(CelebrityAccess MediaWire) — A week after admitting its debt is uncomfortably high after a 40 percent slump in earnings, Sanctuary Records has placed blame upon its Urban music division, run by Matthew Knowles, Beyoncé's father.
Sanctuary's shares fell 9 percent to 18.25 pounds after the company suggested it would sell some of its assets to reduce the £118m debt, according to The Guardian.
Sanctuary warned 10 days ago that earnings fell from £10.6m to £6.6m in the first half as album releases were delayed. Pre-tax profit plunged 81% to £1.3m, the company reported this week.
The company lost 1.3 million sales due to slippage in the first half, and placed blame upon Sanctuary Urban and Mr. Knowles. The company has now restructed the Urban division, leaving Mr. Knowles in charge of artist relationships and giving other executives responsibility for production.
In an attempt to rein in debt, Sanctuary will cut up to 10 percent of its workforce and amalgamate offices. It is also considering selling its books division and its classical recording rights to raise money.
Sanctuary admitted its debt was not at "a higher level than the board is comfortable with going forward," but it dismissed speculation that it is in danger of breaching its banking covenants.
"The board has had discussions with its bank and its bondholder and is confident of their continued support," Sanctuary said in a statement.
The company rejected suggestions that it was contemplating a rights issue to raise extra money, but confirmed talks were continuing with private equity investors and others interested in buying the whole business. It hopes to conclude the talks before the end of summer but said it could "still not be sure of their outcome."
Sanctuary expects earnings to rebound in the current half, as tours and festivals are staged and more records are released. It said the full-year result would still be "substantially less" than last year – by at least 25 percent according to reports.
The Sanctuary board described the profit slump as "regrettable and unacceptable," according to the The Guardian, but stood by its business model. "The board is confident…the group can return to acceptable levels of profit and cash generation." –by CelebrityAccess Staff Writers