HMV won a two-month reprieve from its lenders yesterday as it issued its third profit warning of the year.
The struggling retailer, which is in talks to sell its Waterstone’s book chain and Canadian division, said that trading had “remained difficult” and downgraded its profit forecast for the full-year, which ends next month.
Yet the company has been given an extra two months before a key covenant on its debt is tested, giving it additional time to satisfy lenders by securing a sale of Waterstone’s or renegotiating its loans.
The shares closed down 3p, or nearly 20 per cent, at 12¼p.
HMV said that it expected profits for the year to the end of April to be about £30 million. Until a poor trading update on March 1, it had expected to make £45 million. This means that HMV’s profits are expected to have plunged by more than 60 per cent from last year.
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The company said that its banking facilities were still “fully available” and that “the group’s lenders continue to be supportive and the group is maintaining a regular and constructive dialogue with them”.
Andrew Wade, a Numis Securities retail analyst, estimated that the DVD market was down 20 per cent year-on-year, with music down 10 per cent, games 8 per cent and books down 6 per cent, which is weaker than the recent trend.
HMV hoped that a push into technology products would make up for rapidly declining sales in its core markets. Mr Wade added that, even in its refurbished, new-look stores, this would leave 75 per cent of floor space devoted to goods that are in long-term decline.
The leading contender to take control of Waterstone’s is Alexander Mamut, the Russian entrepreneur and friend of Roman Abramovich.
Hilco, the distressed-company investor, has looked at HMV’s Canadian stores, which are even less profitable than its British business.
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Last month HMV said that its debt had spiralled to £130 million, far higher than City expectations.