GAME Digital PLC Year-end Trading and Business Update (7123O)

TIDMGMD

RNS Number : 7123O

GAME Digital PLC

23 August 2017

23 August 2017

GAME DIGITAL PLC

Year-end Trading and Business Update

GAME Digital plc ("GAME" or the "Group") today provides an update on trading for the 52 week period ended 29 July 2017 and recent key business developments ahead of entering its year end close period. Unless otherwise stated, second half and full year figures are compared to the 26 week and 52 week period to 23 July 2016 respectively in the prior year period.

H2 & FULL YEAR GROUP PERFORMANCE

 
 H2 (26 weeks) to 29               UK         Spain       Group 
  July 2017 
------------------------  -----------  ------------  ---------- 
 Retail Market, YoY 
  % change(*)                   +8.8%   +26.4%(***)   +13.8%(^) 
========================  ===========  ============  ========== 
 GAME Gross Transaction 
  Value, YoY % change      (1.3)%(**)   +23.1%(***)       +6.8% 
========================  ===========  ============  ========== 
 
 
 Full Year to 29 July               UK         Spain      Group 
  2017 
------------------------  ------------  ------------  --------- 
 Retail Market, YoY 
  % change(*)                   (6.8)%   +22.4%(***)   +0.1%(^) 
========================  ============  ============  ========= 
 GAME Gross Transaction 
  Value, YoY % change      (12.1)%(**)   +22.7%(***)     (2.3)% 
========================  ============  ============  ========= 
 

Note:

* Source: GfK Chart-Track; based on value of retail sales of mint console hardware, software, digital and accessories for 52 weeks ended 29 July 2017

** UK includes both UK Retail and UK Esports, Events & Digital (E,E&D) sales

*** Converted into sterling equivalent

(^) UK and Spanish markets combined

As reported in the Group's trading update on 30 June 2017, following the launch of the Nintendo Switch(TM) console in March 2017, both the UK and Spanish video games markets have experienced growth, with total mint market sales in the second half up 8.8% and 15.7% respectively in the UK and Spain, in local currencies. Adjusting for the impact of a weaker Pound, the Spanish market rose 26.4% in Sterling terms.

Against this backdrop, the Group's total Gross Transaction Value(1) ("GTV") rose 6.8% in the second half, to GBP325.4 million (H2 2016: GBP304.6 million) which resulted in total GTV for the full year to 29 July 2017 of GBP891.7 million (2016: GBP912.6 million). On a statutory basis, Group revenues for the 52 weeks ended 29 July 2017 are expected to be approximately GBP780 million (53 weeks ended 30 July 2016: GBP822.5 million).

The Group has continued to maintain a highly-disciplined approach to both working capital and cash management and given the recent improved sales performance expects to report an increased year end cash position (net of overdrafts) of approximately GBP47 million (2016: GBP43.1 million). In addition to this positive net cash balance, as at the year end the Group had access to combined facilities across the UK and Spain of over GBP77 million.

OPERATIONAL UPDATE

The Group continues to focus on delivering the UK Action Plan, initiated in January 2016 to address the challenges faced in its core console markets in the UK. Further encouraging progress has been made in the second half delivering on key strategic initiatives and realising cost efficiencies.

In particular, significant focus has been placed on reducing fixed and variable costs across the Group's UK retail footprint, where it has over 220 lease events to manage by the end of 2018 (out of a total UK footprint of 306 at year end). In aggregate, across these property and other operational efficiencies, the Group expects to deliver a total cost reduction of approximately GBP5 million across its UK retail operations compared with last year, before absorbing the impact of statutory increases in staff costs.

STRATEGIC UPDATE

Given the encouraging early performance and significant potential of the Group's esports activities, including the first 18 retail concepts now in operation under the BELONG(TM) brand, the Board has recently undertaken a review of all business areas across the Group. Following this review the Board has prioritised the further development of the Group's experience based gaming proposition and esports activities and, consequently, the Board has taken the decision to evaluate strategic options for the Group's digital enterprise activities, including Multiplay's Digital division. It is intended that the Group will focus management and capital resources on the acceleration of the development of the esports and live gaming initiatives and maximise the performance of the core multi-channel retail businesses.

Accordingly, the Group is continuing to develop Multiplay's Events and Esports activities, including the Insomnia gaming festival, and has recently commenced a review to maximise shareholder value in respect of Multiplay's Digital business. Having acquired Multiplay in March 2015, the Group has further developed both the Digital division, comprising its multiplayer game server-hosting technology, and the Events and Esports activities, encompassing major gaming and esports events and the new BELONG concept. Benefiting from this development both divisions have independently delivered significant revenue growth over the last twelve months. Multiplay's Digital sales have more than doubled, from GBP2.1 million to GBP4.5 million, whilst Multiplay's Events and Esports sales have increased almost 50%, from GBP4.8 million to GBP7.1 million. Last year, the Multiplay Events and Esports business was relocated and its integration into the core GAME business has commenced. Multiplay's Digital division remains a separate business unit, based in the New Forest, Hampshire.

Martyn Gibbs, Chief Executive Officer of GAME Digital, commented:

"GAME has made further progress in the second half of the year as we continue to focus on developing our strategic initiatives whilst creating a new cost base for our UK retail business to address the challenges in the UK console market.

"We have been encouraged by the recent growth in both the UK and Spanish markets overall and we expect that this momentum will continue into peak trading driven by the benefits of continued customer demand for the Nintendo Switch(TM) , the launch of Microsoft's Xbox One X and a strong line up of new games releases.

"GAME has now opened 18 BELONG(TM) arenas, and we have seen encouraging early performance. We have reviewed our operations and are now accelerating development plans as we seek to fully capitalise on the strong growth potential in our exciting and growing esports activities."

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      [phone] 
 Grant Ringshaw 
  Jos Bieneman 
 

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 reward 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. Adjusted EBITDA is a non-IFRS measure defined by the Group as operating profit before tax, depreciation, amortisation, net finance costs, exceptional and adjusting items.

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014

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 or may not 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

Listed on the London Stock Exchange in June 2014, GAME Digital plc is dedicated to delivering an authoritative range of specialist gaming products and services to the gaming communities of the UK and Spain and beyond, providing more ways for gamers to enjoy more games and unique gaming experiences, more often. GAME's UK and Spanish retail businesses are the market leaders in those geographical areas, operating a total of over 570 stores across the two areas, a fully integrated omni-channel offer including the multi-award winning GAME App, and a reach of more than 17 million customers across its Reward programmes. Multiplay Events and Esports delivers unparalleled gaming events and experiences directly and on behalf of third parties, including its flagship consumer event, Insomnia, the UK's largest gaming festival. For more information please visit www.gamedigitalplc.com.

This information is provided by RNS

The company news service from the London Stock Exchange

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