RNS Number:2959T
Game Group PLC
29 April 2008
THE GAME GROUP PLC
RNS release
Year ended
31 January 2008
THE GAME GROUP PLC
+----------------------------------------------------+-------+-----+
|Year ended 31 January | 2008| 2007|
|# millions (unless stated) | | |
+----------------------------------------------------+-------+-----+
|Sales |1,491.9|801.3|
+----------------------------------------------------+-------+-----+
|Like for like sales % | 41.2| 16.2|
+----------------------------------------------------+-------+-----+
|Gross margin % | 24.8| 27.2|
+----------------------------------------------------+-------+-----+
|Operating profit (before non-recurring costs)* | 82.3| 33.0|
+----------------------------------------------------+-------+-----+
|Operating profit | 75.2| 33.0|
+----------------------------------------------------+-------+-----+
|Profit before taxation (before non-recurring costs)*| 75.5| 29.5|
+----------------------------------------------------+-------+-----+
|Profit before taxation | 68.4| 29.5|
+----------------------------------------------------+-------+-----+
|Full year dividend | 4.40p|2.93p|
+----------------------------------------------------+-------+-----+
|Basic earnings per share | 13.79p|6.25p|
+----------------------------------------------------+-------+-----+
|Earnings per share before non-recurring costs* | 15.88p|6.25p|
+----------------------------------------------------+-------+-----+
| | | |
+----------------------------------------------------+-------+-----+
|Trading store numbers (inc. Franchises) | 1,161| 817|
+----------------------------------------------------+-------+-----+
|Trading square footage (000s) | 1,170| 875|
+----------------------------------------------------+-------+-----+
* There are non-recurring costs of #7.1m relating to the acquisition of
Gamestation
Operational and Financial Highlights
o Excellent sales performance with total sales growth of 86% and like for like ('lfl') sales up by 41.2%
o Record profit before tax and non-recurring costs of #75.5m, an increase of 156% on last year
o Final dividend increased by 79% to 2.97p (2007: 1.66p) resulting in the full year dividend up 50% to 4.40p
(2007: 2.93p)
o Continued expansion in overseas territories - opened a net 116 new stores in four territories bringing total
international stores to 512 including franchises. International operating profits more than doubled to #13.2m from
#6.1m.
o Strong growth in our eCommerce businesses with turnover and operating profits up by 147% and 61% respectively.
o Successful acquisition of Gamestation's 217 store chain, bringing total number of stores in UK to 649.
o Ongoing benefit from the unprecedented range of formats available, with the Nintendo Wii and DS Lite in particular
broadening the appeal of video games
Current Trading and Outlook - FY 2008/9
* Strong current trading, with Group lfl sales up by 20.1% in the 13 weeks to 26 April, despite the Playstation 3
having launched in the comparative period last year
* Sales continue to be strong on all formats, with supply improving on the Nintendo Wii
* Gross margin expected to improve by 50 to 100 basis points driven by purchasing synergies and a slightly
reduced hardware participation in the sales mix
* The integration of Gamestation will result in revenue and cost synergies in the current financial year of
around #7m
* Around 100 store openings planned this year, with key focus on France, Spain and Australia
* Continued growth and development of our eCommerce proposition
Peter Lewis, Chairman, commented:-
"This is a record set of results and clearly demonstrates that we've taken the right steps to expand the scale and
geographic reach of our specialist offer to benefit from the broadening appeal of pc and video games products.
This performance marks a transformational year with a significant improvement in a number of core business operations,
further enhanced by the acquisition of Gamestation in the UK. In addition we more than doubled international operating
profits and increased eCommerce operating profits by over 60%, both of which continue to be a focus for growth.
The unprecedented range of popular products has broadened the demographic appeal to new customers of all generations.
It has also favourably altered the short and medium term outlook for our industry. With a large and growing installed
base of hardware in the market, a strong line-up of new software launches and the benefits of full year ownership of
Gamestation in prospect, the Board remains very confident in the outlook for the 53 weeks to 31 January 2009."
A presentation to investors and analysts will be held today at 9.30am (BST) at
The Lincoln Centre, 18 Lincoln's Inn Fields, London, WC2A 3ED.
A live webcast of the presentation to analysts will be available on the
Company's website at www.gamegroup.plc.uk from 9.30am (BST) today and will be
available to view on demand from approximately 2.00pm (BST).
An interview with Lisa Morgan, Chief Executive will be available from 7.00am
(BST) on www.gamegroup.plc.uk and on www.cantos.com.
Enquiries:
The GAME Group plc Lisa Morgan +44 (0)1256 784050
Group Chief Executive
David Thomas +44 (0)1256 784085
Deputy CEO & Group Finance Director
Simon Soffe +44 (0)1256 784162
Head of Investor Relations and Group Communications
Brunswick Jonathan Glass +44 (0)20 7404 5959
Wendel Verbeek
Ash Spiegelberg
www.gamegroup.plc.uk
Chairman's Statement
This was an outstanding year for the Group with total revenue growth of 86%. The Group's expansion was accelerated by
our acquisition of Gamestation in the UK and the opening of a net 116 new GAME stores internationally. This excellent
trading performance delivered a Group like for like ("lfl") performance of 41.2%. Through our ongoing focus on
operational efficiency we were able to translate our excellent sales growth into a record profit before tax and
non-recurring costs of #75.5m, an increase of 156% on the prior year (2007: #29.5m).
The success of our operational and financial performance is an endorsement of our strategy to expand the scale and
geographic reach of our portfolio ahead of the launch of this new generation of games consoles.
Results
Group turnover for the year to 31 January 2008 increased by 86% to #1,491.9m (2007: #801.3m) with lfl sales up by
41.2%. In the UK and Ireland total sales increased by 88% and lfl sales were up by 42.5%. In our international
operations total sales and lfl sales increased by 80.2% and 37.9% respectively.
As expected, Group gross margin declined by 240 basis points compared to last year, due to lower margin hardware being
a larger part of the total sales mix. Other factors included the impact of the acquisition of Gamestation, which has
traditionally achieved lower margins, and the participation of our international businesses.
Group operating profit was #75.2m (2007: #33.0m), including international operating profits more than doubling to
#13.2m (2007: #6.1m) and eCommerce operating profits achieving a growth of 61%, to #2.9m. Profit before tax was #68.4m
(2007: #29.5m) and basic earnings per share were 13.79p (2007: 6.25p).
The Board is proposing a 79% increase in the final dividend to 2.97p (2007: 1.66p), lifting the total dividend for the
year by 50% to 4.40p per share (2007: 2.93p).
Our net cash position as at 31 January was #42.1m (2007: #0.6m). The Group continues to have a strong balance sheet.
Business Development
The Market and Our Market Position
The latest generation of consoles from all three hardware manufacturers (the Sony PS3 and PSP; the Nintendo Wii and DS
Lite, and the Microsoft Xbox 360) have expanded the video games market significantly, with the Sony PS2 and pc games
also remaining popular. The variety of product innovation has broadened the appeal of gaming to a wider customer base,
attracting both the younger and older generations and in particular more females.
We developed the key differentiators of our business to ensure we were well positioned ahead of the launch of the
latest generation of formats:
- Our well established supplier relationships allow us to source appropriate quantities of "must have" new products and
present innovative offers to our customers
- GAME and Gamestation's specialist retail propositions allow us to carry the widest range of product on the high
street. Consumers can experience a wide range of console hardware formats and an unprecedented software line-up
- Our well trained and knowledgeable employees are instrumental in guiding consumers to the products, deals and choices
that best suit their needs
- Our GAME Reward Card scheme, to which over 10 million members have signed up since inception, gives the consumer
great discounts and exclusive benefits
- Our trade-in programme and preowned product offer allow consumers to use their old games to buy new ones cheaper, and
buy preowned games at a cheaper price than new.
We have opened stores in the right territories and the right locations. We now have 1,161 stores across two brands and
five key geographic operating divisions, reflecting our expansion strategy of building our business in the most
appropriate markets.
We continue to invest in our multi channel proposition to ensure we can deliver growth in the future and maintain our
competitive position. Our strategy reflects customers' increasing adoption of multi channel shopping, and we have
invested in this area to ensure that the qualities of the GAME brand are replicated for our eCommerce customers.
Acquisitions - Gamestation
On 2 May 2007 we acquired Gamestation, a specialist pc and video games retailer with 217 stores in the UK. The Office
of Fair Trading reviewed our acquisition of Gamestation and, on 9 August 2007, referred the acquisition to the
Competition Commission, from which point we operated under agreed legal "hold separate" undertakings. On 15 January
2008 the Competition Commission unconditionally cleared the transaction. The non-recurring costs of the Group
complying with these requirements were #4.2m.
We have been very pleased with the performance of the Gamestation business. We originally expected synergies of #7m to
be achieved in the 12 months from acquisition, however on 3 March 2008 the Board announced that it considers that these
can be realised fully within the current financial year.
There will be a total non-recurring charge of approximately #7m related to integrating the acquisition, of which #2.8m
has been incurred this year. Furthermore, there will be capital expenditure, required to achieve the integration, of
around #4m.
We will continue to operate both GAME and Gamestation as separate brands, which will allow us to appeal to the widest
range of customers that make up the pc and video game playing market.
International
Our international business has grown from small acquisitions in France and Spain in 2001 to 512 stores contributing
operating profits of #13.2m (2007: #6.1m). We opened a net 116 stores in the year with 40 of these in France, 43 in
Iberia, 35 in Australia and 2 closures in Scandinavia. We have also closed or acquired 14 franchises in the year. Our
profitability is continuing to improve as we achieve greater economies of scale in these international markets.
eCommerce and Digital Distribution
The Group eCommerce turnover increased by 147% to #58m (2007: #23.5m). The operating profits increased to #2.9m from
#1.8m. The capital investment in our eCommerce offering has been over #5m in the past 2 years. In the UK we launched a
new website for our primary platform game.co.uk and upgraded our logistics infrastructure. We anticipate further
significant growth in eCommerce turnover and operating profits this year.
All of our international businesses now have transactional websites that we will continue to evolve.
We launched a digital distribution service offering our customers the opportunity to download pc games. This is a
minimal but growing part of the market.
Employees
The Group's growth and results could not have been achieved without the fantastic efforts of our employees. For many,
particularly those at Gamestation and in our new stores, it was their first year in the Group and I would like to
welcome and thank them and all of our other staff for their dedication and enthusiasm.
Current Trading & Outlook
The first quarter has seen a very encouraging start to the year particularly given that the comparative period in 2007
included the launch of Playstation 3.
In the first 13 weeks to 26 April 2008 the Group lfl and total sales were up by 20.1% and 64.3% respectively. In the UK
and Ireland lfl sales and total sales were up by 25.6% and 78.6% respectively. In our international business lfl sales
and total sales were up by 8.8% and 34.3% respectively.
The unprecedented range of popular products has broadened the demographic appeal to new customers of all generations.
It has also favourably altered the short and medium term outlook for our industry. With a large and growing installed
base of hardware in the market, a strong line-up of new software launches and the benefits of full year ownership of
Gamestation in prospect, the Board remains very confident in the outlook for the 53 weeks to 31 January 2009.
Peter Lewis
Chairman
Chief Executive's Review
This has been a momentous year both for the Group and for the pc and video games industry. Our specialist business has
benefited greatly, not only from a buoyant market but also from the solid foundations we have put in place.
Our acquisition of Gamestation has considerably enhanced our UK market position and given us a second specialist brand
allowing access to a much wider range of customers.
Video games are now mainstream entertainment, appealing to and entertaining a broad spectrum of customers. In the UK,
pc and video games sales exceeded #3.2bn in 2007, compared to #3bn sales for recorded music in the UK or #1bn for
cinema receipts.
As a specialist retailer we offer a compelling shopping environment, both on the high street and online.
We offer an extensive product range, a trade-in and preowned programme, offers and promotions, and most importantly
enthusiastic and knowledgeable staff to best help consumers find the products that meet their needs.
As a result, for the third consecutive year the Group reported excellent lfl sales.
The GAME Group specialist proposition:
To drive growth in every part of our business and in every market in which we operate, we put our relationship with our
customer at the heart of our activities. The key components of this relationship are:
* Compelling shopping environment - Both on the high street and online we aim to deliver customers an enhanced
shopping experience.
* The quality of our staff - Our staff are trained to offer advice on the broad range of products now available and
are dedicated to delivering the highest levels of customer care and service.
* Product range and choice - We present the customer the widest range of pc and video games products. Our specialist
buyers negotiate unique offers, leading promotions and innovative hardware packs offering excellent value.
* Preowned and trade-in programme - The ability to trade-in and buy preowned games at GAME and Gamestation is a real
benefit for customers. Trading in games is a unique way for customers to save money, using their old games as
currency against new purchases. Preowned games enable us to offer a wider range and better value to today's more
price conscious consumer.
* Customer Loyalty and Customer Relationship Management - The GAME Reward Card gives us a unique relationship with
our customers. We reward our customers with points on every purchase which can be used as discounts against future
purchases. The transactional data allows us to track purchasing trends and learn about our changing needs. It also
helps us plan tactical direct marketing, advertising and other campaigns to increase loyalty. Over time, we have
signed up over 10 million GAME Reward Card members across the UK and our international businesses.
* eCommerce - We relaunched our eCommerce service game.co.uk in September 2007. As the UK's leading online specialist
video games retailer, we offer customers a range of multi channel services that replicate the specialist service in
our stores. This year the Group will increase investment to accelerate the expansion of our multi channel offer
both in the UK and internationally.
These activities have served us well in building brand recognition in all the territories in which we operate and in
generating a strong performance for the year. We have seen considerable growth in loyalty and membership, excellent
results for mystery shopping and improvements in service across the chain.
Supporting the specialist proposition
To maintain our leading specialist proposition it has been vital that we ensure all elements of our support functions
are working to the very highest standards:
* Buying - We have maintained long term and successful relationships with all of the key hardware and software
suppliers in the market. This ensures we receive a good allocation of products for our customers. Together,
we are able to maximise new launches and generate unique product deals and offers. Working closely with each
supplier also helps us to create market leading campaigns.
* Distribution and merchandising - In such a fast paced market, where launch dates are key, it is crucial that
products are available for the customer as fast as possible. Distribution centres for each of our business units
are dedicated to moving large volumes of products quickly and efficiently to final destinations, whether that is
our stores or direct to customer homes via online orders. In the UK, for example, our distribution centre
despatched over 30m units in 2007, an increase of over 25% on the previous year. Our sophisticated systems and
merchandising function ensures that we get the correct products in the right quantities to every destination.
* Property management - A major part of successful retailing is the location and management of retail outlets.
Our rigorous review procedures mean that we open stores in the right demographic and geographic locations. We
constantly assess store performance, ensuring that our lease commitments allow us to manage the portfolio
efficiently to maximise profitability.
Where we sell
We deliver our specialist proposition throughout the Group worldwide, using a consistent operating model.
Outside the UK and Ireland we operate in Iberia, France, Scandinavia and Australia. Total revenues from our
international businesses of #387.3m (2007: #214.9m) represented 26.0% of Group revenues. Total international sales
increased by 80%, with a 37.9% increase in the lfl sales.
France: All of the former Maxi-Livres book stores, which we acquired in October 2006, have now been refitted and
branded as GAME and the 50 store portfolio delivered a pleasing trading performance in their first year as pc and video
games specialist stores.
Scandinavia: Managed from our central office in Stockholm, we have stores in Sweden, Norway and Denmark in all the
major retail hubs.
Iberia: Over the course of the year we have experienced a strong roll-out of stores, allowing us to consolidate our
number one position in the market.
Australia: This is the newest market for the GAME business and we have achieved considerable growth over the last
financial year, opening 35 new stores to make a total of 51.
We recognise that eCommerce is an important area in the pc and video games market and we will continue to invest in and
develop our multi-channel proposition, building our offer online to reflect the same brand values our customers
recognise and trust. In the past two years, we have invested over #5m in our eCommerce offering and will commit a
further #5m this year.
Outlook
The excellent performance for the year is a result of our efficient operating model, our investment in our stores, our
people, our supplier relationships, and our creation of a leading specialist proposition that is designed to exceed our
customers' expectations and build long-term loyalty.
We look forward to the current year with confidence. We will continue to evolve our consumer proposition, both online
and in our stores, realise the benefits from the Gamestation acquisition in the UK and build further on our successful
international expansion programme.
Lisa Morgan
Chief Executive
The Business Review
Overview:
GAME Group is Europe's leading specialist retailer of pc and video game
products. The business started trading in 1991 from 11 stores in the UK, and has
grown both organically and through acquisition to a 1,161 store chain as at 31
January 2008. We operate stores in nine countries, supported by eCommerce
websites. Following the successful acquisition of Gamestation in 2007, we
operate in the UK market under the GAME and Gamestation brands - and as GAME in
all other territories.
+--------------------------+---------------+-----------------+-----------------+
|As at 31 January | | 2008| 2007|
+--------------------------+---------------+-----------------+-----------------+
| | | Number| Number|
+--------------------------+---------------+-----------------+-----------------+
|Company owned and | | | |
|concessions | | | |
+--------------------------+---------------+-----------------+-----------------+
|UK and Ireland | | | |
| | | | |
|- GAME | | 414| 407|
| | | | |
|- Gamestation | | 235| -|
+--------------------------+---------------+-----------------+-----------------+
|Total UK and Ireland | | 649| 407|
+--------------------------+---------------+-----------------+-----------------+
|France | | 170| 130|
+--------------------------+---------------+-----------------+-----------------+
|Iberia | | 208| 165|
+--------------------------+---------------+-----------------+-----------------+
|Scandinavia | | 62| 64|
+--------------------------+---------------+-----------------+-----------------+
|Total Continental Europe | | 440| 359|
+--------------------------+---------------+-----------------+-----------------+
|Australia | | 51| 16|
+--------------------------+---------------+-----------------+-----------------+
|Total International | | 491| 375|
+--------------------------+---------------+-----------------+-----------------+
|Total owned and | | 1,140| 782|
|concessions | | | |
+--------------------------+---------------+-----------------+-----------------+
|Franchises | | | |
+--------------------------+---------------+-----------------+-----------------+
|France | | 7| 11|
+--------------------------+---------------+-----------------+-----------------+
|Iberia | | 10| 18|
+--------------------------+---------------+-----------------+-----------------+
|Australia | | 4| 6|
+--------------------------+---------------+-----------------+-----------------+
|Total franchises | | 21| 35|
+--------------------------+---------------+-----------------+-----------------+
|Total operational outlets | | 1,161| 817|
+--------------------------+---------------+-----------------+-----------------+
Our market
Technology:
Video game technology has evolved rapidly since Atari launched Pong in the
1970s, with present day games offering very realistic simulations and
opportunities for multiple players. The current generation of games consoles are
not purely for playing games. They can be used to access the web, watch films,
store photos and for many other functions. The technology in our industry is
evolving in a number of ways:
- To enhance the game play, graphics and content. Gamers like to experience
the full game playing power of a next generation console, driving demand for
ever more complex games and more realistic simulations. This, in turn,
significantly increases the cost of developing new games.
- To increase the inclusivity of gaming. Some manufacturers are foregoing the
race to push the technology in favour of making products that focus on
simplicity and having fun.
- To extend how and where games are played. Portable consoles and online gaming
allow people to challenge each other or themselves wherever they are. It is
also possible to download simple games.
In the short to medium term, games manufacturers will continue to create
products that realise the potential of the current consoles and their
entertainment possibilities, in order to satisfy the demands of the game-playing
public. Over the longer term, games are expected to feature more online play,
but current technology constraints are limiting growth.
Digital distribution is another potential route to market but existing domestic
broadband networks generally do not deliver speeds of more than 8 MB/sec
and game file sizes are increasing, so games are slow to download. It is also
difficult to store large files in a console's limited memory. For example, PS3
games can be up to 50GB in size, whereas the PS3 hard drive is limited to 40GB.
Geography:
There are 229 million games consoles in the top 15 markets, creating an industry
worth US$42.5bn (source IDG). The prime markets are the USA, Japan and Europe.
Japan and the USA are the lead markets, and are also the national homes of the
console manufacturers. In Europe the largest video game market is the UK
followed by France, Spain, Germany, Italy and Scandinavia.
The US, Japanese and UK markets tend to be the most mature with consumers very
aware of the products and choices available to them. The other European games
markets are continuing to evolve rapidly. The Australian market shows a strong
growth profile, with an installed base penetration of approximately one third of
the penetration seen in the UK market.
Within these economies the games market has become part of the wider
entertainment industry, competing successfully for consumer spend on
entertainment. As with the wider entertainment industry, growth in the video
games industry has been driven more by new technology than by the state of the
wider economy.
Around the globe there are a significant number of emerging economies with the
right infrastructure and customer demographic to support a successful pc and
video games market.
Consumer:
Historically the video game consumer would have been a male in his teens or
early 20s (the "core gamers"). This has changed radically in the last three
years, with the arrival of many new and innovative products. Today's consoles
and in particular, the Nintendo Wii and DS Lite offer a game play experience
that has expanded the consumer base to include children, the over 30's and many
more female players (the "mass market gamers").
This broadening of the demographic appeal of computer games is occurring in all
key game playing geographic areas. As a result, hardware manufacturers and games
publishers need to satisfy the demands of both the "core gamer" and the "mass
market gamers".
Products:
Typically a successful specialist video game retailer will sell a wide range of
hardware, software, accessories and preowned products:
Hardware: The consoles used to run the software. These are manufactured and
supplied by Microsoft (Xbox360), Sony (PS2, PS3 and the handheld PSP), and
Nintendo (Wii and handheld DS Lite). Hardware sales drive the future purchase of
software products.
Software: Video games for all console formats plus game software products for
pc. Like other entertainment products, longstanding brands are often the most
successful. Well established franchises - such as Mario from Nintendo, Halo from
Microsoft, Grand Theft Auto from Rockstar, FIFA from EA, Gran Turismo from Sony
and Metal Gear Solid from Konami are classed as AAA launches. The recent
explosion of mass market customers has lengthened purchasing trends, and new
franchises such as Brain Training from Nintendo, and Guitar Hero from Activision
have achieved strong chart positions.
Accessories: Hand-held controllers, steering wheels, protective cases, cables
and other attachments that improve the game play experience. 'Casual' games are
increasingly reliant on accessories to maximise the game play - including
microphones for singing titles, mock guitars for music games, steering wheels
for driving games and add-ons for the Wii such as the Wii Fit.
Preowned: Console software and hardware that is traded in for cash, credit or a
discount off another purchase. Trading in games is a unique way for customers to
save money, using their old games as currency against new purchases. Preowned
games allow the specialist to offer a broader range and great value to today's
more price conscious consumer.
Our business
The acquisition of Gamestation in 2007 marks a transformation in our UK
business. We now have two popular retail brands appealing to both the "mass
market customers" and "core gamers". Our success under both brands is a
testament to our qualities as a specialist retailer:
o A quality shopping environment - Both on the high street and online we aim to
deliver customers the best shopping experience whilst maximising sales opportunities.
The GAME brand provides an easy-to-shop store layout, clear signage, helpful and
knowledgeable staff and offers and promotions tailored to the mass market consumer.
The Gamestation brand, with its distinctive advertising, offers and mix of preowned,
has a greater appeal to the core gamer. In both chains, our employees are trained
to give the very highest levels of product knowledge support to the customer.
o Product range and choice - Our specialist offer allows us to present to the
customer the widest range of pc and video game products on the high street. To
support the range, we run special promotions, unique offers and innovative
bundling campaigns. Uniquely, GAME stores offer a wide range of own brand
accessories which give consumers value for money. Pre-owned products are
increasingly popular with customers and represent a significant part of our
business. They allow both our chains to offer competitive price points to
cost-conscious consumers. Pricing and stock are controlled centrally to ensure
sufficient stock levels are maintained.
o Price Offerings - We use a variety of tools to give our customers value for
money. We work with suppliers to provide attractive promotions, including Deal
of the Week, and Buy One Get One Free offers. Our preowned range offers lower
price points, and customers can save money against their new purchases by
trading in their used games. Our Reward card provides a 2.5% discount on any
purchase made and 5% on many pre-orders.
As outlined in the Chief Executive's Review, we have built our specialist
retailer proposition by having a strong support infrastructure:
o Supplier relationships - to create unique deals and offers for the consumer;
o Sophisticated distribution and merchandising systems - to ensure we get the
right quantities and type of product to meet customer demand whether online
or in-store;
o Property management - to ensure we are in the right locations for maximising
customer catchment and profitability;
o Customer Relationship Management tools - to ensure we respond to our customers'
changing needs and market trends;
o Preowned and trade in - offering a preowned alternative to the price conscious
consumers.
We replicate this strong operating chain and specialist retail proposition in
each of the territories in which we operate.
Store profiles:
We aim to produce a standard store format across our portfolio. Most measure
just over 1,000 sq.ft., although this does vary by territory. Each is
merchandised to provide a great product range across all formats, clear offers
and promotions and most of all an easy and satisfying shopping experience for
our customers. We are constantly updating our proposition to keep up with the
latest consumer trends and demands, making sure the customer remains at the
heart of everything we do.
UK & Ireland:
GAME
With over 4,000 employees and 414 outlets GAME is the leading video games
retailer in the UK. Stores are located in prime locations in shopping centres,
high streets and out-of-town retail parks. We also have concessions including
Hamleys, Selfridges, Debenhams, and Fenwicks. GAME UK is supported by a
state-of-the-art distribution centre and head office facility in Basingstoke,
built specifically for the Group and comprising some 196,000 sq. ft. of storage
space.
Gamestation:
The Group acquired Gamestation on 2 May 2007, with 1,800 employees and 217
stores. The majority of Gamestation stores are located in popular secondary
retail sites and appeal more to the typical 'core gamer'. Gamestation opened 18
new stores in 2007, recruiting 528 new members of staff. Gamestation is
supported by a head office and distribution facility in York. Distribution is
managed by a third party logistics partner.
France:
GAME in France, where we have 170 stores, continues to grow and perform well. We
are the number two specialist pc and video games retailer in the market. France
is traditionally a very strong market for Nintendo, which has been reflected in
its sales of the Wii and DS Lite. The French business is supported by a 16,000
sq. ft. head office and distribution centre, situated in Paris.
Iberia:
GAME has been the leading retailer of pc and video game products in Spain since
2006. The operational performance of the business is excellent. GAME has
benefited from the rapid growth of shopping centres and is represented in every
new retail development in the country. We acquired a presence in the Spanish
market in 2001 and from here expanded into Portugal in 2006. The Iberian
business is supported by a 31,200 sq. ft. head office and distribution centre
situated in Madrid.
Scandinavia:
The operational performance in Sweden, Denmark and Norway continues to improve,
and we are very pleased with trading in all three markets. We now have 44 stores
in Sweden, 8 in Denmark 10 in Norway. The Scandinavian business is supported by
a 12,500 sq ft head office and distribution centre situated in Stockholm.
Australia:
Our presence in Australia has more than trebled since we acquired a local
business in September 2006. Under the leadership of the experienced existing
management team, we have achieved excellent progress. On acquisition we
relocated the head office and distribution centre to a 16,700 sq.ft. facility in
Sydney and re-branded the existing stores to GAME. We also began a rapid store
opening programme taking the portfolio from 16 to 51 stores in just over a year.
GAME now has stores in every state in Australia.
Online retailing, online gaming and digital distribution
ECommerce has rapidly increased its contribution to the Group and represents a
significant opportunity for the future.
In the UK we operate retail websites game.co.uk, gamestation.co.uk, and
gameplay.com.
The relaunch of game.co.uk in September 2007 generated a 65% increase in traffic
and a 50% rise in customers visiting and purchasing. The revised site has won
awards for usability and traffic increases in the UK. In November 2007 we
launched a 'click and collect' service which allows customers to order online
and collect products from our stores. This new channel complements our existing
digital download and games-on-demand services.
Planning for future growth
Computer game retailing is evolving rapidly through the combined impact of
technological advances and an increasingly competitive high street and online
market.
We aim to maintain our leading position by adhering to the core principles of
our Group as a specialist retailer, and to continue to roll out new stores
across appropriate markets. We plan to open around 100 new stores primarily
focussed on France, Spain, and Australia.
We will continue to review opportunities in our current sectors and in new
territories. We will acquire new stores and businesses providing they are a good
fit with our existing outlets and the new businesses meet our criteria for
capable management, sound infrastructure and good financial returns.
In the current year we expect the total capital expenditure including
information technology and head office expenditure for the Group to be in the
region of #40m.
We will maintain our focus on the online area of our business to ensure that we
are well positioned both in terms of eCommerce and digital distribution. We aim
to build on recent market share gains and increase the proportion of sales
online in the Group. The successes of our relaunch of game.co.uk will be applied
to other Group sites in the coming year.
Corporate and social responsibility (CSR)
CSR is right at the heart of GAME Group. As a responsible retailer, we recognise that
the way we operate as a business has a direct impact on our reputation and our
brand. To be successful we must do more than just maximise profits for our
shareholders and maintain the product range and choice for our customers. We
need to combine these objectives with first class management of all our
stakeholder relationships. This isn't an easy task. Our stakeholders may have
conflicting expectations of what we should deliver.
Dedicated committee
We believe we already tick a lot of CSR boxes. But in the next 12 months we will
be more co-ordinated and focussed so as to improve our approach to CSR year on
year. Our first step has been to form a CSR committee comprised of individuals
in the business who would represent our key stakeholders and ensure their needs
and expectations are met. This committee reports to the GAME Board via David
Thomas, who is its CSR representative.
We recognise that CSR is not something the company can address in isolation. To
be effective, our CSR policy must be linked to the way we do business. At our
first meeting, the committee determined exactly who our key stakeholders were
and the best way we could serve them at every stage of our operating chain. In
the coming year the committee plans to report quarterly to the Board of
Directors on CSR issues and to publish a fuller report on the Company website.
Key stakeholders
Our suppliers, the environment, our customers, our employees, our bankers and
lenders, our shareholders and the community in which we live and operate are all
stakeholders.
Our suppliers
Our operating chain begins with our suppliers and we need to seek reassurance
that they comply with our high ethical standards. During the coming year the
Committee will be developing CSR questionnaires which we will use to evaluate
our suppliers' own CSR policies.
Distribution and the environment
We wish to make certain that our distribution methods have the minimum impact on
the environment. We ensure that all of our subsidiaries comply with any relevant
environmental laws and standards. We are committed to reducing our impact on the
environment with a particular focus on energy consumption, waste reduction and
recycling.
Our Group head office and GAME UK distribution centre was opened in Basingstoke
in 2004. It is equipped with a sophisticated building management system that
regulates temperature and switches off lights when not in use.
We aim to recycle as much as possible across the business and in our
distribution centre alone we recycled 406.7 metric tonnes of cardboard and 6.8
metric tonnes of plastic. We are a member of a recycling programme called
Recycle More, implemented by Valpack Limited, a packaging waste compliance
scheme company.
A key feature of our operating processes is that we are able to repair damaged
CDs, through our own in-house operations, and we deal with damaged hardware by
using third party sources. Both these actions reduce the level of electrical
waste, a target for the European Union Waste Directive.
Stores and the environment
As we open new stores they are fitted with the latest energy-saving technology,
including digital inverter air conditioning, energy-efficient lighting and
single switch control - which minimises energy consumption when the store is
closed.
Quality employees
Our employees play an important role in every part of our operating chain. We
are committed to equal opportunities for everyone. All our employment decisions,
policies and practices are made without regard to an individual's gender, race,
colour, religion, creed, sexual preference or national origin. We are also
dedicated to the provision of equal opportunities for all disabled persons able
to discharge job duties and functions required as part of their employment in
the Group.
Our Working Environment
The GAME Group places considerable emphasis on providing a relaxed, safe and
healthy workplace for all of our employees.
- We do not tolerate any act of sexual or racial harassment for whatever reason
at any level in the organisation.
- It is our policy to do all that is reasonably practicable to ensure a safe and
healthy environment. We provide instructions, training, supervision and information
to enable all employees to perform their work safely. We comply with all laws
of health and safety and take all possible steps to ensure that everyone in
our stores and places of work is safe. We are committed to a system of monitoring
and recording our health and safety performance so that we can continually improve
it.
- We offer a fully-serviced canteen and "Chill Out Zone" - a leisure room containing
the latest hardware consoles and games - to allow the staff to enjoy breaks and
free time outside office hours should they wish.
Employee Rewards
We offer a variety of financial rewards across the business to ensure that staff
see a direct benefit from the effort and commitment they put into our business.
The mainstream rewards are:
- Long service awards: The Group has a scheme of awards designed to recognise and
reward employees for the length of service.
- Sharesave: The Group believes in its employees sharing in the success of the
business and operates a sharesave scheme for all employees.
- Sales incentives and management bonus: The Group believes that sales
incentives and bonus schemes will help focus our people on the achievement of
key objectives and reward them for contributing to the success of the Group.
- Share option scheme and performance share plan: The Group operates a share option
scheme and performance share plan which are designed to aid employee retention
and align the objectives of our senior management with those of our shareholders.
Career development
We recognise the importance of employee continuity in generating a knowledgeable
and driven workforce and are committed to enhancing the skills of our people. We
offer external courses as well as our own bespoke training programme, EIP
(Excellence In People), as structured methods of training within the business.
We are also keen to support our employees in understanding the qualities of the
latest technologies on the market, by offering them discounts on purchases and
providing a lending library. This greater knowledge of our products helps our
teams to advise our customers on their purchases.
Employee feedback
- We positively encourage feedback from our people and use an annual survey to
measure our success as employers. We have also introduced a Bright Ideas scheme,
which rewards employees for ideas that will enhance our working environment or
our operating performance.
- Our newsletter keeps employees up to date with business related activities.
This is supplemented by internal annual conferences, which give us a chance to
communicate with our store management and field teams and congratulate
them face to face.
Customer relationships
Our primary aim is to ensure that our customers are given the products, range,
choices and offers that best suit their particular requirements. However we are
also mindful of the need to take great care to sell age-related games
appropriately, only to the customers for whom they are intended. We take our
responsibility very seriously and we are actively engaged with the Entertainment
and Leisure Software Publishers Association (ELSPA), the Video Standards Council
(VSC) and the Entertainment Retailers' Association (ERA).
Our employees receive regular training in the importance of complying with our
own internal policy and legislative requirements. They are empowered and
encouraged to challenge customers and demand proof of age. To monitor the
success of our training we employ mystery shopper processes which help us
sustain our track record in avoiding under-age selling.
Business support
The GAME business is supported by its shareholders, its bankers and lenders. We
attach great importance to the effectiveness of our communications with these
stakeholders and we aim to provide all the financial and strategic information
they need on a regular basis. We do this through presentations and by the
publication of information on our website. We are proud that our relationships
with our financial partners go back many years.
Our responsibility to the community
We want to be a positive influence within the communities in which we operate
and, throughout 2007, we have donated a number of pc and video games to
non-profit making bodies and official charities in sectors including education,
community health and welfare and the environment. We have donated to both Asthma
UK and NCH.
We do not donate to any political party or religious groups.
CSR case studies:
Case study: helping children
In August 2007 a team of 20 GAME employees contributed to the John Waterhouse
Project in Kenilworth, a residential project run by leading children's charity
NCH. The project provides short breaks for young people with severe learning or
physical disabilities. The volunteers redecorated and transformed bedrooms and
bathrooms, and donated a range of games consoles and software. The makeover was
part of a wider initiative that saw GAME employees raise over #30,000 for the
charity. Other events included a GAME team completing the Great North Run and a
summer fundraising fete at the GAME head office.
Case study: rewarding Excellence
With such talented people at GAME, we like to reward and promote best practice.
In 2007 we introduced Bonus Bonds - vouchers awarded on the spot by regional
managers when an individual employee has delivered excellent customer service.
Over #20,000 of Bonus Bonds were handed out in 2007. Team excellence is also
rewarded. Every month the best performing store in each of the 22 GAME regions
is given #200 to spend on a team night out. We reward great ideas too, with a
monthly #250 prize to the best 'Bright Idea' submitted by a team member, and
five runners-up prizes of #50.
Case study: saving energy
Reducing waste cuts costs. The GAME Group office and distribution facilities in
Basingstoke were purpose-built in 2004 using the latest energy saving
technologies. Motion detectors are used throughout the buildings to switch off
lights when they're not needed. No heating or light is used overnight when the
buildings are empty. All cardboard and pallets used in the distribution centre
are recycled.
Case study: protecting consumers
GAME Group is committed to enforcing age ratings on video games to ensure the
right games are sold to the right customers. In 2007 the British Prime Minister
commissioned psychologist Dr Tanya Byron to review measures that protect
children from mature content in video games and on the internet. GAME
contributed by attending all of the relevant consultations with the Byron team,
both to reinforce our support for age ratings and to see what we could do
better. Published in March 2008, The Byron Review recognised the critical role
of specialist retailers to raise awareness of the rating systems and train staff
appropriately. GAME will continue to work with partners in the games industry
and with customers, to implement the review's recommendations and ensure that
our measures to sell games responsibly are robust, well understood and
frequently tested.
FINANCIAL RESULTS
Profit and Loss Account
Revenue
During the year Group revenue increased by 86% to #1,492m from #801m last year.
Lfl sales increased by 41% with new store openings, excluding Gamestation,
contributing a 14% increase.
Average sales per annum per sq. ft. increased by #359 to #1,275.
Gross Margin
Overall gross margin was 24.8% compared to a prior year margin of 27.2%. This
decline in gross margin was in line with our expectations. It was caused by the
increased participation of hardware in our sales mix, the acquisition of
Gamestation, with its lower margin operating model, and the participation from
our overseas businesses.
Operating Expenses
Total operating costs have increased by 28% from #184.8m to #237.3m, excluding
Gamestation and non-recurring costs, and as a percentage of sales were 20%
compared to 23% last year. On a cash basis our operating expenditure has
increased year on year but this is in line with the increase in volumes traded
across our business. The decrease in operating costs as a percentage of sales is
a testament to our ability to control our expenditure across the operating
chain.
Profit before tax
We achieved a profit before tax of #68.4m compared to a profit before tax of
#29.5m for last year.
Taxation
The effective rate of Corporation Tax was 31.0% (2007: 28.3%) and we have
continued to provide deferred taxation in line with IAS 12.
Earnings per share
Basic earnings per share were 13.79p compared to 6.25p last year, an increase of
121%. Diluted earnings per share were 13.65p compared to 6.20p last year, an
increase of 120%.
Dividend
The Board is recommending a final dividend of 2.97p per share, which will give a
total dividend for the period of 4.40p compared to 2.93p last year an increase
of 50%. The dividend will be paid on 18th July 2008, to shareholders on the
register at the 30th May 2008.
Balance Sheet
Capital Expenditure
Capital expenditure in the period, excluding acquisitions, amounted to #40m. The
majority of this expenditure was undertaken to open new stores in the UK, the
rest of Europe and Australia. Additionally we invested in the IT infrastructure
across the Group, enhanced our distribution facilities in the UK and France and
relocated our Head Office and distribution centre in Australia. In summary:
Capital Expenditure 2008 2007
#m #m
Stores 25 12
Refits 5 3
Web 4 1
Infrastructure 6 6
_______ _______
Total 40 22
_______ _______
Stock
Stock at the end of the period represented #127k per owned store compared to
#108k for the same period last year. The increase in the average stock holding
per store reflects the fact that we were holding higher levels of hardware
product to meet ongoing consumer demand and that the unit cost of stock has
increased with the launch of PS3 in March 2007, a next generation product that
commands a higher retail price point.
Cash flow
Net cash generated by operations was #172m compared to #35m last year. The
significant increase on the prior year can be attributed both to the strong
operating performance of the business and the timing of supplier payments at the
year end. With the GAME Group operating on a 52 week year, the year end payment
to suppliers fell after our year end date of 26th January 2008. Immediately
following the year end the Group made payments to suppliers to the value of
approximately #90m.
Consolidated Income Statement for the year ended 31 January 2008
Note 2008 2007
#'000 #'000
Revenue 1 1,491,914 801,306
Cost of sales 1,122,337 583,563
_______ _______
Gross profit 369,577 217,743
Other operating expenses 2 294,385 184,778
_______ _______
Operating profit
before non-recurring costs 82,340 32,965
Non-recurring costs 3 (7,148) -
_______ _______
Operating profit 4 75,192 32,965
Finance income 5 1,511 247
Finance costs 6 (8,341) (3,719)
_______ _______
Profit before 68,362 29,493
taxation
Taxation 8 21,183 8,353
Profit for the year attributable to equity 47,179 21,140
holders of the parent
_______ _______
Earnings per share - basic 10 13.79p 6.25p
- diluted 10 13.65p 6.20p
_______ _______
All amounts relate to continuing activities
Consolidated Balance Sheet at 31 January 2008
Note 2008 2007
#'000 #'000
Non-current assets
Property, plant & equipment 11 130,662 100,995
Intangible assets 12 172,871 101,522
Deferred tax asset 18 - 1,111
_______ _______
303,533 203,628
_______ _______
Current assets
Inventories 13 145,041 84,587
Trade and other receivables 14 53,845 28,258
Cash and cash equivalents 137,899 48,286
_______ _______
336,785 161,131
_______ _______
Total assets 640,318 364,759
_______ _______
Current liabilities
Trade and other payables 15 315,498 150,095
Short term borrowings 16 - 15,359
Current portion of long term 16 38,038 4,477
borrowings
Leasehold property incentives 19 846 592
Current tax liabilities 15,862 5,003
_______ _______
370,244 175,526
_______ _______
Non-current liabilities
Long term borrowings 16 57,809 27,827
Leasehold property incentives 19 6,414 4,070
Deferred tax liabilities 18 1,929 -
_______ _______
66,152 31,897
_______ _______
Total liabilities 436,396 207,423
_______ _______
Net assets 203,922 157,336
_______ _______
Equity attributable to equity holders of the parent
Share capital 20 17,167 17,003
Share premium account 21 44,848 42,286
Capital redemption reserve 22 2,223 2,223
Shares held in trust 22 (4,403) (1,176)
Merger reserve 22 76,907 76,907
Foreign exchange reserve 22 5,904 (3,759)
Retained Earnings 22 61,276 23,852
_______ _______
203,922 157,336
_______ _______
Consolidated Statement of Recognised Income and Expense for the year ended 31
January 2008
Note 2008 2007
#'000 #'000
Exchange differences on translation of foreign
currency net investments in subsidiary undertakings 9,663 (3,571)
Deferred income tax on share based payments 22 1,272
_______ _______
Total income and expense recognised directly in 9,685 (2,299)
equity
Profit on ordinary activities after taxation 47,179 21,140
_______ _______
Total recognised income and expense for the year
attributable to equity holders 22 56,864 18,841
_______ _______
Consolidated Cash Flow Statement for the year ended 31 January 2008
Note 2008 2007
#'000 #'000
Cash flow from operating activities
Operating profit 75,192 32,965
Equity settled share-based payment expense 1,204 1,202
Depreciation and amortisation 20,587 12,813
Loss on disposal of non current assets 286 728
Impairment of assets/goodwill - -
Market value movement on financial (139) 183
instrument
_______ _______
97,130 47,891
Increase in trade and other receivables (20,772) (11,514)
Increase in inventories (28,562) (13,139)
Increase in trade and other payables 143,645 20,257
Increase in leasehold incentives 532 101
_______ _______
Cash generated from operations 191,973 43,596
Finance costs paid (8,341) (3,719)
Corporation tax paid (11,580) (5,002)
_______ _______
Net cash from operating activities 172,052 34,875
_______ _______
Cash flows from investing activities
Acquisitions 23 (80,941) (9,000)
Purchase of property, plant and equipment (37,218) (20,431)
Purchase of intangible assets (2,703) (1,322)
Proceeds from sale of equipment 205 897
Finance income received 1,511 247
_______ _______
Net cash used in investing activities (119,146) (29,609)
_______ _______
Cash flows from financing activities
Proceeds from issue of share capital 2,726 1,767
Shares purchased for Trust (3,667) -
Proceeds from long term borrowings 64,098 9,881
Repayments of long term borrowings - (12,673)
Repayments of short term borrowings - -
Payment of finance lease liabilities (550) (462)
Dividends paid (10,541) (8,947)
_______ _______
Net cash used in financing activities 52,066 (10,434)
_______ _______
Net increase/(decrease) in net cash and cash
equivalents 104,972 (5,168)
Cash and cash equivalents at beginning of year 32,927 38,095
_______ _______
Cash and cash equivalents at end of year 24 137,899 32,927
_______ _______
Statement of Accounting Policies
The financial information set out above and in the accompanying notes, does not
constitute the Company's statutory accounts for the years ended 31 January 2008
or 2007, but is derived from those Accounts. Statutory accounts for 2007 have
been delivered to the Register of Companies and those for 2008 will be delivered
following the Company's annual general meeting. The auditors have reported on
those accounts; their reports were unqualified and did not contain statements
under the Companies Act 1985, s 237 (2) or (3).
Basis of Preparation
The accounting reference date of The GAME Group plc and all of its subsidiary
undertakings (the "Group") is 31 January. The comparative year's results are for
the 52 week period ended 27 January 2007. The current year's results are for the
52 week period ended 26 January 2008.
The consolidated financial statements incorporate the results of the Group made
up to 31 January 2008. The Group has used the acquisition method of accounting
to consolidate the results of subsidiary undertakings. The results of subsidiary
undertakings are included from the date of acquisition.
The group consolidated financial statements have been prepared in accordance
with the Companies Act 1985 as applicable to companies reporting under IFRS and
those IFRS and IFRIC interpretations issued and effective and endorsed by the
European Union as at the time of preparing these financial statements.
Notes to the Financial Statements for the year ended 31 January 2008
1 Revenue, profit and net assets
Revenue, pre-tax profits and net assets all relate to computer software and
video game retailing and the Group's operations are organised and managed by
geographic location only. Management consider the geographical locations split
between the UK and Ireland and Other EU countries ("Other EU"). The non-EU
element of "Other EU", Norway and Australia, is an insignificant proportion of
the category.
Revenue by origin and destination are not materially different.
United Kingdom Other EU United Kingdom Other EU
and Ireland and Ireland
2008 2008 2007 2007
#'000 #'000 #'000 #'000
Revenue 1,104,657 387,257 586,361 214,945
Cost of sales 829,630 292,707 423,848 159,715
________ _______ ________ _______
Gross profit 275,027 94,550 162,513 55,230
Other operating expenses 205,913 81,324 135,684 49,094
________ _______ ________ _______
Operating profit before
non-recurring costs 69,114 13,226 26,829 6,136
Non-recurring costs 7,148 - - -
________ _______ _______ _______
Operating profit 61,966 13,226 26,829 6,136
________ _______ ________ _______
Finance income/costs (5,891) (939) (2,914) (558)
Taxation (17,747) (3,436) (6,734) (1,619)
________ _______ _______ _______
Profit after tax 38,328 8,851 17,181 3,959
________ _______ ________ _______
Other segmental information:
Goodwill and other intangibles 151,267 21,604 82,729 18,793
Other Assets 259,839 207,608 156,718 106,519
_______ _______ _______ _______
Assets 411,106 229,212 239,447 125,312
Liabilities 233,117 203,279 89,743 117,680
_______ _______ _______ _______
Net assets 177,989 25,933 149,704 7,632
_______ _______ _______ _______
Capital expenditure 15,576 24,345 9,199 12,136
_______ _______ _______ _______
Depreciation and 12,886 7,701 8,710 4,103
amortisation
_______ _______ _______ _______
Share Based Payment Expense 1,204 - 1,202 -
_______ _______ _______ _______
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
1 Revenue, profit and net assets (continued)
Year Year
ended ended
31 January 31 January
2008 2007
#'000 #'000
Turnover by territory
United Kingdom and Ireland 1,104,657 586,361
France 141,183 81,204
Iberia 175,808 97,744
Scandinavia 43,485 30,912
Australia 26,781 5,085
1,491,914 801,306
Stores by territory Number Number
United Kingdom and Ireland 649 407
France 170 130
Iberia 208 165
Scandinavia 62 64
Australia 51 16
1,140 782
Franchises
France 7 11
Iberia 10 18
Australia 4 6
21 35
Trading square footage by Sq ft Sq ft
territory at year end
United Kingdom and Ireland 712,408 518,230
France 162,014 128,571
Iberia 177,427 141,809
Scandinavia 59,729 64,961
Australia 58,639 21,611
1,170,217 875,182
2 Other operating expenses
2008 2007
#'000 #'000
Selling and distribution 234,450 156,066
Administrative expenses 59,935 28,712
_______ _______
294,385 184,778
_______ _______
Administrative expenses include non-recurring costs of #7,147,721 (2007: #nil)
(see note 3).
3 Non-recurring costs
In the current year administrative expenses include non-recurring costs of
#7,147,721 (2007: #nil). Of these non-recurring costs, #2,957,051 was in
relation to integration planning fees on the acquisition of Gamestation and
#4,190,670 was incurred in dealing with the merger control review of the
Gamestation acquisition by the Office of Fair Trading and subsequently by the
Competition Commission (see note 23).
4 Operating profit
2008 2007
#'000 #'000
This is stated after
charging:
Depreciation charge 18,583 12,068
Amortisation of intangible fixed assets 2,004 745
Operating lease rentals - leasehold premises 65,569 48,235
- other 1,214 427
Loss on disposal of non current assets 286 728
Auditors' remuneration - Fees payable to the company's auditor
for the audit of the company's annual 87 72
accounts
- Fees payable to the company's
auditors and its
associates for other services:
The audit of the company's
subsidiaries,
pursuant to legislation 294 253
- other services supplied pursuant to 44 53
legislation
- other services relating to tax 117 74
- Recruitment and remuneration services 31 -
- All other services 11 -
_______ _______
5 Finance income
2008 2007
#'000 #'000
Interest income on financial assets classified as loans 1,511 247
and receivables
_______ _______
1,511 247
_______ _______
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
6 Finance costs
2008 2007
#'000 #'000
Interest expense for finance lease and hire 102 120
purchase arrangements
Interest expense for borrowings at amortised cost 8,223 3,560
Other interest 16 39
_______ _______
Finance costs 8,341 3,719
_______ _______
7 Employees
Staff costs for all employees (including directors) consist of:
2008 2007
#'000 #'000
Wages and salaries 101,878 61,590
Social security costs 12,831 8,302
Other pension costs 743 551
Share-based payment expense (see note 20) 1,204 1,202
_______ _______
116,656 71,645
_______ _______
The average number of employees of the Group
during the year, including directors, was as follows:
2008 2007
Number Number
Selling and distribution 7,271 4,648
Administration 688 500
_______ _______
7,959 5,148
_______ _______
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
8 Taxation
(a) Analysis of charge in the year 2008 2007
#'000 #'000
Current tax
UK corporation tax 19,615 7,696
Adjustments in respect of prior periods (1,191) (1,269)
Overseas tax payable 3,436 1,619
_______ _______
Total current tax 21,860 8,046
Deferred tax
Current year movement (191) 307
Adjustment to estimated recoverable deferred tax asset
arising in previous period 825 -
Prior year movement (1,274) -
Change in tax rates (37) -
_______ _______
Taxation on profit on ordinary activities 21,183 8,353
_______ _______
(b) Factors affecting the tax charge for the year
2008 2007
#'000 #'000
Profit on ordinary activities before taxation 68,362 29,493
_______ _______
Profit on ordinary activities multiplied by the
standard
rate of corporation tax in the UK of 30% (2007: 30%) 20,509 8,848
_______ _______
Effects of:
Expenses not deductible for tax purposes 1,441 651
Effect of foreign tax rates 439 239
Tax losses incurred but unutilised in the year 471 109
Adjustment to estimated recoverable deferred tax asset
arising in previous period 825 -
Adjustments to tax charge in respect of previous (2,465) (1,269)
periods
Other items (37) (225)
_______ _______
Tax charge for the year 21,183 8,353
_______ _______
The Group has approximately #20m (2007: #20m) of unrelieved trading losses
available for offset against future taxable profits of certain Group companies.
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
9 Dividends
2008 2008 2007 2007
Pence Pence
per share #'000 per share #'000
Final paid 1.66 5,636 1.38 4,661
Interim paid 1.43 4,905 1.27 4,286
_______ _______
10,541 8,947
_______ _______
It is proposed that a final dividend of 2.97p will be paid on 18 July 2008 to
shareholders on the register on 30 May 2008.
10 Earnings per share
The calculation of earnings per share for the year ended 31 January 2008 is
based on the profit after taxation of #47,178,969 (2007: #21,140,000). The
calculation of basic earnings per share is based on a weighted average number of
342,198,365 (2007: 338,469,975) shares in issue during the year. The number of
shares used in these calculations and the reconciliation of denominators used
for basic and diluted earnings per share calculations is set out in the table
below:
Effect of
Basic share options Diluted
Year ended 31 January 2008 342,198,365 3,405,544 345,603,909
Year ended 31 January 2007 338,469,975 2,355,027 340,825,002
Additional disclosure has been provided in respect of earnings per share before
non-recurring costs as the directors believe this gives a better view of ongoing
maintainable earnings in the prior year.
2008 2007
Pence Pence
Basic earnings per share 13.79 6.25
Non-recurring costs 2.09 0.00
________ ________
Basic earnings per share before
non-recurring costs 15.88 6.25
________ ________
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
11 Property, plant and equipment
Short Fixtures,
Freehold leasehold Improvements fittings
land and land and to leasehold and
property property property equipment Total
#'000 #'000 #'000 #'000 #'000
Group
Cost
At 31 January 2006 19,474 29,295 41,747 48,621 139,137
Additions - 3,802 9,936 6,692 20,430
Acquisitions - 3,810 382 879 5,071
Disposals - (1,040) (800) (2,180) (4,020)
Exchange adjustment - (621) (523) (384) (1,528)
_______ _______ _______ _______ _______
At 31 January 2007 19,474 35,246 50,742 53,628 159,090
Additions 1,089 5,071 18,091 12,967 37,218
Acquisitions - - 13,629 5,848 19,477
Disposals - (25) (1,873) (1,683) (3,581)
Exchange adjustment - 2,851 2,572 1,609 7,032
_______ _______ _______ _______ _______
At 31 January 2008 20,563 43,143 83,161 72,369 219,236
_______ _______ _______ _______ _______
Accumulated Depreciation and
Impairment
At 31 January 2006 545 5,666 15,182 27,094 48,487
Charge for the year 389 1,080 4,507 6,092 12,068
Acquisitions - - - 200 200
Disposals - - (526) (1,841) (2,367)
Exchange adjustment - (16) (117) (160) (293)
_______ _______ _______ _______ _______
At 31 January 2007 934 6,730 19,046 31,385 58,095
Charge for the year 389 1,335 8,145 8,714 18,583
Acquisitions - - 9,639 3,880 13,519
Disposals - (375) (1,434) (1,266) (3,075)
Exchange adjustment - 89 631 732 1,452
_______ _______ _______ _______ _______
At 31 January 2008 1,323 7,779 36,027 43,445 88,574
_______ _______ _______ _______ _______
Carrying Amount
At 31 January 2008 19,240 35,364 47,134 28,924 130,662
_______ _______ _______ _______ _______
At 31 January 2007 18,540 28,516 31,696 22,243 100,995
_______ _______ _______ _______ _______
At 31 January 2006 18,929 23,629 26,565 21,527 90,650
_______ _______ _______ _______ _______
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
11 Property, plant and equipment (continued)
The net book value of tangible fixed assets includes an amount of #1,358,429
(2007: #2,304,000) in respect of assets held under finance lease and hire
purchase contracts, and these are recorded in fixtures, fittings and equipment.
The related depreciation charge for the year was #1,284,695 (2007: #579,000).
The main finance leases are for EPOS equipment and motor vehicles.
The amount of interest capitalised during the year amounted to #nil (2007:
#nil), bringing the total amount of capitalised interest to date to #741,500.
The related depreciation charge for the year was #31,500 (2007: #31,500).
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
12 Intangible fixed assets
Other
Goodwill Intangibles Total
#'000 #'000 #'000
Group
Cost
At 31 January 2006 94,358 5,031 99,389
Acquisitions 4,261 242 4,503
Additions 417 905 1,322
Foreign exchange adjustment (208) (15) (223)
Disposals - (10) (10)
_______ _______ _______
At 31 January 2007 98,828 6,153 104,981
Acquisitions 52,770 18,050 70,820
Additions - 2,703 2,703
Foreign exchange adjustment 519 65 584
Disposals - (8) (8)
_______ _______ _______
At 31 January 2008 152,117 26,963 179,080
_______ _______ _______
Amortisation
At 31 January 2006 - 2,664 2,664
Acquisitions - 63 63
Charge for the period - 745 745
Foreign exchange adjustment 3 (11) (8)
Disposals/impairments - (5) (5)
_______ _______ _______
3 3,456 3,459
At 31 January 2007
Acquisitions - 711 711
Charge for the period - 2,004 2,004
Foreign exchange adjustment 32 52 84
Disposals/impairments - (49) (49)
_______ _______ _______
At 31 January 2008 35 6,174 6,209
_______ _______ _______
Carrying Amount
At 31 January 2008 152,082 20,789 172,871
_______ _______ _______
At 31 January 2007 98,825 2,697 101,522
_______ _______ _______
At 31 January 2006 94,358 2,367 96,725
_______ _______ _______
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
12 Intangible fixed assets (continued)
Other intangible assets comprise computer software and costs associated with the
Group's web domains and brand valuations in relation to GAME Australia and
Gamestation.
Goodwill principally relates to the GAME and Gamestation brands. The goodwill is
allocated, for impairment testing purposes, to cash generating units as follows:
#'000
UK and Ireland 131,688
Other 20,394
_______
Total 152,082
_______
The carrying value of goodwill has been assessed on a value-in-use basis. The
key assumptions for the calculations are those regarding growth rates and
expected changes to selling prices and direct costs. The growth rates are based
on industry forecasts, changes in selling prices and direct costs are based on
past practices and expectations of future changes in the market. The Group
prepares cash flow forecasts derived from the most recent financial budgets
approved by management for the next 3 years and extrapolates cash flows for no
more than 13 years using a steady growth rate applicable to the relevant market.
This rate does not exceed the average long-term growth rate for the relevant
markets. The cash flows were discounted using pre-tax discount rates between 8%
and 13% dependent on the territories concerned and GAME's operations in those
territories. No impairments were recognised in the year.
Notes to the Financial Statements for the year ended 31 January 2008 (Continued)
13 Inventories
2008 2007
#'000 #'000
Finished goods and goods held for resale 145,041 84,587
_______ _______
The directors consider that the replacement value of inventories is not
materially different from their carrying value. The stock provision in the
current year is #11,748,000 (2007: #6,741,000).
14 Trade and other receivables
2008 2007
#'000 #'000
Amounts falling due within one year:
Trade receivables 18,921 9,179
Other receivables 14,050 4,355
VAT recoverable 324 108
_______ _______
Total trade and other receivables 33,295 13,642
Prepayments and accrued income 20,550 14,616
_______ _______
53,845 28,258
_______ _______
A large proportion of the trade receivables of the Group relates to customers
using credit cards or similar arrangements to purchase goods. GAME bears no risk
of recovery and as a result, the risk of impairment of accounts receivable is
not considered by the directors to be significant.
As at 31 January 2008 and 31 January 2007 there were no amounts which were past
due and no amounts which were impaired.
15 Trade and other payables
2008 2007
#'000 #'000
Amounts falling due within one year:
Trade payables 192,529 95,580
Other payables 7,838 4,699
Tax and social security costs 4,039 2,890
VAT payable 50,206 21,573
Accruals and deferred income 60,886 25,353
_______ _______
315,498 150,095
_______ _______
Trade payables are non-interest bearing and are normally settled on 60-day
terms.
THE GAME GROUP PLC
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
16 Borrowings
2008 2007
#'000 #'000
Short term:
Bank overdrafts - 15,359
_______ _______
Long term:
Current portion:
Bank loans 37,515 3,835
Obligations under finance leases and
hire purchase contracts 523 642
_______ _______
38,038 4,477
_______ _______
Non current portion:
Bank loans 56,897 26,479
Obligations under finance leases and
hire purchase contracts 912 1,348
_______ _______
57,809 27,827
_______ _______
The borrowings are repayable as follows:
On demand or within one year 37,515 19,194
In one to two years 25,924 2,796
In more than two years but less than 30,973 17,683
five years
After five years - 6,000
_______ _______
94,412 45,673
_______ _______
The finance leases are repayable as follows:
On demand or within one year 523 642
In one to two years 712 577
In more than two years but less than 200 771
five years
After five years - -
_______ _______
1,435 1,990
_______ _______
There is no material difference between the book value and current value of
these borrowings.
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
17 Financial Instruments
Categories of financial instruments
Financial assets Loans and Receivables
2008 2007
#'000 #'000
Current financial assets
Trade and other receivables (Note 14) 33,295 13,642
Net cash and cash equivalents (Note 24) 137,899 32,927
_______ _______
171,194 46,569
_______ _______
Financial Liabilities Financial liabilities
measured at
amortised cost
2008 2007
#'000 #'000
Current financial liabilities
Trade and other payables (Note 15) 315,498 150,095
Loans and borrowings (Note 16) 38,038 4,477
_______ _______
Total current financial liabilities 353,536 154,572
Non-current financial liabilities
Loans and borrowings (Note 16) 57,809 27,827
_______ _______
Total non-current financial liabilities 57,809 27,827
_______ _______
Total financial liabilities 411,345 182,399
_______ _______
The directors consider that the carrying amounts of financial assets and
financial liabilities recorded at amortised cost in the financial statements
approximate their fair values.
The maximum exposure to credit risk at the reporting date is represented by the
carrying value of the financial assets in the balance sheet.
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
17 Financial Instruments (continued)
The directors review any requirement for interest rate hedging during the year
dependent upon the level of borrowings.
(a) Interest rate and currency of borrowings
The currency and interest rate exposure of the Group's borrowings is shown
below:
2008 2007
#'000 #'000
Floating rate Euro borrowings 14,412 14,188
Floating rate Sterling borrowings 81,164 33,475
Floating rate AUD borrowings 271 -
_______ _______
95,847 47,663
_______ _______
The floating rate borrowings comprise bank borrowings and finance leases bearing
interest rates based upon LIBOR and EURIBOR.
The Group holds a Revolving Credit Facility (RCF) of #70m to be used for general
corporate and working capital purposes. As at 31 January 2008 an amount of Euro15m
was drawn down for use in Spain. The interest rate on the RCF is based on LIBOR
and EURIBOR.
The floating rate sterling borrowings comprise an #80m Term Loan taken out in
order to fund the purchase of Gamestation and refinance the existing debt at
GAME. The interest rate on the loan is based on LIBOR. The first repayment was
made in January 2008 and three further annual instalments are due.
The terms of the loan facility indicates a fixed charge over the freehold
property and a floating charge over assets.
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
17 Financial Instruments (continued)
(b) Interest rate and currency of cash balances
The currency and interest rate exposure of the Group's floating rate cash
balances is shown below:
2008 2007
#'000 #'000
Sterling 84,840 32,705
Euro 47,237 12,440
Swedish Krona 1,757 2,359
Danish Krone 147 106
Norwegian Krone 490 462
Australian Dollar 3,428 214
_______ _______
137,899 48,286
_______ _______
The floating rate assets comprise bank accounts bearing interest rates based
upon LIBOR and EURIBOR. There are no fixed rate financial assets.
(c) Sensitivity analysis
The sensitivity analyses below are based on a change in an assumption while
holding all other assumptions constant. In practice this is unlikely to occur
and changes in some of the assumptions may be correlated, for example, a change
in interest rate and a change in foreign currency interest rates. The
sensitivity analysis prepared by management for foreign currency risk and
interest rate risk illustrates how changes in the fair value or future cash
flows of a financial instrument will fluctuate because of changes in foreign
exchange rates.
At 31 January 2008, if interest rates on the floating rate borrowings
denominated in sterling had been 100 basis points higher with all other
variables held constant, profit after tax for the period would be #1,037,910
lower (2007: #468,461 lower).
At 31 January 2008, if interest rates on the floating rate borrowings
denominated in euros had been 100 basis points higher with all other variables
held constant, profit after tax for the period would be #173,231 lower (2007:
#106,797 lower).
The directors consider that 100 basis points is the maximum likely change to
sterling and euro interest rates over the next year, being the period up to the
next point at which the Group expects to make these disclosures. The directors
do not consider that any reasonably possible change in the interest rates
attached to the Australian dollar debt would have a significant effect on the
Group.
The tables in (a) and (b) above present financial liabilities and assets
denominated in foreign currencies held by the group in 2008 and 2007. If the
euro weakened or strengthened by 10% against sterling, with all other variables
held constant, profit after tax and equity would move by #352,146. If the
Australian dollar weakened or strengthened by 10% against sterling, with all
other variables held constant, profit after tax and equity would move by
#205,562.
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
17 Financial Instruments (continued)
(d) Fair value of borrowings and financial assets
Set out below is an analysis of all the Group's borrowings and financial assets
by category. The fair value of floating rate borrowings is the amortised cost
because the interest rate payments are based on market value.
2008 2007
#'000 #'000
Trade and other receivables 33,295 13,642
Net cash and cash equivalents 137,899 32,927
Current portion of long term debt (38,038) (4,477)
Non current portion of long-term debt (57,809) (27,827)
_______ _______
There is no material difference between the book value and current value of
these borrowings.
(e) The Group had no material monetary assets or liabilities that are not
denominated in the functional currency of the operating unit involved.
(f) As at 1 April 2008, the Group had undrawn working capital facilities
available to it of #15.9 million (2007: #48.8 million) and Euro nil (2007: Euro
nil). There are no significant conditions attached to these facilities.
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
17 Financial Instruments (continued)
Capital risk management
The capital structure of the Group consists of debt, which includes the
borrowings disclosed in note 16, cash and cash equivalents and equity
attributable to equity holders of the parent, comprising issued capital,
reserves and retained earnings as disclosed in notes 20, 21 and 22.
Gearing ratio
It is the Group's policy to maintain its gearing ratio within the range of
0-100% (2007: 0-100%). The Group's gearing ratio at the balance sheet date is
shown below:
2008 2007
#'000 #'000
Debt (i) 95,847 32,304
Trade and other payables 315,498 150,095
Net cash and cash equivalents (137,899) (32,927)
_______ _______
Net debt 273,446 149,472
_______ _______
2008 2007
#'000 #'000
Equity (ii) 203,922 157,336
_______ _______
Capital and net debt 477,368 306,808
_______ _______
Gearing ratio 57% 49%
(i) Debt is defined as current and non-current portion of long term debt, as
detailed in note 16.
(ii) Equity includes all capital and reserves of the Group.
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
18 Deferred taxation
2008 2007
#'000 #'000
Accelerated capital allowances (1,369) (2,896)
Tax losses carried forward - 825
Share options 2,615 2,340
Other temporary and deductible differences (3,175) 842
_______ _______
Deferred tax (liability) / asset (1,929) 1,111
_______ _______
At 1 February 2007 1,111 3
Acquisition of subsidiary (3,739) 143
Deferred tax charge in the income 677 (307)
statement for the year (note 8)
Deferred tax taken to equity 22 1,272
_______ _______
At 31 January 2008 (1,929) 1,111
_______ _______
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
19 Leasehold property incentives
Rent free periods and reverse premiums 2008 2007
#'000 #'000
At 1 February 2007 4,662 4,345
Rent free periods and reverse premiums received 3,239 713
during the year
Released to profit and loss account (641) (396)
_______ _______
At 31 January 2008 7,260 4,662
_______ _______
Due within one year 846 592
Due greater than one year 6,414 4,070
_______ _______
At 31 January 2008 7,260 4,662
_______ _______
20 Called up share capital
2008 2007
#'000 Number #'000 Number
Authorised
Ordinary shares of 5p 24,000 480,000,000 24,000 480,000,000
_______ _________ _______ __________
Allotted, called up and fully paid
Ordinary shares of 5p 17,167 343,344,566 17,003 340,071,161
_______ _________ _______ __________
a) Shares issued
During the year, 3,273,405 (2007: 3,162,746) shares were issued to employees
exercising share options granted under various option schemes. The total
consideration received on the exercise of these options was #2,725,551 (2007:
#1,767,256).
Between the year end and 1 April 2008, a further 1,523,576 shares have been
issued to employees exercising share options granted under various option
schemes. The total consideration received on the exercise of these options was
#1,059,743.
b) Shares purchased
No shares were repurchased for cancellation by the Company during the current
and prior years.
c) Trust shares
During the year 1,892,460 shares (2007: no shares) were purchased at a cost of
#3,666,622 (2007: #nil). These shares are to be used wholly and exclusively to
pay LTIP awards when they become due for payment.
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
21 Share premium account
2008 2007
#'000 #'000
Amount subscribed for share capital in excess of
nominal value.
At 1 February 2007 42,286 40,677
Arising on issue of shares during the year (net of 2,562 1,609
expenses)
_______ _______
At 31 January 2008 44,848 42,286
_______ _______
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
22 Reconciliation of Changes in Equity
Share Share Capital Shares Merger Retained Foreign Total
Capital Premium Redemption held in Reserve Earnings Exchange
Reserve Trust Reserve
At 1 February 2006 16,845 40,677 2,223 (963) 76,907 9,185 (188) 144,686
Exchanges - - - - - - (3,571) (3,571)
differences
on translation of
foreign
currency net
investment
in subsidiaries
Deferred income tax - - - - - 1,272 - 1,272
on share based
payments credited
to equity
_____ ______ _______ ______ ___ _____ ______ ______
Net income
recognised
directly in equity - - - - - 1,272 (3,571) (2,299)
Net income
recognised
in income statement - - - - - 21,140 - 21,140
_____ ______ _______ ______ ______ ________ ______ _____
Total recognised
income
and expense - - - - - 22,412 (3,571) 18,841
Issue of shares 158 1,609 - - - - - 1,767
Purchase of shares - - - - - - - -
Dividends payable - - - - - (8,947) - (8,947)
Shares held in - - - (213) - - - (213)
Trust
Share based - - - - - 1,202 - 1,202
payments
_____ ______ ______ _____ _____ ____ ____ ______
At 1 February 2007 17,003 42,286 2,223 (1,176) 76,907 23,852 (3,759) 157,336
_____ ______ _______ ______ ______ ____ ______ ______
Exchanges - - - - - - 9,663 9,663
differences
on translation of
foreign
currency net
investment
in subsidiaries
Deferred income tax - - - - - 22 - 22
on share based
payments credited
to equity _____ ______ _______ ______ ______ _____ ______ ______
Net income
recognised
directly in equity - - - - - 22 9,663 9,685
Net income
recognised
in income statement - - - - - 47,179 - 47,179
_____ ______ _______ ______ ______ _____ _____ ______
Total recognised
income
and expense - - - - - 47,201 9,663 56,864
Issue of shares 164 2,562 - - - - - 2,726
Purchase of shares - - - (3,667) - - - (3,667)
Exercise of options - - - 440 - (440) - -
Dividends payable - - - - - (10,541) - (10,541)
Share based - - - - - 1,204 - 1,204
payments
_____ ______ _______ _____ ______ _____ ____ ______
At 31 January 2008 17,167 44,848 2,223 (4,403) 76,907 61,276 5,904 203,922
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
Share Capital - The amount subscribed for share capital at nominal value
Share Premium - The amount subscribed for share capital in excess of nominal
value
Capital Redemption Reserve - relates to the capital redemption reserve; amounts
transferred from share capital on redemption of issued shares.
Shares held in Trust - relates to shares held in trust, being the weighted
average cost of own shares held in treasury and by the ESOP Trust, the employee
benefit trust was established in January 2002 to provide for the future
obligations of the company for share awards under the Performance Share Plan and
other share based plans. Under the scheme the trustee, BDO Guernsey Trustees
Limited, purchases the Company's ordinary shares in the open market.
Merger Reserve - relates to the merger reserve which holds the share premium
arising on the share for share exchange on acquisition of Game Plc.
Retained Earnings - relates to retained earnings, being the cumulative net gains
and losses recognised in the consolidated income statements.
Foreign Exchange Reserve - relates to the foreign exchange reserve, which holds
gains/losses arising on re-translating the net assets of overseas operations
into sterling since 1 February 2004.
The Employee Benefit Trust was established in January 2002 to provide for the
future obligations of the Company for share awards under the Performance Share
Plan and other share based plans. Under the scheme the trustee, BDO Guernsey
Trustees Limited, purchase the Company's ordinary shares in the open market.
The cumulative amount of goodwill resulting from acquisitions in previous years
prior to the adoption of FRS10 (Goodwill and intangible assets) which has been
eliminated against Group reserves, net of goodwill attributable to disposals
before 31 January 2008, is #9,639,000 (2007: #9,639,000).
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
23 Acquisitions
Current year acquisitions
On 2 May 2007 the Group acquired 100% of the share capital of the UK pc and
video games retailer Gamestation. On acquisition Gamestation operated 217 owned
stores throughout the UK. The business was acquired for an initial consideration
of #76m and a post completion deferred payment of #7.6m, to reflect cash of
#4.3m and other working capital, plus fees of #2.6m.
Book Fair
value Adjustment Value
#'000 #'000 #'000
Property, plant and equipment 5,871 - 5,871
Inventories 31,892 (744) 31,148
Trade and other receivables 4,813 - 4,813
Trade and other payables (24,060) (1,109) (25,169)
Cash and cash equivalents 4,289 - 4,289
Tax asset 530 (4,428) (3,898)
Intangible fixed assets 1,039 - 1,039
_______ _______ _______
Total net assets 24,374 (6,281) 18,093
Initial cash consideration 76,000
Deferred consideration 7,603
Costs of acquisition 2,641
_______
Goodwill and intangibles 68,151
_______
The goodwill arising on acquisition of Gamestation is attributable to the
anticipated profitability of the distribution of the Group's products and the
anticipated future operating synergies from the combination. The following
factors have contributed to the recognition of goodwill:
- The acquired workforce
- The expected synergies from acquisition
From the date of acquisition Gamestation added #273m to turnover and #12m to
operating profit.
If the acquisition had been completed on the first day of the financial year,
group revenues for the year would have been increased by #67m and the group
profit attributable to equity holders of the parent would have been decreased by
#1.5m.
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
23 Acquisitions (continued)
Current year acquisitions
On 1 July 2007 Engine Technology Systems SL, a subsidiary of Game Group PLC,
acquired 100% of the share capital of the Spanish retailer Mail Vigo which owned
a GAME Spanish franchise. On acquisition Mail Vigo operated three owned stores
throughout Spain. The business was acquired for an initial consideration of
#413k.
In addition four Spanish franchises were acquired - Vigo Pontevedra,
Fuenguirola, Valladolid and Coruna - for a total consideration of #512k.
Spanish
Mail Vigo franchises Gamestation Total
Fair value Fair value Fair value Fair value
#'000 #'000 #'000 #'000
Property, plant and equipment 87 - 5,871 5,958
Inventories 169 236 31,148 31,553
Trade and other receivables 19 - 4,813 4,832
Trade and other payables (240) (250) (25,169) (25,659)
Cash and cash equivalents 94 - 4,289 4,383
Long term borrowings (109) - - (109)
Tax asset - - (3,898) (3,898)
Intangible fixed assets - 393 526 51,851 52,770
goodwill
Intangible fixed assets - brand - - 16,300 16,300
Intangible fixed assets - other - - 1,039 1,039
_______ _______ _______ _______
Total purchase price 413 512 86,244 87,169
Cash and cash equivalents (94) - (4,289) (4,383)
Non-cash - - (1,845) (1,845)
_______ _______ _______ _______
Cash flows on acquisition net
of cash acquired 319 512 80,110 80,941
______ _______ _______ _______
From the date of acquisition Mail Vigo, Vigo Pontevedra, Fuenguirola, Valladolid
and Coruna added #1,544k, #271k, #785k, #222k, and #294k to turnover
respectively and #237k, #36k, #113k, #9k and #31k to operating profit
respectively.
If these acquisitions, other than Gamestation, had been completed on the first
day of the financial year, it is not anticipated that the operating profit would
have been materially different. No fair value adjustments were required on these
acquisitions.
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
23 Acquisitions (continued)
Prior year acquisitions
On 19 September 2006 the Group acquired 100% of the share capital of the
Australian retailer, The Games Wizards ("TGW"). TGW operated 14 owned stores and
8 franchises at the time of the acquisition. On 9 October 2006 the Group
acquired the trade and assets of the Norwegian retailer, Spiderman TV Spiel
Spesialisen AS. Spiderman operated 10 stores at the time of acquisition. On 13
November 2006 the Group acquired 50 stores from the French book retailer
Maxi-Livre. In Spain five franchises were bought back in to the business.
TGW Spiderman Maxi-Livre Spain Total
Acquisition Acquisition Acquisition Acquisition Acquisition
#'000 #'000 #'000 #'000 #'000
Property, plant and 1,010 51 3,810 - 4,871
equipment
Inventories 808 552 - 236 1,596
Trade and other receivables 143 - - 143
Trade and other payables (1,873) - - (177) (2,050)
Cash and cash equivalents (1,803) - - - (1,803)
Long term borrowings - - - - -
Deferred tax asset - - - - -
Intangible fixed assets - 3,476 244 - 690 4,410
goodwill
Intangible fixed assets - 30 - - 30
other
_______ _______ _______ _______ _______
Total purchase price 1,791 847 3,810 749 7,197
Deferred consideration - - - - -
Cash and cash equivalents 1,803 - - - 1,803
_______ _______ _______ _______ _______
Cash flows on acquisition
net
of cash acquired 3,594 847 3,810 749 9,000
_______ _______ _______ _______ _______
From the date of acquisition TGW, Spiderman, Maxi-Livre and the Spanish
franchises added #5.1m, #1.3m, #0.1m and #1.1m to turnover respectively and #
(30)k, #60k, #(20k) and #157k to operating profit respectively.
If these acquisitions had been completed on the first day of the financial year,
it is not anticipated that the operating profit would have been materially
different. Fair value adjustments were made to the Australian balance sheet to
reflect the write-down of historic goodwill in the business and the value in use
of certain of the fixed assets. No fair value adjustments were required on the
other acquisitions.
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
24 Analysis of net funds
2008 2007
#'000 #'000
Cash and cash equivalents 137,899 48,286
Short term borrowings - (15,359)
_______ _______
Net cash and cash equivalents 137,899 32,927
Current portion of long term borrowings (38,038) (4,477)
Long term borrowings (57,809) (27,827)
_______ _______
Net funds 42,052 623
_______ _______
During the year, the Group entered into new finance lease arrangements in
respect of assets with a total capital cost of #279,695 (2007: #2,245,000).
25 Operating lease commitments
The Group leases certain land and buildings on short term leases. The rents
payable under these leases are subject to re-negotiation at various intervals
specified in the leases. At the balance sheet date, the Group has outstanding
commitments for future minimum lease payments under non-cancellable operating
leases, which fall due as follows:
Motor Land & Motor Land &
vehicles buildings vehicles buildings
2008 2008 2007 2007
#'000 #'000 #'000 #'000
The total future minimum lease payments are
due
as follows:
Not later than one year 189 486 291 36,786
Later than one year but not later than five 352 53,396 434 142,103
years
Later than five years - 402,460 - 197,953
_______ _______ _______ _______
541 456,342 725 376,842
_______ _______ _______ _______
The average remaining term on operating leases over land and buildings in the UK
and Ireland is 7.5 years.
The operating leases over land and buildings in Continental European operations
have lengths of term for a maximum period of 9 years.
Notes to the Financial Statements for the year ended 31 January 2008 (continued)
26 Related party transactions
There were no related party transactions within the year or prior year.
27 Risks
The principal risks and uncertainties facing the Group have been and are as at
the date of this report:
Competition
The Group faces strong competition from a diverse range of competitors including
supermarkets, online retailers, conventional high street retailers and
independents. The Group expects increased competition from food retailers who
are expanding their range of non-food items.
Seasonality
The Group's business is highly seasonal with the key trading period being the
Christmas season. Turnover, operating profit and cash flow may be adversely
impacted by variations in demand during this period.
Technology
Playing games online is a growing part of the market, whereby software content
is sent digitally, direct from the publisher to the gamer. This may lead to
reduced product sales for mainline retailers.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SELFUASASEIL
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