HMV Group shares hit by profits warning

Shares in HMV Group have fallen 22% after the struggling music and book retailer said full-year pre-tax profits would miss market expectations of £45m.

The company also said it expected to breach its banking covenants when they are tested after its full-year results.

It said it had started talks with its lenders with a view to changing its loan facilities.

Lenders continued to be supportive and loan facilities remained fully available, it added.

"Trading conditions remain tough, reflecting a difficult consumer environment as well as the changing markets in which we operate," said chief executive Simon Fox.

"However, our business is adapting quickly to respond to these external factors, and we are confident that our plans will ensure its long-term sustainable future."

Earlier this year, HMV said profits would be at the low end of forecasts.

It also confirmed that some of its suppliers had seen levels of credit insurance cut.

Suppliers take out credit insurance to cover payments owed to them by customers. So when insurance companies lower their credit limits, they are concerned about the ability of the supplier's customers to pay their debts.

The group, which also owns Waterstone's bookshops, said it was closing 60 shops this year as a result of falling sales.

The company has faced fierce competition from online retailers such as Amazon and iTunes.

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