TIDMGAW
RNS Number : 6633Z
Games Workshop Group PLC
14 January 2020
PRESS ANNOUNCEMENT
GAMES WORKSHOP GROUP PLC
14 January 2020
HALF-YEARLY REPORT
Games Workshop Group PLC ('Games Workshop' or the 'Group')
announces its half-yearly results for the six months to 1 December
2019.
Highlights:
Six months to Six months
to
1 December 2019 2 December
2018
-------------------------------- ---------------- -------------
Revenue GBP148.4m GBP125.2m
Revenue at constant currency* GBP145.6m GBP125.2m
Operating profit pre-royalties
receivable GBP48.5m GBP35.3m
Royalties receivable GBP10.7m GBP5.5m
Operating profit GBP59.2m GBP40.8m
Operating profit at constant GBP57.1m GBP40.8m
currency*
Profit before taxation GBP58.6m GBP40.8m
Cash generated from operations GBP60.4m GBP36.0m
Basic earnings per share 145.9p 101.3p
Dividend per share declared in
the period 100p 65p
Kevin Rountree, CEO of Games Workshop, said:
"Our business and the Warhammer Hobby continue to be in great
shape.
We are pleased to once again report record sales and profit
levels in the period. The global team have worked their socks off
to deliver these great results. My thanks go out to them all.
Sales for the month of December are in line with our
expectations.
We are also announcing that the Board has today declared a
dividend of 45 pence per share, in line with the Company's policy
of distributing truly surplus cash."
...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 and operating profit are calculated
by comparing results in the underlying currencies for 2018 and
2019, both converted at the average exchange rates for the six
months ended 2 December 2018.
FIRST HALF HIGHLIGHTS
Six months to Six months
to
1 December 2019 2 December
2018
------------------------------------------- ---------------- -------------
Revenue GBP148.4m GBP125.2m
Revenue at constant currency* GBP145.6m GBP125.2m
Operating profit pre-royalties receivable GBP48.5m GBP35.3m
Royalties receivable GBP10.7m GBP5.5m
Operating profit GBP59.2m GBP40.8m
Operating profit at constant currency* GBP57.1m GBP40.8m
Profit before taxation GBP58.6m GBP40.8m
Cash generated from operations GBP60.4m GBP36.0m
Basic earnings per share 145.9p 101.3p
Dividend per share declared in the period 100p 65p
Revenue by segment
Six months to Six months Six months Six months
to to to
1 December 2019 2 December 1 December 2 December
2018 2019 2018
Constant currency Constant currency Actual rates Actual rates
-------------- ------------------ ------------------ ------------- -------------
Trade GBP76.1m GBP61.4m GBP78.1m GBP61.4m
Retail GBP45.3m GBP42.6m GBP45.8m GBP42.6m
Online GBP24.2m GBP21.2m GBP24.5m GBP21.2m
-------------- ------------------ ------------------ ------------- -------------
Total revenue GBP145.6m GBP125.2m GBP148.4m GBP125.2m
-------------- ------------------ ------------------ ------------- -------------
INTERIM MANAGEMENT REPORT
Our business and the Warhammer Hobby continue to be in great
shape.
We are pleased to once again report record sales and profit
levels in the period. The global team have worked their socks off
to deliver these great results. My thanks go out to them all. A
special thanks goes out to our design to manufacturing team, who
have once again delivered on our promise to make the best
miniatures in the world. Our new Citadel Colours paint launch in
the period was a step change in our paint offer. Product innovation
continues to be a key area of focus.
Sales for the month of December are in line with our
expectations.
We are also announcing that the Board has today declared a
dividend of 45 pence per share, in line with the Company's policy
of distributing surplus cash. This will be paid on 2 March 2020 for
shareholders on the register at 24 January 2020, with an
ex-dividend date of 23 January 2020. The last date for elections
for the dividend re-investment plan is 10 February 2020.
Core business
Sales and profit growth continue across our trade, retail and
our online channels. Our constant focus on managing our balance
sheet has ensured our net cash generation has remained healthy
allowing us to invest appropriately, to date GBP5.7 million in
capital projects in the first half. We have also declared GBP32.6
million in dividends during the period.
We have made some good progress with our key priorities. Each of
these is designed to ensure we deliver our exciting operational
plan and continue to engage and inspire our loyal customers.
Our global team - our performance, as ever, was driven by a
considerable team effort across all aspects of our global,
vertically integrated business. It is paramount, then, to our
ongoing success that we continue to invest in our people. To that
end, we have strengthened our central 'People' team adding
additional resources to recruitment, personal development,
wellbeing and pay and other rewards.
Communities and customer engagement - we have continued to build
new communities, opening 12 stores in the period and c.200 trade
accounts. Our digital engagement continues to increase in reach and
scope. Users accessing Warhammer-community.com over the six month
period are up 48% compared to the same period last year and
sessions per user have also increased, meaning our fans are
visiting more often and are more engaged with the content.
IT systems - we have made some good progress on implementing our
European ERP system and upgrading our warehousing capacity and
systems in both Memphis and Nottingham. All projects are broadly on
track and in line with spending limits.
Sustainability - it's early days for us on this important topic.
We have kicked off several projects in the period to look at ways
we can do what is right for our stakeholders and the broader
public. This is a priority for us. We are committed to delivering
better progress.
Non core business
Media and entertainment
Our development work on a TV series, based on the Eisenhorn
series of novels, continues to make good progress. No production
contracts have been signed yet nor have we booked any guaranteed
royalties. Our small, dedicated team of experts continues to work
with our external partners learning how this industry works to
ensure, if it does go into production, our first TV show is not
only true to our IP but is a commercial success too.
Licensing income
Royalties receivable in the period increased by GBP5.2 million
to GBP10.7 million. This includes GBP6.2 million of guaranteed
royalty income on the signing of new licence contracts (2018:
GBP1.6 million). These headline numbers look great. As always this
income continues to be uncertain and, as we recognise guaranteed
royalty income in full on signing the contract, it is even harder
to predict when income will be recognised. As the first half has
seen more new contracts signed than prior years, we will therefore
not make any promises or forecasts on the level of future income.
We are always looking for long term partners that can deliver great
quality products in platform, console and digital gaming markets
without doing any harm to our IP or the core business.
Sales
Reported sales grew by 19% to GBP148.4 million for the period.
On a constant currency basis, sales were up by 16% from GBP125.2
million to GBP145.6 million; split by channel this comprised: Trade
GBP76.1 million (2018: GBP61.4 million), Retail GBP45.3 million
(2018: GBP42.6 million) and Online GBP24.2 million (2018: GBP21.2
million).
Trade
Trade achieved growth of 27% with growth in all key countries.
In the period, our net number of trade outlets increased by c.200
accounts which helped drive forward sales in this channel. It's
worth noting that a large number of independent retailers now also
sell our products online, meaning our customers have more choice
than ever about where to buy Warhammer.
Retail
This channel showed growth in all countries. We opened,
including relocations, 19 stores. After closing 7 stores, our net
total number of stores at the end of the period is 529. As always
it is a challenging environment. 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, engage our existing customers and re-engage lapsed
customers. Ensuring we always recruit great store managers, and
offer our customers an exceptional in-store experience, remain a
priority for us.
Online
Online sales grew by 15% compared to last year. We continue to
improve the online store shopping experience and functionality of
the store. Personalised content and ease of navigation remain areas
of focus. As noted above, our customers have a lot of options when
it comes to shopping for Warhammer online, and are able to buy our
products both through our own web stores, reported in Online and
through those of independent retailers, reported in Trade.
Operating profit and profit before taxation
Operating profit before royalty income increased by GBP13.2
million to GBP48.5 million. On a constant currency basis, operating
profit before royalty income increased by GBP11.6 million to
GBP46.9 million. Following the adoption of IFRS 16 'Leases' in June
2019, a liability has been recognised in respect of future lease
payments as well as a corresponding asset representing the right to
use the underlying asset during the lease term. The interest
expense incurred on the lease liabilities and the depreciation
charged on the right-of-use asset is recognised separately in the
income statement. During the period, as a result of the transition
of IFRS 16, additional interest of GBP0.6 million and additional
depreciation of GBP4.6 million have been recognised, partially
offset by a reduction in rental payments in other operating
expenses of GBP4.6 million.
Operating expenses increased by GBP6.0 million due to investment
in sales facing activities relating to new retail store costs and
continued investment in marketing and other central costs. As in
the prior year, we have again rewarded all of our staff with a
payment in December of GBP500 each due under the profit share
scheme.
On a constant currency basis, royalty income increased by GBP4.7
million to GBP10.2 million.
Total operating profit increased by GBP18.4 million to GBP59.2
million. The net impact in the six months to 1 December 2019 of
exchange rate fluctuations was a gain of GBP2.1 million. It is not
the Group's policy to hedge against foreign exchange rate
exposure.
Profit before taxation increased by GBP17.8 million to GBP58.6
million after recognising the impact of adopting IFRS 16.
Capital employed
12 month average capital employed** increased by GBP7.5 million
to GBP74.7 million. The book value of tangible and intangible
assets increased by GBP24.0 million. The impact of IFRS 16 being
adopted during the period has resulted in an increase in tangible
assets of GBP16.3 million, with the underlying increase of GBP7.7
million being mainly due to investments in a second production
facility, warehouse expansion and the ongoing investment in the
implementation of a new ERP system. Trade and other receivables
increased by GBP1.9 million as a result of growth in trade revenue
and inventory increased by GBP2.7 million due to the timing of
product launches and to meet product demand. Liabilities increased
by GBP21.1 million, of which GBP16.4 million relates to lease
liabilities recognised on the adoption of IFRS 16. The net impact
of the adoption of IFRS 16 was a decrease in average capital
employed of GBP0.1 million.
Return on capital employed
We continue to deliver great returns. During the period our
return on capital employed increased from 96% at November 2018 to
111% at November 2019. This was driven by the increase in operating
profit before royalties receivable, offset by an increase in
investment in capacity and in working capital.
Cash generation
During the period, the Group's core operating activities
generated GBP37.7 million of cash after tax payments (2018: GBP23.9
million). The Group also received cash of GBP5.1 million in respect
of royalties in the period (2018: GBP4.0 million). In the period,
the Group had purchases of tangible and intangible assets and
product development costs of GBP13.7 million (2018: GBP10.9
million), lease liability payments of GBP4.8 million (2018:
GBPnil), dividends of GBP21.1 million (2018: GBP21.0 million) and
net interest and foreign exchange losses of GBP0.4 million (2018:
gains of GBP0.1 million). In addition UK corporation tax payments
were GBP16.2 million (2018: GBP7.9 million) as HMRC changed the
quarterly payment timings during the period. There were net funds
at the end of the period of GBP33.0 million (2018: GBP25.3
million).
Dividends
In the period we declared and paid dividends of 30 pence per
share and 35 pence per share (2018: 30 pence and 35 pence)
amounting to GBP21.1 million (2018: GBP21.0 million). A dividend of
35 pence per share was declared on 19 November 2019 amounting to
GBP11.4 million. In addition, a dividend has been declared today of
45 pence per share amounting to GBP14.7 million.
Risks and uncertainties
The board has overall responsibility for ensuring risk is
appropriately managed across the Group. The top seven 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 in all circumstances. The principal risks
identified in 2019/20 are discussed below. These risks are not
intended to be an extensive analysis of all risks that may arise
but more importantly are the ones that could cause business
interruption in the year ahead.
-- Recruitment - to always have a world class team to support
our business. The risk is that we compromise and recruit only for
skills and not on the personal qualities that we need new members
of our global team to demonstrate to ensure we deliver our
long-term goals. The Games Workshop recruitment process aims to
ensure we recruit for attitude as well as skills, to help mitigate
this risk. This end to end process starts with writing a new job
specification highlighting the personal qualities needed in the job
as well as the skills, through to a robust induction process which
will help them be successful in their job. Our new recruitment and
onboarding systems also help in ensuring the recruitment process is
efficient and effective for both the new recruit and the recruiting
manager.
-- Supply chain - to deliver a seamless supply of products to
our customers. The risk is that there are unnecessary delays or
expense. Constant review by the executive directors and the rest of
the board of our production and warehousing capacity ensures that
issues are dealt with in an appropriate timescale. This is
particularly relevant given the recent growth in sales.
-- Range management - we are reviewing our range to ensure that
we are exploring all opportunities. The risk is that we don't fully
capitalise on all the opportunities that are available to us or
that we have too much stock. To ensure we have the right product in
the right place at the right time, we have been investing in our
merchandising and logistics team throughout the period.
-- ERP change - we are changing our core ERP system in the UK
which is a complicated project with the risk of widespread business
disruption if it is not implemented well. It is being implemented
and managed by a strong internal project team and specialist ERP
software consultants.
-- Innovation - to surprise and delight our customers with ever
better new miniatures and related products. The risk is that we
become complacent. Our design studios are responsible for creating
great new miniatures, games and complementary products. The sales
of new products are reviewed and assessed by the executive team and
the design studios to ensure that we continue to deliver on our
promise to make the best miniatures in the world.
-- IP exploitation - to optimise our Warhammer brands fully, in
addition to being innovative in our core business. The risks are
that we do harm to the core business or that we don't take this
opportunity seriously. With the appointment of our new
non-executive director, Kate Marsh, the board will manage the risk
going forward supporting the senior team on these new
opportunities.
-- 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.
In our opinion the greatest risk is the same one that we repeat
each year, namely, management. So long as we have the right people
in the right jobs we will be fine. Problems will arise if the board
allows egos and private agendas to rule. We will do our utmost to
ensure that this does not happen.
Brexit impact statement
Following the UK Government invoking Article 50 of the Treaty of
Lisbon, notifying the European Council of its intention to withdraw
from the EU, Games Workshop has reviewed the impact that this may
have on the Group. The key risks for Games Workshop relate to the
movement of goods from the UK to the EU across all sales channels
as well as the recruitment and retention of EU nationals working in
the UK. These risks have been assessed and plans have been put in
place to help mitigate the possible impact of these changes
depending on the nature of the UK's withdrawal from the EU.
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.
There have been no changes to the board since the annual report
for the year to 2 June 2019. 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
14 January 2020
*Constant currency revenue and operating profit are calculated
by comparing results in the underlying currencies for 2018 and
2019, both converted at the average exchange rates for the six
months ended 2 December 2018.
**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, royalty income and dividends.
CONSOLIDATED INCOME STATEMENT
Six months Six months
to to
Notes 1 December 2 December Year to
2019 2018 2 June 2019
GBP000 GBP000 GBP000
------------------------------- -------- ------------- ------------ -------------
Revenue 3 148,350 125,225 256,574
Cost of sales (45,316) (41,392) (83,306)
------------------------------- -------- ------------- ------------ -------------
Gross profit 103,034 83,833 173,268
Operating expenses 3 (54,545) (48,552) (103,434)
Other operating income -
royalties receivable 10,670 5,490 11,365
------------------------------- -------- ------------- ------------ -------------
Operating profit 3 59,159 40,771 81,199
Finance income 63 38 102
Finance costs (638) - (5)
------------------------------- -------- ------------- ------------ -------------
Profit before taxation 5 58,584 40,809 81,296
Income tax expense 6 (11,131) (7,999) (15,475)
------------------------------- -------- ------------- ------------ -------------
Profit attributable to owners
of the parent 47,453 32,810 65,821
------------------------------- -------- ------------- ------------ -------------
Basic earnings per ordinary
share 7 145.9p 101.3p 202.9p
Diluted earnings per ordinary
share 7 144.6p 100.7p 200.8p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE
Six months Six months
to to
1 December 2 December Year to
2019 2018 2 June 2019
GBP000 GBP000 GBP000
--------------------------------------------- ------------- ------------ -------------
Profit attributable to owners of
the parent 47,453 32,810 65,821
Other comprehensive income
Items that may be subsequently reclassified
to profit or loss
Exchange differences on translation
of foreign operations (1,701) 771 708
--------------------------------------------- ------------- ------------ -------------
Other comprehensive (expense)/income
for the period (1,701) 771 708
--------------------------------------------- ------------- ------------ -------------
Total comprehensive income attributable
to owners of the parent 45,752 33,581 66,529
--------------------------------------------- ------------- ------------ -------------
The following notes form an integral part of this condensed
consolidated interim financial information.
CONSOLIDATED BALANCE SHEET
1 December 2 December
2019 2018 2 June 2019
Notes GBP000 GBP000 GBP000
---------------------------------- -------- ----------- ----------- ------------
Non-current assets
Goodwill 1,433 1,433 1,433
Other intangible assets 9 18,052 14,850 16,004
Property, plant and equipment 10 39,066 33,029 35,303
Right-of-use assets 11 29,022 - -
Trade and other receivables 4,516 1,866 3,085
Deferred tax assets 8,680 6,713 8,582
---------------------------------- -------- ----------- ----------- ------------
100,769 57,891 64,407
---------------------------------- -------- ----------- ----------- ------------
Current assets
Inventories 21,708 22,393 24,192
Trade and other receivables 28,749 21,821 18,796
Current tax assets 676 319 814
Cash and cash equivalents 32,967 25,335 29,371
---------------------------------- -------- ----------- ----------- ------------
84,100 69,868 73,173
---------------------------------- -------- ----------- ----------- ------------
Total assets 184,869 127,759 137,580
---------------------------------- -------- ----------- ----------- ------------
Current liabilities
Lease liabilities (8,086) - -
Trade and other payables (18,799) (15,950) (19,199)
Dividends payable 4 (11,436) - -
Current tax liabilities (2,364) (8,522) (9,135)
Provisions for other liabilities
and charges 12 (526) (510) (919)
---------------------------------- -------- ----------- ----------- ------------
(41,211) (24,982) (29,253)
---------------------------------- -------- ----------- ----------- ------------
Net current assets 42,889 44,886 43,920
---------------------------------- -------- ----------- ----------- ------------
Non-current liabilities
Lease liabilities (20,354) - -
Other non-current liabilities (943) (682) (1,010)
Provisions for other liabilities
and charges 12 (1,454) (519) (844)
---------------------------------- -------- ----------- ----------- ------------
(22,751) (1,201) (1,854)
---------------------------------- -------- ----------- ----------- ------------
Net assets 120,907 101,576 106,473
---------------------------------- -------- ----------- ----------- ------------
Capital and reserves
Called up share capital 1,634 1,624 1,625
Share premium account 13,030 12,251 12,281
Other reserves 2,984 4,748 4,685
Retained earnings 103,259 82,953 87,882
---------------------------------- -------- ----------- ----------- ------------
Total equity 120,907 101,576 106,473
---------------------------------- -------- ----------- ----------- ------------
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 2 June 2019 and 3 June 2019 1,625 12,281 4,685 87,882 106,473
Profit for the six months to 1
December 2019 - - - 47,453 47,453
Exchange differences on translation
of foreign operations - - (1,701) - (1,701)
---------------------------------------- --------- --------- ---------- ---------- ---------
Total comprehensive income for
the period - - (1,701) 47,453 45,752
Transactions with owners:
Share-based payments - - - 197 197
Shares issued under employee sharesave
scheme 9 749 - - 758
Deferred tax charge relating to
share options - - - (359) (359)
Current tax credit relating to
exercised share options - - - 649 649
Dividends declared to Company
shareholders - - - (32,563) (32,563)
---------------------------------------- --------- --------- ---------- ---------- ---------
Total transactions with owners 9 749 - (32,076) (31,318)
---------------------------------------- --------- --------- ---------- ---------- ---------
At 1 December 2019 1,634 13,030 2,984 103,259 120,907
---------------------------------------- --------- --------- ---------- ---------- ---------
Called
up Share
share premium Other Retained Total
capital account reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------------- --------- --------- ---------- ---------- ---------
At 3 June 2018 and 4 June 2018 1,617 11,571 3,977 70,957 88,122
Profit for the six months to 2
December 2018 - - - 32,810 32,810
Exchange differences on translation
of foreign operations - - 771 - 771
---------------------------------------- --------- --------- ---------- ---------- ---------
Total comprehensive income for
the period - - 771 32,810 33,581
Transactions with owners:
Share-based payments - - - 140 140
Shares issued under employee sharesave
scheme 7 680 - - 687
Deferred tax charge relating to
share options - - - (281) (281)
Current tax credit relating to
exercised share options - - - 355 355
Dividends declared to Company
shareholders - - - (21,028) (21,028)
---------------------------------------- --------- --------- ---------- ---------- ---------
Total transactions with owners 7 680 - (20,814) (20,127)
---------------------------------------- --------- --------- ---------- ---------- ---------
At 2 December 2018 1,624 12,251 4,748 82,953 101,576
---------------------------------------- --------- --------- ---------- ---------- ---------
Called
up Share
share premium Other Retained Total
capital account reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------------- --------- --------- ---------- ---------- ---------
At 3 June 2018 and 4 June 2018 1,617 11,571 3,977 70,957 88,122
Profit for the 52 weeks to 2 June
2019 - - - 65,821 65,821
Exchange differences on translation
of foreign operations - - 708 - 708
---------------------------------------- --------- --------- ---------- ---------- ---------
Total comprehensive income for
the period - - 708 65,821 66,529
Transactions with owners:
Share-based payments - - - 339 339
Shares issued under employee sharesave
scheme 8 710 - - 718
Deferred tax credit relating to
share options - - - 224 224
Current tax credit relating to
exercised share options - - - 818 818
Dividends declared to Company
shareholders - - - (50,277) (50,277)
---------------------------------------- --------- --------- ---------- ---------- ---------
Total transactions with owners 8 710 - (48,896) (48,178)
---------------------------------------- --------- --------- ---------- ---------- ---------
At 2 June 2019 1,625 12,281 4,685 87,882 106,473
---------------------------------------- --------- --------- ---------- ---------- ---------
The following notes form an integral part of this condensed
consolidated interim financial information.
CONSOLIDATED CASH FLOW STATEMENT
Six months Six months
to to
Notes 1 December 2 December Year to
2019 2018 2 June 2019
GBP000 GBP000 GBP000
---------------------------------------- -------- ------------ ------------ -------------
Cash flows from operating activities
Cash generated from operations 8 60,428 35,968 88,776
UK corporation tax paid (16,249) (7,885) (14,217)
Overseas tax paid (1,410) (159) (2,079)
---------------------------------------- -------- ------------ ------------ -------------
Net cash generated from operating
activities 42,769 27,924 72,480
---------------------------------------- -------- ------------ ------------ -------------
Cash flows from investing activities
Purchases of property, plant and
equipment (8,494) (6,560) (13,651)
Proceeds on disposal of property,
plant and equipment 23 - 10
Purchases of other intangible
assets (1,474) (812) (1,875)
Expenditure on product development (3,726) (3,536) (6,962)
Interest received 63 38 102
---------------------------------------- -------- ------------ ------------ -------------
Net cash used in investing activities (13,608) (10,870) (22,376)
---------------------------------------- -------- ------------ ------------ -------------
Cash flows from financing activities
Proceeds from issue of ordinary
share capital 758 687 718
Repayment of principal under finance (4,841) - -
leases
Interest paid (10) - (5)
Dividends paid to Company shareholders (21,127) (21,028) (50,277)
---------------------------------------- -------- ------------ ------------ -------------
Net cash used in financing activities (25,220) (20,341) (49,564)
---------------------------------------- -------- ------------ ------------ -------------
Net increase/(decrease) in cash
and cash equivalents 3,941 (3,287) 540
Opening cash and cash equivalents 29,371 28,545 28,545
Effects of foreign exchange rates
on cash and cash equivalents (345) 77 286
---------------------------------------- -------- ------------ ------------ -------------
Closing cash and cash equivalents 32,967 25,335 29,371
---------------------------------------- -------- ------------ ------------ -------------
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 2
June 2019 were approved by the board of directors on 29 July 2019
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 1 December 2019 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
2 June 2019 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 14 January 2020.
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 2 June 2019,
with the addition of the additional judgements and estimations
needed in the application of IFRS 16, including determination of
the lease term, calculation of the discount rate, and the
separation of lease and non-lease components.
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual
earnings.
The accounting policies applied are consistent with those of the
annual financial statements for the year ended 2 June 2019, as
described in those financial statements, except for the adoption of
new standards effective from 3 June 2019. The Group applies for the
first time IFRS 16 'Leases', effective from 3 June 2019. The nature
and the impact of the changes are disclosed in note 2.
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 policy
IFRS 16 'Leases' supersedes IAS 17 'Leases' and related
interpretations, and applies to financial periods commencing on or
after 1 January 2019. This new standard sets out the principles for
the recognition, measurement, presentation and disclosure of leases
and requires lessees to account for all leases under a single
on-balance sheet model similar to the accounting for finance leases
under IAS 17. The standard includes two recognition exemptions for
lessees: leases of 'low value' assets; and short-term leases (i.e.
leases with a term less than 12 months). At the lease commencement
date, a liability will be recognised in respect of the future lease
payments and a corresponding asset representing the right to use
the underlying asset during the lease term. The interest expense
incurred on the lease liability and the depreciation charged on the
right to use asset will be recognised separately in the income
statement. Right-of-use assets are measured at an amount equal to
the lease liability, adjusted by the amount of any prepaid or
accrued lease payments.
Where a lease includes the option for the Group to extend the
lease term, the Group applies judgement as to whether it is
reasonably certain that the opportunity to extend will be taken.
Certain events will result in the lease liability being re-measured
(e.g. a change in the lease term, a change in future lease payments
resulting from a change in an index or rate used to determine those
payments). The re-measurement will be first adjusted against the
right-of-use asset and any excess charged to profit or loss.
The Group has applied the modified retrospective approach for
its transition to this new standard from 3 June 2019, meaning that
prior reporting periods have not been restated. In adopting this
approach the Group intends to use the following practical
expedients as offered by the standard:
- Application of a single discount rate to a portfolio of leases
with reasonably similar characteristics;
- The use of hindsight in determining the lease term if the
contract contains options to extend or terminate the lease;
- Exclusion of initial direct costs from the measurement of the
right of use asset at the date of initial application;
- Reliance has been placed on the assessment made under IAS 37
to identify onerous leases, rather than performing an impairment
test on right-of-use assets on transition; and
- No recognition of leases whose term ends within twelve months
of the date of initial application.
The Group has elected to apply the standard to contracts that
were previously identified as leases applying IAS 17 and IFRIC 4.
The Group will not apply the standard to contracts that were not
previously identified as containing a lease. The Group has elected
to apply the transition exemption for leases where the underlying
asset is of low value, i.e. when the underlying asset has a value
of GBP5,000 or less when new. We will not be separating lease
components from non-lease components for any asset class other than
buildings.
The Group has calculated and applied the incremental borrowing
rate ('IBR') to its future cash flows to determine the lease
liability. The incremental borrowing rate has been defined by the
standard as 'the rate of interest that a lessee would have to pay
to borrow over a similar term, and with similar security, the funds
necessary to obtain an asset of a similar value to the right-of-use
asset in a similar environment'. The Group has no external
borrowing, therefore a credit risk spread approach has been used to
calculate the IBR, which combines the risk-free security rate and a
corporate security rate in each economic environment in which the
Group has a lease, linked to the life of the underlying lease
agreement. The weighted average incremental borrowing rate applied
by the Group on transition was 2.07%.
Once a right-of-use asset has been capitalised, it is
subsequently depreciated over the length of the lease term, or, for
the assets capitalised at transition, the remaining lease term from
the date of transition. The provisions of IAS 36 concerning
impairment testing also apply to capitalised right-of-use
assets.
The impact of the transition to IFRS 16 on 3 June 2019 on the
results on the consolidated balance sheet was as follows:
Impact of
change in
2 June 2019 accounting 3 June
GBP000 standards 2019
GBP000 GBP000
------------------------------------------------ ----------------------- --------------------
Non-current assets 64,407 33,598 98,005
- Right-of-use assets - 33,598 33,598
Current assets 73,173 (905) 72,268
- Trade and other receivables 18,796 (905) 17,891
Current liabilities (29,253) (8,705) (37,958)
- Lease liabilities - (8,786) (8,786)
- Provisions for other liabilities
and charges (919) 81 (838)
Non-current liabilities (1,854) (23,988) (25,842)
- Lease liabilities - (24,079) (24,079)
- Provisions for other liabilities
and charges (844) 91 (753)
Net assets 106,473 - 106,473
------------------------------------- --------- ----------------------- --------------------
There were no assets previously held under finance leases prior
to transition.
The introduction of IFRS 16 has had the following effects on the
consolidated financial statements following transition:
- An increase in the carrying value of fixed assets and an
increase in financial liabilities on the balance sheet on
recognition of the new right-of-use assets and their corresponding
lease liabilities. Financial obligations from operating leases were
previously reported off balance sheet. Rental prepayments sitting
in trade and other receivables at 2 June 2019 relating to assets
now capitalised were removed as these have been built into the
future cash flows used in the calculation of the asset value.
- Right-of-use assets have been depreciated since the date of
transition, and these depreciation charges, along with the interest
expense on the lease liability have been recognised in the income
statement, in operating expenses and finance charges respectively.
Rental charges, other than those related to short-term or low value
leases, are no longer recognised in the Income statement. In the
six months to 1 December 2019, this has led to an increase in
interest expenses of GBP0.6 million, an increase in depreciation of
GBP4.6 million, and a decrease in other operating expenses of
GBP4.6 million.
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 1 December
2019, 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 online 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.
- Online. This includes sales through the Group's global web
stores and digital product sales through external affiliates.
- Product and supply. This includes the design and manufacture
of products and incorporates the production facility in the UK and
the Group logistics and merchandising 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 marketing costs.
- 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.
- Media and entertainment. Costs associated with developing our
IP as digital content for animation and television.
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 the discretionary
payment to employees in the year ended 2 June 2019. 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 Six months Year ended
to to 2 June 2019
1 December 2 December GBP000
2019 2018
GBP000 GBP000
------------------------ ------------------- ----------------------- ------------------------
Trade 78,096 61,445 121,445
Retail 45,804 42,547 87,803
Online 24,450 21,233 47,326
Total external revenue 148,350 125,225 256,574
------------------------ ------------------- ----------------------- ------------------------
For information, we analyse external revenue further below:
Six months Six months Year ended
to to 2 June 2019
1 December 2 December GBP000
2019 2018
GBP000 GBP000
--------------------------------- ------------ ------------------------- --------------------------
Trade
UK and Continental Europe 33,869 25,816 51,324
North America 33,921 27,171 53,509
Australia and New Zealand 3,273 2,838 5,061
Asia 3,619 2,657 5,332
Rest of world 2,283 1,761 3,796
Black Library 1,131 1,202 2,423
Total Trade 78,096 61,445 121,445
--------------------------------- ------------ ------------------------- --------------------------
Retail
UK 13,751 13,652 27,831
Continental Europe 10,964 10,404 21,380
North America 14,876 12,935 27,428
Australia and New Zealand 4,496 4,182 8,316
Asia 1,717 1,374 2,848
Total Retail 45,804 42,547 87,803
--------------------------------- ------------ ------------------------- --------------------------
Online 24,450 21,233 47,326
Total external revenue 148,350 125,225 256,574
--------------------------------- ------------ ------------------------- --------------------------
Operating expenses by segment are regularly reviewed by the
executive directors and are provided below:
Six months Six months Year ended
to to 2 June 2019
1 December 2 December GBP000
2019 2018
GBP000 GBP000
------------------------------------------- ------------ ----------------------- ------------------------
Trade* 5,050 6,525 13,475
Retail* 29,075 23,946 49,524
Online* 2,368 2,731 5,668
Product and supply 1,786 1,666 3,789
Central costs 6,332 5,140 9,653
Service centre costs 7,999 6,946 14,700
Royalties 519 346 775
Media and entertainment 118 - -
------------------------------------------- ------------ ----------------------- ------------------------
Total segment operating expenses 53,247 47,300 97,584
Share-based payment charge 196 140 339
Profit share scheme charge 1,102 1,112 2,226
Discretionary payment to employees - - 3,285
Total group operating expenses 54,545 48,552 103,434
------------------------------------------- ------------ ----------------------- ------------------------
*Retail operating expenses in the six months to 2 December 2018
are net of inter group marketing service income of GBP2,671,000
(year ended 2 June 2019: GBP5,515,000) which was recognised within
the Trade (GBP2,133,000) and Online (GBP538,000) segments (year
ended 2 June 2019: Trade: GBP4,307,000, Online: GBP1,208,000).
These inter group charges were effective for a five year term
following the structural reorganisation in 2014 and are no longer
applicable.
Total segment operating profit is as follows and is reconciled
to profit before taxation below:
Six months Six months Year ended
to to 2 June 2019
1 December 2 December GBP000
2019 2018
GBP000 GBP000
----------------------------------------- ------------ ----------------------- ------------------------
Trade* 31,507 22,474 43,688
Retail* 1,767 4,821 10,386
Online* 15,697 13,060 29,247
Product and supply 16,487 9,594 18,517
Central costs (7,035) (5,946) (10,684)
Service centre costs (7,999) (6,946) (14,695)
Royalties 10,151 4,966 10,590
Media and entertainment (118) - -
----------------------------------------- ------------ ----------------------- ------------------------
Total segment operating profit 60,457 42,023 87,049
Share-based payment charge (196) (140) (339)
Profit share scheme charge (1,102) (1,112) (2,226)
Discretionary payment to employees - - (3,285)
----------------------------------------- ------------ ----------------------- ------------------------
Total group operating profit 59,159 40,771 81,199
Finance income 63 38 102
Finance costs (638) - (5)
----------------------------------------- ------------ ----------------------- ------------------------
Profit before taxation 58,584 40,809 81,296
----------------------------------------- ------------ ----------------------- ------------------------
4. Dividends
Dividends of GBP9,751,000 (30 pence per share) and GBP11,376,000
(35 pence per share) were declared and paid in the six months to 1
December 2019. A further dividend of GBP11,436,000 (35 pence per
share) was declared during the period and was paid prior to the
approval of the consolidated interim financial information and a
dividend of GBP14.7 million (45 pence per share) was declared
today.
Dividends of GBP9,705,000 (30 pence per share) and GBP11,323,000
(35 pence per share) were declared and paid in the six months to 2
December 2018. Further dividends of GBP9,749,000 (30 pence per
share), GBP8,124,000 (25 pence per share), and GBP11,376,000 (35
pence per share) were declared and paid during the second half of
the year.
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 Six months Year ended
to to 2 June 2019
1 December 2 December GBP000
2019 2018
GBP000 GBP000
---------------------------------------- --------------- ----------------------- ------------------------
Redundancy costs and compensation
for loss of office 73 264 934
Impairment/(reversal of impairment)
of property, plant and equipment 119 (18) 8
Net charge/(credit) to property provisions
including closed or
loss-making retail stores - 108 (150)
Net inventory provision creation 2,917 3,422 5,770
----------------------------------------------- -------- ----------------------- ------------------------
6. Tax
The taxation charge for the six months to 1 December 2019 is
based on an estimate of the full year effective rate of 19.0%
(2018: 19.6%). While we continue to expect a rate above that for a
business with activities based solely in the UK due to higher
overseas tax rates, it will be offset by increased elimination of
inter group profit at those same rates.
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 Six months Year ended
to to 2 June 2019
1 December 2 December GBP000
2019 2018
GBP000 GBP000
------------------------------------- ------------ ----------------------- ------------------------
Profit attributable to owners
of the parent (GBP000) 47,453 32,810 65,821
------------------------------------- ------------ ----------------------- ------------------------
Weighted average number of ordinary
shares in issue (thousands) 32,530 32,376 32,438
------------------------------------- ------------ ----------------------- ------------------------
Basic earnings per share (pence
per share) 145.9 101.3 202.9
------------------------------------- ------------ ----------------------- ------------------------
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 Six months Year ended
to to 2 June 2019
1 December 2 December GBP000
2019 2018
GBP000 GBP000
------------------------------------------ ------------ ----------------------- ------------------------
Profit attributable to owners of
the parent (GBP000) 47,453 32,810 65,821
------------------------------------------ ------------ ----------------------- ------------------------
Weighted average number of ordinary
shares in issue (thousands) 32,530 32,376 32,438
Adjustment for share options (thousands) 280 199 347
------------------------------------------ ------------ ----------------------- ------------------------
Weighted average number of ordinary
shares for diluted earnings per
share (thousands) 32,810 32,575 32,785
------------------------------------------ ------------ ----------------------- ------------------------
Diluted earnings per share (pence
per share) 144.6 100.7 200.8
------------------------------------------ ------------ ----------------------- ------------------------
8. Reconciliation of profit to net cash from operating activities
Six months Six months Year ended
to to 2 June 2019
1 December 2 December GBP000
2019 2018
GBP000 GBP000
--------------------------------------- --------------- ----------------------- ------------------------
Operating profit 59,159 40,771 81,199
Depreciation of property, plant and
equipment 4,460 3,754 8,941
Impairment/(reversal of impairment)
of property, plant and equipment 119 (18) 8
(Profit)/loss on disposal of property,
plant and equipment (17) 9 144
Loss on disposal of intangible assets - - 188
Amortisation of capitalised development
costs 2,533 2,965 5,341
Amortisation of other intangibles 614 754 1,608
Depreciation of right-of-use assets 4,611 - -
Loss on disposal of right-of-use (11) - -
assets
Share-based payments 197 140 339
Changes in working capital:
-Decrease/(increase) in inventories 2,130 (2,195) (3,357)
-Increase in trade and other receivables (11,900) (5,911) (4,021)
-Decrease in trade and other payables (1,715) (4,085) (2,149)
-Increase/(decrease) in provisions 248 (216) 535
--------------------------------------------- --------- ----------------------- ------------------------
Net cash from operating activities 60,428 35,968 88,776
--------------------------------------------- --------- ----------------------- ------------------------
9. Other intangible assets
1 December 2 December 2 June 2019
2019 2018 GBP000
GBP000 GBP000
--------------------------------- ----------- ---------------------- -----------------------
Net book value at beginning of
period 16,004 14,195 14,195
Additions 5,200 4,348 8,894
Exchange differences (5) 1 3
Disposals - - (188)
Amortisation charge (3,147) (3,719) (6,949)
Reclassification from property,
plant and equipment - 25 49
Net book value at end of period 18,052 14,850 16,004
--------------------------------- ----------- ---------------------- -----------------------
10. Property, plant and equipment
1 December 2 December 2 June 2019
2019 2018 GBP000
GBP000 GBP000
-------------------------------------- ----------- ---------------------- -----------------------
Net book value at beginning of
period 35,303 30,072 30,072
Additions 8,494 6,608 14,238
Exchange differences (146) 119 145
Disposals (6) (9) (154)
Depreciation charge (4,460) (3,754) (8,941)
(Impairment)/reversal of impairment
charge (119) 18 (8)
Reclassification to other intangible
assets - (25) (49)
Net book value at end of period 39,066 33,029 35,303
-------------------------------------- ----------- ---------------------- -----------------------
11. Right-of-use assets
1 December 2 December 2 June 2019
2019 2018 GBP000
GBP000 GBP000
-------------------------------- ----------- ---------------------- -----------------------
Net book value at beginning of - - -
period
Additions 34,472 - -
Exchange differences (718) - -
Disposals (121) - -
Depreciation charge (4,611) - -
Net book value at end of period 29,022 - -
-------------------------------- ----------- ---------------------- -----------------------
Included within additions for the period is GBP33.6 million of
right-of-use assets recognised on transition to IFRS 16 on 3 June
2019. See note 2 for further information.
12. Provisions for other liabilities and charges
Analysis of total provisions:
1 December 2019 2 December 2 June 2019
GBP000 2018 GBP000
GBP000
--------------------------------------- ------------------------ ---------------------- -----------------------
Current 526 510 919
Non-current 1,454 519 844
--------------------------------------------- ------------------ ---------------------- -----------------------
Total provisions for other
liabilities and charges 1,980 1,029 1,763
--------------------------------------------- ------------------ ---------------------- -----------------------
Employee benefits Property Total
GBP000 GBP000 GBP000
--------------------------------- ---------- ------------------ ---------------------- -----------------------
At 3 June 2018 768 460 1,228
Charged to the income statement 78 108 186
Exchange differences 9 8 17
Utilised (68) (334) (402)
--------------------------------------------- ------------------ ---------------------- -----------------------
At 2 December 2018 787 242 1,029
--------------------------------------------- ------------------ ---------------------- -----------------------
At 3 June 2018 768 460 1,228
Charged to the income statement 727 123 850
Exchange differences 3 2 5
Utilised (44) (276) (320)
--------------------------------------------- ------------------ ---------------------- -----------------------
At 2 June 2019 1,454 309 1,763
Charged/(credited) to the
income statement 431 (118) 313
Exchange differences (31) (1) (32)
Utilised (40) (24) (64)
At 1 December 2019 1,814 166 1,980
--------------------------------------------- ------------------ ---------------------- -----------------------
13. Seasonality
The Group's monthly sales profile demonstrates an element of
seasonality around the Christmas period which impacts sales in the
month of December.
14. Commitments
Capital expenditure contracted for at the balance sheet date but
not yet incurred is GBP4,592,000 (2018: GBP2,969,000).
15. Related party transactions
There were no material related-party transactions during the
period.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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