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Game Group - What a disaster.....

Wednesday, Apr 21 2010 by
4

GMG a widely followed stock on TMF.

Todays results were not particularly great but they were not the end of the world either! What really caught a lot of peoples eyes were the departure of the CEO And COO.


Lisa Morgan has stepped down from her role as
Chief Executive Officer ("CEO"). Lisa had indicated her desire to step down to
pursue other opportunities.

http://www.advfn.com/p.php?pid=nmona&article=42461406
She spent 14 years in the business and the departure seems sudden and abrupt!

I have watched this stock with interest and it was only a few days ago when certain investors said they were in for a quick 50%  despite what is a business that does'nt look healthy longer term as people will with time turn to downloading games of the net where it would be cheaper then spending £40 for a game!

What JTCod has unravelled in the last half hour or so....

On the 12th of January the company said

We will continue to exercise strong cost control disciplines with effective management of the portfolio
and infrastructure. The Group has a strong balance sheet, with net cash as at 31 January 2010
expected to represent an increase on the prior year
.


http://www.investegate.co.uk/Article.aspx?id=201001120700073761F

In the results from 2009 they said :

Our net cash position as at 31 January 2009 increased to £81.4m (2008: £42.1m). The Group continues to

be very cash generative and has a strong balance sheet.

http://www.investegate.co.uk/Article.aspx?id=200904220700109010Q


In the results published today the company said
Our net cash as at 31 January 2010 was GBP44.9m compared with GBP81.4m in the
prior year. As noted above, the decrease reflects a change in the timing of
supplier payments around the year end, and stock holding for January releases.

http://www.advfn.com/p.php?pid=nmona&article=42461398


I find this INCREDIBLE! I honestly can't believe you have companies which have been trading for a long time & have been listed on the stockmarket a very long time make such serious errors as this! One would think they would read and then re-read and then read again whatever statements they publish to the markets!

What makes it worse is they don't seem to be upfront about their error, I find that very frustrating!

One does have to question the numbers on the Financial statement and as well as the auditors opinion...

The CFO should and most likely will follow the door out ... another slump for the share price. What an absolute shambles....

And for those that are talking about a takeover etc I have been around long enough in this Investment game to know it is not worth buying stocks with the hope they will be taken over!

Buying sound businesses that are sustainable in the long term is a much better strategy.......


Disclaimer:  

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26 Posts on this Thread show/hide all

Isaac 21st Apr '10 7 of 26
5

In fact reflecting on this point further the fact that they have chosen to make the payment just before year end gives me more confidence in that they've chosen NOT to window dress the year end figures.

What? That is a LEGAL requirement for them to do so. It is nothing to do with the management trying to make the numbers look rosy or anything like that.

You would expect to have professional accountants poring over the numbers and they have a duty to act in the public interest and not just to satisfy their employers.

As a member of public I have to feel confident the financial statements published are reliable and as such not exposed to material changes in a short period of time. Three weeks and £40 million is quite a large difference in my books.

It is a bit like me saying to you Nigel, I have £80m in the bank but with a caveat that in 3 weeks time I may have half of that but I'm not going to tell you until about 3 months time and in the meantime you can Invest in my company based on this information.

 

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nigelpm 21st Apr '10 8 of 26
2

I give up!

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Isaac 21st Apr '10 9 of 26
8

Trade and other payables

2010 :

258,203

2009 :

349,182

Making sense?

 

No. If trade payables are coming down then surely you would know who you need to pay and in what time period? Are you suggesting the company had no idea on Jan 12 th on who they would need to pay in the next three weeks ? I would hope they would know as I would expect them to do a cashflow forecast ...

 

 

 

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jseth123 22nd Apr '10 10 of 26
7

Isaac,

"Our net cash position as at 31 January 2010 decreased to GBP44.9m (2009:
GBP81.4m). The decrease largely reflects a change in the timing of supplier
payments, with significant payments being made just before the year end rather
than just after, as they were in the prior year. On a like for like basis, our
cash position is consistent with last year, and the Group continues to be cash
generative with a strong balance sheet. "

Read this. And then again, and then again.

Taking a SNAPSHOT of their cash position on the 31st January, they had £44.9m vs £81.4m the year before. It may be that on the 1st February last year they paid their supplier then had £40m, or they have have had £90m or they may have had £50m. It's just that last year, when they took the snapshot the supplier's HADN'T been paid whereas this year they HAVE been paid and hence the cash balance is lower.

You are missing the point if you are claiming you should have been informed when they gave an annoucement and didn't notify shareholders about the "£40m difference" - do you want to be informed of every transaction with a supplier? It's the only solution to what you are advocating.

For me, it might have been nice for them to have been a bit more specific with their cash balance last year after dealing with the supplier - I suspect the phrase "consistent with last year" means "lower, but same ball park".

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nigelpm 22nd Apr '10 11 of 26
2

Cheers Seth. You wrote what I just could not be bothered to.

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repobear 22nd Apr '10 12 of 26
1

nigelpm,

I haven't followed at all closely but the smell isn't that great and whatever you say about him Isaac has a certain feel for a bad smell.

I take it you hold these. Are you entirely comfortable with that and if not what doubts do you have?

repobear

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nigelpm 22nd Apr '10 13 of 26
3

In reply to repobear, post #12

I haven't followed at all closely but the smell isn't that great and whatever you say about him Isaac has a certain feel for a bad smell.


He's posted completely misleading information.


I take it you hold these. Are you entirely comfortable with that and if not what doubts do you have?


Nope. Not interested at all.

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DearLeader 3rd Sep '10 14 of 26
1

Definately not a disaster the past few sessions I've noticed. Seems to be some momentum here...


DL

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djpreston 3rd Sep '10 15 of 26
4

In reply to DearLeader, post #14

Id imagine that there is some growing optimism regarding sales, which is one of the reason we bought more on Wednesday.

Look at the pipeline of launches over the coming weeks running into Christmas. I dont think that there has ever been a stronger release pipeline. I know that the manager and staff at the local GMG were both pleased but equally unhappy with the prospect of several "Open at Midnight" sessions (for the really big releases):

Halo Reach 14/10

Call of Duty 9/11

Fifa 11 1/10

Fallout New Vegas 22/10

Fable III 29/10

Assassins Creed: Brotherhood 19/11

Medal of Honor 15/10

Gran Turismo 5 5/11

World of Warcraft: Cataclysm

And not fogetting, of course, the launch of the:

Xbox 360 Xinect on 10/11

Sony Move 17/9

That is a collossal line up of "must have" franchises and peripherals in the run up to Christmas (and ignores all the other titles being launched).

Virtually all of the "biggies" have special edition verions limited to Game, that come with "bonus" items in game etc or pre-ordered versions which again come with "bonuses" - all designed to encourage orders from Game as opposed to the "plain vanilla" versions that the supermarkets will offer. Okay, those may be cheaper but geeks like to have the extras..... Oh, and pre orders also get double Game Reward points. Preordering looks likely to be the only way to be sure get one of the Kinects before the New Year due to the anticipated demand.

I think that this year could be a fantastic Christmas for the games sellers and GMG looks cheap. Wonder if we will even see Gamestop finally make a play for it ahead of what could be a bumper Chirstmas?

Fund Management: European Wealth
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MrContrarian 3rd Sep '10 16 of 26
1

In reply to djpreston, post #15

There are always big releases with extra-hype forthcoming but the real profit bonanza comes when a new console sells out and retailers then get an armlock on punters and then sell only game+console bundles. They get full or near full price for the games and moreover sell 2 or 3 with each console. This makes the cycle very deep for Game Group. I was appalled by the LFL figures of -17% we saw this year until I understood this.
I don't think we are going to see wii-type mania this time but the new motion add-ons will sell well and bring people into the shops. They will want motion-enabled games as well.
I hold.

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loglorry 17th Sep '10 17 of 26


I see GamStop in the US have started a share buy back spending a huge $500m. Not sure if this is a bad thing of not however. It shows they have spare cashflow but also shows that they are not so keen on expansion and probably not keen on a UK aquisition.

With EPS forecasts of 20p for 2010 (Hemscott) one wonders if Game (GMG) should do something similar?

I'm a little uncertain on this share although continue to hold. One the one had it looks well geared to economic recovery and has a strong set of accounts. On the other I wonder if it is going to be made obsolete by the Internet and become another HMV type situation. With little asset backing this is a worry.

BTW on Dragon's den a teenager was trying to setup a game swap website. Doesn't she know Game do it ?

Log

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djpreston 3rd Nov '10 18 of 26
1

In reply to djpreston, post #15

I know Ive been banging on for months now about Gamestop possibly making a move but here's another rehashing of the rumour, which is presumed to be behind the surge in volumes and price yesterday (continuing a nice rally from the recent lows).

http://www.dailymail.co.uk/money/article-1326094/MARKET-REPORT-GEOFF-FOSTER-Time-Game-Group.html?ito=feeds-newsxml

Fund Management: European Wealth
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zakmundo 3rd Nov '10 19 of 26

What has daily mail accuracy/reliability been like for this kind of thing?

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djpreston 3rd Nov '10 20 of 26

In reply to zakmundo, post #19

Not something Ive ever tracked to be honest.

Its a standard line to be pushed out whenever GMG rises but the logic is compelling - doesnt mean it will happen but...

Fund Management: European Wealth
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jseth123 3rd Nov '10 21 of 26

Thank you for posting this DJP. I have been wondering what was responsible. How is one meant to keep up with what rumours are governing the rises of their shares on seemingly no news? Where do you get your hands on such rumours!? (Obviously the DM in this case but you get my point, I hope) Even ADVFN didn't have a mention of anything like this when I looked last night.

I was already lamenting my decision not to double up at 56p (the day of the interim results). I am a small player so only use RSPs to deal and I was even as far as having my finger over the button with 15 seconds to decide and I opted to bail out for the time being and see what happened. Suffice to say that was the wrong decision and I would be nicely in profit now if only I had the confidence in my view that the drop was overdone. Alas, I digress, but I shall be interested to see where this goes.

I'm still holding for the results after Christmas, Kinect pre-orders and demand seem strong (anecdotally if nothing else) and a new Call of Duty release is days away as well.

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djpreston 3rd Nov '10 22 of 26

In reply to jseth123, post #21

No problem jseth

As its my job, Ive got several screens open firing back information, news, alerts, etc.

Anecdotal evidence is that the run of Big releases since the interims have gone very well indeed and Kinect pre orders are very high (my own in apparently sat in a warehouse for the release date) Huge interest in the Kinect and Move (or whatever the PS3 version is called), well, you'd expect that with MSFT's marketing spend rumoured to be c $500m so Id expect it to be a big seler.

The big Q of course is, how much of the market has GMG secured????

Cant blame you for not buying back then. Safest option was to hold on and see what happens over Christmas.

ATB

D

Fund Management: European Wealth
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jseth123 8th Dec '10 23 of 26
3

Pretty horrid IMS today.

I've been holding these to see how it would go over Christmas and I have to say with this weather I'm not expecting great things.

May well get rid of them before then

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Isaac 16th Nov '11 24 of 26
2

I guess I was right about these despite some adamant folk from TMF telling me otherwise....

 

2 Year chart. Click to open a chart window

 

 

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jseth123 16th Nov '11 25 of 26

Indeed, this was the quarter with lots of big software releases and the effect has been minimal in stopping the slide in sales. High street media retail is dead IMO.

I see the last post before Isaac's graph is a comment from me...if anyone is interested, I sold out before the IMS in very early January after suspecting that Xmas 2010 sales would be underwhelming.

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Isaac 21st Mar '12 26 of 26
1

GAME OVER

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