Sanctuary Group warned today (June 28) that the company's full-year earnings before interest, taxation, depreciation and amortisation would likely be "substantially less" than the previous year.

Sanctuary Group warned today (June 28) that the company's full-year earnings before interest, taxation, depreciation and amortisation would likely be "substantially less" than the previous year.

The British independent music firm disclosed that first-half EBITDA declined to £6.6 million ($12 million) against £10.6 million ($19.3 million). Pre-tax group profits were down to £1.3 million ($2.3 million) vs. £6.9 million ($12.9 million). At the same time, group overheads rose to £30 million ($54 million) from £26.0 million ($47 million).

Sanctuary levelled most blame for the downturn on its bullish expansion activities and the "slippage" of urban genre album releases in the six months to March 31. "Regrettably the slippage that has been experienced in record sales has impacted profits and we have not met our original targets for the period," the firm said in a statement issued to the London Stock Exchange.

Sanctuary said it had posted "regrettable and unacceptable" results, particularly in the Recorded Product aspect of its 360-degree business model.

"As our success has grown -- and as we have proven ourselves with artists like Morrissey and Robert Plant -- the records that we have and the artists that we attract have a much greater impact if they slip," group CEO Merck Mercuriadis tells Billboard.biz. "Whereas two years ago, we might have had two records which slipped that were worth 100,000 each in terms of record sales, now if we have two records that slip it might be worth a million."

Overall, album shipments during the period were down 1.3 million units on expectations, reducing forecast revenue by £9.3 million ($16.9 million), Sanctuary says. Recorded Product saw a £5 million ($9.12 million) fall in revenue to £36 million ($65 million), as group sales declined to £85 million ($155 million) from £89 million ($162 million). Revenues from its artists services division rose slightly.

A profit warning delivered June 3 took some of the sting out of today's report. Stock in the company was down 1.7% in morning trading to 18.25p.

To redress some of its operational issues, Sanctuary says it has instigated a global operational review with an aim to achieve annual costs of £7-8 million ($12-14 million). Details of its cost-cutting measures were not disclosed.

Sanctuary recently confirmed its executives had held conversations with third-parties on a buyout. Without identifying those parties, Sanctuary says the talks "are continuing."