HMV Stock Jumps on Profit-Recovery Forecast: London Mover

HMV Group Plc (HMV), the U.K. music retailer that obtained support from its main banks in January, rose the most in more than three months in London trading after saying it’s confident of restoring profit in the coming year.

Pretax profit of at least 10 million pounds ($16.2 million) is expected for the 12 months ending April 2013, compared with analyst estimates of a 5 million-pound loss, the Maidenhead, England-based company said today. HMV also said net debt at the end of April was less than previously expected, tempering a prediction that last year’s loss was worse than forecast.

“The expectation of a move to a decent level of profits in 2013 is a nice surprise,” Philip Dorgan, an analyst at Panmure Gordon, said in a note. He kept a hold rating on the stock after what he termed “the first piece of good news in years.”

HMV rose as much as 24 percent to 4.6 pence, the steepest intraday gain since Jan. 20, when the company said banks waived a covenant test after support for the retailer from its main music and film suppliers. The stock was trading up 15 percent at 4.25 pence at 8:43 a.m. as about 5.7 million shares changed hands, more than the daily average in the last six months.

Net borrowings were about 168 million pounds at the end of April, an improvement on previous forecasts, HMV said today, adding that a strategic review of the HMV Live events unit is continuing almost six months after it started.

Fiscal-Year Loss

The pretax loss in the year ended April 28 was about 16 million pounds, the company also said, citing a slow release schedule for CDs and DVDs. The average of four estimates compiled by Bloomberg was 5.3 million pounds. HMV is scheduled to release detailed earnings figures in June, according to the retailer’s website.

“The last year has been a difficult and challenging one for HMV and this will be reflected in our annual results,” Chief Executive Officer Simon Fox said in a statement. “However, we are confident that the actions we have taken will enable us to significantly improve our profit and cash generation in the year ahead.”

Same-store sales at HMV’s main retail business declined 13 percent in the 17 weeks through April 28, contributing to a drop of 12 percent for the fiscal year. Revenue has been weighed down by a faltering economy and by competition from online retailers and supermarkets.

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