Game interim profits surge but sales decline

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Game interim
// Game Digital’s interim revenue drops 4.7% to £492.9m despite popularity of blockbuster games
// However, profit before tax jumped 20.3% to £14.8m
// Meanwhile, gross transaction value was down 1.4% to £578.4m and adjusted operating profit up 21.7% to £25.8m

Game Digital posted mixed results in its first half, with profits surging amid a decline in sales despite a boost from blockbuster video games such as Fortnite.

For the 26-week period ending January 26, the video game retailer saw pre-tax profits jump 20.3 per cent year-on-year to £14.8 million.

However, revenue went down by 4.7 per cent year-on-year to £492.9 million.

Game’s financial results that do not follow IFRS measures painted a slightly rosier picture.

Gross transaction value was down 1.4 per cent to £578.4 million for the half-year period, and on a like-for-like basis it was broadly flat.

Adjusted EBITDA surged 21.7 per cent to £25.8 million. This was boosted by a 20.6 per cent uptick in adjusted EBITDA to £26.9 million in its core retail arm, but dragged by Game’s event and esports division, which recorded a loss of £1.1 million.

Finally, adjusted profit before tax was up 40.1 per cent to £19.9 million.

The video game retailer said sales of high-end accessories and licensed merchandise were boosted by Fortnite and other battle royale games, in a phenomenon the company said it anticipates replicating with the recently-released Apex Legends.

Despite this, the continued downturn in pre-owned games took its toll and hardware sales were weaker amid tough competition.

Game also reduced the amount of promotional activity over Black Friday week, which resulted in lower sales.

Meanwhile, the retailer attributed its improved profitability to better margins and the delivery of £4.9 million in cost savings.

“During the period the UK retail business delivered further efficiency improvements and achieved considerable cost savings across all areas including store operating and fixed costs, distribution and head office costs,” chief executive Martyn Gibbs said.

“Our flexible lease profile gives us a unique opportunity to work closely with landlords to manage our store portfolio and we continue to deliver, and anticipate ongoing, rent reductions.”

Game said it was planning to expand Belong, its in-store leisure experience which allows shoppers to play games or watch competitions.

Gibbs said the rollout could be aided by good deals with landlords, who are finding themselves short on tenants amid the retail crisis.

Shares in the retailer were up 5.26 per cent early this morning.

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