Games Workshop Group — H124 in line, solid core growth

Games Workshop Group (LSE: GAW)

Last close As at 16/07/2024

GBP105.00

−120.00 (−1.13%)

Market capitalisation

GBP3,460m

More on this equity

Research: Consumer

Games Workshop Group — H124 in line, solid core growth

Games Workshop Group’s (GAW’s) H124 trading update indicated a robust start to the year in line with management’s expectations. The launch of the new edition of Warhammer 40k in Q1 helped to boost core year-on-year revenue growth in the first half by an expected 11% to no less than £235m (H123: £212.3m). Licensing revenue is expected at £12m (H123: £14.3m), taking total group revenue to c £247m (H123: £227m). There was an implied slowdown in core revenue growth in Q2 versus Q1, although this is expected following a new edition of Warhammer 40k. PBT is expected to grow 12% to ‘not less than’ £94m (H123: £83.6m). We have left our estimates unchanged, anticipating broadly a 50:50 H1:H2 split for both revenue and profit. The H124 results are scheduled for 9 January 2024.

Russell Pointon

Written by

Russell Pointon

Director of Content, Consumer and Media

Media and Games Invest_resized

Consumer

Games Workshop Group

H124 in line, solid core growth

H124 trading update

Consumer goods

7 December 2023

Price

10,600p

Market cap

£3,489m

Net cash (£m) at 28 May 2023 (excluding lease liabilities of £49.9m)

90.2

Shares in issue

32.9m

Free float

97.6%

Code

GAW

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

Business description

Games Workshop Group is a leading international specialist designer, manufacturer and multi-channel retailer of miniatures, scenery, artwork and fiction for tabletop miniature games set in its fantasy Warhammer worlds.

Analysts

Russell Pointon

+44 (0)20 3077 5700

Milo Bussell

+44 (0)20 3077 5700

Games Workshop Group is a research client of Edison Investment Research Limited

Games Workshop Group’s (GAW’s) H124 trading update indicated a robust start to the year in line with management’s expectations. The launch of the new edition of Warhammer 40k in Q1 helped to boost core year-on-year revenue growth in the first half by an expected 11% to no less than £235m (H123: £212.3m). Licensing revenue is expected at £12m (H123: £14.3m), taking total group revenue to c £247m (H123: £227m). There was an implied slowdown in core revenue growth in Q2 versus Q1, although this is expected following a new edition of Warhammer 40k. PBT is expected to grow 12% to ‘not less than’ £94m (H123: £83.6m). We have left our estimates unchanged, anticipating broadly a 50:50 H1:H2 split for both revenue and profit. The H124 results are scheduled for 9 January 2024.

Year end

Revenue (£m)

PBT*

(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

05/22

414.8

158.1

394.6

235.0

26.9

2.2

05/23

470.8

171.6

411.8

415.0

25.7

3.9

05/24e

495.8

187.3

426.3

425.0

24.9

4.0

05/25e

518.4

194.4

442.3

435.0

24.0

4.1

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

GAW demonstrated good group revenue growth in H124 of 9% at actual exchange rates to no less than c £247m (H123: £227m), as the release of the 10th edition of GAW’s most significant IP, Warhammer 40k, was well received and helped to grow core revenue. The core revenue growth of 11% marks a slowdown from the 14% reported in Q1, although this is to be expected given the boost to core sales a 40k release provides. Licensing, which accounts for just 5% of group revenue and is typically quite lumpy, declined 16% to c £12m (H123: £14.3m). The more favourable cost profile of Warhammer 40k helped to expand the core operating margin by 160bp y-o-y to 34.9% (H123: 33.3%) and provide a boost to the bottom line as PBT grew to ‘not less than’ £94m (H123: £83.6m). As GAW continues to make good progress, management is rewarding its staff through a profit share of £2,500 per employee, up 66.7% y-o-y to a total cost of £7.5m (H123: £4.5m). Shareholders have received good cash returns with dividends paid to date in FY24 of 195p/share. The H124 results are scheduled to be published on 9 January 2024.

General disclaimer and copyright

This report has been commissioned by Games Workshop Group and prepared and issued by Edison, in consideration of a fee payable by Games Workshop Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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London │ New York │ Frankfurt

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General disclaimer and copyright

This report has been commissioned by Games Workshop Group and prepared and issued by Edison, in consideration of a fee payable by Games Workshop Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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