Sanctuary Battens Down The Hatches

Whether 2005 will be best remembered for hurricane warnings from the Gulf Of Mexico or profit warnings from Sanctuary looks like a close run as the U.K. music company is battening down the hatches and struggling for long-term survival.

Despite dumping 175 of its crew overboard, the company has announced that it’s still bracing itself against a multimillion-pound hit to its balance sheet.

The Times reported that the company has told investors that the end-of-year balance sheet will show “net liabilities.” Technically, that means the business is currently worth less than nothing.

Sanctuary’s problems have been exacerbated by retailers returning large quantities of stock amid fears for the company’s survival. That situation has reportedly stabilised.

The signed-off end-of-year result – or full damage report – is expected early December, and it will look disastrous against the £133 million net assets that the company held at the half-year stage.

The short-term problem is that cutting costs by £16 million can’t be achieved without Sanctuary first swallowing the estimated £8 million bill for redundancies and more restructuring.

Another problem is that it paid £6.1 million to Mathew Knowles (Beyoncé‘s father) for Destiny’s Child‘s management company and put him in charge of Sanctuary’s new urban and gospel music division, which has since shown a lack of ability to deliver product within deadline or budget.

The upside, according to The Times, is that the current financial year has started well with strong sales from albums by Status Quo and Simple Minds, and well as touring income from Elton John and Joss Stone.

John Gammon