Canadian producer/distributor E1 Entertainment has launched a strategic review of its business but plans to keep it intact.

Toronto-based E1 said poor U.S. music sales have prompted a restructuring of Koch Entertainment, the New York-based CD distribution business, while Canadian market turmoil has forced a delay of plans to return to the Toronto Stock Exchange.

E1 CEO Darren Throop cited a continuing fall in physical CD sales and a shift to digital sales of music tracks as grounds to eliminate as many as 25 distribution jobs, or 14% of the division work force.

The move will prompt a one-time, mostly non-cash charge when E1 reports its year-end results to March 31.

Koch Entertainment, which last month changed its name to E1 Music, like market rivals, has seen 20% year-over-year revenue declines as big retailers like Wal-Mart cut their music shelf space.

Other cost-cutting moves include downsizing E1 Music's Manhattan label office and shifting manpower to an existing distribution facility in Long Island.

Throop insisted no selling or spinning off of assets was being considered as E1 attempts to shore up its sagging share price amid a continuing market downturn.

Canadian equity market volatility has also prompted E1 to pull plans for a TSX listing to tap growth capital here.

E1, which already trades on London's AIM Exchange, had planned a move to the TSX and the London Stock Exchange.

But market turmoil in September forced E1 to pull the plug on a reverse takeover of rival Canadian producer DHX Media to secure a TSX listing.

Throop said a worsening Canadian IPO market, with no recovery in sight, means E1 will no longer pursue a TSX listing on its own to unlock shareholder value.

Marwyn Investment Management, the British hedge fund that two years ago helped E1 leave the TSX as an income fund and refloat itself on London's AIM market, in a statement reiterated its support for E1 as it seeks to re-establish a Canadian market presence.

"We are confident that the board's strategy will deliver substantial value and Marwyn remain committed to the long term future of the company," James Corsellis, non-executive director of E1 and managing partner of Marwyn Investment Management, said in a statement.

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