Good morning! 

A couple of things which caught my eye so far:

Games Workshop (LON:GAW)

  • Share price: £30.175 (-9%)
  • No. of shares: 32 million
  • Market cap: £977 million

Trading Statement

This is almost comedic in its brevity:

Following on from the Group's update in September, trading to 7 October 2018 has continued well.  Compared to the same period in the prior year, sales are ahead and profits are at a similar level to the prior year.
However, the Board remains aware that there are some uncertainties in the trading periods ahead for the rest of the 2018/19 financial year.  A further update will be given as appropriate.

The share price has now fallen by 25% from its recent high, with a further 9% fall today.

Isn't it remarkable that nearly £100 million pounds in value can be wiped away merely at the mention of "some uncertainties"?

I suppose there's a little bit more to it than that. There is a slight cause for concern in that profit margins must have slipped, if sales are up and profits are flat.

But there's also a discrepancy (in the company's favour) between official forecasts and this update.

Official forecasts for the full-year ending in June 2019 are that sales will be a little lower and pre-tax profit will fall by c. 17% to £62 million, before the trend turns positive again in FY 2020.

But according to this note, sales so far are up and profits are flat. So if this trend could be sustained for the rest of the year (not guaranteed by any means, since there are still 7-8 months left), then we would be on course for an earnings beat by the end of the year.

Given that management have expressed some caution (over unnamed uncertainties), I'm inclined to think that we won't get an earnings beat in the end. As I've said many times, the product cycle with GAW can be a bit lumpy and we shouldn't necessarily view this on a 12-month cycle.

Anyway, let's not…

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