Picture supply: Getty Photos
Of all of the shares within the FTSE 100 index, Video games Workshop (LSE: GAW) is my favorite. This selection is made simpler when the share worth is up 107% in three years, and continues to earn cash in my portfolio.
Video games Workshop inventory rose once more right this moment (29 July), up 5.7% to 16,140p. In 10 years, the Warhammer maker has returned round 2,700%, not together with money dividends (of which there have been loads).
Let’s check out why this FTSE 100 outperformer is on the transfer proper now.
A cracking yr
Video games Workshop has simply printed its full-year outcomes, masking the 52 weeks to 1 June (FY25). The headline information was that pre-tax revenue rose practically 30% yr on yr to £262.8m. This comfortably matched prior steerage of “not lower than £255m.”
That was on income of £617.5m, up 17.5%. Instantly, we will see with these figures why many traders love the miniature wargames maker. It’s very, very worthwhile, with eye-catching margins.
Licensing income jumped 69% to £52.5m, as online game Area Marine 2 carried out nicely above expectations. This highlights how the agency is efficiently monetising its treasure trove of mental property to usher in high-margin income.
Administration says it’s going to look to launch extra Warhammer 40,000 video games, as nicely hunt for companions to convey its Age of Sigmar setting and characters to console, PC and cell.
CEO Kevin Rountree commented: “Video games Workshop and the Warhammer pastime are in nice form. A cracking efficiency by the group delivering some cracking outcomes: core enterprise revenue earlier than tax of over £200m from gross sales of Warhammer merchandise for the primary time and the very best monetary leads to Video games Workshop’s historical past, to date.”
Licensing lumpiness
Warhammer IP is wealthy, huge and infinite…Our technique is to use the worth of our IP past our core tabletop enterprise, in a number of classes and markets globally.
Video games Workshop.
Now, one factor price mentioning is that the licensing income determine could also be arduous to prime this yr. This factors to a little bit of IP lumpiness, which could trigger volatility within the share worth.
And whereas a take care of Amazon for the variation of Warhammer 40,000 universe into TV content material is now signed, administration cautions that “these items take a number of years to convey to market”.
Elsewhere, the corporate mentioned it may take round a 2% hit on the gross margin this yr on account of tariffs. It’s attempting to make up the shortfall by effectivity financial savings, but it surely warns that “this isn’t a easy activity after we are already very environment friendly“.
A slight disappointment for me was that its three shops in China at the moment are underneath evaluation. If Warhammer had taken off there, the expansion alternative may have been huge. Nevertheless, you’ll be able to’t win all of them, and most international locations are nonetheless delivering robust progress, together with Japan (the place retail gross sales rose 25.9%).
Video games Workshop ended the interval with 570 shops. This yr, it goals to open one other 35 or so in North America, Europe and Asia (together with its first Warhammer retailer in South Korea).
Silly takeaway
Whereas the corporate continues to impress and could possibly be price contemplating, the inventory isn’t low-cost, buying and selling at practically 30 occasions ahead earnings. Traders researching Video games Workshop ought to be aware of the valuation.
Personally although, I intend to maintain holding my shares for a few years to come back.
