just as importantly, variable costs
are also falling, driven by the greater efficiency and effectiveness of the new
structure and new approach.

The results can be seen not only in the significant improvement in operating
profit in that division, but also in the signs that the greater emphasis on
artist development and international marketing, which are fundamental to the
longer term success of the business, are bearing fruit, through such talented
artists as The Vines, Norah Jones, Kylie Minogue and Coldplay, to name but a
few.

Led by Group CFO Roger Faxon, we completed the restructuring of our debt into
medium and long-term facilities, including a £325m sterling bond and a US$180m
private placement. Less than 5% of our net borrowings are now due within one
year, compared with over 75% at the same time last year. This places the Group
on a very firm financial footing going forward, and demonstrates the confidence
of the debt markets in our future.

We welcome Peter Georgescu to the Board as a non-executive director. Peter was
for seven years the Chairman and CEO of the international advertising company
Young & Rubicam, and is now their Chairman Emeritus. He is also on the Board of
Levi's and Toys `R' Us. In July, Hugh Jenkins retired from the Board after
seven years of valuable service. His contribution will be greatly missed, and
we wish him well.

In the second half of the financial year we expect the global recorded music
market to continue to decline, but at a reducing rate. This market weakness
will now result in full year sales in Recorded Music below last year's level.
Nonetheless, we expect that significant and accelerating margin improvement in
that business, coupled with continued strength in Music Publishing, will enable
us to deliver a substantial full year improvement at all levels of
profitability for the group.

We are committed to changing the way we do business. Great progress has been
made, but there is much work still to do. Increasingly sophisticated consumers
and advancing technology present us with a host of opportunities and
challenges. We are taking determined steps to develop compelling business
models for the legitimate digital delivery of music as well as introducing new
physical products. In parallel, we are taking the battle to the pirates, and
are intent on making real progress in reducing the level of illegal copying. We
call on governments and enforcement agencies around the world to work with us
to protect the rights of all intellectual property holders, and give support to
the creative community.

Recorded Music Operating Review

The six months ended 30 September 2002 marked a substantial turnaround in the
performance and focus of EMI Recorded Music, as the restructuring and
re-creation programme begun last year started to bear fruit. We have achieved
our planned cost savings, substantially reducing the fixed overhead base in the
business. Beyond this, however, the new management disciplines we have
introduced have gone much further, focusing attention more closely on
controlling costs and generating profitable turnover rather than simply empty
market share. The success of albums from artists like Norah Jones and Coldplay
has reinforced this approach.

We took the decision that we would significantly limit the albums released in
the first quarter, in order to minimise the disruption from the restructuring
programme. Coupled with the effects of roster reduction and closing loss-making
satellite labels last year, turnover in Recorded Music fell to £759.3m this
year from £867.0m in 2001. Exchange rate differences contributed £21.9m to this
fall. In this period, the world music market decreased by 6.1%, and our market
share was 11.8%.

In spite of this drop in turnover, operating profit (EBITA) in EMI Recorded
Music grew substantially, to £35.5m before exchange rate differences and
central cost allocations, from a loss of £3.1m in the same period last year.
This represents an improvement of £38.3m and clearly demonstrates the success
of the actions taken. After the allocation of central costs and movement in
exchange rates, operating profit grew to £28.0m from a loss of £8.1m the
previous year.

In North America, market share fell slightly in the period. The closure of
loss-making satellite labels, cost savings generated by the restructuring and a
focus on improving margins have generated a substantial improvement in
operating profitability. Virgin America has now successfully completed its move
to New York, providing us with a strong East Coast creative presence, and a
creative team across North America to drive long-term profitable improvement.

The Latin American market continued to struggle. Despite this, EMI performed
well, and profitability increased considerably, with a margin improvement of
more than 25 percentage points.

In the UK & Ireland, EMI generated significant market share gains. This
excellent business continually generates good margins and strong repertoire.
The changes made over the past year have enabled it to build on this strength
still further, improving margins and remaining the prime source of successful
UK and Irish repertoire on both domestic and international charts.

Continental Europe was more difficult. Despite continued growth in France, the
European music market fell 4.5% compared with last year, and our market share
decreased although we had considerable success with Herbert Grönemeyer in
Germany and Renaud in France. This drop in performance was largely the result
of the European restructuring progressing more slowly than planned because of
the constraints imposed by labour regulations. It is now almost complete and we
expect to realise the benefits of it in the remainder of this financial year.

Our Japanese business performed extremely well in the period. Although the
market remained weak, we improved our market share substantially, which drove
margins still higher from a strong base. The Asian market outside Japan fell
12.6% compared with last year. Nonetheless, we also increased market share in
this region and improved profitability.

Piracy has always been a factor in the global recorded music market, but in
2001 reached substantial proportions. Large-scale, commercial physical piracy
remains a significant problem, particularly in Latin America and South East
Asia, but more recently, and more worryingly, it has spread to the established
markets of southern Europe. Digital piracy is also an issue, particularly with
regard to public perception.

EMI is at the forefront of the fight against piracy, and we are pleased that
other companies, both in our industry and in other content-related businesses,
now appear to have joined the battle. We have actively lobbied governments
around the world to convince them to enforce their existing intellectual
property legislation and, where that is inadequate, to enact more stringent
laws. Technology is also important - we are now copy protecting our CDs in a
number of regions, and expect to implement user-friendly protection in most of
the world by mid 2003.

We have joined with industry organisations in supporting legal action against
illegal file-sharing sites, and against both the companies that permit this
activity and the individuals who engage in it. The artists are also realising
the importance of protecting their work, and many have joined with the industry
in press and television campaigns to educate consumers on the importance of
copyright protection. Reducing piracy to acceptable levels will take time - we
estimate approximately two years - but we are now making significant progress.

It is essential to reduce illegal copying, but it is equally important to
present consumers with an alternative. The demand for good music is as strong
as ever, and we must ensure that we satisfy that demand, both in traditional
formats and through digital delivery. EMI has always been proactive in making
its content available through legitimate sources. We continue to move forward
aggressively in this area, and have now developed a flexible wholesale digital
pricing policy that allows different business models to operate competitively.

Beyond digital delivery, we are broadening our revenue streams in a number of
other ways. Over the course of the past year, we have sought to expand our
activity in new products, particularly DVD and ring tones. We have also begun
to widen the base of our income, as recently illustrated in the historic deal
with British superstar Robbie Williams, through which we not only profit from
album sales, but also participate in revenue generated through other
music-related activities, such as touring and merchandise.

Looking forward, it is clear that the markets will remain difficult for the
remainder of our financial year, with a consequent impact on our sales.
However, the measures we have taken to reduce the cost base and the much
greater focus on controlling margins will allow a substantial profit uplift for
the full year, and we expect to make continued progress thereafter.

Music Publishing Operating Review

EMI Music Publishing has once again turned in a solid performance in a
difficult market, with turnover for the six months ended 30 September 2002 up
4.1% in constant currency. Including movement in exchange rates, turnover
increased 1.1% to £202.2m.

Before the allocation of central costs and movements in exchange rates,
operating profit (EBITA) grew 3.1% to £53.9m. After taking into account
exchange rate movements and central costs, operating profit for the six-month
period was £51.0m, compared with £51.2m in 2001. Operating margins were 25.9%,
compared with 26.2% for the same period last year. This is principally the
result of geographic and sales mix differences, with a higher proportion of new
release sales in the mechanical revenue stream.

In light of the difficult market conditions in the world recorded music market,
coupled with lower advertising spend on a global basis, these are very good
results. They reflect the strength and depth of our catalogue, and our
continued ability to identify and develop new uses for our songs.

Mechanical royalties comprised 55% of our total publishing revenue in the
period, and grew 1.8% compared with last year. On a constant currency basis,
they grew 4.8%. In the context of the significant fall in the worldwide
recorded music market, this is a very strong result, and reflects the success
of our strategy to gain market share by signing successful new writers.

Performance royalties comprise 25% of our music publishing revenue, and grew
3.1% compared with the same period last year (5.7% at constant currency).
Growth in this revenue stream has been propelled largely through the increasing
penetration of media worldwide, coupled with greater efficiency of the
licensing and collection agencies.

Synchronisation royalties, which represent 13% of total music publishing
revenues, fell 1.8% compared with the same period last year, although at
constant exchange rates they grew 2.6%. The lower growth rate is principally a
function of the flat global advertising market, and the timing of
synchronisation deals, which are individually larger and less regular than
performance and mechanical royalty streams.

Other revenue sources, which represent 7% of the total publishing revenue, fell
marginally compared with the same period last year, also because of the timing
of receipts.

In 1997, we acquired 50% of the Jobete catalogue, which has works from such
talented writer/artists as Marvin Gaye, Stevie Wonder and Smokey Robinson, and
contains over 100 number one hit singles. We look forward to completing the
purchase of the other 50% in the next few months. We are pleased to have this
opportunity to gain full ownership of this wonderful, and lucrative, catalogue.

Our ongoing focus on identifying and signing the hit songwriters of today,
combined with our continued success in promoting the uses of our exceptional
catalogue, has enabled us to achieve this solid performance despite the current
downturn in the global recorded music market, coupled with the fall in
advertising spend in most major territories.

In the remainder of the year, we expect the pressure on mechanical royalties to
increase as the recent decline in the recorded music market flows through to
our receipts. However, we also anticipate that we will continue to make
progress in growing our other revenue streams, particularly performance and
synchronisation. On balance, we feel confident that we will be able to turn in
a good result for the year.

Financial Review

Group profit after tax for the six months ended 30 September 2002 increased to
£138.4m from a loss last year of £54.4m. This reflects a substantial
improvement in the performance of EMI Recorded Music, continued strength in EMI
Music Publishing and the net gain on the disposal of a portion of EMI's
interest in HMV and certain other assets.

Group turnover decreased by £105.5m (£77.6m at constant currency) to £961.5m.
This reflects a reduction in first-half sales in Recorded Music of 12.4% (9.9%
at constant exchange rates) in part offset by an increase of 1.1% from Music
Publishing (just over 4% at constant exchange rates).

Group operating profit (EBITA) for the first half, excluding exceptional items,
increased 83.3% to £79.0m (£80.6m at constant exchange rates) from £43.1m last
year. The largest contribution to this increase came from Recorded Music, which
generated a rise in operating profit to £28.0m compared with a loss of £8.1m
last year. Before the allocation of central costs and at constant exchange
rates, profit was £35.5m compared with a loss of £3.1m last year. Music
Publishing profit remained broadly flat at £51.0m compared with £51.2m in 2001.
At constant exchange rates, and before central cost allocation Music Publishing
had operating profit of £53.9m, compared with £52.3m in the prior year.

Following the exit from loss-making Recorded Music satellite labels, operating
profit from associates also improved substantially, moving from a loss of £8.0m
last year to a profit of £0.1m this year.

In May 2002, HMV listed on the London Stock Exchange and EMI simultaneously
reduced its stake to 14.5%. Therefore, the group no longer consolidates HMV's
operating profit and interest charges, which last year were £3.8m and £9.5m
respectively. For the period up to flotation, EMI's share of HMV's operating
profit was £0.4m, and of its finance charges, £1.3m.

Group finance charges for the first half were £36.0m, £4.6m higher than last
year. The increase arose principally from higher interest rates resulting from
the restructuring of group debt into primarily medium to long-term instruments.

The substantial increase in operating profit was the principal driver of the
rise in adjusted profit before tax (adjusted PBT), which grew to a profit of £
42.2m for the six months ended 30 September 2002 from a loss of £2.0m last
year.

Other items affecting earnings

Amortisation for copyrights acquired and goodwill on acquisitions decreased
from £27.1m to £22.7m, reflecting the write down of investments in certain
satellite labels in the previous financial year in connection with the Recorded
Music restructuring.

During the period, the group also benefited from a non-operating exceptional
profit of £174.8m, largely arising from the disposal of EMI's stakes in HMV and
Viva Media AG, offset by a modest loss relating to certain other disposals. In
the first half of the prior year, the group incurred an operating exceptional
charge of £15.1m, and recognised £12.4m in operating and non-operating
exceptional charges in respect of HMV.

The group tax charge for the first half, before amortisation and exceptional
items, was £51.7m, including tax on the unrecognised profit on the 1998 spin
out of HMV into a joint venture (£25.6m) and taxes on the disposal of other
interests (£12.6m). The underlying tax rate for the period was 32%, up from 30%
last year, which had benefited from recovering Foreign Income Dividend payments
from prior years.

The minority interest charge increased from £2.3m to £4.2m, as a result of
improved profits at our Japanese recorded music operation.

As mentioned above, group profit after tax was £138.4m for the first half,
compared with a loss of £54.4m last year. This resulted in adjusted diluted
earnings per share rising to 2.9p, compared with a loss of 0.8p per share last
year.

In recognition of the progress the group has made the Board declared an interim
dividend of 2.0p per share. The Board's current intention is to maintain the
total dividend at 8.0p per share.

Cash flow and net borrowings

The net cash outflow from operating activities before exceptional items was £
94.6m, compared with an outflow of £109.3m last year. After exceptional
restructuring spend of £52.4m, acquisitions and capital expenditure of £42.4m,
disposal proceeds of £173.7m, interest of £33.6m, tax paid of £12.2m and
including exchange and other movements, net debt increased by £26.6m. Net debt
at 30 September 2002 was £1,084.5m, compared with £1,057.9m at 31 March 2002,
and £1,196.2m at 30 September 2001.

Treasury

EMI has completed the restructuring of its debt into medium and long-term
facilities. The six-year sterling bond issued in May was increased in June to £
325m, and in August we raised a further US$180m from a private placement of
debt with maturities of between seven and 10 years. Together with the net
proceeds of £140.6m from the HMV flotation in May, these funds were used to
repay and cancel part of the £1.3bn revolving credit facility that was
finalised in April 2002.

EMI GROUP PLC INTERIM REPORT (unaudited)

 

 

(a)      Financial highlights for the six months ended 30 September 2002.    
                                                                             
(b)      Consolidated profit and loss account for the six months ended 30    
         September 2002.                                                     
                                                                             
(c)      Consolidated balance sheet at 30 September 2002.                    
                                                                             
(d)      Statement of total recognised gains and losses for the six months   
         ended 30 September 2002.                                            
                                                                             
(d)      Reconciliation of movements in shareholders' funds for the six      
         months ended 30 September 2002.                                     
                                                                             
(e)-(f)  Consolidated cash flow statement for the six months ended 30        
         September 2002.                                                     
                                                                             
(g)-(m)  Notes to the accounts for the six months ended 30 September 2002.   

                                                                               

                                                               Attachment (a)

                             FINANCIAL HIGHLIGHTS                              

            for the six months ended 30 September 2002 (unaudited)             

                                                                               

                                                                               

                                                  6 mths ended   6 mths ended
                                                       30.9.02        30.9.01
                                                                             
                                        Notes               £m             £m
                                                                             
Group turnover                            2              961.5        1,067.0
                                                                             
EBITDA (i)                                               100.2           69.0
                                                                             
Group operating profit (EBITA)(ii)        2               79.0           43.1
                                                                             
Adjusted profit (loss) before taxation                    42.2          (2.0)
(iii)                                                                        
                                                                             
Adjusted diluted earnings per share       8               2.9p         (0.8)p
(iv)                                                                         
                                                                             
Dividend per share                        7               2.0p          4.25p
                                                                             
Return on sales (v)                                       8.2%           4.0%
                                                                             
Interest cover (vi)                                       2.8x           2.2x

 

(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 profit (loss) 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 2002 (unaudited)             

                                                                               

                                                                               

                                    6 mths ended 30.9.02 6 mths ended 30.9.01
                                                                             
                                               EMI Group   EMI Group         
                                              (excl. HMV  (excl. HMV         
                                              Group plc)  Group plc)         
                                                                             
                                        Total     Before      Before    Total
                                                   excep excep items         
                                                 items &    & amortn         
                                                  amortn                     
                                                                             
                                           £m         £m          £m       £m
                                                                             
                                                                             
                                                                             
Group turnover (note 2)                 961.5      961.5     1,067.0  1,067.0
                                                                             
Group operating profit (notes 2&3)       56.4       79.0        43.1      1.7
                                                                             
Share of operating profit in joint        0.4          -           -      3.8
venture                                                                      
                                                                             
before exceptional items                                                     
                                                                             
Share of operating profit in joint          -          -           -   (10.3)
venture -                                                                    
                                                                             
exceptional items (note 4)                                                   
                                                                             
Share of operating profit (loss) in       0.4          -           -    (6.5)
joint venture                                                                
                                                                             
Share of operating profits (losses)         -        0.1       (8.0)    (8.8)
in associates                                                                
                                                                             
Total operating profit (loss)            56.8       79.1        35.1   (13.6)
                                                                             
Non-operating exceptional items         174.8          -           -        -
                                                                             
Profit (loss) before finance charges    231.6       79.1        35.1   (13.6)
                                                                             
FINANCE CHARGES                                                              
                                                                             
Group (inc. associates)                (36.0)     (36.0)      (31.4)   (31.4)
                                                                             
Joint venture before exceptional        (1.3)          -           -    (9.5)
items                                                                        
                                                                             
Joint venture - exceptional items           -          -           -    (2.1)
                                                                             
Joint venture                           (1.3)          -           -   (11.6)
                                                                             
Total finance charges (note 5)         (37.3)     (36.0)      (31.4)   (43.0)
                                                                             
Profit (loss) on ordinary activities    194.3       43.1         3.7   (56.6)
before taxation                                                              
                                                                             
Taxation on profit (loss) on ordinary  (51.7)     (13.8)           -      4.5
activities (note 6)                                                          
                                                                             
Profit (loss) on ordinary activities    142.6       29.3         3.7   (52.1)
after taxation                                                               
                                                                             
Minority interests (equity)             (4.2)                           (2.3)
                                                                             
Profit (loss) attributable to members   138.4                          (54.4)
of the Holding Company                                                       
                                                                             
Dividends (equity) (note 7)            (15.6)                          (32.8)
                                                                             
Transfer to (from) profit & loss        122.8                          (87.2)
reserve                                                                      
                                                                             
                                                                             

                                                                               
                                                               Attachment (c)

                                                                               

                          CONSOLIDATED BALANCE SHEET                           

                       at 30 September 2002 (unaudited)                        

                                                                               

                                                                               

                                                        at 30.9.02 at 30.9.01
                                                                             
                                                                     Restated
                                                                             
                                                                £m         £m
                                                                             
FIXED ASSETS                                                                 
                                                                             
Music copyrights                                             462.1      518.0
                                                                             
Goodwill                                                      59.2       62.4
                                                                             
Tangible fixed assets                                        274.3      298.9
                                                                             
Investments: associates                                        6.4       20.8
                                                                             
Other fixed asset investments                                 35.8       21.9
                                                                             
Investments: own shares                                       12.5       14.0
                                                                             
                                                             850.3      936.0
                                                                             
CURRENT ASSETS                                                               
                                                                             
Stocks                                                        36.7       51.2
                                                                             
Debtors                                                      906.3      956.0
                                                                             
Deferred taxation                                             16.9       20.4
                                                                             
Investments: liquid funds                                      1.0        0.9
                                                                             
Cash at bank & in hand & cash deposits                       111.0       92.9
                                                                             
                                                           1,071.9    1,121.4
                                                                             
CREDITORS: amounts falling due within one year                               
                                                                             
Borrowings                                                  (38.6)    (927.9)
                                                                             
Other creditors                                          (1,127.4)  (1,176.3)
                                                                             
                                                         (1,166.0)  (2,104.2)
                                                                             
NET CURRENT LIABILITIES                                     (94.1)    (982.8)
                                                                             
TOTAL ASSETS LESS CURRENT LIABILITIES                        756.2     (46.8)
                                                                             
CREDITORS: amounts falling due after more than                               
one year                                                                     
                                                                             
Borrowings                                               (1,157.9)    (362.1)
                                                                             
Other creditors                                             (41.3)     (27.2)
                                                                             
                                                         (1,199.2)    (389.3)
                                                                             
PROVISIONS FOR LIABILITIES AND CHARGES                                       
                                                                             
Deferred taxation                                            (2.7)      (3.5)
                                                                             
Other provisions                                           (141.3)     (97.1)
                                                                             
Investments: joint venture (HMV Media Group)                     -    (182.1)
                                                                             
                                                           (144.0)    (282.7)
                                                                             
                                                           (587.0)    (718.8)
                                                                             
CAPITAL AND RESERVES                                                         
                                                                             
Called-up share capital                                      110.4      110.4
                                                                             
Share premium account                                        445.8      445.8
                                                                             
Capital redemption reserve                                   495.8      495.8
                                                                             
Other reserves                                               256.0      256.0
                                                                             
Profit & loss reserve (including goodwill                (2,024.8)  (2,163.3)
previously written off)                                                      
                                                                             
Equity shareholders' funds                                 (716.8)    (855.3)
                                                                             
Minority interests (equity)                                  129.8      136.5
                                                                             
                                                           (587.0)    (718.8)

                                                                               

                                                               Attachment (d)

                                                                               

                                                                               

                STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES                 

            for the six months ended 30 September 2002 (unaudited)             

                                                                               

                                                                               

                                                6 mths ended     6 mths ended
                                                     30.9.02          30.9.01
                                                                             
                                                  £m      £m       £m      £m
                                                                             
Profit (loss) for the period                           138.4           (54.4)
                                                                             
Currency retranslation - Group                   7.1            (1.6)        
                                                                             
Currency retranslation - joint venture         (0.2)              0.7        
                                                                             
Other recognised gains (losses)                          6.9            (0.9)
                                                                             
Total recognised gains and losses relating             145.3           (55.3)
to the period                                                                

                                                                               

                                                                               

                                                                               

                                                                               

                                                                               

                                                                               

              RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS               

            for the six months ended 30 September 2002 (unaudited)             

                                                                               

                                                                               

                                                   6 mths ended  6 mths ended
                                                        30.9.02       30.9.01
                                                                             
                                                                     Restated
                                                                             
                                                             £m            £m
                                                                             
Opening shareholders' funds                           (1,030.2)       (788.4)
                                                                             
Adjustment to opening balance (FRS19)                         -          12.2
                                                                             
Profit (loss) for the period                              138.4        (54.4)
                                                                             
Dividends (equity) (note 7)                              (15.6)        (32.8)
                                                                             
Other recognised gains (losses)                             6.9         (0.9)
                                                                             
Goodwill adjustments                                      183.7           5.2
                                                                             
Shares issued                                                 -           0.2
                                                                             
Share of joint venture reserves adjustments                   -           3.6
                                                                             
Net increase (decrease) in shareholders' funds            313.4        (66.9)
                                                                             
Closing shareholders' funds                             (716.8)       (855.3)

                                                                               

                                                                               

                                                               Attachment (e)

                                                                               

                                                                               

                       CONSOLIDATED CASH FLOW STATEMENT                        

            for the six months ended 30 September 2002 (unaudited)             

                                                                               

                                                                               

                                                    6 mths ended 6 mths ended
                                                         30.9.02      30.9.01
                                                                             
                                                              £m           £m
                                                                             
Net cash outflow from operating activities               (147.0)      (114.5)
                                                                             
Dividends received from associates                           0.1          0.4
                                                                             
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE                              
                                                                             
Net interest paid                                         (33.6)       (30.8)
                                                                             
Dividends paid to minorities                               (6.5)        (1.1)
                                                                             
Net cash outflow from returns on investments and          (40.1)       (31.9)
servicing of finance                                                         
                                                                             
Tax paid                                                  (12.2)       (26.3)
                                                                             
Net cash flow from capital expenditure and                 143.9       (33.4)
financial investment                                                         
                                                                             
Net cash outflow from acquisitions and disposals           (6.4)       (13.8)
                                                                             
Equity dividends paid                                          -            -
                                                                             
Net cash outflow before management of liquid              (61.7)      (219.5)
resources and financing                                                      
                                                                             
Issue of Ordinary Share capital                                -          0.2
                                                                             
Management of liquid resources (note 9)                      0.4          5.3
                                                                             
Financing: New loans (note 9)                              818.1        280.5
                                                                             
           Loans repaid (note 9)                         (722.9)      (154.8)
                                                                             
Net cash inflow from management of liquid                   95.6        131.2
resources and financing                                                      
                                                                             
Increase (decrease) in cash (note 9)                        33.9       (88.3)

                                                                               

                                                               Attachment (f)

                                                                               

                                                                               

                  CONSOLIDATED CASH FLOW STATEMENT continued                   

            for the six months ended 30 September 2002 (unaudited)             

 

 

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

 

                                                 6 mths ended   6 mths ended
                                                      30.9.02        30.9.01
                                                                            
                                                           £m             £m
                                                                            
Group operating profit                                   56.4            1.7
                                                                            
Depreciation charge                                      21.2           25.9
                                                                            
Amortisation charge:                                                        
                                                                            
     Music copyrights                                    20.8           21.4
                                                                            
     Goodwill                                             1.8            4.9
                                                                            
Amounts provided                                          7.2            3.8
                                                                            
Provisions utilised                                    (59.4)         (12.0)
                                                                            
(Increase) decrease in working capital:                                     
                                                                            
     Stock                                                0.5          (5.7)
                                                                            
     Debtors                                           (86.0)          (6.1)
                                                                            
     Creditors                                        (109.5)        (148.4)
                                                                            
Net cash outflow from operating activities            (147.0)        (114.5)

                                                                               

                                                               Attachment (g)

                                                                               

                                                                               

                             NOTES TO THE ACCOUNTS                             

            for the six months ended 30 September 2002 (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 2002 and 30 September 2001 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 2002. Statutory accounts for the year ended 31 March 2002, which       
incorporate an unqualified auditor's report, have been filed with the        
Registrar of Companies.                                                      
                                                                             
The Accounting Standards Board issued the following Financial Reporting      
Standards effective for the Company's year ended 31 March 2002: FRS17 -      
Retirement Benefits; FRS18 - Accounting Policies; and FRS19 - Deferred Tax.  
FRS18 was adopted by the Group effective 1 April 2001 and has had no material
impact on the accounts. FRS19 was adopted by the Group effective 1 April 2001
and the comparatives for the six months ended 30 September 2001 have been    
restated where appropriate. The transitional arrangements for FRS17 were     
adopted from 31 March 2002.                                                  

 

NOTE 2 - SEGMENTAL ANALYSES

 

TURNOVER                                          6 mths ended   6 mths ended
                                                       30.9.02        30.9.01
                                                                             
                                                            £m             £m
                                                                             
BY CLASS OF BUSINESS:                                                        
                                                                             
     Recorded Music                                      759.3          867.0
                                                                             
     Music Publishing                                    202.2          200.0
                                                                             
Group turnover*                                          961.5        1,067.0
                                                                             
BY ORIGIN:                                                                   
                                                                             
     United Kingdom                                      135.4          132.0
                                                                             
     Rest of Europe                                      272.1          312.1
                                                                             
     Latin America                                        26.2           33.0
                                                                             
     North America                                       333.6          390.3
                                                                             
     Asia Pacific                                        187.5          189.9
                                                                             
     Other                                                 6.7            9.7
                                                                             
Group turnover*                                          961.5        1,067.0

 

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

 

 

                                                               Attachment (h)

                                                                               

                                                                               

                        NOTES TO THE ACCOUNTS continued                        

            for the six months ended 30 September 2002 (unaudited)             

 

 

NOTE 2 - SEGMENTAL ANALYSES continued

 

OPERATING PROFIT                                  6 mths ended   6 mths ended
                                                       30.9.02        30.9.01
                                                                             
                                                            £m             £m
                                                                             
BY CLASS OF BUSINESS:                                                        
                                                                             
     Recorded Music                                       28.0          (8.1)
                                                                             
     Music Publishing                                     51.0           51.2
                                                                             
Group*                                                    79.0           43.1
                                                                             
Operating exceptional items and amortisation**                               
                                                                             
     Recorded Music                                      (2.8)         (20.5)
                                                                             
     Music Publishing                                   (19.8)         (20.9)
                                                                             
Group                                                   (22.6)         (41.4)
                                                                             
Group operating profit*                                   56.4            1.7
                                                                             
BY ORIGIN:                                                                   
                                                                             
     United Kingdom                                       20.9           17.3
                                                                             
     Rest of Europe                                       17.2           22.6
                                                                             
     Latin America                                       (2.7)         (10.2)
                                                                             
     North America                                        19.9          (3.6)
                                                                             
     Asia Pacific                                         23.2           15.9
                                                                             
     Other                                                 0.5            1.1
                                                                             
Group*                                                    79.0           43.1

 

*     Group operating profit excludes the Group's share of amounts relating  
      to the joint venture (HMV Group plc) and associates.                   
                                                                             
**    Comprises operating exceptional items of £nil (2001/02: £(15.1)m) and  
      amortisation of goodwill and music copyrights of £(22.6)m (2001/02: £  
      (26.3)m).                                                              

 

 

                                                               Attachment (i)

 

                                                                               

                        NOTES TO THE ACCOUNTS continued                        

            for the six months ended 30 September 2002 (unaudited)             

 

 

NOTE 2 - SEGMENTAL ANALYSES continued

 

OPERATING ASSETS                                  6 mths ended   6 mths ended
                                                       30.9.02        30.9.01
                                                                             
                                                            £m             £m
                                                                             
BY CLASS OF BUSINESS:                                                        
                                                                             
    Recorded Music                                       252.4          378.2
                                                                             
    Music Publishing                                     443.3          503.6
                                                                             
    Other (HMV Group plc)                                    -        (182.1)
                                                                             
Group operating assets                                   695.7          699.7
                                                                             
BY ORIGIN:                                                                   
                                                                             
    United Kingdom                                        85.4         (43.9)
                                                                             
    Rest of Europe                                        39.3           44.8
                                                                             
    Latin America                                          6.7           15.6
                                                                             
    North America                                        440.6          536.7
                                                                             
    Asia Pacific                                         115.9          143.3
                                                                             
    Other                                                  7.8            3.2
                                                                             
Group operating assets                                   695.7          699.7

                                                                               

                                                                               

NOTE 3 - EXCEPTIONAL ITEMS - GROUP

 

(i) Operating exceptional items

                                                  6 mths ended   6 mths ended
                                                       30.9.02        30.9.01
                                                                             
                                                            £m             £m
                                                                             
Release of overprovision for reorganisation                4.2              -
costs charged in prior year                                                  
                                                                             
Reorganisation costs                                     (4.2)         (15.1)
                                                                             
Total operating exceptional items                            -         (15.1)
                                                                             
The attributable tax benefit is £nil (2001/02:                               
£4.5m).                                                                      

 

 

(ii) Non-operating exceptional items

                                                  6 mths ended   6 mths ended
                                                       30.9.02        30.9.01
                                                                             
                                                            £m             £m
                                                                             
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                                                  
                                                                             
Gain (provision for loss) on sale of fixed                19.2              -
asset investments                                                            
                                                                             
Total non-operating exceptional items                    174.8              -
                                                                             
The attributable tax charge is £38.2m (2001/02:                              
£nil).                                                                       

 

 

                                                               Attachment (j)

 

                                                                               

                        NOTES TO THE ACCOUNTS continued                        

            for the six months ended 30 September 2002 (unaudited)             

 

 

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

 

(i) Share of operating exceptional items in       6 mths ended   6 mths ended
joint venture                                          30.9.02        30.9.01
                                                                             
                                                            £m             £m
                                                                             
Restructuring, store closure and fixed asset                 -         (10.3)
impairment costs                                                             
                                                                             
The attributable tax benefit is £nil (2001/02:                               
£nil).                                                                       

 

 

(ii) Share of non-operating exceptional finance   6 mths ended   6 mths ended
charges in joint venture                               30.9.02        30.9.01
                                                                             
                                                            £m             £m
                                                                             
Renegotiation of senior credit facilities                    -          (2.1)
                                                                             
The attributable tax charge is £nil (2001/02: £                              
nil).                                                                        

 

 

NOTE 5 - FINANCE CHARGES

 

                                                  6 mths ended   6 mths ended
                                                       30.9.02        30.9.01
                                                                             
                                                            £m             £m
                                                                             
Interest payable on:                                                         
                                                                             
    Bank overdrafts and loans                             29.5           32.8
                                                                             
    Other                                                  8.8            4.6
                                                                             
                                                          38.3           37.4
                                                                             
Interest receivable on:                                                      
                                                                             
    Bank balances                                        (1.0)          (1.5)
                                                                             
    Other                                                (1.3)          (4.5)
                                                                             
                                                         (2.3)          (6.0)
                                                                             
Group finance charges (including associates)              36.0           31.4
                                                                             
Joint venture finance charges (HMV Group plc)              1.3           11.6
                                                                             
Total finance charges                                     37.3           43.0
                                                                             
Finance charges for associates are £nil (2001/                               
02: £nil).                                                                   

 

 

 

                                                               Attachment (k)

                                                                               

                                                                               

                        NOTES TO THE ACCOUNTS continued                        

            for the six months ended 30 September 2002 (unaudited)             

 

 

NOTE 6 - TAXATION

 

The tax charge for the six months ended 30 September 2002 has been calculated
by reference to the forecast tax rate for the year ending 31 March 2003      
(32.0%). The total tax charge of £51.7m (2001/02: £4.5m credit) includes a £ 
38.2m charge on exceptional items (2001/02: £4.5m credit).                   

 

 

NOTE 7 - DIVIDENDS

 

                                                  6 mths ended   6 mths ended
                                                       30.9.02        30.9.01
                                                                             
                                                            £m             £m
                                                                             
Ordinary dividends:                                                          
                                                                             
Interim                                                   15.8           33.5
                                                                             
Adjustment to the 2002 final dividend                    (0.2)              -
                                                                             
Adjustment to the 2001 final dividend                        -          (0.7)
                                                                             
                                                          15.6           32.8
                                                                             
The interim dividend of 2.0p per share will be paid on 4 April 2003 to       
shareholders on the register at the close of business on 7 March 2003.       

 

 

                                                               Attachment (l)

                                                                               

                                                                               

                        NOTES TO THE ACCOUNTS continued                        

            for the six months ended 30 September 2002 (unaudited)             

 

 

NOTE 8 - EARNINGS PER SHARE

 

                                                  6 mths ended   6 mths ended
                                                       30.9.02        30.9.01
                                                                             
Basic earnings per Ordinary Share                        17.7p         (6.9)p
                                                                             
Diluted earnings per Ordinary Share                      17.7p         (6.9)p
                                                                             
Adjusted basic earnings per Ordinary Share                2.9p         (0.8)p
                                                                             
Adjusted diluted earnings per Ordinary Share              2.9p         (0.8)p
                                                                             
Adjusted earnings 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, 784.1m (2001/02: 782.8m), is the weighted   
average number of Ordinary Shares in issue, 783.9m (2001/02: 782.5m), plus   
adjustments for dilutive share options, 0.2m (2001/02: 0.3m).                

 

Reconciliation of adjusted earnings:                                         
                                                                             
                                                  6 mths ended   6 mths ended
                                                       30.9.02        30.9.01
                                                                             
                                                            £m             £m
                                                                             
Earnings                                                 138.4         (54.4)
                                                                             
Adjustments:                                                                 
                                                                             
Operating exceptional items                                  -           15.1
                                                                             
Non-operating exceptional items                        (174.8)              -
                                                                             
Share of operating exceptional items in joint                -           10.3
venture                                                                      
                                                                             
Share of exceptional finance charges in joint                -            2.1
venture                                                                      
                                                                             
Amortisation of goodwill and music copyrights             22.7           27.1
                                                                             
Attributable taxation                                     38.2          (4.5)
                                                                             
Minority interest (re music copyright                    (2.1)          (2.1)
amortisation)                                                                
                                                                             
Adjusted earnings                                         22.4          (6.4)

 

                                                               Attachment (m)

                                                                               

                                                                               

                        NOTES TO THE ACCOUNTS continued                        

            for the six months ended 30 September 2002 (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, 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            /   movement          
                                             (disposals)                     
                         At 1.4.02                                         At
                                                                      30.9.02
                                                                             
                                £m       £m           £m         £m        £m
                                                                             
Cash at bank and in hand      84.4     27.1            -      (1.0)     110.5
                                                                             
Overdrafts                  (40.7)      6.8            -        0.3    (33.6)
                                                                             
Cash                          43.7     33.9            -      (0.7)      76.9
                                                                             
Debt due after more than   (371.3)  (814.2)            -       29.3 (1,156.2)
one year                                                                     
                                                                             
Debt due within one year   (729.5)    718.5        (5.5)       12.2     (4.3)
                                                                             
Finance leases               (2.8)      0.5            -      (0.1)     (2.4)
                                                                             
Financing                (1,103.6)   (95.2)        (5.5)       41.4 (1,162.9)
                                                                             
Investments: liquid            0.7      0.3            -          -       1.0
funds                                                                        
                                                                             
Cash deposits                  1.3    (0.7)            -      (0.1)       0.5
                                                                             
Liquid resources               2.0    (0.4)            -      (0.1)       1.5
                                                                             
Total                    (1,057.9)   (61.7)        (5.5)       40.6 (1,084.5)
                                                                             
Cash inflow on financing of £(95.2)m is split between new loans of £(818.1)m 
and loans repaid of £722.9m.                                                 

 

 

NOTE 10 - CONTINGENT LIABILITIES

On 19 July 2002 the Group announced that it will complete the purchase of the
Jobete song catalogue, one of the world's premier music publishing catalogues
containing the classic standards of the Motown era. EMI acquired an initial  
50% of Jobete in 1997 and expects to complete the purchase of the remaining  
50% in early 2003. The consideration payable will be calculated by reference 
to the net publisher's share of Jobete in the preceding year, with a minimum 
price of US$168m and a maximum price of US$250m.