Trading Statement & Interims
Games Workshop Group PLC
05 January 2007
TRADING STATEMENT AND INTERIM RESULTS
Games Workshop Group PLC ('Games Workshop' or the 'Group') announces its interim
results for the six months to 26 November 2006.
Highlights:
* Returning to growth, but later than expected
* Revenue down £2.3m to £54.8m (2005: £57.1m)
* Gross margin strengthened to 70.1% (2005: 69.1%)
* Operating profit unchanged at £0.5m (2005: £0.5m)
* Investment: 7 new Hobby stores opened
* Maintained interim dividend of 4.95p
* Earnings per share of 0.2p (2005: 0.2p)
Tom Kirby, Chairman and Chief Executive of Games Workshop, said: 'While our
sterling sales for the first half have declined by £2.3m, the sales in
September, October and November reinforce our confidence that the business is
returning to growth.
'The directors firmly believe that the prospects for the business remain very
good.'
For further information, please contact:
Games Workshop Group PLC Today only: 01756 770 376
Tom Kirby, Chairman and Chief Executive Thereafter: 0115 900 4001
Michael Sherwin, Finance Director 0115 900 4001
Julia Woodall, PR Manager 0115 900 4006
Investor relations website http://investor.games-workshop.com
General website www.games-workshop.com
Rawlings Financial PR Limited Tel: 01759 373 104
Catriona Valentine
FIRST HALF HIGHLIGHTS
Six months to Six months to
26 November 27 November
2006 2005
Revenue £54.8m £57.1m
Operating profit £0.5m £0.5m
Profit before tax £0.1m £0.1m
Basic earnings per share 0.2p 0.2p
Interim dividend per share 4.95p 4.95p
CHAIRMAN'S STATEMENT
Results
During this six month period we have seen the re-establishment of growth in our
sales. In September, October and November we experienced growth in our Hobby
store sales and, in November, we saw progress in our sales to independent
retailers. We are encouraged by these figures.
Our Hobby store performance has been strongest in the UK (+£0.3m), Asia Pacific
(+A$0.6m) and the Americas (+$0.3m). Sales to independent retailers have been
weakest in Continental Europe (-€2.3m). Significantly, the constant currency
figures set out below show that sales in the Americas are growing.
During this half year we have opened 15 new Hobby stores and closed 8, leaving
us with 344 Hobby stores at the end of November.
We have strengthened our gross margin to 70.1% (2005: 69.1%).
Compared to November 2005, sterling has strengthened against both the dollar
(+6.6%) and the euro (+0.4%). We have shown below our sales progression in
constant currency terms so that readers can better understand the figures.
Dividend
A maintained interim dividend of 4.95 pence per share (2005: 4.95p) will be paid
on 20 April 2007 to shareholders on the register at 16 March 2007.
Prospects
While our sterling sales for the first half have declined by £2.3m, the sales in
September, October and November reinforce our confidence that the business is
returning to growth. Our strategy to underpin this growth remains the same: we
will continue to open new stores and ensure that our in-store activity of
introductory gaming, painting lessons and other structured Hobby events is well
delivered; we will continue to seek good independent retailers to develop areas
not suitable for our own stores; and we will continue work on improving our
internal systems to help direct sales.
The sales trends underlying our first half results have continued for the five
weeks to 31 December 2006. We can now see that our full year sales, and
therefore profits, are likely to fall short of current market expectations. This
is why we have brought forward the timing of our interim results announcement
this year.
The directors firmly believe that the prospects for the business remain very
good.
T H F Kirby
Chairman and Chief Executive
5 January 2007
REVENUE BY GEOGRAPHICAL AREA OF SALES OPERATION IN
LOCAL CURRENCY
Six months to Six months to
26 November 27 November
2006 2005
Continental Europe €32.1m €34.6m
United Kingdom £17.1m £17.4m
The Americas US$22.9m US$21.9m
Asia Pacific Aus$8.9m Aus$8.7m
CONSOLIDATED INCOME STATEMENT
Six months to Six months to Year to
26 November 27 November 28 May
2006 2005 2006
Notes £000 £000 £000
Revenue 2 54,836 57,090 115,150
Cost of sales (16,404) (17,650) (34,265)
------- ------- -------
Gross profit 38,432 39,440 80,885
Operating expenses (38,442) (39,481) (77,838)
Other operating income
- royalties receivable 466 504 1,170
------- ------- -------
Operating profit 2 456 463 4,217
Finance income 107 69 238
Finance costs (436) (413) (797)
------- ------- -------
Profit before taxation 127 119 3,658
Income tax expense 4 (51) (54) (1,660)
------- ------- -------
Profit attributable to equity
shareholders 76 65 1,998
======= ======= =======
Basic earnings per ordinary
share 5 0.2p 0.2p 6.5p
Diluted earnings per ordinary
share 5 0.2p 0.2p 6.4p
Proposed interim dividend per
ordinary share 3 4.95p 4.95p
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
Six months to Six months to Year to
26 November 27 November 28 May
2006 2005 2006
£000 £000 £000
Profit attributable to equity
shareholders 76 65 1,998
Exchange differences on translation
of foreign operations (473) 717 (133)
Cash flow hedges:
- fair value gains 122 178 86
- transferred to the income statement (26) (315) (331)
Tax on items recognised directly in
equity (29) 40 73
------- ------- -------
Total recognised (expense)/income
for the period (330) 685 1,693
======= ======= =======
CONSOLIDATED BALANCE SHEET
As at As at As at
26 November 27 November 28 May
2006 2005 2006
Notes £000 £000 £000
Non-current assets
Goodwill 2,412 2,531 2,449
Other intangible assets 4,375 4,401 4,320
Property, plant and equipment 28,859 29,777 29,475
Other receivables 1,015 882 712
Deferred income tax assets 2,075 2,224 2,121
------- ------- -------
38,736 39,815 39,077
------- ------- -------
Current assets
Inventories 12,824 13,382 12,407
Trade and other receivables 11,766 13,037 9,081
Current tax assets 1,496 374 382
Financial assets - derivative
financial instruments 304 338 181
Cash and cash equivalents 5,669 6,253 6,444
------- ------- -------
32,059 33,384 28,495
------- ------- -------
Total assets 70,795 73,199 67,572
------- ------- -------
Current liabilities
Financial liabilities - borrowings (8,417) (4,043) (1,705)
Financial liabilities - derivative
financial instruments (19) (65) (14)
Trade and other payables (14,841) (16,344) (15,714)
Current income tax liabilities (122) - (415)
Provisions (397) (222) (584)
------- ------- -------
(23,796) (20,674) (18,432)
------- ------- -------
Net current assets 8,263 12,710 10,063
------- ------- -------
Non-current liabilities
Financial liabilities - borrowings (9,989) (10,007) (6,960)
Other non-current liabilities (757) (1,135) (1,317)
Provisions (951) (903) (927)
------- ------- -------
(11,697) (12,045) (9,204)
------- ------- -------
Net assets 35,302 40,480 39,936
======= ======= =======
Capital and reserves
Called up share capital 7 1,556 1,555 1,556
Share premium 7 7,822 7,778 7,822
Other reserves 7 (942) 387 (536)
Retained earnings 7 26,866 30,760 31,094
------- ------- -------
Total shareholders' equity 35,302 40,480 39,936
======= ======= =======
CONSOLIDATED CASH FLOW STATEMENT
Six months to Six months to Year to
26 November 27 November 28 May
2006 2005 2006
Notes £000 £000 £000
Cash flows from operating
activities
Cash generated from operations 6 782 1,961 15,789
UK corporation tax paid (458) (1,137) (1,665)
Overseas tax paid (1,057) (1,275) (1,838)
------- ------- -------
Net cash from operating
activities (733) (451) 12,286
------- ------- -------
Cash flows from investing
activities
Purchases of property, plant
and equipment (3,306) (4,931) (8,321)
Proceeds on disposal of property,
plant and equipment 26 19 32
Purchases of other intangible
assets (260) (336) (830)
Expenditure on product development (1,391) (1,236) (2,505)
Interest received 114 72 234
------- ------- -------
Net cash from investing activities (4,817) (6,412) (11,390)
------- ------- -------
Cash flows from financing
activities
Proceeds from issue of ordinary
share capital - 164 207
Proceeds from borrowings 3,070 5,000 1,955
Repayment of principal under
finance leases (34) (72) (143)
Equity dividends paid (4,364) (4,340) (5,874)
Interest paid (504) (371) (886)
------- ------- -------
Net cash from financing activities (1,832) 381 (4,741)
------- ------- -------
Effects of foreign exchange rates (125) 173 (5)
------- ------- -------
Net decrease in cash and cash
equivalents (7,507) (6,309) (3,850)
======= ======= =======
Opening cash and cash equivalents 4,772 8,622 8,622
------- ------- -------
Closing cash and cash equivalents (2,735) 2,313 4,772
======= ======= =======
Analysis of net debt
As at Other non- As at
28 May Cash cash Exchange 26 November
2006 flow changes movement 2006
£000 £000 £000 £000 £000
Cash at bank and in hand 6,444 (641) - (134) 5,669
Current borrowings - bank overdraft (1,672) (6,741) - 9 (8,404)
------- ------- ------- ------- -------
Cash and cash equivalents 4,772 (7,382) - (125) (2,735)
Non-current borrowings - bank loan (6,955) (3,070) - 54 (9,971)
Finance leases (38) 34 (27) - (31)
------- ------- ------- ------- -------
Net debt (2,221) (10,418) (27) (71) (12,737)
======= ======= ======= ======= =======
NOTES TO THE INTERIM RESULTS
1. Interim results
The interim results for the six months to 26 November 2006 and for the
comparative six months to 27 November 2005 are unaudited and do not constitute
statutory accounts within the meaning of section 240 of the Companies Act 1985.
The financial information set out in the interim report has been prepared in
accordance with the accounting policies under International Financial Reporting
Standards ('IFRS') detailed in the financial statements for the year to 28 May
2006 which are expected to be followed in the full financial statements for the
year ending 3 June 2007. The Group has chosen not to adopt IAS 34 'Interim
Financial Statements' in preparing the interim results and therefore, the
interim statement is not in accordance with IFRS.
Copies of the interim results will be sent to shareholders and are available to
members of the public at the Company's registered office.
2. Segmental analysis
Period ended 26 November 2006
Continental United The Asia Rest of Central/ Design and Royalty Group
Europe Kingdom Americas Pacific the world unallocated development income
£000 £000 £000 £000 £000 £000 £000 £000 £000
Total gross segment
by operation 21,827 17,070 12,348 3,591 - - - - 54,836
------- ------ ------ ------ ------- ------- -------- ------- ------
Total gross segment
sales by location of
customers 23,257 14,538 13,178 3,752 111 - - - 54,836
------- ------ ------ ------ ------- ------- -------- ------- ------
Operating profit/
segment result by
location 2,595 1,890 219 (57) 56 (2,727) (1,986) 466 456
------- ------ ------ ------ ------- ------- -------- ------- ------
Restated
Period ended 27 November 2005
Continental United The Asia Rest of Central/ Design and Royalty Group
Europe Kingdom Americas Pacific the world unallocated development income
£000 £000 £000 £000 £000 £000 £000 £000 £000
Total gross segment
by operation 23,599 17,374 12,428 3,689 - - - - 57,090
------- ------ ------ ------ ------- ------- -------- ------- ------
Total gross segment
sales by location of
customers 24,933 15,033 13,008 3,879 237 - - - 57,090
------- ------ ------ ------ ------- ------- -------- ------- ------
Operating profit/
segment result by
location 3,760 1,693 (706) (260) 119 (2,641) (2,006) 504 463
------- ------ ------ ------ ------- ------- -------- ------- ------
Restated
Year ended 28 May 2006
Continental United The Asia Rest of Central/ Design and Royalty Group
Europe Kingdom Americas Pacific the world unallocated development income
£000 £000 £000 £000 £000 £000 £000 £000 £000
Total gross segment
by operation 46,553 35,066 26,121 7,410 - - - - 115,150
------- ------ ------ ------ ------- ------- -------- ------- ------
Total gross segment
sales by location of
customers 49,460 30,018 27,766 7,854 52 - - - 115,150
------- ------ ------ ------ ------- ------- -------- ------- ------
Operating profit/
segment result by
location 8,154 3,799 (487) 470 22 (4,872) (4,039) 1,170 4,217
------- ------ ------ ------ ------- ------- -------- ------- ------
As a result of a reorganisation within the Northern Europe sales operation, the
prior period numbers have been restated to include the Emerging Markets
operation within the UK.
3. Dividends
An interim dividend was proposed in the period for the year ended 3 June 2007 of
4.95p (November 2005: 4.95p) resulting in a proposed interim dividend of
£1,540,000 (November 2005: £1,534,000). The interim dividend was declared by the
board on 5 January 2007 and as such has not been included as a liability as at
26 November 2006.
A final dividend of 14.025p (2005: 14.025p) was paid on 27 October 2006.
4. Income tax expense
Six months to Six months to Year to
26 November 27 November 28 May
2006 2005 2006
£000 £000 £000
UK corporation tax 19 27 530
Overseas tax 28 32 1,072
Origination and reversal of
temporary differences 4 (5) 58
------- ------- -------
51 54 1,660
======= ======= =======
The taxation charge for the six months to 26 November 2006 is based on an
estimate of the full year effective rate of 40% (2005: 45%) for the year ending
3 June 2007.
5. Earnings per ordinary share
The calculation of basic earnings per ordinary share is based on the profit
attributable to equity shareholders and the weighted average number of ordinary
shares in issue throughout the relevant period, excluding treasury shares.
Six months to Six months to Year to
26 November 27 November 28 May
2006 2005 2006
Profit attributable to equity
shareholders (£000) 76 65 1,998
------- ------- -------
Weighted average number of
ordinary shares in issue
(thousands) 31,116 30,790 30,959
------- ------- -------
Basic earnings per ordinary
share (pence per share) 0.2 0.2 6.5
======= ======= =======
Diluted earnings per ordinary share
The calculation of diluted earnings per ordinary share has been based on the
profit attributable to equity shareholders and the weighted average number of
shares in issue during the relevant period, excluding treasury shares, adjusted
for the dilution effect of share options outstanding at the end of the period.
Six months to Six months to Year to
26 November 27 November 28 May
2006 2005 2006
Profit attributable to equity
shareholders (£000) 76 65 1,998
------- ------- -------
Weighted average number of
ordinary shares in issue
(thousands) 31,116 30,790 30,959
Adjustment for share options
(thousands) 293 208 47
------ ------- -------
Weighted average number of
ordinary shares in issue for
diluted earnings per share
(thousands) 31,409 30,998 31,006
------ ------- -------
Diluted earnings per ordinary
share (pence per share) 0.2 0.2 6.4
====== ======= =======
6. Reconciliation of profit to cash generated from operations
Six months to Six months to Year to
26 November 27 November 28 May
2006 2005 2006
£000 £000 £000
Profit attributable to equity
shareholders 76 65 1,998
Income tax expense 51 54 1,660
Depreciation of property, plant and
equipment 3,294 3,697 7,145
Loss on disposal of property, plant
and equipment 29 11 113
Amortisation of capitalised
development costs 1,237 974 2,289
Amortisation of other intangibles 348 272 736
Finance income (107) (69) (238)
Finance costs 436 413 908
Net fair value gains on derivative
financial instruments (24) (41) (43)
Share-based payments 60 230 168
Exchange losses/(gains) on
borrowings 63 - (111)
Changes in working capital:
(Increase)/decrease in inventories (611) (143) 465
(Increase)/decrease in trade and
other receivables (3,134) (2,720) 948
Decrease in trade and other payables (767) (696) (562)
(Decrease)/increase in provisions (169) (86) 313
------- ------- -------
Cash generated from operations 782 1,961 15,789
======= ======= =======
7. Consolidated statement of changes in shareholders' equity
Other reserves Retained earnings
------------------------------------------ --------------------
Called Capital
up share Share redemption Translation Hedging Other Treasury Profit Total
capital premium reserve reserve reserve reserve shares and loss equity
£000 £000 £000 £000 £000 £000 £000 £000 £000
As at 29 May 2006 1,556 7,822 101 353 60 (1,050) (49) 31,143 39,936
Exchange adjustments - - - (473) - - - - (473)
Profit for the period - - - - - - - 76 76
Dividends paid - - - - - - - (4,364) (4,364)
Share-based payment - - - - - - - 60 60
Current tax - - - - (29) - - - (29)
Cash flow hedges:
- fair value gains
in the period - - - - 122 - - - 122
- transferred
to net profit - - - - (26) - - - (26)
------- ------ ------ ------ ------ ------ ------ ------ ------
As at 26 November
2006 1,556 7,822 101 (120) 127 (1,050) (49) 26,915 35,302
======= ====== ====== ====== ====== ====== ====== ====== ======
Other reserves Retained earnings
------------------------------------------ --------------------
Called Capital
up share Share redemption Translation Hedging Other Treasury Profit Total
capital premium reserve reserve reserve reserve shares and loss equity
£000 £000 £000 £000 £000 £000 £000 £000 £000
As at 30 May 2005 1,553 7,592 101 486 232 (1,050) (1,132) 35,960 43,742
Exchange adjustments - - - 717 - - - - 717
Profit for the period - - - - - - - 65 65
Shares vested - - - - - - 672 (672) -
Dividends paid - - - - - - - (4,340) (4,340)
Share-based payment - - - - - - - 230 230
Deferred tax - - - - - - - 1 1
Current tax - - - - 38 - - - 38
Cash flow
hedges:
- fair value gains
in the period - - - - 178 - - - 178
- transferred
to net profit - - - - (315) - - - (315)
Issue of ordinary
share capital 2 186 - - - - - (24) 164
------- ------ ------ ------ ------ ------ ------ ------ ------
As at 27 November
2005 1,555 7,778 101 1,203 133 (1,050) (460) 31,220 40,480
======= ====== ====== ====== ====== ====== ====== ====== ======
Other reserves Retained earnings
------------------------------------------ ----------------------
Called Capital
up share Share redemption Translation Hedging Other Treasury Profit Total
capital premium reserve reserve reserve reserve shares and loss equity
£000 £000 £000 £000 £000 £000 £000 £000 £000
As at 30 May 2005 1,553 7,592 101 486 232 (1,050) (1,132) 35,960 43,742
Exchange adjustments - - - (133) - - - - (133)
Profit for the period - - - - - - - 1,998 1,998
Shares vested - - - - - - 1,083 (1,083) -
Dividends paid - - - - - - - (5,874) (5,874)
Share-based payment - - - - - - - 168 168
Current tax - - - - 73 - - - 73
Cash flow hedges:
- fair value gains
in the period - - - - 86 - - - 86
- transferred
to net profit - - - - (331) - - - (331)
Issue of ordinary share
capital 3 230 - - - - - (26) 207
------- ------ ------ ------ ------ ------ ------ ------ ------
As at 28 May
2006 1,556 7,822 101 353 60 (1,050) (49) 31,143 39,936
======= ====== ====== ====== ====== ====== ====== ====== ======
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