Universal Music Group Earnings Surge in 2023

Universal Music Group saw a boost in their shares on Thursday following a report of increased earnings in 2023. The surge was mainly driven by subscription revenue and the implementation of cost-saving measures.

Positive Financial Performance

At 1004 GMT, shares were trading 6% higher at EUR28.15. The company revealed that revenue for the fourth quarter of the previous year reached 3.21 billion euros ($3.48 billion), surpassing Jefferies' expectations by about 7%. Analyst Andrew Uerkwitz noted that the company's music publishing revenue grew significantly by 15% at constant currency.

Recorded-Music Division's Strong Performance

The recorded-music division exceeded expectations due to robust physical and licensing revenue. This segment benefited from touring activities and the growing demand for vinyls, according to Uerkwitz.

Adjusted earnings before interest, taxes, depreciation, and amortization for 2023 met expectations. However, Universal's adjusted Ebitda margin of approximately 21% fell slightly below UBS's growth estimate, as mentioned by analyst Adam Berlin.

Focus on Margins and Future Growth

The company's adjusted Ebitda margin in 2023 showed a 1.2% improvement from the previous year, excluding one-off items. Deutsche Bank's Silvia Cuneo highlighted this positive development in their research note.

"Adjusted Ebitda margins remain a focal point, and with a restructuring plan in place, UMG is demonstrating its commitment to achieving mid-20s Adjusted Ebitda margins in the upcoming years," as stated by Uerkwitz.

Future Outlook

Universal's success in paid streaming, coupled with their cost-saving efforts, is expected to drive free cash flow growth to over EUR2 billion by 2025, according to UBS analysts.