Friday, December 7, 2007

EMI executives face losing bonuses

EMI's new owner Terra Firma has told executives at the music group they will receive no bonuses unless the music company hits a £150m underlying earnings target by next June.

Terra Firma are to study artist returns, from international stars such as Robbie Williams [pictured] to breaking stars and local acts
The private equity giant has also imposed a hiring freeze and told EMI to slash its £250m marketing and promotions spend by more than 10pc between now and the end of June.
Terra Firma has also asked EMI to present a sample of around a dozen different artists - from international stars such as Robbie Williams, Coldplay and Norah Jones to breaking stars and local acts - to study which type of artists produce the best returns.
Terra Firma is striving to impose private equity-style management on the company and is working on a strategic review.
Separately, Terra Firma boss Guy Hands has told EMI staff that they should ''not try to be or act like artists themselves" and that Terra Firma plans to display ''leadership" which in the past had been "confused".

EMI's previous bonus scheme ran from March to March, but managers are being set new targets for the year to June. Even if they achieve divisional targets they will get nothing unless the group profit target is achieved.
Sources close to Terra Firma insist that EMI's £150m earnings before interest, tax, depreciation and amortisation (ebitda) target does not relate to the private equity group's banking covenants with Citigroup, which loaned £2.5bn towards its surprise acquisition of the company this summer.
In the year to March 31, 2007 EMI saw ebitda slump from £276m to £174m on revenues down 16pc at £1.75bn. However, Terra Firma is comfortable it can beat £150m, helped by its clampdown on costs.
The cuts in marketing spend are expected to target parties and other discretionary spending.
Terra Firma has parachuted approximately 45 people into EMI to help its review but has imposed a ban on replacing any leavers unless exceptional cases can be made.
It is also clamping down on overshipping. It is understood that EMI had 65m unsold CDs returned to it by retailers last year at a cost of about £1.50 per unit, almost £100m in total.
In the letter to his staff, Mr Hands writes that Terra Firma is ''driving value-added changes" in several ways. These include: ''Making the people in the business understand what it is they are supposed to be doing, that is, that they are there to serve the customer and the artist and not to try and be or act like artists themselves; and changing the culture and displaying leadership where previously there was little and, what little there was, was confused."

No comments: