GAME Digital 2016/17 Interim Results
29 March 2017
GAME DIGITAL PLC | INTERIM RESULTS 2016/17
Forward looking statements
This presentation includes statements that are, or may be deemed to be,
“forward-looking statements”. These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
“believe”, “estimates”, “plans”, “projects”, “anticipates”, “expects”, “intends”,
“may”, “will”, or “should” or, in each case, their negative or other variations or
comparable terminology. These forward-looking statements include matters
that are not historical facts and include statements regarding the Company’s
intentions, beliefs or current expectations.
Any forward-looking statements in this presentation reflect the Company’s
current expectations and projections about future events. By their nature,
forward-looking statements involve a number of risks, uncertainties and
assumptions that could cause actual results or events to differ materially
from those expressed or implied by the forward-looking statements. These
risks, uncertainties and assumptions could adversely affect the outcome and
financial effects of the plans and events described herein. Forward-looking
statements contained in this presentation regarding past trends or activities
should not be taken as a representation that such trends or activities will
continue in the future. You should not place undue reliance on forwardlooking statements, which speak only as of the date of this presentation. No
representations or warranties are made as to the accuracy of such
statements, estimates or projections.
Please note that the Directors of the Company are, in making this
presentation, not seeking to encourage shareholders to either buy or sell
shares in the Company. Shareholders in any doubt about what action to take
are recommended to seek financial advice from an independent financial
advisor authorised by the Financial Services and Markets Act 2000.
2
MARTYN GIBBS
Chief Executive Officer
3
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
H1 Group Headlines
Performance reflects divergent dynamics across our major retail markets
•
UK business impacted by market headwinds and the market wide underperformance of certain titles
•
Positive Spanish trading performance, with reported GTV up +22% (3.1% in local currency)
Cost savings and operational improvements delivered in response to UK market conditions
•
UK retail costs reduced by over £5m year on year
•
Ongoing positive supplier engagement to improve trading arrangements
•
Continued focus on costs and property optimisation, with over 240 lease events over the next 2 years
•
Strong cash and liquidity maintained
Strategic progress made across the Group
•
Strong growth achieved in digital and new retail categories, up 28% and contributing 25% of Group GTV
•
9 in-store gaming arenas now trading under the new BELONGTM brand; with 30 targeted by the end of 2017
•
Continued development of Events, Esports and Digital businesses, with sales more than doubled
New product launches and greater VR supply underpin an improving market outlook
•
Nintendo SwitchTM launched on 3 March, to strong consumer demand
•
•
1)
GTV of Core Retail1 up 20% in first 7 weeks of H2
Strong line-up of titles building for peak 2017, with Project Scorpio also launching in H1 17/18
1. UK and Spain combined
44
MARK GIFFORD
Chief Financial Officer
5
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
H1 2016/17: Group financial summary
•
H1
2016
H1
2017
VAR, %
608.0
566.3
(6.9)
GTV excluding Hardware
450.8
448.7
(0.5)
GTV of New2 retail categories
112.3
144.1
28.3%
23.8%
24.7%
+90bpts
(102.7)
(105.7)
(2.9)
Adjusted EBITDA
33.1
23.3
(29.6)
Adjusted Profit before tax
27.7
16.9
(39.0)
12.2p
7.9p
(35.2)
All figures in £m (unless stated)
Gross Transaction Value
(GTV)1
Gross Margin %
Operating costs pre exceptional & adjusting items
Adjusted (basic) EPS
Dividend – Interim
1.67p
1.00p
Group GTV down 6.9%, predominantly explained by the
decline in low margin hardware sales
•
Group GTV (ex hardware) decline of 0.5%
•
New2 retail categories up 28.3%
•
Events, Esports & Digital up 120.5%
•
Gross margins benefiting from shift to higher margin
categories
•
Strong cost discipline across the business, with over £5
million of costs savings realised in UK Retail
•
•
Overall cost increase largely explained by exchange
rate impact of Spanish operations and expansion of
Events, Esports & Digital divisions
Positive cash generation continued in the period
•
Group remains well funded with net cash of £73.0
million and facilities of over £80 million
•
Dividend of 1p reflects prioritisation of capital into strategic
growth initiatives
•
Positive start to H2 with GTV up in UK and Spanish Retail
(40.1)
Strong growth in key focus categories and significant cost savings delivered in UK Retail
1)
1. Gross Transaction Value is a non-IFRS measure defined as total retail receipts excluding VAT and before the deduction of revenue deferral relating to reward points. Gross Transaction Value reflects the full sales value of digital sales, agency sales
(including sales by business partners on GAME’s Marketplace website), warranties and other similar arrangements and thereby includes the publishers’ and sellers’ shares of those transactions
2)
2. ‘New’ retail categories defined as preowned technology products, digital content, PC and other non-console accessory and peripheral products, virtual reality headsets, licensed merchandise and services, as well as Marketplace.
66
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
Group GTV by category
All figures in £m (unless stated)
H1 2016
H1 2017
VAR, %
•
Old Gen down 70%, all other software sales flat
204.4
184.7
(9.6)
•
62.8
77.4
+23.2
Poorer market performance of certain annually released top titles
plus no equivalent new release to match performance of Fallout 4
launched in the prior year
267.2
262.1
(1.9)
•
Strong growth in console and non-console digital content
Preowned (core)
81.7
71.4
(12.6)
Preowned tech
23.1
24.3
+5.2
•
New gen software +15.4%, Old Gen software down 41.6%
Total Preowned
104.8
95.7
(8.7)
•
Continued range extension in Spain and greater margin focus in UK
Core A&O
74.9
82.3
+11.4
•
3.9
8.6
+120.5
PC accessories +12.9%, Licensed Merch +27.8%, Marketplace
+47.1%, VR sales of £10.2m (2016: nil)
78.8
90.9
+15.4
Sub-total (ex Hardware)
450.8
448.7
(0.5)
•
Total Hardware
157.2
117.6
(25.2)
Stronger line up of events with larger like for like events and new
contract events plus new digital contracts and revenue streams
established
Total
608.0
566.3
(6.9)
•
Ongoing impact of lower average selling prices and lower volumes
Physical software
Digital content
Total Content
Events, Esports & Digital
Total A&O
Strong GTV growth across digital, pre-owned tech and accessories (inc VR) & other (inc events)
GAME Digital Final Results 2015/16
7
7
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
GAME DIGITAL PLC - FIRST HALF RESULTS 2015/16
Group
gross
margin
(as % of GTV) by category
GROSS PROFIT
MARGIN,
OF GTV
H1 2016
%
H1 2017
%
%pt Change
Content
22.8
22.1
(0.7)
Preowned
37.0
34.6
(2.4)
A&O
32.5
29.2
(3.3)
Sub-total
27.8
26.2
(1.6)
Hardware
3.4
4.9
+1.5
Total
21.5
21.8
+0.3
•
Digital margins flat year-on-year
•
Underlying software margins decreased in half due to greater market wide promotional
activity and relative strength of exclusive proposition in PY
•
Strong improvement of preowned tech margins, up 4.2ppts
•
More than offset by mix effect of increased preowned tech and lower core pre-owned
margins
•
Mix effect, predominantly VR sales at lower margins and lower E,E&D margins in the half
•
Hardware margins up 1.5%, benefiting from improved terms and new console iteration
launches
Note: Calculated as % of GTV
Greater mix of higher margin categories drove a 30ppt increase in GM%
8
8
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
Group performance overview by division
£m
H1 2016 H1 2017
Gross Transaction Value (GTV)
VAR, %
UK Retail
•
•
18.1% decline in GTV, with gross profit down £13.5m to £82.4m
Decline offset in part by cost savings of over £5m, with UK Retail
Adjusted EBITDA of £13.4m
608.0
566.3
(6.9)
UK Retail
447.7
366.7
(18.1)
Spain Retail
156.4
191.0
+22.1
3.9
8.6
+120.5
130.7
123.4
(5.6)
UK Retail
95.9
82.4
(14.0)
Total Retail
Spain Retail
33.8
39.7
+17.5
•
•
1.0
1.3
+30.0
33.1
23.3
(29.6)
UK Retail
22.2
13.4
(39.6)
Spain Retail
11.6
12.7
+9.5
Events, Esports & Digital
(0.7)
(2.8)
(300.0)
Events, Esports & Digital
Gross Profit
Events, Esports & Digital
Adjusted EBITDA
Spain Retail
•
•
•
GTV growth of 3.1% in local currency
Benefiting from FX movement on reported growth
Adjusted EBITDA up 9.5% to £12.7m in GBP
Adjusted EBITDA of £26.1m, down 22.8%
PBT of £22.1m, down £2.8m
Events, Esports & Digital
•
•
Sales up over 120% driven by strong growth from Multiplay’s events
and digital divisions
Further cost investment ahead of anticipated sales growth
•
Multiplay costs of £2.8m, up £1.1m
•
BELONGTM live gaming H1 costs of £0.8m
•
1st time inclusion of Ads Reality and GAME Esports (Spain) costs of £0.5m
Strong growth in Spain and E,E&D more than offset by the decline in UK Retail despite significant cost savings
LC = Local Currency (EUR)
9
9
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
Group operating costs
Group Continuing Costs1
£m (unless otherwise stated)
H1 2016
H1 2017
VAR, £m
Selling & Distribution costs
79.4
78.8
0.6
Administrative costs
23.3
26.9
(3.6)
102.7
105.7
(3.0)
5.1
5.6
(0.5)
97.6
100.1
(2.5)
16.1%
17.7%
Total Operating expenses
Less: Underlying Depreciation & Amortisation
Total Operating expenses before D&A
as % of GTV
Group Continuing costs by division1,2
£m (unless otherwise stated)
H1 2016
H1 2017
VAR, £m
95.9
96.0
(0.1)
UK Retail
73.7
69.0
4.7
Spain Retail
22.2
27.0
(4.8)
Spain Retail, €m
30.5
31.6
(1.1)
1.7
4.1
(2.4)
Core Retail
Events, Esports & Digital
•
Total underlying operating costs1 of £105.7m,
up 2.9%
•
Continuing costs1 excluding depreciation and
amortisation up 2.6% to £100.1 million
•
Significant cost savings and operational
efficiencies realised in the UK
•
UK Retail costs down £4.7m or 6.4% to £69.0m
•
Spain Retail costs up €1.1m or 3.6% in local
currency, broadly in line with GTV growth
•
Events, Esports and Digital costs1,2 increased
£2.4m to £4.1m, reflecting the continued
expansion of these operations, including the first
time addition of BELONGTM, Ads Reality and
GAME Esports (Spain)
Strong cost control in UK Retail with continued investment in high growth E,E&D opportunities
1)
1. Excludes exceptional and adjusting items
2)
2. Before depreciation and amortisation
10
10
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
Underlying operating cost bridge1
UK Retail
£m
Spain Retail
105
(6.4%)
+21.6% : £
+3.6% : €
100
+141%
+2.6%
+0.1%
+0.8
+2.4
+4.0
(5.3)
95
•
+0.6
90
97.6
•
•
•
85
•
£2.6 million reduction in store
payroll and store variable costs
£0.8m reduction in in property costs
Distribution savings and efficiencies
of over £1.3 million
Net marketing and other savings of
£0.6 million
97.7
•
•
•
Underlying costs up 3.6% in euros,
in line with sales increase
Selected further investment in
central costs to drive new growth
initiatives
First time inclusion
of BELONGTM, Ads
Reality and
SocialNat (GAME
Esports, Spain)
100.1
Scaling up of
Multiplay operations
•
•
Winning significant
new contracts
Delivering
expanded existing
operations
80
H1 15/16
Selling &
Distribution
Administrative
Selling &
Distribution
Administrative
Total Core Retail
Events, Esports
& Digital
H1 16/17
Cost control and savings in core retail activities; investment continued in high growth opportunities
1)
1. Excludes exceptional and adjusting items and depreciation and amortisation
11
11
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
Cash flow generation
£m
H1 2016
H1 2017
22.8
17.3
Proceeds from sale of property
-
13.3
Exceptional profit on sale of assets
-
(6.3)
9.6
10.4
EBITDA & property proceeds
32.4
34.7
Capital expenditure
(6.9)
(5.8)
Taxation
(3.5)
(1.4)
Net interest
(0.6)
(0.9)
FREE CASH FLOW pre change in W/C
21.4
26.6
Working capital & other items
38.3
6.6
FREE CASH FLOW
59.7
33.2
Operating Profit
Depreciation & amortisation
•
Positive free cash flow before working
capital movement of £26.6m, up £5.2m
•
Continuing investment for growth with
capital expenditure of £5.8m in the first half
•
Working capital benefit in H1 of £6.6m
•
YOY timing differences in working capital
given period end reporting date 28 January
2017 vs 23 January 2016
Continued strong free cash generation
12
12
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
Cash flow and net cash
£m
H1 2016
H1 2017
Var, £m
(20.0)
Opening cash
63.1
43.1
Free cash flow before w/c
21.4
26.6
Working capital, tax, interest
& dividends
45.7
9.8
Capex
(6.9)
(5.8)
Movement in borrowings
Movement in cash
Closing net cash
Finance Leases
Net Funds
(0.2)
(0.7)
5.2
•
Increased available facilities of over £80m
(2016: £60m)
•
UK ABL facility of up to £50m, rising to
£75m in peak
•
Total facilities in Spain of €34.7m
1.1
(0.5)
29.9
(30.1)
123.1
73.0
(50.1)
(4.0)
(1.1)
69.0
(51.2)
120.2
Strong net cash position of £69.0m, after the
deduction of finance lease liabilities
(35.9)
60.0
(2.9)
•
•
As at 28 January 2017, both facilities were
undrawn
•
Impacted by working capital timing differences
due to 53rd week in 2015/16
•
Net cash position of £50.6m on 4
February 2017, £12.1m above LY
Strong cash position and increased available facilities
13
13
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
Current trading and outlook
Total Mint
•
Market trends seen in H1 have continued into the early part of H2 in both
territories for core Xbox and PlayStation categories
•
Strong Nintendo Switch™ launch has brought positive impetus to the overall
market – H2 sales highly dependent on stock availability (both hardware and
software)
•
•
•
Market1
7 weeks to 18 March
YoY, %
UK
+22.0%
Spain (€)
+50.7%
UK & Spain combined (£)
+32.2%
7 weeks to 18 March
YoY, %
Growth from new retail categories, as well as Events, Esports and Digital
expected to continue
Current Trading
Currently anticipated sales of the Nintendo Switch™, together with other sales
initiatives are expected to offset the expected effects of H2 Xbox and
PlayStation market declines
Spain Retail GTV (€)
+38.1%
Total Retail GTV (£)
+19.8%
Mint Market Share1
7 weeks to 18 March
UK market share
31.8%, (1.0)% points
Spanish market share
42.4%, (2.3)% points
Further supportive market developments are expected in the second half of
the calendar year, with the launch of Microsoft’s Project Scorpio and several
major new game titles already announced, including Red Dead Redemption 2
and Super Mario Odyssey
UK Retail GTV
+6.8%
More positive market outlook for balance of 2017, though sales dependent on stock availability
1 Source GfK Chart-track
14
14
MARTYN GIBBS
Chief Executive Officer
15
Building the most valuable community for gamers
19
million insight database
4.5
m i l l i o n a c t i v e ( LT M )
EVENTS
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
GAME Changing strategy recap: Pillars and 2017 priorities
Maximise retail
potential in the UK
and Spain
1. Enhance our
specialist offer
2. Build new categories
& services
3. Multichannel
development
4. Store optimisation
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
Expand live and
online gaming
services for gamers
and publishers
1. Local competitive
gaming and esports,
headlined under
BELONGTM
2. Insomnia Gaming
Festival
3. Major third party
contract events
Develop new markets
through digital
enterprise services
Optimise the Group's
efficiency whilst
investing for the
future
1. Managed game
server hosting
1. Fixed and variable
store costs
2. Distribution
efficiencies
3. Procurement and
business process
improvements
4. Supplier
arrangements
2. Augmented reality
based visual
marketing
17
17
Strategy recap: Illustrative strategic value creation plan
Value
Today
Cost efficiencies
New markets
New retail
categories
Core console
retail
FY15/16
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
Note: Chart not to scale, indicative only
New retail
categories
Core console
retail
FY18/19
18
18
UK action plan: Driving business efficiency and optimisation
1
2
3
SUPPLIER ARRANGEMENTS
PROPERTY
CASH AND
WORKING CAPITAL
4
ORGANISATIONAL DESIGN
5
OPERATIONAL COSTS &
BUSINESS PROCESSES
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
• Improved supplier terms driving better hardware margins
• Positive discussions around ongoing specialist support, including exclusives
• Good engagement on broader strategic dialogue around live gaming initiatives
• Further property cost savings of £0.8m achieved in H1
• Total annualised benefits of c£2m since programme implemented
• Planning for over 240 lease events over the next 2 years
• Strong cash position at end-Jan, improved with sale & leaseback
• Appropriate facilities in place
• Stock management and controls strengthened
• Structures optimised to reflect future growth areas
• Ongoing reviews to ensure teams set up to deliver commercial and strategic intent
• Ongoing areas of focus include central, stores, online and customer service operations
• Driving improved customer service (ways to receive) and efficiency benefits
19
19
UK action plan focus: UK operational efficiencies and cost savings have
continued
•
•
•
•
Property savings including
rent and rates
Payroll cost savings from
organisational redesign and
store staffing efficiencies
Business wide savings from
efficiency measures and
procurement activities
Pursuing further savings
across property, payroll,
distribution and procurement
in H2 16/17
Annualised
FY16 savings
Additional
savings
targeted in
FY17
Total savings
realised in H1
Annualised
FY16 +
expected
FY17 savings
Property
1.0
1.0+
0.8
2.0+
Payroll
2.6
1.0+
2.6
3.6+
Other procurement,
distribution and efficiency
savings
2.6
1.0+
1.9
3.6+
Total
6.2
3.0+
5.3
9.2+
£m
Continued delivery of efficiency initiatives, procurement benefits and other cost saving actions
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
20
20
UK action plan focus: Property optimisation programme update
•
Successfully realising opportunities to significantly
reduce UK estate costs prior to any store closures
•
Total annualised group rent reduction of c.£2m to
date1
UK LEASE PROFILE
UK Lease Profile
200
180
160
140
•
67 leases renewed to date2
120
100
•
•
•
Average rent reduction of c.20%
Average length to first break remains 1.2 years
80
60
40
20
Planning for over 240 UK lease events over the next
2 years
•
0
<1
2 3 4 5 6 7 8 9 10 11 12 13 14 15
yrs yrs yrs yrs yrs yrs yrs yrs yrs yrs yrs yrs yrs yrs
Total annual rent of c.£16m
No of leases to exit : Break or Expiry
No of Leases by Expiry
1 Includes impact of a net 8 store closures since 23 January 2016
2 Since UK action plan initiated in January 2016
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
21
21
Market Update
22
Market update: Headlines
The most powerful console ever.
• Peak 2016 impacted by several factors:
• weaker new release line-up
• maturing console cycle
• digital growth
• successful VR launches (restricted supply)
• Expect structural headwinds to persist, however more
positive market dynamics in 2017:
• new product developments
• stronger peak line up
• increased VR stock availability
• maturing digital penetration
• Arrival of the next generation of consoles expected 2019
• Esports industry continues to develop and grow rapidly
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
23
UK software market impacted by weaker year-on-year line up and softer
performance of key titles…
•
Number of strong titles (i.e. FIFA, Pokémon, Forza) demonstrates
enduring demand for physical products
•
•
However, overall market impacted by:
•
•
FIFA
COD
(1)
Fallout 4
Battlefront /
Battlefield
Est. 80%+ of AAA titles sold physically
Pokemon
H1 16
(2)
Underperformance of certain major ‘annual’ titles, notably the latest
Call of Duty title
The absence of a major AAA in 16/17 to mirror Fallout 4 from
2015/16
Forza
Metal Gear
Solid V
Gears of War
WWE 2K
Unchartered
H1 17
Source: GfK Chart-Track, Spanish market, units sold in H1 17 vs. H1 16
1. Infinite Warfare vs. Black Ops III
2. Sun & Moon vs. Sapphire and Ruby
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
24
24
…resulting in 13% year-on-year decline in the overall UK software market
UK physical software market, H1 17 vs. H1 16 change, %
Top 30 selling titles
+18.1%
(2.9%)
(13.2%)
(18.0%)
New release
Catalogue
All other
Total software
Source: GfK Chart-Track, 26 weeks to 28 January 2017
GAME
Digital
Final
Results
2015/16
GAME
DIGITAL
PLC
– INTERIM
RESULTS 2016/17
25
25
Strong Spanish software market, supported by higher PlayStation and
Nintendo penetration
•
FIFA 17
Pokemon
(1)
Call of Duty
(2)
Grand Theft
Auto V
Top 10 titles units sold up 19% y/y in aggregate
Battlefield 1 /
Battlefront
H1 16
Source: GfK Chart-Track, Spanish market, units sold in H1 17 vs. H1 16
1. Sun & Moon vs. Sapphire and Ruby
2. Infinite Warfare vs. Black Ops III
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
GAME Digital Final Results
2015/16
Just Dance
NBA 2K
Fallout 4
Watchdogs 2
Pro Evolution
Soccer
H1 17
26
26
Full Game Downloads: 3rd party forecasts and surveys point to a maturing in
the direct channel for full games
•
Significant majority (c.80%) of AAA games continue to be
purchased physically
•
Range of consumer surveys indicate proportion purchased
digitally likely to settle at c25%
Over three-quarters of gamers still prefer to buy
games in-store
24%
AAA Full Games Purchased Digitally (UK)
+3.1%
30.0%
26.2% 26.2%
+16.6%
25.0%
20.0%
23.1%
76%
17.1%
15.0%
11.4%
10.0%
5.1%
Buy games in-store
5.0%
0.0%
0.0%
0.5%
2012
2013
Download games directly to console
Source: SurveyMonkey, BofA Merrill Lynch Global Research, December 2016
2014
2015
2016
2017E 2018E 2019E
Source: IHS, Company estimates
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
27
27
Digital market continues to represent a significant growth market for GAME…
£m
Total digital content market, £m (UK only)
GAME digital sales (GTV), £m
+18%
CAGR
110.2
95.4
1,034
Y/Y
+25%
77.3
73.5
67.0
875
62.0
725
580
2017E
2016
2015
2014
2013
429
2013
2014
2015
2016
H1 16
H1 17
Source: IHS
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
28
28
… though the pace of digital growth is forecast to moderate as penetration
plateaus
£m
•
•
•
Digital represented 54% of the total content
market in 2016, up from 22% in 2012
Driven by console and digital platform
developments and the growth in ‘add-on’
downloadable content (DLC)
Digital/physical split expected to plateau from
2017, based on trends in other media forms
Total console content market split by physical / digital, £m (UK)
2000
1800
1600
1400
1200
1000
800
600
400
200
Physical content
2020E
2019E
2018E
2017E
2016
2015
2014
2013
2012
0
Digital content
Source: IHS
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
29
29
2017: Major market drivers
•
The most powerful console ever.
Successful Nintendo SwitchTM launch
•
Ongoing hardware and software sales dependent on
stock availability
• Growing adoption of VR
•
Further stock availability and growing content library
•
Total UK installed base forecast to reach 1.2m by end-17
• Xbox Project Scorpio launching ‘Fall-2017’
•
4.5x more powerful than Xbox One, 4K and VR ready
•
Further details expected at E3
• Strong line-up building for peak
•
Red Dead Redemption 2, from Rockstar Games
•
Several SwitchTM titles including Super Mario Odyssey
•
Star Wars Battlefront 2 (EA) and Destiny 2 (Activision)
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
30
Beyond 2017: Improving outlook to medium term dynamics
Total mint market size, £m (UK & Spain combined)
+14.8%
+1.3%
+5.2%
1,279
662
831
492
332
1,027
1,216
1,303
1,342
1,242
1,319
961
1,154
1,293
1,005
732
871
2012
2013
1,152
2014
892
813
782
950
825
724
752
892
2015
2016
2017
2018
2019
Hardware
Software
1,222
2020
Digital
Mint console market forecast to return to growth in 2018 driven by Nintendo SwitchTM, with further growth in
2019 and 2020 driven by the next generation of consoles
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
Source: Company compiled industry market estimates, UK and Spanish markets combined
31
31
Business and strategy update
i. Maximising Core retail
32
Maximising Core Retail: Priorities
1. Maximise the value of our core markets
2. Expand beyond our core retail categories
3. Increase multichannel engagement
4. Optimise the store estate
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
33
1. Maximise the value of our core markets
#1 market positions maintained
#1
#1
#1
#1
#1
#1
#1
#1
#1
#1
#1
#1
#1
#1
#1
#1
#1
#1
#1
50%
50%
682
40%
#1
663
625
40%
610
260
30%
30%
20%
20%
332
10%
323
321
319
313
311
263
264
275
254
237
247
267
270
270
236
311
10%
0%
2008 2009 2010 2011 2012 2013 2014 2015 2016
#
H1
H2
2017 HTD
Market position
0%
2008 2009 2010 2011 2012 2013 2014 2015 2016
# of stores
H1
H2
2017 HTD
market share1
1 Source: GfK-Chart Track. Share of console gaming hardware, software, accessories and digital products at retail
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
34
34
1. Maximise the value of our core markets
GAME remains a high street destination
Cumulative footfall, 000 (UK)
4,000
80,000
3,500
70,000
3,000
60,000
2,500
50,000
2,000
40,000
1,500
30,000
1,000
20,000
500
10,000
0
0
12/13
13/14
14/15
15/16
16/17
Year to date Y/Y footfall
(LFL): -3%
Wk 1
Wk 3
Wk 5
Wk 7
Wk 9
Wk 11
Wk 13
Wk 15
Wk 17
Wk 19
Wk 21
Wk 23
Wk 25
Wk 27
Wk 29
Wk 31
Wk 33
Wk 35
Wk 37
Wk 39
Wk 41
Wk 43
Wk 45
Wk 47
Wk 49
Wk 51
Wk 1
Wk 3
Wk 5
Wk 7
Wk 9
Wk 11
Wk 13
Wk 15
Wk 17
Wk 19
Wk 21
Wk 23
Wk 25
Wk 27
Wk 29
Wk 31
Wk 33
Wk 35
Wk 37
Wk 39
Wk 41
Wk 43
Wk 45
Wk 47
Wk 49
Wk 51
5 year weekly footfall trends, 000 (UK)
12/13
13/14
14/15
15/16
16/17
Footfall remains robust, despite wider high street trends and lower overall games market in 2016
1 Source: GfK-Chart Track. Share of console gaming hardware, software, accessories and digital products at retail
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
35
35
1. Maximise the value of our core markets
Several initiatives ongoing to further enhance our specialist proposition
•
New Reward membership service to launch in H2
•
Total reward customers up 100k in H1 to 4.5 million
with swipe rates up 2.3% in the UK
•
New online trade-in tool launching in H2
•
Significant expansion of our new repair service in
Spain, with sales up 49% in the half, to €0.5m
•
New live gaming services launched
•
•
Experiential and challenge zones rolled out to 180
stores
•
Roll-out of BELONGTM gaming arenas underway
Continued development of our award winning elearning platform for store and central teams
Exclusives
Attractive reward
programs

4.5m
Wide range across
physical and digital;
mint & preowned
active reward
customers - LTM
(2016: 4.4m)
Specialist stores, teams
& engagement
Specialist gaming
services
DRIVING LOYALTY &
CUSTOMER LIFETIME
VALUE
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
36
36
2. Expand beyond our core retail categories
Identified ‘gaming lifestyle’ markets are large and growing
Gaming lifestyle categories - est. UK Market Size, £m (2016)
2,000
2,000
1,800
1,600
Total market value:
1,400
£4.5 billion
(vs. £2.2 billion console gaming market, UK, 2016)
1,200
1,000
800
800
600
600
500
400
170
200
250
0
Non-console
PC gaming
digital gaming
(hardware,
content
accessories)
(PC/mobile)
VR devices
Preowned
Gadgets and
Licensed
(hardware mobile phones
tech
merchandise
only)
and tablets
accessories
Sources: IHS, IDG, OC&C, Radiant insights, The Licensing Letter, John Peddle Research, GAME Digital internal growth estimates
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
37
2. Expand beyond our core retail categories
Ongoing developments to drive new category growth
Total ‘New’ Category Sales1, £m
• Curation of in-store ranges targeting
gaming lifestyle categories
•
+28%
Successful Red5 trial for VR, drones etc.,
now rolled out to 257 stores
• Improving visual merchandising and
fixtures for VR and PC gaming
144
112
• Remerchandising space to newer, higher
margin categories
• Continued development of the ‘GAME
Marketplace’ online proposition
•
over 400 vendors and 100k products
H1
15/16
H1
16/17
Digital content
PO Tech
Licensed Merch
VR
PC & mobile accessories
Marketplace
Services & other
1 Measured as Gross Transaction Value. Includes sales of the following: Digital products,
Preowned tech (GAMEtronics), Licensed Merchandise, PC and other non-console accessories,
Marketplace and services
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
38
38
3. Increase multichannel engagement
mComm & App development
•
mComm represented 47% of UK online sales in H1, up 4%pts from 2016
•
GAME app a central pillar of our ‘mobile first’ focus and customer engagement strategy
•
•
•
4.3 million lifetime downloads
UK App relaunched October 2016
•
Daily downloads up 33% since relaunch
•
750k downloads since relaunch
•
4.5* rating on the App Store, up from 3* for prior version
Driving strong engagement
•
98% of all registered downloads since relaunch have become a Reward member
•
1.2 million competition entries to date
•
650,000 customers signed up for push notifications
GAME App relaunched in H1, further App and mComm development planned for H2
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
39
39
3. Increase multichannel engagement
UK eComm site relaunched + new delivery services
•
UK eCommerce site relaunched in October
•
Overall conversion up 12 bpts since relaunch
•
‘Test and learn’ programme underway to
further improve performance and conversion
•
Improved Click and Collect service launched in
October – now represents c10% of online sales
•
Click & reserve launched
Conversion rates following site relaunch (Nov ’16 – Mar ‘17)
Total sessions
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
Product page
Basket
Total conversion
40
40
3. Increase multichannel engagement
New media content and insight programmes
•
•
•
•
Greater content focus
across all channels
Reviews, interviews, ratings,
staff picks, competitions,
editorial etc..
Increased use of
personalised CRM
campaigns
Encouraging initial customer
feedback
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
41
41
4. Optimise the store estate
Real estate optimisation strategy underway
Ensuring each store is ‘fit for purpose’ according to its location
•
•
•
•
•
Top 50 – 100 locations
Highest footfall, premium
locations
Most profitable stores
Investing in customer experience
BELONGTM arena roll-out
•
•
•
•
•
•
50-100 locations
Larger centres and higher footfall
2 into 1 and other opportunities
Reviewing all lease events
Concession partnership opportunities
Challenger and VR zones in all stores
•
•
•
•
•
BELONGTM gaming arenas
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
50-100 locations
Smaller towns and lower footfall
locations
Potential relocation opportunities
to smaller / lower cost sites
Concession partnership
opportunities
Exiting lower contribution stores
180 stores with challenger zones, VR zones
42
4. Optimise the store estate
Property optimisation progress
Store
Action
Metro Centre
2 into 1
Cwmbran
2 into 1
Trafford Centre
Relocation
Southampton
Relocation
Aberystwyth
Relocation
Leamington Spa
Relocation
Edinburgh Waverley
Relocation
Romford
2 into 1
Livingston
2 into 1
Peterborough
2 into 1
Net contribution margin (% of GTV)1
10.0%
9.1%
9.0%
8.0%

7.0%

UK store average (LTM)
6.0%
5.0%
4.0%

3.5%
3.0%






2.0%
1.0%
0.0%
Average Net Contribution Margin across 10 stores
Pre
1)
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
Post
Net contribution margin calculated as store EBITDA (excludes central overheads) as a % of store sales. Preconversion ratio calculation based on LTM actuals/estimate. New store ratio analysis based on trading to date
plus forecast trend data to cover 12 month period
43
43
4. Optimise the store estate
Portfolio activity H1
UK
Spain
Group
313
267
580
Openings
3
3
6
of which concessions
2
0
2
(5)
(0)
(5)
4
0
4
Stores at end of half
311
270
581
Avg. Years to first break
1.2
1.0
1.1
1,265
806
1,053
Stores at beginning of half
Closures
Relocations and 2 into 1s
Average sq. footage
GAME Digital Final Results 2015/16
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
45
44
44
Business and strategy update
ii. Live gaming services
45
Expanding the Group’s live gaming services
BELONGTM Gaming Arenas
• Leisure-led live gaming format launched July 2016
•
Driving new customers into stores
•
1 in 5 BELONGTM customers new to GAME
•
Higher dwell time, with average playing time over 1.25 hours
•
New revenue streams added (Pay to Play, Food & Beverage)
•
Halo effect on core sales, particularly PC / digital
• Nine in-store arenas opened to date; plans to open a
further 20 more during 2017
• BELONGTM brand launched in December
• Gross capex per refit of c.£50-100k, dependent on store
configuration. Targeting:
•
•
6-18 month payback
12% operating margin
• Strong supplier support
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
47
47
Expanding the Group’s live gaming services
BELONGTM Gaming Arenas
BELONG customers
New customer
21%
Existing GAME
customer
79%
Attracting a new audience…
Annual Average Customer Value, £
384
191
Avg. GAME
Avg. GAME + BELONG
…and appealing to a valuable demographic
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
48
48
Expanding the Group’s live gaming services
Initial BELONGTM performance has been encouraging
•
Direct arena sales1 up more than 3x in first 4 months
•
Limited marketing to date
2017 BELONGTM opening locations:
Open/Tranche 1
Avg. Arena sales
Tranche 2
(all arena stores rebased to 100 at week 1)
350%
300%
250%
200%
150%
Week 22
Week 21
Week 20
Week 19
Week 18
Week 17
Week 16
Week 15
Week 14
Week 13
Week 12
Week 11
Week 10
Week 9
Week 8
Week 7
Week 6
Week 5
Week 4
Week 3
Week 2
Week 1
100%
Source: Company data
1 Arena sales comprise Pay to Play (console & VR), venue hire, Food & Beverage and PC and VR category sales in arenas
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
49
49
Expanding the Group’s live gaming services
BELONGTM: Positive impact on retail
•
Strong improvement to both console and PC gaming categories since opening
•
PC gaming revenue uplift +180% against base, compared with pre-launch period against avg. GAME store
•
Core console sales +14% uplift on same basis
Uplift to avg. weekly PC/VR sales, pre/post launch
Uplift to avg. weekly console sales, pre/post launch
+180% uplift to relative
performance post launch
Post launch performance vs. 8 weeks prior to launch
GAME avg.
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
GAME+BELONG avg.
+14% uplift to relative
performance post launch
Post launch performance vs. 8 weeks prior to launch
GAME avg.
Source: Company commercial and insight data
Average uplift data based on stores with a BELONG arena open for more than 10 weeks
GAME+BELONG avg.
50
50
Expanding the Group’s live gaming services
BELONGTM: Future roadmap and priorities
•
Driving utilisation and
performance of existing arenas
•
Ongoing roll-out of new arenas
•
Development of online platform
•
Phase 1 launched in March
•
Creation and recruitment of initial
wave of local teams (‘tribes’)
•
Developing a growing programme
of grassroots esports tournaments
Building an integrated, content rich physical and digital ecosystem
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
51
52
51
Expanding the Group’s live gaming services
BELONGTM: Forms one element of our expanding esports proposition,
with local activity supported by a content rich multichannel experience
Major arena event
production
Active social engagement
GAME Digital Final Results 2015/16
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
National online / offline
esports tournaments
BELONGTM arenas
Content production and
in-house broadcast studio
Esports consultancy services
Nationwide local community activity
(competitive and non-competitive)
Online platform
(Phase 1 launched Mar-17)
52
5252
Expanding the Group’s live gaming services
Continued progress on major gaming events
• Events sales growth of 49% in H1
• Targeting FY sales of over £9m
• Senior team hires to drive future performance
• Record Insomnia sales
Total Event divisional Sales, £000s
10000
9000
H2F
8000
• Largest ever Insomnia event held in August 2016
7000
• Universal Music / Island Records partnership for April 2017
6000
• New branding and website launched
5000
• 3-year UK franchise deal for Brick Live signed
4000
• 4 events per year including London and Birmingham
3000
• Strong 3rd party contract events sales
• Delivery partner for MineCon 2016, Anaheim, US
H2
H1
H1
+49%
2000
1000
0
FY16
FY17F
16/17 H1A
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
16/17 H2F
53
Strategic Update
iii. Digital markets
54
Developing digital markets
Managed server hosting
• Digital sales up 120% in H1, to £2.2m, following the recent
contract to provide the global hosting for Titanfall2
• Growing pipeline of future opportunities with several major
developers and publishers
• Continue to focus on the smooth implementation of current
server provisioning whilst further developing the Clanforge
technology, team and infrastructure
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
55
55
Developing digital markets
Ads Reality: Augmented Reality
• Work undertaken for major retail and consumer goods
companies in the half
• Partnership with WPP store agreed
• Continued progress on technology roadmap
• Key team hires in marketing and business development to
drive future growth
• Strong interest in technology from a wide range of industry
sectors - growing pipeline of business opportunities
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
56
56
Closing
ClosingRemarks
Remarks
H1 Summary
Tough half for UK retail in core console markets
•
growth delivered in Spain and new categories
Business strengthened through ongoing action plan
•
•
good progress realising efficiencies and cost savings
focused on cash generation and disciplined use of capital
Clear strategy and plans to address long term structural changes
in our markets
•
•
•
•
improving customer proposition to maximise core retail markets
building new categories and live gaming proposition
targeting major new growth markets across the group
positive start to H2
Prepared for positive market developments
•
•
new innovations to drive growth and impetus in 2017
investment in multichannel and our differentiated, specialist proposition
positions us well
58
58
Future Priorities
Continued optimisation of the core retail business
•
Realising efficiencies and cost savings
•
Focus on cash generation and disciplined use of capital
Capitalising on our exceptional store estate flexibility
•
Exploring potential partnership opportunities
Roll-out and development of BELONGTM live gaming and esports
•
Transforming our customer proposition
Maximising new product launches and driving new category growth
•
New games releases and consoles
•
PC, VR, digital and tech
59
59
59
QUESTIONS
Appendix
61
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
H1 Titles, Year on Year
Other Top Selling ‘Non-Perennial’ AAA
H1 16/17
Perennial AAA
H1 15/16
star
62
62
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
Gross Transaction Value (GTV) by segment
Spain Retail (€)
UK Retail
Events, Esports & Digital
£m
€m
£m
500
250
10
400
250
200
117.7
350
300
56.5
76.0
200
77.4
150
55.2
63.3
100
54.4
25.2
39.7
46.6
700
600
8
170.8
50
95.9
UK Retail
Y/Y %
Spain Retail
Content
-13.5
Content
Preowned
-16.7
Preowned
300
104.8
95.7
267.2
262.1
H1 16
H1 17
37.7
8.6
4
106.0
200
2
3.9
100
0
H1 16
90.9
5
0
H1 17
78.8
6
1
H1 16
400
32.1
50
0
117.6
500
3
197.5
157.2
7
150
100
£m
9
450
Group (£m)
0
H1 17
H1 16
Y/Y %
E,E&D
+10.5
-5.0
H1 17
Y/Y %
Group, £
Y/Y %
Content
n/a
Content
-1.9
Preowned
n/a
Preowned
-8.7
A&O
-2.3
A&O
+27.4
A&O
+120.5
A&O
+15.4
H/W
-34.2
H/W
-14.3
H/W
n/a
H/W
-25.2
Total
-18.1
Total
+3.1
Total
Total
-6.9
+120.5
63
63
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
Statutory revenue by segment
UK Retail
Spain Retail (Local)
Esports, Events, Digital
£m
€m
£m
700
350
7
600
300
6
205
216
500
144
76
250
45
400
78
65
66
123
137
79
200
26
135
150
65
52
300
120
63
65
28
34
56
61
£m
900
800
269
254
200
89
96
116
169
183
185
300
335
333
311
FY13
FY14
FY15
FY16
700
5
600
42
4
67
3
100
200
Group (£m)
6.1
500
73
400
172
300
4.2
2
113
200
100
243
207
241
FY13
FY14
221
50
117
114
117
FY14
FY15
121
0
0
FY15
FY16
1
0
FY13
FY16
0.0
0.0
FY13
FY14
0
FY15
FY16
Y/Y Change
Y/Y Change
Y/Y Change
Y/Y Change
100
Content
16.4
1.2
-9.4
-2.4
2.4
3.7
11.6
-0.7
-6.4
Preowned
2.1
11.9
-1.6
-12.9
8.0
9.7
-1.4
8.3
1.0
A&O
25.2
1.8
18.6
7.8
19.2
22.6
21.8
8.5
20.7
H/W
177.5
-5.3
-29.9
40.9
2.4
17.3
137.1
-5.4
-21.2
Total
41.2
1.1
-11.3
3.7
5.4
10.5
31.0
0.6
-6.2
46.7
46.7
64
64
GAME DIGITAL PLC – INTERIM RESULTS 2016/17
Gross profit by segment
UK Retail
Spain Retail (Local)
£m
160
17
140
1
7
23
4
100
80
52
47
1.6
40
71
78
4
70
2
7
4
9
4
8
69
25
24
FY13
FY14
FY15
FY16
1.0
140
26
120
0.8
33
1.3
FY14
Margin
FY15
FY16
Margin
3
24
63
32
29
71
67
7
40
67
100
60
40
84
94
101
94
FY13
FY14
FY15
FY16
20
0.0
FY13
10
20
80
1.1
0.2
0
0
160
0.4
31
200
1.2
20
28
220
180
0.6
30
£m
1.4
30
10
20
24
Group (£m)
12
50
60
60
80
47
43
40
£m
60
120
18
€m
29
22
Esports, Events, Digital
0
FY13
FY14
FY15
FY16
Margin
Margin
Content
28.9
29.4
32.0
31.4
26.0
24.5
26.3
27.0
28.0
28.0
30.4
30.1
Preowned
36.0
38.3
38.1
34.9
38.4
42.2
40.0
39.3
36.7
39.3
38.5
36.1
A&O
34.6
34.2
35.4
36.9
28.0
27.9
26.8
29.4
32.8
32.6
32.7
34.1
H/W
1.4
7.9
3.6
2.9
5.0
6.2
6.0
5.0
2.6
7.6
4.0
3.4
Total
26.7
24.4
24.7
25.9
25.6
24.2
24.6
24.5
26.4
24.3
24.7
25.5
27.5
27.5
22.0
22.0
65
65