GMD.L Regulatory News (GMD)

27 March 2018

GAME DIGITAL PLC

Interim results for the 26 weeks ended 27 January 2018

GAME Digital plc ("GAME" or the "Group") today announces its interim results for the 26 week period ended 27 January 2018 (the "period"). All comparator periods are for the 26 weeks ended 28 January 2017 unless otherwise stated.

Strategic, operational and financial headlines

Martyn Gibbs, Chief Executive Officer, said:

"During the period important strategic progress was achieved, helping us to better position the Group for our development in the rapidly growing esports market with our unique and high margin concept traded under the BELONG banner. This is further facilitated by entering into a new and exciting collaboration with Sports Direct that will allow us to accelerate our expansion and help develop a larger scale experience based gaming business than previously planned and steadily reposition our retail offering. The traditional retail landscape is under increasing pressure and we have developed a strong growth strategy to utilise the valuable components of our core business in building our new experience based gaming offer."

"We also delivered a strong sales performance in the first half of the financial year, driven by our ability to capitalise on strong customer demand for consoles (particularly Nintendo Switch™); a stronger line up of new software releases and the further development of the Group's gaming experiences and events offering.

"Furthermore, during the period UK Retail delivered cost savings of c.£5 million as we continued to re-shape and right size the business. We continue to negotiate property savings and, where appropriate, close stores, rationalise retail working hours and deliver further operational and procurement benefits as well as focus on our core retail opportunities including a large array of new software releases particularly during the final quarter of the 2018 calendar year."

Market Update and Outlook

The positive market trends seen in the second half of the last financial year in our core console categories have continued throughout the first half of the current financial year and cumulatively the UK and Spanish markets remain in strong growth so far this year. The annualisation of the highly successful initial launch of Nintendo Switch in March 2017 has created a short-term year-on-year impact on like-for-like performance. Nevertheless, the UK market was up 10.0% for the 33 weeks to 17 March and the Spanish market was up 8.3% over the same period. Strong demand for Nintendo Switch has continued to deliver growth to the overall market and consumer interest is expected to remain robust. Moreover, the expected future growth in the Nintendo software market should be supported by the expanding installed base and also by newly announced titles from established franchises including Super Smash Bros. and Pokémon. Together with other related opportunities through associated products, including the new LABO range, these developments suggest a strong year for the Nintendo Switch market.

The overall console market is expected to be more challenging in H2 given the strong comparatives in H2 2016/2017 including the initial success of Nintendo Switch following its launch in March last year. Given that the timing of the release of the new Nintendo games are still to be confirmed and other titles such as Red Dead Redemption 2 have moved into the first half of the next financial year, even greater priority has been placed on efficiency and cost saving actions that the directors believe will largely offset this impact. Furthermore, the Directors remain optimistic for FY18/19 given the stronger line up of games announced and anticipated, the expected benefits from the further development of the BELONG business and thereafter for the prospects and benefits from the potential launch of new consoles. The release schedule for H1 2018/2019 includes annual titles such as Call of Duty: Black Ops 4 as well as non-perennial titles including Red Dead Redemption 2, The Division 2 and Shadow of the Tomb Raider.

The Board was pleased with the continued development of the Group's BELONG concept in the first half of the financial year and believe that the new collaboration with Sports Direct will allow a faster and larger scale development of this relatively new proposition. Whilst in discussion with Sports Direct to enter into this new partnership, the management team reviewed new standalone store opportunities as well as other opportunities and plans available under the new collaboration. The review highlighted the benefits of more gaming stations per arena and therefore the requirement for larger properties which lead to a deferral of new store openings in H1 compared to the original plans for the year and as a result there will be a small delay in the anticipated earnings growth. Nevertheless, the Group believes that the latest plans means it is better placed to provide more opportunities for gamers to experience BELONG, leading to a more successful performance in FY18/19 and beyond and the Board are positive about the overall benefits that will develop from the new Sports Direct relationship.

The Board will announce its full year results for the 52 weeks ending 28 July 2018 in November 2018.

Results Presentation

Management will be hosting a presentation for analysts and investors at 9.30 a.m. today at Citigate Dewe Rogerson, 3 London Wall Buildings, London Wall, EC2M 5SY. A live audio webcast of the presentation will be available via the Company's website at www.gamedigitalplc.com/investor-relations. A recording of the presentation will be made available on www.gamedigitalplc.com later today.

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

Notes:

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

2. 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. The calculation of Adjusted profit before tax excludes all exceptional and adjusting items (see note 3 to the condensed financial statements).

5. Adjusted basic earnings per share is calculated as set out in note 7 to the condensed financial statements.

6. The prior period has been restated to reflect the reclassification of marketing income from operating expenses to revenue or a deduction within cost of sales (see notes 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 560 stores across the two areas, a fully integrated omnichannel offer including the multi-award winning GAME App, and over 4.6 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

SUMMARY OF FINANCIAL RESULTS

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

2. 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 profit before tax, depreciation, amortisation, net finance costs, exceptional and adjusting items (see note 1).

4. Adjusted profit before tax is a non-IFRS measure defined by the Group as profit before exceptional and adjusting items (see note 3).

5. Adjusted basic EPS is calculated as set out in note 7.

CHIEF EXECUTIVE'S STATEMENT

Review of Group results

During the period, the Group continued to develop its business and delivered a pleasing improvement in the sales performance from the UK business (including the Events & Esports division) and the Spanish business. The move from a seller of physical and digital products to one offering gaming services that translate positively into volume and margin continues at pace. Overall, the Group delivered revenue of £517.4 million (2017: £498.1 million), an increase of 3.9%. The Group's Gross Transaction Value (GTV), a better measure of underlying retail activity as it includes the gross value of digital receipts, was £586.8 million (2017: £565.4 million), up 3.8%. This was predominantly driven from the growth in console hardware, a higher level of physical software sales and the continued development of the Group's revenue from offering gaming experiences and events.

The trading margins across hardware, physical software and accessories & other were up year-on-year through improved terms and better commercial processes. However, Group gross profit rate (as a percentage of GTV) declined by 150 basis points to 21.0%, primarily from the increasing mix of hardware sales connected with the Nintendo Switch which launched in March 2017 and the Xbox One X which launched in November 2017, and the decline in higher margin core preowned sales.

Costs have remained a key focus for us and were well controlled in the period. We have continued to successfully negotiate significant property savings and where appropriate closed stores, rationalised retail working hours and delivered further efficiency and procurement benefits across the rest of the business. We have delivered savings in the underlying costs of the UK Retail business of approximately £5 million. Higher retail costs in Spain (up £2.2 million) were mainly a result of higher costs associated with higher sales. Overall, total underlying operating costs for the Group (excluding depreciation, amortisation, adjusting and exceptional items) were down by £1.9 million or 1.8% to £101.9 million.

Group Adjusted EBITDA in the half was £21.2 million (2017: £23.3 million), a decline of £2.1 million, with a Core Retail (UK & Spain) Adjusted EBITDA of £22.3 million (2017: £26.1 million) and an EBITDA loss of £1.1 million (2017: loss of £2.8 million) within Events, Esports & Digital as we continue to scale up these business areas. Profit before tax, adjusting and exceptional items was £14.2 million (2017: £16.9 million), whilst adjusted earnings per share was 6.4 pence (2017: 7.9 pence).

The Group generated £32.2 million of cash from operating activities in the half (2017: £25.7 million), ending the period in a strong financial position with cash of £84.9 million (2017: £73.0 million) and access to aggregated facilities across the UK and Spain of up to £75 million (2017: £80 million) at the period end.

The UK business has 233 potential lease expiries before the end of December 2018 and the collaboration agreement signed with Sports Direct allows the Group to rollout more BELONG concepts across a significant number of locations, including within Sports Direct stores, which gives rise to many important business and location decisions over the next few months. At the same time, the Group expects to move from other existing locations to new, lower cost sites where savings are not otherwise available. This strategic transformation and property optimisation will require additional capital investment and will be supported by the financing facilities from Sports Direct where necessary. Reflecting this period of change, the Board has taken the decision not to declare an interim dividend (2017: 1.0 pence).

Market update

* Source: GfK Chart-Track; based on value of retail sales of mint console hardware, software, digital and accessories. 26 weeks ended 27 January 2018 vs. 26 weeks ended 28 January 2017

^ UK and Spanish markets combined. Spain converted into sterling equivalent

The total value of the console gaming market in which we operate grew by 15.2% in the first half, continuing the momentum seen in the second half of last year which grew by 13.8%. The Nintendo Switch console has continued to drive growth in both markets with the UK market seeing an acceleration in growth to 14.3%, up from 8.8% in H2 last year, and the Spanish market growing by 13.5%, compared to 15.7% in H2 last year.

Hardware sales grew in both markets, driven by the Nintendo Switch and the new Xbox One X, with the UK hardware market up 29.3% and Spain up 13.9%. A major factor in this difference was due to the relative impact of the launch of Xbox One X, with Microsoft being more significant in the UK.

Software sales grew due to a better line up of new releases including Call of Duty: WWII which was ahead of its prior year equivalent, Destiny 2 which had no comparative in the prior year, and new Nintendo Switch titles including Super Mario Odyssey and Mario Kart 8. The UK software market was up 6.0% with the Spanish market up 12.4%, the difference being due to a number of factors, including the relative strength of PlayStation 4 and Nintendo in the Spanish market.

Consumer demand is expected to remain strong for both the Nintendo Switch console and the upcoming new titles for the console, including Super Smash Bros. and a Pokémon game, as well as accessory and other opportunities best highlighted by the recently announced LABO range. In addition to the benefits of the growing installed base of Nintendo Switch owners, there is also a strong slate of upcoming new titles including Red Dead Redemption 2 launching in October and other significant new releases announced or anticipated for later in the calendar year (e.g. The Division 2).

Operational and strategic update

Key Performance Metrics

Note:

* GTV growth rates converted into sterling equivalent

** Digital and non-console retail categories comprise digital content, preowned tech, PC and mobile accessories, licensed merchandise, services, VR and Marketplace

*** Source: GfK Chart-Track. Total market based on value of retail sales of mint console hardware, software, digital and accessories. 26 weeks ended 27 January 2018 vs. 26 weeks ended 28 January 2017

Figures in brackets denote H1 2017 comparatives as at 28 January 2017

UK Retail Performance

Our UK Retail business delivered a satisfactory performance in the half, with GTV down -0.3% on the prior year. Console sales grew 27.3%, driven by the Nintendo Switch which was launched in March 2017 and so had no comparative sales, along with the continued adoption of PlayStation 4 and the launch of Xbox One X. Total mint software sales fell 1.7%, consistent with the reduction in the size of the store estate (a 3.9% reduction in the number of stores to 299 (2017: 311)) and a further shift of sales online (online sales up 30.6% in the period).

GAME's overall share of the total mint console market at retail was 26%, down 3 percentage points on the prior year. The fall in our market share was a result of the following factors: firstly, an expansion in participants to the GfK Chart-Track market pool (with more retailers of digital content submitting data); secondly, the planned reduction in the size of the store estate combined with greater space allocated to non-console categories including BELONG; and thirdly, the increased contribution of the online channel accounting for circa 1.5 percentage points of market share. During the period we delivered online sales and online market share growth although the overall market swing to a greater online penetration outweighed this positive online performance. The strong growth in hardware sales led to lower overall margins in the period with the gross profit margin rate down 230 basis points to 24.1% (calculated as a % of revenues).

Management have continued to focus on improving performance through the realisation of efficiencies and cost saving measures. We have continued to give significant attention to our store footprint and reducing property costs wherever possible and a further 25 leases were renewed in the first half of the year, of which 23 were on improved terms. The cumulative annual rent savings from these lease renegotiations since we began this process in January 2016 is £2.5 million. Within retail operations, we continue to carefully manage our store employment costs, adjusting resourcing levels as required whilst maintaining appropriate service standards. We have also continued to focus on reducing expenditure across the business, where possible, and have delivered procurement savings on certain business service contracts and other business process improvements.

These initiatives have realised c.£5 million of operational efficiencies and savings in the first half of the year across our UK Retail operations including:

· £1.6 million reduction in store payroll, after absorbing additional inflation including the effects of the national minimum wage

· £1.6 million reduction in property related costs, reflecting rent savings from lease renegotiations completed in the period as well as those achieved in the previous year, plus rates savings

· Over £1.5 million of savings in other store costs and head office costs from the review and tender of contracts and cancellation of non-essential services

· Distribution savings and marketing spend reductions of £0.3 million

Overall, underlying operating costs (before depreciation, amortisation, adjusting and exceptional items) were reduced by £4.0 million after including costs increases such as incremental rental costs following the sale and leaseback of the Group's UK head office and distribution centre and other modest inflationary increases including pay review costs. The cost review activities have been intensified with greater savings targeted and actioned for the second half of the year including further restructuring and reorganisation activities across stores, distribution and centrally. The total targeted savings for the second are at least £6 million.

We ended the half with 299 stores (H1 2017: 311) in the UK, with an average length to first break of 1.1 years and 233 potential lease events before the end of December 2018. During the 26 week period we opened one new store, closed six stores and relocated six stores in the period.

Spain Retail Performance

Our Spanish business delivered a strong performance in the half, with total GTV up 7.5% on a local currency basis. Market share of both the high street and online channels increased year-on-year but the higher contribution of online has meant that our share of the overall market declined by 1 percentage point to 38% (2017: 39%).

In local currency terms, our Spanish Retail business delivered GTV growth in hardware up 16.5%, content up 7.4% and accessories & other up 11.7% with just the preowned category seeing a decline of 6.6%. The growth in hardware sales was driven by Nintendo Switch (which had no comparative) and the new Microsoft range which benefited from the launch of Xbox One X. Within software sales, Nintendo Switch software sales were a major driver (no comparative), PlayStation 4 and Xbox One software sales were up 12.0% and digital sales were up 5.6%. Within the preowned category, growth in PlayStation 4 and Xbox One software sales, up 8.4%, and preowned technology sales, up 25.0%, were more than offset by the fall in other software formats and hardware. Our focus categories (comprising digital content, preowned technology, PC and other accessories and licensed merchandise) were up 12.8%.

In total, after the effects of a slightly stronger Euro, which appreciated approximately 3% against Sterling, GTV rose 11.2% and gross profit rose 4.6%, after a 1.3 percentage points decline in gross profit margin, to 22.8% (calculated as a percentage of revenue).

Underlying operating costs (before depreciation, amortisation and adjusting and exceptional items) rose €1.4 million, or 4.3% on a local currency basis, well below the 7.5% increase in GTV.

We opened two new stores in Spain in the 26 week period, closed three and relocated one, ending with 267 stores (H1 2017: 270).

Events, Esports & Digital Performance

Our Events, Esports and Digital division includes BELONG, Game Esports and Events, Ads Reality, Game Esports Spain and Multiplay (UK) Limited prior to its disposal.

In aggregate, these areas grew sales by 15.6%, or £1.2 million, to £8.9 million in the half (2017: £7.7 million), with the majority of these sales attributable to BELONG and Game Esports and Events.

Gross profit margin improved by 15.7 percentage points in the period to 32.6%, predominantly reflecting the higher margins achieved on events such as Insomnia and Minecon in the period.

Underlying operating costs (before depreciation, amortisation, adjusting and exceptional items) across these areas decreased to £4.0 million (2017: £4.1 million), resulting in an Adjusted EBITDA loss of £1.1 million (2017: EBITDA loss of £2.8 million).

Group Strategy Update

The video games industry is changing rapidly, driven by the continuing evolution of customer and gaming behaviours. Our strategic initiatives ensure that we continue to meet the needs of our customers and suppliers, whilst positioning the business to respond to challenges and realise the growth opportunities arising. Our mission remains to build the most valuable community for gamers and we continue to focus on initiatives to transform the business to a group more offering gaming experiences and services.

New collaboration with Sports Direct

On 12 February 2018 the Group entered into a collaboration agreement with Sports Direct and also obtained new borrowing facilities of £55 million from Sports Direct. This new partnership means the Group has greater opportunity and flexibility to expand its gaming experience activities faster, in more and larger sites and achieve critical scale and thereby deliver on its financial targets.

The collaboration agreement covers the rollout of BELONG and Game Retail Limited stores, in standalone locations as well as concessions in Sports Direct sites. As part of the collaboration agreement, Sports Direct has acquired a 50% interest in the rights of the BELONG intellectual property for cash consideration of £3.2 million and the right to a profit share of up to 50% of future profits of BELONG arenas and/or profits from new and existing venues that include a BELONG arena or a BELONG arena with a Game Retail proposition. Any new standalone Game Retail locations fall outside of this agreement meaning there will not be any sharing of profitability of any new Game Retail locations where there is no BELONG concept included, unless the Game Retail location is within a Sports Direct site. The sharing of profits from venues that include a BELONG arena (or a similar concept) cover sites in the UK and internationally.

The facilities agreement comprises a £20 million unsecured working capital facility and a £35 million unsecured capital expenditure facility, the latter of which the Group may utilise to fund the opening of new BELONG arenas and Game Retail stores under the collaboration agreement, and ongoing development of the BELONG website and its related tournament management system. The working capital facility is available until 31 January 2019, with the option to request an extension. The capital expenditure facility is available for drawing over quarterly periods expiring 31 January 2023. Repayments under the capital expenditure facility commence approximately two years after initial drawdown and equal repayments (20% of the amounts drawn in any quarterly period) are to be made annually thereafter over the next five years.

In the period, we also delivered important milestones against each pillar of our strategy as follows:

1. Improve our core multichannel retail businesses to maximise market potential and profitability

· Strong customer engagement

o GAME Elite membership programme in the UK has over 80,000 sign-ups to date

o Over 700,000 new customers signed up to our Reward programmes in the UK and Spain, with active Reward customers up 100,000 to 4.6 million (last 12 months)

· Building new categories and services

o Continued development in Spain of its new focus categories (including digital content, accessories, preowned technology and licensed merchandise), where GTV growth of 12.8% was delivered on a local currency basis

o Continued development in the UK of the live and online gaming services, see point 2 below

· Further developing the online and multichannel proposition

o Click & Collect and Reserve & Collect propositions growth of 28.7% versus H1 last year in the UK and represented 10% of online sales for the period

o Delivery options further developed to include a free next day tracked service (including Saturday) for order values over £75 and store retail stock for preowned and mint software now available online and despatched directly from stores

o Online trade-in service proposition successfully launched and developed

o Website further developed and enhanced including site navigation and customer journey improvements

o The launch of an online consumer finance offering

· Optimising the store estate

o Seven stores relocated and a further three new stores opened across the UK and Spain. Four of these relocations and openings were concessions within Maplin stores which have since closed in H2

o Nine stores across the UK and Spain were closed during the first half period

o Significant store activity planned in H2 with the growth of BELONG, plus we continue to review and improve the configuration of our UK store estate and drive and protect store contribution

2. Expand the Group's live and online gaming services for gamers and publishers

· Growth in BELONG arenas

o 20 BELONG arenas in operation, 3 new openings in the current financial year to date

o 176,000 hours played in the half, representing a utilisation level of 28.5% versus 18.7% in H2 last year

o New online booking platform launched in February 2018

o New facilities allow for approximately 100 BELONG arenas within 3 years

o Plans progressing to open the first BELONG arenas in Spain

· Continued expansion of our esports activities

o Secured the hosting of the Call of Duty ('COD') World League: Birmingham Open, part of the COD World League Global Circuit with a prize pool of US$200,000, the largest esports event the Group has run to date

o Three seasons of BELONG arena clash to date with growth in participation in the latest competition (season three in the current year up 137% on season two)

o One further season of our 'UK Masters' national esports tournaments successfully completed, with viewership targets exceeded and 'Weekly Cups' launched in October 2017

· Successful development and growth of the Insomnia Gaming Festival

o Over 68,000 footfall achieved at the Summer Insomnia in August 2017

o Expected footfall of over 55,000 for Insomnia 62, a 10% increase Easter on Easter

· Continued development of the contract events business

o Over 30,000 footfall at BRICKLIVE Birmingham in October 2017, the largest third party event the Group has organised to date.

3. Optimise organisational efficiency while investing for the future

· Significant operational efficiencies and cost savings achieved

o Approximately £5 million of cost savings realised across UK retail operations

· Continued progress rationalising the UK store base and delivering property savings

o A further 23 leases renegotiated on improved terms in the half, realising over £0.8 million of annual rent savings

o Planning for 233 lease events during calendar 2018 and a further 39 in calendar 2019

· Disciplined investment in strategic initiatives

o Planning well underway to accelerate the rollout of BELONG concepts in collaboration with Sports Direct and other growth initiatives spanning multichannel retail, events and esports

Chief Financial Officer

The Company is pleased to report the appointment of Martin Hopcroft as Interim Chief Financial Officer with immediate effect. He will attend and advise at all future board meetings. Martin is a graduate chartered accountant with considerable experience in providing financial, operational and strategic management to businesses in transformation and has most recently acted as interim CFO for Cambian Group plc.

Conclusion

Our core console markets continued to grow in the first half of the year; but at a faster rate than the second half of last year. This growth was driven by strong customer demand for Nintendo Switch, the continued adoption of PlayStation hardware, the launch of Microsoft's Xbox One X and a stronger line up of new software titles compared to the same time last year. In the second half of the year there will be several significant new games titles and new software releases for the Nintendo Switch. Despite these developments, the Board remains cautious on the outlook for the second half and has increased its focus on efficiency and cost saving actions to right size the business for the current and future environment.

The Group continues to pursue its diversification and growth strategies through further rollout of BELONG arenas and development of esports activities plus the continued focus on the development of non-console categories. The new collaboration with Sports Direct provides important and necessary funding and exciting new opportunities. The Group continues to organise itself effectively, enhancing its consumer proposition and customer engagement, whilst building ever stronger and more collaborative arrangements with its key suppliers and business partners and believes it is well positioned to execute its strategy and deliver future growth.

FINANCIAL REVIEW

Group Results

The Group's Gross Transaction Value (GTV) grew by £21.4 million or 3.8% to £586.8 million (2017: £565.4 million), which was predominantly driven by the growth in console hardware and physical content as well as the growth in sales of gaming experiences and related ancillary sales.

Group revenue (which takes into account the commission-only element of digital sales) grew by 3.9% in the period to £517.4 million (2017: £498.1 million).

Group gross profit rate (as a percentage of GTV) fell by 150 basis points to 21.0%. The change in gross profit rate was explained by the shift in sales mix to lower margin hardware and the decline in the higher margin core preowned category that more than offset the higher trading margins in both hardware and physical software.

Underlying operating costs (excluding depreciation, amortisation, exceptional and adjusting items) decreased by £1.9 million or 1.8% in the half to £101.9 million. This overall cost reduction was explained by the significant savings achieved in UK Retail being offset in part by the impact of modestly higher Spanish retail costs. The underlying costs in Core UK Retail of £67.3 million reflect the benefits of approximately £5 million of cost saving initiatives delivered in the period. The underlying costs in Core Spanish Retail of €34.3 million were well controlled and increased by €1.4 million or 4.3% on the equivalent period last year. Costs across the Group's Events, Esports & Digital division, comprising BELONG, Game Esports and Events, Ads Reality, Game Esports Spain and Multiplay (UK) Limited prior to its disposal, were reduced by £0.1 million to £4.0 million. The change in costs reflect the continued expansion of BELONG, the benefits of the cost reduction programme in Game Esports & Events as well as lower costs given the disposal of Multiplay Digital.

Group operating profit was £12.9 million (2017: £17.3 million). The change in operating profit in the period is explained by lower gross profit generation, lower operating costs and net exceptional income of £4.0 million (2017 exceptional income: £6.3 million). The Group achieved an Adjusted EBITDA of £21.2 million (2017: £23.3 million), reflecting a 14.6% decline in Core Retail to £22.3 million and a lower EBITDA loss of £1.1 million (2017: EBITDA loss £2.8 million) within Events, Esports & Digital as the new business activities were further developed in the period.

Adjusted profit before tax in the year was £14.2 million (2017: £16.9 million) and Adjusted basic earnings per share was 6.4 pence (2017: 7.9 pence). On a statutory basis, profit before tax was £12.3 million (2017: £16.5 million) and basic earnings per share was 5.4 pence (2017: 7.7 pence).

Segmental results

Core Retail: UK

1. Calculated as a % of GTV

The core UK Retail business saw Gross Transaction Values broadly in line with last year. Hardware GTV increased by 27.3% but all other key categories were down year on year. Nintendo Switch drove the growth in hardware although its related software and accessories sales could not offset the decline in the other categories.

The increase in sales mix of the lower margin hardware category drove a 2.0 percentage point decline to the gross margin (as a % of GTV) in the first half to 21.1% (2017: 23.1%).

Operating costs before depreciation, amortisation, adjusting and exceptional items were reduced by £4.0 million or 5.6%, reflecting operating cost savings of over £5 million. This was partially offset by additional rent payable on the UK distribution centre and head office buildings of £0.2 million following the sale and leaseback of the property in October 2016 and other inflationary increases.

The impact of the change in sales category mix on the gross profit margin rate meant Adjusted EBITDA for the core UK Retail business declined £3.5 million in the half to £9.9 million (2017: £13.4 million) despite the significant reduction in operating costs.

Core Retail: Spain

Note: ^ LC currency basis (LC). Calculated based on original Euro amounts.

GAME's Spanish Retail business (excluding esports) delivered GTV growth of 7.5% over the period on a local currency basis. Hardware GTV increased by 16.5%, meaning that GTV excluding low margin hardware grew by 5.1% on a local currency basis. A key priority for the Spanish retail business was the continued development of its new focus categories (including digital content, PC and other accessories, preowned technology and licensed merchandise), where GTV growth of 12.8% was delivered on a local currency basis.

On a reported basis, after the effects of a stronger Euro during the half, Spanish GTV rose 11.2%. On a reported basis, Spanish revenue grew 10.8% to £188.5 million.

Gross profit rates in the territory declined by 130 basis points to 20.2% (2017: 21.5%). Spanish operating costs excluding depreciation, amortisation and adjusting and exceptional items increased to £30.6 million (2017: £28.4 million), representing 14.4% of GTV (2017: 14.9%). In local currency, these Spanish operating costs increased €1.4 million, or 4.3%, well below the level of increase in sales.

The Adjusted EBITDA for the period was £12.4 million (2017: £12.7 million). In local currency terms Adjusted EBITDA was €13.9 million (2017: €14.9 million).

Events, Esports & Digital

Revenue from Events, Esports & Digital grew 15.6% to £8.9 million (2017: £7.7 million). Revenue from Events & Esports (excluding Digital, as Multiplay Digital was sold 28 November 2017) grew 31.5% to £7.1 million (2017: £5.4 million).

The gross profit rate increased by 15.7 percentage points in the half, to 32.6%. The improvement in gross margin was largely due to greater profitability within Game Esports and Events where the move to the NEC in the prior year had initially increased the operating costs of events. Gross profit from Events & Esports (excluding Digital) grew 250% to £2.1 million (2017: £0.6 million). This is explained by the greater focus on operating profitable events and the scaling up of the BELONG operation.

Core underlying operating costs attributable to Events, Esports and Digital decreased £0.1 million to £4.0 million in the first half (2017: £4.1 million). Cost investment in BELONG amounted to £0.6 million as the Group continued to expand its activities in this area but this was offset by savings in the Game Esports and Events business plus lower costs as a result of the Multiplay (UK) Limited disposal.

The Adjusted EBITDA loss in the half was £1.1 million (2017 EBITDA loss: £2.8 million).

Gross Transaction Value (GTV) and Revenue

1 Includes sales contributed from Events, Esports & Digital businesses

Group GTV increased 3.8% over the first half to £586.8 million (2017: £565.4 million). Foreign exchange rates positively impacted the reported GTV during the half. GTV in UK businesses of £374.0 million was level on last year and GTV in Spain of £212.8 million was up 11.1% on last year.

Hardware sales grew £29.1 million to £146.7 million, reflecting the continued consumer demand for Nintendo Switch consoles, the benefits of the Xbox One X launch and the stronger relative sales of PlayStation 4.

Content GTV, which includes both mint boxed and digital game content, increased by 1.2% in the period. Physical software sales grew 3.3% to £190.8 million in the first half. This improvement reflects the strong consumer reaction to Nintendo Switch software and a 0.5% increase in the sales of Xbox One and PlayStation 4 content. Total digital console sales continued to grow, although non-console digital sales (comprising Steam and other PC downloads and point of sale activation cards) fell resulting in an overall 3.7% decrease in digital GTV in the half.

GTV from the accessories & other category decreased by £2.7 million or 3.0% to £87.3 million. This decline was experienced despite an increase of 8.2% in console and PC accessories in the period as this was more than offset by the continued decline of the Toys-to-Life category and impacted by the strong performance of Virtual Reality in 2017 when the major launches occurred. Sales in the period from Game Esports & Events (excluding Digital) increased 31.5% to £7.1 million.

Sales of preowned mobile phones and tablets (GAMEtronics) were in line with the prior year but the Group saw a decline in sales of preowned Xbox 360 and PlayStation 3 hardware and software, plus lower Xbox One and PlayStation 4 software leading to an overall decline in GTV for preowned products of 8.6% to £87.5 million.

On a statutory basis, Group revenue increased 3.9% in the first half to £517.4 million (2017: £498.1 million).

Gross profit

Gross profit fell by 3.1% to £123.1 million (2017: £127.1 million).

Gross profit margin by category is analysed in the table below.

Note: Gross profit calculated as a % of GTV

Overall the Group gross profit rate decreased by 1.5 percentage points in the period due to the higher mix of lower margin hardware sales as well as a lower mix and falling rates on preowned and content categories. This was despite higher gross profit rates in hardware and accessories & other.

Hardware margin rates improved 1.4 percentage points compared with the same period last year to 7.1% due to a combination of improved supplier terms and higher achieved margin rates on Nintendo Switch. The performance of Nintendo Switch reflects the earlier stage of its selling cycle with relatively limited supply and fewer discounts.

The gross margin of accessories & other increased 3.0 percentage points to 32.9%. This increase was due to the higher margin achieved in the Events, Esports & Digital segment (including pay to play margins in the BELONG arenas) and the mix of products within this category, including higher sales of core console accessories and lower sales of virtual reality headsets.

Despite higher physical software trading margins of 25.2% (2017: 24.6%), the overall content gross profit rate decreased 1.4 percentage points to 21.6% in the half, mainly due to the change in mix of physical and digital product sales.

Preowned margin rates fell 4.1 percentage points due to the increasing mix of Xbox One and PlayStation 4 (new format) software, which achieve lower margin rates than older formats, as well as lower gross profit rates on preowned technology products.

Operating expenses

Continuing operating expenses before exceptional and adjusting items, comprising selling and distribution and administrative expenses, decreased by £1.1 million or 1.0% to £108.3 million. Continuing operating costs (excluding depreciation, amortisation, exceptional and adjusting items) decreased by 1.8% to £101.9 million.

Group continuing selling and distribution expenses decreased 2.1% or £1.7 million to £80.5 million with UK Retail costs down £4.1 million from cost savings and business efficiencies, but partly offset by increases in Spain Retail and Events, Esports & Digital costs. Group continuing administrative costs increased £0.6 million to £27.8 million.

Underlying core retail costs were £1.8 million lower year on year, at £97.9 million (2017: £99.7 million). Within this, UK Retail costs were reduced by 5.6% or £4.0 million to £67.3 million whilst Spanish retail costs increased 7.7% to £30.6 million predominantly due to sales-related costs and the impact of a weaker pound. Across the Group's UK Retail operations, a number of business efficiencies and cost savings were delivered in the period:

· £1.6 million reduction in store payroll, after absorbing additional inflation including the effects of the national minimum wage

· A reduction of £1.6 million in property related costs, reflecting rent savings from lease renegotiations completed in the period as well as those achieved in the previous year, plus rates savings

· Over £1.5 million of savings in other store costs and head office costs from the review and tender of contracts and cancellation of non-essential services

· Distribution savings and marketing spend reductions of £0.3 million

In local currency, Spanish retail costs for the period increased by 4.3% or €1.4 million, which was below the sales growth of over 7%. Higher distribution costs, store payroll and store rent costs, mainly linked to greater sales activity, were incurred.

Operating expenses across the Group's Events, Esports and Digital businesses decreased £0.1 million to £4.0 million (2017: £4.1 million). Cost savings and efficiencies were achieved in Game Esports and Events and Multiplay Digital. However, higher costs arose in BELONG from the greater number of arenas opened versus the prior year.

Exceptional and adjusting items

The exceptional items as detailed in note 3 are as follows:

Exceptional income of £6.0 million was recognised in the period relating to the gain on the sale of Multiplay (UK) Limited. In the previous period the Group entered into the sale and leaseback of the UK head office and distribution centre, which gave rise to an exceptional gain of £6.3 million.

During the period the Group has undertaken several key strategic projects and initiatives which resulted in £1.4 million of non-recurring costs (2017: £nil). In addition, £0.6 million (2017: £nil) of redundancy and reorganisation costs have been incurred in the UK businesses and further costs will be incurred in the second half of the year as the Group continues with its reorganisation plans.

The adjusting items before tax as detailed in note 3 are as follows:

Amortisation charges decreased by £0.1 million in the half as a result of the disposal of Multiplay (UK) Limited. The post-acquisition remuneration of £1.2 million (2017: £1.7 million) related to amounts of cash and shares payable to certain of the original shareholders of Multiplay (UK) Limited which was linked to the completion of a minimum period of post-acquisition employment. The payment of this post-acquisition remuneration was made on 2 March 2018, representing £2.4 million of cash and the issue of 2,079,002 ordinary shares in GAME Digital plc. No further post-acquisition remuneration will accrue on the Multiplay acquisition after this date.

Adjusted EBITDA

Note: EBITDA margin calculated as a % of revenue

Group Adjusted EBITDA (EBITDA less exceptional and adjusting items) of £21.2 million (2017: £23.3 million) fell by a total of £2.1 million in the period. Core Retail performance reflects a £3.8 million decline, predominantly related to the UK Retail operation whilst the Spanish Retail operations delivered an Adjusted EBITDA of £12.4 million, down £0.3 million. The Adjusted EBITDA loss from Events, Esports and Digital totalled £1.1 million (2017 EBITDA loss: £2.8 million), reflecting the improvement in performance in Game Esports and Events (arising from higher margins and cost saving measures) as well as the growth in the new business activities in the period.

Financing costs

Net financing costs totalled £0.6 million (2017: £0.8 million). The decrease in financing costs reflects lower drawings in Spain over the period and lower costs for the UK facilities following the expiry of the facility provided by Lajedosa Investments S.à r.l. on 31 October 2017.

Profit before tax

Profit before tax for the period amounted to £12.3 million (2017: £16.5 million). Profit before tax for Core Retail was £9.7 million (2017: £22.1 million) and Events, Esports and Digital reported a profit before tax of £2.6 million (2017 loss: £5.6 million).

Taxation 

The effective tax rate (defined as the accounting tax charge divided by the accounting profits before tax) was 25.2% (2017: 20.6%). The increase in the tax rate reflects the change in mix of profitability of companies in the Group with a higher proportion of profits generated by the Spanish business at a tax rate in Spain of 25%. No deferred tax is forecast to be recognised in relation to the full year taxable losses expected to arise in the UK and the existing deferred tax asset has been released and charged to the statement of comprehensive income in the period. No corporation tax is expected to be payable in the UK in the current year and subject to agreement with HMRC, a tax refund from previous years should become receivable.

Earnings per share 

The earnings used for the calculation of Adjusted basic EPS are as follows:

* Basic shares outstanding excludes shares held in trust (EBT and SIP)

The Group delivered Adjusted basic earnings per share of 6.4 pence (2017: 7.9 pence). In order to give a better view of underlying earnings, adjustments to earnings per share have been made to remove exceptional and adjusting items.

On a statutory basis, after the impact of exceptional and adjusting items, basic earnings per share for the 26 weeks ended 27 January 2018 was 5.4 pence (2017: 7.7 pence).

Cash flow and net cash

Cash generated from operations

Cash generated from operations amounted to £36.3 million, £8.3 million higher than the previous year. This increase has been generated from an improvement in working capital which has offset the fall in EBITDA. After finance costs and corporation tax payments, cash generated from operating activities was £32.2 million (2017: £25.7 million).

The working capital improvement was largely explained by a significant decrease in the inventories balance compared to the prior year. Stock levels in the UK have fallen year-on-year from more efficient stock management and greater supplier support over the peak trading period.

Corporation tax paid has increased by £2.3 million to £3.7 million due to the timing impact of payments on account in Spain.

Note: Working capital generation ratio calculated as working capital generated as a % of net cash from operating activities

Capital expenditure

Group capital expenditure amounted to £6.2 million in the half (2017: £5.8 million), representing 29% of Adjusted EBITDA (2017: 25%) and 1.2% of revenue (2017: 1.2%).

Capital expenditure was prioritised on investment in BELONG (stores and technology), online and systems development, a small number of new retail and store relocations in the UK and Spain as well as additional investment in the distribution centre in Spain.

Dividends

Reflecting the decision to increase investment in the Group's new BELONG concept and optimise the UK estate in light of the significant number of lease events planned for over the next nine months, the Board has taken the decision not to declare an interim dividend (2017: 1.0 pence per share).

The Board will continue to evaluate future dividends and remains committed to returning surplus cash to shareholders after retaining sufficient capital to fund the required investment to support future business growth.

Cash resources and financing

As at 27 January 2018, the Group had cash and cash equivalents of £84.9 million (2017: £73.0 million) and both the UK and Spanish banking facilities were undrawn.

As at 27 January 2018 the Group had aggregate available banking facilities of up to £75 million (2017: £80 million) comprising a UK asset-backed revolving loan facility agreement with PNC Financial Services UK Limited and Wells Fargo Capital Finance (UK) Limited of up to £50 million and a two-year financing facility with a syndicate of Spanish banks amounting to €28.0 million (2017: €34.7 million). The UK and Spain facilities can be increased by up to £25 million and €16 million respectively during the peak season annually until the respective expiry dates.

The new Spanish facilities signed on 19 January 2018 comprise a working capital facility of €8 million and a guarantee facility of €20 million available throughout the term (expiring 31 January 2020, subject to the option to request an extension). In each peak trading period over the next 2 years the working capital facility will increase by €16 million.

On 12 February 2018 the Group entered into a collaboration agreement with Sportsdirect.com Retail Limited ('Sports Direct') and obtained new borrowing facilities of £55 million from Sports Direct. Sports Direct is a subsidiary of Sports Direct International plc, a related party of the Group by virtue of holding 25.75% of the share capital of the Company.

The facilities agreement comprises a £20 million unsecured working capital facility and a £35 million unsecured capital expenditure facility, the latter of which the Group may utilise to fund the opening of new BELONG arenas and Game Retail stores under the collaboration agreement, and ongoing development of the BELONG website and its related tournament management system. The working capital facility is available until 31 January 2019, with the option to request for an extension. The capital expenditure facility is available for drawing over quarterly periods expiring 31 January 2023. Repayments under the capital expenditure facility commence approximately two years after initial drawdown and equal repayments (20% of the amounts drawn in any quarterly period) are to be made annually thereafter over the next five years.

Working capital

Net investment in trade working capital decreased by £19.4 million to £47.7 million (2017: £67.1 million), reflecting the lower stock balances referred to in the cash flow and net cash section above.

The Group stock balances have decreased £12.9 million to £89.8 million, achieved through more efficient purchasing and management of stock in the UK Retail business.

The trade receivables balance has modestly decreased £4.2 million to £15.7 million and trade payables increased by £1.8 million to £57.3 million. These movements reflect management's actions to optimise the timing of stock intake and other actions to improve working capital management.

Prior period restatements and changes in accounting estimates

During the 52 week period ended 29 July 2017, the Group recorded prior period errors for material differences identified in two balance sheet accounts. The error relating to potentially overpaid VAT on preowned goods must be agreed with HMRC and, as there is currently no certainty over the recoverability of part or all of the error, no receivable balance has been recorded in these financial statements.

In addition, the Group reviewed its supplier funding arrangements and how these are reflected in the financial statements. This resulted in a reclassification of marketing income from other operating expenses to a deduction within cost of sales.

Where applicable, these prior period errors and reclassification of supplier marketing income have been reflected in the comparative information as set out in notes to the condensed set of financial statements.

Going concern

The Directors have a reasonable expectation that the Group and the Company has adequate financial resources to ensure it continues to operate for a period of not less than 12 months from the approval of the 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.

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 2017 Annual Report, described as follows, also remain relevant to the rest of the financial year: Strategy and business model, competition, people and organisational capability, key supplier dependency, trading and consumer confidence, data protection and cyber security, financial management and control, business disruption and crisis management, core systems and new technologies and health and safety.

Responsibility Statement

The Directors confirm, to the best of their knowledge and belief, that this condensed consolidated set of interim 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 27 January 2018 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 27 January 2018 and any material changes in the related party transactions described in the last Annual Report.

A copy of the Company's 2017 Annual Report and Accounts is available on GAME's website www.gamedigitalplc.com

This responsibility statement was approved by the Board of directors on 26 March 2018 and is signed on its behalf by:

Martyn Gibbs

Chief Executive Officer

Condensed Consolidated Statement of Comprehensive Income

For the 26 weeks ended 27 January 2018

All results relate to continuing operations (note 1).

Condensed Consolidated Statement of Financial Position

As at 27 January 2018

Condensed Consolidated Statement of Changes in Equity

For the 26 weeks ended 27 January 2018

Condensed Consolidated Statement of Cash Flows

For the 26 weeks ended 27 January 2018

Notes to the Condensed Set of Financial Statements

For the 26 weeks ended 27 January 2018

General information

The financial information included in this interim statement of results does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The statutory accounts for the 52 week period ended 29 July 2017 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 condensed consolidated interim financial statements of the Company for the 26 week period ended 27 January 2018 comprise the Company and its subsidiaries (together referred to as the 'Group'). The condensed interim 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 29 July 2017.

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 29 July 2017. The condensed financial statements have been prepared on the historical cost basis except for the revaluation of certain financial instruments that are measured at fair values at the end of each reporting period.

The Group will adopt IFRS 9 Financial Instruments from the financial year beginning 29 July 2018 and this new standard is not expected to have a material impact on the consolidated financial statements.

The Group is currently assessing the impact that IFRS 15 Revenue from Contracts with Customers may have on the consolidated financial statements and a detailed review of revenue streams is being performed. Management have identified that the following areas are likely to be impacted by the new standard: loyalty schemes, gift cards and warranties. No material adjustment to revenue is expected and the Group will adopt the new standard from the financial year beginning 29 July 2018.

The Group has not begun to assess the impact that IFRS 16 Leases will have on the consolidated financial statements and it is not practicable to provide a reasonable estimate until a detailed review has been completed. Also given the nature of the store lease negotiations that have taken place in the UK in the last two years, some of the leases may be covered by the exception for short-term leases. However, as with most retailers this standard is expected to have a significant impact on the Group's results and balance sheet. With 566 store leases across the Group and head office and distribution centre leases in the UK and Spain, the majority of these leases will be brought onto the balance sheet. This will have the effect of increasing the Adjusted EBITDA but the overall impact on the profit before tax has not been quantified. The standard is mandatory for periods beginning on or after 1 January 2019 and at this stage the Group does not intend to adopt the standard before its effective date.

Prior period restatements

During the 52 week period ended 29 July 2017, the Group recorded prior period errors for material differences identified in two balance sheet accounts. In addition, the Group reviewed its supplier funding arrangements and how these are reflected in the financial statements which resulted in a reclassification of marketing income from other operating expenses to a deduction within cost of sales. Further details are set out in note 1 to the consolidated financial statements for the 52 weeks ended 29 July 2017.

Where applicable these prior period errors and reclassification of supplier marketing income have been reflected in the comparative information as set out in note 15.

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, Game Esports Spain and Multiplay (UK) Limited prior to its disposal, are presented as a separate segment titled 'Events, Esports & Digital'. The performance of this segment is reviewed separately by the Chief Executive Officer, the activities are different to those of the retail segments and significant growth is expected in the next few years.

Multiplay (UK) Limited, comprising the Multiplay Digital business, was sold on 28 November 2017 but has been presented within continuing operations as it was part of the Events, Esports & Digital CGU and not a significant part of the business to be classified as a discontinued operation.

The performance of operating segments is assessed based on Gross Transaction Value ('GTV'), Revenue and Adjusted EBITDA defined as follows:

· 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. 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. Adjusted EBITDA is a supplemental measure of the Group's performance and liquidity that is not required to be presented in accordance with IFRS.

The activities and products of the operating segments are detailed on pages 132 to 135 of the Group's latest Annual Report and Accounts.

The following is an analysis of the Group's GTV, revenue and Adjusted EBITDA by reportable segment:

Other accounting adjustments comprise movements in provisions and estimates (including accounting for gift card, returns and deposits) and other revenue for the Core Retail segment.

Revenue, and hence profitability, of the Core Retail division is more heavily weighted towards the first half of the financial year with the Christmas period and timing of key new software releases.

For the purposes of monitoring segment performance and allocating resources between segments, the Group's Chief Executive monitors the tangible, financial and current assets and current and non-current liabilities attributable to each segment. All assets and liabilities are allocated to reportable segments.