REG - Games Workshop Group - Half-year Report
11/01/2022 07:05
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RNS Number : 9973X Games Workshop Group PLC 11 January 2022
GAMES WORKSHOP GROUP PLC
11 January 2022
HALF-YEARLY REPORT
Games Workshop Group PLC ('Games Workshop' or the 'Group') announces its
half-yearly results for the six months to 28 November 2021.
Highlights:
Six months to Six months to
28 November 2021 29 November 2020
Revenue £191.5m £186.8m
Revenue at constant currency* £198.8m £186.8m
Operating profit - pre-royalties receivable £68.4m £83.3m
Royalties receivable £20.1m £8.7m
Operating profit £88.5m £92.0m
Operating profit at constant currency* £93.8m £92.0m
Profit before taxation £88.2m £91.6m
Cash generated from operations £76.4m £100.0m
Basic earnings per share 217.2p 226.1p
Dividends per share declared in the period 100p 80p
Dividends per share paid in the period 115p 80p
Kevin Rountree, CEO of Games Workshop, said:
"We are on the front foot and confident in our ability to continue to deliver
our strategy. Our commitment to focus on real cash returns and return on
capital continues to deliver honest and consistent returns to our owners. We
will continue to try our best. In the period reported, we have delivered just
that.
We have proven once again that the Warhammer hobby creates exciting
experiences and allows people around the world to come together and have some
fun. We continue to focus on making the best miniatures in the world and to
document and deliver an exciting operational plan.
I'm once again immensely proud of the global teams' performance, the ongoing
support of our customers and those unsung heroes that keep us safe and well,
thank you."
…Ends…
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 (http://investor.games-workshop.com)
General website www.games-workshop.com
*Constant currency revenue and operating profit are calculated by comparing
results in the underlying currencies for 2020 and 2021, both converted at the
average exchange rates for the six months ended 29 November 2020.
FIRST HALF HIGHLIGHTS
Six months to Six months to
28 November 2021 29 November 2020
Revenue £191.5m £186.8m
Revenue at constant currency £198.8m £186.8m
Operating profit - pre-royalties receivable £68.4m £83.3m
Royalties receivable £20.1m £8.7m
Operating profit £88.5m £92.0m
Operating profit at constant currency £94.2m £92.0m
Profit before taxation £88.2m £91.6m
Cash generated from operations £76.4m £100.0m
Basic earnings per share 217.2p 226.1p
Dividend per share declared in the period 100p 80p
Dividend per share paid in the period 115p 80p
Revenue by segment
Six months to Six months to Six months to Six months to
28 November 2021 29 November 2020 28 November 2021 29 November 2020
Constant currency Constant currency Actual rates Actual rates
Trade £112.8m £104.0m £108.1m £104.0m
Retail £43.3m £36.9m £41.9m £36.9m
Online £42.7m £45.9m £41.5m £45.9m
Total revenue £198.8m £186.8m £191.5m £186.8m
Summary operating profit
Six months to Six months to Six months to Six months to
28 November 2021 29 November 2020 28 November 2021 29 November 2020
Constant currency Constant currency Actual rates Actual rates
Revenue £198.8m £186.8m £191.5m £186.8m
Gross profit £138.2m £141.1m £131.3m £141.1m
Operating expenses (£64.2m) (£57.8m) (£62.9m) (£57.8m)
Operating profit pre-royalties receivable £74.0m £83.3m £68.4m £83.3m
Royalties receivable £20.2m £8.7m £20.1m £8.7m
Operating profit £94.2m £92.0m £88.5m £92.0m
Foreign exchange rates
Our currency exposures are the euro and US dollar:
euro US dollar
2021 2020 2021 2020
Rate used for the balance sheet at the period end 1.18 1.11 1.33 1.33
Average rate used for earnings 1.17 1.11 1.37 1.30
INTERIM MANAGEMENT REPORT
Games Workshop and the Warhammer hobby are in great shape.
We are on the front foot and confident in our ability to continue to deliver
our strategy. Our commitment to focus on real cash returns and return on
capital continues to deliver honest and consistent returns to our owners. We
will continue to try our best. In the period reported, we have delivered just
that.
Thanks to a resilient and engaged global team, we have had another great six
months. We continue to deliver the day job: designing and making the best
miniatures, books, games and paints in the world. With a relentless focus, we
continue to support our existing customers and build new communities of
like-minded Warhammer hobbyists. This despite, on occasions, having one arm
tied behind our backs e.g. global travel restrictions and our retail
recruitment offer has been compromised for some time.
We are proud and humbled most days with the feedback that we receive;
particularly that the Warhammer hobby continues to be a happy place for most
people. We are ever more mindful these days of the role hobbies play for those
who are struggling with wellbeing challenges. We will continue to work hard to
ensure that the Warhammer hobby remains a fun and immersive pastime, offering
people around the world an opportunity to form friendships and find support
and to express themselves creatively as they explore Warhammer's fantastical
worlds.
COVID-19
Our number one priority during the period has remained the health, safety and
wellbeing of our staff, their families and our customers. We thank all of
those whose efforts helped to keep us safe and well - you are all amazing!
We are still operating with additional safety measures in place, e.g. social
distancing, and we continue to encourage face coverings in areas such as our
factories. We have actively encouraged our staff to do the right thing for
themselves and their colleagues; having the COVID-19 vaccines is top of the
list, and we mandate they follow all local government guidelines. We continue
to pay all our staff fully, even when the virus forces them to temporarily sit
at home. We know they're desperate to get back to work and look forward to
having them do just that.
COVID-19 related disruption has continued, and countries continue to be at
various stages of normality. These events are outside of their control.
However, the negative impact on Games Workshop's normal operational processes
has reduced in the period reported. Our main facilities are broadly back to
normal allowing us to focus on the completion of some major projects. For
example, staff from our support functions have been able to fly to Memphis to
help the local team get our warehouse project fully operational. We are
hopeful we can clear back orders and reduce delivery times in the next month
or so.
We once again thank our customers for their patience and understanding. Sorry
if we have let you down, the team is doing everything they can to speed things
up.
Growth
The global team has delivered another record sales performance (at constant
currency rates) - this is fantastic - the prior year was by far our best
performance ever. Our plan was rougher around the edges than I would have
liked. This will likely remain the case for a few more months as the global
disruptions continue to ease. To be honest, I'm a little disappointed that we
have not delivered to our full potential: e.g. having to delay some of our new
products due to shipping issues. I hope we get the opportunity in the second
half.
Even so, I am delighted to report that we continue to perform well in most
countries, the exception being Australia. The ongoing COVID-19 restrictions
there have kept our stores closed - something I know that has frustrated our
passionate store managers. The team is ready to bounce back as soon as they
get the chance. The performance of our core product ranges remains in line
with our exciting operational plans, see below for more details.
Our profit before tax is down £3.4 million, however, excluding foreign
exchange movements and increased carriage costs and paying our staff more (a
good thing!), our net core business profits are broadly in line with last
year's record performance. When we say the core business, we are referring to
our business that focuses on realising our intellectual properties as
miniatures and supporting products, excluding licensing. We continue to remain
focused on our core business metrics and are working tirelessly to improve the
ones that are in our control. In the short term, some of our global freight
and raw material suppliers have been passing some cost increases on to us - we
will be working hard over the period ahead to ensure they are fair. The
negative impact of these on our gross margin is about 3%. To date, the
discount we offer our trade accounts and our global RRPs have not
significantly changed, pragmatically this is under constant review.
Core business highlights
Our strategy has not changed - we continue to make the best miniatures in the
world, in ever increasing volumes, and to engage and inspire our customers new
and old.
In line with our group profit share scheme, payments in cash to staff are
£6.9 million (2020: £6.3 million). Total dividends declared in the period
reported were 100 pence per share (2020: 80 pence per share).
Sales for the month of December are broadly in line with our expectations.
On a constant currency basis:
· Sales growth - sales growth (+6%) continues across Trade (+8%),
Retail (+17%) with a decline in Online (-7%).
· Gross margin - down 6% to 70% in the period with increasing
volumes, offset by the costs of increased staff costs (investment in pay
grades and increased headcount, +£3.0 million, +68 new jobs in the period),
input and carriage cost increases (+£5.6 million) and the incremental cost of
our new facilities (+£0.7 million). Investment in inventory to ensure we meet
customer demand has also resulted in additional inventory provisioning of
£2.9 million. Our average RRP increase during the period was broadly the same
as last year.
· Cost to sales ratio - at 29% (excluding group profit share)
(2020: 28%) our costs are under control and mainly relate to increases in
staff costs (3% annual pay rise and increases in headcount +27).
· Operating profit pre-royalties receivable - given the tough
comparatives - both value (down £9.3 million to £74.0 million) and profit to
sales ratio (down 8% to 37%) have declined but remain our second highest of
all time.
At actual exchange rates:
· Net cash generated from core business operating activities -
down £28.3 million in the period reported against last year, driven by the
decline in core business operating profit of £14.9 million and outstanding
European VAT receipts following Brexit of £15.1 million. Our constant focus
on managing our balance sheet has ensured our net cash generation remains in
great shape compared to historical levels.
· Major capital projects - to date £2.6 million in capital
projects in the first half, including warehouse and factory investment and our
European ERP system.
· Returns to shareholders - we have declared £32.8 million in
dividends during the period (2020: £26.1 million).
· Foreign exchange differences - the impact on reported operating
profits pre-royalties receivable is an adverse £5.6 million. We don't
actively manage foreign exchange rates and we will continue to report the
impact on our results.
Cash generation - no change in our policy or principles. We have continued to:
· Maintain an appropriate balance sheet to ensure we can maintain
our current level of profits and can withstand any short term setbacks.
· Provide for the safe ongoing operation of our global business
in an ethical way.
· Reinvest to grow sustainably and deliver our strategy.
· Pay regular dividends to our shareholders - we return any
'truly surplus' cash as dividends as and when we have excess cash.
We are not planning any share buybacks or acquisitions.
Key priorities
We have made some good 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.
Customer focused
The Age of Sigmar launch in July was our best fantasy launch to date by a
considerable margin. This saw us unveil the next chapter in the struggle for
the Mortal Realms alongside some fantastic new miniatures. We spearheaded the
launch with a high-end animated trailer, showcasing the Mortal Realms like
never before. This was viewed 28 million times in the period. Sales following
the launch have been strong as this relative newcomer to our offer (it was
launched in 2015) continues to grow in popularity.
Following last year's relaunch we have been revisiting some much loved
factions from our Warhammer 40,000 (40k) universe with Adepta Sororitas, Space
Marines, Orks and Astra Militarum all receiving new models in the period. The
new version of Kill Team, our fast-paced skirmish game set in the 40k
universe, was well received by hobbyists proving its long term place in our
offer. We celebrated this with a high-end animated battle sequence, which
quickly became our most immediately watched piece of content ever with almost
6 million views in the first 14 days.
The 'Imperium' part-work, aimed at those new or returning to the 40k hobby,
was launched in UK newsstands in August. Sales have been ahead of expectations
and launches in other countries are scheduled for the new calendar year.
We have been producing our core products in Mandarin for years using
translation agencies but, in the period, we moved all translation in house to
improve consistency and quality of our offer in this key market.
Although suffering from disruptions in global shipping, there was a steady
flow of new miniatures for our other intellectual properties (IPs) (Blood
Bowl, Necromunda etc) as we continue to provide customers with ever more depth
and choice.
Our epic Horus Heresy novel series is drawing close to its galaxy changing
conclusion. Currently standing at over 7.5 million words, we aren't aware of
a more detailed and in-depth story in any fantasy or science fiction IP.
IP and design studio payroll costs increased by £0.8 million to £5.6
million; as a percentage of sales they have increased by 0.4% to 2.9%.
Community
Supporting these new miniatures, we have continued to put out tens of
thousands of pieces of content across warhammer-community.com and social
channels. As a result, we've more Warhammer fans than ever before. On social,
despite ever more restrictive algorithms from the big players, we're reaching
more people compared to the same period last year. On warhammer-community.com
users are up 15% across all territories. Even more encouraging, our email
marketing is up across all metrics - subscribers, opens, clicks and revenue -
all telling us that we continue to grow and retain an engaged customer base.
Within the period, we launched a range of new initiatives to ensure customer
experience of the Warhammer hobby is better than ever.
With something for every Warhammer fan, our brand-new subscription service
Warhammer+ got off to a great start. In particular, our animation and in-house
shows have been extremely popular, with 2 million views in total across all
shows in just three months. We view Warhammer+ as a 'club' for our most loyal
fans and will look to extend the ways in which we deliver them even more
exclusive content and reward them with exciting new product and service
offers.
With our operations not at full speed and to ensure our customers never missed
the Warhammer releases they really wanted, we introduced a 'pre-order
promise', guaranteeing every fan the chance to purchase the latest releases,
without fear of missing out. This is especially important for a hobby where
collectability lies at the heart of the experience. As we get back to normal
operations this will be pragmatically reviewed.
During lockdown many of our customers missed getting together to roll dice. As
restrictions have eased and the world tentatively returns to normal, the
Warhammer events team went on the road in the US. This effort in kickstarting
a return to in-person events has been a rousing success, with each of our
roadshow events selling out almost instantly, and with live game coverage
broadcast to hundreds of thousands of viewers worldwide. We look forward to
furthering our events programme next year.
Our customers really enjoy user-generated content, and as such we are
committed to supporting fans as they create their own Warhammer-related
events, videos, articles, podcasts etc. To this end, we are in the process of
creating a community outreach team, to work with and support creators and
prominent community members who champion the Warhammer hobby outside of our
own pages and spaces.
We continue to look for more ways to surprise and delight our fans.
Employees
Our performance, as ever, was driven by a considerable team effort across all
aspects of our global, vertically integrated business.
Throughout the past six months, our priority has remained the health, safety
and wellbeing of our staff, their families and our customers. We will always
follow all government guidance and do what we think is right in order to look
after everyone at Games Workshop. Equally as important as our COVID-19 control
measures have been our people and wellbeing initiatives. These include a range
of initiatives across health, mental wellbeing, engagement and personal and
professional development. In just six months we have launched a new global
occupational health and employee assistance programme, mental health awareness
and training, a global new starter induction programme, two paid volunteer
days for the global workforce (from January 2022) and subsidised gym
memberships. We're extremely proud of the progress we've made, but there's
still lots more for us to do.
Training and development remains a key area of focus. We recognise that each
employee, whether they are new to Games Workshop or have been with us for many
years, needs to know what is expected of them in their job and needs to be
given the appropriate support to achieve their performance potential. With
this in mind, we rolled out our new manager training in June, it was well
received. It should ensure, as we grow, we continue to build high performing
teams.
We are committed to ensuring that all staff are paid fairly for the job they
perform and to rewarding our staff for their considerable contribution. We
always manage the business for the long term and aim to get the right mix of
annual pay rises and variable cash rewards. In the last five years we have
increased fixed base pay on average of 3% per year, a total of £20 million
over the period. Over the same period, we have also rewarded staff with a
discretionary payment and group profit share payments of £35 million,
equating to c. £15,000 per staff member on top of their base pay.
Social responsibility and sustainability
Our new head of social responsibility and sustainability will have joined us
by the time you are reading this. This new recruit, we hope, brings with them
a wealth of expertise and experience on this key subject. An area we would
like to see some significant progress on in the years ahead. Working alongside
our departmental heads across the global business, they will be reviewing and
redefining our sustainability action list. Once complete, we intend to
communicate this plan to our shareholders, customers and staff to ensure that
everyone is clear on both our priorities and our progress.
Facilities
Factories
This period has been one of consolidation within our two factories. With staff
health and safety being an ever present priority, we have maintained elements
of social distancing throughout the factories. Despite this, the planned
installation of additional equipment and five more injection moulding machines
was successful. This takes the number of our live injection moulding machines
up to 43. We plan to use them all. The second tool room is fully operational
and has greatly increased our tooling capability. With the renewed focus of a
new small, dedicated team, product innovation remains a key area of focus.
We have created 35 jobs in the period, taking our total number of jobs in our
factories to 432. These additional jobs and the annual pay rise, increased
payroll costs by £1.8 million to £6.3 million; increasing to 3.3% from 2.4%
of Group sales.
Warehouses - North America
Logistics projects have progressed, albeit more slowly than planned, partly
due to COVID-19 restrictions preventing the UK project team from entering the
US. Given these challenges, the progress that has been made has been
remarkable. The new system and technology in our Memphis facility is now
operational, significantly increasing the number of orders we can pick and
pack. The £5 million of back orders at the end of November 2021 will be
cleared by early January, hurray! We now have a team of 71, up 7 in the
period. To ensure we realise the benefits of this investment, the short term
goal is to maintain a full team. The job market in Memphis has been more fluid
than historical trends resulting in some shortages in the period reported.
Warehouses - UK
Development of the technology for the East Midland Gateway (EMG) facility was
consciously slowed to allow greater focus on the delivery of the Memphis
project. Despite that decision, the UK team have continued to use the site to
great effect fulfilling multiple key launches including the summer's Age of
Sigmar launch set and fulfilling all of the factories' component requirements.
All equipment and infrastructure at EMG is now in place and, with Memphis
having recently gone live, focus has switched to the UK 'go live' within the
next six months. The first phase of work to refurbish the original Nottingham
warehouse facility has been completed successfully. This will be our component
warehouse and should be fully operational by May 2022. At full capacity it
will employ 200 people, it currently employs 37.
Total warehousing costs have increased by £2.8 million to £9.7 million; as a
percentage of sales they have increased from 3.7% to 5.0% in line with our
operational plan. This can be better analysed as a new day to day running cost
e.g. staff and facilities costs. We try our best to get the right stock in the
right place at the right time and we have fallen short during the period. The
challenging backdrop, live projects and global disruption, has increased some
of our stock levels more than I would have liked, getting back to the basics
of managing our range and stock levels will be a key area of focus.
Brexit
In the period, we have continued to use the new working arrangements adopted
following the UK's exit from the European Union in January 2021. This has
resulted in additional shipping and freight costs of £2 million in the six
months to 28 November 2021 and is included as part of the £5.6 million
increase in input and carriage cost increases discussed earlier in gross
margin. In addition, from a cash flow perspective, there are delays in the
repayment of VAT from some European tax authorities.
Capital investment
In Manufacturing we have invested £1.8 million in facilities and equipment
and £3.3 million in tooling. In Merchandising and Logistics we have spent
£1.5 million in the period on facilities, racking and IT systems. ERP - we
have made some good progress on implementing our European ERP system and we
are working hard to help achieve the completion of this long and complex
project with £0.5 million incurred in the period.
Non core business - licensing, media and entertainment
Video games
We have again found great successes in licensing Warhammer into computer games
with some world class partners. A number of major video games are due to be
launched in 2022 including Total War: Warhammer 3, Warhammer 40,000: Darktide
and Lost Crusade. Deals have been announced to launch a major online game set
in the Age of Sigmar universe as well as Space Marine 2. We continue to search
for the right long term partners to exploit other IP opportunities: we have
some further exciting plans in development.
Entertainment
In terms of media and entertainment, progress continues and we are delighted
to have signed up a major LA based agency to help us. Eisenhorn is in
development and the subject of discussions with potential distribution
partners. We have made some solid progress in our writers' room and have a
number of further exciting live action and animated projects in development.
We remain ambitious and patient.
Licensing income
Royalties receivable in the period increased by £11.4 million to £20.1
million. This includes £13.7 million (2020: £2.3 million) of guaranteed
royalty income which is recognised on the signing of new licence contracts,
while additional royalty income earned was equal to the prior period at £6.4
million. As always, this income continues to be uncertain and, as we recognise
guaranteed royalty income in full on signing the contract, it is even harder
to predict when further income will be recognised.
Sales
Reported sales grew by 3% to £191.5 million for the period. On a constant
currency basis, sales were up by 6% from £186.8 million to £198.8 million;
split by channel this comprised: Trade £112.8 million (2020: £104.0
million), Retail £43.3 million (2020: £36.9 million) and Online £42.7
million (2020: £45.9 million).
Trade
Trade achieved growth of 4% with growth in all key countries. In the period,
our net number of trade outlets increased by c.500 accounts to 5,900 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. It's also
worth reminding you that our success with our independents is not completely
in our control. The viability of these stores is completely dependent on the
store owner and their choices on what to sell. Our experts offer fantastic
support on product range and advice on the right volumes to ensure we give
them the best chance of success. Most also sell third party products e.g.
collectible cards and board games. We lost 340 accounts in the period which
was broadly in line with long term trends.
The recruitment and retention of EU nationals working in the UK has, as you
would expect, not been easy. We are currently running at 20% vacancies
(compared to normal levels of 10%).
Retail
In the period, we opened, including relocations, four stores. After closing
eight stores, our net total number of stores at the end of the period is 519.
Retail remains a challenging environment, so we are being pragmatic with our
store opening programme. Our stores are improving at different rates, as a
direct consequence of whether they can open or not.
Our Warhammer World store at our HQ in Nottingham has been open for 8 months
now and is trading at pre-COVID levels. Our Warhammer café stores in Dallas
and LA, together with our relocated store on Tottenham Court Road in London,
are also performing well. We hope the second half gives us the opportunity to
once again show our full and unique retail offer and get back to our
face-to-face training sessions.
The majority of our stores are profitable (34 stores are not).
Online
Online sales declined by 10% compared to the same period last year,
maintaining the step change in sales order levels against the prior year is
the plan.
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).
The board has signed off on the first phase of the web store upgrade. The
capital investment is c.£6 million. To date we have spent £0.3 million.
Asia
We continue to make some good progress, hampered a little by the process of
toy safety certification. We had our first external audit which was passed.
Various delays have resulted in a decision to move our new release schedule by
c. 10 weeks to allow us to catch up. Not great for our customers in Asia,
however, without the accreditation our long term growth would be threatened by
legal restrictions. The work on the new Warhammer café store in Shanghai has
also been pragmatically paused to ensure it gets off to the best possible
start. Like all of our other stores, it will be run as a profitable store. We
are hopeful about opening a new café style store in Tokyo in 2022. We have in
the period, increased RRPs by circa 25%, aligning with our global pricing
strategy.
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 top four 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 in the period ahead.
· Digital selling strategy - as sales through our online channel
are over 20% of sales, it is now more important than ever that we have a
robust plan in place which ensures we are making product available to our
customers in a manner consistent with modern consumer expectations/behaviour.
We have approved and started the development work on our new online store. We
are also investing in the support functions to ensure it is delivered on time.
· 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. They are 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. We have recruited a senior manager to document a
realistic plan to make some progress, forever.
Our biggest risk is senior management becoming complacent. I will continue to
do my best to make sure it does not happen.
We consider that COVID-19 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 have proven once again that the Warhammer hobby creates exciting
experiences and allows people around the world to come together and have some
fun. We continue to focus on making the best miniatures in the world and to
document and deliver an exciting operational plan.
I'm mindful of the uncertainty caused by COVID-19 and the expectation of more
growth given our recent performance. To help inform shareholders and followers
of Games Workshop as best we can, we will continue to provide regular updates
to the market. We are pleased to confirm that we continue to trade in line
with expectations and look forward to providing a further update to the market
in due course.
Finally, I'm once again immensely proud of the global teams' performance, the
ongoing support of our customers and those unsung heroes that keep us safe and
well, thank you.
Going concern
After making appropriate enquiries, the directors have a reasonable
expectation that the Group has adequate resources, in light of the level of
cash generation, to continue in operational existence for at least twelve
months from the date of approval of the condensed consolidated interim
financial information. For this reason, they have adopted the going concern
basis in preparing this condensed consolidated interim financial information.
Statement of directors' responsibilities
The directors confirm that this condensed consolidated interim financial
information has been prepared in accordance with IAS 34, 'Interim Financial
Reporting', as adopted by the United Kingdom, and that the interim management
report herein includes a 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 first six months and their impact on the condensed set of financial
statements, and a description of (I) the principal risks and uncertainties for
the remaining six months of the financial year; (ii) material related party
transactions in the first six months and (iii) any material changes in the
related party transactions described in the last annual report. There have
been the following changes to the board since the annual report for the year
to 30 May 2021:
· The resignation of Sally Matthews as non-executive director and
chair of the audit and risk committee from 28 November 2021. The recruitment
process for a non-executive director is underway.
· The retirement of Nick Donaldson as non-executive director from
31 May 2021.
A list of all current directors is maintained on the investor relations
website at investor.games-workshop.com.
By order of the board
Kevin Rountree
CEO
Rachel Tongue
CFO
CONSOLIDATED INCOME STATEMENT
Year to
Six months to Six months to 30 May 2021
Notes 28 November 2021 29 November 2020 £m
£m £m
Revenue 2 191.5 186.8 353.2
Cost of sales (60.2) (45.7) (96.3)
Gross profit 131.3 141.1 256.9
Operating expenses 2 (62.9) (57.8) (121.5)
Other operating income - royalties receivable 20.1 8.7 16.3
Operating profit 2 88.5 92.0 151.7
Finance income 0.1 0.1 0.2
Finance costs (0.4) (0.5) (1.0)
Profit before taxation 4 88.2 91.6 150.9
Income tax expense 5 (17.0) (17.7) (28.9)
Profit attributable to owners of the parent 71.2 73.9 122.0
Basic earnings per ordinary share 6 217.2p 226.1p 372.7p
Diluted earnings per ordinary share 6 216.6p 224.0p 370.5p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE
Six months to Six months to Year to
28 November 2021 29 November 2020 30 May 2021
£m £m £m
Profit attributable to owners of the parent 71.2 73.9 122.0
Other comprehensive income
Items that may be subsequently reclassified to profit or loss
Exchange differences on translation of foreign operations 1.8 (1.6) (3.1)
Other comprehensive income/(expense) for the period 1.8 (1.6) (3.1)
Total comprehensive income attributable to owners of the parent 73.0 72.3 118.9
The following notes form an integral part of this condensed consolidated
interim financial information.
CONSOLIDATED BALANCE SHEET
28 November 2021 Restated 30 May 2021
£m 29 November 2020 £m
Notes £m
Non-current assets
Goodwill 1.4 1.4 1.4
Other intangible assets 8 25.7 20.3 23.7
Property, plant and equipment 9 52.9 42.2 49.8
Right-of-use assets 10 46.4 49.7 46.0
Deferred tax assets 10.0 8.9 10.1
Trade and other receivables 11 15.2 7.1 6.3
151.6 129.6 137.3
Current assets
Inventories 33.8 19.6 27.5
Trade and other receivables 11 53.5 25.5 30.6
Current tax assets 0.1 0.3 1.1
Cash and cash equivalents 88.6 96.5 85.2
176.0 141.9 144.4
Total assets 327.6 271.5 281.7
Current liabilities
Lease liabilities (8.1) (8.8) (8.6)
Trade and other payables (42.7) (31.7) (35.4)
Current tax liabilities (0.4) (4.5) (0.1)
Provisions for other liabilities and charges (0.6) (0.5) (0.6)
(51.8) (45.5) (44.7)
Net current assets 124.2 96.4 99.7
Non-current liabilities
Lease liabilities (39.5) (41.4) (38.4)
Other non-current liabilities (0.6) (0.6) (0.6)
Provisions for other liabilities and charges (1.8) (1.8) (1.7)
(41.9) (43.8) (40.7)
Net assets 233.9 182.2 196.3
Capital and reserves
Called up share capital 1.6 1.6 1.6
Share premium account 16.3 14.4 14.5
Other reserves 3.9 3.6 2.1
Retained earnings 212.1 162.6 178.1
Total equity 233.9 182.2 196.3
Comparative financial information for right-of-use assets, non-current lease
liabilities and current lease liabilities has been restated. See note 10 for
further information.
The following notes form an integral part of this condensed consolidated
interim 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 2021 and 31 May 2021 1.6 14.5 2.1 178.1 196.3
Profit for the six months to 28 November 2021 - - - 71.2 71.2
Exchange differences on translation of foreign operations - - 1.8 - 1.8
Total comprehensive income for the period - - 1.8 71.2 73.0
Transactions with owners:
Share-based payments - - - 0.6 0.6
Shares issued under employee sharesave scheme - 1.8 - - 1.8
Deferred tax charge relating to share options - - - (0.4) (0.4)
Current tax credit relating to exercised share options - - - 0.3 0.3
Dividends paid to Company shareholders - - - (37.7) (37.7)
Total transactions with owners - 1.8 - (37.2) (35.4)
At 28 November 2021 1.6 16.3 3.9 212.1 233.9
Called up Share premium account Other reserves Retained earnings Total
share capital £m £m £m equity
£m £m
At 31 May 2020 and 1 June 2020 1.6 13.1 5.2 113.8 133.7
Profit for the six months to 29 November 2020 - - - 73.9 73.9
Exchange differences on translation of foreign operations - - (1.6) - (1.6)
Total comprehensive income for the period - - (1.6) 73.9 72.3
Transactions with owners:
Share-based payments - - - 0.5 0.5
Shares issued under employee sharesave scheme - 1.3 - - 1.3
Deferred tax charge relating to share options - - - (0.3) (0.3)
Current tax credit relating to exercised share options - - - 0.8 0.8
Dividends paid to Company shareholders - - - (26.1) (26.1)
Total transactions with owners - 1.3 - (25.1) (23.8)
At 29 November 2020 1.6 14.4 3.6 162.6 182.2
Called up Share premium account Other reserves Retained earnings Total
share capital £m £m £m equity
£m £m
At 31 May 2020 and 1 June 2020 1.6 13.1 5.2 113.8 133.7
Profit for the year 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 paid to Company shareholders - - - (60.5) (60.5)
Total transactions with owners - 1.4 - (57.7) (56.3)
At 30 May 2021 1.6 14.5 2.1 178.1 196.3
The following notes form an integral part of this condensed consolidated
interim financial information.
CONSOLIDATED CASH FLOW STATEMENT
Six months to Six months to Year to
28 November 2021 29 November 2020 30 May 2021
Notes £m £m £m
Cash flows from operating activities
Cash generated from operations 7 76.5 100.0 164.8
UK corporation tax paid (15.3) (13.3) (28.8)
Overseas tax paid (0.5) (2.4) (3.3)
Net cash generated from operating activities 60.7 84.3 132.7
Cash flows from investing activities
Purchases of property, plant and equipment (8.8) (5.2) (17.4)
Purchases of other intangible assets (1.3) (1.2) (2.9)
Expenditure on product development (5.4) (4.3) (9.7)
Interest received 0.1 0.1 0.2
Net cash used in investing activities (15.4) (10.6) (29.8)
Cash flows from financing activities
Proceeds from issue of ordinary share capital 1.8 1.4 1.4
Repayment of principal under leases (5.7) (5.3) (10.9)
Dividends paid to Company shareholders (37.7) (26.1) (60.5)
Net cash used in financing activities (41.6) (30.0) (70.0)
Net increase in cash and cash equivalents 3.7 43.7 32.9
Opening cash and cash equivalents 85.2 52.9 52.9
Effects of foreign exchange rates on cash and cash equivalents (0.3) (0.1) (0.6)
Closing cash and cash equivalents 88.6 96.5 85.2
The following notes form an integral part of this condensed consolidated
interim financial information.
NOTES TO THE FINANCIAL INFORMATION
1. Basis of preparation
The Company is a limited liability company, incorporated and domiciled in the
United Kingdom. The address of its registered office is Willow Road, Lenton,
Nottingham, NG7 2WS.
The Company has its listing on the London Stock Exchange.
This condensed consolidated interim financial information does not comprise
statutory accounts within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year ended 30 May 2021 were approved by the
board of directors on 26 July 2021 and have been delivered to the Registrar of
Companies. The report of the auditor on those accounts was unqualified, did
not contain an emphasis of matter paragraph and did not contain any statement
under either section 498 (2) or section 498 (3) of the Companies Act 2006.
This condensed consolidated interim financial information has not been audited
or reviewed pursuant to the Auditing Practices Board guidance on 'Review of
Interim Financial Information' and does not include all of the information
required for full annual financial statements.
This condensed consolidated interim financial information for the six months
ended 28 November 2021 has been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority and with IAS 34,
'Interim Financial Reporting' as adopted by the United Kingdom. The condensed
consolidated interim financial information should be read in conjunction with
the annual financial statements for the year ended 30 May 2021 which have been
prepared in accordance with IFRSs as adopted by the United Kingdom.
After making appropriate enquiries, the directors have a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. For this reason, they have adopted the
going concern basis in preparing this condensed consolidated interim financial
information.
This condensed consolidated interim financial information was approved for
issue on 11 January 2022.
This condensed consolidated interim financial information is available to
shareholders and members of the public on the Company's website at
investor.games-workshop.com.
The preparation of interim financial information requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities,
revenues and expenses. Actual results may differ from these estimates.
In preparing this condensed consolidated interim financial information, the
significant judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the same as those
that applied to the consolidated financial statements for the year ended 30
May 2021.
Taxes on income in the interim periods are accrued using the tax rate that
would be applicable to expected total annual earnings.
The accounting policies applied are consistent with those of the annual
financial statements for the year ended 30 May 2021, as described in those
financial statements.
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 statements.
2. 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 periods ending 30 May 2021 and 29
November 2020 has been restated to better reflect the structure of the Group.
Manufacturing costs previously reported within the 'Design to manufacture'
segment are now combined with the 'Merchandising and logistics' segment to
create the 'Design, merchandising and logistics' segment. Costs previously
reported within the 'Media and entertainment' segment are now included within
the 'Licensing' segment. The segments previously reported as 'Group' and
'Operations and support' have been combined into a single segment; 'Group,
operations and support'. At 28 November 2021, 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 online 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.
- Online: this includes sales through the Group's global web stores and
digital product sales through external affiliates and subscription sales
through digital platforms.
- Design, manufacturing and logistics: this includes the design
studio (that creates all of the IP and the associated miniatures, artwork,
games and publications), the production facilities, the warehouses, logistics
costs and charges for inventory provisions. This includes adjustments for the
profit in stock arising from inter-segment sales.
- Group, operations and support: this includes the Company's
overheads, support services (marketing, IT, accounting, payroll, personnel,
procurement, legal, health and safety, customer services and credit control)
to activities across the Group and undertakes strategic projects.
- Licensing: this is royalty income earned from third party
licensees after deducting associated licensing costs, including the
development of licensed media.
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. This has been reconciled to
the Group's total profit before taxation below.
The segment information reported to the executive directors for the periods
included in this financial information is as follows:
Six months to Six months to Year ended
28 November 2021 29 November 2020 30 May 2021
£m £m £m
Trade 108.1 104.0 194.8
Retail 41.9 36.9 70.7
Online 41.5 45.9 87.7
Total external revenue 191.5 186.8 353.2
For information, we analyse external revenue further below:
Restated Restated
Six months to Six months to Year ended
28 November 2021 29 November 2020 30 May 2021
£m £m £m
Trade
UK and Continental Europe 44.8 45.9 82.3
North America 47.8 44.6 85.4
Australia and New Zealand 5.7 5.2 10.2
Asia 5.1 4.3 9.0
Rest of world 3.7 2.7 5.6
Black Library 1.0 1.3 2.3
Total Trade 108.1 104.0 194.8
Retail
UK 11.8 7.5 13.3
Continental Europe 9.5 9.8 16.4
North America 16.2 12.9 28.2
Australia and New Zealand 3.2 5.4 10.3
Asia 1.2 1.3 2.5
Total Retail 41.9 36.9 70.7
Online
UK 9.3 11.6 22.2
Continental Europe 8.6 9.4 18.0
North America 14.4 16.2 30.6
Australia and New Zealand 2.5 3.2 5.5
Asia 0.2 0.3 0.5
Rest of world 0.7 0.7 1.3
Digital and apps 5.8 4.5 9.6
Total Online 41.5 45.9 87.7
Total external revenue 191.5 186.8 353.2
Operating expenses by segment are regularly reviewed by the executive directors and are provided below:
Restated Restated
Six months to Six months to Year ended
28 November 2021 29 November 2020 30 May 2021
£m £m £m
Trade 4.9 5.3 9.1
Retail 25.7 25.5 50.2
Online 4.6 3.6 7.5
Design, manufacturing and logistics 1.7 1.9 4.0
Group, operations and support 17.2 14.1 35.0
Licensing 1.3 0.6 1.3
Total segment operating expenses 55.4 51.0 107.1
Share-based payment charge 0.6 0.5 1.2
Profit share scheme and discretionary payment charge 6.9 6.3 13.2
Total group operating expenses 62.9 57.8 121.5
Total segment operating profit is as follows and is reconciled to profit
before taxation below:
Restated Restated
Six months to Six months to Year ended
28 November 2021 29 November 2020 30 May 2021
£m £m £m
Trade 3.5 3.4 6.4
Retail 1.6 1.4 2.8
Online 1.4 1.5 2.6
Design, manufacturing and logistics 88.6 98.6 175.3
Group, operations and support (17.9) (14.2) (36.0)
Licensing 18.8 8.1 15.0
Total segment operating profit 96.0 98.8 166.1
Share-based payment charge (0.6) (0.5) (1.2)
Profit share scheme and discretionary payment charge (6.9) (6.3) (13.2)
Total group operating profit 88.5 92.0 151.7
Finance income 0.1 0.1 0.2
Finance costs (0.4) (0.5) (1.0)
Profit before taxation 88.2 91.6 150.9
3. Dividends
A dividend of £16.4 million (50 pence per share), declared in the prior
period was paid in the six months to 28 November 2021. Dividends of £13.1
million (40 pence per share) and £8.2 million (25 pence per share) were also
declared and paid in the six months to 28 November 2021. A further dividend of
£11.5 million (35 pence per share) was declared on 18 November 2021 and was
paid on 5 January 2022.
Dividends of £9.8 million (30 pence per share) and £16.3 million (50 pence
per share) were declared and paid in the six months to 29 November 2020. A
further dividend of £19.7 million (60 pence per share) was declared on 7
December 2020 and was paid on 25 January 2021.
4. Profit before taxation
Profit before taxation is stated after charging/(crediting):
Six months to Six months to Year ended
28 November 2021 29 November 2020 30 May 2021
£m £m £m
Depreciation
- Owned property, plant and equipment 5.7 4.3 9.2
- Right-of-use assets 5.5 5.4 11.0
Amortisation 4.2 2.8 6.0
Impairment of computer software - - 0.4
Redundancy costs and compensation for loss of office 0.3 0.5 1.2
Inventory provision creation 3.2 0.9 0.9
Reversal of inventory provisions - (0.8) -
5. Tax
The taxation charge for the six months to 28 November 2021 is based on an
estimate of the full year effective rate of 19.3% (2020: 19.3%). While we
continue to expect a rate above that for a business with activities based
solely in the UK due to higher overseas tax rates, it will be offset by
increased elimination of inter group profit at those same rates.
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 throughout the relevant period.
Six months to Six months to Year ended
28 November 2021 29 November 2020 30 May 2021
Profit attributable to owners of the parent (£m) 71.2 73.9 122.0
Weighted average number of ordinary shares in issue (thousands) 32,786 32,691 32,733
Basic earnings per share (pence per share) 217.2 226.1 372.7
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 relevant period, adjusted for the dilution effect of
share options outstanding at the period end.
Six months to Six months to Year ended
28 November 2021 29 November 2020 30 May 2021
Profit attributable to owners of the parent (£m) 71.2 73.9 122.0
Weighted average number of ordinary shares in issue (thousands) 32,786 32,691 32,733
Adjustment for share options (thousands) 79 297 194
Weighted average number of ordinary shares for diluted earnings per share
(thousands)
32,865 32,988 32,927
Diluted earnings per share (pence per share) 216.6 224.0 370.5
7. Reconciliation of profit to net cash from operating activities
Six months to Six months to Year ended
28 November 2021 29 November 2020 30 May 2021
£m £m £m
Operating profit 88.5 92.0 151.7
Depreciation of property, plant and equipment 5.7 4.3 9.2
Depreciation of right-of-use assets 5.5 5.4 11.0
Impairment of intangible assets - - 0.4
Loss on disposal of property, plant and equipment 0.1 0.2 -
Loss on disposal of intangible assets 0.3 - 0.1
Amortisation of capitalised development costs 3.5 2.2 4.8
Amortisation of other intangibles 0.7 0.6 1.2
Share-based payments 0.6 0.5 1.2
Changes in working capital:
-(Increase)/decrease in inventories (6.6) 1.5 (6.2)
-Increase in trade and other receivables (32.0) (5.9) (10.8)
-Increase in trade and other payables 10.0 0.2 3.1
-Increase/(decrease) in provisions 0.2 (1.0) (0.9)
Net cash from operating activities 76.5 100.0 164.8
8. Other intangible assets
28 November 2021 29 November 2020 30 May 2021
£m £m £m
Net book value at beginning of period 23.7 17.6 17.6
Additions 6.5 5.5 12.6
Disposals (0.3) - (0.1)
Amortisation charge (4.2) (2.8) (6.0)
Impairment - - (0.4)
Net book value at end of period 25.7 20.3 23.7
9. Property, plant and equipment
28 November 2021 29 November 2020 30 May 2021
£m £m £m
Net book value at beginning of period 49.8 42.0 42.0
Additions 8.6 4.9 17.7
Disposals (0.1) - (0.1)
Exchange differences 0.3 (0.4) (0.6)
Depreciation charge (5.7) (4.3) (9.2)
Net book value at end of period 52.9 42.2 49.8
10. Right-of-use assets
Restated Restated
28 November 2021 29 November 2020 30 May 2021
£m £m £m
Net book value at beginning of period 46.0 36.8 36.8
Additions 5.2 19.1 23.0
Disposals - (0.2) (0.5)
Exchange differences 0.7 (0.6) (2.3)
Depreciation charge (5.5) (5.4) (11.0)
Net book value at end of period 46.4 49.7 46.0
The comparative right-of-use assets and corresponding lease liabilities have
been restated to reflect the extension of the lease on our warehouse in
Memphis, US. The lease renewal was signed in the year ending 31 May 2020 but
was not recognised as an addition under IFRS 16. Accordingly, a prior year
adjustment was made during the year ended 30 May 2021 to restate the 2020
balances to their correct amounts. The impact of the adjustment was to
increase right-of-use assets by £4.9 million and increase current lease
liabilities by £0.2 million and non-current lease liabilities by £4.7
million. The impact to the income statement and cash flow statement is below
£0.1million and has therefore not been adjusted. There was no impact on any
period prior to 2020.
11. Trade and other receivables
28 November 2021 29 November 2020 30 May 2021
£m £m £m
Trade receivables 11.4 10.7 7.8
Prepayments and accrued income 14.1 6.8 9.9
Other receivables 28.0 15.1 19.2
Total trade and other receivables 68.7 32.6 36.9
Non-current receivables:
Other receivables 15.2 7.1 6.3
Non-current portion 15.2 7.1 6.3
Current portion 53.5 25.5 30.6
Included within prepayments and accrued income are contract assets relating to
uninvoiced royalty income amounting to £1.3 million (2020: £1.1 million).
Included within other receivables is invoiced royalty income of £26.1 million
(2020: £12.5 million) of which £13.7 million (2020: £5.5 million) is
non-current, being in respect of guarantee instalments due in over one year.
Also included in other receivables is a VAT receivable of £15.5 million
(2020: nil) in respect of outstanding European VAT receipts following Brexit.
12. Seasonality
The Group's monthly sales profile demonstrates an element of seasonality
around the Christmas period which impacts sales in the month of December.
13. Commitments
Capital expenditure contracted for at the balance sheet date but not yet
incurred is £5.8 million (2020: £3.6 million).
14. Related party transactions
There were no material related-party transactions during the period.
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