HMV halves dividend as losses swell

(SHARECAST) – Extremely difficult market conditions and a bigger than expected first-half loss have forced CD and DVD retailer HMV to slash the interim dividend.

The owner of book chain Waterstones lost £41.3m before tax in the 26 weeks ended 23 October, up from £24.9m last year and worse than the City had predicted.

Sales fell six percent to £749.5m from £797m in 2009 and the like-for-like sales decline accelerated from 2.1 percent to 11.5 percent.

HMV UK & Ireland’s total sales sank 15.3 percent, or 16.1 percent like-for-like, slicing £17.6m off the division’s operating profit. Waterstone’s suffered a 2.4 percent slip in total sales and 3.2 percent like for like.

And things have not gone well at the start of the key Christmas trading period, the company’s busiest time of the year which, along with the last four months of its financial year, account for 60 percent of annual sales.

“The outcome of our full financial year will be largely determined by the next four weeks of the key Christmas trading period,” HMV said. “Despite more encouraging trading at the beginning of the second half, the start to the Christmas trading period has been undermined by the severe weather of the last two weeks, which has significantly affected consumer footfall and consequently makes trading patterns hard to determine at this stage.”

Chief executive Simon Fox blamed the increased seasonal loss on the tough trading conditions in HMV UK, where good progress in growing new product categories was not enough to offset weak entertainment markets.

A decision to aim for dividend cover of 2.5-3.0x on a full-year basis caused the dividend to fall from 1.8p a share to 0.9p this time.