UMG, Taylor Swift's music label, sees higher profit, helped by superfans

Universal Music Group said on Tuesday it expects annual core profit growth of more than 10 per cent through to 2028 on higher subscription revenue, expanded partnerships and boosted by the superfans of its artists such as Taylor Swift, BTS and Drake.
 

The world's biggest music label, which announced its financial targets through 2028 ahead of a capital markets day, also said it expects compound annual revenue growth of 7 per cent in the period.
 

The forecast was better than the consensus outlook for 6.1 per cent annual revenue growth and 8.8 per cent annual adjusted EBITDA growth, according to ING.
 

Analysts have said the capital markets day, to be held at London's famed Abbey Road Studios, will be an opportunity for the group to spell out how it plans to revive slowing subscriber and streaming growth, which triggered a 30 per cent slump in its stock in late July after second-quarter figures fell short of expectations.
 

In Tuesday's outlook, UMG said it sees annual subscription revenue growth of between 8 per cent and 10 per cent, higher than the consensus of 6.6 per cent, as quoted by ING.
 

J.P. Morgan said the targets are consistent with its forecasts and better than consensus.
 

"We believe consensus forecasts are too conservative on subscription growth and other revenues streams and EBITDA forecasts do not fully reflect operational gearing and announced cost savings over the next 3 years," it adds.
 

UMG expects a free cash flow conversion rate (before investing activity) of between 60 per cent and 70 per cent, it said.
 

In mid-August, UMG announced an expanded agreement with Facebook-parent Meta Platforms to create new opportunities for its artists and songwriters across Meta's social platforms.
 

The company's second-quarter subscription revenue growth slowed to 6.9 per cent from 12.5 per cent in the first quarter, missing the 11.1 per cent estimate in a company-compiled consensus cited by Barclays.
 

For 2023, UMG reported an 11 per cent increase in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of 2.4 billion euros ($2.67 billion). At constant exchange rates, EBITDA gained 14.6 per cent.

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