COMPUTER software retailer Game today eased disappointment at the collapse of takeover talks by announcing a strong recovery in sales.

The Hampshire company, which employs 200 people and has high street outlets at Southampton, Winchester, Eastleigh and Fareham, saw profits soar by 31.3 per cent to £31.9m.

The rise comes despite a five per cent fall in turnover to £576.6m, which was caused by a breakdown in the supply of PlayStation 2 consoles over Christmas.

Details emerged less than 24 hours after Game revealed that discussions over a potential offer for the company had broken down, sending its shares down nearly 20 per cent and wiping £60m off its value.

The identity of the suitor has not been revealed although speculation in the City centred on a management buyout using funds provided by a private equity firm.

Financial experts also suggested the collapse of talks was linked to the $1.44 billion US dollars (£761m) offer by US-based games retailer GameStop for rival Electronics Boutique.

Game chief executive Martin Long, 38, who lives near Romsey, stood to make a multi-million pound fortune if a deal had gone ahead.

Mr Long, a Liverpool FC supporter, is a familiar figure in Southampton business circles, having worked for regional accountancy giant Burnett Swayne, which became part of the Numerica group.

He said: "The video games industry is a multi-billion dollar worldwide phenomenon.

"In Western Europe more money is spent on video games than is spent going to the cinema or renting videos and DVDs. One in four homes in the United Kingdom owns a PlayStation 2."

Basingstoke-based Game, which has 400 stores in the UK, credited the launch of the handheld Nintendo DS console in Europe and an attractive software line-up over Easter with driving like-for-like sales eight per cent higher in the 11 weeks to April 16.

This enabled the group to maintain its share of the market for computer games, but Game said margins had come under pressure because handhelds are less profitable and the price of software was continuing to come down.

Meanwhile, Game is gearing up for the launch of the next generation Xbox and PlayStation consoles in 2006.