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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

nigelpm 21st Apr '10 1 of 26


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!


How exactly is this an error?

On 12th January they used the words "expect".

And have today clarified that it wasn't where they expected and provided the reason why not :


As noted above, the decrease reflects a change in the timing of
supplier payments around the year end, and stock holding for January releases.


The cash position in the retailing industry moves around like wildfire. This isn't hugely surprising.

I guess management would have been better using the word "anticipate" or not putting the sentence in at all but it's by-the-by IMHO.

Where's the problem?

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Isaac 21st Apr '10 2 of 26
1

Nigel,

If you look at the results it states "Preliminary Results for the 52 weeks ended 31 January 2010"

http://www.investegate.co.uk/Article.aspx?id=201004210700235259K

In a trading statement that is published two weeks before the year end I CERTAINLY would not expect a difference of £40m in the cash balance. I personally find this unacceptable.

If I was an Investor I would be furious because one would use such information to make an Investment decision (I would hope anyway).

I think this is such a big flaw that it would have been apparent 3 months ago and they should have re-released a statement to correct what they had said only two weeks before.

I think it is unacceptable to wait until the final results are released to publish such information.

People really need to ask themselves why the CEO had left just like that.....In most companies there is usually a transition period. Just look at how long Stuart Rose in Marks and Spencers has been around in his "transition" period.

It is always good to follow this kind of stuff as it makes you more aware of the risks involved in Investing in the stock market.

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nigelpm 21st Apr '10 3 of 26

in a trading statement that is published two weeks before the year end I CERTAINLY would not expect a difference of £40m in the cash balance. I personally find this unacceptable.

it's three weeks. However, do you know much about the retailing industry Isaac?

CF's in retail firms fluctuate rapidly. I don't see this as being particularly remarkable.

Happy to be proven wrong though.

 

In fact if you continue to read the RNS :

 

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.



It's spelt out for you.

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Isaac 21st Apr '10 4 of 26
3

It's spelt out for you.

 

I think you are missing the point I am trying to make which is a CEO that has been with a company for 14 years and is backed by a team who is involved in the day to day of the business should know better then to release statements such as we expect cash to be ahead of the previous year and then to release results which show anything but.

If it was within 10% then fine but cash is about 50% below compared to what it was.

If one was running my business I would fully expect that individual to be totally on the ball with the numbers and with what gets said to the owners. Directors of big companies are paid huge sums of money as they are responsible for getting things like this right.

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nigelpm 21st Apr '10 5 of 26


I think you are missing the point I am trying to make which is a CEO that has been with a company for 14 years and is backed by a team who is involved in the day to day of the business should know better then to release statements such as we expect cash to be ahead of the previous year and then to release results which show anything but.

If it was within 10% then fine but cash is about 50% below compared to what it was.

If one was running my business I would fully expect that individual to be totally on the ball with the numbers and with what gets said to the owners. Directors of big companies are paid huge sums of money as they are responsible for getting things like this right.


Sorry mate. You don't understand retail. Anyhow, I've emailed them to check.

 

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.

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nigelpm 21st Apr '10 6 of 26
2

In fact just to hammer the point home if I haven't done already (and you want to keep giving me negative feedback even though I'm trying to help you)

Look at the statement of financial position and :

Trade and other payables

2010 :

258,203

2009 :

349,182

Making sense?

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