The period under review is the 52 weeks ended 25 April 2009, whilst the prior period covers the 52 weeks to 26 April 2008. Following the disposal of HMV Japan during the prior period, the Group's comparatives shown below exclude HMV Japan to reflect continuing operations only, except where specified.

Key Performance Indicators	2009 £m	2008 £m	Growth %
Continuing operations:
Sales	1,956.7	1,874.9	4.4%
Like for like sales – %1	(0.4)%	7.3%
Operating profit (before exceptional items)	70.3	66.2	6.4%
Exceptional items	(1.7)	(4.6)
Profit before tax (before exceptional items)	63.0	56.6	11.5%
Profit before tax	61.3	52.0
Discontinued activities – HMV Japan	–	51.7
Adjusted basic earnings per share (continuing operations)	11.1p	10.1p	10.3%
Basic earnings per share (continuing operations)	10.8p	9.2p	17.4%
Total dividend per share declared	7.4p	7.4p
Underlying net debt2	6.5	0.2
Free cash flow3	12.3	87.4
Store numbers (continuing operations)	722	692
Average trading square footage (continuing operations)	3.77m	3.68m	2.4%

1. HMV Group's like for like sales performance is calculated at constant exchange rates and measures stores that were open at the beginning of the previous financial year (ie open at the beginning of May 2007) and that have not been resized, closed or resited during that time. It includes sales from internet sites and is only ever the net amount received.
2. Underlying net debt is stated before unamortised deferred financing fees.
3. Free cashflow is cashflow from operating activities after capital expenditure and net interest.

Total sales from the Group's continuing operations increased by £81.8m or 4.4% to £1,956.7m, including a 0.4% decline in like for like sales. At constant exchange rates, total sales grew by 2.4%. Beneficial exchange rate movements, primarily in the Euro and Canadian dollar, increased sales by £37.7m and operating profit by £1.7m.

Operating profit from continuing operations before exceptional charges increased by £4.1m or 6.4% to £70.3m. The improvement on last year reflects the strong sales performance of HMV UK & Ireland, partially offset by the impact of a decline in like for like sales in HMV International and Waterstone's. The result also reflected good management of gross margin and tight control of operating costs, including the benefit of cost saving initiatives, particularly Group buying synergies and the consolidation of back office functions. The joint venture entered into in January 2009 contributed £0.2m to operating profit.

Net finance charges fell from £9.6m to £7.3m, reflecting lower base interest rates and the annualised benefit of the prior year HMV Japan disposal, partially offset by an increased interest margin following the refinancing.

The profit before tax and exceptional items for continuing operations was £63.0m, up 11.5% on the prior period.

A net exceptional charge before taxation of £1.7m (2008: £4.6m) was incurred in the year. This included an exceptional past service credit of £5.6m arising on changes to the Group's defined benefit pension scheme, partially offsetting exceptional operating costs totalling £7.3m (2008: £4.6m). The exceptional costs were incurred in connection with the review of the combined Waterstone's store portfolio, following the acquisition of Ottakar's, impairment of certain assets due to current market trading conditions and store restructuring costs as a result of the implementation of the Waterstone's book hub.

Discontinued operations in the prior period, reflecting the trading and disposal of HMV Japan, generated a profit after tax of £51.7m.

Underlying net borrowings at £6.5m (2008: £0.2m) were £6.3m higher than last year, reflecting higher levels of capital investment and the reversal of prior year end favourable working capital timing differences.

The Board is proposing a final dividend of 5.6p, making a total dividend for the year of 7.4p (2008: 7.4p).

Sales	2009 £m	2008 £m	Year on year growth1 %	Constant exchange growth (decline)2 %	Like for like sales growth (decline) %
HMV UK & Ireland	1,154.6	1,079.0	7.0	6.1	1.9
HMV International	253.8	231.6	9.6	(0.5)	(3.4)
Total HMV	1,408.4	1,310.6	7.5	4.9	1.0
Waterstone’s	548.3	564.3	(2.8)	(3.6)	(3.8)
Total continuing operations	1,956.7	1,874.9	4.4	2.4	(0.4)
Discontinued operation – HMV Japan	–	61.2
Total HMV Group	1,956.7	1,936.1

Operating profit (before exceptional items)	2009 £m	2008 £m	2009 % of sales	2008 % of sales	Year on year growth (decline)1 %	Constant exchange growth (decline)2 %
HMV UK & Ireland	53.7	41.4	4.7	3.8	29.6	28.1
HMV International	6.4	8.5	2.5	3.7	(24.0)	(32.4)
Total HMV	60.1	49.9	4.3	3.8	20.5	17.8
Waterstone’s	10.0	16.3	1.8	2.9	(38.5)	(40.7)
Share of post-tax profit of joint venture	0.2	–
Total continuing operations	70.3	66.2	3.6	3.5	6.4	3.8
Discontinued operation – HMV Japan	–	0.1
Total HMV Group	70.3	66.3

1. Year on year growth for the 52 week period compared with the corresponding period last year is based on results translated at the actual exchange rates being the weighted average exchange rates for the year ended 25 April 2009 and year ended 26 April 2008 respectively.
2. Constant exchange growth for the 52 week period compared with the corresponding period last year is based on the weighted average exchange rates for the year ended 26 April 2008.

HMV UK & Ireland

HMV UK & Ireland, operating through 272 stores and online, traded well with total sales at statutory exchange rates up by 7.0%, including like for like sales up 1.9%. The year was characterised by significant volatility in HMV's markets, with a solid first half being followed by difficult conditions as the credit crisis deepened, leading to the failure before Christmas of Woolworths, followed by specialist competitor Zavvi. Total sales growth was boosted by: the acquisition of 19 ex-Zavvi stores (14 in the UK, five in Ireland) from the administrator for £2.0m, including stock; a further six former Zavvi stores secured directly from landlords; and a strong contribution from seven Fopp stores acquired plus one new opening in the prior period. Like for like sales performance further benefited from underlying market share gains, the withdrawal from the market of significant retail capacity and continuing growth in hmv.com.

Market share increased in all product categories. Games and technology continued to be the key growth category in the period accounting for 24% of HMV's sales, up from 20% in the prior period. In a buoyant games market, HMV gained 0.4% share, and sales performance also benefited from the successful roll-out from the Autumn of the 'Re/Play' pre-played games offer. In music (28% of sales), the market was more robust than anticipated, down only 3.4% in volume, with HMV gaining 2.5% of market share. In the visual category (45% of sales), HMV increased share by 1.2% in a market in which volume grew 2.4%.

Gross margin rate was maintained year on year, as rate improvements offset the increased mix of lower margin products. With operating costs well controlled, including the delivery of planned strategic cost saving initiatives, operating profit increased by 29.6% to £53.7m, with the operating margin up to 4.7% from 3.8%.

Non-cash exceptional impairment costs of £2.1m have been charged in the period, partially offset by a £0.9m reversal of previous asset impairments, following a review of the carrying value of certain assets in the current market trading conditions. In addition, an exceptional past service credit of £3.5m has been reflected in the income statement due to changes in benefits receivable under the Group's defined benefit pension scheme.

HMV International

HMV International now comprises 129 HMV stores in Canada and seven stores in Hong Kong and Singapore, with HMV's business in Japan sold in August 2007 and disclosed as a discontinued operation in the comparative period.

Sales were £253.8m, a decrease of 0.5% on last year at constant exchange rates, including like for like sales down 3.4%. Total reported sales growth was 9.6%, reflecting beneficial exchange rate movements. The year reflected a solid first half performance, with like for like sales up 1.7%, followed by a significant deterioration in trading conditions as the world-wide economic crisis impacted, particularly in Hong Kong and Singapore, where our largest stores are located in the financial district.

Market share performance was strong throughout, albeit against weak underlying markets, particularly music. The sales strategy has focused on developing the games and technology offer (up to 12% of sales from 7%) to reduce the historically high mix of music sales, which remain 38% of sales (from 43%). Visual sales remain the predominant category, at 46% of the mix and continue to evolve towards the growing Blu-ray format.

During the period HMV Canada opened eight stores and resited a further five stores. One store was closed in Hong Kong.

Overall, the operating profit of HMV International fell to £6.4m, reflecting the like for like sales decline and the higher mix of lower margin products, offset by tight control of operating costs. In addition, exceptional non-cash impairment costs of £2.2m have been charged following a review of certain assets in current market trading conditions.

Waterstone's

Waterstone's total sales decreased by 3.6% for the period at constant exchange rates, including a like for like sales decline of 3.8% (3.0% after adjusting for the prior year release of Harry Potter and the Deathly Hallows). The sales performance reflected a challenging and highly competitive book market, which contracted by 2% (after adjusting for Harry Potter). Waterstone's share of the high street market grew, reflecting in part the success of the multi-channel loyalty scheme, which had 2.8 million members by the period end. The loyalty scheme also contributed to a 60% growth in sales for waterstones.com, though its current share of a fast-growing online market resulted in an overall 0.4% dilution of total market share.

Waterstone's operating profit of £10.0m was £6.3m lower than last year, reflecting the sales decline, a 10 basis points reduction in gross margin due to the higher mix of online sales, and £2.0m of book hub start-up costs, partially offset by cost control measures, including bonus savings.

Exceptional store closure costs of £1.6m (2008: £4.6m) were incurred in connection with the review of the combined store portfolio following the acquisition of Ottakar's and a further £2.3m has been charged to exceptional costs for restructuring due to the implementation of the book hub. Offsetting these costs is an exceptional credit of £2.1m due to changes in benefits receivable under the Group's defined benefit pension scheme.

During the period, three new stores were opened, eight former Books Etc stores were integrated into the portfolio, and 10 stores closed, resulting in a total estate of 314 stores at the end of the period.

Net finance charges

Net finance costs decreased from £9.6m to £7.3m. This reflected lower market rates offset by a higher interest margin as a result of the new revolving credit facility agreed in October 2008 (see net debt below), and reduced average net debt due to the annualisation of the disposal of HMV Japan in August 2007.

Following the refinancing, associated arrangement fees of £1.1m have been capitalised and will be amortised over the three year facility term.

Taxation

The effective tax rate on continuing operations before exceptional items is 28% (2008: 28%). The total tax expense in the current year includes a credit of £0.5m (2008: £1.1m) in relation to the exceptional items from continuing operations of £1.7m (2008: £4.6m). The prior period also included a charge of £0.9m in relation to the profit on disposal of HMV Japan.

Earnings per share

Adjusted earnings per share from continuing operations, excluding the effect of exceptional items was 11.1p, an increase of 10.3% on last year. Basic earnings per share was 10.8p, compared with 22.1p in 2008, which included the 12.9p per share profit on disposal of HMV Japan.

Dividend

The Board is recommending a final dividend of 5.6p per share in addition to the 1.8p per share interim dividend already paid, bringing the total dividend for the year to 7.4p (2008: 7.4p). By maintaining the dividend level, dividend cover has increased to 1.50x from 1.37x.

Subject to shareholder approval at the Annual General Meeting on 3 September 2009, the final dividend will be paid on 13 October 2009 to shareholders on the register at the close of business on 4 September 2009. Shares will be quoted ex-dividend from 2 September 2009.

Cash flow and net debt

Closing net debt of £6.5m was £6.3m higher than last year. This reflected increased capital investment, higher tax payments and a working capital outflow. Free cash inflow was £12.3m (2008: £87.4m).

	2009 £m	2008 £m
EBITDA1	112.9	108.1
Capital expenditure2	(57.6)	(36.8)
Working capital (outflow) inflow	(15.6)	36.6
Exceptional charges and provision utilisation	(2.8)	(6.1)
Other	1.3	4.2
Net interest paid	(6.6)	(9.3)
Taxation	(19.3)	(9.3)
Free cash flow	12.3	87.4
Net proceeds from equity share placing/disposal of HMV Japan	24.0	65.9
Investment in joint venture	(20.0)	–
Dividends paid	(29.7)	(29.8)
Other	7.1	6.9
Net cash (outflow) inflow	(6.3)	130.4
Underlying opening net debt	(0.2)	(130.6)
Underlying closing net debt	(6.5)	(0.2)

1. EBITDA is earnings before interest, taxation, depreciation, amortisation and exceptional items.
2. Capital expenditure includes £6.1m (2008: £nil) of assets purchased using finance lease funding.

The Group has secured funding to September 2011 via a new £220m revolving credit facility, which the Board believes is adequate to meet current cash requirements. Reflecting current credit markets, margin for the new facility increased to 250bps from 175bps. There are no changes to banking covenants associated with the new facility. As a result of the refinancing, fees of £1.1m were incurred and will be amortised over the three-year term.

Working capital

Working capital outflow of £15.6m (2008: inflow of £36.6m) reflects the reversal of favourable payment timing differences at the prior year end. Stock levels were well managed, down 4.5% on a comparable per sq ft basis. However, reflecting the sales performance, group stock turn fell to 5.4 times (2008: 5.6 times).

Capital expenditure

Capital expenditure in the period was £57.6m (2008: £36.8m). This included one-off investment of £11.3m on supply chain projects, £6.1m of which was finance lease funded. Underlying capital spend reflected £13.9m on new stores and resites, £12.4m on store refurbishment, and £9.6m on IT projects, including e-commerce development.

Mean Fiddler Group – joint venture

In January 2009, the Group acquired 50% of the Mean Fiddler Group, a 50:50 joint venture with MAMA Group plc, which operates live music and entertainment venues in the UK. The transaction required the Group to make an initial cash investment of £20.0m (including fees), with up to £3.3m further consideration payable or refundable based on an assessment of the joint venture's EBITDA for the year to October 2009. The investment included a £5.5m loan note granted by the joint venture to each partner, which converts to Ordinary Shares if not redeemed by 20 July 2009, subject to further extension. The Group's share of Mean Fiddler Group's post tax income in the period since acquisition amounted to £0.2m.

Equity placing

On 15 January 2009 in order to fund the Mean Fiddler Group acquisition outlined above, together with the purchase of ex-Zavvi stores, the Group conducted a placing of 20,168,524 Ordinary Shares, representing 5% of equity share capital. The net proceeds raised from the placing, after fees incurred, were £24.0m.

Discontinued operation

The Group completed the disposal of its HMV Japan business on 25 August 2007 for £70.6m on a cash and debt free basis, giving rise to a post-tax profit on disposal of £51.8m. Prior to disposal, HMV Japan made a loss after tax of £0.1m, giving a total profit after tax for discontinued operations of £51.7m.

The results of HMV Japan have been presented as comparative figures in the income statement as a discontinued operation.

Operating leases

All the Group's stores are held under operating leases. In HMV UK and Waterstone's the majority of leases are on typical institutional lease terms, which are subject to five year upwards only rent reviews. The majority of the Group's international stores and a minority of UK leases operate through turnover related leases, usually with minimum rent guarantees, and lease terms of five to 10 years.

The Group's net operating lease rentals were £154.3m in the financial year (2008: £151.1m). The total future rental commitment at the balance sheet date amounted to £1.2bn, or £0.8bn at net present value, while the existing portfolio has an average remaining lease period of 10 years. Retaining a portfolio of good quality real estate, in prime retail areas, at commercially reasonable rates remains critical to the performance of the Group. Where a store location becomes surplus to requirements, the Group's policy of occupying prime, highly marketable locations serves to limit any lease exposure.

Pensions

The Group has a number of pension schemes in operation. These primarily include various defined contribution arrangements and a defined benefit scheme for approximately 600 employees which was generally closed to new joiners from 1 January 2002.

In respect of the defined benefit scheme, the latest actuarial valuation as at 30 June 2007 was finalised during the year. The result of the valuation was a level of asset cover of 94%, representing a funding deficit of £5.1m, which is being funded by three special contributions of £2.17m on 31 October 2008, 1 May 2009 and 1 May 2010. Inherent in the valuation, were a number of scheme changes, including a cap on future increases to pensionable salaries and pensions and increases to employee contribution rates. The Company has also taken direct responsibility for the administrative costs of the scheme.

Under IAS 19 'Employee Benefits', the HMV defined benefit scheme had a deficit, net of deferred tax, of £15.2m (2008: £11.8m) at 25 April 2009. The changes to future benefits noted above in the form of a cap on pensionable pay increases resulted in a reduction in the liability of £5.6m which has been recognised in the income statement as a past service cost exceptional credit.