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

GAME Dig i ta l 2016/17 In ter im Resul ts

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 forward-

looking 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

3

MARTYN GIBBSChief Executive Officer

4

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

• 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

GAME DIGITAL PLC – INTERIM RESULTS 2016/17

H1 Group Headlines

41) 1. UK and Spain combined

5

MARK GIFFORDChief Financial Officer

6


H1 2016/17: Group financial summary

• 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

All figures in £m (unless stated)

H1

2016

H1

2017 VAR, %

Gross Transaction Value (GTV)1 608.0 566.3 (6.9)

GTV excluding Hardware 450.8 448.7 (0.5)

GTV of New2 retail categories 112.3 144.1 28.3%

Gross Margin % 23.8% 24.7% +90bpts

Operating costs pre exceptional & adjusting items (102.7) (105.7) (2.9)

Adjusted EBITDA 33.1 23.3 (29.6)

Adjusted Profit before tax 27.7 16.9 (39.0)

Adjusted (basic) EPS 12.2p 7.9p (35.2)

Dividend – Interim 1.67p 1.00p (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.

6

7GAME Digital Final Results 2015/16


Group GTV by category

All figures in £m (unless stated) H1 2016 H1 2017 VAR, %

Physical software 204.4 184.7 (9.6)

Digital content 62.8 77.4 +23.2

Total Content 267.2 262.1 (1.9)

Preowned (core) 81.7 71.4 (12.6)

Preowned tech 23.1 24.3 +5.2

Total Preowned 104.8 95.7 (8.7)

Core A&O 74.9 82.3 +11.4

Events, Esports & Digital 3.9 8.6 +120.5

Total A&O 78.8 90.9 +15.4

Sub-total (ex Hardware) 450.8 448.7 (0.5)

Total Hardware 157.2 117.6 (25.2)

Total 608.0 566.3 (6.9)

• Old Gen down 70%, all other software sales flat

• 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

• New gen software +15.4%, Old Gen software down 41.6%

• PC accessories +12.9%, Licensed Merch +27.8%, Marketplace

+47.1%, VR sales of £10.2m (2016: nil)

• Ongoing impact of lower average selling prices and lower volumes

Strong GTV growth across digital, pre-owned tech and accessories (inc VR) & other (inc events)

• Stronger line up of events with larger like for like events and new

contract events plus new digital contracts and revenue streams

established

• Continued range extension in Spain and greater margin focus in UK

• Strong growth in console and non-console digital content

7

8

Greater mix of higher margin categories drove a 30ppt increase in GM%

GAME DIGITAL PLC - FIRST HALF RESULTS 2015/16

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


Group gross margin (as % of GTV) by category

Note: Calculated as % of GTV

• 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

• Hardware margins up 1.5%, benefiting from improved terms and new console iteration

launches

• Mix effect, predominantly VR sales at lower margins and lower E,E&D margins in the half

• 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

8

9

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

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

Total Retail

• 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

£m H1 2016 H1 2017 VAR, %

Gross Transaction Value (GTV) 608.0 566.3 (6.9)

UK Retail 447.7 366.7 (18.1)

Spain Retail 156.4 191.0 +22.1


Gross Profit 130.7 123.4 (5.6)

UK Retail 95.9 82.4 (14.0)

Spain Retail 33.8 39.7 +17.5


Adjusted EBITDA 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)

LC = Local Currency (EUR)


Group performance overview by division

Strong growth in Spain and E,E&D more than offset by the decline in UK Retail despite significant cost savings

9

10

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)

Total Operating expenses 102.7 105.7 (3.0)

Less: Underlying Depreciation & Amortisation 5.1 5.6 (0.5)

Total Operating expenses before D&A 97.6 100.1 (2.5)

as % of GTV 16.1% 17.7%

• 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


Group operating costs

1) 1. Excludes exceptional and adjusting items

2) 2. Before depreciation and amortisation

Group Continuing costs by division1,2

£m (unless otherwise stated) H1 2016 H1 2017 VAR, £m

Core Retail 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)

Events, Esports & Digital 1.7 4.1 (2.4)

10

11

UK Retail Spain Retail

97.6

(5.3)

+0.6

+4.0

+0.8

97.7

+2.4

100.1

80

85

90

95

100

105

H1 15/16 Selling &Distribution

Administrative Selling &Distribution

Administrative Total Core Retail Events, Esports& Digital

H1 16/17

£m

Cost control and savings in core retail activities; investment continued in high growth opportunities

(6.4%)

• £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

+21.6% : £

+3.6% : €

• Underlying costs up 3.6% in euros,

in line with sales increase

• Selected further investment in

central costs to drive new growth

initiatives

+141%

+0.1%

+2.6%

• First time inclusion

of BELONGTM, Ads

Reality and

SocialNat (GAME

Esports, Spain)

• Scaling up of

Multiplay operations• Winning significant

new contracts

• Delivering

expanded existing

operations


Underlying operating cost bridge1

1) 1. Excludes exceptional and adjusting items and depreciation and amortisation

11

12

£m H1 2016 H1 2017

Operating Profit 22.8 17.3

Proceeds from sale of property - 13.3

Exceptional profit on sale of assets - (6.3)

Depreciation & amortisation 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

• 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


Cash flow generation

12

13

£m H1 2016 H1 2017 Var, £m

Opening cash 63.1 43.1 (20.0)

Free cash flow before w/c 21.4 26.6 5.2

Working capital, tax, interest

& dividends 45.7 9.8 (35.9)

Capex (6.9) (5.8) 1.1

Movement in borrowings (0.2) (0.7) (0.5)

Movement in cash 60.0 29.9 (30.1)

Closing net cash 123.1 73.0 (50.1)

Finance Leases (2.9) (4.0) (1.1)

Net Funds 120.2 69.0 (51.2)


Cash flow and net cash

Strong cash position and increased available facilities

13

• Strong net cash position of £69.0m, after the

deduction of finance lease liabilities

• 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

• 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

14

• 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)

• Growth from new retail categories, as well as Events, Esports and Digital

expected to continue

• 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

• 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

More positive market outlook for balance of 2017, though sales dependent on stock availability


Current trading and outlook

Total Mint Market1

7 weeks to 18 March

YoY, %

UK +22.0%

Spain (€) +50.7%

UK & Spain combined (£) +32.2%

1 Source GfK Chart-track

Mint Market Share1 7 weeks to 18 March

UK market share 31.8%, (1.0)% points

Spanish market share 42.4%, (2.3)% points

Current Trading

7 weeks to 18 March

YoY, %

UK Retail GTV +6.8%

Spain Retail GTV (€) +38.1%

Total Retail GTV (£) +19.8%

14

15

MARTYN GIBBSChief Executive Officer

1 9 m i l l i o n i n s i g h t d a t a b a s e

4 . 5 m i l l i o n a c t i v e ( LT M )

Building the most valuable community for gamers

E V E N T S


17

1. Managed game

server hosting

2. Augmented reality

based visual

marketing

1. Local competitive

gaming and esports,

headlined under

BELONGTM

2. Insomnia Gaming

Festival

3. Major third party

contract events

GAME Changing strategy recap: Pillars and 2017 priorities

Maximise retail

potential in the UK

and Spain

Expand live and

online gaming

services for gamers

and publishers

Optimise the Group's

efficiency whilst

investing for the

future

Develop new markets

through digital

enterprise services

1. Enhance our

specialist offer

2. Build new categories

& services

3. Multichannel

development

4. Store optimisation

1. Fixed and variable

store costs

2. Distribution

efficiencies

3. Procurement and

business process

improvements

4. Supplier

arrangements

GAME DIGITAL PLC – INTERIM RESULTS 2016/17 17

18

Strategy recap: Illustrative strategic value creation plan

Core console

retail

Cost efficiencies

FY15/16

New retail

categories

FY18/19

Core console

retail

New retail

categories

Today

Valu

e

Note: Chart not to scale, indicative onlyGAME DIGITAL PLC – INTERIM RESULTS 2016/17

New markets

18

19

• 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

SUPPLIER ARRANGEMENTS

• Structures optimised to reflect future growth areas

• Ongoing reviews to ensure teams set up to deliver commercial and strategic intentORGANISATIONAL DESIGN

• 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

PROPERTY

• Ongoing areas of focus include central, stores, online and customer service operations

• Driving improved customer service (ways to receive) and efficiency benefitsOPERATIONAL COSTS & BUSINESS PROCESSES

• Strong cash position at end-Jan, improved with sale & leaseback

• Appropriate facilities in place

• Stock management and controls strengthened

CASH AND

WORKING CAPITAL

UK action plan: Driving business efficiency and optimisation

1

2

3

4

5


20

• 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

£m

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+

UK action plan focus: UK operational efficiencies and cost savings have

continued

Continued delivery of efficiency initiatives, procurement benefits and other cost saving actions


21

1 Includes impact of a net 8 store closures since 23 January 2016

2 Since UK action plan initiated in January 2016

UK LEASE PROFILE• Successfully realising opportunities to significantly

reduce UK estate costs prior to any store closures

• Total annualised group rent reduction of c.£2m to

date1

• 67 leases renewed to date2

• Average rent reduction of c.20%

• Average length to first break remains 1.2 years

• Planning for over 240 UK lease events over the next

2 years

• Total annual rent of c.£16m

UK action plan focus: Property optimisation programme update

0

20

40

60

80

100

120

140

160

180

200

<1 2yrs

3yrs

4yrs

5yrs

6yrs

7yrs

8yrs

9yrs

10yrs

11yrs

12yrs

13yrs

14yrs

15yrs

UK Lease Profile

No of leases to exit : Break or Expiry No of Leases by Expiry


22

Market Update

The most powerful console ever.Market update: Headlines

• 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


24

UK software market impacted by weaker year-on-year line up and softer

performance of key titles…

FIFA COD Fallout 4 Battlefront /Battlefield

Pokemon Forza Metal GearSolid V

Gears of War WWE 2K Unchartered

H1 16 H1 17Source: 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

• Number of strong titles (i.e. FIFA, Pokémon, Forza) demonstrates

enduring demand for physical products

• Est. 80%+ of AAA titles sold physically

• However, overall market impacted by:

• 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


(2)(1)

24

25GAME Digital Final Results 2015/16

…resulting in 13% year-on-year decline in the overall UK software market

(18.0%)

+18.1%

(2.9%)

(13.2%)

New release Catalogue All other Total software

UK physical software market, H1 17 vs. H1 16 change, %

Top 30 selling titles

Source: GfK Chart-Track, 26 weeks to 28 January 2017


26

Strong Spanish software market, supported by higher PlayStation and

Nintendo penetration

FIFA 17 Pokemon Call of Duty Grand TheftAuto V

Battlefield 1 /Battlefront

Just Dance NBA 2K Fallout 4 Watchdogs 2 Pro EvolutionSoccer

H1 16 H1 17

GAME Digital Final Results 2015/16

• Top 10 titles units sold up 19% y/y in aggregate


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

(1) (2)

26

27

Full Game Downloads: 3rd party forecasts and surveys point to a maturing in

the direct channel for full games

Source: IHS, Company estimates

• 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%

0.0% 0.5%

5.1%

11.4%

17.1%

23.1%

26.2% 26.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2012 2013 2014 2015 2016 2017E 2018E 2019E

AAA Full Games Purchased Digitally (UK)

Source: SurveyMonkey, BofA Merrill Lynch Global Research, December 2016

+16.6%

+3.1%


76%

24%

Over three-quarters of gamers still prefer to buy games in-store

Buy games in-store Download games directly to console

28

£m

Digital market continues to represent a significant growth market for GAME…

Total digital content market, £m (UK only)

429

580

725

875

1,034

201

3

201

4

201

5

201

6

201

7E

67.073.5

95.4

110.2

62.0

77.3

2013 2014 2015 2016 H1 16 H1 17

GAME digital sales (GTV), £m


+18% CAGR

Y/Y

+25%

Source: IHS

28

29

£m

Source: IHS

Total console content market split by physical / digital, £m (UK)

0

200

400

600

800

1000

1200

1400

1600

1800

2000

201

2

201

3

201

4

201

5

201

6

201

7E

201

8E

201

9E

202

0E

Physical content Digital content

• 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

… though the pace of digital growth is forecast to moderate as penetration

plateaus


The most powerful console ever.2017: Major market drivers

• 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)


31

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

732 8711,152

950 825 724 752 8921,222

1,3191,293

1,242

1,1541,005

892 813782

961

332492

662831

1,0271,216 1,303

1,342

1,279

2012 2013 2014 2015 2016 2017 2018 2019 2020

Hardware Software Digital

Source: Company compiled industry market estimates, UK and Spanish markets combined

Total mint market size, £m (UK & Spain combined)

Beyond 2017: Improving outlook to medium term dynamics

+1.3%+5.2%

+14.8%


32

Business and strategy update

i. Maximising Core retail

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


34

682663

625 610

332 323 321 319 313 311 311

0%

10%

20%

30%

40%

50%

2008 2009 2010 2011 2012 2013 2014 2015 2016 H12017

H2HTD

237

260 263 264254

247236

275267 270 270

0%

10%

20%

30%

40%

50%

2008 2009 2010 2011 2012 2013 2014 2015 2016 H12017

H2HTD

#1 #1 #1 #1 #1 #1 #1 #1 #1 #1 #1 #1 #1 #1 #1 #1 #1 #1 #1 #1

# Market position # of stores market share1

1 Source: GfK-Chart Track. Share of console gaming hardware, software, accessories and digital products at retail


#1 market positions maintained


35

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

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Wk 1

Wk 3

Wk 5

Wk 7

Wk 9

Wk 1

1W

k 1

3W

k 1

5W

k 1

7W

k 1

9W

k 2

1W

k 2

3W

k 2

5W

k 2

7W

k 2

9W

k 3

1W

k 3

3W

k 3

5W

k 3

7W

k 3

9W

k 4

1W

k 4

3W

k 4

5W

k 4

7W

k 4

9W

k 5

1

5 year weekly footfall trends, 000 (UK)

12/13 13/14 14/15 15/16 16/17

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Wk 1

Wk 3

Wk 5

Wk 7

Wk 9

Wk 1

1W

k 1

3W

k 1

5W

k 1

7W

k 1

9W

k 2

1W

k 2

3W

k 2

5W

k 2

7W

k 2

9W

k 3

1W

k 3

3W

k 3

5W

k 3

7W

k 3

9W

k 4

1W

k 4

3W

k 4

5W

k 4

7W

k 4

9W

k 5

1

Cumulative footfall, 000 (UK)

12/13 13/14 14/15 15/16 16/17

Year to date Y/Y footfall

(LFL): -3%


GAME remains a high street destination


36


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 e-

learning platform for store and central teams

DRIVING LOYALTY &

CUSTOMER LIFETIME

VALUE

Exclusives

Attractive reward

programs

Wide range across

physical and digital;

mint & preowned

Specialist stores, teams

& engagement

Specialist gaming

services

4.5m active reward

customers - LTM

(2016: 4.4m)


2,000

800

170

600500

250

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Gaming lifestyle categories - est. UK Market Size, £m (2016)


Identified ‘gaming lifestyle’ markets are large and growing

Sources: IHS, IDG, OC&C, Radiant insights, The Licensing Letter, John Peddle Research, GAME Digital internal growth estimates

Non-console

digital gaming

content

(PC/mobile)

PC gaming

(hardware,

accessories)

VR devices

(hardware

only)

Preowned

mobile phones

and tablets

Licensed

merchandise

Gadgets and

tech

accessories

Total market value:

£4.5 billion(vs. £2.2 billion console gaming market, UK, 2016)


38


Ongoing developments to drive new category growth

• Curation of in-store ranges targeting

gaming lifestyle categories

• Successful Red5 trial for VR, drones etc.,

now rolled out to 257 stores

• Improving visual merchandising and

fixtures for VR and PC gaming

• Remerchandising space to newer, higher

margin categories

• Continued development of the ‘GAME

Marketplace’ online proposition

• over 400 vendors and 100k products

112

144

H115/16

H116/17

Total ‘New’ Category Sales1, £m

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

+28%

Digital content PO Tech

Licensed Merch VR

PC & mobile accessories Marketplace

Services & other


39

• 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


mComm & App development

GAME App relaunched in H1, further App and mComm development planned for H2


40

• 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

Product page Basket Total conversion

Conversion rates following site relaunch (Nov ’16 – Mar ‘17)


UK eComm site relaunched + new delivery services


Total sessions

40

41

• Greater content focus

across all channels

• Reviews, interviews, ratings,

staff picks, competitions,

editorial etc..

• Increased use of

personalised CRM

campaigns

• Encouraging initial customer

feedback


New media content and insight programmes


42


Real estate optimisation strategy underway

Ensuring each store is ‘fit for purpose’ according to its location

• 50-100 locations

• Smaller towns and lower footfall

locations

• Potential relocation opportunities

to smaller / lower cost sites

• Concession partnership

opportunities

• Exiting lower contribution stores

• 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

• Top 50 – 100 locations

• Highest footfall, premium

locations

• Most profitable stores

• Investing in customer experience

• BELONGTM arena roll-out

180 stores with challenger zones, VR zonesBELONGTM gaming arenas


43


Property optimisation progress


3.5%

9.1%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

Average Net Contribution Margin across 10 stores

Net contribution margin (% of GTV)1

Pre Post

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

1) Net contribution margin calculated as store EBITDA (excludes central overheads) as a % of store sales. Pre-

conversion 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

UK store average (LTM)

4445

UK Spain Group

Stores at beginning of half 313 267 580

Openings 3 3 6

of which concessions 2 0 2

Closures (5) (0) (5)

Relocations and 2 into 1s 4 0 4

Stores at end of half 311 270 581

Avg. Years to first break 1.2 1.0 1.1

Average sq. footage 1,265 806 1,053

GAME Digital Final Results 2015/16


Portfolio activity H1


45

Business and strategy update

ii. Live gaming services

47

• 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

Expanding the Group’s live gaming services

BELONGTM Gaming Arenas


48


BELONGTM Gaming Arenas


Existing GAME customer

79%

New customer21%

BELONG customers

Attracting a new audience…

191

384

Avg. GAME Avg. GAME + BELONG

Annual Average Customer Value, £

…and appealing to a valuable demographic

48

4949

• Direct arena sales1 up more than 3x in first 4 months

• Limited marketing to date

100%

150%

200%

250%

300%

350%

We

ek 1

We

ek 2

We

ek 3

We

ek 4

We

ek 5

We

ek 6

We

ek 7

We

ek 8

We

ek 9

We

ek 1

0

We

ek 1

1

We

ek 1

2

We

ek 1

3

We

ek 1

4

We

ek 1

5

We

ek 1

6

We

ek 1

7

We

ek 1

8

We

ek 1

9

We

ek 2

0

We

ek 2

1

We

ek 2

2

Avg. Arena sales(all arena stores rebased to 100 at week 1)

Source: Company data

1 Arena sales comprise Pay to Play (console & VR), venue hire, Food & Beverage and PC and VR category sales in arenas

2017 BELONGTM opening locations:

Tranche 2

Open/Tranche 1


Initial BELONGTM performance has been encouraging


5050Source: Company commercial and insight data

Average uplift data based on stores with a BELONG arena open for more than 10 weeks

• 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

Post launch performance vs. 8 weeks prior to launch

Uplift to avg. weekly console sales, pre/post launch

GAME avg. GAME+BELONG avg.

+14% uplift to relative

performance post launch


BELONGTM: Positive impact on retail


Post launch performance vs. 8 weeks prior to launch

Uplift to avg. weekly PC/VR sales, pre/post launch

GAME avg. GAME+BELONG avg.

+180% uplift to relative

performance post launch

51

Building an integrated, content rich physical and digital ecosystem

• 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

52


BELONGTM: Future roadmap and priorities


https://youtu.be/YcZpjBT6omM

52GAME Digital Final Results 2015/16 52

Content production and

in-house broadcast studio

Nationwide local community activity

(competitive and non-competitive)

Online platform

(Phase 1 launched Mar-17)

Major arena event

production

Active social engagement BELONGTM arenas

National online / offline

esports tournaments

Esports consultancy services


BELONGTM: Forms one element of our expanding esports proposition,

with local activity supported by a content rich multichannel experience


• Events sales growth of 49% in H1

• Targeting FY sales of over £9m

• Senior team hires to drive future performance

• Record Insomnia sales

• Largest ever Insomnia event held in August 2016

• Universal Music / Island Records partnership for April 2017

• New branding and website launched

• 3-year UK franchise deal for Brick Live signed

• 4 events per year including London and Birmingham

• Strong 3rd party contract events sales

• Delivery partner for MineCon 2016, Anaheim, US

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

FY16 FY17F

Total Event divisional Sales, £000s

16/17 H1A 16/17 H2F

+49%


Continued progress on major gaming events


H1

H2F

H1

H2

53

54

Strategic Update

iii. Digital markets

55

• 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

Developing digital markets

Managed server hosting


56GAME DIGITAL PLC – INTERIM RESULTS 2016/17

• 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

Developing digital markets

Ads Reality: Augmented Reality

56

Closing RemarksClosing Remarks

58

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

H1 Summary

58

59

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

Future Priorities

5959

Q U E S T I O N S

61

Appendix

62

star

Perennial AAA

H1 1

6/1

7

Other Top Selling ‘Non-Perennial’ AAA

H1 1

5/1

6


H1 Titles, Year on Year

62

63

UK Retail Y/Y %

Content -13.5

Preowned -16.7

A&O -2.3

H/W -34.2

Total -18.1

197.5 170.8

76.063.3

56.555.2

117.7

77.4

0

50

100

150

200

250

300

350

400

450

500

H1 16 H1 17

£m

UK Retail Spain Retail (€)

3.9

8.6

0

1

2

3

4

5

6

7

8

9

10

H1 16 H1 17

£m

Events, Esports & Digital

267.2 262.1

104.8 95.7

78.8 90.9

157.2 117.6

0

100

200

300

400

500

600

700

H1 16 H1 17

£m

Group (£m)


Gross Transaction Value (GTV) by segment

95.9 106.0

39.737.7

25.232.1

54.446.6

0

50

100

150

200

250

H1 16 H1 17

€m

Spain Retail Y/Y %

Content +10.5

Preowned -5.0

A&O +27.4

H/W -14.3

Total +3.1

E,E&D Y/Y %

Content n/a

Preowned n/a

A&O +120.5

H/W n/a

Total +120.5

Group, £ Y/Y %

Content -1.9

Preowned -8.7

A&O +15.4

H/W -25.2

Total -6.9

63

64


Statutory revenue by segment

Y/Y Change

16.4 1.2 -9.4

2.1 11.9 -1.6

25.2 1.8 18.6

177.5 -5.3 -29.9

41.2 1.1 -11.3

207 241 243 221

120123 137

135

5265 66 79

78

216 205144

0

100

200

300

400

500

600

700

FY13 FY14 FY15 FY16

£m

UK Retail

117 114 117 121

65 56 61 67

2628

3442

45 6365

76

0

50

100

150

200

250

300

350

FY13 FY14 FY15 FY16

€m

Spain Retail (Local)

0.0 0.0

4.2

6.1

0

1

2

3

4

5

6

7

FY13 FY14 FY15 FY16

£m

Esports, Events, Digital

300 335 333 311

172169 183 185

7389 96 116

113

269 254200

0

100

200

300

400

500

600

700

800

900

FY13 FY14 FY15 FY16

£m

Group (£m)

Y/Y Change

-2.4 2.4 3.7

-12.9 8.0 9.7

7.8 19.2 22.6

40.9 2.4 17.3

3.7 5.4 10.5

Y/Y Change

46.7

46.7

Y/Y Change

11.6 -0.7 -6.4

-1.4 8.3 1.0

21.8 8.5 20.7

137.1 -5.4 -21.2

31.0 0.6 -6.2

Content

Preowned

A&O

H/W

Total

64

65

Content

Preowned

A&O

H/W

Total

Margin

28.9 29.4 32.0 31.4

36.0 38.3 38.1 34.9

34.6 34.2 35.4 36.9

1.4 7.9 3.6 2.9

26.7 24.4 24.7 25.9

6071 78 69

43

4752

47

18

22

23291

177

4

0

20

40

60

80

100

120

140

160

FY13 FY14 FY15 FY16

£m

UK Retail

30 28 31 33

2524

2426

78

9122 4

4

4

0

10

20

30

40

50

60

70

80

FY13 FY14 FY15 FY16

€m

Spain Retail (Local)

1.11.3

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

FY13 FY14 FY15 FY16

£m

Esports, Events, Digital

84 94 101 94

6367

7167

24

2932

403

2010 7

0

20

40

60

80

100

120

140

160

180

200

220

FY13 FY14 FY15 FY16

£m

Group (£m)

Margin

26.0 24.5 26.3 27.0

38.4 42.2 40.0 39.3

28.0 27.9 26.8 29.4

5.0 6.2 6.0 5.0

25.6 24.2 24.6 24.5

Margin

27.5 22.0

27.5 22.0

Margin

28.0 28.0 30.4 30.1

36.7 39.3 38.5 36.1

32.8 32.6 32.7 34.1

2.6 7.6 4.0 3.4

26.4 24.3 24.7 25.5

65


Gross profit by segment

Documents

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