Preliminary Results 2008

RNS Number : 0225A

Games Workshop Group PLC

29 July 2008

 



GAMES WORKSHOP GROUP PLC

PRELIMINARY RESULTS 2008

Games Workshop Group PLC ('Games Workshop' or the 'Group') announces its preliminary results for the year ended 1 June 2008.

Highlights

• Revenue up at £110.3m (2007: £109.5m) 

• Operating profit - pre-exceptional up at £4.9m (2007: £2.2m)

• Operating profit/(loss) at £2.5m (2007: loss £(1.8)m)

• Pre-tax profit/(loss) at £1.1m (2007: loss £(2.6)m)

• Loss per share of 2.4p (2007: 11.2p)

• Dividend per share nil (2007: 4.95p)

Tom Kirby, chairman of Games Workshop, said: 

'We have had a better year. Not as good as we would like, not as good as it will be, but better nevertheless.'

For further information, please contact:

Games Workshop Group PLC	Today only:	01653 618 016
Tom Kirby, chairman	Thereafter:	0115 900 4001
Mark Wells, chief executive		0115 900 4001
Michael Sherwin, finance director		0115 900 4001
Investor relations website	http://investor.games-workshop.com
General website	www.games-workshop.com
Rawlings Financial PR Limited	Tel:	01653 618016
Catriona Valentine

The 2008 annual report, analyst presentation and notice of annual general meeting may be viewed at the investor relations website at the address above.

  FINANCIAL HIGHLIGHTS

	2008	2007
Revenue	£110.3m	£109.5m
Operating profit - pre-exceptional and pre-royalties receivable	£3.2m	£0.8m
Royalties receivable	£1.7m	£1.4m
Operating profit - pre-exceptional	£4.9m	£2.2m
Exceptional items - cost reduction programme	£(2.4)m	£(4.0)m
Operating profit/(loss)	£2.5m	£(1.8)m
Preߛtax profit/(loss)	£1.1m	£(2.6)m
Discontinued operations - loss for the year	£(1.2)m	£(0.3)m
Year end net borrowings	£10.1m	£10.2m
Loss per share	(2.4)p	(11.2)p
Dividend per share	-	4.95p

BUSINESS REVIEW BY THE CHIEF EXECUTIVE

Summary of results - for the year to 1 June 2008

Overview

These results are encouraging. We have maintained our sales in spite of closing 22 Games Workshop Hobby centres, we have re-established sales growth in the UK, the Americas and Asia Pacific, our gross margins remain strong and our cost reduction programme is delivering the overhead reductions we expected. We have begun to work to improve our capital utilisation, in particular our working capital in the UK and US. We also believe that the right managerial and operational steps are being taken in Continental Europe.

The business is in a different place to where it was 12 months ago. Having taken tough decisions and decisive action on costs, we have refocused and redoubled our efforts on maximising the value of our business for its owners. Key to this is our strategy of growing the Games Workshop Hobby profitably throughout the world. To ensure that all of our resources are applied to that strategy, we have divested our peripheral value diluting activities (Sabertooth card games, role-playing games, board games) and entered into a value creating licence agreement with Fantasy Flight to pursue these other opportunities.*

Last year, our chairman Tom Kirby, referred to a 'steely determination in the business to put things right'. That steely determination is embedded in our attitude to costs, to performance and to driving the return on equity capital which we know that this business can generate in the future.  

Sales by channel

The Games Workshop Hobby is supported and promoted by our own Games Workshop Hobby centres, through which 49% of sales were made in 2007/8. As we continue to develop the Hobby, we opened 8 new Hobby centres during the year and closed 22 (of which 16 were unprofitable stores closed as a result of the cost reduction programme), taking our total at the end of May 2008 to 334. We expect to grow the number of Hobby centres each year in the future. Sales are also made through independent retailers and direct, via the internet and mail order. An analysis of sales for 2007/8 by channel is given below:

	2008		2007
Hobby stores	£53.8m	49%	£54.5m	50%
Direct	£13.1m	12%	£12.1m	11%
Independent retailers	£43.4m	39%	£42.9m	39%

Our sales to independent retailers and our direct sales were in growth compared to last year. There was a slight decline in Hobby centre sales following the Hobby centre closures.

Sales by territory

An analysis of sales for 2007/8 for each of the geographical sectors is given below:

	2008	2007	Growth/	Constant
			(decline)	currency
				growth/
				(decline)**
Continental Europe	£41.1m	£43.0m	£(1.9)m	£(4.7)m
UK	£36.8m	£35.4m	+£1.4m	+£1.4m
The Americas	£24.0m	£23.5m	+£0.5m	+£1.0m
Asia Pacific	£8.4m	£7.6m	+£0.8m	+£0.1m

Continental Europe

There are five sales businesses in Continental Europe, responsible for developing sales in France, Germany, Northern Europe, Spain and Italy. At the year end, we had 109 Games Workshop Hobby centres, down from 114 last year as we have closed unprofitable Hobby centres. Our sales have fallen in all but one of these sales businesses, with the exception being Germany which had slight growth. The decline in these businesses mainly came from our sales to independent retailers. We have changed the sales teams servicing the independent retailer channel in all of these businesses.

The changes which we made to the management of this region at the end of last year, when we appointed our most experienced senior manager as head of sales for Continental Europe, are now bringing the right level of focus onto the people and performance issues in these businesses. Once we have achieved the required levels of profitability, we will start opening more Hobby centres in what remains a large and attractive market.

UK

At the end of May 2008, we had 114 Games Workshop Hobby centres in the UK (2007: 118). Adjusted for the impact of Hobby centre closures, the UK Hobby centre chain was in growth in the year, and our sales to independent retailers also improved. This has been a stable and consistent performance throughout the year, which provides evidence of the underlying health of the Hobby in this, our most mature market. We have recently carried out a detailed geo-demographic review of our UK Hobby centre chain which indicates that there are several potential locations for future Hobby centres, which we believe that we can run profitably. We are currently investing in the training and recruitment of staff to enable us to recommence opening new Games Workshop Hobby centres in the UK to maximise the value of our largest business.

The Americas

We have seen healthy growth in the Americas during the year, where we have closed ten unprofitable Hobby centres and opened four new ones, leaving us with 76 (2007: 82). Our sales to independent retailers and through direct channels have also grown. This business is both focused on and investing in selected metropolitan areas where we can cluster our Hobby centres to grow and nurture the Hobby community. Our development plan over the coming years is to recruit and train staff, develop our middle management and deliver great activity through this metropolitan area strategy. This will require continued investment in recruitment and training, as the staff in our Hobby centres are the lifeblood of our business. Our opening programme has continued to shift the emphasis from the more expensive covered shopping mall locations to lower cost and more flexible strip mall locations. This strategy will also support and develop the independent retailer base in these major metropolitan areas. We have also asked Ernie Baker, head of our US business, to take responsibility for our Canadian business as well, ensuring that we have a co-ordinated strategy across the Americas.

Asia Pacific

This territory comprises Australia, New Zealand and Japan. At the year end, we had 35 Hobby centres in the region (2007: 34). Our operations in Australia and New Zealand enjoyed another successful year, led by a strong performance from our Games Workshop Hobby centres. We opened our fourth Hobby centre in Japan at the beginning of the year as we continue our long-term investment in this exciting new market, which cost us £0.5 million this year (2007: £0.5 million). The initial indications remain promising and we have recently opened our fifth Hobby centre in Japan.

Forge World

This small but highly profitable specialist resin model business enjoyed a successful year with sales of £2.7 million (2007: £2.1 million). Forge World designs and develops large and highly detailed models, mainly from the Warhammer 40,000 universe, which appeal to some of our most experienced Hobbyists. The success of this business provides further evidence of the depth and enduring popularity of our products.

BL Publishing

Our publishing business, which made sales of £2.8 million this year (2007: £2.2 million), continues to develop as a small but profitable niche publishing portfolio, focusing on fantasy and science fiction titles predominantly set in the Warhammer universe. We see this business as integral to our main wargame business, providing background and depth for our Hobbyists while making a good contribution to Group profits.

Other activities

Sabertooth Games

We announced in February the disposal of the trading activities of Sabertooth Games, our collectible card game business. Having conducted a strategic review of this business, it became clear that we would be unable to generate significant shareholder value from Sabertooth.

Licensing

Our licensing business enables Games Workshop to participate in large attractive markets outside our core competencies. By partnering with a small number of competitively advantaged businesses which are keen to use the intellectual property of our well developed worlds of Warhammer and Warhammer 40,000 to launch their own high quality products, we are able to increase the value to our owners.  

During the year we had in place three licences with publishers of computer games: THQ Inc. for Warhammer 40,000; NAMCO BANDAI Games America Inc. for Warhammer; and Electronic Arts Inc., which is developing a massively multiplayer online role-play game set in the Warhammer world. We understand that this online role-play game (WAR - Warhammer Online: Age of Reckoning) is due to be launched towards the end of 2008.  

In February 2008, we granted a licence to Fantasy Flight Games Inc. for publishing collectible card games, role-playing games and board games. Fantasy Flight has a good track record of making high quality games in these markets.

We expect our licensing income to fluctuate from year to year, depending on the commercial success of the products created by our licensees. We disclose this income separately in our financial results due to the different nature of these revenues, which depend significantly upon what our third party licensees are doing in their markets rather than upon the actions of Games Workshop itself. However, we are confident we have selected strong partners in each market and have given ourselves the opportunity of a good income stream from each licence.  

Cost reduction programme

Our cost reduction programme, announced in May 2007, has three key areas:

• Closing loss-making Hobby centres

• Rationalisation of the manufacturing and supply chain

• Removal of unnecessary duplication of back office functions

We have closed 18 unprofitable Hobby centres, where either the low sales or the high rents meant that we could not envisage generating an economic profit during the remaining term of the lease. Eight of these were in the Americas, five in the UK, four in Continental Europe and one in Asia Pacific, and we have also recognised the costs of a further 15 Hobby centres where we are actively engaged in negotiating the closure of these stores. This programme is succeeding in its objective of removing both value destroying activities and a significant management distraction from our sales businesses. 

We have closed our tool making facility at Wisbech, UK and this activity has been relocated to our Nottingham site. The Nottingham toolroom is now fully operational, and we expect to realise significant efficiency gains from this consolidation of our manufacturing and design capabilities. 

We have completed the removal of the former divisional management structures and established service centres in Nottingham to remove unnecessary duplication of back office functions. The service centres support the IT, accounting, HR, production planning and supplier development functions across the majority of the Group's activities.

In addition, as we announced in February 2008, we have included £1.2 million of costs (including disposal of goodwill of £0.9 million) associated with the disposal of the trading activities of Sabertooth Games, our collectible card games business.

This cost reduction programme has created a leaner and more responsive organisation, better equipped to face the growth opportunities which lie before it. 

The costs associated with this programme are shown as exceptional costs, which amounted to £3.6 million in the year. We still expect the cost reduction programme to result in annualised cost reductions of £7 million, of which £5 million have been achieved during the 2007/8 year.

Capital management programme

With the objective of maximising the value of Games Workshop, we are increasing our focus on the management of capital. We have implemented a number of initiatives this year which will improve the return on capital which we expect to receive from each Hobby centre.  

Our programme to improve inventory management has been rolled out across both our UK and our US Hobby centres during the year, and we now have automated inventory replenishment operating in both of these chains. This will enable us to manage our range, reduce our stockholding and improve inventory availability of our fastest moving lines for our Hobby centre customers. 

We have also introduced simple computer terminals in our UK and US Hobby centres. This will allow Hobbyists to access the full Games Workshop inventory online, thereby increasing customer satisfaction and sales, while allowing us to carry the optimal retail range in each Hobby centre - helping us to ensure we manage our capital well.

These initiatives are not only important for our existing portfolio, but will also ensure that as we grow the Games Workshop Hobby throughout the world, we do so with Hobby centres which we can be confident generate a good return.

Our return on average capital employed has strengthened during the year to 12% as set out below:

Return on average capital employed ***

2008	12%
2007	5%
2006	10%
2005	35%
2004	59%

Risks facing the business

We have a formal risk reporting process as part of our annual planning cycle, which is linked into the internal and external audit process, but the management of these risks is an integral part of our daily management process. Our management structure and the reporting systems which we have developed make this process transparent and accountable. The head of sales of each business is responsible for growing the value of his business in each country and for managing market facing risk; the head of operations is responsible for minimising the economic costs of production and risks inherent in that; the head of finance is responsible for using our intellectual property appropriately, for managing corporate risks and for ensuring we comply with the regulatory environment.  

Amongst the costs of production risks are those relating to input prices. The cost of raw materials, such as metal and plastic, represents no more than 5% of our sales and therefore we do not believe that the price volatility of these inputs represents a significant threat to our long-term profitability. In the short term our buying team continues to work to minimise these risks and the people in our manufacturing and supply functions continue to seek process efficiencies to offset any cost impact. However, the recent increases in the price of both metal and plastic have been significant, and we will take action to protect our gross margins.

The main source of risk to this business remains management error. This is one of the reasons why management recruitment, development and succession planning are so important, and this is why we will continue to invest in our internal Academy which is our 'people development' function. It is also why we have recently embarked upon a comprehensive succession planning exercise across all of our businesses for the first time. This will become a key management tool, revised and updated each year.

Dividend

We used the cash which would have otherwise been applied in paying dividends in the 2007/8 financial year to finance the cost reduction programme described above. In 2008/9 we will reduce the level of borrowings and we will not pay dividends. We will continue to keep under review the restoration of dividends as the business resumes its growth profile.

Prospects

Having successfully completed our cost reduction programme, our energies are now focused upon returning the business to profitable growth. We believe that the sales declines of the last three years have been arrested and that the business has stabilised. Three of our four territories have grown in 2007/8 and our management effort is clearly targeted upon the fourth territory, Continental Europe. We have a number of initiatives in place that will improve our return on capital as we grow.

We remain confident that our ability to return to a position where we generate significant value for our owners is simply a matter of time and hard work. Our confidence is based upon the following four fundamentals:

1. We are strongly advantaged in our niche market

We make the best fantasy miniatures and games in the world and have developed two of the strongest fantasy and science fiction universes anywhere. Our investment in tooling and production allows us to make plastic miniatures which offer incredible quality and great value for money for Hobbyists while delivering healthy margins to Games Workshop for further product development. 

Our investment in Games Workshop Hobby centres means that we are able to show people how to collect, paint and play with our miniatures and games and sustain their commitment long after their initial introduction. Hobby centres are at the heart of our marketing and also generate around half our sales.

2. We have good growth prospects

We continue to see Games Workshop as a growth business. Between 2002 and 2005 our sales were above our normal growth line. We believe that it is only a matter of time before we re-establish our historic linear growth rate.

The table below shows our sales per capita in our key sales markets, based upon our 2007/8 sales and the population statistics for each country. In the long term we see no reason why we shouldn't achieve similar levels of sales penetration in each of these markets to those which we currently have in the UK. Achieving this would at least treble the current level of our sales.

Sales per capita by geographical area:

UK	51p
Asia Pacific	36p
Continental Europe	15p
The Americas	10p
Japan	0p

Source: Population information is sourced from the 2007 World Population Data Sheet of the Population Reference Bureau. Sales volumes are shown by geographical territory as defined above.

This is not a sales forecast but a rough indication of the potential sales of Games Workshop.

3. We are fundamentally cash generative

We have come to the end of our capital investment programme, which leaves the business seriously well invested and capable of manufacturing and delivering products to a growing customer base. As we grow sales we should see strong cash flows as these volumes go through our manufacturing and distribution facilities, allowing us to pay off our borrowings, continue to reinvest in our business and distribute free cash flow to owners. 

4. We have great people

Whatever we say in this report and whatever plans we have for the future, the success of Games Workshop is all down to people. So the key question that every owner needs an answer to is simply this - does Games Workshop have good people? 

At the end of this year, I can honestly say that Games Workshop has much better people than we had a year ago. In slimming down our workforce, we have chosen to keep those people with whom we can build this business. These are good people who will work hard and will put the company first.  

We have also proactively removed people who did not fit with our management culture. While their skills will be missed, the team which remains is stronger and more united than before. Those of us who remain believe passionately in this business and its prospects.  

We have learned some tough lessons these past few years and all of us are better people for it. We know what is important and what isn't. And we are more focused and clear on what we have to do than ever. 

The ultimate measure of how good we are is that we deliver. This team delivered on our promises this year. This is a good start. And that is what we are committed to do every year. 

The board remains confident in the future growth and profitability of the Group and believes the Group will create significant shareholder value over time.

Mark Wells

Chief executive

28 July 2008

* Following the disposal of our card games (including collectible card games), role-playing games and board games activities during the year, these activities have been reclassified in this preliminary announcement as discontinued operations.

** Constant currency growth is calculated by comparing sales in the underlying currencioes for 2007 and 2008, both converted at the 2007 average exchange rates.

*** We use average capital employed to take account of the significant fluctuation in working capital which occurs as the business builds both inventories and trade debtors in the pre-Christmas period. Return is defined as pre-exceptional operating profit, and the average capital employed is adjusted by deducting assets and adding back liabilities in respect of cash, borrowings, exceptional provisions, taxation and dividends.

CONSOLIDATED INCOME STATEMENT

			Restated
		52 weeks to	53 weeks to
		1 June 2008	3 June 2007
	Notes	£000	£000
Revenue	3	110,345	109,501
Cost of sales		(33,731)	(31,918)
Gross profit		76,614	77,583
Operating expenses		(75,798)	(80,790)
Other operating income - royalties receivable		1,736	1,423
Operating profit/(loss)	3	2,552	(1,784)
Operating profit - pre-exceptional items and pre-royalties receivable		3,181	821
Exceptional items - cost reduction programme		(2,365)	(4,028)
Royalties receivable		1,736	1,423
Finance income		425	326
Finance costs		(1,918)	(1,110)
Profit/(loss) before taxation		1,059	(2,568)
Income tax expense	5	(613)	(622)
Profit/(loss) for the year from continuing operations		446	(3,190)
Discontinued operations
Loss for the year from discontinued operations	10	(1,186)	(291)
Loss attributable to equity shareholders		(740)	(3,481)
Basic loss per ordinary share	4	(2.4)p	(11.2)p
Diluted loss per ordinary share	4	(2.4)p	(11.2)p
Basic earnings/(loss) per ordinary share - continuing operations	4	1.4p	(10.3)p
Diluted earnings/(loss) per ordinary share - continuing operations	4	1.4p	(10.3)p

The restatement of the prior period results is to reflect the reclassification of certain costs from cost of sales to operating expenses following the establishment of the service centres (2007: £787,000). There are also reclassifications from cost of sales (2007: £216,000) and operating expenses (2007: £226,000) to revenue following the standardisation of trading terms to independent retailers within Europe. Although these reclassifications are not material, they are being reclassified to aid comparison to the current year.

The restatement also relates to the reclassification of the results of the card games, role-playing games and board games activities from continuing operations to discontinued operations.

STATEMENT OF RECOGNISED INCOME AND EXPENSE

	52 weeks to	53 weeks to
	1 June 2008	3 June 2007
	£000	£000
Loss attributable to equity shareholders	(740)	(3,481)
Exchange differences on translation of foreign operations	1,626	(614)
Cash flow hedges:
- fair value losses	(940)	(88)
- transferred to the income statement	88	(86)
Net investment hedge	(737)	-
Tax on items recognised directly in equity	237	52
Total recognised expense for the year	(466)	(4,217)

  CONSOLIDATED BALANCE SHEET

		As at	As at
		1 June 2008	3 June 2007
	Notes	£000	£000
Non-current assets
Goodwill		1,433	2,390
Other intangible assets		6,059	4,963
Property, plant and equipment		26,422	27,986
Trade and other receivables		1,234	1,204
Financial assets - derivative financial instruments		14	-
Deferred income tax assets		3,005	2,314
		38,167	38,857
Current assets
Inventories		10,392	11,260
Trade and other receivables		9,870	8,351
Assets held for sale		464	-
Current tax assets		854	1,056
Financial assets - derivative financial instruments		17	24
Cash and cash equivalents		7,723	6,103
		29,320	26,794
Total assets		67,487	65,651
Current liabilities
Financial liabilities - borrowings		(2,791)	(6,461)
Financial liabilities - derivative financial instruments		(1,401)	(120)
Trade and other payables		(15,351)	(13,889)
Current tax liabilities		(222)	(38)
Provisions		(1,155)	(3,225)
		(20,920)	(23,733)
Net current assets		8,400	3,061
Non-current liabilities
Financial liabilities - borrowings		(15,001)	(9,820)
Other non-current liabilities		(723)	(958)
Provisions		(1,317)	(1,283)
		(17,041)	(12,061)
Net assets		29,526	29,857
Capital and reserves
Called up share capital	7	1,556	1,556
Share premium account	7	7,822	7,822
Other reserves	7	(321)	(1,210)
Retained earnings	7	20,469	21,689
Total shareholders' equity	7	29,526	29,857

CONSOLIDATED CASH FLOW STATEMENT

		52 weeks to	53 weeks to
		1 June 2008	3 June 2007
	Notes	£000	£000
Cash flows from operating activities
Cash generated from operations	9	11,097	10,341
UK corporation tax received/(paid)		6	(503)
Overseas tax paid		(418)	(1,345)
Net cash from operating activities		10,685	8,493
Cash flows from investing activities
Purchases of property, plant and equipment		(5,705)	(5,813)
Proceeds on disposal of intangible assets		44	-
Proceeds on disposal of property, plant and equipment		50	13
Purchases of other intangible assets		(1,557)	(951)
Expenditure on product development		(2,266)	(2,937)
Interest received		415	336
Net cash from investing activities		(9,019)	(9,352)
Cash flows from financing activities
Proceeds from borrowings		5,189	2,908
Repayment of principal under finance leases		(10)	(41)
Equity dividends paid		-	(5,904)
Interest paid		(1,681)	(1,113)
Net cash from financing activities		3,498	(4,150)
Effects of foreign exchange rates		124	(107)
Net increase/(decrease) in cash and cash equivalents		5,288	(5,116)
Opening cash and cash equivalents		(344)	4,772
Closing cash and cash equivalents	8	4,944	(344)

  NOTES TO THE PRELIMINARY RESULTS

1. The consolidated financial statements of Games Workshop Group PLC are prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations, that are adopted by the European Union and with those parts of the Companies Act 1985 applicable to those companies reporting under IFRS.  

2. These results for the year to 1 June 2008 together with the corresponding amounts for the 53 weeks to 3 June 2007 are extracts from the 2008 annual report and do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985 (as amended).

The annual report for the year to 1 June 2008, on which the auditors have issued a report that does not contain a statement under section 237(2) or (3) of the Companies Act 1985, will be posted to shareholders on 29 July 2008 and will be delivered to the Registrar of Companies in due course. Copies will also be available from Michael Sherwin, 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 10.00am on 18 September 2008.

The preliminary announcement is prepared in accordance with the Listing Rules of the Financial Services Authority and accounting policies consistent with those used in the 2007 annual report.

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 period 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, 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 provisions and hence in setting the level of the required provisions.

3. Segmental analysis

The Group has one business segment, the Games Workshop Hobby. Geographical segments represent the dominant source and nature of the Group's risk and returns and is therefore provided below as the primary reporting format.

52 weeks ended 1 June 2008

	Continental Europe	United Kingdom	The Americas	Asia Pacific	Rest of the world	Central/ unallocated	Service centres	Design and development	Royalty income	Group
	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000
Continuing
Total gross segment sales by operation	41,139	36,760	24,011	8,435	-	-	-	-	-	110,345
Total gross segment sales by location of customers	43,091	31,056	26,844	9,080	274	-	-	-	-	110,345
Pre-exceptional operating profit/segment result by location of customers	7,648	7,338	610	207	110	(5,235)	(4,532)	(2,965)	1,736	4,917
Exceptional items	(382)	(1,453)	(568)	2	-	-	-	36	-	(2,365)
Operating profit/segment result by location of customers	7,266	5,885	42	209	110	(5,235)	(4,532)	(2,929)	1,736	2,552

Restated

53 weeks ended 3 June 2007

	Continental Europe	United Kingdom	The Americas	Asia Pacific	Rest of the world	Central/ unallocated	Service centres	Design and development	Royalty income	Group
	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000
Continuing
Total gross segment sales by operation	43,026	35,361	23,497	7,617	-	-	-	-	-	109,501
Total gross segment sales by location of customers	45,431	30,245	25,534	8,101	190	-	-	-	-	109,501
Pre-exceptional operating profit/segment result by location of customers	8,922	5,240	(609)	376	97	(5,179)	(4,895)	(3,131)	1,423	2,244
Exceptional items	(800)	(2,084)	(1,120)	(24)	-	-	-	-	-	(4,028)
Operating profit/segment result by location of customers	8,122	3,156	(1,729)	352	97	(5,179)	(4,895)	(3,131)	1,423	(1,784)

During the year to 1 June 2008, service centres were established in the UK which provide support services (IT, accounting, payroll, HR, production planning and supplier development) to activities across the Group. The related costs which had previously been reported as segmental costs, are now separately identified as service centre costs to aid transparency.

Central/unallocated, service centres, design and development and royalty income segment (costs)/income comprise the (costs)/income arising in the United Kingdom that cannot be directly attributed to an individual geographical segment.

4. Earnings/(loss) per share

The calculation of basic earnings/(loss) per ordinary share has been based on profit/(loss) attributable to equity shareholders of £(0.7) million and £0.4 million for continuing operations (2007: £(3.5) million and £(3.2) million for continuing operations) and the weighted average number of shares in issue throughout the year (2008: 31,123,000; 2007: 31,116,000).

Diluted earnings/(loss) per ordinary share is identical to basic earnings/(loss) per ordinary share as there is no dilutive effect of share options.

5. Income tax expense

Continuing operations	2008	2007
	£000	£000
Current taxation
UK corporation tax	56	50
Overseas tax	819	748
Total current taxation	875	798
Deferred taxation	(262)	(176)
Income tax expense	613	622

Continuing operations	2008	2007
	£000	£000
Profit/(loss) before taxation	1,059	(2,568)
Profit/(loss) before taxation multiplied by the standard rate of corporation tax in the UK of 30%	318	(770)
Effects of:
Expenses not deductible for tax purposes	156	393
Recognition of asset held for sale	(148)	-
Movement in deferred tax not recognised	(79)	1,170
Deferred tax on losses now recognised	(400)	-
Changes in tax rates	95	-
Higher tax rates on overseas earnings	348	(36)
Adjustments to tax charge in respect of previous years	323	(135)
Total tax charge for the year	613	622

6. No final dividend is proposed. There were no dividends paid in the year.

7. Consolidated statement of changes in shareholders' equity

				Other reserves				Retained		earnings
	Called up	Share	Capital								Profit
	share	premium	redemption	Translation	Other		Hedging		Treasury		and	Total
	capital	account	reserve	reserve	reserve		reserve		shares		loss	equity
	£000	£000	£000	£000	£000		£000		£000		£000	£000
As at 3 June 2007	1,556	7,822	101	(261)	(1,050)		(62)		(49)		21,800	29,857
Exchange adjustments	-	-	-	1,626	-		-		-		-	1,626
Net investment hedge	-	-	-	(737)	-		-		-		-	(737)
Loss attributable to equity shareholders	-	-	-	-	-		-		-		(740)	(740)
Share-based payments	-	-	-	-	-		-		-		135	135
Shares vested	-	-	-	-	-		-		49		(49)	-
Deferred tax	-	-	-	-	-		237		-		-	237
Cash flow hedges:
- fair value losses in the year	-	-	-	-	-		(940)		-		-	(940)
- transfers to net profit	-	-	-	-	-		88		-		-	88
As at 1 June 2008	1,556	7,822	101	628	(1,050)		(677)		-		21,146	29,526

				Other reserves				Retained		earnings
	Called up	Share	Capital								Profit
	share	premium	redemption	Translation	Other		Hedging		Treasury		and	Total
	capital	account	reserve	reserve	reserve		reserve		shares		loss	equity
	£000	£000	£000	£000	£000		£000		£000		£000	£000
As at 28 May 2006	1,556	7,822	101	353	(1,050)		60		(49)		31,143	39,936
Exchange adjustments	-	-	-	(614)	-		-		-		-	(614)
Loss attributable to equity shareholders	-	-	-	-	-		-		-		(3,481)	(3,481)
Dividends paid	-	-	-	-	-		-		-		(5,904)	(5,904)
Share-based payments	-	-	-	-	-		-		-		42	42
Deferred tax	-	-	-	-	-		26		-		-	26
Current tax	-	-	-	-	-		26		-		-	26
Cash flow hedges:
- fair value losses in the year	-	-	-	-	-		(88)		-		-	(88)
- transfers to net profit	-	-	-	-	-		(86)		-		-	(86)
As at 3 June 2007	1,556	7,822	101	(261)	(1,050)		(62)		(49)		21,800	29,857

8. Analysis of net debt

	As at			As at
	3 June	Cash	Exchange	1 June
	2007	flow	movement	2008
	£000	£000	£000	£000
Cash at bank and in hand	6,103	1,740	(120)	7,723
Current borrowings - bank overdraft	(6,447)	3,424	244	(2,779)
Cash and cash equivalents	(344)	5,164	124	4,944
Non-current borrowings	(9,811)	(5,189)	-	(15,000)
Finance leases	(23)	10	-	(13)
Net debt	(10,178)	(15)	124	(10,069)

9. Reconciliation of profit/(loss) to net cash from operating activities

	2008	2007
	£000	£000
Operating profit/(loss) - continuing operations	2,552	(1,784)
Operating loss - discontinued operations	(1,106)	(291)
Depreciation of property, plant and equipment	6,778	6,925
Net impairment (reversal)/loss on property, plant and equipment	(52)	306
Loss on disposal of property, plant and equipment	210	95
Disposal of goodwill	922	-
Amortisation of capitalised development costs	2,236	2,525
Amortisation of other intangibles	753	720
Net fair value losses on derivative financial instruments	421	88
Share-based payments	135	42
Changes in working capital:
-Decrease in inventories	811	901
-(Increase)/decrease in trade and other receivables	(847)	128
-Increase/(decrease) in trade and other payables	480	(2,326)
-(Decrease)/increase in provisions	(2,196)	3,012
Net cash from operating activities	11,097	10,341

10. Discontinued operations

On 14 February 2008, the Group disposed of the trading activities of Sabertooth Games Inc., our collectible card game business, and entered into a licensing agreement for the publishing of board games, card games and role-playing games with Fantasy Flight Games Inc. The net result of these operations has been presented as a discontinued operation in the Group's income statement for both years.

These operations, which were previously treated as a separate cash-generating unit due to their non-core nature, have been classified as discontinued.

The table below shows the results of the discontinued operations included in the results of the Group in both years:

	52 weeks to	53 weeks to
	1 June 2008	3 June 2007
	£000	£000
Revenue	1,308	1,541
Cost of sales	(514)	(637)
Gross profit	794	904
Operating expenses	(1,900)	(1,195)
Operating loss	(1,106)	(291)
Operating profit/(loss) - pre-exceptional items	86	(291)
Exceptional items	(1,192)	-
Income tax expense	(80)	-
Loss for the year	(1,186)	(291)

 

END

 

 

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