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Osbad wrote:http://www.iii.co.uk/research/LSE:GAW/news/item/1347707

...a stong pound meaning overseas sales are worth less than they were last year. Also they blame restructuring (still!) and the rebuilding of Warhammer World.

This problem is one that most companies alleviate by having strong foreign subsidiaries, GW's restructuring made them even more of British company with a international presence as opposed to an International company based out of Britain. Other companies structured the second way would have structured it such that GW-US would borrow as a loan what ever profits it was expected to send to GW-UK, in that way GW-UK owns a debt with a value plus interest which it won't owe taxes on until collected and GW-US can wait until its more advantageous from a currency exchange perspective to pay GW-UK.

Riquende wrote:Huh. Sales in the new online shop were broadly comparable to last year. I guess the £4m makeover helped stave off decline in that sector.
Good for them.

This is pretty disastrous when you consider that they've continued to shift more of their product offering as available only from their store.

 aka_mythos wrote:

Osbad wrote:http://www.iii.co.uk/research/LSE:GAW/news/item/1347707

...a stong pound meaning overseas sales are worth less than they were last year. Also they blame restructuring (still!) and the rebuilding of Warhammer World.

This problem is one that most companies alleviate by having strong foreign subsidiaries, GW's restructuring made them even more of British company with a international presence as opposed to an International company based out of Britain. Other companies structured the second way would have structured it such that GW-US would borrow as a loan what ever profits it was expected to send to GW-UK, in that way GW-UK owns a debt with a value plus interest which it won't owe taxes on until collected and GW-US can wait until its more advantageous from a currency exchange perspective to pay GW-UK.

And particularly nimble companies would take advantage of lower manufacturing costs by having the facilities in the US produce product for countries where it is advantageous to sell from there, while the UK would handle those which are best from there...

 Sean_OBrien wrote:

 Torga_DW wrote:
Okay, so projecting their revenue and profit to be identical in the 2nd half of the year (in other words, take the figures we just got and x2), this is what i come up with.

Historically, GW's second half year results have been 7.7% higher than the first half year results (1995 till present) while the past 5 years have averaged 4%.

Their expenses are largely flat (have been for quite awhile) so the year end profits are likely to be in the £7-10 million range with another exceptional cost (Warhammer World renovation this year...).

Accepting that the 2nd half will be 7.7% higher, the results still look to be worse than 2014 which frankly is a low point for the last 5 years. They're back to pre-2009 in terms of revenue, and given the constant price rises that means less volume being shifted. The profits actually look decent at least (in that they're not falling with revenue).

Also, the charts should just say revenue & profit, i forgot to remove the sales part from the spreadsheet before i made the graphs.

Given that last year's half year report was quite a shocker, and they didn't make it back up in the second half, the fact that this year's half-way report is even worse must be a cause for concern.

 notprop wrote:

 Toofast wrote:
It's not looking good. How do you release so many new products in a year at exorbitant prices and still lose that much revenue? The exchange rate doesn't even come close to accounting for this kind of drop in revenue and profits. Of course GW would never tell the truth and say "Profit and revenue are down because we lost customers and have made no attempt to figure out why or get them back."

Over 50% of GWs turnover was generated in foreign markets, exchanges rates really are very important. Ergo why it is mentioned in the report most years.

The last report also identified North America and Austrailia as having been challenging within the period. So they do mention the negatives albeit wrapped up in management BS, you just have to read beyond the chairmans preamble.

Speaking of the exchange rates - a few years ago I noticed that GW consistently valued the British pound above its market value (when looking at their web-store prices). In essence I paid more if I bought in my local currency compared to paying in British pounds (and letting my local bank-branch handle the conversion using day-to-day rates).

I contacted GW about this issue. I was told that GW purposefully set the exchange rates in such a way (artificially high) so that they WOULDN'T BE AFFECTED BY CHANGES IN EXCHANGE-RATES.

So GW can take a long walk off a short pier. Lame excuses are lame, GW.

 Aerethan wrote:

Spoiler:

jcress410 wrote:

TerrorLegion wrote:
Taking a quick look at this report as well as their annual reports, GW's reports always looks like like it was written by a second year B-school student and it just gives me the general feeling that the people running GW doesn't know how to run a publicly traded company let alone a niche retail company.

If this is true there should be an activist who can step in and fix it.

But, the company would need to be undervalued by at least half for an activist investor to take the risk.

Magic has been doing fine since wizards was taken over. Maybe the best we can hope for is a corporate buy out.

We've been waiting for that buyout for nearly 10 years now. No one wants to buy this sinking ship for how much the sellers would want for it. I don't doubt that any time shares are sold, Kirby and associates are likely the ones buying it.

I think it would be easier for another company to see GW go Bankrupt and then buy the IP for a pretty penny.

 Jehan-reznor wrote:
I think it would be easier for another company to see GW go Bankrupt and then buy the IP for a pretty penny.

Easier, but more profitable the long run? Letting GW go bankrupt would mean a huge amount of disruption as stores close, products go out of stock, etc. And that gives GW's competition a perfect opportunity to grab even more of GW's current market share, raising the question of whether any customers would be left by the time the new company gets everything back to normal. And that's on top of whatever damage GW does to the IP in their last desperate attempts to milk the cash cow and avoid bankruptcy for a few more months. Letting things get to that point only really makes sense if whoever buys the IP just wants to make some quick space marine iphone games at the lowest possible cost. A buyer that wants to keep GW's existing business mostly intact would be better off doing it at a point where share prices are down but there's still a reasonably intact company to take over.

I feel like when GW shoots itself in the foot, it uses the shotgun instead of a pistol.

I can't wait to see the end of the year results. And one can only dream about what Peregrine just said, happens.

The quicker they fold the faster they'll be sold.

 Kilkrazy wrote:
Given that last year's half year report was quite a shocker, and they didn't make it back up in the second half, the fact that this year's half-way report is even worse must be a cause for concern.

Perhaps, but if it is no one at GW is acknowledging it.

 Peregrine wrote:

 Jehan-reznor wrote:
I think it would be easier for another company to see GW go Bankrupt and then buy the IP for a pretty penny.

Easier, but more profitable the long run? Letting GW go bankrupt would mean a huge amount of disruption as stores close, products go out of stock, etc. And that gives GW's competition a perfect opportunity to grab even more of GW's current market share, raising the question of whether any customers would be left by the time the new company gets everything back to normal. And that's on top of whatever damage GW does to the IP in their last desperate attempts to milk the cash cow and avoid bankruptcy for a few more months. Letting things get to that point only really makes sense if whoever buys the IP just wants to make some quick space marine iphone games at the lowest possible cost. A buyer that wants to keep GW's existing business mostly intact would be better off doing it at a point where share prices are down but there's still a reasonably intact company to take over.

I don't know get rid of all tainted work environment and start anew? Or a competitor will buy the IP and/or business for its machines and let GW IP die a slow death? What is best for us or for the GW business may not happen.

 Stormwall wrote:
I feel like when GW shoots itself in the foot, it uses the shotgun instead of a pistol.

I like to think that they are using a pistol, but after shooting themselves in the foot didn't work they tried the knee and are now pointed at something a lot more valuable just a little higher.

 jonolikespie wrote:

 Stormwall wrote:
I feel like when GW shoots itself in the foot, it uses the shotgun instead of a pistol.

I like to think that they are using a pistol, but after shooting themselves in the foot didn't work they tried the knee and are now pointed at something a lot more valuable just a little higher.

Their Femoral Artery?

 Crazy_Carnifex wrote:

 jonolikespie wrote:

 Stormwall wrote:
I feel like when GW shoots itself in the foot, it uses the shotgun instead of a pistol.

I like to think that they are using a pistol, but after shooting themselves in the foot didn't work they tried the knee and are now pointed at something a lot more valuable just a little higher.

Their Femoral Artery?

You think now its something more substantial? Could be.

Right now, if things hold true to the previous years, GW should have gross sales of £60.4MM - £61.5MM in H2 of year and £116.9 - £118MM total for year.

This wipes out 7 years of revenue growth (excluding 2014). 2009 turnover was £125.7MM while 2008 was £110.3MM.

However, since GW likes to talk in constant currency - 2008 turnover of £110.3MM in 2015 rates would be £133.5MM. So GW is now about to can about ten years of revenue increase.

Lastly, considering they had COS increase (against a revenue decline), GW is looking like they will cross the critical threshold of when costs can no longer keep up with revenue declines in 2H15 or 1H16. That's when things will get real interesting. But that is a new CEOs worry because it will happen on his watch rather than on Kirby's.

GW can cut costs further if it comes to that: they have attempted to make their operations leaner, meaning they still have roughly same scale of operation but with less people and infrastructure. However, if their sales keep dropping, then there is probably no point maintaining some of their operations, they can scale back production, etc.
It's of course downward spiral, but one cannot make a linear projection "when the costs graph meets the revenue graph -> then kaputt" because one will affect the other.

Backfire wrote:
GW can cut costs further if it comes to that: they have attempted to make their operations leaner, meaning they still have roughly same scale of operation but with less people and infrastructure. However, if their sales keep dropping, then there is probably no point maintaining some of their operations, they can scale back production, etc.
It's of course downward spiral, but one cannot make a linear projection "when the costs graph meets the revenue graph -> then kaputt" because one will affect the other.

But what about GW's long list of lease obligations?

They may be able to off-load their leases.

Maybe that's the reason they get all of their B&M stores in crappy, backwater strip malls?

I am under the impression that in order to get great rates on many of their UK locations, they accepted long leases with few or no break clauses, so they'd have to sub-let to take the costs off their books - though obviously if they close the location at least they save on utilities and staff costs.

We don't know, obviously.

The one thing we do know is that GW has been in the UK high street retail market place for 40 years.

Unless they have forgotten everything they ever learned about how to handle property, they will be getting the best deals they possibly can.

 Accolade wrote:
Maybe that's the reason they get all of their B&M stores in crappy, backwater strip malls?

I'm pretty sure that's nothing to do with lease lengths but because major shopping centers/malls won't allow stores to sit their closed 2 days a week.

I remember a couple years ago when they prided themselves on not doing that, and only chose prominent high-street locations for their stores.

In the past I'd railed on about how I feel the brick and mortar stores are bleeding GW money, but lately I've been wondering if the issue lies more with Warhammer Fantasy being a failing production line.

With the over catering to veteran players it created a game that was hard for new players to buy into, and ultimately vets had to buy little, if anything, to stay on top of things. I almost thing the lost money has been going into producing things for that line that aren't selling which could be leading to the reboot of Fantasy into something that is both more legally protectable, as well as accessible to more players. Plus if it hooks the vets right it might get them buying up whole new armies again (I know a few locally who'd be up for that if the game is decent).

It's just conjecture of course, but when locally I heard that 40k is outselling Fantasy 5.5:1 it makes me pause and wonder.

If true I don't know if their approach to updating Fantasy (which might help trim a lot of the fat they've been loath to get rid of that just doesn't work for the game, not to mention doesn't sell) will be enough to change things, but then again if it can get WFB back in the top 5 wargames then it might help turn the trend GW has been facing.

At least that's my guess on this whole thing.

If you are right it is ironic that some of the changes of the past five years in Fantasy are being applied to 40K as well, and we have been seeing much wailing and gnashing of teeth by erstwhile 40K players, and GW's sales have been falling year on year for a couple of years now.

For my money it was the introduction of £30 hardback codexes that did it.

I agree Kilkrazy, $50 codecii was a complete no-go for me. I have all the codecii for my armies up through 5th and the rulebook for 6th, but when the army books went from a manageable and reasonable $30 to $50 and hardback I had a big "nope" moment.

Could somebody please explain the half-year report from the business point of view in more detail?

For some strange reason, every time GW produces a bad financial report, I go out and buy a pot of paint from one of their stores. Doing my bit

 Riquende wrote:
Huh. Sales in the new online shop were broadly comparable to last year. I guess the £4m makeover helped stave off decline in that sector.

Good for them.

Anyone who has access to internet shops and still buys directly from GW does so on purpose. That would be the die-hard supporters because everything else you can get from other sources cheaper, even wthout much research.

I think the amount of stuff restricted to their own site is a help too.