Update

23 Nov 2006 13:41

Sanctuary Group PLC23 November 2006 23 November 2006: For immediate release THE SANCTUARY GROUP plc Update The Sanctuary Group plc, ('Sanctuary' or 'Group'), the international musicgroup, today announces that, for the year to 30th September 2007, Sanctuaryexpects an improved performance, with all of its major divisions making apositive net contribution in the period. Trading in the first month of the yearhas generally been in line with these expectations, although trading in itsRecorded Product division (principally in Rough Trade Records Limited ("RoughTrade")) has been disappointing. During the period since updating the market in June, Sanctuary's RecordedProduct division has continued to experience difficult trading conditions andSanctuary has recently been informed that Rough Trade (in which it holds a 49%interest) is now likely to record a loss before tax of approximately £2.8million for the year to 30 September 2006. All of this loss will be recognisedin Sanctuary's results, which may result in Sanctuary's EBITDA loss for 2006exceeding its earlier expectations, which had assumed Rough Trade breaking even.Sanctuary is undertaking a number of initiatives with regard to Rough Trade toimprove its performance, curtail its losses and reduce Sanctuary's futurefunding obligations to it. Sanctuary is also considering a disposal of itsinterest in Rough Trade and is in discussions with a number of interestedparties. Sanctuary has been engaged in a detailed review of certain assets andliabilities of the Recorded Product division. The work being undertaken has notyet been finalised, but a number of issues have come to the attention ofSanctuary which cause it to believe that it may be required to take furtherprovisions of £15 million to £18 million. The large majority of these areprovisions against assets and will not have any effect on the cash position ofthe Group. These additional provisions may be reported as a restatement ofresults for 2005 or in Sanctuary's results for 2006. A number of approaches have been made to Sanctuary expressing interest in anumber of its businesses. Once Sanctuary has announced its results for 2006, itexpects to be in a position to consider these strategic proposals. Frank Presland, Chief Executive, said: " Since last updating the market, theBoard has continued to review costs and profitability in all areas of itsbusiness and management also continues to execute the Group's previouslyarticulated recovery strategy. It is, therefore, disappointing that Sanctuary'srecovery is obscured by further historic accounting issues. However, theidentification of those issues serves to emphasise the determination of the newmanagement team to improve the financial reporting of the Group. Considerableprogress has been made in dealing with the outstanding legacy issues. We areseeing the first signs of success from our efforts to put the business on aproper footing and I am confident that we will continue to make progress in thecurrent financial year." Enquiries:James Hogan / Craig Breheny / Ash Spiegelberg Brunswick +44 (0) 20 7404 5959 Note to EditorsSanctuary is a UK listed international music group, encompassing recordedproduct, merchandising, and artist services (which encompasses artistmanagement and arranging and negotiating live performances). This information is provided by RNS The company news service from the London Stock Exchange