Game warns ‘shares may be worthless’

The London-listed company, which employs 10,000 people, is battling for survival after dismal Christmas trading led to top manufacturers deciding not to supply it with the latest blockbuster games.

In a statement to the stock exchange, the group said it was in discussions with its suppliers and lenders that would allow it to pursue a recovery plan announced in February along with new banking facilities.

Game said the board was also “reviewing the position of all of its assets in the UK and international territories”.

It added: “It is uncertain whether any of the solutions currently being explored by the board will be successful or will result in any value being attributed to the shares of the company.”

It is thought that American rival GameStop may be interested in buying the chain, which has 600 shops in the UK.

Game Group’s quarterly rent bill is due in a fortnight and failure to pay its landlords could push it into administration, jeopardising thousands of jobs and wiping out investors. But completing a sale of the group in such a short space of time would be difficult.

Peter Smedley, an analyst at Charles Stanley, said: “Imminent collapse into administration is now a real possibility.”

He added that GameStop could afford to take its time to pick and choose the assets it really wants, suggesting it may wait for a collapse before it makes a move.

Game Group’s battered shares, which had fallen from 62p a year ago to just 3.51p on Friday, lost more than half of their remaining value yesterday.

Opinion among analysts was divided as to whether it is worth hanging on to the shares. Killik & Co issued a “sell” recommendation but Peel Hunt was more optimistic, suggesting those already exposed to the company may want to hold on.

It said a rumoured new X-Box console could give Game a boost next year.

“With global broadband capabilities yet to be sufficient to launch a download-only console, the new X-Box therefore should still underpin a retail backdrop,” Peel Hunt said. “However, for Game Group, the challenge is whether management can gain the support of suppliers and restructure its operations, including international disposals, in order to trade through the intervening period until new hardware is launched.”

The broker said that both the UK and US software markets are currently trading 20-30 per cent below their level a year ago.

Game Group, which has 1,300 stores worldwide, blamed a lack of new consoles as well as a squeeze on consumer spending for its like-for-like sales drop of 12.9 per cent in the eight weeks to 7 January. It has already signalled that losses for the year to the end of January are likely to be around £18 million.

DOMINIC JEFF