The music publisher EMI Group revealed it had unearthed an accounting fraud in its Brazilian business yesterday that caused an overstatement of revenues and profits.
Initial investigations suggested that revenues at its EMI Music recorded music business were overstated to the tune of about £12m and operating profits by about £9m.
The impact of correcting its figures will be felt in results for the six months to September this year, due to be released on 5 November.
A statement from the company, which is home to artists such as Corinne Bailey Rae and Robbie Williams, said: "EMI Group announces that it has identified, through its internal controls, a one-off accounting fraud affecting the reporting of results at EMI's recorded music business in Brazil." EMI launched a full inquiry and has suspended pending its outcome certain senior managers at its Brazilian business.
News of the fraud sent EMI shares 12p lower to 268.75p, valuing the group at a shade more than £2.1bn.
The company declined to say what proportion of sales are derived from Brazil. However, industry estimates suggest that Brazil accounted for about 1 per cent of global music sales last year.
Patrick Yau, an analyst at Bridgewell Securities, cut his forecast for EMI's full-year pre-tax profits by almost £10m to £164m. But he suggested that the fact that EMI itself discovered the fraud may help sentiment towards the shares.
Last week, EMI warned that it expected revenues for the first half of its year to fall by 5 per cent after allowing for currency fluctuations and underlying pre-tax profits to decline by 34 per cent to £27m.
The company is pinning its hopes on a bumper second half of the year with a rash of big name artists, including The Beatles, Robbie Williams, Norah Jones and Joss Stone due to release albums. The City had expected a more subdued first-half performance this year, when albums from the likes of Coldplay, The Rolling Stones and Gorillaz dominated the charts.
Earlier figures from the Figures showed that in the first half of this year physical sales of CDs fell 10 per cent, leading to a 4 per cent slide in global media sales. That was partially offset by the soaring numbers of listeners downloading music digitally.Reuse content