British market-leading music and entertainment retail chain HMV Group Plc achieved a 25% rise in annual profit during the first year of its transformation strategy, and is now "ahead of where we expected to be," according to its CEO Simon Fox.

"We still have much to do," admits Fox, "and whilst we are mindful of the challenging economic outlook, the current financial year has started in line with our expectations and I remain confident that we are building a better and stronger business that can prosper in a rapidly-changing market."

Fox's comments came in a statement issued today to the London Stock Exchange, which accompanied an announcement on the departure this September of the retailer's chairman Carl Symon.

Despite the solid results, stock in HMV today dropped 13% in afternoon trading to 112.50 pence.

Fox is leading HMV through a three-year turnaround plan, at the core of which is a cost-cutting aimed at saving £40 million ($77.2 million) per year by 2010. The review also involves the rollout of "next generation" stores, an overhaul of HMV's online presence, and the introduction of its own social networking site,

That strategic plan, announced in March 2007, is ahead of expectations and is starting to pay off.

Revenue during the 2007 period reached £1.936 billion ($3.86 billion), up from £1.894 billion ($3.77 billion).

The London-based retailer recorded profit before tax and exceptional items of £56.6 million ($112 million), up 25.2% from the previous figure of £45.2 million ($90 million).

The engine-room for HMV's empire, the 250-store U.K. and Ireland business, had a "very good year" which saw year-on-year sales growth of 15.8% to £1.079 billion ($2.15 billion), on a like-for-like improvement of 11.4%. The division generated operating profit of £41.4 million ($82.5 million) before exceptional items, against £24.3 million ($48.46 million), with gains reported across music, DVD and particularly games.

HMV's international business reported year-on-year growth of 7.6% to £231.6 million ($461 million), and a like-for-like sales decline of 1.3%. Operating profit at HMV International declined to £8.5 million ($16.9 million) from £13.4 million ($26 million). The chain's international business incorporates 121 HMV stores in Canada and eight stores in Hong Kong and Singapore,

The company's next trading update will be issued Sept. 5 at the HMV annual general meeting. During the meeting, the retailer's chairman since early 2006, Symon, will officially step down. A successor will be announced in due course.