Game Digital had already warned on profits in January, but its shares have fallen sharply after it released further details and announced its finance director was leaving.
First half earnings dropped 16% to £43m, hit by increased competition and heavy discounting, especially over the key Christmas period. It also warned:
The video games market in the UK has started 2015 more slowly than we anticipated. However....we expect activity in the UK to pick up in coming weeks, driven by promotional campaigns around Easter and the launch of a number of key titles.
We are well positioned to take a leading share of sales for the high quality line-up of new games which are due to be released into the continually expanding installed base of Xbox One and PlayStation 4 consoles.
But its shares are down 8p or 3% at 252p, having earlier fallen as far as 220p, with some support from the confirmation of a special £25m or 14.7p a share dividend. Analysts at Canaccord Genuity said:
The key themes were well rehearsed in the January trading statement, with significant discounting/bundling activity, particularly around Black Friday/Cyber Monday, driving declines in both software and hardware revenues. However, importantly, Game maintained or gained market share in the UK and Spain.
There are a number of growth initiatives (Game Wallet, Marketplace, mobile portal etc), which should augment growth in 2016, but with a weaker run rate into the third quarter and few major releases in the fourth quarter, we reduce 2015 projected revenues by £15m, cutting Ebitda from £51.3m to £48.0m, while a higher tax charge means pretax profit comes down from £41.9m/19.5p to £38.8m/17.5p, a 10% downgrade.
Meanwhile Benedict Smith - who helped the company’s turnaround which led to last year’s flotation - will step down as chief financial officer later this year to join a private equity backed business.
