Games Workshop Share Blog – Interim Results Year Ending 2020

Games Workshop has now released their interim results for the year ending 2020.

Revenues increased when compared to the first half of last year due to a £16.7M growth in trade revenue, a £3.3M increase in retail revenue and a £3.2M growth in mail order revenue.  Amortisation declined by £432K and inventory provisions were down £505K but depreciation increased by £706K and other cost of sales were £4.2M higher to give a gross profit £19.2M higher.  Other operating expenses grew by £6.3M but royalty income was £5.2M higher to give an operating profit £18.4M up.  Finance costs increased by £638K and tax charges were £3.1M higher which meant the profit for the year was £47.5M, a growth of £14.6M year on year.

When compared to the end point of last year, total assets increased by £47.3M, driven by a £29M recognition of right of use assets, a £10M increase in receivables, a £3.6M growth in cash, a £3.8M increase in property, plant and equipment and a £2M growth in other intangible assets, partially offset by a £2.5M decline in inventories.  Total liabilities also increase during the period due to a £28.4M recognition of lease liabilities and £11.4M of dividends payable, partially offset by a £6.8M reduction in current tax liabilities.  The end result was a net tangible asset level of £101.4M, a growth of £12.4M over the past six months.

Before movements in working capital, cash profits increased by £23.8M to £71.9M.  There was a cash outflow from working capital but this was similar to last time and after tax payments increased and finance lease repayments were recognised the net cash from operations was £37.9M, an increase of £10M year on year.  The group spent £8.5M on fixed assets, £1.5M on software and £3.7M on product development leaving a free cash flow of £24.3M.  Of this, £21.1M was paid out in dividends to give a cash flow of £3.9M and a cash level of £33M at the period-end.

Sales for December were in line with expectations. The group have made some good progress implementing their European ERP system and upgrading their warehousing capacity and systems in both Memphis and Nottingham.  All projects are broadly on track and in line with spending limits.

The operating profit for the Trade division was £31.5M, a growth of £9M year on year with 200 new trade accounts opened and growth in all key countries.  The operating profit for the Retail division was £1.8M, a decline of £3.1M when compared to the first half of last year with 12 new stores opened.  The operating profit for the Online division was £15.7M, an increase of £2.6M when compared to the first half of 2018.  Users accessing the website community were up 48% and sessions per user have also increased. 

The operating profit for the Product and Supply division was £16.5M, an increase of £6.9M year on year.  The group made royalties of £10.2M, an increase of £5.2 when compared to the first half of last year.  This includes £6.2M of guaranteed income on the signing of new license contracts as opposed to £1.6M last year so this may not be repeated at such a high level going forward.

The development work on a TV series based on the Eisenhorn series of novels continued to make good progress.  No production contracts have been signed yet nor have they booked any guaranteed royalties. 

At the current share price the shares are trading on a PE ratio of 33.7 which falls to 28.9 on the full year consensus forecast.  The shares are yielding 2.3% which increases to 2.5% on the full year forecast. 

Overall then this has been another good period for the group.  Profits were up, net assets improved and the operating cash flow increased with plenty of free cash being generated.  All divisions performed well with the exception of retail and it should be noticed that the royalty income is quite lumpy and may not be as high going forward.  The great performance comes at a price though with the forward PE of 28.9 and yield of 2.5% these shares are no longer cheap.

On the 11th February the group announced that CEO sold 10,000 shares at a value of £720K; finance director Rachel Tongue sold 4,700 shares at a value of £338K; and chairman Nick Donaldson sold 3,300 shares at a value of £237K. These shares are looking pretty expensive.


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