A lot of people said Thorn EMI overpaid when it acquired Virgin Music for T 560 million ($ 1 billion at the then-exchange rate) in June last year. Well, it looks like they were wrong.

The London-based music, electronics and consumer rentals conglom posted results Tuesday for the year ended March 31 that were way up on the previous year; and a big contribution –$ 81.2 million — came from Virgin.

In fact, EMI Music boss Jim Fifield was right on target when he predicted last summer that Virgin would make profits of $ 87 million in its first full year under his wing. The $ 81.2 million figure covers just 10 months.

Thorn EMI recorded gross revenues of $ 6.8 billion (up 12.6%) and net income of $ 443.6 million (up 96%), to bounce back strongly from the economic doldrums that had afflicted much of its business. Earnings per share increased by 101.3%, to 45.3 pence.

Chairman Colin Southgate credited tight cash management for cash inflow from operating activities that was up $ 106 million to $ 1.1 billion.

The twin pillars of Thorn EMI — music and consumer rentals — continued to account for an ever greater share of company revenues (65%) and profits (80%) last year. But of the two, music is emerging as much the stronger.

EMI Music, which has enjoyed an extraordinary turnaround since Fifield was appointed in 1988, contributed profits of $ 301.3 million (up 57%) on sales of $ 2.3 billion (up 34%). Even without the impact of Virgin, its sales would have been up 11.2% and profits up 14.9%.

Still hard work ahead

According to Fifield, EMI still has some way to go before its operating margins, currently about 13.1% (from 5.8% in 1988) match those of industry leaders Warner Music, Sony and Polygram (estimated at 15% to 17.5%). But he predicted that this year would see further progress, especially in North America where, he said, EMI labels have strong release slates.

Consumer rentals, including Rent-A-Center, which carries general consumer goods, in the U.S., have been hit harder by the worldwide economic recession but still managed to post modestly improved profits of $ 176.4 million on static revenues of $ 2.1 billion.

Thorn EMI’s other businesses, including lighting, defense equipment and the HMV record retail group, are of declining significance and many are up for sale. The company recently sold its majority stake in Thames TV to Pearson for $ 90 million.

The London market responded favorably to the Thorn EMI results, marking up company stock by 26 pence to close Tuesday at 856 pence. The company is to pay a final dividend of 32 pence.

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