Games Workshop 2015 Final Results

DividendMax Ltd.

Games Workshop 2015 Final Results


Positive second half performance resulting in year-on-year sales and margin growth; driven by the growing installed base of Xbox One and PlayStation 4 console owners, a strong exclusive product offering and the continued diversification of our product range

Retail, digital and diversification strategies continue to progress well:

o Retail market share5 maintained in the UK at 33%; increased 3ppts in Spain to 38% (benefiting from the addition of 44 GameStop stores in October 2014)

o Positive digital performance, with GTV up 28% year-on-year

o Significant growth in preowned mobile phone and tablet sales, up 100%

o Developing eSports & Events and Digital Solutions divisions to support future growth

o Successful integration and development of Multiplay; largest ever Insomnia (I55) held in August

o Strong customer engagement

1 million new customers signed up to loyalty programmes in the UK and Spain

Registered App users doubled to over 1.5 million

Over 550,000 registered GAME Wallet customers

Management team strengthened, including the appointment of Mark Gifford as Group CFO, effective 1 October 2015


GTV growth of 2.3% compared to an aggregated market decline (UK and Spain) of -1.3%6

Gross profit increased 8.7% in the second half and 1.9% in the year driven by our Content, Preowned and Accessories, Toys-To-Life & Other (AT&O) categories

o Total Content, Preowned and AT&O gross profit grew 10.0% in H2 and 7.5% in the year

Adjusted EBITDA declined to £46.9 million (2014: £51.3 million) with improved gross profit offset by higher operating costs

Adjusted basic EPS rose 5.6% to 18.8p (2014: 17.8p), benefiting from previously unrecognised tax losses

The Group ended the year in a strong financial position, with net cash of £63.0 million

o £30 million revolving credit facility signed post the year-end for the Group's UK business, replacing the Group's £25 million asset backed lending facility

o Renewed and increased €38.5 million revolving credit facility for the Group's Spanish business

Proposed final dividend per share of 7.35 pence (£12.5 million), taking the total for the year (including the special dividend of £24.9 million announced at the half year results) to 29.4 pence per share (£49.7 million)

Martyn Gibbs, Chief Executive Officer, said:

"GAME had a strong second half to the year and delivered sales and profit growth for the full year as we capitalised on our leading positions in the fast-moving video games industry.

"As we expected, the market has developed as a result of the growing population of Xbox One and PlayStation 4 console owners which has created a positive environment for GAME. We have captured growth opportunities and grown sales of higher margin products to next generation console owners.

"At the same time we have delivered strong increases in sales of other higher margin categories such as preowned phones and tablets, driven our digital sales and expanded into eSports, gaming events and online games hosting with the acquisition of Multiplay.

"Over the last twelve months, our customers and publisher partners have responded positively as we have driven forward our strategy, enhancing our customer and community engagement and broadening our offer beyond pure retail to the places and ways in which our customers play games.

"Looking forward, with the growth opportunities available, particularly in Multiplay, we are committed to growing our businesses and increasing our investment in both capital projects and our operating cost base. We believe we are well prepared for Black Friday and the peak Christmas season, with a strong, specialist customer offer across all product categories.

"GAME is a fantastic business, underpinned by passionate and knowledgeable colleagues, with a clear purpose: to build the most valuable community of gamers, and I remain excited in our future prospects."

Current Trading and Outlook

Group trading so far this year has been in line with our expectations. The UK business is outperforming the market although the market is currently down on the prior year largely due to lower hardware sales.  The Group's Spanish business continues to perform strongly and is trading ahead of the market which has seen good growth in the year to date. Multiplay has also started the year well, holding its largest ever Insomnia convention in August and signing a major contract for its server hosting business.

As expected the margin profile of the business continues to improve as the sales contribution from higher margin categories (Content, Preowned and Accessories, Toys-To-Life & Other) grows, whilst the contribution from the lower margin Hardware category falls.

A growing population of Xbox One and PlayStation 4 owners combined with the highly-anticipated line-up of new game releases due in the coming months provides a supportive market backdrop from which to grow content sales over the course of the year. Within this we expect demand for Xbox One and PlayStation 4 physical and digital content to continue to grow strongly, whilst demand for prior generation games will decline further. Aligned to this the Group also anticipates further good growth in its 'Accessories, Toys-To-Life & Other' category this year.

We are well prepared for Black Friday and the peak Christmas season and the business is also already well progressed in its plans for the first half of the next calendar year, with further key new releases scheduled as well as many other new developments planned for, including the expected launch of several virtual reality devices.

We are very focused on driving new and growing categories and have planned further investment in capital expenditure and revenue costs this year to support these areas aligned with the Group's omni-channel growth plans further future-proofing our business. Furthermore, to support the anticipated growth of Multiplay, the Group is committed to investing in its cost base to accelerate top line sales and future profitability.

Overall, given positive market dynamics together with the increased investment in the business, at this early stage in the year the Board expects the Group to achieve growth in the year ahead in line with expectations.

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