Sanctuary crashes on profits warning

Shares in Sanctuary, the music group with artists such as Morrissey and Iron Maiden on its books, collapsed yesterday after it warned that delayed album releases and expansion costs would hit profits.

Shares in Sanctuary, the music group with artists such as Morrissey and Iron Maiden on its books, collapsed yesterday after it warned that delayed album releases and expansion costs would hit profits.

The company said profits for the six months to the end of March would be 40 per cent lower than the same period last year, and that profits for the full year would be "very substantially lower" than current forecasts.

Shares fell more than 30 per cent during the day, closing at a two-year low of 29.75p. Some £50m was wiped off the company's market value.

Sanctuary blamed "significant slippage" in record releases compared with the same period last year for the profits warning. The rival record label EMI has had similar problems and recently blamed the delay in receiving the latest album from Coldplay for its financial woes. But Sanctuary has refused to disclose which of its artists have not delivered new material on time. It has also incurred additional costs from overseas expansion, while last month Morrissey said his next album would be with another label, saying Sanctuary mistakenly convinced his fans he would be at the Isle of Wight festival.

The board is now urgently reviewing all of the group's operating divisions. This could result in the sale of a large division or another record company taking a stake. It is already in talks with a number of parties, thought to include EMI, Warner Music and other private equity groups, about possible asset sales or a strategic investment in the company.

This is not the first time Sanctuary has disappointed the City close to a results announcement. Yesterday's warning comes a week before the company is due to report its interim results. In January, Sanctuary warned of a loss at its books division and revealed an £11m write-off on a bad debt two days before its full-year results were released. Shares dropped 15 per cent on news that it would have to write off a loan given to a television company it used to own.

In recent years Sanctuary has bought up independent management companies owned by Elton John and Matthew Knowles, the father and manager of the Destiny's Child singer Beyoncé. The board is reviewing the company with a view to improving cash generation and reducing long-term debt built up from its acquisition spree.