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Investec places GAME Group price target under review after strategy update

Last updated: 04:36 16 Feb 2011 EST, First published: 05:36 16 Feb 2011 EST

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GAME Group (LON:GMG) today gave investors a peek into the key points of its revamped strategy, prompting Investec (LON:INVP) to put its forecasts and target price for the video game retailer under review.

In a statement ahead of today’s formal presentation that will outline the group’s initiatives for further business development, GAME said that online and digital revenues will become a larger part of its sales mix.

The group told investors that the activities it will unveil will be profit enhancing, while the gross margin percentage will decrease as online and digital revenues become a larger part of the sales mix.

“In 2011/12 we anticipate there will be a margin impact of around 100 bps as we reposition our business to be truly multichannel.

“In the short term, we have chosen to invest nearly all of the £15 million of cost savings we expected to achieve in 2011/12 to deliver on our strategic goals,” said GAME.

The operating cost base and capital expenditure over the next three years are expected to be in line with 2010/11.

Specialist banking and asset management group and FTSE 100 constituent Investec said that revenue uplifts should limit downside risk to its pre-tax profit forecast for 2012 and placed its 90 pence target price and forecasts under review.

Shares in GAME Group last traded at 72 pence.

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