August 25, 2010

By By Ed Christman

Last week, EMI's financials were released in the form of a report from Maltby Capital Limited, the Terra Firma company formed to acquire the major. In that report, it was noted that EMI Group posted a 512 million pound loss ($791 million) on sales of 1.7 billion pounds, for the fiscal year ended March 31 (billboard Apgu. 28, 2010). Billboard had a phoner with EMI Group chief executive officer Roger Faxon to discuss the implications of the news.

So, you're operating results show some nice improvements.
Yes, improvement on all fronts. Interestingly, we moved the top line a little bit, which is good in the current environment. Even better, we moved the bottom line quite a lot and operating cash flow is getting to where it ought to be, around 75% of EBITDA. Those are all pretty good things. In the round, its a very nice picture of a well operated business. There is always the press speculation about the debt load and all of those things. But basically everyone should feel comfortable that EMI is operating on four of its six cylinders, so we have two more cylinders to ignite to get the thing to roll where it ought to be and maybe we will get it up to eight cylinders. But its a good solid story and in any other industry, it would be sort of 'oh yeah, they are doing okay.' In our industry, it?s a pretty remarkable turnaround story.

In terms of all the implemented cost savings, has all of that flowed through to the P&L statement or will there be more realized this year?
What the record company did over the last year is let the organization settle in, which is why I think you saw such a nice improvement in their performances. They really dug in and got going. Most of the big restructuring was done earlier and most of it flowed through in the year just ended. A little bit more will be realized in this fiscal year.

Of course, you haven't unveiled your plans yet for what you will do this year.
No, but that sort of make it sounds like a huge thing. Its more about what's our strategy going forward because we are seeing a different kind of future for the music business and we want to get ourselves positioned to take advantage of its. What the numbers in front of you show, we have a very good base to make that next leap.

To what do you attribute the revenue increase?
Its modestly gone up which is an unusual thing when you're markets are dropping. It?s an easy answer. We had a lot of really good records in the marketplace. Obviously, we had the Beatles re-mastered program, which was very successful. But we had a lot of other really great success. Lady Antebellum burned up the charts and while Robbie Williams is largely a European phenomenon, he did really well. You had David Guetta and Lily Allen and a great run with Depeche Mode this past year. So there was a lot of reasons why EMI Music did well and probably more reasons why EMI Music Publishing did well, when you look at the success of the writers that we represent. They are all over the records. You well know what's been happening on the chart share for us, which is indicative of the success of the songwriters we represent. They have done brilliantly.

Click here for part two of the talk with Roger Faxon.

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