RNS Number:0439Q
Game Group PLC
23 September 2003
23rd September 2003
THE GAME GROUP PLC
Interim Results for the six months ended 31 July 2003
Highlights
Interim Results for the six months ended 31 July 2003
* Turnover up 8% to #231m (#215m) with like for like sales down 0.3%
* Gross Margin percentage maintained in competitive market
* Half year profit, before goodwill amortisation, of #2.1m (#3.1m) - only the
4th time in the Group's history a profit has been achieved in the first half
* 23%* year to date growth in UK installed base of key hardware formats
together with imminent release of strong titles augurs well for Christmas
trade
* Interim dividend increased by 11% to 0.5p reflecting your Board's
confidence in the prospects of the Group
Peter Lewis, Chairman said:-
"These are solid and reassuring results coming on top of last years' 50% sales
increase. The stage is set for an exciting Christmas."
For further information please contact:
Martin Long, Chief Executive Designate & Chief Financial Officer
Lisa Morgan, Deputy Chief Executive Designate
Simon Soffe, Head of PR & Communication
The GAME Group Tel: 01344 464515
Nic Bennett / Ben Foster / Charlie Armitstead
Financial Dynamics Tel: 020 7831 3113
* source: ChartTrack (includes PS2/ Xbox/ Gamecube/ GBA/ SP)
Chairman's account to the owners for the six months to 31 July 2003
Dear Owner
For the second successive year, your seasonal business has achieved a first half
profit, with operating profit before goodwill amortisation of #1.8m (#2.7m) and
pre-tax profit before goodwill amortisation of #2.1m (#3.1m). The difference
from the previous year is almost wholly attributable to increased seasonal
losses in Europe of #1.5m (loss #0.6m) in line with expectations given the
significant increase in the store base. We continue to increase our activities
in France, Spain and Sweden by organic growth and fully expect to see the
rewards of our investment in future years.
Group turnover increased by 8% to #231m (#215m), with like for like sales down
0.3% compared with a year ago when a 29% increase was recorded. Gross margins
were marginally improved at 28.7% (28.5%).
The industry background has been relatively calm compared to the frenzy of
activity in the market in the first half of 2002, when we had the launch of the
Microsoft Xbox and Nintendo Gamecube. As such these results are very
satisfactory and the Board is proposing to increase the interim dividend by 11%
to 0.5p (0.45p), reaffirming its confidence in the future prospects for your
business.
Your business in the period
In a comparatively quiet period for new products, the only notable hardware
launch was that of Gameboy SP at the end of March which made a useful
contribution to volume growth. We have seen some creditable performances from
software titles, but as a general rule there has been a shortage of major
software titles to take advantage of the ever increasing installed console base.
However, a whole host of blockbuster titles is now scheduled for the latter part
of the year.
As I reported to you in the 2003 Annual Accounts, your management team has
focussed attention on developing GAME's competitive advantages which are proving
effective in an increasingly challenging market place. The improved preowned
programme, promotional product offers, the widest available product range,
emphasis on in-store service and local price competitiveness have all helped
increase our UK market share whilst securing a modest rise in the gross margin
percentage. The continuing success of the GAME loyalty card is a reflection of
our customer appeal. Current membership is 4.2m (3.3m) with the weekly sign-up
rate averaging 15,000 new customers.
At the end of July we traded from 518 stores, concessions and franchises
compared with 465 a year earlier:-
Stores trading at 31 July 2003 2002
Company Owned and concessions
UK 340 326
Europe 123 78
Franchises
Europe 55 61
Total Outlets 518 465
During the period there were 14 net new stores and with planned openings in all
territories in the second half of the year we expect to trade from over 540
outlets for Christmas, up from 507 outlets last year.
We have made headway in Europe during the year in enhancing the infrastructure
of our fledgling business. In France in particular, a great deal of progress
has been made, with the store remodelling programme now well under way. The new
IT systems rollout is now complete and key new management appointments have been
made. In both Spain and Sweden our store opening programme has continued.
We reported on 28 February that last November's decision by the High Court to
maintain the Services Agreement between GAME and Electronics Boutique Inc ("EBI
"), had been upheld by the Court of Appeal. Therefore, the agreement, which
essentially requires GAME to pay EBI 1% of its UK turnover, remains in effect.
It is due to expire in January 2006 with a current annual cost of circa. #5m.
Your Board continues to take a carefully measured approach to the operation of
GAME Digital where losses reduced to #0.5m (#0.8m). In the light of the slow
development of the online PC gaming market in the UK, the Board is undertaking a
review of its activities in this area with the intention of improving Group
profitability. The cost implications of this review are not material. It is
anticipated that the conclusion of this review will be announced at the time of
the Christmas trading statement in early January.
Treasury
Capital expenditure of #13.2m (#8.7m) was dominated by the acquisition of
freehold land in Basingstoke for the new Distribution and Head Office facility
which is on schedule to be operational in the first half of next year. Some
#9.0m of capital expenditure in the period was in respect of Basingstoke and
adequate bank finance has been put in place to facilitate construction.
During the period, #8.2m was spent on the purchase of 17.7m of our own shares
for cancellation at an average price of 46p. Net cash outflow from operating
activities was #8.9m (#7.4m) and, as is seasonally customary, we expect to
generate strong positive cash flow in the second half of the year.
Staff & Management
Your staff and management at all levels have worked incredibly hard to hone and
deliver to customers our distinctive differences which have enabled GAME to
perform well in the face of new competitive challenges. We thank them all.
Your Board
Mr Albert Scardino, non-executive director, has resigned to return to journalism
as a senior editor at a national news organisation. His resignation is
effective 30 September. We are grateful for his contribution to your Group's
affairs and wish him every success. A new appointment will be made in due
course. Christopher Bell has been appointed Chairman of the Remuneration
Committee.
Current & Future Trading
In the 7 weeks to 20 September like for like sales were down 4% which is to be
expected given the shortage of major new releases this year, and last year's
price reduction of both Xbox and PlayStation 2 in August. In the circumstances
this is a strong performance for the year to date and we continue to perform in
line with our expectations, but it is the Christmas season which matters.
The principle drivers for growth are the increase in the installed base of
machines (which prompts demand for software) and the quality of new software
titles (which spurs further consumer demand).
So far this year, strong new titles have been few and far between, but that will
change this Autumn with an impressive line-up of releases including:- Medal of
Honor: Rising Sun, Lord of the Rings: The Return of the King, FIFA football 2004
(all from Electronic Arts), True Crime: Streets of LA (Activision), Prince of
Persia: The Sands of Time and Rainbow six 3 (Ubisoft), Max Payne 2 (Take Two)
and Mario Kart Double Dash (Nintendo).
In contrast to the quiet period for software, in the first half hardware unit
sales have continued to grow. The installed base for key hardware formats in
the UK has increased by 23% since last December to a current total of 7.9m*.
This source of expanded demand coupled with strong new software releases makes
your Board confident of strong software sales this Christmas. In addition we
expect, as traditionally experienced, to see consumer demand heightened by
further much welcomed price moves from console manufacturers.
Set against our optimism about the fundamentals of the strength of both the
industry as a whole and our business model, there needs to be an element of
caution about the potential impact on software margins of yet more competitive
pricing in the coming months. Your Board has taken steps to ensure that your
Group is best prepared for the Christmas season and is cautiously confident of
making further satisfactory progress this year.
Peter Lewis
Chairman
* source: ChartTrack (includes PS2/ Xbox/ Gamecube/ GBA/ SP)
Unaudited consolidated profit and loss account
for the six months ended 31 July 2003
Notes Six months Six months Year
ended ended ended
31 July 31 July 31 January
2003 2002 2003
Unaudited Unaudited Audited
#'000 #'000 #'000
Turnover 231,015 214,664 560,065
Cost of sales 164,710 153,388 402,910
Gross profit 66,305 61,276 157,155
Other operating expenses 1 67,358 61,779 130,786
Operating profit before goodwill
amortisation and re-branding costs 1,800 2,693 32,395
Goodwill amortisation (2,853) (3,196) (5,923)
Re-branding costs - - (103)
Operating (loss)/profit (1,053) (503) 26,369
Net interest receivable 259 423 796
(Loss)/profit on ordinary activities
before taxation (794) (80) 27,165
Taxation on (loss)/profit on ordinary activities 2 675 1,013 10,608
(Loss)/profit on ordinary activities after
taxation (1,469) (1,093) 16,557
Dividends 3 1,790 1,667 3,758
(Loss)/profit for the period (3,259) (2,760) 12,799
(Loss)/earnings per share - basic 4 (0.40p) (0.30p) 4.40p
- diluted 4 (0.40p) (0.30p) 4.36p
Earnings per share before goodwill amortisation
- basic 4 0.38p 0.57p 5.98
- diluted 4 0.38p 0.56p 5.91p
Number of stores trading (including concessions)
At beginning of period 449 389 389
At end of period 463 404 449
Unaudited consolidated balance sheet
as at 31 July 2003
Notes As at As at As at
31 July 31 July 31 January
2003 2002 2003
Unaudited Unaudited Audited
#'000 #'000 #'000
Fixed assets
Intangible 5 89,553 110,068 92,160
Tangible 6 42,350 30,346 41,742
Assets under construction 7 8,984 - -
140,887 140,414 133,902
Current assets
Stocks 43,610 39,249 38,205
Debtors 8 21,875 21,976 17,523
Cash at bank and in hand 8,862 15,652 37,972
74,347 76,877 93,700
Creditors: amounts falling
due within one year 9 62,554 63,563 71,923
Net current assets 11,793 13,314 21,777
Total assets less current liabilities 152,680 153,728 155,679
Creditors: amounts falling due
after more than one year 10 7,925 4,466 1,361
Accruals and deferred income
Leasehold property incentives 1,592 1,457 1,733
Net assets 143,163 147,805 152,585
Capital and reserves
Called up share capital 17,899 18,820 18,772
Share premium account 38,625 37,680 38,513
Capital redemption reserve 935 - 50
Shares to be issued - 11,232 -
Other reserves 76,907 76,907 76,907
Profit and loss account 11 8,797 3,166 18,343
Equity shareholders' funds 143,163 147,805 152,585
Approved by the Board on 23 September 2003.
M Long
Director
Unaudited consolidated cash flow statement
for the six months ended 31 July 2003
Notes Six months Six months Year
ended ended ended
31 July 31 July 31 January
2003 2002 2003
Unaudited Unaudited Audited
#'000 #'000 #'000
Net cash (outflow)/inflow from operating
activities 12 (8,868) (7,384) 37,366
Returns on investments and servicing
of finance 259 423 796
Taxation (4,965) (4,429) (10,648)
Capital expenditure and financial investment
- assets under construction (8,984) - -
- other (3,984) (8,863) (22,263)
Acquisitions (278) (268) (569)
Equity dividends paid (2,065) (1,482) (3,175)
Cash (outflow)/inflow before financing (28,885) (22,003) 1,507
Financing - share buyback (8,218) - (310)
- other 8,025 803 303
(Decrease)/increase in cash in the period 13 (29,078) (21,200) 1,500
Notes to the interim results
1 Other operating expenses
Six months Six months Year
ended ended ended
31 July 31 July 31 January
2003 2002 2003
Unaudited Unaudited Audited
#'000 #'000 #'000
Selling and distribution 52,997 47,932 100,974
Administrative expenses 11,508 10,651 23,889
Goodwill amortisation 2,853 3,196 5,923
67,358 61,779 130,786
2 Taxation
Six months Six months Year
ended ended ended
31 July 31 July 31 January
2003 2002 2003
Unaudited Unaudited Audited
#'000 #'000 #'000
Current year
UK corporation tax 1,208 1,013 10,278
Adjustments in respect of prior periods - - (23)
Overseas tax payable 6 - 26
Total current tax 1,214 1,013 10,281
Deferred tax:
Origination and reversal of timing
differences (539) - 327
675 1,013 10,608
The UK corporation tax charge has been included at a corporation tax rate in
line with the previous year.
3 Dividends
Six months Six months Year
ended ended ended
31 July 31 July 31 January
2003 2002 2003
Unaudited Unaudited Audited
#'000 #'000 #'000
Ordinary dividends
Interim 0.50p per ordinary share (2002: 0.45p) 1,790 1,667 1,693
Final 0.55p per ordinary share - - 2,065
1,790 1,667 3,758
The interim dividend is payable on 28 November 2003 to shareholders on the
register on 7 November 2003.
4 (Loss)/earnings per share
The calculation of loss per share for the six months ended 31 July 2003 is based
on the loss after taxation of #1,469,000 (2002 interim: loss after taxation of
#1,093,000; full year: profit after taxation of #16,557,000) The calculation of
the earnings per share before goodwill amortisation is based on a profit of
#1,384,000 (2002 interim: profit of #2,103,000; full year: profit of
#22,480,000) The calculation of basic loss per share is based on a weighted
average number of shares in issue during the period of 363,823,016 (2002
interim: 370,399,899; full year: 376,009,811). The calculation of diluted loss
per share is based on a weighted average number of shares in issue during the
period of 364,621,789 (2002 interim: 375,144,225; full year 380,174,783).
Reconciliation of denominators used for basic and diluted loss per share
calculations:
Effect of
Share
Basic options Diluted
Number Number Number
31 July 2003 363,823,016 798,773 364,621,789
31 July 2002 370,399,899 4,744,326 375,144,225
31 January 2003 376,009,811 4,164,972 380,174,783
5 Goodwill
As at As at As at
31 July 31 July 31 January
2003 2002 2003
Unaudited Unaudited Audited
#'000 #'000 #'000
Net book value at beginning of period 92,160 112,720 112,720
Amortisation for period (2,853) (3,196) (5,923)
Other movements 246 544 (14,637)
Net book value at end of period 89,553 110,068 92,160
Goodwill arising on acquisitions of subsidiary undertakings is capitalised as an
intangible fixed asset and either amortised over the useful life, when this can
be identified, or amortised over a period of 20 years or less.
6 Tangible fixed assets
As at As at As at
31 July 31 July 31 January
2003 2002 2003
Unaudited Unaudited Audited
#'000 #'000 #'000
Cost
At beginning of period 73,787 61,593 61,593
Acquisitions 25 35 60
Additions 4,187 8,683 22,794
Fair value adjustment - - 817
Foreign exchange adjustment 1,292 170 480
Disposals (1,018) (6,375) (11,957)
At end of period 78,273 64,106 73,787
Depreciation
At beginning of period 32,045 35,618 35,618
Acquisitions - - -
Charge for the period 4,545 4,152 7,862
Foreign exchange adjustment 276 51 146
Disposals (943) (6,061) (11,581)
At end of period 35,923 33,760 32,045
Net book value 42,350 30,346 41,742
7 Assets under construction
Assets under construction comprises the purchase of land at Basingstoke, and
construction costs to date, in relation to the new Distribution facility and
Head Office, which is expected to be completed in early 2004.
8 Debtors
As at As at As at
31 July 31 July 31 January
2003 2002 2003
Unaudited Unaudited Audited
#'000 #'000 #'000
Amounts falling due within one year:
Trade debtors 2,541 4,912 4,224
Other debtors 1,676 536 2,211
VAT 896 541 672
Corporation tax 134 157 137
Deferred tax asset 1,694 1,152 1,155
Prepayments and accrued income (principally rent 14,934 14,678 9,124
& rates)
21,875 21,976 17,523
9 Creditors: amounts falling due within one year
As at As at As at
31 July 31 July 31 January
2003 2002 2003
Unaudited Unaudited Audited
#'000 #'000 #'000
Bank overdraft 555 967 587
Bank loans 2,045 1,070 936
Other loans 496 - -
Trade creditors 34,138 33,239 32,396
Other creditors 1,291 850 746
Taxation and social security costs 1,906 1,330 1,905
VAT payable 3,664 4,914 13,963
Dividends payable 1,790 1,667 2,065
Corporation tax 1,331 2,094 5,085
Obligations under finance leases and hire
purchase contracts
533 536 533
Accruals and deferred income 14,805 16,646 13,707
Deferred consideration - 250 -
62,554 63,563 71,923
10 Creditors: amounts falling due after more than one year
As at As at As at
31 July 31 July 31 January
2003 2002 2003
Unaudited Unaudited Audited
#'000 #'000 #'000
Deferred consideration - 3,022 -
Bank loans 7,168 - -
Other loans 495 1,020 991
Obligations under finance leases and hire
purchase contracts 262 424 370
7,925 4,466 1,361
11 Profit and loss account
The reduction in the profit and loss account, from the 31 January 2003 to the 31
July 2003, is explained by the loss for the period of #3,259,000, the share
buyback of #8,218,000 and foreign exchange movements of #1,931,000.
12 Reconciliation of operating (loss)/ profit to net cash (outflow)/ inflow
from operating activities
Six months Six months Year
ended ended ended
31 July 31 July 31 January
2003 2002 2003
Unaudited Unaudited Audited
#'000 #'000 #'000
Operating (loss)/profit (1,053) (503) 26,369
Amortisation of intangible assets 2,853 3,196 5,923
Loss on disposal of tangible fixed assets 71 308 184
Depreciation 4,545 4,152 7,862
Foreign exchange loss on non-monetary
assets - 91 -
Increase in stocks (5,275) (1,419) (806)
Increase in debtors (3,816) (6,566) (1,995)
Decrease in creditors (6,052) (6,951) (755)
(Decrease)/ increase in leasehold
property incentives (141) 308 584
Net cash (outflow)/inflow from operating
activities (8,868) (7,384) 37,366
13 Reconciliation of net cash flow to movement in net (debt)/ funds
Six months Six months Year
Ended ended Ended
31 July 31 July 31 January
2003 2002 2003
Unaudited Unaudited Audited
#'000 #'000 #'000
(Decrease)/increase in cash in the period (29,078) (21,200) 1,500
Cash (inflow)/outflow from (increase)/
decrease in debt and lease financing (7,901) 714 1,239
Change in net funds resulting from cash (36,979) (20,486) 2,739
flows
New finance leases (199) (45) (339)
Deferred consideration on acquisitions - - 3,500
Translation differences (69) (64) (75)
Movement in net funds in the period (37,247) (20,595) 5,825
Net funds at start of period 34,783 28,958 28,958
Net (debt)/ funds at end of period (2,464) 8,363 34,783
This interim report was approved by the Board of Directors on 23 September 2003.
The interim financial information has been prepared on the basis of the
accounting policies set out in the Annual Report for the year ended 31 January
2003.
The interim financial information does not comprise statutory accounts as
defined in Section 240 of the Companies Act 1985.
The financial information for the year ended 31 January 2003 is an extract from
the latest group accounts. The accounts received an unqualified auditor's
report and have been filed with the Registrar of Companies.
Copies of this Interim Report are being posted to shareholders and are available
from the Company's office at Link House, Ellesfield Avenue, Bracknell, Berkshire
RG12 8TB.
This information is provided by RNS
The company news service from the London Stock Exchange
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