Unused ticket sinks WMG's Q1
$18 mil charge from failed pickup at heart of lossShares of Warner Music Group lost more than 20% on Wednesday after the company reported disappointing fiscal first-quarter results, hurt in part by a write-down from a failed acquisition of a concert promoter.
WMG posted a loss of $16 million for the quarter that included the holiday season, a swing from the $18 million profit recorded in the same frame a year ago. The latest figure included an $18 million impairment charge for the acquisition of promoter Bulldog Entertainment, which the firm bought in May only to close it last month.
Revenue grew 6.6% year-over-year to $989 million. Assuming constant currencies, this would have been a 0.7% increase. Operating income before depreciation and amortization declined 7.9% to $129 million.
WMG chairman and CEO Edgar Bronfman Jr. and CFO Michael Fleisher said they expect small, focused acquisitions this year. They declined comment on specific transactions, but WMG is understood to have made a $25 million bid for Death Row Records and be in the running for U.K. indie music group Chrysalis, which is expected to fetch $300 million or more.
Fleisher said WMG has for now decided to continue paying a dividend of a maximum of $80 million per year, but will continue to review it amid credit market turmoil and a troubled state of business, as well as based on its financial need.
Said Bronfman: "2007 was a challenging year for the recorded music industry."
Added Fleisher: "The business remains challenged. It may take some time to return to growth."
WMG said its revenue gains in the U.S. were partially offset by constant-currency declines in the Asia Pacific and Latin American regions and, to a lesser extent, Europe.
Revenue at the company's recorded music unit increased 6.3%, or 0.7% on a constant currency basis, to $850 million.
"Declines in our international physical recorded music business were more than offset by year-over-year revenue increases in our domestic physical recorded music business and our global digital recorded music business," the company said.
Recorded music digital revenue of $132 million was up 41.9% for the quarter and accounted for 15.5% of total recorded music revenue.
Major sellers in the quarter included releases from Josh Groban, Led Zeppelin, Michael Buble, Kobukuro and James Blunt.
Music publishing revenue in WMG's fiscal first quarter rose 8.3%, or was unchanged when assuming constant currencies, and hit $144 million.
WMG shares closed down 20.4% at $6.96, leading Wednesday's decliners on The Hollywood Reporter's Showbiz 50 stock index.