• • … 2013/14 Results Presentation 16 October 2014
Important Notice 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
Agenda Highlights Martyn Gibbs Financial Review Benedict Smith Business and strategic update Martyn Gibbs 3
Martyn Gibbs CEO
Our mission… “is to build the most valuable community of gamers.” 5
FY13/14 Highlights Group revenue growth +31% to £862m (2013: £658m) Adjusted EBITDA +117% to £51.3m (2013: £23.6m) Net cash of £83.7m Good progress on strategic priorities Over 1m new customers signed up to reward card Digital progress Launch of GAME Wallet GAMETronics progressing well Listed on the London Stock Exchange in June 6
Financial Review BENEDICT SMITH GROUP CFO
FINANCIAL HIGHLIGHTS S U M M A R Y All figures in £’m (unless stated) 27 Jul 26 Jul VAR 2014 2013 % Total sales increased by 31% 21% increase in gross margin Group sales 861.8 657.9 31.0 Positive margin rate variance, offset by Gross profit 209.7 174.0 20.5 negative mix variance Adjusted EBITDA 51.3 23.6 117.4 Adjusted EBITDA increased 117% Adjusted operational cash flow 59.6 38.8 53.6 IPO was 6 weeks before year-end Exceptional items predominantly related to Profit after tax 2.8 (19.0) nm IPO costs and charges related to the change in ownership structure Adjusted EPS (pence) 17.8 5.2 242.3 Net cash increased to £83.7m at the year end Net cash / (debt) 83.7 (76.6) nm driven by capital structure and working capital improvements 8
REVENUE BY CATEGORY 2014 2013 VAR 2013 REVENUE MIX 2014 REVENUE MIX £m £m % Content 329.7 300.2 9.8 11% 11% Hardware 265.9 113.4 134.5 38% Preowned 169.0 171.5 (1.5) 20% 46% 26% Other 97.2 72.8 33.5 Total 861.8 657.9 31.0 17% 31% Content Hardware Preowned Other 9
GROSS MARGIN BY CATEGORY 2014 2013 VAR GROUP GM% MOVEMENT S U M M A R Y % % %pts Underlying improvement in gross 1.9 Content 28.3 28.0 0.3 margin across content, hardware and preowned Hardware 8.0 2.6 5.4 Increase in hardware contribution Preowned 39.0 36.7 2.3 -2.1 drove overall 2.1% decline in GM% Other 29.9 32.8 (2.9) -4.0 The lower margin in “Other” is itself a mix effect Total 24.3 26.4 (2.1) Underlying Mix Total 10
REGIONAL PERFORMANCE Sales 2014 2013 VAR Market S U M M A R Y £m £m % % Strong performance across both geographies UK 644.7 455.9 41.4 28 UK market share +4%pts to 33% Spain 217.1 202 7.5 9 Spain market share +1%pt to 35% Total 861.8 657.9 31.0 24 No loss making stores in UK 2014 2013 VAR Adjusted EBITDA Number of loss making stores in Spain £m £m % reduced from 17 to 5 UK 40.6 14.9 172.5 Letter of Intent signed with GameStop in Spain 10.7 8.7 23.0 Spain to transfer stores and stock Total 51.3 23.6 117.4 11
STATUTORY INCOME STATEMENT 2014 2013 S U M M A R Y £m £m Revenue 861.8 657.9 £16.3m of interest (2013: £12.0m) relates to (related party) loans and Gross Margin 209.7 174.0 facilities which were fully 176.5 168.5 Operating expenses before exceptional costs capitalised as part of the Operating (loss) / profit before exceptional costs 33.2 5.5 reorganisation ahead of the IPO Exceptional costs 8.8 8.4 Exceptional costs in FY14 largely 24.8 (3.3) Operating (loss) / profit IPO-related; and in FY13 were final Net interest payable 17.5 12.1 costs of restructuring in the UK Profit before tax 7.3 (15.4) Tax rate expected to normalise Tax 4.5 0.2 closer to standard UK / Spanish - (3.4) Loss from discontinued operations corporate tax rates going forwards Profit after tax 2.8 (19.0) 12
RECONCILIATION TO ADJUSTED EBITDA 2014 2013 S U M M A R Y £m £m 13/14 exceptional costs relate 24.8 (3.3) Operating (loss) / profit predominantly to IPO costs (£7.7m) Depreciation and amortisation 15.1 15.0 Includes the cost of the Virtual of which Brand amortisation 8.3 8.3 Loyalty Share Plan – Reward 39.9 11.7 EBITDA “shares” to 20,000 customers Exceptional costs 8.4 8.8 Landlord litigation accounted for Costs related to change in business structure 2.7 3.1 Costs relating to former private equity 0.3 0.1 Costs related to share based payments ownership ceased on IPO Adjusted EBITDA 51.3 23.6 Share based payment charge relates to LTIP option awards made to senior managers on IPO - essentially a deferred IPO bonus 13
OPERATING EXPENSES 2014 2013 VAR S U M M A R Y £m £m % Costs increased 4.7% on Selling & Distribution Revenue growth of 31% Operating costs 133.2 128.9 3.3 Total underlying operating Exceptional costs - (0.5) nm costs as a % of sales reduced from 25.2% to 20.5% Operating costs before exceptional items 133.2 128.4 3.7 £’m Reduction in rent to £35.8m Administration (2013: £36.8m) Rent now 4.2% of revenue Operating costs 51.3 48.4 6.0 (2013: 5.6%) Exceptional costs (8.1) (8.3) (2.4) Impact of investment in UK Operating before exceptional items 43.2 40.1 7.7 business and management team in FY14 Total Operating costs before exceptional items 176.4 168.5 4.7 14
OPERATING CASH FLOW STATEMENT 2014 2013 S U M M A R Y £m £m Cash generated by operations 47.3 29.7 Continued strong operational cash conversion Impact on cash flow of exceptional items 9.4 6.0 Timing of exceptional cash flows Costs relating to the change in business structure 2.7 3.1 Adjusted operational cash flow 59.4 39.0 Improved credit terms – and continuing to improve Adjusted EBITDA 51.3 23.6 FY13 benefitted from cash impact of Adjusted EBITDA to cash conversion ratio 116% 165% renegotiated leases and greater impact of stock release in the UK from stock built up in FY12 15
BALANCE SHEET AND WORKING CAPITAL 2014 2013 £m £m S U M M A R Y Tangible fixed assets 18.1 15.7 £83.7m net cash Intangible assets 54.8 62.5 57.6 51.5 No long term debt in the UK, £1.6m in Spain Inventory 21.2 23.3 Trade and other receivables € 32m facility signed in Spain post year end 1.8 5.3 Other assets £50m short-term ABL revolving facility in place 83.7 (76.6) Cash (net of borrowings) with HSBC (82.1) (69.5) Trade and other payables (9.2) (10.5) Other Credit terms continue to improve post IPO Net assets 145.9 1.7 Net investment in trade working capital reduced by £9.4m, or 23%, to £31.6m (2013: £41.0m) 57.6 51.5 Inventory Weeks’ inventory on hand improved from 8.2 weeks Trade Receivables 6.1 7.7 to 7.3 weeks (based on H2 COGS and revenue) Trade payables (32.1) (18.2) Trade Working Capital 31.6 41.0 16
NET DEBT / CASH BRIDGE (10.8) 13.5 S U M M A R Y (5.1) 47.4 (2.6) Capital structure has been transformed 83.7 117.8 Cash position better than expected pre-IPO from IPO & restructuring related c. £11m (of (76.5) which £2m reverses) Early terms improvement c. £5m Better working capital generation – c. £14m Prudent forecasting – c. £5m Only currency exposure is to EUR on Spanish business 17
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