SuperGroup Regulatory News (SGP)

27 Jan 2005 07:01

Sanctuary Group PLC27 January 2005 Thursday, 27th January 2005 THE SANCTUARY GROUP PLC Preliminary results for the year ended 30 September 2004 The Sanctuary Group plc ("Sanctuary" or "the Group"), the international musiccompany, today announces preliminary results for the year ended 30 September2004. Highlights: •Turnover increased by 45.7% to £220.9m (2003: £151.7m) •EBITDA increased to £24.8m, up 9% excluding discontinued activities, (2003 adjusted: £22.8m) •Normalised pre-tax profits* of £16.1m (2003: £16.5m - excluding £471k for discontinued activities). •Normalised earnings per share of 3.18p (2003: 3.85p) •Dividend per share increased by 12.5% to 0.45p (2003: 0.4p) •Continuing improvement in cash conversion with a 89% conversion on EBITDA (2003: 75%) •The trend of long term recoupment as a percentage of current Artists' advances continued to improve strongly with £11.4m recoupment in the year with £14.1m new advances in the year (2003: £3.9m recoupment with £14.5m advances). •Trading performances of core operating divisions on or above expectations: •Recorded Product EBITDA = £18.9m (2003: £16.6m) •Artist Services EBITDA = £8.2m (2003: £4.7m) •Book Publishing made an EBITDA loss of £2.1m as a result of provisions and write-offs against debtors and stock. •Exceptional item: The Board has also approved a provision of £11.4m against the loan notes from Cloud 9, the Group's former television interests. •Highlights in Recorded Product included the resurgence of Morrissey with Platinum selling 'You Are The Quarry' shipping close to 1 million globally and achieving 4 top ten singles during 2004 in the UK alone. The financial year saw top ten album successes in the UK with (chart positions shown) The Libertines (1), The Strokes (2), Alison Moyet (7) and Blue Nile (10) as well as two UK number one singles (Kelly & Ozzy Osbourne and Gary Jules). •Artist Management reached a new level of market strength with Sanctuary now managing in excess of 130 acts worldwide. Sanctuary Urban has grown to become one of the world's largest Urban music management companies. New artists under management range from top Urban acts Nelly and Jadakiss through to Slipknot and Russell Watson, whilst new emerging acts under management include The Departure, The Black Velvets and The Datsuns. Our live agency business again had a strong touring year across the world arranging sell-out tours for artists such as Morrissey, Beyonce, Iron Maiden, Metallica, The Darkness and Franz Ferdinand. •Merchandising increased sales strongly through touring merchandise for artists such as Shania Twain, Elton John, Rush, Simon & Garfunkel and Anastacia whilst the new, higher margin retail business began to show strong success, especially in the US via major chains such as Target and Hot Topic. Bravado also launched an online service to sell official product from over 60 artists and brands including Led Zeppelin, Eminem, Kings of Leon, Rasmus, Ronan Keating, Morrissey, Bo Selecta and Nintendo. Commenting on the results, Andy Taylor, Executive Chairman, said: "I am pleased to be able to report strong results in the core operatingdivisions for the Sanctuary Group, justifying our belief there is always demandfor quality music in all forms. During a time of considerable upheaval in theglobal music industry, and tough retail conditions, Sanctuary has consistentlyachieved strong growth in profits year on year through our 360 degree approachto the industry. Over the past five years we have concentrated on building a profitable, longterm music business that benefits from all revenue streams associated with themusic industry. We have now reached a point, partly through our long termacquisitions strategy, where we believe we have a fully rounded business with astrong business structure and a dedicated and experienced management team inplace to continue to grow the business." -Ends- * Normalised profit before tax is calculated by taking the profit before tax(FRS 3) and adjusting for the effects of goodwill amortisation costs and thepurchased intangible assets amortisation costs. For further information, please contact: The Sanctuary Group plc Andy Taylor, Executive Chairman +44 (020) 7300 6618 Mike Miller, Finance Director +44 (020) 7300 6618 Philip Ranger, Director, Corporate & Investor Relations +44 (020) 7300 1323 +44 (0)7768 534 641 Eddy Leviten, Head of Communications +44 (020) 7300 6542 +44 (0)7768 057 464 Merlin Paul Downes or Rebecca Penney +44 (020) 7653 6620 Attached: Extracts from the Executive Chairman's Review Consolidated profit and loss account Consolidated balance sheet Consolidated cash flow statement Notes FINANCIAL HIGHLIGHTS AND BUSINESS DEVELOPMENTS --------------------------------------------------------------------------------RESULTS Year ended Year ended 30 September 2004 30 September 2003 (unaudited) (audited) ------------------------------------------------------------------------------- GROUP TURNOVER £220.9m £151.7mGROUP EBITDA* £24.8m £24.5mGROUP NORMALISED PBT £16.1m £17.0mEPS - NORMALISED DILUTED 3.18p 3.85p * EBITDA - Earnings before interest, taxation, depreciation and amortisation. EXTRACTS FROM THE EXECUTIVE CHAIRMAN'S REVIEW Executive Chairman's Review Introduction I am delighted to be able to announce to our shareholders another successfulyear for The Sanctuary Group plc with growth and positive developments in allour core businesses. We now have a more fully-rounded business and in continuing our well-establishedmanagement approach of marrying sound commercial and financial managementprinciples with a creative, artist-friendly culture, I feel very confident aboutSanctuary's position as a market leader in the global music business. Group Highlights The past year has seen a number of significant operating highlights covering allaspects of the Group's activities. Our Recorded Product division continued to sign both established and newdeveloping artists. The biggest success in this division in the past year hasbeen that of Morrissey, whose first album in eight years, 'You Are The Quarry',has already shipped close to a million copies worldwide. We also manageMorrissey, as well as handling his merchandising and live agency and he recentlycompleted a highly successful series of live dates in the US and UK. In addition, we achieved our first Number One single in the UK in December 2003with Ozzy & Kelly Osbourne's rendition of the classic Black Sabbath track'Changes'. Sanctuary artists won many awards during the year. Beyonce received five Grammyawards and a Brit award, and Sanctuary artists and releases were awarded fiveMOJO Magazine awards. Another achievement was reached in the US in the summerwhen acts we manage accounted for four albums in one week in the top 40 of theBillboard Album chart. Our commitment to Artist Management continued as we consolidated our recentacquisitions. In addition, management signings included Slipknot, The Departureand The Soundtrack Of Our Lives. Established acts we manage, such as The Who,Fleetwood Mac and Guns N' Roses, also had a very successful year with newproduct releases and live dates. An important part of the future development of the Group is the growth in ourcommitment to urban music through the Sanctuary Urban division and this area hasalready started to see significant growth, especially in the dominant US market.Sanctuary Urban Management is now one of the world's largest urban managementcompanies with 30 artists including Nelly and Destiny's Child. Sanctuary also operates one of the world's largest music merchandisingbusinesses, and our grip on this market was significantly strengthened duringthe year following the acquisition of the US-based company, World Online. Thishas given the Group a strong presence in the American retail merchandisingmarket. Although we have stated in the past that we felt that music publishingcatalogues were over valued, we have nonetheless begun to build this business upthrough acquisitions and other activities. As a result of this process,publishing has recorded a small operating loss of £0.6m in 2004 - a situation wewould hope to be reversed in 2005. In addition, we have been consolidating our studios to the point where we havesufficient infrastructure to service our clients but where we also have alimited continuing cost base. To this end, we closed Westside and Westwaystudios during 2004. Acquisitions strategy In 2003, we raised a £20m (net) Convertible Loan specifically to continue ourlong-term acquisitions strategy. During the year under review we invested some£24m in acquiring assets including management businesses, recorded productcatalogues and publishing catalogues. Our objective has been to build up areasof our business that we felt were below critical mass, in particular in ArtistManagement. Cash generation As we have pursued our stated growth strategy, we have used cash to help buildthe business. Shareholders should expect to see key cash generative indicatorsimproving as the business model and the key divisions mature. Our conversionrate of cash to EBITDA, before Artist advances, is showing a steady trend,moving from 72% in 2002 to 75% in 2003 through to 89% in 2004. A further indicator of cash generation in Recorded Product is the level ofrecoupment of previous artist advances compared with the levels of new advancesto artists in any year. With the typical recoupment cycle for a new CD beinggenerally about two years, we have always maintained that, over time, recoupmentlevels should reach and match advances during any given year. In 2003, artistadvances were some £14.5m and recoupment levels reached £3.9m. In 2004, artistadvances were at £14.1m whereas recoupment was £11.4m. We expect thissignificantly improved trend to continue. Cloud 9: Exceptional Item The Board has decided that it would be prudent to make a provision of £11.4magainst loan notes issued in connection with the sale in 2003 of the televisionbusiness, Cloud 9. In 2003, the Group took the strategic decision to withdraw from Cloud 9 deemingit to be a non- core business. The business was sold to its founder as a goingconcern in exchange for £28.5m in loan notes. Sanctuary retains security overthe intellectual property rights (including 5 complete series of the globalselling series "The Tribe" and "The Enid Blyton Adventure Series") againstdefault on the loan notes and is entitled to receive revenues from Cloud 9'scatalogue activities. The Board believes that Cloud 9 remains a viable business and had allowed forthe founder to restructure the business during early 2004 (which includedrelocating it from New Zealand to the more international Australian market) andto initiate new projects. In addition to revenue entitlement from the catalogue,the Group has certain participation rights relating to the commercial success ofnew projects. There are several new projects either in pre-production or now being filmed,including a sequel series to The Tribe, called "The New Tomorrow", and "Scoobs",an adventure series in association with Brit Allcroft. However, revenues havebeen slower to materialise than had been expected and the provision is felt tobe prudent at this time. Currency effects The rapidly deteriorating exchange rate between Sterling and the US Dollarduring 2004 had a negative effect on our revenues as a large percentage of ourrevenues arise from activities in the US. Digital strategy Sanctuary has had a digital strategy in place for several years and ourlong-term process of digitising all our recorded music catalogues is now in itsthird year. We have agreements in place with all the main digital distributionentities including i-Tunes and Napster. Although we would expect to see our digital income reach similar levels as forthe major record companies, our 360-degree approach puts us in a strong positionto be able to exploit additional digital and telecoms opportunities that areunavailable to record companies, for example, through merchandising and visualrights exploitation. In the telecoms market in particular, given the inclusionin our roster of high profile, global artists such as Nelly, Beyonce andDestiny's Child, the major mobile phone networks are seeking to negotiate visualrights deals with Sanctuary and we are in discussions with a number of them. Board changes In December 2004, we announced a number of key changes to the senior managementteam with immediate effect. Merck Mercuriadis, previously CEO North America whohas built up our US business from a very low base in 2000 to a businessrepresenting close to 50% of Group global revenues, has been appointed as GroupCEO with a specific brief to direct and manage the creative strategy of theGroup across its businesses on a global basis. Merck has worked for Sanctuaryfor 18 years. He relocated from London to New York 4 years ago to build theNorth American business and will remain based in the US. I will remain as Executive Chairman for the long term and will continue todirect the commercial and financial strategy of the Group alongside the GroupFinance Director, Mike Miller. Mike will continue to be the main point ofcontact with the investment community, alongside Philip Ranger, Director,Corporate and Investor Relations. In addition to Merck's new role, Aky Najeeb, previously CEO Sanctuary ArtistServices (excluding North America) now has a worldwide overview, having becomeCEO, Sanctuary Artist Services Worldwide. Aky has worked for Sanctuary for 20years. He will remain based in the UK. Joe Cokell, currently CEO, Sanctuary Records Group (excluding North America) nowhas a worldwide overview, having become CEO, Sanctuary Recorded Music Worldwide.He joined Sanctuary in 2000 following the acquisition of Castle Records. He willalso remain based in the UK. Prospects Everyone at Sanctuary is very excited about the prospects for further stronggrowth over the next few years, having developed a well-rounded and successfulmusic business model. We are seeing signs that the major record companies arefocusing on developing long term career artists again, which we believe willlead to a resurgence in enthusiasm for music and recorded product. Therefore, weexpect to see growth in sales of recorded product, both through traditionalmeans and increasingly through digital distribution. Having focused on building up the artist management business, particularly inSanctuary Urban, we started to see good growth in revenues this year and we arelooking forward to seeing increasing returns from that business over the nextfew years. It has always been a profitable and robust business to be in but, asthe largest music management company in the world, we are now in a very strongposition to generate value for shareholders in future. We are also excited about developments in the retail merchandising side of ourbusiness, particularly in the US, and we see opportunities in that area growingrapidly, helping to further extend margins in what is a high revenue producingbusiness. In addition, we are seeing increasing opportunities not just throughdownloads but increasingly in the telecoms market where we are able to exploitour visual rights licenses, a fast growing area in which traditional recordcompanies do not participate. We are as keen as our shareholders are to improve further the rate of cashconversion within the business and this is a priority for the senior managementteam, and as we continue to demonstrate the quality of the business model wehave developed, so I look forward to continuing to report improvements in thatarea. Of course, Sanctuary is nothing without its people and I would like to thank theSanctuary family worldwide for the tremendous effort and commitment that theycontinue to show every day. Andy Taylor Executive Chairman BUSINESS OVERVIEW Recorded Product -------------------------------------------------------------------------------- RECORDS Year ended Year ended 30 September 2004 30 September 2003--------------------------------------------------------------------------------TURNOVER £127.3m £78.0mEBITDA £18.9m £16.6m Sanctuary's profile as a home for great artists rose considerably during theyear, a situation that looks set to be continued as we attract to sign highquality acts, both established and emerging. Our strategy of signing such artists has been a key element in the success ofthe Recorded Product Division throughout the year. Our creative and businessphilosophy means we can now appeal to the likes of Tom Petty and Lou Reed, allof whom have signed to Sanctuary in the past twelve months. 2004 proved to be a great year for the Record Division. In September we achieveda particularly satisfying 'first', with two albums in the UK Top 10 - TheLibertines' ' The Libertines' and Blue Nile's 'High' - accounting for more than27% of that week's Top 10 album sales. Morrissey's 'You Are The Quarry', released on our Attack imprint in May, reachedNumber Two in the UK, where it also went platinum - 300,000 unit sales - andNumber 11 in the US. Morrissey also achieved his best ever chart success,including his time with the iconic band, The Smiths, with four Top 10 singles inthe UK. He also performed during the year to sell out crowds at festivals andin-door venues in the UK, the US and Europe. The year also saw both critical and sales success for The Strokes and for TheLibertines, both of whom we release through our joint venture with the RoughTrade label. The Libertines' self-titled album went straight into the UK albumcharts at Number One, a first for the joint venture, and The Strokes secondalbum, 'Room On Fire' debuted at Number Two, with sales of 255,000 and over350,000 to date respectively. Further successes also came from Belle &Sebastian's new longplayer 'Dear Catastrophe Waitress' and The Delays' album,'Faded Seaside Glamour' which also sold well throughout the year. Another of our joint ventures, Fantastic Plastic, had great commercial andcritical success during the year with Ikara Colt, whose album 'ModernApprentice' sold well. The label's Help She Can't Swim and The Beat Ups are alsogaining critical and commercial success. Our recent joint venture with leadingpop/punk label Drive Thru' Records is also performing well with acts includingSomething Corporate, Steel Train and Halifax and a very active release schedulein 2005. It is the success of artists such as The Libertines and The Delays that confirmsour position in the industry as a home for new and exciting artists as well asthe better-known, established acts. As our profile gains prominence, so we areconfident that more acts come to us and our profile will continue to grow. 'The System Has Failed', the new album by American metal act Megadeth, sold morethan 250,000 units following its release in September. Other highpoints includedour second album with UK singer Alison Moyet, whose album 'Voices', debuted atNumber 7 in the UK album charts in September and which has sold over 130,000units, while Nancy Sinatra's self-titled album, released in October also soldwell during the year. Another return to form was the first album in nearly ten years by Blue Nile as'High' entered the UK album charts at Number 10, the highest chart position theband has ever scored. Sanctuary was also delighted to have had two Number One singles in the UK duringthe year. Our first was with Ozzy and Kelly Osbourne, whose version of 'Changes'has gone on to sell more than half a million copies. We doubled our Number Onequota during the year with Gary Jules' unique take on the Tears For Fearsclassic, 'Mad World', which not only achieved the Number One spot in the UK andsold more than 750,000 copies but also reached Three in Germany. Gary's album,'Trading Snakeoil For Wolftickets', reached Number 12 in the UK and has soldmore than 80,000 units. In recent months signings to Sanctuary Records have included Lou Reed, TheCharlatans and Tom Petty, all of whom will release albums in 2005. Earlier inthe year the division also signed US rap icons Wu-Tang Clan, whose album'Disciples Of The 36 Chambers' is selling well in the US, and new artistsignings included young rock acts The*Ga*Ga*s and Hurricane Party. Sanctuary Urban Records is already having some considerable success in signinghigh profile artists such as Earth Wind & Fire, De La Soul and The O'Jays aswell as working to develop new artists on the same lower risk model we use forall our records releases. Key urban releases for 2005 include albums from KeithSweat and Earth Wind & Fire. Our catalogue arm has again had an outstanding year, attracting both criticalacclaim and commercial success. Standout releases include The Kinks' 'VillageGreen Preservation Society - a highly rated deluxe package - and the band's'Ultimate Collection', together with Emerson Lake & Palmer's 'Anthology', BobMarley's 'Roots Of A Legend' and various artist collections such as 'The SixtiesAlbum', 'The Essential Acoustic Album' and 'The Ultimate Reggae Party Album',all of which illustrate the depth and value of the Group's recorded musiccatalogue. The Creole Records catalogue acquisition in November 2003 hasbroadened our reggae catalogue. During the year we concluded a number of exciting medium term catalogueexploitation deals on some of our catalogue rights. Currently, these deals onlyrelate to North America. We were able to negotiate favourable minimumguarantees which based on our existing accounting policies have only beenrecognised on a discounted cash flow basis. These amounted to £41 million ofturnover and have added £10 million of debtors due greater than one year. Thesehave had an impact on overall EBITDA margins. We expect these deals to generatefurther income in the future and we are looking additionally at further dealsfor other elements of the catalogue in other territories. The Recorded Product division also had considerable success with its VisualEntertainment area. Neil Young's movie 'Greendale' was released on DVD for thefirst time and has sold well in the US, while Canadian rockers Rush saw morethan 120,000 copies of their 'Live In Rio' DVD sell at retail. The Who's 'The Kids Are Alright' documentary, originally released throughcinemas in 1979, was spruced up and released as a double disc package with ahost of extra features and new footage. The DVD was Number One in the UK MusicDVD chart and has gone on to sell more than 80,000 units and other strongselling DVD titles include 'Bob Marley - The Legend Live' and Kiss's 'TheSymphony'. Artist Services* --------------------------------------------------------------------------------ARTIST SERVICES Year ended Year ended 30 September 2004 30 September 2003--------------------------------------------------------------------------------TURNOVER £87.7m £63.8mEBITDA £6.1m £4.5m *Includes Artist Management, Live Agency and Merchandising, books and musicpublishing --------------------------------------------------------------------------------ARTIST MANAGEMENT Year ended Year endedand 30 September 2004 30 September 2003 LIVE AGENCY-------------------------------------------------------------------------------- TURNOVER £31.8m £18.0mEBITDA £9.0m £5.3m Artist Management This year has seen a consolidation of the most recently acquired components ofthe division. EBITDA margin improved for the year to 29.2%. Our stated aim in the management field has been to draw together the separateparts of our activity in this area and operate as a large player; this strategyis being fulfilled through acquisition and subsequent consolidation. It has been a period that has also seen the Group make a move into a market thatwe expect to have a significantly positive impact on the development of ourbusiness. In 2003 we announced the creation of Sanctuary Urban with Mathew Knowles, thehighly regarded urban artist manager - and father of Destiny's Child's BeyonceKnowles. The venture has resulted in us bringing in a number of new managers andacts - the likes of Jadakiss, Nelly and D12 - in the space of less than 12months. Our move into - and dedication towards - urban music is a natural strategy forthe Group. We created a business model effectively around the rock music genre,and being able to apply this model to as vibrant and burgeoning genre as urbanmusic is of great importance to us. As we have done with the rock music market,we are using the existing expertise of some of the best known names in the urbanworld to drive this part of our business forward, combined with the same levelof dedication, professionalism and strategic approach that we have appliedthroughout our business divisions. Sanctuary Urban Management runs alongside our existing Sanctuary ArtistManagement arm. The acquisition of Tony Davis' urban management company broughtus the multi-platinum artist Nelly, whose simultaneously released albums 'Sweat'and 'Suit' debuted at Number One and Two in the US charts on their release inSeptember. Other newly managed Urban signings include US rap artist Xzibit, who hosted the2004 MTV European Music Awards and saw his 'Pimp My Ride' show for MTV attractgood audiences worldwide. In the year we also acquired the Erving Wondermanagement company, which brought into Sanctuary key urban artists such asJadakiss, whose album, 'Kiss Of Death', debuted at Number One on the BillboardAlbum chart, as well as the highly respected Eve, Floetry and Angie Stone. It has also been a busy year for managed act Beyonce. Her solo album,'Dangerously In Love', continued to sell very well, she completed a major USstadium tour with Missy Elliot and Alicia Keys, filmed a major role for theforthcoming Pink Panther movie and recorded the film's theme song. Beyonce'sendorsement deals with a number of top brand products including Pepsi and TommyHilfiger continue to thrive and she also saw her 'Live At Wembley' DVD top thecharts around the world. The new Destiny's Child album, 'Destiny Fulfilled',released in November 2004, has had strong sales and already making tripleplatinum in the US and setting the stage for a major world tour in 2005. We also attracted new management acts such as Sweden's The Soundtrack Of OurLives, as well as emerging acts such as The Departure, The Black Velvets, TheLongcut, The Datsuns and Kenna. New management clients Slipknot released their new album 'Vol.3: The SubliminalVerses' which entered the Billboard Top 200 album chart at Number Two and whichhas sold 2.8m units worldwide to date. Slipknot also toured in the US and Europewith fellow management act Slayer. In the UK rock act Funeral For A Friend saw their debut album, 'Casually DressedAnd Deep In Conversation', achieve gold status - 100,000 units - while the bandincreased its exposure to a wider audience by supporting Iron Maiden on alengthy European tour. Groove Armada secured major synchronisation licensing deals for Asda and Renaultcampaigns, while the act's 'Best Of' album charted at Number Six in the UK,selling in excess of 200,000 copies. The act's year culminated with a sell outUK tour including five nights at London's Brixton Academy. Overseer was anotheract to secure a great synch deal, this time for the new Vodafone advertisementin the UK and throughout Europe. Two Sanctuary managed stalwarts - The Who and Guns N' Roses - had great successduring the year with DVD and album releases respectively. The Who's 'The KidsAre Alright' topped the DVD charts in the UK, while GN'R's 'Greatest Hits' albumtopped the UK album chart and was a Number Two album across Europe and a NumberThree in the US. Fleetwood Mac undertook a successful world tour in 2003/04which continues into 2005, while the Manic Street Preachers toured the UK withtheir new album 'Lifeblood'. Live agency Our agency businesses, Helter Skelter and K2, continued to contribute steadyincome to the Group throughout the year. EBITDA margin declined primarily as aresult of the mix of revenues generated by individual agents varying year onyear. The year has seen Helter Skelter clients dominate the live music scene andnotable highlights are Busted who played 11 nights at Wembley Arena in additionto many other arena shows through the year, The Darkness headlining the Readingfestival after cleaning up at the Brit Awards earlier in the year and theincredible breakthrough talents of Franz Ferdinand, Kings of Leon, Snow Patroland many more ready to make their mark in 2005. Helter Skelter is the largest live agency outside North America, with over 300acts on its roster, and K2 also has a substantial roster of high profile actsand given the scope of the market we feel there is little room for furtherlarge-scale acquisition, yet the business continues to be profitable. Liveagency activity is an important area in which to be involved and thisinvolvement also benefits the Group in other areas such as record label andmerchandising. --------------------------------------------------------------------------------MERCHANDISING Year ended Year ended 30 September 2004 30 September 2003--------------------------------------------------------------------------------TURNOVER £50.1m £37.0mEBITDA £2.1m £0.8m Merchandising We firmly believe in the future of merchandising an act's associated products,such as T-shirts and other branded clothing and are seeing good growth in ourmerchandising operation. The development of online retail services, act's own websites, music retailersand supermarkets, has meant that merchandising in this area is no longerrestricted to live touring events - which is traditionally a 'high volume/lowmargin' business - but is moving towards a landscape that sees retail become asignificant part of our business. This movement has already resulted in ourdoubling the EBITDA margins for this area. Our commitment to this activity meant that during the year we acquired WorldOnline Merchandising in the US in April 2004. This acquisition has strengthenedour global presence in this sector and particularly in the US and has addedclients including major acts Shania Twain, Elton John, Simon & Garfunkel and N*E*R*D. Books In reviewing this business a number of provisions and write-offs have been madetogether with cut-backs in overheads to create a strong business going forward.The division has a great catalogue and with new distribution arrangements inplace we believe that we now have a solid base. Music Publishing We were delighted to conclude a deal to sign the publishing for Guns N' Rosesfrontman Axl Rose which covers all of the band's catalogue as well theforthcoming Guns N' Roses album. Guns N' Roses 'Greatest Hits' album was one of2004's top selling albums worldwide. We also signed the catalogue of legendaryUK pop act UB40, who are releasing a Greatest Hits compilation in 2005 tocelebrate their 25th anniversary. During the year we signed a deal to administer Ten Ten Music's catalogue for theUK, Eire, France and Germany. Ten Ten have successful writers and artistsincluding Keith Urban and Alan Jackson. We also signed a deal to administer andwork on development with Untouchable Songs, set up by Ivor Novello winningsongwriter Chris Braide and Andy Graham. The summer saw us have nine publishedsongs in the UK Album chart, including works performed by Mike & The Mechanics,Paul Weller and Elaine Page. We continue to develop Music Publishing organically whilst the prices forcatalogues in this area remain unrealistically high. To this end we sign newwriters who want to work with us, and we will sign established acts where thesituation is deemed appropriate. Group Services Our Studios continue to provide high quality facilities both for our own artistsand for external clients. Townhouse Studios recently celebrated its 25thanniversary and is a premier recording and mastering facility, with recentclients including Coldplay, Beyonce, Duran Duran, Busted, Sugababes, Elton John,Jamelia, Mary J Blige and Graham Coxon. Sanctuary Post is a high-end facilityfor audio-visual post-production. and Sanctuary Post clients include Flextech,Lion TV, National Geographic, Discovery Channel, Nickelodeon and Warner Visionfor a range of TV and music projects. In addition, Sanctuary Mobiles providedmobile recording and mixing facilities for a wide range of clients and eventsfrom The Brits, MTV Europe Awards to Kings Of Leon and David Bowie. THE SANCTUARY GROUP PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT YEAR ENDED 30 SEPTEMBER 2004 Unaudited Audited Year to Year to 30 September 2004 30 September 2003 £'000 £'000 Turnover Existing Operations 207,935 149,100 Acquisitions 13,030 - ----------- ----------- Continuing Operations 220,965 149,100 Discontinued Operations - 2,579 ----------- ----------- Group Turnover 220,965 151,679 ----------- -----------Operating Profit before Depreciation and 24,824 24,500Amortisation (EBITDA)Depreciation (3,154) (2,613)Amortisation (6,476) (7,403)Group Operating Profit Existing Operations 14,627 14,031 Acquisitions 567 - ----------- ----------- Continuing Operations 15,194 14,031 Discontinued Operations - 453 ----------- ----------- Group Operating Profit 15,194 14,484 ----------- -----------Interest receivable and similar income 93 175Exceptional item - Amounts written off (11,400) -InvestmentsInterest payable and similar charges (5,689) (3,868) ----------- -----------(Loss)/Profit on ordinary activities before (1,802) 10,791taxationTax on profit on ordinary activities (4,981) (3,954) ----------- -----------(Loss)/Profit on ordinary activities after tax (6,783) 6,837Equity Minority interests (129) (243) ----------- -----------(Loss)/Profit for the period (6,912) 6,594 =========== ===========Dividend proposed (1,528) (1,340) =========== ===========Retained (loss)/profit for the financial year (8,440) 5,254 =========== ===========Earnings per share - Basic (2.08)p 2.03pEarnings per share - Diluted (2.08)p 1.98pEarnings per share - Normalised diluted* 3.18p 3.85p * Normalised diluted EPS is calculated usingprofit on ordinary activities after tax, minorityinterests and exceptional items, having added backthe goodwill and intangible assets amortisationcosts over the diluted weighted average number ofshares in issue during the year. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES YEAR ENDED 30 SEPTEMBER 2004 ------------ ----------- Unaudited Audited 30 September 30 September 2004 2003 ------------ ----------- £'000 £'000 ------------ ----------- (Loss) /Profit for the financial year (6,912) 6,594 ------------ -----------Foreign Exchange translation differences on foreigncurrency net investment in subsidiaries (1,517) (1,034) ------------ -----------Total recognised gains and losses relating to the (8,429) 5,560financial year ============ =========== THE SANCTUARY GROUP PLC CONSOLIDATED BALANCE SHEET 30 SEPTEMBER 2004 Unaudited Unaudited Audited 30 September 30 September 30 September 2004 2004 2003 £'000 £'000 £'000 Fixed AssetsIntangible Assets 31,553 26,879Goodwill 84,185 76,975Tangible Assets 13,652 12,817Investments 17,907 29,950Investments in joint venturesShare of gross assets 2,135Share of gross liabilities (2,135) --------- - ---------- --------- 147,297 146,621 ---------- ---------Current assetsStocks 10,524 9,197Advance payments to artists to secure 16,432 15,433rights due within one yearAdvance payments to artists to secure 17,352 15,657rights due after more than one yearDebtors - Amounts falling due within one year 66,490 61,675Debtors - Amounts falling due after one year 24,233 6,130Cash at bank and in hand 20,046 9,271 ---------- --------- 155,077 117,363Creditors - Amounts falling due within one year (93,639) (76,993) ---------- ---------Net current assets 61,438 40,370 ---------- ---------Total assets less current liabilities 208,735 186,991Creditors - Amounts falling due after (78,876) (52,739)more than one yearProvisions for Liabilities and Charges (7,011) (4,480) ---------- --------- 122,848 129,772 ========== =========Capital and ReservesCalled up Share Capital 41,997 40,907Shares to be issued 250 750Share Premium 81,493 79,155Profit and loss account (1,235) 8,722 ---------- ---------Equity Shareholders' Funds 122,505 129,534Minority Interests 343 238 ---------- --------- 122,848 129,772 ========== ========= THE SANCTUARY GROUP PLC CONSOLIDATED CASH FLOW STATEMENT YEAR ENDED 30 SEPTEMBER 2004 Unaudited Audited Year to Year to 30 September 30 September 2004 2003 £'000 £'000 Net cash inflow from operating activities 8,109 4,001Returns on investment and servicing of finance (5,596) (2,795)Taxation (168) (3)Capital Expenditure and Financial Investment (12,597) (3,287)Acquisitions and DisposalsPurchase of subsidiaries (10,729) (10,253)Equity dividends paid (1,328) (1,140) ----------- -----------Cash outflow before financing (22,309) (13,477)Financing 21,482 16,656 ----------- -----------(Decrease)/Increase in Cash in the year (827) 3,179 =========== =========== Reconciliation of net cash flow to movement in net debt (Decrease)/Increase in Cash in the year (827) 3,179Cash flow from movement in debt and lease financing (20,882) (14,034) ----------- -----------Change in net debt resulting from cash flows (21,709) (10,855)New finance leases (500) (803) ----------- -----------Movement in net debt in the year (22,209) (11,658)Net debt 1 October 2003 (51,643) (39,985) ----------- -----------Net debt 30 September 2004 (73,852) (51,643) =========== =========== ANALYSIS OF NET DEBT At At 30 September Other 30 September 2003 Cashflow non-cash 2004 changes £'000 £000 £'000 £'000 Cash in hand, at bank 9,271 10,775 - 20,046Overdrafts (4,452) (11,602) - (16,054) ---------------------------------------------------- 4,819 (827) 3,992 Debt due within one (3,000) - - (3,000)year Debt due after one year (52,000) - - (52,000) Finance leases (1,462) 618 (500) (1,344) ----------------------------------------------------Total before Convertible (51,643) (209) (500) (52,352)Loan Notes ---------------------------------------------------- Convertible Loan Notes - (21,500) - (21,500) ---------------------------------------------------- Total (51,643) (21,709) (500) (73,852) ==================================================== THE SANCTUARY GROUP PLC RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS YEAR ENDED 30 SEPTEMBER 2004 Unaudited Audited 30 September 30 September 2004 2003 £'000 £'000Opening Shareholders' Funds 129,534 122,995(Loss)/Profit for the financial year (6,912) 6,594Proposed dividends (1,528) (1,340)Loss on retranslation of opening net assets and longterm funding of overseas subsidiaries (1,517) (1,034)Issue of share capital 2,928 2,319 ----------- -----------Net movement in Shareholders Funds (7,029) 6,539 ----------- -----------Closing Shareholders' Funds 122,505 129,534 =========== =========== THE SANCTUARY GROUP PLC Notes to the unaudited preliminary consolidated financial statementsYEAR ENDED 30 SEPTEMBER 2004 1 Basis of accounting The unaudited preliminary financial statements are prepared under the historical cost convention and in accordance with applicable accounting standards. The same accounting policies have been used for the year ended 30 September 2004 as for the year ended 30 September 2003. 2 Segmental Information Analysis by class of business Unaudited Audited 2004 2003 Turnover £'000 £'000 Recorded Product 127,341 78,029 Artist Services 87,678 63,808 Group Services 5,946 7,263 ------- ------- Continuing activities 220,965 149,100 Screen - discontinued activities - 2,579 ------- ------- 220,965 151,679 ------- ------- Analysis by geographical region Turnover £'000 £'000 United Kingdom 70,607 67,093 USA 107,868 51,278 Europe 27,716 27,178 Rest of World 14,774 6,130 ------- ------- 220,965 151,679 ------- ------- Further information on segmental analysis can be found in the Business Overview section. 3 Statutory information and audit review The financial information in this preliminary announcement does not constitute statutory accounts within the meaning of Section 240 (5) of the Companies Act 1985. The audited financial statements of The Sanctuary Group plc for the year ended 30 September 2003 have been reported on with an unqualified audit report in accordance with Section 235 of the Companies Act 1985 and have been delivered to the Registrar of Companies. 4 Dividend The Directors' recommend a final dividend on the ordinary shares of 0.45 pence per share (2003 0.4 pence per share) for the year. The final dividend is payable on 6 April 2005 to shareholders on the register on 4 March 2005, with shares going ex-dividend on 2 March 2005. 5 Taxation Tax on profit on ordinary activities has been calculated based on the assumption that the exceptional item of £11,400,000 relating to amounts written off investments is not deductible for taxation purposes. 6 Investments Investments includes a provision of £11,400,000 against the £28,500,000 Loan Notes issued in 2003 as part of the disposal of the Cloud 9 Group of companies. 7 Goodwill Goodwill additions in the year includes the acquisition of World On Line (a US based merchandising company), various US based artist management companies and Creole Records Limited (a UK based record catalogue). 8 Reconciliation of operating profit to net cash inflow from operating activities Unaudited Audited Year to Year to 30 September 30 September 2004 2003 £'000 £'000 (a) Operating profit 15,194 14,484 Depreciation of Tangible fixed assets 3,154 2,613 Amortisation of Goodwill and Intangible fixed 6,476 6,210 assets Amortisation of Intangible fixed assets in 2,786 1,946 cost of sales Amortisation of Investment in Programming - 1,193 Recoupment of advances to artists 11,367 3,939 Profit on disposal of fixed assets (44) (150) Increase in stocks (869) (2,709) Increase in advances to artists to secure (14,061) (14,542) rights Increase in debtors (21,901) (10,331) Increase in creditors 7,524 2,382 Effect of foreign exchange rate changes (1,517) (1,034) ----------- ---------- Net cash inflow from operating activities 8,109 4,001 =========== ========== (b) Analysis of cash flows for headings netted in the cash flow Returns on investments and servicing of finance: £'000 £'000 Interest received 93 175 Interest paid (5,538) (2,754) Interest element of finance lease rental (151) (216) payments ----------- --------- Net cash outflow for returns on investments (5,596) (2,795) and servicing of finance =========== ========= Capital expenditure and financial investment: £'000 £'000 Purchase of tangible fixed assets (3,393) (2,925) Purchase of intangible fixed assets and (9,163) (12,251) investment in programming Sale of tangible fixed assets 124 12,456 Purchase of investments (165) (567) ----------- ---------- Net cash outflow for capital expenditure and (12,597) (3,287) financial investment =========== ========== Acquisitions and disposals: £'000 £'000Purchase of subsidiary undertakings (11,502) (10,491)Net cash acquired with subsidiaries 773 238 ----------- ----------Net cash outflow for acquisitions and disposals (10,729) (10,253) =========== ========== Financing: £'000 £'000 Issue of Ordinary Share Capital (net of expenses) 600 572 Issue of Convertible Loan Notes 21,500 - Debt due within one year: Decrease in short-term - (40)borrowing Capital element of finance lease rental payments (618) (1,076) New secured loans: repayable within one to two years - 2,000 New secured loans: repayable within two to five - 15,200years ----------- -----------Net cash inflow from financing 21,482 16,656 =========== =========== This information is provided by RNS The company news service from the London Stock Exchange