GMD.L Regulatory News (GMD)

24 March 2015

GAME DIGITAL PLC

Interim Results for the 26 weeks ended 24 January 2015

STRONG CASH GENERATION SUPPORTS £25 MILLION SPECIAL DIVIDEND

POSITIVE STRATEGIC DEVELOPMENTS

GAME Digital plc ("GAME" or the "Group") today announces its interim results for the 26 weeks ended 24 January 2015. All comparator periods are for the 26 weeks ended 25 January 2014 unless otherwise stated.

FINANCIAL HEADLINES

BUSINESS AND OPERATIONAL HEADLINES

STRATEGIC DEVELOPMENTS

OUTLOOK FOR THE FULL YEAR

The video games market in the UK has started 2015 more slowly than we anticipated, however we continue to maintain our strong market shares and expect activity in the UK to pick up in coming weeks, driven by promotional campaigns around Easter and the launch of a number of key titles.

Our specialist proposition and omni-channel platform mean that we are well positioned to take a leading share of sales for the high quality line-up of new games which are due to be released into the continually expanding installed base of Xbox One and PlayStation 4 consoles.

Our costs remain well controlled and we anticipate a modest positive impact to percentage gross margin in the second half, driven by our preowned performance. Overall, management expects the Group to deliver adjusted EBITDA for the full year within the range of current market expectations.

Martyn Gibbs, Chief Executive Officer, said:

"The video games market remains dynamic and competitive. While we experienced some challenging conditions over the Christmas trading period, we are confident that our strategy of focusing on customer recruitment, combined with the significant and growing number of Xbox One and PlayStation 4 owners across our two major territories, provides a solid foundation from which to drive growth over the medium term.

"In the first half of the year we continued to make good progress on our strategic priorities. We achieved strong revenue and market share growth in digital sales, added a significant number of new Reward customers and users of GAME Wallet and delivered a number of improvements to our omni-channel offer. We have taken important steps in our strategy to broaden our offer beyond purely retail, to the places and ways in which our customers play games, with great support from our supplier partners.

"Our focus for the second half is to deliver on our trading targets and to continue to push forward our strategic initiatives, including further developing our digital strategy and broadening our engagement with gaming communities through technology, events and eSports following our acquisition of Multiplay.

"In the coming weeks and months we can look forward to a solid line up of new physical and digital games launches. Our pre-order rates on the major titles are encouraging and we have secured exclusive editions on many of the key titles.

"We continue to manage the business prudently, balancing the need to fund growth with the discipline of returning excess capital. In this regard, I am pleased to announce the Group's intention to return £25 million to shareholders by way of a special dividend, in addition to our maiden interim dividend of £12.5 million."

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 recording of the presentation will be available on www.gamedigitalplc.com later today.

Enquiries

Notes:

SUMMARY OF FINANCIAL RESULTS

OVERVIEW

FINANCIAL RESULTS

Following a solid performance in our first quarter, a highly competitive Christmas trading period in the UK and weaker market conditions in Spain resulted in the Group achieving sales and profits below our original expectations for the first half. Total sales for the first half were broadly in line with the same period last year at £582.1 million (2014: £586.4 million), whilst Adjusted EBITDA declined to £43.0 million (2014: £51.3 million).

Despite lower profit generation over the period, our strong cash position and confidence in the Group's long term strategy and future prospects means that we are today announcing a return of £25 million (14.7 pence per share) to shareholders by way of a special dividend. This is in addition to the Group's announcement of an interim ordinary dividend of 7.35 pence per share. Both the interim ordinary and special dividend will be paid on 17 April 2015 to shareholders on the register as at close on 7 April 2015.

Our balance sheet remains strong, with no long term debt, and we remain focused on cash generation. We continue to take a disciplined approach to cost and working capital across the business, whilst investing to support our customer offer and growth ambitions.

CUSTOMER ENGAGEMENT AND STRATEGIC INITIATIVES

We have made good progress on our customer engagement and strategic priorities, adding 500,000 new Reward customers, whilst over 450,000 customers have now registered with GAME Wallet, our e-payment platform. We have surpassed the milestone of 1 million registered app users, begun the beta trial of a mobile games store and made a number of key enhancements to our omni-channel offer. This includes the launch of GAME Marketplace in February, which has added a large and growing number of specialist gaming-related products to our range.

Finally, as announced on 2 March 2015, GAME has acquired Multiplay, a community-based specialist gaming company that runs the UK's largest gaming festivals and provides online gaming services to millions of multiplayer gamers around the world. The bringing together of GAME and Multiplay is an important step forward in our strategic development. The acquisition supports our ambition to increase further our relevance and engagement across our communities and accelerate our move into the rapidly growing world of eSports and multiplayer gaming, as well as enhancing our customer insight.

Following that acquisition, we have restructured GAME into three new operating divisions: GAME Retail, GAME eSports and Events and GAME Digital Solutions. Alongside this re-shaping, key team appointments have been made to support the future development of the business, helping to ensure we deliver against our commercial and strategic objectives.

SUMMARY

We are laying the foundations to capitalise on a number of strategic opportunities for the Group. In the short term our key focus is on delivering trading results in what we expect will continue to be a dynamic and competitive market. In the longer term, we are focused on developing the business both to enhance and strengthen the leading positions we hold in our core markets, whilst moving into attractive and growing new markets. The Group is driving these developments to position itself for long term profitable growth.

MARKET AND PERFORMANCE REVIEW

UK Overview

Our UK revenues grew 2.4% in the first half to £447.7 million, representing 76.9% of Group sales. Adjusted EBITDA in the UK fell 17.8% to £31.9 million predominantly as a result of lower margins achieved on hardware due to hardware bundling with games, and a higher cost base, reflecting the investments made to support the business's strategic initiatives and increased central costs as a result of the Group's IPO.

The hardware market backdrop in the UK over our first half was characterised by two distinct periods. In the first quarter the hardware market experienced further strong growth driven by sales of Xbox One and PlayStation 4 against a relatively soft comparative period in 2013 (being the last quarter before the launch of the new consoles in November 2013). By contrast, in the second quarter significant promotional and competitor activity over Black Friday and Christmas saw hardware volume growth but at markedly lower average selling prices and a greater intensity of software 'bundling' deals across the market.

These dynamics saw the UK market grow mint hardware sales by 232% in the first quarter before declining 10.5% in the second, leading to overall first half hardware growth in the market of 14.9%.

The intense promotional activity seen over our peak period drove rapid consumer adoption of the latest generation of consoles, with the installed base of Xbox One and PlayStation 4 owners in the UK reaching over three million units by the end of January, significantly ahead of our expectations.

We continue to view the sale of consoles as one of the Group's key customer acquisition tools. The Group took the strategic decision that it was important to continue to defend its market share and either recruit new customers or convert existing customers to Xbox One or PlayStation 4, despite the highly competitive market and significant level of value being offered to customers at the expense of retailers' margins. Whilst new customer acquisition became less profitable as a consequence, it should be noted that these sales remained profitable. In the week in which Black Friday fell, the UK business recorded one of its highest market share weeks of the first half.

Software sales growth followed a different trajectory to hardware over the period. The first quarter of our 2013/14 financial year included the launch of the fastest selling entertainment title of all time, Grand Theft Auto V (GTAV), on Xbox 360 and PlayStation 3. As a result, in the first quarter of 2014/15 the physical content market fell 24.5% by value, before growing 5.4% in the second quarter, resulting in an overall decline of 6.1% over the first half.

The growing installed base of Xbox One and PlayStation 4 consoles drove software sales growth on these platforms of 118% in the second quarter, whilst software sales on prior generation consoles declined 50%. The continued adoption of the latest generation of consoles should support this trend and drive positive physical and digital content growth in the second half of the year and beyond.

Spain Overview

In Spain, on a constant currency basis (based on revenue growth in euros year-on-year), revenue in the business declined 3.9%, resulting in an Adjusted EBITDA of £11.1 million (2014: £12.5 million).

The divergence in the performance of the UK and Spanish markets has continued. Spanish hardware sales did not grow as quickly as in the UK as a result of a comparatively weaker economic backdrop and the territory's greater exposure to one platform. Software growth rates in Spain were affected by GTAV last year and have also suffered as a result of the slower adoption of next generation hardware.

As a result, the total Spanish mint market rose by 3.5% in the first quarter, but declined by 11.1% in the second quarter, resulting in an overall decline of 7.7% in the first half.

Market Share

In the UK our market share by value was stable at 33% in the first half, whilst in Spain our share increased by 2%pts to 36% (as the Group benefitted from the addition of 44 GameStop stores which were transferred and rebranded to GAME stores in November 2014).

In both markets GAME grew share in the mint software, digital and accessories categories whilst our share of the mint hardware market fell slightly, driven by the greater supply of Xbox One and PlayStation 4 consoles over the peak period compared with the prior year.

In the UK, our Gross Transaction Value (a more comparable measure when compared against market growth as it includes total digital receipts) grew 6.3%, against the UK market which rose 4.6%. In Spain, our Gross Transaction Value declined 1.1% versus a 7.7% decline in the market (both on a constant currency basis).

OPERATIONAL REVIEW

Our long term strategy is focused on capitalising on the significant market opportunities ahead of us, both in the utilisation of our current resources and relationships to deliver growth from our core markets, but also in terms of developing the Group as a customer, marketing, technology and community driven business.

In this section we provide an update on recent operational developments across the five key priorities of the business that underpin our strategy.

1. Be the #1 destination for gamers

Range and offer

Our commercial offer continues to improve around our line-up of exclusive products, the strength of the deals we are able to secure with our supplier partners, and the ways in which we are working more closely with those partners across our commercial, marketing, insight and technology teams to support their products and our position as a specialist.

So far in this financial year we have launched successful PlayStation 4 and Xbox One hardware exclusives (in addition to securing exclusives on most major new software titles); consistently delivered market leading deals on the latest generation of consoles; and launched franchise bays in-store on FIFA and Call of Duty.

In February we launched GAME Marketplace, an online marketplace specialising in games and gaming-related goods, enabling peer-to-peer selling between vendors and customers. To date, Marketplace has added over 50 vendor partners and 50,000 new products to our catalogue for our customers to access. As well as driving incremental sales, it is helping to generate additional insight into our customers' preferences, supporting our ability to deliver an ever better proposition.

Value

Our preowned category performed well in the first half, attracting value-conscious customers, with sales up 10.8%. New generation formats, mobile phones and tablets are continuing to prove popular items for customers to trade-in and purchase and we expect this trend to continue into our second half, supported by the increased supply of popular games due to the bundling of software over Christmas.

In addition, an increasing range and depth of stock, focused promotions, growing awareness of our newer product categories such as phones and tablets, and the allocation of additional store space to these products are expected to support preowned sales.

2. Grow sales of digital content and services

Our digital product range remains market leading across retail and is expanding quickly.

We significantly outperformed the market in digital content sales in the first half, with total digital receipts up approximately 40% since the start of the year across the Group. Our market share on digital content was over 60% in both the UK and Spain, growing 4%pts and 12%pts respectively.

Investing in our digital infrastructure, partnering with suppliers to grow our range and driving customer education and awareness of digital products are key priorities for the business. We are making good progress against our plans, with the launch of several new digital ranges in the first half, including becoming the first retailer in the UK to offer downloadable content for the Xbox One.

In November we launched a beta trial of our mobile games store on android phones, allowing customers to purchase a selected range of mobile games content with Reward points, gift card, top-up and trade-in credit via their GAME Wallet account.

Finally, through our acquisition of Multiplay, we are now able to offer customers managed game hosting services for their online gaming needs.

3. Enhance the omni-channel experience

Channel development

We are investing across our stores, website, mobile site and app to improve the customer journey and increase convenience. Last year all of our UK stores were fitted with interactive areas to support the launch of the new consoles and this year we are rolling out more digital screens within our stores to help improve in-store conversion and promote multi-channel engagement.

Our UK eCommerce and mCommerce sites underwent a major upgrade in October with improvements to the design, layout, navigation and check-out processes. GAME's mobile app is subject to a rolling programme of innovation and development. In September 2014, GAME added the 'Scan It' function; an augmented reality experience that combines image recognition and a customer's Reward account to support personalised product pricing and interactive content discovery.

Further online and app enhancements are planned for 2015.

Customer loyalty and ways to pay

Over half a million Reward members were added in the first half, taking total membership across the Group to over 17 million. In the last 12 months over 4.5 million Reward customers have been active with us and over half of all transactions (approximately two-thirds by value) have been linked to a Reward account.

A growing population of our customers are now trading-in products, boosted by strong marketing campaigns to drive activity around key periods, as well as the increasing range of products customers are able to trade-in (for example, the iPhone 5 was the third most traded-in product by value in the first half).

Registrations to GAME Wallet over the period have continued to grow in both the UK and Spain. Initiatives are due to launch in the second half to boost the rate of registrations and engagement. Our gift card service was also re-launched in the UK in time for the peak Christmas season, giving better functionality for customers and broadening our reach. Since the launch of Marketplace we have also realised the use of gift cards in our eCommerce and mCommerce channels.

Service levels

During an exceptionally busy peak period both our in-store and customer service teams have continued to generate high customer satisfaction ratings. New training programmes are being deployed for customer facing teams during 2015 and in addition we are upgrading our call centre IT infrastructure to further improve customer service levels.

4. Drive greater community engagement by going beyond retail

Our teams are actively engaged with their communities through a variety of in-store, online and social media activity. Our programme of store events remain ever popular and provide regular opportunities for gamers to get together to discover new games and socialise with one another. In 2014 we organised 280 lock-ins and over 3,000 midnight openings.

Our social media reach is now well over 1 million with all stores maintaining their own twitter feeds and almost 200 stores now present on Facebook.

The acquisition of Multiplay, announced in March, is another important step forward in our ability to drive community engagement - supporting our ambition to increase our interaction with gamers through live gaming events (both our own and for third parties), live and online eSports competitions and online gaming forums. We will also be working with the teams at Multiplay to deliver more non-traditional use of our retail space.

5. Innovate and champion new gaming technologies

We are continually looking for ways to improve our range of specialist products and services and champion new gaming technologies.

In the last six months we have:

In addition, as part of our commitment to innovation we have partnered with Ascension Ventures, an early-stage digital media and tech investment fund, to work together to access and back early-stage UK-based 'games' and 'e-commerce' companies.

GROUP RESULTS FOR 6 MONTHS ENDING 24 JANUARY

REVENUE

Group revenue declined by 0.7% in the half to £581.9 million (2013: £586.4 million).

Gross Transactional Value, a better measure of underlying retail activity, grew by 3.0% in the 26 weeks under review. Content revenue, which includes both boxed and digital game content, declined by 5.6%, predominantly due to the market distortion caused by the launch of Grand Theft Auto V in September 2013. When sales of GTAV are excluded from both years, content sales (in the UK) rose 15% year-on-year. Growth in sales of content for the new Xbox One and PlayStation 4 formats was strong, rising by 175% in the UK, however this growth was offset by the decline in content sales from older formats. Within content, digital receipts increased by 40% year-on-year. Content Gross Transactional Value increased by 3.4% year-on-year.

During the first half, the Group's next generation hardware volumes in the UK were up 58%, with some 16% of H1 unit console sales sold in the four days between Black Friday and Cyber Monday. Despite this, lower average selling prices on these consoles led to a 0.5% decline in overall hardware revenue.

Revenue from preowned products increased by 10.8% driven by growing sales of the next generation formats, mobile phones and tablets. Included within this category is the GAMEtronics range of preowned smart phones and tablets which contributed 44% of preowned hardware sales in the UK (H1 2014: 36%).

Revenue from other products increased by just under 1% to £58.2 million.

GROSS PROFIT AND GROSS MARGIN ANALYSIS

Gross profit decreased by 1.6% to £135.2 million (2014: £137.4 million).

The gross margin percentage for 2015 was 23.2%, approximately 20 basis points lower than 2014. The impact of lower hardware prices and bundling on gross margin has been partially offset by mix effects and the increasing proportion of both digital content and Xbox One and PlayStation 4 content within overall content sales.

This was the first Christmas where retailers were not under any supply constraints for the new consoles and the first Black Friday event for which the new consoles were available. As a consequence, the pricing and promotional activity and changes in competitor and consumer behavioural trends were hard to predict, both in regards to Black Friday and through the Christmas trading period. Over this period in particular the level of retailer competition increased significantly, most notably in the Group's larger, UK business. Console bundles (consoles and new games sold together) were sold at lower prices, with an increasing number of desirable games being included within the bundles than had been expected. This led to the dual impact of reductions in both average selling price ("ASP") of consoles and games, and lower percentage margins achievable on the lower ASP. Ultimately, this led to lower than expected percentage margins during the peak trading period for the Group and a lower level of profitability than we had expected.

The Group received significant support from its supplier partners during the peak trading period, through a combination of exclusive content, first to market promotions, rebates and other promotional funding.

Margins on content rose 3.4% year-on-year to 30.5%, benefiting from the increased proportion of digital sales within the overall mix of content sales. This served to increase the reported content percentage margin (as digital revenue is accounted for as commission revenue with no associated cost of sale).

The underlying impact on margin from lower hardware prices is expected to continue into the second half, although due to the impact of an improving mix, the Group's overall gross margin percentage for the full year is expected to be broadly in line with last year.

Preowned margin rates fell slightly as a result of the increasing proportion of sales of technology products in the mix.

The gross margin of Other rose 0.4%, benefiting from a greater proportion of higher margin warranties and disc care sales in the mix and a lower emphasis on movies.

Foreign exchange rates also negatively impacted the reported gross margin, with the euro c. 7% weaker against sterling in the 26 weeks ended January 24, 2015. This accounted for a reduction in gross margin year-on-year of c.£2 million.

COSTS, ADJUSTED OPERATING PROFIT AND OTHER ITEMS

Operating costs and underlying operating profit

Overall operating costs increased by £6.3 million to £101.7 million. Selling and distribution costs before exceptional items increased by £4.9 million, or 6.7%, to £77.9 million. The ratio of selling and distribution costs to revenue increased by 0.9 percentage points to 13.4% of revenue. In addition to a modest increase in variable costs in-store operations, the Group received a lower level of marketing income compared with the prior year (when additional funding was provided to the Group to support the new console launches). Finally, the addition of the 44 GameStop stores added £0.9m to Selling & Distribution costs in the half.

Rent declined £0.2 million year-on-year to £17.2 million, representing 2.9% of revenue (2014: 3.0%). The number of stores in the UK at 24 January 2015 was 319 (2014: 327) with an average length to first break of 2.3 years. All the Group's stores in the UK are profitable. In Spain, following the addition of 44 GameStop stores in November 2014, the business ended the period with 280 stores (2014: 239), with an average length to first break of 1.3 years. There were seven loss making stores at 24 January 2015 (defined as stores trading at a loss over the last 12 months at the date of measurement).

The Group continues to maintain a relatively short lease profile, with the average remaining lease period to first break option across the portfolio of 1.8 years at 24 January 2015.

Administrative expenses, including depreciation and amortisation costs but before exceptional items increased by £2.1 million or 9.8% to £23.6 million, reflecting the investment in teams and senior management in the Group's UK operations and £1.3 million of new costs associated with being a PLC. Included within administrative expenses are IPO-related share based bonus costs of £1.3 million for the period.

Exceptional costs of £0.2 million relate to the one-off costs associated with the transfer of the GameStop stores in Spain.

Excluding exceptional costs, adjusted operating profit declined by £8.9 million in the period to £39.2 million.

Financing costs

Net financing costs across the Group totalled £0.3 million (2014: £8.2 million) and related to the short-term stock finance facility in the UK and third party loan, overdraft and bank guarantee facilities in Spain.

The comparative figure for the first half of 2014 included £5.0 million related to interest and fees payable for loans and facilities which were fully capitalised or cancelled as part of the reorganisation implemented ahead of the IPO.

Taxation

The effective tax rate (defined as the accounting tax charge divided by the accounting profits before tax) was 23.2% (2014: 30.2%). The high level of IPO related and other non-deductible costs in the prior year led to a non-standard effective rate for 2014.

BALANCE SHEET, CASH FLOW, EXCESS CASH AND SPECIAL DIVIDEND

Financial Position

The Group's balance sheet remains strong, with average week-ending cash balances across the period of approximately £104 million (H1 2014: approximately £31 million). The Group continues to benefit from substantially improved supplier credit terms since IPO.

At the end of January the directors reviewed the requirement of the UK business for the HSBC asset-based revolving loan facility and decided to exercise the right to reduce the commitment under that facility to £25 million from £50 million, effective from 6 February 2015. This was based on assessment of that business's expected future financing requirements and the increased level of supplier credit now available to the UK business.

At period-end the Group had net cash of £140.4 million (H1 2014: net debt of £48.6 million).

Operational cash flow

Cash generation over the period was strong, benefiting from the additional supplier credit received and improved working capital management during the period compared with the same period last year. Adjusted operational cash flow (defined as cash generated by operations after adjusting for the impact on cash flow of exceptional items and costs relating to the change in business structure) totalled £66.9 million (H1 2014: £45.9 million), representing an Adjusted EBITDA to cash conversion ratio of 156% (H1 2014: 89%). The higher level of cash flow generated is in part a factor of the Group's UK business, in particular, benefiting from a greater level of supplier credit and in part a factor of the payment terms of that credit, most of which is now paid on end-of-month terms, which led to large balances not falling due for payment until after the January balance sheet date.

Cash flow for the full year is likely to be broadly neutral as the Company will be distributing surplus cash to shareholders. Surplus cash is the cash remaining after paying interest, capital expenditure, strategic investments and ordinary dividends.

Working Capital

Net investment in trade working capital reduced by £37.1 million, or 62%, to £23.0 million (H1 2014: £60.1 million).

Group inventories reduced by £2.9 million to £74.5 million compared with the same period last year.

Weeks' inventories on hand excluding GameStop inventory (defined as period-end inventory divided by cost of sales per week for the last 26 weeks) reduced by 7% from 4.5 weeks to 4.2 weeks, improving working capital and cash generation.

Trade and other receivables increased by £27.4 million to £57.4 million, reflecting the higher level of rebates and other promotional support received from supplier partners.

Trade and other payables increased by £62.2 million to £160.1 million. The Group benefitted from improved supplier credit over this peak trading period compared to last year; both in the quantum of credit and in payment terms. Because the 26 week period under review period fell just before the end of the month in which the payments were due, the balance was particularly high. It is the policy of the Group to maintain open and regular dialogue with the credit insurance agencies in order to support the provision of insured credit to the supplier partners of the Group.

Capital Expenditure

Group capital expenditure amounted to £6.4 million in the first half (H1 2014: £6.8 million). Total capital expenditure for FY 2015 is expected to be in line with our previous guidance of 1-1.5% of sales.

Major areas of capital expenditure in the period included further investment in our UK store estate and eCommerce site as well as in digital infrastructure such as the app, GAME Wallet, GAME Marketplace and Codebank, our digital code distribution platform.

Excess Cash and Special Dividend

As reported at our FY2014 results in October, improvements to the Group's working capital profile, driven by greater access to supplier credit and one-off capital structure benefits due to the IPO, have resulted in better than expected cash generation in the period and, subsequently, a higher net cash position than forecast at the time of the IPO.

With the period of peak trading and peak working capital requirement complete, a detailed review of the Group's existing facilities, cash position and future cash requirements has been undertaken. The outcome of this review concluded that an amount of £25 million was identified as excess cash and should be returned to shareholders. The Board has subsequently approved the one-off return of £25 million to shareholders by way of a special dividend. The special dividend will be paid on 17 April 2015. The shares will trade ex-dividend from 2 April 2015 and the record date will be 7 April 2015.

Going forward, the Group is committed to its policy of maintaining a strong capital position whilst pursuing a disciplined approach to capital allocation - balancing investment in growth initiatives with the return of excess cash to shareholders, in the way deemed most appropriate or efficient at that time, including via special dividends or share buy backs. The Board is confident that following the return of capital the Group will continue to maintain a robust financial position, with sufficient cash and liquidity headroom to meet all anticipated future requirements.

ORDINARY DIVIDEND AND DIVIDEND POLICY

The Board's dividend policy, as set out at the time of the IPO, is to maintain a progressive dividend policy which reflects the cash flow generation and long term earnings potential of the Group, whilst returning surplus capital to shareholders through the most appropriate mechanisms. The Board's intention remains to pay an annual ordinary dividend, split broadly evenly between an interim and a final dividend.

The Board has approved an interim ordinary dividend payment to shareholders of 7.35 pence per share. The interim ordinary dividend will be paid on 17 April 2015. The shares will trade ex-dividend from 2 April 2015 and the record date will be 7 April 2015.

As discussed above, in addition to these ordinary dividends, we will also pay a special dividend of 14.7 pence per share. The payment, ex-dividend and record date will be the same as those for the ordinary dividend.

Going concern

The Directors have a reasonable expectation that the Group and the Company has adequate financial resources together with a strong business model to ensure it continues to operate for the foreseeable future. The Directors have formed this view based on the information available to them including operational forecasts, the Group's cash and working capital balances and the existing credit facilities available to the Group. 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 2014 Annual Report, described as follows, also remain relevant to the rest of the financial year: Implementation and development of the business strategy to address changing markets; financial strategy; performance; failure to compete effectively; store estate; reputation; relationships with key suppliers; people; technology; our websites, mobile sites or app lose customer appeal; continuity and crisis management.

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, 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:

A copy of the Company's 2014 Annual Report and Accounts is available on GAME's website www.gamedigitalplc.com

This responsibility statement was approved by the board of directors on 23 March 2015 and is signed on its behalf by:

Condensed Consolidated Statement of Comprehensive Income

For the 26 weeks ended 24 January 2015

 All results relate to continuing operations.

Condensed Consolidated Statement of Financial Position

As at 24 January 2015 and 25 January 2014

Condensed Consolidated Statement of Changes in Equity

For the 26 weeks ended 24 January 2015

During the period ended 24 January 2015 £0.7m was transferred from retained earnings to merger reserves in order to correctly allocate a bonus share issue that was recognised in Game Digital Holdings Limited in the period ended 26 July 2014.

For the 26 weeks ended 25 January 2014

The amounts included in other comprehensive expense in respect of exchange differences on translation of foreign operations will be recycled to the income statement upon disposal of the investment to which the reserve relates.

Condensed Consolidated Statement of Cash Flows

For the 26 weeks ended 24 January 2015

Notes to the Condensed Set of Financial Statements

For the 26 weeks ended 24 January 2015

General information

The information for the 52 weeks ended 26 July 2014 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has 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.

Accounting policies

Basis of preparation

Game Digital Plc (the "Company") is a company domiciled in England. The condensed consolidated interim financial statements of the Company for the 26 week period ended 24 January 2015 comprise the Company and its subsidiaries (together referred to as the "Group"). The condensed interim financial statements have been prepared using accounting policies set out in the Report and Accounts 2014 and in accordance with IAS 34. They are unaudited but have been reviewed by the Company's auditor. The results for the 52 weeks ended 26 July 2014 and the balance sheet as at that date are abridged from the Company's Report and Accounts 2014 which have been delivered to the Registrar of Companies.

Changes in accounting policy

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 26 July 2014. The condensed financial statements have been prepared on the historical cost basis except for the revaluation of certain financial instruments that are measured at revalued amounts or fair values at the end of each reporting period.

Going concern

The Directors have a reasonable expectation that the Group and the Company has adequate financial resources together with a strong business model to ensure it continues to operate for the foreseeable future. The Directors have formed this view based on the information available to them including operational forecasts, the Group's cash and working capital balances and the existing credit facilities available to the Group. 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 under IFRS 8 Operating Segments have been determined based on the management accounts reviewed by the Board. The performance of operating segments is assessed based on Revenue and Adjusted EBITDA. The Group defines Adjusted EBITDA as operating profit before depreciation and amortisation, exceptional items, costs relating to the change in business structure and IPO related share based compensation. 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 94 and 95 of the Group's latest Annual Report.

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

The accounting policies of the reportable segments are the same as the Group's accounting policies which are described in the Group's latest Annual Report.

Adjustments made to reconcile from basic to adjusted earnings employed in the earnings per share calculation are detailed in note 7.

Segment assets

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.

Revenues from major products and services

The Group's revenues from its major products and services were as follows:

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 on a commission basis and is recognised net of associated purchase costs. Hardware represents the sale of console platforms. Pre-owned includes the sale of pre-owned content and hardware. Other revenues relate to the sale of accessories, movies and DVDs within stores and online. For the period ended 25 January 2014 management have reassessed the methodology used to allocate revenue streams and related IFRS adjustments across the product categories which has resulted in a segmental reallocation in the comparative period.

2 Other operating expenses

For details of these exceptional costs, see note 3.

Included with in Administrative expenses are costs amounting to £1.3m (period ended 25 January 2014: nil) relating to IPO-related share-based compensation and costs related to the change in business structure of £nil (period ended 25 January 2014: £0.9m)

3 Exceptional costs

Administrative expenses include exceptional costs of £0.2m for the period ended 24 January 2015 (period ended 25 January 2014: £1.0m).

The exceptional costs in the period ended 25 January 2014 relate principally to costs incurred relating to the delivery of the IPO and costs incurred with external advisors in strategically restructuring the business.

4 Operating profit/(loss)

5 Finance costs

In the period ended 25 January 2014 the Group had interest payable to related parties which comprised the following:

As a result of the reorganisation implemented ahead of the IPO, the Group reduced its borrowings such that the level of finance costs has greatly decreased compared to the comparable period.

The Directors have reviewed the requirements of the HSBC asset-based revolving loan facility going forward and have exercised their right under the agreement to cancel £25m of the facility effective from 6 February 2015 thereby leaving an asset-based revolving loan facility of £25m.

6 Taxation

Tax for the period ended 24 January 2015 is charged at 23.2% (period ended 25 January 2014: 30.2%), representing the best estimate of the average annual effective tax rate expected for the full year, applied to the pre-tax income of the 26 week period. This is higher than the standard rate of corporation tax in the UK of 21% mainly due to the Spanish corporation tax rate of 30% and to certain costs charged in the consolidated statement of comprehensive income for which no tax deduction is available.

The movement on the balance sheet corporation tax liability from £1.4m as at 26 July 2014 to £7.5m at 24 January 2015 is primarily due to the profit generated in the UK trading company in the period compared to a loss in the prior year.

7 Earnings per share

Earnings per share (EPS) has been calculated by dividing the profit for the period by the weighted average number of ordinary shares in issue during the period.

The calculation of the earnings per share is shown in the table below.

Earnings

All shares in issue are considered to be outstanding and are therefore incorporated in both basic and diluted earnings per share calculations.

As disclosed in the Group's latest Annual Report, an adjustment to earnings per share has been made for the interest on the Senior Loan Notes and Management Loan Notes because this related party debt was capitalised as part of the restructuring ahead of the IPO. No adjustment has been made to earnings per share for costs of the short-term stock finance facility provided to GAME Retail Limited by an indirect related party as this has been replaced (albeit on more favourable terms) with a new facility provided by HSBC.

8 Property, plant and equipment

During the period ended 24 January 2015, the Group spent £3.8m (period ended 25 January 2014: £5.9m) on additions and disposed of assets with a total carrying amount of £nil (period ended 25 January 2014: £0.2m).

9 Financial instruments' fair value disclosures

The Group held the following financial instruments at fair value at 24 January 2015, further details of which can be found in the latest Annual Report. The Group had no financial instruments in the current or previous period with fair values that are determined by reference to significant unobservable inputs i.e. those that would be classified as level 3 in the fair value hierarchy, nor have there been any transfers between levels of the fair value hierarchy. There are no non-recurring fair value measurements.

 The Forward has been classified as a Level 1 financial asset in accordance with the fair value hierarchy. The cash ultimately to be received by the Group is derived from the Company's share price, which is publicly available and its shares are quoted on an active market. As set out in the latest annual report, customers participating in the Virtual Loyalty Share Plan may exercise an option to redeem Virtual Loyalty Shares at periodic intervals. During the period ended 24 January 2015, 221,391 shares covered by the Forward were exercised. As at the period ended 24 January 2015 the cash-settled Forward covered 403,609 shares relating to the Virtual Loyalty Share Plan (26 July 2014: 625,000 shares and 25 January 2014: nil), representing a decrease of approximately 35% since the period ended 26 July 2014.

10 Analysis of net funds/(debt)

11 Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

There have been no significant changes to the related party transactions during the interim period under review:

Transactions with related parties

In the period ended 25 January 2014, GAME Retail Limited was party to a monitoring services agreement and an advisory services agreement with related parties as part of its ownership and governance structure as part of a private group. Fees in relation to these arrangements amounted to £nil for the period ended 24 January 2015 (period ended 25 January 2014: £0.6m). As these arrangements were terminated on IPO and will not recur, they have been adjusted for in arriving at Adjusted EBITDA.

In the period ended 25 January 2014, financing costs related to the arrangement and provisioning of long-term loans from Duodi Investments S.à r.l. (the Group's then immediate parent company) and an inventory financing facility from an indirect related party entity in respect of which Elliott Advisors (UK) Limited is a sub-adviser to that entity's investment services provider. Further details are provided in the latest Annual Report.

Amounts owed (to)/by related parties

Up until the IPO the Group was funded by related party loans with the investment vehicles which held either directly or indirectly a controlling equity interest in the Group. The Group issued £106.1m of Senior Loan Notes on 1 April 2012. On 18 April 2013, £63.0m of the Senior Loan Notes was redeemed. On 18 April 2013, an additional £63.0m of Management Loan Notes were issued to Baker Investments LP (an entity in which each of Duodi Investments S.à r.l. and certain Directors had an interest). As described in note 18 of the Annual Report all the related party debt was settled in full as part of the group reorganisation in relation to the IPO.

12 Dividends

The proposed interim dividend of 7.35p per share and proposed special dividend of 14.70p per share were approved by the Board on 23 March 2015 and have not been included as a liability as at 24 January 2015.

13 Post balance sheet events

On 2 March 2015, the Group obtained control of Multiplay (UK) Limited by acquiring 100% of its issued share capital. Multiplay (UK) Limited is a community-based specialist gaming company and it was acquired to increase the Group's relevance and engagement across communities, and to accelerate the move into the rapidly growing world of eSports and multiplayer gaming. Goodwill of £7.8 million arises from a number of factors including expected synergies through combining a highly skilled and knowledgeable workforce.

Recognised amounts of identifiable assets acquired and liabilities assumed (provisional fair values):

The fair value of trade and other receivables approximates the gross contractual value. The best estimate at the acquisition date of the contractual cash flows not to be collected was £nil.

The fair value of the acquired identifiable intangible assets of £5.3 million is provisional pending receipt of the final valuations for those assets. The fair value of all other assets and liabilities is provisional pending full review of the accounts.

None of the goodwill recognised is expected to be deductible for income tax purposes.

Deferred consideration of £2.4 million in cash and £5.0 million of ordinary shares in the Group will be payable to certain selling shareholders of Multiplay (UK) Limited subject to their remaining in employment with the Group for three years following the acquisition date. The earn-out payments will be expensed to administrative expenses in the income statement as the services are provided.

Acquisition related costs of £0.4m will be charged to exceptional costs in the income statement.