Sanctuary fails to lift gloom

UK Entertainment group Sanctuary dealt investors a double blow today when it issued a fresh profits warning and said an earlier takeover approach was unlikely to lead to an offer close to its current value.

The group, whose portfolio of artists includes Elton John and Beyonce, said trading had remained tough since a half-year profits fall in June, and added that a further deterioration was likely.

Shares slumped by a third as Sanctuary also said talks with the unnamed party behind an approach in June were unlikely to lead to an offer “at or near to the current share price”.

However, it added that talks were ongoing with a number of other parties about a “range of possible transactions”, including a possible offer for the firm.

Sanctuary said in June that interim profits were hit by delays to releases, with its Urban division – featuring rap and R&B artists – particularly affected. This led it to say full year earnings were likely to be “substantially lower” than last year.

The group runs the largest global management business for music artists with stars such as Manic Street Preachers, Nelly, Morrissey and Iron Maiden on its books. It also owns the biggest live tour booking agency outside the United States and sells official merchandise.

It said today that a cost reduction programme launched in response to the shortfall was on track to achieve its predicted £7m (€10.2m) to £8m (€11.7m) of annual cost savings.

The firm has given no details on what the plan involves but speculation has centred around possible job cuts.

Today’s trading statement also gave details of increased debt facilities to £120m (€176m) to fund both the cost-saving programme and its day-to-day operations. The firm has also obtained waivers to certain terms of its loans.

It said these changes, together with management action, should provide it with the financial stability it needs to implement plans to improve its performance.

Before today’s announcement, investors had pencilled in annual profits ranging from around £6m (€8.8m) to £13m (€19m), against £16.1m (€27m) last time.

However, analyst Malcolm Morgan at Investec Securities said he believed investors would now be considering a loss for the year rather than a profit.

He said: “It is disappointing to note that the party with whom they have had, one presumes, most extensive discussions, feels the current share price is too high to do a deal.”

Shares have slumped from a high of 43.75p on the day of the original takeover approach announcement on June 3, to 11p today.

Mr Morgan added: “Overall we struggle to find any silver lining to this announcement.”