It's that time again: GW 2012 Financials

[frozenwastes]

I ran some numbers to get an accurate comparison with 2011. Removing a 53rd from the revenue to account for the extra week and removing royalty income to get at their miniature business only) and after inflation (2.84% for the UK with the latest data), GW saw a revenue growth of 0.86%.

And to celebrate their "success" (less than a percent after inflation) they again decided to pay out MORE than they made in dividends.

In the 2011 period, the average price increase was 13.2%. So if you calculate revenue growth compared to price increases, they again lost around 7-8% of their unit sales.

GW is continuing to stagnate. They've figureed out how to squeeze more money out of a declining pool of customers so they can pay their dividends at an unsustainable rate. I have no doubt the major players at GW (Kirby & Wells) will both retire very, very rich, regardless of what happens to GW in the long term.

So why should they change course? Expect another 10%+ price increase in 2013, more stock options exercised and more dividends beyond profit paid out. After inflation growth will probably again be around a percent while their unit sales will probably again fall 5%+.

GW's customer base is stagnating. Available opponents become less numerous with the passage of time. Less people are buying less product and paying more for it. If you're contemplating pouring $1000+ into a new army, perhaps the grass is greener somewhere else?

[DarkLordBelial]

You can't directly relate an average price increase to revenue increases - it takes no account of individual product volumes.

[frozenwastes]

Yes, I know. It's an average and an estimate.

But it is mathematically impossible to increase prices, have relatively flat revenue and not have your unit sales not decline.

I'd say the 5%+ estimate is likely quite reliable.

Why do you need to put an "opponets wanted" notice in your signature? 10 years ago, you'd have no trouble finding WFB players. What's changed? This decline year over year in customers.

Here in Canada (where we have to go hundreds of miles where someone in the UK has to go tens) I had no problems finding endless 40k and WFB opponents 10 years ago. Now, even with the internet, social networking, etc., I can't reliably find a game of WFB and 40k I'd have to hunt and schedule (but I'd still find one). What's happened? Year over year price increases with a decline in unit sales.

Less people are buying less but are paying more for it. That means less opponents. And this compounds like compound interest.

Every dollar put into a new army for a GW game is going to give you less opportunities to play than in previous years. GW knows this. Jervis told us that the majority of GW's customers are "craft hobbyists" that don't actually play any game. Fortunately GW's models are good in of themselves, even if they will deliver less and less in terms of participation in a wider gaming community as more and more customers are driven away.

Can GW get to the point where they can expand revenue without losing customers? And continue to increase prices by 10%+ a year?

[Melkanador]

You can't directly relate an average price increase to revenue increases - it takes no account of individual product volumes.

Surly not direct, but the way GW is heading is slow, but steady.

As history told us: an empire will fall slowly.

I thank GW for the sculpters, designers and other great people they gave a chance and got rid of, otherwise the wargaming hobby wouldn´t be so diverse.

[I3uLLioN]

Good on GW. Looks like the doomsayers are wrong for yet another year.

[Melkanador]

Good on GW. Looks like the doomsayers are wrong for yet another year.

Are they? All the so said doomsayers say is that GW´s customer basis/salesunits is/are shrinking which at some time will reach a tidal turning point.

Let´s see how it´s looking in 5-10 years.

[I3uLLioN]

Yes they are. Its funny to see them squirming when the report is good. Growth, profit, increased sales.. but yeah GW ARE FAILING!!!! hahahaha

[Melkanador]

To say whether GW fails or does not depends on the point of view one takes.

From the perspective of the shareholders and GW´s management GW is doing great as they increased the earnings, cut the costs, ... .

From the perspective of a customer who should be intrested in the long term development of GW, the report shows again, that GW is selling fewer items, so assuming the average customer buys the same amount then last year, this means there are less customers, so GW fails to keep up the players with a reasonable gamerbase.

Already one can read from time to time in this and other forums that it got harder to find some WHF/40k games due to the lack of players. And also it´s often reported that the number of GW games played in clubs have had a reducing trend.

I´ve been buying and playing GW games since the early ´90s, once I expected to play till retirement WHF/40k and I probably will, but it won´t be GW which will be selling it, which is sad to as I´d been working there for quite a time.

[f2k]

Yes they are. Its funny to see them squirming when the report is good. Growth, profit, increased sales.. but yeah GW ARE FAILING!!!! hahahaha

The thing is, having briefly scanned the report, Games Workshop is NOT growing. Their unit-sales are still going down and they’re basically being held afloat by cuts and royalties.

And this is what we “doomsayers” have been pointing out for years now. Games Workshops unit-sales are dropping, year after year, which means that fewer people are playing. And for a social hobby, that is very bad indeed. At some point Games Workshop will come to a tipping point where their customer base will start eroding very fast. And that’s when we’ll see them going into the red...

Companies seldom crash overnight – it takes time before they reach that point. Sadly, it seems that Games Workshop is either entirely oblivious, or simply don’t care, that they’re still heading in the wrong direction.

[Skyth]

Some points I noticed from the financial statements. First off, they had a change in accounting principle to move 1.7 million of revenues from the previous two years to this year. This means it isn't as profitable as they would make you believe. The second point is that they have tactily agreed that it's likely that they'll lose the lawsuit against Chapterhouse.

Volumes of sales are down (Even including making all the customers replace their paints), thus the customer base is shrinking plus giving out more dividends than you have profits (and combine with the revenue shifting they did to make it appear as if they had even more revenue than they did...) makes the long-term viability questionable.

[I3uLLioN]

the report shows again, that GW is selling fewer items, so assuming the average customer buys the same amount then last year, this means there are less customers, so GW fails to keep up the players with a reasonable gamerbase.

Erm... I must have read a different report from you as the one I read contains no such information.

[Melkanador]

Erm... I must have read a different report from you as the one I read contains no such information.

It does but it´s hidden. You need to compare the yearly price rise across all items and the rise of turnover leaving out things like FW/BL/royalties and then one starts to get an overall picture of GW´s real situation. Sure one can dig a lot deeper if one wants to.

And of course no CEO would announce in a report that their customer base is being reduced on a yearly basis, but I hope he knows about it and just foregoes it out of personal (retirement [my personal guess]) reasons.

[frozenwastes]

Revenue = price x units sold.

If you keep Revenue the same and increase price, units sold goes down.

Revenue has gone up a bit (about 3.5%) but price increases have been massive.

The math just adds up to faling unit sales.

Sorry. *shrugs*

EDIT:

GW has no reason to change directions at this point. Kirby and Wells are both going to retire super rich. So why not pay a dividend greater than the money you made? Why not shift previous years revenue into this year to justify paying yourself that larger dividend? Why stop raising prices? As long as bonuses and dividends can be justified, there's simply no reason for them not to continue to exercise their stock options and collect the dividends. Kirby has much, much more to gain by doing that than thinking long term. Wells is following in his footsteps.

[Scaryscarymushroom]

Erm... I must have read a different report from you as the one I read contains no such information.

The powers of deduction are a wonderful (and often dangerous) tool.

Games Workshops unit-sales are dropping, year after year, which means that fewer people are playing.

Strictly speaking, I don't think a drop in sales necessarily means less people play. A good indicator, sure... but there could be other explanations for why less people play. I mean, I still have +2k of sisters of battle that I could use to play games if I wanted to without making more purchases.

[f2k]

Strictly speaking, I don't think a drop in sales necessarily means less people play. A good indicator, sure... but there could be other explanations.

True. It could also be that the same amount of players is simply buying less. But, going by the dwindling amount of local players reported by the members of WarSeer, I would say that less players playing is a good bet.

In either case, it's bad news as it indicates that, at best, the number of players remain static and, at worst, is actually dropping with few new players and a bad retention rate.

I admit that this is probably a somewhat simplistic way of looking at it. But regardless of what the explanation might be, the fact is that unit-sales are going down and have been doing so for years.

[Eldarin Hope]

Revenue = price x units sold.

If you keep Revenue the same and increase price, units sold goes down.

Revenue has gone up a bit (about 3.5%) but price increases have been massive.

The math just adds up to faling unit sales.

Sorry. *shrugs*

EDIT:

GW has no reason to change directions at this point. Kirby and Wells are both going to retire super rich. So why not pay a dividend greater than the money you made? Why not shift previous years revenue into this year to justify paying yourself that larger dividend? Why stop raising prices? As long as bonuses and dividends can be justified, there's simply no reason for them not to continue to exercise their stock options and collect the dividends. Kirby has much, much more to gain by doing that than thinking long term. Wells is following in his footsteps.

What it doesn't automatically add up to is that the player base decreased by X amount.

There is no reason to presume that players are buying the same amount - if something increases in price and I still have the same disposable income then I'm buying less in terms of unit sales but my contribution to the player base remains at 1.

People are using presumptions to paint the numbers in the worst light.

I imagine we will see a boost next year due to the Hobbit

[I3uLLioN]

But GW doesnt sell only 1 type of product. If you were talking about a company that only sold one thing at a single price point and their revenue didnt increase at the same rate as their price increases, then it would make sense to say sales are dropping. That isnt the case with GW. People simply do not have the information to state that volume sales are dropping and the customer base is shrinking. They are twisting the numbers to fit their negative view of the company.

I could argue that existing players arent buying that much as they already have significant collections and that the vast majority of sales are to brand new players. That would mean that the player base is actually growing. I actually think this is more likely the case as most people would probably agree that people tend to spend more when they are just starting up. When you have several armies you tend to just make smaller puchases to keep things ticking along.

People also dont have a break down of what is selling and to who. Who knows if the vast majority of sales are made up of models at the lower end of the price scale. Again... this would mean that more people are being introduced to the hobby and the player base is growing.

Folk on Warseer always make the assumption about how the profits didnt go up relative to the price increase... Therefore the player base is shrinking. The simple fact of the matter is that that is a major assumption. Nothing more.

GW is a healthy company. It is more efficient, it is expanding into new areas, has no debt, good cash reserves with an IP that is becoming more well known. Its really sad to see people blinded by the thihgs they dont like about GW.

[Private_SeeD]

* 'Unusual'(ly high) income from THQ royalties on Space Marine.

I assume if that's true that GW will be looking into releasing other franchises if they're were such good money spinners?

Also I'm no expert and will ask my gf who is a charted account have a read of these documents but I might be naive here but with what Kirby and Wells are doing isn't there rules against that or are the board/share holders just blinded by the money and/or the BS being sold in these yearly reports?



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[Skyth]

I might be naive here but with what Kirby and Wells are doing isn't there rules against that or are the board/share holders just blinded by the money and/or the BS being sold in these yearly reports?

Nope. It's not against the rules at all. Financial statements are supposed to reflect what has happened and everything is disclosed. They fully disclosed how much money they're getting, their interest in the company, the profits, how the profits came about (Including shifting money from previous years) and the dividends paid.

The point of the rules about financial statements isn't that they insist that the company be run well, but rather that how the company is being run is disclosed for investors to make their own choices.

[Tonny]

Each year the critics say GW is falling. One year they will be right. As it's inevitable, because everything ends.. Anyway this year they are again wrong. Next year they can try again.