HMV: modeFinance Credit Report

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’ sMORE Credit Ratings and MORE CreditLimit to help you in the decision making.It covers all essential information includingfinancial statements of the last three yearsand descriptive information including tradedescription and sector analysis.This report type is ideally suited fordecisions on transactions with each levelof credit risk.

modeFinanceTM HeadquarterBuilding A - AREA Science ParkPadriciano 99 - 34149 Trieste - ItalyPh.: +39 040 375 5337Fax: +39 040 375 [email protected]

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HMV GROUP PLCTuesday, 15 January 2013

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D C CC CCC B BB BBB A AA AAA

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D C CC CCC B BB BBB A AA AAAnot

available

non return extremlypathological

pathological highdanger

weak sufficient adequate good very

strongextremely

strong

Company name HMV GROUP PLC

Identification number Not available

Country United Kingdom

ZIP code and city SL6 1SR - MAIDENHEAD

Address SHELLEY HOUSE

+44 1628 818 300

www.hmvgroup.com

[email protected]

Legal form Public company, quoted

Account Consolidated

Incorporation date 1998/03

NACE 2 Sector 4761 - Retail sale of books in specialised stores

Listed

Status Active

MORE Credit limit Not assessable on the base of the available informations

28/04/2012 30/04/2011 24/04/2010

Turnover (th e) 1,070,252 1,289,137 2,323,747

Rating CC CCC BB

Probability of default 48.00% 19.00% 2.60%

Confidence Level 100% 100% 100%

Solvency ratios

Leverage ratio -2.88 -10.37 6.10

Total asset/Total liabilities 0.65 0.90 1.16

Liquidity ratios

Current Ratio 0.94 0.70 0.65

Quick Ratio 0.56 0.50 0.20

Profitability and economic equilibri-

um ratios

Return on investement ROI (%) -5.20 2.51 10.70

Return on equity ROE (%) -27.85 -5.66 49.50

Asset turnover 3.41 2.17 2.86

Interest paid weight -1.90 0.80 0.09

Gross Profit/Operating revenue 0.11 0.21 0.10

Interest Coverage ratios

EBIT interest coverage ratio -0.59 1.22 11.38

Analysis and trend of financial

strength


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modeFinance TM srlVAT number [email protected]

Area Science Park,Padriciano 99. 34149 Trieste, ItalyTel. +39 040 3755337Fax +39 040 3756741

Sector Analysis

Company Healthy Balanced Vulnerable Risky

Solvency ratios

Leverage ratio -2.88 0.45 2.10 6.60 -2.13

Total asset/Total liabilities 0.65 3.23 1.48 1.14 0.89

Liquidity ratios

Current Ratio 0.94 2.65 1.36 1.03 0.82

Quick Ratio 0.56 1.54 0.64 0.38 0.33

Profitability and economic equilibrium ratios

Return on investement ROI (%) -5.20 11.64 4.98 1.18 -12.19

Return on equity ROE (%) -27.85 11.13 8.04 -2.20 -94.88

Asset turnover 3.41 2.43 2.25 1.89 1.81

Interest paid weight -1.90 0.00 0.12 0.14 -0.07

Gross Profit/Operating revenue 0.11 0.31 0.34 0.30 0.33

Interest Coverage ratios

EBIT interest coverage ratio -0.59 1,000,000.00 6.86 0.49 -12.59

Cash Conversion Cycle (days)

Days Sales Of Inventory (DIO) 33 45 57 73 84

Days Sales Outstanding (DSO) 7 7 8 8 11

Days Payable Outstanding (DPO) 25 24 44 45 83

Cash Conversion Cycle (DIO + DSO - DPO) 15 32 24 33 23

Numer of analyzed companies - 77 197 108 48

(Average) Rating CC A BB B CC

The sector has been chosen according to:

international companies in the sector NACE 2 4761 with financial data of year 2012.


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Sector Analysis - Graphs


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Balance Sheet

BALANCE SHEET (th e) 28/04/2012 30/04/2011 24/04/2010

Accounting practice IFRS IFRS IFRS

Exchange rate GBP - EUR 1.22581 1.12079 1.15231

Number of months 12 12 12

Total assets 313,561 593,124 812,839

Fixed assets 73,303 171,369 397,892

Intangible fixed assets 2,452 62,204 140,812

Tangible fixed assets 57,613 75,990 192,781

Other fixed assets 13,239 33,176 64,299

Current assets 240,258 421,755 414,947

Stocks 96,961 119,028 285,542

Debtors 19,735 18,941 15,210

Other current assets 123,561 283,785 114,194

Cash & cash equivalent 23,413 27,011 34,224

Shareholders funds -166,832 -63,325 114,540

Capital 5,148 389,028 399,967

Other shareholders funds -171,981 -452,353 -285,427

Total liabilities 480,394 656,449 698,299

Non current liabilities 224,323 54,246 62,801

Long term debt 195,148 7,846 13,597

Other non-current liabilities 29,174 46,401 49,204

Current liabilities 256,071 602,203 635,499

Loans 40,819 207,347 96,218

Creditors 74,039 104,122 293,954

Other current liabilities 141,213 290,734 245,327

Total shareh. funds & liab. 313,561 593,124 812,839

NET DEBT (th e) 28/04/2012 30/04/2011 24/04/2010

Short term debts 40,819 207,347 96,218

Long term debt 195,148 7,846 13,597

Cash & cash equivalent 23,413 27,011 34,224

Net debt 212,555 188,181 75,591

28/04/2012 30/04/2011 24/04/2010

Working capital 42,658 33,848 6,799

Net Current Assets -15,813 -180,448 -220,552

28/04/2012 30/04/2011 24/04/2010

Days Sales Of Inventory (DIO) 33 34 45

Days Sales Outstanding (DSO) 7 5 2

Days Payable Outstanding (DPO) 25 29 46

Cash Conversion Cycle (DIO + DSO - DPO) 15 10 1


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Income Statement

INCOME STATEMENT (th e) 28/04/2012 30/04/2011 24/04/2010

Accounting practice IFRS IFRS IFRS

Exchange rate GBP - EUR 1.22581 1.12079 1.15231

Number of months 12 12 12

Sales 1,070,252 1,289,137 2,323,747

Revenues growth (%) -17 -45 -

Other revenues +/- variation in inventories and contract in progress + Fixed assets

own construction capitalized0 0 0

Operating revenue / turnover 1,070,252 1,289,137 2,323,747

Total operating costs 1,088,639 1,274,455 2,237,208

Costs growth (%) -15 -43 -

Service costs - - -

Material costs - - -

Costs of employees 161,561 261,257 272,636

EBITDA 59,084 197,036 138,968

Depreciation 77,471 182,353 52,430

EBIT -18,387 14,682 86,538

Financial P/L -28,929 -11,768 -7,144

Financial revenue 2,084 224 461

Financial expenses 31,013 11,992 7,605

Interest paid 31,013 11,992 7,605

P/L before tax -47,316 2,914 79,394

Extr. and other P/L -1,471 -1,569 0

Extr. and other revenue - - -

Extr. and other expenses - - -

P/L before tax + Extr. and other P/L -48,787 1,345 79,394

Taxation -2,329 4,931 22,700

P/L for period -46,458 -3,587 56,694

28/04/2012 30/04/2011 24/04/2010

Costs of Good Sold 956,374 1,024,854 2,085,795

Gross Profit 113,877 264,283 237,952

Other Operating Expenses 132,265 249,601 151,413

28/04/2012 30/04/2011 24/04/2010

Cash flow 31,013 178,767 109,124

Added value 227,265 452,016 370,928

28/04/2012 30/04/2011 24/04/2010

Number of employees - - 14,154


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Evolutions and trends


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Qualitative information

Full overview It is an international retailer of music, books and video. The company has 580 stores in eight different countries.

It is a combination of two retail brands which are leaders in their respective fields: HMV and Waterstone’s. The

company was founded in March 1998 following the acquisition of HMV and Dillon’s from EMI and Waterstone’s

from WH Smith. Its corporate headquarters located in Maidenhead, United Kingdom. Its brands include music

products, books and video. The company is one of the world’s leading retailers of music and video and the

leading retailer of books in the United Kingdom. It is one of the most well - known and respected music and

video retail brands around the globe. The company’s seven key objectives are: apply the HMV blueprint across the

group, secure leadership in chosen markets, deliver unrivalled authority, achieve superior financial performance,

exploit new product opportunities, embrace alternative distribution channels and technologies, and optimise store

portfolio. It is active in the United Kingdom, Australia, Germany, Hong Kong, Japan, Ireland, the United States,

Canada and Singapore. The company focuses on providing an authoritative range and depth of selection that is

superior to that of its competitors, including hard - to - find recordings and a large number of back catalogue titles.

History Founded following the acquisition of HMV and Dillon’s from EMI and Waterstone’s from WH Smith.

Primary business line Operates as an international retailer of music, books and video.

Secondary business line Not available.

Main activity Retail; Services.

Secondary activity Not available.

Main products and services Music products, books and video.

Size estimate One of the world’s leading retailers of music and video and the leading retailer of books in the United Kingdom.

Strategy, organization and policy Apply the HMV blueprint across the group, secure leadership in chosen markets, deliver unrivalled authori-

ty, achieve superior financial performance, exploit new product opportunities, embrace alternative distribution

channels and technologies, and optimise store portfolio.

Strategic alliances Not available.

Membership of a network Not available.

Main brand names Not available.

Main domestic country United Kingdom.

Main foreign countries or regions Australia; Germany; Hong Kong; Japan; Ireland; United States; Canada; Singapore.

Main production sites Not available.

Main distribution sites Australia; Germany; Hong Kong; Japan; Ireland; United States; Canada; Singapore.

Main sales representation sites Not available.


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Main customers Not available.

Auditor/Advisor/Bank

name type address

ERNST & YOUNG LLP Auditor -

LLOYDS TSB BANK PLC Banker -

THE ROYAL BANK OF SCOTLAND Banker -

SIMMONS & SIMMONS Law Firm -

NOMURA Brand Name Advisor -

CAPITA REGISTRARS Registrar -

CITIGROUP Investment Advisor -

Board

name date of birth nationality function

Mr. David Alexander Robertson Adams 12/11/1954 United Kingdom Non Executive Director - Non - Exec Contact

Mr. Andrew John Duncan 31/07/1962 United Kingdom Non Executive Director - Non - Exec Contact

Mr. Ian Peter Kenyon 23/09/1961 United Kingdom Director

Mr. Trevor Philip Moore 12/07/1969 United Kingdom Director

Mrs. Orna Gabrielle Ni Chionna 21/02/1956 United Kingdom Director (occupation: Company Secretary); Senior Independent Non

Executive Director; Non Executive Director - Non - Exec Contact

Mr. Philip Edward Rowley 22/09/1952 United Kingdom Director

Miss Elaine Marriner 12/10/1961 United Kingdom Company Secretary

Sharehoders (the first twenty shareholders ordered by Direct %)

UBS AG via its funds Rating:

Country ISO code CH Operating Revenue (MIL $) 10804.23

NACE Rev. 2, Core code - Total Assets (MIL $) -

Direct % - Number of Employees 36693

Total % 12.68 Information date 2012/09

Address : Not available


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UBS GLOBAL ASSET MANAGEMENT (UK) LTD Rating: BB

Country ISO code GB Operating Revenue (MIL $) 180.85

NACE Rev. 2, Core code - Total Assets (MIL $) 129.62

Direct % 10.55 Number of Employees 0

Total % - Information date 2011/04


TORONTO DOMINION BANK via its funds Rating:

Country ISO code CA Operating Revenue (MIL $) 23131.25





HENDERSON GROUP PLC Rating: -






HENDERSON GLOBAL INVESTORS LIMITED Rating: CCC






CHASE NOMINEES LIMITED A/C TMBC1 Rating:

Country ISO code - Operating Revenue (MIL $) -





BARCLAYS PLC via its funds Rating: CCC






CHANNEL TRUSTEES LIMITED Rating:

Country ISO code KN Operating Revenue (MIL $) -






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FIDELITY INTERNATIONAL LIMITED Rating:

Country ISO code GB Operating Revenue (MIL $) -





SCHRODER INVESTMENT MANAGEMENT LIMITED Rating: BBB






FIL LIMITED Rating:

Country ISO code BM Operating Revenue (MIL $) -





JURANGKOOL APICHART Rating:

Country ISO code - Operating Revenue (MIL $) -


Direct % 4.63 Number of Employees -



ARTEMIS FUND MANAGERS LIMITED Rating: B






GAM HOLDING AG via its funds Rating:

Country ISO code CH Operating Revenue (MIL $) 213.76





VIDACOS NOMINEES LIMITED Rating: D


NACE Rev. 2, Core code - Total Assets (MIL $) 0





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STANDARD LIFE INVESTMENTS LIMITED Rating: AA






HSBC HOLDINGS PLC via its funds Rating: CCC

Country ISO code GB Operating Revenue (MIL $) 68347





HARGREAVES LANSDOWN PLC via its funds Rating: AA






SOCIÉTÉ GÉNÉRALE via its funds Rating:

Country ISO code FR Operating Revenue (MIL $) 31648.79





NORGES BANK Rating:

Country ISO code NO Operating Revenue (MIL $) 2149.92





Subsidiaries (the first twenty subsidiaries ordered by Direct %)

HMV (IP) LIMITED Rating: AA






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HMV GROUP PENSION TRUSTEES LIMITED Rating: D





HMV GROUP SENIOR EXECUTIVE PENSION TRUSTEES LIMITED Rating: D





HMV GUERNSEY LIMITED Rating:





HMV HONG KONG LIMITED Rating:

Country ISO code HK Operating Revenue (MIL $) -




HMV MUSIC LIMITED Rating: CCC





HMV SINGAPORE PTE LIMITED Rating:

Country ISO code SG Operating Revenue (MIL $) -




REVOLVER RECORDS LIMITED Rating:





RUSTICO HOLDINGS LIMITED Rating:

Country ISO code IE Operating Revenue (MIL $) -





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VOICE GROUP LIMITED Rating: -





VOICE RETAIL & MEDIA LIMITED Rating: D





VOICE RETAIL LIMITED Rating: C





VOICE RETAIL MEDIA LIMITED Rating: D





WATERSTONE’S BOOKSELLERS BELGIUM Rating: A

Country ISO code BE Operating Revenue (MIL $) 4.06




WATERSTONE’S BOOKSELLERS AMSTERDAM BV Rating:

Country ISO code NL Operating Revenue (MIL $) -




WATERSTONE’S BOOKSELLERS LIMITED Rating:





FORUM CLUB (KENTISH TOWN) LIMITED Rating: BBB






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HMV IRELAND LIMITED Rating: B

Country ISO code IE Operating Revenue (MIL $) 113.63




MF PRESENTS LIMITED Rating: D





WATERSTONE’S BOOKSELLERS IRELAND LIMITED Rating:

Country ISO code IE Operating Revenue (MIL $) -


Direct % - Number of Employees -



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ASKMORE rating guide

General vision A credit rating is an opinion of the general creditworthiness of an obligor (issuer rating), or the creditworthiness of

an obligor in respect of a specific debt security, or other financial obligation (issue rating), based on relevant risk

factors.

The Multi Objective Rating Evaluation (MORE) model is essentially used to assess the level of distress of industrial

companies by using data included in financial statements.

The basic idea of the model is to analyze a set of financial and economic ratios in a predictive corporate bankruptcy

model with the purpose of creating a fundamental credit rating model for each industrial sector. Results of the

model are obtained by applying newly developed numerical methodologies, drawing together financial theory,

data mining and engineering design methodologies. The heart of MORE is a multi dimensional and multi objective

algorithm that produces a classification of each company, by taking into account any attributes (such as sector and

country) characterizing a firm.

The model gives the opportunity to assign a rating to a company even without considering a complete data analysis

and allows to process quality information. It induces a better understanding of a company’s strength and weakness

thanks to sophisticated data mining tools and taking into account the analyst knowledge.

The MORE rating vision is to look at the fundamental economics of the company. The main idea is to evaluate the

rating observing every aspect of the economical and financial behavior of the company: better is the equilibrium

between the different aspects, better will be the final rating.

This is done studying, evaluating and aggregating the most important sections of the financial and economic

behavior of a company such as: profitability, liquidity, solvency, interest coverage and efficiency.


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Rating scale

Rating class Rating macro class Assessment

AAA

Healthy

The company’s capacity to meet its financial commitments is extremely strong. The company shows an excellent

economic and financial flow and fund equilibrium.

AAThe company has very strong creditworthiness. It also has a good capital structure and economic and financial

equilibrium. Difference from AAA is slight.

AThe company has a high solvency. The company is however more susceptible to the adverse effects of changes in

circumstances and economic conditions than companies in higher rated categories.

BBB

Balanced

Capital structure and economic equilibrium are considered adequate. The company’s capacity to meet its financial

commitments could be affected by serious unfavourable events.

BBA company rated BB is more vulnerable than companies rated BBB. Furthermore the company faces major ongoing

uncertainties or exposure to adverse business, financial, or economic conditions.

B

Vulnerable

The company presents vulnerable signals with regards to its fundamentals. Adverse business, financial, or economic

conditions will be likely to impair the company’s capacity or willingness to meet its financial commitments.

CCC

A company rated CCC has a dangerous disequilibrium on the capital structure and on its economic and financial

fundamentals. Adverse market events and an inadequate management could affect with high probability the

company’s solvency.

CC

Risky

The company shows signals of high vulnerability. In the event of adverse market and economic conditions, the

company’s strong disequilibrium could increase.

CThe company shows considerable pathological situations. The company’s capacity to meet its financial

commitments is very low.

D The company has not any longer the capacity to meet its financial commitments.


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Fundamental Credit Rating Ratios

Analysis area Ratio Assessment

Solvency ratios

Leverage ratioThis measures the level of total liabilities of the company in comparison

with equity.

Assets to debtThis indicates company’s solvency. The company shows a level of deficit

when the value of this ratio is under one unit.

Financial ratios Fixed Assets coverage ratioThis is calculated only for holdings. It measures the capital structure i.e.

whether a company covers the fixed assets with long term capital.

Liquidity ratios

Current ratioThis measures whether a company has sufficient short-term assets to cover

its short-term liabilities.

Quick ratioThis compares current liabilities only to those assets that can be readily

turned into cash.

Profitability and economic ratios

Return on Investement(ROI)This measures the profitability of company investments without regard to

the way the investment is financed.

Return on Equity(ROE) This measures the profitability of the equity.

Asset turnover

This indicates the investments turnover with regards to sales. The lev-

el assumed from the ratio depends on the sector in which the company

operates.

Profit margin This indicates the profitability of sales.

Interest coverage ratio Interest Paid coverage

This indicate the ability of the company to cover interest expenses through

the economic margins (Gross profit and EBIT) and through the cash flow

from operating activities.


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MORE Credit Limit, Probability of default and Confidence Level

MORE Credit Limit MORE Credit limit is the estimation of the amount of maximum credit that is possible to assign on a commercial

relationship with the analyzed company with an outlook of one year.

modeFinance used the following values associated with the company analyzed while computing the credit limit:

• Size;

• Years in Business;

• Average number of suppliers;

• Liquidity of the company and the comparison with its sector;

• The funds dedicated to be paid to suppliers;

• The likelihood that a company may pay its debts in the next 12 months (MORE Ratings).

The credit limit in this report is merely a suggested value of commercial credit limit calculated on the basis of annual

public data. This value should be reviewed by paying attention to the Confidence Level value and by using other

information such as other business information, news... etc; and private information such as the relationship with

client, history of payments, guarantees and the knowledge of the sector.

Probability of default e Confidence

Level

In addition to the MORE Rating, modeFinance also estimates the probability of default and provides a level of

confidence. The probability of default is the degree of certainty (in quantitative terms) that the company will go

into default.

As the probability of default is strongly affected by the economic climate that the company is operating in,

companies in the same MORE class will not necessarily have the same probability of default.

The MORE model can produce a MORE rating even if there is missing data by using an associated confidence level:

Confidence =

∑Available Information∑

Total Information

The level of confidence does not indicate financial confidence in the company. It is a reflection of the variations in

availability of financial data across Europe due to filing regulations and suggests the degree of financial detail the

MORE rating is able to take into account for each company.

For companies with fully populated records a confidence level of 100% would be applied: companies where no

financial data is provided, 0%. This puts the MORE rating in a context for the user and aids interpretation.


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Notes and disclaimer

NOTES modeFinance has based the present analysis on the company available financial statements, coming from one or

more of the following sources: local providers, Commercial Register (Companies House), websites, modeFinance’s

database etc.

DISCLAIMER All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any

form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of

the publisher modeFinance. The facts of this report are believed to be correct at the time of publication but cannot

be guaranteed. Please note that the findings, conclusions and recommendations that modeFinance delivers will

be based on information gathered in good faith from both primary and secondary sources, whose accuracy we

are not always in a position to guarantee. As such modeFinance can accept no liability whatever for actions taken

based on any information that may subsequently prove to be incorrect.

Contacts

Company modeFinance

Products MORE rating

Where AREA Science Park

34149 Trieste, via Padriciano 99 - ITALY

Info [email protected]

web www.modefinance.com

Phone +39 040 3755337

Documents

HMV: modeFinance Credit Report