SuperGroup Regulatory News (SGP)

28 Apr 2006 10:00

Sanctuary Group PLC28 April 2006 28 April 2006 The Sanctuary Group plc (the "Company" or the "Group") ANNUAL GENERAL MEETING AND TRADING UPDATE The Sanctuary Group plc announces that at its Annual General Meeting today, itwill provide the following update: Overview The completion of the recent equity fundraising on 20 March 2006 hassignificantly strengthened the Group's balance sheet with the net indebtednessof the Group being reduced to approximately £32 million immediately followingcompletion compared to approximately £163 million prior to it. The Directorsbelieve that this has created a much stronger foundation from which the Groupcan rebuild. As a result of the Group's financial position during the majority of the firsthalf of this financial year, trading conditions remained very difficult. Thesenior management team had to concentrate on the restructuring and refinancingof the business as well as normal trading operations where clients and potentialclients remained concerned about the financial situation. Since the completionof the refinancing the executive team has been able to focus more on thebusiness and the Board believes that the greater certainty over the Group'sfinancial position has created a more favourable environment in which to win newclients. Although the refinancing of the business has been completed with many benefits,the restructuring will continue over the course of this financial year. TheBoard is mindful that whilst many of the costs associated with this exercisehave already been incurred there will be additional costs during the second halfof this year. Some of these costs will relate to the planned improvement in theGroup's internal control, risk management and corporate governance framework.Good progress has been made in these areas with two new Board appointments andtoday, following a competitive tendering process, KPMG Audit PLC will beproposed to shareholders as auditors to the Group. The Group remains committedto implementing a very high standard of internal control, risk management andcorporate governance. Many of the business issues facing the Group remain to be resolved. Aspreviously stated we are seeking to dispose of the studios, publishing andcertain other businesses. Whilst these disposals are being progressed thebusinesses will continue to incur operating costs. We are also in discussions inrelation to the realisation of the Group's interest in the Cloud 9 Loan Notes.The Board is determined to resolve these issues as soon as possible. Current Trading and Outlook The underlying current trading of the Group, at a consolidated level, remains inline with the expectations for the current financial year established by theBoard at the time of the equity fundraising. Both the Recorded Product and Merchandising Divisions continue to perform welland the Directors remain confident that the Group's more robust financialposition has restored the ability of these divisions to attract new acts. TheArtist Management division is highly reliant on commission income which isuncertain as to timing and the performance of this division is behind theBoard's expectations. In the second half of this financial year the Group will benefit from a greatlyreduced interest expense compared to the high levels incurred under the previouscapital structure. The Directors expect that the total interest expense for thefinancial year will be in the region of £9 million, including interest on leasesand other instruments. Whilst the Group is seeking to improve performance during the current financialyear the key priority of the Board is to provide a platform to facilitateimproved performance. As set out above good progress is being made with respectto internal controls, risk management and corporate governance. As a result of the refinancing and restructuring the Group has incurredsignificant non-recurring expenses in the current financial year. The Boardbelieves that other exceptional costs may be incurred during the second half ofthe year relating to the resolution of the issues set out above and expect thattotal non recurring expenses, many of which are non cash items, could amount tobetween £10 million and £15 million in the current financial year. Whilst there can be no certainty as to the timing of events the Board intends todeal with the outstanding business issues and restructuring as soon as possible. Interim Reporting The Group has already indicated it will be announcing in July 2006 its interimresults for the six months ended 31 March 2006, which will be prepared underIFRS. The previously reported numbers for the period ended 31 March 2005 will berestated in the interim report. The restatement primarily arises from the priorperiod adjustments disclosed in the accounts for the year ended 30 September2005. However, the interim report will also restate the previously reportednumbers for the six months ended 31 March 2005 to correct a fundamental errorrelated to a transaction that was incorrectly included in calculating theGroup's operating profit for the period. Whilst this transaction was correctly accounted for in the 30 September 2005Annual Report, in the interim results to 31 March 2005 the Group's operatingprofit was overstated by £3.6 million resulting in an operating loss for theperiod of £1.9 million compared to the operating profit of £1.7 million aspreviously stated. The Board is continuing to review the description of those prior yearadjustments disclosed in the 30 September 2005 Annual Report that will also beincluded in the restated results for the six months ended 31 March 2005. TheDirectors do not believe that this review will affect the trading results andbalance sheet reported at, and for the year ended, 30 September 2005. Financial Reporting Review Panel (the "FRRP"). Following the finalisation of the Group's audited accounts for the year ended 30September 2005 which included an adverse audit opinion issued by the Group'sauditors, the Group has been in correspondence with the FRRP about thecircumstances surrounding the changes in accounting policies disclosed in theaccounts. Such enquiries are usual following an audit qualification. Ends For further information, please contact: The Sanctuary Group plcPhilip Ranger, Director, Corporate & Investor 07768 534641Relations 020 7300 1323 This information is provided by RNS The company news service from the London Stock Exchange