Final Results
Games Workshop Group PLC
31 July 2001
PRELIMINARY RESULTS
Games Workshop Group PLC ('Games Workshop' or the 'Group') announces its
preliminary results for the year ended 3 June 2001.
Highlights
* Turnover at £92.6m (2000: £78.0m) up 19%
* Pre-exceptional operating profit at £11.2m (2000: £10.0m) up 12%
* Pre-exceptional earnings per share of 22.8p (2000: 20.2p) up 13%
* Dividend per share of 10.54p (2000: 9.91 p) up 6%
* The Hobby continues to grow from strength to strength
* Encouraging sales growth in all territories
* Restructuring programme nearing completion
* Continued strong cash generation
* Share buy-back programme to commence
Tom Kirby, Chairman and Chief Executive, said: 'These results confirm that
the long term organic sales growth trends, which have been a consistent
feature of this business, are continuing. The directors firmly believe the
prospects for the business are very good.'
For further information, please contact:
Games Workshop Group PLC Today: 01756 770 376
Tom Kirby, Chairman and Chief Executive Thereafter: 0115 916 8100
Mike Sherwin, Finance Director
Rawlings Financial PR Limited Tel: 01756 770 376
John Rawlings
Catriona Valentine
FINANCIAL HIGHLIGHTS
2001 2000
Turnover £92.6m £78.0m
Pre-exceptional operating profit £11.2m £10.0m
Operating profit £9.4m £6.7m
Pre-tax profit £9.4m £6.5m
Year end net funds £9.0m £2.2m
Pre-exceptional earnings per share 22.8p 20.2p
Earnings per share 18.4p 11.4p
Dividend per share 10.54p 9.91p
CHAIRMAN'S STATEMENT
Our core business
I am delighted to report the key message which underpins these results: the
Games Workshop Hobby, which is the heart of all of our business activities,
continues to grow from strength to strength.
Our core market remains model soldiers, and the demand from our customers
during the period confirms that we have a great product portfolio. Our design
studio continues to support our core game systems, Warhammer Fantasy Battle
and Warhammer 40,000 with new armies and characters, constantly improving and
refreshing the gaming experience. We also continue to develop diverse and
exciting specialist games which add new dimensions to the Hobby - this year we
launched the Inquisitor game, which has appealed to many of our more
experienced gamers.
In the coming year we have an opportunity to add to our existing games. The
exclusive worldwide tabletop wargames licence for the Lord of the Rings films
gives us another product range to exploit our unparalleled skills in making
and selling model soldiers.
Results
These results confirm encouraging sales growth in all territories, and in
particular the Americas where we see great potential for future development.
Our profit growth continues to be underpinned by strong cash generation, and
we have £9.1m of cash in the balance sheet. From this position of financial
strength we are seeking approval to begin a share buy-back programme of up to
15% of the shares in issue. We believe that this programme will enhance
shareholder value.
Operations
The plan to restructure our manufacturing and supply chain is now nearing
completion - both on time and within budget. This leaves us in a more robust
position to take advantage of the market opportunities we are creating. As
our sales operations grow in confidence that their supply of product is
assured, their efforts are now aligned on Hobby development.
There will be further exploitation of our existing intellectual property, and
we have signed various deals which will yield an income stream over time.
This includes the development project of an online game set in the Warhammer
fantasy world.
Management
Since my return to an executive position, I have been impressed by the
management team which now has a healthy blend of experience and Hobby
enthusiasm, and I am confident that it has the skills required to deliver our
future growth.
Workforce
One of our key strengths is the hard core of committed gamers who make up the
majority of our staff. Despite a couple of tough years, their faith, like
mine, never wavered and they are now delivering results they should be very
proud of, as I am proud of them.
Future prospects
These results confirm that the long term organic sales growth trends, which
have been a consistent feature of this business, are continuing. The
directors firmly believe the prospects for the business are very good.
T H F Kirby
Chairman and Chief Executive
REVIEW OF OPERATIONS
Sales
The Hobby continues to grow from strength to strength, continuing to generate
consistent, organic, year-on-year sales growth.
Sales by channel
The sales growth has been strongest in those channels which we control, direct
(mail order and internet) and GW stores, which further underlines the strength
of the Hobby when marketed by our uniquely skilled and enthusiastic staff.
In response to this trend we are increasingly adopting a more integrated
approach to marketing the Games Workshop Hobby in our major territories. We
are breaking down the barriers between the channels by giving our sales
managers responsibility for all sales in their geographical area. This
encourages them to use their staff to support not only the GW stores and
direct sales operations, but also to support and assist our independent
customers with training, Hobby demonstrations and other marketing activities.
This new approach of 'territory management' is currently being trialled in
both the UK and the Americas.
Sales by territory
We have achieved encouraging sales growth in all territories. The table below
shows the sales by territory and the underlying constant currency growth after
eliminating the effect of exchange rate variations:
United Kingdom £33.7 million up 17%
Continental Europe Euro 35.7 million up 18%
The Americas US $ 46.0 million up 17%
Asia Pacific Aus $ 14.8 million up 7%
The Americas
Our growth in the Americas is driven primarily by sales to independent
retailers which account for 66% of turnover (2000: 70%). We have opened three
new stores in the year taking the total to 37. Our plan for the current year
is to accelerate the opening programme. Direct sales have grown by an
impressive 39%, with our internet turnover growing by over 75%. Over the
coming two years we will be investing in the infrastructure of this business
to ensure that the new territory management structure enables the American
business to maximise its great potential.
UK
Our UK sales have grown during the year due to the stabilisation and
improvement of the GW store chain which represents 61% of turnover (2000: 60%)
with 120 stores. This turnaround has been achieved by the new management team
in the UK business which has ensured that our sales activities in the stores
have been appropriately focused on building the Hobby with the right
customers.
Continental Europe
Our sales in Continental Europe have moved ahead in all countries with double
digit constant currency growth. We opened five new stores taking the total to
61. At the beginning of the year we relocated our German sales operation,
which had previously been run as a remote function from the UK, to Dusseldorf
so that this business can now take advantage of proximity to market to realise
its growth potential. We expect Germany to outstrip France as our largest
Continental European sales business.
Asia Pacific
Our sales in Asia Pacific are mainly in Australia with a presence in New
Zealand and Hong Kong. We opened two stores in Australia and closed one in
Hong Kong. The Australian business enjoyed double digit sales growth in
constant currency.
Restructuring - manufacturing and supply chain
In January 2000, we began a programme of restructuring our vertically
integrated manufacturing and supply chain to simplify and remove unnecessary
complexity, and to improve the supply of product to our sales operations. The
restructuring plan is now nearing completion - on time and within budget.
During the year we have introduced multi-lingual packaging to our core product
lines, consolidated most of our European logistics activities into a central
warehouse and introduced a third party outsourced warehousing operation in the
Americas. We have also made significant improvements to our factory layout
and our manufacturing processes. We remain confident that the benefits of
this major overhaul of our supply chain will underpin the profitability of the
business as it continues to expand in the future.
Management team
The business is run on a day to day basis by an executive team which comprises
the chief executive, three functional heads (design, production, finance) and
the three senior sales managers in the Group. This group meets weekly and
ensures the prompt communication of both strategic and operational issues to
the front line managers of each business. As communication and collegiate
working are key to achieving our business objectives, members of the executive
team travel regularly to our various sales operations around the world.
Lord of the Rings - exclusive worldwide licence
We have secured the exclusive rights from New Line Cinema to design,
manufacture and retail fantasy tabletop wargames based on its eagerly awaited
film trilogy. We believe that there is great potential to create premium
products that will appeal to both existing and new gamers everywhere. We have
established a dedicated team which is co-ordinating our activity in connection
with this project which will last for a minimum of five years.
Other exploitation of Games Workshop intellectual property
There will be further exploitation of our existing intellectual property into
areas which are an extension of our core model soldier business.
Following the year end, we have established a 72% Games Workshop owned company
to create Warhammer Online, a multiplayer online computer game set in the
Warhammer world. Our partner in this venture is Climax, a major UK computer
games developer which owns 23% of the project company. We have also recently
entered a long term computer games licence with THQ, a computer games
publisher, to create and distribute games based on our Warhammer 40,000 world
and imagery. A third recent development is the granting of a licence to
create a collectible card game based on Warhammer 40,000 imagery to Sabertooth
Games Inc.
These three ventures are examples of a more strategic approach to establishing
long term relationships with businesses which understand and share our
appreciation for the Games Workshop intellectual property. We believe that
working in this way we will ensure that our intellectual property is exploited
in an appropriate and sympathetic way with the right level of input from Games
Workshop staff. Over time we expect that these arrangements will yield some
attractive royalty and direct income.
T H F Kirby
Chairman and Chief Executive
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year to Year to
3 June 28 May
2001 2000
£000 £000
Turnover 92,634 77,993
Cost of sales (31,879) (27,261)
------- -------
Gross profit 60,755 50,732
Net operating expenses (51,377) (44,069)
------- -------
Operating profit 9,378 6,663
Continuing operations - pre-exceptional 11,235 10,037
Continuing operations - exceptional items (1,857) (3,374)
Interest receivable 483 390
Interest payable and similar charges (496) (508)
------- -------
Profit on ordinary activities before taxation 9,365 6,545
Taxation on profit on ordinary activities (3,609) (2,983)
------- -------
Profit for the financial year 5,756 3,562
------- -------
Dividends (3,288) (3,100)
------- -------
Profit retained for the financial year 2,468 462
======= =======
Pre-exceptional earnings per ordinary share 22.8p 20.2p
Basic earnings per ordinary share 18.4p 11.4p
Diluted earnings per ordinary share 18.2p 11.2p
Dividend per ordinary share 10.54p 9.91p
All items dealt with in arriving at the profit on ordinary activities before
taxation relate to continuing activities. There is no difference between the
profit on ordinary activities before taxation and the retained profit for the
year stated above and their historical cost equivalents.
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Year to Year to
3 June 28 May
2001 2000
£000 £000
Profit for the financial year 5,756 3,562
Currency translation differences on
foreign currency net investments 238 448
------- -------
Total recognised gains and losses
relating to the year 5,994 4,010
Prior year adjustment 811 -
------- -------
Total gains and losses recognised since
last annual report 6,805 4,010
======= =======
BALANCE SHEETS
Group Company
Restated Restated
As at As at As at As at
3 June 28 May 3 June 28 May
2001 2000 2001 2000
£000 £000 £000 £000
Fixed assets
Goodwill 1,785 1,891 - -
Tangible assets 14,897 15,365 - -
Investments 455 122 18,341 18,008
------- ------- ------- -------
17,137 17,378 18,341 18,008
------- ------- ------- -------
Current assets
Stocks 9,233 9,022 - -
Debtors 8,626 7,349 7,060 7,087
Cash at bank and in hand 9,090 5,865 1,297 5,706
------- ------- ------- -------
26,949 22,236 8,357 12,793
Creditors: amounts falling
due within one year (16,402) (12,491) (8,251) (10,572)
------- ------- ------- -------
Net current assets 10,547 9,745 106 2,221
------- ------- ------- -------
Total assets less current
liabilities 27,684 27,123 18,447 20,229
Creditors: amounts falling
due after more than
one year (20) (3,145) - (3,000)
Provisions for liabilities
and charges (1,401) (500) (299) -
------- ------- ------- -------
Net assets 26,263 23,478 18,148 17,229
======= ======= ======= =======
Capital and reserves
Called up share capital 1,567 1,565 1,567 1,565
Other reserve (418) (495) 7,610 7,533
Profit and loss account 25,114 22,408 8,971 8,131
------- ------- ------- -------
Equity shareholders' funds 26,263 23,478 18,148 17,229
======= ======= ======= =======
CONSOLIDATED CASH FLOW STATEMENT
Year to Year to
3 June 28 May
2001 2000
£000 £000
Net cash inflow from operating activities 17,061 12,606
------- -------
Returns on investments and servicing of finance
Interest received 486 411
Interest paid (495) (493)
Interest paid on hire purchase contracts (18) (17)
------- -------
Net cash outflow from returns on investment
and servicing of finance (27) (99)
------- -------
Taxation
UK corporation tax paid (1,953) (3,388)
Overseas taxation paid (1,273) (1,233)
------- -------
Net cash outflow from taxation (3,226) (4,621)
------- -------
Capital expenditure and financial investment
Purchase of tangible fixed assets (3,515) (4,822)
Sale of tangible fixed assets 45 54
Purchase of own shares (561) (122)
------- -------
Net cash outflow from capital expenditure
and financial investment (4,031) (4,890)
------- -------
Equity dividends paid (3,099) (3,094)
------- -------
Net cash inflow / (outflow) before financing 6,678 (98)
------- -------
Financing
Issue of ordinary share capital 79 454
Repayment of principal under hire
purchase agreements (86) (73)
Repayment of medium term revolving credit
facility (3,000) -
------- -------
Net cash (outflow) / inflow from financing (3,007) 381
------- -------
Increase in cash in the year 3,671 283
======= =======
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
Reconciliation of operating profit to operating cash flow
2001 2000
£000 £000
Operating profit 9,378 6,663
Loss on disposal of tangible fixed assets 21 42
Depreciation of tangible fixed assets 4,134 4,041
Amortisation of goodwill 106 105
Amortisation of own shares 228 -
Exchange movements 231 363
(Increase) / decrease in stocks (211) 239
Increase in debtors (847) (17)
Increase in creditors 3,120 670
Increase in provisions 901 500
------- -------
Net cash inflow from operating activities 17,061 12,606
======= =======
Analysis of net funds
As at As at
28 May 3 June
2000 Cash flow 2001
£000 £000 £000
Cash at bank and in hand 5,865 3,225 9,090
Bank overdrafts (446) 446 -
Debt due after one year (3,000) 3,000 -
Hire purchase agreements (218) 86 (132)
------- ------- -------
Net funds 2,201 6,757 8,958
======= ======= =======
Reconciliation of net cash flow to movement in net funds
Year to Year to
3 June 28 May
2001 2000
£000 £000
Increase in cash in the year 3,671 283
------- -------
Cash outflow from decrease in debt
and lease financing 3,086 73
------- -------
Increase in net funds in the year 6,757 356
Net funds at 28 May 2000 2,201 1,845
------- -------
Net funds at 3 June 2001 8,958 2,201
======= =======
NOTES TO THE ACCOUNTS
1. The calculation of pre-exceptional earnings per ordinary share has been
based on profit for the year of £7.1 million (2000: £6.3 million) being the
profit for the financial year adjusted for the exceptional restructuring costs
and the tax credit thereon. This calculation has been included to enable like
for like comparison with other years where no exceptional costs are charged.
The calculation of basic earnings per ordinary share has been based on profit
for the year of £5.8 million (2000: £3.6 million) and the weighted average
number of shares in issue throughout the year.
The calculation of diluted earnings per ordinary share has been based on
profit for the year and the weighted average number of shares in issue
throughout the year, adjusted for the dilution effect of share options
outstanding at the year end.
2001 2000
Weighted average number of shares:
For basic earnings per ordinary share 31,276,803 31,177,439
Dilution effect of share options 384,302 547,776
---------- ----------
For diluted earnings per ordinary share 31,661,105 31,725,215
========== ==========
2. Taxation on profit on ordinary activities
2001 2000
£000 £000
Current taxation
UK corporation tax 2,769 1,641
Overseas tax 1,151 1,342
------- -------
Total current taxation 3,920 2,983
Deferred taxation (311) -
------- -------
Taxation on profit on ordinary activities 3,609 2,983
======= =======
3. The Group's policy for accounting for deferred tax has changed to
comply with Financial Reporting Standard 19, Deferred Tax. Previously
deferred tax was only provided to the extent that timing differences were
expected to reverse in the future without being replaced. Deferred tax is now
provided in respect of all timing differences that have originated but not
reversed at the balance sheet date where transactions or events that result in
an obligation to pay more tax in the future or a right to pay less tax in the
future have occurred at the balance sheet date.
The effects of the change in policy are summarised below:
Balance sheet £000
Increase in deferred tax asset
and retained earnings
as at 28 May 2000 811
Deferred tax credit in the profit
and loss account for the year 311
Exchange difference (5)
-------
Net deferred tax asset as at
3 June 2001 1,117
=======
The directors consider that the impact of the change in accounting policy on
the tax charge for the current and prior year is not significant.
4. The financial information given above does not constitute the Group's
statutory accounts. Statutory accounts for the years ended 3 June 2001 (53
weeks) and 28 May 2000 (52 weeks) have been reported on without qualification
by Arthur Andersen, the Group's auditors. Statutory accounts for the year
ended 28 May 2000 have been delivered to the Registrar of Companies and the
statutory accounts for the year ended 3 June 2001 will be delivered to the
Registrar of Companies in due course.
5. The Annual Report will be mailed to shareholders on 2 August 2001.
Copies of the Annual Report will also be available from Michael Sherwin, Games
Workshop Group PLC, Willow Road, Lenton, Nottingham NG7 2WS.
6. The proposed final dividend per share of 6.77p will be paid on 2
November 2001 to shareholders on the register at the close of business on 12
October 2001.