Shares in Sanctuary Group plunged 30 per cent to 6¾p after the music company issued its sixth profit warning and flagged a possible break-up, starting with the sale of Rough Trade, the record label.
Sanctuary, an artist manager, record label and music publisher, said that it had received a number of approaches from parties interested in buying its businesses. “Once Sanctuary has announced its results for 2006, it expects to be in a position to consider these strategic proposals,” the struggling company said in a statement.
The continuing troubles of Sanctuary mean that the company is unlikely to retain its independence, although it still has a strong publishing catalogue and successful artist management operations and merchandising activities, all of which could interest music majors.
Although the company said that it was considering a number of options for Rough Trade, the label behind Morrissey, it is believed that the full sale of Sanctuary’s 49 per cent stake in the label is its preferred option. The business is run by its founder, Geoff Travis.
Sanctuary revealed that Rough Trade will produce a £2.8 million pre-tax loss for the year to September 30, 2006. It gave warning that this, in tandem with its recorded product division “continuing to experience difficult trading conditions”, meant that it was now set to report a loss “exceeding earlier expectations”.
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In June, Sanctuary indicated that it expected a loss before interest, tax, depreciation and amortisation of £17 million to £22 million.
The group, which has announced a series of profit warnings recently, gave warning yesterday that it may have to book provisions of £15 million to £18 million.
The provisions relate to advances made to artists in previous years that were not recouped in record sales, and may lead to a restatement of the 2005 results or be reported in the 2006 results.
Sanctuary Group’s recently appointed chairman, Bob Ayling, the former head of British Airways, ousted Andy Taylor, the music company’s founder, this year. Mr Ayling then brought in as chief executive Frank Presland, Sir Elton John’s manager.
Mr Presland said that it was “disappointing that Sanctuary’s recovery is obscured by further historic accounting issues”. He added: “Considerable progress has been made in dealing with the outstanding legacy issues.”