Sanctuary in the hole?

  • Sanctuary braced for painful hit

    The Times (London) - October 29, 2005


    SANCTUARY GROUP gave warning yesterday that it would have to take a multimillion-pound hit to its balance sheet as it fights to ensure its long-term survival.

    The company told investors that its end-of-year balance sheet "will show net liabilities" - meaning that, technically, the business is worth less than nothing.

    Shares in the record company behind Morrissey, the former Smiths frontman, plunged 15 per cent as Sanctuary said that it was reviewing its accounting policies, as well as dealing with the consequences of a dismal year of trading.

    It is not clear how great the impact will be - results for the year to September are due in early December. At the half-year, Sanctuary had net assets of £133 million, suggesting that the change would be very significant.

    Sanctuary Group, still the world’s largest independent music company, has been hit by a string of disasters since it said this year that delays in key releases were hitting profits, particularly at its Urban division, run by Matthew Knowles, father of the Destiny’s Child singer and solo artist, Beyoncé.

    The company now expects to report negative underlying earnings for the year to September - despite achieving a positive £6.6 million in the first half.

    The only crumb of comfort comes from a bright start to the current year, with strong sales from albums by Status Quo and Simple Minds, and well as touring income from Sir Elton John and Joss Stone. Problems have been caused by retailers returning large quantities of stock over the summer, amid fears about Santuary’s long-term future. That situation is thought to have stabilised, but only after the balance sheet date.

    Sanctuary is also planning on making 175 staff redundant to cut costs, twice the amount planned initially. According to analysts, that exercise will cost an estimated £8 million, to achieve annual cost savings of about £16 million.

    http://business.timesonline.co.uk/article/0,,9070-1847991,00.html

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