MIDAS SHARE TIPS: Games Workshop fantasy game stores make real money
It is easy to imagine Games Workshop as a niche store loved only by teenage boys, but the company behind the Warhammer and Middle Earth games is now a £ 3 billion colony 50 percent more valuable than Marks & Spencer.
It turns out, we’d rather spend lockdown-painting demons and warriors than buy vests, so while other stores were struggling because of Covid-19, GW has had its best year yet.
What is the secret? Simply put, Games Workshop has turned a beloved hobby into a large and lucrative business without losing its heart.
Games Workshop is now a £ 3 billion giant worth 50% more than M&S
Despite the fact that the company is now worth £ 3 billion and exists in 23 countries, the stores are staffed by friendly enthusiasts who allow customers to hang out and play or paint miniatures.
These employees are the company’s biggest weapon, recruiting new players and maintaining old hands – making sure everyone pays a lot of money for plastic or plastic miniatures that are then used to play the company’s fantasy games.
So while most of us still like to avoid the high street, Games Workshop fans are more in a hurry to come back. Meanwhile, there is a thriving online community, which has seen a 40 percent increase in user numbers due to lockdown.
A record two million people watched the trailer for Warhammer’s latest launch of Warhammer 40k, which is on track to be the most successful launch in its history.
Chief executive Kevin Rountree said the pandemic and related closings had cost the company just six weeks of revenue and profit.
It posted a five percent increase in sales to £ 269.7 million for the year to the end of May, while pre-tax profits rose 10 percent to £ 89.4 million.
Although the company initially fired staff, Rountree says they repay the government money. The cash-generating company will also pay a dividend of 145p, down from 155p last year.
This is partly due to a decision to have three months of working capital in the future due to uncertainty about Covid. The company is fiscally conservative and only distributes dividends from excess cash.
What could stop Games Workshop? Despite its strong position, the company can fall victim to some bad dice. While it has its own stores, it also sells a lot of inventory through independent retailers who are more likely to fall victim to street problems. This can become popular in some regions.
There is also a danger that many hobbyists have less money to spend as a recession with Covid accelerates.
The company is undoubtedly highly valued – the shares closed at £ 87.80 last week, which puts them at a record high and a massive profit that goes up 40 times, yielding 1.5 percent, based on updated figures from broker Peel Hunt this week .
MIDAS VERDICT: Lockdown has changed many of our consumer habits forever, and Games Workshop can be one of those companies that takes a step away from big events and the pub and into evenings with a game and some friends. The company’s stock is expensive, but the successful launch of the new game signals a bit of a resurgence in popularity for the hobby. Management has shown financial caution in recent years, so fans should buy weakness.