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EMI Group PLC (EMI)

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Wednesday 16 November, 2005

EMI Group PLC

Interim Results


 

16 November 2005
 

EMI GROUP PLC RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2005
 

EMI Group delivered a strong increase in both revenues and profits in the first
half, with both divisions outperforming the market
 

EMI Group revenues increased to £924.6m, up 5.8% (4.6% on a constant currency
basis). Group profit from operations (EBITA) increased by 12.6% to £86.7m with
operating margin improving from 8.8% to 9.4%
 

EMI Music revenues returned to growth, with a constant currency increase of
4.3% and 6.3% on a pre-IFRS basis. Global market share increased from 12.5% to
13.1%(i),driven by market share gains in almost all regions
 

EMI Music Publishing delivered constant currency revenue growth of 5.8% with
growth across all revenue types and all regions
 

EMI Group's digital sales grew by 142.4% at constant currency to £44.6m,
representing 4.9% of total Group revenues, up from 2.1% of Group revenues in
the prior year's first half
 

For the industry, rapid digital growth almost offset physical declines over the
period, with the total global recorded market declining by an estimated 0.9%
 

Group profit before tax, amortisation and exceptional items (Adjusted PBT)
increased by 9.0% to £41.0m
 

Adjusted diluted EPS increased by 17.6% to 4.0p, and the half-year dividend is
maintained at 2.0p per share

 

Eric Nicoli, Chairman of EMI Group, said, "Today's results show that EMI Group
had a successful first half, delivering significant growth in both revenues and
profits, and that both our recorded music and music publishing divisions made
good progress during the period.
 

The global recorded music industry declined only modestly in the half,
continuing the improved trend driven by rapid digital growth. We remain
confident that digital music will return the industry to growth in due course.
 

With strong release schedules for both EMI Music and EMI Music Publishing, the
Group remains on track to deliver in line with our expectations for the full
financial year."
 

Notes:

(i) Source: EMI Group based on IFPI data. This represents EMI Music's share of 
    global physical sales only and does not include its share of digital sales.
    The industry is working on improving digital market statistics and EMI     
    hopes to include market share figures, including both physical and digital,
    in its full year results announcement.                                     
 

Enquiries


EMI Group plc

Amanda Conroy  Corporate Communications +44 20 7795 7529
                                                        
Claudia Palmer Investor Relations       +44 20 7795 7635
                                                        
Susie Bell     Investor Relations       +44 20 7795 7971
                                                        
Sonia Shah     Investor Relations       +44 20 7795 7625
 

Brunswick Group LLP

Patrick Handley   +44 20 7404 5959
                                  
Pamela Small                      
                                  
Mark Antelme                      
                                  


A live webcast of EMI's presentation to investors and analysts will take place
at 9.00 am (UK time) today, 16 November, and can be accessed via the Company's
web site, www.emigroup.com.  An archive will be available for viewing shortly
thereafter.


Interviews with Eric Nicoli, Chairman, and Martin Stewart, Group Chief
Financial Officer, in video, audio and text are available on www.emigroup.com
and www.cantos.com


Part I

EMI Group Operating Review


EMI Group

EMI Group significantly outperformed the market in the six months ended 30
September 2005, with both divisions delivering good revenue growth. Group
revenues increased by 5.8% to £924.6m during the period, with EBITA growing by
12.6% to £86.7m, driving an operating margin improvement of 8.8% to 9.4%.
Adjusted PBT increased to £41.0m, resulting in adjusted diluted earnings per
share increasing by 17.6% to 4.0p per share.


Industry

Growth in digital music sales continues at a very rapid pace and, on a global
basis, digital now represents approximately 5.8% of the total recorded music
market, compared to approximately 2.0% a year ago. This digital growth almost
offset the decline in physical music sales in the half, with the global
recorded music market declining by an estimated 0.9%.


The development and roll-out of technologies, such as high-speed broadband, 3G,
portable music devices and music phones, is driving digital growth. Almost
weekly, services are being launched around the world, which offer new and
exciting ways for us to deliver our music to consumers. Importantly, many of
these offerings also represent new ways for us to monetise our music content.

Some of the highlights from the last six months include:

The successful launch of music video download services, a new revenue stream
for EMI. iTunes music store in the US sold more than one million videos
industry-wide in its first 20 days, indicating strong consumer demand;

Rapid development of the mobile music market, in particular in the US, with a
number of big mobile operators launching new music services. In September,
Apple, Motorola and Cingular launched the world's first phone with iTunes. More
recently, Sprint Nextel launched the first 'over the air' music service in the
US;

The market for downloads in Japan was established with the launch of the iTunes
music store and iTunes was also recently launched in Australia;

Subscription services gained momentum with the uptake of Napster To Go and the
launch of Yahoo Unlimited. In the UK, Virgin Megastore and HMV launched their
online music stores, which offer compelling download and subscription services;

EMI has agreements to provide its music content to all of the above mentioned
digital distributors.

The digital landscape is very dynamic and growth rates vary significantly by
platform, product and region, largely reflecting advances in technology. Growth
has been fast, consumer interest and demand continues to be strong, but the
technology is not yet perfect or universal. The market place is still at a very
early stage in its development. We are optimistic that on-going technological
advancement will continue to enhance the digital music consumer offering and
dramatically expand our retail reach, with these two factors driving growth in
the consumption of music.


In terms of content protection, in the last six months we have welcomed two
important landmark decisions that represent critical progress in the creative
community's fight against piracy. In both the unanimous US Supreme Court
Grokster ruling and the Kazaa ruling in Australia, the message from the courts
could not have been clearer - businesses based on copyright infringement are
not protected under the law.


We believe that EMI's and the industry's initiatives to date that counter
piracy have had a real impact. Importantly, we are beginning to contain the
growth of online piracy in a world with increasing broadband penetration.
Looking ahead, we will persist in our aggressive pursuit of businesses and
individuals who engage in or facilitate the mass theft of copyrighted works.


EMI Music

EMI Music delivered a strong first-half performance gaining market share in
almost all regions, with global physical share increasing from 12.5% to 13.1%.
The key focus of our A&R strategy remains the development of long-term career
artists, a strong commitment to the development of local repertoire, and
maximising artists' global sales potential. Good progress across all of these
areas has driven the division's performance in the first half:


The albums X&Y from Coldplay and Demon Days from Gorillaz met with critical
acclaim and have sold very well around the world;

A number of albums from new developing artists have sold very well, including
Eye to the Telescope from KT Tunstall, The Magic Numbers from The Magic Numbers
and Rebelde from RBD, all of whom we believe have good future potential;

In the US, Keith Urban has continued to establish himself as a superstar with
his last album Be Here, released over a year ago, selling more than one million
units in the half, taking total units sold to over 2.5m;

Local repertoire sales were very strong, in particular in Continental Europe
where we are seeing the benefits from the restructuring initiatives announced
in 2004. Local successes included Raphael and Souchon in France, Subsonica in
Italy, Bebe, who recently won a Latin Grammy award for "Best New Artist", and
Amaral in Spain, Wir Sind Helden in Germany, Anouk in Benelux, Missy Higgins in
Australia and Radja in Indonesia.


Digital revenues continued to grow very rapidly almost tripling in value on the
prior year to £35.9m. They now represent 5.0% of EMI Music's sales, up from
1.8% in the prior year's first half.


EMI Music Publishing

EMI Music Publishing delivered another strong performance in the first half
with revenue growth reported across all revenue types and all regions. This
again reflects the division's skill in signing the best song-writing talent and
its pursuit of all revenue opportunities, both existing and new.


Hits during the half included releases from songwriters Jermaine Dupri, Rob
Thomas, Kelly Clarkson, James Blunt and Daddy Yankee.


Digital revenues grew strongly during the period, increasing by 42.6% on the
prior year to £8.7m. EMI Music Publishing remains at the forefront of the
publishing industry's effort to ensure that the right structures are in place
to identify and fully collect all future digital revenues. 


Summary and outlook

EMI Group had a successful first half, delivering significant growth in both
revenues and profits. Both our recorded music and music publishing divisions
made good progress during the period. The global recorded music industry
declined only modestly in the half, continuing the improved trend driven by
rapid digital growth. We remain confident that digital music will return the
industry to growth in due course. With strong release schedules for both EMI
Music and EMI Music Publishing, the Group remains on track to deliver in line
with our expectations for the full financial year.


Part II

Financial review


Underlying trading

Group revenue increased by 4.6% at constant currency in the first half of the
year. This comprised an increase in first half sales for EMI Music of 4.3% and
an increase of 5.8% for EMI Music Publishing.  At constant currency, there were
revenue increases in all geographic regions apart from Asia Pacific. The impact
on translation of the slight weakening of Sterling during the period resulted
in a further 1.2% increase in revenue against the equivalent period in 2004/05.
Overall, Group revenue at weighted average exchange rates increased from £
874.0m in the first half of the 2004/05 financial year to £924.6m in the
equivalent period in 2005/06, an increase of 5.8%.


In line with the increase in revenue, Group profit from operations (EBITA)(i)
for the first half grew by 11.7% at constant currency. The EMI Music
contribution, after allocation of central costs, grew by 33.8% at constant
currency, whilst the Music Publishing contribution, after allocation of central
costs, decreased by 1.2%. Exchange rate movements improved Group profit from
operations by 0.9%. After taking currency movements into account, reported
Group profit from operations (EBITA)(i) increased from £77.0m in the first half
of the 2004/05 financial year to £86.7m in the equivalent period in 2005/06.
EMI Music EBITA increased from £28.4m to £38.3m and EMI Music Publishing EBITA
decreased from £48.6m to £48.4m. All geographic regions contributed to the
overall increase in Group EBITA apart from North America and Asia Pacific.
Particularly noteworthy were the increases from £6.6m in 2004/05 to £18.6m in
2005/06 for UK & Ireland, and from £17.6m to £31.3m in Continental Europe.


The Group's share of profit on its associated company investments increased
from £0.3m in 2004/05 to £0.6m in 2005/06. Consequently, the total profit from
operations for the Group increased from £77.3m in the first half of the prior
year to £87.3m in the first half of this year.


Group finance charges before exceptional items increased from £39.7m in the
first six months of 2004/05 to £46.3m in the equivalent period in 2005/06. The
increased finance charges were a consequence of higher interest rates, lower
amortisation of swap gains, lower notional net interest on pension fund assets
and higher average net debt.


The Group tax charge increased from £8.8m to £9.0m in the first half of the
year. As in prior years, the underlying tax rate used in the calculation of the
tax charge for the first half year is the proforma rate for the full year. For
2005/06, the rate is 22.0%.


The Group's adjusted profit on ordinary activities after taxation(ii) increased
from £28.8m in the first six months of 2004/05 to £32.0m in 2005/06, an
increase of 11.1%.


The adjusted basic earnings per share(ii) were 3.9p in the first half of 2005/
06, an increase of 0.7p from the first half of 2004/05. Adjusted diluted
earnings per share, the calculation of which includes the impact of the
potential conversion of convertible bonds (and related bond interest) together
with the possible exercise of dilutive share options, increased over the same
period from 3.4p to 4.0p.


Other items affecting earnings

Exceptional items and amortisation comprise operating exceptional costs,
finance exceptional costs and amortisation of music copyrights and intangibles.


The Group is reporting operating exceptional income of £2.6m in the first half
of 2005/06 compared with income of £0.8m in the first half of the prior year.
In both years, the component elements were gains on property disposals and fair
value adjustments to listed investments.


The Group is reporting finance exceptional net income relating to
remeasurements of £14.4m compared to £41.0m in the first half of last year.
This primarily relates to the gain on revaluation to fair value of the
convertible bond derivative of £14.2m (2004/05: £47.4m gain) and the foreign
exchange gain on Euro borrowings of £4.0m (2004/05: £7.5m loss).
 

Amortisation of music copyrights and other intangibles amounted to £25.4m in
the first half in comparison with £24.6m in the equivalent period last year.
 

The charge for the minority interest share of profit decreased from £3.4m in
the prior year first half to £1.1m in 2005/06. This primarily reflected the
decrease in profit in TOEMI, our Japanese recorded music business.
 

In recognition of the solid results in a demanding marketplace, the Board has
declared an interim dividend of 2.0p per share, in line with the interim
dividend last year.
 

Reported results

Total Group profit from operations (including share of associates) is £64.5m in
comparison with £53.5m in the first six months of 2004/05. This increase is
primarily due to improved trading.
 

Total profit before taxation was £32.6m in the first half of 2005/06 as against
£54.8m in the equivalent period of 2004/05. This decrease is entirely due to
the reduction in finance exceptional income.
 

Cash flow and net borrowings

The net cash outflow from operating activities of £79.0m for this year compares
with an outflow of £50.5m in the first half of the prior year. The increased
cash outflow was primarily driven by working capital being £61.8m higher at 30
September 2005 than at 30 September 2004, largely due to sales phasing.
 

The net cash outflow from investing activities fell to £12.7m from £79.8m in
the prior year. The higher amount in 2004/05 was the consequence of significant
staged payments for Music Publishing copyright acquisitions. There were no
comparable payments in 2005/06.
 

The net interest payment totaled £65.7m in the first half. The cash interest
paid is higher than the charge in the Consolidated income statement as the
interest payable on our Sterling bond is payable in one installment in May.
 

After net interest payments, dividends to shareholders and minorities of £18.0m
and other payments of £0.6m, the increase in net debt resulting from cashflows
was £176.0m. After currency exchange losses of £25.6m and remeasurements of £
5.6m, net debt at 30 September was £1,064.7m.  Given the seasonality in our
business, net debt at the half year is typically higher than at the financial
year end.
 

Notes:

(i)  Group profit from operations (EBITA) is before exceptional items and      
     amortisation and before share of profit in associates.                    
                                                                               
(ii) Before exceptional items and amortisation.                                
 

Part III

EMI Music operating review
 

EMI Music significantly outperformed the global recorded music industry in the
six months to September 2005, gaining market share. The division reported a
constant currency increase in revenues of 4.3% and 6.3% on a pre-IFRS basis.
The lower growth rate under IFRS reflects the reclassification as revenue of
income from jointly controlled operations. A combination of releases from new
developing artists such as KT Tunstall, Radja, RBD and The Magic Numbers, and
big-selling albums from global superstars such as Coldplay, Gorillaz and The
Rolling Stones, helped drive this strong performance.


Operating profit increased by 34.9% to £38.3m, resulting in a 1.1% improvement
in the operating margin. Cost savings from our restructuring programme
announced in March 2004 helped drive this increase in profitability.


Market share gains were achieved in almost all regions, with global physical
share increasing from 12.5% to 13.1%(i).


The UK was again a source of creative excellence. New album releases from
Coldplay and Gorillaz were met with great critical acclaim and have been top
sellers around the world. Coldplay's X&Y achieved the number one position in 32
countries including the UK, US, Japan, France, Germany, Canada and Australia
and in every iTunes chart globally. X&Y sold a total of 7.5m units in the first
half and Gorillaz' Demon Days sold 3.4m units. Both Coldplay and Gorillaz won
awards at the MTV Video Music Awards in Lisbon earlier this month. The UK has
also been successful in breaking and developing new talent, in particular The
Magic Numbers and KT Tunstall whose debut album Eye to the Telescope has now
sold over one million units.


We are seeing the benefits of a successful turnaround in our Continental
European business with both revenue and profits growing well in this region in
the first half. EMI Music has led the European charts with EMI artists holding
the number one position for 27 weeks of this calendar year. In particular, our
French business has delivered an excellent performance gaining significant
market share. Through strong A&R there have been a number of album successes
from both established artists, such as Raphael and Souchon, and new developing
artists such as Cali and Camille. We gained market share in all the other key
Continental European markets with top-selling albums from local artists
including Subsonica in Italy, Bebe and Amaral in Spain, Wir Sind Helden in
Germany and Anouk in Benelux.


Our North American business gained market share during the half despite a
lighter release schedule. This performance was driven by good sales of
Coldplay, Gorillaz, The Rolling Stones and Paul McCartney, reflecting the
effective marketing and promotion of these albums in the US, and also key local
successes including strong sell-through on Keith Urban's latest album Be Here,
as well as new album releases from Dierks Bentley and Christian artist Relient
K.


Australasia delivered a very strong performance in the first half, gaining
significant market share.  Top-selling albums in this region were from
Coldplay, Gorillaz and local superstar Missy Higgins.


Our Japanese business lost market share in the first half, with the weakness in
this region reflecting a lack of releases from local artists. We are focused on
revitalising our Japanese roster but recognise that this takes time.


EMI Music's digital revenues continue to grow very strongly, almost tripling in
value in the first half to £35.9m. Looking ahead, we continue to be focused on
maximising all digital revenue opportunities for our music content, negotiating
deals on the right terms with the digital retailers and, most importantly,
supporting and developing new ways of monetising our exclusive music content.
As an example, during the half we have seen music video downloads to mobile
phones and portable music devices becoming a reality. We remain optimistic
about the digital opportunity and believe that digital will continue to be a
key growth driver for our business both in the near and long term. As a global
music content business, we believe that EMI Music is well positioned to
maximise future digital growth opportunities across all platforms, products and
regions.


For the second half, we have a strong release schedule with depth across the
regions. The latest album from superstar Robbie Williams, Intensive Care, was
released in late October and has already sold approximately 3.5m million units,
making it his fastest-selling album to date. Robbie was recently awarded the
"Best Male Artist" honour at the MTV Europe awards. Other highlights of the
second-half release schedule include, from the UK, albums from Kate Bush,
Depeche Mode, Massive Attack and Starsailor, from Continental Europe, albums
from Jean-Louis Aubert, Diam's and Vasco Rossi, from Japan, albums from 175R
and Kishidan and from the US, albums from Beastie Boys, Ben Harper, Bubba
Sparxxx, Chingy, Dem Franchise Boys, KoRn and Yellowcard.


Notes:

(i) Source: EMI Group based on IFPI data. This represents EMI Music's share of 
    global physical sales only and does not include its share of digital       
    sales.  The industry is working on improving digital market statistics and 
    EMI hopes to include market share figures, including both physical and     
    digital, in its full year results announcement.                            
 

Part IV

EMI Music Publishing operating review

 

EMI Music Publishing's pursuit of new revenue streams and an ongoing focus on
signing the best song-writing talent continued to pay dividends in the six
months to 30 September 2005, with divisional revenues increasing by 5.8% at
constant currency over the period. A broad range of songs, songwriters and
products underpinned this growth, reflecting the quality of the portfolio and
the innovative ways in which we are monetising this asset. Operating profit was
broadly flat on the prior year, with the benefits of growing revenues being
offset by a heavier first-half weighting of certain overhead costs and higher
employee benefits charges under IFRS this year versus last year.
 

All revenue streams recorded growth in the period. Mechanical revenues were up
1.4% due to the success of releases by songwriters such as Jermaine Dupri, Rob
Thomas, Kelly Clarkson, James Blunt and Daddy Yankee. This was an impressive
result in the context of a music market that remained subdued in the prior six
months. 
 

Performance revenues grew by 4.9% and now represent close to 30% of divisional
revenues. Key drivers of growth in this business are the chart success of songs
from our roster of active songwriters and the proliferation of new media
channels, especially across Europe.
 

Synchronisation revenues were again a strong contributor to revenue growth,
rising by 10.6% over the period. Our music was used in advertising campaigns
for brands ranging from Aquafina to American Express and in TV programmes such
as Alias and Desperate Housewives.
 

Digital revenues rose to £8.7m and now account for 4.3% of divisional sales.
Digital downloads as well as mobile phone personalisation products, such as
ring tones, ring tunes and ring backs, fuelled this growth. This development of
our digital business is an exciting example of our continuing strategy to
extend the use of our music into new areas. We are working to ensure that
appropriate industry-wide licence regimes and collection structures are in
place to support this expansion.
 

EMI Music Publishing enjoyed revenue growth across all regions. In the US,
digital and synchronisation were areas of particular strength while, in the UK,
performance exhibited strong growth. In Continental Europe, Spain was a
highlight due to higher synchronisation income and increased mechanical
revenues. Korea, Malaysia and Taiwan were significant performers, contributing
to double digit-growth in the South East Asian region.
 

Recent and forthcoming releases from artists including Alicia Keys, Arctic
Monkeys, Black Eyed Peas, Depeche Mode, Destiny's Child, Jamiroquai, Sean Paul,
Prodigy, Sugababes, Kanye West, and Pharrell Williams should underpin good
results in the second half.

 

ATTACHMENTS


EMI GROUP PLC INTERIM REPORT 2005/06 (unaudited)


(a)     Financial highlights for the six months ended 30 September 2005        
                                                                               
(b)     Consolidated income statement for the six months ended 30 September    
        2005                                                                   
                                                                               
(c)     Consolidated balance sheet at 30 September 2005                        
                                                                               
(d)     Statement of recognised income and expense for the six months ended 30 
        September 2005                                                         
                                                                               
(e)     Consolidated cash flow statement for the six months ended 30 September 
        2005                                                                   
                                                                               
(f)     Notes to the consolidated cash flow statement for the six months ended 
        30 September 2005                                                      
                                                                               
(g) -   Notes to the financial statements for the six months ended 30 September
(r)     2005                                                                   
 

   Attachment (a)
                 
                                                                       
                                                                       
FINANCIAL HIGHLIGHTS                                                   
                                                                       
                                                                       
for the period ended 30 September 2005 (unaudited)                     
                                                                      
                                                                       
                                 Six months       Six months           
                                 ended                 ended Year ended
                                                                       
                                  30 September  30 September   31 March
                                          2005          2004       2005
                                                                       
                                                    Restated   Restated
                                                                       
                                            £m            £m         £m
                                                                       
Revenue                                  924.6         874.0    2,001.2
                                                                       
EBITDA (i)                                99.6          89.1      250.2
                                                                       
Group profit from operations                                           
(EBITA) (ii)                              86.7          77.0      225.1
                                                                       
Adjusted PBT (iii)                        41.0          37.6      141.1
                                                                       
Profit before taxation                    32.6          54.8       99.0
                                                                       
Adjusted diluted earnings per                                          
share (iv)                                4.0p          3.4p      13.1p
                                                                       
Basic earnings per share                  2.9p          5.4p       9.6p
                                                                       
Return on sales (v)                       9.4%          8.8%      11.2%
                                                                       
Interest cover (vi)                       2.2x          2.2x       2.8x
                                                                       
                                                                                                                                                                                                                                                        
      EBITDA is Group profit from operations before depreciation and operating  

  (i) exceptional items and amortisation.                                                                                                                                                                                                                 
      Group profit from operations (EBITA) is before operating exceptional items and                                                                                                  
 (ii) amortisation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
(iii) Adjusted PBT is before exceptional items and amortisation.                                                                                                                                                                                          
      Adjusted diluted earnings per share is before exceptional items and                                                                                                                                                                                 
 (iv) amortisation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
      Return on sales is defined as Group profit from operations before operating                                                                                                                                                                         
  (v) exceptional items and amortisation as a percentage of Group revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                        
      Interest cover is defined as the number of times EBITDA is greater than Group                                                                                                                                                                       
 (vi) finance charges, excluding non-periodic interest and non-standard charges.                                                                                                                                                                          
      Exceptional items include operating exceptional items and finance exceptional                                                                                                                                                                       
      items. Operating exceptional items include impairment of goodwill, gains                                                                                                                                                                            
      (losses) on disposal of property, plant and equipment and remeasurement of                                                                                                                                                                          
      listed investment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
      Finance exceptional items include remeasurement of financial assets and                                                                                                                                                                             
      liabilities to be included within finance charges and exceptional refinancing                                                                                                                                                                       
      costs.                                                                                                                                                                                                                                              

   Attachment (b)
 

CONSOLIDATED INCOME STATEMENT                                                                                          
                                                                                                                       
for the six months ended 30 September 2005 (unaudited)                                                                 
                                                                                                                       
                                                                                                                       
                                                                                                                       
                    Six months ended 30 September      Six months ended 30 September                                   
                                             2005                               2004           Year ended 31 March 2005
                                                                                                                       
                           Exceptional                          Exceptional                        Exceptional         
                             items and                            items and                          items and         
                          amortisation                         amortisation                       amortisation         
                    Total            * Underlying   Underlying            *    Total   Underlying            *    Total
                                                                                                                       
                                                      Restated     Restated Restated     Restated     Restated Restated
                                                                                                                       
             Notes     £m           £m         £m           £m           £m       £m           £m           £m       £m
                                                                                                                       
                                                                                                                       
                                                                                                                       
Revenue          2  924.6            -      924.6        874.0            -    874.0      2,001.2            -  2,001.2
                                                                                                                       
                                                                                                                       
                                                                                                                       
Group profit                                                                                                           
from                                                                                                                   
operations                                                                                                             
before                                                                                                                 
operating                                                                                                              
exceptional                                                                                                            
items and                                                                                                              
amortisation         86.7            -       86.7         77.0            -     77.0        225.1            -    225.1
                                                                                                                       
Operating                                                                                                              
exceptional                                                                                                            
items and                                                                                                              
amortisation     3 (22.8)       (22.8)          -            -       (23.8)   (23.8)            -       (65.5)   (65.5)
                                                                                                                       
Share of                                                                                                               
profit                                                                                                                 
(loss) in                                                                                                              
associates            0.6            -        0.6          0.3            -      0.3          1.1            -      1.1
                                                                                                                       
Profit from                                                                                                            
operations       2   64.5       (22.8)       87.3         77.3       (23.8)     53.5        226.2       (65.5)    160.7
                                                                                                                       
Finance                                                                                                                
charges:                                                                                                               
                                                                                                                       
     Finance                                                                                                           
income        3, 4   47.9         19.6       28.3         28.9         48.5     77.4         58.6         32.9     91.5
                                                                                                                       
     Finance                                                                                                           
costs         3, 4 (79.8)        (5.2)     (74.6)       (68.6)        (7.5)   (76.1)      (143.7)        (9.5)  (153.2)
                                                                                                                       
Total net                                                                                                              
finance                                                                                                                
charges            (31.9)         14.4     (46.3)       (39.7)         41.0      1.3       (85.1)         23.4   (61.7)
                                                                                                                       
Profit                                                                                                                 
(loss)                                                                                                                 
before                                                                                                                 
taxation             32.6        (8.4)       41.0         37.6         17.2     54.8        141.1       (42.1)     99.0
                                                                                                                       
Overseas                                                                                                               
taxation            (9.0)            -      (9.0)        (8.8)            -    (8.8)       (38.5)            -   (38.5)
                                                                                                                       
UK taxation             -            -          -            -            -        -          7.0          7.6     14.6
                                                                                                                       
Taxation         5  (9.0)            -      (9.0)        (8.8)            -    (8.8)       (31.5)          7.6   (23.9)
                                                                                                                       
Profit                                                                                                                 
(loss) on                                                                                                              
continuing                                                                                                             
operations                                                                                                             
after                                                                                                                  
taxation             23.6        (8.4)       32.0         28.8         17.2     46.0        109.6       (34.5)     75.1
                                                                                                                       
                                                                                                                       
                                                                                                                       
Attributable                                                                                                           
to:                                                                                                                    
                                                                                                                       
Equity                                                                                                                 
holders of                                                                                                             
the parent           22.5                                                       42.6                               75.6
                                                                                                                       
Minority                                                                                                               
interest              1.1                                                        3.4                              (0.5)
                                                                                                                       
                                                                                                                       
                                                                                                                       
                                                                                                                       
                                                                                                                       
Earnings per share (EPS)                                                                                               
                                                                                                                       
                    Six months ended 30 September      Six months ended 30 September                                   
                                             2005                               2004           Year ended 31 March 2005
                                                                                                                       
             Notes                                                          Restated                           Restated
                                                                                                                       
                                                                                                                       
                                                                                                                       
Basic                                                                                                                  
earnings per                                                                                                           
Ordinary                                                                                                               
Share            7                           2.9p                               5.4p                               9.6p
                                                                                                                       
Diluted                                                                                                                
earnings per                                                                                                           
Ordinary                                                                                                               
Share                                        3.1p                               5.4p                               9.7p
                                                                                                                       
Adjusted                                                                                                               
basic                                                                                                                  
earnings per                                                                                                           
Ordinary                                                                                                               
Share            7                           3.9p                               3.2p                              13.4p
                                                                                                                       
Adjusted                                                                                                               
diluted                                                                                                                
earnings per                                                                                                           
Ordinary                                                                                                               
Share            7                           4.0p                               3.4p                              13.1p
                                                                                                                       
Adjusted earnings are included as they provide a better understanding of the                                           
underlying trading performance of the Group on a normalised basis.                                                     
                                                                                                                       
                                                                                                                       
                                                                                                                       
                                                                                                                       
                                                                                                                       
Average exchange rates for the period                                                                                  
                                                                                                                       
                    Six months ended 30 September      Six months ended 30 September                                   
                                             2005                               2004           Year ended 31 March 2005
                                                                                                                       
                                                                                                                       
                                                                                                                       
US Dollar to                                                                                                           
£1                                           1.82                               1.81                               1.85
                                                                                                                       
Euro to £1                                   1.47                               1.49                               1.46
                                                                                                                       
Yen to £1                                  200.54                             198.78                             198.32
                                                                                                                       
The results for the period have been translated into Sterling at the                                                   
appropriate average exchange rates.                                                                                    
                                                                                                                       
                                                                                                                       
                                                                                                                       
* Exceptional items include operating exceptional items and finance exceptional                                        
items. Operating exceptional items include impairment of goodwill, gains                                               
(losses) on disposal of property, plant and equipment and remeasurement of                                             
listed investment.                                                                                                     
                                                                                                                       
Finance exceptional items include remeasurement of financial assets and                                                
liabilities to be included within finance charges and exceptional refinancing                                          
costs.                                                                                                                 
 

   Attachment (c)
 
CONSOLIDATED BALANCE SHEET                                                                                                                                    
at 30 September 2005 (unaudited)                                               
                                                                               
                                                                               
                                                                               
                                     At 30                   At 30  At 31 March
                                     September 2005 September 2004         2005
                                                                               
                                                          Restated     Restated
                                                                               
                                                 £m             £m           £m
                                                                               
                                                                               
                                                                               
ASSETS                                                                         
                                                                               
                                                                               
                                                                               
Non-current assets                                                             
                                                                               
Music copyrights and intangibles              404.5          436.2        404.6
                                                                               
Goodwill                                       39.2           34.4         35.1
                                                                               
Property, plant and equipment                 200.0          216.1        200.0
                                                                               
Investments: associates (including                                             
goodwill)                                       9.5            6.2          8.5
                                                                               
Other fixed asset investments                  15.0           15.5         14.9
                                                                               
Financial derivatives                          26.4            7.6         16.9
                                                                               
Other debtors                                     -              -          6.6
                                                                               
                                              694.6          716.0        686.6
                                                                               
Current assets                                                                 
                                                                               
Stocks                                         30.2           29.1         28.2
                                                                               
Advances                                      352.6          372.0        336.0
                                                                               
Trade debtors                                 491.6          375.1        300.1
                                                                               
Other debtors                                  25.3           27.9        133.6
                                                                               
Deferred taxation                              30.5           23.9         29.9
                                                                               
Investments: liquid funds                       3.1            2.7          1.6
                                                                               
Cash at bank and in hand and cash                                              
deposits                                      193.2          152.8        240.9
                                                                               
                                            1,126.5          983.5      1,070.3
                                                                               
                                                                               
                                                                               
Total assets                                1,821.1        1,699.5      1,756.9
                                                                               
                                                                               
                                                                               
LIABILITIES                                                                    
                                                                               
                                                                               
                                                                               
Non-current liabilities                                                        
                                                                               
Borrowings                                (1,239.6)      (1,140.5)    (1,068.7)
                                                                               
Other creditors                              (11.2)         (71.9)       (10.2)
                                                                               
Deferred taxation                             (8.3)          (4.1)        (8.2)
                                                                               
Pension provisions                           (72.3)        (106.9)      (100.1)
                                                                               
Financial derivatives                        (83.3)         (73.7)       (92.8)
                                                                               
Other provisions                             (36.9)         (71.6)       (43.6)
                                                                               
                                          (1,451.6)      (1,468.7)    (1,323.6)
                                                                               
                                                                               
                                                                               
Current liabilities                                                            
                                                                               
Borrowings                                   (21.4)         (22.3)       (31.3)
                                                                               
Other creditors                           (1,193.5)      (1,072.0)    (1,236.1)
                                                                               
                                          (1,214.9)      (1,094.3)    (1,267.4)
                                                                               
                                                                               
                                                                               
Total liabilities                         (2,666.5)      (2,563.0)    (2,591.0)
                                                                               
                                                                               
                                                                               
NET LIABILTIES                              (845.4)        (863.5)      (834.1)
                                                                               
                                                                               
                                                                               
EQUITY                                                                         
                                                                               
                                                                               
                                                                               
Equity attributable to equity                                                  
holders of the parent                                                          
                                                                               
Called-up share capital                       110.6          110.6        110.6
                                                                               
Share premium account                         447.3          447.2        447.3
                                                                               
Capital redemption reserve                    495.8          495.8        495.8
                                                                               
Foreign exchange reserve                     (11.2)          (9.5)          3.8
                                                                               
Other reserves                                238.8          239.6        235.4
                                                                               
Profit and loss reserve                   (2,175.2)      (2,212.0)    (2,176.3)
                                                                               
                                            (893.9)        (928.3)      (883.4)
                                                                               
Minority interests (equity)                    48.5           64.8         49.3
                                                                               
TOTAL EQUITY                                (845.4)        (863.5)      (834.1)
                                                                               

 

 

Period-end exchange                                                            
rates                                                                          
                                                                               
                        At 30 September         At 30 September     At 31 March
                        2005                               2004            2005
                                                                               
US Dollar to £1                        1.77                1.81            1.89
                                                                               
Euro to £1                             1.47                1.46            1.45
                                                                               
Yen to £1                            200.51              199.44          202.11
                                                                               
The results for the period have been translated into Sterling at the           
appropriate period-end exchange rates.                                         
                                                                               


   Attachment (d)
 

STATEMENT OF RECOGNISED INCOME AND EXPENSES                                    
                                                                               
for the six months ended 30 September 2005 (unaudited)                         
                                                                               
                                                                               
                                                                               
                         Six months ended                         Year ended 31
                            30 September                             March 2005
                                     2005 Six months ended 30                  
                                           September     2004                  
                                                                               
                                           Restated  Restated Restated Restated
                                                                               
                                £m     £m        £m        £m       £m       £m
                                                                               
                                                                               
                                                                               
Profit for the financial                                                       
period:                                                                        
                                                                               
  Group                       21.9             42.3               74.5         
                                                                               
  Associated                                                                   
  undertakings                 0.6              0.3                1.1         
                                                                               
Profit for the period                22.5                42.6              75.6
                                                                               
Currency retranslation -                                                       
Group                       (14.6)            (9.5)                3.8         
                                                                               
Pension funds: actuarial                                                       
gains and losses              25.0                -                3.6         
                                                                               
Revaluation movements          2.4                -                9.5         
                                                                               
Other recognised income              12.8               (9.5)                  
and expenses                                                               16.9
                                                                               
Total recognised income                                                        
and expense relating to                                                        
the period                           35.3                33.1              92.5
 

   Attachment (e)
                 
 

CONSOLIDATED CASH FLOW STATEMENT                                               
                                                                               
for the six months ended 30 September 2005 (unaudited)                         
                                                                               
                                                                               
                                                                               
                                Six months ended   Six months ended  Year ended
                                                                               
                                                                       31 March
                                30 September 2005 30 September 2004        2005
                                                                               
                                                           Restated    Restated
                                                                               
                                               £m                £m          £m
                                                                               
                                                                               
                                                                               
Cash flows from operating                                                      
activities                                                                     
                                                                               
Cash receipts from operations               848.9             934.9     1,984.7
                                                                               
Cash used in operations                   (909.2)           (967.9)   (1,763.0)
                                                                               
Tax paid                                   (18.7)            (17.5)      (32.7)
                                                                               
Net cash (used in) generated                                                   
from operating activities                  (79.0)            (50.5)       189.0
                                                                               
Net cash flows from investing                                                  
activities                                 (12.7)            (79.8)     (107.3)
                                                                               
Net cash flows from financing                                                  
activities                                                                     
                                                                               
Issue of ordinary share capital                 -               1.6         1.7
                                                                               
Purchase of own shares                      (0.6)             (0.3)       (0.3)
                                                                               
Equity dividend paid                       (15.7)            (15.7)      (62.9)
                                                                               
Dividends paid to minorities                (2.3)             (0.9)       (1.3)
                                                                               
Management of liquid resources                0.2             (0.4)       (0.8)
                                                                               
Financing:                                                                     
                                                                               
     New loans                              193.4              81.2       128.9
                                                                               
     Loans repaid                          (69.9)            (44.5)     (127.1)
                                                                               
     Capital element of finance                                                
lease repayments                            (0.4)             (0.4)       (0.8)
                                                                               
Interest received                             9.0               2.8         5.2
                                                                               
Interest paid                              (74.4)            (66.1)     (105.5)
                                                                               
Interest element of finance                                                    
lease repayments                            (0.3)             (0.2)       (0.5)
                                                                               
Net cash generated from (used                                                  
in) financing activities                     39.0            (42.9)     (163.4)
                                                                               
                                                                               
                                                                               
Net (decrease) in cash                     (52.7)           (173.2)      (81.7)
                                                                               
Cash at the beginning of the                                                   
period                                      227.3             310.2       310.2
                                                                               
Exchange gains (losses) on cash                                                
in the period                                 0.4             (5.5)       (1.2)
                                                                               
Cash at the end of the period               175.0             131.5       227.3
                                                                               


Reconciliation of net cash flow to movement in net                             
debt                                                                           
                                                                               
                                                         Six months            
                              Six months ended                ended  Year ended
                                                                               
                                                       30 September    31 March
                                   30 September 2005           2004        2005
                                                                               
                                                           Restated    Restated
                                                                               
                                                  £m             £m          £m
                                                                               
                                                                               
                                                                               
(Decrease) increase in cash                   (52.7)        (173.2)      (81.7)
                                                                               
Cash (inflow) outflow from                                                     
(decrease) increase in liquid                                                  
resources                                      (0.2)            0.4         0.8
                                                                               
Cash (inflow) from increase                                                    
in loans                                     (193.4)         (81.2)     (128.9)
                                                                               
Cash outflow from repayment                                                    
of loans and finance leases                     70.3           44.9       127.9
                                                                               
Change in net debt resulting                                                   
from cash flows                              (176.0)        (209.1)      (81.9)
                                                                               
Loans acquired                                     -              -           -
                                                                               
Remeasurements                                 (5.6)            3.4        16.4
                                                                               
Exchange difference                           (25.6)         (10.2)       (0.6)
                                                                               
Movement in net debt                         (207.2)        (215.9)      (66.1)
                                                                               
Net debt at the beginning of                                                   
the period                                   (857.5)        (791.4)     (791.4)
                                                                               
Net debt at the end of the                                                     
period                                     (1,064.7)      (1,007.3)     (857.5)
                                                                               


 

   Attachment (f)
                 
                 

 

NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT                                  
                                                                               
for the six months ended 30 September 2005 (unaudited)                         
                                                                               
                                                                               
                                                                               
a) Reconciliation of operating profit to net cash flow                         
from operating activities                                                      
                                                                               
                                                            Six months     Year
                                       Six months ended          ended    ended
                                                                               
                                                          30 September 31 March
                                      30 September 2005           2004     2005
                                                                               
                                                              Restated Restated
                                                                               
                                                     £m             £m       £m
                                                                               
                                                                               
                                                                               
Group profit from operations                       63.9           53.2    159.6
                                                                               
Depreciation charge                                12.9           12.1     25.1
                                                                               
Property impairment charge                            -              -     18.6
                                                                               
Gain on disposal of property, plant                                            
and equipment and current asset                                                
investments                                       (1.2)          (0.7)    (0.8)
                                                                               
Amortisation and impairments charge:                                           
                                                                               
     Music copyrights and intangibles              25.4           24.2     45.8
                                                                               
     Goodwill                                         -            0.4      2.2
                                                                               
ESOP transactions                                   0.9            1.2      2.3
                                                                               
Amounts provided                                    1.6           10.0     15.0
                                                                               
Provisions utilised                              (12.1)         (43.9)   (75.7)
                                                                               
Remeasurements                                    (1.6)          (0.1)        -
                                                                               
Share based payment                                 1.1              -        -
                                                                               
(Increase) decrease in working                                                 
capital:                                                                       
                                                                               
     Stock                                        (1.0)          (0.7)    (0.1)
                                                                               
     Debtors                                     (84.5)           15.2     39.1
                                                                               
     Creditors                                   (65.7)        (103.9)    (9.4)
                                                                               
Net cash generated from (used in)                                              
operations                                       (60.3)         (33.0)    221.7
                                                                               
Tax paid                                         (18.7)         (17.5)   (32.7)
                                                                               
Net cash generated from (used in)                                              
operating activities                             (79.0)         (50.5)    189.0
                                                                               

 

 

b) Analysis of movement in the Group's net borrowings in                       
the period                                                                     
                                                                               
                  At 1                                                    At 30
                 April    Cash Acquisitions                  Exchange September
                  2005    flow    (disposals) Remeasurements movement      2005
                                                                               
              Restated                                                         
                                                                               
                    £m      £m             £m             £m       £m        £m
                                                                               
                                                                               
                                                                               
Cash at bank                                                                   
and in hand      239.1  (47.4)              -              -      1.3     193.0
                                                                               
Overdrafts      (11.8)   (5.3)              -              -    (0.9)    (18.0)
                                                                               
Cash             227.3  (52.7)              -              -      0.4     175.0
                                                                               
Debt due                                                                       
after more                                                                     
than one                                                                       
year         (1,052.8) (139.5)              -          (5.6)   (26.2) (1,224.1)
                                                                               
Debt due                                                                       
within one                                                                     
year            (18.2)    16.0              -              -    (0.1)     (2.3)
                                                                               
Finance                                                                        
leases          (17.2)     0.4              -              -      0.2    (16.6)
                                                                               
                       (123.1)                                                 
Financing    (1,088.2)       *              -          (5.6)   (26.1) (1,243.0)
                                                                               
Investments:                                                                   
liquid funds       1.6     1.5              -              -        -       3.1
                                                                               
Cash                                                                           
deposits           1.8   (1.7)              -              -      0.1       0.2
                                                                               
Liquid                                                                         
resources          3.4   (0.2)              -              -      0.1       3.3
                                                                               
Total          (857.5) (176.0)              -          (5.6)   (25.6) (1,064.7)
                                                                               
* Cash flow on financing of £(123.1)m is split between new loans of £(193.4)m, 
loans repaid of £69.9m and the capital element of the finance leases repaid of 
£0.4m.                                                                         
                                                                               

 

The Group has cash and liquid resources balances of £81.8m held with banks   
within the UK and £114.5m held with banks outside, but freely transferable   
to, the UK.                                                                  
                                                                             
                                                                             
                                                                             
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.      
                                                                             

 


 

   Attachment (g)
                 
                 

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 September 2005 (unaudited)

 

 

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

 

Basis of preparation

The interim financial information comprises the accounts of the Company and its
subsidiaries on a historical cost basis, except for derivative financial
instruments and available-for-sale financial assets that have been measured at
fair value.  The carrying values of recognised assets and liabilities that are
hedged are adjusted to record changes in the fair values attributable to the
risks that are being hedged.

 

Following a regulation adopted by the European Parliament, the interim
financial information has been prepared in accordance with International
Financial Reporting Standards (IFRS).  The Group's principal accounting
policies under IFRS are set out below.  The transition date for the application
of IFRS is 1 April 2004, and the comparative figures for the six months ended
30 September 2004 and the year ended 31 March 2005 have been restated
accordingly.

 

IFRS 1 First-time adoption of IFRS

When preparing its IFRS balance sheet as at 30 September 2005, the Group has
taken the following options available under IFRS 1 in applying IFRS:

· The requirements of IFRS 3 Business Combinations have been applied
prospectively from 1 April 2003;

· All actuarial gains and losses in respect of defined benefit pension and
post-retirement schemes have been recognised in full in reserves from 1 April
2004;

· Cumulative translation differences relating to net investments in overseas
companies that arose prior to 1 April 2004 have been set to zero and will not
be included in any subsequent calculation of profit or loss on disposal; and 

· The Group has chosen to adopt IAS 32 Financial Instruments: Disclosure and
Presentation and IAS 39 Financial Instruments: Recognition and Measurement from
1 April 2004.

 

Basis of consolidation

The consolidated financial statements comprise the financial statements of EMI
Group plc and its subsidiaries for the period ended 30 September 2005.

 

All intercompany balances and transactions, including unrealised profits and
losses arising from intra-group transactions, have been eliminated in full.

 

Subsidiaries are consolidated from the date on which control is transferred to
the Group and cease to be consolidated from the date on which control is
transferred out of the Group. Where there is a loss of control of a subsidiary,
the consolidated financial statements include the results for the part of the
reporting year during which EMI Group plc has control.

 

Foreign currency translation

Sterling(£) is the functional currency of the parent undertaking and the
presentational currency of the Group.  The functional currency of subsidiaries,
joint ventures and associated companies ("foreign operations") is the currency
of the primary economic environment in which they operate.

 

Transactions in foreign currencies are initially recorded in the functional
currency at the rate ruling on the date of the transaction.  Monetary assets
and liabilities denominated in foreign currencies are retranslated at the
functional currency rate of exchange ruling at the balance sheet date.  All
differences are taken to profit or loss with the exception of differences on
foreign currency borrowings that provide a hedge against a net investment in a
foreign operation. These are taken directly to equity until the disposal of the
net investment, at which time they are recognised in profit or loss.  Tax
charges and credits attributable to exchange differences on those borrowings
are also dealt with in equity.  Non-monetary items that are measured in terms
of historical cost in a foreign currency are translated using the exchange
rates at the dates of the initial transactions.  Non-monetary items measured at
fair value in a foreign currency are translated using the exchange rates at the
date when the fair value was determined.

 

The assets and liabilities of foreign operations are translated into sterling
at the rate of exchange ruling at the balance sheet date and their income
statements are translated at the weighted average exchange rates for the
period.  The exchange differences arising on the retranslation of foreign
operations are taken directly to a separate component of equity.  On disposal
of a foreign operation, the deferred cumulative amount recognised in equity
relating to that particular foreign operation is recognised in the income
statement.

 


 

   Attachment (h)
                 
                 

 

NOTES TO THE FINANCIAL STATEMENTS continued

for the six months ended 30 September 2005 (unaudited)

 

 

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES continued

 

Business combinations and goodwill

The purchase method of accounting is used to account for the acquisition of
subsidiaries.  The cost of an acquisition is measured as the fair value of the
assets given, equity instruments issued and liabilities incurred or assumed at
the date of exchange, plus costs directly attributable to the acquisition. 
Identifiable assets acquired, and liabilities and contingent liabilities
assumed, in a business combination are measured initially at their fair values
at the acquisition date, irrespective of the extent of any minority interest. 
The excess of the cost of the acquisition over the fair value of the Group's
share of the identifiable net assets acquired is recorded as goodwill.

 

Goodwill on acquisition is initially measured at cost.  Following initial
recognition, goodwill is measured at cost less any accumulated impairment
losses.

 

Due to the adoption of IFRS 3 Business Combinations from 1 April 2003, goodwill
on acquisitions from 1 April 2003 is not amortised and goodwill already carried
in the balance sheet is not amortised from 1 April 2003. Goodwill is reviewed
for impairment annually, or more frequently if events or changes in
circumstances indicate that the carrying value may be impaired.

 

For an asset, such as goodwill, that does not generate largely independent cash
flows, the recoverable amount is determined for the smallest identifiable group
of assets including that asset that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets (a 'cash
generating unit').

 

Goodwill previously written off under the provisions of the then UK GAAP, that
is, on acquisitions made prior to 1 April 1998, remains eliminated against
reserves.  Such goodwill previously written off is not included in the
calculation of profit or loss on disposal or termination of businesses to which
the goodwill relates.

 

Intangible assets

Intangible assets include music copyrights and other intangibles.  Intangible
assets acquired separately are capitalised at cost, whilst those acquired as
part of a business acquisition are capitalised at fair value at the date of
acquisition.  

 

Following initial recognition, intangible assets with finite lives are
amortised on a systematic basis over their economic useful lives.  Intangible
assets are tested for impairment if events or changes in circumstances indicate
that the carrying value may be impaired.  Useful lives are examined on an
annual basis and adjustments, where applicable, are made on a prospective
basis.

 

Intangible assets created within the business that cannot be distinguished from
the cost of developing the business as a whole are not capitalised.  Any
relevant expenditure is charged against profit from operations in the period in
which the expenditure is incurred.

 

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation
and any impairment in value. Depreciation is calculated on a straight-line
basis to write off the cost, less residual value, of assets over the estimated
useful life of the asset.  The annual rates used are:

     Freehold buildings                  
                                                             2%

     Property held under finance leases and leasehold improvements      Period
of lease

     Plant, equipment and
vehicles                                                             10 - 331/
3%

 

The carrying values of property, plant and equipment are reviewed for
impairment when events or changes in circumstances indicate that the carrying
value may not be recoverable. Where an indicator of impairment exists, the
Group makes an estimate of the recoverable amount. Where the carrying amount of
an asset exceeds its recoverable amount, the asset is considered impaired and
is written down to its recoverable amount.

 

Assets are derecognised upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising
on derecognition of the asset (calculated as the difference between the net
disposal proceeds and the carrying value of the asset) is included in the
income statement in the period in which the item is derecognised.

 

 

 

 

 

 

   Attachment (i)
                 
                 

 

NOTES TO THE FINANCIAL STATEMENTS continued

for the six months ended 30 September 2005 (unaudited)

 

 

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES continued

 

Leases

Leases which transfer to the Group substantially all the risks and benefits
incidental to ownership of the leased item are capitalised as finance leases at
the inception of the lease at the fair value of the leased asset or, if lower,
at the present value of the minimum lease payments. Lease payments are
apportioned between finance charges and a reduction of the lease liability so
as to achieve a constant rate of interest on the remaining balance of the lease
liability.  Capitalised leased assets are depreciated over the shorter of the
estimated useful life of the asset or the lease term.

Leases where the lessor retains substantially all the risks and benefits of
ownership of the asset are classified as operating leases.  Operating lease
payments are recognised as an expense in the income statement on a
straight-line basis over the lease term.

 

Investments in joint ventures and associates

The Group's investments in its associates are accounted for using the equity
method.  The investment is carried in the balance sheet at cost plus
post-acquisition changes in the Group's share of net assets of the associate,
less any impairment in value or dividends received. The Group's share of the
results after interest and tax of the associate are included in profit from
operations.  When an associate has recognised a change in net assets other than
through the income statement, the Group recognises its share of the change and
discloses it, when applicable, in the statement of recognised income and
expense.

 

The Group has a number of jointly controlled operations where there is no
separate legal entity.  The expenses that the Group incurs, and the share of
the income that the Group earns from the sale of goods by these jointly
controlled operations, are included in the Income Statement.  The assets that
the Group controls, and the liabilities that the Group incurs, in respect of
these jointly controlled operations are included in the balance sheet.

 

Investments

All investments are initially recognised at cost, being the fair value of the
consideration given and including acquisition charges associated with the
investment.  For those investments designated as fair value through profit and
loss, changes in fair value are recognised in the income statement along with
gains or losses on disposal.

 

Those investments for which a fair value cannot reliably be determined are held
at cost less any impairment in value.

 

Advances

In the ordinary course of business the Group pays advances, and other expenses
recoupable from future royalties, to performing artists, songwriters, producers
and third party repertoire owners.  The amounts paid are carried at cost less
recoupment and less an allowance for any unrecoupable amounts.  The allowance
is based on past revenue performance, current popularity and projected revenue.

 

Advances are recoupable during the business operating cycle.  All advances are
therefore reported as current assets, including advances recoupable more than
12 months after the balance sheet date.

 

Trade receivables

Trade receivables, which generally have 30-90 day terms, are recognised and
carried at the originally invoiced amount less an allowance for any doubtful
debts. An estimate for doubtful debts is made when collection of the full
amount is no longer probable. Bad debts are written off when identified.

 

Inventories

Inventories are valued at the lower of cost and net realisable value.  Cost
includes manufacturing overheads where appropriate.

 

Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and in
hand and short-term deposits with an original maturity of three months or
less.  For the purpose of the consolidated cash flow statement, cash and cash
equivalents consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts.

 

 


 

   Attachment (j)
                 
                 

 

NOTES TO THE FINANCIAL STATEMENTS continued

for the six months ended 30 September 2005 (unaudited)

 

 

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES continued

 

Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at cost, being the fair value
of the consideration received net of issue costs associated with the
borrowing.  After initial recognition, interest-bearing loans and borrowings
are subsequently measured at amortised cost using the effective interest
method. Amortised cost is calculated by taking into account any issue costs and
any discount or premium on settlement.  Gains and losses on derecognition are
recognised in finance charges.

 

Hedge accounting is adopted where derivatives, such as "fixed to floating"
interest rate swaps, are held as fair value hedges against fixed interest rate
borrowings.  Under fair value hedge accounting, fixed interest rate borrowings
are revalued at each balance sheet date by the change in fair value
attributable to the interest rate risk being hedged.

 

Derivative financial instruments

The Group uses derivative financial instruments such as interest rate swaps and
foreign currency contracts to hedge risks associated with interest and exchange
rate fluctuations. Such derivative financial instruments are stated at fair
value.  The fair values of interest rate swaps and foreign currency contracts
are determined by reference to market rates for similar instruments.

 

For the purpose of hedge accounting, hedges are classified as either: fair
value hedges when they hedge the exposure to changes in the fair value of a
recognised asset or liability; or cash flow hedges where they hedge exposure to
variability in cash flows that is attributable to either a particular risk
associated with a recognised asset or liability or a forecast transaction.

 

In relation to fair value hedges (e.g. fixed to floating interest rate swaps
held as fair value hedges against fixed interest rate borrowings) which meet
the conditions for hedge accounting, any gain or loss from remeasuring the
hedging instrument at fair value is recognised immediately in the income
statement. Any gain or loss on the hedged item attributable to the hedged risk
is adjusted against the carrying amount of the hedged item and recognised in
the income statement.  The Group does not currently hold any cash flow hedges.

 

For derivatives that do not qualify for hedge accounting, any gains or losses
arising from changes in fair value are taken directly to the income statement.

 

Guaranteed convertible bonds

The component of the guaranteed convertible bonds that exhibits characteristics
of a liability is recognised as a liability in the balance sheet, net of issue
costs.  On issue of the guaranteed convertible bonds, the fair value of the
liability component was determined using a market rate for an equivalent
non-convertible bond.  This amount is carried as a liability on the amortised
cost basis until extinguished on conversion or redemption.  As the convertible
bonds are denominated in US dollars but are convertible to sterling shares, the
remainder of the proceeds is allocated to the conversion option that is
recognised and included as a derivative liability, net of issue costs. The
value of the conversion option is revalued to fair value at each balance sheet
date, with movements in fair value reflected as finance charges or finance
income.

 

Issue costs were apportioned between the liability and derivative components of
the guaranteed convertible bonds based on the allocation of proceeds to the
liability and derivative components when the instruments were first recognised.

 

Employee benefits (other than post-employment benefits)

Employee benefits that can be carried forward if they have not been used are
accrued as they are earned until the benefit is paid or used.  Those employee
benefits that are foregone if not taken at the time are expensed when
incurred. 

 

Provisions

Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, when it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and when a reliable estimate can be made of the amount of the
obligation. Where the Group expects some or all of a provision to be
reimbursed, for example under an insurance contract, the reimbursement is
recognised as a separate asset but only when the reimbursement is virtually
certain.  The expense relating to any provision is presented in the income
statement net of any reimbursement. If the effect of the time value of money on
the quantification of the provision is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and, where appropriate,
the risks specific to the liability. Where discounting is used, the increase in
the provision due to the passage of time is recognised as a finance charge.


 

   Attachment (k)
                 
                 

 

NOTES TO THE FINANCIAL STATEMENTS continued

for the six months ended 30 September 2005 (unaudited)

 

 

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES continued

 

Pensions and other post-employment benefits

The Group operates three major defined benefit pension schemes, plus a number
of smaller defined benefit pension schemes.  The cost of providing benefits
under the schemes is determined separately for each scheme using the projected
unit actuarial valuation method. 

 

Liabilities of the schemes are discounted by the current rate of return of an
AA-rated corporate bond of equivalent term and currency to the liabilities. 
Assets of the schemes are measured at fair value at the balance sheet date. 
Actuarially calculated surpluses or deficits on the defined benefit schemes are
included within the consolidated balance sheet.  The service cost of each of
the schemes is charged against profit from operations.  Expected long term
returns on defined benefit scheme assets and interest on defined benefit scheme
liabilities are included as net finance charges.  Effective from 1 April 2004,
the Group has adopted the amendment to IAS 19 Employee Benefits that permits
actuarial gains and losses to be charged or credited directly to reserves
through the statement of recognised income and expense.

 

In addition, the Group operates a number of defined contribution schemes.
Contributions to defined contribution schemes are charged to the income
statement as incurred.

 

Revenue

Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured. The
following specific recognition criteria must also be met before revenue is
recognised:

- Sale of goods: revenue is recognised when the significant risks and rewards
of ownership of the goods have passed to the buyer and can be reliably
measured.  Revenue is measured at fair value after making provision in respect
of expected future returns of goods and services supplied by the Group prior to
the balance sheet date;

- Royalty and other income: all royalty and other income is recognised when it
has been earned and can be reliably measured.

 

Share-based payments

The share option programme allows certain Group employees to acquire shares of
the Company.  The fair value of options granted is recognised as an employee
expense with a corresponding increase in equity.  The fair value is measured at
grant date and the expense is spread over the period during which the employees
become unconditionally entitled to the options.  The fair value of the options
granted is measured using a binomial lattice model, taking into account the
terms and conditions upon which the options were granted. 

 

The amount recognised as an expense reflects the extent to which the vesting
period has expired and the Group's best estimate of the number of awards that
will ultimately vest.  No expense is recognised for awards that do not
ultimately vest, except for awards where the vesting is conditional upon a
market condition, which are treated as vesting irrespective of whether or not
the market condition is satisfied, provided that all other performance
conditions are satisfied.

 

Certain subsidiaries of the Group have employee share incentive plans and the
Group has an employee share trust to satisfy non-transferable options granted
to executives and senior employees. Shares in the Group held by the employee
share trust are treated as treasury shares and presented in the balance sheet
as a deduction from equity.

 

The Group has taken advantage of the transitional provisions of IFRS 2 in
respect of equity-settled awards and has applied IFRS 2 only to equity-settled
awards granted after 7 November 2002 that had not vested on or before 1 January
2005.

 

Finance charges and finance income

Finance charges comprise interest payable on borrowings calculated using the
effective interest rate method, foreign exchange losses and losses on hedging
instruments that are recognised in the income statement.

 

Finance income comprises interest receivable on funds invested calculated using
the effective interest rate method, dividend income, foreign exchange gains and
gains on hedging instruments that are recognised in the income statement.

 

 


 

   Attachment (l)
                 
                 

 

NOTES TO THE FINANCIAL STATEMENTS continued

for the six months ended 30 September 2005 (unaudited)

 

 

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES continued

 

Income tax

Income tax on the profit or loss for the period comprises current and deferred
tax.  Income tax is recognised in the income statement except to the extent
that it relates to items recognised directly in equity, in which case it is
recognised in equity.

 

Current tax is the expected tax payable on the taxable income for the period,
using tax rates enacted or substantially enacted at the balance sheet date, and
any adjustment to tax payable in respect of previous periods.

 

Deferred tax is provided using the balance sheet liability method, providing
for temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation
purposes.  The following temporary differences are not provided for: goodwill
not deductible for tax purposes; the initial recognition of assets or
liabilities that affect neither accounting nor taxable profit; and differences
relating to investments in subsidiaries to the extent that they will probably
not reverse in the foreseeable future.  The amount of deferred tax provided is
based on the expected manner of realisation or settlement of the carrying
amount of assets and liabilities, using tax rates enacted or substantially
enacted at the balance sheet date.

 

A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilised.  Deferred tax assets are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.

 

Segments

A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments.  A geographical segment is engaged in
providing products or services within a particular economic environment that
are subject to risks and returns that are different from those segments
operating in other economic environments.

 

 


 

   Attachment (m)
                 
                 

 

NOTES TO THE FINANCIAL STATEMENTS continued

for the six months ended 30 September 2005 (unaudited)

 

NOTE 2 - SEGMENTAL ANALYSIS

 

                  Six months ended 30          Six months ended 30                             
                       September 2005               September 2004     Year ended 31 March 2005
                                                                                               
                EMI  EMI Music             EMI  EMI Music               EMI  EMI Music         
                                                                                               
              Music Publishing  Total    Music Publishing    Total    Music Publishing    Total
                                                                                               
                                      Restated   Restated Restated Restated   Restated Restated
                                                                                               
                 £m         £m     £m       £m         £m       £m       £m         £m       £m
                                                                                               
                                                                                               
                                                                                               
By class of                                                                                    
business:                                                                                      
                                                                                               
Group revenue 720.7      203.9  924.6    683.0      191.0    874.0  1,600.5      400.7  2,001.2
                                                                                               
                                                                                               
                                                                                               
Group profit                                                                                   
from                                                                                           
operations                                                                                     
before                                                                                         
operating                                                                                      
exceptional                                                                                    
items and                                                                                      
amortisation   38.3       48.4   86.7     28.4       48.6     77.0    125.5       99.6    225.1
                                                                                               
Operating                                                                                      
exceptional                                                                                    
items and                                                                                      
amortisation    0.9     (23.7) (22.8)    (1.1)     (22.7)   (23.8)   (22.8)     (42.7)   (65.5)
                                                                                               
Share of                                                                                       profits in                                                                                     
associates      0.2        0.4    0.6        -        0.3      0.3      0.6        0.5      1.1
                                                                                               
Group profit                                                                                   
from                                                                                           
operations     39.4       25.1   64.5     27.3       26.2     53.5    103.3       57.4    160.7
                                                                                               
Finance                                                                                        
charges                        (31.9)                          1.3                       (61.7)
                                                                                               
Profit before                                                                                  
taxation                         32.6                         54.8                         99.0
                                                                                               
                                                                                               
                                                                                               
Operating                                                                                      
assets                                                                                         
(liabilities) 108.0      348.7  456.7     12.2      386.6    398.8   (68.3)      340.6    272.3
                                                                                               

 

 

                                              Six months ended 30 September 2005
                                                                                
                                       Rest                                     
                              United     of   Latin   North    Asia             
                                                                                
                             Kingdom Europe America America Pacific Other  Total
                                                                                
                                  £m     £m      £m      £m      £m    £m     £m
                                                                                
                                                                                
                                                                                
By origin:                                                                      
                                                                                
Group revenue                  143.7  271.3    33.8   303.0   160.4  12.4  924.6
                                                                                
                                                                                
                                                                                
Group profit from operations                                                    
before operating exceptional    18.6   31.3     1.0    29.9     4.1   1.8   86.7
items and amortisation                                                          
                                                                                
Operating exceptional items    (2.2)  (3.4)       -  (16.8)   (0.4)     - (22.8)
and amortisation                                                                
                                                                                
Share of profits in                                                             
associates                                                                   0.6
                                                                                
Group profit from operations                                                64.5
                                                                                
Finance charges                                                           (31.9)
                                                                                
Profit before taxation                                                      32.6
                                                                                
                                                                                
                                                                                
Operating assets                                                                
(liabilities)                   52.3   21.6     1.0   331.4    48.8   1.6  456.7
                                                                                

                                                                                                                                                                                          

 

                                              Six months ended 30 September 2004
                                                                                
                    United  Rest of    Latin    North     Asia                  
                                                                                
                   Kingdom   Europe  America  America  Pacific    Other    Total
                                                                                
                  Restated Restated Restated Restated Restated Restated Restated
                                                                                
                        £m       £m       £m       £m       £m       £m       £m
                                                                                
                                                                                
                                                                                
By origin:                                                                      
                                                                                
Group revenue        133.2    245.3     23.5    289.7    172.8      9.5    874.0
                                                                                
                                                                                
                                                                                
Group profit from                                                               
operations before                                                               
operating              6.6     17.6      0.1     41.1     10.4      1.2     77.0
exceptional items                                                               
and amortisation                                                                
                                                                                
Operating                                                                       
exceptional items    (2.3)    (2.2)    (0.6)   (19.0)      0.3        -   (23.8)
and amortisation                                                                
                                                                                
Share of profits                                                                
in associates                                                                0.3
                                                                                
Group profit from                                                               
operations                                                                  53.5
                                                                                
Finance charges                                                              1.3
                                                                                
Profit before                                                                   
taxation                                                                    54.8
                                                                                
                                                                                
                                                                                
Operating assets                                                                
(liabilities)       (15.3)      5.0    (4.2)    325.3     87.3      0.7    398.8
                                                                                

 


 

   Attachment (n)
                 
                 

 

NOTES TO THE FINANCIAL STATEMENTS continued

for the six months ended 30 September 2005 (unaudited)

 

 

NOTE 2 - SEGMENTAL ANALYSIS continued

 

                                                        Year ended 31 March 2005
                                                                                
                    United  Rest of    Latin    North     Asia                  
                                                                                
                   Kingdom   Europe  America  America  Pacific    Other    Total
                                                                                
                  Restated Restated Restated Restated Restated Restated Restated
                                                                                
                        £m       £m       £m       £m       £m       £m       £m
                                                                                
                                                                                
                                                                                
By origin:                                                                      
                                                                                
Group revenue        339.6    633.9     55.8    581.3    366.3     24.3  2,001.2
                                                                                
                                                                                
                                                                                
Group profit from                                                               
operations before                                                               
operating             46.3     84.4      3.2     68.9     17.8      4.5    225.1
exceptional items                                                               
and amortisation                                                                
                                                                                
Operating                                                                       
exceptional items    (3.8)    (4.6)    (0.7)   (35.8)   (20.6)        -   (65.5)
and amortisation                                                                
                                                                                
Share of profits                                                                
in associates                                                                1.1
                                                                                
Group profit from                                                               
operations                                                                 160.7
                                                                                
Finance charges                                                           (61.7)
                                                                                
Profit before                                                                   
taxation                                                                    99.0
                                                                                
                                                                                
                                                                                
Operating assets                                                                
(liabilities)        (0.4)   (50.6)      0.7    283.3     40.3    (1.0)    272.3
                                                                                
                                                                                
                                                                                
Profit from operations is analysed instead of profit before taxation as finance 
charges are borne centrally and are not allocated to the operating businesses.  
Operating assets include deferred consideration of £1.0m (30 September 2004: £  
1.2m, 31 March 2005: £0.9m): this amount is not conditional upon the            
satisfaction of future performance criteria.                                    
                                                                                
                                                                                
                                                                                

 

 

NOTE 3 - EXCEPTIONAL ITEMS AND AMORTISATION                                   
                                                                              
                                                                              
                                                                              
Exceptional items include material items which do not derive from events or   
transactions that fall within the ordinary activities of the Group and which  
have been disclosed separately to provide a better understanding of the       
underlying trading performances of the Group on a normalised basis.           
                                                                              
                                                                              
                                                                              
(i) Operating exceptional items and amortisation                              
                                                                              
                                     Six months        Six months   Year ended
                                       ended 30          ended 30     31 March
                                 September 2005    September 2004         2005
                                                                              
                                                         Restated     Restated
                                                                              
                                             £m                £m           £m
                                                                              
                                                                              
                                                                              
Net gain on sale of property,                                                 
plant  and equipment                        1.0               0.7          0.8
                                                                              
Fair value adjustment to                                                      
listed investments                          1.6               0.1          0.2
                                                                              
Release of overprovision for                                                  
reorganisation costs charged in                                               
prior years                                 2.4               2.6          3.8
                                                                              
Reorganisation costs                      (2.4)             (2.6)        (3.8)
                                                                              
Property impairment                           -                 -       (18.5)
                                                                              
Amortisation                             (25.4)            (24.6)       (48.0)
                                                                              
Total                                    (22.8)            (23.8)       (65.5)
                                                                              
The attributable tax charge is £nil (30 September 2004: £nil, 31 March 2005: £
(7.6)m).                                                                      
                                                                              

 

(ii) Finance exceptional items                                                  
                                                                                
                     Six months ended 30    Six months ended 30    Year ended 31
                          September 2005         September 2004       March 2005
                                                                                
                                                       Restated         Restated
                                                                                
                                      £m                     £m               £m
                                                                                
                                                                                
                                                                                
Convertible -                                                                   
derivatives                         14.2                   47.4             31.2
                                                                                
Interest rate                                                                   
swaps                                1.4                    1.1              1.7
                                                                                
Foreign exchange                                                                
on borrowings                        4.0                  (7.5)            (9.5)
                                                                                
Exceptional                                                                     
refinancing costs                  (5.2)                      -                -
                                                                                
Total                               14.4                   41.0             23.4
                                                                                
The attributable tax charge is £nil (30 September 2004: £nil, 31 March 2005: £  
nil).                                                                           
                                                                                

 

   Attachment (o)
                 
                 

 

NOTES TO THE FINANCIAL STATEMENTS continued

for the six months ended 30 September 2005 (unaudited)

 

 

NOTE 4 - FINANCE CHARGES                                                       
                                                                               
                          Six months ended     Six months ended   Year ended 31
                         30 September 2005    30 September 2004      March 2005
                                                                               
                                                       Restated        Restated
                                                                               
                                        £m                   £m              £m
                                                                               
                                                                               
                                                                               
Interest payable on:                                                           
                                                                               
     Bank overdrafts                                                           
and loans                             46.1                 38.9            83.8
                                                                               
     Other                            28.5                 29.7            13.9
                                                                               
                                      74.6                 68.6            97.7
                                                                               
Interest receivable                                                            
on:                                                                            
                                                                               
     Bank balances                   (1.0)                (0.9)           (2.2)
                                                                               
     Other                          (27.3)               (28.0)          (10.4)
                                                                               
                                    (28.3)               (28.9)          (12.6)
                                                                               
Group finance charges                 46.3                 39.7            85.1
                                                                               
Finance exceptional                                                            
items (Note 3 (ii))                 (14.4)               (41.0)          (23.4)
                                                                               
Total                                 31.9                (1.3)            61.7
                                                                               
Finance charges for associated undertakings are £nil (30 September 2004: £nil, 
31 March 2005: £nil)                                                           
                                                                               
                                                                               
                                                                               

 

NOTE 5 - TAXATION                                                              
                                                                               
The tax charge for the six months ended 30 September 2005 has been calculated  
by reference to the proforma tax rate for the year ending 31 March 2006. The   
total tax charge of £9.0m (30 September 2004: £8.8m, 31 March 2005: £23.9m)    
includes £nil on exceptional items (30 September 2004: £nil, 31 March 2005: £  
(7.6)m).                                                                       
                                                                               

 

 

NOTE 6 - DIVIDENDS (EQUITY)                                                    
                                                                               
                                                                     Year ended
                            Six months ended 30 Six months ended 30    31 March
                                 September 2005      September 2004        2005
                                                                               
                                                           Restated    Restated
                                                                               
                                             £m                  £m          £m
                                                                               
Ordinary                                                                       
dividends:                                                                     
                                                                               
     2005                                                                      
final dividend                             47.2                   -           -
                                                                               
     2004                                                                      
final dividend                                -                47.2           -
                                                                               
   2004 final dividend                                                         
  and 2005 interim                                                             
  dividend                                    -                   -        62.9
                                                                               
Total                                      47.2                47.2        62.9
                                                                               
The 2005 final dividend of 6.0p per share was paid on 7 October 2005 to        
shareholders on the register at the close of business on 9 September 2005.     
                                                                               

 


 

   Attachment (p)
                 
                 

 

NOTES TO THE FINANCIAL STATEMENTS continued

for the six months ended 30 September 2005 (unaudited)

 

 

NOTE 7 - EARNINGS PER ORDINARY SHARE (EPS)                                     
                                                                               
                                 Six months                                    
                                   ended 30                                    
                                  September  Six months ended     Year ended 31
                                       2005 30 September 2004        March 2005
                                                                               
                                            Restated Restated Restated Restated
                                                                               
                                        Per               Per               Per
                                  £m  share       £m    share       £m    share
                                                                               
                                                                               
                                                                               
Earnings/basis EPS              22.5   2.9p     42.6     5.4p     75.6     9.6p
                                                                               
Adjustments:                                                                   
                                                                               
  Exceptional items and                                                        
  attributable taxation       (17.0) (2.1)p   (41.8)   (5.3)p   (13.5)   (1.7)p
                                                                               
  Impairment of goodwill and                                                   
  amortisation of music                                                        
  copyrights and intangibles    25.4   3.1p     24.6     3.1p     48.0     6.1p
                                                                               
  Minority interest                                                            
  (impairment of goodwill and                                                  
  amortisation of music                                                        
  copyrights and intangibles)  (0.2)      -        -        -    (0.3)        -
                                                                               
  Minority interest                                                            
  (exceptional items and                                                       
  attributable taxation)           -      -        -        -    (4.8)   (0.6)p
                                                                               
Adjusted earnings/adjusted                                                     
EPS                             30.7   3.9p     25.4     3.2p    105.0    13.4p
                                                                               
Convertible bond interest        4.6   0.1p      4.5     0.2p      9.0   (0.3)p
                                                                               
Adjusted earnings/adjusted                                                     
diluted EPS                     35.3   4.0p     29.9     3.4p    114.0    13.1p
                                                                               
                                                                               
                                                                               
                                                                               
                                                                               
Basic                                                                          
                                                                               
Weighted average number of Ordinary  786.3m            785.3m            785.6m
Shares in issue                                                                
                                                                               
Diluted                                                                        
                                                                               
Weighted average number of Ordinary  874.1m            872.4m            872.8m
Shares                                                                         
                                                                               
                                                                               
                                                                               
The weighted average number of Ordinary Shares used in the diluted earnings per
share calculation, 874.1m (30 September 2004: 872.4m, 31 March 2005: 872.8m),  
is the weighted average number of Ordinary Shares in issue, 786.3m (30         
September 2004: 785.3m, 31 March 2005: 785.6m), plus adjustment for dilutive   
share options, 8.9m (30 September 2004: 8.3m, 31 March 2005: 8.3m), and for    
convertible bonds, 78.9m (30 September 2004: 78.8m, 31 March 2005: 78.9m).     
                                                                               
                                                                               
                                                                               
Adjusted earnings are included as they provide a better understanding of the   
underlying trading performance of the Group on a normalised basis.             
                                                                               

 

 

NOTE 8 - INVESTMENTS                                                           
                                                                               
During the period, the Group invested £5.5m in buying out a minority interest, 
offset by £2.6m received from the disposals of current asset investments.      
                                                                               
                                                                               
                                                                               

 

NOTE 9 - RECONCILIATION OF MOVEMENTS IN EQUITY ATTRIBUTABLE TO EQUITY HOLDERS  
OF THE PARENT                                                                  
                                                                               
                         Six months ended                         Year ended 31
                           30 September                              March 2005
                                     2005 Six months ended 30                  
                                           September     2004                  
                                                                               
                                           Restated  Restated Restated Restated
                                                                               
                 Notes       £m        £m        £m        £m       £m       £m
                                                                               
                                                                               
                                                                               
Opening balance                   (883.4)             (916.4)           (916.4)
                                                                               
Profit for the                                                                 
financial period           22.5                42.6               75.6         
                                                                               
Dividends        6                                                             
(equity)                 (47.2)              (47.2)             (62.9)         
                                                                               
Other recognised gains                                                         
and losses                 12.8               (9.5)               16.9         
                                                                               
Goodwill                                                                       
adjustment                    -               (0.3)              (0.3)         
                                                                               
ESOP transactions           0.3                 0.9                2.0         
                                                                               
Share based payment         1.1                   -                  -         
                                                                               
Shares issued                 -                 1.6                1.7         
                                                                               
Net increase                                                                   
(decrease) for the                                                             
period                             (10.5)              (11.9)              33.0
                                                                               
Closing balance                   (893.9)             (928.3)           (883.4)
                                                                               

 


 

   Attachment (q)
                 
                 

 

NOTES TO THE FINANCIAL STATEMENTS continued

for the six months ended 30 September 2005 (unaudited)

 

 

NOTE 10 - RECONCILIATION TO PREVIOUS GAAP                                      
                                                                               
The consolidated financial information has been prepared in accordance with    
International Financial Reporting Standards (IFRS).  The adoption of these     
standards has resulted in changes to the accounting policies previously applied
under UK GAAP for the 2005 financial year.  The effects of differences from    
previous GAAP on the Income Statement and Equity Shareholders' Funds, insofar  
as they relate to the Group, are summarised below.                             
                                                                               
                                                                               
                                                                               
                                                                               
                                                                               
Reconciliation of profit                                                       
                                                                               
                                             Six months ended 30 September 2004
                                                                               
                             Group profit from               Profit on ordinary
                            operations (EBITA) Adjusted        activities after
                                             *   PBT **                taxation
                                                                               
                                            £m       £m                      £m
                                                                               
                                                                               
                                                                               
As previously reported                                                         
under UK GAAP                             79.8     36.9                     2.8
                                                                               
Adjustments:                                                                   
                                                                               
  Employee benefits 1                    (2.7)      2.0                     2.0
                                                                               
  Leases 2                               (0.1)    (0.3)                   (0.3)
                                                                               
  Derivatives 3                              -    (1.0)                    40.1
                                                                               
  Acquisition 4                              -        -                     1.6
                                                                               
  Taxation 6                                 -        -                   (0.2)
                                                                               
As restated under IFRS                    77.0     37.6                    46.0
                                                                               
  Group profit from                                                            
  operations (EBITA) is                                                        
  before operating                                                             
* exceptional items***.                                                        
                                                                               
                                                                               
* Adjusted PBT is before                                                       
* exceptional items***.                                                        
                                                                               
                                                                               
*                                                                              
* See the Consolidated income statement for definitions of operating           
* exceptional items and exceptional items.                                     
                                                                               
                                                                               
                                                                               
                                                                               
                                                                               
Reconciliation of                                                              
shareholders' equity                                                           
                                                                               
                                                           At 30 September 2004
                                                                               
                                                           Shareholders' equity
                                                                               
                                                                             £m
                                                                               
                                                                               
                                                                               
Figures previously                                                             
reported under UK GAAP                                                  (814.9)
                                                                               
Adjustments:                                                                   
                                                                               
  Employee benefits 1                                                    (84.0)
                                                                               
  Leases 2                                                                (0.8)
                                                                               
  Derivatives 3                                                          (51.9)
                                                                               
  Acquisition 4                                                             2.9
                                                                               
  Dividends 5                                                              15.7
                                                                               
  Taxation 6                                                                4.7
                                                                               
As restated under IFRS                                                  (928.3)
                                                                               
                                                                               
                                                                               

 

 


 

   Attachment (r)
                 
                 

 

NOTES TO THE FINANCIAL STATEMENTS continued

for the six months ended 30 September 2005 (unaudited)

 

 

NOTE 10 - RECONCILIATION TO PREVIOUS GAAP continued
                                                   

 

Explanatory notes         
                          

 

1 Employee Benefits

Under UK GAAP, pension costs were charged to the profit and loss account so as
to spread the cost of pensions over the working lives of the employees within
the Group.  Valuation surpluses or deficits were amortised over the expected
remaining working life within the Group of the relevant employees.  Under IFRS,
any such surpluses or deficits in the Group's defined benefit pension scheme
have been brought on to the balance sheet.

 

In addition, certain employee benefits earned but not yet paid have been
accrued on the balance sheet.  Further, as under IFRS the Group must recognise
an expense in the income statement for 'equity-settled transactions', the Group
now expenses employees' and directors' share options and other share-based
incentives at fair value over the vesting period.

               

2 Leases

Following the adoption of IAS 17 Leases, one lease entered into by the Group
has been reclassified from an operating lease to a finance lease.  In addition,
a lease incentive is being released over the full lease term instead of the
shorter period over which it was being released under UK GAAP.

               

3 Derivatives

IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial
Instruments: Recognition and Measurement have significantly changed the
accounting for borrowings, finance charges and other financial instruments. 
For the Group's convertible bond, amounts received from the issue have been
split between debt and derivative components.  The difference between the debt
portion of the convertible bond and the principal is amortised as a finance
charge over the life of the convertible.  In addition, a derivative must now be
recognised on the balance sheet at fair value for the eventual conversion of
the foreign currency debt into a fixed number of EMI Group plc ordinary
shares.  Any movements in the fair value, excluding the impact of foreign
exchange movements, are reported as finance charges.

 

Further, the Group has adopted hedge accounting in respect of 'fixed to
floating' interest rate swaps held as hedges against fixed interest rate
borrowings.  The swaps are revalued to fair value with a corresponding
adjustment to borrowings.  In 2003, the Group unwound a swap position and the
gain was deferred and has been released over the scheduled remaining life of
the borrowing. Under IFRS, this deferred gain has been reclassified from
creditors to borrowings. 

 

Under IFRS, the Group's Euro bond cannot be classified as a net investment
hedge and hence the exchange gain or loss on this borrowing can no longer be
recorded directly in reserves, but instead is booked as a finance charge.

 

Those investments designated as fair value through profit and loss have been
revalued to fair value, with the increase or decrease in value being recognised
in the income statement.

               

4 Acquisitions

The key effect of IFRS 3 Business Combinations upon the Group's accounting has
been the Group ceasing annual goodwill amortisation and, instead, testing for
impairment annually.  Consequently, the Group has reversed any goodwill
amortisation charged in the period ending 30 September 2004.

               

5 Dividends

Under IAS 10 Events after the Balance Sheet Date, dividends proposed or
declared cannot be recognised until they are authorised and no longer at the
discretion of the Group.  The effect of this on the Group is that the final
dividend relating to any particular financial year (or the interim dividend
relating to any six month period ending 30 September) cannot be recognised
until the following financial year (or six month period).

               

6 Taxation

Due to the introduction of IAS 12 Income Taxes and the changes in accounting
policies from the introduction of IFRS, corresponding adjustments have occurred
in the calculation of income taxes.