TIDMGMG
RNS Number : 5019F
Game Group PLC
27 April 2011
THE GAME GROUP PLC
RNS release
Year Ended
31 January 2011
Registered Number : 875835
GAME Group plc preliminary results
THE GAME GROUP PLC, Europe's leading retailer of pc and video
games products, today announces Preliminary Results for the 52
weeks ended 31 January 2011.
2010/11: Summary
Financial Overview 52 Weeks ended 52 weeks ended
All figures in GBP'm (unless 31 January 31 January
stated) 2011 2010
---------------------------------------- ---------------- ----------------
Group turnover 1,625.0 1,772.4
---------------------------------------- ---------------- ----------------
Gross profit margin (%) 26.3% 27.8%
---------------------------------------- ---------------- ----------------
Operating profit before non-recurring
costs 43.2 94.8
---------------------------------------- ---------------- ----------------
Non-recurring costs(*) 14.7 6.2
---------------------------------------- ---------------- ----------------
Operating profit 28.5 88.6
---------------------------------------- ---------------- ----------------
Profit before non-recurring
costs and tax 37.8 90.4
---------------------------------------- ---------------- ----------------
Profit before tax 23.1 84.2
---------------------------------------- ---------------- ----------------
Basic earnings per share before
non-recurring costs (pence) 8.75 19.24
---------------------------------------- ---------------- ----------------
Basic earnings per share (pence) 4.51 17.45
---------------------------------------- ---------------- ----------------
Final dividend per share (pence) 3.90 3.90
---------------------------------------- ---------------- ----------------
Full year dividend per share
(pence) 5.78 5.78
---------------------------------------- ---------------- ----------------
Trading store numbers (including
franchises) 1,313 1,380
---------------------------------------- ---------------- ----------------
Trading square footage (sq.
ft. thousands) 1,370.3 1,438.4
---------------------------------------- ---------------- ----------------
52 weeks to 31 January
Full year sales analysis 2011
--------------------------- --------------------------
Total sales Lfl sales
(%) (%)
--------------------------- ------------- -----------
Group -8.3 -6.7
--------------------------- ------------- -----------
UK & Ireland stores -12.8 -9.8
--------------------------- ------------- -----------
International stores -1.3 -2.0
--------------------------- ------------- -----------
Group Online -2.0 -2.0
--------------------------- ------------- -----------
*Non-recurring costs relate to business restructuring in
Australia and France
Financial and Operational Highlights:
-- Delivered a Group lfl of -6.7% compared to an aggregated
market decline of -9.9%
-- Preowned revenue increased by 3.3% to GBP386.9m (2010:
GBP374.5m)
-- Digital revenues increased by 27% to GBP41m
-- Own-label revenues increased by 36% to GBP29m
-- Gross margin improvement between H1 and H2
-- Reduced operating costs by GBP13.7m
-- Underlying Group PBT of GBP37.8m in line with market
expectations
-- Working capital improved by GBP66.3m, leading to a closing
net cash position of GBP119.8m
-- Final dividend maintained at 3.90p (full year dividend:
5.78p)
2011/12: Current trading and strategic progress:
Q1 sales analysis 12 weeks to 23 April 2011
----------------------- -----------------------------
Total sales Lfl sales
(%) (%)
----------------------- --------------- ------------
Group -14.3 -12.1
----------------------- --------------- ------------
UK & Ireland stores -14.9 -12.4
----------------------- --------------- ------------
International stores -15.8 -14.2
----------------------- --------------- ------------
Group Online +2.1 +2.1
----------------------- --------------- ------------
-- Continued to outperform UK market
-- Leading market share for launch of Nintendo 3DS
-- Strategic initiatives delivering early progress:
o Multichannel: Online market share has increased from 13% to
18% since Strategic Update in February
o Right stores: Closed 15 UK stores in Q1 2011
o Unique products: Digital sales growth continues, up 28% in Q1
2011
o Novel ways to buy: Preowned sales grown to 29% of total sales,
with 41% margin
o Customer relationships: 180,000 new loyalty members in Q1
2011
Ian Shepherd, Group Chief Executive commented:
"GAME is on a journey. Our customers have new and different ways
to buy and play video games and we need to make sure our business
provides everything they want, wherever they want it. Today, no
other business does this for the gamer. We plan to be the
first.
We are operating, however, in a very challenging economic
climate and have a lot to do and a long way to go if we want to
outperform the market by growing new revenue streams. Our strategy
is designed to do just that, and our dedicated teams around the
world are focused on delivering it. I'm encouraged by the good
progress we've seen in the early months of this year.
We face the tough markets of 2011 with a strong balance sheet,
high quality retail operations and real differentiators that few
competitors can match. We are well placed to deal with the
prevailing economic challenges and help our customers through these
difficult times and consequently are maintaining guidance for the
full year. In the longer term, we are putting GAME in the right
place to deliver the strongest returns as the industry continues to
change and evolve."
- ENDS -
Enquiries
Ian Shepherd, Chief Executive
Ben White, Group Finance Director
GAME Group Simon Soffe, Communications & Investor
plc Relations Director +44 1256 784566
Brunswick Jonathan Glass +44 207 404
Wendel Verbeek 5959
Natalia Marisova
Notes:
1. GAME Group Store portfolio
31 January 31 January
2011 2010
-------------------------------- ------------ ------------
Number Number
-------------------------------- ------------ ------------
Company owned and concessions
-------------------------------- ------------ ------------
UK and Ireland:
- GAME - Stores 381 390
- GAME - Concessions 11 33
- Gamestation 247 254
-------------------------------- ------------ ------------
Total UK and Ireland 639 677
-------------------------------- ------------ ------------
France 197 199
-------------------------------- ------------ ------------
Iberia 287 283
-------------------------------- ------------ ------------
Scandinavia 65 68
-------------------------------- ------------ ------------
Czech Republic 31 29
-------------------------------- ------------ ------------
Total Continental Europe 580 579
-------------------------------- ------------ ------------
Australia 93 118
-------------------------------- ------------ ------------
Total International 673 697
-------------------------------- ------------ ------------
Total owned and concessions 1,312 1,374
-------------------------------- ------------ ------------
Franchises
-------------------------------- ------------ ------------
Iberia 0 5
-------------------------------- ------------ ------------
Australia 1 1
-------------------------------- ------------ ------------
Total franchises 1 6
-------------------------------- ------------ ------------
Total operational outlets 1,313 1,380
-------------------------------- ------------ ------------
Chairman's Statement
Overview
Our Group has seen significant changes over the last 12 months.
With a new Chief Executive in place and a new strategy underway, we
are making good progress in difficult markets. We are building on
our leading high street retail strengths to establish leading
positions in all the channels that people use to play pc and video
games.
Our existing skills, which are built on twenty years of
experience and knowledge from over 17 million customer
relationships, help us to understand changing consumer demands and
put us in a strong position to build for the future.
Market background
The video games market continued to be tough in 2010. In the UK,
hardware revenues were down 25% and entertainment software revenues
were down 5%. However, the launch of new peripherals from Microsoft
and Sony, along with another year of strong Christmas software
releases, provided the market with some support during the
important Christmas period.
Digital downloads and social gaming products have continued to
gain in popularity. The pace of change is accelerating as new
products are launched, and as developers and publishers seek the
most effective ways to reach consumers.
Results
Although we held or increased our market share in all of our
territories over the year, revenues were down on the previous year
with Group like for like sales of -6.7%, reflecting the challenges
of the wider market. Our markets remained competitive and value was
critical to customers, so our strong preowned offers and market
leading deals helped us to maintain market leadership. Gross
margins held up well in the second half with strong preowned and
own brand sales offsetting the competitive deals on mint products.
The Group continues to exercise strong cost controls, saving
GBP13.7m over the year, and therefore we delivered a profit before
tax and non-recurring items of GBP37.8m (2010: GBP90.4m).
Our disciplined approach to working capital management and
capital expenditure meant we improved our cash flow by GBP65.1m,
and consequently closed the year with a net cash position of
GBP119.8m (2010: GBP44.9m). In February 2011 we agreed a new 3[1/2]
year bank facility, providing us with borrowings of GBP160m to
further strengthen our balance sheet.
Reflecting its confidence in the Group's clear strategic
direction, but mindful of the wider economic and market conditions,
the Board proposes a maintained final dividend of 3.90p per share
(2010: 3.90p). This will result in a full year dividend of 5.78p
per share (2010: 5.78p).
Our people and Board
Our colleagues consistently demonstrate a commitment to
customers and products. Their passion and skills are at the heart
of our brands, and we are very grateful to them all.
I will be stepping down as Chairman after the Annual General
Meeting on 15 June 2011, and I am delighted that Chris Bell will be
appointed as the new Chairman. It has been an immense privilege to
serve the Group as Chairman over the last 13 years. During this
time our two biggest challenges, the pace of technological change
and the expectations of our customers, have continued to
accelerate. The Group has evolved with them, and is positioned at
the forefront of innovation with a clear plan and the right team.
Chris Bell and Ian Shepherd are a strong combination, with Chris's
longstanding experience and network in the investor and business
communities, and Ian's extensive experience in the consumer
technology sector and CRM.
Chris, Ian, the Board and the GAME team around the world are
committed to growing the Group and delivering significant returns
for our shareholders, and I wish them every success.
Summary
Across all of our territories, the markets in which we operate
continue to be tough, but we have been able to outperform through
our strength in preowned and our success in launching new
products.
We are making progress delivering our strategic plans. We have
outlined clear indicators to measure our progress and are pleased
with the actions taken on our portfolio of stores, the expansion of
our own brand product range and, in particular, the increasing
sales of digital and online products. We have more work to do, and
we have robust plans in place.
Our industry is driven by innovation, and we expect improvements
when new products are announced. This, together with our existing
business model and the delivery of our clear strategic plans, means
the Group is well positioned to face the ongoing challenges in the
retail environment.
Peter Lewis
Chairman
27 April 2011
The Group will release an IMS statement at the Annual Meeting on
15 June, following the E3 industry conference in Los Angeles, which
is scheduled for 7 to 9 June 2011.
Chief Executive's Review
Introduction
GAME is on a journey. Our customers have new and different ways
to buy and play video games and we need to make sure our business
provides everything they want, wherever they want it. Today, no
other business does this for the gamer. We plan to be the
first.
The need for change
Our industry is changing rapidly because customers are demanding
it. Customers are offered a massive choice of technology products
and there have never been more ways to buy them.
This is reflected in the evolution of the market. Industry
analysts are predicting modest growth for the "traditional"
elements of the market over the next few years (i.e. consoles,
boxed software, accessories and preowned), until the next console
cycle starts. At the same time, they are forecasting growth in
other areas of the market, specifically social, mobile and digital
games.
GAME has a strong position in both the traditional and the
emerging digital segments of the games market. We already have
digital, ecommerce and physical revenue streams - in fact, we take
a leading market share in some areas of the UK digital gaming
market. The reason why is clear. A lot of the growth in the digital
market is fuelled by people buying digital add-ons for their
physical games. This cross-over of channels increases the need for
a retailer who can aggregate all of the products and guide
customers to the products that they want. I believe that with our
unique combination of strong customer relationships, retail
theatre, customer service, innovative pricing models and industry
knowledge, GAME is well placed to deliver such an offer.
We are not, however, complacent. Trading in our market remains
difficult and we need to deliver fundamental changes. It is no
surprise, therefore, that the strategy I have recently outlined
builds on our existing strengths as we grow from our traditional
retail base into a multichannel future.
Our future strategy
Our strategy is rooted in our understanding of our customers. We
know what it is like to be a gamer or someone buying for a gamer,
and we passionately want to be our customers' first choice for all
of their gaming needs. Our strategy reflects that and is called
"Dedicated to Gaming".
We know that customers are shopping across multiple channels,
and placing equal importance on their experiences online, on mobile
platforms and in stores. In delivering our strategy, we will focus
on five specific areas:
We will become a multichannel specialist, offering the same high
quality services wherever and whenever our customers need us. We
will manage our property portfolio and rejuvenate our estate to
create the right stores to be the hubs of our multichannel
experience. To be our customers' chosen gaming partner, we will
sell a broad and unique product range spanning both physical and
digital content. We will also be creative in finding ways for
customers to experience gaming in the most affordable way, and will
develop novel ways to buy. And finally, we will be dedicated to our
customers and build strong relationships with them founded on trust
and active communication.
A multichannel specialist
We have an opportunity to grow our online business - our share
of online games revenues is lower than our share in retail stores.
We also know that growing our online business benefits our stores.
Our data shows that the customers who shop with us both in stores
and online are our best customers, spending much more than single
channel customers. Therefore, our ambition is to grow the number of
customers who shop in this way, with the aim of tripling our online
revenues over the next three years. In 2010 our share of online
revenues was 13% in the UK.
To make ourselves a genuinely multi-channel retailer we need to
do three things:
1. Grow our web presence and deliver a better web experience for
customers;
2. Fully integrate the web with our stores, so that our store
estate helps us grow online share;
3. Continue to invest in emerging digital and mobile
channels.
We have made a good start. The web platforms we started to build
in 2010 are coming online. The Gamestation website was the first to
go live, in February 2011, and our GAME UK site will follow. Our
sites now offer a much better retail experience as well as more
community and social network content.
We have just embarked on our online strategy, and we are already
seeing some success with our market share up by five percentage
points to 18% (source: ChartTrack) since our strategic update in
February. There is much for us to do, with the immediate next steps
being the integration of web and stores to create a truly joined up
proposition.
Right stores
We are re-engineering our stores to be at the heart of our
multichannel offering. This will not only drive performance online
and digitally, but will also enhance our store offer.
Our stores must become the place for customers to play and
interact with pc and video games. Critically this allows us to give
them a great shopping experience and improve our customer
conversion. The opportunity is enormous, with 3.5m customers
visiting our stores across the Group every week. Our teams are
already very good at converting these customer visits into sales,
and in 2010 we increased the conversion rate by a full percent to
19%. We are aiming to increase this by 1% every year going
forward.
To create the right store environment we are increasing the
multichannel feel of our outlets: adding new digital lines,
including digital content for consoles, partnering with the leading
social gaming sites and trialling new technology to improve our
customer service.
Having the right locations inevitably means that we are going to
have fewer stores. In the UK we are targeting 550 stores by
Christmas 2013. We closed 15 stores in the first 12 weeks of 2011,
in addition to the 38 stores we closed last year. We aim to close
stores without losing sales, using loyalty card data and marketing
initiatives to transfer a minimum of 60% customers to the nearest
store or online. A relatively short average lease length of 5 years
continues to offer us flexibility.
Internationally, stores remain the key route to market in the
medium term. In Spain, Portugal and the Czech Republic, where we
are market leaders, there may be tactical growth where we see local
and profitable opportunities. As we move to strengthen our
businesses in France and Australia, there may be a small number of
additional closures.
Unique product range
As a specialist, our customers expect to receive a unique and
differentiated offer. It is therefore crucial to have a unique
product range as we combine web and stores together and we will
increase our range of digital content, exclusive versions of games
and own-label items - all of which give us stronger than usual
market shares - in order to increase customer choice and sales. For
example, we plan to double the size of our own-label business in
the next three years.
Our range of own-label accessories and peripherals already
contains over 100 products, and this gives us a strong market share
of the total accessories market. We source these products direct
from the manufacturer, giving us strong margins and total control.
The range is expanding, and includes a range for new launches
including accessories for Sony Move, Nintendo DSi and 3DS.
In 2010 our own-label sales outperformed the rest of our
business, with sales growth of 36%.
Exclusive products and extra content are another important part
of our customer offering in both physical and digital product.
Customers love the opportunity to buy a special version of a
product, and we see our market share outperform when we offer
exclusive elements.
Last year we offered customers 39 exclusive versions of titles,
and on average they delivered a market share around a third higher
than when we sell a generic version of a game. Our exclusives are
stronger than ever, and in Q1 2011 have included exclusive versions
of Pokemon Black and White; the Bulletstorm Epic edition which
provided Beta access to Gears of War 3; and the Crysis 2 Nano
Edition which included an exclusive backpack, figurine and
book.
Increasingly we are working with supplier partners to provide
customers with exclusive digital content when they buy a physical
copy of a game. This helps us to introduce customers to digital
content, and to position GAME as the lead authority on multichannel
gaming.
We maintain a very strong share on all new products because our
supplier partners see how we actively sell more products than
anyone else, and they support us with exclusive products and
appropriate volumes of stock.
A "retail accelerator" effect also applies very clearly to
digital products, and as a retailer we are able to sell more
digital content than publishers or developers on their own. Sales
of digital products, which include Xbox Live and Sony PSN time
cards as well as points cards and downloadable content cards, grew
at 27% last year to GBP41m. This has continued in 2011, with UK Q1
sales up 28% compared to Q1 2010.
Novel ways to buy
We have always been innovative in giving customers new ways to
own and experience games that are as affordable as possible. Our
trade-in model, supporting the sale of preowned games and hardware
reduces the cost to our customers of their gaming purchases,
particularly when combined with our loyalty cards, and GAME has
great skill and expertise in this area. We are also looking at new
ownership models, both on our own and with suppliers.
The power of preowned and trade-in should not be under-estimated
in this market place. Preowned forms the backbone of our value
proposition, allowing customers to liquidate their unwanted assets
and giving them access to a lower price alternative. It is
performing strongly in our business, becoming a larger part of our
overall sales mix and delivering strong margins. It is a key pillar
of support for our business, and our established model provides
opportunity for further growth. Our objective is to increase the
number of customers who trade-in products and buy preowned, as they
have a higher customer lifetime value.
For the first time, a significant range of preowned products is
being offered online, giving customers additional choice and
strengthening our value messages. Our objective is to have a full
range of preowned products available online in the next year.
In 2010/11 preowned participation was 23.8% and preowned margins
were 39.7%. This has continued in 2011, with preowned participation
now 29.1% and preowned margins 41.0%.
Customer relationships
To engage all of our customers, we must communicate regularly
and personally with them. Our established CRM programme, combined
with our multi-channel initiatives and strategic plans, will make
the biggest difference in the future.
Over 17 million customers have joined our loyalty programmes,
giving us a unique data asset with which to plan for the future. It
shows us that over 60% of customers have shopped with us in the
last 12 months, and 10% of them are "super users" - the customers
who shop with us at least seven times in a five month period. The
customer lifetime value of these gamers is triple the average.
Our objectives are to increase the number of card holders across
the Group, drive up the number of super users, and re-engage lapsed
users. We will also proactively use the schemes to drive sales. In
2010 such activities generated less than GBP5m for the Group. By
2013, we want these revenues to exceed GBP100m.
The first step was to have a card for each brand, and in October
2010 we launched the Gamestation Elite card. It now has over
800,000 members, and is growing rapidly. In total more than 17m
customers hold a GAME Reward card or Gamestation Elite card.
We need to make our customer loyalty count. To that end we will
use our loyalty card programme to reward, remunerate and retain
customers. The key to our success will be supporting the loyalty
schemes through all channels. We have the back office functionality
that allows us to know each customer whenever and however they shop
with us. In Q1 2010 we initiated 150,000 proactive customer
contacts. In Q1 2011 this increased to more than 500,000.
The key elements of the loyalty card schemes, the number of card
holders and the percentage of "super users" continue to increase.
In 2010 we added 2.5m new members and in the first quarter this has
improved by 30,000 members a week.
Current trading:
In the first 12 weeks to 23 April 2011, the Group's total sales
were down by 14.3 per cent and lfl sales were down by 12.1 per
cent. In the UK and Ireland, total sales and lfl sales were down by
14.9 per cent and 12.4 per cent respectively, outperforming the
market.
In our International business, total sales were down by 15.8 per
cent and lfl sales on a constant currency basis were down 14.2 per
cent. Online sales were up by 2.1 per cent.
Our markets continue to be tough, but we were able to outperform
the markets through our strength in preowned and successful new
product launches. Our market share on the Nintendo 3DS and AAA
software launches, in particular, was higher than our average
because of our ability to offer customers excellent value via
trade-in deals.
Summary and Outlook
As the games market grows and evolves, we are more convinced
than ever that there is a role for a strong multichannel retailer
to aggregate content of different kinds and build solid customer
relationships based on trust and expertise.
The GAME Group is uniquely positioned to fulfil that role. Our
ability to launch new products in stores as well as online, with
customers using their loyalty cards to buy and enjoy both digital
and physical content, are assets no other business possesses. That
ability is driven by our passionate, expert and dedicated teams
around the world.
We are operating, however, in a very challenging economic
climate and we have a lot to do and a long way to go if we want to
outperform the market by growing new revenue streams. Our strategy
is designed to do just that, and our dedicated teams around the
world are focused on delivering it.
I'm encouraged by the good progress we've seen in the early
months of this year. We see good evidence that we can grow our
online, digital, own-label and preowned businesses strongly, even
in very tough market conditions.
It is critical that we implement the strategy with a firm focus
on cash generation, efficient capital expenditure and tight control
of costs. We will only invest where it helps us to achieve our
strategic goals.
These strategic and cost actions, coupled with our expectation
of the market, lead us to reaffirm guidance for the year with sales
growth of +2 per cent to +5 per cent, gross margins down 100 basis
points and flat operating costs.
We face the tough market of 2011 with a strong balance sheet,
high quality retail operations and real differentiators that few
competitors can match. We are well placed to deal with the
prevailing economic challenges and help our customers through these
difficult times. In the longer term, we are putting GAME in the
right place to deliver the strongest returns to our stakeholders as
the industry continues to change and evolve.
Directors' responsibility statement for the year ended 31
January 2011
Directors' responsibility statement
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Group, and enable them to ensure that the
financial statements comply with the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS
Regulation. They are also responsible for safeguarding the assets
of the Company, for taking reasonable steps for the prevention and
detection of fraud and other irregularities and for the preparation
of a Directors' Report and Directors' Remuneration Report which
comply with the requirements of the Companies Act 2006. Under
company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of
the state of affairs of the group and company and of the profit or
loss for the group for that period.
The Directors are responsible for preparing the annual report
and the financial statements in accordance with the Companies Act
2006. The Directors are also required to prepare financial
statements for the Group in accordance with International Financial
Reporting Standards as adopted by the European Union (IFRSs) and
Article 4 of the IAS Regulation. The Directors have chosen to
prepare financial statements for the Company in accordance with UK
Generally Accepted Accounting Practice.
The Directors are responsible for ensuring the annual report and
the financial statements are made available on a website. The
financial statements are published on the Group's website
(www.gamegroup.plc.uk) in accordance with legislation in the United
Kingdom governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions.
The maintenance and integrity of the Group's website is the
responsibility of the Directors. The Directors' responsibility also
extends to the ongoing integrity of the financial statements
contained therein.
Group financial statements
International Accounting Standard 1 requires that financial
statements present fairly for each financial year the Group's
financial position, financial performance and cash flows. This
requires the faithful representation of the effects of
transactions, other events and conditions in accordance with the
definitions and recognition criteria for assets, liabilities,
income and expenses set out in the International Accounting
Standards Board's 'Framework for the preparation and presentation
of financial statements'. In virtually all circumstances, a fair
presentation will be achieved by compliance with all applicable
IFRSs. A fair presentation also requires the Directors to:
-- consistently select and apply appropriate accounting
policies;
-- make judgements and accounting estimates that are reasonable
and prudent;
-- state whether they have been prepared in accordance with
IFRSs as adopted by the European Union, subject to any material
departures disclosed and explained in the financial statements;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information; and
-- provide additional disclosures when compliance with the
specific requirements in IFRSs is insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance.
Report of the Directors for the year end 31 January 2011
Parent Company financial statements
Company law requires the Directors to prepare financial
statements for each financial year which give a true and fair view
of the state of affairs of the Company and of the profit or loss of
the Company for that period. In preparing these financial
statements, the Directors are required to:
-- select suitable accounting policies and then apply them
consistently;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business;
-- make judgements and estimates that are reasonable and
prudent; and
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements.
Directors' responsibility statement pursuant to DTR4
The Directors confirm to the best of their knowledge:
-- The Group financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs) and Article 4 of the IAS
Regulation and give a true and fair view of the assets,
liabilities, financial position and profit and loss of the
Group.
-- The Annual Report includes a fair review of the development
and performance of the business and the financial position of the
Group and the Parent Company, together with a description of the
principal risks and uncertainties that they face.
Consolidated Statement of Comprehensive Income for the year
ended 31 January 2011
2011 2010
Note GBP'000 GBP'000
=================================== ====== =========== ===========
Revenue 1 1,625,034 1,772,358
Cost of sales 1,197,638 1,279,666
=================================== ====== =========== ===========
Gross profit 427,396 492,692
Other operating expenses 2 398,921 404,102
Operating profit before
non-recurring costs 43,208 94,789
Non-recurring costs 3 (14,733) (6,199)
----------------------------------- ------ ----------- -----------
Operating profit 4 28,475 88,590
Finance income 5 375 538
Finance costs 6 (5,745) (4,917)
=================================== ====== =========== ===========
Profit before taxation 23,105 84,211
Taxation 8 (7,452) (23,744)
=================================== ====== =========== ===========
Profit for the year attributable
to equity holders of
the parent 15,653 60,467
=================================== ====== =========== ===========
Other comprehensive income:
Exchange differences
on translating foreign
operations 2,921 3,920
Deferred income tax on
share-based payments 370 (1,078)
Income tax on share-based
payments 37 596
=================================== ====== =========== ===========
Other comprehensive income
for the period, net of
tax 3,328 3,438
=================================== ====== =========== ===========
Total comprehensive income
for the period attributable
to equity holders of
the parent 18,981 63,905
=================================== ====== =========== ===========
Earnings per share - 10 4.51p 17.45p
basic
- diluted 10 4.51p 17.42p
=================================== ====== =========== ===========
All amounts relate to continuing activities
Consolidated Balance Sheet as at 31 January 2011
Restated Restated
2011 2010 2009
Note GBP'000 GBP'000 GBP'000
================================ ====== ========= ========== ==========
Non-current assets
Property, plant and equipment 11 109,122 128,588 134,141
Intangible assets 12 209,875 212,668 213,735
Deferred tax asset 18 3,647 3,614 4,004
================================ ====== ========= ========== ==========
322,644 344,870 351,880
================================ ====== ========= ========== ==========
Current assets
Inventories 13 149,915 176,045 181,965
Trade and other receivables 14 48,538 48,316 55,465
Cash and cash equivalents 151,243 86,128 139,614
================================ ====== ========= ========== ==========
349,696 310,489 377,044
================================ ====== ========= ========== ==========
Total assets 672,340 655,359 728,924
================================ ====== ========= ========== ==========
Current liabilities
Trade and other payables 15 294,570 258,203 349,182
Current portion of long-term
borrowings 16 15,875 17,361 26,325
Leasehold property incentives 19 1,869 1,341 904
Current tax liabilities 7,755 12,943 26,037
================================ ====== ========= ========== ==========
320,069 289,848 402,448
================================ ====== ========= ========== ==========
Non-current liabilities
Long-term borrowings 16 15,559 23,908 31,847
Leasehold property incentives 19 9,718 10,048 8,328
================================ ====== ========= ========== ==========
25,277 33,956 40,175
================================ ====== ========= ========== ==========
Total liabilities 345,346 323,804 442,623
================================ ====== ========= ========== ==========
Net assets 326,994 331,555 286,301
================================ ====== ========= ========== ==========
Equity attributable to
equity holders of the
parent
Share capital 20 17,373 17,333 17,316
Share premium account 21 47,086 46,662 46,462
Capital redemption reserve 22 2,248 2,248 2,248
Shares held in Trust 22 (3,629) (3,395) (6,451)
Merger reserve 22 76,907 76,907 76,907
Foreign exchange reserve 22 30,295 27,374 23,454
Retained earnings 22 156,714 164,426 126,365
================================ ====== ========= ========== ==========
Total equity 326,994 331,555 286,301
================================ ====== ========= ========== ==========
The financial statements were approved by the Board of Directors
and authorised for issue on 27 April 2011 and were signed on its
behalf by:
Ben White
Director
Statement of Changes in Equity for the year ended 31 January
2011
Share Share Capital Shares Merger Retained Foreign Total
held
capital premium redemption in reserve earnings exchange
reserve Trust reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=============== ========= ========= ========= ========= ========= ========== ========== ==========
At 1 February
2009 17,316 46,462 2,248 (6,451) 76,907 126,365 23,454 286,301
=============== ========= ========= ========= ========= ========= ========== ========== ==========
Exchange
differences - - - - - - 3,920 3,920
on
translation
of foreign
currency net
investment
in
subsidiaries
Income tax on
share-based
payments
- Deferred
tax - - - - - (1,078) - (1,078)
- Current tax - - - - - 596 - 596
Net income
recognised
directly in
equity - - - - - (482) 3,920 3,438
Net income
recognised
in income
statement - - - - - 60,467 - 60,467
=============== ========= ========= ========= ========= ========= ========== ========== ==========
Total
recognised
income
and expense - - - - - 59,985 3,920 63,905
Issue of
shares 17 200 - - - - - 217
Purchase of
shares - - - (1,893) - - - (1,893)
Exercise of
options - - - 4,949 - (4,949) - -
Dividends
paid - - - - - (19,366) - (19,366)
Share-based
payment
expense - - - - - 2,391 - 2,391
At 1 February
2010 17,333 46,662 2,248 (3,395) 76,907 164,426 27,374 331,555
=============== ======== ======== ======= ========= ======== ========== ======== ==========
Exchange
differences - - - - - - 2,921 2,921
on
translation
of foreign
currency net
investment
in
subsidiaries
Income tax on
share-based
payments
- Deferred
tax - - - - - 370 - 370
- Current tax - - - - - 37 - 37
Net income
recognised - - - - - 407 2,921 3,328
directly in
equity - - - - - -
Net income
recognised
in income
statement - - - - - 15,653 - 15,653
=============== ======== ======== ======= ========= ======== ========== ======== ==========
Total
recognised
income
and expense - - - - - 16,060 2,921 18,981
Issue of
shares 40 424 - - - - - 464
Purchase of
shares - - - (1,926) - - - (1,926)
Exercise of
options - - - 1,692 - (1,692) - -
Dividends
paid - - - - - (20,073) - (20,073)
Share-based
payment
credit - - - - - (2,007) - (2,007)
At 31 January
2011 17,373 47,086 2,248 (3,629) 76,907 156,714 30,295 326,994
=============== ======== ======== ======= ========= ======== ========== ======== ==========
The restatement is a reclassification within Non-Current Assets
and has no impact on equity.
Consolidated Statement of Cash Flows for the year ended 31
January 2011
Restated
2011 2010
Note GBP'000 GBP'000
================================== ====== ========== ==========
Cash flow from operating
activities
Operating profit 28,475 88,590
Equity-settled share-based
payment (credit)/ expense (2,007) 2,391
Depreciation and amortisation 30,521 32,898
Impairment of goodwill 3,354 -
Loss on disposal of non-current
assets 4,800 2,734
Market value movement
on financial instrument 5 81
================================== ====== ========== ==========
65,148 126,694
(Increase) / decrease
in trade and other receivables (236) 6,869
Decrease in inventories 27,750 7,220
Increase / (decrease)
in trade and other payables 38,623 (87,860)
Increase in leasehold
incentives 198 1,757
================================== ====== ========== ==========
Cash generated from operations 131,483 54,680
Finance costs paid (5,745) (4,917)
Corporation tax paid (14,359) (36,626)
================================== ====== ========== ==========
Net cash from operating
activities 111,379 13,137
================================== ====== ========== ==========
Cash flows from investing
activities
Purchase of property,
plant and equipment (9,763) (24,927)
Purchase of intangible
assets (7,909) (4,963)
Proceeds from sale of
equipment 2,396 455
Finance income received 375 538
================================== ====== ========== ==========
Net cash used in investing
activities (14,901) (28,897)
================================== ====== ========== ==========
Cash flows from financing
activities
Proceeds from issue of
share capital 464 217
Shares purchased for
Trust (1,926) (1,893)
Payment of Term Loan (8,330) (63,330)
Proceeds from Term Loan - 50,000
Payment of other long-term
borrowings (1,023) (2,935)
Payment of finance lease
liabilities (475) (419)
Dividends paid (20,073) (19,366)
================================== ====== ========== ==========
Net cash used in financing
activities (31,363) (37,726)
================================== ====== ========== ==========
Net increase / (decrease)
in net cash and cash
equivalents 65,115 (53,486)
Cash and cash equivalents
at beginning of period 86,128 139,614
================================== ====== ========== ==========
Cash and cash equivalents
at end of period 24 151,243 86,128
================================== ====== ========== ==========
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 2011 or 2010, but is derived from
those Accounts. Statutory accounts for 2010 have been
delivered to the Register of Companies and those for 2011 will
be delivered following the Company's Annual General Meeting.
The Independent Auditors' report on the 2010 accounts was
unqualified and did not contain a statement under 498(2) or
498(3) of the Companies Act 2006. The Independent Auditors'
report on the 2011 accounts was unqualified* and did not
contain a statement under 498(2) or 498(3) of the Companies Act
2006.
* did not draw attention to any matters by way of emphasis
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
30 January 2010. The current year's results are for the 52
week period ended 30 January 2011.
The consolidated financial statements incorporate the results of
the Group made up to 31 January 2011. 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 2006 as applicable to
companies reporting under IFRS and those IFRSs and IFRIC
interpretations issued and effective and endorsed by the
European
Union as at the time of preparing these financial
statements.
Change in accounting policy
In the current year, the Group has revised its accounting policy
for the classification of Droit au Bail (a type of French key
money). The balance of GBP32,533,000 at 31 January 2010 was
previously classified within "Short leasehold land and property" as
the payments confer onto the Group many rights similar to those
associated with a leasehold. These assets are assessed as having an
indefinite useful life and the carrying value is tested for
impairment . In light of proposed amendments to accounting for
leases, the nature of these assets has been reviewed and the
accounting policy revised to classify Droit au Bail within
Intangible Assets.
There has been no effect on the equity, or results of the Group
arising from the revision of this policy. The financial position
and cash flows of the Group has been re-stated to show the revised
disclosure within Non-current Assets.
Notes to the Financial Statements for the year ended 31 January
2011
1 Revenue, profit and net assets
Revenue, pre-tax profits and net assets all relate to the retail
of pc and video game products and the Group's operations are
organised and managed by geographic location only. Management
consider the reportable operating segments in accordance with IFRS
8 to be split between the UK and Ireland Stores, International
Stores, and Global Online. Management do not consider there to be
any major individual customers of the Group.
Revenue by origin and destination are not materially different.
Inter-segment transactions between operating segments are entered
into on an arms-length basis in a manner similar to transactions
with third parties.
The Group's business is seasonal with the key trading period
being the Christmas season.
United
Kingdom
and Ireland International Global
stores stores online Total
2011 2011 2011 2011
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 935,320 594,566 95,148 1,625,034
Cost of sales (673,286) (442,821) (81,531) (1,197,638)
Gross profit 262,034 151,745 13,617 427,396
Other operating
expenses
excluding
inter-segment
expenses (223,222) (149,170) (11,796) (384,188)
Inter-segment
expenses 3,619 (3,619) - -
Operating profit
/ (loss) before
non-recurring
costs 42,431 (1,044) 1,821 43,208
Non-recurring
costs - (14,733) - (14,733)
Operating profit
/ (loss) 42,431 (15,777) 1,821 28,475
=================== ============= =============== ========== =============
Net finance costs
excluding
inter-segment (5,208) (162) - (5,370)
Inter-segment
finance costs 3,503 (3,503) - -
Taxation (5,384) (2,068) - (7,452)
Profit / (loss)
after tax 35,342 (21,510) 1,821 15,653
=================== ============= =============== ========== =============
Other segmental
information:
Goodwill and
other
intangibles 155,693 53,584 598 209,875
Other assets 189,088 258,600 14,777 462,465
=================== ============= =============== ========== =============
Assets 344,781 312,184 15,375 672,340
Liabilities (143,482) (201,500) (364) (345,346)
Net assets 201,299 110,684 15,011 326,994
=================== ============= =============== ========== =============
Capital
expenditure 8,222 5,032 4,418 17,672
=================== ============= =============== ========== =============
Depreciation and
amortisation 15,774 12,079 2,668 30,521
=================== ============= =============== ========== =============
Impairment of
goodwill - 3,354 - 3,354
=================== ============= =============== ========== =============
Share-based
payment credit (2,007) - - (2,007)
=================== ============= =============== ========== =============
United
Kingdom
and Ireland International Global
stores stores online Total
2010 2010 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 1,072,698 602,556 97,104 1,772,358
Cost of sales (751,296) (447,373) (80,997) (1,279,666)
Gross profit 321,402 155,183 16,107 492,692
Other operating
expenses
excluding
inter-segment
expenses (240,044) (146,633) (11,226) (397,903)
Inter-segment
expenses 3,331 (3,331) - -
Operating profit
before
non-recurring
costs 84,689 5,219 4,881 94,789
Non-recurring
costs (6,199) - - (6,199)
Operating profit 78,490 5,219 4,881 88,590
=================== ============= =============== ========== =============
Net finance costs
excluding
inter-segment (4,184) (195) - (4,379)
Inter-segment
finance costs 2,544 (2,544) - -
Taxation (20,321) (3,423) - (23,744)
------------------- ------------- --------------- ---------- -------------
Profit / (loss)
after tax 56,529 (943) 4,881 60,467
------------------- ------------- --------------- ---------- -------------
Other segmental
information:
Goodwill and
other
intangibles 153,650 58,506 512 212,668
Other assets 212,042 220,653 9,996 442,691
=================== ============= =============== ========== =============
Assets 365,692 279,159 10,508 655,359
Liabilities (166,077) (149,524) (8,203) (323,804)
Net assets 199,615 129,635 2,305 331,555
=================== ============= =============== ========== =============
Capital
expenditure 11,013 14,333 4,544 29,890
=================== ============= =============== ========== =============
Depreciation and
amortisation 15,908 14,751 2,239 32,898
=================== ============= =============== ========== =============
Impairment of
assets - - - -
=================== ============= =============== ========== =============
Share-based
payment expense 2,391 - - 2,391
=================== ============= =============== ========== =============
2011 2010
Total Total
% of % of
GBP'000 Total GBP'000 Total
================ =========== ======== =========== ========
Revenue
Hardware 330,437 20.3 433,748 24.5
Software 670,956 41.3 730,800 41.2
================ =========== ======== =========== ========
New hardware
and software 1,001,393 61.6 1,164,548 65.7
Preowned 386,921 23.8 374,485 21.1
Other 236,720 14.6 233,325 13.2
================ =========== ======== =========== ========
Total 1,625,034 100.0 1,772,358 100.0
================ =========== ======== =========== ========
2011 2010
Total Total
% of % of
GBP'000 Total GBP'000 Total
================ =========== ======== =========== ========
Gross margin
New hardware
and software 198,823 46.5 257,362 52.2
Preowned 153,761 36.0 156,007 31.7
Other 74,812 17.5 79,323 16.1
================ =========== ======== =========== ========
Total 427,396 100.0 492,692 100.0
================ =========== ======== =========== ========
2011 2010
Total Total
% %
================ =========== ======== =========== ========
Gross margin
New hardware
and software 19.9 22.1
Preowned 39.7 41.7
Other 31.6 34.0
================ =========== ======== =========== ========
Total Group 26.3 27.8
================ =========== ======== =========== ========
2011 2010
GBP'000 GBP'000
Revenue by territory
United Kingdom and Ireland 935,320 1,072,698
France 163,441 187,291
Iberia 300,823 288,342
Scandinavia 48,963 49,962
Australia 71,568 69,705
Czech Republic 9,771 7,256
====================================== =========== ===========
Total Stores 1,529,886 1,675,254
Total Online 95,148 97,104
====================================== =========== ===========
Total Revenue 1,625,034 1,772,358
====================================== =========== ===========
Number Number
====================================== =========== ===========
Stores by territory
United Kingdom and Ireland 639 677
France 197 199
Iberia 287 283
Scandinavia 65 68
Australia 93 118
Czech Republic 31 29
====================================== =========== ===========
1,312 1,374
====================================== =========== ===========
Franchises
Iberia - 5
Australia 1 1
====================================== =========== ===========
1 6
====================================== =========== ===========
Sq ft Sq ft
====================================== =========== ===========
Trading square footage by territory
United Kingdom and Ireland 760,591 797,594
France 183,547 185,172
Iberia 236,389 236,045
Scandinavia 67,209 69,575
Australia 104,050 132,564
Czech Republic 18,494 17,483
====================================== =========== ===========
1,370,280 1,438,433
====================================== =========== ===========
2 Other operating expenses
2011 2010
GBP'000 GBP'000
=========================== ========= =========
Selling and distribution 316,078 324,198
Administrative expenses 82,843 79,904
=========================== ========= =========
398,921 404,102
=========================== ========= =========
Administrative expenses include non-recurring costs of
GBP14,732,620 (2010: GBP6,199,486) (see Note 3).
3 Non-recurring costs
In the current year administrative expenses include
non-recurring costs of GBP14,732,620 (2010: GBP6,199,486). Current
year non-recurring costs relate to the restructuring of the
Australian and French businesses. The non-recurring cost comprises
GBP8.5m of non-cash items including the write-off of goodwill in
respect of Australia, together with the write-off off certain
assets. The remaining GBP6.2m of cash items included termination
payments on leases, employment contracts and supplier contracts.
Prior year non-recurring costs were in relation to integration
costs following the acquisition of Gamestation.
4 Operating profit
2011 2010
GBP'000 GBP'000
======================================================== ========= =========
This is stated after charging:
Depreciation charge 25,404 28,593
Amortisation of intangible fixed assets 5,117 4,305
Goodwill impairment charge 3,354 -
Operating lease rentals - leasehold
premises 86,609 87,775
- other 1,001 1,289
Loss on disposal of non-current assets 4,800 2,734
Auditors' remuneration - Fees payable
to the Company's auditor for the
audit of the Company's
annual accounts 78 75
- Fees payable for the audit of the Company's
subsidiaries, pursuant to
legislation 357 355
- other services supplied pursuant to legislation
36 33
- other services relating to
tax 272 294
- All other services 154 169
======================================================== ========= =========
Goodwill impairment charges have been recognised within
administrative expenses in the consolidated statement of
comprehensive income.
5 Finance income
2011 2010
GBP'000 GBP'000
======================================= ========= =========
Interest income on financial assets
classified as loans and receivables 375 538
======================================= ========= =========
375 538
======================================= ========= =========
6 Finance costs
2011 2010
GBP'000 GBP'000
Interest expense for finance lease
and hire purchase arrangements 10 49
Interest expense for borrowings at
amortised cost 5,704 4,866
Other interest 31 2
===================================== ========= =========
Finance costs 5,745 4,917
===================================== ========= =========
7 Employees
Staff costs for all employees (including
Directors) consist of:
2011 2010
GBP'000 GBP'000
Wages and salaries 133,938 135,070
Social security costs 20,576 18,710
Other pension costs 2,026 1,700
Share-based payment (credit) / expense
(see Note 20g) (2,007) 2,391
============================================= ========= =========
154,533 157,871
============================================= ========= =========
The average number of employees of the Group during
the year, including Directors, was as follows:
2011 2010
Number Number
Selling 9,372 9,775
Administration and distribution 846 817
============================================= ========= =========
10,218 10,592
============================================= ========= =========
The key management personnel of the business are limited to the
Board of Directors.
8 Taxation
(a) Analysis of charge in the year
2011 2010
GBP'000 GBP'000
Current tax
UK corporation tax expense 7,513 22,192
Adjustments in respect of prior periods (5,182) (1,950)
Overseas tax payable 4,784 4,192
============================================ ========= =========
Total current tax 7,115 24,434
Deferred tax
Current year movement (641) (1,695)
Increase / decrease in tax rate 173 -
Prior year movement 805 1,005
============================================ ========= =========
Total deferred tax 337 (690)
============================================ ========= =========
Taxation on profit on ordinary activities 7,452 23,744
============================================ ========= =========
(b) Factors affecting the tax charge for the year
2011 2010
GBP'000 GBP'000
Profit on ordinary activities before
taxation 23,105 84,211
=========================================== ========= =========
Profit on ordinary activities multiplied
by the standard
rate of corporation tax in the UK
of 28.0% (2010: 28.0%) 6,469 23,579
=========================================== ========= =========
Effects of:
Expenses not deductible for tax
purposes 2,128 1,698
Effect of foreign tax rates 304 283
Tax losses incurred and (utilised)/not
utilised in the year 2,006 (1,128)
Adjustments to tax charge in respect
of previous periods (4,377) (946)
Other items 922 258
Tax charge for the year 7,452 23,744
=========================================== ========= =========
The Group has approximately GBP75.8 million (2010: GBP54.0
million) of unrelieved trading losses available for offset against
future taxable profits of certain Group companies. Of these losses,
GBP11.2 million (2010: GBP11.4 million) has been provided which
represents a recognised deferred tax asset of GBP3.0 million (2010:
GBP3.1 million). There are unprovided tax losses of GBP64.6 million
(2010: GBP42.6 million). Deferred tax assets have not been
recognised in respect of these losses as there is uncertainty over
future taxable profits against which these can be offset.
9 Dividends
2011 2010
Pence Pence
per share GBP'000 per share GBP'000
Final paid 3.90 13,541 3.71 12,849
Interim paid 1.88 6,532 1.88 6,517
=============== =========== ========= =========== =========
20,073 19,366
=============== =========== ========= =========== =========
It is proposed that a final dividend of 3.90p per share (2010:
GBP3.90p per share) will be paid on 15 July 2011 to shareholders on
the register on 24 June 2011. Based on the number of shareholders
on the register as at 31 March 2011 the final dividend will be
GBP13,550,944 (2010: GBP13,541,238).
10 Earnings per share
The calculation of earnings per share for the year ended 31
January 2011 is based on the profit after taxation of GBP15,652,502
(2010: GBP60,467,009). The calculation of basic earnings per share
is based on a weighted average number of shares in issue during the
period of 347,170,991 (2010: 346,512,537). 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
================== ============= =============== =============
31 January 2011 347,170,991 38,242 347,209,233
================== ============= =============== =============
31 January 2010 346,512,537 677,327 347,189,864
================== ============= =============== =============
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.
2011 2010
Pence Pence
================================================ ======= =======
Basic earnings per share 4.51 17.45
Non-recurring costs per share 4.24 1.79
================================================ ======= =======
Basic earnings per share before non-recurring
costs 8.75 19.24
================================================ ======= =======
Diluted earnings per share 4.51 17.42
Non-recurring costs per share 4.24 1.79
================================================ ======= =======
Diluted earnings per share before
non-recurring costs 8.75 19.21
================================================ ======= =======
There are 475,452 anti-dilutive share options in the current
year (2010: 648,948).
11 Property, plant and equipment
Short
Freehold leasehold Improvements Fixtures,
fittings
land and land and to leasehold and
property property property equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Group Restated Restated
Cost
At 31 January
2009 20,794 21,692 106,372 99,418 248,276
Additions 178 1,779 6,770 16,200 24,927
Disposals (362) (316) (2,648) (3,393) (6,719)
Exchange
adjustment 10 (1,246) (356) 1,743 151
=============== ========== =========== ============== =========== ==========
At 31 January
2010 20,620 21,909 110,138 113,968 266,635
Additions 378 668 2,774 5,943 9,763
Disposals - (934) (8,751) (8,972) (18,657)
Exchange
adjustment (383) 1,268 1,209 2,038 4,132
=============== ========== =========== ============== =========== ==========
At 31 January
2011 20,615 22,911 105,370 112,977 261,873
=============== ========== =========== ============== =========== ==========
Accumulated
depreciation
and impairment
At 31 January
2009 1,843 9,359 48,531 54,402 114,135
Charge for
the year 464 1,831 10,939 15,359 28,593
Disposals (146) (255) (1,845) (2,387) (4,633)
Exchange
adjustment 4 (63) (221) 232 (48)
=============== ========== =========== ============== =========== ==========
At 31 January
2010 2,165 10,872 57,404 67,606 138,047
Charge for
the year 542 2,995 10,251 11,616 25,404
Disposals - (682) (5,038) (6,481) (12,201)
Exchange
adjustment (127) 132 507 989 1,501
At 31 January
2011 2,580 13,317 63,124 73,730 152,751
=============== ========== =========== ============== =========== ==========
Carrying
amount
At 31 January
2011 18,035 9,594 42,246 39,247 109,122
=============== ========== =========== ============== =========== ==========
At 31 January
2010 18,455 11,037 52,734 46,362 128,588
=============== ========== =========== ============== =========== ==========
At 31 January
2009 18,951 12,333 57,841 45,016 134,141
=============== ========== =========== ============== =========== ==========
The net book value of tangible fixed assets includes an amount
of GBP96,887 (2010: GBP323,485) 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 GBP226,598 (2010: GBP893,736). The main
finance leases are for EPOS equipment.
In the current year the Group has revised its accounting policy
for the classification of Droit au Bail. These amounts have been
reclassified from 'Short leasehold land and property' to a separate
class of Intangible Asset (see Note 12). As a result, Property,
Plant and Equipment has been restated.
12 Intangible fixed assets
Computer Droit
Goodwill Brands software Au Bail Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Group Restated Restated
Cost
At 31 January 2009 160,657 18,164 13,615 31,468 223,904
Additions - 10 3,558 1,395 4,963
Disposals - - (2,460) (299) (2,759)
Exchange adjustment (461) 48 (120) (31) (564)
======================== ========== ========= ========== ========== ==========
At 31 January 2010 160,196 18,222 14,593 32,533 225,544
Additions - 19 7,378 512 7,909
Disposals /
impairments (3,420) - (900) (456) (4,776)
Exchange adjustment (2) (311) (421) (1,525) (2,259)
At 31 January 2011 156,774 17,930 20,650 31,064 226,418
======================== ========== ========= ========== ========== ==========
Amortisation
At 31 January 2009 205 2,276 7,688 - 10,169
Charge for the year - 1,257 3,048 - 4,305
Disposals/impairments - - (1,656) - (1,656)
Exchange adjustment (24) 7 75 - 58
======================== ========== ========= ========== ========== ==========
At 31 January 2010 181 3,540 9,155 - 12,876
Charge for the year - 1,224 3,893 - 5,117
Disposals /
impairments - - (682) - (682)
Exchange adjustment 77 (32) (813) - (768)
======================== ========== ========= ========== ========== ==========
At 31 January 2011 258 4,732 11,553 - 16,543
======================== ========== ========= ========== ========== ==========
Carrying Amount
At 31 January 2011 156,516 13,198 9,097 31,064 209,875
======================== ========== ========= ========== ========== ==========
At 31 January 2010 160,015 14,682 5,438 32,533 212,668
======================== ========== ========= ========== ========== ==========
At 31 January 2009 160,452 15,888 5,927 31,468 213,735
======================== ========== ========= ========== ========== ==========
Brands include GBP12,225,000 (2010: GBP13,311,667) in respect of
the Gamestation brand which has a remaining useful economic life of
11 years. On acquisition, the total useful economic life of the
Gamestation brand was 15 years.
Goodwill is made up as follows:
2011 2010
GBP'000 GBP'000
UK and Ireland 131,948 131,948
International 24,568 28,067
================= ========= =========
Total 156,516 160,015
================= ========= =========
For the purposes of impairment testing, the goodwill is
allocated to the lowest levels for which there are separately
identifiable cash flows, known as cash-generating units. The
carrying amount of goodwill allocated to the UK and Ireland
cash-generating unit (principally related to the GAME and
Gamestation brands) is considered significant in comparison with
the carrying amount of goodwill. The amounts disclosed as
International are made up of a number of cash-generating units
which are individually, and in aggregate not significant in
comparison with the total carrying amount of goodwill.
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 three years
and extrapolates cash flows using a steady growth rate applicable
to the relevant market. This rate does not exceed the average
long-term growth rate for the global market. The cash flows were
discounted using pre-tax discount rates, incorporating relevant
country and small corporate factors for each cash-generating unit.
Major assumptions used in the value-in-use calculations are as
follows:
UK and
2011 Ireland International
% %
Pre-tax discount rate 12.3 12.0-13.5
Long-term growth rate 3.0 3.0
======================== ========== ===============
UK and
2010 Ireland International
% %
Pre-tax discount rate 6.7 6.7
Long-term growth rate 3.0 3.0
======================== ========== ===============
During the year the Australian subsidiary, TGW Pty Limited,
implemented a restructuring program which resulted in the closure
of a number of stores. This had an adverse effect on the projected
value-in-use of the operation concerned and consequently resulted
in a full impairment of goodwill of GBP3.4m.
The carrying value of goodwill includes an amount of GBP6m
acquired goodwill in France. An increase in the discount rate to
13% or reduction in forecast profit of 20% would cause an
impairment of GBP1m to the carrying value of this goodwill.
To cause the carrying value of any of the remainder of the
Group's business units to exceed their recoverable amount would
require material and significant adverse changes in one or a more
of the assumptions made. The Board do not consider these to be
reasonably possible changes.
13 Inventories
2011 2010
GBP'000 GBP'000
================================ ========= =========
Finished goods and goods held
for resale 149,915 176,045
================================ ========= =========
The Directors consider that the replacement value of inventories
is not materially different from their carrying value. There are no
individual items of inventory held at fair value less costs to sell
(2010: none) and there are no items of stock written off in the
period (2010: none). The stock provision in the current year is
GBP10,123,536 (2010: GBP24,905,000), which estimates the difference
between the cost of stock and its estimated net realisable
value.
14 Trade and other receivables
2011 2010
GBP'000 GBP'000
======================================= =========
Amounts falling due within one year:
Trade receivables 11,660 16,022
Other receivables 14,852 13,134
=======================================
Total trade and other receivables 26,512 29,156
Prepayments and accrued income 22,026 19,160
48,538 48,316
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 2011 and 31 January 2010 there were no amounts
which were past due and no amounts which were impaired.
The fair values of trade and other receivables are the same as
book values as credit risk has been addressed as part of impairment
provisioning and due to the short-term nature of the amounts
receivable they are not subject to other fluctuations in market
rates.
15 Trade and other payables
2011 2010
GBP'000 GBP'000
======================================= ========= =========
Amounts falling due within one year:
Trade payables 201,009 159,441
Other payables 9,619 6,041
Tax and social security costs 8,022 5,924
VAT payables 32,792 34,091
Accruals and deferred income 43,128 52,706
=======================================
294,570 258,203
Trade payables are non-interest bearing and are normally settled
on 30 days following the end of the month of receipt.
Book values approximate to fair value at 31 January 2011 and 31
January 2010 due to the short-term nature of these items and taking
into account the credit risk of the Group. The difference between
the book and fair values is not considered to be material.
16 Borrowings
2011 2010
GBP'000 GBP'000
=========
Long-term:
Current portion:
Bank loans 15,727 16,864
Obligations under finance leases and
hire purchase contracts 148 497
15,875 17,361
=========
Non-current portion:
Bank loans 15,559 23,782
Obligations under finance leases and
hire purchase contracts - 126
15,559 23,908
=========
The borrowings are repayable as follows:
On demand or within one year 15,727 16,864
In one to two years 15,559 15,736
In more than two years but less than
five years - 8,046
31,286 40,646
=========
The finance leases are repayable as
follows:
On demand or within one year 148 497
In one to two years - 126
In more than two years but less than
five years - -
After five years - -
148 623
=========
Minimum
The finance leases are repayable as Lease Present
follows: Payments Interest Value
2011 2011 2011
GBP'000 GBP'000 GBP'000
On demand or within one year 168 (20) 148
In one to two years - - -
In more than two years but less than
five years - - -
After five years - - -
168 (20) 148
Minimum
Lease Present
Payments Interest Value
2010 2010 2010
GBP'000 GBP'000 GBP'000
On demand or within one year 530 (33) 497
In one to two years 147 (21) 126
In more than two years but less than
five years - - -
After five years - - -
677 (54) 623
There is no material difference between the book value and
current value of these borrowings.
2011 2010
GBP'000 GBP'000
The gross contractual maturity of
financial liabilities is as follows:
On demand or within one year 16,678 18,662
In one to two years 15,715 16,581
In more than two years but less than
five years - 8,140
Less: interest due (959) (2,114)
31,434 41,269
There is no material difference between the book value and
current value of these borrowings.
17 Financial instruments
Categories of financial instruments
Loans and receivables
2011 2010
Financial assets GBP'000 GBP'000
=============
Current financial assets
Trade and other receivables (Note 14) 26,512 29,156
Net cash and cash equivalents (Note 24) 151,243 86,128
177,755 115,284
============== =============
Financial liabilities
measured at
amortised cost
2011 2010
Financial liabilities GBP'000 GBP'000
=============
Current financial liabilities
Trade and other payables (Note 15) 294,570 258,203
Loans and borrowings (Note 16) 15,875 17,361
Total current financial liabilities 310,445 275,564
Non-current financial liabilities
Loans and borrowings (Note 16) 15,559 23,908
Total non-current financial liabilities 15,559 23,908
============== =============
Total financial liabilities 326,004 299,472
============== =============
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.
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:
2011 2010
GBP'000 GBP'000
=========
Floating rate Euro borrowings - 1,128
Floating rate Sterling borrowings 31,434 40,141
31,434 41,269
=========
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 GBP125
million to be used for general corporate and working capital
purposes. As at 29 January 2011 an amount of EURnil (2010: EURnil)
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 a GBP33.3 million
Term Loan taken out in order to refinance the existing debt at
GAME. The interest rate on the loan is based on LIBOR.
The terms of the loan facility indicates a fixed charge over the
freehold property and a floating charge over assets.
(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:
2011 2010
GBP'000 GBP'000
Sterling 83,628 45,500
Euro 55,897 26,783
Swedish Krona 7,593 4,473
Danish Krone 160 229
Norwegian Krone 863 806
Australian Dollar 1,676 7,447
Czech Koruna 1,426 890
151,243 86,128
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 2011, 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 GBP789,048 lower (2010: GBP1,131,051 lower).
At 31 January 2011, 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 GBP85,781 lower (2010: GBP271,576 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 tables in (a) and (b) above present financial liabilities
and assets denominated in foreign currencies held by the Group in
2011 and 2010. If the Euro weakened or strengthened by 10 per cent
against Sterling, with all other variables held constant, profit
after tax and equity would change by GBP1,288,242 (2010: change by
GBP331,991).
(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.
2011 2010
GBP'000 GBP'000
Trade and other receivables 26,512 29,156
Net cash and cash equivalents 151,243 86,128
Current portion of long-term
debt (15,875) (17,361)
Non-current portion of long-term
debt (15,559) (23,908)
The Directors believe that as they are short-term, the fair
values for all items, other than long-term debt, equate to their
book value.
The fair values of both current and non-current bank borrowings
are based on cash flows discounted using rates based on the
applicable market rate. The discount rate applied were within the
range 3 per cent to 4 per cent (2010: 3 per cent to 4 per
cent).
(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 30 March 2011, the Group had undrawn working capital
facilities available to it of GBP66.8 million (2010: GBP54.8
million). There are no significant conditions attached to these
facilities.
(g) The Group has entered into standby letters of credit to the
value of GBP2,029,205 (2010: GBP2,029,205). In this respect, the
Group treats these letters of credit as a contingent liability
until such time as it becomes probable that the Group will be
required to make a payment under the terms of the letters.
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 the statement of changes in equity.
Gearing ratio
It is the Group's policy to maintain its gearing ratio within
the range of 0-100 per cent (2010: 0-100 per cent). The Group's
gearing ratio at the balance sheet date is shown below:
2011 2010
GBP'000 GBP'000
Debt(i) 31,434 41,269
Trade and other payables 294,570 258,203
Net cash and cash equivalents (151,243) (86,128)
Net debt 174,761 213,344
2011 2010
GBP'000 GBP'000
Equity(ii) 326,994 331,555
Capital and net debt 501,755 544,899
Gearing ratio 35% 39%
(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.
18 Deferred taxation
(Charged)/
Credited (Charged)/
to profit Credited
Asset Liability Net or loss to equity
2011 2011 2011 2011 2011
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Accelerated
capital
allowances 211 - 211 681 -
Tax losses
carried
forward 3,028 - 3,028 (85) -
Share options 995 995 (774) 370
Other
temporary
and
deductible
differences (587) (587) (159) -
Deferred tax
asset /
(liability) 4,234 (587) 3,647 (337) 370
(Charged)/
Credited (Charged)/
to profit Credited
Asset Liability Net or loss to equity
2010 2010 2010 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Accelerated
capital
allowances - (470) (470) (536) -
Tax losses
carried
forward 3,113 - 3,113 1,516 -
Share options 1,399 - 1,399 355 (1,078)
Other
temporary
and
deductible
differences - (428) (428) (645) -
Deferred tax
asset /
(liability) 4,512 (898) 3,614 690 (1,078)
2011 2010
GBP'000 GBP'000
At 1 February 3,614 4,004
Deferred tax (charge) / credit in
the income statement for the year
(Note 8) (337) 690
Deferred tax taken to equity:
Accelerated capital allowances - -
Tax losses carried forward - -
Share options 370 (1,078)
Other temporary and deductible differences - -
Other items - (2)
At 31 January 3,647 3,614
19 Leasehold property incentives
2011 2010
Rent-free periods and
reverse premiums GBP'000 GBP'000
At 1 February 11,389 9,232
Rent free periods and reverse premiums
received during the year 2,660 3,311
Released to statement
of comprehensive income (2,462) (1,154)
At 31 January 11,587 11,389
Due within one year 1,869 1,341
Due greater than one year 9,718 10,048
At 31 January 11,587 11,389
20 Called-up share capital
2011 2010
GBP'000 Number GBP'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 17,373 347,461,388 17,333 346,659,167
(a) Shares issued
During the year, 802,221 (2010: 335,510) shares were issued to
employees exercising share options granted under various option
schemes. The total consideration received on the exercise of these
options was GBP464,158 (2010: GBP216,799). The weighted average
share price during the period was 77.62p (2010: 152.96p).
Between the year end and 1 April 2011, no shares have been
exercised.
(b) Shares purchased
During the year no shares (2010: nil) were repurchased for
cancellation by the Company at a cost of GBPnil (2010: GBPnil).
(c) Trust shares
During the year 2,000,000 shares (2010: 1,450,000 shares) were
purchased at a cost of GBP1,925,800 (2010: GBP1,893,495). These
shares are to be used wholly and exclusively to pay LTIP awards
when they become due for payment.
Trust shares comprise 3,297,275 (2010: 2,368,001) 5p ordinary
shares. The market value of these shares at 31 January 2011 is
GBP2,209,174 (2010: GBP2,178,561).
21 Share premium account
2011 2010
GBP'000 GBP'000
=========
Amount subscribed for share capital
in excess of nominal value
At 1 February 46,662 46,462
Arising on issue of shares during
the year (net of expenses) 424 200
At 31 January 47,086 46,662
22 Reserves
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, First Tower 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 cumulative amount of goodwill resulting from acquisitions in
previous years prior to the adoption of FRS 10 (Goodwill and
intangible assets) which has been eliminated against Group
reserves, net of goodwill attributable to disposals before 31
January 2011, is GBP9,639,000 (2010: GBP9,639,000).
23 Acquisitions
There were no acquisitions during the current or prior year.
24 Analysis of net funds
2011 2010
GBP'000 GBP'000
Cash and cash equivalents 151,243 86,128
========== ==========
Net cash and cash equivalents 151,243 86,128
Current portion of long-term borrowings (15,875) (17,361)
Long-term borrowings (15,559) (23,908)
Net funds 119,809 44,859
========== ==========
During the year, the Group did not enter into any new finance
lease arrangements in respect of assets (2010: nil).
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:
2011 2010
Motor Land and Motor Land and
vehicles buildings vehicles buildings
GBP'000 GBP'000 GBP'000 GBP'000
The total future
minimum lease
payments
are due as follows:
Not later than one
year 116 3,370 91 4,093
Later than one year
but not later than
five years 818 127,755 795 110,805
Later than five years - 265,168 - 326,950
934 396,293 886 441,848
===========
The average remaining term on operating leases over land and
buildings is five years.
The operating leases over land and buildings in International
operations have lengths of term for a maximum period of nine
years.
26 Related party transactions
There were no related party transactions within the year or
prior year.
27 Principal risks and uncertainties
Risk at GAME
Our Board believes that recognising and managing risks is the
key to an effectively run business. The monitoring of risk is
delegated to the Audit Committee which has tasked the business with
capturing and reporting on risk in a consistent manner across the
Group. The methodology is both bottom up, with detailed risk
reports on all operating matters being sent from each territory,
and top down, with senior management identifying all risks that
could potentially prevent us from delivering our agreed strategy.
Every identified risk is examined and mitigating activities are put
in place. A risk report is presented to the Audit Committee half
yearly.
Risk factors
Risk Type Impact Risk Mitigation
Technology The digital world is We are investing in
Speed of change and evolving quickly. If we the mobile and digital
growth of technology do not adapt to the future to ensure we
in the market place changes we run the risk can serve our
of failing to deliver a customers in whichever
truly multichannel medium they wish to
offering to our purchase games, be
customers. that digital download,
web or in store.
Competition If we are unable We use a suite of
The pc and video to compete we run specialist tools to
games market continues the risk of losing give customers great
to be an attractive our customers and value. We recognise
place to do business. our market share. that this is not
Our competition comes always direct price
in many guises. A cuts. This is where
relatively new entrant our position as a
to the games market specialist in the
is found in the mobile market place must give
operators selling us the edge. We strive
directly to consumers to find exclusive
whilst supermarkets offerings for our
continue to discount customers that they
heavily or run short- cannot get anywhere
term loss leading else. Our preowned
campaigns on newly offerings, trade-in
released products. promotions and the use
We also have our of loyalty card points
more traditional as currency allows our
competition from customers to enjoy
other specialists popular and new
and online players. products at great
value.
Reputational We have Damage to our We protect our
built up customer reputation could lead reputation by ensuring
loyalty over many to loss of revenue and that our staff are
years. GAME and shareholder value. highly trained and
Gamestation are trusted know their obligations
brands. Our customers to protect and respect
demand that we stock our customers. We
the broadest range of demand that our teams
products but trust us follow regular
to sell those products rigorous training
appropriately. Some of programmes, and adhere
our video games, for to strict policies and
instance, are age procedures relating to
restricted and age-rated products,
mis-selling is illegal. and data protection.
Through our loyalty
card programmes we have
built up a valuable
database of information
about our customers.
Our customers give us
personal information so
that we can keep them
up to date with offers
and new releases of
interest to them. It is
vital that this data is
protected and secure.
Major Business Like all businesses All parts of our
Interruption any disruption to business, in every
our capacity to do territory, have put
business will affect together business
our profitability. continuity plans to
ensure we are able to
trade through
challenges. This was
put to the test
recently in the UK
when adverse weather
conditions close to
Christmas threatened
to disrupt our supply
chains. Our processes
worked, and business
interruption was
minimised.
People and Change Business change cannot Every aspect of the
be delivered if we Group's reward and
fail to attract, development programmes
develop and retain is regularly reviewed
the right people to ensure that it
in the right roles. keeps pace with our
business needs and
market conditions. Our
Group HR Director
works closely with the
Remuneration Committee
to ensure best
practice across the
Group
This information is provided by RNS
The company news service from the London Stock Exchange
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