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Games Workshop surmounts store closures

The fantasy games outfit has thrived despite widespread store closures
July 27, 2021
  • Logistical problems in the early part of 2021
  • Strong growth in independent retail outlets

Typically, bosses at Games Workshop (GAW) take a conservative, or perhaps restrained line when assessing the company’s results. But there is no hiding the fact that hobbyists were busy in FY 2021. Full-year figures were in line with the May trading update, with a near one-third increase in sales and a 73 per cent increase in operating profits (at constant currencies) to £156m.

A renewed focus on hobbies and increased leisure time helped mitigate the negative effects of big drops in footfall. Activity at the company’s stores and trade accounts severely curtailed through the year, while much of the gaming aspect of the product offering was heavily restricted. If that wasn’t enough, logistical delays meant that deliveries to its Continental European customers were well below expectations during the opening months of 2021, which makes financial performance for the year even more remarkable. No one could have predicted events over the past year and a half, but the various strands of the business have served to compensate one another when in-store trading was constrained. The company’s “long-term goal is to have all three channels (retail, trade and online) growing in harmony” and it seems that it is someway along the road to achieving this.

The global footprint continued to deepen despite the pandemic. Around 55 per cent of sales came via independent retailers, the number of which increased to 5,400 from 4,900 in FY 2020. Games Workshop now sells into 73 countries.

The warhammer-community.com, described as “the cornerstone" of the company’s online presence, registered a 16 per cent year-on-year increase in site visits and there was a commensurate increase in email lists through the period. Online subscribers now approach the 600,000 mark.

Looking ahead, hopes are high for the release of the 'Warhammer +' service. It promises to provide subscribers with free exclusive miniatures, together with access to animation shows and other activities. The company notes that previews for the service “quickly became some of our most viewed content of all time”.

The full-roll out will be keenly watched by analysts and investors, as will the ability of the company to leverage its IP by growing its licensing income. For now, the shares change hands at 29 times consensus earnings, as provided by FactSet. It remains a difficult company to value due to a dearth of genuine peers, but the long-term momentum - a near 30-fold total return over five years - convinces us to maintain our buy recommendation. Buy.

Last IC view: Buy, 9,175p, 11 Mar 2021

GAMES WORKSHOP (GAW)  
ORD PRICE:11,377pMARKET VALUE:£3.73bn
TOUCH:11,350-11,400p12-MONTH HIGH:12,260pLOW: 8,310p
DIVIDEND YIELD:2.1%PE RATIO:31
NET ASSET VALUE:599pNET CASH:£38m
Year to 30 MayTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201715838.495.174.0
201822174.3184126
201925781.3203155
202027089.4219145
2021353151373235
% change+31+69+70+62
Ex-div:5 Aug   
Payment:13 Sep