Guy Hands, the private equity boss who bought EMI Music last year and has been criticised as a suit who paid way too much for dying asset, has something to say: I’m not as dumb as you think.
That’s the message Guy is sending out today, via staff memo which details the company’s Q1 performance. Rather than unlucky and clueless, Guy appears to have been fortunate and/or smart. Reuters:
Revenues at British music group EMI rose 61 per cent and earnings from the troubled recorded music division also shot up in the first quarter, due to cost cuts and strong releases under its new private equity owners.
According to a letter to staff from Terra Firma Chief Executive Guy Hands which was seen by Reuters, the recorded music business achieved first quarter earnings before interest, tax, depreciation and amortisation of 59.2 million pounds ($118.4 million).
That compared to a loss of 45.1 million pounds in the same period of 2007.
We’d love to see the full memo, because we’re missing a few numbers here: We’d like to see the breakdown in that 61% revenue jump, for instance — we’re assuming that most of it comes from publishing, not recorded music sales. If we get it we’ll pub the whole thing. Still, no matter how Guy got them, the numbers have to be at the very least encouraging to EMI’s remaining employees — and insitutions that own billions in EMI debt.
UPDATE: We’ve seen more of the memo, which wasn’t illuminating. More helpful, a chat with someone familiar with results who was able to explain the turnaround in general terms:
- EMI’s increase in revenue isn’t attributable to any particular band or album – the big selling Coldplay record was release right at the end of the quarter, so it would have some impact on top line but not a signficant one.
- EMI insiders attribute much of the increase in revenue to a more efficient marketing and promotions operation: EMI got a 2x increase in revenue for each dollar it spent pushing its music.
- The improved results don’t include the impact of the large restructuring that (finally) kicked in at the end of the quarter. That means Q2’s results should show a much lower cost base (and presumably, very large restructuring charges).
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