Against a backdrop of weak consumer confidence and a well-flagged low point in the console gaming cycle, GMD has delivered a solid H1 trading performance. GTV reduced by 1.4%, with growth in content and accessories offset by an ongoing managed decline in preowned games and a reduction in hardware and events revenue. However, both like-for-like GTV and the group gross margin remained broadly flat and this, combined with further material operating cost savings, helped to deliver EBITDA growth of 21.7% to £25.8m.
Higher profits and tight working capital management also helped to drive an £11.9m year-on-year increase in net cash to £94.1m. The H1 net cash balance compares with £56.8m at the end of FY18, reflecting the significant and typical weighting of revenue and positive EBITDA to H1 (which includes the peak Christmas trading period). The group has access to combined UK and Spanish facilities of £110m.
Notably, the roll out of BELONG, designed to position GMD as market leader in local and national e-sports, has been slower than anticipated. Compared with expectations for 20 new arenas in FY19, only two were opened in the first half. The retail property market, opportunities to gain significantly improved property deals and the need to work in collaboration with Sports Direct will shift the pipeline of openings into subsequent years.
Whilst the roll-out of BELONG remains a key strategic objective for management, a near-term delay is likely, combined with management’s cautious outlook for the balance of the year due to ongoing economic uncertainties and market headwinds, to put some near-term pressure on earnings.