Emi Group Plc Case Study
1.0 INTRODUCTION
EMI Group plc
In early spring 2007, Martin Stewart as chief financial officer (CFO) for global music giant EMI, he’s knew most of the news that would break at the company’s April 18 earnings announcement. Annual underlying revenue for the company was down 16% to GBP 1.8 billion (British pounds). Earnings per share (EPS) have also dropped from 10.9 pence (p) in 2006 to -36.3p in FY2007. The performance reflected the global decline in music industry revenues, as well as the extraordinary cost of the restructuring program EMI was pursuing to realign its investment priorities and focus its resources to achieve the best returns in the future.
On an annual basis, EMI has consistently paid an 8p-per-share dividend to ordinary shareholders since 2002. EMI’s recent performance, Stewart questioned whether EMI should continue to maintain what would represent a combined GBP 63 million annual dividend payment. Stewart recognized that EMI faced considerable threat of takeover. It seemed that boosting EMI’s share price was imperative, if Emi wanted to maintain its independence.
The Dividend Decision
The board already declared an interim dividend of 2p per share in November 2006, whether to maintain the past payout level by recommending an additional 6p final EMI dividend be paid. Provided a forecast of the cash flows effects of maintaining the dividend based on market-based forecast of performance.
Dividends are payments made by an organization to its shareholders from earnings generated in current or previous periods. Shareholders earn income from two sources, the capital gain due to appreciation of share and dividend yield. Dividend yield is calculated by dividing the current dividend by the price of a share.
2.0 OVERVIEW OF MUSIC INDUSTRY ON 2007
EMI, Warner Music Group, Sony BMG Music Entertainment, and Universal Music Group, collectively known as “the majors” dominated the music industry in the early 21st century and accounted for
EMI Group plc
In early spring 2007, Martin Stewart as chief financial officer (CFO) for global music giant EMI, he’s knew most of the news that would break at the company’s April 18 earnings announcement. Annual underlying revenue for the company was down 16% to GBP 1.8 billion (British pounds). Earnings per share (EPS) have also dropped from 10.9 pence (p) in 2006 to -36.3p in FY2007. The performance reflected the global decline in music industry revenues, as well as the extraordinary cost of the restructuring program EMI was pursuing to realign its investment priorities and focus its resources to achieve the best returns in the future.
On an annual basis, EMI has consistently paid an 8p-per-share dividend to ordinary shareholders since 2002. EMI’s recent performance, Stewart questioned whether EMI should continue to maintain what would represent a combined GBP 63 million annual dividend payment. Stewart recognized that EMI faced considerable threat of takeover. It seemed that boosting EMI’s share price was imperative, if Emi wanted to maintain its independence.
The Dividend Decision
The board already declared an interim dividend of 2p per share in November 2006, whether to maintain the past payout level by recommending an additional 6p final EMI dividend be paid. Provided a forecast of the cash flows effects of maintaining the dividend based on market-based forecast of performance.
Dividends are payments made by an organization to its shareholders from earnings generated in current or previous periods. Shareholders earn income from two sources, the capital gain due to appreciation of share and dividend yield. Dividend yield is calculated by dividing the current dividend by the price of a share.
2.0 OVERVIEW OF MUSIC INDUSTRY ON 2007
EMI, Warner Music Group, Sony BMG Music Entertainment, and Universal Music Group, collectively known as “the majors” dominated the music industry in the early 21st century and accounted for