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GAME revenue dips but profits jump on 'relentless' cost savings

Decline in pre-owned and hardware sales offset by growth in accessories and game sales

GAME's revenue has fallen 4.7 per cent to 492.9 million for the half-year to January 26th, 2019.

But pre-tax profit has risen sharply to 14.8 million, a rise of more than 20 per cent year-on-year.

Sales of games consoles for the group dropped year-on-year by 9.3 per cent, and pre-owned - which is undergoing a structural decline - tumbled by almost 21 per cent. However, software sales - both digital and physical - rose 5.8 per cent. And accessory sales, driven by the company's increased focus on PC add-ons, jumped 9.2 per cent.

GAME has also been able to increase its profitability by significantly reducing costs across its business. The company's cost savings have been driven by rent negotiations, although pay roll and head office and distribution savings have also been made.

The company tells GamesIndustry.biz that the cost savings will continue to be 'relentless' as it deals with a challenging retail environment, and as hardware sales drop ahead of the expected launch of PS5 in 2020.

The firm's Belong business - which are pay-to-play areas within GAME stores - has shown growth overall, although the firm's wider Events and Esports division reported a loss 1.1 million for the period, which is the same as last year. The company expects Belong will break even this year.

The number of PC stations increased 20 per cent in Belong during the period. The utilisation rate was 28 per cent compared with 28.5 per cent during the year prior, however the average price per hour was up 6.3 per cent to 4.71.

"Our core retail businesses are facing a challenging retail environment that continues to evolve at pace, but we have set ourselves up well with our transformation programme and continued focus on costs and efficiencies," CEO Martyn Gibbs said in a statement. "Despite the market backdrop, the Group delivered a solid GTV performance and maintained its gross profit rate. Exclusives on new game releases, sales growth in higher margin categories and focusing on our multichannel and specialist customer offerings helped to offset a weaker console hardware market and the continued structural decline of the preowned market.

"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. 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.

"Belong remains core to our transformation strategy and we have continued to pursue the expansion of this business through enlarging current arenas, opening new arenas and are planning for bigger arenas in more locations. We expect the property market to further favour the tenant leading to improved deals being available for the rollout. Esports shows strong growth potential and we will capitalise on our unique position in the market to further expand our opportunities."

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