AILING retailer HMV revealed the details of a painful year in which bottom-line profits slumped to £2.6m.

The group, which sold its Waterstone’s book chain and Canadian business to buy some breathing space in its battle for survival, said the surplus for the year to April 30 compared with £67.3m the previous year. Underlying profits slumped by 61% to £28.9m.

Group sales declined by 7% to £1.9bn, while like-for-like sales at its 266 HMV and Fopp stores in the UK and Ireland were down by 14.8% after being squeezed by weaker consumer spending and competition from internet downloads and supermarkets.

HMV said that it continues to operate in a challenging environment and the core markets in which it trades remain difficult.

However, the group said it is now on a more even keel following the sale of the two businesses, which raised a total of £55m.

It has launched a new strategy to rescue the business by broadening its range to sell more electronic gadgets such as iPods, MP3 players and tablet computers alongside its range of music.

Following an encouraging trial of the new range in six stores, it plans to roll out the format to 150 stores by its key Christmas trading period.

HMV also plans to build up its live entertainment and ticket business, which operates 12 venues in the UK, including through the opening of a 1,500-capacity venue in Manchester in the autumn.

It has been a torrid year for the group after a poor Christmas followed by continued weak trading in 2011 led the group to issue four profits warnings.

Earlier this year, it admitted it was in danger of breaching its banking covenants, but secured a £220m refinancing deal on the condition it sold Waterstone’s to help it pay down some of its debt pile.