Fantasy miniatures maker Games Workshop (GAW) says sales and profits for 2017/18 to date are running ‘slightly above expectations’.

This is the latest in a lengthening list of forecast-beating guidance.

Today’s positive update is all the more impressive considering the tough performance comparatives Games Workshop faces, demonstrating the earnings resilience the company draws from its loyal base of global hobbyists, nigh-on obsessional about its high quality miniatures and games.

BATTLING HIGHER

In a short but sweet trading update, the Nottingham-based business behind the Warhammer universe enthuses the ‘good growth trends’ flagged on 5 February have continued to the end of April.

Given the high operational gearing of the business, this is driving a better than expected earnings performance.

Peel Hunt analyst Charles Hall increases his year to May 2018 sales forecast by £6m to £217m and his adjusted profit before tax estimate rises by £4m to £74m, although sales and profits will reduce to £200.2m and £58m next year due to demanding comparatives and the impact of currency.

Shares urged buying at £12.00 on 29 June of last year, since when the share price has more than doubled, which probably explains today’s 17.5p share price reverse to £24.23.

After an initial rise at the opening bell, some investors are keen to take some profits off the table.

Last summer, we highlighted the company’s strong cash generation, earnings resilience and global growth potential, which have powered consistent upbeat updates and earnings upgrades and sent the shares higher and higher.

While the UK consumer is hard-pressed, Games Workshop’s customers are obsessive about the hobby and prioritise spending on its products and the business also has growing traction in overseas markets.

FIRST CLASS COMMUNICATOR

We’re admirers of the clear and concise way in which Games Workshop explains its business model and growth strategy.

As CEO Kevin Rountree outlined in last summer’s annual results announcement, Games Workshop’s ambitions remain clear: ‘to make the best fantasy miniatures in the world and sell them globally at a profit, and it intends doing so forever’, adding that ‘all of our decision making is focused on the long term success of Games Workshop, not short term gains.’

Rountree and his team have an unwavering focus on cash too: ‘By delivering a good cash return every year we can continue to innovate, surprise and delight our loyal existing customers and new customers with great product.

To be around forever we also need to invest in both long term capital and short-term maintenance projects every year, pay our staff what they have earned for the value they contribute and deliver surplus cash to our shareholders.'

As Russ Mould, investment director at AJ Bell, comments: ‘Ten years ago it would have seemed unimaginable that Games Workshop would end up a FTSE 250 company.’

Interest in tiny fantasy figures had waned following a strong period inspired by the success of the Lord of the Rings films.

‘It battled profit warnings rather than miniature warlords,’ says Mould.

‘A decade on and its share price has increased more than 12-fold and the company is sitting in the prestigious mid-cap stock market index. The business has struck a chord with a new generation of fantasy fans and is engaging with customers via multiple channels.

While Warhammer figures may not be to everyone’s taste, Games Workshop has proved that it is possible to be a retail success if you know how to connect with your market and have the right products and superior service levels,’ AJ Bell's Mould says.

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Issue Date: 04 May 2018