TIDMGAW
RNS Number : 2864B
Games Workshop Group PLC
09 January 2018
PRESS ANNOUNCEMENT
GAMES WORKSHOP GROUP PLC
9 January 2018
HALF-YEARLY REPORT
Games Workshop Group PLC ("Games Workshop" or the "Group")
announces its half-yearly results for the six months to 26 November
2017.
Highlights:
Six months Six months
to to
26 November 27 November
2017 2016
Revenue GBP108.9m GBP70.9m
Revenue at constant currency* GBP108.6m GBP70.9m
Operating profit pre-change
in accounting estimates
and royalties receivable GBP33.4m GBP9.7m
Impact of change in accounting GBP1.2m GBP0.8m
estimates
Operating profit pre-royalties GBP34.6m GBP10.5m
receivable
Royalties receivable GBP4.2m GBP3.3m
Operating profit and pre-tax GBP38.8m GBP13.8m
profit
Cash generated from operations GBP41.2m GBP19.6m
Basic earnings per share 97.6p 34.0p
Dividend per share declared
in the period 61p 25p
Kevin Rountree, CEO of Games Workshop, said:
"Our business and our Warhammer Hobby are in great shape.
We are pleased to report record sales and profit levels in the
period. It is encouraging that sales and profit growth continue
across all regions and channels. Given the high levels of
operational gearing and our relentless management of our costs, our
improving sales performance has translated into record profit and
cash levels.
Our sales for the month of December have also shown good growth
trends."
...Ends...
For further information,
please contact:
Games Workshop Group PLC 0115 900 4003
Kevin Rountree, CEO
Rachel Tongue, Group Finance
Director
Investor relations website investor.games-workshop.com
General website www.games-workshop.com
*Constant currency revenue is calculated by comparing results in
the underlying currencies for 2016 and 2017, both converted at the
average exchange rates for the six months ended 27 November
2016.
FIRST HALF HIGHLIGHTS
Six months Six months
to to
26 November 27 November
2017 2016
Revenue GBP108.9m GBP70.9m
Revenue at constant currency* GBP108.6m GBP70.9m
Operating profit pre-change
in accounting estimates and GBP9.7m
royalties receivable GBP33.4m
Impact of change in accounting GBP1.2m GBP0.8m
estimates
Operating profit pre-royalties GBP34.6m GBP10.5m
receivable
Royalties receivable GBP4.2m GBP3.3m
Operating profit and pre-tax GBP38.8m GBP13.8m
profit
Cash generated from operations GBP41.2m GBP19.6m
Basic earnings per share 97.6p 34.0p
Dividends per share declared
in the period 61p 25p
Revenue by segment
Six months Six months Six months Six months
to to to to
26 November 27 November 26 November 27 November
2017 2016 2017 2016
Constant Constant Actual Actual
currency currency rates rates
Trade GBP48.0m GBP29.3m GBP48.0m GBP29.3m
Retail GBP39.3m GBP29.2m GBP39.6m GBP29.2m
Mail order GBP21.3m GBP12.4m GBP21.3m GBP12.4m
Operating profit by segment
Six months Six months Six months Six months
to to to to
26 November 27 November 26 November 27 November
2017 2016 2017 2016
Constant Constant Actual Actual
currency currency rates rates
Trade GBP13.1m GBP8.8m GBP13.5m GBP8.8m
Retail GBP1.5m GBP(2.4)m GBP1.8m GBP(2.4)m
Mail order GBP13.6m GBP6.7m GBP13.6m GBP6.7m
Product GBP18.4m GBP6.4m GBP17.9m GBP6.4m
and supply
Royalties GBP3.8m GBP3.0m GBP3.8m GBP3.0m
Other costs GBP(11.9)m GBP(8.7)m GBP(11.8)m GBP(8.7)m
INTERIM MANAGEMENT REPORT
Our business and our Warhammer Hobby are in great shape.
We are pleased to report record sales and profit levels in the
period. It is encouraging that sales and profit growth continue
across all regions and channels. Given the high levels of
operational gearing and our relentless management of our costs, our
improving sales performance has translated into record profit and
cash levels.
Our sales for the month of December have also shown good growth
trends.
These cracking results are built on hard work continuing to
focus on making and selling an ever better range of Warhammer
miniatures. We're proud of the improving trends, but we are not
taking anything for granted, our feet remain firmly on the ground
as we stride into the year ahead. We will continue to focus on the
core values and activities that drive our business. In the second
half of this financial year I will continue to invest appropriately
in my team and facilities to ensure we can deliver our ambitious
operational plans.
One of our key measures of our performance is return on capital.
During the period our return on capital grew from 40% at November
2016 to 119% at November 2017. This was driven by the increase in
operating profit before royalties receivable, offset slightly by an
increase in average capital employed**.
Sales
Reported sales grew by 54% to GBP108.9 million for the period.
On a constant currency basis, sales were up by 53% from GBP70.9
million to GBP108.6 million; split by channel this comprised:
retail GBP39.3 million (2016: GBP29.2 million), trade GBP48.0
million (2016: GBP29.3 million) and mail order GBP21.3 million
(2016: GBP12.4 million).
Customer focused
Key to this sales performance has been our commitment to talking
with our customers. We have a great, global community who are both
loyal and passionate. Over the last six months we have - again -
doubled the number of customers interacting with us on social
media.
We've supported these customers with daily content for
Warhammer: Age of Sigmar and Warhammer 40,000, and increased our
video output to more than one video every day, reaching over
100,000 people per day. We've also continued to develop
warhammer-community.com and created new brand content sites. In the
last six months alone, our content has had 16.3 million views from
2.5 million users, and this increase shows no sign of stopping.
Retail
This channel showed growth in all territories. We opened,
including relocations, 17 stores. After closing 10 stores, our net
total number of stores at the end of the period is 469. The key
priority in the period reported has been to continue to offer our
store managers the appropriate product and sales support to help
them recruit new customers, retain our existing customers and
re-recruit lapsed customers. Recruiting new store managers remains
a key area of focus.
Trade
All key territories achieved growth. In the period, our net
number of trade outlets increased by 199 accounts. In the period
reported we changed our trade terms with our independent accounts
in North America, implementing a minimum advertised pricing policy.
This was implemented on time and as a direct result supported the
growth in this territory in this channel.
Mail order
Sales in our online shops were up 71%. We continue to improve
the online store shopping experience and functionality of the
store. Our new games-workshop.com homepage, our email newsletters
and the personalisation of page content and navigation through our
range online remain an area of focus.
Digital sales
Sales of digital publications through Apple continue to grow, up
22%. In addition, the last six months saw us launch our digital
titles onto Amazon and release our Black Library audio range onto
Audible. The overall effect has been to increase our digital sales.
In addition, this has increased our exposure to new customers and
will help us recruit as we move into next year and beyond.
Operating profit
Operating profit before royalty income increased by GBP23.7
million to GBP33.4 million (2016: GBP9.7 million) before the change
in accounting estimates described below. On a constant currency
basis, operating profit before the change in accounting estimates
increased by GBP23.4 million to GBP33.1 million.
With effect from 30 May 2016 the Group implemented a change in
accounting estimates for the amortisation of development costs
intangible assets and for the depreciation of moulding tools. The
impact of the change for the six months to 26 November 2017 is an
increase in operating profit of GBP1.2 million. The change in
accounting estimates is described in note 2 to this half-yearly
report.
On a constant currency basis, royalty income increased by GBP0.9
million to GBP4.2 million (2016: GBP3.3 million).
Total operating profit increased by GBP25.0 million to GBP38.8
million (2016: GBP13.8 million). The net impact in the six months
to 26 November 2017 of exchange rate fluctuations was a gain of
GBP0.3 million. It is not the Group's policy to hedge against
foreign exchange rate exposure.
Operating expenses increased by GBP5.4 million due to an
investment in sales facing activities relating to new retail store
costs and increased retail variable pay, continued investment in
marketing and IT teams, as well as an increased profit share
payment paid to all employees.
Capital employed
Average capital employed** increased by GBP4.3 million to
GBP46.1 million. The book value of tangible and intangible assets
increased by GBP2.8 million, mainly due to the ongoing investment
in the implementation of a new ERP system and the change in
accounting estimates for development costs and moulding tools.
Whilst trade and other receivables increased by GBP2.2 million,
inventory increased by GBP2.8 million due to the timing of product
launches, provisions decreased by GBP0.3 million and current
liabilities increased by GBP3.8 million.
Cash generation
During the period, the Group's core operating activities
generated GBP33.2 million of cash after tax payments (2016: GBP14.5
million). The Group also received cash of GBP2.8 million in respect
of royalties in the year (2016: GBP3.6 million). After purchases of
tangible and intangible assets and product development costs of
GBP8.4 million (2016: GBP6.8 million), dividends of GBP17.7 million
(2016: GBP8.0 million), proceeds from issue of share capital of
GBP0.9 million (2016: GBPnil) and foreign exchange losses of GBP0.1
million (2016: gains of GBP0.8 million) there were net funds at the
end of the period GBP28.6 million (2016: GBP15.9 million).
Dividends
In the period we paid dividends of 20 pence per share and 35
pence per share (2016: 25 pence) amounting to GBP6.4 million and
GBP11.3 million respectively (2016: GBP8.0 million). Also in the
period a further 6 pence per share, amounting to GBP1.9 million,
was distributed by way of a rectification dividend. The
rectification dividend was satisfied by the release of Company
shareholders from the liability to repay the amount received in the
year ended 28 May 2017 in the form of an unlawful dividend. In
addition, a dividend of 30 pence per share was declared on 13
December 2017 amounting to GBP9.7 million.
Risks and uncertainties
The board has overall responsibility for ensuring risk is
appropriately managed across the Group. As discussed in the 2017
annual report, the top five risks to the Group are reviewed at each
board meeting. The risks are rated as to their business impact and
their likelihood of occurring. In addition, the Group has a
disaster recovery plan to ensure ongoing operations are maintained.
The principal risks for the balance of the year are the same as
those identified in the 2017 annual report and are discussed
below:
ERP change - we are changing our core ERP system in the UK. This
is a complicated project with the risk of widespread business
disruption if it is not implemented well. Our new Global Head of IT
and her team are making steady progress.
Store manager recruitment - this comprises both recruitment of
managers for new stores as well as replacing poor performing
managers. Retail is our primary method of recruiting new customers
and so we need great managers in all our stores. Our new recruiting
website and tools are on track to go live in 2018.
Supply chain - our new mail order warehouse system went live in
September 2017. This is part of an ongoing programme of continuous
improvement for our warehouse systems. We have strengthened the
team with a new Global Head of Logistics joining us in January
2018. In relation to factory capacity, given the step change in our
performance in the last two years we need to ensure we have the
appropriate infrastructure to support the new levels of product
volumes in our vertically integrated business. We are making the
necessary and appropriate investments in factory capacity to manage
these risks.
Range management - we are reviewing our range to ensure that we
are exploring all opportunities. The risk is that we don't fully
exploit all the opportunities that are available to us. We have
strengthened the team and a new Global Head of Merchandising will
be joining us in February 2018.
Distractions - this is anything else that gets in the way of us
delivering our goals.
Games Workshop relies upon the continued availability and
integrity of its IT systems. Our business critical systems are
monitored and disaster recovery plans are in place and reviewed to
ensure they remain up to date. The security of our systems is
reviewed with software updates applied and equipment updated as
required.
We do not consider that we have material solvency or liquidity
risks. We also feel that it is too early to tell what the effects
will be on Games Workshop of the UK Government invoking Article 50
of the Treaty of Lisbon, notifying the European Council of its
intention to withdraw from the European Union.
The greatest risk is the same one that we repeat each year,
namely, management. So long as we have great people we will be
fine. Problems will arise if the board allows egos and private
agendas to rule. I will do my utmost to ensure that this does not
happen.
Going concern
After making appropriate enquiries, the directors have a
reasonable expectation that the Group has adequate resources 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 European Union,
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.
Tom Kirby retired from the board at the 2017 AGM and Nick
Donaldson was appointed as non-executive chairman. There have been
no other changes to the board since the annual report for the year
to 28 May 2017. A list of all current directors is maintained on
the investor relations website at investor.games-workshop.com.
By order of the board
K D Rountree
CEO
R F Tongue
Group Finance Director
9 January 2018
*Constant currency revenue is calculated by comparing results in
the underlying currencies for 2016 and 2017, both converted at the
average exchange rates for the six months ended 27 November
2016.
**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 receivables in the
pre-Christmas trading period. Return is defined as operating profit
before royalty income, and the average capital employed is adjusted
by deducting assets and adding back liabilities in respect of cash,
borrowings, taxation and dividends.
CONSOLIDATED INCOME STATEMENT
Year to
Six months to Six months to 28 May
26 November 2017 27 November 2016 2017
Notes GBP000 GBP000 GBP000
Revenue 3 108,852 70,935 158,114
Cost of sales pre-change in
accounting estimates* (31,103) (22,171) (45,224)
Cost of sales impact of change in
accounting estimates* 1,233 798 1,533
----------------------------------- ------------------- ------------------- ----------- -----------
Cost of sales (29,870) (21,373) (43,691)
---------- ---------- ----------
Gross profit 78,982 49,562 114,423
Operating expenses (44,425) (39,065) (83,591)
Other operating income - royalties
receivable 4,216 3,261 7,491
---------- ---------- ----------
----------------------------------- ------------------- ------------------- ----------- -----------
Operating profit pre-change in
accounting estimates* 37,540 12,960 36,790
Operating profit impact of change
in accounting estimates* 1,233 798 1,533
----------------------------------- ------------------- ------------------- ----------- -----------
Operating profit 3 38,773 13,758 38,323
Finance income 51 29 87
Finance costs (50) - (7)
---------- ---------- ----------
Profit before taxation 5 38,774 13,787 38,403
Income tax expense 6 (7,371) (2,857) (7,856)
---------- ---------- ----------
Profit attributable to owners of
the parent 31,403 10,930 30,547
====== ====== ======
Basic earnings per ordinary share 7 97.6p 34.0p 95.1p
Diluted earnings per ordinary
share 7 96.8p 33.9p 94.5p
Basic earnings per ordinary share
pre-change in accounting
estimates* 7 94.5p 32.0p 91.2p
Diluted earnings per ordinary
share pre-change in accounting
estimates* 7 93.7p 31.9p 90.7p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE
Six months to 26 November 2017 Six months to Year to
27 November 28 May
2016 2017
GBP000 GBP000 GBP000
Profit attributable to owners of the parent 31,403 10,930 30,547
Other comprehensive (expense)/income
Items that may be subsequently reclassified to
profit or loss
Exchange differences on translation of foreign
operations (419) 2,687 2,663
--------- --------- ----------
Other comprehensive (expense)/income for the
period (419) 2,687 2,663
--------- --------- ----------
Total comprehensive income attributable to
owners of the parent 30,984 13,617 33,210
====== ====== =======
The following notes form an integral part of this condensed
consolidated interim financial information.
*With effect from 30 May 2016 the Group implemented a change in
accounting estimates for the amortisation of development costs
intangible assets and for the depreciation of moulding tools. The
change in accounting estimates is described in note 2 to this
condensed consolidated interim financial information.
CONSOLIDATED BALANCE SHEET
As at As at As at
26 November 27 November 28 May
2017 2016 2017
Notes GBP000 GBP000 GBP000
Non-current assets
Goodwill 1,433 1,433 1,433
Other intangible assets 9 14,271 12,824 12,917
Property, plant and equipment 10 24,367 22,112 22,132
Trade and other receivables 1,505 1,413 1,081
Deferred tax assets 4,509 2,881 5,399
---------- ---------- ----------
46,085 40,663 42,962
---------- ---------- ----------
Current assets
Inventories 16,277 11,224 12,421
Trade and other receivables 15,329 11,507 12,976
Current tax assets 513 982 596
Cash and cash equivalents 28,639 15,877 17,910
---------- ---------- ----------
60,758 39,590 43,903
---------- ---------- ----------
Total assets 106,843 80,253 86,865
---------- ---------- ----------
Current liabilities
Trade and other payables (22,622) (16,761) (16,515)
Current tax liabilities (6,579) (2,689) (5,840)
Provisions for other liabilities and charges 11 (757) (838) (689)
---------- ---------- ----------
(29,958) (20,288) (23,044)
---------- ---------- ----------
Net current assets 30,800 19,302 20,859
---------- ---------- ----------
Non-current liabilities
Other non-current liabilities (537) (416) (494)
Provisions for other liabilities and charges 11 (536) (662) (495)
---------- ---------- ----------
(1,073) (1,078) (989)
---------- ---------- ----------
Net assets 75,812 58,887 62,832
====== ====== ======
Capital and reserves
Called up share capital 1,617 1,606 1,607
Share premium account 11,531 10,533 10,599
Other reserves 3,911 4,354 4,330
Retained earnings 58,753 42,394 46,296
---------- ---------- ----------
Total equity 75,812 58,887 62,832
====== ====== ======
The following notes form an integral part of this condensed
consolidated interim financial information.
CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
Called up Share
share premium Other Retained Total
capital account reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
At 28 May 2017 and 29 May 2017 1,607 10,599 4,330 46,296 62,832
Profit for the six months to 26 November 2017 - - - 31,403 31,403
Exchange differences on translation of foreign
operations - - (419) - (419)
---------- ---------- ---------- ---------- ----------
Total comprehensive (expense)/income for the period - - (419) 31,403 30,984
Transactions with owners:
Share-based payments - - - 60 60
Shares issued under employee sharesave scheme 10 932 - - 942
Deferred tax credit relating to share options - - - 279 279
Corporate tax credit relating to exercised share
options - - - 292 292
Dividends paid to Company shareholders - - - (19,577) (19,577)
---------- ---------- ---------- ---------- ----------
Total transactions with owners 10 932 - (18,946) (18,004)
---------- ---------- ---------- ---------- ----------
At 26 November 2017 1,617 11,531 3,911 58,753 75,812
====== ====== ====== ====== ======
Called up Share
share premium Other Retained Total
capital account reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
At 29 May 2016 and 30 May 2016 1,606 10,519 1,667 39,371 53,163
Profit for the six months to 27 November 2016 - - - 10,930 10,930
Exchange differences on translation of foreign
operations - - 2,687 - 2,687
---------- ---------- ---------- ---------- ----------
Total comprehensive income for the period - - 2,687 10,930 13,617
Transactions with owners:
Share-based payments - - - 82 82
Shares issued under employee sharesave scheme - 14 - - 14
Deferred tax credit relating to share options - - - 42 42
Dividends paid to Company shareholders - - - (8,031) (8,031)
---------- ---------- ---------- ---------- ----------
Total transactions with owners - 14 - (7,907) (7,893)
---------- ---------- ---------- ---------- ----------
At 27 November 2016 1,606 10,533 4,354 42,394 58,887
====== ====== ====== ====== ======
Called up Share
share premium Other Retained Total
capital account reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
At 29 May 2016 and 30 May 2016 1,606 10,519 1,667 39,371 53,163
Profit for the year to 28 May 2017 - - - 30,547 30,547
Exchange differences on translation of foreign
operations - - 2,663 - 2,663
---------- ---------- ---------- ---------- ----------
Total comprehensive income for the period - - 2,663 30,547 33,210
Transactions with owners:
Share-based payments - - - 160 160
Shares issued under employee sharesave scheme 1 80 - - 81
Deferred tax credit relating to share options - - - 14 14
Current tax credit relating to exercised share
options - - - 5 5
Dividends paid to Company shareholders - - - (23,801) (23,801)
---------- ---------- ---------- ---------- ----------
Total transactions with owners 1 80 - (23,622) (23,541)
---------- ---------- ---------- ---------- ----------
At 28 May 2017 1,607 10,599 4,330 46,296 62,832
====== ====== ====== ====== ======
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
26 November 27 November 28 May
2017 2016 2017
Notes GBP000 GBP000 GBP000
Cash flows from operating activities
Cash generated from operations 8 41,206 19,621 49,370
UK corporation tax paid (4,602) (1,313) (5,212)
Overseas tax paid (566) (155) (270)
---------- ---------- ----------
Net cash generated from operating activities 36,038 18,153 43,888
---------- ---------- ----------
Cash flows from investing activities
Purchases of property, plant and equipment (4,948) (2,484) (5,409)
Proceeds on disposal of property, plant and equipment 1 - -
Purchases of other intangible assets (927) (1,187) (1,749)
Expenditure on product development (2,554) (3,167) (5,686)
Interest received 51 35 87
---------- ---------- ----------
Net cash used in investing activities (8,377) (6,803) (12,757)
---------- ---------- ----------
Cash flows from financing activities
Proceeds from issue of ordinary share capital 942 14 81
Interest paid (49) - (4)
Loans to Company shareholders - - (1,901)
Dividends paid to Company shareholders (17,676) (8,031) (23,801)
---------- ---------- ----------
Net cash used in financing activities (16,783) (8,017) (25,625)
---------- ---------- ----------
Net increase in cash and cash equivalents 10,878 3,333 5,506
Opening cash and cash equivalents 17,910 11,775 11,775
Effects of foreign exchange rates on cash and cash equivalents (149) 769 629
---------- ---------- ----------
Closing cash and cash equivalents 28,639 15,877 17,910
====== ====== ======
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 28
May 2017 were approved by the board of directors on 24 July 2017
and have been delivered to the Registrar of Companies. The report
of the auditors 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 26 November 2017 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 European Union. The condensed
consolidated interim financial information should be read in
conjunction with the annual financial statements for the year ended
28 May 2017 which have been prepared in accordance with IFRSs as
adopted by the European Union.
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 9 January 2018.
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 28 May
2017.
The accounting policies applied are consistent with those of the
annual financial statements for the year ended 28 May 2017, as
described in those financial statements. With effect from 30 May
2016 the Group implemented a change in accounting estimate for the
amortisation of development costs intangible assets and the
accounting estimate for the depreciation of moulding tools. These
are described in note 2 below along with the impact on the results
for the six months to 26 November 2017.
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual
earnings.
There are no new accounting standards or interpretations
effective in the current period which are relevant to the
Group.
New standards, amendments to standards and interpretations which
have been published but are not yet effective which are relevant to
the Group are:
-IFRS 16 'Leases' (effective for the year ending 31 May 2020).
Under this new standard all leases will be required to be
recognised on balance sheet. Currently under IAS 17 'Leases' only
leases categorised as finance leases are recognised on balance
sheet, with leases categorised as operating leases not recognised.
In broad terms the impact will be to recognise a lease liability
and corresponding asset for the Group's operating lease
commitments. The Group is assessing the impact of the new
standard.
-IFRS 15 'Revenue from contracts with customers' (effective for
the year ending 2 June 2019). Under this new standard the royalty
minimum guarantee income is expected to be taken as revenue up
front. Currently the minimum guarantee income is deferred and
released in line with licensee sales. In addition, amounts
receivable from customers in respect of delivery charges will be
recognised as revenue. Currently these are offset against the
carriage cost to the Group within cost of sales. The Group is
assessing the impact of the new standard and expects to have a
clearer view of the financial impact by the year end.
-IFRS 9 'Financial instruments' (effective for the year ending 2
June 2019). Under this new standard, provisions for impairment of
trade receivables will be recognised at an amount based on expected
credit losses and will be calculated from the initial recognition
of the asset. Currently provisions for impairment of trade
receivables are not recognised until there is an indication of
impairment. The Group is assessing the impact of the new standard
and expects to have a clearer view of the financial impact by the
year end.
The Group does not consider that any other standards, amendments
or interpretations issued by the IASB, but not yet applicable, will
have a significant effect on the financial statements.
2. Change in accounting estimates
With effect from 30 May 2016 the Group implemented a change in
accounting estimates for the amortisation of development costs
intangible assets and the depreciation of moulding tools.
Previously product development costs recognised as intangible
assets were amortised on a straight line basis over periods ranging
between 1 and 48 months. These development costs intangible assets
are now amortised on a reducing balance basis with rates ranging
from 50% to 80%. Previously moulding tools were depreciated on a
straight line basis over a period of 48 months. Moulding tools
relating to specific products are now amortised on a reducing
balance basis at 50%.
The changes were made in order to better match the expenditure
incurred to the expected revenue generated from the subsequent
product release. In accordance with IAS 8 'Accounting policies,
changes in accounting estimates and errors', the changes have been
recognised prospectively since 30 May 2016.
The impact of the change on the results for the six months to 26
November 2017 is shown in the table below:
Impact of change in accounting Total
Pre-change in accounting estimates six months to
estimates 26 November 2017
GBP000 GBP000 GBP000
Cost of sales (31,103) 1,233 (29,870)
Gross profit 77,749 1,233 78,982
Operating profit 37,540 1,233 38,773
Income tax expense (7,137) (234) (7,371)
Profit attributable to owners
of the parent 30,404 999 31,403
Retained earnings brought
forward 45,054 1,242 46,296
Other intangible assets 10,952 3,319 14,271
Property, plant and equipment 24,919 (552) 24,367
Deferred tax assets 4,404 105 4,509
Current tax liabilities (5,948) (631) (6,579)
Net assets 73,571 2,241 75,812
Basic earnings per share 94.5p 3.1p 97.6p
Diluted earnings per share 93.7p 3.1p 96.8p
The impact of the change in accounting estimates in future
periods will depend on the release mix and nature of products being
developed in those years. A benefit relating to the changes in
accounting estimates is expected until the year ending 31 May 2020,
when the change will no longer materially impact the financial
statements.
3. Segment information
As Games Workshop is a vertically integrated business,
management assesses the performance of sales channels and
manufacturing and distribution channels separately. At 26 November
2017, 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 directly 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.
- Mail order. This includes sales through the Group's global web
stores and digital sales through external affiliates.
Product and supply. This includes the design and manufacture of
the products and incorporates the production facility in the UK and
the Group logistics and stock management costs. This also includes
adjustments for the profit in stock arising from inter-segment
sales and charges for inventory provisions.
Central costs. These include the Company overheads, head office
site costs and the costs of running the Games Workshop Academy.
Service centre costs. Provides support services (IT, accounting,
payroll, personnel, procurement, legal, health and safety, customer
services and credit control) to activities across the Group and
undertakes strategic projects.
Royalties. This is royalty income earned from third party
licensees after deducting associated licensing costs.
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, for the year to 28
May 2017, 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 to
26 November 27 November 28 May
2017 2016 2017
GBP000 GBP000 GBP000
Trade 47,961 29,341 61,254
Retail 39,615 29,168 64,848
Mail order 21,276 12,426 32,012
------------- ------------- ------------
Total external revenue 108,852 70,935 158,114
======== ======== =======
For information, we analyse external revenue further below:
Restated*
Six months to Six months to Year to
26 November 27 November 28 May
2017 2016 2017
GBP000 GBP000 GBP000
Trade
UK and Continental Europe 19,652 12,958 25,442
North America 21,345 12,178 27,207
Australia and New Zealand 2,407 1,261 2,472
Asia 2,025 1,109 2,257
Rest of world 1,260 648 1,580
Black Library 1,272 1,187 2,296
------------- ------------- -------------
Total Trade 47,961 29,341 61,254
------------- ------------- -------------
Retail
UK 13,077 10,275 22,474
Continental Europe 10,321 7,869 16,859
North America 10,587 7,141 16,759
Australia and New Zealand 4,586 3,338 7,471
Asia 1,044 545 1,285
------------- ------------- -------------
Total Retail 39,615 29,168 64,848
------------- ------------- -------------
Mail order 21,276 12,426 32,012
------------- ------------- -------------
Total external revenue 108,852 70,935 158,114
======== ======== ========
*Segment revenue of GBP5,915,000 for the six months to 27
November 2016 previously reported as non-core trade has been
reclassified within the trade segment as UK and Continental Europe
(GBP2,542,000), North America (GBP1,047,000), Australia and New
Zealand (GBP128,000), Asia (GBP363,000), Rest of world (GBP648,000)
and Black Library (GBP1,187,000) to reflect the management
structure in place at 28 May 2017 and 26 November 2017.
Segment revenue of GBP1,752,000 for the six months to 27
November 2016 previously reported as non-core retail has been
reclassified within the retail segment as UK (GBP1,648,000), North
America (GBP97,000) and Asia (GBP7,000) to reflect the management
structure in place at 28 May 2017 and 26 November 2017.
In addition mail order segment revenue of GBP2,143,000 for the
six months to 27 November 2016 previously reported as non-core mail
order and GBP10,283,000 previously reported as Citadel and Forge
World are now reported together as Mail order which reflects the
management structure in place at 28 May 2017 and 26 November
2017.
Operating expenses by segment are regularly reviewed by the
executive directors and are provided below:
Restated*
Six months Six months Year to
to to
26 November 27 November 28 May
2017 2016 2017
GBP000 GBP000 GBP000
Trade (5,734) (5,388) (10,855)
Retail (23,020) (21,222) (42,849)
Mail order (2,719) (2,595) (5,290)
Product and supply (1,412) (1,261) (2,618)
Central costs (3,743) (3,143) (6,215)
Service centre costs (6,360) (4,738) (11,824)
Royalties (352) (192) (371)
------------- ------------- -------------
Total segment operating
expenses (43,340) (38,539) (80,022)
Share-based payment charge (60) (82) (160)
Profit share scheme charge (1,025) (444) (444)
Discretionary payment to
employees - - (2,965)
------------- ------------- ------------
Total group operating expenses (44,425) (39,065) (83,591)
======== ======== ========
*Operating expenses of GBP18,000 for the six months to 27
November 2016 relating to certain marketing costs have been
reclassified from product and supply to central costs which
reflects the management structure in place at 28 May 2017 and 26
November 2017.
Total segment operating profit is as follows and is reconciled
to profit before taxation below:
Restated*
Six months to Six months to Year to
26 November 27 November 28 May
2017 2016 2017
GBP000 GBP000 GBP000
Trade 13,471 8,791 17,956
Retail 1,813 (2,369) 461
Mail order 13,626 6,651 18,788
Product and supply 17,901 6,356 16,286
Central costs (4,397) (3,406) (6,724)
Service centre costs (6,360) (4,738) (11,824)
Royalties 3,804 2,999 6,949
------------- ------------- ----------
Total segment operating profit 39,858 14,284 41,892
Share-based payment charge (60) (82) (160)
Profit share scheme charge (1,025) (444) (444)
Discretionary payment to employees - - (2,965)
------------- ------------- ----------
Total group operating profit 38,773 13,758 38,323
Finance income 51 29 87
Finance costs (50) - (7)
------------- ------------- -------------
Profit before taxation 38,774 13,787 38,403
======== ======== ========
*A segment loss of GBP281,000 for the six months to 27 November
2016 relating to certain marketing costs has been reclassified from
product and supply to central costs. This reflects the management
structure in place at 28 May 2017 and 26 November 2017.
4. Dividends
Dividends of GBP6,428,000 (20 pence per share) and GBP11,248,000
(35 pence per share) were declared and paid in the six months to 26
November 2017. In addition a further GBP1,901,000 (6 pence per
share) was distributed in the six months to 26 November 2017 by way
of a rectification dividend. The rectification dividend was
satisfied by the release of Company shareholders from the liability
to repay the amount received in the year ended 28 May 2017 in the
form of an unlawful dividend.
A dividend of GBP8,031,000 (25 pence per share) was declared and
paid in the six months to 27 November 2016.
Dividends of GBP8,031,000 (25 pence per share), GBP9,638,000 (30
pence per share), and GBP6,132,000 (19 pence per share) were
declared and paid during the year ended 28 May 2017.
5. Profit before taxation
The following costs have been incurred in the reported periods
in respect of ongoing redundancies, inventory provisions,
impairments and loss-making retail stores:
Six months to Six months to Year to
26 November 27 November 28 May
2017 2016 2017
GBP000 GBP000 GBP000
Redundancy costs and compensation for loss of office 177 345 1,009
(Reversal) of/charge for impairment of property, plant and equipment (17) 16 (55)
Charge for impairment of computer software - - 833
Net charge/(credit) to property provisions including closed or
loss-making retail stores 28 197 (185)
Net inventory provision creation 1,610 235 1,376
6. Tax
The taxation charge for the six months to 26 November 2017 is
based on an estimate of the full year effective rate of 19.0%
(2016: 20.7%). Although overseas tax rates are higher than the UK
rate of 19%, these are offset by the release of prior provisions
against tax uncertainties.
7. 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 to
26 November 27 November 28 May
2017 2016 2017
Profit attributable to owners of the parent (GBP000) 31,403 10,930 30,547
------------- ------------- -------------
Weighted average number of ordinary shares in issue (thousands) 32,166 32,121 32,126
------------- ------------- -------------
Basic earnings per share (pence per share) 97.6 34.0 95.1
======== ======== ========
Basic earnings per share pre-change in accounting estimates
Basic earnings per share pre-change in accounting estimates is
calculated by dividing the profit attributable to owners of the
parent, before the impact of the change in accounting estimates, by
the weighted average number of ordinary shares in issue throughout
the relevant period.
Six months to Six months to Year to
26 November 27 November 28 May
2017 2016 2017
Profit attributable to owners of the parent pre-change in
accounting estimates (GBP000) 30,404 10,286 29,305
------------- ------------- -------------
Weighted average number of ordinary shares in issue (thousands) 32,166 32,121 32,126
------------- ------------- -------------
Basic earnings per share pre-change in accounting estimates
(pence per share) 94.5 32.0 91.2
======== ======== ========
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 to
26 November 27 November 28 May
2017 2016 2017
Profit attributable to owners of the parent (GBP000) 31,403 10,930 30,547
------------- ------------- -------------
Weighted average number of ordinary shares in issue (thousands) 32,166 32,121 32,126
Adjustment for share options (thousands) 280 77 199
------------- ------------- -------------
Weighted average number of ordinary shares for diluted earnings
per share (thousands) 32,446 32,198 32,325
------------- ------------- -------------
Diluted earnings per share (pence per share) 96.8 33.9 94.5
======== ======== ========
Diluted earnings per share pre-change in accounting
estimates
The calculation of diluted earnings per share has been based on
the profit attributable to owners of the parent, before the impact
of the change in accounting estimates, 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 to
26 November 27 November 28 May
2017 2016 2017
Profit attributable to owners of the parent pre-change in
accounting estimates (GBP000) 30,404 10,286 29,305
------------- ------------- -------------
Weighted average number of ordinary shares in issue (thousands) 32,166 32,121 32,126
Adjustment for share options (thousands) 280 77 199
------------- ------------- -------------
Weighted average number of ordinary shares for diluted earnings
per share (thousands) 32,446 32,198 32,325
------------- ------------- -------------
Diluted earnings per share pre-change in accounting estimates
(pence per share) 93.7 31.9 90.7
======== ======== ========
8. Reconciliation of profit to net cash from operating activities
Six months to Six months to Year to
26 November 27 November 28 May
2017 2016 2017
GBP000 GBP000 GBP000
Operating profit 38,773 13,758 38,323
Depreciation of property, plant and equipment 2,635 3,156 6,107
Net (reversal) of impairment/impairment of property, plant and
equipment (17) 16 (55)
Loss on disposal of property, plant and equipment 20 23 111
Impairment of intangible assets - - 833
Loss on disposal of intangible assets - - 14
Amortisation of capitalised development costs 1,630 1,557 2,900
Amortisation of other intangibles 651 604 1,217
Share-based payments 60 82 160
Changes in working capital:
-Increase in inventories (4,128) (1,805) (2,984)
-Increase in trade and other receivables (4,813) (1,298) (379)
-Increase in trade and other payables 6,279 3,585 3,491
-Increase/(decrease) in provisions 116 (57) (368)
---------- ---------- ---------
Net cash from operating activities 41,206 19,621 49,370
====== ====== ======
9. Other intangible assets
26 November 27 November 28 May
2017 2016 2017
GBP000 GBP000 GBP000
Net book value at beginning of period 12,917 10,501 10,501
Additions 3,635 4,479 7,376
Exchange differences - 5 4
Disposals - - (14)
Amortisation charge (2,281) (2,161) (4,117)
Impairment - - (833)
---------- ---------- ----------
Net book value at end of period 14,271 12,824 12,917
====== ====== ======
10. Property, plant and equipment
26 November 27 November 28 May
2017 2016 2017
GBP000 GBP000 GBP000
Net book value at beginning of period 22,132 22,621 22,621
Additions 4,912 2,348 5,372
Exchange differences (39) 338 302
Disposals (20) (23) (111)
Charge for the period (2,635) (3,156) (6,107)
Reversal of impairment/(impairment) 17 (16) 55
---------- ---------- ----------
Net book value at end of period 24,367 22,112 22,132
====== ====== ======
11. Provisions for other liabilities and charges
Analysis of total provisions:
26 November 27 November 28 May
2017 2016 2017
GBP000 GBP000 GBP000
Current 757 838 689
Non-current 536 662 495
---------- ---------- ----------
1,293 1,500 1,184
====== ====== ======
Employee
Other benefits Property Total
GBP000 GBP000 GBP000 GBP000
At 29 May 2016 - 547 897 1,444
Charged to the income
statement - 99 197 296
Exchange differences - 53 60 113
Utilised - (47) (306) (353)
---------- ---------- ---------- ----------
At 27 November 2016 - 652 848 1,500
====== ====== ====== ======
Employee
Other benefits Property Total
GBP000 GBP000 GBP000 GBP000
At 29 May 2016 - 547 897 1,444
Charged/(credited)
to the income statement - 153 (185) (32)
Exchange differences - 47 57 104
Utilised - (67) (265) (332)
-------- -------- -------- ----------
At 28 May 2017 - 680 504 1,184
Charged to the income
statement 50 150 28 228
Exchange differences (1) (5) (6) (12)
Utilised - (61) (46) (107)
---------- ---------- ---------- ----------
At 26 November 2017 49 764 480 1,293
====== ====== ====== ======
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 GBP2,480,000 (2016: GBP996,000).
14. Related-party transactions
There were no material related-party transactions during the
period.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BCGDBSSGBGII
(END) Dow Jones Newswires
January 09, 2018 02:00 ET (07:00 GMT)
Games Workshop (LSE:GAW)
Historical Stock Chart
From Mar 2024 to Apr 2024
Games Workshop (LSE:GAW)
Historical Stock Chart
From Apr 2023 to Apr 2024