On the same day it announced a winning takeover bid, EMI announced its results for the fiscal year ending March 31, 2007. Revenue dropped 15.8% (12.1% on constant currency) and a £118.1 million gain in fiscal 2006 turned into a £263.3 million loss in 2007.

Included in operating profit are an exceptional gain of £50.2 million (sale and leasebacks of offices in Tokyo and Los Angeles, plus Bertelsmann settlement money) and an exceptional costs of £191.5 million (restructuring charges) and £164 million (balance sheet review).

Key items:

• Total cash from operations was a paltry £7.3 million (versus £188.3 million last year).
• Gross margin dropped to 34.9% from 37.2%.
• EMI has suspended dividend payments (this was announced on April 18th) and an interim dividend of 2p per share has been paid.
• Recorded music sales dropped by 15%. Digital represented 10.4% of recorded music and 9.4% of total company revenues.
• By region: North American dropped 7.7% (digital up 80.1%); UK & Ireland dropped 11.8% (digital up 79.7%); and Japan dropped 2.4% (digital up 69%).
• Publishing operating profits increased 4.2% (at constant currency) while revenue, dragged down by lower physical sales, dipped 0.9%.
• Publishing revenues related to digital music increased 35.5%, although "growth in digital revenues in music publishing continues to lag the recorded music industry."
• Performance revenue increased by 10.1% and synchronization revenue increased 5.6%.
• EMI's interest coverage ratio dropped to 1.9 as EBITDA decreased to £174 million from £275.8 million.

Conclusion: Extraordinary events killed operating profit and restructuring charges were a big hit to cash flows from operations. Publishing shows potential and is the company's current strength. Sync and performance revenues are up. Digital revenues are up big. The problem remains: Nothing can overcome the drop in revenue from falling CD sales. EMI was smart to begin a restructuring program, but it came too late. Chalk that one up to the slow-to-react leadership of the Munns/Levy era.