EMI, whose artists include Lily Allen, has seen sales slide

The debt-laden firm said it had already executed most of its cost cuts, and would save �70m by March 2008 as part of a wider �110m restructuring drive.

EMI also said that it may securitise its music library, a move that would sell the rights to future royalties, and provide another source of revenue.

Signs that EMI is turning around sent shares 6% higher in London.

'Pleasant surprise'

David Bowie was the first artist to securitise his music, though others, including James Brown, have followed.

Music publishers are seeking new revenue sources as sales of records and CDs have faced tough rivalry from digital media and piracy.

Securitisation would allow EMI to sell bonds, that would be paid back using the company's slice of royalties from artists including Lily Allen, Robbie Williams and Norah Jones.

The prospects of recovery are beginning to show Richard Hunter, Hargreaves Lansdown EMI retunes its finances

The money raised from the bonds would allow EMI to pay down its debt.

David Bowie raised $55m (�27m) with his Bowie Bonds, while James Brown leveraged hits including Get Up (I Feel Like Being) A Sex Machine and Papa's Got A Brand New Bag to bring in about $30m.

In the interim, EMI has suspended its dividend payments and warned that annual revenues from its EMI Music division were set to drop 15%.

The world's third-largest music firm said it was suspending dividends until its restructuring plan was completed.

'Challenging'

Hargreaves Lansdown analyst Richard Hunter said the latest figures came as a "pleasant surprise".

"The prospects of recovery are beginning to show" he said.

However, despite the recent success, EMI has said that the market remains "very challenging".

EMI added that digital revenues at its music division were expected to have risen 59% in the past year, accounting for 10% of revenue.

Earlier this month, EMI announced that it would be taking software locks off better-quality music downloads available through sites such as iTunes.

EMI has issued two profit warnings already this year, but said its forecast for a 15% fall in revenue at EMI Music was in line with previous guidance given in February.