Analysis

Beggars Group still profitable with second Adele spike to come


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Independent label group Beggars Group has reported its financial results for 2014, revealing revenues of £42m and a net profit of £3.8m in a year when it notched up 44 releases.

That compares to 2013’s figures: £52.9m of revenues and a £4m net profit from 40 releases. But the bigger picture is that in 2014, the group’s financials essentially returned to where they were in 2010.

Why is that significant? Because 2011 saw the release of Adele’s album ’21’, which was a monster global hit for Beggars subsidiary XL Recordings. You can see the spike clearly when you chart the group’s turnover and profit between 2009 and 2014:

beggars-financials

2015’s figures, of course, will include just over a month’s worth of sales of Adele’s next album ’25’, which will send both lines zooming upwards again – an effect that will continue in 2016 and perhaps beyond. Yet the other story of the graph above is a stable – and profitable – underlying business even when you factor out the Adele spike.

The latest financials also broke out specific figures for XL, which saw its turnover fall from £18.1m in 2013 to £11.5m in 2014, reporting a profit after tax of £2.7m in 2014, down from £4.7m in 2013.

Just under £18m of Beggars Group’s turnover in 2014 came from joint ventures, while another £536k came from associates – leaving £23.5m of direct revenues from the group’s core business: sales and licensing of sound recordings.

£7.7m of the latter figure was generated in the UK, and £15.8m elsewhere in the world. Beggars Group ended 2014 with £15.3m of cash at bank and in hand, compared to £12.9m at the start of the year.

beggars-financials-2In the financials, filed with Companies House in the UK, Beggars Group outlined some of the key trends affecting its business.

“In 2014 the global music market has seen a huge growth in streaming at the expense of physical sales, and to some extent, downloads,” explained the company in the Business Review section of its filing.

“Beggars Group Limited too has experienced a similar shift to streaming. We remain committed to supporting physical formats, and vinyl sales in particular have exceeded our expectations.”

The document goes on to outline one of the new costs that has come through the growth of streaming: “We have invested significantly in our internal systems to help deal with the increasing complexity and volume of data being collected.”

Beggars cited the success of Jungle, Warpaint, FKA Twigs and Future Islands as bright spots in 2014, but its filing also warned about the potential impact of regulatory and political battles ahead.

“Market dynamics outlined above may impact on the long term business model and underlying profitability, in particular the uncertainty of the effectiveness of regulatory influence over powerful global digital service providers,” it explained. “However we continue to work hard on behalf of our artists to ensure that the independent sector is heard and represented.”

Stuart Dredge

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