Struggling British music and DVD retailer HMV, which has been selling off assets in a bid to secure its future, said trading conditions were set to remain tough as it posted a 61 per cent drop in annual profit.

The 90-year-old group, which has issued four profit warnings this year, said today it made a profit before tax and one-off items of £28.9 million in the 53 weeks to April 30th, in line with its latest guidance.

After tax and non-cash impairments charges from the assets it has sold, it plunged to a loss of £121.7 million.

HMV has been struggling for years with the rise of digital downloading and cut-price competition from supermarkets.

Its problems have come to a head this year with a downturn in consumer spending which has driven a string of retailers, including Focus DIY and Jane Norman, out of business, and led others such as chocolatier Thorntons to close stores.

HMV, which is trying to switch its emphasis to faster-growing markets such as new technology products, live music and event ticketing, secured its immediate future this month with a £220 million refinancing deal with its banks.

It has also sold its Waterstone's books chain and its Canadian arm to cut debts.

"We continue to operate in a challenging macro environment, and the core retail markets in which HMV trades also remain difficult," it said. "However, we have taken decisive action to restructure the group, and have a clear strategy for transforming HMV into a broad-based entertainment business."

HMV shares, down 78 per cent over the past year, closed at 10 pence yesterday, valuing the firm at £48.5 million.

Reuters