GAME's Administrators To Recommend Liquidation At Next Creditor's Meeting

Documents cited by Kotaku Australia state that PwC, the company placed in charge of GAME's administration, will recommend GAME go into liquidation after the next creditor's meeting on June 19. Creditors will vote to decide GAME's fate, but PwC explicitly states in its Administrators report that "absent of any other options, it is our opinion that the Company be placed into liquidation as the Company is insolvent".

Another alternative is that the company is placed back in the hands of the previous Directors, but according to the report, the administrators "do not believe that this alternative is in the best interests of the creditors".

It will, however, be up to the creditors themselves to decide come June 19.

According to the report, GAME hasn't made an annual profit since it was purchased in 2006.

"We understand that the Company has been loss making since at least the time it was purchased by Game Stores and has relied on funding from GameUK (via Game Stores) since that time to continue trading," claimed the report.

Until recently GAME Australia has been relying on funds diverted from the UK in order to keep its head above water. This made business difficult when GAME UK itself went into administration in March of this year.

"[GAME Australia] has relied on the funds received from Game Stores to fund its losses and therefore to continue to trade since it was purchased in 2006," said the report. "This is evidenced by the combined loan and equity injections of $122m made by Game Stores to the Company since that time."

The report provides different perspectives on precisely why GAME Australia's business struggled, with both the administrators and GAME themselves providing different reasons as to why they failed to make a profit since 2006.

GAME itself attributed its troubles to...

- Lacklustre economic growth and weak general conditions experienced by the retail sector. - Cyclicality of the gaming industry, with 2011 being the third consecutive year of double digit industry revenue declines. - The Company’s inability to move from start-up losses into sustainable profitability after Game’s initial acquisition in 2006. - Inflexible and high cost leases which made break-even performance challenging and future lease exists difficult to execute without significant funding.

PwC themselves, after investigation, believed that dependence on GAME UK for funds, in addition to the following reasons drove GAME into administration.

- Inability to generate sufficient sales volume or margins to cover expenses. - High overheads including wages, transport and lease costs. - Number and location of stores did not appear to be in line with the Company’s market - Change in market conditions in recent times has seen a shift from retail to on-line purchasing of the gaming product at lower costs to the consumer.

It's an interesting situation, but it looks as though PwC will recommend liquidation unless a reasonable offer for the company is made before the creditor's meeting on June 19.

At the moment the report states there are upward of 30 parties possibly interested in purchasing GAME, and PwC is continuing to deal with those parties: apparently an update on the possible sale of the company will also be provided at the creditors meeting.

"Unfortunately this is a report for the creditors of GAME to consider and vote upon at the second creditors meeting on 19 June 2012," said PwC, when we approached them for comment. "Accordingly it is inappropriate for PwC to comment before then."


Comments

    Interesting that they cite online purchases as a factor.

    I started in 2006 and saw the decline from then on. the point of number and locations of stores was an issue then, it was plain as day. High wage and transport costs, mainly from H/O i am guessing also was evident.

    Ouch. I guess they figure it's better to cut and run now than try to salvage the business. Sad but cold reality of a competitive business I guess. :(

    "PwC, the company placed in charge of GAME’s administration, will recommend GAME go into administration"

    The last bit should be "liquidation" I think. They are already in administration.

    Well I can't even count on my hands how many times they would give cash incentives to under performing stores and the stores making the money get nothing.Really good way to keep your performing staff. Totally inept company, wasted money on marketing like it was toilet paper. . So glad i seen that the writing was on the wall at the end of JAN this yr & got out of there.

      The writing on the wall. More likely you got fired.

        its true he did

    $80-$100 in store or $20-$60 online. Hmm hard choice.
    Anyone who charges RRP will have to change their attitude or will end up being like Game.

      EB Games is far from going under and they charge RRP (in fact they have majority market share for almost every new release).

      And the percentage of people that grey import games isnt that big. The demographics of this site are very different to the demo of the entire market.

        Finally.... Someone on here that gets it! You are dead right!

        EB games also owns a large portion of "exclusive" collectors editions, that you cant get online (ie content doesn't work with internationally purchased codes.) It's the only reason I buy new from EB. If i'm not getting collectors, then I don't need it day 1 and go for cheap online.

        And your right, the larger demographic of EB is the mum's and dad's buying games for the under 18's who demand the game, and mum and dad don't know where to go online.

      The RRP or Recommended Retail Price is the price a store should set for them to profitable that would pay the supplier for the item, pay the staff wages, pay the freight company for shipping the goods, pay the lease of the building, which can be 1000's of dollars per week etc etc. You obviously know nothing about business. Now this doesn't have much to do with Game and why they failed but more so the lack of education you have by your answer.

    How about general lack of stock & super-high prices which when combined forced (we went willingly) consumers to other stores.

    got an email from GAME, for some reason don't think i was supposed to

      TGW Pty Ltd (Administrators Appointed) (Trading as GAME) ACN 111 680 696

      I refer to previous correspondence and advise that, in accordance with Section 439A of the Corporations Act 2001 (the Act), a meeting of the Company's creditors will be held on at 11.30am on Tuesday 19 June 2012 at The Portside Centre, Symantec House, Level 5, 207 Kent Street, Sydney 2000.

      Please click on the following link http://cloud.game.com.au/439aReport.pdf to access the Administrators' report pursuant to Section 439A(4) of the Act

      Please click on the following link http://cloud.game.com.au/439aAppendix.pdf to access the following:
      * Formal Notice of Meeting (refer Appendix 3);
      * Form 532 Appointment of Proxy (refer Appendix 3); and
      * Form 535 Informal Proof of Debt (refer Appendix 3)

      Each form should be completed and returned to this office by 4:00pm on Monday, 18 June 2012. Further details on the creditors meeting are included in Section 10 of this report.

      Should you have any enquiries regarding the information provided, please contact (02) 8266 1705 or by email [email protected]

    I guess EB is next once the mums (any retail stores biggest market, prove me wrong) figure out that they are charging RRP compared to JB who go at cost.
    BTW EB are already planning to cut a whole bunch of stores once GAME goes in to liquidation.

      got a source on that last one?

      Also, the only reason I buy from EB is exclusive collectors edition (that, more often than not, aren't that exclusive...)

      Wrong. Why would eb cut stores after Game went into liquidation? Would they not look to open a few more where it made sense? They have opened two more in victoria already this year.

        They've also closed at least two in Victoria this year.

    "Documents cited by Kotaku Australia".

    Mark, is it possible you meant 'sighted' there?
    As in you saw the documents - or did you really mean you were just quoting from them?

    I hope they go away, I started hating game after some redheaded bimbo stole my job there

      I understand you're human, but that's kind of a ridiculous reason to hope an entire company goes away, because someone else got a job that you didn't. In hindsight, perhaps a good thing? Otherwise you'd be out of a job instead of wherever you're at now

      Dey terk yer jerb!

    My game started to suck when the manager of my local store jumped ship,
    he knew what was coming and moved on, now they replaced him with some moron who
    thinks hes gods answer to video games, attitude like that means i never go back!
    so long douchebags!

      LOL. Same store as mine? RIngwood?

    Given they never made any cash surely there's a case for them trading as insolvent?

    I guess I'm not getting my $90 worth of outstanding preorder money back hey. :/

    Anyone remember how great Games Wizards was?

    GAME Ruined Games Wizards

    Went to GAME at ttp today to check the sale out. Nice friendly staff. Ended up talking bout this situation and random games. Sucks they will be out of a job. One of em has $500 (I think a week?) mortgage. D:

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