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Trading statements

GAME Digital conditions 'challenging'

23 December 2015 07:32

GAME Digital says trading conditions in the UK retail market for the 21 weeks to 19 December were challenging with total sales for the video games market down 13.5% year on year.

Total group gross transaction value of GBP466.8 million was down 6.7%, largely explained by the reduction in low margin console sales, down 20.3%. UK GTV of GBP353.5 million was down 11.4% YoY, with Black Friday weekend trading stronger than overall performance.

GAME UK's new format content sales of GBP114.6 million (mint and preowned Xbox One and PlayStation 4 software) increased GBP19.0 million or 19.9%. However, this was more than offset by the unexpectedly steep decline in Xbox 360 and PlayStation 3 content sales, down GBP30.8 million to GBP23.4 million, a 56.7% decline. Furthermore, the fall in other old format content sales (such as Nintendo 3DS) resulted in total UK content margin of GBP37.1 million, down GBP4.0 million.

UK console sales of GBP98.7 million were down 28.3%, but given the low margin of this category this did not impact on gross trading margin. Multiplay, the Group's eSports, events and server hosting business, has continued to deliver positive growth.

The company says the next few days will represent the busiest trading period for the group. However, given the recent trends and disappointing sales since the start of school Christmas holidays, the board now expects that the Adjusted EBITDA for the 26 weeks ending 23 January 2016 will be around GBP30 million. This is after charging underlying operating costs of cGBP97m, an increase of cGBP5m YoY.

Chief executive Martyn Gibbs said: "The trading conditions in the UK video games market have been challenging. The switch over from the older gaming formats to PlayStation 4 and Xbox One software has impacted profitability across the UK market. The extent of the impact of this switch over has only become apparent in December which has been compounded by lower year on year high street and shopping centre footfall.

"We remain committed to our strategy of building "the most valuable community of gamers". GAME Retail UK has recruited significant numbers of new customers through sales of hardware and content and continues to provide great customer service and competitive offers. Despite the market challenges, GAME has continued to deliver significant growth from new format content and newer categories such as licensed merchandise and preowned mobile phones and tablets, and we continue to prioritise these areas as well as growing our Multiplay business. Whilst we are pleased with strong growth in our newer products, this has not been sufficient to offset the margin decline from sales of Xbox 360 and PlayStation 3 content and other old format software.

"The pre-Christmas period and the winter sale are very important to our customers and with market leading offers we remain well prepared in our stores and online for the remaining peak trading period."

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