Thurday January 16, 2014
“LONDON (Alliance News) - Games
Workshop Group PLC sat firmly on the stock-market losers list Thursday, having
seen almost a quarter wiped off its market value, after the games retailer
reported a huge drop in profits and revenues for the first half of its
financial year.Shares in Games Workshop were the biggest faller on the London All-Share Thursday, down 24% at 548.00 pence per share.”
Many people have been
blogging about this “shocking” event in this post I will show you that this is
the beginning of Games Workshop’s inevitable fall into the dust heap of history.
Six months to 1 December
2013 Six months to 2 December 2012
60.5m 67.5m
So Games Workshop lost 7
million in sales in the 1st half fiscal year of 2014. Considering
the price of a GW miniature that is shocking. So what does GW’s report to
shareholders say about this?
(From the GW financial report
)
“INTERIM MANAGEMENT REPORT
First half performance Sales
in the first half of the year were down against the comparable period in the
prior year, continuing the trend that developed in the second half of 2012/13. During
the first half, the rapid transition from multi-man stores to one-man stores
and the reduction of trading hours across the Group caused disruption in our
retail chain. We also experienced some decline in sales through independent
stockists.
We view these as short term
issues and expect to see growth return in both channels. We continue with our
store opening programme (27 stores opened, 20 closed in the period) secure in
the knowledge that our one man model allows us to insure new openings are
profitable. In the future we expect to benefit from the more focussed selling
operation across all channels against the background of a materially lower cost
base.”
Ok
so GW managements excuse for such a massive loss of sales the change from
mulit-person to one-man retail stores. This is a major reorganization of their
retail operations, and interestingly it removes the cudgel GW has been using to
bludgeon the online retailer out of the GW racket. From now on GW will not be
providing the “hobby content” (painting days, gaming days) that they have been
known for. Now the move to push online retailers out of the GW market is
revealed to be an important part of their sales strategy since a customer will
no longer receive any more value through purchasing a product in a one man
store than they would have on line.
Let’s
take a closer look at the sales figures:
REVENUE BY SEGMENT IN
CONSTANT CURRENCY
Six months to Six Months to
1 December 2013 2 December 2012
UK 13.7m 15.6m
Continental Europe 16.9m 19.6m
North
America 15.6m 18.1m
Australia 4.6m 5.6m
So here you can see that the
independent sales contracts GW has forced upon its independent retailers and
its constant price increases has resulted in loss of sales around the globe. What
does the CEO have to say about this?
Here
is the CEO’s assessment of 2012-13 from the financial report:
“Games Workshop has had a
mixed year. Sales were stronger in the first half than the second, but cost
control and cash management have strengthened throughout the period. We finish
the year with the most profit this company has generated since flotation and
have returned £18.4 million to our owners.”
So
why is GW the things they are doing to their customers? This statement sums up
the direction of Games Workshop quite nicely.
(From
the Chairman’s Preamble of the same report.)
“During the year Mark Wells
left Games Workshop, after more than ten years, five as chief executive, he has
gone to graze in pastures new. His tenure as CEO saw our return on capital
increase from around 10% to over 50%. He is a man who truly understands about
shareholder value and put that understanding into good practice.
Thank you Mark, and good
luck.”
As you can see “a return on
capital” has been and reminds the goal of GW management. The owners of GW want
a huge return on their investment and management is prepared to give it to
them. Take a look at GW’s major investors.
The
Nomad Investment Partnership LP 3,450,545 10.9 % of the company
Investec
Asset Management Limited 3,087,765 9.7 % of the company
Ruffer
LLP 2,492,260
7.9 % of the company
Phoenix
Asset Management Partners Limited 1,865,218 5.9
% of the company
FIL
Limited 1,753,900
5.5 % of the company
Legal
& General 1,683,901
5.3 % of the company
Artemis
Investment Management LLP 1,620,001 5.1 % of the company
Look
these companies up on the web they are all small Hedge Funds, some rather shady
looking like
The Nomad Investment Partnership LP out of the Cayman
Islands, looking to make money for their clients.
If
you take a close look at GW’s revenues you’ll see that they’ve been inflated
with massive price hicks over the last few years.
GW’s
revenue by year.
2013 2012
134.6m 131.0m
2012 2011
131.0m 123.1m
2011 2010
123.1m 126.5m
2010 2009
126.5m 125.7m
2009 2008
125.7m 110.3m
2008 2007
110.3m 109.5m
2007 2006
111.5m 115.2m
2006 2005
115.2m 136.6m
What’s
all this Decline and Fall bull?! This massive revenue loss it the tipping
point, the beginning of the end. I suspect out going CEO Mark Wells new full
well that he brought the company to this point, but them he made millions as did the investors. They have been looting the company, any return even close to 50%
is out right looting.
So now that Mark Wells is
gone things will change for the better right? Wrong! The main driver of GW is
now The Nomad
Investment Partnership LP, the shadowy investment group out of the Cayman Islands. They
have increased their position in GW and are now the dominate board controller.
They want money, but Games Workshop did not declare a dividend this time the dividend
for 2012 was 18p per share and 20p before that. So Expect big price increases
in a few months once the sacking of the majority of retail sales staff fails to
raise the stock price.
Here are the 3 reasons why
GW is on the downward spiral;
1) Price, GW’s marketing department has likened
wargamers to heroin addicts we’ll see our mothers to get a fix. That’s true to
a point and now the point has arrived. Across the globe wargamers have stopped
buying GW not because they don’t want the goodies, but because they literally
can’t afford it anymore.
2) Loss of Standing, GW’s has abandoned the “hobby
center” in favor of a tiny little one man shop. They
are closing down the highly visible high street shops in favor of cheaper
rents. These high street shops where the face of GW and a portal for main
street to enter wargames street. This loss of visibility is immeasurable.
3) Customer Feed Back, GW’s refusal to solicit or even
listen to customer feed back of even the most basic sort has created a profound
disconnect between then and their customers. Even the simplest complaint, no
hobby content in the White Dwarf, is utterly ignored by a company that survives
on discretionary funding. This disconnect not to mention the anger it has
generated among its customers has, and will continue to accelerate its loss of
sales.
Its fall will not be swift
there will be 5-6 more years of falling revenues before GW is forced into
receivership. But receivership is where this company is bound.
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