Half-year pre-tax profits drop $10.2 mil

LONDON — Having already issued profit warnings, music company Sanctuary Group today revealed a drop in half-year pre-tax profits to £1.3 million ($2.4 million), compared with £6.9 million ($12.6 million) last year.

Publishing its interim results for the six months to March 31, Sanctuary disclosed “substantial underperformance against expectations” and blamed this on the late delivery of albums, particularly in its Sanctuary Urban division. The estimated revenue lost on those late albums was put at £9.3 million ($17 million).

The company notes that many of these releases have been rescheduled for the second half of the year and should therefore lead to a greater second half performance.

But on a sour note, Sanctuary admitted some album releases, together with releases originally scheduled for the second half are now expected to be delayed until the company’s next financial year.

Because it has not met targets, Sanctuary’s board of directors is now looking to cut costs to put in place “an infrastructure more appropriate to its realized business going forward,” which should result in annualized savings of at least £7 million ($12.8m). The board is also considering selling some of its businesses and assets.

Overall, Sanctuary’s group revenues totaled £85 million ($155 million) during the six months to March 31, compared with £89 million ($162.4 million) in the same period a year ago.

That led to EBITDA of £6.6 million ($12 million), down from £10.6 million ($19.3 million) last year.

Split into the company’s various divisions, recorded product brought in £36 million (2004: £41 million), artists services — which includes management and live agency services — accounted for £47 million (2004: £46 million).

The company also said it was continuing talks, with unnamed parties, which may or may not lead to an offer for the company or a further business opportunity.

In a statement, Andy Taylor, Sanctuary Group’s executive chairman, said: “I am clearly disappointed that set-backs within Recorded Product releases, and particularly within Sanctuary Urban, have resulted in a lack of growth in the business in an environment where we had increased overheads in anticipation of continued growth. The measures we will take will have an immediate effect and, in adjusting our costs to a level more consistent with the level of business we have been able to achieve, we will have started to establish a more stable operating environment for our core business areas.”

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