HMV profits plunge as company banks on digital

Jun 29 2011

HMV profits plunge as company banks on digital

Posted by Jason Foster in Finance Online

The 90-year-old group, which has issued four profit warnings this year, said on Thursday it made a profit before tax of just £2.6m in the 53 weeks to the end of April, compared with £67.3m last year. Like-for-like sales fell 11pc.

HMV Group

However, charges from its Waterstone’s book stores and Canadian arms, which were both sold this year, meant the group plunged to a loss of £121.7m.

HMV has been struggling for years with the rise of digital downloads and cut-price competition from supermarkets.

Its problems came to a head this year with a downturn in consumer spending which has driven a string of retailers, including Jane Norman and Focus DIY, out of business, and led others such as chocolate-maker Thorntons to close 120 stores.

HMV sold its Waterstone’s bookchain in May to Russian billionaire Alexander Mamut for £53m, and this week confirmed the sale of its loss-making Canadian business to Hilco UK for £2m.

The group is trying to switch its emphasis to faster-growing markets such as new technology products, live music and event ticketing, and secured its immediate future this month with a £220m refinancing package with state-backed lenders Lloyds Banking Group and RBS.

“We continue to operate in a challenging macro environment, and the core retail markets in which HMV trades also remain difficult,” HMV said in a statement on Thursday.

“However, we have taken decisive action to restructure the group, and have a clear strategy for transforming HMV into a broad-based entertainment business.”

HMV shares fell 3pc on opening, before recovering to a 2.5pc rise by mid-morning.

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