HMV in profit warning

HMV Group has said full-year pre-tax profits will be "moderately below" market expectations of £45m.

The company, which has been hit by the move to downloads, also said it expected to breach its banking covenants when they are tested after its full-year results.

It confirmed 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.

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

"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."

Arden analyst Nick Bubb said: "The shock is that HMV has flagged that year end net-debt will be way higher than expected at around £130m (we had a £70m debt forecast), because of a working capital squeeze and what it calls "changes in product mix".