Games Workshop Share Discussion Threads

[epo001] 26/8/2018 13:50

I see aspirational as wanting something not yet in reach, this is how the customer base is grown (or how a reputation for "being worth the money" is acquired). People who can simply afford Apple or GAW products are the basis of a stable revenue stream.

[epo001] 25/8/2018 16:22

New recruits age into the GAW fold and are, I suspect, a self selecting population. Apple's toys are "aspirational", it it even possible for GAW to make their products have the same crossover appeal?

[nod] 25/8/2018 06:10

Very interesting appraisals by Richard Beddard. He gives GAW an overall score of 80% with 100% for everything except valuation which is neutral and gets zero points. This seems fair. Richard suggests GAW needs to keep more customers in the hobby longer. This should occur naturally with a vast increase in new customers compared with three years ago. So, if the ratio of customers staying in the hobby remains the same, there will be a lot more of them. I believe the solution to growth is to keep increasing the number of new recruits every year. Sounds simple. Apple does it.

[santr0] 24/8/2018 20:32

Thanks for the article!
There is also another interesting article by the same author about GW from last week. hxxps://www.ii.co.uk/analysis-commentary/re-assessing-games-workshop-it-buy-ii438041/

[robinnicolson] 24/8/2018 17:43

"Games Workshop: Verdict on this stunning performer"

A long article by financial analyst Richard Beddard on Interactive Investor:

www.ii.co.uk/analysis-commentary/games-workshop-verdict-stunning-performer-ii506649/

[cockerhoop] 24/8/2018 15:51

BVXP though is 13 people working in a single shed :-). GAW still provides a better EV/FCF ratio than BVXP even after the Cap Ex.GAW Cap Ex well below 50% in the last 2 years as growth kicked in. Both exceptional companies!

[robinnicolson] 24/8/2018 14:13

"...feel particularly positive about Games Workshop's low capital expenditure".

I thought that Games Workshop's capital expenditure to operating cash flow ratio is high, averaging nearly 40% over the last five years. Compare that with a company like Bioventix...an unbelievably profitable business with a capex/operating cash flow ratio over the last 5 years averaging only 1.3%

[nod] 24/8/2018 13:21

"Wotton and AAA-rated co-manager Brendan Gulston feel particularly positive about Games Workshop's low capital expenditure". ROFL as my grandma used to say. Are they Wallace and Grommet in disguise?The good news is, if we are a patient in recovery we have a long way to go.

[robinnicolson] 24/8/2018 13:12

"is backing a recovery at miniature war gaming company Games Workshop". Sloppy writing by the journalist.

The article headline read:

AAA-rated Wotton rolls the dice on Games Workshop

Ken Wotton, manager of the Livingbridge UK Multi Cap Income fund, explains why Games Workshop's recovery has further to go.

[greyingsurfer] 24/8/2018 12:00

is backing a recovery at miniature war gaming company Games Workshop.

A WHAT?

[robinnicolson] 24/8/2018 11:39

Apparently GW hobbyists can spend up to ONE YEAR painting the more complex models before entering them in painting competitions. Annual award winners can be seen on the Golden Demon website.

[robinnicolson] 24/8/2018 11:29

Citywire:

AAA-rated Ken Wotton, manager of the Livingbridge UK Multi Cap Income fund, is backing a recovery at miniature war gaming company Games Workshop.

'It is a unique business that has done brilliantly over the last couple of years,' he said.

'It has been around for quite a long time, but they had some issues with over-expansion in terms of stores around the UK probably about four or five years ago.'

Since then, Wotton explains there has been a change of management.

'The current management team has really honed the business by focusing on their demographic, which is a combination of teenage and early twenties men, who are sort of discovering it for the first time, and late 40s to late 50s men, who probably discovered it 20 to 30 years ago.'

Investors have responded positively to the measures that have been put in place by the new management team, with Games Workshop's share price up by 102% over the past 12 months.

Wotton and AAA-rated co-manager Brendan Gulston feel particularly positive about Games Workshop's low capital expenditure. For example, its stores are typically not on the high street and tend to be 'destination stores', resulting in lower overheads.

While some investors have concerns about Games Workshop's store-based model, Wotton takes a different view.

'Long-term, does this sort of thing get superseded by online? Actually it has not happened. There have been a number of years where that could have happened and it hasn't.'

In fact, looking ahead the fund manager believes Games Workshop's online presence can drive the business forward.

'They have online community groups and they get a lot of feedback through the online channels about what is working and what is not,' he explains.

The fund manager puts the company's strong performance down to its store rollout, particularly in the US.

Wotton adds that Games Workshop has used data from its online proposition to better understand their customers before they launch a store.

'If they want to go into Germany, for example, they already know where there are people who are enthusiastic about this product because they are already engaging with it online.'

This is why Wotton believes there is huge growth potential for store rollouts across different countries.

'It is not just a UK thing, it is an international community of people who are enthusiasts for the Warhammer game and therefore are prepared to pay what, to a average person, would be quite a large amount of money to buy these models,' he explained.

He adds that customers are willing to spend hundreds of pounds on buying a model to paint and to use in these games.

'What they [Games Workshop] have tapped into is this international community of people who are hugely enthusiastic about the game and product,' Wotton said.

The fund manager notes that there is no direct competitor anywhere near the scale of the success of the Warhammer game.

'It has been good earnings growth story. Their policy is to pay out any excess cash they generate as a dividend,' he noted.

Since launch in June 2017, LF Livingbridge UK Multi Cap Income has performed strongly. Over the 12 months to the end of July, the managers have returned 16.8% versus 5.3% by the average fund in the UK equity income sector.

[nod] 24/8/2018 02:46

Robin, a very interesting look back at some of Tom's plans back in 2008 and before, regarding North America growth. I've been regurgitating his thinking about the USA since then. Unfortunately the GFC resulted in a loss of both indies and own stores so we lost quite a few years. The company's view in the early 00s was for hobby shops in large shopping malls. Not in the centre of the mall but often in one of the less expensive wings. The retail landscape has changed since then, although the big malls still attract increasing foot traffic while the town centres around the globe have struggled to compete with malls as well as online retail giants like Amazon, who have the massive advantage of paying no taxes. GW's expensive USA stores were not sustainable following the GFC. The downsizing to one man stores began and was still going on in 2013. We had to buy out a lot leases, resulting in a few years of impairments and reorganisation. That said in 2012/13 the USA was the fastest growing area and had overtaken the U.K. in sales although not profits due to the high store costs. However, much higher visibility and awareness of our brand in the USA placed us in a good position for the next up-wave in the hobby.In New Zealand, our GW stores in malls closed down after the GFC and eventually the indies in the town centres followed. In Auckland, we have only only one GW store operating in a run-down and difficult to reach location by public transport for three quarters of the City and even difficult by car. Auckland has many WH hobbyists but they will be spread out over a large geographic area. I don't know where kiwi kids would go to play these days, as there seem to be few options.

[robinnicolson] 23/8/2018 16:18

As an investor I am not overly concerned about Forge World price increases. GW's margins show they have pricing power over their customers. As management said about their products:

"...we sell them for the price that we believe the investment we have made in quality is worth".


In his book "Invest in The Best", KA-L wrote this memorable line about GW:

"...such is the hold it has on its hobbyists that I have likened it to the nearest thing to legalised drug dealing on the Stock Exchange."

[robinnicolson] 23/8/2018 12:52

From a FE Trustnet interview last month with Keith Ashworth-Lord of the 'Buffettology' fund:

...the final type of moat is held by businesses that Ashworth-Lord describes as "owning a piece of the customer's mind" and an example here is one of his pet-favourite stocks, Games Workshop.

"The people who play that would spend their last dime on it," he continued. "They would find a way to play it if they were 100ft underground."

"People asked me, 'why are you sticking with that? It is a loser, it is going nowhere'," he said.

"But everything about the business has been steadily improving over the last six or seven years. The reality was that all the operating ratios, the things that I judge companies by, were going the right way. It was moving from prime sites to secondary and tertiary ones, while staff costs to sales were also going down, with the move to single-manager stores.

"You could see the sales outlook was rising, so cost-cutting wasn't hurting it there, and more importantly, operating profit per employee was rising. So all of this confirmed to me it was executing on everything it said it was going to do and I thought that at some point or another, the market is going to recognise this."

While Ashworth-Lord is a keen student of Warren Buffett and Benjamin Graham, he said his experience with Games Workshop reminded him of some words of wisdom given to him by a fund manager much closer to home. This was Nick Train, manager of the LF Lindsell Train UK Equity fund, who told him: "Always invest in great companies, because the surprises tend to be pleasant."

[epo001] 23/8/2018 12:34

The thing with Internet blowhards is that they usually have no skin in the game. E.g. people complaining about Apple prices are Android users finding some reason to whine about Apple "I don't buy Apple because it is so expensive".

The Youtube commenters are probably not actual FW customers. As with anti-Apple Youtube videos this is someone monetising anti-GW sentiment. It means nothing.

Having made it, the comparison with Apple appeals to me. If GW know their customers and give them the goods they expect at a high quality then their customers will find the money.

GW alienating their customer base would indeed be of concern.

[santr0] 23/8/2018 12:12

Yes, FW always was a very expensive line. My main concern with it as recently we have seen a number of events that could indicate some potential issues with the management. Space Wolf codex issues show that the codex was clearly rushed to the point that they need to fix it before its release. Now this significant price increase without any real explanation.
Can't say that any of these issues are really big and are seriously threatening the sales, but still something to have an eye on since we didn't have any significant anticonsumer moves (something that they did a lot before 2016) by GW for quite a while. Probably it is nothing serious but it also could be a very early sign of returning to the old style of management which didn't work well.

[robinnicolson] 23/8/2018 09:58

A Google search of "Forge World expensive" will show that hobbyists have been complaining about the prices for at least the last ten years...

[shanklin] 23/8/2018 09:00

santr0

That youtube link you posted is certainly generating some negative feedback re GAW.

[robinnicolson] 23/8/2018 08:57

Thinking about the potential growth story for GW, the company used to publish an interesting chart in the annual report. It illustrated sales per capita by geographical area. Back in 2008 UK GW sales were approx. 53 pence per head of population. In comparison The Americas was less than 10 pence per head.
Management said "in the long term we see no reason why we shouldn't achieve similar levels of sales penetration in each of these markets to those which we currently have in the UK. Achieving this would at least treble the current level of sales".

Ten years later they have managed to double sales, whilst the number of GW stores has increased from 334 to 489. Last millennium (!) Kirby believed the US market alone could support 700-800 GW stores, whilst more recently he saw the potential for 200 GW stores in the UK. Both those projections were made before the conversion to single-person retail stores. The latter have a smaller catchment area but how many GW stores could the UK realistically support?

The potential in Asia Pacific must be huge, especially with their youthful populations and the growing middle class. Does anyone have any insight into the AP markets?

[nod] 23/8/2018 01:05

Goblin Gaming was mentioned recently as selling GW products at 20% off. They seem to be a typical indie with one shop in Navigation Road, Northwich and a very good online store. They must offer great service as their reviews are outstanding. I went on Google Maps to look them up. They have a 360 video of the interior. They sell many brands of a similar ilk. Open until 11pm three days a week.

[santr0] 22/8/2018 16:33

What do you guys think about the latest price hike for the Forge World range? (
An increase of 20+% for many products sounds like a massive deal for many customers, obviously, they are not too happy about it. Although it only touches the Forge World line (which was always rather small compared to the core line), it is still can cause some damage to the overall reputation and sales of the company.

[robinnicolson] 22/8/2018 12:10

Yes, an online store must have a 'Shop Front Channel'.

Looking at what constitutes the 4,100 trade outlets: "Any method of Distance Selling which is not associated with or connected to any particular retail premises...shall constitute a single 'Outlet'."

GW definition of the Distance Selling Channel:"...includes mail order, TV shopping and the Internet."

Obviously GW merchandise is near-perfect to sell online. Fairly high value, low weight and no sell by date!

From the latest annual report: "Sales to trade accounts which sell primarily online continue to perform well."