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Mixed figures at music and books retail chain

BRITISH-BASED music and books retailer HMV Group Plc said yesterday that its full-year profit fell by half compared to a year ago, when its bottom line was fattened by the sale of operations in Japan.

Net profit for the year ending April 25 was 44.2 million pounds (US$73.9 million), compared to 89 million pounds in the previous year. However, profit from continuing operations - which doesn't include one-time effects such as the sale of the Japanese business - was up 18.5 percent to 44.2 million pounds. Revenue rose 4.4 percent to 1.96 billion pounds.

The company said sales by its music and games shops in the United Kingdom and Ireland were up 1.9 percent while sales at its Waterstone's book stores declined by 3.8 percent.

HMV shares rose 1.3 percent to 120.25 pence in early trading on the London Stock Exchange.

The results were at the top end of analysts' forecasts, said Freddie George at Seymour Pierce, who was cautious about the company's outlook.

"The company will benefit from a full-year consolidation of the joint venture with Mama Group in concert venues. However, the like-for-likes are up against difficult comparatives, partly because of the weather, and games software sales are slowing," George said.

HMV is expanding its offering of live music: in the past year it invested 20 million pounds in a joint venture with Mama Group Plc, owner of 11 live entertainment venues in the UK.

The company funded the investment with a share placing in January that raised 24 million pounds. Part of the proceeds were used to buy 25 stores from the defunct Zavvi chain.

HMV shares have fallen from around 150 pence in May, noted David Jeary at Investec Securities.

"This seems harsh in our view for a stock that has beaten market expectations and driven profit upgrades against the current difficult economic backdrop through a combination of self-help and capacity withdrawal irrespective of longer-term concerns on its product categories," Jeary said.

Games and technology now generate a quarter of sales at HMV shops, up from 20 percent a year earlier, the company said. Music sales rose 5 percent during the year, accounting for 28 percent of sales, down from 30 percent a year earlier.


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