Pre-tax profits at Game Group fell to £5.4m from £29m previously, as the computer games retailer suffered sharply lower prices on older games and a lack of availability of new consoles.

The firm's chairman, Peter Lewis, said he expected the market to remain competitive in 2006, particularly with older formats, but it should benefit as the transition from old to new technologies accelerates this year with the launch of Sony's PlayStation 3 and Nintendo Revolution.

Despite the drop in profits, Game is raising the dividend by 15% to 2.53p, reflecting its confidence in the future.