Followers of Nottingham-based tabletop games and miniatures retailer, Games Workshop LON:GAW can expect two things.
Firstly, the company announced this week that investors can expect at least GBP170m of profit this year – at least an 8.3% increase on profits reported in 2022. This comes on the back of a 13.7% increase in year-on-year core revenues to GBP440m.
However, licencing revenue fell 10% year-on-year to GBP25m. This is continuing a trend that began last year, as previously reported, where in Games Workshop’s half-year report to end-November 2022, licensing revenue from royalty income decreased by GBP5.8m to GBP14.3m. At the time chief executive, Kevin Rountree attributed this mainly due to a high level of guarantee income on multi-year contracts signed in 2021.
Licencing revenue
Prior to 2022, licencing Games Workshop’s intellectual property (IP) was seen as area of future growth for the company, given that today’s younger demographic ‘do leisure’ in a different way to their predecessors. A young person today is more likely to slump down in front of a console, or pick up a mobile ‘phone to ‘game’ as opposed to take a cardboard box full of an army of intricately-painted models to their friend’s house (who also has to have a model army), or to a Games Workshop shop in centre of town, to engage in a three-to-four hour tabletop battle involving rulers, dice and complicated rules.
- Games Workshop’s conquest continues with record profits and licensing boom
- Podcast: Baillie Gifford’s Gary Robinson on US growth stocks
- Domino’s Pizza sees short trades increasing rapidly
That’s not to say that Games Workshop’s core offering – box-set and individual models, rulebooks and associated physical media – hasn’t still got a hard-core of devotees; not least 53-year-old UK Foreign Secretary, James Cleverly, who admitted his darkest secret was being a Warhammer nerd. I suppose those long inter-governmental conferences at the UN General Assembly must fly by if you can get away with painting the latest incarnation of Abaddon the Despoiler under the desk, whilst the speaker drones on about refugees or something.
Accelerated marketing
But three years ago, Games Workshop was signing new video games licences at the rate of one every two to three months, as reported. The company was also hopeful of bringing its IP to the big and small screen with hopes of TV deals and films. At the time management thought that the licencing business was going too slow, and they had started to throw money at the segment to try an accelerate the marketing of their IP.
Since then, however, it seems that uptake has slowed-down, not accelerated, notwithstanding the success of the Total War: Warhammer series in collaboration with Creative Assembly and Sega [TYO:6460], which published its third and final chapter last year, and is busy trying to extract as much money from fans as it can with a deluge of DLCs.
The company is still hoping that in the future licensing will be a significant revenue stream. As Jon Gillard, global head of licensing at Games Workshop said in an interview: “Having been around for decades there’s an ever-increasing number of extremely passionate Warhammer fans – they may not all be involved in every product type all the time, but the IP is in their blood and whether their current thing is miniatures, books, action figures, animation, video games or just wearing a t-shirt to publicly profess their love, they are a very engaged customer base.”
Games Workshop shares with room to grow
Nevertheless, Games Workshop is still one of those shares that has room to grow. Currently residing in the FTSE250, the engaged fanbase that Gillard cites is very loyal – throughout the generations – something that the company hopes to drill into in the second bit of news, its re-release of Warhammer Old World IP, the original tabletop fantasy battle product that has been drawing in customers for four decades. Although the company has not set a date for the re-up, but its has been teasing observers with artwork for a while now.
The company retains a healthy profit margin, has a strong balance sheet, and as management reminded the market, rewards the loyalty of its shareholders with regular dividends – dividends declared and paid in the year were GBP136m, or 415p per share, up from GBP77m or 235p a share in 2021/22.
The company is bubbling under the FTSE100, so it’s a buy and hold scenario. It will be interesting to see the full breakdown of results next month.
Games Workshop opened trading on 14th June at 9,922p and jumped to 10,206p following the announcement.
The company has offered a 17.4% year-to-date return and 56.7% over one-year, with shares ranging from 5,565p to 10,250p. The company has a market capitalisation of GBP3.2bn.
Bridgewise rate Games Workshop as a ‘Hold’ stating: “Games Workshop’s recently released results from 4Q22 indicate that it is performing reasonably well and on par with its peers. It is highly likely that Games Workshop will be mostly tethered to market performance and sector movements for the near term. Overall, Games Workshop’s income and value factors are trending positively, and we, therefore, give it an overall grade of 73 and a ‘Hold’ recommendation.”
- Stock recommendations by Bridgewise. Try a free trial of Data+ for a deeper look.
