EMI's new owners have accused the record company of dismal management as it ran up a £757 million loss in the year in which it was acquired by Guy Hands' Terra Firma.

The poor results were accompanied by a “no holds barred” review of the year written by Mr Hands' adviser, Lord Birt, the former BBC director-general, who now chairs the company behind EMI.

Lord Birt said that EMI's previous bosses had tolerated a culture where “high expenditure [was] at odds with the challenges it faced” — and running a business where nobody knew how profitable individual artists were.

Warning that EMI “cannot be turned around overnight”, Lord Birt said that the company's problems had their origin “in a culture and behaviours embedded not just in EMI but in much of the wider music industry”.

EMI's music division spent £700,000 on taxis in London, reflecting an “approach to expense policies [that] was more than generous”. Its bill with the taxi company was the fourth-highest, exceeded only by “three investment banks with eight to ten times the staff of EMI Music”.

Terra Firma, which bought EMI for £2.1 billion in August 2007, concluded that only one in eight of its recording artists actually made any money and that in the year to March 2008 it lost £125 million on new releases.

EMI acts include Coldplay, Robbie Williams and Katy Perry, although in the year of the £757 million losses there were few big releases and only three records sold more than a million copies. As a result of that and the weakness in the music market, revenues for the year plunged 19 per cent to £1.45 billion.

Lord Birt said that he had little choice but offer “a forthright presentation of problems” to spell out the challenges faced by EMI's recorded music division, the fourth-largest in the world. But he said that the report “does not signal any lack of confidence in EMI”.

Instead, the tone is intended to demonstrate that Terra Firma is realistic about the problems it faces in turning around EMI and also to reassure investors in Terra Firma funds that the situation at the business has not deteriorated since it was acquired.

The annual report admits that EMI has been losing share in a market that fell by 7.9 per cent last year, but could not see how poorly it was performing because it was shipping too many copies of albums, such as Norah Jones's Not Too Late, to retailers, which were then returned, unsold.

Terra Firma bought EMI for £2.1 billion in August 2007 and Mr Hands and his colleagues have been brutal in spelling out the company's problems. Their criticisms have dented morale and some artists, such as The Rolling Stones, have left.

The music major was also hit by £123 million of one-off restructuring costs relating to the dismisal of 1,500 staff. Underlying profits were £164 million and were wiped out by the interest charge of £165 million. Financial charges relating to currency movements, totalling £250 million, contributed to the net loss of £757 million. The company ended the year with debts of £2.68billion. It is funded by £545 million from Terra Firma and a further £1 billion shareholder loan.

Terra Firma has released the figures to comply with the Walker Code, requiring private equity-owned businesses to release accounts annually.

The one exception to the gloomy review was Terra Firma's assessment of EMI's music publishing division, which represents songwriters such as Kayne West and Amy Winehouse. It lifted underlying profits 3 per cent to £116 million, on sales up 3 per cent at £411 million.

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