Overview: music to his ears

Investors will be looking for a top performance from the top dog next week.
On Tuesday 4 July HMV will be posting its preliminary results for year-end April
2006, and analysts will have the opportunity to grill His Master’s Voice on the
Ottakar book chain deal.
The move, if it goes to completion, will see HMV combine its own Waterstones
business with that of Ottakar to create an even greater presence in the high
What’s happened?

It has been a busy time for the senior HMV directors. Not only have group
finance director Neil Bright (above) and his chief executive Alan Giles been
browsing through Ottakar’s book shelves, they have been fending off an audacious
bid for their own book collection, as well as the whole company.

In March, HMV rejected a £843m takeover bid from Permira, the private equity
group. Then in May a £280m attempt by Tim Waterstone to buy back the
Waterstone’s chain he founded in 1982 collapsed in acrimony.

Meanwhile, Bright and Giles’ original bid for Ottakar lapsed last year after
it had been referred to the Competition Commission.

They had offered £96m for the chain, and when the bid lapsed, analysts
HMV to return to the fray once the CC had cleared the bid, but with a much
reduced offer. And indeed they did, this time offering an agreed £62.8m for the
troubled bookseller.

What’s going to happen?

Aside from the Ottakar’s deal, Bright and Giles are expected to reveal a
profit before tax and exceptional costs in the middle of the range of analysts’
expectations of between £93m and £103m. In an earlier trading statement, they
indicated that total sales for the full year fell by 1.5% and were down 5.7% on
a like-for-like basis.

HMV, like many other retailers has been going through a tough time, and it
has been admitted that jobs will go, largely in the administration and back
office functions, if the Ottakar deal goes through.

There have also been questions over whether Ottakar chief executive James
Heneage will be staying with the business, though no news on FD Michael

Incidentally, Giles resigned in January, though he will be in the hot seat
for the rest of the year while a successor is found. Could Bright follow a
growing trend of finance directors stepping up to become top dog?

Raising his master’s voice

As well as posting its results,plans for a national roll-out ofHMV’s new
pricing and promotional strategy could be announced on 4 July.The new
strategy,currently being trialled in six stores in SouthWales and
prices for chart CDs cut to £9.95 and £14.95 for DVDs.Also all back catalogueCDs
andDVDs have been rationalised into four pricing points,starting at £5 for
DVDs.‘The roll-out depends on us being confident that the business will be
better off
through so doing,’Giles said.

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