Last close As at 05/08/2026
GBP190.10
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Market capitalisation
GBP6,282m
Research: Consumer
Games Workshop’s (GAW) interim results are ahead of expectations. The highest rates of revenue growth were achieved in the channels with the highest operating margins, ie Trade (40% margin) and Online (64% margin). This has produced a strong improvement in free cash flow generation and ROCE has improved from 96% to 111%. We upgrade our forecasts for FY20 and FY21 by a further 3% following the 9% upgrade in November. Our DCF-based valuation increases by 11% to 5,748p.
Games Workshop Group |
‘Record sales and profit’ again |
Interim results |
Consumer goods |
15 January 2020 |
Share price performance
Business description
Next events
Analysts
Games Workshop Group is a research client of Edison Investment Research Limited |
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Games Workshop’s (GAW) interim results are ahead of expectations. The highest rates of revenue growth were achieved in the channels with the highest operating margins, ie Trade (40% margin) and Online (64% margin). This has produced a strong improvement in free cash flow generation and ROCE has improved from 96% to 111%. We upgrade our forecasts for FY20 and FY21 by a further 3% following the 9% upgrade in November. Our DCF-based valuation increases by 11% to 5,748p.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
05/18 |
221.3 |
74.3 |
181.6 |
126 |
38.3 |
1.8 |
05/19 |
256.6 |
81.3 |
200.8 |
155 |
34.7 |
2.2 |
05/20e |
286.4 |
95.6 |
235.8 |
182 |
29.5 |
2.6 |
05/21e |
300.8 |
101.3 |
250.0 |
193 |
27.8 |
2.8 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
H120 results: Revenue growth & operational gearing
GAW’s interim results highlighted growth in revenue of c19%, operating profit pre-royalties of c 37%, and PBT growth of c 44%. Revenue of £148.4m and PBT of £58.6m compare to figures indicated for the interims, at the trading statement in November 2019, of not less than £140m and £55m, respectively. By channel, constant currency revenue growth was strongest in the highest-margin channels: Trade (revenue growth of c 24%) and Online (c 14% on an easy comparative of -3.6%) and was lowest in Retail (c 6%), giving a gross margin change y-o-y of 2.5pp to 69.5% and an operating margin change (pre-royalties) of 4.5pp to 32.7%. The drop-through of incremental revenue to gross profit was high at c 83%. Royalty income, likely to become a larger source of income over the longer term with the strategy of further exploiting brands, albeit likely to be lumpy and difficult to predict, grew by 94%. The higher operating margin, better control of working capital, and lower capex and investment (relative to sales) led to an improvement in free cash flow generation (relative to sales) of 19.6% in H120 versus 13.6% in H119. Cumulative dividend announcements so far in FY20 are 145p versus 155p for the whole of FY19.
Forecasts: Upgraded by 3% for FY20 and FY21
Following upgrades of 9% after the trading update in November 2019, we upgrade our forecast PBT for FY20 and FY21 by 3% to reflect the H120 performance and now incorporate IFRS 16, which does not affect operating profit but adds a net interest charge of £1.2m in both years. IFRS 16 increases fixed assets and total liabilities by £29m.
Valuation: DCF-based valuation increases by 11%
The shares have performed strongly since the last trading update in November. Our DCF-based share price target increases by 11% to 5,748p given the forecast upgrades, improved cash flow generation and rolling forward the DCF.
Exhibit 1: Financial summary
Accounts: IFRS, year-end: May, £000s |
|
2016 |
2017 |
2018 |
2019 |
2020e |
2021e |
|
INCOME STATEMENT |
|
|
|
|
|
|
|
|
Total revenues |
|
|
118,069 |
158,114 |
221,304 |
256,574 |
286,357 |
300,780 |
Cost of sales |
|
|
(37,438) |
(43,691) |
(64,219) |
(83,306) |
(88,389) |
(91,337) |
Gross profit |
|
|
80,631 |
114,423 |
157,085 |
173,268 |
197,968 |
209,443 |
Gross profit margin |
|
|
68.3% |
72.4% |
71.0% |
67.5% |
69.1% |
69.6% |
SG&A (expenses) |
|
|
(69,710) |
(83,591) |
(92,383) |
(103,434) |
(114,812) |
(120,552) |
Other income/(expense) |
|
|
5,939 |
7,491 |
9,617 |
11,365 |
13,608 |
13,608 |
Exceptionals and adjustments |
|
|
0 |
0 |
0 |
0 |
0 |
0 |
Reported EBIT |
|
|
16,860 |
38,323 |
74,319 |
81,199 |
96,764 |
102,499 |
Report EBIT margin |
|
|
14.3% |
24.2% |
33.6% |
31.6% |
33.8% |
34.1% |
Finance income/(expense) |
|
|
88 |
80 |
(49) |
97 |
(1,200) |
(1,200) |
Reported PBT |
|
|
16,948 |
38,403 |
74,270 |
81,296 |
95,564 |
101,299 |
Income tax expense (includes exceptionals) |
|
|
(3,452) |
(7,856) |
(14,815) |
(15,475) |
(18,191) |
(19,283) |
Reported net income |
|
|
13,496 |
30,547 |
59,455 |
65,821 |
77,373 |
82,016 |
Diluted average number of shares, m |
|
|
32,150 |
32,325 |
32,732 |
32,785 |
32,810 |
32,810 |
Adjusted diluted EPS (p) |
|
|
42.0 |
94.5 |
181.6 |
200.8 |
235.8 |
250.0 |
Adjusted EBITDA |
|
|
27,250 |
48,547 |
86,482 |
97,089 |
124,317 |
130,737 |
Adjusted EBIT |
|
|
16,860 |
38,323 |
74,319 |
81,199 |
96,764 |
102,499 |
Adjusted PBT |
|
|
16,948 |
38,403 |
74,270 |
81,296 |
95,564 |
101,299 |
Adjusted EPS (p) |
|
|
42 |
95 |
184 |
203 |
239 |
253 |
Adjusted diluted EPS (p) |
|
|
42 |
94 |
182 |
201 |
236 |
250 |
BALANCE SHEET |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
22,621 |
22,132 |
30,072 |
35,303 |
30,585 |
19,528 |
Right-of-use assets |
|
|
|
|
|
0 |
29,022 |
29,022 |
Goodwill |
|
|
1,433 |
1,433 |
1,433 |
1,433 |
1,433 |
1,433 |
Intangible assets |
|
|
10,501 |
12,917 |
14,195 |
16,004 |
14,669 |
13,988 |
Other non-current assets |
|
|
4,148 |
6,480 |
7,780 |
11,667 |
11,667 |
11,667 |
Total non-current assets |
|
|
38,703 |
42,962 |
53,480 |
64,407 |
87,376 |
75,638 |
Cash and equivalents |
|
|
11,775 |
17,910 |
28,545 |
29,371 |
50,432 |
80,607 |
Inventories |
|
|
8,540 |
12,421 |
20,159 |
24,192 |
26,784 |
27,678 |
Trade and other receivables |
|
|
10,120 |
12,976 |
15,502 |
18,796 |
20,978 |
22,034 |
Other current assets |
|
|
725 |
596 |
457 |
814 |
814 |
814 |
Total current assets |
|
|
31,160 |
43,903 |
64,663 |
73,173 |
99,008 |
131,133 |
Other non-current liabilities |
|
|
1,109 |
989 |
1,204 |
1,854 |
22,790 |
22,790 |
Total non-current liabilities |
|
|
1,109 |
989 |
1,204 |
1,854 |
22,790 |
22,790 |
Trade and other payables |
|
|
12,844 |
16,515 |
20,298 |
19,199 |
20,370 |
21,050 |
Other current liabilities |
|
|
2,747 |
6,529 |
8,519 |
10,054 |
10,054 |
10,054 |
Total current liabilities |
|
|
15,591 |
23,044 |
28,817 |
29,253 |
38,510 |
39,190 |
Equity attributable to company |
|
|
53,163 |
62,832 |
88,122 |
106,473 |
125,084 |
144,792 |
CASH FLOW STATEMENT |
|
|
|
|
|
|
|
|
EBIT |
|
|
16,860 |
38,323 |
74,319 |
81,199 |
96,764 |
102,499 |
Depreciation and amortisation |
|
|
10,457 |
11,016 |
12,155 |
16,086 |
18,331 |
19,016 |
Share based payments |
|
|
193 |
160 |
204 |
339 |
339 |
339 |
Other adjustments |
|
|
28 |
111 |
40 |
144 |
0 |
0 |
Movements in working capital |
|
|
(756) |
(240) |
(4,386) |
(8,992) |
(3,603) |
(1,271) |
Interest paid/received |
|
|
83 |
83 |
(39) |
97 |
(1,200) |
(1,200) |
Income taxes paid |
|
|
(2,552) |
(5,482) |
(12,227) |
(16,296) |
(18,191) |
(19,283) |
Cash from operations (CFO) |
|
|
24,313 |
43,971 |
70,066 |
72,577 |
101,662 |
109,323 |
Capex |
|
|
(12,663) |
(12,844) |
(21,580) |
(22,488) |
(21,500) |
(16,500) |
FCF |
|
|
11,650 |
31,127 |
48,486 |
50,089 |
80,162 |
92,823 |
Cash used in investing activities (CFIA) |
|
|
(12,663) |
(12,844) |
(21,580) |
(22,488) |
(21,500) |
(16,500) |
Net proceeds from issue of shares |
|
|
304 |
81 |
982 |
718 |
0 |
0 |
Dividends paid |
|
|
(12,837) |
(23,801) |
(38,701) |
(50,277) |
(59,101) |
(62,647) |
Other financing activities |
|
|
0 |
(1,901) |
0 |
0 |
0 |
0 |
Cash from financing activities (CFF) |
|
|
(12,533) |
(25,621) |
(37,719) |
(49,559) |
(59,101) |
(62,647) |
Increase/(decrease) in cash and equivalents |
|
|
(883) |
5,506 |
10,767 |
540 |
21,061 |
30,175 |
Cash and equivalents at end of period |
|
|
11,775 |
17,910 |
28,545 |
29,371 |
50,432 |
80,607 |
Net (debt)/cash |
|
|
11,775 |
17,910 |
28,545 |
29,371 |
21,410 |
51,585 |
Movement in net (debt)/cash over period |
|
|
(786) |
6,135 |
10,635 |
826 |
(7,961) |
30,175 |
Source: Company accounts, Edison Investment Research
|
|
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