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Profits dip at GAME but cost savings reduce losses

Retailer remains “cautiously optimistic” about the year ahead as Belong strategy continues to develop

GAME has released the final results for its financial year, which shows flat revenues and a slight drop in profits.

For the 52 weeks ended July 28th, 2018, the firm reports revenues of £782.3 million (just 0.1 per cent lower than the £782.9 million recorded last year) and a 4.3 per cent year-on-year decline in profits, not at £196.2 million.

The Group attributed the latter to an increase in the low-margin hardware and digital content it sells, combined with a decrease in higher margin categories, with a drop in pre-owned sales cited as a notable factor.

However, there was better news when it came to net cash - up 24.4 per cent to £58.7 million - and the Group's Gross Transaction Value (GTV), which rose 1.9 per cent year-on-year to £907.7 million. A much larger increase in GTV was seen by the retailer's events and esports business, including Belong, up 40.2 per cent to £12.2 million.

GAME has also spent the year making significant cost savings to bring its loss before tax down from £10 million to £7.4 million - an improvement of 26 per cent. This is partly attributed to the growth of its Belong arenas and efficiencies in other events, esports and digital businesses, bringing the adjusted EBITDA loss for this segment down from £6 million last year to £2.1 million.

Meanwhile, CEO Martyn Gibbs mentions in his statement that the UK retail business saved £11.4 million in costs as the company renegotiated leases for key stores, as well as relocating or closing others. A reorganisation of GAME's head office, plus improvements in the efficiency of store operations, have also contributed to savings.

Investment in the Belong business remains a priority, with significant steps towards expanding this made through its partnership with Sports Direct, opening up more potential locations for GAME's pay-to-play arenas.

"Belong remains core to our transformation strategy and we continue to expand the business through the opening of larger gaming arenas while improving our GAME Retail offer to fully capitalise on the strong growth potential in the esports market," said Gibbs. "The first of these larger arenas has opened and trading results to date are promising. Planning for the further rollout of arena locations is well advanced."

While the results for the previous financial year are somewhat mixed, GAME is more positive about the current one. For the first 14 weeks, trading has been stronger than the same period last year, with the Group's GTV up by 4.5 per cent.

GTV for the UK business is up 6.6 per cent on 2017, while Spain is tracking at 1.7 per cent ahead. Belong's performance has also been promising, up 50 percent year-on-year - and that doesn't include revenues from the two newest arenas.

The Board states it is "cautiously optimistic" about GAME's future prospects.

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