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Update on Game Group

Article By: ,  Financial Analyst
May 19, 2014 5:41 PM

UK-based video game retailer, Game Group, which entered into administration some two years ago, has announced its intention to list on the London Stock Exchange.

The company, now known as Game Digital, is looking to garner proceeds of around £12m from its IPO.

So, what’s changed for Game?

Indeed, that’s the key question. After all, it wasn’t long ago that tough conditions forced the company to enter into administration, back in 2012.

But, under its new owners, the company has had something of a makeover.

For starters, Game’s previous international expansion ambitions look to have been scaled back considerably.

Prior to its widely-discussed woes a couple of years ago, Game had a presence in Australia, the Czech Republic, France, Ireland, Portugal, Scandinavia, the UK and Spain.  All of these, except Spain, entered into administration.

Currently, the company is focused on its UK and Spanish businesses, where it’s streamlined its portfolio by shutting down underperforming stores. It now operates 560 stores across both regions, versus 874 stores last January.

The company boasts having reduced expenses via a number of activities – including renegotiating certain leases in a bid to lower rents on its stores.

All of that’s in addition to its other activities, which includes investing to boost its online and mobile presence.

Those efforts have helped improve the company’s numbers.

Game’s latest financial performance…

For the twenty-six weeks to 25th January this year, Game took revenue of around £586m, representing around a 37% increase over the same period the previous year.

Adjusted EBITDA (excludes items such as costs relating to store closure) came in at around £51m, up from around £25m last year.

Looking ahead, the company reckons it’s well positioned to capture the growth opportunities in the UK and Spanish video game market, which it highlights as set to reach £5.8bn in 2016 (marking a compound annual growth rate, or CAGR, of 7.6%).

Progress with the company’s turnaround is certainly there to be seen. 

Albeit thanks – in part – to the launch of new consoles (PlayStation 4 and Xbox One, to be precise).

And, while its efforts to differentiate itself are undoubtedly of merit, it’s worth bearing in mind that the competition hasn’t gone anywhere.

Still, given the recent flurry of retail-related IPOs which seem to have shown investor appetite for retail players, Game’s timing seems about right.

 

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