GAME CHANGING GAME DIGITAL PLC | 2018/19 INTERIM RESULTS 21 ST MARCH - - PowerPoint PPT Presentation

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GAME CHANGING GAME DIGITAL PLC | 2018/19 INTERIM RESULTS 21 ST MARCH - - PowerPoint PPT Presentation

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GAME DIGITAL PLC 2018/19 INTERIM RESULTS GAME CHANGING GAME DIGITAL PLC | 2018/19 INTERIM RESULTS 21 ST MARCH 2019 GAME DIGITAL PLC 2018/19 INTERIM RESULTS FORWARD LOOKING STATEMENTS This presentation includes statements that are, or

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SLIDE 1

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

GAME CHANGING

GAME DIGITAL PLC | 2018/19 INTERIM RESULTS

21ST MARCH 2019

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SLIDE 2

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

FORWARD LOOKING STATEMENTS

2

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

  • r

warranties are made as to the accuracy of such statements, estimates or projections. Please note that the Directors

  • f

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.

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SLIDE 3

MARTYN GIBBS

CHIEF EXECUTIVE OFFICER

3

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SLIDE 4

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

H1 GROUP HEADLINES

4

SOLID GTV AND GROSS PROFIT RATE PERFORMANCE ACHIEVED IN A CHALLENGING RETAIL ENVIRONMENT

  • Group GTV broadly flat on a like-for-like basis
  • GTV improvement of 5.8% in Content (physical and digital)
  • GTV increased by 9.2% in Accessories & Other
  • GTV in Hardware down (9.3)% and Preowned down (20.9)%
  • Group gross profit rate maintained at 21.0%
  • Group Adjusted EBITDA up 21.7% to £25.8 million (2018: £21.2 million)

DRIVING OPERATIONAL EFFICIENCIES

  • Strong Core UK Retail performance with Adjusted EBITDA growth of 49.5% to £14.8 million from

improved gross profit rate and the delivery of £4.9 million of operational efficiencies and cost savings

  • Average length to break on leases in the UK and Spain under 1 year and average savings on rents

renegotiated in the period of 59%

  • Further strategic progress achieved towards repositioning and right sizing the retail business in

the UK with savings in distribution, head office, store payroll and store rent

  • Continued strong liquidity with Group cash of £95.5 million as at 26 January 2019 (2018: £84.9

million) and access to aggregated facilities as at today’s date of up to £110 million across the UK and Spain STRATEGY PROGRESSION TOWARDS REPOSITIONING THE BUSINESS

  • 20% increase in station count this period, and 44% increase in stations YoY
  • 2 new arenas opened, Stratford and West Thurrock Lakeside
  • 52% Increase in pay-to-play revenue in H1 FY19 vs H1 FY18, driven by new arenas and

enlargement of existing arenas

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SLIDE 5

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

5

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SLIDE 6

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

BELONG IS A SOCIAL GAMING NETWORK

6

Each arena can support more community members than the number of stations. A network of gamers forms around the arena

1 2 3 4

Our arenas provide a physical home for the community The community talks to each

  • ther generating content for

BELONG that reaches new potential community members Arena Clash and CRM retain and continuously engage BELONG gamers in the network, further building customer value

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SLIDE 7

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

7

BELONG GAMER SEGMENTATION

  • Five BELONG gamer segments established and profiled:

1. Competitive & community – Strong interest in esports 2. Fun with friends – Enjoy playing together in one location 3. Private player – Solo gamers playing to unwind in their downtime 4. Time together – Parents & children who like to game together 5. Grateful guardians – Parents not interested in gaming, but children are

  • Establishing programmes to target different segments that increases

utilisation

  • Segmentations inform decision making when planning new arena locations
  • Primary focus is segment one, competitive gamers, with a tailored programme
  • f activities such as Arena Clash and Arena Cups (multi-arena), as well as

community cups and leader board competitions (individual arenas)

  • Subscription trials target segment one gamers, offering them better value

pricing per hour and incentivising them to visit BELONG more frequently

  • Other four segments continue to be important, with tailored experiences such

as parties and casual play which drives utilisation within these segments

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SLIDE 8

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

BELONG’S ESPORTS PROGRAMME IN 2019

8

APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER ACADEMY BOOT CAMPS

TOURNAMENT ZONE AT I64 ARENA CLASH FINALS AT I64 ARENA CLASH SUMMER MINIMUM OF FIVE TITLES ARENA CLASH WINTER MINIMUM OF FIVE TITLES ARENA RIVALS

ACADEMY CLASSES ESPORTS TEAMS MEET & GREETS

TOURNAMENT ZONE AT I65 ARENA CLASH FINALS AT I65 ARENA CLASH SPRING JUNIOR ARENA CLASH ARENA RIVALS ESPORTS TEAMS RELATIONSHIPS FORMALISED ACADEMY CLASSES

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SLIDE 9

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

9

CREATING VALUE THROUGH BELONG

52% 20% 44% 72% £4.71 224k 54%

Increase in stations this FY Increase in stations YoY at Jan 19 Increase in pay-to-play revenue in arenas with an increased station count for H1 FY19 Increase in pay-to-play revenue in H1 FY19 H1 FY19 Average Price Per Hour vs H1 FY 18 £4.43

47%

Increase in average customer value Jan 19 vs Jan 18 (Rolling 12 months)

740 28%

Utilisation rate for the H1 FY19 vs 28.5% H1 FY18 Parties hosted in H1 FY19, a 64% increase vs H1 FY18 (450) Total gaming hours in H1 FY19, a 25% increase vs H1 FY18 (179k) More spent by subscription customer

  • n arena play time than

segment 1 gamer

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SLIDE 10

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

BELONG LOCATIONS

10

  • Bradford
  • Bristol Cribbs Causeway
  • Bristol City Centre
  • Cardiff
  • Colchester
  • Craigavon
  • Gateshead
  • Glasgow
  • Hull
  • Kingston
  • London Wardour Street
  • London Stratford
  • Manchester
  • Milton Keynes
  • Norwich
  • Portsmouth
  • Preston
  • Plymouth
  • Teesside
  • West Thurrock
  • York

CURRENT BELONG GAMING ARENA LOCATIONS

  • Total number of stations increased by 44% to 4401 by

January 2019 vs 3051 in January 2018

  • Two new arenas opened in the half – Stratford and West

Thurrock (Lakeside Sports Direct Concession), catering to two different gaming communities

  • Ongoing focus to drive hours played in existing arenas by

increasing station count, with seven arenas increased

  • Arenas with an increased station count have seen a slight

decline in utilisation that is more than compensated for by the total increased revenue

  • Top 50 locations identified across the UK, with the key

requirement being larger locations to accommodate higher station counts

  • Establishing larger premises for higher station count
  • Defining the best possible rent deals based on current

property landscape

Station Count Increased New Arena Location FY18/19 Station Count unchanged

1 EXCLUDING ALT GAMING LOUNGE

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SLIDE 11

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

11

VENUE IMPROVEMENTS FOR THE COMPETITIVE GAMER

LARGER 100-SEATER LOCATIONS LOCAL COMMUNITY AREAS & COMPETITIVE LEADER BOARDS ESPORTS TRIBE JERSEYS HIGH-SPEC KIT DESIGNED FOR COMPETITIVE PLAY

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SLIDE 12

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

12

THE VALUE WE DELIVER FOR OUR SUPPLIER PARTNERS

Supplier partners and publishers seek ways to promote their products or brand BELONG Gaming Arenas social channels and programmes provide authentic engagement mechanics to reach gamers Lapsed, existing and new gamers generate content by engaging Partners and/or BELONG utilise this content to sell/promote brands and products

OUR PARTNERS & BRANDS WE WORK WITH

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SLIDE 13

13

RAY KAVANAGH

CHIEF FINANCIAL OFFICER

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SLIDE 14

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

H1 GROUP FINANCIAL SUMMARY

14

All figures in £m (unless stated) H1 2019 H1 2018 VAR, % Gross Transaction Value (GTV)1 578.4 586.8 (1.4) Gross profit rate² 21.0% 21.0%

  • Underlying operating costs³

(95.8) (101.9) 6.0 Adjusted EBITDA 25.8 21.2 21.7 Adjusted profit before tax 19.9 14.2 40.1 Net cash from operating activities 41.6 32.2 29.2 Net cash 95.5 84.9 12.5

  • Group GTV down 1.4% reflecting:
  • LFL sales broadly flat
  • Content improvement of 5.8%
  • Accessories & Other up 9.2%
  • Hardware and Preowned down 9.3% and

20.9% respectively

  • Gross profit rate maintained at 21.0%
  • Strong cost discipline across the Group with £4.9

million of savings realised in UK Retail

  • Adjusted EBITDA increased by £4.6 million as a result
  • f UK Retail improvement
  • Positive cash generation continued in the period
  • Group remains well funded with net cash of £95.5

million at 26 January 2019 and current facilities of up to £110 million

¹ GROSS TRANSACTION VALUE IS A NON-IFRS MEASURE DEFINED AS TOTAL RETAIL RECEIPTS AND ALL OTHER GROUP REVENUE EXCLUDING VAT AND BEFORE THE DEDUCTION OF LOYALTY POINTS AND OTHER ACCOUNTING ADJUSTMENTS. GTV REFLECTS THE FULL SALES VALUE OF DIGITAL SALES, AGENCY SALES, WARRANTIES AND OTHER SIMILAR ARRANGEMENTS AND THEREBY INCLUDES THE PUBLISHERS' AND SELLERS' SHARES OF THOSE TRANSACTIONS ² GROSS PROFIT EXPRESSED AS A PERCENTAGE OF GTV ³ OTHER OPERATING EXPENSES EXCLUDING DEPRECIATION AND AMORTISATION CHARGES, AND BEFORE EXCEPTIONAL AND ADJUSTING ITEMS

22% GROWTH IN ADJUSTED EBITDA WITH SIGNIFICANT IMPROVEMENT IN UK RETAIL GROUP REMAINS WELL FUNDED AND HAS £110M OF FACILITIES AVAILABLE

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SLIDE 15

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

GROUP GTV BY CATEGORY

15

All figures in £m (unless stated) H1 2019 H1 2018 VAR, % Total Content 280.8 265.3 5.8 Physical software 190.1 190.8 (0.4) Digital content 90.7 74.5 21.7 Total Hardware 133.1 146.7 (9.3) Total Accessories & other 95.3 87.3 9.2 Core Accessories & other 89.8 78.4 14.5 Events & Esports 5.5 7.1 (22.5) Multiplay Digital¹

  • 1.8
  • Total Preowned

69.2 87.5 (20.9) Preowned core 51.1 63.2 (19.1) Preowned tech 18.1 24.3 (25.5) Total 578.4 586.8 (1.4)

  • Hardware sales growth in Nintendo Switch and

PlayStation 4, but older formats and Xbox sales down

  • Physical software in line with previous year with UK

growing 3% and improving market share

  • Digital growth driven by continued popularity of

Fortnite and enhancing gaming experience

  • Growth in PC & console accessories, licensed

merchandise and figurines offset the decline in VR categories

  • Sales in Events declined from removal of Runefest,

Bricklive and Minecon events

  • Decline in core driven by both hardware and software

where the market continues structural decline

  • Tech has also seen a decline, partly due to the general

slowdown in the mobile replacement cycle

¹MULTIPLAY DIGITAL SOLD 28 NOVEMBER 2017

STRONG GTV GROWTH IN DIGITAL, ACCESSORIES AND LICENSED MERCHANDISE TO PARTLY MITIGATE PREOWNED AND HARDWARE DECLINE

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SLIDE 16

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

GROUP GROSS PROFIT RATE (AS % OF GTV) BY CATEGORY

16

H1 2019 H1 2018 % PT CHANGE Total Content 21.7 21.6 0.1 Physical software 25.6 24.5 1.1 Digital content 13.5 14.2 (0.7) Hardware 7.7 7.1 0.6 Accessories & Other 30.1 32.9 (2.8) Preowned 31.5 30.5 1.0 Total 21.0 21.0

  • Benefiting from improved mix of new releases where

the Group secured higher margin exclusives for the majority of these releases

  • Digital margins down from mix of console and non-

console sales

  • Lower promotional activities together with improved

PlayStation bundling on new software releases

  • Mix effect of products and services in this category, with

improvements on accessories & licensed merchandise

  • ffsetting decline on VR & toys
  • Driven by hardware & tech trading and tighter stock

management

  • Overall Group gross profit rate maintained despite

higher mix of lower margin digital and declining sales

  • f preowned

HIGHER MARGIN RATES ACHIEVED ACROSS SOFTWARE, HARDWARE AND PREOWNED

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SLIDE 17

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

GROUP OPERATING COSTS

17

  • Significant cost savings and operational

efficiencies realised in the UK as detailed

  • n the next page
  • Spain Retail costs up €0.4 million in local

currency, largely volume-related, and in sterling this equated to an increase of £0.3 million

  • Events & Esports costs down £1.5 million
  • Higher costs from the continued

expansion of BELONG were offset by savings in Game Esports & Events and from the sale of Multiplay Digital part way through last year

Group operating expenses1 All figures in £m (unless stated) H1 2019 H1 2018 VAR, £m Selling & distribution costs 76.7 80.5 (3.8) Administrative costs 24.4 27.8 (3.4) Total operating expenses 101.1 108.3 (7.2) Less: Underlying depreciation & amortisation (5.3) (6.4) (1.1) Total operating expenses before D&A 95.8 101.9 (6.1) As % of revenue 19.4% 19.7% Group continuing costs by division1,2 All figures in £m (unless stated) H1 2019 H1 2018 VAR, £m Core Retail 93.3 97.9 (4.6) UK Retail 62.4 67.3 (4.9) Spain Retail 30.9 30.6 0.3 Spain Retail, €m 34.7 34.3 0.4 Events, Esports & Digital 2.5 4.0 (1.5)

¹EXCLUDES EXCEPTIONAL AND ADJUSTING ITEMS ² BEFORE DEPRECIATION AND AMORTISATION

CONTINUED STRONG COST REDUCTION PROGRAMME IN THE UK BUSINESS

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SLIDE 18

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

UK OPERATIONAL EFFICIENCIES & COST SAVINGS CONTINUED

18

  • H1 savings of £4.9 million delivered across all

aspects of the UK operation

  • Significant savings delivered on property

estate through annualisation of prior year reductions and new in-year negotiations

  • Store payroll hours reduced over peak trading

while maintaining customer service levels

  • Head office reorganisation fully embedded

during the period

  • Annualisation of changes made during FY18

delivered ongoing benefits in distribution and controllable costs

  • Further property savings already secured in H2

to date

Total UK Retail savings £m H1 2019 TOTAL Property (rent & rates) 1.7 Payroll 1.6 Procurement, distribution, efficiency savings and other 1.6 Total 4.9

CONTINUED DELIVERY OF EFFICIENCY INITIATIVES & OTHER COST SAVING ACTIONS

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SLIDE 19

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

UK PROPERTY OPTIMISATION PROGRAMME UPDATE

19

  • Average length to first break 0.8 years
  • Successfully realising opportunities to further reduce

UK estate costs

  • Annualised rent reductions of c.£0.5 million

realised in H1 representing a 59% reduction

  • Since the end of the period this has increased to

£2.2 million

  • Further potential opportunities continue to be

negotiated and large, multi-site landlord negotiations have commenced

  • Flexibility is being retained in the estate which allows

for BELONG growth strategy and to respond to UK retail market conditions

  • 26 leases on zero rent at the end of H1 2019
  • A total 138 lease events on rolling breaks, plus

52 potential events before December 2019

138 52 54 19 11

20 40 60 80 100 120 140 160 Rolling Break To December 2019 December 2020 December 2021 2022+

UK Store Lease Expiries at H1 2019

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SLIDE 20

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

CASH FLOW & NET CASH

20

All figures in £m (unless stated) H1 2019 H1 2018 VAR, £m Cash generated by operations 42.8 36.3 6.5 Finance costs and tax (1.2) (4.1) (2.9) Net cash from operating activities 41.6 32.2 9.4 Capital expenditure (4.0) (6.2) 2.2 Disposal of Multiplay Digital

  • 14.9

(14.9) Dividends

  • (1.7)

1.7 Finance leases (0.3) (1.3) 1.0 Other (0.5) (0.2) (0.3) Movement in cash 36.8 37.7 (0.9) Opening net cash 58.7 47.2 11.5 Closing net cash 95.5 84.9 10.6

  • Strong closing cash position of £95.5 million
  • All facilities undrawn at end of the period and UK facilities

yet to be drawn

  • Total available facilities c.£110 million as at today’s date
  • UK ABL facility of up to £50 million, rising to £75

million in peak

  • SPD capex facility of £35 million
  • Working capital and guarantee facilities in Spain of

€28 million, rising to €44 million in peak

  • Total maximum facilities over peak season of c.£149 million

STRONG CASH GENERATION AND UK FACILITIES YET TO BE DRAWN

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SLIDE 21

21

BUSINESS & STRATEGY

GAME DIGITAL PLC | 2018/19 INTERIM RESULTS

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SLIDE 22

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

22

BUILDING THE MOST VALUABLE COMMUNITY FOR GAMERS

CORE SPECIALIST RETAIL MAJOR GAMING EVENTS ESPORTS, BELONG & COMPETITIVE GAMING

BUILDING THE MOST VALUABLE COMMUNITY FOR GAMERS

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SLIDE 23

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

23

GAME CHANGING STRATEGY PROGRESS & PRIORITIES

Continue to improve our core multichannel retail business, based around the needs and behaviours of customers, in

  • rder to maximise market

potential and profitability Optimise the organisation’s efficiency while investing for the future Expand the group’s live and

  • nline gaming services for

consumers and publishers in

  • rder to build customer &

gamer engagement and generate incremental revenues

IMPROVE OPTIMISE EXPAND

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SLIDE 24

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

24

GAME CHANGING STRATEGY PROGRESS & PRIORITIES

IMPROVE Continue to improve our core multichannel retail business, based around the needs and behaviours of customers, in order to maximise market potential and profitability 1. Expansion of the Group’s exclusive proposition across new game releases and licensed merchandise 2. Ongoing development of new product categories including PC gaming accessories and licensed merchandise for gamers 3. Continued growth of market share in online through proposition improvements:

  • Enhanced customer journey across desktop, mobile and social channels
  • New ‘paid for’ delivery services offered increasing choice and convenience. Further service enhancements

planned in H2

  • Access to extended ranges online including through Marketplace
  • Increased range and availability of preowned stock online using store fulfilment
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SLIDE 25

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

25

GAME CHANGING STRATEGY PROGRESS & PRIORITIES

OPTIMISE Optimise the organisation’s efficiency while investing for the future 1. Leveraging our specialist retailer credentials to improve supplier terms 2. Focus on better service across our channels resulted in a 30% reduction in inbound customer service contacts, with wait times reduced by more than 80% vs. last year 3. Significant operating cost savings delivered through efficiencies and better procurement in distribution and across the store estate 4. Further material savings in property costs 5. More selective investment in marketing across our channels, spending only where the ROI justifies it 6. Maintained robust stock and cash disciplines across all areas of the business ensuring our available cash resources provide adequate headroom

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SLIDE 26

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

26

GAME CHANGING STRATEGY PROGRESS & PRIORITIES

EXPAND Expand the group’s live and online gaming services for consumers and publishers in order to build customer & gamer engagement and generate incremental revenues 1. Delivering growth of revenue and margin through our existing arena network: 2. Ongoing focus on identifying suitable arena locations to support expansion 3. Expansion of Arena Clash to feature 5 major titles across 21 participating arenas 4. Growth of the BELONG online community and unique visitors to Belong.gg 5. Evaluating potential strategic international opportunities for BELONG 6. Continued growth of Insomnia in the UK with I64 (April) to feature more esports tournament zones 7. International expansion of Insomnia franchise events. First overseas event held in Egypt in Oct 2018, with Dubai and Dublin scheduled later this year

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SLIDE 27

27

MARKET UPDATE

GAME DIGITAL PLC | 2018/19 INTERIM RESULTS

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SLIDE 28

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

  • 12.5%

8.8% 14.1% 5.8% 3.6%

  • 5.9%

2.7%

H1 16/17 H2 16/17 H1 17/18 H2 17/18 H1 18/19 WEEKS 27-32 WEEKS 1-32

UK MINT VIDEO GAME MARKET

  • The UK and Spanish mint console markets have

both shown growth in the period

  • Driven by consumer demand for the

PlayStation 4 and Nintendo Switch consoles

  • Digital currency, PC and console

accessories growth driven by Fortnite and

  • ther Battle Royale games
  • For the 6 weeks ended 9 March 2019, the mint

market in the UK market was down 5.9% and in Spain it was down 2.3% on a constant currency basis

  • UK market has seen a decline in hardware

and digital

  • The Spanish market has seen similar

declines in hardware and digital

  • Accessories is up in both markets

28 1.9% 15.4% 13.5% 3.5% 1.9%

  • 2.3%

1.5%

H1 16/17 H2 16/17 H1 17/18 H2 17/18 H1 18/19 WEEKS 27-32 WEEKS 1-32

SPAIN MINT VIDEO GAME MARKET

UK & SPAIN MARKET UPDATE

SOURCE: GFK CHART-TRACK

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SLIDE 29

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

MARKET OUTLOOK

29

  • Challenging retail climate in the UK likely to continue in the short term due to

weakening consumer confidence and economic uncertainty

  • Our retail performance is impacted by the console cycle timings and we are

managing the low point of the current cycle through our cost savings programme and investment and growth in BELONG

  • Current console cycle has entered its sixth year with projected decline in low

margin console sales

  • Physical software has held up well in the year to date, with Kingdom Hearts

and Division 2 anticipated to perform well in H2

  • Preowned revenues will continue to decline
  • The current IHS market expectations is for a new PlayStation and Xbox console to

launch in 2020

  • Apex Legends launched in February 2019 and has disrupted the market

considerably with the opportunity to monetise through digital currency, high-end accessories and licensed merchandise

  • Our focus remains on our transformational strategy to move from a seller of

physical products to a provider of gaming experiences and services

SOURCE: IHS

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SLIDE 30

30

CLOSING REMARKS

GAME DIGITAL PLC | 2018/19 INTERIM RESULTS

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SLIDE 31

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

31

SUMMARY & H2 PRIORITIES

SUMMARY

  • Delivered a 22% growth in adjusted EBITDA in the first half
  • Material improvement in cash and liquidity during the period
  • Ongoing economic uncertainty and market headwinds expected to affect performance in the

near term CONTINUE TO IMPROVE OUR CORE MULTICHANNEL RETAIL BUSINESS

  • Continuous improvement of our customer proposition through exclusive offers, range

development, market leading customer service and expertise

  • Further enhancements and development of our online channel and mobile app, encouraging

increased customer engagement and spend OPTIMISE THE ORGANISATION’S EFFICIENCY WHILE INVESTING FOR THE FUTURE

  • Realise further opportunities to reduce UK estate costs whilst retaining flexibility to allow for

BELONG growth and evolving UK retail market conditions

  • Continued focus on cost management across all areas of the Group
  • Disciplined approach to cash management and use of capital

EXPAND THE GROUP’S LIVE AND ONLINE GAMING SERVICES

  • Ongoing transformation of our business to a provider of gaming experiences and services
  • Focus on identifying suitable arena locations with the right cost infrastructure to support

profitable expansion of BELONG

  • Development of content at Insomnia and international Insomnia franchises
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SLIDE 32

32

QUESTIONS

GAME DIGITAL PLC | 2018/19 INTERIM RESULTS

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SLIDE 33

33

APPENDIX

GAME DIGITAL PLC | 2018/19 INTERIM RESULTS

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SLIDE 34

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

BELONG ILLUSTRATIVE FINANCIALS & CORE ELEMENTS

34 NUMBER OF STATIONS Collaboration Agreement allows for larger arenas going forward with c.40 stations or more Our most recent openings have been of large arenas with 24-36 stations HOUR UTILISATION The annual pay to play hours per station per arena are 1,156 78 hours per week, per arena x 52 weeks x average large arena utilisation c.28.5% PRICE PER HOUR Assumed average price paid for every hour of gameplay is £4.50 Including activities such as: Station hire Party hire Arena Clash ANNUAL PAY TO PLAY MARGIN Average pay to play revenue per arena is c.£200k CAPEX Average capex per large BELONG/GAME £350k Average arena capex £230k and average retail capex of £120k Average payback per large BELONG/GAME c.2 - 2.5 years

CORE ELEMENTS OF BELONG PROPOSITION

  • 1. VENUES

BELONG Gaming Arenas Insomnia Gaming Festival

  • 2. INFRASTRUCTURE

Belong.gg Website Booking Platform Tournament Platform Studio & Production

  • 3. TOURNAMENTS

BELONG Arena Clash BELONG Arena Cups

  • 4. PLAYER SUPPORT

BELONG Tribes Academy Team Partnerships Industry & Charity Collaborations

  • 5. RETAIL

PC Hardware, Accessories & Digital VR & Merchandise Food & Drink

  • 6. TEAM

GAME & BELONG Specialist Resource

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SLIDE 35

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

A WEALTH OF INSIGHT INTO OUR BELONG CUSTOMERS

35

  • 1. COMPETITIVE & COMMUNITY

Strong interest in esports and are likely have experience in Amateur tournaments

38%

20-21 yrs.

69% View

esports competitions

TOP AGE RANGE ESPORTS

HOW LONG

Average usage: 3 hours at a time

WHEN

Evenings & weekday afternoons

% OF TOTAL

19%

% of bookings

7%

% of users

  • 4. TIME TOGETHER

Kids / teens who are passionate about gaming and also parents who go along to play alongside their children

47%

30+ yrs.

15% View

esports competitions

TOP AGE RANGE ESPORTS

HOW LONG

Average usage: 1.5 hours at a time

WHEN

Early afternoons & weekends

% OF TOTAL

19%

% of users

14%

% of bookings

  • 5. GRATEFUL GUARDIANS

This segment is made up of parents who do not have an interest in gaming themselves but whose children do.

66%

30+ yrs.

27% View

esports competitions

TOP AGE RANGE ESPORTS

HOW LONG

Average usage: 1.5 hours at a time

WHEN

Early afternoons & weekends

% OF TOTAL

8%

% of users

13%

% of bookings

  • 2. FUN WITH FRIENDS

These players are motivated by having all their friends in one place, the environment and using the best quality equipment.

17%

12-15 yrs.

50% View

esports competitions

TOP AGE RANGE ESPORTS

HOW LONG

Average usage: 2 hours at a time

WHEN

Afternoons during weekends & weekdays

% OF TOTAL

42%

% of users

35%

% of bookings

19%

% of bookings

24%

% of users

  • 3. PRIVATE PLAYER

These gamers use BELONG for some private down time and to unwind playing video games,

  • ften filling a gap in the day.

21%

12-15 yrs.

50% View

esports competitions

TOP AGE RANGE ESPORTS

HOW LONG

Average usage: 2 hours at a time

WHEN

Weekdays & early afternoon

% OF TOTAL

slide-36
SLIDE 36

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS 192 222 253 347 143 173 201 297 2017 2018 2019 2022 Esports Enthusiasts Occasional Viewers

36

SOURCE: NEWZOO 2019 GLOBAL ESPORTS MARKET REPORT

GLOBAL ESPORTS MARKET

IN 2019, 1.8 BILLION PEOPLE WILL BE AWARE OF ESPORTS WORLDWIDE

ESPORTS AUDIENCE GROWTH (M) GLOBAL | FOR 2017, 2018, 2019, 2022 ESPORTS REVENUE GROWTH ($M) GLOBAL | FOR 2017, 2018, 2019, 2022

655 865 1,096 1,790 2017 2018 2019 2022 456.7 251.3 189.2 103.7 95.2

Sponsorship Media Rights Advertising Merchandise & Tickets Game Publisher Fees

2019 ESPORTS REVENUE STREAMS | GLOBAL INCLUDING YEAR-ON-YEAR GROWTH

335M 395M

+17.8%

YOY

454M

+15.0%

YOY

645M

+14.0%

CAGR 2017- 2022

+32.0%

YOY

+26.7%

YOY

+22.3%

CAGR 2017-2022

+34.3%

YOY

+41.8%

YOY

+14.8%

YOY

+22.4%

YOY

  • 3.0%

YOY

$1.1Bn

2019 total esports revenues, +26.7% YOY

slide-37
SLIDE 37

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

60.4 72.3 79.3 96.8 111.9 59.5 76.7

0.0 20.0 40.0 60.0 80.0 100.0 120.0 FY14 FY15 FY16 FY17 FY18 H1 FY18 H1 FY19

Group Console Digital Sales

37

SUBSCRIPTIONS CURRENCY CONTENT FULL GAME DOWNLOADS

29%

£m

CONSOLE DIGITAL MARKET

SOURCE IHS: CALENDAR

slide-38
SLIDE 38

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

38

HARDWARE & SOFTWARE MARKET OUTLOOK – UK & SPAIN

SOURCE HIS CALENDAR

458 664 649 537 650 656 733 744 627 556

200 400 600 800 1,000 1,200 1,400 1,600 2016 2017 2018 2019 2020

UK MINT MARKET VALUE - HARDWARE & SOFTWARE (£M)

PS, XB & SWITCH HW PS, XB & SWITCH SW

235 340 330 269 265 211 298 328 291 270

200 400 600 800 1,000 1,200 1,400 1,600 2016 2017 2018 2019 2020

SPAIN Mint Market Value - Hardware & Software (€m)

PS, XB & SWITCH HW PS, XB & SWITCH SW

slide-39
SLIDE 39

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

GROUP STORE ESTATE

39

UK SPAIN GROUP Stores at beginning of the year 276 267 543 Openings 3 3 6 Closures (5) (1) (6) Stores at H1 2019 274 269 543 Relocations 3 2 5 Average years to first break 0.8 0.8 0.8

slide-40
SLIDE 40

GAME DIGITAL PLC – 2018/19 INTERIM RESULTS

40

IFRS 16 – ILLUSTRATIVE IMPACT

  • GAME will adopt IFRS 16 Leases from FY20
  • The transition approach is still to be determined
  • Over 540 store leases across the Group plus head office and

distribution centre leases

  • We will recognise right of use assets on the balance sheet and a

corresponding obligation for the lease liabilities

  • In the statement of comprehensive income, operating lease rental

costs will be replaced by depreciation charges on the asset and a finance cost on the liability

  • These high level calculation for FY18, based on general

assumptions applied to all leases, show a minimal impact on profit before tax but a significant improvement in adjusted

  • EBITDA. These are estimated calculations to show the potential

impact of IFRS 16 and actual restatements for FY19 may differ from this illustration

  • No impact on cash flow
  • One of the key judgements relates to the treatment of store leases
  • n rolling breaks or where the lease has expired and we are in

negotiation with the landlord

52 weeks ended 28 July 2018 (Underlying) AS REPORTED IFRS 16 RESTATED VAR, £M Revenue

782.3 782.3 0.0

Cost of sales

(586.1) (586.1) 0.0

Gross profit

196.2 196.2 0.0

Other operating costs

(198.4) (195.5) 2.9

Operating (loss) / profit

(2.2) 0.7 2.9

Net finance costs

(1.3) (4.7) (3.4)

Loss before tax

(3.5) (4.0) (0.5)

Adjusted EBITDA

10.1 42.0 31.9

Depreciation & amortisation

(12.3) 41.3 (29.0)

Operating (loss) / profit

(2.2) 0.7 2.9