HMV recovery on track thanks to games

HMV has told investors that its recovery in on track as Britain's biggest music retailer reported a jump in pre-tax profits.

The company, which also owns book chain Waterstones, said this morning that strong demand for video games helped drive pre-tax profits up about 25pc to £56.6m for the 12 months to April 26. Sales climbed to £1.87bn from £1.68bn.

Analysts at Panmure Gordon welcomed the results, saying "the second year of recovery starts from a good place, with a debt-free balance sheet and strong market share growth.It's going to be difficult, given the challenging markets that it operates in, but we do believe that there is substantial self help opportunity here."

HMV UK and Ireland saw like-for-like sales up 11.4pc while Waterstones' sales increased by 3.3pc.

Games and technology sales soaerd 21pc as the British appetite for computer games showed no sign of abating, with Grand Theft Auto and the Nintendo Wii proving popular amongst gamers.

Despite the group facing stiff competition from music downloads online sales from HMV.com increased by 42pc.

Last year, HMV launched a three-year turnaround plan which it hoped would allow it to successfully compete against Internet retailers and supermarkets.

Simon Fox, Chief Executive, said: "One year into our transformation plan group profits are up by 25pc and we are ahead of where we expected to be.

"We still have much to do, and whilst we are mindful of the challenging economic outlook, the current financial year has started in line with our expectations and I remain confident that we are building a better and stronger business that can prosper in a rapidly changing market."

The group also said its debt had virtually been eliminated by the sale of its Japanese business.

A final dividend of 5.6p will be paid on 10 October making a total dividend of 7.4p and is unchanged from the previous year.