Last close As at 05/08/2026
GBP190.10
▲ −20.00 (−0.11%)
Market capitalisation
GBP6,282m
Research: Consumer
As outlined in our recent initiation note, ‘On a mission’, Games Workshop’s (GAW) focus on international multi-channel expansion, customer engagement and product innovation, alongside its openness to exploring ways in which to leverage its rich intellectual property (IP) to generate royalty income, is continuing to deliver outstanding results. Strong trading since the half year, and new licensing agreements, lead us to upgrade our FY19 and FY20 earnings forecasts by c 14%.
Written by
Games Workshop Group |
Marching on up |
Trading update |
Consumer goods |
17 April 2019 |
Share price performance
Business description
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Analysts
Games Workshop Group is a research client of Edison Investment Research Limited |
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As outlined in our recent initiation note, ‘On a mission’, Games Workshop’s (GAW) focus on international multi-channel expansion, customer engagement and product innovation, alongside its openness to exploring ways in which to leverage its rich intellectual property (IP) to generate royalty income, is continuing to deliver outstanding results. Strong trading since the half year, and new licensing agreements, lead us to upgrade our FY19 and FY20 earnings forecasts by c 14%.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
05/17 |
158.1 |
38.4 |
95.1 |
74 |
41.8 |
1.9 |
05/18 |
221.3** |
74.3 |
184.3 |
126 |
21.6 |
3.2 |
05/19e |
255.3 |
80.8 |
198.6 |
155 |
20.0 |
3.9 |
05/20e |
266.2 |
84.4 |
207.7 |
162 |
19.1 |
4.1 |
Note: *PBT and EPS are normalised, excluding exceptional items. **Restated at H119 to reflect IFRS 15: Revenue from contracts with customers.
Trading update: strong performance, special dividend
Games Workshop has delivered a strong trading performance, across all regions and via all sales channels (trade, retail and online) since the H1 results in January. Royalties receivable are also ahead year-on-year, following the signing of new licensing agreements with the major digital games publishers. As a result, the company has stated that it expects pre-tax profit for FY19 to be c £80m. In line with company policy to distribute excess cash, a dividend of 35p has been declared, taking the total dividend this year to £1.55.
Forecasts: 14% upgrade
We upgrade our FY19 and FY20 PBT forecasts by c 14%. We expect trade to remain the dominant channel and anticipate FY19 sales growth of 27%, comparable to that of H1, while retail and online are expected to grow at c 7%. We have raised our FY19 gross margin assumption by 100bp as the company progresses with infrastructure projects (as outlined in our recent initiation note). We leave our conservative assumptions for FY20 sales growth and margin progression unchanged, but increase royalty income by c £2.5m to reflect the recently signed agreements. We believe there may be further opportunities to leverage GAW’s rich IP via its existing relationships with the major publishers.
Valuation: c 10% upside; attractive yield prospects
The shares have risen by c 18% since the upgrade but still trade at a discount to our new DCF valuation of 4,167p, which assumes revenue growth beyond FY20 of 4.2% fading to 2% and a perpetuity EBITDA margin of 39% (FY20e: 37.5%). Our peer group, comprising specialist interest operators and the ‘mainstream’ multinational toy/game companies, suggests a valuation broadly in line with the current share price, of 3,703p, leading to a blended valuation of 3,935p. We forecast FY20 net cash of £49m, underpinning a healthy c 4% yield and scope for further distributions.
Exhibit 1: Financial summary
Accounts: IFRS, year-end: May, £000s |
|
2015 |
2016 |
2017 |
2018 |
2019e |
2020e |
|
INCOME STATEMENT |
|
|
|
|
|
|
|
|
Total revenues |
|
|
119,132 |
118,069 |
158,114 |
221,304* |
255,291 |
266,213 |
Cost of sales |
|
|
(36,988) |
(37,438) |
(43,691) |
(64,219) |
(81,740) |
(82,575) |
Gross profit |
|
|
82,144 |
80,631 |
114,423 |
157,085 |
173,551 |
183,638 |
Gross profit margin |
|
|
69.0% |
68.3% |
72.4% |
71.0% |
68.0% |
69.0% |
SG&A (expenses) |
|
|
(67,207) |
(69,710) |
(83,591) |
(92,383) |
(103,478) |
(109,954) |
Other income/(expense) |
|
|
1,498 |
5,939 |
7,491 |
9,617 |
10,579 |
10,579 |
Exceptionals and adjustments |
|
|
42 |
0 |
0 |
0 |
0 |
0 |
Reported EBIT |
|
|
16,477 |
16,860 |
38,323 |
74,319 |
80,651 |
84,263 |
Report EBIT margin |
|
|
13.8% |
14.3% |
24.2% |
33.6% |
31.6% |
31.7% |
Finance income/(expense) |
|
|
108 |
88 |
80 |
(49) |
127 |
184 |
Reported PBT |
|
|
16,585 |
16,948 |
38,403 |
74,270 |
80,778 |
84,447 |
Income tax expense (includes exceptionals) |
|
|
(4,328) |
(3,452) |
(7,856) |
(14,815) |
(16,113) |
(16,845) |
Reported net income |
|
|
12,257 |
13,496 |
30,547 |
59,455 |
64,665 |
67,602 |
Basic average number of shares, m |
|
|
31,975 |
32,093 |
32,126 |
32,258 |
32,553 |
32,553 |
Basic EPS (p) |
|
|
38.3 |
42.1 |
95.1 |
184.3 |
198.6 |
207.7 |
Adjusted EBITDA |
|
|
27,516 |
27,250 |
48,547 |
86,482 |
94,267 |
99,711 |
Adjusted EBIT |
|
|
16,435 |
16,860 |
38,323 |
74,319 |
80,651 |
84,263 |
Adjusted PBT |
|
|
16,543 |
16,948 |
38,403 |
74,270 |
80,778 |
84,447 |
Adjusted EPS (p) |
|
|
38 |
42 |
95 |
184 |
199 |
208 |
Adjusted diluted EPS (p) |
|
|
38 |
42 |
94 |
182 |
197 |
206 |
BALANCE SHEET |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
22,719 |
22,621 |
22,132 |
30,072 |
35,554 |
37,021 |
Goodwill |
|
|
1,433 |
1,433 |
1,433 |
1,433 |
1,433 |
1,433 |
Intangible assets |
|
|
8,262 |
10,501 |
12,917 |
14,195 |
16,097 |
15,682 |
Other non-current assets |
|
|
4,816 |
4,148 |
6,480 |
7,113 |
7,113 |
7,113 |
Total non-current assets |
|
|
37,230 |
38,703 |
42,962 |
52,813 |
60,197 |
61,249 |
Cash and equivalents |
|
|
12,561 |
11,775 |
17,910 |
28,545 |
34,051 |
48,729 |
Inventories |
|
|
7,625 |
8,540 |
12,421 |
20,159 |
24,770 |
23,593 |
Trade and other receivables |
|
|
9,425 |
10,120 |
12,976 |
16,169 |
18,652 |
19,450 |
Other current assets |
|
|
600 |
725 |
596 |
457 |
457 |
457 |
Total current assets |
|
|
30,211 |
31,160 |
43,903 |
65,330 |
77,929 |
92,229 |
Other non-current liabilities |
|
|
822 |
1,109 |
989 |
1,204 |
1,204 |
1,204 |
Total non-current liabilities |
|
|
822 |
1,109 |
989 |
1,204 |
1,204 |
1,204 |
Trade and other payables |
|
|
13,131 |
12,844 |
16,515 |
20,298 |
25,836 |
26,100 |
Other current liabilities |
|
|
1,963 |
2,747 |
6,529 |
8,519 |
8,519 |
8,519 |
Total current liabilities |
|
|
15,094 |
15,591 |
23,044 |
28,817 |
34,355 |
34,619 |
Equity attributable to company |
|
|
51,525 |
53,163 |
62,832 |
88,122 |
102,567 |
117,655 |
CASH FLOW STATEMENT |
|
|
|
|
|
|
|
|
EBIT |
|
|
16,477 |
16,860 |
38,323 |
74,319 |
80,651 |
84,263 |
Depreciation and amortisation |
|
|
11,114 |
10,457 |
11,016 |
12,155 |
13,616 |
15,448 |
Share based payments |
|
|
232 |
193 |
160 |
204 |
300 |
300 |
Other adjustments |
|
|
33 |
28 |
111 |
40 |
0 |
0 |
Movements in working capital |
|
|
(2,277) |
(756) |
(240) |
(4,386) |
(1,556) |
643 |
Interest paid/received |
|
|
114 |
83 |
83 |
(39) |
127 |
184 |
Income taxes paid |
|
|
(2,305) |
(2,552) |
(5,482) |
(12,227) |
(16,113) |
(16,845) |
Cash from operations (CFO) |
|
|
23,388 |
24,313 |
43,971 |
70,066 |
77,025 |
83,993 |
Capex |
|
|
(12,348) |
(12,663) |
(12,844) |
(21,580) |
(21,000) |
(16,500) |
FCF |
|
|
11,040 |
11,650 |
31,127 |
48,486 |
56,025 |
67,493 |
Cash used in investing activities (CFIA) |
|
|
(12,348) |
(12,663) |
(12,844) |
(21,580) |
(21,000) |
(16,500) |
Net proceeds from issue of shares |
|
|
738 |
304 |
81 |
982 |
0 |
0 |
Dividends paid |
|
|
(16,601) |
(12,837) |
(23,801) |
(38,701) |
(50,519) |
(52,814) |
Other financing activities |
|
|
0 |
0 |
(1,901) |
0 |
0 |
0 |
Cash from financing activities (CFF) |
|
|
(15,863) |
(12,533) |
(25,621) |
(37,719) |
(50,519) |
(52,814) |
Increase/(decrease) in cash and equivalents |
|
|
(4,823) |
(883) |
5,506 |
10,767 |
5,506 |
14,679 |
Cash and equivalents at end of period |
|
|
12,561 |
11,775 |
17,910 |
28,545 |
34,051 |
48,729 |
Net (debt)/cash |
|
|
12,561 |
11,775 |
17,910 |
28,545 |
34,051 |
48,729 |
Movement in net (debt)/cash over period |
|
|
(4,823) |
(786) |
6,135 |
10,635 |
5,506 |
14,679 |
Source: Games Workshop; Edison Investment Research. Note: *Restated at H119 to reflect IFRS 15: Revenue from contracts with customers.
|
|
BCI Minerals reported a c 33.3% increase in royalty EBITDA during Q3 from operations at Iron Valley under the influence of higher iron ore prices in the aftermath of Vale’s Feijao tailings dam disaster in January and the supply disruptions to exports from north-western Australia occasioned by a trio of cyclones in the region. Notwithstanding the disruptions, shipments from Iron Valley were steady at 1.8Mt (cf Edison’s prior estimate of 7.5Mt for FY19, or 1.875Mt per quarter) – albeit comprising a higher proportion of lower-value ‘fines’ product as the operator sought to draw down existing fines stockpiles. We have updated our forecasts for FY19 to reflect these changes. More significantly however, BCI’s share price remains at a >50% discount to our ‘base case’ valuation of 34.05c/share (see below) at a time when the DFS target parameters are becoming increasingly de-risked.