HMV Group plc

Company Profile

Publication Date: 10 Nov 2009

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HMV Group plc

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HMV Group plc
TABLE OF CONTENTS

TABLE OF CONTENTS

Company Overview..............................................................................................4
Key Facts...............................................................................................................4
Business Description...........................................................................................5
History...................................................................................................................6
Key Employees.....................................................................................................7
Key Employee Biographies..................................................................................8
Major Products and Services............................................................................12
Top Competitors.................................................................................................15
Company View.....................................................................................................16
Locations and Subsidiaries...............................................................................18

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HMV Group plc
Company Overview

COMPANY OVERVIEW

HMV Group is engaged in the retailing of books, recorded music, pre-recorded video, DVDs, and
electronic games under the HMV and Waterstone’s brand names. The company operates in the UK,
Ireland, Belgium, Canada, the Netherlands, Hong Kong and Singapore. It is headquartered in
Maidenhead, the UK and employs around 13,801 people.

The company recorded revenues of £1,956.7 million (approximately $3,286.2 million) in the fiscal
year ended April 2009, an increase of 4.4% over 2008. The company's operating profit was £68.4
million (approximately $114.9 million) in fiscal 2009, an increase of 11% over 2008. Its net profit was
£44.2 million (approximately $74.2 million) in fiscal 2009, a decrease of 50.3% as compared to 2008.

KEY FACTS

Head Office HMV Group plc

Shelley House
2-4 York Road
Maidenhead
Berkshire SL6 1SR
GBR
Phone 44 1628 818 300
Fax 44 1628 818 301
Web Address http://www.hmvgroup.com
Revenue / turnover 1,956.7
(GBP Mn)
Financial Year End April
Employees 13,801
London Stock HMV
Exchange Ticker

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Business Description

BUSINESS DESCRIPTION

HMV Group is involved in the retailing of books, pre-recorded music, video and electronic games
under the HMV and Waterstone’s brand names. The company operates 692 stores. It has operations
in the UK, Ireland, Belgium, the Netherlands, the US, Canada, Hong Kong and Singapore.

The company operates through three business divisions: HMV UK and Ireland, HMV International
and Waterstone’s.

HMV UK and Ireland segment operates 272 stores in the UK and Ireland. It offers entertainment
products such as pre-recorded music, DVD’s, video and electronic games under the HMV brand
name. It also offers its products through local territory transactional websites.

HMV International segment operates 129 HMV stores in Canada, six stores in Hong Kong and two
stores in Singapore. It offers pre-recorded music, DVD’s, video and electronic games.

Waterstone’s segment is engaged in book retailing business. It sells ranges of books through 314
retail stores operating in the UK and Ireland. It also offers its products through a transactional website,
waterstones.com.

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HMV Group plc
History

HISTORY

HMV Group’s history dates back to 1921, when a record shop opened by Sir Edward Elgar. In 1986,
EMI, a recording company transferred to HMV two small chains in Canada, which were rebranded
as HMV. In the same year, HMV launched its operations in Ireland.

Waterstone’s was formed in 1982. The company opened its first stores in Australia in 1989. In the
following year, it also opened stores in Japan and the US.

In 1990, HMV Group opened its stores Hong Kong. Three years later, Waterstone’s was bought by
WH Smith.

The company also opened stores in Germany and Singapore in 1996 and 1997 respectively.

In 1998, the HMV Group formed as a leveraged buyout following the acquisition of HMV and Dillon’s
from EMI and Waterstone’s from WH Smith.

Waterstone’s rebranded its entire portfolio of Dillon’s branded stores to Waterstone’s in 1999.

In 2002, the company was listed on the London Stock Exchange. In the same year, EMI disposed
of its remaining shareholding in HMV Group.

Advent International, the company’s leveraged buy-out venture capital backer, disposed of its residual
holding in 2003.

In 2004, Waterstone’s opened a superstore on Oxford Street, London. In the following month, HMV
sold its HMV Australia subsidiary to Brazin.

In 2006, the company acquired Ottakar’s, a specialist book retailer in the UK. In the same year, it
launched a digital downloading service, HMV Digital.

HMV Group appointed Gerry Johnson was appointed as the Managing Director, Waterstone's of the
company in 2007. In the same year, the company sold its HMV Japan business to DSM Investments
Catorce Co for £70.6 million.

In September 2008, Robert Swannell was appointed the Chairman of the company.

HMV Group appointed Andy Duncan to its Board of Directors in March 2009.

In September 2009, HMV Group acquired 50% stake in 7digital, an international digital media
company for £7.7 millions.

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HMV Group plc
Key Employees

KEY EMPLOYEES

Name Job Title Board

Simon Fox Chief Executive Officer and Managing Director, Executive Board
HMV UK and Ireland
Neil Bright Group Finance Director Executive Board
Gerry Johnson Managing Director, Waterstone's Executive Board
Robert Swannell Chairman Non Executive Board
Christopher Rogers Non Executive Director Non Executive Board
Lesley Knox Non Executive Director Non Executive Board
Philip Rowley Non Executive Director Non Executive Board
Andy Duncan Non Executive Director Non Executive Board
Orna Ni-Chionna Non Executive Director Non Executive Board
Humphrey Kadaner President, HMV Canada Senior Management

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Key Employee Biographies

KEY EMPLOYEE BIOGRAPHIES

Simon Fox

Board: Executive Board

Job Title: Chief Executive Officer and Managing Director, HMV UK and Ireland
Since: 2006
Age: 48

Mr. Fox has been the Chief Executive Officer at HMV Group since 2006. He also serves as the
Managing Director at HMV UK and Ireland Busiiness of the company. Previously, Mr. Fox was the
Chief Operating Officer at Kesa Electricals. He was with Kingfisher, since 1998, holding various
senior roles. Prior to Kingfisher, Mr. Fox was the Founder of Office World, the UK’s first out-of-town
office supplies retailer. He began his career as a Graduate Trainee at Security Pacific Bank, followed
by Boston Consulting Group, and Sandhurst Marketing.

Neil Bright

Board: Executive Board

Job Title: Group Finance Director
Since: 1998
Age: 46

Mr. Bright has been the Group Finance Director at HMV Group since 1998. He is a Chartered
Accountant, having trained and qualified at Coopers & Lybrand in London. Prior to joining HMV in
1996, Mr. Bright served as the Group Planning Manager at Thorn EMI.

Gerry Johnson

Board: Executive Board

Job Title: Managing Director, Waterstone's
Since: 2007
Age: 49

Mr. Johnson has been the Managing Director, Waterstone's at HMV Group since 2007. He started
in retail as a part-time employee at Tesco. Mr. Johnson became Manager at a Tesco superstore in
1985. He joined in Allied Maples, part of the Asda Group, served as a Member of its Executive Board.
Mr. Johnson also spent four years in charge of the Booker wholesale operation.

Robert Swannell

Board: Non Executive Board

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Key Employee Biographies

Job Title: Chairman

Since: 2009
Age: 58

Mr. Swannell has been the Chairman at HMV Group since 2009. He also serves as the Vice Chairman
at Citi Europe. Mr. Swannell has worked in investment banking since joining Schroders in 1977. He
serves as a Director at British Land. Mr. Swannell is a qualified Chartered Accountant and Barrister.

Christopher Rogers

Board: Non Executive Board

Job Title: Non Executive Director
Since: 2006
Age: 49

Mr. Rogers has been a Non Executive Director at HMV Group since 2006. He has been a Finance
Director at Whitbread since 2005. Mr. Rogers previously served as the Group Finance Director at
Woolworths Group and Chairman at the Woolworth Group’s entertainment and wholesale publishing
businesses. He qualified as an Accountant at Price Waterhouse and joined Kingfisher Group as the
Corporate Finance Manager in 1998. His other appointments included Group Financial Controller
at Kingfisher, Finance Director at Comet Group, and four years as Commercial Director at Comet.

Lesley Knox

Board: Non Executive Board

Job Title: Non Executive Director
Since: 2002
Age: 56

Ms. Knox has been a Non Executive Director at HMV Group since 2002. She was a Founder Director
at British Linen Advisors, a specialist corporate finance advisor focusing on growth companies. Prior
to that, Ms. Knox was a Corporate Finance Director and Head, Institutional Asset Management at
Kleinwort Benson Group. She serves as the Chairman at the Alliance Trusts, a Non Executive
Director at MFI Furniture Group and Hays.

Philip Rowley

Board: Non Executive Board

Job Title: Non Executive Director
Since: 2007
Age: 57

Mr. Rowley has been a Non Executive Director at HMV Group since 2007. He was the Chairman
and Chief Executive Officer at AOL Europe, the interactive services, web brands, Internet technologies

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Key Employee Biographies

and e-commerce provider. Mr. Rowley is a qualified Chartered Accountant and was the Group
Finance Director at Kingfisher from 1998 to 2001. Prior to that, his roles included the Executive Vice
President and Chief Financial Officer at EMI Music Worldwide, and Chief Operating Officer and Chief
Financial Officer at Golden Books Family Entertainment. Mr. Rowley was also the Co-founder and
Managing Director at Tribeca Technologies. He is currently serves as a Director at ARM Holdings,
QXL Ricardo and Skinkers.

Andy Duncan

Board: Non Executive Board

Job Title: Non Executive Director
Since: 2009
Age: 47

Mr. Duncan has been a Non Executive Director at HMV Group since 2009. He has been the Chief
Executive at Channel 4 since 2004. Previously, Mr. Duncan was a member of the BBC's Executive
Board from 2001 to 2004 as Director, Marketing, Communications and Audiences. He served as
the Chairman of the joint venture with BBC, Sky and Crown Castle. From 1984 to 2001, Mr. Duncan
worked at Unilever where he held a series of Senior Director positions. He has also been the Chairman
at Media Trust since 2006.

Orna Ni-Chionna

Board: Non Executive Board

Job Title: Non Executive Director
Since: 2009
Age: 53

Ms. Ni-Chionna has been a Non Executive Director at HMV Group since 2009. She is a former
Partner at McKinsey & Company, where she specialized in serving retail and consumer clients. Ms.
Ni-Chionna is currently the Senior Independent Director at Northern Foods, where she has been a
Director since 2002; and is Chairman of Eden McCallum's Advisory Board. She also served as a
Senior Independent Director at Bupa and was a Non Executive Director at Bank of Ireland UK
Holdings and Bristol & West. Ms. Ni-Chionna has also served as a member of the UK Retail and
Consumer Advisory Board of Apax Partners.

Humphrey Kadaner

Board: Senior Management

Job Title: President, HMV Canada
Since: 2003
Age: 50

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Key Employee Biographies

Mr. Kadaner has been the President, HMV Canada at HMV Group since 2003. Previously, he served
at Sony Retail as the Executive Vice President. Prior to Sony, Mr. Kadaner held senior marketing,
franchise, operations, purchasing and business development roles at PepsiCo in Canada.

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Major Products and Services

MAJOR PRODUCTS AND SERVICES

HMV Group is a retailer of books, recorded music, pre-recorded video, DVDs, and electronic games.
The company’s key offerings include the following:

Music albums:

Rock and pop

Soul and dance
Soundtracks
Jazz and blues
Country
Easy listening
Folk
World
Comedy

Videos:

Film
Music
Childrens
Comedy
Television
Sport
General interest
Adult

Film DVDs:

Music
Childrens
Comedy
Television
Sport
General interest
Adult

Games:

XBOX
PS2
Gamecube
Game Boy Advance

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Major Products and Services

PC CD ROM
Playstation

Books:

Biography
Comedy
Fiction
Literary classics
Music
Non fiction
Sheet music

HMV downloads

MP3 players:

Silver mini ipod

Gold mini ipod
Pink mini ipod
Blue mini ipod
Green mini ipod
Ipod remote earphones

iPod accessories:

iPod dock Connector to USB 2.0 and Firewire Cable For PC

iPod Dock Connector to Firewire Cable For Mac and PC
iPod Remote Earphones
iPod In-Ear Headphones
iPod World Travel Adapter Kit
iPod Carrying Case

Books:

Fiction
Poetry
Drama and criticism
Non-fiction
Food and drink
Reference
Address books
Journals
Education and languages
Religion and spirituality
Art, architecture and photography

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Major Products and Services

Audio cassettes
Health, family and lifestyle
Science fiction and fantasy
History
Science and nature
Biography
Home and garden
Scientific, technical and medical
Business, finance and law
Horror
Sport, hobbies and games
Children's books
Humour
Society, politics and philosophy
Comics and graphic novels
Mind, body and spirit
Travel and holiday
Computers and internet
Music, stage and screen
Young adult
Crime, thrillers and mystery

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Top Competitors

TOP COMPETITORS

The following companies are the major competitors of HMV Group plc

Amazon.com, Inc.
Woolworths Group plc
ASDA Group Limited
Virgin Books Limited
Borders (UK) Limited

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HMV Group plc
Company View

COMPANY VIEW

A statement by Robert Swannell, Chairman at HMV Group is given below. The statement has been
taken from the company’s 2009 annual report.

The Group has the leading position in its markets in both HMV and Waterstone’s. The markets for
both businesses are undergoing long-term structural change. Building from its strengths, the Group’s
Chief Executive Simon Fox and his team set out a comprehensive plan in March 2007 to transform
the Group over three years. This requires changes in many aspects of the businesses. It was
fundamental to my decision to join the Group that there is a senior management team in place with
the necessary open-mindedness and intensity to make these plans a reality.

I have been impressed by the passionate commitment and knowledge of staff at all levels of HMV
and Waterstone’s. They care about what they do and are proud of the organisations for which they
work. It will not be simple to transform the business against the backdrop of rapid changes in digital
technology, online channels and competition from the major supermarkets. In the absence of effective
government action we must also face up to competition from the free illegal digital market.
Nonetheless, I believe that shareholders can be reassured that the business has a determined team
and a clear strategy to enhance shareholder value, building on our clear strengths as the only
specialist retailer of scale in our markets.

The Group has had a year of pleasing financial performance, at a time when the conditions for
consumer businesses could not be more testing. In the autumn of last year markets were convulsed
by the problems in the banking sector and businesses suffered the greatest shock in living memory
as economies across the world headed for recession. That said, our transformation plans set out
two years ago and, in particular, the initiatives to drive cost efficiencies have helped to underpin this
year’s resilience. A number of the strategies to protect and revitalise our store businesses and to
grow in new channels have also made a successful contribution.

HMV UK & Ireland continues to make good progress in adapting to the structural changes taking
place in the entertainment market, and has been the principal driver of this year’s improved profit
performance. HMV’s reinvigorated market positioning is clear not only to customers of the brand
today, but is pointing towards a strategy for our engagement with them over the longer term. The
step we have made this year to invest in live music venues and ticketing is the first beyond the
current plan, and shareholders can expect further new initiatives to follow. The HMV International
division had a more difficult year, and here our focus is on accelerating the path to transformation.

Waterstone’s has made a robust defence of its leading high street position against the backdrop of
a difficult book market this year, and is continuing to adapt its business online and to differentiate
itself from the competition. As it becomes fully operational, the new book hub is expected to enhance
Waterstone’s routes to market as well as the overall financial performance of the business.

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Company View

I am, therefore, pleased to report that results for the Group for the year ended 25 April 2009 saw a
11.5% increase in profit before tax and exceptional items to £63.0m, on revenue which grew by
4.4% to £1,956.7m. Our adjusted earnings per share rose by 10.3% to 11.1p and the Board has
recommended a final dividend of 5.6p per Ordinary Share. Together with the interim dividend of 1.8p
per share, the total dividend for the year is 7.4p, the same as last year.

Shareholders should be assured by the maintenance of a strong capital structure albeit, like all
retailers with a predominantly leasehold portfolio, we have significant inherent gearing through our
store leases.The Group successfully secured new funding to September 2011 via a £220m revolving
credit facility, which the Board believes is adequate to meet the Group’s current cash requirements.
An equity placing of 5% of our share capital in January 2009 was strongly supported by institutional
investors, and provided all of the funding for our new strategic investments. At the end of the year,
our underlying net borrowings were just £6.5m.

Progress on so many fronts would not, of course, have been possible without the commitment and
experience of many people to whom I offer my thanks: the people across our business world-wide;
and Simon Fox and his senior management team. This isn’t just token appreciation. As I mentioned
earlier, I am particularly impressed by the commitment that people at all levels apply to their work
in our businesses.

This year there have been several changes to the composition of the Board, including my own
appointment. I was delighted to join the Group as Chairman on 2 February 2009, succeeding Lesley
Knox. On behalf of the Board, I would like to thank Lesley for her leadership during an interim period
from September 2008 after Carl Symon stepped down. As our new Senior Independent Director the
Board continues to benefit from Lesley’s experience. The Board would also like to thank Carl for his
considerable contribution in his term as Chairman over the years from 2006, during which Simon
Fox was recruited and the transformation plan was set out.

Roy Brown, a Non-Executive and Senior Independent Director since the Group’s IPO in May 2002,
retired from the Board in April 2009 and I would also like to place on record the Board’s great
appreciation for his contribution and enormous commitment to the business during this period.

I am delighted that Andy Duncan, Chief Executive of Channel 4, joined our Board in March 2009.
He brings a wealth of relevant experience, particularly in media businesses and their online and
digital applications and in marketing and communications more generally; this will be a real asset
as we address the next part of our strategic agenda.

In summary, this year the Group’s performance has been robust in economic conditions that have
been volatile and negative. We have delivered profit growth in this difficult environment and made
good progress on our continuing transformation plan. Significant steps too have been taken to
develop the business for the long term, whilst tight control over our finances has been maintained.
We know there is a great deal that remains to be done, and that our markets continue to undergo
profound change, but we are determined to use our inherent strengths as the leading retailer in our
markets to create an enduring and growing business.

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Locations and Subsidiaries

LOCATIONS AND SUBSIDIARIES

Head Office
HMV Group plc
Shelley House
2-4 York Road
Maidenhead
Berkshire SL6 1SR
GBR
P:44 1628 818 300
F:44 1628 818 301
http://www.hmvgroup.com

Other Locations and Subsidiaries

HMV UK & Ireland HMV Hong Kong Limited

Film House 5 F Sands Building
142 Wardour Street 17 Hankow Road
London W1F 8LN Tsimshatsui
GBR Kowloon
HKG

HMV Singapore Pte Limited HMV Canada Inc

260 Orchard Road 5401 Eglinton Avenue West
No 1 to 11 The Heeren Etobicoke
Singapore 238855 Ontario M9C 5K6
SGP CAN

Waterstone’s Booksellers Limited HMV USA LP

Capital Court USA
Capital Interchange Way
Brentford
Middlesex TW8 0EX
GBR

HMV Ireland Limited Waterstone’s Booksellers Belgium SA

IRL BEL

Waterstone’s Booksellers Amsterdam BV HMV Music Limited

NLD GBR

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