HMV considers sale of live music division

London: British entertainment retailer HMV, grappling with waning demand in its core CD and DVD markets, warned it may not survive as it posted wider first-half losses and weak trading in the key Christmas period so far.

The 90-year-old group, the last national music and movies chain on Britain's town centre shopping streets, said it was currently able to meet its liabilities as they fall due.

"However, the economic environment and trading circumstances create material uncertainties which may cast significant doubt on the group's ability to continue as a going concern in the future," it said.

Its shares, already down 88 per cent this year, fell 8 per cent yesterday.

Chief executive Simon Fox said of the warning: "There are uncertainties and we're obliged to point those out."

Value of net debt

HMV, which trades from 256 stores in Britain and Ireland, employing 4,500, ended the period with net debt of £163.7 million (Dh932 million) and has a market capitalisation of just £15.1 million (Dh86 million).

It said it was maintaining "regular and constructive discussions" with its banks and had started a strategic review of its profitable HMV Live concert and festival division which could lead to its sale, with the proceeds used to reduce its debt.

"What we're looking at with HMV live is to de-leverage in order not to be paying higher interest rates [from January 2013] and in order to make sure that by the time we come to re-finance the business in September 2013, our overall levels of debt are lower," Fox told reporters.

He said he would expect to re-coup more than the £60 million (Dh341 million) the firm paid for the Live business two years ago.

Independent retail analyst Nick Bubb said selling HMV Live "wouldn't guarantee survival, but it would help." "(It) would be yet another strategic volte-face, in a long line of strategic volte-faces, but the embattled HMV are in a corner."

Fox said he had not ruled out attempting to tap shareholders for more funds in the new year. "It's certainly not a route we'd wish to close off. But I've always said we've got to have a strong equity story in order to raise equity."

HMV, famous for its Nipper the Dog trademark, has suffered as the downturn in consumer spending exacerbated the long-term challenges of intense competition from supermarkets and internet retailers, as well as the increasing popularity of digital downloading.

HMV said like-for-like retail sales were down 13.2 per cent in the seven weeks to December 17.

"That sort of outcome for the whole of the second half would literally be disastrous, but the extra Christmas Saturday to come this week [December 24] will make a big difference," said Bubb.

Change in strategy

Fox denied reports that suppliers, worried about HMV's longevity, had refused to supply the firm. "Our suppliers have been extremely supportive. It's in their interests that we continue to be on the high street and that we prosper," he said.

The firm has been shifting its emphasis from CDs and DVDs to the growth markets of portable digital products such as headphones, speaker docks and tablet computers.

HMV has also sold the Waterstone's book chain and a Canadian arm to cut debt.