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Games Workshop dividend cut no matter

A cut to the annual dividend hasn't upset the market, thanks to the shares' mighty yield
July 27, 2016

Cooling sales growth, a contraction in the gross margin, and a hefty cut to the dividend might not make many Games Workshop (GAW) shareholders very happy right now. But City analysts weren't perturbed by the miniature maker's latest set of annual results and nor was the market-at-large - the shares barely moved on their release. Adjusted pre-tax profit still came in ahead of broker Peel Hunt's forecasts and underlying trading saw a significant uptick after a disappointing December. This is something chief executive Kevin Rountree echoed: following a sluggish Christmas, a "thorough" review of the group's operations led to "four out of five months of profitable sales growth".

IC TIP: Buy at 455p

There are a number of new initiatives still to come as well. These include broadening price points across the range, launching new products into new markets and making better use of marketing and merchandising across the business on a global scale. Games Workshop has also overhauled the way it recruits staff, particularly in North America where the business operates 100 stores.

Analysts at Peel Hunt expect adjusted pre-tax profit of £17m for the year ending May 2017, giving EPS of 41p, compared with £16.9m and 42.1p in FY2016.

GAMES WORKSHOP (GAW)
ORD PRICE:455pMARKET VALUE:£146m
TOUCH:455-475p12-MONTH HIGH:625pLOW: 420p
DIVIDEND YIELD:8.8%PE RATIO:11
NET ASSET VALUE:166p*NET CASH:£11.8m

Year to 29 MayTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201113119.546.863.0
201213521.451.558.0
201412412.425.20.0
201511916.638.352.0
201611816.942.140.0
% change-1+2+10-23

Ex-div: 28 Apr

Payment: 3 Jun

*Includes intangible assets of £11.9m, or 37p a share