Morrissey is back with a new album at no 1 in the album charts out on Sanctuary Records (SGP). This is a big deal for a pretty small company. Added to this the first half results out today should show improvements in first half sales - their niche strategy is working. Expectations of an upbeat trading statement with double digit growth bucking the trend in the music industry. Share should tick up today.

OK I know what your thinking - you'd be nuts to go into the music industry in view of dwindling hard record sales, internet downloads etc etc right? WRONG. Take a look at Sanctuary in light of their latest acquisition and apply a little bit of analysis. Now not only do they have several top 10 charting albums in the bag this Summer, Libertines, Morrisey (superb) and Blue Nile (stunning album) but they have become in a couple of audacious moves the world's lARGEST producer of Urban music. Why is this significant? Because they have taken a leadership position in the one niche where consumers are still buying hard product and it's a fast growing segment - 14% of UK sales (good) BUT 25% of US sales (outstanding) - SGPs artits play in both the world's largest music markets. This stock will explode given the FY potential which will blow away all the forecasts..

Here's the detail of the latest acquisition - much more significant than the investment community seem to realise, in my humble opinion....

The Sanctuary Group plc ('Sanctuary' or the 'Group') announces that on 30th
September 2004, in Los Angeles, it agreed to purchase Tony Davis Management Inc.
('TDM') from Mr Tony Davis. TDM is a music management company and Mr Davis, who
is to join Sanctuary's US artist management team, manages the multi-platinum
selling artist Nelly, amongst others.

Following Sanctuary's acquisition of Mathew Knowles' Music World Entertainment
in 2003, and the subsequent formation of Sanctuary Urban, the Group is now the
world's leading Urban music company. Sanctuary's Urban businesses include
Sanctuary Urban Management; Sanctuary Urban Records Group; URBANE, a
merchandising division; and a live booking agency. Urban music now accounts for
a quarter of all music hard product sold in the US and 14% in the UK.

The Sanctuary Urban Management roster has some of the highest profile artists in
the world and includes Beyonce; Mary J. Blige; Sleepy Brown; Destiny's Child;
EVE; Floetry; RJ Helton; JadaKiss; Mary Mary; Kelly Rowland; Solange; Angie
Stone; Carl Thomas; Trinitee 5:7; Michelle Williams and Xzibit. Sanctuary Urban
Records artists include Jon B; Chaka Khan; De La Soul; Earth, Wind & Fire; The
O'Jays and Ray J.

Tony Davis is one of the most successful and respected managers in the high
growth Urban genre. Nelly has sold 20,000,000 records worldwide and last week
released two new albums 'Sweat' and 'Suit' that have since debuted on
Billboard's top 200 album chart at numbers 1 and 2 respectively - an historic
achievement. In addition Tony Davis also brings platinum artists Murphy Lee and
St. Lunatics to the Sanctuary roster.

Take a very close look at this little baby. Up 5% again today and still so unfeasibly cheap. These guys are absolutely going to blow the analysts forecasts away - today with the price is 41.5 pence...this is just an incredible bargain. They have had so much HUGE commercial success in the last few months it's hard to know where to start. No-one is on to them yet it seems. Expect plently of activity in the balance of year - volume up in 7mm's today...unprecedented opps. I know this is a ramble but I'll do a decent post on SPG next week meantime if you have not already then GET ON...great small/mid cap sustained growth play.

Following yesterday's bullish trading statement, SGP set to outperform sector and also tipped in today's Times (Tempus). Guardian article below. Still at an incredible price in my view - 43.5 pence is amazing value.


Sanctuary on track for good year

Reuters
Tuesday November 2, 2004
The Guardian

UK music firm Sanctuary is on track to meet market expectations for its financial year, boosted by acts ranging from lugubrious lyricist Morrissey to rowdy rabble rousers The Libertines, it said yesterday.
Sanctuary, whose 150,000-track music catalogue makes it the world's largest independent owner of music intellectual property rights, said it expected to benefit from new albums and major tours by pop divas Destiny's Child and ageing rockers Iron Maiden. House broker Credit Suisse First Boston is forecasting a pre-tax profit of 18.3m for the year ended September 30.

The company said it had continued to invest in new recorded products, with advances to artists continuing at a similar level to last year's 14m.

Sanctuary made several acquisitions this year, notably reggae catalogue Creole Records and artist management company TDM. Sanctuary said merchandising had also performed well.

In this morning's Independent (and tipped in the Times)..no change to price (yet) so still time...

Morrissey helps Sanctuary Group hit the right note

The devoted fans of artists such as Morrissey, whose latest album sold more than 700,000 copies, and The Libertines have helped Sanctuary Group weather the downturn in CD sales in recent years.

In a trading statement yesterday, the music company said it had felt some margin pressure, but sales were still strong.

Only 50 per cent of Sanctuary's business is music publishing, however. The rest is artist management services, and Mary J Blige and Nelly have recently signed up, joining artists diverse as Beyoncnd the Manic Street Preachers. Record labels have to pay advances to bands that may subsequently flop, but as a manager, Sanctuary takes a lucrative 15 to 20 per cent of the artists' revenues with little capital outlay.

Sanctuary also runs a live agency that rakes in chunky fees for booking tour dates for sell-out acts such as the Red Hot Chili Peppers. Together with its merchandising arm, its reliance on CD sales is minimal.

Consumer spending power is an issue for the music industry, but at 43.5p, Sanctuary is only trading at about 10 times earnings with good organic growth potential. Add it to your collection.

Several large buys going through this morning

Interesting use of a logarithmic axis on the share price in figure above.
Makes the drops look less dramatic.

3mm volume today is 4x normal. Some sizeable buys sqeezing in just before the close. Price held flat today but expect this to keep ticking up this week especially if we keep seeing high volumes.

more big buys in the last hour..sp must clip on at this level of activity

There is no question that the investment community is waking up to that fact that Sanctuary have successfully established themselves as a new big kid on the block in the music industry. Tipped at 39p in June and now 47.5p on Friday...there is so much upside here and the second half profits will be absolutely stellar. Unlike many of the others, relatively unimpacted by the internet and will comfortably outperform the industry...

Sanctuary Group PLC
18 November 2004


Notification of Major interests in shares


The Sanctuary Group plc ('the Company')


18 November 2004


The Company was notified on 18 November 2004 that Morgan Stanley Securities
Limited ('MSSL') acquired an interest in the ordinary shares of the Company on
16 November 2004 with the result that MSSL now have a beneficial interest in the
Company of 27,898,004 shares, being approximately 8.19% of the issued share
capital of the Company.


MSSL have transferred from time to time 12,599,000 shares to a third party on
terms which gave MSSL the right to require the return of an equivalent number of
shares. Accordingly, MSSL's interest in 12,599,000 shares is pursuant to Section
208(5) of the Companies Act 1985.


MSSL is a member of the Morgan Stanley Group of companies. Those group companies
which are direct or indirect holding companies of MSSL are, under the terms of
section 203 of the Companies Act 1985, each interested by attribution in any
shares in which MSSL is interested.

oop's my shares have slipped a bit.
This one is now a target for a bid.

This share is going to be worth buying very soon.

I think this stock will recover (I do not hold at the moment)

The group explained that its growth strategy for its Recorded Product Division over the past two years has focused on acquisitions and signings of high profile established artists capable of generating significant sales.

I knew I should have got some of these.

Get on quick - will not be at these levels long!

run for cover all holders Clem has tipped it in Sunday Business, the kiss of death?

Oh no- not ANOTHER driver disaster too, oh dear,

This is going to bounce big time from this sp.

Reasons? Might be a short term bounce, but gamblers only. SGP is classic example of a business where any investor can learn that cash is more important, when reading the balance sheet, than profit (which can be massaged in many ways, particularly in an acquisition hungry business like SGP). In years to 2001 - 2004 SGP showed pretax profit 7.7m, 11.26m, 10.79m and then loss 1.8m after (non cash) writedown of investments 11.4m. On the face of it, decently profitable. However, debt in 2002 was 11.6m, in 2003 it ballooned to 51.6m and 2004 to 73.8m. Latest trading statement suggests bank facilities now 120m and there are also 30m convertible loan notes. Debt imo has spiralled out of control and banks appear finally to have had enough. Further pointer with the benefit of hindsight is the sale by each of the two principal directors of 5.75m shares each at 75p towards the end of 2000. One of my guiding principles is to get out if directors sell large chunks (whatever the stated reason) and imo it works more often than not.

partridge
Good post I think you are properly right I do not hold I sold at 46p

A much stronger H2 was what the group promised and based on August sales/new releases there is some small reason for optimism...

Sanctuary have 3 of the Top 5 UK singles for the second time in a month with:

James Blunt (managed by Sanctuary Artist Management/ Twenty-First Artists) at No. 2, Baby Shambles (Rough Trade Records) at No.4 and Iron Maiden (Sanctuary Artist Management/ Live Agency/ Merchandising) at No.5
Additionally, 2Pac feat. Elton John (Twenty-First Artists) is currently at No.12, Jamiroquai (Sanctuary Artist Management - North America) at No.14 and Super Furry Animals (Ankst/ Sanctuary Artist Management) at No.28

This gives Sanctuary 6 out of the Top 30 singles.

James Blunt remains at No.1 on the album chart.

"Iron Maiden have had more hits than any other heavy metal band in chart history, with 16 of their singles making the Top 10, 33 reaching the Top 40, and 35 entering the Top 75 since their 1980 debut Running Free" - Music Week