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GAME Digital prepares for difficult AGM

Group ready to implement "further operational efficiencies" as UK business struggles

Game Digital, the UK retail chain resurrected from the Game Group in 2014, is today preparing for an AGM in which it will likely have to make some difficult announcements, reflecting a continuing shrinkage of UK revenues and difficult market conditions.

The firm's AGM takes place at 10am UK time today, but a pre-meeting statement has revealed that, whilst Christmas showed some improvement to the downward trend for revenues exhibited over the last six months, the gross transactional value for the UK retail arm of the company still dropped by 5.9 per cent over the year's busiest three weeks and 10.5 per cent over the last six months. In the same statement, CEO Martyn Gibbs warned of difficult circumstances and a need for increased margins if that trend is to be reversed.

Nonetheless, Gibbs found some cause for optimism, particularly in the rise of fortunes for the company's Spanish operations, which showed growth of 8.8 per cent in GTV over the last half year.

"Alongside pursuing commercial developments we are focused on driving further operational efficiencies and the Group has already begun to implement a series of initiatives to deliver an improvement in the profitability of our UK business."

"As outlined in our previous trading update, recent trading conditions in the UK video games market have been challenging, impacting GAME UK's peak trading performance," said Gibbs. "However, we have seen a better market and an improved sales trend over the last three weeks. The strong performance in Spain in the first 21 weeks of the year has also continued over our most recent trading period.

"We are committed to taking appropriate actions to respond to the market challenges that we face in the UK market. Alongside pursuing commercial developments we are focused on driving further operational efficiencies and the Group has already begun to implement a series of initiatives to deliver an improvement in the profitability of our UK business."

Game Digital's share price bounced a little today, rising slightly from the all-time low of 96p recorded on January 8 to 107 at the time of writing. Nonetheless, that represents a 63 per cent drop from the price six months ago and a 71 per cent drop from a year ago. The company saw a disastrous plummet of 39 per cent in share prices in December after a sales slump sapped investor confidence.

The company has been in something of a state of flux since rebuilding itself after entering administration in 2012. After an initial surge in share prices, culminating in a high-water mark of 360p at the end of 2014, business has been struggling. The appointment of a new CFO in May doesn't seem to have arrested that decline.

"Looking forward, we see a solid schedule of new games releases planned during the second half of our financial year. We also anticipate that new technology releases this year, in particular the launch of Virtual Reality device"

However, Gibbs sees potential good news on the horizon once more, pointing to a busy release schedule and the potential impact of VR on the business - despite that market's likely digital-only, closed-marketplace focus in the near future. The events firm Multiplay, which Game acquired last year, is also seen as a potential growth area.

"Looking forward, we see a solid schedule of new games releases planned during the second half of our financial year. We also anticipate that new technology releases this year, in particular the launch of Virtual Reality devices, will lead to increased consumer interest which will benefit GAME as customers seek expert advice and specialist service. We believe that these factors, together with the continued move towards high margin new format mint and preowned software and accessories and a growing contribution from the Group's newer categories and businesses, including GAMEtronics and Multiplay, will support margin growth in our second half and beyond."

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