Shares in HMV were up over six per cent on the FTSE Small Cap and are a "cautious buy", ahead of tomorrow's preliminary results for the full year.

In April the group, which owns Waterstone's bookstores as well as the HMV chain, saw like for like sales drop in Britain and Ireland by 13.2 per cent in the quarter. The poor performance was attributed to poor weather, fewer marketing campaigns and competition from supermarkets.

Following the results HMV shares were downgraded from "buy" to "neutral" by Goldman Sachs.

Despite this there were signs of improvement in HMV's Waterstone's stores and the group has started to break into the live music ticketing business.

Keith Bowman, analyst at Hargreaves Lansdown, said, "On balance, with a revamping of the group's Waterstone's business showing some positive signs and the group's move into live music and ticket offerings still in its infancy, market consensus currently denotes a cautious buy".

By 16:29 shares in HMV were up 6.10 per cent to 56.50 pence per share.