Friday, January 6, 2012

Games Workshop moves up a level

Games Workshop has been a mainstay of my personal gaming.  I've been a huge fan going all the way back to 1977 with the first publication of White Dwarf.   Many thousands of dollars later (I'm afraid to check how much I really spent on their products over the decades, continue to have a love/hate relationship as so many gamers have with GW:  price increases, new versions of the game, the fluctuation of new products, etc.  I'm sure there is more.   I have a business background, and expected the worse when GW went public in 1994.  Typically, when companies go public, their products lose a bit of the 'personal flavor' they once had in exchange for meeting the needs of its shareholders who are interested more in the short-term gains.

It would be interesting to see the demographics of the players since the 1980s compared to today's players.  I can surmise, from my personal experiences of managing game shops and the players in the area that the players have shifted in their interests, age, and income.

I saw a number of posts on this on various groups and thought I would post this on our blog.   The following article was published on January 5th and thought I would lend some commentary to it.   I'd love to hear other thoughts from other folks.

Games Workshop moves up a levelBy John Harrington
Thu 05 Jan 2012
[Games Workshop moves up a level] LONDON
(SHARECAST) - Fantasy and science fiction tabletop war gaming firm Games
Workshop saw growth in sales, profit and return on capital from its core
business in the first half of its financial year.

The Warhammer 40k miniatures gaming firm saw revenue rise to £62.7m
in the six months to November 27th, 2011, from £60m at the interim
stage the year before, although the sales total was boosted by £0.7m
of gains from favourable exchange rate movements.

Profit before tax surged to £9.1m from £6.8m the year before,
while earnings per share climbed to 22.1p from 15.6p.

This is a heck of a profit for a game company, particularly in an industry that has a direct correlation on the health of the economy.  Gaming itself typically increases when the economy drops, however new sales of games typically decreases (just as other hobby purchases).  This is similar to more people wtching TV rather than going out to dinner, but fewer people typically buy new TVs to do so.  With the collapse of the Euro and the poor health of the US Economy, one would think that the exchange rates would also have an even heavier weight against the British company.  It will be interesting to see how this would play out if the economies were healthy.

The company has only recently resumed dividend payments, but has done so
with a vengeance; the interim dividend of 29p is not fully covered by
earnings per share, but with net funds of £15.9m, up from £11.5m a
year earlier, the company feels able to return cash to shareholders.
Unfortunately, this is the crux of it.  Although dividends are increasing, so are the price points for their products.  A recent purchase of a pricey Dread Fleet of $115 is a large pill to swallow.  The other thing I find interesting is the increase in Warhammer 40K figures.  Certainly there have been new releases, but 40K has not been a big seller for us.  In fact, checking with GMT, their 40K sales were down significantly for the past 2 years.  It might be just a US slump in the intrest of 40K.

The UK, North America, Asia, Emerging Markets and Capital Cities plus
its two specialist businesses, Forge World and Black Library, all
delivered constant currency sales growth. Continental Europe was down
slightly in constant currency with strong performances from Italy and
the Netherlands unable to offset declines elsewhere.

Increase sales in Italy does not surprise me.  Italy has been slow on the up-take of GW products and over the past couple of years Italy has had some really significant increase in the number of game clubs and conventions.  On the downside, Italy's economy is about as good as Greece's economy and dare I say a similar attitude on entitlements from the government.

Gross margin was maintained despite increased costs. Other than the rise
in raw materials, however, the management sounded sanguine about the
impact of the "real world" on the fantasy milieu in which the group

Bla bla bla....  this is corporate-speak. 

"As a niche business, we, in general terms, neither benefit nor suffer
from macro economic factors as our current results show. The Hobby is
healthy and the challenge is to stay focused on what needs to be done to
service it efficiently and cost effectively," the company statement

Well, it seems healthier than I thought it would be.  I just don't get it myself.  Let's just hope that GW doesn't experience a 'Jordache moment'...those of you from the 80's know what I'm talking about!  Go look in the discount stores and see if you can still find any Jordache jeans.

Shares in Games Workshop shot up 40p to 490p following the release of
the results.\

As of this post, Games Workshop stock is up over 5% since yesterday's article selling at 515.00 GBp. 

What are your thoughts?


1 comment:

  1. GW has been scraping the insides of my wallet for many years. The best thing they have done is come out with their very inexpensive Army should still be $40 less in my opinion though just to get more people into the hobby.