Game plays with higher profits to buck high street worries

Profits soared at video game retailer Game’s parent company in the first six months of the financial year, even as revenue fell by nearly five per cent.

The figures

Game Digital’s profits before tax increased over 20 per cent to £14.8m, however gross profit contracted 1.2 per cent to £122m.

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Revenue fell 4.7 per cent to £493m during the 26 weeks ending 26 January, while basic earnings per share rose nearly 30 per cent to 7p.

At the end of the period the company held £41.6m in net cash, a 29 per cent increase on the year before.

Why it's interesting

In an industry which is by its nature challenged by digital alternatives, Game has posted positive results despite a chequered past.

The company was forced off the London Stock Exchange in 2012 when it entered administration, but was saved by private equity firm Opcapita and re-listed in 2014.

A 1.4 per cent reduction in gross transaction value to £578m was pulled down by a 9.3 per cent fall in hardware and a 21 per cent reduction in sales of pre-owned products. 

Game said the whole sector is facing challenges as economic uncertainty grows and consumer confidence continues to fall.

As the main consoles, Playstation 4 and Xbox One enter their sixth year, the firm expects low margin console sales to decline, but physical software sales have held up well, it said. Sony is expected to launch a new Playstation in 2020.

What Game said

Chief executive Martyn Gibbs said: "Despite the market backdrop, the group delivered a solid gross transaction value performance and maintained its gross profit rate.

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"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 pre-owned 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."