23 Dec 2015 07:00
23 December 2015
GAME DIGITAL PLC
Trading Update
GAME Digital plc ("GAME" or the "Group"), the specialist video games retailer, today updates on recent trading. All financial data, unless otherwise specified, relates to the 21 week period ended 19 December 2015.
Headlines
· | Total Group Gross Transaction Value1 ("GTV") of £466.8 million was down 6.7%, largely explained by the reduction in low margin console sales, down 20.3%. |
· | Trading conditions in the UK retail market have been challenging with total sales for the video games market2 down 13.5% year on year ("YoY"). |
· | UK GTV of £353.5 million, down 11.4% YoY, with Black Friday weekend trading stronger than overall performance. |
· | UK sales and overall margins impacted by a faster than expected decline in the market for old format content as well as a slower than anticipated switch to new format content (Xbox One and PlayStation 4). |
· | Significant growth in newer categories with GAMEtronics (preowned mobile phones and tablets) sales of £16.4 million, up 91.8% YoY. |
· | UK gross trading margin3 of £73.9 million, down £3.7 million or 4.8%. |
· | Strong performance by GAME Spain with GTV of £109.7 million, up 8.1% and gross trading margin of £26.3 million, up 5.5%. |
· | The Board expects that the Adjusted EBITDA4 for the 26 weeks ending 23 January 2016 will be around £30 million. |
GAME UK's new format5 content sales of £114.6 million (mint and preowned Xbox One and PlayStation 4 software) increased £19.0 million or 19.9%. However, this was more than offset by the unexpectedly steep decline in Xbox 360 and PlayStation 3 content sales, down £30.8 million to £23.4 million, a 56.7% decline. Furthermore, the fall in other old format6 content sales (such as Nintendo 3DS) resulted in total UK content margin of £37.1 million, down £4.0 million.
UK console sales of £98.7 million were down 28.3%, but given the low margin of this category this did not impact on gross trading margin. Multiplay, the Group's eSports, events and server hosting business, has continued to deliver positive growth.
Outlook
The next few days will represent the busiest trading period for the Group. However, given the recent trends and disappointing sales since the start of school Christmas holidays, the Board now expects that the Adjusted EBITDA for the 26 weeks ending 23 January 2016 will be around £30 million. This is after charging underlying operating costs7 of c£97m, an increase of c£5m YoY.
The Board believes margins in UK Retail for H2 will be higher than the equivalent period in the previous year. This is based on the expected growth from Xbox One and PlayStation 4 software, sales of preowned mobile phones and tablets, and other growth categories in GAME Retail UK as well as the reducing impact of declining Xbox 360 and PlayStation 3 content sales. Game Spain is expected to continue to perform above last year in the second half.
Martyn Gibbs, GAME Digital Chief Executive Officer, said:
"The trading conditions in the UK video games market have been challenging. The switch over from the older gaming formats to PlayStation 4 and Xbox One software has impacted profitability across the UK market. The extent of the impact of this switch over has only become apparent in December which has been compounded by lower year on year high street and shopping centre footfall.
"We remain committed to our strategy of building "the most valuable community of gamers". GAME Retail UK has recruited significant numbers of new customers through sales of hardware and content and continues to provide great customer service and competitive offers. Despite the market challenges, GAME has continued to deliver significant growth from new format content and newer categories such as licensed merchandise and preowned mobile phones and tablets, and we continue to prioritise these areas as well as growing our Multiplay business. Whilst we are pleased with strong growth in our newer products, this has not been sufficient to offset the margin decline from sales of Xbox 360 and PlayStation 3 content and other old format software.
"The pre-Christmas period and the winter sale are very important to our customers and with market leading offers we remain well prepared in our stores and online for the remaining peak trading period."
Enquiries:
GAME Digital plc | +44 (0) 1256 784 000 |
Martyn Gibbs | Chief Executive Officer |
Mark Gifford | Chief Financial Officer |
James Staveley | Investor Relations & Corporate Development Director
|
Citigate Dewe Rogerson | |
Grant Ringshaw | +44 (0) 207 282 2851 |
Jos Bieneman | +44 (0) 207 282 1053 |
Notes
1 Gross Transaction Value ("GTV")
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 reward points. GTV reflects the full sales value of digital sales, agency sales (including sales by business partners on GAME's Marketplace website), warranties and other similar arrangements and thereby includes the publishers' and sellers' shares of those transactions.
2 UK and Spain retail market
Source: GfK Chart-Track. Based on the value of retail sales in each country for mint hardware, mint software, digital content and mint gaming accessories.
3 Gross trading margin ("Margin")
Gross profit before the deduction of revenue deferral relating to reward points, adjustments for slow-moving inventory and shrinkage provisions, other margin adjustments and supplier rebate income.
4 Adjusted EBITDA
Operating profit before net finance charges, taxation, depreciation, amortisation, exceptional and adjusting items.
5 New format - Xbox One and PlayStation 4 ("Xbox1 and PS4")
6 Old format - Xbox 360 and PlayStation 3 ("Xbox360 and PS3")
7 Underlying operating costs comprise selling and distribution costs plus administrative costs and exclude depreciation, amortisation, interest and adjusting items and exceptional items.
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.