HMV Group plc : Interim Results

December 13, 2012 at 04:23 am EST

MarketScreener.com By The editorial team

HMV Group plc Interim Results

HMV Group plc, the UK's leading High Street entertainment retailer, today announces its interim financial results for the 26 weeks ended 27 October 2012.

· Total sales from continuing operations £288.6m (2011: £333.7m), down 13.5%. Like for like sales (from continuing operations) down 10.2% (2011: down 11.9%)

· Operating loss before exceptional items from continuing operations of £24.1m (2011: loss of £33.2m)

· Total Group loss after tax and exceptional items reduced to £36.1m (2011: loss of £50.1m)

· Adjusted EPS from continuing operations1 improved to loss of 8.1p (2011: loss of 9.1p). Basic EPS loss from continuing operations of 8.8p (2011: loss of 11.3p)

· Net cash outflows from operating activities £33.5m (2011: outflow of £28.4m)

· Underlying net debt2 of £176.1m (2011: £163.7m)

· New CEO and CFO recruited in September 2012

· Growing market share in all formats with suppliers continuing to provide strong support

· Disappointing release schedule in summer 2012 impacted sales but LFL trend improved in the second quarter

· Current market trading conditions result in material uncertainties facing the business. Probable covenant breach at the end of January 2013

· Constructive discussions with the Group's banks including keeping them fully informed in relation to current trading

Commenting, Chief Executive Trevor Moore said:

"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."

Enquiries

HMV Group	Trevor Moore, Ian Kenyon	020 7404 5959 *
Brunswick	Helen Smith, Nick Cosgrove	020 7404 5959

* All enquiries on 13 December should be directed via Brunswick.

Notes for editors

HMV Group is one of the world's leading High Street retailers of music, video and electronic games in terms of total sales. As of 27 October 2012, the HMV Retail division operated 238 HMV and 9 Fopp stores selling music, video and games in four countries. All of the Group's retail operations, both in the United Kingdom and internationally, are wholly owned.

Notes

1 Adjusted EPS - earnings from continuing operations before exceptional items

2 Underlying net debt - cash and short term deposits less external borrowings, before unamortised deferred financing fees

I am delighted to have been given the opportunity to lead HMV through a period of significant change in the entertainment industry. During the first half of the year the Group has continued to face a challenging set of market conditions but has made progress on the continued rationalisation of the Group and is now increasingly able to focus on the core UK retail business.

Retail business

Operationally the UK business has continued to innovate its proposition to provide customers with strong offers and provide suppliers with a return on their continued support. Many suppliers took the decision to avoid any significant product launches over the summer as they anticipated, correctly, the impact that the Olympics was going to have on consumers. Consequently, the business worked with the suppliers to introduce promotions such as "2 for £15" on CD chart products, "5 for £30" on Blu-Ray discs and "2 for £10" on CD's and DVD's. As a result of these strong offers, market shares in music and visual continued to increase but like for like sales fell by 16% due to the weakness in the market. At the end of the period the business had a 38% share of the physical music market and a 27% share of the physical visual market.

Like for like sales of games and technology products increased by 6% year over year with the business continuing to benefit from the reduced market presence of GAME Group stores and a continued demand by customers for technology products centred around tablets and headphones.

Whilst the performance of music and visual has been in line with expectations the growth in games and technology was not as strong as the business had believed it would be, which was disappointing. Consequently the UK business only managed to reduce its operating loss by £9.7m to £23.2m. However, the Group continues to enjoy significant support from its key suppliers and is working on developing a number of new opportunities with them.

The six stores in Hong Kong and two in Singapore performed in line with our expectations with a first half loss of £0.4m (2011: £0.2m)

Following the decision of the Board to undertake a strategic review of the Live business, the Board decided to dispose of the business. The Group completed the disposal of the Hammersmith Apollo in August, which resulted in a net cash inflow of £25.7m and also enabled the Group's existing £220m bank facility to be extended by a further year to September 2014. Progress has been made on the disposal of the remaining HMV Live business. The Group confirmed the sale of MAMA Group on 3 December 2012 for a cash consideration of £7.3m, which will allow the Group to reduce net debt further. This does not include the sale of G-A-Y Group Limited and Heaven (London) Limited, which will be the subject of a separate transaction, discussions for which are ongoing.

Since I joined, alongside Ian Kenyon, our new Group CFO, I have spent my first few months meeting all of our key suppliers, our banks and key management. I have spent a lot of time visiting our stores, talking to our store colleagues and really understanding the business. I recognise that the Christmas trading opportunity is hugely significant to the business and I have concentrated my effort, and my management team's effort, on delivering a strong trading performance over this important period.

I joined the Group because I believe it has a strong future. HMV's UK stores attract more than 170 million visits a year and the website attracts over 50 million visits. The business has significant customer awareness and remains the leading entertainment retailer on the High Street. The business has a great history and a strong store portfolio and has access to entertainment franchises that are recognised worldwide. In the last few weeks I have sought to improve the level of in-store service rolling out a range of specific service initiatives including :

· Actions that remove store administration tasks allowing managers to spend more time on the shop floor

· Accelerating training in selling skills and product knowledge particularly on games and technology

· Introducing a store focused incentive scheme

· Reviewing and amending communication between stores, suppliers and Head Office

These are starting to show positive signs and can be built on in 2013.

I am encouraged by the support the business enjoys from the suppliers and believe there are opportunities to develop these relationships even further to the benefit of both HMV and the suppliers. This will be a key area of focus through 2013. Additionally I have also initiated a comprehensive review of the Group's cost base to reflect the simplification of the Group following the disposal of the Live business. At the appropriate time I will provide further updates on the secure future that I believe HMV can enjoy.

Whilst I can see many future opportunities it is clear to me that the current market conditions, and in particular the volatility in the Group's core music, visual and games markets, create uncertainty as to the level of trading results that can be achieved in the year ahead. In particular, the third quarter has a significant bearing on the profitability of the Group and given that the current trading performance is not in line with expectations, the Group is unlikely to achieve previous expectations for the full year. The next covenant test date under the banking facility is at the end of January 2013. In light of current trading performance, and market conditions, it is probable that the banking covenants will not be complied with at that time. However, the Group is currently operating within the terms of its banking facility and the Directors continue to maintain regular and constructive discussions with the Group's banks. The Directors believe that the Group will be able to meet their liabilities as they fall due, including the £30m amortisation payment due in January 2013, and will have adequate resources to continue in operational existence for the foreseeable future. The business and financial review (under the sub-heading material uncertainty) sets out further information in respect of this matter.

These interim results are for the 26 weeks ended 27 October 2012.

Financial highlights	26 weeks ended 27 October 2012	26 weeks ended 29 October 2011 (Restated)
	£m	£m
Continuing operations:
Sales	288.6	333.7
Like for like sales %	(10.2)	(11.9)
Operating loss (before exceptional items)	(24.1)	(33.2)
Exceptional items (operating and financing)	(2.6)	(9.3)
Loss before tax (before exceptional items)	(34.7)	(38.8)
Loss before tax	(37.3)	(48.1)

Discontinued operations profit (loss) after tax and exceptional items	1.1	(2.2)

Adjusted loss per share (continuing operations)	(8.1)p	(9.1)p
Basic loss per share (continuing operations)	(8.8)p	(11.3)p
Dividend per share	-	-

Underlying net debt	176.1	163.7
Free cash outflow	(33.5)	(28.4)

Adjusted loss per share - continuing operations before exceptional items

Underlying net debt - cash and short-term deposits less external borrowings, before unamortised deferred financing fees

Free cash outflow - cash flow from operating activities after capital expenditure and net interest

The results of the Group are presented on the basis of continuing and discontinued operations. The continuing operations consist of HMV Retail (HMV UK & Ireland, HMV Hong Kong and HMV Singapore) and 7digital. The discontinued operation is HMV Live, which included the HMV Hammersmith Apollo for the first three months of the period until it was sold, and the remainder of the Live business for the whole of the period.

Total sales from continuing operations decreased by 13.5% compared with the same period last year, including a like for like decline of 10.2%. Total sales at HMV Live were down by 18.6%.

Continuing operations generated a seasonal operating loss of £24.1m (2011: £33.2m), reflecting improved gross margins and tight cost control offset by a decrease in sales. Net finance costs increased from £5.6m to £10.6m, due to higher average debt and higher interest rates. This resulted in a loss before tax and exceptional items from continuing operations of £34.7m (2011: £38.8m).

In addition, net exceptional charges from continuing operations of £2.2m (2011: £4.7m) were incurred in the period. This comprised charges in respect of restructuring the business, closing stores and relocating a distribution centre offset by a gain on the deemed disposal of the Group's holding in 7digital. Exceptional finance charges of £0.4m (2011: £4.6m) were incurred in relation to the amendment of the Group's banking facilities.

Discontinued operations contributed a trading profit after tax of £0.5m (2011: loss of £7.8m), exceptional charges in respect of restructuring of £0.6m and a net exceptional profit on disposal of £1.2m (2011: £5.6m).

Underlying net borrowings were £176.1m, £12.4m higher than last year, due to poor trading results and working capital outflows, offset by the receipt of proceeds from the sale of Hammersmith Apollo Limited. Free cash outflow of £33.5m (2011: £28.4m) resulted from the trading loss, capital expenditure, exceptional costs, a working capital outflow and interest payments.

The segmental results below, for the 26 weeks ended 29 October 2011, have been restated to reflect the reclassification of HMV Live and aNobii as discontinued operations. Discontinued operations for the 26 weeks ended 29 October 2011 also include two months of trading of Waterstone's and HMV Canada.

HMV Retail comprises HMV UK & Ireland, HMV Hong Kong and HMV Singapore.

Sales	26 weeks ended 27 October 2012	26 weeks ended 29 October 2011 (Restated)	Year on year decline1	Constant exchange decline2	Like for like sales decline3
	£m	£m	%	%	%
Continuing operations - HMV Retail	288.6	333.7	(13.5)	(13.1)	(10.2)
Discontinued operations	25.4	109.6	(76.8)	(76.8)	-
Total HMV Group	314.0	443.3	(29.2)	(28.9)	(10.2)

Operating profit (loss)	26 weeks ended 27 October 2012	26 weeks ended 29 October 2011 (Restated)	26 weeks ended 27 October 2012	26 weeks ended 29 October 2011 (Restated)
	£m	£m	% of sales	% of sales
Continuing operations - HMV Retail	(23.6)	(33.1)	(8.2)	(9.9)
Share of post-tax loss of joint ventures	(0.5)	(0.1)	-	-
Discontinued operations	0.8	(7.4)	-	-
Total HMV Group	(23.3)	(40.6)	(8.4)	(9.9)

1 Year on year decline over the corresponding period last year is based on results translated at the actual exchange rates being the weighted average exchange rates for the 26 weeks ended 27 October 2012 and the 26 weeks ended 29 October 2011 respectively.

2 Constant exchange decline over the corresponding period last year is based on the weighted average exchange rates for the 26 weeks ended 29 October 2011.

3 Like for like sales decline over the corresponding period last year is based on the weighted average exchange rates for the 52 weeks ended 28 April 2012.

HMV Retail

HMV Retail total sales fell by 13.5% at statutory exchange rates, primarily due to a like for like decline of 10.2%. This reflected the continuing difficult economic conditions in the UK and a particularly poor release schedule across the summer months in our traditional product categories, as suppliers avoided the Diamond Jubilee, Euro 2012, Olympic and Paralympic periods.

All three UK entertainment markets declined in value terms over the period, with music down by 22%, visual down nearly 16% and games down by 23%, all reflecting continuing structural decline and the release schedule being heavily loaded towards the end of the period. Within all of these markets HMV's share marginally improved in the year to date. However, HMV Retail's sales performance in September and October improved significantly, albeit below expectations, when compared with the first four months of the period, with like for like sales down 6.7% in the last two months, compared with 12.2% in the first four months.

Other products, including technology, now make up 17% of the product mix, up from 14% last year, and the like for like sales increase over the period was 18%. This growth is expected to slow down in the second half as we annualise against the period when technology was introduced across the estate. However, this product category will continue to benefit from expanding ranges, better merchandising and an improved service proposition in stores.

The changes made to the nature of HMV UK's relationships with its key music and visual suppliers have delivered an improvement in gross margin whilst at the same time maintaining a relevant pricing strategy for the customer. The business is purchasing increasing amounts of back catalogue on a consignment basis, which enables it to provide a much broader offer with a lower impact on working capital. In addition, the benefits of previous restructuring activities are now being seen with reductions in central employment and other costs such as marketing and depreciation, compared with last year. These improvements partially offset the impact of the sales decline, resulting in an operating loss of £23.2m (2011: £32.9m)

HMV Hong Kong and Singapore saw sales up £0.7m 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 £0.4m was £0.2m worse than last year.

Exceptional costs of £3.3m (2011: £4.7m) 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 £31.2m and operating profit of £3.4m and aNobii contributed a loss of £0.6m. 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 £78.4m and made a combined loss before tax of £10.2m. The net profit on disposal was £5.6m.

HMV Live

Sales at HMV Live for the period were £25.4m, down from £31.2m 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 £0.6m were incurred in respect of redundancies and other restructuring costs. The disposal of Hammersmith Apollo Limited gave rise to an exceptional profit of £11.6m, however this is largely offset by the impairment of the remaining Live business by £10.4m resulting in a net gain of £1.2m. 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 £0.5m (2011: £0.1m). 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 £1.1m 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 £1. 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 £10.6m (2011: £6.0m) due to higher average net debt and higher interest rates payable on the amended facility. This includes non-cash charges of £4.1m for exit fees (2011: £nil), £1.3m for amortisation of deferred financing fees (2011: £0.9m) and £0.4m for the accretion of warrants (2011: £nil), partially offset by non-cash income of £0.2m (2011: £1.3m) representing the movement in the fair value of warrants issued as a component of the bank facility (see Note 13).

Exceptional finance costs of £0.4m (2011: £4.6m) have been charged relating to the costs of refinancing in August 2012. In addition, fees totalling £8.8m have been deferred and are being amortised over the 39-month term of the amended facility to September 2014.

Taxation

A tax charge of £0.1m (2011: £nil) 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: £nil).

Cash flow and net debt

	26 weeks to 27 October 2012	26 weeks to 29 October 2011
	£m	£m
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 £176.1m was £12.4m higher than at October last year. This includes the benefit of £25.7m net proceeds received from the disposal of Hammersmith Apollo Limited during the period. Underlying free cash outflow of £33.5m 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 £220m 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 £26.0m (October 2011: £20.8m, April 2012: £16.2m). The most recently completed actuarial valuation was at 30 June 2010, where a funding deficit of £65.2m 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:

- £5.0m per annum (payable monthly) from 1 July 2011 until the close of any agreed recovery plan;

- £0.5m per annum from 1 May 2013 to 30 April 2021 and £3.0m on 1 January 2014; and an additional share of annual cash generation capped at £1.0m.

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.

- the highly seasonal nature of the business, especially the Christmas season which is the most important trading period in terms of profitability and cashflows, is mitigated through detailed forward planning and excellent operational practices to ensure peak trading opportunities are maximised and unexpected events managed;

- the growth of digital entertainment has introduced new products and methods of delivery of traditional products. The Group is addressing this through strategic investment plans to develop a broader retail offering, embracing new technology products, which have been successfully incorporated into stores on a limited basis; the delivery of entertainment content to customers through multiple channels in retail; and the diversification of the Group's business to retail new and an extended range of products and in digital media delivery;

Business and financial review (continued)

- the Group's product offer is sensitive to economic conditions and would be impacted by a prolonged economic downturn. This is minimised by strategic planning that allows for a range of economic scenarios as well as the products being retailed at affordable price points making them more resilient to reductions in discretionary spend than higher value products;

- the Group operates in highly competitive markets where these products are often sold at or below cost. The Group continues to adapt and develop its retail offer to remain competitive; it maximises its direct relationship with its suppliers to ensure the widest ranges of core products; and ensures that its reputation as a specialist retailer is maintained through compelling offers and active customer relationship management;

- potential damage to the reputation or brands of the Group is managed through staff training and regular review of policies and operating procedures;

- the performance of the Group depends on its ability to continue to attract, motivate and retain staff. This is managed through appropriate development and training programmes and reward structures;

- exposure to a major external event, such as terrorism or an outbreak of a pandemic disease, as well as fires, floods or system failures is mitigated through contingency planning and appropriate insurance cover;

- retaining a portfolio of good quality real estate in prime retail areas and at commercially reasonable rates remains critical to the performance of the Group. The store network is regularly reviewed and renegotiated as appropriate to maintain a good quality portfolio with short flexible lease lengths, with rents linked to turnover where possible; and

Material Uncertainty

In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future.

Following the successful negotiation of improved supplier commercial terms during the latter part of last year, the disposal of Hammersmith Apollo and the extension of amended debt facilities at the start of the current period, the Directors, when approving the annual financial statements for the 52 weeks ended 28 April 2012, had a reasonable expectation that the Group would have adequate resources to continue in operational existence for the foreseeable future.

As part of the Group's funding arrangements with its banks it is required to pass quarterly covenant tests in respect of gearing and fixed charge cover. The tests in July and October 2012 have been passed.

The current market conditions and, in particular, the volatility in the Group's core music, visual and games markets driven by the release schedule and the growth of the digital market, create uncertainty as to the level of trading results that will be achieved in the year ahead. The third quarter represents around 46% of the Group's annual revenues and has a significant bearing on the profitability of the Group. This year has seen a very late release schedule as suppliers have tried to avoid release dates for new products during the Olympics and Queen's Jubilee. As a consequence, the third quarter results this year take on an even greater significance.

As noted in the CEO's review good progress has been made on a number of initiatives to mitigate this uncertainty. However, the current level of Christmas trading has not been in line with the level expected and the Directors have concluded that it is probable that the January 2013 and April 2013 covenants will not be complied with.

The Directors recognise that this represents a material uncertainty which may cast doubt upon the Group's ability to continue as a going concern and therefore the Group may be unable to continue to realise assets and discharge liabilities in the normal course of business. Note 2 to the interim statements sets out further information in respect of this matter.

Forward-looking statements

Certain statements in this interim report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, the Group can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.

The Group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

		26 weeks to 27 October 2012	26 weeks to 27 October 2012	26 weeks to 27 October 2012
	Note	Before exceptional items £m	Exceptional items £m	Total £m
Continuing operations:
Revenue	4	288.6	-	288.6
Cost of sales		(297.1)	(1.5)	(298.6)
Gross loss		(8.5)	(1.5)	(10.0)
Administrative expenses		(15.1)	(1.8)	(16.9)
Trading loss	4	(23.6)	(3.3)	(26.9)
Share of post-tax (losses) profit of investments accounted for using the equity method		(0.5)	1.1	0.6
Operating loss		(24.1)	(2.2)	(26.3)
Finance revenue		0.2	-	0.2
Finance costs		(10.8)	(0.4)	(11.2)
Loss before taxation		(34.7)	(2.6)	(37.3)
Taxation	6	0.1	-	0.1
Loss from continuing operations		(34.6)	(2.6)	(37.2)
Discontinued operations:
Profit after tax from discontinued operations	7	0.5	0.6	1.1
Loss for the period		(34.1)	(2.0)	(36.1)

Attributable to:
Shareholders of the parent company		(34.2)	(2.0)	(36.2)
Non-controlling interests		0.1	-	0.1
		(34.1)	(2.0)	(36.1)

Loss per share for the period attributable to shareholders of the parent company:
Basic	8	(8.0)p	(0.5)p	(8.5)p
Diluted	8	(7.8)p	(0.5)p	(8.3)p

Loss per share for the period attributable to shareholders of the parent company from continuing operations:
Basic	8	(8.1)p	(0.7)p	(8.8)p
Diluted	8	(7.9)p	(0.7)p	(8.6)p

Dividend per share	9	-	-	-

Notes 1 to 18 form an integral part of the interim condensed consolidated financial statements. See note 5 for a description of exceptional items.

		26 weeks to 29 October 2011	26 weeks to 29 October 2011	26 weeks to 29 October 2011
	Note	Before exceptional items (Restated) £m	Exceptional items (Restated) £m	Total (Restated) £m
Continuing operations:
Revenue	4	333.7	-	333.7
Cost of sales		(347.8)	-	(347.8)
Gross loss		(14.1)	-	(14.1)
Administrative expenses		(19.0)	(4.7)	(23.7)
Trading loss	4	(33.1)	(4.7)	(37.8)
Share of post-tax losses of investments accounted for using the equity method		(0.1)	-	(0.1)
Operating loss		(33.2)	(4.7)	(37.9)
Finance revenue		1.4	-	1.4
Finance costs		(7.0)	(4.6)	(11.6)
Loss before taxation		(38.8)	(9.3)	(48.1)
Taxation	6	0.2	-	0.2
Loss from continuing operations		(38.6)	(9.3)	(47.9)
Discontinued operations:
Loss after tax from discontinued operations	7	(7.8)	5.6	(2.2)
Loss for the period		(46.4)	(3.7)	(50.1)

Attributable to:
Shareholders of the parent company		(47.4)	(3.7)	(51.1)
Non-controlling interests		1.0	-	1.0
		(46.4)	(3.7)	(50.1)

Loss per share for the period attributable to shareholders of the parent company:
Basic	8	(11.1)p	(0.9)p	(12.0)p
Diluted	8	(11.0)p	(0.9)p	(11.9)p

Loss per share for the period attributable to shareholders of the parent company from continuing operations:
Basic	8	(9.1)p	(2.2)p	(11.3)p
Diluted	8	(9.0)p	(2.2)p	(11.2)p

Dividend per share	9	-	-	-

Notes 1 to 18 form an integral part of the interim condensed consolidated financial statements. See note 5 for a description of exceptional items.

		52 weeks to 28 April 2012
	Note	Before exceptional items £m	Exceptional items £m	Total £m
Continuing operations:
Revenue	4	873.1	-	873.1
Cost of sales		(838.5)	(4.9)	(843.4)
Gross profit (loss)		34.6	(4.9)	29.7
Administrative expenses		(33.3)	(11.1)	(44.4)
Trading profit (loss)	4	1.3	(16.0)	(14.7)
Share of post-tax losses of investments accounted for using the equity method		(0.3)	-	(0.3)
Operating profit (loss)		1.0	(16.0)	(15.0)
Finance revenue		1.7	-	1.7
Finance costs		(18.9)	(6.4)	(25.3)
Profit (loss) before taxation		(16.2)	(22.4)	(38.6)
Taxation		1.9	-	1.9
Profit (loss) from continuing operations		(14.3)	(22.4)	(36.7)
Discontinued operations:
Profit (loss) after tax from discontinued operations		(10.2)	(33.5)	(43.7)
Profit (loss) for the period		(24.5)	(55.9)	(80.4)

Attributable to:
Shareholders of the parent company		(25.7)	(55.9)	(81.6)
Non-controlling interests		1.2	-	1.2
		(24.5)	(55.9)	(80.4)

Earnings (loss) per share for the period attributable to shareholders of the parent company:	8
Basic		(6.1)p	(13.2)p	(19.3)p
Diluted		(5.9)p	(12.7)p	(18.6)p

Earnings (loss) per share for the period attributable to shareholders of the parent company from continuing operations:	8
Basic		(3.4)p	(5.3)p	(8.7)p
Diluted		(3.3)p	(5.1)p	(8.4)p

Dividend per share	9	-	-	-

Notes 1 to 18 form an integral part of the interim condensed consolidated financial statements. See note 5 for a description of exceptional items.

	26 weeks to 27 October 2012	26 weeks to 29 October 2011 (Restated)	52 weeks to 28 April 2012
	£m	£m	£m

Loss for the period	(36.1)	(50.1)	(80.4)

Foreign exchange translation differences	-	0.6	0.9
Foreign exchange translation differences recycled to profit and loss account on disposal of businesses	-	1.0	1.1
	-	1.6	2.0

Cash flow hedges:
Gain (loss) on forward foreign exchange contracts	-	0.1	0.5
Loss on interest rate swap	-	(0.1)	-
Transfers to the income statement on cash flow hedges (cost of sales)	-	0.5	-
	-	0.5	0.5

Actuarial (loss) gain on defined benefit pension schemes	(11.1)	3.6	6.9
Deferred tax on defined benefit pension schemes	(0.4)	(1.0)	(4.3)
	(11.5)	2.6	2.6

Other comprehensive (loss) profit for the period, net of tax	(11.5)	4.7	5.1

Total comprehensive loss for the period	(47.6)	(45.4)	(75.3)

Attributable to:
Shareholders of the parent company	(47.7)	(46.4)	(76.5)
Non-controlling interests	0.1	1.0	1.2
	(47.6)	(45.4)	(75.3)

Notes 1 to 18 form an integral part of the interim condensed consolidated financial statements.

			27 October 2012	29 October 2011	28 April 2012
	Note		£m	£m	£m
Assets
Non-current assets
Property, plant and equipment		10	40.6	67.0	47.0
Intangible assets			2.0	55.4	2.0
Investments accounted for using equity method			7.6	10.6	7.1
Deferred income tax asset			1.0	5.2	1.4
Trade and other receivables			1.1	12.7	2.3
			52.3	150.9	59.8
Current assets
Inventories		11	90.1	122.5	79.1
Trade and other receivables			27.9	30.5	37.0
Derivative financial instruments			-	0.1	-
Cash and short-term deposits		12	28.7	41.6	19.1
			146.7	194.7	135.2
Assets in disposal groups held for sale			20.0	-	60.8
Total assets			219.0	345.6	255.8
Liabilities
Non-current liabilities
Deferred income tax liabilities			(3.3)	(5.3)	(3.4)
Retirement benefit liabilities			(26.8)	(25.3)	(17.4)
Interest-bearing loans and borrowings		13	(127.2)	(6.6)	(159.2)
Provisions		14	(1.2)	(1.9)	(1.3)
Other payables			(10.5)	-	-
			(169.0)	(39.1)	(181.3)
Current liabilities
Trade and other payables			(141.4)	(207.6)	(143.7)
Current income tax payable			(2.3)	(2.8)	(1.4)
Interest-bearing loans and borrowings		13	(73.2)	(194.7)	(33.3)
Derivative financial instruments			-	(0.9)	(0.9)
Provisions		14	(5.8)	(4.9)	(10.6)
			(222.7)	(410.9)	(189.9)
Liabilities in disposal groups held for sale			(9.2)	-	(19.0)
Total liabilities			(400.9)	(450.0)	(390.2)
Net liabilities			(181.9)	(104.4)	(134.4)
Equity
Equity share capital		15	4.3	4.2	4.2
Foreign currency translation reserve			14.7	14.3	14.7
Capital reserve			0.5	56.7	0.5
Retained earnings			(203.0)	(180.9)	(155.5)
Equity attributable to shareholders of the Parent Company			(183.5)	(105.7)	(136.1)
Non-controlling interests			1.6	1.3	1.7
Total equity			(181.9)	(104.4)	(134.4)

Notes 1 to 18 form an integral part of the interim condensed consolidated financial statements.

26 weeks to 27 October 2012
	Equity share capital	Hedging reserve	Foreign currency trans- lation reserve	Other reserves	Retained earnings	Total	Non-controll-ing interests	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m

As at 28 April 2012	4.2	-	14.7	0.5	(155.5)	(136.1)	1.7	(134.4)

(Loss) profit for the period	-	-	-	-	(36.2)	(36.2)	0.1	(36.1)
Other comprehensive loss	-	-	-	-	(11.5)	(11.5)	-	(11.5)
Total comprehensive (loss) profit	-	-	-	-	(47.7)	(47.7)	0.1	(47.6)

Issue of equity shares	0.1	-	-	-	0.1	0.2	-	0.2
Share-based payments	-	-	-	-	0.1	0.1	-	0.1
Payments to non-controlling interests	-	-	-	-	-	-	(0.2)	(0.2)

As at 27 October 2012	4.3	-	14.7	0.5	(203.0)	(183.5)	1.6	(181.9)


					26 weeks to 29 October 2011
	Equity share capital	Hedging reserve	Foreign currency trans-lation reserve	Other reserves	Retained earnings	Total	Minority interests	Total
	£m	£m	£m	£m	£m	£m	£m	£m

As at 30 April 2011	347.1	(0.5)	12.7	(0.3)	(418.6)	(59.6)	0.8	(58.8)

Loss for the period	-	-	-	-	(51.1)	(51.1)	1.0	(50.1)
Other comprehensive income	-	0.5	1.6	-	2.6	4.7	-	4.7
Total comprehensive income (loss)	-	0.5	1.6	-	(48.5)	(46.4)	1.0	(45.4)

Share premium cancellation	(342.9)	-	-	56.4	286.5	-	-	-
Share-based payments	-	-	-	-	0.2	0.2	-	0.2
Share-based payment awards	-	-	-	0.6	(0.6)	-	-	-
Deferred tax on share-based payments	-	-	-	-	0.1	0.1	-	0.1
Payments to non-controlling interests	-	-	-	-	-	-	(0.5)	(0.5)

As at 29 October 2011	4.2	-	14.3	56.7	(180.9)	(105.7)	1.3	(104.4)

		26 weeks to 27 October 2012	26 weeks to 29 October 2011 (Restated)	52 weeks to 28 April 2012
	Note	£m	£m	£m
Cash flows from operating activities
Loss before tax - continuing operations		(37.3)	(45.7)	(38.6)
Profit (loss) before tax - discontinued operations		1.2	(4.6)	(43.5)
Profit on disposal of discontinued operations		(11.6)	(5.6)	(5.5)
Net finance costs		11.2	10.6	24.4
Share of post-tax losses (profit) of joint ventures accounted for using the equity method		(0.6)	0.7	1.1
Depreciation		9.1	10.6	21.4
Amortisation		-	-	0.2
Net impairment charges		10.4	-	41.5
Profit on disposal of investments		-	(0.4)	-
Loss on disposal of property, plant and equipment		0.4	-	-
Equity-settled share-based payment charge		-	0.2	0.4
Pension contributions less income statement charge		(1.7)	(4.2)	(8.7)
		(18.9)	(38.4)	(7.3)
Movement in inventories		(11.1)	(29.0)	13.9
Movement in trade and other receivables		12.4	17.9	5.4
Movement in trade and other payables		(7.0)	37.7	(26.7)
Movement in provisions		(1.9)	(8.3)	(6.0)
Cash generated from operations		(26.5)	(20.1)	(20.7)
Income tax received		0.7	7.5	7.4
Net cash flows from operating activities		(25.8)	(12.6)	(13.3)

Cash flows from investing activities
Purchase of property, plant and equipment	10	(3.4)	(11.6)	(18.3)
Proceeds from sale of investments		-	0.4	-
Interest received		-	-	0.2
Disposal costs	7	(3.0)	(6.6)	(6.7)
Proceeds from sale of businesses, net of cash disposed	7	28.7	43.2	56.2
Investments in /contributions to joint ventures		-	-	(0.7)
Payments to non-controlling interests		(0.2)	(0.5)	(0.9)
Other movements in non-controlling interests		-	-	0.5
Net cash flows from investing activities		22.1	24.9	30.3

Cash flows from financing activities
Movements in funding		10.8	11.6	1.2
Costs of raising debt		(0.4)	(6.3)	(7.4)
Interest paid		(4.3)	(4.7)	(10.7)
Settlement of interest rate swap		(0.9)	-	-
Repayment of capital element of finance lease		-	(0.1)	(0.1)
Net cash flows from financing activities		5.2	0.5	(17.0)

Net increase in cash and cash equivalents		1.5	12.8	-
Opening cash and cash equivalents		28.7	28.4	28.4
Effect of exchange rate changes		-	0.4	0.3
Closing cash and cash equivalents	12	30.2	41.6	28.7

Notes to the interim condensed consolidated financial statements 1. General information

The Company is a public limited company incorporated and domiciled in the UK. The address of its registered office is Windsor House, Spittal Street, Marlow, Buckinghamshire, SL7 3HJ.

The Company is listed on the London Stock Exchange.

The interim condensed consolidated financial statements of the Group were approved for issue on 12 December 2012.

These interim financial results do not comprise statutory accounts within the meaning of Section 435 of the Companies Act 2006 and are unaudited. Statutory accounts for the 52 weeks ended 28 April 2012 were approved by the Board of Directors on 9 August 2012 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

2. Basis of preparation

The interim condensed consolidated financial statements for the 26 weeks ended 27 October 2012 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, "Interim Financial Reporting" as adopted by the European Union. The interim condensed consolidated financial report should be read in conjunction with the annual financial statements for the year ended 28 April 2012, which have been prepared in accordance with IFRSs as adopted by the European Union.

Going Concern Review

As described in note 13, the amended debt facility contains covenants in respect of gearing and fixed charge cover, together with certain mandatory payments. The Group has complied with its covenant obligations during the period. The current level of Christmas trading has not been in line with the level expected and the Directors have concluded that, it is probable that the January 2013 and April 2013 covenants will not be complied with.

The Directors are aware of further uncertainties facing the business which are as follows:

- the ability to trade is dependent on continuity of supply. Any reduction or withdrawal of supplier support and the inability to negotiate more favourable commercial terms with suppliers, will materially adversely affect the Group's margins. The Group continues to work closely with its suppliers to secure the future of the business and these discussions continue to be positive.

- future trading may not be in line with the assumptions in the Group's latest forecasts. These are dependent on the current economic environment, the strength of core physical product markets in the important gifting season, the strength of the releases relative to forecast, HMV's market share and the impact of the new store service initiatives.

These uncertainties may lead to an inability of the Group to maintain sufficient cash flow in order to operate within the existing debt facilities, including the requirement to clear down the £50 million working capital facility for a period of 31 consecutive days and repaying the amortisation payment of £30 million in January 2013.

The Directors recognise that these uncertainties represent a material uncertainty which may cast significant doubt upon the Group's ability to continue as a going concern and therefore the Group may be unable to continue to realise assets and discharge liabilities in the normal course of business.

The Directors continue to maintain regular and constructive dialogue with the Group's banks which includes keeping them fully informed in relation to current trading.

The Directors have reviewed current trading and cashflow projections as part of their assessment of the probability of a covenant breach and after making reasonable enquiries and carefully considering the matters described above, the Directors have a reasonable expectation that the Group will be able to meet their liabilities as they fall due and will have adequate resources to continue in operational existence for the foreseeable future. The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern, which would include writing down the carrying value of assets to their recoverable amount and providing for any further liabilities that might arise.

3. Accounting policies

The accounting policies adopted are consistent with those of the annual financial statements for the 52 weeks ended 28 April 2012, as described in those annual financial statements.

The Group has not adopted early the requirements of the following accounting standards and interpretations, which have an effective date after the start of these interim financial statements.

- IAS 19 Employee Benefits (Revised) (1 January 2013)

- IFRS 9 Financial Instruments: Classification and Measurement (1 January 2013)

- IFRS 10 Consolidated Financial Statements (1 January 2013)

- IFRS 11 Joint Arrangements (1 January 2013)

- IFRS 12 Disclosure of Interests in Other Entities (1 January 2013)

- IFRS 13 Fair value measurement (1 January 2013)

4. Segmental information

The following tables present certain revenue and profit information regarding the Group's reportable segments. The segmental results below for the 26 weeks ended 29 October 2011 have been restated to reclassify HMV Live and aNobii as discontinued operations. Waterstone's and HMV Canada were also classified as discontinued operations as both were sold in the 26 weeks ended 29 October 2011.

		26 weeks to 27 October 2012
	HMV Retail	Continuing operations	Discontinued operations	Total
	£m	£m	£m	£m
Segment revenue	288.6	288.6	25.4	314.0
Segment operating (loss) profit before exceptional items	(23.6)	(23.6)	0.8	(22.8)
Operating exceptional items:
Restructuring costs	(1.8)	(1.8)	(0.6)	(2.4)
Closure costs (stores & distribution centre)	(1.5)	(1.5)	-	(1.5)
Profit on disposal	-	-	11.6	11.6
Impairment loss on remeasurement to fair value less costs to sell	-	-	(10.4)	(10.4)
Total exceptional items allocated to segments	(3.3)	(3.3)	0.6	(2.7)
Segment operating (loss) profit	(26.9)	(26.9)	1.4	(25.5)
Share of post-tax losses of associates and joint ventures not allocated to segments		(0.5)	-	(0.5)
Exceptional gain on deemed disposal of holding in joint venture		1.1	-	1.1
Total operating (loss) profit		(26.3)	1.4	(24.9)
Net finance costs		(10.6)	(0.2)	(10.8)
Exceptional finance costs		(0.4)	-	(0.4)
(Loss) profit before taxation		(37.3)	1.2	(36.1)
Taxation		0.1	(0.1)	-
(Loss) profit for the period		(37.2)	1.1	(36.1)

		26 weeks to 29 October 2011 (restated)
	HMV Retail	Continuing operations	Discontinued operations	Total
	£m	£m	£m	£m
Segment revenue	333.7	333.7	109.6	443.3

			52 weeks to 28 April 2012
	HMV Retail	Continuing operations	Discontinued operations	Total
	£m	£m	£m	£m
Segment revenue	873.1	873.1	128.5	1,001.6
Segment operating profit (loss) before exceptional items	1.3	1.3	(8.4)	(7.1)
Operating exceptional items:
Restructuring costs	(4.2)	(4.2)	-	(4.2)
Store closure costs	(2.1)	(2.1)	-	(2.1)
Store impairment costs	(2.8)	(2.8)	-	(2.8)
Festival cancellation costs	-	-	(0.3)	(0.3)
Profit on disposal	-	-	5.5	5.5
Impairment loss on remeasurment to fair value less costs to sell	-	-	(37.1)	(37.1)
Total exceptional items allocated to segments	(9.1)	(9.1)	(31.9)	(41.0)
Segment operating loss	(7.8)	(7.8)	(40.3)	(48.1)
Exceptional items not allocated to segments:
Restructuring costs		(6.9)	-	(6.9)
Impairment loss on remeasurment to fair value less costs to sell of associate		-	(1.6)	(1.6)
Share of post-tax profits of associates and joint ventures		(0.3)	(0.8)	(1.1)
Total operating loss		(15.0)	(42.7)	(57.7)
Net finance costs		(17.2)	(0.8)	(18.0)
Exceptional finance costs		(6.4)	-	(6.4)
Profit (loss) before taxation (continuing and discontinued)		(38.6)	(43.5)	(82.1)
Taxation				1.7
Loss for the period				(80.4)

The following table presents certain asset information regarding the Group's reportable segments:

	26 weeks to 27 October 2012
	HMV Retail	Discontinued operations	Total
	£m	£m	£m
Assets	170.6	20.0	190.6
Unallocated assets managed on a Group basis:
Investments accounted for using the equity method			7.6
Deferred income tax asset			1.0
Centrally held cash and short-term deposits			19.8
Total assets			219.0

		52 weeks to 28 April 2012
	HMV Retail		Discontinued operations	Total
	£m		£m	£m
Segment assets	176.0		60.8	236.8
Unallocated assets managed on a Group basis:
Investments accounted for using the equity method				7.1
Deferred income tax asset				1.4
Centrally held cash and short-term deposits				10.5
Total assets				255.8

Unallocated assets include balances relating to cash, taxation and investments in joint ventures, which are managed on a Group basis.

5. Exceptional items (before taxation)

	26 weeks to 27 October 2012 Total	26 weeks to 29 October 2011 Total	52 weeks to 28 April 2012 Total
	£m	£m	£m
Recognised in arriving at operating profit (continuing operations):
Restructuring costs	(1.8)	(4.7)	(11.1)
Store closure costs	(1.5)	-	(2.1)
Gain on deemed disposal of holding in joint venture	1.1	-	-
Impairment costs	-	-	(2.8)
Operating exceptional items	(2.2)	(4.7)	(16.0)
Recognised in arriving at operating profit (discontinued operations):
Restructuring costs	(0.6)	-	-
Festival cancellation costs	-	-	(0.3)
Profit on disposal of business (Note 7)	11.6	5.6	5.5
Impairment loss on remeasurement to fair value less costs to sell (Note 7)	(10.4)	-	(38.7)
	(1.6)	0.9	(49.5)
Exceptional finance costs - refinancing	(0.4)	(4.6)	(6.4)
Total exceptional items	(2.0)	(3.7)	(55.9)

In the 26 weeks to 27 October 2012 exceptional items comprised the following:

- Restructuring costs of £1.8m relating to redundancy costs of non-store employees, professional advisory fees and other related costs;

- £1.5m of costs relating to the closure of several UK stores and the relocation of a distribution centre from Guernsey to the UK;

- £1.1m gain on the revaluation of the Group's investment in 7digital on dilution of the stake held from 50% to 35% and reclassification from joint venture to associate;

- Restructuring costs of £0.6m in HMV Live relating to redundancy costs and other related charges;

- Profit on disposal of Hammersmith Apollo Limited of £11.6m, including transaction fees (see Note 7);

- Impairment loss of £10.4m on remeasurement to fair value less costs to sell of the remainder of the Live business;

- £0.4m of costs relating to the refinancing of the business in June 2012.

In the 52 weeks ended 28 April 2012, exceptional items comprised the following:

- Restructuring costs totalling £11.1m relating to restructuring of HMV Europe (£4.2m), and the restructuring of the Group (£6.9m), including staff-related costs, closure of a Head Office location and professional fees incurred;

- Store closure costs totalling £2.1m in HMV UK & Ireland, including fixed asset write-offs, redundancy costs incurred, strip-out costs, stock obsolescence and an assessment of provisions required for future property costs on stores where the leases have not yet expired;

- Fixed asset impairment charges totalling £2.8m were incurred by HMV UK & Ireland following a review of the carrying value of retail assets based on prevailing market trading conditions;

- Costs totalling £0.3m in HMV Live relating to the cancellation of the 2012 Vintage music festival;

- On 27 June 2011 the Group sold the HMV Canada business for a total cash consideration of £2.0m. This resulted in a loss on disposal of £5.9m. On 28 June 2011 the Group sold Waterstone's for £53.0m resulting in a profit on disposal of £11.4m. These results include transaction fees and foreign exchange recycled from the translation reserve (see Note 12);

- At 24 December 2011 the Group classified its investment in aNobii Limited as held for sale (see Note 7). At this point it was remeasured to the lower of carrying value and fair value less costs to sell, which resulted in an exceptional charge of £1.6m. At 31 March 2012 the HMV Live business was classified as a disposal group held for sale (see Note 7). At this point it was remeasured to the lower of carrying value and fair value less costs to sell, which resulted in an exceptional charge of £37.1m;

- Exceptional costs of £4.6m incurred with respect to the refinancing completed in June 2011 and a further £1.8m relating to the refinancing completed 8 August 2012. Of the total of £6.4m, £2.7m was non-cash and comprised fees relating to the old facility which had previously been deferred and were expensed on extinguishment of that facility in June 2011.

6. Taxation

The taxation credit for continuing operations for the period of £0.1m 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 (2011: £0.2m). A tax charge of £0.1m (2011: £nil) 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.

7. Discontinued operations

On 7 August 2012 the Group completed the sale of Hammersmith Apollo Limited ('HAL'), the company which owns and operates the Hammersmith Apollo, to Stage C Limited for a total cash consideration of £32.0m. The disposal was conditional upon shareholder approval, banking approvals and the purchaser securing regulatory approvals, all of which conditions were satisfied prior to completion. The company was sold on a cash-free, debt-free basis, except for the inclusion of certain advance ticket receipt monies. Transaction costs incurred by the Group totalled £3.0m. The result reported below is provisional, subject to final agreement of the completion balance sheet which is expected to be finalised in the second half of the year.

The Board remains committed to the sale of the remainder of the HMV Live division, which is classified as a disposal group held for sale and as a discontinued operation. An impairment charge of £10.4m has been recognised on the remeasurement of the disposal group to fair value less costs to sell.

On 11 June 2012 the Group sold is stake in its associate, aNobii Limited, to J Sainsbury's plc for £1.

In the prior year, the Group disposed of HMV Canada for £2.0m and the Waterstone's group of companies for £53.0m. The results of these businesses are included in the comparative information as discontinued operations.

The results of the discontinued operations are as follows:

				26 weeks to 27 October 2012
				HMV Live £m
Revenue				25.4
Expenses				(24.6)
Profit before tax and exceptional items				0.8
Exceptional items:
Restructuring cost				(0.6)
Profit on disposal of discontinued operation				11.6
Impairment recognised on remeasurement to fair value less costs to sell				(10.4)
Operating profit				1.4
Finance costs				(0.2)
Profit before tax from discontinued operations				1.2
Tax charge				(0.1)
Profit for the period from discontinued operations				1.1

The tax charge in the current period all relates to ordinary activities.

			26 weeks to 29 October 2011
	Waterstone's £m	HMV Canada £m	HMV Live £m	aNobii £m	Total £m
Revenue	56.1	22.3	31.2	-	109.6
Expenses	(63.8)	(24.8)	(27.8)	-	(116.4)
(Loss) profit before tax and exceptional items	(7.7)	(2.5)	3.4	-	(6.8)
Share of associates losses	-	-	-	(0.6)	(0.6)
Operating (loss) profit	(7.7)	(2.5)	3.4	(0.6)	(7.4)
Net finance costs	-	-	(0.4)	-	(0.4)
Profit (loss) on disposal of discontinued operation	11.5	(5.9)	-	-	5.6
Profit (loss) before tax from discontinued operations	3.8	(8.4)	3.0	(0.6)	(2.2)

There was no tax charge or credit in relation to discontinued operations in the prior year.

The profit on disposal is calculated as follows:

	26 weeks to 27 October 2012	26 weeks to 29 October 2011
	HMV Live £m	Waterstone's £m	HMV Canada £m	Total £m
Net cash consideration received	32.0	53.0	2.0	55.0
Disposal costs incurred	-	(5.0)	(1.6)	(6.6)
Net assets disposed of	(20.4)	(38.0)	(3.8)	(41.8)
Foreign exchange recycled from the translation reserve	-	1.5	(2.5)	(1.0)
	11.6	11.5	(5.9)	5.6

Disposal costs incurred on the sale of Hammersmith Apollo of £3.0m were charged in the year ended 29 April 2012 as part of the remeasurement to fair value less costs to sell.

The major classes of assets and liabilities disposed of were as follows:

26 weeks to 27 October 2012		26 weeks to 29 October 2011
	HMV Live £m	Waterstone's £m	HMV Canada £m	Total £m
Intangible assets	11.1	-	-	-
Property, plant and equipment	0.6	25.6	8.0	33.6
Current income tax asset	-	-	1.8	1.8
Inventories	0.1	86.9	32.9	119.8
Trade and other receivables	8.9	47.2	1.1	48.3
Cash	3.3	1.1	1.7	2.8
	24.0	160.8	45.5	206.3
Interest bearing loans and borrowings - overdraft	-	(2.3)	(1.7)	(4.0)
Interest bearing loans and borrowings - finance lease	-	(4.0)	-	(4.0)
Deferred income tax liability	-	(0.3)	-	(0.3)
Provisions	-	(4.4)	-	(4.4)
Trade and other payables	(3.6)	(110.8)	(40.0)	(150.8)
Current income tax payable	-	(1.0)	-	(1.0)
	(3.6)	(122.8)	(41.7)	(164.5)
Net assets disposed of	20.4	38.0	3.8	41.8

The major classes of assets and liabilities of the remainder of the HMV Live division, classified as a disposal group held for sale were as follows:

26 weeks to 27 October 2012
			HMV Live £m
Intangible assets			4.6
Property, plant and equipment			5.6
Investments in associates and joint ventures			2.7
Inventories			0.4
Trade and other receivables			5.2
Cash			1.5
Assets classified as held for resale			20.0
Interest bearing loans and borrowings
Deferred income tax liability			(0.6)
Provisions			(0.6)
Trade and other payables			(7.8)
Current income tax payable			(0.2)
Liabilities classified as held for resale			(9.2)
Net assets of disposal group			10.8

The impairment recognised in respect of HMV Live of £10.4m has been allocated to goodwill (£3.5m) and property, plant and equipment (£6.9m).

Cash flows of the discontinued operations are as follows:

26 weeks to 27 October 2012		26 weeks to 29 October 2011
	HMV Live £m	Waterstone's £m	HMV Canada £m	HMV Live £m	Total £m
Operating cash flows	(2.4)	0.6	(7.0)	2.1	(4.3)
Investing cash flows	(0.6)	(1.8)	-	(1.8)	(3.6)
Financing cash flows	(0.6)	1.7	6.8	(0.8)	7.7
Net cash flows excluding disposal proceeds	(3.6)	0.5	(0.2)	(0.5)	(0.2)

Cash flows on sales were as follows:

26 weeks to 27 October 2012		26 weeks to 29 October 2011
	HMV Live £m	Waterstone's £m	HMV Canada £m	Total £m
Gross consideration received	32.0	40.0	2.0	42.0
Cash disposed of with the business	(3.3)	(1.1)	(1.7)	(2.8)
Overdraft disposed of with the business	-	2.3	1.7	4.0
	28.7	41.2	2.0	43.2
Transaction costs incurred	(3.0)	(5.0)	(1.6)	(6.6)
Net cash flow	25.7	36.2	0.4	36.6

8. Earnings per share

Earnings per share attributable to shareholders of the Company arises as follows:

	26 weeks to 27 October 2012	26 weeks to 29 October 2011 (restated)	52 weeks to 28 April 2012
	£m	£m	£m
Loss from continuing operations attributable to shareholders of the parent company	(37.2)	(47.9)	(36.7)
Exceptional items less tax thereon - continuing operations	2.6	9.3	22.4
Adjusted loss from continuing operations attributable to shareholders of the parent company	(34.6)	(38.6)	(14.3)

Discontinued operations profit (loss) after tax and exceptional items	1.1	(2.2)	(43.7)
Less non-controlling interests	(0.1)	(1.0)	(1.2)
Profit (loss) from discontinued operations attributable to shareholders of the parent company	1.0	(3.2)	(44.9)
Exceptional items, less tax thereon - discontinued operations	(0.6)	(5.6)	33.5
Adjusted profit (loss) from discontinued operations attributable to shareholders of the parent company	0.4	(8.8)	(11.4)

Total loss attributable to shareholders of the parent company	(36.2)	(51.1)	(81.6)
Exceptional items less tax thereon	2.0	3.7	55.9
Total adjusted (loss) profit attributable to shareholders of the parent company	(34.2)	(47.4)	(25.7)

	26 weeks to 27 October 2012	26 weeks to 29 October 2011	52 weeks to 28 April 2012
	Number million	Number million	Number million
Weighted average number of Ordinary shares - basic	424.6	423.4	423.5
Dilutive share options	9.6	6.2	14.8
Weighted average number of Ordinary shares - diluted	434.2	429.6	438.3
	26 weeks to 27 October 2012	26 weeks to 29 October 2011	52 weeks to 28 April 2012
	Pence	Pence	Pence
Continuing operations:
Basic	(8.8)	(11.3)	(8.7)
Diluted basic	(8.6)	(11.2)	(8.4)
Adjusted	(8.1)	(9.1)	(3.4)
Diluted adjusted	(7.9)	(9.0)	(3.3)
Discontinued operations:
Basic	0.3	(0.7)	(10.6)
Diluted basic	0.3	(0.7)	(10.2)
Adjusted	0.1	(2.0)	(2.7)
Diluted adjusted	0.1	(2.0)	(2.6)
Total operations:
Basic	(8.5)	(12.0)	(19.3)
Diluted basic	(8.3)	(11.9)	(18.6)
Adjusted	(8.0)	(11.1)	(6.1)
Diluted adjusted	(7.8)	(11.0)	(5.9)

The adjusted earnings per Ordinary Share is shown in order to highlight the underlying performance of the Group.

Earnings per share for the discontinued operations is derived from the (loss)/profit attributable to equity shareholders of the Parent Company from discontinued operations of £1.0m (2011: £3.2m loss), divided by the weighted average number of ordinary shares in issue during the year, for both basic and diluted amounts as per the table above.

The weighted average number of shares excludes shares held by an Employee Benefit Trust and has been adjusted for the issue of shares during the period. There are 9.6m dilutive share options in issue (2011: 6.2m). At the period end 0.2m anti-dilutive share awards were in issue (2011: 1.0m).

9. Dividends

The Board is not recommending the payment of an interim dividend (2011: £nil).

10. Property, plant and equipment

During the 26 weeks ended 27 October 2012, the Group acquired assets with a cost of £3.4m (2011: £11.6m).

Assets with a net book value of £0.4m were disposed of by the Group during the 26 weeks ended 27 October 2012 (2011: £nil), resulting in a net loss on disposal of £0.4m (2011: £nil). Investments with a net book value of £nil (2011: £nil) were disposed of by the Group, resulting in a net profit on disposal of £nil (2011: £0.4m).

11. Inventories

Inventories primarily comprise finished goods and goods for resale. The replacement cost of inventories is considered to be not materially different from the balance sheet value.

The Group has continued to extend its purchase of back catalogue inventory on a consignment basis and to develop its relationships with key suppliers. This action has resulted in a c. £13.5m reduction in cost of sales in the 26 weeks ended 27 October 2012 (2011: £nil).

12. Cash and cash equivalents

For the purpose of the interim consolidated cash flow statement, cash and cash equivalents comprise the following:

	26 weeks to 27 October 2012	26 weeks to 29 October 2011	52 weeks to 28 April 2012
	(Unaudited) £m	(Unaudited) £m	(Audited) £m
Cash at bank and in hand	27.6	40.2	18.0
Short-term deposits	1.1	1.4	1.1
	28.7	41.6	19.1
Cash held in disposal group	1.5	-	9.6
	30.2	41.6	28.7

13. Loans and borrowings

On 7 August 2012 the Group amended its existing Bank Facility with its existing lenders and extended it to 30 September 2014 or, if certain conditions are satisfied, to 30 September 2015.

The £220m bank facility comprises a £70m term loan (Facility A), a £90m term loan (Facility B) and a £60m revolving credit facility (Facility C). The facility requires mandatory payment of £30m in January 2013 and a further £10m in January 2014.

An arrangement fee of 2% of the maximum facility amount (£4.4m) is payable in January 2013 with an ongoing obligation to pay commitment fees. Ongoing interest is payable at a margin of 4.0% over LIBOR. An exit fee is also payable on the amount outstanding under Facility B, which will be payable upon repayment of Facility B or 30 September 2014. The rate at which the exit fee accrues started at 5% per annum and increased on 1 April 2012 to 8%. It will increase again on 1 January 2013 to 14% to the extent that Facility B has not been repaid by that date. Any amounts not repaid in line with the voluntary repayment schedule incur interest at a margin of 8% over LIBOR and an exit fee of 10% from five months after non-repayment. The notional balance of the Facility B term loan to which the exit fee applies at any time, reduces following the application of the proceeds of any equity raising by the Group, which are required to be applied in part against that term loan balance. In addition, the Group has an obligation to prepay the facilities with the proceeds of any subordinated debt issues, certain disposals and from any excess cash flow generated.

The Amended Facility contains the same prohibitions on the payment of dividends and restrictions on capital expenditure as the previous Facility and the lenders maintain the warrants issued to them previously.

The Amended Facility is subject to financial covenants in respect of gearing and fixed charge cover (interest and rent). These are tested quarterly, with thresholds reset to reflect current trading and long term projections within the following ranges over the term of the facility:

- Gearing: Ratio of Average Consolidated Total Net Borrowings to Consolidated EBITDA not to exceed a range of 6.58 to 1.71 to 1.

- Interest and Rent Cover: Ratio of Consolidated EBITDAR (EBITDA before rent) to Consolidated Interest Plus Rent Payable to be not less than 1.58 to 1.19 to 1.

There is also a continuing obligation to ensure that the aggregate gross assets, revenue, and operating profits of the guarantors are at least 90% of the Group (excluding HMV Live) at all times. Finally, there is a clean-down requirement of 31 consecutive days per year, during which the Group cannot utilise £50m of the £60m Revolving Credit Facility.

At 27 October 2012, £207.0m had been drawn down from the facility (2011: £199.0m). Re-financing costs of £4.4m were capitalised at inception of the facility and a further fee of £4.4m (payable in January 2013) has also been capitalised. Both fees are being amortised over the life of the facility to September 2014. £0.4m of exceptional costs have been charged to interest in the 26 weeks ended 27 October 2012 (2011: £4.6m), all of which relates to the arrangement of the new facility (2011: £1.9m). In 2011 a further non-cash charge of £2.7m related to the write-off of financing fees incurred on the previous facility, which had been capitalised.

The Group's wholly owned subsidiary, Mean Fiddler Group Ltd, had a five year bank term loan, which was repaid during the period with the proceeds of the disposal of Hammersmith Apollo Limited.

The Company has also issued warrants to the lenders at closing representing 5% of the Company's total share capital (on the basis that all outstanding warrants or options have been exercised). The warrants are fully detachable and are convertible into Ordinary Shares at any time from 30 June 2012 until the tenth anniversary of the issue of the warrants (28 June 2021). The warrants, which are classified as a financial liability, were recognised at inception at their fair value of £2.2m. 4.4m warrants have been exercised during the period and the remaining 18.1m warrants have been revalued at 27 October at fair value of £0.3m (2011: £0.9m). The movement in fair value since 29 April 2012 of £0.2m has been recognised as other finance income in the income statement.

14. Provisions

	£m
As at 30 April 2011	13.7
Charged during the year	1.2
Disposed of with businesses	(4.4)
Provisions utilised	(3.7)
As at 29 October 2011	6.8

As at 28 April 2012	11.9
Charged during the year	2.7
Provisions utilised	(7.6)
As at 27 October 2012	7.0
Analysed as:
Current	5.8
Non-current	1.2
	7.0

Provisions consist of amounts in respect of store closures, restructuring costs and onerous leases. The £2.7m provision created during the period was largely in respect of restructuring costs and store closures. The utilisation of provisions in the current period mainly reflects the implementation of previously announced restructuring initiatives.

15. Share capital

	Number of ordinary shares	Ordinary shares	Share premium	Total
	Thousands	£m	£m	£m
As at 30 April 2011	423,587	4.2	342.9	347.1
Share premium account cancellation	-	-	(342.9)	(342.9)
As at 29 October 2011	423,587	4.2	-	4.2

As at 28 April 2012	423,587	4.2	-	4.2
Ordinary shares issued	3,147	0.1	-	0.1
As at 27 October 2012	426,734	4.3	-	4.3

16. Related party transactions

Payments of £nil (2011: £0.5m) have been made to non-controlling interests in the current period.

The Group did not acquire any services in the period under review from 7digital, a joint venture, (2011: £0.4m), There were no balances outstanding at 27 October 2012 (2011: £0.1m).

17. Seasonality

Retail sales of entertainment products are subject to seasonal fluctuations, with peak demand in the Christmas trading period, which falls in the second half of the financial year. For the 26 weeks ended 27 October 2012, the level of sales from continuing operations represented 33.0% (2011: 31.8%) of the annual level of sales in the 52 weeks ended 28 April 2012.

18. Post balance sheet event

On 3 December the Group announced the sale of MAMA Group Limited and its subsidiaries and its separately held interest in 50% of Mean Fiddler Group Limited ("MAMA") to Juno Newco Limited, a wholly owned subsidiary of Lloyds Development Capital Limited. The sale of MAMA does not include the sale of G-A-Y Group Limited and Heaven (London) Limited, which will be the subject of a separate transaction, discussions for which are ongoing.

The net cash consideration for the sale of MAMA is £7.3m of which £3.5m will be deferred for 12 months. The proceeds of sale will be used to reduce the Group's debt.

Statement of Directors' responsibilities

The Directors confirm that this interim condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:

· The interim management report includes a fair review of the important events during the first 26 weeks and a description of the principal risks and uncertainties for the remaining 26 weeks of the year; and

· The interim management report includes a fair review of disclosure of related party transactions and changes therein.

The Directors of HMV Group plc are listed in the HMV Group plc Annual Report for the 52 weeks ended 28 April 2012. A list of current Directors is maintained on the HMV Group plc website www.hmvgroup.com.

By order of the Board

Trevor Moore Ian Kenyon

Chief Executive Officer Group Finance Director

12 December 2012 12 December 2012

INDEPENDENT REVIEW REPORT TO HMV GROUP PLC

Introduction

We have been engaged by the company to review the interim condensed consolidated financial statements in its interim financial results report for the 26 weeks ended 27 October 2012 which comprises the interim consolidated income statement, interim consolidated statement of comprehensive income, interim consolidated balance sheet, interim consolidated statement of changes in equity, interim consolidated cash flow statement and related notes 1-18. We have read the other information contained in the interim financial results report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The interim financial results report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The interim condensed consolidated financial statements included in this interim financial results report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the company a conclusion on the interim condensed consolidated financial statements in the interim financial results report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim condensed consolidated financial statements in the interim financial results report for the 26 weeks ended 27 October 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Emphasis of matter - going concern

In forming our review opinion on the interim condensed consolidated financial statements, which is not modified, we have considered the adequacy of the disclosure made in Note 2, Basis of Preparation, concerning the Group's ability to continue as a going concern. These include the following material uncertainties which cast significant doubt on the Group's ability to continue as a going concern:

- the current level of Christmas trading has not been in line with the level expected and the Directors have concluded that it is probable that the January 2013 and April 2013 covenants will not be complied with.

The Directors continue to maintain regular and constructive dialogue with the Group's banks which includes keeping them fully informed in relation to current trading.

The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern, which would include writing down the carrying value of assets to their recoverable amount and providing for any further liabilities that might arise.

Ernst & Young LLP

Birmingham

12 December 2012

This information is provided by RNS

The company news service from the London Stock Exchange

ENDIR GGGMWPUPPUQW

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HMV Group plc

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