Sanctuary Tries To Get Into Shape
Troubles at Sanctuary’s U.S. recorded music business have prompted a shakeup of the whole operation, as the company seeks ways to turn at least a small-margin profit within the next two years.
The strategy confirmed at the March 29th AGM in London will see Sanctuary go forward as "three autonomous divisions."
"Our emphasis is on profitability," the annual report said. The company has spent the last year issuing profit warnings while its share price was in freefall.
Sanctuary, according to the report, continues to make progress but much work needs to be done.
Former British Airways chief exec Bob Ayling, who was brought in as non-executive chairman a year ago, and Frank Presland – who picked up the reins and began steering the company about a month later – don’t really have any good news to report, other than there’s been no more bad news for a few months.
Ayling and Presland, who took up the chief exec’s role when company founder Andy Taylor was forced out over irregular accounting practices, inherited more debt than they could have believed at the time.
Too much of the £110 million (US$205 million) raised in last year’s rescue deal, which was needed as a platform for turning the company around, went to filling previously undiscovered black holes in the balance sheet.
It’s understandable that Sanctuary, once the high-flyer of the international music business, is being forced to set its sights a lot lower. The board readily admits "it will be 2008 or later before there is a return to overall profitability."
As for the U.S., a company statement said, "In response to the significant changes currently under way in the U.S. music market, to which our U.S. operations have not been immune, the board has approved a proposal to restructure the recorded product division’s U.S. operations."
The statement also says the changes are a "restructuring" resulting from the "departure in late 2006 of Merck Mercuriadis," which reads like an admission that the U.S. company needs to rip it up and start again.
The cost of the restructuring and a further undisclosed number of job cuts aren’t expected to make any material impact during the current financial year.