"GW Financials" Topic

GW published their shareholders report today

PDF link

Revenue and profit both look pretty flat from last year. Market seems to see it as mildly good news, with the stock getting a small bump in trading so far, on up day for the exchange overall.

That is good news for them. They took quite a beating the last two years.

I don't buy GW anymore. Don't hate em just not interested in current product line. Glad to see things stabilizing. I wish them well.

TL;DR

Revenues Down,
Profits up.

:)

GW is the best thing since sliced bread, now give me my 1% residuals of profits dudes ;D

Games Workshop's ambitions remain clear: to make the best fantasy miniatures in the world and sell them globally at a profit, and it intends doing so forever. All of our decision making is focused on the long term success of Games Workshop, not short term gains.

Well there you have it in black and white.

OMG!

Did you see? On page 2, fifth paragraph, last sentence;

They split an infinitive!!

Well, I just…can't with them anymore.

Anyone seen my lighter fluid?

LotR is dead. Long live LotR

Used to buy their paints until I figured out they had about the same shelf life as a fruit fly. Perhaps that's a marketing strategy along the lines of planned obsolescence, but it's lost on me.

GW seems to make its living on a fairly constant reinventing of itself that works as long as it doesn't stumble. Perhaps with this most recent incarnation, it has done just that.

Games Workshop's ambitions remain clear: to make the best fantasy miniatures in the world and sell them globally at a profit, and it intends doing so forever. All of our decision making is focused on the long term success of Games Workshop, not short term gains.

This statement includes all the key elements of what we do and why we do it that way.

Before I go into what each key element is I'd like to share a thought. I believe we are a unique business and I understand that some people find us and our product a little odd and possibly a little quirky too. We are both of these and we are proud of it. I also know I am CEO of one of the most exciting companies creating fun on the planet. We forget most days because we are all focused on delivering our jobs. Our Hobby is great fun. We really do intend to be around forever, creating fun.

The first element – we make high quality miniatures. We understand that what we make is not for everyone, so to recruit and re-recruit customers we are absolutely focused on making our models the best in the world. In order to continue to do that forever and to deliver a decent return to our owners, we sell them for the price that we believe the investment in quality is worth.

Our customers tend to be teenage boys and male adults with some spare money to spend and time to enjoy hobbies. I'd like to think our Hobby – modelling, painting, collecting, gaming – is for anyone. Our customers are found everywhere. Our job is to, on a day to day basis, find them, commercially, wherever they are.

The second element is that we make fantasy miniatures based in our imaginary worlds. This gives us complete control over the imagery and styles we use and complete ownership of the intellectual property. Aside from our core business, we are constantly looking to grow our royalty income from opportunities to use our IP in other markets.

The third element is the global nature of our business. We seek out our customers all over the world. We believe that our customers carry our Hobby gene and to find them we apply our tried and tested approach of recruiting customers in our own stores, by offering a fantastic customer experience. Our retail business is supported by our own mail order store (it has the full range of our product) and our independent stockist accounts and trade outlets across the world. The independent accounts do a great job supporting our customers in parts of the world where we either have not opened one of our stores or where it is not commercially viable for us to have one of our stores. We will always have more independent accounts than our own stores. Our strategy is to grow our business through geographic spread growing all of the three complementary channels.

The fourth element is being focused on cash. We want to deliver a great cash return every year so that we can continue to innovate, surprise and delight our loyal existing customers and new customers with great product. To be around forever we also need to invest in both long term capital and short term maintenance projects every year, pay our staff what they have earned for the value they contribute and deliver surplus cash to our shareholders. Our complete dedication and focus should ensure we deliver on time and within our agreed cash limits.

We measure our success by seeking a high return on investments. In the short term, we will measure our success on our ability to grow sales whilst maintaining our core business operating profit margin. The way we go about implementing this strategy is to recruit the best staff we can by looking for the appropriate attitudes and behaviour each job we do requires and identifying the value that job brings. It is also important that everyone we employ has a real desire to learn and has a great attitude to change. Our Academy offers all of our staff both personal development and management skills training. It is also worth noting it's not what you know at Games Workshop, it's how much you contribute to our success, that we value.

We continue to believe there are great opportunities for further growth, particularly in North America and Northern Europe. So, we intend to keep on growing steadily; if we rush there is always a risk we will compromise one of the above.

Business model and structure

We design, manufacture, distribute and sell our fantasy miniatures and related products. These are fantasy miniatures from our own Warhammer 40,000 and Warhammer universes. Our factory, main distribution centre and back office support functions are all based in Nottingham.

We are an international business centrally run from our HQ in Nottingham, with 72% of our sales coming from outside the UK.

Design

Employing 167 people, the design studio in Nottingham creates all the miniatures, artwork, games and publications that we sell. In 2014/15 we invested £7.70 GBP million in the studio (including software costs) with a further £2.00 GBP million spent on tooling for new plastic miniatures. We are committed to a similar level of investment every year.

Manufacture

We are proud to manufacture our product in Nottingham. It's where we started and where we intend to stay. During the year we have been planning a project to upgrade our core IT systems that interface with our manufacturing equipment and systems.

Distribute

All of our product is initially distributed from our warehouse facility in Nottingham. This facility supplies our two hubs in Memphis, Tennessee and Sydney, Australia and either directly to our trade accounts and retail stores or via a third party carrier. During the year we started a project to upgrade the IT infrastructure and software for the warehouse that supports our mail order store based in Nottingham.

Sell

We sell via three channels, our own stores 'Retail', third party independent retailers 'Trade' and our 'Mail order' web store.

Games Workshop stores – Retail – they provide the focus for the Hobby in their areas. They only stock Games Workshop product. They are where we recruit the majority of our new customers. To do so the stores don't offer the full range of our products, they are merchandised to offer all customers new release product and the appropriate extended range. To achieve this we centrally run automatic stock replenishment from Nottingham. At the year end we had 418 Games Workshop stores in 20 countries. Our stores contributed 42% of the year's sales. Over the last five years we have been focusing on ensuring all of our stores are profitable by exiting expensive locations and converting our stores to one man stores. We believe that this project is in effect complete: we have 324 one man stores, small sites, each one staffed by only one store manager. We also have 94 multi man stores, which are constantly reviewed to ensure they remain profitable. If not, they will be closed and replaced with one man stores.

Trade – we sell to third party retailers under closely controlled terms and conditions. They help us sell our products mostly where we don't have our own stores. The bulk of these sales are made via our telesales teams based in Memphis and Nottingham. We also have small teams in Sydney, Tokyo and Shanghai. Last year we had 3,700 independent retailers in 52 countries. We have successfully introduced over the last few years a stockist programme which is designed to sell the right amount of stock into every account in line with their store format and performance. This programme is reviewed annually. The intention is that we stock all of our stockist accounts with our best sellers. We strive to deliver excellent service, operating in 16 languages covering all time zones. 37% of our sales came from sales to independent retailers in the year reported.

Mail order – the mail order store allows enthusiasts full access to all Games Workshop products. It is run centrally from Nottingham. It accounted for 21% of total sales in 2014/15. All of our stores have a terminal that allows our retail customers access to the full range.

Structure

We control the business centrally from Nottingham; it is where the people with experience and knowledge of running our niche business work. I have put in place a flat structure: the people with senior responsibility report directly to me. My team is split into three parts: Sales, Operations and Advisers.

My channel sales structure comprises retail, trade and mail order. This structure is made up of three key territory retail sales managers in the UK, North America and Continental Europe and a global trade manager. These four individuals have been in their jobs now for just over 18 months and their progress is encouraging. Since taking up the position of CEO I have appointed a new global mail order manager, a new global digital sales manager, and a retail sales manager for Australia and New Zealand. I also have a sales manager for Asia.

My operations and support structure includes a new finance director for Games Workshop who is responsible for accounts, compliance and legal duties. I have a product and supply manager who is responsible for our factory, logistics and design studios (Citadel, Forge World and Black Library). He also manages our three main distribution hubs in Nottingham, Memphis and Sydney. A personnel manager and our Academy personal development and skills training ensure we take our people recruitment and development seriously. All of our senior managers attend management skills training, as a team, three times per year.

My advisers comprise a small team who advise me with regard to any aspect of the use of our IP, licensing and product strategy. To help me stay focused on executing my key day to day duties I have arranged a consultancy agreement with Tom Kirby to support me with our Academy programme and our expansion in Asia.

Key performance indicators

The board and management team use a number of key performance indicators to provide a consistent method of analysing performance, in addition to allowing the board to benchmark performance against our forecast. The key performance indicators utilised by the board can be split into key financial performance indicators and key non-financial performance indicators.

The key financial performance indicators are:

Moving Annual Total ('MAT') sales growth by channel

Measures the sales growth achieved in each of our channels on a rolling 12 month basis.

MAT Group gross margin

Measures the gross profit achieved on sales after taking account of the direct costs and depreciation of manufacturing and shipping our product to customers/stores on a rolling 12 month basis.

MAT core business profit

Measures gross profit less operating expenses on a 12 month rolling basis, before royalty income.

MAT number of own stores by territory

Measures the number of our own stores on a rolling 12 month basis. This is an indicator of our global reach.

MAT number of ordering stockist accounts by territory

Measures the number of trade outlets that have ordered from us in the last three months. It is an indicator of our global reach and the health of our trade account base.

The key non-financial indicators are:

Product quality

This is an indicator of the effectiveness of our design studio and our continuous improvement in design to manufacture. We measure this by looking at sell through. If the product is great we sell a lot, if not we sell very few.

Outstanding customer service

This is an indicator of the effectiveness and efficiency of the service experience customers get in our stores and the time it takes us to resolve a customer query made to our customer service teams. The former is measured by the number of complaints I receive – very few – and the latter is tracked by five micro KPIs. Our approach is that 'the customer is always right' and we do our utmost to resolve successfully any issues.

Shareholder value

We believe shareholder value is created, primarily, by not destroying it. We have no intention to acquire other companies, nor to dispose of any of those we own.

We return our surplus cash to our owners and try to do so in ever increasing amounts.

Review of the year

Over the year we have seen modest sales growth, at constant currency, in our core trade and mail order channels. We saw a small sales decline in our own stores due to continued difficult trading in Continental Europe following our restructuring last year. We saw expected declines in some non-core activities (described below) that are grouped with core activities in our reporting. The effect of these non-core activities and the continuing effects of unfavourable exchange rates mean that our reported sales show declines in retail (-4.6%) and trade (-6.3%). Mail order growth was 3.9%.

It is encouraging to see that the channels and territories not impacted by our restructuring last year delivered sales growth, namely, mail order, trade in North America, Australia and New Zealand and retail in the UK, Australia and New Zealand.

The restructuring across Continental Europe was delivered on time, within budget and has delivered the cost savings that were planned. We anticipated – correctly – that it would take some time to get this region back to its normal levels as we knew we would have to recruit a new trade team of recruiters and account developers in Nottingham servicing all of Continental Europe in the local languages. In the second half that new team delivered sales growth of 1%. The impact in retail has taken a little longer than planned to recover. The key issue is store manager recruitment, which remains a key priority.

The exit of loss making stores in North America has been a challenge; we closed nine stores in the year and as a direct result have not delivered a net increase in stores in North America in the year. This project is now complete and, subject to finding the right managers, we will be embarking on a store opening programme in North America in 2015/16.

We expected a decline in non-core trade activities (-£2.2 million) and this comprised export, non-strategic accounts and magazine sales via newsstand. The decline of non-core retail of £0.70 GBP million is due to the redevelopment of the visitor centre in Nottingham. We aim to offset this sales decline in 2015/16 with the opening of our new visitor centre and our new events programme. We are all very proud of the new venue, which opened on time and on budget in May 2015. It is a great example of our staff working together to deliver a project successfully.

Gross margin declined in the period due to a decline in sales volumes and increased development costs due to the release of more new products. The quality of new product we release continues to surprise and delight our customers and we plan to do so every week. We have increased the prices of our new releases to reflect the additional investment and value we have built into these new releases. The annual impact of this increase on our UK RRP price list is an average increase of 3%.

Costs have been reduced in the year, mainly as a result of the savings delivered from restructuring in Continental Europe, the exit of high cost stores in North America and the way in which we maintain cover staff for our UK stores.

I have set a goal of getting the business into sales growth in 2015/16 and have asked staff to accept a salary freeze until December 2015 to allow us to maintain our cost to sales ratio. If we deliver sales growth in the first half of 2015/16 I have agreed to back date any salary reviews to 1 June 2015. We are all working hard to deliver this goal.

Warhammer branding

We have taken the decision in the year to rebrand our stores 'Warhammer'. It is what our customers call us. This will be rolled out progressively, as and when we open new or refurbish our existing stores. At the year end date we had 13 Warhammer branded stores.

Product

In July 2015, we relaunched Warhammer Fantasy to broad acclaim 'Warhammer: Age of Sigmar'. We are so proud of this new range of miniatures that we have commissioned an additional statue at our HQ to complement our Space Marine, which has delighted our customers and staff for the last 17 years. You have to see it to believe it, you will not be disappointed.

Licensing

In the period we signed 17 new deals and have 44 contracts currently in place to produce more than 50 interactive products. Reported income is split: 52% traditional PC games, 27% mobile and 21% card, board and role-playing game licences. 37 new products were released in the period. We also announced a major tie up with SEGA to develop a real time strategy game 'Total War: Warhammer'.

Projects

We have three major projects being implemented currently:

· European ERP – enterprise resource planning (core back office systems) – replacement. It is estimated to cost £6.40 GBP million.

· Forge World mail order store. To protect our sales we are building a new Forge World mail order store on the same platform and hosting environment as our Citadel mail order store and migrating all products and imagery. It is on track with a scheduled go live date in the summer of 2015. It will cost £1.10 GBP million.

· Mail order warehouse system replacement. It is estimated to cost £0.80 GBP million.

Return on capital*

Our key measure of our performance is return on capital. During the year our return on capital fell from 42% to 40%. This was driven by both a decline in operating profit and an increase in capital employed.

Sales

Reported sales fell by 3.5% to £119.10 GBP million for the year. On a constant currency basis, sales were down by 0.3% from £123.50 GBP million to £123.10 GBP million; split by channel this comprised: retail £50.80 GBP million (2014: £52.00 GBP million), trade £46.20 GBP million (2014: £46.90 GBP million) and mail order £26.10 GBP million (2014: £24.60 GBP million).

Operating profit

Core business operating profit (operating profit before royalty income) fell by £0.40 GBP million to £15.00 GBP million (2014: £15.40 GBP million). On a constant currency basis, core business operating profit increased by £2.20 GBP million to £17.50 GBP million. This was driven by a reduction in operating expenses excluding exceptional items.

Operating expenses (excluding exceptional items) fell by £4.20 GBP million; £1.80 GBP million due to a reduction in retail store costs and savings of £2.40 GBP million from the restructure of Continental Europe have been realised. Costs remain a key area of focus.

Capital employed

Average capital employed* increased by £2.00 GBP million to £38.60 GBP million. The book value of tangible and intangible assets increased by £1.30 GBP million whilst trade and other receivables decreased by £0.20 GBP million, inventories fell by £0.40 GBP million and current liabilities fell by £1.30 GBP million.

Cash generation

During the year, the Group's core operating activities generated £20.30 GBP million of cash after tax payments (2014: £17.90 GBP million). The Group also received cash of £3.00 GBP million in respect of royalties in the year (2014: £2.40 GBP million). After purchases of tangible and intangible assets and product development costs of £12.40 GBP million (2014: £11.70 GBP million) and dividends of £16.60 GBP million (2014: £5.10 GBP million) there were net funds at the year end of £12.60 GBP million (2014: £17.60 GBP million).

Investments in assets

This is what we have been spending your money on:

2015

2014

£million

£million

Shop fits for new and existing stores
0.8

1.1

Production equipment and tooling
3.0

2.8

Computer equipment and software
1.6

2.7

Lenton site including the new visitor centre
2.4

0.5

Total capital additions
7.8

7.1

In 2014/15 we invested £0.80 GBP million in shop fits: 34 new stores and three refurbishments. We also invested £3.00 GBP million in tooling, milling and injection moulding machines. Capital investment is expected to be higher than depreciation and amortisation over the next few years as we upgrade our core back office systems in Nottingham.

Dividends

We followed our principle of returning truly surplus cash to shareholders. Dividends of 52 pence per share were paid during the year (£16.6 million; 2014: £5.10 GBP million).

Royalty income

Royalty income increased in the period by £0.10 GBP million to £1.50 GBP million.

Taxation

The tax rate for the year was 26.1% (2014: 32.0%). We continue to expect a rate above that for business activities based solely in the UK, due to higher overseas tax rates.

Sales by channel

42% (2014: 42%) of sales were made through our own stores, 37% (2014: 38%) of sales were to independent retailers and 21% (2014: 20%) mail order.

Retail

Store openings and closures during the year

Number of stores at May 2014

Opened

Closed
Number of stores at May 2015
Number of one man stores at May 2015
Number of one man stores at May 2014

UK
142
10
(10)
142
108
103

North America
87
6
(9)
84
72
63

Europe
141
10
(6)
145
105
99

Australia
40
7
(4)
43
36
29

Asia
4
1
(1)
4
3
3

414
34
(30)
418
324
297

We relocated 15 stores and these are included in the opened/closed movement above. Our ability to open new stores is still (and always will be) limited by our ability to find the right people to run them. Although we are getting better at it, it is still our number one priority.

Retail sales fell by 4.6% in the year (-2.2% at constant currency), partially due to the continental european reorganisation as well as a decline in non-core retail sales relating to the refurbishment of the visitor centre in Nottingham.

Trade

Sales fell by 6.3% in the year (-1.6% at constant currency), partially due to the continental european reorganisation and decline in non-core trade sales.

Mail order

Our new online shop was launched in April 2014 and our online sales in the period were 3.9% higher than the prior year (+5.9% at constant currency).

Treasury

The objective of our treasury operation is the cost effective management of financial risk. The relationship with the Group's bank is managed centrally. It operates within a range of board approved policies. No transactions of a speculative nature are permitted.

Funding and liquidity risk

The Group pays for its operations entirely from our cash flow. We had a small facility at the bank which expired in December 2014.

Interest rate risk

Net interest receivable for the year (excluding net foreign exchange gains and unwinding of discounts on provisions) was £109,000.00 GBP (2014: £106,000.00 GBP).

Foreign exchange

Our big currency exposures are the euro and US dollar:

euro US dollar

2015 2014 2015 2014

Year end rate used for the balance sheet 1.39 1.23 1.53 1.68

Average rate used for earnings 1.31 1.20 1.58 1.62

The net impact in the year of exchange rate fluctuations on our operating profit was a reduction of £2.50 GBP million (2014: reduction of £1.30 GBP million).

Priorities for next year

As part of our overall strategy, four key strategic initiatives will be prioritised in 2015/16. These are designed to deliver sales growth whilst maintaining our gross margin and keeping our costs flat.

Firstly, staff recruitment. We need a constant stream of new people to join Games Workshop across all departments and over the last three years our Academy team has been training us all on how to find people whose personal qualities fit the jobs we need to fill. This has radically changed how we recruit and also how we performance manage; to date our new approach has proven to be successful. The challenge now is how do we deal with our recruitment process on an industrial scale: globally we recruit hundreds of people every year and our rigorous approach means that to do this successfully we need to consider thousands of application letters. To help us in this process I will be adding an expert in recruitment to my management team. This appointment should help ensure Games Workshop has the right processes in place to recruit the people we need when we need them to deliver our growth.

Secondly, I will review our product range. We believe this is long overdue: it is time for a resetting of the ranges. Not tweaking here and there but a top down reassessment. I expect to update you further at the half year. We will aim to continue to deliver outstanding product and customer service, maintain our Group gross margin and continue to improve our Group stock turn. To be absolutely clear I will not be reducing the RRP of our products: they are premium priced for their premium quality. I will, however, be looking to offer a broader range of price points. This is exciting and is for the long term, so I'm not promising when you will see a change. We have already started the brainstorming in our monthly strategic product meetings. It is early days, but I can already foresee some busy times ahead.

Thirdly, we must grow the number of customers we have. We have been underperforming here in recent years, mainly on account of our focus on the value based initiatives of converting our loss making stores to profitable ones and restructuring our sales businesses to take out duplicate and unnecessary costs. My aim is to:

1. Open more of our own stores, mostly in our proven one man store format, in greenfield cities in North America and Continental Europe. Our retail sales managers all have ambitious goals for 2015/16. I am also working closely with our manager for Asia to open more stores in Japan, Singapore and Hong Kong. We do believe we can establish our Hobby business in Asia, but this isn't going to happen overnight. My global goal is to open 30 stores (net) in 2015/16. If we achieve our first initiative it may well be many more.

I'm also proposing a trial in a few high footfall locations, like the one we opened in April 2015 on Tottenham Court Road, London. It is a multi-man format store with an extended (more expensive) shop fit: mainly new till format, mobile tills, better use of merchandising space, new web terminal (to access our broader range) and next day stock delivery to the store for in-store orders. The store has been branded 'Warhammer' instead of 'Games Workshop'. I believe that this store format can support the additional investment as such stores are uniquely placed to service a higher number of customers, often lots of tourists. My aim is to pilot, on a smaller scale, one each in Boston, Sydney, Munich, Paris and Copenhagen in the year ahead. I don't intend to move our overall retail strategy away from one man stores; these will be exceptional stores. The only differences to our one man store format will be the additional rent and property related costs and the additional capital investment. We can flex the staffing levels.

2. Open more stockist trade accounts using our proven stockist strategy. This will be based on our well established terms and conditions, selling independent accounts our best selling products and, where appropriate, the extended range. Our global trade manager has some ambitious plans to grow the net number of trade outlets we have, with a particular focus on North America.

3. Explore new core trade opportunities in toy, craft, book and comic stores. This has always been a great opportunity to extend our reach and help us find new customers. I am working closely with my advisers exploring these types of locations.

Finally, we will be replacing the European ERP system in Nottingham that we have been using for over 15 years: it has come to the end of its useful life. This project will give us the opportunity to drive synergies throughout our back office functions by removing complexity, re-engineering our processes and delivering our services at a lower cost. Following a lengthy and robust process we have now chosen the product and the vendor. As a result our capital investment is likely to be higher over the next few years. The total cost of this project, including internal resources, is estimated to be £6.40 GBP million.

Risks and uncertainties

The board has overall responsibility for ensuring risk is appropriately managed across the Group. The top five risks to the Group are reviewed at each board meeting. The risks are rated as to their business impact and their likelihood of occurring. In addition, the Group has a disaster recovery plan to ensure ongoing operations are maintained in all circumstances. The principle risks identified in 2014/15 are discussed below. These risks are not intended to be an extensive analysis of all risks that may arise but more importantly the ones that would cause business interruption in the year ahead.

ERP change – as discussed above we are changing our core ERP system in the UK. This is a complicated project with the risk of widespread business disruption if it is not implemented well.

Store manager recruitment – this comprises both recruitment of managers for new stores as well as replacing poor performing managers. Retail is our primary method of recruiting new customers and so we need great managers in all our stores.

Supply chain – as discussed above we are currently changing our mail order warehouse system. This is part of an ongoing programme of continuous improvement for these warehouse systems. As with any system change there are risks associated with the transition.

Range management – as discussed above we are reviewing our range to ensure that we are exploring all opportunities. The risk is that we don't fully exploit all the opportunities that are available to us.

Distractions – this is anything else that gets in the way of us delivering our goals.

In my opinion the greatest risk is the same one that we repeat each year, namely, management. So long as we have great people we will be fine. Problems will arise if the board allows egos and private agendas to rule. I will do my utmost to ensure that this does not happen on my watch.

Summary

We have all been working hard this year, made some good progress and honoured our commitment to distribute genuinely surplus cash to our shareholders. That commitment isn't going to change.

Since being appointed CEO, I believe I have hit the ground running and not dropped too many balls. I am delighted that my team has responded well to the new CEO. We are working well together, are looking very lively – and with the launch of Warhammer: Age of Sigmar having some fun too.

We are confident we can achieve the priorities I have set for 2015/16. I will keep you appropriately informed.

The board continues to believe that the prospects for the business are good.

Kevin Rountree

CEO

He doesn't really think I read all that does he?

A re-setting of their entire range? That sounds exciting!

Is this ^ what folks mean by "a wall of text"?

They took quite a beating the last two years

Looks like they are still taking a beating.

The number of one person stores increased which means that they are inflating their profits by letting individuals go.

Plus their revenues are down from last year.

In July 2015, we relaunched Warhammer Fantasy to broad acclaim 'Warhammer: Age of Sigmar'.

Really?

A re-setting of their entire range? That sounds exciting!

Yes it is, since they have already killed WFB and replaced it with not very well received product.

First of all, to the people who are focusing on GW's profits being flat – I would remind you – again – that hundreds of companies profits are flat around the world.

As a matter of fact, thousands of companies around the world are generating NO profit, but are operating in the red or just barely breaking even. The world is TOTALLY leveraged and TOTALLY in debt. We live in a perpetual-growth paradigm that is dependent on ever-increasing borrowing and ever-increasing debt. And we are told that this is sustainable unto infinity. Lol. 2008 anyone? Just a sideshow of what is to come globally.

That being said, the fact that GW made profits the past two years in a world of declining manufacturing, declining investment, declining growth, and declining purchasing power, is HUGELY significant. There are a multitude of companies who would have LOVED to have had "flat profits" over the past two years, would have LOVED to have had profits at all.

I just feel that many of you aren't seeing the big picture here. GW sells miniatures to a niche gaming market. They aren't Microsoft. They don't have the mobility or resources to mass-market a Hasbro-level toy game to Walmart and Target around the world. Love or hate them, put up with or reject their prices, the fact is that GW is a survivor that has consistently made high-quality miniatures spanning three decades. And they have invested huge amounts of money in also making rules and supplements for that massive line of miniatures.

They were able to mass-market things like their online PC games because those things do not involve their miniatures! When you write a program for a game, the game is then stamped out a million at a time in China, and the box is printed in China. The whole thing is made in China at pennies on the dollar, and off it goes to the world.

GW doesn't do that with their miniatures, and WHY SHOULD THEY? Why should GW compromise their own pride, integrity, and product quality by having their miniatures produced in China?

The answer is because they pride themselves on the level of detail of their minis, detail that they control and quality that they control.

GW isn't a toy company. They don't make "army guys"!

They make adult miniatures that appeal to people of all ages.

I mean think about it for a second! With practically everything, and I mean EVERYTHING we buy and use in our lives being made in China – go to Walmart and tell me how many U.S. made products you find. Yeah.

Go online and show me anything you can find that isn't made in a third-world country for pennies. That is why we are able to live this cheap, consumer-goods disposable lifestyle that we do. And it is one of the reasons that GW products are expensive. Because they keep British employees employed and British people's bills paid. The money stays at home.

GW is an exception. A product they design, a product they produce, and a product that they maintain the quality of. That's actually a pretty rare thing in this day and age.

If GW believes they are trying to appeal to young adults they better add a couple dozen or so staffers to manage social networking. That generation does not like shouting down a well nor do they like being left in the dark. A personality needs to represent GW products effectively to build loyalty with that generation or they will loose them fast; perceived as another faceless money grabbing big business ignoring them. Does GW realize their targeted generation does not have the money, patience nor attention span to assemble something with more than 2 parts….much less the ability to sit for any length of time, in a room by themselves to paint it?

How can GW attract a Global market share with just a website and a handful of specialized storefronts displaying/selling their product?

Beats me…..

"Is this ^ what folks mean by "a wall of text"?"

Not really. A proper WoT has no paragraph spacing, no paragraph structure, and frequently no clue what it might be talking about.

GW has (as affirmed in the above report) always relied on the pre-pubescent passing traffic in large, high-rent shopping centres to recruit new customers (and their children). The pounding dance 'music', garish colours, flash, and adolescent squeals of delight emanating from its shops were the irresistible lure to its unsuspecting prey – and for a long time it's been a recruiting strategy that's worked beautifully. Whether it's enough to sustain the company's profitability in a rapidly changing commercial and social environment remains to be seen.

I don't know what the national and international picture is, but locally GW seems to have partially conceded defeat on the off-line recruiting front when it vacated the largest of our shopping centres for a lower rent on-street site a few years ago.

That being said, the fact that GW made profits the past two years

They made a profit because of their price increases and because they got rid of workers thus lowering their costs.

Oh and they got quite a few individuals to buy into the End of Times for WFB and then they killed WFB.

The world is TOTALLY leveraged and TOTALLY in debt.

To whom? Mars? For every debit there's a credit.

Solid performance by GW plc despite the doomsayers in other threads on this site.

@Gennorm

Please don't try to inject thought and common sense into this discussion. It really has no place here.

@Genorm.

I'd disagree on the 'solid performance' judgement. revenue – income, is down again, year on year GW have been selling less and less.

Restructuring is a way to hide this, lower rent stores, less staff etc all are attempting to hide one single fact.

GW are losing sales year on year on year. Unless they do something to acknowledge and address this there will come a crisis point for them at some point in the future.

@GhostBear

Revenue is only slightly down on a currency-neutral view.
£123.10 GBPm v £123.50 GBPm. (.3%) This they attribute to disruptions caused by the restructuring of their retail channel in Europe. Their mail-order sales increased. If the company continues to increase profit, it's hard to see what sort of crisis they would experience.

The market has looked at these numbers and considered it good news, witnessed by the 5% increase in the share price after the report came out.

The trend I'm seeing is that sales have decreased quantitatively speaking. So GW has increased prices to maintain profits selling fewer miniatures. As long as there are enough people willing to pay the prices they charge for their "quality" products, they can happily maintain their current practices.

On the other hand, if they slash prices in an effort to sell at higher volume, they will reach a saturation point where they'll see diminishing profits because the hobby's appeal is limited.

GW has to maximize returns on investment while selling just enough to reach that goal. Selling more for less doesn't necessarily mean higher profitability.

GW doesn't do that with their miniatures, and WHY SHOULD THEY? Why should GW compromise their own pride, integrity, and product quality

I will answer this with…

FINECAST RESIN

GW has to maximize returns on investment while selling just enough to reach that goal. Selling more for less doesn't necessarily mean higher profitability.

Thing is selling less for higher prices doesn't either.

I'd disagree on the 'solid performance' judgement. revenue – income, is down again, year on year GW have been selling less and less.

Restructuring is a way to hide this, lower rent stores, less staff etc all are attempting to hide one single fact.

GW are losing sales year on year on year

So very true.

Now with them killing off one of their biggest games – WFB I do not see their sales increasing over the next year.

What I do expect from them are:

Higher Prices for their Miniatures
More individuals let go
More One Person Stores

If the company continues to increase profit

Thing is the ways they go about increasing profit usually ends up with less sales, which is proven by their report.

"We also announced a major tie up with SEGA to develop a real time strategy game 'Total War: Warhammer'. "

LOL A computer game promoting fluff/product lines GW no longer supports because it was replaced with AoS.

Bail out while you can, SEGA! Bail out!

Not unless it's "Total War: Warhammer AoS" with Stormcast Eternals.

Thank God that it isn't.

That was an informative read. I hope things continue to grow for them.

They are not growing.

When a company decides to cut out a big portion of their product line they are shrinking.

When a company decides to go to just one person stores they are shrinking.

Killing off the background of its former core system, the foundation on which the system was build for 30+ years, looks like an act of desperation.

Or inspiration. Or evolution.

No desperation.

No matter how much GW harps about AoS it is not going over as well as expected.

Just from the many posts here and on the many other sites there are a lot of upset individuals.

Now me I have been hating GW for over 15 years but now they will have lots more individuals who will be hating them.

Well …
It looks like you can get the new starter set for £75.00 GBP
Which is a tad beyond my personal choice of price point
But if one of my children wanted to get involved then I'd probably pay it
Having said that it looks like you can get it for under £60.00 GBP on the WWW
So nigh on 50 figures plus rules etc … £1.00 GBP a man …
Doesn't sound that outrageous …
A friend's played the download rules and said its a good fun game …
Some of the figures look like they will appeal to folk [there is a post on TMP with a picture of some archers that don't really appeal to me personally – but as always YMMV]
So I suspect, as always GW know their market and AoS will prove to be a success for them
Time will no doubt tell

I haven't bought any AoS. But it has sold *really* well at our local gaming stores. I'm not sure its going to be the failure that the Internet financial gurus are predicting.

desperation

They killed a product line that had run it's course.

Warhammer was dead.

It was an archaic system firmly rooted in 80's design philosophy with a bajillion retail skus.

To quote GW, a single 40k release outsold the entire line of Warhammer. No one was buying, no one was playing. Why keep it going?

No one was buying because GW raised the prices to a level that very few individuals could afford to buy.

This is on GW and no one else.

Oddly enough, I stopped playing WArhammer because 8th was crap. I still occasionally bought models, though.

Anyways, GW stock paid a large dividend and then their stock prices went up, so they've done something right. As much as that makes you gnash your teeth and wail, Mithmee.

GW stock paid a large dividend and then their stock prices went up, so they've done something right. As much as that makes you gnash your teeth and wail, Mithmee.

investor.games-workshop.com

Games Workshop Group PLC announces that the Board has today declared a dividend of 20 pence per share.

Oh this is around $0.31 USD in US dollars.

Now if you think that is a huge dividend good for you.

Remember last year there were no dividends.

As a comparison one can easily run a Google search and see that $0.31 USD is a higher dividend than Intel or GE, and only slightly lower than Hasbro.

LOL!

Now we know why Mithmee hates GW so much… he sold his GW shares and invested in Intel and GE… and Games Workshop are outperforming both!

Now if you think that is a huge dividend good for you.

It is a huge dividend for a small company, so good for all the investors.

If you look historically
link

you'll see that it's also in the top 5 dividends GW has ever paid out to it's investors.

You can't assess an investment on just the dividend. For a meaningful comparison between equities you need the P/E Ratios and the Yields.

"Games Workshop yields a very enticing 6.3%. Furthermore, it trades on a P/E ratio of just 13.9, which indicates that a rerating potential is on the cards."

link

That the CEO assigned a marketing person to answer a TMP post (granted, many TMP posts -- positive and negative -- over the years) shows that he's paying attention…and should be applauded. As a freelancer who covers the retail industry (Retail Performance Monitor if you are interested, among other things), you hardly ever get that sort of business thought provided. Yes, I read through it all.

Whether or not you agree with him…well, that's up to you. Some do. Some don't. I don't agree with the trend of software companies charging annual licensing fees for internet-only code or killing off your access, but that's me.

make the best fantasy miniatures in the world and sell them globally at a profit

Like GW or hate 'em, they got the first part right, and, as their financial show, the second part, too. For the record, I do *not* own GW stock or sell GW products.

As for GW, companies refresh products. Imagine all the clothes boutiques or department store sections without a refresh of fashion every quarter. Autos change with every model year (as well as upgrades in between). Menus in restaurants change. Boardgame companies bring out new boardgames. Some of this may be good. Some bad. Some of it may be good, but ineptly done. But bringing out new items is how companies continue.

Whether that alienates the base or not is another question.

Disclosure: My gaming group never gamed fantasy Warhammer, one guy has 40K but I can't remember the last time we had a game. We game Epic scale 40K about once per year using version 2 rules because we have so many of the models. We even play a couple of the GW boardgames once every year or two. I have Warhammer Quest and extra figures that I used for a Halloween game. I couldn't even tell you where a GW retailer is located. We're just not the primary audience and we don't spend $9 USD-$10 a figure.

In our case, with the switch from v2 to v3 (square bases to strips), we continued to buy some of the new Epic vehicle models, but absolutely ignored the infantry.

The v3 rules were a mess, scattered in several booklets, and nobody, but nobody, liked the rules change that turned all the nuances of each unit into a blob of generic fire points. It was as if it was an alpha version of the rules without playtesting.

Apparently, shortly thereafter, they discontinued the line, perhaps because sales dropped.

Reported sales fell by 3.5% to £119.10 GBP GBP million

reported sales show declines in retail (-4.6%) and trade (-6.3%). Mail order growth was 3.9%.

Disappointing, surely, and makes me wonder about unit sales of a product that demands extra effort (i.e. painting) to make it appealing. However, it also makes sense in that closing stores are part of a restructuring process. One clothing retail chain found that half the stores made 3/4 of the chain's profits…so, the other half of the stores were closed.

That possibly puts more pressure, especially considering the target audience, on social media and other electronic forms of gaming. Notice the highlight on the licensing deals -- that may be a good sign for the continued intellectual property value of GW.

From a recent article from a UK investment site;

"Of course, other stocks also hold considerable appeal and, while GlaxoSmithKline is an obvious choice, there are strong returns on offer elsewhere. For example, miniature figurine and games manufacturer Games Workshop (LSE: GAW) has seen its share price rise by over 5% yesterday after releasing impressive results for its most recent financial year.

In fact, Games Workshop delivered an increase in pretax profit, with it rising from £12.00 GBPm in the previous year to over £16.00 GBPm last year. That's an excellent gain when you consider that a weak Euro had a negative impact on the company's sales and, with consumer confidence in the single-currency region also coming under pressure, it was a double blow for the Warhammer games producer. Still, dividends are on the up and, at its present price of 557p, Games Workshop yields a very enticing 6.3%. Furthermore, it trades on a P/E ratio of just 13.9, which indicates that a rerating potential is on the cards."

Well, well…that hardly seems like a company ready to slip beneath the waves. Sometimes it helps to get your news from multiple sources so that you have a true and complete picture of a given topic or issue. But if you don't, well – ahem.

Intelligent and informed comment. That's more like it.