TIDMGMD
RNS Number : 5122T
GAME Digital PLC
21 March 2019
21 March 2019
GAME DIGITAL PLC
Interim results for the 26 weeks ended 26 January 2019
GAME Digital plc ('GAME' or the 'Group') today announces its
interim results for the 26 week period ended 26 January 2019 (the
'period'). All comparator periods are for the 26 weeks ended 27
January 2018 ('2018') unless otherwise stated.
26 weeks ended 26 weeks ended
All figures in GBPm (unless 26 January 27 January
stated) 2019 2018 % Change
================ ================
Statutory measures
Revenue 492.9 517.4 (4.7)
Gross profit 121.6 123.1 (1.2)
Profit before tax 14.8 12.3 20.3
Net cash from operating activities 41.6 32.2 29.2
Basic earnings per share 7.0p 5.4p 29.6
Cash and cash equivalents 95.5 84.9 12.5
Selected non-IFRS measures
Gross Transaction Value (GTV)(1) 578.4 586.8 (1.4)
GTV - Events & Esports (excluding
Multiplay Digital) 5.5 7.1 (22.5)
Gross profit rate(2) 21.0% 21.0% -
Adjusted EBITDA(3) - Group 25.8 21.2 21.7
Adjusted EBITDA - Core Retail 26.9 22.3 20.6
Adjusted EBITDA - Events &
Esports(4) (1.1) (1.1) -
Adjusted profit before tax(5) 19.9 14.2 40.1
Adjusted (basic) earnings per
share (EPS) 9.8p 6.4p 53.1
========================================= ================ ================ ==========
Financial Headlines
-- Solid GTV and gross profit rate performance achieved in a challenging
retail and trading environment. On a like-for-like basis, GTV
was broadly flat
-- Group GTV of GBP578.4 million, down 1.4% year-on-year
-- GTV improvement of 5.8% in Content (physical and digital)
-- GTV increased by 9.2% in Accessories & Other
-- GTV in Hardware down 9.3% and Preowned down 20.9%
-- Group gross profit rate maintained at 21.0%
-- Group Adjusted EBITDA of GBP25.8 million (2018: GBP21.2 million)
an increase of 21.7%
-- Strong Core UK Retail performance with Adjusted EBITDA growth
of 49.5% to GBP14.8 million from improved gross profit rate
and the delivery of GBP4.9 million of operational efficiencies
and cost savings
-- Core Spanish Retail performance reflects a small increase
in GTV and Adjusted EBITDA broadly in line with last year
-- Events & Esports saw growth in BELONG(TM) revenue and gross
profit and, as anticipated, a decline in revenue in the Events
business from a reduction in the number of events, resulted
in an Adjusted EBITDA loss of GBP1.1 million, flat on last
year
-- Continued strong liquidity with Group cash of GBP95.5 million
as at 26 January 2019 (2018: GBP84.9 million) and access to aggregated
facilities as at today's date of up to GBP110 million across
the UK and Spain
Operational and Strategic Headlines
-- Continued material cost savings driven from the rent negotiation
programme, store payroll efficiencies and other store, head office
and distribution savings.
-- Further strategic progress achieved towards repositioning and
right sizing the retail business in the UK, combined with strong
cash management
-- Average lease length to break in the UK and Spain under one year
and savings in the first half of 59% on those leases renegotiated
-- 20% increase in BELONG stations in the period, and 44% year-on-year,
with two new BELONG arenas opened and increased number of stations
in existing arenas
-- Transforming our retail business to create a far lower cost operation
whilst investing in BELONG remain the priorities for the Group
Martyn Gibbs, Chief Executive Officer, said:
"We are pleased with our performance in the first half
delivering a 22% growth in Adjusted EBITDA and a material
improvement in cash and liquidity during the period. Our core
retail businesses are facing a challenging retail environment that
continues to evolve at pace, but we have set ourselves up well with
our transformation programme and continued focus on costs and
efficiencies.
"Despite the market backdrop, the Group delivered a solid GTV
performance and maintained its gross profit rate. Exclusives on new
game releases, sales growth in higher margin categories and
focusing on our multichannel and specialist customer offerings
helped to offset a weaker console hardware market and the continued
structural decline of the preowned market.
"During the period the UK Retail business delivered further
efficiency improvements and achieved considerable cost savings
across all areas including store operating and fixed costs,
distribution and head office costs. Our flexible lease profile
gives us a unique opportunity to work closely with landlords to
manage our store portfolio and we continue to deliver, and
anticipate ongoing, rent reductions.
"BELONG remains core to our transformation strategy and we have
continued to pursue the expansion of this business through
enlarging current arenas, opening new arenas and are planning for
bigger arenas in more locations. We expect the property market to
further favour the tenant leading to improved deals being available
for the rollout. Esports shows strong growth potential and we will
capitalise on our unique position in the market to further expand
our opportunities.
"The improved Group profitability in the half and strong cash
position means that we are well placed to advance our strategic
priorities in the coming months whilst managing our business
closely in the current challenging retail environment."
Market Update and Outlook
The retail sector is facing further challenges over the coming
months with considerable economic uncertainty and weakening
consumer confidence. Our retail performance is also impacted by the
console cycle which has entered its sixth year and is likely to
lead to a decline in low margin console sales, however, physical
software sales have held up well. For the 6 weeks ended 9 March
2019, the mint market in the UK was down 5.9% and in Spain it was
down 3.8% (down 2.3% on a constant currency basis).
The current market expectations are for a new PlayStation
console to launch in 2020. Alongside this we are managing the low
point of the cycle through our cost savings programme and
investment and growth in BELONG.
Gaming continues to change and the development of ways for more
players to access games has been evolving rapidly. Apex Legends
launched in February 2019 and is a disrupter in this ever-changing
market, however, as we demonstrated with Fortnite, we have the
opportunity to monetise through digital currency, high-end
accessories and licensed merchandise.
Our focus remains on our transformational strategy to move from
a seller of physical products to providing gaming experiences and
services. As more consumer focus and spend moves to experiences, we
are well advanced in delivering unique, world class gaming at both
local and national level.
The Board were pleased with the performance of the Group in the
period and the progress made in its transformation strategy. We
believe there will be ongoing economic uncertainty and market
headwinds which are expected to affect the performance of the Group
in the near term, however we remain confident in the longer term
growth prospects of the Group.
The Board will announce its full year results for the 52 weeks
ending 27 July 2019 in November 2019.
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 later today.
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014 ("MAR"). Upon the publication of this
announcement this inside information is now considered to be in the
public domain.
Enquiries
+44 (0) 1256
GAME Digital plc 784 000
Martyn Gibbs Chief Executive
Officer
Ray Kavanagh Chief Financial
Officer
+44 (0) 20 7638
Citigate Dewe Rogerson 9571
Jos Bieneman
Michael Russell
Notes:
1. Gross Transaction Value ('GTV') 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) and other similar arrangements and thereby includes the
publishers' and sellers' shares of those transactions (see note 1
to the condensed financial statements). GTV provides the most
reliable measure of activity in an environment where more sales are
expected to move from physical to digital.
2. Gross profit rate calculated as statutory gross profit as a percentage of GTV.
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 1 to the
condensed financial statements).
4. Adjusted EBITDA for Events & Esports includes Multiplay
Digital in the previous period up to the date of the disposal on 28
November 2017.
5. The calculation of Adjusted profit before tax excludes all
exceptional and adjusting items (see note 1 to the condensed
financial statements).
6. Adjusted basic earnings per share is calculated as set out in
note 6 to the condensed financial statements.
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 540 stores across the
two areas, a fully integrated multichannel offer including the
multi-award winning GAME App, and over 4.4 million active customers
across its Reward programmes. GAME is developing its proposition
with the continued expansion of BELONG, the Group's leisure
experience, which brings video-gaming to high streets, shopping
centres and communities nationwide. 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. The
Group's visual recognition and augmented reality business, Ads
Reality, is pioneering the use of new technologies to reach gamers
and business partners outside its main markets.
For more information please visit:
www.gamedigitalplc.com, www.game.co.uk, www.game.es,
www.insomniagamingfestival.com or www.adsreality.com
CHIEF EXECUTIVE'S STATEMENT
The video games markets in the UK and Spain have continued to
evolve rapidly and our strategy has ensured that we have met the
needs of our customers and supplier partners over this key period,
whilst advancing the profitability and cash position of the Group.
This provides us with a sound base for further investment and
development of the business in the future.
Group GTV declined by just 1.4% in the period with continued
growth in Digital at 21.7% and Core Accessories & Other up
14.5%, offsetting the decline in Preowned (down 20.9%) and Hardware
(down 9.3%) while Physical Software held its own as the Group
secured exclusives on the majority of new releases in the period.
Revenue was GBP492.9 million (2018: GBP517.4 million), down GBP24.5
million or 4.7% in the period. The growth in Digital and
Accessories & Other reflects the demand for console & PC
accessories associated with Fortnite and other Battle Royale games
and of people spending longer playing individual games.
The growth in sales of higher margin categories, such as new
release exclusives, console and PC accessories and licensed
merchandise, helped to maintain our gross profit rate (calculated
as gross profit as a percentage of GTV) at 21.0% (2018: 21.0%). The
overall Group gross profit was GBP1.5 million lower than last year,
but with the UK cost saving programme generating c.GBP4.9 million
of savings and reduced operating costs associated with the sale of
Multiplay Digital last year, the Group Adjusted EBITDA increased by
GBP4.6 million to GBP25.8 million (2018: GBP21.2 million).
Profit before tax was a solid performance of GBP14.8 million
(2018: GBP12.3 million, which included GBP6.0 million of
exceptional income on the sale of Multiplay Digital). The basic
earnings per share was 7.0 pence (2018: 5.4 pence) whilst on an
adjusted basis, this was 9.8 pence (2018: 6.4 pence).
Segmental performance
Core Retail delivered a positive performance for the half given
the current retail landscape and this demonstrates the success of
our strategic pillars.
UK Retail delivered a 49.5% growth in Adjusted EBITDA to GBP14.8
million (2018: GBP9.9 million). GTV saw a decline of 1.8% which was
broadly flat on a like-for-like basis. Revenue declined 5.4% to
GBP302.8 million (2018: GBP320.0 million), impacted by lower
Preowned and Hardware sales. In spite of this, both gross profit
and the gross profit rate were up year-on-year, primarily due to a
higher rate on Software, driven by new release exclusives. Cost
saving actions delivered improvements in many areas and resulted in
a GBP4.9 million reduction in underlying operating expenses
compared to the previous period.
Spain Retail saw GTV increase by 0.7% although a decline in
revenue of 2.1%. Accessories & Other and Digital both performed
strongly, and the gross profit rate was largely maintained at 20.1%
(2018: 20.2%) despite the change in category mix. Underlying
operating expenses were marginally higher year-on-year and this
resulted in an Adjusted EBITDA of GBP12.1 million (2018: GBP12.4
million).
Events & Esports (which includes the results of Multiplay
Digital up to the date of the sale in November 2017) had a mixed
performance in the period. BELONG saw revenue and gross profit
growth including a 52.2% increase in pay-to-play revenue which has
a 100% margin rate. Events experienced a decline in overall
profitability from the reduction in the level of UK activity and
focused on growing our international franchise proposition which
led to lower revenue and profitability. Adjusted EBITDA for this
segment was a loss of GBP1.1 million (2018 loss: GBP1.1 million)
though this position is expected to improve for the full year
results as we see further growth in BELONG.
The improvement in profitability and strong working capital
management have resulted in total net cash of GBP95.5 million
(2018: GBP84.9 million) and there were no facilities drawn in the
UK and Spain as at the balance sheet date (2018: GBPnil). The UK
business did not utilise any of its facilities during the
period.
Our mint markets
% change UK (GBP) Spain Group
(EUR) (GBP)(2)
====================== ========== ======== ===========
Total Retail Market
(1) +3.6% +1.9% +3.2%
====================== ========== ======== ===========
(1) Source: GfK Chart-Track; based on value of retail sales of
mint console hardware, software, digital and accessories. 26 weeks
ended 26 January 2019 vs. 26 weeks ended 27 January 2018 (restated
- prior year market information in the UK has been restated by GfK
Chart-Track)
(2) UK and Spanish markets combined. Spain converted into
sterling equivalent
The mint console markets in the UK and Spain have both seen
growth in the period, reflecting the continued strong demand for
digital currency and console accessories associated with Fortnite
and other Battle Royale games, and the total gaming market in which
we operate grew by 3.2% in the first half.
In the UK, the software market value was down marginally versus
the prior year, however, our market share in this category grew
year-on-year in part due to the exclusives secured on new game
releases which help to drive higher sales at higher prices. Strong
competition on hardware and accessories sales led to our overall
market share for the period falling one percentage point to 26%
(2018: 27%). Black Friday is a highly competitive time for retail
sales in the UK with significant discounting across the market. We
decided to reduce the level of promotional activity over this week
and, although our sales were lower which reduced market share, our
gross profit was not negatively impacted due to a higher gross
profit rate achieved versus the prior year.
The Spanish market experienced a decline in total software and
hardware sales in comparison to the previous year. The market share
for our Spanish business was 37% (2018: 38%) and the reduction was
from a combination of discounting by competitors and a further
shift to online as this channel is less well developed in
Spain.
Consumer demand for Digital content and PC & console
accessories is expected to remain strong, particularly with the
recent release of Apex Legends. There are a number of new releases
in the second half of the financial year to drive software sales
(e.g. Kingdom Hearts III and The Division 2) and other significant
new releases anticipated for later in the calendar year. However,
the economic uncertainty and reduced consumer confidence continues
to impact the wider retail market.
Strategic update
In building the most valuable community for gamers we have three
key pillars:
1. Improving the core specialist retail offering
As a specialist retailer in the video gaming market, we continue
to enhance our proposition and differentiate ourselves based on the
changing needs and behaviours of customers, in order to maximise
our profitability.
We continued to work with our supplier partners to expand our
exclusive proposition across new game releases and licensed
merchandise and these higher margin products have contributed to
maintaining the Group's gross profit rate at 21.0% (2018: 21.0%)
for the period and also helped to drive sales in a challenging and
competitive market despite the continued decline in preowned
revenues.
Our product proposition has been enhanced and PC accessories
will continue to be a core focus area alongside further development
of our gaming services.
Further enhancements to the online customer journey and delivery
options have led to an improved online conversion and market share.
New initiatives for our multichannel proposition are planned to
launch later this year to further enhance the online offering.
Active loyalty scheme members across the Group totalled 4.4
million (2018: 4.6 million) and the number of registered app users
has increased to 2.3 million (2018: 2.0 million), both of which
drive engagement and sales growth and demonstrate our importance to
our customers.
2. Optimising the organisation to deliver efficiencies
A total of GBP4.9 million of cost savings have been achieved in
the UK in the period, including GBP1.4 million of store rent
savings. Initiatives and actions in the period delivered
efficiencies across all areas of the business and we completed the
head office reorganisation that commenced in the previous financial
year.
The store optimisation programme has continued in the UK and our
flexible lease profile gives us a unique opportunity to work
closely with our landlords, renegotiating rent and other store
fixed costs. As a result of these ongoing lease negotiations,
GBP0.5 million of additional annualised rent savings were agreed in
the period and store rent costs were GBP1.4 million lower than the
previous year. Our average lease length to break was 0.8 years
(2018: 1.1 years) and we have 190 potential lease events before the
end of 2019, of which over 70% are on short-term flexible
arrangements, and thus well-placed to constantly review our store
portfolio and associated cost base in the challenging retail
market.
A significant number of notices were recently served on
landlords to accelerate this programme of savings and the
annualised rent reductions to date now equates to GBP2.2 million
with further potential opportunities continuing to be
negotiated.
The store estate in Spain is similarly reviewed and the average
period to earliest break is also 0.8 years (2018: 0.9 years).
Stores are opened, closed and relocated when appropriate, although
the 'bricks and mortar' retail market remains much stronger in
Spain than the UK so opportunities to renegotiate rent costs are
more limited.
The Group has maintained strong cash and working capital
discipline across the period and net cash at 26 January 2019 was
GBP95.5 million (2018: GBP84.9 million). All facilities in the UK
and Spain were undrawn at the balance sheet date and in conjunction
with the net cash balance, this places the Group in a good position
for the future to focus on the expansion and growth of BELONG and
to deliver long-term returns to shareholders.
3. Expanding the Group's live gaming services
The expansion of the Group's live gaming service, BELONG,
remains a key objective and we increased the number of stations by
20% in the half and by 44% year on year. We continue to focus on
station growth through new and larger locations for future
arenas.
Like-for-like arenas saw pay-to-play revenue growth of 32% while
those arenas which increased station count saw revenue grow 72%.
This was compared to 17% pay-to-play revenue growth in the arenas
that did not have an increase in stations.
The total number of stations at 26 January 2019 was 440(1) (27
January 2018: 305(1) ) and the utilisation rate for the period was
28.0% compared to 28.5% in the prior year period. The average price
per hour was up 6.3% to GBP4.71. We are looking to drive a higher
utilisation rate by introducing a subscription model that is
currently being trialled. Initial results have shown an increase at
current low utilisation times without impacting high utilisation
times, driving a net revenue upside through higher utilisation at a
reduced price per hour.
With the aid of our BELONG customer segment analysis we are
gaining increased insight in to the different types of gamers
frequenting our arenas and we then adapt the local gaming
experiences and focus to drive utilisation. These segmentation
types are also being used to plan for new arenas.
Arena Clash, whereby the arena tribe teams compete against one
another is growing in adoption and the Spring season has seen the
addition of FIFA 19 and Rainbow Six to the line-up alongside League
of Legends, Tekken 7 and Overwatch. 22 arenas participated and in
one arena alone we saw 40 gamers competing for a place in the
League of Legends Championship team. In the second half of this
financial year, we will be launching Arena Rivals, a new
competitive gaming offer in Arena Clash off season times.
The first international Insomnia franchise event took place in
Egypt in October 2018 and achieved a footfall of over 10,000.
Insomnia Dubai has also been announced for October 2019, Insomnia
Dublin in November 2019 and we are having further discussions with
new and existing franchise partners on potential new
territories.
Notes:
1. Excludes ALT Gaming Lounge, Nottingham which was refitted and
rebranded to BELONG, and its Arena Clash tribe announced, in
January 2019.
Conclusion
The Group has produced a solid sales and gross profit
performance in the period, despite the challenges in the retail
sector. We have been able to capitalise on our position as a
specialist retailer to enhance our customer proposition and work
collaboratively with our supplier partners. Our cost optimisation
programme has produced further savings and we continue to look at
ways to reshape our retail businesses for the future. BELONG
remains the key focus for the transformation of the Group and we
are pursuing the rollout of additional stations.
FINANCIAL REVIEW
Group Results
26 weeks 26 weeks 26 week
ended 26 ended 27 change
January January
2019 2018
Statutory Results - IFRS measures GBPm GBPm %
======================================== =========== =========== =========
Revenue 492.9 517.4 (4.7)
Gross profit 121.6 123.1 (1.2)
Profit before tax 14.8 12.3 20.3
Net cash from operating activities 41.6 32.2 29.2
Basic earnings per share 7.0p 5.4p 29.6
Cash and cash equivalents 95.5 84.9 12.5
======================================== =========== =========== =========
Selected Non-IFRS measures
======================================== =========== =========== =========
Gross Transaction Value (GTV) 578.4 586.8 (1.4)
GTV - Events & Esports (excluding
Multiplay Digital) 5.5 7.1 (22.5)
Gross profit rate 21.0% 21.0% -
Adjusted EBITDA 25.8 21.2 21.7
Adjusted EBITDA - Core Retail 26.9 22.3 20.6
Adjusted EBITDA - Events
& Esports (1.1) (1.1) -
Adjusted profit before tax 19.9 14.2 40.1
Adjusted (basic) earnings
per share 9.8p 6.4p 53.1
======================================== =========== =========== =========
Revenue and Gross Transaction Value
Group revenue for the 26 week period was GBP492.9 million (2018:
GBP517.4 million) and was impacted by the continued decline of the
Preowned category in the UK and the growth in digital sales which
are recorded at the net commission element earned. Gross
Transaction Value ('GTV') includes the full retail sales value of
digital sales and therefore provides a more reliable measure of
activity where more sales are moving from physical to digital.
The Group GTV by category is analysed in the table below and a
reconciliation to revenue is provided in note 1 to the condensed
financial statements.
26 weeks 26 weeks 26 week
ended 26 ended 27 change
January January
2019 2018
Gross Transaction GBPm GBPm %
Value
====================== =========== =========== =========
Content 280.8 265.3 5.8
Hardware 133.1 146.7 (9.3)
Accessories & Other 95.3 87.3 9.2
Preowned 69.2 87.5 (20.9)
====================== =========== =========== =========
Total 578.4 586.8 (1.4)
====================== =========== =========== =========
Content GTV, which includes both physical and digital gaming
content, increased by 5.8% to GBP280.8 million (2018: GBP265.3
million). Within this total, the GTV of all physical software
formats was in line with the previous year, with a decline in Xbox
One and older generation format games being offset by growth in
Nintendo Switch(TM) sales. Digital sales have continued to grow at
a similar rate to that seen in the second half of last year and,
within this category, console digital sales were up 28.9% versus
the previous year, driven by the demand for currency and additional
content.
Hardware GTV was GBP133.1 million (2018: GBP146.7 million) where
sales of Nintendo Switch and PlayStation 4 consoles grew
year-on-year, were offset by a decline in Xbox One and older
formats sales, particularly in the UK business.
The GTV of the Accessories & Other category increased GBP8.0
million to GBP95.3 million (2018: GBP87.3 million). Console and PC
accessories were up 16.7% and licensed merchandise performed well,
boosted by sales of Fortnite and new gaming titles-related
merchandise. These categories more than compensated for lower sales
from Toys-to-Life and VR. Events & Esports GTV was impacted by
a different line-up and scope of events and from the sale of
Multiplay Digital during the prior year.
The Preowned Group GTV declined by 20.9% to GBP69.2 million
(2018: GBP87.5 million), largely due to the structural decline of
the market in the UK. Preowned software sales were down 18.5%, in
part due to a lack of titles from a weaker mint market in the
previous year. Sales of preowned mobile phones (GAMEtronics) were
also down 25.5% as consumers are now keeping phones for longer.
Gross profit
The Group gross profit for the period was GBP121.6 million
(2018: GBP123.1 million), down GBP1.5 million or 1.2% from the
previous period, compared to a 4.7% decline in revenue. The change
in mix of products sold in the period, particularly the decline in
lower margin Hardware sales and an increase in Accessories &
Other as indicated in the GTV table above, has helped to mitigate
the fall in revenue.
The gross profit rate (calculated as gross profit as a
percentage of GTV) for the Group was flat at 21.0% (2018: 21.0%).
This calculation of the rate provides a more consistent approach to
measuring gross profit where more sales are moving from physical to
digital.
26 weeks 26 weeks 26 week
ended 26 ended 27 change
January January
2019 2018
Gross profit rate % % %pts
(% of GTV)
====================== =========== =========== =========
Content 21.7 21.6 0.1
Hardware 7.7 7.1 0.6
Accessories & Other 30.1 32.9 (2.8)
Preowned 31.5 30.5 1.0
====================== =========== =========== =========
Total 21.0 21.0 -
====================== =========== =========== =========
The Content gross profit rate improved by 0.1 percentage points
to 21.7%, despite the increase in lower margin Digital sales in the
period. The rates achieved on new generation Software (PlayStation
4 and Xbox One), particularly in the UK, were up versus the
previous period, in part due to the Group's strategy to secure
exclusives on new releases which typically result in a higher
margin. The Group also took the decision to reduce the level of
promotional activity over Black Friday and, although this resulted
in lower sales compared to the previous year, the gross profit
value was maintained and the rate improved year-on-year,
particularly on Software and Hardware sales.
The gross profit rate in the Accessories & Other category,
which comprises a mix of products and services at different margin
rates, from low margin VR to the 100% margin rate of BELONG
pay-to-play, decreased by 2.8 percentage points to 30.1% (2018:
32.9%). Although higher rates were achieved on categories such as
console and PC accessories and licensed merchandise, the Events
business and other categories saw a drop in the level of
profitability in the period.
The Preowned gross profit rate for the period was 31.5%, 1.0
percentage point better than the previous year. Although sales in
this category have fallen, improved controls over trade-in and sale
prices and additional products available online, have helped to
improve the overall profitability.
Operating expenses
Underlying operating expenses (before adjusting and exceptional
items) decreased by GBP7.2 million or 6.6% to GBP101.1 million
(2018: GBP108.3 million), driven by further cost saving initiatives
and actions in the UK retail business. Total underlying operating
expenses in the Spain Retail business were marginally higher than
the previous period although the impact of statutory wage increases
was largely absorbed by savings across other areas.
26 weeks ended 26 26 weeks ended 27
January 2019 January 2018
Core Events Core Events
Retail & Esports Total Retail & Esports Total
GBPm GBPm GBPm GBPm GBPm GBPm
================================ ========= ============ ========= =========== ============ =========
Selling and distribution 75.7 1.0 76.7 79.7 0.8 80.5
Administrative 22.4 2.0 24.4 24.0 3.8 27.8
================================ ========= ============ ========= =========== ============ =========
Total underlying operating
expenses 98.1 3.0 101.1 103.7 4.6 108.3
Depreciation and amortisation (4.8) (0.5) (5.3) (5.8) (0.6) (6.4)
================================ ========= ============ ========= =========== ============ =========
Underlying operating expenses
excluding D&A 93.3 2.5 95.8 97.9 4.0 101.9
================================ ========= ============ ========= =========== ============ =========
Excluding depreciation and amortisation, underlying operating
expenses decreased by GBP6.1m and comprised GBP4.9m reduction in
the UK Retail business, GBP1.5m reduction in Events & Esports
and an increase of GBP0.3m in Spain Retail.
Group selling and distribution costs were GBP76.7 million, down
GBP3.8 million from the previous year. Events & Esports saw a
small increase in costs from the continued investment in BELONG,
while Core Retail costs were GBP4.0 million lower. This reduction
reflected the cost savings in the UK on store rent and payroll
costs plus distribution and other store efficiencies.
Group administrative expenses fell GBP3.4 million to GBP24.4
million (2018: GBP27.8 million). Events & Esports accounted for
GBP1.8 million of this reduction and the majority of the
improvement resulted from the sale of Multiplay Digital and lower
costs in the Events business. Core Retail costs were lower because
of the head office reorganisation that commenced in the second half
of the previous year and continued into the current period.
Depreciation and amortisation charges for the Group were GBP5.3
million, down GBP1.1 million. Total Group capital expenditure has
fallen in the last couple of years and been focused on BELONG and
other strategic spend only, thereby resulting in these depreciation
and amortisation costs to gradually fall.
Adjusted EBITDA
26 weeks 26 weeks 26 week
ended ended change
26 January 27 January
2019 2018
Adjusted EBITDA GBPm GBPm %
=================== ============= ============= =========
UK Retail 14.8 9.9 49.5
Spain Retail 12.1 12.4 (2.4)
=================== ============= ============= =========
Core Retail 26.9 22.3 20.6
Events & Esports (1.1) (1.1) -
=================== ============= ============= =========
Total 25.8 21.2 21.7
=================== ============= ============= =========
A reconciliation of Adjusted EBITDA to the profit before tax is
provided in note 1 to the condensed financial statements.
The Group delivered an Adjusted EBITDA of GBP25.8 million (2018:
GBP21.2 million) for the period, an improvement of GBP4.6 million.
UK Retail was the driver of the improved profitability and although
market conditions were challenging in terms of revenue, the
annualisation of prior year cost saving actions plus further
initiatives and efficiencies in the year have led to this positive
result. Spain Retail Adjusted EBITDA of GBP12.1 million (2018:
GBP12.4 million) was largely in line with the previous period.
Events & Esports Adjusted EBITDA loss of GBP1.1 million
(2018 loss: GBP1.1 million) was in line with the previous period.
The Events business saw a reduction in the number of events in the
period as it focused on its key Insomnia franchise which led to
lower profitability whereas BELONG saw an improvement in its
profitability.
Segmental results
Core Retail
UK
26 weeks 26 weeks 26 week
ended ended change
26 January 27 January
2019 2018
GBPm GBPm %
================================== ============= ============= =========
Gross Transaction Value 359.1 365.5 (1.8)
Revenue 302.8 320.0 (5.4)
Gross profit rate % 21.5% 21.1% 0.4%pts
Underlying operating
expenses (excluding
depreciation and amortisation) 62.4 67.3 (7.3)
Adjusted EBITDA 14.8 9.9 49.5
================================== ============= ============= =========
UK Retail saw GTV decline by 1.8% and revenue was down 5.4% or
GBP17.2 million to GBP302.8 million (2018: GBP320.0 million) with
the higher percentage reduction in revenue due to the recording of
Digital sales on a net commission basis (Digital GTV was up 20.0%).
Revenue in both the Preowned and Hardware categories was down
versus the previous period, although this was partially mitigated
by an increase in Software revenue, driven by the performance of
new releases and demand for Nintendo Switch games. Due to this
change in sales category mix and a focus on improved terms, the
gross profit rate improved by 0.4 percentage points to 21.5%.
Underlying operating expenses before depreciation and
amortisation charges were down GBP4.9 million and this net
reduction included the following operating cost savings:
- A decrease of GBP1.6 million in store payroll costs, after absorbing the impact of statutory
wage increases;
- GBP1.4 million of rent savings from lease renegotiations;
- Procurement, distribution, efficiency and other savings of GBP1.0 million; and
- GBP0.9 million of head office and other central costs, which included a reduction in staff
costs following the UK reorganisation.
Despite the fall in revenue, the improved gross profit rate
percentage and the reduction in operating expenses led to an
Adjusted EBITDA of GBP14.8 million (2018: GBP9.9 million).
Core Retail
Spain
26 weeks 26 weeks 26 week 26 week
ended ended change change
26 January 27 January LC(1)
2019 2018
GBPm GBPm % %
================================== ============= ============= =========== ===========
Gross Transaction Value 213.8 212.4 0.7 0.7
Revenue 184.6 188.5 (2.1) (2.0)
Gross profit rate % 20.1% 20.2% (0.1%pts) (0.1%pts)
Underlying operating
expenses (excluding
depreciation and amortisation) 30.9 30.6 1.0 1.2
Adjusted EBITDA 12.1 12.4 (2.4) (2.2)
================================== ============= ============= =========== ===========
(1) LC- local currency basis. Calculated based on original Euro
amounts
The Spanish Retail business delivered GTV growth of 0.7%, but
with significant growth in Digital as per UK Retail, this led to a
2.1% decline in revenue to GBP184.6 million. Accessories &
Other performed strongly which more than compensated for a decline
in Hardware revenue, and although Preowned revenue was marginally
down versus the previous period, the decline of this category was
not to the same extent experienced in the UK. The total gross
profit rate was broadly maintained at 20.1% and a lower rate in
Content, driven by Digital growth, was offset by an improved rate
in Accessories & Other.
Underlying operating expenses (excluding depreciation and
amortisation charges) increased GBP0.3 million to GBP30.9 million
for the period. Statutory wage increases impacted on store and head
office salary costs although these were mitigated by small savings
in other areas. The Adjusted EBITDA of GBP12.1 million (2018:
GBP12.4 million) was in line with the previous period.
Events & Esports
26 weeks 26 weeks 26 week
ended ended change
26 January 27 January
2019 2018
GBPm GBPm %
================================== ============= ============= ===========
Gross Transaction Value 5.5 8.9 (38.2)
Revenue 5.5 8.9 (38.2)
Gross profit rate % 25.5% 32.6% (7.1%pts)
Underlying operating
expenses (excluding
depreciation and amortisation) 2.5 4.0 (37.5)
Adjusted EBITDA (1.1) (1.1) -
================================== ============= ============= ===========
GTV and revenue for Events & Esports decreased by GBP3.4
million to GBP5.5 million, impacted by the sale of Multiplay
Digital during the prior year and a different line-up of events in
the Events business, which also led to the lower gross profit rate
percentage. BELONG revenue grew year-on-year with the addition of
two new larger arenas in the first half of the period.
Underlying operating expenses before depreciation and
amortisation fell GBP1.5 million due to lower costs in the Events
business and the sale of Multiplay Digital last year. The Adjusted
EBITDA loss was GBP1.1 million (2018 loss: GBP1.1 million).
Exceptional and adjusting items
Exceptional and adjusting items are detailed in note 1 to the
condensed financial statements and other exceptional income in note
3.
Adjusting items for the 26 weeks ended 26 January 2019 comprised
amortisation charges on acquired intangibles of GBP4.3 million
(2018: GBP4.7 million). These are a significant recurring cost to
the Group and therefore are not classified as exceptional, however,
as they are non-cash items that are not reflective of the
underlying trading of the businesses they are presented as
adjusting items. The previous year included post-acquisition
remuneration charges of GBP1.2 million associated with the original
acquisition of Multiplay (UK) Limited and these ceased in March
2018 with the payment of cash and the issue of shares in final
settlement of this liability.
Exceptional costs included GBP0.5 million (2018: GBP0.6 million)
of redundancy and related costs, incurred as part of the UK
reorganisation, with several senior roles removed from the
organisation structure in the period. The Group has also undertaken
or commenced several key strategic projects and initiatives and
incurred costs of GBP0.3 million (2018: GBP1.4 million) including
legal and professional fees for the proposed but unapproved move to
AIM.
Exceptional income of GBP6.0 million in the previous period
represented the gain on sale of Multiplay (UK) Limited, which was
sold on 28 November 2017.
Net finance costs
Net finance costs totalled GBP0.6 million (2018: GBP0.6 million)
for the period. While the UK facilities were undrawn over the
period, commitment fees and the amortisation of arrangement fees
were incurred together with interest costs on finance leases. The
Spanish business utilised its facilities during the period.
Profit before tax
The Group profit before tax for the period amounted to GBP14.8
million (2018: GBP12.3 million). Profit before tax for Core Retail
was GBP16.6 million (2018: GBP9.7 million) and the movement was due
to the improved profitability of the UK Retail business. Events
& Esports reported a loss before tax of GBP1.8 million (2018
profit: GBP2.6 million) with the variance due to the inclusion of
the GBP6.0 million gain on sale of Multiplay (UK) Limited in the
previous year.
Tax
The effective tax rate (defined as the tax charge divided by the
profit before tax) was 18.2% (2018: 25.2%). The change in the tax
rate reflects the change in mix of profitability of companies in
the Group.
A corporation tax charge of GBP2.8 million (2018: GBP2.9
million) has been recorded for Spain where the tax rate is 25%. No
corporation tax is forecast to be payable in the UK in the current
year and no deferred tax asset is forecast to be recognised on
losses brought forward and the full year taxable loss.
Earnings per share
In order to give a better view of underlying earnings,
adjustments to earnings per share have been made to remove the
impact of adjusting and exceptional items as follows:
26 weeks 26 weeks
ended ended
26 January 27 January
2019 2018
GBPm GBPm
========================== ============= =============
Profit before tax 14.8 12.3
Adjusting items 4.3 5.9
Exceptional costs 0.8 2.0
Exceptional income - (6.0)
========================== ============= =============
Adjusted profit before
tax 19.9 14.2
Tax (2.9) (3.4)
========================== ============= =============
Adjusted profit after
tax 17.0 10.8
========================== ============= =============
Shares outstanding
(basic)(1) 172,719,508 169,696,481
Adjusted basic earnings
per share 9.8p 6.4p
========================== ============= =============
(1) Excludes shares held in trust (EBT and SIP)
The Group delivered Adjusted basic earnings per share of 9.8
pence (2018: 6.4 pence). On a statutory basis, the basic earnings
per share for the 26 weeks ended 26 January 2019 was 7.0 pence
(2018: 5.4 pence). The increase in both earnings per share measures
resulted from the improved profitability of the Group in the
period.
Cash flow and net cash
26 weeks 26 weeks
ended ended
26 January 27 January
2019 2018
GBPm GBPm
===================================== ============= =============
Profit before tax 14.8 12.3
Depreciation, amortisation
and other non-cash items 10.6 7.5
Net movement in working capital 17.4 16.5
===================================== ============= =============
Cash generated by operations 42.8 36.3
Finance costs paid (0.5) (0.4)
Corporation tax paid (0.7) (3.7)
===================================== ============= =============
Net cash from operating activities 41.6 32.2
Capital expenditure (4.0) (6.2)
===================================== ============= =============
Cash used in operations after
capital expenditure 37.6 26.0
Disposal of Multiplay (UK)
Limited - 14.9
Dividends - (1.7)
Net repayments of borrowings (0.3) (1.3)
Finance income 0.1 0.1
===================================== ============= =============
Net increase in cash and cash
equivalents 37.4 38.0
===================================== ============= =============
Cash generated by operations amounted to GBP42.8 million (2018:
GBP36.3 million) and the increase was driven by the higher profits
and improvement in working capital. Inventories increased in
comparison to the previous period, but this was more than offset by
higher payables and lower receivables balances.
Corporation tax payments decreased from GBP3.7 million last year
to GBP0.7 million in the current year due to the timing and value
of payments on account for the Spanish business, plus refunds were
received in the UK in respect of previous years.
Group capital expenditure totalled GBP4.0 million (2018: GBP6.2
million) and was primarily incurred on store relocations and
improvements and further development of the online
infrastructure.
The sale of Multiplay Digital in the previous period resulted in
net proceeds of GBP14.9 million. A further GBP1.9 million of
consideration on the disposal is held in Escrow and has been
recorded in other receivables, as it is subject to any warranty
claims, and is receivable on 28 June 2019.
Cash resources and financing
As at 26 January 2019 the Group had cash and cash equivalents of
GBP95.5 million (2018: GBP84.9 million) and the UK and Spanish
banking and other facilities were undrawn.
The Group has access to combined facilities across the UK and
Spain of up to GBP110 million (2018: GBP75 million) as follows:
-- A UK asset-backed revolving loan facility agreement with
PNC Financial Services UK Limited and Wells Fargo Capital
Finance (UK) Limited of up to GBP50 million, increasing to
GBP75 million in the peak period, expiring on 31 December
2020.
-- A financing facility with a syndicate of Spanish banks amounting
to EUR28 million and increasing by a further EUR16 million
during the peak season, expiring on 31 January 2020.
-- A GBP35 million unsecured capital expenditure facility provided
by Sportsdirect.com Retail Limited which the Group may utilise
to fund the opening of new BELONG arenas under the collaboration
agreement. This facility is available to draw over quarterly
periods expiring on 31 January 2023.
-- A GBP20 million unsecured working capital facility provided
by Sportsdirect.com Retail Limited that expired on 31 January
2019 and was not extended.
Dividends
Reflecting the decision to continue to focus on the expansion
and investment in the Group, including on BELONG, the Board has
taken the decision not to declare an interim dividend for the
period.
The interim dividend of GBP1.7 million in respect of the 52
weeks ended 29 July 2017 was paid in the previous period.
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 for a period of not less than 12 months from the
approval of these condensed financial statements. In making their
assessment the Directors have reviewed the Group's latest forecasts
and considered reasonably possible downside sensitivities in
performance together with mitigating action. Accordingly the
condensed financial statements have been prepared on the going
concern basis.
Principal risks and uncertainties
The Board has considered the principal risks and uncertainties
for the remaining six months of the financial year and determined
that the risks presented in the 2018 Annual Report, also remain
relevant to the rest of the financial year: Core Retail strategy,
competition and digital disintermediation, key supplier dependency,
market dynamics and gaming trends, key partner dependency, core
systems and investment, data protection and cyber security, people
(talent management and succession), funding and financial
management and the EU referendum and economic uncertainty.
Responsibility statement
The Directors confirm, to the best of their knowledge and
belief, that the interim condensed consolidated financial
statements have been prepared in accordance with IAS 34 as adopted
by the European Union, gives a true and fair view of the assets,
liabilities, financial position and profit or loss of the Group and
that the interim management report herein includes a fair review of
the information required by the DTR 4.2.7 and DTR 4.2.8 namely:
-- an indication of important events that have occurred during the 26 weeks ended 26 January
2019 and their impact on the condensed consolidated financial statements, and a description
of the principal risks and uncertainties for the remaining six months of the financial year;
and
-- material related party transactions in the 26 weeks ended 26 January 2019 and any material
changes in the related party transactions described in the last Annual Report.
A copy of the Company's 2018 Annual Report and Accounts is
available on GAME's website www.gamedigitalplc.com
This responsibility statement was approved by the Board of
Directors on 20 March 2019 and is signed on its behalf by:
Martyn Gibbs Ray Kavanagh
Chief Executive Officer Chief Financial Officer
Condensed Consolidated Statement of Comprehensive Income
For the 26 weeks ended 26 January 2019
26 weeks ended 26 weeks ended
26 January 2019 27 January 2018
(Unaudited) (Unaudited)
Underlying Adjusting Total Underlying Adjusting Total
& &
exceptional exceptional
Note GBPm GBPm GBPm GBPm GBPm GBPm
=============== =================== ============ ============== ========= ============ ============== =========
Revenue 1 492.9 - 492.9 517.4 - 517.4
------------------------------- --- ------------ -------------- --------- ------------ -------------- ---------
Cost of sales (371.3) - (371.3) (394.3) - (394.3)
=============================== === ============ ============== ========= ============ ============== =========
Gross profit 121.6 - 121.6 123.1 - 123.1
=============================== === ============ ============== ========= ============ ============== =========
Other operating expenses 2 (101.1) (5.1) (106.2) (108.3) (7.9) (116.2)
------------------------------- --- ------------ -------------- --------- ------------ -------------- ---------
Other exceptional income 3 - - - - 6.0 6.0
=============================== === ============ ============== ========= ============ ============== =========
Operating profit/(loss) 4 20.5 (5.1) 15.4 14.8 (1.9) 12.9
=============================== === ============ ============== ========= ============ ============== =========
Finance income 0.1 - 0.1 0.1 - 0.1
------------------------------- --- ------------ -------------- --------- ------------ -------------- ---------
Finance costs (0.7) - (0.7) (0.7) - (0.7)
=============================== === ============ ============== ========= ============ ============== =========
Profit/(loss) before
taxation 19.9 (5.1) 14.8 14.2 (1.9) 12.3
=============================== === ============ ============== ========= ============ ============== =========
Taxation 5 (2.9) 0.2 (2.7) (3.4) 0.3 (3.1)
------------------------------- --- ------------ -------------- --------- ------------ -------------- ---------
Profit/(loss) for the
period attributable
to equity holders of
the Company 17.0 (4.9) 12.1 10.8 (1.6) 9.2
=============================== === ============ ============== ========= ============ ============== =========
Exchange difference
on translation of foreign
operations (1.1) - (1.1) (0.7) - (0.7)
------------------------------- --- ------------ -------------- --------- ------------ -------------- ---------
Total comprehensive
income/
(expense) for the period
attributable to equity
holders of the Company 15.9 (4.9) 11.0 10.1 (1.6) 8.5
=============================== === ============ ============== ========= ============ ============== =========
Earnings per share
------------------------------- --- ------------ -------------- --------- ------------ -------------- ---------
Basic (pence) 6 7.0 5.4
------------------------------- --- ------------ -------------- --------- ------------ -------------- ---------
Diluted (pence) 6 6.8 5.3
=============================== === ============ ============== ========= ============ ============== =========
All results relate to continuing operations (note 1).
The condensed consolidated financial statements should be read
in conjunction with the accompanying notes.
Condensed Consolidated Statement of Financial Position
As at 26 January 2019
26 January 27 January 28 July
2019 2018 2018
GBPm GBPm GBPm
Note (Unaudited) (Unaudited) (Audited)
================================= ====== ============== ============== ============
Non-current assets
--------------------------------- ------ -------------- -------------- ------------
Property, plant and equipment 7 14.9 16.8 16.1
--------------------------------- ------ -------------- -------------- ------------
Intangible assets 8 19.1 31.0 24.0
--------------------------------- ------ -------------- -------------- ------------
Deferred tax asset - 0.1 -
================================= ====== ============== ============== ============
Trade and other receivables 2.4 4.0 1.7
================================= ====== ============== ============== ============
36.4 51.9 41.8
================================= ====== ============== ============== ============
Current assets
--------------------------------- ------ -------------- -------------- ------------
Inventories 92.9 89.8 78.0
--------------------------------- ------ -------------- -------------- ------------
Trade and other receivables 25.3 32.7 20.0
--------------------------------- ------ -------------- -------------- ------------
Current income tax assets - 1.0 0.9
--------------------------------- ------ -------------- -------------- ------------
Cash and cash equivalents 9 95.5 84.9 58.7
================================= ====== ============== ============== ============
213.7 208.4 157.6
--------------------------------- ------ -------------- -------------- ------------
Total assets 250.1 260.3 199.4
================================= ====== ============== ============== ============
Current liabilities
--------------------------------- ------ -------------- -------------- ------------
Trade and other payables 134.8 136.2 95.6
--------------------------------- ------ -------------- -------------- ------------
Borrowings 9 0.8 0.9 0.8
--------------------------------- ------ -------------- -------------- ------------
Current income tax liabilities 2.2 1.1 1.0
--------------------------------- ------ -------------- -------------- ------------
Leasehold property incentives 0.5 0.6 0.5
================================= ====== ============== ============== ============
138.3 138.8 97.9
================================= ====== ============== ============== ============
Net current assets 75.4 69.6 59.7
================================= ====== ============== ============== ============
Non-current liabilities
--------------------------------- ------ -------------- -------------- ------------
Borrowings 9 0.6 1.8 1.1
--------------------------------- ------ -------------- -------------- ------------
Deferred tax liabilities 0.7 1.3 0.8
--------------------------------- ------ -------------- -------------- ------------
Leasehold property incentives 0.8 1.3 1.1
================================= ====== ============== ============== ============
2.1 4.4 3.0
================================= ====== ============== ============== ============
Total liabilities 140.4 143.2 100.9
================================= ====== ============== ============== ============
Net assets 109.7 117.1 98.5
================================= ====== ============== ============== ============
Equity attributable to equity
holders of the Company
----------------------------------------- -------------- -------------- ------------
Share capital 1.7 1.7 1.7
--------------------------------- ------ -------------- -------------- ------------
Share premium 15.0 14.4 15.0
--------------------------------- ------ -------------- -------------- ------------
Merger reserve 130.9 130.9 130.9
--------------------------------- ------ -------------- -------------- ------------
Cumulative translation reserve (3.2) (2.4) (2.1)
--------------------------------- ------ -------------- -------------- ------------
Other reserve - 4.8 -
--------------------------------- ------ -------------- -------------- ------------
Retained deficit (34.7) (32.3) (47.0)
================================= ====== ============== ============== ============
Total equity 109.7 117.1 98.5
================================= ====== ============== ============== ============
The condensed consolidated financial statements should be read
in conjunction with the accompanying notes.
Condensed Consolidated Statement of Changes in Equity
For the 26 weeks ended 26 January 2019
Cumulative
Share Share Merger translation Other Retained Total
capital premium reserve reserve reserve deficit equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================== ========== ========== ========== ============== =========== ========== =========
At 29 July 2017 (Audited) 1.7 14.4 130.9 (1.7) 4.0 (40.1) 109.2
------------------------------ ---------- ---------- ---------- -------------- ----------- ---------- ---------
Profit for the period - - - - - 9.2 9.2
------------------------------ ---------- ---------- ---------- -------------- ----------- ---------- ---------
Exchange difference on
translation
of foreign
operations - - - (0.7) - - (0.7)
============================== ========== ========== ========== ============== =========== ========== =========
Total comprehensive
(expense)/income - - - (0.7) - 9.2 8.5
============================== ========== ========== ========== ============== =========== ========== =========
Credit to equity for
equity-settled
share-based
Payments - - - - - 0.3 0.3
------------------------------ ---------- ---------- ---------- -------------- ----------- ---------- ---------
Credit to equity for
equity-settled
post-acquisition
Remuneration - - - - 0.8 - 0.8
------------------------------ ---------- ---------- ---------- -------------- ----------- ---------- ---------
Dividends - - - - - (1.7) (1.7)
============================== ========== ========== ========== ============== =========== ========== =========
At 27 January 2018
(Unaudited) 1.7 14.4 130.9 (2.4) 4.8 (32.3) 117.1
============================== ========== ========== ========== ============== =========== ========== =========
Loss for the period - - - - - (19.4) (19.4)
------------------------------ ---------- ---------- ---------- -------------- ----------- ---------- ---------
Exchange difference on
translation
of foreign
operations - - - 0.3 - - 0.3
============================== ========== ========== ========== ============== =========== ========== =========
Total comprehensive
income/(expense) - - - 0.3 - (19.4) (19.1)
============================== ========== ========== ========== ============== =========== ========== =========
Credit to equity for
equity-settled
share-based
payments - - - - - 0.3 0.3
------------------------------ ---------- ---------- ---------- -------------- ----------- ---------- ---------
Credit to equity for
equity-settled
post-acquisition
remuneration - - - - 0.2 - 0.2
============================== ========== ========== ========== ============== =========== ========== =========
Issue of share capital - 0.6 - - (5.0) 4.4 -
============================== ========== ========== ========== ============== =========== ========== =========
At 28 July 2018 (Audited) 1.7 15.0 130.9 (2.1) - (47.0) 98.5
============================== ========== ========== ========== ============== =========== ========== =========
Cumulative adjustment on
adoption of IFRS 15
(note 13) - - - - - (0.1) (0.1)
============================== ========== ========== ========== ============== =========== ========== =========
At 29 July 2018 (opening
position after IFRS
15 adoption) 1.7 15.0 130.9 (2.1) - (47.1) 98.4
============================== ========== ========== ========== ============== =========== ========== =========
Profit for the period - - - - - 12.1 12.1
------------------------------ ---------- ---------- ---------- -------------- ----------- ---------- ---------
Exchange difference on
translation
of foreign
operations - - - (1.1) - - (1.1)
============================== ========== ========== ========== ============== =========== ========== =========
Total comprehensive
(expense)/income - - - (1.1) - 12.1 11.0
============================== ========== ========== ========== ============== =========== ========== =========
Credit to equity for
equity-settled
share-based
payments - - - - - 0.3 0.3
============================== ========== ========== ========== ============== =========== ========== =========
At 26 January 2019
(Unaudited) 1.7 15.0 130.9 (3.2) - (34.7) 109.7
============================== ========== ========== ========== ============== =========== ========== =========
The condensed consolidated financial statements should be read
in conjunction with the accompanying notes.
Condensed Consolidated Statement of Cash Flows
For the 26 weeks ended 26 January 2019
26 weeks 26 weeks
ended ended
26 January 27 January
2019 2018
GBPm GBPm
Note (Unaudited) (Unaudited)
======================================== ====== ============== ==============
Cash flow from operating activities
---------------------------------------- ------ -------------- --------------
Profit before tax 14.8 12.3
---------------------------------------- ------ -------------- --------------
Depreciation 3.0 3.2
---------------------------------------- ------ -------------- --------------
Amortisation 6.6 7.9
---------------------------------------- ------ -------------- --------------
Other exceptional income 3 - (6.0)
---------------------------------------- ------ -------------- --------------
Loss on disposal of assets 0.1 0.3
---------------------------------------- ------ -------------- --------------
Cash settled post-acquisition
remuneration charge - 0.4
---------------------------------------- ------ -------------- --------------
Share-based payments expense 0.3 1.1
---------------------------------------- ------ -------------- --------------
Finance income (0.1) (0.1)
---------------------------------------- ------ -------------- --------------
Finance costs 0.7 0.7
---------------------------------------- ------ -------------- --------------
Increase in trade and other
receivables (6.4) (10.0)
---------------------------------------- ------ -------------- --------------
Increase in inventories (16.4) (9.5)
---------------------------------------- ------ -------------- --------------
Increase in trade and other
payables 40.5 36.4
---------------------------------------- ------ -------------- --------------
Decrease in leasehold incentives (0.3) (0.4)
======================================== ====== ============== ==============
Cash generated by operations 42.8 36.3
======================================== ====== ============== ==============
Finance costs paid (0.5) (0.4)
---------------------------------------- ------ -------------- --------------
Corporation tax paid (0.7) (3.7)
======================================== ====== ============== ==============
Net cash from operating activities 41.6 32.2
======================================== ====== ============== ==============
Cash flows from investing activities
---------------------------------------- ------ -------------- --------------
Purchase of property, plant
and equipment (2.2) (3.5)
---------------------------------------- ------ -------------- --------------
Purchase of intangible assets (1.8) (2.7)
---------------------------------------- ------ -------------- --------------
Proceeds from sale of subsidiary - 14.9
---------------------------------------- ------ -------------- --------------
Finance income 0.1 0.1
======================================== ====== ============== ==============
Net cash (used in)/generated
by investing activities (3.9) 8.8
======================================== ====== ============== ==============
Cash flows from financing activities
---------------------------------------- ------ -------------- --------------
Repayments of borrowings (0.3) (1.3)
======================================== ====== ============== ==============
Dividends paid - (1.7)
======================================== ====== ============== ==============
Net cash used in financing activities (0.3) (3.0)
======================================== ====== ============== ==============
Net increase in cash and cash
equivalents 37.4 38.0
---------------------------------------- ------ -------------- --------------
Cash and cash equivalents at
beginning of period 58.7 47.2
---------------------------------------- ------ -------------- --------------
Effect of foreign exchange rates (0.6) (0.3)
======================================== ====== ============== ==============
Cash and cash equivalents at
end of period 9 95.5 84.9
======================================== ====== ============== ==============
The condensed consolidated financial statements should be read
in conjunction with the accompanying notes.
Notes to the Condensed Consolidated Financial Statements
For the 26 weeks ended 26 January 2019
General information
The financial information included in the interim condensed
consolidated financial statements does not constitute statutory
accounts as defined in section 434 of the Companies Act 2006. The
statutory accounts for the 52 week period ended 28 July 2018 have
been delivered to the Registrar of Companies. The auditors reported
on those accounts: their report was unqualified, did not draw
attention to any matters by way of emphasis and did not contain a
statement under section 498(2) or (3) of the Companies Act
2006.
Basis of preparation
GAME Digital plc (the 'Company') is a company incorporated in
England. The interim condensed consolidated financial statements of
the Company for the 26 week period ended 26 January 2019 comprise
the Company and its subsidiaries (together referred to as the
'Group'). The interim condensed consolidated financial statements
have been prepared in accordance with IAS 34 Interim Financial
Reporting as adopted by the European Union. They are unaudited but
have been reviewed by the Company's auditor and should be read in
conjunction with the consolidated financial statements of the Group
for the 52 week period ended 28 July 2018.
Accounting policies
The accounting policies adopted in the preparation of the
condensed consolidated financial statements are the same as those
set out in the Group's annual financial statements for the 52 weeks
ended 28 July 2018 except for the adoption of new standards as set
out below.
IFRS 9 Financial Instruments
The Group has adopted IFRS 9 with effect from 29 July 2018 and
it has had no material impact on the classification of financial
assets and financial liabilities on the consolidated statement of
financial position. An element of trade receivables has been offset
against trade payables as these balances with suppliers are settled
net. The methodology for this reclassification has not changed
under IFRS 9.
The impairment of financial assets under the expected credit
loss model has not resulted in a difference to the impairment
provision. The Group applied the simplified approach and calculated
a provision matrix to measure the expected credit losses. However,
as the impairment allowance calculated was lower than the provision
required for specific bad debts, these additional amounts were
added which resulted in the same provision under IFRS 9 to the
previous accounting policy.
IFRS 15 Revenue from Contracts with Customers
The Group has adopted IFRS 15 with effect from 29 July 2018 and
adopted the cumulative effect method therefore the comparative
information is presented under the previous accounting
policies.
Revenue from the sale of games and gaming-related products in
retail stores is recognised at the point of sale and has been
unaffected by IFRS 15. Online revenue was previously recognised
when the goods were despatched to the customer, however, in
accordance with IFRS 15, revenue is now recognised when control
passes to the customer, which is on receipt of the goods.
IFRS 15 has impacted on the accounting for the Group's loyalty
schemes. Previously a portion of the sales transaction price was
allocated to the loyalty scheme using the fair value of points
awarded whereas under IFRS 15, the fair value is now determined
relative to the total transaction price.
The estimated breakage on gift cards is recognised in line with
the spend on the gift card in accordance with IFRS 15 whereas the
previous accounting policy recognised breakage immediately on the
sale of the gift card.
See note 13 for further details on the impact that IFRS 15 has
had on the interim condensed consolidated financial statements.
New standards effective for periods beginning on or after 1
January 2019, that have not been applied in preparing these interim
condensed consolidated financial statements.
IFRS 16 Leases
IFRS 16 is effective for periods beginning on or after 1 January
2019 and will be adopted by the Group on 28 July 2019. Leases
previously accounted for as operating leases will be brought onto
the balance sheet as right-to-use assets and an obligation recorded
for the lease liabilities. Lease costs will no longer be part of
the Group's Adjusted EBITDA due to the recognition of depreciation
charges on the assets and finance costs on the lease liability. The
total expense recognised in the statement of comprehensive income
over the life of a lease will be unaffected by IFRS 16, however, it
will result in the acceleration of costs with higher finance costs
in the earlier years of the lease.
From the work performed to date, this standard will have a
significant impact on the assets and liabilities reported on the
Group's balance sheet given the number of store and other leases,
but it will not affect the cash flow generated for the year. The
impact on the overall profitability of the Group in the statement
of comprehensive income is expected to be less material due to the
short-term nature of many of the store leases, hence not leading to
a significant acceleration of costs. One of the key judgement areas
for the Group is determining the lease term where it is reasonably
certain that a lease will continue to be extended despite a rolling
break within the contract. Establishing the discount rate is the
other key judgement as rates tend not to be implicit in the leases
therefore the incremental borrowing rate will be applied to
calculate the present value of the lease obligations.
Lease data is currently being collated across the UK and Spain
and the Group has invested in new software to calculate the initial
entries on adoption of IFRS 16 and to manage the continuing
accounting that will be required going forwards. Given the frequent
lease renegotiations that have taken place in the UK in the last
few years and the additional data requirements that this involves,
the Group has not yet determined which transition approach will be
taken and therefore cannot provide an estimate of the impact until
this work has been completed. An update on this work will be
provided in the consolidated financial statements for the year
ending 27 July 2019.
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 condensed 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. On
that basis they continue to adopt the going concern basis of
accounting in preparing the condensed financial statements.
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.
1 Operating segments
The Group's operating segments have been determined based on the
management information reviewed by the Group's Chief Executive
Officer.
The Chief Executive Officer considers the business from a
geographic perspective for the retail businesses, namely the UK and
Spain and these segments are separately managed. Recent
acquisitions and new business ventures, comprising BELONG, Game
Esports and Events, Ads Reality and Game Esports Spain, are
presented as a separate segment titled 'Events & Esports'. 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.
Multiplay (UK) Limited, comprising the Multiplay Digital
business, was sold on 28 November 2017 but has been presented
within continuing operations in the comparative period as it was
part of the Events & Esports segment and not a significant part
of the business to be classified as a discontinued operation.
The Group uses certain Alternative Performance Measures ('APMs')
that are not required to be presented in accordance with IFRS nor
are defined under IFRS and these included Gross Transaction Value
('GTV') and Adjusted EBITDA. The APMs provide additional and more
consistent measures of underlying activity and performance by
removing items that are not reflective of the Group's underlying
trading.
The performance of operating segments is assessed based on GTV,
Revenue and Adjusted EBITDA defined as follows:
-- GTV is 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.
GTV 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. GTV 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.
The segment information provided to the Chief Executive Officer
for the reportable segments is as follows:
26 weeks ended 26 January 26 weeks ended 27 January
2019 2018
(Unaudited) (Unaudited)
Events Events
Core Retail & Esports Total Core Retail & Esports Total
GBPm GBPm GBPm GBPm GBPm GBPm
========================== =============== ============ ========= =============== ============ =========
Gross Transaction
Value
-------------------------- --------------- ------------ --------- --------------- ------------ ---------
UK 359.1 5.2 364.3 365.5 8.5 374.0
-------------------------- --------------- ------------ --------- --------------- ------------ ---------
Spain 213.8 0.3 214.1 212.4 0.4 212.8
========================== =============== ============ ========= =============== ============ =========
Total Gross Transaction
Value 572.9 5.5 578.4 577.9 8.9 586.8
========================== =============== ============ ========= =============== ============ =========
Revenue
---------------- ------- ----- ------- ------- ----- -------
UK 302.8 5.2 308.0 320.0 8.5 328.5
---------------- ------- ----- ------- ------- ----- -------
Spain 184.6 0.3 184.9 188.5 0.4 188.9
================ ======= ===== ======= ======= ===== =======
Total revenue 487.4 5.5 492.9 508.5 8.9 517.4
================ ======= ===== ======= ======= ===== =======
26 weeks ended 26 weeks ended
26 January 27 January
2019 2018
GBPm GBPm
(Unaudited) (Unaudited)
================================ ================ ================
Total Gross Transaction Value 578.4 586.8
--------------------------------- ---------------- ----------------
Digital cost of sales (78.0) (63.2)
--------------------------------- ---------------- ----------------
Other agency sales (3.6) (2.8)
--------------------------------- ---------------- ----------------
Loyalty points deferral (5.2) (6.8)
--------------------------------- ---------------- ----------------
Other accounting adjustments 1.3 3.4
================================= ================ ================
Total revenue 492.9 517.4
================================= ================ ================
Other accounting adjustments comprise movements in provisions
and estimates (including accounting for gift card, returns and
deposits) and other revenue adjustments for the Core Retail
segment.
26 weeks ended 26 January 26 weeks ended 27 January
2019 2018
(Unaudited) (Unaudited)
Events Events
Core Retail & Esports Total Core Retail & Esports Total
GBPm GBPm GBPm GBPm GBPm GBPm
================================ =============== ============ ========= =============== ============ =========
Adjusted EBITDA
-------------------------------- --------------- ------------ --------- --------------- ------------ ---------
UK 14.8 (1.1) 13.7 9.9 (0.8) 9.1
-------------------------------- --------------- ------------ --------- --------------- ------------ ---------
Spain 12.1 - 12.1 12.4 (0.3) 12.1
================================ =============== ============ ========= =============== ============ =========
Total Adjusted EBITDA 26.9 (1.1) 25.8 22.3 (1.1) 21.2
================================ =============== ============ ========= =============== ============ =========
Depreciation and
amortisation (4.8) (0.5) (5.3) (5.8) (0.6) (6.4)
================================ =============== ============ ========= =============== ============ =========
Underlying operating
profit/(loss) 22.1 (1.6) 20.5 16.5 (1.7) 14.8
================================ =============== ============ ========= =============== ============ =========
Adjusting items:
-------------------------------- --------------- ------------ --------- --------------- ------------ ---------
Brand and other acquired
intangibles amortisation (4.2) (0.1) (4.3) (4.2) (0.5) (4.7)
-------------------------------- --------------- ------------ --------- --------------- ------------ ---------
Cost of post-acquisition
remuneration - - - - (1.2) (1.2)
================================ =============== ============ ========= =============== ============ =========
(4.2) (0.1) (4.3) (4.2) (1.7) (5.9)
================================ =============== ============ ========= =============== ============ =========
Exceptional items:
-------------------------------- --------------- ------------ --------- --------------- ------------ ---------
Project-related costs
and other similar
costs (0.3) - (0.3) (1.4) - (1.4)
-------------------------------- --------------- ------------ --------- --------------- ------------ ---------
Redundancy and reorganisation
costs (0.4) (0.1) (0.5) (0.6) - (0.6)
================================ =============== ============ ========= =============== ============ =========
(0.7) (0.1) (0.8) (2.0) - (2.0)
================================ =============== ============ ========= =============== ============ =========
Other exceptional
income: gain on sale
of business (note
3) - - - - 6.0 6.0
-------------------------------- --------------- ------------ --------- --------------- ------------ ---------
Finance income 0.1 - 0.1 0.1 - 0.1
-------------------------------- --------------- ------------ --------- --------------- ------------ ---------
Finance costs (0.7) - (0.7) (0.7) - (0.7)
================================ =============== ============ ========= =============== ============ =========
Profit/(loss) before
taxation 16.6 (1.8) 14.8 9.7 2.6 12.3
================================ =============== ============ ========= =============== ============ =========
Revenue, and hence profitability, of the Core Retail division is
more heavily weighted towards the first half of the financial year
which includes the Christmas period and many of the key new games
releases each year.
Adjusting items:
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, plus other acquired intangibles were
recognised on the acquisitions of Multiplay (UK) Limited and Ads
Reality. 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 businesses they are presented as
adjusting items.
Post-acquisition remuneration charges related to cash and shares
payable to certain selling shareholders agreed at the time of the
original acquisition of Multiplay (UK) Limited and this cost was in
addition to recurring annual remuneration for these employees. The
total post-acquisition remuneration was paid on 2 March 2018,
representing GBP2.4 million of cash and the issue of 2,079,002
ordinary shares in GAME Digital plc. No further post-acquisition
remuneration accrued on the Multiplay acquisition after 2 March
2018.
Exceptional costs:
During the period, the Group has undertaken several key
strategic projects and initiatives, plus incurred other one-off
costs, which has resulted in GBP0.3 million (2018: GBP1.4 million)
of non-recurring costs. In addition, GBP0.5 million (2018: GBP0.6
million) of redundancy and related costs have been incurred as part
of the UK reorganisation.
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.
At 26 January 2019 At 27 January 2018
(Unaudited) (Unaudited)
Events Events
Core Retail & Esports Total Core Retail & Esports Total
GBPm GBPm GBPm GBPm GBPm GBPm
======================== =============== ============ ========= =============== ============ =========
Total assets
------------------------ --------------- ------------ --------- --------------- ------------ ---------
UK 150.5 6.1 156.6 157.7 8.6 166.3
------------------------ --------------- ------------ --------- --------------- ------------ ---------
Spain 92.9 0.6 93.5 93.4 0.6 94.0
======================== =============== ============ ========= =============== ============ =========
Combined total assets 243.4 6.7 250.1 251.1 9.2 260.3
======================== =============== ============ ========= =============== ============ =========
Total liabilities
----------------------------- ------- ----- ------- ------- ----- -------
UK 82.6 1.1 83.7 86.8 3.6 90.4
----------------------------- ------- ----- ------- ------- ----- -------
Spain 56.7 - 56.7 52.8 - 52.8
============================= ======= ===== ======= ======= ===== =======
Combined total liabilities 139.3 1.1 140.4 139.6 3.6 143.2
============================= ======= ===== ======= ======= ===== =======
At 28 July 2018
(Audited)
Events
Core Retail & Esports Total
GBPm GBPm GBPm
======================== ==== =============== ============ =========
Total assets
------------------------ ---- --------------- ------------ ---------
UK 117.8 7.2 125.0
-------------------------------- --------------- ------------ ---------
Spain 73.8 0.6 74.4
================================ =============== ============ =========
Combined total assets 191.6 7.8 199.4
================================ =============== ============ =========
Total liabilities
----------------------------- ------ ----- -------
UK 54.8 1.8 56.6
-------------------------------- ------ ----- -------
Spain 44.3 - 44.3
================================ ====== ===== =======
Combined total liabilities 99.1 1.8 100.9
================================ ====== ===== =======
Revenues from major products and services
The Group's revenues from its major products and services were
as follows:
26 weeks ended 26 weeks ended
26 January 27 January
2019 2018
GBPm GBPm
(Unaudited) (Unaudited)
====================== ================ ================
Content 200.1 198.5
----------------------- ---------------- ----------------
Hardware 132.0 145.0
----------------------- ---------------- ----------------
Accessories & Other 92.0 88.1
----------------------- ---------------- ----------------
Preowned 68.8 85.8
======================= ================ ================
Total revenue 492.9 517.4
======================= ================ ================
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. Hardware
revenue represents the sale of console platforms. Accessories &
Other includes the sale of console accessories, PC, VR and related
accessories, licensed merchandise and all other retail revenue and
revenue from the Events & Esports segment including
'pay-to-play' activities in BELONG arenas. Preowned includes the
sale of preowned content, hardware, accessories and mobile
devices.
2 Other operating expenses
26 weeks ended 26 weeks ended
26 January 27 January
2019 2018
GBPm GBPm
(Unaudited) (Unaudited)
======================================== ================ ================
Selling and distribution costs 76.7 80.5
----------------------------------------- ---------------- ----------------
Administrative expenses 24.4 27.8
========================================= ================ ================
Total other operating expenses before
adjusting items 101.1 108.3
----------------------------------------- ---------------- ----------------
Adjusting items: administrative
expenses (note 1) 4.3 5.9
----------------------------------------- ---------------- ----------------
Exceptional items: administrative
expenses (note 1) 0.8 2.0
========================================= ================ ================
Total other operating expenses 106.2 116.2
========================================= ================ ================
3 Other exceptional income
26 weeks ended 26 weeks ended
26 January 27 January
2019 2018
GBPm GBPm
(Unaudited) (Unaudited)
=========================== ================= ================
Gain on sale of business - 6.0
============================ ================ ================
Total - 6.0
============================ ================ ================
On 28 November 2017, the Company sold its entire shareholding in
Multiplay (UK) Limited to Unity Technologies APS for cash
consideration of GBP19.0 million of which GBP17.1 million was
received and the remaining GBP1.9 million is held in escrow for 19
months until June 2019. Transactions costs totalled GBP1.5 million
and the settlement of the finance lease liability was GBP0.7
million which resulted in net proceeds of GBP14.9 million.
4 Operating profit
26 weeks ended 26 weeks ended
26 January 27 January
2019 2018
GBPm GBPm
(Unaudited) (Unaudited)
============================================= ================ ================
This is stated after charging/(crediting):
--------------------------------------------- ---------------- ----------------
Depreciation of property, plant
and equipment 3.0 3.2
---------------------------------------------- ---------------- ----------------
Amortisation of intangible assets 6.6 7.9
---------------------------------------------- ---------------- ----------------
Loss on disposal of assets 0.1 0.3
---------------------------------------------- ---------------- ----------------
Gain on sale of business - (6.0)
---------------------------------------------- ---------------- ----------------
Staff costs 41.8 46.8
---------------------------------------------- ---------------- ----------------
Net foreign exchange losses 0.2 0.3
---------------------------------------------- ---------------- ----------------
Operating lease rentals - leasehold
premises 15.7 17.1
---------------------------------------------- ---------------- ----------------
- other 0.2 0.1
============================================== ================ ================
5 Taxation
Tax for the period ended 26 January 2019 is charged at the best
estimate of the average annual effective tax rate for the UK and
Spain expected for the full year, applied to the pre-tax profit of
the 26 week period of those entities. The effective tax rate for
the UK is nil due to forecast losses for the year and the
corporation tax charge for the period of GBP2.8 million (2018:
GBP2.9 million) relates entirely to the Spanish business.
The Group is impacted by the uneven generation of taxable
profits throughout the year as it typically generates a much higher
level of profits in the first half of the financial year. It is
anticipated that the tax expense will reduce in the full year
results.
Deferred tax movements in the period amounted to a credit of
GBP0.1 million (2018: charge of GBP0.2 million).
6 Earnings per share
Earnings per share has been calculated by dividing the profit
for the period by the weighted average number of ordinary shares in
issue during the period.
Basic earnings per share
26 weeks ended 26 weeks ended
26 January 27 January
2019 2018
GBPm GBPm
(Unaudited) (Unaudited)
============================================= ================ ================
Profit for the period attributable to
equity holders of the Company 12.1 9.2
============================================== ================ ================
Weighted average number of ordinary shares
in issue 172,938,108 170,859,106
---------------------------------------------- ---------------- ----------------
Less: weighted average number of shares
held in trusts (218,600) (1,162,625)
============================================== ================ ================
Weighted average number of ordinary shares
for basic earnings per share 172,719,508 169,696,481
============================================== ================ ================
Basic earnings per share (pence) 7.0 5.4
============================================== ================ ================
Diluted earnings per share
26 weeks ended 26 weeks
26 January ended
2019 27 January
2018
GBPm GBPm
(Unaudited) (Unaudited)
============================================= ================ ============================
Profit for the period attributable to
equity holders of the Company 12.1 9.2
============================================== ================ ============================
Weighted average number of ordinary shares
for basic earnings per share 172,719,508 169,696,481
---------------------------------------------- ---------------- ----------------------------
Effect of dilutive potential ordinary
shares:
============================================= ================ ============================
Share options 5,258,150 4,614,093
============================================== ================ ============================
Weighted average number of ordinary shares
for diluted earnings per share 177,977,658 174,310,574
============================================== ================ ============================
Diluted earnings per share (pence) 6.8 5.3
============================================== ================ ============================
Adjusted earnings per share
26 weeks ended 26 weeks ended
26 January 27 January
2019 2018
GBPm GBPm
(Unaudited) (Unaudited)
==================================================== ================ ================
Profit for the period attributable to equity
holders of the Company 12.1 9.2
----------------------------------------------------- ---------------- ----------------
Adjusting items:
---------------------------------------------------- ---------------- ----------------
Brand and other acquired intangibles amortisation 4.3 4.7
----------------------------------------------------- ---------------- ----------------
Cost of post-acquisition remuneration - 1.2
----------------------------------------------------- ---------------- ----------------
Exceptional items:
---------------------------------------------------- ---------------- ----------------
Project-related costs and other similar
costs 0.3 1.4
----------------------------------------------------- ---------------- ----------------
Redundancy and reorganisation costs 0.5 0.6
----------------------------------------------------- ---------------- ----------------
Other exceptional income: gain on sale
of business - (6.0)
----------------------------------------------------- ---------------- ----------------
Tax on items above (0.2) (0.3)
===================================================== ================ ================
Adjusted profit for the period attributable
to equity holders of the Company 17.0 10.8
===================================================== ================ ================
Weighted average number of ordinary shares
for adjusted basic earnings per share 172,719,508 169,696,481
===================================================== ================ ================
Adjusted basic earnings per share (pence) 9.8 6.4
===================================================== ================ ================
Weighted average number of ordinary shares
for adjusted diluted earnings per share 177,977,658 174,310,574
===================================================== ================ ================
Adjusted diluted earnings per share (pence) 9.6 6.2
===================================================== ================ ================
7 Property, plant and equipment (unaudited)
During the period ended 26 January 2019, the Group spent GBP2.2
million (period ended 27 January 2018: GBP3.5 million) on additions
and disposed of assets (including assets held for sale) with a
total carrying amount of GBP0.1 million (period ended 27 January
2018: GBP0.3 million).
8 Intangible assets (unaudited)
During the period ended 26 January 2019, the Group spent GBP1.8
million (period ended 27 January 2018: GBP2.7 million) on
additions. Disposals of goodwill and other intangible assets of a
total carrying value of GBP11.2 million were made in relation to
the sale of Multiplay (UK) Limited in the previous period.
9 Analysis of net funds
26 January 27 January 28 July
2019 2018 2018
GBPm GBPm GBPm
(Unaudited) (Unaudited) (Audited)
============================ ============== ============== ============
Cash and cash equivalents 95.5 84.9 58.7
---------------------------- -------------- -------------- ------------
Finance lease liabilities (1.4) (2.7) (1.9)
============================ ============== ============== ============
Net funds 94.1 82.2 56.8
============================ ============== ============== ============
10 Contingencies and commitments
During the year ended 28 July 2018, HMRC carried out a National
Minimum Wage review for the UK Group and advised that they believe
certain staff in stores and the distribution centre within Game
Retail Limited had been underpaid over the time period from April
2013 to date. Game Retail Limited disputes the basis of HMRC's view
of the underpayments. No reliable estimate of any potential
liability can be made at this time as the assessment process
remains at an early stage.
11 Related party transactions
Game Stores Iberia SLU leases a property in which a member of
key management owns 50% of the ordinary share capital of the lessor
company. The annual rent is GBP0.1 million and the lease term is
for a period of five years from 25 June 2015, however the lessee
can terminate the lease at any time by providing three months'
notice.
Under the profit sharing arrangement set out in the
collaboration agreement with Sportsdirect.com Retail Limited, the
Group recognised a cost of GBP0.8 million (2018: GBPnil) for the
period and had a liability of GBP0.1 million (2018: GBPnil) at the
balance sheet date. The unsecured borrowing facilities of GBP55
million (comprising a GBP20 million working capital facility and
GBP35 million capital expenditure facility) provided by Sports
Direct have not been utilised in the period and no drawdowns were
made. The GBP20 million working capital facility expired on 31
January 2019 and was not extended. Sportsdirect.com Retail Limited
is a subsidiary of Sports Direct International plc which is a
related party of the Company by virtue of a 28.43% interest in the
Company's share capital.
There were no other transactions with related parties during the
period and there were no amounts owed by or to related parties at
the end of the period (27 January 2018: GBPnil).
12 Dividends
Amounts recognised as distributions to equity holders in the
period:
26 weeks ended 26 weeks ended
26 January 27 January
2019 2018
GBPm GBPm
(Unaudited) (Unaudited)
================================================== ================= ================
Interim dividend for the 52 weeks ended 28 July
2018 of GBPnil (52 weeks ended 29 July 2017 of
1.0p) per share - 1.7
=================================================== ================ ================
Total - 1.7
=================================================== ================ ================
The interim dividend for the 52 weeks ended 29 July 2017 was
paid to shareholders on 4 August 2017.
No interim dividend has been proposed for the 52 weeks ended 27
July 2019.
13 Changes in accounting policies
IFRS 15 Revenue from Contracts with Customers introduces a
five-step approach to the timing of revenue recognition based on
performance obligations in customer contracts. For the majority of
the Group's revenue which arises from retailing, there is little
judgement in determining the transaction price and when control
passes to the customer and hence there is no change to the previous
accounting policy.
The following three revenue streams have been impacted by the
adoption of IFRS 15:
Loyalty schemes
Pursuant to IFRIC 13 Customer Loyalty Programmes, a portion of
the sales transaction price was allocated to loyalty using the fair
value of points awarded. Under IFRS 15, the fair value is
determined relative to the total transaction price. The change in
methodology has resulted in an immaterial increase of GBP0.1
million to revenue and profit before tax on the transition date of
29 July 2018.
Gift cards
Revenue from gift cards sold by the Group was recognised on
redemption of the gift card and an element of breakage recognised
immediately upon sale of the gift card, calculated based on
historical redemption and expiry rates. Under IFRS 15, the
estimated breakage is recognised in line with the spend on the gift
card, which has the effect of deferring this revenue over a longer
period. The adjustment required on the transition date was a
reduction to revenue and profit before tax of GBP0.2 million.
Online revenue
Revenue from online sales was previously recognised when the
goods were despatched to the customer whereas under IFRS 15,
revenue is now recognised when control passes to the customer,
which is on receipt of the goods. At the transition date, the
adjustment reduced revenue by GBP0.3 million and the associated
cost of sales and distribution costs totalled GBP0.3 million
therefore the overall impact on the profit before tax was
GBPnil.
The adjustment to the retained deficit at the transition date
was as follows:
Retained
deficit
GBPm
========================================= ==========
At 28 July 2018 as previously reported
(audited) (47.0)
------------------------------------------- ----------
Loyalty schemes 0.1
------------------------------------------- ----------
Gift cards (0.2)
------------------------------------------- ----------
Online revenue (net impact on profit -
before tax)
========================================= ==========
At 29 July 2018 (opening position
after IFRS 15 adoption) (47.1)
=========================================== ==========
Accruals and deferred income would have been GBP0.1 million
higher in the consolidated statement of financial position as at 28
July 2018 because of these adjustments.
In accordance with the transitional disclosures required under
IFRS 15 on adoption of the cumulative effect method, the
consolidated statement of comprehensive income for the 26 weeks
ended 26 January 2019 applying previous standards was as
follows:
26 weeks ended IFRS 15 26 weeks ended
26 January adjustments 26 January 2019
2019
(as reported) (previous standards)
GBPm GBPm GBPm
===================================== ================ ============== =======================
Revenue 492.9 1.0 493.9
------------------------------------- ---------------- -------------- -----------------------
Cost of sales (371.3) (0.7) (372.0)
===================================== ================ ============== =======================
Gross profit 121.6 0.3 121.9
===================================== ================ ============== =======================
Other operating expenses (106.2) - (106.2)
===================================== ================ ============== =======================
Operating profit 15.4 0.3 15.7
===================================== ================ ============== =======================
Finance income 0.1 - 0.1
------------------------------------- ---------------- -------------- -----------------------
Finance costs (0.7) - (0.7)
===================================== ================ ============== =======================
Profit before taxation 14.8 0.3 15.1
===================================== ================ ============== =======================
Taxation (2.7) - (2.7)
------------------------------------- ---------------- -------------- -----------------------
Profit for the period attributable
to equity holders of the Company 12.1 (0.3) 12.4
===================================== ================ ============== =======================
A new software release occurred a few days after the period
ended 26 January 2019 and, as under IFRS 15 revenue is recognised
on delivery for online sales rather than on despatch, revenue and
profit before tax for the 26 weeks ended 26 January 2019 were lower
by GBP0.9 million and GBP0.2 million respectively than would have
been the case under the former accounting policies. The remainder
of the difference related to movements on gift cards and loyalty
scheme.
Independent Review Report to GAME Digital plc
Introduction
We have been engaged by the Company to review the condensed
consolidated financial statements in the interim results financial
report for the twenty-six weeks ended 26 January 2019 which
comprises Condensed Consolidated Statement of Comprehensive Income,
Condensed Consolidated Statement of Financial Position, Condensed
Consolidated Statement of Changes in Equity, and Condensed
Consolidated Statement of Cash Flows.
We have read the other information contained in the interim
results financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed consolidated financial statements.
Directors' responsibilities
The interim results financial report is the responsibility of
and has been approved by the directors. The directors are
responsible for preparing the interim results financial report in
accordance with the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
As disclosed in the notes, the annual financial statements of
the group are prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. The
condensed consolidated financial statements included in this
interim results financial report has been prepared in accordance
with International Accounting Standard 34, "Interim Financial
Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed consolidated financial statements in the interim
results financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed consolidated financial
statements in the interim results financial report for the
twenty-six weeks ended 26 January 2019 is not prepared, in all
material respects, in accordance with International Accounting
Standard 34, as adopted by the European Union, and the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of interim results financial reporting in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority and for no other purpose. No
person is entitled to rely on this report unless such a person is a
person entitled to rely upon this report by virtue of and for the
purpose of our terms of engagement or has been expressly authorised
to do so by our prior written consent. Save as above, we do not
accept responsibility for this report to any other person or for
any other purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
Gatwick
20 March 2019
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR PGUGAWUPBPUU
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