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http://investor.games-workshop.com/

After a year of speculation since the last one, what has happened to the mighty beast? Is it dying a slow death, or is it stronger than ever before?

Very short answer: They didn't do as well, but not a large slide (Roughly -2.7%).

Basically, TL;DR:

They lost money, but not as much as everyone thought they would have

And now we wait for Ouze and Sourclams to go over it. No point in commenting until then.

I like how Mark Wells states that the reason for the increase in the price for finecast miniatures is because more quality control is required,

'to ensure that quality standards are maintained',

when talking about avoiding miscasts.

BAAHAHAHAHAH!

So the report is written in 'Wellsian Spin'.

H.B.M.C. wrote:So the report is written in 'Wellsian Spin'.

It would be ironic if FineCast were spin cast

I await people to pull out the appropriate details from the report.

Never in my life have I seen a greater attempt to polish a turd than what I just read Mark Wells 2011 preliminary announcement to the GW financial report.

Dividends are up. Huzzah.

I'll quote myself from warseer:

OK. Most obvious thing first.
Revenue is down (2.9%). Profit is down (4.4%, after royalties and tax). Black Library and Forge World continue to perform strongly, which GW takes to be a strong indicator of the health of the hobby.

GW is paying dividends (18p) again, because they have 'truly surplus cash' that they can't think of anything more useful to do with.

Mark Wells made a huge deal about Finecast, taking a full page to talk about it. More importantly, he specifically said:

Mark Wells wrote:
However, manufacturing in resin is a very labour intensive process which involves mixing chemicals in flexible moulds that can deteriorate after a small number of casts. Quality control has to be 100% as the potential for miscasts is much higher than for metal or plastic miniatures. As a consequence the price of each kit is necessarily somewhat higher than the former metal versions and production runs are small to ensure that quality standards are maintained.

which seems to indicate that Finecast is not actually a money saving measure. He talked about how customers value the quality of the miniature above all else, that they had reached the peak of quality in metal miniatures, and that the logical progression was to resin. He said however that

Mark Wells wrote:The initial production run achieved a
97% quality level, far exceeding previous levels achieved in the development phase. There is a continuous improvement programme in place to ensure that the quality level in production is improved even further. The reaction of customers and staff to Citadel Finecast has been overwhelmingly positive.

which seems different to the reports online. However, forums are ever the vocal, angry minority...
Wells also comments on the 'booming' web store - 150,000 new registrations! - yet the sales from the web store were behind last years.

Finance Review wrote:
Reported sales decreased by 2.7% to £123.1 million for the year. However, on a constant currency basis, sales were down by 2.9% from
£126.5 million to £122.8 million; progress was achieved in Emerging Markets and Japan (+2.1%) and in the Other business units (+7%) while
sales in Continental Europe (+0.6%) were flat. UK (-6.3%), North America (-4.8%) and Australia (-11.8%) were in decline.

Mentioned below is that Northern Europe is now strictly UK, whilst Scandinavia has been merged into Emerging Markets/Japan business, which slightly skews the data.

The Southern Hemisphere Embargo was not mentioned. However, the nearly 12% decline in Aus sales goes directly against last year's report of the Australian business performing strongly. Ideally, the embargo should have pushed customers from the UK market to the Australian market, but the negativity towards this seems to have decreased Aus sales even further. Australia was actually a net LOSS of 406,000, compared to last year's profit of 654,000. Sales decreased (though not significantly) in Aus, whilst operating expenses increased significantly, especially when the three major sales regions decreased expenses.
Overall, operating expenses were lower, employee numbers were lower, but wages were much higher.

Tom Kirby bought more shares in GW, paid out more dividends, and had a half-page ramble about retiring soon. He mentioned that hobby centres still need to return to growth.

Overall, despite what they said last year about not being affected by global economic conditions, I believe they *are* affected and as such they are doing pretty well to have only decreased by such a small amount. That being said, the retail model seems to continue to drain the business, and there is yet more proof that they are failing to adapt to the changed exchange rate as the Australia business makes a net loss for them this year.

Any seasoned economists have opinions?

Talking about fincast: "The initial production run achieved a
97% quality level, far exceeding previous levels achieved in the development phase"

Where did they pull 97% from?

SilverMK2 wrote:Talking about fincast: "The initial production run achieved a
97% quality level, far exceeding previous levels achieved in the development phase"

Where did they pull 97% from?

You can use whatever number you want when you don't actually define what a quality level is.

Laughing Man wrote:You can use whatever number you want when you don't actually define what a quality level is.

Pretty much what I was thinking - especially when most of the models they were using to demo finecast on their own site were full of bubbles and other miscasts

SilverMK2 wrote:

Laughing Man wrote:You can use whatever number you want when you don't actually define what a quality level is.

Pretty much what I was thinking - especially when most of the models they were using to demo finecast on their own site were full of bubbles and other miscasts

Or perhaps - GASP - reports of Finecast flaws here and elsewhere on the ever-reliable internet were overexaggerated and full of hyperbole?

Im no GW apologist but you can't just make up financial reports, and all companies use some form of spin to paint themselves in a positive light or highlight their successes; how could you expect anything different? It seems more and more than this board is the other side of the coin, where everything GW does is portrayed as negatively as possible.

I'd be inclined to agree, except retailers don't ship their entire inventory of a product back to the manufacturer if there's only a 3% fail rate.

Forget the financials, did you see they claim the initial Finecast release hit a 97% quality goal? That doesn't... seem possible. Of course they don't define the metrics used.

Their numbers are better then I thought they would be. They're not great - negative growth is, by definition, "not good" - but I think they're as good as is possible during a recession, and certainly better then I expected.

I think the real report to see, of course, is next years, after all the recent bombs they dropped as of recent are felt.


I also feel I should point I don't have any special insight into this. I'm an amateur investor, but far from an expert. I think Reds8n follows this a little more then I, although I could be mistaken.

Define the quality level as "sent out to stores/indy" and bang, 97% no problem.

Rampage wrote:I like how Mark Wells states that the reason for the increase in the price for finecast miniatures is because more quality control is required,

'to ensure that quality standards are maintained',

when talking about avoiding miscasts.

That was the funniest thing in the whole report, that and the fact that Tom is going to get involved in telling staff how to sell? Sorry if that's slightly off I'm going on the quick scan I did before work this morning.

Hokkaido23 wrote:Or perhaps - GASP - reports of Finecast flaws here and elsewhere on the ever-reliable internet were overexaggerated and full of hyperbole?

Check out what I actually said - when you have a 97% "quality" rating, you don't use miscast stuff to demo your super awesome new product on your own damn site...

a 97% quality rating? Are you F*** kidding me? I've had to return four ***** fine cast models already.

Holy_doctrine wrote:a 97% quality rating? Are you F*** kidding me? I've had to return four ***** fine cast models already.

But the other 130 Finecast models you bought were fine though, right?

SilverMK2 wrote:Talking about fincast: "The initial production run achieved a
97% quality level, far exceeding previous levels achieved in the development phase"

Where did they pull 97% from?

He also didn't define what 'initial production run' means either. It could be the first cast from each new mould that was perfect 97% of the time, and in fact it's the 2nd, 3rd, 4th etc runs that return increasing defects. This seems likely considering their main explanation for the poor start of finecast was trying to produce too much too quickly.

Probably counted as 3% returns from unsatisfied customers/stores demanding replacements.

97% success rate?! In my experience (13 models) I've had 76.9% miscast rate. Either they are lying or they're using a REALLY small sample.

97% didn't explode, disintegrate, turn into goo, or jump to warp space while being taken out of the mold...?

We are also in the process of renewing our successful licence deal with Fantasy Flight Publishing Inc.
which continues to release high quality products in the board game, card game and role playing
genres.

*phew*

Finally, we have renewed our highly successful Warhammer 40,000 licence deal with THQ Inc. until
2020

Good for them.

Royalties receivable £2.5

Can only see that going up next year. Even if things "wobble" and drop hugely to, say, £1 Million per annum.... that's a handy and hefty chunk of income for, on GW's part, very little work.

Black Library, which has delivered another strong performance amidst the disruption in the book trade,
has also significantly strengthened its strategic position this year by launching its first range of digital
books through the Black Library website. These downloadable eBooks proved popular immediately
and Black Library has been steadily adding back catalogue and new titles in this format. Black Library
eBooks are now also available on Apple’s iBooks store. Sales of this highly profitable format are
growing steadily with no apparent adverse effect on their paper counterparts, which continue to figure
in fantasy and science fiction bestseller lists on both sides of the Atlantic.

well hello ! Bet that's made a few people take notice of things, or possible advances to their current business model.

...wonder if we might see some evidence of a follow up to this at certain events later in the year ?

From a strategic perspective, Citadel Finecast has established an
even greater quality differential for Games Workshop over other miniature makers using traditional
metal manufacturing methods. Importantly, it will be difficult technically, with a high entry cost, for
anyone to try to establish manufacturing facilities to replicate product of this quality in significant
volume.

..hhmm... that's interesting.

One's tempted, given recent store openings, to wonder if this is a pre-emptative counter against any forgery/knock offs in regions that, traditionally, don't really seem all that bothered about IP and minor legal technicalities like that.

... one does wonder as well about all those companies GW are suing. What medium do they generally work in again ?

..meh, that's a bit too tinfoil hat possibly methinks.

This year a new programme will be introduced for all managers: ‘Understanding the Games Workshop
Business’. Tom Kirby will lead this programme with the objective of educating the future leaders of
Games Workshop on the critical success factors for running our niche business model. The first
modules will focus on how to identify people who ‘fit’ Games Workshop’s unique and demanding
culture. The politically correct need not apply

... STFU or GTFO.

I wonder how many items weren't returned due to customers not knowing their rights, not bothered or think it's the norm? I know he has to put in a load of BS, but surely he could of said something like, "our initial run wasn't up to our usual standards, but we've got a handle on it now and things should be getting better."

reds8n wrote:

We are also in the process of renewing our successful licence deal with Fantasy Flight Publishing Inc.
which continues to release high quality products in the board game, card game and role playing
genres.

*phew*

Thank the Emperor for that.

reds8n wrote:

‘Understanding the Games Workshop Business'

Thereby implying that they currently don't understand their own business.

Trasvi wrote:

Tom Kirby bought more shares in GW, paid out more dividends, and had a half-page ramble about retiring soon. He mentioned that hobby centres still need to return to growth.

This sickens me.

The $600,000 from last time obviously wasn't enough, a bit more pocket money before he jumps out of the plane with his golden parachute.

Ah the Kirby Jugend program!

Not a lot to add to what has been said before. To be honest this is pretty close to what I was expecting when they made their preliminary announcements a while back.

For me, it will be no surprise that my main issue is the "Sales decline of 2.9%". Now that is in absolute terms. In "real" terms, (i.e. taking account of an inflation rate last year of around 4% (I''ll check the actual numbers in a minute and put up my usual graphs) that is a decline therefore of nearly 7%. Or taking into account GW's actual price inflation rate which at a wild guess looking at the Space Marine Battle Company box was something like 20% is actually equivalent to a decline in volume of 22.9%! Prices went up last May 2010 by what 20% or so. OK lets be generous and say it was an average of even only 10%, and still revenues declined by 2.9%! They're taking a bath, and their customers are deserting them in droves. And that's all there is to it. As a customer (not a shareholder) I couldn't care less how much profit they earn. That doesn't affect me. What does affect me is that GW's business is shrinking and their prices are increasing way beyond the level of background inflation. As has been said before, there is only so long before their business disappears altogether, and along with it all shareholder profits. Maybe then the myopic stock market will sit up and give Wells and Kirby the arse-kicking they thoroughly deserve!

Now, compare these to the reports we have from Privateer Press that they are working around the clock and still can't keep up with demand for their product. Similarly we get such reports from Spartan Games as well. That indicates to me that the miniature wargaming market is actually still pretty healthy, despite the recession. It is just that GW is now capturing a smaller slice of it than they have ever had.

"Return to Growth" ? That has been the GW mantra ever since 2004 and they still haven't managed it. I call baloney! "A poor first half but an improved second half" ? I've heard that all before as well, many, many times. IIRC their first half turnover was down 4% like-for-like. That meanst their second half must have improved by 1.1% (probably slightly less as their second half sales are always higher than their first half as they include Christmas and Easter sales peaks). They are trumpeting a 1% increase in sales revenue (which as I implied before is actually a 3% or greater real decline) as some sort of achievement? Really? How desperate are they for good news!?

Every year we hearthe same old desperate bulll-poo from the same tired old mouths. Every year GW teeters closer to the brink. Their licence deals are all that's keeping their fat out of the fire. Their core business is over and all but buried. You'd think some of the suits would spot that at the AGM wouldn't you? But no. All they'll care about is increased profit for this year and the dividend. It doesn't matter that the company may not be around next year or the year after - they'll have had their pound of flesh and trousered their bonuses and take what's left of their money and stick it with some other short term enterprise which they can milk till it drops...