Game Digital narrows losses as it chases high margins with e-sports venture

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Game Digital hopes to grow with a focus on mass gaming arenas (Source: Getty)

Game Digital narrowed its losses but still saw sales fall in its full year results published today.

The figures

Revenue came in flat ar £782.3m in the year to the end of July, while the video game retailer made a loss before tax of £7.4m, 26 per cent better than 2017's £10m, as the retailer bumped up cash reserves by a quarter to £58.7m.

Shares lifted on the smaller loss despite gross profit slipping 4.3 per cent to £196.2m.

Why it's interesting

Game continued to struggle on a challenging high street, with its UK retail performance suffering from lower sales in high margin categories such as pre-owned products and higher sales of low margin hardware and digital content.

However, the company mitigated this with cost savings of approximately £11.4m.

The company said it had made progress in moving away from lower margin retail sales to high margin gaming experiences through Belong, its e-sports gaming venture with events around the country.

Sports Direct has paid £3.2m for a 50 per cent stake in the venture, and the sports shop will also introduce the meet-ups to its own stores.

Game's investment in the project means it will not pay a final dividend this year.

Paul Hickman, analyst at Edison Investment Research, said Game's cost saving initiatives and e-sports venture were key to its financial results.

"Further savings are in the pipeline, as the company has over 200 potential lease events by the end of 2019 out of a UK store estate of 276," he said.

Game Digital has performed well in a challenging market," he added. "Management is focused on the Belong gaming arena initiative. In its existing 21 sites the concept has demonstrated high occupancy, high margin and low capex."

What Game Digital said

Martyn Gibbs, chief executive officer, said: "Despite the challenges facing our core retail business and the difficult wider retail environment, we are making good progress on our strategic initiatives to ensure we continue to meet the needs of gamers, our customers and our supplier partners as we transform our business to become a leading provider of gaming experiences and services.

"Our core UK and Spain console markets have remained in growth this year driving a strong sales performance and we are constantly improving our multi-channel customer proposition in our stores and online to maximise on these opportunities. The shift in the retail product mix towards the lower margin categories has impacted on the gross profit rate but we continue to focus on improving margins by product category and driving high margin revenue streams whilst reducing the operating cost base of the group."