Trading Update

Trading update

1 March 2011

Since the publication of the Group's Interim Management Statement (IMS) on 5 January 2011, trading conditions have remained challenging.

As a consequence, the Group now expects that profit before tax and exceptional items for the financial year will be moderately below market expectations.* In addition, due to a combination of changes in product mix and other working capital movements, net debt is expected to be not less than £130m.

At the time of the IMS, the Group's forecasts indicated that, based on current trading at that time, compliance with the financial year end covenants under its bank facility would be tight. While the Group continues to comply with the terms and conditions of its bank facility agreement, and is not in breach of any covenant tests, it does not expect to meet certain of its covenant tests when they are next tested by reference to its full year results. The Group has therefore commenced discussions with its lenders ahead of publication of its full year results regarding potential changes to the facility agreement, which would ensure their appropriateness for future trading conditions and to support delivery of the Group's strategy. In the meantime, the Group's banking facilities remain fully available, the Group's lenders continue to be supportive and the Group is maintaining a regular and constructive dialogue with them.

Commenting, Chief Executive Simon Fox said:

"Trading conditions remain tough, reflecting a difficult consumer environment as well 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 and sustainable future."

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* The median of market expectations for the profit before tax and exceptional items for the full financial year is £45 million. (Source: HMV Group/Reuters Knowledge).

**All calls on the day to Brunswick.