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Read this on www.digitallook.com/news/rns/1253600-12010/GAW-Trading_Statement.html this morning.

As a result of this announcement GW's share price has fallen below 200p (yesterday at close it was around 327p).  Clearly not good news for GW's business plan!

"Games Workshop Group PLC
03 May 2007


                  TRADING STATEMENT AND COST REDUCTION PROGRAMME

TRADING

Since our interim announcement and trading statement on 5 January 2007 the Group has continued to make sales progress in our more established markets (UK and Australia), with further evidence of promising developments in our US business. However, in Continental Europe we have continued to see sales declines, particularly in Germany and France. Management changes have recently been made in this area.

Consequently, our overall sales performance, particularly over the recent
trading period, has not been as strong as expected and therefore profits are
unlikely to meet market expectations for the year to May 2007.

The Board expects to announce the Group's 2007 preliminary results on 31 July 2007.

COST REDUCTION PROGRAMME

In view of the Group's current trading performance the Board has decided to
accelerate and intensify its programme of cost reduction in the business. During the next six months this programme will include:

*  The closure of 35 loss-making stores
*  The reorganisation of warehousing and manufacturing activities
*  The centralisation of various sales support and back office activities

We expect this programme to result in a reduction of full time headcount of over 10% and to generate annualised cost savings of some £7m.

These changes will focus on the removal of administrative and back office
activities from our sales businesses, leaving them better equipped to
concentrate on and deliver sales growth.

The estimated cost of this programme is approximately £6m, which will be taken as an exceptional charge in the current financial year.

CONTINUED INVESTMENT IN THE BUSINESS AND DIVIDEND

In addition to this essential short term revenue investment of £6m to restore
and strengthen the future profitability of the business, Games Workshop will
continue to invest in opening new stores in growth areas and in other long term capital projects in the normal course of business. This reflects the Board's continued confidence in the long term growth credentials of the business.

In order to retain funding flexibility and to avoid placing excessive short term
strain on the Group's finances, the Board does not intend recommending the
payment of a final dividend for the current year.

PROSPECTS

The measures set out above are designed to address short term issues. The Board remains confident in the long term future of the business and continues to focus on growing the Games Workshop Hobby throughout the world.

For further information, please contact:

Games Workshop Group PLC                                     Tel: 0115 900 4001
Tom Kirby, Chairman and Chief Executive                          
Michael Sherwin, Finance Director                                

Rawlings Financial PR Limited                                Tel: 0207 628 4681
John Rawlings"

This is the bit that did it.

Hell, it took a plummet all the way down to 180 at nearly the beginning of the trade day (8:10 am).

Thats the lowest I have ever seen it. I know it wont remain that low for very long. Its already rising above 205 as I type this.

Finally no dividend and a cut of 10% off staff?

I wonder how much more they can cut?

Heh. Its already up to 220.



www.lse.co.uk/ShareChart.asp   (click "Intraday" )

There is also this as well:

Thursday, 3rd May 2007 08:31

UK smallcap opening - Games Workshop plunge on FY profits warning, div omission

LONDON (Thomson Financial) - Games Workshop came under pressure, plunging 132-1/2 pence, or 40.46 pct, to 195 after the company warned full-year profits are unlikely to meet market expectations, and that it will omit the final dividend.

The group continued to make sales progress in its more established markets (UK and Australia), with further evidence of promising developments in the US business. However, in Continental Europe it continued to see sales declines, particularly in Germany and France.

In response to the warning, Bridgewell Securities shifted its stance on the stock to 'underweight' from 'neutral' and slashed its full-year pretax profits forecast by 62 pct to 1.2 mln stg. For 2008, the broker is cutting its profit prediction by around 19 pct to 4.2 mln.

The full effect of cost savings will be felt in FY 2009, where pretax estimates may actually tick up, Bridgewell concluded.


www.lse.co.uk/ShareNews.asp

Short term bad news. Some of the price rise will no doubt be dead cat bounce, but not all.

Question is whether the decline in Europe is long term bad news. The stores are continuing to lose them money in this post-Internet world.

Is it too simplistic to think that more and more stores will become "unprofitable" while they charge such high prices for their variety of fun?

Seems like America's results may not have been too bad this year - as they haven't mentioned them!

Of course, now we know why that director ditched his shareholding last week...

Posted By Osbad on 05/03/2007 1:12 AM

Short term bad news. Some of the price rise will no doubt be dead cat bounce, but not all.

Of course, now we know why that director ditched his shareholding last week...

I agree....

Hopefully a wakeup call.

Hey GW,

Remember that freshman economics course that said you can't charge more for a luxury item then people can afford or they won't buy it?  I bet you do now.

 

Nah, they'd bunked off for that lecture...

I'd say the chances of GW being bought out / taken over in the next 48 hours are 50/50. They've got great IP, a large customer base and an established market. They just need some management-side changes.

Re: The director selling last week: I think some British regulators will be looking at that very closely.

I'll gonna have to take a hard look at the stock now. It's finally getting cheap enough to place a (small) bet, even if it's just for the fun of being a shareholder.

@Dragonman: Interestingly, when I was a freshman in college taking such classes, Space Marines came 30 to a box for about $30, and people complained about the prices THEN.

"$30? For plastic?!?"

If you want cheap, stick to RPGs. Pricing isn't the big issue here.

@Asmodai: I agree. They just need some management shakeups. Yes, they're getting more competition these days, and WoW is stealing potential customers. But the company has some real strengths that could be leveraged by a smart management team.

Posted By Asmodai on 05/03/2007 4:56 AM
I'd say the chances of GW being bought out / taken over in the next 48 hours are 50/50. They've got great IP, a large customer base and an established market. They just need some management-side changes.

Re: The director selling last week: I think some British regulators will be looking at that very closely.

I'll take that bet. Put me down for 1.1 PILLION dollars that they don't get bought out by week's end.

Geee... What did I say? Someone say regulators...

well went to go buy some games workshop and there is a 500 share minimum. so need to wait until the market opens to clear out some stocks for cash.

...there may be some Directors willing to trade... at the right price...

The price has largely rebounded now anyway.

If you were psychic and bought at the low point early this morning, you could have already realized at 50% gain on your investment.

Posted By Asmodai on 05/03/2007 4:56 AM
Re: The director selling last week: I think some British regulators will be looking at that very closely.

If they can find him. He's probably on a beach in Spain.

BYE

Posted By H.B.M.C. on 05/03/2007 7:30 AM

Posted By Asmodai on 05/03/2007 4:56 AM
Re: The director selling last week: I think some British regulators will be looking at that very closely.

If they can find him. He's probably on a beach in Spain.

BYE

Spain? No love I'm not in Spain, I'm in Agony, that's where I am! /Noises Off

Posted By H.B.M.C. on 05/03/2007 7:30 AM

Posted By Asmodai on 05/03/2007 4:56 AM
Re: The director selling last week: I think some British regulators will be looking at that very closely.

If they can find him. He's probably on a beach in Spain.

More likely some tropical third world paradise with no US or UK extradition treaties where he's sucking down mai-tais and singing "So long suckers!"


Of course GW's "brilliant" restructuring plan is going to involve another "price adjustment" (in the only direction they know: up), they are the Porsche of Miniatures! People should pay a premium for their figures, right? Right? To me, what is most telling (and alarming), is they have already been slashing back end costs via a reductions in force across the board (except sr. management, where it's probably needed the most), maximizing manufacturing efficiencies (CAD processing, switching to more plastics from labor intensive metals, quality reduction, increased automation, etc...), slashing the design studio (greater reliance on freelance artists, scavenging FW designs & porting them in vis AutoCAD), as well as having already closed down many poor performing stores in the US (and abroad) amongst other measuers.

Yet they *still* aren't going to make market projections, after already revising downward said expectations four months ago? Something definitely not right in Nottingham. If things continue as they have been, I'll be surprised if GW is still it's own entity by this time next year. It now seems almost certain that they will be subject to at least one hostile takeover attempt or some sort of management buy out. Unfortunately, given the way Kirby & co have been managing things (ie: continuing to arrogantly refuse to pay attention to their customers), I don't see GW successfully weathering this storm without something drastic (like a hostile takeover) occurring. The next few months sure will be interesting though!

I think I saw him in a Corona commercial.. well you know, with Cinco De Mayo and all comming up fast...

Who wants to take bets that GW sells to some larger company and goes private?

I think you mean "or". It would be hard to do both (unless they split up the company - which might be a feasible idea: branch off the LotR division, have it focus on prepaints, mass market and toy lines, and take the husk with the 40K and Warhammer (and legacy specialist) products private and develop them as separate brands).

Not me. Going private maybe. Being bought-by whom? Why?

Posted By jfrazell on 05/03/2007 9:01 AM
Not me. Going private maybe. Being bought-by whom? Why?

For the IP and the idea that it could be managed more efficiently and return greater profits.

Likely candidates include Hasbro/WotC and Mongoose (who just spent a huge wad building printing facilities in the UK). Though Mongoose may have already invested more of their nest-egg already.

Hasbro is already heavily invested in the field and would benefit from increased economies of scale. The main drawback is GW's rental agreement obligations (as Hasbro/WotC has been withdrawing from direct retailing).

@Asmodai: I was thinking more of a private equity buying the company and either restructuring/rehabilitating or selling off the assets (including IP) rather than, say, Hasbro buying the company for the IP a la WOTC and D&D.

Ah, OK. Sorry for the confusion. (I think the length of GW's leases in retail spaces will be a major factor in how viable that is. If they're mostly 10 or 25 year leases, GW's assets might not be enough to warrant the cost of negotiating out of them.)

Generally looking at an EBITDA multiple of 14.3MM vs. $101 Market cap is 7.06x. Multiples in the leisure industry are running 11x (CapIQ).  Interestingly Hasbro is 8.4x.  These multiples are subnstantially higher than PP&E (28.9MM) and receivables/inventory (25MM). Admittedly this is a very poor thumbnail but  I don’t think you’re going to get an IP value in the 50MM plus range, so a breakup is unlikely.

 

Going private? With the exception of a management acquisition I don’t see it.  GW is a super niche operator in an industry that could be described as stagnant or deteriorating with multiple channel and non-channel competitors, many of which are larger than the company itself.

 

Being acquired by a competitor. Again the question becomes-why? -Machinery.  You could sell the machinery at a certain rate.  But the purchase multiple is not good, and this product could be outsourced to <st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>. Store leases-that’s a negative.  This doesn’t fit most competitors models. Profitability per store is difficult to obtain, but I would posit that a minority are profitable.  It would be a different story if their store chain were profitable, a hidden gem.  But its not.

I just hope to god my games come out intact. :S
Seriously, we all love to moan, but I'd actually really hate to be right about all my doom and gloom predictions...

Same here. I'm not carrying any sick flag to see GW's downfall. ON an enlightened self interest basis, flagging interest in the game means flaggin market prices should I ever re-sell all this tuff on ebay.

Oh, believe you me, I sure as hell don't want to see GW fall or get bought out, gutted and turned into some clicky game or anything remotely similar. But unless some changes happen at the top, that could very well be what happens. However, a best case scenario could involve a buyout, a scouring of the idiots running the company into the ground, jettisoning the corporate culture of arrogance that seems to have thoroughly entrenched itself at the top and a return to core values instead of the current focus of short term results. Who knows what will happen though, I just hope to freaking jebus whatever changes come out of this are for the better and not the worse.