GAME Digital plc 2015/16 Half Year Results
Transcription
GAME Digital plc 2015/16 Half Year Results
building the most valuable community of gamers GAME Digital plc 2015/16 Half Year Results 23 MARCH 2016 1 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 forwardlooking 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 GROUP H1 HEADLINES » » » » » H1 results ahead of January guidance; lower year on year due to challenging UK market dynamics Strong performance in Spain UK business review undertaken and action plan implemented to address current market trends and improve profitability Good progress across the Group’s retail and business diversification strategies » Committed to financial investment to support multichannel, community and digital growth plans Clear focus across the business on driving trading performance, the UK action plan and the Group’s strategic priorities Insomnia 56 CS:GO Final, December 2015 3 MARK GIFFORD CHIEF FINANCIAL OFFICER 4 GAME DIGITAL PLC - FIRST HALF RESULTS 2015/16 FINANCIAL HEADLINES All figures in £’m (unless stated) Gross Profit Operating costs pre depreciation, amortisation, exceptional & adjusting items Adjusted EBITDA H1 2016 H1 2015 VAR % 130.7 135.2 (3.3) (97.6) (92.2) (5.8) 33.1 43.0 (23.0) Gross Profit decline of 3.3%; -1.2% on a constant currency basis Margin performance reflects Xbox One and PS4 software growth plus new category growth and Multiplay Content margins (mint and preowned) down given the sales decline of old generation software Higher operating costs due to first time inclusion of Multiplay. Core operating cost inflation of 3.6% EBITDA declined to £33.1m, £9.9m lower than the prior year Gross Transaction Value Total 608.0 644.1 (5.6) Total excluding Hardware 450.8 446.6 0.9 H1 decline in GTV of 5.6%; down 3.6% on a constant currency basis GTV growth excluding Hardware up 0.9%, up 3.1% on a constant currency basis SWITCH FROM OLD GEN TO NEW GEN IMPACTING MARGINS CONTINUED INVESTMENT AND PROGRESS IN GROWTH CATEGORIES AND MULTIPLAY 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 5 GAME DIGITAL PLC - FIRST HALF RESULTS 2015/16 FINANCIAL HEADLINES - CONTINUED All figures in £’m (unless stated) H1 2016 H1 2015 VAR % 27.7 38.9 (28.8) Adjusted (basic) EPS 12.2p 17.8p (31.5) Dividend – Interim 1.67p 7.35p (77.3) 66.6 64.9 2.6 120.2 140.4 (14.4) Adjusted Profit before tax Net cash from operating activities Net cash H1 Adjusted PBT of £27.7m Higher effective tax rate (predominantly due to the greater profit contribution from Spain) New dividend policy targeting 1/3:2/3 split between interim and final Interim dividend of 1.67p declared Positive cash generation continued in the period After special dividend of £25m paid last year, net cash closed at £120.2m Group remains well funded with new and increased facilities GROUP WELL-FUNDED, POSITIVE CASH GENERATION CONTINUES 6 GAME DIGITAL PLC - FIRST HALF RESULTS 2015/16 GTV BY CATEGORY H1 2016 £m H1 2015 £m VAR % Content 267.2 281.0 (4.9) Preowned 104.8 102.4 2.3 78.8 63.2 24.7 Sub-total 450.8 446.6 0.9 Hardware 157.2 197.5 (20.4) Total 608.0 644.1 (5.6) Group GTV Mix, % 13% 17% 44% 26% AT&O New Gen software up 25%, Old Gen down 59% Solid digital content growth, +9.2% Driven by preowned tech sales of £23m, +93% New Gen software up 40%, Old Gen down 37% Growth in Accessories, Toys-To-Life and Other sales, excl. Multiplay, up 18.5% Multiplay sales of £3.9m (2015: Nil) Ongoing impact of lower average selling prices and lower volumes STRONG GROWTH IN AT&O PLUS PREOWNED PHONES AND TABLETS 7 GAME DIGITAL PLC - FIRST HALF RESULTS 2015/16 GROSS PROFIT MARGIN, % OF GTV Gross Profit Margin, % (of GTV) %pt Change H1 ‘16 % H1 ‘15 % Content 22.8 24.9 (2.1) Preowned 37.0 38.1 (1.1) AT&O 32.5 31.0 1.5 Sub-total 27.8 28.8 (1.0) Hardware 3.4 3.3 0.1 21.5 21.0 0.5 Total Underlying software margins increased marginally, +0.1% Overall margin decline explained by growth in digital content (stronger digital currency sales) as well as a nonrecurring digital bundling benefit last year Preowned software margins increased Mix effect of increased preowned tech AT&O margins benefited from mix effects, with increase of higher margin licensed product and lower contribution from lower margin DVD sales Hardware margins stable GREATER MIX OF HIGHER MARGIN CATEGORIES DROVE A 50BPT INCREASE IN GM% 8 GAME DIGITAL PLC - FIRST HALF RESULTS 2015/16 GROSS TRADING MARGIN1, £M PS3/Xbox360 and all other Software (Mint and Preowned) £78.4m £132.7m1 Other categories £54.3m PS4/XB1 Growth categories up 25% in H1 Old format content (preowned and mint) of £29.4m down 44% on last year explaining overall Group performance Old format content (representing 22% of overall margins) will have a reducing impact on overall performance going forwards Other categories AT&O2 (Mint & Preowned) Digital Content Preowned Tech A Sub-Total Hardware (Mint & Preowned) Total Gross profit, £m 28.3 10.9 5.5 44.7 9.6 54.3 GM, % 33.1 17.3 23.8 26.1 5.5 15.7 GTV VAR, % +21.1 +9.2 +93.0 +22.4 (19.2) (2.8) Software (Mint & Preowned) B PS4 and Xbox One PS3 and Xbox 360 All other formats Sub-Total Total Gross profit, £m 49.0 18.2 11.2 29.4 78.4 GM, % 27.0 36.7 35.2 36.1 29.8 GTV VAR, % +27.0 (50.8) (30.1) (44.3) (9.0) Total A + B 93.7 26.5 +24.7 GROWTH CATEGORIES CONTRIBUTED GROSS PROFIT OF c£94M, OVER 70% OF TOTAL 1 Gross trading margin is gross profit before adjusting for rebates, loyalty and other margin adjustments, totalling (£2 million) in aggregate 2 Group figures including UK and Spanish Retail plus Multiplay 9 GAME DIGITAL PLC - FIRST HALF RESULTS 2015/16 INSTALLED BASE GROWTH Units sold, millions Installed User Base (UK) PS3/Xbox360 14 Adoption rate of the latest generation of consoles (PS4, Xbox1) remains well ahead of previous generation (PS3, Xbox360) at same point in cycle PS4/Xbox1 12 5.1 million vs. 3.5 million 10 8 Significant further hardware sales of the latest generation of consoles to come 5.1m 6 4 current PS4/Xbox1 installed base approximately 1/3rd that of the prior generation (c.14.5 million units) 3.5m 2 0 0 1 2 3 4 5 6 7 8 Further PS4/Xbox1 hardware growth expected to drive continued content and accessories sales growth Years after launch ACCELERATED CUSTOMER RECRUITMENT FOR NEW GENERATION CONSOLES CONTINUES Source: IHS Screen Digest, GfK Chart-Track, IDG 10 GAME DIGITAL PLC - FIRST HALF RESULTS 2015/16 MARKET BACKDROP: H1 CONSOLE PERFORMANCE Console Gaming Market (Hardware, Software, Accessories, Digital) 11.1% Console Gaming Market (Hardware, Software, Accessories, Digital) 17.5% -12.8% Spain Console Market GAME Spain GTV Ex. Hardware UK Console Market -9.6% GAME UK GTV Ex. Hardware 5.5% 13.1% -0.2% -5.2% Spain Console Market GAME Spain GTV UK Console Market GAME UK GTV 1) Source: GfK Chart-Track (Based on value of retail sales of mint hardware, mint software, console digital content and gaming accessories), 26 weeks to 23 January 2016. Spain figures in local currency 2) Gross Transaction Value (“GTV”) is a non-IFRS measure defined as total retail receipts excluding VAT, including publishers’ share of digital sales and before the deduction of the cost of Reward points. GTV provides a more comparable measure to market growth as it includes total digital receipts at till, rather than digital commissions 11 GAME DIGITAL PLC - FIRST HALF RESULTS 2015/16 REGIONAL PERFORMANCE Spain GTV GTV ex. Hardware Gross Profit Operating Costs (ex D&A) Adjusted EBITDA UK1 GTV GTV ex. Hardware Gross Profit Operating Costs (ex. D&A) Adjusted EBITDA H1 2016 £m 156.4 117.0 33.8 (22.2) 11.6 H1 2015 £m 144.3 112.0 32.5 (21.4) 11.1 VAR % 8.4 4.5 4.0 3.7 4.5 H1 2016 £m 451.6 333.8 96.9 (75.4) 21.5 H1 2015 £m 499.8 334.6 102.7 (70.8) 31.9 VAR % (9.6) (0.2) (5.6) 6.5 (32.6) LC VAR % 17.5 13.1 13.1 13.0 13.5 Strong GTV and GP growth in Spain in local currency. Reported growth rates reduced due to currency Performance helped by addition of 44 GameStop Spain stores in October 2014 Spanish LFL sales +16.1% in LC Spanish EBITDA +13.5% in LC UK GP decline due to impact of decline in older gen software sales Overall UK Operating costs increased 6.5%, including the first time addition of Multiplay Actions to improve UK profitability launched with benefits already being delivered STRONG GROWTH IN SPAIN; ACTIONS BEING TAKEN TO IMPROVE UK PROFITABILITY LC = Local Currency (EUR) 1) UK figures incorporate Multiplay, Digital Solutions and Group (PLC) costs 12 GAME DIGITAL PLC - FIRST HALF RESULTS 2015/16 OPERATING EXPENSES Selling & Distribution Administrative Of which exceptional items Of which adjusting items Administrative expenses pre exceptional and adjusting items Total Operating expenses pre exceptional and adjusting items as % of revenues July 15 £m July 14 £m VAR % (79.4) (77.9) 1.9 (28.5) (23.8) 19.7 0.4 - - (5.6) (5.7) - (23.3) (18.1) 28.7 (102.7) (96.0) 7.0 18.7% 16.4% Total operating costs of £102.7m, up £6.7m in H1 including first time inclusion of Multiplay costs Costs (excluding Multiplay and deprecation and amortisation) of £95.5m, up £3.3m or 3.6% Distribution cost increases of £1.5m to £10.8m driven by online growth Rent decreases of £0.6m to £17.1m Store payroll increase of £0.5m (1.7%) to £31m £0.6m decrease in net marketing costs Underlying £5.2m increase in Administrative costs explained by: £2.1m of Multiplay costs £1.3m increase in depreciation and amortisation £0.7m Digital Solutions set up £1.0m in UK / Spain central cost increases COST CONTROL IN CORE ACTIVITES; INVESTMENT CONTINUED IN HIGH GROWTH OPPORTUNITIES 13 GAME DIGITAL PLC - FIRST HALF RESULTS 2015/16 12 MONTH CASH FLOW AND NET CASH OPERATING CASH FLOW £m FREE CASH FLOW £m CASH GENERATION £m NET CASH £m Operating Profit 15.5 Operating cash flow 50.9 Free cash flow 33.4 Depreciation & Amortisation 18.6 Capital expenditure (11.8) Interim Dividend (12.4) Cash generation 8.4 Working capital & other items 16.8 Taxation (5.1) Acquisition of subsidiary (12.4) Special Dividend (24.8) Net Interest (0.6) Acquisition of investment (0.2) FREE CASH FLOW 33.4 CASH GENERATION OPERATING CASH FLOW 50.9 8.4 OPENING NET CASH Increase borrowings and FX CLOSING NET CASH 140.4 (3.8) 120.2 In 12 months to 23 January 2016 Positive operating cash flow from core business of £50.9m, including positive working capital management Continuing investment for growth with capital expenditure of £11.8m Free cash flow of £33.4m before dividends and acquisitions Cash generation of £8.4m before payment of £24.8m special dividend POSITIVE OPERATING CASHFLOWS AND WORKING CAPITAL MANAGEMENT 14 GAME DIGITAL PLC - FIRST HALF RESULTS 2015/16 BALANCE SHEET, WORKING CAPITAL AND TREASURY £m Tangible fixed assets Investments Intangible assets Inventory Trade and other receivables Trade and other payables Cash (net of borrowings) Other liabilities Net assets Inventory Trade receivables Trade payables Trade working capital Jan 2016 23.9 0.2 56.9 103.9 37.6 (197.7) 120.2 (12.5) 132.5 Jan 2015 19.6 51.2 74.5 57.4 (160.1) 140.4 (14.5) 168.5 103.9 17.7 (99.6) 22.0 74.5 34.7 (86.2) 23.0 Strong cash position of over £120m New and increased facilities agreed in the first half £30m RCF facility in UK €38.5m facilities in Spain, currently Spring annual review Review of UK facilities Net investment in trade working capital decreased by £1.0m, or 4.3%, to £22.0m Inventory increased 39% to £103.9m due to: additional stock investment in the growth AT&O category increased GAMEtronics stock levels to support the current sales demand greater stock investment put into software following the agreement of extended payment terms from certain suppliers STRONG CASH POSITION AND IMPROVED FACILITIES; INVESTMENT IN STOCK IN NEW GROWING CATEGORIES 15 GAME DIGITAL PLC - FIRST HALF RESULTS 2015/16 OUTLOOK AND FY15/16 GUIDANCE Targeting a modest, positive Group EBITDA for H2 Second half trading in line with expectations Cost investment in faster growth categories in retail and investing in new divisions Cost efficiencies being delivered across the UK business Group capex for core retail business and Multiplay Planned EBITDA growth for 2016/17 and beyond Targeting dividend split of approximately 1/3, 2/3 between interim and final FOCUSED ON REALISING GROWTH OPPORTUNITIES WHILST CONTROLLING COSTS IN CORE ACTIVITES 16 MARTYN GIBBS CHIEF EXECUTIVE OFFICER 17 1. UK ACTION PLAN 2. STRATEGIC AND BUSINESS UPDATE 18 1. SUPPLIER ARRANGEMENTS 2. ORGANISATIONAL DESIGN 3. PROPERTY REVIEW AND OPTIMISATION 4. BUSINESS PROCESSES 5. CASH PLANNING & STOCK EFFICIENCES © Tom Clancy’s Rainbow Six Siege, Released 1 December 2016 (UBISOFT) UK ACTION PLAN COMMERCIAL OPPORTUNITIES IMPROVED CONSUMER PROPOSITION REALISING OPERATIONAL EFFICIENCIES 19 SUPPLIER ARRANGEMENTS: BROADENING BUSINESS PARTNERSHIPS CUSTOMER & CHANNELS COLLABORATION EXCLUSIVE & DIFFERENTIATED RANGE AND OFFER CUSTOMER AND GAMER INSIGHT AND ENGAGEMENT ACTIVATION THROUGH GAMING EVENTS COMPETITIVE GAMING & ESPORTS INNOVATIVE DIGITAL GAMING SOLUTIONS WORKING TOGETHER TO BUILD GAMING COMMUNTIES AND FUEL THEIR PASSION 20 PROPERTY REVIEW AND OPTIMISATION OPPORTUNITY TO SIGNIFICANTLY REDUCE ESTATE COSTS PRIOR TO ANY STORE CLOSURES » PROGRESS ALREADY ACHIEVING RESULTS NO LOSS MAKING STORES IN THE UK* 120 100 80 60 40 20 0 246 EVENTS 114 75 57 37 34 30 25 20 15 10 5 0 £m SIGNIFICANT CONSIDERATION GIVEN TO EVERY LEASE RENEWAL UK LEASE EVENTS # of lease events 246 UK LEASE EVENTS BY JULY ‘18; £55M TOTAL FIXED COSTS 2015/16 2016/17 2017/18 2018/19 After 18/19 # LEASE EVENTS TOTAL FIXED COSTS (RHS) * Calculated as store EBITDA contribution in LTM before allocation of central costs 21 BUILDING THE MOST VALUABLE COMMUNITY OF GAMERS 22 GAMERS ARE AT THE HEART OF EVERYTHING WE DO PRO ESPORTS TOURNAMENTS LOCAL COMPETITIONS INSOMNIA ACTIVITY STORES ONLINE MOBILE CONSOLE TITLES PC TITLES LIVE EVENTS AND ONLINE SOCIAL & CRM APP CUSTOMER SUPPORT PASSIONATE & KNOWLEDGABLE TEAMS FROM GRASSROOTS TO THE WORLD’S TOP PROS INSOMNIA GAMING CONVENTIONS REGIONAL EVENTS EXCLUSIVES PHYSICAL & DIGITAL CONTENT BRANDED H/W & ACCESSORIES STORE EVENTS ROADSHOWS FIRST PLAYS BRANDED MERCHANDISE PC GAMING RANGE OF SERVICES UNIQUE AND MEMORABLE GAMING EVENTS AUTHORITATIVE RANGE AND RELEVANT SERVICES REWARD & DIGITAL WALLET APP SCAN IT! SOCIAL MEDIA CLUBS NEWSLETTERS GROWING DIGITAL ENGAGEMENT 23 PRIORITIES TO DELIVER LONG TERM, SUSTAINABLE GROWTH SPECIALIST RETAIL ESPORTS & EVENTS DIGITAL SOLUTIONS Multichannel retail operations in the UK and Spain Insomnia, gaming events, eSports and local competitive gaming Clanforge server management 24 SPECIALIST RETAIL 25 STORE PURPOSE AND PROFITABILITY CONVENIENCE – CHOICE – EXPERIENCE - DISCOVERY TARGETED NEW STORE OPENINGS IN H1 - TRIALLING IN-STORE INITIATIVES EXPLORING PARTNERSHIP OPPORTUNITIES TRIALLING NEW FORMATS IMPROVED SPACE PLANNING METRO STORE OPENING, OCTOBER 2015 26 CUSTOMER INSIGHT AND SEGMENTATION NAME: MIKE B SEGMENT: 8 SEGMENT PROFILE (EXAMPLES): ATF 9.4X % DIGITAL 59% % TRADE-IN 50% SHOP IN STORE & ONLINE 24% SHOP PHYSICAL & DIGITAL 56% SHOP MINT AND PREOWNED 64% GAMING PREFERENCES: Platform: Xbox One, PlayStation 4 Genres: First Person Shooters, Racing, Sports Local Store: Liverpool GAME Wallet: DEEP UNDERSTANDING OF CUSTOMER SHOPPING AND PLAYING PREFERENCES 27 CUSTOMER & CHANNELS: CONTINUED MULTICHANNEL DEVELOPMENTS NEW CUSTOMER AND CHANNELS DIRECTOR ONBOARD ENHANCED WAYS TO ORDER AND RECEIVE MOBILE SITE UPGRADE COMPLETED FURTHER DESKTOP / TABLET SITE IMPROVEMENTS PLANNED MARKETPLACE / ENDLESS RANGE DEVELOPMENTS +5.7% 50% Unique web visits, H1 % of online sessions via mobile, H1 28 CUSTOMER & CHANNELS: DRIVING ENGAGEMENT THROUGH AN ENRICHED DIGITAL APP EXPERIENCE MAJOR APP UPGRADE PLANNED FOR IN 2016 RICHER CONTENT, COMPETITIONS AND EXCLUSIVE OFFERS EXPANDING BEYOND GAMING - EVENTS, MOVIES ETC. BUILDING COMMUNITY VIA SOCIAL ENGAGEMENT AND EXPERIENCES GAME WALLET INTEGRATION WITH ONE TOUCH PAYMENT SIMPLE & SECURE REWARD ACCESS 3,000,000 DOWNLOADS TO DATE 750,000 GAME WALLET USERS 29 RANGE AND OFFER: DELIVERY IN CORE CATEGORIES AND DEVELOPMENT OF NEW GROWTH AREAS NEW GEN SOFTWARE (PS4/XB1) DIGITAL CONTENT PREOWNED TECH PC GAMING +27% +9.2% +93% +9.4% Mint and Preowned sales Digital sales Preowned tech sales PC Category sales ACCESSORIES, TOYS TO LIFE & LICENSED MERCHANDISE MARKETPLACE +150% 150,000 Licensed merchandise sales New online products VIRTUAL REALITY Major devices launching in H2 Note: All growth figures represent category GTV growth for the 26 weeks ended 23 January 2016 (UK & Spain combined). Source: Company NEW SERVICES Click & Collect Consumer Finance Device repair Online Trade-in (H2) Product protection 30 GAMING EVENTS & ESPORTS 31 GROWING INSOMNIA LARGEST EVER INSOMNIA HELD (I55) IN AUGUST 2015 LARGEST WINTER INSOMNIA (I56) HELD AT NEC IN DECEMBER 2015 INSOMNIA 57 SET TO BREAK RECORDS FOR AN EASTER EVENT NEW EVENTS ANNOUNCED FOR IRELAND AND SCOTLAND GAMEFEST CONSUMER EXPO ANNOUNCED TO COINCIDE WITH INSOMNIA 58 £2.9m DISCUSSIONS ONGOING WITH POTENTIAL INTERNATIONAL PARTNERS H1 events sales Insomnia 56 opening ceremony, NEC, December 2015 32 INCREASING ESPORTS AND LOCAL COMPETITIVE GAMING ACTIVITY ACTIVITY HEADLINED BY EVENTS AT INSOMNIA HUNDREDS OF TEAMS / THOUSANDS OF PLAYERS COMPETED IN 2015 FIRST PRO TOURNAMENT HOSTED IN DECEMBER 2015 ACQUIRED POPULAR SPANISH ESPORTS PLATFORM: SOCIALNAT PLANS TO BUILD LOCAL ACTIVITY THROUGH LOCAL COMMUNITIES 33 DIGITAL SOLUTIONS 34 87 TITLES CURRENTLY SUPPORTED ACROSS B2B AND B2C CONTINUED INVESTMENT IN CLANFORGE PLATFORM, TEAM AND INFRASTRUCTURE SIGNIFICANT CONTRACT SUCCESS IN H1 CONTRACT DISCUSSIONS ONGOING WITH SEVERAL OTHER PARTIES 35 © No Man’s Sky, Releasing 2 June 2016 (Hello Games) CLOSING REMARKS 36 SUMMARY CHALLENGING HALF DUE TO UK MARKET DYNAMICS; IMPACT OF PRIOR GEN DECLINES NOW DIMINISHING STRATEGY FOCUSED ON MAXIMISING CURRENT CONSOLE GAMING APPETITE COMBINED WITH NEW CATEGORY DEVELOPMENT NEW DIVISIONS ESTABLISHED TO TARGET SIGNIFICANT GROWTH MARKETS PLANS FOR REMAINDER OF YEAR, INCLUDING LAUNCH OF VR, WELL DEVELOPED INVESTING FOR GROWTH WHILST REALISING ALL COST EFFICIENCIES IN CORE RETAIL BUSINESS © Quantum Break, Releasing 5 April 2016 (Remedy Entertainment/Microsoft Studios) 37 building the most valuable community of gamers 38 RECONCILIATION TO ADJUSTED EBITDA H1 16 £m H1 15 £m 22.8 33.5 9.6 8.0 4.5 4.2 EBITDA 32.4 41.5 Exceptional costs / (income) (0.4) - Cost of IPO-related share-based payment compensation (0.1) 1.3 1.2 - - 0.2 33.1 43.0 Operating profit Depreciation and amortisation of which Brand and other acquired intangibles amortisation Costs of post-acquisition remuneration Cost of transferring GameStop Spain stores Adjusted EBITDA Exceptional income of £0.4m (2015: nil) relating to the release of provisions associated with the former GAME Group plc Adjusting amortisation charges increased by £0.3m as a result of the acquisition of Multiplay IPO-related share-based payment compensation reduced £0.1m Post-acquisition remuneration of £1.2m relates to cash and shares payable to certain Multiplay shareholders Other adjusting costs of £0.2 million, comprising legal and professional fees, incurred in relation to the transfer of Spanish stores from GameStop in October 2014 39 H1 2015/16 CATEGORY PERFORMANCE All figures in £’m (unless stated) Gross Transaction Value Content Preowned Accessories, Toys-To-Life, & Other (AT&O) Sub-Total Hardware Total Gross Profit Content Preowned Accessories, Toys-To-Life, & Other (AT&O) Hardware Total Operating Costs pre exceptional and adjusting items and D&A Adjusted EBITDA H1 2016 H1 2015 VAR % 267.2 104.8 78.8 450.8 157.2 608.0 281.0 102.4 63.2 446.6 197.5 644.1 (4.9) 2.3 24.7 0.9 (20.4) (5.6) 61.0 38.8 25.6 5.3 130.7 (97.6) 33.1 70.0 39.0 19.6 6.6 135.2 (92.2) 43.0 (12.9) (0.5) 30.6 (19.7) (3.3) 5.9 (23.0) GTV ex Hardware up 0.9%; up 3.1% on a constant currency basis Gross profit ex Hardware down 2.5%, -0.4% on a constant currency basis Total Gross Profit down 3.3%, down 1.2% on a constant currency basis Total GTV down 5.6% Hardware GTV down with gross profit fall of £1.3m, 1% of total margin Continued growth in Preowned sales driven by mobile phones and tablets AT&O GTV and margin growth significant Operating costs excluding D&A included Multiplay costs of £2.1m Group underlying operating costs excluding D&A and Multiplay of £95.5m vs. £92.2m, up 3.6% OVERALL GROWTH DELIVERED IN HIGHER MARGIN CATEGORIES OF CONTENT, PREOWNED & AT&O 40 H1 STRATEGIC PROGRESS BUILD DRIVE OPTIMISE EXPAND DEVELOP on our position as the #1 destination for gamers digital sales the omni-channel experience beyond retail and monetise technology 32% 38% Market share in UK1 9% Over 180,000 Acquisition of eSports business Increase in digital GTV Products added online through GAME Marketplace 93% 60% Click & Collect Over GAMEtronics GTV growth (H1) Share of console digital content in UK and Spain2 launched in the UK Insomnia 55 footfall (largest ever) Market share in Spain1 Significant contract success 36,000 1) Source: GfK Chart-Track (Based on value of retail sales of mint hardware, mint software, console digital content and gaming accessories), 26 weeks to 23 January 2016. Spain figures in local currency 2) Source: GfK Chart-Track (Based on value of retail sales of console digital content, 26 weeks to 23 January 2016. Spain figures in local currency 3,000,000+ App downloads 41 42 © Unchartered 4: A Thief’s End, Releases 10 May 2016 (Naughty Dog/Sony Computer Entertainment) GROWING NEW GEN SOFTWARE SALES LEADING SHARES ACHIEVED ON KEY RELEASES IN H1 25% LEADING DIGITAL ATTACH RATES H1 PS4 / XB1 MINT SOFTWARE GTV SOLID SCHEDULE OF NEW RELEASES FOR H2 40% H1 PS4 / XB1 PREOWNED SOFTWARE GTV 42 43 INCREASED DIGITAL RANGE AND SALES » H1 DIGITAL GTV 9% TO £63M » GROWTH ACROSS BOTH CONSOLE AND NON-CONSOLE 9.2% » OVER 1,000 DIGITAL PRODUCTS ADDED TO RANGE IN H1 H1 DIGITAL SALES » DIGITAL SALES REPRESENTED c25% OF CONTENT SALES (2015: 20%) GROUP DIGITAL GTV, £M 95.4 67.0 73.5 57.5 FY12/13 FY13/14 FY14/15 © Call of Duty: Black Ops III, Released 6 November 2015 (Treyarch/Activision) 62.8 H1 14/15 H1 15/16 43 44 GROWING PREOWNED TECH SALES PREOWNED TECH SALES +93% STRONG PERFORMANCE IN BOTH TERRITORIES CONTINUED STOCK INVESTMENT TO SUPPORT SALES DEMAND CENTRALISED DISTRIBUTION AND IMPROVED LOGISTICS ONLINE TECH TRADE-IN LAUNCHING H2 GROWING ACCESSORIES RANGE 44 45 PUTTING THEPCCUSTOMER COMMUNITIES AT THE HEART OF OUR BUSINESS GROWING GAMING &RANGE » DEVELOPMENT ACROSS PC HARDWARE, ACCESSORIES AND CONTENT OFFER » SOLID PC CATEGORY GROWTH YTD » VERY STRONG ACCESSORIES GROWTH » PC DOWNLOAD GROWTH 9.4% PC CATEGORY GROWTH, YTD (HARDWARE, ACCESSORIES AND CONTENT) » NEW HARDWARE AND ACCESSORIES RANGES ADDED » ‘BUILD YOUR OWN PC’ SERVICE LAUNCHED IN SPAIN 45 46 NEW GROWTH CATEGORIES NEW PRODUCTS AND RANGES ADDED 15% IMPROVED IN STORE MERCHANDISING TOYS-TO-LIFE H1 GTV GROWTH EXPANDED RANGE AVAILABLE ONLINE 150% LICENSED MERCHANDISE H1 GTV GROWTH 47 46 CONTINUED MARKETPLACE DEVELOPMENT FOCUSED ON GROWING VENDORS AND RANGE 47 48 VIRTUAL REALITY MAJOR DEVICES COMING 2016 - HTC VIVE, £689 (MAY 2016) - OCULUS RIFT, £499 (JULY 2016) - SONY VR, £350 (OCTOBER 2016) KEY LAUNCH PARTNER CONSUMER ANTICIPATION BUILDING PREPARATIONS WELL DEVELOPED 48 49 CUSTOMER & CHANNELS: NEW CONSUMER SERVICES CONSUMER FINANCE ROLLED OUT IN UK NEW PRODUCT SERVICE PLANS LAUNCHING IN H2 BROADBAND, MOBILE & TV IN STORE OFFER 24/7 CUSTOMER SERVICES LAUNCHED ONLINE TRADE-IN LAUNCHING IN H2 EXPANDED PRODUCT REPAIR SERVICE LAUNCHING 49 50 ANNOUNCED 2016 INSOMNIA EVENTS SPRING: Insomnia 57, 25 – 28 March SCOTLAND: Insomnia Scotland, 29 Apr – 2 May IRELAND: Insomnia Ireland, 10 – 12 June SUMMER: Insomnia 58 & GAMEfest, 26 – 29 August WINTER: Insomnia 59, 9 – 12 December 50 51