Shares in the troubled music group Sanctuary plummeted by almost a third yesterday after it issued a profit warning due to losses at its iconic Rough Trade Records label.
Sanctuary's 49 per cent stake in the label, whose acts include Babyshambles, Jarvis Cocker, the Long Blondes and the Strokes, is likely to be sold off, while a number of approaches have been made for other parts of the business.
The group revealed that Rough Trade will produce a £2.8m pre-tax loss for the year to 30 September, rather than breaking even as previously expected. Although 51 per cent of the label is owned by management, all of the losses will be taken by Sanctuary. Shares have slumped 98 per cent this year from a high of more than 800p down to just 6.75p at the close yesterday.
The group's latest profit warning came a day after Sanctuary shares fell 15 per cent when traders said a distressed seller had been willing to offload 5 million shares at a discount.
Sanctuary also warned that it may have to book provisions of between £15m and £18m that relate to advances made to artists in previous years which were not recouped in record sales.
Despite the gloom, chief executive Frank Presland remained upbeat on the group's outlook and said it was disappointing that Sanctuary's recovery was being "obscured by further historic accounting issues".
"We are seeing the first signs of success from our efforts to put the business on a proper footing and I am confident that we will continue to make progress in the current financial year," he said.
It has been a difficult year for the group. This month, Sanctuary co-founder Rod Smallwood quit and took Iron Maiden, one of its major bands, with him. The company's other co-founder Andy Taylor was sacked in May after an investigation into the group's accounts.
Earlier in the year, Sanctuary was saved from collapse by a £110m rescue package to help it recover from the disastrous acquisition of Urban Records from Matthew Knowles, the father of R&B diva Beyonce.
Sanctuary has been circled for some time and last month rejected a takeover approach from its smaller rival Mama.Reuse content