-Full-year revenues up 9%, pre-tax profit up 3%
-Derating continues, shares down 48% in last nine months
-Fundamentals remain intact
Fantasy games and miniatures manufacturer Games Workshop (GAW) said full-year revenues to 29 May would be at least £385 million, in line with market expectations.
As usual the company provided the briefest of financial data and commentary. Full-year revenues will be at least 9% higher than 2021 while pre-tax profit of at least £155 million represents growth of around 3%.
Investors shrugged at the in-line trading update, marking the shares down 2.5% to £62.56.
During the pandemic investors had become accustomed to Games Workshop regularly outperforming analysts’ forecasts, driven by a more people being stuck indoors and a new cohort of gaming enthusiasts.
PRESSURE ON VALUATION CONTINUES
The shares have steadily de-rated since September 2021 partly inline with other highly rated stocks and partly because the company faced tough prior year comparatives and increased freight costs.
A de-rating refers to a decline in the earnings multiple that investors are willing to pay for the shares. Since the March trading update 2022 earnings per share estimates have remained stable at around 393p but the multiple has shrunk further to 16.8 times.
The shares have dropped 48% compared with a fall in the FTSE 250 index of 20% over the last nine months.
FUNDAMENTALS REMAIN INTACT
However, while sentiment towards the shares may have taken a knock the fundamentals of the business look as strong as ever and it is impressive that the company has maintained the higher revenue base generated throughout the pandemic.
Investment director at AJ Bell Russ Mould commented: ‘There have been growing fears that Games Workshop sat in the “lockdown winners” category and a return to more normal life would see a drop-off in sales as people put down their paint brushes and returned to the great outdoors during their spare time.
‘Its year-end trading update would suggest that decorating goblins and trolls is still a major pastime for a lot of people, with both sales and profit ahead of the previous year.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Martin Gamble) and the editor (Tom Sieber) own shares in AJ Bell.
