Rough Trade losses shake music company
LONDON — The troubled music company Sanctuary Group has issued another profits warning after it emerged that one of its star performer investments expects to report a financial loss in the year ended Sep. 30, 2006.
The company has told the stock exchange that it is continuing to experience poor trading in its recorded product division and that indie stalwart Rough Trade Records, in which Sanctuary owns a 49% stake, has unexpectedly revealed that it is likely to record a loss before tax of about £2.8 million ($5.4 million).
In a statement, the company said: “All of this loss will be recognized in Sanctuary’s results, which may result in Sanctuary’s EBITDA loss for 2006 exceeding its earlier expectations, which had assumed Rough Trade breaking even.”
It added: “Sanctuary is undertaking a number of initiatives with regard to Rough Trade to improve its performance, curtail its losses and reduce Sanctuary’s future funding obligations to it. Sanctuary is also considering a disposal of its interest in Rough Trade and is in discussions with a number of interested parties.”
The company also revealed that it has been reviewing the assets and liabilities in its recorded product division and advised that it may still have to make further provisions of £15 million to £18 million ($28.7 million-$34.5 million) in adjusting the balance sheet value of those assets. This may force the company to restate its results for 2005.
Sanctuary CEO Frank Presland said: “It is disappointing that Sanctuary’s recovery is obscured by further historic accounting issues. However, the identification of those issues serves to emphasize the determination of the new management team to improve the financial reporting of the group.”