"The third element is that we are customer focused. We talk to our customers. We aim to communicate in an open, fun way.
Whoever and wherever our customers are, and in whichever way they want to engage with Warhammer, we will do our utmost to support them."

This is the biggest difference between the current GW that has returned to growth and the declining GW of yesteryear.

"Our long term goal is to have all three channels (retail, trade and online) growing in harmony. We will always have more independent accounts than our own stores. Our strategy is to grow our business through geographic spread, growing all of the three complementary channels."

Another big change is how easy it is to deal with GW as a stockist now. I have also heard zero reports of sudden massive short stocking of new releases when a local GW opens up in the same area. The core products needed to be stocked to get the best discount isn't predatory and full of crap that will never move.

The area that still needs improving is the paints side of things. At least in Canada you can't get individual pots of paints as a store so when you restock a colour or just want to top things up you have to get multiples of each colour. And since some colours are pretty niche this means a lot of money has be tied up with pots 3 and 4 of a colour you might sell once or twice a year. One local guy has $2000 in just paints that are the back two out of four in each colour.

And extra $2000 of product that could be turned over and sold each month can actually make quite a difference to a local small store. It can even be GW products.

"To be around forever we also need to invest in both long term capital and short term maintenance projects every year, pay our staff what they have earned for the value they contribute and deliver surplus cash to our shareholders. Our dedication and focus should ensure we deliver on time and within our agreed cash limits."

I'm not familiar with British accounting jargon, but "cash limits" here is more for public sector stuff. I guess he's using it colloquially. Like the board agreed to keep a s portion of their cash around but surplus will be paid out in dividends? Given the dividends per share and earnings per share being stable from the last couple years, it's good GW has an actual plan now rather than just paying whatever Kirby could get rubber stamped and raiding the success of the past to pay dividends greater than earnings.

"At the year end we had 489 Games Workshop stores in 23 countries. Our stores contributed 37% of the year's sales. We have 379 one man stores, small sites, each one staffed by only one store manager. We also have 110 multi-man stores, which are constantly reviewed to ensure they remain profitable. If not, they will be closed and probably replaced with one man stores."

This is actually different from the Kirby years. During those years even some profitable stores were closed and replaced with single employee operations just for the cost savings. People have reported they ended up seeing a 40% decline in sales but a major staff savings that made them more profitable but resulted in lower sales volume.

As well, some single employee stores have been restored to being multi-employee stores. One local to me has had exactly that happen.

"The key performance indicators utilised by the board can be split into key financial performance indicators and key non-financial performance indicators."

I'm beginning to suspect that these reports are now being written for a slightly different audience. Since GW returned to growth they have gotten both increased coverage within the British financial press as well as increased interest by individual retail investors.

To a large degree Kirby didn't have anyone paying attention. The majority of the institutional investors didn't care as GW represented such a small portion of their portfolios and the financial press barely covered them.

It could also just be that Rountree is just more professional and isn't going to ramble like Kirby did.

So here's a pretty key one:

"Product quality
This is an indicator of the effectiveness of our design studio and our continuous improvement in design to manufacture. We measure this by looking at sell through. If the product is great we sell a lot, if not we sell very few."

The board of directors is looking at how well each new thing sells. They directly saw the instant selling out of Shadow War Armageddon and are probably quite aware of the sales numbers for something like the Firestorm campaign box for Age of Sigmar (which I'm going to guess did not hit their targets).

"It would be unrealistic, if not daft, of me to promise that we can continue to grow at the rates we have reported over the last two years. I am not, however, planning to scale down our ambitions, I am just informing you of the back drop."

I'm not going to try to predict the future, but it's possible that sales could fluctuate up and down very rapidly. Loads of former customers have been coming back and if they leave again after checking things out, things could drop off rapidly. I don't think it's going to happen that way, but I think GW's management is aware of the risks.

During the LOTR boom they massively expanded every part of their business and then when the last movie hit the theatres and the LOTR hype train had left the station, GW had retail locations and manufacturing operations for a whole lot of product that they weren't going to sell. I think this still looms in the background of what GW does.

"The total capital cost of this new facility including the purchase of the land will be approximately £9 million.

Our manufacturing investment included doubling the number of plastic injection moulding machines as well as flexing up our
average production staffing levels from 143 to 198 at our HQ site in Nottingham. Production payroll costs have increased by
£2.0 million to £5.9 million; as a percentage of Group revenue they have increased from 2.5% to 2.7%."

This does not strike me as the same sort of overly rapid expansion as they did near the turn of the millennium.

" The launch month, June 2017, reached new heights for us, which was no real surprise as the models and supporting gaming mechanics were better than ever."

Is this the first time GW's management has actually mentioned the actual mechanics of warhammer? I'm shocked

"Gross margin declined in the year (2018: 71.4%; 2017: 72.4%), as a direct result of some of the teething problems a step change in volumes brings."

I like how a tiny 1% decline in margins is taken so seriously. Least painful teething problems ever.

" It has also been affected by the sales mix of new and existing product - 38% of sales from new releases and 62% of sales from existing product - as well channel mix change."

So here's an example of actual obfuscation in a financial report. Sales from new releases have gone up. Last time this was reported it was closer to 33% and since they don't change their prices on old product and only on new product and target a 3% growth on prices, this would actually positively impact margins. It's the sales channel mix and the "teething pains."

The shift to people buying more new releases rather than less would in no way contribute to a reduction in gross margin as the margin on those products is simply better given what they say in the same report about how they are increasing their prices.

Notice how it's worded as to be technically true while giving the impression that this is some sort of explanation as it has details and numbers while the other factor "as well channel mix change" is tacked on with no details. The tacked on thing is the real explanation.

"As a direct result of our significant sales and profit growth, we rewarded all of our staff with a £1,500 discretionary payment in
addition to a £1,000 profit share payment each (total cost £4.8 million). We also honoured our commitment to pay 20% of any
sales increase to our retail store managers (total cost £2.9 million) who achieved sales growth whilst maintaining costs broadly in-line with last year."

This is such a huge change from the Kirby years. In previous reports Kirby actually talked about how they had replacements ready for any staff member that stepped out of line or didn't meet their sales goals.

"• Partworks - We learnt a great deal from the Battle Games in Middle-earth partwork launched back in 2002. And some of
those lessons were painful! Now though, I think we are in the best position we’ve ever been to have another go. ‘Warhammer 40,000 Conquest’, a serialised product, will launch this summer."

I bet Rountree was trying to get Kirby to approve of using outside marketing like they did during the LOTR years for *years*. A Battle Games in the 41st Millennium should work well for them. Hopefully it gets distributed more widely than just the UK.

"When we say marketing at GW, we mean informing, engaging and inspiring our global community. Our commitment to talking
with our customers has never been stronger, and their response never more positive. Warhammer-community.com has become the real home of Warhammer content online, with over 70 million page views in 2017/18 from almost 5 million users supported by tens of millions of interactions on social media."

And I'm guess they know that loads of people use their Combat Roster even if it doesn't have point values. I'm just throwing that out there because the various internet people who are 2000 point matched play only panned it when it launched. I think they are a minority of GW's customers and GW knows it. The type of content they are producing is for all approaches to play and it is working in terms of sales and will continue.

Yes, I'm aware that the quoted paragraph doesn't go into that at all, but when the report contains page views and users and video views from Warhammer TV, you know they are also paying attention to the uses of the Warscroll and 40k Roster programs.

"A key measure of our performance is return on capital. During the year our return on capital increased from 72% to 120%. This was driven by an increase in operating profit before royalty income, offset slightly by an increase in average capital employed."

This is probably the most important number in the entire report. Profit growth is nice and so is all the info about sales channels and expansions and whatever, but in the end GW is about making money on the money they put in. This also explains so much of what they do in terms of how they launch new product lines and which products might be selected for inclusion in products like Kill Team and Start Collecting boxes.

I maintain that Kill Team, like Shadow War Armageddon before it, was about hitting the return on capital targets for the terrain. The rules and ongoing support is nice, but the goal of kill team was to sell loads of the new terrain in one go to cover the capital invested in the project.

Compare this to how they did Age of Sigmar: Skirmish and Path to Glory. Stand alone books with some separate bundles.

Given that they pay attention to the sales of each product at the board room level, it's obvious which approach works better.

You can see the result in Malign Sorcery. Whereas previous expansions like Skirmish, Path to Glory and even Malign Portents were stand alone books with a handful of attached separate products, Malign Sorcery was handed over to their terrain team and bundled it all together as a larger set.

Expect more of that approach.

"Reported sales grew by 39% to £219.9 million for the year. On a constant currency basis, sales were up by 41% from £158.1 million to £222.6 million." and later "The net impact in the year of these exchange rate fluctuations on our operating profit was a decrease of £1.5 million (2017: increase of £7.0 million).

Lol. Looks like the BBC reporter had it exactly backwards. The change in the pound made GW's sales slightly less amazing, not contributed to it. Over a larger time frame, obviously the weaker pound did help GW but not this financial year.

Trade £96.2m (sales) £33.3m (profit) or 34.6%
Retail £82.5m (sales) £6.7m (profit) or 8.1%
Online £43.9m (sales) £27.9m (profit) or 63.6%

It's pretty clear that GW's online store has become the most efficient way of selling their product. Followed by trade sales. Their own stores are a very inefficient and high risk way to sell their products.

I think it's pretty clear that the primary role of their stores is recruitment. It's also important to remember that they barely made money on their stores last year and lost money on them in previous years.

If GW experiences even a small reversal, even a temporary one, in their sales, it'll show up in their retail channel first. They'll be the first thing to go back into loss making.

"net funds at the year end of £28.5 million"

Wow. For anyone who's been predicting GW's demise for the last decade that's never been less likely to happen. GW has made the changes needed and now they are sitting on so much cash. And that's after paying out massive dividends and profit sharing and bonuses to their employees. And investing massively in both the design studio and production and distribution including buying more land, building another building, adding more injection moulding machines, more production and design staff as well as taking on some 3rd party warehousing and logistics help.

They went from 360 one man stores to 379 one man stores over the last year. So I guess that continues to move forward anywhere where a store is borderline. So even with converting some stores back to multiemployee stores, the trend is still in the direction of cost cutting here. Despite all the growth, I'd say GW still hasn't cracked the code when it comes to retailing. They seem to be juggling different priorities like recruitment and sales goals. It'll be interesting how the Warhammer Cafe in Texas ends up performing and how much of any first year loss there gets accepted as a marketing cost.

I think there might be something to GW having a paid travelling promotions team or expanding their social media team to including facilitating clubs and escalation type army building in online communities. If the role of GW's retail arm is recruitment, maybe they could take a page from both religion and the insurance business and have some independently operating recruiters/sales people.