Financial pundit Richard Beddard appears to be back on Games Workshop’s case some in his latest financial column. See what he thinks about the new GW.
Beddard had a lot to say last year about the state of Games Workshop, after asking “Can We Trust The Board of Games Workshop?”. Now the tune may have changed… some.
..Tom Kirby, the contrary, self-flagellating, proselytizing, defender of “the Hobby”, who has at times been chairman, at times been chief executive, and at times been both, is standing down from the board.
In his latest column Re-assessing Games Workshop: Is it a buy? Beddard addressed his previous remarks, Kirby’s departure, and some of the things we may all be keen to hear!
Here’s some excerpts from the article:
Egg on your face Richard?
Egg?
Yes, egg. A couple of years ago you laid into Games Workshop. You said either you were mad or Games Workshop was delusional. Yet in the year to May 2017 the company has increased revenue 21% at constant exchange rates and nearly doubled profit. Care to explain who was delusional?
Ah. I see what you’re getting at. Let me explain. I made that comment in January 2016 when Games Workshop (GAW) published its half-year results. The company had failed to lift revenue convincingly for well over a decade and had recently promised a sales drive, yet sales had fallen.
I actually said: “But when I read Games Workshop’s results, I wonder about what the company says, and what it doesn’t say, and whether I’m mad or it’s delusional.”
Either condition could have been true. I was simply unable to reconcile the company’s rhetoric with its results. Pundits too often project certainty, when actually their confident assertions belie deep misgivings.
It makes the stock market more perilous for naïve investors because the pundit transmits his overconfidence to them. If you don’t know, I think it’s better to be honest about it.
What was it that you didn’t like?
Swayed by comments on my articles from hundreds of angry gamers, I thought Games Workshop might be killing the goose that laid the golden egg.
The company only seemed to be interested in big-spending older customers. By and large these customers have stopped playing Warhammer, the war game that got them into the hobby as teenagers.
They often pay modellers to assemble and paint elaborate models costing up to a thousand pounds.
No doubt these are highly profitable customers, but the company’s inability to lift revenue despite rising prices suggested the number of customers was slowly diminishing.
To maintain profitability Games Workshop threw its efforts into manufacturing and retail efficiency, churning out millions of models as cheaply as possible and selling them through its new one-man store format.
There was very little talk of the game in annual reports and, since gamers were complaining about cost and rule changes that required them to buy new models, I though the company may be throttling the next generation of hobbyist.
Frankly, I didn’t know whether to believe the hypothesis or not. It seemed incredible to me that the company would be so short-sighted, especially considering its oft-repeated ambition to remain in business forever.
But the results suggested something was wrong.
And now. Are you any closer to reconciling the rhetoric and the results?
First off the results have finally, and quite dramatically, lurched in the right direction. Take a look at return on capital (Above)
The first years of that chart are anomalous. Games Workshop suffered a dramatic contraction in profitability due to a wild expansion on the back of a game based on the Lord of the Rings.
The game was a fad that lasted little longer than the film trilogy’s run in cinemas, but Games Workshop had expanded as though its appeal, like Warhammer’s, was permanent.
Even so, in its most recent financial year, Games Workshop was almost twice as profitable as any previous year.
Some of this supercharged performance was due to good luck. 75% of Games Workshop’s revenue comes from abroad, so it benefited from the devaluation of the pound.
Most of it was due to a plethora of Games Workshop initiatives, though, including the one-man stores, rebranding them Warhammer, relaunching the classic Warhammer game in a simpler guise as Warhammer Age of Sigmar, providing a wider range of miniatures at different price points and a drive to recruit better managers.
So the results have changed, what about the rhetoric?
Maybe it’s wishful thinking, but I detect subtle changes of emphasis in the annual report. One paragraph, admittedly buried in the middle of chief executive Kevin Rountree’s spiel, particularly excited me.
It referred to improvements in the range addressing “all aspects of the hobby: collect, build, paint and play”. It’s the last word that heartened me so.
Rountree and chairman Tom Kirby still strike a somewhat maniacal tone, though. They brook no criticism from outside the company, or within.
The biggest risk they say, is ego. Not their own egos, but those of their managers and they will not allow private agendas to rule. They give the impression of a cult.
Reading the testimony of employees on Glassdoor, a site that invites reviews of employers, reinforces that impression. If you don’t fit in – you won’t last long.
I don’t think I’d like to work there, I’d be the square peg, but plenty of people rate it as a great place to work.
Having exercised pay restraint in previous years, the company did the right thing this year and rewarded staff handsomely. It paid every employee a bonus of £1,750 on top of the £250 maximum profit share.
Only the executive directors received no bonus. Read that again, because I don’t think you’ll read it about many other companies.
Oh and Tom Kirby, the contrary, self-flagellating, proselytizing, defender of “the Hobby”, who has at times been chairman, at times been chief executive, and at times been both, is standing down from the board.
Kirby’s going?
Well, I wouldn’t go that far. He’ll still be paid £250,000 a year as a consultant.
OK, the Kirby conundrum aside, it’s a buy then?
Not so fast, hot shot. First of all, one swallow doesn’t make a summer. This was a year in which a lot of things went right. It won’t always be so.
My expectation is the Games Workshop of the next 10 years will probably be more profitable than the Games Workshop of the last 10 years.
I doubt it will always reach the amazing heights it achieved this year, though.
Previous GW Financial Updates:
Games Workshop Group PLC announces that the Board has today declared a dividend of 25 pence per share. This will be paid on 2 June 2017 for shareholders on the register at 28 April 2017, with an ex-dividend date of 27 April 2017. The last date for elections for the dividend re-investment plan is 11 May 2017.
Another sign this toy giant is on the mend, this is the second time in recent months they have paid out to shareholders:
Games Workshop Group PLC announces that the Board has today declared a dividend of 25 pence per share. This will be paid on 2 December 2016 for shareholders on the register at 28 October 2016, with an ex-dividend date of 27 October 2016. The last date for elections for the dividend re-investment plan is 11 November 2016.
Games Workshop Group PLC announces that sales and profits in the four months to 2 October 2016 are ahead of the Board’s original expectations.
Over the four month period of the year to date we have seen sales growth in constant currency terms. Sales have further benefitted from the favourable impact of a weaker pound. These have resulted in growth in reported sales for the period.
However, the Board is aware that this is early in the 2017 financial year and that there are a number of key challenging trading periods ahead.
Well have at it! Can GW see the light at the end of the tunnel now that sales are up, and they are having a gangbuster year? Have they satiated the questions of a curious hobby and non-hobby audience?
So what say ye? Where do you spend you hobby dollars in the Summer of 2017?
About the Author: Rob Baer
Rob Baer
Job Title: Managing Editor
Founded Spikey Bits in 2009
Socials: Rob Baer on Facebook and @catdaddymbg on X
About Rob Baer: Founder, Publisher, & Managing Editor of Spikey Bits, the leading tabletop gaming news website focused on the hobby side of wargaming and miniatures.
Rob also co-founded and currently hosts the Long War Podcast, which has over 350 episodes and focuses on tabletop miniatures gaming, specializing in Warhammer 40k. and spent six years writing for Bell of Lost Souls.
Every year, along with his co-hosts, he helps host the Long War 40k Doubles Tournament at Adepticon and the Long War 40k Doubles at Las Vegas Open, which attracts over 350 players from around the world.
Rob has won many Warhammer 40k Tournaments over the years, including multiple first-place finishes in Warhammer 40k Grand Tournaments over the years and even winning 1st place at the Adepticon 40k Team Tournament.
With over 30 years of experience in retail and distribution, Rob knows all the products and exactly which ones are the best. As a member of GAMA (Game Manufacturers Association), he advocates for gaming stores and manufacturers in these difficult times, always looking for the next big thing to feature for the miniatures hobby, helping everyone to provide the value consumers want.
While he’s played every edition of Warhammer 40k and Warhammer Fantasy (since 5th Edition) and has been hobbying on miniatures since the 1980s, Titans of all sizes will always be his favorite! It’s even rumored that his hobby vault rivals the Solemnance Galleries, containing rulebooks filled with lore from editions long past, ancient packs of black-bordered Magic Cards, and models made of both pewter and resin.
