Games Workshop Share Discussion Threads

[sogoesit] 12/1/2021 16:17

Sharesmag today says "profit taking after strong first half":

"Shares in fantasy miniatures group Games Workshop (GAW) dropped 7.7% to £107.4 despite reporting a 27% year-on-year increase in first half revenue and 57% growth in operating profit.

Having delivered first half profit just above prior guidance, there was some disappointment that recent trading was merely 'in line with expectations.'

SUFFERING FROM SHIFT TO VALUE

The strong past performance in the shares combined with shift in investor focus away from companies benefitting from lockdown after the first vaccine was announced in November is contributing to today’s weakness in the shares.

Revenue in constant currencies grew 27% to £186.8 million which led to a 57% growth in operating profit including royalty income to £93.2 million as the company demonstrated positive operating leverage.

Increasing volumes led to higher gross margins of 75% compared with 69% last year while the cost to sales ratio dropped to 28% compared with 36%, leading to a higher operating margin of 49.5% (39.9%) including royalty income.

As we have previously noted the high operating leverage at Games Workshop means that it converts a high percentage of incremental revenues into profits.

Of the £39.8 million growth in revenues, £34 million was turned into incremental operating profit, representing a ratio of 85%.

ONLINE SUCCESS

The 529 retail stores remained closed or restricted during the six months leading to a 19% fall in revenues, but this was more than offset by online channels which grew 87%.

Cash generation improved by £40 million to £100 million, an improvement of 65% on the prior year leaving the group with period end cash equivalents of £96.5 million.

A dividend of 60p was declared on 7 December 2020 and is due to be paid on 25 January 2021."

[wildshot] 12/1/2021 16:11

Hi discodave45 I think the tender away from PwC is a governance compliance issue. GAW (I read) are quite happy with PwC, it is just good corporate governance now to not have the same auditor for ever and a day. I could be wrong but I think there are some regulations/best practice which stipulate that you need to tender/rotate auditors after so many years of being in situ.

[discodave45] 12/1/2021 16:02

Thanks.Just very strange!.PWC also getting the boot or did they decline to re-tender?.

[shanklin] 12/1/2021 15:45

Well said discodave45

The outlook section is four paragraphs of BS and does not even include the sentence on December trading.

Quite as bizarre as the 06-Nov-20 TS which failed to mention sales whilst provide an initial estimate of H1 PBT.

[discodave45] 12/1/2021 15:40

Think it's also a combination of other things, like December sales being "broadly" in line with expectations, which most have assumed to mean they are slightly below.I'm a bit confused as well with regards to the inclusion of an outlook statement that was actually just a load of waffle and management speak - most previous interims haven't included an outlook unless a trading update has been specifically included within the interims. So why did they bother this time and then say nothing of any use?.Oh well, whatever the reason for a dip it provides opportunity.

[recut more] 12/1/2021 15:13

Its dropped because of the dividend cut, which is bloody ridiculous, alliance news put this out 'Games Workshop Group PLC on Tuesday lowered its interim payout and warned on current trading conditions, despite reporting a solid rise...' The report hasn't been perceived correctly.

[trainsailing] 12/1/2021 12:49

Today’s drop just a tiny blip on the chart. Onwards and upwards.

[malcontent] 12/1/2021 11:55

chart is still a beauty and a strong hold for me from a good while ago now

[melody9999] 12/1/2021 10:46

The 'reduction in interim payment' ignores the 80p paid 7 days after period end. Though I think the RNS could have made more mention of this.

"Sales for the month of December are broadly in line with our expectations."
Bear in mind retail was affected by 2nd lockdown

just business as usual

[luderitz] 12/1/2021 10:45

As Capitalist said further back the drop is probably due to "sell on the news"

also shares rarely go up in a straight line.

[red5] 12/1/2021 10:39

its a buying opportunity to me

[red5] 12/1/2021 10:39

its a buying opportunity to me

[scooper72] 12/1/2021 09:12

Yep. There is something to be said for share prices not just continuously going up too steeply. It gives a chance for serious investors to get in on the drop and once the price has consolidated it can carry on up with more confidence. Of course part of me wishes I had taken some profits yesterday but when I look at excellent companies that I have traded I generally have done better when I have just left my holdings alone

[actomox] 12/1/2021 09:03

this is a well managed company which seems to have made all the right decisions at the right time so I do not see the current valuation as in any way 'crazy'. Turnover and profits keep growing.

[daijavu] 12/1/2021 09:01

Could today's drop be in any way connected to the 5% drop in retail shares this morning/ BooHoo also dropped and maybe for the same reason.

[1rcl] 12/1/2021 08:52

A rather strange choice of focus from Alliance News: "Nottingham-based Games Workshop Group PLC on Tuesday lowered its interim payout and warned on current trading conditions, despite reporting a solid rise in profit and revenue for the period."

Truly bizarre. Still, I should be grateful as an active investor; this creates opportunities.

[1smw] 12/1/2021 08:49

We don't have gross margins by quarter so I can only look at them at PBIT and PBT levels. If I add back £5m to Q2 PBIT and PBT (because it was accounted for there) then I have Q1 PBT margins 50.0%, Q2 44.7% and PBIT margins Q1 53.3%, Q1 50.2%. I was pointing it out as much to explain my forecast as anything. Sales mix happens in all businesses. Forecasting for May 22 is too difficult at present, but it is clear there will be more growth as they have highlighted improvements to come, inter alia, through factory capacity, logistics, stores actually being open and less "stock outs" (last of these will be tied to first and second point). Businesses spend much time and effort recruiting customers (GAW being one of them), the recent recruitment of new customers and growing customers will, of course, lead to losses of some of customers in the future. However, they will have more than they started 2020 with and these and further new recruits will continue to drive sales growth.

[cockerhoop] 12/1/2021 08:37

You might want to look at Note 2 Shanklin, certainly booked in H1 but paid in December.

[scooper72] 12/1/2021 08:36

Really not like Bitcoin. It has fundamentals and does not run solely on momentum. It has been close to all time highs so not surprising people want to take some profits. Bitcoin goes up and down by over 15 or 20Percent in a day. I'm tempted to take some profits here in one of my recent positions which was originally meant as a shorter term trade. But at the moment I am thinking of turning not into a long term hold

[shanklin] 12/1/2021 08:35

Anybody any thoughts on how much this will cost?

"In line with our earlier announcement regarding repayment of furlough support and other government subsidies, we are also in the process of cancelling the UK expanded business rates retail discount scheme for 2020/21. We made no claims for financial support or subsidies from government during the period."

Obviously a good idea as leaves them whiter than white in terms of paying dividends, rewarding staff, etc.

[kpe] 12/1/2021 08:35

Crazy valuation. Sales and profit not running in tandem with share rise.Hornby spring to mind.As soon as the fundamentals slip this is going fall like a hammer........

[shanklin] 12/1/2021 08:34

The £5m staff bonus was in H2