SHARES IN HMV rose more than 10 per cent after the music retailer said it would move back into full-year profit next year, although the group predicted a worse-than-expected loss in its current financial year.
The retailer said pretax profit would be at least £10 million (€12.34 million) for the year to April 2013, ahead of a consensus analyst estimate of a pretax loss of £5 million. However, it expects a pretax loss of about £16 million for the corresponding period to 2012, more than a predicted loss of £10 million, the chain said in a trading update yesterday.
HMV said the upbeat outlook reflected the disruption caused to competitor Game Group, whose British assets were bought out of administration last month by private investment firm OpCapita.
Game Group went into administration in March, resulting in the closure of 277 of its 610 UK stores, including stores in Ireland.
HMV also cited the “changed nature” of the relationship with its music and film suppliers. The retailer granted warrants to key suppliers in the music and film industry, giving them a small equity position in the group.
In an important show of support at a time of tough trading conditions on the high street, HMV also struck a deal in January with its banks to waive covenants on £180 million of debt.
“The last year has been a difficult and challenging one for HMV and this will be reflected in our annual results,” said HMV chief executive Simon Fox. “However, we are confident that the actions we have taken will enable us to significantly improve our profit and cash generation in the year ahead.”
Sales fell 18.4 per cent in the 17 weeks to April 28th, and were down 18.3 per cent overall for the year. The retailer is grappling with a structural shift in the entertainment market away from the high street to the internet with consumers downloading music and or renting films more cheaply online – a trend exacerbated by the economic downturn.
The group said its year-end net debt was expected to be about £168 million. The retailer will report full-year results in June.
Shares in HMV closed up 12.2 per cent at 4.2p, giving the group a market capitalisation of £15.7 million. – (Copyright The Financial Times Limited 2012)
