Game Digital has finished its trading year to July with cost measures countering trading pressures and with the strategically important BELONG gaming arena concept moving into action as the first larger sites open.
There has been progress on the February 2018 collaboration agreement with Sports Direct, with detailed planning completed, and the first arena under the agreement opened in Westfield Stratford on 17 August 2018 with 50 playing stations. The second is due to open in September at Lakeside Thurrock.
The retail gaming market remains difficult and competitive. FY18 gross transaction value, GAME’s prime measure of sales, grew 1.8% in the year following a 1.6% decline in H2. Frist half trends continued in the second, with strong sales of lower-margin digital and hardware and challenges in pre-owned products all affecting the gross profit rate. However, quality new content launches such as God of War III have traded positively. GAME has countered with cost savings, particularly on lease events where it is in a strong negotiating position with a majority of its leases expiring by December. Head office and distribution functions have also been reorganised and contracts renegotiated as they expire.
GAME is focusing on working capital and cash control, and including the November 2017 disposal proceeds of Multiplay, July 2018 cash less overdrafts were £58m. Including its facilities under the collaboration agreement with Sports Direct, GAME has total facilities of up to £130m, seasonally increasing to up to £169m to facilitate significant new releases and peak trading.
The clearer future represented by BELONG is not reflected in the share price, which at 28p remains less than net cash of 32p per share. So the existing business and BELONG are effectively being valued at zero.