Universal Music 2021 earnings rise in line with expectations

Universal Music Group NV (UMG) (UMG.AS) on Thursday reported a 19% rise in full-year core earnings for 2021, in line with expectations, due to growing revenue from streaming services and ad-supported social media platforms.

UMG's adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) came in at 1.79 billion euros ($1.98 billion), compared with 1.50 billion euros in 2020.

Analysts had forecast 2021 EBITDA at 1.78 billion euros, according to Refinitiv data. Earnings per share for 2021 were 0.49 euros, the company said.

Universal indicated that EPS was impacted by the fall in value of its stakes in two listed companies, Spotify (SPOT.N) and Tencent Music (TME.N).

Universal, the largest of the "big three" record labels, represents stars such as Taylor Swift, Billie Eilish, The Weeknd and Korean pop stars BTS.

"If you look at subscription and streaming revenue, it continues to grow very well," CFO Boyd Muir said on a call after earnings were published, pointing to a 19% rise in the fourth quarter.

That business line accounts for roughly half of the company's sales. Since the mid 2010s, consumers have increasingly adopted paid music subscription music services such as those offered by Spotify and Apple (AAPL.O). They are also listening to more music in video clips on social media platforms such as TikTok or YouTube.

Universal receives royalties from both, and those trends have led to a recovery in the fortunes of the music industry, where Universal competes with Warner (WMG.O) and Sony Music (6758.T).

"We see a long runway ahead for subscriber penetration, and also for continued growth in advertising monetization" Muir said.

He forecast a "strong" 2022 and said the company would improve margins and grow revenues in the high single digits in the medium term.

Revenue in 2021 rose 14.4% to 8.5 billion euros, beating estimates of 8.4 billion euros.

UMG was spun out of France's Vivendi (VIV.PA) in September, in Europe's largest stock market listing of 2021, with shares initially surging from a reference price of 18.50 euros.

They are down about 19% in 2022 amid a broad tech sell-off. Before the earnings were announced, shares closed on Thursday at 19.36 euros.