TIDMHMV
RNS Number : 4382T
HMV Group PLC
13 December 2012
HMV Group plc Interim Results
HMV Group plc, the UK's leading High Street entertainment
retailer, today announces its interim financial results for the 26
weeks ended 27 October 2012.
Financial Summary for the 26 weeks
-- Total sales from continuing operations GBP288.6m (2011:
GBP333.7m), down 13.5%. Like for like sales (from continuing
operations) down 10.2% (2011: down 11.9%)
-- Operating loss before exceptional items from continuing
operations of GBP24.1m (2011: loss of GBP33.2m)
-- Total Group loss after tax and exceptional items reduced to
GBP36.1m (2011: loss of GBP50.1m)
-- Adjusted EPS from continuing operations(1) improved to loss
of 8.1p (2011: loss of 9.1p). Basic EPS loss from continuing
operations of 8.8p (2011: loss of 11.3p)
-- Net cash outflows from operating activities GBP33.5m (2011: outflow of GBP28.4m)
-- Underlying net debt(2) of GBP176.1m (2011: GBP163.7m)
Business Update
-- New CEO and CFO recruited in September 2012
-- Growing market share in all formats with suppliers continuing to provide strong support
-- Disappointing release schedule in summer 2012 impacted sales
but LFL trend improved in the second quarter
-- Current market trading conditions result in material
uncertainties facing the business. Probable covenant breach at the
end of January 2013
-- Constructive discussions with the Group's banks including
keeping them fully informed in relation to current trading
Commenting, Chief Executive Trevor Moore said:
"HMV has had a difficult first half. However, the business has
started to deliver a number of new initiatives which will help to
maximise the seasonal sales opportunity and provide a platform for
growth in 2013.
Additionally, as we trade through this period we will continue
to develop further initiatives with our suppliers and I will
provide updates at the appropriate time."
Enquiries
HMV Group Trevor Moore, Ian Kenyon 020 7404 5959
*
Brunswick Helen Smith, Nick Cosgrove 020 7404 5959
* All enquiries on 13 December should be directed via
Brunswick.
Notes for editors
HMV Group is one of the world's leading High Street retailers of
music, video and electronic games in terms of total sales. As of 27
October 2012, the HMV Retail division operated 238 HMV and 9 Fopp
stores selling music, video and games in four countries. All of the
Group's retail operations, both in the United Kingdom and
internationally, are wholly owned.
Notes
1 Adjusted EPS - earnings from continuing operations before
exceptional items
2 Underlying net debt - cash and short term deposits less
external borrowings, before unamortised deferred financing fees
Chief Executive's Review
I am delighted to have been given the opportunity to lead HMV
through a period of significant change in the entertainment
industry. During the first half of the year the Group has continued
to face a challenging set of market conditions but has made
progress on the continued rationalisation of the Group and is now
increasingly able to focus on the core UK retail business.
Retail business
Operationally the UK business has continued to innovate its
proposition to provide customers with strong offers and provide
suppliers with a return on their continued support. Many suppliers
took the decision to avoid any significant product launches over
the summer as they anticipated, correctly, the impact that the
Olympics was going to have on consumers. Consequently, the business
worked with the suppliers to introduce promotions such as "2 for
GBP15" on CD chart products, "5 for GBP30" on Blu-Ray discs and "2
for GBP10" on CD's and DVD's. As a result of these strong offers,
market shares in music and visual continued to increase but like
for like sales fell by 16% due to the weakness in the market. At
the end of the period the business had a 38% share of the physical
music market and a 27% share of the physical visual market.
Like for like sales of games and technology products increased
by 6% year over year with the business continuing to benefit from
the reduced market presence of GAME Group stores and a continued
demand by customers for technology products centred around tablets
and headphones.
Whilst the performance of music and visual has been in line with
expectations the growth in games and technology was not as strong
as the business had believed it would be, which was disappointing.
Consequently the UK business only managed to reduce its operating
loss by GBP9.7m to GBP23.2m. However, the Group continues to enjoy
significant support from its key suppliers and is working on
developing a number of new opportunities with them.
The six stores in Hong Kong and two in Singapore performed in
line with our expectations with a first half loss of GBP0.4m (2011:
GBP0.2m)
Live business
Following the decision of the Board to undertake a strategic
review of the Live business, the Board decided to dispose of the
business. The Group completed the disposal of the Hammersmith
Apollo in August, which resulted in a net cash inflow of GBP25.7m
and also enabled the Group's existing GBP220m bank facility to be
extended by a further year to September 2014. Progress has been
made on the disposal of the remaining HMV Live business. The Group
confirmed the sale of MAMA Group on 3 December 2012 for a cash
consideration of GBP7.3m, which will allow the Group to reduce net
debt further. This does not include the sale of G-A-Y Group Limited
and Heaven (London) Limited, which will be the subject of a
separate transaction, discussions for which are ongoing.
Looking ahead
Since I joined, alongside Ian Kenyon, our new Group CFO, I have
spent my first few months meeting all of our key suppliers, our
banks and key management. I have spent a lot of time visiting our
stores, talking to our store colleagues and really understanding
the business. I recognise that the Christmas trading opportunity is
hugely significant to the business and I have concentrated my
effort, and my management team's effort, on delivering a strong
trading performance over this important period.
I joined the Group because I believe it has a strong future.
HMV's UK stores attract more than 170 million visits a year and the
website attracts over 50 million visits. The business has
significant customer awareness and remains the leading
entertainment retailer on the High Street. The business has a great
history and a strong store portfolio and has access to
entertainment franchises that are recognised worldwide. In the last
few weeks I have sought to improve the level of in-store service
rolling out a range of specific service initiatives including :
-- Actions that remove store administration tasks allowing
managers to spend more time on the shop floor
-- Accelerating training in selling skills and product knowledge
particularly on games and technology
-- Introducing a store focused incentive scheme
-- Reviewing and amending communication between stores, suppliers and Head Office
These are starting to show positive signs and can be built on in
2013.
I am encouraged by the support the business enjoys from the
suppliers and believe there are opportunities to develop these
relationships even further to the benefit of both HMV and the
suppliers. This will be a key area of focus through 2013.
Additionally I have also initiated a comprehensive review of the
Group's cost base to reflect the simplification of the Group
following the disposal of the Live business. At the appropriate
time I will provide further updates on the secure future that I
believe HMV can enjoy.
Whilst I can see many future opportunities it is clear to me
that the current market conditions, and in particular the
volatility in the Group's core music, visual and games markets,
create uncertainty as to the level of trading results that can be
achieved in the year ahead. In particular, the third quarter has a
significant bearing on the profitability of the Group and given
that the current trading performance is not in line with
expectations, the Group is unlikely to achieve previous
expectations for the full year. The next covenant test date under
the banking facility is at the end of January 2013. In light of
current trading performance, and market conditions, it is probable
that the banking covenants will not be complied with at that time.
However, the Group is currently operating within the terms of its
banking facility and the Directors continue to maintain regular and
constructive discussions with the Group's banks. The Directors
believe that the Group will be able to meet their liabilities as
they fall due, including the GBP30m amortisation payment due in
January 2013, and will have adequate resources to continue in
operational existence for the foreseeable future. The business and
financial review (under the sub-heading material uncertainty) sets
out further information in respect of this matter.
Business and financial review
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