Sanctuary shares slump on warning

Morrissey is one of the cult names in Sanctuary's stable

Sanctuary Group shares have fallen sharply after it said delayed releases and expansion costs would hit profits.

The music firm warned earnings would be 40% lower for the first six months of the financial year, compared to the £10.6m posted in same period 2004.

Sanctuary - home to Kelly Osbourne, The Charlatans and Morrissey - blamed "significant slippage" of record releases which had led to lower sales.

Shares in the firm had sunk almost 29.07% to 30.5 pence by 1000 GMT.

The group is set to release its results later this month.

The world's largest independent record label added it was now undertaking a "thorough review" of its business in order to improve cash generation and profitability, and reduce its long-term debts.

'Marked' fall

At its AGM in March, Sanctuary executive chairman Andy Taylor warned that, as in previous years, the company's performance would be better in the second half than in the first.

He also noted that "the disparity between the .... halves will be more marked than hitherto".

The group - whose operations cover music management, record and DVD production, merchandising, publishing and touring - has also been expanding its business internationally in recent years, another factor that has eaten into its profits.

A spokesman for the firm said its pace of expansion had increased in recent years since it moved into the US in 2000.

Earlier this month Sanctuary revealed it had been holding takeover talks with potential buyers.

"In response to speculation about a potential offer for the group, the board has nothing to add at this stage," the firm said.