Interactive Investor

Dividend news keeps Games Workshop shares on track to hit record high

25th July 2023 15:33

by Graeme Evans from interactive investor

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Hearing that the Warhammer firm will return millions more to shareholders this year, investors chased the shares closer to the £120 level last seen in 2021.

Warhammer 40,000 cosplayer at Comic Con 600

Caption: a Warhammer 40,000 cosplayer poses at Comic Con, in San Diego, California, this month. Credit: Getty Images

Games Workshop followers can look forward to a bumper September dividend after results today showed the business and the Warhammer hobby are both in “great shape”.

The promised 145p a share is up from 90p a year ago and is a positive signal for the year to come at a company that declares dividends based on “truly surplus cash”.

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Shares rose 60p to 11,370p as a result, with the payment on 11 September helping to keep investors on board after the company’s market capitalisation soared to £3.7 billion.

That’s almost double the valuation seen last autumn and places Games Workshop Group (LSE:GAW) in the FTSE 250’s top 10, ahead of the likes of easyJet (LSE:EZJ), British Land Co (LSE:BLND) and Tate & Lyle (LSE:TATE).

The shares no longer appear cheap on around 26 times 2024 earnings, but house broker Peel Hunt believes 2021’s record high at near to 12,000p can still be repeated.

The City firm recently raised its target price from 10,500p and said it had been encouraged by the initial response to June’s launch of the new edition of Warhammer 40,000.

It added: “The potential upside to numbers and the long-term prospects for the hobby and royalties mean we continue to see material upside”.

In terms of today’s results, Peel Hunt pointed to favourable trends after Games Workshop saw improved sales and profits growth of 20% and 28% in the second half. This compares with sales 7% higher and profits down 5% in the first half.

Overall for the year to 28 May, revenues lifted 8% to £470.6 million and profits by 9% to £170.6 million as the company came in slightly ahead of its guidance in June.

The figures are the best since Games Workshop joined the stock market 29 years ago, having delivered eight consecutive years of growth. Dividends announced and paid during the year amounted to £136 million at the equivalent of 415p a share, which compares with the 285p a share paid the previous year.

Chief executive Kevin Rountree added: “It has been another exciting year. After a relatively slow start for us, we finally got into our rhythm and have delivered profitable sales growth in all of our three channels and in all major countries.”

The trade channel is the company’s biggest and achieved growth of 15.7% in the year, having expanded by a net 300 accounts to 6,500. Retail generated revenues of £106.4 million following growth of 22%, ahead of online’s total at £91 million.

Rountree said: “Our stores are filled with staff who have extensive Warhammer knowledge, build local communities, and offer Warhammer hobby guidance and support. It is an essential and unique customer service offer that we are proud of.”

He added that the company’s digital offering has “never been richer” as social media channels help to unite thousands of  Warhammer hobby enthusiasts every day.

More than three-quarters of sales now come from outside the UK, but with two main factories,  design studios and back office support functions all based in or near Nottingham. It has two major logistics hubs in Memphis, Tennessee, and Sydney, Australia.

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