Company Town : EMI’s Billion-Dollar Bet on Virgin Music Pays Off : Earnings: After a rocky transition, the autonomous label has become a major profit center for its parent.

LONDON —  Meat Loaf was way over budget working on his “Bat Out of Hell II” album and now, in May, 1992, he wanted more money to keep going.

Executives at Virgin Music, which holds distribution rights to the record outside North America, were concerned about pouring more cash into the project. But after listening to what had been recorded so far, Virgin Chairman Ken Berry recalls, “Everybody just said, ‘Yes!’ ”

Eighteen months later, “Bat II” has proven to be one of the biggest records of 1993. The single “I’d Do Anything for Love” tops the British and U.S. charts.

Now Berry and Virgin U.K. Managing Director Paul Conroy can gloat about knowing they had a potential hit on their hands and maneuvering it to the top.

Indeed, there is much for them to gloat about at Virgin, which is enjoying the most successful period in the company’s 20-year history. EMI Music earnings figures, scheduled for release today, are expected to show that Virgin has become a major profit center for the parent company.

Virgin underwent a period of confusion after it was sold to Thorn EMI in March, 1992, and suffered from a disrupted release schedule caused by a changeover to EMI’s manufacturing and distribution system.

But since reducing staff and cutting its roster by more than half to concentrate on fewer artists, the company has produced a slew of hits--from Janet Jackson to Smashing Pumpkins and Lenny Kravitz to UB40. Virgin has done particularly well in the United States, which has traditionally been among its weakest territories.

The label also appears to have finally overcome longstanding doubts among outsiders that it was worth the nearly $1 billion EMI paid for it.

Berry, sitting in his spacious London office dressed in jeans and sneakers, says Virgin is not only performing well now, but that EMI “did not buy Virgin to make two years of profits” in any case. “They bought Virgin to build EMI for the year 2000. This is part of a long-term strategy.”

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EMI Music is expected to report substantial gains in both sales and earnings today, with Virgin making a strong contribution to the increase over last year.

For the first half of the 1993 fiscal year--April through September--EMI will report sales of nearly $1.2 billion, up 27% from last year. The company is expected to report pretax and pre-interest profit of $136 million, up 48%. Return on sales has risen from 9.9% to 11.6%. Virgin’s contribution to the half-year profit at EMI was $54 million.

“Virgin is one of the main reasons we’ve had such strong six-month results,” says Jim Fifield, president and chief executive of EMI, which also includes the Capitol and SBK labels. Virgin’s performance this year, which included placing six albums at No. 1 on the British charts, should go far in finally quelling industry rumblings that its status as an autonomous company within EMI would be short-lived.

But in an industry of sniping and rumors, there are already whispers that Virgin won’t be able to repeat this year’s sterling chart performance in 1994.

Berry dismisses the rumbling. While admitting that the music business is cyclical, he points out that Virgin releases for 1994 include Paula Abdul’s first album for ages and a new record from Steve Winwood. The Rolling Stones, who came to the label this year, are back in the studio, and Janet Jackson’s album, “janet.,” which has sold more than 6 million copies worldwide, should continue selling well, adds Berry.

Virgin also hopes to transcend its image as a purveyor of pop acts (Abdul) and wrinkly rockers (Peter Gabriel, Phil Collins, Winwood, the Stones). Toward that end, it is set to launch a rap label and delve deeper into alternative rock.