Daily Stock Market Report (Tue 14 Jan 2025) - CARD, JD., RFX, GAMA, JNEO, GAW, PSN, CRN, HTG

Good morning! It's a very busy day for updates.

12.40pm: All done! Thank you.

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Spreadsheet accompanying this report (updated to 10/1/2025)

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Companies Reporting

Name (Mkt Cap)	RNS	Summary	Our view (Author)
BP (LON:BP.) (£69.6bn)	Q4 TU	Production lower in Q4, refining margins also lower. Fuel demand weaker than expected.
Smiths (LON:SMIN) (£5.9bn)	New CFO & updated FY guidance	FY organic rev guidance now 6%-8%, from 5%-7% previously. Margin exps unchanged.
JD Sports Fashion (LON:JD.) (£5.0bn)	TU	FY profit forecast slightly below previous guidance. Adj PBT exp between £915m and £935m.	AMBER/RED (Megan)
Games Workshop (LON:GAW) (£4.4bn)	Interim Report	Rev up 21% to £399m, PBT up 33% to £126.8m. Budget cost impact not material.	GREEN (Roland)
Persimmon (LON:PSN) (£3.6bn)	2024 TU	Completions +7%, avg selling price +5%. FY adj PBT upper end of expectations.	AMBER (Roland)
Ocado (LON:OCDO) (£2.9bn)	Q4 TU	Q4 retail rev +17.5% to £716m. Volumes +17%, avg order/wk +16.9%. Customers +12%.
Grafton (LON:GFTU) (£1.7bn)	TU	FY trading in line, returned to LFL growth in Nov/Dec. Ireland strong, UK decline easing.
GlobalData (LON:DATA) (£1.6bn)	TU	FY rev +4% to c.£286m, with adj EBITDA +6%. Both within range of mkt exps. Outlook confident.
Gamma Communications (LON:GAMA) (£1.4bn)	TU and acquisition	EPS at upper end of guidance. £165m deal to acquire STARFACE in Germany. Business comms software tailored to DE mkt.	GREEN (Megan)
Integrafin Holdings (LON:IHP) (£1.1bn)	Q1 TU	Q1 FY25 net inflows of £0.9bn, 5.7% of opening FUD. Record FUD of £65.9bn.
Cairn Homes (LON:CRN) (£1.1bn	TU	Ahead of guidance. €150m op profit (guidance: €145m) and over 2,200 closed units. ROE 15%.	AMBER/GREEN (Graham)
Hunting (LON:HTG) (£506m)	Year-end TU	FY24 in line with mkt exps. EBITDA range $123-$126m. FY order book $500m, +ve outlook.	GREEN (Graham)
Advanced Medical Solutions (LON:AMS) (£416m)	Full year TU	FY in line with consensus exps, with rev £177m/adj PBT £29.2-£29.7m. Acq. perf well.
Crest Nicholson Holdings (LON:CRST) (£401m)	Revised date for 2024 prelim results	Auditor req extra time to assess fire remediation. Total provision exp £245m-£255m, from £145m at HY24. FY adj PBT at lower end of £22-£29m guidance.
Card Factory (LON:CARD) (£316m)	TU	In line. Sales for 11 months to Dec 2024 +6.2%, LfL store revenue +3.9%. FY25 adj. PBT £65.7-67m.	AMBER/GREEN (Roland)
MJ GLEESON (LON:GLE) (£259m)	TU	Results to be ahead of last year and in line with current market expectations.
GYM (LON:GYM) (£254m)	TU	Adjusted EBITDA expected to be slightly ahead of expectations.
Robert Walters (LON:RWA) (£221m)	Q4 TU	Q4 fee income -14%, slightly weaker vs exps. Profit warning - “broadly b/even” for full year.
Hostelworld (LON:HSW) (£171m)	TU	Adj. EBITDA +19% to €21.8m, ,”in line with consensus”. Net cash €2m.
Knights group (LON:KGH) (£104m)	Half Year Results	H1 PBT +30% to £9m. Trading in H2 has begun in line with full year expectations.
Ramsdens Holdings (LON:RFX) (£75m)	FY Results	2024: rev +14%, PBT +12% to £11.4m. For Q1 2025, good momentum continues.	GREEN (Graham)
Journeo (LON:JNEO) (£48m)	TU	FY24 revs £50m, in line. Adj. PBT £5m, slightly ahead. “Continuing to perform ahead of mgmt exps.”	AMBER/GREEN (Graham)
MTI Wireless Edge (LON:MWE) (£43m)	Contract wins	$1m of military antenna orders to be delivered over 2025.
XP Factory (LON:XPF) (£22m)	TU	On track to meet expectations. 8.5% LfL sales growth in Q3.
Pebble Beach Systems (LON:PEB) (£12m)	TU & Strategy update	Customers delaying decisions, so below exps. rev £11.5m, EBITDA £3.3m (exps: £13.4m and £4.1m).

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Summaries

Card Factory (LON:CARD) - Up 8.4% to 98p (£343m) - Trading Statement - Roland - AMBER/GREEN

The value card and giftware retailer appears to have had a strong festive season, reporting positive LFL growth and leaving full-year profit guidance unchanged. NI/wage increases are expected to be mitigated. While I can see some risks, I’m encouraged by progress and cautiously optimistic.

JD Sports Fashion (LON:JD.) - down 10% to 86p (£5bn) - Trading update for 9 weeks to 4 January - Megan - AMBER/RED

Another profit warning for the sports apparel retailer, whose difficulties in October persisted throughout the rest of 2024. Annual profit forecasts are now expected at between £915m and £935m (compared to £917m last year) down from the previous estimates of £955m-£1035m. I’m not convinced the worst is over.

Ramsdens Holdings (LON:RFX) - up 3% to 242.5p (£77m) - Annual Results - year ended 30 Sep 2024 - Graham - GREEN

RFX reports an excellent 2024 and treats investors to the good news that FY Sep 2025 has gotten off to a good start. Panmure accordingly increase their EPS estimate for the current year by 5% to 27p, despite the impact of higher national insurance contributions. I’ve been a fan of this business for some time and have little reason to change my positive stance.

Games Workshop (LON:GAW) - Down 3% to 12,800p (£4.2bn) - Interim Report - Roland - GREEN

Investors were hoping for more detail on Games Workshop’s Amazon deal, but will now have to wait until the summer. In the meantime, strong trading and a 148% increase in licensing revenue support a 33% rise in H1 profits. Capex is up to support higher volumes and there’s some evidence of growing pains in the supply chain. But this remains an excellent business that may still be fairly priced.

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Short Sections

Gamma Communications (LON:GAMA)

Up 2% to 1426p (£1.35bn) - Trading update & acquisition announcement - Megan - GREEN

One of Aim’s long-time gems has provided another reassuring announcement as it prepares to exit the junior market for the main market later in the year. Gamma Communication’s adjusted, fully diluted earnings for the year are now expected in the upper half of previous guidance (80.3p to 88.4p), substantially higher than the adjusted earnings of 67p reported in 2023.

The year has been characterised by some large contract wins for the Enterprise division and strong demand for its cloud solutions in the Business division. Acquisitions have bolstered the underlying performance in 2024 and this morning, management has also announced another acquisition to enhance Gamma’s position in Germany in 2025 and beyond.

Starface is a market leader in the German cloud communications market. In 2024, the company generated sales of approximately €44m, 70% of which came from recurring sources, and adjusted EBITDA of €15m. Gamma is buying the company for a total cash consideration of €196m (£165m), equivalent to 13 times adjusted EBITDA. The acquisition will be financed with £125m of existing cash resources, with the remainder provided by a new revolving credit facility.

Megan’s view:

Gamma is trading on an EV to EBITDA ratio of 11.72, which is a lower valuation than what it is paying for Starface.

This is a quality company with a strong balance sheet - net cash was £154m at the year end, but that is before the £125m of cash payments required to fund the Starface acquisition. Management utilises its cash reserves (and impressive cash generation) to invest in the company’s future growth, largely through acquisitions.

The movement to the main market (where the company will enter the FTSE 250) could also provide a little boost to the share price this year. GREEN.

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Journeo (LON:JNEO)

Up 3% to 298p (£49m) - Trading Update - Graham - AMBER/GREEN

A nice little update from this “leading provider of information systems and technical services to transport operators and local authorities”. As readers will know, it provides products such as live CCTV on buses, fleet tracking systems, and various displays used in buses/trains.

Today’s news: revenues for FY Dec 2024 are set to be in line with expectations at £50m, and adj. PBT is set to be slightly ahead of expectations at £5m (expectations: £4.8m). Furthermore, the group continues to trade well and FY Dec 2025 is now anticipated to be slightly ahead of expectations (£5.0m), even after the tax changes in the Autumn Budget.

Estimates: a helpful note from Cavendish suggests that 20% year-on-year PBT growth (from £4m in 2023 to £5m in 2024) is due to “improving gross margins across segments and greater scale in the business” following an acquisition. Government spending trends on public transport are seen as a source of opportunity, such as Labour’s £1 billion bus funding plan. They raise their adj. PBT forecast for 2025 to £5.2m.

Graham’s view: I’ve been mildly positive on this one, giving it an AMBER/GREEN in November (share price at the time: 290p). The main point holding me back has been limited organic growth expectations, and that remains a factor today as 2025 is only forecast to see 4% revenue growth over 2024. But I do appreciate the large cash balance (around £13m currently) and the 20% growth in profitability in one year is impressive - perhaps we could start to see some operational leverage, maybe even some pricing power, and a better profit margin?

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Persimmon (LON:PSN)

Up 5.8% to 1,117p (£3.6bn) - 2024 Trading Statement - Roland - AMBER

Persimmon built 10,664 houses last year, an increase of 7% from 9,922 in 2023. This level of completions is slightly ahead of the company’s original 2024 guidance of 10,000-10,500. As a result, full-year underlying pre-tax profit is expected to be at the upper end of market expectations of £349m to £390m (FY23: £352m).

Housebuilders are known for their reluctance to cut asking prices. Persimmon appears to have achieved some price growth in 2024, with the average selling price rising by 5% to £268,500. For reference, the UK average house price was £269,426 at the end of last year, according to Nationwide – so Persimmon’s positioning is very much mid-market.

Forward sales at the year end rose by 8% to £1,146m, including £653m private forward sales. I believe the remainder relates to bulk sales and build-to-rent, including social housing. Private sales are a lower share of total sales than in the past, reflecting market conditions.

Roland’s view: housebuilders’ share prices were strong ahead of the Autumn Budget, but have come off the boil since then. Persimmon is down 35% from its October 2024 high:

This has left the stock trading close to its last-reported book value of 1,067p per share. I think Persimmon could be reasonable value at this level, although it’s worth noting how returns on equity have dropped to sub-10% levels since the Help to Buy scheme ended. On balance, I’m neutral - AMBER.

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Cairn Homes (LON:CRN)

Unch. at 175.4p (£1.09bn / €1.29bn) - Trading Update - Graham - AMBER/GREEN

This share had a great run in 2024 (from 120p in January and from 126p in February, when we covered it last. The momentum is justified today by a full-year trading update which shows revenue +29% to €860m. The company has beaten its guidance for €145m of operating profit (actual: €150m), and has generated an ROE slightly above its 15% target. All of these metrics are up substantially on the prior year. The slight reduction in average selling price and gross margin were irrelevant as the company simply sold far more homes than it did in prior years. It has been a great year for shareholders:

Looking ahead, the forward order book (2,361 homes) along with its net sales value (€910m) are both up slightly on where they were a year ago. There is also an agreement with public sector bodies to deliver 2,150 social and affordable homes “over a multi-year period”. For 2025, the company is guiding for revenue growth of 10%.

Graham’s view: I’ve been positive on this one due to the intense pressure in the Irish housing market which doesn’t seem to show any signs of letting up any time soon. Forces propelling house prices higher include a rising population, full employment and rising wages, all pitted against very limited supply. Even interest rates are no longer a barrier. The only real obstacle in the way of house prices rising faster is legislation preventing banks from lending more than 4x salary to first-time buyers.

When I look at Cairn specifically, I see a company that’s well-placed to take advantage of this strong demand but that is also disciplined in the sense that it’s targeting an attractive ROE of 15%, and has hit this target. Public contracts are now set to provide a further boost. However, I’m going to moderate my stance today (from GREEN) as the valuation has changed considerably this year. Balance sheet net assets were last seen (June 2024) at €759m, and the now stock trades at a considerable premium to this level. I also note that the co-founder and CEO has reduced his stake from 3.5% to 2.3%. While I still like this one, the share price now does a better job of reflecting its excellent prospects.

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Hunting (LON:HTG)

Up 14% to 349p (£580m) - 2024 Year-end Trading Update - Graham - GREEN

This is a “precision engineering group”, or in more words, “a world-leading manufacturer and technology provider for the energy, aerospace, medical and power generation industries globally”. Strength in the oil and gas industry has been associated with a recent boom in profitability: see Paul’s coverage in July.

Today’s update says that 2024 is in line with previous guidance and with expectations: EBITDA of $123-126m and revenue of $1,040-1050m. Net cash will be ahead of guidance at $100-105m (c. £84m).

Looking forward, the order book has reduced from the enormous $700m recorded at H1 and finished the year at c. $500m. New EBITDA guidance for 2025 is $135-145m, which is below the prior consensus according to a note published by Canaccord today ($147m). However, HTG also says that their EBITDA guidance does not include the positive impact of any acquisitions (“for which we are in active discussions”) nor does it reflect their tender pipeline. By leaving active pipeline prospects completely out of their guidance, surely they are setting themselves up to beat this new guidance?

Graham’s view: I’m no expert when it comes to the oil and gas industry, but I’m inclined to leave our prior GREEN stance unchanged as it seems difficult to fault any particular aspect of this update. The cash performance has been strong and the company reminds us that they “regularly consider if additional shareholder returns are appropriate”. The net cash position now supports a chunk of the market cap but the company isn’t resting on its laurels: instead, it’s restructuring its EMEA segment to save costs of up to $10m and prepare for future focus on the Americas and other geographic regions. 

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Graham's Section

Ramsdens Holdings (LON:RFX)

Up 3% to 242.5p (£77m) - Annual Results - year ended 30 Sep 2024 - Graham - GREEN

It was a good year for Ramsdens; here are the results for FY Sep 2024:

All four income streams have grown but the company leads with the 29% profit growth in precious metals purchasing (to £11.8m), supported by the high gold price.

From royalmint.com, here is the progression of the gold price in GBP over the past three years. The y-axis goes from £1,400 to £2,300:

Other segments grew at lesser rates: pawnbroking gross profit up 16% to £11.7m, jewellery retail up 10% to £13.3m, and foreign currency up 4% to £14.2m. Note that foreign currency remains the largest contributor for now.

EPS grows 7%; the company points out that the change in the corporation tax rate (effective April 2023) affects this growth rate. FY Sep 2023 was taxed at the lower rate for six months. It makes a lot more sense to use the PBT growth rate to understand company performance: 12%.

Current trading/outlook: Q1 for the new financial year was from Oct-Dec 2024.

The good momentum the Group enjoyed in H2 FY24 has continued with all segments performing ahead of the prior year:

Gold purchasing: volumes up 5% but profits up 40% due to the higher gold price.

Pawnbroking: loan book nudges up further to £10.9m. New dedicated pawnbroking website.

Jewellery retail revenues +15%. Watches are strong (previously this was a cause for some concern, after a boom and bust in luxury watches)

FX: profit up 3%. Sales of foreign currency are up, but there’s a reduction in purchases as tourists are not coming home with a surplus of foreign currency to sell.

CEO Peter Kenyon has been very excited about the company’s multi-currency Mastercard and says that RFX has been gaining market share in this area. Some interesting news here:

For the last seven years, the Group has introduced customers wanting to make international money transfers to TorFX. However, since the year end, the Group has now been authorised by the FCA to make international money transfers and will shortly launch an in-house service.

Employment costs: RFX is a supporter of the Real Living Wage, which is increasing 5% in 2025 to £12.60 per hour (slightly higher than the national living wage of £12.21). That’s on top of the changes to national insurance, which are set to cost £0.8m p.a.

Another source of higher costs is energy: an additional £0.25m cost p.a. under a new fixed price energy contract.

Overall there is some uncertainty, but the company seems happy with its positioning:

It is still early in the new financial year, however, trading performance to date has been pleasing and the Group continues to benefit from the very strong gold price. Whilst the economic outturn for the rest of the year is uncertain, the Group's diversified business model, strong cash generation and cost management gives the Board confidence that the Group will continue to grow and create value for all stakeholders.

The Chairman signs his last annual report. He has been in this position for just over 10 years.

Store opening programme remains reassuringly measured. 15 stores have opened in the last two years, bringing the total to 169 stores. “All new stores are trading well, with several well ahead of expectations.”

They make an interesting point that was also expressed to me in an interview I had with management: that they have successful stores in towns with a population of less than 15,000. But there are c. 350 towns/cities in the UK with a population of over 30,000. So they think it’s possible that they could have many more stores than the current 169. As long as they continue to move in a measured fashion, I think they are right to continue exploring this opportunity!

They mention the possibility of acquiring a watch repair business; H & T (LON:HAT) did this and I believe it worked out very well for them.

Balance sheet: net assets have increased from £48m to nearly £54m, and net cash moves from £5m to over £7m. The full-year dividend goes to 11.2p.

Estimates: Panmure have upgraded their EPS estimate for FY Sep 2025 by 5% to 27p, which they point out would have been a 9% upgrade if not for higher NICs.

Graham’s view: at a PER of less than 10x and with good momentum behind it across four income streams - not just gold purchasing but also retailing, pawnbroking and FX - I think I have little choice but to stay positive on this one.

For perhaps sentimental reasons I would be inclined to buy HAT first, but I see plenty of attractions at RFX too.

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Megan's Section

JD Sports Fashion (LON:JD.)

Down 10% to 86p (£5bn) - Trading update for 9 weeks to 4 January - Megan - AMBER/RED

Another day and another retailer has been punished for trimming its forecasts for the 2025 financial year and tempering expectations for the year to come.

JD Sports’ share price has fallen almost as low as it did during the Covid-19 sell-off as difficult trading conditions mean like-for-like annual revenues for the year to January 2024 are now expected to be flat on last year. Full year pre-tax profit forecasts have been trimmed to between £915m and £935m, some way off the £955m to £1035m announced in the interim results in October.

We did know that annual results were going to fall short of these expectations (Roland covered the company’s November profit warning here), but the weak trading conditions that were experienced in October seem to have persisted throughout the rest of 2024 and the decision not to pursue a discount strategy during the Christmas period failed to bear fruit.

Like-for-like revenues were down 1.5% during November and December when the wider sports apparel market saw heavy promotional activity. A quick browse of the e-commerce site of JD’s close peer Frasers shows that the latter continues to discount heavily, while JD is sticking with its “proven long-term approach” not to discount items.

Sticking with the sale of full price goods has helped to protect gross margins, which are forecast to be 48% in FY2025. At Frasers, gross margins are more like 43% and could be undercut further by the heavy discount strategy pursued this year.

There is no comment in this trading update on the potential impact of higher national insurance contributions to operating margins, but management will update the market again with the outlook for the 2026 financial year in March. Perhaps then we’ll have more detail on any shifts in the cost base.

Megan’s view:

The sell-off at JD means it’s now trading on an enticing 6.7x forecast earnings. Roland gave this an Amber/Green rating back in October, based on the fact that this is a high quality retailer with decent margins which is currently looking like it’s pretty good value.

I am a bit more cautious. Market conditions for sports apparel retailing are changing and an increasing number of brands are selling direct-to-consumer (and sometimes at a discount) cutting out the need for JD Sports. I am not convinced that the ‘no discounting’ policy remains the right one.

The earnings trajectory is currently heading in the wrong direction and that concerns me, especially as profit warnings tend to recur.

I also don’t like the balance sheet which is heavy on debt, with net gearing now 117%.

I am going to move to Amber/Red for this one, awaiting a turnaround in fortune hopefully later in the year.

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Roland's Section

Card Factory (LON:CARD)

Up 8.4% to 98p (£343m) - Trading Statement - Roland - AMBER/GREEN

I think it’s fair to say there has been a suspicion among investors that value retailer Card Factory was due a profit warning. But that doesn’t seem to be the case. Today’s trading statement is defiantly in line with expectations:

Robust revenue growth with expectations for full year adjusted profit before tax unchanged.

Brokers covering the company do not seem to have slipped through a downgrade, either. Analyst consensus estimates on Stockopedia remained stable through the second half of last year:

With that said, let’s take a look at today’s statement.

Trading update: CARD’s financial year ends on 31 January, so today’s update covers 11 months of the year, including all the peak trading periods. So I would not expect any surprises in the remaining three weeks.

Here are the headline figures:

• Total revenue +6.2% to £506.6m

• Store revenue +5.7% with LFL +3.9%

• 32 net new stores (c.1,100 total)

• Online LFL -10% as focus on higher margin ranges

• Partnership revenue +23.5% to £18.9m, including acquisitions

The company says that cost savings, efficiency gains and margin-enhancing range development are helping to offset cost pressures, as guided with the half-year results (see here).

Growth in partnership revenue seems promising, too. This includes the recent $25m acquisition of Garven Holdings in the US, which will allow Card Factory to start selling its products through retailers in the US, and potentially US wholesalers.

Christmas trading: in line with expectations, with revenue growth of 4.7% in November and December. Higher average basket values reflected expanded ranges.

• LFL store revenue +3% in Nov/Dec

• Expanded gift categories included confectionary, licensed ranges and soft toys, plus a new value-focused Christmas card offer

Management says the business is “outperforming a challenging non-food market”.

It’s certainly encouraging to see positive like-for-like growth during the pre-Christmas period. B&M – which we looked at last week – serves the same demographic, but saw negative LFL sales during the three months to 31 December.

Outlook: FY25 adjusted pre-tax profit is expected to be in line with market expectations.

Broker forecasts on Stockopedia suggest earnings of 14.4p per share, putting Card Factory on a modest forward P/E of 6.8, with a 5.1% yield.

Looking ahead, changes to the minimum wage and National Insurance are expected to cost c.£14m in FY26. Management expects to offset this “through our proven approach” – a mix of cost savings, range development and pricing.

Despite these pressures, profit expectations are positive for FY26:

We currently expect to deliver a mid-to-high single digit percentage increase in adjusted profit before tax in FY26.

Consensus estimates suggest earnings could rise 11% to 15.9p per share for FY26, giving a P/E of 6 and a 6%+ dividend yield.

Roland’s view

Card Factory appears to be performing well and continuing to carve out its own niche.

The valuation continues to look reasonable, in my view, given the strong cash generation and attractive quality metrics of the business:

A couple of points I think might be worth watching are:

• Net debt: the half-year statutory figure of £177m shown in the StockReport is inflated by £103.5m of lease liabilities. Net bank debt was £74.9m at the half-year market, but management say debt normally peaks in Q3 as they stock up for Christmas. I’d prefer to see the company target a lower level of year-end debt, ideally net cash.

• US expansion: early results from the company’s partnership efforts seem positive but I would hope Card Factory does not attempt too many/too large acquisitions – for a comparison, IG Design’s efforts to expand through a large US acquisition have been fairly disastrous, in my view.

On balance, my view is cautiously optimistic after today’s statement. I’m going to go AMBER/GREEN ahead of May’s full-year results.

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Games Workshop (LON:GAW)

Down 3% to 12,800p (£4.2bn) - Interim Report - Roland - GREEN

I'm delighted to report our best first half-year performance.

Today’s half-year results from Games Workshop were keenly awaited and appear to have disappointed investors (slightly). I suspect the main reason for this is the absence of any further information on the company’s potentially lucrative Amazon tie-up.

As Megan commented in the Week Ahead on Friday, this deal has the potential to generate a substantial increase in licensing income and provide terrific marketing for Warhammer.

However, today’s commentary on the Amazon deal is limited to the following remark:

After the period end we concluded our negotiations with Amazon Content Services LLC, a subsidiary of Amazon.com, Inc., for the adaption of Games Workshop's Warhammer 40,000 universe into films and television series, together with associated merchandising rights. We will give you an appropriate update in the full year report.

More than a year after this deal was first announced, Games Workshop has still not provided any clue to their financial expectations for this partnership. It looks like investors will now have to wait until the summer’s annual results to find out more.

Fortunately, progress elsewhere in the business appears to have been very strong.

H1 financial highlights: I’ve pasted in the financial summary table from today’s results below to save re-typing. I’ve highlighted the licensing entries to show the growth and profitability of this income stream:

Core revenue rose by 14.3%, split as follows:

Core revenue growth (+14.3%) continues across Trade (+21.7%), Retail (+11.2%) whilst Online decreased (-4.2%).

This sales split suggests to me that overseas markets (Trade) are driving much of the recent growth.

Licensing revenue rose by 148% to £30.1m, generating a 93% operating margin and contributing 22% of group operating profit for the half year.

These are remarkable numbers in my view. They help to illustrate the value of Games Workshop’s intellectual property and explain why shareholders are so excited about the Amazon deal.

Profitability: crunching the numbers gives me the following financial metrics for the 12 months to 30 November 2024:

• TTM operating margin: 40.4%

• TTM return on capital employed (ROCE): 75.7%

Both of these are usefully above the levels reported for the FY24 financial year:

While profitability from the core business was slightly higher in H1, I think the majority of this improvement is being driven by the increased contribution from licensing.

Cost increases relating to last year’s Budget are not expected to have a material impact – the company says it already pays all its UK staff, as a minimum, “close to the new level”. However, it’s said the changes could lead to some third-party input cost increases in 2025/26.

Cash flow & Capex: Games Workshop declared 185p per share of dividends during the half year, down slightly from 195p during the same period last year. Net cash also fell to £79.1m (H1 24: £85.3m).

This reflects an increase in capital expenditure during the period to £14.3m (H1 24: £6.5m). This was due to spending on land and property for new factory and paint shop sites in Nottingham, together with £5.3m on tooling, manufacturing facilities and equipment.

Management says a further £12m of cash outflows are due to support the construction of its new factory and paint shop facilities over the next 12 months.

I don’t see any concerns with this investment, given the strength of demand for the company’s products. I’m happy to see the company is maintaining its target cash buffer at £80m. If that means slightly lower dividends for a short while, I would be in favour. Dividends are meant to represent surplus cash.

Trading commentary: there is too much detail in today’s report for me to repeat here. But in short, the company’s recent product launches appear to have met with resounding demand:

It's fair to say our results were helped by some of the excitement around media and licensing product launches. I'm told by my retail team that we had more people coming into our Warhammer stores in the period.

Additional demand has been supported by the company’s manufacturing team, but supply and demand were not perfectly matched. This led to some availability issues and an increase in stock write downs:

Our manufacturing team has delivered record volumes and has improved our stock management and commercial performance. We still have, however, some hard work to do. We are still not meeting our stock availability KPIs and not all of our new product releases sold to our planned levels, so our write downs of the stock in our warehouses were c. £3.6 million higher than the same period last year.

Largely as a result of this increase in provisions, gross margin fell to 67.5% in H1, from 69.4% one year ago.

This doesn’t sound disastrous to me and may simply be growing pains – the company says it’s “all well within our control” and can be addressed by some fine tuning. I think it’s worth watching though, checking back in 6/12 months to see what’s changed.

Outlook: Games Workshop CEO Kevin Rountree is not a fan of forward guidance. He uses the outlook statement to thank staff and customers.

He also warns that the “timing and magnitude of any US tariffs” remains uncertain and could impact cash generation and other financial metrics.

Consensus forecasts on Stockopedia suggest earnings of 492p per share for FY25, rising only modestly to 510p in FY26. That gives the stock a full – but not necessarily unreasonable – valuation, in my view:

Roland’s view

As a non-gamer, I sometimes struggle to understand the appeal of this business to customers. To be honest, I’m amazed it’s become so large where so many other gaming hobbies remain niche.

However, from an investment perspective, I’m a big fan of Games Workshop’s excellent management, superb profitability, and clean, high-quality accounts.

In my opinion, a business that can consistently generate c.60% returns on equity from a net cash balance sheet deserves a premium valuation.

However, I would be remiss if I did not point out the risk that future sales growth, or perhaps the Amazon deal, could still disappoint the market at some point.

Last year we saw a wobble in forecasts – there’s no reason this couldn’t happen again:

What’s a fair price for Games Workshop? It’s hard to say, in my view, because I don’t have any view on how long the current growth rate can be maintained.

In terms of valuation, one metric I use a lot is earnings yield (operating profit/enterprise value).

As a rule of thumb, I view an earnings yield of 8% as cheap, and 6% as likely to be decent value – for regular businesses with positive earnings growth.

I calculate Games Workshop’s current earnings yield as 5.4%, based on today’s results. Given the outstanding financial quality of the business and its apparent strong momentum, I have to conclude that could be a reasonable price. I’m going to maintain our GREEN view for now.