REG - Games Workshop Group - Annual Report
26/07/2022 07:00
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RNS Number : 6845T Games Workshop Group PLC 26 July 2022
PRESS ANNOUNCEMENT
GAMES WORKSHOP GROUP PLC
26 July 2022
ANNUAL REPORT
Games Workshop Group PLC ("Games Workshop" or the "Group") announces its
annual report for the 52 week period to 29 May 2022.
Highlights
52 week period to 52 week period to
29 May 2022 30 May 2021
£m £m
Core revenue 386.8 353.2
Licensing revenue 28.0 16.3
Revenue 414.8 369.5
Revenue at constant currency 418.6 369.5
Core operating profit 131.7 136.7
Licensing operating profit 25.4 15.0
Operating profit 157.1 151.7
Operating profit at constant currency 161.5 151.7
Profit before taxation 156.5 150.9
Net increase in cash - pre-dividends paid 79.3 93.4
Earnings per share 391.3p 372.7p
Dividends per share declared in the period 235p 235p
Dividends per share paid in the period 285p 185p
Kevin Rountree, CEO of Games Workshop said:
"It's been another astonishing year. I once again take great comfort that some
things don't change - our staff and customers love Warhammer. I thank you all
for helping make this another very successful year."
For further information, please contact:
Games Workshop Group PLC investorrelations@gwplc.com
Kevin Rountree, CEO
Rachel Tongue, CFO
Investor relations website investor.games-workshop.com
General website www.games-workshop.com
The full 2022 annual report can be downloaded from the investor relations
website at investor.games-workshop.com
See the glossary for details on the alternative performance measures (APMs)
used by the Group. Where appropriate, a reconciliation between an APM and its
closest statutory equivalent is provided.
STRATEGIC REPORT
Strategy and objectives
Games Workshop is committed to the continuous development of our IP and making
the Warhammer hobby and our business ever better.
Our ambitions remain clear: to make the best fantasy miniatures in the world,
to engage and inspire our customers, and to sell our products globally at a
profit. We intend to do this forever. Our decisions are focused on long-term
success, not short-term gains.
Let me go through our strategy part-by-part:
The first element is that we make high quality miniatures. We understand that
what we make may not appeal to everyone, so to recruit and retain customers we
are absolutely focused on making our models the best in the world. In order to
continue to do that forever and to deliver a decent return to our owners, we
sell our miniatures for a price that we believe represents the investment in
their quality.
The second element is that we make fantasy miniatures based in our endless,
imaginary worlds. This gives us control over the imagery and styles we use,
and ownership of the intellectual property ('IP'). Aside from our core
business, we are constantly looking to grow our licensing income from
opportunities to use our IP in other markets.
The third element is that we are customer focused. We aim to communicate in an
open, fun way. Whoever and wherever our customers are, and in whichever way
they want to engage with Warhammer, we will do our utmost to support them.
The fourth element is the global nature of our business. Our customers can be
found anywhere, and we seek them out all over the world. They're a passionate
bunch with an interest in science fiction and fantasy. They're collectors,
painters, model builders, gamers, book lovers and much more. And while no two
customers engage with Warhammer in exactly the same way, they're all deeply
invested in the rich characters and settings of our IP.
To reach them, we have two key tools: our retail chain and our digital
content. In retail, we showcase the Warhammer hobby and offer a fantastic
customer experience. Our digital offering has never been richer. Through
warhammer-community.com and social media we reach thousands of people every
day, showing them the very best aspects of the Warhammer hobby and inviting
them to join our global community of enthusiastic fans.
Our retail channel is supported by our own online store (it has the full range
of our products) and our independent stockist and trade accounts across the
world. These independent accounts do a great job supporting our customers in
parts of the world where we either have not yet opened one of our stores or
where it is not commercially viable for us to have one. Our long-term goal is
to have all three channels (retail, trade and online) growing in harmony. We
will always have more independent accounts than our own stores. Our strategy
is to grow our business through geographic spread, growing all of the three
complementary channels.
The fifth element is being focused on cash. By delivering a good cash return
every year we can continue to innovate, surprise and delight our loyal
existing customers and new customers with great products. To be around forever
we also need to invest in both long-term capital and short-term maintenance
projects every year, pay our staff what they have earned for the value they
contribute and deliver surplus cash to our shareholders. Our dedication and
focus should ensure we deliver on time and within our agreed cash limits.
We measure our long-term success by seeking a high return on investment. In
the short term, we measure our success on our ability to grow sales whilst
maintaining our core operating profit margin at current levels. The way we go
about implementing this strategy is to recruit the best staff we can. We look
for those with the appropriate attitude and behaviour a given job requires and
for those who are aligned with our principles and who are quality obsessed. It
is also important that everyone we employ has a real desire to learn the
skills needed to do their job and has a great attitude towards change (there's
never a dull moment here!). To support them, we offer all of our staff both
personal development and skills training.
We continue to believe there are great opportunities for our business to grow,
particularly in North America and Asia, the latter being on a longer
timeframe.
Our brands
We have originated and are in control of a number of strong, globally
recognised brands with their own identities, associations and logos.
Our key consumer facing brand is 'Warhammer'.
We design, make and sell products under a number of brands and sub-brands,
which denote setting, tone and product type, the key ones being:
· Warhammer: Age of Sigmar - our unique fantasy setting
· Warhammer 40,000 - our most popular and recognisable brand is a
space fantasy setting
· Horus Heresy - an offshoot of Warhammer 40,000, the Horus Heresy
brand is presented as a 'fictional history' of that universe
We believe our IP to be among the best in the world.
The Warhammer settings are incredibly rich and evocative backdrops. They're
populated by more than three decades of fantastical characters and comprise
thousands of exciting narratives. We are committed to making it easier than
ever for people to discover, engage with and immerse themselves in our IP.
Aided by a small, senior team we have already begun to find new partners, and
new ways to help us bring the worlds of Warhammer to life like never before.
Together, we'll continue to explore animation, live action and more. We'll
present the very best aspects of our rich IP, delighting audiences while
always ensuring we do no harm to our core miniatures business.
Business model and structure
We design, manufacture, distribute and sell our fantasy miniatures and related
products. These are fantasy miniatures from our own Warhammer 40,000 and
Warhammer: Age of Sigmar universes. We are an international business centrally
run from our HQ in Nottingham, with 78% of our sales coming from outside the
UK. We added a small dedicated factory, just for paint, which operationally
went live in May and this, together with our two main factories, two warehouse
facilities, design studios and back office support functions are all based in
or near Nottingham.
Design
We design all of our products at our HQ in Nottingham. Employing 284 people,
the design studio creates all the IP and all the associated miniatures,
artwork, games and publications that we sell. Annually, these specialist staff
produce hundreds of new sculpts, illustrations, rules, stories etc. enabling
us to deliver new products every week and continue to keep our customers
engaged and excited. In 2021/22 we invested £16.7 million in the studio
(including software costs) with a further £5.7 million spent on tooling for
new plastic miniatures. We are committed to investing in these areas at an
appropriate level every year.
All of our plastic miniatures are branded as Citadel Miniatures, a mark with
an unparalleled reputation for quality. It denotes both a style and level of
detail that we apply to both our own worlds (Warhammer 40,000, Warhammer: Age
of Sigmar, etc.) and those of others, e.g. Lord of the Rings.
Our resin miniatures, designed for more experienced customers, are branded as
Forge World and are less widely available than their plastic counterparts.
Many customers love personalising their miniatures and our Citadel Colour
paint range, brushes and accompanying painting system are designed to help
everyone from the complete beginner to the most experienced painters in the
world achieve great results. In the pursuit of ever better, we continually
develop new types of paint and ways of using them. The result - our paints are
used the world over. And for painting more than just our miniatures!
When not interacting with our miniatures, many customers enjoy reading stories
set in our rich and immersive worlds. Under our Black Library imprint we
publish new titles every year, from short stories and audio dramas through to
full length novels and audio books. These we make available in physical
bookstores, third party digital platforms and through our own retail and other
specialist stores.
Manufacture
We are proud to manufacture our product in Nottingham. It's where we started
and where we intend to stay.
Logistics
Our product is distributed from our main warehouse at our HQ or our new rented
warehouse facility approximately 25 minutes away. These facilities supply our
two hubs; one in Memphis, Tennessee and one in Sydney, Australia. Between
these four facilities, we are able to directly supply our independent
retailers, our own retail stores and fulfil our online orders.
Sell
Our core revenue is generated via three channels, our own stores 'Retail',
third party independent retailers 'Trade' and our online store 'Online'. We
also sell via our licensing partners. We support these channels and activities
via our digital and marketing team.
Retail - our stores provide the focus for the Warhammer hobby in their
geographical areas. Our stores only stock Games Workshop product. They are
where we probably recruit the majority of our new customers. To do so, the
stores don't offer the full range of our product, only starter sets, new
release products and the appropriate extended range. At the period end, we had
518 of our own retail stores in 23 countries. Our stores contributed 23% of
the year's sales. We have 400 single staff stores: small sites, each one
operated by only one store manager. We also have 118 multi-staff stores,
which, like our single staff stores, are constantly reviewed to ensure they
remain profitable. If not, they will probably be converted to single staff
stores.
Trade - we sell to third party retailers under closely controlled terms and
conditions. Independent retailers are an integral part of our business model
helping us to sell our products around the world and importantly in areas
where we don't have our own stores. Games Workshop strives to support those
outlets which help to build the Warhammer hobby community in their local
areas. The bulk of our sales to independent retailers are made via our
telesales teams based in Memphis and Nottingham. We also have small telesales
teams in Sydney, Tokyo, Shanghai, Singapore, Hong Kong and Kuala Lumpur. In
2021/22 we had 6,200 independent retailers (2021: 5,400) in 72 countries. We
strive to deliver excellent service, operating in 23 languages covering all
time zones. 55% of our core revenue came from sales to independent retailers
in the period reported. These sales are from their physical stores as well as
their own online web stores.
Online - sales via our own web stores accounted for 22% of total core revenue
in 2021/22. All of our retail stores also have a web store terminal that
allows our customers to access the full range from within the store. Our web
stores are run centrally from our HQ.
Licensing - we grant licences to a number of carefully chosen partners. This
allows us to leverage our IP to broaden the presence and brand exposure of
Warhammer around the world, often entering new markets such as board games,
apparel or accessories and media and entertainment. It also allows us to
generate additional income. Currently, the majority of this income is
generated by video games sales in North America, the UK and Continental
Europe.
Marketing - keeps us customer focused. This team acts as the bridge between
our other business areas, ensuring we have a joined up approach between
product (design to manufacture) and sales. Marketing spends a lot of time
listening and developing a two way dialogue with our customers to make sure we
keep their needs at the forefront, championing the Warhammer hobby around the
globe and injecting our content and communications with a real sense of
passion and fun.
Structure
We control the business centrally from our HQ in Nottingham; it is where the
majority of people with experience and knowledge of running our business work.
I have put in place a flat structure: the people with senior responsibility
that make all of the big decisions, report directly to me. My structure is now
split into two teams: a core business team and a licensing business team.
The core business is split into five parts: product design and IP creation,
manufacturing and supply chain, sales, marketing, and operations and support.
Licensing is now split into two main areas: media and video games. I also have
an executive assistant, who supports me, and runs a team that supports the day
to day running of the teams above.
We have a global IP and product design director who is responsible for our
design studios (miniatures, books and box games, specialist systems, Warhammer
hobby product and our publishing business - Black Library). They work very
closely with our new creative director who manages our licensing team.
Together, they ensure any content that is produced, whether physical or
virtual, truly represents our IP.
The responsibility for our retail chain is split between two retail territory
heads, one for North America and Asia and one for the rest of the world. Our
trade sales are the responsibility of a single head of trade sales. Our online
store (our biggest store) is now the responsibility of our rest of the world
retail manager, who also manages our biggest physical store, Warhammer World.
These sales channels are supported by a merchandising team, managed by the
global manufacturing and supply chain director, and by the marketing team that
sits under the group marketing manager. The global manufacturing and supply
chain director also manages the factories and our four main warehouse
facilities in Nottingham, Memphis and Sydney.
Our operations and support structure includes a chief financial officer for
Games Workshop who is responsible for accounts, HR, legal and compliance and
IT.
Key performance indicators
The board and management team use a number of key performance indicators to
provide a consistent method of analysing performance, in addition to allowing
the board to benchmark performance against our forecast. The key performance
indicators utilised by the board can be split into key financial performance
indicators and key non-financial performance indicators.
Our key financial performance indicators are:
Monthly and year to date core business sales growth by channel
This measures the core business sales growth achieved in each of our core
channels on a monthly and year to date basis.
Monthly and year to date core gross margin
This measures the core gross margin achieved on core sales after taking
account of the direct costs and depreciation of manufacturing equipment and
shipping our product to customers/stores on a monthly and year to date basis.
Year to date core operating profit percentage
The ratio of core operating profit against core revenue, as a percentage. This
is considered to be a measure which reflects sales under our direct control.
Monthly and year to date core operating profit
This measures gross profit less operating expenses for the core business on a
monthly and year to date basis. This is considered to be a measure which
reflects sales under our direct control.
Year to date licensing revenue
This measures licensing revenue earned from licensing. This is a measure which
reflects revenue which is not under our control.
Our key non-financial performance indicators are:
Number of own stores by territory
This measures the number of our own stores which is an indicator of our global
reach.
Number of ordering stockist accounts by territory
This measures the number of trade outlets that have ordered from us in the
last six months. It is an indicator of our global reach and the health of our
trade account base: see 'Trade' paragraph.
Customer engagement
We measure this through our owned content channel Warhammer-community.com and
reach delivered through our social platforms.
Shareholder value
We believe shareholder value is created, primarily, by not destroying it. We
have no intention to acquire other companies, nor to dispose of any of those
we own.
We return our surplus cash to our owners and try to do so in ever increasing
amounts. A 'working cash buffer' of three months' worth of working capital
requirement has been set aside alongside six months' worth of future tax
payments before deciding how much cash is truly surplus for the purpose of
declaring dividends.
Review of the year
Another record year for Games Workshop - the business and the Warhammer hobby
are in great shape. Another amazing team effort - thank you all!
Our annual report seems to get longer and longer and my job more and more
bureaucratic (I have duties and obligations that may seem onerous and tiresome
- they are not), however, one thing remains constant - we love Warhammer, and
we continue to deliver on our strategy: to make the best miniatures in the
world. Thanks again to our design to manufacture teams; the quality and
product range have again been incredible, sales of our miniatures have grown
for the seventh year in a row.
More Warhammer. More Often - core business
This year has been exceptional, we not only beat the record revenue of a
Warhammer 40k launch year, we did it with some ongoing operational growing
pains (thankfully reducing) and the additional cost pressures from Covid,
Brexit and the war in Ukraine. As an international business, somewhere in our
Group we are still feeling the emotional and financial pain of these - we hope
the horrendous war in Ukraine ends soon. The light at the end of the tunnel
was that as the year evolved, the impact from Covid significantly reduced.
We finished the year making up for what seems like some lost time on face to
face collaboration, staff development, improving our processes and some team
fun. We are still working on improving general morale to pre-Covid levels in
some countries: we will be trying new ways to improve our communication and
ongoing support at a local and global level in the new year. I got caught
watching a little in Australia and Asia, sorry to our staff and customers. We
had to reduce our service levels due to some of the lingering effects of Covid
and international shipping challenges. I didn't do a great job managing
expectations. It's a priority to put that right. Australia seems to be
improving and we wait to respond to the ever changing announcements coming out
of China. We have put in more regular Q&A sessions with our staff
globally.
Morale is good but we are checking levels more often. We are more mindful that
it's been a tough few years for most people. There has been lots of change. We
put our staff at the heart of everything we do well, so to help monitor morale
in a mostly post Covid world, we try to ensure that our business units always
feel fully supported and are a fun place to work. We will do more to help
foster a workplace that consists of people with our shared values and beliefs
and ensure that everyone recognises that compassion towards each other and
appreciation of individual efforts in a team help us deliver consistent
results. We champion diversity and equality: Games Workshop and the Warhammer
hobby are for everyone.
As mentioned above, it has been a challenging year in parts; they all are
these days. We are pragmatically getting used to this new normal and remain
focused on delivering the day job. Whether that's full time at our sites or
working remotely, our staff have delivered another fantastic year.
Most external factors affecting Games Workshop are not new. My best guess is
losing Russia sales for a full year is c.£4 million lost in net revenue.
Additional freight and carriage costs is c.2.4% of sales.
Major highlight:
Our relentless focus on producing the highest quality miniatures continues to
deliver results. That combined with a customer focused approach helped us sell
more miniatures than any year before.
Low point:
Stuff not in our control - Brexit has added £3.4 million of additional supply
chain costs, we have an outstanding £11 million VAT receivable (a timing
difference as we now pay VAT on entry to Europe and submit a reclaim) with the
French tax authorities and we are trying to mitigate staff recruitment gaps
especially those with language skills in the UK based European trade team. We
look forward to the Brexit benefits promised.
The results: we have again delivered a consistent financial performance built
on investing in the things that drive net cash generation. This is driven by
making the best miniatures in the world supported by strict cost control and
working capital management; ensuring we have sufficient cash to purchase the
resources we need to give us the best chance of delivering our long term and
short term goals and to pay a fair return to our shareholders and pay to our
staff. We continue to pay our taxes and suppliers on time and we thank our
trade accounts for paying us on time too. We continue to take some risks and
we don't forecast too far out and are careful not to fool ourselves that
forecasting too far out in time brings any certainty.
In line with our Group profit share scheme, we have paid in total £9.9
million (2021: £2.6 million profit share plus £10.6 million discretionary
payment) to staff to further reward their exceptional performance in helping
to increase our profitability in the period reported. Total dividends declared
in the period were £77 million, 235 pence per share (2021: £77 million, 235
pence per share).
Some more detail:
In the year we have increased our design, factory and warehouse capacity -
it's slightly late but it's always better to go live when we're ready rather
than not. As a team we took the easy decision to pause our ERP project in
January 2022 (we were not spending money wisely) while we delivered the final
parts of the projects that add real value: our Memphis warehouse project,
which I'm delighted to report has now gone live, and also phase one of our
online webstore project started well and is on track to be completed later
this year. That should ensure we are on a stable online platform. We will
restart the ERP project again soon. I'm told it will be a project ongoing in
the background for some time. I may have been more than a little optimistic to
think otherwise. Our IT and support teams are doing a great job keeping things
business as usual and have welcomed the break from the project. I'm sure
they'll be refreshed and ready to go again later this year. Our new global
head of IT will, I'm sure, be a breath of fresh air.
We continue to deliver through a multi-channel approach - our retail and trade
channels were in growth again in the period reported. Most significant
countries were in growth - with only Australia, China and Russia falling
short.
Our online store broadly maintained the step change from £50 million in
2019/20 to £90 million delivered in 2020/21 and £85 million in 2021/22 and
with retail and trade in double digit growth, I see that as a success (a
reminder our online store does not offer a discount off the RRP, most trade
accounts do).
Our retail stores continue to recover sales levels back to pre-Covid closure
levels at different rates, more importantly for us, 92% of our own stores are
profitable - proving again our low cost model is fairly robust.
Our trade accounts have supported us well during the year. We are delighted we
have added more outlets in the most significant countries we trade in and
continue to grow our export countries. We again thank them for their ongoing
support and patience when our delivery service levels fell short. Our service
levels are now very close to being back to normal levels.
As a team we care passionately about people and the world around us. Our
people team, with the support from staff across the business, have been
working on improving our induction programmes, staff development and checking
our recruitment processes are free from any bias. We are also making good
progress on ESG topics. I can see we are doing ever more to focus on topics
like diversity and inclusion, delivering on our legal requirements and
ensuring our suppliers meet industry ethical supply standards as well as our
commitments on health and safety.
We are also committed to supporting best practice - there are lots of things
to evaluate and the list grows every year. The key areas on our agenda: we are
documenting a new science-based target approach to do what's in our control to
keep global warming to below 1.5°C and looking at how we can reduce waste. I
promise to report progress on those in our normal open and honest way. It will
take some time for these to have a significant impact, however, we are
absolutely committed to making progress. During the period we have started to
recycle plastic - our granulator can take in finished goods and turn them back
into raw materials. It's early days but a major step in the right direction.
Design
It's been another great year for IP development and miniature design at Games
Workshop. Our extended team, up 21 in the year to 284, have mostly migrated
back to the HQ. We will continue to strengthen our IP and miniatures creation
teams, scouring the world for talent. It will be several years before these
additional investments deliver their full return, but they are fundamental to
our strategy of ensuring we deliver the best miniatures and IP in the world,
forever. Over the last few years, we have been working towards offering a full
experience of Warhammer to our key export territories: official translations
and marketing support. We have made some great progress and await the chance
to exploit these fully. Our in-house Chinese translation team is now fully
operational and delivering under very challenging lockdown conditions. Our
Russian translation team, based in the UK, is operational and working hard
pending a wider decision about our future in Russia, although currently all
trading is suspended.
After a great launch in July 2021, subsequent Warhammer: Age of Sigmar
releases were affected by shipping delays meaning we lost some momentum. That
said, Age of Sigmar remains in good shape and we have an exciting roadmap of
releases going forward.
Warhammer 40,000 continues to perform. Our new style launch boxes are proving
very popular with customers who want to buy everything new in a single
purchase. The UK release of 'Imperium,' the Warhammer 40,000 magazine
partwork, designed and made by us but sold and distributed by a licensing
partner, was followed by successful launches in Spain, Germany and, a first
for us, the US. It is proving another route into our hobby for both new and
lapsed hobbyists.
The financial period closed with the release of Necromunda: Ash Wastes, adding
more background and fantastic new models to one of our lesser known, but no
less rich, IPs.
Painting is a hugely important part of our hobby for the majority of our
customers and a key focus for us. Covid lockdowns slowed our paint development
plans but next year will mark a step change in the pace at which we will
develop the range.
Our monthly magazine 'White Dwarf' is again growing in readership and reach,
now appearing on shelves of over 2,300 locations in the UK alone.
After a record performance last year, Black Library, our novel publishing
division, struggled in the face of global supply disruption with many key new
releases arriving later than planned. Underlying sales continue to grow,
especially in the digital space, with sales of electronic and audio books
exceeding those of physical for the first time ever.
The strategy of keeping customers engaged by broadening and deepening our
offer sees us continue to invest in IP and design with studio payroll costs
increasing by £1.1 million to £10.0 million; as a percentage of core
revenue, they have fallen by 0.5% to 2.8%. This additional investment will
allow us to broaden our miniatures range and provide additional intellectual
property for exploitation through our licensing team.
Manufacturing
Our manufacturing team has for the seventh year in a row delivered record
output. They continue to work on a 24/5 shift pattern and we are keeping our
overtime to a minimum and leaving weekends for our staff to enjoy.
Our manufacturing facilities and capabilities have continued to expand with
the installation of more machinery in our UK factories enabling 2021/22 to be
a year of record factory output. In total Factories 1 and 2 now operate 43
injection moulding machines (up 4 on last year) and these have enabled weekly
volumes to regularly exceed record cycles per week. At the end of the period,
we successfully opened a third Nottingham factory dedicated to paint
production (note: to help you understand the scale it is 1,000 sqm versus our
main Factory 1 at 5,500 sqm). Consolidating all paint production into this new
specialised facility not only opens the door to greater efficiency, it also
releases space within Factories 1 and 2 for future injection moulding growth.
CCC product safety registration for China continues in the background as our
third party warehouse in Shanghai starts to reopen. We have had to
pragmatically pause, in line with local government restrictions, any efforts
on growing our hobby communities in this region. We will start as soon as we
can.
The land we purchased in 2020 near our Factory 2, will be cleared to get it
ready for increasing space for packing, manufacturing, tooling or in the short
term, car parking space. In the meantime, we are pursuing options for
additional space close to our main HQ to allow us to begin the work on
optimising our Factory 1 and Factory 2 space.
Production payroll costs rose in the year in line with volume with costs
increasing by £2.0 million to £12.0 million, increasing to 3.1% of core
revenue.
Warehousing
Another exciting year of investment at our main facilities. We have
significantly increased our capacity in the year and by the end of summer
2022, we will have the best facilities Games Workshop has had, ever.
North America
The new systems and automation are fully operational. This brought immediate
benefits enabling long standing order backlogs to be cleared. The investments
we have made mean that the number of orders we can pick and dispatch each day
has quadrupled. Customer orders that previously might have taken up to two
weeks to dispatch will now typically be shipped within 24 hours (note:
postal/shipping times remain two to four days depending upon destination and
carrier). It's worth noting the new warehouse system still interfaces with our
legacy IT systems, which continue to cause us daily operational processing
challenges; thanks to our team most problems go unnoticed by our customers. We
apologise for the poor customer service we offered for much of the year and
are confident that with this milestone project now delivered, service will be
much improved going forward.
UK
The East Midlands Gateway (EMG) distribution facility has been improving month
on month since opening in July 2020. It continues to support our manufacturing
process with storing components and distributing our major new releases. We
are planning for a fully operational go live in summer 2022. It will mirror
the technology and process we have been using successfully for six months at
Memphis.
In a period of increasing scarcity and rising costs of short-term warehousing
across the UK, the EMG facility has reduced our reliance on third party
storage. Currently we have 13% (2020/21: 16%) of physical inventory offsite.
Working closely with our haulage partner, our original Eurohub facility in
Nottingham has been able to offer a markedly improved service to European
customers shopping on games-workshop.com. Work to reconfigure and repurpose
the original Eurohub facility to become our primary component facility is
ongoing.
Australia
Global sea freight has remained highly disrupted and this has had a direct
impact upon product availability and new miniature launches with 8% of our new
releases delayed. There has been a slow and gradual improvement in
availability and we expect this trend to continue. We look forward to our
facility based in Sydney getting back to its normal rhythm in 2022/23.
Total warehousing costs have increased by £4.0 million to £20.3 million, the
majority of the increase being staff costs; as a percentage of core sales they
have increased from 4.8% to 5.2%.
Services
We continue to invest in the core support functions of the business.
During 2021/22 we have transitioned our staff to new ways of working with a
mix of hybrid or office based working depending on the requirements of each
job. We have improved the tools available to managers to manage their teams
effectively by improving training, from IT security through to mental
wellbeing, using our learning management system. We have expanded our health,
safety and wellbeing function to 9 people, to ensure we look after everyone
who works at Games Workshop in the best way possible.
Our IT team successfully transitioned our pre-Covid office based staff back to
office based or hybrid working during the year. They have also worked
alongside other business areas to help deliver the Memphis and EMG warehouse
projects as well as the upgrade to the webstore.
As we discussed last year, we have continued our focus on ESG areas by
appointing a senior manager to help bring all of our good work together and
help move it forward.
Customer focused
Our goal remains to reach, engage and inspire Warhammer fans everywhere.
As lockdown eased, we returned to hosting physical location events. This
return to getting together and celebrating all things Warhammer allowed us to
make good on our promise to continue to support event organisers across the
wider Warhammer community and enable thousands of new people to experience
Warhammer for the first time. In the year, we engaged with around a thousand
independent events helping them grow their local Warhammer community and
giving our core customers more opportunities to enjoy their Warhammer
collections.
We also attended many of the largest tabletop events in the world, interacting
with tens of thousands of people through introductory Warhammer activities
such as paint-and-take and demo games, and at these, we had some additional
fun launching an all new location experience - Kill Team Live. This saw
thousands of players take part in a specially created game of laser tag using
custom blasters imitating those from the 41(st) millennium. Finally, the
Golden Demon returned. This, our world-renowned painting competition which
celebrates the modelling and painting aspect of Warhammer in all its glory.
Not only was this the first Golden Demon since lockdown, but this was the
first time we'd held the competition in the US for over a decade. Our fans in
North America were delighted.
In the year we delivered more rich online content than ever before:
The Space Marine armouring vignette explored a seminal piece of our IP, our
Kill Team trailer unveiled a range of new miniatures and propelled a new
edition of our Warhammer 40,000 skirmish game to an exciting start, and the
Horus Heresy trailer showcased the full spectacle of mass battle in the far
future, announcing to our legion of fans that something special was coming
this summer. These pieces of animated content racked up c. 9 million views on
our own channels alone, to say nothing of the millions of views generated
elsewhere through reposting, watch alongs etc. We think it is safe to say that
Warhammer content has never been viewed more than it has this year.
Our goal is to give Warhammer fans a safe and welcoming online environment. We
continue to focus our efforts on four of our own key spaces:
Warhammer Community
Warhammer-community.com remains the cornerstone of our online presence. Over
the year, the team again put out over ten thousand pieces of content to
engage, inform and inspire Warhammer fans globally. There are more people
reading about Warhammer than ever!
My Warhammer
Registrations continue to grow at pace and are up +140% on 2020/21.
Warhammer+
In the year we launched Warhammer+. It is only now approaching its first
anniversary and so it is still in very early development. The exciting content
delivered through Warhammer+ will remain an integral part of our digital offer
and how we share our IP.
Email
Our email campaigns continue to be one of our most effective methods of
communication. The team has worked hard to understand our customers and
develop the tools to ensure we're talking to them about the parts of Warhammer
they value most. Subscribers increased by 39%. We continue to look for more
ways to surprise and delight our loyal fans.
More Warhammer. More Often - licensing business
Towards the end of the year, I appointed a new creative director, putting IP
nous at the heart of our licensing opportunities. Warhammer IP is rich, vast
and endless so as we do more projects, it's important that we are focused on
exploiting it all and that its representation continues to be respectfully
maintained.
Our strategy is to exploit the value of our IP beyond our core tabletop
business, leveraging multiple categories and markets globally. We intend to
ensure Warhammer's place as one of the top fantasy IPs globally. The main
areas of focus are:
Entertainment
It is our intent that any new partner/s will become the home of Warhammer on
screen for many years to come. We acknowledge that given that they will need
sufficient time to invest and deliver the quality we believe our IP deserves.
A greater slice of our IP and direct access to the experts in our IP
development team will allow them to invest in Warhammer with the confidence
that they have our full support on the interpretation of the IP. We will keep
you updated with any significant progress.
Video games
During the year our licensing partners launched six new games; four
PC/console, one virtual reality and one mobile. We also saw revenue from
established games that continued to perform well, many years after launch,
through a mixture of added content and continued marketing. Particular
launches of note were the highly anticipated Total War: Warhammer 3, and
Warhammer 40,000: Chaos Gate Daemonhunters.
Eight new games were announced in the year including Space Marine 2, which has
been the most consistently requested game since the first game came out in
2011. Fan response was overwhelmingly positive.
New games launching in 2022/23 include major franchises Warhammer 40,000:
Darktide and Bloodbowl 3, plus four more still awaiting release dates. In
total there are 12 unreleased games in development and four new licences were
signed in the year. We recognised one significant one in the income statement
this year at £7.5 million with Nexon - note this is not all paid in cash at
the time it is recognised. The cash is paid throughout the lifetime of the
licence.
Priorities for 2022/23
Core business
We have made some reasonable progress with our key priorities. Each of these
is designed to ensure we deliver our exciting operational plan and continue to
engage and inspire our loyal customers.
To summarise - our current areas of operational focus are:
· keeping our loyal hobbyists engaged in their Warhammer hobby,
· recruiting more hobbyists,
· mitigating a c.2% (c.£8 million) decline in core gross margin,
which is a fair challenge. In the year we reviewed our input price increases
and they looked more permanent, so we increased our prices on a broader
existing range by c.5%. We will always, in the short term, continue to absorb
some of the cost pressures ourselves - we prefer to only increase prices for
the additional quality of new miniatures. We are focusing our efforts on
efficiency improvements everywhere and further volume growth.
· getting our major projects over the line: our investments in a
new finished goods warehouse near Nottingham (estimated go live date summer
2022) and our new ERP system (estimated delivery date - plan pending)
restarted.
Of course, as a vertically integrated international company, we have lots of
other things to worry about. We will continue to monitor and deal with those
as a team in our normal way - through hard work, grit and determination with a
little humour too. Life's never dull at Games Workshop and that's why we enjoy
it so much.f
As part of our overall strategy, six key initiatives will be prioritised in
2022/23. These are designed to deliver further sales growth whilst maintaining
our core operating profit margin and continuing to surprise and delight our
customers. They are in addition to our investment in new product quality and
ensuring our new factories and warehouses deliver the appropriate cash
payback.
Staff training and development
We care passionately about our global team. We have ambitious long-term plans,
but we also run the business with only the resources we need. We will continue
to only recruit essential new jobs or where we need to back-fill positions.
Like last year, many of these recruits will be in order to scale - in our
factories and warehouse facilities as well as in our support functions, mainly
IT.
We will continue to support lifelong learning and training to develop the
skills needed to enable all our staff to be successful. We are also more
active in developing orderly succession plans of both the board and senior
management. We continue in our commitment to diversity and inclusion at Games
Workshop.
Growth
We are planning for all of our existing 518 stores to be fully operational
and, to add a further 21 new stores: 15 in North America and 5 in Europe (in
France, after another successful year) with our new Warhammer café in Tokyo
opening too. This will be our first large store in Japan. Warhammer World is a
long way away, so we hope this goes some way to immersing our hobbyists in our
broader offer. I can't wait to see how well it launches and is received by our
relatively small but ever growing hobby community in Japan.
We again aim to grow in every major country in the world, and via all of our
three sales channels with all of our core IP. Our online store will have a new
platform and will be rebranded for launch in the summer. Phase one will have
no major bells or whistles but will be a more stable technical solution. We
look forward to more hobbyists signing up to My Warhammer, the gateway into
our fantasy worlds.
We will continue to open more independent retailer accounts. Selling via
physical outlets remains an important sales channel for us. Some have their
own online store, some not. We have seen sales grow in both. We will have a
broader range of products to offer with the launch of our third range, Horus
Heresy.
We will continue to search for and engage with hobbyists everywhere.
Customer focus
We will also continue to be customer focused - better engaging our existing
ones and reaching whole new audiences with the Warhammer hobby, and the rich
worlds it is set within.
Social responsibility
We now have our first joined up draft* plan. We will continue to focus on
ethical sourcing and staff wellbeing, diversity and inclusion - delivering our
legal requirements. We are reviewing the business consequences of collecting
and reporting on race and ethnicity - to date we have never collected that
data from our staff. We are not sure it is the right thing to do or have
legal authority in some countries to request it without failing some other
legal requirement. It's a complex problem to solve and we don't discriminate.
We continue our work on TCFD reporting, our first attempt is detailed in the
annual report 2022. We will report progress on science-based targets next
year. The team are working on driving more value through well thought through
and deliverable sustainable site waste reduction and extending our sustainable
packaging initiatives. We care about the planet and the people that live on
it. We will report with clarity and be very honest about our progress - we
don't intend to do any greenwashing.
Committed to diversity, we will continue to performance manage and recruit for
the personal qualities you need to do a particular job as well as the
necessary skills. We do not select based on any other criteria. I will
continue to do my best to ensure this is the case and that we are fair and
free from any bias and/or prejudice.
Sustainability - climate change has enormous implications for society. We
acknowledge that fully. We are committed to doing our bit. We won't make any
long-term promises - we never do on any topic. We will guarantee to take it
seriously and make progress every year. By continuing to do the right thing,
we will deliver change. More recently we have created a new 'sustainability
action list' which aligns our approach of just doing the right thing with
better external reporting. The action list will focus our efforts on where we
can make the biggest difference. We believe that we create long-term value for
our stakeholders through delivering on each of these elements: growth, good
cash returns and by having a positive impact on others.
Licensing business
The priority remains the same to deliver on our digital strategy by licensing
our IP to partners who will successfully launch high quality video games, live
action or animation shows.
Media
Our IP is huge and there are many opportunities, we will keep you informed
appropriately in line with any agreement with potential partners. We will also
seek the appropriate legal support on what we can say and what we can't…it's
quite complex and we don't wish to slip up on any of our legal duties or
misrepresent progress when this industry works at a different pace to our core
business. I continue to remind our team, it's a long process and we can fail
at many hurdles. We remain confident we will bring the worlds of Warhammer to
the screen like you have never seen before. We are pragmatically patient, it's
not in our complete control.
Video game partners
We are looking to add more long-term partners to help us globally reach even
more fans of our IP. The year ahead looks reasonably exciting with three major
launches in the period. The efforts it takes to bring a video game to launch
is incredible - we take this opportunity to thank our current partners for
their ongoing investment in Warhammer, their hard work and dedication in
representing our IP true to their artistic and literary form and wish them
continued success.
*This will be an investment we commit to every year. Often long-term
commitments like these are paused when financial KPIs need to be maintained.
To deliver a long term change we really need to commit for the long term.
Sales
This year we have reclassified royalties receivable from other operating
income within the income statement to licensing revenue, given the growing
prominence of this income stream. Core revenue is the revenue earned from the
designing, making and selling our hobby.
Reported core revenue grew by 10% to £386.8 million for the period. On a
constant currency basis, sales were up by 11% from £353.2 million to £391.5
million; split by channel this comprised: Trade £218.1 million (2021: £194.8
million), Retail £88.1 million (2021: £70.7 million) and Online £85.3
million (2021: £87.7 million).
Licensing revenue from royalty income increased in the year by £11.7 million
to £28.0 million. This was largely due to a high level of guarantee income on
multi-year contracts signed in the year; this income is recognised in full at
the inception of the contract in line with IFRS 15 'Revenue from contracts
with customers' following assessment of the performance obligations of the
contract. Reported income is split as follows: 83% PC and console games, 7%
mobile and 10% other. In the period, guarantee income was £15.0m (2021:
£4.3m).
Revenue by sales channel
52 weeks ended 52 weeks ended 52 weeks ended 52 weeks ended
29 May 2022 30 May 2021 29 May 2022 30 May 2021 2022 2021
Constant currency Constant currency Actual rates Actual rates % of core % of core
£m £m £m £m revenue revenue
Trade 218.1 194.8 214.3 194.8 55% 55%
Retail 88.1 70.7 87.2 70.7 23% 20%
Online 85.3 87.7 85.3 87.7 22% 25%
Core revenue 391.5 353.2 386.8 353.2
Licensing revenue 27.1 16.3 28.0 16.3
Revenue 418.6 369.5 414.8 369.5
Trade
Trade achieved significant growth of 10% with growth in all key countries. In
the period, our net number of trade outlets increased by c.800 accounts to
6,200 which helped drive forward sales in this channel. It's worth noting that
a large number of independent retailers now also sell our products online,
meaning our customers have more choice than ever about where to buy Warhammer.
Retail
Store openings and closures during the year:
Number of single staff stores at Number of single staff stores at
Number of stores at Number of stores at 29 May 2022 30 May 2021
30 May 2021 29 May 2022
Opened Closed
UK 138 3 6 135 93 96
North America 161 5 1 165 145 142
Continental Europe 153 - 2 151 111 113
Australia 49 1 1 49 37 37
Asia 22 1 5 18 14 18
523 10 15 518 400 406
We believe our stores are the best place to start your Warhammer hobby journey
with us. Our stores are filled with staff who have extensive Warhammer
knowledge, build local communities and offer Warhammer hobby guidance and
support. It is an essential and unique customer service offer that we are
proud of.
In the period, we opened, including relocations, 10 stores. After closing 15
stores, our total number of stores at the end of the period is 518. As most of
our stores across the globe were open for the majority of the year, retail
performed well except for Australia which had Covid related closures across
the region in 2021/22. The performance of each store will be kept under
review and any stores that do not meet our financial model will be closed.
We opened our second café store in California in June 2021 and are planning a
further 15 new stores in North America in the new year too alongside five in
France. Our new store openings will continue to follow our low cost single
staff model where appropriate, alongside opening a café store in Tokyo in the
next year. We will continue to review the format of our stores pragmatically.
Ensuring we always recruit great store managers and offer our customers an
exceptional in-store experience, remains a priority for us.
Online
Online sales declined slightly by 3% compared to the same period last year. As
noted above, our customers have a lot of options when it comes to shopping for
Warhammer online and are able to buy our products both through our own web
stores (reported in Online) and through those of independent retailers
(reported in Trade). We are part way through the first phase of upgrading our
online store which will go live in 2022/23.
Core gross margin
Core gross margin percentage declined in the year by 5.6% points (2022: 67.1%;
2021: 72.7%). It was negatively impacted by; an increase in inventory
provisions of £10.6 million as we failed to get the right stock in the right
place at the right time, £9.2 million additional freight and carriage costs
including £3.4 million of costs into Europe; and £2.5 million additional
staff costs.
Operating expenses
Core operating expenses have increased by £7.5 million in the year (2022:
33.0% of core revenue; 2021: 34.0%): £4.6 million additional spend on our
operations, support and marketing teams (including staff costs of £1.7
million and IT related operational costs of £1.7 million). Online costs have
increased by £1.9 million relating to investment in the new webstore and
£1.2 million increase in support and hosting costs. Other variable selling
costs have increased by £1.6 million. Retail and events costs have increased
by £2.0 million as stores reopened and we restarted events following Covid
closures. This is partially offset against the prior period by savings of
£3.3 million as we rewarded all our staff with a £3,500 profit share payment
each (2022: £9.9 million; 2021: £13.2 million). Bonuses to the senior
management team were £0.6 million (2021: £1.1 million).
Licensing operating expenses have increased by £1.3 million in the year as we
moved some costs from the core creative team into the licensing team.
Operating profit
Core operating profit decreased by £5.0 million to £131.7 million (2021:
£136.7 million). On a constant currency basis, core business operating profit
increased by £0.2 million to £136.9 million. As a percentage of core sales,
core business operating profit was 34.0% (2021: 38.7%).
Licensing operating profit grew by £10.4 million to £25.4 million (2021:
£15.0 million). On a constant currency basis, licensing operating profit
increased by £9.6 million to £24.6 million. These numbers are income less
costs; they do not include any costs related to using the IP created in the
core business.
Cash generation
During the year, the Group's core activities generated cash of £106.1 million
after tax payments (2021: £118.5 million) which includes group profit share
payments of £9.9 million (2021: £13.2 million), an increase in inventory of
£12.2 million (2021: £6.2 million) and an increase in the VAT debtor of
£5.9 million (2021: £5.4 million). Licensing cash receipts were £15.4
million (2021: £14.2 million). After purchases of tangible and intangible
assets of £18.4 million (2021: £20.3 million) and product development costs
of £13.9 million (2021: £9.7 million), dividends paid of £93.5 million
(2021: £60.5 million), lease payments of £11.1 million (2021: £10.0
million), proceeds from the issue of ordinary share capital relating to the
sharesave scheme of £1.8 million (2021: £1.4 million), there was cash at the
period end of £71.4 million (2021: £85.2 million).
Dividends
We followed our principle of returning truly surplus cash to shareholders.
Dividends of £77.1 million (2021: £76.9 million) were declared during the
year. A 'working cash buffer' of three months' worth of working capital
requirement alongside six months' worth of tax payments has been set aside
before deciding how much cash is truly surplus for the purpose of declaring
dividends.
Return on capital employed - core business
A long-term measure of our performance has been return on capital employed
(ROCE). During the year our core business return on capital has declined from
185% to 118%. The prior period result was exceptional and ROCE has returned to
a more typical historical level. If ROCE was calculated using the period end
values, it would be 113% (2021: 156%).
Capital employed
Core average capital employed increased by £37.6 million to £111.3 million.
This was driven by the average book value of tangible and intangible assets
increasing by £14.5 million, average inventories increasing by £11.8 million
and trade and other receivables increasing by £11.1 million. Average balances
are calculated over the 12 month period.
Investments in assets
This is what we have been spending your money on:
2022 2021
£m £m
Shop fits for new and existing stores 1.3 0.6
Production equipment and tooling 10.1 7.5
Computer equipment and software 2.9 5.2
Site 3.4 7.3
Total capital additions 17.7 20.6
In 2021/22, we invested £4.1 million in tooling, milling and injection
moulding and paint machines and a further £6.0 million on moulding tools. The
investment in computer equipment and software includes £0.9 million on the
new warehousing facility in Nottingham and work on the ERP system of £0.6
million. The investment in Site includes £2.7 million to expand our
production, warehousing and office capacity in Nottingham.
Inventories
Inventories have increased by £10.9 million as a result of the logistical
difficulties of getting the right stock in the right place and my poor
forecasting. Inventory before inventory provisions increased to £44.8 million
(2021: £32.2 million) and inventory provisions increased by 0.4% to 1.7% of
core revenue (2022: £6.4 million; 2021: £4.6 million). We continue to offer
a broad range of price points. The average increase in the price of product
varies by product category and ranges from 2% to 10%.
Trade and other receivables
Trade and other receivables increased by £21.1 million, which includes a
£13.3 million increase in royalty income receivable, £5.9 million increase
in VAT receivable, £0.8 million increase in trade debt, £0.5 million
increase in accrued digital income and £0.6 million in rent and rates
prepayments.
Trade and other payables
Trade and other payables decreased by £2.8 million, including a £2.5 million
decrease in trade payables and a decrease of £2.8 million in PAYE, rates and
VAT liabilities. This was partially offset by a £2.7 million increase in
deferred income.
Taxation
The effective tax rate for the period was 18.0% (2021: 19.2%). The rate is
lower than in the prior period as a result of the increase in overseas profit
in inventory provisions together with the impact of super deductions.
Treasury
The objective of our treasury operation is the cost effective management of
financial risk. The relationship with the Group's bank is managed centrally.
It operates within a range of board approved policies. No transactions of a
speculative nature are permitted.
Funding and liquidity risk
The Group pays for its operations entirely from our cash flow.
Interest rate risk
Net interest receivable for the year was £0.2 million (2021: £0.2 million).
Foreign exchange
Our big currency exposures are the euro and US dollar:
euro US dollar
2022 2021 2022 2021
Period end rate used for the balance sheet 1.18 1.16 1.26 1.42
Average rate used for earnings 1.18 1.13 1.34 1.34
The net impact in the year of exchange rate fluctuations on our operating
profit was a gain of £1.8 million (2021: loss of £4.0 million).
Risks and uncertainties
The board has overall responsibility for ensuring risk is appropriately
managed across the Group and has carried out a robust assessment of the
principal risks to the business. The key strategic risks to the Group are
regularly reviewed by the board. The principal strategic risks identified in
2021/22 are discussed below. These risks are not intended to be an extensive
analysis of all risks that may arise but more importantly are the ones which
we believe could cause business interruption.
· IT strategy and delivery - with a number of significant business
projects in play, all of which are dependent on IT support, there is a
requirement for a robust IT strategy which enables us to deliver key strategic
projects as well as supporting day to day activities. We are keeping the
structure of our global IT team under review to ensure the IT support needs of
the business can be delivered.
· Media - whilst this remains an area for future growth, it is
imperative that exploitation of our IP through media channels does no harm to
our core business. Our IP steering team meets every month to discuss ongoing
and future exploitation, to ensure that all use of our IP, through all
channels, is approved, correct and consistent. It is fully supported by our
in-house legal team who will act when needed.
· Social responsibility - we don't intend to 'greenwash' or to be
'politically correct'. We believe we are already good corporate citizens and
we have been making some good progress quietly in the background. We are
looking for ways we can support global initiatives including climate change,
diversity and equality and we are documenting a realistic plan to make some
progress, forever.
We consider that Covid is not a specific risk that we can mitigate against but
we are managing our response to it alongside our operational risks. We also do
not consider that we have material solvency or liquidity risks.
Outlook
We are on the front foot, have a clear strategy for our core and licensing
business, a culture built on long standing proven principles, a pretty good
operational plan building on the progress we have made, a work ethic built on
trust and a hobby that is fun and engaging. We look forward with a great deal
of confidence. Our goal remains the same to deliver our strategy and share our
love for Warhammer, globally.
It's been another astonishing year. I once again take great comfort that some
things don't change - our staff and customers love Warhammer. I thank you all
for helping make this another very successful year.
Approved by the board, and signed on behalf of the board
Kevin Rountree
CEO
25 July 2022
Statement of directors' responsibilities
The directors confirm that this condensed consolidated financial information
has been prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and UK-adopted
International Accounting Standards and that the management report herein
includes a true and fair review of the information required by DTR 4.2.7 and
DTR 4.2.8, namely:
· an indication of important events that have occurred during the
period and their impact on the condensed financial information, and a
description of the principal risks and uncertainties; and
· material related-party transactions in the period and any material
changes in the related-party transactions described in the last annual report.
A list of all current directors is maintained on the investor relations
website at investor.games-workshop.com (http://investor.games-workshop.com/)
.
By order of the board
Kevin
Rountree
Rachel Tongue
CEO
CFO
26 July 2022
CONSOLIDATED INCOME STATEMENT
Restated
Notes 52 weeks ended 52 weeks ended
29 May 2022 30 May 2021
£m £m
Core revenue 386.8 353.2
Licensing revenue 28.0 16.3
Revenue 3 414.8 369.5
Cost of sales (127.4) (96.3)
Core gross profit 259.4 256.9
Licensing gross profit 28.0 16.3
Gross profit 287.4 273.2
Operating expenses 3 (130.3) (121.5)
Core operating profit 131.7 136.7
Licensing operating profit 25.4 15.0
Operating profit 157.1 151.7
Finance income 0.2 0.2
Finance costs (0.8) (1.0)
Profit before taxation 156.5 150.9
Income tax expense 4 (28.1) (28.9)
Profit attributable to owners of the parent 128.4 122.0
Comparative financial information for revenue and gross profit has been
restated for the reclassification of licensing revenue, previously included as
royalties receivable in other operating income.
Earnings per share for profit attributable to the owners of the parent during
the period (expressed in pence per share):
52 weeks ended 52 weeks ended
Notes 29 May 2022 30 May 2021
Basic earnings per ordinary share 5 391.3p 372.7p
Diluted earnings per ordinary share 5 390.6p 370.5p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
52 weeks ended 52 weeks ended
Notes 29 May 2022 30 May 2021
£m £m
Profit attributable to owners of the parent 128.4 122.0
Other comprehensive income/(expense)
Exchange gains/(losses) on translation of foreign operations 0.8 (3.1)
Other comprehensive income/(expense) for the period 0.8 (3.1)
Total comprehensive income attributable to owners of the parent 129.2 118.9
The following notes form an integral part of this condensed consolidated
financial information.
CONSOLIDATED BALANCE SHEET
29 May 2022 30 May 2021
Notes £m £m
Non-current assets
Goodwill 1.4 1.4
Other intangible assets 7 25.6 23.7
Property, plant and equipment 8 55.0 49.8
Right-of-use assets 9 48.1 46.0
Deferred tax assets 17.8 10.1
Trade and other receivables 19.4 6.3
167.3 137.3
Current assets
Inventories 38.4 27.5
Trade and other receivables 39.6 30.6
Current tax assets 4.4 1.1
Cash and cash equivalents 10 71.4 85.2
153.8 144.4
Total assets 321.1 281.7
Current liabilities
Lease liabilities (9.2) (8.6)
Trade and other payables (33.5) (35.4)
Current tax liabilities (1.1) (0.1)
Provisions for other liabilities and charges 11 (0.8) (0.6)
(44.6) (44.7)
Net current assets (109.2) 99.7
Non-current liabilities
Lease liabilities (39.7) (38.4)
Other non-current liabilities (0.6) (0.6)
Provisions for other liabilities and charges (1.5) (1.7)
(41.8) (40.7)
Net assets 234.7 196.3
Capital and reserves
Called up share capital 1.6 1.6
Share premium account 16.3 14.5
Other reserves 2.9 2.1
Retained earnings 213.9 178.1
Total equity 234.7 196.3
The following notes form an integral part of this condensed consolidated
financial information.
CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
Called up Share premium account Other reserves Retained earnings Total
share capital £m £m £m equity
£m £m
At 30 May 2020 and 1 June 2020 1.6 13.1 5.2 113.8 133.7
Profit for the 52 weeks to 30 May 2021 - - - 122.0 122.0
Exchange differences on translation of foreign operations - - (3.1) - (3.1)
Total comprehensive income for the period - - (3.1) 122.0 118.9
Transactions with owners:
Share-based payments - - - 1.2 1.2
Shares issued under employee sharesave scheme - 1.4 - - 1.4
Deferred tax credit relating to share options - - - 0.1 0.1
Current tax credit relating to exercised share options - - - 1.5 1.5
Dividends declared and paid to Company shareholders - - - (60.5) (60.5)
Total transactions with owners - 1.4 - (57.7) (56.3)
At 30 May 2021 and 31 May 2021 1.6 14.5 2.1 178.1 196.3
Profit for the 52 weeks to 29 May 2022 - - - 128.4 128.4
Exchange differences on translation of foreign operations - - 0.8 - 0.8
Total comprehensive income for the period - - 0.8 128.4 129.2
Transactions with owners:
Share-based payments - - - 1.6 1.6
Shares issued under employee sharesave scheme - 1.8 - - 1.8
Deferred tax debit relating to share options - - - (1.4) (1.4)
Current tax credit relating to exercised share options - - - 0.7 0.7
Dividends paid to Company shareholders - - - (93.5) (93.5)
Total transactions with owners - 1.8 - (92.6) (90.8)
At 29 May 2022 1.6 16.3 2.9 213.9 234.7
The following notes form an integral part of this condensed consolidated
financial information.
CONSOLIDATED CASH FLOW STATEMENT
52 weeks ended 52 weeks ended
29 May 2022 30 May 2021
Notes £m £m
Cash flows from operating activities
Cash generated from operations 13 159.2 164.8
UK corporation tax paid (34.0) (28.8)
Overseas tax paid (3.7) (3.3)
Net cash generated from operating activities 121.5 132.7
Cash flows from investing activities
Purchases of property, plant and equipment (17.0) (17.4)
Purchases of other intangible assets (1.4) (2.9)
Expenditure on product development (13.9) (9.7)
Interest received 0.2 0.2
Net cash (used in)/generated from investing activities (32.1) (29.8)
Cash flows from financing activities
Proceeds from issue of ordinary share capital 1.8 1.4
Repayment of principal under leases (11.1) (10.0)
Lease interest paid (0.8) (0.9)
Dividends paid to Company shareholders (93.5) (60.5)
Net cash used in financing activities (103.6) (70.0)
Net (decrease)/increase in cash and cash equivalents (14.2) 32.9
Opening cash and cash equivalents 85.2 52.9
Effects of foreign exchange rates on cash and cash equivalents 0.4 (0.6)
Closing cash and cash equivalents 71.4 85.2
The following notes form an integral part of this condensed consolidated
financial information.
NOTES TO THE FINANCIAL INFORMATION
1. General information
The consolidated financial information of Games Workshop Group PLC is prepared
under the going concern basis and in accordance with both international
accounting standards in conformity with the requirements of the Companies Act
2006 and UK-adopted International Accounting Standards.
The financial information set out above does not constitute the company's
statutory accounts for the periods ended 29 May 2022 or 30 May 2021 but is
derived from those accounts. Statutory accounts for 2021 have been delivered
to the registrar of companies, and those for 2022 will be delivered in due
course. The auditors have reported on those accounts; their reports were (i)
unqualified, (ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their reports
and (iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006. Copies will also be available from Ross Matthews, Games
Workshop Group PLC, Willow Road, Lenton, Nottingham, NG7 2WS. This information
is also available on the Company's website at
http://investor.games-workshop.com.
The annual general meeting will be held at Willow Road, Lenton, Nottingham,
NG7 2WS at 10am on 21 September 2022.
The annual financial report is prepared in accordance with the Listing Rules
and Disclosure and Transparency Rules of the Financial Conduct Authority and
accounting policies consistent with those used in the 2022 annual report.
The preparation of the consolidated financial information requires management
to make estimates and assumptions that affect the reported amounts of
revenues, expenses, assets and liabilities, and disclosure of contingencies at
the balance sheet date. If in future such estimates and assumptions, which are
based on management's best judgement at the date of the consolidated financial
information, deviate from actual circumstances, the original estimates and
assumptions will be modified, as appropriate, in the period in which the
circumstances change.
Management do not consider there to be any critical accounting estimates or
judgements that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial
period.
2. Change in accounting policy
The Group has applied amendments to IAS 1 and IAS 8 'Definition of Material'
for the first time in the financial information commencing 31 May 2021. The
application of these new standards and amendments did not have a material
impact on the financial information in either the current or prior periods.
The Group considers that there are no new accounting standards, amendments or
interpretations issued by the IASB, but not yet applicable, which have had, or
are expected to have a significant effect on the financial information.
3. Segment information
As Games Workshop is a vertically integrated business, management assesses the
performance of sales channels and manufacturing and distribution channels
separately. Segment information for the 52 weeks ended 30 May 2021 has been
restated to better reflect the structure of the Group. Segments have been
split into core and licensing as described below. Costs previously reported
within 'Design to manufacture', 'Merchandising and logistics', and 'Operations
and support' have been combined to create the 'Design, manufacture, logistics
and operations' segment. Share-based payment charges, profit share scheme
charges and discretionary payments to employees were previously included
outside of segment operating expenses, these have now all been included in
core operating expenses.
At 29 May 2022 Games Workshop has two segments, core and licensing, as
described below:
- Core: the core segment includes all revenue and expenditure
relating to the design, manufacture and sales of our fantasy miniatures and
related products.
- Licensing: the licensing segment includes all revenue and
expenditure relating to licences granted to external partners, including the
development of digital content for animation and TV.
We provide further information on revenue and expenses within the core segment
below. The core segment has been divided into channels as follows:
- Trade: this sales channel sells globally to independent retailers,
agents and distributors. It also includes the Group's magazine newsstand
business and the distributor sales from the Group's publishing business (Black
Library).
- Retail: this includes sales through the Group's retail stores, the
Group's visitor centre in Nottingham and global events.
- Online: this includes sales through the Group's global web stores,
our online subscription service (Warhammer+) and digital sales through
external affiliates.
- Design, manufacturing, logistics and operations, which includes
costs for:
- the design studio (that creates all of the IP and the associated
miniatures, artwork, games and publications);
- the production facilities;
- the warehouses and logistics costs;
- charges for inventory provisions. This includes adjustments for
the profit in stock arising from inter-segment sales;
- support services (marketing, IT, accounting, payroll, personnel,
procurement, legal, health and safety, customer services and credit control)
provided to activities across the Group;
- Group: this includes the Company's overheads
The chief operating decision-maker, identified as the executive directors,
assesses the performance of each segment based on segmental operating profit.
This has been reconciled to the Group's total profit before taxation below.
Core Licensing Total
2022 2021 2022 2021 2022 2021
£m £m £m £m £m £m
Trade 214.3 194.8 - - 214.3 194.8
Retail 87.2 70.7 - - 87.2 70.7
Online 85.3 87.7 - - 85.3 87.7
Licensing - - 28.0 16.3 28.0 16.3
Revenue 386.8 353.2 28.0 16.3 414.8 369.5
Cost of sales (127.4) (96.3) - - (127.4) (96.3)
Gross Profit 259.4 256.9 28.0 16.3 287.4 273.2
Trade (10.7) (9.1) - - (10.7) (9.1)
Retail (52.4) (50.2) - - (52.4) (50.2)
Online (11.7) (7.8) - - (11.7) (7.8)
Design, manufacturing, logistics and operations (37.6) (35.2) - - (37.6) (35.2)
Licensing - - (2.6) (1.3) (2.6) (1.3)
Group (3.8) (3.5) - - (3.8) (3.5)
Share-based payment charge (1.6) (1.2) - - (1.6) (1.2)
Profit share scheme and discretionary payment charge (9.9) (13.2) - - (9.9) (13.2)
Operating expenses (127.7) (120.2) (2.6) (1.3) (130.3) (121.5)
Operating profit 131.7 136.7 25.4 15.0 157.1 151.7
Finance income 0.2 0.2 - - 0.2 0.2
Finance costs (0.8) (1.0) - - (0.8) (1.0)
Profit before tax 131.1 135.9 25.4 15.0 156.5 150.9
Additional revenue analysis
Segment revenue and segment profit include transactions between business
segments; these transactions are eliminated on consolidation. Sales between
segments are carried out at arm's length. The revenue from external parties
reported to the executive directors is measured in a manner consistent with
that in the income statement. For information, core external revenue is
analysed further below:
52 weeks ended 52 weeks ended
29 May 2022 30 May 2021
£m £m
Trade
UK and Continental Europe 90.4 82.3
North America 96.5 85.4
Australia and New Zealand 11.4 10.2
Asia 8.5 9.0
Rest of world 5.9 5.6
Black Library 1.6 2.3
Total Trade 214.3 194.8
Retail
UK 25.7 13.3
Continental Europe 18.5 16.4
North America 33.6 28.2
Australia and New Zealand 7.3 10.3
Asia 2.1 2.5
Total Retail 87.2 70.7
Online
UK 19.0 22.2
Continental Europe 16.3 18.0
North America 31.4 30.6
Australia and New Zealand 4.4 5.5
Asia 0.4 0.5
Rest of world 1.4 1.3
Digital 12.4 9.6
Total Online 85.3 87.7
Total external core revenue 386.8 353.2
External core revenue analysed by customer geographical location is as
follows:
52 weeks ended 52 weeks ended
29 May 2022 30 May 2021
£m £m
UK 83.4 80.5
Continental Europe 95.6 82.1
North America 169.7 145.5
Australia and New Zealand 23.3 26.1
Asia 11.8 12.1
Rest of world 3.0 6.9
External core revenue 386.8 353.2
The Group is not reliant on any one individual customer.
Additional operating expenses analysis
Operating profit as reported above includes impairment, depreciation and
amortisation charges as follows:
52 weeks ended 52 weeks ended
29 May 2022 30 May 2021
£m £m
Retail 11.0 10.8
Online 2.8 0.2
Design, manufacturing, logistics and operations 22.2 15.6
Total group charges for impairment, depreciation and amortisation 36.0 26.6
Non-current asset analysis
Non-current assets (excluding deferred tax and non-current financial
instruments) located within the UK were £120.6m (2021: £100.0m) and all
other countries was £28.5m (2021: £27.2m). Tangible, intangible and
right-of-use asset additions included within the UK were £34.5m (2021:
£45.2m) and all other countries were £9.0m (2021: £8.1m).
Other non-cash charges
Other non-cash charges and significant costs included in operating profit are
as follows:
Redundancy costs and compensation for loss of office
Charge to inventory provisions
52 weeks ended 52 weeks ended 52 weeks ended 52 weeks ended
29 May 2022 30 May 2021 29 May 2022 30 May 2021
£m £m £m £m
Core (10.6) (0.9) (0.5) (1.2)
Licensing - - (0.1) -
Total group charge (10.6) (0.9) (0.6) (1.2)
4. Taxation
52 weeks ended 52 weeks ended
29 May 2022 30 May 2021
£m £m
Current UK taxation:
- UK corporation tax on profits for the period 31.3 28.1
Adjustments to tax charge in respect of prior periods (0.4) (0.6)
30.9 27.5
Current overseas taxation:
- Overseas corporation tax on profits for the period 4.3 2.9
Adjustments to tax charge in respect of prior periods 0.8 (0.3)
Total current taxation 36.0 30.1
Deferred taxation:
Origination and reversal of timing differences (7.3) (2.0)
Adjustments to tax charge in respect of prior periods (0.6) 0.8
Tax expense recognised in the income statement 28.1 28.9
Current tax credit relating to sharesave scheme (0.7) (1.5)
Deferred tax debit/(credit) relating to sharesave scheme 1.4 (0.1)
Debit/(credit) taken directly to equity 0.7 (1.6)
The tax on the Group's profit before taxation differs in both periods
presented from the standard rate of corporation tax in the UK as follows:
52 weeks ended 52 weeks ended
29 May 2022 30 May 2021
£m £m
Profit before taxation 156.5 150.9
Profit before taxation multiplied by the standard rate of corporation tax in 29.7 28.7
the UK of 19% (2021: 19%)
Effects of:
Items not assessable for tax purposes (1.3) (0.3)
Different tax rates on overseas earnings (1.1) 0.5
Tax rate changes 1.0 0.1
Adjustments to tax charge in respect of prior periods (0.2) (0.1)
Total tax charge for the period 28.1 28.9
On 3 March 2021, the Chancellor announced that the UK corporation tax rate
will be increased from 19% to 25% from 1 April 2023. This change had been
substantively enacted at the balance sheet date at 29 May 2022 and its impact
has therefore been included in these condensed consolidated financial
information.
Items not assessable for tax purposes include the release of provisions no
longer considered a risk to the Group as well as tax relief for other taxes
paid.
5. Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
owners of the parent by the weighted average number of ordinary shares in
issue during the period.
52 weeks ended 52 weeks ended
29 May 2022 30 May 2021
Profit attributable to owners of the parent (£m) 128.4 122.0
Weighted average number of ordinary shares in issue (thousands) 32,813 32,733
Basic earnings per share (pence per share) 391.3 372.7
Diluted earnings per share
The calculation of diluted earnings per share has been based on the profit
attributable to owners of the parent and the weighted average number of shares
in issue throughout the period, adjusted for the dilutive effect of share
options outstanding at the period end.
52 weeks ended 52 weeks ended
29 May 2022 30 May 2021
Profit attributable to owners of the parent (£m) 128.4 122.0
Weighted average number of ordinary shares in issue (thousands) 32,813 32,733
Adjustment for share options (thousands) 60 194
Weighted average number of ordinary shares for diluted earnings per share 32,873 32,927
(thousands)
Diluted earnings per share (pence per share) 390.6 370.5
6. Dividends per share
Dividends of £16.4m (50 pence per share) were declared in the prior period
and paid during the current period. Dividends of £13.1m (40 pence per share),
£8.2m (25 pence per share), £11.5m (35 pence per share), £21.3m (65 pence
per share) and £23.0m (70 pence per share) were declared and paid during the
current period.
Dividends of £9.8m (30 pence per share), £16.3m (50 pence per share),
£19.7m (60 pence per share) and £14.7m (45 pence per share) were declared
and paid during the prior period.
7. Other intangible assets
2022 2021
£m £m
Net book value at the beginning of the period 23.7 17.6
Exchange differences 0.1 -
Additions 15.3 12.6
Disposals (0.3) (0.1)
Reclassifications (0.2) -
Amortisation charge (11.7) (6.0)
Impairment (1.3) (0.4)
Net book value at the end of the period 25.6 23.7
8. Property, plant and equipment
2022 2021
£m £m
Net book value at the beginning of the period 49.8 42.0
Exchange differences 0.5 (0.6)
Additions 16.3 17.7
Disposals (0.1) (0.1)
Reclassifications 0.2 -
Depreciation charge (11.7) (9.2)
Net book value at the end of the period 55.0 49.8
9. Right-of-use assets
2022 2021
£m £m
Net book value at the beginning of the period 46.0 36.8
Exchange differences 1.4 (2.3)
Additions 11.9 23.0
Disposals - (0.5)
Depreciation charge (11.2) (11.0)
Net book value at the end of the period 48.1 46.0
10. Cash and cash equivalents
Cash and cash equivalents include the following for the purposes of the cash
flow statement:
2022 2021
£m £m
Cash at bank and in hand 71.4 85.2
Cash and cash equivalents 71.4 85.2
11. Provisions for other liabilities and charges
Analysis of total provisions:
2022 2021
£m £m
Current 0.8 0.6
Non-current 1.5 1.7
Total provisions for other liabilities and charges 2.3 2.3
Employee benefits
£m Property Total
£m £m
At 31 May 2021 2.3 - 2.3
Charged/(credited) to the income statement:
- Additional provisions 0.1 0.1 0.2
- Unused amounts reversed (0.5) - (0.5)
Additional provision charged to right-of-use assets - 0.4 0.4
Utilised (0.1) - (0.1)
At 29 May 2022 1.8 0.5 2.3
12. Commitments
Capital expenditure contracted for at the balance sheet date but not yet
incurred is £4.3m (2021: £3.5m). Inventory purchase commitments contracted
for at the balance sheet date are £6.7m (2021: £4.5m). Lease commitments at
the balance sheet date were £nil (2021: £0.2m).
13. Reconciliation of profit to net cash from operating activities
2022 2021
£m £m
Profit before taxation 156.5 150.9
Finance income (0.2) (0.2)
Finance costs 0.8 1.0
Operating profit 157.1 151.7
Depreciation of property, plant and equipment 11.7 9.2
Depreciation of right-of-use assets 11.4 11.0
Net impairment charge of intangible assets 1.3 0.4
Loss on disposal of intangible assets 0.3 0.1
Amortisation of capitalised development costs 10.1 4.8
Amortisation of other intangibles 1.6 1.2
Share-based payments 1.6 1.2
Changes in working capital:
- Increase in inventories (12.2) (6.2)
- Increase in trade and other receivables (21.5) (10.8)
- (Decrease)/increase in trade and other payables (2.2) 3.1
- - Decrease in provisions - (0.9)
Net cash from operating activities 159.2 164.8
GLOSSARY
Alternative Performance Measures (APMs)
APM definitions Closest equivalent IFRS measure Reconciliation to closest IFRS measure where applicable
Core revenue Revenue Core revenue is reconciled to revenue in note 3 to the financial information.
Direct sales made of our core products to external customers, through the
Group's network of retail stores, independent retailers and online through the
global web stores
Core gross profit Gross profit Core gross profit is reconciled to gross profit in note 3 to the financial
information.
Core gross profit is core revenue less all related cost of sales
Core operating expenses Operating expenses Core operating expenses are reconciled to operating expenses in note 3 to the
financial information.
Operating expenses relating to the core business of selling directly to
external customers
Core operating profit Operating profit Core operating profit is reconciled to operating profit in note 3 to the
financial information.
Core operating profit is core revenue less all related cost of sales and
operating expenses
Licensing revenue Revenue Licensing revenue is reconciled to revenue in note 3 to the financial
information.
Income relating to royalties earned from third party licensees.
Licensing gross profit Gross profit Licensing gross profit is reconciled to gross profit in note 3 to the
financial information.
Licensing gross profit is licensing revenue less any related cost of sales
Licensing operating expenses Operating expenses Licensing operating expenses are reconciled to operating expenses in note 3 to
the financial information.
Operating expenses relating to the licensing segments
Licensing operating profit Operating profit Licensing operating profit is reconciled to operating profit in note 3 to the
financial information.
Licensing operating profit is licensing revenue less all related cost of sales
and operating expenses
Revenue at constant currency Revenue This is calculated by converting underlying revenue amounts at local currency
value for both the current and prior period at the prior period average
Revenue for the current and prior period converted at a constant exchange exchange rate.
rate.
Operating profit at constant currency Operating profit This is calculated by converting underlying operating profit amounts at local
currency value for both the current and prior period at the prior period
Operating profit for the current and prior period converted at a constant average exchange rate.
exchange rate.
Core average capital employed None This value is calculated by taking monthly net assets and adjusting for any
cash, borrowings, licensing receivables, exceptional provisions, taxation and
This is a measure of the capital employed in the core business averaged over a dividends, for each of the 12 months. These are then added together and
12 month period divided by 12 to give the core average capital employed.
Return on capital employed (ROCE) None Return is calculated by dividing the core operating profit by the core average
capital employed.
Measure of the profit relative to the amount of capital employed. The higher
the ROCE, the greater the return for the capital employed
Cash generated - pre dividends paid Net increase/(decrease) in cash and cash equivalents Net increase in cash-pre dividends paid can be calculated by taking the net
increase/(decrease) in cash and cash equivalents and adding back the dividends
Movement in cash in the period before any payments of dividends are taken into which have been paid in the period.
account
Cash generated from core activities Net cash generated from operating activities This is calculated by taking the net cash generated from operating activities
in the cash flow of £121.5 million (2021: £132.7 million) less the cash
Net cash generated from operating activities less the licensing cash received received in respect of licensing of £15.4 million (2021: £14.2 million).
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