Hungry For Sanctuary Leftovers?

The U.K.’s Financial Times pointed out that while its U.S. investors were tucking into their Thanksgiving turkey, a turkey of another sort was issuing a profit warning that saw its shares drop 30 percent to 6.75 pence.

In a similar vein, The Times reported on what’s likely to happen to the leftovers as Sanctuary Group considers breaking up the cash-strapped business.

Most likely to be up for sale is Rough Trade – the label that has Morrissey, Babyshambles, The Strokes, Antony & The Johnsons, and The Long Blondes – although it’s expected to show a £2.8 million pre-tax loss for the year that ended September 30th.

Sanctuary bought a 49 percent stake in the company in 2001. The price wasn’t disclosed.

The business is run by its founder Geoff Travis, who started the brand as a record shop in 1975 before developing the cult record label and management company alongside the store.

Sanctuary’s summer prediction that its annual loss before interest, tax, depreciation and amortisation would be £17 million to £22 million has since been overshadowed by the departure of senior execs including Rod Smallwood and Merck Mercuriadis.

Smallwood quit to focus on managing Iron Maiden, which is out of contract with Sanctuary, while the long-running rumors of Mercuriadis teaming with Irving Azoff’s Front Line have become remarkably quieter in the last four weeks.

Neither of their departures, or even the two put together, bothered the market nearly as much as the November 23rd warning that Sanctuary may also have to book provisions of £15 million to £18 million, which apparently relates to advances made to un-recouped artists.

The changes will either come in a restatement of the 2005 results or be held over to the 2006 results. The latest stock collapse was triggered just before the November 23rd announcement, according to The Independent. Traders reportedly said that one unnamed but obviously distressed seller had been willing to offload 5 million Sanctuary shares at a discount.

Having seen the company make what he described as “considerable progress” in dealing with the outstanding “legacy issues,” chief exec Frank Presland said it’s disappointing that Sanctuary’s recovery is obscured by further historic accounting issues.

Presland, who also manages Elton John and James Blunt, took over when recently appointed chairman Bob Ayling – the former head of British Airways – ousted company co-founder Andy Taylor in May.

The board said his departure was due to anomalies in the accounting procedure.

Sanctuary is understood to have received offers for various parts of its music empire, but it’s unlikely to be in a position to do much about them until the 2006 figures are finalized.

Two months ago, it rejected a takeover approach from its smaller rival MAMA, which has the management of U.K. acts including Franz Ferdinand and Kaiser Chiefs and assets including the Channelfly rock venue business.

Even earlier in the year, Sanctuary was saved from collapse by a £110 million rescue package to help it recover from expensive loss-making acquisitions including buying Urban Records from Matthew Knowles, the father of R&B diva Beyoncé.

It involved selling new shares at 50 pence, and within a matter of months, the value has fallen to less than 15 percent of that.

Recent changes in the U.K. operation include Malcolm Dunbar being appointed head of A&R, and the reactivating of the Sequel and Slogan labels.

Sequel is a classic brand that Sanctuary intends to specialize as a home for contemporary artists, particularly those who have already established a fan base. The first signings are The Cooper Temple Clause and Idlewild.

— John Gammon