Shares in Game Digital (GMD) tumbled a tenth after the video games retailer slashed its dividend and revealed a 23 per cent plunge in half-year adjusted cash profit to £33.1m. Lower sales of consoles and older games in the UK, together with weaker Christmas footfall, more than offset brisk trading in Spain and robust demand for newer products. Moreover, a torrid December trading update has prompted some of its suppliers' credit insurers to reduce their cover for dealings with the group.
Flagging sales of Xbox 360 and PlayStation 3 games in the UK outweighed strong growth in next-generation software revenues. Management is now looking to cut costs and optimise stock management, supplier terms and store sizes. The bright spot was the Spanish business, which snatched market share and delivered sales growth in all product categories. Overall, gross profit from newer offerings such as digital content and pre-owned smartphones soared a quarter to make up around 70 per cent of the total.
Game Digital acquired SocialNAT, one of several 'eSports' companies that are turning gaming into a spectator sport. It also plans to expand its Insomnia gaming festivals into Scotland and Ireland. Broker Canaccord Genuity tweaked its forecasts and now expects adjusted pre-tax profit of £22.3m in the year to July, giving EPS of 10.1p (from £38m and 18.5p in 2015).
| GAME DIGITAL (GMD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 125p | MARKET VALUE: | £211m | |
| TOUCH: | 125-128.5p | 12-MONTH HIGH: | 276p | LOW: 94p |
| DIVIDEND YIELD: | 7.2%† | PE RATIO: | 16 | |
| NET ASSET VALUE: | 78p* | NET CASH: | £120m | |
| Half-year to 23 Jan | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015** | 586 | 33.2 | 15.0 | 7.35 |
| 2016** | 549 | 22.5 | 10.0 | 1.67 |
| % change | -6 | -32 | -33 | -77 |
Ex-div: 30 Jun Payment: 5 Aug *Includes intangible assets of £56.9m, or 34p a share **26-week periods to 24 Jan 2015 and 23 Jan 2016 †Excludes special dividend of 14.7p a share, paid in April 2015 | ||||
