HMV Group PLC Interim Results -7-

  income (loss)            -        0.5            1.6           -      (48.5)    (46.4)                 1.0    (45.4) 
 
 Share premium 
  cancellation       (342.9)          -              -        56.4       286.5         -                   -         - 
 Share-based 
  payments                 -          -              -           -         0.2       0.2                   -       0.2 
 Share-based 
  payment 
  awards                   -          -              -         0.6       (0.6)         -                   -         - 
 Deferred tax on 
  share-based 
  payments                 -          -              -           -         0.1       0.1                   -       0.1 
 Payments to 
  non-controlling 
  interests                -          -              -           -           -         -               (0.5)     (0.5) 
 
 As at 29 October 
  2011                   4.2          -           14.3        56.7     (180.9)   (105.7)                 1.3   (104.4) 
-----------------  ---------  ---------  -------------  ----------  ----------  --------  ------------------  -------- 
 

Interim consolidated cash flow statement

 
                                                      26 weeks      26 weeks    52 weeks 
                                                            to            to          to 
                                                    27 October    29 October    28 April 
                                                          2012          2011        2012 
                                                                  (Restated) 
                                            Note          GBPm          GBPm        GBPm 
-----------------------------------------  -----  ------------  ------------  ---------- 
 Cash flows from operating activities 
 Loss before tax - continuing 
  operations                                            (37.3)        (45.7)      (38.6) 
 Profit (loss) before tax - discontinued 
  operations                                               1.2         (4.6)      (43.5) 
 Profit on disposal of discontinued 
  operations                                            (11.6)         (5.6)       (5.5) 
 Net finance costs                                        11.2          10.6        24.4 
 Share of post-tax losses (profit) 
  of joint ventures accounted 
  for using the equity method                            (0.6)           0.7         1.1 
 Depreciation                                              9.1          10.6        21.4 
 Amortisation                                                -             -         0.2 
 Net impairment charges                                   10.4             -        41.5 
 Profit on disposal of investments                           -         (0.4)           - 
 Loss on disposal of property,                             0.4             -           - 
  plant and equipment 
 Equity-settled share-based payment 
  charge                                                     -           0.2         0.4 
 Pension contributions less income 
  statement charge                                       (1.7)         (4.2)       (8.7) 
                                                        (18.9)        (38.4)       (7.3) 
 Movement in inventories                                (11.1)        (29.0)        13.9 
 Movement in trade and other 
  receivables                                             12.4          17.9         5.4 
 Movement in trade and other 
  payables                                               (7.0)          37.7      (26.7) 
 Movement in provisions                                  (1.9)         (8.3)       (6.0) 
-----------------------------------------  -----  ------------  ------------  ---------- 
 Cash generated from operations                         (26.5)        (20.1)      (20.7) 
 Income tax received                                       0.7           7.5         7.4 
-----------------------------------------  -----  ------------  ------------  ---------- 
 Net cash flows from operating 
  activities                                            (25.8)        (12.6)      (13.3) 
-----------------------------------------  -----  ------------  ------------  ---------- 
 
 Cash flows from investing activities 
 Purchase of property, plant 
  and equipment                               10         (3.4)        (11.6)      (18.3) 
 Proceeds from sale of investments                           -           0.4           - 
 Interest received                                           -             -         0.2 
 Disposal costs                                7         (3.0)         (6.6)       (6.7) 
 Proceeds from sale of businesses, 
  net of cash disposed                         7          28.7          43.2        56.2 
 Investments in /contributions 
  to joint ventures                                          -             -       (0.7) 
 Payments to non-controlling 
  interests                                              (0.2)         (0.5)       (0.9) 
 Other movements in non-controlling 
  interests                                                  -             -         0.5 
 Net cash flows from investing 
  activities                                              22.1          24.9        30.3 
-----------------------------------------  -----  ------------  ------------  ---------- 
 
 Cash flows from financing activities 
 Movements in funding                                     10.8          11.6         1.2 
 Costs of raising debt                                   (0.4)         (6.3)       (7.4) 
 Interest paid                                           (4.3)         (4.7)      (10.7) 
 Settlement of interest rate                             (0.9)             -           - 
  swap 
 Repayment of capital element 
  of finance lease                                           -         (0.1)       (0.1) 
 Net cash flows from financing 
  activities                                               5.2           0.5      (17.0) 
-----------------------------------------  -----  ------------  ------------  ---------- 
 
 Net increase in cash and cash 
  equivalents                                              1.5          12.8           - 
 Opening cash and cash equivalents                        28.7          28.4        28.4 
 Effect of exchange rate changes                             -           0.4         0.3 
-----------------------------------------  -----  ------------  ------------  ---------- 
 Closing cash and cash equivalents            12          30.2          41.6        28.7 
-----------------------------------------  -----  ------------  ------------  ---------- 
 

Notes to the interim condensed consolidated financial statements

1. General information

The Company is a public limited company incorporated and domiciled in the UK. The address of its registered office is Windsor House, Spittal Street, Marlow, Buckinghamshire, SL7 3HJ.

The Company is listed on the London Stock Exchange.

The interim condensed consolidated financial statements of the Group were approved for issue on 12 December 2012.

These interim financial results do not comprise statutory accounts within the meaning of Section 435 of the Companies Act 2006 and are unaudited. Statutory accounts for the 52 weeks ended 28 April 2012 were approved by the Board of Directors on 9 August 2012 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

2. Basis of preparation

The interim condensed consolidated financial statements for the 26 weeks ended 27 October 2012 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, "Interim Financial Reporting" as adopted by the European Union. The interim condensed consolidated financial report should be read in conjunction with the annual financial statements for the year ended 28 April 2012, which have been prepared in accordance with IFRSs as adopted by the European Union.

Going Concern Review

In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future.

As described in note 13, the amended debt facility contains covenants in respect of gearing and fixed charge cover, together with certain mandatory payments. The Group has complied with its covenant obligations during the period. The current level of Christmas trading has not been in line with the level expected and the Directors have concluded that, it is probable that the January 2013 and April 2013 covenants will not be complied with.

The Directors are aware of further uncertainties facing the business which are as follows:

- the ability to trade is dependent on continuity of supply. Any reduction or withdrawal of supplier support and the inability to negotiate more favourable commercial terms with suppliers, will materially adversely affect the Group's margins. The Group continues to work closely with its suppliers to secure the future of the business and these discussions continue to be positive.

- future trading may not be in line with the assumptions in the Group's latest forecasts. These are dependent on the current economic environment, the strength of core physical product markets in the important gifting season, the strength of the releases relative to forecast, HMV's market share and the impact of the new store service initiatives.

These uncertainties may lead to an inability of the Group to maintain sufficient cash flow in order to operate within the existing debt facilities, including the requirement to clear down the GBP50 million working capital facility for a period of 31 consecutive days and repaying the amortisation payment of GBP30 million in January 2013.