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GW financial results for the year ended May 2009 have been published today.

You can download the report from http://investor.games-workshop.com/latest_results/Results2009/downloads/GW_year_end_09.pdf

Highlights.

2009 (2008)
Revenue £125.7m (£110.3m)
Revenue at constant currency* £113.9m (£110.3m)
Operating profit - pre-royalties receivable** £5.5m (£0.8m)
Royalties receivable £3.5m (£1.7m)
Operating profit** £9.0m (£2.5m)
Pre-tax profit £7.5m (£1.1m)
Discontinued operations profit/(loss) for the year £0.1m (£(1.2)m)
Year end net borrowings £1.6m (£10.1m)
Earnings/(loss) per share 17.8p ((2.4p))

On the face of it a good year, at last.

BUT strip out the £11.8M of exchange rate gains (the extra revenue generated by sales denominated in $ and Euros being worth morth in £ at the end of the year than at the beginning of it) and their Operating Profit £9M looks like a loss of nearly £3M - worse than last year. As I suspected their underlying performance has been modest, but they have profited handsomly from the demise of the £! On the positive side though, they have wisely used their windfall (plus extra licencing revenues from, presumably, WAR and FFG) to pay off debt, which makes them less vulnerable to the banks and improves their returns to shareholders.

There's a lot more to read though in the report, and I encourage you to do so as it provides a fascinating insight into the workings of the company.

A couple of nuggets:

Don't espect the move to 100% plastic to result in any price drops any time soon:

We have centralised our pricing and range decisions in Nottingham to ensure that we have more consistent pricing
across the range to better reflect the improvement in quality we have been delivering. Indeed, with the investment we
have made in our state-of-the-art plastic tool making facility in Nottingham and skill of our design and manufacturing
teams, the quality of our new plastic miniatures are now superior to their metal counterparts. By charging what these
new models are worth, we can continue to invest in further plastic product development and quality improvements across
the range.

That tells me that the party line is that their plastics are "as good as, or better than, metals" therefore they will be charging metal-equivalent prices. Personally Ithink thats a crock of poo, but it doesn't surprise me in the least.

Secondly, Forgeworld have now outsourced some production to China:

We have improved our resin manufacturing processes in Nottingham and implemented a new resin cell in
Shanghai to manage the significantly higher levels of sales growth we have been experiencing from Forge World.

There's more, much more, but you can read it yourselves... I look forward to much informed debate!

Osbad wrote:I look forward to much informed debate!

On Dakka? Anywhere on the interwebs?

Good luck with that

Oh-hohoho, just wait until John barges in.

So they're not making any money... but in a good way?

Flashman wrote:So they're not making any money... but in a good way?

, oh the funny burns.

Osbad wrote:Secondly, Forgeworld have now outsourced some production to China:

Is that... a good thing? I can't help but feel worried for the GW(fw) customers... because I am definitely not one of them, though my friend wants some stuff from them. Hmmm.... I am actually interested in FW specifically because they seem to be pretty inconsistent with their manufacturing, though I am basing this on what I have heard. GW(fw) is actually one of my biggest concerns about GW.... or GW(fw) or w/e...

Anyone informed on the molding batches from FW? Do they only make batches every year or what? How does it work, and what impact will outsourcing have on specific models, more importantly will they hide/protect which ones are outsourced?

You know, it is quite interesting reading.

I know it's a UK company, but still staggered that we buy more stuff than Europeans or North Americans (ignore my Iranian flag, I'm from the UK).

Also surprised that roughly half their sales come from independent retailers (presumably from H.B.M.C. buying the contents of Maelstrom's stockroom on a daily basis).

Hmm, will carry on perusing (more interesting than work anyway).

Price drops will never happen.......
Things in this world only go Up....

Flashman wrote:You know, it is quite interesting reading.

I know it's a UK company, but still staggered that we buy more stuff than Europeans or North Americans (ignore my Iranian flag, I'm from the UK).

Also surprised that roughly half their sales come from independent retailers (presumably from H.B.M.C. buying the contents of Maelstrom's stockroom on a daily basis).

Hmm, will carry on perusing (more interesting than work anyway).

You know I was quite shocked by that aswell.

However maybe we should take into consideration the North American Market which seems to have a higher number of FLG Stores than actual GW Run stores, or at least thats the impression I have always had.

I too found the statement about raising plastic prices to charge 'what they're worth' (meaning 'what people will pay for them' not 'a fair price based on what they cost to make') both disheartening and unsurprising.

Also unsurprising but disheartening was the admittance that they need to keep the price of metal figures high just in case the price of tin spikes again. The truth is, tin probably will rise rapidly once the world's economy recovers, but the fact that the price of metal figures is being kept high for this eventuality is, well, just disheartening, *especially* if they're then using this exorbitant price point to match their plastics back to.

I mean, right now their metal mini prices are pretty much insane, but you can always say to yourself "Well I know the price of tin has been high and plus I can get most of this army in plastic". But if all of GW's mini prices are based around the same level of the current metal models, well, that will just be a crazy level of insanity IMHO.

Of course, this is all just speculation based on a couple lines of corporate speak. I will reserve any true feelings of 'the sky is falling' until the plastic prices actually are bumped to that level.

Well the one that gets me is everyone complaining about GW's "Massive profits" when it amounts to 4.37% on actual products (not including royalties)

is my maths right there?

True Yakface, but that approach is already happening with the Plastic Greatswords and Plastic Steamtank.......how can something smaller than a Hammerhead or a Russ be 5 - 10 £ Sterling more?

Its a simple fact that those products were clearly a dry run for this eventuality of metals being phased out slowly and all the plastics being put to the price point of metal models they replace.

GW wrote:By charging what these
new models are worth...

Hmm...

Box of Empire Handgunners (10 plastic miniatures) = AUD$35
Box of Empire Free Company (20 plastic miniatures) = AUD$50
Box of Empire Greatswords (10 plastic miniatures) = AUD$69

What they're worth? No...

They are worth what you will pay for them, simple as that. GW believes they can make higher cash flows via margin vs. volume. Period. I'm ok with that. No one makes me buy their stuff.

I will say this. I will never buy Chinese manufactured crap from GW.

99MDeery wrote:True Yakface, but that approach is already happening with the Plastic Greatswords and Plastic Steamtank.......how can something smaller than a Hammerhead or a Russ be 5 - 10 £ Sterling more?

QFT.


@yak -
This reminds me when I was in my "local" GW store and the clerk was trying to tell me that the current prices of the metal models was so high because of the cost of tin.

99MDeery wrote:
However maybe we should take into consideration the North American Market which seems to have a higher number of FLG Stores than actual GW Run stores, or at least thats the impression I have always had.

Most likely.

I live in South Carolina and don't have an official GW store within 7 hours of where I live. GW stores tend to show up in our larger cities but thats about it. Then again why would I ever need to go to a GW store when my LGS is better.

Jin wrote:

99MDeery wrote:True Yakface, but that approach is already happening with the Plastic Greatswords and Plastic Steamtank.......how can something smaller than a Hammerhead or a Russ be 5 - 10 £ Sterling more?

QFT.


@yak -
This reminds me when I was in my "local" GW store and the clerk was trying to tell me that the current prices of the metal models was so high because of the cost of tin.

Remember that Red Shirts get their information with one year delay

M.

@Miguelsan - Truth . He was stumped when I informed him that tin prices had been down for a while.

I don't think they're saying they'll make plastic cost as much as metal (right now anyway), but more like their plastics won't be as cheap (if it could ever have been considered cheap) ... for example, the price of the new imperial guard box of 10 men vs the old box of 20.

Expecting them to lower prices, really ever, is kinda silly. that will never happen. If metal gets cheaper for them, that just means more profit.

step 1: buy metal
step 2: make metal army men
step 3: ???
step 4: profit!

Overall, I'm happy if it shows they are improving financially, weather it's because of currency issues or any other reason. If they're in a better place than they were last year, especially in this economy, then that tells me there will be a lot more great models to come

Love the South Park reference Necros. Yes, these be weird times. I vote they just start bottling and shipping Bugmans. That's a tastey brew...

Yeah. I think the underlying message I get from these figures is that their core business is just about holding steady.

Sure, they've improved efficiency and used their windfall gains from foreign exchange gains, licencing fees from WAR and interest rate cuts to pay off £3m of debt (although not yet to a level sufficient to enable them to pay out a dividend, they still owe £10m to the banks at an annual cost of a couple of million). So much is good sound business sense and as a gamer that is in my interest. But there seems to be a staggering lack of imagination in understanding why they are struggling to make real, regular growth in their core business.

That, at a time when so many are sceaming on the interwebs "just don't charge so much for your crap and I'll buy loads".

This absolute dedication to the notion of selling us as little as possible for as much cash as possible and persisting with massive margins is clearly strangling them.

They admitted themselves that although the 4th quarter was good (presumably due to the release of WotR), their 3rd quarter (i.e. Christmas) was very poor in terms of underlying sales. That should be telling them something - many consumers and potential consumers do not think what they are selling is worth the price they are asking. Putting up new stores on every corner and whipping your sales force until they bleed won't change that. Not lying to your customer base about the cause of your price rises, not hiking your prices by > the rate of inflation twice a year, sorting out rules issues in a timely fashion, those things may do it. But just "selling harder"? Not so much! At least IM(not so)HO.

Sure prices won't come down, but do they have to go up so ridiculously, and so frequently? And as for plastic being the same quality as metal? Eff off! Their newer kits are good quality, but it is physically impossible to match the quality of a metal casting (at least for troop models, vehicles and anything "flat" are different) with a steel mould because of the lack of undercuts. No amount of multi part fiddly gubbins on a sprue will compensate for that!

So its good news in the short term for the shareholders (some windfall gains, wisely applied), but it continues to be bad news for the fans: More and larger price rises for the forseeable future (that's what "maintaining our margins" means when translated out of Corporate Speak).

If you are thinking about developing new armies, bear this in mind!

I do fear Yakface, that your misgivings about all GW plastics prices ultimately being raised to the excessive levels of their current metal ones are true. They think they will be able to get away with it because they clearly are strategising to raise increasing generations of "dedicated fans" (or "brainwashed fools"... you say pot-ay-to, I say pat-ah-to...) who won't bother to look outside of the "official GW" box for their wargaming fix.

Kirby champions capitalism in his intoductory remarks. From my point of view, capitalism is all very well, but there is a fine line between the free market, and exploitation of their fans, who are often of tender years and unable to make a true estimation of value...

In an increasingly savvy marketplace (consumers have killed off the blind purchase marketing strategy for instance - it no longer is a viable method of marketing miniatures games due to consumers not wanting to feel ripped off by it), this appears to be a high risk strategy. Anything that does not rely simply on producing the best quality possible at the best (for the consumer) price possible ultimately leaves the company vulnerable. If I were a shareholder, that would really worry me for the long term. It seems they do well in quarters of a popular big release (WotR pulled their fat out of the fire this year, what will come along next? Planetstrike? What the year after that?)

And in closing, I think this is where I eat my hat. I predicted back in 2005 that GW had 4 years left to live. Clearly I have been proved wrong. My hat goes off to them for surviving and halting the trend of 2005-2007. That has partly been due to some good work - Apocalypse is clearly popular and the "big kits" seem to be money spinners, WotR was a shot in the arm. And partly due to luck - exchange rate gains, tin price crash, WAR licencing. So I continue to watch GW's financial results with great interest. Their financial roller-coaster ride in many ways is more exciting than the games they produce these days!

Actually, with the spike in oil prices last year having an effect on production costs for much of the latter part of last year into this year, I'd say they did well over all.

Given that FW will be outsourcing manufacturing to China, production costs in that division should decrease which is good for the investor. Production quality may suffer which is bad for the consumer.

All in all, they are going in the right direction, but aren't out of the woods yet, espcially given a deep global recession and the fact that entertainment dollars are amongst the first o be cut in the family budget.

Wow, North America and UK sales are just about equal despite GW closing down a lot of stores in NA. I guess in NA most of us purchase our stuff online or through indies which makes me want to spit on the UK GW business model. At least they're trying to downsize as noted in the report.

I also wonder how GW determines their 'sales by territory' chart: Do North American customers who buy from UK stores like Maelstrom Games get their purchase counted under UK or NA? I'm guessing UK; these sales figures are also likely to be hugely affected by the failing British pound - earlier in the year it was cheaper to buy Forgeworld stuff than GW direct equivalents after all.

....GW is focusing on the wrong market imo and should focus on the US/Canada (feels wrong to say North America sometimes since Mexico gets and contributes nothing here)

Interesting to note that Forgeworld is outsourcing to China although I doubt that means a reduction in prices. Guess it was only a matter of time before their cheap labor was exploited, perhaps this will be a major step into penetrating that market? Also could potentially lead to cheap knock offs appearing on the market.


Oh man I hate that plastics quote; definitely does not look good for future elite choices since they'll likely be as expensive as the Goldswords. This could mean that a 10 man plastic Stormtrooper box could retail over $40 like their metal counterparts...good god.


Thanks for your insight Osbad, its definitely a service to us GW customers who aren't competent in this stuff such as myself. No one around here has demonstrated your level of writing and analysis abilities. Kudos!

I must say the same. I did not think they would make it through mid 2009.

Frazzled wrote:They are worth what you will pay for them, simple as that. GW believes they can make higher cash flows via margin vs. volume. Period. I'm ok with that. No one makes me buy their stuff.

I will say this. I will never buy Chinese manufactured crap from GW.

GW can't match what they are worth to me. I'm willing to pay about 40% of what the current prices are. They don't want to sell to me? Screw 'em; got all the toys I need about 5 years ago when I worked for them dirt-ass cheap. Good luck with your pricing, GeeDub!

Cane wrote:This could mean that a 10 man plastic Stormtrooper box could retail over $40 like their metal counterparts...good god.

sad thing is, if the models look good enough, I'll be buying em still. can't control myself!

But then, $40 for 10 men is better than $50 if you were to buy 2 command squad boxes. I considered doing that to have more special looking guys for vet squads, but it's just too pricey. But I have a feeling though they are gonna sell stormtroopers as 5 models for $25, same as the command squads.. since the unit minimum is 5 models, and you can add up to 5 more for a full 10 man squad.

Grraaaagh... Forge World Outsourcing to China?! I'm scared. The optimist in me says the casting quality can't get WORSE, and this just means much quicker turnaround times on orders. Unfortunately the Cynic in me has beaten the optimist to death and is screaming in rage, covered in optimistic blood.

First thought that pops into my head is that the Blastscape was a little foray into China mass production, to test the waters. I know, vacu-form vs. resin, not the same thing, but I keep thinking about the AWESOME Resin masters of the Blastscape and I just get pissed off. If FW quality takes a hit of that magnitude they'll be wiped off the map.

Secondly, what kind of customer service can we expect now? I'm hopeful that nothing will change, but with Forge World being taken almost completely out of the production process (Besides development and pre-production), I'm worried their hands will be tied with the customer service department as well. Maybe they'll no longer be able to send me the Hydra I ordered when I received a Manticore, or they can no longer just sent me a new barrel when one is warped beyond usability.

This may mean that they can spend more time on development and produce new models faster, but I doubt that. I just can't imagine their modellers are the ones slaving over the molds.

This bodes very badly, me thinks. But I'll wait and see before I abandon all hope.


Random Conjecture: Maybe GW is so tight lipped about rumours and what's on the horizon at the moment because they just don't have anything else, beyond Codex and Armybook updates. With Planetstrike and WotR, I imagine they're out of ideas and are hoping to coast along on these cash cows for a year or two. Which bodes ill for investors. But I have nothing to base that on, so just talking out my arse.

I was talking to a manage at the Games Workshop store near me, and i was complaining about how all the good models are always more expensive. He told me that GW also prices the models on how good they. This is why you can buy a plastic necron destoryer for 35 dollars? or why hive tyrants are 50 dollars. They price the better units higher so that if you really want that amazing army you pay top dollar.

acreedon wrote:I was talking to a manage at the Games Workshop store near me, and i was complaining about how all the good models are always more expensive. He told me that GW also prices the models on how good they. This is why you can buy a plastic necron destoryer for 35 dollars? or why hive tyrants are 50 dollars. They price the better units higher so that if you really want that amazing army you pay top dollar.

Very true, and as a customer I avoid buying these models on purpose. Eldar weapons platforms are a joke, there cannot be any other reason for them to be expensive, it is nigh to highway robbery for a damn toy. Say what you want, but I am sure some poor parent has had to explain to their kid why the toy is just not worth that much money. Pretty underhanded and immoral tactics if you ask me, but the problem is that GW is a company, and all toy companies are run by the devils (sorry, meant DisneyCorp) minions.

I'm probably beating a dead horse, here, but I do think that there's some shortsightedness at GW when it comes to prioritising miniatures quality so completely that they regard the rules as a kind of optional add-on.

Sure, most of us probably got initially enthusiastic because of those incredibly cool-looking toy soldiers. But the more you get into the games, the more frustrating the rules issues get; the lack of clarity, the lack of updates, and the lack of balance. At that point, your spending on miniatures declines, because of that frustration. So GW's general attitude of "we want the best sculptors in the world, and will pay them accordingly, whereas for studio staff we'll take on anyone who's enthusiastic enough about the hobby to work for peanuts" is starting to show cracks.

Frazzled wrote:They are worth what you will pay for them, simple as that. GW believes they can make higher cash flows via margin vs. volume. Period. I'm ok with that. No one makes me buy their stuff.

I will say this. I will never buy Chinese manufactured crap from GW.

lol, you need to look at a codex you've bought from the past 5 years! you're already doing it. their quote on "charging what the plastic is worth" is a gem that i will remember for years to come as i avoid new plastic kits. 4 armies is enough for any sane player so i'll have to try and resist the black rage of purchasing when new stuff comes out. also, the moderate interest in buying FW is gone now. i've heard people having lots of casting problems with their stuff that needs to be filed/heated/cut/etc and even returned. when the casting and customer service is in the same area, that becomes a more hasslefree process. if it's separated by several thousand miles, it's certainly not going to improve. also, will we be hearing chinese accents when you call FW now?