The future of GAME Group, the struggling computer gaming retailer, looks secure for a while yet as the company revealed it is confident it will pass its latest banking covenant tests after agreeing new facilities with its lenders.
The group also cheered investors by indicating that losses in the year to January 31st, 2012, will not be as severe as feared.
The board now expects that the full year loss before tax and non-recurring items will be around £18m; the consensus forecast among the ten brokers covering the stock is currently for a loss of £23.75m.
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As for the revised banking facilities, the group has agreed to operate within lower limits of its existing facilities than was previously available. These revised facilities will allow the company to continue to trade.
The group has also agreed to provide an updated strategic plan for review, and approval in part, by the lenders. This plan will cover all aspects of the business's activities and strategy, including its overseas operations.
The new strategic plan will need to address a number of challenges facing GAME, including weak consumer confidence, the competitive threat from Internet rivals and the rise in popularity of smartphones as games machines, which is causing some to question the future of games consoles and, more specifically, hand-held dedicated gaming devices.
Ian Shepherd, Chief Executive Officer of GAME was not sugar-coating the company's predicament.
"We're pleased to reach agreement with our lenders, but should be under no illusions about the challenges in our market or the hard work that is required to deliver our strategic plan," Shepherd said.
Shares in GAME rose 1.72p to 7.05p in response to the announcement, but are still down almost nine-tenths over the last year.
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