City sceptical about HMV’s restructuring

HMV provided one of the biggest talking points again and was among the week’s biggest risers as it revealed it had agreed a two-year £220m restructuring lifeline. The deal follows HMV selling off the Waterstone’s book chain for £53m to Russian billionaire Alexander Mamut, and gives the retailer’s lenders 5% of the company, which will be converted into shares next year.

Reduce, Arden advised. The broker said: “Against the odds, HMV has survived in the short term on the hopes of a successful switch to selling technology, but this seems to us to be a triumph of hope over experience and we would be surprised if the good results from the first six stores can be replicated in a wider roll out.”

Peel Hunt advises hold, and said: “While a positive event in terms of providing stability and allowing management focus to return to operations, we fear this is an interim pause before the next step down.”

Asos reported strong full-year results with pre-tax profit, before exceptionals, ahead 41% to £28.6m on revenues 52% up to £339.7m.

Finncap retained sell view on Asos. The broker said: “Management has undeniably done a good job in getting to this point. The balance sheet remains cash-rich despite the heavy investment in the new warehouse. These factors all argue for a premium rating. But 60 times earnings?”

Numis said this has been “a year of huge progress for Asos” in terms of product, international expansion and the launch of services such as Fashion Finder. The broker said: “We see little to derail either the rapid growth or aspiration to become a global fashion destination.”

Upmarket jeweller Theo Fennell remains on Seymour Pierce’s buy list despite the surprise resignation of chief executive Barbara Snoad. The broker said Snoad “successfully introduced a much needed degree of structure to the business after a period of underperformance and over ambitious expansion”. Founder Theo Fennell is taking on the role of temporary chief executive.

Seymour Pierce said: “We continue to believe that Theo Fennell, with its unique and internationally recognised designs, is well positioned not only to benefit from growth in the luxury goods market as the global economy recovers, but also from self help.”

Next week brings first-quarter updates for supermarkets Tesco and Sainsbury’s. Numis forecasts Tesco’s UK like-for-likes for the period up 1.2%, and said: “A notably weak start to the calendar year for the UK grocers was offset by strong weather-related trading across the Easter/royal wedding public holidays.”

Jefferies expects Sainsbury’s to report like-for-like growth, excluding VAT and petrol, of 1.3%, reflecting a very strong April - when it expects sales have been up 3% - and then a reversal to “much weaker levels”, of about 0.5%.

Next week also brings updates from Carphone Warehouse and Ted Baker.