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HMV warns of a ?probable? bank agreement breach

High street retailer HMV has warned of a “probable” breach with banking agreements as it announced significant profit falls in its interim results.

The business, which sells CDs, DVDs and electrical goods, said sales were down by 10.2% year-on-year, while it also incurred a profit loss of £37.3m before tax.

HMV said “material uncertainties” and “current market conditions” may lead to a “probable covenant breach” when the company is tested at the end of January.

The store’s new chief executive, Trevor Moore, said that HMV would, however, be able to pay the £30m amortisation payment due at the end of next month.

Disappointing release schedules were also blamed for HMV’s financial woes, while online piracy could also be impacting the business.

Mr Moore commented: “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.”

Bdaily reported on Wednesday on HMV’s reliance on its suppliers for £40m to buoy the businessthrough the Christmas period, and Mr Moore thanked suppliers for their continuing support on Thursday.

Offers such as “2 for £15” for chart CDs and ““5 for £30” on blu-ray disks, have been introduced after talks with suppliers to boost sales for the struggling retailer.

HMV’s technology and games products performed well despite the bad news throughout the rest of its divisions, with 6% sales increases in this unit.

The company added that the Christmas period would be “hugely significant”, and that its teams would work to deliver strong trade over the festive season.

This was posted in Bdaily's Members' News section by Miranda Dobson .