Game Digital has acknowledged that UK supply shortages for the highly successful Nintendo Switch console will have an impact on results in the second half of FY17. This is by nature a timing issue and other aspects of management’s transition strategy remain on course. We have placed our forecasts under review.
Written by
Game Digital |
Switch supply impacts short term results |
Trading update |
Retail |
30 June 2017 |
Share price performance
Business description
Analysts
Game Digital is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||
Game Digital has acknowledged that UK supply shortages for the highly successful Nintendo Switch console will have an impact on results in the second half of FY17. This is by nature a timing issue and other aspects of management’s transition strategy remain on course. We have placed our forecasts under review.
Year end |
Revenue (£m) |
EBITDA |
PBT* |
EPS* |
DPS |
P/E |
EV/EBITDA (x) |
Yield |
07/15 |
866.6 |
46.9 |
38.0 |
18.5 |
14.7 |
2.5 |
2.9 |
31.8 |
07/16 |
822.5 |
28.0 |
16.4 |
8.8 |
3.4 |
5.3 |
0.7 |
7.4 |
Note: *PBT and EPS (diluted) are normalised, excluding amortisation of acquired intangibles and exceptional items. FY16 is for 53 weeks.
Game Digital has provided an update on the second half of the year ending 31 July 2017.
The Spanish business is trading strongly and in line with expectations. In the UK, the challenging trading environment has continued from the first into the second half. The company expected H2 sales to be underpinned by the Nintendo Switch console launch in March 2017, always dependent on stock availability.
In fact, despite strong demand, supply to the UK for Switch has been lower than expected. Together with continued softness in the core Xbox and PlayStation markets, this reduces guidance for GTV growth in H2 to 5-6% (on a 52-week basis), which compares with our forecast assumption of 17%. As a result, EBITDA for the year is now expected to be substantially below previous expectations.
Moving into FY18, the positive demand for the Switch should benefit results, albeit from a lower base. In addition, interest is building in the new Xbox One X console, expected in November 2017, and there is a stronger line-up of new releases on Xbox, PlayStation and Nintendo.
Development of new BELONG in-store gaming arenas is progressing, and the concept now trades in 12 locations, with an expectation of 20 in the full year. This is lower than our forecast assumption of 30, but we did not expect significant profit contribution in the year from these developments.
We have placed our forecasts under review.
Game Digital will announce its full year results in October 2017.
|
Disclaimer
|
|
Disclaimer
|
Research: Real Estate
Noratis is a hybrid between a property company that owns residential assets and a residential asset developer. Noratis has been operating in Germany’s non-core cities since 2011, and exploits the opportunities in this market segment while mitigating typical developer’s risks through targeting a constant cash inflow from rental income. Noratis acquires existing residential blocks, aims to modernise them with minimal disruption to the rental income stream and, within 12 to 36 months, aims to sell the building as a whole or unit-by-unit. Noratis has raised gross funds of €17.25m, which should enable it to boost its asset base, generate economies of scale and therefore mitigate risks for investors further, widening the gap between recurring rental yields and operating costs.