HMV warns of banking breach in January

Financially troubled entertainment retailer HMV warned of a probable covenant breach at the end of January 2013 and said it is unlikely to achieve full year expectations.

The high street retailer, which sells CDs, DVDs and games, said current market conditions, and in particular volatility in its core music, visual and games markets, has created uncertainty as to the level of trading results 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," it said in a company statement.

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Total sales from continuing operations fell to £288.6m for the 26 weeks ended 27th October 2012 from £333.7m the year before. Like for like sales from continuing operations dropped 10.2% compared to an 11.9% decline a year earlier.

HMV posted a pre-tax loss of £37.3m during the period an improvement from the £48.1m loss a year earlier.

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."

Underlying net debt increased to £176.1m from £163.7m in 2011.

HMV said constructive discussions were being held with its lenders and it is keeping them fully informed in relation to current trading.

CJ