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GAME Digital shares level up as underlying earnings rise over 25%

The group reported that its adjusted EBITDA for the year was £10.1mln, up 26.3% on the prior year despite a 0.1% decline in revenues to £782.3mln
Video game controller
Despite the uptick in earnings, GAME said its core retail division had suffered a 12.9% decline in adjusted EBITDA

Video game retailer Game Digital PLC (LON:GMD) saw its shares jump in early trading Thursday after its full-year underlying earnings (EBITDA) rose by over 25%.

The group reported that its adjusted EBITDA for the year was £10.1mln, up 26.3% on the prior year despite a 0.1% decline in revenues to £782.3mln.

READ: Game Digital shares gain as it reveals positive second half

Despite the uptick in earnings, GAME said its core retail division had suffered a 12.9% decline in adjusted EBITDA to £12.2mln, with its UK retail performance impacted by a margin decline resulting from a change in product mix toward lower margin products such as hardware and digital content.

Meanwhile, the group’s Events, Esports & Digital (EED) segment saw its adjusted EBITDA loss narrow to £2.1mln from £6mln last year due to growth in its BELONG gaming areas.

GAME signed a collaboration agreement with Sports Direct International PLC (LON:SPD) in February for 50% of its BELONG intellectual property for £3.2mln, which will see the gaming areas placed in Sports Direct stores.

READ: GAME Digital to put retail outlets, gaming areas into Sports Direct stores

The group also said it had ended the year with a net cash balance of £58.7mln, up from £47.2mln last year.

In current trading, GAME said it was “cautiously optimistic” around the prospects for the group into the new year, with trading for the first 14 weeks ahead of the year-ago period.

The company added that the BELONG pay-to-play performance had been up 50% on the prior year in the same period, while gross transaction value at its UK and Spanish markets was up 6.6% and 1.7% on the year-ago period respectively.

In a note to clients, analysts at City broker Liberum said operation efficiencies coupled with the improvements in the EED segment had “more than offset the challenges in a tough retail market”.

The broker added that the strong net cash would continue to support investment to “accelerate diversification into additional, long-term revenue streams”.

Shares were up 7.9% at 31.1p.

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