Games Workshop reported its financial performance for the last six months of 2012 with plenty of good news to go around: sales and core business operating profit were up and operating expenses were down:
Sales in the first half of the 2012/13 financial year have increased from £62.7 million in 2011 to £67.5 million. Operating expenses have reduced by £1.4 million (£0.6 million at constant currency) as we continue to keep a tight control on rents and staff headcount. Core business operating profit (operating profit before royalty income) has increased from £6.5 million to £10.6 million and core business operating margin from 10.3% to 15.7%. Royalty income of £0.4m is modest compared to last year’s exceptional receipts (2011: £2.6m). Group return on capital has improved from 52% to 63%. The impact of currency fluctuations on operating profit was a negative £1.0 million. The strong cash generation of the business has remained a key element of our performance and in line with our policy of distributing truly surplus cash, the board declared a dividend of 18p per share in November 2012.
Tom Kirby, Chairman of Games Workshop, was optimistic in the report:
The Hobby is healthy and the challenge is to stay focused on what needs to be done to grow it efficiently and cost effectively. We know that we have to do the basics right every single day and we never take this for granted. The principal risks and uncertainties for the rest of the financial year are sales related and our businesses are focused on achieving growth whilst the product and supply chain will continue to implement plans to maintain gross margin.
Kirby's biggest concern was the manager running their stores:
For Games Workshop to continue to be successful, we need motivated, hard-working managers in all parts of the business who understand Games Workshop’s niche business model, who are aligned with its values and behaviours and are committed to getting things done. The biggest risk for Games Workshop is not having enough of these managers to continue to grow the business globally. This risk is being mitigated by recruiting people who fit with our culture, developing them to fulfil their potential and training them with the skills we need.
2012 also concluded with the departure of CEO Mark Wells after five years, leaving on good terms. While the board seeks to appoint a new CEO, Chairman Tom Kirby, will be Acting CEO and Chairman. Kirby rounded out the half-year report on an optimistic note:
Games Workshop’s core business model remains strong. The initiatives we have implemented are designed to lead to growth whilst maintaining the hard won efficiencies.
If Games Workshop's "hard won" efficiencies are any indication of what it takes to remain competitive in a global hobby industry, it's likely Hasbro -- the parent company of Wizards of the Coast and Dungeons & Dragons -- will have some tough decisions ahead in 2013.
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