Record delays hit Sanctuary profits

Sanctuary, the record company and pop star management business behind Elton John and Mario, reassured investors yesterday that delayed releases and rising debts would not undermine its long-term future.

Sanctuary, the record company and pop star management business behind Elton John and Mario, reassured investors yesterday that delayed releases and rising debts would not undermine its long-term future.

Andy Taylor, the chief executive, said although debt had risen to £117.7m, its bank, the Bank of Scotland, and its main bondholder, Highbridge, continued to be supportive of the business. The company was not planning an emergency rights issue to raise cash, he said, although it remained in talks that might lead to a possible offer for the business.

"In 30 years of business this is not the first time we have had a blip. Our model is working, we've had a bit of a slip ... and we regret that, but it's the sort of thing that happens," he said. "Given the way the City has reacted, you do lose your faith in human nature sometimes."

The company's previous rapid growth rate in acquiring artists meant a short-term setback had a proportionately larger impact on the business, he said.

Announcing interim results for the six months to 31 March, Sanctuary's sales fell from £89m to £85m, while pre-tax profits fell from £6.9m to £1.3m. Its share price fell 8.75 per cent.

The company's problems have arisen from delayed record releases in the first half of the year, reducing turnover from its recorded music business by £9.3m. It refused to name the artists involved, a different tactic to EMI, which this year blamed late releases from Coldplay and Gorillaz for a profits warning.

Sanctuary had, however, increased its cost base to cope with higher levels of record releases, which it promised to cut by the equivalent of up to £8m a year. It is also planning to sell a number of undisclosed non-core operations.