A MONTH-LONG rally in HMV Group came to a halt amid fresh concerns over plans by the book and CD retailer to push into digital downloading.
At its full-year results in June, the EMI spin-off said it would set out its strategy on music downloading later this year, sending its shares sharply lower on worries over the likely scale of its investment.Although they have recovered during August, they retreated yesterday as RW Baird suggested that uncertainty over the success of its venture is likely to hold back the shares.
Paul Smiddy, retail analyst, points out that rivals are already making headway and gaining consumer recognition in the UK, with the likes of Apple, Real Networks and Napster having launched services in the past six months. Elsewhere, Loudeye’s OD2 has reported a 30 per cent month-on-month increase in volumes, while MVC, an offshoot of Woolworths Group, off ¼p at 43¾p, has launched a digital music preview service.
Mr Smiddy puts the maximum cost of replicating a service such as iTunes at $60 million. However, he claims the profitability of the download business model is “murky” and would be only partially salvaged by the retailer’s move into selling MP3 player hardware. He says pricing pressure remains severe, while HMV is handicapped against rivals such as Apple, which have cut the price of their services to promote hardware sales. With Baird repeating its underperform stance and 200p price target, HMV lost 4p to 223p, against a 37.3 rise in the FTSE 250 to 6,073.6.
This week’s strong run in Singer & Friedlander after Monday’s first-half results was partly explained by yesterday’s after-hours declaration that Iceland’s Burdaras, which emerged on the share register this month, has raised its stake from 8.03 per cent to 9.44 per cent. However, Singer shed 8¾p to 273¾p.
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Honeygrove Group, the residential property developer, rose 1¼p to 9¾p, prompting an after-hours admission that it has received an approach. Hightower Construction, the AIM shell, rose ¾p to 9½p on confirming talks to buy a groundworks contractor.
Mediasurface, a web software specialist, ticked up 1p to 13p in first-day dealings on AIM, with Spice Holdings, the support services group whose shares were also placed by KBC Peel Hunt, adding 17½p to 132½p. River Diamonds, which has interests in Brazil, gained ¼p to 2¾p on its debut through WH Ireland.