Entertainment group HMV has issued a profit warning after continued tough trading.
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In an unscheduled update the retailer, owner of bookseller Waterstone’s as well as the eponymous music chain, said that full-year earnings would be “moderately” below the City consensus of £45m.
HMV said that while it is not in breach of banking covenants at present, it does not expect to meet certain covenant tests measured according to full year performance.
Net debt is likely to be at least £130m, “due to a combination of changes in product mix and other working capital movements.” Arden analyst Nick Bubb said he had previously expected the figure to be £70m.
HMV said: “The group has therefore commenced discussions with its lenders ahead of publication of its full year results regarding possible changes to the facility agreement, which would ensure their appropriateness for future trading conditions and to support delivery of strategy.” Lenders continue to be supportive, the retailer said.
HMV chief executive Simon Fox said: “Trading conditions remain tough, reflecting a difficult consumer environment in which we operate.
“However our business is adapting quickly to respond to these external factors and we are confident that our plans will ensure its long-term and sustainable future.”
HMV is thought to be in the sights of potential bidders for all or part of the business, including Russian tycoon Alexander Mamut who will reportedly meet HMV representatives this week to discuss his potential acquisition of Waterstone’s.
HMV also said that chairman Robert Swannell, who is also chairman of Marks & Spencer, has stood down from that role but remain as a non-executive director.
He is replaced by Philip Rowley, who has been an HMV non-executive director since 2007.