TROUBLED music group HMV more than halved pre-tax profits last year but has offered hope that the worst of its woes are behind it.

The group, which also owns book chains Waterstone's, said its recovery plan had seen the new financial year kick off well, with like-for-like sales up 3.8 per cent in the past two months.

HMV's latest figures come after a tough year for the group amid stiff competition from supermarkets and online retailers - confirmed by results showing profits dived from £98.2m to £48.1m.

The music and books group reported a like-for-like sales decline of 3.5 per cent in the year, a period which saw HMV issue two profits warnings.

Trading at Waterstone's was worst affected, with a 4.1 per cent fall in like-for-like sales against a 3.3 per cent drop for the HMV stores across the UK, Asia and Canada.

The firm's full year results are in line with expectations in the City, but are significantly below original forecasts for profits of between £69m and £89m - which came before the firm admitted it was struggling last December.

Simon Fox, HMV chief executive, said the group was taken by surprise by the extent of changes in the market.