The Game Group has reported an 81% drop in full year profits, year-on-year, slipping from a pre-tax margin of £25.8 million last year to £4.9 million in the 12 months ending July 2016. Cash from the sale of the group headquarters, totalling £13 million, came after the year's end.
Sales dropped too, but only by 5.1%, from £866.6 million to £822.5 million, with the company's Gross Transactional Value (GTV) dropping by 4.1% to £923.3 million. Net cash from operating activities plummeted 89% from £43.3 million to just £4.5 million.
Nonetheless, the group believes the results to have been in line with market expectations, issuing a cautiously positive outlook for the coming financial year.
"Trading for the first 10 weeks of the year has been in line with Group plans," an accompanying statement reads. "Looking forward, we remain encouraged by the line-up of new games as well as exciting console and VR launches scheduled for release over our peak period and the next 12 months. These developments will provide impetus to our markets and fresh opportunities to engage with both existing and new customers. Nevertheless, the Group needs to balance these positive future market events with the prevailing trading conditions. Accordingly, at this stage the Board retains a cautious outlook and reaffirms its previous guidance for the year. T
"The Board expects Adjusted EBITDA for FY16/17 to be broadly level to the current year (on a 52 week basis), before the financial impact of its planned new live gaming activities and the impact of the property sale and leaseback announced on 28 September 2016. Based on the roll-out of the new stand-alone gaming venues and in-store gaming arenas currently planned, the Group expects to incur a small loss across these activities in the first year. Dependent on the success of these initial trials, the Group may decide to accelerate the roll-out and increase investment to support the development of this opportunity."
CEO Martyn Gibbs echoed that sentiment, relishing the imminent arrival of PSVR, PS Pro and Nintendo NX.
"Market dynamics in the UK have undoubtedly been tough in the past year," said Gibbs. "The management team responded quickly to these new market conditions and have made significant progress with its action plan since January. This has included improving supplier arrangements and terms, implementing efficiency and cost saving initiatives across the business; completing an organisation redesign and other process improvements. This programme of activity is ongoing and has started to help to improve our financial performance.
"The Group continues to maintain strong customer engagement across the UK and Spain and has made further progress in driving its retail diversification plans, including strong performances in digital content, higher margin accessories, and preowned phones and tablets. In addition, we have achieved significant progress across our strategic growth initiatives, including esports, events, live gaming activities and digital services.
"Looking forward, we are encouraged by the strong line-up of highly anticipated new consoles, virtual reality headsets and games scheduled for launch over the next 12 months that will drive new growth and impetus to the market and our business together with the wider growth opportunities for the Group. I am confident that by organising ourselves effectively, delivering for our customers and building ever stronger and more collaborative partnerships with our key suppliers, we are positioning the business to deliver on our strategy and transition to sustainable earnings growth."