HMV Hong Kong and Singapore saw sales up GBP0.7m on last year,
despite a like for like decline of 10.7%. This like for like
performance reflected similar issues to the UK together with the
impact of a new iTunes visual rental business. Operating loss of
GBP0.4m was GBP0.2m worse than last year.
Exceptional costs of GBP3.3m (2011: GBP4.7m) have been incurred
to cover restructuring, including store closures, central support
functions and the relocation of an internet distribution centre
from Guernsey to the UK.
HMV UK closed six stores and opened one in the period. The total
retail estate stood at 247 stores at 27 October 2012.
Discontinued operations
In the current period discontinued operations consists entirely
of the results of HMV Live, as discussed in further detail
below.
In the comparative period discontinued operations has been
restated to include HMV Live and the joint venture, aNobii. In the
26 weeks ended 29 October 2011 HMV Live had sales of GBP31.2m and
operating profit of GBP3.4m and aNobii contributed a loss of
GBP0.6m. The previously reported results comprised HMV Canada and
Waterstone's for the two months of that financial year before they
were sold when they reported total sales of GBP78.4m and made a
combined loss before tax of GBP10.2m. The net profit on disposal
was GBP5.6m.
HMV Live
Sales at HMV Live for the period were GBP25.4m, down from
GBP31.2m in the prior year. This primarily reflects the disposal of
Hammersmith Apollo Limited in August, the cancellation of the
Vintage festival and disappointing performance of the Lovebox
festival. The remaining venues business performed largely in line
with expectations.
Exceptional charges of GBP0.6m were incurred in respect of
redundancies and other restructuring costs. The disposal of
Hammersmith Apollo Limited gave rise to an exceptional profit of
GBP11.6m, however this is largely offset by the impairment of the
remaining Live business by GBP10.4m resulting in a net gain of
GBP1.2m. See Note 7 for further details.
Joint ventures and associates
At the period end the Group's continuing investments in joint
ventures and associates accounted for using the equity method
comprise only the digital media company, 7digital. The Group's
share of 7digital's post tax losses was GBP0.5m (2011: GBP0.1m). On
10 October 2012 7digital completed a successful refinancing with a
$10m investment from two new strategic partners and consequently
the Group's equity stake was diluted from 50% to 35%, resulting in
a gain on revaluation of GBP1.1m which has been recognised as an
exceptional item.
On 11 June 2012 the Group sold its stake in its associate,
aNobii, an eBook venture, to J Sainsbury's plc for GBP1. In
addition, various investments of the Live division have been
classified as discontinued operations as they will be disposed of
with that business.
Net finance costs
Net finance costs from continuing operations increased in the
period to GBP10.6m (2011: GBP6.0m) due to higher average net debt
and higher interest rates payable on the amended facility. This
includes non-cash charges of GBP4.1m for exit fees (2011: GBPnil),
GBP1.3m for amortisation of deferred financing fees (2011: GBP0.9m)
and GBP0.4m for the accretion of warrants (2011: GBPnil), partially
offset by non-cash income of GBP0.2m (2011: GBP1.3m) representing
the movement in the fair value of warrants issued as a component of
the bank facility (see Note 13).
Exceptional finance costs of GBP0.4m (2011: GBP4.6m) have been
charged relating to the costs of refinancing in August 2012. In
addition, fees totalling GBP8.8m have been deferred and are being
amortised over the 39-month term of the amended facility to
September 2014.
Taxation
The taxation credit for continuing operations for the period of
GBP0.1m reflects the impact on the deferred tax liability of the
reduction in the UK corporate income tax rate from 24% to 23% with
effect from 1 April 2013.
A tax charge of GBP0.1m (2011: GBPnil) has been recognised in
respect of the operating profit of discontinued operations.
No current tax credit has been recognised in the income
statement in respect of continuing operations for the period.
Earnings per share
Adjusted earnings per share from continuing operations,
excluding the effect of exceptional items, were a loss of 8.1p, an
improvement of 11% on last year. Basic earnings per share for
continuing operations were a loss of 8.8p, (2011: 11.3p). Adjusted
earnings per share for the total Group were a loss of 8.0p and
basic earnings per share were a loss of 8.5p.
Dividend
The Board is not recommending the payment of a dividend (2011:
GBPnil).
Cash flow and net debt
26 weeks to 26 weeks to
27 October 29 October
2012 2011
GBPm GBPm
--------------------------------------- ------------ ------------
EBITDA (14.3) (30.0)
Capital expenditure (3.4) (11.6)
Working capital (outflow) inflow (5.7) 26.6
Provision spend and other (4.8) (12.1)
Special pension contribution (1.7) (4.2)
Net interest paid (4.3) (4.6)
Taxation 0.7 7.5
--------------------------------------- ------------ ------------
Free cash flow (33.5) (28.4)
Net proceeds from disposal of
businesses 25.7 36.6
Cost of raising debt (0.4) (6.3)
Payments to non-controlling interests (0.2) (0.5)
Other (1.0) 5.2
Effect of exchange rate changes - 0.4
--------------------------------------- ------------ ------------
Net cash (outflow) inflow (9.4) 7.0
--------------------------------------- ------------ ------------
Underlying opening net debt (166.7) (170.7)
--------------------------------------- ------------ ------------
Underlying closing net debt (176.1) (163.7)
--------------------------------------- ------------ ------------
EBITDA - Earnings before interest, taxation, depreciation and
amortisation
Free cashflow - Cashflow from operating activities after capital
expenditure and net interest
Underlying net debt - Underlying net debt is stated before
unamortised deferred financing fees
Closing underlying net debt of GBP176.1m was GBP12.4m higher
than at October last year. This includes the benefit of GBP25.7m
net proceeds received from the disposal of Hammersmith Apollo
Limited during the period. Underlying free cash outflow of GBP33.5m
reflects the trading loss in the period, capital expenditure on IT
and refitting stores, a working capital outflow, spend on
exceptional items to restructure the business, contributions to the
pension scheme and interest payments.
On 7 August 2012 the Group amended its GBP220m bank facility,
the details of which are given in Note 13 to these interim
financial statements.
Pensions
The Group has a number of pension schemes in operation. These
primarily include various defined contribution arrangements and a
defined benefit scheme which closed to future service accrual on 31
March 2011.
Under IAS 19 'Employee Benefits', the HMV defined benefit scheme
had a deficit at 27 October 2012, net of deferred tax, of GBP26.0m
(October 2011: GBP20.8m, April 2012: GBP16.2m). The most recently
completed actuarial valuation was at 30 June 2010, where a funding
deficit of GBP65.2m was identified. A deficit recovery plan was
agreed with the Trustees and payments have been made in accordance
with the schedule. Future payments are primarily due as
follows:
- GBP5.0m per annum (payable monthly) from 1 July 2011 until the
close of any agreed recovery plan;
- GBP0.5m per annum from 1 May 2013 to 30 April 2021 and GBP3.0m
on 1 January 2014; and an additional share of annual cash
generation capped at GBP1.0m.
Principal risks and uncertainties
The Board has a policy of continuous identification and review
of key business risks and uncertainties. After appropriate review
the Board considers that the principal risks affecting the Group in
respect of the current financial year together with the mitigating
actions being taken, are summarised as follows;
- the Group's ability to operate depends on access to adequate
short and medium-term funding predominantly from the bank lending
market. There is a regular review and stress testing of liquidity,
interest rate and foreign exchange exposures and covenant headroom.
Open discussions are maintained with the Group's bankers;
- the ability to trade is dependent of continuity of supply. The
revenues from the Group are correlated to the quantity and quality
of content from third party suppliers and the release dates of
significant new products. The recent developments regarding
supplier terms increases the certainty of continuing support from
key suppliers, but any variation, reduction or withdrawal of
support may reduce the Group's margins which may materially
adversely affect the Group's business, financial condition,
results, operations and prospects. This is managed by ongoing
active engagement with suppliers, building strategic relationships
with key suppliers, using the Groups retail platforms and digital
business, as well as a flexible supply chain with contingency and
disaster recovery plans that are regularly tested.
HMV (LSE:HMV)
Historical Stock Chart
From Oct 2024 to Nov 2024
HMV (LSE:HMV)
Historical Stock Chart
From Nov 2023 to Nov 2024
