TIDMGMD
RNS Number : 5101W
GAME Digital PLC
15 November 2017
15 November 2017
GAME DIGITAL PLC
Final results for the 52 weeks ended 29 July 2017
GAME Digital plc ("GAME" or the "Group") today announces its
final results for the 52-week period ended 29 July 2017 (the
"period"). Throughout this announcement, unless otherwise stated,
year on year changes will refer to the unaudited 52-week prior year
period to 23 July 2016, to provide more meaningful comparison.
52 weeks 52 weeks 53 weeks
ended ended ended
29 July 23 July 30 July
2017 2016 2016
All figures in GBPm (audited) (restated^) (restated^)
(unless stated) (unaudited) % Change (audited)
================================ =========== ============== =========== =============
Statutory measures
Revenue 782.9 812.5 (3.6) 821.9
Gross profit 205.1 217.4 (5.7) 220.1
Gross profit margin 26.2% 26.8% (0.6%)pts 26.8%
(Loss)/Profit before
tax (10.0) 1.1 nm 1.9
Net cash from operating
activities 7.7 4.5 64.4 4.5
Basic (loss)/earnings
per share (7.1p) 1.5p nm 1.9p
Final dividend per
share - 1.75p nm 1.75p
================================ =========== ============== =========== =============
Selected non-IFRS
measures
Gross Transaction
Value (GTV)(1) 891.0 912.6 (2.4) 923.3
GTV excluding Hardware 716.8 710.3 0.9 719.1
GTV of Digital &
Non-console(2) retail
categories 236.8 191.3 23.8 194.4
GTV of Events, Esports
& Digital 13.2 6.1 116.4 6.1
Group Adjusted EBITDA(3) 8.0 25.6 (68.8) 26.4
Adjusted EBITDA -
Core Retail 14.0 28.7 (51.2) 29.5
Adjusted EBITDA -
Events, Esports and
Digital (6.0) (3.1) (93.5) (3.1)
Adjusted (loss)/profit
before tax(4) (4.3) 14.0 nm 14.8
Adjusted basic (loss)/earnings
per share (EPS)(5) (3.8p) 7.8p nm 8.2p
Net cash(6) 47.2 43.1 9.5 43.1
-------------------------------- ----------- -------------- ----------- -------------
Financial Headlines
-- Group GTV of GBP891.0 million, down 2.4% year-on-year,
although up 6.6% in H2
o Excluding lower margin hardware, Group GTV grew
0.9% year-on-year
-- Group Adjusted EBITDA of GBP8.0 million (2016:
GBP25.6 million)
-- Core Retail Adjusted EBITDA of GBP14.0 million
(2016: GBP28.7 million)
o UK Retail performance impacted by a challenging
market in the period, particularly in the first
half, with a weaker line up of new game launches
compared with the prior year and under performance
of a key new release
o Positive performance in Spain, with reported
(sterling) GTV and Adjusted EBITDA up 22.5% and
10.9% respectively
o Launched a transformation programme to improve
customer focus and competitiveness
-- Events, Esports and Digital EBITDA loss of GBP6.0
million (2016: GBP3.1 million), reflecting investments
made in the period to support significant planned
future growth
-- Strong balance sheet maintained, with Group net
cash6 of GBP47.2 million at year end (2016: GBP43.1
million) and access to aggregated facilities of
up to c.GBP77 million across the UK and Spain
o During October, short term Spanish facilities
increased to EUR40.6 million (EUR30.0 million
at 29 July 2017)
-- Commitment to increase investment in the Group's
new gaming concepts and UK store optimisation programme
and as a result no final dividend has been proposed
Operational and Strategic Headlines
-- Retained market leading positions in the UK and
Spain, with total active loyalty customers of over
4.5 million across the Group (2016: 4.5 million)
o Key role and leading share for the successful
launch of the Nintendo Switch(TM) in both territories
in March, which has driven a return to growth
across the UK and Spanish console markets
-- Continued diversification of the Group's retail
sales achieved in the year, with Digital and Non-console
retail category GTV growth of 23.8%, to GBP236.8
million (2016: GBP191.3 million)
-- Strong growth achieved from the Group's esports,
live gaming and digital activities, with GTV from
these areas (Events, Esports and Digital) up 116.4%,
to GBP13.2 million
-- 18 BELONGTM gaming areas opened in the UK to date,
delivering encouraging results across pay-to-play
gaming, PC, VR, confectionery and drink category
sales and core console categories. Targeting 35
BELONG arenas by the end of FY17/18
-- UK Retail operational efficiencies and cost savings
of over GBP11 million achieved during the
o Business set to continue to benefit from flexible
lease structure, with 221 lease events planned
for by the end of 2018, c75% of our total UK
store base
o Maintaining lease flexibility with average length
to break of 0.9 years
o New retail concession trials and other collaboration
opportunities underway
-- Strategic review of Multiplay Digital, announced
in August 2017, with sales process commenced and
progressing well
Current Trading
Trading for the first 15 weeks of the year has been ahead of
Group plans, with Group Retail GTV up 5.4%. GTV in both UK and
Spain are up on last year 1.8% and 9.2% respectively in local
currencies reflecting the benefits of Nintendo Switch, the recent
launch of Xbox One X and a stronger performance from new game
releases this year. Over the same 15 week period, mint sales in UK
and Spain are up on last year 8.8% and 10.7% respectively.
Accordingly, at this early time in the year, the Board remains
comfortable, alongside all the strategic initiatives moving
forward, with the prospects of the Group in the future.
Martyn Gibbs, Chief Executive Officer, said:
"Though our markets remained volatile last year, we made solid
strategic progress as we continued to focus on those elements
within our control; delivering on each of the four pillars of our
strategy and creating a new cost base for our UK retail
business.
"We have now opened 18 BELONG venues, 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 the growing esports
market.
"After 2 years of declines, our core UK console market returned
to growth in the second half of our financial year on the back of
the launch of the Nintendo Switch. This growth has continued into
our new financial year in both of our key territories. Whilst we
remain mindful of the structural headwinds that remain in our core
markets, we expect recent positive market dynamics to continue into
our peak Christmas trading period, driven by strong growth in all
elements of the PlayStation 4 category, continued customer demand
for the Nintendo Switch, the launch of Microsoft's Xbox One X and
continued stronger demand for related software.
"Against this market backdrop, our priorities remain unchanged.
Across the Group we are focussed on maximising the opportunities
from our core retail markets by delivering a compelling and
constantly improving customer proposition, realising further
operational efficiencies and driving the continued transformation
of the business, as we transition our business from a leading
retailer of boxed products to a leading provider of physical and
digital gaming products, services and experiences."
Results presentation
Management will be hosting a presentation for analysts and
investors at 9.30 a.m. today at Citigate Dewe Rogerson, 3 London
Wall Buildings, London Wall, EC2M 5SY. A live audio webcast of the
presentation will be available via the Company's website at
www.gamedigitalplc.com/investor-relations. A recording of the
presentation will be made available on www.gamedigitalplc.com later
today.
Enquiries
GAME Digital plc +44 (0) 1256 784 000
Martyn Gibbs Chief Executive Officer
Mark Gifford Chief Financial Officer
Citigate Dewe Rogerson +44 (0) 20 7638 9571
Jos Bieneman
Michael Russell
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 retail 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
(see note 3). 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. 'Digital and Non-console' categories include all digital
products, preowned technology products, PC and other non-console
accessory and peripheral products, virtual reality headsets,
licensed merchandise and services, as well as Marketplace.
3. 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 (see note 3).
4. The calculation of Adjusted profit before tax excludes all
exceptional and adjusting items (see note 8).
5. Adjusted basic earnings/(loss) per share is calculated as set out in note 8.
6. Net cash is cash at bank and in hand, net of overdrafts where relevant.
^ See note 2 of the financial statements for full details of the
adjustments made to the 2015/16 restated results.
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.
Notification of Home Member State
Following changes made to the Disclosure Rules and Transparency
Rules ("DTR") as a result of the Transparency Directive Amending
Directive (2013/50/EU), the Company is required to disclose its
Home State. Accordingly, pursuant to DTR 6.4.2, the Company
announces that its Home State is the United Kingdom.
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,
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 19 million
customers 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 Multiplay
Digital, its specialist game server hosting business and Ads
Reality, the Group's visual recognition and augmented reality
business.
For more information please visit:
www.gamedigitalplc.com, www.game.co.uk, www.game.es,
www.multiplay.com, www.insomniagamingfestival.com or
www.adsreality.com
You can view or download copies of this announcement and the
latest Half Year and Annual Report & Accounts from the Group's
corporate website at www.gamedigitalplc.com or request free printed
copies by corporate@game.co.uk.
This announcement constitutes inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 ("MAR").
SUMMARY OF FINANCIAL RESULTS
Figures in GBPm unless 52 weeks 53 weeks
indicated ended ended
Includes non-IFRS 52 weeks 23 July 30 July
measures ended 2016 2016
29 July 52 week
2017 (restated) change (restated)
(audited) (unaudited) % (audited)
------------------------------ ----------- ------------ ---------- -----------
Gross Transaction
Value (GTV)(1)
Core Retail: UK 562.0 648.7 (13.4%) 655.7
Core Retail: Spain 315.8 257.8 22.5% 261.5
Events, Esports and
Digital 13.2 6.1 116.4% 6.1
Group 891.0 912.6 (2.4%) 923.3
------------------------------ ----------- ------------ ---------- -----------
Revenue
Core Retail: UK 491.3 577.2 (14.9%) 583.3
Core Retail: Spain 278.4 229.1 21.5% 232.4
Events, Esports and
Digital 13.2 6.1 116.4% 6.1
------------------------------ ----------- ------------ ---------- -----------
Group 782.9 812.5 (3.6%) 821.9
------------------------------ ----------- ------------ ---------- -----------
Gross Profit, GBPm 205.1 217.4 (5.7%) 220.1
Gross Profit % 26.2% 26.8% (0.6%)pts 26.8%
------------------------------ ----------- ------------ ---------- -----------
Operating Costs before
depreciation, amortisation,
exceptional and adjusting
items 197.1 191.8 2.8% 193.7
------------------------------ ----------- ------------ ---------- -----------
Adjusted EBITDA(2)
Core Retail: UK 1.8 17.7 (89.8%) 18.5
Core Retail: Spain 12.2 11.0 10.9% 11.0
Events, Esports and
Digital (6.0) (3.1) (93.5%) (3.1)
------------------------------ ----------- ------------ ---------- -----------
Group 8.0 25.6 (68.8%) 26.4
------------------------------ ----------- ------------ ---------- -----------
Net Finance Costs 1.3 1.1 18.2% 1.1
------------------------------ ----------- ------------ ---------- -----------
(Loss) / Profit Before
Tax (10.0) 1.1 nm 1.9
------------------------------ ----------- ------------ ---------- -----------
Adjusted (Loss) /
Profit Before Tax(3) (4.3) 14.0 nm 14.8
------------------------------ ----------- ------------ ---------- -----------
Proposed Final Dividend
Per Share - 1.75p nm 1.75p
------------------------------ ----------- ------------ ---------- -----------
Adjusted Basic Earnings
per Share(4) (3.8)p 7.8p nm 8.2p
------------------------------ ----------- ------------ ---------- -----------
Cash (net of overdrafts) 47.2 43.1 9.5% 43.1
------------------------------ ----------- ------------ ---------- -----------
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 (note 3). 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 profit before tax, depreciation,
amortisation, net finance costs, exceptional
and adjusting items (see note 3).
3. Adjusted profit before tax is a non-IFRS
measure defined by the Group as profit before
exceptional and adjusting items.
4. Adjusted basic EPS is calculated as set out
in note 8
CHIEF EXECUTIVE OFFICER'S REPORT
Introduction
Our industry continues to evolve rapidly, with huge growth in
esports, live streaming, social and mobile gaming whilst social
media is changing the way games are played and how gaming
communities interact. Innovative new games consoles and
technologies are coming to market, including virtual reality
devices and most recently, the Nintendo Switch and Microsoft Xbox
One X, and at the same time consumers are continuing to benefit
from an ever-increasing choice in how they buy and play games.
Console price points have reduced further promoting more customers
to buy into current generation consoles with PlayStation 4 seeing
stronger relative performance.
As evidenced by the tough UK market environment experienced in
the first half of the year, some of these changes continue to
provide challenges to our business, but they also provide
significant opportunities. Our 'GAME Changing' strategy is focused
on realising these opportunities and, while our overall financial
results for the year were disappointing, I am pleased with the
strategic progress we have made over the last 12 months.
Across our retail businesses we have continued to enhance and
differentiate our specialist proposition, including launching our
new 'GAME Elite' membership scheme in the UK. We have further
developed new categories and ranges, such as digital content, PC
gaming and licensed merchandise, delivering strong sales growth in
these areas. We have made improvements to our multichannel
proposition, to make shopping with us even more convenient and we
continue to take steps to reduce costs and optimise the performance
of our retail footprint. The immense flexibility of our lease
portfolio continues to support significant reductions in fixed
costs whilst also allowing us to reposition our retail and venue
approach in major cities and towns.
Importantly, we have made significant progress in pioneering and
delivering competitive gaming at a local level. Our flagship
'BELONG' gaming arena initiative was launched just over a year ago,
with an encouraging performance being delivered from the first 18
venues in operation. At the same time, we have successfully
developed our digital enterprise businesses. We will continue to
expand our BELONG footprint both in the UK and we are planning to
launch our first arenas in Spain in 2018.
The fast-moving dynamics of our industry demand that we be agile
and focused with regards to the Group's strategic direction.
Accordingly, following a recent review of the Group's business
areas, and particularly in light of the positive performance of
BELONG, we have decided to prioritise the development of our
experience based esports and competitive gaming proposition.
Consequently, the Board has evaluated strategic options to maximise
shareholder returns from our digital enterprise activities.
Despite GTV growth in the second half period of 6.6%, overall
Group sales for the year (measured as GTV) fell by 2.4% to GBP891.0
million and Adjusted EBITDA was GBP8.0 million (2016: GBP25.6
million). Strong working capital management helped us end the year
with an increase in our cash position (net of overdrafts) to
GBP47.2 million (2016: GBP43.1 million). Together with access to
financing facilities across the Group of up to c.GBP77 million,
this means that we have the required cash and facilities to develop
our plans and drive future growth over the next 12 months.
Our Markets - A year of two halves
Total Mint Video Game Retail Market
Value(1) , YoY % Change
H1 H2 FY
======================= ======== ======= =======
UK video games market (12.5%) +8.8% (6.8%)
======================= ======== ======= =======
Spanish video games
market (EUR) +1.8% +15.7% +6.3%
======================= ======== ======= =======
Combined (GBP)(^) (5.4%) +13.8% +0.1%
======================= ======== ======= =======
1 Source: GfK Chart-Track; based on value of retail sales of
mint console hardware, software, digital and accessories products.
H1: 26 weeks ended 28 January 2017 vs. 26 weeks ended 23 January
2016; H2: 26 weeks ended 29 July 2017 vs. 26 weeks ended 23 July
2016
(^) UK and Spanish markets combined. Spain converted into
sterling equivalent
In a challenging first half, the value of the console gaming
retail market in our two major geographic markets declined by 5.4%
(UK and Spain combined), reflecting the maturity at that time of
the Xbox and PlayStation console cycles and a weaker line up of new
titles compared with the prior year period. A perennial AAA release
also significantly underperformed in the market which had a
significant impact on our business.
Conversely, in the second half, despite constrained supply, the
record breaking launch of the new Nintendo Switch console brought
fresh impetus to markets globally, leading to local currency growth
of 8.8% and 15.7% in the UK and Spain respectively.
This positive market momentum has continued into our new
financial year, with the total video game markets in the UK and
Spain up 9.1% and 14.2% respectively, in local currencies, for the
first 15 weeks (Spain 14 weeks) of FY17/18, compared to the
equivalent period last year.
Consumer demand is expected to remain strong for both the
Nintendo Switch console as well as new and upcoming titles for the
console. Sales of both the console and key software titles will
remain dependent on stock availability. We are also seeing
meaningful upside in the whole PlayStation 4 category as the price
for the console migrates downwards and the quality of releases
continually improves.
In addition to the Nintendo Switch, the arrival of the Xbox One
X console in November, together with a stronger slate of new titles
announced for FY17/18, are expected to drive stimulus to the market
over the next 12 months.
Group Operating Review
Divisional Performance
Key Performance
Metrics Core Retail
===============================
Events,
Spain Esports
UK Spain(1) (EUR) & Digital Group
============================ ========== ========== ======= =========== ==========
GTV, % change (13.4%) +22.5% +6.7% +116.4% (2.4%)
============================ ========== ========== ======= =========== ==========
Digital and Non-console(2)
retail categories
GTV, % change +14.9% +49.2% +31.1% +23.8%
============================ ========== ========== ======= =========== ==========
Market share of
Console Market(3)
, % 29% (32%) 40% (40%) 32% (34%)
============================ ========== ========== ======= =========== ==========
Market share of
Console Digital,
% 59% (60%) 59% (64%) 59% (61%)
============================ ========== ========== ======= =========== ==========
Active Reward 2.7m 1.8m 4.5m
programme members(4) (2.7m) (1.8m) (4.5m)
============================ ========== ========== ======= =========== ==========
Number of stores(4) 304 (313) 268 (267) 572 (580)
============================ ========== ========== ======= =========== ==========
Average lease 0.9 (1.5) 1.0 (1.0) 1.0 (1.3)
length, years
============================ ========== ========== ======= =========== ==========
Note:
1 GTV growth rates converted into sterling equivalent
2 Digital and non-console retail categories comprise console and
non-console digital products, preowned technology, PC and mobile
accessories, licensed merchandise, VR devices, online Marketplace
sales and retail services
3 Source: GfK Chart-Track. Share based on total market value of
retail sales of mint console hardware, software, digital and
accessory products. 52 weeks ended 29 July 2017 vs. 52 weeks ended
23 July 2016
4 Figures in brackets denote 2015/16 comparatives as at 30 July
2016
Core Retail: UK
UK Retail GTV declined by 2.8% in the second half, which
nonetheless represented a significant improvement on the 18.1%
decline reported in the first half. This improved relative
performance was supported by the launch of the Nintendo Switch in
March 2017, with hardware sales up 21% in the second half, together
with our continued focus on growing sales of digital content and an
expanding range of non-console categories which are proving popular
with our customer base. Overall, GTV from digital and non-console
categories (including mint and preowned phones and tablets, PC and
mobile accessories, licensed merchandise, virtual reality devices
and retail services) increased 14.9%, to over GBP162 million.
We retained our position as the leading retailer of video games
in our core markets during the year, with a 29% share of the market
(2016: 32%). The movement in market share was largely explained by
the decline in certain key games where the UK business has
historically achieved high market shares as well as an increased
contribution of the online channel, where the business currently
achieves a lower market share. We have continued to invest in
improvements to our online, mobile and App channels during the
year, as well as in our multi-channel capabilities, e.g. the
expansion of delivery options. We have started to see an improved
impact on our online performance in recent months, with
year-on-year growth in market share metrics, customer orders and
conversion.
We continue to work closely with our supplier partners and have
been successful in securing additional support. The benefits from
these new arrangements, together with our continued focus on higher
margin categories and digital content sales have driven a positive
improvement in our UK Gross Margin rate, which increased 10 basis
points in the year, to 27.4% (calculated as a % of revenue).
Improving our performance through the realisation of
organisational efficiencies and cost saving measures, as outlined
in the UK action plan initiated in January 2016, remains a key
focus for the business. Considerable attention continues to be
given to the review of our store footprint and reducing property
costs wherever possible. 39 lease renewals have been renegotiated
on improved terms during the last 12 months and where proposed new
lease terms have not been acceptable, the Group has relocated to
lower cost premises. We are also exploring opportunities to open
new concession locations where lower cost of occupation and more
flexible terms can be agreed, commencing a concession trial with
the leading consumer electronics retailer Maplin, in September
2017. We are also exploring opportunities to open new BELONG venues
in low cost, high footfall retail and leisure locations both
within, and outside, our existing estate.
Within retail operations, we continue to focus on improving
customer service standards whilst carefully managing our store
employee costs, flexing resourcing levels during periods of higher
and lower demand. We have also continued to focus on reducing
expenditure across the business, where possible, and have delivered
procurement savings on certain business service contracts,
productivity improvements in our distribution centres and other
business process improvements.
These initiatives have seen the realisation of GBP11.1 million
in overall operational efficiencies and savings in the year across
our UK Retail operations including:
-- GBP3.8 million reduction in store payroll
and other store variable costs, before absorbing
additional inflation including the effects
of statutory wage increases
-- A reduction of GBP1.4 million in property
related costs, reflecting savings from rent
renegotiations
-- Distribution savings and efficiencies of
GBP1.4 million
-- Reduction in marketing costs other efficiencies
and procurement benefits of GBP4.5 million
Overall, underlying operating costs (before depreciation and
amortisation and adjusting and exceptional items) were reduced by
GBP7.4 million. This reflects the cost savings outlined above
together with the investments we have made to support multi-channel
and customer service improvements, additional rent from the recent
Basingstoke property sale and leaseback as well as the continued
development of our growth categories. Further efficiencies and
savings totalling GBP8.3 million have been targeted for FY17/18
with GBP2.1 million having been achieved in the first quarter of
the new financial year.
We ended the year with 304 stores (2016: 313) in the UK, with an
average length to first break of 0.9 years and 221 lease events by
the end of calendar year 2018. We opened 11 new stores, closed 20
stores of which six were relocations during the year. We had eight
loss making stores in the UK in the year (2016: one) (calculated as
annual store EBITDA contribution before the allocation of central
overheads, excluding new stores or closed stores) all of which have
been addressed with reduced rents (two moving to nil rents) or will
be closing or have an imminent lease event / an opportunity to
turnaround the operating performance.
Core Retail: Spain
Our Spanish business produced another strong performance. GTV
growth of 12.8% was delivered in the second half, resulting in
total GTV for the year up 6.7% on a local currency basis. We
maintained our leading position in the Spanish market during the
year, with a share of 40% (2016: 40%).
In local currency terms, we delivered Content GTV growth of 7.7%
in the territory. Within this, PlayStation 4 and Xbox One physical
software sales were up 21.3% and digital sales were up 21.1%. Total
Preowned sales rose 2.7% on the back of the strong mint software
market, with further strong growth in PlayStation 4 and Xbox One
software sales, up 43.7%, and preowned technology sales, up 41.3%.
Sales of Accessories & Other rose 29.6%, whilst low margin
Hardware sales fell by 3.9% (including the growth in the second
half of 21.1%, driven by the launch of the Nintendo Switch).
Aligned with our UK priorities, we continue to focus our efforts
in Spain on driving the development of digital and non-console
retail categories, with GTV in these areas (including preowned
technology products, PC accessories, licensed merchandise, virtual
reality devices and retail services) up 31.1% in the year. We are
also planning our first gaming arenas to launch in calendar H1
2018.
In total, after the effects of a stronger Euro, which
appreciated approximately 13% against Sterling, our Spanish GTV
rose 22.5% and gross profit rose 16.8%, after a 0.9 percentage
points decline in gross profit margin, to 24.5%. The margin rate
decline was mainly explained by a lower mix of prior generation
pre-owned sales.
Underlying operating costs (before depreciation, amortisation
and adjusting and exceptional items) rose EUR2.5 million, or 4.0%
on a local currency basis, well below the rate of increase in
sales.
We opened 4 new stores in Spain in the year and closed 3, ending
with 268 stores (2016: 267) of which three were loss making (2016:
three).
Events, Esports & Digital
Events, Esports and Digital (EE&D) includes our local
competitive gaming activity, managed under our new BELONG brand
which launched in late 2016, together with Multiplay (comprising
both the Events & Esports and Digital divisions), Ads Reality
and SocialNat. Having been purchased in February 2016, SocialNat
has been integrated into our Spanish business and rebranded as GAME
Esports Spain.
In aggregate, we delivered sales of GBP13.2 million from
EE&D in the year (2016: GBP6.1 million) up 116.4%, with the
majority of sales in the year generated from Multiplay. The Group
has continued to invest in and develop Multiplay's Digital
division, comprising its multiplayer game server-hosting
technology, and the Events and Esports activities, encompassing
major gaming and esports events during the year. Benefiting from
this development both activities have independently delivered
significant revenue growth over the last twelve months. Multiplay's
Digital sales more than doubled, from GBP2.1 million to GBP4.5
million, whilst Multiplay's Events and Esports sales increased
almost 50%, from GBP4.8 million to GBP7.3 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.
Whilst we expect to achieve better than average gross margins
from these areas over the medium term, the gross profit margin
declined 2.4% points in the year. This reduction was predominantly
caused by the investment in the cost of sales within the Events
business following the move of the Insomnia festival to the NEC in
August 2016, as we scaled the event to a new and larger venue to
accommodate future growth.
We continue to develop and invest in each of our Events, Esports
& Digital activities to support the future growth ambitions for
these businesses. Reflecting this investment, underlying operating
costs (before depreciation, amortisation and adjusting and
exceptional items) rose GBP4.1 million to GBP8.5 million (2016:
GBP4.4 million). This included higher operating costs for Multiplay
of GBP4.9 million (up to GBP0.8 million in the period); first time
costs relating to the set up and operation of the new BELONG
concept of GBP2.2 million and the first full year of Ads Reality
and Game (Spain) of GBP1.4 million, up GBP1.1 million on the
year.
Group Strategic Review
Delivering our GAME Changing strategy in 2017
A year ago I set out our 'GAME Changing' strategy, focused
around four key strategic pillars which were designed to give the
business clear direction, respond to changing market dynamics and
effect the Group's transition to sustainable, profitable growth. We
have made good progress in each of these four areas over the last
12 months.
1. Continue to improve our core retail businesses in the UK and
Spain, based around the needs and behaviours of customers, in order
to maximise market potential and profitability
Across our UK and Spanish retail business we continue to
prioritise our efforts around four key strategic objectives: i)
maximise the value of our core markets by delivering a compelling
customer proposition, built around our specialist differentiators,
ii) build new retail categories and services, iii) continue to
improve our online and multi-channel proposition; and iv) effect
the ongoing optimisation of our store estate.
i) Delivering a compelling customer proposition
Enhanced UK loyalty scheme: 'GAME Elite'
Launched 20 years ago this year, our customer loyalty programmes
in the UK and Spain are some of the longest-standing and most
popular of their kind in their respective regions. We remain
focussed on increasing sign-ups and usage of these schemes. As well
as encouraging greater brand loyalty, the schemes provide valuable
insight into our customers and their shopping preferences. This
insight helps us continuously refine, improve and personalise our
offer and communications, driving increased sales and margins which
also benefits our suppliers.
4.5 million GAME Reward scheme members shopped with us in the
year (2016: 4.5 million), whilst our 'swipe rate' (transactions
linked to a Reward account) increased by 4% to 65% in the UK, and
reached 78% in Spain (2016: 79%).
Building on this success and after significant consumer research
and planning, in May 2017 the Group launched a major new loyalty
initiative, 'GAME Elite'. GAME Elite is a subscription-based
membership scheme for UK customers, offering enriched rewards and a
range of additional benefits. This new initiative has been a
central pillar of our refreshed 'customer first' retail strategy in
the UK, intended to attract and retain customers and increase
lifetime value.
The new GAME Elite membership scheme has proved popular with
customers, with over 60,000 memberships added so far and has helped
recruit new customers and increase frequency and spend of previous
loyalty scheme members. Overall, more than one million customers
signed up to our GAME Reward programmes (including GAME Elite)
during the year, across the two territories.
Further expanding our exclusive proposition
Maintaining and expanding our 'ONLY AT GAME' exclusive
proposition remains another key focus for the Group, supporting our
unique, specialist position. Working with our supplier partners
during the year, we were once again able to secure exclusive
editions on the vast majority of the years' biggest selling
titles.
Looking forward, we continue to focus on working with a broader
range of our supplier partners to further expand our exclusive
strategy, including new categories such as PC hardware, PC
accessories and licensed merchandise.
Improving our trade-in and preowned propositions online
A key priority for the Group remains the successful promotion
and development of our trade-in and preowned propositions, which
support our specialist and value proposition and remain popular
with customers. In September 2017, we launched an online trade-in
service, allowing customers to trade-in their games, console and
mobile phones online. More recently, we reconfigured our software
stock management system to significantly improve the availability
of preowned products online. We believe these developments will
support the future growth and popularity of these areas.
ii) Building new categories and services
Our retail diversification strategy continues at pace. Over the
last three years we have almost doubled sales (measured as GTV)
from our digital and 'non-console' categories, from GBP123.5
million in FY13/14 to GBP236.8 million in FY16/17, with these areas
contributing approximately 27% of the our total GTV this year.
Continued digital growth
Retail remains an important channel in the large and growing
digital content market, with our total digital sales up 16.8% to
GBP128.7 million in the year. Promoting and selling a broad range
of digital products (across both console and non-console digital
products) in our stores and online remains a key focus.
During the year we expanded our digital product range, improved
in-store and online merchandising, worked with partners to support
enhanced digital promotions, and improved education and training
for in-store sales staff. Overall, this helped us to maintain our
share of the retail digital market, with a c.60% share of the
console segment in the UK and Spain.
Range development and new retail services
We have continued to successfully develop a number of key,
complementary product categories and retail services over the last
12 months. These product ranges include preowned mobile phones and
tablets and associated peripherals (such as chargers and audio
headphones), PC gaming hardware and accessories, virtual reality
devices and accessories, collectibles, clothing and other licensed
products. During the year we further increased the allocation of
in-store space to these categories, continued to develop in-store
and online ranges, improved in store visual merchandising and
up-weighted marketing support across these areas.
We have also continued to develop a much broader online range
through our 'Marketplace' offer in the UK, which had over 265,000
listings from a range of 3(rd) party sellers across a broad range
of categories. We are pleased with the 35% growth in GTV achieved,
to approximately GBP4 million.
Alongside these developments the Group continues to broaden and
improve its range of retail services. Recent initiatives include
the launch of a consumer finance proposition online for higher
value transactions, an expanded UK gift card programme, a
significantly increased repair service in Spain, and wider product
protection plans. These initiatives helped our services revenue to
grow 64% in the year, to almost GBP6 million.
iii) Developing our online and multi-channel proposition
Like all retail markets around the world, we continue to see
consumers completing a growing proportion of their purchases
online, particularly through mobile devices. Delivering a seamless,
connected and engaging customer journey is therefore increasingly
important to our business.
We have invested in our online teams, websites and
infrastructure over recent years to improve the online and
multichannel experience, ensuring that customers are able to
discover content and easily shop online with us whenever and
however they want.
In the past 12 months, we have made several improvements to our
click & collect service in the UK. Combined with our 'Endless
Range' in-store proposition customers can now order online or
in-store, for delivery to home, or to store. During the year we
also launched a new 'click & reserve' proposition, providing
further convenience for customers. Click & collect sales
contributed c.8% of total online sales in the UK in 2016/17, and we
expect them to continue to grow as a proportion of online sales in
the future.
We have continued to invest in our ecommerce platforms,
improving online functionality and customer journeys as well as
enriching editorial content. One significant project completed
during the year was our 'One Account' initiative, providing
customers with a single login for every touch point (Reward card,
online, App and GAME Wallet accounts). Since its launch we have
seen significantly higher Reward utilisation rates online and
higher online sales conversion.
As mentioned previously, we have also launched an online
trade-in proposition and new preowned stock management engine
during the year, enhancing our online proposition in these
areas.
Finally, during the year we relaunched our App in the UK with a
new look and feel, focused on engaging content and franchise
'campaigns'. Alongside social media, the Group's Apps in the UK and
Spain remain central pillars of customer engagement and
communication and have been downloaded over 1.9 million times.
iv) Optimising the store estate
Our stores remain a key strategic asset of the Group, acting as
the central hub of customer engagement and a vital part of our
omni-channel strategy. They also remain a major cost of our
business. During the year we have continued to focus our efforts on
improving future store contribution by way of the following:
1) Fixed cost reductions through ongoing lease renewal programme
and concession partnerships
During the year, 39 UK leases were successfully renewed on
improved terms out of a total of 49 renewed, with rents reduced on
an annualised basis by GBP1.4 million across those leases. Since
the UK plan was initiated in January 2016, 50 leases have been
renewed on better terms, producing an annualised saving of GBP1.7m.
We have 221 lease events in the UK in the period to 31 December
2018 (out of a total of 304 stores) which we are currently planning
for.
In conjunction with this programme, 23 stores were closed across
the UK and Spain, of which 6 were relocated in to new stores. A
further five new stores were opened in the year in the UK and four
in Spain, including a concession trial of two stores in the UK with
WH Smith. A further concession trial with Maplin was started in
September 2017, with four initial sites opened to date.
2) Improvements to the store operating model
After a successful trial launched over the Summer 2017, a new
store efficiency programme is being rolled out across the UK store
estate. The programme is designed to lower variable costs in stores
whilst improving customer services levels by increasing store
efficiencies. The programme covers several areas including payroll,
logistics and in-store marketing and we are pleased with the
initial results and savings that have been realised.
3) Enhancing the store environment and space utilisation
Whilst we remain disciplined on costs, we have and will continue
to invest in the estate, refurbishing and refreshing the in-store
environment where we believe it will generate a good return on
investment. Through cosmetic enhancements, new fixtures and better
merchandising and signage, we are improving the in-store customer
experience. Given our small store footprints, space is at a
premium. In the last year we rolled out new software which allow us
to track space and category contribution more frequently and
accurately. This is helping us to improve space allocation and
merchandising to ensure sales and margin densities are
maximised.
2. Expand the Group's live and online gaming services for gamers
and publishers in order to build customer and gamer engagement and
generate incremental revenues
Major new social and competitive gaming initiative launched -
'BELONG(TM) by GAME'
Following a successful trial of the 'gaming arena' concept
launched a year ago, in March we announced plans to accelerate and
expand our roll-out plans for our experiential retail concept,
BELONG, in the UK. We have now opened 19 gaming venues (18 BELONG
in-store arenas and one stand-alone gaming lounge trial), with
further openings planned for 2017/18. A tribe identity has been
established at every BELONG arena, to inspire players to feel part
of their local community and encourage group and team participation
in the inter-arena tournaments and local competitions.
The performance of the BELONG arena stores has been encouraging
and continues to improve as we continually refine the offer, with a
positive trend in pay-to-play utilisation rates, the growth of B2B
income and venue hire for parties and events. In the first quarter
of the new financial year, gaming hours played totalled c.90,000
which is up over 110% versus Q4 of FY16/17. The concept is
successfully driving increased footfall, higher in-store dwell time
and attracting a new customer demographic, with 25% of BELONG
customers new to GAME. Importantly, we are achieving a retail sales
uplift relative to the estate average in these stores, with the
greatest impact seen in PC gaming and VR categories and core
categories such as PlayStation 4 have also benefited despite
consolidation of store space.
Development has been completed for our booking platform which
allows customers to book a station in each arena for specific time
slots similar to systems operated by cinemas. We are also at Beta
stage with our tournament platform allowing in-arena, online and
competitive esports tournament play.
Arena time has also been recently developed and launched which
allows BELONG customers to purchase bulk 'credits' for gaming hours
in our arenas. This will deliver a reward element for those that
participate with us the most.
Feedback from customers, store teams, supplier partners and
gaming communities continues to be very positive.
Continued expansion of our esports and events activities across
the UK and Spain
In conjunction with BELONG, we have continued to develop and
expand our esports and event capabilities and activities during the
year, with directly attributable sales from these areas
approximately doubling in the year, to GBP8.7 million (2016: GBP4.0
million).
Key developments for the Insomnia Gaming Festival included the
launch of a refreshed brand and website, further improvements to
the show's content, enhanced marketing and promotional arrangements
and the signing of a major new 3-year partnership with Island
Records (Universal Music). These initiatives have supported a
further broadening of the show's appeal and audience, with a record
footfall of over 155,000 achieved across the five flagship shows
held during the year.
We have continued to develop our proprietary online systems to
allow us to expand our tournament hosting capabilities and have
continued to increase the content and programming from our esports
broadcast studios. During the period, we completed 3 seasons of our
own 'UK Masters' esports series of tournaments, with over GBP75,000
awarded in prize money and viewership targets exceeded. We were
also selected by Activision to host a European qualifying event for
the 2017 Call of Duty World League ("CWL") Championship. The CWL
Birmingham Open was held at the Insomnia 60 festival in April 2017,
with 96 teams competing for a share of the $50,000 prize pool.
We continue to organise major white label events on behalf of
publishers, including acting as delivery partner for MineCon US,
held in Anaheim, California in September 2016 and successfully
hosted our first Brick Live shows in the UK (an event for Lego
enthusiasts) in July 2017, having signed a franchise agreement
earlier in the year. In August 2017, we also entered in a licence
agreement with Mojang to operate BlockFest, for a minimum of five
years, that is, to run, market and promote official Minecraft
community events globally. This will allow Multiplay to operate
Minecraft events or sub-licence event management within defined
territories, using assets created and built by Multiplay
Events.
Our esports activities have also continued to develop in Spain,
with the creation of a new broadcast studio to support high quality
content creation, a new online esports website launched and a
growing programme of successful esports partnerships with major
gaming events across the territory, including Madrid Games
Week.
3. Develop and grow the Group's digital enterprise services
We have been pleased with the further successful development of
our digital business over the last 12 months.
Strong growth in game server hosting
We have continued to successfully develop and grow Multiplay's
game server hosting business during the year, with sales more than
doubling to GBP4.5 million (2016: GBP2.1 million).
Publisher and developer interest for its services continues to
grow, with major new relationships successfully launched, several
new contracts signed and a number of key proof of concepts
underway. The Group has continued to invest sensibly during the
year in the required resource and infrastructure to support the
significant future growth anticipated.
Our portfolio of partners is impressive including Electronic
Arts, Activision, Psyonix, Ready at Dawn, Tripwire Interactive and
numerous other leading publishers and developers.
Successful development of Ads Reality, the Group's AR based
digital marketing business
Ads Reality was acquired in May 2016 after more than two years
of collaboration between the two companies. During the first 15
months of ownership we have continued to support the development of
the business and its technology to drive future growth. During the
year the team delivered projects for several major consumer brands
and international businesses, including Sainsbury and Heathrow
Airport and are successfully building a growing pipeline of future
projects.
Strategic review of digital businesses launched
Following the strong early performance and significant potential
of BELONG, the Group has decided to prioritise management and
capital resources on the acceleration of the development of its
esports and live gaming initiatives. Accordingly, the Board is
evaluating strategic options for the Group's digital enterprise
activities to maximise shareholder value and allow the Group to
increase its strategic focus.
4. Optimise organisational efficiency while investing for the
future
Running an efficient business remains a key strategic priority
for the Group and we have made good progress realising business
efficiencies and delivering cost savings during the year. As
discussed in more detail in the operating review, we achieved
GBP11.1 million in cost reductions across our UK retail operations
in the year, before the impact of higher statutory wage rates and
other increases. Across our retail businesses we continue to
carefully manage store employee costs, adjusting resourcing levels
as required to maintain service standards during periods of higher
or lower demand. We also continue to focus on reducing costs where
possible across all areas of the business, including rent savings
at lease renewal, business services contracts and procurement,
productivity improvements in our distribution centres and other
business process improvements.
Considerable attention continues to be given to the
rationalisation of our store footprint and reducing property costs.
Since the UK plan was initiated in January 2016, 50 leases have
been renewed on improved terms and where proposed new lease terms
have not been acceptable, the Group has relocated to lower cost
premises. We are planning for 221 lease events before the end of
2018 and, in conjunction with these plans, we are exploring
opportunities to open new concession locations with complementary
third-party brands, where a lower overall cost of occupation and
flexible terms can be agreed.
Conclusion
Whilst dynamics in the UK console market have been challenging,
we have made good progress in the year as we continue to focus on
developing our strategic initiatives and creating a new cost base
for our UK retail operations.
We have reviewed our operations and are now accelerating the
development of BELONG and our esports plans, as we seek to fully
capitalise on the significant future potential of these high growth
areas.
Our core markets returned to growth in the second half, and this
momentum has continued over the first few weeks of the new
financial year, driven by continued strong customer demand for the
PlayStation 4 category, the increasing availability of the Nintendo
Switch, the launch of Microsoft's Xbox One X and a stronger
selection of new games.
Once again, I would like to convey my huge gratitude to our
teams and our business partners for their hard work, dedication and
support over the past year, as we continue to drive forward the
transformation of our business.
By organising ourselves effectively, continuing to improve and
enhance our consumer proposition and building on the collaborative
partnerships we hold with our key suppliers, I am confident we will
be able to maximise this market potential whilst continuing to
drive further strategic progress over the next 12 months.
Martyn Gibbs
Group Chief Executive Officer
14 November 2017
CHIEF FINANCIAL OFFICER'S REVIEW
The FY2016/17 accounting period represents the 52 week period
from 31 July 2016 to 29 July 2017. The prior year FY2015/16
accounting period represents the 53 week period from 26 July 2015
to 30 July 2016. Throughout the Financial Review, unless otherwise
stated, FY2016/17 commentary will refer to the unaudited 52 week
period to 23 July 2016 when referring to the comparative period, to
better reflect the underlying performance of the Group.
Summary of Group Results
52 weeks 52 weeks 52 week 53 weeks
ended ended change ended
29 July 23 July 30 July
2017 2016 2016
(audited) (Restated) (Restated)
(unaudited) (audited)
Statutory Results GBPm GBPm % GBPm
- IFRS measures
================================= =========== ============= ======== ============
Revenue 782.9 812.5 (3.6%) 821.9
================================= =========== ============= ======== ============
Gross Profit 205.1 217.4 (5.7%) 220.1
================================= =========== ============= ======== ============
Operating (Loss)/Profit (8.7) 2.2 Nm 3.0
================================= =========== ============= ======== ============
Net Finance Costs (1.3) (1.1) (18.2%) (1.1)
================================= =========== ============= ======== ============
(Loss)/Profit Before
Tax (10.0) 1.1 Nm 1.9
================================= =========== ============= ======== ============
Basic EPS (7.1p) 1.5p Nm 1.9p
================================= =========== ============= ======== ============
Selected Non-IFRS
measures
================================= =========== ============= ======== ============
Gross Transaction
Value (GTV) 891.0 912.6 (2.4%) 923.3
================================= =========== ============= ======== ============
Gross Transaction
Value excluding Hardware 716.8 710.3 0.9% 719.1
================================= =========== ============= ======== ============
Adjusted EBITDA 8.0 25.6 (68.8%) 26.4
================================= =========== ============= ======== ============
Adjusted EBITDA -
Core Retail 14.0 28.7 (51.2%) 29.5
================================= =========== ============= ======== ============
Adjusted EBITDA -
Events, Esports and
Digital (6.0) (3.1) (93.5%) (3.1)
================================= =========== ============= ======== ============
Adjusted (Loss)/Profit
Before Tax (4.3) 14.0 nm 14.8
================================= =========== ============= ======== ============
Adjusted (basic) (loss)/earning
per share (3.8p) 7.8p nm 8.2p
================================= =========== ============= ======== ============
Overall, the Group's Gross Transaction Value (GTV) fell by
GBP21.6 million or 2.4% in the year, to GBP891.0 million (2016:
GBP912.6 million). Excluding low margin Hardware sales, GTV rose by
GBP6.5 million or 0.9%. After a decline in the first half, sales
grew in the second half of the financial year, with GTV increasing
6.6%. GTV in the second half of the year benefited from the release
of the Nintendo Switch(TM) console in March 2017, together with a
strong performance from digital content, gaming accessories and
licensed merchandise. Sales from the Group's Events, Esports and
Digital businesses also continued to grow strongly, up 116.4% in
the year. A key priority for the Group continues to be the further
development of the Group's digital and non-console categories
(including PC gaming accessories, virtual reality headsets,
preowned phones & technology products and licensed
merchandise), where GTV growth of 23.8% was delivered in the
year.
Despite strong sales growth in the Spanish Retail business and
across the Group's Events, Esports and Digital divisions, Group
revenue declined by 3.6% in the period to GBP782.9 million (2016:
GBP812.5 million), driven by the decline in UK Retail.
Group gross margins (as a percentage of revenue) reduced by 60
basis points to 26.2%. This decline was a result of the higher mix
of sales originating from our Spanish Retail and Events, Esports
and Digital businesses, where the Group currently achieves a lower
gross margin than UK Retail. The reclassification of marketing
income and other promotional funding from operating expenses to
cost of sales has also impacted on the gross margin as the level of
income varies between years.
The increase of 2.8% in underlying operating costs (excluding
exceptional and adjusting items and excluding depreciation and
amortisation) to GBP197.1 million was a result of cost increases in
the core Spanish retail business as well as cost investment in the
Group's Events, Esports and Digital businesses offset in part by
savings in the core UK retail business. Overall underlying costs in
Core Retail rose 0.6%, with a GBP7.4 million reduction in UK retail
operating costs (after absorbing statutory wage increases and
additional cost increases from the sale and leaseback of the
Basingstoke premise) being offset by the impact of higher Spanish
retail costs, largely explained by the translation effect of weaker
year on year sterling to Euro exchange rates. Underlying Spanish
retail costs increased 4% in local currency terms, lower than the
uplift in GTV of 6.7%. Costs across the Group's Events, Esports and
Digital divisions, comprising Multiplay, Game Esports Spain and Ads
Reality, as well as the Group's new local competitive gaming
activities, increased by GBP4.1 million to GBP8.5 million.
The Group made an operating loss of GBP(8.7) million (2016:
GBP2.2 million operating profit). This loss is explained by the
lower gross profit generation, higher operating expenses, including
a GBP1.0 million increase in depreciation and amortisation, and is
after the inclusion of exceptional income of GBP6.3 million in the
period (2016: exceptional costs of GBP0.5 million). The Group
delivered an Adjusted EBITDA of GBP8.0 million (2016: GBP25.6
million), reflecting a GBP14.7 million decline in Core Retail to
GBP14.0 million and the EBITDA loss of GBP(6.0) million (2016:
EBITDA loss GBP(3.1) million) within Events, Esports and Digital
incurred as the new business activities were being further
developed.
The Adjusted loss before tax for the year was GBP(4.3) million
(2016: GBP14.0 million profit) and the Adjusted basic loss per
share was (3.8) pence (Adjusted basic earnings per share 2016: 7.8
pence). On a statutory basis, the loss before tax was GBP(10.0)
million (2016: GBP1.1 million profit) and basic loss per share was
(7.1) pence (earning per share 2016: 1.5 pence).
Segmental results
Core Retail: UK
52 weeks 52 weeks 52 week 53 weeks
ended ended change ended
29 July 23 July 30 July
2017 2016 2016
(audited) (Restated) (Restated)
(unaudited) (audited)
GBPm GBPm % GBPm
=================== =========== ============= ======== ============
Gross Transaction
Value 562.0 648.7 (13.4%) 655.7
=================== =========== ============= ======== ============
Revenue 491.3 577.3 (14.9%) 583.4
=================== =========== ============= ======== ============
Gross Margin
%(1) 27.4% 27.3% 27.4%
=================== =========== ============= ======== ============
Adjusted EBITDA 1.8 17.7 (89.8%) 18.5
=================== =========== ============= ======== ============
1. Calculated as a % of revenue
After a stronger second half performance, the core UK Retail
business saw Gross Transaction Values decline by 13.4% and revenue
by 14.9% in the year. A key priority for the business continues to
be the further development of its digital and non-console retail
categories. GTV across these categories grew 14.9% in the year, to
GBP162.8 million.
An increase in sales mix of higher margin categories, together
with higher achieved margins on mint Hardware following the launch
of the Nintendo Switch, drove a 10 basis point improvement to the
gross margin (as a % of revenue), to 27.4% (2016: 27.3%).
Operating costs before depreciation and amortisation and
adjusting and exceptional items were reduced by GBP7.4 million or
5.3%. This net reduction reflects achieved operating cost savings
of GBP11.1 million, partially offset by statutory wage increases
implemented during the year, cost investment to support strategic
growth initiatives and rent payable on the UK distribution centre
and head office buildings of GBP0.8 million following the sale and
leaseback of the property in October 2016.
Despite the improvement in gross margin rate and lower costs,
the fall in GTV meant Adjusted EBITDA for the core UK Retail
business declined to GBP1.8 million in the year (2016: GBP17.7
million).
Core Retail: Spain
52 weeks 52 weeks 52 week 52 week 53 weeks
ended ended growth LC growth^ ended
29 July 23 July 30 July
2017 2016 2016
(audited) (Restated) (Restated)
(unaudited) (audited)
GBPm GBPm % % GBPm
=================== =========== ============= ======== ============ ============
Gross Transaction
Value 315.8 257.8 22.5% 6.7% 261.5
=================== =========== ============= ======== ============ ============
Revenue 278.4 229.1 21.5% 5.8% 232.4
=================== =========== ============= ======== ============ ============
Gross Margin
%(1) 24.5% 25.4% 25.5%
=================== =========== ============= ======== ============ ============
Adjusted
EBITDA 12.2 11.0 10.9% (6.0%) 11.0
=================== =========== ============= ======== ============ ============
Note:
^ LC local currency basis. Calculated based on original Euro
amounts.
1. Calculated as a % of revenue
GAME's Spanish Retail business (excluding esports) delivered GTV
growth of 6.7% over the period on a local currency basis. Excluding
low margin hardware, Spanish retail GTV grew 10.0%. Consistent with
the UK business, a key priority for the Spanish retail business is
the continued development of digital and non-console retail
categories (including PC gaming accessories and virtual reality
headsets), where GTV growth of 31.1% was delivered on a local
currency basis.
On a reported basis, after the effects of a stronger Euro during
the period, Spanish GTV rose 22.5% while Spanish revenue grew 21.5%
to GBP278.4 million.
Gross margin rates in the territory declined by 90 basis points
to 24.5% (2016: 25.4%), reflecting a lower mix of higher margin
older generation software (across both mint and preowned
categories) as well as selected price investment across key
categories to support our leading market shares. Spanish operating
costs excluding depreciation, amortisation and adjusting and
exceptional items increased to GBP55.9 million (2016: GBP47.3
million), representing 17.7% of GTV (2016: 18.3%). On a local
currency basis, Spanish operating costs excluding depreciation,
amortisation and adjusting and exceptional items increased EUR2.5
million, or 4.0%, broadly in line with the increase in sales.
The Adjusted EBITDA for the period was GBP12.2 million (2016:
GBP11.0 million). In local currency terms Adjusted EBITDA was
EUR14.2 million (2016: EUR15.1 million).
Events, Esports and Digital
52 weeks 53 weeks Growth
ended ended
29 July 30 July
2017 2016
(audited) (audited)
GBPm GBPm %
=================== =========== =========== ========
Gross Transaction
Value 13.2 6.1 116.4%
=================== =========== =========== ========
Revenue 13.2 6.1 116.4%
=================== =========== =========== ========
Gross Profit
%(1) 18.9% 21.3%
=================== =========== =========== ========
Adjusted EBITDA
loss (6.0) (3.1) (93.5%)
=================== =========== =========== ========
1. Calculated as a % of revenue
Revenue from Events, Esports and Digital, comprising the
Multiplay and Ads Reality businesses in the UK, and revenue
generated from esports and local competitive gaming activities in
the UK and Spain, grew 116.4% to GBP13.2 million (2016: GBP6.1
million). Revenue streams include ticket sales, in-store gaming
services such as 'pay-to-play' and advertising and sponsorship
deals.
Combined gross margins across these areas declined by 2.4
percentage points, to 18.9%. This decline was largely due to
increased costs of sales within Multiplay's Events division as a
result of moving to the NEC, in preparation for further expected
growth in audience numbers.
Core underlying operating costs attributable to Events, Esports
and Digital increased GBP4.1 million to GBP8.5 million (2016:
GBP4.4 million) as the Group continued to expand its activities and
further develop its operations. Cost investment across Multiplay's
Events and Digital businesses amounted to GBP0.8 million, taking
total Multiplay costs in the period to GBP4.9 million. In addition,
GBP2.2 million of cost was incurred by the Group's new local
competitive gaming activities (2016: nil) with the balance of the
remaining cost investment split across Ads Reality and Game Esports
Spain.
Investment continues into activities targeted to deliver future
growth, including the roll out of 18 BELONG gaming arenas during
the year, and an upgrade to the Group's server management platform
to enable it to run the global hosting requirements for major AAA
titles. The Adjusted EBITDA loss was GBP6.0 million (2016 EBITDA
loss: GBP3.1 million).
Gross Transaction Value (GTV) and Revenue
Gross Transaction Revenue
Value (GTV)
52 weeks 52 weeks 52 53 52 weeks 52 weeks 52 53
ended ended week weeks ended ended week weeks
29 July 23 July growth ended 29 July 23 July growth ended
2017 2016 30 2017 2016 30
July July
2016 2016
(audited) (unaudited) (audited) (audited) (Restated) (Restated)
(unaudited) (audited)
GBPm GBPm % GBPm GBPm GBPm % GBPm
============= =========== ============= ======== =========== =========== ============= ======== ============
Content 396.0 401.0 (1.2%) 404.6 286.9 311.5 (7.9%) 313.8
Preowned 174.3 185.8 (6.2%) 189.3 174.8 184.5 (5.3%) 188.0
Accessories
& Other(1) 146.5 123.5 18.6% 125.2 147.8 116.2 27.2% 117.9
============= =========== ============= ======== =========== =========== ============= ======== ============
Sub-Total 716.8 710.3 0.9% 719.1 609.5 612.2 (0.4%) 619.7
============= =========== ============= ======== =========== =========== ============= ======== ============
Hardware 174.2 202.3 (13.9%) 204.2 173.4 200.3 (13.4%) 202.2
============= =========== ============= ======== =========== =========== ============= ======== ============
Total 891.0 912.6 (2.4%) 923.3 782.9 812.5 (3.6%) 821.9
============= =========== ============= ======== =========== =========== ============= ======== ============
1 Includes sales contributed from Events, Esports and Digital
businesses
Total Group Gross Transaction Value (GTV) fell 2.4% over the
year to GBP891.0 million (2016: GBP912.6 million) with strong
growth achieved in the second half period (H1: (6.9)%, H2:
+6.6%).
Hardware sales rebounded strongly in the second half, rising
25.5% following the launch of the Nintendo Switch in March 2017.
However, this was not sufficient to offset the declines experienced
in the first half, with overall Hardware GTV for the year GBP28.1
million lower, at GBP174.2 million (2016: GBP202.3 million).
Excluding lower margin Hardware, GTV grew by GBP6.5 million or
0.9%, with continued growth in Accessories & Other more than
offsetting the decline in Content and Preowned.
Content GTV, which includes both mint boxed and digital game
content, fell by 1.2% (H1: (1.9%), H2: +0.1%). In part, this is
explained by the ongoing decline in physical sales for Xbox 360 and
PlayStation 3, with sales down a further 69.3% across the Group.
The combined GTV of all other software formats was flat in the
year, although, as reported in the Group's first half results, the
market reaction to certain key annual titles in the first half was
not as strong as in the prior year and there was no major,
non-perennial title to match the performance of Fallout 4, which
launched in the equivalent period in 2015/16. Within Content GTV,
digital sales continued to grow, rising 16.8% to GBP128.7
million.
GTV from Preowned products decreased by 6.2% to GBP174.3 million
(H1: (8.7%), H2: (3.0%)). Sales of preowned PlayStation 4 and Xbox
One software products rose 12.1%, and sales of preowned mobile
phones and tablets rose 4.4% over the year, but these were more
than offset by a decline in sales of preowned Xbox 360, PlayStation
3 and other older format hardware and software.
GTV from the Accessories & Other category increased by
GBP23.0 million or 18.6% to GBP146.5 million, benefiting from a
GBP7.1 million increase in Events, Esports and Digital sales,
together with strong growth of PC accessories and licensed
products.
On a statutory basis, Group revenue declined 3.6% to GBP782.9
million (2016: GBP812.5 million).
Gross profit
Gross profit fell by 5.7% to GBP205.1 million (2016: GBP217.4
million). Foreign exchange rates positively impacted the reported
gross profit during the half, with the Euro c.13% stronger relative
to sterling in the 52 weeks ended 30 July 2017. This accounted for
a year-on-year benefit to gross profit of c.GBP8.6 million. On an
underlying, constant currency basis, total gross profit decreased
by 9.6%.
52 weeks 52 weeks 52 week 53 weeks
ended ended change ended
29 July 23 July 30 July
2017 2016 2016
(audited) (Restated) (Restated)
(unaudited) (audited)
GBPm GBPm % GBPm
Core Retail:
UK 134.5 157.8 (14.8%) 159.6
================= =========== ============= ======== ============
Core Retail:
Spain 68.1 58.3 16.8% 59.2
================= =========== ============= ======== ============
Events, Esports
and Digital 2.5 1.3 92.3% 1.3
================= =========== ============= ======== ============
Total 205.1 217.4 (5.7%) 220.1
================= =========== ============= ======== ============
Core Retail:
Spain (EURm) 79.0 77.4 2.1% 78.5
================= =========== ============= ======== ============
Gross profit by category is analysed in the table below.
52 weeks 52 weeks 52 53 weeks
ended ended week ended
29 July 23 July Growth 30 July
2017 2016 2016
(audited) (Restated) (Restated)
(unaudited) (audited)
% % %pts %
============= =========== ============= ======== ============
Content 32.3 33.1 (0.8) 33.1
Preowned 33.5 35.8 (2.3) 35.9
Accessories
& Other 29.4 34.2 (4.8) 34.2
============= =========== ============= ======== ============
Sub-Total 31.9 34.1 (2.2) 34.1
============= =========== ============= ======== ============
Hardware 6.1 4.2 1.9 4.3
============= =========== ============= ======== ============
Total 26.2 26.8 (0.6) 26.8
============= =========== ============= ======== ============
Note: Gross profit calculated as a % of revenue.
Overall gross profit rates remained broadly stable in the year,
at 26.2% (2016: 26.8%). The Content gross profit rate decreased 0.8
percentage points to 32.3% given the mix of physical and digital
product sales. Preowned margin rates fell 2.3 percentage points due
to the increasing mix of Xbox One and PlayStation 4 (new format)
software and technology products, which achieve lower margin rates
than older format preowned sales. The gross margin of Accessories
& Other fell 4.8 percentage points to 29.4%. This decline was
due to the first-time contribution of virtual reality device sales
launched in the period, which attract a lower margin than the
category average as well as year on year decline in the gross
margin achieved for the licensed merchandise sub-category, due to
the mix of sales within that category. Hardware margin rates
improved 1.9 percentage points to 6.1% due to improved supplier
terms and higher achieved average selling prices on the new console
iterations launched during the year, comprising the Xbox One S,
PlayStation 4 Slim, PlayStation 4 Pro and Nintendo Switch.
Operating expenses
52 weeks ended 29 July 2017 (audited)
Core Events, Esports & Digital Continuing Adjusting Sub-total Exceptional Total
Retail costs items items
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========================== ======= ========================= ========== ========= ========= =========== =======
Selling and distribution (153.2) (1.1) (154.3) - (154.3) - (154.3)
Administrative (45.5) (8.3) (53.8) (12.0) (65.8) - (65.8)
========================== ======= ========================= ========== ========= ========= =========== =======
Total operating expenses (198.7) (9.4) (208.1) (12.0) (220.1) - (220.1)
========================== ======= ========================= ========== ========= ========= =========== =======
Depreciation and
amortisation (10.1) (0.9) (11.0) (9.6) (20.6) - (20.6)
========================== ======= ========================= ========== ========= ========= =========== =======
Operating expenses
excluding D&A (188.6) (8.5) (197.1) (2.4) (199.5) - (199.5)
========================== ======= ========================= ========== ========= ========= =========== =======
53 weeks ended 30 July 2016 (Restated) (audited)
Core Events, Esports & Digital Continuing Adjusting Sub-total Exceptional Total
Retail costs items items
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========================== ======= ========================= ========== ========= ========= =========== =======
Selling and distribution (157.6) 0.6 (157.0) - (157.0) - (157.0)
Administrative (42.0) (5.2) (47.2) (12.4) (59.6) (0.5) (60.1)
========================== ======= ========================= ========== ========= ========= =========== =======
Total Operating expenses (199.6) (4.6) (204.2) (12.4) (216.6) (0.5) (217.1)
========================== ======= ========================= ========== ========= ========= =========== =======
Depreciation and
amortisation (10.3) (0.2) (10.5) (9.1) (19.6) - (19.6)
========================== ======= ========================= ========== ========= ========= =========== =======
Operating expenses
excluding D&A (189.3) (4.4) (193.7) (3.3) (197.0) (0.5) (197.5)
========================== ======= ========================= ========== ========= ========= =========== =======
Continuing operating expenses before exceptional and adjusting
items, comprising selling and distribution and administrative
expenses, increased by GBP3.9 million or 1.9% to GBP208.1 million.
Continuing operating costs, before exceptional and adjusting items
and excluding depreciation and amortisation increased by 1.8% to
GBP197.1 million.
Group continuing selling and distribution expenses decreased
1.7% or GBP2.7 million to GBP154.3 million, whilst Group continuing
administrative costs increased by GBP6.6 million to GBP53.8
million. Expansion of the Events, Esports and Digital businesses
accounted for GBP3.1 million of the increase in Group continuing
administrative costs. Further investment was also made in UK Retail
to strengthen the senior management team and an additional rent
cost of over GBP0.8 million has been incurred following the sale
and leaseback of the distribution centre and head office buildings.
Both the UK and Spain have also invested in the new retail
categories.
Continuing costs 52 weeks 52 weeks Change 53 weeks
- excluding exceptional, ended ended ended
adjusting items 29 July 23 July 30 July
and depreciation 2017 2016 2016
and amortisation
(audited) (Restated) (Restated)
(unaudited) (audited)
GBPm GBPm % GBPm
=========================== =========== ============= ======= ============
Core Retail 188.6 187.4 0.6% 189.3
UK Retail (132.7) (140.1) (5.3%) (141.1)
Spain Retail (55.9) (47.3) 18.2% (48.2)
Events, Esports
and Digital (8.5) (4.4) 93.2% (4.4)
=========================== =========== ============= ======= ============
Total (197.1) (191.8) 2.8% (193.7)
=========================== =========== ============= ======= ============
Spain Retail, EURm (64.8) (62.3) 4.0% (63.3)
=========================== =========== ============= ======= ============
Underlying core retail costs were up 0.6%, at GBP188.6 million
(2016: GBP187.4 million). Within this, UK retail costs were reduced
by 5.3% or GBP7.4 million to GBP132.7 million whilst Spanish retail
costs increased 18.2% to GBP55.9 million predominantly due to the
impact of a weaker pound. Across the Group's UK retail operations,
a number of business efficiencies and cost savings have been
delivered during the year:
-- GBP3.8 million reduction in store payroll
and other store variable costs, before absorbing
additional inflation including the effects
of the national minimum wage of GBP1.5 million
-- A reduction of GBP1.4 million in property
related costs, reflecting savings from renegotiations
completed in the period as well as those
achieved in FY15/16
-- Distribution savings and efficiencies achieved
cost reductions of GBP1.4 million
-- Marketing cost reductions and other efficiencies
and procurement benefits of GBP4.5 million
In local currency, Spanish retail costs for the period increased
by 4.0% or EUR2.5 million, compared with GTV sales growth of 6.7%.
Higher distribution costs and store variable costs mainly linked to
greater sales activity were incurred together with further
investment in central costs to similarly drive the new growth
initiatives including costs associated with the repair centre and
the greater focus on developing the PC category.
Operating expenses across the Group's Events, Esports and
Digital businesses rose GBP4.1 million to GBP8.5 million, with
further investments made across each area. In 2017, for the first
time these costs included expenses incurred in relation to the
Group's new live gaming UK retail concept (BELONG); first full year
of costs for both Ads Reality and Game Esports Spain as well as
increases in Multiplay's costs associated with the ramp up in
trading across both its Events and Digital divisions.
Exceptional and adjusting items
The exceptional items before tax as detailed in note 5, are as
follows:
53 weeks
ended 30
July 2016
52 weeks
ended 29
July 2017 (Restated)
Exceptional items GBPm GBPm
=================== =========== ============
Gain on disposal
of property 6.3 -
Redundancy and
reorganisation
costs - (0.5)
Total 6.3 (0.5)
=================== =========== ============
Exceptional income of GBP6.3 million was recognised in the
period relating to the gain on the sale of the Group's UK head
office and distribution centre.
The adjusting items before tax as detailed in note 5, are as
follows:
52 weeks 53 weeks
ended 29 ended
July 2017
(audited) 30 July
2016
(audited)
GBPm GBPm
===================================== ========== ==========
Brand and other acquired intangibles
amortisation 9.6 9.1
------------------------------------- ---------- ----------
Costs of post-acquisition
remuneration 2.2 2.7
------------------------------------- ---------- ----------
Cost of IPO-related share-based
payment compensation 0.2 -
------------------------------------- ---------- ----------
Costs relating to the acquisition
of Ads Reality - 0.5
------------------------------------- ---------- ----------
Impairment relating to the
acquisition of Ads Reality - 0.1
------------------------------------- ---------- ----------
Total adjusting items 12.0 12.4
===================================== ========== ==========
Amortisation charges increased by GBP0.5 million in the period
as a result of the acquisition of Ads Reality in May 2016. The
post-acquisition remuneration of GBP2.2 million relates to future
amounts of cash and shares payable to certain of the original
directors of Multiplay and adjustments relating to Ads Reality,
linked to their potential earnings. The share-based payment charge
reflects the latest estimate of the cost of awards under the
Group's share incentive plan and the associated national insurance
provision required thereon.
Adjusted EBITDA
52 weeks ended 52 weeks ended
29 July 2017 23 July 2016
(audited) (Restated)
(unaudited)
53
weeks
ended
30
July
2016
(Restated)
Events, Events, (audited)
Core Esports Core Esports 52 week
Retail & Digital Total Retail & Digital Total change
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================= ======== =========== ======== ======== =========== ======== ========== ============
GTV 877.8 13.2 891.0 906.5 6.1 912.6 (21.6) 923.3
Revenue 769.7 13.2 782.9 806.4 6.1 812.5 (29.6) 821.9
================= ======== =========== ======== ======== =========== ======== ========== ============
Gross profit 202.6 2.5 205.1 216.1 1.3 217.4 (12.3) 220.1
Adj. operating
costs ex.
D&A (188.6) (8.5) (197.1) (187.4) (4.4) (191.8) (5.3) (193.7)
================= ======== =========== ======== ======== =========== ======== ========== ============
Adjusted EBITDA 14.0 (6.0) 8.0 28.7 (3.1) 25.6 (17.6) 26.4
================= ======== =========== ======== ======== =========== ======== ========== ============
Adjusted EBITDA
margin % 1.8% (45.5%) 1.0% 3.6% (50.8%) 3.2% (2.2%pts) 3.2%
================= ======== =========== ======== ======== =========== ======== ========== ============
Note: Adjusted EBITDA margin calculated as a % of revenue
Group Adjusted EBITDA (EBITDA less exceptional and adjusting
items) of GBP8.0 million (2016: GBP25.6 million) fell by GBP17.6
million in the period. Core Retail performance reflects a GBP15.9
million decline related to the UK Retail operation whilst the
Spanish Retail operations delivered an Adjusted EBITDA of GBP12.2
million, up GBP1.2 million. The Adjusted EBITDA loss from Events,
Esports and Digital totalled GBP6.0 million (2016 EBITDA loss:
GBP3.1 million) reflecting the scaling of operations to support
future growth ambitions across these areas.
Financing costs
Net financing costs totalled GBP1.3 million (2016: GBP1.1
million). The increase in financing costs reflects more frequent
drawings in Spain over the period and the higher non-utilisation
costs of the new and larger UK facilities.
(Loss)/profit before tax
The loss before tax for the period amounted to GBP10.0 million
(2016 (53 week): GBP1.9 million profit). The profit before tax for
Core Retail was GBP0.4 million (2016 (53 week): GBP9.4 million
profit) and Events, Esports and Digital incurred a loss before tax
of GBP10.4 million (2016 loss: GBP7.5 million).
Taxation
The effective tax rate (defined as the accounting tax charge
divided by the loss/profit before tax) was -21.0% (2016: -68.4%).
The tax rates in both periods has been impacted by a number of
one-off adjustments to the tax charge, unrecognised losses and the
sale of the freehold property in the UK.
(Loss)/Earnings per share
The (losses)/earnings used for the calculation of Adjusted basic
LPS / EPS are as follows:
52 weeks 53 weeks
ended ended
29 July 30 July
2016 2016
(audited) (Restated)
(audited)
================================ ============ ============
(Loss)/profit before tax (10.0) 1.9
Adjusting items 12.0 12.4
Exceptional (gains)/costs (6.3) 0.5
Adjusted (Loss)/profit
before tax (4.3) 14.8
================================ ============ ============
Effective tax rate on above (49%) 7%
Tax (2.1) (1.0)
================================ ============ ============
Adjusted (loss)/profit
after tax (6.4) 13.8
================================ ============ ============
Shares outstanding (basic)
* 169,690,084 168,868,310
================================ ============ ============
Adjusted (loss)/basic earnings
per share (3.8p) 8.2p
================================ ============ ============
* Basic shares outstanding excludes shares held in trust (EBT
and SIP)
In order to give a better view of underlying earnings,
adjustments to earnings per share have been made to remove
exceptional and adjusting items.
The Group reported an Adjusted basic loss per share of 3.8
pence.
On a statutory basis, after the impact of exceptional and
adjusting items, the basic loss per share was 7.1 pence (2016:
earnings per share for 53 weeks ended 30 July 2016 of 1.9
pence).
Cash flow and net cash
52 53
weeks weeks
ended ended
29 30
July July
2017 2016
(audited) (audited)
GBPm GBPm
==================================== =========== ===========
Net cash from operating activities 7.7 4.5
Capital expenditure (11.6) (13.3)
Proceeds from sale of property 13.3 -
==================================== =========== ===========
Cash generated / (used) from
operations after capital
expenditure 9.4 (8.8)
==================================== =========== ===========
Dividends (5.8) (12.4)
Acquisition of business /
subsidiary - (1.5)
Net (repayments)/drawings
of borrowings (0.2) 1.5
Other 0.1 0.2
Cash flow 3.5 (21.0)
==================================== =========== ===========
Opening cash 43.1 63.1
Effect of changes in foreign
exchange rates 0.6 1.0
==================================== =========== ===========
Closing cash 47.2 43.1
Finance lease liabilities (4.6) (4.6)
==================================== =========== ===========
Net cash 42.6 38.5
==================================== =========== ===========
Cash generated from operations
Cash generated from operations amounted to GBP10.0 million
broadly in line with the prior year (2016: GBP10.1 million). A fall
in EBITDA of GBP17.0 million was largely offset by the favourable
movement in working capital and other items of GBP16.9 million.
After finance costs and corporation tax payments, cash generated
from operating activities was GBP7.7 million (2016: GBP4.5
million).
52 53
weeks weeks
ended ended
29 30
July July
2017 2016
(audited) (Restated)
(audited)
GBPm GBPm
=============================== =========== ============
Operating (loss)/profit (8.7) 3.0
Exceptional gain on sale
of property (6.3) -
Depreciation and amortisation 20.6 19.6
=============================== =========== ============
EBITDA 5.6 22.6
=============================== =========== ============
Movement in working capital
and other items 4.4 (12.5)
=============================== =========== ============
Cash generated by operations 10.0 10.1
=============================== =========== ============
Finance costs (1.4) (1.7)
Corporation tax paid (0.9) (3.9)
=============================== =========== ============
Net cash from operating
activities 7.7 4.5
=============================== =========== ============
Working capital generation
ratio, % 57.1% (277.8%)
=============================== =========== ============
Note: Working capital generation ratio calculated as working
capital generated as a % of net cash from operating activities
Capital Expenditure and proceeds from the sale of property
Group capital expenditure amounted to GBP11.6 million (2016:
GBP13.3 million), representing 1.5% of revenue (2016: 1.6%).
Capital expenditure was incurred on investment in the UK and
Spanish retail operations. This included expenditure on 16 new
BELONG arenas, including 7 store relocations, and further upgrade
and maintenance capital expenditure for the existing store
environment, core IT systems and distribution centre. In addition,
capital expenditure was incurred on the Group's online and digital
infrastructure and managed server hosting technology.
Future capital expenditure is planned for the existing physical
estate, focused on the development of more experiential BELONG
gaming arenas, new Game concessions and other planned relocations.
Capital expenditure plans also include visual merchandising
opportunities to improve sales densities in stores in both UK and
Spain. Finally, additional capital expenditure is planned for
online initiatives, core IT and digital infrastructure.
Proceeds from the sale of property of GBP13.3 million (2016:
GBPnil) related to the net sale proceeds received in October 2016
from the sale and leaseback of the Group's freehold property
interests of the distribution centre and head office buildings
located in Basingstoke, UK. The Group continues to operate its
principal UK business activities from its Basingstoke head office
and continues to use its distribution centre as its primary UK
store and online storage and fulfilment centre.
Dividends
Reflecting the decision to increase investment in the Group's
new BELONG concept and optimise the UK estate in light of the
significant number of lease events planned for over the next 12
months, the Board has taken the decision not to declare a final
dividend payment (2016: 1.75 pence per share). Total ordinary
dividend in respect of the financial year therefore totals 1.0
pence per share (2016: 3.42 pence per share).
The Board will continue to evaluate future dividends and remains
committed to returning surplus cash to shareholders after retaining
sufficient capital to fund the required investment to support
future business growth.
Cash resources and financing
As at 29 July 2017, the Group had aggregate available facilities
of approximately GBP77 million (2016: GBP80 million) comprising a
UK asset-backed revolving loan facility agreement with PNC
Financial Services UK Limited and Wells Fargo Capital Finance (UK)
Limited of GBP50 million and short-term financing facilities with
Spanish banks BBVA and Banco Santander amounting to EUR30.0 million
(2016: EUR49.6 million). The UK asset-backed facility can be
increased annually over the peak season by a further GBP25 million.
As at 29 July 2017, the UK and Spain facilities were undrawn.
On 6 October 2017, 14 October 2017, 17 October 2017, 27 October
2017 and 30 October 2017 the Company's Spanish subsidiary, Game
Stores Iberia SLU, entered into and renewed a number of short-term
financing facilities with Spanish banks Banco Bilbao Vizcaya
Argentaria, S.A., Bankia S.A. and Ibercaja Banco S.A. in an
aggregate amount of EUR40,600,000, comprising EUR25,600,000 of
overdraft facilities and EUR15,000,000 of commercial credit
guarantees made available to suppliers by the banks. The cost to
the Group of the overdraft facilities is an arrangement fee up to
0.13 per cent, a quarterly commitment fee of between 0.10 per cent
and 0.18 per cent per annum and interest on drawn funds up to 2.75
per cent per annum above Euribor. The cost to the Group of the bank
guarantees is an arrangement fee of up to 0.15 per cent and a
quarterly commitment fee of between 0.20 per cent and 0.30 per cent
per annum.
The asset-backed revolving loan facility of up to GBP100.0
million with Lajedosa Investments S.à r.l., a related party,
matured on 31 October 2017. No amount had been drawn under this
facility up to the date of maturity.
.
Working capital
Net investment in trade working capital decreased by GBP9.6
million to GBP43.8 million (2016: GBP54.0 million).
29 30
July July
2017 2016
(audited) (audited) Change
Trade working capital GBPm GBPm GBPm
======================= =========== ============ =======
Inventory 81.2 76.1 5.1
Trade receivables 9.9 9.5 0.4
Trade payables (47.3) (31.6) (15.7)
======================= =========== ============ =======
43.8 54.0 (10.2)
======================= =========== ============ =======
The Group is carrying higher stock balances of GBP81.2 million
at the end of the financial year, up GBP5.1 million on last year.
This increase is explained by further investment in growth
categories such as PC accessories and preowned phones and tablets,
as well as the impact of foreign exchange rates on the Spanish
balance. The Group continues to maintain a strong focus on the
efficient management of console software and hardware stock.
The trade receivables balance increased modestly, to GBP9.9
million (2016: GBP9.5 million).
Trade payables increased by GBP15.7 million to GBP47.3 million.
This movement was predominantly due to a strong focus on working
capital management throughout the year as well as a timing benefit
arising from the impact of the 53rd week last year which brought in
an additional supplier payment run for the calendar month end in
July 2016.
Prior period restatements and changes in accounting
estimates
During the period, as part of a detailed review of financial
processes, controls and reconciliations in the UK retail business,
material differences were identified in two balance sheet accounts.
Further investigation highlighted that the differences related to
previous years and, due to their materiality, a prior period error
has been recorded in the financial statements.
The first adjustment relates to the correction of accruals for
stock received but not invoiced, of GBP2.3 million as at 25 July
2015 and a further GBP0.9m in the period ended 30 July 2016.
Secondly, the provision for margin adjustments in relation to the
sale of preowned goods was found to be understated and,
accordingly, GBP0.7 million has been recorded as a deduction from
revenue in the period ended 30 July 2016 and GBP0.9 million in the
period ended 25 July 2015.
Accordingly, the Adjusted EBITDA for the 53 weeks ended 30 July
2016 was restated from GBP28.0 million to GBP26.4 million,
reflecting an additional accrual for stock purchases of GBP0.9
million in the period and margin adjustment on preowned sales of
GBP0.7 million.
The provision relating to the error in margin adjustments was
identified and corrections have been made to restate amounts in the
appropriate accounting periods. In order to recover potentially
overpaid VAT on preowned goods, the error will need to be agreed
with HMRC and, as there is currently no certainty over the
recoverability of part or all of the error, no receivable balance
has been recorded in the financial statements.
In the next financial year, and subject to agreement with HMRC,
any amount recovered will be recorded in the statement of
comprehensive income. Any material recovery will be presented as an
exceptional item, and, subject to the size of the amounts it may
require separate presentation and disclosure.
In addition, an exceptional item of GBP1.4 million was recorded
in the income statement in the period ended 30 July 2016 for gift
card expiries relating to prior periods and other similar prior
year items. This was not considered to be a material prior period
error requiring restatement at the time, however, together with the
amounts identified in the current financial year, this GBP1.4
million has been reflected in the years to which it relates, being
the period ended 25 July 2015 and earlier financial periods.
The Group has also undertaken a review of all its supplier
funding arrangements and how these are reflected in the financial
statements. In accordance with developing accounting practice and
other recent guidance and interpretations, income received from
suppliers in relation to promotional support where there are no
directly attributable costs has been reclassified from other
operating expenses to a deduction within cost of sales and a small
amount recorded as revenue. The impact on the period ended 30 July
2016 has been to record an additional GBP0.1 million of revenue, an
GBP11.8 million deduction to cost of sales and a corresponding
GBP11.9 million increase to other operating expenses. The Adjusted
EBITDA and operating profit for the prior period are unchanged as a
result of this particular restatement.
Following the review into gift card reporting in the previous
year, management have undertaken an additional project in the
current year to age all gift card balances. This review has
resulted in a change in the accounting estimate for the expiry rate
and, accordingly, an additional GBP0.4 million of income has been
recognised in the statement of comprehensive income, reflecting the
change in the expiry rate methodology.
A similar detailed review of loyalty scheme balances by
customers was also undertaken in the year, following a reduction in
the validity period of loyalty scheme points in the previous period
from 18 months to 12 months. This reduction had the effect of
increasing the expiry rate and the resulting income recognition in
the statement of comprehensive income in the current period. The
change also resulted in higher expiries of points accrued in the
previous financial period and, consequently, the value of prior
year points recognised in the statement of comprehensive income
when compared to the provision for expiries made at 30 July 2016.
The reduced cost recorded in the statement of comprehensive income
statement for points awarded in the prior year and recognised as
expired that was incremental to the original accounting estimate of
expected expiries made at 30 July 2016 was GBP1.0 million.
Going concern
The Directors have considered the activities and performance of
the Group together with factors which could potentially affect
future developments. After careful consideration, the Directors
believe that the Group has sufficient cash resources and
appropriate financing facilities to ensure payments can be made as
they fall due.
In making their assessment the Directors have reviewed the
Group's latest budget and forecasts and considered reasonably
possible downside sensitivities in performance and mitigating
actions. These indicate that the Group will operate within its cash
resources, financing facilities and covenants. Accordingly, the
financial statements have been prepared on the going concern
basis.
Viability statement
In accordance with provision C.2.2 of the 2014 revision of the
Code, the Directors have assessed the viability of the Company and
Group over a longer period than the 12 months required by the Going
Concern reporting requirements. The Directors concluded that an
assessment period of three years to July 2020 is appropriate as
this is consistent with the Group's three year plan process. The
Group's plans takes into consideration the current and expected
future market conditions and latest and projected trading
performance, the Group's strategy, plans and the principal risks,
as set out in the Report and Accounts.
In assessing viability, the Directors have considered the
principal risks facing the Group and modelled reasonable downside
scenarios to analyse the cash and borrowing levels as well as the
headroom under the Group's facilities and this modelling included
the potential for and effectiveness of mitigating actions. Various
scenarios were modelled, some of which took account of the impact
of plausible multiple risks occurring and these included faster
declines in the console market including lower sales of physical
software; slower growth in profits from its new growth activities
including its experiential gaming concepts; and potential changes
in the financial position including changes in lending and credit
insurance arrangements. The Directors also considered other
strategic initiatives that could mitigate against the risks
assessed above including the potential sale of parts of the
Group.
Based on this assessment and after careful consideration, the
Directors believe that it is reasonable to expect that the Group
will be able to continue in operation and meet its liabilities as
they fall due over the period to 31 July 2020.
The Strategic report has been approved by the Board of Directors
on 14 November 2017 and is signed on its behalf by:
Martyn Gibbs Mark Gifford
Chief Executive Officer Chief Financial Officer
Consolidated Statement of Comprehensive Income
For the 52 weeks ended 29 July 2017
52 weeks ended 53 weeks ended
29 July 2017 30 July 2016
(Restated)
Core Events, Total Core Events, Total
Retail Esports Retail Esports
& Digital & Digital
Note GBPm GBPm GBPm GBPm GBPm GBPm
=========================== ===== ======== =========== ======== ======== =========== ========
Revenue 3 769.7 13.2 782.9 815.8 6.1 821.9
--------------------------- ----- -------- ----------- -------- -------- ----------- --------
Cost of sales (567.1) (10.7) (577.8) (597.0) (4.8) (601.8)
=========================== ===== ======== =========== ======== ======== =========== ========
Gross profit 202.6 2.5 205.1 218.8 1.3 220.1
=========================== ===== ======== =========== ======== ======== =========== ========
Other operating
expenses 4 (207.3) (12.8) (220.1) (208.3) (8.8) (217.1)
--------------------------- ----- -------- ----------- -------- -------- ----------- --------
Other exceptional
income: gain on
sale of property 5 6.3 - 6.3 - - -
=========================== ===== ======== =========== ======== ======== =========== ========
Operating (loss)/profit
before exceptional
items and other
income (4.7) (10.3) (15.0) 11.0 (7.5) 3.5
Exceptional items 5 6.3 - 6.3 (0.5) - (0.5)
=========================== ===== ======== =========== ======== ======== =========== ========
Operating profit/(loss) 6 1.6 (10.3) (8.7) 10.5 (7.5) 3.0
=========================== ===== ======== =========== ======== ======== =========== ========
Investment income 0.1 - 0.1 0.2 - 0.2
--------------------------- ----- -------- ----------- -------- -------- ----------- --------
Finance costs (1.3) (0.1) (1.4) (1.3) - (1.3)
=========================== ===== ======== =========== ======== ======== =========== ========
Profit/(loss) before
taxation 0.4 (10.4) (10.0) 9.4 (7.5) 1.9
=========================== ===== ======== =========== ======== ======== =========== ========
Taxation (2.2) 0.1 (2.1) 1.0 0.3 1.3
=========================== ===== ======== =========== ======== ======== =========== ========
(Loss)/profit for
the period attributable
to equity holders
of the Company (1.8) (10.3) (12.1) 10.4 (7.2) 3.2
=========================== ===== ======== =========== ======== ======== =========== ========
Total other comprehensive
income - exchange
differences on
translation of
foreign operations 1.7 - 1.7 3.9 - 3.9
=========================== ===== ======== =========== ======== ======== =========== ========
Total comprehensive
(expense)/income
for the period
attributable to
equity holders
of the Company (0.1) (10.3) (10.4) 14.3 (7.2) 7.1
=========================== ===== ======== =========== ======== ======== =========== ========
(Loss)/earnings
per share
--------------------------- ----- -------- ----------- -------- -------- ----------- --------
Basic (pence) 8 (7.1) 1.9
--------------------------- ----- -------- ----------- -------- -------- ----------- --------
Diluted (pence) 8 (7.1) 1.9
=========================== ===== ======== =========== ======== ======== =========== ========
Consolidated Statement of Financial Position
As at 29 July 2017
29 July 30 July 25 July
2017 2016 2015
(Restated) (Restated)
GBPm GBPm GBPm
================================ ==== ======== ============ ============
Non-current assets
-------------------------------- ---- -------- ------------ ------------
Property, plant and equipment 17.2 16.8 19.2
-------------------------------------- -------- ------------ ------------
Intangible assets 47.5 56.7 61.0
-------------------------------------- -------- ------------ ------------
Investments - - 0.2
====================================== ======== ============ ============
Deferred tax asset - 0.2 -
================================ ==== ======== ============ ============
Trade and other receivables 2.5 2.0 -
====================================== ======== ============ ============
67.2 75.7 80.4
===================================== ======== ============ ============
Current assets
-------------------------------- ---- -------- ------------ ------------
Inventories 81.2 76.1 66.2
-------------------------------------- -------- ------------ ------------
Trade and other receivables 23.5 20.4 17.3
-------------------------------------- -------- ------------ ------------
Current income tax assets 1.7 1.5 -
-------------------------------------- -------- ------------ ------------
Financial assets at fair
value through profit
or loss - 0.2 0.9
-------------------------------------- -------- ------------ ------------
Cash and cash equivalents 47.2 48.8 63.1
====================================== ======== ============ ============
153.6 147.0 147.5
===================================== ======== ============ ============
Assets of disposal group -
classified as held for
sale - 7.1
================================ ==== ======== ============ ============
153.6 154.1 147.5
===================================== ======== ============ ============
Total assets 220.8 229.8 227.9
====================================== ======== ============ ============
Current liabilities
-------------------------------- ---- -------- ------------ ------------
Trade and other payables 100.8 89.4 93.2
-------------------------------------- -------- ------------ ------------
Borrowings 2.0 7.2 -
-------------------------------------- -------- ------------ ------------
Current income tax liabilities 2.6 1.3 2.8
-------------------------------------- -------- ------------ ------------
Leasehold property incentives 0.8 1.3 1.3
====================================== ======== ============ ============
106.2 99.2 97.3
===================================== ======== ============ ============
Net current assets 47.4 54.9 50.2
====================================== ======== ============ ============
Non-current liabilities
-------------------------------- ---- -------- ------------ ------------
Trade and other payables - 1.1 0.3
-------------------------------------- -------- ------------ ------------
Borrowings 2.6 3.1 0.1
-------------------------------------- -------- ------------ ------------
Deferred tax liabilities 1.3 1.5 3.0
-------------------------------------- -------- ------------ ------------
Leasehold property incentives 1.5 1.8 2.4
====================================== ======== ============ ============
5.4 7.5 5.8
===================================== ======== ============ ============
Total liabilities 111.6 106.7 103.1
====================================== ======== ============ ============
Net assets 109.2 123.1 124.8
====================================== ======== ============ ============
Equity attributable to
equity holders of the
Company
-------------------------------- ---- -------- ------------ ------------
Share capital 1.7 1.7 1.7
-------------------------------------- -------- ------------ ------------
Share premium 14.4 14.4 13.4
-------------------------------------- -------- ------------ ------------
Merger reserve 130.9 130.9 130.9
-------------------------------------- -------- ------------ ------------
Cumulative translation
reserve (1.7) (3.4) (7.3)
-------------------------------------- -------- ------------ ------------
Other reserve 4.0 2.6 -
====================================== ======== ============ ============
Retained deficit (40.1) (23.1) (13.9)
====================================== ======== ============ ============
Total equity 109.2 123.1 124.8
====================================== ======== ============ ============
Consolidated Statement of Changes in Equity
For the 52 weeks ended 29 July 2017
Cumulative
Share Share Merger translation Other Retained Total
capital premium reserve reserve reserve deficit equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
===================================== ==== ======== ======== ======== ============ ========= ======== =======
At 25 July 2015 (as previously
reported) 1.7 13.4 130.9 (7.3) - (12.5) 126.2
------------------------------------- ---- -------- -------- -------- ------------ --------- -------- -------
Effect of prior period errors 1 - - - - - (1.4) (1.4)
===================================== ==== ======== ======== ======== ============ ========= ======== =======
At 25 July 2015 (restated) 1.7 13.4 130.9 (7.3) - (13.9) 124.8
------------------------------------- ---- -------- -------- -------- ------------ --------- -------- -------
Profit for the period - - - - - 3.2 3.2
------------------------------------- ---- -------- -------- -------- ------------ --------- -------- -------
Other comprehensive income - - - 3.9 - - 3.9
===================================== ==== ======== ======== ======== ============ ========= ======== =======
Total comprehensive income - - - 3.9 - 3.2 7.1
===================================== ==== ======== ======== ======== ============ ========= ======== =======
Issue of share capital - 1.0 - - - - 1.0
------------------------------------- ---- -------- -------- -------- ------------ --------- -------- -------
Credit to equity for equity-settled
share-based payments - - - - - 0.9 0.9
------------------------------------- ---- -------- -------- -------- ------------ --------- -------- -------
Credit to equity for equity-settled
post-acquisition remuneration - - - - 1.9 - 1.9
------------------------------------- ---- -------- -------- -------- ------------ --------- -------- -------
Deferred tax charge relating
to
share-based payments - - - - - (0.2) (0.2)
------------------------------------- ---- -------- -------- -------- ------------ --------- -------- -------
Transfer to other reserve for
prior period
equity-settled post-acquisition
remuneration - - - - 0.7 (0.7) -
------------------------------------- ---- -------- -------- -------- ------------ --------- -------- -------
Dividends 7 - - - - - (12.4) (12.4)
===================================== ==== ======== ======== ======== ============ ========= ======== =======
At 30 July 2016 1.7 14.4 130.9 (3.4) 2.6 (23.1) 123.1
===================================== ==== ======== ======== ======== ============ ========= ======== =======
Loss for the period - - - - - (12.1) (12.1)
------------------------------------- ---- -------- -------- -------- ------------ --------- -------- -------
Other comprehensive income - - - 1.7 - - 1.7
===================================== ==== ======== ======== ======== ============ ========= ======== =======
Total comprehensive income/(expense) - - - 1.7 - (12.1) (10.4)
===================================== ==== ======== ======== ======== ============ ========= ======== =======
Credit to equity for equity-settled
share-based payments - - - - - 0.9 0.9
------------------------------------- ---- -------- -------- -------- ------------ --------- -------- -------
Credit to equity for equity-settled
post-acquisition remuneration - - - - 1.4 - 1.4
------------------------------------- ---- -------- -------- -------- ------------ --------- -------- -------
Dividends 7 - - - - - (5.8) (5.8)
===================================== ==== ======== ======== ======== ============ ========= ======== =======
At 29 July 2017 1.7 14.4 130.9 (1.7) 4.0 (40.1) 109.2
===================================== ==== ======== ======== ======== ============ ========= ======== =======
Consolidated Statement of Cash Flows
For the 52 weeks ended 29 July 2017
52 weeks 53 weeks
ended ended
29 July 30 July
2017 2016
(Restated)
Note GBPm GBPm
================================== ===== ========= ============
Cash flow from operating
activities
---------------------------------- ----- --------- ------------
Operating (loss)/profit (8.7) 3.0
---------------------------------- ----- --------- ------------
Depreciation 6 6.1 5.6
---------------------------------- ----- --------- ------------
Amortisation 6 14.5 14.0
---------------------------------- ----- --------- ------------
Impairment 6 - 0.1
---------------------------------- ----- --------- ------------
Gain on sale of property 5 (6.3) -
---------------------------------- ----- --------- ------------
Loss on disposal of non-current
assets 6 0.2 0.2
---------------------------------- ----- --------- ------------
Cash-settled post-acquisition
remuneration charge 0.8 0.8
---------------------------------- ----- --------- ------------
Share-based payments expense 2.3 2.8
---------------------------------- ----- --------- ------------
Increase in trade and other
receivables (2.8) (3.1)
---------------------------------- ----- --------- ------------
Increase in inventories (3.4) (6.6)
---------------------------------- ----- --------- ------------
Increase/(decrease) in
trade and other payables 8.1 (6.1)
---------------------------------- ----- --------- ------------
Decrease in leasehold incentives (0.8) (0.6)
================================== ===== ========= ============
Cash generated by operations 10.0 10.1
================================== ===== ========= ============
Finance costs paid (1.4) (1.7)
---------------------------------- ----- --------- ------------
Corporation tax paid (0.9) (3.9)
================================== ===== ========= ============
Net cash from operating
activities 7.7 4.5
================================== ===== ========= ============
Cash flows from investing
activities
---------------------------------- ----- --------- ------------
Acquisition of subsidiaries
and businesses, net of
cash acquired - (1.5)
---------------------------------- ----- --------- ------------
Purchase of property, plant
and equipment (6.5) (7.1)
---------------------------------- ----- --------- ------------
Purchase of intangible
assets (5.1) (6.2)
---------------------------------- ----- --------- ------------
Proceeds from sale of property,
plant and equipment 13.3 -
---------------------------------- ----- --------- ------------
Investment income 0.1 0.2
================================== ===== ========= ============
Net cash generated by/(used
in) investing activities 1.8 (14.6)
================================== ===== ========= ============
Cash flows from financing
activities
---------------------------------- ----- --------- ------------
Proceeds from borrowings 1.4 53.3
---------------------------------- ----- --------- ------------
Repayments of borrowings (1.6) (51.8)
---------------------------------- ----- --------- ------------
Dividends paid to owners
of the Company 7 (5.8) (12.4)
================================== ===== ========= ============
Net cash used in financing
activities (6.0) (10.9)
================================== ===== ========= ============
Net increase/(decrease)
in cash and cash equivalents 3.5 (21.0)
---------------------------------- ----- --------- ------------
Cash and cash equivalents
at beginning of period 43.1 63.1
---------------------------------- ----- --------- ------------
Effect of foreign exchange
rates 0.6 1.0
================================== ===== ========= ============
Cash and cash equivalents
at end of period 47.2 43.1
================================== ===== ========= ============
Cash and cash equivalents include the following:
29 July 30 July
2017 2016
GBPm GBPm
=========================== ======== ========
Cash and cash equivalents 47.2 48.8
---------------------------- -------- --------
Bank overdrafts - (5.7)
============================ ======== ========
Cash and cash equivalents 47.2 43.1
============================ ======== ========
Notes
1 Basis of preparation
This statement is based on the Company's financial statements
which are prepared in accordance with International Financial
Reporting Standards (IFRS) and IFRS Interpretation Committee (IFRS
IC) interpretations as adopted by the European Union and in
accordance with the Companies Act 2006 applicable to companies
reporting under IFRS.
With the exception of the new and revised standards adopted in
the year, as discussed below, there have been no significant
changes in accounting policies from those set out in the GAME
Digital plc's Annual Report and Accounts 2016. The accounting
policies have been applied consistently throughout the 52 week
period ended 29 July 2017 and 53 week period ended 30 July
2016.
The financial information set out in this statement does not
constitute the Group's statutory accounts for the 52 week period
ended 29 July 2017 and 53 week period ended 30 July 2016 but is
derived from those accounts. Statutory accounts for 2016 have been
delivered to the Registrar of Companies and those for 2017 will be
delivered following the Company's Annual General Meeting. The
auditor's reports on the 2016 and 2017 accounts were unqualified,
did not draw attention to any matters by way of emphasis without
qualifying their report and did not contain a statement under
section 498(2) or (3) of the Companies Act 2006.
The following new and revised standards and interpretations are
relevant to the Group and have been adopted for the first time for
the financial period. Their adoption has not had any significant
impact on the amounts reported in the financial statements:
-- Annual Improvements 2012 - 2014 Cycle
-- Amendments to IAS 1 Presentation of Financial
Statements
-- Amendments to IAS 16 Property, Plant and
Equipment and IAS 38 Intangible Assets
-- Amendments to IAS 27 Consolidated and Separate
Financial Statements
-- Amendments to IFRS 11 Acquisitions of Interests
in Joint Operations
Going concern
The Directors have a reasonable expectation that the Group and
the Company has adequate financial resources to ensure it continues
to operate for a period of not less than 12 months from the
approval of the Financial Statements. In reaching their conclusion
the Directors have carefully considered the cash resources and
financing facilities available to the Group and have reviewed
budgets and forecasts including downside sensitivities. Given this
information the Directors have adopted the going concern basis of
accounting in preparing the financial statements.
2 Prior period restatements
During the period as part of a detailed review of processes,
controls and reconciliations in the UK business, material
differences were identified in two balance sheet accounts. Further
investigation highlighted that the differences related to previous
years and due to their materiality, require restatement of the
results for the 53 week period ended 30 July 2016 as well as the
consolidated statement of financial position as at 30 July 2016 and
at 25 July 2015.
The first adjustment related to the correction of accruals for
stock received but not invoiced of GBP2.3m in the period ended 25
July 2015 and a further GBP0.9m in the period ended 30 July 2016.
The second adjustment was for a provision for margin adjustments in
relation to the sale of preowned goods of GBP0.9m in the period
ended 25 July 2015 and GBP0.7m in the period ended 30 July
2016.
The provision relating to the error in margin adjustments was
identified and corrections have been made to restate amounts in the
appropriate accounting periods. In order to recover potentially
overpaid VAT on preowned goods, the error will need to be agreed
with HMRC and, as there is currently no certainty over the
recoverability of part or all of the error, no receivable balance
has been recorded in the financial statements.
In the next financial year, and subject to agreement with HMRC,
any amount recovered will be recorded in the statement of
comprehensive income. Any material recovery will be presented as an
exceptional item, and, subject to the size of the amounts it may
require separate presentation and disclosure.
In addition, an exceptional item of GBP1.4m was recorded in the
statement of comprehensive income in the period ended 30 July 2016
for gift card expiries relating to prior periods and other similar
items. This was recorded in the 2016 financial statements as an
exceptional item as it was not considered a material prior period
error requiring restatement at the time. However together with the
amounts above that have been identified to relate to the period
ended 25 July 2015, the previously disclosed exceptional item of
GBP1.4m has been reflected in the years to which it relates being
the period ended 25 July 2015 and earlier financial periods.
In addition to the prior period error, the Group has undertaken
a review of all its supplier funding arrangements and how these are
reflected in the financial statements. In light of developing
accounting practice and other recent guidance and interpretations,
income received from suppliers in relation to promotional support
where there are no directly attributable costs has been
reclassified from other operating expenses to a deduction within
cost of sales with a small proportion recorded as revenue.
A summary of the combined impact of the prior period adjustments
as well as the reclassification of certain marketing income on the
consolidated statement of comprehensive income and consolidated
statement of cash flows for the 53 weeks ended 30 July 2016 as well
as the consolidated statement of financial position as at 30 July
2016 and at 25 July 2015 arising from the restatements is as
follows:
Consolidated statement of comprehensive income for the 53 weeks
ended 30 July 2016
Total Additional Marketing
as accrual Preowned Exceptional income Tax
previously for margin items reclassification effect Restated
reported stock
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================== ============= =========== =========== ============== ================= ========= ===========
Revenue 822.5 - (0.7) - 0.1 - 821.9
------------------ ------------- ----------- ----------- -------------- ----------------- --------- -----------
Cost of sales (612.7) (0.9) - - 11.8 - (601.8)
================== ============= =========== =========== ============== ================= ========= ===========
Gross profit 209.8 (0.9) (0.7) - 11.9 - 220.1
================== ============= =========== =========== ============== ================= ========= ===========
Other operating
expenses (203.8) - - (1.4) (11.9) - (217.1)
------------------ ------------- ----------- ----------- -------------- ----------------- --------- -----------
Operating
profit/(loss)
before
exceptional
items 5.1 (0.9) (0.7) - - - 3.5
Exceptional
items 0.9 - - (1.4) - - (0.5)
================== ============= =========== =========== ============== ================= ========= ===========
Operating
profit/(loss) 6.0 (0.9) (0.7) (1.4) - - 3.0
================== ============= =========== =========== ============== ================= ========= ===========
Investment income 0.2 - - - - - 0.2
------------------ ------------- ----------- ----------- -------------- ----------------- --------- -----------
Finance costs (1.3) - - - - - (1.3)
================== ============= =========== =========== ============== ================= ========= ===========
Profit/(loss)
before taxation 4.9 (0.9) (0.7) (1.4) - - 1.9
================== ============= =========== =========== ============== ================= ========= ===========
Taxation 0.7 - - - - 0.6 1.3
================== ============= =========== =========== ============== ================= ========= ===========
Profit/(loss)
for the period
attributable
to equity
holders
of the Company 5.6 (0.9) (0.7) (1.4) - 0.6 3.2
================== ============= =========== =========== ============== ================= ========= ===========
Total other
comprehensive
income -
exchange
differences
on translation
of foreign
operations 3.9 - - - - - 3.9
================== ============= =========== =========== ============== ================= ========= ===========
Total
comprehensive
income/(expense)
for the period
attributable
to equity
holders
of the Company 9.5 (0.9) (0.7) (1.4) - 0.6 7.1
================== ============= =========== =========== ============== ================= ========= ===========
Consolidated statement of cash flows for the 53 weeks ended 30
July 2016
Total Additional Marketing
as previously accrual Preowned Exceptional income Tax
reported for margin items reclassification effect Restated
stock
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================ =============== =========== =========== ============== ================= ========= ===========
Net cash from
operating
activities 4.5 - - - - - 4.5
---------------- --------------- ----------- ----------- -------------- ----------------- --------- -----------
Net cash used
in investing
activities (14.6) - - - - - (14.6)
---------------- --------------- ----------- ----------- -------------- ----------------- --------- -----------
Net cash used
in financing
activities (10.9) - - - - - (10.9)
================ =============== =========== =========== ============== ================= ========= ===========
Net decrease
in cash and
cash
equivalents (21.0) - - - - - (21.0)
---------------- --------------- ----------- ----------- -------------- ----------------- --------- -----------
Cash and cash
equivalents
at beginning
of period 63.1 - - - - - 63.1
---------------- --------------- ----------- ----------- -------------- ----------------- --------- -----------
Effect of
foreign
exchange rates 1.0 - - - - - 1.0
================ =============== =========== =========== ============== ================= ========= ===========
Cash and cash
equivalents
at end of
period 43.1 - - - - - 43.1
================ =============== =========== =========== ============== ================= ========= ===========
Consolidated statement of financial position as at 30 July
2016
Additional
As accrual Preowned Exceptional
previously for margin items Tax Restated
reported stock effect
GBPm GBPm GBPm GBPm GBPm GBPm
=========================== ============ =========== =========== ============== ========= ===========
Non-current assets
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Property, plant
and equipment 16.8 - - - - 16.8
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Intangible assets 56.7 - - - - 56.7
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Deferred tax asset 0.2 - - - - 0.2
=========================== ============ =========== =========== ============== ========= ===========
Trade and other
receivables 2.0 - - - - 2.0
=========================== ============ =========== =========== ============== ========= ===========
75.7 - - - - 75.7
=========================== ============ =========== =========== ============== ========= ===========
Current assets
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Inventories 76.1 - - - - 76.1
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Trade and other
receivables 20.4 - - - - 20.4
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Current income tax
assets 0.5 - - - 1.0 1.5
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Financial assets
at fair value through
profit or loss 0.2 - - - - 0.2
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Cash and cash equivalents 48.8 - - - - 48.8
=========================== ============ =========== =========== ============== ========= ===========
146.0 - - - 1.0 147.0
=========================== ============ =========== =========== ============== ========= ===========
Assets of disposal
group classified
as held for sale 7.1 - - - - 7.1
=========================== ============ =========== =========== ============== ========= ===========
153.1 - - - 1.0 154.1
=========================== ============ =========== =========== ============== ========= ===========
Total assets 228.8 - - - 1.0 229.8
=========================== ============ =========== =========== ============== ========= ===========
Current liabilities
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Trade and other
payables 84.6 3.2 1.6 - - 89.4
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Borrowings 7.2 - - - - 7.2
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Current income tax
liabilities 1.3 - - - - 1.3
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Leasehold property
incentives 1.3 - - - - 1.3
=========================== ============ =========== =========== ============== ========= ===========
94.4 3.2 1.6 - - 99.2
=========================== ============ =========== =========== ============== ========= ===========
Net current assets 58.7 (3.2) (1.6) - 1.0 54.9
=========================== ============ =========== =========== ============== ========= ===========
Non-current liabilities
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Trade and other
payables 1.1 - - - - 1.1
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Borrowings 3.1 - - - - 3.1
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Deferred tax liabilities 1.5 - - - - 1.5
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Leasehold property
incentives 1.8 - - - - 1.8
=========================== ============ =========== =========== ============== ========= ===========
7.5 - - - - 7.5
=========================== ============ =========== =========== ============== ========= ===========
Total liabilities 101.9 3.2 1.6 - - 106.7
=========================== ============ =========== =========== ============== ========= ===========
Net assets 126.9 (3.2) (1.6) - 1.0 123.1
=========================== ============ =========== =========== ============== ========= ===========
Equity attributable
to equity holders
of the Company
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Share capital 1.7 - - - - 1.7
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Share premium 14.4 - - - - 14.4
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Merger reserve 130.9 - - - - 130.9
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Cumulative translation
reserve (3.4) - - - - (3.4)
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Other reserve 2.6 - - - - 2.6
=========================== ============ =========== =========== ============== ========= ===========
Retained deficit (19.3) (3.2) (1.6) - 1.0 (23.1)
=========================== ============ =========== =========== ============== ========= ===========
Total equity 126.9 (3.2) (1.6) - 1.0 123.1
=========================== ============ =========== =========== ============== ========= ===========
Consolidated statement of financial position as at 25 July
2015
Additional
As accrual Preowned Exceptional
previously for margin items Tax Restated
reported stock effect
GBPm GBPm GBPm GBPm GBPm GBPm
=========================== ============ =========== =========== ============== ========= ===========
Non-current assets
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Property, plant
and equipment 19.2 - - - - 19.2
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Intangible assets 61.0 - - - - 61.0
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Investments 0.2 - - - - 0.2
=========================== ============ =========== =========== ============== ========= ===========
80.4 - - - - 80.4
=========================== ============ =========== =========== ============== ========= ===========
Current assets
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Inventories 66.8 - - (0.6) - 66.2
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Trade and other
receivables 17.8 - - (0.5) - 17.3
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Financial assets
at fair value through
profit or loss 0.9 - - - - 0.9
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Cash and cash equivalents 63.1 - - - - 63.1
=========================== ============ =========== =========== ============== ========= ===========
148.6 - - (1.1) - 147.5
=========================== ============ =========== =========== ============== ========= ===========
Total assets 229.0 - - (1.1) - 227.9
=========================== ============ =========== =========== ============== ========= ===========
Current liabilities
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Trade and other
payables 92.5 2.3 0.9 (2.5) - 93.2
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Current income tax
liabilities 3.2 - - - (0.4) 2.8
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Leasehold property
incentives 1.3 - - - - 1.3
=========================== ============ =========== =========== ============== ========= ===========
97.0 2.3 0.9 (2.5) (0.4) 97.3
=========================== ============ =========== =========== ============== ========= ===========
Net current assets 51.6 (2.3) (0.9) 1.4 0.4 50.2
=========================== ============ =========== =========== ============== ========= ===========
Non-current liabilities
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Trade and other
payables 0.3 - - - - 0.3
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Borrowings 0.1 - - - - 0.1
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Deferred tax liabilities 3.0 - - - - 3.0
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Leasehold property
incentives 2.4 - - - - 2.4
=========================== ============ =========== =========== ============== ========= ===========
5.8 - - - - 5.8
=========================== ============ =========== =========== ============== ========= ===========
Total liabilities 102.8 2.3 0.9 (2.5) (0.4) 103.1
=========================== ============ =========== =========== ============== ========= ===========
Net assets 126.2 (2.3) (0.9) 1.4 0.4 124.8
=========================== ============ =========== =========== ============== ========= ===========
Equity attributable
to equity holders
of the Company
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Share capital 1.7 - - - - 1.7
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Share premium 13.4 - - - - 13.4
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Merger reserve 130.9 - - - - 130.9
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Cumulative translation
reserve (7.3) - - - - (7.3)
--------------------------- ------------ ----------- ----------- -------------- --------- -----------
Retained deficit (12.5) (2.3) (0.9) 1.4 0.4 (13.9)
=========================== ============ =========== =========== ============== ========= ===========
Total equity 126.2 (2.3) (0.9) 1.4 0.4 124.8
=========================== ============ =========== =========== ============== ========= ===========
3 Segmental information
The Group's Chief Executive Officer is the Group's chief
operating decision-maker. Management has determined the operating
segments based on the information reviewed by the Chief Executive
Officer for the purposes of allocating resources and assessing
performance.
The Group's Chief Executive Officer considers the business from
a geographic perspective for the retail businesses, namely the UK
(including one store in the Isle of Man) and Spain and these
segments are separately managed.
Recent acquisitions and new business ventures, comprising
BELONG, Multiplay (UK) Limited, Ads Reality Limited and Game
Esports Spain, are presented as a separate segment titled 'Events,
Esports & Digital'. The performance of this segment is reviewed
separately by the Chief Executive Officer, the activities are
different to those of the retail segments and significant growth is
expected in the next few years.
The Group's Chief Executive Officer assesses the performance of
the operating segments based on Gross Transaction Value, Revenue
and Adjusted EBITDA defined as follows:
-- Gross Transaction Value is a non-IFRS measure
defined as total retail receipts and all
other Group revenue excluding VAT and before
the deduction of revenue deferral relating
to loyalty points and other accounting adjustments.
Gross Transaction Value reflects the full
retail 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.
-- Revenue is measured in a manner consistent
with that in the statement of comprehensive
income.
-- The Group defines Adjusted EBITDA as operating
profit before depreciation and amortisation,
exceptional and adjusting items (note 5).
Adjusted EBITDA is a supplemental measure
of the Group's performance and liquidity
that is not required to be presented in accordance
with IFRS.
The segment information provided to the Chief Executive Officer
for the reportable segments is as follows:
53 weeks ended 30
July 2016
52 weeks ended 29
July 2017 (Restated)
Events, Events,
Esports Esports
Core & Digital Core & Digital
Retail Total Retail Total
GBPm GBPm GBPm GBPm GBPm GBPm
================== ======= ========== ===== ======== ========== =====
Gross Transaction
Value
------------------ ------- ---------- ----- -------- ---------- -----
UK 562.0 12.7 574.7 655.7 6.1 661.8
------------------ ------- ---------- ----- -------- ---------- -----
Spain 315.8 0.5 316.3 261.5 - 261.5
================== ======= ========== ===== ======== ========== =====
Total Gross
Transaction
Value 877.8 13.2 891.0 917.2 6.1 923.3
================== ======= ========== ===== ======== ========== =====
Revenue
------------------ ------- ---------- ----- -------- ---------- -----
UK 491.3 12.7 504.0 583.4 6.1 589.5
------------------ ------- ---------- ----- -------- ---------- -----
Spain 278.4 0.5 278.9 232.4 - 232.4
================== ======= ========== ===== ======== ========== =====
Total revenue
from external
customers 769.7 13.2 782.9 815.8 6.1 821.9
================== ======= ========== ===== ======== ========== =====
52 weeks 53 weeks
ended 29 ended
July 2017
30 July
2016
(Restated)
GBPm GBPm
============================= === ========== ===========
Total Gross Transaction
Value 891.0 923.3
---------------------------------- ---------- -----------
Digital cost of sales (108.2) (93.6)
---------------------------------- ---------- -----------
Other agency cost of sales (3.5) (2.6)
---------------------------------- ---------- -----------
Loyalty points deferral (5.9) (10.5)
---------------------------------- ---------- -----------
Other accounting adjustments 9.5 5.3
================================== ========== ===========
Total revenue 782.9 821.9
================================== ========== ===========
In the current year, management performed a detailed review and
recalculation of the loyalty scheme in the UK following a reduction
in the expiry period in the previous financial year. This resulted
in a lower deduction for loyalty point redemptions being recorded
in the current period revenue relating to a change in the
accounting estimate of future expiries.
Other accounting adjustments comprise movements in provisions
and estimates (including accounting for gift card, returns and
deposits), other revenue for the Core Retail segment and marketing
income (note 2).
53 weeks ended 30
July 2016
52 weeks ended 29
July 2017 (Restated)
Events, Events,
Esports Esports
Core & Digital Core & Digital
Retail Total Retail Total
GBPm GBPm GBPm GBPm GBPm GBPm
========================== ======= ========== ======= ======== ========== =======
Adjusted EBITDA
-------------------------- ------- ---------- ------- -------- ---------- -------
UK 1.8 (5.3) (3.5) 18.5 (2.9) 15.6
-------------------------- ------- ---------- ------- -------- ---------- -------
Spain 12.2 (0.7) 11.5 11.0 (0.2) 10.8
========================== ======= ========== ======= ======== ========== =======
Total Adjusted
EBITDA 14.0 (6.0) 8.0 29.5 (3.1) 26.4
========================== ======= ========== ======= ======== ========== =======
Depreciation
and amortisation (10.1) (0.9) (11.0) (10.3) (0.2) (10.5)
-------------------------- ------- ---------- ------- -------- ---------- -------
Adjusting items
(note 5):
-------------------------- ------- ---------- ------- -------- ---------- -------
Brand and other
acquired intangibles
amortisation (8.4) (1.2) (9.6) (8.2) (0.9) (9.1)
-------------------------- ------- ---------- ------- -------- ---------- -------
Costs of post-acquisition
remuneration - (2.2) (2.2) - (2.7) (2.7)
-------------------------- ------- ---------- ------- -------- ---------- -------
Cost of IPO-related
share-based
compensation (0.2) - (0.2) - - -
-------------------------- ------- ---------- ------- -------- ---------- -------
Acquisition-related
costs - - - - (0.5) (0.5)
-------------------------- ------- ---------- ------- -------- ---------- -------
Impairment of
investment - - - - (0.1) (0.1)
-------------------------- ------- ---------- ------- -------- ---------- -------
Total adjusting
items (8.6) (3.4) (12.0) (8.2) (4.2) (12.4)
========================== ======= ========== ======= ======== ========== =======
Exceptional
items (note
5) - - - (0.5) - (0.5)
-------------------------- ------- ---------- ------- -------- ---------- -------
Other exceptional
income: gain
on sale of property
(note 5) 6.3 - 6.3 - - -
-------------------------- ------- ---------- ------- -------- ---------- -------
Investment income 0.1 - 0.1 0.2 - 0.2
-------------------------- ------- ---------- ------- -------- ---------- -------
Finance costs (1.3) (0.1) (1.4) (1.3) - (1.3)
========================== ======= ========== ======= ======== ========== =======
Profit/(loss)
before taxation 0.4 (10.4) (10.0) 9.4 (7.5) 1.9
========================== ======= ========== ======= ======== ========== =======
53 weeks ended 30
July 2016
52 weeks ended 29
July 2017 (Restated)
Events, Events,
Esports Esports
Core & Digital Core & Digital
Retail Total Retail Total
GBPm GBPm GBPm GBPm GBPm GBPm
================== ======= ========== ===== ======== ========== =====
Total assets
------------------ ------- ---------- ----- -------- ---------- -----
UK 129.7 17.6 147.3 149.7 20.3 170.0
------------------ ------- ---------- ----- -------- ---------- -----
Spain 72.9 0.6 73.5 59.2 0.6 59.8
================== ======= ========== ===== ======== ========== =====
Combined total
assets 202.6 18.2 220.8 208.9 20.9 229.8
================== ======= ========== ===== ======== ========== =====
Total liabilities
------------------ ------- ---------- ----- -------- ---------- -----
UK 66.2 5.6 71.8 65.2 7.1 72.3
------------------ ------- ---------- ----- -------- ---------- -----
Spain 39.8 - 39.8 34.4 - 34.4
================== ======= ========== ===== ======== ========== =====
Combined total
liabilities 106.0 5.6 111.6 99.6 7.1 106.7
================== ======= ========== ===== ======== ========== =====
For the purposes of monitoring segmental performance and
allocating resources between segments, the Group's Chief Executive
Officer monitors the current and non-current assets and current and
non-current liabilities attributable to each segment. All assets
and liabilities are allocated to reportable segments.
Other segment information
52 weeks ended 29 53 weeks ended 30
July 2017 July 2016
Events, Events,
Esports Esports
Core & Digital Core & Digital
Retail Total Retail Total
GBPm GBPm GBPm GBPm GBPm GBPm
================== ======= ========== ===== ======== ========== =====
Depreciation
and amortisation
------------------ ------- ---------- ----- -------- ---------- -----
UK 15.9 2.1 18.0 16.1 1.1 17.2
------------------ ------- ---------- ----- -------- ---------- -----
Spain 2.6 - 2.6 2.4 - 2.4
================== ======= ========== ===== ======== ========== =====
Total 18.5 2.1 20.6 18.5 1.1 19.6
================== ======= ========== ===== ======== ========== =====
52 weeks ended 29 53 weeks ended 30
July 2017 July 2016
Events, Events,
Esports Esports
Core & Digital Core & Digital
Retail Total Retail Total
GBPm GBPm GBPm GBPm GBPm GBPm
=========== ============== ========== ===== ======== ========== =====
Additions to non-current
assets
--------------------------- ---------- ----- -------- ---------- -----
UK 7.4 2.6 10.0 12.4 4.0 16.4
----------- -------------- ---------- ----- -------- ---------- -----
Spain 1.6 - 1.6 1.6 0.6 2.2
=========== ============== ========== ===== ======== ========== =====
Total 9.0 2.6 11.6 14.0 4.6 18.6
=========== ============== ========== ===== ======== ========== =====
No impairment losses against property, plant and equipment and
intangible assets have been recognised against any segment in
either of the periods presented above.
Revenues from major products and services
The Group's revenues from its major products and services were
as follows:
52 weeks 53 weeks
ended 29 ended
July 2017
30 July
2016
(Restated)
GBPm GBPm
====================== === ========== ===========
Content 286.9 313.8
--------------------------- ---------- -----------
Preowned 174.8 188.0
--------------------------- ---------- -----------
Accessories and Other 147.8 117.9
=========================== ========== ===========
Sub-total 609.5 619.7
--------------------------- ---------- -----------
Hardware 173.4 202.2
=========================== ========== ===========
Total revenue 782.9 821.9
=========================== ========== ===========
Content revenue includes income relating to the sale of gaming
products for use on hardware platforms, including both physical and
digital content. Digital content is reported on a commission basis
and is recognised net of associated purchase costs. Preowned
includes the sale of preowned content, hardware and mobile devices.
Accessories and Other includes the sale of console accessories, PC,
VR and related accessories, licensed merchandise and all other
retail revenue and all revenue from the Events, Esports &
Digital segment. Hardware represents the sale of console platforms.
No single customer contributed more than 10% to Group revenue.
The Group's revenue from external customers, based on the
destination of the customer, and information on non-current assets
by geographical location are detailed below:
Revenue Non-current assets
52 weeks 53 weeks
ended 29 ended
July 2017
30 July 29 July 30 July
2016 2017 2016
(Restated)
GBPm GBPm GBPm GBPm
====== ========== =========== ========= =========
UK 495.5 584.9 56.6 64.4
------ ---------- ----------- --------- ---------
Spain 279.1 232.6 10.6 11.3
------ ---------- ----------- --------- ---------
Other 8.3 4.4 - -
====== ========== =========== ========= =========
Total 782.9 821.9 67.2 75.7
====== ========== =========== ========= =========
Revenue from the individual countries included within Other are
not material.
4 Other operating expenses
52 weeks 53 weeks
ended 29 ended
July 2017
30 July
2016
(Restated)
GBPm GBPm
========================== === ========== ===========
Selling and distribution
costs 154.3 157.0
------------------------------- ---------- -----------
Administrative expenses 65.8 60.1
=============================== ========== ===========
Total operating expenses 220.1 217.1
=============================== ========== ===========
Less exceptional items - (0.5)
=============================== ========== ===========
Other operating expenses
before exceptional items 220.1 216.6
=============================== ========== ===========
5 Exceptional and adjusting items
The Group defines exceptional items as per the accounting
policy. Certain items that do not meet the definition of
exceptional but, in management's view are not reflective of
underlying trading, are presented as adjusting items, when
calculating non-GAAP performance measures, namely Adjusted EBITDA
(note 3) and Adjusted Earnings per Share (note 8).
52 weeks 53 weeks
ended 29 ended
July 2017
30 July
2016
Exceptional items (Restated)
GBPm GBPm
=================================== === ========== ===========
Other exceptional income:
gain on sale of freehold property 6.3 -
======================================== ========== ===========
Redundancy and reorganisation
costs - (0.5)
======================================== ========== ===========
Total 6.3 (0.5)
======================================== ========== ===========
On 7 October 2016, the Group sold its freehold property interest
in the distribution centre and head office buildings located in
Basingstoke, UK, and entered into an immediate leaseback of these
premises. The total cash consideration was GBP13.5m less
transaction costs of GBP0.2m resulting in an exceptional gain of
GBP6.3m.
Redundancy and reorganisation costs were associated with the
implementation of the organisational redesign for the UK businesses
in the previous period to ensure they were structured and resourced
to drive future growth opportunities and to realise savings
opportunities.
Adjusting items in the period are as follows:
52 weeks 53 weeks
ended 29 ended
July 2017 30 July
Adjusting items 2016
GBPm GBPm
===================================== ========== ========
Brand and other acquired intangibles
amortisation 9.6 9.1
-------------------------------------- ---------- --------
Costs of post-acquisition
remuneration 2.2 2.7
-------------------------------------- ---------- --------
Cost of IPO-related share-based
payment compensation 0.2 -
-------------------------------------- ---------- --------
Costs relating to the acquisition
of Ads Reality - 0.5
-------------------------------------- ---------- --------
Impairment relating to the
acquisition of Ads Reality - 0.1
====================================== ========== ========
Total adjusting items 12.0 12.4
====================================== ========== ========
Brand amortisation arose in the UK on the purchase of the trade
and assets from the former GAME Group plc and in Spain on
consolidation of the company. Following the acquisition of
Multiplay (UK) Limited and Ads Reality, the separately identifiable
intangible assets were capitalised, including brand value, customer
relationships and contracts and technology, and amortised over
their useful lives. These amortisation charges are recurring costs
to the Group and therefore not classified as exceptional, however,
as they are significant non-cash items and are not reflective of
the underlying trading of the business are presented as adjusting
items.
Post-acquisition remuneration relates to cash and shares payable
to certain selling shareholders agreed at the time of the
acquisition of Multiplay (UK) Limited and this cost is in addition
to recurring annual remuneration for these employees. Similar
post-acquisition remuneration is also payable, subject to certain
performance criteria, in shares or cash to certain senior
management of Ads Reality and is in addition to recurring annual
remuneration for these employees.
One-off awards of ordinary shares were made in conjunction with
the IPO in June 2014. The share-based payments charge and
associated costs in respect of these awards are presented within
adjusting items due to the nature of the awards. Subsequent annual
awards are included within operating expenses as they are a
recurring cost to the Group.
Legal and professional fees associated with the acquisition of
Ads Reality and impairment of the investment are not deemed
significant enough to meet the definition of exceptional items.
However, as the costs are acquisition related and not part of the
underlying trading of the business they are classified as
adjusting.
6 Operating profit/(loss)
52 weeks 53 weeks
ended 29 ended
July 2017 30 July
2016
GBPm GBPm
============================================== ========== ========
Operating profit/(loss) is stated after
charging/(crediting):
---------------------------------------------- ---------- --------
Depreciation of property, plant and equipment 6.1 5.6
----------------------------------------------- ---------- --------
Gain on sale of freehold property (6.3) -
----------------------------------------------- ---------- --------
Loss on disposal of non-current assets 0.2 0.2
----------------------------------------------- ---------- --------
Amortisation of intangible assets 14.5 14.0
----------------------------------------------- ---------- --------
Impairment of investment - 0.1
----------------------------------------------- ---------- --------
Staff costs 96.2 87.1
----------------------------------------------- ---------- --------
Net foreign exchange losses 0.1 -
----------------------------------------------- ---------- --------
Operating lease rentals - leasehold premises 34.5 33.1
----------------------------------------------- ---------- --------
- other 0.3 0.3
=============================================== ========== ========
7 Dividends
Amounts recognised as distributions to owners of the Company in
the period:
52 weeks 53 weeks
ended 29 ended
July 2017 30 July
2016
GBPm GBPm
============================= ========== ========
Final dividend for the 52
weeks ended 25 July 2015
of 7.35p per share - 12.4
------------------------------ ---------- --------
Interim dividend for the
53 weeks ended 30 July 2016
of 1.67p per share 2.8 -
------------------------------ ---------- --------
Final dividend for the 53
weeks ended 30 July 2016
of 1.75p per share 3.0 -
============================== ========== ========
Total 5.8 12.4
============================== ========== ========
Amounts proposed and not recognised as distributions to owners
of the Company in the period:
Proposed interim dividend
for the 52 weeks ended 29
July 2017 of 1.0p (2016:
1.67p) per share * 1.7 2.8
================================ === ===
Proposed final dividend
for the 52 weeks ended 29
July 2017 of nil pence (2016:
1.75p) per share - 3.0
================================ === ===
* The proposed interim dividend for the 52 weeks ended 29 July
2017 was paid to shareholders after the end of the accounting
period on 4 August 2017 and therefore has not been included as a
liability in these financial statements as per the accounting
policy.
The GAME Digital plc Employee Benefit Trust has waived all
dividends payable by the Company in respect of the ordinary shares
held by it. The total dividends waived in the period were GBPnil
(2016: GBP0.1m).
8 (Loss)/earnings per share
(Loss)/earnings per share has been calculated by dividing the
(loss)/profit for the period by the weighted average number of
ordinary shares in issue during the period.
Basic
52 weeks 53 weeks
ended ended
29 July 30 July
2017 2016
(Restated)
GBPm GBPm
===================================== ============ ============
(Loss)/profit for the period
attributable to equity holders
of the Company (12.1) 3.2
===================================== ============ ============
Weighted average number of ordinary
shares in issue 170,859,106 170,214,777
===================================== ============ ============
Less: weighted average number
of shares held in trusts (1,169,022) (1,346,467)
===================================== ============ ============
Weighted average number of ordinary
shares for basic earnings per
share 169,690,084 168,868,310
===================================== ============ ============
Basic (loss)/earnings per share
(pence) (7.1) 1.9
===================================== ============ ============
Diluted
52 weeks 53 weeks
ended ended
29 July 30 July
2017 2016
(Restated)
GBPm GBPm
===================================== ============ ============
(Loss)/profit for the period
attributable to equity holders
of the Company (12.1) 3.2
===================================== ============ ============
Weighted average number of ordinary
shares in issue for basic earnings
per share 169,690,084 168,868,310
------------------------------------- ------------ ------------
Effect of dilutive potential
ordinary shares:
------------------------------------- ------------ ------------
Share options and equity-settled
post-acquisition remuneration - 2,826,591
===================================== ============ ============
Weighted average number of ordinary
shares for diluted earnings
per share 169,690,084 171,694,901
===================================== ============ ============
Diluted (loss)/earnings per
share (pence) (7.1) 1.9
===================================== ============ ============
There was no difference in the weighted average number of shares
used for the calculation of basic and diluted loss per share for
the period ended 29 July 2017 as the effect of all potentially
dilutive shares outstanding was anti-dilutive.
Adjusted (loss)/earnings per share
52 weeks 53 weeks
ended ended
29 July 30 July
2017 2016
(Restated)
GBPm GBPm
======================================== ============ ============
(Loss)/profit for the period
attributable to equity holders
of the Company (12.1) 3.2
---------------------------------------- ------------ ------------
Adjusting items:
---------------------------------------- ------------ ------------
Brand and other acquired intangibles
amortisation 9.6 9.1
---------------------------------------- ------------ ------------
Costs of post-acquisition remuneration 2.2 2.7
---------------------------------------- ------------ ------------
Cost of IPO-related share-based 0.2 -
compensation
---------------------------------------- ------------ ------------
Costs relating to the acquisition
of Ads Reality - 0.5
---------------------------------------- ------------ ------------
Impairment relating to the acquisition
of Ads Reality - 0.1
======================================== ============ ============
Total adjusting items 12.0 12.4
======================================== ============ ============
Other exceptional income: gain (6.3) -
on sale of property
---------------------------------------- ------------ ------------
Exceptional items - 0.5
---------------------------------------- ------------ ------------
Tax on items above - (2.3)
======================================== ============ ============
Adjusted (loss)/profit for the
period attributable to equity
holders of the Company (6.4) 13.8
======================================== ============ ============
Weighted average number of ordinary
shares in issue for adjusted
basic earnings per share 169,690,084 168,868,310
Adjusted basic (loss)/earnings
per share (pence) (3.8) 8.2
======================================== ============ ============
Weighted average number of ordinary
shares in issue for adjusted
diluted earnings per share 169,690,084 171,694,901
======================================== ============ ============
Adjusted diluted (loss)/earnings
per share (pence) (3.8) 8.0
======================================== ============ ============
9 Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation.
Transactions with related parties
In the previous period Game Retail Limited received software and
development services from Paperclip Mobile Limited, a company in
which the Group had a 3% holding. The fees paid for these services
amounted to GBP0.1m and services were discontinued in May 2016 when
the Group acquired the trade and assets of Paperclip Mobile
Limited.
Game Stores Iberia SLU has a lease agreement for a property in
which a member of key management owns 50% of the ordinary share
capital of the lessor company. The annual rent is GBP0.1m and the
lease term is for a period of five years from June 2015, however
the lessee can terminate the lease at any time by providing three
months' notice.
There were no amounts (2016: GBPnil) owed by or to related
parties at the end of the financial period.
On 20 April 2016, the Company, its subsidiary Game Retail
Limited (as borrower) and certain other subsidiaries of the Company
entered into an asset-backed revolving loan facility of up to
GBP100.0m with Lajedosa Investments S.à r.l., a related party which
expired on 31 October 2017. Lajedosa Investments S.à r.l. is an
associate of Duodi Investments S.à r.l. which is a related party of
the Company by virtue of holding approximately 42.98% of the
Company's ordinary share capital. No amount had been drawn under
this facility up to the period end date. The cost to the Group of
this facility should it be activated is a commitment fee of 0.5%
per annum on the undrawn committed amount and interest on drawn
funds of 5.5% per annum above LIBOR.
10 Post balance sheet events
Spanish financing facilities
On 6 October 2017, 14 October 2017, 17 October 2017, 27 October
2017 and 30 October 2017 the Company's Spanish subsidiary, Game
Stores Iberia SLU, entered into and renewed a number of short-term
financing facilities with Spanish banks Banco Bilbao Vizcaya
Argentaria, S.A., Bankia S.A. and Ibercaja Banco S.A. in an
aggregate amount of EUR40,600,000, comprising EUR25,600,000 of
overdraft facilities and EUR15,000,000 of commercial credit
guarantees made available to suppliers by the banks. The cost to
the Group of the overdraft facilities is an arrangement fee up to
0.13 per cent, a quarterly commitment fee of between 0.10 per cent
and 0.18 per cent per annum and interest on drawn funds up to 2.75
per cent per annum above Euribor. The cost to the Group of the bank
guarantees is an arrangement fee of up to 0.15 per cent and a
quarterly commitment fee of between 0.20 per cent and 0.30 per cent
per annum.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FZLLFDFFXFBX
(END) Dow Jones Newswires
November 15, 2017 02:01 ET (07:01 GMT)
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