REG - Games Workshop Group - Annual Financial Report <Origin Href="QuoteRef">GAW.L</Origin> - Part 2
25/07/2017 07:06
- Part 2: For the preceding part double click ID:nRSY9495La
assets (1,749) (2,789)
Expenditure on product development (5,686) (4,578)
Interest received 87 86
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Net cash used in investing activities (12,757) (12,577)
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Cash flows from financing activities
Proceeds from issue of ordinary share capital 81 304
Interest paid (4) (3)
Loans to Company shareholders (1,901) -
Dividends paid to Company shareholders (23,801) (12,837)
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Net cash used in financing activities (25,625) (12,536)
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Net increase/(decrease) in cash and cash equivalents 5,506 (883)
Opening cash and cash equivalents 11,775 12,561
Effects of foreign exchange rates on cash and cash equivalents 629 97
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Closing cash and cash equivalents 8 17,910 11,775
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The following notes form an integral part of this condensed consolidated
financial information.
NOTES TO THE FINANCIAL INFORMATION
1. General information
The consolidated financial statements of Games Workshop Group PLC are prepared
under the going concern basis and in accordance with International Financial
Reporting Standards (IFRSs), IFRS Interpretations Committee (IC)
interpretations as adopted by the European Union and with those parts of the
Companies Act 2006 applicable to those companies reporting under IFRSs.
These results for the year ended 28 May 2017 together with the corresponding
amounts for the year ended 29 May 2016 are extracts from the 2017 annual
report and do not constitute statutory accounts within the meaning of section
434 of the Companies Act 2006.
The annual report for the year ended 28 May 2017, on which the auditors have
issued a report that does not contain a statement under either section 498(2)
or 498(3) of the Companies Act 2006, will be posted to shareholders on 25 July
2017 and will be delivered to the Registrar of Companies in due course. Copies
will also be available from Rachel Tongue, 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 10:00 am on 13 September 2017.
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 2016 annual report. With
effect from 30 May 2016 the Group implemented a change in accounting estimates
for the amortisation of development costs intangible assets and the accounting
estimate for the depreciation of moulding tools. These are described in note 2
below along with the impact on the results for the year ended 28 May 2017.
The preparation of the consolidated financial statements 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
statements, deviate from actual circumstances, the original estimates and
assumptions will be modified, as appropriate, in the year in which the
circumstances change. The following areas are considered of greater complexity
and/or particularly subject to the exercise of judgement:
· Management estimates and judgements are required in assessing the
impairment of assets, including capitalised development costs and fixtures and
fittings within loss making retail stores, particularly in relation to the
forecasting of future cash flows and the discount rate applied to the cash
flows.
· Judgement is involved in assessing the exposures in the provisions
(including inventory, loss making retail stores, other property, bad debt and
returns) and hence in setting the level of the required provisions.
2. Change in accounting estimates
With effect from 30 May 2016 the Group implemented a change in accounting
estimates for the amortisation of development costs intangible assets and the
depreciation of moulding tools. Previously product development costs
recognised as intangible assets were amortised on a straight line basis over
periods ranging between 1 and 48 months. These development costs intangible
assets are now amortised on a reducing balance basis with rates ranging from
50% to 80%.
Previously moulding tools were depreciated on a straight line basis over a
period of 48 months. Moulding tools relating to specific products are now
amortised on a reducing balance basis at 50%.
The changes have been made in order to better match the expenditure incurred
to the expected revenue generated from the subsequent product release. In
accordance with IAS 8 'Accounting policies, changes in accounting estimates
and errors' the changes are recognised prospectively and hence there is no
impact on the results or financial position previously reported for the year
ended 29 May 2016.
The impact of the change on the results for the year ended 28 May 2017 is
shown in the table below:
Pre-change in accounting estimates Impact of change in accounting estimates TotalYear ended28 May 2017
£000 £000 £000
Cost of sales (45,224) 1,533 (43,691)
Gross profit 112,890 1,533 114,423
Operating profit 36,790 1,533 38,323
Income tax expense (7,565) (291) (7,856)
Profit attributable to owners of the parent 29,305 1,242 30,547
Other intangible assets 10,720 2,197 12,917
Property, plant and equipment 22,796 (664) 22,132
Deferred tax assets 5,273 126 5,399
Current tax liabilities (5,423) (417) (5,840)
Net assets 61,590 1,242 62,832
Basic earnings per share (expressed in pence per share) 91.2p 3.9p 95.1p
Diluted earnings per share (expressed in pence per share) 90.7p 3.8p 94.5p
The impact of the change in accounting estimates in future years will depend
on the release mix and nature of products being developed in those years. A
benefit relating to the changes in accounting estimates is expected until the
year ending 31 May 2020, when the change will no longer materially impact the
financial statements.
3. Segment information
The chief operating decision-maker has been identified as the executive
directors. They review the Group's internal reporting in order to assess
performance and allocate resources. Management has determined the segments
based on these reports.
As Games Workshop is a vertically integrated business, management assesses the
performance of sales channels and manufacturing and distribution channels
separately. At 28 May 2017, the Group is organised as follows:
- Sales channels. These channels sell product to external customers,
through the Group's network of retail stores, independent retailers and
directly via the global web stores. The sales channels have been aggregated
into segments where they sell products of a similar nature, have similar
production processes, similar customers, similar distribution methods, and if
they are affected by similar economic factors. The segments are 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 exhibitions.
- Mail order. This includes sales through the Group's global web stores
and digital sales through external affiliates.
- Product and supply. This includes the design and manufacture of the
products and incorporates the production facility in the UK and the Group
logistics and stock management costs. This also includes adjustments for the
profit in stock arising from inter-segment sales and charges for inventory
provisions.
- Central costs. These include the Company overheads, head office site
costs and the costs of running the Games Workshop Academy.
- Service centre costs. Provides support services (IT, accounting,
payroll, personnel, procurement, legal, health and safety, customer services
and credit control) to activities across the Group and undertakes strategic
projects.
- Royalties. This is royalty income earned from third party licensees
after deducting associated licensing costs.
The chief operating decision-maker assesses the performance of each segment
based on operating profit, excluding share option charges recognised under
IFRS 2, 'Share-based payment', charges in respect of the Group's profit share
scheme and the discretionary payment to employees for the current year. This
has been reconciled to the Group's total profit before taxation below.
The segment information reported to the executive directors for the year ended
28 May 2017 is as follows:
Year ended 28 May 2017£000 Year ended 29 May 2016£000
Trade 61,254 44,522
Retail 64,848 48,414
Mail order 32,012 25,133
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Total external revenue 158,114 118,069
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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, we analyse external revenue
further below:
Restated*
Year ended28 May 2017£000 Year ended29 May 2016£000
Trade
UK and Continental Europe 25,442 18,921
North America 27,207 19,523
Australia and New Zealand 2,472 1,816
Asia 2,257 1,417
Rest of world 1,580 1,069
Black Library 2,296 1,776
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Total Trade 61,254 44,522
Retail
UK 22,474 19,364
Continental Europe 16,859 12,916
North America 16,759 10,584
Australia and New Zealand 7,471 5,133
Asia 1,285 417
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Total Retail 64,848 48,414
Mail order 32,012 25,133
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Total external revenue 158,114 118,069
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*Segment revenue of £8,675,000 for the year ended 29 May 2016 previously
reported as non-core trade has been reclassified within the trade segment as
UK and Continental Europe (£3,417,000), North America (£1,579,000), Australia
and New Zealand (£158,000), Asia (£676,000), Rest of world (£1,069,000) and
Black Library (£1,776,000) to reflect the management structure in place at 28
May 2017.
Segment revenue of £3,495,000 for the year ended 29 May 2016 previously
reported as non-core retail has been reclassified within the retail segment as
UK (£3,290,000), Continental Europe (£38,000) and North America (£167,000) to
reflect the management structure in place at 28 May 2017.
In addition mail order segment revenue of £4,115,000 for the year ended 29 May
2016 previously reported as non-core mail order and £21,018,000 previously
reported as Citadel and Forge World are now reported together as Mail order
which reflects the management structure in place at 28 May 2017.
Operating expenses by segment are regularly reviewed by the executive
directors and are provided below:
Year ended 28 May 2017£000 Restated*Year ended 29 May 2016£000
Trade (10,855) (8,899)
Retail (42,849) (35,930)
Mail order (5,290) (5,002)
Product and supply (2,618) (2,380)
Central costs (6,215) (5,969)
Service centre costs (11,824) (10,907)
Royalties (371) (430)
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Total segment operating expenses (80,022) (69,517)
Share-based payment charge (160) (193)
Profit share scheme charge (444) -
Discretionary payment to employees (2,965) -
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Total group operating expenses (83,591) (69,710)
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*Operating expenses of £387,000 for the year ended 29 May 2016 relating to
certain marketing costs have been reclassified from product and supply to
central costs which reflects the current management structure in place for the
year ended 28 May 2017.
Total segment operating profit is as follows and is reconciled to profit
before taxation below:
Restated**
Year ended* 28 May 2017£000 Year ended 29 May 2016£000
Trade 17,956 10,625
Retail 461 (3,927)
Mail order 18,788 13,747
Product and supply 16,286 8,019
Central costs (6,724) (5,833)
Service centre costs (11,824) (10,907)
Royalties 6,949 5,329
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Total segment operating profit 41,892 17,053
Share-based payment charge (160) (193)
Profit share scheme charge (444) -
Discretionary payment to employees (2,965) -
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Total group operating profit 38,323 16,860
Finance income 87 93
Finance costs (7) (5)
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Profit before taxation 38,403 16,948
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*The implementation of the change in accounting estimates for the amortisation
of development costs intangible assets and the depreciation of moulding tools,
as described in note 2, has resulted in an increase in operating profit of
£1,533,000 which is shown within the product and supply segment above. There
is no impact on the results for the year ended 29 May 2016.
**Segment operating profit for the year ended 29 May 2016 has been restated to
reclassify a stock valuation gain of £517,000 from the retail segment to the
product and supply segment. In addition a segment loss of £409,000 for the
year ended 29 May 2016 relating to certain marketing costs has been
reclassified from product and supply to central costs. These restatements
reflect the current management structure in place for the year ended 28 May
2017.
4. Dividends per share
A dividend of 20 pence per share, amounting to a total dividend of £6,413,000,
and a further dividend of 20 pence per share, amounting to a total dividend of
£6,424,000, were declared and paid during the prior year. A dividend of 25
pence per share, amounting to a total dividend of £8,031,000, a dividend of 30
pence per share, amounting to a total dividend of £9,638,000 and a further
dividend of 19 pence per share, amounting to a total dividend of £6,132,000,
were declared and paid during the current year.
Dividends of 80 pence per share were declared during the year. As a result of
a procedural oversight, 6 pence per share of the dividend paid on 2 June 2017
is being treated as an unlawful dividend in the annual report. Although the
Company always had sufficient reserves to pay this dividend at the time that
it was made, the Companies Act 2006 requires this to be demonstrated by
reference to interim accounts filed at Companies House prior to payment. Those
interim accounts, however, were not filed with Companies House until after the
relevant dividend had been paid and after the lapse had been identified. No
fines or other penalties have been incurred by the Company. A resolution is to
be proposed at the AGM in order to remedy this oversight.
5. Tax
Year ended Year ended
28 May 2017£000 29 May 2016£000
Current UK taxation:- UK corporation tax on profits for the year- Under provision in respect of prior years 8,217887 2,58840
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Current overseas taxation:- Overseas corporation tax on profits for the year- Over provision in respect of prior years 9,104 587(77) 2,628 349(32)
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Total current taxation 9,614 2,945
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Deferred taxation:- Origination and reversal of timing differences- Over provision in respect of prior years (477)(1,281) 660(153)
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Tax expense recognised in the income statement 7,856 3,452
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Current tax (credit)/charge relating to sharesave scheme (5) 3
Deferred tax credit relating to sharesave scheme (14) -
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(Credit)/charge taken directly to equity (19) 3
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The tax on the Group's profit before taxation differs in both years presented
from the standard rate of corporation tax in the UK as follows:
Year ended Year ended
28 May 2017£000 29 May 2016£000
Profit before taxation 38,403 16,948
Profit before taxation multiplied by the standard rate of corporation tax in the UK of 19.83% (2016: 20%)Effects of:Items not deductible/(assessable) for tax purposesMovement in deferred tax not recognisedHigher tax rates on overseas earningsAdjustments to tax charge in respect of prior years 7,615 210-502(471) 3,390 (248)(2)457(145)
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Total tax charge for the year 7,856 3,452
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Reductions to the UK corporation tax rate were included in the Finance Act
(No. 2) 2015 which reduced the main rate to 19% from 1 April 2017. A further
reduction in the UK corporation tax rate was included in the Finance Act 2016
to reduce the rate to 17% from 1 April 2020. These changes had been
substantively enacted at the balance sheet date and their impact has therefore
been included in these financial statements.
On 29 March 2017, the UK Government invoked Article 50 of the Treaty of
Lisbon, notifying the European Council of its intention to withdraw from the
European Union (the 'EU'). There is an initial two year timeframe for the UK
and EU to reach an agreement on the withdrawal, although this timeframe can be
extended. There is significant uncertainty about the withdrawal process; its
timeframe; and the outcome of the negotiations. As a result, there is
significant uncertainty as to the period for which the existing EU laws for
member states will continue to apply to the UK and which laws will apply to
the UK after an exit. At this stage the level of uncertainty is such that it
is impossible to determine if, how and when the UK's tax status will change.
The directors have assessed and have not identified any significant matters
impacting the financial statements.
6. 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 year.
Year ended 28 May 2017 Year ended 29 May 2016
Profit attributable to owners of the parent (£000) 30,547 13,496
Weighted average number of ordinary shares in issue (thousands) 32,126 32,093
Basic earnings per share (pence per share) 95.1 42.1
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Basic earnings per share - pre-change in accounting estimates
Basic earnings per share - pre-change in accounting estimates is calculated by
dividing the profit attributable to owners of the parent, before the impact of
the change in accounting estimates, by the weighted average number of ordinary
shares in issue during the year.
Year ended 28 May 2017 Year ended 28 May 2016
Profit attributable to owners of the parent pre-change in accounting estimates (£000) 29,305 13,496
Weighted average number of ordinary shares in issue (thousands) 32,126 32,093
Basic earnings per share pre-change in accounting estimates (pence per share) 91.2 42.1
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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 year, adjusted for the dilutive effect of share
options outstanding at the year end.
Year ended 28 May 2017 Year ended 29 May 2016
Profit attributable to owners of the parent (£000) 30,547 13,496
Weighted average number of ordinary shares in issue (thousands) 32,126 32,093
Adjustment for share options (thousands) 199 57
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Weighted average number of ordinary shares for diluted earnings per share (thousands) 32,325 32,150
Diluted earnings per share (pence per share) 94.5 42.0
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Diluted earnings per share - pre-change in accounting estimates
The calculation of diluted earnings per share pre-change in accounting
estimates has been based on the profit attributable to owners of the parent,
before the impact of the change in accounting estimates, and the weighted
average number of shares in issue throughout the year, adjusted for the
dilutive effect of share options outstanding at the year end.
Year ended 28 May 2017 Year ended 29 May 2016
Profit attributable to owners of the parent pre-change in accounting estimates (£000) 29,305 13,496
Weighted average number of ordinary shares in issue (thousands) 32,126 32,093
Adjustment for share options (thousands) 199 57
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Weighted average number of ordinary shares for diluted earnings per share (thousands) 32,325 32,150
Diluted earnings per share pre-change in accounting estimates (pence per share) 90.7 42.0
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7. Reconciliation of profit to net cash from operating activities
2017£000 2016£000
Operating profit 38,323 16,860
Depreciation of property, plant and equipment 6,107 5,305
Net (reversal) of impairment/impairment of property, plant and equipment (55) 28
Loss on disposal of property, plant and equipment 111 28
Impairment of intangible assets 833 -
Loss on disposal of intangible assets 14 39
Amortisation of capitalised development costs 2,900 3,853
Amortisation of other intangibles 1,217 1,232
Share-based payments 160 193
Changes in working capital:
- Increase in inventories (2,984) (701)
- Increase in trade and other receivables (379) (293)
- Increase/(decrease) in trade and other payables 3,491 (198)
- - (Decrease)/increase in provisions (368) 436
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Net cash from operating activities 49,370 26,782
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8. Cash and cash equivalents
Cash and cash equivalents include the following for the purposes of the cash
flow statement:
2017£000 2016£000
Cash at bank and in hand 16,307 10,998
Short term bank deposits 1,603 777
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Cash and cash equivalents 17,910 11,775
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9. Other intangible assets
2017 2016
£000 £000
Net book value at beginning of the year 10,501 8,262
Additions 7,376 7,362
Exchange differences 4 1
Disposals (14) (39)
Amortisation charge (4,117) (5,085)
Impairment (833) -
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Net book value at end of the year 12,917 10,501
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10. Property, plant and equipment
2017 2016
£000 £000
Net book value at beginning of the year 22,621 22,719
Additions 5,372 5,193
Exchange differences 302 70
Disposals (111) (28)
Charge for the year (6,107) (5,305)
Reversal of impairment/(impairment) 55 (28)
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Net book value at end of the year 22,132 22,621
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11. Provisions for other liabilities and charges
Analysis of total provisions:
2017 2016
£000 £000
Current 689 823
Non-current 495 621
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Total provisions for other liabilities and charges 1,184 1,444
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Employee
benefits Property Total
£000 £000 £000
At 30 May 2016 547 897 1,444
Charged/(credited) to the income statement 153 (185) (32)
Exchange differences 47 57 104
Utilised (67) (265) (332)
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At 28 May 2017 680 504 1,184
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12. Commitments
Capital expenditure contracted for at the balance sheet date but not yet
incurred is £1,102,000 (2016: £609,000). Inventory purchase commitments
contracted for at the balance sheet date are £4,013,000 (2016: £2,689,000).
13. Related-party transactions
T H F Kirby provided consultancy at a cost of £35,000 during the prior year.
14. Subsequent events
A dividend of 20 pence per share was declared after the balance sheet date and
was paid before the signing of the financial statements.
This information is provided by RNS
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