Thursday, July 28

Financial analysis of GW


Ok folks, time to get a little corporate now.  Usually I stray away from talking GW corporate stuff, but with their recent Year End Financial Statements just coming out I can't help myself.  While reading it there was some really interesting stuff out there, lets jump right in and see what goodness Tom Kirby and his associates have given us this year.




First, before I start I wanted to give you a little background on myself.  I have an MBA, Suma Cum Laude,  in Finance and Accounting as well as an Undergrad in Business Admin and Finance.  I am also in the middle of my CFA level three exam prep and I hold a series 7 and 66.  I have also been working on Wall Street managing investments as an analyst for a large national bank for about 10 years.  The point of this isn't to stroke myself or to pat myself on the back.  I just wanted to give you the angle I am coming from, I might not be right (as my wife kindly points out)... But I do have a lot of background at looking into these things. I also want to note that while Ill try to take this from a professional standpoint, it is going to be hard not to insert my 'consumer,' side.

Anyhow, here are some of the more "interesting," things I found-

First things first... Despite popular opinion, this years financial results do not include the recent price increases.   On may 17 2011 Bell of Lost Souls reported the rise in prices by GW.  The Financial year end for GW is May 29.  So, there might be some tiny bit of change there, but it is a non factor when looking at these financial results. Likewise, the "Finecast," line wasn't reported until May 24, 2011 (also by BoLS).  As such it is also a non-factor in this financial report.

Moving on, lets see how GW did.

***ALL NUMBERS ARE IN POUNDS STERLING***

1. Revenue:
 In 2009 GW top line revenues sat at a nice 125.7M, in 2010 it rose slightly (flat) to 126.5M.  However, in 2011 Revenue (aka sales) fell to 123.1M.  This means that this year is the lowest year since 2008 (110.3M) which was in the middle of a very bad recession.   Well, if the recession is over (debatably) then why is Games Workshop losing money?

2.  Chairmans Preamble:
  For those of you who don't know, the Dark Lord of Games Workshop is Chairman Tom Kirby.  He is the largest single (as an individual) shareholder (6%) and he is the Chairman of the Board.  First off he says they know by trial and error and not "sophisticated analysis," how the business works.  Personally I don't like it when a chairman just pushes aside "sophisticated analysis," but that is just me.  He then goes on to say "We know...how to surprise and delight our customers over and over again." At least half of that is right, we are constantly surprised.  And even though Finecast is not reflected in the financial data (As stated above) he goes on to use it as a shinning example.  Doing this is like saying "I know I placed 130th at the last con, but my new list is awesome and will get me 1st!"  He should talk about finecast, but as an example of what is to come, not an example of what is. Mr. Kirby then continues to tout how well the return on capital is doing for the investors.  Hmmm Revenue is at a 3 year low, Earnings per share is down year over year and the stock price has gone from 439 to 440... Wow! Don't you feel the money your swimming in?  They did issue a dividend this year though (In a losing year?!).  Mentioning the dividend, he then goes on to say that it isn't stable and is in fact "happenstance," that doesn't make me feel comfotable as an investor.  Why? Because I buy stocks for 2 reasons 1. GROWTH! (NFLX) 2. Stable and predictable dividend payments (Utilities) if you can't do either then why do I want to own your company.  Tom obviously has no idea what he is talking about, and it saddens me.  The only hope that his preamble offers are these words (Hopefully in reference to himself) "retires," and "Succession."


WAKE UP!

3.  CEO Commentary
 Now lets move on to someone who at least has an idea of how to run the firm.  Mark Wells is CEO and is someone who would run the company very efficiently if Kirby got out of the way (IMHO).  Mr. Wells starts off with saying that the year provided "satisfactory performance."

 He specifically mentions that the specialist Forge World and Black Library businesses showed strong growth.  I personally have dealt with the head of American Operations over at Black Library and I must say that they really understand what it takes to sell their product. Black Library should be held up as a shinning example of how to run a company.

  An interesting point that is made is that the ROC (return on capital) has risen from 44% in 2010 to 45.7% in 2011.  For those of you who want to know,  return on capital is calculated as:

Net Operating Income 
Book Value of Invested Capital 

Net Operating income = Earnings - Cost of goods sold- admin expenses- depreciation - other expenses + non-operating income

Book Value of Invested Capital = Original value of investment - depreciation/ loss - liabilities 


This rise in ROC is likely from cost cutting (lower admin and cost of goods sold means higher Net Operating Income and as such the Numerator is higher, and because the numerator is higher the ROC is higher). Because we know, from past annual statements,  that it wasn't revenues which was increasing this number.

 Mark then dives straight into Fine Cast. Most of it is corporate babble to shareholders about how the new product is great and how it has been accepted by the consumers like wildfire.  There is one thing that was interesting in this corporate drivel.  He has pinned the cost of Finecast directly on QC (Quality control).  He claims that maintaining such a high level of QC is the reason that the costs are much higher than metal.  Tell that to everyone who sent the product back "the reactions of customers...has been overwhelmingly positive." I have no idea what he is basing this off of...But it is most likely sales, in which case his opinion is being skewed because those models were likely to be purchased in metal and were simply purchased in finecast because it was the only thing available.  He really should do a study to see how many purchases were made simply because of the new material and not just "I need a crowe."
  
  The only interesting thing (From a business perspective) that came out of his comments on WHFB is that they have finally admitted in writing that 40k is snuffing out WHFB and that GW is doing everything they can to "revitalize," it.  We all knew it, but GW had never flat out admitted it until now.

 Interestingly, GW has embraced the internetz!  They will be oopening 392 facebook accounts (one for each store).  I think this is a great initiative, though a little late to the party (since facebook is shutting down march 15th ;) lol)  They also congratulated Black Library for finding the Apple Bookstore and noted that it has not affected the paper sales in a negative way.

A very interesting note here, there is absolutely no mention of Tom Kirby's pet project: the one man store! In fact they go quite the opposite direction and only mention fully staffed hobby centers and their managers and how they are investing in training those managers to be more effective.  Sadly though, Tom Kirby will be teaching a class to these managers called "Understanding the Games Workshop Business." In my opinion Kirby should be sitting in on the class, not teaching it.  But that is my personal opinion.


ARE YOU BORED YET!!?? NO?....OK LETS JUMP IN AGAIN!


4. FINANCE REVIEW!!!
 - Sales: The big one here is that sales in Austraillia were down 11.8% during this period.  Remember, this is before the price hike in March.  It can't be getting better down under.  The main reason that this wasn't worse was becuase they had massive consolidations in North America which saved 3 million pounds. 

- Stock vs. index: A bright point in all of this, When looking at the long term the GW common stock has outperformed the FTSE small Cap index, but it should be disclosed that the index which is chosen to compare itself to is picked by the company.  

- Tom Kirby recieved a 20% pay increase while the CEO recieved a 5% increase, its good to be king!

- Free Cash flow: This is a measure of how much actual cash a company generates after doing business.  It is like asking how much gas you have in your car.  It is calculated as:

 EBIT (1-tax rate) +depreciation & Amortization - Change in Net working capital  - Capital Expenditure
Or essentially it mean "how much cash was left over after running the business and doing upgrades,"
The Free cash flow for Games Workshop was 14.253M pounds, which is 11.80% of revenue.  Last year  was 18.594 (14.69% of revenue).  As we can see the year over year cash flow for GW is down.  Though it is still positive.  This isn't a horribly negative thing, but GW should really be keeping an eye on their cash flow.  The easiest way to change this is by increasing earnings and lowering capital expenditures.  This is most likely why they have increased prices recently.  Time will tell if that was the correct action or not. 

- Current Ratio: This is a measurement of how quickly the company can pay its short term debt. It is calculated as:
Current Assets
Current Liabilities

A number under 1 means that the company can't pay off its obligations if an emergency happened and that the company is in bad financial health.  In essence you want this as high as possible. GW's Current ratio is 1.98, this isn't bad and means that the company has about twice as much current assets to pay off current liabilities than it needs.  It is mostly their large cash position which allows this number to be high. It is also the reason they initiated a dividend, if this number was closer to 1 then no dividend would have been issued (most likely). 



CONCLUSION:
- At this current time GW is in a decent enough financial position.  I wouldn't say that they are in any risk of failing and going out of business.  However, they have some immediate problems that they need to resolve.  Mostly their main problems lie in increasing sales.  This will raise Earnings per share and obviously it will increase revenues.  They need to particularly focus in UK, North America and Australia because they are losing revenues there year after year.  I personally think UK and North America will come out of it on their own, but Australia needs a lot of focus to bring it back into the black.  
 If I were GW CEO I do not believe that my choice would be to increase the cost of my products this year.  I believe that the elasticity (how much the change in price changes demand) of the GW product is not as much as GW would like to think, as such increasing costs will only serve to lower demand, which in turn lowers revenues.  Perhaps one way to rectify this would be to re-do the apocolypse boxed sets.  That way you don't actually have to lower prices permanently, but you get the cash-flow effects of lowering them.  If this increased revenues GW would be a very attractive small company to buy, especially if it could maintain its liquidity and cash/ dividend positions.

I could go on and on, but this is already getting long in the tooth.  What did you all think of this? did you even finish it? Thanks for reading anyhow, comments are welcome below.

Duke

83 comments:

  1. i would happily read more of this. it is great to get an analysis from someone who knows what they are talking about. to me, i can understand the gist of the report, but the numbers lose me very fast.
    thanks a lot!

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  2. This is actually very interesting... thanks for sharing and I would read more if you had posted it!

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  3. I agree with Atreides above. I read the report, but I don't have the knowledge to really pull the information out of it in a meaningful way as you just did.

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  4. Can you do my taxes next year?

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  6. Good report BTW, I like haveing some one who knows relate this to me in a fasion I can somewhat understand.

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  7. Glad you guys liked it... I was trying to write something that everyone could read/understand/ appreciate. Sometimes Financial reports cab be really dry.

    Here is the full analysis in a sentence. GW is like an old lady slowing down (lower revenues) on the highway for no reason but she has a full gas tank (cash flow) to do that for a long time. All she has to do is step on the gas and she can go really far (profitability).

    Perhaps I will do more stuff like this since you all could have read more. I just dust want to put everyone to sleep.

    Duke

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  8. Really love the Post. More is always welcome!
    And if you don't mind, share your posts on twitter.

    Greetz

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  9. I found that very interesting. I've been too scared to even attempt to read the report, so it's great reading a summary/analysis of it by someone who knows what it is they're reading.

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  10. 20% pay increase? Disgraceful. Considering how he's running this companies finances, this should be considered embezzlement.

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  11. Great read, thanks

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  12. Really nice job Duke! I could have read way more !

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  13. As a Future Store owner, and one who is studying accounting, this information is immensely helpful when looking at the big picture. Thanks for all the hard work, and keep it up!

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  14. Very good analysis, I would like to read more in the future.

    So would it be worth it to invest in the company, or would you stay away from it like the plague?

    From what I've gathered, Tom Kirby is actually doing more harm then good. If thats the case, what can be done to get him out of gw and replace him with someone more...buisness savy?

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  15. I say you figuer out how to buy atleast 7% of the shares so you can become chairman and fix GW. I love the company, but they have been stepping on their own feet time and time again this year for some reason. And I would cry tears of joy if they brought back the Apoc boxed armies.

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  16. Good read, and thank you for writing it all up. I know these things aren't easy to write, especially when you have a lot of explaining and equations to put in HTML, which is generally not easy. But the review is very accessible and brings up interesting scenarios.

    I was going to make a snarky comment about how your education unfortunately didn't include grade school grammar, but I'll just sneak it in after a compliment.

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  17. This made interesting and clear a report which was all mumbo jumbo for me. Thanks, Duke. And yes, I could have read more too.

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  18. That's what I has an assistant for. The only thing I need commas and periods for is to organize all my dolla dolla billz, y'all.

    Seriously though, I'm lazy with Internet grammar. If this was an official document it would be more... Um; through. And stuff.

    Duke

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  19. Fantastic stuff! Thank you for taking the time to do this!

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  20. Outstanding write-up, this confirmed my suspicions the numbers did not intuitively match up with the official report/explanation offered by Mr. Kirby.

    Cheers, and keep up the good work!

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  21. Great write-up! Not dull at all, well written and engaging to the average reader.

    A 20% raise for Tom Kirby is shameful. Shame on you, GW: raise the prices of your products to pay for Kirby's next boat? It is a terrible example of greed and stupidity being rewarded.

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  22. The recession is still affecting business badly in the UK, FYI.

    They're doing pretty damned well compared to other UK businesses.

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  23. It was good to hear from someone with an expert analysis. I for one wouldn't mind reading more articles like this. Don't sell yourself short, business talk may be dry reading to nonbusiness people, but to alot of us it is very insightful.

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  24. Really enjoyed this, Duke. Many thanks.

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  26. loved your analysis, a concise & appropriate summary I thought.


    On p.6 when Kirby is talking about the class the section ends with "The politically correct need not apply" which seems a strange way to do business.

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  27. @ grey tide: depending on how you judge "over," you are right. Generally speak ing a recession is defined by successive quarters of negative GDP in a country. It has been a while since I checked the GDP of the UK, but even if it is "out if recession," that doesn't mean much to the bloke who lost his job and can't find one because nobody is hiring.... essentially "recession is over," is easily debatable.

    However, I wouldnt say GW is doing "damn good." Yes they are in a good place from a cash standpoint, but if they don't fix the revenues problem things could get ugly. The reason is simple, you can only cost cut your way into cash flow for so long. Once your at your peak operational efficiency you simply have to sell more stuff. I do not believe they are a bad company, but I would rate them as a "hold," (as opposed to "buy," or "sell,"). I hope this came across correctly, I appreciate your reply.

    @ anon and everyone else:
    It seems like everyone likes this type of article from me. Perhaps I will do a series of articles on "If I were GW CEO." thoughts?

    Duke

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  28. funny how the biggest thing I read on here was Facebook is closing down march 15th?? I had not heard this...

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  29. Great write up! I had one nitpick though: You stated that the free cash flow this year was 14,253M. To the layperson that reads as 14,253 million pounds, or 14.253 BILLION pounds. If they had that much free cash there would be no problem with the company whatsoever!

    You might want to consider replacing that comma (and the one in the ~18M number for last year) with a point (.) instead.

    Thanks for taking the time to read through this stuff. I was thinking about figuring out whether GW was worth buying back into this year, but since the stock price and earnings are flat and free cash is down, I don't think so.

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  30. Very nice break down, if only the stock holders would read this and start to ask some very important questions in their next meeting. Thanks for the good read!

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  31. Great post. I like a lot of people get lost in the numbers.
    In regards to Australia (and New Zealand which I'm guessing is included in that) I would also be watching the UK figures. A lot of people ordered from the online UK stores and since we now can't this will have a small influence on them. I'm guessing a very small influence over the total amount but a influence none the less.

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  32. I like the idea of this sort of article and thought it was immensely interesting once I got past what came across as a hostile consumer bias in the first few paragraphs. I appreciate opinions for sure and wouldn't want you to stymie them outright, but I guess I'm so completely burnt on the whole "evil empire" perception and all the negativity towards GW that when I'm looking at legit financial analysis I'm looking for less "name calling" type commentary and more of the actual analysis.

    Don't get me wrong, you delivered in the end, but the Dark Lord business was a bit much.

    Also, one last note. When commenting on Mr. Kirby's % wage increase it'd be good to drop actual figures. I don't know how much he makes but a 20% increase means much different things if someone makes $8.00 an hour, $40,000 a year, or $500,000 a year.

    Anyway, I'd definitely like to see more articles "mostly" like this. ;)

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  33. Duke, I'm curious. What would you predict the GW numbers to look like at the end of the year, based upon all the actions they took at the end of May (price hike, embargo, Finecast)?

    I know you're not a soothsayer. I won't hold you to anything. :)

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  34. What I want to know is how is it possible for us to buy enough stock as a group to take the company over. How much money would that take?

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  35. It wouldn't take much to resolve their issues in Australia. Their lower sales last year (2010 to 2011) will be due to buyers purchasing overseas. Their losses this year (2011 to 2012) will be due to the mass exodus from GW products due to over inflated prices and the general feeling of being stabbed in the back. Australia currently pays twice as much as the UK or US for the same items.

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  36. Very interesting. Thank you i would love to see a follow up.

    One thing i noted. I went back and read the financial reports from when the LOTR bubble burst through to the current day and the situation is worse than indicated here. You will notice gross revenue for the years up to 2008 was fairly static at around 110. then it jumped to 120. that was due to the $US dropping. So if you extend those figures outward you will see for around the last 8 years prices have gone up by ~50% or more and revenue is static. they are doing far fewer sales.

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  37. @Nick Baran: I did try to stray away from the consumer side, but it is really hard in this case :( I do feel (I don't know, I just feel) though that Tom Kirby is one of the biggest reasons that GW makes a good portion of their less popular decisions. but your right, we could all tone down the evil empire talk a little. To answer the pay scale thing... He went from 403,00 in total compensation to 479,000 this year. Granted it isn't exactly 20% but a pay increase of 79,000 a year is outrageous, especially when the next highest paid employee (CEO) makes 268,000 per year. and the COO/CFO makes 187,000 per year. (Remember that this is in pounds, not dollars.) In dollars he made $782,877 last year.

    @Anonymous 1: I once called investor relations and asked about buying a lot of stock. To make a really long story short their response was "good luck, we are a tightly held company and you likely won't be able to buy a significant portion, if any." This was a very interesting position for a publicly traded company to take.

    @Anonymous 2: SPOT ON! I didn't want to go too much on to year over year numbers, but they are really struggling to get those revenues back up, even with price increases. It is my opinion, as I stated earlier, that it has to do with the elasticity of the product.

    Duke

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  38. @Spy_Smasher: I could do some projections for the next year, but that would take me a little longer than I want to devote to this reply. Perhaps that could be another post (Then we can see how wrong I am next year!)

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  39. Amazing write up!
    Allow me to play Devil's Advocate... instead of a series of articles about what you would do to fix GW, how about an article or two on how Privateer Press or Wyrd could surpass them?

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  40. Sounds good to me.

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  41. Honestly I don't know a lot about PP or Wyrd, if I could get ahold of their financial statements I would love to take a stab at it. Anyone know if they are publicly traded (I don't think they are).

    Really all I can say on "how to beat GW," is simple. I have never seen a company fail solely on the basis on doing right by the customer 100% of the time. If you take care of your customers and listen to their purchasing habits/comments you can't go wrong. (But you didn't need me to tell you that.)

    Duke

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  42. Great write up and your Analysis on Kirby is one that I share. I also completely agree the elasticity of the product is at or near its breaking point. There is a finite number the market will bare and combine with the long term effects of under and poor employment rates, as well as price increase fatigue by the consumer. You potentially have a recipe for continued loss on year over year sales with shrinking revenue.

    Kirby's salary increase is a slap in the face to the work force that he bravely fired or removed from management to save cost. The single man stores will be a true loss leader as shrink or lose due to theft will likely be higher.

    Again well reasoned and talked out to the everyman analysis of GW report. I think Finecast, higher costs and Fantasy really taking a pounding will either force GW to make stronger longer term business decisions. Or they will continue down a short term path that will eat there cash position.

    They are in financial terms serviceable but I don't call a company with lower sales, higher cost of goods sold, healthy with a year over year cash position lowering. They are nearly out of cuts to make which as you said means only path to sustainable cash is through revenue growth. Growth comes from sales not from price increases.

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  43. I've never read your blog before, but this is a wonderful article. I am pleased that you have condensed this report into something readable by the masses.

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  44. Very nice translation to non-accountants!
    Want to increase sales for GW? Start a pre-Heresy line, including Primarchs and Knight titans. That for sure would fix sales everywhere....

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  45. Good article.

    One thing that I noticed when perusing the report was that they mentioned 150,000 new GW online store accounts, and the mention that this wasn't done through price decreases or sales. To me it seemed like they were pointing a finger at all the independent stores who sell at a discount online and saying "Nah-Naaa." It also says to me that there may be some dissent in the company as to whether GW needs to lower prices to compete with their own stockists.

    I don't know if I feel that a 1.98 current ratio is particularly good. I mean, yes they are in a good financial position, but you want your current ratio to be right over 1. The only cases where you need to get it higher is 1) You plan on increasing your current debt or 2) You foresee a very bad time ahead where you will need the extra capital. Generally with the extra money a company should do one of two things, 1) Invest in long term equipment or upgrades, or 2) Pay off long term debt which will save in interest costs. I seem to remember that there was mention about some more investments so I think that that is what GW is going to do.

    Finally, about Australia, Like you said the financial statement is pre-New Australian rules. I would venture a guess that the new policies were in response to those bad sales. Think about it, sales are dropping over 5x more than anywhere else, and we have a bunch of stores in the UK selling to Australians. I think that the new policy was to do something about it, and i would not doubt at all if sales rose in this coming year down under.

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  46. I also would like to know what is meant by "the politically correct need not apply" for these manager positions and course....

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  47. Interesting read. I appreciated the simplification as I had an interest in reading the raw data, but have neither the time nor familiarity with the Jargon to do so.

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  48. @Tyler: Good point on the Current ratio. But remember, some companies just simply prefer to have a higher current ratio. You need look no further than Google to see this in effect. I personally agree, though, once your above 1.5 you have 'cash to spend.' Perhaps GW intentionally invested in the Finecast line because they have this much cash on-hand... Who knows.

    Duke

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  49. @Duke/Tyler- Not sure what their previous years current ratio was- I'd predict that it was lower, but they may well have increased cash on hand to a) make capital infrastructure investments (new molds for finecast, putting out the entire DE line in a few waves, etc) and to b) continue to weather the financial turbulence via strong cash reserves.

    But I do agree, that as an investor, I'd like to see them utilizing more debt financing- that would present a stronger future outlook from management.

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  50. 20% increase? Really? I would be pissed with 5% expecialy if I was the one reinflating the raft all the damn time.

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  51. Great report! In my opinion, the price hike may not have been the best move at this time. With inflation and unemployment being high along with possibly less disposable income, not many people may be able to afford keeping up with the hobby.

    And since I am Asian I maybe biased to say that going global(rather than just US,EU,UK and Aus) for GW could be an option. XD
    But prices should be lower for competitiveness sake. Again, this is just probably me.

    And I also second the comments on the current ratio.

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  52. Brilliant. I've only got a BA in International Business, so a lot of the subtleties are lost on me when looking at the actual report. I'm very thankful for this write-up! It's not only educational, but the conclusion to it all is good! GW is in a good position to push forward, make new products, make new Codices, and continue supporting themselves and the hobby. Now we just have to see what they do with their cash! I'd like to see them use their cash in creating new products at higher quality (finecast) rather than paying out dividends though.

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  53. Read the article, not all the comments. Thank you very much for putting it in terms lay-people can understand! I was trying to make sense of this yesterday, and I got lost after Mark Wells stopped talking at me :)

    Very helpful, and as others have said, would gladly read more!

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  54. Thanks alot for the another walkthrough this year, hope you will do it again next year.

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  55. I run my own wargames business (Veni Vidi Vici) and my view is that the recession is still far from over, GW has done a good job in keeping turnover strong. Why no mention that profits have (almost) been maintained - however I know that figures can be shaded to meet desirable targets.

    The biggy for me is saying that price elasticity is not what GW thinks. Well predicting the future is a dangerous business, historical trends would indicate that GW has is right and most customers are prepared to pay the higher prices.

    But Finecast might just be the killer here as GW fans are no longer being asked to pay more for the same product but rather more for a new product. If they don't like the new product, then they could vote with their feet (and wallets).

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  56. Tom Kirby's significant pay rise should be taken as a sign that he plans to retire, and soon.

    It is not uncommon in UK businesses (can't speak for the ROW) to give directors one last large pay rise, to bump up their final salary based pension.

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  57. The issue with sales in Australia is that GW charges Australians TWICE what they can buy the same product for from the UK. Coupled with the high Australian dollar $1AUD currently = $1.1USD or 67p, this makes the business conditions for GW in Australia rather toxic. Noting the wargaming demographic, its pretty reasonable to assume that most of the Austyralian gaming community can use the internet and buy the same product at half the price via online sales. GWs recent Rest of the World policy change to prevent UK sales to the antipodean community worked for about 4 weeks until legal work arounds were established by Wayland Games and others. Ultimately all they've done is contribute to the toxic reputation GW now has in Australia and contributed to the flow of customers to Privateer Press.

    IMHO to revert the sales slide GW needs to reassess its Australian pricing strategy (a Land Raider in Australia now costs over $100USD). Rather than relying upon increased prices for to generate additional revenue they need to restore their reputation, reduce prices and rely upon increased volume. Put simply, the massively inflated start-up costs of the hobby in Australia when compared to the rest of the world are stifling the growth of the customer base. Few parents are in the position to (or would consider) dropping hundreds of dollars so that there 12-14 year old can try a new hobby - risking it being dumped at some future point in time when their interests change. Without the 'new blood' coming into the hobby, growth will remain stagnant and, as seen in your data, eventually decrease as older gamers (who got hooked as kids) vote with their wallets and head elsewhere to satisfy their plastic-crack addiction.

    Great post and thanks for the time it took to put the analysis together.

    Death to Kirby!!!

    TrozOz

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  58. Nice write and easy to understand. Thanks!

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  59. Really enjoyable! I'm studying business studies at the moment but it's great to be able to read a good intelligent summary without having to go through the whole report with a text book next to me.

    One thing i'd add is that Tom Kirby was lauded a couple of years ago when everyone in GW just had the same £1k bonus scheme whatever they did for the company. Funny that his basic wage should almost double in the same time...

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  60. Thanks Duke, I came here totally expecting "analysis" from someone who is writing from a completely consumer oriented point of view. I'm glad to see an actual financial analysis!

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  61. Good Job! I would have liked a longer read myself. :)

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  62. Thanks for this analysis! It is alway good to here someone explain stuff like this to the ones who are not from this kind of business.

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  63. I really appreciate your work. It is good to see a common language breakdown of their report. Thanks. Australia is going to be a tough nut to crack as the support base here feels badly done by especially since we are paying such high prices for the product compared to other countries.

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  64. Just reading through your comments and noticed the one one buying GW stock, and the answer that the GW gave you about buying stock.

    Despite being a "public company", GW stock only does a daily average trading volume of approx. 1000 shares. 1000 shares out of 31 million. Just 3%. That means that the people who have the stock are most likely holding onto it long term, not trading it daily like some stocks.

    I know that my fiance's grandfather owns a "public" bank, but its shares rarely are sold, and so there is almost no ability to buy them even if you want them. GW isn't going to sell more shares just so that people can buy them, it doesn't need the cash and would only decrease the value of the stock.

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  65. Thanks for putting up an analysis from someone educated in the field. Unlike Stelek.

    If I need an expert witness in gaming industry financial analysis, I know who to call.

    Law Students and Gamers over at
    dissentingdice.blogspot.com

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  66. @Tyler: I am aware of the factors you point out. Generally if you are that closely held an illiquid it is often better to simply be a privately held company. Still, I talk to many small, illiquid public companies and usually you get a response something like "we would love for you to buy our stock! Please remember though that we dont do much trade volume."

    In the end it is too bad that they don't have more shareholders, because most likely a heavy portion of those minority share holders would be gamers... Oh well.

    Duke

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  67. Fantastic!! Thanks for putting it in terms the majority of us understands. Would love to read more like everyone else. Look forward to any other reports you may have!!

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  68. Thank you for this summery and review. The +20% for Kurby made me spit my tea (I normally don't drink tea, but sitting down to an article on a brit company demanded such.)
    As I read your review I thought 'if this were a check-up the response would be, not sick, but could do to make some healthy living choices.' We will all be watching the Australian market very carefully.

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  69. Thanks for putting this together, it was very interesting, and a good analysis. I thought it came across as very fair, and more objective than scathing.

    I am keenly interested in the effect the rising costs of product in Australia might have on GW, as I live here. I suspect that most of the lost sales GW saw in this report were not going to other miniature companies like Privateer Press in any real volume (though some are), but being absorbed by overseas sales and other forms of entertainment, such as eating out, media and games.

    I would be interested in seeing what kind of gamers are still buying, in terms of their time in the hobby and how much usable product (armies large enough to field) they have. I suspect the declining sales are from new gamers getting their first army and established gamers who have multiple 'complete' armies. That is just a guess on my part though.

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  70. You should absolutely do a series of articles called "if i were a GW CEO"! Im sure you have a bunch of associates and colleagues in the same field(s) as you that you could even collaborate on and provide second and/or third opinions of the situation.

    Im always trying to figure out whats REALLY going on over there at GW. Having people who are qualified to speak about it (and provide second/third opinions) would be a huge relief.

    Keep up the good work!

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  71. @Duke,

    For the record, I didn't imply GW was a Buy, I just said they're doing well COMPARED to other UK businesses, who are mostly screwed.

    All UK businesses are struggling to compare favourably to normal standards at the moment.

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  72. Having had to do this myself, I wanted to suggest that the 150,000 new webstore accounts is probably a product of the new practice of carrying smaller inventories in the stores--if you want something "special ordered" in-store, you have to do it through their web terminal and using a webstore account. I myself had to set one up just to pre-order a new release item, so this number may be in fact composed of existing rather than new customers.

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  73. thanks for the input - more would be welcomed I'm sure!

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  74. i have to say, i also like this thread, very informative.

    but i also want to say that i always laugh when people say "the recession is over", because, yeah, "technically" it is over, but its like an earthquake, after a quake theres alot of damage and alot of problems that need fixing, meaning it will still be a while before things are fully fixed and repaired.

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  75. I think GW really do overestimate their price elasticity. I wouldn't be so churlish to suggest they don't understand that there are substitutes for their products but they are certainly pricing themselves out of sales. This is especially true due to decreasing point costs in Codices meaning that one has to pay from upwards of £200 to even get started.

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  76. Interesting read I reposted. The Facebook closure on the 15th has now been confirmed to be a hoax.

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  77. I would like to thank you for putting this article out. It is apparent that GW on certain levels, do not know what they are doing. They assume they do and fail. Maybe they should start listenining to people outside of the company (critics) instead of all the "yes" men within the company.

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  78. @Recession: Yes, it was a hoax... I just thought it was funny that GW finally comes to the internet table and there is a (fake) news story about Facebook closing. In my line of work I have a few 'indicators,' of when to get out of a stock or sector. Perhaps I will add "GW enters into the sector," to one of my 'sell,' signals.

    @Anon: From what I know of GW they are a company rife with fear. They are afraid of everything, even their own people. A company that is lead by fear is usually on a timer before they explode, however an attentive management change can turn that timer off. Sadly, with Kirby in the lead I don't think the 'yes men,' are going anywhere.

    Duke

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  79. To
    Respected sir

    From
    Ramesh kamuni
    Mail:k.s.srinivas123@gmail.com
    Mobile:+0091 9246087265

    Respected sir
    Please see the link if possible sir
    1.The advatesment on the blog http://tristencosgroveblog.blogspot.com/
    2.The request on the link
    http://tristencosgroveblog.blogspot.com/2011/09/microfinance-in-india-crisis-at-bottom.html

    Thanking you
    Yours truly
    Ramesh kamuni
    India.

    ReplyDelete
  80. In few words he is more than suitable to in the position that he is right now. but he used his humble skills to do it.

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  81. GW has many problems. The main one being that they try to abuse their customers as much as possible. Now, while I am a gamer, I have been an accountant and controller for various manufacturing concerns for over 30 years. From a business standpoint, I can't really argue their logic in increasing prices without seeing their background calculations. However, in this tough economy, when many people haven't had a raise in a couple of years, informing the gaming public that they are financing a 20% raise for the head man just won't sit too well with the gaming community.

    In fact, several of the people that I game with have stated that they will buy anywhere BUT GW for the coming year. I am talking about individuals that have spent more than $20,000 over time on their various 40k armies.

    To comment on the Australian situation, GW has really shot themselves in the foot there. They have regional pricing that makes their product so expensive that the average gamer cannot afford to keep buying on a regular basis. By restricting the hobby stores in Australia from purchasing product through (for example) a US distributor and passing the savings on to their customers, they gouge the Australian consumer for the sake of a few Pounds Sterling. I occasionally sell some of my excess GW stuff on ebay and have had Australian bidders willing to pay (what I consider to be exorbitant) shipping if they win the bid as they are getting the product at a substantially reduced price. I don't sell painted items, only assembled and sometimes primed.

    Summing it up and reading this article as both a business person and a gamer, I am concerned that my not inconsiderable investment is going down the drain as the game becomes so cost prohibitive for the new player to enter. I expect that in 10 years without a serious review of their business model, GW may have trouble existing as an independent hobby manufacturer, let alone actually be a game company.

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  82. Dear Duke

    Thanks for your work.

    First, I really appreciate an interesting read all the way through.

    Second, from reading all the comments here I hope you feel inspired to write an even deeper analysis next year. I'm sure we will all follow you, in reading, as deep as you would like to go.

    Third, one of the hardest things in life is explaining complicated things simply.

    Thanks.

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