Overview: Introduction

We made good progress in Year Two of our three-year transformation plan, by continuing to revitalise our stores business, drive growth from new channels and generate substantial cost savings through Group efficiencies.

Cognisant that we must adapt with the structural changes taking place in our core entertainment categories, HMV's product offering has further evolved. To support these initiatives, we have continued to enhance the appeal of our stores and the way in which our brand engages with customers. Significant changes to the competitive structure of the UK entertainment market have created new opportunities for HMV, which we are making every effort to maximise over the medium and long term.

Waterstone's loyalty programme has rapidly achieved meaningful scale, enriching the knowledge we have about our customers and the quality of our relationships with them. Furthermore, our ranges of complementary and related products are being successfully extended.

Our brands have a rapidly growing presence online, where we have enhanced the service, content and communication provided to customers. We have progressed our digital offerings in music as well as books, and are positioning ourselves to grow faster in these and other categories.

We have maintained our focus to drive significant cost savings by working more efficiently as a Group and with our business partners.

In a tough economy, the Group's financial performance this year has been pleasing. We have made good progress on current strategy, whilst taking our first steps beyond the transformation plan. We expect to unfold new initiatives for successful long-term growth, and remain resolute about achieving our current objectives.