Last close As at 05/08/2026
GBP190.10
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GBP6,282m
Research: Consumer
Games Workshop’s (GAW’s) year-end trading update highlights higher revenue and a more significant increase in operating profit and licensing income, versus our expectations. FY21 has been very strong despite COVID-19 restrictions on retail, likely incremental costs due to Brexit and recent currency headwinds. Management’s new estimates for FY21 imply year-on-year growth for revenue and PBT of at least c 30% and c 68% respectively and limited underlying cost growth of c 4%. The strong performance has led to higher year-on-year rewards for staff (profit-related pay increased fivefold) and shareholders (total dividend of 235p versus 145p). We increase our forecasts for FY21 to be consistent with the new estimates and make a modest upgrade to FY22. Our DCF-based valuation increases to 12,000p.
Games Workshop |
Rounding off a stellar year |
FY21 trading update |
Consumer goods |
20 May 2021 |
Share price performance
Business description
Next events
Analysts
Games Workshop is a research client of Edison Investment Research Limited |
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Games Workshop’s (GAW’s) year-end trading update highlights higher revenue and a more significant increase in operating profit and licensing income, versus our expectations. FY21 has been very strong despite COVID-19 restrictions on retail, likely incremental costs due to Brexit and recent currency headwinds. Management’s new estimates for FY21 imply year-on-year growth for revenue and PBT of at least c 30% and c 68% respectively and limited underlying cost growth of c 4%. The strong performance has led to higher year-on-year rewards for staff (profit-related pay increased fivefold) and shareholders (total dividend of 235p versus 145p). We increase our forecasts for FY21 to be consistent with the new estimates and make a modest upgrade to FY22. Our DCF-based valuation increases to 12,000p.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
05/19 |
256.6 |
81.3 |
200.8 |
155.0 |
55.7 |
1.4 |
05/20 |
269.7 |
89.4 |
217.8 |
145.0 |
51.4 |
1.3 |
05/21e |
350.5 |
152.1 |
367.6 |
235.0 |
30.4 |
2.1 |
05/22e |
375.5 |
158.1 |
380.9 |
250.0 |
29.4 |
2.2 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
FY21: Higher profitability than expected
Management’s new estimates for FY21 of sales not less than £350m and PBT not less than £150m indicate a better profit performance than our prior forecasts of £349.1m and £140.4m respectively. With marginally lower licensing income year-on-year of £15m (FY20 £16.8m) ahead of our estimate of £13m, the profit performance is even more impressive as operating costs include an incremental £10m profit share versus FY20 to reward staff for an exceptional year. Using the low end of management’s estimates for the year versus FY20, GAW generated incremental revenue of at least c £80m on a total cost (COGS and operating costs) increase of c £18m, including the above-bonus increase, or c 4% excluding the bonus increase. The operating margin pre-royalties of at least 38.8% compares with FY20’s 27.1%, implying an H221 margin of at least 32.1% (H121 44.6%), highlighting the influence of major product launches on margin as per our recent note. The further dividend of 50p takes the cumulative total for the year to 235p.
Forecasts: FY21 and FY22 upgraded
We increase our FY21 forecasts to be consistent with management’s new estimates. Our FY22 PBT forecast increases by c 1% to £158.1m, reflecting more forex headwinds for revenue, a lower year-on-year gross margin given the success of the major launch in FY21 and lower growth in operating expenses.
Valuation: DCF valuation increased to 12,000p
Our DCF-based valuation increases 3% to 12,000p from 11,613p. The 29.4x FY22 P/E is at a premium to recent previous peak multiples in non-COVID-19-affected years, which reflects GAW’s higher profitability.
Exhibit 1: Financial summary
Year-end May |
£'m |
|
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021e |
2022e |
|
|
|
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
INCOME STATEMENT |
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
119.1 |
118.1 |
158.1 |
221.3 |
256.6 |
269.7 |
350.5 |
375.5 |
Cost of sales |
|
|
(37.0) |
(37.4) |
(43.7) |
(64.2) |
(83.3) |
(89.1) |
(94.6) |
(112.6) |
Gross profit |
|
|
82.1 |
80.6 |
114.4 |
157.1 |
173.3 |
180.6 |
255.9 |
262.8 |
SG&A (expenses) |
|
|
(67.2) |
(69.7) |
(83.6) |
(92.4) |
(103.4) |
(107.4) |
(118.0) |
(121.0) |
Other operating income/(expense) |
|
|
1.5 |
5.9 |
7.5 |
9.6 |
11.4 |
16.8 |
15.0 |
17.0 |
EBITDA (excl royalties) |
|
|
26.0 |
21.3 |
41.8 |
76.8 |
85.7 |
98.8 |
164.9 |
170.1 |
EBITDA |
|
|
27.5 |
27.3 |
49.3 |
86.5 |
97.1 |
115.6 |
179.9 |
187.1 |
Depreciation and amortisation |
|
|
(11.1) |
(10.4) |
(11.0) |
(12.1) |
(15.9) |
(25.6) |
(27.1) |
(28.2) |
Operating profit (before royalties and exceptionals) |
|
14.9 |
10.9 |
30.8 |
64.7 |
69.8 |
73.2 |
137.9 |
141.8 |
|
Reported operating profit |
|
|
16.5 |
16.9 |
38.3 |
74.3 |
81.2 |
90.0 |
152.9 |
158.8 |
Finance income/(expense) |
|
|
0.1 |
0.1 |
0.1 |
(0.0) |
0.1 |
(0.6) |
(0.7) |
(0.7) |
Reported PBT |
|
|
16.6 |
16.9 |
38.4 |
74.3 |
81.3 |
89.4 |
152.1 |
158.1 |
Income tax expense (includes exceptionals) |
|
|
(4.3) |
(3.5) |
(7.9) |
(14.8) |
(15.5) |
(18.1) |
(30.7) |
(31.9) |
Adjusted net income |
|
|
12.2 |
13.5 |
30.5 |
59.5 |
65.8 |
71.3 |
121.4 |
126.2 |
Reported net income |
|
|
12.3 |
13.5 |
30.5 |
59.5 |
65.8 |
71.3 |
121.4 |
126.2 |
WASC (m) |
|
|
31.975 |
32.093 |
32.126 |
32.258 |
32.438 |
32.602 |
32.724 |
32.822 |
Diluted average number of shares (m) |
|
|
32.025 |
32.150 |
32.325 |
32.732 |
32.785 |
32.736 |
33.021 |
33.119 |
Reported EPS (p) |
|
|
38.3 |
42.1 |
95.1 |
184.3 |
202.9 |
218.7 |
370.9 |
384.4 |
Reported diluted EPS (p) |
|
|
38.3 |
42.0 |
94.5 |
181.6 |
200.8 |
217.8 |
367.6 |
380.9 |
Adjusted diluted EPS (p) |
|
|
38.1 |
42.0 |
94.5 |
181.6 |
200.8 |
217.8 |
367.6 |
380.9 |
DPS (p) |
|
|
52.0 |
40.0 |
74.0 |
126.0 |
155.0 |
145.0 |
235.0 |
250.0 |
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
69.0% |
68.3% |
72.4% |
71.0% |
67.5% |
67.0% |
73.0% |
70.0% |
EBITDA margin (excl royalties) |
|
|
21.8% |
18.1% |
26.5% |
34.7% |
33.4% |
36.6% |
47.1% |
45.3% |
EBITDA margin (incl royalties) |
|
|
23.1% |
23.1% |
31.2% |
39.1% |
37.8% |
42.9% |
51.3% |
49.8% |
Operating margin (before royalties and exceptionals) |
|
|
12.5% |
9.2% |
19.5% |
29.2% |
27.2% |
27.1% |
39.3% |
37.8% |
|
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
22.7 |
22.6 |
22.1 |
30.1 |
35.3 |
42.0 |
53.4 |
59.8 |
Right-of-use assets |
|
|
|
|
|
|
|
31.9 |
40.2 |
39.4 |
Goodwill |
|
|
1.4 |
1.4 |
1.4 |
1.4 |
1.4 |
1.4 |
1.4 |
1.4 |
Intangible assets |
|
|
8.3 |
10.5 |
12.9 |
14.2 |
16.0 |
17.6 |
20.7 |
23.4 |
Other non-current assets |
|
|
4.8 |
4.1 |
6.5 |
7.8 |
11.7 |
16.4 |
16.4 |
16.4 |
Total non-current assets |
|
|
37.2 |
38.7 |
43.0 |
53.5 |
64.4 |
109.3 |
132.1 |
140.4 |
Cash and equivalents |
|
|
12.6 |
11.8 |
17.9 |
28.5 |
29.4 |
52.9 |
66.1 |
98.3 |
Inventories |
|
|
7.6 |
8.5 |
12.4 |
20.2 |
24.2 |
20.7 |
22.0 |
26.2 |
Trade and other receivables |
|
|
9.4 |
10.1 |
13.0 |
15.5 |
18.8 |
19.6 |
25.5 |
27.3 |
Other current assets |
|
|
0.6 |
0.7 |
0.6 |
0.5 |
0.8 |
0.2 |
0.2 |
0.2 |
Total current assets |
|
|
30.2 |
31.2 |
43.9 |
64.7 |
73.2 |
93.4 |
113.8 |
152.0 |
Trade and other payables |
|
|
(13.1) |
(12.8) |
(16.5) |
(20.3) |
(19.2) |
(30.3) |
(20.0) |
(22.5) |
Borrowings |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Leases |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
(8.3) |
(8.3) |
(8.3) |
Other current liabilities |
|
|
(2.0) |
(2.7) |
(6.5) |
(7.3) |
(10.1) |
(4.5) |
(4.5) |
(4.5) |
Total current liabilities |
|
|
(15.1) |
(15.6) |
(23.0) |
(27.6) |
(29.3) |
(43.1) |
(32.8) |
(35.3) |
Borrowings |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Leases |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
(23.8) |
(32.3) |
(31.7) |
Other non-current liabilities |
|
|
(0.8) |
(1.1) |
(1.0) |
(1.2) |
(1.9) |
(2.1) |
(2.1) |
(2.1) |
Total non-current liabilities |
|
|
(0.8) |
(1.1) |
(1.0) |
(1.2) |
(1.9) |
(25.9) |
(34.4) |
(33.8) |
Net assets |
|
|
51.5 |
53.2 |
62.8 |
89.3 |
106.5 |
133.7 |
178.7 |
223.3 |
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW STATEMENT |
|
|
|
|
|
|
|
|
|
|
EBIT |
|
|
16.5 |
16.9 |
38.3 |
74.3 |
81.2 |
90.0 |
152.9 |
158.8 |
Depreciation and amortisation |
|
|
11.1 |
10.4 |
10.2 |
12.2 |
15.9 |
25.0 |
27.1 |
28.2 |
Impairments |
|
|
0.0 |
0.0 |
0.8 |
(0.0) |
0.0 |
0.6 |
0.0 |
0.0 |
Share-based payments |
|
|
0.2 |
0.2 |
0.2 |
0.2 |
0.3 |
0.5 |
0.5 |
0.5 |
Other adjustments |
|
|
0.1 |
0.1 |
0.1 |
0.1 |
0.3 |
0.3 |
0.0 |
0.0 |
Movements in working capital |
|
|
(2.3) |
(0.8) |
(0.2) |
(4.4) |
(9.0) |
10.8 |
(17.5) |
(3.5) |
Income taxes paid |
|
|
(2.3) |
(2.6) |
(5.5) |
(12.2) |
(16.3) |
(22.7) |
(30.7) |
(31.9) |
Operating cash flow |
|
|
23.3 |
24.2 |
43.9 |
70.1 |
72.5 |
104.5 |
132.2 |
152.1 |
Net capex and intangibles |
|
|
(12.3) |
(12.7) |
(12.8) |
(21.6) |
(22.5) |
(24.6) |
(30.8) |
(26.6) |
Net interest |
|
|
0.1 |
0.1 |
0.1 |
(0.0) |
0.1 |
0.1 |
(0.7) |
(0.7) |
Net proceeds from issue of shares |
|
|
0.7 |
0.3 |
0.1 |
0.9 |
0.7 |
0.8 |
0.0 |
0.0 |
Dividends paid |
|
|
(16.6) |
(12.8) |
(23.8) |
(38.7) |
(50.3) |
(47.3) |
(76.9) |
(82.1) |
Other financing activities |
|
|
0.0 |
0.0 |
(1.9) |
0.0 |
0.0 |
(10.3) |
(10.6) |
(10.6) |
Net cash flow |
|
|
(4.8) |
(0.9) |
5.5 |
10.7 |
0.5 |
23.2 |
13.2 |
32.2 |
Opening cash and cash equivalents |
|
|
17.6 |
12.6 |
11.8 |
17.9 |
28.5 |
29.4 |
52.9 |
66.1 |
Currency translation differences and other |
|
|
(0.2) |
0.1 |
0.6 |
(0.1) |
0.3 |
0.3 |
0.0 |
0.0 |
Closing cash and cash equivalents |
|
|
12.6 |
11.8 |
17.9 |
28.5 |
29.4 |
52.9 |
66.1 |
98.3 |
Closing net cash (including leases) |
|
|
12.6 |
11.8 |
17.9 |
28.5 |
29.4 |
20.8 |
25.5 |
58.3 |
Source: Company data, Edison Investment Research
|
|
Research: TMT
Nanoco has provided an update on the litigation against Samsung for the alleged wilful infringement of the group’s IP. The US Patent Trial and Appeal Board (PTAB) has agreed to Samsung’s request to review the validity of the five patents in the case. In our view, this development does not significantly swing the likely outcome of the court case one way or the other, although it could delay the final outcome by a number of months.