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Games Workshop faces tougher year

The model-maker has been tasked with matching an excellent 2017/18 financial year
July 31, 2018

We interpreted the results day fall in Games Workshop's (GAW) shares as indicative of profit-taking, seeing as the stock has risen by a whopping 90 per cent over the last 12 months. Results were largely as expected, with sales and reported profits surging ahead despite increased operating costs and negative currency effects. There was a slight contraction in the gross margin to 71.4 per cent, as the business struggled momentarily to deal with the extraordinary surge in demand, as well as a higher mix of trade sales. This year analysts expect margins to land at around 70 per cent if trade sales make up a greater proportion of revenues and stock provisioning continues.

IC TIP: Hold at 3045p

The group also faces a tough first quarter if it hopes to match last year's comparators. In fact, management already expects sales to be 5 to 10 per cent lower year on year. Thankfully, cash generation rose by two-thirds to £82.3m last year, leaving the group well funded to explore new avenues, including animation and live action. 

Analysts at Peel Hunt still expect adjusted pre-tax profit of £58m for the year ending May 2019, giving EPS of 144p, compared with £74.5m and 183p in 2017.

GAMES WORKSHOP (GAW)  
ORD PRICE:3,045pMARKET VALUE:£987m
TOUCH:3,045-3,055p12-MONTH HIGH:3,240pLOW: 1,554p
DIVIDEND YIELD:4.1%PE RATIO:16
NET ASSET VALUE:261p*NET CASH:£28.5m
Year to 3 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201412412.425.20.0
201511916.638.352.0
201611816.942.140.0
201715838.495.174.0
2018**22074.5185126
% change+39+94+95+70
Ex-div:tbc**   
Payment:tbc**   
*Includes £15.6m worth of intangible assets, or 48p a share **Dividends are paid quarterly – last 30p instalment paid 27.07.18