20th Dec 11
HMV warns future is uncertain as losses widen
by Adam Richards
Big sale: HMV wants rid of all its live music venues and festivals
Big sale: HMV wants rid of all its live music venues and festivals
Embattled retailer HMV has reported a first-half net loss of £50m and warned that harsh trading and economic conditions created uncertainty about its future.
HMV, which has warned on profits four times this year, said that it had sufficient resources to remain in business for the foreseeable future. But it warned that trading circumstances and the economic environment create material uncertainties that cast considerable doubt on the company’s ability to continue in operation in the future.
Shares in the retailer dropped 0.31 to 3.56p, with the company now valued at £15m, equal to roughly a week’s worth of sales. HMV, which sealed a refinancing deal worth £220m in June, said that directors are in constructive and regular discussions with its banks. However, despite offloading its Waterstone’s business and HMV Canada, its net debt has gone up from £152m one year ago to £164m.
The company has now announced that it is trying to sell its music venue business HMV Live which operates 13 venues and several festivals including Global Gathering close to Stratford-upon-Avon and Lovebox in London. It hopes to receive a minimum of £60m from any sale – equal to the price it paid for the business.
The music retailer’s underlying sales have dropped 11.9 per cent during the first half, with indications that sales had performed slightly better in recent months. However, the chief executive Simon Fox said that they have never tried to claim they do not have to deal with a structurally demanding market.
Tough competition from online retailers and supermarkets, the growing popularity of downloading from the internet which has impacted DVD and CD sales and the consumer downturn have all hit the group hard. The group has responded by opting to focus on headphones, MP3 players, tablet computers and speaker docks – a move which some analysts view as a ‘sticking plaster’. The chief executive said he hopes the business can make a third of its total revenues from these products, in comparison with the current 12 per cent.
Retail consultancy Conlumino’s managing director Neil Saunders described the technology market as “low margin”, saying that it is subject to strong competition and is increasingly migrating online. He added that in the end it will just delay, not prevent, HMV’s ongoing decline.
Net losses went up to £50.1m during the 26 weeks ending 29 October, falling from a net loss of £30.1m in the same time in 2010. This included a loss of £10m from discontinued business. Overall sales fell 17.6 per cent to £364.9m.
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