The release of the next generation of games consoles cannot come soon enough for computer gaming specialist Game Group, which is struggling with some of its bank loan covenants after a tough Christmas trading period.
Total sales in the eight weeks to January 7th were down 14.7% on a year earlier, with the only bright spot being a 3.9% increase in online sales. That improvement merely emphasises, however, Game's major problem, which is the threat posed by online competitors such as Amazon and the digital download platform Steam.
The stores in UK and Eire saw a 17.6% slide in sales from a year earlier, while the International division's sales were down 12.0%.
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Like-for-like (LFL) sales overall were down 12.9% year-on-year, with UK & Eire off 15.2%, International stores down 11.4% and Online sales up 3.9%.
Game's financial year ends on the final day of this month, and things are looking bleak for the outcome. Total sales in the 49 weeks to January 7th were down 11.9% on a year earlier, or 10.0% on a LFL basis. Full year LFL sales are now expected to be no better than 10.3% lower than in fiscal 2010/11.
Nevertheless, the company was taking heart from the fact that over the same period, the gaming market as a whole was down 13.1%. On the other hand, the company is paying a price for holding on to market share, as it said gross margins for the full year will be 1.9 percentage points lower than in the previous year.
On the positive side, the company is not burning through cash, and the end-January cash position will be positive and at a similar level to the end-January 2011 number of £120m, but there looks like trouble ahead with the banking covenants.
The group currently remains compliant with its loan covenants, but the board reckons there is a good chance that the company will not meet its earnings before interest, tax, depreciation and amortisation covenants (fixed charge coverage and leverage) when they are tested on 27 February 2012 for the period to 31 January 2012.
"Given the year-end cash position, the debt service covenant should be met satisfactorily. The group continues to be in regular and constructive dialogue with its lenders, who remain supportive," the company statement said.
"Our industry had an incredibly tough 2011, and so did we. We remain the market leader and have a clear strategy which will return the business to growth. We are adapting to the changing market and are well prepared for the next hardware cycle," said Ian Shepherd, Game's Chief Executive Officer.
The release of the next generation of games consoles cannot come soon enough for computer gaming specialist Game Group, which is struggling with some of its bank loan covenants after a tough Christmas trading period.
Total sales in the eight weeks to January 7th were down 14.7% on a year earlier, with the only bright spot being a 3.9% increase in online sales. That improvement merely emphasises, however, Game's major problem, which is the threat posed by online competitors such as Amazon and the digital download platform Steam.
The stores in UK and Eire saw a 17.6% slide in sales from a year earlier, while the International division's sales were down 12.0%.
Like-for-like (LFL) sales overall were down 12.9% year-on-year, with UK & Eire off 15.2%, International stores down 11.4% and Online sales up 3.9%.
Game's financial year ends on the final day of this month, and things are looking bleak for the outcome. Total sales in the 49 weeks to January 7th were down 11.9% on a year earlier, or 10.0% on a LFL basis. Full year LFL sales are now expected to be no better than 10.3% lower than in fiscal 2010/11.
Nevertheless, the company was taking heart from the fact that over the same period, the gaming market as a whole was down 13.1%. On the other hand, the company is paying a price for holding on to market share, as it said gross margins for the full year will be 1.9 percentage points lower than in the previous year.
On the positive side, the company is not burning through cash, and the end-January cash position will be positive and at a similar level to the end-January 2011 number of £120m, but there looks like trouble ahead with the banking covenants.
The group currently remains compliant with its loan covenants, but the board reckons there is a good chance that the company will not meet its earnings before interest, tax, depreciation and amortisation covenants (fixed charge coverage and leverage) when they are tested on 27 February 2012 for the period to 31 January 2012.
"Given the year-end cash position, the debt service covenant should be met satisfactorily. The group continues to be in regular and constructive dialogue with its lenders, who remain supportive," the company statement said.
"Our industry had an incredibly tough 2011, and so did we. We remain the market leader and have a clear strategy which will return the business to growth. We are adapting to the changing market and are well prepared for the next hardware cycle," said Ian Shepherd, Game's Chief Executive Officer.
The shares, which had already lost around nine-tenths of their value prior to the Christmas trading update, fell to another 52-week low, slipping to 4.70p at one point before recovering to 5.00p, down 1.75p on the day. In February of last year the shares were trading at a barely imaginable 73.25p.
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