Business Briefing: Can Game reach the next level?

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The Independent Online

The City expects electronic games retailer the Game Group, which operates 800 stores across Europe and Australia, to show a profit when it reports its interim results on Tuesday.

But the shadow of a regulatory investigation into Game's £74m acquisition of Gamestation in May this year is likely to make investors cautious.

What are the analysts forecasting?

When the company issued guidance it estimated pre-tax pre-exceptional profits of £2m to £3m, and the City expects a pre-tax profit of £2.5m. This contrasts favourably with the same period last year, when Game made an interim pre-tax loss of £7.1m for the six months to July 2006. The company has, however, warned that the anticipated pre-tax profit figures it has put out are before costs relating to the acquisition of Gamestation.

Games retailing is a highly seasonal business, with peak sales at Christmas and New Year. Despite a pre-tax loss in the first half of last year, the company reported full-year profits of £29m. This year the City expects yearly profits of around £52m.

What shape is the company in?

For the first 22 weeks to 30 June, total group sales were up 74.1 per cent, according to the company's guidance, including sales from the Gamestation acquisition.

What's the problem?

The Office of Fair Trading's chief executive, John Fingleton, referred the acquisition to the Competition Commission last month, saying: "Without better evidence that competition from other suppliers will be sufficient to prevent the merged firm from raising prices or cutting back services – in a market where retail sales amount to around £1.5bn – we must refer to the CC for fuller inquiry."

The report is expected by 23 January.

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