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Outdoor wear store Blacks Leisure said an internal review has found the performance of its Sandcity unit has been overstated.

The admission covers at least two financial years. The company has subsequently suspended Sandcity managing director Darren Spurling.

It added it is assessing the feasibility of merging Sandcity, which distributes and retails the O'Neill Boardwear brand in the UK, with its Freespirit operation.

Since both operate in the same market segment, this should reduce the operating cost of the group's boardwear businesses. Blacks Leisure said group pre-tax profit for 2008 and 2009 is likely to be about £1 million lower than estimates.

It added the group's recovery plan is unaffected by these developments and it remains convinced its medium-term prospects remain healthy. Shares were off 9p, or 7% at 121.8 pence.