Finance funding and legislative frameworks for success emi music ltd

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EXECUTIVE SUMMARY

Nowadays, there is a significant development in field of technology which has made a drastic change in the lifestyle consumer behaviour due to which the lifestyle of common people have been much easier. Therefore, the music industry had made unimaginable wonders in human's life. Music has become part of our lifestyle and we can feel the difference.

1.0 Inroduction

EMI is one of the world's top music companies and best known for different recording lables, artists, songwriters and music catalogues. In the course of their own music company they are able to serve our artists, writers and consumers all over the world. EMI is one of high street retailer of UK in the music industries with having global branches in different countries. It holds huge reputation in UK market by focusing on sales of music. EMI is not only the manufacturer of music but it act as distributors in the market as it market share is less but hold a position of brand in the market in this competitive world. EMI offers stylish, high quality music and sound recording with providing outstanding service especially their own brands since last 3 decades.

EMI is organised into two core divisions: EMI Music which specialises in signing, developing and promoting recording artists and their recordings, and other is EMI Music Publishing which specialises in signing, developing and promoting songwriters and their songs.

2.0 Operating Finanacial Data (Summerised)

YEAR ->

2003

2004

2005

2006

Revenue

2,175

2,121

2,001

2,080

Operating profit/(loss)

before exceptional items

212

198

177

201

Operating profit/(loss)

401

43

161

206 2.1 Operating P/L

YEARS ->

2007

2008

2009

2010

Revenue

1,808

1,458

1,569

1,651

Operating profit/(loss)

before exceptional items

98

(135)

7

121

Operating profit/(loss)

(157)

(258)

(1,031)

(481)

Source: 2003-2007 figures taken from EMI Group PLC 2007 Annual Report

Source: ANNUAL REVIEW 2009/10 MALTBY CAPITAL LIMITED

3.0 EMI Music as a System

3.1 Internal Structure:-

As an organisation EMI music is alos having departmental structures on different management levels. As per company is having its higher management level which was having a very important impact on the control of the company. After acquisition by MALTBY Capital Limited company has modified many of its operating policies. Its internal structure became more effective to control and for operations of different management levels. It has adopted the effective process of communication to make understandings between all of its departmets easily. Mainly they are having departments of people who can manage development and innovations required for music. Though EMI music is facing many difficulties since last three - four years. It is suffering from loss since last two years and it is now becoming difficult for EMI music to manage it.

3.2 Management:-

As a music company the management level of the organisation has to work for the input required for the output to earn income. The management level is working on the different input sources required for production of music like to tie up with some singers, music composers and other technical experts required to do every work required. As per the EMI music they are having their comtracts and tie ups with some very big and famous names in the music industry like David Guetta, Katy Perry, Norah Jones and The Beatles.

3.3 Production Departmets:-

EMI music is having good recording facilities to record songs and it is having a very good technical staff to handle all the process of recording and manufacturing. It is also launching its new recording facility to help the customers to buy music instantly. It is trying to record and produce music instantly from the live shows and after finishing the show they are looking forward to provide the music to the audience of the show to purchase instantly. EMI music is looking forward to apply new policies to reduce their production expences though they are having advantages in the usage of latest technologies.

3.4 Publication of Music:-

Emi music is no. 1 music publishing company in the world. It is having over 50 artist to publish their music. EMI is having more publication than Sony Music annually. The advantage for having such annual output of production is the technological advantages the company is having. EMI music is having its publication houses in Unitd Kingdom and United States of America with annual publication more than Sony Music.

Application of Porters 5 Forces

Threat of New Entrants

Power of Buyers

Competitive Rivelries

Power of Suppliers

Threats of Substitutes

R

(-)

R

(-/+)

R

(-/+)

R

(-/+)

R

(-)

According to the music industry we have considered here it is threatning for the company to face and to tackle new entrants to stay in the market.

The power of buyers always effects any company. In the case of EMI as a music producing company the buyers always effects its performance because buyers always considers prices so to make the market share safe it is always have to be considered about the prces of their products in comparison of their competitiors.

It is always said competition is not healthy for companies. Competitive rivelry is benificial for the company because if competitiors reduces their prices in case of increasing the market share and for that they might do the mistake to maintain the quality. This can also happen with our own company. So it will both positively and negatively effetct the company

The company always considers the prices in which it gets the meterials from the suppliers. In this case company has to fix margins at either quality or price to maintain. So if company sacrifices quality it will effects its sales and profit. If it is considered to price it will deffinietly effects sales and profit because of low price the sales will increase and with increased sale the profit will automatically increase.

The major substitute in music industry is not a proper substitute but nowadays people uses it very much it is called as PIRACY. It is having a major negative impact on the company. People get all the music and other publications free of cost so it effecs majorly on revenue and profit.

4.0 Financial Performance:-

EMI music as a music producing company is having its financial data with some good figures and some bad figures. While eying on its revenue it is having huge revenue every year but when it comes to profitability there are no good news about this company.

4.1 Profitability:-

Taking concederation the data of 2009 and 2010 (Annual Report 2009-10 MALTBY Capital) company is earnong the gross profit but after remaining accounting treatments the company is having losses only. It is having around 67.30% change in its loss after tax payment. It is having a huge figures of loss in last few years and if it has earned profit, it is not as much as to which we can tell is an amount of profit.

4.2 Liquidity:-

EMI music is having liquid assets but its liquidity is not as per it can use as per its requirement in aany circumstances. Because of losses faced by the company it is not having liquidity in case of investments and other liquid requirements. It is having imapairment of intengible assets on a quit large bases and that is the main thing because of the company is havong losses since last few years overall and unable to use the liquidit of its assets.

PESTEL Objects which can effect the Company

PESTEL Thing which may change

Frequency in how this will change (1-5)

Impact

(-/+)

Impacts by dynamics

Importance or impact/Relevence-

Very high, High, Medium, Low, Very Low

Which area of an organisations finance is it likely to effect(B/S, P/L, C/F)

Digital Technology

5

(-/+)

Upwords

High

P/L

Piracy

1

(-)

Downwords

Very High

P/L

Competition

3

(-)

Downwords

Medium

C/F

New Entrants

1

(-/+)

Relevant

Medium

B/S

Quality expectation

5

(-/+)

Relevent

High

P/L

Marketing Tactics

3

(-/+)

Relevant

Medium

B/S, P/L

Suppliers

5

(+)

Relevant

High

C/F

5.0 Recommendation:-

As per the performance of the company since last few years and as per its reports company is having a weak management system. It has to improve its technology adaption process to lower the cost of production and it must have adopt a better marketing policy to improve the sales. Management have to allocate the assets as per their requirements and must have to utilize the sources available for them. EMI music still needs to work on allocations of their assets according to their needs which still needs to be understood by the management.

6.0 Conclusion:-

EMI as a music company and despite having its sales on the top of the market still suffering from severe loss. It is having many operational problems because of its weak management systems. It is having advantages with many intellectual properties like it is having copyrights of many composed musics anf lyrics etc. It is having good marketing strategies then its competetors and human resource.

Appendix

£ million

2007

2008

2009

2010

Revenue

1,808

1,458

1,569

1,651

Overheads

(445)

(402)

(399)

(392)

EBITDA

(before restructuring charges and fair value adjustment in 2008)*

68

164

293

334

% EBITDA / Revenue

3.8%

11.2%

18.7%

20.2%

Operating Performance

(after restructuring, depreciation & amortisation but before impairment of goodwill and intangible assets)

(135)

(258)

7

121

Total Loss

(after impairment of goodwill and intangible assets)

(287)

(451)

(1,567)

(512)

Cash flow generated from operating activities

7

(153)

161

250

CASH FLOW FOR FOUR YEARS

£ million

Year ended 31 March 2010*

Year ended 31 March 2009*

% Change

Net Revenue

1,651

1,569

+5,2%

Cost of sales

(925)

(877)

+5.5%

Gross margin

726

692

+4.9%

Overheads

(392)

(399)

-1.8%

EBITDA

334

293

+14.0%

Depreciation

(23)

(22)

+4.5%

Amortisation

(119)

(128)

-7.0%

Restructuring

(71)

(136)

-47.8%

Fair value adjustments

(602)

(1,038)

-42.0%

Loss from operations

(481)

(1,031)

-53.3%

Total finance charges

(143)

(722)

-80.2%

Loss before tax

(624)

(1,753)

-64.4%

Loss before tax

112

186

-39.8%

Loss after tax

(512)

(1,567)

-67.3%

PROFIT AND LOSS

Balance sheet of EMI Music

£ million

NOTE

2010

2009

Assets

Non-current assets

Music catalogues and other intangibles

09

3,086

3,660

Goodwill

10

1,186

1,555

Property, plant and equipment

12

182

186

Investments in associates

13

29

29

Financial assets

14

11

11

Pension assets

24

-

54

Deferred taxation

21

58

33

Other receivables

15

11

09

4,563

5,537

Current assets

Trade receivables

15

277

249

Advances

15

190

217

Corporation tax recoverable

15

17

20

Other receivables

15

69

82

Inventories

16

25

27

Cash and cash equivalents

17

343

336

921

931

Total assets

5,484

6,468

Liabilities

Current liabilities

Trade and other payables

18

(951)

(1,083)

Corporation tax payable

18

(33)

(53)

Financial liabilities

19

(3,116)

(88)

Other provisions for liabilities

22

(76)

(115)

(4,176)

(1,339)

Non-current liabilities

Other payables

18

(144)

(7)

Shareholder loan

19

(398)

(346)

Other financial liabilities

19

(148)

(3,377)

Pension liabilities

24

(174)

(49)

Deferred taxation

21

(1,080)

(1,252 )

(1,944)

(5,031)

Total liabilities

(6,120)

(6,370)

Net (liabilities) / assets

(636)

98

Equity

Capital and reserves

Share capital

25

704

704

Foreign exchange reserve

670

784

Other reserve

521

559

Retained earnings

(2,534)

(1,952)

Equity attributable to equity holders of the parent

(639)

(9)

Minority interests

(3)

(3)

Total equity

(636)

98

Calculations of ratios

2010

2009

%change

EBIT

334

293

14.00%

Sales revenue

1651

1569

5.20%

total assets

5484

6468

gross profit

726

692

4.90%

current assts

921

931

current liabilities

76

115

Sotck=trade receivable

277

249

net income after tax

222

107

total equity

-636

98

tax

112

186

-39.80%

Capital employed

3927

5635

Loss after tax

-512

-1567

-67.30%

EMI was suffering from loss in 2 years

2010 it lost less than 2009

In the report page 79 its impairment of intangible assets are too large, that's the reason of it lost too much.

Profit margin 2010=EBIT/Sales revenue=334/1651=0.202301635

2009= EBIT/Sales revenue=293/1569=0.186743149

Asset utilization 2010=Sales revenue/total assets=1651/5484=0.301057622times

2009=Sales revenue/total assets=1569/6468=0.24257885times

Gross margin 2010=Gross profit/Sales revenue=726/1651=0.439733495≈0.44 not change much

2009=Gross profit/Sales revenue=692/1569=0.441045252≈0.44

Current ratio 2010=current assets/current liabilities=921/76=12.11842105

2009=current assets/current liabilities=931/115=8.095652174

Liquid ratio 2010= current assets- trade receivable /current liabilities

= 921-277/76=8.473684211

2009= current assets- trade receivable /current liabilities

= 931-249/115=5.930434783

Return on equity 2010=net income after tax/total equity=222/-636=-0.349056604

2009=net income after tax/total equity=107/98=1.091836735

ROCE 2010 =EBIT/Capital employed=334/3927=0.085052203

2009 =EBIT/Capital employed=293/5635=0.051996451

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