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 ?

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.

Dark Eldars?

Aha i like the Operating Profit

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

Ebay played a huge part i bet

...

... Dreadfleet .. ?

reds8n wrote:...

... Dreadfleet .. ?

That I dont believe -_-

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.

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

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?

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

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.

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

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

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?

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 )

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?

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.

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.

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.

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

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?

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.

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

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

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.

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.

Thats what i said!

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.

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

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.

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

n0t_u wrote:So they just price them high enough so they don't have to make many? I can see the Ferrari comparison now.

Seems like it :3

I'm mildly amused by the undertone I'm seeing that total sales dropped primarily because of a rebellion of gamers against Games Workshop increasing their prices, and not perhaps by the fact that if you live in the EU or North America, chances are you're presently struggling to pay the bills in the first place.

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

That, however, has me scratching my head.

Sales dropping would be a combination rather than exclusively one way or the other, simply the amount complaining alone wouldn't make enough of an impact leaving.

Avakael wrote:I'm mildly amused by the undertone I'm seeing that total sales dropped primarily because of a rebellion of gamers against Games Workshop increasing their prices, and not perhaps by the fact that if you live in the EU or North America, chances are you're presently struggling to pay the bills in the first place.

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

That, however, has me scratching my head.

Im amused that you thought that, but not the case.

Its not any successful rebellion ( not even related ) , but rather the comedy that GW keep raising prices despite the situation you just described.

The audacity ^-^

So, around about a 3% dip in revenue from Europe and Austrailia combined? Doesn't seem too bad in the current climate.

How much further up can they push gross margin?

Is this the first time GW has raised prices and seen static revenue? Could be an indication that next time would reduce revenue, if so.

LunaHound wrote:

Avakael wrote:I'm mildly amused by the undertone I'm seeing that total sales dropped primarily because of a rebellion of gamers against Games Workshop increasing their prices, and not perhaps by the fact that if you live in the EU or North America, chances are you're presently struggling to pay the bills in the first place.

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

That, however, has me scratching my head.

Im amused that you thought that, but not the case.

Its not any successful rebellion ( not even related ) , but rather the comedy that GW keep raising prices despite the situation you just described.

The audacity ^-^

Well, seems to be working for them.

o.0 really? the stats doesnt say its working

LunaHound wrote:o.0 really? the stats doesnt say its working

· Revenue at £62.7m (2010: £60.0m)

Any gain, even one that small in this global economic environment = "working".

Avakael wrote:I'm mildly amused by the undertone I'm seeing that total sales dropped primarily because of a rebellion of gamers against Games Workshop increasing their prices, and not perhaps by the fact that if you live in the EU or North America, chances are you're presently struggling to pay the bills in the first place.

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

That, however, has me scratching my head.

GW themselves have said their business is not affected by the general state of the economy. I somewhat doubt that.

However, GW sales volumes (number of boxes shifted) appear to have been dropping for years, while revenue has been sustained by higher prices.

LunaHound wrote:o.0 really? the stats doesnt say its working

I think they were joking.

Mr. Burning wrote:So, around about a 3% dip in revenue from Europe and Austrailia combined? Doesn't seem too bad in the current climate.

How much further up can they push gross margin?

Economy in Australia is actually doing alright due to exports to countries such as China. I'm not surprised the embargo didn't have a huge impact anyway as likely the amount it would effect would simply be too small. It'd have no effect on the majority they prefer to buy in store.

Not sure why they lump them together though, it'd make more sense to separate Australia or at least use the Australasia region.

darrkespur wrote:Is this the first time GW has raised prices and seen static revenue? Could be an indication that next time would reduce revenue, if so.

They have been fairly static for a few years now. Nothing major since the LOTR bubble anyway. 6th ed this year should see GW pretty for another 12 months at least.

Should sales truly decline then future growth would possibly come outide of core retail. I could imagine that licencing could be ramped up. I'm sure a Fisher Price My First Daemonette would see a major sales upsurge!

Avakael wrote:

LunaHound wrote:o.0 really? the stats doesnt say its working

· Revenue at £62.7m (2010: £60.0m)

Any gain, even one that small in this global economic environment = "working".

That, I cannot agree with you, but that opens a whole new complicated debate

n0t_u wrote:Economy in Australia is actually doing alright due to exports to countries such as China. I'm not surprised the embargo didn't have a huge impact anyway as likely the amount it would effect would simply be too small. It'd have no effect on the majority they prefer to buy in store.

Not sure why they lump them together though, it'd make more sense to separate Australia or at least use the Australasia region.

Australian customers probably have similar enough buying patterns to Europe to lump them together- also note that Australia and New Zealand aren't exactly a large market, so giving them their own mention is kind of unnecessary.

They lumped Aussies and Europe together because... / drumrolls

MAELSTROM and WAYLAND!











j/k

LunaHound wrote:

Avakael wrote:

LunaHound wrote:o.0 really? the stats doesnt say its working

· Revenue at £62.7m (2010: £60.0m)

Any gain, even one that small in this global economic environment = "working".

That, I cannot agree with you, but that opens a whole new complicated debate

Looking from an institutional investors point of view it's pretty good going. The majority shareholder must be thrilled!

Just made more sense to have an overview geographically of sales to me.

LunaHound wrote:

Avakael wrote:

LunaHound wrote:o.0 really? the stats doesnt say its working

· Revenue at £62.7m (2010: £60.0m)

Any gain, even one that small in this global economic environment = "working".

That, I cannot agree with you, but that opens a whole new complicated debate

Well, if it's a lower gain in profit in comparison to normal, then yes, it's not as good as normal, but I haven't seen these statistics to deduce either way. And while it's also fairly easy to conclude (whether correctly or incorrectly) that Games Workshop is only trying to maintain short term profit by raising prices, and in the process accept the risk of potentially harming long term interests by driving notable numbers of customers to other gaming systems, they're still successfully maintaining the short term profit. I shall give Games Workshop's due, by giving them my best expression of general indifference.

Christmas boosts the sales of most retail outlets quite substantially.

If there is even a small increase in these 6 months, in the wake of the finecast fiasco and price rises, before Christmas figures are taken into consideration I think GW will be on for a good one next half year.

More store closures on the horizon?

To be fair, I always thought there were an awful lot of GW stores.

Can someone help me understand this?

GW upped it's prices for some reason last year.

Now they're saying they have "truly surplus cash" so are paying out large dividends to the shareholders.

I'm now wondering why they had to put the price up at all.

Yeah on the face of it you would have to say that it looks like a pretty good 6months for GW, but the real proof I think will be in the years results. Certainly Mr Wells is putting a very positive light on it.

Only 4-5 months of the embargo atm and including Christmas could push it up or down. I'm interested to see what way it goes.

Allot of high street chains have reported good Christmas and new yer sales by those were with actual "sales" whether GW will see the same without remains to be seen.

Kilkrazy wrote:However, GW sales volumes (number of boxes shifted) appear to have been dropping for years, while revenue has been sustained by higher prices.

We often moot this theory, but it doesn't take into account any shift in buying habits. I've been getting stuff from Dark Sphere recently. The money is going to GW in the long run but it constitutes a drop in revenue (because I bought it at a cheaper cost). However they have still "made the sale".

obsidianaura wrote:Can someone help me understand this?

GW upped it's prices for some reason last year.

Now they're saying they have "truly surplus cash" so are paying out large dividends to the shareholders.

I'm now wondering why they had to put the price up at all.

It states that prices were raised (plus efficiencies) to combat increased costs in the release.

It also note a large paymenfrom royalties (renewal of the THQ licence) which has boosted cash.

Dividedends are paid to shareholders because they own the company and have rights to a Share of the profits. This is factored in to the accounts. The cash figure s slightly different and can represent a number of things.

My guess is that pay rises, transport and property costs have increased requiring the rise. Inflation is still high in the UK so I would expect another one come July.

Yey! I get £12.76 from GW for the 44 shares I own!!

Flashman wrote:

Kilkrazy wrote:However, GW sales volumes (number of boxes shifted) appear to have been dropping for years, while revenue has been sustained by higher prices.

We often moot this theory, but it doesn't take into account any shift in buying habits. I've been getting stuff from Dark Sphere recently. The money is going to GW in the long run but it constitutes a drop in revenue (because I bought it at a cheaper cost). However they have still "made the sale".

Also the move from smaller blister packs towards larger unit boxes and multi unit boxes.

Mr. Burning wrote:

darrkespur wrote:Is this the first time GW has raised prices and seen static revenue? Could be an indication that next time would reduce revenue, if so.

They have been fairly static for a few years now. Nothing major since the LOTR bubble anyway. 6th ed this year should see GW pretty for another 12 months at least.

I assume we will see a range of Hobbit stuff appear next christmas to re-inflate the LOTR bubble. That is pretty much the reason I think they have kept LOTR going for the last year or so.

Howard A Treesong wrote:I assume we will see a range of Hobbit stuff appear next christmas to re-inflate the LOTR bubble. That is pretty much the reason I think they have kept LOTR going for the last year or so.

Yes, I'm afraid I will be buying any Company of Dwarfs set that comes out

Haha me too, I love the LoTR Dwarves and have a collection of them even though I have never used them in a game

notprop wrote:Yeah on the face of it you would have to say that it looks like a pretty good 6months for GW, but the real proof I think will be in the years results. Certainly Mr Wells is putting a very positive light on it.

Only 4-5 months of the embargo atm and including Christmas could push it up or down. I'm interested to see what way it goes.

Allot of high street chains have reported good Christmas and new yer sales by those were with actual "sales" whether GW will see the same without remains to be seen.

That's the sticking point. Most, if not all retailers had a sale of some sorts, GW doesn't do sales, so it will be interesting to see if this did affect them.

notprop wrote:

Flashman wrote:

Kilkrazy wrote:However, GW sales volumes (number of boxes shifted) appear to have been dropping for years, while revenue has been sustained by higher prices.

We often moot this theory, but it doesn't take into account any shift in buying habits. I've been getting stuff from Dark Sphere recently. The money is going to GW in the long run but it constitutes a drop in revenue (because I bought it at a cheaper cost). However they have still "made the sale".

Also the move from smaller blister packs towards larger unit boxes and multi unit boxes.

It would not help GW to sell more boxes through discounters while maintaining an increasingly irrelevant retail chain of their own, to sustain revenue at the same level.

It also contradicts the experience of the various anti-indi crackdowns, most recently the attempt to prevent sales out of "region".

It seems reasonable to assume that GW's unit price to distributors is increased at more or less the same as the retail price in their own shops. If so, then the discounted retail price will more or less follow, thus in the long term, there wouldn't be an increasing shift from buying at GW retail to buying at discounted retail.

The sales/revenue trend can be followed back to 2,000.

The report does paint a rosy picture, but that is what it is supposed to do. I expect that if you look deeper, it is not so bright. We know that they have been cutting costs with such innovations as one man stores and finecast. Yet their operating expenses and cost of sales are going up. Maybe they are spending lots of money designing new minis.

Just remember there legal costs re:the chapterhouse case hasn't come out of that yet, as a guess that's probably going to run to a few million

spaceelf wrote:The report does paint a rosy picture, but that is what it is supposed to do. I expect that if you look deeper, it is not so bright. We know that they have been cutting costs with such innovations as one man stores and finecast. Yet their operating expenses and cost of sales are going up. Maybe they are spending lots of money designing new minis.

I'm guessing that the change to Failcost would have, incured on some extra expenses in aquiring the production capability for it. So that would explain the increased operating expenses during this period.

spaceelf wrote:..................... Maybe they are spending lots of money designing new minis.

IIRC their last yearly report did denote an increase in R&D and the design studio.

UNCLEBADTOUCH wrote:Just remember there legal costs re:the chapterhouse case hasn't come out of that yet, as a guess that's probably going to run to a few million

At what point to they actually have to declare these costs? Could look a bit embarrassing throwing millions at squashing a gnat, which is all Chapterhouse is really.

Don't Chapterhouse pay the legal fees if they are 'squashed'?

Medium of Death wrote:Don't Chapterhouse pay the legal fees if they are 'squashed'?

Probably not. It is highly unlikely that a small company like Chapterhouse has access to even a tiny fraction of the funds available to cover the costs that GW is spending in pursuing this lawsuit. Even if GW does win, and the courts award GW full compensation for their legal fees, Chapterhouse could just file for bankruptcy and not end up paying much of anything, just whatever they could get after liquidating their tiny assets.

Let me see if i understood: GW keep bleeding, but the wounds are small so the blood loss is small too?

Medium of Death wrote:Don't Chapterhouse pay the legal fees if they are 'squashed'?

We don't have a "loser pays" system in the USA. Usually, the only time you get money is if you're awarded damages.

LunaHound wrote:

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 )

Looking at the initial post,

Gross margin at 76.8% (2010: 76.7%)

This would tell me that the increase in price kept the gross margin consistant with prior year. If the Gross Margin went up substantially, your argument that the price increase was only there to increase their profit was correct. The Gross Margin is calculated as follows GM = Revenues less COGS. Revenues are the sales figures and the COGS are the costs to actually make the product (resin, pewter, scultor/art fees, labor for the sculptor, the casting process, for the rules/armybooks - the printing costs, etc). This does not include over head costs such as management, R&D, retail arm, etc. The fact that the GM increased 0.1% from prior year means the price increase is due to the manufacturing costs. A price increase does not mean instant profit or an increase in profit. It just means they passed the increase in materials on to the customer.


Automatically Appended Next Post:

Breotan wrote:

Medium of Death wrote:Don't Chapterhouse pay the legal fees if they are 'squashed'?

We don't have a "loser pays" system in the USA. Usually, the only time you get money is if you're awarded damages.

Usually the only time you are required to pay the legal fees for someone else is a divorce and that is because the funds are all coming from the same "pot" and one person is required to absorb them as part of their settlement.


Automatically Appended Next Post:

Howard A Treesong wrote:

UNCLEBADTOUCH wrote:Just remember there legal costs re:the chapterhouse case hasn't come out of that yet, as a guess that's probably going to run to a few million

At what point to they actually have to declare these costs? Could look a bit embarrassing throwing millions at squashing a gnat, which is all Chapterhouse is really.

Not sure about UK GAAP but unless they are expecting damages that will offset their legal fees, they should be recognizing these expenses as incurred. Unless you're seeing a large increase in the Company's prepaid expenses/other assets which should be itemized or broken out if they relate to a legal preceding.

Breotan wrote:

Medium of Death wrote:Don't Chapterhouse pay the legal fees if they are 'squashed'?

We don't have a "loser pays" system in the USA. Usually, the only time you get money is if you're awarded damages.

And additionally, as I hinted at in my previious post, just because a court awards you damages doesn't mean that you will ever see a single penny of it. Getting a judgment from the court is only the beginning of the process; collecting on that judgment can take much longer.

As an example, I saw a credit report for a customer just last week who had two judgments totalling $5K+ in her public records that have gone uncollected since before 2006. If the winner of the suit cannot find your assets, then they cannot attach them. It's even harder to collect when the losing party is a corporation, because the obligations of the corporation do not pass onto the individuals who run it (barring criminal activity like Ponzi schemes and such).

Nice to see I'll be getting another dividend. I honestly do not get all the doom and gloom from people, my share continues to rise, overall, and now they're back to paying dividends. From an investor standing, they're a healthy company with a reasonable balance sheet and have been a solid investment for me.

I have to say they're doing much better than my Citibank stock right now.

Howard A Treesong wrote:

UNCLEBADTOUCH wrote:Just remember there legal costs re:the chapterhouse case hasn't come out of that yet, as a guess that's probably going to run to a few million

At what point to they actually have to declare these costs? Could look a bit embarrassing throwing millions at squashing a gnat, which is all Chapterhouse is really.

The bigger picture with Chapterhouse is that if the 'gnat' gets away with it then someone will do it on a larger scale and GW will loose their IP. At the same time the experience gained from fighting this would be a good lever when sending out the C&D letters next time round.

I am very intrigued by these figures as they relate to the Finecast release and the price rises in Australia and the shipping clampdown in Europe. It doesn't seem to relate to the amount of noise on the internet about GW's policies.

I'm curious, if GW dropped its retail division (I.E. all the GW Hobby Centers, etc.) perhaps keeping open only the larger battlebunkers and a handful of stores in larger metropolitan areas dotted across the world, what would be the impact on revenues, and what would be the impact on profits... and how soon would that translate to a price drop across the product range :3

Bloodwin wrote:

Howard A Treesong wrote:

UNCLEBADTOUCH wrote:Just remember there legal costs re:the chapterhouse case hasn't come out of that yet, as a guess that's probably going to run to a few million

At what point to they actually have to declare these costs? Could look a bit embarrassing throwing millions at squashing a gnat, which is all Chapterhouse is really.

Not sure about UK GAAP but unless they are expecting damages that will offset their legal fees, they should be recognizing these expenses as incurred. Unless you're seeing a large increase in the Company's prepaid expenses/other assets which should be itemized or broken out if they relate to a legal preceding.

Actually, under US GAAP, successful defence of a copyright is not an expense, but increases the asset value of the copyright which is amoritized over the length of the copyright (I believe 31 years?). If GW is reasonably convinced that they would win the suit, then it would be acceptable to apply the legal fees to increase the asset value of copyright. Likely they have done that. As an auditor, I'd slap them on that since I don't think it's reasonable that they'll win Unsuccessful defence should be charged as incurred. I believe UK GAAP is similar in this regards, but don't quote me on that.

Regardless, this is something that should be included in the notes to the financial statements.

In other words, we won't see the effects of the legal fees on the income statements until the case is settled.

chaos0xomega wrote:I'm curious, if GW dropped its retail division... how soon would that translate to a price drop across the product range

About the same time Satan goes shopping for a ice pick so he can feed his goldfish.

chaos0xomega wrote:I'm curious, if GW dropped its retail division (I.E. all the GW Hobby Centers, etc.) perhaps keeping open only the larger battlebunkers and a handful of stores in larger metropolitan areas dotted across the world, what would be the impact on revenues, and what would be the impact on profits... and how soon would that translate to a price drop across the product range :3

Why would you expect a price drop?

Mr. Burning wrote:

chaos0xomega wrote:I'm curious, if GW dropped its retail division (I.E. all the GW Hobby Centers, etc.) perhaps keeping open only the larger battlebunkers and a handful of stores in larger metropolitan areas dotted across the world, what would be the impact on revenues, and what would be the impact on profits... and how soon would that translate to a price drop across the product range :3

Why would you expect a price drop?

Think he may mean a price freeze, or with inflation a future drop in prices.

Basically this report says that GW is putting prices up to compensate for the increase in production costs, ok.

This relates pretty much directly to finecast I would most probably think. Not that resin is expensive, no it is cheaper than metal. The cost of that production is all the extra QA that GW has had to put in place to ensure the product meet the required standard and personally I think they are doing a great job of this (sarcasm), non of the finecast models I have seen from GW have had any defects in them (mega sarcasm).

What is more of an eye opener is the retail arm that is struggle. They are taking a loss on this and trying to keep stores open for the time being. This is no doubt because there is a big cost in the closing then re-opening of stores. The hiring, training then firing then re-hiring and training is expensive. They would probably only really consider closing stores if they didn't see a future in that store, that it could probably never make a profit. By doing this games workshop are basically gambling that retail will pick up in the short to mid term, not a bad assumption if you ask me.

The number of financial and strategic experts in this thread is amazing!

Leenus wrote:The number of financial and strategic experts in this thread is amazing!

Being an expert in financial strategy is a prerequisite for joining Dakka. Didn't you take the test?

Flashman, when did that lady get added to your avatar?

Has she always been there?

There's an avatar under that lady?

Flashman wrote:

Leenus wrote:The number of financial and strategic experts in this thread is amazing!

Being an expert in financial strategy is a prerequisite for joining Dakka. Didn't you take the test?

We had better send the memo around again, Flashman. Can't have people working here at dakka that haven't taken the competency test. Good timing seen as the dakka office Chirstmas party has just been and gone.

Does this mean there's about to be another price hike? There always seems to be one of those after these reports. . .


Automatically Appended Next Post:

Medium of Death wrote:Flashman, when did that lady get added to your avatar?

Has she always been there?

It's a Frank Frazetta painting entitled, "Flashman on the Charge." I believe.

puma713 wrote:

Medium of Death wrote:Flashman, when did that lady get added to your avatar?

Has she always been there?

It's a Frank Frazetta painting entitled, "Flashman on the Charge." I believe.

Correct, the lady is part of the painting and has been there since I've been using it as my Avatar

Flashman wrote:

Leenus wrote:The number of financial and strategic experts in this thread is amazing!

Being an expert in financial strategy is a prerequisite for joining Dakka. Didn't you take the test?

Ha! Test??? Was a sneaky little DE and got in through the back door.

Thanks for the everyone's ideas. As a business owner it's good to see how other people think about this and what it might mean for us laters.

puma713 wrote:Does this mean there's about to be another price hike? There always seems to be one of those after these reports. . .

There is one price rise a year and it happens every June. It's been like that for several years now.

Flashman wrote:

puma713 wrote:

Medium of Death wrote:Flashman, when did that lady get added to your avatar?

Has she always been there?

It's a Frank Frazetta painting entitled, "Flashman on the Charge." I believe.

Correct, the lady is part of the painting and has been there since I've been using it as my Avatar

OHOH! Please stay where you are, the Dakka morals and clothing enforcement team will be with you shortly.


Automatically Appended Next Post:

boyd wrote:and the COGS are the costs to actually make the product (resin, pewter, scultor/art fees, labor for the sculptor, the casting process, for the rules/armybooks - the printing costs, etc). This does not include over head costs such as management, R&D, retail arm, etc.

Would these costs include any new machinery that needed to be bought to implement the Failcrap production methods? Because if they did, then those are 1 time investments that wouldn't be reflected in future reports.

Flashman wrote:

puma713 wrote:

Medium of Death wrote:Flashman, when did that lady get added to your avatar?

Has she always been there?

It's a Frank Frazetta painting entitled, "Flashman on the Charge." I believe.

Correct, the lady is part of the painting and has been there since I've been using it as my Avatar

Mind Blown. First time I've noticed... yet I was always aware of the dashing man with the glorious moustache... wait a minute...

Have to take a closer look tomorrow.
First impression: Operating profit 9.1m £. Paid dividend: 9.1m £ (Kirby 554.772£, Wells 38.924£).

Oh, and Chapterhouse doesn't have to pay any fees, the lawyers work pro bono (that is for no money).

PhantomViper wrote:Would these costs include any new machinery that needed to be bought to implement the Failcrap production methods? Because if they did, then those are 1 time investments that wouldn't be reflected in future reports.

Machinery is typically depreciated over several years (The number of years is based on an estimate of the life of the machinery). So no, it is not a one-time charge that you only see on one year's reports.

skyth wrote:

PhantomViper wrote:Would these costs include any new machinery that needed to be bought to implement the Failcrap production methods? Because if they did, then those are 1 time investments that wouldn't be reflected in future reports.

Machinery is typically depreciated over several years (The number of years is based on an estimate of the life of the machinery). So no, it is not a one-time charge that you only see on one year's reports.

Football teams do the same thing when they buy players.

As I see it, GW is still very much in the neutral gear they have been for a number of years - keep the profit margin, and thus the dividend payment, the same, despite falling sales. I feel they could increase turnover substantially by moving to a policy of aiming for fanbase growth through sales, smaller game modes (more support for kill team and other small size games in 6th, for instance) and a price freeze, and that the additional demand would make up for the lack of a price rise, but that's obviously not their plan. I don't think they are doing badly, but I do think they are behaving too conservatively and it's allowing other companies the opportunity to catch up and steal market share. If another game system breaks out and starts pulling in the non-gamer audience that GW are failing to attract these days, then I think their market position could change rather rapidly.

Doom! Gloom!

For some reason my stock share has risen 100p in the last 1/2 year.

LoL

Avakael wrote:

LunaHound wrote:

Avakael wrote:I'm mildly amused by the undertone I'm seeing that total sales dropped primarily because of a rebellion of gamers against Games Workshop increasing their prices, and not perhaps by the fact that if you live in the EU or North America, chances are you're presently struggling to pay the bills in the first place.

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

That, however, has me scratching my head.

Im amused that you thought that, but not the case.

Its not any successful rebellion ( not even related ) , but rather the comedy that GW keep raising prices despite the situation you just described.

The audacity ^-^

Well, seems to be working for them.

Lol im no business major and even i know this statement is as slowed as it could possibly get.

agnosto wrote:Doom! Gloom!

For some reason my stock share has risen 100p in the last 1/2 year.

LoL

As shown in recent years the stock market has no correlation to reality whatsoever.

Korraz wrote:

agnosto wrote:Doom! Gloom!

For some reason my stock share has risen 100p in the last 1/2 year.

LoL

As shown in recent years the stock market has no correlation to reality whatsoever.

Shhh.... you might hurt the feelings of all those people that went to college to get a gamblers degree.


The amount of people trying to deny:

Price hike + decrease in sales + decrease in units sold + disparity betwin price hike and sales revenue = Shrinking consumer base.

Is amazing.

I'm making money, that's all I care about. I love having a hobby that nearly pays for itself because I bought stock in the company...

n0t_u wrote: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.

Royalty payments... how about from the PC and console games.. oh and the Ultramarines movie.

Silly question but how does one go about buying shares?

They only thing I can make from all these numbers is that I'm not looking forward to June again...

Daston wrote:Silly question but how does one go about buying shares?

I bought mine through an online stock broker; I'm sure you have similar services in he U.K. I'd advise you to wait though as the stock will probably dip after issuance of dividends as is usually the case and you can get a better deal then.

GW's going to do fine financially... with The Hobbit and 6th edition 40k looming, I can't see a change in that. Other game systems have started to do well, but that doesn't mean GW isn't, too.

Not worth stressing about it, really... they'll make business decisions just like any other company, hopefully it'll coincide with what's good for gamers. If not, there are other options... but I don't see this report (or any recent one) pointing towards a decline in GW, even with the lower volume in sales.

Honestly, I don't know why everything GW makes isn't in plastic (although I'm sure someone will tell me). I love their plastic models, the detail is great, and are easy to convert. They also are usually perfect.

Hopefully GW doesn't raise prices to go with 6th Ed. Or maybe they will, in the hopes that with increased sales due to the new edition + the higher prices they can squeeze more money out of us. The only problem is that the nanosecond I have 3k points worth of Necrons, I'm done, unless something amazing happens.

McNinja wrote:Honestly, I don't know why everything GW makes isn't in plastic (although I'm sure someone will tell me). I love their plastic models, the detail is great, and are easy to convert. They also are usually perfect.

Because tooling a plastic mold costs a gak load more than making a rubber metal/resin mold. It's simply not cost effective making them for everything. Lower selling units simply won't make the money back on the mold.

-Loki- wrote:

McNinja wrote:Honestly, I don't know why everything GW makes isn't in plastic (although I'm sure someone will tell me). I love their plastic models, the detail is great, and are easy to convert. They also are usually perfect.

Because tooling a plastic mold costs a gak load more than making a rubber metal/resin mold. It's simply not cost effective making them for everything. Lower selling units simply won't make the money back on the mold.

But if they put in that "gakload" as reinvested revenue they could have made it back by now.

-Loki- wrote:

McNinja wrote:Honestly, I don't know why everything GW makes isn't in plastic (although I'm sure someone will tell me). I love their plastic models, the detail is great, and are easy to convert. They also are usually perfect.

Because tooling a plastic mold costs a gak load more than making a rubber metal/resin mold. It's simply not cost effective making them for everything. Lower selling units simply won't make the money back on the mold.

Aren't they reusable though? If they can make enough models with it to cover the cost of the mold, then they should at the very least be breaking even, and probably make a fair bit more than the mold was worth.

Also, if Resin is that much cheaper, why not use that for everything, rather than some things? And for that matter, why is the price of Finecast models so much higher if they're cheaper to produce? More QA people?

As an aside, I like how Infinity models, which are metal, are about $12 a pop for an regular individual, while Finecast models are about $16.

McNinja wrote:Aren't they reusable though? If they can make enough models with it to cover the cost of the mold, then they should at the very least be breaking even, and probably make a fair bit more than the mold was worth.

YEs, they are reuseable, and that's where the decision comes in - do they expect the model to sell enough to make back the money on the mold in whatever timeframe they need it to (say, a year, for example). If they simply do not see the model selling enough - like Tyranid elites where people have, at most, 9 of the one model in an army, but very likely only 2 or 3 - they're just not financially viable to tool a plastic mold for.

McNinja wrote:As an aside, I like how Infinity models, which are metal, are about $12 a pop for an regular individual, while Finecast models are about $16.

GW pricing. Though Corvus Belli aren't saints in this area - having bought some Haqqislam models the other night, I paid $12 for a doctor and a fiday, but $22 for a panzerfaust ghulam. Which had about the same about of metal in it as the fiday. They do overpricing as well.

UNCLEBADTOUCH wrote: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.

It may just be that it's late and I'm really tired. But could the fact UK sales were down, sinceUK based web retailers like Wayland games and Malestorm can no longer ship their GW product over seas?

@.@

That explains the release of Apocalypse.

GW needs to (internally) go through why sales are declining, and figure out what they can do to stop that. I don't know if its the increase in prices, the lack of any sort of advertising/marketing outside of word-of-mouth, the terrible grip they have on their IP and who can sell what where, or the fact that wargaming simply isn't as easy to get into as, say videogames. $60 for a game you could potentially spend dozens of hours on, or $300 for a game that requires dozens of hours before you can even play? I'm not saying GW needs to start catering to everyone, but the small community of people that play tabletop games like 40k isn't getting much bigger, its the new people who are just getting started GW really relies upon.

There are plenty of things GW could do to increase its presence without spending a terrible amount of money, but they are being way too conservative with their money to even consider doing anything.

skyth wrote:

PhantomViper wrote:Would these costs include any new machinery that needed to be bought to implement the Failcrap production methods? Because if they did, then those are 1 time investments that wouldn't be reflected in future reports.

Machinery is typically depreciated over several years (The number of years is based on an estimate of the life of the machinery). So no, it is not a one-time charge that you only see on one year's reports.

To expand on that...

What happens is that cash is spent to acquire a piece of machinery which is capital equipment worth whatever was paid for it.

In other words the overall worth of the company does not change. A cash balance is replace by a capital balance. No goods have been produced, and in theory the machine can be sold for whatever it cost, so there isn't any cost of goods at this point. (If you are a retail business, in other words, you are selling the machines you buy, then things are different.)

GW is a manufacturer, though. The machine is run, and gets depreciated over several years, according to rules that vary by the company and machine type. For example in my company, computer equipment costing over £1,000 is a capital expense and gets depreciated to zero over three years (even if the computer is used for more than three years).

There are various ways to calculate depreciation, one of which is the straight line method. That means, at the end of year one of three, the machine loses 1/3rd of its value. The company has then lost capital worth £333.33. OTOH you aim to have used the machine to make goods worth more than £333.33. That is what business is all about.

Once you start running your machine, you have to absorb its fixed cost into your production costs. There are various ways of doing this. It is unusual to absorb it all at once because that causes the accounts to show major fluctuations. What is more likely is that the accountant will absorb the depreciation expense per year, divided by the number of goods made with that machine. Let's say the machine makes 300 models, then the fixed cost per model would be £333.33 / 300 = £1.11. That goes into your cost of goods, along with costs for electricity, materials, labour, maintenance and facilities.

As companies are assumed to be indefinitely ongoing concerns, they need to renew and replace their machinery on a regular basis, so there shouldn't be any major fluctuations from one year to the next except if there is a large expansion of plant such as expanding a factory.

Daston wrote:Silly question but how does one go about buying shares?

The following is genuine advice and hopefully will be heeded as such:

(Answer for long term interest) If you have to ask that question, you would do very well to become informed through channels that are NOT wargame forums.

(answer for short term interest) That, and if you have to ask that question, you really should stay away from the stock market.

Normally your bank can do it for you.

They will charge a fee.

McNinja wrote:That explains the release of Apocalypse.

GW needs to (internally) go through why sales are declining, and figure out what they can do to stop that. I don't know if its the increase in prices, the lack of any sort of advertising/marketing outside of word-of-mouth, the terrible grip they have on their IP and who can sell what where, or the fact that wargaming simply isn't as easy to get into as, say videogames. $60 for a game you could potentially spend dozens of hours on, or $300 for a game that requires dozens of hours before you can even play? I'm not saying GW needs to start catering to everyone, but the small community of people that play tabletop games like 40k isn't getting much bigger, its the new people who are just getting started GW really relies upon.

There are plenty of things GW could do to increase its presence without spending a terrible amount of money, but they are being way too conservative with their money to even consider doing anything.

I agree with you entirely.

The problem is, there is no cheaper entry level option to act as a hook to get people into the hobby. It's almost like they have no confidence at all in their ability to keep people buying games, more like "we'll get those 12 year olds addicted for one christmas, they'll spend $400 and then we will never see them again."

Yes, you can buy small model count games (Necromunda, BB etc.) from Specialist games, but I'm talking about games for the entry level here that are readily available to the wide-eyed kids stepping in to the store for the first time. The Space Hulks, Heroquests, yes even BB when they were all sold in store. Even things like Space Crusade, sold in toy shops for parents who would usually never step into a GW. How many of us here, especially the gamers 25+, were brought into the hobby, were first addicted, by playing one of those games? And by comparison, how many were brought in by immediately buying a 1500pt army for 40k or WFB?

There are only so many times that cutting staff and reducing overheads can be used to give a short-term profit. I worry that absolutely nothing is being done for the long term viability of Games Workshop, of truly hooking in customers beyond short term splurges of money that they know are unsustainable. And don't get me started on Space Marine, the opportunities for pulling people into GW to play games, and the things that could have been done, would be a 1st year project for a marketing undergraduate. Wargaming is already niche, and the company seems committed to ensuring it remains so.

Pacific wrote:

McNinja wrote:That explains the release of Apocalypse.

GW needs to (internally) go through why sales are declining, and figure out what they can do to stop that. I don't know if its the increase in prices, the lack of any sort of advertising/marketing outside of word-of-mouth, the terrible grip they have on their IP and who can sell what where, or the fact that wargaming simply isn't as easy to get into as, say videogames. $60 for a game you could potentially spend dozens of hours on, or $300 for a game that requires dozens of hours before you can even play? I'm not saying GW needs to start catering to everyone, but the small community of people that play tabletop games like 40k isn't getting much bigger, its the new people who are just getting started GW really relies upon.

There are plenty of things GW could do to increase its presence without spending a terrible amount of money, but they are being way too conservative with their money to even consider doing anything.

I agree with you entirely.

The problem is, there is no cheaper entry level option to act as a hook to get people into the hobby. It's almost like they have no confidence at all in their ability to keep people buying games, more like "we'll get those 12 year olds addicted for one christmas, they'll spend $400 and then we will never see them again."

Yes, you can buy small model count games (Necromunda, BB etc.) from Specialist games, but I'm talking about games for the entry level here that are readily available to the wide-eyed kids stepping in to the store for the first time. The Space Hulks, Heroquests, yes even BB when they were all sold in store. Even things like Space Crusade, sold in toy shops for parents who would usually never step into a GW. How many of us here, especially the gamers 25+, were brought into the hobby, were first addicted, by playing one of those games? And by comparison, how many were brought in by immediately buying a 1500pt army for 40k or WFB?

There are only so many times that cutting staff and reducing overheads can be used to give a short-term profit. I worry that absolutely nothing is being done for the long term viability of Games Workshop, of truly hooking in customers beyond short term splurges of money that they know are unsustainable. And don't get me started on Space Marine, the opportunities for pulling people into GW to play games, and the things that could have been done, would be a 1st year project for a marketing undergraduate. Wargaming is already niche, and the company seems committed to ensuring it remains so.

+1 on this.

As I have commented before we are talking about the decline of their customer base.

I've posted this before. The article was posted at URL on 11-02-11 concerning US summer sales.
http://www.icv2.com/articles/news/21399.html

I will post the important statement concerning sales:

Games Workshop, the leader in the non-collectible miniatures category, had a rough summer, with quality issues on its new Finecast resin line, spotty supply, and shorter solicitation cycles all affecting sales. Meanwhile, Privateer continued steps to shore up its backlist availability, and coupled with GW’s problems, was picking up customers.

I'm waiting for the next quarter of sales data and when found will be posted on Dakka of course.

People have already hit on the crux of the problem. They are losing their customer base. They are making up the loss by increases in prices and streamlining all revenue sources. This looks good short term. As far as fixing the problem I doubt it can be. Their business model is shifting more to Controlled licensing IP to other companies.
FW and BL are doing well but these are their subsidiaries, to me, better than the retail arm of the core company.

They will continue to make profit, which looks good to their share holders until something drastically gives.