Games Workshop first half report :

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**reds8n**

GAMES WORKSHOP GROUP PLC

5 January 2012

HALF-YEARLY REPORT

Games Workshop Group PLC ("Games Workshop" or the "Group") announces its half-yearly results for the six months to 27 November 2011.

Highlights:
· Revenue at £62.7m (2010: £60.0m)
· Revenue at constant currency* at £62.0m (2010: £60.0m)
· Gross margin at 76.8% (2010: 76.7%)
· Operating profit pre-royalty income at £6.5m (2010: £5.8m)
· Royalty income at £2.6m (2010: £1.0m)
· Operating profit at £9.1m (2010: £6.8m)
· Pre-tax profit at £9.5m (2010: £6.8m)
· Earnings per share of 22.1p (2010: 15.6p)
· Net funds of £15.9m (2010: £11.5m)
· Dividend per share of 29p

Mark Wells, CEO of Games Workshop, said:

"An encouraging first half performance in which we have delivered growth in sales, profit and return on capital from our core business. Good progress has been made on our strategic initiatives; these are beginning to show through in results from our Hobby centres. We also received a significant royalty payment which has been recognised in the first half. In line with our policy of distributing truly surplus cash, we are pleased to report that the board is declaring a dividend of 29p per share."

http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=11079038

Share price +£.40 thus far this AM. http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary.html?fourWayKey=GB0003718474GBGBXSSQ3

29p per share ain't bad in this economic climate, all things considered.

Royalty payments are indeed a big help here, the revenue increase is a nice addition here too methinks.

... what armies does this cover ? Necrons and Ogres are the only ones that leap to mind immediately ?

**SagesStone**

Maybe the Grey Knights as well?

Also looking at the royalty part maybe also some of the funds from Space Marine unless I'm remembering the release wrong.

**LunaHound**

Dark Eldars?

Aha i like the Operating Profit

Net funds not as high as i imagined however.......

Ebay played a huge part i bet

**reds8n**

...

... Dreadfleet .. ?

**LunaHound**

reds8n wrote:...

... Dreadfleet .. ?

That I dont believe -_-

**SagesStone**

I suppose they all contributed in a way really, to the internet it likely sold poorly but the internet isn't everyone.

The hype around Finecast could have also worked, putting aside all the moaning about it, not everyone would check out about it. I don't doubt there are people out there who get their news solely from the GW store and couldn't care less any other way.

I mentioned Space Marine as the royalty seems to have made an alright jump, coming out in september this would cover the initial sales.

**Surtur**

Can't wait to see the break down of year to year. Kroot does those right?

**Howard A Treesong**

reds8n wrote:Earnings per share of 22.1p (2010: 15.6p)

· Dividend per share of 29p

How does this work without depleting your funds? You pay out more per share than you took? Or have I misunderstood?

**LunaHound**

Howard A Treesong wrote:
reds8n wrote:Earnings per share of 22.1p (2010: 15.6p)

· Dividend per share of 29p

How does this work without depleting your funds? You pay out more per share than you took? Or have I misunderstood?

If im not mistaken, thats for reinvesting back. Whether its sustained is another case so....

Price Hike incoming 0.o ( that or earnings from video game / ultramarine movie? ) royalties

**Avakael**

It's worth noting that if

· Revenue at £62.7m (2010: £60.0m)
· Revenue at constant currency* at £62.0m (2010: £60.0m)

^Revenue has remained practically unchanged between the previous two years despite the price increases we've had, the price increases were probably warranted.

**LunaHound**

Avakael wrote:It's worth noting that if

· Revenue at £62.7m (2010: £60.0m)
· Revenue at constant currency* at £62.0m (2010: £60.0m)

^Revenue has remained practically unchanged between the previous two years despite the price increases we've had, the price increases were probably warranted.

Or one can say

+20% price vs -20% buying volume.

The 2% increase we'll go with inflation xD

Automatically Appended Next Post:

Surtur wrote:Can't wait to see the break down of year to year. Kroot does those right?

I'll do it then

http://investor.games-workshop.com/wp-content/uploads/2011/07/2011-Full-Year-Report-and-Accounts-full-25-July.pdf

http://investor.games-workshop.com/wp-content/uploads/2012/01/2011-12-Press-statement.pdf

**UNCLEBADTOUCH**

So despite price increases they made less profit in the uk and continental Europe than the previous six months, good work.

**Grimtuff**

So, for all of us not versed in business doublespeak and all that malarkey, is this a good or bad report for GW? How much "spin" have they put on it this time?

**LunaHound**

Grimtuff wrote:So, for all of us not versed in business doublespeak and all that malarkey, is this a good or bad report for GW? How much "spin" have they put on it this time?

Good and Bad

The Good: For the share holders that only care about crunching CURRENT numbers, they are doing.... not too good, but OK. ( this part instil confidence in share holders to NOT FOLD )

the numbers only tell half the story though.

The Bad.

e.g why despite the price increase, the profit didn't increase accordingly.

Its late so cant read through the pages but.... Im mostly curious in Australia , Canada ( where we were always hit the hardest + embargo )

**Howard A Treesong**

UNCLEBADTOUCH wrote:So despite price increases they made less profit in the uk and continental Europe than the previous six months, good work.

Profit is up isn't it? To £6.5m from £5.8m and they've taken more from royalties.

But revenue is static.

So unless I'm mistaken, their increased profits are due to more royalties and the cost saving elsewhere. If revenue is the same after a price increase they are shifting less stock overall. To still make more profit they have decreased costs elsewhere. Finecast, or just their approach to one man stores and shutting some places down?

**Pacific**

You would expect profits in RoW to go up surely, as those customers who are still buying GW there would be forced to purchase from that retail arm of GW, while it might have caused a minor knock to to UK sales?

And I believe that Space Marine sold quite well, GW should have made millions from the royalties on that.

**UNCLEBADTOUCH**

Gross profit in those two regions has actually fallen, Asia and its expanding markets have seen good growth in profit and some other regions have pretty much stagnated.

To me that seems like units sold in Europe and Uk must have fallen, otherwise like for like sales with price increases should have led to growth unless operating costs in those two regions increased more than there price rises.

Automatically Appended Next Post:

Pacific wrote:You would expect profits in RoW to go up surely, as those customers who are still buying GW there would be forced to purchase from that retail arm of GW, while it might have caused a minor knock to to UK sales?

And I believe that Space Marine sold quite well, GW should have made millions from the royalties on that.

Even GW state how they have made a surprisingly large amount from licensing, this also makes up a much bigger chunk of the profit growth than there actual sales. Sales alone only generated an extra £700k profit, licensing added over £2million to the operating profit.

Automatically Appended Next Post:
Another interesting aside is they have actually increased there profit margins so any price flux has obviously taken care of any fluctuation in cost of sales overall.

**Kilkrazy**

This report does not cover Christmas. Presumably a lot of stuff will have been sold in December and not show up until the end of year report.

**LunaHound**

I actually prefer if it doesn't cover christmas for the reason of more accurate averages of the other months

**Wolfstan**

So does that mean that without the likes of the Space Marine game their profit margin would of been down compared to the previous report?

**darrkespur**

Australia revenue fell slightly from £5.0M in six months to £4.9M. Continental Europe fell from £17.5M to £17.0M. Everywhere else rose. The 'other businesses' column including Black Library and Forgeworld is up by nearly a million. This part of the business also has an operating profit of £2.5M, which is higher than any of the other parts of the business even though they mostly have higher revenue streams.

**UNCLEBADTOUCH**

So in reality black library, forgeworld and the licensing part of GW that are nothing to do with its retail arm is doing well and propping the company up.

The retail arm, not so much.

Well I think we know what needs work don't we

**LunaHound**

UNCLEBADTOUCH wrote:So in reality black library, forgeworld and the licensing part of GW that are nothing to do with its retail arm is doing well and propping the company up.

The retail arm, not so much.

Well I think we know what needs work don't we

Another price adjustment on the retail sir?

Or raise the none retail sectors just so the retail doesn't seem as lonely and expensive? xD

**SagesStone**

Surely the retail arm just needs to raise its prices to make more money.

Wolfstan wrote:So does that mean that without the likes of the Space Marine game their profit margin would of been down compared to the previous report?

Not by much looking at it.

· Royalty income at £2.6m (2010: £1.0m)

However it is entirely unknown if the game persuaded anyone into the tabletop thus making the game a contributor to general sales. As with the date it would likely cover the first few weeks of the game's sale, the next report may show higher royalties again depending on the spread of the game's sales. It is also not the sole contributor to the royalties income, just thats where it'd go.

**Delephont**

Howard A Treesong wrote:
reds8n wrote:Earnings per share of 22.1p (2010: 15.6p)

· Dividend per share of 29p

How does this work without depleting your funds? You pay out more per share than you took? Or have I misunderstood?

If the current earnings per share is 22.1p and GW is giving its investors an increase above this price, it's likely that the increase is achieved from the retained earnings from previous financial years earnings. A company will very rarely (read never) give its share holders the full share earnings each year (dividend), as those earnings are required as capaital to reinvest into the business (simply put), normally, under postive trading conditions, they will release a steady increase year on year back to the shareholders and retain a large portion of the earnings for "lean" years. This way, even if, in this case, GW had a bad year, they could still release an increased return (dividend) to the investors bolstered from previous years earnings thereby ensuring that the investors always garner a profit from dealing with GW.

**LunaHound**

Thats what i said!

**StraightSilver**

I'm just amazed that a company can maintain a gross profit margin of over 75% in the current climate.

To me this means that they have either massively stripped down their operating costs, or their prices are just higher than they need to be.

I would suspect that the efficiencys in it's retail arm are actually having a negative impact, and if they were prepared to cut their margins down and invest some of this capital into their stores they may actually generate more sales.

Looking at the figures it does seem that year on year like for like growth is at least constant, most retailers are seeing a drop this year, but then most retailers maintain an average of 45-50% gross margin, although I accept that as GW also do a lot of online sales that over 50% is understandable, but over 75% is still very high.

**LunaHound**

You know what will be scary with efficiency?

Imagine, if GW took into account to price the kits high enough so they don't have to sell high volume to cover
transport / shipping costs.
replacing the expensive plastic (injection?) machines. well w/e it is its expensive supposedly.

Well they probably do, since even i considered it xD

**Howard A Treesong**

Delephont wrote:
Howard A Treesong wrote:
reds8n wrote:Earnings per share of 22.1p (2010: 15.6p)

· Dividend per share of 29p

How does this work without depleting your funds? You pay out more per share than you took? Or have I misunderstood?

If the current earnings per share is 22.1p and GW is giving its investors an increase above this price, it's likely that the increase is achieved from the retained earnings from previous financial years earnings. A company will very rarely (read never) give its share holders the full share earnings each year (dividend), as those earnings are required as capaital to reinvest into the business (simply put), normally, under postive trading conditions, they will release a steady increase year on year back to the shareholders and retain a large portion of the earnings for "lean" years. This way, even if, in this case, GW had a bad year, they could still release an increased return (dividend) to the investors bolstered from previous years earnings thereby ensuring that the investors always garner a profit from dealing with GW.

Right.

Just don't forget who owns a lot of these shares.

**SagesStone**

So they just price them high enough so they don't have to make many? I can see the Ferrari comparison now.