The (BE)long game

Game Digital 27 March 2018 Long Update (4+ pages)
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Game Digital

The (BE)long game

Interim results and collaboration agreement

Retail

27 March 2018

Price

25.0p

Market cap

£43m

Net cash (£m) at end January 2018

82.2

Shares in issue

172.9m

Free float

31%

Code

GMD

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(16.0)

(57.5)

(40.7)

Rel (local)

(12.4)

(53.7)

(38.1)

52-week high/low

61.5p

19.2p

Business description

Game Digital is the leading omni-channel specialist retailer of video games in the UK and Spain, with 299 stores in the UK, 267 stores in Spain and over 30% market share.

Next events

July 2018

Trading update

Analysts

Paul Hickman

+44 (0)20 3681 2501

Neil Shah

+44 (0)20 3077 5715

Game Digital is a research client of Edison Investment Research Limited

A year ago we titled our initiation note ‘The long game’. But growth is now more closely tied to the transformative expansion of BELONG, as well as retail formats under the recent collaboration agreement with Sports Direct. These plans represent a direct path to Game Digital’s future identity as a service-based business providing gaming experiences.

Year end

Revenue (£m)

EBITDA

(£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

EV/EBITDA

(x)

Yield
(%)

7/16

821.9

26.4

14.8

10.7

3.4

2.3

0.2

13.7

7/17

782.9

8.0

(4.3)

(3.7)

1.0

N/A

N/A

4.0

7/18e

821.0

10.8

(1.4)

(0.6)

0.0

N/A

N/A

N/A

7/19e

840.8

15.1

0.8

0.4

0.0

66.7

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

A transformative moment

Having signed the collaboration agreement with Sports Direct (SD) in February, Game Digital (GMD) is now accelerating its key strategy of widening its reach into experiential areas and engaging with customers more fully. It is planning the roll-out of its BELONG gaming arena concept, where customers experience the latest hardware and game releases, as well as relevant retail operations. It is According to its plans, GMD should be able to roll out 4,000 playing stations in 111 units in the three years to FY21, and 5,000 stations in c 135 units by FY22. That should result in steady state EBITDA of £20m by FY22 at a total capital cost of c £45m.

Satisfactory interims in a strong market

Interim results to January were a reasonable result in a market that, while positive, has some undesirable features. With growth dominated by hardware – which creates the conditions for higher margin content sales thereafter – revenues were biased to low-margin product and GMD has responded with active cost actions.

BELONG supports forecast growth

We adjust our forecast to recognise the new positioning of the BELONG roll-out programme. Our FY18 EBITDA forecast reduces by 11.5% to £10.8m reflecting the new focus on larger sites. From FY19 we expect the momentum of the BELONG opening programme to support EBITDA growth, although our FY20 forecast decreases overall on the slower market forecasts.

Valuation: Blended valuation of 74p

The market is valuing GMD at less than net cash of 48p. We approach valuation on three metrics: peer comparison, DCF and sum-of-the-parts. On a peer basis, which is quite inexact, we would value the shares at 88p. DCF valuation is helpful in valuing the medium-term strategy and gives 71p. On a sum-of-the-parts basis, separating out the growth elements from others, we reach 62p. Averaging all three metrics, we define a blended valuation of 74p (previously 93p). Looking only at GMD’s share of the BELONG income stream, its capital cost and adjusted year-end cash, we would value this at £98m, or 53p per share.

Collaboration agreement: Power to experiential model

In February 2018 GMD signed a collaboration agreement with SD to roll out both BELONG gaming arenas and/or GAME retail units in standalone and SD stores. SD paid £3.2m for 50% of the existing BELONG business, comprising 19 units within GMD stores.

The agreement and what it says

The agreement states that GMD and SD will cooperate to develop BELONG gaming arenas and GAME retail operations in the following formats:

Standalone BELONG arenas

BELONG arenas in or next to GAME retail stores

BELONG arenas in SD retail stores

GAME retail stores within SD retail stores

BELONG arenas with GAME retail stores, within SD retail stores

Each project will be jointly agreed before being committed to. Revenues and operating costs from the applicable operations (including a management fee to GMD) will be split equally between the parties. Where BELONG and GAME retail units are established within SD retail stores, the operating team will be controlled entirely by GMD. Rent will be negotiated as normal for a concession.

Fit-out costs will be borne by GMD, financed by a £35m long-term unsecured capex loan facility extended by SD, at 2.5% over base and with drawdowns repayable over five years following the second anniversary of each opening. SD is also providing a £20m one-year extendable working capital facility at the same rate.

The agreement is formally a profit sharing agreement and is not a joint venture agreement.

Acceleration of a key strategy

BELONG arenas, where customers experience the latest hardware and game releases, are key to GMD’s strategy of widening its reach into experiential areas and engaging with customers more fully. The roll-out to date has demonstrated average payback of 16 months, but also that optimum scale is formats above 24 playing positions. Management now plans a roll-out of up to 5,000 BELONG playing stations in the UK. The project is planned to be introduced to Spain during calendar 2018.

Given the number of lease events (272 over the next two years), GMD has significant flexibility to move into larger sites. SD contributes its retail presence and fast-developing estate with increasing numbers of larger stores. Management expects JV sites will have 40-60 positions (we model 40 in openings running at 29 pa).

Focus on BELONG arenas

In our view the key points about the BELONG project are:

It should position BELONG as market leader in local and regional esports

Since the investment is in shop fit-outs, with significant supplier funding and support, it has relatively low capex with fast payback

Strategically important for both parties and therefore should receive close management attention

High margin: it has a 100% margin profile for pay-to-play. Including food and drink, PC hardware, accessories, digital products and VR, gross margin is 45% and after incremental rent, labour, supplier contributions and management fees, GMD’s retained share of operating profit is planned at 23% of total revenue

High occupancy: existing units that conform to the template are achieving 28.5% utilisation

The concept is powerful in driving new customers into stores: one in four BELONG customers is new to GAME

The company has identified a number of potential BELONG gaming arenas alongside enhanced GAME retail units. We forecast for five of these to open by July 2018.

Real estate opportunity: Optionality for development

The conditions exist for rapid roll-out of the concept, along with GMD’s enhanced stores because the company has over 270 lease negotiations over the next two years, largely allowing for the reorganisation of the UK estate:

Exhibit 1: Lease event schedule

Source: GMD

This gives management negotiating leverage with landlords because it increases their options. For example, with a small existing store, the company can negotiate with the landlord to extend the property, give a rent-free period etc. Alternatively, the company could form a standalone BELONG arena in a different property, or rehouse the BELONG in a SD development. Or it could convert the existing GAME store into a BELONG arena, taking an entirely new lease for an enhanced GAME store nearby. In a challenged retail property world, this leverage is powerful.

Extension of retail reach under GMD’s control

The creation of concessions in selected SD stores responds to GMD’s and SD’s common customer base. It leverages SD’s UK retail presence of c 500 stores and accords with its property ‘elevation’ strategy of connecting with the consumer through multi-channel experiences and of developing leading flagship stores. But, GMD will have full control of sites selected, terms and unit management.

Roll-out details: The road to 5,000 stations

GMD has now defined its roll-out plans. While these also include BELONG facilities and Game retail concessions within new SD stores, we focus on standalone BELONG units because these provide a clearer model and are not subject to SD’s own estate development considerations. Management expects, over the three years to FY21, to roll out some 4,000 playing stations, although there is potential for 5,000 places. Assuming an average of 40 playing stations per site, this is equivalent to 29 openings a year starting in FY19. Clearly we recognise that there is execution risk associated with a project of such scale and rapidity. However:

This is not a standing start. GMD has been rolling out and trialling the BELONG concept since July 2016 (building to 19 sites) and as a result has acquired experience of how to roll out the format as well as how to gain best returns from the model. Its operating management has gained experience with player teams (‘tribes’) which link to the existing national tournament structure.

The company has good leverage and optionality given that it has over 200 lease events in the next 12 months, a number of alternative format combinations and a real estate partnership with SD.

The retail estate market is well-known to be soft and an operator rolling out an experience-based concept should be in a strong bargaining position.

Both parties in the agreement are listed companies with strong lease covenants.

For modelling purposes we assume an average BELONG site operates as follows:

Exhibit 2: BELONG arena model

Desks per site

40

Playing hours per desk per week

78

Possible hours per week

3,120

Actual hours per week

889

Utilisation

28.5%

Rate per hour (£)

4.50

£000

Total

GMD share

Pay-to-play revenue (£k)

208

PC, VR & F&B sales

468

Total revenue

676

676

Share of EBITDA

311

156

% of sales

46.0%

23.0%

Capex

350

350

Payback years

2.3

Source: GMD

The operating metrics used in the model are based on those actually being achieved in the larger size BELONG units, of over 30 stations that form the template for the roll-out. Notably, while the playing revenue is running at £4.50 per hour, total revenue is over three times that. The balance relates to sales of PCs, VR equipment and food & beverage. There is also marketing support from suppliers whose products feature in the arenas, for example tournament and software launch support.

We illustrate below how we model the roll-out to 5,000 paying stations. Conservatively, we assume no price inflation or improvement in utilisation. On these assumptions, the full roll-out takes until 2022 and results in 136 units on the additional assumption that all the playing stations were created in the standalone format. That assumption is unlikely to be literally true, but the economics of the model are unlikely to be disadvantageous if, alternatively, they are housed in a large format SD or GAME retail unit.

Exhibit 3: BELONG gaming arenas roll-out

FY18e

FY19e

FY20e

FY21e

FY22

Run rate

Number, beginning of period

24

53

82

111

136

Openings

29

29

29

25

Number, end of period

24

53

82

111

136

136

Average

19

31

60

89

117

136

Desks, end period

572

1,732

2,892

4,052

5,052

5,052

£m

Revenue per site

0.68

0.68

0.68

0.68

0.68

Total revenue

12.8

21.1

40.7

60.4

79.3

92.0

Gross margin (%)

45.0%

45.0%

45.0%

45.0%

45.0%

45.0%

Gross profit

5.8

9.5

18.3

27.2

35.7

41.4

Share of site level EBITDA

2.1

4.9

9.4

13.9

18.2

21.2

EBITDA margin (%)

10.0%

23.0%

23.0%

23.0%

23.0%

23.0%

Central team, other

(4.8)

(1.0)

(1.0)

(1.0)

(1.0)

(1.0)

GMD share of EBITDA

(2.7)

3.9

8.4

12.9

17.2

20.2

Contribution per location

(141)

124

139

144

147

148

Capital investment each (£k)

350

350

350

350

350

Capital investment total (£m)

3.5

10.2

10.2

10.2

8.8

0.0

Total invested*

5.3

15.5

25.6

35.8

44.5

44.5

Source: Edison Investment Research. Note: *Gross, before the £3.2m received from SD.

Our assumptions result in a steady state EBITDA share of £20m to GMD by FY22.

Financials

Interim results

Interim results showed a decline that was essentially cyclical. EBITDA was down 9% year-on-year, mainly as a result of margin declines resulting from mix changes, mitigated in part by operational efficiencies and cost savings.

Exhibit 4: Summary of results

£m

H117

H118

±

Gross transaction value

565.4

586.8

3.8%

Revenue

498.1

517.4

3.9%

Gross profit

127.1

123.1

-3.1%

Operating costs

-103.8

-101.9

-1.8%

EBITDA

23.3

21.2

-9.0%

PBT

16.9

14.2

-16.0%

Source: GMD. Note: EBITDA, PBT are adjusted.

The trading period saw a strong retail market both in the UK, up 14.3%, and Spain, up 13.5%, driven primarily from strong sales of Nintendo Switch and associated software, following the initial supply problems in the second half of 2017. Microsoft’s Xbox One X was launched in November 2017, but had more of an impact on the UK market than Spain.

Exhibit 5: Analysis of gross transaction value (GTV)

£m

H117

H118

±

Hardware

117.6

146.7

24.7%

Content

262.1

265.3

1.2%

A&O

90.0

87.3

-3.0%

Preowned

95.7

87.5

-8.6%

Total

565.4

586.8

3.8%

Source: GMD. Note: Adjusted.

GTV was up by 3.8%, a blend of a 0.3% decline in the UK and a 7.5% constant currency increase in Spain (exchange rates had a c 3% positive effect). The UK had an extreme variation in mix, with console sales up 27.3% but mint software down 1.7%. That software decline reflected in part the 3.9% decline in the number of UK stores, but also a shift to online sales of console product (the offsetting advantage of which is that it releases store space for new activities such as BELONG, PC sales and VR). In Spain, buoyant hardware growth of 16.5% was supported by content sales up 7.4%. On a group basis, hardware was up 24.7% and content up 1.2%.

Within Accessories & Other (A&O), the core category was down 4.7% £78.4m, as a result of console accessories following the hardware growth, while VR sales declined against major launches last year. Events and Esports, still small at £5.4m, were however up 31.5% on acceleration in BELONG and events.

Pre-owned declined 8.6%, reflecting core categories tracking mint software performance in FY17.

Gross profit: Mix effect

Gross profit slipped 150bp overall as a percentage of GTV: representing a 3.1% decline in gross profit.

Exhibit 6: Summary of gross margin (% of GTV)

%

H117

H118

±

Hardware

5.7

7.1

1.4

Content

23.0

21.6

-1.4

A&O

29.9

32.9

3.0

Preowned

34.6

30.5

-4.1

Total

22.5

21.0

-1.5

Source: GMD

This was primarily an effect from the much higher mix of relatively low-margin hardware in the period, although individual categories had small variations in their own margins.

Operating costs: Savings programme mitigates headwinds

Realised savings of £5m in the period mitigated the decline in gross profit. These were spread across property, payroll, procurement and distribution, with a focus on UK retail, where an overall reduction of £4.0m was achieved. However, linked to volume increases, retail costs in Spain increased leaving the net underlying reduction in costs at £1.9m to £101.9m.

Cash flow and balance sheet

The company was very cash generative with operating cash flow of £36.3m compared with EBITDA of £21.2m, helped by working capital improvements of £16.9m of which we expect c £5m to remain in the full year. The most significant cash item was the receipt of £17.1m from the sale of Multiplay in November 2017, following which net cash was up £13.2m year-on-year at £82.2m.

Forecast: Firming up the BELONG project

Our forecast reflects our projections as set out above for the BELONG project, combined with expected changes in the market cycle at the longer end:

Exhibit 7: Changes to forecasts

 

GTV (£m)

Revenue (£m)

EBITDA (£m)

PBT (£m)

EPS (p)

 

From

To

+/-

From

To

+/-

From

To

+/-

From

To

+/-

From

To

+/-

7/18

912.5

925.2

1.4%

793.2

821.0

3.5%

12.3

10.8

-11.5%

0.2

-1.4

N/A

0.1

-0.6

N/A

7/19

916.9

958.2

4.5%

796.3

840.8

5.6%

15.0

15.1

0.4%

1.9

0.9

-54.5%

0.9

0.4

-55.1%

7/20

1,058.2

1015.8

-4.0%

920.4

899.0

-2.3%

33.1

25.1

-24.3%

17.7

7.2

-59.5%

7.9

3.2

-59.5%

Absolute change FY18

12.7

27.8

-1.4

-1.6

-0.7

Absolute change FY19

41.3

44.5

0.1

-1.1

-0.5

Absolute change FY20

 

 

-42.4

 

 

-21.4

 

 

-8.0

 

 

-10.5

 

 

-4.7

Source: Edison Investment Research

The market in H218 remains strong both in the UK and Spain, although the Nintendo Switch launch has just annualised, and its growth path in FY17-18 will provide a like-for-like challenge ahead. In addition, although well-established houses have announced Nintendo titles, their timing has not been confirmed, while other game titles have moved from H218 to H119. This has prompted a response from the company, which now has actions in hand to save £6m of costs in H2 in addition to the £5m saved in H1.

Our FY18 EBITDA forecast has reduced mainly as a result of the repositioning of the BELONG roll-out programme. As a result of management’s conclusion that only larger formats should be used, combined with the SD negotiations, we now only expect 24 to be open by the end of the financial year compared with 45 in our previous forecast. But from FY19 we expect the momentum of the BELONG opening programme to drive EBITDA ahead based on our roll-out projections.

The overall decrease in our FY20 forecast needs to be seen in the context of an 8% reduction in market forecasts for that year, as a result of revised expectations for the PS5 launch, while still markedly higher than the previous two years.

Exhibit 8: Year-on-year change in market forecasts, hardware and content

Source: Market data from GMD (February 2017 forecasts adjusted to July year end by Edison)

Although we have not forecast GMD beyond FY20, our further forecasts for EBITDA of BELONG, against the company forecast to that point should be of interest to investors:

Exhibit 9: Forecast EBITDA of BELONG vs rest of GMD

Source: Edison

This illustrates the consistent growth of the BELONG concept, which should be largely independent of the traditional gaming cycle, which is governed by the timing of hardware model releases.

Valuation

We approach valuation on three metrics: peer comparison, DCF and sum-of-the-parts.

Peer comparison: An approximate science

There is no exact peer, the nearest being US operator Gamestop, which shares a stated change strategy involving a move away from reliance on physical products. It trades on year one and two P/E multiples of 4.7x, and EV/EBITDA of 2.8x which imply a GMD value of 56p. Also appropriate (as they serve special interest groups) are UK small-caps Games Workshop, Goals Soccer Centres, Everyman Media Group and Focusrite. These trade on an average EV/EBITDA multiple of 11.9x in year one and 10.8x in year two. Averaged between the years, that implies a GMD value of 120p. Taking the average of these two values produces a valuation of 88p (unchanged).

DCF valuation: Valuing the medium-term strategy

DCF is an appropriate metric because it does take account of medium-term strategy, albeit this is subject to risk across a number of years. In view of that, we apply a high 15% WACC to the future streams. To represent the cycle, we assume the next three years’ revenue growth beyond our 2020 forecast is the same as the average for the previous three before fading to a terminal 2% over the final three years. We assume no change in the 2020 EBITDA margin, and we conservatively reflect maintenance capex at 2% of revenue. On this basis, we value the shares at 71p (previously 72p). That is c 10p sensitive to a 1% change in WACC and c 20p sensitive to a 1% change in the margin assumption.

Sum of the parts: Focus on the growth element

Since GMD is on a path to realise a business independent of the zero-sum-game cycle, our preferred measure is to create a valuation of each element. We define the growth element as A&O, Gametronics, Esports, Events and Digital. Below the forecast gross profit level, we model specific operating costs in esports, events and digital, and BELONG operating costs. We then allocate operating costs pro-rata to revenue, which is slightly unfair to the growth businesses, which therefore pick up a higher share.

Exhibit 10: Forecast EBITDA – growth and core businesses

£m

FY17e

FY18e

FY19e

FY20e

Growth categories

4.7

9.1

14.5

24.0

Other categories

3.3

1.8

0.6

1.1

Total

8.0

10.8

15.1

25.1

Source: Edison Investment Research

For non-growth operations, we reproduce the cycle by averaging the last three years’ EBITDA of core operations and, after capex and tax, value it as a perpetuity assuming 2% growth, at 4p per share. In the case of growth businesses, we conservatively fade revenue growth from a 2020 rate of 21% to terminal growth of 2%, producing a DCF valuation of 58p. The sum of the two is 62p.

Averaging all three metrics, we define a blended valuation of 74p (previously 93p).

A further consideration: Future EBITDA

As shown in Exhibit 9 above, the growing operations under the collaboration agreement, as represented by our BELONG projections, is set to dominate the company’s earnings. As shown in our projection at Exhibit 3, the roll-out of 5,000 paying stations would suggest steady state EBITDA of £20m by FY22. On the current All-Share General Retailers 12-month forward EV/EBITDA multiple of 6.5x, that would equate to £130m, which discounted at 10% would suggest an EV of £76m. Subtracting the £45m capital cost of the project gives a value of £31m or 18p. Adding the company’s net cash of £60m (year-end £43m adjusted for disposal proceeds of £17m), or 35p, results in a total of 53p per share.

Exhibit 11: Financial summary

Accounts: IFRS, Yr end: July, GBP: Millions

 

2015A

2016A

2017A

2018E

2019E

2020E

Profit and Loss statement

 

 

 

 

 

 

 

Total revenues

 

866.6

821.9

782.9

821.0

840.8

899.0

Cost of sales

 

(652.9)

(612.7)

(577.8)

(621.8)

(630.7)

(677.6)

Gross profit

 

213.7

209.2

205.1

199.2

210.1

221.4

Other income/(expense)

 

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals and adjustments

 

(12.2)

(12.9)

(5.7)

(2.6)

(9.6)

(9.6)

Depreciation and amortisation

 

(8.5)

(10.5)

(11.0)

(11.5)

(13.3)

(16.2)

Reported EBIT

 

26.2

3.0

(8.7)

(3.2)

(7.8)

(0.7)

Finance income/(expense)

 

(0.4)

(1.1)

(1.3)

(0.8)

(0.9)

(1.7)

Exceptionals and adjustments

 

(3.7)

(3.8)

3.9

7.0

0.0

0.0

Reported PBT

 

25.8

1.9

(10.0)

(4.0)

(8.8)

(2.5)

Income tax expense (includes exceptionals)

 

(4.4)

1.3

(2.1)

0.3

(0.2)

(1.6)

Reported net income

 

21.4

3.2

(12.1)

(3.7)

(8.9)

(4.0)

Basic average number of shares, m

 

168.3

168.9

169.7

172.9

172.9

172.9

Basic EPS, p

 

12.7

1.9

(7.1)

(2.1)

(5.2)

(2.3)

Dividend per share, p

 

14.7

3.4

1.0

0.0

0.0

4.0

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

46.9

26.4

8.0

10.8

15.1

25.1

Adjusted EBIT

 

38.4

15.9

(3.0)

(0.6)

1.8

8.9

Adjusted PBT

 

38.0

14.8

(4.3)

(1.4)

0.8

7.1

Adjusted diluted EPS, p

 

18.5

10.7

(3.7)

(0.6)

0.4

3.2

 

 

 

 

 

 

 

 

Balance sheet

 

 

 

 

 

 

 

Property, plant and equipment

 

19.2

16.8

17.2

18.5

29.7

38.3

Goodwill

 

0.0

0.0

0.0

0.0

0.0

0.0

Intangible assets

 

61.0

56.7

47.5

29.3

15.6

1.9

Other non-current assets

 

0.2

2.2

2.5

2.5

2.5

2.5

Total non-current assets

 

80.4

75.7

67.2

50.3

47.8

42.7

Cash and equivalents

 

63.1

48.8

47.2

71.1

67.8

63.9

Inventories

 

66.8

76.1

81.2

76.2

77.3

83.0

Trade and other receivables

 

17.8

20.4

23.5

20.6

21.1

22.6

Other current assets

 

0.9

8.8

1.7

3.6

1.7

1.7

Total current assets

 

148.6

154.1

153.6

171.5

167.9

171.2

Non-current loans and borrowings

 

0.1

3.1

2.6

2.6

2.6

2.6

Other non-current liabilities

 

5.7

4.4

2.8

2.8

2.8

2.8

Total non-current liabilities

 

5.8

7.5

5.4

5.4

5.4

5.4

Trade and other payables

 

93.8

90.7

101.6

98.8

100.2

107.7

Current loans and borrowings

 

0.0

7.2

2.0

7.7

7.7

7.7

Other current liabilities

 

3.2

1.3

2.6

2.6

2.6

2.6

Total current liabilities

 

97.0

99.2

106.2

109.1

110.5

118.0

Equity attributable to company

 

126.2

123.1

109.2

107.3

99.8

90.5

 

 

 

 

 

 

 

 

Cashflow statement

 

 

 

 

 

 

 

Cash from operations (CFO)

 

44.1

3.2

9.1

19.5

17.0

26.0

Capex

 

(11.3)

(13.3)

(11.6)

(17.6)

(24.5)

(24.8)

Acquisitions & disposals net

 

(12.4)

(1.5)

13.3

17.1

1.9

0.0

Other investing activities

 

(0.2)

0.0

0.0

0.0

0.0

0.0

Cash used in investing activities (CFIA)

 

(23.9)

(14.8)

1.7

(0.5)

(22.6)

(24.8)

Net proceeds from issue of shares

 

0.0

0.0

0.0

0.0

0.0

0.0

Movements in debt

 

(1.5)

1.5

0.0

0.0

0.0

0.0

Other financing activities

 

(37.8)

(13.9)

(4.3)

(0.8)

(0.9)

(5.2)

Cash from financing activities (CFF)

 

(39.3)

(12.4)

(4.3)

(0.8)

(0.9)

(5.2)

Increase/(decrease) in cash and equivalents

 

(19.1)

(24.0)

6.5

18.2

(6.5)

(4.0)

Currency translation differences and other

 

(3.1)

1.0

0.6

0.0

0.0

0.0

Cash and equivalents at end of period

 

63.1

40.1

47.2

65.4

58.9

58.2

Net (debt) cash

 

63.0

38.5

42.6

60.8

57.5

53.6

Movement in net (debt) cash over period

 

63.0

(24.5)

4.1

18.2

(3.3)

(4.0)

Source: GMD, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Game Digital and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication.
This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

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US

Sydney +61 (0)2 8249 8342

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Game Digital and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication.
This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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