Interactive Investor

Games Workshop shares surge 10% to equal 2024 high

A brief year-end trading update has got investors excited about the fantasy miniatures maker. Graeme Evans explains why.

19th June 2024 15:59

by Graeme Evans from interactive investor

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Warhammer shop in London Getty

A profits surprise by Games Workshop Group (LSE:GAW) cheered its many stock market followers today as the Warhammer figurines maker surged to the top of the FTSE 250 index leaderboard.

The guidance for a surplus of at least £200 million in annual results on 30 July compares with 2022-23’s outturn of £171 million and the £190 million expected by house broker Peel Hunt.

Shares responded by setting a high for the year at 10,370p before settling this afternoon at 10,110p, still representing a bounce of 675p. They had traded at 11,700p last summer, but today’s high of 10,410p equals the best price the shares have traded at since before last December’s disappointing half-year update.

The recovery is a welcome development for an army of retail investors, as well as holders of the Baillie Gifford UK Growth Trust Ord (LSE:BGUK)and Keith Ashworth-Lord's CFP SDL UK Buffettology fund. The latter has about 9.3% of its portfolio invested in the Nottingham-based company.

Games Workshop’s brief update today showed that core revenues for the year to 2 June are expected to be not less than £490 million, up from £445 million the year before and £5 better than Peel Hunt’s forecast of £485 million.

Licensing revenues, which are typically lumpy due to the success and timing of customer launches, rose £5 million in the year to £30 million.

The broker said: “The company has had an excellent year with a strong product line-up helped by Warhammer 40,000. The long-term prospects continue to look compelling, in our view, and the company is expanding its production.”

Peel Hunt, which has a target price of 12,000p, referred to this month’s planning application by the company to expand facilities in its home city of Nottingham.

The City firm said: “This shows confidence in the long-term prospects and will provide capacity for the next 10 years.”.

The company also has two major logistics hubs in Memphis, Tennessee, and Sydney, Australia, serving the now three-quarters of company sales generated outside the UK.

There was no further dividend announcement in today’s update, having declared and paid £138 million or 420p a share. This compared with £136 million or 415p the year before.

Today’s profit estimate of not less than £200 million takes into account a big increase in staff profit share payment from £11 million last year to £18 million in 2023-24.

Games Workshop joined the stock market three decades ago and is now worth more than £3 billion, fuelled by eight consecutive years of growth and the cumulative return of more than £720 million to shareholders.

This record is made all the more remarkable by the absence of acquisitions or fundraisings over the 30 years, with the company’s delivery of profits of £200 million sustained by organic cash generation. Dividends are paid out of “truly surplus cash.”

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