SebastianRushworth
New member
For the five year summary link below
http://investor.games-workshop.com/investor_relations/financial_results/results2006/full_year/fiveyear.htm
CHAIRMAN\'S PREAMBLE
I\'ve never done anything that\'s quite as much fun * as running a public company. The intellectual challenges and emotional rewards, even in a year of declining sales, are always there.
This year has seen both sales and profits decline. The decline in sales was expected, but it has been hard to project accurately the amount. Most of the decline is due to the trading cycles I spoke about last year - partly product cycles and partly channel problems. Some of it, though, is our own fault. During the good times, when life is easy, it\'s possible to forget the good habits that earned those good times. All of us forgot some of those good habits, and some of us forgot all of them. This is something I have been working at all year (and much of the previous year) to put right. I believe there is now evidence that we are putting it right. The standards of service which built this company are returning.
Profits are down as well. With declining profits we had a duty to look at our costs. The key question we asked ourselves was: is this still a growth business? The answer was a clear \'yes\' and so it would have been crazy to take out the facilities we had just built or those temporarily unprofitable Hobby stores. We never intended cutting costs so deeply that the infrastructure of the business that we need for our future growth would be damaged. Nevertheless the fact that profits aren\'t even lower than they are is due to Paul Thomas (Manufacturing and Supply division) and Mark Wells (Hobby division) who have managed the reductions in costs superbly, and far better and further than your chairman would have.
In a bad year the management and staff of Games Workshop have taken the opportunity to re-establish a lean and efficient company, one that will reward owners richly as growth returns and profit and cash start flowing again.
Hard times reveal the quality in a business and I\'m proud to be associated with the people who run this one.
*
During the year I have been taken to task by some owners - both individual and corporate - over our (my) refusal to do \'something\' about the share price. I believe I do \'something\' about the share price all day every day and that \'something\' is to run this company the best way I know how for long-term success. By long-term I mean 20 years or more. Leaving aside the dubious morality of trying to manipulate the share price on a daily basis (and my inevitable insanity) it is simply not practicable. Owners who share my view that I should focus all my energy on the long-term growth of the business will be pleased to hear that I will do nothing that is designed to engineer a short-term change in the share price. Owners who are disappointed by that news may wish to reconsider their investment positions.
*
On the \'investor relations\' section of our corporate web site (which has all our annual reports since 2001, and the institutional presentations we make) there is a place where people can post questions for me to answer. Mostly they are about what new models we are planning (read White Dwarf), or why we haven\'t got a store in Omaha, Nebraska (yet), or why we put our prices up all the time (we don\'t) but every now and then I get one that touches on something that needs to be explained. Blair Svendson from Missouri asked \'[why am I] seeing my favorite independent hobby stores going out of business?\'. He was referring to the United States, and so is my response. This is a question that concerns all of us at Games Workshop - staff, managers, customers and owners. I\'m not certain I know THE answer, but I have an explanation that fits the facts. Most of these small owner-manager hobby stores have thrived over the last 20 years or so on role play games, collectible card games (CCGs) and niche merchandise from fantasy movie imagery. Role play games and movie merchandise are in decline; CCGs can now be bought in mass market outlets which hurts hobby store sales. Many of these stores carry our products very successfully, but they are not enough to support the whole store. Additionally many of these stores are run as lifestyle enterprises rather than as for profit businesses; when times get hard they sometimes respond slowly and weakly which can be, and has been in many cases, disastrous.
*
I have written in the past about the basics of the Games Workshop business model and mentioned in passing that it is predicated upon the desire to own (lots of) miniatures. I shouldn\'t just mention it in passing because feeding this desire is the fundamental thing that we do. What causes these characteristics in people I don\'t know, but I do know that out there in the world is the gene that makes certain people (usually male) want to own hundreds of miniatures. We simply fill that need - it\'s not new (we didn\'t create it). What we do is make wonderful miniatures in a timeless and culturally independent way and sell them at a profit. Everything else we make and do is geared around that end. The games and stories provide the context for the miniatures, our stores are recruitment centres that simply give an opportunity to innate miniatures lovers to know themselves. Alan Merrett ** and I were sitting ruminating about this basic truth last week. I was reflecting on how it was sometimes hard for potential owners to understand the basics of the business and why it was so long-term and resilient. He reminded me how many of the people who work here forget it. There is so much stuff going on: so many army lists, so many designs, so many kits, so many campaigns, so many events, so many new stores, so many independent stockists, so many management issues that even the people who work here can forget from time to time that all we are doing, every day, is selling more toy soldiers, at a profit, to people who are truly grateful.
*
At last year\'s staff meeting (which we hold annually to discuss the year\'s results with staff) I was asked what interest \'the City\' took in our environmental and community programmes. I said \'not much\' which, given the number of questions I had had on the topic from institutional investors on the road show, was an exaggeration. On reflection I think this was a pretty poor answer. Firstly, I had forgotten the thousands of owners who do not benefit from a corporate road show who might care very much indeed and, secondly, I was dismissing way too lightly the enormous amounts of effort put into these schemes by Games Workshop staff. Later in this report you\'ll be able to read about these programmes. They are important to us for two reasons. Firstly, they are important because the good habits they demand usually result in better practices, which in turn lead (you\'ve guessed it) to more profit. Secondly, and this is the bigger reason, they are important because they are the right things to do.
Tom Kirby
Chairman and Chief Executive
* fun, that is, so long as you don\'t want to win popularity contests or track your personal net worth on a daily basis
** Alan is one of a small group of people who are responsible for helping line management maintain the integrity of our products and our business. He tends to get very passionate and excited when making points in debate and thus gets called \'Ranter\' Merrett which is a bit unfair, but funnier than Alan \'Very Passionate And Excited\' Merrett.
BUSINESS REVIEW
Summary of results
This year our sales and profits have fallen for two main reasons: firstly, the continuing decline in sales following an exceptional trading period *, and secondly, the continued reduction in our sales to independent toy and hobby retailers, notably in the US, where many smaller independent operators are ceasing to trade.
Following the decline in sales, management faced three issues. Firstly, the need for all staff to be focused on the temporary nature of the decline. Secondly, during the rapid sales upturn between 2002 and 2004, some of the good habits on which we have built the business became eroded. Thirdly, over the same period, our traditional product stream became disrupted. The first was the easiest to deal with - we all knew the franchise was sound and undamaged - all we had to do was to remind everyone to be patient. The second required us to work hard at re-training and re-invigorating our staff in the basics of providing our normal, exceptional, customer service. As regards the third we are now engaged in the process of re-establishing our normal product life cycles.
We have also taken the opportunity to examine closely the costs that have come into the business over the last few years. We believe we have made significant inroads into the extra costs that had crept in.
The results of this work leave the Company in a more healthy state at the end of this year than at its beginning. In the first half of the year we reported a sales decline of 20%. In the second half this decline slowed to 12%. By the end of the year our Games Workshop Hobby stores in seven of our nine sales businesses, including both the US and the UK - our two largest businesses - were recording growth.
Despite the lower production volumes resulting from the decline in sales, we have been able to maintain and improve our gross profit margin to 70%. This is due to price rises, improved operational efficiency from the capital investments which have now been completed in our manufacturing facilities at both Nottingham and Memphis, and the sourcing of bought-in components and print more cost effectively from both Europe and Asia.
Additionally we have reduced overheads by million during the year, whilst increasing our expenditure on customer facing activities including a net increase of ten new Hobby stores since May 2005.
Full report below
http://investor.games-workshop.com/investor_relations/financial_results/Results2006/full_year/default.htm
http://investor.games-workshop.com/investor_relations/financial_results/results2006/full_year/fiveyear.htm
CHAIRMAN\'S PREAMBLE
I\'ve never done anything that\'s quite as much fun * as running a public company. The intellectual challenges and emotional rewards, even in a year of declining sales, are always there.
This year has seen both sales and profits decline. The decline in sales was expected, but it has been hard to project accurately the amount. Most of the decline is due to the trading cycles I spoke about last year - partly product cycles and partly channel problems. Some of it, though, is our own fault. During the good times, when life is easy, it\'s possible to forget the good habits that earned those good times. All of us forgot some of those good habits, and some of us forgot all of them. This is something I have been working at all year (and much of the previous year) to put right. I believe there is now evidence that we are putting it right. The standards of service which built this company are returning.
Profits are down as well. With declining profits we had a duty to look at our costs. The key question we asked ourselves was: is this still a growth business? The answer was a clear \'yes\' and so it would have been crazy to take out the facilities we had just built or those temporarily unprofitable Hobby stores. We never intended cutting costs so deeply that the infrastructure of the business that we need for our future growth would be damaged. Nevertheless the fact that profits aren\'t even lower than they are is due to Paul Thomas (Manufacturing and Supply division) and Mark Wells (Hobby division) who have managed the reductions in costs superbly, and far better and further than your chairman would have.
In a bad year the management and staff of Games Workshop have taken the opportunity to re-establish a lean and efficient company, one that will reward owners richly as growth returns and profit and cash start flowing again.
Hard times reveal the quality in a business and I\'m proud to be associated with the people who run this one.
*
During the year I have been taken to task by some owners - both individual and corporate - over our (my) refusal to do \'something\' about the share price. I believe I do \'something\' about the share price all day every day and that \'something\' is to run this company the best way I know how for long-term success. By long-term I mean 20 years or more. Leaving aside the dubious morality of trying to manipulate the share price on a daily basis (and my inevitable insanity) it is simply not practicable. Owners who share my view that I should focus all my energy on the long-term growth of the business will be pleased to hear that I will do nothing that is designed to engineer a short-term change in the share price. Owners who are disappointed by that news may wish to reconsider their investment positions.
*
On the \'investor relations\' section of our corporate web site (which has all our annual reports since 2001, and the institutional presentations we make) there is a place where people can post questions for me to answer. Mostly they are about what new models we are planning (read White Dwarf), or why we haven\'t got a store in Omaha, Nebraska (yet), or why we put our prices up all the time (we don\'t) but every now and then I get one that touches on something that needs to be explained. Blair Svendson from Missouri asked \'[why am I] seeing my favorite independent hobby stores going out of business?\'. He was referring to the United States, and so is my response. This is a question that concerns all of us at Games Workshop - staff, managers, customers and owners. I\'m not certain I know THE answer, but I have an explanation that fits the facts. Most of these small owner-manager hobby stores have thrived over the last 20 years or so on role play games, collectible card games (CCGs) and niche merchandise from fantasy movie imagery. Role play games and movie merchandise are in decline; CCGs can now be bought in mass market outlets which hurts hobby store sales. Many of these stores carry our products very successfully, but they are not enough to support the whole store. Additionally many of these stores are run as lifestyle enterprises rather than as for profit businesses; when times get hard they sometimes respond slowly and weakly which can be, and has been in many cases, disastrous.
*
I have written in the past about the basics of the Games Workshop business model and mentioned in passing that it is predicated upon the desire to own (lots of) miniatures. I shouldn\'t just mention it in passing because feeding this desire is the fundamental thing that we do. What causes these characteristics in people I don\'t know, but I do know that out there in the world is the gene that makes certain people (usually male) want to own hundreds of miniatures. We simply fill that need - it\'s not new (we didn\'t create it). What we do is make wonderful miniatures in a timeless and culturally independent way and sell them at a profit. Everything else we make and do is geared around that end. The games and stories provide the context for the miniatures, our stores are recruitment centres that simply give an opportunity to innate miniatures lovers to know themselves. Alan Merrett ** and I were sitting ruminating about this basic truth last week. I was reflecting on how it was sometimes hard for potential owners to understand the basics of the business and why it was so long-term and resilient. He reminded me how many of the people who work here forget it. There is so much stuff going on: so many army lists, so many designs, so many kits, so many campaigns, so many events, so many new stores, so many independent stockists, so many management issues that even the people who work here can forget from time to time that all we are doing, every day, is selling more toy soldiers, at a profit, to people who are truly grateful.
*
At last year\'s staff meeting (which we hold annually to discuss the year\'s results with staff) I was asked what interest \'the City\' took in our environmental and community programmes. I said \'not much\' which, given the number of questions I had had on the topic from institutional investors on the road show, was an exaggeration. On reflection I think this was a pretty poor answer. Firstly, I had forgotten the thousands of owners who do not benefit from a corporate road show who might care very much indeed and, secondly, I was dismissing way too lightly the enormous amounts of effort put into these schemes by Games Workshop staff. Later in this report you\'ll be able to read about these programmes. They are important to us for two reasons. Firstly, they are important because the good habits they demand usually result in better practices, which in turn lead (you\'ve guessed it) to more profit. Secondly, and this is the bigger reason, they are important because they are the right things to do.
Tom Kirby
Chairman and Chief Executive
* fun, that is, so long as you don\'t want to win popularity contests or track your personal net worth on a daily basis
** Alan is one of a small group of people who are responsible for helping line management maintain the integrity of our products and our business. He tends to get very passionate and excited when making points in debate and thus gets called \'Ranter\' Merrett which is a bit unfair, but funnier than Alan \'Very Passionate And Excited\' Merrett.
BUSINESS REVIEW
Summary of results
This year our sales and profits have fallen for two main reasons: firstly, the continuing decline in sales following an exceptional trading period *, and secondly, the continued reduction in our sales to independent toy and hobby retailers, notably in the US, where many smaller independent operators are ceasing to trade.
Following the decline in sales, management faced three issues. Firstly, the need for all staff to be focused on the temporary nature of the decline. Secondly, during the rapid sales upturn between 2002 and 2004, some of the good habits on which we have built the business became eroded. Thirdly, over the same period, our traditional product stream became disrupted. The first was the easiest to deal with - we all knew the franchise was sound and undamaged - all we had to do was to remind everyone to be patient. The second required us to work hard at re-training and re-invigorating our staff in the basics of providing our normal, exceptional, customer service. As regards the third we are now engaged in the process of re-establishing our normal product life cycles.
We have also taken the opportunity to examine closely the costs that have come into the business over the last few years. We believe we have made significant inroads into the extra costs that had crept in.
The results of this work leave the Company in a more healthy state at the end of this year than at its beginning. In the first half of the year we reported a sales decline of 20%. In the second half this decline slowed to 12%. By the end of the year our Games Workshop Hobby stores in seven of our nine sales businesses, including both the US and the UK - our two largest businesses - were recording growth.
Despite the lower production volumes resulting from the decline in sales, we have been able to maintain and improve our gross profit margin to 70%. This is due to price rises, improved operational efficiency from the capital investments which have now been completed in our manufacturing facilities at both Nottingham and Memphis, and the sourcing of bought-in components and print more cost effectively from both Europe and Asia.
Additionally we have reduced overheads by million during the year, whilst increasing our expenditure on customer facing activities including a net increase of ten new Hobby stores since May 2005.
Full report below
http://investor.games-workshop.com/investor_relations/financial_results/Results2006/full_year/default.htm
