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View Full Version : GW Shares Drop As Operating Profit Falls Vs LY



Kegslayer
08-12-2014, 13:11
From dakka.

Pretty much, they lost some more off their profit margin and stocks are taking a bit of a hit due to it.

At the rate of this fall, the stock price might go under it's 2014 low set in FebruaryMarch of this year.

http://www.lse.co.uk/AllNews.asp?code=jcj9xozw&headline=Games_Workshop_Shares_Down_As_It_Warns_On _Sterling_Hit_To_Profits


LONDON (Alliance News) - Games Workshop Group PLC saw its shares fall Monday after it said it now expects its operating profit for the first half to be slightly lower than last year, hit by the strong pound.

Shares in the maker of miniature figures and gaming sets were down 6.7% Monday morning at 506.99 pence, after it said that while trading in the six months to end-November has been "broadly in line" with its expectations when reported at constant currency, its taking a sterling hit at actual rates.

"The company has been exposed to the continuing strength of sterling, particularly against the US dollar and euro in the period reported," the company said.

Games Workshop said that it now expects to report a first-half operating profit GBP1 million lower than the prior year, when reported at actual rates. For the first-half of last year it generated an operating profit of GBP11 million.

The company said it will releases its half-year results on January 14, 2015.


http://investor.games-workshop.com/2014/12/08/trading-statement/#more-%27



Games Workshop Group PLC announces that trading in the six months to 30 November 2014 at constant currency has been broadly in line with the Board’s expectations and 2013/14 first half performance.

The Company has been exposed to the continuing strength of sterling, particularly against the US dollar and euro in the period reported. The adverse impact in the six months to 30 November 2014 will result in operating profit at actual rates being approximately £1 million lower than 2013/14 first half performance.

The Company’s half yearly report for the six months to 30 November 2014 will be released on 14 January 2015.

aprilmanha
08-12-2014, 13:39
Global trading is always something I can't get my head around, its quite amazing that a change in currency values can make a £1M profit difference!

tu33y
08-12-2014, 14:28
yes. exchange rates. that's the exact reason. in other words...

"No... because... you know... things... so reason that isn't my fault. not my fault. pound... that's it. pound, yes."

Katastrophe
08-12-2014, 14:41
I'm sure we'll also see a drop in revenue but they likely don't want to advertise that prior to the report being released. It'll be interesting to see whether they were able to drop their operating costs any more this 1/2 year as they did in the previous year. Many of us asked how deep could they cut before having no more reductions.

Tyberos
08-12-2014, 15:04
Well I don't know about anyone else but I for one have certainly bought less this year. I doubt there's much more they can cut without significantly impacting their product quality. The proof will be in the pudding if their revenues have fallen below what they were in the same half of the previous year. On a side note, I would be surprised if the revenue hadn't fallen.

El_Commi
08-12-2014, 15:34
Well I don't know about anyone else but I for one have certainly bought less this year. I doubt there's much more they can cut without significantly impacting their product quality. The proof will be in the pudding if their revenues have fallen below what they were in the same half of the previous year. On a side note, I would be surprised if the revenue hadn't fallen.

With The End Times releases I have bought substantially more this year than the last few (and not all of it End Times releases..) -direct from GW not via a reseller.

BFalcon
08-12-2014, 15:56
Strength of Sterling? It's been 1.5 to 1.6 for most of the past 6 months hasn't it? It's not like the $2 we used to see.

OK, just checked - it was up into the 1.7s earlier this year (around July) so they might have a point, but I do wonder how much it's a smokescreen for falling unit sales.

http://www.xe.com/currencycharts/?from=GBP&to=USD&view=1Y

shelfunit.
08-12-2014, 16:21
With The End Times releases I have bought substantially more this year than the last few (and not all of it End Times releases..) -direct from GW not via a reseller.

All that means is that The End times releases have just kept them afloat, and whilst you may have been spending more, far more people are spending less, or nothing.

Master Sheol
08-12-2014, 16:27
I can say "THE SKY IS FALLING!!!!" now??? :D

GW lies are falling down, falling down, falling down...
GW lies are falling down, it's the End Times... :D

Seriously, when they will go bankrupt who they will accuse??? Santa Claus for not able to distribute enough Dark Vengeage boxes to all the good Timmy boys around the world??? :D

Edit: GW shares finished 510 today witgh a drop of 32.5 equal to -5.90% Not critical like january fall (drop from 720 to 540) but still allarming considering that GW is burning in 1 year like 3 years of capitalisation and 3 years of profit growth...

MiyamatoMusashi
08-12-2014, 18:06
Share price itself is so much meh. It reflects very little about the actual strengths or weaknesses of the company.

Profits down a million, having already dropped millions from the year before... that's a bigger deal.

babylonia
08-12-2014, 18:45
Perhaps the final book to be released will be called End Times: Games Workshop. ;)

ObiWayneKenobi
08-12-2014, 19:15
Perhaps the final book to be released will be called End Times: Games Workshop. ;)

End Times: Fall of the Citadel

Scaryscarymushroom
08-12-2014, 19:28
I love how a 9% drop in operating profits is "broadly in line with expectations." It's like they know they're incompetent.



EDIT: I do recognize that one year's profits aren't the telltale sign of competence. But I very much doubt that they're putting their revenue to good use.

shelfunit.
08-12-2014, 19:39
I love how a 9% drop in operating profits is "broadly in line with expectations." It's like they know they're incompetent.

14.9% drop - £7.7m to £6.7.

Scaryscarymushroom
08-12-2014, 20:49
14.9% drop - £7.7m to £6.7.

From reading the article, I thought it was a drop from 11m to 10m. Was it really only 7.7m last year?

Dronevil
08-12-2014, 20:59
From reading the article, I thought it was a drop from 11m to 10m. Was it really only 7.7m last year?


Games Workshop said that it now expects to report a first-half operating profit GBP1 million lower than the prior year, when reported at actual rates. For the first-half of last year it generated an operating profit of GBP11 million.
I came to the same conclusion.

shelfunit.
08-12-2014, 21:09
From reading the article, I thought it was a drop from 11m to 10m. Was it really only 7.7m last year?

They are saying the profit is £1m down on the 1st half of the 2013/2014 year report, which is the June-Nov period, for that period profit was £7.7m. If the first half profits are £10m then they are £3.3m up on the same period last year. The shares are down, so this is clearly not the case. June-Nov may be the second half of the calender year, but it is the first half of the financial year, or at least GW's.

Scaryscarymushroom
08-12-2014, 21:18
They are saying the profit is £1m down on the 1st half of the 2013/2014 year report, which is the June-Nov period, for that period profit was £7.7m. If the first half profits are £10m then they are £3.3m up on the same period last year. The shares are down, so this is clearly not the case. June-Nov may be the second half of the calender year, but it is the first half of the financial year, or at least GW's.

Ugh. You're right. Looks like the news article screwed up the facts. It was £11m in the first half of the year before last. It was only £7.7m in the first half of last year (http://investor.games-workshop.com/wp-content/uploads/2014/01/2013-14-Press-statement-final-released.pdf).

It's worse than I thought. GW is shrinking pretty fast.

EDIT: I wonder if the line about them having £11m in profits last year was an... intentional lie... to make the company look healthier than it is. One hopes not.

EDIT2: Sorry. Just paranoid. I'm researching securities fraud for my thesis right now. The thought just came to mind.

frozenwastes
08-12-2014, 22:30
The most interesting question of all is whether or not the exceptional costs from the last year truly were exceptional. If they were, then GW's revenue is tanking as this reduced profit would include not paying the exceptional expenses like the website, restructuring, etc.,. If they continued to convert their remaining fully staffed stores to single employee operations at the same rate as last year, then they will have a new exceptional expense and revenue reduction.

Herzlos
08-12-2014, 23:18
They are renovating warhammer world, that one time cost will explain it

Commissar_42
08-12-2014, 23:41
Is there anywhere we can compare like with like sales to see if they're telling the truth or just ********ting for their loss of sales?

frozenwastes
08-12-2014, 23:45
Their previous financial reports are on their investor relations site. You'll have to wait until mid January to get their finalized numbers for this reporting period.

GW telegraphs their results with their dividend payments. The last one was 16p. The one before that was 20p. You can compare their dividends per share with their earnings per share and find out their average pay out ratio. Back in October they announced their 16p dividend that was paid out a bit over a week ago.

http://investor.games-workshop.com/2014/10/22/dividend-5/

GW knows how much cash they have when they announce the dividend and how much they expect to have when they need to actually pay the money. If their sales weren't already slumping in October, they would have announced more than 16p in dividend payments given their tendency to pay out as much of their cash as possible.

GW has actually gone insane with their dividend policy. For the last few years they've been paying out more per share than during the LOTR boom when they made their highest amount of money. With their flat revenue and declining profits and sales volume, they're scraping together the cash to pay more in dividends than when they were rolling in LOTR money.

Korinov
08-12-2014, 23:57
Another "good year" in the making, it seems :)

Katastrophe
09-12-2014, 02:12
Share price itself is so much meh. It reflects very little about the actual strengths or weaknesses of the company.

Profits down a million, having already dropped millions from the year before... that's a bigger deal.

Absolutely agree. I've always said there share price was artificially propped up by their dividends payments, which they've made regardless of dropping revenue and profits.

Their continued slide both in total revenue and profits, particularly based on the aggressive releases, is what should be causing concern.

I'll keep saying over and over that The End Times is not the money maker folks believe. The total revenue being generated is maybe a couple million dollars thus not really a major sales impact.

Hellebore
09-12-2014, 06:32
Their previous financial reports are on their investor relations site. You'll have to wait until mid January to get their finalized numbers for this reporting period.

GW telegraphs their results with their dividend payments. The last one was 16p. The one before that was 20p. You can compare their dividends per share with their earnings per share and find out their average pay out ratio. Back in October they announced their 16p dividend that was paid out a bit over a week ago.

http://investor.games-workshop.com/2014/10/22/dividend-5/

GW knows how much cash they have when they announce the dividend and how much they expect to have when they need to actually pay the money. If their sales weren't already slumping in October, they would have announced more than 16p in dividend payments given their tendency to pay out as much of their cash as possible.

GW has actually gone insane with their dividend policy. For the last few years they've been paying out more per share than during the LOTR boom when they made their highest amount of money. With their flat revenue and declining profits and sales volume, they're scraping together the cash to pay more in dividends than when they were rolling in LOTR money.

That sounds like a case of Keeping Up Appearances (https://www.youtube.com/watch?v=Kdg6aVAeXm0) to me. If your dividend is high it keeps your shareholders happy.

Hellebore

shelfunit.
09-12-2014, 07:49
They are renovating warhammer world, that one time cost will explain it

That hasn't started yet though (has it?), so probably won't be included until the second half report, or the first half of next years. Also, they would have said the reduction in profit was from that, rather than from currency "fluctuations".


I'll keep saying over and over that The End Times is not the money maker folks believe. The total revenue being generated is maybe a couple million dollars thus not really a major sales impact.

Completely agree - and the majority of the money spent on TET will be money that would have been spent on other GW product anyway, and if it actually has brought multitudes of players "back", then all it has achieved is partially stabilizing the outflow.

Herzlos
09-12-2014, 08:51
That hasn't started yet though (has it?), so probably won't be included until the second half report, or the first half of next years. Also, they would have said the reduction in profit was from that, rather than from currency "fluctuations".

It started in August so shoulld be nearly done now.

I'm sure the "fluctuations" are to try and mask the decline of the US/Aus markets, but they'll use the one-off costs of WHW to claim that the profit drop is expected and will go away in time.

williamsond
09-12-2014, 09:54
while I'm not a supporter of GW practices, I still think by in large they have a few years left in them yet. that being said if the the January 14th results very poor we may see some significant fall out. With regards to EoT I too don't think its the big money maker people think it is, along with all the current batch of releases the only reason they seem to sell well is they are only printing a limited number of them so they sell out quick which generates hype.

williamsond
09-12-2014, 10:07
Thought provocing article from last month regarding GW as a company and its future. https://uk.finance.yahoo.com/news/warren-buffett-small-cap-may-123204137.html

shelfunit.
09-12-2014, 11:25
Thought provocing article from last month regarding GW as a company and its future. https://uk.finance.yahoo.com/news/warren-buffett-small-cap-may-123204137.html

Nice article, but he lets himself down with this...

"When you spend hours building figures, the quality of detail is central to the experience and Games Workshop has an advantage here over other model makers."

...somewhat subjective claim.

Senbei
09-12-2014, 13:12
Thought provocing article from last month regarding GW as a company and its future. https://uk.finance.yahoo.com/news/warren-buffett-small-cap-may-123204137.html

" "I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will"

Games Workshop's great product offering meant success was its to lose, and unfortunately management seem to be doing their best to destroy these fantastic qualities from the inside."

^_^

Korinov
09-12-2014, 13:47
Nice article, but he lets himself down with this...

"When you spend hours building figures, the quality of detail is central to the experience and Games Workshop has an advantage here over other model makers."

...somewhat subjective claim.

More than subjective, I'd say "showing ignorance". Typical from people who barely knows about "other model makers", yet lists them as inferior anyway.

frozenwastes
09-12-2014, 17:35
That sounds like a case of Keeping Up Appearances (https://www.youtube.com/watch?v=Kdg6aVAeXm0) to me. If your dividend is high it keeps your shareholders happy.


GW's dividend history (in pence):

1998 - 9
1999 - 9.7
2000 - 9.9
2001 - 10.54
2002 - 13
2003 - 17
2004 - 18.75
2005 - 18.975
2006 - 18.975
2007 -
2008 - No dividends in this period
2009 -
2010 - 20
2011 - 45
2012 - 63
2013 - 58
2014 - 36

So out of their expansion from a UK based importer of games into a global miniature manufacturer and retailer in the 90s and into their height and the LOTR boom, we have steady dividend growth in keeping with the growth of the company.

Then the LOTR bubble popped and GW didn't know how to make things work with their decline in revenue. So they started slashing costs everywhere they could. From 2007 to 2009 the investment model of GW fundamentally changed. Prior to this they were a growth company that paid a small dividend and were interested in expanding their market to as many customers as possible.

Just look at the numbers from 1998-2006 and from 2010 to 2014. They look like the numbers from completely different companies. From 2007 to 2009 GW was transformed from a growth story into what Kirby calls an efficient cash machine.

What did Kirby say when the dividends returned?

"Dividends have returned. I am as pleased as you are. Does this herald in a new era of progressive dividends on an assured yield? Hardly. We return truly surplus cash to shareholders. 'Truly surplus' means the cash we can not use because we have already spent all we need for the growth of the business. It would sit in a bank account if we didn't return it. Working this way means the payment of dividends will be fairly happenstance; I can see us having surplus cash in the future and when we have (assuming it is a sensible sum) it will be returned, not according to a schedule, but right then and there." Kirby 2010-11 annual report

He wants the investors to believe that they actually could not think of anything to reinvest in. That they had spent all they could and just had so much surplus cash they just had to give it to the shareholders because there was nothing they could do with it.

Year - Earnings per share - dividends paid
2010 - 48.4 - 20
2011 - 36.1 - 45
2012 - 46.8 - 63
2013 - 51.5 - 58
2014 - 25.2 - 36

Does anyone actually believe that paying more in dividends than you are earning is sustainable? That doing so is just returning "truly surplus" cash that would just sit in the bank because there's nothing they can actually spend it on?

When the LOTR bubble popped and their sales of 40k and WFB fell over years that followed, GW stopped being profitable. They even propped up their last dividend of this period by borrowing money to pay it. At this point they changed their business model from one of growth to one of efficient cash extraction.

Given that GW is willing to pay all of their earnings (and more) as dividends and the 2nd half of 2014 saw the dividend reduced from 20p to 16p (totally 36p for 2014) we can assume that their earnings per share will be dropping by a similar amount. If they had the money rolling in during Q3 of 2014 they would have announced a larger dividend in October.

The machine isn't working. It's not growing because they are no longer investing in growth and on top of that they actually want to sell less product to fewer people at a higher price because it gives them a better margins and if they ship half the product at twice the price, they can lay off production, shipping and sales staff and save even more money. Switching their stores from fully staffed into single employee locations costs them sales but it also costs them recruitment. Which over time means their player base is shrinking. And those losses in volume compound over time and demand higher and higher prices to make up for it.

Wintermute
09-12-2014, 19:15
Every time we receive news regarding Games Workshops financial status, be it a year end report, a profits warning or any other news relating to the financial position and/or business strategy of the company we get new threads to discuss the 'news'.

A few months ago a long term and respected member of WarSeer suggested we create one on-going thread to discuss these matters and keep all relevant debate in one thread in the same manner we keep all discussion of GW pricing policy together here (http://www.warseer.com/forums/showthread.php?209297-Games-Workshop-Pricing-Feedback-Thread).

So this we have created a new thread here (http://www.warseer.com/forums/showthread.php?403157-Games-Workshop-Financial-Reports-and-Business-Strategy-Feedback-Thread) to discuss these matters and this thread has been closed.

Wintermute

RevEv
15-12-2014, 16:03
yes. exchange rates. that's the exact reason. in other words...

"No... because... you know... things... so reason that isn't my fault. not my fault. pound... that's it. pound, yes."

I hope you find this video from Youtube useful in describing Worldwide Economics NSFW
https://www.youtube.com/watch?v=KKma8rKhUlU