City news, people. Shares in the EMI Group yesterday slumped after the major announced that it had uncovered accounting fraud at its Brazilian record company that had incorrectly boosted revenues and operating profits. The fraud meant that EMI Music had overstated its revenue and profits, by £12 million and £9 million respectively.
In a statement, EMI said that the revenue and profit impact would be reflected in the financial results for the six months ending 30 Sep, which will be released on 15 Nov.
It is not entirely clear what proportion of EMI's global sales come from Brazil and therefore what overall impact the discovery will have on the Group's worldwide financial performance. According to Billboard, the International Federation Of The Phonographic Industry says that Brazil accounted for about 1% of the world's total recorded music sales last year, which might provide some kind of indication.
EMI has already said that it expects revenues and profit for the first half of the current financial year to be less than initially expected because of the way its release schedule has worked out, though with major releases from Robbie Williams and Norah Jones upcoming, it anticipates meeting expectations at year end. Whether the fraud discovery will affect that judgment on full year performance is also not clear.
The major did confirm it is conducting a full investigation into the fraud, and that it has suspended some of its senior management in Brazil in relation to it.