GAME Digital PLC AGM Statement and Trading Update (3956U)

TIDMGMD

RNS Number : 3956U

GAME Digital PLC

18 January 2017

18 January 2017

GAME Digital PLC

AGM Statement and Trading Update

GAME Digital plc ("GAME Digital" or the "Group") is today providing an update on trading ahead of the Group's Annual General Meeting to be held at 11.00 a.m. today.

Group Gross Transaction Value(1) ("GTV") performance for the 3 week Christmas period and 23 week trading period ended 7 January 2017 was as follows:

 
                      3 weeks to    23 weeks to 
                       7 January     7 January 
                          2017          2017 
-------------------  ------------  ------------ 
                      GTV Growth,   GTV Growth, 
                           %             % 
-------------------  ------------  ------------ 
 Group                       -1.6          -6.3 
-------------------  ------------  ------------ 
 Group (ex. lower 
  margin hardware)           +2.0          +0.7 
-------------------  ------------  ------------ 
 Events, Esports & 
  Digital(2)                  n/a         +80.0 
-------------------  ------------  ------------ 
 

Group Headlines

-- Group GTV over the peak Christmas trading weeks was down 1.6%. Over the first 23 trading weeks of the year, to 7 January 2017, GTV declined 6.3%

o Excluding lower margin hardware, Group GTV rose 2.0% in the key three week Christmas trading period, with GTV up 0.7% over the 23 week period

o Strong growth was achieved in the Group's new retail categories(3) (including digital content, PC gaming accessories and virtual reality (VR) headsets), with GTV up 31% in the 23 week period

-- The first seven in-store gaming arenas have been successfully launched in the UK under the Group's new BELONG(TM) brand, with encouraging early results across pay to play gaming, VR and PC category sales

-- Plans are underway to extend the roll out of BELONG(TM) , with up to a further 20 in-store gaming arenas to be opened during the second half. Incremental costs of up to cGBP2 million are anticipated in the second half to support these openings, including pre-opening disruption and central costs, plus additional marketing support

-- Consistent with its plans, the Group expects to realise core operational efficiencies and cost savings of over GBP5 million in the first half across its UK retail operations

-- Continued strong liquidity, with Group cash (net of overdrafts) on 7 January 2017 of GBP68 million (2016: GBP105 million), with access to aggregated facilities of approximately GBP100 million across the UK and Spain (2016: GBP60 million)

-- Strong customer pre-orders building for the forthcoming Nintendo Switch(TM) console, launching on 3 March 2017 in both territories

Divisional Trading Performance

Retail: UK & Spain

-- As expected, console gaming markets have continued to experience the impact of a further softening of demand as the industry entered its fourth year since the launch of the latest generation of Xbox and PlayStation consoles

-- In addition, despite some strong new releases in the period such as Pokémon Sun & Moon, a weaker overall year on year performance was delivered from new titles released in the period

-- These market dynamics continue to be more pronounced in the UK, contributing to an 18.3% decline in our UK Retail GTV over the 23 week period to 7 January 2017

-- In Spain, GTV rose 8.5% in local currency over the 23 week period to 7 January 2017. After the effects of a weaker pound, Spanish GTV rose 29.0% in sterling terms over the corresponding period

-- Trading over the key Christmas trading weeks, as well as the Black Friday period, was well executed and in line with the Group's expectations

-- The Group continues to focus on the diversification of its retail businesses through the development of adjacent growth categories with a strong appeal to its customer demographic, including preowned phones and tablets, digital content, PC accessories, VR devices and licensed merchandise. In aggregate, sales of these new areas grew 31% in the 23 week period to 7 January 2017 and contributed over 30% of Group GTV

-- The Group's gross margins have continued to benefit from the shift to higher margin sales categories. This resulted in an over 30 basis point improvement to the Group's gross trading margin(4) in the 23 week period to 7 January 2017

Events, Esports & Digital

-- Sales from the Group's newer Events, Esports and Digital businesses grew a combined 80% over the period

-- Both the digital and events businesses saw strong growth over the period, with new digital service arrangements being brought into operation and new and larger events successfully organised

Costs, Cash and Facilities

-- The Group continues to focus on optimising its organisational efficiency, as outlined in the UK Action Plan last year

-- In total, overall efficiencies and savings of over GBP5 million are expected to be realised in the first half, across the Group's UK retail operations including:

o efficiencies and savings of over GBP2 million in store and online controllable costs, after absorbing additional inflation including the effects of the national living wage

o distribution savings and efficiencies totalling over GBP1 million

o savings of approximately GBP1 million in property related costs, including store rents

o efficiencies, procurement benefits and other savings of over GBP1 million in marketing

-- The Group continues to carefully manage its stock, working capital and cash position, and expects to end the first half with an improved stock position year on year and a strong balance sheet

-- Group cash (net of overdrafts) on 7 January 2017 totalled GBP68 million (2016: GBP105 million), with access to aggregated facilities of approximately GBP100 million across the UK and Spain (2016: GBP60 million)

Commenting, Martyn Gibbs, GAME Digital Chief Executive Officer, said:

"I would like to thank our 5,000 colleagues across the UK and Spain, for their continued hard work and dedication at our busiest time of year as well as our supplier partners for their ongoing support in helping us to deliver the ultimate specialist gaming proposition for our customers and gaming communities.

"Trading conditions in the UK video games market remain tough, with lower console sales, and we continue to take appropriate actions to respond to these market dynamics and to reposition and transform the business. Overall demand for new games released in the period was lower than expected but we were pleased with the Group's performance over the peak weeks of Black Friday and Christmas, with GTV excluding lower margin hardware sales up 2% year on year. Furthermore, over the period we continued to deliver significant operational efficiencies and cost savings whilst achieving strong growth in our new retail categories and new businesses. We remain focused on achieving further progress against these key strategic priorities in the year ahead.

"We have been pleased with the customer reaction and initial performance of our new in-store gaming arenas, under our new BELONG(TM) brand. We have also continued to see the broadening of our partner base and growing support for this strategic initiative. As a result, we have taken the decision to extend the roll out of this exciting new proposition, ensuring that we can bring the opportunity to play, experience and compete through us, both in store and online, to as many gaming fans as possible.

"Looking ahead, we are encouraged by the strong consumer anticipation which is building for the launch of the Nintendo Switch(TM) console in March this year, and beyond that to the launch of Xbox's Project Scorpio later in the year. We expect these new consoles to drive interest and activity in our core console markets, as well as open up new growth opportunities for our business."

The Group will announce its half year results on 29 March 2017.

Enquiries:

   GAME Digital plc                  [phone] 
   Martyn Gibbs                           Chief Executive Officer 
   Mark Gifford                             Chief Financial Officer 
   James Staveley                        Investor Relations & Corporate Development Director 

Citigate Dewe Rogerson

   Grant Ringshaw                      [phone] 
   Jos Bieneman                         [phone] 

Notes:

1. Gross Transaction Value is a non-IFRS measure defined as total retail receipts excluding VAT and before the deduction of revenue deferral relating to loyalty points. Gross Transaction Value reflects the full sales value of digital sales, agency sales (including sales by business partners on GAME's Marketplace website), warranties and other similar arrangements and thereby includes the publishers' and sellers' shares of those transactions. Gross Transaction Value provides the most reliable measure of activity in an environment where more sales are expected to move from physical to digital

2. Events, Esports and Digital is a reporting segment combining sales of acquired businesses operating within these areas, comprising Multiplay (UK) Limited, Ads Reality Limited and SocialNat

3. New retail categories comprise: preowned technology products, digital content, PC and other non-console accessory and peripheral products, virtual reality devices, licensed merchandise and services, as well as marketplace and other non-console related product sales

4. Gross trading margin is calculated by dividing gross margin by GTV. Gross margin is gross profit before the deduction of revenue deferral relating to reward points, adjustments for slow-moving inventory and shrinkage provisions, other margin adjustments and supplier rebate income

Forward Looking Statements

This announcement contains certain forward-looking statements which have been made by the Directors in good faith using information available up until the date they approved the announcement. Forward-looking statements should be regarded with caution as by their nature such statements involve risk and uncertainties relating to events and circumstances that may occur in the future. Actual results may differ from those expressed in such statements, depending on the outcome of these uncertain future events.

Notes to editors

GAME Digital plc is a leading gaming company, providing an authoritative range of gaming and gaming lifestyle products and services to customers. GAME's UK and Spanish retail businesses are the market leaders in those geographical areas, operating a total of 580 stores, a fully integrated omni-channel offer, and reaching more than 18 million consumers across its reward programmes. Through its esports and events activities the Group is delivering unparalleled consumer gaming experiences directly, and on behalf of third parties, including its flagship event, Insomnia, the UK's largest gaming festival. Across its digital businesses the Group is pioneering the use of new technologies to reach gamers and business partners outside its main markets. This is effected through Ads Reality Limited, the Group's visual recognition and augmented reality business and Multiplay, its specialist game server hosting business. For more information please visit www.gamedigitalplc.com, www.multiplay.com or www.adsreality.com.

This announcement constitutes inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 ("MAR").

This information is provided by RNS

The company news service from the London Stock Exchange

END

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January 18, 2017 02:00 ET (07:00 GMT)