HMV In Administration

HMV is poised to go into administration, putting more than 4,000 jobs at risk.

The company’s common shares were suspended from trading on the London Stock Exchange on the morning of Jan. 14.
At the end of last year, the high street CD and DVD retailer – which has 239 shops in the UK and Ireland – warned it was in danger of breaking its banking covenants.

It also released interim results that showed like-for-like sales had fallen by 10.2 percent and that annual losses would be in the region of £35 million.

“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,” said HMV chief exec Trevor Moore.

HMV has been kept alive by the supports of its banks and suppliers, who have allowed it to take stock on a sale-or-return basis, but it now seems that support has been withdrawn. The chain has bank debts of about £200 million.

Over the Jan. 10-12 weekend, it began a massive sale to boost revenues, although the move also saw its share price plummet to an all-time low of 1.11 pence, valuing the company at less than £5 million.

Although Deloitte will hope keep HMV’s 239 stores open while it assesses the prospects for the business and seeks potential buyers, the company’s staff have been told not to accept gift cards and vouchers.

The first HMV store was opened by Sir Edward Elgar in July 1921. It floated on the London Stock Exchange in May 2002, when the business was valued at £1 billion. In February 2005 HMV shares peaked at 247 pence.

The company issued a statement Jan. 15 saying it’s “been unable to reach a position where it feels able to continue to trade outside of insolvency protection.”

It said that, under the circumstances, it intends to file notice to appoint administrators to the company and certain of its subsidiaries with immediate effect.

“The directors of the company understand that it is the intention of the administrators, once appointed, to continue to trade whilst they seek a purchaser for the business,” it explained.