The share price of London based independent music company Sanctuary fell sharply at the end of last week after management warned that a combination of delayed releases and expansion costs would hit profits hard.
Sanctuary warned investors that profits for the first six months of the current financial year would be down 40% compared with the same period last year. Bosses said the "significant slippage" was down to a reduction in the number of key releases within their recordings division, which affected both overall revenues and profits.
The announcement wasn't a complete surprise. The company's executive chairman, Andy Taylor, warned back in Mar that, like last year, figures for the first half of the financial year would be lower than for the second, adding that this year "the disparity between the halves will be more marked than hitherto".
Nevertheless, once the specifics of the profits slide were announced shares fell just over 29% to 30.5 pence. Sanctuary bosses tried to reassure the investment community by saying they were undertaking a "thorough review" of the business in order to improve cash generation and profitability, and reduce its long-term debts.
However company bosses had no more to say on their recent admission they were considered looking for a buyer to acquire the company. On that the company said last week: "In response to speculation about a potential offer for the group, the board has nothing to add at this stage".
Fingers crossed the profits slide is a temporary glitch for Sanctuary because their interesting business model (they are unique in having companies that deal in recordings (labels and studios), management, publishing and live music) might just be the future of the music industry.