Latest GW financial announcement

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**reds8n**

Games Workshop Group PLC

IMS, TRADING UPDATE AND DIVIDEND
For the period 29 November 2010 to 3 April 2011

For immediate release 8 April 2011

Games Workshop Group PLC today issues the following interim management statement for the period 29 November 2010 to 3 April 2011. In the four months to 3 April 2011 the Group has continued to deliver strong gross margins and cost savings.

The Group announces that pre-tax profits in respect of the year to 29 May 2011 are likely to be ahead of current market expectations.

Cash generation remains healthy. As a result, and in line with the Company's dividend policy to distribute to shareholders truly surplus cash (as set out in the Company's 2010 annual report) the board has today declared a dividend of 20p per share. This will be paid on 25 May 2011 for shareholders on the register at 26 April 2011.

http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary.html?fourWayKey=GB0003718474GBGBXSSQ3

(Reuters) - Games Workshop Group Plc , a retailer of toy soldiers, forecast full-year pretax profit ahead of current market estimates, helped by strong gross margins and cost savings.

The retailer, which licences The Lord of the Rings tabletop battle game, said cash generation remained healthy and set a dividend of 20 pence per share.

Three analysts on average were expecting the company to post a full-year pretax profit of 12.2 million pounds ($19.7 million), according to Thomson Reuters I/B/E/S.

In January, the company said its pretax profit for the year to May 29 was likely to be below market expectations due to weak sales volumes. [ID:nLDE70408P]

http://www.reuters.com/article/2011/04/08/gamesworkshop-idUSL3E7F80Y320110408

so.. profits above expectation then.

Must be something alright then.

**Ratius**

It only covers a 4 month period though (including the cash cow of Christmas)?

**reds8n**

...yyeess....?

They'd previously said

For immediate release 5 January 2011

Games Workshop announces that pre-tax profits in respect of the year to 29 May 2011 are likely to be below current market expectations.

Sales were down 4% in the first half to 28 November 2010. Difficult trading conditions since that time mean that this shortfall is unlikely to be recovered by the year end. The Group's gross margin and costs remain under firm control and cash generation remains healthy. In addition, the outlook for royalties receivable in the current year remains good, although not as significant as in the year to 30 May 2010.

The Board of Games Workshop currently believes that, as a result of reduced volumes, pre-tax profits in respect of the year ending 29 May 2011 are unlikely to meet current market consensus estimates.

The Board will announce the Group's half-yearly results for the six months to 28 November 2010 on 25 January 2011.

So Xmas, and presumably post Xmas sales have been better than they were expecting.

I keep thinking this might, perhaps, be due to GW seeming to increase the rate of their releases and, radical as this sounds, actually telling people about them.

It's a crazy idea, it'll never catch on.

**dantay_xv**

And the putting up of prices (okay so the VAT goes to the government, but models arent that cheap anymore)

**RUNE**

And the lack of megaforces for christmas... :(

**RandyMcStab**

Does this mean we get a week off price increases?

**gr1m_dan**

RandyMcStab wrote:Does this mean we get a week off price increases?

HA!

Don't be daft chap.

**reds8n**

http://www.guardian.co.uk/business/marketforceslive/2011/apr/08/games-workshop-gains

A profit warning in January, a positive update in April. That's the story at Games Workshop, and the latest news has lifted the company's shares by 12%.

The retail group, which specialises in table top battle games including one based on Lord of the Rings, said it had traded strongly in the four months to last week, and as a consequence full year profits were likely to be ahead of current market expectations. Cash generation remains healthy and so it has declared a 20p a share dividend. Part of the reason for the improvement is a spate of cost cutting, including restructuring its retail outlets, relocating its north American sales office and closing a model making plant in Shanghai, as well as investment in its online development.

These improvements took longer to come through than expected, but the company appears now be seeing the benefits.

Games Workshop is currently 45p higher at 415p, and in a buy note analyst Charles Hall at Peel Hunt said

We are upgrading our 2011 estimate by 25%, as the gross margin and cost reductions are higher than expected and restructuring charges lower than anticipated. In addition, cash balances have risen, and this has enabled the company to accelerate dividend payments. We were previously forecasting a 25p payment for the final dividend – we now expect a total payment of 30p.

Games Workshop has never been in better shape operationally and we should see a return to sales growth. The company has excellent long-term potential, given the global scope of the business, high margins and strong cash generation. The company has committed to returning truly surplus cash to shareholders each year – the 30p dividend would deliver an attractive yield of 8%.

**filbert**

Same old, same old for GW.

Guardian wrote: Part of the reason for the improvement is a spate of cost cutting, including restructuring its retail outlets, relocating its north American sales office and closing a model making plant in Shanghai, as well as investment in its online development.

I hate to be Captain Bring-down, but surely touting cost cutting as a long-term way to increase profits is very short sighted? I mean, how often can they sack people and close stores? We seem to see this every time GW release a financial report and I expect it to be borne out in the detail: "sales are down again but its OK because we closed some stores, reduced other stores to one man operations and hiked prices to compensate".

Guardian wrote:
Games Workshop has never been in better shape operationally and we should see a return to sales growth.

They have been saying this for some time now but we are yet to see the evidence. If anything, their own financial reports have shown the opposite.

**guyperson5**

Can somebody PLEASE sum the first bit up?

**RandyMcStab**

reds8n wrote: so.. profits above expectation then.

Must be something alright then.

This sums it up pretty well

**Kirasu**

guyperson5 wrote:Can somebody PLEASE sum the first bit up?

Basically it says, we got 12 million pounds in profits and part of that came from better margins on our sales (IE selling same amount at higher prices) and some of that came from cost savings (IE kicking people out on the street). It doesnt say what the percentage is due to both activities but as an above poster stated COST CUTTING is not a business plan for growth, its generally a short term executive bonus boosting strategy

**reds8n**

I'm somewhat disheartened to see how almost every report on this has a headline along the lines of " Games Workshop to produce great figures ".

I haven't been so disheartened since that NYT headline t'other day about the serial killer.

**warboss**

RandyMcStab wrote:Does this mean we get a week off price increases?

i'm sure they could delay the annual price increase this summer by a week.

**RandyMcStab**

In that case I'm glad all those guys got sacked...

**BrassScorpion**

RandyMcStab wrote:Does this mean we get a week off price increases?

June 1 is coming soon. Fear it.

**Kroothawk**

More interested in whether total annual sales went down again, which I believe they did.

**Chibi Bodge-Battle**

Depends where they set expectations, which may have been conservative.

**agnosto**

You see, I read that and I can't help but focus on the 20p per share thing and think "I get money again!". Woot.

Sorry, continue with the hate.

**Chibi Bodge-Battle**

Yeah but you'll only give it back to GW by spending the divi on some more toy soldiers Agnosto

**agnosto**

Chibi Bodge-Battle wrote:Yeah but you'll only give it back to GW by spending the divi on some more toy soldiers Agnosto

Well, yeah, that was kind of the point in me buying the stock to begin with.

Nothing like paying myself to play.

**sourclams**

It's certainly a bump in the right direction, but keep in mind that GW stock is currently trading 4.17 a share after being pretty stuck at 3.70-ish a share, which was a big falloff after trading around 4.30 a share for the better part of 2010.

In short, it's managed to go nowhere real fast, and if a significant chunk of this 'big up' was cost cutting with regards to their retail stores and staffing, well, that's not exactly sustainable revenue.

**Player not found**

filbert wrote:
I hate to be Captain Bring-down, but surely touting cost cutting as a long-term way to increase profits is very short sighted? I mean, how often can they sack people and close stores? We seem to see this every time GW release a financial report and I expect it to be borne out in the detail: "sales are down again but its OK because we closed some stores, reduced other stores to one man operations and hiked prices to compensate".

Sorry if my lack of a major in economics might occlude my understanding of your logic, but I fail to see how that is shortsighted.

Cutting down operational costs (staff) is an expenses reduction which will carry on from month to month, no? If they sack a hundred staffers and spend X less £ as a result, won't they still be paying X less £ the following months too?

Of course, a temporary costs reduction like "We cut expenses down by reducing the volume of metal used to make models by melting back older unsold stocks" wouldn't be a valid long-term strategy because they'd eventually run out, but we're not talking about a short-term expenses reduction here; laid-off staff won't all of a sudden come back and get paid again next month...

**Chibi Bodge-Battle**

Because you assuming that all things are equal.
If sales continue to fall however then the cost savings won't be as effective long term

Great we've made a profit due to non operational strategies seems to be the order of the day for GW.
I agree with Filbert, that it surely cannot be a sustainable approach.

**sourclams**

Player not found wrote:Sorry if my lack of a major in economics might occlude my understanding of your logic, but I fail to see how that is shortsighted...

In the '70s-'80s it was... I won't say common, but let's call it a "known tactic" for a new CEO to roll in, cut all research and development, fire everybody but the barest skeleton crew needed to run the company, and run big promos to move more volume in a shorter time period.

This had the effect of boosting sales as momentum from all the stuff that the R&D and sales & marketing staff used to do rolled forward, which combined with the drastic cuts in costs would spike revenue and make your stock look like it was worth a lot more. At that point you sell all your shares at the new, higher market value and quit to go find a new job.

The company you left, in the meantime, having lost most of its people, would then spiral toward oblivion, ultimately worth less and less because it had no new product development or direction.

Not saying this is what's happening in GW, but it's an example of how cutting costs is rarely indicative of actual long term growth and sustainability.

Think about it like this: You have two options-- Get a check for $1,000, or get a job that pays $500 a week. For the first two weeks, the $1,000 check is the better deal. By week 3, the steady job outstrips the free thousand bucks.

**agnosto**

Or you could look at it the opposite way and say that the company was bloated and is now more efficient and streamlined.

Not saying which view is correct just that there's more than one possibility. In any event, as a stockholder, I'm happy to receive dividends again.

**sourclams**

It could... theoretically. (as in, in my opinion, "not really")

But seriously, if you're interested in dividends, why are you even in GW at all? Go buy the S&P or Apple or pretty much anything else that isn't horribly rangebound between 2.00 and 4.00/share.

**agnosto**

sourclams wrote:It could... theoretically. (as in, in my opinion, "not really")

But seriously, if you're interested in dividends, why are you even in GW at all? Go buy the S&P or Apple or pretty much anything else that isn't horribly rangebound between 2.00 and 4.00/share.

Oh, I don't own a ton of GW; my dividend income mostly comes from some tech stocks and, until the recent trouble, bank stock and the sometimes biotech stocks (I generally don't keep those very long). I bought the GW as a larf some time ago and now I'm just sitting on it for no other reason than it's fairly stable and the one stock I own that has anything to do with my hobbies.

**Kilkrazy**

Kroothawk wrote:More interested in whether total annual sales went down again, which I believe they did.

Yes. That is the key point. Are they growing actual sales numbers or relying on higher prices and bigger margins to generate profit?

**agnosto**

Kilkrazy wrote:
Kroothawk wrote:More interested in whether total annual sales went down again, which I believe they did.

Yes. That is the key point. Are they growing actual sales numbers or relying on higher prices and bigger margins to generate profit?

We'll have to wait til July to find out.