RNS Number : 6105E
Game Group PLC
30 September 2008
THE GAME GROUP PLC, Europe's leading retailer of PC and video games products, today announces interim results for the six months ended
31 July 2008.
Interim Results for the six months ended 31 July 2008
Highlights
All figures in �'m (unless Six months ended Six months ended 31/7/07
stated) 31/7/08
Group turnover 743.4 482.4
Gross profit margin (%) 27.0 25.8
Operating profit before 39.0 6.2
non-recurring costs
Non-recurring costs 3.0 1.4
Profit before non-recurring 36.4 2.7
costs and tax
Profit before tax 33.4 1.3
Basic earnings per share 7.66 0.67
before non-recurring costs
(pence)
Basic earnings per share 6.78 0.27
(pence)
Interim dividend per share 1.79 1.43
(pence)
Trading store numbers 1,245 1,084
Trading square footage (sq. 1,296 1,123
ft.thousands)
Operational and financial highlights
* Record first half profit of �36.4m before non-recurring costs and tax (2007: �2.7m)
* Strong sales performance across the Group with total sales growth of 54.1% and like for like ('lfl') sales ahead by 22.2%
* Good international performance with sales up 64.2% and lfl sales up 17.4%
* Gross margin up by 120 basis points for the half year compared to the same period last year (see full year guidance below)
* Gamestation integration progressing better than anticipated and we are on track to deliver �9m of synergies in the current year an
increase of �2m from our prior guidance (see full year guidance below)
* Further broadening our reach with an acquisition, post the half year, in the Czech Republic of a 19 store specialist retail chain
and a 33 store concession deal with Borders in the UK
* Store portfolio will be over 1,300 by the key Christmas trading season compared to 1,150 at the same time last year
* Strong balance sheet and minimal gearing
* Interim dividend increased by 25% to 1.79p
* Current trading remains good with total sales increase of 14.6% and lfl increase of 4.9% for the 8 weeks to 20 September (Prior
year total sales lfl for the comparable period up by 44.9%) (see full year guidance below).
Revised Guidance
* Due to a strong performance to date and positive outlook, we have raised our guidance for the Group's full year LFL sales
performance from 5-10% to 8-12%
* Gross margin growth guidance (including the gross margin benefit of the Gamestation synergies) for the full year raised to 80 -
110 basis points ('bps') from 50 - 100 bps
* Gamestation synergy guidance raised for the current year from �7m to �9m and a total of �14m of annualised benefits expected in
the year to 31 January 2010
Peter Lewis, Chairman, said:
"I am very pleased to report a record first half for the Group with a very significant increase in profit before taxation and
non-recurring costs to �36.4m (2007: �2.7m). The business has performed extremely well with both turnover and profit growth throughout the
Group.
We deliver a compelling customer experience. Our specialist proposition is centred around customer service, our pre-owned offer, our
Reward Card and our online capabilities, all of which have contributed to this success.
The third generation consoles are all in good supply. Demand has continued to be strong and the installed console base now stands at
over 17.3 million in the key UK market. This level of console ownership has been achieved in just three years compared to second generation
consoles which took a seven year period from 2000 until 2007 to reach similar levels.
Due to a strong performance to date, a broad and growing installed base of console ownership, and a strong pipeline of new and
innovative software, we have raised our guidance for the Group's full year LFL sales performance from 5-10% to 8-12%.
We recognise the extraordinarily challenging and uncertain market conditions in which we are operating today, and we cannot be immune
to wider economic uncertainties. However, we continue to be encouraged by the ongoing demand for third generation hardware and software
which is in part being driven by the broadening demographic appeal. In addition, playing games provides a more affordable alternative to
many other family leisure activities and we remain committed to delivering our customers the widest choice and value for money.
We look forward to the key Christmas trading period and remain confident in the outlook for the Group."
A presentation to investors and analysts will be held today at 9.30am (BST) at The City Presentation Centre, 4 Chiswell Street, EC1Y
4UP.
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).
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 REPORT
I am very pleased to report a record first half for the Group with a very significant increase in profit before taxation and
non-recurring costs to �36.4m (2007: �2.7m). The business has performed extremely well with both turnover and profit growth throughout the
Group.
We deliver a compelling customer experience. Our specialist proposition is centred around customer service, our pre-owned offer, our
Reward Card and our online capabilities, all of which have contributed to this success.
We recognise the extraordinarily challenging and uncertain market conditions in which we are operating today, and we cannot be immune to
wider economic uncertainties. However, we continue to be encouraged by the ongoing demand for third generation hardware and software which
is in part being driven by the broadening demographic appeal. In addition, playing games provides a more affordable alternative to many
other family leisure activities and we remain committed to delivering our customers the widest choice and value for money.
Results
Group turnover for the six months to 31 July 2008 increased by 54.1% to �743.4m (2007: �482.4m) with lfl sales up by 22.2%. In the UK
and Ireland, total sales increased by 50.4% and lfl sales were up by 24.2%. In our international operations, total sales and lfl sales
increased by 64.2% and 17.4% respectively.
We had previously forecast an improvement in gross margin of 50 to 100 basis points but we actually achieved a 120 basis point
improvement with gross margin increasing to 27%. This arose from an increase in higher margin software within the overall sales mix and, to
a limited extent, better purchasing terms for Gamestation.
Group operating profit was �36.0m (2007: �4.8m). Profit before tax was �33.3m (2007: �1.4m) and basic earnings per share were 6.78p
(2007: 0.27p).
Your Board is declaring an interim dividend of 1.79p per share, an increase of 25%.
Our net debt position as at 31 July 2008 more than halved from the prior year July to �57.8m (2007: �127.5m). The Group continues to be
very cash generative and has a strong balance sheet.
Business development
Our market and position
The Group is now well positioned in five key international territories - UK and Ireland, France, Iberia, Scandinavia and Australia with
a total of 1,245 outlets trading at 31 July 2008.
We continue to target the Group's resources towards those markets with the strongest return characteristics and where we believe our
expertise can deliver real improvements in performance. We are continuing to build the Group's online capability in tandem with the growth
of the store portfolio.
The third generation consoles are all in good supply. Demand has continued to be strong and the installed console base now stands at
over 17.3 million in the key UK market. This level of console ownership has been achieved in just three years compared to second generation
consoles which took a seven year period from 2000 until 2007 to reach similar levels.
An expanded base of hardware in the market leads to more software being sold, both to the more traditional gamer and to new customers
entering the market for the first time. The consumer appeal of PC and video games is broadening with more women and families, younger
children and older people buying games in our stores.
The manufacturers and publishers of PC and video games are continuing to stimulate this broader audience by creating and launching fun
and interactive games such as Nintendo Wii Fit, Electronic Arts Rockband and Activision's Guitar Hero World Tour.
The UK and Ireland
In the UK, we are continuing to evolve the distinctive dual brand position of GAME
and Gamestation. A thorough analysis of the combined portfolio and the consumer offering has reinforced the value of a dual brand
strategy as each brand can appeal to separately identifiable consumer segments.
We acquired Gamestation in May 2007 and received Competition Commission clearance in January 2008. We have been very pleased with the
performance of the Gamestation business which has exceeded our expectations.
The Gamestation store portfolio continues to grow with a focus on locations that are complementary to the GAME brand.
We originally expected synergies of �7m to be achieved in the 12 months from acquisition. However the Board now considers that ongoing
synergies of �9m can be achieved in the 53 weeks to 31 January 2009 and a further �5m, giving an annual rate of �14m, in the year to 31
January 2010. The synergies will both increase gross margin and reduce operating expenses. Of the �9m in the current year around �1.5m will
be a reduction in operating expenses which will increase to around �5m in the year to January 2010.
There will be an increased total non-recurring charge of approximately �10m related to integrating the acquisition, of which �3m was
incurred last year and �5.5m will be incurred this year with the balance in 2009. In addition, the total capital expenditure required to
integrate and enhance the acquisition will be �5m with �4m incurred in the current year.
Borders
On 29 September 2008, GAME entered into a concession agreement with Borders to open up to 33 concessions within Borders stores in the
UK. The agreement was reached after a successful trial in six stores. A further 14 stores will be opened by Christmas 2008 with the balance
by September 2009.
This store-in-store concept, which will be branded GAME, will help to broaden our consumer reach and will complement the GAME standalone
stores and our other 31 concessions within retailers such a Debenhams, Selfridges, Hamleys and Fenwick.
International
The International business continues to perform well in all territories, contributing 29% to the Group revenue and 10% of operating
profit. Our profitability is continuing to improve as we achieve greater economies of scale in these international markets.
We opened a net 71 international stores in the first half with 17 of these in France, 33 in Iberia, 21 in Australia with the Scandinavia
store portfolio remaining at 62 stores.
As part of our international growth strategy we are continuing to buy-in or close existing franchises. On 2 July 2008, we completed the
purchase of five of the remaining seven French franchise stores for a cost of EUR1.8m (�1.43m).
Czech Republic
On 21 August 2008, GAME acquired the Czech video games retailer "JRC" for Czk122.5m (�3.95m) in cash of which Czk61.75m (�2m) was
payable immediately and the balance is payable over the course of the next two years.
JRC, based in Prague, is the leading specialist retailer of PC and video games in the Czech Republic. JRC provides the opportunity to
develop GAME's international business in Central and Eastern Europe. The company operates 19 specialist PC and video games stores, located
in the principal cities in the Czech market including six stores in Prague, and transactional e-Commerce site www.jrc.cz. It is the leading
retailer in the market with market share in excess of 15%. JRC has a committed management team with more than 15 years of experience.
In the financial year to 31 December 2007 JRC reported EBITDA of �625k (2006: �195k) and sales of �6.8m (2006: �5.2m). We believe this
acquisition will be earnings enhancing for the Group within the first year.
Treasury
Our net debt as at 31 July 2008 was �57.8m (31 July 2007 - �127.5m) (31 January 2008 - �42.1m net cash), the reduction being driven by
strong operating cashflows.
In the 2008/09 financial year average net debt is anticipated to be around �67m (2007: �82m). The Board is committed to an efficient
capital structure and continues to review the dividend policy and a share buyback strategy along with the continued organic or acquisitive
growth of the store portfolio.
We anticipate that our total capital expenditure for the year on store openings, refurbishment and information technology requirements,
will be around �40m. In addition we will spend �7m on eCommerce development and �4m on the Gamestation integration.
Store Portfolio
During the period the Group has opened or acquired 97 stores and closed six stores as part of the Group's ongoing portfolio management.
31 July 2008 31 July 2007 31 January 2008
Number Number Number
Company owned and concessions
UK and Ireland
- GAME - Stores 386 377 381
- GAME - Concessions 37 33 33
- Gamestation 246 223 235
669 633 649
France 187 161 170
Iberia 241 183 208
Scandinavia 62 61 62
Total Continental Europe 490 405 440
Australia 72 22 51
International 562 427 491
Total owned and concessions 1,231 1,060 1,140
Franchises
France 2 7 7
Iberia 10 12 10
Australia 2 5 4
Total franchises 14 24 21
Total operational outlets 1,245 1,084 1,161
Ahead of the key Christmas trading period we aim to have 440 GAME and 250 Gamestation stores in UK and Ireland, 500 stores and 10
franchises in Europe and 100 owned stores and one franchise in Australia.
eCommerce
We continue to focus on our multi-channel proposition and our sales from eCommerce have grown 80% year on year to �32m (�18m) with every
international business actively participating in this area. This year, GAME is on track to invest �7m in distribution infrastructure and
consumer facing development.
The Board
On 3 July 2008, Dennis Woodside was appointed as a non-executive director. Mr Woodside (39) is the Managing Director of Google for the
UK, Ireland and Benelux. He has a wealth of experience in the internet arena and has a deep understanding of online retailing. His
consultancy experience with McKinseys and his legal training will also bring complementary skills to the Board.
Staff and Management
Our staff and management have once again delivered a great performance through their significant efforts and enthusiasm. I would like to
thank them all.
Corporate Social Responsibility
Corporate and Social Responsibility ("CSR") is right at the heart of GAME.
As a responsible retailer, we recognise that the way we operate as a business has a direct impact on our reputation and our brand. We
are continuing to develop our CSR strategy and our stakeholder relationships.
Current Trading and Future Prospects
We have had a fantastic first eight months of the year.
Consumer demand remains strong for all formats. Sony launched an 80Gb version of their PS3 on 22 August and Microsoft reduced the
recommended retail price of the entry level Xbox 360 to a mass market price point of �129 from �159 on 23 September 2008. The Nintendo Wii
and DS Lite continue to be sought after and demand for software such as Wii Fit and Mario Kart is still exceeding supply.
The UK installed base of third generation platforms now exceeds 17.3 million and we expect this to have reached an unprecedented base of
around 21 million by Christmas 2008. The rapidly growing installed base will continue to stimulate the sale of software. Once again the
line-up from October for Christmas is very strong with annual releases such as FIFA09 and Need for Speed, sequels such as Gears of War 2 and
Call of Duty 5 and exciting new franchises including Mirrors Edge from Electronic Arts, Lips from Microsoft and Little Big Planet from
Sony.
In the eight weeks ended 20 September 2008 (the comparable period as reported last year when Group lfl sales were up by 44.9%) total
Group sales were up by 14.6% with the UK and Ireland and international total sales up by 8.5% and 32.5% respectively. For the same period
Group lfl sales were up by 4.9%, with the UK and Ireland lfl sales up by 4.6% and international lfl sales up by 5.9%.
In the 34 weeks to 20 September total Group sales were up by 39% with the UK and Ireland and International up by 38.2% and 41.2%
respectively. For the same period Group lfl sales were up by 17.5%, with the UK and Ireland lfl sales up by 18.6% and International lfl
sales up by 14.4%.
Due to a strong performance to date, a broad and growing installed base of console ownership, and a strong pipeline of new and
innovative software, we have raised our guidance for the Group's full year LFL sales performance from 5-10% to 8-12%. We now anticipate that
gross margin for the year to 31 January 2009 will increase by 80 to 110 basis points as higher margin software becomes a larger part of the
sales mix compared to last year and we achieve further purchasing and stock efficiencies.
We look forward to the key Christmas trading period and remain confident in the outlook for the Group.
Peter Lewis
Chairman
30 September 2008
GAME Group Plc
Unaudited Condensed Consolidated Income Statement
for the six months ended 31 July 2008
Notes Six months Six months Year
ended ended ended
31 July 31 July 31 January
2008 2007 2008
Unaudited Unaudited Audited
�'000 �'000 �'000
Revenue 2 743,385 482,363 1,491,914
Cost of sales 542,720 357,895 1,122,337
Gross profit 200,665 124,468 369,577
Other operating expenses 3 164,694 119,634 294,385
39,016 6,198 82,340
Operating profit before
non-recurring costs
Non-recurring costs 3 (3,045) (1,364) (7,148)
Operating profit 35,971 4,834 75,192
Finance income 828 330 1,511
Finance costs (3,490) (3,805) (8,341)
Profit before taxation 33,309 1,359 68,362
Taxation 4 9,903 421 21,183
Profit for the period 23,406 938 47,179
attributable to equity holders
of the parent
Earnings per share - basic 6 6.78p 0.27p 13.79p
- diluted 6 6.75p 0.27p 13.65p
GAME Group Plc
Unaudited Condensed Consolidated
Balance Sheet
at 31 July 2008
Notes As at As at As at
31 July 31 July 31 January
2008 2007 2008
Unaudited Unaudited Audited
�'000 �'000 �'000
Non current assets
Property, plant and equipment 7 144,928 114,035 130,662
Intangible assets 8 175,566 166,286 172,871
Deferred tax asset - 1,666 -
320,494 281,987 303,533
Current assets
Inventories 184,045 120,490 145,041
Trade and other receivables 9 61,825 45,614 53,845
Cash and cash equivalents 62,647 26,479 137,899
308,517 192,583 336,785
Total assets 629,011 474,570 640,318
Current liabilities
Trade and other payables 10 261,716 153,964 315,498
Short-term borrowings - 5,081 -
Current portion of long term 11 63,439 67,855 38,038
borrowings
Leasehold property incentives 713 735 846
Corporation tax liabilities 14,030 2,842 15,862
339,898 230,477 370,244
Non current liabilities
Long-term borrowings 11 57,030 81,087 57,809
Leasehold property incentives 7,094 5,978 6,414
Deferred tax liabilities 1,929 - 1,929
66,053 87,065 66,152
Total liabilities 405,951 317,542 436,396
Net assets 223,060 157,028 203,922
Equity attributable to equity
holders of the parent
Share capital 13 17,314 17,135 17,167
Share premium account 14 46,435 44,213 44,848
Capital redemption reserve 15 2,249 2,223 2,223
Shares held in Trust 15 (5,315) (1,176) (4,403)
Merger reserve 15 76,907 76,907 76,907
Foreign exchange reserve 15 13,323 (2,011) 5,904
Retained Earnings 15 72,147 19,737 61,276
Shareholders' funds 223,060 157,028 203,922
Approved and authorised for
issue by the Board on 30
September 2008
D Thomas
Director
GAME Group Plc
Unaudited Condensed
Consolidated Statement of
Recognised Income & Expense
for the six months ended 31
July 2008
Notes Six months Six months Year
ended ended ended
31 July 31 July 31 January
2008 2007 2008
Unaudited Unaudited Audited
�'000 �'000 �'000
Exchange differences on 7,419 1,748 9,663
translation of foreign
currency net investments in
subsidiary undertakings
Deferred income tax on - - 22
share-based payments
Total income and expense 7,419 1,748 9,685
recognised directly in equity
Profit on ordinary activities 23,406 938 47,179
after taxation
Total recognised income and 30,825 2,686 56,864
expense for the year
attributable to equity holders
GAME Group Plc
Unaudited Condensed
Consolidated Cash Flow
Statement
for the six months ended 31
July 2008
Notes Six months Six months Year
ended ended ended
31 July 31 July 31 January
2008 2007 2008
Unaudited Unaudited Audited
�'000 �'000 �'000
Cash flows from operating
activities
Operating profit 35,971 4,834 75,192
Equity-settled share-based 828 583 1,204
payment expense
Depreciation and amortisation 12,632 8,855 20,587
Loss on disposal of (212) 611 286
non-current assets
Market value movement on 205 102 (139)
financial instrument
49,424 14,985 97,130
Increase in trade and other (7,980) (12,542) (20,772)
receivables
(Increase)/decrease in (38,806) (4,010) (28,562)
inventories
(Decrease)/increase in trade (51,926) (19,601) 143,645
and other payables
(Decrease)/increase in 547 (14) 532
leasehold incentives
Cash generated from operations (48,741) (21,182) 191,973
Finance costs paid (3,490) (3,804) (8,341)
Corporation tax paid (11,735) (2,582) (11,580)
Net cash from operating (63,966) (27,568) 172,052
activities
Cash flows from investing
activities
Acquisitions 16 (1,595) (80,314) (80,941)
Purchase of property, plant (20,475) (14,579) (37,218)
and equipment
Purchase of intangible assets (2,605) (1,110) (2,703)
Proceeds from sale of 455 - 205
equipment
Finance income received 828 330 1,511
Net cash used in investing (23,392) (95,673) (119,146)
activities
Cash flows from financing
activities
Proceeds from issue of share 1,710 2,058 2,726
capital
Purchase of own shares (1,241) - -
Shares purchased for Trust (2,692) - (3,667)
Proceeds from long term 25,124 52,173 64,098
borrowing
Proceeds from short term - 63,421 -
borrowing
Payment of finance lease (503) (304) (550)
liabilities
Dividends paid (10,292) (5,636) (10,541)
Net cash used in financing 12,106 111,712 52,066
activities
Net (decrease)/increase in (75,252) (11,529) 104,972
cash and cash equivalents
Cash and cash equivalents at 137,899 32,927 32,927
beginning of period
Cash and cash equivalents at 12 62,647 21,398 137,899
end of period
Notes to the interim results
1 General
The GAME Group plc is a company incorporated, domiciled and registered in England and Wales and is listed on the London Stock Exchange.
The address of its registered office is Unity House, Telford Road, Basingstoke, RG21 6YJ.
Basis of preparation
The financial information presented in this interim report has been prepared in accordance with the accounting policies the Group
expects to be applicable at 31 January 2009. The interim report has been prepared in accordance with those IFRS and IFRIC interpretations
issued and effective as at the time of preparing the statement, and with the Disclosure and Transparency Rules of the Financial Services
Authority and with IAS 34, Interim Financial Reporting, as adopted by the European Union. In line with this standard, the financial
statements are referred to as condensed.
Accounting policies
The accounting policies used in preparing the Interim Report are as set out in the statutory accounts for the year ended 31 January
2008. There have been no changes in accounting policies and accounting estimates.
Estimates and judgements
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.
Significant items subject to such assumptions and estimates include the useful lives of assets, the measurement and recognition of
provisions, the recognition of deferred tax assets and liabilities for potential corporation tax. The most critical accounting policies in
determining the financial condition and results of the Group are those requiring the greatest degree of subjective or complex judgements.
These relate to inventory valuation; lease costs; the valuation of goodwill and acquired intangible assets; share-based payments and
taxation. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Notes to the interim results
1 General (continued)
Adoption of new and revised Standards
Standards and Interpretations effective in the current period
IFRIC 13 *Customer Loyalty Programmes* is effective for financial statements commencing after 1 July 2008 although this interpretation is
not yet endorsed by the EU. The Directors are considering the impact of the adoption of this interpretation for the financial year ended 31
January 2010.
Standards and Interpretations in issue not yet adopted
The International Accounting Standards Board and the International Financial Reporting Interpretations Committee have issued the following
standards and interpretations to be applied to financial statements with periods commencing on or after the following dates:
International Accounting Standards (IAS/IFRS) Effective Date
IAS 1* Presentation of Financial statements amendment 01/01/2009
IFRS 8 Operating Segments 01/01/2009
IAS 23* Borrowing costs amendment 01/01/2009
IAS 32* Financial Instruments: Presentation amendment 01/01/2009
IFRS 2* Share-based payments amendment 01/01/2009
IFRS 3* Business Combinations amendment and complementary
amendments to IAS 27 Consolidated and Separate Financial Statements 01/07/2009
IAS 39* Financial Instruments: Recognition and
measurement: Eligible Hedged Items amendment 01/07/2009
IFRS 5* Non-current assets held for sale and discontinued operations
amendment
01/01/2010
IAS 7* Statement of cash flows amendment 01/01/2010
IAS 18* Revenue amendment 01/01/2010
IAS 36* Impairment of assets amendment 01/01/2010
IAS 38* Intangible assets amendment 01/01/2010
International Financial Reporting Interpretations Committee (IFRIC) Effective Date
IFRIC 12* Service Concession Arrangements 01/01/2008
IFRIC 14*, IAS 19* *The Limit on a Defined Benefit Asset Minimum
Funding Requirements and their Interaction* 01/01/2008
IFRIC 13* Customer Loyalty Programmes 01/07/2008
IFRIC 16* Hedges of a Net Investment in a Foreign Operation 01/01/2009
IFRIC 15* Agreements for the Construction of Real Estate 01/01/2009
*These standards and interpretations are not endorsed by the EU at present.
The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the group*s
financial statements in the period of initial application.
Notes to the interim results
2 Revenue and operating profit
United Other United Other United Other
Kingdom & EU Kingdom EU Kingdom & EU
Ireland & Ireland
31 July Ireland 31
2008 31 July 31 July 31 July January 31 January
2008 2007 2007 2008 2008
�'000 �'000 �'000 �'000 �'000 �'000
Revenue 528,495 214,890 351,457 130,906 1,104,657 387,257
Cost of sales 383,701 159,019 259,229 98,666 829,630 292,707
Gross profit 144,794 55,871 92,228 32,240 275,027 94,550
Other operating expenses 109,263 52,386 84,276 33,994 205,913 81,324
Operating profit/(loss) before 35,531 3,485 7,952 (1,754) 69,114 13,226
non-recurring costs
Non-recurring costs 3,045 - 1,364 - 7,148 -
Operating profit/(loss) 32,486 3,485 6,588 (1,754) 61,966 13,226
Six months Six months Year
ended ended ended
31 July 31 July 31 January
2008 2007 2008
Unaudited Unaudited Audited
�'000 �'000 �'000
Turnover by territory
United Kingdom and Ireland 528,495 351,457 1,104,657
France 78,475 47,793 141,183
Iberia 97,819 60,773 175,808
Scandinavia 19,853 16,464 43,485
Australia 18,743 5,876 26,781
743,385 482,363 1,491,914
Stores by territory
United Kingdom and Ireland 669 633 649
France 187 161 170
Iberia 241 183 208
Scandinavia 62 61 62
Australia 72 22 51
1,231 1,060 1,140
Franchises
France 2 7 7
Iberia 10 12 10
Australia 2 5 4
14 24 21
Trading square footage by
territory
United Kingdom and Ireland 781,294 729,655 712,408
France 173,548 154,867 162,014
Iberia 199,921 153,079 177,427
Scandinavia 59,729 59,923 59,729
Australia 81,566 25,238 58,639
1,296,058 1,122,762 1,170,217
Notes to the interim results
3 Other operating expenses
Six months Six months Year
ended ended ended
31 July 31 July 31 January
2008 2007 2008
Unaudited Unaudited Audited
�'000 �'000 �'000
Selling and distribution 137,768 100,646 234,450
Administrative expenses 26,926 18,988 59,935
164,694 119,634 294,385
In the current year administrative expenses include non-recurring costs of �3,044,635 (2007 interim: �1,364,000; full year: �7,147,721)
in relation to integration fees following the acquisition of Gamestation.
4 Taxation
The UK corporation tax charge has been included at an underlying corporation tax rate in line with the previous year.
Six months Six months Year
ended ended Ended
31 July 31 July 31 January
2008 2007 2008
Unaudited Unaudited Audited
�'000 �'000 �'000
Current year
UK corporation tax 8,701 421 19,615
Adjustments in respect of - - (1,191)
prior periods
Overseas tax payable 1,202 - 3,436
Total current tax 9,903 421 21,860
Deferred tax:
Current year movement - - (191)
Adjustment to estimated - - 825
recoverable deferred tax asset
arising in previous period
Prior year movement - - (1,274)
Change in tax rates - - (37)
9,903 421 21,183
5 Dividends
Six months Six months Year
ended ended ended
31 July 31 July 31 January
2008 2007 2008
Unaudited Unaudited Audited
�'000 �'000 �'000
Ordinary dividends
Final Paid 10,292 5,636 5,636
Interim Paid - - 4,905
10,292 5,636 10,541
The interim dividend in relation to the period ended 31 July 2008 was declared on 30 September 2008 and is payable on 27 November 2008
to shareholders on the register on 31 October 2008. This dividend is therefore not included above.
Notes to the interim results
6 Earnings per share
The calculation of earnings per share for the six months ended 31 July 2008 is based on the profit after taxation of �23,406,000 (2007
interim: �938,000; full year: �47,179,000). The calculation of the earnings per share before non-recurring costs is based on a profit of
�26,451,000 (2007 interim: �2,302,000; full year: �54,327,000). The calculation of basic earnings per share is based on a weighted average
number of shares in issue during the period of 345,472,823 (2007 interim: 341,617,905; full year: 342,198,365). The calculation of diluted
earnings per share is based on a weighted average number of shares in issue during the period of 346,734,921 (2007 interim: 345,436,165;
full year: 345,603,909).
Reconciliation of denominators used for basic and diluted loss per share calculations:
Effect of
Basic share Diluted
options
Number Number Number
31 July 2008 345,472,823 1,262,098 346,734,921
31 July 2007 341,617,905 3,818,260 345,436,165
31 January 2008 342,198,365 3,405,544 345,603,909
There are no anti-dilutive share options in the current or prior years.
As at As at As at
31 July 31 31
2008 July January
Unaudite 2007 2008
d Unaudi Audited
ted
Pence Pence Pence
Basic earnings per share 6.78 0.27 13.79
Non-recurring costs 0.88 0.40 2.09
Basic earnings per share before 7.66 0.67 15.88
non-recurring costs
Notes to the interim results
7 Property, plant and equipment
As at As at As at
31 July 31 July 31
2008 2007 January
Unaudit Unaudit 2008
ed ed Audited
�'000 �'000 �'000
Cost
At 31 January 2008 219,236 159,090 159,090
Additions 20,475 14,579 37,218
Acquisitions 149 19,239 19,477
Disposals (1,016) (724) (3,581)
Foreign exchange adjustment 5,936 1,300 7,032
At 31 July 2008 244,780 193,484 219,236
Depreciation
At 31 January 2008 88,574 58,095 58,095
Charge for the period 10,749 8,192 18,583
Acquisitions - 13,353 13,519
Disposals (854) (474) (3,075)
Foreign exchange adjustment 1,383 283 1,452
At 31 July 2008 99,852 79,449 88,574
Carrying amount 144,928 114,035 130,622
8 Intangible fixed assets
As at As at As at
31 July 31 July 31
2008 2007 January
Unaudit Unaudit 2008
ed ed Audited
�'000 �'000 �'000
Cost
At 31 January 2008 179,080 104,981 104,981
Acquisitions 1,211 65,089 70,820
Additions 2,605 1,110 2,703
Foreign exchange adjustment 958 121 584
Disposals (102) - (8)
At 31 July 2008 183,752 171,301 179,080
Amortisation
At 31 January 2008 6,209 3,459 3,459
Acquisitions - 877 711
Charge for the period 1,883 664 2,004
Foreign exchange adjustment 115 15 84
Disposals (21) - (49)
At 31 July 2008 8,186 5,015 6,209
Carrying amount 175,566 166,286 172,871
Notes to the interim results
9 Trade and other receivables
As at As at As at
31 July 31 31
2008 July January
Unaudit 2007 2008
ed Unaudi Audited
ted
�'000 �'000 �'000
Amounts falling due within one year:
Trade receivables 10,739 10,360 18,921
Other receivables 16,205 8,291 14,050
VAT recoverable 804 221 324
Total trade and other receivables 27,748 18,872 33,295
Prepayments and accrued income 34,077 26,742 20,550
61,825 45,614 53,845
10 Trade and other payables
As at As at As at
31 July 31 July 31
2008 2007 January
Unaudit Unaudit 2008
ed ed Audited
�'000 �'000 �'000
Amounts falling due within one year:
Trade payables 169,792 96,584 192,529
Other payables 10,814 4,659 7,838
Tax and social security costs 4,293 2,770 4,039
VAT payable 21,531 15,669 50,206
Accruals and deferred income 55,286 34,282 60,886
261,716 153,964 315,498
Notes to the interim results
11 Long term borrowings
As at As at As at
31 July 31 July 31
2008 2007 January
Unaudited Unaudited 2008
Audited
�'000 �'000 �'000
Current portion
Bank loans 62,963 67,256 37,515
Obligations under finance 476 599 523
leases and hire purchase
contracts
63,439 67,855 38,038
Non-current portion
Bank loans 56,573 80,000 56,897
Obligations under finance 457 1,087 912
leases and hire purchase
contracts
57,030 81,087 57,809
12 Analysis of net (debt)/funds
As at As at As at
31 July 31 July 31
2008 2007 January
Unaudite Unaudited 2008
d Audited
�'000 �'000 �'000
Cash and cash equivalents 62,647 26,479 137,899
Short-term borrowings - (5,081) -
Net cash and cash equivalents 62,647 21,398 137,899
Current portion of long-term (63,439) (67,855) (38,038)
borrowings
Long-term borrowings (57,030) (81,087) (57,809)
Net (debt)/funds (57,822) (127,544) 42,052
Notes to the interim results
13 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 17,314 346,282,946 17,135 342,698,757
Shares issued
During the half year 2,938,380 shares (2007 interim: 2,599,943; full year: 3,273,405) were issued to employees exercising share options
granted under various option schemes. The total consideration received on the exercise of these options was �1,732,846 (2007 interim:
�2,058,437; full year: �2,725,551).
Share purchased
During the year 500,000 shares (2007 interim: nil; full year: nil) were purchased for cancellation by the Company.
Trust shares
During the year 1,000,000 shares (2007 interim: nil; full year: 1,892,460) were purchased at a cost of �2,692,310 (2007 interim: �nil;
full year: �3,666,622). These shares are to be used wholly and exclusively to pay LTIP awards when they become due for payment.
14 Share Premium account
As at As at As at
31 July 31 July 31
2008 2007 January
Unaudit Unaudit 2008
ed ed Audited
�'000 �'000 �'000
Amount subscribed for share capital in
excess of nominal value
At 1 February 44,848 42,286 42,286
Arising on issue of shares during the 1,587 1,927 2,562
year (net of expenses)
46,435 44,213 44,848
Notes to the interim results
15 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 2007 17,003 42,286 2,223 (1,176) 76,907 23,852 (3,759) 157,336
Exchange differences - - - - - - 1,748 1,748
on translation of foreign
currency net investment
in subsidiaries
_____ ______ _______ ______ ___ _____ ______ ______
Net income recognised
directly in equity - - - - - - 1,748 1,748
Net income recognised
in income statement - - - - - 938 - 938
_____ ______ _______ ______ ______ ________ ______ _____
Total recognised income
and expense - - - - - 938 1,748 2,686
Issue of shares 132 1,927 - - - - - 2,059
Dividends paid - - - - - (5,636) - (5,636)
Share based payments - - - - - 583 - 583
_____ ______ ______ _____ _____ ____ ____ ______
At 31 July 2007 17,135 44,213 2,223 (1,176) 76,907 19,737 (2,011) 157,028
_____ ______ _______ ______ ______ ____ ______ ______
At 1 February 2008 17,167 44,848 2,223 (4,403) 76,907 61,276 5,904 203,922
Exchange differences - - - - - - 7,419 7,419
on translation of foreign
currency net investment
in subsidiaries
_____ ______ _______ ______ ___ _____ ______ ______
Net income recognised
directly in equity - - - - - - 7,419 7,419
Net income recognised
in income statement - - - - - 23,406 - 23,406
_____ ______ _______ ______ ______ ________ ______ _____
Total recognised income
and expense - - - - - 23,406 7,419 30,825
Issue of shares 123 1,587 - - - - - 1,710
Purchase of shares - - - (2,692) - - - (2,692)
Exercise of options - - - 1,830 - (1,830) - -
Dividends paid - - - - - (10,292) - (10,292)
Share based payments - - - - - 828 - 828
Share buyback (26) - 26 - - (1,241) - (1,241)
Net settled options 50 - - (50) - - - -
_____ ______ ______ _____ _____ ____ ____ ______
At 31 July 2008 17,314 46,435 2,249 (5,315) 76,907 72,147 13,323 223,060
_____ ______ _______ ______ ______ ____ ______ ______
Notes to the interim results
16 Acquisitions
Current period acquisitions
On 2 July 2008 ABC Games International S.A., a subsidiary of GAME Group plc, acquired five French franchises for a total consideration
of �1.4 million, reflecting cash of �0.3m and other working capital. The value of net assets at acquisition has been calculated at �0.6
million, generating an intangible assets value of �0.8 million.
During the period the trade and assets of two Spanish franchises were acquired by Engine Tecnology Systems SL, a subsidiary of GAME
Group plc. Centro Fotografico Salmantino was acquired on 26 May 2008 for a total consideration of �0.2m and Machinami Games was acquired on
18 July 2008 for a total consideration of �0.3m. The value of net assets at acquisition has been calculated at �0.1m, generating an
intangible assets value of �0.4m.
The results of these operations have been incorporated from the date of acquisition and no fair value adjustments were required.
17 Post Balance Sheet Events
On 21 August 2008, the Group acquired 100% of the share capital of the Czech pc and video games retailer JRC. On acquisition, JRC owned
19 specialist pc and video games stores located in the principal cities in the Czech market and transactional e-commerce site www.jrc.cz.
The business was acquired for an initial consideration of �3.95m payable in two instalments with �2.0m payable immediately and the balance
over the course of the next two years.
Due to the proximity of this transaction to the interim period end, the disclosures as required by IFRS 3 paragraph 67 have not been
presented as it is impracticable to do so.
18 Related party transactions
There were no related party transactions within the period.
Notes to the interim results
19 Risks
The principal risks and uncertainties facing the Group for the remaining six months of the year 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.
20 This interim report was approved by the Board of Directors on 30 September 2008
The financial information contained within this interim report does not comprise statutory accounts as defined in Section 240 of the
Companies Act 1985.
The comparatives for the full year ended 31 January 2008 are not the Company's full statutory accounts for that year. A copy of the
statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified,
did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did
not contain a statement under section 237(2)-(3) of the Companies Act 1985.
Copies of this interim report are being posted to shareholders and are available from the Company's office at Unity House, Telford Road,
Basingstoke, Hampshire RG21 6YJ.
Statement of Directors' Responsibilities
The directors confirm, to the best of their knowledge and belief, that this condensed set of financial statements has been prepared in
accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the
information required by DTR 4.2.7 and DTR 4.2.8. The directors of GAME Group plc are listed in the Company's 2008 Annual Report and
Accounts.
By order of the Board
David Thomas
Director
30 September 2008
This information is provided by RNS
The company news service from the London Stock Exchange
END
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