Games Workshop; final results

Games Workshop; (GAW.L, FTSE Mid 250, Market Cap £1525m, 4694p, 3.3 of JIC Portfolio and 0.0 of JIC Top 10)

Results for the year ended 2ndJune.

Conclusion: The results are slightly better than forecast in its year-end trading update, but I don’t think enough to see upgrades to the current year. The results statement reads well, and it is clear that management is totally focused on growing the core business and increasing shareholder value. It has invested in new manufacturing and warehousing facilities that could support double the current level of sales. Cashflow is robust, and it re-iterates its commitment to distribute excess cash to shareholders. This is a Quality Business, (margins of 30%+ and return on capital of 70%+) which deserves a long-term position in the JIC Portfolio. That is not to say that occasionally the share price will get ahead of itself, which I think it did above 5000p when I reduced a little. It is now 3.3% of the Portfolio (having been 5.0%), and I think my next move will be to add back.

On current forecasts for the year ending 31st May 2020, the shares are on 23.8x and a prospective yield of 2.9%. The dividend is likely to be higher than current forecasts, especially in light of its declaration today of a 30p dividend to be paid in September. I think a dividend of 160p+, giving a yield of 3.4%, is more likely. I would like to see the prospective PE ratio nearer to 20.0x before adding which will either happen due to profits upgrades or the share price drifting down a little more. Happy Holder!

Revenue up 16% to £256.574m and a little ahead of the previously guided £254m.
Pre-tax profits up 9.4% to £81.296m and ahead of previous guidance of “not less than £80m”.
Cash generated from operations of £88.776m, up 7.8% from £82.332m.
Earnings per share of 202.9p up 10.0% from 184.3p.
Dividend per share up 23% to 155p as previously notified.

Kevin Rountree, CEO of Games Workshop, said:

“An amazing set of results – the best year in Games Workshop’s history, so far. You can once again see from these results that our business and the Warhammer Hobby are in good shape. 

The board and I continue to believe that the prospects for the business are good.”

There is then a concise description of the strategy and objectives of the business, its business model and structure and its key performance indicators.

On shareholder value, it is clear “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.”

And also, on its distribution policy: “We return our surplus cash to our owners and try to do so in ever increasing amounts.”

It lays out its key priorities for the coming year which includes focussing on opening 25 more stores in North America and Germany, improving its product range and completing its core IT systems and manufacturing and warehouse project.

It is also looking at leveraging Warhammer by bringing it to TV and animation through new media partners. That could be lucrative.

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