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HMV predicts return to profit HMV predicts return to profit
(about 2 hours later)
HMV, the embattled high street entertainment chain, says it will return to profit this year as it takes advantage of the collapse of rival Game.HMV, the embattled high street entertainment chain, says it will return to profit this year as it takes advantage of the collapse of rival Game.
In a trading update to the City on Friday, HMV said that like-for-like sales were down nearly 13% in the last three months and that it would make a loss of £16m for the financial year just ended. It blamed a dull line-up of CD and DVD releases in the run-up to Christmas. In a warning to the City on Friday, HMV said that like-for-like sales were down nearly 13% in the past three months and that it would make a bigger loss of £16m for the financial year just ended compared to the previous £10m estimate. It blamed a dull line-up of CD and DVD releases in the run-up to Christmas for the poor sales figures.
However the group said it could return to profit this year and forecast it would make "at least £10m". However, the group said it could return to profit this year and forecast it would make "at least £10m".
The chief executive, Simon Fox, said: "The last year has been a difficult and challenging one for HMV and this will be reflected in our annual results. However, we are confident that the actions we have taken will enable us to significantly improve our profit and cash generation in the year ahead."The chief executive, Simon Fox, said: "The last year has been a difficult and challenging one for HMV and this will be reflected in our annual results. However, we are confident that the actions we have taken will enable us to significantly improve our profit and cash generation in the year ahead."
Analysts had been expecting a £5m loss this year after a disastrous period for the retailer that saw Fox pin his hopes for growth on selling headphones and other accessories to make up for plunging sales of computer games and CDs.Analysts had been expecting a £5m loss this year after a disastrous period for the retailer that saw Fox pin his hopes for growth on selling headphones and other accessories to make up for plunging sales of computer games and CDs.
A massive debt pile built up during the boom has weighed heavily on the company's finances and earlier this year it looked headed for collapse. A boom in sales from Guernsey and Jersey, avoiding UK VAT, orchestrated by rivals including Amazon, also hit the company's finances. A debt pile built up during the boom has weighed heavily on the company's finances and this year it looked headed for collapse. A boom in sales from Guernsey and Jersey, avoiding UK VAT, orchestrated by rivals including Amazon, also hit the company's fortunes.
But the collapse of rival Game has provided a major boost for Fox and followed successful talks with major suppliers to prop up the chain with preferential terms for CDs and games. Game has since been rescued by a private equity group and 333 of its 610 shops saved, though the interruption to its business was significant. But the collapse of Game has provided a boost for Fox and followed successful talks with its main suppliers to prop up the chain with preferential terms for CDs and games.
Fox has used HMV's status as the last mainstream presence on the high street for the four major music publishers to extract major concessions. Allowing HMV to go bust would rob Sony, Universal, EMI and Warner Music Group of a shop window in the UK following the disappearance of Zavvi and Woolworths from the high street. Each of the big four supported a rescue and took a small stake in the business. Game has since been rescued by a private equity group and 333 of its 610 shops saved, though the interruption to its business was significant.
Fox also struck a deal with the firm's banks in January and believes earlier predictions of £168m net debt by the end of the financial year to 28 April will prove too pessimistic. Fox has used HMV's status as the last mainstream presence on the high street for the four top music publishers to extract major concessions. Allowing HMV to go bust would rob Sony, Universal, EMI and Warner Music Group of a shop window in the UK after the disappearance of Zavvi and Woolworths. Each of the big four supported a rescue and took a small stake in the business.
Fox also struck a deal with the company's banks in January and believes earlier predictions of £168m net debt by the end of the financial year to 28 April will prove too pessimistic.
A sale of HMV Live, which includes Hammersmith Apollo, in London, and five music festivals, is still going ahead, run by the investment bank Citi. The private equity firm Oakley Capital has reportedly tabled a bid to back a management buyout for about £40m.
It is understood other parties expressed an interest in parts of HMV Live ahead of a deadline at the end of April.