ICV2 Report: Games-Workshop's Half-Year Report : Update with 6 month results, discussion starts pg12

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**agnosto**

Lithlandis Stormcrow wrote:
agnosto wrote:
Yes, whether they like it or not, they are a company that produces mediocre games and some nice models. Until recently that was enough but they have real competition now in the form of several, smaller games makers who beat them in one or several aspects to the point it has been cutting into their bottom line. It's change or die for GW and they appear to be honestly trying to change; whether what they're doing is enough remains to be seen.

The thing is: what exactly is the aim of this change? Do they really want to drive away the "competitive crowd" and keep the unshakable die hard fans that will buying the ever more expensive kits? Do they truly think that willingly leaking away a fair percentage of their customer base to their competitors and hope for the best is a sane path to go?

Personally I don't think they have the talent to turn things around and be competitive but that doesn't mean that they shouldn't try. It's a toy company. Until recently it was run completely by a man in his late 60s but the new CEO is in his 40s. I'm not being ageist, older people are usually risk averse in business and most companies stack management so that counter points are present, GW doesn't really do that so they keep trying the same tactics hoping that it eventually works...yeah. They need a major shakeup and some new blood in management.

**Lithlandis Stormcrow**

agnosto wrote:
Lithlandis Stormcrow wrote:
agnosto wrote:
Yes, whether they like it or not, they are a company that produces mediocre games and some nice models. Until recently that was enough but they have real competition now in the form of several, smaller games makers who beat them in one or several aspects to the point it has been cutting into their bottom line. It's change or die for GW and they appear to be honestly trying to change; whether what they're doing is enough remains to be seen.

The thing is: what exactly is the aim of this change? Do they really want to drive away the "competitive crowd" and keep the unshakable die hard fans that will buying the ever more expensive kits? Do they truly think that willingly leaking away a fair percentage of their customer base to their competitors and hope for the best is a sane path to go?

Personally I don't think they have the talent to turn things around and be competitive but that doesn't mean that they shouldn't try. It's a toy company. Until recently it was run completely by a man in his late 60s but the new CEO is in his 40s. I'm not being ageist, older people are usually risk averse in business and most companies stack management so that counter points are present, GW doesn't really do that so they keep trying the same tactics hoping that it eventually works...yeah. They need a major shakeup and some new blood in management.

I couldn't agree more, really.

**Baragash**

agnosto wrote:
Lithlandis Stormcrow wrote:
agnosto wrote:
Yes, whether they like it or not, they are a company that produces mediocre games and some nice models. Until recently that was enough but they have real competition now in the form of several, smaller games makers who beat them in one or several aspects to the point it has been cutting into their bottom line. It's change or die for GW and they appear to be honestly trying to change; whether what they're doing is enough remains to be seen.

The thing is: what exactly is the aim of this change? Do they really want to drive away the "competitive crowd" and keep the unshakable die hard fans that will buying the ever more expensive kits? Do they truly think that willingly leaking away a fair percentage of their customer base to their competitors and hope for the best is a sane path to go?

Personally I don't think they have the talent to turn things around and be competitive but that doesn't mean that they shouldn't try. It's a toy company. Until recently it was run completely by a man in his late 60s but the new CEO is in his 40s. I'm not being ageist, older people are usually risk averse in business and most companies stack management so that counter points are present, GW doesn't really do that so they keep trying the same tactics hoping that it eventually works...yeah. They need a major shakeup and some new blood in management.

The more important issue rather than his age is his experience. His experience is very GW-centric, and whilst it's good that he's had wide exposure to all areas of the business, he's got limited exposure to outside/different ways of thinking. I do think that it's unusual for a company of GW's size to have appointed him through the path he's followed and I suspect that it's a contributory factor to the position they find themselves in.

**Shandara**

Azreal13 wrote:
No, apparently they're not a gaming company because minimum wage.

Not a good thing to read with a cuppa in my hand. Touché.

**agnosto**

Baragash wrote:
agnosto wrote:
Lithlandis Stormcrow wrote:
agnosto wrote:
Yes, whether they like it or not, they are a company that produces mediocre games and some nice models. Until recently that was enough but they have real competition now in the form of several, smaller games makers who beat them in one or several aspects to the point it has been cutting into their bottom line. It's change or die for GW and they appear to be honestly trying to change; whether what they're doing is enough remains to be seen.

The thing is: what exactly is the aim of this change? Do they really want to drive away the "competitive crowd" and keep the unshakable die hard fans that will buying the ever more expensive kits? Do they truly think that willingly leaking away a fair percentage of their customer base to their competitors and hope for the best is a sane path to go?

Personally I don't think they have the talent to turn things around and be competitive but that doesn't mean that they shouldn't try. It's a toy company. Until recently it was run completely by a man in his late 60s but the new CEO is in his 40s. I'm not being ageist, older people are usually risk averse in business and most companies stack management so that counter points are present, GW doesn't really do that so they keep trying the same tactics hoping that it eventually works...yeah. They need a major shakeup and some new blood in management.

The more important issue rather than his age is his experience. His experience is very GW-centric, and whilst it's good that he's had wide exposure to all areas of the business, he's got limited exposure to outside/different ways of thinking. I do think that it's unusual for a company of GW's size to have appointed him through the path he's followed and I suspect that it's a contributory factor to the position they find themselves in.

That's a very good point. It's hard to do new things if your only experience is unidirectional.

Automatically Appended Next Post:

Azreal13 wrote:
No, apparently they're not a gaming company because minimum wage.

Or rather because of the price of sheep in Botswana.

**Azreal13**

Ah, the Botswanian Ovine Conjecture. Yes, yes.

*strokes beard, puffs pipe. *

(I'll get back on topic shortly...)

**agnosto**

Azreal13 wrote:
Ah, the Botswanian Ovine Conjecture. Yes, yes.

*strokes beard, puffs pipe. *

(I'll get back on topic shortly...)

No worries, I think we've ran this one into the ground and now it's just a matter of waiting til the 12th for the report. I'm curious as to how big of a drop in sales we'll see; I'll conjecture 6-8% year-on-year.

**Baragash**

agnosto wrote:
Azreal13 wrote:
Ah, the Botswanian Ovine Conjecture. Yes, yes.

*strokes beard, puffs pipe. *

(I'll get back on topic shortly...)

No worries, I think we've ran this one into the ground and now it's just a matter of waiting til the 12th for the report. I'm curious as to how big of a drop in sales we'll see; I'll conjecture 6-8% year-on-year.

I don't even think Kirby can find the niche language to describe 6-8% as a "small decline". I expect to see nothing worse than 3%.

TRADING UPDATE ON THE CLOSE OF THE HALF YEAR ENDED

29 NOVEMBER 2015

Games Workshop Group PLC announces that trading in the six months to 29 November 2015 at constant currency has been broadly in line with the Board’s expectations and 2014/15 first half performance.

Over the six month period we have seen modest sales growth at constant currency. However, the adverse impact of a stronger pound will result in a small decline in reported sales for the period.

The Company’s half yearly report for the six months to 29 November 2015 will be released on 12 January 2016.

http://investor.games-workshop.com/2015/12/07/trading-update-2/

**TheAuldGrump**

Azreal13 wrote:
No, apparently they're not a gaming company because minimum wage.

And unemployed Cypriots.

*EDIT* It really was a most bizarre argument... he has been on my Ignore list for so long that I never noticed that he had stopped posting.

On topic - it is interesting to note that what seems to be garnering the best responses on the 'Best Idea' thread are all things that GW has gone back to doing, not actually 'new ideas'.

The sad thing is that I agree that those are all good ideas.

Specialist Games - check! (This one even has me interested.)
Bundles with a discount - check! (Not buying any - but it is still a very good idea. If Fantasy were still a thing, I might have been moved to get some Empire or Tomb Kings... for Kings of War.)
Year's Best Sellers - well... a tiny check. (I don't much care - but others seem enthused, and it isn't an actively bad idea.)

Locally... AoS is doing much worse than I had expected - I had thought that there would be at least a brief period of 'Let's try this out!' - instead there was the sound of the community going 'Meh', followed by nothing.

The Auld Grump

**agnosto**

@Baragash,

Well, Kirby did brush off the 10% drop we saw last year by saying they were doing well and then some drivel about crops burning and plague or some such.

**Baragash**

agnosto wrote:
@Baragash,

Well, Kirby did brush off the 10% drop we saw last year by saying they were doing well and then some drivel about crops burning and plague or some such.

In fairness, I think a more accurate paraphrase of what he said was "the numbers are bad but we're going to measure the health of the business in a completely different way that you'll just have to take my word for............so, moving on....", and by the time everyone had finished looking up unusual words, porcine healthcare and wondering who in the American legal system was setting fire to his allotment the world had moved on

**Talys**

Keep in mind that it's a company's management's job to spin the facts in the most favorable light. Kirby, or any other CEO/CFO/Board Director would not be doing their job if they didn't point out the reasons why their stock is a good buy. You don't have to drink their Kool-Aid

I agree with KK completely that putting aside profit, declining revenue is a possible indicator that the market as a whole doesn't buy GW's perception of what the hobby should be. Especially when you combine it with much higher prices, the revenue declines mean that the unit sales are substantially lower: ie, fewer fans, or fans buying numerically fewer kits. I think this is a much stronger argument for a different direction than anything else, and to embrace aspects of the hobby other than exactly what GW perceives that the hobby or game should be.

To play the devil's advocate, however, it is entirely possible that GW *IS* maximizing its profits. Perhaps if it gave us the game at the prices that the majority of Dakka seem to want (a game I'm sure I'd personally enjoy, and prices that I'd like more), that GW would actually make less money than it does today. I don't discount the possibility that they're right, but we'll never know.

On a totally different note, despite being reasonably well-read in history and generally interested in actual events on our world, both present and past, I find zero appeal in historical miniatures or miniatures that model reality (like present-day airplanes). It's because to me, hobby is escapism, and I want to model or play the part of a Hollywood-style heroic band or villainous army, with over-the-top weaponry and legendary powers. Every day, when I look out the window or walk outside, I can enjoy the amazing marvels of reality -- and there's an endless amount there to love -- so I don't need more of it when I sit down in my hobby room

**agnosto**

Baragash wrote:
agnosto wrote:
@Baragash,

Well, Kirby did brush off the 10% drop we saw last year by saying they were doing well and then some drivel about crops burning and plague or some such.

In fairness, I think a more accurate paraphrase of what he said was "the numbers are bad but we're going to measure the health of the business in a completely different way that you'll just have to take my word for............so, moving on....", and by the time everyone had finished looking up unusual words, porcine healthcare and wondering who in the American legal system was setting fire to his allotment the world had moved on

You're much more forgiving than I am. As an investor, I don't want the Chairman of my company to sound like a senile old man, sitting in an empty house, shouting at invisible cats. Rountree was the EOY report's saving grace and the only reason that I kept my money with GW. I'm glad that I did because the stock is doing quite well. They're a financially strong company but you can only slide in sales so long before it hits the bottom line and we're approaching that time in the next several years if things don't turn around.

Automatically Appended Next Post:

Talys wrote:
Keep in mind that it's a company's management's job to spin the facts in the most favorable light. Kirby, or any other CEO/CFO/Board Director would not be doing their job if they didn't point out the reasons why their stock is a good buy. You don't have to drink their Kool-Aid

I agree with KK completely that putting aside profit, declining revenue is a possible indicator that the market as a whole doesn't buy GW's perception of what the hobby should be. Especially when you combine it with much higher prices, the revenue declines mean that the unit sales are substantially lower: ie, fewer fans, or fans buying numerically fewer kits. I think this is a much stronger argument for a different direction than anything else, and to embrace aspects of the hobby other than exactly what GW perceives that the hobby or game should be.

To play the devil's advocate, however, it is entirely possible that GW *IS* maximizing its profits. Perhaps if it gave us the game at the prices that the majority of Dakka seem to want (a game I'm sure I'd personally enjoy, and prices that I'd like more), that GW would actually make less money than it does today. I don't discount the possibility that they're right, but we'll never know.

On a totally different note, despite being reasonably well-read in history and generally interested in actual events on our world, both present and past, I find zero appeal in historical miniatures or miniatures that model reality (like present-day airplanes). It's because to me, hobby is escapism, and I want to model or play the part of a Hollywood-style heroic band or villainous army, with over-the-top weaponry and legendary powers. Every day, when I look out the window or walk outside, I can enjoy the amazing marvels of reality -- and there's an endless amount there to love -- so I don't need more of it when I sit down in my hobby room

Yes, they should spin things, but they should appear professional in the process not like an insane asylum resident who is completely out of touch with reality. The Chairman's preamble made it sound like there was no issue at all, not recognition that things had turned sour, nothing. Spin it, yes, but at least recognize that there is room for growth.

In retail, you never really maximize your profits; the company is either growing or dying, that's it. I don't want upper management to pander to me or talk to me like I'm a simpleton, I want management to show they are grounded in reality and have a plan for success. Not even Rountree showed he had an inkling of an idea but he at least said something other than inanities about crops withering, etc.

**Baragash**

Talys wrote:
Keep in mind that it's a company's management's job to spin the facts in the most favorable light.

Maybe things work differently in Canada? You're confusing what people actually do with what they should do.

**Kilkrazy**

Talys wrote:
Keep in mind that it's a company's management's job to spin the facts in the most favorable light. Kirby, or any other CEO/CFO/Board Director would not be doing their job if they didn't point out the reasons why their stock is a good buy. You don't have to drink their Kool-Aid

I agree with KK completely that putting aside profit, declining revenue is a possible indicator that the market as a whole doesn't buy GW's perception of what the hobby should be. Especially when you combine it with much higher prices, the revenue declines mean that the unit sales are substantially lower: ie, fewer fans, or fans buying numerically fewer kits. I think this is a much stronger argument for a different direction than anything else, and to embrace aspects of the hobby other than exactly what GW perceives that the hobby or game should be.

To play the devil's advocate, however, it is entirely possible that GW *IS* maximizing its profits. Perhaps if it gave us the game at the prices that the majority of Dakka seem to want (a game I'm sure I'd personally enjoy, and prices that I'd like more), that GW would actually make less money than it does today. I don't discount the possibility that they're right, but we'll never know.

On a totally different note, despite being reasonably well-read in history and generally interested in actual events on our world, both present and past, I find zero appeal in historical miniatures or miniatures that model reality (like present-day airplanes). It's because to me, hobby is escapism, and I want to model or play the part of a Hollywood-style heroic band or villainous army, with over-the-top weaponry and legendary powers. Every day, when I look out the window or walk outside, I can enjoy the amazing marvels of reality -- and there's an endless amount there to love -- so I don't need more of it when I sit down in my hobby room

My view is that GW have increased profits despite declining sales by becoming a lot more efficient. Some of this is things like dumping metal, which probably saved them £1M a year in materials costs, and was a good move. There isn't really a downside to it, except Finecast. They had to get rid of Bitz as well, but this has been slightly compensated by putting more spare weapons and kit into various boxed sets.

GW also closed all the regional HQs and moved lots of shops to smaller locations with less staff and shorter opening hours. These actions, while very money saving, may end up biting GW in the bum as they lose touch with local markets and lose the network effect of shops as hobby centres and attractors to passing trade. Time will tell.

But anyway, in theory the organisational and production efficiencies can be applied to any new products that GW put out, so it should be a good idea to publish a wider variety of games as they would be more profitable than 10 years ago, and I would expect sales to increase by attracting more customers.

I do think pricing is a definite problem too. Therefore I am pleased to see that in the past year or two, GW have adopted a policy of bringing out more games, freezing prices on old kits and applying price rises to new kits that have value, creating genuine bundle deals, and even publishing softback versions of books at a lower price, because these are all things I have suggested in the past. It's great to know that the new CEO has been taking my advice.

@Talys, it's interesting what you say about liking fantasy games that take you away from everyday life. I like history and historical games for the same reason. But I don't play anything more modern than Vietnam.

**Talys**

@Baragash - Spinning financials aren't the *only* job of management

But it's certainly one of them; at the end of the day, driving share price is a main function a public-company CEO. Raising money, providing vision, all that kind of wonderful stuff, too, of course.

@agnosto - There aren't many CEOs that go on record saying that the ship's sinking. Stephen Elop comes to mind, with his "burning oil rig" analogy with Nokia. For people who have zero interest in wargaming and are strictly looking for an investment, I'm not so sure that Kirby or Roundtree sound implausible at all. I don't think GW is a terrible investment, anyhow, though as I've said many times, I don't think it's an ideal public company in the first place.

@KK - Yeah, the bundles like the Start Collecting, and many of the box sets seem to be movement in the right direction to attract new players and to entice existing players to give something else a shot. We'll see how it all pans out in the long run.

I personally also think that it's possible to keep the crazed model collectors very happy while making the game significantly better, if not perfect. The funny thing is, I like what they did in 2014 with factions like Dark Eldar and Blood Angels and I also like what they did in 2015 with factions like Mechanicus and Dark Angels. But... I can't believe they did them both within the same edition, LOL. If they keep going with the 2015 game (which I actually like better than the 2013-2014 game), and actually finish up all the factions, I think fans will remember 7+ edition as a good time for 40k, if GW manages to do all the factions without hitting the reset button again.

Prediction... in 2022, people will look back and say, "40k was such a great game in 2017! GW is ruining it all! At least back then everyone's titans were pretty much balanced!"

**agnosto**

There are worlds of difference between, "it's going down, panic!" and the realization that people can read the damn report and see there are issues so here's what we're going to do to turn it around.

I have and continue to make a decent chunk of change from my ownership of GW stock so I'm not saying they're a weak company. That said, I'm also not blind and certainly not ignorant enough to assume it's all sunshine and roses.

**Baragash**

Talys wrote:
@Baragash - Spinning financials aren't the *only* job of management But it's certainly one of them; at the end of the day, driving share price is a main function a public-company CEO. Raising money, providing vision, all that kind of wonderful stuff, too, of course.

That is completely incorrect.

Management spinning the numbers is one of the fundamental issues raised in the Corporate Ethics element of accounting studies. The numbers are a report to the shareholders, that is, the owners of the company. They are not meant to be "spun", they are meant to a balanced an unbiased representation of the company's performance and position ("true and fair" view is the official term).

The reason they are spun is because there is a fundamental disconnect in the incentives of the agents involved. Management a) want to keep their jobs and b) often receive shares as part of their renumeration package, hence they are doubly incentivised to present the results in the most positive possible light without breaching statutory rules, and to engage in inconsistent or obfuscationary practices.such as recutting data or declaring certain data formations aren't representative of the way the company is run (GW has done this on several occasions in the last 10-15 years).

Having an artificially high share price can also harm shareholders (for example by discouraging or preventing takeover bids which would actually allow shareholders to realise the value of capital growth).

**blaktoof**

Same report that the OP article link shows GW profit is up close to 25% over the previous year.

They had increased capital costs by opening more stores, and store sales were down but sells to retailers and online were up along with royalties....

http://investor.games-workshop.com/wp-content/uploads/2015/07/2014-15-Press-statement-final-website-final.pdf

has the full report.

**Korinov**

blaktoof wrote:
Same report that the OP article link shows GW profit is up close to 25% over the previous year.

They had increased capital costs by opening more stores, and store sales were down but sells to retailers and online were up along with royalties....

http://investor.games-workshop.com/wp-content/uploads/2015/07/2014-15-Press-statement-final-website-final.pdf

has the full report.

That's the annual report from six months ago.

Their profits went up if compared to the previous year (2013-14) because they did not need to bury millions of pounds in their website again.

**Talys**

@agnosto - as I'm certain you're aware, a company doesn't have to be sunshine and roses to be an amazing investment -- it just has to be priced at less than what you think it's worth. Conversely, a lot of companies that are doing great are terrible investments, because they're overpriced.

@Baragash - Sounds like academia

In the real world, professional CEOs and CFOs of public companies are hired and paid disproportionately humongous salaries because of their ability to increase the value of the stock, with any ability or understanding of the company's core business being a plus, rather than a requirement. For little public companies (or private companies aspiring to become public), often, NOTHING matters other than the CEO's ability to raise capital (ie their ability to dog and pony shows). The company could be in the business of selling eggs, and the CEO could be incapable of distinguishing a male from a female chicken, and it wouldn't matter as long as they could raise the next $10 million.

Sure, we can argue about how this is not how things should work, how it contributes to bubbles that burst, yadda yadda yadda... but hey... it's the way the world goes round and round and how trillions of dollars change hands. GW is just a little, mostly insignificant piece of that cog

Anyways, I've rarely read preambles in annual reports from profitable public companies that were doom and gloom. I don't believe that GW is in imminent peril of anything, and we'll see in a week or so, but I figure they sold hundreds of millions more dollars of little toy soldiers and pocketed a nifty sum that they'll just pay out to their shareholders. Considering that half of the period was a grand experiment that, in my opinion was risky, if they're profitable at all, I think management and shareholders will be satisfied.

**reds8n**

HALF-YEARLY REPORT AND TRADING UPDATE

Games Workshop Group PLC ("Games Workshop" or the "Group") announces its half-yearly results for the six months to 29 November 2015.

Highlights:

Six months to

Six months to

29 November
30 November

2015
2014

Revenue
£55.3m
£56.5m
Revenue at constant currency*
£56.9m
£56.5m
Operating profit pre-royalties receivable
£4.7m
£5.5m
Royalties receivable
£1.5m
£0.7m
Operating profit
£6.2m
£6.2m
Pre-tax profit
£6.3m
£6.3m
Cash generated from operations
£8.6m
£7.8m
Basic earnings per share
14.9p
14.5p
Dividend per share declared in the period
20p
36p

Kevin Rountree, CEO of Games Workshop, said:

"We have made some good progress on our strategic initiatives all focused on delivering long term growth. Whilst we are disappointed with the decline in return on capital reported in the period, we are all confident that we are focused on delivering the necessary changes to address this decline.

In the period we launched some great new products and our new visitor centre has performed well.

December sales were below expectations across the Group. At this stage in the Company's financial year, the Company's internal projections indicate that pre-tax profit for the year to 29 May 2016 is unlikely to exceed £16 million. A further update will be made when appropriate. "

apologies for the awful format when C & P'ed.

http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB0003718474GBGBXSSMM.html?lang=en

We have made some good progress on our strategic initiatives all focused on delivering long term growth. Whilst we are disappointed with the decline in return on capital reported in the period, we are all confident that we are focused on delivering the necessary changes to address this decline.

In the period we launched some great new products and our new visitor centre has performed well.

We are focused on delivering value. Our key measure of our performance is return on capital. During the period our return on capital fell from 38% at November 2014 to 36%. This was driven by both an increase in average capital employed** and a decline in operating profit before royalties receivable.

Trading update
December sales were below expectations across the Group. At this stage in the Company's financial year, the Company's internal projections indicate that pre-tax profit for the year to 29 May 2016 is unlikely to exceed £16 million. A further update will be made when appropriate.

Sales
Reported sales fell by 2.2% to £55.3 million for the period. On a constant currency basis, sales were up by 0.7% from £56.5 million to £56.9 million; split by channel this comprised: retail £23.0 million (2014: £23.4 million), trade £22.3 million (2014: £22.0 million) and mail order £11.6 million (2014: £11.1 million).

Retail
This channel showed growth in non-core retail but was offset by declines in our core retail business. However on a constant currency basis sales were broadly in line with last year. We opened, including relocations, 22 one man store format stores and three multi man format stores in the period. We also started our trial of four multi man format stores in high footfall locations; Sydney, Munich, Paris and Copenhagen. After closing 13 stores, our net total number of stores at the end of the period is 430.

The key priority is store manager recruitment. On 9 November 2015, I appointed an expert in recruitment to my management team. This person will ensure we have a constant supply of retail store managers and trade recruiters and account developers. She will also work with me to review our global people strategy.

Trade
All key territories were broadly in line with last year. In the period, our net number of trade outlets increased by 61 accounts.

To broaden our core trade product reach, in the period, we have designed a small new product range and are at present actively signing up distribution agents to sell this product into North America. We continue to work on other product formats to optimise other opportunities.

Mail order
Sales in our online shops were up 5.3%.

Non-core
This includes licensing, digital, export, the visitor centre, non-strategic trade accounts, book trade, magazine and mass-market opportunities. Non-core sales were down by 2.5% from £7.8 million to £7.6 million due to declines in sales in digital, export and the book trade offset by growth in visitor centre and non-strategic trade sales. In the period, royalties receivable from licensing increased from £0.7 million to £1.5 million.

Operating profit
Core business operating profit (operating profit before royalty income) fell by £0.8 million to £4.7 million (2014: £5.5 million). On a constant currency basis, core business operating profit increased by £0.1 million to £5.6 million. The net impact in the six months to 29 November 2015 of exchange rate fluctuations was a loss of £0.9 million. It is not the Group's policy to hedge against foreign exchange exposure.

Operating expenses increased by £0.3 million due to an investment in sales facing activities relating to new retail store costs. Costs remain a key area of focus.

Capital employed
Average capital employed** increased by £3.3 million to £40.8 million. The book value of tangible and intangible assets increased by £2.6 million, mainly due to the refurbishment of the visitor centre whilst trade and other receivables increased by £1.0 million, inventory increased by £0.6 million, provisions fell by £0.6 million and current liabilities increased by £1.5 million.

Cash generation
During the period, the Group's core operating activities generated £6.6 million of cash after tax payments (2014: £5.5 million). The Group also received cash of £1.1 million in respect of royalties in the year (2014: £1.0 million). After purchases of tangible and intangible assets and product development costs of £6.3 million (2014: £5.1 million) and dividends of £6.4 million (2014: £11.5 million) there were net funds at the end of the period £7.8 million (2014: £8.4 million).

Projects
We have three major projects being implemented currently:

European ERP system replacement (enterprise resource planning) - on track.
Forge World mail order store - this store was launched in August 2015 on time and within cash limits.
Mail order warehouse system replacement - complicated project currently postponed until after the busy December trading period.

Risks and uncertainties
The board has overall responsibility for ensuring risk is appropriately managed across the Group. As discussed in the 2015 annual report, the top five risks to the Group are reviewed at each board meeting. The risks are rated as to their business impact and their likelihood of occurring. In addition, the Group has a disaster recovery plan to ensure ongoing operations are maintained in all circumstances. The principal risks for the balance of the year are the same as those identified in the 2015 annual report and are discussed below:

ERP change. This is a complicated project with the risk of widespread business disruption if it is not implemented well.
Store manager recruitment. This comprises both recruitment of managers for new stores as well as replacing poor performing managers. Retail is our primary method of recruiting new customers and so we need great managers in all our stores.
Supply chain. We are changing our mail order warehouse system. This is part of an ongoing programme of continuous improvement for these warehouse systems. As with any system change there are risks associated with the transition.
Range management. We constantly review our range to ensure that we are exploring all opportunities.
Distractions. Anything else that gets in the way of us delivering our goals.

The greatest risk is the same one that we repeat each year, namely, management. So long as we have great people we will be fine. Problems will arise if the board allows egos and private agendas to rule. I will do my utmost to ensure that this does not happen.

Going concern
After making appropriate enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason they have adopted the going concern basis in preparing this condensed consolidated interim financial information.

Statement of directors' responsibilities
The directors confirm that this condensed consolidated interim financial information has been prepared in accordance with IAS 34, 'Interim Financial Reporting', as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely: an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of (i) the principal risks and uncertainties for the remaining six months of the financial year; (ii) material related-party transactions in the first six months and (iii) any material changes in the related-party transactions described in the last annual report.

There have been no other changes to the board since the annual report for the year to 31 May 2015. A list of all current directors is maintained on the investor relations website at investor.games-workshop.com.

By order of the board

K D Rountree
CEO

R F Tongue
Group finance director

**H.B.M.C.**

"Everything is fine, nothing is broken!"

**Kilkrazy**

Most companies do some spinning when they have to announce bad results.

Yesterday M&S, a major UK clothes retail chain, announced bad Christmas results and blamed it on weather, discounting by rivals, and lack of stock. M&S had a 30% off sale in December.

Weather certainly is a factor, but it's not hard to see that everyone can't be suffering from rivals discounting if they are discounting themselves, and it's hard to understand why you would run out of stock if your problem is you aren't getting enough customers into your shops.

In other words, the spin is obvious bs and I think most people are intelligent enough to see this sort of malarkey in any company report, including the GW one.

**H.B.M.C.**

Kilkrazy wrote:
In other words, the spin is obvious bs and I think most people are intelligent enough to see this sort of malarkey in any company report, including the GW one.

Saving this quote for posterity.

**Joyboozer**

Egos and private agendas eh?

**Baragash**

Talys wrote:
@Baragash - Sounds like academia In the real world, professional CEOs and CFOs of public companies are hired and paid disproportionately humongous salaries because of their ability to increase the value of the stock, with any ability or understanding of the company's core business being a plus, rather than a requirement. For little public companies (or private companies aspiring to become public), often, NOTHING matters other than the CEO's ability to raise capital (ie their ability to dog and pony shows). The company could be in the business of selling eggs, and the CEO could be incapable of distinguishing a male from a female chicken, and it wouldn't matter as long as they could raise the next $10 million.

Are you for real?

Apart from patronising me with "in the real world" about the job I do for a living, that is utter tripe.

**Kilkrazy**

Well, let's not get side-tracked into the topic of high level executive salaries.

**Shadow Captain Edithae**

Seems like "Managed Decline" sums up Games Workshop. For years, they've had an annual ritual of making excuses for their disappointing results.

**loki old fart**

Kilkrazy wrote:
Most companies do some spinning when they have to announce bad results.

Yesterday M&S, a major UK clothes retail chain, announced bad Christmas results and blamed it on weather, discounting by rivals, and lack of stock. M&S had a 30% off sale in December.

Weather certainly is a factor, but it's not hard to see that everyone can't be suffering from rivals discounting if they are discounting themselves, and it's hard to understand why you would run out of stock if your problem is you aren't getting enough customers into your shops.

In other words, the spin is obvious bs and I think most people are intelligent enough to see this sort of malarkey in any company report, including the GW one.

This has been one of the mildest winters, we've had for years.

Spin doesn't always work.
Marks and Spencer chief executive Marc Bolland to quit
http://www.bbc.co.uk/news/business-35249317

Marks and Spencer chief executive Marc Bolland is to step down in April, the company said as it announced its Christmas results.

Mr Bolland will be succeeded by Steve Rowe, executive director of general merchandise.

Third-quarter sales of general merchandise were down by 5.8% for the thirteen weeks to 26 December.