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Quite apologetic in some regards about how fat and lazy they have become. Interesting, but it is about time they faced up to  it. figures aren't a good trend. Balance shows big increase in debt again. Retained earnings has taken a massive hit this year - not a good thing.

Sales drops are mainly in US $1.5mil and continental europe $3mill - with UK up $0.6mill. Funny thing is US maintains it is Europe dragging GW down.

Here is the hyperlink:-

http://investor.games-workshop.com/latest_results/Results2007/downloads/GW_year_end_07.pdf

Highlights: A loss of over 2 million pounds this year and continued borrowing of debt to operate.

Sales are flat. Growth in Australia is cancelled out by declines in Europe. (Actually down overall and the lowest in 5 years, flat is charitable.)

32 stores are slated to be closed.

The Canadian warehouse is being closed and Canadian sales are being routed through Memphis. (I hope this doesn't mean I'll have to start paying customs duties on GW orders.)

From the Chairman's Preamble (Tom Kirby):



I think more than just a management re-organization might be required here.

whilst I agree with fat and lazy, they missed out arrogance - which to me is the biggest reason they are not doing well. Took them two years to realize? Apparently earning 350k GBP dumbs the ol' senses a bit.

Just a sec - is it me or are the headline figures comparing a 53wk year for 2007 with a 52 week year for 2006. Sales for the 53wk amounted to GBP1.7 million see pg 9.

So doesn't this make sales for 2007 on a 52 week basis GBP109.8mill, which is a drop of GBP5.4million

Even the sector analysis is 53 v's 52. So the sales and loss for a 52 week comparable for 2007 are worse.

I thought you couldn't do this and that the comparables had to be apples with apples. I must be wrong as it has gone through audit - boy, shows I haven't prepared a full set of accounts in many years.

Phew! Not as nasty as I thought it was going to be, but not too bad.

I do find the preamble to be enormously hilarious though.

A full gambit of "Hindsight is 20/20"  but he does go on to say, and repeat what he has stated earlier this year regarding forgetting the basic skills required to run the biz.

I guess listening to their customers isnt as important as it is to borrow nearly 21 million dollars this year to keep the company rolling.

Make a good product, get rewarded for it.
Forget about the customer and make shoddy product (i.e. rules that needs faqs, faqs never being made until its nearly too late, etc.) and you loose a ton of money and have to borrow exponentially more.

Interesting none the less.

[edit]

I really find the 53rd week to be something to give shareholders hope so the stock doesnt drop tomorrow morning (which I think it invariably will).
I mean, what the hell sold during the last week in may to make sales go so high? I know they didnt release anything to make it jump, so where is this "mythical" $3,000,000 coming from?
The blood angel white dwarf release? I find this highly unlikely.
Late dark angels sales? Again, even less likely than blood angels sales.
School getting out and the kids buying stuff for summer? A possibility, the best I can come up with at the moment.

I just dont get it.

Hmmmm.
Wonder what the response will be? More of the same, but more aggressive? Or a re-evaluation?

(The above figures are not discounted for the effect of the 53 week years - see the excellent post above for an explanation)

There is no excuse for the above performance.  GW have had 3 years to fix the problem and have had to take drastic action.  They are betting a lot on continuing underlying support for their product.  Support that they claim is out there and that us "moaners" tend to feel is diminishing.  But that's business.

Kirby has gone up in my estimation though (mind you he could hardly go down).  He has taken it on the chin and finally come out and stated that it is no good blaming the rest of the world, GW's problems are GW's own fault and no one else's!

He admits they were "fat and lazy" and that they haven't been competing effectively.  Good to read vindication of stuff I have been saying for years (and been villified for saying by the pro-GW lobby).  Also good to hear that he agrees with me that Computer Games aren't a new threat and so it is inadequate (as he did earlier in the year) to claim it is somehow "their" fault that GW is struggling.

So now it is a matter of record.  If Kirby, the CEO says it is true, it *must* be true (and not just the ranting opinions of a disabused former fan) that GW were FAT and LAZY for the last three years.  Lets hear it again...: FAT and LAZY!!

Ooh, that sounds good.

Where he seems to be still going wrong (in my view) is in his belief that "selling" and "cost cutting" alone will do the trick.  No mention of actually improving the product quality (rules playability) any or offering better value for money to the customer (high prices).  While those problems remain unaddressed, I don't see much of a turnaround coming any time soon.  Turnover will likely continue to diminish.

Another small item of interest is that the main swathe of shop closures happened in the US, and NOT in Northern Europe as was claimed for a while.  Glimmers of hope there if that is follow-through of promises to work _with_ and not _against_ FLGSs.

Another matter is that their gearing ratio has virtually doubled from 13% to 25% of total net assets.  That is a significant increase in debt and will hit shareholder value if they don't start earning some profits soon in order to pay it off.

As for the short term affect on share price; I don't believe there will be one.  These results are no worse than predicted at the time of the interim results in January.  Shares were discounted at that point.  These results don't indicate any further discount is required.  As such, they offer no "news" regarding stuff that will impact company value.

Posted By Hellfury on 07/31/2007 12:14 AM
I really find the 53rd week to be something to give shareholders hope so the stock doesnt drop tomorrow morning (which I think it invariably will).
I mean, what the hell sold during the last week in may to make sales go so high? I know they didnt release anything to make it jump, so where is this "mythical" $3,000,000 coming from?
The blood angel white dwarf release? I find this highly unlikely.
Late dark angels sales? Again, even less likely than blood angels sales.
School getting out and the kids buying stuff for summer? A possibility, the best I can come up with at the moment.

I just dont get it.

My money would be on two things: 

1/ They needed to incorporate 31st May so that those who had been offered redundancy terms that were to take place by then (most of the head office staff sacked) would have the associated "extraordinary" costs of their redundancy package brought into 2007 rather than having it bleed forward into 2008 and make next yer's results look worse. 

2/ Probably more importantly the WD XXX birthday and related shennanikins.  Lots of people will have taken up the "subscribe to WD this month and get 8 issues extra for free" offer (I did), as well as buying stuff in the celebratory events that were held in the GW stores in what was "half term" in the UK.  At the time I thought it a little "coincidental" that such a fuss was being made of the WD birthday (when they hadn't done anything like for WD300 a couple of years before) in what was the end of their financial year.

Australia and new zealand are still making a profit.

Either we are dumb enough to pay the exorbitant prices (I can mailorder from the US, pay postage and still save 20% on OZretail if I spend more than $100US) or GWAsiaPacific is doing something right that other GW branches need to look at.

I have to say that the rules (40K) or the dumbing down of them have finally killed the game for me. After playing 40k for quite sometime now, I've decided to sell off my 2 armies, SOB's & Space Wolves. I will keep enough to run a 40k in 40 minutes SW force & 13th Company force, but that's it.

I enjoy the fluff books, but understand that the game will never live up to them, so that's why I'm ending it. Have found a set of rules called Rules of Engagement that I can use my Bolt Action Germans with.

Posted By Hellfury on 07/31/2007 12:14 AM
I really find the 53rd week to be something to give shareholders hope so the stock doesnt drop tomorrow morning (which I think it invariably will).
I mean, what the hell sold during the last week in may to make sales go so high? I know they didnt release anything to make it jump, so where is this "mythical" $3,000,000 coming from?
The blood angel white dwarf release? I find this highly unlikely.
Late dark angels sales? Again, even less likely than blood angels sales.
School getting out and the kids buying stuff for summer? A possibility, the best I can come up with at the moment.
I just dont get it.

Part of it might be the swift closure of many US stores.  I know that one of the stores in MA (Harvard Square) was shut down with very little warning. Another in MA (Holyoke) is gone but no one I know has any idea when it disappeared.  If this trend happened in other areas GW could have used it to surge that last week.

This is when I will freely admit I know nothing about business or stocks or fiscal things.  But it might explain that surge....?

Wow they have unsecured bank debt. Who would give these guys unsecured bank debt? You Brits have life too easy.

How can Australia be turning a profit?

I don't buy anything from here. I just got the Chaos Army box on pre-order from the UK, with free shipping, for half the price of me buying it here. Whenever I want to get something I order direct from the US online store, and essentially get 3 for the price of 2 with how the prices are worked out.

We pay stupid amounts for GW stuff over here, so much so that I avoid buying stuff here wherever possible. Surley I'm not alone in this.

BYE

Hmm, looking at page 11 it appears that the majority of GW shares are held by venture capital companies (I think the top 4 with nearly 60% fall in this catagory). That seems a bit strange to me - the UK press keeps going on about how venture capital prefers to buy companies up ad take them private (hence having more control), often the assets are then sold off and the company sold on with loads of debt.

I could of course be talking rubbish as I've not researched this all that much - I am rather lazy (although not especially fat)!

Posted By fullheadofhair on 07/30/2007 11:38 P 

Sales drops are mainly in US $1.5mil and continental europe $3mill - with UK up $0.6mill. Funny thing is US maintains it is Europe dragging GW down.

 

The America's sales total is more an issue of the falling value of the dollar than it is falling sales.  In the constant currancy conversion the America's sales were up .4M pound.  With manufacturing located in the US, I'd guess that GW US kept most of their profits in the US denominated in dollars and avoided most of the currency conversion costs (or at least that's what they should have done).

Posted By Osbad on 07/31/2007 2:20 AM
Kirby has gone up in my estimation though (mind you he could hardly go down).  He has taken it on the chin and finally come out and stated that it is no good blaming the rest of the world, GW's problems are GW's own fault and no one else's!

I would think that after saying for two years that the problems were largely down to management, sacking wide swathes of staff and keeping yourself in charge is hardly 'taking it on the chin'...

Posted By Asmodai on 07/30/2007 11:51 PM

The Canadian warehouse is being closed and Canadian sales are being routed through Memphis. (I hope this doesn't mean I'll have to start paying customs duties on GW orders.)

I wonder if we'll be seeing lower prices now that GW Canada can't use the tired old "shipped from the UK" arguement.  Of course, prices will probably go up to reflect the rising cost of crude and the horrendous fuel costs to ship the models up from the US by truck.

Indeed.

Yeah no one's too shocked about this.

Has there been any credible talk of a take over?

Games Workshop....a subsidiary of Hasbro...maker of Warhammer-clix, 40K-clix, and "Whacky Orks and Ladders."

Life sucks and then you die.  However,  if you're a game company and your games suck, you get bought out by Hasbro.

 

Hasbro haven't exactly killed D'n'D tesseract.

None I can find. So far the City are buying Kirby's guff as the shares have only fallen a few pence on the day.

I just don't understand what goes through city brokers' minds. Can't they see he's talking rot and just doesn't understand his market? In last year's annual report he was all "well next year things will get better because WFB 7th Edition is coming out". But then 7th Edition came out and it sank without a trace financially. So why aren't they calling him out on it? What's to say that his current approach isn't just as much hogwash?

Personally If I had any money invested in GW I'd run a mile! But then I'd have taken it out and kept it out years back.

Until they get someone in charge who cares about product quality and value for money the company (either lower their prices, or improve their quality - either is good) is stuffed. Right now everything hinges on Apocalypse and the new Ork Codex. And they just won't generate that extra £6M turnover they need!

If GW wanted to start making profit, this is what they should do. 

1: spend the necessary finances to hire intelligent people, who are capable of creating balanced rules, and army formats.

2: give the game theorists (ie the ones who make up the fluff) direct access to the people who are balancing the rules to insure that the armies and battles match what the fluff says they should.

3: GW should then release all codexs (one for each race) at once, along with a rule book to be used with these codexs.

4: Along with these codexs and a universal rulebook, standardized 6 by 4 map mats should be created (maybe 10-15 different ones), with all of the terrain drawn on.  This gives people the option to just play with the map mat, or to create their own terrain to place onto the mat.  (for example: there is a green patch that represents forest, a player could just use this section, or they could create a forest terrain piece that is the same size as the green patch and place it on the patch.)  These maps should be balanced with the codexs and the rule book, but the balance should be complex, so that one strategy will work on one map, while it will not work on another.

5: Then the prices on the miniatures, and the paints should come down to reach a more reasonable point, so that the adverage1850 pt army costs between 250-450 dollars, as apposed to the 500-750 that currently must be spent.

6: Then GW should modify their tournaments, by removing any points being scored for comp, sportsmanship, or painting, and put all of the scoring on the outcome of the game.  Then they should add separate awards (but not related to winning or losing) for best painted, and best sportsman.

7: The system for scoring battle points should be more exact, (as an example, but not saying it should do this:  the score for a battle is;  the winner gets [his victory points - victory points of the opponent].  And the loser gets the [armies point total (ie 1850 pts) - the winners score (not victory points).  Edit: i realize this format wouldn't work but the general idea would I think.

8:  There should be significant cash prizes (not limited to GW merchandise) awarded to the winners of official GW tournaments.

Actually Epidemic Heart I would go a little differently.

I think tournaments are not what drive sales, I think creativity does.

GW's competative advantage is in models and converting.

Their best way forward is to go back to their model of the late 90s and early 2000s with new army lists coming out almost every month. They would certainly need to pay more attention to balance but I think the way to do it is make them all 'draft' army lists, put out 1 a month in WD, revise and revisit them regularly with the most popular becoming codexes.

The rules should be in a CHEAP $10 book that gets revised every year or two and is included in every army deal.

And they need a skirmish version of 40k as an intro game.

You're all daft. To remain profitable they would wack all nonperforming lines (like...orks), simplify the game, and push it into the big boxes. I'm thinking Necrons and Marines. Marines for Da Win!

@ Epidemic Heart: GW's biggest problem is lack of new product, they've been busy recycling products for years now and it shows. LOTR was brand new & was a huge sales generator. The last new 40K army (Tau) is 5 years old? The last WFB army was Ogres, 3 years ago?

I'd love to know how well the COD city terrain sold, its one of the few new things to come from GW in some time.

Maybe Apocalypse will save 2007 - new ideas, new models. The Orks might actually save 2008 if they can come out with the fabled modular ork vehicles. Now if GW can only hold off on releasing new SM veterans for the 4th time....

@ kid kyoto

In my blind frustration towards GW I accidentally substituted the question "what would be most profitable for GW?", with "what do I want them to do so that I would enjoy the game more".

Your right most of the money lies in the collectors who are constantly needing to buy, build, and paint more, more, more.

What's so bad about being fat and lazy? that's what I am!

I blame the board. They should have fired Fat and Lazy at least a year ago.

How a company with the resources and market presence like GW continues to lose money, staggers me.

Huh. At this point, I kind of would like to see what Hasbro would do with 40k/fantasy. They certainly can't make it any worse....

Posted By Da Boss on 07/31/2007 7:22 AM
Hasbro haven't exactly killed D'n'D tesseract.

Hasbro takes companies and leverages the business side.  Hasbro helped D&D, but have killed other companies like Avalon Hill ... reducing them from wargames to a nameplate for military games like Axis and Allies  (The exception being ASL.).

GW selling to a larger company is not a bad thing.  At this point the up side of a sale look a lot better than the status quo.