Interim Management Statement
June 17 2010 - 2:00AM
UK Regulatory
TIDMGMG
RNS Number : 7592N
Game Group PLC
17 June 2010
17 June 2010
GAME GROUP PLC ("GAME")
INTERIM MANAGEMENT STATEMENT
The GAME Group plc ("GAME" or "the Group"), Europe's leading retailer of pc and
video games products, today issues its Interim Management Statement covering the
period from 1 February to 12 June 2010.
Trading Update
The market for pc and video games continues to be challenging across Europe,
particularly in the UK. The good range of software releases, such as Red Dead
Redemption and Battlefield: Bad Company 2, have sold well, although not in
sufficient volume to offset the year on year decline in hardware and software
sales. In the UK market, hardware revenues have decreased by 33%, primarily due
to lower Nintendo sales, and software decreased by 11% leading to an overall
decrease of 19% (source: GfK ChartTrack).
For the first 19 weeks to 12 June 2010, total Group sales were down by 11.4% and
like for like (lfl) Group sales for the same period were down by 12.3%. In the
UK and Ireland, total sales were down by 18.5% and lfl sales were down by 17.2%.
In our International business, total sales were up by 1.2% and lfl sales were
down by 4.6%. In our Online business sales were up by 13.5%. Excluding the
impact of the DSi launch in the prior period, Group lfl sales were down by 8.4%.
Despite this revenue performance we have continued to outperform the market, by
offering customers exclusive extras on new product releases, such as unique
digital weapons and vehicle designs for Battlefield: Bad Company 2, and
exclusive outfits for characters in Red Dead Redemption; plus value for money on
hardware bundles, deals of the week and through our leading trade-in and
preowned programmes which continues to give us a real point of differentiation
in the market.
In order to outperform the market we have, as outlined in April, strengthened
the value proposition in our stores and our online businesses. As a result, we
now expect full year gross margins to decrease by around 100 basis points year
on year.
Operations
We are making good progress with the plans outlined in April to develop our
unique combination of specialist brand attributes, value, range, service and
loyalty, in all channels to market.
Stores are the main route to market for pc and video games, and our aim is to
have a store footprint in each market that reflects its maturity and the
specific demands of our customers.
In the UK, 42 of the 43 overlapping stores identified for closure in April will
be closed by 19 June, and 25 of our new concept stores are now open.
Internationally, we continue to grow our market leading positions in both Iberia
and the Czech Republic and plan up to 15 new store openings.
The review of our businesses in France and Australia has confirmed our belief
that we have two worthwhile businesses although changes are necessary. In both
territories we have immediately made changes to the senior management teams, and
have started reviews of our commercial proposition and cost structures. We are
targeting break-even in both markets during 2011. This restructuring will result
in some non-recurring costs this year and we will provide more details in our
Interim Results Statement in September.
In our Ecommerce channel, we have seen our growth exceed that of the wider UK
online market. The wider UK online market now accounts for 17.6% of total sales
in the UK market (see table below). The implementation of a new Group
infrastructure and back office system is on track.
In the digital channels, as outlined in April, we are strategically well
positioned to identify and maximise the opportunities as they evolve.
Our capital expenditure for the full year will be lower than originally
anticipated, at no more than GBP21m (2009/10: GBP30m).
We continue to maintain tight cost control across the business, generating GBP5m
of cost savings this year, to be delivered in the second half of the year, and
GBP7m of additional cost savings next year, more than previously announced.
The Board
We have today announced the appointment of Ian Shepherd as Chief Executive, with
effect from 28 June 2010. Chris Bell, who has performed the role of Interim CEO
since 21st April 2010 pending the appointment of a new CEO, will then resume his
role as the Group's senior non executive director. The Board is delighted that
Ian has accepted the role, and is confident that he has the talent and energy to
develop our customer proposition further and to drive the business forward.
The Market
There were some important announcements for the games industry at the recent E3
show. All of the products which were unveiled will require dedicated specialist
retail outlets to maximise their launch potential. These include:
Hardware - New style Microsoft Xbox 360 250GB; Nintendo 3DS; 3D gaming on PS3
Software - Gran Turismo 5; Halo: Reach; The Legend of Zelda: Skyward Sword; Call
of Duty Black Ops; Medal of Honor; Killzone 3; Assassin's Creed: Brotherhood.
Peripherals - Sony Move; Microsoft Kinect.
(We await final confirmation of all European launch dates and prices)
As Europe's leading video games retailer, with nearly 15 million loyalty card
members and 1,343 stores, we are working closely with supplier partners to
generate high profile campaigns which will give our customers great offers,
exclusive extras, and unrivalled expertise.
Outlook
To date, our revenue performance has been broadly in line with our expectations.
We have maintained or improved market share in each of our territories, and are
focussed on evolving our brand proposition in multiple channels.
The news flow from E3 has been positive for the specialist retailer with an
exciting range of new software releases, and further details about new motion
sensing technology that will transform the way people play pc and video games.
We will use our trade-in and preowned programmes in particular to maximise the
opportunities of these launches.
The new technology releases are unlikely to materially impact our trading
performance until next year, with year on year market revenue declines still
expected in 2010. Consequently, although we expect to outperform the market with
the strength of our preowned offering, we anticipate negative full year lfls.
This revenue profile, coupled with our enhanced value proposition, will prompt a
return to our traditional performance trends with losses in the first half and
profits in the second half.
The Group continues to operate with a strong balance sheet. The Group net debt
at 30 May 2010 was GBP78m (31 January 2010: net cash GBP45m). Average net debt
during the year to 31 January 2011 is expected to be around GBP60m.
The Board recognises that this is a transitional year for the pc and video games
market and the Group. We believe that the new disc based technology entering
our marketplace will extend the life of existing third generation technology and
move us towards the next cycle of innovation. While we remain mindful of the
challenges we continue to face, we are confident that our retention of clear
market leadership in our principal territories will deliver us success through
all stages of the new hardware and software launches.
- ends -
The Group will hold its Annual General Meeting on 22 June. There will be no
further trading update at that time. The Group will next report in September
2010 when it will publish Interim Results.
Notes:
1. Store portfolio:
+-------------------------------+--------------------+--------------------+--------------------+
| | | 12 June 2010 | 31 January 2010 |
+-------------------------------+--------------------+--------------------+--------------------+
| | | Number | Number |
+-------------------------------+--------------------+--------------------+--------------------+
| Company owned and concessions | | | |
+-------------------------------+--------------------+--------------------+--------------------+
| UK and Ireland: | | 641 | 677 |
+-------------------------------+--------------------+--------------------+--------------------+
| - GAME - stores | | 382 | 390 |
+-------------------------------+--------------------+--------------------+--------------------+
| - GAME - concessions | | 12 | 33 |
+-------------------------------+--------------------+--------------------+--------------------+
| - Gamestation | | 247 | 254 |
+-------------------------------+--------------------+--------------------+--------------------+
| | | | |
+-------------------------------+--------------------+--------------------+--------------------+
| France | | 198 | 199 |
+-------------------------------+--------------------+--------------------+--------------------+
| Iberia | | 287 | 283 |
+-------------------------------+--------------------+--------------------+--------------------+
| Scandinavia | | 68 | 68 |
+-------------------------------+--------------------+--------------------+--------------------+
| Czech Republic | | 30 | 29 |
+-------------------------------+--------------------+--------------------+--------------------+
| Total Continental Europe | | 583 | 579 |
+-------------------------------+--------------------+--------------------+--------------------+
| Australia | | 118 | 118 |
+-------------------------------+--------------------+--------------------+--------------------+
| Total International | | 701 | 697 |
+-------------------------------+--------------------+--------------------+--------------------+
| Total owned and concessions | | 1,342 | 1,374 |
+-------------------------------+--------------------+--------------------+--------------------+
| Franchises | | | |
+-------------------------------+--------------------+--------------------+--------------------+
| France | | - | - |
+-------------------------------+--------------------+--------------------+--------------------+
| Iberia | | - | 5 |
+-------------------------------+--------------------+--------------------+--------------------+
| Australia | | 1 | 1 |
+-------------------------------+--------------------+--------------------+--------------------+
| Czech Republic | | - | - |
+-------------------------------+--------------------+--------------------+--------------------+
| Total franchises | | 1 | 6 |
+-------------------------------+--------------------+--------------------+--------------------+
| Total operational outlets | | 1,343 | 1,380 |
+-------------------------------+--------------------+--------------------+--------------------+
2. UK Market revenues by channel:
+--------------------------+-----------+-----------+-------------+
| Channel | Packaged | Packaged | Digitally |
| | software: | software: | distributed |
| | Stores | eCommerce | software |
+--------------------------+-----------+-----------+-------------+
| Share of UK market | 80% | 17.6% | 2.4% |
| revenues, Q1 2010 | | | |
| | | | |
+--------------------------+-----------+-----------+-------------+
Source: Parker Consulting Ltd
Enquiries:
+-------------------------------------------------------------------+----------------------------------------+
| The GAME Group plc: | +44 (0)1256 784566 |
+-------------------------------------------------------------------+----------------------------------------+
| Peter Lewis, Chairman | |
| Chris Bell, Interim Group Chief Executive | |
+-------------------------------------------------------------------+----------------------------------------+
| Ben White, Group Finance Director | |
+-------------------------------------------------------------------+----------------------------------------+
| Simon Soffe, Investor Relations and Group Communications Director | |
+-------------------------------------------------------------------+----------------------------------------+
| | |
+-------------------------------------------------------------------+----------------------------------------+
| Brunswick: | +44 (0)20 7404 5959 |
+-------------------------------------------------------------------+----------------------------------------+
| Jonathan Glass, Wendel Verbeek, Oliver Hughes | |
+-------------------------------------------------------------------+----------------------------------------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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