News Column

Game to give its regulars 'virtual loyalty shares' when it floats

May 20, 2014

Zoe Wood



Game is handing its most committed shoppers "virtual loyalty shares" as part of a stockmarket float expected to value the video games specialist at around pounds 400m.

A successful flotation would complete the company's rehabilitation after it collapsed into administration two years ago, resulting in half its UK stores closing and the loss of thousands of jobs.

"We've got half the store base and the same market share," said chief executive Martyn Gibbs. "We're able to engage the same customers from a lower cost base and the right financial architecture."

With 16m members in the Game Reward scheme, Gibbs said 20,000 would be handed "virtual loyalty" shares worth pounds 100 each. The value of the virtual shares is pegged to the company's share price, but they can be swapped for credits to spend in the stores.

Saga, the over-50s holidays and insurance group, is to include a similar reward scheme for customers as part of its imminent listing.

The Game flotation will trigger a windfall for the retailer's hedge fund owner, Elliott Advisors, which bought the retailer out of administration for around pounds 50m, as well the management team. Elliott was initially advised by OpCapita, the investment firm that controversially profited from the collapse of electricals chain Comet, but Gibbs said it was not currently involved with running the business.

Game is targeting a free float of at least 35% with pounds 12m to be raised from the sale of new shares.

Renamed Game Digital, the company made a profit before financial charges of pounds 47m on sales of pounds 815.7m in the year to 25 January. The streamlined group has 560 stores in the UK and Spain compared with 874 in 2012.

The turnaround was boosted by the arrival of the Xbox One and PlayStation 4 consoles last year.

Gibbs said the flotation was an opportunity to bring "long term investors" on to its share register. The retailer has no debt and a new pounds 50m credit line with HSBC in place. The fresh start would also help suppliers, who at present can obtain only limited credit insurance.

Independent retail analyst Nick Bubb said the "remarkable" recovery in Game's financial performance had been helped by the upswing in the video games cycle. "This is obviously a very cyclical business, as investors know to their cost," said Bubb. "This is no doubt taken into account in the mooted pounds 400m valuation."


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Source: Guardian (UK)


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