Games Workshop Share Discussion Threads

[cockerhoop] 21/9/2018 15:54

Nod,

The more frequent release of product is an attempt to flatten the sales cycles between major new edition releases. Previously sales fell by 20% in the year following a new 40k release. That will not happen this year.

The general economic cycle is clearly not addressed by release frequency but it should be noted that GAW is currently bucking the current retail malaise witnessed on the UK High St.

[nod] 21/9/2018 13:15

hatfull, I don't believe cyclical or secular is switched by the higher frequency of product releases. If it was that simple there would be no secular or cyclical companies. Every company would release more very good products to be secular.

[nod] 21/9/2018 09:38

A mention in the Financial Times under Shares to Watch.

[trident5] 20/9/2018 20:40

A share split would be completely at odds withy their philosophy - of not wasting time and money on things that do not generate a return.

[push n run] 20/9/2018 19:00

I hope they don't waste their time with something so pointless, Woozle1.

[cockerhoop] 20/9/2018 18:34

Somehow doubt it

[woozle1] 20/9/2018 15:54

Must be getting to share split time!
w1

[robinnicolson] 20/9/2018 13:46

More on that PH note:

"As a result, we are increasing our sales forecast by 5% to £215m and PBT by 7% to £62m. We continue to expect profits to be lower than last year due to lower gross margin (mix & capacity expansion) and higher operating costs (new openings, investment and higher wages). Games Workshop has also announced a 35p dividend, which is similar to the dividend announced this time last year and reflects the cash flow in the period. We are increasing our target price to 3,250p to reflect greater confidence in the long term outlook."

[hatfullofsky] 20/9/2018 13:09

Nod,

Cyclical based around new game / figure releases. This has been the historical problem. Earning were lumpy after a new release (ie last year) then tail off until the next one (2 -3 years). If GAW move out of this cycle by releasing more figures / games, more licensing deals then the earnings are maintainable and we will re-rate to the fundamentals, which are exceptionally strong.

[robinnicolson] 20/9/2018 12:33

More about that PH broker note (running to catch up):

FT:

Peel Hunt, Games Workshop’s house broker, said it was raising year-end revenue and profit forecasts by 5 per cent and 7 per cent respectively, to £215m and £62m. The broker also increased its share price target to £32.50 “to reflect greater confidence in the long-term outlook”.

[cockerhoop] 20/9/2018 12:25

GAW Agm 19th Sept 2018

I was expecting the earlier start time – 9:30am, along with the dramatically changed format from previous years would reduce the turnout at the Agm. These fears proved unfounded as probably 20 or so investors filed into a GAW office (rather than Bugmans Bar) for the formal business.

As last year the formal business was swiftly passed with the minimum of fuss and concluded without incident. No questions were taken collectively of the board but investors were invited to chat informally with directors whilst taking coffee.
I managed to join a small group asking Kevin Rountree questions – as last year Kevin was open and honest in his answers. All answers here are my interpretation rather than quotes from Kevin.

Q. Why the change in Agm format?

A. Last year took a large amount of senior management effort in the month before the Agm to benefit 8 investors (including 4 ex-employees). The company is currently extremely busy and their time is better utilised sorting the operational issues during current expansion and release schedule.

Q. Your rate of release has been relentless, can it continue especially since new edition of 40k released in 2017 & new edition of AoS this year.

A. Moving away from the major boom & bust new edition release every 4 years model to the more frequent release schedule currently witnessed this year. Ie Kill Team, Rouge Trader, Battle of Pelennor Fields, Adeptus Titanicus all released in quick succession. The increased pace of release was confirmed by long term War Hammer veterans attending the agm.

Q.Which area’s of geographic expansion are being targeted?

A. US & Germany. Kevin thinks Asia is difficult as he doesn’t have a good plan yet. There isn’t a network of independent trade stores to utilise so any expansion via GAW stores will be incremental ie new Hong Kong store.

Q. New Amazon 5 series LOTR prequel due for release in 2021/2. Effect?

A. Whilst GAW have a LOTR licence for the previous film characters a licence would have to be negotiated with Amazon for any characters/settings created for the series. So no direct benefit without a licence.

Q. Rationale for Part works & business model?

A. Recruitment of new customers. It’s a royalty type model with the distributor who pay for GAW to provide the content. Subscriber numbers better than expected. Distributor paid for the TV ads!!

Another new recruitment initiative under Kevin is the schools club program where GAW craft skills are taught in an after school club with GAW providing free starter kits. I recently noticed my local store had a board with 6-8 local secondary schools listed.

Q. I mentioned my partner recently ‘finding’; the Horus Heresay via Audible and that she thought it a cross between Game of Thrones & Star Wars which I considered worthy of consideration for a film or series.

A. Kevin suggested digital book sales were growing really well via Audible type apps and that if a film/series was made it would likely to be from the Black Library rather than 40K of AoS based although he cautioned that only 1 in 20 film options purchased ever make it to the screen.

Q. What percentage of trade sales are online?

A. Not monitored but Kevin guessed at 20% ie approx. 50% of trade sales. So ultimately 40% of GAW business is carried out online.

Q. Can we have a tour of the factory?
A. No chance, we’ll take you on a tour when we’ve got something to show you. Kevin alluded to current expansion creating temporary inefficiencies during works etc.

My general feeling from my own scuttlebutt that sales were going pretty well appeared to be confirmed by Kevin’s answers (without explicitly stating it!!)
Kevin is trying to get to a 50/50 split between 40k & AoS, previously it was 70/30 but is now more evenly split (perhaps 60/40??). Because of the hobby centre nature of GAW and the fact the manager is always a participant the company has to guard against the manager promoting 40k ahead of AoS as it’s often his (the managers) chosen poison so to speak being a more mature player and AoS attracting a younger player. My big take from the Agm is Kevin’s very strong focus on recruitment.

As 11am approached directors left 1 by 1 to attend the board meeting with Rachel returning to prise Kevin away from any further questioning at 11:05. I note a fairly bland trading statement was released at 12:05 by which time myself and Julian had adjourned to a café to debrief and have a very interesting chat about investing.
As an aside in a brief chat with Neil he suggested the new Dallas concept store was very well received – He compared it to a Rapha Clubhouse where cyclists have a coffee/food whilst gazing adoringly at high end cycle clothing. I imagine Neil is a cyclist (who are obviously good blokes!!).

[nod] 20/9/2018 12:14

You are asking whether GAW will be cyclical or secular in the future. Most secular companies produce FMCG that people have to buy even during recessions. GAW has always been cyclical - driven by the ups and downs of consumer demand, fads and trends. I can't see that changing. It makes luxury products, not essential products. It doesn't go out of business as it can shrink its overheads quite quickly.

[hatfullofsky] 20/9/2018 11:22

Looks like the market enjoyed that statement. Are we moving in to a less cyclical model form GAW, if so there is some way for this to go

[robinnicolson] 20/9/2018 11:00

Oh, so Peel Hunt have quietly increased their price target by c.20%.

In other news, I noticed that Brian Blessed OBE is playing a character in one of the upcoming Black Library audio dramas:

hxxps://www.blacklibrary.com/coming-soon/november/gotrek-realmslayer-mp3.html

Is this employment of an established actor something new by GW?

[nod] 20/9/2018 09:17

Early hours but new highs, blue skies.

[argylerich] 20/9/2018 08:36

Peel Hunt 'Hold' price target 3250. That's nice of them!

[shanklin] 20/9/2018 07:57

push n run

Fair comment albeit IIRC GAW are investing quite heavily in the business, in order to grow revenue and profits. So much of the cash they are generating will be being deployed to this end.

[push n run] 19/9/2018 20:34

I'm not sure that flat dividends indicate that the business is still growing strongly, Shanklin. Of course it is only Q1.

[nod] 19/9/2018 12:41

The last reference to Board expectations was given with the Results on 31 July: "the directors confirm that they have a reasonable expectation that the Group will be able to continue in operation "Good news then.

[mozy123] 19/9/2018 12:33

The GAW never gives any detail to trading updates. They are always one liners.

[shanklin] 19/9/2018 12:29

Everything other than the PH forecasts would appear to suggest the business is still growing strongly.